PROJECT ON:

“AWARENESS AND SCOPE OF MUTUAL FUNDS”

IN PARTIAL FULFILLMENT OF POST GRADUATE DIPLOMA IN MANAGEMENT

(PGDM) FROM SADHANA CENTRE FOR MANAGEMENT AND LEADERSHIP
DEVELOPMENT

STUDIED BY
AMIT SHARMA
2005 A - 38
 ACKNOWLEDGEMENT

I take immense pleasure in completing this project and submitting the final project report.
The last 20 days with KARVY STOCK BROKING LTD has been full of learning and sense of
contribution toward the organization. I would like to thank KARVY STOCK BROKING LTD for
giving me an opportunity of learning and contributing through this project. I also take this
opportunity to thank all those people that made this experience a memorable one.

A successful project can never be prepared by the single effort of the person to whom project is
assigned, but it also demand the help and guardianship of some conversant person who helped the
undersigned actively or passively in the completion of successful project.

In this context as a student of SADHANA CENTRE FOR MANAGEMENT AND

LEADERSHIP DEVELOPMENT, Pune I would first of all like to express my gratitude to
Mr.RAVI GAIKWAD for assigning me such a worthwhile topic AWARENESS AND SCOPE
OF MUTUAL FUND to work upon in KARVY STOCK BROKING LTD.

During the actual project work, Mr. Kuldeep Bhorkar (Sr. Relationship Manager) has been a
source of inspiration through his constant guidance; personal interest; encouragement and help. I
convey my sincere thanks to him. In spite of his busy schedule he always find time to guide me
through the project. I am also grateful to him for reposing confidence in my abilities and giving me
the freedom to work on my project.
The project couldn’t have been complete without timely and vital help of other office staff. Special
thank to Mr. Ninad Raghatate, Mr. Vikrant Joshi, Mr. Vijay singh, Ms. Sonal Chopra, Ms.
Shweta Singh & last but not the least Mr. Abhijeet sen for their invaluable guidance, keen interest,
cooperation, inspiration and of course moral support through out my project session.
AMIT SHARMA
2005 A-38

2
 INDEX

No. TOPIC Page no.

1. EXECUTIVE SUMMARY 4

2. COMPANY PROFILE 5

3. INTRODUCTION - MUTUAL FUNDS 15

• INVESTMENT AND YOU

• MUTUAL FUNDS AND YOU
• HISTORY OF MUTUAL FUNDS
• TYPES OF MUTUAL FUNDS
• ADVANTAGES AND DRAWBACKS
• FUTURE OF MUTUAL FUNDS
• HOW TO JUDGE A MUTUAL FUND
• AMC’S OPERATING IN INDIA
• COMPARISON OF MUTUAL FUNDS
• AMFI AND MUTUAL FUNDS

4. PROJECT ANALYSIS 44

• DATA COLLECTON 46
• DATA INTERPRETATION 48

5. PROJECT FINDINGS AND RECOMMENDATIONS 58

6 QUESTIONAIRE 60

7. BIBLIOGRAPHY 62

3
EXECUTIVE SUMMARY: -

The project titled “AWARENESS AND SCOPE OF MUTUAL FUND” being carried out for
KARVY STOCK BROKING LTD.
KARVY operates in various financial products and services like, Consultancy, Stock Broking,
Mutual Fund, Insurance, Registrar and Transfer Agent, Research, Mapin etc.

The evaluation of financial planning has been increased through decades, which is best seen in
customer rise. Now a day’s investment of saving has assumed great importance.
According to the study of the markets, it is being observed that markets are doing well in Mutual
fund. In near future a proper financial planning is required to invest money in all type of financial
product because there is good potential in market to invest.

In this project the great emphasis is given to the investor’s mind in respect to investment in Mutual
Fund .The needs and wants of the client is taken into consideration.

I hope KARVY, Pune will recognize this as well as take more references from this project report.

The main objective of this project is to know the Awareness of Mutual Fund among investors and
also to know the investing pattern of people in different Financial Project.

IT sector has been given more emphasis for the study of the project because it is the only sector
where all type of Age group, Income class and different level of people are represented.
After analyzing the feedback the conclusion has been made that the Indian financial market is
having lots of potential customer the only thing is to give a proper guidance to the prospective
customers.

4
5
OVERVIEW: -

KARVY, is a premier integrated financial services provider, and ranked among the top

five in the country in all its business segments, services over 16 million individual

investors in various capacities, and provides investor services to over 300 corporates,

comprising the who is who of Corporate India. KARVY covers the entire spectrum of

Financial services such as Stock broking, Depository Participants, Distribution of

Financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,

Commodities Broking, Personal Finance Advisory Services, Merchant Banking &

Corporate Finance, placement of equity, IPOs, among others. Karvy has a professional

management team and ranks among the best in technology, operations and research of

various industrial segments.

EARLY DAYS

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a
small group of practicing Chartered Accountants who founded the flagship company …Karvy
Consultants Limited. Company started with consulting and financial accounting automation, and
carved inroads into the field of registry and share accounting by 1985. Since then, they have
utilized their experience and superlative expertise to go from strength to strength…to better their
services, to provide new ones, to innovate, diversify and in the process, evolved Karvy as one of
India’s premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route, towards building a reputation as
an integrated financial services provider, offering a wide spectrum of services. And we have made
this journey by taking the route of quality service, path breaking innovations in service, versatility
in service and finally…totality in service. Their highly qualified manpower, cutting-edge
technology, comprehensive infrastructure and total customer-focus has secured for them the
position of an emerging financial services giant enjoying the confidence and support of an enviable
clientele across diverse fields in the financial world.

6
Mile Stones:

PRINCIPAL ACTIVITY OF KARVY ARE-

(1) KARVY CONSULTANTS LIMITED

As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained at
the helm of organizational affairs, pioneering business policies, work ethic and channels of
progress.

Having emerged as a leader in the registry business, the first of the businesses that Karvy ventured
into, company have now transferred this business into a joint venture with Computer share Limited
of Australia, the world’s largest registrar. With the advent of depositories in the Indian capital
market and the relationships that Company have created in the registry business, Karvy believe that
they were best positioned to venture into this activity as a Depository Participant. Karvy were one
of the early entrants registered as Depository Participant with NSDL (National Securities
Depository Limited), the first Depository in the country and then with CDSL (Central Depository
Services Limited). Today, Karvy service over 6 lakhs customer accounts in this business spread
across over 250 cities/towns in India and are ranked amongst the largest Depository Participants in
the country. With a growing secondary market presence, they have transferred this business to
Karvy Stock Broking Limited (KSBL), their associate and a member of NSE, BSE and HSE.

7
The corporate website of the company, “www.karvy.com”, gives access to in-depth information on
financial matters including Mutual Funds, IPOs, Fixed Income Schemes, Insurance, Stock Market
and much more. A link called ‘Resource Center’, devoted solely to research conducted by team of
experts on various financial aspects like ‘Sector Research’, deals exclusively with in-depth analysis
of the key sectors of the Indian economy. Besides, a host of other links like ‘My Portfolio’ which
acts as a personalized and customized financial measure, makes this site extremely informative
about investment options, market trends, news and also about our their company and each of the
services offered here.

(2) KARVY STOCK BROKING LIMITED

Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely towards
attaining diverse goals of the customer through varied services. Creating a plethora of opportunities
for the customer by opening up investment vistas backed by research-based advisory services.
Here, growth knows no limits and success recognizes no boundaries. Helping the customer create
waves in his portfolio and empowering the investor completely is the ultimate goal.

Karvy is a Member of National Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and
The Hyderabad Stock Exchange (HSE).

(3) KARVY INVESTORS SERVICES LIMITED

Merchant Banking- Recognized as a leading merchant banker in the country, Karvy are registered
with SEBI as a Category I merchant banker. This reputation was built by capitalizing on
opportunities in corporate consolidations, mergers and acquisitions and corporate restructuring,
which have earned us the reputation of a merchant banker. Raising resources for corporate or
Government Undertaking successfully over the past two decades have given us the confidence to
renew company focus in this sector.

Karvy quality professional team and their work-oriented dedication have propelled company to
offer value-added corporate financial services and act as a professional navigator for long term
growth of companies clients, which includes leading corporate, State Governments, foreign
institutional investors, public and private sector companies and banks, in Indian and global
markets.

Karvy financial advice and assistance in restructuring, divestitures, acquisitions, de-mergers, spin-
offs, joint ventures, privatization and takeover defense mechanisms have elevated company
relationship with the client to one based on unshakable trust and confidence.

(4) KARVY COMPUTERSHARE PVT. LIMITED

Karvy have traversed wide spaces to tie up with the world’s largest transfer agent, the leading
Australian company, Computershare Limited. The company that services more than 75 million
shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5
continents has entered into a 50-50 joint venture with KARVY.

Mutual Fund Services

8
Karvy have attained a position of immense strength as a provider of across-the-board transfer
agency services to AMCs, Distributors and Investors.

Nearly 40% of the top-notch AMCs including prestigious clients like Deutsche AMC and UTI
swear by the quality and range of services that company offer. Besides providing the entire back
office processing, Karvy provide the link between various Mutual Funds and the investor,
including services to the distributor, the prime channel in this operation.

Karvy service enhancements such as ‘Karvy Converz', a full-fledged call center, a top-line website
(www.karvymfs.com), the ‘m-investor' and many more, creating a galaxy of customer advantages.
www.karvymfs.com

Issue Registry

In company voyage towards becoming the largest transaction-processing house in the Indian
Corporate segment, KARVY have mobilized funds for numerous corporate, and emerged as the
largest transaction-processing house for the Indian Corporate sector. With an experience of
handling over 700 issues, Karvy today, has the ability to execute voluminous transactions and hard-
core expertise in technology applications have gained company the No.1 slot in the business.
Karvy is the first Registry Company to receive ISO 9002 certification in India that stands
testimony to its stature

Corporate Shareholder Services

Karvy has been a customer centric company since its inception. Karvy offers a single platform
servicing multiple financial instruments in its bid to offer complete financial solutions to the
varying needs of both corporate and retail investors where an extensive range of services are
provided with great volume-management capability.

Today, Karvy is recognized as a company that can exceed customer expectations which is the
reason for the loyalty of customers towards Karvy for all his financial needs. An opinion poll
commissioned by “The Merchant Banker Update” and conducted by the reputed market research
agency, MARG revealed that Karvy was considered the “Most Admired” in the registrar
category among financial services companies.

(5) KARVY GLOBAL SERVICES LIMITED

The specialist Business Process Outsourcing unit of the Karvy Group. The legacy of expertise and
experience in financial services of the Karvy Group serves us well as company enter the global
arena with the confidence of being able to deliver and deliver well.

Here company offers several delivery models on the understanding that business needs are unique
and therefore only a customized service could possibly fit the bill. KARVY service matrix has
permutations and combinations that create several options to choose from.

KARVY is in re-engineering and managing processes or delivering new efficiencies, company’s

service meets up to the most stringent of international standards. Their outsourcing models are
designed for the global customer and are backed by sound corporate and operations philosophies,

9
and domain expertise. Providing productivity improvements, operational cost control, cost savings,
improved accountability and a whole gamut of other advantages.

KARVY operate in the core market segments that have emerging requirements for specialized
services. Their wide vertical market coverage includes Banking, Financial and Insurance Services
(BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and Utility and Healthcare.

(6) KARVY COMMODITIES BROKING LIMITED

At Karvy Commodities, they are focused on taking commodities trading to new dimensions of
reliability and profitability. They have made commodities trading, an essentially age-old practice,
into a sophisticated and scientific investment option.

Company enables trade in all goods and products of agricultural and mineral origin that include
lucrative commodities like gold and silver and popular items like oil, pulses and cotton through a
well-systematized trading platform.

The technological and infrastructural strengths and especially the street-smart skills make them an
ideal broker. Their service matrix is holistic with a gamut of advantages, the first and foremost
being their legacy of human resources, technology and infrastructure that comes from being part of
the Karvy Group.

Their wide national network, spanning the length and breadth of India, further supports these
advantages. Regular trading workshops and seminars are conducted to hone trading strategies to
perfection. Every move made is a calculated one, based on reliable research that is converted into
valuable information through daily, weekly and monthly newsletters, calls and intraday alerts.
Further, personalized service is provided here by a dedicated team committed to giving hassle-free
service while the brokerage rates offered are extremely competitive.

Karvy’s commitment to excel in this sector stems from the immense importance that commodity
broking has to a cross-section of investors & dash; farmers, exporters, importers, manufacturers
and the Government of India itself.

(7) KARVY INSURANCE BROKING PRIVATE LIMITED

At Karvy Insurance Broking Pvt. Ltd., they provide both life and non-life insurance products to
retail individuals, high net-worth clients and corporate. With the opening up of the insurance sector
and with a large number of private players in the business, they are in a position to provide tailor
made policies for different segments of customers. In their journey to emerge as a personal finance
advisor, they will be better positioned to leverage their relationships with the product providers and
place the requirements of their customers appropriately with the product providers. With Indian
markets seeing a sea change, both in terms of investment pattern and attitude of investors,
insurance is no more seen as only a tax saving product but also as an investment product. By
setting up a separate entity, we would be positioned to provide the best of the products available in
this business to their customers.

KARVY have wide national network, spanning the length and breadth of India, further supports
10
these advantages. Further, personalized service is provided here by a dedicated team committed in
giving hassle-free service to the clients.

KARVY Alliances

Karvy Computershare Private Limited is a 50:50 joint venture of Karvy Consultants Limited and
Computershare Limited, Australia. Computershare Limited is world's largest -- and only global --
share registry, and a leading financial market services provider to the global securities industry.

The joint venture with Computershare, reckoned as the largest registrar in the world, servicing over
60 million shareholder accounts for over 7,000 corporations across eleven countries spread across
five continents. Computershare manages more than 70 million shareholder accounts for over
13,000 corporations around the world.

Karvy Computershare Private Limited, today, is India's largest Registrar and Share Transfer Agent
servicing over 300 corporate and mutual funds and 16 million investors.

Quality Policy

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial services. In
the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives

As per the Quality Policy, Karvy will:

 Build in-house processes that will ensure transparent and harmonious relationships with its
clients and investors to provide high quality of services.

 Establish a partner relationship with its investor service agents and vendors that will help in
keeping up its commitments to the customers.

 Provide high quality of work life for all its employees and equip them with adequate
knowledge & skills so as to respond to customer's needs.

 Continue to uphold the values of honesty & integrity and strive to establish unparalleled
standards in business ethics.

 Use state-of-the art information technology in developing new and innovative financial
products and services to meet the changing needs of investors and clients.

 Strive to be a reliable source of value-added financial products and services and constantly
guide the individuals and institutions in making a judicious choice of same.

 Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and
regulatory authorities) proud and satisfied.

11
CORNERSTONES OF STRAREGY:-

1. Focus on retail segment.

2. Build a strong pan-India network managed by experienced professionals, build presence across
both metros and class A/B town.

3. Build full-service capabilities leveraging the network-offer the entire gamut of financial services,
backed by strong transaction processing and high volume handling capability.

4. Established a high degree of customer ownership and top-of-mind recall in the local markets-
ensures steady customer traffic and repeat business.

5. Build a trusted brand; ensure high visibility

ACHIVEMENTS:-

 Largest independent distributor for financial products

 Amongst the top 5 stock brokers

 Amongst the top 3 Depository participants

 Largest network of branches and business associates

 Amongst top 10 investment Bankers.

 Ranking 1st in retail procurement in equity IPOs.

 Ranking 8th in Merchant Banking services.

MISSION OF KARVY:-

12
Their mission is to be a leading, preferred service provider to our customer, and they aim to
achieve this leadership position by building an innovative, enterprising, and technology driven
organization which will set the highest standards of service and business ethics.

13
Karvy at a Glance
TRANSACTION CORPORATE
PROCESSING FINANCE
GROUP GROUP

TECHNOLOGY RESOURCE
GROUP

IT ENABLED FINANCIAL
SERVICE PRODUCTS
E BUSINESS
GROUP DISTRIBUTION
GROUP

SUPPORT

HR & Admn. SA&FC

STRATEGIC PLANNING, COMPLIANCE, LEGAL &
CORPORATE AFFAIRS, SECRETARIAL
TRAINING & DEVELOPMENT FINANCE & ACCOUNTS
CORPORATE QUALITY

14
INTRODUCTION:-
Mutual Funds

15
Introduction:

Mutual funds are for everyone. Around the world, millions of investor invests in mutual funds
because of their safety, ease of investing and the many advantages they offer. It is very necessary
before investing that you know some basics of investing which are given below.

Investments and you:

Investment is never an easy process. However, a sound understanding of some basic concepts
make the process of investment decision-making much easier and the experience much more
enjoyable. The following step can help you get started on your path to becoming a successful
investor:

1. Identify your financial needs and goals:

The first step is to get a clear understanding of your own financial needs and goals. Ask
yourself the question –When do I need money and for what purpose? List down your financial
goals and when they will materialise (daughter’s higher education after 6 years, purchase of a
house after 10 years), and how much money you will need for the same. The answer will help you
arrive at the time frame for your investment – short term, medium term or long term.

Financial Goals Amount required at Year’s to achieve Investment horizon

today’s price your goal

Retirement Rs. 25 Lakhs 20 years Long term

Daughter’s higher Rs. 2 Lakhs 6 years Long term

Education

Buying a car Rs. 4 Lakhs 2 years Medium term

Son’s computer Rs. 0.5 Lakhs 6 months Short term

course

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2. Understand your tolerance to risk:

Before making an investment decision, it is very necessary for an investor to know his risk
tolerance limits. Will he be comfortable with fluctuations in the value of his investments? Or would
he prefer to settle down for a lower return without many ups and downs. By knowing risk tolerance
limit of himself an investor can decide his portfolio and also choose from a variety of financial
investment tools , one which suit his portfolio the most.

3. Estimate your required rate of return:

Your required rate of return depends on your financial goals and the time you have to achieve
them. Take an example that your retirement goal at 58 years is Rs. 20 Lakhs and your monthly
savings is Rs. 5000, your required rate of return depending on your current age would be:

Present Age Returns

43 years 9.5 %

48 years 21.2%

As you can see, the later you start, the higher will be your required rate of return, hence as your
investment horizon reduces, for the same level of saving you may need to take higher risk.
Alternatively, if you were not willing to take a higher risk, you would have to save a higher amount
every month- Rs 9800, almost twice the original savings required to achieve your target
accumulation.
These three steps give a very basic idea about how to invest, when an investor is seeking
investment in different financial tools. Though there are different steps of investment in each
financial tool, these acts as blue print for them too.

Mutual Funds and You:

What is a mutual fund?

A mutual fund is a type of financial intermediary that pools the funds of investors who seek
the same general investment objective and invests them in a number of different types of financial
claims (e.g. equity shares, bonds, money market instrument). These pooled funds provide
thousands of investors with proportional ownership of diversified managed by professional
investment managers.

Where do mutual funds invest?

17
Broadly, mutual funds invest basically in three types of asset classes:

Stocks: Stocks represent ownership or equity in a company. These are also called as shares.

Bonds: These represent debt from companies, financial institutions or government agencies.

Money Market Instruments: These include short-term debt instrument such as treasury bills,
certificates of deposits and inter bank money.

History of Mutual Funds in India:

In India the setting up of Unit Trust of India (UTI) in 1963 marked the advent of mutual fund
industry. Unit Trust of India was set up by an Act of Parliament. The purpose of establishing of
Unit Trust of India was to give a fillip to the equity market. In the wake of Indo-China war of 1962,
there was shortage of savings going into industrial investment for economic development. There
was a need to mobilize adequate amount of risk capital for industrial enterprise. The household
savings were sought to be channelized into primary and secondary market through units. However,
in the initial years, the emphasis in UTI was on income product. MasterShare launched in 1986
ushered in the equity-oriented schemes in India. Unit Trust of India launched a variety of
innovative products suited to meet diverse needs of investors, virtually the complete life cycle of
investors.

Evolution of Mutual Fund in India:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank the. The history of mutual funds in
India can be broadly divided into four distinct phases.

First Phase: 1964-1987

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)

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 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.

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

18
 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 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

Fourth Phase: Since 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. 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 assets under management
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. As at the end of September, 2004, there
were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

19
The graph indicates the growth of assets over the years

Funds For All Reasons And All Seasons:

TYPES OF MUTUAL FUNDS: -

Mutual Funds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any number of different
funds to help one meets ones specific goals. In general mutual fund fall under 3 general categories:
-

 Equity fund invest in shares of common stocks.

 Fixed income funds invest in government or corporate securities which offer fixed rate of
returns.
 Balanced fund invest in a combination of both stocks and bonds.

AGGRESSIVE GROWTH FUNDS :-

These funds seek to provide maximum growth of capital with secondary emphasis on
dividend or interest income. They invest in common stocks with a high potential for rapid growth
and capital appreciation.
Aggressive growth funds are suitable for those investors who can afford to assume the risk of
potential loss in value of their investment in the hope of achieving substantial and rapid gains. They
are not suitable for investors who must conserve their principal or who must maximize their current
income.
20
GROWTH FUNDS:-

Like aggressive growth funds, growth fund generally invests in stocks for growth rather than
income. They are considered more conservative in their approach because they usually invest in
established companies to achieve long-term growth. Growth fund provides low current income but
the investor principal is more stable then it would be in an aggressive growth fund. While the
growth potential may be less over the short term, many growth funds have superior long-term
performance records.
These funds are suitable for growth oriented investors but not investors who are unable to
assume risk or who are dependent on maximizing current income from there investments.

GROWTH AND INCOME FUNDS:-

Growth and income funds seek long-term growth of capital as well as current income. The
investments strategies use to reach these goals vary among funds.
Growth and income funds have low to moderate stability of principal and moderate potential
for current income and growth. They are suitable for investors who can assume some risk to
achieve growth of capital but want to maintain a moderate level of current income.

FIXED INCOME FUNDS:-

The goal of fixed income fund is to provide high current income consistent with the level of
capital. Growth of capital is of secondary importance.
Fixed income funds offer a higher level of current income than money market funds, but a
lower stability of principal. Fixed income funds are suitable for investors who want to maximize
current income and who can assume a degree of capital risk in order to do so.

EQUITY FUNDS:-

Funds that invest in stocks represent the largest category of mutual fund. Generally the
investment objective of this class of fund is long-term capital growth with some income. There are
however many type of equity funds.

BALANCED FUNDS:-

The Balanced funds aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents. It is an idea
for investors who are looking for the combinations of income and moderate growth.

MONEY MARKET FUNDS/ LIQUID FUNDS:-

For the cautious investors these funds provide a very high stability of principal while seeking
a moderate to high current income. They invest in highly liquid; virtually risk free, short-term debt
securities of agencies of the Indian government, banks and corporation and treasury bills. Because
of their short-term investments, money market mutual funds are able to keep a virtually constant
unit price; only the yield fluctuates.
Money market funds are suitable for those investors who want high stability of principal and
current income with immediate liquidity.
21
SPECIALITY / SECTOR FUNDS:-

These funds invest in securities of a specific industry or sector of the economy such as health
care, technology, leisure, utilities or precious metals. The funds enable investor to diversify holding
among many companies within an industry, a more conservative approach than investing directly
in one particular company.
Sector funds offer a opportunity for sharp capital gains in cases where the fund’s industry is
“in favor” but also entail the risk of capital losses when the industry is out of favor. While sectors
funds restrict holdings to a particular industry, other specialty funds such as index funds gives
investors a broadly diversified portfolio and attempt to mirror the performance of various market
averages.

OPEN ENDED SCHEMES:-

Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at
NAV- related prices from and to the mutual fund on any business day. These schemes have
unlimited capitalization, open-ended schemes do not have a fixed maturity, there is no cap on the
amount you can buy from the fund and the unit capital keep growing. These funds are not generally
listed on any exchange.
Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem units
any time during the life of schemes. Hence unit capital of open-ended funds can fluctuate on a
daily basis. The advantages of open ended schemes are: -

1. Any time exit option

2. Any time enter option.

CLOSE ENDED SCHEMES:-

Close-ended schemes have fixed maturity periods. Investors can buy into these funds during
the period when these funds are open in the initial issue. After that such scheme cannot issue new
units except in case of bonus or right issue. However after the initial issue you can buy or sell units
of the schemes on the stock exchange where they are listed. The market price of the unit could vary
from the NAV of the schemes due to demand and supply factor

HOW LONG TO KEEP INVESTMENT TO GET MAXIMUM RETURNS

Technically open-ended funds you can withdraw your investments even within a week, but to
get desired returns positive time frame is required are:

22
Funds Time Period

Equity Funds 3 Years (plus)

Balanced Funds 18 months to 3 Years

MIP’s 1 Year (plus)

Income Funds 6 months to 1 Year

Liquid Funds few days to 6 months

WHAT RETURNS CAN I EXPECT IF I KEEP MY MONEY FOR SUGGESTED TIME

FRAMES

Funds Returns

Sector funds 22% to 25% p.a

Balance funds 15% to 18% p.a

MIP’s Pension Plans 12% to 15% p.a

Income Funds 10% to 12% p.a

Liquid Funds 7% to 9% p.a

The above-mentioned returns in the table are indicative and not assured. All investments in
MUTUAL FUNDS are securities and are subject to market risk and the NAVs of the schemes may
go up and down depending upon the factors and forces affecting the security market including the
fluctuations in the internal rates .The past performance of the MUTUAL FUNDS is not indicative
of future performance.

23
THE RISK RETURN GRAPHS FOR VARIOUS FUNDS:-

Sector Funds

R
E Equity Funds
T
U Balanced Funds
R
N Income Funds
S
Liquid Funds

RISKS

The above Graph shows the Risk and Returns generated by different Funds. Liquid Funds are less
Risky and also generate less Returns where as Sector Funds are more Risky but generate more
Returns by the example of above two Funds it is clear that Risk and Returns are directly
proportional to each other. Other Funds like Equity Funds, Balanced Funds and Income Funds are
also gives the same percentage of Returns as the Risk involved.

24
ADVANTAGE OF MUTUAL FUND: -

The advantages of investing in a Mutual Fund are:

• Diversification: The best mutual funds design their portfolios so individual investments
will react differently to the same economic conditions. For example, economic conditions
like a rise in interest rates may cause certain securities in a diversified portfolio to decrease
in value. Other securities in the portfolio will respond to the same economic conditions by
increasing in value. When a portfolio is balanced in this way, the value of the overall
portfolio should gradually increase over time, even if some securities lose value.

• Professional Management: Most mutual funds pay topflight professionals to manage their
investments. These managers decide what securities the fund will buy and sell.
• Regulatory oversight: Mutual funds are subject to many government regulations that
protect investors from fraud.
• Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call,
and you've got the cash.
• Convenience: You can usually buy mutual fund shares by mail, phone, or over the
Internet.
• Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment.
Expenses for Index Funds are less than that, because index funds are not actively managed.
Instead, they automatically buy stock in companies that are listed on a specific index.
• Transparency: Mutual Fund schemes are said to be Transparent because they show the
clear allocation of Funds to Investors.
• Flexibility: Mutual funds are flexible because they change time to time and also if an
Investor wants his money back before the maturity of the Fund He/she can easily redeem it.

DRAWBACKS OF MUTUAL FUNDS:-

Mutual funds have their drawbacks and may not be for everyone:

25
 • No Guarantees:

No investment is risk free. If the entire stock market declines in value, the value of mutual fund
shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing money.

• Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or "loads" to compensate brokers, financial consultants, or financial
planners. Even if you don't use a broker or other financial adviser, you will pay a sales
commission if you buy shares in a Load Fund.

• Taxes:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay
taxes on the income you receive, even if you reinvest the money you made.

• Management risk:

When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of course, if
you invest in Index Funds, you forego management risk, because these funds do not employ
managers.

FUTURE OF MUTUAL FUND IN INDIA:-

By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by
2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore.
26
The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5
years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010
the asset will be double.

Let us discuss the following table:

Aggregate deposits of Scheduled Com Banks in India (Rs.Crore)

Mar- Mar- Mar- Mar-
Month/Year Mar-02 Mar-03 Sep-04 4-Dec
98 00 01 04
60541 85159 98914 113118 128085 156725
Deposits - 1622579
0 3 1 8 3 1
Change in % over last
- 15 14 13 12 - 18 3
yr
Source – RBI

Mutual Fund AUM’s Growth

Mar- Mar- Mar- Mar- Mar- Mar-
Month/Year Sep-04 4-Dec
98 00 01 02 03 04
13762 15114
MF AUM's 68984 93717 83131 94017 75306 149300
6 1
Change in % over last yr - 26 13 12 25 45 9 1
Source - AMFI

Some facts for the growth of mutual funds in India :-

27
  100% growth in the last 6 years.

 Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity

Investments, US based, with over US$1trillion assets under management worldwide.

 Our saving rate is over 23%, highest in the world. Only channelizing these savings in

mutual funds sector is required.

 We have approximately 29 mutual funds which is 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.

Introduction of Financial Planners who can provide need based advice.

HOW TO JUDGE A MUTUAL FUND:-

28
Consider this – The Indian mutual fund (MF) industry reached Rs. 1,50,537 crore in December
2004. The industry witnessed a 100% growth in the last six years. By year 2010, MF assets are
expected to double. India has 29 MF’s compared to 800 in the US.

In the last one year, the number of retail investors in India has increased steadily. The big question
is how to judge a MF before investing? It is important for an investor to consider a fund's
performance over several years. Different fund managers adopt different strategies to improve
performance. While one fund manager may have played it cautious by investing in good quality
stocks over the years and given a return of 30% over a five-six year period, another one who
invested in speculative stocks may have struck gold in that year, thereby outperforming tits
counterpart by a long way. Thus it is important to look at consistency of returns over a period of
time rather than going by absolute returns generated in the short term.

Let us look at the advantages of investing in a MF. To begin with, you don't have to make your
investment decisions. Your money is handled by top professionals hired by fund houses who
decide what securities the fund will buy and sell. Moreover, MF industry is highly regulated, thus,
protecting investors from fraud. Regulators block funds from having more than a certain
percentage of the fund in any one firm. This prevents from over exposure in one particular industry
or stock. It's easy to get your money out of a MF. It is very convenient to buy a MF unit over phone
or Internet.

An investor should consider certain drawbacks before investing in MF. Unlike a fixed deposit, MF
does not give any guarantee on returns. If the entire stock market declines in value, the value of MF
shares will go down as well. An investor has to shell out an entry and exit load.
When you invest in a MF, you depend on the fund's managers to make the right decisions regarding
the fund's portfolio. If the manager does not perform well, you might not make as much money on
you investment as you expected. The short-term focus of money managers and pressure from unit
holders for immediate performance are obstacles to long-term growth.

Most funds lack the cash reserves to pay off the massive redemptions which will follow a
market panic. Fund managers can change without notice

29
Some of AMCs operating currently are:-

NAME OF AMC OWNERSHIP

Alliance capital asset management (I)Pvt. Ltd
Private foreign

Birla Sunlife Asset Management Company ltd. Private Indian

Bank of Baroda Asset management Company LTD
Bank
Bank of India Asset Management Company Ltd
Bank
Canbank Investment Management Services Ltd
Bank
Cholamandalam Cazenove Asset Management Company Ltd. Private foreign
Dundee Asset Management Company Ltd
Private foreign
DSP Merrill Lynch ASSET Management Company Ltd Private foreign
Escorts Asset management ltd
Private Indian
First India Asset Management Ltd
Private Indian
GIC Asset Management Company Ltd.
Institution
IDBI Investment Management Company Ltd
Institution
Indfund Management Ltd
Bank
ING Investment Asset Management Company Pvt. Ltd Private foreign
J M Capital Management limited
Private Indian
Jardine Fleming Asset Management ltd
Private foreign
Kotak Mahindra Asset Management Company
Private Indian
Kothari Pioneer Asset Management Company
Private Indian
Morgan Stanley Asset Management Company Pvt Ltd Private foreign
Punjab National Bank Asset Management Company Ltd Bank
Reliance Capital Asset Management Company Private Indian
State Bank of India Funds Management ltd.
Bank
Shriram Asset Management Company Ltd.
Private Indian
Sun F and C Asset Management Company Ltd.
Private foreign
30
 Sundaram Newton Asset Management Company ltd Private foreign
Tara Asset Management Company Ltd.
Private Indian
Credit Capital Asset Management Company Ltd
Private Indian
Templeton Asset Management Company Ltd
Private foreign
Unit Trust Of India
Institution

COMPARISSION OF MUTUAL FUNDS

**OPERATIONS & DATA COLLECTION:

From the secondary data available from the fact sheet, internet eyc. Analyses between three
different types of funds are as follows:-

• Equity Diversified Fund

• Income Fund

• Balanced Fund

Mutual Fund companies that are selected for the analysis are as follows:-

• Principal PNB Mutual Fund

• Birla Mutual Fund

• HDFC Mutual fund

• UTI Mutual Fund.

⇒ PARAMETERS USED FOR COMPARISION

The parameters that are used for comparison of Principal PNB Mutual Fund Schemes with
other Mutual Fund Schemes are done on the following basis:-
• Annualized Returns
• Standard Deviation
• Sharpe Ratio
• Beta Ratio
• Alpha Ratio
• R-Squared
• Annualized Returns

31
 The percentage movement in the value of the shares or units in a fund over a period of time
(i.e. the CUMULATIVE RETURN), adjusted to an annualized (or compounded) basis, rather than
being a simple percentage change over the total period under review. A simple example would be a
fund increasing in value in a two-year period from Rs 100 per unit to Rs 125 per unit. The increase
of Rs 25 per unit in the two-year period would represent a 25% (Rs 25/Rs100) CUMULATIVE
RETURN, but would be 11.8% per annum on an ANNUALIZES RETURN basis (a two year
compound return of 11.8% equates to an cumulative return of 25% over the same period [ Rs 100*
(1.118^2) = Rs 125].
This can be written as:

(1/No. of years)

CAGR = ( Ending Value/ Beginning Value )

⇒ VOLATILITY MEASURES:

Volatility is something all investors face, especially while investing in equities and equity
mutual funds. But when we talk about risks and volatility, one should keep in mind that they are
different. Volatility is a side effect of risk. It’s what happens when potential risks like economic,
price, sector…etc become a reality. When considering a fund’s volatility, an investor may find it
difficult to decide which fund will provide the optimal risk-reward combination.

⇒ DIVERSIFIED EQUITY SCHEME – COMPARISION

Fund Name Principal Birla HDFC Equity UTI Equity

Equity Advantage

Launch Date
May 1995 Feb 1995 Dec 1994 May 1992

32
Category Equity Equity Equity Equity
Diversified Diversified Diversified Diversified

1Year
Return 55.93 64.56 68.88 62.57

Asset Size
(Cr) 79.25 463.60 1280.55 1273.09

One Year Return

80
70
60
Return

50
40 Return
30
20
10
0
e
ity

ty

ty
g
ta

ui
qu

ui
q
n

q
lE

E
va

E
C
pa

I
T
A

U
ci

D
a
rin

H
irl
P

Company

PERCENTAGE WISE RETURN

Fund Name Principal Birla HDFC Equity UTI Equity

Equity Advantage

1 Month
Return (%) 8.09 6.84 9.23 7.54

6 Month
Return (%) 17.88 19.49 23.95 17.88

1 Year Return
(%) 55.93 64.56 68.88 62.57

3 Year Return
(%) 38.83 46.16 56.95 45.31

33
 Percentage Wise Return

80
70
60 1 Month Return (%)
50
Returns

6 Month Return (%)

40
1 Year Return (%)
30
20 3 Year Return (%)
10
0
Principal Birla HDFC UTI Equity
Equity Advantage Equity
Company

34
⇒ Interpretation:

 HDFC equity is recommended over Principal equity as this fund has a better return as
compared to other Mutual Funds.

 The Standard Deviation of Principal Equity Fund is the least hence it is more reliable as
compared to other Mutual Funds.

 Sharpe Ratio is in direct relation with the Risk and Return means as the risk is increasing so as
the return, as in the case of HDFC Equity, its risk is high so as the returns of the fund.

 Considering the 3-year period than HDFC equity is better than Principal Equity, while the other
two mutual funds have not completed 3 years.

 Beta of UTI Dynamic Equity is 0.95, while that of Principal Equity is 0.76 which means that if
there is 20% change in Index then the change in UTI Dynamic Equity and Principal Equity
would be 19% and 15% respectively. Beta of Birla Advantage and HDFC Equity is some what
in the middle of 0.76 and 0.95. So if the market is bullish then the gain of UTI – Dynamic
equity is good while if the market is bearish or declines than the loss of Principal Equity would
be minimum as compared to other mutual funds.

35
RECOMMENDATION & SUGGESTIONS:

 Principal Mutual Fund has almost all the kinds of Debt Funds and those funds are
performing quite well, hence it should retain its performance.
 Principal Mutual Fund should come up with fund of funds, where the fund manager invests
in the different schemes of Principal to make the portfolio of Principal Mutual Fund a
complete Mutual Fund organization.
 Most of the business for Mutual Fund Industry comes through Distributors/Agents. During
the stay in branch office in summer training an impression was formed that advisors are not
satisfied by the commission structure. Since, advisors bring mostly retail customers and
retail customers have a major share in the total business, company should take some steps
to nullify the dissatisfaction among the advisors to reap long term results.
Some of the big mutual fund companies are buying the Assets of smaller mutual fund companies or
buying the Assets of those mutual fund companies who wants to exit from the mutual fund
business such as HDFC Asset Management acquires the Assts of Zurich Asset Management and
Birla Asset Management Company acquiring the alliance capital Asset Management. In the same
way Principal Asset Management Company must try to acquire another Asset Management
Company if that company wants to sell its Assets. Thus by doing this it can increase its investor
base and also the Asset Under Management.

36
LIMITATIONS:

Though the report has given the insight to the various mutual fund schemes but cannot be said
fully relevant because of some limitations these are:-
 It is difficult to get full insight of how fund managers have deployed their funds.
 There are more than 30 companies and offering various ranges of products and analyzing all of
them is again a difficult task.
 Mutual Fund industry performance is dependent on daily churning of portfolio and Net Asset
Value of each fund changes every day, thus the fund which in comparison is doing better today
may not perform well tomorrow and thus it affects the analysis process.
 Due to the time constraint only four companies share in portfolio is taken for the study.
Remaining 26 companies are not studied or difficult to study because of time limitation though
they have considerable effect on return.
 Funds which are compared have different asset size and time period and they may not be so
relevant for comparison. In Debt oriented fund the different rating companies have different
criteria to rate their companies and hence it affects on the analysis part of the research.

37
CONCLUSION:

A Mutual Fund pools the money of people with similar investment goals. The money in
turn is invested in various securities depending on the objective of the mutual fund scheme,
and the profits (losses) are shared among investors in proportion to their investments. After
doing the analysis on 4 funds following conclusion can be made.

 Out of the different compared fund HDFC equity fund is better on all the front line
risk, return and volatility as compared to all the other funds.

 Investors have to compensate their risk with the return. Higher the return higher the
risk.

 For the people who are looking for regular income should opt for any of the Debt
Fund, as the long term returns of all the funds are almost the same.

 Those who want regular income and also capital appreciation should go for Principal
Balanced Fund.

38
ASSOCIATION OF MUTUAL FUNDS IN INDIA:-

With the increase in mutual fund players in India, a need for mutual fund association in India
was generated to function as a non-profit organization. Association of Mutual Funds in India
(AMFI) was incorporated on 22nd August 1995.
AMFI is an apex body of all Asset Management Companies (AMC), which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its
members. It functions under the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a
professional and healthy market with ethical lines enhancing and maintaining standards. It follows
the principle of both protecting and promoting the interests of mutual funds as well as their unit
holder

The objectives of Association of Mutual Funds in India :-

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

 This mutual fund association of India maintains high professional and ethical standards in
all areas of operation of the industry. It also recommends and promotes the top class
business practices and code of conduct which is followed by members and related people
engaged in the activities of mutual fund and asset management. The agencies that are by
any means connected or involved. In the field of capital markets and financial services also
involved in this code of conduct of the association.

 AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
Industry.
 Association of Mutual Fund in India do represent the Government of India, the Reserve
Bank of India and other related bodies on matters relating to the Mutual Fund Industry.
 It develops a team of well-qualified and trained Agent distributors. It implements a
program of training and certification for all intermediaries and other engaged in the mutual
fund industry.
 AMFI undertakes all India awareness programmed for investor’s in order to promote
proper understanding of the concepts and working of mutual funds.
 At last but not the least association of mutual fund of India also disseminate information’s
on Mutual Fund Industry and undertakes studies and research either directly or in
association with other bodies.

Regulatory Aspects:

39
Schemes of Mutual funds: -

• The Asset management company shall launch no schemes unless the trustees approve such
scheme and a copy of the offer has been filed with the Board.
• Every mutual fund shall along with the offer documents of each scheme pay filing fees.
• The offer document shall contain disclosures which are adequate in order to enable the
investors to make informed investment decision including the disclosure non maximum
investments proposed to be made by the scheme in the listed securities of the group
companies of the sponsor. A close-ended scheme shall be fully redeemed at the end of the
maturity period. “Unless a majority of the unit holders otherwise decide for its rollover by
passing a resolution”.

• The mutual fund and asset management company shall be liable to refund the application
money to the applicants: -

• If the mutual fund fails to receive the minimum subscription amount referred to in clause
(i) of sub- regulation.

• If the moneys received from the applicants for units are in excess of subscription as
referred to in clause (ii) of sub-regulation.

The asset management company shall issue to the applicant whose:

 Application has been accepted, unit certificates or a statement of accounts

 Specifying the number of units allotted to the applicant as soon as possible
 But not later than six weeks from the date of closure of the initial
 Subscription list and or from the date of receipt of the request from the unit
 Holders in any open ended scheme.

Rules Regarding Advertisement: -

The offer document and advertisement materials shall not be misleading or contain any statement
or opinion, which are incorrect or false.

Investment objectives and valuation policies: -

The price at which the units may be subscribed or sold the price at which such unit may at any time
be repurchased by the mutual fund shall be made available to the investors.

General Obligation: -

 Every asset management company for each scheme shall keep and maintain proper book of
accounts, records and document, for each scheme so as to explain its transaction and to
disclose at any point of time the financial position of each scheme and in particular give a
true and fair view of the state of affairs of the fund and intimate to the board the place
where such books of accounts, records and documents are maintained.
40
  The financial year for all the scheme shall end as of March 31 of each year. Every mutual
fund or the asset management company shall prepare in respect of each financial year an
annual report and annual statement of accounts of the schemes and the fund as specified in
Eleventh Schedule.

 Every mutual fund shall have the annual statement of accounts audited by an auditor who is
not in any way associated with the auditor of the asset management comp

Procedure for Action In Case Of Default: -

On and from the date of the suspension of the certificate or the approval, as the case may be,
the mutual fund, trustees or asset management company, during the period of suspension and shall
be subject to the direction of the Board with regard to any records, documents, or securities that
may be in its custody or control relating to its activities as mutual funds, trustees or the asset
management company.

Restrictions on Investments:

• A mutual fund scheme shall not invest more than 15% of its NAV in debt instrument issued
by a single issuer, which are rated not below investment grade by a credit rating agency
authorize to carry out such activity under the act. Such investment limit may be extended to
20% of the NAV of the scheme with the prior approval of the Board of Trustees and the
Board of Asset Management Company.

• A mutual fund Scheme shall not invest more than 10% of its NAV in unrated debt
instrument issued by a single issuer and the total investment in such instruments shall not
exceed 25% of the NAV of the Board of Trustees and the Board of Asset management.

• No mutual funds under all its schemes should own more than 10% of any company’s paid
up capital carrying voting rights.

• Such transfers are done at the prevailing market price for quoted instrument on spot basis.

• The securities so transferred shall be in conformity with the investment objectives of the
scheme to which such transfer has been made.

• A scheme may invest in another scheme under the same asset management company or any
other mutual fund without charging any fees, provided that aggregated intercourse inter
scheme investment made by all schemes under the same management or in schemes under
the management of any other asset management company shall not exceed 5% of the net
asset value of the mutual fund.

The initial issue expenses in respect of any scheme may not exceed 6% of the funds raised under
that scheme.

41
• Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all
cases of purchases, take delivery of relative securities and in all cases of sale, deliver the
securities and shall in no case put itself in a position whereby it has to make short sale or
carry forward transaction or engage in Badla finance.

• Every mutual fund shall get the securities purchased or transferred in the name of the
mutual fund on account of the concerned scheme, wherever investments are intended to be
of long-term nature.

• Pending deployment of funds of a scheme a mutual fund can invest the funds of the scheme
in short term deposits of scheduled commercial banks.

• No mutual fund scheme shall make any investment in;

 Any unlisted security of an associate or group company of the sponsor or

 Any security issued by way of private placement by an associate or group company

of the sponsor.

 The listed securities of group companies of the sponsor which is in excess of 30%
of the net assets (of all the schemes of a mutual fund)

 No mutual fund scheme shall invest more than 105 of its NAV in the equity shares
or equity related instrument of any company. Provided that, the limit of 10 percent
shall not be applicable for investments in index fund or sector or industry specific
schemes.

 A Mutual fund scheme shall not invest more than 5% of its NAV in the equity
shares or equity related investments in case of open-ended schemes and 10 % of its
NAV in case of close-ended schemes.

42
Some facts for the growth of mutual funds in India :-

 100% growth in the last 6 years.

 Number of foreign AMC’s is in the queue to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management worldwide.
 Our saving rate is over 23%, highest in the world. Only channelizing these savings in
mutual funds sector is required.
 We have approximately 29 mutual funds which is 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.

PROJECT ANALYSIS

43
PROBLEM STATEMENT AND OBJECTIVE OF THE
STUDY:-

PROBLEM STATEMENT: -

44
 Due to the falling Rate of Interest on Bank deposits, it is obvious that Investment in
Mutual Fund will grow in year to come. However lack of Awareness of Mutual Fund is a
hindering factor in expected growth of Mutual Fund Business. Under noted problems are
envisaged in this area:
• Difficult in convincing people for investment.
• Difficult to change mind of the investor according to age and
Profession.
• Difficult to make an approach to investors.
• Difficult to take an appointment with professional people.
• Difficult to get the documents required for formalities from investors
• Difficult to overcome an impassionate person who wants return in less time.
• Difficult to follow up the people whose names are being stored in a data.
• Difficult to remove the fear of risk from the minds of investors.

OBJECTIVE OF STUDY:-

In view of the problem cited above, the study aims at analyzing the following major issues:

• To know the awareness of MUTUAL FUND among people.

• To know the different Asset management companies involve in MUTUAL FUND.
• To know the different aspects of MUTUAL FUND according to different age, profession etc.
• To see the interest of people in investing in MUTUAL FUNDS.
• To know the future of MUTUAL FUNDS in India.
• To know the different attitudes of people regarding risk, rate of return, period of investment
etc.
• To study the diversification of mutual fund.

METHODOLOGY OF STUDY:

Research can be defined as a systemized effort to gain new knowledge. A research is carried
out by different methodologies which have their own pros and cons. Research methodology is a
way to solve research in study and solving research problems along with logic behind them are
45
defined through research methodology. Thus while talking about research methodologies we are
not only talking of research methods but also consider the logic behind the methods. We are in
context of our research studies and explain why it is being used a particular method or technique
and why the others are not used. So that research result is capable of being evaluated either by
researcher himself or by others.

RESEARCH METHODOLOGY:

Research has its special significance in solving various operational and planning problem of
business and industry. Research methodology is a way to systematically analyze the research
problem.

ASSUMPTIONS:

1. It has been assumed that sample of hundred represents the whole population
2. The information given by the customer is unbiased

LITERATURE SURVEY:

The project is based on pure findings of facts

Development of Working Hypothesis: The hypothesis could be developed by discussing with the
consulting department heads and guides about this exploratory research and reach to the conclusion
that the data is to be collected by personal interaction with the clients, asking them about their
investment planning and their need for financial advisory service from KARVY Stock Broking
Ltd.
First of all are they aware of tax and investment planning or not and then analyzing the findings to
reach to the objectives of research.

COLLECTION OF DATA:
This research is solely based on primary research done by means of questionnaires targeted to
respondents who primarily belong to the business and service sector. The sample size is 100.
a. Sampling Methods: A sample is the representative of the populations which will predict the
behaviors of the whole universe
b. The sampling size put under 2 categories: Probability Sampling and Non Probability
Sampling.

EXECUTION OF PROJECT

It is very essential in the research process to know the accuracy of the finding’s which depends on
how systematically the study has been carried out so that it can make sense.
We have executed the project after prior discussion with our guide and structured in the following
steps:
a. Preparation of a questionnaire

46
 b. The focal point of the designing the questionnaire was to comprehend the current
investment scenario
c. This questionnaire was primarily aimed to respondents who belong to the service and
business class people
d. The questionnaires were discussed through personal interface with the respondents

LIMITATIONS OF STREAMLINING RESULTS:

Every work has its own limitations. Limitations are extent to which the process should not
exceed. The following limitations for the project are:
1. Duration of project was not enough to make our conclusion on such a vast subject. Time
constraints has also become a major limitation
2. The sample size taken for drawing the conclusion was not sizeable
3. Investor ignorance was faced during discussions with respondents

47
DATA INTERPRETATION

Q1. Do you invest regularly?

YES 89
NO 11
TOTAL 100

Percentage of people making any

investment

11%

YES
NO

89%

It has been observed that approximately 90% of the correspondents invest in some or the
other financial instrument. Though the percentage of choice of investment may vary due to
different factors such as age, education, risk etc.

Q2. Do you invest using-

a. Scientific Tools b. By Intuition

Scientific Tools 47
By Intuition 53
Total 100

48
 Methods of investment

47%
scientific tools
by intution
53%

It has been observed that there is no major difference between the percentage of people who
invest using scientific tools and those whose who believe in their intuition but it is seen that
the younger generation is more leaning towards usage of scientific tools than their peers.

Q3. What are you preferred investment priorities?

a. Insurance

YES 77
NO 23
TOTAL 100

LIC

23%

YES
NO

77%

49
A major chunk who have been interviewed it has been observed that almost 80% have some
kind of insurance policy. It has also been observed that though LIC is a public sector
undertaking, people of all ages have more faith in it as compared to other private sector
companies.
b. Bank (Fixed deposit)

YES 49
NO 41
TOTAL 100

Banks(Fixed Deposit)

YES
NO

There is no major difference between the number of people who prefer keeping their money
in fixed deposit and who don’t opt for it. There is however a growing concern about the
falling interest rate in banks on fixed deposit.

c. Bonds & Debentures

BONDS & Debentures
YES 34
NO 66
TOTAL 100

YES
NO

50
It has been observed that only 34% they have invested in Bonds and Debentures AS
compared to those who have not. This may be due to less knowledge about it or the time of
re-demption.

d. Equities & Share Market

YES 45
NO 55
TOTAL 100

Equity & Share Market

YES
YES
NO
NO

By the chart we observe that the percentage of people investing in equity and share market is
not much but there is a going interest among people especially the younger generation to
invest so as to make quick bucks with the market boom.

e. PPF

YES 43 PPF
NO 57
TOTAL 100

43%
YES
NO
57%

Out of the total people asked 57% said they invest in PPF and 43% said they don’t, but it has
been observed that from the people who said they invest the major chunk are people from
service sector.
51
f. NSC

YES 45
NO 55
TOTAL 100

NSC

45%
YES
NO
55%

Out of all the people questioned 45% said YES and 55% said NO. People who have said that
YES a major percentage are either business man or working people who want a fix rate of
return and security.

g. Post Office Savings

YES 31
NO 69
TOTAL 100 Post Office Savings

31%

YES
NO

69%

Out of the total correspondent only 31% they invest in post office savings. This could be due
to falling interest rate and better return by other tools.

52
h. Real Estate

YES 42
NO 58
TOTAL 100

Real Estate

42%
YES
NO
58%

The correspondent who said YES are 42% and who said NO is 58% but this will change as
people are more comfortable in real estate and with falling interest rate people try to find
new avenue of investments.

i. Gold

YES 41
NO 59
TOTAL 100

Out of the total correspondent questioned 41% say they prefer to invest in gold while 59%
say they don’t.
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j. Others

YES 39
NO 61
TOTAL 100
OTHERS

39%
YES
NO
61%

Of all the correspondents asked only 39% said they have other options to invest other than
the conventional options.

Q4. What percentage of your income do you invest?

Below 10% 30
10%-30% 57
30%-50% 10
Above 50% 3

About 60% of people said that they invest between 10%-60% of their total income in some or
other types of financial tools. A major chunk of people belonging to this segment are from IT
sector who are young, large disposable income and have a little knowledge about investment
and are willing to take risk.

54
Q5. Are you aware about mutual funds?

YES 88
NO 12
TOTAL 100

Aw areness about m utual funds

12%

YES
NO

88%

Only 12% of correspondent said they don’t know any thing about mutual fund and 88% said
they know about mutual funds but what we found that they have just a primary or very
negligible knowledge about mutual funds and not really aware of the concept called
MUTUAL FUND.

Q6. What is your perception about mutual funds?

SAFE 15%
RISKY 25%
OTHERS 60%
TOTAL 100%

Perception about mutual funds

60%

50%

40%
60%
30% Series1

20%
25%
10% 15%

0% 55
Safe Risky Others
The percentage of person who say that mutual fund is safe is 5%, an those who say it is risky
is 25% but a major percentage of corresponds opt as other which is about 60%. These are
people who say that mutual funds are high risk and high gain or even people who have no
opinion.

Q7. Have you ever invested in mutual fund?

YES 41
NO 59
TOTAL 100

investment in mutual funds

60
50
40
30
20
10
0
Yes No
Out of the total correspondents asked about 41% have said that they had invested in mutual
funds before while 59% said NO. Out of the total people who have said yes a majority of
them are young, having disposable income and willingness to take risk.

Q8. Do you know different type of mutual scheme present in the market?

YES 36
NO 64
TOTAL 100

Types of mutual funds

100%

80%

60%

40%

20% 56
0%
Yes No
Out of total corresponds only 36% said that they know about various mutual schemes as this
number is very small it explains that people still don’t know about various schemes in the
market. It also shows that even those who have bought mutual funds are still ignorant about
the different schemes.

Q9. How you choose a mutual fund?

BRAND NAME 35
HIGH NAV 26
HIGH RETURNS 15
ADVERTISING 12
OTHERS 12
TOTAL 100

Choosing of mutual fund

40
35
30
25
20
15
10
5
0
Brand Name High NAV High Returns Advertising Others

It has been observed that brand name does matter when people are choosing a mutual fund
as 35% said brand name. The next is NAV at about 26%. These two factors play a major role
during selection of mutual funds.

57
 PROJECT FINDINGS
&
RECOMMENDATIONS

58
PROJECT FINDINGS:

• There is great opportunity for Mutual Fund companies as there is a is a rise in number of
people who want to invest in share market but don’t have time and knowledge to do so,
also these people want to take less risk .

• With booming market and falling interest rate of bank deposits, people see mutual funds as
an attractive financial tool which provide a high return rate at lower risk as compared to
equity market.

• Young people these days are particularly more interested in mutual funds because they see
mutual fund as safe bet. Also these people have large disposable incomes and risk taking
capability too.

• The bad part is people are still ignorant about mutual funds and different schemes about
mutual funds, hence it is very necessary to educate them about mutual funds

• Advertising can also play a major part as it has been seen that people buy mutual fund
looking at the brand name.

RECOMMENDATIONS:

• India is passing through a tremendous growth phase with an average growth rate of 7-8%
per annum. With this growth phase there is growth in each and every sector, hence there is
rush to by shares and equities. It is also a very good time for mutual fund companies but it
is advisable for them and their brokers that they don’t just sell mutual funds but sell the
right kind of scheme which is comfortable to a person nature of taking risk and need,

• There is a general ignorance and questions about, what are mutual funds? What are
different schemes of mutual funds? How to invest in a mutual? And many more. This thing
should be handled by mutual fund companies and their brokers to provide knowledge to
their clients.

• It has been seen that there is a major increase in the percentage of young investors who
have large amount of disposable income with them and want to invest, these type of
prospective clients should be tapped at an early stage.

• Small towns, villages are still untapped and can also acts as an business area of very huge
potential.

59
 • Now even co-operative society can invest up to 10% of their capital in mutual funds which
open the door to new and very important client base.

Questionnaire

1. Are you a regular investor?

a. Yes b. No

2. Do you invest using –

a. Scientific Tools b. By Intuition

3. What are your preferred investment priorities?

Name of Investment
Insurance
Bank
Bonds & Debentures
Equities & Share Market
PPF (Public Provident Fund)
NSC (National Saving Schemes)
Post Office Saving Schemes
Real Estate
Gold
Others

4. What percentage of your income do you invest?

a. Below 10%
b. 10% - 30%
c. 30% - 50%
d. Above 50%

5. Are you aware about Mutual Funds?

a. Yes b. No

6. What is your perception about Mutual Funds?

a. Safe
b. Risky
c. Others

60
 7. Have you invested in some Mutual Funds?
a. Yes b. No

8. Do you know different type of Mutual Fund scheme present in the market?
a. Yes b. No

9. How do you select and choose Mutual Funds?

a. Brand Name b. High NAV
c. High Dividends d. Advertisement
e. Others

Demographics

1. NAME: _____________________________________________

2. AGE: SEX: M / F

3. MARTIAL STATUS:

4. PROFESSION:

5. ANNUAL INCOME:
a. Less than Rs. 1, 00,000/-
b. 1, 00,000 - 1, 50,000/-
c. 1, 50,000 - 2, 50,000/-
d. 2, 50,000 - 5, 00,000/-
e. Above 5,00,000/-

6. Contact Number:

7. Email ID : ___________________________________________

*************************Thank you****************************

61
BIBLIOGRAPHY

WEB:

• www.njindiainvest.com
• www.moneycontrol.com
• www.amfiindia.com
• www.valuesearch.com

BOOKS

• AMFI COURSE BOOK

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