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BY:
GOURAV SHARMA
Roll No. - 94512236916
M.B.A.-IV
1
DECLARATION
I, the undersigned hereby declare that the final project report submitted to my
college i.e. Gian Jyoti Institute of Management & Technology in partial fulfillment
for the Degree of Master of Business Administration on “Analysis of Investment In
Mutual Fund” is a result of my own work under continuous guidance and kind co-
operation of our college faculty member, Dr. Navjot Kaur. I have not submitted
this training report to any other university for the award of degree.
Gourav Sharma
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CERTIFICATE OF GUIDE
This is to certify that the project entitled “Analysis of Investment in Mutual Funds”
is submitted as a final project report of the requirement for the degree of MBA,
affiliated to the Punjab Technical University, Jalandhar is a work carried out by
Gourav Sharma, Roll No. - 94512236916, under my supervision & guidance.
Project Guide
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ACKNOWLEDGEMENT
Any accomplishment requires the effort of many people and this work is not
different.
I owe the debt of gratitude to my project guide, Dr. Navjot Kaur, Gian Jyoti
Institute of Management & Technology, under whose guidance I was able to
complete my project successfully. Her valuable advice and guidance at various
stages of the project will always be cherished.
GOURAV SHARMA
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TABLE OF CONTENTS
Acknowledgement
Executive summary
1 Introduction 1-31
6 Recommendations 61
Bibliography 62
Annexure
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EXECUTIVE SUMMARY
Project work is a part of our curriculum that gives us the knowledge about the practical work in
any organization and makes are stand in an organization. This also helps to understand &
correlate the theoretical concepts better which remains uncovered in the classrooms. I have
prepared this report in the process of my postgraduate diploma in business management.
The topic that has been taken for the project is “ANALYSIS OF INVSTMENT IN MUTUAL
FUNDS”.
A mutual fund is uniquely a democratic institution. It is an investment vehicle ideally suited for
small and unsophisticated investors. These funds are financial intermediaries, which bring a
wider variety of securities within the reach of small and medium investors. These investors by
subscribing to mutual fund units can share the capital appreciation in the giant blue chip
companies like MNC stocks. It is essentially a mechanism of pooling together the saving of a
large number of investors for collective investment portfolio and expert investment management
and advice to a large number of investors through institutionalized risk pooling mechanism. It
ensures a reasonable return, liquidity, safety and security to investors besides proving growth
prospects and tax advantage in certain cases.
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As the mutual fund industry is at a very progression stage from the last decade. It needs a
through probe to this fast growing industry term of growth rate, risk and return, portfolio
composition etc.
In order to achieve the various stated objectives both primary data and secondary data available
on the subject is used and other necessary information is collected from mutual fund houses,
newspaper, journals, magazines etc. Data collected is used for knowing the awareness of mutual
funds and sources from which the investors get the information about mutual funds.
CHAPTER – I
INTRODUCTION
Mutual fund is the most suitable investment (or the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio relatively at a low cost.
Anybody with an inventible surplus of as little as a few thousand rupees can be invested in mutual
funds. Change in the economic scenario, falling interest rates of bank deposits, volatile nature of
capital market and recent hitter experience of investors in making direct investment emphasis the
increasing importance of the intermediaries like mutual funds.
Mutual funds help the small and medium size investors to participate in today's complex
and modern financial scenario. Investors can participate in the mutual fund by buying the units of
the fund. The income earned through these investments and capital appreciation realized by the
schemes is shared by its unit holders in proportion to the number of units owned by them. Mutual
funds play vital role in mobilization of resources and their efficient al1ocation. These funds played a
significant role in financial inter-mediation, development of capital markets and growth of the financial
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sector as a whole. The active involvement of mutual funds in economic development can be seen by
their dominant presence in the money and capital market. In early 19th century, mutual funds have
proved to be an important institutional arrangement of risk pooling. These institutions have come to
assume so much of significance them they now completely dominate the entire financial market.
Mutual Fund is an investment company that pools money from shareholders and invests in a
variety of securities, such as stocks, bonds and money market instruments. Most open-end mutual funds
stand ready to buy back (redeem) its shares at their current net asset value, which depends on the total
market value of the fund's investment portfolio at the time of redemption. Most open-end mutual funds
continuously offer new shares to investors.
In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in offer document.
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.
The profits or losses are shared by the investors in proportion to their investments. The mutual
funds normally come out with a number of schemes with different investment objectives which are
launched from time to time. In India , A mutual fund is required to be registered with Securities and
Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the
public.
In Short, a mutual fund is a common pool of money in to which investors with common
investment objective place their contributions that are to be invested in accordance with the stated
investment objective of the scheme. The investment manager would invest the money collected from
the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example,
an equity fund would invest equity and equity related instruments and a debt fund would invest in
bonds, debentures, gilts etc. Mutual Fund is a 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.
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1.2 THE CONCEPT OF A MUTUAL FUND:
A mutual fund is a common pool of money into which investors place their contributions that are
to be invested in accordance with a stated objective. The ownership of the fund is thus joint or
“mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the same
proportion as the amount of the contribution made by him or her bears to the6 total amount of the fund.
A mutual fund uses the money collected from investors to buy those assets which are
specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity
assets-ordinary shares, preference shares, warrants etc. a bond fund would mainly buy debt instruments
such as debentures, bonds, or government securities. It is these assets which are owned by the investors
in the same proportion as their contribution bears to the total contribution of all investors put together.
When investors 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 a joint stock company,
in which case the purchase makes the investors a part owner of the company and its assets. In fact, in
the U.S.A., a mutual fund is constituted as an investor “buys into the fund”, meaning he buys the shares
of the fund. In India, a mutual fund is constituted as a trust and the investor subscribes to the “units”
issued by the fund, which is where the term Unit Trust comes from. However, whether the investors get
fund shares or units is only a matter of legal distinction. In any case, a mutual fund shareholder or unit-
holder is a part owner of the fund’s assets. In this project, used the term unit-holder includes the mutual
fund account-holder or close-end fund shareholder. A unit-holder in unit trust of India US-64scheme is
the same as a UTI Master share-holder or investors in an Alliance or DSP Merrill Lynch or Prudential-
ICICI or Tata or Templeton or SBI or any other fund manager’s open-end or close-end scheme.
Since each owner is a part owner of a mutual fund, it is necessary to establish the value of his
part. In other words, each share or unit that investors hold needs to be assigned a value. Since the units
held by-an investor’s evidence the ownership of the fund’s assets the value of the total assets of the
fund when divided by the total number of units issued by the mutual fund gives us the value of one
unit. This is generally called the Net Asset Value (NAV) of one unit or share. The value of an
investor’s part ownership is thus determined by NAV of the number of units held number of units held
9
by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under
management.
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The graph indicates the growth of assets over the years.
1. Income. Income funds focus on dividends and interest that provide income to investors. This is a
relatively steady source of money, but the fund’s NAV can still go up and down.
2. Growth. Growth funds focus on increasing the value of the principal or amount invested through
capital gains and net asset values. Growth funds are usually more risky but offer greater
potential return.
3. Stability. Stability funds focus on protecting the amount invested from loss so the
Fund’s NAV does not go down. This is the least risky type of fund but may make the least
amount of money.
C. GEOGRAPHICAL CLASSIFICATION:
1. DOMESTIC FUNDS:
Funds which mobilize resources from a particular geographical locality like a country or a
region are domestic funds. The market is limited and confined to the boundaries of a nation in which
the fund operates. They can invest only in the securities, which are issued and traded in the domestic
financial market.
2. OFFSHORE FUNDS;
Offshore funds attract foreign capital for investment in the country of the issuing company. They
facilities cross-border fund flow which leads to an increase in foreign currency and foreign exchange
reserves. Such mutual funds can invest in securities of foreign companies. They open domestic capital
market to international investors. Many mutual funds in India have launched a number of offshore
funds, either independently or jointly with foreign investment management companies. The first
offshore fund, the India fund, was launched by unit trust of India in July 1986 in collaboration with the
US fund manager, Merril Lynch.
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D. OTHER FUNDS:
1. TAX SAVING SCHEMES:
The objective of Tax Saving Schemes is to offer tax rebates to the investors under specific
provisions of the Indian Income Tax Laws. Investment made under some schemes is allowed as
deduction u/s 88 of the Income Tax Act.
2. INDUSTRY SPECIFIC SCHEMES:
Industry specific schemes invest only in the industries specific in the offer document of the
schemes.
3. SECTORAL SCHEMES:
The schemes invest particularly in specific industries or initial public offering.
4. INDEX SCHEMES:
Such schemes link with the performance of BSE sensex or NSE.
5. LOAD FUNDS:
A loan fund charges a commission each time when you buy or sale units in the fund.
6. NO-LOAD FUNDS:
A No-Loan fund does not charge a commission on purchase or sale of the unit in the fund.
7. EQUITY-LINKED SAVING SCHEME(ELSS):
In order to encourage investor to invest in equity market, the government has given tax-
concessions through special schemes. Investment in these schemes entitles the investor to claim an
income tax rebate, but these schemes carry a lock in period before the end of which funds cannot be
withdrawn.
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investment management skills, along with the needed research into available investment option, ensure
a much better return than what n investor can manage on his own. Few investors have the skills and
resources of there own to succeed in today’s fast-moving, global and sophisticated markets.
3) Reduction/Diversification Of Risk :
An investor in a mutual fund acquires a diversified portfolio, no matter how small his
investment. Diversification reduces the risk of loss, as compared to investing directly in one or two
share or debentures or other investments. When an investor invests directly, all the risk of potential loss
is his own. A fund investor also reduces his risk in another way. While investing in the pool of funds
with other investors, any loss on one-two securities is also shared with other investor. This risk
reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.
4) Reduction Of Transaction Costs :
What is true of risk is also true of the transaction costs. A direct investor bears all the costs of
investing such as brokerage or custody of securities. When going through a fund, he has the benefits of
economies of scale: the fund pays lesser costs because of larger volumes, a benefit passed on to its
investors.
5) Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly sell. Investment in
a mutual fund, on the other hand, is more liquid. An investor can liquidate the investment, by selling
the units to the fund if open-end, or selling them in the market if the fund is close-end and collect funds
at the end of a period specified by the mutual fund or the stock market.
6) Convenience And Flexibility:
Mutual fund management companies offer many investor services that a direct market investor
cannot get. Investors can easily transfer their holding from one scheme to the other, get updated market
information, and so on.
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Investors who invest on their own can build their own portfolios of shares, bonds and other
securities. Investing through funds means he delegates this decision to the fund managers. The very
high-net-worth individuals or large corporate investors may find this to be a constraint in achieving
their objectives their objectives. However, most mutual fund help investors overcome this constraint by
offering families of schemes- a large number of different schemes- within the same fund. An investor
can choose from different investment plans and construct a portfolio of his choice.
3. Managing A Portfolio of Funds:
Availability of a large number of funds can actually mean too much choice for the investor. He
may again need advice on how to select a fund to achieve his objectives, quite similar to the situation
when he has to select individual shares or bonds to invest in.
3. Risk Factors:
Mutual fund and securities investments are subject to market risk and there is no assurance or guarantee
that the objective of the schemes will be achieved. As with any security investment, he Net Asset Value
(NAV) of the units issued under the schemes can go up or down depending on the factors affecting the
capital market. Past performance of the sponsors, the Asset Management Company/ Fund does not
indicate the future performance of the fund.
4. Net Asset Value (NAV):
It is the common practice for the mutual fund to compute the share of each investor on the basis
of the value of net asset per share/unit, commonly known as the Net Asset Value. It is the market value
of the assets minus the liabilities on the day of valuation. In other words it is the amount which the
shareholder will collectively get if the fund is dissolved or liquidation.
NAV= {Market price of securities + other assets – Total liabilities}/Units outstanding at the NAV date.
NAV={Net asset of the scheme + Number of units outstanding, Market value of investment +
Receivables + Other accrued income + other assets –Accrued expenses-other payable
liabilities}/Number of units outstanding at the date of NAV.
1.8 ORGANISATION OF MUTUAL FUNDS
A mutual fund in India is constituted in the form of trust under public trust act, 1882. The key
players namely sponsors, mutual fund trust, and Asset Management Company (AMC) are involved in
setting up a mutual fund. They are assisted by other independent administrative entities like banks,
registrars, transfer agents, and custodians (Depository participants).
There are many entities involved and the diagram below illustrates the organizational set up of a mutual
fund:
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Trustees
The trust of mutual finds may be managed by a board of trustees, or a trust company, corporate body.
Most of the funds in India are managed by Board of Trustees.
Sponsor
Sponsor is the person who acting alone or in combination with another body corporate establishes a
mutual fund. Sponsor must contribute atleast 40% of the networth of the Investment Manged and meet
the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the
operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund.
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent
to the Mutual Fund. The Registrar processes the application form, redemption requests
and dispatches account statements to the unit holders. The Registrar and Transfer agent
also handles communications with investors and updates investors records
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1.9 REGULATIONS OF MUTUAL FUNDS IN INDIA
In India SEBI and RBI act as regulators of mutual fund.
SEBI (Mutual Fund) REGULATIONS,1996
The provisions of this regulations pertaining to AMC are:
• All the schemes to be launched by the Asset Management Company(AMC) need to be approved
by the trustees and copies of offer document of such schemes are to be filed with SEBI.
• The offer document shall contain adequate disclosure to enables the investor to make informed
decision.
• Advertisement in respect of schemes should be in conformity with the SEBI prescribed
advertisement code, and discloses the method and periodicity of the valuation of investment sales
and repurchase in addition to the investment objectives.
• The listing of close ended schemes is mandatory and every close ended scheme should be listed on
a recognized stock exchange with in six months from the closure of subscription. However, listing
is not mandatory in case the scheme provides for monthly income or caters to the special classes of
persons like senior citizen, women, children, and physically handicapped. If the scheme discloses
detail of repurchase in the offer document: if the schemes opens for repurchase with in six months
of closure of subscription.
• Units of a close ended scheme can be opened for sale or redemption at a predetermined fixed
interval if the minimum and maximum amount of sale, redemption, and periodicity is disclosed in
the offer document.
• Units of a close ended scheme can also be converted into an open ended scheme with the consent
of majority of the unit holder and disclosure is made in the offer document about the option and
period of conversion.
• Units of a close ended scheme may be rolled over by passing resolution by a majority of the
shareholders.
• No scheme other than unit linked schemes can be opened for more than 45 days.
• The AMC must specify in the offer document about the minimum subscription and the extent of
over subscription, which is intended to be retained. In the case of over subscription, all applicants
applying up to 500 units must be given full allotment subjected to over subscription.
• The AMC must refund the application money if minimum subscription is not received and also the
excess over subscription with in the six weeks of closure of subscription.
• Guaranteed returns can be provided in a scheme if such returns are fully guaranteed by the AMC or
sponsor. In such cases, there should be a statement indicating the name of the person, and the
manner in which the guarantee is to be made must be stated in the offer document.
• A close ended scheme shall be wound up on redemption date, unless it is rolled over, or if 75% of
the unit holders of a scheme pass a resolution of winding up of the scheme : if the trustee on
happening of any event, requires the scheme to be wound up: or if SEBI, so directed in the interest
of investors.
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1.10 PROFILE OF MUTUAL FUNDS
Mutual funds now represent perhaps the most appropriate investment opportunity for the most
investors. As financial markets become more sophisticated and complex, investors need a financial
intermediary who provides the required knowledge and professional expertise on successful investing.
It is no wonder then that in the birthplace of mutual fund-the U.S.A. - the fund industry has already
overtaken the banking industry, more funds being under mutual fund management than deposited with
banks.
The Indian mutual fund industry has already started opening up many of the exciting investment
opportunities to Indian investors. We have started witnessing the phenomenon of more saving now
being entrusted to the funds than to the banks. Despite the expected continuing growth in the industry,
mutual funds are still a new financial intermediary in India. Hence, it is important that the investors, the
mutual fund agents/distributors the investment advisors and even fund employees acquire better
knowledge of what mutual funds are, what they can do for investors and what they cannot, and how
they function differently from other intermediaries such as the banks.
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health of capital market. Mutual funds have imparted much needed liquidity into the financial system
and challenged the hitherto dominant role of banking and financial institution in the capital markets.
When you invest in a mutual fund, your money is pooled with other investors’ money
in the fund you receive units, or shares, in the fund in exchange for the money you
invest.
The fund uses the money received from investors to buy investors to buy investments, which are held in
trust on behalf of the investors by a custodian the custodian must be either a Canadian chartered bank
or a large trust company.
Each mutual fund is managed by a professional manager. The fund manager invests the money in a
variety of investments, and charges the fee for providing this service
Schemes
Growth Income Income & Sectoral Special Tax saving Others Growth
Purpose
Equity Bonds Metals Real estate Money Market Security Price Others
Indices
In Mutual Funds, Assured Return Schemes are those schemes that assure a specific return to the unit
holders irrespective of performance of the scheme. A scheme cannot promise returns unless such
returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer
document. Investors should carefully read the offer document whether return is assured for the entire
period of the scheme or only for a certain period. Some schemes assure returns one year at a time and
they review and change it at the beginning of the next year.
An investor must mention clearly his name, address, number of units applied for and such other
information as required in the application form. He must give his bank account number so as to avoid
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any fraudulent encashment of any cheque/draft issued by the mutual fund at a later date for the purpose
of dividend or repurchase. Any changes in the address, bank account number, etc at a later date should
be informed to the mutual fund immediately.
An abridged offer document, which contains very useful information, is required to be given to the
prospective investor by the mutual fund. The application form for subscription to a Mutual Fund is an
integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document.
An investor, before investing in a Mutual Fund scheme, should carefully read the offer document. Due
care must be given to portions relating to main features of the Mutual Fund, risk factors, initial issue
expenses and recurring expenses to be charged to the Mutual Fund entry or exit loads, sponsor’s track
record, educational qualification and work experience of key personnel including fund managers,
performance of other Mutual Fund schemes launched by the mutual fund in the past, pending litigations
and penalties imposed, etc.
Yes. They Can However, no change in the nature or terms of the scheme, known as fundamental
attributes of the Mutual Fund e.g. structure, investment pattern, etc. can be carried out unless a written
communication is sent to each unit holder and an advertisement is given in one English daily having
nationwide circulation and in a newspaper published in the language of the region where the head
office of the mutual fund is situated. The unit holders have the right to exit the Mutual Fund at the
prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual
funds are also required to follow similar procedure while converting the scheme form close-ended to
open-ended scheme and in case of change in sponsor.
The mutual funds are required to inform any material changes to their unit holders. Apart from it, many
mutual funds send quarterly newsletters to their investors.
At present, offer documents are required to be revised and updated at least once in two years. In the
meantime, new investors are informed about the material changes by way of addendum to the offer
document till the time offer document is revised and reprinted.
The performance of a Mutual Fund is reflected in its net asset value (NAV) which is disclosed on daily
basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs
of mutual funds are required to be published in newspapers. The NAVs are also available on the web
sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of
Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access
NAVs of all mutual funds at one place
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The mutual funds are also required to publish their performance in the form of half-yearly results which
also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and
since inception of schemes. Investors can also look into other details like percentage of expenses of
total assets as these have an affect on the yield and other useful information in the same half-yearly
format.
The mutual funds are also required to send annual report or abridged annual report to the unit holders at
the end of the year.
Various studies on mutual fund schemes including yields of different schemes are being published by
the financial newspapers on a weekly basis. Apart from these, many research agencies also publish
research reports on performance of mutual funds including the ranking of various schemes in terms of
their performance. Investors should study these reports and keep themselves informed about the
performance of various schemes of different mutual funds.
Investors can compare the performance of their schemes with those of other mutual funds under the
same category. They can also compare the performance of equity oriented schemes with the
benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc.
On the basis of performance of the mutual funds, the investors should decide when to enter or exit from
a mutual fund scheme
The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis
which are published in the newspapers. Some mutual funds send the portfolios to their unit holders. The
scheme portfolio shows investment made in each security i.e. equity, debentures, money market
instruments, government securities, etc. and their quantity, market value and % to NAV. These
portfolio statements also required to disclose illiquid securities in the portfolio, investment made in
rated and unrated debt securities, non-performing assets (NPAs), etc. Some of the mutual funds send
newsletters to the unit holders on quarterly basis which also contain portfolios of the schemes.
Almost all the mutual funds have their own web sites. Investors can also access the NAVs, half-yearly
results and portfolios of all mutual funds at the web site of Association of mutual funds in India
(AMFI) www.amfiindia.com. AMFI has also published useful literature for the investors.
Investors can log on to the web site of SEBI www.sebi.gov.in and go to "Mutual Funds" section for
information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual
funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of
information on mutual funds is given. There are a number of other web sites which give a lot of information of
various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful
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information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to
guide them in this regard.
Sales Load
It is a charge collected by a scheme when it sells the units? It is also called 'Front-end' Load.
CHAPTER - II
REVIEW OF LITERATURE
A. Kumar Vijay
Mutual Funds have opened salutary avenues for development of capital market and mobilizing
savings. For their orderly growth, it is pertinent that he investors interest should be protected. After
investment, services of a high order and quality should be guaranteed. The encouraging public response
to the Mutual Funds reveals the potential of mobilizing the savings of the masses for industrial finance.
The securities scam and the subsequent fall in the share prices have made the public reluctant to invest
their savings in the stock market and Mutual Funds can make use of this opportunity to mobilize the
savings of the economy.
The managers of the mutual funds have to accept the challenge to analyse the needs and
investment preference of the investors and device schemes to suit their needs. Indeed, with the entry of
private sector mutual funds, this industry is posed for a tremendous growth. No doubt, mutual funds
will have a major role in mobilizing the savings of the household sector, in the years to come.
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Dua Monika
The mutual fund industry in India is at the stage of infancy but is slowly and steadily progressing
towards the stage of growth. And from the passage from growth to popularity it will be obvious to the
investor in India that the industry has maximum potential and benefits to the investor. This combined
with the ever-increasing players in the MF market promises to make it one of most exciting areas in the
field of finance.
However, in the fact of intensive competition success will come only to those MF’s who prove
their mettle in the market. This will include:
- Reliability of investment performance
- Understanding Investor needs while designing investment schemes.
- Quality of post sale service given to clients.
Singh Paramjit
The encouraging public response to the mutual funds reveals the potential of mobilizing the
savings of the masses for industrial finance. The mutual fund need amendments and modifications with
respect to have a uniform rules and regulations for governing mutual funds, disclosure of information,
listing of mutual funds in stock exchanges, disallowing private sector in entering mutual fund business,
removing urban biasness, limit of investment of a mutual fund company should be lowered.
Nayak Mahesh
The typical equity investor in India is a seasonal investor, who tends to rush into a bull market
and gets carried away with the good returns from diversified schemes,” says Hemant Rustagi, CEO,
Wiseinvest Advisors. This is a perfect description. And when the market gets volatile, like now, or
when it slides, the retail investor, trapped without an exit route, pulls out of equity altogether, opting to
go with small savings, debt instruments and other assured return, low-risk avenues.
Is there no middle path? For the conservative investor who would like to start flirting with equity, there
are index funds. However, this option has been largely out of favour with Indian investors. And for
obvious reasons. Returns generated by diversified funds have consistently beaten those by index funds.
In the past year, diversified funds have given an average return of 49 per cent compared to 37 per cent
by index funds.
Kirkire Sandesh
Over the last few years, the Indian financial system has undergone sea changes. The most
remarkable of them is the evolution of investor preference in
favour of market-linked investment vehicles, as compared to conventional assured return
instruments. The same is evident from the fact that the asset under management with mutual funds
(excluding UTI) have grown from about Rs.35,000 crore in March 2000 to over Rs.2,07,000 crore in
January 2007.
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CHAPTER - III
RESEARCH METHODOLOGY
CHAPTER – III
3.1 RESEARCH PROBLEM
The purpose of this project was “Analysis of investments in Mutual funds”.
3.5 POPULATION
The population consists of investors in Chandigarh.
An analysis has been done as per the objectives and attempt has been done to study each and every
parameter to make it more useful and to the mark. effort has been done so that information collected is
correct for the subject studied but there are some limitations which are as follow.
• Study has been undertaken only on 100 investors of Chandigarh which cannot provide the
information of general public.
• Data collected is from different sources. Mainly secondary data which might have changed or
fluctuated.
• Analysis in done on 100 investors only. So the same cannot be imposed on whole population.
• The time constraint was one of the major problem.
• The lack of information sources for analysis part.
CHAPTER-IV
ANALYSIS AND INTERPRETATION
The present chapter includes the analysis of the primary data collected from the investors through the
questionnaires.
A total of 100 investors were taken and were personally interviewed with the help of structured
questionnaire to get the information regarding the awareness level of Mutual Fund schemes.
4.1 According to the first objective, "To study the investor knowledge and awareness about
various mutual fund schemes present in the market", the following results are:
Table 4.1(a) : No. of investors who are investing in Mutual Fund schemes present in India
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OPTIONS NO. OF INVESTORS
YES 72%
NO 28%
NO. OF INVESTORS
NO
28%
YES
72%
From the above pie chart, it is clear that 72% of the investors invest in Mutual Fund schemes present in
India and 28% investors are not aware about Mutual Fund schemes. This shows that more than half of
the investors are aware about Mutual Fund schemes.
Table 4.1 (b): Factors which are considered by investor while selecting the scheme for investment
RANK GIVEN
Factor
considered for
1 2 3 4
investment
Tax benefit 31 31 10 0
Return 29 13 21 9
Liquidity 8 14 14 36
Saving 3 16 25 28
The following chart shows the pictorial view of the above statistical data:
Chart showing Factors Considered by the Investor for Investment
fa
28
➢ More of the people consider tax benefit as most important criteria for investment.As we can see
that 31 people has ranked it as 1st and another 31 ranked it as 2nd.
➢ People while making an investment also take return into account. But return has relatively less
important as compared to Tax Benefit.
A SME person is also considered about liquidity. But here we see that liquidity is not given
more importance.
Table 4.1(c) : Occupation of the investors who are investing in mutual funds
From the above table, it is clear that occupation of investors also influence there investment decision
14% of investors belong to business class, 80% of investors are salaried and 6% of investors are from'
other class like Pensioners, Retired. So, it is clear that the no. of salaried class people is greater than the
other class people. It's also clear that they have keen interest especially in investing in mutual fund
schemes so as to avail various benefits
s
Provided under these schemes such as regular income which is more important for salaried class people
and other benefits like tax benefits, for saving purpose etc.
Table:4.1 (d) Schemes which the investors prefer while making investment in mutual fund
From the above table, it is clear that 40 out of 72 investors prefer open ended schemes i.e 55% of
investors are preferring Open-ended scheme, 29% of investors are preferring Balanced Fund schemes,
3% of investors Close-ended schemes, 13% of investors money market mutual fund scheme and no
investor is preferring leverage funds. It also shows that the open-ended schemes suit to the investors
approximately two times more than the balanced fund schemes whereas the money market mutual
fund schemes suit to the investors seven times more than the closed fund schemes. It reflects that
investors prefer open-ended schemes more because they want to sustain the regular income along with
liquidity as these funds can be sold at any time.
60%
No. of 40%
Investors
20%
NO. OF INVESTORS
0%
Ope Clo Bal Mon Lev
NO. OF 55% 3% 28% 14% 0%
INVESTORS
Scheme
Table 4.1(e) :Information, which is required by the investor for selection of mutual fund scheme
to invest in:-
30
information about attributes affecting investment
decision in mutual fund
30
25
percentage
20
15 No. of Investors
10
5
0
Profitability
Any Other
Return/Yield
Attached
Maturity
Period
Risk
Rate of
From the above table, it is clear that 28% of investors required the rate; of return/yield information,
another 18% investors required the information related to maturity period, still another 27% investors
attributes
required profitability information, 22% investors required risk attached information and 5% investors
required other information like liquidity or investment portfolio etc. This shows that the investors are
greatly concerned with the information regarding rate of return and profitability. To some extent,
investors are also concerned with the risk attached factor also and then with the maturity period.
Investors are least concerned with the other factors such as market conditions, liquidity, investment
portfolio, investment strategy and company profile etc.
Table 4.1(f) Reason due to which respondents are reluctant for making investment in mutual fund
Reason No. of respondents % of
respondents
31
Bitter past 2 7.14%
experience
Lack of knowledge 14 50%
7 25%
Lack of confidence
Difficult scheme 2
selection 7.14 %
Inefficient advisor 3 10.7%
Total 28 100
The following pie chart shows the pictorial view of the above statistical data:
Chart showing reasons for not investing in Mutual Funds.
Most of the people donot invest in Mutual Funds because of lack of knowledge
(50%) and lack of confidence (25%).
➢ Some investors have difficulty in selection of schemes.
➢ Some of them are not getting proper guidance from their advisers.
Few no. of investors has bitter past experience so they decided that they do not invest in Mutual
Funds .
Table 4.1(g) Satisfaction level of investors investing in mutual funds in relation to returns,
liquidity, flexibility, safety, diversification.
Highly Satisfied Indifferent Dissatisfied High
satisfied dissatisfied
32
- Returns 19 33 8 7 5
- Liquidity 17 36 11 5 3
- Flexibility 15 29 12 9 7
- Safety 16 31 18 4 3
Returns:-
X F fx fx2 Percentage
5 19 95 475 26.3
3 8 24 72 11.11
2 7 14 28 9.72
1 5 5 5 6.94
Population mean = 4
Sample mean = ∑fx = 3.75
∑f
Assumption: Investors are satisfied by investing their money in mutual funds w.r.t Returns as reported by
majority of investors i.e 46%. To test whether this factor is applicable to all the investors.
1. It is parametric in nature.
2. Sample Size n = 100 , n> 30 .Therefore Z test is applicable
3. Standard deviation ,σ = 1.148
4. Standard error = 0.11
5. Level of significance = 5 %
6. Level of confidence = 95%
7. Two tail test is applicable
8. Hypothesis Setting
Ha = XS ≠ XP
9. Zc = | Xs –Xp |
33
Standard Error
= | 3.75 – 4 |
0.11
Inference :- The difference in two means is significant. We can genaralise the result to all investors who are
investing in mutual funds to earn satisfactory returns
7%
10% 26%
highly satisfied
11% satisfied
indifferent
dissatisfied
highly dissatisfied
46%
The above graph shows that nearly 70% of investors are satisfied by returns they get by
investment in mutual fund. Only 17% of investors are dissatisfied.thus mutual funds is useful tool
for earning the satisfactory returns.
LIQUIDITY:
X F fx fx2 percentage
5 17 85 425 23.6
4 36 144 576 50
34
3 11 33 99 15.3
2 5 10 20 6.94
1 3 3 3 4.16
Population mean = 4
Assumption: Investors are satisfied by investing their money in mutual funds w.r.t liquidity as reported by
majority of investors i.e 50%. To test whether this factor is applicable to all the investors.
1. It is parametric in nature.
2. Sample Size n = 100 , n> 30 .Therefore Z test is applicable
3. Standard deviation ,σ = 1.036
4. Standard error = 0.103
5. Level of significance = 5 %
6. Level of confidence = 95%
7. Two tail test is applicable
8. Hypothesis Setting
Ha = XS ≠ XP
9. Zc = | Xs –Xp |
Standard Error
= | 3.81 – 4 |
0.103
35
Inference :- The difference in two means is insignificant. We can generalise the result to all investors
investing in mutual fund.
4%
7%
24%
HIGHLY SATISFIED
15%
SATISFIED
INDIFFERENT
DISSATISFIED
HIGHLY DISSATISFIED
50%
The above graph shows more than 50% of investors are satisfied with investment in mutual funds
as far as liquidity is considered. Thus most of investors consider mutual funds as important tool
for investment so as to have liquidity in investment .15% of investors are indifferent and
remaining 11% are dissatisfied w.r.t liquidity provided by investment in mutual fund
FLEXIBILITY:-
X F fx fx2 percentage
5 15 75 375 20.83
3 12 36 108 16.7
2 9 18 36 12.5
1 7 7 7 9.72
Population mean = 4
Sample mean = ∑fx = 3.5
∑f
36
Assumption: Investors are satisfied by investing their money in mutual funds w.r.t liquidity as reported by
majority of investors i.e 50%. To test whether this factor is applicable to all the investors.
5. Level of significance = 5 %
6. Level of confidence = 95%
7. Two tail test is applicable
8. Hypothesis Setting
Ha = XS ≠ XP
9. Zc = | Xs –Xp |
Standard Error
= | 3.5 – 4 |
0.122
Inference :- The difference in two means is significant. We can generalise the result to all investors investing
in mutual fund.
37
% OF INVESTORS SATISFIED BY FLEXIBILITY
PROVIDED BY MUTUAL FUNDS
10%
21%
12% HIGHLY SATISFIED
SATISFIED
INDIFFERENT
17% DISSATISFIED
HIGHLY DISSATISFIED
40%
The pie chart shows that only 21% of investors are highly satisfied by investing in mutual funds
for the purpose of flexibility and 40% of investors are satisfied by investing in mutual fund for
achieving flexibility. 17% of investors have indifferent attitude. And nearly 22% of investors are
dissatisfied w.r.t flexibility provided by mutual funds.
SAFETY:-
X F fx fx2 percentage
5 16 80 400 22.2
3 18 54 162 25
2 4 8 16 5.56
1 3 3 3 4.16
Population mean = 4
Assumption: Investors are satisfied by investing their money in mutual funds w.r.t liquidity as reported by
majority of investors i.e 50%. To test whether this factor is applicable to all the investors.
38
1.It is parametric in nature.
3.Standard deviation ,σ = 1
4.Standard error = .1
5.Level of significance = 5 %
8. Hypothesis Setting
Ha = XS ≠ XP
9. Zc = | Xs –Xp |
Standard Error
= | 3.73 – 4 |
0.1
Inference :- The difference in two means is significant. We can generalise the result to all investors investing
in mutual fund.percentage of investors satisfied by safety provided by
investment in mutual funds
Now a day’s Mutual funds are becoming an investment option for people. When I told about benefits of
Mutual Fund to respondents and ask them will they consider Mutual Fund as an investment option in
future? Following table shows result of that question.
9%
yes
no
91%
40
The above chart shows that almost all the investors want to invest in mutual funds in future if they
assure tax benefits, high returns, liquidity, less risk and diversification. Provided proper knowledge
about various mutual fund schemes suiting there needs, more investors would like to invest in near
future.
4.2 According to the second objective, "To know about sources where respondents get
information about mutual funds", the following results are:
Table 4.2 (a): Sources for providing information to investors.
40
no. of respondents
35
30
25
20 Series1
15
10
5
0
r
t
er
s
he
en
on
nd
ok
ot
m
rs
ie
Br
se
pe
y
Fr
An
rt i
s
ve
le
Sa
Ad
sources
From the above chart, it is clear that out of 72 investors who have invested in Mutual Fund schemes,
52% of investors are satisfied that the advertisement provides them the proper information and 25%
investors get knowledge from brokers. Friends and salesperson have little contribution in motivating
them for investment So it shows that investors who are satisfied with the advertisement are twice than
other investors. This results that the advertisement is an effective media for providing the information
to the investors while making the investment decision and advertisement is the only media which helps
in providing the complete information to the investors regarding the schemes.
41
CHAPTER - V
SUMMARY & CONCLUSION
Summary of findings
Today almost every investor is aware about mutual funds and its schemes. As per report and
analysis most of the investor want to make investment in mutual funds
Salaried class people are keener investor in mutual fund than other to earn regular income
through different schemes.
• Advertisement in newspaper, magazine & pamphlets provide a make an effective media to take
decision among customers.
42
CHAPTER VI
SUGGESTIONS
• Mutual funds are still an urban phenomenon. Trust build up over time. Today still, there is a lack
of awareness about mutual fund. People have heard the name of mutual fund , but they actually
do not know the various schemes of mutual fund. So one of prime challenges in front of mutual
fund is lack of awareness.
• Media can provide more information by giving proper advertisement of schemes.
• Other categories than salaried class should be motivated to purchase mutual funds for
investments.
• To attract more investor’s mutual fund company should provide motive and objective of scheme
in advertisements.
• Some innovativeness is required in industry. It is imperative to be innovative
ahead of market trends.
43
• There is a need to educate investors about various schemes and benefits by
investing in mutual fund.
CHAPTER- VII
BIBLIOGRAPHY
1. Dua Monika “ Mutual funds In India : A study of investment management”
WEBSITES
• www.amfiindia.com
• www.investors.sebi.gov.in
• www.mutualfundindia.com
• www.ohioline.osu.edu
• www.personalfn.com
• www.scribd.com
• www.investopedia.com
QUESTIONNAIRE
(a) Name :
(b) Age :
(c) Occupation :
(d) Gender : Male
Female
1. Do you invest in Mutual Funds?
44
Yes
No
If answer to question 1 is “yes” answer the following;-
2. In which Mutual fund scheme have you currently invested?
(a) Open ended scheme
(b) Close ended scheme
(c) Balanced fund
(d) Money marked mutual fund
(e) Leverage funds
3. You primarily invest in mutual fund for (Rank according to your preference)
[ ] Tax Benefits
[ ] Returns
[ ] Liquidity
[ ] Savings
- Returns
- Liquidity
- Flexibility
- Safety
- Diversification
45
6. Your company does not invest in Mutual Fund because of
i. Bitter past experience [ ] Yes [ ] No [ ] May be
ii. Lack of Knowledge [ ] Yes [ ] No [ ] Maybe
iii. Lack of confidence in service being provided [ ] Yes [ ] No [ ] Maybe
iv. Difficulty in selection of schemes [ ] Yes [ ] No [ ] Maybe
v. In-efficient investment advisors [ ] Yes [ ] No [ ] May be
7. If Mutual Fund offer you Steady Returns, Tax Benefits, Liquidity, Diversification of Portfolio,
Lesser Risk would consider it as an investment option in the future?
[ ] Yes
[ ] No
[ ] May be
8. Would you be interested to know more about Mutual Funds?
[ ] Yes
[ ] No.
46