1

ACKNOWLEDGEMENT

I express my deep sense of gratitude to my teacher MR. Y.P SINGH for his unflinching
support and making himself available for discussion and providing as required facilities
whatever, whenever needed throughout duration of our project.

I also want to give my special thanks to my friends and batch mates who gave their
valuable time to me and helped me in this project.

At last I would like to give my thanks to all those persons who somehow directly and
indirectly helped me in making of this project.

Chulbul Pandey
PGDM-IInd Year
Enroll No: -1137
 2

INTRODUCTION

There are a lot of investment avenues available today in the financial market for an

investor with an investable surplus. He can invest in Bank Deposits, Corporate

Debentures, and Bonds where there is low risk but low return. He may invest in Stock of

companies where the risk is high and the returns are also proportionately high. The recent

trends in the Stock Market have shown that an average retail investor always lost with

periodic bearish tends. People began opting for portfolio managers with expertise in stock

markets who would invest on their behalf. Thus we had wealth management services

provided by many institutions. However they proved too costly for a small investor. These

investors have found a good shelter with the mutual funds.

CONCEPT OF MUTUAL FUND:

A mutual fund is a common pool of money into which investors place their contributions

that is 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 the total amount of the fund Mutual Funds are trusts, which accept savings from

investors and invest the same in diversified financial instruments in terms of objectives set

out in the trusts deed with the view to reduce the risk and maximize the income and

capital appreciation for distribution for the members. A Mutual Fund is a corporation and

the fund manager’s interest is to professionally manage the funds provided by the

investors and provide a return on them after deducting reasonable management fees.
 3

The objective sought to be achieved by Mutual Fund is to provide an opportunity for

lower income groups to acquire without much difficulty financial assets. They cater

mainly to the needs of the individual investor whose means are small and to manage

investors portfolio in a manner that provides a regular income, growth, safety, liquidity

and diversification opportunities.

DEFINITION:

“Mutual funds are collective savings and investment vehicles where savings of small (or

sometimes big) investors are pooled together to invest for their mutual benefit and returns

distributed proportionately”.

“A mutual fund is an investment that pools your money with the money of an unlimited

Number of other investors. In return, you and the other investors each own shares of the

fund”.

The fund’s assets are invested according to an investment objective into the fund's

portfolio of investments. Aggressive growth funds seek long-term capital growth by

investing primarily in stocks of fast-growing smaller companies or market segments.

Aggressive growth funds are also called capital appreciation funds”.

The securities and Exchange Board Of India (Mutual Fund) Regulations,1993 defines a
mutual fund as “A fund establish in the form of a trust by a sponsor ,to raise monies by the
trustees trough the sale of unit to public ,under one or more scheme ,for investing in
securities in accordance with these regulations”.

These mutual fund are referred to the Unit Trust In UK and open end investment companies
in U.S.A, Therefore, Kamm J.O. defines an open end investment company as “An
 4

organization formed for the investment of fund obtain from individual and institutional
investors who in exchange for the fund receive shares which can be redeemed at any time at
there underlying assets values”.

According to western J. Fred Brigham, Eugene ,f. Unit Trust are “Corporation which accept
dollar forms saver and use these dollars to buy stock, long term bonds, short term dept
instrument issued by business or govt. units; this corporation pool fund and thus reduce risk
by diversification”.

Thus, mutual funds are corporation which pool fund by selling their own shares and reduce
risk by diversification.

ADVANTAGES OF MUTUAL FUNDS

If mutual funds are emerging as the favorite investment vehicle, it is because of the many

advantages they have over other forms and the avenues of investing, particularly for the

investor who has limited resources available in terms of capital and the ability to carry out

detailed research and market monitoring. The following are the major advantages offered

by mutual funds to all investors:

1. Portfolio Diversification:

Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to hold

a diversified investment portfolio even with a small amount of investment that would

otherwise require big capital.

2. Professional Management:

Even if an investor has a big amount of capital available to him, he benefits from the

professional management skills brought in by the fund in the management of the

investor’s portfolio. The investment management skills, along with the needed research
 5

into available investment options, ensure a much better return than what an investor can

manage on his own. Few investors have the skill and resources of their own to succeed in

today’s fast moving, global and sophisticated markets.

3. Reduction/Diversification of Risk:

When an investor invests directly, all the risk of potential loss is his own, whether he

places a deposit with a company or a bank, or he buys a share or debenture on his own or

in any other from. While investing in the pool of funds with investors, the potential losses

are also shared with other investors. The 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 as also true of the transaction cost. The investor bears all the costs of

investing such as brokerage or custody of securities. When going through a fund, he has

the benefit of economies of scale; the funds pay 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. When

they invest in the units of a fund, they can generally cash their investments any time, by

selling their units to the fund if open-ended, or selling them in the market if the fund is

close-end. Liquidity of investment is clearly a big benefit.

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.

 6

DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

1. No Control over Costs:

An investor in a mutual fund has no control of the overall costs of investing. The investor

pays investment management fees as long as he remains with the fund, albeit in return for

the professional management and research. Fees are payable even if the value of his

investments is declining. A mutual fund investor also pays fund distribution costs, which

he would not incur in direct investing. However, this shortcoming only means that there is

a cost to obtain the mutual fund services.

2. No Tailor-Made Portfolio:

Investors who invest on their own can build their own portfolios of shares and bonds and

other securities. Investing through fund 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. However, most mutual fund managers help

investors overcome this constraint by offering families of funds- a large number of

different schemes- within their own management company. An investor can choose from

different investment plans and constructs a portfolio to 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 individual shares or bonds to select.
 7

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial

position, risk tolerance and return expectations etc. thus mutual funds has Variety of

flavors, Being a collection of many stocks, an investors can go for picking a mutual fund

might be easy. There are over hundreds of mutual funds scheme to choose from. It is

easier to think of mutual funds in categories, mentioned below:

 8

A). BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the year. These do

not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset

Value (“NAV”) related prices. The key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:

Closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can

invest in the scheme at the time of the initial public issue and thereafter they can buy or

sell the units of the scheme on the stock exchanges where they are listed. In order to

provide an exit route to the investors, some close-ended funds give an option of selling

back the units to the Mutual Fund through periodic repurchase at NAV related prices.

SEBI Regulations stipulate that at least one of the two exit routes is provided to the

investor.

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and close-

ended schemes. The units may be traded on the stock exchange or may be open for sale or

redemption during pre-determined intervals at NAV related prices.

 9

B). BY NATURE

1. Equity Fund:

These funds invest a maximum part of their corpus into equities holdings. The structure of

the fund may vary different for different schemes and the fund manager’s outlook on

different stocks. The Equity Funds are sub-classified depending upon their investment

objective, as follows:

 Diversified Equity Funds

 Mid-Cap Funds

 Sector Specific Funds

 Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on

the risk-return matrix.

2. Debt Funds:

The objective of these Funds is to invest in debt papers. Government authorities, private

companies, banks and financial institutions are some of the major issuers of debt papers.

By investing in debt instruments, these funds ensure low risk and provide stable income to

the investors. Debt funds are further classified as:

 Gilt Funds: Invest their corpus in securities issued by Government, popularly

known as Government of India debt papers. These Funds carry zero Default risk

but are associated with Interest Rate risk. These schemes are safer as they invest in

papers backed by Government.

 Income Funds: Invest a major portion into various debt instruments such as

bonds, corporate debentures and Government securities.

 10

 MIPs: Invests maximum of their total corpus in debt instruments while they take

minimum exposure in equities. It gets benefit of both equity and debt market.

These scheme ranks slightly high on the risk-return matrix when compared with

other debt schemes.

 Short Term Plans (STPs): Meant for investment horizon for three to six months.

These funds primarily invest in short term papers like Certificate of Deposits

(CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested

in corporate debentures.

 Liquid Funds: Also known as Money Market Schemes, These funds provides

easy liquidity and preservation of capital. These schemes invest in short-term

instruments like Treasury Bills, inter-bank call money market, CPs and CDs.

These funds are meant for short-term cash management of corporate houses and

are meant for an investment horizon of 1day to 3 months. These schemes rank low

on risk-return matrix and are considered to be the safest amongst all categories of

mutual funds.

3. Balanced Funds: As the name suggest they, are a mix of both equity and debt funds.

They invest in both equities and fixed income securities, which are in line with pre-

defined investment objective of the scheme. These schemes aim to provide investors with

the best of both the worlds. Equity part provides growth and the debt part provides

stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter

viz, Each category of funds is backed by an investment philosophy.

 11

C). BY INVESTMENT OBJECTIVE:

 Growth Schemes: Growth Schemes are also known as equity schemes. The aim

of these schemes is to provide capital appreciation over medium to long term.

These schemes normally invest a major part of their fund in equities and are

willing to bear short-term decline in value for possible future appreciation.

 Income Schemes: Income Schemes are also known as debt schemes. The aim of

these schemes is to provide regular and steady income to investors. These schemes

generally invest in fixed income securities such as bonds and corporate

debentures. Capital appreciation in such schemes may be limited.

 Balanced Schemes: Balanced Schemes aim to provide both growth and income

by periodically distributing a part of the income and capital gains they earn. These

schemes invest in both shares and fixed income securities, in the proportion

indicated in their offer documents (normally 50:50).

 Money Market Schemes: Money Market Schemes aim to provide easy liquidity,

preservation of capital and moderate income. These schemes generally invest in

safer, short-term instruments, such as treasury bills, certificates of deposit,

commercial paper and inter-bank call money.

 Load Funds: A Load Fund is one that charges a commission for entry or exit.

That is, each time you buy or sell units in the fund, a commission will be payable.

Typically entry and exit loads range from 1% to 2%. It could be worth paying the

load, if the fund has a good performance history.

 12

 No-Load Funds: A No-Load Fund is one that does not charge a commission for

entry or exit. That is, no commission is payable on purchase or sale of units in the

fund. The advantage of a no load fund is that the entire corpus is put to work.

OTHER SCHEMES:

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax

laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions

made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular index

such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of

only those stocks that constitute the index. The percentage of each stock to the total

holding will be identical to the stocks index weight age. And hence, the returns from such

schemes would be more or less equivalent to those of the Index.

 13

NET ASSET VALUE (NAV)

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 an investor holds needs to be assigned a

value. Since the units held by investor 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 one share. The value of an investor’s part ownership is thus

determined by the NAV of the number of units held.

Calculation of NAV: Let us see an example. If the value of a fund’s assets stands at Rs.

100 and it has 10 investors who have bought 10 units each, the total numbers of units

issued are 100, and the value of one unit is ` 10.00 (1000/100). If a single investor in fact

owns 3 units, the value of his ownership of the fund will be ` 30.00(1000/100*3). Note

that the value of the fund’s investments will keep fluctuating with the market-price

movements, causing the Net Asset Value also to fluctuate. For example, if the value of

our fund’s asset increased from Rs. 1000 to 1200, the value of our investors holding of 3

units will now be (1200/100*3) ` 36. The investment value can go up or down, depending

on the markets value of the fund’s assets.

 14

MUTUAL FUND FEES AND EXPENSES

Mutual fund fees and expenses are charges that may be incurred by investors who hold

mutual funds. Running a mutual fund involves costs, including shareholder transaction

costs, investment advisory fees, and marketing and distribution expenses. Funds pass

along these costs to investors in a number of ways.

1. TRANSACTION FEES

 Purchase Fee: It is a type of fee that some funds charge their shareholders when

they buy shares. Unlike a front-end sales load, a purchase fee is paid to the fund

(not to a broker) and is typically imposed to defray some of the fund's costs

associated with the purchase.

 Redemption Fee: It is another type of fee that some funds charge their

shareholders when they sell or redeem shares. Unlike a deferred sales load, a

redemption fee is paid to the fund (not to a broker) and is typically used to defray

fund costs associated with a shareholder's redemption.

 Exchange Fee: Exchange fee that some funds impose on shareholders if they

exchange (transfer) to another fund within the same fund group or “family of

funds”.

2. PERIODIC FEES

 Management Fee: Management fees are fees that are paid out of fund assets to

the fund's investment adviser for investment portfolio management, any other

management fees payable to the fund's investment adviser or its affiliates, and

administrative fees payable to the investment adviser that are not included in the

“Other Expenses” category. They are also called maintenance fees.

 15

 Account Fee: Account fees are fees that some funds separately impose on

investors in connection with the maintenance of their accounts. For example, some

funds impose an account maintenance fee on accounts whose value is less than a

certain dollar amount.

3. OTHER OPERATING EXPENSES

 Transaction Costs: These costs are incurred in the trading of the fund's assets.

Funds with a high turnover ratio or investing in illiquid or exotic markets usually

face higher transaction costs. Unlike the Total Expense Ratio these costs are

usually not reported.

RISK FACTORS OF MUTUAL FUNDS:

1. The Risk-Return Trade-Off: The most important relationship to understand is the

risk-return trade-off. Higher the risk greater the returns / loss and lower the risk

lesser the returns/loss. Hence it is up to you, the investor to decide how much risk

you are willing to take. In order to do this you must first be aware of the different

types of risks involved with your investment decision.

2. Market Risk: Sometimes prices and yields of all securities rise and fall. Broad

outside influences affecting the market in general lead to this. This is true, may it be

big corporations or smaller mid-sized companies. This is known as Market Risk. A

Systematic Investment Plan (“SIP”) that works on the concept of Rupee Cost

Averaging (“RCA”) might help mitigate this risk.

3. Credit Risk: The debt servicing ability (May it be interest payments or repayment

of principal) of a company through its cash flows determines the Credit Risk faced
 16

by you. This credit risk is measured by independent rating agencies like CRISIL

who rate companies and their paper. A ‘AAA’ rating is considered the safest

whereas a ‘D’ rating is considered poor credit quality. A well-diversified portfolio

might help mitigate this risk.

WORKING OF MUTUAL FUNDS

The mutual fund collects money directly or through brokers from investors. The money is

invested in various instruments depending on the objective of the scheme. The income
 17

generated by selling securities or capital appreciation of these securities is passed on to

the investors in proportion to their investment in the scheme. The investments are divided

into units and the value of the units will be reflected in Net Asset Value or NAV of the

unit. NAV is the market value of the assets of the scheme minus its liabilities. The per

unit NAV is the net asset value of the scheme divided by the number of units outstanding

on the valuation date. Mutual fund companies provide daily net asset value of their

schemes to their investors. NAV is important, as it will determine the price at which you

buy or redeem the units of a scheme. Depending on the load structure of the scheme, you

have to pay entry or exit load.

STRUCTURE OF A MUTUAL FUND

India has a legal framework within which Mutual Fund have to be constituted. In India

open and close-end funds operate under the same regulatory structure i.e. as unit Trusts. A

Mutual Fund in India is allowed to issue open-end and close-end schemes under a

common legal structure. The structure that is required to be followed by any Mutual Fund

in India is laid down under SEBI (Mutual Fund) Regulations, 1996.

The Fund Sponsor: Sponsor is defined under SEBI regulations as any person who,

acting alone or in combination of another corporate body establishes a Mutual Fund. The

sponsor of the fund is akin to the promoter of a company as he gets the fund registered

with SEBI. The sponsor forms a trust and appoints a Board of Trustees. The sponsor also

appoints the Asset Management Company as fund managers. The sponsor either directly

or acting through the trustees will also appoint a custodian to hold funds assets. All these

are made in accordance with the regulation and guidelines of SEBI.

 18

As per the SEBI regulations, for the person to qualify as a sponsor, he must contribute at

least 40% of the net worth of the Asset Management Company and possesses a sound

financial track record over 5 years prior to registration.

Mutual Funds as Trusts: A Mutual Fund in India is constituted in the form of Public

trust Act, 1882. The Fund sponsor acts as a settler of the Trust, contributing to its initial

capital and appoints a trustee to hold the assets of the trust for the benefit of the unit-

holders, who are the beneficiaries of the trust. The fund then invites investors to

contribute their money in common pool, by scribing to “units” issued by various schemes

established by the Trusts as evidence of their beneficial interest in the fund.

It should be understood that the fund should be just a “pass through” vehicle. Under the

Indian Trusts Act, the trust of the fund has no independent legal capacity itself, rather it is

the Trustee or the Trustees who have the legal capacity and therefore all acts in relation to

the trusts are taken on its behalf by the Trustees. In legal parlance the investors or the

unit-holders are the beneficial owners of the investment held by the Trusts, even as these

investments are held in the name of the Trustees on a day-to-day basis. Being public

trusts, Mutual Fund can invite any number of investors as beneficial owners in their

investment schemes.

Trustees: A Trust is created through a document called the Trust Deed that is executed by

the fund sponsor in favor of the trustees. The Trust- the Mutual Fund – may be managed

by a board of trustees- a body of individuals, or a trust company- a corporate body. Most

of the funds in India are managed by Boards of Trustees. While the boards of trustees are

governed by the Indian Trusts Act, where the trusts are a corporate body, it would also

require complying with the Companies Act, 1956. The Board or the Trust company as an

independent body, acts as a protector of the of the unit-holders interests. The Trustees do
 19

not directly manage the portfolio of securities. For this specialist function, the appoint an

Asset Management Company. They ensure that the Fund is managed by ht AMC as per

the defined objectives and in accordance with the trusts deeds and SEBI regulations.

THE ASSET MANAGEMENT COMPANIES

The role of an Asset Management Company (AMC) is to act as the investment manager

of the Trust under the board supervision and the guidance of the Trustees. The AMC is

required to be approved and registered with SEBI as an AMC. The AMC of a Mutual

Fund must have a net worth of at least ` 10 Crores at all times. Directors of the AMC,

both independent and non- independent, should have adequate professional expertise in

financial services and should be individuals of high morale standing, a condition also

applicable to other key personnel of the AMC. The AMC cannot act as a Trustee of any

other Mutual Fund. Besides its role as a fund manager, it may undertake specified

activities such as advisory services and financial consulting, provided these activities are

run independent of one another and the AMC’s resources (such as personnel, systems

etc.) are properly segregated by the activity. The AMC must always act in the interest of

the unit-holders and reports to the trustees with respect to its activities.

Custodian and Depositories:

Mutual Fund is in the business of buying and selling of securities in large volumes.

Handling these securities in terms of physical delivery and eventual safekeeping is a

specialized activity. The custodian is appointed by the Board of Trustees for safekeeping

of securities or participating in any clearance system through approved depository

companies on behalf of the Mutual Fund and it must fulfill its responsibilities in
 20

accordance with its agreement with the Mutual Fund. The custodian should be an entity

independent of the sponsors and is required to be registered with SEBI. With the

introduction of the concept of dematerialization of shares the dematerialized shares are

kept with the Depository participant while the custodian holds the physical securities.

Thus, deliveries of a fund’s securities are given or received by a custodian or a depository

participant, at the instructions of the AMC, although under the overall direction and

responsibilities of the Trustees.

Bankers: A Fund’s activities involve dealing in money on a continuous basis primarily

with respect to buying and selling units, paying for investment made, receiving the

proceeds from sale of the investments and discharging its obligations towards operating

expenses. Thus the Fund’s banker plays an important role to determine quality of service

that the fund gives in timely delivery of remittances etc.

Transfer Agents: Transfer agents are responsible for issuing and redeeming units of the

Mutual Fund and provide other related services such as preparation of transfer documents

and updating investor records. A fund may choose to carry out its activity in-house and

charge the scheme for the service at a competitive market rate. Where an outside Transfer

agent is used, the fund investor will find the agent to be an important interface to deal

with, since all of the investor services that a fund provides are going to be dependent on

the transfer agent.

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA

 21

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.These

regulations make it mandatory for mutual fund to have three structures of sponsor trustee

and asset Management Company. The sponsor of the mutual fund and appoints the

trustees. The trustees are responsible to the investors in mutual fund and appoint the AMC

for managing the investment portfolio. The AMC is the business face of the mutual fund,

as it manages all the affairs of the mutual fund. The AMC and the mutual fund have to be

registered with SEBI.

SEBI REGULATIONS

 As far as mutual funds are concerned, SEBI formulates policies and regulates the

mutual funds to protect the interest of the investors.

 SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds

sponsored by private sector entities were allowed to enter the capital market.

 The regulations were fully revised in 1996 and have been amended thereafter from

time to time.

 SEBI has also issued guidelines to the mutual funds from time to time to protect

the interests of investors.

 All mutual funds whether promoted by public sector or private sector entities

including those promoted by foreign entities are governed by the same set of

Regulations. The risks associated with the schemes launched by the mutual funds

sponsored by these entities are of similar type. There is no distinction in regulatory

requirements for these mutual funds and all are subject to monitoring and

inspections by SEBI.
 22

 SEBI Regulations require that at least two thirds of the directors of trustee

company or board of trustees must be independent i.e. they should not be

associated with the sponsors.

 Also, 50% of the directors of AMC must be independent. All mutual funds are

required to be registered with SEBI before they launch any scheme.

 Further SEBI Regulations, inter-alia, stipulate that MFs cannot guarantee returns

in any scheme and that each scheme is subject to 20 : 25 condition [I.e. minimum

20 investors per scheme and one investor can hold more than 25% stake in the

corpus in that one scheme].

MUTUAL FUNDS IN INDIA

In 1963, the day the concept of Mutual Fund took birth in India. Unit Trust of India

invited investors or rather to those who believed in savings, to park their money in UTI

Mutual Fund.

For 30 years it goaled without a single second player. Though the 1988 year saw some

new mutual fund companies, but UTI remained in a monopoly position.

The performance of mutual funds in India in the initial phase was not even closer to

satisfactory level. People rarely understood, and of course investing was out of question.

But yes, some 24 million shareholders were accustomed with guaranteed high returns by

the beginning of liberalization of the industry in 1992. This good record of UTI became

marketing tool for new entrants. The expectations of investors touched the sky in

profitability factor. However, people were miles away from the preparedness of risks

factor after the liberalization.

 23

The net asset value (NAV) of mutual funds in India declined when stock prices started

falling in the year 1992. Those days, the market regulations did not allow portfolio shifts

into alternative investments. There was rather no choice apart from holding the cash or to

further continue investing in shares. One more thing to be noted, since only closed-end

funds were floated in the market, the investors disinvested by selling at a loss in the

secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market

scandal, the losses by disinvestments and of course the lack of transparent rules in the

where about rocked confidence among the investors. Partly owing to a relatively weak

stock market performance, mutual funds have not yet recovered, with funds trading at an

average discount of 1020 percent of their net asset value.

The securities and Exchange Board of India (SEBI) came out with comprehensive

regulation in 1993 which defined the structure of Mutual Fund and Asset Management

Companies for the first time.

The supervisory authority adopted a set of measures to create a transparent and

competitive environment in mutual funds. Some of them were like relaxing investment.

Restrictions into the market, introduction of open-ended funds, and paving the gateway

for mutual funds to launch pension schemes.

The measure was taken to make mutual funds the key instrument for long-term saving.

The more the variety offered, the quantitative will be investors.

Several private sectors Mutual Funds were launched in 1993 and 1994. The share of the

private players has risen rapidly since then. Currently there are 34 Mutual Fund

organizations in India managing 1, 02,000 crores.

 24

At last to mention, as long as mutual fund companies are performing with lower risks and

higher profitability within a short span of time, more and more people will be inclined to

invest until and unless they are fully educated with the dos and don’ts of mutual funds.

Mutual fund industry has seen a lot of changes in past few years with multinational

companies coming into the country, bringing in their professional expertise in managing

funds worldwide. In the past few months there has been a consolidation phase going on in

the mutual fund industry in India. Now investors have a wide range of Schemes to choose

from depending on their individual profiles.

 25

Major Mutual Fund Companies in India:

 ABN AMRO Mutual Fund,

 Birla Sun Life Mutual Fund,

 Bank of Baroda Mutual Fund,

 HDFC Mutual Fund,

 HSBC Mutual Fund,

 ING Vysya Mutual Fund,

 Prudential ICICI Mutual Fund,

 State Bank of India Mutual Fund,

 Tata Mutual Fund,

 Unit Trust of India Mutual Fund,

 Reliance Mutual Fund,

 Standard Chartered Mutual Fund,

 Franklin Templeton India Mutual Fund,

 Morgan Stanley Mutual Fund India,

 Escorts Mutual Fund,

 Alliance Capital Mutual Fund,

 Benchmark Mutual Fund,

 Can bank Mutual Fund,

 Chola Mutual Fund,

 LIC Mutual Fund,

 GIC Mutual Fund.

 26

CONCLUSION

Mutual Funds now represent perhaps most appropriate investment opportunity for 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. As the investor always try to maximize the returns and minimize the

risk. Mutual fund satisfies these requirements by providing attractive returns with

affordable risks. The fund industry has already overtaken the banking industry, more

funds being under mutual fund management than deposited with banks. With the

emergence of tough competition in this sector mutual funds are launching a variety of

schemes which caters to the requirement of the particular class of investors. Risk takers

for getting capital appreciation should invest in growth, equity schemes. Investors who

are in need of regular income should invest in income plans.

The stock market has been rising for over three years now. This in turn has not only

protected the money invested in funds but has also to help grow these investments.

This has also instilled greater confidence among fund investors who are investing more

into the market through the MF route than ever before.

Reliance India mutual funds provide major benefits to a common man who wants to make

his life better than previous.

 27

BIBLIOGRAPHY

REFERENCE BOOK:

 FINANCIAL MARKET AND SERVICES- Gordon and Natarajan.

 INVESTMENT MANAGEMENT - V.K.Bhalla

 RESEARCH METHODOLOGY – Kothari.

WEBSITE:

 www.mutualfundindia.com

 www.indiamarkets.com

 www.utimf.com

 www.reliancemutual.com

 www.amfiindia.com

 www.karvy.com

 www.sebi.gov.in

 www.moneycontrol.com