MUTUAL FUND

1.1 INTRODUCTION The research methodology is the conceptual structure within which the research is conducted.

1.2 TITLE: A COMPREHENSIVE STUDY ON MUTUAL FUND.

1.3 NEED AND SCOPE OF THE STUDY: A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. As stated earlier, a mutual fund is nothing but a pool of the investors fund. The special feature of a mutual fund is that the contributors and the beneficiaries of the fund are one and the same class of people i.e., investors. Nobody else can claim that fund. Since the investors themselves contribute to the pool of fund and enjoy it and its fruits, the term Mutual have been employed.

1.4 OBJECTIVES OF THE STUDY: 1. To get insight knowledge about mutual fund 2. To know the importance of mutual fund 3. To know the mutual fund performance on present market 4. To know the awareness of mutual fund among different groups of investors

1.5 LIMATITATION OF THE STUDY 1. It is one time study. 2. Some of the persons were not so responsive. 3. Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire.

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Mutual funds have become a hot favorite of millions of people all over the world. The driving force of mutual fund is the safety of the principal guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. People prefer Mutual Funds to bank deposits, life insurance and even bond because with a little money, they can get into the investment game. One can own string blue chips like ITC, TISCO, Reliance etc., through mutual funds. Thus, mutual funds act as a gateway to enter into big companies hitherto inaccessible to an ordinary investor with his small investment. In the current economic scenario interest rates are falling and fluctuation I the share market have put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues. Over the past decades mutual funds have grown intensely in popularity and have experienced a Considerable growth rate. Mutual funds are popular because they make it easy for small investors to invest their money in a diversified pool of securities. As the mutual fund industry has evolved over the years, there have arisen many questions about the nature of operations and characteristics of these funds. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. Mutual fund industry today is one of the most preferred investment avenues in India. Like all investment, they also carry certain risks. The investors compare the risks & expected fields after adjustment to tax on various instrument while taking investments decision. Mutual fund is the better investment plan Stock markets have been one of the major avenues for investing. Investors have been focusing their attention mostly on large capitalization stocks. They used to invest most of their money only in large capitalization stocks. But, lately it has been observed that few medium capitalization stocks have been giving returns better than large capitalization stocks. Portfolio manager evaluates his portfolio performance and identifies the source of strength and weakness. The evaluation of portfolio provides a feed back about the performance to evolve better management strategy. Even though evaluation of portfolio performance is considered to be the last stage of investment process, it is a continuous process. The managed portfolios are commonly known as mutual funds. Various managed portfolio are prevalent in the capital market. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day.

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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. An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. 2.1 Meanings: Mutual Funds Definition refers to the meaning of Mutual Fund, which is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner. Before investing they carry out thorough research and detailed analysis on the market

MUTUAL FUND

Conditions and market trends of stock and bond prices. These things help the fund mangers to speculate properly in the right direction. Mutual Fund A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. 2.3 MUTUAL FUND-CONCEPT A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it instocks, bonds, short-term money market instruments, and other securities. The mutual fund has a fund manager who trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually. According to SEBI (Mutual Fund) Regulations 1993, Mutual Fund is "a fund established in the form of a trust by a sponsor to raise money by the trustees through the sale of units to the public under one or more schemes for investing securities in accordance with these regulations.A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. Hence it the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unitholder.Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities, which is determine every day. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

MUTUAL FUND

OPERATION OF MUTUAL FUND

2.4 ORGANISATION OF MUTUAL FUND

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There are many entities involved and the diagram below illustrates the organizational set up of a Mutual fund: Sponsor: The sponsor is the promoter of the mutual fund. The sponsor establishes the Mutual fund &registers the same with SEBI. He appoints the trustees, Custodians & the AMC with prior approval of SEBI, & in accordance with SEBI regulations. He must have at least five year track record of business interest in the financial markets. Sponsor must have been profit making in at least three of the above five years. He must contribute at least 40% of the capital of the AMC. Trustees: The Mutual Fund may be managed by a Board of Trustees of individuals, or a trust company a corporate body. Most of the funds in India are managed by board of trustees. While the board of trustees is governed by the provisions of the Indian trust act, where the trustee is the corporate body, it would also be required to comply with the provisions of the companies act, 1956. The board of trustee company, as an independent body, act as protector of the unit-holders interest. The trustees dont directly manage the portfolio of securities. For this specialist function, they appoint an AMC. They ensure that the fund is managed by AMC as per the defined objectives &in accordance with the trust deed & SEBI regulations. Asset Management Company (AMC): The role of an Asset management companies is to act as the investment manager of the trust. They are the ones who manage money of investors. An AMC takes decisions, compensates investors through dividends, maintains proper accounting & information for pricing of units, calculates the NAV, & provides information on listed schemes. It also exercises due diligenceon investments & submits quarterly reports to the trustees. AMCs have been set up in various countries internationally as an answer to the global problem of bad loans. Types of AMCs in Indian Context: The following are the various types of AMCs we have in India:AMCs owned by banks.AMCs owned by financial institutions.AMCs owned by Indian private sector companies.AMCs owned by foreign institutional investors.AMCs owned by Indian & foreign sponsors. Custodian: Often an independent organization, it takes custody all securities & other assets of mutual fund. Its responsibilities include receipt & delivery of securities collecting income-distributing dividends, safekeeping of the unit & segregating assets & settlements between schemes. A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to be the custodian of the assets of the fund &perhaps the third one to handle registry work for the unit holder of the fund.

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Agent(R & T Registrars & Transfer Agent): The Registrars & Transfer Agents(R & T Agents) are responsible for the investor servicing function, as they maintain the records of investors in mutual funds. They process investor applications; record details provide by the investors on application forms; send out to investors details regarding their investment in the mutual fund; send out periodical information on the performance of the mutual fund; process dividend payout to investor; incorporate changes in information as communicated by investors; & keep the investor record up-to-date, by recording new investors & removing investors who have withdrawn their funds. SEBI Securities and Exchange Board of India: It is a board (autonomous body) created by the Government of Indian 1988 and given statutory form in 1992 with the SEBI Act 1992 with its head office atMumbai.SEBI acts as the nodal agency for addressing complaints of the investor, if they are not solved directly between the parties concerned, or if the investor is not happy with the response.SEBI has listed certain categories of grievances for which investors can file complaints with it. These include: on-receipt of refund order or allotment advice in case of investment in IPO's, FPO's and rightsissuesNonreceipt of dividend from listed companies on-receipt of share certificates after transfer from listed companies on-receipt of debentures after transfer or non-receipt of interest or principal on redemption andnon-receipt of interest on delayed repayment on-receipt of rights offer letter Brokers -Complaints against brokers stem from disputes over brokerage rates, non-receipt of purchased shares or payments for sold shares, auction of shares sold and delivered timely, but delay at broker's end, etc Complaints against securities lending intermediaries may arise due to non-receipt of shares lent by the investor or interest thereupon, or non-receipt of funds upon return of borrowed shares or excessive interest charged upon borrowing. Complaints against merchant bankers, registrar and transfer agents, bankers to issues and underwriters generally stem from problems in primary market issues, like non-disclosures, service issues etc.Complaints against securities exchanges, clearing or settlement houses or depositories - these concern irregularities or failure to act diligently, Derivative trading - Investors sign legal papers empowering the broker to trade on their behalf, without proper knowledge and wake up on seeing their margin money eroded due to sustained losses.

MUTUAL FUND

2.5 METHOD OF MEASURING MUTUAL FUND: Compounded Average Annual Return Method: This method is basically used for calculating the return for more than 1 year. In this method return is calculated with the following formula: A = P X (1 + R / 100) N Where P = Principal invested = maturity value = period of investment in years = Annualized compounded interest rate in %R = {(Nth root of A / P) 1} X 100E. g: If amount invested is Rs. 100 & in the end we get return of Rs. 200 & period of Investment is 10 years then annualized compounded return is200 = 100 (1 + R / 100) 10 Rate= 7.2 % Total Return when dividend is reinvested: This method is also called the return noninvestment (ROI) method. Here, the dividends are reinvested into the scheme as soon as they are received at the then prevailing NAV.Ex-dividend NAV = [(Value of holdings at the end of the period/ value of the holdings atthe beginning) 1)*100]E.g. an investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007. On June 30,2007. He receives dividends at the rate of 10%. The ex-dividend NAV was Rs. 10.25. On December 31, 2007, the funds NAV was Rs. 12.25.Value of holdings at the beginning period= 10.5*100= 1050Number of units re-invested = 100/10.25 = 9.756End period value of investment = 109.756*12.25 = 1344.51 Return on Investment= ((1344.51/1050)-1)*100= 28.05% Total Return Method: The total return method takes into account the dividends distributed by the mutual fund, and adds it to the NAV appreciation, to arrive at returns. Total Return=(Dividend distributed + Change in NAV)/ NAV at the start X 100Ex: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in between dividend of Rs. 4 has been distributed then Total Return= {4 + (22 20)}/20 X 100 = 30% Simple Annual Return Method: Converting a return value for a period other than one year, into a value for one year, is called as animalization. In order to annualize a rate, we find out what the return would before a year, if the return behaved for a year, in the same manner it did, for any other fractional period.Ex: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months then Annual Return= (22 20) /20 X 12/6 X 100 = 20% Absolute Return Method:Percentage change in NAV is an absolute measure of return, which finds the NAV appreciation between two points of time, as a percentage.Ex: If NAV of one fund changes from Rs.20 to Rs.22 in 12 months then

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Absolute return= (22 20)/20 X 100 =10% SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a closed-fund). On the other side, a fund may sell new units at aprice that is different from the NAV, but the sale price cannot be higher than 107 % of NAV. Also the difference between the repurchase price and the sale price of the unit is not permitted to exceed 7% of the sale price Units Sold or Redeemed. Other Assets and Liabilities. Valuation of all Investment Securities. Purchase or Sale of Investors Securities. Funds NAV is affected by Pay: Other PayablesLia: Other Liabilities (Custodian and Management Fees) COMPUTATION OF NAV: The net assets represent the market value of assets, which belong to the investors, on a givendate.Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the fund, in net asset terms. Following are the regulatory requirements and accounting definitions laid down bySEBI:NAV = Net Asset of the Scheme / Number of Units Outstanding= MVL+ REC+ AI+ Asset AE Pay LiaNo .of Units Outstanding as at the NAV date Where MVL: Market value of InvestmentREC: Receivables: Other Accrued Income Asset: Other Assets (Dividend yet to be received)AE: Accrued Expenses If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

INVESTMENT STRATEGIES: Systematic Investment Plan: A fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAVis high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) Systematic Transfer Plan: Under this an investor invests in debt oriented fund and gives instructions to transfer afixed sum, at a fixed interval, to an equity scheme of the same mutual fund. Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

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Portfolio A collection of various company shares, fixed interest securities or money-market instruments. People may talk grandly of 'running a portfolio' when they own a couple of shares but the characteristic of a serious investment portfolio is diversity. It should show a spread of investments to minimize risk - brokers and investment advisers warn against 'putting all your eggs in one basket'. Portfolio Management Portfolio management involves deciding what assets to include in the portfolio, given the goals of the portfolio owner and changing economic conditions. Selection involves deciding what assets to purchase, how many to purchase, when to purchase them, and what assets to divest. These decisions always involve some sort of performance measurement, most typically expected return on the portfolio, and the risk associated with this return (i.e. the standard deviation of the return). Portfolio Evaluation Portfolio evaluation refers to the evaluation of the performance of the portfolio. It is essentially the process of comparing the return earned on a portfolio with the return earned on one or more other portfolios or on a benchmark portfolio. Portfolio evaluation essentially comprises two functions, performance measurement and performance evaluation.

Equity Funding The term equity funding is the exchange of money for a share of business. This allows you to obtain funds for your business without incurring any debt. Selling equity means taking on investors. Many small businesses raise equity by bringing in investors to make their business succeed and get a return on investment. Debt Funding The term debt funding refers to money that it borrowed and has to be repaid over a period of time; this is normally re-paid with interest. This debt funding can either be short term or long term. In a short term sense the full amount to be repaid is done so within a year. In a long term sense the repayments will go on for over a year.

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Advantages of mutual fund Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Safety of regulated environment Choice of schemes Transparency Disadvantages of mutual fund No control over Cost in the Hands of an Investor No tailor-made Portfolios Managing a Portfolio Funds Difficulty in selecting a Suitable Fund Scheme

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REVIEW OF LITERATURE Industry Scenario Mutual fund provides an opportunity for an investor. The benefit of diversification and the advantages of the return of capital market with less risk. Mutual fund's birth place is America. It was registered in 1882, until the beginning of foreign company by holding establishing their business in India. UTI was only mutual funds Company by holding almost all entire market shares. In simple mutual fund in India was a monopoly market for UTI. Why do investors pour money in Unit trust funds? The whole point is to leave the direct investing; stock or bond picking decision to the professionals, as they don't have the time, knowledge, skills and expertise to manage the money themselves. When selecting a unit trust fund, investors tend to trust and rely on the fund's track record. It is course greatly determined by the investments mangers behind the fund. We frequently have expectations of events in our lives. We expect the traffic to be smooth because of school holidays. We also expect that when it rains heavily, the traffic will be bad, based on historical experience. It's no different for the fund managers. They set their expectations of markets and plan their investments strategies and decisions accordingly. Expectations are constantly built into markets especially after an anticipated event (economic or otherwise) to explain why a particular stock or the market in general went up or down. The explanation for this behavior is pretty simple. Investors, especially professional investors, are rational human beings. They set their expectations on how things are going to pan out and then make key investment decisions based on these expectations. A Successful fund manager must be creative, innovative and understand all the essential financial concepts like the cost of capital, price earnings ratio, dividend yields, discounted cash flows and portfolio theory. With these concepts, he supposedly can derive valuations of stock. Then, he buys an undervalued stock and sells it becomes overvalued. One must have an interest in markets not only when they're hot but also when they're cold. A good fund manager has the ears of a fox and is able to figure out the huge amount of noise coming from the various markets in order to pick the right pieces of pies. The experience of the fund manager plays a large part in fund managing. Experience gives a fund manager the material with to mix and match hypothesis. While history rarely repeats itself, as the timing may be off or the reaction may be more intense, it gives a guide with to forecast future outcomes. The fund manager should be rational about his view of the markets or a particular stock, draw a conclusion and instinctively act on it. In more difficult situation, a fund manager must keep an open mind; markets can go either way and the fund manager is merely waiting for the appropriate data to confirm or deny his hypothesis.

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A great fund can sense when theyre in sync with the market; when they feel that the 'force' is with them. However, even the best fund manager can lose his hearing and sight just when he thinks he has skills down pat. A successful fund manager is one who is able to pick to himself up and start searching again for the right decision. Its an art to be able to hold strongly onto one's beliefs even through paper losses and volatility. A good fund manager has to know macroeconomics and valuation methodologies well, but it's still not enough. He has to be able to make expectations well. In other words, he has to anticipate what the market, comprising all investors and market participants, will focus on next, extrapolate the outcome and position his portfolio ahead of time for that out come to materialize. This must be done over and over again and often is revised because the fund manager will sometimes be wrong. Markets will always test a fund manager's conviction or expectations. A great fund manager will understand rational expectations in markets and constantly feel its pulses. Managing money successfully is purely a form of art. A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. Mutual Fund like most developed and developing countries the mutual fund cult has been catching on in India. There are various reasons for this. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation. And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investors, providing an opportunity for the financial success that was once available only to a select few. Understanding Mutual funds is easy as their such a simple concepts: a mutual fund is a company that pools the of money of many investors its shareholders to invest in a variety of different securities. Investments may be in stock, bonds, money market security or some combination of these. Those securities are professionally managed on behalf of the shareholder, and each investor holds a pro rata share of the portfolio entitled to any profits when the securities are sold, but subject to any losses in value as well. For the individual investors, mutual funds provides the benefits of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investors can get started in mutual funds.

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A mutual fund by its very nature is diversified its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversification. Mutual fund industry in India began with setting up of Unit Trust of India (UTI) in 1964 by the government of India. During last 39 years UTI has grown to be a dominant player in the industry. The UTI is governed by a special legislation, the Unit Trust of India Act 1963. In 1987 public sector banks and insurance companies were permitted to set up mutual funds and accordingly in 1987 six public sectors banks have set up mutual funds. Also the two insurance companies LIC and GIC established the mutual funds. Securities Exchange Board of India (SEBI) formulated the mutual fund regulation in 1993, which for the first time established a comprehensive regulatory framework for the mutual fund industry. Since then several mutual funds have been set up the private and joint sectors. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The SEBI (MF) Regulations, 1993 defines mutual fund as A fund established in the form of a trust by a sponsor to raise monies by the trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations. What is mutual fund? A mutual fund collects the savings from small investors, invest them in government and other corporate securities and earn income through interest and dividends, besides capital gains. It works on the principle of small drops of water make a big ocean A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. It works principle of small drops of water make a big ocean. For instance, if one has Rs 1000 to invest, it may not fetch very much on its own .But when it is pooled with Rs.1000 each from a lot of other people, then, one could create a big fund large enough to invest in a wide varieties

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of shares and debentures on a commanding scale and thus, to enjoy the economies of large scale operations. Hence, a mutual fund is nothing but a form of collective investment. It is formed by the coming together of a number of investors who transfer their surplus funds to a professionally qualified organization to manage it. To get the surplus funds from investors, the fund adopts a simple technique. Each fund is divided into a small fraction called units of equal value. Each investor is allocated units in proportion to the size of his investment. Thus, every investor, whether big or small, will have a stake in the fund and can enjoy the wide portfolio of the investment held by the fund. Hence, mutual funds enable millions of small and large investors to participate in and derive the benefit of the capital market growth. Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual fund are known as unit holders.

Definition refers to the meaning of Mutual Fund, which is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner. Before investing they carry out thorough research and detailed analysis on the market conditions and market trends of stock and bond prices. These things help the fund managers to speculate properly in the right direction

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3.2 History of mutual fund The first mutual funds were established in Europe. One researcher credits a Dutch merchant with creating the first mutual fund in 1774. The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London stock exchange. Mutual funds were introduced into the United States in the 1890s.They became popular during the 1920s. These early funds were generally of the closed-end type with a fixed number of shares which often traded at prices above the value of the portfolio. The first open-end mutual fund with redeemable shares was established on March 21, 1924. This fund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However, closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929, open-end funds accounted for only 5% of the industry's $27 billion in total assets. After the stock market crash of 1929, Congress passed a series of acts regulating the securities markets in general and mutual funds in particular. The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the Securities and Exchange Commission and that they provide prospective investors with a prospectus that discloses essential facts about the investment. The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual funds, report regularly to their investors; this act also created the Securities and Exchange Commission, which is the principal regulator of mutual funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds, while the Investment Company Act of 1940 governs their structure. When confidence in the stock market returned in the 1950s, the mutual fund industry began to grow again. By 1970, there were approximately 360 funds with $48 billion in assets. The introduction of money market funds in the high interest rate environment of the late 1970s boosted industry growth dramatically. The first retail index fund, First Index Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100 billion in assets as of January 31, 2011. Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bull market for both stocks and bonds, new product introductions (including tax-exempt bond, sector, international and target date funds) and wider distribution of fund shares. Among the new distribution channels were retirement plans. Mutual funds are now the preferred investment option in certain types of fast-growing retirement plans, specifically in 401(k) and other defined contribution plans and in individual retirement accounts (IRAs), all of which surged in popularity in the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of 2008. In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of fund shareholders. Some fund management companies allowed favored investors to engage in late trading, which is illegal, or market timing, which is a practice prohibited by fund policy. The scandal was initially discovered by then-New York State Attorney General Eliot Spitzer and resulted in significantly increased regulation of the industry.

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At the end of 2010, there were over 15,000 mutual funds of all types in the United States with combined assets of $13.1 trillion, according to the Investment Company Institute (ICI), a national trade association of investment companies in the United States. The ICI reports that worldwide mutual fund assets were $24.7 trillion on the same date. Mutual funds play an important role in U.S. household finances. At the end of 2010, they accounted for 23% of household financial assets. Their role in retirement planning is particularly significant. Roughly half of assets in 401 plans and individual retirement accounts were invested in mutual funds. 3.3 History of Mutual Funds in India: Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously. The end of millennium marks 36 years of existences of mutual funds in this country. The ride through these 36 years is not been smooth. Investors opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operation from July 1964. The impetus for establishing a formal institution came from the desire to increase propensity of the middle and lower groups to save and invest. UTI came into existence during a period market by great political and economical uncertainty in India. With war on borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital market. The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. UTI commenced its operation from July 1964 With a view to encouraging savings and investments and participations in the income, profits and gains accruing to the corporation from the acquisition, holding management and disposal of securities. Different provisions of the UTI Act laid down the structure of management, scope of business, power and function of the Trust as well as accounting, disclosures and regulatory requirements for the trust.

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year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of Mutual funds and the regaining of investors confidence in these mutual funds. This time around all the participants are involved in the revival of the funds, the AMC's, the unit holders. The other related parties. However, the sole factor that gave life to the revival of the funds was the Union Budget. Mutual fund is the better investment plan brought a large number of changes in the on one stroke. An insight of the Union Budget on Mutual funds taxation in provided later. The fund started to regulate them and was all out on winning and trust and confidence of the investors under the agencies of the ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI). The quest to attract investors extended beyond just new schemes. One can say that industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly opening discussing difficulties opportunities and compulsions. Mutual funds are best alternatives to stocks to get high returns with medium risk in India. Many financial institutions, banks, Equity related companies offering the mutual funds in India.

Popular and Top Mutual Fund Companies in India mentioned here. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously. List of "Mutual Fund Companies" in India Sr. No.Name of company 1 Reliance 2 State bank of India (SBI) 3 TATA 4 HDFC 5 ABN Amro 6 AIG 7 Bank of Baroda 8 Canara bank 9 ICICI 10 DBS Cholamandalam AMC 11 DSP Merrill lynch 12 Birla Sun life

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13 14 15 16 17 18 19 20 21 22 23

LIC (Life Insurance Corporation of India) HSBC JP Morgan Kotak Mahindra bank JM financial Sundaram BNP Paribas UTI (Unit Trust of India) Standard chartard Fidelity Sahara Franklin Templeton

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The chart shows our risk rating overview which takes into account a funds potential downside, volatility, investment objectives, and its underlying investments. There are three main categories of funds in our risk rating overview: equity funds, multi-asset class funds and debt funds. Investors can choose the funds to form their portfolio based on their investment objectives as well as their risk profile. Investors should be aware of the fact that funds that may deliver higher potential returns tend to carry higher risks. The funds with the lowest risk such as liquid and ultra short term funds start off with a risk rating of 1, and funds with the highest risk, such as sector/thematic funds are given a rating of 10. The rating goes up as the risk level increases.

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What Should Investors Do With Investments In Fidelity Mutual Fund? March 28, 2012 Impact on a regular investor with L&T Finance's buy out of Fidelity Mutual Fund. Or to be more precise, the sole question lingering through the minds of investors, "What should you do with the investments made in Fidelity's Mutual Funds?" The big news doing the rounds in the mutual fund industry is L&T buying out the India business of Fidelity Mutual Fund for an undisclosed amount. However, the amount paid by L&T is assumed to be lower than the bids offered by HDFC Asset Management Company and Pramerica. But, how is a regular investor affected with this buy out? Or to be more precise, the sole question lingering through the minds of investors, What should you do with the investments made in Fidelitys Mutual Funds? 3.4 Growth 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 history of mutual funds in India can be broadly divided into four distinct phases. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 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 Can bank 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 corers. Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari

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Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 corers. The Unit Trust of India with Rs.44, 541 corers of assets under management was way ahead of other mutual funds. Fourth Phase since February 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 corers 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. Overview of existing schemes existed in mutual fund category Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry. 1. Concept of Mutual Fund 2. Many investors with common financial objectives pool their money 3. Investors on a proportionate basis. Get mutual fund units for the sum contributed to the pool 4. The money collected from investors is invested into shares, debentures & other securities by the fund manager 5. The fund manger realizes gains or losses, & collects divided or interest income 6. Any capital gains or losses from such investments are passed on to the investors in proportion of the number of units held by them

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When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. The important features of a mutual fund are the following: 1. A mutual fund belongs to those who have contributed to that fund and thus, the ownership of the fund lies in the hands of the investors. 2. The pool of funds collected is invested in a portfolio of marketable securities. 3. Generally the investment portfolio of the mutual fund is created according to the objective of the fund. For example a sectoral mutual fund invests its funds in a specific sector like IT sector, oil sector etc. 4. The investors share in the fund is represented by units just like shares in the case of share capital of a company. The unit value depends upon the value of the portfolio held by the fund. Hence, the value changes almost every day and it is called Net Asset Value. The entire mutual fund industry operates in a very organized way. The investors, known as unit holders, handover their savings to the AMCs under various schemes. The objective of the investment should match with the objective of the fund to best suit the investors needs. The AMCs further invest the funds into various securities according to the investment objective. The return generated from the investments is passed on to the investors or reinvested as mentioned in the offer document.

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Importance of Mutual Funds The mutual fund industry has grown at a phenomenal rate in the recent past. One can witness a revolution in the mutual fund industry in view of its importance to the investors in general and the countrys economy at large. The following are some of the important advantages of mutual funds Channelizing Savings for Investment: Mutual funds act as a vehicle in galvanizing the savings of the people by offering various schemes suitable to the various classes of customers for the development of the economy as a whole. A number of schemes are being offered by MFs so as to meet the varied requirements of the masses, and thus, savings are directed towards capital investments directly.

Providing Better Yields: The pooling of funds from a large number of customers enables the fund to have large funds at its disposal. Due to these large funds, mutual funds are able to buy cheaper and sell dearer than the small and medium investors. Thus, they are able to command better market rates and lower rates of brokerage .So; they provide better yields to their customers. Promoting Industrial Development: The economic development of any nation depends upon its industrial advancement and agricultural development. All industrial units have to raise their funds by resorting to the capital market by the issue of shares and debentures. The mutual funds not only create a demand for these capital instruments but also supply large sources of funds to the markets, and thus, the industries are assured of their capital requirements. In fact the entry of mutual funds has enhanced the demand for Indias stocks and bonds. Thus, mutual funds provide financial resources to the industries at market rates. Keeping the Money Market Active: Individual investors can not have any access to money market instruments since the minimum amount of investment is out of his reach. On the other hand, mutual funds keep the money market active by investing money on the money market instruments. In fact ,The availability of more money market instruments itself is a good sign for a developed money market which is essential for the successful functioning of the central bank in a country. Thus mutual funds provide stability to share prices, safety to investors and resources to prospective entrepreneurs.

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Introducing Flexible Investment Schedule: Some mutual funds have permitted the investors to exchange their units from one scheme to another and this flexibility is a great boon to investors. Income units can be exchanged for growth units depending upon the performance of the funds. One cannot derive such flexibility in any other investments. Providing Greater Affordability and Liquidity: Even very small investors can afford to invest in Mutual Funds. They provide an attractive and cost effective alternative to direct purchase of shares. In the absence of MFs, small investors cannot think of participating in a number of investments with such a merge sum. Again, there is greater liquidity. Units can be sold to the Fund at any time at the Net Asset Value and thus quick access to liquid cash is assured. Simplified Record Keeping: An investor with just an investment in 500 shares or so in 3 or 4 companies has to keep proper records of dividend payments, bonus issues, price movements, purchase or sale instruction, brokerage and other related items. It is tedious and it consumes a lot of time. One may even forget to record the rights issue and may have to forfeit the same. Thus, record keeping is the biggest problem for small and medium investors. Now, mutual funds offers a single investment source facility, i.e., a single buy order of 100 units from a mutual fund is equivalent to investment in more than 100 companies. Reducing the Marketing Cost of New Issues: The mutual fund helps to reduce the marketing cost of the new issues. The promoters used to allot a major share of the Initial Public Offering to the mutual funds and thus they are saved from the marketing cost of such issues. Providing Research Service: A mutual fund is able to command vast resources and hence it is a possible for it to have an in depth study and carry out research on corporate securities. Each fund maintains a large research team which constantly analyses the companies and the industries and recommends the fund to buy or sell a particular share. Thus, investments are made purely on the basis of a thorough research. Since research involves a lot of times, efforts and expenditure, an individual investors cannot take up this work. By investing in a mutual fund, the investor gets the benefit of the research done by the fund.

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Advantages of Mutual Fund: Diversification: An investor undertakes risk if he invests all his funds in a single scrip. Mutual funds invest in a number of companies across various industries and sectors. This diversification reduces the risk of the investment. Professional Management: An investor lacks the knowledge of the capital market operations and does not have large resources to reap the benefits of investment. Hence, he requires the help of an expert. Mutual funds are managed by professional managers who have the requisite skills and experiences to analyses the performance and prospectus of companies. Regulatory oversight: Mutual funds are sub 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. It reduces paperwork, saves time and makes investment easy. 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 funds transparently declare their portfolio every month. Thus, an investor knows where his/her money is being deployed and in case they are not happy with the portfolio they can withdraw at a short notice. Tax benefits: Mutual fund investors now enjoy income tax benefits. Dividends received from mutual funds debt schemes are tax exempt to the overall limit of Rs 9000 allowed under section SOL of the Income Tax Act.

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Disadvantage of Mutual Fund: 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 manage does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Organization of a Mutual Fund 1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month. RISK V/S. RETURN: The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vice versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly

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Higher as compared to the bank deposits but the risk involved also increases in the same proportion. 3.5 CATEGORIES OF MUTUAL FUND: Mutual funds can be classified as follows: In the investment market, one can find a variety of investors with different needs, objectives and risk capacities. For instance, a young businessman would like to get more capital appreciation for his funds and he would be prepared to take greater risks than a person who is just on the verge of his retiring age. So, it is very difficult to offer one fund to satisfy all the requirements of investors. One fund is not suitable to meet the vast requirements of all investors. Therefore, many types of funds are available to the investors. It is completely left to the discretion of the investors to choose any one of them depending upon has requirements and his risk taking capacity. Based on their structure: Structure of mutual fund In the United States, mutual funds must be registered with the Securities and Exchange Commission, overseen by a board of directors or board of trustees and managed by a registered investment advisor. They are not taxed on their income if they comply with certain requirements. Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. They have a long history in the United States. Today they play an important role in household finances. There are 3 types of U.S. mutual funds: open-end, unit investment trust and closed-end. The most common type, the open-end mutual fund, must be willing to buy back its shares from its investors at the end of every business day. Exchange-traded funds are open-end funds or unit investment trusts that trade on an exchange. Open-end funds are most common, but exchangetraded funds have been gaining in popularity. Mutual funds are classified by their principal investments. The four largest categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively-managed. Investors in a mutual fund pay the funds expenses. There is controversy about the level of these expenses. A single mutual fund may give investors a choice of different combinations of expenses by offering several different types of share classes. In the United States, a mutual fund is registered with the Securities and Exchange Commission (SEC) and is overseen by a board of directors (if organized as a corporation) or board of trustees (if organized as a trust). The board is charged with ensuring that the fund is managed in the best interests of the fund's investors and with hiring the fund manager and other service providers to the fund.

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The fund manager, also known as the fund sponsor or fund management company, trades (buys and sells) the fund's investments in accordance with the fund's investment objective. A fund manager must be a registered investment advisor. Funds that are managed by the same fund manager and that have the same brand name are known as a "fund family" or "fund complex". Mutual funds are not taxed on their income as long as they comply with requirements established in the Internal Revenue Code. Specifically, they must diversify their investments, limit ownership of voting securities, distribute most of their income to their investors annually, and earn most of the income by investing in securities and currencies. Mutual funds pass taxable income on to their investors annually. The type of income they earn is unchanged as it passes through to the shareholders. For example, mutual fund distributions of dividend income are reported as dividend income by the investor. There is an exception: net losses incurred by a mutual fund are not distributed or passed through to fund investors. Mutual funds may invest in many kinds of securities. The types of securities that a particular fund may invest in are set forth in the fund's prospectus, which describes the fund's investment objective, investment approach and permitted investments. The investment objective describes the type of income that the fund seeks. For example, a "capital appreciation" fund generally looks to earn most of its returns from increases in the prices of the securities it holds, rather than from dividend or interest income. The investment approach describes the criteria that the fund manager uses to select investments for the fund.

A mutual fund's investment portfolio is continually monitored by the fund's portfolio manager or managers, who are employed by the fund's manager or sponsor. Hedge funds are not considered a type of mutual fund. While they are another type of commingled investment scheme, they are not governed by the Investment Company Act of 1940

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and are not required to register with the Securities and Exchange Commission (though many hedge fund managers now must register as investment advisors).

Open-ended funds: Under this scheme, the size of the fund and /or the period of the fund are not pre-determined. The investors can buy and sell the units from the fund, at any point of time. For instance, the unit scheme (1964) of the Unit Trust of India is open ended one, both in terms of period and target amount. Anybody can buy this unit at any time and sell it also at any time at his discretion. The Main Features of the Open-ended Funds are: 1. The main objective of this fund is income generation. The investors get dividend, rights or bonuses as rewards for their investments. 2. These units are not publicly traded but, the fund is ready to repurchase them and resell them at any time. 3. Generally the listed prices are very close to their Net Asset Value .The Fund fixes different prices for their purchases and sales. Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments cannot be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close- ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity. The main features of the close-ended funds are: 1. The main objective of this fund is capital appreciation. 2. The whole fund is available for the entire duration of the scheme and there will not be any redemption demands before its maturity .Hence, the fund manager can manage the investments efficiently and profitably without the necessity of maintaining any liquidity.

3. From the investors point of view, it may attract more tax since the entire. Capital appreciation is realized in at one stage itself. 4. Generally the prices of close-end scheme units are quoted at a discount of up to 40 percent below their Net Asset Value (NAV).

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Based on their investment objective: Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: Index fundsIn this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weight ages. Equity diversified funds100% of the capital is invested in equities spreading across different sectors and stocks.

Dividend yield fundsit is similar to the equity diversified funds except that they invest in companies offering high dividend yields. Thematic fundsInvest 100% of the assets in sectors which are related through sometheme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. Sector fundsInvest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes: -oriented funds Investment below 65% in equities.

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-oriented Funds -Invest at least 65% in equities, remaining in debt. Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs. Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills. Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.

Gilt funds LT- They invest 100% of their portfolio in long-term government securities. Income funds LT- Typically; such funds invest a major portion of the portfolio in long-term debt papers.

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3.6 SWOT Analysis Strength: 1. It is one of the biggest Businesses in India 2. It portfolios up to 12 different investment companies. 3. It includes huge number of employees 4. It is having merger & acquisition with and more companies to increase its growth.

5. It elaborates its Network throughout the world.

Weakness: 1. Comparatively it has less branch offices geographically . 2. It has high level competition

Opportunities: 1. It has unlimited geographical locations for business 2. It has an opportunity to serve different kinds of customers. 3. Due to consistent level of competition there is an opportunity to improve its performance.

Threats: 1. It has different tax rates & policies for different locations 2. Difficult to manage every companys response

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4.1 Source of Data: Data which is collected for the first time is called primary data. In the study primary data includes the data which is collected from the customer directly with interaction. The study includes data got with personal interaction. Primary and Secondary Data: The appraiser or market analyst must know what they are and what affects them. All data used in appraisals and market studies should be current, relevant, reliable, accurate, and conceptually correct. This article presents a discussion of each of these terms and their significance in the context of the data and in the analysis. The article then discusses the nature of potential errors that can affect primary and secondary data. Several categories of errors can exist. The analyst needs to be able to recognize the error, understand its significance and evaluate the applicability of that data in the analysis. Secondary data Information from secondary sources, i.e., not directly compiled by the analyst; may include published or unpublished work based on research that relies on primary sources of any material other than primary sources used to prepare a written work. Secondary data has been gathered by others for their own purposes, but the data could be useful in the analysis of a wide range of real property. In general, secondary data exists in published sources. Methods for Obtaining Primary Data: The analyst can obtain primary data through the process of direct observation or by explicit questioning of people. Observation: Observation as a data gathering technique focuses attention on an observable fact or inanimate entity such as a building or on an observable action or behavior by an animate entity such as a homeowner or shopper. Observation of an inanimate object is the easier of the two activities, but it is not free from error or misinterpretation. Data collection instrument This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.

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Sample size: The sample size of my project is limited to 100 people only. Out of which only 60 people had invested in Mutual Fund. Other 40 people did not have invested in Mutual Fund. Sample design: Sampling is a practice a researcher uses to draw data on people, places, or things to study. Sampling allows statisticians to draw conclusions about a whole by examining a part. It enables us to estimates characteristics of a population by openly observing a portion of the entire population. The whole that the researcher wants to know something about is the population is called a sample. Data has been presented with the help of bar graph, pie charts, line graphs etc. Procedure data collection methods The sample was selected of them who are the customers/visitors of Allegro advisor private limited, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool. Techniques for data analysis Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.

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QUSTIONERY Please answer the following questions by selecting only one response to each question. 1 What is your current age? A) 18 to 30 years old B) 31 to 40 years old C) 41 to 50 years old D) 51 to 60 years old E) Above 60 years old 2 How many months of expenses can your emergency funds cover? A) I currently have no emergency funds B) Less than 3 months C) 4 to 6 months D) 7 to 9 months E) More than 9 months 3 What percentage of monthly income can be invested? A) 0 to 10% B) 11% to 20% C) 21% to 30% D) More than 30% E) I currently have no income 4 When do you expect to liquidate your investment? A) Less than 1 year B) 1 to 2 years C) 3 to 5 years D) 6 to 7 years E) More than 7 years 5 How many people depend on you financially? A) 0 B) 1 C) 1, but someone who work D) 2 to 3 E) More than 3

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In order to achieve high returns I am willing to choose high risk investments. A) Strongly agree B) Agree C) Neutral D) Disagree E) Strongly disagree

What is your expected rate of return from your investments? A) Potential return of 6% per annum B) Potential return of 10% per annum C) Potential return of 12% per annum D) Potential return of 15% per annum E) Potential return of more than 15% per annum

I would start to worry about my investments if my portfolio value falls? A) Less than 5% per annum B) 5%-10% per annum C) 10%-20% per annum D) 20%-30% per annum E) More than 30% per annum

Maximum allocation in your current portfolio pertains to A) Savings and fixed deposits B) Bonds C) Equities D) Mutual Funds E) Derivatives options, swaps and futures

10 A) B) C) D) E)

I prefer to keep capital safe rather than have high returns Strongly agree Agree Neutral Disagree Strongly disagree

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4.2 TIPS FOR INVESTING IN MUTUAL FUND:Determine your financial objectives and amount to invest - Make sure the funds objectives coincide with your own. Dont change your objectives or exceed the amount set aside for investment unless you have good reason. Always obtain all available information before you invest- Request the prospectus, The Statement of Additional Information and the latest shareholder report from each Fund you are considering. Never invest in periodic payment plans unless you are virtually certain that you will not have to redeem early - If you redeem early or do not complete the plan, you may have to pay sales charges of up to 51% of your investment. Be alert for incorporation by reference -You will have "no excuse" for not knowing this information, if a problem arises. You may be legally presumed to know materials incorporated by reference in a prospectus or other documents. Always determine all sales charges, fees and expenses before you invest -Fees such as 12b-1 fees can cost you dearly and charges for reinvestment of dividends and capital gains distributions can substantially add to your costs. Shop around among them any funds offered and compare the various fees and costs connected with funds that appeal to you. Learn the costs of redemption-Sometimes investors are surprised to learn that they have to pay to get out of funds through back-end loads or redemption fees. Find out the redemption costs before you invest so you wont be unpleasantly surprised when you redeem your shares. Never treat the risks of investment in a fund lightly -Weigh the risks of the funds you want to buy against your ability to tolerate the ups and downs of the market and your investment goals. Be extra cautious when considering investing in funds with high yield/high risk portfolios. Junk bond problems, for example, invariably affect the funds performance. Dont be misled by the name of a fund -Some funds have been given names denoting safety, stability and low risk, despite the fact that the underlying investments in the portfolio are volatile and highly risky.

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LIMITAION OF THE STUDY Time factor basically prevent me to take limited sample size, as more would have highlighted a very clear scenario of the study. The insecurity in Hyderabad led some respondent to be reluctant in their response. Possibility of error in data collection. Data Analysis and interpretation done may not be that strong due to small sample and conveyance skill in me. My inexperience in research area might have affected results.

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SUGGESTION AND RECOMMENDATIONS A Seminar or a kind of campaigns should be launched in Hyderabad to educate citizens about Mutual Fund, as most of the people have only the vague idea about Mutual Fund. While interacting with investors, some groups of customers were not aware of Mutual Fund. Thus a Mutual Fund awareness program can help to increase the penetration of Mutual Funds in the market. The most vital problem spotted is of ignorance. Investors should be made aware of the various advantages while investing in Mutual Fund. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. Middle age people (40) will be a key new customer group in the future, which should be the focal point of the financial advisor in other to attract more investor in Hyderabad. The bank employee are not able to expand the service of business Mutual Fund, due to lack of time, Hence forth the Asset Management Company can provide them knowledge about single window services by which investor can get all financial services from one place. Financial advisors should giving sound and quality advice about Systematic Investment Plan (SIP) to the salaried people, which will gain advantage as this group shows keen interest in Investing yet lack technical know-how. The people do not want to take risk. Therefore AMC should launch more diversified funds so that the risk becomes minimum. This will lure more and more people to invest in mutual funds. Mutual funds offer lot of benefit, which no other single option could offer. But the investors only see it as just another investment option. Henceforth the advisors should try changing the mindset of the people. The various schemes should be clearly explained-merits and demerit, such that Investors can take decision in choosing the scheme which deemed suit, which will draw greater interest in participating

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CONCLUSION

A business can be successful only when the firm understand its customer perspective and diagnosed the wants and demand of it Customer. This project study has made an attempt to understand the customer perspective on mutual Fund in compression to various other investment avenues in Hyderabad City. In my observation, some people have fear in investing in Mutual Fund. Due to lack of technical knowledge, they assume that their money will not be secure in Mutual Fund. As they are not aware of as to how Mutual fund is professionally managed. A certain group of people do not invest in Mutual Fund, due to lack of awareness although they have money to invest. Yet in reality, Mutual Fund is the best investment option for those seeking financial advice in making investment decisions. It is also a best option for novice investors. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to invest in mutual funds and to use the right knowledge in the sales process which customers will gladly accept, giving due weight age to advantages. The increases in awareness level of Mutual Fund will increases the number of investors in Mutual Fund, as once people are aware of Mutual Fund investment opportunities, they enjoying the benefits of investing in Mutual Funds, the number who decide to invest in Mutual funds increases to as many as one in five people. This Project gave me a great learning experience, enhances my analytical ability and gets to know the different aspect of Mutual Fund. The analysis and advice presented in this Project Report is based on market research on a study on customer perspective on Mutual fund v/s other investment options in Hyderabad City.

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BIBLOGRAPHY

http://www.iloveindia.com/finance/mutual-funds/index.html http://www.economywatch.com/mutual-funds/definition/ http://www.investorwords.com/3173/mutual_fund.html http://www.investopedia.com/university/mutualfunds/mutualfunds.asp#axzz1qr17cNf4 http://www.investopedia.com/terms/f/front-endload.asp#axzz1qr17cNf4 http://www.fundsupermart.co.in/main/home/index.svdo http://www.fundsupermart.co.in/main/fundinfo/listManager.tpl http://www.fundsupermart.co.in/main/home/whyUnitTrusts.svdo http://www.fundsupermart.co.in/main/research/assistBuy.svdo?formSubmitUrl=assistBuyScore.s vdo

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IF YOU HAVE ALREADY INVESTED IN FIED MF Do not panic! The world is not coming to an end; there is no reason to worry. L&T Finance is a part of world renowned Indian conglomerate giant L&T. Well be able to retain investors Were an equally good brand. We have good fund management capabilities to satisfy investors. The integration will also happen at the distributor level, said Y.M Deosthalee, Managing Director and Chairman of L&T Finance. (Source: Economic Times, 28 March 2012) There is mention in the media that majority of the employees and staffs will be absorbed by L&T Finance and the Equity Fund Management team will be with L&T Finance till the integration process is complete. Fidelity employees need not worry about this deal. L&T Finance is an equally strong brand. And historically, Indian funds have done much better than foreign fund houses," Deosthalee pointed out. (Source: Economic Times, 28 March 2012) The fact that L&T AMC has majority of its assets under management in the fixed income category and Fidelity, on the other hand, has majority of its assets in the equity category, the deal is seen as complimenting each others skill sets. Investors, therefore, should benefit from the synergies that get drawn in from both the brands. Mr. N. Sivaraman, President & Whole-time Director, L&T Finance Holdings Limited added, ''We have significant bandwidth in the equity investment management team comprising 9 members (3 portfolio managers and a team of 6 analysts/associates) which will ensure that the integration is smooth and the investors and distributors continue to enjoy the same high quality experience that they have come to expect from both, L&T Mutual Fund and Fidelity Mutual Fund." (Source: Press Release - L&T Finance Limited, 27 March 2012) CONCLUSION One should not get swayed by any frenzy. This comment by Mr. Deosthalee should help us sum up what is in it for us in this transformation "With this acquisition we are one step closer to achieving our vision of being among the top players in the Indian mutual fund industry. We remain committed to that goal and look forward to building one of India's most admired asset management businesses. This acquisition provides L&T Mutual Fund the necessary scale, products and access to retail customers to grow profitably." (Source: Press Release - L&T Finance Limited, 27 March 2012).

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