Mutual Fund

Topic
Assessing market potential for Mutual Funds in Bhilai. Prateek Lakhani

HDFC BANK
HDFC was incorporated in 1977 as the first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporates and developers for the purchase or construction of residential housing. It also provides property related services (e.g. property identification, sales services and Valuation), training and consultancy. Of these activities, housing finance remains the dominant activity. HDFC has a client base of over 10,00,000 borrowers, approximately 8,30,000 depositors, 93,900 shareholders and 50,000 deposit agents.

MUTUAL FUND
History, Concept, Mutual Fund Operation Flow Chart, Organisation Structure, Advantages, Disadvantages and Types Need for Investment.

Topics Covered

History of mutual fund Concept Mutual fund Operation Organisation of a Mutual Fund Advantages & Disadvantages of Mutual Funds Types of Mutual Fund Schemes Frequently Used Terms Needs for Investment Project

The history of mutual fund in India

A 1963-1987: The Unit Trust of India was the sole player

in the industry. Created by an Act of Parliament in 1963, UTI launched its first product, the unit scheme 1964, which is even today the single largest mutual fund scheme. UTI created a number products such as monthly income plans, children's plans, equity-Oriented schemes and offshore funds during this period. UTI managed assets of Rs 6700 crore at the end of this phase.

Cont

B 1987-1993: In 1987 public sector banks and financial

institutions entered the mutual fund industry. SBI mutual fund was the first non-UTI fund to be set up in 1987. Significant shift of investors from deposits to mutual fund industry happened during this period. Most funds were growth oriented closed ended funds. By the end of this period, assets under UTI's management grew to Rs 38247 crore and public sector funds managed Rs 8750 crore.

Cont

C 1993-1996: In 1993, the mutual fund industry was open

to private sector players, both Indian and foreign. SEBI's first set of regulations for the industry was formulated in 1993 and, substantially revised in 1996. Significant innovations in servicing, product design and information disclosure happened in the phase, mostly initiated by private sector players

Cont

D 1996-1999: The implementation of the new SEBI

regulation and the restructuring of the mutual fund industry led to rapid asset growth. Bank mutual fund was re-cast according to the SEBI recommended structure, and UTI came under voluntary SEBI supervision.

Cont

E 1999-2003: very rapid growth in the industry and

significant increase in market shares of private sector player marked this phase. Assets crossed Rs. 100,0000 crore. The tax break offered to mutual funds in 1999 created arbitrage opportunities for a number of institutional players. Bond funds and liquid funds registered the highest growth in this period, accounting for nearly 60% of the assets. UTI's share of the industry dropped below 50%.

Concept

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.

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.

Mutual Fund Operation Flow Chart

Organisation of a Mutual Fund

Advantages of Mutual Funds

Professional Management Diversification Convenient Administration Return Potential Low Costs Liquidity Transparency Flexibility Choice of schemes Tax benefits Well regulated

DISADVANTAGES OF MUTUAL FUND

No control over costs: Since investors do not directly monitor the fund's operations they cannot control the costs effectively. Regulators therefore usually limit the expenses of mutual funds. No tailor- made portfolio: Mutual fund portfolio is created and marketed by AMCs, into which investors invest. They cannot create tailor made portfolios.

Types of Mutual Fund Schemes

Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The figure in the next slide gives an overview into the existing types of schemes in the Industry.

Types of Schemes

By Structure

Open Ended Schemes Close Ended Schemes

By Investment Objectives

Growth Schemes: The primary investment objective of the Scheme is to

generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments.

Balance Schemes: The primary objective of the Scheme is to generate capital

appreciation along with current income from a combined portfolio of equity and equity related and debt and money market instruments.

Long Term Advantages Fund: The primary objective of the Scheme is to

generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments.

Cont

Income scheme:
The primary objective of the Scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments that payout maximum dividend to their investors.

Other Schemes
Tax Saving Schemes.

Frequently Used Terms

Net Asset Value (NAV) Net Asset Value 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. It is the price per unit of a mutual fund. Sale Price Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load.

Cont

Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes. Entry Load Is a charge collected by a scheme when it is purchased.

NEED FOR INVESTMENT

Increasing household expense. Creation of wealth. Increasing cost of living. Financial needs according to life stages. Regular income. Combination of all above.

Project
The purpose of project was to call the customers of HDFC Bank and ask them did they know about Mutual Fund or not.

If yes then 1. Tell them in brief about the new product/s which has been launched by the bank. 2. Tell them the benefits of the product. 3. Fix the appointment Questions to be asked : a) In which kind of product would you like to invest? : Equity, Debt, or Balanced. b) Through whom you have invested in Mutual Fund? : Broker, Bank or Other. c) How much you have invested in Mutual Fund? d) How much return you received through investment in Mutual Fund? e) You invested in Mutual Fund due to? : Security, Additional income, Tax saving, others. 4. Complete the call.

Cont

If no then 1. Tell them about Mutual fund. 2. Tell them the benefits of the Mutual Fund. 3. Ask them do they want to invest in Mutual Fund? 4. Tell them about the new product of bank. 5. In which type of fund would you like to invest? : Open-ended fund or Close-ended fund. 6. In which kind of product would you like to invest? : Equity, Debt, or Balanced 7.How much you can invest in Mutual Fund? 8. How much risk you can bear? 9. How much return do you expect through Mutual Fund? 10. Complete the call.

THANK YOU !!!