A PROJECT ON

STUDY OF DEMAT ACCOUNT AND SHAREKHAN COMPANY

SUBMITTED TO

UNIVERSITY OF MUMBAI THE DEGREE OF BECHELOR IN

MANAGEMENT STUDIES IN FINANCE
SEMESTER VI (2024-2025)
UNDER THE FACULITY OF COMMERCE
SUBMITTED BY
HARSH PANDHARINATH KADAM
ROLL NO.06
UNDER THE GUDIANCE OF PROFESSOR. ZORA ALLANI

NAVA SAMAJ MANDAL DEGREE COLLEGE

DIXIT CROSS ROAD NO.1 VILE PARLE (EAST), MAHARASHTRA-
400057
 Declaration

I, the undersigned Mr.HARSH PANDHARINATH KADAM here by, declare that

the work embodied in this project work titled “ A STUDY ON MUTUAL FUND ”. Form
my own contribution to the research work carried out under the guidance of Asst. Prof.
Zora Allani is a result of my own research work and has not been previously submitted to
any other. University for any other Degree/Diploma to this or any other University.

Wherever reference has been made to previous work of others, it has been clearly
indicated as such and included in the bibliography.

I, here by future declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

__________________________

HARSH PANDHARINATH KADAM

Roll No. 06
 Certificate
This is to certify that Miss DIPTI RAGHUNATH PARAB has worked and duly
completed her project work for the degree of bachelor of management studies under the
facility of commerce in the subject of FINANCE and her project is entitled . “A STUDY
ON mutual fund ” under my supervision.

I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of any
university.

It is her own work and facts reported by her personal findings and investigation

________________________

Signature of internal examiner

_________________________

Signature of external examiner

__________________

Signature of co-ordinate __________________

Signature of principal
 Index

CHAPTER CONTENT PAGE

NO.
NO.
1 INTRODUCTION TO MUTUAL FUND
1.1 Introduction
1.2 .Meaning
1.3 Purpose
1.4 Objective
1.5 Research problem
1.6 scope of mutual fund
2 RESEARCH METHODOLOGY
3 REVIEW OF LITERATURE
4 MAIN STUDY OF PROJECT
4.1 Importance of mutual fund
4.2.Features of mutual fund 4.3.Need of mutual fund
4.4.Working of mutual fund
4.5.Structure of mutual fund
4.6. scenario of mutual fund in India
4.7.Advantages and disadvantages
4.8.Case studies
4.9.Mutual fund in India challenges
4.10.Problems and prospects of mutual fund in India
5 COMPARATIVE STUDY
6 DATA ANALYSIS AND INTERPRETATION
7 SUGGESTION
8 CONCLUSION
9 REFERENCE/BIBLIOGRAPHY
10 ANNEXURE/ QUESTIONNAIRE
 INTRODUCTION TO MUTUAL FUND

1.1 Introduction

• WHAT ARE MUTUAL FUNDS?

A mutual fund is a collective investment vehicle that collects & pools money from a
number of investors and invests the same in equities, bonds, government securities,
money market instruments. The money collected in mutual fund scheme is invested by
professional fund managers in stocks and bonds etc. in line with a scheme’s investment
objective. The income / gains generated from this collective investment scheme are
distributed proportionately amongst the investors, after deducting applicable expenses and
levies, by calculating a scheme’s “Net Asset Value” or NAV. In return, mutual fund
charges a small fee. In short, mutual fund is a collective pool of money contributed by
several investors and managed by a professional Fund Manager.

Mutual Funds in India are established in the form of a Trust under Indian Trust Act, 1882,
in accordance with SEBI (Mutual Funds) Regulations, 1996.The fees and expenses
charged by the mutual funds to manage a scheme are regulated and are subject to the
limits specified by SEBI.

• HOW A MUTUAL FUND WORKS?

One should avoid the temptation to review the fund’s performance each time the market
falls or jumps up significantly. For an actively-managed equity scheme, one must have
patience and allow reasonable time – between 18 and 24 months – for the fund to generate
returns in the portfolio.
When you invest in a mutual fund, you are pooling your money with many other
investors. Mutual fund issues “Units” against the amount invested at the prevailing NAV.
Returns from a mutual fund may include income distributions to investors out of
dividends, interest, capital gains or other income earned by the mutual fund. You can also
have capital gains (or losses) if you sell the mutual fund units for more (or less) than the
amount you invested.

• Mutual funds are ideal for investors who –

Lack the knowledge or skill / experience of investing in stock markets directly.

Want to grow their wealth, but do not have the inclination or time to research the stock
market.

Wish to invest only small amounts.

• WHY INVEST IN MUTUAL?

As investment goals vary from person to person – post-retirement expenses, money for
children’s education or marriage, house purchase, etc. – the investment products required
to achieve these goals too vary. Mutual funds provide certain distinct advantages over
investing in individual securities. Mutual funds offer multiple choices for investment
across equity shares, corporate bonds, government securities, and money market
instruments, providing an excellent avenue for retail investors to participate and benefit
from the uptrends in capital markets. The main advantages are that you can invest in a
variety of securities for a relatively low cost and leave the investment decisions to a
professional manager.

• Rationale of the study

There are a lot of investment avenues available today in the financial market for an
investor with An investable surplus. He can invest in Bank Deposits, Corporate
Debentures, and Bonds where there is low risk but low return. He may invest in Stock of
companies where the risk is high and The returns are also proportionately high. The recent
trends in the Stock Market have shown that an average retail investor always lost with
periodic bearish tends. People began opting for portfolio managers with expertise in stock
markets who would invest on their behalf. Thus we had wealth management services
provided by many institutions. However they proved too costly for a small investor. These
investors have found a good shelter with the mutual funds. Mutual fund industry has seen
a lot of changes in past few years with multinational companies Coming into the country,
bringing in their professional expertise in managing funds worldwide. In the past few
months there has been a consolidation phase going on in the mutual fund industry in
India. Now investors have a wide range of Schemes to choose from depending on their
Individual profiles.

• Introduction to the Industry

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 of India. The history
of mutual funds in India can be broadly divided into four distinct phases.

First Phase – 1964-1987

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The First scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs. 6,700 Crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June
1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC Established its mutual fund in June 1989 while GIC had set up
its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets
under management of Rs. 47,004 crores.

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
Industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in Which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and Revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996.

The 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 crores. The Unit Trust of India with Rs. 44,541 crores 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 crores as at the end of January 2003,
representing broadly, the Assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund,
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.

Types of Mutual Fund:

1.Money market funds

These funds invest in short-term fixed income securities such as government bonds,
treasury bills, bankers’ acceptances, commercial paper and certificates of deposit. They
are generally a safer investment, but with a lower potential return then other types of
mutual funds. Canadian money market funds try to keep their net asset value (NAV)
stable at $10 per security.

2. Fixed income funds

These funds buy investments that pay a fixed rate of return like government bonds,
investment-Grade corporate bonds and high-yield corporate bonds. They aim to have
money coming into the fund on a regular basis, mostly through interest that the fund
earns. High-yield corporate Bond funds are generally riskier than funds that hold
government and investment-grade bonds.

3. Equity funds

These funds invest in stocks. These funds aim to grow faster than money market or fixed
income funds, so there is usually a higher risk that you could lose money. You can choose
from different types of equity funds including those that specialize in growth stocks
(which don’t usually pay dividends), income funds (which hold stocks that pay large
dividends), value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or
combinations of these.

4. Balanced funds
These funds invest in a mix of equities and fixed income securities. They try to balance
the aim of achieving higher returns against the risk of losing money. Most of these funds
follow a formula to split money among the different types of investments. They tend to
have more risk than fixed income funds, but less risk than pure equity funds. Aggressive
funds hold more equities and fewer bonds, while conservative funds hold fewer equities
relative to bonds.

5. Index funds

These funds aim to track the performance of a specific index such as the S&P/TSX
Composite Index. The value of the mutual fund will go up or down as the index goes up
or down. Index funds typically have lower costs than actively managed mutual funds
because the portfolio manager doesn’t have to do as much research or make as many
investment decisions.

6. Specialty funds

These funds focus on specialized mandates such as real estate, commodities or socially
responsible investing. For example, a socially responsible fund may invest in companies
that support environmental stewardship, human rights and diversity, and may avoid
companies involved in alcohol, tobacco, gambling, weapons and the military.

7. Fund-of-funds
These funds invest in other funds. Similar to balanced funds, they try to make asset
allocation and diversification easier for the investor. The MER for fund-of-funds tend to
be higher than stand-alone mutual funds.
Diversify by investment style portfolio managers may have different investment
philosophies or use different styles of investing to meet the investment objectives of a
fund. Choosing funds with different investment styles allows you to diversify beyond the
type of investment. It can be another way to reduce investment risk

4 common approaches to investing

1. Top-down approach – looks at the big economic picture, and then finds industries
or countries that look like they are going to do well. Then invest in specific
companies within the chosen industry or country.

2. Bottom-up approach – focuses on selecting specific companies that are doing well,
no matter what the prospects are for their industry or the economy.
3. A combination of top-down and bottom-up approaches – A portfolio manager
managing a global portfolio can decide which countries to favour based on a
 topdown analysis but build the portfolio of stocks within each country based on a
bottom-up analysis.

4. Technical analysis – attempts to forecast the direction of investment prices by

studying past market data.

• Introduction to the company

Some of the 5 popular asset management companies are:

1.Axis mutual fund – Axis Mutual Fund is an asset management company in India. It
was established in 2009 and is headquartered in Mumbai. Axis Mutual Fund offers
various types of mutual fund schemes to invest in India, such as equity funds, hybrid
funds, debt funds, and more.

2.Kotak mutual fund – Kotak Mahindra Asset Management Company Limited

(KMAMC), a wholly owned subsidiary of Kotak Mahindra bank Limited (KMBL), is the
Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations
in December 1998 and has approximately 74 Lac investors in various schemes.

3.Reliance mutual fund – Reliance Capital Limited is an Indian diversified financial

services holding company promoted by Reliance Anil Dhirubhai Ambani Group. Reliance
capital, a constituent of Nifty Midcap 50 and MSCI Global Small Cap Index, is a part of
the reliance group. It is amongst India’s leading and most valuable financial services
companies in the private sector. As on 31 March 2017, the net worth of the company
stood at Rs 16,548 crore, while its total assets as on the date stood at Rs 82,209 crore. In
Fortune India 500 list of 2018, Reliance Capital was ranked as the 77th largest corporation
in India with 5th rank in ‘Non-Banking Finance’ category.

4.HDFC mutual funds – Housing Development Finance Corporation Limited (HDFC) is

an Indian financial services company based in Mumbai, India. It is a major housing
finance provider in India. It also has a presence in banking, life and general insurance,
asset management, venture capital, realty, education, deposits and education loans.
5.SBI mutual funds – SBI Mutual Fund was incorporated in 1987 with its corporate head
office located in Mumbai, India. SBIFMPL is a joint venture between the State Bank of
India, an Indian public sector bank, and Amundi, a European asset management company.
A shareholder agreement in this regard has been entered on April 13, 2011, between SBI
& AMUNDI Asset Management. Accordingly, SBI currently holds 63% stake in
SBIFMPL and the 37% stake is held by AMUNDI Asset Management through a wholly
owned subsidiary, Amundi India Holding. SBI & AMUNDI Asset Management shall
jointly develop the company as an asset management company of international repute by
adopting global best practices and maintaining international standards.

• Justification of the topic

In case of individual investor there is higher return by way of dividends and capital
appreciation. Risk of loss is reduced as the funds are managed by well informed
professional managers. Risk of loss is reduced as the funds are managed by well informed
professional managers.

It is also reduced due to diversification of portfolio in terms of companies and industries.

Further, since the returns are automatically invested, the scope for capital appreciation is
enhanced.

As the savings and investments of a large number of investors are pooled the advantage of
economies of scale accrues. The individual investor is spared of the ordeal of having to
self-decide and then go through the process of investment. Thus, from the individual
investor’s angle mutual funds are very much advantageous.

From the point of view of capital market, if the foreign investors are also investing, due to
increased volume of trading operation the liquidity for the domestic market players is
enhanced. Such competition with a market regulator surely, and to an extent even
otherwise, would automatically demand a higher investor discipline by way of increased
disclosure, improved information flow, etc.
Major Mutual Fund Companies in India

I. ABN AMRO Mutual Fund

II. Reliance Mutual Fund
III. Bank of Baroda Mutual Fund
IV. Birla Sun Life Mutual Fund
V. Standard Chartered Mutual Fund
VI. Franklin Templeton India Mutual Fund
VII. HDFC Mutual Fund
VIII. Morgan Stanley Mutual Fund India
IX. HSBC Mutual Fund
X. Escorts Mutual Fund
XI. ING Vysya Mutual Fund
XII. Alliance Capital Mutual Fund
XIII. Prudential ICICI Mutual Fund
XIV. Benchmark Mutual Fund
XV. State Bank of India Mutual Fund
XVI. Canbank Mutual Fund
XVII. Tata Mutual Fund
XVIII. Chola Mutual Fund
XIX. Unit Trust of India Mutual Fund XX. LIC Mutual Fund

1.2 Meaning of mutual fund

A mutual fund is an investment vehicle that pools money from multiple investors to invest
in a diversified portfolio of stocks, bonds, or other securities. Investors buy shares in the
mutual fund, and the fund’s value fluctuates based on the performance of its underlying
investments. Professional fund managers make investment decisions on behalf of the
mutual fund, aiming to generate returns for the investors. Mutual funds provide a way for
individuals to access a diversified portfolio without directly managing it themselves.

KEY TAKEAWAYS
• A mutual fund is a type of investment vehicle consisting of a portfolio of stocks,
bonds, or other securities.

• Mutual funds give small or individual investors access to diversified,

professionally managed portfolios.
 • Mutual funds are divided into several kinds of categories, representing the kinds of
securities they invest in, their investment objectives, and the type of returns they
seek.

• Mutual funds charge annual fees, expense ratios, or commissions, which may
affect their overall returns.

• Employer-sponsored retirement plans commonly invest in mutual funds.

Understanding Mutual Funds

A mutual fund is a type of investment that pools money from many people to invest in a
variety of assets like stocks, bonds, or other securities. This pooling allows individuals to
diversify their investments and access a broader range of strategies or assets than they
might be able to on their own.

A mutual fund effectively owns a portfolio of investments that is funded by all the
investors who have purchased shares in the fund. So when an individual buys into a
mutual fund, they gain part-ownership of all the underlying assets that fund owns. This
gives the individual investor exposure to a much wider swath of the market through a
single mutual fund investment compared to what they might be able to buy individually.

The performance of the mutual fund depends on the underlying assets that it holds. If
these assets increase in value on net, so does the value of the fund’s shares. Conversely, if
the assets decrease in value, so does the value of the shares.

The fund manager oversees the portfolio, making decisions about how to allocate money
across sectors, industries, companies etc. based on the stated strategy of the fund. By
pooling money into a large fund, investors can participate in a professionally-managed,
diversified group of securities that they wouldn’t usually have access to as individuals.

This diversification and access is a key benefit of mutual funds for individual investors.
1.3 Purpose of mutual fund
The long-term purpose of a mutual fund is to provide investors with a diversified
investment portfolio managed by professionals. This helps spread risk and potentially
generate returns over an extended period. Mutual funds aim to help individuals achieve
financial goals like retirement, education, or wealth accumulation by offering a
convenient and professionally managed investment vehicle.

Mutual Fund for Long-Term Financial Goals

Long-term- For 5 years & above Long-term investment in mutual funds is one of the most
suitable methods to gather wealth slowly and steadily. If you have a small amount of
money to invest, you can quickly start with just Rs.500 or Rs.1000 per month. Over a
period of time, this can grow into a large corpus that can be used for various financial
goals, funding your child’s education or planning for retirement.

Conclusion There is always a mutual fund scheme that can help you achieve your goals,
be it short, medium or long term. However, it is important to consult a financial advisor to
make the right investment decision and aim to achieve your goals and expectations.
Mutual fund investments are subject to market risks, read all scheme related documents
carefully.

Long term goals are the ones that you think will take you longer to achieve. Also,
planning for the long-term will hit your major financial goals, however, it has to be very
systematic and organized. This may include planning for your children’s future, their
education or saving for your retirement, taking your family on a world tour and so on…
Moreover, it may include paying off your debt that you might have taken for mid-term
goals.

Investors who are planning for long-term goals should go for Equity Mutual Funds.
Historically, these funds have proven to deliver higher returns, but these are highly risky.
So, investor who have a high-risk appetite should only prefer investing in these funds.
There are various types of Equity Funds that you can choose from such as- Large
Cap/Mid Cap/Small cap funds, ELSS, Diversified Funds and sector funds.
Large cap funds invest in the stocks of large sized companies. These companies are
essentially large companies with large businesses and a large workforce. They are
companies that have a market capitalization (MC= no of shares issued by the company X
market price per share) of more than INR 1000 crore. These stocks give steady returns
over long periods of time. Mid Cap Mutual Funds invest the funds in mid-sized
companies. From a standpoint of the investor, the investing period of mid-caps should be
much higher than large-caps due to the higher fluctuations ( or volatility) in the prices of
the stocks. Mid caps could be companies with a market capitalization of INR 500 Cr to
INR 1000 Cr.
1.4 Objective of mutual fund

The primary objective of Mutual funds is to invest in securities that can increase in value
over time, leading to capital gains for investors. They focus on capital appreciation by
investing in stocks of companies with growth potential.

Mutual Fund Objectives

Mutual funds seek to fulfill the following objectives for their unitholders:

• Diversification: It is usually advised not to put all your eggs in one basket. Doing
so can disproportionately increase your risk. Mutual funds are inherently
diversified. They diversify across securities, assets, and even geographies. Hence,
they help lower the risk.

• Capital protection: Some mutual funds, such as money-market funds and liquid
funds, aim to protect your capital. However, while they are relatively safer, they
also have lower returns.

• Capital growth: Certain mutual funds, such as equity funds, focus on growth to
protect your investment against inflation. These funds invest in stocks and have
higher returns but also come with higher risks.

• Saving tax: A certain class of mutual funds, called equity-linked savings schemes
(ELSS) or tax-saving funds, also provide income-tax deductions up to Rs 1.5 lakh
in a financial year in the old income-tax regime.
• Asset diversification: A reason why mutual funds are such a great investment is
that they have a large number of assets in their portfolio. You will often hear
expert investors advise not to put all eggs in one basket. Because if you do so,
there is a high chance that the fall in asset value will affect your entire portfolio.
As mutual funds invest in a large number of holdings, it provides necessary
diversification that protects the investment in case of a decline in the value of any
of one of these assets.

• Generating income: Fixed-income investment managers generally use two types

of investment management types to generate income for investors. They are
interest rate anticipators and spread traders. If a mutual fund has income
generation as its main objective, it becomes riskier than a money market fund.

However, its returns are also high.

• Professional Management: The primary objective of mutual funds is to provide

professional management of investments to individual and institutional investors.
Mutual fund managers have expertise in selecting and managing investments
across different asset classes such as equity, debt, and money market instruments
based on their internal investment model that is fine-tuned to achieve the objective
of the fund.

• Liquidity: Mutual funds offer investors the flexibility to redeem their investments
at any time, which provides liquidity to the investors. This makes it a crucial
benefit for investors who allocate a part of their emergency fund in mutual funds.

• Convenience: Investing in mutual funds is easy and convenient. Investors can buy
or sell units of a mutual fund scheme through online platforms, agents, or
distributors, and even directly from the mutual fund company. Furthermore,
 investors also have the option to invest through the SIP mode or through the
lumpsum investment mode as per their capital availability. This makes it highly
flexible for the investors ensuring maximum participation across investor
categories.

• Inflation beat returns: The mutual fund scheme should be able to give
inflationbeat returns over time. If the returns on your investment fail to beat
inflation, you are losing your investments’ value. However, mutual funds or other
financial instruments may not give good when there is negative sentiment in the
market or due to a pandemic.
1.5 Research problem

Mutual funds industry in India has passed more than four decades of its presence. In this
short period, the decline in mutual funds industry had been attributed to the factors such as
a) Prolonged bearish trends and scams in Indian stock market that killed the investors’
interest in equities and units b) The fall of UTI broke the investors’ faith and confidence
c) Unattractive returns on mutual fund schemes. Although, good performance of debt funds
helped the industry for some time, the continuous reduction in interest rates in the
economy has adversely affected the growth momentous of mutual funds industry again d)
Sluggish trends and sickness in corporate sector after 1980s

e) Inefficiency and corruptibility in mutual funds management f) Withdrawal of tax

benefits under Section 80 M of Income Tax Act g) Poor performance of mutual fund
schemes h) Series of crisis, scandals and frauds. The above-mentioned factors have
created supplementary flaws and setbacks for the mutual funds industry at various points
of time and have been among the major causes of the decline in mutual funds industry.
The major weaknesses and problems of the Indian mutual funds industry are examined
below.

• Low Level of Awareness

• Regulatory Problems
• Low Participation and Penetration
• Limited Products
 • High Cost
• Low Engagement and Misselling
• Rising Investors’ Complaints
• Other Problems- Financial Literacy and Single Lingual Mechanism

Herding Behaviour

More Focus on Short-term Growth Strategy

Secrecy in Documents

1.6 Scope of mutual fund

• The scope of mutual funds encompasses a wide range of investment options and
strategies that can be used for asset allocation, risk management, long-term
growth, and professional management.

• Mutual funds provide investors with access to a diverse range of investments, such
as stocks, bonds, and cash, allowing them to diversify their portfolios and reduce
risk.

• They offer liquidity, tax-efficiency, and low minimum investment options, making
them accessible to investors of all levels.

• Additionally, mutual funds are cost-efficient, providing investors with access to a

diverse range of investments at a lower cost than they would have to pay to
purchase the securities individually.

• The scope of mutual funds has grown tremendously over the years. With the
emergence of new AMC (Asset Management Companies) and the development of
innovative mutual fund products, investors now have a wide range of mutual fund
schemes to choose from.
• Mutual funds play an important role for those without time to research the stock
market and track their investments regularly.

• Investors can choose from various types of mutual funds that offer different
investment objectives and levels of risk. For example, Equity or stock funds invest
in publicly traded stocks, while bond funds invest in government and corporate
bonds. Money market funds invest in short-term, low-risk securities, while
balanced funds invest in a mix of stocks and bonds. You can choose based on your
needs.

• Some specialized mutual funds invest in specific sectors such as healthcare, IT,
FMCG, Green energy, or gold. For example, if you are optimistic about the IT
sector and believe it will grow in the coming years, you can invest in an IT
thematic mutual fund.

• Nowadays, one can invest in a global mutual fund from India. Global mutual
funds like S&P 500 and NASDAQ allow you to invest in international companies.

• With the vast array of options available, investors must carefully evaluate before
selecting a mutual fund. Proper research and consultation with a financial advisor
can help investors make informed decisions and maximize their returns.
 Research methodology

One of the most important use of research methodology is that it helps in identifying the
problem, collecting and analyzing the required information 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
decisions and critical ones.

The process used to collect information and data for the purpose of making business
decisions. The methodology may include publication research, interviews, surveys and
other research techniques, and could include both present and historical information.

Financial and Statistical Tools for Measurement

The Statistical and Financial tool used to analyze the primary and secondary data to find
the impact and performance of mutual fund on Indian capital market. The Tools are as
under:

NAV:-Net assets Value means current market value of a mutual fund unit in other notion
it’s value of a unit on which funds traded in market. The calculation of NAV is as under:

NAV= Market value of Assets +Accrued Income −Liabilities −Accrued Liabilities

Units outstanding
Mean:-Mean value represents the average of the numeric data.

:-Standard deviation explains the risk and its higher value indicate high risk and lower
value indicate lower risk. The standard deviation explain how for value is from its mean
value.

Β:- Beta measure the relation between security return and market return it’s a relative
measurement. Beta measure the uncontrolled risk it show amount of change in security
return if one unite change in market return. Beta value may be 1,>1, and<1 and beta value
greater than one indicates particular stock in riskier than market and beta value less than
one present stock is les riskier than market. Beta value measures the uncontrolled risk it
includes market risk, political risk, inflation risk and interest rate risk.

²: - ² – Show the percentage of variance explained by independent variable on

dependent variable. The value of R2 range between 0 to 1.

Sharpe’s Performance Index

To measure the performance of mutual fund Sharpe used relative measure that results
single numeric value called Sharpe’s index. Sharpe’s index measure the relation with risk
premium to standard deviation that shows amount of funds return by bearing one unit of
risk(Standard deviation as a measure of risk).As per index value funds are ranked the fund
having high index value ranked one and last rank assigned to lest performer fund having
lowest index value. Sharp’s index measure given as under:
 p

𝑆𝑡 = Sharpe’s index

𝑅𝑝 = Funds mean return

𝑅𝑓 = risk less rate of return

𝜎𝑝 = Standard Deviation of the Funds return.

Treynor’s Performance Index

The Treynor’s index measure the performance of mutual funds it shows a single value that
indicate the relation between risk premium and beta a measure of systematic risk. The
calculated index shows amount of return with per unit of risk. The fund with high index
value is known as best performer fund and funds ranks are assigning as per index value.
Ranks one assign to highest index value and last rank to list performer fund

Treynor’s ratio is given below.

n = 𝑅𝑝 −𝑅𝑓

𝛃𝑝

𝑅𝑝 = Funds mean Return

𝑅𝑓 = Risk less Rate of Return

Β = Beta of Funds

Jenson’s Measure

The absolute measure of mutual fund performance was pioneered by Michael Jensen
(1968) that also known as Jenson’s measure. It’s an absolute measure because the
calculated value compare with pre define standard and that standard show the manager’s
predictive ability. The Jenson’s measure of performance is used in many researches
globally. Jenson’s Measure is as under:

𝑅𝑝 = 𝑅𝑓 + β (𝑅𝑚 – 𝑅𝑓)

𝑅𝑝 = Average return of portfolio

𝑅𝑓 = Risk less rate of return

Β = A measure of systematic risk

𝑅𝑚 = Average market return

Research Hypothesis
Null hypothesis (H⁰) = Equity funds perform better than debt and hybrid funds.

Alternative hypothesis (H¹) = Equity funds do not perform better than Debt and Hybrid
funds.

Review of literature
Reviewing the literature on mutual funds reveals a vast array of studies examining various
aspects such as performance, risk, fees, investor behavior, and market efficiency. Scholars
often analyze factors influencing fund performance, including manager skill, investment
style, and market conditions. Additionally, research delves into investor decision-making,
fund flows, and the impact of regulations. Studies also explore the evolution of mutual
fund industry, its role in financial markets, and its implications for individual and
institutional investors. Overall, the literature provides valuable insights for academics,
practitioners, and policymakers navigating the complexities of mutual fund investing.

Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012), have studied
Impact of Sharpe Ratio & Treynor’s Ratio on Selected Mutual Fund schemes.
This paper examines the performance of selected mutual fund schemes, that the
risk profile of the aggregate mutual fund universe can be accurately compared
by a simple market index that offers comparative monthly liquidity, returns,
systematic & unsystematic risk and complete fund analysis by using the special
reference of Sharpe ratio and Treynor’s ratio.

Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research
on Comparative Performance Analysis of Select Indian Mutual Fund Schemes.
This study analyzes the performance of Indian owned mutual funds and
compares their performance. The performance of these funds was analyzed using
a five year NAVs and portfolio allocation. Findings of the study reveals that,
mutual funds out perform naïve investment. Mutual funds as a medium-to-long
term investment option are preferred as a suitable investment option by
investors.

Dr. Yogesh Kumar Mehta (Feb 2012), has studied Emerging Scenario of
mutual Funds in India: An Analytical Study of Tax Funds. The present study is
based on selected equity funds of public sector and private sector mutual fund.
Corporate and Institutions who form only 1.16% of the total number of
investors accounts in the MFs industry, contribute a sizeable amount of Rs.
2,87,108.01 crore which is 56.55% of the total net assets in the MF industry. It
is also found that MFs did not prefer debt segment.

Dr Surender Kumar Gupta and Dr. Sandeep Bansal (Jul 2012), have done a
comparative Study on Debt Scheme of Mutual Fund of Reliance and Birla sunlife.
This study provides an overview of the performance of debt scheme of mutual
fund of Reliance, and Birla Sunlife with the help of Sharpe Index after calculating
Net Asset Values and Standard Deviation. This study reveals that returns on Debt
Schemes are close to Benchmark return (Crisil Composite debt Fund Index:
4.34%) and Risk Free Return: 6% (average adjusted for last five year).

Prof. V. Vanaja and Dr. R. Karrupasamy (2013), have done a Study on the
performance of select Private Sector Balanced Category Mutual Fund Schemes in India.
This study of performance evaluation would help the investors to choose the best schemes
available and will also help the AUM’s in Better portfolio construction and can rectify the
problems of underperforming Schemes. The objective of the study is to evaluate the
performance of Select private sector balanced schemes on the basis of returns and
Comparison with their bench marks and also to appraise the performance of different
category of funds using risk adjusted measures as suggested by Sharpe, Treynor and
Jensen.

E. Priyadarshini and Dr. A. Chandra Babu (2011), have done Prediction of the Net
Asset Values of Indian Mutual Funds Using Auto- Regressive integrated Moving Average
(Arima). In this paper, some of the mutual funds in India had been modeled using
BoxJenkins autoregressive integrated moving average (ARIMA) methodology. Validity
of the models was tested using standard statistical techniques and the future NAV values
of the mutual funds have been forecasted.

Dr. Ranjit Singh, Dr. Anurag Singh and Dr. H. Ramananda Singh (August 2011),
have done research on Positioning of Mutual Funds among Small Town and Sub-Urban
Investors. In the recent past the significant proportion of the investment of the urban
investor is being attracted by the mutual funds. This has led to the saturation of the market
in the urban areas. In order to increase their investor base, the mutual fund companies are
exploring the opportunities in the small towns and sub-urban areas. But marketing the
mutual funds in these areas requires the positioning of the products in the minds of the
investors in a different way. The product has to be acceptable to the investors, it should be
affordable to the investors, it should be made available to them and at the same time the
investors should be aware of it. The present paper deals with all these issues. It measures
the degree of influence on acceptability, affordability, availability and awareness among
the small town and sub-urban investors on their investment decisions.

Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a
comparative Study On Performance Evaluation of Mutual Fund Schemes Of indian
Companies. In this paper the performance evaluation of Indian mutual funds is carried out
through relative performance index, risk-return analysis, Treynor’s ratio, Sharp’s ratio,
Sharp’s measure, Jensen’s measure, and Fama’s measure. The data used is daily closing
NAVs. The source of data is website of association of Mutual Funds in India (AMFI). The
study period is 1st January 2007 to 31st December, 2011. The results of performance
measures suggest that most of the mutual fund have given positive return during 2007 to
2011.

Main study of project

The main study of mutual funds encompasses a multifaceted analysis that delves into
various critical aspects. Firstly, performance analysis is pivotal, involving the assessment
of historical returns and risk-adjusted performance metrics to gauge a fund’s effectiveness
compared to its peers and benchmarks. Additionally, researchers examine the fund’s
investment strategies, which can range from active management to passive/index
investing, to understand its approach and potential for generating returns. Risk
management techniques employed by fund managers, such as diversification and hedging
strategies, are also scrutinized to evaluate a fund’s resilience in different market
conditions. Furthermore, the impact of fees and expenses on the fund’s returns over time
is carefully analyzed, alongside an examination of the fund’s portfolio composition,
including holdings, asset allocation, and diversification levels. Assessing the expertise and
track record of the fund manager or management team, as well as considering prevailing
market conditions and investor preferences, further enriches the study.
Ultimately, this comprehensive analysis aims to provide investors, financial advisors, and
fund managers with valuable insights to make informed investment decisions in mutual
funds.

4.1 Importance of mutual fund

1. Diversification: Mutual funds pool money from multiple investors to invest in a

diversified portfolio of assets, reducing individual risk.

2. Professional Management: Experienced fund managers make investment

decisions, aiming to maximize returns within the fund’s objectives.

3. Accessibility: Mutual funds offer access to various asset classes (stocks, bonds,
etc.) and investment strategies, making them suitable for different risk profiles and
investment goals.

4. Liquidity: Investors can easily buy or sell mutual fund shares at the fund’s current
net asset value (NAV), providing liquidity compared to directly investing in
individual securities.

5. Affordability: With relatively low minimum investment requirements, mutual

funds allow investors to access a diversified portfolio without needing a large
amount of capital.

6. Regulation and Oversight: Mutual funds are regulated and supervised by

financial authorities, providing transparency and investor protection.

7. Convenience: Mutual funds handle administrative tasks like record-keeping,

dividend reinvestment, and periodic reporting, simplifying the investment process
for investors.
 8. Potential for Returns: While not guaranteed, mutual funds offer the potential for
capital appreciation and income through dividends and interest payments.

9. Tax Efficiency: some mutual funds are structured to be tax-efficient, helping

investors minimize tax liabilities on investment gains.

10. Education and Research: Mutual fund companies often provide educational
resources and research tools to help investors make informed decisions about fund
selection and asset allocation.

4.2 Features of Mutual Funds:

Mutual funds are investment vehicles that pool money from multiple investors to purchase
a diversified portfolio of stocks, bonds, or other securities. One of the key features of
mutual funds is professional management, where experienced fund managers make
investment decisions on behalf of investors. This expertise helps in selecting the right mix
of assets to achieve the fund’s investment objectives. Additionally, mutual funds offer
diversification, spreading investments across various securities, which helps reduce risk
compared to investing in individual stocks or bonds. They also provide liquidity, allowing
investors to buy or sell shares on any business day at the fund’s net asset value.
Transparency is another important aspect, as mutual funds regularly disclose their
holdings, performance, and expenses to investors. Moreover, mutual funds come in a
variety of options, catering to different investment preferences and risk tolerances. They
are also regulated by government agencies to ensure investor protection and fair practices.
With features like affordability, tax efficiency, dividend reinvestment, and accessibility,
mutual funds serve as popular investment choices for individuals, institutions, and
retirement plans seeking to achieve their financial goals.

4.3 Needs of Mutual Funds:

Equity mutual funds can help you create wealth through capital appreciation, while debt
mutual funds can generate income for you. Hybrid mutual funds can help you in both
capital appreciation and wealth creation.
Mutual funds serve several essential purposes for investors. Firstly, they offer
diversification by spreading investments across various assets, which helps mitigate risks
associated with individual securities.

Secondly, they provide access to professional management expertise, as seasoned fund

managers make informed investment decisions on behalf of investors.

Additionally, mutual funds offer accessibility, allowing individuals to invest with

relatively small amounts of money and access diversified portfolios. Furthermore, they
provide liquidity, enabling investors to buy or sell shares at the fund’s net asset value,
providing flexibility in market participation.

Cost efficiency is another advantage, as mutual funds can achieve economies of scale,
resulting in lower transaction costs and management fees compared to individual
investing.

Lastly, mutual funds are subject to regulation and oversight, ensuring transparency and
investor protection.

Overall, mutual funds offer a convenient and effective way for investors to participate in
the financial markets while benefiting from diversification, professional management,
accessibility, liquidity, cost efficiency, and regulatory safeguards.

The main purpose of doing this project was to know about mutual fund and its functioning.
This helps to know in details about mutual fund industry right from its inception stage,
growth and future prospects.

It also helps in understanding different schemes of mutual funds. Because my study depends
upon prominent funds in India and their schemes like equity, income, balance as well as the
returns associated with those schemes. The project study was done to ascertain the asset
allocation, entry load, exit load, associated with the mutual funds. Ultimately this would
help in understanding the benefits of mutual funds to investors.
4.4 Working of mutual fund

The mutual fund collects money directly or through brokers from Investors. The money is
invested in various instruments depending on the objective of the scheme. The income
generated by selling securities or capital appreciation of these securities is passed on to the
investors in proportion to their investment in the scheme. The investments are divided into
units and the value of the units will be reflected in Net Asset Value or NAV of the unit.
NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV
is the net asset value of the scheme divided by the number of units outstanding on the
valuation date. Mutual fund companies provide daily net asset value of their schemes to
their investors. NAV is important, as it will determine the price at which you buy or redeem
the units of a scheme. Depending on the load structure of the scheme, you have to pay entry
or exit load.
4.5 Structure of mutual fund

India has a legal framework within which Mutual Fund have to be constituted. In India open
and close-end funds operate under the same regulatory structure i.e. as unit Trusts. A Mutual
Fund in India is allowed to issue open-end and close-end schemes under a common legal
structure. The structure that is required to be followed by any Mutual Fund in India is laid
down under SEBI (Mutual Fund) Regulations, 1996. particular topic. Therefore a review of
literature helps in relating the present study to the previous ones in the same field.

The Fund Sponsor: Sponsor is defined under SEBI regulations as any person who, acting
alone or in combination of another corporate body establishes a Mutual Fund. The sponsor
of the fund is akin to the promoter of a company as he gets the fund registered with SEBI.
The sponsor forms a trust and appoints a Board of Trustees. The sponsor also appoints the
Asset Management Company as fund managers. The sponsor either directly or acting
through the trustees will also appoint a custodian to hold funds assets. All these are made
in accordance with the regulation and guidelines of SEBI.

As per the SEBI regulations, for the person to qualify as a sponsor, he must contribute at
least 40% of the net worth of the Asset Management Company and possesses a sound
financial track record over 5 years prior to registration.
Mutual Funds as Trusts: A Mutual Fund in India is constituted in the form of Public trust
Act, 1882. The Fund sponsor acts as a settlor of the Trust, contributing to its initial capital
and appoints a trustee to hold the assets of the trust for the benefit of the unit-holders, who
are the beneficiaries of the trust. The fund then invites investors to contribute their money
in common pool, by scribing to “units” issued by various schemes established by the Trusts
as evidence of their beneficial interest in the fund. It should be understood that the fund
should be just a “pass through” vehicle.

Under the Indian Trusts Act, the trust of the fund has no independent legal capacity itself,
rather it is the Trustee or the Trustees who have the legal capacity and therefore all acts in
relation to the trusts are taken on its behalf by the Trustees. In legal parlance the investors
or the unit-holders are the beneficial owners of the investment held by the Trusts, even as
these investments are held in the name of the Trustees on a day-to-day basis. Being public
trusts, Mutual Fund can invite any number of investors as beneficial owners in their
investment schemes.

Trustees: A Trust is created through a document called the Trust Deed that is executed by
the fund sponsor in favour of the trustees. The Trust- the Mutual Fund – may be managed
by a board of trustees- a body of individuals, or a trust company- a corporate body. Most of
the funds in India are managed by Boards of Trustees. While the boards of trustees are
governed by the Indian Trusts Act, where the trusts are a corporate body, it would also
require complying with the Companies Act, 1956.

The Board or the trust company as an independent body, acts as a protector of the of the
unit-holders interests. The Trustees do not directly manage the portfolio of securities. For
this specialist function, appoint an Asset Management Company. They ensure that the Fund
is managed by ht AMC as per the defined objectives and in accordance with the trusts deeds
and SEBI regulations.

The Asset Management Companies: The role of an Asset Management Company (AMC)
is to act as the investment manager of the Trust under the board supervision and the
guidance of the Trustees. The AMC is required to be approved and registered with SEBI as
an AMC. The AMC of a Mutual Fund must have a net worth of at least Rs. 10 Crores at all
times. Directors of the AMC, both independent and non-independent, should have adequate
professional expertise in financial services and should be individuals of high morale
standing, a condition also applicable to other key personnel of the AMC. The AMC cannot
act as a Trustee of any other Mutual Fund. Besides its role as a fund manager, it may
undertake specified activities such as advisory services and financial consulting, provided
these activities are run independent of one another and the AMC’s resources (such as
personnel, systems etc.) are properly segregated by the activity. The AMC must always act
in the interest of the unit-holders and reports to the trustees with respect to its activities.

Custodian and Depositories: Mutual Fund is in the business of buying and selling of
securities in large volumes. Handling these securities in terms of physical delivery and
eventual safekeeping is a specialized activity. The custodian is appointed by the Board of
Trustees for safekeeping of securities or participating in any clearance system through
approved depository companies on behalf of the Mutual Fund and it must fulfil its
responsibilities in accordance with its agreement with the Mutual Fund. The custodian
should be an entity independent of the sponsors and is required to be registered with SEBI.
With the introduction of the concept of dematerialization of shares the dematerialized shares
are kept with the Depository participant while the custodian holds the physical securities.
Thus, deliveries of a fund’s securities are given or received by a custodian or a depository.
Participant, at the instructions of the AMC, although under the overall direction and
responsibilities of the Trustees.

Bankers: A Fund’s activities involve dealing in money on a continuous basis primarily with
respect to buying and selling units, paying for investment made, receiving the proceeds
from sale of the investments and discharging its obligations towards operating expenses.
Thus the Fund’s banker plays an important role to determine quality of service that the fund
gives in timely delivery of remittances etc.

Transfer Agents: Transfer agents are responsible for issuing and redeeming units of the
Mutual Fund and provide other related services such as preparation of transfer documents
and updating investor records. A fund may choose to carry out its activity in-house and
charge the scheme for the service at a competitive market rate. Where an outside Transfer
agent is used, the fund investor will find the agent to be an important interface to deal with,
since all of the investor services that a fund provides are going to be dependent on the
transfer agent.

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996. These
regulations make it mandatory for mutual fund to have three structures of sponsor trustee
and asset Management Company. The sponsor of the mutual fund and appoints the trustees.
The trustees are responsible to the investors in mutual fund and appoint the AMC for
managing the investment portfolio. The AMC is the business face of the mutual fund, as it
manages all the affairs of the mutual fund. The AMC and the mutual fund have to be
registered with SEBI.
4.6 Current scenario of mutual fund in India

Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for the
month of January 2024 stood at ₹ 52,89,008 crore.

Assets Under Management (AUM) of Indian Mutual Fund Industry as on January 31,
2024 stood at ₹ 52,74,001 crore.

The AUM of the Indian MF Industry has grown from ₹9.03 trillion as on January 31,
2014 to ₹52.74 trillion as on January 31, 2024 around 6 fold increase in a span of 10
years.

The MF Industry’s AUM has grown from ₹ 23.37 trillion as on January 31, 2019 to
₹52.74 trillion as on January 31, 2024, more than 2 fold increase in a span of 5 years.

The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the
first time in May 2014 and in a short span of about three years, the AUM size had increased
more than two folds and crossed ₹ 20 trillion (₹20 Lakh Crore) for the first time in August
2017. The AUM size crossed ₹ 30 trillion (₹30 Lakh Crore) for the first time in November
2020. The Industry AUM stood at ₹52.74 Trillion (₹ 52.74 Lakh Crore) as on January 31,
2024.

The mutual fund industry has crossed a milestone of 10 crore folios during the month
of May 2021.

The total number of accounts (or folios as per mutual fund parlance) as on January 31, 2024
stood at 16.96 crore (169.6 million), while the number of folios under Equity, Hybrid and
Solution Oriented Schemes, wherein the maximum investment is from retail segment stood
at about 13.57 crore (135.7 million).
4.7 The Advantages of Mutual Funds

1. Liquidity
The biggest advantage of investing in a mutual fund scheme is that you can redeem
your units anytime you want. Unlike FDs (Fixed Deposits), mutual funds offer very
flexible and convenient withdrawals. However, factors like exit load and preexisting
penalties should be taken into consideration while exiting from an MF scheme.

2. Diversification
Diversification is another advantage of mutual funds. It lowers the risks involved in
building an investment portfolio and hence reduces the risk for the investors.
Because mutual funds contain multiple securities, investors’ gains are safeguarded
even if there is a drop in some of the securities in their portfolios.

3. Expert Management
Beginner investors may not have the knowledge of where and how to invest. Such
people can invest in mutual funds because they are managed by experienced
professionals. These experts collect money from several investors and allocate this
fund to different securities and thereby helping investors generate more gains. The
professionals keep an eye on timely entry and exit and also handle all the challenges
incurred in the investment horizon. In mutual funds, you just have to make an
investment, the rest is taken care of by the professionals who will help you succeed
in this field.

4. Flexibility
Mutual funds offer the flexibility to invest in smaller amounts. That means you don’t
need a lot of money to invest in mutual funds. You can invest according to your
income and cash flow. For example, if you depend on a monthly salary, then you
can select the SIP (Systematic Investment Plan) mode of investment and invest a
fixed amount every month or at regular intervals.
5. Accessibility
Mutual funds are very easy to buy/sell. They are easily accessible and you can buy
them from anywhere.

Disadvantages of Mutual Funds

The following are the disadvantages of mutual funds you must know before
investing:

1. Entry or Exit Load

Some mutual funds may charge either entry or exit load or both. They levy this
charge primarily to maintain their operations and pay staff salaries. Sometimes, the
charge may go up to a high 3% of the net investment amount. However, it mostly
remains around 1%.

While the load might seem one of the significant disadvantages of mutual funds,
funds charging a high load usually offer much higher returns than the average
mutual funds. Hence, while the load certainly eats into your profit, you must analyze
the fund’s past performance before deciding.

2. Diversification Might Cause Lower Profits

While diversification might significantly reduce your risks, it may also reduce your
profit margin. This may become more prominent if you invest in balanced or hybrid
mutual funds. Since these funds invest a part of your capital in equity and the other
part in debt, any profit in one might be muted due to a loss in the other.

3. Difficult Phases
Although long-term investors seldom endure losses, you may have to suffer a capital
loss if you accidentally invest before a bad phase. Mutual fund returns are never
guaranteed. Hence, it is wise to know a little about the economy and the fund
performance before investing.

4. Liquidity
Fixed maturity and ELSS schemes come with a lock-in period. ELSS usually has a
lock-in period of three (3) years. And a fixed maturity plan’s lock-in period depends
on the instrument it invests in. For example, if it invests in a bond with a 5-year
maturity, you cannot withdraw the units before five years.

5. Capital Gains Tax

Both short-term and long-term capital gains from mutual funds are taxable. If you
withdraw your profits before one year from the investment date, you may have to
pay a 15% to 20% tax. And, if you withdraw it after a year, you may have to pay a
10% capital gains tax. You may also need to understand the concept of indexation
to calculate the taxes efficiently.
4.8 Case studies
All of us want our kids to have a successful career and a joyful life but successful
career does not come with ease. We all know there is a huge competition and to
ensure successful career, we need to provide quality education to our children.
While we do our best to give our children the best food, clothing etc. then why not
give them the best education. After all education is the path to success which will
make the child financially independent.

Having similar thought in mind, one of our clients Mr. X & Mrs. Y wanted to
secure the future of their child, by planning for his education and marriage.

Let’s take up their case and see how proper planning can help one plan for their
child’s education and marriage.

Personal Details
Mr. X a 30 year old married individual and his wife whose age was 27 years had a
3 year old Daughter. Mr. X was earing Rs 40,000 per month while his wife was
earning Rs 25,000 per month, thus having a total family income of Rs 65,000 per
month. As their expenses were around Rs 42,000 per month, they could have a
Surplus of around Rs 23,000 on a monthly basis.

He had the following assets as depicted in the table below.

Assets…
So, you can see that Mr. X & Mrs Y had total assets worth Rs 35 lakhs, of which
Fixed Deposit comprises of more than 40% of his total assets. They had small
Amount of investment physical gold which was mostly in the form of gold
ornaments of Mrs Y. They also had their individual EPF, PPF and Cash in Bank
accounts. The Cash in Bank was mainly kept for contingency purpose.

However Mr. X & Mrs Y did not have any liabilities.

And here was Mr. X & Mrs Y’s Financial Objectives!

They were very concerned about their Daughter’s future. So they wanted to plan for
his graduation at the age of 18 years’ worth Rs 9 lakhs, post-graduation at the age
of 21 years’ worth Rs 15 lakhs and marriage at the age of 22 years’ worth Rs 12
lakhs.(All costs are current values), they want their own car and flat in next 5 years
on EMI basis from bank.

(Note: Inflation considered at 7% per annum and investment return considered at

12% per annum, Interest rate is according to SBI Loan Scheme)

Mr. X & Mrs Y needed to make a total investment of Rs 35674 per month to achieve
just these goals, while they had a surplus of Rs 23,000 per month. They wanted to
know how they can plan for their child’s goals.

We recommended them the following:

1. Accommodation Goal: As they already pay rent of 12000 per month for
accommodation now they have to pay 15144 for EMI purpose so in near future they
own their flat.
2. Graduation Goal: Since Graduation is the highest priority goal, we advised
them to a start a SIP of Rs 497O per month. SIP was advised across Equity, debt &
Gold in the allocation of 80%, 10% and 10% respectively for 15 years

3. Post-Graduation Goal: Post-Graduation is the next priority goal, but the

amount required for this goal was very high. If they were to start a SIP of such a
high amount, they would have sacrificed on all other financial goals. So, we advised
them to start a SIP of Rs 4000 per month and increase it by 25% after every 3 years.
They could easily do so as their salaries would increase in future and they can easily
increase their investment amount for this goal as well. SIP was advised across
Equity, Debt & Gold in the allocation of 80%, 10% and 10% respectively for 18
years.

4. Marriage Goal: Marriage was the least priority goal among these 3 goals and
it was difficult for them to start a SIP for this goal immediately. So we advised them
to start a SIP of Rs. 12000 per month after 7 years and increase it by 20% after every
3 years. SIP was advised across Equity, Debt & Gold in the allocation of 80%, 10%
and 10% respectively for 15 years.

5. Other Financial Goals: After planning for the child goals, their total
investment is just Rs 12114 per month while they had surplus of Rs 23,000 per
month. So they can still invest Rs 10886 (Rs 23,000- Rs 12114) for other financial
goals such as retirement, vacation or any other financial goal they might have.

We did not utilize any of their current assets as cash in bank was kept for
Contingency purpose, physical gold was mostly gold ornaments and EPF & PPF
account can be dedicated to other financial goals such as retirement.

Even though Mr. X & Mrs. Y thought their surplus amount is insufficient to fund
for their child goals leaving aside all other goals, but proper planning helped
 them not only to plan for their child goals but also plan for other financial goals.
Amount received as bonus at every year is utilized for other luxury need like this
year this amount is utilized in purchasing a car.

Loan amount is 1500000 as 1500000 down payments are done by FD

withdrawal.

4.9 Mutual fund in India challenges

One of the biggest challenges that the mutual fund industry faces is the lack of healthy
participation from a large part of the country. To illustrate this lack of participation, we first
aggregated the AUMs originating out of each district of India. We then rank ordered all the
districts of India in descending order of their domestic product (GDP) and then partitioned
this list into ten parts. The top 60 districts formed the first decile followed by the second
decile and so on. We then aggregated the AUMs and GDPs for each of these deciles and
took the ratio of these two figures. The AUM/GDP ratio is one of the best indicators of how
much of the yearly income in a given district is being invested into mutual funds.

Financial inclusion has for long been a priority for the policy makers in India. The Reserve
Bank of India (RBI) has permitted the banks to use the services of Business Facilitators and
Business Correspondents. A roll out of Ultra Small branches (USBs) in remote locations is
one of the steps being taken in this direction.

Direct Cash Transfers and linkages with Aadhaar would be a step forward towards the goal
of financial inclusion and may prove beneficial to mutual fund houses in the long run. With
below poverty households finally coming to own bank accounts, fund houses could use pre-
existing bank channels to offer investment opportunities when these people finally start
earning saving.
The advantages of having an active participation by retail investors in mutual fund are not
just limited to financial inclusion. It has been shown in past studies that institutional
investors (in the form of mutual funds) ‘herd’ towards small-cap and mid-cap stock which
offer growth prospects thereby increasing the depth and breadth of capital markets
(Wermers, 1999). Institutional buying and selling of stocks also increases the
priceadjustment process in capital markets and under right conditions institutional investors
tend to decrease stock price volatility. All these effects are desirables as far as financial
markets are concerned.

Earning high returns from Mutual Fund investment takes much more than simply investing
in a top fund. You need to work on a strategy after considering several factors to earn high
returns. Some tips that can help you build a strategy are as follows:

1.Understand Your Risk Appetite

Different types of Mutual Fund investment plans are for different types of investors and risk
appetites. Investing in a fund which does not suit your risk appetite can make you exit the
fund sooner than you should, resulting in lower returns or even losses.

2. Keep Your Age in Mind

Your age also plays a crucial role in your Mutual Fund investment strategy. Younger people
have fewer financial obligations and can take more risk as they have more time to recover
from losses if any. Equity funds are an excellent choice for someone in their 20s and 30s
while people above 40 should invest most of their money in safer funds like debt funds.

3.Diversify Your Mutual Fund Portfolio

Rather than relying on a particular type of Mutual Fund, keep your portfolio diversified with
at least a few different types of funds. If at all, a specific market segment starts
underperforming, funds from other market segments can balance the portfolio and still help
you earn decent returns.

4.Know Your Investment Objective

One of the most important investment strategies in Mutual Funds is to know your
investment objective clearly. For instance, someone aiming for retirement planning or other
long-term goals can consider equity funds while someone looking for tax saving can invest
in Equity-Linked Savings Scheme (ELSS) funds.

5.Go the SIP Way

This allows you to invest as little as Rs <1,000> per month (or even lesser) in the fund of
your choice. Over time, small Systematic Investment Plan (SIP) investments can help you
create a considerable portfolio and benefit you through rupee-cost averaging and
compounding.

6.Prefer Funds with Lower Expense Ratio

Expense ratio is an annual fee that investors pay to the fund house. The lower the expense
ratio will be, the higher will be your returns. So, if you are looking to learn Mutual Fund
performance analysis, give special attention to the expense ratio of the funds.

7.Track and Adjust

Once you have invested in Mutual Funds, make sure that you check the performance of your
investment regularly. Give adequate time for the investment to grow, but do re-adjust the
portfolio if the performance of the funds is below your expectations.
4.10 PROBLEMS AND PROSPECTS OF MUTUAL FUNDS IN INDIA

Mutual funds convert the scattered savings into productive assets by investing them into
capital market instruments. In the process, mutual funds lead to the financial deepening as
well as intermediation. These activities of mutual funds influence the short-term and
longterm behaviour of savers, growth of capital market and the economy. The
economic fundamentals – real economy and financial sector, market structure,
institutional arrangement, consumer confidence, savings and capital market, and
financial policy regime, affect the scope and efficiency of mutual funds. In India, the
ongoing financial reforms have widened the scope of mutual funds by integrating the Indian
capital market with rest of the world markets. The process of liberalisation and globalisation
of Indian economy has increased the scope of technological innovation, competition and
efficiency for mutual funds and made the industry as one of the fastest growing segments
of Indian economy. Presently, the Net Assets of mutual funds is more than 7 percent of
India’s gross domestic product (GDP). Also, the monies accredited to mutual funds form
an adequate part of gross domestic savings (GDS) in the country. This indicates the
important place of mutual funds as an investment vehicle in the country. During the last
decade, the Indian mutual funds industry has experienced a rapid growth which has largely
been attributed to the buoyancy of domestic stock markets and the changing economic
and demographic profile of our country.

It is notable that the majority of the money parked in mutual funds come from the
institutional segment including corporates, banks and foreign institutional investors (FIIs)
and the corporates segment alone accounts for about 90 percent of institutional assets
under management (AUM). The participation of retail investors in AUM stands quite low,
which shows the ample opportunity to be tapped by industry in coming years. The industry
is dominated by the top 10 mutual fund players who control more than 80 percent of the
AUM while the bottom 10 mutual fund players control less than 1 percent of the AUM.
Geographically, 87 percent of AUM is covered by the top 15 cities of the country and rest
is attributed to semi urban and rural areas. The current situation reveals some hard and
contradictory facts for the industry. Firstly, the Indian mutual funds industry could not
establish its worthiness as the preferred investment vehicle among the general investors till
now despite having more than forty five years of its existence; even though the industry is
growing consistently. Secondly, there are some factors adversely affecting the investors’
confidence in the industry but at the same time, fostering economic variables are giving
faith for its bright future. This contradictory state of mutual funds in the country prompted
us to conduct a study entitled “Problems and Prospects of Mutual Funds in India” with
the intention of finding answers to the following questions:

What are the problems of mutual funds in India?

Are the prospects of mutual funds in India good?

Keeping these questions in the mind, the researcher has carried out the present study
with the objectives of (i) studying the growth, development and regulations of
mutual funds industry in India; (ii) identifying the factors responsible for the problems
and prospects of mutual funds industry in India.
 Problems of Mutual Funds

Mutual funds industry in India has passed more than four decades of its presence. In this
short period, the decline in mutual funds industry had been attributed to the factors such as
a) Prolonged bearish trends and scams in Indian stock market that killed the investors’
interest in equities and units b) The fall of UTI broke the investors’ faith and confidence
c) Unattractive returns on mutual fund schemes. Although, good performance of debt funds
helped the industry for some time, the continuous reduction in interest rates in the
economy has adversely affected the growth momentous of mutual funds industry again d)
Sluggish trends and sickness in corporate sector after 1980s e) Inefficiency and
corruptibility in mutual funds management f) Withdrawal of tax
benefits under Section 80 M of Income Tax Act g) Poor performance of mutual fund
schemes h) Series of crisis, scandals and frauds. The above-mentioned factors have
created supplementary flaws and setbacks for the mutual funds industry at various points
of time and have been among the major causes of the decline in mutual funds industry.
The major weaknesses and problems of the Indian mutual funds industry are examined
below.

1. Low Level of Awareness

The awareness of investors determines the success of mutual funds industry. In India,
low investors awareness/ information level and financial literacy have been causing biggest
threats to mutual funds industry in channelising the household savings into mutual funds.
According to the Invest India Market Solutions Report (2007) “Just one out of seven
people with savings in 2007 were aware of mutual fund opportunities”. Low
awareness level among retail investors has a direct bearing on the low mutual funds off
take in the retail segment. Due to this, investors in India still prefer bank deposits to
mutual funds. The Karvy Private Wealth Report (2010) reveals that “More than 40 percent
of Indian household savings find their way into bank deposits. Only 3.8 percent of their
savings go to mutual funds”. The majority of new investors do not understand the concept,
operations and advantages of investment in mutual funds. The lack of understanding about
mutual fund products is more pervasive in semi-urban and rural areas. Majority of the
people in these areas find it difficult to differentiate between mutual funds and direct stock
market investments. A large number of retail investors do not understand the concept of
risk-return, asset allocation and portfolio diversification. Moreover, less understanding of
Systematic Investment Plans (SIPs) in mutual funds has caused investors to invest in a
lump-sum manner. One of the worst drawbacks of such lack of information or
understanding of mutual funds is that investors remain unaware of what mutual funds are
doing to their money. Besides, mutual fund companies are not making any concerted
efforts to address this issue. It is also seen that mutual fund offer documents are issued
only to Non Resident Indian (NRI) investors and High Net worth Investors (HNI). It is
provided to general investors on their demand only. Also, the agents and the sales
executives of the mutual fund companies assure higher returns to the investors and paint a
rosy picture about the mutual funds while marketing the schemes. The agents or
distributors of mutual funds are more concerned about their commissions and incentives
and thus do not explain the risk involved in the investment owing to the fear that it may
discourage the investors to invest. The ignorance of the investors about mutual funds
coupled with aggressive selling by promising higher returns to the investors have resulted
into loss of investors’ confidence. Moreover, the mutual funds in our country have quite
wrongly been promoted as an alternative to investment. The investors who invest
in growth or equity schemes consider it as an alternative to stock market investment and
the investors who invest in debt schemes expect returns higher than on nationalized
banks’ fixed deposits. They get dissatisfied when they do not receive the expected returns.
The dissatisfaction of investors results into poor demand for such schemes. The NAV of
such schemes decline on listing and trading due to poor sentiments of investors.
Thus, investors’ low level of awareness is the major problem of mutual funds industry.

2. Regulatory Problems

A strong regulatory framework is the key to success for any business environment and so
is the case for Indian mutual funds industry. The level of competition in the industry
has continuously been going up. So, it needs to perform a more dynamic and vibrant
role to meet the tests of time. We have observed some areas in mutual fund regulations
which are to be addressed soon so as to make it more competitive and transparent.

1. The first level regulation of mutual funds in the country rest with the trustee. The
actions taken by the trustee are deemed to be the actions of the mutual funds.
SEBI requires at least four trustees in a mutual fund and 2/3 of them must be
independent from AMC. However, their functions in fund management are not
demarcated in the regulations. Trustees are usually drawn from diverse background.
They are generally experienced bankers, eminent lawyers, ex-judges and renowned
charted accountants. So, it would be unrealistic to expect them to possess a high level
of mutual fund expertise. This situation is not conducive to the exercise of competence.
2. The mutual fund distributors are out of the regulatory purview of SEBI. There are no
separate regulations framed by SEBI for them. In US, distributors are registered under
the Securities Exchange Act of 1934 as broker-dealers. They are regulated by
Securities Industries and Financial Markets Associations and are required to pass
broker-dealer exam for selling mutual fund units. Similarly, Financial Service
Authority (FSA) in UK spells out the responsibilities for distributors in ‘The
Responsibilities of Providers and Distributors for the Fair Treatment of
Customers’ (RPPD). Such regulatory norms for distributors are yet to be framed in
India. Recently, SEBI has taken a few steps in this regard. It has directed AMCs to
regulate the distributors by carrying out due diligence process. We feel that giving
responsibility to AMCs to regulate distributors is not enough to secure the interest of
investors. SEBI should frame separate and more comprehensive regulations for
distributors so as to regulate their activities properly. Besides, SEBI should set up a
separate governing body to look into the activities of mutual fund distributors as in
UK.
3. Fund managers are bound to invest funds according to the investment objectives
of schemes stated in the offer documents. They do not have choice to invest in other
 good performing securities. This mandate sometimes, restricts the mutual funds
to perform effectively in the market.
4. SEBI regulations regarding transparency in mutual fund product names and definitions
are not comprehensive in nature. Mutual fund products are used to have hazy names
like T.I.G.E.R (The Infrastructure Growth and Economic Reforms),
S.M.I.L.E (Small and Medium Indian Leading Equities) and C.U.B. (Competitive
Upcoming Businesses) etc. The equity funds are vaguely defined such as
‘opportunities funds’ and ‘multi-cap’ funds. Because of this, investors do not
understand how diversified funds are different from ‘opportunities funds’ and
‘multi-cap’ funds. Owing to this, investors do not get the real picture about where
the fund will be invested and what kind of risk it will take. To tackle this problem,
SEBI is trying to evolve a fund labelling system which can help investors to some
extent. It is a good step and it will certainly boost up the investors’ confidence in the
market.
5. The ban on entry load in 2009 reduced the ability of distributors to sell mutual funds
in the market. Earlier, distributors were paid Rs. 2.25 (per hundred rupees) as
compensation by AMCs, which was deducted as the entry load from scheme’s
amount. The average commission paid to distributors was 1.78 percent in 2008,
which came down to 0.98 percent in 2010. The entry load ban not only lowered the
distributors’ commission but also compelled large number of distributors to go out of
the mutual funds business. As a result, the participation of households in mutual funds
has declined. Also, from June 30, 2009 onwards, SEBI has enabled investors to
pay commissions directly to the distributors depending on his/ her assessment of
various factors, such as the quality of service rendered by distributors. But, we think
that no investor will be interested to pay money separately for any kind of service
received from distributors. It will raise a concern from distributors regarding the non-
receipt of payment from investors, and may thereby lead to the conflict of interest
between distributors and investors. These regulatory steps do not seem to be practical
and may go against the distributors who are considered key to the success of the mutual
funds industry.

3. Low Participation and Penetration

Low retail participation is the biggest challenge posed before the Indian mutual funds
industry regardless the availability of favourable retail environment and ample growth
opportunities in the Indian economy. According to the Confederation of Indian Industry
& PricewaterhouseCoopers Mutual Fund Summit Report (2010), “Indian mutual funds
industry has experienced a marginal increase of 5.3 percent in retail participation from
21.3 percent in 2009 to 26.6 percent in March, 2010”. Dent of low retail participation is
mainly attributed to the week distribution network and low transparency in client
servicing. Moreover, mutual funds are popular mainly with the urban, high, and middle-
income groups. The penetration of mutual funds is quite low beyond top 20 cities.
According to the Klynveld Peat Marwick Goerdeler & Confederation of Indian Industry
Report (2009), “the cities beyond top 20 contribute around 10 percent of the industry
AUM”. The population living in Tier II & Tie III cities is not able to invest in mutual
funds owing to the lack of proper distribution channels and client servicing. Mutual fund
houses have largely concentrated on the distribution network in top 20 cities because the
cost associated for penetration in Tier II, Tie III cities and rural areas is very high.
However, some of the mutual fund companies have now started to focus on cities and
areas beyond top 20 cities by increasing their branches and supporting the distribution
reach. They have stepped up the number of branches in Tier II & Tier III cities but have
failed to focus adequately on boosting retail business. The institutional segment has been
given more weightage in garnering the AUM that comprises more than 60 percent of total
AUM share in mutual funds. This is because of the mindset of current investment
managers who think institutional money as the easiest route of having a big slice of cake
in one go. The availability of tax arbitrage and large ticket volume to corporates on
investing in money market mutual funds and the easy access of institutional investors in
Tier I cities appear to be important factors responsible for this phenomenon. The
focus on retail segment requires significant distribution capabilities, wide network and
intense foot prints. It Is noteworthy that Asset Management Companies (AMCs) have
recently begun to focus on these aspects.

4. Limited products

The mutual funds industry in India offers limited products to meet the needs of investors.
Unlike the US, UK and Japan, the Indian mutual funds industry is very slow in offering
innovative products to investors. In US, different mutual funds are available for the entire
life span of investors. Schemes, more than 10,000 in number, fit to every 10
economic and social need of investors, be it a university admission (College Target Date
Funds), retirement (Retirement Target Date Funds) or purchasing of the property. Likewise
in the UK, there are over 2,000 different types of unit trusts and Openended Investment
Companies (OEICs) available to investors, investing in over 30 sectors. These sectors have
been categorized by the Investment Management Association (IMA) and are divided
among the assets class (like funds investing equities, fixed interest, and property),
geography (such as UK Equity, North America, Japan and
Emerging Markets), sector type (like Technology and Telecoms) and investment style
(such as Growth or Income). Compared to that in India, only about 1,200 mutual fund
schemes are available in the market and most of which are either income, balanced, liquid
or growth funds. The sector specific funds, commodity funds, index funds, funds of funds
(FOFs) and exchange traded funds (ETFs) have recently been introduced in India.
These funds have not gained adequate interest of investors yet. So, owing to few
options, the investors in India are restricted to a limited range of mutual fund products.
The lack of experience, traditional investment practices, risk averse and conservative
attitude of mutual funds appear to be the reasons for limited product offering in India.

5. Other Problems

A. Financial Literacy and Single Lingual Mechanism – The low level of

financial literacy causes many problems to mutual funds investors. SEBI and mutual
fund companies have recently taken a number of steps to educate the investors. The
applicability of single lingual mechanism in the application forms/ offer documents is also
an important problem especially for those who are unable to read/ write English.

B. Herding Behaviour - Herding behaviour keeps investors unaware of the

existing market trends and also creates hype and rumours among them regarding other
good mutual funds. This has become one of the most serious problems of the mutual
funds industry now.

C. More Focus on Short-term Growth Strategy – Mutual fund companies in India

are following short-term growth strategies by concentrating more on heavy advertising and
high selling practices leaving sideways the performance, product innovation and customer
services.

D. Secrecy in Documents – The documents of mutual funds are often not sound and
their operations are characterized by secrecy, lack of accountability, unwillingness to
furnish required information and so on. Not with standing many guidelines of SEBI, mutual
funds are following little transparency in their working.

Mutual funds are a good source of investment for small investors. They invest their savings
in numerous sectors of the economy thereby contributing to the economic development
in our country. Investors have responded very enthusiastically to this financial
instrument of savings, but a lot has to be done for its stabilisation and popularisation
in the country. Thus, it is important to address the above-mentioned problems in a
comprehensive way for the sustainable and rapid growth of the mutual funds industry.
Prospects of Mutual Funds

The performance of Indian mutual funds industry has been quite encouraging over the years
in spite of the several problems faced by the industry. This can be seen from the mounting
growth of mutual funds AUM, its market participants, investor base and total number of
schemes offered. Based on which, the industry is anticipated to sustain its encouraging
trends in future also. Moreover, the country’s economic and financial health, its future
prospects and sound regulatory framework also play an important role in deciding
the future of mutual funds industry in India.
 Comparative study of mutual fund

PERFORMANCE COMPARISON OF MUTUAL FUNDS OF THREE COMPANIES:

1. HDFC MidCap Opportunities (G)

2. UTI Mid Cap (G)
3. Birla SL Midcap Fund (G)

⚫ HDFC MUTUAL FUNDS

 Mutual fund HDFC Mutual fund
Setup date Jun-30-2000
Incorporation date Dec-10-1999
Sponsor Housing development finance
corporation limited, standard life
investments limited
Trustee HDFC Trustee company limited
Chairman N.A
CEO/MD Mr. Millind barve
CIO Mr. Prashant jain
Compliance officer Mr. Yezdi khariwala
Investor service officer Mr. John Mathews
Assets managed Rs. 165013.31 crore (Jun-30-2015)

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies
Act, 1956, on December 10, 1999, and was approved to act as an Asset Management
Company for the HDFC Mutual Fund by Securities and Exchange Board of India (SEBI)
vide its letter dated July 3, 2000. The registered office of the AMC is situated at “HUL
House”, 2nd Floor, H. T. Parekh Marg, 165-166, Backbay Reclamation, Churchgate,
Mumbai- 400 020. The Company Identification Number (CIN) is
U65991MH1999PLC123027..

In terms of the Investment Management Agreement, the HDFC Trustee Company Ltd
has appointed the HDFC Asset Management Company Limited (AMC) to manage
schemes of the Mutual Fund. The paid up capital of the AMC is Rs. 25.241 crore as on
September 30, 2013.

HDFC ASSETS

ASSET Breakup (Jul-31-2015)

Class %
Equity 94.79
Others/unlisted N.A
Debt N.A
Mutual funds N.A
Money market N.A
Cash/call 5.21
Net receivable/payable N.A

Cash/call

Equity
⚫UTI MUTUAL FUND

UTI Asset Management Company Ltd. (UTI AMC) was incorporated on November 14,
2002 and commenced operations from February 1, 2003. UTI AMC has been promoted
by four sponsors, namely, State Bank of India, Life Insurance Corporation of India, Bank
of Baroda and Punjab National Bank and each of them hold 25% of the paid up capital of
UTI AMC. UTI AMC was converted from a private limited company to a limited
company with effect from November 14, 2007. On January 20, 2010 T.Rowe Price
Group
Inc. through its wholly owned subsidiary T.Rowe Price Global Investment Services Ltd.
U.K.(TRP) acquired 26% stake in UTIAMC after obtaining all the requisite approvals
from the Government of India, SEBI and the RBI. Directors representing TRP have been
inducted on UTIAMC board.

manages offshore funds and provides support to the Specified Undertaking of the Unit
Trust of India. It is the holding company for UTI Venture Funds Management Company
which manages venture funds and UTI International Ltd., which markets offshore funds
to overseas investors.

UTI AMC is a SEBI registered Portfolio Manager bearing registration number

PM/INP000000860. UTI AMC has been managing/advising the portfolios of
domestic/offshore funds and mandates since inception in 2004. Some of the key offshore
mandates/funds that the PMS Division has been advising/managing are:

1. Shinsei India Fund, an equity fund based in Japan,

2. Rainbow Fund, registered in Mauritius as a multi-class equity fund,
3. India allocation of the United China-India Dynamic Growth Fund, based out of
Singapore.

UTI PORTFOLIO HOLDINGS SECTOR ALLOCATION AND ASSET

ALLOCATION

Holdings(Jun 20, 15)

Equity Sector Value (Rs) Assets %

SRF Manufacturing 81.70 2.92
Holdings %
Top 5 12.64
Top 10 21.77
Sectors %
Top 3 37.43
⚫BIRLA SUN LIFE MUTUAL FUNDS
Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment manager
of
Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the
Sun Life Financial Inc. of Canada. The joint venture brings together the Aditya Birla
Group’s experience in the Indian market and Sun Life’s global experience.

Established in 1994, Birla Sun Life Mutual fund has emerged as one of India’s leading
flagships of Mutual Funds business managing assets of a large investor base. Our
solutions offer a range of investment options, including diversified and sector specific
equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range
of debt and treasury products and offshore funds.

Birla Sun Life Asset Management Company has one of the largest team of research
analysts in the industry, dedicated to tracking down the best companies to invest in.
BSLAMC strives to provide transparent, ethical and research-based investments and

ASSETS ALLOCATION

Holdings(Sep 30,14)

Equity Sector Value (Rs) Assets %

ING Vysya Bank Banking/Finance 1.50 4.61
Glenmark Pharmaceuticals 1.38 4.23 Tech Mahindra Technology 1.34
4.11 Exide Ind Automotive 1.31 4.03
Motherson Sumi Automotive 1.27 3.91
AB Nuvo Conglomerates 1.27 3.91
LIC Housing Fin Banking/Finance 1.10 3.38
Container Corp Services 0.85 2.62
Union Bank Banking/Finance 0.79 2.43
Oil India Oil & Gas 0.76 2.34
Full portfolios
Concentration

Holdings %
Top 5 20.89
Top 10 35.57
Sectors %
Top 3 40.18

Data Analysis & Interpretation

 1. Analyzing to according to Age

Age No. Of respondents Percentage

15-25 21 87.5
25-35 1 4.2
35-45 -- --
More than 45 2 8.3

Data interpretation

» Respondent from Mumbai city were selected for this research.

» Out of total respondent, 87.5% belongs to the 15-25 age group.

» Out of total respondent, 4.2% belongs to the 25-35 age group.

» Out of total respondent, 0% belongs to the 35-45 age group.

» Out of total respondent, 8.3% belongs to the more than 45 age group.
 2. Analyzing to according to Gender

Gender No. Of respondents Percentage

Male 13 54.2
Female 11 45.8
Other -- --

Data interpretation

» Respondent from Mumbai city were selected for this research.

» Out of total respondent, 54.2% belongs to the Male group.

» Out of total respondent, 45.8% belongs to the Female group.

 3. Analyzing to according to Qualification

Qualification No. Of respondents Percentage

Graduation 12 50
Post graduation 2 8.3
Under graduation 10 41.7

DATA interpretation

» Respondent from Mumbai city were selected for this research.

» Out of total respondent, 41.7% belongs to the Under Graduate.

» Out of total respondent, 50% belongs to the Graduate.

» Out of total respondent, 8.3% belongs to the Post Graduate.

 4. Analyzing to according to occupation

Occupation No. Of respondents Percentage

Govt.sec 2 8.7
Pvt.sec 10 43.5
Business 3 13
Others 2 34.8

DATA interpretation

» Respondent from Mumbai city were selected for this research.

» Out of total respondent, 8.7% belongs to the Govt.sec.

» Out of total respondent, 43.5% belongs to the Pvt.sec.

» Out of total respondent, 13% belongs to the business

» Out of total respondent, 34.8% belongs to the Others.

5.

Annual income No. Of respondents Percentage

1 lakh 11 45.8
2-4 lakh 10 41.7
4-5 lakh 2 8.3
More than 5 lakh 1 4.2

DATA interpretation

» Respondent from Mumbai city were selected for this research.

» Out of total respondent, 45.8% belongs to the 1 lakh.

» Out of total respondent, 41.7% belongs to the 2-4 lakh.

» Out of total respondent, 8.3% belongs to the 4-5 lakh.

» Out of total respondent, 4.2% belongs to the more than 5 lakh.

Data interpretation

» As we can see most people select the safe in investment options like in above chart
saving account , gold investment, and if we have market knowledge & do some kind of
research then we can also go for Mutual fund investment.
7.

While investing your No. Of respondents Percentage

money, which factor you
prefer most?
Liquidity 4 17.4
High return 8 34.8
Low risk 9 39.1
Company reputation 2 8.7

Data interpretation

» as above diagram shows most of the people selected Low Risk & High Returns i.e:
39.1% people selected low risk & 34.8% people selected high returns. Note: however
above both statistics cannot be true at a same time i.e. we can not expect high returns on
low risks investments and Vic-e-versa.
8.

Have you ever No. Of respondents Percentage

invested your
money in mutual
fund ?
Yes 13 54.2
No 11 45.8

Data interpretation

» In India recently (around past one decade/few years only) people started looking &
exploring mutual funds as investment options.
9.

If yes, Where do you find No. Of respondents Percentage

yourself as a mutual fund
investor?
Totally ignored 7 31.8
Partial knowledge of 8 36.4
mutual fund
Aware only of any specific 3 13.6
scheme in which you
invested
Fully aware 4 18.2

Data interpretation

» This is the explanation of above question 8 i.e. major population 34.8% people have
partial knowledge of mutual funds.
10.

If not invested in mutual No. Of respondents Percentage

then why?
Not aware of mutual fund 6 28.6
Higher risk 5 23.8
Not any specific reason 10 47.6

Data interpretation

» I guess 47.6% not any specific reasons is also equal as Not aware of mutual fund Data
interpretation
11.

In which kind of No. Of respondents Percentage

mutual fund you
would like to
invest?
Public 16 66.7
Private 8 33.3

» Based on the above data, it appears that 66.7% of respondents prefer to invest in
public mutual funds, while 33.3% prefer private mutual funds. This suggests that a
majority of respondents lean towards the transparency and accessibility offered by
public mutual
 funds, while a significant minority are interested in the potentially higher returns and
specialized strategies associated with private mutual funds.

Data interpretation
»
The data indicates that the majority of respondents (73.9%) prioritize the potential
return on investment when making investment decisions. Market trends (26.1%) and tax
implications (17.4%) also play significant roles, while factors such as brand image
(13%), liquidity (13%), and risk (13%) have relatively lower influence. Overall, potential
returns, market trends, and tax implications are the primary drivers of investment
decisions for this group.

13.

How do you come No. Of respondents Percentage

to know about
mutual fund?
Advertisement 12 50
Banks 11 45.8
Peer group -- --
Financial advisors 1 4.2

Data interpretation
»
The data suggests that 50% of respondents learn about mutual funds through
advertisements, while 45.8% acquire knowledge through banks. Financial advisors play a
smaller role, with only 4.2% of respondents relying on them for information.
Interestingly, none of the respondents cited their peer group as a source of information
about mutual funds. This highlights the significant influence of advertising and banks in
shaping public awareness and understanding of mutual funds.

14.

Which mutual fund No. Of respondents Percentage

scheme have you
used?
Open ended 9 39.1
Close ended 1 4.3
Liquid fund 2 8.7
Mid cap 8 34.8

Data interpretation
»

The data indicates that 39.1% of respondents have used open-ended mutual fund
schemes, while 4.3% have used close-ended schemes. A notable portion of respondents
(34.8%) have utilized mid-cap funds, and 8.7% have invested in large-cap funds. This
suggests that open-ended schemes and mid-cap funds are more popular among the
respondents surveyed.
Data interpretation

» It appears the highest investment in HDFC Mutual Fund, followed by ICICI Prudential.
The remaining investments are evenly distributed among various other funds.

16.

Which risks you No. Of respondents Percentage

think usually
affects mutual
funds?
Systematic risks 16 69.6
Unsystematic risks 7 30.4
Data interpretation

» In short, mutual funds are mainly affected by systematic risks (69.6%) which are factors
impacting the entire market, such as economic downturns or geopolitical events.
Unsystematic risks (30.4%) are specific to individual assets or companies within the fund,
like company-specific issues or management changes.

17.

Where from you No. Of respondents Percentage

purchase mutual
funds?
Directly from the 4 18.2
AMC’s
Brokers only 8 36.4
Brokers/Sub-brokers 2 9.1
Other sources 8 36.4
Data interpretation

» In short, mutual funds are typically purchased either directly from the Asset
Management Companies (AMCs) (18.2%) or through brokers (36.4%). Some investors
use a combination of brokers and sub-brokers (9.1%), while others utilize alternative
sources (36.4%) for their purchases.

18.

Are you satisfied No. Of respondents Percentage

by the service of
the company’s
employees
behaviour?
Highly satisfied 2 9.1
Satisfied 10 45.5
Neutral 9 40.9
Dissatisfied 1 4.5
Data interpretation

» In short, regarding the satisfaction with the company’s employees’ behavior, 54.6% of
respondents are either highly satisfied or satisfied, while 40.9% are neutral and 4.5% are
dissatisfied.

19.

How do you rate No. Of respondents Percentage

the risk associated
with mutual funds?
Low 8 36.4
Moderate 12 54.5
High 2 9.1
Data interpretation

» The majority of respondents rate the risks associated with mutual funds as moderate
(54.5%), followed by low (36.4%), while only a minority perceive them as high (9.1%).

20.

What type of No. Of respondents Percentage

funds do you
invest or like to
invest in?
Equity funds 11 36.4
 Debt funds 6 54.5
Both type of funds 5 9.1

Data interpretation

» The data indicates a preference for debt funds among respondents, with 54.5% favoring
this option. Debt funds are often chosen for their stability and lower risk profile.
Meanwhile, 36.4% express a preference for equity funds, suggesting a willingness to
embrace higher risk for potentially higher returns associated with the stock market. A
smaller proportion (9.1%) option for a balanced approach, indicating an interest in
diversifying their investments by considering both equity and debt funds.
21.
How do you rate No. Of respondents Percentage
the risk associated
with mutual funds?
Short term (1 to 5 10 43.5
years)
Medium term (5 to 7 30.4
10 years)
Long term (more 6 26.1
than 10 years)

Data interpretation

» The majority of respondents (43.5%) prefer a short-term investment horizon of 1 to 5

years, possibly indicating a desire for quick returns or flexibility in their investment
strategies. A significant portion (30.4%) opt for a medium-term approach of 5 to 10 years,
suggesting a balance between patience and the anticipation of longer-term market trends.
A smaller proportion (26.1%) are inclined towards a long-term perspective, exceeding 10
years, indicating a commitment to enduring growth and wealth accumulation over an
extended period.

SUGGESTIONS

From the findings & conclusion the researcher is willing to give following suggestions to
the investors:
1. The best fund for investment is definitely LIC MF Tax saver fund as it has
maximum average returns & minimum value of overall as well as systematic risk

2. Second best fund for investment is HSBC Tax saver Equity fund as it has given
second best average return & its overall as well as systematic risk is second best amongst
the select tax saver funds.

3. The investors should avoid investing in Nippon India tax saver fund due to its
least average return & maximum overall as well as systematic risk.

From the findings & conclusion the researcher is willing to give following suggestions to
the fund manager / asset management companies of the select mutual fund schemes:

1)The LIC MF tax saver fund has done really well in terms of managing its risk & return.
It should continue to do well so as to attract more & more investors in its scheme.

2)HSBC Tax saver equity fund has some scope of improvement in terms of giving higher
returns to investors & managing its overall as well as systematic risk.

3)Nippon India Tax saver fund has very high scope of improvement as it has given least
average return & maximum volatility in terms of overall as well as systematic risk. If this
performance continues in future as well, the investors will be disappointed & may switch
their investment into other tax saver funds.

 The mutual funds industry should focus on managing investor money and other
function such as accounting and other allied services can be outsourced. This will
save both money and energy to concentrate in other profitable ventures.
 The rate of attrition is very high amongst the fund manger of various schemes as
they are frequently changing their job to get higher package. This is cause of
major concern as it is impacting the profitability and long term objectives of the
schemes Mutual funds industry at present having minuscule share of house hold
savings as majority of people still prefer to park their savings in banks and other
safer avenue of investments. To overcome this customer education programme
should be under taken by AMFI in collaboration with other fund houses.
 To increase the pace of growth of the industry use of information technology
should be promoted at a larger scale. This will reduce the time of transaction.
 The broker often engages in unethical practices of false projection about funds
performance in order to generate brokerage on mobilized investment. This create
negative image about the mutual funds industry and dissuade investors from
investments.
 Mutual funds can be offered online to the investors through the stock exchange.
This can in one hand lower the cost of servicing the fund holder and on the other
increase the penetration of mutual funds.
 The investors should have through knowledge about the funds before they make
any investment. Therefore investment should be preceded by tracking the
performance of the funds over a period of time and different business cycles.
 The Indian mutual funds industry should develop product separately for the
institutional and retail investors. This would prevent undesirable practices and
protects the interest of the retail investors.
 The tax benefit should be made available only to retail investors and necessary
regulations should be framed in this context.
 The institutional investors at present have share of 55 percent of the corpus this
should be gradually reduced and the share of retail investors increased gradually.
 The net worth of the asset management company’s (AMC) should be gradually
raised from Rs 10 crore to Rs 50 crore.
 The existence of variety of schemes and their different variant confuses the
investors. This should be controlled and reduced gradually. The number of
schemes launched should be directly proportional to the net owned funds.
 CONCLUSION

We can infer from the analysis that the concept of mutual fund in the place like Ludhiana
is still in its growing phase. With the growing importance of mutual fund in other areas
in the country, this place is witnessing the same rate of growth in mutual funds. Apart
from these facts the following are some other important facts which can easily be
inferred from the paper---Huge opportunities of Mutual funds exist in the Meerut. In
short the market in this city is a growing market as because many companies exist in this
market, competition is cut to throat. Mindsets of the investors are not towards mutual
funds. They still think of investing in traditional investment alternatives. Customers are
not properly educated about the mutual funds.

Few private sectors banks like ICICI, HDFC, UTI, ING VYSYA etc. sell mutual funds
through their branches only specialized agents of mutual funds are rarely seen. Financial
advisors are not seen there who can educate the investors. Posters, banners or other
promotional activities are rarely seen in this market. Mutual fund companies do not have
aggressive strategies. Insurance products are and can be the main competitors of mutual
funds.

Mutual fund investors are confined to the upper-middle and upper social class in this
market. Upper- lower class and lower-upper class people are still untouched.

More than half of the respondents have wrong perception about the mutual funds. They
feel mutual funds are very risky investment alternative Most of the respondents are
satisfied with their current return from their investment. Most of the respondents neither
do not want to take risk in investing their money in mutual funds.
 BIBLIOGRAPHY

Books:

Common Sense on Mutual Funds, John C. Bogle, David F. Swensen, By John Wiley &
Sons, 148 Page, 2nd paragraph.

Everything you wanted to know About Investing in Mutual Funds, Deepa

Venkatraghavan, By Network 18 Publications, 84 page, 2nd paragraph.

Study of the Performance of Mutual Funds in India, Dr. Preeti Singh, By Galgotia
publications Pvt Ltd 79 page, 4th paragraph.

Management of Financial Services, Sandeep K. Bansal, Rama Bansal, By Kalyani

Publishers, 4.20 page, 4th paragraph.

Mutual Funds: Risk and Performance Analysis for Decision making, John Haslem,
Published by Wiley Blackwell, 214 page, 1st paragraph.

Morning Guide to Mutual Funds: 5 Star Strategies for Success, Christine Benz, Peter Di
Teresa, Russel Kinnel, Don Phillips, Published by Wiley Blackwell, 56 page, 5th
paragraph.

REFERENCES:

Jeck L. Treynor, How to Rate the Management of Investment Funds, Harvard Business
Review, Vol 43, No.1, pp. 63-75.

Turan, M.S., Bodla, B.S. and Mehta, Sushil Kumar, Performance Evaluation of Schemes
of Mutual Fund, vol 15, pp. 38 -66.

Wermers, Russ, Mutual Fund Performance, An Empirical Decomposition into Stock

Picking Talent, Style, Transaction Costs, and Expenses, the Journal of finance, Vol. 55,
pp. 1655-1703.

Che, Joseph Hong, Harrison Ming and Kubik, Jeffery D, Does Fund Size Erode Mutual
Fund Performance? The role of liquidity and organization, The American Economic
Review. Vol. 94, No.5, pp.1276-1302.
Jenson, Michal C., The Performance of Mutual Funds in the Period 1945 – 1964, The
Journal of Finance, Vol 23, No. 2, pp.389-416.
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 ANNEXURE

1)Name- ____________

2)Age

o 15-25 o 25-35
o 35-45 o More
than 45

3)Gender o
Male o
Female o
Other

4)Qualification o
Graduation o Post
graduation o Under
graduation

5)Occupation o
Govt.sec o
Pvt.sec o
Business o
Other

6)What is your annual income approximately?

 o 1 lakh o 2-4 lakh o 4-5 lakh o
More than 5 lakh

7)What is kind of investments you prefer most?

o Saving account o Fixed deposit

o Insurance o Mutual fund o
Post office-NSC, etc.
 o Share/Debentures
o Gold/silver
o Real estate o PPF
o PF

8)While investing your money which factor you prefer most?

o Liquidity o Low
risk o High return
o Company
reputation

9)Have you ever invested your money in mutual fund?

o Yes o No

10)If yes, where do you find yourself as a mutual fund investor?

o Totally ignored o
Partial knowledge
of mutual fund
o Aware only of any
specific scheme in
which you
invested o Fully
aware

11)If not invested in mutual fund then why?

o Not aware of
mutual fund o
Higher risk o Not
only specific
reason

12)In which kind of mutual fund would like to invest?

o Public o Private

13)What factors influence yours investment decision?

 o Return o Brand
image o Liquidity
o Tax implications
o Market trends o
Risk

14)How do you come to know about mutual fund?

o Advertisement o
Banks o Peer
group o Financial
advisors

15)Which mutual fund scheme have you used?

o Open ended o
Close ended o
Large cap o Mid
cap

16)In which mutual fund have invested?

o SBIMF o UTI

o HDFC
o Reliance o ICICI
prudential funds o
JM mutual funds o
Other

17)Which risks you think usually affects mutual fund?

o Systematic risks o
Unsystematic risks

18)Where from you purchase mutual fund?

o Directly from the

AMC’s o Brokers
only o
Brokers/Sub-
brokers o Other
sources
19)Are you satisfied by the service of the company’s employees
behaviour?

o Highly satisfied o
Satisfied o Neutral
o Dissatisfied

20)How do you rate the risk associated with mutual funds?

o Low o Moderate o High
21)What type of funds do you invest or like to invest in?

o Equity funds o
Mutual funds o
Both type of funds
o Other

22)How long would you like to hold your mutual funds investments?

o Short term (1 to 5)
o Medium term (5
to 10) o Long term
(more than 10
years)