13246827 project on mutual fund akhilesh mishra 120417081405 phpapp02

7/28/2019 13246827 Project on Mutual Fund Akhilesh Mishra 120417081405 Phpapp02

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CONTENTS

Acknowledgement

Declaration

Executive Summary

Chapter - 1 INTRODUCTION

Chapter - 2 COMPANY PROFILE

Chapter - 3 OBJECTIVES AND SCOPE

Chapter - 4 RESEARCH METHODOLOGY

Chapter - 5 DATA ANALYSIS AND INTERPRETATION

Chapter - 6 FINDINGS AND CONCLUSIONS

Chapter - 7 SUGGESTIONS & RECOMMENDATIONS

BIBLIOGRAPHY


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MUTUAL FUNDS

ALL ABOUT MUTUAL FUNDS

WHAT IS MUTUAL FUND

BY STRUCTURE

BY NATURE

EQUITY FUND

DEBT FUNDS

BY INVESTMENT OBJECTIVE

OTHER SCHEMES

PROS & CONS OF INVESTING IN MUTUAL FUNDS

ADVANTAGES OF INVESTING MUTUAL FUNDS

DISADVANTAGES OF INVESTING MUTUAL FUNDS

MUTUAL FUNDS INDUSTRY IN INDIA

MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

CATEGORIES OF MUTUAL FUNDS

INVESTMENT STRATEGIES

WORKING OF A MUTUAL FUND

GUIDELINES OF THE SEBI FOR MUTUAL FUND

COMPANIES DISTRIBUTION CHANNELS


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DOES FUND PERFORMANCE AND RANKING PERSIST?

PORTFOLIO ANALYSIS TOOLS

RESEARCH REPORT

OBJECTIVE OF RESEARCH

SCOPE OF THE STUDY

DATA SOURCES

SAMPLING

DATA ANALYSIS

QUESTIONNAIRE


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Chapter - 1

Introduction


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INTRODUCTION

Mutual fund is a trust that pools the savings of a number of investors who share a

common financial goal. This pool of money is invested in accordance with a stated objective. The

joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus

collected is then invested in capital market instruments such as shares, debentures and other

securities. The income earned through these investments and the capital appreciations realized are

shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is

the most suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is

an investment tool that allows small investors access to a well-diversified portfolio of equities,

bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units areissued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not

move in the same direction in the same proportion at the same time. Mutual fund issues units to

the investors in accordance with quantum of money invested by them. Investors of mutual funds

are known as unit holders.


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When an investor subscribes for the units of a mutual fund, he becomes part owner of the

assets of the fund in the same proportion as his contribution amount put up with the corpus (the

total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a

unit holder.

Any change in the value of the investments made into capital market instruments (such as

shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined

as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is

calculated by dividing the market value of scheme's assets by the total number of units issued to

the investors.
http://www.appuonline.com/mf/knowledge/concept.htmlhttp://www.appuonline.com/mf/knowledge/concept.html


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ADVANTAGES OF MUTUAL FUND

Portfolio Diversification

Professional management

Reduction / Diversification of Risk

Liquidity

Flexibility & Convenience

Reduction in Transaction cost

Safety of regulated environment

Choice of schemes

Transparency

DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor

No tailor-made Portfolios

Managing a Portfolio Funds

Difficulty in selecting a Suitable Fund Scheme


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HISTORY OF THE INDIAN MUTUAL FUND 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. Though the growth was slow, but it

accelerated from the year 1987 when non-UTI players entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both

qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending

phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the

fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the

height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund

industry can be broadly put into four phases according to the development of the sector. Each

phase is briefly described as under.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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.


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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). LICestablished 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)

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. As at the end of January 2003, there were 33 mutual funds with total

assets of Rs. 1,21,805 crores.

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


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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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at the

end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421

schemes.

CATEGORIES OF MUTUAL FUND:


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Mutual funds can be classified as follow :

Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.

Close-ended funds: These funds raise money from investors only once. Therefore, after the

offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks

exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most


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of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such

as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such

funds have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With fluctuating

share prices, such funds show volatile performance, even losses. However, short term fluctuations

in the market, generally smoothens out in the long term, thereby offering higher returns at

relatively lower volatility. At the same time, such funds can yield great capital appreciation as,

historically, equities have outperformed all asset classes in the long term. Hence, investment in

equity funds should be considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their

portfolio mirrors the benchmark index both in terms of composition and individual stock

weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different

sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in

companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.


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v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will

invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund:Their investment portfolio includes both debt and equity. As a result, on the risk-return

ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for

investors who prefer spreading their risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund:They invest only in debt instruments, and are a good option for investors averse to

idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income

instruments like bonds, debentures, Government of India securities; and money market instruments

such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into

any of these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large portion being

invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments

which have variable coupon rate.


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iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing

between cash market and derivatives market. Funds are allocated to equities, derivatives and

money markets. Higher proportion (around 75%) is put in money markets, in the absence of

arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term

debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-

30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the

fund.


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INVESTMENT STRATEGIES

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a

month. Payment is made through post dated cheques or direct debit facilities. The investor gets

fewer units when the NAV is high and more units when the NAV is low. This is called as the

benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give

instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual

fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can

withdraw a fixed amount each month.


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RISK V/S. RETURN:


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Chapter 2

Company Profile

INTRODUCTION TO SBI MUTUAL FUND

SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country with an

investor base of over 4.6 million and over 20 years of rich experience in fund management

consistently delivering value to its investors. SBI Funds Management Pvt. Ltd. is a joint

venture between 'The State Bank of India' one of India's largest banking enterprises, and


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Socit Gnrale Asset Management (France), one of the world's leading fund

management companies that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28500 crores of assets and has a diverse profile of

investors actively parking their investments across 36 active schemes. In 20 years of

operation, the fund has launched 38 schemes and successfully redeemed 15 of them, and in

the process, has rewarded our investors with consistent returns. Schemes of the Mutual

Fund have time after time outperformed benchmark indices, honored us with 15 awards of

performance and have emerged as the preferred investment for mil lions of investors. The

trust reposed on us by over 4.6 million investors is a genuine tribute to our expertise in

fund management.

SBI Funds Management Pvt. Ltd. serves its vast family of investors through a network of

over 130 points of acceptance, 28 Investor Service Centres, 46 Investor Service Desks and

56 District Organizers.SBI Mutual is the first bank-sponsored fund to launch an offshore fund

Resurgent India Opportunities Fund.

Growth through innovation and stable investment policies is the SBI MF credo.

PRODUCTS OF SBI MUTUAL FUND

Equity schemes

The investments of these schemes will predominantly be in the stock markets and

endeavor will be to provide investors the opportunity to benefit from the higher returns

which stock markets can provide. However they are also exposed to the volatility and


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attendant risks of stock markets and hence should be chosen only by such investors who

have high risk taking capacities and are willing to think long term. Equity Funds include

diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds

invest in various stocks across different sectors while sectoral funds which are specialized

Equity Funds restrict their investments only to shares of a particular sector and hence, are

riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a

particular index and the performance of such funds move with the movements of the

index.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum Midcap Fund

Magnum Multicap Fund

Magnum Multiplier plus 1993

Magnum Sectoral Funds Umbrella

MSFU- Emerging Business Fund

MSFU- IT Fund

MSFU- Pharma Fund

MSFU- Contra Fund

MSFU- FMCG Fund


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SBI Arbitrage Opportunities Fund

SBI Blue chip Fund

SBI Infrastructure Fund - Series I

SBI Magnum Taxgain Scheme 1993

SBI ONE India Fund

SBI TAX ADVANTAGE FUND - SERIES I

Debt schemes

Debt Funds invest only in debt instruments such as Corporate Bonds, Government

Securities and Money Market instruments either completely avoiding any investments in

the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities

as in Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At

the same time the expected returns from debt funds would be lower. Such investments are

advisable for the risk-averse investor and as a part of the investment portfolio for other

investors.

Magnum Childrens benefit Plan

Magnum Gilt Fund

Magnum Income Fund

Magnum Insta Cash Fund

Magnum Income Fund- Floating Rate Plan
http://www.sbimf.com/Product_Details.asp?ProductId=40&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=6&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=44&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=15&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=41&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=50&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=18&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=23&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=40&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=6&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=44&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=15&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=41&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=50&catid=1http://www.sbimf.com/Product_Details.asp?ProductId=18&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=23&catid=2


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Magnum Income Plus Fund

Magnum Insta Cash Fund -Liquid Floater Plan

Magnum Monthly Income Plan

Magnum Monthly Income Plan- Floater

Magnum NRI Investment Fund

SBI Premier Liquid Fund

BALANCED SCHEMES

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they are

less risky than equity funds, but at the same time provide commensurately lower returns.

They provide a good investment opportunity to investors who do not wish to be

completely exposed to equity markets, but is looking for higher returns than those

provided by debt funds.

Magnum Balanced Fund

COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Dehradoon are as Follows:
http://www.sbimf.com/Product_Details.asp?ProductId=29&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=21&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=43&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=25&catid=3http://www.sbimf.com/Product_Details.asp?ProductId=29&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=21&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=43&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=25&catid=3


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i . ICICI Mutual Fund

ii. Reliance Mutual Fund

iii. UTI Mutual Fund

iv. Birla Sun Life Mutual Fund

v. Kotak Mutual Fund

vi. HDFC Mutual Fund

vii. Sundaram Mutual Fund

viii. LIC Mutual Fund

ix. Pr incipal

x. Franklin Templeton

AWARDS AND ACHIEVEMENTS

SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award - 8 times,

CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-2006) and most

recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for

our schemes.


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Chapter - 3

Objectives and scope

OBJECTIVES OF THE STUDY


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1. To find out the Preferences of the investors for Asset Management Company.

2. To know the Preferences for the portfolios.

3. To know why one has invested or not invested in SBI Mutual fund

4. To find out the most preferred channel.

5. To find out what should do to boost Mutual Fund Industry.

Scope of the study


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A big boom has been witnessed in Mutual Fund Industry in resent times. A large number of new

players have entered the market and trying to gain market share in this rapidly improving market.

The research was carried on in Dehradoon. I had been sent at one of the branch of State Bank of

India Dehradoon where I completed my Project work. I surveyed on my Project Topic A study of

preferences of the Investors for investment in Mutual Fund on the visiting customers of the SBI

Boring Canal Road Branch.

The study will help to know the preferences of the customers, which company, portfolio, mode of

investment, option for getting return and so on they prefer. This project report may help the

company to make further planning and strategy.


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Chapter 4

Research Methodology

RESEARCH METHODOLOGY


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This report is based on primary as well secondary data, however primary data collection was

given more importance since it is overhearing factor in attitude studies. One of the most important

users of research methodology is that it helps in identifying the problem, collecting, analyzing the

required information data and providing an alternative solution to the problem .It also helps in

collecting the vital information that is required by the top management to assist them for the better

decision making both day to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.

Research has been done by primary data collection, and primary data has been collected by

interacting with various people. The secondary data has been collected through various journals

and websites.

Duration of Study:

The study was carried out for a period of two months, from 30 th May to 30th July 2008.

Sampling:

Sampling procedure:


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The sample was selected of them who are the customers/visitors of State Bank if India, Boring

Canal Road Branch, irrespective of them being investors or not or availing the services or not. It

was also collected through personal visits to persons, by formal and informal talks and through

filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical

tool.

Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120 people had

invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund.

Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.

Limitation:


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Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have not

given actual answers of my questionnaire.

Sample size is limited to 200 visitors of State Bank of India , Boring Canal Road

Branch, Dehradoon out of these only 120 had invested in Mutual Fund. The sample.

size may not adequately represent the whole market.

Some respondents were reluctant to divulge personal information which can

affect the validity of all responses.

The research is confined to a certain part of Dehradoon.


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Chapter 5

Data Analysis&

Interpretation

ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Dehradoon


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A

g

e

G

r

o

u

p

50

N

o.

o

f

I

n

v

e

st

o

rs

12

18

30

24

20

16

12

18

30

2420

16

0

5

10

15

20

25

30

35

50

Age group of the Investors

InvestorsinvestedinMutualFu

nd


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Interpretation:

According to this chart out of 120 Mutual Fund investors of Dehradoon the most are in the age

group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20%

and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Dehradoon

EducationalQualification

Number ofInvestors

Graduate/ PostGraduate

88

Under Graduate 25

Others 7

Total 120

71%

23%

6%

Graduate/Post Graduate Under Graduate Others


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Interpretation:

Out of 120 Mutual Fund investors 71% of the investors in Dehradoon are Graduate/Post Graduate,

23% are Under Graduate and 6% are others (under HSC).

c). Occupation of the investors of Dehradoon

.

35

45

30

4 60

1020

30

40

50

Govt.

Service

Pvt.

Service

Business Agriculture Others

Occupation of the customers

No.ofInvestors

Occupation No. of

InvestorsGovt. Service 30Pvt. Service 45

Business 35Agriculture 4

Others 6


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Interpretation:

In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29%

are Govt. Employees, 3% are in Agriculture and 5% are in others.

(d). Monthly Family Income of the Investors of Dehradoon.

Income Group No. of

Investors30,000 32

512

2843

32

0

5

10

1520

25

30

35

40

45

50

30

Income Group of the Investorsn (Rs. in Th.)

No.o

fInvestors


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Interpretation:

In the Income Group of the investors of Dehradoon, out of 120 investors, 36% investors that is the

maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e.

27% investors are in the monthly income group of more than Rs. 30,000 and the minimum

investors i.e. 4% are in the monthly income group of below Rs. 10,000

(2) Investors invested in different kind of investments.

Kind of Investments No. of Respondents

Saving A/C 195Fixed deposits 148Insurance 152Mutual Fund 120Post office (NSC) 75Shares/Debentures 50Gold/Silver 30

Real Estate 65


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195

148

152

120

75

50

30

65

0 50 100 150 200 250

Savin

gA/cIn

suranc

e

Post

Offi

ce(N

SC)

Gold

/Silv

er

KindsofInvestmen

t

No.of Respondents

Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people

have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund,

37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

Factors (a)

Liquidity

(b)

Low

Risk

(c)

High

Return

(d)

Trust

No. of

Respondents

40 60 64 36


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20%

30%32%

18%

Liquidity Low Risk High Return Trust

Interpretation:

Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest

where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust

4. Awareness about Mutual Fund and its Operations

Response Yes NoNo. of

Respondents

135 65


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67

33

Yes No

Interpretation:

From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations

and 33% are not aware of Mutual Fund and its operations.

5. Source of information for customers about Mutual Fund

Source of information No. of

Respondents

Advertisement 18Peer Group 25

Bank 30Financial Advisors 62


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18 2530

62

0102030405060

70

No.o

f

Respondents

AdvertisementPeer Group Bank Financial

Advisors

Source of Information

Interpretation:

From the above chart it can be inferred that the Financial Advisor is the most important source of

information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through

Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.

6. Investors invested in Mutual Fund

Response No. of

Respondents

YES 120

NO 80

Total 200


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Yes

60%

No

40%

Interpretation:

Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual

Fund.

7.Reason for not invested in Mutual Fund

Reason No. of

Respondents

Not Aware 65Higher Risk 5

Not any Specific 10


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Reason

81

136%

Not Aware Higher Risk Not Any

Interpretation:

Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13%

said there is likely to be higher risk and 6% do not have any specific reason.

8. Investors invested in different Assets Management Co. (AMC)

Name of AMC No. of

InvestorsSBIMF 55

UTI 75HDFC 30

Reliance 75ICICI Prudential 56


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Kotak 45Others 70

75

75

56

55

45

30

70

0 20 40 60 80

UTI

Reliance

ICICI

SBIMF

Kotak

HDFC

Others

NameofAMC

No. of Investors

Interpretation:

In Dehradoon most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors

62.5% have invested in each of them, only 46% have invested in SBIMF, 47% in ICICI Prudential,

37.5% in Kotak and 25% in HDFC.

9. Reason for invested in SBIMF

Reason No. of


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RespondentsAssociated with SBI 35

Better Return 5

Agents Advice 15

649

27

Associated with SBI Better Return Agents Advice

Interpretation:

Out of 55 investors of SBIMF 64% have invested because of its association with Brand SBI, 27%

invested on Agents Advice, 9% invested because of better return.

10. Reason for not invested in SBIMF

Reason No. of


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RespondentsNot Aware 25Less Return 18

Agents Advice 22

38%

28%

34%

Not Aware Less Return Agent's Advice

Interpretation:

Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF, 28% do not

have invested due to less return and 34% due to Agents Advice.

11. Preference of Investors for future investment in Mutual Fund

Name of

AMC

No. of

InvestorsSBIMF 76

UTI 45HDFC 35

Reliance 82


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ICICI Prudential 80Kotak 60Others 75

76

45

35

82

80

60

75

0 20 40 60 80 100

No. of Investors

SBIMF

UTI

HDFC

Reliance

ICICI Prudential

Kotak

Others

Name

ofAMC

Interpretation:

Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in SBIMF,

62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.

12. Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial

Advisor

Bank AMC

No. of

Respondents

72 18 30


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60%15

25

Financial Advisor Bank AMC

Interpretation:

Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and

15% through Bank.

13. Mode of Investment Preferred by the Investors

Mode of

Investment

One time

Investment

Systematic Investment

Plan (SIP)No. of 78 42


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Respondents

65%

35%

One time Investment SIP

Interpretation:

Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic

Investment Plan.

14. Preferred Portfolios by the Investors

Portfolio No. of

Investors


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Equity 56Debt 20

Balanced 44

46

17%

37%

Equity Debt Balance

Interpretation:

From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred

Debt portfolio

15. Option for getting Return Preferred by the Investors


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Option Dividen

d

Payout

Divide

nd

Reinve

stment

G

r

o

w

t

hNo. of

Respon

dents

25 10 8

5

21

8%

71

Dividend Payout Dividend Reinvestment Growth

Interpretation:


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From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8%

preferred Dividend Reinvestment Option.

16. Preference of Investors whether to invest in Sectoral Funds

Response No. of

RespondentsYes 25

No 95

21

79Yes No

Interpretation:

Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is

maximum risk and 21% prefer to invest in Sectoral Fund.


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Chapter 6

Findings and

Conclusion


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Findings

In Dehradoon in the Age Group of 36-40 years were more in numbers. The second

most Investors were in the age group of 41-45 years and the least were in the age

group of below 30 years. In Dehradoon most of the Investors were Graduate or Post Graduate and below HSC

there were very few in numbers.

In Occupation group most of the Investors were Govt. employees, the second most

Investors were Private employees and the least were associated with Agriculture.

In family Income group, between Rs. 20,001- 30,000 were more in numbers, the

second most were in the Income group of more than Rs.30,000 and the least were in

the group of below Rs. 10,000.

About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed

Deposits, Only 60% Respondents invested in Mutual fund.

Mostly Respondents preferred High Return while investment, the second most

preferred Low Risk then liquidity and the least preferred Trust.

Only 67% Respondents were aware about Mutual fund and its operations and 33%

were not.


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Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not

have invested in Mutual fund.

Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not

any specific reason for not invested in Mutual Fund and 6% told there is likely to be

higher risk in Mutual Fund.

Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI

Prudential has also good Brand Position among investors, SBIMF places after ICICI

Prudential according to the Respondents.

Out of 55 investors of SBIMF 64% have invested due to its association with the

Brand SBI, 27% Invested because of Advisors Advice and 9% due to better return.

Most of the investors who did not invested in SBIMF due to not Aware of SBIMF,

the second most due to Agents advice and rest due to Less Return.

For Future investment the maximum Respondents preferred Reliance Mutual Fund,

the second most preferred ICICI Prudential, SBIMF has been preferred after them.

60% Investors preferred to Invest through Financial Advisors, 25% through AMC

(means Direct Investment) and 15% through Bank.

65% preferred One Time Investment and 35% preferred SIP out of both type of

Mode of Investment.

The most preferred Portfolio was Equity, the second most was Balance (mixture of

both equity and debt), and the least preferred Portfolio was Debt portfolio.


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Maximum Number of Investors Preferred Growth Option for returns, the second

most preferred Dividend Payout and then Dividend Reinvestment.

Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to

invest in Sectoral Fund.

Conclusion

Running a successful Mutual Fund requires complete understanding of the

peculiarities of the Indian Stock Market and also the psyche of the small investors.

This study has made an attempt to understand the financial behavior of Mutual Fund

investors in connection with the preferences of Brand (AMC), Products, Channels


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etc. I observed that many of people have fear of Mutual Fund. They think their

money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund

and its related terms. Many of people do not have invested in mutual fund due to

lack of awareness although they have money to invest. As the awareness and income

is growing the number of mutual fund investors are also growing.

Brand plays important role for the investment. People invest in those Companies

where they have faith or they are well known with them. There are many AMCs in

Dehradoon but only some are performing well due to Brand awareness. Some AMCs

are not performing well although some of the schemes of them are giving good

return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI

Prudential etc. they are well known Brand, they are performing well and their Assets

Under Management is larger than others whose Brand name are not well known like

Principle, Sunderam, etc.

Distribution channels are also important for the investment in mutual fund. Financial

Advisors are the most preferred channel for the investment in mutual fund. They can

change investors mind from one investment option to others. Many of investors

directly invest their money through AMC because they do not have to pay entry

load. Only those people invest directly who know well about mutual fund and its

operations and those have time.


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Chapter 7


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SuggestionsAnd

Recommendations

Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should be made aware of

the benefits. Nobody will invest until and unless he is fully convinced. Investors

should be made to realize that ignorance is no longer bliss and what they are losing

by not investing.

Mutual funds offer a lot of benefit which no other single option could offer. But

most of the people are not even aware of what actually a mutual fund is? They only


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see it as just another investment option. So the advisors should try to change their

mindsets. The advisors should target for more and more young investors. Young

investors as well as persons at the height of their career would like to go for advisors

due to lack of expertise and time.

Mutual Fund Company needs to give the training of the Individual Financial

Advisors about the Fund/Scheme and its objective, because they are the main source

to influence the investors.

Before making any investment Financial Advisors should first enquire about

the risk tolerance of the investors/customers, their need and time (how long they

want to invest). By considering these three things they can take the customers into

consideration.

Younger people aged under 35 will be a key new customer group into the future, so

making greater efforts with younger customers who show some interest in investing

should pay off.

Customers with graduate level education are easier to sell to and there is a large

untapped market there. To succeed however, advisors must provide sound advice

and high quality.


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Systematic Investment Plan (SIP) is one the innovative products launched by

Assets Management companies very recently in the industry. SIP is easy for monthly

salaried person as it provides the facility of do the investment in EMI. Though most

of the prospects and potential investors are not aware about the SIP. There is a large

scope for the companies to tap the salaried persons.

BIBLIOGRAPHY

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

WWW.SBIMF.COM

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM
http://www.sbimf.com/http://www.moneycontrol.com/http://www.amfiindia.com/http://www.onlineresearch.com/http://www.sbimf.com/http://www.moneycontrol.com/http://www.amfiindia.com/http://www.onlineresearch.com/


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WWW. MUTUALFUNDSINDIA.COM

Mutual Funds


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All About Mutual FundsBefore we understand what is mutual fund, its very important to know the area in which

mutual funds works, the basic understanding of stocks and bonds.

Stocks : Stocks represent shares of ownership in a public company. Examples of public

companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common

owned investment traded on the market.

Bonds : Bonds are basically the money which you lend to the government or a company, and in

return you can receive interest on your invested amount, which is back over predetermined

amounts of time. Bonds are considered to be the most common lending investment traded on the

market. There are many other types of investments other than stocks and bonds (including

annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or

bonds.

What Is Mutual Fund


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A mutual fund is just the connecting bridge or a financial intermediary that allows a group

of investors to pool their money together with a predetermined investment objective. The mutual

fund will have a fund manager who is responsible for investing the gathered money into specificsecurities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of

the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others

they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual

fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do

it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk &

maximizing returns.

Thus a Mutual Fund is the most suitable investment for the common man as it offers an

opportunity to invest in a diversified, professionally managed basket of securities at a relatively

low cost. The flow chart below describes broadly the working of a mutual fund

Unit Trust of India is the first Mutual Fund set up under a separate

act, UTI Act in 1963, and started its operations in 1964 with the issueof units under the scheme US-64.

Overview of existing schemes existed in mutual fund category

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

position, risk tolerance and return expectations etc. The table below gives an overview into the

existing types of schemes in the Industry.

Type of Mutual Fund Schemes

BY STRUCTURE

Open Ended Schemes

An open-end fund is one that is available for subscription all through the year. These do not

have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")

related prices. The key feature of open-end schemes is liquidity.

Close Ended Schemes


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

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

scheme at the time of the initial public issue and thereafter they can buy or sell the units of thescheme on the stock exchanges where they are listed. In order to provide an exit route to the

investors, some close-ended funds give an option of selling back the units to the Mutual Fund

through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of

the two exit routes is provided to the investor.

Interval Schemes

Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale orredemption during pre-determined intervals at NAV related prices.

BY NATURE

1. Equity fund:

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

fund may vary different for different schemes and the fund managers outlook on different stocks.

The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

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

risk-return matrix.

2. Debt funds:

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

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

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

investors. Debt funds are further classified as:


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

Government of India debt papers. These Funds carry zero Default risk but are associated with

Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds: Invest a major portion into various debt instruments such as bonds, corporate

debentures and Government securities.

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

exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly

high on the risk-return matrix when compared with other debt schemes.

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

primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers

(CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and

preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-

bank call money market, CPs and CDs. These funds are meant for short-term cash management of

corporate houses and are meant for an investment horizon of 1day to 3 months. These schemesrank low on risk-return matrix and are considered to be the safest amongst all categories of mutual

funds.

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

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

objective of the scheme. These schemes aim to provide investors with the best of both the worlds.

Equity part provide growth and the debt part provides stability in returns.

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

Each category of funds is backed by an investment philosophy, which is pre-defined in the

objectives of the fund. The investor can align his own investment needs with the funds objective

and invest accordingly.


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BY INVESTMENT OBJECTIVE

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

schemes is to provide capital appreciation over medium to long term. These schemes normally

invest a major part of their fund in equities and are willing to bear short-term decline in value forpossible future appreciation.

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

is to provide regular and steady income to investors. These schemes generally invest in fixed

income securities such as bonds and corporate debentures. Capital appreciation in such schemes

may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodicallydistributing a part of the income and capital gains they earn. These schemes invest in both shares

and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of

capital and moderate income. These schemes generally invest in safer, short-term instruments,

such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.


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OTHER SCHEMES

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

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

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

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

the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks

that constitute the index. The percentage of each stock to the total holding will be identical to the

stocks index weightage. And hence, the returns from such schemes would be more or less

equivalent to those of the Index.

Sector Specific Schemes: These are the funds/schemes which invest in the securities of only

those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast

Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are

dependent on the performance of the respective sectors/industries. While these funds may give

higher returns, they are more risky compared to diversified funds. Investors need to keep a watch

on the performance of those sectors/industries and must exit at an appropriate time.

Types of returns

There are three ways, where the total returns provided by mutual funds can be enjoyed by

investors:

Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all

income it receives over the year to fund owners in the form of a distribution.

If the fund sells securities that have increased in price, the fund has a capital gain. Most fundsalso pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase

in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a

choice either to receive a check for distributions or to reinvest the earnings and get more shares.


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Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons ofinvestments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professionalmanaged, by well qualified professional. Investors purchase funds because they do not have the

time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively

less expensive way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or

bonds, the investors risk is spread out and minimized up to certain extent. The idea behind

diversification is to invest in a large number of assets so that a loss in any particular investment isminimized by gains in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help

to reducing transaction costs, and help to bring down the average cost of the unit for their

investors.


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4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their

holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available

instruments in the market, and the minimum investment is small. Most AMC also have automatic

purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesnt perform in neither the market, as their

management is not dynamic enough to explore the available opportunity in the market, thus many

investors debate over whether or not the so-called professionals are any better than mutual fund or

investor himself, for picking up stocks.

2. Costs The biggest source of AMC income, is generally from the entry & exit load which they

charge from an investors, at the time of purchase. The mutual fund industries are thus charging

extra cost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high returns from a

few investments often don't make much difference on the overall return. Dilution is also the result

of a successful fund getting too big. When money pours into funds that have had strong success,

the manager often has trouble finding a good investment for all the new money.


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4. Taxes - when making decisions about your money, fund managers don't consider your personal

tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered,

which affects how profitable the individual is from the sale. It might have been more advantageousfor the individual to defer the capital gains liability.

Mutual Funds Industry in India

The origin of mutual fund industry in India is with the introduction of the concept of mutual fund

by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when

non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvements, both quality

wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase, the

Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose

the AUM to Rs. 470 in in March 1993 and till April 2004, it reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than

the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking

industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the country.

Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the

prime responsibility of all mutual fund companies, to market the product correctly abreast of

selling.


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The mutual fund industry can be broadly put into four phases according to the development of the

sector. Each phase is briefly described as under.

The major players in the Indian Mutual Fund Industry are:

Major Players of Mutual Funds In India

Period (Last&nbsp1 Week)

ank Scheme

Name

Date NAV

(Rs.)

Last

1

Week

Since

Inception

1 JM Core 11Fund - Series1 - Growth

Mar26 ,2008

8.45 5.12 -94.64

2 Tata Indo-GlobalInfrastructure Fund -Growth

Mar26 ,2008

8.26 5.05 -40.42

3 Tata CapitalBuilder Fund- Growth

Mar26 ,2008

12.44 5.03 15.35

4 Standard Mar 14.07 5 20.92
http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=JM263http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=JM263http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=JM263http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA183http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA183http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA183http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=AZ222http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=JM263http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=JM263http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=JM263http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA388http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA183http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA183http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=TA183http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=AZ222


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CharteredEnterpriseEquity Fund

- Growth

26 ,2008

5 DBS CholaInfrastructure Fund -Growth

Mar26 ,2008

9.01 4.65 -17.17

6 ICICIPrudentialFusion Fund- Series III -Institutional -Growth

Mar26 ,2008

10.2 4.62 23.69

7 DSP MerrillLynch MicroCap Fund -Regular -Growth

Mar26 ,2008

9.93 4.56 -0.85

8 ICICIPrudentialFusion Fund- Series III -Retail -Growth

Mar26 ,2008

10.19 4.51 22.39

9 DBS CholaSmall CapFund -Growth

Mar26 ,2008

6.36 3.75 -81.78

10 PrincipalPersonalTaxsaver

Mar25 ,2008

124.66

3.44 29.97

11 BenchmarkSplit Capital

Fund - PlanA - PreferredUnits

Mar26 ,

2008

141.51

3.14 13.71

12 ICICIPrudentialFMP - Series33 - Plan A -Growth

Mar26 ,2008

9.89 2.91 -7.88

13 Tata SIPFund - SeriesI - Growth

Mar26 ,200

10.25 2.38 2.39
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814 Sahara

R.E.A.L

Fund -Growth

Mar25 ,

2008

7.64 1.86 -49.52

15 Tata SIPFund - SeriesII - Growth

Mar26 ,2008

9.93 1.58 -0.94

A mutual fund is a professionally-managed firm of collective investments that pools money from

many investors and invests it in stocks, bonds, short-term money market instruments, and/or other

securities.in other words we can say that A Mutual Fund is a trust registered with the Securities

and Exchange Board of India (SEBI), which pools up the money from individual / corporate

investors and invests the same on behalf of the investors /unit holders, in equity shares,

Government securities, Bonds, Call money markets etc., and distributes the profits.

The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly

calculated daily based on the total value of the fund divided by the number of shares currently

issued and outstanding.The value of all the securities in the portfolio in calculated daily. Fromthis, all expenses are deducted and the resultant value divided by the number of units in the fund is

the funds NAV.

NAV = Total value of the fund.

No. of shares currently issued and outstanding

Advantages of a MF

Mutual Funds provide the benefit of cheap access to expensive stocks

Mutual funds diversify the risk of the investor by investing in a basket of assets
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A team of professional fund managers manages them with in-depth research inputs frominvestment analysts.

Being institutions with good bargaining power in markets, mutual funds have access tocrucial corporate information, which individual investors cannot access.

History of the Indian mutual fund 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. The history of mutual funds in India can

be broadly divided into four distinct phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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


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(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)

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. As at the end of January 2003, there were 33 mutual funds with total assets of

Rs. 1,21,805 crores.

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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at the

end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421

schemes.


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Categories of mutual funds:


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Mutual funds can be classified as follow:

Based on their structure :

Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.


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Close-ended funds: These funds raise money from investors only once. Therefore, after the offer

period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange

the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the NewFund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly

or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have

relatively low liquidity.

Based on their investment objective :

Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices,

such funds show volatile performance, even losses. However, short term fluctuations in the market,

generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At

the same time, such funds can yield great capital appreciation as, historically, equities have outperformed

all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at

least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Theirportfolio mirrors the benchmark index both in terms of composition and individual stockweightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading across differentsectors and stocks.

iii) Dividend yield funds- it is similar to the equity diversified funds except that they invest incompanies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme.e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund willinvest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund:Their investment portfolio includes both debt and equity. As a result, on the risk-return

ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for

investors who prefer spreading their risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.


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ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund:They invest only in debt instruments, and are a good option for investors averse to ideaof taking risk associated with equities. Therefore, they invest exclusively in fixed-income

instruments like bonds, debentures, Government of India securities; and money market instruments

such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into

any of these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large portion beinginvested in call money market.

ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.

iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments whichhave variable coupon rate.

iv)Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing

between cash market and derivatives market. Funds are allocated to equities, derivatives and

money markets. Higher proportion (around 75%) is put in money markets, in the absence of

arbitrage opportunities.

v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-termdebt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities.

viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of thefund.

Investment strategies:


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1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a

month. Payment is made through post dated cheques or direct debit facilities. The investor gets

fewer units when the NAV is high and more units when the NAV is low. This is called as thebenefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give

instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual

fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can

withdraw a fixed amount each month.

Risk v/s. return:


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Working of a Mutual fund:


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The entire mutual fund industry operates in a very organized way. The investors, known as unit

holders,handover their savings to the AMCs under various schemes. The objective of the

investment should match with the objective of the fund to best suit the investors needs. The

AMCs further invest the funds into various securities according to the investment objective. The

return generated from the investments is passed on to the investors or reinvested as mentioned inthe offer document.


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Working

Of

Mutual Fund


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Mutual Funds

Before we understand what is mutual fund, its very important to know the area in whichmutual funds works, the basic understanding of stocks and bonds.

Stocks : Stocks represent shares of ownership in a public company. Examples of public

companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common

owned investment traded on the market.

Bonds : Bonds are basically the money which you lend to the government or a company, and in

return you can receive interest on your invested amount, which is back over predetermined

amounts of time. Bonds are considered to be the most common lending investment traded on the

market. There are many other types of investments other than stocks and bonds (including

annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or

bonds.

What Is Mutual Fund

A mutual fund is just the connecting bridge or a financial intermediary that allows a group

of investors to pool their money together with a predetermined investment objective. The mutual

fund will have a fund manager who is responsible for investing the gathered money into specific

securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of

the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others

they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual

fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do

it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk &

maximizing returns.


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Thus a Mutual Fund is the most suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managed basket of securities at a relativelylow cost. The flow chart below describes broadly the working of a mutual fund


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Overview of existing schemes existed in mutual fund category

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financialposition, risk tolerance and return expectations etc. The table below gives an overview into the

existing types of schemes in the Industry.


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Type of Mutual Fund Schemes

BY STRUCTURE

Open Ended SchemesAn open-end fund is one that is available for subscription all through the year. These do not have a

fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related

prices. The key feature of open-end schemes is liquidity.

Close Ended Schemes

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

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

scheme at the time of the initial public issue and thereafter they can buy or sell the units of the

scheme on the stock exchanges where they are listed. In order to provide an exit route to theinvestors, some close-ended funds give an option of selling back the units to the Mutual Fund

through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of

the two exit routes is provided to the investor.

Interval Schemes

Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or

redemption during pre-determined intervals at NAV related prices.


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BY NATURE

Under this the mutual fund is categorized on the basis of Investment Objective. By nature themutual fund is categorized as follow:


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1. Equity fund:

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

fund may vary different for different schemes and the fund managers outlook on different stocks.

The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are

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