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Project Report on Analysis of

“Investment Pattern in Mutual Fund”

Submitted in partial fulfillment for Semester 6 Bachelor of Business Administration Practical Studies

Submitted to:

Gujarat Law Society (J.P Shah) Institute of Business Administration

Submitted by:

Sr.no. Name of the Student Roll. No.1 Vishal Kothiya 512 Darshan Lakhani 523 Krishna Lakum 534 Ankit Lalakiya 545 Riya Lalcheta 556 Ankit Makwana 567 Ankit Makwana 578 Kiran Makwana 589 Prakash Makwana 5910 Roshni Makwana 6011 Niraj Pahwa 71

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Certificate

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Preface

As Professional course, practical studies are very important. Case studies, industrial visits, a

preparation of various reports consist of practical studies which gives the real life exposure to the

management students. Being B.B.A student, practical exposure of corporate forms an essential

part of our studies.

Education can build the power of knowledge but to win in the competitive world, one must be

practical. As one of the philosopher has rightly said that “One can learn only through one’s

expert once”, hold true here. Practical managerial training is very essential for any management

student. It brings the gap between the theoretical knowledge and its application in practical life.

Thus the objective behind preparing this project is to relate the management subjects taught in

the classroom to their practical application. Our work in this project, is, therefore humble attempt

towards this end. In this direction, we have tried our level best to present the project based on

this company.

Project Report is about “Investment Pattern in Mutual Fund” in Ahmedabad city. This study

provides Future of Mutual Funds industry information as well as awareness level amongst people

for Mutual Funds. Also this project report of Mutual Funds gives an outlook to management as

to how the mutual funds are performing in the current market situation as a result what may be

the future of this industry. This study also facilitates the general people who can understand the

importance and explore the new option for investment in Mutual Funds.

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Acknowledgement

The submission of this Project Report gives us an opportunity to convey our gratitude to all those

people whose helping hands and guidance have made the successful accomplishment of this

project a reality.

It gives us the immense pleasure to present this project report. Completing a task is a never a

one-man effort. It is often the result of valuable contribution of a number of individuals in a

direct or indirect manner that helps on shaping and achieving an objective.

We wish to express our sincere gratitude to innumerable number of people who have been

associated with us throughout this project. We feel blessed to have the opportunity of expressing

our hearty gratitude to the following personalities, without the help of whom our project could

not have been hatched. First of all we are greatly indebted to honorable Director Dr. Shefali

Dani and all the teaching staff.

We express our sincere thanks to Prof. Swati Modi, Prof. Maitrey Bhagat & Prof. Neha

Shroff (Internal Guide), who guided us throughout the project and gave us valuable suggestions

and encouragement to complete project report successfully.

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Executive Summary

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. The recent trends in the Stock Market have shown that an

average retail investor always lost with periodic bearish tends. If the invests in Index Funds, they

foregoes management risk, because these funds do not employ managers. This report gives the

idea about Mutual Fund industry, its structure and working of Mutual Fund

The present study analyses the mutual fund investments in relation to investor’s behavior. The

objectives of the study are to find out the factors influencing the respondents to prefer mutual

funds and to know the demographic factors affect to the preference of investors. The primary

data was collected from the investors of mutual funds with help of the questionnaire. The

secondary data were collected from the books, records and journals.

Study aims to analyse the whole industry and it becomes helpful to management of the company

to know investors perception and it is helpful to the investors to take right decision for

investment. From the study, we can say that people invest in Mutual fund to get good return and

to get the tax efficiency. People do not invest in Mutual fund due to risk involved in it. So if

there is any scheme provided by the Asset Management Company which provides fix return and

low risk than many of the customer would like to invest in Mutual Fund.

In future, there will be many people who would like to invest in Mutual Fund. The company

should come up with some innovation to attract more people and they should try to spread

awareness about it to the more and more people. If positive attitude is created in the minds of

people than Mutual Fund Industry will grow in future.

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Table of Content

Serial No. Topic Page No.1 Mutual Fund Sector Overview 7-82 Process of Mutual Fund 93 History of Mutual Fund 10-114 Structure of Mutual Fund 12-165 Advantages and Disadvantages of Mutual Fund 17-196 Role of SEBI in Mutual Fund 207 Role of AMFI in Mutual Fund 218 Current scenario of Mutual Fund in India 22-269 PEST Analysis 27-2810 SWOT Analysis 2911 Major Companies under Mutual Fund 30-3412 Major Schemes under Mutual Fund 35-3613 Research Methodology 37-3814 Research Design 39-4015 Analysis 41-5716 Findings 5817 Recommendation 59-6318 Conclusion 64-6519 Bibliography 6620 Questionnaire 67-72

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Mutual Fund Sector Overview

A Mutual Fund pools the money of people with certain investment goals. The money invested in

various securities depending on the objectives of the mutual fund scheme and the profits (or loss)

are shared among investors’ in proportion to their investment. Investments in securities are

spread across a wide cross-section of industries and sectors. 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. The profits or losses are shared by

the investors’ in proportion to their investment. The mutual funds normally come out with a

number of schemes with different investment objectives which are launched from time to time. A

mutual fund is required to be registered with Securities and Exchange Board of India (SEBI)

which regulates securities markets before it can collect funds from the public. A Mutual fund is a

trust that pools the savings of a number of investors’ who share a common financial goal. The

money collected from investors’ is invested in capital market instrument such as shares,

debentures and other securities. The income earned through these investments and the capital

appreciations realized are shared by its unit’s holder in proportion to the number of units owned

by them. Thus a Mutual Fund is the most suitable investment to the common man as it offers an

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

low cost.

Mutual funds can be invested in many different kinds of securities. The most common are cash,

stock, and bonds, but there are hundreds of sub-categories. Stock funds invest primarily in the

shares of a particular industry, such as technology or utilities. These are known as sector funds.

Bond funds can vary according to risk (e.g., high-yield or junk bonds, investment-grade

corporate bonds), type of issuers (e.g., government agencies, corporations, or municipalities), or

maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily

securities (domestic funds) and foreign securities (global funds), or primarily foreign securities

(international funds).Most mutual funds' investment portfolios are continually adjusted under the

supervision of a professional manager, who forecasts the future performance of investments

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appropriate for the fund and chooses those which he or she believes will most closely match the

fund's stated investment objective. A mutual fund is administered through a parent management

company, which may hire or fire fund managers. Mutual funds are liable to a special set of

regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not

taxed on their income as long as they distribute substantially all of it to their shareholders. Also,

the type of income they earn is often unchanged as it passes through to the shareholders. Mutual

fund distributions of tax-free municipal bond income are also tax-free to the shareholder.

Taxable distributions can be either ordinary income or capital gains, depending on how the fund

earned those distributions.

A mutual is a set up in the form of trust, which has sponsor, trustee, Assets Management

Company (AMC) and custodian. Sponsor is the person who acts alone or in combination with

another body corporate and establishes a mutual fund. Sponsor must contribute at least 40% of

the net worth of the investment managed and meet the eligibility criteria prescribed under the

Securities and Exchange Board of India (Mutual Funds) regulations, 1996. The sponsor is not

responsible or liable for any loss or shortfall resulting from the operation of the schemes beyond

the initial contribution made by it towards setting up of Mutual Fund.

Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882

by the Sponsor. Trustee is usually a company (corporate body) or a board of trustees (body of

individuals). The main responsibility of the trustee is to safeguard the interest of the unit holders

and also ensure that AMC functions in the interest of investors’ and in accordance with the

Securities and Exchange Board of India (Mutual Fund) Regulations 1996 the provisions of the

Trust deed and the offer Document of the respective schemes. The AMC is appointed by the

Trustees as the investment Manager of the Mutual Fund. The AMC is required to be approved by

SEBI to act as an asset management company of the Mutual Fund. The AMC if so authorized by

the Trust Deed appoints the Registrar and Transfer Agent to agent the mutual fund. The registrar

processes the application form, redemption requests and dispatches account statements to the

unit holders. The Registrar and Transfer agent also handles communications with investors’ and

updates investor records.

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Process of Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. Anybody with an investible surplus of as little as a few thousand rupees can invest

in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has defined

investment objective and strategy.

The money thus collected is then invested by the fund manager in different types of securities.

These could range from share to debentures to money market instruments, depending upon the

scheme’s stated objectives. The income earned through these investments and the capital

appreciations realized by the scheme are shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common man

as it offers an opportunity to invest in a diversified, professionally managed basket of securities

at a relatively low cost.

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History of Mutual Fund

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 – 1964-87 (Unit Trust of India)

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

Reserve Bank of India and functioned under the Regulatory and administrative control of the

Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development

Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The

first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6700crore

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,

004crores.

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.

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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, 21,805crores. The Unit Trust of India with Rs.44,541crores 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.29,835crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of

Unit Trust of India, functioning under an administrator and under the rules framed by

Government of India and does not come under the purview of the Mutual Fund Regulations.

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

with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the

erstwhile UTI which had in March 2000 more than Rs.76000 crores of assets under management

and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund

Regulations, and with recent mergers taking place among different private sector funds, the

mutual fund industry has entered its current phase of consolidation and growth. As at the end of

March 2007, there were 34 funds, which manage assets over Rs. 326388crores under 500

schemes.

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Structure of Mutual Fund

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management

company (“AMC”) and a custodian. The trust is established by a sponsor or more than one

sponsor who is like a promoter of a company. The trustees of the mutual fund hold its property

for the benefit of the unit-holders. The AMC, approved by SEBI, manages the funds by making

investments in various types of securities. The custodian, who is registered with SEBI, holds the

securities of various schemes of the fund in its custody. The trustees are vested with the general

power of superintendence and direction over AMC. They monitor the performance and

compliance of SEBI Regulations by the mutual fund.

A typical mutual fund structure in India can be graphically represented as follows:

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Sponsor

The sponsor is required, under the provisions of the Mutual Fund Regulations, to have a Sound

track record3, a reputation of fairness and integrity in all his business transactions additionally;

the sponsor should contribute at least 40% to the net worth of the AMC. However, if any person

holds 40% or more of the net worth of an AMC shall be deemed to be a sponsor and will be

required to fulfill the eligibility criteria specified in the Mutual Fund Regulations. The sponsor or

any of its directors or the principal officer employed by the mutual fund should not be guilty of

fraud, not be convicted of an offence involving moral turpitude or should have not been found

guilty of any economic offence.

Trustees

The mutual fund is required to have an independent Board of Trustees, i.e. two thirds of the

trustees should be independent persons who are not associated with the sponsors in any manner

whatsoever. An AMC or any of its officers or employees are not eligible to act as a trustee of any

mutual fund. In case a company is appointed as a trustee, then its directors can act as trustees of

any other trust provided that the object of such other trust is not in conflict with the object of the

mutual fund. Additionally, no person who is appointed as a trustee of a mutual fund can be

appointed as a trustee of any other mutual fund unless he is an independent trustee and prior

approval of the mutual fund of which he is a trustee has been obtained for such an appointment.

The trustees are responsible for - inter alia - ensuring that the AMC has all its systems in place,

all key personnel, auditors, registrars etc. have been appointed prior to the launch of any scheme.

It is also the responsibility of the trustees to ensure that the AMC does not act in a manner that is

favorable to its associates such that it has a detrimental impact on the unit holders, or that the

management of one scheme by the AMC does not compromise the management of another

scheme. The trustees are also required to ensure that an AMC has been diligent in empanelling

and monitoring any securities transactions with brokers, so as to avoid any undue concentration

of business with any broker. The Mutual Fund Regulations further mandates that the trustees

should prevent any conflicts of interest between the AMC and the unit holders in terms of

deployment of net worth.

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The trustees are also responsible for ensuring that there is no change carried out in the

fundamental attributes of any scheme or the trust or fees and expenses payable or any other

change that would modify the scheme and affect the interest of unit holders, unless each unit

holder is provided with written communication thereof. In addition, the unit holders must be

given the option to exit at the prevailing Net Asset Value (“NAV”) without any exit load. They

are obliged to perform a quarterly review of all transactions carried out between the mutual

funds, AMC and its associates.

As far as professional indemnity cover for the trustees or the AMC is concerned, industry

practice in India reveals that the insurance policy is taken out by an Indian insurance company

(as is required by the Insurance Act, 1938) while the risk is subsequently ceded to an overseas re-

insurer who underwrites the primary policy issued by the Indian insurance company.

Asset Management Company

The sponsor or the trustees are required to appoint an AMC to manage the assets of the mutual

fund. Under the Mutual Fund Regulations, the applicant must satisfy certain eligibility criteria in

order to qualify to register with SEBI as an AMC:

The sponsor must have at least 40% stake in the AMC

The directors of the AMC should be persons having adequate professional experience in finance

and financial services related field and not found guilty of moral turpitude or convicted of any

economic offence or violation of any securities laws

The AMC should have and must at all times maintain, a minimum net worth of Rs. 100 million

The board of directors of such AMC has at least 50% directors, who are not associates of or

associated in any manner with, the sponsor or any of its subsidiaries or the trustees;

The Chairman of the AMC is not a trustee of any mutual fund.

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In addition to the above eligibility criteria and other ongoing compliance requirements laid down

in the Mutual Fund Regulations, the AMC is required to observe the following restrictions in its

normal course of business:

Any director of the AMC cannot hold office of a director in another AMC unless such person is

an independent director and the approval of the board of the AMC of which such person is a

director, has been obtained

The AMC shall not act as a trustee of any mutual fund

The AMC cannot undertake any other business activities except activities in the nature of

portfolio management services, management and advisory services to offshore funds, pension

funds, provident funds, and venture capital funds, management of insurance funds, financial

consultancy and exchange of research on commercial basis if any of such activities are not in

conflict with the activities of the mutual fund However, the AMC may, itself or through its

subsidiaries, undertake such activities if it satisfies the Board that the key personnel of the asset

management company, the systems, back office, bank and securities accounts are segregated

activity wise and there exist systems to prohibit access to inside information of various activities.

The AMC shall not invest in any of its schemes unless full disclosure of its intention to invest

has been made in the offer. However, an AMC shall not be entitled to charge any fees on its

investment in that scheme.

The AMC is required to take all reasonable steps and exercise due diligence to ensure that the

investment of funds pertaining to any scheme are not contrary to the provisions of the Mutual

Fund Regulations and the trust deed. An AMC cannot, through any broker associated with the

sponsor, purchase or sell securities, which is an average of 5% or more of the aggregate

purchases and sale of securities made by the mutual fund in all its schemes. However, the

aggregate purchase and sale of securities excludes the sale and distribution of units issued by the

mutual fund and the limit of 5% shall apply only for a block of any three months.

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Custodian

The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry

out the custodial services for the schemes of the fund. Only institutions with substantial

organizational strength, service capability in terms of computerization, and other infrastructure

facilities are approved to act as custodians. The custodian must be totally delinked from the

AMC and must be registered with SEBI. Under the Securities and Exchange Board of India

(Custodian of Securities) Guidelines, 1996, any person proposing to carry on the business as a

custodian of securities must register with the SEBI and is required to fulfil specified eligibility

criteria. Additionally, a custodian in which the sponsor or its associates holds 50% or more of the

voting rights of the share capital of the custodian or where 50% or more of the directors of the

custodian represent the interest of the sponsor or its associates cannot act as custodian for a

mutual fund constituted by the same sponsor or any of its associate or subsidiary company.

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Advantages of Mutual Fund

Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a

dedicated investment research team that analyses the performance and prospects of companies

and selects suitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section of industries and

sectors. This diversification reduces the risk because seldom do all stocks decline at the same

time and in the same proportion. You achieve this diversification through a Mutual Fund with far

less money than you can do on your own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad

deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save

your time and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they

invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly investing in the

capital markets because the benefits of scale in brokerage, custodial and other fees translate into

lower costs for investors.

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Liquidity

The investor gets the money back promptly at net asset value related prices from the Mutual

Fund. The units can be sold on a stock exchange at the prevailing market price or the investor

can avail of the facility of direct repurchase at NAV related prices by the mutual funds.

Transparency

You get regular information on the value of your investment in addition to disclosure on the

specific investments made by your scheme, the proportion invested in each class of assets and

the fund manager's investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your needs and

convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A Mutual Fund

because of its large corpus allows even a small investor to take the benefit of its investment

strategy.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of strict

regulations designed to protect the interests of investors. The operations of Mutual Funds are

regularly monitored by SEBI.

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Disadvantages of Mutual Fund

Dilution

It's possible to have too much diversification because funds have small holdings in so many

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.

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

advantageous for the individual to defer the capital gains liability.

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Role of SEBI in Mutual Fund

Unit Trust of India was the first mutual Fund set up in India in the year 1963. In early 1990s,

Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives

of SEBI are – to protect the interest of investors in securities and to promote the development of

and to regulate the securities market.

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

protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993.

Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital

market. The regulations were fully revised in 1996 and have been amended thereafter from time

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

interests of investors.

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Role of AMFI in Mutual Fund

AMFI  is  dedicated  to  developing  the  Indian  Mutual  Fund  Industry  on  professional, healthy and  ethical  lines  and  to  enhance  and  maintain  standards  in  all  areas  with  a view to  protecting  and  promoting  the  interests  of  mutual  funds  and  their  unit  holders

Objectives  

To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry  

To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services.

To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry.

To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry. 

To develop a cadre of well trained Agent distributors and to implement a programme of training and certification for all intermediaries and other engaged in the industry.

To undertake nationwide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds.

To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.

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Current Scenario of Mutual Fund in India

The Indian Mutual fund industry has witnessed considerable growth since its inception in 1963.

The assets under management (AUM) have surged to Rs 4,173 bn in Mar-09 from just Rs 250

mn in Mar-65. In a span of 10 years (from 1999 to 2009), the industry has registered a CAGR of

22.3%, albeit encompassing some shortfalls in AUM due to business cycles. The impressive

growth in the Indian Mutual fund industry in recent years can largely be attributed to various

factors such as rising household savings, comprehensive regulatory framework, favorable tax

policies, and introduction of several new products, investor education campaign and role of

distributors. In the last few years, household’s income levels have grown significantly, leading

to commensurate increase in household’s savings. Household financial savings (at current

prices) registered growth rate of around 17.4% on an average during the period FY04-FY08 as

against 11.8% on an average during the period FY99-FY03. The considerable rise in

household’s financial savings, point towards the huge market potential of the Mutual fund

industry in India.

Besides, SEBI has introduced various regulatory measures in order to protect the interest of

small investors that augurs well for the long term growth of the industry. The tax benefits

allowed on mutual fund schemes (for example investment made in Equity Linked Saving

Scheme (ELSS) is qualified for tax deductions under section 80C of the Income Tax Act) also

have helped mutual funds to evolve as the preferred form of investment among the salaried

income earners.

Besides, the Indian Mutual fund industry that started with traditional products like equity fund,

debt fund and balanced fund has significantly expanded its product portfolio. Today, the

industry has introduced an array of products such as liquid/money market funds, sector-specific

funds, index funds, gilt funds, capital protection oriented schemes, special category funds,

insurance linked funds, exchange traded funds, etc. It also has introduced Gold ETF fund in

2007 with an aim to allow mutual funds to invest in gold or gold related instruments. Further,

the industry has launched special schemes to invest in foreign securities. The wide variety of

schemes offered by the Indian Mutual fund industry provides multiple options of investment to

common man.

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With a strong growth in the AUM of domestic Mutual fund industry, the ratio of AUM to GDP

increased gradually from 4.7% in 2001 to 8.5% in 2009. The share of mutual funds in

households’ financial savings also witnessed a substantial increase to 7.7% in 2008 as against

1.3% in 2001.

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The investor-wise pattern of asset-holding as well as investors accounts reveals that individual

investors account for almost 96.75% of total investors account and contribute Rs 1552.8 bn

which is 37.0% of the total net assets as on March 31, 2009. The comparatively lower share of

net assets of individual investors in total net assets is mainly because of lower penetration of

mutual fund as an investment instrument among working population (age group 18-59 years). A

majority of investors in the age group 18-59 years are not aware of mutual funds or of investing

in mutual funds through Systematic Investment Plan (SIP). However, take up of mutual fund as

an investment opportunity by individual investors, particularly in Tier 2 and Tier 3 towns, is

expected to increase in the near future.

Corporate/institutions sector on the other hand, though account for only 1.2% of the total

number of investors’ accounts in Mutual funds industry, and contribute as much as 56.3% to the

total net assets of the industry as on March 31, 2009. Despite a rise in net FII inflows in the

domestic mutual funds, FIIs constitute a very small percentage of investors’ accounts (0.0003%)

and contribute Rs 49.83 bn to the total net assets (1% of total net assets of the Indian Mutual

fund industry as on March 31, 2009).

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The net resource mobilization of domestic mutual funds which registered strong growth in

FY2000 due to the tax incentives announced in the Union Budget for FY2000, witnessed a

sharp decline in FY01. The decline in resource mobilization in FY01 was primarily due to the

bearish trend in the domestic stock markets and problems in UTI. The resource mobilization

continued to remain at low level up to FY05. In FY05 resource mobilization by mutual funds

declined by almost 95.3% on account of redemption pressures on income, gilt and equity-linked

saving schemes subsequent to shift of resources in favor of small saving schemes that offered

attractive tax adjusted rates of return. Mutual funds mobilized huge amount of resources under

liquid/money market schemes & growth/equity oriented schemes, while resource mobilization

under debt schemes experienced sharp fall due to change in interest rate scenario. While, the

resource mobilization by mutual funds witnessed strong growth during FY06-FY07 and in the

period Apr-Aug 07 due to buoyant capital market conditions, the eruption of sub-prime

mortgage crisis during Sep-07 and consequent volatility witnessed in the domestic stock

markets led to decline in resource mobilization. The net resource mobilization of mutual funds

turned negative as there was a net outflow of Rs 282.97 bn during FY09 as against a net inflow

of Rs 1,538.01 bn during FY08. The uncertain conditions in stock markets coupled with

redemption pressures from banks and corporate amidst tight liquidity conditions resulted in

significant outflows during the months of Jun-08 (Rs 392.3 bn), Sep-08 (Rs 456.5 bn) and Oct-

08 (458 bn). This led the RBI to announce various liquidity augmentation measures to provide

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liquidity support to mutual funds through banks. With the easing of overall liquidity conditions,

net resource mobilization by mutual funds again turned positive between the period Dec-08 to

Feb-09. Further, with liquidity conditions remaining comfortable and stock markets registering

strong gains, the net resource mobilization by mutual funds grew considerably during the first

quarter of FY10.

The data reveals that the increase in revenue and profitability of the Mutual fund industry has

not been commensurate with the AUM growth in past few years. The increased expenditure on

marketing, distribution and administration exerted upward pressure on the operating expenses,

thereby impacting AMC’s margins. The operating expenses as a percentage of AUM rose from

41 basis points in FY04 to 113 basis points in FY08.

The mutual fund industry, beset by net redemptions by investors and adverse global and local

market conditions, shrank by 1.6% in terms of assets under management during the year

FY2011-2012.The benchmark BSE Sensex and the assets under management (AuM) for the

mutual fund industry have risen in tandem. Booming markets in 2006 saw increased investor

participation in the industry, leading to fund inflows enabling the AuM to grow at a pace greater

than the Sensex.

26

PEST Analysis

Political Analysis

In India, SEBI (Mutual Fund) Regulations, 1996 regulates the structure of mutual funds.

Mutual funds in India are constituted in the form of a Public Trust created under The

Indian Trusts Act, 1882.

The stability of the government and people faith into it acts as an important return factor.

The impact of foreign investment:

o Forced renegotiation of contracts

o A requirement that a minimum percentage of supervisory positions be held by

locals.

Economic Analysis

India's population is young, with 54% under the age of 25and 80% under 45 and the

percentage of working population is raising rapidly.

If we see the position of BSE Sensex as compared to other major indexes in the world

then we find that BSE has been the best performer.

India – Potential 'Services Capital' of the World-With services becoming increasingly

tradable, India is well placed in terms of costs and skill sets and over the past 13 years.

Inflation affects the Return-Inflation has always lowered the actual return from bank

savings except the year 2002

Impact of Various Changes-With the increase in global trade and finance, there is a need

for level playing field as the WTO has laid down common rules to facilitate smooth trade

among member countries irrespective of their size.

27

Socio-cultural Analysis

The most important factor shaping in today's global economy is the process of

globalization.

The increasing share of India and other emerging market economies in world trade.

To fund future needs, to meet contingencies, to maintain same standard of living after

retirement.

Standard of living of population tends to improve.

Technological Analysis

Indian companies are moving in search of low-cost markets, technology is driving growth

in production and competition is becoming more intense.

The outburst in communication technology has led to greater integration of Indian

financial markets across the world.

The outburst of technology has made it possible for the foreign companies to look for

Indian market and returns associated with it.

All the legal framework and associated work has become easy to handle.

28

SWOT Analysis

Strengths Large number of potential customers are base Government support by way of tax concession for MF investors. Volatility of bank interest rate. Better scope for accessing market information. Offer liquidity to the investors at any time. Offers variety of products to the investors. The size of the market is large.

Weakness Poor participation of retail investors. Lack of focus. Under performance. Poor service conditions. Distribution network is confines only to metro cities.

Opportunities Huge untapped market in semi-urban and rural areas. High level of savings habit among the people. Liberalized business environment. Using on-line mode of trading systems. Investment opportunities abound in the international market. Failures of non bank financial company operations.

Threats Increasing competition among the players. High level of volatility in the stock market. Possibility of more stringent regulations by SEBI, RBI, AMFI, etc in future.

29

Major Companies under Mutual Funds

Public Companies

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore

fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest

Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15

have already yielded handsome returns to investors. State Bank of India Mutual Fund has more

than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18

schemes.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial.

Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada,

the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual

Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs.

10,000crores.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The

sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the

Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed

on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under

which units are issued to the Public with a view to contribute to the capital market and to provide

investors the opportunities to make investments in diversified securities.

30

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI

Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset Management

Company presently manages a corpus of over Rs.20000 Crore. The sponsors of UTI Mutual

Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and

Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,

Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.

Axis Mutual Funds

Axis Bank was the first of the new private banks to have begun operations in 1994 after the

Government of India allowed new private banks to be established. The Bank was promoted

jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and

other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India

Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance

Company Ltd.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing

Development Finance Corporation Limited and Standard Life Investments Limited.

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Private Companies

Franklin Templeton India Mutual Fund

The group, Frank line Templeton Investments is a California (USA) based company with a

global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services

groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or

through mail or through their website. They have Open end Diversified Equity schemes, Open

end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open

end Income and Liquid schemes, closed end Income schemes and Open end Fund of Funds

schemes to offer.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee

Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management

(India) Pvt. Ltd. was incorporated on April 6, 1998.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets

(India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee

Company of HSBC Mutual Fund

BOI AXA Mutual Fund

Bharti AXA Investment Managers Private Limited was incorporated on 13th August, 2007 and is

headquartered in Mumbai, the commercial hub of India. With a presence in more than 34

locations across the country within one year of the launch, Bharti AXA Investment Managers

boasts one of the largest footprints for any AMC in the country during launch. This indicates the

retail focus of the AMC. With best practices brought in from world leaders in financial

protection, Bharti AXA Investment Managers aim to be an aggressive player in the Indian Asset

Management Industry.

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Others Mutual Fund Companies (Public and Private)

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital

Management Corp. of Delaware (USA) as sponsorer. The Trustee is ACAM Trust Company Pvt.

Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the corporate office

in Mumbai.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and it’s leading in the market in

securities, investment management and credit services. Morgan Stanley Investment Management

(MISM) was established in the year 1975. It provides customized asset management services and

products to governments, corporations, pension funds and non-profit organizations. Its services

are also extended to high net worth individuals and retail investors. In India it is known as

Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan

Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the

needs of Indian retail investors focusing on a long-term capital appreciation.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is

presently having more than 1,99,818 investors in its various schemes. KMAMC started its

operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors

with varying risk - return profiles. It was the first company to launch dedicated gilt scheme

investing only in government securities.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for Tata

Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager

is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset

Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on

April 30, 2005) of AUM.

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Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as

the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31,

1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs

25.8 crore.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest

life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of

October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed

is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company

Limited incorporated on 22nd of June, 1993.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the

sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB

Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

34

Major Schemes under Mutual Fund

Equity Fund Scheme

Funds that invest in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income. There are, however, many different types of equity funds because there are many different types of equities. A great way to understand the universe of equity funds is to use a style box an example of which is below.

The idea is to classify funds based on both the size of the companies invested in and the investment style of the manager. The term value refers to a style of investing that looks for high quality companies that are out of favor with the market. These companies are characterized by low P/E and price-to-book ratios and high dividend yields. The opposite of value is growth, which refers to companies that have had (and are expected to continue to have) strong growth in earnings, sales and cash flow. A compromise between value and growth is blend, which simply refers to companies that are neither value nor growth stocks and are classified as being somewhere in the middle.

Debt/Income Scheme

The schemes in this asset class generally invest in fixed income securities such as bonds, corporate debentures, government securities (gilts), money market instruments, etc. and provide regular and steady income to investors.

Liquid Scheme

35

Funds which do not invest any part of assets in securities with a residual maturity of more than 91 days are liquid funds. Currently, the average portfolio maturity of this category ranges between four and 91 days. These funds invest in short-term debt instruments with maturities of less than one year. Investments are mostly in money market instruments, short-term corporate deposits and treasury. The maturity of instruments held is between 3 and 6 months.

Hybrid Scheme

In the hybrid category, balanced funds tend to stick to a relatively fixed allocation of stocks and bonds. Actively managed asset allocation funds tend to have portfolios with a mix of stocks and bonds that responds to market conditions as perceived by the fund manager. Passively managed asset allocation, life-cycle and target-date funds generally have a stock-bond mix that changes over a lifetime, moving progressively from aggressive to more conservative structures.

Fixed Margin Plan

In these volatile times, risk-averse investors prefer closed-ended debt funds because of the higher interest rate and double-indexation benefit that FMPs offer. For fund houses, the investment objective of FMPs is to generate returns and protect the capital invested as the schemes invest in debt products with a fixed maturity. In fact, FMPs score better than bank deposits because of their tax efficiency. Also, FMPs have lower expense ratios compared with open-ended debt funds because the fund managers do not have to churn the portfolio, which, otherwise, adds to the costs for the investor.

Exchange Trade Fund

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange ETFs experience price changes throughout the day as they are bought and sold. One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.

36

Research Methodology

TITLE OF THE STUDY

Title of study is “Investment Pattern in Mutual Fund” in Ahmedabad City

INTRODUCTION

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

an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds where

there is low risk but low return. He may invest in Stock of companies where the risk is high and

the returns are also proportionately high. The recent trends in the Stock Market have shown that

an average retail investor always lost with periodic bearish tends. People began opting for

portfolio managers with expertise in stock markets who would invest on their behalf. Thus we

had wealth management services provided by many institutions. However they proved too costly

for a small investor. These investors have found a good shelter with the mutual funds.

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

financial goal. The money thus collected is then invested in capital market instruments such as

shares, debentures and other securities. The income earned through these investments and the

capital appreciations realized are shared by its unit holders in proportion to the number of units

owned by them. Thus, Mutual 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.

This study provides Future of Mutual Funds industry information as well as awareness level and

preference of mutual fund among people. Also this project report of Mutual Funds gives an

outlook to management as to how the mutual funds are performing in the current market

situation as a result what may be the future of this industry.

37

OBJECTIVES OF STUDY

The present study is undertaken with the following specific objectives:

Primary Objective

To analyze the investors awareness and perception regarding investing in mutual funds.

To find out the factors influencing the respondents to prefer mutual funds in Ahmedabad.

To analyze the preference of investors towards different mutual fund schemes.

Secondary Objective

To study and analyze the impact of various demographic factors on investors’ attitude

towards mutual fund.

To offer suitable suggestions to improve the scope of the market of mutual funds.

SCOPE OF STUDY

The scope of the study was to track out the investors’ preferences, priorities and their awareness towards different mutual fund schemes. Keeping in view the various constraints the scope of the study is limited only to the investors residing in Ahmedabad. Data for the study is collected from a sample of 346 investors by using Convenient and Snowball Sampling Method.

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RESEARCH DESIGN

“A Research Design is the arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in procedure.” In

fact, the research design is the conceptual structure within which research is conducted; it

constitutes the blueprint for the collection, measurement and analysis of data.

TYPE OF RESEARCH DESIGN

Research Design is of Exploratory Type.

Exploratory type of research conducted for a problem that has not been clearly defined. It often

occurs before we know enough to make conceptual distinctions or posit an explanatory

relationship. Exploratory research helps determine the best research design, data collection

method and selection of subjects. It should draw definitive conclusions only with extreme

caution. Given its fundamental nature, exploratory research often concludes that a perceived

problem does not actually exist.

POPULATION OF STUDY

Population of study was the investors of Ahmedabad city

SAMPLE UNIT

Sample unit was investors of Ahmedabad city

SAMPLE SIZE

Sample size was 346

SAMPLING METHOD

Sampling Method was Convenient and Snowball Sampling.

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DATA COLLECTION METHOD

Primary Data was collected from investors through survey. Secondary Data was collected from

different sources.

SOURCES OF DATA

Primary Source

Primary source of data collection was questionnaire.

Secondary Source

Secondary source of data collection was books, newspaper, magazine, journals, and

websites.

DATA ANALYSIS TOOL

Statistical tools like Frequency Distribution, Pie Chart and Bar Chart are used for analysis of

data. Google Docx is used for the analysis of Questionnaires.

LIMITATIONS OF STUDY

The study has the following limitations.

Any study having a bearing on attitude, incomplete, wrong information and non-responses to some questions cannot be avoided.

Due to paucity of time and the resources available, the study was restricted to 346 respondents only.

The survey was done in Ahmedabad City.

40

Analysis

1. Age:

Interpretation:

There are 35 investors who are below the age of 25 years

There are 140 investors whose age is 26 to 35 years

There are 144 investors whose age is 35 to 50 years

There are 27 investors whose age is more than 50 years

So majority of investors are having age of 36 to 50 years.

2. Income:

41

Age No. of Responses

% of Responses

Less than 25 35 10%26 to 35 140 40%36 to 50 144 42%More than 50 27 8%

Income (pa) No. of Responses % of ResponsesLess than 2 Lacs 58 17%2 to 5 Lacs 112 32%5 to 10 Lacs 135 39%More than 10 Lacs 41 12%

Interpretation:

From the above chart, we can analyze that 17% of investors having their income less than 2 lacs, 32% investors have their income between 2 to 5 lacs, while 39% of investors have their income from 5 to 10 lacs and 12% of investors have their income more than 10 lacs.

3. Do you invest?

42

Interpretation:

Our main focus was on the investors of Ahmedabad city who invest in mutual funds so 100% of the respondent was investing in some or in other investment plans.

4. What kind of investment you prefer most?

43

Yes 346 100%

No 0 0%

Bank Deposit 83 13%Share Market 78 13%Real Estate 46 7%LIC 96 15%Mutual Fund 314 51%Others 4 1%

Interpretation:

Majority of the investors are investing in mutual funds i.e 51% and there are investors who also invest their money in LIC, Bank Deposits, Real Estate, Share Market and in other investment like P.F, P.P.F, N.S.C, etc.

5. Objective of Investment?

44

Meeting Contingencies 64 13%Tax Reduction 150 30%Retirement Benefits 103 21%Children Education 85 17%Safety / Security of old age 98 20%Other 1 0%

Interpretation:

There is always some objective behind investment, so from the analysis investors have given first priority to the tax reduction and second main objective is for the retirement. About 30% investors are investing their money to get tax Benefit.

6. What is the purpose of investment in mutual fund?

45

Safety

Flexibility

Tax Benefit

Diversification

Good Return

Others

0 20 40 60 80 100 120 140 160

Safety 94 19%Flexibility 65 13%Tax Benefits 80 16%Diversification 132 26%Good Return 134 26%Others 1 0%

Interpretation:

There is always a purpose for any type of investment. The respondent was majorly concern about the good return and diversification from the investment in mutual funds. 94 respondents were investing for safety that leads to 19% while 132 respondents were investing for Diversification that composes to 26% and many businessmen were investing for getting tax benefits. As mutual funds also provide flexibility so 65 respondents were investing in mutual funds that compose to 13% of the responses and 134 responses was concerned about a Good Return from the investment in mutual funds.

7. How much percentage of your saving do you invest in mutual fund?

46

Less than 25% 213 62%26 to 50% 117 34%51 to 75% 15 4%76 to 100% 1 0%

Interpretation:

Saving plays a major role for the investment purpose. From the savings only people are investing in investment plans. 213 respondents was investing less than 25% of their saving in mutual fund that compose to 62% of the total responses while 117 respondents was investing 26 to 50% of their saving in mutual fund that leads to 34% of the total responses and 16 responses was investing more than 50% of their saving in mutual funds. Thus, majority of the responses was investing less than 25% of their savings in mutual funds.

8. Which scheme in mutual fund you prefer most?

47

Equity Scheme 60 13%Debt / Income Scheme

87 19%

Liquid Scheme 113 25%Hybrid Scheme 64 14%Fixed Margin Scheme 99 22%Exchange Trade Fund 24 5%

Interpretation:

There are different kinds of schemes in mutual funds. Investors are investing their money in schemes like equity, debt, liquid, hybrid, fixed margin, exchange trade fund, etc. In the survey, 60 respondents was investing in equity schemes which composes to 13% of the total responses while 87 respondents was investing in Debt schemes which composes to 19% of the total responses. 113 respondents were investing in liquid schemes that compose to 25% of the total responses while 64 respondents were investing in Hybrid schemes that compose to 14% of the total responses. 99 respondents were investing in Fixed Margin schemes while 24 respondents were investing in Exchange Trade Fund. Thus, majority of investors prefer liquid schemes as well as Fixed margin scheme. This shows that investors are risk averse and they want a fixed income from their investments.

9. Which Sub Scheme you prefer in your selected type of mutual fund scheme?

48

Large-cap Oriented 41 9%Small and mid cap Oriented 90 20%Consistent performers 83 19%Monthly Incomes 73 16%Long term fund 95 21%Short term fund 66 15%

Interpretation:

There are different sub schemes in which investors invest their money in mutual funds. 41 respondents was investing in Large cap Oriented schemes which leads to 9 % of the total responses while 90 responses were investing in Small and Mid cap oriented schemes that leads to 20% of the total responses. 83 Respondents were investing in consistent performers which composes to 19% of the total responses while 73 respondent was investing in monthly income schemes which leads to 16% of the total responses. This means that Investors are risk averse. They are more interested in investing in consistent performers and in monthly income schemes. Investors are also investing in long term and short term fund schemes. 95 respondents were investing in Long term fund schemes while 66 respondents were investing in short term fund schemes. Thus, majority of the investors are investing in long term fund to earn capital gains in future.

10. Parameters of selecting the mutual fund scheme?

49

Permance Ranking by Net Value Asset

Ratio Analysis

Total Expense

Fund Manager Tenure and Experience

Scheme Asset Size

0 20 40 60 80 100 120 140

Performance Ranking as per Net Value Asset

132 29%

Ratio Analysis 65 15%Total Expense 61 14%Fund Manager Tenure and Experience 95 21%Scheme Asset Size 95 21%

Interpretation:

Investors have different parameters of selecting the mutual fund schemes such as performance ranking by NAV, ratio analysis, total expense, fund manager tenure and experience and scheme asset size. 132 respondents select performance ranking that compose to 29% of the total responses, 65 respondents select ratio analysis that leads to 15% of the total responses, 61 respondents select total expense that compose to 14% of the total responses, 95 respondents select fund manager tenure and experience that compose to 21% of the total responses and 95 respondents select scheme asset size that compose to 21% of the total responses. Thus, Performance Ranking as Per Net Value Asset plays an important role as a parameter for selecting the mutual fund scheme.

50

11. In which MF company you prefer to invest?

Interpretation:

SBI, Birla sun Life, Reliance, UTI, Axis, HDFC are the public companies under mutual funds while Franklin, ING, HSBC, BOI AXA, Goldman Sachs and JM Financial are the private companies in mutual funds. From the survey it is seen that flow of finance in mutual fund is more in Public Companies than Private Companies. 76% flow is in public sector while remaining 24% is in private sector in mutual funds. Thus, Public Sector companies are having more number of investors in mutual funds.

51

SBI 90 16%Birla sun life 79 14%Reliance 67 12%UTI 40 7%Axis 54 10%HDFC 94 17%Franklin 16 3%ING 24 4%HSBC 39 7%BOI AXA 24 4%Goldman Sachs 12 2%JM Financial 19 3%Others 5 1%

12. How do you normally get information about various Mutual Fund Schemes?

Friends 37 8%Newspaper 16

837%

Advertisement 143

31%

Agent 105

23%

Other 6 1%

Interpretation:

There is always a source from where the investors get information regarding different mutual fund schemes. The main sources of information are friends, Newspaper, Advertisement and Agents. 8% of the respondents get information from friends while 37% respondents get information from Newspaper. 31% of the respondents get information from Advertisement while 23% respondents get information from Agents and 1% investors get information from other sources such as leaflets, poster, emails, etc. Thus, maximum investors get information from Newspaper so it is a good source for an investor for knowing the mutual fund schemes.

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13. Which types of investment procedure do you normally follow?

Lump Sum 74 21%Systematic Investment Plan 212 61%Both 60 17%

Interpretation:

There is always a procedure which a investor follow for his investment. 74 respondents follow the lump sum type of procedure that compose to 21% of the total responses, 212 respondents follow Systematic Investment Plan which leads to 61% of the total responses and 60 respondents follow both lump sum as well as systematic investment plan that compose to 17% of the total responses. Thus, majority of investors follow Systematic Investment Plan procedure.

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14. Which types of investment procedure helps you to get maximum return?

Lump Sum 80 23%Systematic Investment Plan 214 62%Both 52 15%

Interpretation:

Investors try to get maximum return from the procedure that they follow. In the survey it was observed that 23% of the respondents was getting maximum return from the lump sum procedure while 62% respondents was getting maximum return from the systematic investment plan and 15% of the respondents was getting maximum return from both lump sum as well as systematic investment plan. Thus, majority of respondents get maximum return from Systematic Investment Plan.

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15. At what time do you normally invest in MF?

New fund offer 82 22%Year ending 16

043%

Anytime 71 19%Whenever sufficient fund 62 17%

Interpretation:

Investors follow a specific time to invest their money. 22% of the respondents invest the money when there are new fund offer while 43% of respondents invest their money on Year ending. 19% of the investors invest the money anytime and 17% of the investors invest the money when they had sufficient fund with them. Thus, majority of investor invest their money on year ending.

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16. What is the Duration of Investment?

Upto 6 months 77 22%6 months to 1 year 15

645%

1 year to 3 year 78 23%more than 3 year 35 10%

Interpretation:

Duration of investment is the period of investment. It shows for how longer period the investors are investing their money in mutual funds. 77 respondents invest their money upto 6 months that compose to 22% of the total responses while 156 investors invest their money for 6 months to 1 year that compose to 45% of the total responses. 78 respondents invest their money from 1 year to 3 years that compose to 23% of the total responses while 35 respondents invest their money for more than 3 years which leads to 10% of the total responses. Thus, Majority of the investors invest for shorter period of time that is for less than 1 year.

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17. Are you satisfied with the return you are getting from it?

Highly satisfied 46 13%Satisfied 178 51%Neutral 112 32%Dissatisfied 9 3%Highly Dissatisfied 1 0%

Interpretation:

Majority of the investors are satisfied from the return of mutual funds so it is a good venture to invest in. 32 % of the investors are neutral and 3% of the investors are dissatisfied from the investment in mutual funds. Thus, Mutual Funds help to attain a good return.

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58

Findings

There are many investment options available but majority of investors are investing in mutual funds.

Objective of the investors behind investment is to get tax benefit and retirement purpose. Majority of investors are investing less than 25% of their savings in mutual fund. Investors majorly prefer to invest in liquid and fixed margin schemes and the little

proportion is seen in other schemes. SBI and HDFC have maximum investors of mutual funds. Systematic Investment Plan procedure helps to get maximum return from the investment

in mutual fund. Majority of investors get information of mutual fund schemes from Newspaper and

Advertisements Main purpose for investing in mutual fund is good return and diversification. Performance Ranking by Net Value Asset plays an important role as a parameter for

selecting the mutual fund schemes. Public Companies are having more number of investors in mutual fund Maximum investors invest at the end of the year in mutual fund to get the tax benefits. Majority of the investors are satisfied from the investment in mutual funds. Age and type of investment scheme is independent in mutual fund. Level of income has a direct impact on the investment because if savings would be more

than investors will invest more in mutual fund.

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Recommendation

Recommendation to Industry

Asset Management Companies should provide scheme with low risk and Fix Return.

Mostly the investors are more interested in those schemes that can easily provide them

liquidity. The suggestion makers have emphasized that the fund managers should invest the

investor’s money in secure income related schemes so that liquidity must be ensured.

Generally the offer documents and reports of various mutual fund companies are not free

from technicalities. So the investors’ opinion that the information contained in the offer

documents should be simple and free of technicalities so that a lay investor can easily

understand them.

Mostly a lay person doesn’t have enough knowledge to invest in mutual funds. So they

depend on the fund managers who are experts in managing efficient portfolios. The fund

managers should be the person of integrity and financial experts. They should have clear cut

knowledge of when to invest and in which securities to invest .They should mobilize the

investor’s savings in such a way that they can get maximum benefits out of them.

Some investors suggested that the fund values of fund should be informed to the investors

through SMS on fortnightly basis. This will help the investors in keeping themselves up to

date with the latest information and latest NAV’s of different funds.

When we compare the SIP with Recurring Account of Bank than people can invest in

Recurring deposit with minimum Rs.100 and Bank provides fix return, while SIP starts with

minimum Rs. 500 and in some company it starts with minimum Rs.1000. So most people

would like to invest in Bank Recurring rather than SIP.

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Steps should be taken to boost the confidence and morale of the investors. This can be done

through appropriate communication and by educating investors to invest in mutual funds.

Timely and right information should be provided to them by different communication modes

so that they come to know about the latest trends in the market.

Company should provide regular knowledge about the market condition and best time for

investment to the existing customer, so that company can attract existing customer to invest

more

Conducting a Nationwide Customer Awareness Program

o NISM along with the industry association to design the content for promoting customer

awareness programs on mutual funds

o AMCs with support from CII, AMFI and NISM should rollout customer awareness

campaigns and provide infrastructure, content and speakers for running the campaigns on a

pan-India basis over a sustained period of five years

o Social marketing firms and media companies to design effective and meaningful mass media

campaigns in multiple languages using television, hoardings, flyers, street plays and other

mechanisms to reach the masses

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Recommendation to Investors

On the basis of results of the study, the following recommendations are made to the investors

Assess yourself: Self-assessment of one’s needs; expectations and risk profile is of prime

importance failing which; one will make more mistakes in putting money in right places than

otherwise. One should identify the degree of risk bearing capacity one has and also clearly

state the expectations from the investments. Irrational expectations will only bring pain.

Try to understand where the money is going: It is important to identify the nature of

investment and to know if one is compatible with the investment. One can lose substantially

if one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go

through the literature such as offer document and fact sheets that mutual fund companies

provide on their funds.

Don't rush in picking funds, think first: one first has to decide what he wants the money

for and it is the investment goal that should be the guiding light for all investments done. It is

thus important to know the risks associated with the fund and align it with the quantum of

risk one is willing to take. One should take a look at the portfolio of the funds for the

purpose. Excessive exposure to any specific sector should be avoided, as it will only add to

the risk of the entire portfolio. Mutual funds invest with a certain ideology such as the "Value

Principle" or "Growth Philosophy". Both have their share of critics but both philosophies

work for investors of different kinds. Identifying the proposed investment philosophy of the

fund will give an insight into the kind of risks that it shall be taking in future.

Invest. Don t speculate: A common investor is limited in the degree of risk that he is willing

to take. It is thus of key importance that there is thought given to the process of investment

and to the time horizon of the intended investment. One should abstain from speculating

which in other words would mean getting out of one fund and investing in another with the

intention of making quick money. One would do well to remember that nobody can perfectly

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time the market so staying invested is the best option unless there are compelling reasons to

exit.

Don’t put all the eggs in one basket: This old age adage is of utmost importance. No matter

what the risk profile of a person is, it is always advisable to diversify the risks associated. So

putting one s money in different asset classes is generally the best option as it averages the

risks in each category. Thus, even investors of equity should be judicious and invest some

portion of the investment in debt. Diversification even in any particular asset class (such as

equity, debt) is good. Not all fund managers have the same acumen of fund management and

with identification of the best man being a tough task, it is good to place money in the hands

of several fund managers. This might reduce the maximum return possible, but will also

reduce the risks.

Be regular: Investing should be a habit and not an exercise undertaken at one swishes, if

one has to really benefit from them. As we said earlier, since it is extremely difficult to know

when to enter or exit the market, it is important to beat the market by being systematic. The

basic philosophy of Rupee cost averaging would suggest that if one invests regularly through

the ups and downs of the market, he would stand a better chance of generating more returns

than the market for the entire duration. The SIPs (Systematic Investment Plans) offered by all

funds helps in being systematic. All that one needs to do is to give post-dated Cheques to the

fund and thereafter one will not be harried later. The Automatic investment Plans offered by

some funds goes a step further, as the amount can be directly/electronically transferred from

the account of the investor.

Do your homework: It is important for all investors to research the avenues available to

them irrespective of the investor category they belong to. This is important because an

informed investor is in a better decision to make right decisions. Having identified the risks

associated with the investment is important and so one should try to know all aspects

associated with it. Asking the intermediaries is one of the ways to take care of the problem.

Find the right funds: Finding funds that do not charge much fees is of importance, as the fee

charged ultimately goes from the pocket of the investor. This is even more important for debt

funds as the returns from these funds are not much. Funds that charge more will reduce the

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yield to the investor. Finding the right funds is important and one should also use these funds

for tax efficiency. Invest important and one should also use these funds for tax efficiency.

Investors of equity should keep in mind that all dividends are currently tax-free in India and

so their tax liabilities can be reduced if the dividend payout option is used. Investors of debt

will be charged a tax on dividend distribution and so can easily avoid the payout options.

Keep track of your investments: Finding the right fund is important but even more

important is to keep track of the way they are performing in the market. If the market is

beginning to enter a bearish phase, then investors of equity too will benefit by switching to

debt funds as the losses can be minimized. One can always switch back to equity if the equity

market starts to show some buoyancy.

Know when to sell your mutual funds: Knowing when to exit a fund too is of utmost

importance. One should book profits immediately when enough has been earned i.e. the

initial expectation from the fund has been met with. Other factors like non-performance, hike

in fee charged and change in any basic attribute of the fund etc. are some of the reasons for to

exit. Investments in mutual funds too are not risk-free and so investments warrant some

caution and careful attention of the investor. Investing in mutual funds can be a dicey

business for people who do not remember to follow these rules diligently, as people are likely

to commit mistakes by being ignorant or adventurous enough to take risks more than what

they can absorb. This is the reason why people would do well to remember these rules before

they set out to invest their hard-earned money.

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CONCLUSION

Today a lot of investment opportunities are available to the investors in the financial markets.

Investors can invest in corporate bonds, debentures, bank deposits, post office schemes etc.

But nowadays investors opt for portfolio managers to invest money on their behalf. These

portfolio managers are experts in stock market operations and invest the money in such a

way that the investors would get minimum assured returns. Today many institutions are busy

in providing wealth management services to the investors. But these services are very costly.

Thus in order to help the investor’s mutual funds provide a protective shed to the small and

big investors.

The present study analyses the mutual fund investments in relation to investor’s

preference.

Investors’ opinion and perception has been studied relating to various issues like type of

mutual fund scheme, main objective behind investing in mutual fund scheme, level of

satisfaction, role of financial advisors and brokers, investors’ opinion relating to factors

that attract them to invest in mutual funds, sources of information, deficiencies in the

services provided by the mutual fund managers, challenges before the Indian mutual fund

industry etc.

This study is very important in order to judge the investors’ behaviour in a market like

India, where the competition increases day by day due to the entry of large number of

player with different financial strengths and strategies.

The present investigation outlined that mostly the investors have positive approach

towards investing in mutual funds. In order to maintain their confidence in mutual funds

they should be provided with timely information relating to different trends in the mutual

fund industry.

For achieving heights in the financial sector, the mutual fund companies should formulate

the strategies in such a way that helps in fulfilling the investors’ expectations. Today the

main task before mutual fund industry is to convert the potential investors into the reality

investors.

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New and more innovative schemes should be launched from time to time so that

investor’s confidence should be maintained. All this will lead to the overall growth and

development of the mutual fund industry.

The Indian asset management industry has answered existential questions. However, the

present scenario demands vigorous innovation and reinvention. Wholesale or drastic changes

may not be warranted; instead, the purpose may be better served by adopting a cluster of key

initiatives in the areas of cost efficiency, product design and positioning, alternative

distribution models, revenue diversification and capacity creation Mutual fund products are a

natural component of options for all class of investors and will remain so. The evolution is

more towards gaining a larger mindshare with all key stakeholders including, most

importantly, the investors.

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Bibliography

BOOK:

Research Methodology by C.R.Kothari, 2nd edition, New Age International Publisher

WEB SITES:

www.amfiindia.com

www.mutualfundindia.com

www.investopedia.com

www.sebi.com

www.wikipedia.com

Google Search Engine

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Questionnaire

INVESTMENT PATTERN IN

MUTUAL FUND

Personal details

Name:

Age:

Less than 25 26 to 35

36 to 50 More than 50

Occupation:

Income:

Less than 2 lacs 2 to 5 lacs

5 to 10 lacs More than 10 lacs

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Investment Related

1) Do you invest?

Yes No

2) If yes, what kind of investment you prefer most?

Bank Deposit

Share market

Real estate

LIC

Mutual fund

Other

3) Objective of Investment?

Meeting contingencies

Tax reduction

Retirement Benefits

Children Education

Safety / Security of old age

Other

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4) What is the purpose of investment in mutual fund?

Safety

Flexibility

Tax benefits

Diversification

Good return

Other

5) How much percentage of your saving do you invest in mutual fund?

Less than 25% 26 to 50%

51 to 75% 76 to 100%

6) Which scheme in mutual fund you prefer most?

Equity Scheme

Debt/ Income Scheme

Liquid Scheme

Hybrid Scheme

Fixed Margin Plan

Exchange Trade Fund

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7) Which Sub Scheme you prefer in your selected type of mutual fund scheme?

Large cap - oriented

Small and mid cap- oriented

Consistent performers

Monthly income

Long term fund

Short term fund

8) Parameters of selecting the mutual fund scheme?

Performance Ranking as per Net Value AssetRatio Analysis

Total Expense Ratio

Fund Manager Tenure and Experience

Scheme Asset Size

9) In which MF company you prefer to invest?

Public Company Private Company

SBI Franklin

Birla sun life ING

Reliance HSBC

UTI BOI AXA

Axis Goldman Sachs

HDFC JM financial

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Other ____________ Other ____________

10) How do you normally get information about various Mutual Fund Schemes?

Friends

News paper

Advertisement

Agent

Other

11) Which types of investment procedure do you normally follow?

Lump sum

Systematic Investment Plan

Both

12) Which types of investment procedure helps you to get maximum return?

Lump sum

Systematic Investment Plan

Both

13) At what time do you normally invest in MF?

New fund offer

Year ending

Any time

Whenever sufficient fund

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14) What is the Duration of Investment?

Upto 6 month

6 month to 1 year

1 year to 3 year

More than 3 year

15) Are you satisfied with the return you are getting from it?

Highly satisfied

Satisfied

Neutral

Dissatisfied

Highly dissatisfied

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