THE STUDY OF MUTUAL FUNDS

IN INDIA

Presented to: Presented by:

Prof. Prachi Anand Abhinandan Jain Bm-014006

Aman Chawla Bm-014024

Amir Ali Bm-014025

Amit Yadav Bm-014027

Anupam Shiva Bm-014044

Rights reserved

INTRODUCTION

• Mutual fund is a investment fund that pools money from many investors to

purchase securities.

• Pool of money provided by individual investors, companies, and other

organisation.

• A fund manager is hired to invest the cash the investors have contributed.

• The goal of manager depends upon the type of fund, for e.g fixed income

fund manager would strive to provide highest yield at lower risk.

REGULATION

• Governed by SEBI (Mutual funds) Regulation, 1996

All mutual funds registered with it, constituted as trust(under indian trusts act,1882)

• Bank operated MF's supervised by RBI too.

• SEBI- very detailed guidelines for disclosures in offer document, offer period,

investment guideline, etc

• NAV to be declared everyday for open-ended and every week for close ended

• Disclose on website, newspapers.

•

TYPES OF MUTUAL FUNDS

• By structure

• Open- ended- anytime enter/exit

1. close-ended- listed on exchange, redemption after period of scheme is over.

• By investment objective

• Equity- only in stocks-long term(3 years)

1. Debt- only in fixed income securities

2. Liquid / money market- short term money market

3. Balanced/hybrid- stocks+ fixed income securities

1. Other schemes

2. Tax saving scheme such as ELSS.

3. Special scheme (ETF, foreign funds)

HOW TO SELECT FUND THAT IS RIGHT FOR YOU

• Invest in only blue chip companies or in start-up businesses or in specific sectors.

• Must consider fund ranking which are released by Morning star or Standard & poor,

especially if fund manager has recently changed

• Past sucess is no indication of future.

• If you don't have brokerage account then visit companies website offering mutual fund

investment, most funds have minimum initial inveatment of Rs.500/.

• Mutual funds are constantly monitored by fund manager and he can devate more time in

analysing financial statements or calculating financial ratios than an individual

investor.

INVESTING CHECKLIST

• Draw up your asset allocation

1. Financial goal & time frame(Are you investing for retirement?, for children's

education?,or for current income?)

2. Risk taking capacity

• Identify funds that fall in your buy list

• Obtain and read the offer documents.

• Match your objectives

1. In terms of eqity share , downside risk protection, tax benefit offered, dividend

payout policy.

• Check your past performance.

• performance of various funds with similar objectives for atlest 3-5 years(managed

well&provide consistent results)

CHECKLIST CONTD..

• Think hard about investing in sector funds

1. For reletively agrresive investors.

2. Close touch with developments in sector, review portfolio regularly

3.

• Look for loads costs

1. management fees, annual expenses of fund and sales loads.

• Does the fund change fund manager often?

• Look for size and credentials

1. Asset size less than Rs. 25 crore

• Invest regularly, choose the S-I-P

• Mutuall fund - an integral part of your savings and wealth building plans.

TRACKING MUTUAL FUNDS

• Filling up an apllication form and writing out a cheque = end of story...NO!

• Periodically evaluate performance of your funds

1. Fact sheets and newsletters

2. website such as www.valueresearchonline.com, www.mutualfundsindia.com,

3. www.morningstar.in, www.lipperweb.com

• Newspapers

•

• Professional advisor

WARNING SIGNALS

• Fund's management changes.

• Performance slips compared to similar funds.

• Fund's expense ratio climb.

• Beta , a technical measurfe of risk, also climbs.

• Independent rating services reduce their ratings of the fund.

• It emerges into another fund.

• Change in management style or a change in the objective of the fund.

MUTUAL FUND COMPARISON

• Absolute returns

• - % difference of NAV

- Diversified equity with sector funds- NO

• Benchmark returns

• - SEBI directs

- Funds returns comparedto its benchmark

• Time period

• - Equal to time for whichyou plan to invest

- Equity - compare for 5 years, debt for 6 months.

• Market conditions

• - proved its mettle in bear market

What mutual funds are not?

• MFs are not 'get rich quick investments'

• MF's are not ' risk free investment'

• MF's are not ' assured return investments'

• MF's are not ' a universal solution to all investment needs'