INTRODUCTION

PREFACE

I have study and analyze the different aspects of investment companies (mutual funds) of India and has also done the comparative analysis related to different companys mutual funds for the submission of research report in college and university in the partial fulfillment of Master of Business Administration degree program.

Today the mutual fund industry has emerged as the most dynamic segment of the Indian financial system, thanks to the rigorous policy initiatives of the government. Till 1987,UTI was the only mutual fund with an investiable fund of Rs.6700 crores. The industry has witnessed an unprecedented level of growth with the entry of mutual funds sponsored by nationalized bank and insurance companies in1987. By the end of 1992-93, the funds under management rose to nearly Rs.48,000 crores. The mutual fund activity attained momentum in1993 with the opening up of the industry to private sector fund operators and, consequently, by 1995, the investiable funds of the industry have crossed Rs.72,000 crores. By the end of 1994-95, 11 private sector and nine public sector mutual funds, excluding UTI, came into operation.

As mutual fund industry is one of the important industries in todays scenario so, I have tried to analyze different mutual funds related to different industries both public as well as private.

The report contains the analysis and interpretation of various aspects of mutual fund industry. The starting part of the report gives the description of the evolution, growth, classification and current status of mutual funds in India with a focus on the problems and prospects of the industry.

The later part of the report deals with the research that is research methodology used and the analysis and interpretations of different companies mutual funds along with the findings of the research and recommendation to improve this industry.

Acknowledgement

No project is created entirely by an individual. Many people helped me to rate this project and each of their contribution has been valuable

I take this opportunity to express my profound and sincere gratitude , Symbiosis centre for Distance learning, Pune, for providing me with the opportunity to explorer the corridors of the corporate world and gather invaluable information and practical experience via such summer training project in finance.

First I want to give a lot of thanks and grateful regards to my teacher for valuable guidance inspiration and supervision throughout my work.

I also grateful to these companys whose data has been used for completing number of studies.And atlest but not the least I give my heartiest gratitude to my respected parents family members and friends who gave me full support in the completion of this project.

Ravi Shanker declaration Ravi Shanker student of PGDBA Programme, Symbiosis centre for Distance learning, Pune of Batch 2007, Reg No. 200759687 hereby declare that the Research Project Report titled as A COMPARATIVE STUDY OF MUTUAL FUNDS SCHEMES OF DIFFERENT INVESTMENT COMPANIES is the outcome of my own research work and the same has not been submitted to any University/Institution for the award of any degree.Date: 11-11-2011(Ravi Shanker)

PGDBA 2007 TABLE OF CONTENTS

1. Introduction

2. History of mutual funds in India3. Organization of mutual funds in India4. Objectives of study

5. Research Methodology

i. Types of researchii. Collection of secondary data

6. Classification of mutual funds

7. Role of mutual funds in the financial market

8. Future of mutual funds in India

9. Concept of mutual funds10. Data Analysis

11. Findings

12. Suggestions13. Conclusion

14. Bibliography

INTRODUCTIONIt is said, Necessity is the mother of invention. Innovation has been always the spirit of human nature. In the financial sector also, several new instruments had been innovated in tune with the market needs. The constraints of banks to provide growth with market yields for the investors section of society has already given birth to one more new institution the Mutual Fund.

Therefore, emergence of mutual funds in the Indian scene is a product of necessity. The constraints on the banking sector to tap the fruits of the capital market and the reluctance of the investors to take a direct plunge in complex and erratic capital market operation required an intermediary. Mutual fund fills this gap admirably.

The word mutual denotes something to be done collectively by a group of people with the common objective having mutual faith and understanding among them. The other part of the word, i.e. fund is used in monetary terms, to collect some money from the members of the mutual fund for a common objective of all the members of the group. Here the common objective of the members of mutual fund can be well guessed as earning the profits from a huge collective fund with a joint effort.

Mutual fund has been defined as it is a non-depository or non-banking financial intermediary which acts as important vehicle for bringing wealth holders and deficit units together indirectly.

According to Dr. Vinayakam, N. a Mutual Fund is an indirect investment made by the public by pooling in sources. The fund per se comprises equal units/ shares/ certificates and the public invests its savings in them depending on the quantum of resources available with the individuals. The fund uses these savings for investment in equity shares and debentures of various companies. The resulting earnings are distributed among the fund owners. Mutual funds perform as per their portfolio, and better the portfolio management, it will give better returns.

A mutual fund is a single; large professionally managed investment organization that combines the funds of many individual investors having similar investment objectives. In rapidly changing stock markets, it is essential to respond positively and quickly to events, which tend to move share prices. The search for maximum returns has to be balanced against the need to control risk. A mutual fund is able to reduce such risk associated with investments by investment in a large number of companies across different industries. An individual investor with limited financial resources may be unable to do so. The guiding factor behind investment decisions of a mutual fund is the fundamental strength of a share determined by the overall economic situation. The research dept. is the backbone of a mutual fund, which devises investment strategies based upon market knowledge, experience and the expertise.

A mutual fund is a pool of co-mingled funds invested by different investors. Most mutual fund investors do not know each other and never have contact with each other. The investment management of such a pool of funds is usually performed by a professional money management firm for a fee of say 1% of the market value of all the assets managed each year. Such managers invest the funds in a diversified portfolio of securities they research and analyze and expect to perform well. The owners of shares in mutual funds may either invest more money or withdraw their money at time from the mutual fund scheme.

HISTORY OF MUTUALFUNDS IN INDIA

The end of millennium marks 36 years of existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it.

UTI commenced its operations from July 1964 .The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India. With war on the borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capitalmarket.The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. Earnest efforts were required to canalize savings of the community into productive uses in order to speed up the process of industrial growth.

The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or institution to purchase the units offered by the trust. However, this institution as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small."

His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing retail savings and investing those savings in the capital market and passing on the benefits so accrued to the small investors.

UTI commenced its operations from July 1964 " with a view to encouraging savings and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities." Different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the Trust as well as accounting, disclosures and regulatory requirements for the Trust.

One thing is certain the fund industry is here to stay. The industry was one-entity show till 1986 when the UTI monopoly was broken when SBI and Can bank mutual fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of Rs. 25 crore in 1964 the industry has grown at a compounded average growth rate of 27% to its current size of Rs.90000 crore.

The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From one player in 1985 the number increased to 8 in 1993. The party did not last long. When the private sector made its debut in 1993-94, the stock market was booming.

The opening up of the asset management business to private sector in 1993 saw international players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital International along with the host of domestic players join the party. But for the equity funds, the period of 1994-96 was one of the worst in the history of Indian Mutual Funds.

First Phase 1964-87

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

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Mutual funds have been around for a long period of time to be precise for 36 yrs but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MFs. This time around all the participants are involved in the revival of the funds ----- the AMCs, the unit holders, the other related parties. However the sole factor that gave lifer to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke. An insight of the Union Budget on mutual funds taxation benefits is provided later.

It provided centre stage to the mutual funds, made them more attractive and provides acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business, which would mean to increase asset base, and to get asset base, and investor base they had to be fully armed with a whole lot of schemes for every investor. So new schemes for new IPOs were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI). One can say that the industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly and openly discussing difficulties opportunities and compulsions.

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

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

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund 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.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

ORGANIZATION OF A MUTUAL FUND

Essentially there are four parties to any mutual fund organization. These are:

The Sponsor

The Asset Management Company (AMC)

The Trustees

The Custodians

THE SPONSOR

A mutual fund is set up b a company, which is called the sponsor. Sponsor must be has a sound track record, general reputation and fairness among the players in its business transactions {SEBI (Mutual Funds) regulations, 1993}. Now in India a sponsor can be financial institution like ICICI, a bank either in the public sector or in the private sector like state bank of India (SBI), life insurance corporation of India (LIC), General insurance corporation of India (GIC), Unit trust of India and a body corporate registered under the Indian companies Act, 1956 like HB portfolio leasing Ltd.

THE ASSET MANAGEMENT COMPANY

Mutual funds are to be operated by a separate Asset Management Company (AMC). The asset management Company operates and manages the fund of the mutual fund schemes and mutual fund regulations issued from time to time by the Securities and Exchange Board of India (SEBI). It has to submit a quarterly report on the functioning of the funds to the trustees. The asset Management Company employs professionals from various fields for conducting the research and taking investment decisions for the maximization of return on investments made by the mutual fund in the capital market. The general success of mutual fund lies in the quantum of return on investments to any scheme of the fund.

To ensure efficient management, SEBI desires that existing Asset Management Company should have a sound track record (good net worth, dividend paying capacity and profitability, etc.) general reputation and fairness in transactions. The directors of AMC should be expert in relevant fields like portfolio management, investment analysis and financial administration.

TRUSTEES

The third essential of a mutual fund is the Trustee. A trustee is a person who holds the property of mutual fund in trust for the benefit of the unit holders. Trustees have the exclusive ownership of the Trust Fund and are also vested with the general power of superintendence, direction and management of the affairs of the Trust. The Trustees ensure that Asset Management Company fulfills the duties and functions assigned to it. The Trustees are the persons of very high repute and experts in their fields.

Once a mutual fund trust is formed, virtually the role of the sponsor comes to an end, as it is mutual trust, which takes charge of the mutual fund, which takes charge of the mutual fund to interact with the SEBI. To ensure fair dealings, mutual fund regulations require that one cannot be a trustee or a director of a trustees company in more than one mutual fund. Further at least 50% of the trustees are bound to be independent of the sponsors. These independent trustees may enjoy multi-trusteeships. Asset Management Company or its directors or its employee shall not act as trustees of any mutual fund.

The trustees appoint Asset Management Company (AMC) to float the mutual fund schemes in consultation with the sponsors. The trustees are to evolve investment management agreement to be entered into with Asset Management Company. It is the duty of the trustee to observe and ensure the Asset Management Company is managing the schemes in accordance with the trust deed. Trustees are vested with the power to dismiss Asset Management Company if they are not satisfied with the working of the AMC. For their services, trustees are paid their trusteeship fees, which are specified in the trust deed itself. Trustees are to present annual report to the investors of the mutual fund.Some of the main obligations of Asset Management Company are as under:

1. To appoint the custodians of the mutual fund.

2. To appoint registrar and share transfer agents.

3. To file a detail of the transactions in securities with the trustees.

4. To report the trustees about any investment made in a company, which has invested more than 5% of net asset value of any scheme of the mutual fund.

5. To ensure that investments of the mutual fund schemes are as per the provisions of regulations.

6. To file with the trustees the details of the transactions in securities made by its officials in their own name or on behalf of the asset Management Company.

7. To report the trustees any transaction in securities with any of its associates.

OBJECTIVE OF STUDY

This research project work undertaken for the partial fulfilment of the MBA degree programme fulfils the following objectives.

To analysis the various types of mutual funds

To study the role of mutual funds in financial market.

To study about the regulatory aspects mutual funds

To study the current trends of the mutual fund industry and the future thereof.

To understand and compare different mutual funds of different companies on basis of different criteria.

RESEARCH METHODLOGYAs to compare, analyze and interpretation, the research has to be done so that the right data is been collected.

I have tried to analyze different mutual funds of major companies they are UTI, CANBANK, ICICI, KOTAK MAHINDRA. As to know the present position of different companys mutual funds it necessary to go for data and information finding but it cannot be possible to get it from the questionnaire as analysis and evaluation of different mutual funds are been done by head office finance team members. So lot of work has been done to get the data.

Types of ResearchThe basic types of research are as follows: -

1. Descriptive Research:

The major purpose of this research is description of the state of affairs as it exists at present.2. Analytical Research:In this research, the researcher has to use facts or information already available, and analyze these to make a critical evaluation of the material

Fundamental Research:It mainly concerned with generalizations and with the formulation of a theory.Conceptual Research:It is related to some abstract ideas or theory.

Collection of Secondary Data:

When the researchers utilize the secondary data, then he has to look into various sources from where he can obtain them. Secondary data may either be published data or unpublished data. Usually published data are available in-

1. Various publications of the central, state and local governments.

2. Various publications of foreign governments or of international bodies and their subsidiary organizations.

3. Technical and trade journals.

4. Books, magazines and newspapers.

5. Report and publications of various associations connected with business and industry, banks, stock exchanges etc.

6. Reports prepared by research scholars, universities, economists etc. in different fields.

7. Public record and statistics, historical documents, and other sources of published information.

Second data collected for my research was mainly with the help of journals, magazines and newspapers and Internet.

CLASSIFICATION OF MUTUAL FUNDS

(FUNCTIONAL CLASSIFICATION)OPEN-ENDED FUND

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices, which are declared on a daily basis. The key feature of open-end schemes is liquidity.

CLOSE-ENDED FUND

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. 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 the units 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 i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

INVESTMENT OBJECTIVE CLASSIFICATION

A scheme can also be classified on the basis of the investment objectives that are they are designed to meet the objectives of different types of savers. This classification can also be name as portfolio classification. Such schemes may be open-ended or close-ended schemes. Such schemes may be classified mainly as follows:

GROWTH / EQUITY ORIENTED SCHEME

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

INCOME / DEBT ORIENTED SCHEME

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long-term investors may not bother about these fluctuations.

BALANCED FUND

The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.MONEY MARKET OR LIQUID FUND

These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

LEVERAGED FUNDS

Leveraged funds or borrowed funds are used in order to increase the size of the value of the portfolio and benefit the shareholders by gains exceeding the cost of the borrowed funds. Funds are used in speculative and risky investments like short sale to take advantage of declining market to realize gains in the portfolio. Short sales decrease loss of the portfolio in a declining market and vice versa in rising market.DUAL PURPOSE FUNDS

Income and growth are two objectives, which are achieved by offering half of the amount of funds to those investors who wish regular income and half to those who wish growth. The funds thus received are pooled together and used for investment. Any income derived from the portfolio goes to the investors who hold income shares. The investors who hold capital shares receive no income. Instead they receive capital gains or losses that result from investments of total portfolio.

REAL ESTATE FUNDReal estate fund is of closed-end type. The fund is named so because of the primary investment in real estate ventures. Such funds are of various types depending upon real estate transactions.

PERFORMANCE FUNDS

The investment is made in buying equity shares of small-unseasoned companies with relatively high price earnings ratio and higher price volatility. Such funds were set up in USA in 1960s to seek large profits in high-flying common stocks.SPECIALITY FUNDS

The investment is made in good track record companies, which offer long-term capital growth and provide handsome dividend income.

INDEX FUNDS

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds, which are traded on the stock exchanges.

GILT FUND

These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as are the case with income or debt oriented schemes.

SPECIALIZED FUNDS

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. They may also seek advice of an expert.

TAX SAVING SCHEMES

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

LOAD OR NO-LOAD FUND

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund, which are more important. Efficient funds may give higher returns in spite of loads.

A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

GEOGRAPHICAL CLASSIFICATION

Mutual funds can be classified from the angle of territorial jurisdiction of operations in two types:

DOMESTIC MUTUAL FUNDS (DMFS)

Domestic mutual funds launch schemes, which are operational within political territorial limits of a country for the residents or non-residents.

OFFSHORE MUTUAL FUNDS (OMFS)

Offshore mutual funds are cross border funds meant to attract foreign savings for investment in India.

ROLE OF MUTUAL FUNDS IN THE

FINANCIAL MARKETMutual funds have opened new vistas to investors and imparted much needed liquidity to the system. In this process they have challenged the hitherto dominant role of the commercial banks in the financial market and national economy.

Mutual Funds And Household Savings

In 1997 the share of mutual funds in household financial assets was over 5% in the USA, 8% in Germany, 3% in Japan, 3%in Italy and about 5% in India. The other indicator, which highlights their importance, is the rate of growth of this share. The economist magazine in its issue of 9 Oct 1995 reported that in 1980, 58% on the personal sector wealth in the USA was held in financial assets; by 1992 this had risen to 63%. Out of these financial assets the share of mutual funds stood at 5.4% as against 0.7% in 1980.

In India there has been a steady increase in the share of mutual funds in households savings (financial assets) since 1988-89, i.e. after the entry of public sector mutual funds. The most significant growth during 1980-81 to 1992-93 was in respect of UTI. It increased from 0.3% of the total household savings in 1980-81 to 7.0% in 1992-93. However the percentage share of bank deposits declined from 45.8% in1980-81 to 40.2% in1994-95.

Mutual Funds And The Capital MarketAccording to centre for Monitoring Indian Economy (CMIE), mutual funds cornered 12% of the total market capitalization, the share of the UTI being 9.4% of the total market capitalization of Indian stock markets in 1994. Out of the total investment of rs.71, 828.62 crores, 51% was invested inequities while about 21% was invested in debt instruments like debentures/ bonds. This indicates that mutual funds have strongly supported the equity market. While non-UTI mutual funds have tended more towards equities and debentures. UTI due to its special structure has rendered better support to government securities market.

Mutual Funds And Corporate FinanceAccording to the flow of funds statistics published by the RBI, the share of the banking sector in filling the resource gap of the corporate sector has declined from 54.42% in 1988-89 to 2.3% in 1991-92, while of the other financial sector (including mutual funds) has increased from 39.9% to 102.58%. RBI has noted that the rapid growth of mutual funds and increase in term lending by other financial institutions appear to have contributed to this trend. FUTURE OF MUTUAL FUNDS IN INDIA

Future of mutual funds industry seems to be bright in view of improved performance of fund managers and increasing confidence of investors in working the funds as also benefits of investing in funds. Further, with economy picking up, mutual funds industry is expected to grow at a good pace. It is also expected that money moving into the lap of mutual funds from banks as open-ended funds offers same convenience, higher rate of returns, variety of schemes, better performance, transparency, after sales customer services and genuine retail investor interest will drive the industry's growth. Technology and new distribution channels would increase reach even as investors move funds out from traditional investment channels.

Despite slow down in growth of mutual fund industry during 1999-2000, growth potential of the industry is beyond doubt as the Chairman of Housing Development Finance Corporation. Deepak Parekh stated recently we have only scratched surface. Equity funds in the US account for nearly 65 per cent of the total equity market capitalization while in India it is barely 5% of BSE's market capitalization of Rs. 8,50,000 crore in March 31, 2000. Indian mutual funds are expecting a pick up in equity investments in near future with blue chip shares looking attractively value after the recent declines.

Besides, the 40 per cent average growth of the mutual fund industry during the last two years compares favorably with the much more sedate growth in bank deposits of 16-18 percent recorded in the last five years. Mutual funds will continue to grow as they are getting accepted as a savings vehicle. Large pools of savings are outside the purview of the industry at present, for example, bank deposits, pension funds, etc. These will certainly provide a source for big growth for the industry.

Prospects of mutual find industry are likely to brighten further in view of some important reforms on the anvil. With the SEBI proposing a corporate structure on the lines of US funds, the existing trustee structure will be modified to introduce professional trustee companies. The underlying objective is to bring greater democracy in mutual fund administration and give the unit holders the right to change the trustees if they fail to perform their job.

More flexibility to asset management companies is also likely so that it can charge expenses, which are directly attributable to a particular scheme. Investors will have access to the balance sheets of AMCs. Although the balance sheets of most AMCs that are subsidiaries of public listed companies are already available. But most foreign mutual funds are not bound to disclose their AMC operations separately and this provision would help investors understand their operations better.

In the interest of the unit holders, mutual funds are now required to follow minimum international standards, for trading by their employees so that there is no conflict of interest between the transactions of employees and the mutual funds and there is no front running and insider trading. The code is likely to be finalized soon in consultation with the Association of Mutual Funds of India. CONCEPT OF MUTUAL FUNDA 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 appreciation realized 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. The flow chart below describes broadly the working of a mutual fund:A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized 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. The flow chart below describes broadly the working of a mutual fund:A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized 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. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund

Organization of a Mutual Fund

DATA ANALYSIS

COMPANYS DETAIL

KOTAK MAHINDRA

OVERVIEW

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. Uday Kotak, S.A.A. Pinto and Kotak & Company promoted this company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited (KMFL). With affect from March 22, 2003, the company KMFL has got converted into Kotak Mahindra Bank Limited (KMBL).

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 1,15,000 investors in various schemes. KMMF offers schemes catering to investors with varying risk- return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.

Kotak Mahindra Asset Management Company Ltd., a wholly owned subsidiary of Kotak Mahindra Bank Ltd, manages Kotak Mahindra Mutual Fund (KMMF). Kotak Mahindra Mutual Fund launched its Schemes in December 1998 and today manages assets close to Rs.3000 cr. contributed by over 115000 investors in various schemes. KMMF has to its credit the launching of innovative schemes and plans like K Gilt and Free Life Insurance with K Bond Deposit Plan.Risk Factors:

Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved.

As with any securities investment, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the capital market.

Past performance of the Sponsor or that of existing schemes of the Fund does not indicate the future performance of the Scheme.

K 30 is only the name of the Scheme and does not in any manner indicate the quality of the Scheme, future prospects or returns.

UNIT TRUST OF INDIA

Mission

To offer customer-oriented, innovative products by leveraging technology to provide superior returns achieve the highest service standards and attain sustained growth levels through principled human resources striving in a focused, transparent ethical manner to exceed investor expectations.

Overview

UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset Management Company presently manages 42 NAV based domestic SEBI compliant schemes and 4 Offshore funds having a corpus Rs.15, 243 crore from about 10 million investor accounts.

UTI Mutual Fund has a track record of managing a variety of schemes catering to the needs of every class of citizenry over a period of 39 years. It has a nationwide network consisting 54 branch offices, 3 UTI Financial Centres (UFCs) and representative offices in Dubai and London. With a view to reach to common investors at district level, 18 satellite offices have also been opened in select towns and districts. It has 2400 committed employees and over 10,000 active agents and 266 chief representatives to sell and service its schemes. It has a well-qualified, professional fund management team, who has been highly empowered to manage funds with greater efficiency and accountability in the sole interest of unit holders. The fund managers are also ably supported with a strong in-house equity research department. To ensure better management of funds, a risk management department is also in operation.

It has reset and upgraded transparency standards for the mutual funds industry. All the branches, UFCs and registrar offices are connected on a robust IT network to ensure cost-effective quick and efficient service. All these have evolved UTI Mutual Fund to position as a dynamic, responsive, restructured, efficient, and transparent and SEBI compliant entity.

UTI Mutual Fund has recently opened out yet another investor friendly vista for its investors on the Internet i.e. My UTI whereby an investor can transact through the Internet. With this the investors need not visit UTI offices, or write letters for non monetary changes, not involving any document submission for transactions viz. change of address, bank particulars mandate (mode of payment), update income tax details and view, and download.

As on January 31, 2003, almost all schemes/funds have outperformed the respective benchmark indices over various periods. These schemes have distributed income/bonuses consistently. Over and above the faith reposed by the investor community on UTI has also been reflected by fresh sales mobilization over Rs.5,200 crores in the last 7 months, commencing 1st July 2002. US 95 has been awarded with CNBC Mutual Fund Award for the year for the best performance in the open-end balance fund category under the threeyear segment.

UTI Mutual Fund is poised to meet the challenges of the future with its dedicated human resources, vast reservoir of funds and 38-year track record. Speed, Quality and Transparency is the edifice on which it desires to stride ahead for the benefit of its investors.

CANARA BANK

Mission

To build on a deep strong foundation ensuring long - lasting stability.

To attain heights of growth with an eye always on safety.

To share with every single investor the sweet scent of success.

To manage our most precious assets your trust and confidence."

Overview

Canbank Mutual Fund (herein after referred to as the "Fund") was set up by Canara Bank, pursuant to the approvals received by it from theGovernment of India, Ministry of Finance, New Delhi vide letter No. D.O. No F.1/65/SE/87 dated 15th December 1987 for making investments in equity and other securities. The Securities & Exchange Board of India has also granted registration vide Registration No.MF/004/93/4 date. 19/10/1993. Canbank Mutual Fund has also been recognized under section 10(23D) of Income-Tax Act, 1961 vide Notification No.SO/1064/E dated 18th November 1988 issuedby Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, and Government of India.The Asset Management Company:

Canbank Investment Management Services Ltd. - a wholly owned subsidiary of Canara Bank, (hereinafter referred to as the "Investment Manager") has been set up as per the Securities and Exchange Board of India (Mutual Funds) Regulations, 1993.

An Investment Management Agreement has been signed between Canbank Mutual Fund and the Investment Manager on 16th June 1993, whereby the Investment Manager is empowered to manage the affairs of Canbank Mutual Fund and operate its various Schemes.

The Investment Manager is also the sub-Investment Manager in respect of IC-Himalayan Fund / Canbank (Offshore) Fund. Controls & Safeguards as suggested by SEBI vide letter No. IIMARP/3219/94 dt. 27.05.1994 for managing the Offshore Fund are being adhered to and there is no conflict of interest in managing the Schemes of Canbank Mutual Fund and IC-Himalayan Fund / Canbank (Offshore) Fund.

The risk factors generally associated with mutual fund before subscribing to the units of any Scheme of Canbank are:

All investments in mutual funds and securities are subject to market risks and the NAV of the schemes may go up or down depending upon the factors and forces affecting the securities market.

There can be no assurance that the schemes' investment objectives will be achieved.

The past performance of the sponsors / asset management company / mutual fund is not necessarily indicative of the future performance of the scheme.

The sponsors are not responsible or liable for any loss resulting from the operation of the scheme.

The name (s) of the Scheme (s) do not in any manner indicate the quality of the Scheme (s), its future prospects or returns. PRUDENTIAL ICICI

Overview

Prudential ICICI Asset Management Company, (55%: 45%) a joint venture between Prudential, UK's leading insurance company and ICICI Bank Ltd, India's premier financial institution.

The joint venture was formed with the key objective of providing the Indian investor mutual fund products to suit a variety of investment needs. The AMC has already launched a range of products to suit different risk and maturity profiles.

Prudential ICICI Asset Management Company Limited has a net worth of about Rs. 69.89 crore (1 crore = 10 million) as of March 31, 2002. Both Prudential and ICICI Bank Ltd have a strategic long-term commitment to the rapidly expanding financial services sector in India.

GUIDING PRINCIPLES

Prudential CICI will conduct its business with Honesty and trustworthiness in all interactions. A pioneering spirit and excellence in action. Collaboration and teamwork. An understanding of customer needs and the desire to satisfy them. The highest service standards. A consistently above average performance. GENERAL RISK AND ICICIS BANK DISCLAIMERInvestors are advice to read the risk factors carefully before taking an investment decision. Offer Document/s / Abridge Offer Document/s are available with Mutual Fund Companies/ ICICI Bank. For taking an investing decision, investors must rely on their own examination of the issuer and offer, including risk involved. It is to be distinctly understood that the mutual fund schemes, being offered for investment, have not been recommended by ICICI Bank and nor ICICI Bank has sponsored any scheme. ICICI Bank does not take any responsibility either for the financial soundness of any scheme or for the correctness of statement made or opinion expressed in the Offer Document / Abridge Offer Document of mutual funds. ICICI Bank does not guarantee any returns on investments made in mutual fund scheme/s by investors. Investment in mutual funds involves a degree of risks and investors should not invest any funds unless they can afford to take risk of losing their investment.

FUNDS OFFERED

Balanced Fund

Balanced funds are more evenly invested in equities and income securities. Balanced and equity-income funds are suitable for conservative investors who want high current yield with some growth. If you seek to generate long-term capital appreciation and current income, an investment in the balanced fund would be ideal. It gives you an exposure to the stock market without the entire risk of the stock market. The funds offered under this category are the Prudential ICICI Balanced Fund and Prudential ICICI Child Care Plan.Investment Philosophy

The AMC proposes to invest in a mix of equities and fixed income securities with the aim of generating capital appreciation, while at the same time minimizing the volatility inherent in pure equity schemes. With this aim, the AMC would allocate the assets between equity and fixed income instruments within the limits laid down for each scheme.

Debt funds

The goal of fixed income funds is to provide high current income consistent with the preservation of capital. Growth of capital is of secondary importance. These funds invest in corporate bonds or government securities that have a fixed rate of return. The funds are suitable for investors who want to maximize current income and who do not wish to assume a high degree of capital risk in order to do so. Since bond prices fluctuate with changing interest rates, there is some principal risk involved despite the fund's conservative nature.

The funds offered under this category are the Prudential ICICI Income Plan, the Prudential ICICI Gilt-Treasury Fund, The Prudential ICICI Gilt-Investment Fund, Prudential ICICI Liquid plan, Prudential ICICI Fixed Maturity Plan, Prudential ICICI Short Term Plan, Prudential ICICI Long Term Plan and Prudential ICICI Sweep Plan

Investment Philosophy

The AMC aims to identify securities, which offer superior levels of yield at lower levels of risks. With the aim of controlling risks, the investment team of the AMC will carry out rigorous in-depth credit evaluation of the securities proposed to be invested in. The credit evaluation includes a study of the operating environment of the company, the past track record as well as the future prospects of the issuer, the short as well as longer-term financial health of the issuer. Rated debt instruments in which the Scheme invests will be of investment grade as rated by a credit rating agency. In case a debt instrument is not rated, specific approval of the Board of the AMC will be obtained for such an investment.In addition, the investment team of the AMC studies the macro economic conditions, including the politico-economic environment and factors affecting liquidity and interest rates. The AMC would use this analysis to attempt to predict the likely direction of interest rates and position the portfolio appropriately to take advantage of the same.

Equity Funds

Equity funds seek to provide maximum growth of capital with secondary emphasis on dividend or interest income. They invest in common stocks with a high potential for rapid growth and capital appreciation. An equity fund gives an exposure to the stock market. The fund would have long-term growth potential but provide low current income. They are not suitable for investors who are risk averse and are focused on maximizing current income or conserving principal. The funds are the Prudential ICICI Growth Plan, Prudential ICICI FMCG Fund, Prudential ICICI Technology Fund, Prudential ICICI Tax Plan, Prudential ICICI Index Fund and Prudential ICICI Power.Investment Philosophy

The overriding objective of the AMC in managing its investments is to produce a consistently above average long-term performance. The AMC believes in a bottom-up approach to stock picking. This means that the focus is on the fundamental quality of companies as opposed to a focus on favored sectors and market movements. The AMC will follow a structured investment process in order to identify the best stocks for inclusion in the portfolio. This would involve consistently examining all stocks under an internally developed research framework. A stock would be considered or inclusion in the portfolio when the valuation does not adequately capture its underlying fundamental value in the AMC's opinion based on the above factors. The AMC's portfolio management style is conducive to a low portfolio turnover rate. However, the AMC will take advantage of the opportunities that present themselves from time to time because of inefficiencies of the securities markets. The AMC will endeavor to balance the increased cost on account of higher portfolio turnover with the benefits derived there from.

Appreciation of the value of the Units issued under the Scheme can be restricted in the event of a high asset allocation to cash when stocks appreciate.

The NAV of the Units issued under the Scheme may be affected, inter-alia, by changes in the market interest rates, trading volumes, settlement periods and transfer procedures.

Tax laws may change, affecting the return on investment in Units.

In the event of receipt of a very large number of redemption requests or very large value redemption requests or of a restructuring of the Schemes portfolio, there may be delays in the redemption of Units. Please refer to the paragraph on "Right to limit Redemption" in the Combined Offer Document.

Statutory: Kotak Mahindra Mutual Fund has been established as a trust under the Indian Trusts Act, 1882, by Kotak Mahindra Finance Limited (liability Rs. NIL) with Kotak Mahindra Trustee Company Limited as the Trustee and with Kotak Mahindra Asset Management Company Limited as the Investment Manager.

INVESTMENT PATTERN OF GILT PLAN

MUTUAL FUND

ICICI

UTI

CANBANK

KOTAK MAHINDRA

INTERPRETATION Gilt fund refers to those funds in which invest only in Govt. securities including call money, treasury bill and repos of varying maturities with a view to generating credit risk free return. . According to the graph study we can see that companies has different investment pattern. UTI has allotted 100% investment in Sovereign debt. Where as Kotak Mahindra has 89% in Govt. Sect., 10% in Repo and 2% in Other Rec. Can Bank has invested 29% in money market funds and 71 % in debt. ICICI has 100% in Gilt securities (treasury bills).

INVESTMENT PATTERN OF SECTOR PLAN

MUTUAL FUND

ICICI

CANBANK

KOTAK MAHINDRA

UTI

INTERPRETATION

As from the graph we can see that different company has adopted different pattern of investment. ICICI FMCG PLAN has invested 90% in debt and 10% in MMF. UTI Growth Sector has invested in100 % equity of the specific sector. CanBank has also invested in 87% in equity and 13%in MMF .Kotak invested in 61.40% in equity ,34.23% in MMF ,4.37% in other .

INVESTMENT PATTERN OF LIQUID PLAN

MUTUAL FUND

ICICI

UTI

CANBANK

KOTAK MAHINDRA

INTERPRETATION

As from the graph we can see that different company has adopted different pattern of investment. ICICI LIQUID PLAN has invested 20% in debt and 80% in MMF. UTI MMF has invested 100 % in debt.. CanBank has invested 70% in MMF and 30% in debt. KOTAK has invested 46% in debt, 41% in MMF and 12.88% in other assets.

INVESTMENT PATTERN OF BALANCE PLAN

MUTUAL FUND

UTI

ICICI

CANBANK

KOTAK MAHINDRA

INTERPRETATION Balanced fund refers to those fund in which there is a good mix of equity and debt. According to the graph study we can see some company has equal ratio of equity and debt, but some do follows equal portion pattern. UTI has allotted 60:40 ratios for asset investment pattern in equity and debt. Where as Kotak Mahindra has 40% in debt, 52% in equity and 9% in money market fund. CanBank has invested 63% funds in equity, 17% in money market funds and 20 % in debt. ICICI has same portion allotment as UTI.

FINDING

In Gilt fund UTI & ICICI invested 100% in sovereign debt, KOTAK invested 89%, Canbank invested 29%

According to section plan invested pattern ICICI FMCG plan invested 90% debt & 10% in MMF, KOTEK invested 90% debt & 10% in MMF & 4.37% in other.

According to liquid plan invested pattern KOTAK invested 46% in debt, 41% in MMF & 12.88% in other assets, UTI invested 100% in debt.

In balanced fund UTI invested 60% in equity 40% in debt, KOTAK invested 40% in debt, 52% in equity &9% in MMF

SUGGESTIONS

In order to render the existing mutual funds more effective and purposeful the following steps should be taken:

There should be comprehensive legislation to control the operations of the mutual funds including the kotak mahindra mutual funds are to guidelines laid down by the RBI, Government of India and the SEBI and some of the guidelines are contradictory leading to confusion among the mutual fund managers. Further, the guidelines governing the kotak mahindra. It is, therefore, necessary that the Government should come out with single set of comprehensive legislation, which will uniformly be applicable to public sector and private sector mutual funds and the kotak mahindra.

So far mutual funds in India confined themselves to urban areas; leaving vast saving potentials in rural hinterlands untapped. By penetrating in rural areas and introducing saving schemes tailored to the diverse preferences of rural community and by educating them about the benefits of the schemes, mutual funds can raise burgeoning resources which can be gainfully employed for the national development.

Investors' confidence in mutual funds can be restored by rendering their operations more transparent and providing better services.

While it is fine to advertise good performance of a particular scheme by a fund in order to attract more investment, the times are fast approaching when an honest view based approach would compel a mutual fund to advise investors on "sell" or "switch" between schemes, as emphatically as it would advise on the purchase. So as to attract investors, it is, therefore, advisable to mutual funds to offer this sort of counseling which will certainly make a mutual fund different from other institutions. CONCLUSION

Mutual funds are financial intermediaries concerned with mobilizing savings of those who have surplus and canalization of these savings in those avenues where there is demand of kotak mahindra mutual funds. These institutions employ their resources in such a manner as to afford for their investors the combined benefits of low risk, steady return, high liquidity and capital appreciation through diversification and expert management.

The performance of a mutual fund is dependent on the prudence of the management in selection of scrips, the diversity of investment in scrips and the extent to which risks are minimized during investment. The future prospects of an ongoing manufacturing company could be judged and predicted with a fair degree of confidence, and investment strategies could be worked out accordingly. Whereas, investment in a mutual fund is judged purely from the point of returns given to the investor, management's expertise and the types of schemes offered to the public, prediction of any scheme performing better than those of any other mutual funds is generally not possible specially for a growth scheme. This is purely because the investor is investing his money in mutual funds to enable the latter to further re-invest in scrips, which provide both short-term and long-term gains. Therefore, this intermediary (MF) is a decision-maker for public money investment.

Since mutual fund is a pool of public money, maximum care and caution is taken to invest in the right scrip for capital appreciation and returns on investment for its distribution to the investors. Therefore, the business of mutual fund is to re-invest in any scrip in the market, and prove their performance through returns to investors. Therefore, each mutual fund is a reinvestment agency.

For a mutual fund, its environment is the environment of all industries put together. Its management's function is highly specialized, as they have to have the knowledge or individual companies, their economic and commercial environment as well as the government laws that regulate and promote that industry. In the absence of this information, the mutual fund will not be in a position to meaningfully diversify its investment in various scrips to maximize profit and minimize risks.

BIBLIOGRAPHY

BOOK NAME

AUTHOR NAME

Mutual Funds in India

S. Krishnamurti

Manual of SEBI

Nabhi Publications

Financial Sector Reforms

B.B Tandon and

A.K. Vashisht

Manual of Merchant Banking

Dr J.C. Verma

Mutual fund

K.G Sahadevan

Management of Indian FinancialInstitution

R.M. Srivastava

Research methodology

C.R. KothariWEBSITES

www.kotakmutual.com www.canbankmutual.com www.unittrustofindia.com www.sebi.com www.pruiciciamc.com www.google.com www.money control.com www.valueresearch.comMAGAZINE

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