PRABHJOT

Chapter-1
INTRODUCTION
In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being.
Mutual Funds had not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising
more and more people are enjoying by getting benefits by investing in mutual funds.
The Indian mutual funds industry is witnessing a rapid growth as a result of

infrastructural development, increase in personal financial assets, and rise in foreign
participation. With the growing risk appetite, rising income, and increasing awareness,
mutual funds in India are becoming a preferred investment option compared to other
investment vehicles like Fixed Deposits (FDs) and postal savings that are considered safe
but give comparatively low returns.
Mutual Funds had seen CAGR at 47% next only to Russia at 97% and China at 67%
during the period of 2003-08. Some of estimates say that in the next 2-3 years, Mutual
fund industry would grow at 35-40%.
Mutual funds incurred heavy loss of Rs 150000 Cr in 2008. This accounted for nearly
three-forth of the overall gains in the previous year 2007. But the average AUM which
cost 23.52 percent as on Dec 31, 2008 as compared to Dec 2007 was much less when
compared to sensex which plummeted 52.47 percent, the steepest in the last 30 years.
The mutual fund industry has registered a net inflow of Rs 1,54,192 crore during April
2009. This is the highest net inflow in the last four years. Mutual funds registered
maximum inflows in the debt category at Rs 1,03,055 crore. . This shows that liquidity
situation is normalised, money has again starting pouring in debt funds. With so much
volatility in equities, debt funds have become the flavour of the season for mutual funds.
1.1 Objective
Amity Business School, Amity University, Noida Page 1
The objective of the project was to study the performance of mutual funds in India.. So
this report will prove helpful to find out that, are mutual fund a good option to invest? and
are mutual funds are successful in creating wealth for investors and for how much time
we should invest money in mutual funds to get good returns. The research is based on
annualized return (CAGR)of Equity Diversified mutual funds and also to study the
investors investment pattern . This research was conducted to know that what a investor
perception about the Mutual Funds. Do they trust Mutual funds as a wealth creating
instrument or not and what factors they have in mind while investing in Mutual funds.. So
it is important for all investment firms to understand the investments preferences of the
investor. This research helps to find out what factors effect the investment by the
investors and shows what drives an investor to invest in Mutual funds.
.
1.2 Research Design
The research method used here was descriptive research. Descriptive research is
conducted when the objective of the research is clear. Descriptive research tries to
answers the questions like what, where, when, how. For example, in case of when a
company is going to launch a new product in the market, it will conduct a descriptive
research. Descriptive research will try to find out the buying behavior of a consumer and
attitude of the consumer to similar products already existing in the market.
Since the objective of our research is clear as in the above example, Thus we conducted a
descriptive research.
1.3 Sample

The sample of the survey consisted of 200 respondents. The method used for selecting the
sample was simple random sampling. Under simple random sampling individuals are
chosen from large population randomly without any biasness.
The sample consisted people of various age groups from different work areas and from
different income groups.
1.4Type Of Data
Data collected was primary data which was collected by questioning directly to the
people using a structured questionnaire.
1.5Data Collection Tool
The tool used for collecting the data was

1. Personal Interview: The data was collected by personally meeting the
respondents
2. Telephonic Interview: The data was also collected on telephone.
1.6Analyzing Tool Used
The analyzing tool used to analyze the data were SPSS17.0
1.7Limitations
The time this project was undertaken the world was going through one of the biggest
financial crisis seen after THE GREAT DEPRESSION. The country's mutual fund
industry witnessed hefty Rs 54,54,650 crores redemptions in the financial year 2008-
2009, as meltdown in the stock market and liquidity crunch made investors, including the
big corporate houses, pull out huge amounts from various schemes. Amid these tough

times the investors were very doubtful and fearful of investment in any financial
instruments including mutual fund. So I faced a lot of problems in fixing meetings with
the investors. I covered a total of 200 investors for my project.
• Some of the persons were not so much responsive.
• Possibility of error in data collection as many of investors may have not given
actual answers of my questionnaire.
• Sample size is limited to 200
• Size may not adequately represent the whole market.
• Some respondents were reluctant to tell personal information which can affect
the validity of all responses.
• The research is confined to a certain parts of Delhi.
CHAPTER-2

INDUSTRY PROFILE
The Mutual Fund industry in India has seen dramatic improvements in quantity as well as
quality of product and service offerings over the past decade. Industry experts admit that
the growth in the last 10 years was considerably below potential. The mutual fund Assets
Under Management (AUM) have grown from about Rs.4700 crores in March 1993 to
Rs.5,52006.25 crores in April 2009 .
In the United States, as high as 22 per cent of the household financial assets are invested
in mutual funds, which is only slightly less than the proportion of assets invested in bank
deposits. Compared to this, the assets under management of the entire mutual fund
industry in India are less than half of the deposits held by one bank, SBI and constitute
less than 11 per cent of the Rs.14,042 billion total deposits held by the Indian banking
industry.
One of the primary reasons for this slow growth is the fact that mutual funds are a new
concept in India, which need to be still understood by large sections of Indian investors.
In this scenario, the mutual fund companies have the high responsibility of not just selling
mutual fund products, but ‘marketing’ them correctly. In other words, mutual funds
should understand the specific needs of different segments of investors and sell the right
product to the right customer. If sales of mutual fund products are not personalized to
investor needs, there is the danger of the investor getting disenchanted with the mutual
funds in general and the tremendous growth promise of the industry getting nipped in the
bud.
The Indian mutual fund industry has witnessed several records during the fiscal ended
March 2005. It was the year in which the largest number of new schemes - 97 in all, were
launched. The amount mobilised by the new schemes at over Rs 25,000 crore is also a
new record. The industry mobilised Rs 25,764 crore through 97 new schemes during the
fiscal as against Rs 8,549 crore mobilised through 46 new schemes in the previous fiscal
The table below shows all the average Asset Under Management of all Asset
Management Companies in India.

Average Assets Under Management (AUM) as at the end of April-2009 (Rs in Crore)
Mutual Fund Name Average AUM Equity & Debt & Equity Debt
Balance MIP (%) (%)
AIG Global Investment Group MF 1454.97 840.90 614.07 57.79 42.21
Baroda Pioneer Mutual Fund 1882.01 39.34 1842.67 2.09 97.91
Benchmark Mutual Fund 939.11 335.49 603.62 35.72 64.28
Bharti AXA Mutual Fund 249.22 29.87 219.35 11.99 88.01
Birla Sun Life Mutual Fund 51845.27 5483.41 46361.86 10.58 89.42
Canara Robeco Mutual Fund 6592.30 478.46 6113.84 7.26 92.74
DBS Chola Mutual Fund 1611.40 164.53 1446.87 10.21 89.79
Deutsche Mutual Fund 11110.79 354.44 10756.35 3.19 96.81
DSP BlackRock Mutual Fund 15945.02 8763.32 7181.70 54.96 45.04
Edelweless Mutual Fund 14.57 0.20 14.37 1.37 98.63
Escorts Mutual Fund 184.59 170.80 13.79 92.53 7.47
Fidelity Mutual Fund 7320.85 4666.93 2653.92 63.75 36.25
Fortis Mutual Fund 6467.17 378.45 6088.72 5.85 94.15
Franklin Templeton Mutual Fund 20802.40 9278.02 11524.38 44.60 55.40
HDFC Mutual Fund 63880.63 13439.11 50441.52 21.04 78.06
HSBC Mutual Fund 9321.28 2780.15 6541.13 29.83 70.17
ICICI Prudential Mutual Fund 56074.65 9403.45 4671.20 16.77 83.23
IDFC Mutual Fund 16041.80 2097.26 1394.54 13.07 86.93
ING Mutual Fund 2539.68 470.89 2068.79 18.54 81.46
JM Financial Mutual Fund 5472.84 1670.47 3802.37 30.52 69.48
JP Morgan Mutual Fund 2776.86 807.43 1969.43 29.08 70.92
Kotak Mahindra Mutual Fund 21812.86 3240.45 18572.41 14.86 85.14
LIC Mutual Fund 26115.27 1990.95 24124.32 7.62 92.38
Mirao Asset Mutual Fund 190.56 169.67 20.89 89.04 10.96
Morgan Stanlay Mutual Fund 1587.62 1587.62 0.00 100.00 0.00
Principal Mutual Fund 755.18 1767.74 5787.44 23.40 76.60
Quantum Mutual Fund 59.17 26.41 32.76 44.53 55.37
Reliance Mutual Fund 88387.99 22847.50 65540.49 25.85 74.15
Religare Mutual Fund 7273.99 503.46 6770.53 6.92 93.08
Sahara Mutual Fund 185.82 43.79 142.03 23.57 76.43
SBI Mutual Fund 30875.02 12147.08 18727.94 39.34 60.6
Sundaram BNP Paribas Mutual Fund 11167.77 5928.33 5233.44 53.11 46.89
Tata Mutual Fund 19438.82 4971.31 14467.51 25.57 74.43
Taurus Mutual Fund 344.82 162.13 182.69 47.02 52.98
UTI Mutual Fund 54489.99 20115.04 34374.95 36.92 63.08
Total of above Mutual Funds 552006.25 137154.40 414851.85 24.85 75.15
CHAPTER-3

LITERATURE AND CONCEPT REVIEW
3.1 The Concept and Role of Mutual Funds
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 invested by the fund manager in
different types of securities which depends upon the objective of the scheme. These could
range from shares to debentures and to money market instruments. The income earned
through these investments and the capital appreciation realized by these schemes 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 to investors
an opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. The small savings of all the investors are put together to increase the buying
power and they hire a professional manager to invest and monitor the money. Each
Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with some predetermined investment
objective. The mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities that is (stocks or bonds). When you invest in a
mutual fund, you are buying units or portions of the mutual fund and thus on investing
into it becomes a shareholder or unit holder of the fund. Mutual funds are considered as
one of the best available investments as compare to others as they are very cost efficient
and also easy to invest in, thus by pooling money together in a mutual fund, investors can
purchase stocks or bonds with much lower trading costs than if they tried to do it on their
own. But the biggest advantage to mutual funds is diversification, which minimizes risk
& maximizes returns. Thus a Mutual Fund is the most suitable investment for the
common man as mutual fund 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 Cycle
Concept of Mutual Fund


Many investors with common financial objectives

pool their money

Investors, on a proportionate basis, get mutual fund
units for the sum contributed to the pool

The money collected from investors is invested into ,
shares,debentures and other securities by the fund manager

The fund manager realizes gains or losses, and collects
dividend or interest income
Any capital gains or losses from such investments are

passed on to the investors in proportion of the number of units held by them
3.2 Evolution of Mutual Funds In India

The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated
from the year 1987 when non-UTI players entered the industry in the past decade, Indian
mutual fund industry had seen a dramatic improvement, both quality wise as well as
quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets
under Management (AUM) were Rs. 67billion. The private sector entry to the fund
family raised the AUM to Rs. 470 billion in March 1993 and till April 2004; it reached
the height of 1,540 billion. Putting the AUM of the Indian Mutual Funds Industry into
comparison, the total of it is less than the deposits of SBI alone, constitute less than 11%
of the total deposits held by the Indian banking industry. The main reason of its poor
growth is that the mutual fund industry in India is new investment option in the country.
Large sections of Indian investors are yet to be intellectuated with the concept of mutual
funds. Hence, it is the prime responsibility of all mutual fund companies, to market the
mutual fund correctly abreast of selling. The mutual fund industry can be broadly put into
four phases according to the development of the mutual fund sector. Each phase of
development is briefly described as under.
Phase 1. Establishment and Growth of Unit Trust of India - 1964-87
The Unit Trust of India enjoyed complete monopoly when it was established in the year
1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it
continued to operate under the regulatory control of the RBI until the two were de-
linked in 1978 and the entire control of mutual funds was transferred in the hands of
Industrial
Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the largest number of investors in India in
any single investment scheme over the years.
UTI launched more innovative schemes in 1970s and 1980s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift
Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (India's
first equity diversified scheme) in 1987 and Monthly
Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's

assets under management grew ten times to the amount of Rs 6700 crores.
Phase II. Entry of Public Sector Funds - 1987-1993
The Indian mutual fund industry witnessed a large number of public sector players
entering the market in the year 1987. In November 1987, SBI Mutual Fund of the State
Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was
later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund,
Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund respectively . By
1993, the assets under management of the mutual fund industry increased seven times
to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% of the
market share
1992-93 Amount Assets Under Mobilisation as % of

Mobilised Management gross Domestic
Savings
UTI 11,057 38,247 5.2%
Public Sector 1964 8,757 0.9%
Total 13,021 47,004 6.1%
Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management
companies (most of them entering through the joint ventures with Indian promoters) to
enter the mutual fund industry in 1993, provided a wide range of choice to investors and
more competition in the industry. Private funds introduced innovative products,
investment techniques and investor-servicing technologies. By 1994-95, about 11 private
sector funds had launched their schemes in this sector.
Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI
after the year 1996. The mobilization of funds and the number of players operating in the
industry reached new heights as investors started showing more interest in mutual funds
to invest their money. Investors' interests were safeguarded by SEBI and the Government
offered tax benefits to the investors in order to encourage them to inverst. SEBI (Mutual
Funds) Regulations, 1996 was introduced by SEBI that sets standards for all mutual funds
in India. The Union Budget in

1999 exempted all dividend incomes in the hands of investors from the income tax.
Various Investor awareness Programmes were launched during this phase, both by SEBI
and AMFI, with an objective to educate investors and to make them informed about the
mutual
fund industry.
In February 2003, the UTI Act was repealed and UTI was stripped of by its Special legal
status as a trust formed by an Act of Parliament. The primary objective behind this
was to bring all mutual fund players on same level. UTI was then re-organised into
two parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund Presently Unit
Trust of India operates under the name of the UTI Mutual Fund and its past schemes
(like US-64, Assured Return Schemes) are being gradually wound up. However, UTI
Mutual Fund is still the largest player in the industry. In 1999, there was a significant
growth in mobilisation of funds from investors and assets under management which
is supported by the following data:
GROSS FUND MOBILISATION (RS. CRORES)
FROM TO UTI PUBLIC PRIVATE TOTAL
SECTOR SECTOR
01-April-98 31-March-99 11,679 1,732 7,966 21,377
01-April-99 31-March-00 13,536 4;039 42,173 59,748
01-April-00 31-March-01 12,413 6,192 74,352 92,957
01-April-01 31-March-02 4,643 13,613 1,46,267 1,64,523
01-April-02 31-Jan-03 5,505 22,923 2,20,551 2,48,979
01-Feb.-03 31-March-03 * 7,259* 58,435 65,694
0l-April-03 31-March-04 63,553 5,21,632 5,90,190

01-April-04 31-March-05 - 1,03,246 7,36,416 8,39,662
01-April-05 31-March-06 1,83,446 9,14,712 10,98,158
ASSETS UNDER MANAGEMENT (RS. CRORES)

AS ON UTI PUBLIC PRIVATE TOTAL

SECTOR SECTOR
31-March-99 53,32 8,292 6,860 68,472
0
Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of
which are acquisition of schemes o the Alliance Mutual Fund by Birla Sun Life, Sun
F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously,
more international mutual fund players have entered India like Fidelity, Franklin
Templeton Mutual Fund . There were 29 funds in India as at the end of March 2006. This
is a continuing phase of growth of the industry through consolidation and entry of new
international and private sector players in the industry.

3.3 Entities in mutual fund operations
• Sponsor:
The sponsor of a mutual fund is like the promoter of a company. The sponsor may be a
bank, a financial institution, or may bea financial service company. It may be Indian or
foreign. The sponsor is responsible for setting up and establishing the mutual fund. The
sponsor is the settler of the mutual fund trust. The sponsor delegates the trustee function
to the trustees.
• Mutual fund :
The mutual funds constituted as a trust under the Indian trust act, 1881, and registered
with SEBI.
• Trustees:

A trust is a notional entity that cannot contract in its own name. So, the trust enters into
contracts in the name of the trustees. Appointment by the sponsor, the trustees can be
either individuals or a corporate body. Typically it is the latter. The trustees appoint the
asset management company (AMC), secure necessary approval, periodically monitor how
the AMC functions, and hold the properties of the various schemes in trust for the
benefits of investors.
• Asset Management Company:
It also referred to as the investment manager, is a separate company appointed by the

trustees to run the mutual fund. The AMC should have a certificate from SEBI to act as
portfolio manager under SEBI rules and regulations, 1993.
• Custodian:
The custodian handles the investment back office operations of a mutual fund. It looks
after the receipt and delivery of securities, collection of income, distribution of dividends,
and segregation of assets between schemes. The sponsor of a mutual fund cannot act as
its custodian.
• Registrars and transfer agents:
The registrars and transfer agents handle investor related services such as issuing units,
redeeming units, sending fact sheets and annual reports, and so on. Some funds handle
such functions in house, while others outsource it to SEBI approved registrars and
transfer agents like karvy and CAMS.
3.4 Types of Mutual funds

There are many types of ‘schemes’ of mutual funds available to the Indian investor.
However, these different types of schemes can be grouped into certain classification for
better understanding. From the investors’ perspective, we would follow three basic
classifications.
Firstly, schemes are usually classified in accordance with their structure – as closed-end
or open-end. The distinction depends upon whether they give the investors the option to
redeem and buy units at any time from the fund itself (open end) or whether the investors
have to await a given maturity before they can redeem their units to the fund (closed end).
Closed-end funds are listed on stock exchanges. It may be noted that in the USA, all
mutual funds are open-end.
Schemes can also be grouped in terms of whether the fund collect from investors any
charges at the time of entry or exit or both, thus reducing the investible amount or the
redemption proceeds. Funds/schemes that make these charges are classified as load funds,
and funds/schemes that do not make any of these charges are termed no-load funds.
In the USA, schemes are also be classified as being tax-exempt or non-tax-exempt,
depending on whether they invest in securities that give tax-exempt returns or not. We do
not use this classification in India.
Under each broad classification, we may them distinguish between several types of funds
(schemes) on the basis of the composition of their portfolios. A mutual fund has a unique
risk-profile that is determined by its portfolio. Therefore, mutual funds could span a wide
range of investment risk. We first look at the fund classification and then describe the
various types of funds under them. While technically the two terms “fund” and “scheme”
are different, in practice they are used interchangeably. In this workbook too we use the
terms interchangeably.
Open-end Vs. Closed-end Funds:
An open-end fund is one that sells and repurchases units at all times. When the fund sells
units, the investor buys them from the fund. When the investor redeems the units, the
fund repurchases the units from the investor. An investor can buy units or redeem units
from the fund itself at a price based on the net asset value (NAV) per unit. NAV per unit
is obtained by dividing the amount of the market value of the fund’s assets (plus accrued
income minus the fund’s liabilities) by the number of units outstanding. The number of
units outstanding goes up or down every time the fund sells new units or repurchases
existing units. In other words, the ‘unit capital’ of an open-end mutual fund is not fixed
but variable. When sale of units exceeds repurchase, the fund increases in size. When
repurchase exceeds sale, the fund shrinks.
In practice, an open-end fund is not obliged to keep selling new units at all times, though
it has the obligation to repurchase units tendered by the investor. Many successful funds,
if they think they cannot manage a larger fund without adversely affecting profitability,
stop accepting further subscriptions from new investors after they reach a certain size. As
indicated earlier, an open-end round rarely denies its investors the facility of redeem
existing units. However, there are some situations when redemption is not possible. For
example, redemption is only possible after the investor’s cheque for initial subscription
has cleared (or only after the specified by the funds) or until after any “lock-in-period”
specified by the fund is over.
Unlike an open-end fund, the ‘unit capital’ of a closed-end fund is fixed, as it makes a
one-time sale of a fixed number of units. After the offer closes, closed-end funds of not
allow investors to buy or redeem units directly from the funds. However, to provide the
much-needed liquidity to investors, closed-end funds a list on a stock exchange. Trading
through a stock exchange enables investors to buy or sell units of a closed-end mutual
fund from each other, through a stockbroker, in the same fashion as buying or on
investors’ perceptions about the fund’s future performance and other market factors
affecting the dement for or supply of the fund’s units. The number of outstanding units.
The number of outstanding units of a closed-end fund investors. In this case, the mutual
fund actually reduces the number of outstanding units. In India, SEBI regulations ensure
that the closed end scheme investors are given at least one of the two exist avenues.
Load and No-load Funds:

Marketing of a new mutual fund scheme involves initial expenses. These expenses may
be recovered from the investors in different ways at different times. Three useful ways in
which a fund’s marketing expenses may be recovered from the investors are:
1. At the time of investor’s entry into the fund/scheme by deducting a specific
amount from his contribution.
2. By charging the fund/scheme with a fixed amount each year, during a specified
number of years.
3. At the time of investor’s exit from the fund/scheme with a fixed amount each
year, during a specified amount from the redemption proceeds payable to the
investor.
These charges imposed on the investors to cover distribution/sales/marketing expenses
are often called “loads.” The load charged to the investor at the time of his entry into a
scheme is called a “front-end load or entry load”. This is the first case above. The load
amount charged to the scheme over a period of time is called a “deferred load”. This is
the second case above. The load that the investor pays at the time of his exist is called
“back-end load or exit load”. This is the third case above some funds may also charge
different amounts of loads to the investors, depending upon how many years the investor
has stayed with the fund; the longer the investor stays with the fund, less the mount of
“exit load” he is charged. This is called “contingent deferred sales charge”.
When an investor buys units from the fund, the front-end load amount is deducted from
the contribution/purchase amount paid by him to the fund. As this amount is meant to
cover distribution/sales/marketing expenses only the remaining part of his contribution is
available at the disposal of the fund for making investments. Similarly, exit loads are
subtracted from the redemption proceeds before they are paid out of the load may not be
apparent to the investor, as the scheme’s NAV would reflect the net amount after the
deferred load.
Funds that charges front-end, back-end or deferred loads are called load funds. Funds that
make no such charges or loads for sales expenses are called no-load funds.
In India, SEBI has defined a “load” as the one-time fee payable by the investor to
allow the fund to meet initial issue expenses including brokers’/agents’ distributors’

commissions, advertising and marketing expenses. Expenses such as SEBI filing
fees, or printing of offer documents and other forms, or even bank charges related
to new issue of a scheme would be considered initial issue expenses.
Funds that charge a front-end load would be ‘load funds’ as per SEBI definition. This is
in line with the internationally used definition. However, SEBI would consider a fund to
be “a no-load” fund, if an AMC absorbs these initial marketing expenses and does not
charge the fund – a situation that is somewhat special to India and not widely prevalent
elsewhere. Internationally, a fund, even when it does not make a front-end load, would
still be considered a load fund, if it charges an exit load or a deferred sales load.
The reason for this slightly different definition of a load by SEBI is to be found in the
nature of its regulations. Front-end load, or load as defined by SEBI , is meant to cover
the marketing expenses associated with the first issue of a scheme. Other expenses are
defined as “recurring expenses” rather than as “loads”. SEBI regulations allow AMCs to
recover loads from the investors for the purpose of paying for the initial issue expenses.
Subject however to a limit on the maximum amount that can be charged by the AMC.
This limit currently stands at 6%, meaning that initial issue expenses should not exceed
6% of the intial corpus mobilized during the initial offer period. Similarly, SEBI has also
imposed a limit on the maxmmum “recurring expenses” that can be charged to a scheme.
Thus, the AMC can charge a scheme 2.5% of the average net assets of the scheme as
recurring expenses, if the net assets do not exceed Rs. 100 crores, 2.25% on the next 300
crores, 2.00% on the next 300 crores and 1.75% over Rs. 700 crores. If the AMC had
absorbed the initial issue expenses, it can charge an additional 1% of net assets as
recurring expenses. In case of closed End Scheme these percentage shall be lesser by at
least 0.25%.
A load fund’s declared NAV does not include the loads. Hence, a new investor must add
any front-end load amount per unit to the NAV per unit to calculate his purchase price.
An outgoing investor needs to deduct the amount of any back-end load per unit from his
sale price per unit to get to know the net sale proceeds he would receive.

As an example, If an open-end fund’s NAV pr unit is Rs. 11, with a front-load of
2%,
The price at which an investor can buy a unit is Rs. 11.22.
Expressed another way, an investment of Rs. 100 would not buy
100/11=9.09 units, but only 100-2=98/11 = 8.9 units.
If the redemption price is Rs. 10.70 with a back-end load of 2%,

The exit load charged by the refund amounts to Re. 0.21
So net sale proceeds will be 10.70-.21 =10.49.
Expressed another way, sale of 50 units would not fetch
50*10.70=Rs. 535, but only 50*10.49=Rs. 524.5
From the investors’ perspective, it is important to note that loads are not charged only by
open-end funds; even a closed-end fund can charge a load to cover the initial issue
expenses. It is also important to note that there are other expenses such as the fund
managers’s fees, which are charges to the investor’s objective is to get the benefit of
compounding his initial investment by reinvesting and holding his investment for a very
long-term, then, a no-front-load fund is preferable. The number of units allotted to an
investor is based on the purchase price offered to him. In a no-front-load fund preferable.
The number of units allotted to an investor is based on the purchase price offered to him.
In a no-front-end load fund, the NAV based purchase price offered to the investor is same
as the Fund NAV per unit, there being no deduction from the amount paid by him Rs. 100
would buy 10 units in a scheme with NAV of Rs. 10. When there is front-end load, the
units allotted to the investor get reduced by the load amount Rs. 100 invested in a scheme
with Rs. 20 NAV and a front-end load of Re. 1 will mean Rs. 99 invested in 9.9 units
instead of 10 units. Hence, the amount invested (number of units allotted) is higher in a
no front-end load fund. When returns are compounded over many years, this higher initial
base makes a significant difference to the returns on investment.
Some funds charge only an entry load, and some only an exit load. Such funds may be
termed as partial load funds. Sometimes, a fund may defer charging the load to a new
scheme over a specified number of future years. Some funds in India do not charge the

schemes with initial issue expenses. These are borne by the Asset Management Company
or the sponsors. Here, the entire amount paid in by the investor get invested without entry
load deduction. At the same time, some of these no-front-load funds may load fund. Note
that a no-load fund only mans a fund that does not charge marketing expenses. All funds
still charge the schemes for management fees and other recurring expenses; it is only that
an investor in a no-load fund enters or exits at the net NAV of the fund, calculated after
accounting for these expenses, but without paying any further marketing expenses from
the NAV.
Tax-exempt Vs. Non-Tax-exempt Funds:
Generally, when a fund invests in tax-exempt securities, it is called a tax-exempt fund. In

the U.S.A., for example, municipal bonds pay interest that is tax-free. After the 1999
Union Government Budget, all of the dividend income received from any of the mutual
funds is tax-free in the hands of the distributing income to investors. In other words,
open-end equity oriented mutual fund schemes are tae-exempt investment avenues, while
other funds are taxable for distributable income.
For the Indian mutual fund investor, both the dividends and long term capital gains from
their fund investments are currently tax-free. However, any short term capital gains
arising out of repurchase of fund units (held for a period of les than 12 months) are
taxable. Further, after the 2005 Union Budget, repurchase transaction under equity
oriented funds/schemes have been subjected to a Securities Transaction Tax (STT). All
these tax considerations are important in the investment decision. Hence, classification of
mutual funds from the taxability perpective has grate significance for investors.
For a more detailed discussion on the taxability of fund income and gains for investors,
see the Chapter Six on Accounting, Valuation and Taxation.
All mutual funds would be either close-end or open-end and either load or no-load. These
classifications are general. For example all open-end funds operate the same way; or in
case of a load fund a deduction is made from investors’ subscription or redemption and
only then net amount used to determine his number of shares purchases or sold.

Once we have reviewed the fund classes, we are ready to discuss more specific fund
types. Funds are generally distinguished from each other by their investment objectives
and types of securities they invest in. We now look at the major types of funds that are
available under the general classifications as discussed above. It may be noted some of
the following fund types are not yet available/popular in India at present.
(a) Broad Fund Types by Nature of Investments:
Mutual funds may invest in equities, bonds or other fixed income securities, or short-term
money marked securities. So we have Equity, Bond and Money Market or Liquid Funds.
All these invest in financial assets. But there are funds that invest in physical assets. For
example, there are Gold or other Precious Metals funds and there are Real Estate Funds.
(b) Broad Fund Types by Investment Objective:

Investors and hence the mutual funds pursue different objectives while investing. Thus,
Growth Funds invest for medium to long term capital appreciation. Income Funds invest
to generate regular income, and less for capital appreciation. Value funds invest in
equities that are considered under-valued today, whose value will be unlocked in the
future.
(c) Broad Fund Types by Risk Profile:

The nature of a fund’s portfolio and its investment objective imply different levels of risk
undertaken. Funds are, therefore, often grouped in order of risk. Thus Equity Funds have
a greater risk of capital loss than a Debt fund that seeks to protect the capital while
looking for income. Liquid funds are exposed to less risk than even the Bond Funds,
since they invest in short-term fixed income securities, as compared to longer-term
portfolios of Bond Funds.
Fund managers often try to alter the risk profile of funds by suitably changing the
investment objective. For example, a fund house may structure an “Equity Income Fund”
investing in shares that do not fluctuate much in value and offer steady dividends –say
Power Sectors companies, or a Real Estate Income Fund that invest only in income-

producing assets. Balanced funds seek to produce a lower risk portfolio by mixing equity
investments. Investors and their advisors need to understand both the investment
objective and the risk level of the different types of funds.
Money Market/Liquid Funds:

Often considered to be the lowest rung in the order of risk level. Liquid funds invest in
debt securities of a short-term nature, which generally means securities of less than one-
year maturity. The typical, short-term interest-bearing instruments these funds invest in
include Treasury Bills issued by governments, Certificates of Deposit issued by banks
and Commercial paper issue by companies.
The major strengths of money market or liquid funds are liquidity and safety of the
principal that the investors can normally expect from short-term investments. Though
interest rate risk is present, the impact is low as the investment instrument’ maturities are
short.
Gilt Funds:
Gilts are government securities with medium to long-term maturities, typically of over
one year (under one-year instruments being money market securities). In India, we have
Government Securities or Gilt Funds that invest in government paper called dated
securities (unlike Treasury Bills that mature in less than one year). Since the issuer is the
Government/s of India/States, these funds have little risk of default and hence offer better
protection of principal. However, Gilt securities, like all debt securities, face interest rate
risk. Debt securities’ prices fall when interest rate levels increase (and vice versa).
Investors have to understand the potential changes in NAVs of gilt funds on account of
changes in interest rates in the economy.
Debt Funds (or Income Funds):

Next in the order of risk level, we have the general category Debt Funds. Debt funds
invest in debt instruments issued not only by governments, but also by private companies,
banks and financial institutions and other entities such as infrastructure
companies/utilities. By investing in debt, these funds target low risk and stable income

for the investor as their key objectives. However, as compared to the money
market/liquid funds, they do have a higher price fluctuation risk, since they invest in
longer-term securities. Similarly, as compared to Gild Funds, general debt funds do have
a higher risk of default by their borrowers.
Debt funds are largely considered as Income funds as they invest primarily in fixed
income generating debt instruments. They do not target capital appreciation but look for
current income, and therefore distribute a substantial part of their surplus to investors.
Income funds that target high returns can fact more risks. Even within the broad category
of debt investment , different investment objectives can be set. Each would result in a
different risk profile. Let us Debt Funds in this light.
Diversified Debt Funds:

A debt fund that invests in all available types of debt available types of debt securities,
issued by entities across all industries and sectors is a properly diversified debt fund.
White debt funds offer high income and les risk than equity funds, investors need to
recognize that debt securities are subject to risk of default by the issuer on payment of
interest or principal. A diversified debt fund has the benefit of risk reduction through
diversification. Hence a diversified debt fund is less risky than a narrow-focus fund that
invests in debt securities of a particular sector or industry. In addition, all debt mutual
funds lead to risk reduction for the individual investor as any losses by a debt issuer are
shared by a large number of investors in the fund.
Focused Debt Funds:

Some debt funds have a narrower focus, with less diversification in its investments.
Examples include sectors, specialized and offshore debt funds. They have a substantial
part of their portfolio invested in debt instruments and are therefore more income oriented
and inheirntly less risky than equity funds. However, the Indian financial markets have
demonstrated that debt funds should both be automatically considered to be less risky that
equity funds, as there have been relatively large defaults by issuers of debt and many
funds have nor-performing assets in their debt portfolios. It should also be recognized that
market values of debt securities will also fluctuate more as Indian debt markets witness

more trading and interest rate volatility in the future. Te central point to note is that all
these narrow-focus funds have greater risk than diversified debt funds.
Other examples of focused funds include those that invest only in Corporate Debentures
and Bonds or only in Tax Free Infrastructure or Municipal Bonds. While these funds
are entirely conceivable now, they may take some time to appear as a real choice for the
Indian investor, one category of specialized funds that invests in the housing sector, but
offers greater security and safety than other debt instruments, is the Mortgage Backed
Bond Funds that invest in special securities created after securitization of (and thus
secured by) loan receivables of housing finance companies. As the Indian financial
markets witness the growth of securitization, such funds may appear on the mutual fund
scene soon.
High Yield Debt Funds:

Usually, Debt Funds control the default risk by investing in securities issued by
borrowers who are rated by credit rating agencies and are considered to be of “investment
grade”. There are, however, High Yield Debt Funds that seek to obtain higher interest
returns by investing in debt instruments that are considered “below investment grade”.
Clearly, these funds are exposed to higher default risk. In the U.S.A. funds that invest in
debt instruments that are not backed by tangible assets and rated below investment grade
that invest in debt instruments that are not backed by tangible assets and rated below
investment grade (popularly known as junk bounds) are called Junk Bond Funds. These
funds tend to be more volatile than other debt funds, although they may earn at times
higher returns as a result of the higher risks taken.
Assured Return Funds – an Indian Variant:

Fundamentally, mutual funds hold assets in trust for investors. All returns and risks are
assumed by the investor. The role of the fund manager is to provide professional
management service and to ensure the most favourable risk-return profile consistent with
the investment objective of the fund. The fund manager, the trustees or the sponsors do
not guarantee minimum return to the investors.

However, in India, historically, UTI and other funds had offered “assured return”
schemes to investors. The most popular variant of such schemes was the Monthly Income
Plans of UTI. Returns were indicated in advance for all of the future years of these
closed-end schemes. In assured return schemes the shortfall, if any, is borne by the
sponsors/AMCs. Assured Return of Guaranteed Monthly Income Plans are essentially
Debt/Income Funds. Assured return debt funds certainly reduce the risk to the investor as
compared to all other debt or equity funds, but only to the extent that the guarantor has
the required financial strength. Hence the market regulator SEBI permits only those funds
whose sponsors have adequate net-worth to offer assurance of returns.
If an assured return scheme is offered, explicit guarantee is required from a guarantor
whose name has be specified in advance in the offer document of the scheme. The risk
that the investor faces was clearly demonstrated when the assured return schemes of UTI
faced large shortfalls in their payment obligations. In case of UTI, the Government bailed
it out and took over the scheme obligations on itself. Assured return schemes are no
longer by AMCs, through possible.
While Assured Return Schemes may certainly be considered to be the lowest risk type
within the debt funds category, they are still not entirely risk-free, as investors have to
normally lock in their funds for the term of the schemes or at least a specified period such
as three years. During this period, changes in the financial markets may result in the
investor losing the opportunity to obtain higher returns later in other debt or equity funds.
Besides, the investor losing the opportunity to obtain higher returns later in other debt or
equity funds. Besides, the investor is faced with the credit risk of the guarantor who must
remain solvent enough to honour his guarantee during the lock-in period.
Fixed Term Plan Series – Another Indian Variant:

A mutual fund scheme would normally be either open-end or closed-end. However, in
India, mutual funds have developed an innovative middle option between the two, in
response to investor needs.
If a scheme is open-end the fund issues new units and redeems them at all times. The
fund does not have a stated maturity or fixed term of investment as such. Fixed Term

Plan Series offer a combination of both these features to investors, as a series of plans are
offered and units are issued at frequent intervals for short plan durations.
Fixed Term Plans are essentially closed-end in nature, in that the mutual fund AMC
issues a fixed number of units for each series only once and closes the issue after an
initial period, like a closed-end scheme offering. However, a closed-end scheme would
normally make a one-time initial offering of units, for a fixed duration generally
exceeding one year. Investors have to hold the units until the end of the stated duration, or
sell them on a stock exchange if listed. Fixed Term Plans are closed-end, but usually for
shorter term-less than a year. Being of short duration they are not listed on a stock
exchange. Of course, like any closed-end fund, each plan series can be would up earlier,
under certain regulatory conditions as we shall see later.
It is also important to bear in mind that the actual structure of the umbrella scheme under
which a Fixed Term Plan Series is offered can be either closed-end or open-end. Some
funds in India use a closed-end structure, while others the open end structure, to offer
Term Plans. In any case, one can think of Fixed Plans also as a series of closed-end plans
within a scheme. Like the closed-ends funds, Fixed Term Plans also make only a one-
time offering of units, but such offering are made in a series is of plans under one offer
document. No separate offer document is issued each time a new series is launched.
The scheme under which such Fixed Term Plan Series are offered is likely to be an
Income scheme, since the objective is clearly for the AMC to attempt to reward investors
with an expected return within a short period. Mutual Fund AMCs in India usually
offering such plans do not guaranteed any returns, but the product has clearly been
designed to attract the short term investor who would otherwise place the money as fixed
term bank deposits or inter-corporate deposits.
Equity Funds:
As investors move from Debt Fund category to Equity Funds, they face increased risk.
However, there is a large variety of Equity Funds each with a slightly different risk
profile. Investors and their advisors need to sort out and select the right equity fund that
suits their risk appetite. In the following section, we have presented the types of Equity
Funds going from the highest risk level to the lowest level within this category.

Before we look at the types of equity fund in terms of their risk, we must understand
where the risks of equity funds come from and how they are different from debt funds.
Equity funds invest a major portion of their corpus in equity shares issued by companies
acquired directly in initial public offerings or through level, at the industry or sector level
and at the company-specific level. Equity funds’ Net Asset values fluctuate with all these
price movements. These price movements are caused by several external factors-political
social as well as economic. Hence, Equity Funds are generally considered at the higher
end of the risk spectrum among all funds available in the market. On the other hand,
unlike debt instruments that offer fixed amounts of repayments, equities can appreciate in
value in line with the issuer’s earnings potential, and so offer the greatest potential for
growth in capital.
Equity funds adopt different investment strategics resulting in different levels of risk.
Hence, they are generally separated into different types in terms of their investment
styles. Below we discuss some of the major types of equity funds, arranged in descending
order of risk.
Aggressive Growth Funds:

There are many types of stocks/shares available in the market; Blue Chips that are
recognized market leaders, less researched stocks that are considered to have future
growth potential and even some speculative stocks of somewhat unknown or unproven
issuers. Fund managers seek out and invest in different types of stocks in line with their
own perception of potential returns and appetite for risk.
As the name suggest, aggressive growth funds target maximum capital appreciation,
invest in less researched or speculative shares and may adopt speculative investment
strategies to attain their objective of high returns for the investor. Consequently, they tend
to be more volatile and riskier than other funds.
Growth Funds:

Growth funds invest in companies whose earnings are expected to rise at rise at an above
average rate. There companies may be operating in sectors like technology considered
having a growth potential, but not entirely unproven and speculative. The primary
objective of Growth Funds is capital appreciation over a three to five year span. Growth
funds are therefore less volatile than funds that target aggressive growth.
Specialty Funds:
These funds have a narrow portfolio orientation and invest in only companies that need
pre-defined criteria. For example, at the height of the South African apartheid regime,
many funds in the U.S. offered plans that promised not to invest in South African
companies. Some funds may build the Middle East or the ASEAN countries are also an
example of specialty funds. Within the Specialty Funds category, some funds may be
broad-based in terms of the types of investments in the portfolio. However, most
specialty funds tend to be concentrated funds, since diversification is limited to one type
of investment. Clearly concentrated specialty funds tend to be more volatile than
diversified funds.
Sector Funds:
Sector funds’ portfolios consist of investments in only one industry or sector of the
market such as Information Technology, Pharmaceuticals or Fast Moving Consumer
Goods. Since sector and company specific risk than diversified equity funds.
Foreign Securities Funds:

These funds invest in equities in one or more foreign countries thereby achieving
diversification across the country’ borders. However, they also have additional risks-such
as the foreign exchange rate risk – and their performance depends on the economic
conditions of the countries they invest in. Foreign Securities Equity funds may invest in a
single country (hence riskier) or many countries (hence more diversified).

Mid-Cap or Small-Cap Equity Funds:
These funds invest in shares f companies with relatively lower market capitalization that
that of big, blue chip companies. They may thus be more volatile than other funds, as
mid-size or smaller companies’ shares are not very liquid in the markets. We can think of
these funds as a segment of specialty funds. In terms of risk characteristics, small
company funds may be aggressive-growth or just growth type. In terms of investment
style some of these funds may also be “vale investors”.
Option Income Funds:

These funds do not yet exist in India, but Option Income Funds write options on a
significant part of their portfolio. While options are viewed as risky instruments, they
may actually help to control volatility, in properly used. Conservative option funds invest
in large, dividing paying companiene, and them sell options against their stocks positions.
This ensures a stable income stream in the form of premium income through selling
options and dividends. Now that options on individual shares have become available in
India such funds may be introduced.
Diversified Equity Funds:

A fund that seeks to invest only in equities, except for a very small portion in liquid
money market securities, but is not focused on anyone or few sectors or shares, may be
termed a diversified equity fund. While exposed to all equity price risks, diversified
equity funds seek to reduce the sector or stock specific risks through diversification. They
have exposure to the equity market risk. Such general purpose diversified funds are
clearly at a lower risk level than growth funds.
Equity Linked Savings Schemes : an Indian variant:

In India, investors have been give tax concessions to encourage them to invest in equity
markets through these special schemes. Investment in these schemes entitles the investor
to claim an income tax rebate, but usually has a lock-in period. As the name suggests.
Invest and accordingly judge the level of risk involved. Generally, such funds would be in
the Diversified Equity Fund category.

Equity Index Funds:
An index fund tracks the performance of a specific stock market index. The objective is
to match the performance of the stock market by tracking an index that represents the
overall market. The fund invests in shares that constitute the index and in the same
proportionas the index. These diversification however, there are index funds that track a
narrow sectoral index, such as Pharma Index or Bank Index. These will be diviersified
and more risky, although they will still be less risky compared to individual stocks in that
industry/sector.
Value Funds:
The Growth Funds we reviewed above hold shares of companies with good or improving
profit prospects, and aim primarily at capital appreciation. They concentrate on future
growth prospects, may be willing to pay high price/earnings multiples for companies
considerd to have high growth potential. In contrast to the growth investing, some funds
follow Value Investing approach. Value Funds will add only those shares to their
portfolios that are selling at low price-earnings ratios, low market to book value ratios
and are believed to be undervalued compared to their true potential.
Value Funds take equity market risks, but stand often at a lower end of the risk spectrum
in comparison with the Growth funds. Value stocks may be form large number of sectors
and their for diversified. However, value stocks often come form cyclical industries. The
one example of a value fund in India Templeton Fund which has in its portfolio shares of
Cement/Aluminum and othe cyclical industries. Prices of such shares may fluctuate more
than the overall market in both bull and bear markets such value funds more risky than
diversified funds in the short-term.
Equity Income or Divident Yield Funds:

Usually income funds are in the Debt Funds category, as they target fixed income
investments. However, there are equity funds that can be designed to give the investor a
high level of current income along with some steady capital appreciation, investing
mainly in shres of companies with high dividend yields. As an example, an Equity

Income fund would invest largly in Power/Utility companies’ shares of established
companies that pay higher dividends and whose prices do not fluctuate as much as to the
shares. These equity funds should therefore be less volatile and less risky than nearly all
other funds. Recently many fund house have launched such schemes.
Hybrid Funds – Quasi Equity/Quasi Debt:

We have seen that interms of the nature of financial securities held, there are three major
mutual fund types: money market, debt and equity. Many mutual funds mix these
different types of securities in their portfolios. Thus, most funds equity or debt always
have some money market securities in their portfolios as these securities offer the much-
needed liquidity. However, money market holdings will constitute a lower proportion in
the overall portfolios of debt of equity funds. Such funds are termed “hybrid funds” as
they have a dual equity-bond focus. Some of the funds in this category are described
below.
Balanced Funds:
A balanced fund is one that has a portfolio comprising debt instruments, convertible
securities, and preference and equity shares. Their assets are generally held in more or
less equal proportions between debt/money market securities and equities. By investing in
a mix of this nature, balanced funds seek to attain the objectives of income moderate
capital appreciation and preservation of capital, and are ideal for investors with a
conservative and long-term orientation.
Growth-and-Income funds:
Unlike income-focused or growth-focused funds, these funds seek to strike a balance
between capital appreciator and income for the investor. Their portfolios are a mix
between companies with good dividend paying records and those with potential for
capital appreciation. There funds would be less risky than pure growth funds, though
more risky than income funds.

Asset Allocation Funds:
Normally, an Equity fund would have its primary portfolio in equities most of the time.
That is the assets are primarily equity holdings. Similarly, a Debt Fund would have
allocated much of its money to debt instruments. The proportion of money to be invested
in a particular calss of asset is predefined. In other words, their “asset allocation” is
predetermined to a large extent. However, there do exist funds that follow variable asset
allocation policies and more in and our of an asset class. The fund manager is given the
flexibility to shift towards equity when equity market is expected to do well and to shift
towards debt when the debt market is expected to do well. The success of such strategy
would depend on the skill of the fund manager in anticipating market trends. For that
reason, Asset Allocation funds could be riskier.
Commodity Funds:
While all of the debt/equity/liquid funds invest in financial assets, the mutual fund vehicle
is suited for investment in any other –for example-physical assets. Commodity funds
specialize in investing in different commodities directly or through shares of commodity
companies or through commodity futures group such as edible oils or grains while
diversified commodity funds will spread their assets over many commodities.
A most common example of commodity funds is the so-called Precious Metals funds.
Gold Funds invest in gold, gold futures or shares of gold mines. Other precious metals
funds such as Platinum or silver are also available in other countries. In India, the Union
Finance Minister recently announced a gold linked unit scheme like a gold fund. These
schemes hold a good potential, given the large public holding and interest in gold.
Similarly, a large number of commodity futures contracts are now available for trading on
commodity exchanges, making it possible to launch commodity funds.
Real Estate Funds:

Specialized Real Estate funds would invest in real estate directly, or may fund real estate
developers, or lend to them, or buy shares or housing finance companies or may even but
their securitized assets. The funds may have a growth orientation or seek to give investors
regular income.

Exchange Traded Funds:
An Exchange Traded fund (ETF) is a mutual fund scheme, which combines the best
features of open end and closed end structures. It tracks a market index and trades like a
single stock on the Stock Exchange. Its pricing is linked to the index an units can be
bought/sold on the Stock Exchange. ETF offers investor the benefits of flexibility of
holding a single share as well as the diversification and cost efficiency of an index. These
funds are popular abroad and have recently been introduced in India.
Although based on an index. ETFs should not be confused with index funds. Investors
can buy index funds units directly from the asset management company at a unique Net
Asset Value that will be applicable generally market-makers-buying and selling the units
with two-way price quotes. These market makers allow investors to exchange ETF units
for underlying shares. This is not possible in the case of index mutual funds.
Fund distributions should not that ETF usually do not pay any commissions to
intermediaries, nor recover any loads from investors. Market makers keep their margin in
the form of difference in bid and ask prices. For the investor therefore, ETFs are less
costly and more efficient in terms of tracking the index performance. They can even ask
for delivery of underlying shares.
Fund of Funds:
A Fund of Funds invests in other mutual funds. Just as a normal mutual fund invest in a
portfolio of securities suchas debt or equity, a fund of funds invests in a portfolio of the
units of t\other mutual fund schemes. Availability of a fund of funds to an investor helps
him select the right funds from a wide variety of schemes, offered by different asset
management companies. It also helps the investor diversify his risk not only in terms of
the types of securities held in the portfolio but also intemrs of schemes of different fund
managers and investment styles. For example, a fund of funds can invest in top
performing equity funds of different AMCs and offer the most widely diversified
portfolio to the investor. It can also invest in equity and income schemes of other AMCs
simultaneously offering the investor balanced or diversified portifolios across asset
classes.

3.5Distribution channels in mutual funds industry
In India, AMCs work with five distinct distribution channels those are direct, banking,
retail, corporate and individual financial adviser.
• The Direct Channels:

In the direct channel, customers invest in the schemes directly through Asset
Management Companies. In most cases, the company does not provide any
investment advice, so these investors have to carry out their own research and
select schemes themselves in which they want to invest. The fund companies
provide several tools to investors who invest through this direct channel. This
includes monthly a/c statement, processing of transaction, and maintenance of
records. In this channel most investors can invest through websites, or receive
information through telephonic services provided by the company. About 10-20%
of the total sales of an AMC come through this direct channel.
• The banking channel:

The large customer base of banks, in devolped countries, has played an important
role in the selling MFs. In the recent years, this channel has also opened up in the
India. Banks operating in India, including public sector, private and foreign banks
have established tie-up with various fund companies for providing distribution
and servicing. The banking channel is likely to develop as the most vital
distribution channel for fund companies there are several reasons for the same.
Customers remain invested in banks for long periods of time and therefore banks
maintain a relationship of trust with their customers. Customers are relying on
advice provided to them by bankers as they are always on the lookout for better
investment avenues. Managers are guiding to customers about various funds.

An additional advantage that banks provide is that the concerned customer becomes a
permanent contact of the banks and therefore can be reached during launch of (new
fund offer) NFO or new schemes any time in the future.
• The retail channel:

A customer can deal directly with a sub broker belonging to a distribution company,
instead of taking trouble of dealing with several agents. Distribution companies sell
the schemes of several fund houses simultaneously and brokerage is paid by the AMC
whose funds they sell. The retail channel offers the benefits of specialist knowledge
and established client contact and, therefore private fund houses are generally prefer
this channel. Some of the major players in India in this in this channel are national
players' like Karvey, Birla sun life IL&FS and cholamandalam. The key factor for this
channel to sell a company's fund used to be the brokerage paid. The banking and retail
channel generally contribute to about 50-70% of the total Asset under Management
(AUM).
• The corporate channel:

The corporate channel includes a variety of institutions that invest in shares on the
company's name. These are the businesses, trust, and even state and local
governments. For institutional investors, fund managers prefer to create special funds
and share classes. Corporate can either invest directly in themutual funds, or through
an intermediary such as a distribution house or a bank.
Corporate exhibit varying degrees 'of awareness of mutual fund products. Most of the
established corporate, such as the TVS industries in Hyderabad, are well-versed with
the performance and composition of various funds. The smaller companies and startup
firms, however, need to be educating on several aspects of mutual funds. In order to
provide information to such clients, fund companies usually organize presentation for
these companies or set-up meetings with the finance managers.

• Individual Financial Advisors(IFA) or Agents:
i. The IFA channel is the oldest channel for distribution of mutual funds and was
widely employed.
ii. An agent who basically acts as an interface between the customer and the fund
house there is a unique systems in place in India , wherein several sub-brokers are
working under one main broker. The huge network of sub-brokers, thus ensure
larger market penetration and geographic coverage. As per AMFI, over one lakh
agents are registered to sell mutual funds and other financial products such as
insurance across the country.
3.6 Important Definitions:
(NAV)
The Term Net Asset Value (NAV) is used by investment companies to measure net
assets. It is calculated by subtracting liabilities from the value of a fund's securities and
other items of value and dividing this by the number of outstanding shares. Net asset
value is popularly used in newspaper mutual fund tables to designate the price per share
for the fund.
The value of a collective investment fund based on the market price of securities held in
its portfolio. Units in open ended funds are valued using this measure. Closed ended
investment trusts have a net asset value but have a separate market value. NAV per share
is calculated by dividing this figure by the number of ordinary shares. Investments trusts
can trade at net asset value or their price can be at a premium or discount to NAV.
Value or purchase price of a share of stock in a mutual fund. NAV is calculated each day
by taking the closing market value of all securities owned plus all other assets such as
cash, subtracting all liabilities, then dividing the result (total net assets) by the total
number of shares outstanding.

Calculating NAVs - Calculating mutual fund net asset values is easy. Simply take the
current market value of the fund's net assets (securities held by the fund minus any
liabilities) and divide by the number of shares outstanding. So if a fund had net assets of
Rs.50 lakh and there are one lakh shares of the fund, then the price per share (or NAV) is
Rs.50.00.
Sale Price
is the price you pay when you invest in a scheme, also called Offer Price. It may include a
sales load.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a
backend load. This is also called Bid Price.
Redemption Price
is the price at which open-ended schemes repurchase their units and close-ended schemes
redeem their units on maturity. Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called, 'Front-end' load.
Schemes that do not charge a load are called 'No Load' schemes.
Repurchase or 'Back-end' Load
is a charge collected by a scheme when it buys back the units from the unit holders.
• Cost involved in Mutual Funds
An investor must know that there are certain costs involved while investing in
mutual funds.

• Operating expenses:
These refer to cost incurred to operate a mutual fund. Advisory fee is paid to investment
managers, audit fees to charted accountant, custodial fees, register and transfer agent fees,
trustee fees, agent commission. Operating expenses also known as expenses ratio which
is annual expenses expressed as a percentage of these expenses is required to be reported
in the schemes offer document or prospectus.
Operating expenses
Expenses ratio=
Average net assets
For instant, if funds Rs. 100 crores and expenses Rs. 20 lakhs. Then expenses ratio is 2%
expenses ratio is available in the offer document and fro historical per unit statistics
included in the financial results of the fund which are published by annually, un audited
for the half year ending September 30th and audited for the physically year end March 30th
.
Depending upon scheme and net asset, operating expenses are determined by limits
mandated by SEBI mutual funds regulation act. Any excess over specified limits as to
born by Management Company, the trustees or sponsors.
• Sales Charges:
These are known commonly sale loads, these are charged directly to investor. Sales loads
are used by mutual fund for the payment of agent's commission, distribution and
marketing expenses. These charges have no effect on the performance of the scheme.
Sales loads are usually expression percentage and or of two types front-end and back-end.

• Front-end load:
It is a onetime fixed fee paid by an investor when buying a Mutual funds scheme. It
determines public offer price which intern decides how much of your initial investment
actually get invested the standard practice of arriving a public offer price is as follows.
Net asset value

Public offer price=
(1-front end load)
Let us assume, an investor invests Rs. 10,000 in a scheme that charges it 2% front end
load at a NAV per unit Rs. 10 using the formula public offer price = 10/(1-0.02) is Rs.
10.20. So only 980 units are allowed to the investor.
Amount invested
Number of units allotted=
Public offer price

10,000/10.20= 980 units at a NAV of Rs. 10.
This means units worth 9800 are allotted to him an initial investment Rs.10, 000 front end
loads tend to decrease as initial investment amount increase.
• Back end load:
May be fixed fee redemption or a contingent differed sales charged a redemption so load
continues so long as the redeeming or selling of the units of a fund does not take place in
the event of a back end load is applied. The redemption price is arrive or using following
formula.

Net asset value
Redemption price
(1+back end load)
Let us assume an investor redeems units valued at Rs. 10,000 in a scheme that charges a
2% back, end load at a NAV per units of Rs. 10 using the formula Redemption price 10/
(1+0.02)= Rs. 9.8 s, what the investor gets in hand is 9800(9.8*1000).
• Contingent Deferred Sales Charges(CDSC):
Contingent differed sales charges of a structured back end load. It is paid when the units
are reading during the initial years of ownership. It is for a predetermined period only and
reduced over the time you invested for a fund. The longer remains in a fund the lower the
CDSC.
The SEBI stipulate the a CDSC may be charge only for first four years after purchase of
units and also stipulate the maximum CDSC that can we charge every year. This is the
SEBI mutual funds regulations 1996 do not allow either the front end load or back end
load to any combination is higher than 7%.
• Transaction cost:
Some funds may also impose a switch over fee which is charge on transfer of investment
from one scheme to another within a same mutual funds family and also to switch from
one plan to another within same scheme. The real estate mutual funds sector is now being
considered as the engine of economic growth
3.7 Importance or benefits of mutual fund:
Investing in mutual has various benefits which makes it an ideal investment avenue.
Following are some of the primary benefits.

• Professional investment management
One of the primary benefits of mutual funds is that an investor has access to professional
management. A good investment manager is certainly worth the fees you will pay. Good
mutual fund managers with an excellent research team can do a better job of monitoring
the companies they have chosen to invest in than you can, unless you have time to spend
on researching the companies you select for your portfolio. That is because Mutual funds
hire full-time, high-level investment professionals. Funds can afford to do so as they
manage large pools of money. The managers have real-time access to crucial market
information and are able to execute trades on the largest and most cost-effective scale.
When you buy a mutual fund, the primary asset you are buying is the manager, who will
be controlling which assets are chosen to meet the funds' stated investment objectives.
• Diversification
A crucial element in investing is asset allocation. It plays a very big part in the success of
any portfolio. However, small investors do not have enough money to properly allocate
their assets. By pooling your funds with others, you can quickly benefit from greater
diversification. Mutual funds invest in a broad range of securities. This limits investment
risk by reducing the effect of a possible decline in the value of any one security. Mutual
fund unit-holders can benefit from diversification techniques usually available only to
investors wealthy enough to buy significant positions in a wide variety of securities.
• Low Cost
A mutual fund let's one participate in a diversified portfolio for as little as Rs.5,000, and
sometimes less. And with a no-load fund, one pay little or no sales charges to own them.
• Convenience and Flexibility
Investing in mutual funds has it's own convenience. While one own just one security
rather than many and still enjoy the benefits of a diversified portfolio and a wide range of
services. Fund managers decide what securities to trade, collect the interest payments and
see that your dividends on portfolio securities are received and your rights exercised. It

also uses the services of a high quality custodian and registrar. Another big advantage is
that investor can move his/her fund easily from one fund to another within a mutual fund
family. This allows to easily rebalancing the portfolio to respond to significant fund
management or economic changes.
• Liquidity
In open-ended schemes, you can get your money back promptly at net asset value related
prices from the mutual fund itself.
• Transparency
Regulations for mutual funds have made the industry very transparent. You can track the
investments that have been made on you behalf and the specific investments made by the
mutual fund scheme to see where your money is going. In addition to this, you get regular
information on the value of your investment.
• Variety
There is no shortage of variety when investing in mutual funds. You can find a mutual
fund that matches just about any investing strategy you select. There are funds that focus
on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds. The greatest
challenge can be sorting through the variety and picking the best for you.
3.8 Drawbacks of Mutual Funds:
Mutual funds have their drawbacks and may not be for everyone:
• No Guarantees: No investment is risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no matter how
balanced the portfolio. Investors encounter fewer risks when they invest in mutual
funds than when they buy and sell stocks on their own. However, anyone who
invests through a mutual fund runs the risk of losing money.
• Fees and commissions: All funds charge administrative fees to cover their day-
today expenses. Some funds also charge sales commissions or "loads" to

compensate brokers, financial consultants, or financial planners. Even if you don't
use a broker or other financial adviser, you will pay a sales commission if you buy
shares in a Load Fund.
• Taxes: During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund makes a
profit on its sales, you will pay taxes on the income you receive, even if you
reinvest the money you made.
• Management risk: When you invest in a mutual fund, you depend on the fund's
manager to make the right decisions regarding the fund's portfolio. If the manager
does not perform as well as you had hoped, you might not make as much money
on your investment as you expected. Of course, if you invest in Index Funds, you
forego management risk, because these funds do not employ managers.
3.9 Risks Associated with Mutual Funds:

Investing in mutual funds, as with any security, does not come without risk. One of the
most basic economic principles is that risk and reward are directly correlated. In other
words, the greater the potential risk, the greater the potential return.
• Market Risk
Market risk relates to the market value of a security in the future. Market prices fluctuated
and are susceptible to economic and financial trends, supply and demand, and many other
factors that cannot be precisely predicted or controlled. Because of the types of securities
commonly found in mutual funds; common stock, preferred stock, corporate bonds,
government bonds, and so on; are subject to market risk.
• Political Risk
The political landscape has a tendency to change frequently, affecting the value and/or
performance of investments. There is no greatest single factor related to political risk.
Manipulation of minimum wage levels, government regulation, changes in the tax code,
and philosophical differences regarding foreign trade are all just a few of the many

factors that combine to create political risk. Collectively, as citizens, we have indirect
control through the power of our vote. Individually, investors have virtually no control.
• Inflation Risk
Inflation, or purchasing power risk, relates to the uncertainty of the future purchasing
power of invested dollars. The risk is the increase in the cost of goods and services, as
measured by the Consumer Price Index that will erode the purchasing power of fixed
investments
• Interest Rate Risk
Interest rate risk relates to future changes in interest rates. If an investor purchases shares
in a long-term bond fund and interest rates increase, the value of the bonds in the bond
portfolio will decline. This is because the long-term bond fund could not sell lower
yielding bonds for their face value in a market filled with newer, higher yielding bonds.
The bonds would have to be discounted for sale.
• Business Risk
Also known as financial risk, business risk is the uncertainty concerning the future
existence, stability, and profitability of the issuer of the security. Business risk is inherent
in all business ventures. The future financial stability of a company cannot be predicted
or guaranteed, nor can the price of its securities. For example, when a corporation goes
bankrupt and must be liquidated, any taxes due are paid first. Then the claims of the
secured creditors, followed by amounts owed to the secured bondholders, then the
unsecured creditors. Owners of a corporation's stock are the last to be paid. And any stock
of a bankrupt company held by your mutual fund would be adversely affected.
• Economic Risk
Economic risk involves uncertainty in the economy and the various forces acting upon it.
For example, a significant economic downturn can have dire effects on mutual funds and
their underlying securities. The Federal Reserve Board endeavors through various
methods to minimize some of these economic factors and smooth out periodic changes in
the economy. The Federal Reserve Board also manipulates the prime rate and discount
rate, the rate at which member banks borrow funds from the Federal Reserve. All of these

practices are designed to control the nation's money supply in an effort to influence
consumer and commercial spending. This effect on spending could then help accelerate a
stagnant economy, or decelerate an economy that is growing at what the Federal Reserve
Board considers to be an unsustainable rate. In cases where the Federal Reserve Board
has raised interest rates, the resulting higher cost of borrowing would generally slow
corporate growth, reduce corporate earnings which would tend to lower equity prices.
• Credit Risk
The risk that a bond issuer will not be able to repay is debt at maturity. Bond ratings by
agencies like Moody's and Standard & Poor's identify the quality and risk level of bonds.
Highly-rated bonds tend to carry the lowest risk, while bonds with low ratings, like high-
yielding junk bonds, are typically the riskiest.
• Currency Risk
The risk is that fluctuations in the exchange rate between the U.S. dollars and a foreign
currency may decrease the value of a security, that is either invested or whose value is
derived upon that currency. Global and international investments are most subject to this
type of risk.
• Liquidity Risk
The risk that a mutual fund's underlying securities cannot be sold at a fair price within a
reasonable period of time. Shares in large blue-chip stocks are considered liquid because
there are a large number of outstanding shares that are actively traded. As a result, their
stock prices are not dramatically affected by day-to-day buying and selling. Conversely,
small-company stocks with less outstanding shares are generally not considered liquid.

CHAPTER-4
Company Profile
NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial
products and services in India. Established in year 1994, NJ has over a decade of rich
exposure in financial investments space and portfolio advisory services. From a humble
beginning, NJ over the years has evolved out to be a professionally managed, quality
conscious and customer focussed financial / investment advisory & distribution firm.
NJ prides in being a professionally managed, quality focused and customer centric

organisation. The strength of NJ lies in the strong domain knowledge in investment
consultancy and the delivery of sustainable value to clients with support from cutting-
edge technology platform, developed in-house by NJ.
NJ Fundz Network was established in year 2003 as a dedicated platform offering

comprehensive services and support to the independent financial advisors. The services
offered by NJ Fundz Network are increasingly recognized as the best and most
comprehensive in nature. The scope, depth, and quality of the services and support is
unmatched in the industry. NJ Fundz Network is proud to be the pioneers in India in
providing the 360° Advisory platform to independent advisors. With this NJ has managed
to successfully transform the business of many independent financial advisors, bringing
them on equal footing or even better than the strongest competitors in the industry.
NJ has over 13500* NJ Fundz Network Partners and over 4,500* normal advisors
associated with us. NJ presently has over Rs. 5,050* Crores of assets under advice. NJ
has over 130* PSCs (Partner Service Centers) in 22* states spread across India. The
numbers are reflections of the trust, commitment and value that NJ shares with its clients.

N J Vision
• To be the leader in our field of business through,

• Total Customer Satisfaction
• Commitment to Excellence
• Determination to Succeed with strict adherence to compliance
• Successful Wealth Creation of our Customers
N J Mission :
Ensure creation of the desired value for our customers, employees and associates, through
constant improvement, innovation and commitment to service & quality. To provide
solutions which meet expectations and maintain high professional & ethical standards
along with the adherence to the service commitments.
Philosophy:
At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs,
attitudes, actions and decisions of our employees. If NJ is a body, our philosophy is our
spirit which drives our body
Product Profile:-
1.AMFI Certified Mutual Fund (Advisor):-
Company is offering a product called VALUE PACK which includes :-
(a)AMFI exam

(b)AMFI book
(c)AMFI training –Two days training before the AMFI exam and after the exam is
cleared Two days training is given on how to sell Mutual Funds.
(d)SERVICES i.e. 360 degree support.
With this philosophy, N.J. try to offer all possible products, services and support which
an Advisor would need in his business.
The support functions are generally in the following areas …

• Business Planning and Strategy
• Training and Development – Self and of employees
• Products and Service Offerings
• Business Branding
• Marketing
• Sales and Development
• Technology
• Advisors Resources - Tools, Calculators, etc..
• Research
• Communications
2. Mutual funds – covering all AMCs & schemes,

3. Life Insurance (Prudential ICICI)
4. Fixed deposits of companies,
5. Government/RBI bonds,
6. Infrastructure Bonds,
7. Approved securities for charitable trusts, etc

Trainees profile-Trainees are given the task of recruiting the advisors for mutual
fund advisory business.So,we have to go to insurance offices to get leads of insurance
agents whom we invite for BOP(Business Oppurtunity Presentation)and we also have
to do one to one meeting with the candidates to give them full knowledge about
mutual fund advisory business and their benefits.
Past Recognitions
Some of the awards & recognitions that we have received in the past …
Year 2000:
For Outstanding Performance presented by Chairman, Prudential Plc. at London
Year 2002:
For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at
London
Year 2003:
For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at
London
Year 2004:
Among Most Valued Business Associates presented by HDFC Standard Life at
Edinburgh, Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential Singapore at Malaysia
Year 2006:
Award for mobilising the Highest Number of SIPs at National Level by Fidelity Mutual
Fund Plc at Mumbai
Year 2006:
Award – Vietnam

CHAPTER-5
Performance of Mutual Funds in India
In the Research to analyze the performance of Mutual funds in India, Equity Mutual
Funds are being taken.As Equity Mutual funds returns are dependent on the share market.
So,first of all the returns given by BSE 30 (Sensex) are seen from its inception.After that
5 Asset Management Companies are taken and their top 3 Equity Diversified schemes are
taken and to know their performance their annualized returns (CAGR) for
1year,2years,3years and 5 years are taken and the average of the returns given by top 3
Equity Diversified schemes asset management company is taken to know how much
returns they are given and their returns are also being compared with the average
annualized returns of BSE 30(Sensex) for last 1year,2years,3years and 5 years as on 19
June 2009.And finally performance of HDFC Mutual fund is analyzed in case of falling
share market,which is also compared with the BSE 30 (Sensex)
First Step
Years Year SENSEX 1 3 5 7 10 12 15 20

LEVEL
end
0 31 100
march
79
1 31 128.57 28.57
march
80
2 31 173.44 34.90
march
81
3 31 217.71 25.52 29.61
march
82

4 31 211.51 -2.85 18.05
march
83
5 31 245.33 15.99 12.25 19.66
march
84
6 31 353.86 44.24 17.58 22.44
march
85
7 31 574.11 62.24 39.49 27.05 28.36
march
86
8 31 510.36 -11.10 27.66 18.58 21.77
march
87
9 31 -21.94 4.03 13.50 12.61
march
88 398.37
10 31 713.60 79.13 7.52 23.81 18.48 21.72
march
89
11 31 781.05 9.45 15.24 17.16 20.52 19.77
march
90
12 31 1167.97 49.54 43.12 15.26 24.97 21.01 22.73
march
91
13 31 4285.00 266.88 81.76 53.04 42.80 34.71 33.94
march
92
14 31 2280.52 -46.78 42.93 41.76 21.78 26.84 23.95
march
93
15 31 3778.99 65.71 47.90 39.57 33.11 31.45 26.85 27.40
march
94
16 31 3260.96 -13.71 -8.70 33.09 35.03 24.87 25.60 24.05
march
95
17 31 3366.61 3.24 13.86 23.58 24.81 19.35 24.39 21.86
march
96
18 31 3360.89 -0.17 -3.83 -4.74 23.18 20.74 20.63 20.02
march
97
19 31 3892.75 15.82 6.08 11.29 18.77 25.60 17.29 21.43

march
98
20 31 3739.96 -3.92 3.57 -0.21 -1.92 18.02 18.05 19.92 19.85
march
99
21 31 5001.28 33.73 14.17 8.93 11.87 20.40 23.47 19.31 20.09
march
00
22 31 3604.38 -27.93 -2.53 1.37 -0.67 11.93 14.45 13.03 16.38
march
01
23 31 3469.35 -3.75 -2.47 0.64 0.89 -2.09 13.23 13.63 14.85
march
02
24 31 3048.72 -12.12 -15.21 -4.77 -1.41 2.95 8.32 14.53 14.27
march
03
25 31 5590.60 83.38 15.76 8.37 7.54 3.99 2.24 14.71 16.92
march
04
26 31 6492.82 16.14 23.23 5.36 7.58 7.13 9.11 15.16 15.66
march
05
27 31 11279.96 73.73 54.67 25.63 17.08 12.85 9.54 16.32 16.06
march
06
28 31 13072.10 15.89 32.7 30.38 14.71 14.55 12.27 7.72 17.60
march 3
07
29 31 15644.44 19.68 34.0 38.69 23.33 14.92 13.66 13.70 20.14
march 6
08
Probability of Loss 10/29 5/27 3/25 3/23 1/20 0/18 0/15 0/10
Probability of Loss(%) 34.48 18.5 12 13.04 5.00 0.00 0.00 0.00
2
From the above table it is clear that Equities are not risky in the Long Term,as in the
above table it can be seen that as the time of investment increases the chances of loss is
decreasing.
SECOND STEP

Below is given the definition of annualized returns on the basis of which the performance
of mutual fund is being evaluated
ANNUALIZED RETURNS- CAGR is the compound annual growth rate of an

investment (or anything measurable) over a particular period of time. The calculation
represents a steady level of growth from a beginning value to an ending value and is used
to smooth out uneven investment returns. This enables investors to effectively evaluate
performance by calculating the return or loss for each of positionIf you bought a MF unit
for Rs. 10 on 1-Jan-2006 and the NAV of that MF Unit is Rs. 18 on 1-Jan-2008 (that is,
after 2 years) then: . Annualized return is 34%. This is a more involved calculation. This
is also called CAGR (Compounded Annual Growth Rate). What this means is that if your
investment of Rs. 10 had grown at 34% every year it would have been worth Rs. 18 after
2 years.
NOTE-ALL THE VALUES ARE CALCULATED ON 19TH JUNE 2009
1.BIRLA FUND HOUSE
ANNUALIZED RETURNS(CAGR)

In the above table ANNUALIZED RETURNS(CAGR)(IN %) of 3 equity diversified
schemes of Birla Fund House is given for 1year,2 years ,3 years and 5 years respectively.
Then after that average CAGR of these 3 schemes are given and below that BSE 30
average annualized returns are given .
SCHEME NAME 1 YEAR 2 YEARS 3 YEARS 5 YEARS

Birla Sun Life Equity Fund (GR) -4.72 -2.09 16.09 30.11
Birla Sun Life Frontline Equity 5.75 5.90 20.87 29.25
Fund(GR)
Birla Sun Life Mid Cap Fund (GR) -6.45 -1.24 15.48 28.04
Average CAGR -1.81 0.57 17.48 29.13
BSE 30 -3.75 0.38 13.92 24.91
The above table shows that 1 year average return of Birla mutual fund and BSE 30 is
negative but Birla mutual fund is less negative ,2 years average return of Birla is more
than BSE 30 average returns,3 years average return of Birla is more than BSE 30 average
returns,5 years average return of Birla is more than BSE 30 average returns
2. HDFC FUND HOUSE
ANNUALIZED RETURNS(CAGR)

SCHEME NAME 1YEAR 2 YEARS 3 YEARS 5 YEARS
HDFC Equity Fund (GR) 4.51 1.66 16.12 30.15
HDFC Top 200 (GR) 9.36 8.92 20.55 31.81
HDFC Growth Fund (GR) -5.2 3.01 18.45 28.82
Average CAGR 2.89 4.53 18.37 30.26
BSE 30 -3.75 0.38 13.92 24.91

schemes of HDFC Fund House is given for 1year,2 years ,3 years and 5 years
respectively.
The above table shows that 1 year average return of HDFC mutual fund is positive but
BSE 30 is negative ,2 years average return of HDFC is more than BSE 30 average
returns,3 years average return of HDFC is more than BSE 30 average returns,5 years
average return of HDFC is more than BSE 30 average returns.
3. ICCI FUND HOUSE
ANNUALIZED RETURNS (CAGR)

ICICI Pru Infrastructure Fund (G) -4.10 7.85 25.05 N.A.
ICICI Pru Dyanamic Plan -3.65 -0.78 15.96 32.82
ICICI Pru Power (G) -4.42 -5.71 10.29 26.05
Average CAGR -4.06 0.45 17.1 29.43
BSE 30 -3.75 0.38 13.92 24.91

schemes of ICICI Fund House is given for 1year,2 years ,3 years and 5 years respectively.
(except of ICICI Pru Infrastructure Fund (G) for 5 years because the scheme was launced
on Aug 16 2005)
The above table shows that 1 year average return of ICICI mutual fund and BSE 30 is
negative but ICICI has more negative returns,2 years average return of ICICI is more
than BSE 30 average returns,3 years average return of ICICI is more than BSE 30
average returns,5 years average return of ICICI is more than BSE 30 average returns.
4. RELIANCE FUND HOUSE
ANNUALIZED RETURNS(CAGR)(IN %)

Reliance Growth Fund RP(G) -4.41 3.24 19 36.32
Reliance Vision Fund RP (G) -0.43 -1.75 14.53 29.19
Reliance Equity Fund RP (G) -4.81 -6.82 9.09 N.A.
Average CAGR -3.22 -1.78 14.21 32.75
BSE 30 -3.75 0.38 13.92 24.91

schemes of Reliance Fund House is given for 1year,2 years ,3 years and 5 years
respectively.(except of Reliance Equity Fund RP (G)for 5 years because the scheme was
launced on March 7 2006)
The above table shows that 1 year average return of Reliance mutual fund and BSE 30 is
negative but Reliance has less negative returns,2 years average return of Reliance is
negative but BSE 30 average returns are positive,3 years average return of Reliance is
more than BSE 30 average returns,5 years average return of Reliance is more than BSE
30 average returns.
5. SBI FUND HOUSE

ANNUALIZED RETURNS (CAGR)(IN %)

SBI Magnum Contra Fund(G) 1.09 3.97 16.64 34.53
-18.30 -12.36 4.89 27.53
SBI Magnum Global Fund(G)
SBI Blue Chip Fund (G) -1.56 8.73 N.A.
0.61
Average CAGR -16.6 -3.32 10.1 31.03
BSE 30 -3.75 0.38 13.92 24.91

schemes of SBI Fund House is given for 1year,2 years ,3 years and 5 years respectively.
(except of SBI Blue Chip Fund (G)for 5 years because the scheme was launced on Jan 20
2006)
The above table shows that 1 year average return of SBI mutual fund and BSE 30 is
negative but SBI has more negative returns,2 years average return of SBI is negative but
BSE 30 average returns are positive,3 years average return of SBI is less than BSE 30
average returns,5 years average return of SBI is more than BSE 30 average returns.

THIRD STEP
Sr No Date HDFC Tax saver Sensex % Change % Change Particular

Hdfc Sensex
(in Rs.)
1 31-Mar- 10000.00 3366.00
96
2 5-Dec- 7630.00 2812.00 -23.70% -16.14% Initial Fall

96
3 22-Feb- 71918.22 5883.00 842.57% 109.21% Tech Rally
00
4 21-Feb- 42061.73 2600.00 -41.51% -55.80% Twin Tower
01 Attack
5 14-Jan- 128092.51 6194.00 204.53% 138.23% Recovery
04
6 17-May- 107723.95 4505.00 -15.90% -27.27% Govt Change
04
7 14-Dec- 174912.85 6325.00 62.37% 40.40% Recovery
04
8 10-May- 436782.83 12612.00 149.71% 99.40% India Re
06 Rating
9 14-Jun- 293623.03 8929.00 -32.78% -29.20% Heavy FII
06 Selling
10 07-Jan- 617573.53 20812.00 110.33% 133.08% All Time High
08
11 31-Jan- 276947.92 9424.00 -55.16% -54.57% US Sub Prime
09
Total Inception of
CAGR(AnnualReturns) Current
29% 8.30%
From the above table it is cleared that instead of fall in share market the returns of Mutual
funds are positive that is 29%.So it shows that don’t get your money out incase of falling
market ,keep it invested for long term ,and you can make a huge profits which is far more
than BSE 30(Sensex) returns.

SUMMING UP
Hence we can conclude that equities are not risky in long run and incase of Equity
Diversified Mutual Funds whose money is invested in share market and if we invest in
Mutual Funds for atlest 3 Years then we can get positive returns and if we invest for 5
years then we can get huge returns and can make huge amount of profit and we had also
seen that the average returns of Mutual Funds haws outperformed average return of BSE
30(Sensex) , so we can conclude that it is better for a person to invest in mutual funds but
the investment should be done atleast for 5 years. And as we see from the above that
either the market is falling but the mutual funds can get good returns better than the BSE
30(Sensex).So,from this we may conclude that we should not get fear from the falling
market ,and should not take our money out in case the market is falling rather we should
stay calm and should keep our money invested in mutual funds for long time and the
returns can be better than sensex because the portfolio is managed by the fund manager
who is expert in this area.So,it is better for a common man who does not have proper
knowledge and time to track the market to go for mutual funds and get better returns.
CHAPTER-6
TO FIND OUT INVESTORS PATTERN OF

INVESTMENT
AGE
valid Cumulative
Frequency Percent Percent
Valid 18-30 40 20 20
31-45 88 44 64
46-60 53 26.50 90.5
60 and above 19 9.50 100
Total 200 100
9.50% Age
20.00% 18-30
31-45
46-60
60 and above
Pies show counts

26.50%
44.00%
The sample consisted majorly people of age group of 31 to 45 years as they people have
many priorities at the time of investment which include wealth creation, children’s
education, tax saving, retirement saving, etc.
SEX
valid Cumulative
Valid Male 133 66.5 66.5
Female 67 33.5 100
Total 200 100
Sex
Male
Fem ale
33.50% Pies show counts
66.50%
In an average Indian household the major investment decisions are taken by the male.
Thus I decided to choose male respondents over female respondents. Thus out of total
200 respondents included 66.50% of male respondents
OCCUPATION
According to survey respondents are mainly private sector employees

valid Cumulative
Valid Private Sector
68 34 34
Employee
Government
Sector 45 22.5 56.5
Employee

Businessman 28 14 70.5
Professional 24 12 82.5
Student 19 9.5 92
Pensioner 11 5.5 97.5

Others 5 2.5 100.0
Total 200 100.0
2 .5 0 %
5 .5 0 % Oc cu pa tio n
P riva te Se ctor Em plo yee
9 .5 0 % G overn m e n t S ecto r E m p loye e
B us ine s sm an
3 4.0 0% P ro fes s ion al
S tu d en t
P en s io n er
1 2.0 0% O th e rs
P ie s s h ow co u nts
1 4.0 0%
2 2.5 0%
MODE OF INVESTMENT
valid Cumulative
Valid Lump sum 66 33 33
Systematic
Investment
134 67 100
Plan
(Installments)

W h a t m o d e o f in v e s t m e n t d o y o u g e n e r a lly p r
L um p s um
S ys te m a ti c In v e s tm e n t P l a n ( In s ta l l m e n ts )
3 3 .0 0 % P ie s s h o w c o u n ts
6 7 .0 0 %
The survey shows that the maximum number of investors that is 67% prefer systematic
investment plan
TYPE OF MUTUAL FUND PREFFERED
valid Cumulative
Valid Equity 110 55 55
Debt 60 30 85
Balanced 30 15 100
Total 200 100

W h ic h typ e o f M u tua l fun ds do y ou p refer?
1 5.0 0%
E qu ity
D eb t
B ala nc e d
5 5.0 0%
3 0.0 0%
The survey shows that the maximum number of investors like to keep their money in
Equity schemes
PERCENTAGE OF INCOME INVEST IN MUTUAL FUNDS
valid Cumulative
Valid 0-10% 111 55.5 55.5
10-20% 61 30.5 86
20-30% 20 10 96
30 % and
8 4 100
above
Total 200 100

4 .0 0 % H o w m u c h p e r c e n ta g e o f y o u r in c o m e d o y o u lik e to in v e s t in M u t u a l F u
1 0 .0 0 % 0 -1 0 %
1 0 -2 0 %
2 0 -3 0 %
3 0 % a n d a b o ve
P ie s s h o w c o u n ts
5 5 .5 0 %
3 0 .5 0 %
Majority of the investors like to invest 0-10% of their income in mutual funds.
Retrns Expected
Cumulative
Frequency valid Percent Percent
Valid 5-10%
25 12.5 55.5
11-15% 126 63 86
16-20% 42 21 96
Above 20% 7 3.5 100
Total 200 100

3 .5 0 %
1 2 .5 0 % H o w m u c h r e tu rn s d o y o u e x p e c t f ro m M u tu a l F u n d
5 -1 0 %
1 1-1 5%
2 1 .0 0 % 1 6-2 0%
a b o ve 2 0 %
P ie s s h o w c o u n ts
6 3 .0 0 %
The survey shows that main proportion of investors expect 11-15% return from their
investment in mutual funds .
Time Duration
valid Cumulative
Valid Upto 1 year 19 9.5 9.5
1-5 years 86 43 52.5
5-10 years 79 39.5 92
Above 10
16 8 100
years
Total 200 100

The survey shows that major proportion of investors like to keep money in mutual funds
for the period of 1-5 years and after that closely followed by investors who would like to
keep money for 5-10 years
INFLUENCED BY
valid Cumulative
Valid Advertisement 31 15.5 15.5
Family 51 25.5 41
Friends 48 24 65
Advisors/Agent
63 31.5 96.5
s
Others 7 3.5 100
Total 200 100

3 .5 0 % H o w yo u a re in flu en ce d to inv es t in M utua l Fu nds ?
1 5.5 0% Adve rtis em en t
F am ily
F rie n ds
Advis o rs /Ag en t
3 1.5 0% O th e rs
2 5.5 0%
2 4.0 0%
The survey shows that main proportion of investors are influenced by advisors to invest
money in mutual
Factors considered by investors while investing:
An attempt to study various need expectations of small investors from different types of
mutual funds available in Indian market and identify the risk return perception with the
purchase of mutual funds. Various sophisticated multivariate techniques are applied to
identify important characteristics being considered by the Indian investors in the purchase
decision. SPSS version 17 is used for data analysis.
An investor takes into account various factors while deciding about buying of a mutual
fund. These ranges of factors begin with investor perception, the promised return and to

the attractiveness of the offer. All the relevant variables in the purchase of a mutual fund
were included in the study. Eight statements were generated for measuring respondent's
opinion on a 5-point scale on the purchase preference for mutual funds. Factor matrix and
their corresponding factor loading after the varimax rotation are presented in Table for
further interpretation
Correlation Matrix
Tax
Liquidity Advantage Returns Risk
Correlation Liquidity 1.000 .106 -.031 .069
Tax Advantage .106 1.000 -.134 -.087
Returns -.031 -.134 1.000 .000
Risk .069 -.087 .000 1.000
Image of AMC .010 .013 -.002 .014
Previous performance of fund -.041 .081 -.070 .040
Scheme -.168 -.099 -.002 .040
Sector in which fund is to be -.097 -.056 -.036 -.026

invested
Sig. (1-tailed) Liquidity .067 .333 .167
Tax Advantage .067 .029 .110
Returns .333 .029 .498
Risk .167 .110 .498
Image of AMC .447 .426 .487 .420
Previous performance of fund .283 .126 .163 .287
Scheme .009 .081 .488 .285
Sector in which fund is to be .085 .216 .305 .355

invested

Correlation Matrix
Previous Sector in which

performance of fund is to be
Image of AMC fund Scheme invested
Correlation Liquidity .010 -.041 -.168 -.097
Tax Advantage .013 .081 -.099 -.056
Returns -.002 -.070 -.002 -.036
Risk .014 .040 .040 -.026
Image of AMC 1.000 -.067 .008 -.127
Previous performance of fund -.067 1.000 .041 -.052
Scheme .008 .041 1.000 .012
Sector in which fund is to be -.127 -.052 .012 1.000

invested
Sig. (1-tailed) Liquidity .447 .283 .009 .085
Tax Advantage .426 .126 .081 .216
Returns .487 .163 .488 .305
Risk .420 .287 .285 .355
Image of AMC .171 .455 .036
Previous performance of fund .171 .283 .233
Scheme .455 .283 .431
Sector in which fund is to be .036 .233 .431

invested
SPSS Output 1 shows an abridged version of the R-matrix. The top half of this table
contains the Pearson correlation coefficient between all pairs of questions whereas the
bottom half contains the one-tailed significance of these coefficients.

KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .501
Bartlett's Test of Sphericity Approx. Chi-Square 27.056
Df 28
Sig. .002
SPSS Output 2 shows several very important parts of the output: the Kaiser-Meyer-Olkin
measure of sampling adequacy and Bartlett's test of sphericity. The KMO statistic varies
between 0 and 1. A value of 0 indicates that the sum of partial correlations is large
relative to the sum of correlations, indicating diffusion in the pattern of correlations
(hence, factor analysis is likely to be inappropriate). A value close to 1 indicates that
patterns of correlations are relatively compact and so factor analysis should yield distinct
and reliable factors. Kaiser (1974) recommends accepting values greater than 0.5 as
acceptable.
In this, the value of KMO is .501 and is hence acceptable.
Bartlett's measure tests the null hypothesis that the original correlation matrix is an
identity matrix. For factor analysis to work we need some relationships between variables
and if the R- matrix were an identity matrix then all correlation coefficients would be
zero. Therefore, we want this test to be significant (i.e. have a significance value less than
0.05).
As the Significance value is .002 in our case, hence it is significant at 98% confidence
Communalities
Initial Extraction
Liquidity 1.000 .618
Tax Advantage 1.000 .575
Returns 1.000 .395
Risk 1.000 .741
Image of AMC 1.000 .620
Previous performance of fund 1.000 .571
Scheme 1.000 .556

Sector in which fund is to be 1.000 .572
invested
Extraction Method: Principal Component Analysis.

The communalities reflect the common variance in the data structure. So, for example, we
can say that 61.8% of the variance associated with Liquidity is common, or shared
variance. Another way to look at these communalities is in terms of the proportion of
variance explained by the underlying factors. After extraction some of the factors are
discarded and so some information is lost. The amount of variance in each variable that
can be explained by the retained factors is represented by the communalities after
extraction.
Total Variance Explained
Compon Initial Eigenvalues
ent Total
1 1.313 16.412 16.412
2 1.171 14.638 31.051
3 1.113 13.915 44.966
4 1.050 13.129 58.095
5 .971 12.134 70.228
6 .836 10.451 80.680
7 .794 9.928 90.608
8 .751 9.392 100.000

Total Variance Explained
Compo Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
nent Total % of Variance Cumulative % Total % of Variance Cumulative %
1 1.313 16.412 16.412 1.232 15.406 15.406
2 1.171 14.638 31.051 1.195 14.936 30.342
3 1.113 13.915 44.966 1.144 14.295 44.637
4 1.050 13.129 58.095 1.077 13.458 58.095
Before extraction, SPSS has identified 8 linear components within the data set. The
eigenvalues associated with each factor represent the variance explained by that particular
linear component and SPSS also displays the eigenvalue in terms of the percentage of
variance explained (so, factor1 explains 16.412% of total variance). It should be clear that
the first few factors explain relatively large amounts of variance (especially factor 1)
whereas subsequent factors explain only small amounts of variance.
All factors with eigenvalues greater than 1 are extracted, which reduced the number of
factors to 4 in our case. The eigenvalues associated with these factors are again displayed
in the columns labeled Extraction Sums of Squared Loadings.
The values in this part of the table are the same as the values before extraction, except
that the values for the discarded factors are ignored.
In the final part of the table (labeled Rotation Sums of Squared Loadings), the
eigenvalues of the factors after rotation are displayed. Rotation has the effect of
optimizing the factor structure and one consequence for these data is that the relative
importance of the four factors is equalized.

Component Matrixa
Component
1 2 3 4
Liquidity .619 .262 -.127 .388
Tax Advantage .621 -.365 .027 -.235
Returns -.303 .515 -.191 .039
Risk -.055 .252 .426 .702
Image of AMC .158 .484 .317 -.510
Previous performance of fund .098 -.484 .545 .174
Scheme -.531 -.113 .485 -.163
Sector in which fund is to be -.365 -.400 -.496 .182

invested
a. 4 components extracted.
Rotated Component Matrixa
Component
1 2 3 4
Liquidity -.737 .044 .116 .243
Tax Advantage -.309 .600 .140 -.316
Returns .014 -.621 .063 .071
Risk -.056 -.050 .025 .857
Image of AMC .079 -.133 .757 -.152
Previous performance of .231 .644 -.024 .318

fund
Scheme .723 .037 .092 .155
Sector in which fund is to be .091 -.102 -.724 -.171

invested

Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.

So,from the above factor analysis it is derived that Liquidity,risk,Image of A.M.C. and
Previous performance of the fund ,explain the other components and an investor
decisions of investing in Mutual Funds are affected mainly by thes 4 factors.
Investors mainly invest in the companies like-
1.Reliance Mutual Fund

2.Birla Sun Life Mutual Fund
3.ICICI Prudential Mutual Fund
4.SBI Mutual Fund
5.HDFC Mutual Fund
6.DSP Black Rock Mutual Fund
7.Fidelity Mutual Fund
8.Kotak Mahindra Mutual Fund
9.TATA Mutual Fund
10.IDFC Mutual Fund
Investors suggest following ways to increase penetration in Mutual

Fund Industry -
1.By increasing Advisors.
2.By increasing the advertisements
3.By doing Seminars on mutual funds

CHAPTER-7
Findings
1. In equity market long term investments is beneficial.
2. Average Equity Diversified Mutual Funds gives more return than Average BSE 30
(Sensex) returns.
3. The survey shows that the maximum number of investors that is 67% prefer systematic
investment plan .
4. The survey shows that the maximum number of investors like to keep their money in
Equity schemes
5. Majority of the investors like to invest 0-10% of their income in mutual funds.
6. The survey shows that main proportion of investors expect 11-15% return from their
investment in mutual funds .
7. The survey shows that major proportion of investors like to keep money in mutual
funds for the period of 1-5 years and after that closely followed by investors who would
like to keep money for 5-10 years
8. The survey shows that main proportion of investors are influenced by advisors to
invest money in mutual

9. Liquidity, Risk, Image of A.M.C. and Previous performance of the fund ,explain the
other components and an investor decisions of investing in Mutual Funds are affected
mainly by these 4 factors.
Recommendations
1. Mutual fund companies need to carry out awareness campaign at a very large level to
make people aware of the benefits of mutual Funds.
2. More and more number of advisors should be recruited to increase penetration in
mutual fund industry.
3. Also companies should try to make its advisory service more strong as it the main
factor which an investor keep in mind while selecting a investment firm. Its
advisors should be well trained.
4.N.J. is doing a great work in spreading awareness about Mutual Funds. It should
conduct its presentations at different-different places,this would be a good stepping stone
in increasing penetration in mutual fund industry.

Conclusion
1. The main thing concluded from above research is that Mutual fund is a good
option for investing .
2. The research also showed that people who don’t have the knowledge and time to
track the share market can invest in mutual funds and can earn huge amount of
money.
3. There is lesser risk for investing in Mutual funds as it is managed by Fund
manager who can track the share market in more effective way than the
individual investors..
4. The investor should atleast keep money for 3 to 5 years to get good returns.
5. It was also seen that people like to invest mainly in Equity through Mutual Fund
6. Investors are looking for an alternative for their investments which will provide
them a higher return and also safety to their investments So mutual funds offer the
best alternative to the small investors in India

Key Learning’s
1. Learned to be sincere towards my work.

2. Learned how to work under pressure.
3. Got a chance to know the real corporate world.
4. Learned how to use various analytical tools like SPSS and Excel.
5. Gained a lot of knowledge about mutual fund industry, problem faced by it and
various mutual fund products available in market.

CH-8 APPENDIX
QUESTIONNAIRE
INSTRUCTIONS:
1) Please answer all the given questions.

2) Select only ONE option.
3) For statement answers, please write in BLOCK letters.
4) Please underline your answer or make it bold
1) Name - _______________________________________
2) Sex - ________
3) Age
a. 18-30 b. 31-45 c. 46-60 d. 60 and above
4) Occupation
a. Private Sector Employee b. Government Sector Employee

c. Businessman d. Professional
e. Student f. Pensioner
g. Others

5) What are the most important factors you consider while investing in Mutual
Funds?
(Please prioritize the list. 1: Least important,5: Most important)
a. Liquidity __ b. Tax Advantage__

c. Returns__ d. Risk__
e. Image of A.M.C__ f. Previous performance of Fund __
h. Scheme__ g. Sector in which fund is to be invested__
6) What mode of investment do you generally prefer?
a. Lump sum b. Systematic Investment Plan (Installments)
7) In which company/companies Mutual fund do you have invested?
a.………………………………………………………….
b…………………………………………………………..
8) Which type of Mutual funds do you prefer?
a. Equity b. Debt c. Balanced
9) How much percentage of your income do you like to invest in Mutual Funds?
a. 0-10% b. 10-20% c. 20-30% d. 30% and above
10) How much returns do you expect from Mutual Funds?
a. 5-10% b. 11-15% c. 16-20% d. above 20%
11) For how much time do you like to keep money in Mutual Funds?
a. up to 1 year b.1-5 years c. 5-10 years d. above 10 years
12) How you are influenced to invest in Mutual Funds?
a. Advertisement
b. Family
c. Friends
d. Advisors/Agent
e. Others
13) What suggestion do you give to increase penetration of Mutual Funds in India?
…………………………………………………………………………………
…………………………………………………………………………………

…………………………………………………………………………………
BIBILIOGRAPHY
Books: AMFI Workbook for Distribution and Employees of mutual funds In India
Marketing Research by Naresh K Malhotra, 2007 Publication
Websites: www.amfiindia.org
www.njindiainvest.com
www.moneycontrol.com
www.njfundz.com
www.google.com
www.wikipiedia.com
Magazines and Journals: Fundz Watch, Saathi.

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Chapter-1

The Indian mutual funds industry is witnessing a rapid growth as a result of

Amity Business School, Amity University, Noida Page 2

1.5Data Collection Tool

The tool used for collecting the data was

1.6Analyzing Tool Used

The analyzing tool used to analyze the data were SPSS17.0

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• Some of the persons were not so much responsive.

• Sample size is limited to 200

• Size may not adequately represent the whole market.

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Mutual Fund scheme has a defined investment objective and strategy.

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Mutual Fund Cycle

Concept of Mutual Fund

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Many investors with common financial objectives

Any capital gains or losses from such investments are

3.2 Evolution of Mutual Funds In India

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Phase 1. Establishment and Growth of Unit Trust of India - 1964-87

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1992-93 Amount Assets Under Mobilisation as % of

Phase III. Emergence of Private Sector Funds - 1993-96

Phase IV. Growth and SEBI Regulation - 1996-2004

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01-April-99 31-March-00 13,536 4;039 42,173 59,748

01-April-00 31-March-01 12,413 6,192 74,352 92,957

01-April-01 31-March-02 4,643 13,613 1,46,267 1,64,523

01-April-02 31-Jan-03 5,505 22,923 2,20,551 2,48,979

01-Feb.-03 31-March-03 * 7,259* 58,435 65,694

0l-April-03 31-March-04 63,553 5,21,632 5,90,190

ASSETS UNDER MANAGEMENT (RS. CRORES)

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Phase V. Growth and Consolidation - 2004 Onwards

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• Asset Management Company:

It also referred to as the investment manager, is a separate company appointed by the

• Registrars and transfer agents:

3.4 Types of Mutual funds

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Open-end Vs. Closed-end Funds:

Load and No-load Funds:

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If the redemption price is Rs. 10.70 with a back-end load of 2%,

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Tax-exempt Vs. Non-Tax-exempt Funds:

Generally, when a fund invests in tax-exempt securities, it is called a tax-exempt fund. In

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(a) Broad Fund Types by Nature of Investments:

(b) Broad Fund Types by Investment Objective:

(c) Broad Fund Types by Risk Profile:

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Money Market/Liquid Funds:

Debt Funds (or Income Funds):

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Diversified Debt Funds: