My study gives an overview of mutual funds – definition, types, benefits, risks, limitations, history of

mutual funds in India, latest trends, global scenarios. I have analyzed a few prominent mutual funds
schemes and have given my findings.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income

earned through these investments and the capital appreciation realised are shared by its unit
holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost. The flow chart below
describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

classification of mutual funds in India-

1. Open-ended funds: Investors can buy and sell units of open-ended funds at NAV-related price
every day. Open-end funds do not have a fixed maturity and it is available for subscription every
day of the year. Open-end funds also offer liquidity to investments, as one can sell units
whenever there is a need for money.

2. Close-ended funds: These funds have a stipulated maturity period, which may vary from three
to 15 years. They are open for subscription only during a specified period. Investors have the
option of investing in the scheme during initial public offer period or buy or sell units of the
scheme on the stock exchanges. Some close-ended funds repurchase the units at NAV-related
prices periodically to provide an exit route to the investors.
3. Interval Funds: These funds combine the features of both open and close-ended funds. They
are open for sale and repurchase at a predetermined period.

4. Growth funds: They normally invest most of their corpus in equities, as their objective is to
provide capital appreciation over the medium-to-long term. Growth schemes are ideal for
investors with risk appetite.

5. Income funds: As the name suggests, the aim of these funds is to provide regular and steady
income to investors. They generally invest their corpus in fixed income securities like bonds,
corporate debentures, and government securities. Income funds are ideal for those looking for
capital stability and regular income.

6. Balanced funds: The objective of balanced funds is to provide growth along with regular
income. They invest their corpus in both equities and fixed income securities as indicated in the
offer documents. Balanced funds are ideal for those looking for income and moderate growth.

7. Money market funds: These funds strive to provide easy liquidity, preservation of capital and
modest income. MMFs generally invest the corpus in safer short-term instruments like treasury
bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these
schemes hinges on the interest rates prevailing in the market. MMFs are ideal for corporate and
individual investors looking to park funds for short period.

8. Tax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax rebates
to investors under section 88 of the Income Tax Act. They generally have a lock-in period of
three years. They are ideal for investors looking to exploit tax rebates as well as growth in
investments.

9. Special schemes: These schemes invest only in the industries specified in the offer document.
Examples are InfoTech funds, FMCG funds, pharma funds, etc. These schemes are meant for
aggressive and well-informed investors.

10. Index funds: Index Funds invest their corpus on the specified index such as BSE Sensex,
NSE index, etc. as mentioned in the offer document. They try to mimic the composition of the
index in their portfolio. Not only are the shares, even their weight age replicated. Index funds are
a passive investment strategy and the fund manager has a limited role to play here. The NAVs of
these funds move along with the index they are trying to mimic save for a few points here and
there. This difference is called tracking error.

11. Sector specific schemes: These funds invest only specified sectors like an industry or a group
of industries or various segments like ‘A' Group shares or initial public offerings.

Features of mutual funds in India-

Affordability: Mutual funds allow you to start with small investments. For example, if you want
to buy a portfolio of blue chips of modest size, you should at least have a few lakhs of rupees. A
mutual fund gives you the same portfolio for meagre investment of Rs 1,000-5,000. A mutual
fund can do that because it collects money from many people and it has a large corpus.

Professional management: The major advantage of investing in a mutual fund is that you get a
professional money manager for a small fee. You can leave the investment decisions to him and
only have to monitor the performance of the fund at regular intervals.

Diversification: Considered the essential tool in risk management, mutual funds makes it
possible for even small investors to diversify their portfolio. A mutual fund can effectively
diversify its portfolio because of the large corpus. However, a small investor cannot have a well-
diversified portfolio because it calls for large investment. For example, a modest portfolio of 10
blue-chip stocks calls for a few a few thousands.

Convenience: Mutual funds offer tailor-made solutions like systematic investment plans and
systematic withdrawal plans to investors, which is very convenient to investors. Investors also do
not have to worry about the investment decisions or they do not have to deal with their brokerage
or depository, etc. for buying or selling of securities. Mutual funds also offer specialized
schemes like retirement plan, children's plan, industry specific schemes, etc. to suit personal
preference of investors. These schemes also help small investors with asset allocation of their
corpus. It also saves a lot of paper work.

Cost effectiveness: A small investor will find that a mutual fund route is a cost effective method.
AMC fee is normally 2.5% and they also save a lot of transaction costs as they get concession
from brokerages. Also, they get the service of a financial professional for a very small fee. If
they were to seek a financial advisor's help directly, they may end up pay more. Also, the size of
the corpus should be large to get the service of investment experts, who offer portfolio
management.

Liquidity: You can liquidate your investments anytime you want. Most mutual funds dispatch
checks for redemption proceeds within two or three working days. You also do not have to pay
any penal interest in most cases. However, some schemes charge an exit load.

Tax breaks: You do not have to pay any taxes on dividends issued by mutual funds. You also
have the advantage of capital gains taxation. Tax-saving schemes and pension schemes give you
the added advantage of benefits under Section 88. Investments up to Rs 10,000 in them qualify
for tax rebate.

Transparency: Mutual funds offer daily NAVs of schemes, which help you to monitor your
investments on a regular basis. They also send quarterly newsletters, which give details of the
portfolio, performance of schemes against various benchmarks, etc. They are also well regulated
and Sebi monitors their actions closely.
Read more: http://www.articlesbase.com/finance-articles/over-view-of-mutual-fund-industry-in-
india-832261.html#ixzz15FBLKySz
Under Creative Commons License: Attribution
As of October 2007, there are 8,015 mutual funds that belong to the
Investment Company Institute (ICI), a national trade association of
investment companies in the United States, with combined assets of
$12.356 trillion.[3] In early 2008, the worldwide value of all mutual funds
totaled more than $26 trillion.[4]

The formation of Unit Trust of India marked the evolution of the Indian
mutual fund industry in the year 1963. The primary objective at that
time was to attract the small investors and it was made possible
through the collective efforts of the Government of India and the
Reserve Bank of India. The history of mutual fund industry in India can
be better understood divided into following phases:

C. ASSET ALLOCATION AND RISK PROFILE

Under normal circumstances, funds of the Scheme, shall (after providing for all ongoing expenses)
generally be invested / the indicative asset
allocation shall be as follows considering the objective of the Scheme:

Instruments
Indicative allocations (% of total
assets) Risk Profile
Minimum Upto Maximum Upto High/Medium/Low
Equity and Equity related instruments of
companies in the infrastructure sector
70 100 High
Equity and equity related instruments of other
companies
0 30 High
Debt and Money Market instruments* 0 30 Low to medium
* Investment by the scheme in securitized debt will not normally exceed 50% of debt and money market
instruments.
Investments in derivative instruments may be done for hedging and Portfolio balancing. The scheme will
have a maximum derivative net position of
50% of the net assets of the scheme.
Not more than 25% of the net assets of the scheme shall be deployed in securities lending. The Scheme
would limit its exposure, with regards to
securities lending, for a single intermediary, to the extent of 5% of the total net assets of the scheme at
the time of lending.
The Trustee Company may from time to time for a short term period under exceptional circumstances on
defensive consideration modify / alter the
investment pattern / asset allocation the intent being to protect the Net Asset Value of the Scheme &
Unitholders interest without seeking consent of
the unitholders.
Change in Investment Pattern
The Investment Pattern as outlined above is indicative. Investment strategy and pattern may be deviated
from time to time, provided such

Historical Overview
Backed by one of the most trusted and valued brands in India, Tata Mutual Fund has earned the
trust of lakhs of investors with its consistent performance and world-class service.

Tata Mutual Fund manages around 21,963.00 crores (average AUM for the month) as on
September 30, 2010 worth of assets across its varied offerings. Tata Mutual Fund offers an
investment option for everyone, whether you are a businessman or salaried professional, a retired
person or housewife, an aggressive investor or a conservative capital builder.

The Tata Asset Management philosophy is centred on seeking consistent, long-term results. Tata
Asset Management aims at overall excellence, within the framework of transparent and rigorous
risk controls.

We constantly benchmark our efforts against these tenets of performance:

Consistency : We strive to deliver consistent results through our value-based investing

methodology, keeping alive the credo of the late doyen of the Tata Group, Mr. J.R.D. Tata, that
money received from the people should go back to them several times over.

Flexibility : Tata Mutual Fund offers investors a broad range of managed investment products in
various asset classes and risk parameters, with operational flexibility to suit their varied
investment needs.

Stability: Our commitment to the highest quality of service and integrity is the foundation upon
which we build trust with our clients.
Service: We offer a wide range of services to assist investors have a fulfilling and rewarding
financial planning experience with us. We have designed our services
keeping in mind the needs of our investors, giving them a smooth and
hassle-free financial planning process.

A Proud Pedigree

Tata Asset Management Ltd is a part of the Tata group, one of India's
largest and most respected industrial groups, renowned for its adherence to
business ethics.

The Group has always believed in returning wealth to the society that it serves. Thus, nearly two-
thirds of the equity of Tata Sons, the Group's promoter company, is held by philanthropic trusts,
which have created a host of national institutions in the natural sciences, medical care, energy
and the arts. The trusts also give substantial annual grants and endowments to deserving
individuals and institutions in the areas of education, healthcare and social uplift.

By combining ethical values with business acumen, globalisation with national interests and core
businesses with emerging ones, the Tata Group aims to be the largest and most respected global
brand from India. This way, it fulfils its long-standing commitment to improving the quality of
life of its stakeholders.

Leadership With Trust

Our purpose at the Tata Group is to improve the quality of life of the
communities we serve. We do this by attaining leadership positions in
sectors of national economic significance, to which the Group brings a
unique set of capabilities. This requires us to grow aggressively in focused areas of business.

Our heritage of returning to society what we earn evokes trust among consumers, employees,
shareholders and the community. It is an ongoing process, continuously enriched by the
formalisation of the high standards of behaviour that we expect from employees and companies.

The Tata name is a unique asset, representing leadership with trust. Leveraging this asset to
enhance Group synergy and becoming globally competitive is the route to sustained growth and
long-term success.
E. THE INVESTMENT STRATEGIES
The Fund aims to maximize long-term total return by investing in equity and equity-related
securities and / or Units of equity funds / Share classes of
companies, which are incorporated, or have their area of primary activity, in India and in other
parts of world, the Fund may also invest in depository
receipts including American Depository Receipts (ADRs) and Global Depository Receipts
(GDRs), debt securities convertible into common shares,
preference shares, warrants and units of overseas exchange traded funds.
Infrastructure sector plays important role in country’s development and GDP growth India has
already negotiated the difficult transition from public
infrastructure creation to a market-determined model. An ambitious reform programme initiated
involving a shift from a controlled to an open market
economy has opened doors for private sector / foreign investment in infrastructure projects such
as energy, petroleum, telecommunications
transportation sectors etc. And in the Indian context, removal of regulatory and availability
constraints on any product or service, has catalyzed
investments, attracted competition and rationalized costs leading to a new growth trajectory.
The infrastructure sector in the country is thus poised for accelerated growth in the coming
years. There is already momentum in highways, power
generation and ports, where a successful track record has fostered a virtuous cycle of more
success.
Infrastructure sector comprises of Energy, Power and Power Equipment, Oil & Gas and related
industries, Petroleum and related industries, Coal,
Mining, Aluminium and other Metal Industries, Steel and Steel Utilities, Engineering,
Construction and Construction Related Industries, Cement,
Transportation, Ports, Telecommunications, Housing, Banking and Financial Services and
Healthcare and Related Industries. However, the
Scheme will not restricts its investments only in the above mentioned sectors.
However the weightages of debt & equity may be changed in exceptional circumstances,
depending on market conditions, after taking approval of
the Trustee Company. The main aim of such steps will be to protect the interests of the
unitholders. The above investment policies are in conformity
with the provisions of various constitutional documents viz. MOA/AOA of the TAML/ Trustee
Company, IMA and the Trust Deed.
The Scheme will purchase securities in the public offerings and rights issues, as well as those
traded in the secondary markets. On occasions, if
deemed appropriate, the Scheme will invest in securities sold directly by the issuer, or acquired
in a negotiated transaction or issued by way of
private placement. The moneys collected under this scheme shall be invested only in
transferable securities.
Global and India Market Outlook and Strategy
Demand For Infrastructure Is Booming:
Demand for infrastructure assets is at all time high, with an average of around US $ 1bn a
month of new equity being committed to the sector. There
is about US $ 38 bn and US $ 51 bn of new money in private funds looking to be invested, as
well as potential for additional investments from listed
companies with a market capitalization of US$ 1,760 bn. The utility, transport and other
infrastructure sectors continue to develop separate
identities, with the defining features being steady cashflow and predictable yields over the long
term.
Private participation in infrastructure projects in developing countries plummeted after the 1997
Asian crisis and followed a broadly declining trend
for several years afterward. However, in 2004 and 2005 investment in such projects increased
sharply. Meanwhile, the distribution of investment
across sectors and regions, and the allocation of risks between public and private parties, were
shifting. Private sponsors started putting more
emphasis on risk mitigation strategies. To take advantage of private sponsors’ renewed interest
in infrastructure projects, governments need to
create risk sharing arrangements that attract private operators while also benefiting
governments, taxpayers, and users.
Developing country investors have emerged as a major source of investment finance for
infrastructure projects with private participation. Indeed, in
1998–2004 these investors accounted for more of this finance in transport across developing
regions—and for more in South Asia and Sub-
Saharan Africa - than did investors from developed countries. For policymakers this
development suggests a need to rethink the criteria used in
selecting investors in schemes for private participation, which have been biased toward large
international operators.
(Sources: Gridlines No. 16, Public-Private Infrastructure Advisory Facility (PPIAF), Jan 2007)
Growth of Infrastructure :
Infrastructure as sector has grown rapidly. An estimated 2% GDP around US $800 bn, is spent
on infrastructure investment and maintenance
annually. As an indicator of the sectors growth, the total market capitalization of the Macquarie
Global Infrastructure Index (MGII), a proxy for listed
global infrastructure, has grown from US $ 465 bn since 2000 to US $ 1,758 bn in March 2007.
The historic pace of growth is likely to continue, fuelled by demographic and macroeconomic
changes. A rising global population, strong economic
growth and a greater focus on competitiveness are creating demand for new infrastructure close
to 1% of global GDP. What Is perhaps more
important is that the maintenance of existing assets is estimated to be equal to further 1.2% of
Global GDP.
(Source: World Bank)
Increased competitiveness a spur for spending
Quality of infrastructure is an important factor impacting a country’s competitiveness. New
foreign investments has to be supported with the
appropriate quality of infrastructure to ensure investments in businesses and trade profit. As
government seek to increase their competitiveness,
spending on infrastructure is also growing.
The idea that the competitiveness of a country is closely tied to the quality of its infrastructure. It
plots quality of infrastructure (as measured by
industrialists perception of overall infrastructure quality, encompassing transport, energy,
information and communications technology, and housing
infrastructure) against the competitiveness ranking assigned by the World Economic Forum.
Expected Annual Investment Needs 2005 - 2010 (US $m)
TATA INDO-GLOBAL INFRASTRUCTURE FUND
13
REGION
Electricity
Generation
Telephone
Mainlines
Paved Road
Length
Rail Road
Length
Mobile Water Sanitation Total
East Asia & Pacific 25,005 17,041 12,133 164 41,555 1,799 2,608 99,906
South Asia 11,124 3,233 6,575 126 3,392 1,912 1,707 28,069
Europe & Central Asia 12,643 5,157 9,800 743 9,740 235 750 39,069
Middle East & North Africa 7,307 1,278 3,308 51 1,850 399 691 14,884
Sub-Saharan Africa 3,273 539 4,094 140 3,275 689 1,256 13,268
Latin America & Caribbean 15,034 3,276 2,791 0 15,049 645 1,147 37,944
INCOME
High Income 37,051 8,706 77,056 1 11,595 565 982 135,956
Low Income 17,990 4,835 13,598 491 6,393 2,974 3,706 49,988
Middle Income 56,396 25,690 25,104 733 68,068 2,707 4,454 183,151
WORLD 111,436 39,231 115,758 1,225 86,056 6,246 9,143 369,095
Source : World Bank
The above data illustrates that global investment needs for key infrastructure are estimated at around US $370 bn for 2005-2010.
This amounts to
nearly 1 % of worldwide GDP.
Portfolio Turnover
The portfolio turnover is expected to be between 50% and 100%. The AMC will endeavour to optimise portfolio turnover to optimise
risk adjusted
return keeping in mind the cost associated with it. A high portfolio turnover rate is not necessarily a drag on portfolio performance
and may be
representative of arbitrage opportunities that exist for scrips/securities held in the portfolio rather than an indication of change in
AMC’s view on a
scrip etc. However, the AMC will take advantage of the opportunities that present themselves from time to time because of the
inefficiencies in the
securities markets.
F. FUNDAMENTAL ATTRIBUTES
Following

SUGGESTIONS

Four sequential steps will enable investor to decide effectively.

1. Divide the spectrum of Mutual Funds depending on major asset classes invested in.
Presently there are only two.
• Equity Funds investing in stocks.
• Debt Funds investing in interest paying securities issued by government, semi-government bodies,
public sector units and corporates.
2. a) Categorizing equities
• Diversified – invest in large capitalized stocks belonging to multiple sectors.
• Sectorial – Invest in specific sectors like technology, FMCG, Pharma, etc.
b) Categorized Debt.
• Gilt – Invest only in government securities, long maturity securities with average of 9 to 13 years, very
sensitive to interest rate movement.
• Medium Term Debt (Income Funds) – Invest in corporate debt, government securities and PSU bonds.
Average maturity is 5 to 7 years.
• Short Term Debt – Average maturity is 1 year. Interest rate sensitivity is very low with steady returns.
• Liquid – Invest in money market, other short term paper, and cash. Highly liquid. Average maturity is
three months.

3. Review Categories
• Diversified equity has done very well while sectorial categories have fared poorly in Indian market.
• Index Funds have delivered much less compared to actively managed Funds.
• Gilt and Income Funds have performed very well during the last three years. They perform best in a
falling interest environment. Since interest rates are now much lower, short term Funds are preferable.
4. Specific scheme selection
Rankings are based on criteria including past performance, risk and resilience in unfavorable conditions,
stability and investment style of Fund management, cost and service levels. Some recommended
schemes are:
• Diversified equity – Zurich Equity, Franklin India Bluechip, Sundaram Growth. These Funds show good
resilience giving positive results.
• Gilt Funds – DSP Merrill Lynch, Tata GSF, HDFC Gilt have done well.
• Income Fund – HDFC, Alliance, Escorts and Zurich are top performers
• Short Term Funds – Pru ICICI, Franklin Templeton are recommended

Within debt class, presently more is allocated towards short term Funds, because of low prevailing
interest rates.
However if interest rates go up investor can allocate more to income Funds or gilt Funds.

BIBLIOGRAPHY

Websites:

www.hseindia.com
www.nseindia.com
www.amfiindia.com
www.hdfc.com
www.icicidirect.com

Reference books:
•FINANCIAL INSTITUTIONS AND MARKETS - L.M.BHOLE
•INVESTMENT MANAGEMENT - V.K.BHALLA
Key Points to Remember
Mutual funds are not guaranteed or insured by the FDIC or any other government agency — even if you
buy through a bank and the fund carries the bank's name. You can lose money investing in mutual funds.

Past performance is not a reliable indicator of future performance. So don't be dazzled by last year's
high returns. But past performance can help you assess a fund's volatility over time.

Name of the Scheme Tata Infrastructure Fund

(TISF)
Type of Scheme An open ended equity
scheme
Investment Objective The investment objective of
the scheme is to provide
income distribution and / or
medium to long term
capital gains by investing
predominantly in equity /
equity related instruments of
the companies in the
Infrastructure sector.
Liquidity The scheme is an open
ended scheme. This scheme
is open for resale and
repurchase of units at NAV
based price, with applicable
loads, if any on every
business day on an ongoing
basis.
Benchmark BSE SENSEX
Transparency of operation / Determination of Net Asset
NAV Value (NAV) on all business
Disclosure days
Load (SIP / STP & non SIP) Entry Load: Nil (Not
applicable w.e.f August 1,
2009)
Exit Load:
1% of the applicable NAV, if
redeemed on or before expiry
of 365 days from the date of
allotment.
For Subscriptions by way of
SIP / STP: 1% of the
applicable NAV, if redeemed
on or before expiry of 24
months from the date of
allotment.
The above load structure
would be applicable for SIP
amount upto Rs 50 Lakhs per
installment. For SIP
installment above Rs 50
Lakhs the prevailing load
structure for investment other
than SIP will be
applicable.
Minimum subscription under Dividend Option: Rs. 5,000/-
each and in multiples of Re. 1/-
Plan thereafter.
Growth Option: Rs. 5,000/-
and in multiples of Re. 1/-
thereafter.
 For additional investment Rs.
1,000/- and multiples of Re.
1/- thereafter
Duration of the Schemes The scheme, being an open
ended scheme, has
perpetual duration
Investment Options The scheme offers two
options for investments:
a) Dividend Option (payout /
re-investment)
b) Growth Option*
* Growth Option offers an
‘NAV Appreciation Trigger
Facility’ under which if the
NAV of this option
appreciates by 5% or 10%
from the investors’ cost of
acquisition then appreciated
amount i.e. 5% or 10%
as opted by the investor is
either redeemed or swept to
‘Tata Floater Fund – Growth
Option’ as per the
mandate given by the
investor.
Kindly refer page no18 for
further details on this facility.

EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being.
Mutual Funds have 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 the benefits of investing in mutual funds. The main reason the
number of retail mutual fund investors remains small is that nine in ten people with incomes
in India do not know that mutual funds exist. But once people are aware of mutual fund
investment opportunities, the number who decide to invest in mutual funds increases to as
many as one in five people. The trick for converting a person with no knowledge of mutual
funds to a new Mutual Fund customer is to understand which of the potential investors are
more likely to buy mutual funds and to use the right arguments in the sales process that
customers will accept as important and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me enough
scope to implement my analytical ability. The analysis and advice presented in this Project
Report is based on market research on the saving and investment practices of the investors
and preferences of the investors for investment in Mutual Funds. This Report will help to
know about the investors’ Preferences in Mutual Fund means Are they prefer any particular
Asset Management Company (AMC), Which type of Product they prefer, Which Option
(Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic
Investment Plan or One time Plan). This Project as a whole can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the Company
Profile, Objectives of the study, Research Methodology. One can have a brief knowledge
about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected through survey done
on 200 people. For the collection of Primary data I made a questionnaire and surveyed of 200
people. I also taken interview of many People those who were coming at the SBI Branch
where I done my Project. I visited other AMCs in Dehradoon to get some knowledge related
to my topic. I studied about the products and strategies of other AMCs in Dehradoon to know
why people prefer to invest in those AMCs. This Project covers the topic “THE MUTUAL
FUND IS BETTER INVESTMENT PLAN.” The data collected has been well organized and
presented. I hope the research findings and conclusion will be of use.

CONTENTS