SS Jain Subodh Management Institution

SUMMER TRAINING PROJECT REPORT

(NFO in mutual fund)
(2021-22)

Submitted To: Submitted By:

Dr. Meenal Sukhlecha Monika Sharma
(Assistant professor)
 ACKNOWLEDGEMENT

It is my proud privilege to express my sincere gratitude to all those who helped me directly or
indirectly in completion of this project report. I am greatly thankful to Prof. (Dr.) Raju
Agrawal(Director) and MS Dr. Parul Bhargava (placement officer) for his/her support,
guidance and valuable suggestion by which this work has been completed effectively and
efficiently. I also very thankful to MR. Bhavesh Manchandia, Mr. Vinit Khedwal and all
other Baroda mutual fund relationship managers whose continuous cooperation throughout the
study was fabulous . Their charismatic attitude made this study joyful and interesting.

Monika Sharma
MBA 3RD Sem
 DECLERATION

I “Monika Sharma ” student of “S S Jain Subodh Management Institution” hereby

declare that this project “New fund offer in Mutual Fund” is original task performed by me
under the able guidance of Dr. Meenal Sukhlecha and MS Dr. Parul Bhargava This is
after undergoing training program in partial fulfillment of MBA degree. And I also declare
that this has not been submitted by any other student.
COMPANY CERTIFICATE
 Table of content

MUTUAL FUND
• Concept
• History
• Business structure
• Benefit of mutual fund
• Why invest in mutual fund
• Advantage of mutual fund
• Risk in mutual fund
• Taxation of mutual fund
• Types of mutual fund
• Mutual fund investors
• Fixed deposit vs mutual fund
• Growth of mutual fund in India
COMPANY PROFILE.
• Bank of Baroda
• History of BOB
• Mission vision market strategy
• Detailed study about company
• Type of Mutual fund offered by Baroda
• Comparison of Baroda mutual fund with competitors
ABOUT TOPIC.
• New fund offer
• Types of NFO
• Advantage of new fund offer
• Disadvantage of new fund offer
• Thing to be consider as an investors
• Benefits of NFO
• Reason for avoiding NFO
• Why invest in NFO
• IPO vs NFO
• Guide to investing in NFO
 Executive summary

I started my training from 15th July 2021 the concept of my topic is about mutual fund and
New fund offer . At very first day we just given classroom training there we learned about the
mutual fund from the day fifth we were in the market. In few years Mutual Fund has emerged
for ensuring one of the best return tools. Mutual Funds have not only contributed to the India
growth story but have also helped families to achieve their 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 things in the sales process that customers will accept as important and
relevant to their decision.

There is popular saying’’ sold only that attributes which consumer want’’. The topic of the
project has been given by project guide Ms. Parul Bhargava(Placement officer). As per our
discussion the topic has been found very important as far as in Baroda mutual fund. So being
a summer trainee of Baroda mutual fund Niwaru Road Jaipur branch, it was a great opportunity
for me to take up this topic as a challenge, because the result of this project or survey will be
very much beneficial for me as well as company too. They will get to know about their strength
and they will know that how much of market they have captured.

I used to go out to the market for selling interaction the products of the BOB and Due to this I
grab great experience to communicate with different types of customers, which was really good
experience and will help me in my future course of life. The major part of my training is I went
to business people, doctor’s and many more. .During the selling I found some difficulties like
the customers had no time or they were too busy with their works and in most of the cases they
were not available at their places.

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 why 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 program especially designed for bankers
we took part into that as a provisionary concept they used in program was mind blowing. It
was our great pleasure that we also attended training programmed in this session we learned
money market instrument and debt composition funds.

There is one thing that I have found that the peoples working at Baroda mutual fund are very
much helpful in all areas. Every time they came to me and told me that they are available at
any time for us for anything, which really boost me and motivated me towards my goal and
objectives. The culture of Baroda mutual fund is very much friendly and cool to work there.
The boss or cluster head as well as Branch relationship manager together play a vital role to
boost their colleagues.
 MUTUAL FUND
❖ Concept:-

A mutual fund is an investment vehicle which allows investors with similar (one could say
mutual) investment objectives, to pool their resources and thereby achieve economies of scale
and diversification in their investing.

"“mutual fund” means a fund established in the form of a trust to raise monies through the sale
of units to the public or a section of the pubic under one or more schemes for investing in
securities, money market instruments, gold or gold related instruments, real estate assets and
such other assets and instruments as may be specified by the Board from time to time.

In simple terms, a mutual fund is essentially a common pool of money in which investors put
in their contribution. This collective amount is then invested according to the investment
objective of the fund.

The money could be invested in stocks, bonds, money market instruments, gold, real estate and
other similar assets. These funds are operated by money managers or fund managers, who by
investing in line with the specified investment objective attempt to create growth or
appreciation of the amount for investors.
For example, a debt fund will have its specified objective to invest in fixed income instruments
or products like bonds, government securities, debentures, etc. Similarly, an equity fund will
invest in equity related instruments which include convertible debentures, convertible
preference shares, warrants carrying the right to obtain equity shares, equity derivatives and
such other instrument as may be specified by the Board from time to time.

❖ History:
A mutual fund is a financial intermediary that pools the savings of investors for collective
investment in a diversified portfolio of securities. A fund is “mutual” as all of its returns, minus
its expenses, are shared by the fund’s investors.

The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 defines a
mutual fund as a ‘a fund established in the form of a trust to raise money through the sale of
units to the public or a section of the public under one or more schemes for investing in
securities, including money market instruments’.

According to the above definition, a mutual fund in India can raise resources through sale of
units to the public. It can be set up in the form of a Trust under the Indian Trust Act. The
definition has been further extended by allowing mutual funds to diversify their activities in
the following areas:
· Portfolio management services
· Management of offshore funds
· Providing advice to offshore funds
· Management of pension or provident funds
· Management of venture capital funds
· Management of money market funds
· Management of real estate funds
A mutual fund serves as a link between the investor and the securities market by mobilising
savings from the investors and investing them in the securities market to generate returns.
Thus, a mutual fund is akin to portfolio management services (PMS). Although, both are
conceptually same, they are different from each other. Portfolio management services are
offered to high net worth individuals; taking into account their risk profile, their investments
are managed separately. In the case of mutual funds, savings of small investors are pooled
under a scheme and the returns are distributed in the same proportion in which the investments
are made by the investors/unit-holders.
Mutual fund is a collective savings scheme. Mutual funds play an important role in mobilising
the savings of small investors and channelising the same for productive ventures in the Indian
economy.

The history of mutual funds, dates back to 19th century Europe, in particular, Great Britain.
Robert Fleming set up in 1868 the first investment trust called Foreign and Colonial Investment
Trust which promised to manage the finances of the moneyed classes of Scotland by spreading
the investment over a number of different stocks. This investment trust and other investment
trusts which were subsequently set up in Britain and the US, resembled today’s close-ended
mutual funds. The first mutual fund in the US, Massachusetts Investors’
Trust, was setup in March 1924. This was the first open-ended mutual fund.

The stock market crash in 1929, the Great Depression, and the outbreak of the Second World
War slackened the pace of growth of the mutual fund industry. Innovations in products
and services increased the popularity of mutual funds in the 1950s and 1960s. The first
international stock mutual fund was introduced in the US in 1940. In 1976, the first tax-exempt
municipal bond funds emerged and in 1979, the first money market mutual funds were created.
The latest additions are the international bond fund in 1986 and arm funds in 1990. This
industry witnessed substantial growth in the eighties and nineties when there was a significant
increase in the number of mutual funds, schemes, assets, and shareholders. In the US, the
mutual fund industry registered a ten fold growth in the eighties (1980-89) only, with 25% of
the household sector’s investment in financial assets made through them. Fund assets
increased from less than $150 billion in 1980 to over $4 trillion by the end of 1997. Since 1996,
mutual fund assets have exceeded bank deposits. The mutual fund industry and the
banking industry virtually rival each other in size.

❖ BUSINESS STRUCTURE OF MUTUAL FUND

❖ Benefits of Mutual Funds

An investor can invest directly in individual securities or indirectly through a financial
intermediary. Globally, mutual funds have established themselves as the means of investment
for the retail investor.
1. Professional management: An average investor lacks the knowledge of capital market
operations and does not have large resources to reap the benefits of investment. Hence, he
requires the help of an expert. It, is not only expensive to ‘hire the services’ of an expert but it
is more difficult to identify a real expert. Mutual funds are managed by professional managers
who have the requisite skills and experience to analyse the performance and prospects of
companies. They make possible an organised investment strategy, which is hardly possible for
an individual investor.
2. Portfolio diversification: An investor undertakes risk if he invests all his funds in a single
scrip. Mutual funds invest in a number of companies across various industries and sectors. This
diversification reduces the riskiness of the investments.
3. Reduction in transaction costs: Compared to direct investing in the capital market,
investing through the funds is relatively less expensive as the benefit of economies of
scale is passed on to the investors.
4. Liquidity: Often, investors cannot sell the securities held easily, while in case of mutual
funds, they can easily encash their investment by selling their units to the fund if it is an
open-ended scheme or selling them on a stock exchange if it is a close-ended scheme.
5. Convenience: Investing in mutual fund reduces paperwork, saves time and makes
investment easy.
6. Flexibility: Mutual funds offer a family of schemes, and investors have the option of
transferring their holdings from one scheme to the other.
7. Tax benefits Mutual fund investors now enjoy income-tax benefits. Dividends received
from mutual funds’ debt schemes are tax exempt to the overall limit of Rs 9,000 allowed under
section 80L of the Income Tax Act.
8. Transparency Mutual funds transparently declare their portfolio every month. Thus an
investor knows where his/her money is being deployed and in case they are not happy with the
portfolio they can withdraw at a short notice.
9. Stability to the stock market Mutual funds have a large amount of funds which provide them
economies of scale by which they can absorb any losses in the stock market and continue
investing in the stock market. In addition, mutual funds increase liquidity in the money and
capital market.
10. Equity research Mutual funds can afford information and data required for investments as
they have large amount of funds and equity research teams available with them.
 ❖ Why do people buy mutual funds?

Mutual funds are a popular choice among investors because they generally offer the
following features:

❖ Professional Management. The fund managers do the research for you. They select
the securities and monitor the performance.
❖ Diversification or “Don’t put all your eggs in one basket.” Mutual funds typically
invest in a range of companies and industries. This helps to lower your risk if one
company fails.
❖ Affordability. Most mutual funds set a relatively low dollar amount for initial
investment and subsequent purchases.
❖ Liquidity. Mutual fund investors can easily redeem their shares at any time, for the
current net asset value (NAV) plus any redemption fees.

❖ Advantages of Investing in Best Mutual Funds

i. Expert Money Management

Since mutual funds are managed by a fund manager, the chances of making profits are
on the higher side. Every fund manager is backed by a team of analysts and experts who
do the research and choose the best-performing instruments to include in the fund’s
portfolio. Therefore, you don’t have to possess market knowledge
 ii. Option to invest small amounts regularly

One of the most significant advantages of investing in mutual funds is that you can
stagger your investments over time by taking the SIP or systematic investment plan
route. Through an SIP, you can invest a fixed sum as low as Rs 100 on a regular basis.
This alleviates the need to arrange for a lump sum to get started with your investment
journey.

iii. Diversification

On investing in mutual funds, you automatically diversify your portfolio across several
instruments. Every mutual fund invests in various securities, thereby providing
investors with the benefit of exposure to a diversified portfolio.

iv. Can redeem at any time

Most mutual fund schemes are open-ended. Therefore, you can redeem your mutual
fund units at any time. This ensures that investors are provided with the benefit of
liquidity and hassle-free withdrawal at all times.

v. Well regulated

All mutual fund houses are under the purview of the Securities and Exchange Board of
India (SEBI) and the Reserve Bank of India (RBI). Apart from these, the Association
of Mutual Funds in India (AMFI), a self-regulatory formed by the fund houses, also
keeps an eye on fund plans. Therefore, investments made in mutual funds are safe.

vi. Tax-efficient

If you are looking to save taxes under the provisions of Section 80C of the Income Tax
Act, 1961, then you can invest in the equity-linked saving scheme (ELSS) or tax-saving
mutual funds. These mutual funds provide tax deductions of up to Rs 1,50,000 a year,
which helps you save up to Rs 46,800 a year in taxes.

❖ Risk Possessed by Best Mutual Funds

As mentioned before, the risk level of mutual funds varies across types. Equity funds carry the
highest levels of risk since they mostly invest in the equity shares of companies across market
capitalisations. These funds are easily influenced by market movements.
The following are the types of risks that come attached with equity funds:

1. Market Risk

Market risk is the risk which can result in losses due to the underperformance of the
market. Several factors affect market movements. To name a few; natural disasters,
viral outbreaks, political unrest, and so on.

2. Concentration Risk

Concentration generally refers to emphasising on one particular thing. Concentrating

your investments towards a particular company is never advisable. No doubt that having
your investments concentrated on one sector proves to be beneficial at times when that
sector performs well, but if there is any adverse development, then your losses will be
magnified.

3. Interest Rate Risk

The interest rates fluctuate on the basis of the availability of credit with lenders and the
demand from borrowers. The rise in the interest rates during the investment tenure can
result in a drop in the price of securities.

4. Liquidity Risk

Liquidity risk refers to the difficulty in exiting the holding of a security at a loss. This
generally happens when the fund manager fails to find buyers.

5. Credit Risk

Credit risk refers to the possibility of a scenario wherein the issuer of the security fails
to pay the interest that was promised at the time of issuing the securities. You can gauge
the credit risk by looking at the credit ratings given by various credit rating agencies.

The following are the types of risks that come attached with equity funds:

1. Interest Risk
 It is the possibility of the rate of interest varying. This may happen due to a variety of
factors. A change in the rate of interest has a direct impact on the returns offered by the
underlying securities.

2. Credit Risk

It is the possibility of the issuer of the securities defaulting on the repayment of principal
and the payment of interest at the rate agreed upon at the time of issuing the securities.

3. Liquidity Risk

It is the possibility that the underlying securities may turn illiquid and the fund manager
may find it difficult to sell the securities held under the portfolio.

❖ Taxation of Best Mutual Funds

The dividends provided by all mutual funds are added to your overall income and taxed as per
the income tax slab you fall under. The rate of taxation of capital gains realised on selling
mutual fund units varies across mutual funds and holding period.

Here’s how equity funds are taxed:

If you sell your equity fund units within a holding period of one year from the date of purchase,
then you realise short-term capital gains. These gains are taxed at a flat rate of 15%, regardless
of your income tax slab. You realise long-term capital gains on redeeming your equity fund
units after a holding period of one year. Long-term capital gains (LTCG) of up to Rs 1 lakh a
year are made tax-exempt. Any LTCG above Rs 1 lakh a year are taxed at a flat rate of 10%,
and there is no benefit of indexation provided.

Here’s how debt funds are taxed:

Gains realised on selling debt fund units within a holding period of three years are termed short-
term capital gains. These gains are added to your overall income and taxed as per your income
tax slab. You make long-term capital gains on selling your debt fund units after a holding period
of three years. These gains are taxed at a flat rate of 20% after indexation.
Here’s how balanced funds are taxed:

The rate of taxation of gains realised on selling units of balanced funds depends on their equity
exposure. If the equity exposure of a balanced fund is in excess of 65%, then it is taxed like an
equity fund. If not, then the rules of taxation of debt funds apply. Therefore, when you are
investing in a hybrid fund, you should necessarily know its equity exposure.

❖ Types of Mutual Fund Schemes

The objectives of mutual funds are to provide continuous liquidity and higher yields with high
degree of safety to investors. Based on these objectives, different types of mutual fund schemes
have evolved.
Types of Mutual Fund Schemes:-
Functional :- Portfolio :- Geographical :- Other :-
Open-Ended Event Income Funds Domestic Sectoral Specific
Close-Ended Growth Funds Off-Shore Tax Saving
Scheme Balanced Funds ELSS
Interval Scheme Money Market Special
Mutual Fund Gilt Funds
Load Funds
Index Funds
ETFs
PIE Ratio Fund

▪ Functional Classification :-
1. Open-ended schemes: In case of open-ended schemes, the mutual fund continuously
offers to sell and repurchase its units at net asset value (NAV) or NAV-related prices.
Unlike close-ended schemes, open-ended ones do not have to be listed on the stock
exchange and can also offer repurchase soon after allotment. Investors can enter and
exit the scheme any time during the life of the fund. Open-ended schemes do not have
a fixed corpus. The corpus of fund increases or decreases, depending on the purchase
 or redemption of units by investors. There is no fixed redemption period in open-ended
schemes, which can be terminated whenever the need arises. The fund offers a
redemption price at which the holder can sell units to the fund and exit. Besides, an
investor can enter the fund again by buying units from the fund at its offer price. Such
funds announce sale and repurchase prices from time-to-time. UTI’s US-64 scheme is
an example of such a fund. The key feature of open-ended funds is liquidity. They
increase liquidity of the investors as the units can be continuously bought and sold. The
investors can develop their income or saving plan due to free entry and exit frame of
funds. Open-ended schemes usually come as a family of schemes which enable the
investors to switch over from one scheme to another of same family.

2. Close-ended schemes: Close-ended schemes have a fixed corpus and a stipulated

maturity period ranging between 2 to 5 years. Investors can invest in the scheme when
it is launched. The scheme remains open for a period not exceeding 45 days. Investors
in close-ended schemes can buy units only from the market, once initial subscriptions
are over and thereafter the units are listed on the stock exchanges where they dm be
bought and sold. The fund has no interaction with investors till redemption except for
paying dividend/bonus. In order to provide an alternate exit route to the investors, some
close-ended funds give an option of selling back the units to the mutual fund through
periodic repurchase at NAV related prices. If an investor sells units directly to the fund,
he cannot enter the fund again, as units bought back by the fund cannot be reissued.
The close-ended scheme can be converted into an open-ended one.

3. Interval scheme: Interval scheme combines the features of open-ended and close-
ended schemes. They are open for sale or redemption during predetermined intervals at
NAV related prices.

▪ Portfolio Classification :-
Here, classification is on the basis of nature and types of securities and objective of investment.
1. Income funds: The aim of income funds is to provide safety of investments and regular
income to investors. Such schemes invest predominantly in income-bearing instruments
like bonds, debentures, government securities, and commercial paper. The return as
well as the risk are lower in income funds as compared to growth funds.
2. Growth funds: The main objective of growth funds is capital appreciation over the
medium-to-long- term. They invest most of the corpus in equity shares with significant
growth potential and they offer higher return to investors in the long-term. They assume
the risks associated with equity investments. There is no guarantee or assurance of
returns. These schemes are usually close-ended and listed on stock exchanges.

3. Balanced funds: The aim of balanced scheme is to provide both capital appreciation
and regular income. They divide their investment between equity shares and fixed nice
bearing instruments in such a proportion that, the portfolio is balanced. The portfolio
of such funds usually comprises of companies with good profit and dividend track
records. Their exposure to risk is moderate and they offer a reasonable rate of return.

4. Money market mutual funds: They specialise in investing in short-term money

market instruments like treasury bills, and certificate of deposits. The objective of such
funds is high liquidity with low rate of return.

▪ Geographical Classification :-
1. Domestic funds: Funds which mobilise resources from a particular geographical
locality like a country or region are domestic funds. The market is limited and confined
to the boundaries of a nation in which the fund operates. They can invest only in the
securities which are issued and traded in the domestic financial markets.

2. Offshore funds: Offshore funds attract foreign capital for investment in ‘the country
of the issuing company. They facilitate cross-border fund flow which leads to an
increase in foreign currency and foreign exchange reserves. Such mutual funds can
invest in securities of foreign companies. They open domestic capital market to
international investors. Many mutual funds in India have launched a number of offshore
funds, either independently or jointly with foreign investment management companies.
The first offshore fund, the India Fund, was launched by Unit Trust of India in July
1986 in collaboration with the US fund manager, Merril Lynch.

▪ Others :-
1. Sectoral: These funds invest in specific core sectors like energy, telecommunications,
IT, construction, transportation, and financial services. Some of these newly opened-up
sectors offer good investment potential.

2. Tax saving schemes: Tax-saving schemes are designed on the basis of tax policy with
special tax incentives to investors. Mutual funds have introduced a number of tax saving
schemes. These are close--ended schemes and investments are made for ten years,
although investors can avail of encashment facilities after 3 years. These schemes
Contain various options like income, growth or capital application. The latest scheme
offered is the Systematic Withdrawal Plan (SWP) which enables investors to reduce
their tax incidence on dividends from as high as 30% to as low as 3 to 4%.

3. Equity-linked savings scheme (ELSS): In order to encourage investors to invest in

equity market, the government has given tax-concessions through special schemes.
Investment in these schemes entitles the investor to claim an income tax rebate, but
these schemes carry a lock-in period before the end of which funds cannot be
withdrawn.
4. Special schemes: Mutual funds have launched special schemes to cater to the special
needs of investors. UTI has launched special schemes such as Children’s Gift Growth
Fund, 1986, Housing Unit Scheme, 1992, and Venture Capital Funds.

5. Gilt funds: Mutual funds which deal exclusively in gilts are called gilt funds. With a
view to creating a wider investor base for government securities, the Reserve Bank of
India encouraged setting up of gilt funds. These funds are provided liquidity support by
the Reserve Bank.
6. Load funds: Mutual funds incur certain expenses such as brokerage, marketing
expenses, and communication expenses. These expenses are known as ‘load’ and are
recovered by the fund when it sells the units to investors or repurchases the units from
withholders. In other words, load is a sales charge, or commission, assessed by certain
mutual funds to cover their selling costs.
Loads can be of two types-
1) Front-end-load and
2) back-end load.
 Front-end-load, or sale load, is a charge collected at the time when an investor enters
into the scheme. Back-end, or repurchase, load is a charge collected when the investor
gets out of the scheme. Schemes that do not charge a load are called ‘No load’ schemes.
In other words, if the asset management company (AMC) bears the load during the
initial launch of the scheme, then these schemes are known as no-load schemes.
However, these no-load schemes can have an exit load when the unit holder gets out of
the scheme before a I stipulated period mentioned in the initial offer. This is done to
prevent short-term investments and redemptions. Some funds may also charge different
amount of loads to investors depending upon the time period the investor has stayed
with the funds. The longer the investor stays with the fund, less is the amount of exit
load charged. This is known as contingent deferred sales’ charge (CDSL). It is a back-
end (exit load) fee imposed by certain funds on shares redeemed with a specific period
following their purchase and is usually assessed on a sliding scale.

7. Index funds: An index fund is a mutual fund which invests in securities in the index
on which it is based BSE Sensex or S&P CNX Nifty. It invests only in those shares
which comprise the market index and in exactly the same proportion as the
companies/weight age in the index so that the value of such index funds varies with the
market index. An index fund follows a passive investment strategy as no effort is made
by the fund manager to identify stocks for investment/dis-investment. The fund
manager has to merely track the index on which it is based. His portfolio will need an
adjustment in case there is a revision in the underlying index. In other words, the fund
manager has to buy stocks which are added to the index and sell stocks which are
deleted from the index. Internationally, index funds are very popular. Around onethird
of professionally run portfolios in the US are index funds. Empirical evidence points
out that active fund managers have not been able to perform well. Only 20-25% of
actively managed equity mutual funds out-perform benchmark indices in the long-term.
These active fund managers park 80% of their money in an index and do active
management on the remaining 20%. Moreover, risk investors like provident funds and
pension funds prefer investment in passively managed funds like index funds.

8. PIE ratio fund: PIE ratio fund is another mutual fund variant that is offered by Pioneer
IT! Mutual Fund. The PIE (Price-Earnings) ratio is the ratio of the price of the stock of
 a company to its earnings per share (EPS). The PIE ratio of the index is the weighted
average price-earnings ratio of all its constituent stocks.
The PIE ratio fund invests in equities and debt instruments wherein the proportion of
the investment is determined by the ongoing price-earnings multiple of the market.
Broadly, around 90% of the investible funds will be invested in equity if the Nifty Index
PIE ratio is 12 or below. If this ratio exceeds 28, the investment will be in debt/money
markets. Between the two ends of 12 and 28 PIE ratio of the Nifty, the fund will allocate
varying proportions of its investible funds to equity and debt. The objective of this
scheme is to provide superior risk-adjusted returns through a balanced portfolio of
equity and debt instruments.
9. Exchange traded funds: Exchange Traded Funds (ETFs) are a hybrid of open-ended
mutual funds and listed individual stocks. They are listed on stock exchanges and trade
like individual stocks on the stock exchange. However, trading at the stock exchanges
does not affect their portfolio. ETFs do not sell their shares directly to investors for
cash. The shares are offered to investors over the stock exchange. ETFs are basically
passively managed funds that track a particular index such as S&P CNX Nifty.
Since they are listed on stock exchanges, it is possible to buy and sell them throughout
the day and their price is determined by the demand-supply forces in the market. In
practice, they trade in a small range around the value of the assets (NAV) held by them.
• ETFs offer several distinct advantages:
• ETFs bring the trading and real time pricing advantages of individual stocks to mutual
funds. The ability to trade intraday at prices that are usually close to the actual intra-
day NAV of the scheme makes it almost real-time trading.
• ETFs are simpler to understand and hence they can attract small investors who are
deterred to trade in index futures due to requirement of minimum contract size. Small
investors can buy minimum one unit of ETF, can place limit orders and trade intra-day.
This, in turn, would increase liquidity of the cash market.
• ETFs can be used to arbitrate effectively between index futures and spot index.
• ETFs provide the benefits of diversified index funds. The investor can benefit from the
flexibility of stocks as well as the diversification.
• ETFs being passively managed, have somewhat higher NAV against an index fund of
the same portfolio. The operating expenses of ETFs are lower than even those of similar
 index funds as they do not have to service investors who deal in shares through stock
exchanges.
• ETFs can be beneficial for financial institutions also. Financial institutions can use
ETFs for utilizing idle cash, managing redemptions, modifying sector allocations, and
hedging market exposure.
The first exchange traded fund-Standard and Poor’s Depository Receipt (SPDR-also called
Spider)-was launched in the US in 1993. ETFs have grown rapidly with around US$100 billion
in assets as on December 2001. Today, about 60% of trading value on the American Stock
Exchange (AMEX) is from ETFs. ETFs were launched in Europe and Asia in 2001. Currently,
more than 120 ETFs are available in US, Europe, Singapore, Hongkong, Japan, and other
countries. Among the popular ones are SPDRs (Spiders) based on the S&P 500 Index, QQQs
(cubes) based on the Nasdaq-100 Index, i SHARES based on MSCI Indices and TRAHK
(Tracks) based on the Hang Seng Index. The ETF structure has seen over $120 bn pouring into
it in more than 220 funds. It has become the fastest growing fund structure. In year 2001 alone,
the number of funds doubled from 100 to 200.

The first ETF to be introduced in India is Nifty Bench mark Exchange-Traded Scheme (Nifty
BeES). It is an open-ended ETF, launched towards the end of 2001 by Benchmark Mutual
Funds. The fund is listed in the capital market segment of the NSE and trades the S&P CNX
Nifty Index. The Benchmark Asset Management Company has become the first company in
Asia (excluding Japan) to introduce ETF.

Net Asset Value

The net asset value of a fund is the market value of the assets minus the liabilities on the day
of valuation. In other words, it is the amount which the shareholders will collectively get if the
fund is dissolved or liquidated. The net asset value of a unit is the net asset value of fund divided
by the number of outstanding units. Thus NAV = Market Price of Securities + Other Assets –
Total Liabilities + Units Outstanding as at the NAV date. NAV = Net Assets of the Scheme +
Number of units outstanding, that is, Market value of investments + Receivables + Other
Accrued Income + Other Assets - Accrued Expenses - Other Payables - Other Liabilities + No.
of units outstanding as at the NAV date
A fund’s NAV is affected by four sets of factors: purchase and sale of investment securities,
valuation of all investment securities held, other assets and liabilities, and units sold or
redeemed.

SEBI has issued guidelines on valuation of traded securities, thinly traded securities and non-
traded securities. These guidelines were issued to streamline the procedure of calculation
of NAV of the schemes of mutual funds. The aggregate value of illiquid securities as defined
in the guidelines shall not exceed 15% of the total assets of the scheme and any illiquid
securities held above 15% of the total assets shall be valued in the manner as specified in the
guidelines issued by the SEBI. Where income receivables on investments has accrued but has
not been received for the period specified in the guidelines issued by SEBI, provision shall be
made by debiting to the revenue account the income so accrued in the manner specified
By guidelines issued by SEBI.

Mutual funds are required to declare their NAV s and seller purchase prices of all schemes
updated daily on regular basis on the AMFI website by 8.00 p.m. and declare NA V s of their
Close-ended schemes on every Wednesday.

According to SEBI (Mutual Funds) (Second Amendment) Regulations, 2000, a mutual fund
can now invest up to 5% of its NAV in the unlisted equity shares or equity related instruments
in case of open-ended schemes; while in case of close-ended schemes, the mutual fund can
now invest up to 10% of its NAY.

❖ Mutual Fund Investors

Mutual funds in India are open to investment by
o Residents including:-
• Resident Indian Individuals, including high net worthindividuals and the retail or small
investors. Indian Companies
• Indian Trusts/Charitable Institutions
• Banks
• Non-Banking Finance Companies
• Insurance Companies
• Provident Funds
o Non-Residents, including
• Non-Resident Indians
• Other Corporate Bodies (OCBs)
c. Foreign entities, namely, Foreign Institutional Investors (FIIs) registered with SEBI.
Foreign citizens/ entities are however not allowed to invest in mutual funds in India.

Market survey plays a vital role in understanding the investment pattern of the customer and
the level of satisfaction. It is very important for the company to perform such activities like
market research and surveys at regular intervals and accordingly further plans and policies can
be formulated. By studying the investment pattern of the customers, the company can plan the
strategies to capture the more market share by providing the better services and customized
plans.

❖ FD vs Mutual Fund

Fixed Deposits are the traditional investment choice for most Indian households. As per RBI
research released in June 2020, 53% of average household financial assets are invested in Bank
FDs (as on March 2020). Though mutual funds have a long history in India with setting up of
Unit Trust of India in 1963, popularity of mutual funds among retail investors have grown only
in the last 20 – 25 years. As per AMFI data, AUM of mutual funds in India has grown at CAGR
of nearly 17% over the last 20 years. Despite the rapid growth, RBI research suggests that
mutual funds comprise only 7% of household savings. We will compare FD vs mutual fund so
that investors can make informed decision on whether to invest in FD or mutual funds.

What are Fixed Deposits?

As the name suggests, FDs offer fixed interest rate to investors for fixed tenures. FD tenures
can range from 7 days to 10 years. Bank FD interest is compounded, i.e. you get interest on
accrued interest. For example, let us assume a bank pays 6% interest (compounding annually)
for 3 year FD. If you deposit Rs 100, after 1 year your account will have Rs 106. In year 2, you
will get 6% interest on principal plus interest, i.e. 6% on Rs 106 or Rs 6.4. The additional 40
paisa is due to compounding.
A cause of concern especially for senior citizens who invest their savings primarily in FDs is
the declining interest rates. FD interest rate has seen secular decline over the past 25 years (see
the chart below). With RBI cutting interest rates aggressively in the wake of COVID-19
outbreak, banks have also reduced FD interest rates. On a post-tax basis, FD interest rates are
now barely able to beat inflation. FD interest is taxed as per income tax slab of depositors.
Since the FD interest rate is fixed over the FD tenure, there is no indexation benefit in taxation
if FD vs mutual fund comparison is done. Therefore, there is no protection from inflation,
especially when FD interest rates are so low.

What are Mutual Funds?

Mutual funds are financial instruments formed by pooling money from many investors and
managed by Asset Management Companies. Mutual funds are portfolios of stocks or bonds of
which unit-holders have ownership. mutual funds offer a variety of investment options based
on investors’ financial needs. Equity mutual funds invest primarily in the stock market whereas
debt funds invest in money and bond markets. The primary investment objective of equity
funds is capital appreciation and for debt the objective is to generate income.

While investing you should choose schemes whose fund managers have good long term
performance track record. The table below shows 3, 5 and 10 year annualized returns of top
performing equity and debt mutual funds.
Average performance of top quartile mutual funds

Mutual funds 3 year returns 5 year returns 10 year returns

Equity 5% 6 – 7% 11 – 13%

Debt 8 – 9% 8 – 9% L8 – 9%

One major advantage of mutual fund vs fixed deposit is taxation. Mutual funds are among the
most tax efficient investments. Short term capital gains in equity funds (held for less than 12
months) are taxed at 15% and long term capital gains (held for more than 12 months) of up to
Rs 1 lakh are tax exempt and taxed at 10% thereafter.

In debt funds, short term capital gains (held for less than 36 months) are taxed as per the income
tax slab of the investor and long term capital gains (held for more than 36 months) are taxed at
20% after allowing indexation benefits. Therefore, in debt fund vs fixed deposit comparison,
debt funds scores high.

Key difference between fd and mutual funds’ which has a S.V of 90.
Parameters FD Mutual Funds

Very safe (subject to Mutual funds are subject to market risks. Different
Safety financial strength of types of schemes have different risk profiles. Invest
the bank). according to your risk appetite.

Medium to Highly
Open ended funds are highly liquid. Exit load may
liquid. Penalties may
Liquidity apply for withdrawals within a certain period from the
apply on premature
date of investment
withdrawals
 Parameters FD Mutual Funds

Market linked. Historical returns track record of top

Returns Assured returns
performing funds across categories is strong

Long term capital gains tax advantage. If you compare

As per income tax slab debt fund vs fixed deposit, Indexation benefits in debt
Taxation
of investors funds makes it more tax friendly for investors in higher
income tax slabs

Investor
interest Regulated by RBI Regulated by SEBI
protection

Safety of FD versus mutual funds

When FD vs mutual fund is compared, FDs are thought to be the safest investment because of
assured interest and principal on maturity. Though FDs are thought to be risk-free investments,
investors should know that the liquidity and safety of FD depends on the financial solvency of
the bank/ financial institutions. Banks are regulated by RBI, which tries to ensure prudential
lending norms so that depositor’s money is safe. However, several incidents of violations of
RBI norms have been seen in the recent past leaving depositors in the lurch. Such incidents can
cause suspension of withdrawal, limits imposed on how much you can withdraw and even not
being able to withdraw your money indefinitely depending on the situation. Such unpleasant
incidents notwithstanding, FDs are by and large very safe and give you assured returns.

While comparing mutual fund vs fixed deposit, mutual funds diversify risks by investing in a
portfolio of stocks or bonds. However, mutual funds are subject to market risks and there is no
assurance of returns unlike FDs. Different mutual funds like equity funds and debt mutual
funds have different risk profiles. Equity as an asset class is much more volatile than debt funds
but has the potential of high returns over a long investment horizon compared to debt funds.
Equity funds are suitable for long term investment goals while debt funds are suitable for short
to medium term goals. Therefore, investors should always invest according to their financial
goals and risk appetite. Moderately high to high risk appetite profile investors can select equity
funds while those who can take only moderate to low risk can invest in debt funds.

10 best-performing mutual funds in the last 5 years

We have put together the 10 best-performing mutual funds in the last five years to make
it easier to choose the right one best suited to your financial capacity and risk appetite.

While there are several investment options out there, mutual funds are one of the best and
simplest avenues that offer sizable returns.

It’s often said that “While saving money is wise, investing it is profitable”, and for good
reason. Investing your money helps multiply it and build wealth rather than leaving it sitting
idle in your bank accounts. While there are several investment options out there, mutual
funds are one of the best and simplest avenues that offer sizable returns.
While most people are aware of mutual funds, the challenge and confusion often ensue when
those new to the mutual fund space realize that there are several different mutual funds. There
are multiple parameters such as expense ratio, performance against a benchmark, fund
manager’s experience, etc, to consider before investing. Understanding that doing extensive
research on this can be tedious and time-consuming, we’ve put together the 10 best-
performing mutual funds in the last five years to make it easier to choose the right one best
suited to your financial capacity and risk appetite.
However, before delving into the best-performing mutual funds, it’s necessary to understand
their classification. Mutual funds are often categorized as large-cap funds, mid-cap funds,
small-cap funds, flexi cap funds, and ELSS (Equity-Linked Savings Scheme) funds.
1. Axis Bluechip Fund (Large-Cap)
Launched by Axis Mutual Fund, the Axis Bluechip Fund currently has an AUM of INR
29,160.6 crore and invests in blue-chip stocks or stocks of large organizations that are
financially stable and established. While they are less volatile than mid-cap or small-cap
stocks and have sufficient liquidity, they are rated high risk and the minimum SIP is set to
INR 500 with the minimum lump sum investment set to INR 5000. The Axis Bluechip Fund
aims to generate long-term capital growth through investment in a diverse portfolio and is
suitable for investors who are looking for long-term capital appreciation. The 5-year CAGR
for the fund is 18.50%.

2. Canara Robeco Bluechip Equity Fund (Large-Cap)

An equity mutual fund scheme launched by Canara Robeco Mutual Fund, this scheme has
been available since 2013 and seeks to provide capital appreciation by mainly investing in
companies having large market capitalization. With a current Asset Under Management
(AUM) of INR 3,691.25 cr, the fund is rated extremely high risk and the minimum SIP
(Systematic Investment Plan) is set to 1000. While the returns are taxed at 15% if the fund is
redeemed before one year, customers are required to pay 10% along with an LTCG tax on the
returns of INR 1 lakh+ in a financial year. The fund offers a 5-year CAGR of 18.08%.

3. PGIM India Mid-Cap Opportunities Fund

With an expense ratio of 0.37% and a minimum SIP amount of INR 1000, the PGIM India
Midcap Opportunities fund currently has an AUM of INR 2383.38 cr. While the minimum
lump sum amount is INR 5000, for units crossing 10% of the investment, 0.5% will be the
levied charges for redemption within 90 days. Classified as very high risk, the PGIM India
Midcap Opportunities Fund is best suited for investors who aim to invest for at least 3-4 years
and are seeking high returns, and have a 5-year CAGR of 21.23%.

4. Axis Mid-Cap Fund

Having an AUM of INR 13,834.27 cr, the companies chosen for the portfolio of this fund are
the ones with high growth prospects to assist the investment goal of quick wealth creation.
While the Axis Midcap Fund is a moderately high risk, it’s suitable for those looking to
invest for 3-4 years and wish to receive high returns. However, being a high-risk fund,
investors also need to be prepared for the possibility of moderate losses in their investments.
The fund has a 5-year CAGR of 21.13% and is ideal for long-term goals such as education,
retirement, etc.

5. Nippon India Small-Cap Fund

Looking to focus on small-cap companies across sectors, the Nippon India Small-cap Fund is
extremely high risk with minimum SIP investments set to INR 100 while the lump sum
investment is 5000 with an exit load of 1% if redeemed within a month. Made available to
investors in 2013, the fund is ideal for those with greater risk appetite and are expecting
higher returns although investors need to be ready for moderate losses owing to the risk
factor. The fund offers a 5-year CAGR of 23.61%.

6. SBI Small-Cap Fund

With a Net Asset Value (NAV) of INR 102.68 as of 16th Aug 2021, the SBI small-cap fund
has an AUM of INR 9,620.21 cr with an expense ratio of 0.84%. Being extremely high risk,
the fund has a minimum SIP of INR 500. The stock selection strategy includes both growth
and value investing. Providing a 5-year CAGR of 23.31%, the fund aims to provide investors
with opportunities for long-term wealth growth.

7. Parag Parikh Flexi-Cap Fund

Rated extremely high risk, the Parag Parikh Flexi-cap fund has an AUM of INR 13,186.70 cr
but has a lower expense ratio of 0.89%. With a minimum lump sum investment amount of
INR 5000, the fund comes with an exit load of 2% if redeemed within 365 days and 1% if
redeemed between 366-730 days. Aiming to achieve long-term capital appreciation by
investing primarily in equity and equity-related instruments, the fund is suitable for those
looking to invest for 3-4 years and offers a 5-year CAGR of 21.51%.

8. PGIM India Flexi-Cap Fund

Aiming to generate income by investing in an actively managed diversified portfolio, the
PGIM India Flexi-cap fund is extremely high risk and has an AUM of INR 1,688.70 cr.
Having been made available to investors in March 2015, the fund offers high returns but
investors need to be wary of experiencing moderate losses due to its high-risk nature. The
PGIM India Flexi-cap fund offers a 5-year CAGR of 20.79%.
9. Quant Tax Plan (ELSS)
With an AUM of INR 327.45 cr, the Quant Tax Plan seeks to generate capital appreciation by
investing in equity shares that display growth potential. Rated extremely high risk, the fund
has a minimum SIP investment and a minimum lump sum investment of INR 500. Under
Section 80C, up to INR 1.5 lakh on the returns will be exempted from tax but the fund
requires a lock-in period of 3 years. Returns over INR 1.5 lakh will be taxed at 10%. The
fund offers a 5-year CAGR of 23.92%.

10. Mirae Asset Tax Saver Fund (ELSS)

Having a low expense ratio of just 0.48%, the Mirae Asset Tax Saver Fund has a zero exit
load with higher returns than the category average. Being an open-ended ELSS, the fund
comes with a lock-in period of 3 years and is open to investing across market capitalizations.
Its flexible approach offers a diversified portfolio containing stable, established companies
and shows high growth potential. With a 5-year CAGR of 22.45%, the Mirae Asset Tax
Saver fund is best suited for investors looking to place their money in an investment for 3
years. The fund serves a dual purpose – tax-saving and long-term wealth creation.

❖ Growth of Mutual Funds in India

The Indian mutual fund industry has evolved over distinct stages. The growth of the mutual
fund industry in India can be divided into four phases: Phase I (1964-87), Phase II (1987-92),
Phase III (1992-97), and Phase IV (beyond 1997).

Phase I: The mutual fund concept was introduced in India with the setting up of UTI in 1963.
The Unit Trust of India (UTI) was the first mutual fund set up under the UTI Act, 1963, a
special act of the Parliament. It became operational in 1964 with a major objective of
mobilising savings through the sale of units and investing them in corporate securities for
maximising yield and capital appreciation. This phase commenced with the launch of Unit
Scheme 1964 (US-64) the first open-ended and the most popular scheme. UTI’s investible
funds, at market value (and including the book value of fixed assets) grew from Rs 49 crore
in1965 to Rs 219 crore in 1970-71 to Rs 1,126 crore in 1980-81 and further to Rs 5,068 crore
by June 1987. Its investor base had also grown to about 2 million investors. It launched
innovative schemes during this phase. Its fund family included five income-oriented, open-
ended schemes, which were sold largely through its agent network built up over the years.
Master share, the equity growth fund launched in 1986, proved to be a grand marketing success.
Master share was the first real close-ended scheme floated by UTI. It launched India Fund in
1986-the first Indian offshore fund for overseas investors, which was listed on the London
Stock Exchange (LSE). UTI maintained its monopoly and experienced a consistent growth till
1987.

Phase II: The second phase witnessed the entry of mutual fund companies sponsored by
nationalised banks and insurance companies. In 1987, SBI Mutual Fund and Canbank Mutual
Fund were set up as trusts under the Indian Trust Act, 1882. In 1988, UTI floated another
offshore fund, namely, The India Growth Fund which was listed on the New York Stock
Exchange (NYSB). By 1990, the two nationalised insurance giants, LIC and GIC, and
nationalised banks, namely, Indian Bank, Bank of India, and Punjab National Bank had started
operations of wholly-owned mutual fund subsidiaries. The assured return type of schemes
floated by the mutual funds during this phase were perceived to be another banking product
offered by the arms of sponsor banks. In October 1989, the first regulatory guidelines were
issued by the Reserve Bank of India, but they were applicable only to the mutual funds
sponsored by FIIs. Subsequently, the Government of India issued comprehensive guidelines in
June 1990 covering all ‘mutual funds. These guidelines emphasised compulsory registration
with SEBI and an arms length relationship be maintained between the sponsor and asset
management company (AMC). With the entry of public sector funds, there was a tremendous
growth in the size of the mutual fund industry with investible funds, at market value, increasing
to Rs 53,462 crore and the number of investors increasing to over 23
million. The buoyant equity markets in 1991-92 and tax benefits under equity-linked savings
schemes enhanced the attractiveness of equity funds.

Phase III: The year 1993 marked a turning point in the history of mutual funds in India. Tile
Securities and Exchange Board of India (SEBI) issued the Mutual Fund Regulations in January
1993. SEBI notified regulations bringing all mutual funds except UTI under a common
regulatory framework. Private domestic and foreign players were allowed entry in the mutual
fund industry. Kothari group of companies, in joint venture with Pioneer, a US fund company,
set up the first private mutual fund the Kothari Pioneer Mutual Fund, in 1993. Kothari Pioneer
introduced the first open-ended fund Prima in 1993. Several other private sector mutual funds
were set up during this phase. UTI launched a new scheme, Master-gain, in May 1992, which
was a phenomenal success with a subscription of Rs 4,700 crore from 631akh applicants. The
industry’s investible funds at market value increased to Rs 78,655 crore and the number of
investor accounts increased to 50 million. However, the year 1995 was the beginning of the
sluggish phase of the mutual fund industry. During 1995 and 1996, unit holders saw an erosion
in the value of their investments due to a decline in the NA V s of the equity funds. Moreover,
the service quality of mutual funds declined due to a rapid growth in the number of investor
accounts, and the inadequacy of service infrastructure. A lack of performance of the public
sector funds and miserable failure of foreign funds like Morgan Stanley eroded the confidence
of investors in fund managers.

Phase IV: During this phase, the flow of funds into the kitty of mutual funds sharply
increased. This significant growth was aided by a more positive sentiment in the capital market,
significant tax benefits, and improvement in the quality of investor service. Investible funds, at
market value, of the industry rose by June 2000 to over Rs 1,10,000 crore with UTI having
68% of the market share. During 1999-2000 sales mobilisation reached a record level of Rs
73,000 crore as against Rs 31,420 crore in the preceding year. This trend was, however,
sharply reversed in 2000-01. The UTI dropped a bombshell on the investing public by
disclosing the NAV of US-64-its flagship scheme as on December 28,2000, just at Rs 5.81 as
against the face value of Rs 10 and the last sale price of Rs 14.50. The disclosure of NAV of
the country’s largest mutual fund scheme was the biggest shock of the year to investors.
Crumbling global equity markets, a sluggish economy coupled with bad investment decisions
made life tough for big funds across the world in 2001-02. The effect of these problems was
felt strongly in India also. Pioneer m, JP Morgan and Newton Investment Management pulled
out from the Indian market. Bank of India MF liquidated all its schemes in 2002.

The Indian mutual fund industry has stagnated at around Rs 1,00,000 crore assets since 2000-
01. This stagnation is partly a result of stagnated equity markets and the indifferent
performance by players. As against this, the aggregate deposits of Scheduled Commercial
Banks (SCBs) as on May 3, 2002, stood at Rs 11,86,468 crore. Mutual funds assets under
management (AUM) form just around 10% of deposits of SCBs.
COMPANY PROFILE
 ❖ Bank of Baroda (BOB) is an Indian nationalised banking and financial services
company. It is under the ownership of the Ministry of Finance of the government of
India. It is the fourth largest nationalised bank in India, with 132 million customers, a
total business of US$218 billion, and a global presence of 100 overseas offices. Based
on 2019 data, it is ranked 1145 on Forbes Global 2000 list.

The Maharaja of Baroda, Maharaja Sayajirao Gaekwad III, founded the bank on 20 July 1908
in the Princely State of Baroda, in Gujarat. The government of India nationalized the bank,
along with 13 other major commercial banks of India on 19 July 1969; the bank has been
designated as a profit-making public sector undertaking (PSU).

❖ History
Maharaja Sayajirao Gaekwad III, the founder of Bank of Baroda

In 1908, Maharaja Sayajirao Gaekwad III, set up the Bank of Baroda (BOB), with other
stalwarts of industry such as Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey,
Tulsidas Kilachand and NM Chokshi. Two years later, BOB established its first branch
in Ahmedabad. The bank grew domestically until after World War II. Then in 1953 it crossed
the Indian Ocean to serve the communities of Indians in Kenya and Indians in Uganda by
establishing a branch each in Mombasa and Kampala. The next year it opened a second branch
in Kenya, in Nairobi, and in 1956 it opened a branch in Tanzania at Dar-es-Salaam. Then in
1957, BOB took a big step abroad by establishing a branch in London. London was the center
of the British Commonwealth and the most important international banking center. In 1958
BOB acquired Hind Bank (Calcutta; est. 1943), which became BOB's first domestic
acquisition.

1960s

In 1961, BOB acquired New Citizen Bank of India. This merger helped it increase its branch
network in Maharashtra. BOB also opened a branch in Fiji. The next year it opened a branch
in Mauritius
In 1963, BOB acquired Surat Banking Corporation in Surat, Gujarat. The next year BOB
acquired two banks: Umbergaon People's Bank in southern Gujarat and Tamil Nadu Central
Bank in Tamil Nadu state.

In 1965, BOB opened a branch in Guyana. That same year BOB lost its branch
in Narayanganj (East Pakistan) due to the Indo-Pakistani War of 1965. It is unclear when BOB
had opened the branch. In 1967 it suffered a second loss of branches when the Tanzanian
government nationalised BOB's three branches there at (Dar es Salaam, Mwanga, and Moshi),
and transferred their operations to the Tanzanian government-owned National Banking
Corporation.

In 1969, the Indian government nationalised 14 top banks including BOB. BOB incorporated
its operations in Uganda as a 51% subsidiary, with the government owning the rest.

1970s

In 1972, BOB acquired Bank of India's operations in Uganda. Two years later, BOB opened a
branch each in Dubai and Abu Dhabi.

Back in India, in 1975, BOB acquired the majority shareholding and management control of
Bareilly Corporation Bank (est. 1954) and Nainital Bank (est. in 1922), both in Uttar
Pradesh and Uttarakhand respectively. Since then, Nainital Bank has expanded to Uttarakhand,
Uttar Pradesh, Haryana, Rajasthan and Delhi state. Right now BOB have 99% shareholding in
Nainital Bank.

International expansion continued in 1976 with the opening of a branch in Oman and another
in Brussels. The Brussels branch was aimed at Indian firms from Mumbai (Bombay) engaged
in diamond cutting and jewellery having business in Antwerp, a major center for diamond
cutting.

Two years later, BOB opened a branch in New York and another in the Seychelles. Then in
1979, BOB opened a branch in Nassau, the Bahamas.

1980s

In 1980, BOB opened a branch in Bahrain and a representative office in Sydney, Australia.
BOB, Union Bank of India and Indian Bank established IUB International Finance, a licensed
deposit taker, in Hong Kong. Each of the three banks took an equal share. Eventually (in 1999),
BOB would buy out its partners.
A second consortium or joint-venture bank followed in 1985. BOB (20%), Bank of
India (20%), Central Bank of India (20%) and ZIMCO (Zambian government; 40%)
established Indo-Zambia Bank in Lusaka. That same year BOB also opened an Offshore
Banking Unit (OBU) in Bahrain (Gulf).

Back in India, in 1988, BOB acquired Traders Bank, which had a network of 34 branches in
Delhi.

1990s

In 1992, BOB opened an OBU in Mauritius, but closed its representative office in Sydney. The
next year BOB took over the London branches of Union Bank of India and Punjab & Sind
Bank (P&S). P&S's branch had been established before 1970 and Union Bank's after 1980.
The Reserve Bank of India ordered the takeover of the two following the banks' involvement
in the Sethia fraud in 1987 and subsequent losses.

Then in 1992 BOB incorporated its operations in Kenya into a local subsidiary. The next year,
BOB closed its OBU in Bahrain.

In 1996, BOB Bank entered the capital market in December with an initial public
offering (IPO). The government of India is still the largest shareholder, owning 66% of the
bank's equity.

In 1997, BOB opened a branch in Durban. The next year BOB bought out its partners in IUB
International Finance in Hong Kong. Apparently this was a response to regulatory changes
following Hong Kong's reversion to the People's Republic of China. The now wholly owned
subsidiary became Bank of Baroda (Hong Kong), a restricted license bank. BOB also acquired
Punjab Cooperative Bank in a rescue. BOB incorporate a wholly–owned subsidiary, BOB
Capital Markets, for broking business.

In 1999, BOB merged in Bareilly Corporation Bank in another rescue. At the time, Bareilly
had 64 branches, including four in Delhi. In Guyana, BOB incorporated its branch as a
subsidiary, Bank of Baroda Guyana. BOB added a branch in Mauritius and closed its Harrow
Branch in London.

2000s

In 2000 BOB established Bank of Baroda (Botswana). The bank has three banking offices, two
in Gaborone and one in Francistown. In 2002, BOB converted its subsidiary in Hong Kong
from deposit taking company to a Restricted License Bank
In 2002 BOB acquired Benares State Bank (BSB) at the Reserve Bank of India's request. BSB
had been established in 1946 but traced its origins back to 1871 and its function as the treasury
office of the Benares state. In 1964 BSB had acquired Bareilly Bank (est. 1934), with seven
branches in western districts of Uttar Pradesh; BSB also had taken over Lucknow Bank in
1968. The acquisition of BSB brought BOB 105 new branches. Lucknow Bank, a unit bank
with its only office in Aminabad, had been established in 1913. Also in 2002, BOB listed Bank
of Baroda (Uganda) on the Uganda Securities Exchange (USE). The next year BOB opened an
OBU in Mumbai.

In 2004 BOB acquired the failed south Gujarat Local Area Bank. BOB also returned to
Tanzania by establishing a subsidiary in Dar-es-Salaam. BOB also opened a representative
office each in Kuala Lumpur, Malaysia, and Guangdong, China

In 2005 BOB built a Global Data Centre (DC) in Mumbai for running its centralised banking
solution (CBS) and other applications in more than 1,900 branches across India and 20 other
counties where the bank operates. BOB also opened a representative office in Thailand

In 2006 BOB established an Offshore Banking Unit (OBU) in Singapore.

In 2007, its centenary year, BOB's total business crossed 2.09 trillion (short scale), its branches
crossed 2000, and its global customer base 29 million people. In Hong Kong, Bank got Full
Fledged Banking license and business of its Restricted License Banking subsidiary was taken
over Bank of Baroda branch in Hong Kong w.e.f.01.04.2007.

In 2008 BOB opened a branch in Guangzhou, China (02/08/2008) and in Kenton, Harrow
United Kingdom. BOB opened a joint venture life insurance company with Andhra
Bank and Legal & General (UK) called IndiaFirst Life Insurance Company.

In 2009 Bank of Baroda (New Zealand) was registered. As of 2017 BOB (NZ) has 3 branches:
two in Auckland, one in Wellington.

2010s

In 2010 Malaysia awarded a commercial banking licence to a locally incorporated bank to be

jointly owned by Bank of Baroda, Indian Overseas Bank and Andhra Bank.

In 2011 BOB opened an Electronic Banking Service Unit (EBSU) at Hamriya Free Zone,
Sharjah (UAE). It also opened four new branches in existing operations in Uganda, Kenya (2),
and Guyana. BOB closed its representative office in Malaysia in anticipation of the opening of
its consortium bank there. BOB received 'In Principle' approval for the upgrading of its
representative office in Australia to a branch. BOB also acquired Mumbai-based Memon
Cooperative Bank, which had 225 employees and 15 branches in Maharashtra and three in
Gujarat. It had to suspend operations in May 2009 due to its precarious financial condition.

The Malaysian consortium bank, India International Bank Malaysia (IIBM), finally opened in
Kuala Lumpur, which has a large population of Indians. BOB owns 40%, Andhra Bank owns
25%, and IOB the remaining 35% of the share capital. IIBM seeks to open five branches within
its first year of operations in Malaysia, and intends to grow to 15 branches within the next three
years.

On 17 September 2018, the government of India proposed the merger of Dena Bank and Vijaya
Bank with the Bank of Baroda, pending approval from the boards of the three banks, effectively
creating the third largest lender in the country.[10] The merger was approved by the Union
Cabinet and the boards of the banks on 2 January 2019. Under the terms of the merger, Dena
Bank and Vijaya Bank shareholders received 110 and 402 equity shares of the Bank of Baroda,
respectively, of face value ₹2 for every 1,000 shares they held. The merger came into effect on
1 April 2019. Post-merger, the Bank of Baroda is the third largest bank in India, after State
Bank of India and HDFC Bank. The consolidated entity has over 9,500 branches,13,400
ATMs, 85,000 employees and serves 120 million customers. The amalgamation is the first-
ever three-way consolidation of banks in the country, with a combined business of
Rs14.82 trillion (short scale), making it the third largest bank after State Bank of India (SBI)
and ICICI Bank. Post-merger effective 1 April 2019, the bank has become the India's third
largest lender behind SBI and ICICI Bank.

Bank of Baroda announced in May 2019 that it would either close or rationalise 800–900
branches to increase operational efficiency and reduce duplication post-merger. The regional
and zonal offices of the merged companies would also be closed. PTI quoted an unnamed
senior bank official as stating that Bank of Baroda would look to expand in eastern India as it
already had a strong presence in the other regions.

TRUSTEES: Trustees are like internal regulators in a mutual fund, and their job is to protect
the interest of unitholders. Sponsors appoint trustees. Trustees appoint the AMC, which,
subsequently seek their approval for the work it does, and reports periodically to them on how
the business is being run. Trustees float and market schemes, and secure necessary approvals.
They check if the AMC’s investments are within defined limits and whether the fund’s assets
are protected. Trustees can be held accountable for financial irregularities in the mutual fund.
CUSTODIAN: A custodian handles the investment back office of a mutual fund. Its
responsibilities include receipt and delivery of securities, collection of income, distribution of
dividends, and segregation of assets between schemes. The sponsor of a mutual fund mutual
fund cannot act as a custodian to the fund. This condition, formulated in the interest of
investors, ensures that the assets of mutual fund are not in the hands of its sponsor.
REGISTRAR : Registrars, also known as transfer agents, handle all investor-related services.
This includes issuing and redeeming units, sending fact sheet and annual reports. Some fund
houses handle such functions in-house.
The main objectives of the Trust are:
• To carry on the activity of a Mutual Fund as may be permitted at law and formulate and
devise various collective Schemes of savings and investments for people in India and
abroad and also ensure liquidity of investments for the Unit holders;
• To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on
their savings
• To take such steps as may be necessary from time to time to realize the effects without
any limitation

❖ Vision, Mission & Market Strategy:-

o Vision statement –
• “Empowering everyone to live their dream”

o Mission statement-
• “To offer unparalleled value by providing the customer transparent, convenient and
effective anytime-anywhere integrated financial transaction capability”

o Marketing strategy- to provide

• Simple, easy-to-understand, safe and secure trading platform/software
• Uncomplicated, easy-to-understand brokerage/trading cost structure without any riders
• Easy access to the financial market through convenient modes of distribution
• Sound, genuine, unbiased advise individual investments.
 ❖ Detail Study about the company
About Baroda Asset Management India Limited.

Baroda Asset Management India Limited (“AMC”), investment manager to Baroda Mutual
Fund (“Mutual Fund”), is a wholly owned subsidiary of Bank of Baroda and is positioned to
serve the varied asset management needs of investors in India through a range of equity, debt
and money market offerings.
With a focus on enhancing the overall customer experience, the AMC is working towards:

1. Enhancing the existing product range to include products that will provide investors
with a much wider choice suited to their diverse needs and risk profiles

2. Providing consistent investment performance through sound investment management

3. Creating an increasing number of access points for investors through the vast branch
network of Bank of Baroda

4. Bringing in the high levels of compliance and corporate governance

5. Introducing increasingly innovative and useful service features on an ongoing basis

6. Making it easier for investors to receive prompt and effective levels of customer service

Brief history of the company : In 2008, Pioneer Global Asset Management SpA (“PGAM”)
acquired 51% stake in the AMC, which was renamed as Baroda Pioneer Asset Management
Company Ltd. and PGAM became a co-sponsor of the Mutual Fund. The joint venture had Rs.
30 crores in AAuM in June 2008 which grew to Rs. 12,044 crores in July 2019. The AMC
continues its path of success as it grew to become a serious player in the mutual fund industry.

Our sponsor for 10 years, Pioneer Investments, with their merger worldwide with another asset
management company, have moved out of the joint venture and Bank of Baroda, India’s 2nd
largest PSU Bank has now become the sole sponsor for the Mutual Fund.

On September 28, 2018, Bank of Baroda acquired the entire shareholding of UniCredit S.p.A.
(erstwhile PGAM, which merged into its holding company viz. UniCredit S.p.A. effective
November 1, 2017) held in the AMC and Baroda Pioneer Trustee Company Private Limited
(“Trustee”). Subsequently, the names of the AMC and Trustee have been changed to Baroda
Asset Management India Limited and Baroda Trustee India Private Limited respectively,
and the name of our Mutual Fund has been changed to Baroda Mutual Fund.
Sponsors

Baroda Asset Management India Ltd (BAML) is a wholly owned subsidiary of Bank of Baroda

On September 28, 2018, Bank of Baroda acquired the entire shareholding of UniCredit S.p.A.
held in Baroda Pioneer Asset Management Company Limited (“AMC”) and Baroda Pioneer
Trustee Company Private Limited (“Trustee”). Subsequently, the names of the AMC and
Trustee have been changed to Baroda Asset Management India Limited and Baroda Trustee
India Private Limited respectively, and the name of our mutual fund has been changed to
Baroda Mutual Fund.

Bank of Baroda: In the Indian banking universe, Bank of Baroda occupies a distinct position.
Bank of Baroda is a state owned bank with more than 109 years of successful existence. The
biggest strength is its uninterrupted profit performance and consistent record in dividend
payments. The name inspires confidence among its customers. A consistent track-record, sound

financials and its contribution to social sectors and policy-making have given Bank of Baroda
a unique place in the Indian banking universe.

Baroda Pioneer Mutual Fund Updated on December 1, 2021 , 10360 views Baroda Pioneer
Asset Management Company Ltd. is a joint endeavour of Bank of Baroda and Pioneer
Investment. This joint venture was formed in the year 2008. Over the years, the company has
created a strong base in India and today it operates over 40 cities across the country. Baroda
Pioneer Mutual Fund aims to cater the needs of its customers by offering a wide range of
mutual fund products such as Debt fund, Money market funds, Equity Funds, etc.

AMC Baroda Pioneer Mutual Fund

Date of Setup November 24, 1994

AUM INR 12240.30 crore (Jun-30-2018)

CEO/MD Mr. Anthony Heredia

CIO Mr. Sanjay Chawla

Compliance Officer Ms. Farhana Mansoor investor

Service Officer Mr. Amitabh Ambastha

Customer Care Number 022-4219 7999

Telephone +91 22 30741000

Fax +91 22 30741001

E-mail info [AT]barodapioneer.in

Website www.barodapioneer.in. Read more at: https://www.fincash.com/l/baroda-pioneer-

mutual-fund

❖ Type of Mutual Funds Offered by Baroda

Mutual Fund Top Equity Mutual Funds
These are the Mutual Fund schemes that invest their corpus predominantly in equity and
equity-related instruments of various companies. The returns offered by equity schemes are not
constant. Equity funds can be considered as a long-term investment option. Baroda Pioneer
Mutual Fund offers equity plans to ensure long-term growth of the investors. Minimum 65
percent funds of the corpus are put into equity or securities related to equity. It makes the
investors the partial owners of the equity securities in the investors’ fund portfolio. Baroda
Pioneer Equity Fund is ideal for investors who have a high-risk appetite and are seeking for
long-term returns. The Best equity funds offered by Baroda Pioneer Mutual Funds are as
follows.
• Baroda Pioneer Mid-Cap Fund Growth
• Baroda Pioneer Multi Cap Fund Growth
• Baroda Pioneer ELSS 96 Growth
• Baroda Pioneer Large Cap Fund Growth
• Baroda Pioneer Banking And Financial Services Fund Growth.

Top Debt Mutual Funds

In case of debt funds, the accumulated money is invested in fixed income instruments like
government and corporate Bonds. People having low risk appetite can choose debt funds as
one of the investment options and can also choose the tenure. Debt funds generally offer
constant returns. The best and Best Debt Funds offered by Baroda Pioneer Mutual Fund are as
follows.
• Baroda Pioneer Treasury Advantage Fund Growth
• Baroda Pioneer Liquid Fund Growth
• Baroda Pioneer Short Term Bond Fund Growth
• Baroda Pioneer Credit Risk Fund Growth
• Baroda Pioneer Dynamic Bond Fund Growth.

Top Hybrid Mutual Funds

Hybrid or Balanced Fund refer to the scheme that invests the fund money in a combination of
both equity and fixed income instruments. This mutual fund scheme is good for people having
medium risk-appetite. Some of the best schemes offered Baroda Mutual Funds under the hybrid
funds category are below as follows.
• Baroda Pioneer Hybrid Equity Fund Growth
• Baroda Pioneer Conservative Hybrid Fund Growth.

Top ELSS Funds Mutual Funds

Baroda Pioneer Mutual Fund offers Tax Saving Scheme like ELSS'96 to provide investors
long-term capital growth and also tax benefit under Section 80C of income tax Act,1961. The
risk level associated with it is moderate.
 • Baroda Pioneer ELSS 96 Growth.

1. Baroda Pioneer Liquid Fund

To generate income with a high level of liquidity by investing in a portfolio of money market
and debt securities.
Baroda Pioneer Liquid Fund is a Debt - Liquid Fund fund was launched on 5 Feb 09. It is a
fund with Low risk and has given a CAGR/Annualized return of 7.1% since its launch. Ranked
22 in Liquid Fund category. Return for 2020 was 4.1% , 2019 was 6.6% and 2018 was 7.5% .
Below is the key information for Baroda Pioneer Liquid Fund:-
Baroda Pioneer Liquid Fund Growth
Launch Date 5 Feb 09
NAV (04 Dec 21) ₹2,403.54 ↑ 0.21 (0.01 %)
Net Assets (Cr) ₹5,944 on 31 Oct 21 Category
Debt - Liquid Fund
AMC Baroda Pioneer Asset Management Co. Ltd. Rating
☆☆☆☆
Risk Low
Expense Ratio 0.31
Sharpe Ratio -4.62
Information Ratio -2.17
Alpha Ratio -0.3
Min Investment 5,000 Min
SIP Investment 500
Exit Load NIL
Yield to Maturity 3.62%
Effective Maturity 18 Days
Modified Duration 18 Days.
 ❖ Comparison of Baroda mutual fund with compititors:-

Name Last Price Market Cap. Net Interest Net Profit Total Assets
(Rs. cr.) Income
SBI 488.65 436,101.14 265,150.63 20,410.47 4,534,429.63
Bank of Baroda 92.25 47,705.82 70,495.06 828.95 1,155,364.78
PNB 39.50 43,493.51 80,749.77 2,021.62 1,260,632.62
IOB 21.75 41,112.75 16,965.53 831.47 274,010.34
Canara Bank 215.00 39,003.80 69,239.79 2,557.58 1,153,675.03
Union Bank 47.10 32,191.66 68,767.34 2,905.97 1,071,705.85
Bank of India 54.85 22,508.06 40,599.44 2,160.30 725,856.45
Central Bank 22.60 19,618.92 22,730.23 -887.58 369,214.99
Indian Bank 153.40 19,105.07 39,105.79 3,004.68 626,005.03
UCO Bank 13.40 16,020.98 14,446.16 167.04 253,336.10
Bank of Mah 19.95 13,427.34 11,868.54 550.23 196,665.01
Punjab & Sind 16.85 6,828.75 6,973.91 -2,732.90 110,481.88
Vijaya Bank 46.05 6,005.60 12,589.84 727.02 177,632.05
Oriental Bank 43.45 5,953.56 17,867.69 54.99 271,909.55
Corporation Bk 9.80 5,874.30 15,622.63 -6,332.98 213,577.86
United Bank 4.50 4,081.18 8,559.88 -2,315.92 151,529.93
Syndicate Bank 15.15 4,065.84 21,725.40 -2,588.30 311,278.86
Allahabad Bank 7.60 3,440.89 16,864.29 -8,333.96 248,575.76
Dena Bank 12.65 2,857.69 8,932.23 -1,923.15 120,859.80
Andhra Bank 9.10 2,816.94 18,932.22 -2,786.13 249,311.41
INTRODUCTION OF TOPIC
(New Fund Offer)
 ❖ New fund offer:-
What Is a New Fund Offer (NFO)?
A new fund offer (NFO) is the first subscription offering for any new fund offered by an
investment company. A new fund offer occurs when a fund is launched, allowing the firm to
raise capital for purchasing securities. Mutual funds are one of the most common new fund
offerings marketed by an investment company. The initial purchasing offer for a new fund
varies by the fund’s structuring.

KEY TAKEAWAYS

• A new fund offer (NFO) refers to the initial sale of fund shares issued by an investment
company to investors.
• Similar to an IPO in the stock market, NFOs are intended to raise capital for the fund
and attract investors.
• Even though NFOs are marketed, they are done less aggressively so than IPOs, and
target certain select groups of investors. As a result, new fund issues may be less
noticeable to individual investors than IPOs.
 • Investors should check an NFO's expense ratio and the performance of previous funds
offered by the investment company before deciding to invest in an NFO.
• Investors looking to research new fund launches can monitor the press releases of
various investment companies as well as news outlets dedicated to aggregating the
latest fund news.

Understanding New Fund Offers (NFOs)

A new fund offer is similar to an initial public offering (IPO). Both represent attempts to raise
capital to further operations. New fund offers can be accompanied by aggressive marketing
campaigns, created to entice investors to purchase units in the fund. New fund offers often
have the potential for significant gains after beginning to trade publicly.

❖ Brief about NFO

• Asset management companies offer a new mutual fund (NFO) to the public before it is
open for daily transactions(regular mutual fund). If the offer is for a close-ended fund,
you can only invest in it during the offer period; but if it is the launch of an open-ended
mutual fund, you can invest in it once it reopens for subscription.

• But then, why do fund houses come up with an NFO when there are already hundreds
of mutual fund schemes available in the market?
• There are two reasons, either to complete the product basket or to introduce a new
investment theme that is not offered by any existing funds.

• In that case, should you invest in every NFO that comes into the market? No. For
instance, do you watch every movie on the day of its release? Of course not! Even if it
is practically possible, you only go for select films that have an appealing story or
directed by a renowned director or the ones that match your taste.

• Similarly, you should subscribe to an NFO only if it fits in with your checklist or meets
your investment objectives. The best way to find that out is by reading the Scheme
Information Document (SID) which contains basic information such as investment
objective, strategy, fund management team, asset allocation and other risk and liquidity
details. Let’s look at the points you should consider before investing in an NFO.

• New theme: If you have been investing in open-ended mutual funds, the only reason
you should subscribe to an NFO is if the new fund offers a unique theme that is not part
of your portfolio so far.

• Conviction: The theme of the fund may be unique but are you convinced that the theme
will work out? From the above example, you should invest in the NFO only if you
believe that a particular sector / theme will perform well in the future. If you are not
fully convinced, it is better to stay put in existing mutual funds.
• Investment objective: Check out if the fund matches with your investment objective.
Do not invest in a scheme just because everyone is investing or a friend has
recommended it. Make sure it aligns with your financial needs.

• Asset allocation: Check your risk profile and, accordingly, sketch out your asset
allocation strategy. If you are a conservative investor and the NFO is offering an equity
fund, it may not fit well into your portfolio.

• Fund manager: NFOs come with a clean slate. However, a fund manager who is going
to manage the scheme would have a track record. Check the performance of the other
schemes managed by him / her to get an idea on their credibility and expertise.

• Fund house: Next on the list is checking credibility of the fund house. How is the track
record of their management team? Are they ethical and do they comply with all the
regulatory guidelines? Are they process-oriented or people-oriented? Find answers to
these questions as well.

• Now that you have done your research about NFOs, do you want to invest in one? But
before you do that, let’s clear a few of the myths associated with NFOs. Lower NAV
means more units, and more profit: Fund houses price all NFOs at Rs.10 per unit. The
misconception is that lower NAV means one can purchase more units and thereby make
higher profits. But the truth is, performance of any scheme does not depend on the
purchasing price of the fund, but on the performance of its underlying securities.
Let’s take an example.

• NFO is the same as an IPO: The only similarity between an NFO and an IPO is that
they are both open for subscription for a limited period of time. However, the key
difference is that an NFO is launched to expand the product basket by an asset
management or mutual fund companies. The money collected by NFOs is invested in a
portfolio of securities based on its investment objective. Whereas a company comes up
with an IPO to raise capital that could help them meet their operational and or capital
expenditures.
 ❖ Types of New Fund Offers (NFOs)
Mutual funds are the most common type of new fund offering. New fund offerings can be for
open-end or closed-end mutual funds. New exchange-traded funds are also first offered
through a new fund offering. Below are details on how to invest in a few of the market’s
common types of new fund offerings.

• Open-End Fund
In a new fund offer, an open-end fund will announce new shares for purchase on a specified
launch day. Open-end funds do not limit their number of shares. These funds can be bought
and sold from a brokerage firm on their initial launch date and thereafter. The shares do not
trade on an exchange and are managed by the fund company and/or fund company affiliates.
Open-end mutual funds report net asset values daily after the market’s close. Fund companies
can launch new fund offers for new strategies or add additional shares classes to existing
strategies.

• Closed-End Fund
Closed-end new fund offers are often some of the most highly marketed new fund issuances
since closed-end funds only issue a specified number of shares during their new fund offer.
Closed-end funds trade on an exchange with daily price quotes throughout the day. Investors
can buy closed-end funds on their launch date through a brokerage firm.
 • Exchange-Traded Fund
New exchange-traded funds (ETFs) are also launched through a new fund offer. An exchange-
traded fund is a type of investment fund that can be publicly traded on the stock market. On
April 7, 2021, Vanguard launched the Vanguard Ultra-Short Bond ETF (VUSB). According
to Vanguard, "the fund's objective is to seek to provide current income while maintaining
limited price volatility. The fund invests in a diversified portfolio of high-quality and, to a
lesser extent, medium-quality fixed-income securities. The fund is expected to maintain a
dollar-weighted average maturity of 0 to 2 years."

Launches and Alerts

Often, new fund offers are not widely publicized making them challenging to identify.
Companies must register a new fund offering with the Securities and Exchange Commission
(SEC) offering one method of tracking. Investors seeking information on new fund offers prior
to their launch date may also receive alerts from their brokerage firm. News outlets and news
aggregators are also good sources for information on new fund offers. Sources such as
the Closed-End Fund Center provide details on new fund offers.

Companies will also issue press releases on new fund offers. For example, you can
find Vanguard's statement on the launch of their latest ETF on their website.

❖ Advantages and Disadvantages of a New Fund Offer (NFO)

Investing in a new mutual fund may seem like an exciting way to diversify your portfolio,
however, there are some concerns you should know about before doing so.

For example, many investment companies launch a new fund when the market is rich and
investors are hungry to get in on the latest new industry or sector of the economy. However
just because a certain technology or industry is booming now does not mean it will remain
popular in the future. Furthermore, a new fund offer often comes with a higher expense ratio
than normal.
Pros of NFO

New Fund Offers or NFOs are generally launched by an AMC as continuation of its popular
series or to introduce a newly themed best Mutual Fund. Therefore, they come with the
following benefits.

• Provides opportunity to invest with small budget in a theme such as tax savings
or specific sector of the industry, when prices of existing Mutual Fund units are
higher.

• NFOs are ideal if you will stay invested for long in a particular types of Mutual
Fund. Hence, they are best suited for long-term investors.

• If you believe that a particular industry or sector will witness boom in future and
some AMC launches that specific NFO, it provides you an investment opportunity.

• You can get larger number of units through an NFO than buying the same later as
lump sum or through Systematic Investment Plans (SIPs).

• Generally, prices of units bought during NFO are bound to rise at least marginally.
They can slump a bit during stock market downturns.

Cons of NFOs

NFOs come with their fair share of problems that you may be unaware at the time of investing.
Here are some disadvantages of investing in NFOs.

• Usually, AMCs charge an ‘exit load’ when you redeem Mutual Fund investment
units bought during an NFO. Exit load is not applicable only if the NFO is
continuation of a series of Mutual Funds. This exit load can be as high as three
percent of your Net Asset Value at the time of redemption.

• Generally, most NFOs come with a lock-in period. Meaning, you cannot redeem
their units before six months to a year.

• There are no guarantees that an NFO will develop into a profit making Mutual Fund.
There are no past records to prove its performance.
 • NFOs are not rated by credit rankings agency, CRISIL. Hence, how the AMC and
that particular fund manager handles the Mutual Fund is anybody’s guess.

• Large financial scams can send prices of Mutual Funds you bought as NFO into a
tailspin. If the NFO has equities in the scam tainted fund, it might take years to
recover from the initial value of Rs. 10 per unit.

Another big risk of investing in an NFO is also one of the most obvious—the fund has no
track record of success (or failure). While some bullish investors may look at this as an
opportunity for large profits, there is also a serious risk in investing in a fund whose
performance you cannot track.

NFO process:

When a mutual fund Assets Management Company (AMC) announces a public issue of units
of & new fund/scheme, it is called a new fund offer (NFO). The new fund is planned and
sources from where it should be collected and where the amount should be invested is planned
by the AMC. According to the SEBI rules any new fund launched should be approved by SEBI.
Once the AMC get the approval of SEBI for the fund it does the marketing of the fund by it
self or through brokers.

The investors who are willing to invest in a particular fund deposit the amount they plan to
invest in the bank as directed by the AMC. These banks collect the application and amount and
direct it towards the registrar specified by the AMC. From this point India info line came into
the picture as the registrar. The role, responsibilities, activities, forms and reports involved in
this process of NFO is general, are AMC, fund manager, SIP I/c, Switches I/c., NFO
Coordinator. Internal auditor, Systems(S/W) dept. IPO Centre coordinator, IPO-RTI, IPO-
EDP, Scanning and Printing & Dispatching.

Teams involved in the NFO process-

➢ Mutual fund unit

➢ Technology team

➢ Data entry team

➢ Verification team

➢ External audit team

➢ Scanning team

➢ Franking and dispatching team Description

• Bank wise segregation: The India info line branches collect the applications of the
investors across India and abroad for all the branches of the bank that is involved in this
 NFO. These applications are sent to India info line processing center, Hyderabad. After
receiving, these applications are segregated bank wise and branch wise.
• IH Numbering: IH numbering is also called as In house Numbering. India info line
gives this IH numbering to those applications. This is done for their convenience in
doing back office functions easily. All the data on the application is entered into systems
through software developed by India info line technology team called K-Bolt. Later on,
we can get any information of a particular application or investor that we require by
entering this IH number.
• Binding: All the applications that are received are given for binding. Binding of
application is done by segregating them according to the bank and branch fro which
they are received. India info line does this Binding because to keep all these applications
safe, out of any damage and miss-place.
• First Entry: After finishing binding of applications they are sent to Date Entry team.
Here the first time entry is done. All the information or date of an investor that is
available on the application like name of the applicant, age, Address, PAN, Bank
details, broker code, sub broker code, email addresses, guardian name, amount invested,
name of the scheme or plan invested in, etc., are entered into the systems of India info
line.
• Second Entry: After first entry the data is again sent for the second entry. Here in
second entry, the data that is entered in first entry is checked and the information what
ever is missing is entered.
• Online Matching: After entering the data like applicant, age, Address, PAN, Bank
details, broker code, sub broker code, email addresses, guardian name, amount invested,
name of the scheme or plan invested in, etc., in the first entry and once again in the
second entry it is sent to the online matching. Here in online matching the physical form
of application are kept side by an checking of data that was entered in the first entry
and second entry is done.

• First time verification: Data from online matching is sent to the verification team.
This team verifies mistakes that are left in online matching. Mistakes like blank address,
 PAN blank for amount greater than or equal to 50000 RS. Name blank, bank details
blank, invalid or blank broker code etc., are rectified in the first time verification.

• First time CCL: First time check clearing list is in short is called as first time CCL.
First Time CCL is prepared based on the data that is provided after first time
verification.

• External Audit: First time check-clearing list is sent to an external audit team. India
info line appoints this team before the NFO processes. They are nowhere related to the
organization. This external audit team will mainly check name of the investor, amount
invested, bank details PAN number, name of the scheme/plan and mode of holding
(MOH). But in total they will check more than 30 characters

• Second time verification: If the external auditing is not satisfied and if they find any
mistakes or missing information they will send the first time CCL for second time
verification. Here they verify the check list once again and mistakes like invalid mode
of folding (MOH), invalid email address, status minor without guardian name, invalid
date of birth for minor, invalid existing account number, blank/null application number,
NRI with blank account type, saving or current, investor signature missing are rectified.

• Second time CCL: Second check the verification team prepares clearing after
verifying the mistakes that are pointed out by the external audit team. After preparing
second time CCL it is again sent to external audit team.
• Integrity Check (NFO team): Check clearing list will be given by the external audit
team to the NFO team in India info line This NFO team in India info line will once
again check further mistakes like spelling mistakes in the name of the applicant etc.,
and rectify them.
• Integrity Check (by Audit): After integrity check by the NFO team it is once
checked by the internal audit team of India info line.
• Scanning Default Values, Verification of Mismatch cases: Entire data is filtered
at each and every step and finally it is given to the scanning team for scanning here
scanning team will detect and rectify any further default values and mismatch cases.

• Reconciliation, Rejections and Cheque returns:

Cheques of the investors are sent are sent by the balk to India info line Reconciliation
team. Here this team will verify bank details of the investor like PAN number, bank a/c
number, comparing the amount invested with that of the minimum amount that has to
be invested cheques with out hue signature of the investor bounced cheques etc., and
they are rejected. These rejected cheques are dispatched to the investors. A sample
statement of accounts (SOA) is prepared by this reconciliation team.

• Handling over the data to MFS:

Entire data after getting filtered at each and every step will be handing over to mutual fund
services team. This MFS team will once again verify the data and the final data will come
out any mistakes and default values.

• Porting in Task MF: Task MF is the software developed by India info line
Technology team. It is prepared according to the suggestion given by AMC. This Task
MF will resemble the style or Performa or outlook of the statement of accounts. Final
data that they got after filtering the mistakes and default values is ported in the task MF.
• Allotment of units: Allotment of units is done as per the amount that is invested by
investors. They will avail the units taking the Net Asset Value (NAV) of that particular
scheme as base.
• Sample SOA verification by audit:

Statement of accounts (SOA) is picked up randomly from a huge lot and the audit team
does verification. This verification will result in preparing a statement of accounts which
in cent percent correct and exact. This SOA contains data like:

* Name of the investor

* Address

* Bank details

* Pan Number

* Guardian name

* Broker code

* Sub broker code

* Nominee name

* Nominee addresses

* 2 nd and 3rd applicant name

* Amount invested

* No. Of units allotted

* Fund name, Scheme Name, Plan Name & A/c no

* Transaction type details

* Mode of redemption payment

* Mode of dividend payment

* Mode of dispatch

* Status, occupation.

* Current balance, average price, current cost, current NAV etc.,

• Dispatch of SOA: Statement of accounts (SOA) once prepared is dispatched to

the investor. SOA’s are neatly packed in an envelope and dispatched to the investors
by the dispatch team through courier.
 ❖ Things to consider as an investor

• Fund House Reputation

If an investor wants to invest in an NFO, it is of utmost importance to do a background check

on the fund house. Ensure that the fund house has a strong history of operating in the mutual
fund industry, say at least 5 years to 10 years. It will help you analyse the kind of performance
that the fund house has delivered during market ups and downs. If the fund house has a good
track record, then the NFO might perform as promised.

• Fund Objectives

The fund objectives spell out the asset allocation, riskiness, expected returns, and liquidity,
among other things. It helps you develop a perception of the viability of the NFO. An NFO
needs to clearly explain its investment process, which it’s going to carry out for the given
investment horizon. In simple words, it means that reading the offer document should help
potential investors understand what the fund manager is going to do with their money. If
investors are unable to make out the objectives of the NFO, then it shows weaknesses in the
investment process.

• Theme of New Fund Offer

There are hordes of mutual fund schemes in the Indian mutual fund sector. So it is advised to
read the fine print carefully to understand the fund theme when you come across an NFO. The
investment theme must be sustainable and something not provided by the existing schemes.
However, if you find that the new fund offer is a mere repetition of a current strategy, then it
is probably not a viable option.

• Returns

If you are interested in an NFO, then it is advised to analyse the past returns. The offer
document may or may not touch upon this information. You can set an expected rate of return
against which you can analyse the fund accordingly. In case you have already invested your
money in the fund, you can consider reviewing it quarterly, say for the first three years. You
can compare the mutual fund’s performance with the index and peer funds to understand the

returns trend.

• Risk factor

Investing in NFOs could be risky. Unlike existing funds, where you can readily check the asset
allocation and risks involved, NFOs don’t have a performance history. And, you won’t be able
to assess how the fund manager intends to utilise your money. Without any benchmarks or
metrics, it will be difficult for you to predict the fund’s performance. Whether the fund emerges
in flying colours or goes down the drain can remain a mystery.

• Cost of investment

The overall cost involved in investment is one of many parameters that decide your potential
returns. Though there is no entry load, some NFOs charge exit loads if you happen to redeem
units before the completion of the tenure. If the lock-in period is longer than your investment
horizon, then your returns can be affected on account of the exit loads. The expense ratio – the
annual fee charged by the fund house for managing your money – is another crucial parameter.
It is advised to check if the expense ratio is lower or equal to what SEBI mandates.

• Minimum Subscription Amount

NFOs usually specify a minimum subscription amount for the investors. It may range from as
low as Rs 500 to Rs 5,000. As an investor, this can be your primary criteria for shortlisting
your possible investments. If the minimum subscription amount is higher than what you can
spare, re-evaluating your options would be a wise decision. In such cases, you can consider
opting for a systematic investment plan (SIP), in an existing high-performing scheme, which
is an affordable and more convenient choice.

• Investment Horizon

NFOs also come with lock-in periods ranging from three to five years. In such cases, you will
be required to stay invested for the entire tenure. Ensure that your investments are in line with
your investment horizon and goals. Once you have subscribed to a mutual fund scheme, you
may not be able to redeem your units before maturity.

❖ Benefits of Investing in NFO

One should go forward with investing in NFOs because of the benefits and merits they
possess. These are discussed below:

1. Flexibility:
Close-ended funds also offer flexibility to the investor of when to invest in the market. Even
if the timing is not ideal for investment and the NFO is launched at the market peak, the fund
manager can hold a part of investors’ funds to invest them later.

2. Opportunity to Invest in Innovative Funds:

Many AMCs nowadays are coming up with the idea to invest in innovating fund schemes like
the use of hedging strategies, business cycle-based investments, ESG investments, etc.
Through NFO, an investor can get an early opportunity to benefit from the same.

3. Lock-in Support:
Spending time in the market is more important than backing out within a short period of time.
Many investors just spend a few years in the market and end up impairing their gains.
Nevertheless, the lock-in tenure in NFOs, the closed-ended ones helps investors from
indisciplined and hassled investing behaviors.

4. Profit Generation:
As there may exist a significant difference between the NAV and NFO price, it can help the
investor to earn good returns on their investments.

Why Are Investors Choosing the NFO Route to Mutual Funds?

You have many investors opting for equity mutual funds as fixed deposits are offering low-
interest rates. Moreover, many investors missed the stock market rally over the past year and
are eager to invest in equity funds. You also have many individuals working from home due to
the COVID-19 pandemic. It helps them save money which they infuse into equity funds.

Investors who missed the equity rally over the past year believe investing in NFOs helps
them take exposure to equities at a low cost. Moreover, you will find investors deploying
funds into NFOs because AMCs offer units at a fixed price of Rs 10 per unit. AMCs heavily
market NFOs which induces investors into these new mutual fund schemes

You have many investors deploying funds into NFOs of balanced advantage funds. It helps
you invest in a mix of equity and fixed income securities based on your investment objectives
and risk tolerance. Investors who don’t have the skills or the time to pick stocks prefer balanced
advantage funds.You also have investors putting money in Flexi-Cap funds through NFOs to
get exposure to stocks of companies across market capitalisation. advantage funds.

You also companies across market capitalization New Fund Offers (NFOs) are generally
introduced when the markets are doing well. As this is the time when more people are attracted
to markets, giving an opportunity to mutual fund companies to make the most of it. This year
also, when markets have mostly done well, several new fund offers were launched by asset
management

❖ 5 Reasons for avoiding NFOs

1. They don't have any track record and most of the times mutual funds sell old
wine in new bottle; meaning they launch funds that are pretty similar to ones
currently offered by the fund house.

2. More often than not, NFOs are launched when market momentum is strong,
valuations are stretched, investors' confidence is high and there is good news all
around. This limits the chance of fund managers getting good bargains while
constructing portfolio.
3. NFOs are often sold as Initial Public Offers (IPOs) and investors expect listing
or quick gains. Taking advantage of this tendency, sometimes brokers lure
investors by 10 rupee per unit cost.
4. NFOs have no track record to rely on

5. You always have an option to choose a scheme from the existing ones based on
their track record. NFOs can't provide you any better opportunity unless they
have any extraordinary feature, which is rare to find.
 ❖ Why Invest in an NFO?

Investing in a New Fund Offer has the following advantages:

• New Strategies: Close-ended funds offer the chance to invest in new and innovative
strategies that existing open-ended funds may not. The Edelweiss Maiden
Opportunities Fund, launched in February 2018 was dedicated to investing in pre-IPO
and recently listed companies. The DSP A.C.E Fund Series 2 and the Kotak India
Growth Fund Series 4 were both launched with innovative hedging strategies which
would protect your downside using put options. Being close-ended, you could have
only invested in these funds in the NFO period.
• Flexibility: Close-ended funds have flexibility in terms of when to invest your money
in the market. In other words, even if the investment timing is bad and the fund is
launched at a market peak, the fund manager can hold on to your funds and invest some
of them a little later. This flexibility helps fund managers outperform.

• Freedom from large flows: Open-ended funds are vulnerable to large inflows and
outflows. A sudden outflow can force the fund manager to sell his stocks at rock-bottom
prices, causing a loss to all unit holders in the fund. On the other hand, investors in
close ended funds are locked-in for the tenure of the fund and the manager can focus
on stock selection and monitoring. You can only invest in a close ended fund through
an NFO.
 • Lock-in Support: For better returns, the time spent in the market should be considered
more important than timing the market. Most equity fund investors stay invested for
only two years in the market, which greatly impairs their returns. This is simply because
it is difficult for investors to stay immune from market panics and manias. However,
the lock-in provided by close-ended funds of 3-4 years acts as a break, thereby
preventing investors from falling prey to bad investing behaviours.

❖ Difference between NFO and IPO

IPO is the initial offer made by the company to the public for a subscription of
its shares. In comparison, NFO is the first offer of units in a mutual fund scheme just
launched and shown to the investors.
Let us look at the difference between NFO and IPO on three parameters:

• Pricing
Pricing is an essential parameter since it is based on the company's value of past and future
prospects and the company's fundamentals.
The price at which shares are offered helps the investors determine whether they are offered
a discount or premium to its valuations.
Shares that are offered at a discount rate has greater demand in an IPO. On the other hand,
in NFO, the units offered are the face value of the unit. Therefore, these units do not show
the actual value of the investment.

• Performance
A company creating an IPO is in existence and typically engaged in several operations
before stepping into an IPO.
This helps the investors get a clear idea about the company's past performance, strength,
weakness, and market capitalization before planning to invest.
Whereas, in NFO, the investors do not get to see the company's past performance and other
measures to evaluate a company.
They could only look at the performance of other several schemes managed by the fund
manager and fund house that are offering NFO to get a clear understanding of the approach
and philosophy of the fund management.

• Listing price
Once the IPO is over, the price of shares at which they are listed and traded on the stock
exchange depends upon the judgment of the market people on the profitability and
prospects of the company.
On the other hand, the Net Asset Value (NFA) of the scheme in the NFO reflects the
securities of the recent market value held in the portfolio.

• Usage of Funds
In IPO, the funds raised by a particular company is used for several business purposes like
repayment of debts, expansion of the company, or to lower the stake of promoters in the
company.
NFO is launched where fund managers lift all the funds to invest in securities and funds.
The primary objective behind raising funds is to capitalize on a trending theme of
investment.

• Listing
IPO is listed in the stock exchange above or below the decided price band. Therefore, if the
price rises up on the listing day, investors can easily secure a good profit.
In NFO, the fund is gathered at the start and then it is invested based on the Net Asset Value
(NAV), which can be below or above the face value.

• Valuation
The valuation of a company entirely depends on the performance, company's value and
more. Whereas in NFO, the total fund is split and invested in the form of units.

• Risk
The risk involved in IPO is an internal risk that can be exposed to the stock market.
Whereas in NPO, the risk appetite is medium to low and considered ideal for all the
investors.

• However similar they may seem to be, it is important to note than an Initial Public
Offering is quite different from a New Fund Offer. An IPO is the sale of a company’s
shares prior to its listing on the stock market, whereas an NFO is an offer of a mutual
fund scheme’s units.
• An IPO may be priced above or below the stock’s real value, as dictated by the
fundamentals, which in the case of an NFO cannot be interpreted. The pricing of a
mutual fund is simply dictated by the market value of the units it holds, which is also
known as the Net Asset Value or NAV. This is true during the valid time period of NFO
and even after the fund is launched. So, while investing, you do not have to worry about
IPO-like huge price fluctuations and getting allotment in an NFO.

❖ Guide to Investing in an NFO

Investing in a New Fund Offer is a simple task. The first step that needs to be completed is
your KYC. Once this is done, you may log in to your Paisabazaar account and check for suitable
plans that suit your investment objectives.

Investors find New Fund Offers value for money proposition and hence subscribe to it. NFOs
help the investment companies meet their goals of increased Assets under Management. While
investing in a New Fund Offer, it is suggested that you consider the following points.

• Keep a background check on the fund house. It must be ensured that the fund house
you are investing in, has a substantial history of mutual fund investments.
• Asset allocation, risk involvement, returns expected, etc. are a few important points to
be considered before investing your money in an NFO.
• NFOs are launched for new funds without an established track record, which may bring
in an additional level of uncertainty.
• One must carefully go through the offer document and the investment process that the
fund manager is going to follow. It is of utmost importance to keep yourself updated
with what the fund manager is planning to do with your money.
• Since NFOs don’t have any performance history, it is not possible to track the fund’s
performance. However, while investing, you must be wise enough to go through the
returns aspect. Keep an ideal figure of the expected returns and analyze your fund
accordingly.
• The minimum subscription amount for an NFO is an important criteria for deciding
which fund you may want to invest in. Generally, the minimum subscription amount
ranges from Rs. 500 to Rs. 5000.
• Some NFOs might even come with a lock-in period of around 3-5 years. You must be
careful of the time period for which you want to keep your funds locked in and invest
accordingly

SEBI Guidelines on New Fund Offer:

1. Procedure for launching of schemes:

(1) No scheme shall be launched by the asset management company unless such scheme is
approved by the trustees and a copy of the offer document has been filed with the Board.

(2) Every mutual fund shall along with the offer document of each scheme pay filing fees
as specified in the Second Schedule.

2. Disclosures in the offer document:

(1) The offer document shall contain disclosures which are adequate in order to enable the
investors to make informed investment decision [including the disclosure on maximum
investments proposed to be made by the scheme in the listed securities of the group
companies of the sponsor].

(2) The Board may in the interest of investors require the asset management company to
carry out such modifications in the offer document as it deems fit.
(3) In case no modifications are suggested by the Board in the offer document within 21
[working] days from the date of filing, the asset management company may issue the offer
document.

(4) No one shall issue any form of application for units of a mutual fund unless the form is
accompanied by the memorandum containing such information as may be specified by the
Board. 3. Advertisement material:

(1) Advertisements in respect of every scheme shall be in conformity with the

Advertisement Code as specified in the Sixth Schedule and shall be submitted to the Board
within 7 days from the date of issue.

(2) The advertisement for each scheme shall disclose [investment objective for each
scheme]

4. Misleading statements:

The offer document and advertisement materials shall not be misleading or contain any
statement or opinion, which are incorrect or false.

5. Listing of close ended schemes:

Every close ended scheme shall be listed in a recognized stock exchange within six months
from the closure of the subscription Provided that listing of close ended scheme shall not
be mandatory.

(a) If the said scheme provides for periodic repurchase facility to all the unit holders with
restriction, if any, on the extent of such repurchase; or

(b) if the said scheme provides for monthly income or caters to special classes of persons
like senior citizens, women, children, widows or physically handicapped or any special
class of persons providing for repurchase of units at regular intervals; or

(c) If the details of such repurchase facility are clearly disclosed in the offer document; or

(d) If the said scheme opens for repurchase within a period of six months from the closure
of subscription.
6. Repurchase of close ended scheme:

(1) The asset management company may at its option repurchase or reissue the repurchased
units of a close ended scheme.

(2) The units of close ended schemes referred to in the proviso to regulation may be open
for sale or redemption at fixed pre-determined intervals if the maximum and minimum
amount of sale or redemption of the units and the periodicity of such sale or redemption
has been disclosed in the offer document.

(3) The units of close ended scheme may be converted into open ended scheme.

(a) If the offer document of such scheme discloses the option and the period of such
conversion; or

(b) The unit holders are provided with an option to redeem their units in full.

(4) A close ended scheme shall be fully redeemed at the end of the maturity period
[Provided that a close ended scheme may be allowed to be rolled over if the purpose, period
and other terms of the roll over and all other material details of the scheme including the
likely composition of assets immediately before the roll over, the net assets and net asset
value of the scheme, are disclosed to the unit holders and a copy of the same has been filed
with the Board. Provided further, that such roll over will be permitted only in case of those
unit holders who express their consent in writing and the unit holders who do not opt for
the roll over or have not given written consent shall be allowed to redeem their holdings in
full at net asset value based price.

7. Offering Period:

No scheme of a mutual fund other than the [initial] offering period of any equity linked
savings schemes shall be open for subscription for more than 45 days 8. Allotment of Units
and refund of money:
(1) The Asset management company shall specify in the offer document

(a) The minimum subscription amount it seeks to raise under the scheme and

(b) In case of over subscription the extent of subscription it may retain Provided that
where the asset management company retains the over subscription referred to in clause ,
all the applicants applying up to five thousand units shall be given full allotment subject to
the oversubscription mentioned in clause .

(2) The mutual fund and asset Management Company shall be liable to refund the
application money to the applicants-

(i) If the mutual fund fails to receive the minimum subscription amount referred to in
clause (a) of sub-regulation ;

(ii) If the moneys received from the applicants for units are in excess of subscription as
referred to in clause of sub-regulation .

(3) Any amount refundable under sub-regulation shall be refunded within a period of six
Weeks from the date of closure of subscription list, by Registered A.D and by cheque or
Demand Draft marked "A/C Payee" to the applicants.

(4) In the event of failure to refund the amounts within the period specified in sub-
regulation , the asset management company shall be liable to pay interest to the applicants
at a rate of fifteen percent per annum on the expiry of six weeks from the date of closure of
the subscription list.

9. Unit certificates or Statement of Accounts:

The asset management company shall issue to the applicant whose application has been
accepted, unit certificates or a statement of accounts specifying the number of units allotted
to the applicant as soon as possible but not later than six weeks from the date of closure of
the [initial subscription list and or from the date of receipt of the request from the unit
holders in any open ended scheme].Provided that if an applicant so desires, the asset
management company shall issue the unit certificates to the applicant within six weeks of
the receipt of request for the certificate.
10. Transfer of units:

(1) A unit certificate unless otherwise restricted or prohibited under the scheme, shall be
freely transferable by act of parties or by operation of law.

(2) The asset management company shall, on production of instrument of transfer together
with relevant unit certificates, register the transfer and return thse unit certificate to the
transferee within thirty days from the date of such production. Provided that if the units are
with the depository such units will be transferable in accordance with the provisions of the
Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996.

11. Dispatch of warrants and proceeds:

Every mutual fund and asset management company shall,

(a) Dispatch to the unit holders the dividend warrants within [30 days] of the declaration of
the dividend.

(b) Dispatch the redemption or repurchase proceeds within 10 working days from the date
of redemption or repurchase.

(c) In the event of failure to dispatch the redemption or repurchase proceeds within the
period specified in sub-clause the asset management company shall be liable to pay interest
to the unit holders at such rate as may be specified by Board for the period of such delay.

(d) Aside payment of such interest to the unit holders under sub-clause the asset
management company may be liable for penalty for failure to dispatch the redemption or
repurchase proceeds within the stipulated time. Wherever an application for a total value
of RS. 50,000 or more, the applicant or in the case of application in joint names, each of
the applicants, should mention his/her permanent account number (PAN) allotted under the
Income Tax Act, 1961 or where the same has not been allotted, the GIR number and the
income-tax Circle/Ward/District should be mentioned. In case where neither the PAN nor
the GIR number has been allotted, the fact of non-allotment should be mentioned in the
application form. Any application form without these details should not be accepted by the
mutual fund. The above clarification is being issued in accordance with Regulation 77 of
the SEBI (Mutual Funds) Regulations, 1996.

12. Instructions for filing scheme offer document with SEBI:

As advised in SEBI circular MFD/CIR/06/275/2001 dated July 9, 2001, while filing offer
document for launching a new scheme/revising and filing existing offer document with
SEBI, the mutual funds should highlight and clearly mention the page number of the offer
document on which each of the following observation has been incorporated. In case of any
amendment to Regulations, the new provisions should be incorporated in the offer
documents.
 ❖ Recently launched NFO in bank of baroda
Business cycle approach is an investment based on identifying the economic trend.
 • The various business indicators help us understand the economic trend.
• The business cycles have 4 phases; Recovery, Growth, Expansion and Contraction,
each phase are unique Opportunities and Rewards.
BUSINESS CYCLE INVESTING – KEY DIFFERENTIATORS
• Top-Down Approach - Focus on Macro indicators for sector allocation

• Wind Shield Approach - Focus on forward indicators rather than historical data

• Flexible Approach - Exposure to a set of sectors that are beneficiaries from the
economic recovery & is not restrictive in its investment approach

• First Mover Advantage - Based on the lead indicators, opportunities are identified
well ahead of time

• Agility - Investments across sectors are not static in nature & are rotated based on
business cycle phase

What is Business Cycles Investing?

You can skip this section if you are already aware of business cycle theme.

Business cycle has the following phases.

1) Expansion: Strong demand, Capacity utilization above normal, Output growth strong,
corporate profitability very strong, Strong tax revenues, Risk aversion very low
2) Recession: Demand growth starts to slow down, Capacity utilization starts to fall, Output
growth starts trending lower, tax revenues moderating, risk aversion starts to increase.
3) Slump: Demand growth below normal, Capacity utilization much below normal, Risk
aversion very high
4) Recovery: Demand growth starts to pick up, credit growth starts to improve, Tax revenues
start to pick up
 It has been observed that over a period, stock returns are largely driven by cyclical factors tied
to Macro economic factors and hence corporate earnings. The business cycle can therefore be
a critical determinant of equity market returns and the performance of equity sectors.

Type of instruments Min % Max % Risk Profile

Equity and equity related instruments

selected on the basis of business cycles 80% 100% High

Other equity and equity related

instruments 0% 20% Medium to High

Overseas equity and equity related

instruments, including ADR, GDR,
or any other type of securities 0% 20% High

Units issued by REITs and InvITs 0% 10% Medium to High

Debt and Money Market Securities 0% 20% Low to Medium

Baroda Business Cycle Fund SID

What is the investment objective of this MF scheme?

The investment objective of the Scheme is to generate long term capital appreciation for
investors by investing predominantly in equity and equity related securities with a focus on
riding business cycles through dynamic allocation between various sectors and stocks at
different stages of business cycles in the economy.

What is the allocation pattern in this mutual fund?

This fund investment pattern is as follows:

Why to invest in the Baroda Business Cycle Fund?

Here are a few reasons to invest in such mutual fund schemes.

1) The mutual fund invests in opportunities that arises during different stages of business Cycle
in the Indian economy. These are unique opportunities where such mutual funds can benefit.

2) In the recent past we are seeing the business cycles getting shortened. This can provide
numerous opportunities.

Some key risk factors you should consider before you invest in such
funds

One should consider some of these risk factors / negative factors before investing.

1) It invests in opportunities arising out of various stages in business cycle. This would limit
the capability of the fund to invest in other themes / sectors.

2) It invests based on opportunities arising out of various stages of business cycle that could be
high in one period and lower in another period. Though we have seen the shorter business
cycles in the recent past, the returns could highly fluctuate.

3) Since this scheme invests in specific opportunities for companies in special situations,
concentration risk is extremely high.

4) It invests in overseas equity to the tune of 20% which are high risk along with geo-political
risk, forex conversion risk etc.,

5) It invests in REITs and InvITs which are considered as high risk.

6) You can refer complete risk factors by going through the scheme related documents.

Performance of existing Business Cycle Funds

Currently there are two funds with more than 6 months performance in this segment. Here are
the performance details.

L&T Business Cycles Fund: This fund generated 12%, 56%, 11.4% and 11.3% returns in the
last 6 months, 1 year, 3 years and 5 years respectively.
ICICI Pru Business Cycles Fund: This fund generated 10% returns in the last 6 months and
19% since Jan-2021 (inception)
CASE FOR BUSINESS CYCLE INVESTING

*Strong consumer demand

*Rebust earnings growth after
across sectors as economy
a lost decade
reopens
*Nifty EPS is expected to
*Record low interest rates,
grow 25% CAGR from FY21-23
driving increased investor
vs 7% CAGR in last decade
participation in equities

* Improving GDP growth rate

*Low interest rate scenario *Increased capacity utilization
with centeral banks *Capex revival
supporting growth

Domestic economy is showing initials signs of recovery, although the pace of recovery has
been relatively slow. However, there are several investment opportunities which are
emerging & the Business Cycle Fund could capitalize on them.

BARODA BUSINESS CYCLE FUND – KEY BENEFITS

• A fund which could benefit from the changes in the Economic Cycle
• Investing is based on the Macro-Economic Indicators rather than themes or sectors
• Agility to move across sectors, with no sectoral caps on allocation
• Top-Down Approach with Bottom-up stock selection
BARODA BUSINESS CYCLE FUND – FUND SUITABILITY
• Investors aiming to benefit from the strategic fund positioning based on the business cycle
phase
• Investors aiming to benefit from economic recovery over the next few years
• Investors aiming to add style diversification to their portfolio
• Investors aiming wealth creation through a fund which could provide higher alpha and
better risk-adjusted returns over the long term,

SCHEME DETAILS
• Type: An open-ended equity scheme following the Business Cycles theme.
• Investment Objective: The primary objective of the Scheme is to generate long term
capital appreciation for investors by investing predominantly in equity and equity
 related securities with a focus on riding business cycles through dynamic allocation
between various sectors and stocks at different stages of business cycles in the
economy. However, there is no assurance that the investment objective of the Scheme
will be achieved.
• NFO Period: Open date : 24th August 2021
Close date :06th September 2021
• Benchmark: BSE 500 TRI
• Plans/Options: Growth Option (default option in case no option is specified by
investor) Income Distribution Cum Capital Withdrawal Option (ICDW)
▪ Pay-out of Income Distribution Cum Capital Withdrawal Option
▪ Re-investment of Income Distribution Cum Capital Withdrawal Option (default
sub-option in case no sub-option specified by investor)
• Fund Managers: Sanjay Chawla (Chief Investment Ocer), Abul Fateh (Fund
Manager & Sr. Equity Analyst) and Pratish Krishnan (Fund Manager & Senior
Analyst) (Dedicated fund manager for overseas investments)
• Min. App Amt: Purchase : Rs. 5,000/- and in multiples of Re. 1/- thereafter per
application during the NFO period.
• Additional Purchase : Rs. 1,000/- and in multiples of Re. 1/- thereafter Re-purchase :
No minimum amount Exit Load*: Redemption/ switch out of units up to 10% of the
units allotted before 1 year from the date of allotment: NIL For Redemption/switch out
of units within 1 year from the date of allotment: 1% of applicable NAV For
redemption/switch out of units after 1 year from the date of allotment : NIL
* The above Exit Load will be applicable on a FIFO (First-In-First-Out) basis, to all
subscription transactions, excluding switch-ins.
Baroda Business Cycle Fund – Should you invest in this NFO?

Baroda Business Cycle Fund invests based on a business cycle’s investment theme. Such
opportunities could be high in one period (e.g., post covid-19) and limited number of
opportunities in another period. The returns can fluctuate year on year. As indicated in our
earlier articles, this is not that exciting theme. High risk investors who still want to test with
such themes can invest for at least 5 years’ time frame. Moderate to low risk takers should stay
away from such funds.
 SUGGESTIONS AND RECOMMENDATION 
➢ The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should be
made to realize that what they are losing by not investing.

➢ Mutual funds offer lots of benefit which no other single option could offer. But most of
the people are not even aware of what actually a mutual fund is? They only see it as
just another investment option. So the advisors should try to change their mindsets.

➢ The advisors should target for more and more young investors. Young investors as well
as persons at the height of their career would like to go for advisors due to lack of
expertise and time.

➢ Baroda Mutual Fund needs to give the training of the Individual mutual fund about the
Fund/Scheme and its objective, because they are the main source to influence the
investors.

➢ Before making any investment Mutual fund should first enquire about the risk tolerance
of the investors/customers, their need and time (how long they want to invest). By
considering these three things they can take the customers into consideration.

➢ Younger people aged under 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing
should pay off.

➢ Customers with graduate level education are easier to sell and there is a large untapped
market there. To succeed however, advisors must provide sound advice and high
quality.
➢ Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies in the industry.

➢ SIP is easy for monthly salaried person as it provides the facility of do the investment
in EMI. Though most of the prospects and potential investors are not aware about the
SIP.

➢ There is a large scope for the companies to tap the salaried persons.

➢ SIP is more comfortable then lumpsum because in India there is bit difficult to trust on
other person.
 FINDINGS AND CONCLUSION
➢ In Jaipur the investors in the Age Group of 36-40 years were more in numbers. The
second most Investors were in the age group of 41-45 years and the least were in the
age group of below 30 years.

➢ In family Income group, between Rs. 20,001- 30,000 were more in numbers, the
second most were in the Income group between Rs.30,000-40,000 and the least were
in the group of below Rs. 10,000.

➢ About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits,
Only26% Respondents invested in Mutual fund.

➢ Mostly Respondents preferred High Return while investment, the second most
preferred Low Risk then liquidity and the least preferred Trust.

➢ Only 30% Respondents were aware about Mutual fund and its operations and 60%
were not.

➢ Among 100 Respondents only 26% had invested in Mutual Fund and 74% did not have
invested in Mutual fund.

➢ Most of the Investors had invested in LIC and preferred to invest in that due to security.

➢ Out of 26 investors of Baroda mutual fund 41% have invested due to its association
with the Brand Baroda, 29% Invested because of Advisor’s Advice and 30% due to
better return.

➢ Most of the investors who did not invested in BOB due to not Aware of BOB, the
second most due to risks.
➢ For Future investment the maximum Respondents preferred Reliance Mutual Fund,
the second most preferred ICICI Prudential, SBIMF has been preferred after them.

➢ 25% Investors preferred to Invest through Financial Advisors, 15% from their
colleagues and 55% through Bank.

➢ 15% preferred One Time Investment and 85% preferred SIP out of both type of Mode
of Investment.

➢ The most preferred Portfolio was GOLD, the second most was EQUITY and the least
preferred Portfolio was Debt portfolio.

➢ Maximum Number of Investors Preferred Growth Option for returns.

 BIBLIOGRAPHY
➢ https://news.cleartax.in/assess-the-pros-and-cons-of-mutual-fund-
nfos-before-
investing/6944/#:~:text=Pros%20of%20NFOs%20include%20%E2
%80%93%20NFOs,is%20equal%20to%20peer%20funds.

➢ https://www.investor.gov/introduction-investing/investing-
basics/investment-products/mutual-funds-and-exchange-traded-
1#Info

➢ https://www.hdfcfund.com/learn/beginner/mutual-funds/what-
mutual-fund

➢ https://cleartax.in/s/best-mutual-funds-india

➢ https://surejob.in/nfo.html

➢ https://www.adityabirlacapital.com/abc-of-money/what-is-a-growth-
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➢ https://www.financialexpress.com/money/mutual-funds/10-best-
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➢ https://www.amfiindia.com/new-fund-offer

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