0“A comparative study on the benefits of

investing in mutual fund and equity share ”

A Project Submitted To

University Of Mumbai for partial completion of the degree of

Master In Commerce

Under The Faculty Of Accountancy

Submitted By

VIDHI HITESH MAMNIA

Under The Guidance Of

BEENA SAMUEL

KERALEEYA SAMAJAM (REGD) DOMBIVLI MODEL COLLEGE

KANCHANGAON, KHAMBALPADA, NR. RBT

SCHOOL THAKURLI, DOMBIVLI (EAST)

THANE-DIST. MAHARASHTRA – 421203

DECEMBER 2021
 INDEX

CHAPTER TITLE OF THE PAGE NO.

CHAPTER
1 DECLARATION 4
2 ACKNOWLEDGEMENT 5
3 INTRODUCTION 6
4 REVIEW OF 28
LITERATURE

5 RESEARCH 32
METHODOLOGY

6 CONCLUSION 52
7 BIBLOGRAPHY 54
 KERALEEYA SAMAJAM (REGD.) DOMBIVLI’s MODEL COLLEGE

(AUTONOMOUS) (Affiliated to University of Mumbai) RE-ACCREDITED

GRADE “A” BY NAAC

CERTIFICATE

This is to certify that Ms. VIDHI HITESH MAMNIA has worked and duly completed her
Project work for the degree of Master in Commerce under the Faculty of Commerce in the
subject of ACCOUNTANCY and her project is entitled,

“A comparative study on the benefits of investing in mutual fund and equity share ”
under my supervision. I further certify that the entire work has been done by the learner under
my guidance and that no part of it has been submitted previously for any Degree Or Diploma
of any University.

It is her own work and facts reported by her/his personal findings and investigations. Date of
submission:

Name and Signature of

Guiding Teacher

Date of submission:
 DECLARATION

I, the undersigned Miss Vidhi Hitesh Mamnia here by, declare that the work embodied in
this project work title “A comparative study on the benefits of investing in mutual fund
and equity share ” forms my own contribution to the research work carried out under the
guidance of Prof. Beena Samuel, is a result of my own research work and has not been
previously submitted to any other university for any Degree/ Diploma to this or any other
University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic riles and ethical conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

 ACKNOWLEDGMENT

To list who all have helped me in difficult because they are so numerous and depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project

. I take this opportunity to thank the University of Mumbai for giving me chance to do this
project

. I would like to thank my in charge Principal DR. (CA) R.P.BAMBARDEKAR for

providing the necessary facilities required for completion of this project.

I take this opportunity to thank our Co-ordinator DR. THRIVIKRAMAN. M V for his
moral support and guidance.

I would also like to express my sincere gratitude towards my project Guide ASST. PROF.
BEENA SAMUEL whose guidance and care made the project successful

. I would like to thank my college Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped, me in
the completion of the project especially my parents and peers who supported me throughout
my project.
 Chapter I : Introduction

INTRODUCTION

In today’s developing environment, there are various investment avenues available to the
investors. The risk and return from these investment avenues are completely different from
one another. The investors always expect more returns with relatively less risks. Among
various investment options, mutual fund is the best option to the common man since it
provides diversified and professionally managed portfolio at low cost. This paper also makes
an attempt to suggest the investors to choose the right investment avenue for their savings
according to their preference. The study depends majorly on the primary data and the
questionnaire had been served to 90 respondents to collect information with respect to
investment avenues and awareness.

In this modernistic era, money plays an important role in everyone’s life. In order to
overcome the problems in future they have to invest their money. Investment cultivates the
habit of saving in one’s life. Investment goals vary from person to person depending upon
their requirements. Investing the hard earned money is an indispensable activity of every
human being. Investment is the commitment of funds which is saved from current
consumption with the hope that some benefits will be received in future. Savings of the
people are invested in various assets depending on their preferred risk and return, safety of
money, liquidity, the available avenues for investment, etc. Investment is nothing but buying
a financial product with an expectation of favourable future returns. Investing is a serious
subject that can have a major impact on investor’s future well-being. Investors have a lot of
investment avenues to park their savings.

The risk and returns available from each of these investment avenues are completely
different. In India, many investment avenues are available where some are marketable and
liquid while others are non-marketable and some of them are highly risky while others are
almost riskless. The investor has to properly choose the investment avenues depending upon
his specific need, risk preference, and returns expected. The Investors should always focus
only on the safe investment avenues. Common people should cultivate the habit of saving a
part of their income at the early stage of their life in order to get a better and safe future. The
investors also should have full knowledge of the investment options in order to avoid loss in
future. The main objective of comparing investment in equity shares with mutual fund
schemes is to analyze the comparison of mutual funds with equities by considering risk,
return, safety and liquidity. shares, bonds, and derivatives. The stock exchange works as a
facilitator of this transaction and enables the buying and selling of shares. Stock markets form
the largest avenues for investments. There are primarily two stock exchanges in India, the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Companies list
their shares for the first time in the primary market and in the secondary markets investors
can buy and sell their shares during an Initial Public Offering.
DATA ANALYSIS AND INTERPRETATION

Analysis of selected Equity Shares

Interpretation of selected equity shares: The above table no.3 shows the summary statistic
of selected the equity shares company.Returns: Kotak gives highest return i.e. 7.641% and
Bajaj gives lowest return i.e. 6.936% from 2016 to 2020. Standard deviation: Above table 3
shows that Bajaj is more volatile as it indicates more risky whereas HUL is less volatile as it
indicates less risky. Alpha: Above table3 shows that Reliance, HUL, HDFC, and Kotak has
positive alpha as it indicates outperformed shares whereas TCS, HDFC Bank, Infosys, ICICI
Bank, SBI has negative alpha as it indicates 0underperformed shares. Thus, more positive an
alpha the healthier for investors.Beta: Above table 3 shows that Reliance, HDFC Bank,
Infosys, HDFC, ICICI Bank, Kotak, SBI and Bajaj ratio is higher than 1 as it indicates that
the security's price tends to be more volatile than the market whereas TCS and HUL is lower
than 1 as it indicates that the security's price tends to be less volatile than the market. Sharpe,
Treynor and Jensen ratio: Above table 4 shows performance of selected equities by using.
Sharpe, Treynor and Jensen ratio. Now the funds can be ranked according to these ratios,
higher ratio of fund gets higher rank and higher return. Portfolio return according to CAPM
Model: CAPM shows the return of a security is equal to the risk free return plus a risk
premium. Thus, the return of ten equity share portfolio gives return of 16.90%.

Analysis of selected Mutual Fund: Interpretation of selected mutual fund in terms of

returns: The table 5 shows the absolute return during the time period of 1 year, 2 year, 3 year
and 5 year of mutual fund. In the 1 year (2020), Kotakbluechip fund gives 64.14% which is
highest return after that SBI bluechip fund gives 61.13% return and other funds give
comparative less returns. In the 2 year (2019), CanaraRobecobluechip Equity Fund gives
19.98% which is highest return after that Axis bluechip fund gives 17.34% return and other
funds give comparative less returns. In the 3 year(2018),
CanaraRobecobluechip Equity Fund gives 16.71% which is highest return after that Axis
bluechip fund gives 15.37% return and other funds give comparative less returns. In the 5
year(2020), CanaraRobecobluechip Equity Fund gives 17.23% which is highest return after
that Axis bluechip fund gives 17.09% return and other funds give comparative less returns.

Concept of Mutual fund

A mutual fund is a company that pools money from many investors and invests the money in
securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual
fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents
an investor’s part ownership in the fund and the income it generates.

Definition:
A mutual fund is a professionally-managed investment scheme, usually run by an asset
management company that brings together a group of people and invests their money in
stocks, bonds and other securities.

What Is a Mutual Fund?

A mutual fund is a type of financial vehicle made up of a pool of money collected from

many investors to invest in securities like stocks, bonds, money market instruments, and
other assets. Mutual funds are operated by professional money managers, who allocate the
fund's assets and attempt to produce capital gains or income for the fund's investors. A
mutual fund's portfolio is structured and maintained to match the investment objectives
stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios
of equities, bonds, and other securities. Each shareholder, therefore, participates
proportionally in the gains or losses of the fund. Mutual funds invest in a vast number of
securities, and performance is usually tracked as the change in the total market cap of the
fund—derived by the aggregating performance of the underlying investments.

How Mutual Funds Work ?

A mutual fund is both an investment and an actual company. This dual nature may seem
strange, but it is no different from how a share of AAPL is a representation of Apple Inc.
When an investor buys Apple stock, he is buying partial ownership of the company and its
assets. Similarly, a mutual fund investor is buying partial ownership of the mutual fund
company and its assets. The difference is that Apple is in the business of making innovative
devices and tablets, while a mutual fund company is in the business of making investments.

Investors typically earn a return from a mutual fund in three ways:

1. Income is earned from dividends on stocks and interest on bonds held in the fund's
portfolio. A fund pays out nearly all of the income it receives over the year to fund
owners in the form of a distribution. Funds often give investors a choice either to
receive a check for distributions or to reinvest the earnings and get more shares.
2. If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
 3. If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit in the
market.

NET ASSET VALUE

The performance of a particular scheme of a Mutual Fund is denoted by Net Asset Value
(NAV). In simple words, NAV is the market value of the securities held by the scheme.
Mutual Funds invest the money collected from investors in securities markets. Since market
value of securities changes every day, NAV of a scheme also varies on day to day basis. The
NAV per unit is the market value of securities of a scheme divided by the total number of
units of the scheme on any particular date. The NAVs of all Mutual Fund schemes are
declared at the end of the trading day after markets are closed, in accordance with SEBI
Mutual Fund Regulations.

NAV is calculated by dividing the total value of all the cash and securities in a fund's
portfolio, minus any liabilities, by the number of outstanding shares. The NAV calculation is
important because it tells us how much one share of the fund is worth.

The Net Asset Value represents the market value per share for a particular mutual fund. It
is calculated by deducting the liabilities from total asset value divided by the number of
shares. One needs to gather the market value of a portfolio and divide it by the total
current fund unit number to determine the price of each fund unit.

Most of the time, the unit cost of mutual funds begin with Rs. 10 and increase as the asset
under the funds grow. Going by this rule, the more popular a mutual fund is, the higher is
its NAV.
The net value of an asset is most commonly used in case of open-end funds. With these
investments, the interest and shares do not get traded between shareholders. NAV helps
determine which investment one might choose to withdraw or keep in their investment
portfolio by providing a reference value.
The net asset value (NAV) represents the net value of an entity and is calculated as the total
value of the entity’s assets minus the total value of its liabilities. Most commonly used in the
context of a mutual fund or an exchange-traded fund (ETF), the NAV represents the per
share/unit price of the fund on a specific date or time. NAV is the price at which the
shares/units of the funds registered with the U.S. Securities and Exchange Commission
(SEC) are traded (invested or redeemed)
Net asset value is commonly used to identify potential investment opportunities within
mutual funds, ETFs or indexes. One could also use net asset value to view the holdings in
their own portfolio. To invest in any of the aforementioned assets, an investment account
would be needed.
If a mutual fund is construed as a virtual company, its CEO is the fund manager, sometimes
called its investment adviser. The fund manager is hired by a board of directors and is
legally obligated to work in the best interest of mutual fund shareholders. Most fund
managers are also owners of the fund. There are very few other employees in a mutual fund
company. The investment adviser or fund manager may employ some analysts to help pick
investments or perform market research. A fund accountant is kept on staff to calculate the
fund's NAV, the daily value of the portfolio that determines if share prices go up or down.
Mutual funds need to have a compliance officer or two, and probably an attorney, to keep up
with government regulations. Most mutual funds are part of a much larger investment
company; the biggest have hundreds of separate mutual funds. Some of these fund
companies are names familiar to the general public, such as Fidelity Investments, The
Vanguard Group, T. Rowe Price, and Oppenheimer.

The calculation of the net value is pretty straightforward. One can easily do it by using the
formula below –

The net value of an asset = (Total asset – total liabilities)/ total outstanding shares

However, it is crucial to input the correct qualifying items under assets and liabilities to
get an accurate net value of assets.

What is the Net Value of Assets for Mutual Funds?

Mutual funds, unlike stocks, do not trade in real-time. Instead, they are calculated based on
the trading method and depends primarily on various assets and liabilities.

Assets
The asset section of mutual funds includes the cumulative market value of a particular
fund’s investments, receivables, cash, cash equivalents and other accrued income. This
market value is calculated at the end of each day, based on the closing price of the various
securities included in the fund’s portfolio. These funds may include a percentage of capital
in the form of liquid assets and cash as well as other items like interest payments,
dividends, etc. The sum of all these assets mentioned above or their variants falls under the
category of assets.

Liabilities
The liabilities section, while computing net asset value mutual funds include outstanding
payments, money owed to the lenders, and other fees and charges that are owed to
associated entities.
Apart from these, mutual funds may also have foreign liabilities which can include shares
for non-residents, payment pending to foreign conglomerates and various sale proceeds
that are yet to be ousted.

Liabilities can also include various accrued expenses including utilities, staff salaries,
operating expenses, distribution, management expenses, etc.

Thus, for net asset value calculation for mutual funds, the quantum of the above
mentioned liabilities and assets as of the end of a particular day are taken into account.

Types of Mutual Funds

The mutual fund industry in the USA, the UK and Japan has achieved tremendous diversity
in terms of innovative funds (schemes). The launching of innovative schemes in India has
been rather slow due to the prevailing investment psychology and infra structural
inadequacies. Mutual fund investors in India, who are largely from the upper-middle-class
income group, are risk-averse and, as such, more interested in schemes with tolerable capital
risk and returns over bank deposits. This has restricted innovation and launching of more
risky products in the Indian market.

1. Open-Ended Schemes - Though the first, and by far the most popular, mutual fund
scheme,(Unit 64), is an open-ended scheme, open-ended schemes have not been very
successful in India unlike the USA and UK. By the end of March 1996 the total
schemes including UTI’S three venture funds numbered 194, out of which only 31
schemes were open-ended and the rest were close-ended. The exact data pertaining to
the assets of open-ended and close-ended schemes is not readily available. However,
 some idea about the relative strength of open-ended and close-ended schemes can be
drawn from the data compiled by UTI.

Investors are actively involved in fund management, which indicates that such
investments involve a fund manager, who picks the funds where the investment should be
made. Thus, open-ended mutual funds are subject to expense ratio due to the fund
management charge involved. These funds are highly liquid as the funds are not bound to
any maturity period.

Example: Mirae Asset Large Cap Fund (G)

2. Close-Ended Schemes - Close-ended schemes are more popular in India than open-ended
schemes. As we have seen, of the 194 schemes as on 31 March 1996, 163 were close-ended.
The popularity of close-ended schemes is on account of two reasons. First, before the
promulgation of SEBI regulations in 1993, public sector mutual funds came out with many
close-ended income schemes with assured returns. Second due to the stock market boom
during 1991-92, investors have preferred growth-oriented equity schemes.

One of the most prominent differentiating factors between open-ended and close-ended
mutual funds is that the close-ended funds cannot be sold back to the mutual fund house.
Rather, they are to be sold on the stock market at the prevailing rates for the share.

Example: DSP 3Y Close Ended Equity Fund (G)

3. Interval Funds - Interval Funds bridge the gap between open-ended and close-ended
mutual funds. Much like close-ended mutual funds, they are available as an initial offering
and are then opened for the repurchase of shares by the fund management company at
different intervals during the tenure of the fund. Initial unitholders can offload their shares by
selling it to the mutual fund house.

Example: Reliance Yearly Interval Fund – 1 (G)00

Mutual funds are divided into several kinds of categories, representing the kinds of securities
they have targeted for their portfolios and the type of returns they seek. There is a fund for
nearly every type of investor or investment approach. Other common types of mutual funds
include money market funds, sector funds, alternative funds, smart-beta funds, target-date
funds, and even funds of funds, or mutual funds that buy shares of other mutual funds.

Equity Funds

The largest category is that of equity or stock funds. As the name implies, this sort of fund
invests principally in stocks. Within this group are various subcategories. Some equity funds
are named for the size of the companies they invest in: small-, mid-, or large-cap. Others are
named by their investment approach: aggressive growth, income-oriented, value, and others.
Equity funds are also categorized by whether they invest in domestic (U.S.) stocks or foreign
equities. There are so many different types of equity funds because there are many different
types of equities. A great way to understand the universe of equity funds is to use a style
box, an example of which is below.

The other dimension of the style box has to do with the size of the companies that a mutual
fund invests in. Large-cap companies have high market capitalizations , with values over $10
billion. Market cap is derived by multiplying the share price by the number of shares
outstanding. Large-cap stocks are typically blue chip firms that are often recognizable by
name. Small-cap stocks refer to those stocks with a market cap ranging from $300 million to
$2 billion. These smaller companies tend to be newer, riskier investments. Mid-cap
stocks fill in the gap between small- and large-cap.

A mutual fund may blend its strategy between investment style and company size. For
example, a large-cap value fund would look to large-cap companies that are in strong
financial shape but have recently seen their share prices fall and would be placed in the
upper left quadrant of the style box (large and value). The opposite of this would be a fund
that invests in startup technology companies with excellent growth prospects: small-cap
growth. Such a mutual fund would reside in the bottom right quadrant (small and growth).

Fixed-Income Funds

Another big group is the fixed income category. A fixed-income mutual fund focuses on

investments that pay a set rate of return, such as government bonds, corporate bonds, or
other debt instruments. The idea is that the fund portfolio generates interest income, which it
then passes on to the shareholders.
Sometimes referred to as bond funds, these funds are often actively managed and seek to
buy relatively undervalued bonds in order to sell them at a profit. These mutual funds are
likely to pay higher returns than certificates of deposit and money market investments, but
bond funds aren't without risk. Because there are many different types of bonds, bond funds
can vary dramatically depending on where they invest. For example, a fund specializing in
high-yield junk bonds is much riskier than a fund that invests in government securities.
Furthermore, nearly all bond funds are subject to interest rate risk, which means that if rates
go up, the value of the fund goes down.

Index Funds

Another group, which has become extremely popular in the last few years, falls under the
moniker "index funds." Their investment strategy is based on the belief that it is very hard,
and often expensive, to try to beat the market consistently. So, the index fund manager buys
stocks that correspond with a major market index such as the S&P 500 or the Dow Jones
Industrial Average (DJIA). This strategy requires less research from analysts and advisors,
so there are fewer expenses to eat up returns before they are passed on to shareholders.
These funds are often designed with cost-sensitive investors in mind.

Balanced Funds

Balanced funds invest in a hybrid of asset classes, whether stocks, bonds, money market
instruments, or alternative investments. The objective is to reduce the risk of exposure
across asset classes.This kind of fund is also known as an asset allocation fund. There are
two variations of such funds designed to cater to the investors objectives.

Some funds are defined with a specific allocation strategy that is fixed, so the investor can
have a predictable exposure to various asset classes. Other funds follow a strategy for
dynamic allocation percentages to meet various investor objectives. This may include
responding to market conditions, business cycle changes, or the changing phases of the
investor's own life.

While the objectives are similar to those of a balanced fund, dynamic allocation funds do not
have to hold a specified percentage of any asset class. The portfolio manager is therefore
given freedom to switch the ratio of asset classes as needed to maintain the integrity of the
fund's stated strategy.

Money Market Funds

The money market consists of safe (risk-free), short-term debt instruments, mostly

government Treasury bills. This is a safe place to park your money. You won't get
substantial returns, but you won't have to worry about losing your principal. A typical return
is a little more than the amount you would earn in a regular checking or savings account and
a little less than the average certificate of deposit (CD). While money market funds invest in
ultra-safe assets, during the 2008 financial crisis, some money market funds did experience
losses after the share price of these funds, typically pegged at $1, fell below that level
and broke the buck.

Income Funds

Income funds are named for their purpose: to provide current income on a steady basis.
These funds invest primarily in government and high-quality corporate debt, holding these
bonds until maturity in order to provide interest streams. While fund holdings may
appreciate in value, the primary objective of these funds is to provide steady cash flow to
investors. As such, the audience for these funds consists of conservative investors and
retirees. Because they produce regular income, tax-conscious investors may want to avoid
these funds.

International/Global Funds

An international fund (or foreign fund) invests only in assets located outside your home
country. Global funds, meanwhile, can invest anywhere around the world, including within
your home country. It's tough to classify these funds as either riskier or safer than domestic
investments, but they have tended to be more volatile and have unique country and political
risks. On the flip side, they can, as part of a well-balanced portfolio, actually reduce risk by
increasing diversification, since the returns in foreign countries may be uncorrelated with
returns at home. Although the world's economies are becoming more interrelated, it is still
likely that another economy somewhere is outperforming the economy of your home
country.
Specialty Funds

This classification of mutual funds is more of an all-encompassing category that consists of

funds that have proved to be popular but don't necessarily belong to the more rigid
categories we've described so far. These types of mutual funds forgo broad diversification to
concentrate on a certain segment of the economy or a targeted strategy. Sector funds are
targeted strategy funds aimed at specific sectors of the economy, such as financial,
technology, health, and so on. Sector funds can, therefore, be extremely volatile since the
stocks in a given sector tend to be highly correlated with each other. There is a greater
possibility for large gains, but a sector may also collapse (for example, the financial sector in
2008 and 2009).

Regional funds make it easier to focus on a specific geographic area of the world. This can
mean focusing on a broader region (say Latin America) or an individual country (for
example, only Brazil). An advantage of these funds is that they make it easier to buy stock in
foreign countries, which can otherwise be difficult and expensive. Just like for sector funds,
you have to accept the high risk of loss, which occurs if the region goes into a bad recession.

Socially responsible funds (or ethical funds) invest only in companies that meet the criteria
of certain guidelines or beliefs. For example, some socially responsible funds do not invest
in "sin" industries such as tobacco, alcoholic beverages, weapons, or nuclear power. The
idea is to get competitive performance while still maintaining a healthy conscience. Other
such funds invest primarily in green technology, such as solar and wind power or recycling.

Exchange Traded Funds (ETFs)

A twist on the mutual fund is the exchange traded fund (ETF). These ever more popular
investment vehicles pool investments and employ strategies consistent with mutual funds,
but they are structured as investment trusts that are traded on stock exchanges and have the
added benefits of the features of stocks. For example, ETFs can be bought and sold at any
point throughout the trading day. ETFs can also be sold short or purchased on margin. ETFs
also typically carry lower fees than the equivalent mutual fund. Many ETFs also benefit
from active options markets, where investors can hedge or leverage their positions. ETFs
also enjoy tax advantages from mutual funds. Compared to mutual funds, ETFs tend to be
more cost effective and more liquid. The popularity of ETFs speaks to their versatility and
convenience.

8 differences between Mutual Funds and Shares

In the world of investments, mutual funds and shares are two distinct investment avenues.
However, many people often get confused between the two and use them interchangeably. 

Shares are units of the entire capital of a company. Owning a stock of a company means
owning a part of the company; while a mutual fund pools the money collected from various
investors and invests it in a variety of assets, including shares of different companies.
However, you must know that you do not become a part-owner of a company by investing in
mutual funds. Instead, you receive mutual fund units in proportion to the investment amount.
Understanding the differences between mutual funds and shares is critical to make an
informed decision while investing. Let’s take a look at the eight key differences between
mutual funds and shares:

1. Diversification:

Mutual funds allow diversification as the pooled money gets invested across different shares
or fixed income instruments as per the fund’s objective. Direct investment in shares may not
lead to any diversification unless you choose to invest in different stocks.

2. Management:

Once you invest in a mutual fund, you do not have to manage the fund on your own.
Experienced fund managers are responsible for managing the performance of mutual funds
and making decisions to buy or sell. In the case of shares, you are responsible for monitoring
the price movement of shares and managing your investment.
3. Mode of investment:

When you invest in shares, you invest the funds directly as the shares get credited to your
Demat account directly. In case of mutual funds, the fund manager decides where the money
will be invested and sends you a statement of account that represents the units of mutual fund
you are holding.

4. Risk mitigation:

Mutual fund invests the pooled in money into the securities of various companies. This helps
to minimize the risk in case of any market volatility.

5. Flexibility:

Fund managers manage mutual funds. You don't get to decide which securities should be in
your portfolio. When you invest in the shares of a company, you can buy or sell as per your
preference. This gives you the flexibility to buy more of a particular stock if you are
confident of the prospects of that stock.

6. Tax efficiencies:

Equity oriented mutual funds such as Equity Linked Savings Scheme (ELSS) allows
deductions up to Rs. 1.5 lakh in a financial year under Section 80C of the Income Tax Act. 
However, no such tax benefits are available in the case of shares. 

7. SIPs and SEPs:

You can make investments in mutual funds through a Systematic Investment Plan (SIP),
which allows you to invest a fixed amount regularly. You can start with as little as INR 100
and grow your wealth. On the other hand, investing in shares, does not provide you with an
SIP option but a SEP (Systematic Equity Plan) option that allows you to invest in shares in a
systematic manner. Here, you can invest daily, weekly or monthly.

8. The autonomy of investment:

Investing in shares gives you more control as you can decide what to buy or sell, when to buy
or sell, etc. However, in mutual funds, there are fund managers who manage the investment
and they determine the type of securities to invest in, when to buy or sell, etc. 
Now that you have understood the differences between mutual funds and shares, you can pick
the product that suits your needs. Direct investments in shares are suitable if you can choose
the right stocks and create a diversified portfolio. Mutual funds are a good choice for those
who lack expertise or time to manage their investments. However, you can invest in both
direct shares and mutual funds to take advantage of both.

What are the benefits and risks of mutual funds?

Mutual funds offer professional investment management and potential diversification. They
also offer three ways to earn money:

 Dividend Payments. A fund may earn income from dividends on stock or interest on
bonds. The fund then pays the shareholders nearly all the income, less expenses.
 Capital Gains Distributions. The price of the securities in a fund may increase. When
a fund sells a security that has increased in price, the fund has a capital gain. At the
end of the year, the fund distributes these capital gains, minus any capital losses, to
investors.
 Increased NAV. If the market value of a fund’s portfolio increases, after deducting
expenses, then the value of the fund and its shares increases. The higher NAV reflects
the higher value of your investment.

All funds carry some level of risk. With mutual funds, you may lose some or all of the money
you invest because the securities held by a fund can go down in value. Dividends or interest
payments may also change as market conditions change.

A fund’s past performance is not as important as you might think because past performance
does not predict future returns. But past performance can tell you how volatile or stable a
fund has been over a period of time. The more volatile the fund, the higher the investment
risk.

How to buy and sell mutual funds

Investors buy mutual fund shares from the fund itself or through a broker for the fund, rather
than from other investors. The price that investors pay for the mutual fund is the fund’s per
share net asset value plus any fees charged at the time of purchase, su0ch as sales loads.
Mutual fund shares are “redeemable,” meaning investors can sell the shares back to the fund
at any time. The fund usually must send you the payment within seven days.

Before buying shares in a mutual fund, read the prospectus carefully. The prospectus contains
information about the mutual fund’s investment objectives, risks, performance, and expenses.
See How to Read a Mutual Fund Prospectus Part 1, Part 2, and Part 3 to learn more about key
information in a prospectus.

HISTORY OF MUTUAL FUNDS IN INDIA

A strong financial market with broad participation is essential for a developed economy. With
this broad objective India’s first mutual fund was establishment in 1963, namely, Unit Trust
of India (UTI), at the initiative of the Government of India and Reserve Bank of India ‘with a
view to encouraging saving and investment and participation in the income, profits and
gains accruing to the Corporation from the acquisition, holding, management and
disposal of securities’.

In the last few years the MF Industry has grown significantly. The history of Mutual Funds in
India can be broadly divided into five distinct phases as follows:

FIRST PHASE - 1964-1987

The Mutual Fund industry in India started in 1963 with formation of UTI in 1963 by an
Act of Parliament and functioned under the Regulatory and administrative control of
the Reserve Bank of India (RBI). In 1978, UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. Unit Scheme 1964 (US ’64) was the first scheme
launched by UTI. At the end of 1988, UTI had ₹ 6,700 crores of Assets Under
Management (AUM).

SECOND PHASE - 1987-1993 - ENTRY OF PUBLIC SECTOR MUTUAL FUNDS

The year 1987 marked the entry of public sector mutual funds set up by Public Sector
banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first ‘non-UTI’ mutual fund
established in June 1987, followed by Canbank Mutual Fund (Dec. 1987), Punjab
National Bank Mutual Fund (Aug. 1989), Indian Bank Mutual Fund (Nov 1989), Bank
of India (Jun 1990), Bank of Baroda Mutual Fund (Oct. 1992). LIC established its
mutual fund in June 1989, while GIC had set up its mutual fund in December 1990. At
the end of 1993, the MF industry had assets under management of ₹47,004 crores.

THIRD PHASE - 1993-2003 - ENTRY OF PRIVATE SECTOR MUTUAL FUNDS

The Indian securities market gained greater importance with the establishment of SEBI
in April 1992 to protect the interests of the investors in securities market and to
promote the development of, and to regulate, the securities market.

In the year 1993, the first set of SEBI Mutual Fund Regulations came into being for all
mutual funds, except UTI. The erstwhile Kothari Pioneer (now merged with Franklin
Templeton MF) was the first private sector MF registered in July 1993. With the entry
of private sector funds in 1993, a new era began in the Indian MF industry, giving the
Indian investors a wider choice of MF products. The initial SEBI MF Regulations were
revised and replaced in 1996 with a comprehensive set of regulations, viz., SEBI
(Mutual Fund) Regulations, 1996 which is currently applicable.

The number of MFs increased over the years, with many foreign sponsors setting up
mutual funds in India. Also the MF industry witnessed several mergers and acquisitions
during this phase. As at the end of January 2003, there were 33 MFs with total AUM of
₹1,21,805 crores, out of which UTI alone had AUM of ₹44,541 crores.

FOURTH PHASE - SINCE FEBRUARY 2003 – APRIL 2014

In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was
bifurcated into two separate entities, viz., the Specified Undertaking of the Unit Trust of
India (SUUTI) and UTI Mutual Fund which functions under the SEBI MF Regulations.
With the bifurcation of the erstwhile UTI and several mergers taking place among
different private sector funds, the MF industry entered its fourth phase of
consolidation. Following the global melt-down in the year 2009, securities markets all
over the world had tanked and so was the case in India. Most investors who had entered
the capital market during the peak, had lost money and their faith in MF products was
shaken greatly.  The abolition of Entry Load by SEBI, coupled with the after-effects of
the global financial crisis, deepened the adverse impact on the Indian MF Industry,
which struggled to recover and remodel itself for over two years, in an attempt to
maintain its economic viability which is evident from the sluggish growth in MF
Industry AUM between 2010 to 2013.

FIFTH (CURRENT) PHASE – SINCE MAY 2014

Taking cognisance of the lack of penetration of MFs, especially in tier II and tier III
cities, and the need for greater alignment of the interest of various stakeholders, SEBI
introduced several progressive measures in September 2012 to "re-energize" the Indian
Mutual Fund industry and increase MFs’ penetration.

In due course, the measures did succeed in reversing the negative trend that had set in
after the global melt-down and improved significantly after the new Government was
formed at the Center.

Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as
well as the number of investor folios (accounts).

 The Industry’s AUM crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the
first time as on 31st May 2014 and in a short span of about three years the AUM size
had increased more than two folds and crossed ₹ 20 trillion (₹20 Lakh Crore) for the
first time in August 2017. The AUM size crossed ₹ 30 trillion (₹30 Lakh Crore) for
the first time in November 2020.

 The overall size of the Indian MF Industry has grown from ₹ 6.95 trillion as on 31st
October 2011 to ₹ 37.33 trillion as on 31st October 2021, more than 5 fold increase in
a span of 10 years.

 The MF Industry’s AUM has grown from ₹ 16.29 trillion as on October 31, 2016 to
₹37.33 trillion as on October 31, 2021, more than 2 fold increase in a span of 5 years.

 The no. of investor folios has gone up from 5.13 crore folios as on 31-Oct-2016 to
11.44 crore as on 31-October-2021, more than 2 fold increase in a span of 5 years.

 On an average 10.52 lakh new folios are added every month in the last 5 years since
October 2016.

 The growth in the size of the Industry has been possible due to the twin effects of the
regulatory measures taken by SEBI in re-energising the MF Industry in September
2012 and the support from mutual fund distributors in expanding the retail base.
  MF Distributors have been providing the much needed last mile connect with
investors, particularly in smaller towns and this is not limited to just enabling
investors to invest in appropriate schemes, but also in helping investors stay on course
through bouts of market volatility and thus experience the benefit of investing in
mutual funds.

 MF distributors have also had a major role in popularising Systematic Investment

Plans (SIP) over the years. In April 2016, the no. of SIP accounts has crossed 1 crore
mark and as on 31st October 2021 the total no. of SIP Accounts are 4.64 crore.

OBJECTIVES

To evaluate the dynamics of relationship between equity investing and mutual fund investing
in India for the period of 5 years from 2016-2020.
To study relationship between the risk and return of equity shares and mutual fund. Risk free
rate is assumed to be 3.85% (which is rate of return of 364 days Treasury Bills in India as
on 12th, March 2021) for the calculation purpose. Market index is assumed to be 0.686.
Index return is assumed to be 7.505

Table 1. Showing selected equities and their benchmark as per

top 10 market capitalization during 2016-2020
Equities Benchmark
Reliance BSE SENSEX
TCS BSE SENSEX
HDFC Bank BSE SENSEX
Infosys BSE SENSEX
HUL BSE SENSEX

Housing Development
Finance Corporation BSE SENSEX
ICICI Bank BSE SENSEX
Kotak Mahindra BSE SENSEX
SBI BSE SENSEX
Bajaj Finance BSE SENSEX

Table 2. Showing selected mutual fund and their

benchmark as per large cap funds
Mutual Funds Benchmark
Aditya Birla Sun Frontline Equity Fund Nifty 50
Axis Bluechip Fund Nifty 50
Baroda largeCap Fund Nifty 100
CanaraRobeco
Bluechip Equity Fund S&P BSE 100
ICICI Prudential Bluechip Fund Nifty 100
IDFC Largecap Fund S&P BSE 100
KotakBluechip Fund Nifty 50
Franklin India Bluechip fund Nifty 50
Mirae Asset Largecap Fund Nifty 100
SBI Bluechip Fund S&P BSE 100

Chapter II
REVIEW OF LITERATURE

Dibin K. K., AlfiaThaha (2017) examined about ―Mutual Funds, Stocks and Banks: A Study
on the Changing Perspectives of Investments. The aim of this study was to analyze the real
and nominal returns from Banks, Mutual Funds and Stocks. To suggest the best investment
platform based on the risk-return dynamics. Survey method was Financial data of 10 years
have been collected for the purpose of evaluation from the Financial Year (FY) starting 2007
to 2017. The samples are selected based on Judgmental sampling which involves the choice
of funds and companies based on the report published by the rating agency (CRISIL) and the
stock samples were chosen based on the market capitalization. The findings of this study was
revealed that a mutual fund has outperformed among the other investment alternatives in
terms of return and risk and the reason behind this could be the entry of millennial investors.
The real return from the Mutual funds with an average half yearly return of 7.15% is an
exemption. Ankita sharma, Deepak Kumar Adhana (2020), studied about ―A study on
performance evaluation of equity share and mutual funds. The aim of this study was to
analyse the average return and the risk involved in investing in the mutual funds. Survey
method was descriptive research study and total ten companies selected where 5 companies
of equities are listed in BSE 500 benchmark and rest other 5 mutual fund Companies who
were also listed in BSE 500 Benchmark. The finding of this study was revealed that the result
of Sharpe‟s Ratio shows that Sharpe‟s performance index it is not necessary fund with higher
return is always well performing fund standard first time. ANOVA result shows that Null
h(0) hypothesis is Accepted because there is no significant difference between the return and
risk of equity and mutual fund Mutual fund shave average Return of 1.4% and Equity shares
have average return of 17.2% Ehsan Khan, Pallavi Gedamkar (2015), examined about
―Performance Evaluation of Equity Shares and Mutual Funds with Respect to their Risk and
Return. The aim of this study was to analysis financial performance of selected equity shares
and mutual fund schemes through the statistical parameters. Survey method was Exploratory
Research and Non probability judgmental sampling (purposive sampling/ authoritative
sampling). The study covers 5 selected stocks out of 30 BSE and 5 mutual fund schemes out
of mutual fund industry in India for comparison. The finding of this study was revealed that
Performance evaluation measurement ratios i.e. Treynor’s, Sharpe’s and Jensen’s alpha are
mostly used by fund managers to take decision of investment and to diversify portfolio and
for new investors mutual funds is advantageous in terms of portfolio diversification, high
liquidity, lesser risk, low transaction cost, professional management, choice of schemes,
transparency & safety, flexibility.

Jack Treynor (1965) developed a methodology for performance evaluation of a mutual fund
that is referred to as reward to volatility measure, which is defined as average excess return
on the portfolio. This is followed by Sharpe (1966) reward to variability measure, which is
average excess return on the portfolio divided by the standard deviation of the portfolio.
Sharpe (1966) developed a composite measure of performance evaluation and imported
superior performance of 11 funds out of 34 during the period 1944-63.

Michael C. Jensen (1967) conducted an empirical study of mutual funds in the period of
1954-64 for 115 mutual funds. The results indicate that these funds are not able to predict
security prices well enough to outperform a buy the market and hold policy. The study
ignored the gross management expenses to be free. There was very little evidence that any
individual fund was able to do significantly better than which investors expected from mere
random chance.

Jensen (1968) developed a classic study; an absolute measure of performance based upon the
Capital Asset Pricing Model and reported that mutual funds did not appear to achieve
abnormal performance when transaction costs were taken into account.

Carlsen (1970) evaluated the risk-adjusted performance and emphasized that

the conclusions drawn from calculations of return depend on the time period,
type of fund and the choice of benchmark. Carlsen essentially recalculated the
Jensen and Shape results using annual data for 82 common stock funds over
the 1948-67 periods. The results contradicted both Sharpe and Jensen
measures.

Fama (1972) developed a methodology for evaluating investment performance

of managed portfolios and suggested that the overall performance could be
broken down into several components.

John McDonald (1974) examined the relationship between the stated fund
objectives and their risks and return attributes. The study concludes that, on
an average the fund managers appeared to keep their portfolios within the stated risk. Some
funds in the lower risk group possessed higher risk than
funds in the most risky group.

James R.F. Guy (1978) evaluated the risk-adjusted performance of UK

investment trusts through the application of Sharpe and Jensen measures. The
study concludes that no trust had exhibited superior performance compared to
the London Stock Exchange Index.

Hendrickson (1984) reported that mutual fund managers were not able to
follow an investment strategy that successfully times the return on the market
portfolio. Again Herringbone (1984) conclude there is strong evidence that the
funds market risk exposures change in response to the market indicated. But
the fund managers were not successful in timing the market.

Grinblatt and Titman (1989) concludes that some mutual funds consistently
realize abnormal returns by systematically picking stocks that realize positive
excess returns.

Richard A. Ippolito (1989) concluded that mutual funds on an aggregate offer

superior returns. But expenses and load charges offset them. This
characterizes the efficient market hypothesis.
Ariff and Johnson (1990) made an important study in Singapore and found
that the performance of Singapore unit trusts spread around the market
performance with approximately half of the funds performing below the
market and another half performing above the market on a risk-adjusted basis.
Cole and IP (1993) investigated the performance of Australian equity trusts.
The study found evidence that portfolio managers were unable to earn overall
positive excess risk-adjusted returns.

Vincent A. Warther (1995) in the article entitled ―aggregate mutual fund flows and security
returns concluded that aggregate security returns are highly correlated with concurrent
unexpected cash flows into MFs but unrelated to concurrent expected flows. The study
resulted in an unexpected flow equal to 1 percent of total stock fund assets corresponds to a
5.7 percent increase in stock price index.

Singh, B. K. and Jha, A.K. (2009) conducted a study on awareness & acceptability of mutual
funds and found that investors prefer mutual fund due to return potential, liquidity and safety
and they were not totally aware about the systematic investment plan. The invertors’ will also
consider various factors before investing in mutual fund. Ramamurthy and Reddy (2005)
conducted a study to analyse recent trends in the mutual fund industry and draw a conclusion
that the main benefits for small investors’ due to efficient management, diversification of
investment, easy administration, liquidity, transparency, flexibility, affordability, wide range
of choices and a proper regulation governed by SEBI. The study also analysed about recent
trends in mutual fund industry like various exit and entry policies of mutual fund companies,
various schemes related to real estate, commodity, entering of banking sector in mutual fund,
buying and selling of mutual funds through online. Anand and Murugaiah (2004) had studied
various strategic issues related to the marketing of financial services. They found that
recently this type of industry requires new strategies to survive and for operation. For
surviving they have to adopt new marketing tactics that enable them to capture maximum
opportunities with the minimum risks in order to enable them to survive and meet the
competition from various market players globally.
 Chapter III
RESEARCH METHODOLOGY

The present study made an attempt to analyse the performance of the selected equity shares
and mutual fund schemes with the market during the period of the study. In order to achieve
the objectives an analysis has been made to compare these schemes with the market on the
basis of risk and return. Different statistical and financial tools are used to evaluate the
performance of these equity shares and mutual fund schemes under the present study.

To study the Investors perception towards Mutual Fund and Equity the primary and
secondary data has been collected. The collected data has been analysed and interpreted by
Fishers Test, Kruskal Walis H Test and graphical representation. The structured questionnaire
was prepared to collect the primary data from the investors. During the survey the
questionnaire was handed over to respondents and they were asked to return the filled
questionnaire after completion. The secondary data were collected from the books, records,
and journals. An aggregate of 90 respondents responded to the questionnaire in Mangalore
city.
Mutual Fund Fees

A mutual fund will classify expenses into either annual operating fees or shareholder fees.
Annual fund operating fees are an annual percentage of the funds under management,
usually ranging from 1–3%. Annual operating fees are collectively known as the expense
ratio. A fund's expense ratio is the summation of the advisory or management fee and its
administrative costs.

Shareholder fees, which come in the form of sales charges, commissions, and redemption
fees, are paid directly by investors when purchasing or selling the funds. Sales charges or
commissions are known as "the load" of a mutual fund. When a mutual fund has a front-
end load, fees are assessed when shares are purchased. For a back-end load, mutual fund
fees are assessed when an investor sells his shares.

Sometimes, however, an investment company offers a no-load mutual fund, which doesn't
carry any commission or sales charge. These funds are distributed directly by an investment
company, rather than through a secondary party.

Some funds also charge fees and penalties for early withdrawals or selling the holding
before a specific time has elapsed. Also, the rise of exchange-traded funds, which have
much lower fees thanks to their passive management structure, have been giving mutual
funds considerable competition for investors' dollars. Articles from financial media outlets
regarding how fund expense ratios and loads can eat into rates of return have also stirred
negative feelings about mutual funds.

Transaction fees

Purchase Fee - A type of fee that some funds charge their shareholders when they buy
shares. Unlike a front-end sales load, a purchase fee is paid to the fund (not to a Stockbroker)
and is typically imposed to defray some of the fund's costs associated with the purchase.[2]
Redemption Fee - another type of fee that some funds charge their shareholders when they
sell or redeem shares. Unlike a deferred sales load, a redemption fee is paid to the fund (not
to a Stockbroker) and is typically used to defray fund costs associated with a shareholder's
redemption.

Exchange Fee—a fee that some funds impose on shareholders if they exchange (transfer) to
another fund within the same "family of funds".[2]

Periodic fees

Management fees - Management fees are fees that are paid out of fund assets to the fund's
investment adviser for investment portfolio management, any other management fees payable
to the fund's investment adviser or its affiliates, and administrative fees payable to the
investment adviser that are not included in the "Other Expenses" category They are also
called maintenance fees.

Account fees - Account fees are fees that some funds separately impose on investors in
connection with the maintenance of their accounts. For example, some funds impose an
account maintenance fee on accounts whose value is less than a certain dollar amount.

Distribution and service fee - Distribution and service fees are fees paid by the fund out of
fund assets to cover the costs of marketing and selling fund shares and sometimes to cover
the costs of providing shareholder services. They are also called 12b-1 fees after section 12 of
the Investment Company Act of 1940. "Distribution fees" include fees to compensate brokers
and others who sell fund shares and to pay for advertising, the printing and mailing of
prospectuses to new investors, and the printing and mailing of sales literature. "Shareholder
Service Fees" are fees paid to persons to respond to investor inquiries and provide investors
with information about their investments. Shareholder Servicing Fees can be paid inside or
outside of a Rule 12b-1 . Funds can charge up to 0.25% in distribution fees and still describe
themselves as "no-load".
Other operating expenses

Transaction costs - These costs are incurred in the trading of the fund's assets. Funds with a
high turnover ratio, or investing in illiquid or exotic markets usually face higher transaction
costs. Unlike the total expense ratio these costs are usually not reported.

Loads

Definition of a load - Load funds exhibit a "Sales Load" with a percentage charge levied on
purchase or sale of shares. A load is a type of commission. Depending on the type of load a
mutual fund exhibits, charges may be incurred at the time of purchase, time of sale, or a mix
of both. The different types of loads are outlined below.

Front-end load - Often associated with class 'A' shares of a mutual fund. Also known as
Sales Charge, this is a fee paid when shares are purchased. Also known as a "front-end load",
this fee typically goes to the brokers that sell the fund's shares. Front-end loads reduce the
amount of your investment. For example, let's say you have $1,000 and want to invest it in a
mutual fund with a 5% front-end load. The $50 sales load you must pay comes off the top,
and the remaining $950 will be invested in the fund. The Maximum sales load under the
Investment Company Act of 1940 is 9%. The maximum sales load under NASD Rules is
81⁄2%.

Back-end load - Associated with class "B" mutual fund shares. Known as a Contingent
Deferred Sales Charge (CDSC or sometimes Deferred Sales Charge), this is a fee paid when
shares are sold. Also known as a "back-end load", this fee typically goes to the stockbrokers
that sell the fund's shares. Back-end loads start with a fee of about 5 to 6 percent, which
incrementally discounts for each year that the investors own the fund’s shares. The rate at
which the fee declines is disclosed in the prospectus.[5] The amount of this type of load will
depend on how long the investor holds his or her shares and typically decreases to zero if the
investor holds his or her shares long enough.[2]
Level load/low load - It's similar to a back-end load in that no sales charges are paid when
buying the fund. Instead, a back-end load may be charged if the shares purchased are sold
within a given time frame. The distinction between level loads and low loads as opposed to
back-end loads is that this time frame where charges are levied is shorter.

No-load fund - Associated with Class "C" Shares. As the name implies, this means that the
fund does not charge any type of sales load. But, as outlined above, not every type of
shareholder fee is a "sales load". A no-load fund may charge fees that are not sales loads,
such as purchase fees, redemption fees, exchange fees, and account fees. Class "C" shares
have the highest annual expense charges.

NEED OF STUDY

The need of the study arises because the investors are confused to take right decision on
investment. Since investments are risky in nature, investors have to consider various factors
before investing in their preferred avenues. The investor needs suggestion regarding where
the investments are to be made and maximum revenue can be generated. Therefore researcher
felt to undertake study on this topic.

The main purpose of doing this project was to know about mutual fund and its functioning.
This helps to know in details about mutual fund industry right from its inception stage,
growth and future prospects.
It also helps in understanding different schemes of mutual funds. Because my study depends
upon prominent funds in India and their schemes like equity, income, balance as well as the
returns associated with those schemes.
The project study was done to ascertain the asset allocation, entry load, exit load, associated
with the mutual funds. Ultimately this would help in understanding the benefits of mutual
funds to investors.

OBJECTIVES OF THE STUDY

1. To study Investors perception towards Mutual Fund and Equity.
2. To provide feasible solutions on the basis of the findings of the study
3. To give a brief idea about the benefits available from Mutual Fund investment
4. To give an idea of the types of schemes available.
5. To discuss about the market trends of Mutual Fund investment.
6. To study some of the mutual fund schemes and analyse them
7. Observe the fund management process of mutual funds
8. Explore the recent developments in the mutual funds in India
9. To give an idea about the regulations of mutual funds

SCOPE OF THE STUDY

The present study is an attempt to know the investors perception regarding equities and
mutual funds with the available avenues to the investor. Research has been carried with the
help of primary and secondary data. The study is restricted to Mangalore city and analysis
was done based on the responses given by the investors.

In my project the scope is limited to some prominent mutual funds in the mutual fund
industry. I analyzed the funds depending on their schemes like equity, income, balance. But
there is so many other schemes in mutual fund industry like specialized (banking,
infrastructure, pharmacy) funds, index funds etc.

My study is mainly concentrated on equity schemes, the returns, in income schemes the
rating of CRISIL, ICRA and other credit rating agencies.

STRUCTURE OF MUTUAL FUNDS IN INDIA

In developed countries like the UK and the USA the mutual fund industry is highly regulated
with a view to impart operational transparency and protect investor’s interests. Since there is
a clear distinction between open-ended schemes (mutual funds) and close-ended schemes,
usually two different types of structural and management approaches are followed. Open-
ended funds (unit trusts), in the UK follow the ‘trust approach’ while close-ended schemes
(investments trust) follow the ‘corporate approach’. The management and operations of such
funds are therefore guided by separate regulatory mechanisms, and rules are laid down by the
separate controlling authorities. However, these distinctions are not followed in India and
both the approaches, i.e., trust and corporate, have been integrated by the Indian regulatory
authority, SEBI. The formation and operations of mutual funds in India is solely guided by
the securities and Exchange Board of India (Mutual Funds) Regulations, 1993 which came
into force on January 1993. The regulations have since been replaced by the Securities and
Exchange Board of India (Mutual Funds) Regulations 1996, through a notificatio0000n on 9
December 1996. A mutual fund comprises four separate entities, namely sponsor, mutual
fund trust, AMC and custodian. They are of course assisted by other independent
administrative entities like banks, registrars and transfer agents

Advantages of Mutual Fund

Any investor investing in mutual fund can automatically reap the benefits of research and
wider range of low cost information services. A risk-wavers investor can thus expect above
the market returns at a lower cost and lower risk.

 Tax Efficiency -In general, investors pay tax on a year-to-year basis. So if they were to earn
and then reinvest any income, what they would re-invest is the amount that is available after
paying tax. Mutual Fund schemes, on the other hand, do not pay any tax on their income. So
the same earning in a mutual fund scheme could facilitate a higher re-investment. This
differential tax treatment offers an opportunity to investors to multiply their money within a
scheme, without paying tax in the interim. The incidence of taxation can be postponed until
the investors needs the money—at which point of the time the income can be structured as a
long-term capital gain.

 Choice of Risk Position -There are as many risk-level options among mutual fund schemes
as the water level options in the milk sold by the unorganized milk sector in India! The
choice of water level is entirely that of the buyer. The investor can either savour the water
(risk) or drown in it. Each mutual fund promises a certain water (risk) level, and is expected
to stick to it. Mutual fund schemes that do not stick to their promise are not worth investing
in. In the case of milk, the buyer would be happy with a water level that is lower that what
was promised. However, with mutual funds, variation from promised risk level is unethical,
irrespective of whether it is higher or lower than the promise. The trustees are responsible for
ensuring that the AMC invests as per its committed investment objective, and maintains the
promised risk character of the scheme.

 Professional Management - Investment is a specialized and full-time activity. AMCs are

expected to have the professional people and the establishment to carry out this specialized
work. Further, professional managers can take more dispassionate decisions, such as selling
in stop-loss situations, which investors find difficult on emotional grounds.

 Investment Convenience -The facility of marking investments through service centers as

well as through the Internet, a facility offered by some AMCs, ensures convenience.
Similarly, through standing instructions it is possible for investors to adopt SIP, SWP or STP.
Mutual funds that permit switches between schemes without any cost help investors to
manage their exposures economically.  Liquidity- Open-ended schemes offer liquidity
through on-going sale and repurchase facility. Thus, the investor does not have to worry
about finding a buyer for her investment—a risk normally associated with direct investment
in the securities market.

 Investment Lot - Direct investment in the services market often comes with a stiff minimum
investment requirement. This is particularly so in the Indian debt market, where realistic
options for retail investors are only now emerging.

 Cost Economies - Given its size, an AMC would be in a position to negotiate better
brokerage terms for the sales and purchase of its investments. No doubt the establishment
costs of the AMC get loaded to its schemes, and thus changed to the scheme’s investors. But
there are regulations on the extent of such loading. So long as the incremental returns through
professional management, tax efficiencies, and the cost economics are more than the
establishment costs charged to the schemes, investors gain by investing through mutual
funds.

Liquidity
The most important benefit of investing in a Mutual Fund is that the investor can redeem the
units at any point in time. Unlike Fixed Deposits, Mutual Funds have flexible withdrawal but
factors like the pre-exit penalty and exit load should be taken into consideration.
Diversification
The value of an investment may not rise or fall in tandem. When the value of one investment
is on the rise the value of another may be in decline. As a result, the portfolio’s overall
performance has a lesser chance of being volatile.
Diversification reduces the risk involved in building a portfolio thereby further reducing the
risk for an investor. As Mutual Funds consist of many securities, investor’s interests are
safeguarded if there is a downfall in other securities so purchased.
Expert Management 
A novice investor may not have much knowledge or information on how and where to invest.
The experts manage and operate mutual funds. The experts pool in money from investors and
allocates this money in different securities thereby helping the investors incur a profit. 
The expert keeps a watch on timely exit and entry and takes care of all the challenges. One
only needs to invest and be least assured that rest will be taken care of by the experts who
excel in this field.  This is one of the most important advantages of mutual funds
  Flexibility to invest in Smaller Amounts 

Among other benefits of Mutual Funds the most important benefit is its flexible nature.
Investors need not put in a huge amount of money to invest in a Mutual Fund. Investment can
be as per the cash flow position.
If You draw a monthly salary then you can go for a Systematic Investment Plan (SIP).
Through SIP a fixed amount is invested either monthly or quarterly as per your budget and
convenience.
Accessibility – Mutual Funds are Easy to Buy
Mutual Funds are easily accessible and you can start investing and buy mutual funds from
anywhere in the world. An asset management companies (AMC) offers the funds and
distributes through channels like :

 Brokerage Firms
 Registrars like Karvy and CAMS
 AMC’S Themselves
 Online Mutual Fund Investment Platforms
 Agents and Banks

This factor makes mutual funds universally available and easily accessible. More so, you do
not require a Demat Account to invest in Mutual Funds. Mutual funds are easy to buy, track
performance and one-click investment with Scripbox
Schemes for Every Financial Goals
The best part of the Mutual Fund is the minimum amount of investment can be Rs. 500. And
the maximum can go up to whatever an investor wishes to invest.
The only point one should consider before investing in the Mutual Funds is their income,
expenses, risk-taking ability, and investment goals. Therefore, every individual from all
walks of life is free to invest in a Mutual Fund irrespective of their income.
Safety and Transparency
With the introduction of SEBI guidelines, all products of a Mutual Fund have been labeled.
This means that all Mutual Fund schemes will have a color-coding. This helps an investor to
ascertain the risk level of his investment, thus making the entire process of investment
transparent and safe.
This color-coding uses  3 colors indicating different levels of risk- 

1. Blue indicates low risk

2. Yellow indicates medium risk, and
3. Brown indicates a high risk.

Investors are also free to verify the credentials of the fund manager, his qualifications, years
of experience, and AUM, solvency details of the fund house.

Lower cost

In a Mutual Fund, funds are collected from many investors, and then the same is used to
purchase securities. These funds are however invested in assets which therefore helps one
save on transaction and other costs as compared to a single transaction. The savings are
passed on to the investors as lower costs of investing in Mutual Funds.
Besides, the Asset Management Services fee cost is lowered and the same is divided between
all the investors of the fund.

Best Tax Saving Option 

Mutual Funds provide the best tax saving options. ELSS Mutual Funds have a tax exemption
of Rs. 1.5 lakh a year under section 80C of the Income Tax Act. You can use
Scripbox’s income tax calculator to ensure tax plan requirement
All other Mutual Funds in India are taxed based on the type of investment and the tenure of
investment.
ELSS Tax Saving Mutual Funds has the potential to deliver higher returns than other tax-
saving instruments like PPF, NPS, and Tax Saving FDs.

Lowest Lock-in Period

Tax Saving Mutual Funds have the lowest lock-in periods of only 3 years. This is lower as
compared to a maximum of 5 years for other tax saving options like FD, ULIPs, and PPF.
On top of that one has the option to stay invested even after the completion of the lock-in
period.

Lower Tax on the Gains

With Equity linked saving scheme you can save tax up to Rs. 1.5 Lakh a year under section
80C of Income Tax (IT) Act. All other types of Mutual Funds are taxable depending on the
type of fund and tenure.

Before making an investment one should keep in mind the various advantages Mutual Fund
provides. Thorough knowledge of the benefits of Mutual Funds would lead to better gains in
the future.

Disadvantage of Mutual Fund

 No Guarantees: No investment is risk free and investment in mutual fund is not an

exception to it. It implies that, anyone who invests through a mutual fund runs the risk of
losing money also.

 Adverse effect on Return on Investment: Investment and disinvestment decisions of fund

managers of AMC requires deep and clear understanding of various avenues of investment in
the universe and ever changing risk and return characteristics associated with each avenue of
investment. This makes fund managers to get frequently involved in churning of portfolios.
This process of frequent updating the portfolio may adversely affect the return on investment
to investors.
 Returns are associated with market risk: Investment into mutual fund is not free from the
impact of market risk. Mutual funds experience price fluctuations along with the stocks that
make up the fund.

 Returns too affected by over/under diversification: Although diversification is one of the

keys to successful investing, many mutual fund investors tend to over / under diversify. The
idea of diversification is to reduce the risks associated with holding a single security; over /
under diversification occurs when investors acquire many funds that are highly related and, as
a result, reduce benefits of diversification. At the same time, owning few securities may
result to under diversification forcing investors to lose the benefits of optimum
diversification.

 It involves High Costs along with Risks: Mutual funds provide investors with professional
management, but it comes at a cost. Funds will typically have a range of different fees that
reduce the overall payout.

The mutual fund sector operates under stricter regulations as compared to most other
investment avenues apart from offering investors tax efficiency and legal comfort.

Cost to Manage the Mutual Fund scheme

As mentioned above, Market Analysts or Fund Managers manage and operate the mutual
funds. These Fund Managers work for the fund houses that manage huge investments every
day. This requires a lot of efficiencies, expertise, and experience in the subject matter.

Dilution

Due to dilution, it is not recommended to invest in too many Mutual Funds at the same time.
Diversification, although saves an investor from major losses, also restricts one from making
a higher profit.

Lock-in Periods 

Equity-linked Saving Scheme (ELSS) have a longer lock-in period of 3 years. This debars an
investor from withdrawing the investment before the lock-in period is over. However,
withdrawing these funds before the lock-in period could lead to huge penalties. 
A portion of the fund is kept in cash to safeguard investor’s interest . This is done to
compensate the investor in case he desires to withdraw the fund before maturity. This part of
the cash fund does not earn any interest.
In spite of it having certain disadvantages, Mutual Funds in India are considered one of the
best investment plans. The advantages and long term benefits one incurs when investing in a
Mutual Fund makes it a win-win situation for all. The professional expertise makes it easier
even for a novice to investing without having any idea about it.
Here at Scripbox our expert market professionals analyze and research the different Mutual
Funds available. With proper market research, we bring to you the best investment plans
which would allow our investors to gain profits. 
0

How to Invest in mutual funds through Scripbox?

To achieve their financial goals one needs to go through a lot of processes that may not be
simple for a new investor. We, at Scripbox, make sure that our investors achieve their
financial goals. We ensure that the investing journey of our esteemed investors is smooth and
hassle-free. Mutual Funds are easy to buy and track with Scripbox
We understand our investors and accordingly have scientifically and algorithmically selected
Mutual Funds. Our experts have set a comprehensive plan using our advanced tools to
estimate the goals of our investors. We also create a personalized financial plan keeping in
mind the goals of our investors.
At Scripbox, we allow our investors to choose how their investments grow while balancing
the growth and risk ratio. Investors are also free to change their investment styles along the
way. Our investors are free to track their progress from time to time.
Once the financial goal of an investor is achieved, the investors are allowed to glide their path
by moving to lower risk plans. This helps them in securing their gains and thereby reducing
the mark to market risk. 

Steps to invest

 Start Investing through Scripbox for the following benefits:

 Scientifically and algorithmically selected Mutual Funds
 Annually reviewed
 One-click Investment
  Easy to Track
 Customizable to suit the investment
 Helps achieve wealth goals

To invest through Scripbox one needs to open an account with Scripbox by clicking on
SIGN-UP and providing the data we need. Once an account is opened you can start investing
depending on the following things:

 If the investor has already done the one time Know Your Customer (KYC) for Mutual
Funds
 One Time KYC for first time Mutual Fund Investors.
 Monthly Systematic Investment Plans (SIP)for automated investing.

Comparing Mutual Fund with other Investment Option

Inflation always has an adverse effect on the market scenario. As the value of money
decreases with inflation , it becomes very important to invest your money in the right sector.
Money left uninvested may lose its purchasing power as time passes. 
It is very important to know where and how to invest and which channel would fetch the
maximum profit.
Investing in Equity brings high risk but the returns are also high as compared to other
investment plans. An investor must always keep in mind the risk factor and the investment
goal
Time is another factor that an investor must consider before investing such as short term,
medium-term, and long term.
Now that we know the advantages of mutual funds, let us now compare Mutual Funds with
other investment options

Mutual Fund Vs Public Provident Fund (PPF)

PPF is a Long term investment plan with a lock-in period of 15 years. Though this
investment is one of the most preferred options, however, due to the reduced return this has
started losing its preference.
Moreover, the low returns are subject to higher liquidity and growth. Scipbox’s PPF
calculator will help you estimate the interest earned and maturity value. the PPF calculator is
easy to use and provides a detailed investment schedule
Mutual Funds do not have any lock-in period. There is flexibility in tenure for which one
wants to invest.
PPF’s are tax-free up to a limit of Rs. 1.5 lakh annually. Even the returns generated from
PPFs are tax exempted under section 80C of the Income Tax (IT) Act.
With ELSS Fund an investor can save tax up to Rs. 1.5 Lakh a year under section 80C of
Income Tax (IT) Act. All other types of Mutual Funds are taxed based on the type of fund
and tenure.

Company Fixed Deposits Versus Mutual Funds

Fixed deposits unsecured borrowing by the company accepting the deposit. Credit rating of
the fixed deposit program is an indication of the inherent default risk in the investment. The
moneys of investors in a mutual fund scheme are invested by the AMC in specific inves

tment under that scheme. These investments are held and managed in trust for the benefit of
the scheme’s investors. On the other hand, there is no such direct correlation between a
company’s fixed deposit mobilization, and the avenues where it deploys these resources. A
corollary of such linkages between mobilization and investment is that the gains and losses
from the mutual fund scheme entirely flow through to the investors. Therefore, there can be
no certainty of yield, unless a named guarantor assures a return or, to a lesser extent, if the
investment is in a serial gilt scheme. On the other hand, the return under a fixed deposit is
certain, subject only to the default risk of the borrower. Both fixed deposits and mutual funds
offer liquidity, but subject to some differences.

1. The provider of liquidity in the case of fixed deposits is the borrowing company. In mutual
funds, the liquidity provider is the scheme itself for open-end schemes, or the market in the
case of close-ended schemes.

2. The basic value at which fixed deposits are encashable is not subject to market risk.
However, the value at which units of a scheme are redeemed entirely depends on the market.
If securities have gained in value during the period, then the investor can even earn a return
that is higher than what she anticipated when she invested. Conversely, she could also end up
with a loss.
3. Early encashment of fixed deposits is always subject to a penalty charged by the company
that accepted the fixed deposit. Mutual fund schemes also have the option of charging a
penalty on “early” redemption of units. If the NAV has appreciated adequately, then despite
the exit load, the investor could earn a capital gain on her investment.

Bank Fixed Deposits Versus Mutual Funds

Bank fixed deposits are similar to company fixed deposits. The major difference is that banks
are more stringently regulated than are companies. They even operate under strict
requirements regarding Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR)
mandated by RBI. While the above are causes for comfort, bank deposits too are subject to
default risk. However, given the political and economic impact of bank defaults, the
government as well as Reserve Bank of India (RBI) tries to ensure that banks do not fail.
Further, bank deposits up to Rs. 100, 00 are protected by the Deposit Insurance and Credit
Guarantee Corporation (DICGC), so long as the bank has paid the required insurance
premium of 5 paise per annum for every Rs. 100 of deposits. The monetary ceiling of Rs.
100, 000 is for all the deposits in all branches of a bank, held by the same capacity and right.

Bonds And Debentures Versus Mutual Funds

As in the case of fixed deposits, credit rating of a blood or debenture is an indication of the
inherent default risk in the investment. However, unlike fixed deposits, bonds and debentures
are transferable securities. While an investor may have an early encashment option from the
issuer (for instance through a “put” option), liquidity is generally through a listing in the
market. Implications of this are:
  If the security does not get traded in the market, then the liquidity remains on paper.
In this respect, an open-ended scheme offering continuous sale /purchase option is
superior.
 The value that the investor would realize in an early exit is subject to market risk. The
investor could have a capital gain or a capital loss. This aspect is similar to a mutual
fund scheme.

It is possible for an astute investor to earn attractive returns by directly investing in the
debt market, and actively managing the positions. Given the market realities in India,
however, it is difficult for most investors to actively manage their debt portfolio. Further,
at times it is difficult to execute trades in the debt market even when the transaction size
is as high as Rs. 1 crore. In this respect, investment in a debt scheme would be beneficial.
Debt securities could be backed by a hypothecation or mortgage of identified fixed and /
or current assets, e.g. secured bonds or debentures. In such a case, if there is a default, the
identified assets become available for meeting redemption requirements. An unsecured
bond or debenture is for all practical purposes like a fixed deposit, as far as access to
assets is concerned. The investments of a mutual fund scheme are held by a custodian for
the benefit of investors in the scheme. Thus, the securities that relate to a scheme are ring
fenced for the benefit of its investors.

Equity Versus Mutual Funds

Investment in both equity and mutual funds are subject to market risk. An investor
holding an equity security that is not traded in the market place has a problem in realizing
value from it. But investment in an open-end mutual fund eliminates this direct risk of not
being able to sell the investment in the market. An indirect risk remains, because the
scheme has to realize its investments to pay investors. The AMC is however in a better
position to handle the situation. Another benefit of equity mutual fund schemes is that
they give 20 investors the benefit of portfolio diversification through a small investment.
For instance, an investor can take an exposure to the index by investing a mere Rs. 5,000
in an index fund.

Types of Equity Shares

Authorized Share Capital

Issued Share Capital

Subscribed Share Capital

Paid Up Capital

Rights Shares

Bonus Shares

Sweat Equity Share

Various Prices of Equity Shares

Par or Face Value

Issue Price

Share/Security Premium and Share at Discount

Book Value

Market Value

Fundamental Value

Investing and Financing Angle of Equity Shares

METHODOLOGY

To achieve the objective of studying the stock market data has been collected.
Research methodology carried for this study can be two types
1. Primary
2. Secondary

PRIMARY:
The data, which has being collected for the first time and it is the original data.
In this project the primary data has been taken from HSE staff and guide of the project.

SECONDARY:
The secondary information is mostly taken from websites, books, journals, etc.
CONCLUSION

Mutual funds are the better option for the investors but the awareness of investors in
Mangalore region of Karnataka State is moderate as for as various mutual fund schemes are
concerned. If mutual fund agencies and stock marketers take initiatives to conduct more
seminars, workshops then the investors come forward to invest in various mutual fund
schemes and equities. The number of advisors should be increased in order to create
awareness about their stock brokering services to attract new investors. Investors have the
perspicacity that risk in equity is higher than mutual funds. So the company should provide
the detailed information by proving market updating.

Mutual Funds now represent perhaps most appropriate investment opportunity for most
investors. As financial markets become more sophisticated and complex, investors need a
financial intermediary who provides the required knowledge and professional expertise on
successful investing. As the investor always try to maximize the returns and minimize the
risk. Mutual fund satisfies these requirements by providing attractive returns with affordable
risks. The fund industry has already overtaken the banking industry, more funds being under
mutual fund management than deposited with banks. With the emergence of tough
competition in this sector mutual funds are launching a variety of schemes which caters to the
requirement of the particular class of investors. Risk takers for getting capital appreciation
should invest in growth, equity schemes. Investors who are in need of regular income should
invest in income plans.

The stock market has been rising for over three years now. This in turn has not only protected
the money invested in funds but has also to helped grow these investments, This has also
instilled greater confidence among fund investors who are investing more into the market
through the MF route than ever before Reliance India mutual funds provide major benefits to
a common man who wants to make his life better than previous
REFERENCES

1. Grinblatt and Sheridan (1992), the persistence of mutual fund performance, The journal of
finance vol.47, issue no. 5

2. Avadhani, V. A. (2003), Investment Management, Saujanya Books Ltd, New Delhi.

3. Avadhani, V.A.(1997). Investment Analysis & Portfolio Management.Mumbai:Himalaya

Publishing House.

4. Goel, Swetha. (2013). Performance Of Mutual Funds And Investors’ Behavior.(Collection

of articles).

5. www.mutualfundsindia.com

6. www.bseindia.com

7. www.moneycontrol.com

8. http://www.utimf.com

9. http://www.reliancemutual.com

10. http://www.amfiindia.com

11. http://www.google.com