PROJECT REPORT

ON

“ROLE OF MUTUAL FUNDS IN GROWTH OF

FINANCIAL MARKET” WITH SPECIAL
REFERENCE TO ICICI”

Submitted of the partial Fulfillment

of
Master of Business Administration
Session: 2011-13

SUBMITED TO: SUBMITTED BY:

Mr. Arghya Sarkar Archana Singh
H.O.D. Roll No.-12403960615
Management Faculty MBA-1th SEMESTER
Microtek, Varanasi

MICROTEK COLLEGE OF MANAGEMENT & TECHNOLOGY

VARANASI
 DECLEARATION

I, Archana Singh student of the Microtek College of Management &

Technology, Varanasi 2011-2013 do hereby declare that the Summer

Training Project Report on “Role of Mutual funds in growth of

Financial Market” with special reference to ICICI .

the outcome of my original work and the same has not been submitted to
any other academic Institution for the award of the degree of M.B.A
fulltime.

Archana Singh
MBA 4th Sem.
Roll No.- 12403960615
 ACKNOWLEDGEMENT
Industrial profiling is a combined effort of many hands and brains, so I
would thank all the people who the persons who have been directly or
indirectly instrumental in making this report effective and purposeful.

First of all I would thank the Director Mr. Pankaj Rajhans for giving
me an opportunity for performing the task of the industrial analysis.

I am immensely grateful to my mentor Mr. Arghya Sarkar for his

valuable advice and guidance valuable suggestions and persistent
encouragement. It has been my great privilege to work under his inspiring
and provoking guidance.
Lastly, I would like to thank every individual who have directly or
indirectly helped me in completion of my profiling or survey.

Archana Singh
MBA 4th Sem.
Roll No.- 12403960615
 CONTENT

1. INTRODUCTION
2. OBJECTIVE
3. RESEARCH METHODOLOGY
4. DATA ANALYSIS DATA INTERPRETATION
5. FINDINGS
6. CONCLUSION
7. SUGGASTION
8. LIMITATION
9. BIBLIOGRAPHY
10.ANNEXURE
 PART-1

ICICI LIMITED

Industrial Credit and Investment Corporation of India Ltd. was the first development

bank to be set up as a joint stock company in India in 1955. Though Industrial

Finance Corporation of India had already come into existence in 1948, necessity for

another corporation in the private sector was felt primarily to channelise the World

Bank funds to industry in India and also to build up capital market in India. Initially,

its entire share capital was held by commercial banks. insurance companies and other

financial institutions, but with the nationalization of major commercial banks and

insurance companies, the major portion of shares was later held by these nationalized

institutions. After the public cum rights issue of equity capital by ICICI in 1991 the

number of its shareholders increased to over 5 lakh.

Creation of ICICI is another milestone is the growth of the Indian capital market. One

of the cosmic features of the operations of the IFCI was that they confined themselves

to ending activity and kept away from underwriting and investing business, obviously

because of the considerable risks involved in the latter, a chough they were authorized

to help industrial concerns by way of lending the guaranteeing, underwriting and

investing. The result was that l large number of up the coming entrepreneurs

continued to experience tremendous problem in raising funds in the market. They

could not secure the desired amount of loan assistance from the existing financial

corporations owing to their thin equity base. To encourage industrial development in

the private sector, a considerable provision of underwriting facilities was considered

necessary. Furthermore, foreign capital become necessary to accelerate the pace of

industrialization. To fill these gaps in the institutional structure of the Indian capital

market, the Industrial credit and Investment corporation of India was establishment

January 1955.

The idea underlying and establishment of the ICICI first crystallized as a result

of certain deliberations among the Government of India, the World Bank and certain

American financiers.

Unlike the IDBI, the IFCI and the SFCs, which were set-up as government-

owned institutions, the ICICI was organized as a wholly-owned private institution.

With the liberalization of the Indian economy is the 1990s, the ICICI thought

it necessary to provide a wide range of financial services. In order to accomplish this,

it entered into new areas of business such as commercial banking and asset

management and to expand its investment banking business.

FINANCIAL ASSISTANCE

The core business activity of ICICI has traditionally been the business of providing

project finance. But over the years it has undertaken many other modes of providing

financial assistance and has involved in non-project based finance as well.

1. PROJECT FINANCE

Like other development banks, project finance was the core business of ICICI. Table 8.1

shows that a predominant share in the total assistance sanctioned by ICICI since its

inception upto March 1999 was granted for Asset Creation-both in Indian rupees and

foreign currencies.

2. DIVERSIFICTION
The financial assistance sanctioned and disbursed by ICICI Ltd. not only grew

substantially, but also underwent purpose-wise diversification as is evident from the

following table:

3. CORPORATE FINANCE

As is evident from the above table corporate lending accounted for the largest share in

ICICIs loan portfolio in 2000-01. ICICI had emerged as a key player in the medium term

finance market. It had launched a number of innovative financial products in this field. It

had introduced hybrid currency loans. and floating rate loans to facilitate superior foreign

exchange and interest rate management amongst its clients.

4. RETAIL FINANCE

In recent years ICICI became a dominant player in the field of retail financing. Its

Personal Financial Services Division had expanded its product range and provided

complete spectrum of retail asset products to individuals including automobile finance,

home finance, consumer durable finance and personal loans.

 FEE-BASED SERVICES

Besides its main business of financing. ICICI also provided fee-baled value added

services to its clients as detailed below:

Advisory Services & Consultancy

The Advisory Services Division of ICICI provided fee based advisory services to clients

in the private corporate sector and government and quasi-government organisations. The

primary objective of the Division was to facilitate the creation of better projects and

improve the business environment. ICICI was awarded several mandated during 1998-99.

It was preferred as a partner by a number of inernationally reputed consultants for the

execution of assignment. ICICI was a leading restructuring and reform programmes.

Business Consultancy Division provides consultancy services to Indian Corporates for re-

structuring their operations and reshaping their strategies to attain global competitiveness.

1. CUSTODIAL SERVICES

ICICI also offered custodial services to its clients which included foreign financial

institution also. The value of transactions and assets held in custody on behalf of foreign

financial institutions and off shore clients increased significantly.

ICICI was a Depository Participant of National Securities Depository Ltd. and provides

regular electronic depository facilities to retail investors. Several element of its depository

services were offered free of cost to ICICI shareholders.

2. DEBENTURE TRUSTEESHIP

ICICI acted as Trustee for the holders debentures and bonds issued by the companies to

the public by or rights issue or on private placement basis.

Corporate vision mission and objectives of ICICI

With integration of Indian economy with the global economy, increasing

disintermediation in financial sector and growing competition from both domestic and
global players fuelled by proliferation and convergence of information and

computation technologies and rapid deregulation and liberalization the ICICI has

metamorphased its vision to become a globally competitive player through constant

innovation and adoption of cutting edge technology to provide superior customer

solutions.

The ICICI moved from being a wholesale lender to becoming a universal bank

and now, the repositioning moves on to a different platfrom- that of becoming an e-

commerce power house and emerge as a click and brick banker.

The corporation, thus aims to become the pre-eminent provider of a complete

spectrum of financial products and services in India and abroad to its clients

combining emerging technology with new strateties- with the ultimate objective of

increasing its market presense and ensure a greater share of the customer's. wallet and

therby enhancing value creation for its shareholders.

TASKS OF ICICI

In order to achieve the above objective the ICICI performs the following functions:

1. To provide medium and long-term project finance and infrastructure finance to

private industry in India.

2. To provide asset credit.

3. To make funds available for investments by revolving investment as rapidly as

possible.

4. To provide supplier's line of credit.

5. To provide treasury and custodial services to private sector industrial

enterprises

6. To provide lease financing facility.

7. To perform the activities of a banker with view to providing corporate banking

services, working capital finance and cash management services.

8. To act as investment banker for the enterprises and thereby performing the

functions of investment banking, primary dealership, playing active role in

equity and debt capital markets, providing private equity and rendering project

finance advisory services.

9. To provide brokerage facilities.

10. To supply venture capital

11. To raise funds from the market through floatation on bonds, loan and through

acceptance of deposits.

12. To render retail banking and internet banking services.

13. To distribute and service retail loan products.

14. To provide mutual fund and asset management facilities.

 ICICI PRUDENTIAL

ICICI Prudential Assest Management Company enjoys the strong parentage of

Prudential plc. one the UKs largest in insurance & fund management sectors and

ICICI Bank, a well-known and trusted name in financial services in India. ICICI

Prudential Asset Management Company, in a span of just over eight years, has forged

a position of preeminence in the Indian Mutual Fund industry as one of the largest

asset management companies in the country with average assets under management of

Rs. 73,356.07 Crore (as of July 31, 2009). The Company manages a comprehensive

range of schemes to meet the varying invest need of its investors spread across 230

cities in the country.

Securities and exchange board of India, vide its letter no. MFD/PM/567/02

dated June 4, 2002, has accorded its approval in recognizing ICICI Bank Ltd. as a co-

sponsor consequent to the merger of ICICI Ltd.

ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.00

billion (US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion

for the year ended March 31, 2008. ICICI Bank is second amongst all the companies

listed on the Indian stock exchanges in terms of free float market capitalization free

float holding excludes all prompter holding, Strategic investment and cross holdings

among public sector entities. The Bank has a network of about1,308 braches and

3,950 ATMs in India and presence in 18 counties. ICICI Bank offers a wide range of

banking products and financial services to corporate and retail customers through a

variety of delivery channels and through its specialized subsidiaries and affiliates in

the areas of investment banking, life and non-life insurance, venture capital and asset
management. The Bank currently ha subsidiaries in the United Kingdom, Russia and

Canada, branches in Unites, Singapore, Bahrin, Hong Kong, Sri Lanka, Qatar and

Dubai International Finance Centre and representative offices in United Arab

Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our

UK Subsidiary has established branches in Belgium and Germany. ICIC Bank's

equity share are listed in India on Bombay Stock Exchange and the National Stock

Exchange of India Limited and its American Depositary Receipts (ADRs) are listed

on the New stock Exchange.

ICICI Prudential Mutual
Fund Partner

Custodian

Registrar

Distributor

Who can?

How do?

Code of Conduct

Incentives

Sales Team

Bankers

Legal Advisor
ROLE OF ICICI PRUDENTIAL

The Hongkong and Shanghai Banking Corporation Limited, provides the following

services to ICICI Prudential Mutual Fund

 Post-trading and custodial services to the Mutual Fund.

 Ensure that the benefit due ton the holding are received on time.

 Detailed management information and other reports as required by the AMC.

 Maintain confidentiality of the transaction.

 Be responsible for the loss or damage to the assets belonging to the Scheme

due to negligence on its part or on the part of its approval agents and segregate

assets of each scheme.

As registrar to the Scheme, CAMS handles communications with investor,

performs data entry services maintain investor data and dispatches account

statement reflecting the holding and transactions of the investor.

As registrar and transfer agent to the ICICI Premier, ICICI InfoTech handles all

transfer related work, communications with investor, maintain investor data and

processes all unit transactions.

Distributors

The distributors are the network through which the various schemes of ICICI

prudential Mutual Fund reach the investors. The distributors sell the schemes to

the investors for which they are paid an incentive in the form of commission.
 ICICI Prudential Mutual Fund has distributors who have a national presence as

well as those that have a strong local presence. The Distributors could be:

Distributors Examples

Bank

Foreign Citi Bank NA

Private HDFC Bank, ICICI Bank

Kotak Securities

National distributors DSP Merrill Lynch Ltd.

Bajaj Capital Ltd.

Morgan

Mata Securities

S.P. Capital

Blue Chip Corporate Investment Centre

Ltd.

Local distributors
Eastern Finance Ltd.

Sivan Securities Ltd.

NSE/BSE Brokers

Financial advisors Charted Accounts

 Tax Consultants

The distributors are given weightate on the following counts.

 Client Base: How stable are the investor, the nature and number of

investors,

 Sales Force: Educational qualifications, strength of sales force

 Services Offered: Advisory, Collection

Management Team

Mr. Nimesh Shah Mr. Raghav Iyengar Mr. Hemant Agrawal

Mr. Nilesh Shah Mr. Vikram Kaushal Mr. Kalyan Prasath

Mr. Shahzad Madon Ms. Shashi Singh Mr. Ashish Kakkar

Mr. B. Ramakrishna Mr. Krishna Prasad

Tumuluri

Fund Mangers

Mr. S. Naren Mr. RAhul Goswami Mr. Chaitanya Pande

Board of directors Directors of the Trustee

Comapny
Asset Management

Company

Ms. Chanda Kochhar Mr. H.N. Sinor Mr. Eruch B. Desai-

Chairperson chairman

Mr. Barry Stowe Mr. Dileep Choksi Mr. M.S. Parthasarathy

Dr. (Mrs.) Swati S. Mr. N.S. Kannan Mr. D.J. Balaji Rao
Piramal

Mr. Vikram B. Trivedi Mr. Nimesh Shah Mr. Keki Bomi Dadiseth

Mr. Vijay Thacker Mr. Nilesh Shah Ms. Madhabi Puri-Buch

SYSTEMATIC INVESTING

ICICI Prudential Mutual Fund allows you to invest systematically through the

following 3 different systematic investing options which allow you to make your

transactions-whether purchasing a new fund, transferring between funds or redeeming

form a fund in a systematic and disciplined manner.

1. ICICI Prudential Systematic Investment Plan (ICICI Prudential SIP)

ICICI Prudential SIP allows you to make your investments in periodic installments

instead of a lump sum amount. This has the following advangaes:

It helps you start small, with as low as RS. 1000 per month.

It helps you reduce the risk of mistiming the market.

It helps you buy more units when the market is down and fewer units when the

market is up.

2. ICICI Prudential Systematic Transfer Plan (ICICI Prudential STP)

ICICI Prudential STP allows you to make a lump sum investment in a money-

market or a debt oriented ICICI Prudential Scheme and subsequently transfer partial

amount to any equity oriented ICICI Prudential Scheme at regular intervals. This way

your money continues to earn while it waits to be fully deployed in the equity scheme

of your choice. You can choose from three frequencies (weekly, monthly and

quarterly)

ICICI Prudential Systematic Withdrawal Plan (ICICI Prudential SWP)

 ICICI Prudential SWP operate like the reserve of ICICI Prudential SIP. It

allows you to systematically withdraw your existing investment in a ICICI Prudential

Mutual Scheme by redeeming your units in periodic installments instead of all at one

go. As in the case of the SIP, this helps you reduce your risk of mistiming your exit

from a paricular scheme.

 Thematic and sectoral Funds:
ICICI Prudential infrastructure Fund ICICI Prudential Services
Industries Fund
ICICI Prudential FMCG Fund
ICICI Prudential Technology Fund
Diversified Equity Funds:
ICICI Prudential discover fund. ICICI Prudential Power ICICI
dynamic plan, ICICI Prudential Emerging STAR Fund, ICICI
Prudential Tax Plan, ICICI Prudential Growth Plan ICICI
Prudential Index Fund/ICICI Prudential Spice Fund

ICICI Prudential Child Care Plan

ICICI Prudential Balanced Fund
ICICI Prudential Income Multiplier Fund
ICICI Prudential Monthly Income Plan

ICICI Prudential GILT Fund-Investment plan

ICICI Prudential Income Plan
ICICI Prudential Flexible income plan

ICICI Prudential Long term

Floating Rate Plan
ICICI Prudential Balance Plan
ICICI Prudential Short term plan
ICICI Prudential GILT Fund Treasury option
ICICI Prudential Short Term Floater
ICICI Prudential Liquid Plan
 Introduction

Different investment avenues are available to investors. Mutual funds also offer good investment

opportunities to the investors. Like all investments, they also carry certain risks. The investors should

compare the risks and expected yields after adjustment of tax on various instruments while taking

investment decisions. The investors may seek advice from experts and consultants including agents and

distributors of mutual funds schemes while making investment decisions.

With an objective to make the investors aware of functioning of mutual funds, an attempt has been

made to provide information in question-answer format which may help the investors in taking

investment decisions.

What is a Mutual Fund?

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing

funds in securities in accordance with objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the

risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction

in the same proportion at the same time. Mutual fund issues units to the investors in accordance with
quantum of money invested by them. Investors of mutual funds are known as unitholders.

The profits or losses are shared by the investors in proportion to their investments. The mutual funds

normally come out with a number of schemes with different investment objectives which are launched

from time to time. A mutual fund is required to be registered with Securities and Exchange Board of

India (SEBI) which regulates securities markets before it can collect funds from the public.

HISTORY

What is the history of Mutual Funds in India and role of SEBI in mutual funds industry?

Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s,

Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of

SEBI are – to protect the interest of investors in securities and to promote the development of and to

regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to

protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter,

mutual funds spo to enter the capital market. The regulations were fully revised in 1996 and have been

amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to

time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector entities including those promoted

by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory

requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The

risks associated with the schemes launched by the mutual funds sponsored by these entities are of

similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a
mutual fund (as on January 15, 2002). nsored by private sector entities were allowed to enter the capital

market. The regulations were fully revised in 1996 and have been amended thereafter from time to

time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of

investors.

All mutual funds whether promoted by public sector or private sector entities including those promoted

by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory

requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The

risks associated with the schemes launched by the mutual funds sponsored by these entities are of

similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a

mutual fund (as on January 15, 2002).

A mutual fund is an entity that pools the money of many investors... its unit holders..

to invest in different securities. Investments may be in shares, debt securities, money

market securities or a combination of these. Those securities are professionally

managed on behalf of the unit-holders, and each investor holds a pro-rata share of the

portfolio i.e. entitled to any profits when the securities are sold, but subject to any

lesson in value as well.

WHAT ARE MUTUAL FUNDS

A Mutual funds is a managed group of owned securities of several

corporations. These corporations receive dividends on the shares that they hold and

realize capital gains or losses on their securities traded. Investors purchase shares in

the mutual fund as if it was an individual security. After paying operating costs, the

earnings (dividends, capital gains or loses) of the mutal fund are distributed to the

investors, in proportion to the amount of money invested. Investors hope that a loss on
one holding will be made up by a gain on another. Heeding the adage "Don't put all

your eggs in one baket" the holders of mutual fund shares are able collectively to gain

the advantage by diversifying their investments, which might be beyond their finacial

means invidually.

A must fund may be either an open-end or a closed-end. An open-end mutual

fund does not have a set number of shares, it may be considered as a fluid capital

stock. The number of shares changes as investors buys or sell their shares. Investors

are able to buy and sell their shares of the company at any time for a market price.

However the open-end market price is influenced greatly by the fund managers. On

the other hand, closed-end mutual has a fixed number of shares and the valve of the

shares fluctuates with the market but with close-end funds, the fund manager has less

influenced because the price of the underlining owned securities has greater influence.

Professional management of mutual funds

Mutual funds use professional managers to make the decisions regarding

which companies' securities should be bought and sold. The managers of the mutual

fund decide how the pooled funds will be invested. Investment opportunities are

abundant and complex. Fund managers are expected to know what is available, the

risks and gains possible, the cost of acquiring and selling the investments, and the

laws and regulations in the industry. The ability of the managers to select profitable

investment and to sell those likely to decline in value is a key factor for the mutual

fund to earn money for the investor.

MUTUAL FUND PROSPECTUS

The prospectus is a legal documents the includes information about the mutual

fund. In this document you will find information about the terms of the offer, the

issuer, and its objectives. In the atermath of the 1929 stock market crash the federal

government in the securities Act of 1933 required security companies to publish a

prospectus. A first glance a prospectus may seem overwhelming. The information is

the prospectus is usually lengthily, packed with tables and graphs and written in

technical and legal language. This documents is provided to help you make an

informed investment decision before you invest in a mutual fund.

To gain the essential information you need, pay close attention the following

key sections:

Investment Objective

A short statement of the fund's investment objectives. Some funds intend to

achieve short-term growth while others might focus on long-term stability.

Investment Strategy

Exactly how the fund plans to accomplish the objectives. This section

describes the types of assets that the fund pruchase.

Fees and Expenses

Although mutual funds aim to make money for their investors, their ultimate

goal, just like any other business, is to make money for themselves. In order to do so,

funds charge their shareholders a variety of fees and expenses, all of which must be
documented in the prospectus. A table at the front of every prospectus contains a

breakdown of the different fees and expenses, along with a hypothetical projection of

how the fees would impact a $ 10,000 investment over a 10-year period. this enables

you to compare fees and expenses across mutual funds.

Account information

This section contains very basic information about how to buy and sell shares

and other account-related information. In addition to telling you how to get your

money into the fund, the prospectus will also tell you how to take it out of the fund.

The prospectus will inform you which redemption methods are available to you.

Risks

The level of risk that the fund takes and the risks that are associated with the

specific investments made by the fund are one of the most important sections in the

prospectus.

Performance

Information about the fund's performance cover the last 10 years is included.

Investors should be aware that past performance is not necessarily an indicator of

future results. As important is how well the fund has traditionally performed

compared to an index, such as the S&P 500. A fund's performance is also related to

the fund's volatility, dividend payments and turnover.

Management
 The names the managers and some additional information about their

experience and qualifications is reported. It can be helpful to know whether or not

they have managed other funds in the past and their success or failure in order to get a

sense of their past strategies and results.

Statement of additional information

Mutual funds split their prospectus into two parts-- the "Prospectus"

(described above) and the statement of additional information (SAI). In 1983, the

Securities and Exchange Commission required mutual funds to supply much more

detailed information about the fund. These are included in the SAI. For legal purposes

it is assumed that you have read it. If you don't receive the SAI with the prospectus,

you should request one. It provides great detail about the fund's board of directors,

any limitations on the fund's investments, and the fees and expenses that are

mentioned in the prospectus.

What types of funds can I buy?

Major Asset Classes:

1 Money Market Funds

2 Bond Funds

3 Balanced Funds

4 Dividend

5 Equity Funds

6 Specialty Funds
What is a Money Market Fund?

• This type of fund's main objective is to hold investment instruments that are

liquid and secure. This type of fund is usually held on a short-term basis, and

the NAV is often fixed at $10. Examples: Treasury bills, banker's

acceptances, and short term notes.

• One thing an investor should be aware of is that these funds are NOT

guaranteed like a GIC, and hold NO fixed return, but are low risk and do pay

interest.

What is a Bond Fund?

• This type of fund's main objective is to provide a steady stream of income, and

holds bonds issued by either governments or corporations.

• The risk level of this type of fund will be determined by the guidelines in the

prospectus, which will, in turn, determine what type of "rating" and term

(years to maturity) of bond the manager is allowed to purchase.

For example, a provincial bond will be rated "more risky" than a

government of Canada bond because rating systems determine that it

will be easier for the government of Canada to repay their debt easier

than for any provincial government

What is a Balanced Fund?

• This type of fund's main objective is to hold an optimal mix of investments

among cash, equities, and income-producing securities.

• This type of fund usually has several managers who specialize in a specific

area.

• This type of investment is ideal for someone who wants a better return than a

fixed income, but also wants less risk than equity.

What is a Dividend Fund?

• This type of fund's main objective is to mainly hold preferred shares, which

pay out dividends. The manager may choose, however, to invest in common

shares, money market funds or bonds.

* Dividends receive favourable tax treatment, so it is best to hold this

type of fund outside a registered account.

What is an Equity Fund?

• This type of fund's main objective is to provide long-term growth through

equity/stock investments.

• There are three types of equity funds:

1 Canadian Equity Funds, which invest, predominantly, in Canadian

corporations.

2 U.S. Equity Funds, which invest, predominantly, in U.S. corporations

3 International Equity Funds, which invest in many countries around the world.

What is a Specialty Fund?

• This type of fund's main objective is to concentrate its holdings in one

particular sector, geographic region, or in one capital market.

• Examples: telecommunications, health care, technology, financial services,

European markets or Japan.

* As you specialize, you minimize diversification, and that results in

increased risk.
 How is a mutual fund set up

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset

management company (AMC) and custodian. The trust is established by a sponsor or

more than one sponsor who is like promoter of a company. The trustees of the mutual

fund hold its property for the benefit of the unitholders. Asset Management Company

(AMC) approved by SEBI manages the funds by making investments in various types

of securities. Custodian, who is registered with SEBI, holds the securities of various

schemes of the fund in its custody. The trustees are vested with the general power of

superintendence and direction over AMC. They monitor the performance and

compliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee company

or board of trustees must be independent i.e. they should not be associated with the

sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds

are required to be registered with SEBI before they launch any scheme. However,

Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).
 Benefits of Mutual Funds

There are numerous benefits of investing in mutual funds and one of the key reasons for its

phenomenal success in the developed markets like US and UK is the range of benefits they offer,

which are unmatched by most other investment avenues. We have explained the key benefits in this

section. The benefits have been broadly split into universal benefits, applicable to all schemes, and

benefits applicable specifically to open-ended schemes.

Universal Benefits

Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon

the investment objective of the scheme. An investor can buy in to a portfolio of

equities, which would otherwise be extremely expensive. Each unit holder thus gets

an exposure to such portfolios with an investment as modest as Rs.500/-. This amount

today would get you less than quarter of an Infosys share! Thus it would be affordable

for an investor to build a portfolio of investments through a mutual fund rather than

investing directly in the stock market.

Diversification

The nuclear weapon in your arsenal for your fight against Risk. It simply means that

you must spread your investment across different securities (stocks, bonds, money

market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile,

information technology etc.). This kind of a diversification may add to the stability of

your returns, for example during one period of time equities might underperforms but

bonds and money market instruments might do well enough to offset the effect of a

slump in the equity markets. Similarly the information technology sector might be

faring poorly but the auto and textile sectors might do well and may protect your

principal investment as well as help you meet your return objectives.

Variety

Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two

ways: first, it offers different types of schemes to investors with different needs and

risk appetites; secondly, it offers an opportunity to an investor to invest sums across a

variety of schemes, both debt and equity. For example, an investor can invest his

money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending

on his risk appetite and thus create a balanced portfolio easily or simply just buy a

Balanced Scheme.
Professional Management

Qualified investment professionals who seek to maximise returns and minimise risk

monitor investor's money. When you buy in to a mutual fund, you are handing your

money to an investment professional who has experience in making investment

decisions. It is the Fund Manager's job to (a) find the best securities for the fund,

given the fund's stated investment objectives; and (b) keep track of investments and

changes in market conditions and adjust the mix of the portfolio, as and when

required.

Tax Benefits

Any income distributed after March 31, 2002 will be subject to tax in the assessment

of all Unit holders. However, as a measure of concession to Unit holders of open-

ended equity-oriented funds, income distributions for the year ending March 31, 2003,

will be taxed at a concessional rate of 10.5%.

In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from

the Total Income will be admissible in respect of income from investments specified

in Section 80L, including income from Units of the Mutual Fund. Units of the

schemes are not subject to Wealth-Tax and Gift-Tax.

Regulations

Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly

defined rules, which govern mutual funds. These rules relate to the formation,

administration and management of mutual funds and also prescribe disclosure and

accounting requirements. Such a high level of regulation seeks to protect the interest

of investors
Benefits of Open-ended Schemes

Liquidity

In open-ended mutual funds, you can redeem all or part of your units any time you

wish. Some schemes do have a lock-in period where an investor cannot return the

units until the completion of such a lock-in period.

Convenience

An investor can purchase or sell fund units directly from a fund, through a broker or a

financial planner. The investor may opt for a Systematic Investment Plan (“SIP”) or a

Systematic Withdrawal Advantage Plan (“SWAP”). In addition to this an investor

receives account statements and portfolios of the schemes.

Flexibility

Mutual Funds offering multiple schemes allow investors to switch easily between

various schemes. This flexibility gives the investor a convenient way to change the

mix of his portfolio over time.

Transparency

Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the

entire portfolio monthly. This level of transparency, where the investor himself sees

the underlying assets bought with his money, is unmatched by any other financial

instrument. Thus the investor is in the know of the quality of the portfolio and can
invest further or redeem depending on the kind of the portfolio that has been

constructed by the investment manager.

Mutual Fund Structure

The structure consists of

Sponsor
Sponsor is the person who acting alone or in combination with another body corporate

establishes a mutual fund. Sponsor must contribute atleast 40% of the networth of the

Investment Manged and meet the eligibility criteria prescribed under the Securities

and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not

responsible or liable for any loss or shortfall resulting from the operation of the

Schemes beyond the initial contribution made by it towards setting up of the Mutual

Fund.

Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of the

Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian

Registration Act, 1908.

Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of

individuals). The main responsibility of the Trustee is to safeguard the interest of the

unit holders and inter alia ensure that the AMC functions in the interest of investors

and in accordance with the Securities and Exchange Board of India (Mutual Funds)

Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the

respective Schemes. Atleast 2/3rd directors of the Trustee are independent directors

who are not associated with the Sponsor in any manner.

Asset Management Company (AMC)

 The AMC is appointed by the Trustee as the Investment Manager of the Mutual

Fund. The AMC is required to be approved by the Securities and Exchange Board of

India (SEBI) to act as an asset management company of the Mutual Fund. Atleast

50% of the directors of the AMC are independent directors who are not associated

with the Sponsor in any manner. The AMC must have a networth of atleast 10 crore at

all times.

Registrar and Transfer Agent

The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer

Agent to the Mutual Fund. The Registrar processes the application form, redemption

requests and dispatches account statements to the unit holders. The Registrar and

Transfer agent also handles communications with investors and updates investor

records.
 Types of funds

Schemes according to Maturity Period

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

Open-ended Fund/ Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase

on a continuous basis. These schemes do not have a fixed maturity period. Investors

can conveniently buy and sell units at Net Asset Value (NAV) related prices which

are declared on a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The

fund is open for subscription only during a specified period at the time of launch of

the scheme. Investors can invest in the scheme at the time of the initial public issue

and thereafter they can buy or sell the units of the scheme on the stock exchanges

where the units are listed. In order to provide an exit route to the investors, some

close-ended funds give an option of selling back the units to the mutual fund through

periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least

one of the two exit routes is provided to the investor i.e. either repurchase facility or

through listing on stock exchanges. These mutual funds schemes disclose NAV

generally on weekly basis.

Schemes according to Investment Objective

A scheme can also be classified as growth scheme, income scheme, or balanced

scheme considering its investment objective. Such schemes may be open-ended or

close-ended schemes as described earlier. Such schemes may be classified mainly as

follows:

Growth / Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a major part of their corpus in equities. Such

funds have comparatively high risks. These schemes provide different options to the

investors like dividend option, capital appreciation, etc. and the investors may choose

an option depending on their preferences. The investors must indicate the option in

the application form. The mutual funds also allow the investors to change the options

at a later date. Growth schemes are good for investors having a long-term outlook

seeking appreciation over a period of time.

Income / Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate

debentures, Government securities and money market instruments. Such funds are

less risky compared to equity schemes. These funds are not affected because of

fluctuations in equity markets. However, opportunities of capital appreciation are also

limited in such funds. The NAVs of such funds are affected because of change in

interest rates in the country. If the interest rates fall, NAVs of such funds are likely to

increase in the short run and vice versa. However, long term investors may not bother

about these fluctuations.

Balanced Fund

The aim of balanced funds is to provide both growth and regular income as such

schemes invest both in equities and fixed income securities in the proportion indicated

in their offer documents. These are appropriate for investors looking for moderate
growth. They generally invest 40-60% in equity and debt instruments. These funds are

also affected because of fluctuations in share prices in the stock markets. However,

NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity,

preservation of capital and moderate income. These schemes invest exclusively in

safer short-term instruments such as treasury bills, certificates of deposit, commercial

paper and inter-bank call money, government securities, etc. Returns on these

schemes fluctuate much less compared to other funds. These funds are appropriate for

corporate and individual investors as a means to park their surplus funds for short

periods.

Gilt Fund

These funds invest exclusively in government securities. Government securities have

no default risk. NAVs of these schemes also fluctuate due to change in interest rates

and other economic factors as is the case with income or debt oriented schemes.

Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive

index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the

same weightage comprising of an index. NAVs of such schemes would rise or fall in

accordance with the rise or fall in the index, though not exactly by the same

percentage due to some factors known as "tracking error" in technical terms.

Necessary disclosures in this regard are made in the offer document of the mutual

fund scheme.
There are also exchange traded index funds launched by the mutual funds which are

traded on the stock exchanges.

Risk

The discussion on investment objectives would not be complete without a discussion

on the risks that investing in a mutual fund entails.

At the cornerstone of investing is the basic principle that the greater the risk you take,

the greater the potential reward. Remember that the value of all financial investments

will fluctuate.

Typically, risk is defined as short-term price variability. But on a long-term basis, risk

is the possibility that your accumulated real capital will be insufficient to meet your

financial goals. And if you want to reach your financial goals, you must start with an

honest appraisal of your own personal comfort zone with regard to risk. Individual

tolerance for risk varies, creating a distinct "investment personality" for each investor.

Some investors can accept short-term volatility with ease, others with near panic. So

whether you consider your investment temperament to be conservative, moderate or

aggressive, you need to focus on how comfortable or uncomfortable you will be as the

value of your investment moves up or down.

Recognizing the type of investor you are will go a long way towards helping you

build a meaningful portfolio of investments that you can live with. Take the test

"Tolerance Questionnaire" to determine where your preferences lie.

Risk

Managing Risk

Diversification

SIP

Types of Risk

Market

Inflation

Credit

Interest Rate

Employees

Exchange Rate

Investment

Government Policy

Questionnaire
Managing risks

Mutual funds offer incredible flexibility in managing investment risk. Diversification

and Automatic Investing (SIP) are two key techniques you can use to reduce your

investment risk considerably and reach your long-term financial goals.

Diversification

When you invest in one mutual fund, you instantly spread your risk over a number of

different companies. You can also diversify over several different kinds of securities

by investing in different mutual funds, further reducing your potential risk.

Diversification is a basic risk management tool that you will want to use throughout

your lifetime as you rebalance your portfolio to meet your changing needs and goals.

Investors, who are willing to maintain a mix of equity shares, bonds and money

market securities have a greater chance of earning significantly higher returns over

time than those who invest in only the most conservative investments. Additionally, a

diversified approach to investing -- combining the growth potential of equities with

the higher income of bonds and the stability of money markets -- helps moderate your

risk and enhance your potential return.

Systematic Investment Plan (SIP)

The Unitholders of the Scheme can benefit by investing specific Rupee amounts

periodically, for a continuous period. Mutual fund SIP allows the investors to invest a

fixed amount of Rupees every month or quarter for purchasing additional units of the

Scheme at NAV based prices.

Here is an illustration using hypothetical figures indicating how the SIP can work for

investors:

Types of Risks

All investments involve some form of risk. Even an insured bank account is subject to

the possibility that inflation will rise faster than your earnings, leaving you with less

real purchasing power than when you started (Rs. 1000 gets you less than it got your

father when he was your age). Consider these common types of risk and evaluate

them against potential rewards when you select an investment.

Master Risk

At times the prices or yields of all the securities in a particular market rise or fall due

to broad outside influences. When this happens, the stock prices of both an

outstanding, highly profitable company and a fledgling corporation may be affected.

This change in price is due to "market risk".

Inflation Risk

Sometimes referred to as "loss of purchasing power." Whenever inflation sprints

forward faster than the earnings on your investment, you run the risk that you'll

actually be able to buy less, not more. Inflation risk also occurs when prices rise faster

than your returns.

Credit Risk
In short, how stable is the company or entity to which you lend your money when you

invest? How certain are you that it will be able to pay the interest you are promised, or

repay your principal when the investment matures?

Inflation Risk

Changing interest rates affect both equities and bonds in many ways. Investors are

reminded that "predicting" which way rates will go is rarely successful. A diversified

portfolio can help in offseting these changes.

Effect of loss of key professionals and inability to adopt

An industries' key asset is offen the personnel who run the business i.e. intellectual

properties of the key employees of the respective companies. Given the ever-changing

complexion of few industries and the high obsolescence levels, availability of

qualified, trained and motivated personnel is very critical for the success of industries

in few sectors. It is, therefore, necessary to attract key personnel and also to retain

them to meet the changing environment and challenges the sector offers.

Failure or inability to attract/retain such qualified key personnel may impact the

prospects of the companies in the particular sector in which the fund invests.

Exchange Risks

A number of companies generate revenues in foreign currencies and may have

investments or expenses also denominated in foreign currencies. Changes in exchange

rates may, therefore, have a positive or negative impact on companies which in turn

would have an effect on the investment of the fund.

Investment Risk

The sectoral fund schemes, investments will be predominantly in equities of select

companies in the particular sectors. Accordingly, the NAV of the schemes are linked

to the equity performance of such companies and may be more volatile than a more

diversified portfolio of equities.

Change in the Government Policy

Changes in Government policy especially in regard to the tax benefits may impact the

business prospects of the companies leading to an impact on the investments made by

the fund.
 Glossary

Some of the commonly used terms in the industry are explained here.

Advisor

Your financial consultant who gives professional advice on the fund's investments and

to supervise the management of its assets.

Amortization

A method of equated monthly payments over the life of a loan. Payments usually are

paid monthly but can be paid annually, quarterly, or on any other schedule. In the

early part of a loan, repayment of interest is higher than that of principal. This

relationship is reversed at the end of the loan.

Appreciation

When an investment increases in value, it appreciates. For example, a equity share

whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.

Arbitrage
The practice of buying and selling an interlisted stock on different exchanges in order

to profit from minute differences in price between the two markets.

Asset

Property and resources, such as cash and investments, comprise a person's assets; i.e.,

anything that has value and can be traded. Examples include stocks, bonds, real estate,

bank accounts, and jewellery.

Asset Allocation

When you divide your money among various types of investments, such as stocks,

bonds, and short-term investments (also known as "instruments"), you are allocating

your assets. The way in which your money is divided is called your asset allocation.

Asked or Offering Price

The price at which a mutual fund's shares can be purchased. The asked or offering

price means the current net asset value (NAV) per share plus sales charge, if any. For

a no-load fund, the asked price is the same as the NAV.

Asset Allocation Fund

A fund that spreads its portfolio among a wide variety of investments, including

domestic and foreign stocks and bonds, government securities, gold bullion and real

estate stocks. This gives small investors far more diversification than they could get

allocating money on their own. Some of these funds keep the proportions allocated

between different sectors relatively constant, while others alter the mix as market

conditions change.
Automatic Reinvestment

A service offered by most mutual funds whereby income, dividends and capital gain

distributions are automatically invested into the fund by buying additional shares and

thus building up holdings through the effects of compounding.

Annualised Return

This is the hypothetical rate of return, that, if the fund achieved it over a year's time,

would produce the same cumulative total return if the fund performed consistently

over the entire period. A total return is expressed in a percentage and tells you how

much money you have earned or lost on an investment over time, assuming that all

dividends and capital gains are reinvested.

Balance Sheet

A financial statement showing the nature and amount of a company's assets, liabilities

and shareholders' equity.

Balanced Fund

A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60%

equity.

Barter

The exchange of goods and services for other goods and services without the use of

money.
Basis Point

A phrase used to describe differences in bond yields, with one basis point representing

one-hundredth of a percentage point. Thus if Bond X yields 8.5 per cent and Bond Y

8.75 per cent, the difference is 25 basis points.

Bid or Sell Price

The price at which a mutual fund's shares are redeemed (bought back) by the fund.

The bid or redemption price means the current net asset value per share, less any

redemption fee or back-end load.

Blue Chip

A share in a large, safe, prestigious company, of the highest class among stock market

investments. A blue-chip company would be called thus by being well-known, having

a large paid-up capital, a good track record of dividend payments and skilled

management.

Board of Directors

A committee elected by the shareholders of a company, empowered to act on their

behalf in the management of company affairs. Directors are normally elected each

year at the annual meeting.

Bond/Income Fund

A mutual fund whose portfolio consists primarily of corporate and government

securities. These funds generally emphasize income rather than growth.

Bond Rating

System of evaluating the probability of whether a bond issuer will default. CRISIL,

ICRA, CARE and other rating agencies, analyze the financial stability of both

corporate and state government debt issuers. Ratings range from AAA (extremely

unlikely to default) to D (likely to default). Mutual funds generally restrict their bond

purchases to issues of certain quality ratings, which are specified in their

prospectuses.

Capital

This is the amount of money you have invested. When your investing objective is

capital preservation, your priority is trying not to lose any money. When your

investing objective is capital growth, your priority is trying to make your initial

investment grow in value.

Capital Appreciation Fund

A mutual fund that seeks maximum capital appreciation through the use of investment

techniques involving greater than ordinary risk, such as borrowing money in order to

provide leverage and high portfolio turnover.

Capital Gain

Profit from a sale of an investment constitutes a capital gain. For example, if you

bought a share of stock for Rs. 5/- and later sold it for Rs. 7/-, you would have a

capital gain of Rs. 2/-.

Capital Gains Distributions

Payments (usually annually) to mutual fund shareholders of gains realized on the sale

of portfolio securities.

Capital Growth

A rise in market value of a mutual fund's securities, reflected in its NAV per share.

This is a specific long-term objective of many mutual funds.

Certificate of Deposit

Interest-bearing, short-term debt instrument mainly issued by Financial institutions.

Closed-ended Mutual Fund

A mutual fund that offers a limited number of shares. They are traded in the securities

markets. Price is determined by supply and demand. Unlike open-ended mutual funds,

closed-ended funds do not redeem their shares.

Collateral Security
This is extra security provided by a borrower to back up his/her intention to repay a

loan.

Commercial Paper

Short-term, unsecured promissory notes with maturities shorter than 3 months. They

are issued by corporations to fund short-term credit needs.

Commission

The broker's or agent's fee for buying or selling securities for a client. The fee is

usually based on a percentage of the transaction's market value.

Compounding

When you deposit money in a bank, it earns interest. When that interest also begins to

earn interest, the result is compound interest. Compounding occurs if bond income or

dividends from stocks or mutual funds are reinvested. Because of compounding,

money has the potential to grow much faster.

Consideration

The 'consideration' is the total purchase or sale amount associated with a transaction.

The amount you 'pay' or 'receive'. It may also be the basis for working out the

commission, taxes and any other charges you are asked to pay.
Conversion Privilege

See Exchange Privilege

Custodian

The bank or trust company that maintains a mutual fund's assets, including its

portfolio of securities or some record of them. Provides safekeeping of securities but

has no role in portfolio management.

Deficit

The shortfall between government revenues and budgetary spending in any given

year. A surplus occurs when annual revenues exceed expenditures.

Derivative

An investment contract based on an underlying investment called an "instrument."

The most common type of derivative is an option contract, which involves the right to

buy or sell the underlying instrument at an agreed price. Futures contracts are also

derivatives.

Diversification

The policy of spreading investments among a range of different securities to reduce

the risks inherent in investing.

Dividend

When companies pay part of their profits to shareholders, those profits are called

dividends. A mutual fund's dividend is money paid to shareholders from investment

income the fund has earned. The amount of each share's dividend depends on how

well the company does.

Endorsement

Assigning or transferring a lien to another person is accomplished through the use of

an endorsement. The words "PAY TO THE ORDER OF" and then the name of the

person to whom the lien is being assigned to, is written. If there is not enough space

on the original note to write an endorsement, it is written on a separate piece of paper

that is permanently affixed to the original note. This is called an allonge.

Exchange Priviledge

The right to transfer investments from one fund into another, generally within the

same fund group, at nominal cost.

Ex-Dividend Date

The date on which a fund's Net Asset Value (NAV) will fall by an amount equal to

the dividend and/or capital gains distribution (although market movements may alter

the fund's closing NAV somewhat). Most publications that list closing NAVs place an

"X" after a fund's name on its Ex-Dividend Date.

Expense Ratio
The ratio of total expenses to net assets of the fund. Expenses include management

fees, the cost of shareholder mailings and other administrative expenses. The ratio is

listed in a fund's prospectus. Expense ratios may be a function of a fund's size rather

than of its success in controlling expenses.

Face Value

The face value is the term used to describe the value of a bond in terms of what the

company which issued the bond will actually repay when the loan matures. It's

sometimes described as nominal or par value.

Fiscal Year

An accounting period consisting of 12 consecutive months.

Growth Fund

A mutual fund whose primary investment objective is long-term growth of capital. It

invests principally in common stocks with significant growth potential.

Income Fund

A mutual fund that primarily seeks current income rather than growth of capital. It

will tend to invest in stocks and bonds that normally pay high dividends and interest.

Index Fund
A mutual fund that seeks to mirror general stock-market performance by matching its

portfolio to a broad-based index (e.g. BSE Sensex).

Inflation

When the price of goods and services rises, the result is called inflation. This means

that things you buy today at one price are likely to cost more in the future.

Institutional Investor

An institutional investor is a professional money manager whose job it is to put

money into shares and other assets on behalf of private investors who entrust them

with money via their pension and life insurance funds.

International Fund

A fund that invests in securities traded in markets outside India.

Investment Advisor

See Advisor

Investment Objective

The financial goal (long-term growth, current income, etc.) that an investor or a

mutual fund pursues.

Issued Share Capital

This is the total number of shares a company has made publicly available multiplied

by the total nominal value of the shares. A company may have 10 million shares in

issue, each with a nominal value of Re. 1. So the issued share capital is Rs. 10 million.

Junk Bond

A speculative bond with higher credit risk.

Lessee

The person who makes lease payments. He has right of possession and use of a

property under the terms of a lease.

Lessor

The person who receives lease payments. He leases property.

LIBOR

LIBOR stands for London Inter Bank Offer Rate. It's the rate of interest at which

banks offer to lend money to one another in the so-called wholesale money markets in

the City of London. Money can be borrowed overnight or for a period of in excess of

five years. The most often quoted rate is for three month money. '3 month LIBOR'

tends to be used as a yardstick for lenders involved in high value transactions. They

tend to quote rates as 'points above LIBOR'. So if 3 month LIBOR were (say) six per

cent, a bank may choose to lend to another bank at (say) 6 and a quarter per cent. e.g.

a quarter per cent above 3 month LIBOR.

Lien
A type of security instrument (i.e., a tax lien), placed against property, making it

security for the payment of a debt, judgment, mortgage, or taxes. If the lien is not

paid, the lien holder has the right to confiscate the property in order to recover the

money that was loaned.

Liquidity

If you can generally buy or sell an asset quickly, or convert it to cash quickly, then

that asset is considered "liquid."

Load

A sales charge or commission assessed by certain mutual funds ("load funds") to

cover their selling costs.

Load Fund

A mutual fund that levies a sales charge, which is included in the offering price of its

shares, and is sold by a broker or salesman. A front-end load is the fee charged when

buying into a fund; a back-end load is the fee charged when getting out of a fund. See

Redemption Fee.

Low-Load Fund
A mutual funds that charges small commission, usually 1.5% or less, for the purchase

of its shares.

Management Fee

The amount that an Asset Management Company (AMC) charges for management of

the fund's portfolio. In general, this fee ranges from 0.5% to 1.25% of the fund's asset

value.

Market

A public place where the buying and selling of all types of bonds, stocks and other

securities takes place. A stock exchange is a market.

Maturity

This is the length of time (term) before a debt instrument, such as a bond, is due to be

repaid in full.

Money Market Fund

A mutual fund that aims to pay money market interest rates. This is accomplished by

investing in safe, highly liquid securities, including certificates of deposit, commercial

paper, and Government securities. Money funds make these high interest securities

available to the average investor seeking immediate income and high investment

safety.
Mortgage

A legal instrument given by a borrower to the lender entitling the lender to take over

pledged property if conditions of the loan are not met.

Net Asset Value

Also known as NAV, this is the unit price (or rupee value) of one unit of a mutual

fund. NAV is calculated at the end of every business day. It is calculated by adding up

the value of all the securities and cash in the mutual fund's portfolio (its assets),

subtracting the fund's liabilities, and dividing that number by the number of units that

the fund has issued. It does not include a sales charge. The NAV increases (or

decreases) when the value of the mutual fund's holdings increase (or decrease).

Net Worth

A person's net worth is equal to the total value of all possessions, such as a house,

stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and

revolving credit lines.

No-Load Fund

A commission-free mutual fund that sells its units at NAV, either directly to the

public or through an affiliated distributor, without the addition of a sales charge.

Offer Document

See Prospectus
Option

A device used to speculate or hedge in securities markets. Buying a "call" option

gives an investor the right to buy 100 shares of a stock at a certain price within a

specified time; buying a "put" option allows an investor to sell a stock under the same

conditions.

Premium

A bond premium is the amount by which a bond sells above its par (face) value. For

insurance, the premium is the amount you pay for your insurance policy.

Price/Earnings Ratio

This is the price of a stock divided by its earnings per share. This ratio gives an

investor an idea of how much they are paying for a particular company's earning

power. A trailing P/E refers to a ratio that is based on earnings from the latest year,

while a forward P/E uses an analyst's forecast of next year's earnings. For instance, a

stock selling for Rs. 20 a share that earned Re. 1 last year has a trailing P/E of 20. If

the same stock has projected earnings of Rs. 2 next year, then it has a forward P/E of

10.

Price Stability

Price stability protects the original amount you put into an investment. A mutual

fund's price stability is seen in changes in its net asset value over time.
Prospectus

An official document that each investment company must publish, describing the

mutual fund and offering its shares for sale. It contains information that has been

mandatorily required by SEBI.

Rate of Return

The total proceeds derived from the investment per rupee initially invested. Proceeds

must be defined broadly to include both cash distributions and capital gains. The rate

of return is expressed as a percentage.

Record Date

The date the fund determines who its unitholders are; "unitholders of record" who will

receive the fund's income dividend and/or net capital gains distribution.

Redeemable

Preferred shares or bonds that give the issuing corporation an option to repurchase

securities at a stated price. These are also known as callable securities.

Redemption Fee

A fee charged by a limited number of funds for redeeming, or buying back, fund

units.
Redemption Price

The price at which a mutual fund's units are redeemed (bought back) by the fund. The

redemption price is usually equal to the current NAV per unit.

Regional Fund

A mutual fund that concentrates its investments within a specific geographic area,

usually the fund's local region. The objective is to take advantage of regional growth

potential before the national investment community does.

Registrar

See Transfer Agents

Reinvestment Date

The date on which a share's dividend and/or capital gains will be reinvested (if

requested) in additional fund shares.

Reinvestment Privilege

A service that most mutual funds offer whereby a shareholder’s income dividends and

capital gains distributions are automatically reinvested in additional shares. See

Automatic Reinvestment.

Rupee Cost Averaging ( SIP)

The technique of investing a fixed sum at regular intervals regardless of stock market

movements. This reduces average share costs to the investor, who acquires more
shares in periods of lower securities prices and fewer shares in periods of high prices.

In this way, investment risk is spread over time.

Sector Fund

A fund that operates several specialized industries sectors portfolios under one

umbrella. These sectors could be FMCG or Technology.

Securities

This is another word for stocks, bonds, and short-term investments.

Securitization

A process under which non-marketable assets, such as mortgages, automobile leases

and credit card receivables, are converted into marketable securities that can be traded

among investors.

Specialty Fund (See Sector Fund)

A mutual fund specializing in the securities of a particular industry or group of

industries or special types of securities.

Spread
The difference between the rates at which money is deposited in a financial institution

and the higher rates at which the money is lent out. Also, the difference between the

bid and ask price for a security.

Subsidy

A financial contribution by government (including any form of income or price

support) that also confers a benefit to the recipient (i.e., producers of goods or

services or buyers of goods). Many types of government practices constitute a

financial contribution, including traditional forms of subsidies such as grants and

loans, as well as foregone revenues such as tax credits.

Systematic Investment Plan

Many mutual funds offer investment programs whereby unitholders can invest. The

Unitholders of the scheme can benefit by investing specific Rupee amounts

periodically, for a continuous period. The SIP allows the investors to invest a fixed

amount of Rupees every month or quarter for purchasing additional units of the

scheme at NAV based prices.

Systematic Withdrawal Plans

Many mutual funds offer withdrawal programs whereby unit holders receive

payments from their investments. These payments are usually drawn from the fund's

dividend income and capital gain distributions, if any, and from principal only when

necessary.

Total Return
The performance of an investment, including yield (dividends, interest, capital gains)

as well as changes in per unit price, calculated over a designated period of time.

Assuming reinvestment of capital gains and income distributions, multiply the

number of units owned by the net asset value per unit. Subtract the original

investment from the result. Then divide that figure by the original investment and

multiply by 100. (Assuming your units are now worth Rs. 8,000 and the investment

was Rs. 5,000/-, divide Rs. 3,000/- by Rs. 5,000/- getting 0.6. Multiplied by 100-

percentage increase, or total return, was 60%.) Also see Yield.

Trade Date

The actual date on which your shares were purchased or sold. The transaction price is

determined by the closing Net Asset Value on that date.

Transfer Agent (also Registrar)

The organization that mutual funds employ to prepare and maintain records relating to

unit holder accounts. Some mutual fund groups operate in-house transfer agencies.

Trustee

One designated to hold property for another, pending the performance of an

obligation. In a deed of trust state, the trustee is often the title company that handled

the property sale closing.

Underwriter
The organization that acts as the distributor of a mutual fund’s units to broker/dealers

and the public.

Vertical Integration

This is where a company merges or takes over other companies in the same supply

chain. If a shoe manufacturer, takes over his supplier it would be vertical integration.

Volatility

In investing, volatility refers to the ups and downs of the price of an investment. The

greater the ups and downs, the more volatile the investment.

Voluntary Plan

A flexible plan for capital accumulation, involving no specified time frame or total

sum to be invested.

Yield

Income or return received from an investment, usually expressed as a percentage of

market prices, over a designated period. For a mutual fund, yield is interest or

dividend before any gain or loss in the price per share. See Total Return.

Zero Coupon Bond

Bond sold at a fraction of its face value. It appreciates gradually, but no periodic interest payments are

made. Earnings accumulate until maturity, when the bond is redeemable at full face value.
 PROBLEM FORMULATION

Nowadays it is there is too much growth in financial market there are

different types of security where the investor invest we want to know the

role of the mutual fund as the security in financial market.

 Research objective

1. To find out the role of mutual fund in financial market

2. To find out the risk of mutual fund in security market

3. To find out the awareness of the mutual funds

4. To knowing the ICICI different scheme and fund

 SCOPE OF THE STUDY

1. It has compare the to different scheme of the organisation

2. People can get deep knowledge about mutual fund

3. It is defining the area of the mutual fund in the financial market

4. People can get deep knowledge about risk related in mutual fund

PERIOD OF THE STUDY

3 to 4 year
 RESEARCH METHODOLOGY

Research is a careful investigation or enquiry through search of the facts

in any branch of knowledge. Research methodology refers to the methods
that that are used for activities involved in performing the research
operation such as making observation, recording data etc.
1. Sample Unit
We take three type of unit
A = Businessman
B = Serviceman
C = Others
2. Sample size = 100
3. Sampling procedure
Random sampling, researcher have used random sampling
4. Sources of information
A. Primary = Questionnaire
B. Secondary =
1. Internal Sources = Company data, Facts sheet
2. External Sources= Magazine, Journal
5. Statistical Tools and technique
In this study is the statistical tool used is Bar & Pie Chart
 FINDINGS AND
INTERPRETATION
Q.1 Have you invested in stock market?

OPTIONS No. OF RESPONDENTS PERC

YES 92 92%ENTAGE

NO 8 8%

TOTAL 100 100%

Interpretation

From the above diagram, it can be interpreted that investment in the stock
market is 92%. Respondents saying no is 8%. It shows a good indication
towards the Indian share market

.Q.2 If yes, you have invested in

 O

PTIONS No. OF RESPONDENTS

PERCENTAGE

Share 25 25%

Mutual Fund 36 36%

Both 28 28%

No Answer 11 11%

TOTAL 100 100%

Interpretation

It can be assumed from the above bar diagram that among 100
respondents 25% have interest in investing in shares, 36% are invested in
mutual funds, 28% for investing in both and rest 11% are those who have
not made any investment in stock market
Q.3 Are you satisfied with your investment?

OPTIONS PERCENTAGE

Yes 83%

No 17%

TOTAL 100%

Interpretation

From the above diagram it can be seen that there are diversified interest
of the respondents which drives them towards the stock market. 83% are
satisfied with there investment in stock market and 17%(including those
who had not invested in stock market) are not satisfied with there
investment.
Q.7 Have made any investment in Mutual Funds?

OPTIONS PERCENTAGE

Yes 84%

No 16%

TOTAL 100%

Interpretation

The pie chart shows that almost maximum number of public are
interested in investing in mutual funds. The percentage also says that
which is 84%. 16% have not made any investment in mutual fund as they
have invested in shares or are new in this market

Q.13 Do you receive the statement of your investment regularly?

 OPTIONS PERCENTAGE

Yes 76%

No 24%

TOTAL 100%

Interpretation

The respondents are more sincere about getting the statement of their
investment. 76% says they get the statement regularly and 24% says they
don’t get statement.

Q.14 You make investments in funds

 OPTIONS PERCENTAGE

Through Broker 83%

Directly 17%

TOTAL 100%

Interpretation

The above graph shows that 83% investors do their investment through
brokers and 17% directly.
Q.16 If no (ref: Q-8), then are you interested in investing in any fund?

OPTIONS No. OF RESPONDENTS PERCENTAGE

Yes 35 58%

No 25 42%

TOTAL 60 100%

Interpretation

As the new investors agreed that they want to invest in mutual fund rather
in investing in shares. Out of hundred sample 60 gave answer of this
question which gave the percentage of 58% in yes and 42% in no.
Q.17 If yes, in which fund you like to make investment?

OPTIONS PERCENTAGE

S.B.I 63%

H.D.F.C 11%

I.C.I.C.I 05%

Kotak 03%

Tata 06%

Others 06%

TOTAL 100%

Interpretation

The bar chart shows that most investors like invest their money in SBI
rather in other funds. The percentage also indicates it. The percentages of
investment is 63%, 11%, 05%, 03%, 06% and respectively.
Q.19 In the present market scenario, investment in mutual fund is better than shares
because

OPTIONS PERCENTAGE

Less Risk 33%

Nice Return 14%

Easy to Understand 28%

All Three 25%

TOTAL 100%

Interpretation

From the above graph it can be conclude that the investor thinks that
investing in mutual fund is better than investing in shares. They feel that
there is less risk in mutual fund in comparison to shares. The percentage
tends to 33% for Less risk, 145 for Nice return, 28% foreasy to
understand, 25% for All three.

LIMITATION OF THE STUDY

1. Some respondents were biased.
2. Some respondents refused to cooperate because of their work
load.
3. Limitation of pie chart .
4. Limitation of secondary data.
5. Time constraints
 SIGNIFICANCE OF THE STUDY
To the company
1. The company the market position of the organization
2. Help to compare with the other organization
To the industry
Growth of financial market will help the industry to grow and make
future modification.
To the consumer
Better knowledge of mutual fund
Awareness of risk in mutual fund
 BIBLIOGRAPHY

THE REFERED BOOK ARE:-

 RESEARCH METHODOLOGY
“C. R. KOTHARI”

 WWW. GOOGLE.COM
 QUESTIONNAIRE
Q. No. 1 – Have you invested in stock Market?
(i) Yes ( )
(ii) No ( )
Q.No.2- If “Yes" you have invested in ?
(i) Share ( )
(ii) Mutual fund ( )
(iii) Both ( )
(iv) Other ( )
Any other plz specify............................................................................................
Q.No.3- If know what is the most important reason for not investing in
mutual fund.
(i) Lack of knowledge ( )
(ii) Not trust ( )
(iii) Invested in other area ( )
Q.No.4- In the present market scenario investment in mutual fund is
better than share because
(i) Less risk ( )
(ii) Nice return ( )
(iii) Easy to understand ( )
(iv) All of them
Q. No.5- You make invested in fund
(i) Through broker ( )
(ii) Directly ( )
Q. No. 6- Are you satisfied with your investment
(i) Yes ( )
(ii) No ( )
Q. No.7 Which feature of mutual fund like you most
(i) Diversification ( )
(ii) Professional management ( )
(iii) Reduction in risk ( )
(iv) Help in achieving long term goal ( )
Q. No.8 – Do you receive the statement of your investment regularly
(i) Yes ( )
(ii) No ( )
Q. No. 9- Have made any investment in mutual fund.
(i) Yes ( )
(ii) No ( )

Q. No.10- If yes which fund you have invested?

(i) SBI ( )
(ii) HDFC ( )
(iii) ICICI ( )
(iv) Kotak ( )