A Study in Financial Performance Analysis of Selected

Mutual Funds In India

Chapter – 1

1. INTRODUCTION AND DESIGN OF THE STUDY

1.1 Introduction

A mutual fund is a type of budgeting tool that combines a collection of funds

from different financial experts to invest assets in insurances like stocks,
protections, cash market instruments, and other assets. Expert fund managers
handle mutual funds, and they specify the fund's benefits and drawbacks. Make
an effort to provide the fund's investment with capital increases or salary. The
portfolio of a mutual fund is set up and maintained to align with the investment
goals stated in its summary. Mutual fund investments provide small-scale or
lone financial professionals with access to professionally managed value, bond,
and other protections arrangements. In this way, each investor has a relative
stake in the fund's gains or losses.

Mutual funds invest resources in a vast array of safeguards, and execution is

typically tracked as the modification to the fund's all-out market peak, as
implied by the gathering execution of concealed speculations. Mutual funds
aggregate money from contributors and use it to buy various forms of insurance,
typically stocks and bonds. The effectiveness of the protections the mutual fund
organization decides to obtain is what determines its estimation. As a result,
when you buy a unit or fraction of a fund, you are actually buying the portfolio's
presentation—or, more accurately, a portion of the portfolio's value.
Investing in a portion of a fund differs from investing in individual shares of
stock. Funds do not grant their holders any democratic rights, in contrast to
stocks. an element of mutual

Funds refer to holdings in multiple stocks (or insurance policies), not just one.
The price of a mutual fund is indicated as the NET ASSET VALUE (NAV) per
unit for this reason. The NAV of a mutual fund is calculated by dividing the
total estimated value of the portfolio's insurance policies by the total number of
outstanding shares. All shareholders, institutional speculators, and insiders or
officials of friends' companies hold outstanding shares. The reserve's current
NAV, which, unlike a stock price, doesn't vary during stock market hours but is
resolved at the end of the day, can frequently be purchased or recovered as
needed.

What is Mutual Funds?

A mutual fund is a pool of money managed by a professional Fund Manager. It is a

trust that collects money from a number of investors who share a common
investment objective and invests the same in equities, bonds, money market
instruments and/or other securities.

Mutual Fund Types

A variety of classifications are used to categorize mutual funds according

to the types of safeguards they have put in place for their portfolios and
the kinds of gains they seek. For practically every type of investor or
speculative method, there is a reserve.

1. Stock exchanges
The category of equity funds is the largest. As implied by the name, this
type of fund invests mostly in stocks. This group contains various
subclasses. Some equity funds have names based on the capitalization of
the companies they invest in: small, mid, or large-cap.
2. Fixed income investments
The fixed income category is another sizable gathering. Funds that
provide a predetermined rate of return are the main focus of a fixed
income group mutual fund. A few examples of obligation instruments
include corporate or government securities. The idea is that the fund
portfolio generates income, which is later distributed to investors.

3. A fund balance

In order to reduce the risk of exposure to some advantage class, balanced

funds invest in both stocks and bonds. The term "asset allocation fund" is
also used to describe this type of mutual fund. An investor may anticipate
that the distribution of these assets among resource classes will be fairly
constant, although it will vary by asset. The goal of this fund is resource
benevolence with reduced risk. But nevertheless, these assets provide a
comparable risk and can vary just as much as other asset groups.

Four. Index funds Another meeting has occurred, and it belongs to the
category of "index funds" and has been extremely well-known over the
past couple of years. Their business strategy is based on the idea that
trying to consistently outperform the market is difficult and usually
expensive. In this approach, the financial statement supports the fund
manager's acquisitions of companies that are linked to illustrious market
indices like the Sensex and Nifty 50.

5. Money market investments

Government Treasury bills typically make up the safe (risk-free)
transitory obligation instruments that make up the money market. This is
a safe place to stash your money. Although you won't see much of a
return, you won't have to worry about going crazy.
6. Salary funds
Income funds get their name from the goal behind them: to provide
ongoing salaries. These resources are primarily invested in government
and top-notch company obligations, retaining these securities until they
develop to provide interest streams. While subsidy property may increase
in value, the main goal of these assets is to provide dependable income
flow to financial experts. All things considered, retirees and
preservationist financial experts make up the market for these assets.
Charge aware speculators may need to stay away from these assets
because they generate regular income.

1.2 STATEMENT OF THE PROBLEM

A study on analysis of the performance of Mutual fund with reference to Mutual

fund industry. The Indian Mutual Funds Industry is going through a phase of
transformation. Institutional investors dominate the Mutual fund industry. The
mutual fund sector has been in India for more than 40 years. During this brief
time, the decline in the mutual fund industry had been attributed to factors like
a) Prolonged bearish trends and scams in the Indian stock market that killed the
investors' confidence an interest in stocks and units Unattractive returns on
mutual fund schemes, the collapse of UTI, and investors' broken faith and
confidence. Although the industry benefited for a while from the performance
of debt funds, the economy's ongoing decline in interest rates has once again
negatively impacted the industry's rapid growth. d) Slow trends and illness in
the corporate sector after the 1980s e) Ineffectiveness and corruption in the
management of mutual funds f) Withdrawal of tax benefits under
1.3 NEED FOR THE STUDY

Mutual funds offer multiple choices for investment across equity shares, corporate
bonds, government securities, and money market instruments, providing an excellent
avenue for retail investors to participate and benefit from the uptrends in capital
markets. Risk Diversification One of the biggest benefits of mutual funds is risk
diversification. Every stock is subject to three types of risk company risk, sector risk
and market risk. Company risk and sector risk are unsystematic risk, while market
risk is known as systematic risk.

1.4 SCOPE OF THE STUDY

A mutual fund is a business that pools the funds of investors to create a

portfolio of various investments. A mutual fund can consist of a variety of
investments, including stocks, bonds, and money market funds. "A mutual
fund is the perfect financial mechanism for gathering a group of participants to
pool their funds for a single investing objective. Each Mutual Fund is
administered by its respective Asset Management Company, which offers a
variety of programmes (AMC). An investor can choose to invest in one or
more mutual fund schemes, and by doing so, he or she gains ownership of the
scheme's units. The money invested in a certain Mutual Fund plan is
subsequently invested by the fund manager in several sorts of eligible bonds,
money market instruments, including stocks and securities. A certified expert
manages each mutual fund, using the funds to build a portfolio that may
contain stocks, bonds, gilts, money market instruments, or a combination of all
of these. Your portfolio will be diversified by a mutual fund by using a range of
investment vehicles. An investor can invest even a little amount of money
through mutual funds.
1.5 INDUSTRY PROFILE

Average Assets Under Management (AAUM) of Indian Mutual Fund Industry

for the month of November 2022 stood at ₹ 40,49,440 crore. Assets Under
Management (AUM) of Indian Mutual Fund Industry as on November 30, 2022
stood at ₹ 40,37,561 crore. The AUM of the Indian MF Industry has grown
from ₹ 7.93 trillion as on November 30, 2012 to ₹40.38 trillion as on November
30, 2022 more than 5 fold increase in a span of 10 years. The MF Industry’s
AUM has grown from ₹ 22.79 trillion as on November 30, 2017 to ₹40.38
trillion as on November 30, 2022, around 2 fold increase in a span of 5 years.
The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh
Crore) for the first time in 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 Industry
AUM stood at ₹40.38 Trillion (₹ 40.38 Lakh Crore) as on November 30, 2022.

The history of Mutual Fund Industry in India can be traced back to 1963, with
the launch of the Unit Trust of India by the Government of India under an Act
of Parliament. UTI was launched under the regulatory and administrative
control of RBI. In 1978, the regulatory and administrative control of UTI was
transferred from the Reserve Bank of India to IDBI (Industrial Development
Bank of India). The first mutual fund scheme that was introduced in India by
UTI was in the Unit Scheme (1964). UTI had Assets Under Management worth
Rs. 6,700 Crores, by the end of the year 1988.

In 1987, public sector enterprises such as State Bank of India, Punjab National
Bank, Canara Bank, etc. and other non-UTI segments such as General Insurance
Corporation of India (GIC) and Life Insurance Corporation of India (LIC)
entered the market and established public sector mutual funds. The funds
introduced by the public sector banks, by way of historic progression, are listed
below:

 SBI Mutual Fund

 Canbank Mutual Fund
 Punjab National Bank Mutual Fund
 Indian Bank Mutual Fund
 Bank of India Mutual Fund
 Bank of Baroda Mutual Fund

From the year 1993 onwards, private sector funds were established in the
mutual fund industry. In the same year, Mutual Fund Regulations were
introduced in India under which all mutual funds except UTI has to be
registered. The first private sector mutual fund that was registered was the
Kothari Pioneer Fund, which was merged with Franklin Templeton later on. In
1996, the Mutual Fund Regulations were revised and this substituted the earlier
version.

In 2003, the Unit Trust of India Act 1963 was repealed and was divided into 2
separate entities - the UTI Mutual Fund, which is sponsored by Punjab National
Bank, State Bank of India, Life Insurance Corporation of India and Bank of
Baroda and the second entity is the Specified Undertaking of the Unit Trust of
India. This bifurcation was effective from February 2003.

1.5 COMPANY PROFILE

There are 44 asset management companies (AMCs) or mutual fund houses

operating in India. These companies manage the investments of investors to fetch
them optimal returns. The structure of mutual funds in India is a three-tier one with
few other significant components. The three-tier structure comprises the fund
sponsor, trustees and the asset management company. Not only different banks or
AMCs create or float mutual fund schemes.
1.6 CHAPTER SCHEME

The thesis is presented in 6 chapters;

Chapter I deals with the introduction and design of the study. It includes
introduction, need for the study, scope of the study, objectives of the study,
research methodology and limitations of the study.

Chapter II encompasses the review of literature. This chapter presents the

review of the literature related to the topic of the present study.

Chapter III discusses the research methodology

Chapter IV consists of data analysis and interpretation. The analyses have been
made on the basis of the objective of the study. Statistical analysis and
interpretation of data are presented in this chapter.

Chapter V recapitulates the summary of findings, suggestions and conclusion.

In this chapter the results of the study have been summarized and presented
along with possible suggestions. It comprises of results and discussions drawn
from the present study. The implications of the study are also included.