SASMIRA INSTITUTE OF MANAGEMENT

STUDIES AND RESEARCH

Batch B

Group 6 – MUTUAL FUNDS

Vijay Kondabathini

Mangesh
Kirthi Shetty
Pandure
Tejas Raval Keval Mhatre Hemal Sheth Amol Shitole
 What is Mutual Fund?
• A mutual fund is made up of money that is pooled
together by a large number of investors who give
their money to a fund manager to invest in a large
portfolio of stocks and / or bonds.

• It is managed by a team of professional fund

managers (usually called an Asset Management
Company) for a small fee.
Fund Cycle
 IMPORTANCE OF MUTUAL FUNDS IN
INDIA
• Generation of domestic resources by reducing the
dependence on outside funds.
• Get firm allotment of shares.
• The assured returns had great appeal for the typical
Indian investor.
• Managed by professionals having a better knowledge
of market behaviours.
• The dividends and capital gains are reinvested
automatically in mutual funds.
 IMPORTANCE OF MUTUAL FUNDS IN
INDIA
• Mutual fund operation provides a reasonable
protection to investors.
• Tax relief under Section 80 L of the Income Tax Act
and some schemes provide tax relief under Section
88 of the Income Tax Act.
• Creates awareness about the benefits of investment
in capital market among urban and rural middle class
people profitable and safe avenues.
• Mutual funds are controlled and regulated by S E B I
CATEGORIES OF MUTUAL FUND SCHEMES

Mutual fund schemes may be classified on the basis of

its structure and its investment objective.
CATEGORIE
S

By Investment
Objective

OTHER By
SCHEMES Structure
By Structure:
 Open-ended Funds
 Available for subscription all through the year.
 Do not have a fixed maturity.
 Key feature of open-end schemes is liquidity.
 Investors can buy and sell units at Net Asset Value (NAV)
related prices.
 Closed-ended Funds
 Available for subscription only during a specified period.
 Stipulated maturity period generally ranging from 3 to 15
years
 Investors can invest at the time of the initial public issue &
thereafter can buy or sell the units of the scheme on the
stock exchanges where they are listed.

 Interval Funds
 Combine the features of open-ended and close-ended
schemes.
 Open for sale or redemption during pre-determined
intervals at NAV related price.
By Investment Objective:
 Growth Funds
 Aim to provide capital appreciation over the medium to
long- term.
 Normally invest a majority of their corpus in Equities
 Funds have comparatively high risks.
 Provide different options to the investors like dividend
option, capital appreciation, etc. & the investors may
choose an option depending on their preferences.
 Income Funds
 Aim to provide regular and steady income to investors.
 Generally invest in fixed income securities such as bonds,
corporate debentures and Government securities.
 Less risky compared to equity schemes.
 These funds are not affected because of fluctuations in
equity markets.

 Balanced Funds
 Aim is to provide both growth and regular income.
 Periodically distribute a part of their earning and invest
both in Equities & fixed income securities in the proportion.
 Affected by fluctuations in share prices in the stock
markets.
 Money Market Funds
 Aim to provide easy liquidity, preservation of capital and
moderate income.
 Generally invest 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 depending upon the
interest rates prevailing in the market.
 Ideal for Corporate and individual investors as a means to
park their surplus funds for short periods.
 Load Funds
 Charges a commission each time you buy or sell units in
the fund.
 Typically entry and exit loads range from 1% to 2%.
 It could be worth paying the load, if the fund has a good
performance history.

 No-Load Funds
 Does not charge a commission on purchase or sale of
units in the fund.
 The advantage of a no load fund is that the entire corpus
is put to work.
OTHER SCHEMES :
 Tax Saving Schemes
 Offer tax rebates to the investors under specific provisions
of the Indian Income Tax Law.
 Investments made in Equity Linked Savings Schemes (ELSS)
and Pension Schemes are allowed as deduction u/s 88 of
the Income Tax Act, 1961.
 Provides opportunities to investors to save capital gains u/s
54EA and 54EB by investing in Mutual Funds.
 Special Schemes
 Index Schemes
Attempt to replicate the performance of a particular index such as
the BSE Sensex or the NSE 50

 Sectoral Schemes
Invest exclusively in a specified industry or a group of industries or
various segments such as 'A' Group shares or initial public
offerings.
 Association of Mutual Funds in India
(AMFI)
• Incorporated on 22nd August, 1995.
• AMFI is an apex body of all Asset Management
Companies (AMC) which has been registered with
SEBI.
• AMFI is dedicated to developing the Indian Mutual
Fund Industry on professional, healthy and ethical
lines and to enhance and maintain standards.
• It follows the principle of both protecting and
promoting the interests of mutual funds as well as
their unit holders.
 Role of AMFI
The Association of Mutual Funds of India works with 30
registered AMCs of the country.
• Maintains a high professional and ethical standards in all
areas of operation of the industry.
• Recommends and promotes the top class business practices
and code of conduct which is followed by members and
related people engaged in the activities of mutual fund and
asset management.
• Interacts with SEBI and works according to SEBIs guidelines in
the mutual fund industry.
• AMFI represent the Government of India, the Reserve Bank of
India and other related bodies on matters relating to the
Mutual Fund Industry.
• Develops a team of well qualified and trained Agent
distributors. It implements a programme of training and
certification for all intermediaries and other engaged in the
mutual fund industry.
• AMFI undertakes all India awareness programme for investors
in order to promote proper understanding of the concept and
working of mutual funds.
• Disseminate informations on Mutual Fund Industry and
undertakes studies and research either directly or in
association with other bodies.
 Challenges For Mutual Fund Industry
In India
 Highly Fluctuating Rate of Returns
 Mutual Funds investment in no way guarantees any return.
 If the market prices of major shares fall, then the value of
mutual fund shares are sure to go down.

 Diworsification or Over Diversification

 To diversify the investment, Mutual Fund Companies get
involved in Over Diversification.
 Taxes

 Cost
 Most of the mutual funds charge Shareholder fees and
Fund Operating Fees from the investors.
 Reference
• http://allbankingsolutions.com/Mutual-fund-definition-basics-for-dummies.htm
• http://www.authorstream.com/Presentation/aSGuest1085-95719-mutual-funds-
organisation-mutualfundpm-business-finance-ppt-powerpoint/
• http://www.iif.edu/data/fi/journal/FI101/FI101Art6.PDF
• http://finance.indiamart.com/india_business_information/types_of_schemes_mut
ual_funds.html
• http://www.naturemagics.com/finance/mutual-funds-types.shtm
• http://www.sharemarketbasics.com/Mutual-Funds/Mutual-Fund-Types.htm
• http://finance.indiamart.com/india_business_information/amfi.html