Mutual Fund Sector

Overview
Mutual funds are a popular investment vehicle that pool the savings of many
investors to invest in a diversified portfolio of securities. They offer professional
management, diversification, and accessibility to investors of all sizes. This
overview explores the structure, advantages, and disadvantages of mutual funds,
as well as the major players and schemes in the industry.
The Structure of Mutual Funds
Sponsor
The sponsor is the entity that
establishes the mutual fund and
must have a sound track record
and reputation. They are
required to contribute at least
40% of the net worth of the
Asset Management Company
(AMC).
Trustees
Mutual funds must have an
independent Board of Trustees,
with two-thirds being
independent of the sponsor. The
trustees are responsible for
overseeing the fund's operations.
Asset Management
Company
The AMC is appointed by the
sponsor or trustees to manage
the fund's investments. The
AMC must satisfy certain
eligibility criteria set by
regulators.
Advantages of Mutual Funds

1 Professional Management 2 Diversification

Mutual funds provide the services of Mutual funds invest in a diversified basket of
experienced and skilled professionals who securities, reducing risk by ensuring that not all
analyze the market and select suitable investments move in the same direction
investments. simultaneously.

3 Convenience 4 Return Potential

Investing in a mutual fund reduces paperwork Over the medium to long term, mutual funds
and administrative hassles, making it a have the potential to provide higher returns
convenient option for investors. compared to direct investments.
Disadvantages of Mutual Funds
Dilution
Excessive diversification can lead to
dilution of returns, as the high returns from
a few investments may not significantly
impact the overall portfolio performance.
Taxes
Mutual fund managers make decisions
based on the fund's objectives, not the
individual investor's tax situation, which
can result in tax implications for the
investor.
PEST Analysis
Political
Mutual funds in India are regulated by
SEBI and are structured as public trusts.
The stability of the government and
investor confidence are important factors
affecting the industry.
Socio-cultural
Globalization, the increasing share of India
in world trade, and the need to save and
invest for future goals and retirement are
driving the growth of mutual funds.
1
2 Economic
India's young and growing population,
rising incomes, and the country's potential
as a global services hub present
opportunities for the mutual fund industry.
3 Factors like inflation and global trade also
impact the sector.
Technological
4
Advancements in communication and
information technology have enabled
greater integration of financial markets and
easier handling of legal and administrative
tasks for mutual funds.
SWOT Analysis

Strengths Weaknesses Opportunities Threats

Large customer base, Poor retail investor Untapped semi-urban Increasing competition,
government support, participation, lack of and rural markets, high market volatility, and
and better access to focus, and limited savings rate, and potential for stricter
market information. distribution network. liberalized business regulations.
environment.
Major Mutual Fund Companies
Public Companies Private Companies

Major public sector mutual fund companies include Prominent private sector mutual fund companies are
State Bank of India Mutual Fund, Unit Trust of India Franklin Templeton, ICICI Prudential, Tata, Birla Sun
Mutual Fund, Baroda Pioneer Mutual Fund, and BOI Life, HDFC, Axis, Kotak Mahindra, Reliance, and
AXA Mutual Fund. ING Vysya.
Major Mutual Fund Schemes

Equity Funds Debt/Income Liquid Funds Fixed Maturity

Funds Plans
Invest in stocks with Invest in short-term
the objective of long- Invest in fixed income debt instruments to Closed-ended debt
term capital growth securities like bonds provide high liquidity funds that aim to
and some income. and debentures to and stability. protect capital and
provide regular generate returns.
income.
Research Methodology
Introduction
This study explores the investment patterns
and awareness of mutual funds among
investors in Dehradun, India. It provides
insights into the future outlook of the
mutual fund industry and helps
management understand current market
trends.
Objectives
The key objectives of the study are to
assess the level of awareness and
preference for mutual funds, as well as to
analyze the performance and future
prospects of the mutual fund industry.
Demographic Analysis of
Mutual Fund Investors

This demographic analysis provides valuable insights into the profile of mutual
fund investors. The data reveals that the majority of investors fall within the 36
to 50 years age group, indicating a preference for mutual fund investments
among middle-aged individuals. Additionally, a significant portion of investors
(39%) have an annual income ranging from 5 to 10 lakhs, suggesting that the
moderate to upper-middle-income group is particularly drawn to mutual fund
investments.
Preference for Mutual Funds
Favored Investment
Option
Mutual funds emerge as the most
favored investment option
among investors, with 51%
choosing it over other
alternatives like bank deposits,
shares, and real estate.
Conservative Investment
Approach
Investors predominantly display
a cautious approach, with 62%
allocating less than 25% of their
savings to mutual funds,
indicating a conservative
investment strategy.
Risk Appetite Variation
While investors show a
preference for mutual funds,
their risk appetite varies. A
significant portion may be
considered conservative (62%),
opting for lower-risk investment
options, while a smaller segment
could be categorized as
aggressive (4%), seeking higher
returns despite higher risks.
Investment Objectives and Behavior
1 Tax Reduction
Tax reduction emerges as the primary
investment objective for 30% of investors,
highlighting a focus on long-term financial
planning and wealth preservation.
3 Short-term Preference
Investors predominantly prefer short to
medium-term investment durations, with 45%
investing for 6 months to 1 year, indicating a
preference for liquidity and flexibility.
2 Retirement Benefits
Retirement benefits are the second most
important investment objective, accounting for
21% of investors' priorities.
4 Satisfaction with Returns
A majority of investors (51%) express
satisfaction with the returns from mutual funds,
suggesting a degree of confidence in the
investment vehicle's ability to deliver favorable
outcomes.
Preferred Mutual Fund Schemes
Liquid Schemes
Liquid schemes are the most preferred
among investors, indicating a preference
for stability and consistent returns.
Fixed Margin Schemes
Fixed Margin schemes are also among the
top choices for investors, further
emphasizing the desire for investment
options that prioritize stability and
predictable returns.
Information Sources and Investment
Procedure

Traditional Media Systematic Investment Plan (SIP)

Investors primarily rely on traditional media like SIP emerges as the favored investment procedure,
newspapers (37%) for information about mutual fund indicating a disciplined and structured approach to
schemes, highlighting a preference for established investing, which aligns with the conservative risk
sources of information. profile observed among investors.
Income Distribution and Investment Behavior

Income Range 1
A significant portion of investors (39%)
have an income ranging from 5 to 10 lakhs
per annum, suggesting a moderate to 2 Conservative Approach
upper-middle-income group preference for Investors predominantly display a cautious
mutual fund investments. approach, with 62% allocating less than
25% of their savings to mutual funds,
indicating a conservative investment
strategy.
Disciplined Investing 3
The preference for Systematic Investment
Plan (SIP) further reinforces the
disciplined and structured approach to
investing among mutual fund investors.