mutual funds scope bulls

7/28/2019 Mutual Funds Scope Bulls

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CHAPTER-I

INTRODUCTION


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INTRODUCTION TO MUTUAL FUNDS

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who

share a common financial goal. The money thus collected is then invested in capital

market instruments such as shares, debentures and other securities. The income earned

through these investments and the capital appreciations realized are shared by its unit

holders in proportion to the number of units owned by them. Thus a Mutual Fund is the

most suitable investment for the common man as it offers an opportunity to invest in a

diversified, -professionally managed basket of securities at a relatively low cost. The

flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart


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The project basically carried out to give good guidelines for investor. And also

to educate the investors about mutual funds. The project idea is to project mutual funds

as the better avenue for investment. Mutual fund is productive package for a lay-

investor with limited finances. Mutual fund is a very old practice in U.S., and it has

made a recent entry into India. Common man in India still finds Bank as a safe door

for investment. This shows that mutual funds have not gained a strong foot-hold in his

life.

The project creates an awareness that the mutual fund is worthy investment

practice. The various schemes of mutual funds provide the investor with a wide range

of investment options according to his risk-bearing capacities and interest. Besides,

they also give a handy return to the investor. The project analyses various schemes of

mutual fund by taking different mutual fund schemes from different AMCS. The

future challenges for mutual funds in India are also considered.

PURSPOSE OF THE STUDY:

The study basically made to educate the investors about Mutual Funds. Analyze

the various schemes to highlight the risk and return of diversity of investment that

mutual funds offer. Thus, through the study one would understand how a common man

could fruitfully convert a pittance into great penny by wisely investing into the right

scheme according to his risk- taking abilities.


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SCOPE OF THE STUDY:

The study is limited to the analysis made for three major types of schemes

offered by four AMCs namely Indian infoline Asset Management Co. Ltd. Canbank

Investment Management Services, DSP Merrill Lynch Investment Managers Ltd. and

Templeton Asset Management (India) Pvt. Ltd. Each scheme is calculated their risk

and return using different performance measurement theories. The reasons for such

performance are immediately analyzed in the commentary. Pie charts are used to reflect

the portfolio risk and return.


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OBJECTIVES:

1. To project mutual funds as the productive avenue to invest in contrast to the laxity

of bank investing.

2. To show the wide range of investment options available in MFs by explaining

various schemes offered by different AMCs.

3. To help an investor to make a right choice of investment, while considering the

inherent risk factors.

4. To understand the recent trends in the MF world.

5. To understand the risk and return of the various schemes.

6. To find out the various problems faced by Indian mutual funds and possible

solutions.

A mutual fund, also referred to as an open-end fund, is an investment company

that spreads its money across a diversified portfolio of securities -- including stocks,

bonds, or money market instruments. Shareholders who invest in a fund each own a

representative portion of those investments, less any expenses charged by the fund.

Mutual fund investors make money either by receiving dividends and interest

from their investments, or by the rise in value of the securities. Dividends, interest and

profits from the sale of any securities (capital gains) are passed on to the shareholders

in the form of distributions. And shareholders generally are allowed to sell (redeem)

their shares at any time for the closing market price of the fund on that day.


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DR GLEN BROWN

Mutual funds have been around for a long time, dating back to the early 19th

century. The first modern American mutual fund opened in 1924, yet it was only in the

1990s that mutual funds became mainstream investments, as the number of households

owning them nearly tripled during that decade. With recent surveys showing that over

88% of all investors participate in mutual funds, you're probably already familiar with

these investments, or perhaps even own some. In any case, it's important that you know

exactly how these investments work and how you can use them to your advantage.

A mutual fund is a special type of company that pools together money from

many investors and invests it on behalf of the group, in accordance with a stated set of

objectives. Mutual funds raise the money by selling shares of the fund to the public,

much like any other company can sell stock in itself to the public. Funds then take the

money they receive from the sale of their shares (along with any money made from

previous investments) and use it to purchase various investment vehicles, such as

stocks, bonds and money market instruments. In return for the money they give to the

fund when purchasing shares, shareholders receive an equity position in the fund and,

in effect, in each of its underlying securities. For most mutual funds, shareholders are

free to sell their shares at any time, although the price of a share in a mutual fund will

fluctuate daily, depending upon the performance of the securities held by the fund.


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Methodology of Study

To fulfill the objective of the study both primary and secondary data has been

collected. Primary data is the data collected specifically for the study. Data is collected

directly from people and organization via questioners or surveys before being analyzed

to reach conclusions concerning the issues covered in the questionnaire or survey.

In this study primary data was collected through interaction with staff of India

info line pvt Ltd. and the applications of Reliance equity fund.

Secondary data is the data collected previously by someone else for some other

purpose, which can be analyzed and interpreted according to requirements. For

example, source s of secondary data are government publications, newspapers,

worldwide web etc.

In this study the secondary is mainly taken from

The company `s training material.

Reconciliation statements,

Other documents generated with in the organization, which have to access

WWW.indiainfoline.com, WWW.amfindia.com, WWW.Sebi.com
http://www.indiainfoline.com/http://www.amfindia.com/http://www.indiainfoline.com/http://www.amfindia.com/


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LIMITATIONS OF THE STUDY:

1. The study is conducted in short period, due to which the study may not be detailed

in all aspects.

2. The study is limited only to the analysis of different schemes and its suitability to

different investors according to their risk-taking ability.

3. The study is based on secondary data available from monthly fact sheets, web sites,

offer documents, magazines and newspapers etc. as primary data was not

accessible.

4. The study is limited by the detailed study of various schemes.


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CHAPTER - II

REVIEW OF LITRATURE


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The study basically made to educate the investors about Mutual Funds. Analyze

the various schemes to highlight the risk and return of diversity of investment that

mutual funds offer. Thus, through the study one would understand how a common man

could fruitfully convert a pittance into great penny by wisely investing into the right

scheme according to his risk- taking abilities.

BENEFITS OF MUTUAL FUND INVESTMENT

Professional Management:

Mutual Funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance

and prospects of companies and selects suitable investments to achieve the

objectives of the scheme.

Diversification:

Mutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do all

stocks decline at the same time and in the same proportion. You achieve this

diversification through a Mutual Fund with far less money than you can do on your

own.

Convenient Administration:

Investing in a Mutual Fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokers and

companies. Mutual Funds save your time and make investing easy and convenient.


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Return Potential:

Over a medium to long-term, Mutual Funds have the potential to provide a

higher return as they invest in a diversified basket of selected securities.

Low Costs:

Mutual Funds are a relatively less expensive way to invest compared to directly

investing in the capital markets because the benefits of scale in brokerage, custodial and

other fees translate into lower costs for investors.

Liquidity:

In open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a

stock exchange at the prevailing market price or the investor can avail of the facility of

direct repurchase at NAV related prices by the Mutual Fund.

Transparency:

You get regular information on the value of your investment in addition to disclosure

on the specific investments made by your scheme, the proportion invested in each class

of assets and the fund manager's investment strategy and outlook.

Flexibility:

Through features such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience.


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Affordability:

Investors individually may lack sufficient funds to invest in high-grade stocks. A

mutual fund because of its large corpus allows even a small investor to take the benefit

of its investment strategy.

STRUCTURE AND CONSTITUENTS OF FUND

Mutual fund schemes may be classified on the basis of its structure and itsinvestment objective.

By Structure:

Openended funds:

An open end fund is one that is available for subscription all through the year.

These do not have a fixed maturity. Investors can conveniently buy and sell units at Net

Asset Value (NAV) related prices. The key feature of open-end schemes is liquidity.

Closed-ended funds:

A closed end funds has a stipulated maturity period which generally raging

from 3 to 15 years. The funds are open for subscription only during a specified period.

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 they are

listed. In order to provide an exist route to the investors, some close ended funds give

MUTUAL

FUND

Sponsor Trustee AMC Custodian


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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.

Interval Funds:

Interval funds combine the features of open-ended schemes. They are open for

sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective:

Growth Funds:

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

long-term. Such schemes normally invest a majority of their corpus in equities. It has

been proven that returns from stocks, have outperformed most other kind of

investments held over the long term. Growth schemes are ideal for investors having a

long-term outlook seeking growth over a period of time.

Income Funds:

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 and Government securities. Income Funds are ideal for capital stability and

regular income.


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Balanced Funds:

The aim of balanced funds is to provide both growth and regular income. Such

schemes periodically distribute a part of their earning and invest both in equities and

fixed income securities in the proportion indicated in their offer documents. In a rising

stock market, the NAV of these schemes may not normally keep pace, or fall equally

when the market falls. These are ideal for investors looking for a combination of

income and moderate growth.

Money Market Funds:

The aim of money funds is to provide easy liquidity, preservation of capital and

moderate income. These schemes generally invest in safer short-term instruments such

as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

Returns on these schemes may fluctuate depending upon the interest rate prevailing in

the market. These are ideal for Corporate and individual investors as a means to park

their surplus funds for short periods.

Load Funds:

A Load Funds is one that charges a commission for entry of exit. That is, each

time you buy or sell units in the fund, a commission will be payable. Typically entry

exit loads range from 1% to 2%. It could be corpus is put to work.

No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit.

That is, no commission is payable on purchase or sale of units in the fund. The

advantage of a no load is that the entire corpus is put to work.


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Other Schemes:

Tax Saving Schemes

These schemes offer tax rebates to the investor under specific provisions of the

Indian Income Tax laws as the Government offers tax incentives for investment in

specified avenues. Investments in Equity Linked Saving Schemes (ELSS) and Pension

Schemes are allowed as deduction u/s 88 of the Income Tax Act. The Act also provide

opportunities to investors to save capital gains u/s 54EA and 54EB by investing in

Mutual Funds, provided the capital asset has been sold to April 1, 2000 and the amount

is invested before September 30, 2000.

Special Schemes

Industry Specific Schemes:

Industry Specific Schemes invest in the industries specified in the offer

document. The investment or these funds is limited to specific like InfoTech, FMCG

and Pharmaceuticals etc.

Index Schemes:

Index Funds attempt to replicate the performance of a particular index such as

the BSE Sensex or the NSE

Sectoral Schemes:

Sectoral Funds are those, which invest exclusively in a specified industry or a

group of industries or various segments such as A Group shares or initial public

offerings.


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History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit

Trust of India, at the initiative of the Government of India and Reserve Bank the. The

history of mutual funds in India can be broadly divided into four distinct phases

First Phase 1964-87(UTI MONOPOLY)

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set

up by the Reserve Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from

the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory

and administrative control in place of RBI. The first scheme launched by UTI was Unit

Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under

management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public

sector banks and Life Insurance Corporation of India (LIC) and General Insurance

Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund

established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National

Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun

90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June

1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of

Rs.47, 004 crores.


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Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian

mutual fund industry, giving the Indian investors a wider choice of fund families. Also,

1993 was the year in which the first Mutual Fund Regulations came into being, under

which all mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector

mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign

mutual funds setting up funds in India and also the industry has witnessed several

mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds

with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores

of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI

was bifurcated into two separate entities. One is the Specified Undertaking of the Unit

Trust of India with assets under management of Rs.29, 835 crores as at the end of

January 2003, representing broadly, the assets of US 64 scheme, assured return and

certain other schemes. The Specified Undertaking of Unit Trust of India, functioning

under an administrator and under the rules framed by Government of India and does

not come under the purview of the Mutual Fund Regulations.


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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and

LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With

the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000

crores of assets under management and with the setting up of a UTI Mutual Fund,

conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of June 30, 2003, there were

31 funds, which manage assets of Rs.104762 crores under 376 schemes. The graph

indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

Note: While UTI was bifurcated into UTI Mutual Fund and the Specified

Undertaking of the Unit Trust of India effective from February 2003. The Assets under

management of the Specified Undertaking of the Unit Trust of India has therefore been

excluded from the total assets of the industry as a whole from February


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Resent Trends in Mutual Funds Industry

The Indian Mutual fund industry, despite all that has been said about it is still in

a nascent stage and has extremely bright future ahead. The industry is still one-tenth

size of the banking deposits in the country.

The private sector mutual fund industry in its resent avatar is barely 7 years old.

The total asset under management over the past 4 to 5 tears has almost remain

stagnant around the Rs 100, 000 crore mark.

This has put a question mark in front of the claims that mutual funds are

growing part of the financial savings and planning industry in India. It holds scope for

growth. In India this industry began with the setting up of the Unit Trust Of India (UTI)

in 1964 by the government of India in order to mobiles small saving. During the past 37

years, UTI has grown to be a dominant player in the industry with assets with over Rs

76,547 cr as of March2000. However, trouble hit UTI has lost its dominant position in

the industry and the asset under management has slipped drastically to Rs 46,396 cr.

Private sector mutual funds, which were permitted along with foreign partners

in 1993, now enjoy a dominant position in the country. Kothari Pioneer Mutual fund

was the first fund to be established in the private sector with foreign fund. The private

sector now controls around RS 45,818 crore assets under management, almost half the

size of the industry.

The mutual fund industry has become a fastest growing sector in the countrys

capital and financial market with an average compounded growth rate of 20 percent

over the past five years. This is despite increasing competition with more than 30 asset

management companies for investors money. As on June 2002, the industry has Rs

100,703 crore asset under management spread across 36 funds with more than 390

schemes.


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Substantial development have made; spurred on by changes and amendments in

regulation as the mutual fund regulation that established a comprehensive legal

framework for the mutual fund industry to develop coherently. The securities and

Exchange Board Of India (SEBI) came out with comprehensive regulation in 1993

which defined the structure of the mutual fund and asset management Companies for

the first time.

The industry is in the process of evolving into a bigger and better investment

medium for all market segment, Say Kavita Hurry, CEO ING Investment

Management, further, currently, ING Investments manages around Rs.364 crore as on

June 2002.

Drastic Transformation:

The industry is undergoing a transformation and is witnessing large number of

mergers, acquisitions and takeovers in the schemes and asset management companies.

Mutual fund products are competing with the banks deposits, Reserves Banks of India

(RBI) bonds, pension funds and post offices schemes that provide not only guaranteed

return but also tax-free returns. However, mutual funds are unable to provide assured

return since they are investing in financial markets and returns from them are, by

definition, uncertain. These transformation benefiting the investor friendly open-ended

schemes, increasing the range of funds to choose from, enhanced transparency and

improvement regulation.


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New challenges and growth areas:

However, an important step towards maturating of the industry will be develop

third party distribution channel and expand distribution outside of the major cities.

The challenges for the private fund players manager will be to break the big city

limit and begin to sell and educate the rest of the market and to diversify sales, says

Moodys Investors services and ICRA report on the industry.

Further the report notes, asset management companies must attract more retail

investors. A strong retail back-bone will create better standards, greater competition

and more liquidity, in addition to maintain and improving best practices and better

company governances.

The industry needs go deeper into the existing markets and wider into the new

markets and provides newer financial products to grow. Adds Nikhil Kattau, chief

executive officer, Sun F&C. Sun F&C currently manages around Rs.427 crore.

Another fundamental turning point in the growth of the mutual fund market is

the opening of the market to the foreign investments. Now there is an industry wide

limit for investing in overseas securities $500 million offering Indian Mutual funds and

Indian investor the possibility to invest in the non-Indian security mutual funds is a

fundamental step towards modernization and evolution of the market, notes Moddys

ICRA report.

Stable and long-term fiscal incentives designed to capture long-term retail and

private pension savings will be of utmost importance for the industry. Here,

governments fiscal policy and have the capital market regulators for the industrys

continued growth will play an essential role.


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In a supportive environment, investors would be reassured of a stable industry,

private fund managers will be motivated and encouraged to develop new products and

foreign managers will be attracted to the dynamic market.

In an economy growing at 6 percent per annum, any fall in any segment by

more than 30 percent obviously indicates that something serious is happening and

concerned people need to take remedial steps. In the relative absence of UTI from the

scne, till it fate decided by its masters in North Block, the onus of building investor

confidences falls on the shoulders of the private sector mutual funds. With maturing

financial markets and increasing marketing there are reasons for more than moderate

optimisms.

Market Trends:

A lone UTI with just one scheme in 1964 now competes with as many as 400

odd products and 34 players in the market. In spite of the stiff competition and losing

market share, UTI still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the

industry. Product innovation is now pass with the game shifting to performance

delivery in fund management as well as service. Those directly associated with the fund

management industry like distributors, registrars and transfer agents, and even the

regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI

has always been a dominant player on the bourses as well as the debt markets, the new

generations of private funds, which have gained substantial mass, are now seen flexing

their muscles.By rewarding honest and transparent management with higher valuations,

a system of risk-reward has been created where the corporate sector is more transparent

then before.


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Funds have shifted their focus to the recession free sectors like pharmaceuticals,

FMCG and technology sector. Funds performances are improving. Funds collection,

which averaged at less than Rs100bn per annum over five-year period spanning 1993-

98 doubled to Rs210bn in 1998-99. In the current year mobilization till now have

exceeded Rs300bn. Total collection for the current financial year ending March 2000 is

expected to reach Rs450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the

private sector mutual funds rather than public sector mutual funds. Indeed private MFs

saw a net inflow of Rs. 7819.34 crore during the first nine months of the year as against

a net inflow of Rs.604.40 crore in the case of public sector funds.

Mutual funds are now also competing with commercial banks in the race for

retail investors savings and corporate float money. The power shift towards mutual

funds has become obvious. The coming few years will show that the traditional saving

avenues are losing out in the current scenario. Many investors are realizing that

investments in savings accounts are as good as locking up their deposits in a closet. The

fund mobilization trend by mutual funds in the current year indicates that money is

going to mutual funds in a big way. The collection in the first half of the financial year

1999-2000 matches the whole of 1998-99.

India is at the first stage of a revolution that has already peaked in the U.S. The

U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual

fund assets are not even 10% of the bank deposits, but this trend is beginning to

change. Recent figures indicate that in the first quarter of the current fiscal year mutual

fund assets went up by 115% whereas bank deposits rose by only 17%. (Source:

Thinktank, The Financial Express September, 99) This is forcing a large number of


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banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and

some other assets which improves liquidity and reduces risk. The basic fact lies that

banks cannot be ignored and they will not close down completely. Their role as

intermediaries cannot be ignored. It is just that Mutual Funds are going to change the

way banks do business in the future.

Banks v/s Mutual Funds

BANKS MUTUAL FUNDS

Returns Low Better

Administrative exp. High Low

Risk Low High


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STRUCTURE OF MUTUAL FUNDS

SponsorCompany

Establishes MFas a TrustRegisters MF withSEBI

Managed by aBoard of Trustees Mutual Fund

Hold UnitholdersFund in MFEnsure Complianceto SEBI Enter intoAgreement withAMC

AssetManagement

Company

Registrars andTransfer Agents

Custodian

Bankers

Float, MFFundsManagers

Fund as PerSEBIguidelines &AMCAgreement

ProvidesNecessaryCustodianServices

Provide BankingServices

ProvideRegistrarsServices and act

as aTransfers Agents

AppointedbyBoard ofTrustees

AppointedbyTrustees

Appointed

byAMC

AppointedbyAMC


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The formation and operations of mutual funds in India is solely guided by SEBI

(Mutual Fund) Regulations, 1993, which came into force on 20 January 1993. The

regulations have since been replaced by the Securities and Exchange Board of India

(Mutual Funds) Regulations, 1996, through a notification on 9 December 1996

(Appendix 2).

Figure gives an idea of the structure of Indian mutual funds. A mutual fund

comprises four separate entities, namely sponsor, mutual fund trust, AMC and

custodian. They are of course assisted by other independent administrative entities like

banks, registrars and transfer agents. We may discuss in brief the formation of different

entities, their functions and obligations.

The sponsor for a mutual fund can by any person who, acting alone or in

combination with another body corporate establishes the mutual fund and gets it

registered with SEBI. The sponsor is required to contribute at least 40 per cent of the

minimum net worth (Rs 10 crore) of the asset management company. The sponsor

must have a sound track record and general reputation of fairness and integrity in all his

business transactions.

As per SEBI Regulation, 1996, a mutual fund is to be formed by the sponsor

and registered with SEBI. A mutual fund shall be constituted in the form of a trust and

the instrument of trust shall be in the form of a deed, duly registered under the

provisions of the Indian Registration Act, 1908, executed by the sponsor in favour of

trustees named in such an instrument.


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The board of trustees manages the mutual fund and the sponsor executes the

trust deeds in favour of the trustees. The mutual fund raises money through sale of

units under one or more schemes for investing in securities in accordance with SEBI

guidelines. It is the job of the mutual fund trustees to see that the schemes floated and

managed by the AMC appointed by the trustees, are in accordance with the trust deeds

and SEBI guidelines. It is also the responsibilities of the trustees to control the capital

property of mutual funds schemes.

The trustees have the right to obtain relevant information from the AMC, as

well as a quarterly report on its activities. They can also dismiss the AMC under

specific condition as per SEBI regulations.

At least half the trustees should be independent persons. The AMC or its

employees cannot act as a trustee. No person who is appointed as a trustee of a mutual

fund can be appointed as a trustee of any other mutual fund unless he is an independent

trustee and prior permission is obtained from the mutual fund in which he is a trustee.

The trustees are required to submit half-yearly reports to SEBI on the activities of the

mutual fund. The trustees appoint a custodian and supervise their activities. The

trustees can be removed only with prior approval of SEBI.

As per SEBI guidelines, an asset management company is appointed by the

trustees to float the schemes for the mutual fund and manage the funds raised by selling

units under a scheme. The AMC must act as per SEBI guidelines, trust deeds and

management agreement between trustee & the AMC.


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List of AMCs

Benchmark Mutual FundBirla, Sun Life Mutual FundBOB Mutual Fund,BOI

Mutual Fund, Canbank Mutual Fund,Chola Mutual Fund, Deutsche Mutual Fund, DSP

Merrill Lynch Mutual Fund, Dundee Mutual Fund, Escorts Mutual Fund, First India

Mutual Fund, Fund, SMC mutual fund,HDFC Mutual Fund, HSBC Mutual Fund,

IL&FS Mutual Fund, Indian Bank Mutual Fund, ING Savings Trust Mutual Fund, JF

Mutual Fund, Alliance Capital, Mutual Fund,

JM Mutual Fund, Kotak Mahindra Mutual Fund, LIC Mutual Fund, Morgan

Stanley Mutual Fund, Pioneer ITI Mutual Fund, PNB Mutual Fund, Principal Mutual

Fund, Prudential ICICI Mutual Fund, Reliance Capital Mutual Fund, SBI Mutual Fund,

Shriram Mutual Fund, Standard Chartered Mutual Fund, Sun F&C Mutual Fund,

Sundaram Mutual Fund, Tata Mutual Fund, Taurus Mutual Fund, Templeton Mutual

Fund, Unit Trust of India, UTI Mutual Fund, Zurich India Mutual Fund, Alliance

Capital Mutual Fund.
http://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050653&fundname=Benchmark+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050069&fundname=Birla+Sun+Life+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050019&fundname=BOB+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050002&fundname=BOI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050002&fundname=BOI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050003&fundname=Canbank+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050046&fundname=Chola+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14051231&fundname=Deutsche+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050045&fundname=DSP+Merrill+Lynch+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050045&fundname=DSP+Merrill+Lynch+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050041&fundname=Dundee+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050047&fundname=Escorts+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050070&fundname=First+India+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050070&fundname=First+India+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050009.04&fundname=HDFC+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14051203&fundname=HSBC+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050048&fundname=IL%26FS+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050004&fundname=Indian+Bank+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050064&fundname=ING+Savings+Trust+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050030&fundname=JF+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050030&fundname=JF+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050022&fundname=Alliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050016&fundname=JM+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050604&fundname=Kotak+Mahindra+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050007&fundname=LIC+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050599&fundname=Morgan+Stanley+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050599&fundname=Morgan+Stanley+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050066&fundname=Pioneer+ITI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050008&fundname=PNB+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050037&fundname=Principal+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050037&fundname=Principal+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050059&fundname=Prudential+ICICI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050024&fundname=Reliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050005&fundname=SBI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050655&fundname=Shriram+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050058&fundname=Standard+Chartered+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050043&fundname=Sun+F%26C+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050042&fundname=Sundaram+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050038&fundname=Tata+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050012&fundname=Taurus+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050039&fundname=Templeton+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050039&fundname=Templeton+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14040013&fundname=Unit+Trust+of+Indiahttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14051226&fundname=UTI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050040&fundname=Zurich+India+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050022&fundname=Alliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050022&fundname=Alliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050653&fundname=Benchmark+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050069&fundname=Birla+Sun+Life+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050019&fundname=BOB+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050002&fundname=BOI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050002&fundname=BOI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050003&fundname=Canbank+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050046&fundname=Chola+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14051231&fundname=Deutsche+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050045&fundname=DSP+Merrill+Lynch+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050045&fundname=DSP+Merrill+Lynch+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050041&fundname=Dundee+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050047&fundname=Escorts+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050070&fundname=First+India+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050070&fundname=First+India+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050009.04&fundname=HDFC+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14051203&fundname=HSBC+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050048&fundname=IL%26FS+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050004&fundname=Indian+Bank+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050064&fundname=ING+Savings+Trust+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050030&fundname=JF+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050030&fundname=JF+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050022&fundname=Alliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050016&fundname=JM+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050604&fundname=Kotak+Mahindra+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050007&fundname=LIC+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050599&fundname=Morgan+Stanley+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050599&fundname=Morgan+Stanley+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050066&fundname=Pioneer+ITI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050008&fundname=PNB+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050037&fundname=Principal+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050037&fundname=Principal+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050059&fundname=Prudential+ICICI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050024&fundname=Reliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050005&fundname=SBI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050655&fundname=Shriram+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050058&fundname=Standard+Chartered+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050043&fundname=Sun+F%26C+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050042&fundname=Sundaram+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050038&fundname=Tata+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050012&fundname=Taurus+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050039&fundname=Templeton+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050039&fundname=Templeton+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14040013&fundname=Unit+Trust+of+Indiahttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14051226&fundname=UTI+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050040&fundname=Zurich+India+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050022&fundname=Alliance+Capital+Mutual+Fundhttp://www.indiainfoline.com/mufu/divi/Dividend.asp?fundcode=14050022&fundname=Alliance+Capital+Mutual+Fund


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PLAYERS IN MUTUAL FUND INDUSTRY

NAME OF THE FUND NO. OF SCHEMES ASSET UNDER

MANAGEMENT

(Rs. CRORE)

ALLIANCE MUTUAL FUND 36 3309.03

BENCH MARK MUTUAL FUND 1 6.1

BIRLA MUTUAL FUND 35 3436.79

BOB MUTUAL FUND 8 31

CAN BANK MUTUAL FUND 14 692.04

CHOLA MUTUAL FUND 25 812.67

SMC MUTUAL FUND 20 3154.67

DUNDEE MUTUAL FUND 19 20.72

ESCORTS MUTUAL FUND 13 83.91

FIRST INDIA MUTUAL FUND 5 0.7

FRANKLIN TEMPELTION MUTUAL

FUND

25 3919.52

GIC MUTUAL FUND 13 333.29HDFC MUTUAL FUND 22 4707.32

IDBI-PRINCIPAL MUTUAL FUND 33 1346.61

IL & FS MUTUAL FUND 18 537.72

ING MUTUAL FUND 15 396.31

JF MUTUAL FUND 3 201.8

JM MUTUAL FUND 21 1199.2

KOTAK MUTUAL FUND 30 1907.35

MORGAN STANLEY MUTUAL FUND 1 793.87

PIONEER ITI MUTUAL FUND 62 3517.77

PNB MUTUAL FUND 8 149.76

PRU ICICI MUTUAL FUND 52 7006.72

RELIANCE CAPITAL MUTUAL FUND 15 2913.25

SBI MUTUAL FUND 42 3215.40

STANDARD CHARTERED MUTUAL

FUND

30 3294.63

SUN F& C MUTUAL FUND 26 413.11

SUNDARAM MUTUAL FUND 11 702.25

TATA MUTUAL FUND 20 893TAURUS MUTUAL FUND 11 59.76


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UTI MUTUAL FUND 103 509.83

ZURICH INDIA MUTUAL FUND 39 255.11

LIC MUTUAL FUND 27 2340.3

NEED AND IMPORTANCE OF STUDY

A small investor is the one who is able to correctly plan & decide in which

profitable & safe instrument to invest. To lock up ones hard earned money in a savings

banks account is not enough to counter the monster of inflation. Using simple concepts

of diversification, power of compound interest, stable returns & limited exposure to

equity investment, one can maximize his returns on investments & multiply ones

savings.

Investment is a serious proposition one has to look into various factors before

deciding on the instruments in which to invest. To save is not enough. One must invest

wisely & get maximum returns. One must plan investment in such a way that his

investment objectives are satisfied. A sound investment is one which gives the investor

reasonable returns with a proper profitable management

This report gives the details about various investment objectives desired by an

investor, details about the concept & working of mutual fund. This report also covers


31/74

the different players in Mutual Funds and different avenues of investment & in detail

about SMC MUTUAL FUNDS.


32/74

SEBI GUIDELINES (BRIEFLY)

Schemes of a Mutual Fund:

The asset Management Company shall launch no scheme unless the

trustees approve such scheme and a copy of the offer document has been filed with the

Board.

Every mutual fund shall along with the offer document of each scheme

pay filing fees.

The offer document shall contain disclosures which are adequate in

order to enable the investors to make the investment decision including the disclosure

on maximum investments proposed to be made by the scheme in the listed securities of

the groups companies of the sponsor a close-ended scheme shall be fully redeemed at

the end of the maturity period. Unless a majority of the unit holders otherwise decide

for its rollover by passing a resolution.

The mutual fund and asset management company shall be liable to

refund the application money to the applicants;-

1. If the mutual fund fails to receive the minimum subscription amount

referred to in clause (a) of sub-regulation (1);

2. If the moneys received from the applicants for units are in exceeded

subscription as referred to in clause (b) of sub-regulation (1)

The asset management company shall issue to the applicant whose

(uncompleted)


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Rules Regarding Advertisement:

The offer document and advertisement materials shall not be misleading

or contain any statement or opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:

The price at which the units may be subscribed or sold and the price at

which such units any time is repurchased by the mutual fund shall be made available to

the investors.

General Obligations:

Every asset management company for each scheme shall keep and

maintain proper books of accounts, records and documents, for each scheme so as to

explain its transactions and to disclose at any point of time the financial position of

each scheme and in give a true and fair view of the state of affairs of the fund and

intimate to the Board the place where such books of account, records and document are

maintained.

The financial year for all the schemes shall end as of March 31 of each

year. Every mutual or the asset Management Company shall prepare in respect of each

financial year an annual report and annual statement of accounts of the schemes and the

fund as specified in Eleventh schedule.

Every mutual fund shall have the annual statement of accounts guided by

an auditor who is not any way associated with the auditor of the asset

management company.


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Proactive For Action in Case Of Default:

On and from the date of the suspension of the certificate or the approval

as the case may be the mutual fund, trustees or asset management company, shall cease

to carry on any activity as mutual fund, trustees or asset management company, during

the period of suspension, and shall be subject to the directions of the Board with regard

to any records, documents, or securities that may be in its custody of control, telling to

its activities as mutual fund, trust asset management company.

Restrictions on Investments:

A mutual fund scheme shall not invest more than 15% of its NAV In

debt instruments issued by a single issuer, which are rated not below investment grade

by a credit rating agency authorized to of the scheme with the prior approval of the

Board of Trustees and the Board of asset management company y.

A mutual fund scheme shall not invest more than 10% of its NAV in

unrated debt instruments issued by a single issuer and the total investments in such not

exceed 25% of the NAV of the Board of asset Management Company.

No mutual fund under all its schemes should own more than ten per cent

of any companys. paid up capital carrying voting rights,

Such transfers are done at the prevailing market price for quoted

Instruments on spot basis; the securities so transferred shall be in conformity with the

investment objective of the scheme to which such transfer has been made.

A scheme may invest in another scheme under the same asset

management company or any other mutual fund without charging any fees, provided

that aggregate interschmes investment made by all schemes under the same

management of any other asset management company shall not exceed 5% of the net

asset value of the mutual fund.


35/74

The initial issue expansion in respect of any scheme may not exceed six

per cent of the funds raised under that scheme.

Every management company shall buy and sell securities on the basis of

deliveries and shall in all cases of purchases, take delivery of relative securities and in

all cases of sales, deliver the securities and shall in no case put itself in a position

whereby it

Has to make short sale or carry forward transaction or engage in bad finance.

Every management company shall, get the securities purchased or

transferred in the name of the mutual fund on account of the concerned scheme,

wherever investments are intended to be of long-term nature.

Pending deployment of funds of a scheme in securities in terms of

investment objective is of the scheme a mutual fund can invest the funds, of the scheme

in short term deposits of scheduled commercial banks.

No mutual fund scheme shall make any investment in;

I. Any unattested security of an associate or group company of the sponsor or

II. Any security issued by way of private placement by an associate or group

company of the sponsor; or

The listed securities of group companies of the sponsor which is in

Excess of 30% of the net assets [of all the schemes of a mutual fund]

No mutual fund scheme shall invest more than 10 per cent of its NAV in

the equity shares or equity related instruments of any company. Provided that, the limit

of 10 per cent shall not be applicable for investments in index fund or sector industry

specific scheme.


36/74

INVESTORS RIGHTS AND OBLIGATIONS

Investors Rights:

The offer document of a scheme lays down the investors rights. Investors are

the owners of the schemes assets, and it is therefore imperative that they are aware of

their rights with respect to the schemes assets, its management, recourse to the

trustees, the AMC and other constituents. The important rights of the unit-holders are

outlined below:

Unit-holders have a proportionate right in beneficial ownership of the

schemes assets otherwise held in trust for them by the Trustees of the fund. They also

have the proportionate right to any dividend or income declared under the scheme.

Unit-holders have the right to obtain from the trustees any information

that may have an adverse bearing on their investments.

Unit-holders are entitled to receive dividend warrants within 42 days of

the date of dividend declaration.

The appointment of an AMC of a fund can be terminated by 75% of the

unit-holders of the scheme present and voting at a special meeting that can be called for

the purpose with the prior approval of SEBI.

Unit-holders have the right to inspect major documents of the fund i.e.

material contracts (the trust deed, the investment management agreement, the custodian

services agreement and the registrar and transfer agency agreement), memorandum and

articles of association of the AMC, recent audited financial statements, the texts of

SEBI (MF) Regulations, Indian Trusts Act and the offer document of the scheme.


37/74

Investors have the right to approve any changes in the fundamental

attributes of a closed-end scheme (type of scheme, investment objective and terms of

issue), provided the consent of 75% of unit-holders has been obtained. In case of open-

end schemes they have the right to be adequately informed of such changes, so they can

exercise the option redeeming their holdings in the fund.

Each unit-holder has the right to receive a copy of the annual financial

statements, and periodic statements regarding his transactions (purchase, redemption,

and transfer), distributions and reinvestments.

Legal Limitations to Investors Rights

Investors need to note that while they enjoy several rights as outlined above,

they are also subject to certain limitations in their capacity as unit-holders. Unit-holders

are not distinct from the trust and therefore cannot sue the trust i.e. they jdo not have

legal recourse to the trust as, under Indian law, the Trust is not a district or separate

legal entity. However, an investor can initiate legal proceedings against the trustees

who are the protectors of the investors interests, if they feel aggrieved by any action of

the trustees that is seen not to be in their interest.

Also, the fundamental concept of a mutual fund is that the investors invest as

their own risk and cannot force the AMC to assure a specified level of return. In other

countries, mutual funds, do not offer assured return schemes, as any profits or losses

on fund investments in any case belong to the investors. In India, in the initial stages of

development of the fund industry, some of the fund sponsors have, however, offered

such assured returns to investors. But, the investors need to understand that except in

certain circumstances thesponsors of a mutual fund do not have any legal obligation to

meet the shortfall in case the assured return is not achieved.


38/74

Since assured return schemes do exist in India, an exception has been made by

SEBI in case of schemes where such assurance is provided in the offer document, with

a guarantee from the sponsor to meet any shortfall. Only if the offer document has

specifically provided such guarantee by a named sponsor, the investors will have the

right to sue the sponsors to make good any shortfall in promised returns.

Aprospective investordoes not enjoy any standing or rights with respect to the

fund, the AMC or any other constituent. It is only after he has invested in a scheme that

he becomes entitled to the rights discussed earlier. The courts have also upheld this

view in relevant cases in India. In case a unit-holder is aggrieved by any actions of the

Fund or AMC, the appropriate form for him to approach is SEBI as mentioned below.

Investors Obligations

It is the investors duty to carefully study the offer document before investing in

units of a scheme. He must appreciate the fundamental attributes of the scheme, the risk

factors, his rights and the funds and the sponsors track record. Failure to effectively

study the offer document does not entitle him later to have recourse to the fund, the

trustees or the AMC.

The investor must also monitor his investment in a scheme by carefully

studying the schemes financial statements, its portfolio composition and research

reports published by mutual fund tracking agencies. He can certainly exercise in a

reasonable way his right to ask the trustees for information that he requires. But, the

monitoring is entirely the investors own responsibility.


39/74

Accounting and Valuation:

The Importance of Accounting Knowledge

The balance sheet of a mutual fund is different from the normal balance sheet of

a bank or a company. All of the fund's assets belong to the investors and are held in

fiduciary capacity for them. Mutual fund employees and mutual fund agents need to be

aware of the special requirements concerning accounting for the fund's assets, liabilities

and transactions with investors and other outside constituents such as banks, securities

custodians and registrars. This knowledge will help them better understand their

responsibilities and their place in the organization, by getting an overview of the

functioning of the fund, and to explain the performance of mutual funds to investors.

Mutual funds in India are required to follow the accounting policies laid down

in SEBI (Mutual Fund) Regulations, 1996 and the amendments in 1998. This section of

the workbook summarizes the important Regulations, and periodical budgets.

Net Asset Value (NAV)

A mutual fund is a common investment vehicle where the assets of the fund

belong directly to the investors. The fund does not account for investors' subscriptions

as liabilities or deposits but as Unit Capital. On the other hand, the investments made

on behalf of the investors are reflected on the assets side and are the main constituent of

the balance sheet. There are, however, liabilities of a strictly short-term nature that may

be part of the balance sheet. The fund's Net Assets are therefore defined as the assets

minus the liabilities. As there are many investors in a fund, it is common practice for

mutual funds to compute the share of each investor on the basis of the value of Net

Assets per Share/Unit, commonly known as the Net Asset Value (NAV).


40/74

The following are the regulatory requirements and accounting definitions lay

down by SEBI.

NAV = Net Assets of the scheme / Number of Units Outstanding, i.e.

Market value of investments + Receivables + Other Accured Income +

Other Assets

=Accured Expenses - Other Payables - Other Liabilities

No. of Units Outstanding as at the NAV date

A fund's NAV is affected by four sets of factors:

-- Purchase and sale of investment securities

-- Valuation of all investment securities held

-- Other assets and liabilities, and

-- Units sold or redeemed


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RISK INVOLVED IN MUTUAL FUNDS INDUSTRY

Mutual funds are not free from risk. It is so because basically the mutual funds

also invest their funds in stock markets on shares, which are volatile in nature and are

not risk free, the following risk are inherent in their dealing.

INHERENT RISK FACTORS:

1) Market Risks:

In general there are certain risks associated with the every kind of investment on

shares. They are called market risks. These market risks can be reduced, but cannot be

completely eliminated even by a good investment. The prices of shares are subjected to

wide price fluctuations depending upon market conditions over which nobody has a

control. Moreover, every economy has to pas through a cycle-Boom, Recession,

Slump and Recovery. The phase of the business cycle affects the market conditions to

a large extent.

2) Scheme Risks

There are certain risks inherent in the scheme itself. It all depends upon the

nature of the scheme. For instance, in a pure growth scheme, risks are greater.

3) Investment Risks

Whether the mutual fund makes money in shares or loses depends upon the

investment expertise of the Asset Management Company. If the investment advice

goes wrong, the fund has to suffer a lot. The investment expertises of various funds

are different and it is reflected on the returns, which they offer to investors.


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4) Business Risks

The corpus of a mutual fund might have been invested in a companys shares.

If the business of that company suffers any set back, it cannot declare any dividend. It

may even go to the extent of winding up its business. Though the mutual fund can

withstand such a risk, its income paying capacity is affected.

5) Political Risks

Successive Governments bring with them fancy new economic ideologies and

policies. It is often said that many economic decisions are politically motivated.

Changes in Government bring in the risk of uncertainty which every player in the

financial service industry has to face. So mutual funds are no exception to it.


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.

CHAPTER - III

COMPANY PROFILE


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COMPANY PROFILE

Indianbulls is emerging as one of the top most wealth management companies in

India with a daily turnover of over 200 crores and 116 branches spread all over the

country. The Sharyans Group has an impressive portfolio of businesses under its fold

which mainly fall under the real estate and financial services categories. The prominent

subsidiaries of this Group are Prebone Yamane (Countrys largest debt broking

company), Intime Spectrum (Indias largest Registry & Transfer Agents), and Collin

Stewarts India Private Limited (Portfolio Management Services & Research along with

institutional broking operations for Collin Stewarts which is the largest wealth

management company in the UK). Under the guidance of the Sharyans and Inga

Group, Indianbulls will soon touch the pinnacles of success in the financial services

industry by being a dominant force in the broking as well as the distribution arena.

With an unblemished and reputed track record, Indianbulls is all set become an

imposing wealth management firm in the country by giving the best to its clients as

well as stakeholders.

Indianbulls has been set up to engage in

Stock Broking

Institutional Broking

Derivatives

Depository Services

Distribution of Investment Products

Distribution of Insurance

Commodities Broking


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OFFERINGS


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Research competency:

Our primary strengths lie in research and operational efficiency. The day-to-day

operations are managed by some of the best professionals in the industry having in-

depth understanding of underlying market trends and sound business practices The

Research Team comprises of competent professionals with vast experience, insightful

analytical abilities and high standards of integrity.

Some of research reports are as below:

Economic Outlook and Updates

Sector & Company Reports

Technical Recommendations

Daily Market Report

Daily Technical Outlook

Reports on New Fund Offerings

Weekly analysis of mutual funds Fund Focus

Weekly debt report: Debt Dose

Monthly Newsletter - ITI Investment FlashMonthly 4 Pager - ITI Wealth Wise

ITIFSL also offer daily technical calls through SMS to our clients free of charge

ADVANTAGES TO INVESTERS:

Why you need a financial planner?

The financial planner is someone who can help you invest across investment

avenues based on your risk profile and investment objectives. Post-investment, he


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monitors your investments and ensures that you are on course to achieve your

investment objectives. If necessary, he suggests changes to your financial plan so that

you are able to achieve your investment objectives as planned.

Given the critical inputs provided by the financial planner in helping you

achieve your financial goals, it is important that you select the right financial planner.

Here are the reasons why ITI is the right planner for you

Certification/Membership

More than anything else, this is a pre-requisite from the compliance point of

view. Your financial planner should be certified and registered as a broker or mutual

fund agent with NSE, BSE, AMFI etc. ITI FSL has Trading and Clearing Memberships

with major Stock Exchanges in India to offer broking services across market segments

at all of the National-level Exchanges. ITI FSL is a Depository Participant with CDSL.

We also have memberships with commodity exchanges. We have AMFI certified

professionals to advice you on mutual funds.

Competence

Gone are the days when financial planning simply required delivering

application forms. The traditional "one-size fits all" approach is pass. With the

increasing list of investment avenues on offer, selecting the one that suits you the best


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is becoming a challenge. To that end, competence and skill set are the basic criteria that

investors should look for in an investment planner.

With ITI fine staff of professionals, you can be sure that you will get the best

advice and service to achieve your financial goals. Furthermore, the recommendations

offered by ITI are backed by solid research.

Value-add services

In addition to financial planning, ITI provides related, value-add services that

can assist you in the investment process. On-line tools and calculators are some of our

more popular value-add services. These tools can help you keep track of your

investments. These value-add services form an integral part of our offering.

One-stop shop

Every individual has different needs and the same undergo a change over a

period of time. The financial planner should be capable enough to understand these

needs and offer suitable products to fulfill them. For this purpose, ITI provides you

with the entire range of investment products from stocks, mutual funds, bonds to fixed

deposits. In other words, we offer a "one-stop" solution for all your investment needs.

Accessibility

One of the common complaints from investors is that their financial planner is

unavailable/inaccessible and therefore unable to provide adequate/prompt service. This


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is particularly common in a one-man setup where the financial planner's services begin

and end with him, with little or no backup.

If the financial planner is preoccupied with some important clients or if he re-

locates, it leaves you in a soup because your financial plan is in limbo. It is best to go

with a financial planning initiative that is run by teams (as opposed to one-man setups)

to ensure continuity of your financial plan. ITI has a team of professionals who are ever

ready to serve you at any point of time. We are spread across the country so that you

can have access to us always

KEY LEARNINGS IN THE ORGANIZATION

EQUITY

FUTURES

OPTIONS

COMMODITIES

IPO

MUTUAL FUNDS

SIP

TAX SAVING SCHEMES IN INDIA

ONLINE AND OFFLINE TRADING

PORTFOLIO MANAGEMENT


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CHAPTER - IV

ANALYSIS


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1. Age:

Below 20 20 29 30 39

40 49 50 59 Above 60

AGE WISE CLASSIFICATION OF RESPONDENTS

AGE NO. OF RESPONDENTS PERCENTAGEBELOW 20 NIL NIL

20-29 69 34.5

30-39 13 6.5

40-49 34 17

50-59 35 17.5

ABOVE 60 49 24.5

TOTAL 200 100

AGE GROUP OF RESPONDENTS

0

10

20

30

40

50

60

70

80

BELO

W20

20-2

930

-39

40-49

50-59

ABOVE

60

AGE

NO.OFRESPON

DENTS

/

PERCENTA

GE

NO. OF

RESPONDENTS

PERCENTAGE


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Interpretation:

According to the survey the respondents were of different age group. The

investors of age below 20 are in no number. The investors of age 20-29 are 69 in

number with 34.5%. The investors of age 30-39 are 13 with 6.5%, 40-49 there are 34

investors with 17% and in between 50-59 there are 35 investors with 17.5% and above

60 there are 49 investors with 24.5%.

2. Sex:

Male Female

GENDER OF THE RESPONDENTS

GENDER NO. OF RESPONDENTS PERCENTAGE

MALE 158 79

FEMALE 42 21

TOTAL 200 100


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GENDER OF THE RESPONDENTS

0

20

40

60

80

100

120

140

160

180

MALE FEMALE

GENDER

NO.OF

RESPONDENTS

PERCENTAGE

NO. OF

RESPONDENTS

PERCENTAGE

Interpretation:

In the survey numbers of male respondents are more in number that is about 79% &

the next position has been occupied by female respondents they are about 21% of the

sample so, mainly men prefer to go for investments.

3. Occupation:

Household Business Service

Professional Retired Student

OCCUPATION OF THE RESPONDENTS

OCCUPATION NO. OF RESPONDENTS PERCENTAGE

HOUSE HOLD 9 4.5

BUSINESS 46 23

SERVICE 84 42

PROFESSIONAL 30 15

RETIRED 15 7.5STUDENT 16 8


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TOTAL 200 100

OCCUPATION OF RESPONDENTS

0

10

20

30

40

50

60

70

80

90

HOUS

EHO

LD

BUSI

NESS

SER

VICE

PROF

FESSI

ONAL

RET

IRED

ST

UDEN

T

OCCUPATON

NOO

F

RESPONDENCE

PERCENTAGE

NO. OF

RESPONDENTS

PERCENTAGE

occupy 8 According to the survey the respondents were of different occupations.

Most respondents are from service sector is about 42% of the sample. A respondent

from the business are occupying 23%, and then comes professional with 15%, students

%, retired people occupy 7.5%, with house hold occupying 4.5%.


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4. Annual Income

< One Lakh 1 2 Lakh

2 3 Lakh Above 3 Lakhs

TABLE-4:

ANNUAL INCOME OF THE RESPONDENT

ANNUAL NO. OF RESPONDENTS PERCENTAGE

< 1,00,000 53 26.5

1-2 LAKHS 84 42

2-3 LAKHS 48 24

ABOVE 3 LAKHS 15 7.5

TOTAL 200 100

ANNUAL INCOME OF THE RESPONDENT

0

10

20

30

4050

60

70

80

90


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Interpretation:

According to the survey, the respondents of the income group of less than 1 lack

are of 26.5%. They were about 42% of the respondents are of the income group

between 1-2 lack. 24% of the respondents were of the income group 2-3 lacks. 7.5%

respondents were of the income group more than 3 lacks.

5. Do you invest any part of your savings?

Yes No

DO THE RESPONDENTS INVEST THEIR MONEY

INVESTMENTS NO.OF RESPONDENTS PERCENTAGE

YES 200 100

NO NIL NIL

TOTAL 200 100


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RESPONDENTS INVESTING THEIR MONEY

0

50

100

150

200

250

YES NO

INVESTMENTS

NO.OF

RESPONDENTS

PERCENTAGE

NO. OF

RESPONDENTS

PERCENTAGE

Interpretation:

All the respondents considered in the sample, do invest their savings.

Out of the total sample the respondents going for investments are total in numbers with

all the two hundred respondents considered in sample are going for complete

investments with 100%.

6. What criteria you keep in your mind while selecting an investment opportunity

(rank them accordingly)?

Security Yield Maturity

Tax Benefits Liquidity

INVESTOR PREFERENCE FOR VARIOUS INVESTMENT OBJECTIVES

ATTRIBUTES I II III IV V WEIGHTED

AVERAGE

RANK

SECURITY 88 64 32 9 7 55 IYEILD 63 44 46 24 23 47 II


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MATURITY 19 24 45 85 27 35 IV

TAX BENEFIT 8 25 5 42 120 22 V

LIQUIDITY 22 43 72 40 23 40 III

MODEL CALCULATION:

= 88*5 + 64*4 + 32*3 + 9*2 + 7*1 / 1 + 2 + 3 + 4 + 5

= 440 + 256 + 96 +18 + 7 / 15

= 817/15

= 55.

6. Normally what investment opportunities you prefer to invest your savings?

Bank deposits Shares Bonds/Debentures

Mutual funds Insurance Real Estate

NORMAL INVESTMENT OPPURTUNITIES THAT USUALLY RESPONDENT

PREFER TO SAVINGS.

OPTIONS NO. OF RESPONDENTS PERCENTAGE

BANK DEPOSITS 68 33

SHARES 32 16

BONDS / DEBUNTRES 31 16

MUTUAL FUNDS 30 15

INSURANCE 26 13

REAL ESTATE 13 7

TOTAL 200 100


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7. Normally what investment opportunities you prefer to invest your savings?

Bank deposits Shares Bonds/Debentures

Mutual funds Insurance Real EstateIf Mutual Funds

Sample size200

MUTUAL FUND IS A GOOD INVESTMENT OPTION.

OPTIONS NO. OF RESPONDENTS PERCENTAGE

YES 159 79.5NO 41 20.5

TOTAL 200 100

MUTUAL FUND IS A GOOD INVESTMENT OPTION

0

20

40

60

80

100

120

140

160

180

YES NO

OPTIONS

NO.OF

RESPONDENTS

PERCENTAGE

NO. OF

RESPONDENTS

PERCENTAGE


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Many of those mutual funds are a good investment option & 20.5% is not a

good investment option. The individuals are of the view that mutual fund is a good

investment option. Of the total sample survey around 79.5% of the respondents feel

8. In which Mutual funds did you invest?

Indiainfoline Others If Indiainfoline

TABLE-12:

RESPONDENTS PREFFERING INDIAN INFOLINE AS A DISTRIBUTOR OF

MUTUAL FUNDS

OPTION NO. OF RESPONDENTS PERCENTAGE

INDIAN INFOLINE 138 69

OTHERS 62 31

TOTAL 200 100


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Interpretation:

According to the survey, 69% of the respondents are aware of INDIAN

INFOLINE as a distributor of mutual funds & these 69% of the investors would like to

invest in INDIAN INFOLINE mutual fund option. The rest 31% of the respondents

would like to prefer others.


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9. What type of funds you prefer?

Debt Funds Equity Funds

Hybrid Funds

If Debt Funds

TYPE OF SCHEME PREFFERRED BY RESPONDENT IN DEBT FUNDS


LIQUID FUND 2 5

FLOATE RATE 4 10

GILT FUND 5 12

DYNAMIC BOND FUND 15 35

INCOME PLUS 7 17

BOND INDEX FUND 9 21

TOTAL 200 100

TYPE OF SCHEME PREFFERRED BY

RESPONDENT IN DEBT FUNDS

5% 10%

12%

35%

17%

21% LIQUID FUNDFLOATE RATE

GILT FUND

DYNAMIC BOND FUND

INCOME PLUS

BOND INDEX FUND


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Interpretation:

on the survey, it is Based found that the respondents prefer dynamic bond fund

which occupies 35%, then follows is the bond Index Fund with 21%, thirdly Income

Plus is seen with more percentage with 17, followed by Gilt Fund, Floating Rate Fund,

& Liquid Fund with 12, 10, 5.

10.Which type of schemes you prefer?

Liquid Fund Floating Rate Gilt Fund

Dynamic Bond Fund Income Plus Bond Index Fun

If Equity Funds

TYPE OF SCHEME PREFFERED IN EQUITY FUNDS


ADVANTAGE FUND 26 33

MID CAP 6 8

EQUITY PLAN 4 5

MNC FUND 5 6INDEX FUND 3 4


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DIVIDEND YEILD PLUS 32 41

INDIA OPPURTUNITIES FUND 2 3

TOTAL 78 100

TYPE OF SCHEME PREFFERED IN EQUITY

FUNDS

33%

8%5%6%4%

41%

3%

ADVANTAGE FUND

MID CAP

EQUITY PLAN

MNC FUND

INDEX FUND

DIVIDEND YEILD PLUS

INDIA OPPURTUNITIES

FUND

Interpretation:

Based on the survey, that out of 78 sample size, most of the investors choose

dividend yield plus which occupies 41%, followed by Advantage Fund with 33%, then

MNC fund with 6%, mid cap 8%, Equity plan 5%, India opportunities fund 3%.


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CHAPTER - V

FINDINGS & CONCLUSIONS

65


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Findings& Conclusions

4 1. The majority of respondents were of the age group below 29 & above 60.

5 2. Male occupy most of the sample size

6 3. Major part of the respondents belong to service sector.

7 4. Annual income of the respondents between 1-2 lacks prefers more of investments.

8 5. Respondents irrespective of major investment or small are investing in some or

other sources of investments.

9 6. Investors preference when going for an investment in primarily for security.

10 7. Respondents prefer Bank Deposits as most secured for investment, & then to

shares, Bonds / Debentures & then to Mutual Funds.

11 8. The role of Financial Advisors play a key role in making investors educated about

mutual fund. Around 33% of the respondents choose Financial advisors for guidance.

12 9. From the Survey conducted it is clear that 80% of the respondents feel that Mutual

fund is a good investment option.

13 10. 69% of the respondents are aware of Kotak Mahindra as a distributor for Mutual

Funds.

14 11. Out of total respondents, major of them prefer to mutual fund because of

investment strategy.

15 12. From the survey it is clear that most of the respondents feel Kotak Mahindra as a

better option for mutual fund.

16 13. 78% of the Respondents the recommending Kotak Mahindra as a better

investment opportunity.

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CHAPTER - VI

SUGGESTIONS

67


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Suggestions

Kotak Mahindra has to review their portfolio frequently to maximize the

wealth of the investors. (Data support)

Kotak Mahindra Sun Life has to invest in firms, which are having good offers

& high growth opportunities such as shares listed in GroupA.

The awareness of mutual fund & its various schemes should be increased

among the people by proper advertising, promotion and conducting investors

meets..

The fund manager has to be aggressive in portfolio decisions especially MIP

MIP II & I fund.The Ground rules of Mutual Fund Investing

Moses gave to his followers 10 commandments that were to be followed till

eternity. The world of investments too has several ground rules meant for investors who

are novices in their own right and wish to enter the myriad world of investments. These

come in handy for there is every possibility of losing what one has if due care is not

taken.

1) Assess yourself: Self-assessment of ones needs; expectations and risk profile is of

prime importance failing which, one will make more mistakes in putting money in

right places than otherwise. One should identify the degree of risk bearing capacity

one has and also clearly state the expectations from the investments. Irrational

expectations will only bring pain.

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2) Try to understand where the money is going: It is important to identify the nature

of investment and to know if one is compatible with the investment. One can lose

substantially if one picks the wrong kind of mutual fund. In order to avoid any

confusion it is better to go through the literature such as offer document and fact

sheets that mutual fund companies provide on their funds.

3) Don't rush in picking funds, think first: one first has to decide what he wants the

money for and it is this investment goal that should be the guiding light for all

investments done. It is thus important to know the risks associated with the fund and

align it with the quantum of risk one is willing to take. One should take a look at the

portfolio of the funds for the purpose. Excessive exposure to any specific sector

should be avoided, as it will only add to the risk of the entire portfolio. Mutual funds

invest with a certain ideology such as the "Value Principle" or "Growth Philosophy".

Both have their share of critics but both philosophies work for investors of different

kinds. Identifying the proposed investment philosophy of the fund will give an insight

into the kind of risks that it shall be taking in future.

4) Invest. Dont speculate: A common investor is limited in the degree of risk that he is

willing to take. It is thus of key importance that there is thought given to the process

of investment and to the time horizon of the intended investment. One should abstain

from speculating which in other words would mean getting out of one fund and

investing in another with the intention of making quick money. One would do well to

remember that nobody can perfectly time the market so staying invested is the best

option unless there are compelling reasons to exit.

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5) Dont put all the eggs in one basket: This old age adage is of utmost importance.

No matter what the risk profile of a person is, it is always advisable to diversify the

risks associated. So putting ones money in different asset classes is generally the best

option as it averages the risks in each category. Thus, even investors of equity should

be judicious and invest some portion of the investment in debt. Diversification even

in any particular asset class (such as equity, debt) is good. Not all fund managers have

the same acumen of fund management and with identification of the best man being a

tough task, it is good to place money in the hands of several fund managers. This

might reduce the maximum return possible, but will also reduce the risks.

6) Be regular: Investing should be a habit and not an exercise undertaken at ones

wishes, if one has to really benefit from them. As we said earlier, since it is extremely

difficult to know when to enter or exit the market, it is important to beat the market

by being systematic. The basic philosophy of Rupee cost averaging would suggest

that if one invests regularly through the ups and downs of the market, he would stand

a better chance of generating more returns than the market for the entire duration. The

SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. All

that one needs to do is to give post

mutual funds scope bulls

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