47805603 Project on Mutual Fund

7/28/2019 47805603 Project on Mutual Fund

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A PROJECT REPORT

ON

MUTUAL FUNDS IS THE BETTER

INVESTMENTS PLAN

Submitted in partial fulfillment for

MASTER OF BUSINESS ADMIMISTRATION

Programme of

INSTITUTE OF MANAGEMENT TECHNOLOGY

GHAZIABAD

Batch2005-08

Submitted by :- Under Guidance :-

AKHILESH MISHRA CA SHARAD CHAUHAN

MBA( Three Year Programme) Manager Accounts

Batch (2005-2008) Uttam Sugar MillsLimited

Enrolment No-52102689 Corprote office Noida

Department of Business Management

INSTITUTE OF MANAGEMENT TECHNOLOGY


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GHAZIABAD

ACKNOWLEDGEMENT

With regard to my Project with Mutual Fund I would like to thank each and every one

who offered help, guideline and support whenever required.

First and foremost I would like to express gratitude to Manager SBI

kanwali Road Dehradoon and other staffs for their support and guidance in the Project

work.. I am extremely grateful to my guide,CA Sharad Chauhan for their valuableguidance and timely suggestions. I would like to thank all faculty members of Uttam

Sugar Mills Limited for the valuable guidance& support.

I would also like to extend my thanks to my members and friends for their

support specially .MCA Anuj Panday officer I.T.Uttam Sugar Mills Limited

Sharanpur & Mr. Rajeev Goyal consultant, Sales tax, income tax .And lastly, I wouldlike to express my gratefulness to the parents for seeing me through it all.

AKHILESH MISHRA


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CERTIFICATE

This is to certify that Mr. Akhilesh Mishra a student of IMT-CDL Ghazibad has completed

project work on MUTUAL FUNDS IS THE BETTER INVESTMENTS PLAN under myguidance and supervision.

I certify that this is an original work and has not been copied from any source.

Signature of Guide

Name of Project GuideCA Sharad Chauhan

Date-


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DECLERATION

I hereby declare that this Project Report entitled THE MUTUAL FUND IS BETTER INVESTMENT PLAN in SBI Mutual Fund submitted in the partial fulfillment of therequirement of Master of Business Administration (MBA) of INSTITUTE OF

MANAGEMET TECHNOLOGY, GHAZIABAD is based on primary & secondarydata found by me in various departments, books, magazines and websites & Collected by me in under guidance of C.A. Sharad Chauhan.

DATE: AKHILESH MISHRA

MBA (Three Years)

Enrollment No.52102689


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EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring ones financial well

being. Mutual Funds have not only contributed to the India growth story but have also

helped families tap into the success of Indian Industry. As information and awareness

is rising more and more people are enjoying the benefits of investing in mutual funds.

The main reason the number of retail mutual fund investors remains small is that nine

in ten people with incomes in India do not know that mutual funds exist. But once

people are aware of mutual fund investment opportunities, the number who decide to

invest in mutual funds increases to as many as one in five people. The trick for

converting a person with no knowledge of mutual funds to a new Mutual Fund

customer is to understand which of the potential investors are more likely to buymutual funds and to use the right arguments in the sales process that customers will

accept as important and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me

enough scope to implement my analytical ability. The analysis and advice presented in

this Project Report is based on market research on the saving and investment practicesof the investors and preferences of the investors for investment in Mutual Funds. This

Report will help to know about the investors Preferences in Mutual Fund means Are

they prefer any particular Asset Management Company (AMC), Which type of

Product they prefer, Which Option (Growth or Dividend) they prefer or Which


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Investment Strategy they follow (Systematic Investment Plan or One time Plan). This

Project as a whole can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the Company

Profile, Objectives of the study, Research Methodology. One can have a brief

knowledge about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected through

survey done on 200 people. For the collection of Primary data I made a questionnaireand surveyed of 200 people. I also taken interview of many People those who were

coming at the SBI Branch where I done my Project. I visited other AMCs in

Dehradoon to get some knowledge related to my topic. I studied about the products

and strategies of other AMCs in Dehradoon to know why people prefer to invest in

those AMCs. This Project covers the topic THE MUTUAL FUND IS BETTER

INVESTMENT PLAN. The data collected has been well organized and presented. I

hope the research findings and conclusion will be of use.


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CONTENTS

AcknowledgementDeclaration

Executive Summary

Chapter - 1 INTRODUCTION

Chapter - 2 COMPANY PROFILEChapter - 3 OBJECTIVES AND SCOPE

Chapter - 4 RESEARCH METHODOLOGY

Chapter - 5 DATA ANALYSIS AND INTERPRETATION

Chapter - 6 FINDINGS AND CONCLUSIONS

Chapter - 7 SUGGESTIONS & RECOMMENDATIONSBIBLIOGRAPHY


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MUTUAL FUNDS

ALL ABOUT MUTUAL FUNDS

WHAT IS MUTUAL FUND

BY STRUCTURE

BY NATURE

EQUITY FUND

DEBT FUNDS

BY INVESTMENT OBJECTIVE

OTHER SCHEMES

PROS & CONS OF INVESTING IN MUTUAL FUNDS

ADVANTAGES OF INVESTING MUTUAL FUNDS

DISADVANTAGES OF INVESTING MUTUAL FUNDS

MUTUAL FUNDS INDUSTRY IN INDIA

MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

CATEGORIES OF MUTUAL FUNDS

INVESTMENT STRATEGIES

WORKING OF A MUTUAL FUND


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GUIDELINES OF THE SEBI FOR MUTUAL FUND

COMPANIES DISTRIBUTION CHANNELS

DOES FUND PERFORMANCE AND RANKING PERSIST?

PORTFOLIO ANALYSIS TOOLS

RESEARCH REPORT

OBJECTIVE OF RESEARCH

SCOPE OF THE STUDY

DATA SOURCES

SAMPLING

DATA ANALYSIS

QUESTIONNAIRE


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Chapter - 1

Introduction


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INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS

ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a

common financial goal. This pool of money is invested in accordance with a stated

objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all

investors. 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 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. A

Mutual Fund is an investment tool that allows small investors access to a well-

diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as

needed. The funds Net Asset value (NAV) is determined each day.

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

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks


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may not move in the same direction in the same proportion at the same time. Mutual

fund issues units to the investors in accordance with quantum of money invested by

them. Investors of mutual funds are known as unit holders.

When an investor subscribes for the units of a mutual fund, he becomes part owner of

the assets of the fund in the same proportion as his contribution amount put up with

the corpus (the total amount of the fund). Mutual Fund investor is also known as a

mutual fund shareholder or a unit holder.

Any change in the value of the investments made into capital market instruments


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(such asshares , debentures etc) is reflected in the Net Asset Value (NAV) of the

scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of

its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's

assets by the total number of units issued to the investors.

ADVANTAGES OF MUTUAL FUND

Portfolio Diversification

Professional management

Reduction / Diversification of Risk

Liquidity

Flexibility & Convenience

Reduction in Transaction cost

Safety of regulated environment

Choice of schemes

Transparency

DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor

No tailor-made Portfolios

Managing a Portfolio Funds
http://www.appuonline.com/mf/knowledge/concept.htmlhttp://www.appuonline.com/mf/knowledge/concept.html


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Difficulty in selecting a Suitable Fund Scheme

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. Though the

growth was slow, but it accelerated from the year 1987 when non-UTI players entered

the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had

seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The

private sector entry to the fund family raised the Aum to Rs. 470 billion in March

1993 and till April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with themutual fund industry can be broadly put into four phases according to the

development of the sector. Each phase is briefly described as under.

First Phase 1964-87


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Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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.

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

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.


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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. As at the end of January 2003, there were 33

mutual funds with total assets of Rs. 1,21,805 crores.

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 UnitTrust 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 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. consolidationand growth. As at the end of September, 2004, there were 29 funds, which manage

assets of Rs.153108 crores under 421 schemes.


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CATEGORIES OF MUTUAL FUND:


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Mutual funds can be classified as follow :

Based on their structure:


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Open-ended funds: Investors can buy and sell the units from the fund, at any point of

time.

Close-ended funds: These funds raise money from investors only once. Therefore,

after the offer period, fresh investments can not be made into the fund. If the fund is

listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley

Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided

liquidity window on a periodic basis such as monthly or weekly. Redemption of units

can be made during specified intervals. Therefore, such funds have relatively low

liquidity.

Based on their investment objective:

Equity funds : These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses. However,short term fluctuations in the market, generally smoothens out in the long term,

thereby offering higher returns at relatively lower volatility. At the same time, such

funds can yield great capital appreciation as, historically, equities have outperformed

all asset classes in the long term. Hence, investment in equity funds should be

considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds - In this case a key stock market index, like BSE Sensex or Nifty is

tracked. Their portfolio mirrors the benchmark index both in terms of composition

and individual stock weightages.


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ii) Equity diversified funds- 100% of the capital is invested in equities spreading

across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they

invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through

some theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking

sector fund will invest in banking stocks.

vi) ELSS - Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund : Their investment portfolio includes both debt and equity. As a result, on

the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal

mutual funds vehicle for investors who prefer spreading their risk across various instruments.

Following are balanced funds classes:

i) Debt-oriented funds - Investment below 65% in equities.

ii) Equity-oriented funds - Invest at least 65% in equities, remaining in debt.

Debt fund : They invest only in debt instruments, and are a good option for investors

averse to idea of taking risk associated with equities. Therefore, they invest


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exclusively in fixed-income instruments like bonds, debentures, Government of India

securities; and money market instruments such as certificates of deposit (CD),

commercial paper (CP) and call money. Put your money into any of these debt funds

depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large

portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of andT-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt

instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-

pricing between cash market and derivatives market. Funds are allocated to equities,

derivatives and money markets. Higher proportion (around 75%) is put in money

markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government

securities.


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vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in

long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with

that of the fund.


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INVESTMENT STRATEGIES

1. Systematic Investment Plan: under this a fixed sum is invested each month on a

fixed date of a month. Payment is made through post dated cheques or direct debit

facilities. The investor gets fewer units when the NAV is high and more units when

the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and

give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the

same mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund

then he can withdraw a fixed amount each month.


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RISK V/S. RETURN:


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Chapter 2Company Profile

INTRODUCTION TO SBI MUTUAL FUND

SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the

country with an investor base of over 4.6 million and over 20 years of rich


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experience in fund management consistently delivering value to its investors.

SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of

India' one of India's largest banking enterprises, and Socit Gnrale Asset

Management (France), one of the world's leading fund management companies

that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28500 crores of assets and has a diverse

profile of investors actively parking their investments across 36 active schemes.

In 20 years of operation, the fund has launched 38 schemes and successfully

redeemed 15 of them, and in the process, has rewarded our investors with

consistent returns. Schemes of the Mutual Fund have time after time

outperformed benchmark indices, honored us with 15 awards of performance

and have emerged as the preferred investment for millions of investors. The

trust reposed on us by over 4.6 million investors is a genuine tribute to our expertise in fund management.

SBI Funds Management Pvt. Ltd. serves its vast family of investors through a

network of over 130 points of acceptance, 28 Investor Service Centres, 46

Investor Service Desks and 56 District Organizers.SBI Mutual is the first bank-

sponsored fund to launch an offshore fund Resurgent India Opportunities Fund.

Growth through innovation and stable investment policies is the SBI MF credo.

PRODUCTS OF SBI MUTUAL FUND

Equity schemes


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The investments of these schemes will predominantly be in the stock markets

and endeavor will be to provide investors the opportunity to benefit from the

higher returns which stock markets can provide. However they are also

exposed to the volatility and attendant risks of stock markets and hence should

be chosen only by such investors who have high risk taking capacities and are

willing to think long term. Equity Funds include diversified Equity Funds,

Sectoral Funds and Index Funds. Diversified Equity Funds invest in various

stocks across different sectors while sectoral funds which are specializedEquity Funds restrict their investments only to shares of a particular sector and

hence, are riskier than Diversified Equity Funds. Index Funds invest passively

only in the stocks of a particular index and the performance of such funds

move with the movements of the index.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum Midcap Fund

Magnum Multicap Fund

Magnum Multiplier plus 1993

Magnum Sectoral Funds Umbrella

MSFU- Emerging Business Fund

MSFU- IT Fund


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MSFU- Pharma Fund

MSFU- Contra Fund

MSFU- FMCG Fund

SBI Arbitrage Opportunities Fund

SBI Blue chip Fund

SBI Infrastructure Fund - Series I

SBI Magnum Taxgain Scheme 1993

SBI ONE India Fund

SBI TAX ADVANTAGE FUND - SERIES I

Debt schemes

Debt Funds invest only in debt instruments such as Corporate Bonds,

Government Securities and Money Market instruments either completely

avoiding any investments in the stock markets as in Income Funds or Gilt

Funds or having a small exposure to equities as in Monthly Income Plans or

Children's Plan. Hence they are safer than equity funds. At the same time theexpected returns from debt funds would be lower. Such investments are

advisable for the risk-averse investor and as a part of the investment portfolio

for other investors.

Magnum Childrens benefit Plan
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Magnum Gilt Fund

Magnum Income Fund

Magnum Insta Cash Fund

Magnum Income Fund- Floating Rate Plan

Magnum Income Plus Fund

Magnum Insta Cash Fund -Liquid Floater Plan

Magnum Monthly Income Plan

Magnum Monthly Income Plan- Floater

Magnum NRI Investment Fund

SBI Premier Liquid Fund

BALANCED SCHEMES

Magnum Balanced Fund invests in a mix of equity and debt investments.

Hence they are less risky than equity funds, but at the same time provide

commensurately lower returns. They provide a good investment opportunity to

investors who do not wish to be completely exposed to equity markets, but is

looking for higher returns than those provided by debt funds.

Magnum Balanced Fund
http://www.sbimf.com/Product_Details.asp?ProductId=18&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=23&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=29&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=21&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=43&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=25&catid=3http://www.sbimf.com/Product_Details.asp?ProductId=18&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=23&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=29&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=17&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=21&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=43&catid=2http://www.sbimf.com/Product_Details.asp?ProductId=25&catid=3


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COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Dehradoon are as

Follows:

i. ICICI Mutual Fund

ii. Reliance Mutual Fundiii. UTI Mutual Fund

iv. Birla Sun Life Mutual Fund

v. Kotak Mutual Fund

vi. HDFC Mutual Fund

vii. Sundaram Mutual Fund

viii. LIC Mutual Fund

ix. Principal

x. Franklin Templeton

AWARDS AND ACHIEVEMENTS


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SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award -

8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year

2005-2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year

Award 2007 and 5 Awards for our schemes.
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Chapter - 3

Objectives and scope


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OBJECTIVES OF THE STUDY

1. To find out the Preferences of the investors for Asset Management

Company.

2. To know the Preferences for the portfolios.

3. To know why one has invested or not invested in SBI Mutual fund4. To find out the most preferred channel.

5. To find out what should do to boost Mutual Fund Industry.


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Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large

number of new players have entered the market and trying to gain market share in this

rapidly improving market.

The research was carried on in Dehradoon. I had been sent at one of the branch of

State Bank of India Dehradoon where I completed my Project work. I surveyed on my

Project Topic A study of preferences of the Investors for investment in Mutual Fund

on the visiting customers of the SBI Boring Canal Road Branch.

The study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer. This

project report may help the company to make further planning and strategy.


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Chapter 4

Research Methodology


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RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data

collection was given more importance since it is overhearing factor in attitude studies.

One of the most important users of research methodology is that it helps in identifyingthe problem, collecting, analyzing the required information data and providing an

alternative solution to the problem .It also helps in collecting the vital information that

is required by the top management to assist them for the better decision making both

day to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the

reference. Research has been done by primary data collection, and primary data has

been collected by interacting with various people. The secondary data has been

collected through various journals and websites.

Duration of Study:

The study was carried out for a period of two months, from 30th May to 30th July 2008.


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Sampling:

Sampling procedure:

The sample was selected of them who are the customers/visitors of State Bank if

India, Boring Canal Road Branch, irrespective of them being investors or not or

availing the services or not. It was also collected through personal visits to persons, byformal and informal talks and through filling up the questionnaire prepared. The data

has been analyzed by using mathematical/Statistical tool.

Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120

people had invested in Mutual Fund. Other 80 people did not have invested in Mutual

Fund.

Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.


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Limitation:

Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have not

given actual answers of my questionnaire.

Sample size is limited to 200 visitors of State Bank of India , Boring Canal Road

Branch, Dehradoon out of these only 120 had invested in Mutual Fund. Thesample.

size may not adequately represent the whole market.

Some respondents were reluctant to divulge personal information which can

affect the validity of all responses.

The research is confined to a certain part of Dehradoon.


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Chapter 5

Data Analysis

&Interpretation


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ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Dehradoon

Age Group 50

No. of Investors

12 18 30 24 20 16

Interpretation:

12

18

3024

2016

0

5

10

15

20

25

30

35

50

Age group of the Investors

I n v e s t o

r s i n v e s

t e d i n M u

t u a

l F u n d


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According to this chart out of 120 Mutual Fund investors of Dehradoon the most are

in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group

of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Dehradoon

Educational Qualification Number of Investors

Graduate/ Post Graduate 88Under Graduate 25

Others 7

Total 120


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71%

23%6%

Graduate/Post Graduate Under Graduate Others

Interpretation:


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Out of 120 Mutual Fund investors 71% of the investors in Dehradoon are

Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).

c). Occupation of the investors of Dehradoon

.

3545

30

4 60

10

20

30

40

50

Govt.

Service

Pvt.

Service

Business Agriculture Others

Occupation of the customers

N o .

o f I n v e s

t o r s

Occupation No. of InvestorsGovt. Service 30Pvt. Service 45

Business 35Agriculture 4

Others 6


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Interpretation:

In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are

Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in

others.

(d). Monthly Family Income of the Investors of Dehradoon.

Income Group No. of Investors30,000 32

512

28

4332

05

10152025303540

4550

30

Income Group of the Investorsn (Rs. in Th.)

N o . o

f I n v e s

t o r s

Interpretation:

In the Income Group of the investors of Dehradoon, out of 120 investors,

36% investors that is the maximum investors are in the monthly income


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group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the

monthly income group of more than Rs. 30,000 and the minimum investors

i.e. 4% are in the monthly income group of below Rs. 10,000

(2) Investors invested in different kind of investments.

Kind of Investments No. of RespondentsSaving A/C 195Fixed deposits 148Insurance 152Mutual Fund 120Post office (NSC) 75Shares/Debentures 50Gold/Silver 30Real Estate 65

195148152

12075

5030 65

0 50 100 150 200 250

S a v i n

g A / c I n s

u r a n

c e

P o s t

O f f i c

e ( N S C

) G o

l d / S i l

v e r

K i n d s o

f I n v e s t m e n

t

No.of Respondents


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Interpretation: From the above graph it can be inferred that out of 200 people,

97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits,

60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in

Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

Factors (a) Liquidity (b) Low Risk (c) High Return (d) Trust

No. of

Res pondents

40 60 64 36


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20%

30%32%

18%

Liquidity Low Risk High Return Trust

Interpretation:


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Out of 200 People, 32% People prefer to invest where there is High Return, 30%

prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer

Trust

4. Awareness about Mutual Fund and its Operations

67

33

Yes No

Response Yes No No. of Respondents 135 65


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Interpretation:

From the above chart it is inferred that 67% People are aware of Mutual Fund and its

operations and 33% are not aware of Mutual Fund and its operations.

5. Source of information for customers about Mutual Fund

Source of information No. of RespondentsAdvertisement 18

Peer Group 25Bank 30

Financial Advisors 62

18 2530

62

01020304050

6070

N o . o f

R e s p o n

d e n t s

AdvertisementPeer Group Bank FinancialAdvisors

Source of Information

Interpretation:

From the above chart it can be inferred that the Financial Advisor is the most

important source of information about Mutual Fund. Out of 135 Respondents, 46%


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know about Mutual fund Through Financial Advisor, 22% through Bank, 19%

through Peer Group and 13% through Advertisement.

6. Investors invested in Mutual Fund

Response No. of Respondents

YES 120 NO 80

Total 200

Yes

60%

No40%

Interpretation:


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Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested

in Mutual Fund.

7. Reason for not invested in Mutual Fund

Reason No. of Respondents

Not Aware 65Higher Risk 5

Not any Specific Reason 10

81

13% 6

Not Aware Higher Risk Not Any

Interpretation:

Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of

Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any

specific reason.


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8. Investors invested in different Assets Management Co. (AMC)

Name of AMC No. of InvestorsSBIMF 55

UTI 75HDFC 30

Reliance 75ICICI Prudential 56

Kotak 45Others 70

75

75

5655

45

30

70

0 20 40 60 80

UTI

Reliance

ICICI

SBIMF

Kotak

HDFC

Others

N a m e

o f A M C

No. of Investors

Interpretation:

In Dehradoon most of the Investors preferred UTI and Reliance Mutual Fund. Out of

120 Investors 62.5% have invested in each of them, only 46% have invested in

SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC.


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9. Reason for invested in SBIMF

Reason No. of RespondentsAssociated with SBI 35

Better Return 5Agents Advice 15

64%9

27%

Associated with SBI Better Return Agents Advice

Interpretation:

Out of 55 investors of SBIMF 64% have invested because of its association with

Brand SBI, 27% invested on Agents Advice, 9% invested because of better return.


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10. Reason for not invested in SBIMF

Reason No. of Respondents Not Aware 25Less Return 18

Agents Advice 22

38

28%

34

Not Aware Less Return Agent's Advice

Interpretation:

Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF,

28% do not have invested due to less return and 34% due to Agents Advice.

11. Preference of Investors for future investment in Mutual Fund

Name of AMC No. of Investors


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SBIMF 76UTI 45

HDFC 35Reliance 82

ICICI Prudential 80Kotak 60Others 75

76

45

35

82

80

60

75

0 20 40 60 80 100

No. of Investors

SBIMF

UTI

HDFC

Reliance

ICICI Prudential

Kotak

Others

N a m e o f

A M C

Interpretation:

Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63%

in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual

Fund.

12. Channel Preferred by the Investors for Mutual Fund Investment


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Channel Financial Advisor Bank AMC No. of Respondents 72 18 30

6015

25

Financial Advisor Bank AMC

Interpretation:

Out of 120 Investors 60% preferred to invest through Financial Advisors, 25%

through AMC and 15% through Bank.

13. Mode of Investment Preferred by the Investors


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Mode of Investment One time Investment Systematic Investment Plan (SIP)

No. of Respondents 78 42

65%

35

One time Investment SIP

Interpretation:

Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through

Systematic Investment Plan.

14. Preferred Portfolios by the Investors

Portfolio No. of Investors


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Option Dividend Payout Dividend

Reinvestment

Growth

No. of Respondents 25 10 85

21

8

71

Dividend Payout Dividend Reinvestment Growth

Interpretation:

From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout

and 8% preferred Dividend Reinvestment Option.

16. Preference of Investors whether to invest in Sectoral Funds

Response No. of Respondents


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Yes 25No 95

21

79 Yes No

Interpretation:

Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because

there is maximum risk and 21% prefer to invest in Sectoral Fund.


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Chapter 6Findings and

Conclusion

Findings


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In Dehradoon in the Age Group of 36-40 years were more in

numbers. The second most Investors were in the age group of 41-45

years and the least were in the age group of below 30 years.

In Dehradoon most of the Investors were Graduate or Post Graduate

and below HSC there were very few in numbers.

In Occupation group most of the Investors were Govt. employees,

the second most Investors were Private employees and the least were

associated with Agriculture.

In family Income group, between Rs. 20,001- 30,000 were more in

numbers, the second most were in the Income group of more than

Rs.30,000 and the least were in the group of below Rs. 10,000.

About all the Respondents had a Saving A/c in Bank, 76% Invested

in Fixed Deposits, Only 60% Respondents invested in Mutual fund.

Mostly Respondents preferred High Return while investment, the

second most preferred Low Risk then liquidity and the least

preferred Trust.Only 67% Respondents were aware about Mutual fund and its

operations and 33% were not.

Among 200 Respondents only 60% had invested in Mutual Fund and

40% did not have invested in Mutual fund.


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Out of 80 Respondents 81% were not aware of Mutual Fund, 13%

told there is not any specific reason for not invested in Mutual Fund

and 6% told there is likely to be higher risk in Mutual Fund.

Most of the Investors had invested in Reliance or UTI Mutual Fund,

ICICI Prudential has also good Brand Position among investors,

SBIMF places after ICICI Prudential according to the Respondents.

Out of 55 investors of SBIMF 64% have invested due to its

association with the Brand SBI, 27% Invested because of Advisors

Advice and 9% due to better return.

Most of the investors who did not invested in SBIMF due to not

Aware of SBIMF, the second most due to Agents advice and rest

due to Less Return.

For Future investment the maximum Respondents preferred

Reliance Mutual Fund, the second most preferred ICICI Prudential,

SBIMF has been preferred after them.

60% Investors preferred to Invest through Financial Advisors, 25%through AMC (means Direct Investment) and 15% through Bank.

65% preferred One Time Investment and 35% preferred SIP out of

both type of Mode of Investment.


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The most preferred Portfolio was Equity, the second most was

Balance (mixture of both equity and debt), and the least preferred

Portfolio was Debt portfolio.

Maximum Number of Investors Preferred Growth Option for returns,

the second most preferred Dividend Payout and then Dividend

Reinvestment.

Most of the Investors did not want to invest in Sectoral Fund, only

21% wanted to invest in Sectoral Fund.

Conclusion


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Running a successful Mutual Fund requires complete understanding of the

peculiarities of the Indian Stock Market and also the psyche of the small

investors. This study has made an attempt to understand the financial

behavior of Mutual Fund investors in connection with the preferences of

Brand (AMC), Products, Channels etc. I observed that many of people

have fear of Mutual Fund. They think their money will not be secure in

Mutual Fund. They need the knowledge of Mutual Fund and its relatedterms. Many of people do not have invested in mutual fund due to lack of

awareness although they have money to invest. As the awareness and

income is growing the number of mutual fund investors are also growing.

Brand plays important role for the investment. People invest in those

Companies where they have faith or they are well known with them.

There are many AMCs in Dehradoon but only some are performing well

due to Brand awareness. Some AMCs are not performing well although

some of the schemes of them are giving good return because of not

awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they

are well known Brand, they are performing well and their Assets Under

Management is larger than others whose Brand name are not well known

like Principle, Sunderam, etc.


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Distribution channels are also important for the investment in mutual

fund. Financial Advisors are the most preferred channel for the

investment in mutual fund. They can change investors mind from one

investment option to others. Many of investors directly invest their money

through AMC because they do not have to pay entry load. Only those

people invest directly who know well about mutual fund and its

operations and those have time.


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Chapter 7

Suggestions

And

Recommendations


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Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should

be made aware of the benefits. Nobody will invest until and unless

he is fully convinced. Investors should be made to realize that

ignorance is no longer bliss and what they are losing by not

investing.Mutual funds offer a lot of benefit which no other single option

could offer. But most of the people are not even aware of what

actually a mutual fund is? They only see it as just another

investment option. So the advisors should try to change their

mindsets. The advisors should target for more and more young

investors. Young investors as well as persons at the height of their

career would like to go for advisors due to lack of expertise and

time.

Mutual Fund Company needs to give the training of the Individual

Financial Advisors about the Fund/Scheme and its objective,

because they are the main source to influence the investors.


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Before making any investment Financial Advisors should first

enquire about the risk tolerance of the investors/customers, their

need and time (how long they want to invest). By considering these

three things they can take the customers into consideration.

Younger people aged under 35 will be a key new customer group

into the future, so making greater efforts with younger customers

who show some interest in investing should pay off.

Customers with graduate level education are easier to sell to and

there is a large untapped market there. To succeed however,

advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative productslaunched by Assets Management companies very recently in the

industry. SIP is easy for monthly salaried person as it provides the

facility of do the investment in EMI. Though most of the prospects

and potential investors are not aware about the SIP. There is a large

scope for the companies to tap the salaried persons.


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BIBLIOGRAPHY

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

WWW.SBIMF.COM

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM

WWW. MUTUALFUNDSINDIA.COM
http://www.sbimf.com/http://www.moneycontrol.com/http://www.amfiindia.com/http://www.onlineresearch.com/http://www.sbimf.com/http://www.moneycontrol.com/http://www.amfiindia.com/http://www.onlineresearch.com/


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Mutual Funds


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All About Mutual FundsBefore we understand what is mutual fund, its very important to know the area in which

mutual funds works, the basic understanding of stocks and bonds.

Stocks : Stocks represent shares of ownership in a public company. Examples of public companieinclude Reliance, ONGC and Infosys. Stocks are considered to be the most common owneinvestment traded on the market.

Bonds : Bonds are basically the money which you lend to the government or a company, and ireturn you can receive interest on your invested amount, which is back over predetermined amounof time. Bonds are considered to be the most common lending investment traded on the markeThere are many other types of investments other than stocks and bonds (including annuities, reestate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds.

What Is Mutual Fund

A mutual fund is just the connecting bridge or a financial intermediary that allows a group oinvestors to pool their money together with a predetermined investment objective. The mutual fundwill have a fund manager who is responsible for investing the gathered money into specific securiti(stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutua

fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to othersthey are very cost efficient and also easy to invest in, thus by pooling money together in a mutualfund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk &maximizing returns.


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Thus a Mutual Fund is the most suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managed basket of securities at a relatively lo

cost. The flow chart below describes broadly the working of a mutual fund

Unit Trust of India is the first Mutual Fund set up under a separate act,

UTI Act in 1963, and started its operations in 1964 with the issue of

units under the scheme US-64.

Overview of existing schemes existed in mutual fund category

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position

risk tolerance and return expectations etc. The table below gives an overview into the existing typof schemes in the Industry.

Type of Mutual Fund Schemes

BY STRUCTURE

Open Ended SchemesAn 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.

Close Ended SchemesA closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can invest in thescheme at the time of the initial public issue and thereafter they can buy or sell the units of thescheme on the stock exchanges where they are listed. In order to provide an exit route to the

investors, some close-ended funds give an option of selling back the units to the Mutual Fundthrough periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of ttwo exit routes is provided to the investor.

Interval SchemesInterval Schemes are that scheme, which combines the features of open-ended and close-

ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.


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BY NATURE

1. Equity fund:These funds invest a maximum part of their corpus into equities holdings. The structure of the

fund may vary different for different schemes and the fund managers outlook on different stocks.The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the riskreturn matrix.

2. Debt funds:

The objective of these Funds is to invest in debt papers. Government authorities, private companie banks and financial institutions are some of the major issuers of debt papers. By investing in deinstruments, these funds ensure low risk and provide stable income to the investors. Debt funds afurther classified as:

Gilt Funds : Invest their corpus in securities issued by Government, popularly known asGovernment of India debt papers. These Funds carry zero Default risk but are associated wiInterest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds : Invest a major portion into various debt instruments such as bonds, corporatedebentures and Government securities.

MIPs : Invests maximum of their total corpus in debt instruments while they take minimumexposure in equities. It gets benefit of both equity and debt market. These scheme rankslightly high on the risk-return matrix when compared with other debt schemes.


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Short Term Plans (STPs) : Meant for investment horizon for three to six months. Thesefunds primarily invest in short term papers like Certificate of Deposits (CDs) and Commerci

Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds : Also known as Money Market Schemes, These funds provides easy liquidityand preservation of capital. These schemes invest in short-term instruments like TreasurBills, inter-bank call money market, CPs and CDs. These funds are meant for short-term casmanagement of corporate houses and are meant for an investment horizon of 1day to months. These schemes rank low on risk-return matrix and are considered to be the safesamongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They investin both equities and fixed income securities, which are in line with pre-defined investment objectivof the scheme. These schemes aim to provide investors with the best of both the worlds. Equity par provide growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,

Each category of funds is backed by an investment philosophy, which is pre-defined in the objectivof the fund. The investor can align his own investment needs with the funds objective and investaccordingly.


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BY INVESTMENT OBJECTIVE Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these

schemes is to provide capital appreciation over medium to long term. These schemesnormally invest a major part of their fund in equities and are willing to bear short-termdecline in value for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of theseschemes is to provide regular and steady income to investors. These schemes generally invein fixed income securities such as bonds and corporate debentures. Capital appreciation insuch schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemesinvest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes : Money Market Schemes aim 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.

OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to anEquity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular indexsuch as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only


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those stocks that constitute the index. The percentage of each stock to the total holding will bidentical to the stocks index weightage. And hence, the returns from such schemes would be

more or less equivalent to those of the Index. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only

those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, SoftwarFast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds ardependent on the performance of the respective sectors/industries. While these funds maygive higher returns, they are more risky compared to diversified funds. Investors need to keea watch on the performance of those sectors/industries and must exit at an appropriate time.

Types of returns

There are three ways, where the total returns provided by mutual funds can be enjoyed by investors

Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly allincome it receives over the year to fund owners in the form of a distribution.

If the fund sells securities that have increased in price, the fund has a capital gain. Most fundalso pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's sharesincrease in price. You can then sell your mutual fund shares for a profit. Funds will alsousually give you a choice either to receive a check for distributions or to reinvest the earningand get more shares.


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Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of investments in mutual fund.

Advantages of Investing Mutual Funds :

1. Professional Management - The basic advantage of funds is that, they are professional managed, by well qualified professional. Investors purchase funds because they do not have the time or theexpertise to manage their own portfolio. A mutual fund is considered to be relatively less expensivway to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,the investors risk is spread out and minimized up to certain extent. The idea behind diversification to invest in a large number of assets so that a loss in any particular investment is minimized by gain

in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help toreducing transaction costs, and help to bring down the average cost of the unit for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other availableinstruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.


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Disadvantages of Investing Mutual Funds:

1. Professional Management - Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus manyinvestors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks.

2. Costs The biggest source of AMC income, is generally from the entry & exit load which theycharge from an investors, at the time of purchase. The mutual fund industries are thus charging extrcost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high returns from a fewinvestments often don't make much difference on the overall return. Dilution is also the result of asuccessful fund getting too big. When money pours into funds that have had strong success, themanager often has trouble finding a good investment for all the new money.

4. Taxes - when making decisions about your money, fund managers don't consider your personaltax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered,

which affects how profitable the individual is from the sale. It might have been more advantageousfor the individual to defer the capital gains liability.


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The major players in the Indian Mutual Fund Industry are:

Major Players of Mutual Funds In India

Period (Last&nbsp1 Week)

Rank Scheme Name Date NAV(Rs.)

Last 1Week

SinceInception

1 JM Core 11 Fund - Series 1 -Growth

Mar 26, 2008

8.45 5.12 -94.64

2 Tata Indo-Global InfrastructureFund - Growth

Mar 26, 2008

8.26 5.05 -40.42

3 Tata Capital Builder Fund -Growth

Mar 26, 2008

12.44 5.03 15.35

4 Standard Chartered EnterpriseEquity Fund - Growth

Mar 26, 2008

14.07 5 20.92

5 DBS Chola Infrastructure Fund -Growth Mar 26, 2008 9.01 4.65 -17.176 ICICI Prudential Fusion Fund -

Series III - Institutional -Growth

Mar 26, 2008

10.2 4.62 23.69

7 DSP Merrill Lynch Micro CapFund - Regular - Growth

Mar 26, 2008

9.93 4.56 -0.85

8 ICICI Prudential Fusion Fund -Series III - Retail - Growth

Mar 26, 2008

10.19 4.51 22.39

9 DBS Chola Small Cap Fund -Growth

Mar 26, 2008

6.36 3.75 -81.78

10 Principal Personal Taxsaver Mar 25, 2008 124.66 3.44 29.97

11 Benchmark Split Capital Fund -Plan A - Preferred Units

Mar 26, 2008

141.51 3.14 13.71

12 ICICI Prudential FMP - Series33 - Plan A - Growth

Mar 26, 2008

9.89 2.91 -7.88

13 Tata SIP Fund - Series I -Growth

Mar 26, 2008

10.25 2.38 2.39

14 Sahara R.E.A.L Fund - Growth Mar 25, 2008

7.64 1.86 -49.52
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15 Tata SIP Fund - Series II -Growth

Mar 26, 2008

9.93 1.58 -0.94

A mutual fund is a professionally-managed firm of collective investments that pools money frommany investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.in other words we can say that A Mutual Fund is a trust registered with the Securities andExchange Board of India (SEBI), which pools up the money from individual / corporate investors

and invests the same on behalf of the investors /unit holders, in equity shares, Government securitieBonds, Call money markets etc., and distributes the profits.The value of each unit of the mutual fund, known as the net asset value (NAV), is mostlycalculated daily based on the total value of the fund divided by the number of shares currently issueand outstanding. The value of all the securities in the portfolio in calculated daily. From this, allexpenses are deducted and the resultant value divided by the number of units in the fund is the fund NAV.

NAV = Total value of the fund.No. of shares currently issued and outstanding

Advantages of a MF Mutual Funds provide the benefit of cheap access to expensive stocks

Mutual funds diversify the risk of the investor by investing in a basket of assets

A team of professional fund managers manages them with in-depth research inputsfrom investment analysts.

Being institutions with good bargaining power in markets, mutual funds have accessto crucial corporate information, which individual investors cannot access.
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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 theinitiative of the Government of India and Reserve Bank. The history of mutual funds in India can b broadly divided into four distinct phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank ofIndia and functioned under the Regulatory and administrative control of the Reserve Bank of IndiaIn 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) tooover the regulatory and administrative control in place of RBI. The first scheme launched by UTIwas 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 LInsurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI MutuFund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank MutualFund (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 inJune 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutualfund industry had assets under management of Rs.47,004 crores.

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


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1993 was the year in which the first Mutual Fund Regulations came into being, under which allmutual 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 revisedMutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of R1,21,805 crores.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated intotwo 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 schemesThe second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered wiSEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at the end oSeptember, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schem


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Categories of mutual funds :


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Mutual funds can be classified as follow:

Based on their structure :

Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.

Close-ended funds: These funds raise money from investors only once. Therefore, after thoffer period, fresh investments can not be made into the fund. If the fund is listed on a stockexchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently

most of the New Fund Offers of close-ended funds provided liquidity window on a periodi basis such as monthly or weekly. Redemption of units can be made during specified intervalTherefore, such funds have relatively low liquidity.

Based on their investment objective :

Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in themarket, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equitieshave outperformed all asset classes in the long term. Hence, investment in equity funds should beconsidered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. The portfolio mirrors the benchmark index both in terms of composition and individual stocweightages.


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ii) Equity diversified funds- 100% of the capital is invested in equities spreading across differesectors and stocks.

iii) Dividend yield funds- it is similar to the equity diversified funds except that they invest icompanies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund wiinvest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-returnladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle foinvestors who prefer spreading their risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds- Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors averse to ideaof taking risk associated with equities. Therefore, they invest exclusively in fixed-incominstruments like bonds, debentures, Government of India securities; and money market instrumensuch as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into aof these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large portion beininvested in call money market.

ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.

iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments whihave variable coupon rate.

iv)Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing betwecash market and derivatives market. Funds are allocated to equities, derivatives and money markeHigher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities


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v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term deb papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund

Investment strategies :

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of amonth. Payment is made through post dated cheques or direct debit facilities. The investor gets fewunits when the NAV is high and more units when the NAV is low. This is called as the benefit oRupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and giveinstructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he canwithdraw a fixed amount each month.


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Risk v/s. return:


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Working of a Mutual fund :


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The entire mutual fund industry operates in a very organized way. The investors, known as unitholders,handover their savings to the AMCs under various schemes. The objective of the investmenshould match with the objective of the fund to best suit the investors needs. The AMCs further invest the funds into various securities according to the investment objective. The return generatefrom the investments is passed on to the investors or reinvested as mentioned in the offer documen


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Working

Of Mutual Fund

Mutual Funds

Before we understand what is mutual fund, its very important to know the area in whichmutual funds works, the basic understanding of stocks and bonds.


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Stocks : Stocks represent shares of ownership in a public company. Examples of public companie

include Reliance, ONGC and Infosys. Stocks are considered to be the most common owneinvestment traded on the market.

Bonds : Bonds are basically the money which you lend to the government or a company, and ireturn you can receive interest on your invested amount, which is back over predetermined amounof time. Bonds are considered to be the most common lending investment traded on the markeThere are many other types of investments other than stocks and bonds (including annuities, reestate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds.

What Is Mutual Fund

A mutual fund is just the connecting bridge or a financial intermediary that allows a group oinvestors to pool their money together with a predetermined investment objective. The mutual fuwill have a fund manager who is responsible for investing the gathered money into specifsecurities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions

the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to otherthey are very cost efficient and also easy to invest in, thus by pooling money together in a mutufund, investors can purchase stocks or bonds with much lower trading costs than if they tried to doon their own. But the biggest advantage to mutual funds is diversification, by minimizing risk maximizing returns.

Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunityto invest in a diversified, professionally managed basket of securities at a relatively low cost. Theflow chart below describes broadly the working of a mutual fund


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Overview of existing schemes existed in mutual fund category


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Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial positionrisk tolerance and return expectations etc. The table below gives an overview into the existing typ

of schemes in the Industry.


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Type of Mutual Fund Schemes

BY STRUCTURE

Open Ended SchemesAn open-end fund is one that is available for subscription all through the year. These do not have afixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Close Ended Schemes

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15years. The fund is open for subscription only during a specified period. Investors can invest in thescheme at the time of the initial public issue and thereafter they can buy or sell the units of thescheme on the stock exchanges where they are listed. In order to provide an exit route to theinvestors, some close-ended funds give an option of selling back the units to the Mutual Fundthrough periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of ttwo exit routes is provided to the investor.

Interval Schemes

Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or

redemption during pre-determined intervals at NAV related prices.


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These funds invest a maximum part of their corpus into equities holdings. The structure of the

fund may vary different for different schemes and the fund managers outlook on different stocks.The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the riskreturn matrix.

2. Debt funds:

The objective of these Funds is to invest in debt papers. Government authorities, private companies banks and financial institutions are some of the major issuers of debt papers. By investing in debtinstruments, these funds ensure low risk and provide stable income to the investors. Debt funds arefurther classified as:

Gilt Funds : Invest their corpus in securities issued by Government, popularly known asGovernment of India debt papers. These Funds carry zero Default risk but are associated witInterest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds : Invest a major portion into various debt instruments such as bonds, corporatedebentures and Government securities.

MIPs : Invests maximum of their total corpus in debt instruments while they take minimumexposure in equities. It gets benefit of both equity and debt market. These scheme ranksslightly high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs) : Meant for investment horizon for three to six months. Thesefunds primarily invest in short term papers like Certificate of Deposits (CDs) and CommerciPapers (CPs). Some portion of the corpus is also invested in corporate debentures.


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Liquid Funds : Also known as Money Market Schemes, These funds provides easy liquidityand preservation of capital. These schemes invest in short-term instruments like Treasury

Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term casmanagement of corporate houses and are meant for an investment horizon of 1day to 3months. These schemes rank low on risk-return matrix and are considered to be the safestamongst all categories of mutual funds.

3. Balanced funds : As the name suggest they, are a mix of both equity and debt funds. Theyinvest in both equities and fixed income securities, which are in line with pre-defined investmentobjective of the scheme. These schemes aim to provide investors with the best of both the worlds.

Equity part provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,

Each category of funds is backed by an investment philosophy, which is pre-defined in the objectivof the fund. The investor can align his own investment needs with the funds objective and investaccordingly.


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BY INVESTMENT OBJECTIVE

Growth Schemes: Growth Schemes are also known as equity schemes. The aim of theseschemes is to provide capital appreciation over medium to long term. These schemesnormally invest a major part of their fund in equities and are willing to bear short-termdecline in value for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of theseschemes is to provide regular and steady income to investors. These schemes generally invein fixed income securities such as bonds and corporate debentures. Capital appreciation in

such schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemesinvest in both sh

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