A synopsis report on

A study on Growth & Performance of Mutual Funds

Submitted toK.Arjun Goud

Assistant Professor

Submitted byA . Sravan Yadav

12BK1E0001

Introduction

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 invested by the fund manager in different

types of securities depending upon the objective of the scheme. This could range from shares to

debenture to money market instruments. Its unit holders in proportion to the number of units

owned by them (pro rate) share the income earned through this investment and capital

appreciation realized by the scheme. 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

portfolio at a relatively low cost. Anybody with an invisible surplus of as little as a few thousand

rupees can invest in mutual funds. Each mutual fund scheme has a defined investment objective

and strategy. A mutual fund is the ideal investment vehicle for today's complex and model

financial scenario. Market for equity shares, bonds, and other fixed income instruments, real

estate, derivatives and other assets have become mature and information driven. Price changes

in this asset are driven by global events occurring in faraway places. A typical individual is

unlikely to have the knowledge, skills, inclination and time to keep track of event, understand

their implications and act speedily. An individual also fined it difficult to keep track of

ownership of his asset, investment, brokerage dues and bank transaction etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified

and experienced staff that manages each of these functions on a full time basis. The large pool of

money collected in the fund allows it to hire such staff at a very low cost to each investor. In

effect, the mutual fund vehicle exploits economies of scale in all the three areas namely research,

investment and transaction processing. While the concept of individual coming together to invest

money collectively is not new, the mutual fund in its present form of 20 th century phenomenon.

In fact, the mutual fund gained popularity only after the Second World War. Globally, there are

thousands of firm offering tens of thousands of mutual funds with different investment

objectives. Today, mutual funds collectively manage almost as much as or money as compared

to banks. A draft order document is to be prepared at the time of launching the fund. Typically, it

pre specifies the investment objectives of the fund, the risk associated, the cost involved in the

process and the board rules for entry into and exit from the fund and other areas of operations. In

India, as in most countries, these sponsors need approval from the regulator, SEBI (Securities

Exchange Board of India) in our case. SEB1 looks at the track record of the sponsors and its

financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an Asset Management Company to invest the funds according to the

investment objective. It also hires another entity to be the custodian of the asset of the fund and

perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. In the

Indian context, the sponsors promote the Asset Management Company also, in which it holds a

majority stake. In many cases a sponsor can hold a 100% stake in the Asset Management

Company (AMC).

Objectives of Mutual Fund:

1 To provide an opportunity for lower income group to acquire property without much

difficulty in the form of share To cater mainly to the needs of individual investor whose means

are small

1 To manage investor's portfolio in a manner that provides regular income, growth safety,

liquidity and diversification

TYPES OF MUTUAL FUNDS

Mutual fund scheme may be classified on the basis of its structure its investment

objective.

1. By Structure

Open-ended 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 scheme is liquidity.

Closed-ended Funds

A closed end fund has a stipulated maturity period, which generally ranges from 3 to 15 years.

The fund is open for subscription only during a specified period. Investors can invest in the

scheme at the time of initial public issue and there after they can buy or sell the units of the

scheme on the stock exchanges where they are listed. In order to provide an exit route to

investors, some close ended funds give an option of selling back the units of 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. Salient differences between the closed end and

open-end schemes

NEED FOR THE STUDY

The project's idea is to project Mutual Fund as a better avenue for investment on a long-

term or short-term basis. Mutual Fund is a productive package for a lay-investor with limited

finances, this project creates an awareness that the Mutual Fund is a worthy investment practice.

Mutual Fund is a globally proven instrument. Mutual Funds are "Unit Trust" as it is called in

some parts of the world has a long and successful history, of late Mutual Funds have become a

hot favorite of millions of people all over the world. The driving force of Mutual Funds is the

'safety of the principal' guaranteed, plus the added advantage of capital appreciation together

with the income earned in the form of interest or dividend. Mutual Funds offers an investor to

invest even a small amount of money, each Mutual Fund has a defined investment objective and

strategy. Mutual Funds schemes are managed by respective asset managed companies sponsored

by financial institutions, banks, private companies or international firms. A Mutual Fund is the

ideal investment vehicle for today's complex and modern financial scenario.

SCOPE OF THE STUDY

The area of the study was restricted to companies and individual investors with in the

Hyderabad and Secunderabad. The study is based on both primary and secondary data and

examines the availability of bank deposits v/s mutual funds.

OBJECTIVES

The study of "A study on growth and performance of Mutual Funds" proposes the following:

1 Understanding the role of the investors for investing in a mutual fund.

2 Finding out the risk tolerance factors of investors.

3 Calculating the growth and performance of selected mutual funds.

METHODOLOGY

Methodology Data collection methods

The study is based on both primary and secondary data and examines the availability of mutual

funds. The results are drawn mainly from the secondary and primary data collected.

Primary Data

Primary data has been collected from the interaction with the officials of the company

Secondary Data

Secondary data has been collected from the various sources such as

Publications of the company, Business magazines, Journals, text books, Web sites and

Annual reports

LIMITATIONS

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.

5) The NAV’s are not uniform.

6) The data collected for this study is not proper because some mutual funds are not

disclosing the correct information.

7) The study is not exempt from limitations of Sharps, Treynor and Jenson measures.

8) Unique risk is completely ignored in all the measure.