A PROJECT REPORT

ON

“MUTUAL FUNDS IS THE BETTER

INVESTMENTS PLAN”

Submitted in partial fulfillment for

BACHALOR OF BANKING & INSURANCE

Programme of

INSTITUTE OF KET’S V.G. VAZE KELKAR COLLEGE

MUMBAI

Batch20012-13

Submitted by :- Under Guidance :-

KANCHAN BIDWAI SAMPATH KRISHNAN

BBI( Three Year Programme)

Batch (2012-2013)

INSTITUTE OF KET’S V.G. VAZE KELKAR COLLEGE

MUMBAI

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 AXIS BANk

Parel Branch and other staffs for their support and guidance in the Project work.. I am

extremely grateful to my guide, SAMAPTH KRISHNAN for their valuable guidance

and timely suggestions.

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

support specially .Mr Ashish Ponda Assistant Vise President Axis Bank Limited Worli

& Ms. Rupali Varhadi Assistant Manager, Sales tax, income tax .And lastly, I would

like to express my gratefulness to the parent’s for seeing me through it all.

KANCHAN BIDWAI

CERTIFICATE

This is to certify that Mrs. ----------- a student of has completed project work on “MUTUAL

FUNDS IS THE BETTER INVESTMENTS PLAN” under my guidance and supervision.

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

Signature of Guide

Name of Project Guide

Date-

DECLERATION

I hereby declare that this Project Report entitled “THE MUTUAL FUND IS BETTER

INVESTMENT PLAN in AXIS BANK Mutual Fund submitted in the partial

fulfillment of the requirement of Bachlor of Banking & Insurance (BBI) of

INSTITUTE OF KET’S V.G. VAZE KELKAR COLLEGE, MUMBAI is based on

primary & secondary data found by me in various departments, books, magazines and

websites & Collected by me in under guidance of SAMAPTH KRISHNAN.

DATE: KANCHAN BIDWAI

BBI (Three Years)

EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s 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 buy

mutual 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 practices

of 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 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 questionnaire and

surveyed of 200 people. I also taken interview of many People those who were coming

at the AXIS BANK Branch where I done my Project. I visited other AMCs in Worli

Mumbai Office to get some knowledge related to my topic. I studied about the

products and strategies of other AMCs in Mumbai 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.

CONTENTS

Acknowledgement

Declaration

Executive Summary

Chapter - 1 INTRODUCTION

Chapter - 2 COMPANY PROFILE

Chapter - 3 OBJECTIVES AND SCOPE

Chapter - 4 RESEARCH METHODOLOGY

Chapter - 5 DATA ANALYSIS AND INTERPRETATION

Chapter - 6 FINDINGS AND CONCLUSIONS

Chapter - 7 SUGGESTIONS & RECOMMENDATIONS

BIBLIOGRAPHY

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

WORKING OF A MUTUAL FUND

GUIDELINES OF THE SEBI FOR MUTUAL FUND

RESEARCH REPORT

OBJECTIVE OF RESEARCH

SCOPE OF THE STUDY

DATA SOURCES

SAMPLING

DATA ANALYSIS

QUESTIONNAIRE

Chapter - 1

Introduction

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

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 (such

as shares, 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

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 the mutual

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

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.

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 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 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. consolidation

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

assets of Rs.153108 crores under 421 schemes.

CATEGORIES OF MUTUAL FUND:

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 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.

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 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 and

T-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.

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.

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.

RISK V/S. RETURN:

Chapter – 2

Company Profile

INTRODUCTION TO AXIS MUTUAL FUND

Axis Bank was the first of the new private banks to have begun operations in 1994, after the

Government of India allowed new private banks to be established. The Bank was promoted

jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I),

Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC)

and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New

India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India

Insurance Company Ltd.

The Bank as on 31st March, 2011 is capitalized to the extent of ` 410.54 crores with the

public holding (other than promoters and GDRs) at 53.60%.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai.

The Bank has a very wide network of more than 1281 branches (including 169 Service

Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs (as on

31st March, 2011) providing 24 hrs a day banking convenience to its customers. This is one of

the largest ATM networks in the country.

The Bank has strengths in both retail and corporate banking and is committed to adopting the

best industry practices internationally in order to achieve excellence.

PRODUCTS OF AXIS MUTUAL FUND

Equity schemes

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 specialized

Equity 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.

  Axis Equity Fund

 Axis Long Term Equity Fund

 Axis Midcap Fund

 Axis Focused 25 Fun

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 the expected

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.

Axis Banking Debt Fund - Daily Dividend Axis Banking Debt Fund - Growth Axis Banking Debt Fund - Monthly Dividend Axis Banking Debt Fund - Weekly Dividend

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.

Axis Liquid Fund

 Axis Treasury Advantage Fund

  Axis Short Term Fund

 Axis Dynamic Bond Fund

Hybrid Funds :

Axis Triple Advantage Fund

  Axis Income Saver

Gold Fund :

  Axis Gold Fund   Axis Gold ETF

COMPETITORS OF AXIS MUTUAL FUND

Some of the main competitors of AXIS Mutual Fund in Mumbai are as Follows:

i. ICICI Mutual Fund

ii. Reliance Mutual Fund

iii. SBI 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 & ACHIEVEMENTS:

Awards & recognition received by the Bank during the Year 2011:

Bank of the Year – India (The Banker) Brand Excellence Award 2011 in the BFSI category (Star News) The Most Consistent Large Bank (Best Banks – 2011 survey (Business Today and KPMG) Most Preferred Bank Amongst Retail Consumers (CLSA survey on personal banking trends) Most Productive Private Sector Bank (FIBAC 2011 Banking Awards) 3rd Strongest Bank in Asia-Pacific Region (Asian Banker) The Best Domestic Bank – India; The Best Bond House – India (The Asset Triple A country

Awards 2011) Best Risk Master in the Private Sector Category (FIBAC 2011 Banking Awards) Best Bond House in India – 2011 (Finance Asia)

Awards & recognition received by the Bank during the Year 2010:

Euromoney – Best Debt House in India Asiamoney – Best Domestic Debt House in India Financeasia – Best Bond House in India FE Best Banks Award – Best New Private Sector Bank, Rank 2 Forbes Fab 50 – The Best of Asia-Pacific’s Biggest Listed Companies- second year in a row The Asset Triple A Country Awards 2010:

o Best Domestic Bank, India o Best Domestic Bond House, India.

Business Today Best Bank Awards - Overall Winner & Consistent Performer -(Large Banks Category)

Business World Best Bank Award- Fastest Growing Large Bank Ranked No. 1 in "overall experience with bank staff" and "overall branch facilities" by The

Hindustan Times-MaRS Survey Report dated, 29th March, 2010

Chapter - 3

Objectives and scope

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 AXIS Mutual fund

4. To find out the most preferred channel.

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

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 Mumbai. I had been sent at one of the branch of AXIS

Bank LTD Mumbai 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 AXIS Bank Parel 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.

Chapter – 4

Research Methodology

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 identifying

the 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 15th July to 15th Aug 2012.

Sampling:

Sampling procedure:

The sample was selected of them who are the customers/visitors of Axis Bank LTD,

Parel Branch, irrespective of them being investors or not or availing the services or not.

It was also collected through personal visits to persons, by formal 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 50 people only. Out of which only 30

people had invested in Mutual Fund. Other 20 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.

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 50 visitors of Axis Bank Limited , Parel

Branch, Mumbai out of these only 30 had invested in Mutual Fund. The sample.

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 Mumbai.

Chapter – 5

Data Analysis &

Interpretation

ANALYSIS & INTERPRETATION OF THE DATA

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

Age Group <= 30 31-35 36-40 41-45 46-50 >50

No. of

Investors

12 18 30 24 20 16

Interpretation:

According to this chart out of 30 Mutual Fund investors of Mumbai 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 Mumbai.

Educational Qualification Number of Investors

Graduate/ Post Graduate 18

Under Graduate 10

Others 2

Total 30

Interpretation:

Out of 30 Mutual Fund investors 71% of the investors in Mumbai are Graduate/Post

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

c). Occupation of the investors of Mumbai

.

Occupation No. of Investors

Govt. Service 3

Pvt. Service 10

Business 7

Agriculture 4

Others 6

Interpretation:

In Occupation group out of 30 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 Mumbai.

Income Group No. of Investors

<=10,000 5

10,001-15,000 10

15,001-20,000 11

20,001-30,000 2

>30,000 2

Interpretation:

In the Income Group of the investors of Mumbai, out of 30 investors, 36%

investors that is the maximum investors are in the monthly income 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 30

Real Estate 65

Interpretation: From the above graph it can be inferred that out of 50 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

Respondents

40 60 64 36

Interpretation:

Out of 50 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

Response Yes No

No. of Respondents 35 15

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 Respondents

Advertisement 18

Peer Group 2

Bank 10

Financial Advisors 20

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 35 Respondents, 46%

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 30

NO 20

Total 200

Interpretation:

Out of 50 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 8

Higher Risk 2

Not any Specific Reason 10

Interpretation:

Out of 20 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.

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

Interpretation:

In Mumbai most of the Investors preferred UTI and Reliance Mutual Fund. Out of 30

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.

9. Reason for invested in AXISMF

Reason No. of Respondents

Associated with AXIS 35

Better Return 5

Agents Advice 10

Interpretation:

Out of 50 investors of AXISMF 64% have invested because of its association with

Brand SBI, 27% invested on Agent’s Advice, 9% invested because of better return.

10. Reason for not invested in AXISMF

Reason No. of Respondents

Not Aware 20

Less Return 18

Agent’s Advice 17

Interpretation:

Out of 50 people who have not invested in AXISMF, 38% were not aware with

SBIMF, 28% do not have invested due to less return and 34% due to Agent’s Advice.

11. Preference of Investors for future investment in Mutual Fund

Name of AMC No. of InvestorsSBIMF 6AXIS 10

HDFC 5Reliance 12

ICICI Prudential 4Kotak 3Others 10

Interpretation:

Out of 50 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

Channel Financial Advisor Bank AMC

No. of Respondents 12 8 10

Interpretation:

Out of 30 Investors 60% preferred to invest through Financial Advisors, 25% through

AMC and 15% through Bank.

13. Mode of Investment Preferred by the Investors

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

No. of Respondents 18 12

Interpretation:

Out of 30 Investors 65% preferred One time Investment and 35 % Preferred through

Systematic Investment Plan.

14. Preferred Portfolios by the Investors

Portfolio No. of Investors

Equity 10

Debt 8

Balanced 12

Interpretation:

From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17%

preferred Debt portfolio

15. Option for getting Return Preferred by the Investors

Option Dividend Payout Dividend Growth

Reinvestment

No. of Respondents 8 10 12

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

Yes 18

No 12

Interpretation:

Out of 30 investors, 79% investors do not prefer to invest in Sectoral Fund because

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

Chapter – 6

Findings and

Conclusion

Findings

In Mumbai 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 Mumbai 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.

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 50 investors of AXISMF 64% have invested due to its

association with the Brand AXIS, 27% Invested because of Advisor’s

Advice and 9% due to better return.

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

Aware of AXISMF, the second most due to Agent’s advice and rest

due to Less Return.

For Future investment the maximum Respondents preferred

Reliance Mutual Fund, the second most preferred ICICI Prudential,

AXISMF 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.

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

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 related

terms. 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 Mumbai 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, AXIS, 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.

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.

Chapter – 7

Suggestions

And

Recommendations

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.

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 products

launched 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.

BIBLIOGRAPHY

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

WWW.AXISMUTUALFUND.COM

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM

WWW. MUTUALFUNDSINDIA.COM

Mutual Funds

All About Mutual FundsBefore we understand what is mutual fund, it’s 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 companies

include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned

investment traded on the market.

Bonds : Bonds are basically the money which you lend to the government or a company, and in

return you can receive interest on your invested amount, which is back over predetermined amounts

of time. Bonds are considered to be the most common lending investment traded on the market. There

are many other types of investments other than stocks and bonds (including annuities, real estate, 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 of

investors to pool their money together with a predetermined investment objective. The mutual fund

will have a fund manager who is responsible for investing the gathered money into specific securities

(stocks or bonds). When you invest in a mutual fund, you are buying units or portions of 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 others

they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual

fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it

on 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

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

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 types

of 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 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 exit route to the investors, some

close-ended funds give 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 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.

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 manager’s 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 risk-

return 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 debt

instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are

further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as

Government of India debt papers. These Funds carry zero Default risk but are associated with

Interest 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, corporate

debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take minimum

exposure in equities. It gets benefit of both equity and debt market. These scheme ranks

slightly 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. These funds

primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial

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 liquidity

and 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 cash

management of corporate houses and are meant for an investment horizon of 1day to 3

months. These schemes rank low on risk-return matrix and are considered to be the safest

amongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in

both equities and fixed income securities, which are in line with pre-defined investment objective of

the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part

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 objectives

of the fund. The investor can align his own investment needs with the funds objective and invest

accordingly.

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 schemes normally

invest a major part of their fund in equities and are willing to bear short-term decline in value

for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of these

schemes is to provide regular and steady income to investors. These schemes generally invest

in 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 schemes

invest 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 any

Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular index

such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only

those stocks that constitute the index. The percentage of each stock to the total holding will be

identical 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, Software,

Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are

dependent on the performance of the respective sectors/industries. While these funds may give

higher returns, they are more risky compared to diversified funds. Investors need to keep a

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 all

income 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 funds

also 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 shares

increase in price. You can then sell your mutual fund shares for a profit. Funds will also

usually give you a choice either to receive a check for distributions or to reinvest the earnings

and get more shares.

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 the

expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive

way 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 is

to invest in a large number of assets so that a loss in any particular investment is minimized by gains

in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to

reducing 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 available

instruments 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.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesn’t perform in neither the market, as their

management is not dynamic enough to explore the available opportunity in the market, thus many

investors 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 they

charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra

cost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high returns from a few

investments often don't make much difference on the overall return. Dilution is also the result of a

successful fund getting too big. When money pours into funds that have had strong success, the

manager 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 personal tax

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 advantageous for the

individual to defer the capital gains liability.

Mutual Funds Industry in IndiaThe origin of mutual fund industry in India is with the introduction of the concept of mutual fund by

UTI in the year 1963. 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 improvements, both quality wise

as well as quantity wise. Before, the monopoly of the market had seen an ending phase, the Assets

Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUM

to Rs. 470 in in March 1993 and till April 2004, it reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the

deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking

industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the country.

Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime

responsibility of all mutual fund companies, to market the product correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the development of the

sector. Each phase is briefly described as under.

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 1 Week

Since Inception

1 JM Core 11 Fund - Series 1 - Growth 

Mar 26 , 2008  

8.45 5.12  -94.64 

2 Tata Indo-Global Infrastructure Fund - 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 Enterprise Equity Fund - Growth 

Mar 26 , 2008  

14.07 5  20.92 

5 DBS Chola Infrastructure Fund - Growth 

Mar 26 , 2008  

9.01 4.65  -17.17 

6 ICICI Prudential Fusion Fund - Series III - Institutional - Growth 

Mar 26 , 2008  

10.2 4.62  23.69 

7 DSP Merrill Lynch Micro Cap Fund - 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 - Series 33 - 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 

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 from

many 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 and

Exchange 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 securities,

Bonds, 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 mostly calculated

daily based on the total value of the fund divided by the number of shares currently issued and

outstanding. The value of all the securities in the portfolio in calculated daily. From this, all expenses

are deducted and the resultant value divided by the number of units in the fund is the fund’s 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 inputs from investment analysts.

– Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information, which individual investors cannot access.

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 history of mutual funds in India can be

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 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.

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 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 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. consolidation and growth. As at the end of

September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

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 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.

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 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 and T-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.

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.

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.

Working of a Mutual fund :

The entire mutual fund industry operates in a very organized way. The investors, known as unit

holders,handover their savings to the AMCs under various schemes. The objective of the investment

should 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 generated from the

investments is passed on to the investors or reinvested as mentioned in the offer document.

Guidelines of the SEBI for Mutual Fund Companies :

To protect the interest of the investors, SEBI formulates policies and regulates the mutual

funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to

time.

SEBI approved Asset Management Company (AMC) manages the funds by making

investments in various types of securities. Custodian, registered with SEBI, holds the securities

of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or board of

trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual

funds that the mutual funds function within the strict regulatory framework. Its objective is to

increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading

professional standards and in promoting best industry practices in diverse areas such as

valuation, disclosure, transparency etc.

Documents required (PAN mandatory):

Proof of identity :

1. Photo PAN card

2. In case of non-photo PAN card in addition to copy of PAN card any one of the following:

driving license/passport copy/ voter id/ bank photo pass book.

Proof of address (any of the following ) :latest telephone bill, latest electricity bill, Passport,

latest bank passbook/bank account statement, latest Demat account statement, voter id, driving

license, ration card, rent agreement.

Offer document: An offer document is issued when the AMCs make New Fund Offer(NFO).

Its advisable to every investor to ask for the offer document and read it before investing. An

offer document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format)

Summary Information

Glossary of Defined Terms

Risk Disclosures

Legal and Regulatory Compliance

Expenses

Condensed Financial Information of Schemes

Constitution of the Mutual Fund

Investment Objectives and Policies

Management of the Fund

Offer Related Information.

Key Information Memorandum: a key information memorandum, popularly known as KIM,

is attached along with the mutual fund form. And thus every investor get to read it. Its contents

are:

1 Name of the fund.

2. Iestment objective

3. Aset allocation pattern of the scheme.

4. Risk profile of the scheme

5. Plans & options

6. Minimum application amount/ no. of units

7. Benchmark index

8. Dividend policy

9. Name of the fund manager(s)

10 . Expenses of the scheme: load structure, recurring expenses

11. Performance of the scheme (scheme return v/s. benchmark return)

12. Year- wise return for the last 5 financial year.

Distribution channels:

Mutual funds posses a very strong distribution channel so that the ultimate customers doesn’t

face any difficulty in the final procurement. The various parties involved in distribution of

mutual funds are:

1. Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. The

investors can approach to the AMCs for the forms. some of the top AMCs of India are;

Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI, Mirae

Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include: Standard

Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, etc.

2 .Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-broker to

popularize their funds. AMCs can enjoy the advantage of large network of these brokers and

sub brokers.eg: SBI being the top financial intermediary of India has the greatest network. So

the AMCs dealing through SBI has access to most of the investors.

3. Individual agents, Banks, NBFC: investors can procure the funds through individual agents,

independent brokers, banks and several non- banking financial corporations too, whichever he

finds convenient for him.

Research reportObjective of research ;

The main objective of this project is concerned with getting the opinion of people

regarding mutual funds and what they feel about availing the services of financial

advisors.

I have tried to explore the general opinion about mutual funds. It also covers why/ why

not investors are availing the services of financial advisors.

Along with it a brief introduction to India’s largest financial intermediary, SBI has

been given and it is shown that how they operate in mutual fund deptt

Scope of the study:

The research was carried on in the Northern Region of India. It is restricted to Mumbai. I have

visited people randomly nearby my locality, different shopping malls, small retailers etc.

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 and some special publications of SBI .

Sampling:

Sampling procedure:

The sample is selected in a random way, irrespective of them being investor or not or

availing the services or not. It was collected through mails and personal visits to the

known persons, by formal and informal talks and through filling up the questionnaire

prepared. The data has been analyzed by using the measures of central tendencies like

mean, median, mode. The group has been selected and the analysis has been done on

the basis statistical tools available.

Sample size:

The sample size of my project is limited to 50 only. Out of which only 35 people

attempted all the questions. Other 15 not investing in MFs attempted only 2 questions.

Sample design:

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

Limitation:

Time limitation.

Research has been done only at Mumbai.

Some of the persons were not so responsive.

Possibility of error in data collection.

Possibility of error in analysis of data due to small sample size.

QUESTIONNAIRE

A study of preferences of the investors for investment in mutual funds.

1. Personal Details:

(a). Name:- (b). Add: - Phone:- (c). Age:- (d). Qualification:-

(e). Occupation. Pl tick (√)

Govt. Ser Pvt. Ser Business Agriculture Others

(g). What is your monthly family income approximately? Pl tick (√).

Up to Rs.10,000

Rs. 10,001 to 15000

Rs. 15,001 to 20,000

Rs. 20,001 to 30,000

Rs. 30,001 and above

2. What kind of investments you have made so far? Pl tick (√). All applicable.

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate

Graduation/PG Under Graduate Others

3. While investing your money, which factor will you prefer? .

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

4. Are you aware about Mutual Funds and their operations? Pl tick (√). Yes No

5. If yes, how did you know about Mutual Fund?

a. Advertisement b. Peer Group c. Banks d. Financial Advisors

6. Have you ever invested in Mutual Fund? Pl tick (√). Yes No 7. If not invested in Mutual Fund then why?

(a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? Pl. tick (√). All applicable.

a. SBIMF b. UTI c. HDFC d. Reliance e. Kotak f. Other. specify

9. If invested in SBIMF, you do so because (Pl. tick (√), all applicable).

a. SBIMF is associated with State Bank of India.

b. They have a record of giving good returns year after year.

c. Agent’ Advice

10. If NOT invested in SBIMF, you do so because (Pl. tick (√) all applicable).

a. You are not aware of SBIMF.

b. SBIMF gives less return compared to the others.

c. Agent’ Advice

11. When you plan to invest your money in asset management co. which AMC will you prefer?

Assets Management Co.

a. SBIMF

b. UTI

c. Reliance

d. HDFC

e. Kotak

f. ICICI

12. Which Channel will you prefer while investing in Mutual Fund?

(a) Financial Advisor (b) Bank (c) AMC

13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (√).

a. One Time Investment b. Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose?

a. Having only debt portfolio

b. Having debt & equity portfolio.

c. Only equity portfolio.

15. How would you like to receive the returns every year? Pl. tick (√).

a. Dividend payout b. Dividend re-investment c. Growth in NAV

16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (√). Yes No