1. DISSERTATION REPORT
ON
MUTUAL FUNDS INDUSTRY IN INDIA
Submitted to Maharishi Dayanand University, Rohtak
In the partial fulfillment of degree of
Master of Business Administration (MBA)
(Session 2005-2007)
Under guidance of: Submitted By-
Ms Bhawna sharma YOGESH KHURANA
MBA (Final)
Reg. No: ________
____________________________________________________________
D.A.V. Institute of Management, Faridabad

2. ACKNOWLEDGEMENT
Concentration, dedication, hard work and application are essential but not the only factor
to achieve the desired goal. Those must be supplemented by the guidance assistance and
cooperation of experts to make it success.
I am extremely grateful to my institute for providing me the opportunity to undertake this
research project in the prestigious field.
With profound pleasure, I extend my extreme sincere sense of gratitude and indebtedness
to my faculty for extensive and valuable guidance that was always available to me
ungrudgingly and instantly, which help me complete my project without difficulty.
I express my deep and sincere gratitude to Ms Bhawna Sharma, faculty member for
providing me first hand knowledge about other related subjects.
Last but not the least I am indebted to Mr. Sharma, Director of our institute without
whose sincere gratitude this project would not have been possible.
(YOGESH KHURANA)

3. PREFACE
Practical exposure imbibes an integral part of management studies. One cannot rely
merely upon the theoretical knowledge. However class lectures make the functional
concepts clear, but these must be correlated with practical projects.
I consider myself lucky to get the project in India’s best bank. It was a great learning
experience. It helped me to get a practical insight into how to conduct research and to
make my concepts clearer.
In this project I have tried to give comprehensive picture of details of my project.
Learning is like eating. It is not how much one eat that matters, what counts is how much
you digest. Knowledge is potential power, wisdom is real power.
Today’s economy has caused business to rethink their technology decisions. Budgets
have been cut and priorities have been reset. Companies can impact their bottom line
tremendously by gathering necessary information. This dissertation is concerned with the
study mutual funds industry in India
During my tenure of dissertation I studied about mutual funds industry in India and
deeply analyzed its various aspects. This dissertation shows the very aspect undertaken in
context to “MUTUAL FUNDS INDUSTRY IN INDIA”

4. DECLARATION
I, Yogesh Khurana Enrolment No. 05-DAVM-124 No. Class MBA of DAVIM hereby
declares that the project entitled “Mutual fund industry in India” is an original work and
the same has not been submitted to any other institution for the award of any other
Degree. The interim report was presented to the supervisor on 12th March 2007. The
feasible suggestions have been duly incorporated in consultation with the supervisor.
Countersigned
Signature of the supervisor signature of the candidate
Forwarded by:
Director/Principal of the institute

5. INTRODUCTION OF THE STUDY
MUTUAL FUNDS
A mutual fund is a form of collective investment that pools money from many investors
and invests the money in stocks, bonds, short-term money market instruments, and/or
other securities. In a mutual fund, the fund manager trades the fund's underlying
securities, realizing capital gains or loss, and collects the dividend or interest income.
Your search for Mutual Fund India information follows. The investment proceeds are
then passed along to the individual investors. The value of a share of the mutual fund,
known as the net asset value (NAV), is calculated daily based on the total value of the
fund divided by the number of shares purchased by investors.
Mutual funds are financial intermediaries, which collect the savings of investors and
invest them in a large and well diversified portfolio of securities such as money market
instruments, corporate and government bonds and equity shares of joint stock companies.
Mutual funds can survive and thrive only if they can live up to the hopes and trusts of
their individual members .The project deals with the structure of mutual funds industry in
India and its constituents. It also classified the mutual fund schemes and describes the
major players in the industry. The project includes the analysis of performance of 7
mutual fund companies. Which comprises of 3 private players, 3 public and UTI.The
Mutual fund companies have been selected on the basis of their AUM (ASSETS UNDER
MANGEMENT).

6. • COMPANIES HAVING PRIVATE OWNERSHIP
1. Birla Sun Life Mutual Fund
2. Franklin Templeton Mutual Fund
3. Prudential ICICI Mutual Fund
• COMPANIES HAVING PUBLIC OWNERSHIP
4. Canbank Mutual Fund
5. LIC Mutual Fund
6. SBI Mutual Fund
OBJECTIVES OF STUDY
.
 To study about various schemes of mutual funds in India.
 To study the recent and emerging trends in Mutual Fund Market.
 To analyze the performance of major private and public players in Mutual Funds
Industry during 2005-06.

7. RESEARCH METHODOLGY
The whole study is based upon primary data. Therefore, information has been collected
from various magazines, journals, websites, and bulletins.
RESEARCH DESIGN
Scope of study:
The scope of any study should be to cover as large a population as possible to
cover any errors. But due to time and money constraints, this study is limited to
Ambala only. The study involves an interaction with the consumers An effort was
put to cover every dealer in the city and obtain correct and relevant information
DATA COLLECTION
Collection of data is the critical point in the research process. There are two basic
methods of data collection:
• Primary method
• Secondary method

8. For my analysis I have selected the primary method of data collection i.e.
i. Questionnaire
ii. Interview method
iii. Telephone interview
DATA COLLECTION TECHNIQUE:
 QUESTIONNAIRES
 INTERVIEWS
SAMPLING DESIGN
Sampling unit:
 INDIVIDIUAL INVESTORS

9. Sampling size:
 100
Sampling techniques:
 I use many sampling techniques like
• Simple random sampling
• Stratified random sampling
• Judgment sampling

10. MUTUAL FUND-AN 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 then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realised are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. A mutual
fund is simply 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 pooled money into specific securities
(usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or
portions) of the mutual fund and become a shareholder of the fund.
Mutual funds can invest in many different kinds of securities (Mutual Fund India). The
most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock
funds, for instance, can invest primarily in the shares of a particular industry, such as
technology or utilities. These are known as sector funds. Bond funds can vary according
to risk (high yield or junk bonds, investment-grade corporate bonds), type of issuers
(government agencies, corporations, or municipalities), or maturity of the bonds (short or
long term). Both stock and bond funds can invest in primarily US securities (domestic
funds), both US and foreign securities (global funds), or primarily foreign securities
(international funds). Most mutual funds' investment portfolios are continually adjusted
under the supervision of a professional manager, who forecasts the future performance of
investments appropriate for the fund and chooses the ones which he or she believes will
most closely match the fund's stated investment objective. A mutual fund is administered
through a parent management company, which may hire or fire fund managers.

11. DEFINITION:
A mutual fund is a trust that pools the savings of a number of investors who
shares a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion to the number of units owned by them.
“…. A mutual fund is a company that brings together money from
many people and invest in a stock, bonds, or other asset the funds
owns are known as its portfolio. Each investor in the fund owns
share which represents a part of these holdings….”
- The U.S. Securities and Exchange Commission.

12. THE GOAL OF MUTUAL FUND
The goal of a mutual fund is to provide an individual to make money. There are several
thousand mutual funds with different investments strategies and goals to choosen from.
Choosing one can be over whelming, even though it need not be different mutual funds
have different risks, which differ because of the fund`s goals fund manager, and
investment style. Money from a mutual fund is made when the stocks, bonds or other
securities increase in value ( a capital gain ) issue dividends or make interest payments
when investing in a mutual fund the income you make it the result of income received
from dividend paying stocks, and interest from bonds. If the fund sell a holding whose
value is increased you make money even if the fund does not sell that specific holding.
The fund itself will still increase in value, and in that way you may also make money
therefore the value of shares you hold in mutual fund will increase in value when the
holdings increases in value capital gains and income or dividend payments are best
reinvested for younger investors. Retires often seek the income from dividend
distribution to augment their income with reinvestment of dividends and capital
distribution your money increase at a even greater rate. When you redeem your shares
what you receive is the value of the share.

13. MUTUAL FUND OPERATIONS FLOW CHART
The flow chart below describes broadly the working of a Mutual Fund:

14. ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organisational set up of a mutual fund:

15. THE ADVANTAGES OF MUTUAL FUNDS
The advantages of investing in a Mutual Fund are:
• Professional Management
• Diversification
• Convenient Administration
• Return Potential
• Low Costs
• Liquidity
• Transparency
• Flexibility
• Choice of schemes
• Tax benefits
Professional Management - The primary advantage of funds is the professional
management of your money. Investors purchase funds because they do not have the time
or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive
way for a small investor to get a full-time manager to make and monitor investments.
Diversification - By owning shares in a mutual fund instead of owning individual stocks
or bonds, your risk is spread out. 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.
Economies of Scale - Because a mutual fund buys and sells large amounts of securities
at a time, its transaction costs are lower than you as an individual would pay.
Liquidity - Just like an individual stock, a mutual fund allows you to request that your
shares be converted into cash at any time.

16. Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of
mutual funds, and the minimum investment is small. Affordability: With many mutual
funds, you can begin buying units with a relatively small amount of money Some mutual
funds also let you buy more units on a regular basis with even smaller installments.
Flexibility: Many mutual fund companies administer several different mutual funds and
allow you to switch between funds within their 'fund family' at little or no charge.
Performance Monitoring: The value of most mutual funds is reported daily in the
financial press and on many Internet sites, allowing you to continually monitor the
performance of your investment.
DISADVANTAGES OF MUTUAL FUNDS:
Professional Management- Did you notice how we qualified the advantage of
professional management with the word "theoretically"? Many investors debate over
whether or not the so-called professionals are any better than you or I at picking stocks.
Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a
profit. The mutual fund industry is masterful at burying costs under layers of jargon.
Dilution - It's possible to have too much diversification (this is explained in our article
entitled "Are You Over-Diversified?"). Because funds have small holdings in so many
different companies, high returns from a few investments often don't make much
difference on the overall return.

17. MUTUAL FUND INDUSTRY IN INDIA
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6,700 crores of assets under management
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores

18. Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets
of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under
management was way ahead of other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations

19. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.

20. GROWTH IN ASSETS UNDER MANAGEMENT
The graph indicates the growth of assets over the years:

21. FUTURE OF MUTUAL FUNDS IN INDIA
By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimat-
ed that by 2010 March-end, the total assets of all scheduled commercial banks should be
Rs 40,90,000 crore.
The annual composite rate of growth is expected 13.4% during the rest of the decade. In
the last 5 years we have seen annual growth rate of 9%. According to the current growth
rate, by year 2010, mutual fund assets will be double.
SOME FACTS FOR THE GROWTH OF MUTUAL FUNDS IN INDIA
• 100% growth in the last 6 years.
• Number of foreign AMC's are in the que to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management
worldwide.
• Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than US having more
than 800. There is a big scope for expansion.

22. • 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.
• Mutual fund can penetrate rurals like the Indian insurance industry with simple
and limited products.
• SEBI allowing the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.

23. TYPES OF MUTUAL FUND SCHEMES
• By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes
• By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes
• Other Schemes
o Tax Saving Schemes
o Special Schemes
 Index Schemes
 Sector Specfic Schemes
Equity funds: These funds involve only common stock investments. They can earn a lot
of profit, but are also very risky.
Fixed income funds: They include corporate and government securities. These funds
offer fixed returns at a low risk.
Balanced funds: This is the combination of bonds and stocks with a low risk. However,
the investment does not earn a lot through these funds.

24. How it works?
Mutual fund shares can be purchased from the company itself or a broker. There are
secondary market investors also, like the New York Stock Exchange. Per share net asset
value of the funds or NAV is the price that you pay for buying a mutual fund share. It
also includes the shareholder fee that is imposed by the fund, at time of purchase. The
best feature of mutual funds is that these shares are ‘redeemable’. You, as an investor,
can sell your shares back to the broker. In order to accommodate new investors, mutual
fund companies generally create new shares and sell them. They keep selling their shares
continuously till they become large. Investment advisers act as separate entities and are
responsible for managing the investment portfolio of the mutual funds. Investing in
mutual funds tends to lower the risk factor because they are the result of diverse
investments. Since someone else manages your investments, you need not worry about
keeping constant tabs on the investment, though a periodical check enhances your
personal book of accounts. Managing funds is the full time job of the fund manager and
he is responsible for the performance and health of the investment.
The rate of returns in mutual funds is based on the increase or decrease of the value,
during a specific period. Returns of a fund indicate the track record. It is important to
remember that the past performance cannot guarantee future results.
As in the case of any investment or business, mutual funds also have risks associated with
the returns. It is essential to set your financial goals and requirements, before investing in
a mutual fund.

25. TRENDS AND STRUCTURE OF THE INDIAN MUTUAL FUND
INDUSTRY
Though young, the industry has made significant strides in terms of its variety,
sophistication and regulation. The mutual fund industry's existence in India is divided
into four phases.
The first phase which spanned across 1963-1987 saw UTI consolidating its position by
offering a host of products and extending its reach throughout the country.
The next phase (1987-93) marked the arrival of mutual funds sponsored by public sector
banks and financial institutions.
With the arrival of private sector players, both Indian and foreign, began the third phase
(1993-1996).1996 marks yet another milestone in the history of the mutual fund industry
in the country as SEBI (Mutual Funds) Regulations came into being.
The fourth phase, which is in vogue now, begun in 2003, marks, perhaps, the most
significant event in the history of the mutual fund industryrestructuring of UTI. There
was the rush of players into the mutual fund industry during the last decade could be
attributed to low entry barriers, both regulatory and competitive, and the desire of the
existing financial players to broad-base their activities in the financial sector. The period
is also characterized by significant developments such as standardization of operations,
increased influence of technology, best practices, product innovation, and improved
regulatory environment.

26. EVOLVING DISTRIBUTION MODELS
The growing need for a strong distribution network and models for the mutual fund
industry in India to serve the huge untapped market in the country. It observes that the
intensifying competition and the need to attain economies of scale are forcing industry
players to increase their reach in non-metro cities and small towns, where the potential is
high, but, penetration is low.
This is resulting in fund houses exploring innovative distribution channels like
Depository and Distributor models along with the traditional ones like Collection Center
model.
Further, increasing commoditization and growing needs of the customers are forcing
players to shift to solution-based models from the product-based ones.
In either model, the role of the distribution channel remains critical as it helps stave off
competition by maintaining relationships, providing advisory services and customizing
need-based solutions.

27. INDIAN MUTUAL FUND INDUSTRY: OPPORTUNITIES AND
CHALLENGES
There are various challenges and opportunities before the industry. It suggests that a
major challenge before the industry is how to attract retail investors, who are the
backbone of the industry and who provide stability for the growth of the mutual fund
industry. Further, to fuel its growth, the mutual fund industry needs to emphasize creating
greater awareness among investors. Also, it is imperative that the mutual fund industry
addresses the problem of size and its impact on the investors. A large size does not
provide best returns to the investors as the cost of operations is high on account of high
turnover.
MUTUAL FUND INDUSTRY IN INDIA: DEVELOPMENT AND
GROWTH
The Indian mutual fund industry is one of the fastest growing sectors in the Indian capital
and financial markets. The mutual fund industry in India has seen dramatic improvements
in quantity as well as quality of product and service offerings in recent years. Mutual
funds assets under management grew by 96% between the end of 1997 and June 2003
and as a result it rose from 8% of GDP to 15%. The industry has grown in size and
manages total assets of more than $30351 million. Of the various sectors, the private
sector accounts for nearly 91% of the resources mobilised showing their overwhelming
dominance in the market. Individuals constitute 98.04% of the total number of investors
and contribute US $12062 million, which is 55.16% of the net assets under management.

28. TOP INDIAN MUTUAL FUNDS
ABN AMRO Mutual Fund
Bank of Baroda Mutual Fund
Benchmark Mutual Fund
Birla Sunlife Mutual Fund
Canbank Mutual Fund
DBS Chola Mutual Fund
Deutsche Mutual Fund
DSP Merrill Lynch Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
Franklin Templeton
HDFC Mutual Fund
HSBC Mutual Fund

29. ING Vysya Mutual Fund
JM Mutual Fund
INVESTMENT TIPS
INVEST IN THE MUTUAL FUND, NOT ITS NAV
What is NAV? Simply put, NAV is the sum total of all the assets of the mutual fund (at
market price) less the expenses (fund manager fees, audit fees, registration fees among
others); divide this by the number of units and you arrive at the NAV per unit of the
mutual fund. An illustration should help us better understand the same.
NAV calculation
Net Assets (Rs) 51,000
Expenses (Rs) 1,000
No. of Units 5,000
NAV (Rs) 10
The following illustration will clearly establish the irrelevance of NAV while making an
investment decision.
NAV: Does size matter?
Open-ended large cap equity funds NAV (Rs) 1-Yr (%)
Franklin Prima Plus (G) 146.17 43.57
Franklin Bluechip (G) 138.10 39.09
Pru ICICI Power (G) 84.51 38.67
HSBC Equity (G) 74.42 37.63
Kotak 30 (G) 72.06 36.54

30. HDFC Equity (G) 153.79 35.50
It is evident that the fund's current NAV and its expected performance are unrelated and
therefore making an investment decision based on the NAV would be misguided. As an
investor you need to consider factors like your own risk profile, the fund's management
style and performance.
1. Risk profile
Investors have a risk profile that dictates how much risk they can take on to achieve their
investment objective. In this backdrop, they must identify mutual funds that can help
them meet their investment objectives at the desired risk level. For instance, some equity
funds adhere to the growth style of investment (aggressively managed funds), while
others follow the value style of investment (conservatively managed funds). So it is
important for investors to select a fund that takes on risk in line with their own risk
appetite.
2. Fund management style
Fund houses have varying fund management styles and processes. Some pursue the
individualistic style, where the fund manager rather than the investment process plays a
dominant role in the investment process. As opposed to this, there are fund houses that
pursue a team-based investment approach where the investment process holds sway over
the individual. Our preference is for the team-based style of investing since it is more
stable and the mutual fund (and its investors) is not over-dependent on an individual.
3. Mutual fund performance
It is imperative for investors to evaluate a mutual fund on parameters related to risk like
Standard Deviation and Sharpe Ratio as also NAV appreciation. The risk parameters
evaluate the volatility in performance (Standard Deviation) and returns generated by the

31. fund per unit of risk borne (Sharpe Ratio). The best deal for an investor will come from a
mutual fund that has higher NAV appreciation and Sharpe Ratio and lower Standard
Deviation.
Hopefully, we have resolved the debate on the NAV and have given the investor more
relevant points to inquire about before considering investing in a mutual fund. So the next
time your mutual fund distributor advances the low NAV or Rs 10 NAV argument,
demand a detailed analysis of the mutual fund based on the parameters we have listed.
Don't ignore the risk factor
Investors would do well not to lose sight of the risk-return trade off while making
investment decisions. Our advice to investors - always invest in line with your risk
appetite and investment objectives. Chasing higher returns and turning a blind eye to risk
in the process could prove hazardous to your finances.
Schemes like NSC and PPF (offering an assured return of 8% per annum) and market-
linked avenues like tax-saving funds are about as similar as chalk and cheese. Sure tax-
saving funds can offer higher returns than NSC and PPF. But the differential should be
seen as a reward for having taken on higher risk. Unlike NSC and PPF, wherein returns
are assured and capital protected, investors in tax-saving funds take on the risk of even
losing the capital invested, depending on market conditions.
The investment advisor's rationale was fairly simple (and completely incorrect) -
investors should only be concerned about the returns and opt for avenues that are
equipped to offer the highest returns. A vital factor i.e. risk didn't feature in his scheme of
things at all.

32. FAQS ON MUTUAL FUNDS
What is a Mutual Fund?
A Mutual Fund is a body corporate registered with the Securities and
Exchange Board of India (SEBI) that 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.
Which was the First Mutual Fund to be set up in India?
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
Which are the other institutions that have floated Mutual Funds in India?
Currently public sector banks like SBI, Canara Bank, Bank of India, institutions like
IDBI, GIC, LIC Foreign Institutions like Alliance, Morgan Stanley, Templeton and
Private financial companies like HDFC, Prudential ICICI, DSP Merrill Lynch, Sundaram,
Kotak Mahindra etc. have floated their own mutual funds
What is the Regulatory Body for Mutual Funds?
Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds
mentioned above. All the mutual funds must get registered with SEBI. The only

33. exception is the UTI, since it is a corporation formed under a separate Act of Parliament.
Why should I choose to invest in a mutual fund?
• 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.
How do mutual funds diversify their risks?
Financial theory states that an investor can reduce his total risk by holding a portfolio of
assets instead of only one asset. By creating a portfolio of a variety of assets, this risk is
substantially reduced.
Can mutual funds be viewed as risk-free investments?
No. Mutual fund investments are not totally risk free. In fact, investing in mutual funds
contains the same risk as investing in the markets, the only difference being that due to
professional management of funds the controllable risks are substantially reduced.
What are the risks involved in investing in mutual funds?
A very important risk involved in mutual fund investments is the market risk. When the
market is in doldrums, most of the equity funds will also experience a downturn.

34. What are the parameters on which a Mutual Fund scheme should be evaluated?
Performance indicators like total returns given by the fund on different schemes, the
returns on competing funds, the objective of the fund and the promoters’ image are some
of the key factors to be considered while taking decision regarding mutual funds.
What are the different types of plans that any mutual fund scheme offers?
That depends on the strategy of the concerned scheme. But generally there are 3 broad
categories. A dividend plan entails a regular payment of dividend to the investors. A
reinvestment plan is a plan where these dividends are reinvested in the scheme itself. A
growth plan is one where no dividends are declared and the investor only gains through
capital appreciation in the NAV of the fund.
What is NAV and how it is calculated?
NAV is the net asset value of the fund. Simply put it reflects what the unit held by an
investor is worth at current market prices.
What is Switch?
Some Mutual Funds provide the investor with an option to shift his investment from one
scheme to another within that fund. For this option the fund may levy a switching fee.
Switching allows the Investor to alter the allocation of their investment among the
schemes

35. What is the difference between mutual funds and portfolio management schemes?
While the concept remains the same of collecting money from investors, the target
investors are different. In the case of portfolio management the target investors are high
net worth investors while in case of mutual funds the target investors are the retail
investors.
How does the concept of entry load work in case of unit purchases?
An entry load is an additional cost that an investor pays at the point of entry. Assume that
your proposed investment is Rs.10,000/-. Also assume that the current NAV of the fund
is Rs.12.00 and that the entry load is Rs.0.50. Then you will receive 10000/12.50 = 800
units. The entry load could be different for each scheme.
What are the broad guidelines issued for a MF?
SEBI is the regulatory authority of MFs. SEBI has the following broad guidelines
pertaining to mutual funds:
• MFs should be formed as a Trust under Indian Trust Act and should be operated
by Asset Management Companies (AMCs).
• MFs need to set up a Board of Trustees and Trustee Companies. They should also
have their Board of Directors.
• The net worth of the AMCs should be at least Rs.5 crore.
• The AMC or any of its companies cannot act as managers for any other fund.
• All MF schemes should be registered with SEBI.
• MFs should distribute minimum of 90% of their profits among the investors.

36. There are other guidelines also that govern investment strategy, disclosure norms and
advertising code for mutual fund
FREQUENTLY USED TERMS
Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The
per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include
a sales load.
Repurchase Price Is the price at which a close-ended scheme repurchases its units and it
may include a back-end load. This is also called Bid Price.
Redemption Price Is the price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. Such prices are NAV related.
Sales Load Is a charge collected by a scheme when it sells the units. Also called, ‘Front-
end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.
Repurchase or ‘Back-end’ Load
Is a charge collected by a scheme when it buys back the units from the unit holders.

37. Analysis
and
interpretation

38. PEOPLE CONSIDERS VARIOUS FACTORS WHILE INVESTING IN MUTUAL FUND
Options responses Percentages(%)
Returns 49 49
Tax saving 26 26
Liquidity 16 16
Risk free 9 9

39. People consider various factor while investing in
mutual fund
60
50
% of response 40
30 Series1
20
10
0
1 2 3 4 5
options
PEOPLE CONSIDER VARIOUS BASES FOR INVESTING IN ANY PARTICULAR
FUND
OPTIONS RESPONSES RESPONSES IN %
Past performance of fund 64 64
Portfolio of fund 36 36

40. people consider various bases while investing in
any particular fund
64
36
S1 responses in
1 %
2
options
PREFERENCE OF VARIOUS MUTUAL FUNDS OF DIFFERENT PEOPLES
Options Responses Responses in %
Franklin Templeton 17 17
HDFC 19 19
Reliance 11 11
ICICI 18 18
SBI 29 29
Any other 8 8

41. preference of various funds of different peoples
8%
17%
1
2
27%
3
19% 4
5
6
11%
18%
PEOPLE INVEST THE DIFFERENT % OF SAVING IN MUTUAL FUNDS
Sr.no Options Responses Responses in %
1 10-20% 46 46
2 20-30% 33 33
3 50% 15 15
4 More than 50% 6 6

42. peoples invest the different % of savings in
mutual funds
50 46
40
responses in %
33
30
20 15
10 6
0
1 2 3 4
options
PEOPLE EXPECTATIONS OF RETURN FROM DIFFERENT FUNDS
Sr.no Options Responses Responses in %
1 10-20% 32 32
2 20-30% 45 45
3 50% 9 9
4 More than 50% 4 4

43. people expectations of returns from different
funds
50 45
45
40
35 32
returns in %
30
25
20
15
9
10
4
5
0
1 2 3 4
options
SUGGESTIONS

44. CONCLUSIONS
Indian mutual fund industry possess great potential for growth. The drivers for growth
are
• Structural changes in the financial sector
• An increasing awareness of mutual funds as a savings vehicle
Development and trends of mutual funds in India are
• The private sector has grown by 51.84% since 1999,.
• The growth has been primarily in open-ended products.

45. • Development in the previous three years was dominated by the growth of debt
products.
• But with the positive outlook for equity markets, there have been increasing flows
into equity products.
LIMITATIONS OF THE STUDY
 Total number of mutual funds in the market is so large that it needs lot of
resources to analyze them all. There are 34 Mutual fund Companies providing

46. more than 750 funds. They fall into large categories. Handling and analyzing such
a varied and diversified data needs more time and resources.
 As the project is based on secondary data, possibility of unauthenticated
information can not be avoided.
The information about same scheme differ from one source to another

47. Annexure
 Questionnaire
 Bibliography
QUESTIONNAIRE
1. Do you invest in mutual fund?
a) Yes b) no
2. What are the factors you consider while investing in mutual fund?
a) Returns b) tax saving c) liquidity d) risk free
3. On what basis you invest in any particular fund?
a) Past performance of fund b) portfolio of fund c) fund manager
4. How you get information regarding mutual fund?
a) Advertisement b) company sales force c) friends/relatives
5. Which mutual fund you prefer to invest?
a) Franklin Templeton b) HDFC c) Reliance d) ICICI e) SBI f) any other

48. 6. How long you prefer to keep your money in mutual fund?
a) Short term b) long term
7. How much of your saving you invest in mutual fund?
a) 10-20% b) 20-30% c) 50% d) more than 50%
8. How much return do you expect from a mutual fund?
a) 10-20% b) 20-30% c) 50% d) more than 50%
9. Which option in a mutual fund you like to choose?
a) Growth b) dividend
10. What type of fund you like to invest?
a) Debt based b) equity based c) balanced fund
11. What type of plan you like to invest?
a) One time investment b) Mip plan c) Sip plan
BIBLIOGRAPHY
Mutual Fund in India by V.A. Avdhani
Money Outlook
Business India
Business world
Business Today
www.amfiindia.com

49. www.mutualfundsindia.com
www.valueresearchonline.com
www.moneypore.com
www.valuenotes.com
www.karvy.com