A

PROJECT REPORT
ON
ANALYSIS OF MUTUAL FUND SCHEMES
AT
KARVY
A report submitted to Accurate Institute of Management and Technology,
Greater Noida as a mandatory part of PGDM curriculum





Submitted To: Submitted By:
PGP CELL SAURABH SRIVASTAVA
AIMT ROLL NO DM10239
GR.NOIDA BATCH NO 2010-12


Accurate Institute of Management and Technology
49 , Knowledge Park-III, Greater Noida-201306.
E-mail : [email protected]







CERTIFICATE
This is to certify that the project report titled Analysis of Mutual Fund Schemes-
submitted to Accurate Institute Of Management and Technology, Greater Noida by
SAURABH SRIVASTAVA-in partial fulfillment of the requirement for the award of Post
Graduate Diploma in Management, i.e., PGDM / PGDM(IB), is an original work carried
out by the below mentioned student under the guidance and supervision of the below
mentioned guides/supervisors. This work has not been submitted anywhere else for any
other degree/diploma under my signature. The original work was carried out during 6-5-
2011 to 6-7-2011. name of the organization Karvy Company Limited. Gorakhpur.
Signature of the student: _________________________

Name of the student: ____________________________

Dated: ________________________________________


Signature of the Industry Guide: ________________________________

Name of the Industry Guide: ___________________________________

Designation of the Industry Guide: ______________________________

E-mail Address: _____________________________________________

Mailing Address: ____________________________________________
Dated: _____________________ Seal/Stamp of the Organization


Signature of the faculty supervisor: __________________________

Name of the faculty supervisor: _____________________________
Dated: ____________________


ii
ACKNOWLEGDEMENT

I take this opportunity to sincerely thank to all those people without whom my
project would not have taken shape.

I would like to offer sincere thanks to Mr MANISH AGARWAL Regional head
Karvy Stock Broking limited, GORAKHPUR who gave me the permission to do
the project in Karvy Stock Broking LTD.

I would express profound appreciation to MR ASHISH , PFE ,Karvy Stock Broking
Limited, for helping me to complete my project successfully in all respect.

It gives me immense pleasure to record my sincere gratitude and heartfelt
thanks to our Director , Mr. AKILESH KUMAR for giving the opportunity to do
project in this company and my academic guide Ms. Shruti Bhatnagar and
other faculty members AIMT for providing me valuable time, guidance,
suggestions in completing my project

Finally, I would owe a deep sense of gratitude to my beloved parents and my
family members for their extensive moral support and also to the members of
Karvy Stock Broking Ltd. who helped me directy or indirectly in completition
of the project .















iii
STUDENT DECLARATI ON

I here by undertake and declare that this submission is my
original work and to the best of my knowledge and belief , it
contains no materials previously published or written by any
other degree or diploma of any other institute or other
university of higher learning,except where due
acknowledgement has been made in text.




SI GNATURE:

DATE:

NAME OF STUDENT: SAURABH SRI VASTAVA
ROLL NO; DM 10239
ACCURATE I NSTI TUTE OF MANAGEMENT AND TECHNOLOGY
















iv
Contents
Chapter-1

1.1 Company Profile
1.2 Vision and mission of company
1.3 Objective
1.4 SWOT analysis
1.5 Service profile

Chapter-2

2.1 Need of study
2.2 Scope of study
2.3 Objectives of study

Chapter-3

3.1 Research Methodlogy
3.2 Process and steps of Research
3.3 Research Problem
3.4 Data Collection

Chapter-4

4.1 Presentation of Data
4.2 Data Analysis

Chapter-5

5.1 Findings
5.2 Suggestions
5.3 Conclusions
5.4 Bibliography
Chapter-6-Annexure

6.1 Questionnaire Format
6.2 Data Summary
v
EXECUTIVE SUMMARY


The Project was carried out for study and analysing the investment in mutual funds to
special reference of Karvy Stock Broking ltd.. It was done to know the different schemes of
mutual funds and role of AMC.
In this Project report I have made an analysis that what is the Investment Pattern, What is
the Prospect and How Mutual funds have emerged a better Investment option in India Recent
Years giving the Investor Higher returns, Liquidity, Safety against Traditional Investment
avenues like Bank-FD, Post office Saving, Investment in Volatile Stock Market Etc.
With the Growth of The Indian economy Due to various economic Factors Including
Industrialization, Growth of Infrastructure and service industries, increased Foreign direct
investment and foreign Institutional Investment, the Indian Companies have grown to become
Global business Giant.
So, the Market Capitalization of the Indian companies has grown which has resulting in a
building of a strong capital market. People are also now more willing to invest and are ready to
take risk. All this Development has proved to be a good atmosphere for mutual fund investment
in India.
Now a days Investment is saving has assumed great importance. Mutual fund offers a
Wide array of Schemes to suit the Customers Different Investment Objective as per their
Financial Position, Risk Taking Capabilities, Age Etc


Vi








Chapter -1

2.1 Company Profile
2.2 Vision and Mission of Company
2.3 Objective
2.4 SWOT Analysis
2.5 Service Profile


























1


1.1COMPANY PROFILE

KARVY, is a premier integrated financial services provider, and ranked among the top five in
the country in all its business segments, services over 18 million individual investors in various
capacities, and provides investor services to over 400 corporate, comprising the who is who of
Corporate India. In 1982 ,a group of Hyderabad based practicing chartered accountant started
KARVY consultants limited with a capital of rs 1,50,000 offering auditing and taxation service
initially. KARVY covers the entire spectrum of financial services such as Stock broking,
Depository Participants, Distribution of financial products - mutual funds, bonds, fixed deposit,
equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services,
Merchant Banking & Corporate Finance, placement of equity, IPOs, among others. Karvy has a
professional management team and ranks among the best in technology, operations and research
of various industrial segments.
Thus over the last 25 years karvy has travelled the success route, towards building a
reputation as an integrated service provider, offering a wide spectrum of service. And they have
made this journey by taking the route of quality service, path breaking innovation in service
versatility in the service and finally totally in service .High qualified manpower, cutting edge
technology, comprehensive infrastructure and total customer focus has secured for them the
position in of emerging financial service giant enjoying the confidence and support of an
enviable clients across diversified fields in financial world.
Today, karvy has access to million of share of holder besides, companies, banks, financial
institutions and regularatory agencies over the past two and half decades ,karvy has evolved a
variable linked between industry , finance and people.
January 1998, karvy became the first depository participants in Andhra Pradesh. An ISO9001-
9002 COMPANY, KARVYS commitment to quality and retail reach has make it an integrated
financial services company.

KARVY ALLIANCE
Karvy computer share private limited is a 50-50 joint venture of karvy consultant ltd and
Computer share ltd Australia. Computer share ltd is worlds largest and global share registry ,and
a leading financial market services provider to the global securities industry.










2



The joint venture with computer share , reckoned as the largest registrar in the worls, servicing
over 60 million shareholder accounts for over 7000 corporations across eleven countries spread
across five continents. Computer share manages more than 70 million share holder accounts for
over 13000 corporations around the world.
Karvy computer share private ltd, today is indias largest registar and share transfer agent
servicing over 400 corporate and mutual funds and 18 million investors.



1.2 VISION OF THE ORGANISATION
To be amongst the most trusted power utility company of the country by providing environment
friendly power on most cost effective basis, ensuring prosperity for its shareholders and growth
with human face.










MISSION OF THE ORAGANIZATION
Perfection is Power
1. To ensure most cost effective power for sustained growth of India.
2. To provide clean and green power for secured future of countrymen.
3. To retain leadership position of the organization in hydropower generation, while working
with dedication innovation in every project undertaken.
4. To maintain continuous pursuit for cost effectiveness embanked productively for ensuring
financial health of the organization, to take care of shareholder aspiration continuously.
5. T o be a technology driven ,transparent organization, ensuring dignity and respect of its team
members.








3





1.3 QUALITY OBJECTIVES
As per the quality policy, KARVY will:
1. Build in house process that will ensure transparent and harmonious relationships with its
clients and investors to provide high quality of services.
2. Establish a partner relationship with its investor service agents and vendors that will help in
keeping its commitment to the customers.
3. Provide high quality of work life for all its employees and equip them with adequate
knowledge and skills so as to respond to customers need.
4. Continue to uphold the values of honesty and integrity and strive to establish unparalleled
standards in business ethics.












4















2.4 KARVY GROUP AND PRINCIPAL ACTIVITIES
Welcome to Karvy Stock Broking

KARVY Stock Broking Limited, one of the cornerstones of the KARVY edifice, flows freely
towards attaining diverse goals of the customer through varied services. It creates a plethora of
opportunities for the customer by opening up investment vistas backed by research-based
advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping
the customer create waves in his portfolio and empowering the investor completely is the
ultimate goal. KARVY Stock Broking Limited is a member of:
1) National Stock Exchange (NSE)
2) Bombay Stock Exchange (BSE),
3) MCX Stock Exchange(HSE)
Karvy Comtrade Limited
Commodities market, contrary to the beliefs of many people, has been in existence in India
through the ages. However the recent attempt by the Government to permit Multi-commodity
National levels exchanges has indeed given it, a shot in the arm. As a result two exchanges Multi
Commodity Exchange (MCX) and National Commodity and derivatives Exchange (NCDEX)
have come into being. These exchanges, by virtue of their high profile promoters and
stakeholders, bundle in themselves, online trading facilities, robust surveillance measures

5








And a hassle free settlement system. The futures contracts available on a wide spectrum of
commodities like Gold, Silver, Cotton, Steel, Soya oil, Soya beans, Wheat, Sugar, Chana etc.,
provide excellent opportunities for hedging the risks of the farmers, importers, exporters, traders
and large scale consumers. They also make open an avenue for quality investments in precious
metals. The commodities market, as it is not affected by the movements of the stock market or
debt market provides tremendous opportunities for better diversification of risk. Realizing this
fact, even mutual funds are contemplating of entering into this market.

Karvy Comtrade Limited is another venture of the prestigious Karvy group. With our well
established presence in the multifarious facets of the modern Financial services industry from
stock broking to registry services, it is indeed a pleasure for us to make foray into the
commodities derivatives market which opens yet another door for us to deliver our service to our
beloved customers and the investor public at large.



KARVY Insurance Broking Ltd.

At Karvy Insurance Broking Limited we provide both life and non-life insurance products to
retail individuals, high net-worth clients and corporates. With the opening up of the insurance
sector and with a large number of private players in the business, we are in a position to provide
tailor made policies for different segments of customers. In our journey to emerge as a personal
finance advisor, we will be better positioned to leverage our relationships with the product
providers and place the requirements of our customers appropriately with the product providers.
With Indian markets seeing a sea change, both in terms of investment pattern and attitude of
investors, insurance is no more seen as only a tax saving product but also as an investment
product. By setting up a separate entity, we would be positioned to provide the best of the
products available in this business to our customers.











6
Karvy Investors Services Limited
Deepening of the Financial Markets and an ever-increasing sophistication in corporate
transactions, has made the role of Investment Bankers indispensable to organizations seeking
professional expertise and counselling, in raising financial resources through capital market apart
from Capital and Corporate Restructuring, Mergers & Acquisitions, Project Advisory and the
entire gamut of Financial Market activities.
Karvy Investor Services Limited (KISL), a SEBI registered Merchant Banker has emerged as a
leading Investment Banking entity in the country with over a decade of experience. KISL has
built its reputation by capitalizing on its qualified professionals, who have successfully executed
a large number of complex and unique transactions.
Our quality professional team and our work-oriented dedication have propelled us to offer value-
added corporate financial services and act as a professional navigator for long term growth of our
clients, who include leading corporates, State Governments, Foreign Institutional Investors,
public and private sector companies and banks, in Indian and global markets.

We have also emerged as a trailblazer in the arena of relationships, both at the customer and
trade levels because of our unshakable integrity, seamless service and innovative solutions that
are tuned to meet varied needs. Our team of committed industry specialists, having extensive
experience in capital markets, further nurtures this relationship.


Credentials
its Group entities in Research, Stock Broking, Institutional Sales and Emerging as a
leading Investment Banker with a strong support from Retail Distribution.
Strong team of more than 25 qualified professionals operating from six cities; Hyderabad,
Mumbai, Delhi, Kolkata, Chennai, and Bangalore apart from two overseas offices at New
York (USA) and Dubai.



7
Karvy Realty India Limited

Karvy Realty India Limited is promoted by the KARVY Group, a premier and leading integrated
financial services company. KARVY services over 60 million individuals in various capacities,
and provides services to over 400 corporates. KARVY has a network of 400+ branches and 500+
franchisees which enables the Group to have an unmatched reach to stay in touch with the
customers as well as to act as a delivery mechanism for its various products.

KARVY is focused on understanding its customers needs which helps in offering solutions best
suited to them. The group carries forward its legacy of trust and excellence in investor and
customer service delivered with passion and the highest level of quality that align with global
standards. The KARVY Group covers the entire spectrum of services such as Real Estate, Stock
Broking, Distribution of financial products (mutual funds, bonds, fixed deposit, equities),
Personal Finance Advisory Services, Merchant Banking & Corporate Finance, Wealth
Management, NBFC and others. Such diversification of business lines allows for scale, stability,
agile solutions and expertise building.

We at Karvy Realty endeavor to be an integrated real estate investment advisory and
management company that aims to service the mass demand for housing needs in India and to
facilitate the Realty sectors need for structured finance, delivered by a top-notch team of
experienced professionals.


Karvy Computer Share Limited

Karvy Computershare Private Limited (KCPL), presently Indias largest registrar and transfer
agent, is a 50:50 joint venture between the Karvy group and Computershare Ltd Karvy group is a
diversified financial services conglomerate, which undertakes activities of registrar & transfer
agent, depository participant, stock broking, commodities broking, distribution of financial
products, non-banking financial services, wealth management and investment banking. It is
among the top 5 players in most of the segments of the businesses that it operates in. The Karvy
group consists of 12,500 employees, having 428 offices in 385 locations across India, apart from
a franchisee network of 450 offices.

The group is present in New York through a subsidiary company and through a representative
office in Dubai. Computer share can genuinely be considered as an Australian success story.
From modest beginnings in 1978, the Company now employs over 10,000 people and provides
services in 20 countries to more than 30,000 clients.



8
The success can be attributed to many factors, not least of which being the commitment to
providing world-class services and products that perfectly align to the strategic needs of our
clients in attracting and engaging their stakeholders. In addition, the success can also be
attributed to our ability to develop and retain high caliber employees who are focused on service
excellence.

Over the past five years, Computershare has become both the worlds largest provider of investor
services. The prime focus of our growth and solution development has centered on issuers, their
stakeholders and the challenge of removing barriers to efficient servicing of these important
stakeholder groups.

Today, Computershare is considered a world leader in share registration, employee equity plans,
proxy solicitation and other specialized financial, governance and stakeholder communication
services.
KCPL provides registry services to domestic and foreign mutual funds and corporates across the
country.


Karvy Consultants Limited



As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained
at the helm of organizational affairs, pioneering business policies, work ethic and channels of
progress.

Having emerged as a leader in the registry business, the first of the businesses that we ventured
into, we have now transferred this business into a joint venture with Computershare Limited of
Australia, the worlds largest registrar. With the advent of depositories in the Indian capital
market and the relationships that we have created in the registry business, we believe that we
were best positioned to venture into this activity as a Depository Participant. We were one of the
early entrants registered as Depository Participant with NSDL (National Securities Depository
Limited), the first Depository in the country and then with CDSL (Central Depository Services
Limited).

9
Today, we service over 6 lakhs customer accounts in this business spread across over 250
cities/towns in India and are ranked amongst the largest. Depository Participants in the country.
With a growing secondary market presence, we have transferred this business to Karvy Stock
Broking Limited (KSBL), our associate and a member of NSE, BSE and HSE.





Karvy Global Services Limited
We all know we live in a flat world. During the dramatic swings of 2008, it has also become
clear that we live in a fast one. Swings in commodity prices that used to take years are happening
in days, equity markets are roller coasters, and BRIC economies have gone from being the next
big thing to dead in the water to, potentially, the next big thing.

Karvy Global Services is a knowledge services company. We provide specialist resources to
extend in house analyst teams in driving clear business results. We serve investment banks,
insurance providers, brokerages, hedge funds, research agencies, and life settlement providers
across the United States, Middle East, and Europe. Our clients have found our cost advantage,
ability to scale efforts, and specialist knowledge regarding emerging markets to be a strong
advantage in the new, fast, and unpredictable world.
















10


Karvy Data Management Services Limited



KDMSL is emerging as a leading service provider in the areas of E-governance processing,
insurance back office processing, record keeping, back office for BFSI clientele and is in pursuit
to establish credentials in the areas of Telecom processing, Data management requirements of
large corporates.
KDMSL is striving to achieve leadership position by tapping the Indian retail sector boom, through a combination of our extensive branch network and
proprietary IT backbone. Needless to say, KDMSL is run as an independent outfit with seasoned professionals on board, who have decades of expertise in
the industry.
KDMSL is a fully owned subsidiary of Karvy Stock Broking Limited (KSBL), incorporated in April 2008 and is head quartered at Hyderabad.





















11




KARVY, our parent group is one of Indias largest integrated financial services providers with a 25+ year
operating history. KARVY covers the entire spectrum of financial services such as Stock Broking,
Commodities Broking / Finance, Registry Services, Depository services, Merchant Banking & Corporate
Finance, IPO distribution, Investment Banking, Realty Services, Insurance Broking/Distribution, and
Distribution of Financial products like mutual funds, bonds, Personal Finance Advisory Services, BPO /
Technology Services, Wealth Management and Loans. KARVY has a pan-India presence with over 575
offices in 375 locations across India and overseas at Dubai and New York and has over 9,000 highly
qualified staff.

The Karvy Customer:
Every 50th Indian is serviced by KARVY
Every 20th trade in stock market is done through KARVY
Every 10th Demat Account is held at KARVY
Every 6th Investor in India invests through Karvy

Keeping in line with Karvy credo to be a leading and preferred financial services provider, our focus at
Karvy Finance will be to provide the complete spectrum of financial services products to our customers
and build a strong nationwide distribution footprint to emerge as the leader in Capital Markets and Retail
Finance in India

Our niche lies in the fulfillment of your financial needs at all stages of your life by making possible
simple and flexible financial solutions tailor made to suit your requirements.

We make it possible for your goal of financial prosperity to become a reality!!!




12





2.5 TABLE SWOT ANALYSIS

STRENGTHS WEAKNESS
1. Specialist marketing expertise -Lack of marketing expertise.
2. In depth research -Undifferentiated products and
Services.
3. Management Team -Location of your business.
4. Cost advantage through proprietary -Competitors have superior access
Know-how. to distribution channels.
5. Quality processes and procedures -Damaged reputation due to SEBI
regulation.


Opportunity Threats
1. Developing market -New competitors in market.
2. Mergers, joint ventures -Price war in brokerage.
3. A new international market -New regulations.
4. Awareness level of customers -Increase trade barrier.





















13
INTRODUCTION


The deregulation of Indian capital market has led to a lot of interest in a mutual fund as
investment opportunity, which is borne out by the fact that there has been a significant growth in
a mutual fund market. The growth has taken place due to increased competition in the MF.
Market due to the entry of power sector mutual funds with their collaboration with foreign
investment fund managers giving a much needed competitive edge and a wide scope of options
to investors. With the entry of private sector mutual funds, a large number of India and
international players are attached to this Sunrise Area. The process liberalization threw the door
opens to the players in the private sector to provide the much needed competitive edge and a
wide scope of option to the investors. A number of foreign mutual funds have made an entry into
India, but mainly by association themselves with Indian companies.
The principal of determining market share and market potential are never same for all geographic
areas. First determine the customer profile (who fits the bill) and the geographical size of the
market(how many of them are there).Orissa, which is highly conservative market, is ripe for
mutual funds .Considering the growth project lot many companies are foraying into the virgin
market of Orissa.
Money is an integral part of our lives and investing is only a means to an end. Investing is all
about protecting our savings and making them grow in a manner that will help us achieve our
lifes goals, be it our children s education , their marriage or even planning for our post
retirement holidays.
The quality of our lives depends on how well we plan for it the way we earn, the way we invest,
the way we spend. Different investment avenues are available to investors .Mutual fund also
offer good investment opportunities to the investors. Like all investments, they also carry
certain risk. The investor should compare the risks and expected yields after adjustment of tax on
various investment decision. The investors may seek advice from expert and consultants
including agents and distributors of mutual fund schemes while making Investment decisions.
















14


Household saving contribute about 75 to 80 percent to the level of national savings. From about
10 percent saving of GDP in 1950, domestic saving have increased to 27.40 % of GDPIn 2004-
2005. During these five decades, the level of GDP has grown in absolute and relative terms. The
level of savings can be stepped up to 30 percent or even more of GDP provided investors are
assured of a reasonable real rate of return and are offered adequate fiscal incentives. Such a high
level of savings will enable our economy to achieve 9 percent rate of growth, which many think
impossible.






























15

Chapter 2


2.1 NEED OF THE STUDY
2.2 OBJECTIVE
2.3 SCOPE
2.4 LIMITATIONS






































16


2.1 NEED OF THE STUDY
The need of the study behind the performance evaluation is to compare the returns obtained by
the portfolio (or a MF scheme) through active management by the investment manager with the
returns that would have been obtained by client investors if he had chosen one or more
appropriate alternative portfolios for investment . Such portfolios chosen for comparison are
often referred as benchmark portfolios . Hence, stock market index can be selected as a
benchmark market portfolio.
The performance evaluation is mainly concentrated on the comparison of the scheme
return with benchmark portfolio and risk free return.




















17




2.2 OBJECTIVES

My overall objective in writing this project is

OBJECTIVE OF THE STUDY

To check the popularity & growth of mutual fund

To examine whether mutual funds are really having a better prospect in India.

To know the needs and wants of the client.

To understand what investor want out of their investment in different schemes of mutual
fund, how they compare it with traditional investment instrument, what is the number of
increase in the investor base.

To do the detail study of Mutual Funds.
















18

2.3 SCOPE
People differ from each other not only due to the biological characteristics but also due to
financial position such as income, expenditure, saving they have. According to these there needs
varied from each other .Due to this the financial requirement and ability to get the requirement
differ from person to person so the financial market especially the Mutual fund market caters to
a vast area from each of these aspects above.
The title of my project is ``Comparative analysis between different MUTUAL FUND
SCHEMES means to find out the suitable investment between MUTUAL FUNDS in various
aspects that are time value of money, tax, charges, flexibility etc.
On the basis of client need suggest them, invest in mutual fund fulfill there need.
























19
2.4LIMITATIONS OF THE STUDY

The present study has the following limitations:
The scope of the study is limited to the period of study and cannot be taken as future estimates.
The earnings of mutual fund depend on performance of its portfolio, which depends on the
market performance. Hence the return cannot be taken as a forecast for the nest year.
The conclusion may not provide objective justifications of the findings and analysis due to use
of limited methods of analysis and limitation of the available data.
















20





















RESEARCH METHOLOGY
According to Clover and Balsely:
Research is the process of systematically obtaining accurate answers
to significant and pertinent questions by the use of the scientific method of gathering and
interpreting information.
The soul of research work is methodology. Research methodology is an activity that
extends, corrects or verifies knowledge
The meaning of research is any systematic activity carried out in the pursuit of truth. It is
a purposive investigation. It is the application of scientific method to add to the present pool of
knowledge. It is an endeavour to arrive at answers to intellectual and practical problem by the
application of scientific method. It is a way of finding a new way of looking at familiar things in
order to explore ways of changing it. It is an organized inquiry, designed and carried out to
provide information for solving significant and pertinent problems.
Research as a process involves defying and redefining problems, hypothesis formulation
organizing and evaluating data, deriving deductions, inferences and conclusions after careful
testing.
Research methodology is a very organized and systematic way through which a particular
case or problem can be solved efficiently.

21


It is a step-by-step logical process, which involves:
Defining a problem
Laying the objectives of the research
Sources of data
Methods of data collection
Data analysis & processing
Conclusions & Recommendations
Research inculcates scientific and inductive thinking and it promotes the development of logical
habits of thinking and organization.
Characteristics of Research
1) Research is directly towards the solution of a problem.
2) Research is based upon observable experience or empirical evidence.
3) Research demands accurate observation and description.
4) Research involves gathering new data from primary or first hand sources or using
existing data for a new purpose.
5) Research requires expertise, i.e. skill necessary to carry out investigation,
search the related literature and to understand and analyse the data gathered.
6) Research involves the quest for answer to unsolved problem.
7) Research is carefully recorded and reported.
.
22
PROCESS AND STEPS OF RESEARCH
SEARCH PROCESS IN FLOW CHART
Where, (F) = Feed Back
(FF) = Feed Forward
Need and Purpose
Investing in various assets is an interesting activity. Today investment is the employment of
present value for uncertain future return. Financial investment means an exchange of financial
claims stocks and bonds (collectively termed security), real estate, Mortgage etc.
As in today scenario the people are investing there money in funds and shares so it is very
necessary to know what are the different schemes of mutual funds.

23.
Define research
problem
Review concepts
and theories
Review previous
Research
finding
Formulate
hypothesis
Research
Design
(including
Sample
Design)
Collect data
(execution)
Analyse data
(test hypothesis
If any )
Interpret and
report
F
FF
II
III
IV
V
VI
VII
I
I
I
I
Research Problem
A research Problem in general, refers to some difficulty which a researcher experiences
in the context of either a theoretical practical situation and wants to obtain a solution for the
same. Thus a research Problem is one which requires researcher to find out the best solution for
the given Problem i.e. to find out by which course of action the objective can be attained
optimally in the context of a given environment .There are several factors which may result in
making the Problem complicated hence the research problem undertaken for study must be
carefully selected.
Statement of Problem
A research problem, in general, refers to some difficulty which researcher experiences in
the context of either a theoretical or practical situation and wants to obtain a solution for the
same.
The main problem under study is to analytical study of the schemes of mutual fund.
Data Collection
Once the research problem is formulated the next task is data collection. Data are facts,
figures and other relevant materials, past and present saving as bases for study and analysis.
While deciding about the method of data collection to be used for the study, the researcher
should keep in mind two types of data.


24
1) Primary data
2) Secondary data
1) Primary data:
The data which is collected first time through questionnaire, observation is the primary
data. The impact of Mutual Funds schemes fully required secondary data hence there is no need
of primary data.
The analytical study of mutual fund schemes fully required secondary data hence there is
no need of primary data.
2) Secondary data:
Secondary data may be defined as data that has been collected earlier for some purpose
other than the purpose of the present study.
In our study data was collected from books, journals, magazines, news papers, and
modern trend of information like internet.
RESEARCH METHODLOGY
Research Design
Research design of my project is exploratory
Sources of Data
The data which I have collected are from secondary souces from the industry profile,
different journals, books and different website


25

CHAPTER 4
Presentation And Analysis of Data A COMPLETE VI EW ON
MUTUAL FUND
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 investment and the
capital appreciation realized is 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
offer 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 MF.


















26

MUTUAL
FUND
INVESTOR
S
FUNDMANAGER
SECURITIE
S
RETURNS
HISTORY OF MUTUAL FUND IN INDIA
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s,
Government allowed public sector banks and institutions to set up mutual funds.
In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives
of SEBI are to protect the interest of investors in securities and to promote the development of
and to regulate the securities market.
As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to
protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993.
Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital
market. The regulations were fully revised in 1996 and have been amended thereafter from time
to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the
interests of investors.
All mutual funds whether promoted by public sector or private sector entities including those
promoted by foreign entities are governed by the same set of Regulations. There is no distinction
in regulatory requirements for these mutual funds and all are subject to monitoring and
inspections by SEBI. The risks associated with the schemes launched by the mutual funds
sponsored by these entities are of similar type.

HOW I S MUTUAL FUND SET UP?
A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management
company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor
who is like promoter of a company. The trustees of the mutual fund hold its property for the
benefit of the unitholders. Asset Management Company (AMC) approved by SEBI manages the
funds by making investments in various types of securities. Custodian, who is registered with
SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested
with the general power of superintendence and direction over AMC. They monitor the
performance and compliance of SEBI Regulations by the mutual fund.









27

Mutual Funds Organization.
There are many entities involved in the diagram which illustrates set up of a mutual fund:




















28

A) MUTUAL FUND SPONSERS:
The Mutual fund itself is a trust registered under the Indian Trust Act, and is initiated by a
sponsor. The sponsor is the person who acts alone or with another corporate to establish a mutual
fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and
other functions pertaining to the fund.
Role of Sponsor:
Sponsor is a person who sets up a Mutual Fund
Sponsor settles the Trust and executes Trust Deed
Sponsor contributes to the initial capital of the Trust
Sponsor appoints the Board of Trustees
Sponsor appoints Asset Management Company
Sponsor contributes minimum 40% of net worth of AMC


B) MUTUAL FUND TRUSTEES:
The trustees are vested with the general power of superintendent and direction over
AMC. They monitor the performance and compliance of SEBI by the mutual fund. SEBI
regulations require that at least two third of the directors of trustee company or board of
trustee must be independent i.e. they should not be associated with the sponsor. Also, 50
per cent of the directions of AMC must be independent


29

Board of Trustees & Role:
Trustees appointed by the Sponsor with SEBI approval
At least two third Trustees must be Independent
The Trustees have a FIDUCIARY responsibility towards unit holders
Trustees not liable for acts done in good faith and if they have exercised adequate due
diligence
Trustees oversee the functioning of AMC
Trustees approve each MF scheme floated by AMC
The investments in MFs are held by the Trustees
Trustees receive fees for their services.
Obligation to undertake General & specific due diligence.

Who can be a Trustee?
Eligibility Conditions:
Person of high repute and integrity
Not guilty of moral turpitude
Not convicted for economic offence under securities laws
Not a part of AMC e.g. Director, Employee or Officer of AMC
One can be Trustee of two MFs if approved by Board of Trustees of both the Mutual
Funds.



30
C) MUTIAL FUND CUSTODIAN:
A trust company, bank or similar financial institution responsible for holding and
safeguarding the securities owned within a mutual find. A mutual funds custodian may act as
mutual funds transfer agent, maintaining records of shareholders transactions and balances. Also
referred to as Mutual Fund Corporation. Since a mutual fund is essentially a large pool of
funds from many different investors, it requires a third-party custodian to hold and safeguard the
securities that are mutually owned by all the funds investThis structure mitigates the risk of
dishonest activity by separating the fund manager from the physical securities and investor
records.
Custodian / Depository Participant:
Custodian / DP:
Appointed by Board of Trustees
Keep record & account of Securities / Investments
Collects benefits under Securities, Registered with SEBI
Sponsor & Custodian / DP cannot be the same entity
Registrar & Transfer Agent
Registrar & Transfer Ag
Issues, redeems, transfers units of MF schemes
Keeps Unit Holders A/cs up to date
Registered with SEBI


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MUTUAL FUND ADVANTAGE

1. Get Focused
Investing in individual stock can be fun because each company has a unique story.
However, it is important for people to focus on making money. Investing isnt a game.
Your financial future depends on where you hard earned dollars and it shouldnt be taken
lightly.
2. Diversification
Diversification is the idea of spreading out your money across many different types of
instruments. When one investment is down another might be up. Choosing to diversify your
investment holding reduce your risk tremendously.
The most basic level of diversification is to buy multiple stocks rather than just one stock.
Mutual funds are set up to buy many stocks (even hundreds or thousands). Beyond that, you can
diversify even more by purchasing different kinds of stocks, then adding bonds then
international, and so on. It could take you week to buy all these investments but if you purchased
a few mutual funds you could be done in few hours because mutual funds automatically diversify
in a predetermined category of investments (i.e. growth companies, low-grade corporate bonds,
international small companies).







32

3. Professional Management
By purchasing mutual funds, you are essentially hiring a professional manager at an
especially inexpensive price. It would be a bit cocky to think that you know more than mutual
fund manager. These managers have been around the industry for long time and have the
academic credentials to a back it up. Saying you could outperform a mutual fund manager is
similar to a football fan sitting on their couch saying I could have made that catch possible,
but not likely.
Even if some of us are better at picking stocks than a professional and their support staff,
most of us would not want to spend the amount of time it takes to watch, research and trade the
market on a daily basis.
4. Efficiency
By pooling investors monies together, mutual fund companies can take advantage of
economies of scale. With large sums of money to invest, they often trade commission-free and
have personal contacts at the brokerage firms
5. Ease of use
Can you imagine keeping track of portfolio consisting of hundreds of stocks? The bookkeeping
duties involved with stocks are much more complicated than owning a mutual fund. If you are
doing your own taxes, or are short on time, this can be a big deal.





33
6. Liquidity
If you find yourself in need of money in a short amount of time, mutual funds are highly
liquid. Simply put in your order during the day and when the market closes a check will be sent
to you or you can have it wired to a bank account. Stocks can be much more difficult depending
on what kinds of stocks you are investing in. CDs offer no liquidity (not without a hefty fee) and
bonds can be difficult, too. Some mutual funds also carry check writing privileges, which means
you can actually write checks from the account, similar to your checking account at the bank.
8. Risk
In general, mutual funds carry much lower risk than stocks. This is primarily due to
diversification (as mentioned above). Certain mutual funds can be riskier than individual stocks,
but you have to go out of your way to find them. With stocks, one worry is that the company you
are investing in goes bankrupt. With mutual funds, that chance is next to nil. Since mutual funds
typically hold anywhere from 25-5000 companies, all of the companies that it holds would have
to go bankrupt.
I wont argue that you shouldnt ever invest in individual stocks, but I hope you see the
advantages of using mutual funds and make the right choice for the money that you really care
about


34


DISADVANTAGES
1. Fluctuating Returns
Mutual funds are like many other investments without a guaranteed return: there is always the
possibility that the value of your mutual fund will depreciate. Unlike fixed- income products,
such as bonds and Treasury bills, mutual funds experience price fluctuations along with the
stocks that make up the fund. When deciding on a particular fund to buy, you need to research
the risks involved - just because a professional manager is looking after the fund, that doesn't
mean the performance will be stellar.
Another important thing to know is that mutual funds are not guaranteed by the U.S.
government, so in the case of dissolution, you won't get anything back. This is especially
important for investors in money market funds. Unlike a bank deposit, a mutual fund will not be
insured by the Federal Deposit Insurance Corporation (FDIC). (For more on this, read Are My
Investments Insured Against Loss?
2. Cash, Cash and More Cash
As you know already, mutual funds pool money from thousands of investors, so everyday
investors are putting money into the fund as well as withdrawing investments. To maintain
liquidity and the capacity to accommodate withdrawals, funds typically have to keep a large
portion of their portfolios as cash. Having ample cash is great for liquidity, but money sitting
around as cash is not working for you and thus is not very advantageous.

3. Costs
Mutual funds provide investors with professional management, but it comes at a cost. Funds will
typically have a range of different fees that reduce the overall payout. In mutual funds, the fees
are classified into two categories: shareholder fees and annual operating fees.







35
The shareholder fees, in the forms of loads and redemption fees are paid directly by shareholders
purchasing or selling the funds. The annual fund operating fees are charged as an annual
percentage - usually ranging from 1-3%. These fees are assessed to mutual fund investors
regardless of the performance of the fund. As you can imagine, in years when the fund doesn't
make money, these fees only magnify losses. (For more on this topic, read Stop Paying High
Fees

4. Evaluating Funds
Another disadvantage of mutual funds is the difficulty they pose for investors interested in
researching and evaluating the different funds. Unlike stocks, mutual funds do not offer investors
the opportunity to compare the P/E ratio, sales growth, earnings per share, etc. A mutual
fund's net asset value gives investors the total value of the fund's portfolio less liabilities, but
how do you know if one fund is better than another?
Furthermore, advertisements, rankings and ratings issued by fund companies only describe past
performance. Always note that mutual fund descriptions/advertisements always include the
tagline "past results are not indicative of future returns". Be sure not to pick funds only because
they have performed well in the past - yesterday's big winners may be today's big losers.

















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What To Look for in a Fund?
Choosing a mutual fund is not an easy task with so many funds. We think that the correct first
step towards deciding is to decide on a way of deciding. Rarely do investors-normal investors,
who do something else for a living-have a systematic checklist of things that they should
evaluate about a fund, which they are considering buying. Here's our blueprint for a structured
approach to fund selection. There are four basic areas that you must evaluate in a fund to decide
whether it's a good investment.

Performance: Performance comparisons must be used only to compare the same type of fund.
They are meaningless otherwise. Only when used within the same category of funds do
performance numbers tell you anything at all. By the time you come to the stage when you are
comparing performance numbers of different funds, you should already have a good idea of how
much you will invest in that category.

Risk: Almost all investing is risky, at least those investments that get you any meaningful
returns. In general it is said that the riskier a fund, the more its potential for earning high returns,
at least most of the time. However, this is a simplified view that implies that a given amount of
risk always gets you the same returns. This is simply not true because not all funds are equally
well-run.
The true measure of risk is whether a fund is able to give you the kind of returns that justify the
kind of risk it is taking. Evidently, this is not as easy to measure as returns. There are a wide
variety of statistical techniques that can be used to measure this. When we say that a fund has a
five- or four-star rating, it means that the fund, compared to similar funds, performed better,
given its risk level.

Portfolio: Unlike performance and risk, portfolio is one of the 'internals' of a fund. It is internal
in the sense that the result of good, bad or ugly portfolios is already reflected in the first two
measures and it's perfectly OK for you to choose funds on the basis of those two measures alone
without actually bothering about what they own. Our basic analysis of portfolios measures
whether a fund (we are talking about equity funds here) holds mostly large, medium or small
companies. It also looks at whether a fund prefers companies that may be overpriced but which
are growing fast or whether it prefers low-priced stocks belonging to companies that are growing
at a more gentle pace. For fixed income funds, an analogous analysis tells one whether a fund
prefers volatile but potentially high return long-duration securities or stable and low return short-
duration securities. Also, one can analyse whether a fund prefers safer (lower returns) securities
or riskier (higher returns) secur


37
Management: Fund management is a fairly creative and personality-oriented activity. This
may not be true of some types of funds like shorter-term fixed-income funds and, of course,
index funds, but equity investment is more of an art than a science. When you are buying a fund
because you like its track record (and unless you can foresee the future, that's the only way to
buy a fund), what you are actually buying is a fund manager's (or sometimes a fund management
team's) track record. What you need to make sure is that the fund manager who was responsible
for the part of the fund's track record that you are buying into is still there. A high-performance
equity fund with a new manager is a like a new fund.

Cost: While these are the four main points on which to evaluate a fund, there is one more factor
that is becoming increasingly important and that is cost. Funds are not run for free and nor are
they run at an identical cost. While the difference in different funds' cost is not large, these can
compound to significant variations, especially for fixed income funds where the performance
differential between funds is quite small to begin with. Even for equity funds, it may not be
worth buying a higher cost fund that appears to be only slightly better than a lower cost one.
Remember, there is no reason for one AMC to have much higher costs than others, apart from
the fact that it wants to have a higher margin, or that it wants to spend more on things like
marketing, which are of no relevance to you. If an AMC wants higher returns from its business,
then it must justify it by giving you higher returns on your investments.











38

Ground Rules for Investing
Investing is a complex exercise only because we insist on making it so. But the basic principles
are simple. As simple that anyone can become a good investor just by following simple and
easily understood rules, which also help avoid big mistakes. Here are some rules for
investment success:

Develop a Plan:

For your short-term goals, make sure you're taking appropriate risks. Invest money that you'll
need in the next two years to five years in cash and short-term bonds. If you've taken on too
much risk for short-term objectives, pull back now. There's no telling where the bottom of this
market is. It's better to cut your losses and preserve the money you already have for short-term
goals. For your long-term financial goals, consider equities.

Keep It Simple:

Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund
for fixed income exposure. These are the basics of the investment world. Sure, you can buy
many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go
wrong with these two. To keep fund selection simple, stick with a diversified equity funds of
well-established fund families. Equities prove to be the best performing long-term asset class.
Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you
can take in your stride a 25% loss in a quarter.

Ignore the Hot Stocks and Funds:

If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year.
The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old
saying explains it just as well -- what goes up must come down.




39
Invest Regularly:

Investing a little bit of money each month is the surest way to reduce the risk of investing,
because you lessen the possibility of buying at the market top. Also, no one is smart enough to
anticipate all the moves, both up and down.

Buy and Hold:

Short-term trading makes more brokers than investors rich. The income tax department likes the
practice, too. If you meet anyone who claims to have made money through short-term trading,
resist your temptation to listen any further and move on to a more productive conversation.

Start Early:

It is not the "market timing" but time in the market that matters. Power of compounding will turn
things in your favour. Investing is a long-term proposition. Research your investments,
remember your goals, re-examine your risk, and limit how much you listen to day-to-day market
commentary. And don't let your emotions overpower your sense of reason.













40

SYSTEMATIC INVESTMENT PLANNING
Systematic is a word that describes you. Organised, well managed and planned in all your
activities. A Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help you
save regularly.
It is just like a recurring deposit with the post office or bank where you put in a small amount
every month. The difference here is that the amount is invested in a mutual fund.
The minimum amount to be invested can be as small as Rs 100 and the frequency of investment
is usually monthly or quarterly.

How an SIP scores
It makes you disciplined in your savings. Every month you are forced to keep aside a fixed
amount. This could either be debited directly from your account or you could give the mutual
fund post-dated cheques.
As you see above, it helps you make money over the long term. Since you get more units when
the NAV drops and fewer when it rises, the cost averages out over time. So you tide over all the
ups and downs of the market without any drastic losses.
Also, a number of mutual funds do not charge an entry load if you opt for an SIP. This fee is a
percentage of the amount you are investing. And if you do not exit (sell your units) within a year
of buying the units, you do not have to pay an exit load (same as an entry load, except this is
charged when you sell your units).
If, however, you do sell your units within a year, you would be charged an exit load. So it pays to
stay invested for the long-run.
The best way to enter a mutual fund is via an SIP. But to get the benefit of an SIP, think of at
least a three-year time frame when you won't touch your money.
Of course you would lose money if your units lost value over time.
What most SIP Mutual funds don't tell you is that they recover their fees as monthly charges by
selling your units, so while you are buying more units when the market is down, more of your
units are also being sold to fund the monthly charges of the Mutual fund. Also the Bid and Offer
of the Mutual Fund is around 7% and this is the front load or expense you pay for buying the
units each month. Also sometimes the Mutual fund will have annual fee charges.
41
In spite of the above drawbacks the retail investors' benefit in the long term horizon of 58 years
is enormous. Only make sure that you can switch your funds from stock market to money market
at short notice when the markets are really in a correction phase to safeguard the profits which
you have made when the market was in a booming phase

Benefits of SIP
Before I tout the benefits of SIPs let me state that I dont get into SIPs because this type of
regular investing is not something I am looking at right now.
With that said, lets take a look at two benefits of SIPs
1. Regular saving habit: Perhaps the best benefit of setting up a SIP is that it forces you to
set apart some money every month and enforces saving discipline on you.You could argue that
this can be done without a SIP also, and you are right, just that automation enforces a little
more rigor.
2. Protects you from timing the market: If you have already committed money to a SIP
you will most likely continue to invest regardless of a big fall or huge gains in the market. This
in turn will enable you to invest regularly rather than try to time the market, which not many
small investors can do successfully

Non benefits of SIPs
I dont know what else to call them, but I am talking about things that people tout as benefits of
SIPs, which in fact are benefits that you gain from SIPs, but are not exclusive to them.
1. Tax planning: Yes, setting up a SIP in a tax planning mutual fund will help you reduce
taxes, but if you invest the same amount at one go in the same mutual fund you will get the
same tax benefit. Tax benefit is not something exclusive to a SIP.
2. SIP lead to building wealth: Good saving and investing habits are more likely to help
you accumulate wealth in the long run, but there is no guarantee that you will end up doing so.
Especially, if you invest in equity mutual funds.
3. Ignore the spreadsheets: I came across more than a couple of websites that had
examples of how a person could accumulate more units because of regular investing when
compared with someone who buys in bulk. bought units regularly. A lot depends on market
gyrations and nothing can be said with certainty.
42
Major Mutual Fund Companies
1. Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the Joint Venture of Aditya Birla Group and
Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in CANADA, US, Philippines, Japan, Indonesia, and Bermuda Apart from India.
Birla Sun Life Mutual Fund follows a conservative long-term approach to investment.
Recently it crossed Asset Under Management [AUM] of Rs.10, 000 Cores.
2. HDFC Mutual Fund
HDFC Mutual Fund was set up on 30
th
June 2000 with TWO Sponsors
NamelyHousing Development Finance Corporation Limited and Standard Life Investment
Limited. It presently have 1250 investors of Mutual Funds. The total Asset Under
Management of HDFC up to last month is 84,628 Crores.
3. ICICI Prudential Mutual Fund
The Mutual Fund of ICICI is a Joint Venture with Prudential Plc. Of America,
One of the Largest Insurance Company in United State of America. ICICI Prudential Mutual
Fund was set up on 13
th
October 1993 with Two Sponsors, Prudential Plc. and ICICI Ltd. The
trustee company formed is ICICI Prudential Trust Ltd. and the AMC is ICICI Prudential
Assets Management Company Limited Incorporated on 22
nd
June 1993.

43
It presently have 2200 investors of Mutual Funds. The total Asset Under Management
of ICICI Prudential Mutual Fund is Rs.68,742 Crores

4. SBI Mutual Fund
State Bank of India Mutual Fund Is the First bank Sponsored Mutual fund
to Launch Offshore Fund, The Indian Magnum fund with a corpus of Rs. 225 Cr.
Approximately. Today it is a largest bank Sponsored mutual fund in India. They have already
Launched 35 Schemes Out of which 15 have already yielded handsome returns to Investor.
State bank of India mutual fund has Rs. 38,782 Crores as AUM. Now it has an Investor Base
of over 8 Lakh Spread over 18 Schemes.
5. Kotak Mahindra Mutual Fund
Kotak Mahindra Assets Management Company is a Subsidiary of KMBL.
It is presently having more than 1, 99,818 Investors in its various Schemes. KMAMC Started
its Operation in December 1998. Kotak Mahindra Mutual Fund Offers Schemes Catering To
Investor with Varying risk-returns Profile. It was the First Company to launch dedicated gilt
Schemes investing only in Government Securit
6. UTI Mutual Fund
UTI assets Management Company Private Limited is established in 14
th
JANUARY
2003,Managed the UTI Mutual Fund with the support of UTI truatee company
44

Private Limited. UTI Assets Management Company Presently Manage a Corpus of Over Rs.
20,000 Corer. The Sponsor of UTI Mutual funds are Bank of Baroda (BOB), Punjab National
Bank (PNB), State Bank of India (SBI) and Life Insurance Corporation of India (LIC). The
Schemes of UTI mutual fund are Liquid funds, Income funds, Assets Management funds,
Index Funds, Equity Funds and Balanced funds.
7. Reliance Mutual Fund
Reliance Mutual Fund (RMF) was Established as trust under Indian Trust
act, 1882. The Sponsor of RMF is Reliance Capital Ltd. and Reliance Capital Trustee Co. Ltd.
It was Registered on 30
th
June 1995 As Reliance Capital Mutual Fund which was changed on
11th March 2004. Reliance Mutual fund was formed for Launching of Various Schemes
under which units are issue to the public With a view to Contribute to the capital market and
to provide Investor the Opportunities to Make Investments in Diversified Securities.
8. LIC Mutual Fund
Life Insurance Corporation of India Set up LIC Mutual Fund On 19
th
June 1989. It
Contributed Rs. 2 Crores towards the Corpus of Fund. LIC Mutual Fund Was Constituted as a
Trust in Accordance with the provision of the Indian Trust Act, 1882. The Company Starts its
Business on 19
th
April 1994. The Trustees of LIC Mutual Fund Have Appointed Jeevan Bema
Sahayog Assets Management Company Ltd. as the Investment Manager for LIC Mutual Fund.



45



DIFFERENT TYPE OF MUTUAL FUND SCHEMES

Net Asset Value (NAV) of a scheme?
The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV).
Mutual funds invest the money collected from the investors in securities markets. In simple
words, Net Asset Value is the market value of the securities held by the scheme. Since market
value of securities changes every day, NAV of a scheme also varies on day to day basis. The
NAV per unit is the market value of securities of a scheme divided by the total number of units
of the scheme on any particular date. For example, if the market value of securities of a mutual
fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the
investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the
mutual funds on a regular basis - daily or weekly - depending on the type of scheme

Schemes according to Maturity Period:
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.
Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently
buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.
The key feature of open-end schemes is liquidity.
Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open
for subscription only during a specified period at the time of launch of the scheme. 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 the units 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 i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.

46

Schemes according to Investment Objective:
A scheme can also be classified as growth scheme, income scheme, or balanced scheme
considering its investment objective. Such schemes may be open-ended or close-ended schemes
as described earlier. Such schemes may be classified mainly as follows:
Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such
schemes normally invest a major part of their corpus in equities. Such funds have comparatively
high risks. These schemes provide different options to the investors like dividend option, capital
appreciation, etc. and the investors may choose an option depending on their preferences. The
investors must indicate the option in the application form. The mutual funds also allow the
investors to change the options at a later date. Growth schemes are good for investors having a
long-term outlook seeking appreciation over a period of time.
Income / Debt Oriented Scheme
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures, Government
securities and money market instruments. Such funds are less risky compared to equity schemes.
These funds are not affected because of fluctuations in equity markets. However, opportunities
of capital appreciation are also limited in such funds. The NAVs of such funds are affected
because of change in interest rates in the country. If the interest rates fall, NAVs of such funds
are likely to increase in the short run and vice versa. However, long term investors may not
bother about these fluctuations.
Balanced Fund
The aim of balanced funds is to provide both growth and regular income as such schemes invest
both in equities and fixed income securities in the proportion indicated in their offer documents.
These are appropriate for investors looking for moderate growth. They generally invest 40-60%
in equity and debt instruments. These funds are also affected because of fluctuations in share
prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared
to pure equity funds.
Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of
capital and moderate income. These schemes invest exclusively in safer short-term instruments
such as treasury bills, certificates of deposit, commercial paper and inter-bank call money,
government securities, etc. Returns on these schemes fluctuate much less compared to other
funds. These funds are appropriate for corporate and individual investors as a means to park their
surplus funds for short periods.
47
Gilt Fund
These funds invest exclusively in government securities. Government securities have no default
risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic
factors as is the case with income or debt oriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P
NSE 50 index (Nifty), etc These schemes invest in the securities in the same weightage
comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or
fall in the index, though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are made in the offer
document of the mutual fund scheme.
There are also exchange traded index funds launched by the mutual funds which are traded on
the stock exchanges.
What are sector specific funds/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. They may also seek advice of an expert.
What are Tax Saving Schemes?
These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act,
1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity
Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax
benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth
opportunities and risks associated are like any equity-oriented scheme.
What is a Fund of Funds (FoF) scheme?
A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds
is known as a FoF scheme. An FoF scheme enables the investors to achieve greater
diversification through one scheme. It spreads risks across a greater universe.


48
What is a Load or no-load Fund?
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one
buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund
for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well
as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and
those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The
investors should take the loads into consideration while making investment as these affect their
yields/returns. However, the investors should also consider the performance track record and
service standards of the mutual fund which are more important. Efficient funds may give higher
returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the investors can enter the
fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
Can a mutual fund impose fresh load or increase the load beyond the level mentioned in
the offer documents?
Mutual funds cannot increase the load beyond the level mentioned in the offer document. Any
change in the load will be applicable only to prospective investments and not to the original
investments. In case of imposition of fresh loads or increase in existing loads, the mutual funds
are required to amend their offer documents so that the new investors are aware of loads at the
time of investments.
What is a sales or repurchase/redemption price?
The price or NAV a unitholder is charged while investing in an open-ended scheme is called
sales price. It may include sales load, if applicable.
Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases
or redeems its units from the unitholders. It may include exit load, if applicable.
What is an assured return scheme?
Assured return schemes are those schemes that assure a specific return to the unitholders
irrespective of performance of the scheme.
A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or
AMC and this is required to be disclosed in the offer document.
Investors should carefully read the offer document whether return is assured for the entire period
of the scheme or only for a certain period. Some schemes assure returns one year at a time and
they review and change it at the beginning of the next year.
49

Can a mutual fund change the asset allocation while deploying funds of investors?
Considering the market trends, any prudent fund managers can change the asset allocation i.e. he
can invest higher or lower percentage of the fund in equity or debt instruments compared to what
is disclosed in the offer document. It can be done on a short term basis on defensive
considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in
altering the asset allocation considering the interest of the investors. In case the mutual fund
wants to change the asset allocation on a permanent basis, they are required to inform the
unitholders and giving them option to exit the scheme at prevailing NAV without any load.
How to invest in a scheme of a mutual fund?
Mutual funds normally come out with an advertisement in newspapers publishing the date of
launch of the new schemes. Investors can also contact the agents and distributors of mutual funds
who are spread all over the country for necessary information and application forms. Forms can
be deposited with mutual funds through the agents and distributors who provide such services.
Now a days, the post offices and banks also distribute the units of mutual funds. However, the
investors may please note that the mutual funds schemes being marketed by banks and post
offices should not be taken as their own schemes and no assurance of returns is given by them.
The only role of banks and post offices is to help in distribution of mutual funds schemes to the
investors.
Investors should not be carried away by commission/gifts given by agents/distributors for
investing in a particular scheme. On the other hand they must consider the track record of the
mutual fund and should take objective decisions.
Can non-resident Indians (NRIs) invest in mutual funds?
Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are
given in the offer documents of the schemes.
How much should one invest in debt or equity oriented schemes?
An investor should take into account his risk taking capacity, age factor, financial position, etc.
As already mentioned, the schemes invest in different type of securities as disclosed in the offer
documents and offer different returns and risks. Investors may also consult financial experts
before taking decisions. Agents and distributors may also help in this regard.



50

How to fill up the application form of a mutual fund scheme?
An investor must mention clearly his name, address, number of units applied for and such other
information as required in the application form. He must give his bank account number so as to
avoid any fraudulent encashment of any cheque/draft issued by the mutual fund at a later date for
the purpose of dividend or repurchase. Any changes in the address, bank account number, etc at
a later date should be informed to the mutual fund immediately.
What should an investor look into an offer document?
An abridged offer document, which contains very useful information, is required to be given to
the prospective investor by the mutual fund. The application form for subscription to a scheme is
an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer
document. An investor, before investing in a scheme, should carefully read the offer document.
Due care must be given to portions relating to main features of the scheme, risk factors, initial
issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors
track record, educational qualification and work experience of key personnel including fund
managers, performance of other schemes launched by the mutual fund in the past, pending
litigations and penalties imposed, etc.
When will the investor get certificate or statement of account after investing in a mutual
fund?
Mutual funds are required to despatch certificates or statements of accounts within six weeks
from the date of closure of the initial subscription of the scheme. In case of close-ended schemes,
the investors would get either a demat account statement or unit certificates as these are traded in
the stock exchanges. In case of open-ended schemes, a statement of account is issued by the
mutual fund within 30 days from the date of closure of initial public offer of the scheme. The
procedure of repurchase is mentioned in the offer document.
How long will it take for transfer of units after purchase from stock markets in case of
close-ended schemes?
According to SEBI Regulations, transfer of units is required to be done within thirty days from
the date of lodgment of certificates with the mutual fund.
As a unitholder, how much time will it take to receive dividends/repurchase proceeds?
A mutual fund is required to despatch to the unitholders the dividend warrants within 30 days of
the declaration of the dividend and the redemption or repurchase proceeds within 10 working
days from the date of redemption or repurchase request made by the unitholder.

51
In case of failures to despatch the redemption/repurchase proceeds within the stipulated time
period, Asset Management Company is liable to pay interest as specified by SEBI from time to
time (15% at present).
Can a mutual fund change the nature of the scheme from the one specified in the offer
document?
Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes
of the scheme e.g.structure, investment pattern, etc. can be carried out unless a written
communication is sent to each unitholder and an advertisement is given in one English daily
having nationwide circulation and in a newspaper published in the language of the region where
the head office of the mutual fund is situated. The unitholders have the right to exit the scheme at
the prevailing NAV without any exit load if they do not want to continue with the scheme. The
mutual funds are also required to follow similar procedure while converting the scheme form
close-ended to open-ended scheme and in case of change in sponsor.
How will an investor come to know about the changes, if any, which may occur in the
mutual fund?
There may be changes from time to time in a mutual fund. The mutual funds are required to
inform any material changes to their unitholders. Apart from it, many mutual funds send
quarterly newsletters to their investors.
At present, offer documents are required to be revised and updated at least once in two years. In
the meantime, new investors are informed about the material changes by way of addendum to the
offer document till the time offer document is revised and reprinted.
How to know the performance of a mutual fund scheme?
The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on
daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes.
The NAVs of mutual funds are required to be published in newspapers. The NAVs are also
available on the web sites of mutual funds. All mutual funds are also required to put their NAVs
on the web site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus
the investors can access NAVs of all mutual funds at one place
The mutual funds are also required to publish their performance in the form of half-yearly results
which also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5
years and since inception of schemes. Investors can also look into other details like percentage of
expenses of total assets as these have an affect on the yield and other useful information in the
same half-yearly format.

52
The mutual funds are also required to send annual report or abridged annual report to the
unitholders at the end of the year.
Various studies on mutual fund schemes including yields of different schemes are being
published by the financial newspapers on a weekly basis. Apart from these, many research
agencies also publish research reports on performance of mutual funds including the ranking of
various schemes in terms of their performance. Investors should study these reports and keep
themselves informed about the performance of various schemes of different mutual funds.
Investors can compare the performance of their schemes with those of other mutual funds under
the same category. They can also compare the performance of equity oriented schemes with the
benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc.
On the basis of performance of the mutual funds, the investors should decide when to enter or
exit from a mutual fund scheme.
How to know where the mutual fund scheme has invested money mobilised from the
investors?
The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly
basis which are published in the newspapers. Some mutual funds send the portfolios to their
unitholders.
The scheme portfolio shows investment made in each security i.e. equity, debentures, money
market instruments, government securities, etc. and their quantity, market value and % to NAV.
These portfolio statements also required to disclose illiquid securities in the portfolio, investment
made in rated and unrated debt securities, non-performing assets (NPAs), etc.
Some of the mutual funds send newsletters to the unitholders on quarterly basis which also
contain portfolios of the schemes.
Is there any difference between investing in a mutual fund and in an initial public offering
(IPO) of a company?
Yes, there is a difference. IPOs of companies may open at lower or higher price than the issue
price depending on market sentiment and perception of investors. However, in the case of mutual
funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund
scheme takes some time to make investment in securities. NAV of the scheme depends on the
value of securities in which the funds have been deployed.


53
If schemes in the same category of different mutual funds are available, should one choose
a scheme with lower NAV?
Some of the investors have the tendency to prefer a scheme that is available at lower NAV
compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is
issuing units at Rs. 10 whereas the existing schemes in the same category are available at much
higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher
NAVs of similar type schemes of different mutual funds have no relevance. On the other hand,
investors should choose a scheme based on its merit considering performance track record of the
mutual fund, service standards, professional management, etc. This is explained in an example
given below.
Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes
are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes.
He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming
that the markets go up by 10 per cent and both the schemes perform equally good and it is
reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs.
99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it
would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same
return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the
schemes and allotment of higher or lower number of units within the amount an investor is
willing to invest, should not be the factors for making investment decision. Likewise, if a new
equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90,
should not be a factor for decision making by the investor. Similar is the case with income or
debt-oriented schemes.
On the other hand, it is likely that the better managed scheme with higher NAV may give higher
returns compared to a scheme which is available at lower NAV but is not managed efficiently.
Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as
much as inefficiently managed scheme with lower NAV. Therefore, the investor should give
more weightage to the professional management of a scheme instead of lower NAV of any
scheme. He may get much higher number of units at lower NAV, but the scheme may not give
higher returns if it is not managed efficiently.
How to choose a scheme for investment from a number of schemes available?
As already mentioned, the investors must read the offer document of the mutual fund scheme
very carefully. They may also look into the past track record of performance of the scheme or
other schemes of the same mutual fund. They may also compare the performance with other
schemes having similar investment objectives. Though past performance of a scheme is not an
indicator of its future performance and good performance in the past may or may not be
sustained in the future, this is one of the important factors for making investment decision. In
case of debt oriented schemes, apart from looking into past returns, the investors should also see
the quality of debt instruments which is reflected in their rating.
54
A scheme with lower rate of return but having investments in better rated instruments may be
safer. Similarly, in equities schemes also, investors may look for quality of portfolio. They may
also seek advice of experts.
Are the companies having names like mutual benefit the same as mutual funds schemes?
Investors should not assume some companies having the name "mutual benefit" as mutual funds.
These companies do not come under the purview of SEBI. On the other hand, mutual funds can
mobilise funds from the investors by launching schemes only after getting registered with SEBI
as mutual funds.
Is the higher net worth of the sponsor a guarantee for better returns?
In the offer document of any mutual fund scheme, financial performance including the net worth
of the sponsor for a period of three years is required to be given. The only purpose is that the
investors should know the track record of the company which has sponsored the mutual fund.
However, higher net worth of the sponsor does not mean that the scheme would give better
returns or the sponsor would compensate in case the NAV falls.
Where can an investor look out for information on mutual funds?
Almost all the mutual funds have their own web sites. Investors can also access the NAVs, half-
yearly results and portfolios of all mutual funds at the web site of Association of mutual funds in
India (AMFI) www.amfiindia.com. AMFI has also published useful literature for the investors.
Investors can log on to the web site of SEBI www.sebi.gov.in and go to "Mutual Funds" section
for information on SEBI regulations and guidelines, data on mutual funds, draft offer documents
filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI
available on the web site, a lot of information on mutual funds is given.
There are a number of other web sites which give a lot of information of various schemes of
mutual funds including yields over a period of time. Many newspapers also publish useful
information on mutual funds on daily and weekly basis. Investors may approach their agents and
distributors to guide them in this regard.
Can an investor appoint a nominee for his investment in units of a mutual fund?
Yes. The nomination can be made by individuals applying for / holding units on their own behalf
singly or jointly. Non-individuals including society, trust, body corporate, partnership firm,
Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate.


55
If mutual fund scheme is wound up, what happens to money invested?
In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after
adjustment of expenses. Unitholders are entitled to receive a report on winding up from the
mutual funds which gives all necessary details.

How can the investors redress their complaints?
Investors would find the name of contact person in the offer document of the mutual fund
scheme whom they may approach in case of any query, complaints or grievances. Trustees of a
mutual fund monitor the activities of the mutual fund. The names of the directors of asset
management company and trustees are also given in the offer documents. Investors should
approach the concerned Mutual Fund / Investor Service Centre of the Mutual Fund with their
complaints,
If the complaints remain unresolved, the investors may approach SEBI for facilitating redressal
of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned
mutual fund and follows up with it regularly. Investors may send their complaints to:

Securities and Exchange Board of India
Office of Investor Assistance and Education (OIAE)
Plot No.C4-A , G Block, 1
st
Floor,
Bandra- Kurla Complex,
Bandra (E) , Mumbai 400 051.
Phone: 26449199-88-77










56

MONITORING OF MUTUAL FUNDS INVESTMENTS
If you are one of those who track their mutual fund investments with the same enthusiasm
and care as they put in while choosing where to invest in , then we can assure you that you
are in minority . Most people think that once they invest in a fund, the job of taking care of
their investments has been successfully passed on to the fund manager. But this can be a
dangerous strategy to adopt .LET US EXPLAIN WHY.
The performance of a fund, especially equity oriented funds , is to quite an extent dependant on
the calls of fund manager. If your fund manager quits, the investment style may change ,and the
fund performance could suffer . Hence , you should carefully monitor the fund`s performance
any time such changes occur, and exit the fund if it`s performance dips drastically.


How to keep track of your fund`s performance?
All AMCs provide you with their annual report , a half yearly report(unaudited results) and a
quarterly and monthly factsheet/ news letter . over and above this, public disclosure of the NAV
of a scheme happens on the AMFI website , on the AMCs own website, as well as in the
financial dailies. While NAV information tells you very little other than how well your
investment is doing , it is basically the portfolio disclosure that happens through the newsletters
and the AMC reports that one should be interested in .Also , try to gauge the funds performance
its benchmarks and its peers .
The fund manager will not tell you when to exit the fund. This is something you will have to
decide , based on the information available. So, keep track of the funds performance.

Mutual funds available for investment in gold and other commodities
Typically, a mutual fund gives an investor diversification. But when you buy a gold fund, it does
not get you any diversification, rather than that it gets you invested in gold in the form of a paper
instead of a physical form.
Also, there are two other funds in India , which not only buy precious metals, including gold, but
they also own gold mining companies. They have proved to be a little more volatile than gold
prices. But if the outlook for gold is higher then, because they are key beneficiaries, they tend to
benefit. Lkewise , the reverse is true. In that situation , these funds tend to fall much more
sharply. Gold ETFs give you ownership of gold directly in form of paper













57
How to Compare Two Mutual Fund Schemes


Compare mutual funds carefully.
Investing in mutual funds can be an excellent way to save for the future. Mutual funds are
designed to pool the funds of many small investors. The money is used to purchase stocks, bonds
and other types of investments. This helps to reduce the risks associated with buying individual
stocks while still allowing investors to capture market gains. Of course, not all mutual funds are
alike, and it pays to evaluate each mutual fund scheme carefully before investing.

Instructions:
1
Contact at least two mutual fund families and ask for a prospectus and annual report for
each fund. These documents are very important and should be thoroughly reviewed
before making a final decision. The prospectus contains vital information about charges
and expenses, while the annual report details the performance of the fund, as well as its
investment holdings at the time the report was compiled.
2
Turn to the front of the prospectus and examine the expenses associated with the fund.
Mutual funds are required by law to disclose their fees to potential investors, including
providing examples of how much an investor would pay to invest in each fund. When
looking at the expense ratio for the funds, keep in mind that low cost index funds charge
as little as 0.2 percent.


58
3
Check the prospectus for load charges as well. A load is a commission you pay just to
purchase the fund. For instance, if you invest $10,000 in a fund with a 2 percent load
charge, you will lose $200 to the load charge, leaving you with only $9,800 to invest in
the fund.
4
Turn to the annual report and look for the turnover ratio. The turnover ratio is an
indication of how often the fund bought and sold securities during the year. Mutual funds
can incur capital gains when selling stocks, bonds or other instruments. A fund with a
high turnover ratio is more likely to generate above average levels of capital gains. This
is not an issue if the fund is held in an IRA, 401k or other tax sheltered account. But it
can lead to tax liabilities if the fund is held in a personal account.
5
Check the performance of the fund as listed in the most recent annual report. Also check
the performance of the relevant benchmark. A stock fund that returned 10 percent during
the past year might look good, but not if the Standard & Poor's 500 Index returned 15 or
20 percent during the same time period.
6
Evaluate each of the mutual funds under consideration and determine which one best
meets your needs. Look at all of the factors, including the performance of the fund and
the up-front and ongoing costs, and use that information to make a final decision.












59
5 Ways To Measure Mutual Fund Risk





There are flashy numbers of dividend pay outs in percentages declared by fund
houses on a regular basis in newspapers, periodicals, websites, etc. These numbers attract
investor eyeballs towards their schemes. Now, SEBI has stepped in and has asked fund houses to
disclose their pay outs in rupee terms. This shows that investors are trying to get a clearer picture
on their investment returns through dividends. However, investing by considering only historical
returns and dividends in a mutual fund scheme is risky. Investors need to evaluate the risk
involved in mutual fund schemes before investing and review their investments, say, at least
once a year.

Investors may perform a small 5-step exercise to evaluate riskiness of particular mutual fund
scheme, as described below -

We will take a hypothetical example of ABC-Equity (G) scheme to compute its riskiness in
our Paanch Ka Dum (Power of 5)concept:-
1) Alpha:
Alpha basically is the difference between the returns an investor expects from a fund, given its
beta, and the return it actually produces.
Computation: Alpha = {(Fund return-Risk free return) (Funds beta) *(Benchmark return- risk
free return)}.



60

Example-1:
Fund return (Fund performance in last one year) 75%
Risk free return 8%
Benchmark return (Sensex performance in last one year) 41%
Beta 0.69

By computing with above formula we will get alpha as 0.44 for this fund.

A positive alpha means the fund has outperformed its benchmark index. Whereas, a negative
alpha indicates an underperformance of the fund. The more positive an alpha the healthier for
investors.

Here, the fund has underperformed since an alpha we computed is less than beta. It means fund
has produced less returns considering the risks fund is taking while comparing it with actual
return to the one predicted by beta.

Note: The ideal time period for analysing alpha and beta value is one year returns from their
funds.

2) Beta:
Beta is a measure of the volatility of a particular fund in comparison to the
market as a whole, that is, the extent to which the fund's return is impacted by
market factors. Beta is calculated using a statistical tool called regression
analysis.
By definition, the market benchmark index of Sensex and Nifty has a beta of
1.0.

61
It may be challenging for investors to compute it for each mutual fund scheme. However, one
need not worry. Important statistical measures for various mutual fund schemes are easily
available on financial websites like InvestmentYogi where mutual funds performance is tracked
and analysed regularly.

Let us consider 3 possible scenarios in interpreting beta numbers:
[Sensex is assumed as benchmark index].
1. A beta of 1.0 indicates that the fund NAV will move in same direction as that of
benchmark index. The fund will move up and down in tandem with the movement of the
markets (as indicated by the benchmark)
2. A beta of less than 1.0 indicates that the fund NAV will be less volatile than the
benchmark index.
3. A beta of more than 1.0 indicates that the investment will be more volatile than the
benchmark index. It is an aggressive fund that will move up more than the benchmark,
but the fall will also be steeper.
For example, if the beta of ABC-Equity (G) is 1.4 - then its considered as 40% more volatile
than the benchmark index (beta of benchmark index being 1).

Similarly, in example-1, as we have considered beta of ABC-Equity (G) fund as 0.69 - this
means the mutual fund scheme will be less volatile than its benchmark index.

Note: Conservative investors should focus on mutual funds schemes with low beta. Aggressive
investors can opt to invest in mutual fund schemes which have higher beta value for higher
returns taking more risk.





62
3) R-Squared:
As discussed above, beta is dependent on correlation of a mutual fund scheme to its benchmark
index. So, while considering the beta of any fund, an investor also needs to consider another
statistic concept called R-squared that measures the correlation between beta and its benchmark
index. The beta of a fund has to be seen in conjunction with the R-squared for better
understanding the risk of the fund.

R-squared values range between 0 and 1, where 0 represents no correlation and 1 represents
full correlation. If a fund's beta has an R-squared value that is between 0.75 and 1, the beta of
that fund should be trusted. On the other hand, an R-squared value that is less than 0.75 than it
indicates the beta is not particularly useful because the fund is being compared against an
inappropriate benchmark index. This fund will not give returns similar to their benchmark index.
The lower the R-squared the less reliable is the beta, and vice versa.

The R-squared of an index fund, investing in same securities and in the same weightage as the
index, will be one.

Note: Beta and R-squared are calculated based on the historical data. They give an adequate
estimate of risks to be evaluated by investors before investing.

4) Standard Deviation (SD):
The total risk (market risk, security-specific risk and portfolio risk) of a mutual fund is measured
by Standard Deviation (SD). In mutual funds, the standard deviation tells us how much the
return on a fund is deviating from the expected returns based on its historical performance. In
other words can be said it evaluates the volatility of the fund.

The standard deviation of a fund measures this risk by measuring the degree to which the fund
fluctuates in relation to its average return of a fund over a period of time.


63
In other words, it is a measure of the consistency of a mutual fund's returns. A higher SD number
indicates that the net asset value (NAV) of the mutual fund is more volatile and, it is riskier than
a fund with a lower SD.

Note: For SD to be an effective tool, investors will need to use it in comparison with peer group
mutual funds. For example, a large-cap mutual fund is to be compared with a large-cap mutual
fund with the same investment objective(s).

5) Sharpe Ratio:
Sharpe ratio (SR) is another important measure that evaluates the return that a fund has generated
relative to the risk taken. Risk here is measured by SD. It is used for funds that have low
correlation with benchmark index. This ratio helps an investor to know whether it is a safe bet to
invest in this fund by taking the quantum of risk.

The higher the Sharpe ratio (SR), the better a funds return relative to the amount of risk taken.
In other words, a mutual fund with a higher SR is better because it implies that it has generated
higher returns for every unit of risk that was taken. On the contrary, a negative Sharpe ratio
indicates that a risk-free asset would perform better than the fund being analyzed.

It tries to find out the excess return generated by a mutual fund over and above a risk-free rate of
return such as an RBI bond or a post-office savings scheme, etc.








64
ASSET MANAGEMENT COMPANY
A firm that invest the pooled funds of retail investors in securities in line with the stated
investment objectives. For a fee, the investment company provides more diversification,
liquidity, and professional service that are normally available to individual investors.
Asset Management Company is:
Constituted as a Company under the Indian Companies Act
Minimum Net worth of Rs. 10 crores for AMC
Minimum contribution of sponsor: 40% of share capital of AMC
At least 50% of Directors of AMC to be independent
AMC can do only the following businesses
Asset Management Services
Portfolio Management Services
Portfolio Advisory Services
AMC can be terminated/changed with the consent of
Majority of Trustees or
At least 75% majority of Unit holders
Role of AMC
AMC is the Fund Manager for managing Mutual Fund Assets
AMC floats different MF schemes
AMC accountable to the Trustees


65

AMC charges Asset Management Fees subject to ceiling prescribed by SEBI.
Asset Management Agreement between AMC and Trustee

Obligations of AMC
Limit of 5% of aggregate purchase and sales of Securities under all its scheme per broker
per quarter
As far as possible AMC to avoid services of its sponsor.
All Security transactions with a Sponsor and his associates to be disclosed
Disclosure of transactions with a company which has invested more than 5% of NAV in
any scheme.

Working of Asset Management Company:
It is not required that AMC performs all its function of its own. It can hire service of outside
agencies as per its requirements or performs all function of its own. Registrars and Transfers
Agents are assigned the job of receiving and processing the application forms of investors,
issuing units certificate, sending refunds orders, according all transfers of units and maintaining
all such records, repurchasing the units, redemption of units. Issuing divided or income warrants.
For such service they are entitled to a fee, which is in proportion to numbers of units - holders
and numbers of transaction etc. Tata mutual fund proposes to pay of 0.60 percent of schemes
weekly net assets for this service. Such fee is charged by AMC from the mutual fund and is paid
to the agents. In India almost all AMC engage such agents.
66



FUNCTIONS OF ASSET MANAGEMENT COMPANY
There are two main functions of AMC
(a) Investment: -
The major strength of any AMC lies its investment functions is a specialized function
which, depending on operational strategies, such as under.
Fund Manager:-
Asset Management companies manage the investment of fund through a fund manager.
It is desirable to have independent fund manager for each scheme handled by it and this is the
practice in U.S.A. But in India the practice is otherwise. A single fund manager handles many
schemes simultaneously.




67
Registrar &
Transfer
Agent
Fund
Accounting
Lead
Manager
Investment
Advisors
Legal
Advisors
Fund
Manager
Advisors
Asset Management company
It is so because size of schemes is not to big. Each AMC may evolve its own criterion for
number of fund managers. Individual fund managers capacity varies between individuals. Ones
expertise and experience in investment handling decided the size of total corpus one can handle.
His basic function is to decide about which, when, how much securities are to be sold or bought.
To a great extent the success of any scheme depends on the calibre of the fund manager.
Research and Planning Cell:
This department plays a crucial role. It performs a very sensitive and technical assignment.
Depending again on the operational policies, such units can be created by AMC of its own or
research finding can be borrowed. The research can be with respect of securities as well as
positive investment. The fund manager can contribute to the bottom line of mutual fund by
spotting significant changes in securities ahead of the crowed. In India at present many funds
depends on outsiders. Such outsiders need not be technical analyst. Even brokers provide tips to
mutual fund.
Such strategy saves a lot of funds to be invested in small corpus can hardly afford to have their
own database. But there are mutual fund following the philosophy your expertise is your
original research. This section also assists planning new schemes and designing innovations in
schemes.
Dealers:-
To execute the sale and purchase transactions in capital or money market, a separate section may
be created in under the charge of a person called dealer having deep understanding of a stock
market operations.
68
Sometimes this division is under the charge of marketing division of AMC. Dealers are to
comply with all formalities of sale and purchase through brokers. Such brokers are to be
approved by Board Of Directors of AMC.

It is B.O.D., which lays down the guidelines for allocation of business to different brokers. Many
big mutual funds have their own dealing rooms. For making sales or purchase at different stock
exchanges, dealer may have his staff deputed at such centres.
Underwriter:-
Mutual fund have been permitted by SEBI to go in for underwriting of public issues to
generate additional income for their schemes, Mutual fund have to make an application to SEBI
for registration under SEBI (underwriters) Rules and Regulations 1993.
Any underwriting decision by any scheme shall be in conformity with the provisions of
the SEBI of India (mutual fund) Regulation. An underwriting commitment by the Mutual Fund
will be made as if the Mutual Fund is actually investing the amount under any scheme.
(b) Marketing:-
Marketing is a big challenge in business especially for mutual fund. Mutual funds deals
with small investors hard earn money, a sensitive commodity and only service is involved in
selling the product. The main challenge of marketing to mutual fund is that with same product,
customers with diversified profile viz. Demographics, socio-economic background, life style and
psychographics are to be served.




69
Since mutual funds are to interact with lacks of investors who are likely to be associated for a
longer tenure. Post issue services play an important role in customers satisfaction.
It is the marketing division which complies with the formulates to market the product
i.e. a new scheme. It seeks permission from agencies like Ministry Of Finance, Reserve Bank of
India, Securities and Exchange Board of India etc. Gazette notification of scheme is also its
assignment. Marketing division is to pursue the appointment of Registrar to the issue.
Appointment of solicitors, Auditors, custodians and transfer agents is also looked after by this
division. Ones a scheme is approved, the related printing of application forms, offer documents,
banker statement forms, stationery for unit certificates, commission cheques, refund order etc.
This stationery is to be distributed at appropriate time to the concerned agencies. Marketing
people also evolve a target amount of a scheme. The most crucial marketing strategy is evolved
to the best advantage of the fund Advertisement strategy is also designed by it.
Marketing division has to evaluate the market potentials, strength and weakness. For
each scheme, what is its market shear is very crucial question to design its future strategies. To
identify which section of society is under serviced, is another important assignment of marketing
division.







70
Merger of two AMCs:-
Merger of 2 AMCs:
Approval of Trustees of both AMCs required
SEBI approval required
Approval of High Court also required
Unit holders are informed and given option to exit without load
Take Over of AMC / Scheme of AMC
Take over of AMC by new Sponsor
Trustees approval required
SEBI clearance required
Unit holder to be informed
Merger of two schemes of different AMCs
Scheme of one Mutual Fund taken over by another Mutual Fund
Trustees approval required
SEBIs approval required
Unit holders to be informed






71
5.1 Findings:
By the above study, one can have a lot of findings regarding the performance of the
funds in his portfolio. The comparison in performance of these mutual funds can be
done easily. The following finding can be:
As we know that Mutual Fund is the pool of money where people invest there money in
order to get a profitable return on their investment. In today scenario there are various
companies which are providing mutual funds with different schemes to the investor. As
today people have a saving habit so they find these funds a good way in order to invest
and save their money.
With a number of mutual funds scheme existing in the market, it is very difficult by an
investor to choose the best among them so the investor has to carefully analyze the
market situation and see which fund is better for him to invest . Which fund is providing
better return on there investment in case of short term and long term period. For this
the investor should go through the different funds or can take the help of financial
advisor as to which fund will be better for investment







72
5.2 Suggestions

This study can be easily understand and help an investor in many ways. Some of the suggestions
are below
1. It is not only fund or companys goodwill which can be taken into consideration while
choosing a portfolio, the market factors like government policies, economic of sales and
the trend in a particular sector should also be considered.
2. Today investor is having enough funds to invest in a number of schemes. He is always in
search of such statistical tools which can provide him maximum return with lower risk. In
this regard, mutual fund is the best choice.
3. The investor must be given regular feed back on their investments.
4. The investors must be informed about the new schemes and products as they are launched
by any AMC
5. Time and again the finanacial services providers and the AMC should give their
advertisements in the leading newspapers so that they remain in the minds of the
investors.



5.3 Conclusion:
It is well known that now-a-day, mutual funds are most popular and safe parameter for
an investor to invest. Keeping the present and future aspects regarding the mutual
funds in the India, it is easily concluded that this market will give enough to an investor
for long period

73
5.4 Bibliography:
BOOKS
Investment Analysis And MANAGEMENT By Jones
Investment Analysis and Portfolio Management By Prasanna Chand

WEBSITES
www.amfindia.com
www.bseindia.com
www.nseindia.com
www.indobase.com/markets/index.htm
www.karvy.com

















74
Q1) How old are you?

65 and over 45 to 64
35 to 44 25 to 34
24 and under
The above analysis was to know the age group of the investor.
Finding:




Description:
The above study shows that 60% of the investors are belonging to age group of 25-34 and 25%
of the investors are from the age group of 45-64, whereas 11% of the investors are from the age
group of 35-44 and remaining 4% of the investor are from the age group of 65 and over.






77
4%
25%
11%
60%
0%
0%
10%
20%
30%
40%
50%
60%
70%
65 and over 45 to 64 35 to 44 25 to 34 24 and under
Q.2) What is your primary objective for your investment?
Preservation of principal Growth & Income Current Income
Conservative Growth Aggressive Growth
The above analysis was done to know the basic objective of the investor behind investing in
different mutual Funds schemes.
Finding:



Description:
The above study shows that the primary objective of 81% investors for investment is Growth &
Income, whereas 9% investors have an objective of Current Income, 6% having Conservative
Growth and remaining 4% having an objective of Aggressive Growth, whereas there is no
investor with an objective of Preservation of Principal




78
0%
9%
81%
6%
4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Preservation of
principal
Current Income Growth &
Income
Conservative
Growth
Aggressive
Growth

Q.3) How do you expect your current income to change?
Decrease slightly Increase with the pace of inflation
Remain about the same Increase dramatically
The above analysis was done to know the expectation of investors about their current income to
change.
Finding:

Description:
The above study shows that 69% of investors expect their current income will increase with the
pace of inflation and 27% of investors are expect their current income will remain about the
same, whereas 4% of investors expect their income will increase dramatically and there is no
investor who expects his current income will decrease slightly




79

0%
27%
69%
4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Decrease slightly Remain same Increase with pace of
inflation
Increase dramatically
Q.4) Are you presently satisfied with your life from a financial point of view?
YES NO
The above analysis was done to know the investors satisfaction about his life from a financial
point of view.
Finding:.

Description:
The above study shows that 76% of investors are presently satisfied with their life from financial
point of view, whereas 24% of investors are presently not satisfied with their life from financial
point of view.







80
76%
24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes No
Q.5) What is your source of information while investing in mutual funds?
Internet Financial Advisor
Magazine Advertisement
Friends
The above analysis was done to know the source of information of investor while investing in
Mutual Funds.
Finding:

Description:
The above study shows that the source of information of 61% investor is Financial Advisor and
21% investors are gets information from Internet, whereas 8% investors are gets information
from Friends and 8% get information from Advertisement and remaining 4% of investors are
gets information from Magazine.








81
21%
4%
8%
61%
6%
0%
10%
20%
30%
40%
50%
60%
70%
Internet Magazine Friends Financial Advisor Advertisement
.6) You are as an investor

Regular New

The above analysis was done to know that whether the investor is regular or new in Mutual
Funds.
Finding:


Description:

The above study shows that the 50% of investors are Regular and 50% investors are New in
Mutual Fund Investment.






82
50% 50%
0%
10%
20%
30%
40%
50%
60%
Regular New

Q.7) Which type of fund you prefer the most?

Regular Income Diversified
Debt Sector Fund
ELSS [Tax Saving]
The above analysis was done to know type of fund mostly preferred by the investors.
Finding:

Description:
The above study shows that the 44% of the investors are prefer Regular Income Fund most and
28% of the investors are prefer ELSS [Tax Saving] Fund most, 20% of investors are prefer
Diversified Fund most, whereas both Debt Fund and Sector Fund are prefer by 4% of investors
respecti




83
44%
3%
21%
4%
28%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Regular Income Fund Debt Fund Diversified Fund Sector Fund ELSS [Tax Saving]
Q.8) What is most important to you in investing your money?
Return Safety
Principal Diversification
Liquidity
The above analysis was done to know that while investing in Mutual Funds, which of the above
feature is more important by the investors point of view.
Finding:

Description:
The above study shows that the 44% of investors thinks that Return is the most important thing
in investing their money in Mutual Funds, 18% of investors thinks that Safety is the most
important thing in investing their money, whereas 6% investors are think for Diversification and
6% think for Liquidity and remaining 8% of investors are think that Principal is the most
important thing in investing their money in Mutual Funds.







84
44%
8%
18%
6% 6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Return Principal Safety Diversification Liquidity
Q.9) What type of return you expect?
Monthly Half yearly
Quarterly Annually
Finding:


Description:
The above study shows that 40% investors are expect Annually return, 32% investors expect
Quarterly, whereas 18% investors are like to get Half yearly return, also the 10% investors
expect Monthly return.






85
10%
32%
18%
40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Monthly Quarterly Half yearly Annually
Q.10) What are your return expectations on your investment?
Up to 8%
Between 8 to 18%
Above 18%
Finding

Description:
The above study shows that 78% business man are like to get 8 to 18% return on their
investment, and 22% are like to get above 18% return on their investment.



86

0%
78%
22%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
up to 8% Between 8 to 18% Above18%