1 Background

EQUITY FUND MANAGEMENT – PROCESSES &
PRACTCES
(FUNDAMENTAL ANALYSIS)
Module I – BACKGROUND
Evolution of Mutual Funds in India
2
Concept of Mutual Fund
• AMFI defines Mutual fund as “a trust that pools the savings of

a number of investors who share a common financial goal. The
money thus collected is then invested in capital market
instruments such as shares, debentures and other securities”
• The income earned through these investments and the capital

appreciation realized is shared by its unit holders in proportion
to the number of units owned by them.
3
Workflow of a Mutual Fund
4
AUM Growth – Indian MFs
Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for the month of
March, 2024 stood at ₹ 55,00,728 crores (Source: AMFI)
See Link: https://www.amfiindia.com/indian-mutual 5

Components of Mutual Fund Industry
in India
6
• Sponsor: The Sponsor is the main body that establishes the Mutual fund.
The Sponsor can be compared to a promoter of a company. The Sponsor(s)
carry out the process by approaching the SEBI for registration of a mutual
fund and provides the funding. For example, Standard Chartered Mutual
Fund was sponsored by Standard Chartered bank. Can bank Mutual Fund
was sponsored by Canara Bank in December 1987.
• Trustee: A Trustee holds the fiduciary responsibility of protecting the interest

of the investor. A trust is created by the fund sponsor in favour of the
trustees, through a document called a trust deed. The trust is managed by
the trustees and they are answerable to investors. They can be seen as
primary guardians of fund and assets.
• Trustees can be formed by two ways – a Trustee Company or a Board of

Trustees. The trustees work to monitor the activities of the Mutual Fund and
check its compliance with SEBI (Mutual Fund) regulations. They also
monitor the systems, procedures, and overall working of the AMC. Without
the trustees’ approval, AMC cannot float any scheme in the market.
Example, The Trustee for Tata Mutual Fund is Tata Trustee Company Pvt.
Ltd, the trustee at ABN AMRO is ABN AMRO Trustee (India) Pvt. Ltd., the
trustee at Benchmark mutual fund is Benchmark Trustee company Private
Limited 7
• Asset Management Company: The AMC consists of the fund managers
who manage the investments. The AMC takes multiple day to day decisions
including investments purchase, sales, computing net asset values, impact
of corporate actions, declaring dividend, providing investor information
amongst others.
• A custodian is a financial institution that holds customers' securities for

safekeeping in order to minimize the risk of their theft or loss.
A custodian holds securities and other assets in electronic or physical form.
The custodian has the custody of the all the shares and various other
securities bought by the AMC. The custodian is responsible for the safe
keeping of all the securities. The custodian is liable for keeping the
investment account of the mutual fund. They also collect & track dividends &
interests received on the Mutual Fund investment.
• Registrar and Transfer Agent (RTA): The RTA maintains and updates all
the investors records. The main function is investor servicing through its
office and various other branches. Its functions includes processing of
investor application, purchase and redemption transactions by investors in
various schemes and plans.
8
Example
• Sponsor - SBI
• Trustee - SBI MF Trustee Co. Pvt. Ltd.
• AMC - SBI Funds Management Pvt. ltd
• Custodian - HDFC Bank, CITI Bank, etc.
• Registrar & Transfer Agent - Computer Age Management Services

Pvt. Ltd.
• Another Example: http://portal.amfiindia.com/spages/sai3.pdf
9
TYPES OF MUTUAL FUND
Customized products submit to approvals are launched by AMCs, recent

developments include Fund of Funds, AIFs, InvITs, REITs, etc.
10
Categories of Mutual Funds
SEBI Circular no. – SEBI/HO/IMD/DF3/CIR/P/2017/114
Equity
Schemes
Debt Hybrid
Schemes Schemes
Mutual
Funds
Solution
Other
oriented
Schemes
Schemes
11
Sub-categories of Equity Schemes
1. Multi-cap Fund
2. Large-cap Fund
3. Large and Midcap Fund
4. Midcap Fund
5. Small-cap Fund
6. Dividend Yield Fund
7. Value Fund
8. Contra Fund
9. Focused Fund
10.Sectoral/Thematic Funds
11.ELSS, etc.
12
Sub-categories of Debt Schemes
1. Overnight Fund
2. Liquid Fund
3. Ultra Short Duration Fund
4. Low Duration Fund
5. Money Market Fund
6. Short Duration Fund
7. Medium Duration Fund
8. Medium to Long Duration Fund
9. Long Duration Fund
10. Dynamic Fund
11. Corporate Bond Fund
12. Credit Risk Fund
13. Banking & PSU Fund
14. Gilt Fund
15. Gilt Fund with 10 years constant duration
16. Floater Fund
13
Sub-categories of Hybrid Schemes
1. Conservative Hybrid Fund
2. Balanced Hybrid Fund
3. Aggressive Hybrid Fund
4. Dynamic Asset Allocation or Balanced Advantage Fund
5. Multi-Asset Allocation Fund
6. Arbitrage Fund
7. Equity Savings Fund
14
Sub-categories of Solution-oriented Schemes
1. Retirement Fund
2. Children’s Fund
Sub-categories of Other Schemes
1. Index Funds/ ETFs

2. FOFs (Domestic/ Overseas)
15
Advantages and Disadvantages of investing in a
Mutual Fund
Advantages:
• Professional Management
• Liquidity
• Economies of Scale
• Divisibility
• Government regulated industry
• Tax benefits in certain cases
• Diverse range of products to choose from
• Convenience of investment without skills & technical know-how, etc.
16
Advantages and Disadvantages of investing in a
Mutual Fund
Disadvantages:
• Risk: Like any other investment a mutual fund carries its own
inherent risk including market risk, interest rate risk, and credit risk
amongst others.
• Fluctuating Returns
• Excessive Diversification
• Costs
• Misleading Advertisements
• Performance Evaluation
17
AMFI
• The Association of Mutual Funds in India (AMFI) is dedicated to developing the
Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance
and maintain standards in all areas with a view to protecting and promoting the
interests of mutual funds and their unit holders.
• AMFI, the association of SEBI registered mutual funds in India of all the registered
Asset Management Companies, was incorporated on August 22, 1995, as a non-
profit organisation. As of now, all the 42 Asset Management Companies that are
registered with SEBI, are its members.
• Objectives of AMFI
• Maintain high professional and ethical standards of industry
• To recommend and promote best business practices and code of conduct to be
followed
• To interact and represent to SEBI on all matters concerning the mutual fund industry.
• To undertake nation wide investor awareness programme of mutual funds.
• To disseminate information on Mutual Fund Industry and to undertake studies and
research directly and/or in association with other bodies.
• To take regulate conduct of distributors including disciplinary actions (cancellation of
ARN) for violations of Code of Conduct.
• To protect the interest of investors/unit holders.
18
Mutual Fund Factsheet – Large Cap Fund
19
Mutual Fund Factsheet – Large Cap Fund
20
Mutual Fund Factsheet – Small Cap Fund
21
Mutual Fund Factsheet – Small Cap Fund
22

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EQUITY FUND MANAGEMENT – PROCESSES &

• AMFI defines Mutual fund as “a trust that pools the savings of

• The income earned through these investments and the capital

See Link: https://www.amfiindia.com/indian-mutual 5

• Trustee: A Trustee holds the fiduciary responsibility of protecting the interest

• Trustees can be formed by two ways – a Trustee Company or a Board of

• A custodian is a financial institution that holds customers' securities for

• Trustee - SBI MF Trustee Co. Pvt. Ltd.

• AMC - SBI Funds Management Pvt. ltd

• Custodian - HDFC Bank, CITI Bank, etc.

• Registrar & Transfer Agent - Computer Age Management Services

• Another Example: http://portal.amfiindia.com/spages/sai3.pdf

Customized products submit to approvals are launched by AMCs, recent

Sub-categories of Other Schemes

1. Index Funds/ ETFs

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