SUMMER TRAINING PROJECT REPORT ON

Evaluation Of Mutual Fund As An Investment Tool..

Analysis Of Perception Of Individual Investor.

AT

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF
Master of Management Studies
UNIVERSITY OF MUMBAI

UNDER THE GUIDANCE OF

Mr. Shailendra Pawar

SUBMITTED BY
Nikhil D Khandelwal.
DEPARTMENT OF MANAGEMENT STUDIES
SHAH & ANCHOR KUTCHHI ENGINEERING COLLEGE
CHEMBUR, MUMBAI 400 088

MMS 2008-2010
MET Chowk, W.T Patil Marg, Chembur, Mumbai - 88. Ph: 25580854
1

ACKNOWLEDMENT
It was really a great pleasure & good experience in these two months in IL&FS Investsmart
Ltd.
The last two months with IL&FS Investsmart Ltd.has been full of learning and sense
of contribution towards the organization. I would like to thank IL&FS Investsmart Ltd.giving
me this opportunity for learning and contributing. I take this opportunity to thank all those
people who made this experience a memorable one.
While doing this project I have learnt so many things like how to speak to the clients,
how to work in a team, how to be a good leader. Also being a Co-ordinator, it was indeed a
good experience which will boost me in my carrier. Also I have learnt some advisory part of
mutual funds i.e. how to suggest the schemes & also tax planning.
In this context, as a student of Shah & Anchor Kutchhi Engineering College-MMS, I
would like to thank and express my gratitude towards Mr Shailendra Pawar. (Project
Guide) for assigning me such a worthwhile topic & a supportive guidance
I am also thankful to MR. Vinit Kotak sir for giving me a chance to work in a good
company like IL&FS Investsmart Ltd.
The project couldnt have been completed without timely and vital help of other
office staff. Special thanks to Mr. Sadap Khan, Mr.Tejal Mastakar, Mr.Jaideep Pawar,
for their invaluable guidance, keen interest, cooperation, inspiration and of course moral
support throughout my project session. I would also like to thank my project trainees for
helping me in making this project report. I also thank entire staff of IL & FS
INVESTSMART SECURITIES LTD.

INDEX
Sr. no.

Contents

Page no.

Executive Summary.

Company Profile.

Introduction.

15

3.1

Concept of Mutual Fund.

15

3.2

History Of mutual funds in India.

17

3.3

Structure of a Typical Mutual Fund.

18

3.4

Structure of mutual funds in India.

19

3.5

Mutual funds in India.

21

3.6

Types of Mutual Fund.

22

3.7

How to Pick the Right Fund.

26

3.8

How to keep Regular track of Mutual Fund Investors.

27

3.9

Risk return graph of various funds.

28

3.10

Earnings from Mutual Funds.

29

3.11

Advantages of Mutual Funds.

30

3.12

Disadvantages of Mutual Funds.

31

3.13

Future of Mutual Fund in India.

32

Major Mutual Funds in India.

33

Facts about Growth of Mutual Funds in India.

40

5 Most Common Mistakes Mutual Fund Investors Makes.

41

How to judge mutual funds in India.

42

Objective of the PROJECT.

44

RELIANCE MUTUAL FUND ANALYSIS.

45

10

Research Methodology of the Study.

50

11

Sources of Data Collection.

54

12

CONCLUSION

57

13

QUESTIONNAIRE

59

14

BIBLIOGRAPHY

61

1- EXECUTIVE SUMMARY:The project titled Evaluation of Mutual Fund as an Investment tool.Analysis of

Perception of Individual Investor is carried out in IL&FS Investsmart Ltd.
IL&FS INVESTSMART LIMITED, a financial services company, provides customized
financial management solutions for retail customers, institutional investors, and corporate
clients in India. Its retail offerings include mutual fund advisory, portfolio management, IPO
advisory and distribution, and insurance advisory services, as well as equities and derivatives,
and commodity trading services.
The evaluation of mutual funds has been increased through decades, which is best seen in
customer rise. Now a days investment of saving has assumed great importance.
According to the study of the markets, it is being observed that markets are doing well in
Mutual fund. So it is necessary to evaluate the mutual fund performance so that investor can
get clear idea of the investment.
As there exists some relation between mutual fund & market volatility, it is necessary to
know perception of individual investor about mutual fund so that awareness of mutual fund
can be increased.
The main objective of this project is to know the Mutual Funds for individual investors in
India and also to know the investing pattern of people in different Financial Project.
IT sector has been given more emphasis for the study of the project because it is the only
sector where all type of Age group, Income class and different level of people are
represented.

2- Company Profile:

IL&FS INVESTSMART LTD:

The HSBC group has acquired 73.21 per cent stake in the listed retail broking firm IL&FS
Investsmart Ltd (IIL) in an all cash deal for Rs 1,084.5. crore ($261 million). The price also
includes Rs 82 crore ($19.4 million) paid as part of a three-year non-compete agreement.

The foreign bank, which paid Rs 200 per share, will also make an open offer to acquire up to
20 per cent of the remaining shares in Investsmart. The open offer price will be announced on
Tuesday. Ms Naina Lal Kidwai, Group General Manger and CEO, HSBC in India, We got a
good deal here. We paid 1.9 times price to book value, which is much lower compared to the
recent deal of UTI Securities at 5.4 times price to book and that of Geojit Financials at 12.8
times price to book value.
The stock market seems to have got wind of the deal a while ago as IILs share
price moved up by more than 20 per in the last one week. It rose from Rs 164 on May 9 to Rs
198.80 on May 16. Under the terms of the agreement, HSBC will acquire 43.85 per cent stake
in IIL from E*Trade Mauritius Ltd, an indirect wholly owned subsidiary of E*Trade
Financial Corporation and an additional 29.36 per cent stake from Infrastructure Leasing and
Financial Services Ltd. HSBC is expected to change the name of the broking firm once the
regulatory approvals are received. IIL will have to sell its commodity business to obtain RBI
approval as banks or its subsidiaries in India are not allowed to do commodity business.

IL&FS INVESTSMART LIMITED, a financial services company, provides

customized financial management solutions for retail customers, institutional investors, and
corporate clients in India. Its retail offerings include mutual fund advisory, portfolio
management, IPO advisory and distribution, and insurance advisory services, as well as
equities and derivatives, and commodity trading services. The companys institutional
offerings comprise financial advisory and capital-raising services, as well as investing and
trading strategies. In addition, it also provides online trading services. The company was
founded in 1997 and is based in Mumbai, India.

FIG1. Time line of IL&FS Investsmart LTD

Promoters History IL&FS Investsmart Ltd

7

 Promoted by Infrastructure Leasing and Financial Services Ltd

Shareholders of IL&FS include SBI, ORIX-Japan, IFC-Washington, Credit

Commercial de France, Indivest Pte Ltd(an Affiliate of Govt. of Singapore)

Business operations of the promoter

Infrastructure and Development Services: Sectors such as Surface
Transport and Transportation Systems, Water Supply, Hydro Power,
Special Economic Zone, Port and Environment & Social Management
Group.

Investment Banking : Strategy, Asset Financing, Corporate Advisory,

Capital Markets, Project Financing

Made contributions to the following trusts: IL&FS Infrastructure Equity

Fund, IL&FS Investment Trust I, II, IV

The Indian Innovation Award-2005: Awarded to IL&FS by President of India

Top Management:
8

The top management of this company comprises of four directors in equal hierarchical
designation. The table shows their responsibility in the organization.
Table No:1

Name &
Qualification

Age

Position

Functional Areas

Mr. Sandeep
Presswala

39

Chief Operating
Officer

1.Served as COO since October

1999
2. Has over 14 years of experience
in Capital Markets
3. Holds a Bachelors Degree in
Commerce from Bombay
University and is a Chartered
Accountant

Mr. Sachin
Joshi

40

Chief Financial
Officer

1. Served as CFO since October

1999
2. Has over 16 years of Financial
Management experience
3. Holds a Bachelors degree in
Commerce and is a LLB(Gen),
Chartered Accountant and Cost
and Works Accountants

Mr. Girish
Nadkarni

37

Chief Operating
Officer

1. Has over 15 years of industry

experience in financial services
2. Holds a PGDM from IIM-A,
Bachelors in Commerce from
Mumbai University and is a Cost
and Works Accountant

FIG 2. Product Portfolio

FIG 3. Business Model Universal Broker

10

Client Category

Products

Portfolio Management Services

HNI/MNI

Mass Affluent

Retired Individuals

Corporate

Retail

Investment Counseling

Portfolio Advisory

Transaction and

Distribution Products

Transaction and
Distribution Products

IIL uses the above Model to acquire and service clients

11

FIG 4.Our Retail Offerings

11

FIG 5.Achievements

Chosen as The Best Performing National Financial Advisor Retail Segment at the
CNBC TV 18 National Financial Advisor Award 2006.

FIG 6.Business Strategy

12

OBJECTIVES

STRATEGIES

Grow Retail Business

Capitalize on New
Business Opportunities

Grow Institutional Brokerage

and Merchant Banking

Targeted Presence in Key

Overseas Markets

20

Establish alliance with banks to increase market presence

Launch and grow on-line trading capabilities
Grow existing product lines like wealth management & securities related
financing
Expand into related financial services such as commodities broking and
financing services and insurance brokerage
- Established a subsidiary with membership of NCDEX & MCX
- Obtained a brokerage license to distribute insurance products of third
party insurers

Increase institutional relationship backed by enhanced research capabilities

Harness mid-market segment witnessing robust growth

Plan to establish offices in key overseas markets, such as Singapore, Hong

Kong, Dubai, London and New York
Target growth opportunities for institutional brokering, private equity,
syndication and NRI wealth management

Sustainable Growth Drivers

Grow branch and franchisee network across India

- Expand into smaller cities with significant untapped potential

Capitalize on acquisition opportunities in Indian Markets

Growth Plan :

13

Complete business restructuring

Increase Margin Portfolio book to Rs. 7.5 bn

Accelerate branch expansion through setup of mini branches
Reach an AUM of Rs. 20 bn in MF assets
Strong focus on building new businesses : commodities, online trading
Launch international operations in Singapore. Complete Dubai approvals
Consolidate in the niche position in mid market corporate segment and graduate
to large sized deals
Deepen the focus on research and corporate relationships to grow institutional
business

Network Expansion
Accelerated expansion through mini branches and select franchisees planned
Rapid branch expansion on a smaller format (mini branches) planned in
Mumbai, Delhi and Tier II cities
Existing franchisee relationships to be developed, growth from new franchisees
to be selective Table No: 2

3- INTRODUCTION
14

3.1

CONCEPT OF MUTUAL FUNDS

During the past decade, interest in-and information about-investing has increased
dramatically. Technological advances have ushered in a vast supply of new services that
allow you to invest with ease. Mutual fund shareholders have benefited from these
technological advances, as funds have continually offered improved services to meet
changing investor needs.

Still, the most important advantages mutual funds offer over other types of investments
remain unchanged since the first fund was offered in 1924: professional management-the
security of knowing your money is managed by a team of professionals devoted to reaching
your investment objectives-and diversification-the ability to invest affordably in a wide range
of securities and reap market rewards while diminishing accompanying risks.

A mutual fund is a trust that pools the savings of several investors and then invests
these into different kinds of securities (shares, debentures, money market instruments, or a
combination of these) in keeping with a pre-stated investment objective. The income thus
generated and the capital appreciation is distributed among mutual fund unit holders in
proportion to the number of units held by them.

15

UNIT TRUST OF INDIA is the first mutual fund set up under a separate Act, UTI Act in
1963 and started its operation in 1964 with the issue of unit under the scheme US-64.

Currently public sector banks like SBI, Canara bank, Bank of India, and Institution like IDBI,
GIC, and LIC HDFC Foreign institution like Alliance Morgan Stanley, Templeton, Principle
HSBC and private financial Co. like first India mutual fund DSP Merrill Lynch, Sundaram,
Kotak etc. have floated their own mutual funds.

Presently there are 33 mutual funds in India and close to 400 mutual fund schemes.
Currently the total fund under the mutual fund management in India are a little over Rs.
139000 crores. The private funds account for around 77 percent.

16

3.2

THE HISTORY OF MUTUAL FUNDS: THE INDIAN TIMELINE:

1963: UTI is Indias first mutual fund.

1964: UTI launches US-64.
1971: UTIs ULIP (Unit-Linked Insurance Plan) is second scheme to be launched.
1986: UTI Mastershare, Indias first true mutual fund scheme, launched.
1987: PSU banks and insurers allowed to float mutual funds; State Bank of India (SBI)
1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in shares,MF.
1993: Private sector and foreign players allowed; Kothari Pioneer first private fund house to
start operations; SEBI set up to regulate industry.
1994: Morgan Stanley is the first foreign player.
1996: SEBIs mutual fund rules and regulations, which forms the basis of most current laws,
come into force.
1998: UTI Master Index Fund is the countrys first index fund.
1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first acquisition in
the mutual fund industry.
2000: The industrys assets under management crosses Rs 1,00,000 crore.
2001: US-64 scam leads to UTI overhaul.
2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned from
giving commissions to investors; floating rate funds and Foreign debt funds debut.
2003: AMFI certification made compulsory for new agents; fund of funds launched.

17

3.3 STRUCTURE OF A TYPICAL MUTUAL FUND

18

3.4 STRUCTURE OF MUTUAL FUND IN INDIA:

The Indian mutual fund industry is dominated by the Unit Trust of India which has a total
corpus of Rs.700bn collected from more than 20 million investors. The UTI has many funds
schemes in all categories i.e. equity , balanced , income etc with some being open ended and
some being close ended .

The unit schemes 1964 commonly referred to as US 64 , which is a Balanced fund is a

biggest schemes with a corpus of about Rs. 200 billion UTI was floated by financial
institution and is governed by a special act of parliament . Most of its investors believe that
UTI is government owned and controlled which while legally incorrect, is true for all
practical purposes.

The second largest category of mutual funds is the ones floated by Nationalised Banks.
Canbank Asset Management floated by Canara Bank and SBI Funds Management floated by
State Bank of India are the largest of it. GIC AMC floated by General Insurance Corporation
and Jeevan Bema Sahayog AMC floated by LIC are some of the other prominent ones. The
aggregate corpus of funds managed by this category of AMCs is about 150bn.

19

The third largest category of mutual fund is the ones floated by the private sector and by
foreign Asset Management Company . The largest of these are Prudential ICICI AMC and
Birla Sunlife AMC. The aggregate corpus of asset managed by this category of AMCs is in
excess of Rs. 250bn.

20

3.5 MUTUAL FUNDS IN INDIA:-

Mutual Funds in India

UTI

JVs with foreign

Private sector

Foreign Houses

Public

Indian Houses

Partners
Birla Capital

Templeton

Prudential ICICI

Alliance

Alliance Capital

Morgan Stanley

TATA
JM

Kothari Pioneer
Banks

SBI
CANARA
PNB
BOI etc.

Institutions

GIC
LIC etc.

21

3.6 TYPES OF MUTUAL FUNDS

Mutual Funds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any number of
different funds to help one meets ones specific goals. In general mutual fund fall under 3
general categories : Equity fund invest in shares of common stocks.
Fixed income funds invest in government or corporate securities which offer fixed
rate of returns.
Balanced fund invest in a combination of both stocks and bonds.

A. AGGRESSIVE GROWTH FUNDS

These funds seek to provide maximum growth of capital with secondary emphasis on
dividend or interest income. They invest in common stocks with a high potential for rapid
growth and capital appreciation.
Aggressive growth funds are suitable for those investors who can afford to assume the risk of
potential loss in value of their investment in the hope of achieving substantial and rapid gains.
They are not suitable for investors who must conserve their principal or who must maximize
their current income.

22

B. GROWTH FUNDS
Like aggressive growth funds, growth fund generally invests in stocks for growth rather than
income. They are considered more conservative in their approach because they usually invest
in established companies to achieve long-term growth. Growth fund provides low current
income but the investor principal is more stable then it would be in an aggressive growth
fund. While the growth potential may be less over the short term, many growth funds have
superior long-term performance records.
These funds are suitable for growth oriented investors but not investors who are unable to
assume risk or who are dependent on maximizing current income from their investments.

C. GROWTH AND INCOME FUNDS

Growth and income funds seek long-term growth of capital as well as current income. The
investments strategies use to reach these goals vary among funds.
Growth and income funds have low to moderate stability of principal and moderate potential
for current income and growth. They are suitable for investors who can assume some risk to
achieve growth of capital but want to maintain a moderate level of current income.

23

D. FIXED INCOME FUNDS

The goal of fixed income fund is to provide high current income consistent with the level of
capital. Growth of capital is of secondary importance. Fixed income funds offer a higher
level of current income than money market funds, but a lower stability of principal. Fixed
income funds are suitable for investors who want to maximize current income and who can
assume a degree of capital risk in order to do so.

E. EQUITY FUNDS
Funds that invest in stocks represent the largest category of mutual fund. Generally the investment
objective of this class of fund is long-term capital growth with some income. There are however
many type of equity funds.

F. BALANCED FUNDS
The Balanced funds aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents. It is
an idea for investors who are looking for the combinations of income and moderate growth.

G. MONEY MARKET FUNDS/ LIQUID FUNDS

For the cautious investors these funds provide a very high stability of principal while seeking
a moderate to high current income. They invest in highly liquid; virtually risk free, short-term
debt securities of agencies of the Indian government, banks and corporation and treasury
bills. Because of their short-term investments, money market mutual funds are able to keep a
virtually constant unit price; only the yield fluctuates.
Money market funds are suitable for those investors who want high stability of principal and
current income with immediate liquidity.
24

H. SPECIALITY / SECTOR FUNDS

These funds invest in securities of a specific industry or sector of the economy such as health
care, technology, leisure, utilities or precious metals. The funds enable investor to diversify
holding among many companies within an industry, a more conservative approach than
investing directly in one particular company. Sector funds offer a opportunity for sharp
capital gains in cases where the funds industry is in favor but also entail the risk of capital
losses when the industry is out of favour.

I. OPEN ENDED SCHEMES

Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at
NAV- related prices from and to the mutual fund on any business day. These schemes have
unlimited capitalization, open-ended schemes do not have a fixed maturity, there is no cap on
the amount you can buy from the fund and the unit capital keep growing. These funds are not
generally listed on any exchange.Open-ended schemes are preferred for their liquidity. Such
funds can issue and redeem units any time during the life of schemes. Hence unit capital of
open-ended funds can fluctuate on a daily basis.Advantages of open ended schemes are:
1. Any time exit option.
2. Any time enter option.

J. CLOSE ENDED SCHEMES

Close-ended schemes have fixed maturity periods. Investors can buy into these funds during
the period when these funds are open in the initial issue. After that such scheme cannot issue
new units except in case of bonus or right issue. However after the initial issue you can buy
or sell units of the schemes on the stock exchange where they are listed. The market price of
the unit could vary from the NAV of the schemes due to demand and supply factor.
25

3.7

3.8

HOW TO PICK THE RIGHT FUND

HOW TO KEEP REGULAR TRACK OF MUTUAL

FUND INVESTMENTS
26

You can keep a track of your mutual fund investments through any of the following

3.9 THE RISK RETURN GRAPH FOR VARIOUS FUNDS:-

27

R
Sector Funds

E
T

Equity Funds

U
Balanced Funds
R
N
S

Income Funds
Liquid Funds
RISKS

The above Graph shows the Risk and Returns generated by different Funds. Liquid Funds are
less Risky and also generate less Returns where as Sector Funds are more Risky but generate
more Returns by the example of above two Funds it is clear that Risk and Returns are directly
proportional to each other. Other Funds like Equity Funds, Balanced Funds and Income
Funds are also gives the same percentage of Returns as the Risk involved.

3.10 EARNINGS FROM MUTUAL FUNDS

28

3.11 ADVANTAGES OF MUTUAL FUND

Diversification: The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example,
29

economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will respond
to the same economic conditions by increasing in value. When a portfolio is balanced
in this way, the value of the overall portfolio should gradually increase over time,
even if some securities lose value.

Professional Management: Most mutual funds pay topflight professionals to manage

their investments. These managers decide what securities the fund will buy and sell.

Regulatory oversight: Mutual funds are subject to many government regulations that
protect investors from fraud.

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a
call, and you've got the cash.

Convenience: You can usually buy mutual fund shares by mail, phone, Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are not
actively managed. Instead, they automatically buy stock in companies that are listed
on a specific index.

Transparency: Mutual Fund schemes are said to be Transparent because they show
the clear allocation of Funds to Investors.

Flexibility: Mutual funds are flexible because they change time to time and also if
Investors wants his money back before the maturity of the Fund one can easily
redeem it.

3.12 DRAWBACKS OF MUTUAL FUNDS

30

No Guarantees: No investment is risk free. If the entire stock market declines in

value, the value of mutual funds shares will go down as well, no matter how balanced
the portfolio. Investors encounter fewer risks when they invest in mutual funds than
when they buy and sell stocks on their own. However, anyone who invests through a
mutual fund runs the risk of losing money.

Fees and commissions: All funds charge administrative fees to cover their day-today expenses. Some funds also charge sales commissions or "loads" to compensate
brokers, financial consultants, or financial planners. Even if you don't use a broker or
other financial adviser, you will pay a sales commission if you buy shares in a Load
Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit
on its sales, you will pay taxes on the income you receive, even if you reinvest the
money you made.

Management risk: When you invest in a mutual fund, you depend on the fund's
manager to make the right decisions regarding the fund's portfolio. If the manager
does not perform as well as you had hoped, you might not make as much money on
your investment as you expected. Of course, if you invest in Index Funds, you forego
management risk, because these funds do not employ managers.

3.13 FUTURE OF MUTUAL FUND IN INDIA

31

By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is

estimated that by 2010 March-end, the total assets of all scheduled commercial banks
should be Rs 40,90,000 crores.

The annual composite rate of growth is expected 13.4% during the rest of the decade.
In the last 5 years we have seen annual growth rate of 9%. According to the current
growth rate, by year 2010 the asset will be double.

- Major Mutual Fund Companies in India

32

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN
AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN
AMRO Asset Management (India) Ltd. was incorporated on November 4,
2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

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, the US, the Philippines, Japan,
Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows
a conservative long-term approach to investment. Recently it crossed AUM of
Rs. 10,000 crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October
30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management
Company Limited is the AMC of BOB Mutual Fund and was incorporated on
November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.
33

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital
Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts
as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management
(India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America; one of the
largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on
13th of October 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee
Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset
Management Company Limited incorporated on 22nd of June 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation
Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on
August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC
stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it
34

is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes
out of which 15 have already yielded handsome returns to investors. State Bank of India
Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8
Lakhs spread over 18 schemes.
Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for
Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment
manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata
Asset Management Limited is one of the fastest in the country with more than Rs. 7,703
crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is

presently having more than 1,99,818 investors in its various schemes. KMAMC started its
operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to
investors with varying risk - return profiles. It was the first company to launch dedicated gilt
scheme investing only in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages
the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset
Management Company presently manages a corpus of over Rs.20000 Crore. The sponsors of
UTI Mutual Fund 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, Asset Management Funds, Index Funds, Equity Funds
and Balance Funds.

Reliance Mutual Fund

35

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The
sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the
Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund, which was
changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various
schemes under which units are issued to the Public with a view to contribute to the capital
market and to provide investors the opportunities to make investments in diversified
securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard
Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard
Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with
SEBI on December 20,1999.

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a
global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services
groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor
or through mail or through their website. They have Open end Diversified Equity schemes,
Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes,
Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of
Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market
36

in securities, investment management and credit services. Morgan Stanley Investment

Management (MISM) was established in the year 1975. It provides customized asset
management services and products to governments, corporations, pension funds and nonprofit organizations. Its services are also extended to high net worth individuals and retail
investors. In India it is known as Morgan Stanley Investment Management Private Limited
(MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close
end diversified equity scheme serving the needs of Indian retail investors focusing on a longterm capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its
sponsor. The
Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on
December 1, 1995 with the name Escorts Asset Management Limited.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital
Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company
Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the
corporate office in Mumbai.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.
Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.
Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset
Management Company Pvt. Ltd. is the AMC.

Can bank Mutual Fund

Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the
37

Mutual Fund AUMs Growth

sponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993 is
the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance
Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee
Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as
a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company
started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed
Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC
Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a

Government of India undertaking and the four Public Sector General Insurance Companies,
viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The
Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted
as a Trust in accordance with the provisions of the Indian Trusts Act, 1882

38

Month/Year Mar-98 Mar-00 Mar-01 Mar-02

Mar-03

Mar-04 Sep-04

MF AUM's
Change in %
over last yr

68984 93717
26

4-Dec

83131

94017

75306

137626 151141 149300

13

12

25

45

Aggregate deposits of Scheduled Com Banks in India (Rs.Crore)

Month/Year Mar-98 Mar-00 Mar-01

Mar-02

Mar-03

Deposits

1131188

1280853 -

1567251 1622579

13

12

18

Change in %
over last yr

605410 851593 989141

15

14

Mar-04 Sep-04

4-Dec

39

5 - SOME FACTS FOR THE GROWTH OF MUTUAL FUNDS

IN INDIA
100% growth in the last 6 years.
Number of foreign AMCs is in the que to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management worldwide.
Our saving rate is over 23%, highest in the world. Only channelizing these savings in
mutual funds sector is required.
We have approximately 29 mutual funds which is much less than US having more
than 800. There is a big scope for expansion.
'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing cities.
Mutual fund can penetrate rural like the Indian insurance industry with simple and
limited products.
SEBI allowing the MF's to launch commodity mutual funds.
Emphasis on better corporate governance.
Trying to curb the late trading practices.
Introduction of Financial Planners who can provide need based advice.

40

6 THE 5 MOST COMMON MISTAKES MUTUAL FUND

INVESTOR MAKES

Failing to stay invested for a longer period.

Worrying about portfolio turnover or dividends it pays.

Being affected by new the market when youre supposed to be investing for
the long term.

Selling out during bad market.

Being impatient and losing confidence too soon

41

7 - HOW TO JUDGE A MUTUAL FUND:-

Consider this The Indian mutual fund (MF) industry reached Rs. 1,50,537 crore in
December 2004. The industry witnessed a 100% growth in the last six years. By year 2010,
MF assets are expected to double. India has 29 MFs compared to 800 in the US.
In the last one year, the number of retail investors in India has increased steadily. The big
question is how to judge a MF before investing? It is important for an investor to consider a
fund's performance over several years. Different fund managers adopt different strategies to
improve performance.
While one fund manager may have played it cautious by investing in good quality stocks over
the years and given a return of 30% over a five-six year period, another one who invested in
speculative stocks may have struck gold in that year, thereby outperforming tits counterpart
by a long way. Thus it is important to look at consistency of returns over a period of time
rather than going by absolute returns generated in the short term.

Let us look at the advantages of investing in a MF. To begin with, you don't have to make
your investment decisions. Your money is handled by top professionals hired by fund houses
who decide what securities the fund will buy and sell. Moreover,

MF industry is highly regulated, thus, protecting investors from fraud. Regulators block
funds from having more than a certain percentage of the fund in any one firm. This prevents

42

from over exposure in one particular industry or stock. It's easy to get your money out of a
MF. It is very convenient to buy a MF unit over phone or Internet.

An investor should consider certain drawbacks before investing in MF. Unlike a fixed
deposit, MF does not give any guarantee on returns. If the entire stock market declines in
value, the value of MF shares will go down as well. An investor has to shell out an entry and
exit load.

When you invest in a MF, you depend on the fund's managers to make the right decisions
regarding the fund's portfolio. If the manager does not perform well, you might not make as
much money on you investment as you expected.

The short-term focus of money managers and pressure from unit holders for immediate
performance are obstacles to long-term growth. Most funds lack the cash reserves to pay off
the massive redemptions which will follow a market panic. Fund managers can change
without notice

43

8 - OBJECTIVES OF THE PROJECT

To understand the concept of mutual fund,

To understand working and growth of mutual funds in India.

To compare the top mutual funds according to their performance,

To compare the mutual fund with financial products or different investment options
available to the investors,

To know the structure of mutual funds in India,

To know the future of mutual funds in India,

To evaluate individual investors perception about mutual fund as an investment tool.

44

9 - RELIANCE MUTUAL FUND ANALYSIS

Reliance Regular Savings Fund Debt Option

Why invest in RRSF- Debt option now?
Reliance Regular Savings Fund Debt Option is a relatively High Yield Product
which shall predominantly invest in good credit quality papers and shall maintain a
prudent balance between safety, liquidity and profitability aspects in all investments.
The fund is suitable for investors with a medium to long tenor investment horizon (1
- 2 years).
Strategy would be to predominantly invest in short to medium tenor good credit
quality corporate bonds (AA and AA+), PTCs, short tenor G- Secs, money market
instruments and cash with an ultimate aim of running relatively lower duration and
higher accrual over a period of time.
With declining credit concerns, signs of improving macro economic conditions,
growing confidence in the system, comfortable liquidity and RBI resorting to all sorts
of monetary measures to encourage credit enhancement by banks and retail
customers, investments in good quality and highly rated PTCs are expected to
generate good returns for our product.

45

About the product:

Name: Reliance Regular Saving Fund Debt Option
(An open ended scheme)
Investment Objective: The primary investment objective of this option is to generate
optimal returns consistent with moderate level of risk. This income may be
complemented by capital appreciation of the portfolio. Accordingly investments shall
predominantly be made in Debt & Money Market Instruments.
Date of Inception: 9th Jun 05
Fund Manager: Arpit Malaviya
Benchmark Index: Crisil Composite Bond Fund Index
Why invest inpt

Asset allocation:

46

Choice of Plans/Options
Growth Plan
Dividend Plan
- Dividend Payout Option
- Dividend Reinvestment Option

Minimum Application Amount

Rs. 500/- and in multiples of Re 1 thereafter
Minimum additional application amount
Rs. 500 and in multiples of Re 1 thereafter
Maximum Investment Amount
Maximum investment amount per investor (across all folios) shall be Rs. 5 crore w.e.f. from
July 02, 2009
Load Structure
Entry Load: Nil
Exit Load (w.e.f. from July 02, 2009):
2%, if redeemed/switched out on or before completion of 1 year
Nil, if redeemed/switched out after completion of 1 year
47

Reliance Regular Savings Fund Equity Option

(An Open Ended Scheme) Risk Profile

Reliance Regular Savings Fund inculcates the habit of investing on a regular basis.
Such concept emphasize on the use of the effective strategy of rupee cost averaging, thus
avoiding the effect of volatility of markets on the investment.
Fund Positioning
Reliance Regular Savings Fund (RRSF) Equity Option seeks long term capital growth by
investing in companies demonstrating distinct competitive advantages and potential to unlock
value that may not be reflected in the current market prices
Investment Strategy
Growth oriented aggressive equity fund.
Both top down and bottom up approach are followed.
The fund adopts a multi-cap strategy that aims to participate in investment
opportunities

across all sectors and market capitalization with no specific

reservation on any particular sector or market cap.

The Fund Manager keeps the discretion to change the mix between large cap and mid
caps, and also concentration of the portfolio, based on the market conditions.
This strategy therefore provides a flexibility to capitalize on market trends especially
in volatile markets where the valuation differential between mid caps and large caps
starts getting magnified throwing up opportunities. For example:
48

In Bull Run: The fund aims to outperform by :

Taking concentrated bets

Aggressive sector allocation

In Bear Phase: The fund aims to outperform by:

Holding defensive stocks

Diversification in number of stocks

Using cash as a hedge to

Key Benefits

With minimum investment of Rs. 500/-, RRSF enables small investors to inculcate the
habit of regular savings.

Through RRSF, investors would be able to invest on the long term growth trajectory
of India.

The fund provides the flexibility to capitalize on market trends in volatile situations
by adopting a multi-cap strategy.

Investor Profile
The fund is ideal for those investors who are seeking higher exposure to equity for capital
appreciation & growth and considerably lower exposure to debt markets for consistent returns
thereby willing to accept comparatively higher risk and comparatively higher returns.
Investment Style

49

10 - RESEARCH METHODOLOGY OF THE STUDY

Research can be defined as systemized effort to gain new knowledge. A research is carried
out by different methodologies which have their own pros and cons. Research methodology is
a way to solve research in studying and solving research problem along with logic behind
them are defined through research methodology. Thus while talking about research
methodology we are not only talking of research methods but also considered the logic
behind the methods. We are in context of our research studies and explain why it is being
used a particular method or technique and why the others are not used. So that research result
is capable of being evaluated either by researcher himself or by others.

10.1 Research Methodology:

Research has its special significance in solving various operational and planning problem of
business and industry. Research methodology is the way to systematically solve the research
problem.

10.2 Assumptions:
1. It has been assumed that sample of 100 respondents represents the whole population.
2. The information given by the customer is unbiased.

50

10.3 Literature Survey:

The project is based on pure findings of facts. Development of working Hypothesis: The
Hypothesis could be developed by discussing with the concerning department heads and
guides about this exploratory research and reached to the conclusion that the data is to be
collected by personal interaction with the customers, asking them about the services and the
improvement required. First of all they are aware of mutual funds or not and then analyzing
the findings to reach to the objectives of research.

10.4 Collection of Data:

There was secondary data available for the study and also primary data collected by carrying
out by the survey which has been carried out to through personal interviews of the customers.
The sample size was roughly 100.
a. Sampling methods: - A sample is the representative of the population which will
predict the behavior of the whole universe.
b. The sampling size put under two categories: Probability sampling and non
probability sampling.

10.5 Probability sampling:

This is the process of selecting the elements or group of elements from as well defined
population by such procedure which gives every element in the population an equal chance of
being selected for observation. The sampling method use for this survey is the area sampling
which is a sub type of probability sampling.

51

10.6 Sampling size:

Large sample gives reliable result than small sample. However, it is not feasible to target
entire population or even a substantial portion to achieve a reliable result. So, in this aspect
selecting the sample to study is known as sample size. Hence, for my project my sample size
was 100.The Sample Size of 100 is not enough to draw a conclusion but as per the time
assigned it was difficult to take a sample size more than 100.The Sample Size consist of both
the Professional and Business class people. IT peoples, Doctors, Jewelers, Timber Merchants
& Real estate Agents are taken as Sample .

10.7 Execution of the project:

It is the very important step in the research process accuracy findings depends on how
systematically the study has been carried out in time so that it can make some sense when
required. I have executed the project after prior discussion with the guide and structured in
following steps:
a. Preparation of questionnaire.
b. Collection of list of some of the clients interview of the customer so that more
interaction is impossible and the variety of responses can be registered to have a
good data for analysis.
c. Visiting the corporate and asking about their feedback on the mutual funds
services they are availing. Try to find out their satisfaction level with the existing
mutual fund.

52

10.8 Limitations:

Every work has its own limitation. Limitations are extent to which the process should not
exceed. Limitations of this project are:1. Duration of Project was not enough to make a conclusion on such a vast subject time
Constraint has become a big limitation.
2. The Sample Size being taken for drawing a conclusion was too small to get an
accurate result.
3. To know the mindset of people for investing in a particular Financial Product is a
very difficult task.

All the above mentioned statements are the limitations of the project .Time, Sample Size &
Mentality of investor are the main limitations of the project. The study is being done by
taking and keeping all the limitations in mind. The project is completed in prescribed time.
To find the Awareness of Mutual Fund the Sample Size is not at all enough because the
population size is much bigger than the sample size and the last limitation was to change the
mentality of the investor to invest in a particular type of the Investment Product. As the
Indian Market has a large number of potential customers to draw a conclusion in such a small
size may not be reliable.

53

11 - SOURCES OF DATA COLLECTION

Proceeding further after determining the Methodology and limitation of the study the next
step is to analyze the Data being collected for the study. Data is being collected from various
sources like: Questionnaire
Personal visit
Telephonic Information etc.

11.1 QUESTIONAIRE
Questionnaire is a written form being given to the prospective investor to give feedback about
the services provided to them and also to find the satisfaction level of the investor for a
particular investment product .Questionnaire is an easy and simple way of collecting a data
.After filling up of form the next step is to evaluate the form in different dimensions and draw
a conclusion.
It is difficult to get a Questionnaire filled by corporate because of time they dont have time
to fill the Questionnaire so at the time of meeting them personally or after that the
Questionnaire is filled by us.
The Sample size taken for this study is 100 which is not enough to draw a conclusion but due
to time limitation only this much size has been taken into consideration. After analyzing the

54

Questionnaire the following evaluation has been done:

CATEGORY OF INVESTORS

TOTAL INCOME

RISK

RETURN

IT PEOPLE

HIGH

LOW

HIGH

DOCTORS

HIGH

LOW

HIGH

TIMBER MERCHANTS

HIGH

HIGH

HIGH

JEWELLERS

HIGH

HIGH

HIGH

REAL ESTATE AGENTS

HIGH

HIGH

HIGH

After analyzing the above table the conclusion was made that the business people are more
Risk taker while professional people are less Risk taker where the return expected in both the
case are high.
11.2 PERSONAL VISIT
The second way of collecting data is Personal Visits to the corporate personally by fixing an
appointment. Personal Visit gives a clear picture of the conclusion drawn in Questionnaire It
gives a clear view of the client Awareness about the product .Some of the difficulties in
making Personal Visits are:-

To take a time or appointment from the corporates.

To convince investor to invest in a particular product.

55

Personal Visit gives a clear picture about the Investment areas of both the categories
PROFESSIONAL PEOPLE
PPF

BUSINESS PEOPLE
LAND

KISAN VIKAS PATRA

GOLD

BANK ACCOUNT

STOCKS

INSURANCE

INSURANCE

FURTHER STUDIES etc.

VEHICLES etc.

From the above table it is clear that the Professional people invest in the Value Added items
where as Business people they invest in Future Prospect assets like land, gold etc.

11.3 TELEPHONIC INFORMATION:

The further source of collecting data is telephonic information with the existing customer and
the prospective investors. It is very difficult to reveal the data of investors from the company
itself because it has been kept as a secret document. After getting a data some problems too
come in the way. Some are: People are not ready to listen.
People ask question like from where you got the number and so on.
From this source not much of the Information is drawn.

56

12 - CONCLUSION

PROJECT FINDINGS:

There is great opportunity for Mutual Fund companies as there is rise in number of
people who want to invest in share market but dont have time and knowledge to do
so, also these people want to take less risk .

With booming market and falling interest rate of bank deposits, people see mutual
funds as an attractive financial tool which provide a high return rate at lower risk as
compared to equity market.

Young people these days are particularly more interested in mutual funds because
they see mutual fund as safe investment tool. Also these people have large disposable
incomes and risk taking capability too.

The bad part is people are still ignorant about mutual funds and different schemes
about mutual funds; hence it is very necessary to educate them about mutual funds.

Advertising can also play a major part as it has been seen that people buy mutual fund
looking at the brand name.
57

RECOMMENDATIONS:

India is passing through a tremendous growth phase with an average growth rate of 78% per annum. With this growth phase there is growth in each and every sector,
hence there is rush to buy shares and equities. It is also a very good time for mutual
fund companies but it is advisable for them and their brokers that they dont just sell
mutual funds but sell the right kind of scheme which is comfortable to a person nature
of taking risk and need,

There is a general ignorance and questions about, what are mutual funds? What are
different schemes of mutual funds? How to invest in a mutual? And many more. This
thing should be handled by mutual fund companies and their brokers to provide
knowledge to their clients.

It has been seen that there is a major increase in the percentage of young investors
who have large amount of disposable income with them and want to invest, these type
of prospective clients should be tapped at an early stage.

Small towns, villages are still untapped and can also acts as business area of very
huge potential.

Now even co-operative society can invest up to 10% of their capital in mutual funds
which open the door to new and very important client base.

58

13 - A QUESTIONNAIRE DESIGNED ON INDIVIDUAL

PERCEPTION ABOUT MUTUAL FUND
1. NAME

2. CONTACT NO:
3. EMAIL ID

4. AGE:
20-25

25-30

30-35

35-40

40-45

45-50

50-55

55 & Above.

5. INCOME:
Below Rs.50000,

Rs.50000-100000,

Rs.100000-200000,

Rs.200000-300000,

Rs.300000 & Above.

6. ARE YOU AWARE OF MUTUAL FUNDS?
Yes

No

7. IF NO, THEN WHERE DO YOU INVEST IN ?

Insurance,

P.P.F.

Stock Market

Gold

Others.

59

8. WHAT % OF YOUR INVESTABLE SURPLUS DO YOU INVEST IN MF?

OVER 50%

30% TO 50%

10% TO 30%

Below 10%

9. WHERE DO YOU INVEST IN USUALLY?

Open ended Schemes

Closed ended Schemes.

10. WHAT IS YOUR PERCEPTION ABOUT MUTUAL FUND?

High Risk

Medium Risk

Low Risk
11. WHICH OF THEM DO YOU PREFER?
Growth schemes

Income schemes

Balance schemes

Money Market and Liquid schemes

Tax saving schemes

Gilt Funds

12. WHICH MUTUAL FUND WOULD YOU PREFER?

HDFC,

Franklin Templeton,

SBI,

Reliance,

Any other.Specific AMC13. KINDLY INDICATE YOUR CONSIDERATION BEHIND INEVSTMENT IN

MF?
Higher Returns
Dividends,
Diversification of Risk.

60

BIBLIOGRAPHY

1. AMFI Course Book

2. MFI Explorer/RMF Analysis
3. Bloomberg
4. J. P. Morgan
5. www.mutualfundsindia.com
6. www.valueresearchonline.com
7. www.investopedia.com

61