A

PROJECT REPORT
ON

A STUDY OF MUTUAL FUND AT MAHINDRA

FINANCE
A detailed study done in
FINANCE
Submitted in partial fulfillment of the requirement for the award of
degree of Bachelor of Business Administration (BBA) under Bharati
Vidyapeeth Deemed University, Pune.
Submitted by
MISS. JYOTI D SAWANT
ROLL NO: 42
BATCH: 2011-2014
Under the guidance of
PROF.VEENA CHAVAN

Bharati Vidyapeeths
Institute of Management & Entrepreneurship Development
Navi Mumbai

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(i)
ACKNOWLEDGEMENT

Any project would be incomplete without felicitating those instrumental in its

successful completion. The accolades for this project cannot just belong to one
individual because it has been the result of consolidated efforts of many people to
whom I would like to express my concern and gratitude.
I express deep gratitude to my highly co-operative company guide Mr. Joseph
Thomas for providing support and guidance that he gave owing to his experience in
this field for past many years. This project would not have been possible without his
guidance and support
I extend sincere gratitude to my faculty guide Prof. Veena Chavan for her timely
guidance and encouragement through the project. Her belief in my abilities constantly
kept me motivated and helped me in successfully completing the project. I sincerely
thank Dr.D.Y.PATIL for giving me opportunity for doing the summer project and
enhancing my knowledge towards the field.
This project has been a learning experience and it gives me immense pleasure in
expressing my gratitude to the Bharati Vidyapeeth's institute of management and
research for providing us with an opportunity to do this study.
My sincere appreciation to Mahindra finance for giving me the opportunity and
helping me to, Mutual Funds in India and to understand the various instruments of
MF product selection.
This project has been a learning experience for me and this would not have been
possible without the help of these people.
Finally, not forgetting my family and my friend Arun Rana for providing their support
in the completion of the project.
Thank You

Signature of the student

(JOYTI D SAWANT)

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EXECUTIVE SUMMARY
A Mutual Fund is the ideal investment vehicle for todays complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in faraway places. A typical individual is unlikely to have the knowledge,
skills, inclination and time to keep track of events, understand their implications and
act speedily. A mutual fund is answer to all these situations. It appoints professionally
qualified and experienced staffs that manage each of these functions on a fulltime
basis. The large pool of money collected in the fund allows it to hire such staff at a
very low cost to each investor.
Mutual fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with objectives as disclosed in offer
document. Investors need to know how risky individual assets are and what their
contribution to the total risk of a portfolio would be.
Plenty of Mutual Funds are available where the investors can put their money. Before
investing they want to know which fund gives more return, which fund is performing
well, which fund is more risky etc. All these can be found out using certain key
statistics. With the help of these key statistics an investor can analyze different mutual
funds and put his/her money in a fund which suits his/ her risk perception.
Firstly data is collected and then analysis, this information help in proper decision
making as to whether to invest or not to invest in the funds.

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TABLE OF CONTENTS
PARTICULARS

Page NO

Acknowledgement

(i)

Certificates

(ii)

Executive Summary

(iii)

Chapter 1: Introduction of the Project

1.1: Concept & Significance of the Study

1.2: Objective of the Study

1.3: Scope and Limitations

1.4: Literature Review

Chapter 2: Introduction to Industry

2.1: Introduction to the Company

2.2: History

2.3: Product portfolio

2.4: Mutual fund distribution

11

2.5: Investment advisory services

12

Chapter3: Introduction of Mutual fund

15

3.1: Concept of mutual fund

16

3.2: Structure of Indian mutual fund

18

3.3: Advantages And Disadvantages of Mutual fund

20

3.4: Future outlook

23

3.5:Important step taken by SEBI for regulating

24

mutual funds in India

3.6: How is a mutual fund Set up?

28

3.7: Types of mutual fund

30

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3.8: Mutual fund investing strategies

34

3.9: Different modes of receiving the income

35

Earned from Mutual fund investment.

3.10 Types of risk associated with mutual fund

36

Chapter4: Research Methodology

38

4.1: Types of study

39

4.2: Types of data

40

Chapter5: Data Analysis and Interpretation

42

Chapter6: Conclusion

51

Annexure
Bibliography

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CHAPTER-1
INTRODUCTION

1.1 INTRODUCTION OF PROJECT

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Mutual fund is a mechanism for pooling the resources by issuing units the investors
and investing funds in securities in accordance with objectives as disclosed in offer
document. Investments in securities are spread across a wide cross-section of
industries and sectors and thus the risk is reduced. Diversification reduces the risk
because all stocks may not move in the same direction in the same proportion at the
same time. Mutual funds have proven to be safe investments and hence, it is important
to let individuals familiarize themselves with relevant information about mutual
funds.
This project consist a description of the Mutual Fund Industry in brief. It discusses
about the different types of Mutual Funds available and the factors to be taken into
consideration, for the selection and evaluation of performance of Mutual Funds.
Approaching the field of mutual funds in a positive yet cautious manner is needed
since an investor could receive negative returns as well. Mutual funds are a much
safer bet compared to investing in the stock market directly, since the funds are
handled by a fund manager who would have more knowledge about the market
conditions due to his extensive research. Also the fund manager invests in various
avenues so that the risk is spread evenly and losses if any are minimized.

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1.2 OBJECTIVE OF THE STUDY

1. To have a better understanding of Mutual Funds Its working, its structure,

types of Mutual Funds & history of Mutual Funds.
2. To understand the benefits of investing in Mutual Funds.
3. To conduct the survey to know about the awareness of mutual funds, among
the people.
4. To study the various Mutual Funds schemes in India.
5. To study about the risk factors involved in the Mutual Funds and How to
analyze it.

6. To study the factors considered while investing in Mutual funds.

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1.3SCOPE OF THE STUDY

The study of mutual fund has the wider scope. Mutual fund is a professionally
managed form of collective investment that pools money from many investors and
invest it in stocks, bonds, short-term money market instruments and other securities.
Dividend distributed on tax free Mutual Fund schemes is also tax free for the unit
holders of Mutual fund. Taxable distribution can be either ordinary income or capital
schemes which are equity schemes, debt and hybrid schemes.

LIMITATION OF STUDY
The study also has the some limitations which are as follows:
1. The time is the main constraint so limited period of time is spent on this study.
2. The study only takes into consideration the returns provided by the funds
3. The support from the management side may be limited due to their pre occupied
meetings and work.
4. Not possible to get whole information because of their business secret and lack of
awareness among people.
5. The other factors are not considered on while evaluating the performance of the
Mutual Fund

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1.4Literature Review
Analysis of mutual fund performance is not a new area. William Sharpe outlined
methodologies to examine mutual fund performance within the context of three
closely related areas: portfolio selection, the capital asset pricing model (CAPM), and
the general behavior of stock market prices.
Portfolio selection theory defines the roles of three market participants: the portfolio
analyst, the security analyst, and the investor. The portfolio analyst estimates
anticipated results through expected portfolio performance -- and its underlying risk
and selects the most efficient portfolio. The security analyst predicts the performance
of individual securities (within the portfolio) including the relationships between
different securities. The investor, presented with an array of efficient portfolios must
then factor in his risk profile in selecting the portfolio that optimizes the combination
of risk and expected returns.
Sharpe maintains that the performance of mutual funds can vary because of risk. This
risk can either be a high-risk strategy that did not succeed; or, just poor execution by
the manager. CAPM, Sharpe (1964), defines a perfect market whereby participants
use information to form their own portfolios -- that incorporate desired returns against
risk.
However, the analysis of the nature and definition of risk in portfolio selection and
management indicates that the risk is multidimensional and is affected by a series of
financial and stock market data, qualitative criteria and macroeconomic factors. Many
of the models used in the past are based on undimensional approaches that do not fit
to the multidimensional nature of risk.
In the empirical literature for the evaluation of the performance of MF portfolios
several indices regarding the performance of fund per unit of risk have been proposed.
The most well known indices are those of Treynor (1965), Sharpe (1966), and Jensen
(1968). At the same time, evaluation models have been developed to consider the
market-timing and stock selection abilities of MF managers, in order to investigate
whether the performance of MFs is due to occasional incidents or due to their superior
investment management.

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CHAPTER-2
INTRODUCTION
TO INDUSTRY

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2.1 INTRODUCTION OF AUTOMOBILE INDUSTRY

The automotive industry in India is one of the larger markets in the world and had
previously been one of the fastest growing globally, but is now seeing flat or negative
growth rates, India's passenger car and commercial vehicle manufacturing industry is
the sixth largest in the world,, with an annual production of more than 3.9 million
units in 2011. According to recent reports, India overtook Brazil and became the
sixth largest passenger vehicles in the world (beating such old and new auto makers as
Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, France, Brazil),
grew 16 to 18 per cent to sell around three million units in the course of 2011-12. In
2009, India emerged as Asia's fourth largest exporter of passenger car, behind Japan,
South Korea, and Thailand. In 2010, India beat Thailand to become Asia's third
largest exporter of passenger cars.
As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million
automotive vehicles were produced in India in 2010 (an increase of 33.9%), making
the country the second (after China) fastest growing automobile market in the world
in that year. According to the Society of Indian Automobile Manufacturers, annual
vehicle sales are projected to increase to 4 million by 2015, no longer 5 million as
previously projected. The production of passenger vehicles in India was recorded at
3.23 million in 2012-13 and is expected to grow at a compound annual growth rate
(CAGR) of 13 per cent during 2012-2021, as per data published by Automotive
Component Manufacturers Association of India (ACMA).
The majority of India's car manufacturing industry is based around three clusters in
the south, west and north. The southern cluster consisting of Chennai is the biggest
with 35% of the revenue share. The western hub near Mumbai and Pune contributes
to 33% of the market.

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2.2 INTRODUCTION OF THE COMPANY

A subsidiary of Mahindra & Mahindra Limited, Mahindra Finance is one of Indias
leading non-banking finance companies. Focused on the rural and semi-urban sector,
Mahindra Finance provide finance for utility vehicles, tractors and cars and have the
largest network of branches covering these areas. Our goal is to be the preferred
provider of retail financing services in the rural and semi-urban areas of India, while
Mahindra Finance strategy is to provide a range of financial products and services to
the customers. Mahindra Finance are one of Indias leading non-banking finance
companies focused on the rural and semi-urban sectors providing finance for Utility
Vehicles (UVs), tractors and cars. Mahindra Finance is a subsidiary of Mahindra &
Mahindra Limited, a leading tractor and UV manufacturer with over 60 years
experience in the Indian market.
Mahindra Finances goal is to be the preferred provider of retail financing services in
the rural and semi-urban areas of India, while Mahindra Finance strategy is to provide
a range of financial products and services to our customers through our nationwide
distribution network. Mahindra Finance seeks to position ourselves between the
organize banking sector and local money lenders, offering Mahindra Finance
customers.
Mahindra Finance principally finance UVs used both for commercial and personal
purposes, tractors and cars. While we predominantly finance M&M UVs and tractors,
we have continued to expand our lending to vehicles not manufactured by Mahindra
& Mahindra Ltd.

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2.3HISTORY
Mahindra Finance was incorporated on January 1, 1991 as Maxi Motors Financial
Services Limited and received certificate of commencement of business on February
19, 1991. Our name was changed to Mahindra & Mahindra Financial Services
Limited on November 3, 1992. Mahindra Finance is registered with the RBI as an
NBFC with effect from September 4, 1998.
Key events in our business history:
1993
Commenced financing of M&M UVs
1995
Opened Mahindra Finance first branch outside Mumbai, at Jaipur
1996
Commenced financing M&M dealers for purchase of tractors
1998
Launched pilot project for retail tractor financing
1999
Commenced tractor retail financing in rural and semi-urban areas
2001
Total Assets crossed Rs. 10 billion

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2002
Received Tier II debt from International Finance Corporation
Made our first securitization transaction of Rs. 434.8 million
Commenced financing of non-M&M vehicles
2004
Received a long-term credit rating of AA+/Stable
Opened a branch in Port Blair
Listing of non convertible debentures on BSE on the wholesale debt market
segment
2005
Tied up with HPCL
Made MIBL our wholly owned subsidiary
2006
Issued our IPO
Tied up with Maruti
Launched our marketing campaign
Reached a new benchmark with 400 branches

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2.4 PRODUCT PORTFOLIO

Mahindra Finance provides a wide range of products and services, with something to
suit everyones needs. Right from finance for two wheelers, tractors, farm
equipments, cars and utility vehicles to commercial vehicles and construction
equipment, we also have a group of experts providing investment advices and
choosing the most suitable to our customers needs

Vehicle Financing

Construction equipment Pre-owned vehicle financing: Loans for pre-owned cars,

multi-utility vehicles, tractors and commercial vehicle

SME Financing

Loans for varied purposes like project finance, equipment finance and working capital
finance.

Housing Finance

Loans for buying, renovating, extending and improving homes in rural and semiurban India through our subsidiary Mahindra Rural Housing Finance Limited

Personal Finance

Offers personal loans typically for weddings, childrens education, medical treatment
and working capital

Insurance Broking

Insurance solutions to retail customers as well as corporations through our subsidiary

Mahindra Insurance Brokers Limited

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2.5Mutual Fund Distribution

Recently Mahindra Finance has received the necessary permission from Reserve Bank
of India (RBI) to start the distribution of Mutual Fund products through our network.
Hitherto we were only participating in the liability requirements of our customers but
with a mutual fund distribution business, we can also participate in their asset
allocation.
When it comes to investing, everyone has unique needs based on their own objectives
and risk profile. While many investment avenues such as fixed deposits, bonds etc.
exist, it is usually seen that equities typically outperform these investments, over a
longer period of time.
Our Investment Advisory Services help you invest your money in equity through
different Mutual Fund Schemes. We ensure the best for our clients by identifying
products best suited to individual needs.

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2.6INVESTMENT ADVISORY SERVICES

Mahindra finance smart offer investment advisory services which
are:

Personalized Service
Mahindra Fin Smart believe in providing personalized service and individual
attention to each client to ensure that we understand their investment goals and
help to achieve it.

Professional Advice
Mahindra Fin Smart offer expert advice on equity and debt portfolios with an
objective to provide consistent long-term return while taking calculated
market risks. Our approach helps our clients build a proper mix of products,
and not concentrate on just one individual product

Long-term Relationship
Mahindra Fin Smart believes that long-term vision is the only means to steady
wealth creation. However to achieve this one also needs to take advantage of
short-term market opportunities while not losing sight of long-term objectives.
Hence we partner all our clients in realizing their long-term vision.

Access to Research Report

Mahindra Fin Smart provides our clients with access to the expert opinion of
economists and analysts from CRISIL, one of the leading financial research
and rating companies of India. This is because; we believe that unbiased
research is the key to providing sound advice in making informed investment
decisions.

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Transparency and Confidentiality

Mahindra Fin Smart clients receive regular portfolio statements from us via
email. They can also view the detailed performance of their investment
portfolio on the web, the access to which is restricted to the client only.
Moreover, our monitoring system enables us to detect any unauthorized access
to the portfolio.

Flexibility
Mahindra Fin Smart facilitate smooth dealing and consistent attention, all our
clients are serviced by their individual Relationship Executives. Relationship
Executives provide you with completely hassle-free, customized services
taking care of all the administrative aspects of your investments. This includes
submission of application forms to fund houses and a monthly report on the
overall performance of your investment portfolio.

Additional services

Information updates on a daily basis through email

Ease of viewing their portfolio on the internet

Investment advice at their convenience

Weekly, fortnightly and monthly reports sent to them via email, on request

The freedom to contact us, anywhere in India

Access to the multiple products offered by Mahindra Finance through their

Relationship Executive.

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CHAPTER-3
INTRODUCTION
TO MUTUAL
FUND

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3.1CONCEPT OF THE MUTUAL FUND

A mutual fund is a common pool of money into which the investors place their
contribution that is to be invested in accordance with a stated objective.

The

ownership of this fund is thus joint or mutual. The fund belongs to all investors.
A mutual fund uses the money collected from the investors to buy those assets which
are specifically permitted by its stated investment objective. Since each investor is a
part owner of a mutual fund, it is necessary to establish the value of his part. The
value of the total assets of the fund when divided by the total number of unites issued
by the mutual fund gives the value of one unit. This is generally called the Net Asset
Value (NAV) of one unit or one share.
Example :If the value of a fund assets stands at Rs. 1000 and it has 10 investors who have
bought 10 units each, the total number of units issued are 100 and the value of one
unit is Rs. 10 (1000/100). If a single investor holds 3 units, the value of his ownership
of the fund will be Rs. 30 (3 * 10). Now the value of the fund will keep fluctuating
with the markets movements causing Net Asset Value also to fluctuate. For example
if the value of our funds assets increased from Rs.1000 to Rs.1200, the value of our
investors holding will now be (1200/100 *3) Rs.36. The investment value can go up
or down depending on the value of the funds assets.
Mutual fund is set up in the form of a trust which has sponsor, trustees, asset
management company (AMC). In India, the mutual fund is registered with SEBI. In
1992, Securities and Exchange Board of India (SEBI) was passed with the objective
to protect the interest of investors.
The below two charts describe broadly the working of a mutual fund:

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MUTUAL FUND FLOWCHART

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3.2STRUCTURE OF INDIAN MUTUAL FUND

In India, the mutual fund industry is highly regulated with a view to imparting
operational transparency and protecting the investors interest. In India the structure
of a mutual fund is determined by Security Exchange Board of India (SEBI)
regulation. These regulations require a fund to be established in the form of a trust
under the Indian Trust Act 1882. A mutual fund is typically externally managed it is
now an operating company with employees in the traditional sense.
Instead a fund relies upon third parties either affiliated organizations or independent
contractors to carry out its business activities such as investing in securities. A mutual
fund operates through a four-tier structure. The four parties that are required to be
involved are sponsor, board of trustees, Asset Management Company.
Sponsor:
A sponsor is a body corporate who establishes a mutual fund. It may be one person
acting alone or together with another body corporate. Additionally, the sponsor should
contribute at least 40% to the net worth of the AMC. However if any person holds
40%
or more of the net worth of an AMC shall be deemed to be a sponsor and will be
required to fulfill the eligibility criteria specified in the Mutual Find Regulation.

Board of Trustee:
Mutual fund requires to have an independent board of Trustee, where two third of the
trustees should be independent person who are not associated with the sponsor in any
manner. The board of trustees of the trustee company holds the property of the mutual
fund in trust for the benefit of the unit holders. The board of trustees is responsible for
protecting the unit holders interest.

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 Asset Management Company:

The role of Asset Management Company is highly significant in the mutual fund
operation. They are the fund managers i.e. they invest the investors money in various
securities ( equity, debt and money market instruments) after proper research of
market conditions and the financial performance of

individual companies and

specific securities in the efforts to meet or beat average market return and analysis.
Mutual funds provide an economical way for the average investor to obtain
professional money management and diversification of investments much like large
institution and wealthy investors receive. They also look after the administrative
functions of a mutual fund for which they charge management fee.
Custodian:
Mutual fund is required by law to protect their portfolio securities by placing them
with a custodian. Nearly all mutual funds use qualified bank custodians. Only a
registered custodian under the SEBI regulation can act as a custodian to a mutual
fund.

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3.3ADVANTAGES OF MUTUAL FUNDS

There are both advantages and disadvantages to investing in mutual funds. Following
are some of the advantages of investing in Mutual Funds.
One of the main reasons for the creation of mutual funds was to give investors who
wanted to make smaller investments access to professional management. However,
mutual funds offer many advantages to investors of all types.

Diversification:
Investing in a single stock or bond is very risky; owning a mutual fund that
holds numerous securities reduces risk significantly. Mutual funds provide
diversification, which is crucial to a well-balanced portfolio. Diversification is
particularly crucial in small accounts.

Professional management:
It is difficult and time consuming to pick the best stocks and bonds for your
portfolio and to try to beat the benchmarks on these stocks and bonds.
Allowing a professional mutual fund manager to make decisions about stocks
and bonds for you can save you time and frustration.

Minimal transaction costs:

Buying individual stocks and bonds is expensive in terms of transactions costs.
Mutual funds offer the advantage of economies of scale in purchases and sales
because mutual fund transactions are typically large. Economies of scale
refers to the fact that mutual fund costs may decrease as the mutual funds
asset size increases, since brokers may charge lower fees to try to get more of
the mutual funds business.

Liquidity:
Money invested in mutual funds is generally liquid. You can usually sell your
shares and collect money from open-ended funds (funds that can create and
redeem shares on demand), usually within two business days. If the open-end
funds are no-load funds, investors are not required to pay transactions costs
when you buy or redeem shares. Closed-end funds are funds that trade on
stock exchanges or over the counter that may trade above or below its net asset
value or the value of the funds investments.

Flexibility:
Owning individual stocks and bonds does not allow for much flexibility in
terms of liquidity, or the ability to access your money. You cannot write checks
on individual stocks and bonds. However, many mutual funds allow for more
flexibility by allowing you to write checks on your account.

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Low up-front costs:

Certain types of mutual funds have financial benefits that make them less
expensive than individual stocks and bonds. For example, no-load mutual
funds can be sold and redeemed without incurring any sales charges, and
open-ended mutual funds can be purchased at the funds net asset value
(NAV). A funds NAV is calculated daily by subtracting the funds liabilities
from its assets and dividing the resulting amount by the number of outstanding
shares. The benefit of open-ended funds is that you do not need to pay a
premium or a sales charge to purchase or sell the shares.

Service:
Mutual fund companies generally have good customer service representatives
who can answer your questions and help you open accounts, purchase funds,
and transfer funds. Mutual fund companies may also offer other services,
including automatic investment and withdrawal plans; automatic reinvestment
of interest, dividends, and capital gains; wiring funds to and from your
accounts; account access via phone; optional retirement plans; check-writing
privileges; bookkeeping services;

Simplicity Investments in mutual fund is considered to be easy, compare to

other available instruments in the market, and the minimum investment is
small. Most AMC also have automatic purchase plans whereby as little as Rs.
2000, where SIP start with just Rs.50 per month basis.

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Disadvantages of Mutual Fund

There are some Disadvantages of investing through Mutual Funds

No control over Costs The biggest source of AMC income is generally from
the entry & exit load which they charge from investors, at the time of
purchase. The mutual fund industries are thus charging extra cost under layers
of jargon.

Dilution - Because funds have small holdings across different companies,

high returns from a few investments often don't make much difference on the
overall return. Dilution is also the result of a successful fund getting too big.
When money pours into funds that have had strong success, the manager often
has trouble finding a good investment for all the new money.

Taxes - when making decisions about your money, fund managers don't
consider your personal tax situation. For example, when a fund manager sells
a security, a capital-gain tax is triggered, which affects how profitable the
individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.

No Tailor made Portfolios: Investors who invest on their own can have their
own portfolios of shares, bonds and other securities. Investing through mutual
funds means that he delegates this decision to the fund managers. The very
high net worth individuals or large corporate investors may find this to be a
constraint to achieving their objectives

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3.4 FUTURE OUTLOOK

Mutual Fund in India has emerged as a critical institutional linkage among various
financial segments like savings, capital markets and the corporate sector. As various
taxes the government offers incentives and benefits on mutual funds investment, their
role in the mobilization of savings and the development of the economy will assume
more significance. They provide much needed impetus to direct and indirect support
to the corporate sector. Above all, mutual funds having given a new direction to the
flow of personal savings and enables small medium investors in remote rural and semi
rural area to reap the benefits of stock markets investments. Indian mutual funds are
thus playing a very crucial development role in allocating resources in the emerging
market economy. A perceptible change is sweeping across the mutual fund landscape
in India. Factors such as changing investors need and their appetite for risk ,
emergence of internet as a powerful servicing platform and above all the growing
commoditization of mutual fund products are acting as major catalysts putting
pressure on industry players to formulate strategies to stay the course. In the changed
scenario today product innovation is increasingly becoming one of the key
determinants of success. Building and sustaining a powerful brand is also becoming
an issue of paramount importance. Increased deregulation of the financial markets in
the country coupled with the introduction of derivative products offer tremendous
scope for the industry to design and sell innovative schemes to suit individual
customer needs. Distribution has taken a whole new mode like banks, post offices and
co-branded credit cards are bound meaning with the introduction of automated trading
clearing and settlement system. Factors such as cross selling through modes like
banks, post offices and co-branded credit cards are bounds to play decisive role in the
success of the industry players.
Globally it has seen that the top ten players account for a greater pie of the market
hare. With competition getting intense in the domestic industry churning in the
industry looks imminent.

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3.5 Important steps taken by SEBI for regulating mutual funds in

India
(1) Formation:
Certain structural changes have also been made in the mutual fund industry, as part of
which mutual funds are required to set up asset management companies with fifty
percent independent directors, separate board of trustee companies, consisting of a
minimum fifty percent of independent trustees and to appoint independent custodians.
This is to ensure an arms length relationship between trustees, fund managers and
custodians, and is in contrast with the situation prevailing earlier in which all three
functions were often performed by one body which was usually the sponsor of the
fund or a subsidiary of the sponsor.
Thus, the process of forming and floating mutual funds has been made a tripartite
exercise by authorities. The trustees, the asset management companies (AMCs) and
the mutual fund shareholders form the three legs. SEBI guidelines provide for the
trustees to maintain an arms length relationship with the AMCs and do all those
things that would secure the right of investors.
With funds being managed by AMCs and custody of assets remaining with trustees,
an element of counter-balancing of risks exists as both can keep tabs on each other.
(2) Registration:
In January 1993, SEBI prescribed registration of mutual funds taking into account
track record of a sponsor, integrity in business transactions and financial soundness
while granting permission.
This will curb excessive growth of the mutual funds and protect investors interest by
registering only the sound promoters with a proven track record and financial
strength. In February 1993, SEBI cleared six private sector mutual funds viz. 20th
Century Finance Corporation, Industrial Credit & Investment Corporation of India,
Tata Sons, Credit Capital Finance Corporation, Ceat Financial Services and Apple
Industries.
(3) Documents: The offer documents of schemes launched by mutual funds and the
scheme particulars are required to be vetted by SEBI. A standard format for mutual
fund prospectuses is being formulated.
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(4) Code of advertisement:

Mutual funds have been required to adhere to a code of advertisement.
(5) Assurance on returns:
SEBI has introduced a change in the Securities Control and Regulations Act
governing the mutual funds. Now the mutual funds were prevented from giving any
assurance on the land of returns they would be providing. However, under pressure
from the mutual funds, SEBI revised the guidelines allowing assurances on return
subject to certain conditions.
Hence, only those mutual funds which have been in the market for at least five years
are allowed to assure a maximum return of 12 per cent only, for one year. With this,
SEBI, by default, allowed public sector mutual funds an advantage against the newly
set up private mutual funds.
As per basic tenets of investment, it can be justifiably argued that investments in the
capital market carried a certain amount of risk, and any investor investing in the
markets with an aim of making profit from capital appreciation, or otherwise, should
also be prepared to bear the risks of loss.
(6) Minimum corpus:
The current SEBI guidelines on mutual funds prescribe a minimum start-up corpus of
Rs.50 corer for a open-ended scheme, and Rs.20 corer corpus for closed-ended
scheme, failing which application money has to be refunded.
The idea behind forwarding such a proposal to SEBI is that in the past, the minimum
corpus requirements have forced AMCs to solicit funds from corporate bodies, thus
reducing mutual funds into quasi-portfolio management outfits. In fact, the
Association of Mutual Funds in India (AMFI) has repeatedly appealed to the
regulatory authorities for scrapping the minimum corpus requirements.

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(7) Institutionalization:
The efforts of SEBI have, in the last few years, been to institutionalize the market by
introducing proportionate allotment and increasing the minimum deposit amount to
Rs.5000 etc. These efforts are to channel the investment of individual investors into
the mutual funds.
(8) Investment of funds mobilized:
In November 1992, SEBI increased the time limit from six months to nine months
within which the mutual funds have to invest resources raised from the latest tax
saving schemes. The guideline was issued to protect the mutual funds from the
disadvantage of investing funds in the bullish market at very high prices and suffering
from poor NAV thereafter.
(9) Investment in money market:
SEBI guidelines say that mutual funds can invest a maximum of 25 per cent of
resources mobilized into money-market instruments in the first six months after
closing the funds and a maximum of 15 per cent of the corpus after six months to
meet short term liquidity requirements.
Private sector mutual funds, for the first time, were allowed to invest in the call
money market after this years budget. However, as SEBI regulations limit their
exposure to money markets, mutual funds are not major players in the call money
market. Thus, mutual funds do not have a significant impact on the call money
market.
(10) Valuation of investment:
The transparent and well understood declaration or Net Asset Values (NAVs) of
mutual fund schemes is an important issue in providing investors with information as
to the performance of the fund. SEBI has warned some mutual funds earlier of
unhealthy market

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(11) Inspection:
SEBI inspect mutual funds every year. A full SEBI inspection of all the 27 mutual
funds was proposed to be done by the March 1996 to streamline their operations and
protect the investors interests. Mutual funds are monitored and inspected by SEBI to
ensure compliance with the regulations.

(12) Underwriting:
In July 1994, SEBI permitted mutual funds to take up underwriting of primary issues
as a part of their investment activity. This step may assist the mutual funds in
diversifying their business.

(13) Conduct:
In September 1994, it was clarified by SEBI that mutual funds shall not offer buy
back schemes or assured returns to corporate investors. The Regulations governing
Mutual Funds and Portfolio Managers ensure transparency in their functioning.
(14) Voting rights:
In September 1993, mutual funds were allowed to exercise their voting rights.
Department of Company Affairs has reportedly granted mutual funds the right to vote
as full-fledged shareholders in companies where they have equity investments.

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3.6HOW IS A MUTUAL FUND SET UP? STRUCTURE OF

MUTUAL FUNDS

A mutual fund is set up in the form of a trust. There are various parties involved in
mutual fund that can be categorized as follows: Sponsor, Trustee, AMC, Custodians,
Distributors, Registrar and investors.
Legal Framework:
Across the world, the mutual fund sector is viewed as a critical mechanism to channel
investor funds into the capital market. Since these investors are often not so well
qualified to invest, the mutual fund business is highly regulated. Regulations vary
from country to country. But, broadly, they provide for:
Checks and balances in legal structures
Pre-qualifications to start a mutual fund
Permissible schemes and investments
Control over marketing process
Level of operational flexibility
In India, Association of Mutual Funds in India (AMFI) is a body that represents the
interests of the industry. All the mutual funds in India are members of AMFI.

Parties involved in a Mutual fund:

The trust is established by a sponsor or more than one sponsor who is like

promoter of a company.
Trustees: The trustees of the mutual fund hold its property for the benefit of
the unit holders. SEBI Regulations require that at least two thirds of the
directors of trustee company or board of trustees must be independent i.e. they
should not be associated with the sponsors. Also, 50% of the directors of AMC
must be independent.

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

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power of superintendence and direction over AMC. They monitor the

performance and compliance of SEBI Regulations by the mutual fund.

Distributors: have a key role in selling suitable types of units to their clients
i.e. the investors in the schemes. They need to pass the prescribed certification

test, and register with AMFI.

Registrars & Transfer Agents: maintain the accounts of investors for both
the purposes of investment and disinvestment. They handle investor related
services such as issuing units, redeeming units, sending fact sheets, annual

reports and so on.

Investors: whoever invests in the units of mutual fund is an investor. He is the
key person for the mutual fund industry.

All mutual funds are required to be registered with SEBI before they launch any
scheme.

3.7 TYPES OF MUTUAL FUNDS

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Types Of Mutual funds/Schemes:

Classification based on Structure:
1. Open-ended Funds:
The funds which allow the flexibility to purchase & redeem units anytime during the
course of the funds are known as Open-ended funds. The unit-holders of these funds
purchase units of the scheme from the AMC and the AMC will have to purchase units
back when an investor wants to redeem its units. The transaction takes on the NAV of
the day.
2. Closed-ended funds:
The fund issues units for a specified period & units cannot be purchased or sold to the
AMC until maturity. The fund invests in instruments which match its maturity. These
funds do not provide high liquidity but some funds may be traded on the exchange to
provide liquidity to unit holders. FMPs are the best example of close-ended funds

Classification based on Investment type:

1.

Equity Funds

2.

Debt Funds

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3.

Hybrid Funds

3.Equity Funds:
Equity Funds are schemes that invest in equity stocks and equity related instruments.
These can be sub-categorized as below:
Index Funds: This type of fund represents the broad market performance by
investing in similar composition of stocks as that of an index like Nifty. These funds
replicate the index and move along with the index.
Dividend Yield Funds: A dividend-yield fund invests in stocks that offer attractive
returns in the form of dividends
Diversified Funds: They invest in wide variety of stocks across different industries
or sectors: services, manufacturing, infrastructure, technology, etc.
Thematic Funds: These funds are designed around specific themes. These funds
invest in line with the theme. Say, a fund with Green Energy theme would invest
only in stocks of companies which produce green power. Infrastructure is a popular
thematic fund.
Sector Funds: These funds invest in stocks of companies of a particular sector
which it expects to be growing. Say, a FMCG fund would invest in stocks of FMCG
companies only.
ELSS: Equity Linked Savings Scheme Mutual Funds are aimed at enabling
investors to avail tax rebates under Section 80 C of the Income Tax Act.

4.Debt Funds:
Debt Funds invest in fixed-interest securities bonds, CD/CPs & thus enjoy lower risk.
Liquid Funds: Liquid funds invest in short-term (maturing within one year) interest
bearing/discount instruments. These securities are highly liquid and provide safety of
investment, thus making liquid funds the safest investment option when compared
with other mutual fund schemes. They carry no exit load.
Gilt Funds: Gilt Funds invest in sovereign papers issued by the central government
and the state governments. The maturity period in these funds is medium to long-term
depending upon an investors goals.
Income Funds: Income/Bond Funds invest in medium-term and long term
instruments like government securities, corporate bonds, debentures, fixed deposits
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 FMPs: Fixed Maturity Plan (FMP) is a close-ended scheme, and has an exit load, if
redeemed, before the maturity period. Such schemes can have a maturity period of
three months to three years. It generally selects an instrument, which corresponds to
its maturity period.
Floating Rate funds: These Funds with an investment objective to predominantly
invest in short term floating rate instruments
Short term funds: Short-term Funds invest in instruments maturing between one to
three years. They are more liquid than income/gilt funds.

5. Hybrid Funds:
Hybrid schemes, also referred to as balanced schemes, invest in a mix of equity and
debt instruments. A hybrid scheme may be equity oriented or debt oriented or has a
variable asset allocation.
Equity oriented Schemes: An equity oriented hybrid scheme is tilted in favor of
equities which may account for about 60 percent of the portfolio, the balance being
invested in debt instruments.
Debt Oriented Schemes: A debt oriented hybrid scheme is tilted in favor of debt
instruments. The most popular debt schemes I India are monthly income plans which
typically have debt component of 85-90 percent and equity component of 10-15
percent

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3.8MUTUAL FUND INVESTING STRATEGIES

Systematic Investment Plans (SIPs)

These are best suited for young people who have started their careers and need to
build their wealth. SIPs entail an investor to invest a fixed sum of money at regular
intervals in the Mutual fund scheme the investor has chosen, an investor opting for
SIP in xyz Mutual Fund scheme will need to invest a certain sum on money every
month/quarter/half-year in the scheme.

Systematic Withdrawal Plans (SWPs)

These plans are best suited for people nearing retirement. In these plans, an investor
invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at
regular intervals .

Systematic Transfer Plans (STPs)

They allow the investor to transfer on a periodic basis a specified amount from one
scheme to another within the same fund family meaning two schemes belonging to
the same mutual fund.

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3.9DIFFERENT

MODES

OF

RECEIVING

THE

INCOME

EARNED FROM MUTUAL FUND INVESTMENTS

Growth Plan
In this plan, dividend is neither declared nor paid out to the investor but is built into
the value of the NAV. In other words, the NAV increases over time due to such
incomes and the investor realizes only the capital appreciation on redemption of his
investment.

Income Plan
In this plan, dividends are paid-out to the investor. In other words, the NAV only
reflects the capital appreciation or depreciation in market price of the underlying
portfolio.

Dividend Re-investment Plan

In this case, dividend is declared but not paid out to the investor, instead, it is
reinvested back into the scheme at the then prevailing NAV. In other words, the
investor is given additional units and not cash as dividend.

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3.10 TYPES OF RISKS ASSOCIATED WITH MUTUAL FUNDS:

Investing in mutual funds as with any security, does not come without risk. One of the
most basic economic principles is that risk and reward are directly correlated. In other
words, the greater the potential risk, the greater the potential return. The types of risk
commonly associated with mutual funds are:

Market Risk:
Market risk relate to the market value of a security in the future. Market prices
fluctuate and are susceptible to economic and financial trends, supply and demand,
and many other factors that cannot be precisely predicted or controlled.
Political Risk:
Changes in the tax laws, trade regulations, administered prices etc. is some of the
many political factors that create market risk. Although collectively, as citizens, we
have indirect control through the power of our vote, individually as investors, we have
virtually no control.
Inflation Risk:
Inflation or purchasing power risk, relates to the uncertainty of the future purchasing
power of the invested rupees. The risk is the increase in cost of the goods and
services, as measured by the Consumer Price Index.
Interest Rate Risk:
Interest Rate risk relates to the future changes in interest rates. For instance, if an
investor invests in a long term debt mutual fund scheme and interest rate increase, the
NAV of the scheme will fall because the scheme will be end up holding debt offering
lowest interest rate.

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 Business Risk:
Business Risk is the uncertainty concerning the future existence, stability and
profitability of the issuer of the security. Business Risk is inherent in all business
ventures. The future financial stability of a company cannot be predicted or
guaranteed, nor can the price of its securities. Adverse changes in business
circumstances will reduce the market price of the companys equity resulting in
proportionate fall in the NAV of mutual fund scheme, which has invested in the equity
of such a company.
Economic Risk:
Economic Risk involves uncertainty in the economy, which, in turn can have an
adverse effect on a companys business. For instance, if monsoons fail in a year,
equity stocks of agriculture based companys will fall and NAVs of mutual funds,
which have invested in such stocks, will fall proportionately.

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CHAPTER-4
RESEARCH
METHODOLOGY:

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4.1 RESEARCH METHODOLOGY:

Methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. In it we study
the various steps that are generally adopted by a research in studying his research
problem along with the logic behind them. Methodology refers to methods adopted to
carry out the research and steps adopted to solve the problem finding solution.

4.2 Type of the study

Qualitative Study.
The type of the study or research used in this project is a qualitative research design.
It mainly involves surveys and facts findings enquiries of different kinds. The main
objective of qualitative research is to describe the state of affairs as it exists at present.
The major purpose of qualitative research is a description of the state of the affairs, as
it exists at present. Thus a qualitative study is a fact finding investigation with
adequate interpretation. It is the simplest type of research. It focuses on particular
aspects or dimensions of the problem studied. It is designed that it gathers qualitative
information and provides information for formulating more sophisticated studies. The
criteria for selecting this particular design are that, the problem of the project must be
described and not arguable. The data collected is amenable to statistical analysis and
has accuracy and significance. It is possible to develop to valid standards of
comparison. It tends itself to the verifiable procedure of collection and analysis of
data. Qualitative study objective aim at identifying the various characteristics of a
company problem under study.

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4.3 TYPE OF DATA:

Primary Data:

The collection of data true questioner from the consumer or the people who will
become the possible customer for the product. The sample is collected from the
different age group. And field back from the customers

Secondary data:

The data which is used for the research is secondary data. The secondary data is the
data which is duplicate of primary data. The data (published or unpublished) which
have already been collected and processed by some agency or person and taken over
from there and used by any other agency for their statistical work are termed as
person and taken over from there and used by any other agency for their statistical
work are termed as secondary data as far as second agency is concerned. The second
agency if and when it publishes and files such data becomes the secondary source to
anyone who later uses these data. In other words secondary source is the agency who
publishes for use by others the data which was not originally collected and processed
by it.

Sources of data
Unpublished sources:
i. The data can be governments or private offices can be collected from these are
unpublished data.
ii. The research work, the secret documents.
Published sources:
i. Central and state government publication publishes the various statistics like crop
production, population, statistic, wages expenses.

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ii. The commerce association, commerce and trade association, Indian chamber of
commerce federation are publishes several data.
iii. News paper, journals, periodicals etc. publishes the several data.
iv. Some private organization, research berceuse, universities publishes several
datas.

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CHAPTER-5
Data Analysis And
Interpretation

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Q1. Age of the People?

It was found that from 50customers who have mutual funds there ae around 10 i.e.,
20% of them comes under the age of 20-30 years similarly for 30-40 years there are
40% i.e,20 of them, for 40-50 years there are 10% i.e., 5 and for more than 60 years
are are 10.

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ssQ2. GENDER

During the survey it was found that 35 out of 50 were male and 15 of them were
female

Q3).OCCUPATION

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Q4. What is your monthly family income approximately ?

It was found that 70% of them have monthly income of 60000-100000

Q 5. While investing your money, which factor will you prefer most?

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Q6 . Are you aware about Mutual Funds and their operations

Q7. If yes, how did you know about Mutual Fund?

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Q8. Have you ever invested in Mutual Fund?

Q9. If yes, in which Mutual Fund you have invested?

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Q 10. While investing in Mutual Funds, which mode of investment

will you prefer?

Q11. Mutual funds are good form of investment for people , who
dont have enough knowledge about share market?

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Q12. How does you rate knowledge about Mutual fund?

Q13.What is your time horizon for investment?

Q14) What type of investment do you currently have? Please mark

all applicable.

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MUTUAL FUND

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 CONCLUSION
Mutual funds are one of the most highly growing products in financial services market.
Mutual funds are suitable for all types of investors from risk adverse to risk bearer. Mutual
funds have many options of return, risk free return, constant return, market associated return
etc. Mutual funds are suitable to all age of investors, businessmen, salary person, etc.
In todays scenario the market is very risky so the investors should be aware in returns on the
investment. Investors need not to be expert in equity market; mutual funds can satisfy their
need. Fund managers are expert in this area and invest fund in well diversified portfolio, high
return with low risk is possible in mutual fund. In todays world, investors are showing more
trust in mutual fund than any other financial product. There is no need of a financial
consultant, if you have good knowledge of mutual funds and their type to invest.

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ANNEXURE
PART A
(1) Name: Mrs/Ms/Mr
_______________________________________
(2) Age
a) Between 20 30 years
b) Between 30 40 years
c) Between 40 50 Years
d) Between 50 60 Years
e) More than 60 Years

(3) Contact No. _______________________________

(4) Profession: _______________________________________

(5) .Gender: a) Male

b) Female

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Part B
(6) Qualification
a)
b)
c)
d)

SSC
HSC
GRADUATION
POST GAADUATION

(7) Occupation
a) Self employed
b) Professional
c) Student

(8) What is your monthly family income approximately

a)
b)
c)
d)

Up to 10,000
15,000- 30,000
30,000-60,000
60,000-1,00,000

(9) While investing your money, which factor will you prefer?
a)
b)
c)
d)

Liquidity
Low risk
High Return
Trust

(10) Are you aware about Mutual Funds and their operations
a) Yes
b) No

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(11) If yes, how did you know about Mutual Fund?

a)
b)
c)
d)

Advertisement
Peer Group
Banks
Financial Advisors

(12) Have you ever invested in Mutual Fund?

a) Yes
b) No

(13) If yes, in which Mutual Fund you have invested?

a) Mahindra
b) HDFC
c) Kotak
d) Reliance
e) Other

(14) When you invest in Mutual Funds which mode of investment

will you prefer?
a) One Time Investment
b) Systematic Investment Plan (SIP)

(15)How do you rate your knowledge about Mutual fund?

a) Extensive.
b) Good.
c) Limited.
d) None.

(16). Mutual fund are good form of investment , for people , who
dont have enough knowledge about share market?
a) Strongly agree
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b)
c)
d)
e)

Agree
No opinion
Disagree
Strongly disagree

(17). Time Horizon for investment?

a)
b)
c)
d)

Less than 6 months

6 months 1 year
1 year 3 year
More than 3 year

( 18). What type of investment do you currently have? Please mark

all application.
a)
b)
c)
d)
e)

Mutual fund
Property
Fixed deposit
Bonds
Equity

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