SUMMER TRAINING

REPORT
ON

MUTUAL FUND
(Master Trust)

In partial fulfillment of the requirement for the

Award of the degree of

MASTER OF COMMERCE
(2012-2014)

SUBMITTED BY:

PROJECT GUIDE :

Bindiya
M.Com (2nd year)
Roll No.

Mr. A.K. Singla

HOD, Dept. of Comm.

ARYA COLLEGE, LUDHIANA

AFFILIATED TO:
PANJAB UNIVERSITY, CHANDIGARH

CERTIFICATE
This is to certify that the project on Mutual Fund (Master Trust)
submitted to Arya College, Ludhiana in partial fulfillment of the requirement
for the award of Master of Commerce (M.Com) is a bonafide work carried
out by Bindiya, a student of M.Com (2nd year ), Roll No.

under my

supervision and guidance.

MR. A.K. SINGLA

H.O.D
ARYA COLLEGE

DECLARATION
I Bindiya student of M.Com (2nd year), Arya College, Ludhiana hereby
declare that this Project Report under the title MUTUAL FUND
(MASTER TRUST) is the record of my original work under the guidance
of Mr. A.K. Singla. This report has never been submitted anywhere else for
award of any degree/ diploma.

Signature

ACKNOWLEDGEMENT
I express my sincere gratitude to the management of MUTUAL FUND
(MASTER TRUST) for providing me material to prepare my project on
their esteem organization.

I would like to extend special thanks to

Mr. A.K. Singla (Project Guide) for his extensive guidance, corporation and
support.
Finally, I wish to express my gratitude to all those who have in one
ways or other helped me in the successfully completion of my project report.
The project was completed successfully with me valuable cooperation of
companys personnel.

Bindiya

CONTENTS

Chapter No.
1.
2.
3.
4.
5.
6.
7.
8.

Topics
INTRODUCTION
INTRODUCTION TO MUTUAL FUND
REVIEW OF LITERATURE
OBJECTIVE
RESEARCH METHODOLOGY
ANALYSIS AND INTERPRETATION
FINDINGS
SUGGESTION AND RECOMMENDATION
BIBLIOGRAPHY
APPENDIX

Page No.
1-27
28-54
55-59
60-62
63-65
66-75
76-77
78-79
80-81
82-84

CHAPTER 1

INTRODUCTION

INTRODUCTION TO COMPANY
Master Trust Group is one of the leading financial services company in
India. We have a strong belief in nurturing investment culture, attitude and
inculcating a very strong approach towards value investing forms the central part
of any sound investment philosophy. With an impeccable track record in client
servicing of over two decades, we have now grown to 650+ strong employee
organization with over 1,50,000+ client relationships. At Master Trust, our
endeavor is to constantly meet every financial need of our esteemed clients.
mastertrust - is a one point shop for all the investment needs of a
customer. The one-stop destination is specifically targeted towards the retail
customers who require a very strong relationship driven approach towards value
investing. The philosophy of mastertrust has its genesis from Master Trust
groups belief in nurturing the investment culture towards value investing.
Mission :To always earn the right to be our clients first choice through personal &
social wealth maximization
Vision :To be well diversified financial shop for wealth creation and being an
ideal service provider in our domain of business
Corporate Philosophy
Becoming an expert at anything takes a strong will, unyielding
determination and pure ability

Value System

GROUP MILESTONES

1985: Company was incorporated by the name of Arora Financial Consultants

Limited
1993: Acquired status of SEBI accredited Category-I Merchant Bankers under
the name Master Trust Limited
1994: Master Capital Services Ltd. acquired membership of NSE
1995: Master Trust Ltd. came out with an IPO
1997: Became RBI approved Full Fledged Money Changers.
1999: Launched Depository Services as a Depository participant of NSDL.
2001: Launched Depository Services as depository participant of CDSL
2002: Entered into insurance business as advisor for Life & General Insurance
2004: Became member of NCDEX and MCX
Became Insurance Broker under the name of M/s Master Insurance
Brokers
2005: Acquired the membership of Bombay Stock Exchange Limited
Commenced Internet Trading
Became SEBI Registered Portfolio Manager
2007: Set up regional offices at Baroda, Kolkata, Hyderabad, Allahabad, Hissar,
Bhubneshwar & Ahmedabad
2008: Introduced Currency Derivatives trading through MCX-SX & NSE
2009: Established an arbitrage desk
Implemented Master Swift

Established CRM
2010: Trading turnover peaks US$1billion/day of group companies
Became members of NSEL and ACE
Arbitrage desk activated in spot commodity
Rebranding exercise of retail services
2011: Launched its flagship PMS product named Master Quant 10
Started algorithmic trading solutions to its trading clients named Master
Pulse/ Master Trader
Opened branches in Jaipur, Patna and Mumbai
2012: Launched Integrated Amibroker and Metatrader charting platform for
clients
Declared India's best Derivatives Broker by BSE
Crossed 10,000 clients in currency segment on NSE
Acquired membership of MCX-SX India's new stock exchange in both
equity as well as derivatives segment
Activated SLBM segment on NSE as a new asset class for our esteemed
customers

10

11

BOARD OF DIRECTORS
Mr. Harjeet Singh Arora (FCA, FCS),

As a founder

entrepreneur, he has been instrumental in making Master Group

one of the leading Financial Services players in India. He laid the
foundation of the group in 1985 under the name of Arora
Financials (P) Ltd. He has handled more than 150 public issues
and has been involved in many other merchant banking &
investment banking mandates of top corporate of India. He has
over 30 years of experience in Corporate Finance, Capital Market
and Financial Advisory Services.

Mr. R.K.Singhania (F.C.A.) is another co-promoter of the group.

He had over 10 years experience as Director (Finance) with a top
Corporate before joining the group. He is having more than 30
years experience in Corporate Strategy, Tax Planning, Financial
Engineering and M & A space.

Mr. Pavan Chhabra (F.C.A.) is having a rich experience of more

than 20 years in Primary and Secondary Capital Market,
Institutional Broking Business and other Merchant Banking
activities.

Mr. G.S. Chawla (B.E., M.B.A., D.B.F.) has worked with Public
Financial Institutions & Corporate for more than 12 years. He also
has 15 years rich experience of Capital Market, Finance, Merchant

12

Banking, Research, IT and other related activities with group.

Mr. Harinder Singh * (B.Com, I.C.W.A.inter) has been

monitoring the Secondary Market operations of the group for more
than 15 years.

Mr. Sanjay Sood (F.C.A.) is having more than 15 years of

experience in Merchant Banking, Foreign Exchange Management,
Financial and Retail services.He ceased to be director of the
Company w.e.f. 01.04.2014

Mr. Puneet Singhania* (M.B.A., C.F.A.) is involved in new

initiatives in the group and assists other Directors in corporate
strategy. Prior to Joining the Company, he was working with ING
Investment Management in India in their equity fund management
department.

Mr.Jashan Arora* (A.C.A.) is overseeing the arbitrage business and also

marketing initiatives on all India Level. He is actively involved on the I-Banking
front and private equity deals for the company.

13

FINANCIAL PLANNING
Financial Planning is a process for you to meet your financial goals keeping in
mind your assets, liabilities, income, expenses & price inflation together
But do you really need financial planning? Not really if you have a money
machine at your home and can print as much money as you want but that is not the
case even with Mr. Mukesh Ambani or Mr. Bill Gates
Everyone needs financial planning to answer questions like:

How much do I need in ten years time to buy a house?

How much should I invest now to get that money in ten years?

What should be my return on investments?

What instruments would give me those kind of returns?

Are the instruments suitable for me based on my risk tolerance and risk
taking capacity?

How do I monitor the investments?

Many a times people are not able to differentiate between risk
tolerance and risk taking capacity and that is where expert financial planners

14

at mastertrust help you differentiate between the two and answer and
implement

all

your

questions

above.

Financial Planning includes

Investment planning,

Risk Management & Insurance Planning,

Retirement Planning

Tax Planning & Estate Planning.

The company carry's Merchant Banking activities, ranging from Issue

Management to Advisory Services and Underwriting of Issues. In 1993 SEBI

accredited Category- I Merchant Bankers under the name of M/s Master
Capital Services Ltd. A "Merchant Banker" could be defined as " An
organization that acts as an intermediary between the issuers and the ultimate
purchasers of securities in the primary security market". Merchant Banker
has been defined under the Securities & Exchange Board of India (Merchant
Bankers) Rules, 1992 as " any person who is engaged in the business of
issue management either by making arrangements regarding selling, buying
or subscribing to securities as manager, consultant, advisor or rendering
corporate advisory service in relation to such issue management". As a
Merchant Banker, Master Capital Services Ltd provides:
Management of Capital Issues

15

 Management of Buybacks, Takeovers and Delisting offers

Private placement of Debt and Equity
Merger and Amalgamations

16

MERCHANT BANKING
Loan Syndication
"We also provide focused corporate finance advisory services for SMEs in the
areas of Mergers & Acquisitions, Private Equity Placements, IPOs and High Yield
Debt. We see specific opportunities in cross border M&As that would bring in
strategic benefits and growth opportunities for companies in the SME sector and
we are already seeing good attraction in this area".
Our Association
We have been associated with the following Groups/Mandates in various
capacities as Merchant Bankers.
1.

Oswal Agro Group of Companies.

2.

Vardhman Group of Companies.

3.

Trident Group of Companies

4.

Surya Roshni Ltd.

5.

Telephone Cables Ltd.

6.

Jaidka Foods Ltd.

7.

Asian Lakto Group of Companies.

8.

Vee Kay Fibres Ltd.

9.

PHFGroup Of Companies

10.

Parkash Industries Ltd.

11.

Samana Steel Ltd.

17

12.

Shreyans Paper Mills Ltd.

13.

Ritesh Group of Industries

14.

Oswal Spinning Group of Companies

15.

Arihant Group of Companies

16.

Thapar Group of Companies

17.

Punjab Alkalies & Chemicals Ltd.

18.

Sigma Cements Ltd.

19.

Tokyo Plast Ltd.

20.

R.S Petro Chemicals Ltd.

PUBLIC OFFERS HANDLED

Public Offer of following Target companies has been handled as Managers.
1.

Esteem Capital & Management services Ltd.

2.

Mohan Fibre Products Ltd.

3.

Oswal Overseas Ltd.

4.

AEC India Ltd.

5.

AEC Enterprises Ltd.

6.

Polo Hotels Ltd.

7.

Yokogawa Bluestar Ltd.

8.

Shivalik Agro Poly Products Ltd.

18

Besides these we have handled IPOs / Right issues of large number of

midcap companies.
FOREX
With dedicated forex bureaus offering travel related foreign exchange
services from special counters even beyond banking hours, we offer one of
the largest bouquet of FX Services at very competitive prices. These forex
bureau also offer door delivery of foreign exchange to corporate and other
specified customers.
Services Offered

Retail Foreign Exchange

Sale & Purchase of Currency Notes & Travellers Cheques

Encashment of Travellers Cheques

Western Union Money Transfer

Travel Insurance

19

Western Union Money Transfer

Western Union is a global leader in money transfer services, with a history
of

pioneering

service

dating

back

more

than

150

years.

We have tied up with BTI SITA an agent of Western Union for secure
transfer of money into India from almost anywhere in the world. You can quickly
and easily receive money from over 200,000 Western Union Agent locations in
over 190 countries worldwide. Money transfers make it easy for you to assist
family

or

friends

back

home.

When you've got to receive money, and you've got to do it fast, turn to
mastertrust
INSURANCE
Future is uncertain and one needs to provide for the uncertainty today. We
at "mastertrust" help you secure your future through insurance products. Life
insurance is a unique investment that helps you to meet your dual needs - saving
for life's important goals, and protecting your assets.

20

Life Stage
Young
(unmarried)
Young (married)
Married & Kids
Children's
education
Middle aged &

Primary Need

Life Insurance Product

Asset buildup

Wealth creation products

Asset buildup and

Wealth creation and mortgage

protection

protection products

Asset buildup and

Education, mortgage protection &

protection

wealth creation products

Retirement planning

Retirement solutions & mortgage

Teenage Children and asset protection

protection products

Any Life Stage

Health Insurance products

Health plans

Our Thrust is

To give value added and quality services to the insuring public and
enable them to get proper insurance coverage that will adequately
indemnify them in time of need.

To give risk management back up to clients through our team of

managers and experienced executives.

To work together with the customers, combining our skills,

technologies and experience - no matter what your business is or how
difficult the situation is - we give it the correct perception.

21

Our approach to insurance broking is holistic. mastertrust

critically views the need and adequacy of Insurance from a client's
perspective:

Define risk profile

Propose a risk management plan

Source insurance quotes

Evaluate quotes with recommendations

Focus on coverage and cost optimization

Placement of insurance as per clients choice

Validate the policy in line with proposal

Policy updation

Our motto is "Total Customer Satisfaction."

Our core value helps us to build and sustain enduring corporate

relationships.
As always, we put your needs first.

22

INSURANCE PRODUCTS
General Insurance Products

Mediclaim Insurance

Householder Policy

Personal Accident Policy

Motor Insurance

Overseas Mediclaim Policy

Shop Keeper Insurance Policy

Fire & Loss Of Profit Insurance

Public Liability Insurance

Group Mediclaim Insurance

Life Insurance Products

Unit Linked Insurance Plans

Endowment Plans

Term Plans

Money Back

Child Plans

Retirement Solutions
23

Single Premium Plans

Keymans & Partners Insurance

Depository Services Branch

Master Capital Services Ltd. boasts of an ever-growing customer base of
over 95,000 account holders under its retail brand - mastertrust. We are
depository participants with the NSDL & CDSL for trading and settlement of
dematerialized shares. We perform clearing services for all securities transactions
through our accounts. We offer depository services to create a seamless transaction
platform execute trades and settle these transactions. Depository Services is part
of our value added services for our clients that create multiple interfaces with the
client and provide for a solution that takes care of all your needs.
TYPES OF ACCOUNTS

Resident individual

HUF

Partnership

Corporate & Clearing member account etc

NRI

24

LOAN AGAINST SHARES

We at Mastertrust work towards servicing our clients in a better way.
We provide Loan Against Shares (LAS) facility as we understand your needs
and help meet your liquidity requirements. With LAS we allow you loan
against our approved list of shares at reasonably competitive rates of interest.
This product helps you take advantage of opportunities available in the
market without involvement of new funds by you and optimize the returns
on your existing portfolio.
Requirements for availing this facility:
Loan Agreement: The client has to enter into an agreement and related
formalities

are

to

be

executed

with

Master

Trust

Ltd.

Bank Account: The client needs to open a current account with a designated
bank, with a POA executed in favor of Master Trust Ltd.
Demat Account: The client needs to open a demat account with us, with a
POA set in favor of Master Trust Ltd.
Trading Account: The client needs a trading account with a broker
NRI SERVICES
1]

NRI FAQ

2]

NRI Services

25

3]

NRI Account at Mastertrust

4]

NRI Help Desk

1] NRI FAQ
Who is a Non-Resident Indian (NRI)?
"Non Resident Indian" means a person who is a citizen of India or is a
person of Indian origin residing outside India for more than 90 days for
employment or carrying on business or vocation.
Who is an Overseas Corporate Body (OCB)?
Overseas Corporate Body (OCB) means a company, partnership firm,
society and other corporate body owned directly or indirectly to the extent of at
least 60% by NRIs and includes overseas trust in which not less than 60%
beneficial interest is held by NRIs directly or indirectly but irrevocably.
What is Participatory Notes (PN) ?
Participatory notes(PN) is issued by FII-Foreign Institution Investment and
its sub accounts. This is the route by which foreign national and or company can
invest in Indian Stocks.
What is an NRE A/C?

26

A NRE bank account is an external saving bank account opened for Non
resident Indians. This is why it is known as Non-Resident External account. Since
it is an external account, any monies lying in NRE account can be taken outside
the country or in other words, the monies lying in NRE account are fully
repatriable. This money can be converted into any foreign currency at the behest
of the account holder and can be remitted outside the country.
What is Non Repatriable?
Non Repatriable : Any amount of profit/ money made by NRI of his
investment which is not allowed to be converted into foreign currency or allowed
to be taken abroad is called Non Repatriable.
What is Repatriable?
Repatriable: Any amount of profit or money which an NRI or PIO is
allowed to convert into foreign currency and take out of India is called
Repatriable.
What is PIS?
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of
India (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000
under which the Non Resident Indians (NRIs) and Person of Indian Origin

27

(PIOs) can purchase and sell shares and convertible debentures of Indian
Companies on a recognized stock exchange in India by routing all such
purchase/sale transactions through their account held with a Designated Bank
Branch.
Any NRI wanting to trade/make fresh investments in the Indian Equity
Secondary Market needs and must have one PIS account with only one designated
bank in India. Notes:

PIS account is applicable only for NRIs and not for resident Indians.

It is only for trading in Indian markets and not any other foreign markets.

It is applicable only for equity trades and not MF investments.

Why is PIS required?

For all the Indian companies or companies listed on Indian stock
exchanges, there are certain limits which have to be monitored under
FEMA-Foreign Exchange Management Act regulations. For any company
the foreign investment into that company cannot cross certain limit. This
limit is different from company to company and sector to sector. Also
individually any NRI or a PIO cannot invest more than 5% in any Indian
company.
Do NRIs need any permission of RBI to subscribe for IPOs or Private

28

placements of equity shares/convertible debentures of existing or new

companies?
No. NRIs do not require any permission to invest though Initial
Public Offerings (IPOs) or Private placements. In such cases, the Issuing
Company should comply with all necessary regulations for issuing securities
to a person resident outside India.
2]

NRI Services
We looks forward to meet every financial need of its esteemed clients and

following services are being provided:

Stock Broking

Commodity Broking

Depository

Merchant Banking

Project Consultancy

Primary Market

Mutual funds

Forex

Money Transfers

Insurance Broking (Life & General)

SEBI and Company Law consultancy

3] NRI Account at Mastertrust

29

DEMAT

First Mastertrust will open your NRE Account and PIS with Axis Bank.

After PIS is opened RBI permission no. will be obtained from Bank.

Open a DEMAT ACCOUNT with repatriable status with Mastertrust.

For opening demat accounts besides the documents stated above, we need
to have copy of PAN obtained by you from IT department in India.

TRADING
After having opened NRE, PIS & Demat accounts, you can open trading
account with Mastertrust with all the relevant proofs of having opened these
accounts and same set of documents that is required for opening Demat account.

30

CONTACT US
HEAD OFFICE
Ludhiana
SCO 19, Feroze Gandhi Market
Ludhiana.
Phone No : +91-161-3911500
Fax No.

: +91-161-2402963

REGIONAL OFFICE
Chandigarh
SCO 22-23, Sector 9 D
Chandigarh
Phone No : +91-172-4848000, 3025800
Fax : +91-172-2745865
Mumbai
C-1, Jeevan Jyot, 18/20, Cawasjee Patel Street,
Mumbai - 400 001
Phone No : +91-22-40675300
Fax : +91-22-22026067
New Delhi
1012, Arunachal Building,
19, Barakhamba Road,
New Delhi - 110001.
Phone No : +91-11-42111000
Fax : +91-11-42111040
Kolkata
6th Floor, Sabarwal House,

31

55 B,Mirza Galib Street,

Kolkata - West Bengal - 700016.
Phone No : +91-33-40059773-75-76
Fax : +91-33-40059774

Uttar Pradesh/Uttarakhand
602, 6th Floor, Ratan Square,
Vidhan Sabha Marg,
Lucknow - 226001.
Phone No : +91-522-4911555
Hyderabad
LG-15, Lower Ground Floor,
Bhuvana Towers (CMR), S. D. Road,
Secundrabad, Andhra Pradesh - 500003.
Phone No : +91-40-30510600-04

32

CHAPTER 2

INTRODUCTION
TO
MUTUAL FUND

33

INTRODUCTION
Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities.
The incomes earned through these investments are shared by its unit
holders in proportion to the number of units owned by them.
A MUTUAL fund is a pool of money, collected from investor, and is invested
according to certain investment objective.
The Mutual Fund industry in India started in 1963 with the formation of
Unit Trust of India. In the year 1992, Securities and exchange Board of India
(SEBI) Act was passed. As far as Mutual funds are concerned, SEBI formulates
policies and regulates the mutual funds to protect the interest of the investors. A
mutual fund is created when investor put their money together. It is therefore a
pool of the investors' fund. The most important characteristic of a mutual fund is
that the contribution and the beneficiaries of the fund are the same class of people,
namely the investor. The term mutual fund means that investor contribute to the
pool, and also benefit from the pool. There are no other claimants to the fund. The
fund held mutually by investors is the mutual fund.
The Mutual Fund industry in India started in 1963 with the formation of
Unit Trust of India. In the year 1992, Securities and exchange Board of India
(SEBI) Act was passed. As far as Mutual funds are concerned, SEBI formulates

34

policies and regulates the mutual funds to protect the interest of the investors. A
mutual fund is created when investor put their money together. It is therefore a
pool of the investors' fund. The most important characteristic of a mutual fund is
that the contribution and the beneficiaries of the fund are the same class of people,
namely the investor. The term mutual fund means that investor contribute to the
pool, and also benefit from the pool. There are no other claimants to the fund. The
fund held mutually by investors is the mutual fund.
The Mutual Fund industry in India started in 1963 with the formation of
Unit Trust of India. In the year 1992, Securities and exchange Board of India
(SEBI) Act was passed. As far as Mutual funds are concerned, SEBI formulates
policies and regulates the mutual funds to protect the interest of the investors.

35

Investors in the mutual fund industry today have a choice of around 30

mutual funds companies, offering cumbersome amount of funds. Though the
categories of products offered could be classified under about a dozen generic
heads, competition in the industry has led to innovative alterations to standard
products. It is also possible for investors to decide the manner in which their
returns would be distributed and choose from daily, monthly, quarterly or annual
pay outs: or reinvestment of dividends into the mutual fund product itself: or a
growth option that would seek growth in investment over distribution of income.
The most important benefits of product choice are that it enables investors to
choose options that suit their return requirements and risk appetite. Investors can
combine the options to arrive at their own mutual fund portfolio that fit with their
financial planning objectives.
In fact too many people, investing means buying mutual funds. After all, its
common knowledge that investing in mutual funds is better than simply letting
your cash waste away in saving account but for most people that's where the
understanding of funds ends.
A Mutual fund is nothing more than a collection of stocks and bonds. One
can think of mutual fund as a company that brings together a group of people and
invests their money in stocks, bonds and other securities.

36

CHARACTERISTICS

A mutual fund belongs to the investors who have pooled their funds. The
ownership of the mutual fund is in the hands of the investor.

Investment professionals and other service providers, who earn a fee for their
services, from the fund, manage the mutual fund.

The pool of funds is invested in a portfolio of marketable investments. The

value of the portfolios is updated every day.

The investors share n the fund is denominated by "UNITS". The values of the
units change with change in the portfolio's value, every day. The value of one
unit of investment is called as the NET ASSET VALUE (NAV).
The investment portfolio of the mutual fund is created according to the stated
investment objectives of the fund.

37

IMPORTANT PHASES IN THE HISTORY OF MUTUAL FUNDS IN INDIA

First Phase - 1964-87
An Act of Parliament established Unit Trust of India (UTI) on 1963. It was
set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked
from the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched
by UTI was Unit Scheme 1964. At the end of 1 988 UTI had Rs.6, 700 crores of
assets under management
Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov
89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in
December 1990. At the end of 1993, the mutual fund industry had assets under
management of Rs.47, 004 crores.

38

Third Phase -1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first Mutual Fund Regulations came
into being, under which all mutual funds, except UTI were to be registered and
governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton)
was the first private sector mutual fund registered in July 1993. The 1993 SEBI
(Mutual Fund) Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2003, there were 33 mutual
funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,
541 crores of assets under management was way ahead of other mutual funds
Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29, 835 crores as at
the end of January 2003, representing broadly, the assets of US 64 scheme, assured
return and certain other schemes. The Specified Undertaking of Unit Trust of
India, functioning under an administrator and under the rules framed by
39

Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76, 000 crores of assets under management and with the setting up of a UTI
Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent
mergers taking place among different private sector funds, the mutual fund
industry has entered its current phase of consolidation and growth. As at the end of
September 2004, there were 29 funds, which manage assets of Rs.153108 crores
under 421 schemes.

MUTUAL FUND COMPANIES IN INDIA

ABN AMRQ Mutual Fund

Alliance Capital Mutual Fund
Benchmark Mutual Fund
Birla Sun Life Mutual Fund
BOB Mutual Fund
Can bank Mutual Fund
DBS Chula Mutual Fund
Deutsche Mutual Fund
DSP Merrill Lynch Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
Franklin Templeton Mutual Fund
LIC Mutual Fund

PNB Mutual Fund

PRINCIPAL Mutual Fund
Prudential ICICI Mutual Fund
Quantum Mutual Fund
SBI Mutual Fund
HSBC Mutual Fund
IL&F S Mutual Fund
ING Vysya Mutual Fund
JM Financial Mutual Fund
Kotak Mahindra Mutual Fund
GIC Mutual Fund
HDFC Mutual Fund
Morgan Stanley Mutual Fund

40

ADVANTAGES
Professional Management
Mutual Funds are managed by investment managers Asset Management
Companies who are appointed by trustees and bound by the investment
management agreement, on the how's and whys of their investment
management functions. AMC are also required to adequately capitalized,
and are closely regulated to SEBI. Investment managers and funds are also
bound by the AMFI code of ethics, which foster professional standards in
the industry.
Diversified Portfolio
By offering ready diversified portfolio, mutual funds enable investors to
hold diversified portfolios. Though investors can create their own
diversified portfolio, the costs of creating and monitoring such portfolios
can be high, apart from the fact that investors may lack the professional
expertise to manage such a portfolio.
Reduction In Risk
Mutual fund invests in a portfolio of securities. This means that all funds
are not invested in the same investment avenue. It is well known that risk
and return of various investment options do not move uniformly or in
sympathy with one another.

41

 Liquidity
Most of the funds being sold today are open -ended. That is investors can
sell their existing units or buy new units, at any point of time, at prices that
are related to the NAV of the fund on the date of the transaction this enables
investors to enjoy a high level of liquidity on their investments.
Convenient Potential
Investing in a mutual fund reduces paper work and helps you avoid
many problems such as bad deliveries, delayed payments and follow up
with brokers and companies. Mutual Funds save your time and make
investing easy and convenient.
Return Potentials
As it is said that NO ONE CAN TIME THE MARKET. Still from the past
record long term investments have been giving higher returns as compared
to short term benefits i.e. over a medium to long term , Mutual Fund have
the potential to provide a higher return as they invest in a diversified basket
of selected securities.

DISADVANTAGES
No Control over costs: - Since investors do not directly monitor the fund's
operations they cannot control the costs effectively. Regulators therefore
usually limit the expenses of mutual funds.

42

 No tailor-made portfolios: Mutual Fund portfolio axe created and

marketed by AMC"S into which investors invest. They cannot create tailor
made portfolios.
Managing a portfolio of funds: As the number of mutual funds increases,
in order to tailor a portfolio for himself, an investor may be holding a
portfolio of funds, with the costs of monitoring them and using them,
being incurred by him.
Trading Limitation: Mutual Funds are liquid; most mutual funds cannot
be bought or sold in the middle of the trading day. These are only buying
and sell them at the end of the day, after they have calculated the current
value of their holdings.
No Insurance: Mutual Funds although regulated by the Government, are
not insuring against LOSSES. The Federal Deposit insurance Corporation
(FDIC) only insures against certain losses at banks, credit unions and
savings and loans, not Mutual funds. That means that despite the risk
reducing diversification benefits provided by Mutual Funds, losses can
occur.

THE REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA

The structure of mutual funds in India is governed by the SEBI (Mutual
Fund) Regulations, 1996. These regulations make it mandatory for Mutual

43

funds to have a three- tier structure of SPONSOR-TRUSTEE-ASSET

MANAGEMENT COMPANY (AMC)
The Sponsor is the Promoter of the Mutual Fund and appoints the Trustees.
The

trustees

are responsible

to

the investors in the mutual fund

and appoint the AMC for managing the investment portfolio.

The AMC is the business face of the mutual fund, as it manages all the
Affairs of the Mutual Fund. The mutual fund and the AMC have to be registered
with SEBI.
SEBI regulation also provide for who can be sponsor, trustee and AMC and
specify the format of agreements between these entities. These agreements
provide for the rights, duties and obligations of these three entities.
The UTI is also structured as a TRUST. The important difference though, is
that UTI does not have Sponsors or Separate AMC.
Financial institution and banks that contributed to the initial capital of the
UTI have their representatives on UTI's Board of Trustees, which oversees the
operation of the UTI. The chairman appointed by the board, who in turn employs
managers and staff to run its activities, manages UTI.

44

SPONSOR
The sponsor is the promoter of the mutual fund. The sponsor
establishes the Mutual Fund and Registers the same with SEBI.
TASKS OF THE SPONSOR
a) Sponsor appoints the trustees, Custodians
and the AMC with prior approval of SEBI,
and in accordance with SEBI Regulation.
b) Sponsor must be carrying on business in
financial services for a minimum period of
five years.
c) Sponsor must be in profit making in at least 3 of the immediately proceeding
5 years including the 5th year.
d) Sponsor must contribute at least 40% of the Net worth of the AMC.
TRUSTEE
The mutual fund which is a trust is managed either by a Trust Company or
a aboard of Trustees. Board of Trustees and Trust companies are governed by the
provisions of the Indian trust Act. If the Trustee is a company, it is also subject to
the provisions of the Indian Companies Act. It is the responsibility of the Trustees
to protect the interests of investors, whose Fund is managed by the AMC. The
AMC and other functionaries are functionally accountable to the trustees.
The sponsor executes and registers a Trust Deed in Favor of the Trustees.
The third Schemes of the SEBI Regulations specify the contents of the Trust deed.
45

The trust deed has to be stamped and registered according to the Indian Regulation
Act.
The appointment of all trustees has to be done with prior approval of SEBI.
There must be at least 4 members in the Board of Trustees and at least 2/3" 1
of the members of the board of trustees must be independent.
Trustee of one Mutual Fund cannot be the trustee of another Mutual Fund,
unless he is an Independent Trustee in both cases, and has approval of both the
boards.
AMC
The trustees on the advice of the sponsors
usually appoint the AMC. The trust deed authorizes
the trustees to appoint the

AMC. The AMC is

usually a private limited company, in which the

sponsors and their associates or joint venture partners
are shareholders. The AMC has to be a SEBI
registered entity, and should have a minimum net worth of Rs.10 crore. The
trustees sign an investment management agreement with the AMC, which spells
out the functions of the AMC. The investment management agreement has to be in
accordance of SEBI regulations.
Responsibility Of Amc
1.

The AMC shall not act as a trustee of any Mutual Funds.

46

2. AMC shall not undertake any business activity except in the Nature of portfolio
management services, management and advisory services to offshore funds etc,
provided these activities are not in conflict with activities of Mutual Fund
3.

AMC shall not invest in any of its scheme unless full disclosure of its intention to
invest has been made in the offer document.

Mutual fund schemes can be classified as follows:

BY STRUCTURE

Open -Ended Schemes

Close - Ended Schemes

Interval Schemes

BY INVESTMENT OBJECTIVES
Growth Schemes
Income Schemes
.

Balanced Schemes

Money Market Schemes

OTHER SCHEMES

Tax Saving Schemes

Special Schemes

Index Schemes

Sector Specific.

47

BY STRUCTURE
Open Ended Schemes:
In an open ended fund, investor can buy and sell units of the fund, at NAV
related prices, at any time, directly from the fund. This is called Open Ended Fund
because, the pool of funds is open for additional sales and repurchases. Therefore
both the amount of funds that the mutual fund manages and the number of units
vary everyday. The price at which investor buy or sell unit is related to its NAV.
Open ended funds have to balance the investors who come in, investor who go out
and investors who stay invested .Open ended funds are offered for sales at a prespecified price, say Rs.10 in the initial offer period. After a Pre- specified period,
saySO days, the fun is declared open fro further sales and repurchases. These
transactions happen at the computed NAV related price. An investor in an open
ended fund can liquidate his investments by repurchasing the units from the fund.
Investor in open ended funds receives an account statement of their holdings.
Close Ended Fund:
A closed end fund is open for sale to investor for a specific period after
which .further sales are closed. Any further Transaction for buying the units or
repurchasing them, happen in the Secondary markets, where closed end funds are
listed. Therefore new investors buy from the existing investors, and existing
investor can liquidate their units by selling them to other willing buyers. In a
closed end fund, thus the pool of funds can technically be kept constant. The AMC
however, can buy out the investors. The price at which units can be sold or
48

redeemed depends on the market prices, which are fundamentally linked to the
NAV. Investors in closed end funds receive either certificates or depository
receipts, for their holdings in a closed end mutual fund.
Interval Funds
Interval funds combine the feature of open-ended and close- ended
schemes. They are open for sale or redemption during pre-determined intervals at
NAV related prices.
BY INVESTMENT OBJECTIVES
Growth funds:
The aim of the growth funds is to provide capital appreciation over the
medium to long term. Such schemes normally invest a majority of their
corpus in equities. It has been proven that returns from stocks, have out
performed most other kind of investments held over
schemes

the

long

term. Growth

are ideal for having a long term outlook seeking growth over a period

of time.
Income funds:
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as bonds,
corporate debentures and government Securities. Income funds are ideal for
capital stability and regular income.

49

Balanced funds:
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest both in
equities and fixed income securities in the proportion indicated in their offer
documents. In a rising stock market, the NAV of these schemes may not normally
keep pace, or fall equally when the market falls these are ideal for investors
looking for a combination of income and moderate growth.
Money market funds:
The aim of money market funds is to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer short term
instruments such as treasury bills, certificates of deposit, commercial paper and
inter bank call money. Returns on these schemes may fluctuate depending upon
the interest rates prevailing in the market. These are ideal fro Corporate and
individual investors as a means to park their surplus funds for short periods.
OTHER SCHEMES
Tax Saving Schemes
These Schemes offer tax rebates to the investor s under specific provision
of the Indian Income Tax Las as the government offers tax incentives for
investment in specified avenues. Investments made in Equity Linked Saving
Schemes (ELSS) and pension Schemes are allowed as deduction u/s 88 of the
Income Tax Act.1961. The Act also provides opportunities to investors to save

50

capital gains u/s 54 EB by investing in Mutual Funds, provides the capital asset
has been sold prior to aprill, 2000 and the amount is invested before September
30, 2000.
Finance Minister has allowed a Tax deduction up to Rs.1

Lakh under

section 80 C.
If we invest in any Tax Saver Mutual Fund for just three years.
This is inclusive of your other investments like PPF, NSE, KVP,
Insurance, Infrastructure Bonds etc. But the return in these Tax Saver
schemes is much higher then any other type of investment.
SPECIAL SCHEMES
Industry Specific Schemes
Industry Specific Schemes invest only in the industries in the offer
document. The investment of these funds is limited to specific industries like Info
Tech, FMCG, Pharma, Cement, Sports etc.
Index Schemes
Index Funds attempt to replicate the performance of a particular index such
as BSE Sensex or The NSE 50.
Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or
a group industry or a group of industries or various segments such as "A" Group
Shares or initial Public offering.

51

OPTIONS FOR RESTRUCTURING RETURNS TO AN INVESTOR IN

MUTUAL FUND DIVIDEND OPTION
Investors, who choose a dividend option on their investments, will receive
dividends from mutual fund. As and when such dividends are declared. Dividends
are paid in the form of warrants or are credited to the investor bank accounts.
Growth Fund
In growth option the income earned are retained in the investment
portfolio, and allowed o grow, rather then being distributed to the investor. The
return to the investor who chooses a growth option is the rate at which his initial
investment has grown over the period for which he was invested in the fund. The
NAV of the investor choosing this option will vary with the value of the
investment portfolio, while the number of units held will remain constant.
Re-Investment
Investor re-invest the dividends that are declared buy the mutual fund, back into
the fund itself, at NAV that is prevalent at the time of re investment. In this option,
the number of units held by the investor will change with every re-investment. The
value of the units will be same as under dividend option.
Investments Plans
Investment Plans are the different ways to invest or re-invest in a scheme
by investors. These are services offered by Different mutual funds of their
investors. These plans provide variable degree of convenience and flexibility to
investors. The convenience could be in the form of freedom to invest at regular
52

intervals or making withdrawals periodically. Similarly flexibility may be offered

by allowing investors to transfer from one scheme to another.
Systematic Investment Plan (SIP)
This is plan based on the concept of "Rupee Cost Averaging". In this plan
the investor is allowed to invest a fixed amount at regular intervals. This gives the
investor a way to save and invest in a disciplined and phased manner. The
investment could be made by giving post dated cheque advance or by a facility of
direct debit to the investors' salary accounts.
Automatic Reinvestment Plan (ARP)
As we already know that a scheme may have two broad options- The
dividend option and the Growth investment. In the dividend option the income
earned by the funds is distributed to the unit holders. The automatic reinvestment
plan allows the investors to reinvest the amount of dividend instead of receiving it
in cash. This reinvestment may either be in the same scheme or into other scheme
of the same fund. The reinvestment will happen at the ex- dividend NAB. After
reinvestment the investor will receive additional unit's equivalent to the amount of
dividend less any dividends distribution tax, if any.
Systematic Transfer Plan (STP)
This plan gives the facility to transfer on a periodic basis a specific amount
from one scheme to another scheme of the same mutual fund. A transfer from one
scheme will mean redemption of unit's form that scheme and, like wise it would
be considered as an investment in units of the scheme to which the transfer is
53

made. This redemption and investment would happen at applicable NAV's. This
plan gives investor the leverage to manage his funds among different schemes to
achieve his objectives.
Systematic Withdrawl Plan (SWP)
This is a plan whereby an investor can make systematic withdrawals and
credited to his bank account on a periodic basis. The amount withdrawn is treated
as redemption of units by investors and the units are calculated using the
applicable NAV as the offer document.

PRODUCTS OFFERED BY MUTUAL FUNDS

Equity Funds
Equity funds are those that invest pre-dominantly in Equity Share of
Companies. There are a variety of ways an equity portfolio can be created for
investors. There are thus the following choices in Equity Funds: Simple Equity Fund: These funds invest pre-dominant portion of the fund
mobilized in Equity and Equity related products. In most cases 80-90% of
their investments are in equity shares. These funds have the freedom to
invest both to invest both in primary and secondary markets fro Equity.
Primary Market Funds: The Primary market funds invest in Equity
Shares, but do so only when a primary market offering is available. The
focus is on capturing the opportunity to buy those companies which

54

issue their equity in Primary Markets, either through a public offer or

through a private placement.
Sectoral Funds: Sectoral funds choose to invest in one or more chosen
sectors of the equity markets. The sectors vary depending on the investor
preferences and the return-risk attributes of the sector.
Index Funds: In a simple equity fund, the fund manager has the mandate
to create an investment portfolio of equity shares. According to his
understanding of the valuation and returns markets.
Debt Fund
Debt funds are those that pre- dominantly invest in debt securities. Since
most debt securities pay periodic interest these funds are also known as income
funds. The universe of debt securities comprises of long term instruments such as
bond Issues by central and state governments, public sector organizations, public
financial institutions and private sector companies and short term instruments such
as call money lending, commercial papers, certificates of deposits and treasury
bills. Debt funds tend to create a variety of options fro investors by choosing one
or more of these segments of the debt markets in their investment portfolio.

Gilt Funds: A gilt fund invests only in securities that are issued by the
government and therefore does not carry any credit risk.

Simple Debt Funds: These funds invest in a portfolio of debt

securities indicates above.

55

Sectoral Debt Funds: These funds invest in a pre- specified subset of the
debt markets. For example, there are debt funds that would invest only in
AAA rated debt securities issues by the corporate sector.

Serial Plans or Fixed Term Plans: This is a variation to the simple debt
fund, where the objective is to match the holding period horizon of the
investor, with the maturity of the investment. A variety of serial plans that
enable investor to choose from 1 day to 5 years are available.

Balanced Funds
Funds that invest both in debt and equity markets are called balanced funds.
A typical balanced Fund would be almost equally invested in both the markets.
The variations are funds that invest predominantly in equity (about 70%) and keep
a smaller part of their portfolios in debt securities. These funds seek to enhance the
income potential of their equity component, by bringing in debt. Similarly there
are pre- dominantly debt funds (over 70% in debt securities) which invest in
equity, to provide both equity and debt markets in a one product. Therefore the
benefits of diversification get further enhanced, as equity and debt markets have
different risk and return profiles.
COMMON TERMS
Load Fund
Investment Manager charges a fee for Managing Funds, and also imposes
certain operation costs on the investment income of a fund. These expenses are
usually calls Load. Whether investor or the AMC's bear these costs is a load fund.
56

No Load Fund
If the expenses are not charged to the fund, but borne by the investment manager,
they are called as No-Load fund.
Entry Load
An entry load is an additional cost that an investor pays at the point of entry.
Example: your proposed investment is Rs.10, OOO/-. Also assume that the current
NAV of the fund is Rs.12.00 and that the entry load is Rs.0.50. Then you will
receive 10000/12.50 = 800 units.
Exit Load
An exit load is levy that an investor pays at the point of exit. This is levied to
dissuade investors from exiting the fund.
Example: Assume that the current NAV of the fund is Rs.12.00 %

and that

the exit load is Rs.0.50. Now if you sell 800 units then you stand to receive
800X11.5 = Rs. 9200.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It
may include a sales load
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may
include a back-end load. This is also called Bid Price

57

Redemption Price
Is the price at which open-ended schemes repurchase their units and closeended schemes redeem their units on maturity. Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units? Also called,
'Front-end1 load. Schemes that do not charge a load are called 'No Load' schemes
Repurchase And Back End Loan
Is a charge collected by a scheme when it buys back the units from the unit
holders?

RIGHTS AS A MUTUAL FUND UNIT HOLDER

Some of the important rights that investors in Mutual Funds have are:
1.

Investors are entitled to receive dividends declared in a scheme, within 30

days.

2.

Redemption proceeds have to be sent to the investor with 10 business days

form the date receipt of such request by the AMC.

3.

If an investor fails to claim the dividend or redemption proceeds, he has the

rights to claim it up to a period of 5 years from the due date, at the then
prevailing NAV. After the expiry of this period, Investor will be eligible to
receive the NAV prevailing at the end of the 3rd year.

4.

Mutual Funds have to allot units within 30 Days of the IPO and also open
the scheme for redemption, if it is an open ended scheme.
58

5.

Mutual fund have to publish their half-yearly results in at least one national
daily, and publish their entire portfolios at least one national daily, and
publish their entire portfolio at least once in 6 months. Such disclosure
should be done with 30 days from the six monthly account- closing dates of
the fund.

6.

Trustees will have to ensure that any information having a material impact
on the unit holder's investments should be made, public by the mutual fund.

7.

If 75% of the unit holders decide:

A scheme can be wound up.
Meeting of unit holders can be called
Appointment of the AMC of the mutual fund can be terminated.

8.

If there is any change in any fundamental attribute of a scheme, the unit

holders have to be notified through a letter. They also have the right to
repurchase at NAV, without any load, before such a change is effected.

9.

Unit holders have the right to inspect the following documents:

Copies of the Trust Deed, investment management agreement and
agreements with fund constituents.
Memorandum and articles of Association of the AMC

59

CHAPTER 3
REVIEW
OF
LITERATURE

60

REVIEW OF LITERATURE
A survey of Investor perception by March Marketing Consultancy and Research
attempts to know the mutual funds investor better. It examines some interesting
choices of the investor including the reason behind investing in mutual funds and
the investors knowledge about mutual funds. Its objective was to measure the
investor sensitivity to manage the portfolio to achieve objective like tax incentives,
capital gain, time horizon of investment and risk, return expectations. Knowing the
perception of the customers is very important in any industry. This provides
insights in to the customer behavior and his expectations from the industry
players. A proper understanding of the perceptions would definitely benefits the
players.

Jensen investigates 115 Mutual fund returns (1964-65) relative to S&P 500
index and finds that the funds on average earned 1.1% less than expected
given their level of systematic risk on average Mutual fund do not produce
returns to offset their internal expenses and fees.

Carlson (1970) Aggregate performance of Mutual fund (1948-67) and

the Mc Donald (1974) Objective and performance of Mutual fund,1960-69
address performance relative to fund type and fund objective respectively
Carlson shows the regression of fund returns on S&P index returns have a
high unexplained variance which is significantly reduced when a Mutual fund
index (diversified, balanced or income) is used as a market proxy . In a related

61

vein, Mc Donald reports that more aggressive portfolio appears to out perform
less aggressive ones. As a reward do variability ratio, the author uses mean
excess return dividend by standard deviation and find that a majority of
estimated ratio fall below the ratio of market index.

According to mutual fund book published by investment company

institute of the U.S.A : A mutual fund is a financial service organization that
receive money from shareholder, invest it, earns return on it, attempt to make
it grow and agrees to pay the shareholders cash on demand for the current
value of his investment

According to Securities and Exchange Board of India (Mutual fund)

regulation , 1996 : Mutual fund is established in the form of a trust to raise
monies through the sale of units to the public or a section of the public under
one or more schemes for investing in securities , including money market
instruments .

Vijay

(1996) , examined the funds started by private sector finance

companies like CRB capital, 20th century etc and found that most of them had
not been given even the 18 percent return which an investor get from
corporate deposits inclusive of incentives and which an equity investors was
entitled to demand. Their prices on the bourses were at substantial discounts to
NAVs indicating terrible erosion in investors confidence. However he saw
better days ahead.

62

Reddy (1996), In his article, Kothari Pioneer Mutual fund: Great

Expectation attempted to investigate t5he prime fund and blue chip issued by
the investment trust of India. During the market condition Dec. 1994, the NAV
of prime fund had fallen by 40.75 percent as against a decline of 29.24 percent
in the sensex. Accordingly, the Blue chip has out performed almost all the
schemes launched by Mutual fund.

Mohanti (1996), in his paper Mutual fund industry seeks change in

investment patterns , tried to know the reason of not so good performance of
Mutual fund and discovered that the mutual fund in India were not allowed to
enter in some areas such as bill discounting, corporate financing etc. as in
Western countries where funds are allowed to enter in foreign exchange
market. That is why the secured bonds are offering rates anywhere between 16
percent and 17.5 percent which makes them more attractive than the Mutual
funds.

Cahart (1997) in his study persistence in Mutual fund Performance

demonstrated that common factor in stock returns and investment expenses
almost completely explained persistence in equity based Mutual fund and risk
adjusted return.

According to Securities and Exchange Board of India (Mutual fund)

regulation , 1999 Trustee is a person who hold the property of the Mutual
fund interest for the benefit of the unit holder and include a trustee company
and the directors of the trustee company .

Amit Nigam, a fund manager ABN AMRO in a article Titled Eating

into your cash said that India is on an upward trend and returns are much
63

higher when compared with the expenses ratio of funds in developed market.
The total expense ratio (TER) and management costs of equity funds in India
are the Highest in the world .In India , most mutual funds have an expense
ratio of 2.5%,a ceiling fixed by the market regulators, SEBI.

According to Krishnamurthy Vijayan ,CEO, JP Morgan in the year

2007 in the article titled, Do away with Quotas said that: It might be
worthwhile to consider what IPO Quotas were intended for: to increase retail
participation directly as well as via mutual funds , and to reduce the
probability of FIIs dominating the issue with their financial muscle. Unlike
Indian mutual fund, which usually dont bid for more than they can pick- up,
FIIs do not have such restrictions quota helps merchant bankers make an issue
look good and creates an artificial appearance.

According to Devendra Nevgi , CIO and CEO , Quantum Mutual fund

in the article titled Beast in the MF jungle do roar , but may not always
bite said that: A name can make a fund appealing but may not necessarily
indicate better performance. No doubt, the funds are named T.I.G.E.R and
L.I.O.N to attract investors attention. Names do not make a fund good or bad.
Fund should not use exotic names as it can lead to misunderstanding among
investors that a fund might be different. What can probably be insisted upon
by the regulators is that abbreviations should not be used only simple and
plane full length names like equity diversified multi-cap be used.

64

CHAPTER 4
OBJECTIVES

65

OBJECTIVES
The objectives of my project are as under:
1.

To study the level of customer awareness and consciousness regarding

mutual funds.

2.

To know the expectations of customers from mutual funds.

3.

To know that why do consumers find it risky to invest in mutual funds.

4.

To analyze why do consumers prefer to invest in mutual funds.

5.

To find why have consumers shifted from Stock market to mutual funds.

6.

To find what are advantages to consumers to invest in mutual funds.

66

LIMITATIONS OF THE STUDY

Due to the constraints of time and resources, the present study is likely to
suffer from a certain limitations. Some of these are mentioned under, so that the
findings of the study may be understood in a proper perspective. The limitations of
the study are:

The research is carried on respondents as per the convenience, thus the

result may vary.

The nature of respondents affects response in every study. Although great

care was taken to select educated respondents, yet casualness or biasness in
responses cannot be ruled out.

The questionnaire might also be having certain undetectable errors and

limitations that also affect the study, since no pre-test was done before the
circulation of the questionnaire.
The sample size taken is small and may not be sufficient to predict the results with
100% accuracy. For a study like this one a still bigger sample size would have
been appropriate.

67

CHAPTER 5
RESEARCH
METHODOLOGY

68

RESEARCH METHODOLOGY
Research methodology is one of the important aspects of any project. This
gives us a clear cut view of the methods so used while gathering the
information so needed for the completion of the report.

RESEARCH DESIGN
Research design is a series of advanced decisions that taken together
comprise a master plan or model for the conduct of an investigation. So
research design provides a framework of plan for study, which guides the
collection, measurement, analysis, and interpretation of the data.
The research in my project is exploratory.

DATA COLLECTION METHOD

In this project sources of data collection are both primary and secondary
data.
Primary source of data includes personal interviews as well as structured
questionnaire.
Secondary source of data includes the use of books, brochures and Internet
services.
SAMPLING DESIGN
Universe

69

 The basic thing to be decided is the universe (what is to be surveyed?).

In this research universe for the survey includes the investors investing
in Mutual Funds. The target population includes Business class,
Service class, Professionals who had invested in mutual funds.
Sample size
The next issue to be decided is the sample size (how many units are to
be surveyed?). Of course, the whole universe cannot be studied in a
single research project. The researcher has to select a relevant fraction
of population, which is represented of the entire population or universe.
The sample size is 80 respondents in concern to this research.
Sampling Technique

The technique to be used in this project is convenience sampling. In

this method, the sample units are chosen primarily on the basis of the
convenience to the investigator.

DATA ANALYSIS AND INTERPRETATION

The data has been processed and analyzed by tabulation interpretation so that the
findings can be communicated and can be easily understood. The findings are
presented in the best possible way. Tables and graphs have been used for
illustration of principle findings of the research.

70

CHAPTER 6
ANALYSIS
AND
INTERPRETATION

71

DATA ANALYSIS AND INTERPRETATION

Q.1: Monthly Income of Respondents
Monthly Income

Respondents

Below 8500

11

8500-15000

24

15000-25000

25000 - 35000

Above 35000

Total

50

24

25
20
15
11
10

6
5
0

Below 8500

8500-15000 15000-25000 25000-35000 Above 35000

OBJECTIVE: Income is the most influential factor determining the investment

behavior of people. This question aimed to know the income level of different
respondents.
INFERENCE: Majority of the respondents lie between Rs8300 to Rs25000
monthly income category.
72

Q. 2: Proportion of people who invests in stock market.

Invest

Respondents

Yes

30

No

20

Total

50

OBJECTIVES: This question was intended to check the awareness of the

respondents regarding the stock markets.
INFERENCE: Majority of the respondents don't invest in stock markets.

73

Q.3 : Reasons for not investing in a stock market.

Why don't you invest

Respondents

Higher Risk

Lack of awakeness

No fixed return

Lack of time

5
20

Total

OBJECTIVE: Motive of the question was to know the reasons why respondents
don't invest in stock markets.
INFERENCE: The factors shown above are equally important reasons for
respondents not investing in stock markets.

74

Q.4: Sources of Awareness about Mutual Funds

1.
2.
3.
4.

Respondents
Through bank
Media
Financial Planners/ Agents
Friends
Total

7
7
7
29
50

OBJECTIVE: The intention of the question was to understand the proportion of

major sources making people aware of mutual funds.
INFERENCE: Banks play a dominant role in making their customers aware
about mutual funds.

Q.5

Do you invest in mutual funds?

Respondents
75

1.
2.

Yes
No
Total

50
0
50

OBJECTIVE: The purpose of the question was to know the proportion of people
who know about mutual fund and invest in it.
.

76

Q.6: Investment choice of people investing in mutual funds. Can tick more
than one

1.
2.
3.
4.
5.
6.
7.

Fixed Deposit
Post office schemes
Insurance
Bonds
Real Estate
Any other
Stock Markets
Total

10
32
5
6
7
4
20
80

OBJECTIVE: Motive of the question was to know the various alternatives where
people not investing in mutual funds do invest.
INFERENCE: The Response depicts that from people who dont invest in
mutual funds majority invest in low risk instruments i.e. FDs, Pos etc. This
indicates one of the implied behavior of such people that they are risk averse.

77

Q.7: Awareness about composition of mutual funds.

Aware about composition

Respondents

Yes

35

No

15

Total

50

OBJECTIVE: It was intended to know whether the investors know where

their money is being put into.
INFERENCE: We can infer that most are active in choosing their
investment but their still lies a considerable no. of investors who are not
that aware.

78

Q.8: Time period of investment in mutual funds.

Time period

Respondents

Upto 1 year

15

1 - 3 Years

20

Above 3 years

15

Total

50

OBJECTIVE: Generally, time period of an investment has a direct relation with

its returns because in long term the fluctuations in the stock market get
neutralized. So my aim was to study the time period of investments
INFERENCE: Fairly large proportion of people don't like to keep their
investment for a long time periods.

79

Q.9: Checking of NAV.

Period

Respondents

Daily

10

Weekly

25

Monthly

10

Not regularly

Total

50

OBJECTIVE: To check the level of consciousness among investors regarding their

investments.
INFERENCE: Only half of the investors show regularity in checking the current value
of their investments, thus depicting high level of concern.

80

CHAPTER 7
FINDINGS

81

CHAPTER 7
FINDINGS
1.

As the report reveals, most of the people of the mutual fund investors know
about their composition and check its NAVs regularly.

2.

Friends play a major role in making people aware about mutual funds but
still there is a huge proportion of customers who are unaware of mutual
funds and have doubts about them. More efforts on customer education and
spreading awareness about different types of mutual funds according to
customer needs.

3.

Large percentage of the investors show weekly in checking the current

value of their investments, thus depicting high level of concern.

4.

Majority of the investors go for funds which have high equity instrument in
its portfolio. Thus they invest for higher profits and dont mind higher risks.

5.

There have so many investors who do not want invest in mutual fund for
long time period.

82

CHAPTER 8
SUGGESTION
AND
RECOMMENDATIONS

83

SUGGESTIONS & RECOMMENDATIONS

1. Some people dont invest in stock market because of high risk So more
awareness among public about the mutual funds should be increased.
2. Customers should invest in mutual funds as these offer savings and high
returns on investments.
3. As banks play a dominant role in creating awareness about mutual funds,
banks should adopt new measures to increase the awareness about mutual
funds like conducting seminars, or circulating pamphlets.
4. Investors should show regularity in checking the current value of their
investments.

84

BIBLIOGRAPHY

85

BIBLIOGRAPHY
Websites are:
www.sbi.com
ww\v. sbimutualfunds.com
www.sbiaxvardsandachievement.com
BOOKS
The beginner's guide to smart investors
Knowledge series from S.B.I Mutual Funds

86

APPENDIX

87

QUESTIONNAIRE
Dear Customer,
I am a student of GGNIMT Civil Line Ludhiana. I am undergoing a project
named, "Consumer preference towards Mutual Funds". So by filling this
questionnaire, please help me in completing my project.
1. What is your monthly income?
a) Below 8300 [ ]

b) 8300 - 15000 [ ]

d) 25000 35000 [ ]

e) Above 35000

c) 15000-25000 [ ]
[ ]

2. Why do you invest? Give ranks according to your priority.

For Savings [ ]
For Tax Benefits

[ ]

For High Returns

[ ]

3. Do you invest in stock markets?

Yes

[ ]

No

[ ]

4. If no, why you don't invest in stock market?

Higher Risk [ ]
No fixed returns [ ]

Lack of awareness [ ]
Lack of time

[ ]

5. Do you know about mutual funds?

Yes

[ ]

No

[]

6. What is your source of knowledge about mutual funds?

Through Bank

[ ]

Qualified Professionals

Media
[ ]

[ ]

Friends and Colleagues

7. Do you invest in mutual funds?

Yes

[ ]

No

[ ]

8. If no, where do you invest?

Fixed Deposit

[ ]

Post office Schemes [ ]

Insurance

[ ]

Bonds

Real Estate

[ ]

Any other

88

[ ]
[ ]

[ ]

9. Why do you invest in mutual funds? Give ranks according to your priority.
For Higher Returns________________
For tax Benefits____________________
Savings___________________________
10. Are you aware of the composition of mutual fund investment?
Yes

[ ]

No

[ ]

11. For how long you would like to keep your investment in mutual funds?
Upto 1 Year

[ ]

1-3 Years

[ ]

Above 3 Years

[ ]

12. How regularly do you check the NAV of your mutual fund investment?
Daily

[ ]

Weekly

[ ]

Monthly

[ ]

Not regularly [ ]

13. What return do you expect from your mutual fund investment in future (3 yrs)?
Upto 15%

[ ]

15-25% [ ]

25-35%

[ ]

35% & above[ ]

89