LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT

R RE EP PO OR RT T O ON N S SU UM MM ME ER R T TR RA AI IN NI IN NG G
O ON N
Evaluating different mutual fund schemes for HNIs
AT


SUBMITTED TO LOVELY PROFESSIONAL UNIVERSITY
In partial fulfillment of the
Requirements for the award of Degree of
Master of Business Administration
Submitted by:
Pankaj Attri
11300645
DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
JALANDHAR NEW DELHI GT ROAD
PHAGWARA
PUNJAB


INDEX
S.N0. TOPIC
1 EXECUTIVE SUMMARY
2 INTRODUCTION
RELIANCE CAPITAL
ABOUT RELIANCE MONEY
SWOT ANALYSIS
3 RELIANCE ADA GROUP STRUCTURE
4 STRUCTURE OF RELIANCE SECURITIES
5 ABOUT RELIANCE MUTUAL FUND AND ORIGIN OF INVESTING IN
MUTUAL FUNDS
6 INTRODUCTION ABOUT MUTUAL FUNDS
7 MUTUAL FUND INDUSTRY IN INDIA AND ITS PHASES
8 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA
9 NET ASSET VALUE (NAV) AND ITS CALCULATION
10 MUTUAL FUNDS DISTRIBUTION CHANNELS
11 SELECTION PARAMETERS FOR MUTUAL FUND
12 WHY SELECT MUTUAL FUND?
13 ADVANTAGES OF MUTUAL FUNDS:
14 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS
15 REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA
16 MUTUAL FUND COMPANIES IN INDIA
17 HIGH NET WORTH INDIVIDUAL (HNI)
18 LITERATURE REVIEW:
19 RESEARCH METHODOLOGY

20 OBJECTIVE
21 QUESTIONNAIRE TO ANALYSE PERCEPTIONS OF PEOPLES FOR
MUTUAL FUNDS
22 DATA ANALYSIS & INTERPRETATION
23 FINDINGS
24 SUGGESTIONS
25 CONCLUSION
26 BIBLIOGRAPHY



















CERTIFICATE

This is to certify that the project work done Evaluating different mutual fund schemes for
HNIs is an original work carried out by Mr. Pankaj Attri under my supervision and guidance.
The project report is submitted towards the partial fulfillment of the Requirements for the award
of Degree of Master of Business Administration

This work has not been submitted anywhere else for any other degree/diploma. The work was
carried out from 13
th
June, 2014 to 29
th
July, 2014 in Reliance Securities.

Name & Sign of Industry Guide Name & Sign of Faculty
GURVINDER WALIA
(Relationship Manager)





Date:
Students Name and Sign
Pankaj Attri

Roll No.:-MBA- 11300645



DECLARATION

I PANKAJ ATTRI hereby declare that the Project report entitled done Evaluating different
mutual fund schemes for HNIs at Reliance Securities, Chandigarh under the guidance of Mr.
Gurvinder Walia submitted for the fulfillment of the requirement for the award of degree of Post
Graduate LOVELY PROFESSIONAL UNIVERSITY is my original work and not submitted
for the award of any degree, diploma, fellowship or other similar titles or prizes to any other
institution/organization or university by any other person.


Project Guide:-
GURVINDER WALIA
(Relationship Manager)








Date:
Place: Chandigarh PANKAJ ATTRI


ACKNOWLEDGEMENT
A drop of ink makes million think
Although training work is based on ones shoulder but many remains unseen. Any research is
never an individual effort. It is contributory efforts of many hearts, hand and heads.
I would like to express my heartfelt thanks to many people. This dissertation is an effort to
contribute towards achieving the desired objectives. In doing so, I have optimized all available
resources and made use of some external resources, the interplay of which, over a period of time,
led to the attainment of the set goals.
I take here a great opportunity to express my sincere and deep sense of gratitude to my mentor
Mr. Sarabjeet sing suri, Lovely professional university, for her valuable suggestion and guidance
at regular interval in completion of the project. The support & guidance from sir, was of great
help & it was extremely valuable.
I owe my special thanks to all the staff members of reliance securities Chandigarh
Last but not the least, I also express my sincere thanks to all the people who, directly or
indirectly, contributed in time, energy and knowledge to this effort.


Pankaj Attri








PREFACE
Knowledge has two aspects- theoretical and practical and no theoretical concept is complete
without having knowledge of its practical application. A few weeks professional training
program was introduced as a part of curriculum of MBA. This summer training program proves
really beneficial to the future managers as they are confronted with the problems of actual work
environment during their training period.
As per curriculum requirement, I did 6 weeks training in RELIANCE SECURITIES,
CHANDIGARH working in such a big concern, no matter for a very small period was really a
matter of pride. As my specialization is Finance, so my major area of work in the concern was
confined to the Finance Department. And moreover it was not possible for me to cover all the
areas of Finance Department in such a short period of time so I concentrated my working on the
project assigned to me i.e. Evaluating different mutual fund schemes for HNIs. and some
basic knowledge about demat and trading account.
The learning during the training in RELIANCE SECURITIES is being presented in the
following a report.



Pankaj Attri









EXECUTIVE SUMMARY
I had undertaken a project titled Evaluating the different mutual fund schemes for HNIs This
project work consists of analyzing different mutual fund schemes for HNIs which provides the
factors which the HNIs consider before investing, some schemes which re most preferred by
them etc. The methodology that was adopted for framing the project was primary and secondary
data. This project is restricted to Chandigarh area only. In my project, I have collected the data
through the questioner to get the deep understanding of the investment pattern and the perception
of the HNIs towards the mutual funds. This project highlights the different types of mutual fund
schemes and the reason that why the investors are attracted toward them. The project was
studied with the help of brochure, magazine, books and net. Even a dialogue was carried with the
top executive so that it can help me to shape my project and get the exact idea where the position
of product lines and its status.
Customers are the king. They were interviewed and their opinion was taken into consideration so
that I can correlate my information with the theory part. Since customers were rigid they didnt
reveal the exact information about the product .Even keeping in mind the duration of the project
there were certain limitations for it. As people were not ready to spare some time and discuss the
product or answer to the query raised by me. So, I have to drawn some of the conclusion on the
basis of the brochures and material of the company being provided.










INTRODUCTION
RELIANCE CAPITAL
Tag line/slogan-When its a question of your money
Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani Group, and is ranked
among the 25 most valuable private companies in India. Reliance Capital is one of India's
leading and fastest growing private sector financial services companies, and ranks among the top
3 private sector financial services and banking groups, in terms of net worth. Reliance Capital
has interests in asset management and mutual funds, life and general insurance, private
equity and proprietary investments, stock broking, depository services, distribution of
financial products, consumer finance and other activities in financial services. The Reliance
Anil Dhirubhai Ambani Group is one of India's top 2 business houses, and has a market
capitalization of over Rs.2,90,000 crore (US$ 75 billion), net worth in excess of Rs.55,000 crore
(US$ 14 billion), cash flows of Rs. 11,000 crore (US$ 2.8 billion) and net profit of Rs. 7,700
crore (US$ 1.9 billion). Reliance Capital Ltd. is a Non-Banking Financial Company (NBFC)
registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act,
1934. RCL was incorporated as a public limited company in 1986 and is now listed on the
Bombay Stock Exchange and the National Stock Exchange (India). With a net worth of over Rs
3,300 crore and over 165,000 shareholders, Reliance Capital has established its presence as a
leading player in the financial services sector in the country. On conversion of outstanding equity
instruments, the net worth of the company will increase to about Rs 4,100 crore. Reliance Capital
sees immense potential in the rapidly growing financial services sector in India and aims to
become a dominant player in this industry and offer fully integrated financial services. It is
headed by Anil Ambani. Its headquarter is in Mumbai(India)
Subsidiaries of reliance capital:
Reliance Life Insurance
Reliance General Insurance,
Reliance Capital Asset Management Limited
Reliance Money and Reliance Consumer Finance




About Reliance Money:
Reliance Money is a group company of Reliance Capital; one of India's leading and fastest
growing private sector financial services companies, ranking among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital is a part of the
Reliance Anil Dhirubhai Ambani Group.

Reliance Money which commenced commercial operations in April 2007 has over 300,000
customers and 4,300 outlets in more than 3,500 locations across India. Reliance Money is a
comprehensive electronic transaction platform offering a wide range of asset classes. Its
Endeavour is to change the way India transacts in financial markets and avails financial services.
Reliance Money is a single window, enabling you to access, amongst others in Equities, Equity
& Commodities Derivatives, Mutual Funds, IPOs, Life & General Insurance products, Off share
Investments, Money Transfer, Money Changing and Credit Cards.




















BOARD OF DIRECTORS


Anil Ambani, Chairman




Amitabh Jhunjhunwala, Vice-Chairman




Rajendra Chitale, Independent Director



Shri C. P. Jain















Success is a journey, not a destination. If we look for examples to prove this quote then we
can find many but there is none like that of Reliance Money. The company which is today
known as the largest financial service provider of India.

SUCCESS SUTRAS OF RELIANCE MONEY

The success story of the company is driven by 9 success sutras adopted by it namely

Trust, I ntegrity, Dedication, Commitment, Enterprise, Hard work, Homework, Team work
play, Learning and I nnovation, Empathy and

Humility and last but not the least its the network .


VISION OF RELIANCE MONEY


To achieve & sustain market leadership, Reliance Money shall aim for complete customer
satisfaction, by combining its human and technological resources, to provide world class
quality services. In the process Reliance Money shall strive to meet and exceed customer's
satisfaction and set industry standards.

MISSION STATEMENT


Our mission is to be a leading and preferred service provider to our customers, and we aim to
achieve this leadership position by building an innovative, enterprising , and technology
driven organization which will set the highest standards of service and business ethics.




SWOT ANALYSIS
OF
RELIANCE MONEY (RELIANCE SECURITIES LIMITED)
Strength
1. Innovative range of financial services
2. Diversified risk with investments in upcoming sectors like infrastructure
3. Largest E-broking house in the country
4. Has over 6000 outlets in India and over 3.5 million clients
5. Ranks among the top 3 private sector financial services and banking groups, in terms of
net worth
6. Security token
7. Software for computers and mobile



Weakness
1. Penetration limited to urban areas
2. Blanket branding
3. Less attention to small investors


Opportunity
1. Growing rural market
2. Earning Urban Youth
3. Educating people about the benefits of investments to increase target audience
4. Sensex above 26000 and nifty above 7600 points
5. Increasing inflation



Threats
1. Stringent Economic measures by Government and RBI
2. Entry of foreign finance firms in Indian Market
3. Competitors
4. Economic slowdown or recession











RELIANCE ADA GROUP STRUCTURE









































DIRECT
STRUCTURE OF RELIANCE SECURITIES
INDIRECT
FRANCHISE PARTNER
CM
RM RMA SERVICE
MANAGER
DEALER
BRANCH HEAD (MR. MANISHA GUPTA)
AREA HEAD (MR. VINEET )
CHIEF EXECUTIVE OFFICER
(MR. SAM GHOSH)
GROUP CHAIRMAN/ CEO
(MR. AMITABH JHUN JHUN WALA)
CHAIRMAN (MR. ANIL AMBANI)
EXECUTIVE DIRECTOR (MR. VIKRANT)
NATIONAL HEAD (MR. RAJIV RATAN)
SEGMENT HEAD (MR. NISHANT SRIVASTAV)


ABOUT RELIANCE MUTUAL FUND:

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Average Assets
Under Management (AAUM) of Rs. 84563.92 Crs (AAUM for June 30th 08 ) and an investor
base of over 68.38 Lakhs.
Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the
fastest growing mutual funds in the country.
RMF offers investors a well-rounded portfolio of products to meet varying investor
Requirements and has presence in 118 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative products and customer service
initiatives to increase value to investors.
"Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management limited. A
subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the
balance paid up capital being held by minority shareholders."
Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and banking
companies, in terms of net worth.
Reliance Capital Ltd. has interests in asset management, life and general insurance, private
equity and proprietary investments, stock broking and other financial services.

ORIGIN OF MUTUAL FUND INVESTING:-
When three Boston Securities executives pooled their money together in 1924 to create the first
mutual fund, they have no idea how popular mutual funds would become. The idea of pooling
money for investing purposes started in Europe in mid 1800s. The first pooled in the US was
created in 1893 for the faculty and staff of Harvard University.
On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts
Investors Trust. After one year the Massachusetts Investor Trust grew from $ 50000 in assets to
3, 92,000 in assets (with around 200 share holders). In contrast there are more than 10000 mutual
funds in US today totaling around $7 trillion (with approximately 83 million individual
investors) according to the Investment Company Institute



INTRODUCTION ABOUT MUTUAL FUNDS
A Mutual Fund is a trust that pools the savings of a number of investors w ho share a common
financial goal. A Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a well-diversified portfolio of equities, bonds and other securities,
professionally managed basket of securities at a relatively low cost.
Mutual Funds are financial intermediaries. They are companies set up to receive investors
money, and then having received it, make investments with the money Via an AMC. It is a good
opportunity for the people who want to invest but do not want to be bothered with decoding the
numbers and deciding whether the stock they purchased is a good deal or not.
A mutual fund manager proceeds to buy a number of stocks from various markets and industries.
Depending on the amount investor (we) invest, owns part of the overall fund. The beauty of
mutual funds is that anyone with an investible surplus of a few hundred rupees can invest and
reap returns as high as those provided by the equity markets or have a steady and comparatively
secure investment as offered by debt instruments
Mutual Fund Operation Flow Chart


.



Organization of a Mutual Fund



















MUTUAL FUNDS INDUSTRY IN INDIA:-

The origin of mutual fund industry in India is with the introduction of the concept of mutual fund
by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987
when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality
wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the
Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family
raised the AUM to Rs. 470 bn in March 1993 and till April 2004;it reached the height of 1,540
bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than
the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian
banking industry.


The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be educated with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the development of
the sector. Each phase is briefly described as under.










Phases of mutual funds
First Phase - 1964-87:-
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. 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 1988 UTI had
Rs.6,700 crores of assets under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Could bank 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 in 1989 and GIC
in 1990. The end of 1993 marked Rs.47,004 as assets under management.
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
This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January
2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by 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
AUM 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.
The graph indicates the growth of assets under management over the years.
GROWTH IN ASSETS UNDER MANAGEMENT











TYPES OF MUTUAL
FUNDS
BY STRUCTURE
Open - Ended
Schemes
Close - Ended
Schemes
Interval Schemes
BY NATURE
Equity Fund
Debt Funds
Balanced Funds
BY INVESTMENT
OBJECTIVE
Growth Schemes
Income Schemes
Balanced Schemes
Money Market
Schemes
OTHER SCHEMES
Tax Saving
Schemes
Index Schemes
Sector Specific
Schemes

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors,
Being a collection of many stocks, an investors can go for picking a mutual fund might be easy.
There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual
funds in categories, mentioned below.





A). BY STRUCTURE

1. Open - Ended Schemes:
An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value
("NAV") related prices. The key feature of open-end schemes is liquidity.


2. Close - Ended Schemes:
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can invest in
the scheme at the time of the initial public issue and thereafter they can buy or sell the units of
the scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-
ended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.

B). BY NATURE
1. Equity Fund:
These funds invest a maximum part of their corpus into equities holdings. The structure
of the fund may vary different for different schemes and the fund managers outlook on different
stocks. The Equity Funds are sub-classified depending upon their investment objective, as
follows:
Diversified Equity Funds
Mid-Cap Funds
Sector Specific Funds
Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.

2. Debt Funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By

investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated
with Interest Rate risk. These schemes are safer as they invest in papers backed by
Government.

Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.


Monthly income plans (MIPs): Invests maximum of their total corpus in debt
instruments while they take minimum exposure in equities. It gets benefit of both equity
and debt market. These scheme ranks slightly high on the risk-return matrix when
compared with other debt schemes.
Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for
short-term cash management of corporate houses and are meant for an investment
horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are
considered to be the safest amongst all categories of mutual funds.

3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment objective of
the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part
provides growth and the debt part provides stability in returns.




Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds objective
and invest accordingly.

C). BY INVESTMENT OBJECTIVE:
Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is to
provide capital appreciation over medium to long term. These schemes normally invest a major
part of their fund in equities and are willing to bear short-term decline in value for possible
future appreciation.

Income Schemes:
Income Schemes are also known as debt schemes. The aim of these schemes is to provide
regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures. Capital appreciation in such schemes may be
limited.

Balanced Schemes:
Balanced Schemes aim to provide both growth and income by periodically distributing a
part of the income and capital gains they earn. These schemes invest in both shares and fixed
income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes:
Money Market Schemes aim 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.

Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you
buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range
from 1% to 2%. It could be worth paying the load, if the fund has a good performance history.

No-Load Funds:



A No-Load Fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a no load fund
is that the entire corpus is put to work.

OTHER SCHEMES
Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time
to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings
Scheme (ELSS) are eligible for rebate.

Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that
constitute the index. The percentage of each stock to the total holding will be identical to the
stocks index weightage. And hence, the returns from such schemes would be more or less
equivalent to those of the Index.

Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries as
specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of
the respective sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.





There are two types of investment in Mutual Funds:

1. Lump Sum,
2. Systematic Investment Plan (SIP).

Lump sum:

In Lump sum the investment is only one times that is of Rs. 5,000, and if the investment is
monthly then the investment will be 6,000/-.

Systematic Investment Plan (SIP):

We have already mentioned about SIPs in brief in the previous pages but now going into details,
we will see how the power of compounding could benefit us. In such case, every small amounts
invested regularly can grow substantially. SIP gives a clear picture of how an early and regular
investment can help the investor in wealth creation. Due to its unlimited advantages SIP could be
redefined as a methodology of fund investing regularly to benefit regularly from the stock
market volatility. In the later sections we will see how returns generated from some of the SIPs
have outperformed their benchmark.







Types of Reliance Mutual Funds:
1. Reliance Growth Fund,
2. Reliance Vision Fund,
3. Reliance Banking Fund,
4. Reliance Diversified Power Sector Fund,
5. Reliance Pharma Fund,
6. Reliance Media & Entertainment Fund,
7. Reliance NRI Equity Fund,
8. Reliance Equity opportunities Fund,
9. Reliance Index Fund,
10. Reliance Tax Saver (ELSS) Fund,
11. Reliance Equity Fund,
12. Reliance Long Term Equity Fund,
13. Reliance Regular Saving Fund.

























NET ASSET VALUE (NAV):

Since each owner is a part owner of a mutual fund, it is necessary to establish the value of
his part. In other words, each share or unit that an investor holds needs to be assigned a value.
Since the units held by investor evidence the ownership of the funds assets, the value of the total
assets of the fund when divided by the total number of units issued by the mutual fund gives us
the value of one unit. This is generally called the Net Asset Value (NAV) of one unit or one
share. The value of an investors part ownership is thus determined by the NAV of the number of
units held.

Calculation of NAV:

At this place I am sharing an example which was shared with me by my mentor. If the value of a
funds assets stands at Rs. 100 and it has 10 investors who have bought 10 units each, the total
numbers of units issued are 100, and the value of one unit is Rs. 10.00 (1000/100). If a single
investor in fact owns 3 units, the value of his ownership of the fund will be Rs.
30.00(1000/100*3). Note that the value of the funds investments will keep fluctuating with the
market-price movements, causing the Net Asset Value also to fluctuate. For example, if the value
of our funds asset increased from Rs. 1000 to 1200, the value of our investors holding of 3 units
will now be (1200/100*3) Rs. 36. The investment value can go up or down, depending on the
markets value of the funds assets










MUTUAL FUNDS DISTRIBUTION CHANNELS
Investors have varied investment objectives and can be classified as aggressive, moderate and
conservative, depending on their risk profile. For each of these categories, asset management
companies (AMCs) devise different types of fund schemes, and it is important for investors to
buy those that match their investment goals.
Funds are bought and sold through distribution channels, which play a significant role in
explaining to the investors the various schemes available, their investment style, costs and
expenses. There are two types of distribution channels-direct and indirect. In case of the former,
the investors buy units directly from the fund AMC, whereas indirect channels include the
involvement of agents. Let us consider these distribution channels in detail.
Direct channel
This is good for investors who do not need the advisory services of agents and are well-versed
with the fundamentals of the fund industry. The channel provides the benefit of low cost, which
significantly enhances the returns in the long run.
Indirect channel
This channel is widely prevalent in the fund industry. It involves the use of agents, who act as
intermediaries between the fund and the investor. These agents are not exclusive for mutual
fund and can deal in multiple financial instruments. They have an in-depth knowledge about the
functioning of financial instruments and are in a position to act as financial advisers. Here are
some of the players in the indirect distribution channels.
a) Independent financial advisers (IFA): These are individuals trained by AMCs for selling their
products. Some IFAs are professionally qualified CFPs (certified financial planners). They help
investors in choosing the right fund schemes and assist them in financial planning. IFAs manage
their costs through the commissions that they earn by selling funds.

b) Organized distributors: They are the backbone of the indirect distribution channel. They have
the infrastructure and resources for managing administrative paperwork, purchases and
redemptions. These distributors cater to the diverse nature of the investor community and the
vast geographic spread of the country by establishing offices in rural and semi urban locations.


c) Banks: They use their network to sell mutual funds. Their existing customer base serves as a
captive prospective investor base for marketing funds. Banks also handle wealth management for
their clients and manage portfolios where mutual funds are one of the asset classes. The players
in the indirect channel assist investors in buying and redeeming fund units.
They try to understand the risk profile of investors and suggest fund schemes that best suits their
objectives. The indirect channel should be preferred over the direct channel when investors want
to seek expert advice on the risk-return mix or need help in understanding the features of the
financial securities in which the fund invests as well as other important attributes of mutual
funds, such as benchmarking and tax treatment.






SELECTION PARAMETERS FOR MUTUAL FUND

Your objective:
The first point to note before investing in a fund is to find out whether your objective
matches with the scheme. It is necessary, as any conflict would directly affect your prospective
returns. Similarly, you should pick schemes that meet your specific needs. Examples: pension
plans, childrens plans, sector-specific schemes, etc.

Your risk capacity and capability:
This dictates the choice of schemes. Those with no risk tolerance should go for debt
schemes, as they are relatively safer. Aggressive investors can go for equity investments.
Investors that are even more aggressive can try schemes that invest in specific industry or
sectors.
Fund Managers and scheme track record:
Since you are giving your hard earned money to someone to manage it, it is imperative
that he manages it well. It is also essential that the fund house you choose has excellent track
record. It also should be professional and maintain high transparency in operations. Look at the
performance of the scheme against relevant market benchmarks and its competitors. Look at the
performance of a longer period, as it will give you how the scheme fared in different market
conditions.
Cost factor:
Though the AMC fee is regulated, you should look at the expense ratio of the fund before
investing. This is because the money is deducted from your investments. A higher entry load or
exit load also will eat into your returns. A higher expense ratio can be justified only by
superlative returns. It is very crucial in a debt fund, as it will devour a few percentages from your
modest returns.
Also, Morningstar rates mutual funds. Each year end, many financial publications list the year,s
best performing mutual funds. Naturally, very eager investors will rush out to purchase shares of
last year's top performers. That's a big mistake. Remember, changing market conditions

make it rare that last year's top performer repeats that ranking for the current year. Mutual fund

investors would be well advised to consider the fund prospectus, the fund manager, and the
current market conditions. Never rely on last year's top performers.

WHY SELECT MUTUAL FUND?

The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for
bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in
capital protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity. That doesnt mean
mutual fund investments risk free.
This is because the money that is pooled in are not invested only in debts funds which are
less riskier but are also invested in the stock markets which involves a higher risk but can expect
higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives
market which is considered very volatile.

RETURN RISK MATRIX

Mutual
Funds
Equity
Bank FD
Postal
Savings
Venture
Capital
HIGHER RISK
HIGHIER RETURNS
LOWER RISK
HIGIER RETURNS
LOWER RISK
LOWER RETURNS
HIGHIER RISK
MODERATE RETURNS




ADVANTAGES OF MUTUAL FUNDS:
If mutual funds are emerging as the favorite investment vehicle, it is because of the many
advantages they have over other forms and the avenues of investing, particularly for the investor
who has limited resources available in terms of capital and the ability to carry out detailed
research and market monitoring. The following are the major advantages offered by mutual
funds to all investors:

1. Portfolio Diversification:
Each investor in the fund is a part owner of all the funds assets, thus enabling him to
hold a diversified investment portfolio even with a small amount of investment that would
otherwise require big capital.

2. Professional Management:
Even if an investor has a big amount of capital available to him, he benefits from the
professional management skills brought in by the fund in the management of the investors
portfolio. The investment management skills, along with the needed research into available
investment options, ensure a much better return than what an investor can manage on his own.
Few investors have the skill and resources of their own to succeed in todays fast moving, global
and sophisticated markets.

3. Reduction/Diversification Of Risk:
When an investor invests directly, all the risk of potential loss is his own, whether he
places a deposit with a company or a bank, or he buys a share or debenture on his own or in any
other from. While investing in the pool of funds with investors, the potential losses are also
shared with other investors. The risk reduction is one of the most important benefits of a
collective investment vehicle like the mutual fund.
4. Reduction of Transaction Costs:
What is true to risk is also true of the transaction costs. The investor bears all the costs of
investing such as brokerage or custody of securities. When going through a fund, he has the
benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit
passed on to its investors.



5. Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When
they invest in the units of a fund, they can generally cash their investments any time, by selling
their units to the fund if open-ended, or selling them in the market if the fund is close-end.
Liquidity of investment is clearly a big benefit.

6. Convenience And Flexibility:
Mutual fund management companies offer many investor services that a direct market
investor cannot get. Investors can easily transfer their holding from one scheme to the other; get
updated market information and so on.

7. Tax Benefits:
Any income distributed after March 31, 2002 will be subject to tax in the assessment of
all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-
oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a
concessional rate of 10.5%.
In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the
Total Income will be admissible in respect of income from investments specified in Section 80L,
including income from Units of the Mutual Fund. Units of the schemes are not subject to
Wealth-Tax and Gift-Tax.

8. Choice of Schemes:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

9. Well Regulated:
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

Transparency:
You get regular information on the value of your investment in addition to disclosure on the

specific investments made by your scheme, the proportion invested in each class of assets and
the fund manager's investment strategy and outlook




DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

1. No Control Over Costs:
An investor in a mutual fund has no control of the overall costs of investing. The investor
pays investment management fees as long as he remains with the fund, albeit in return for the
professional management and research. Fees are payable even if the value of his investments is
declining. A mutual fund investor also pays fund distribution costs, which he would not incur in
direct investing. However, this shortcoming only means that there is a cost to obtain the mutual
fund services.

2. No Tailor-Made Portfolio:
Investors who invest on their own can build their own portfolios of shares and bonds and
other securities. Investing through fund means 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
in achieving their objectives. However, most mutual fund managers help investors overcome this
constraint by offering families of funds- a large number of different schemes- within their own
management company. An investor can choose from different investment plans and constructs a
portfolio to his choice.

3. Managing A Portfolio Of Funds:
Availability of a large number of funds can actually mean too much choice for the
investor. He may again need advice on how to select a fund to achieve his objectives, quite
similar to the situation when he has individual shares or bonds to select.

4. The Wisdom Of Professional Management:
That's right, this is not an advantage. The average mutual fund manager is no better at
picking stocks than the average nonprofessional, but charges fees.


5. No Control:
Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat
of somebody else's car


6. Dilution:
Mutual funds generally have such small holdings of so many different stocks that
insanely great performance by a fund's top holdings still doesn't make much of a difference in a
mutual fund's total performance.

7. Buried Costs:
Many mutual funds specialize in burying their costs and in hiring salesmen who do not
make those costs clear to their clients.

Risks involved in investing in Mutual Funds
Mutual Funds do not provide assured returns. Their returns are linked to their performance.
They invest in shares, debentures and deposits. All these investments involve an element of risk.
The unit value may vary depending upon the performance of the company and companies may
default in payment of interest/principal on their debentures/bonds/deposits. Besides this, the
government may come up with new regulation which may affect a particular industry or class of
industries. All these factors influence the performance of Mutual Funds.




Types of Returns on Mutual Fund:
There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:
Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly
all income it receives over the year to fund owners in the form of a distribution.
If the fund sells securities that have increased in price, the fund has a capital gain. Most
funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase
in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you
a choice either to receive a check for distributions or to reinvest the earnings and get more
shares.
REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.These
regulations make it mandatory for mutual fund to have three structures of sponsor trustee and
asset Management Company. The sponsor of the mutual fund and appoints the trustees. The
trustees are responsible to the investors in 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 AMC and the mutual fund have to be registered with SEBI.













MUTUAL FUND COMPANIES IN INDIA:

The concept of mutual funds in India dates back to the year 1963. The era between 1963 and
1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets under
management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end
of the 80s decade, few other mutual fund companies in India took their position in mutual fund
market.
The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank
Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India
Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry. By the end
of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started
penetrating the fund families. In the same year the first Mutual Fund Regulations came into
existance with re-registering all mutual funds except UTI. The regulations were further given a
revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India which has now
merged with Franklin Templeton. Just after ten years with private sector players penetration, the

total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.
















Major Mutual Fund Companies in India

1. ABN AMRO Mutual Fund 11. Reliance Mutual Fund
2. Birla Sun Life Mutual Fund 12. Standard Chartered Mutual
Fund
3. Bank of Baroda Mutual Fund 13. Franklin Templeton India
Mutual Fund
4. HDFC Mutual Fund 14. Morgan Stanley Mutual
Fund India
5. HSBC Mutual Fund 15.Escorts Mutual Fund
6. ING Vysya Mutual Fund 16. Alliance Capital Mutual
Fund
7. Prudential ICICI Mutual Fund 17. Benchmark Mutual Fund
8. State Bank of India Mutual Fund 18. Canbank Mutual Fund
9. Tata Mutual Fund 19. Chola Mutual Fund
10. Unit Trust of India Mutual Fund 20. LIC Mutual Fund






HIGH NET WORTH INDIVIDUAL (HNI)
High net worth individual (HNI) is a classification used by the financial services industry to
denote an individual or family with high net worth. The cut-off for this designation is imprecise
i.e. some companies use the term to denote individuals with over $100,000 in assets, while other
companies use $500,000. Although there is no precise definition of how rich somebody must be
to fit into this category, high net worth is generally quoted in terms of liquid assets over a certain
figure. The categorization is relevant because high net worth individuals generally qualify for
separately managed investment accounts instead of regular mutual funds. HNIs are in high
demand by private wealth managers. The more money a person has, the more work it takes to
maintain and preserve those assets. These individuals generally demand (and can justify)
personalized services in investment management, estate planning, tax planning etc.
Who is a High Net Worth Individual (HNI)?
While there is no standard definition of HNIs
14%
20%
9%
9%
4%
9%
4%
4%
3%
3%
4%
3%
14%
Market Share '
Reliance Mutual Fund HDFC Mutual Fund Birla Sun Life Mutual Fund
ICICI Prudential Mutual Fund Kotak Mahindra Mutual Fund UTI Mutual Fund
LIC Mutual Fund SBI Mutual Fund IDFC Mutual Fund
TATA Mutual Fund Franklin templeton Mutual Fund DSP Black Mutual Fund
23 others players

They can be based on Net Worth, Investible surplus, assets under advise
Most common standard in India
Emerging HNI: Investible surplus of Rs. 25 lac - Rs. 2 cr.
HNI: Investible surplus of over Rs. 2 cr.
How should a HNI approach his financials?
HNIs should start by identifying needs on the following broad parameters
Financial Needs
1. Investments
Three primary objectives-
Wealth accumulation
Wealth preservation
Liquidity
Holistic view of wealth

Personal wealth
Business wealth
2. Protection
Protection solutions to safeguard their
Wealth
Health
Assets
Against Liabilities
These needs are typically overlooked by HNIs
3. Credit
Two basic requirements

Leverage investments
Liquidity
Across
Personal - home loan, IPO funding
Business - working capital and term loans, promoter funding
4. Inheritance planning
Need for smooth transfer of wealth to next generation
Tax efficient
Appropriate legal structures
5. Tax planning
Inherent part of any financial decision
Post tax returns
Tax deductibility

Indian HNI Population on the Rise

The number of high net worth individuals (HNIs or individuals with investable assets of $1
million or more) in India has grown for the second straight year.

India's HNI population grew at 20.8% to 1.53,000 in 2010 compared with 1,26,700 in 2009,
according to the 2011 Asia-Pacific Wealth Report by Merrill Lynch Global Wealth Management
and Capgemini. The cumulative wealth of Indian HNIs grew by 22% in 2009-10 to Rs 28,60,000
crore from a year ago.
















LITERATURE REVIEW:
Performance evaluation of mutual funds is one of the preferred areas of research where a good
amount of study has been carried out. The area of research provides diverse views of the same.
For instance one paper
1
evaluated the performance of Indian Mutual Fund Schemes in a bear
market using relative performance index, risk-return analysis, Treynors ratio, Sharpes ratio,
Jensens measure, Famas measure. The study finds that Medium Term Debt Funds were the best
performing funds during the bear period of September 98-April 2002 and 58 of 269 open ended
mutual funds provided better returns than the overall market returns.
Another paper
2
used Return Based Style Analysis (RBSA) to evaluate equity mutual funds in
India using quadratic optimization of an asset class factor model proposed by William Sharpe
and analysis of the relative performance of the funds with respect to their style benchmarks.



962827 and PP.1-18

Their study found that the mutual funds generated positive monthly returns on the average,
during the study period of January 2000 through June 2005. The ELSS funds lagged the Growth
funds or all funds taken together, with respect to returns generated. The mean returns of the
growth funds or all funds were not only positive but also significant. The ELSS funds also
demonstrated marginally higher volatility (standard deviation) than the Growth funds.
One study
3
identified differences in characteristics of public-sector sponsored & private-sector
sponsored mutual funds find the extent of diversification in the portfolio of securities of public-
sector sponsored and private-sector sponsored mutual funds and compare the performance of
public-sector sponsored and private-sector sponsored mutual funds using traditional investment
measures. They primarily use Jensens alpha, Sharpe information ratio, excess standard deviation
adjusted return (eSDAR) and find out that portfolio risk characteristics measured through
private-sector Indian sponsored mutual funds seems to have outperformed both Public- sector
sponsored and Private-sector foreign sponsored mutual funds and the general linear model of
analysis of covariance establishes differences in performance among the three classes of mutual
funds in terms of portfolio diversification.


Another study
4
examined the risk-adjusted performance of open-end mutual funds which invest
mainly in German stocks using Jensons measure and Sharpes measure. The study finds out that
the rates of return of the mutual funds and the rates of return of the chosen benchmark both must
include identical return components. Either both must include dividends or exclude them. The
performance estimates are not very sensitive with respect to the benchmark choice. When we
look at an investment strategy in which the investment in a specific fund has the same risk as the
chosen benchmark, the average underperformance is small when we weight the individual fund
returns equally. The average performance is neutral, when we weight the individual fund returns
according to fund size, measured by assets under management.






One more paper analyzed whether it was more appropriate to apply a factor-based or a
characteristic-based model - both known as benchmarks in portfolio performance measurement
using the Linear model, asset pricing model and Fama and French factors. The study showed that
if information on returns was used and a linear model was proposed that adjusted return to a set
of exogenous variables, then the right side of the equation reported the achieved performance
and the passive benchmark that replicated the style or risk of the assessed portfolio. While, a
factor model utilizes a replicate benchmark with short positions implicitly symmetrical to the
long positions. Performance of Russell indexes was analyzed by applying various factor models,
constructed from the indexes themselves, and other models that use the indexes directly as
benchmarks; the presence of biases was detected. Therefore, according to the empirical findings,
selection of exogenous variables that define the replicate benchmark would appear to be more
relevant than the type of model applied.
Another study aimed at analyzing performance of select open-ended equity mutual fund using
Sharpe Ratio, Hypothesis testing and return based on yield. The most important finding of the
study had been that only four Growth plans and one Dividend plan (5 out of the 42 plans studied)
could generate higher returns than that of the market which is contrary to the general opinion
prevailing in the Indian mutual fund market. Even the Sharpe ratios of Growth plans and the
corresponding Dividend plans stand testimony to the relatively better performance of Growth

plans. The statistical tests in terms of F-test and t-Test further corroborate the significant
performance differences between the Growth plans and Dividend plans.
Another study
5
investigated mutual fund performance using a survivorship bias controlled
sample of 506 funds from the 5 most important mutual fund countries using Carhart (1997) 4-
factor asset-pricing model. The study revealed a preference of European funds for small and high
book-to-market stocks (value). Secondly, it showed that small cap mutual funds as an investment
style out-performed their benchmark, even after control for common factors in stock returns.
Finally 4 out of 5 countries delivered positive aggregate alphas, where only UK funds out-
performed significantly.




One more study looked at some measures of composite performance that combine risk and
return levels into a single value using Treynors ratio, Sharpes ratio, Jensons measure. The
study analyzed the performance of 80 mutual funds and based on the analysis of these 80 funds,
it was found that none of the mutual funds were fully diversified. This implied there is still some
degree of unsystematic risk that one cannot get rid of through diversification. This also led to
another conclusion that none of those funds would land on Markowitzs efficient portfolio curve.
Another paper aimed to evaluate if mutual fund managers exhibit persistently superior stock
selection skills over a short-horizon of one year using risk-adjusted abnormal returns (RAR),
One-factor capital asset pricing model or CAPM three-factor, Fama-French model, Four-factor
Carhart model. Their study demonstrated that short-term persistence in equity mutual funds
performance does not necessarily imply superior stock selection skills. Common factors in stock
returns explained some of the abnormal returns in top ranking mutual fund schemes. Only the
winner portfolios sorted on four-factor alphas' provided an annual abnormal return of about 10%
on post-formation basis using daily data. The short-term persistence results were much better
when daily data was used rather than monthly observations, thus implying that data frequency
does affect inferences about fund performance.
A similar study examined the empirical properties of performance measures for mutual funds
using Simulation procedures combined with random and random-stratified samples of NYSE and
AMEX securities and other performance measurement tools employed are Sharpe measure,
Jensen alpha, Treynor measure, appraisal ratio, and Fama-French three-factor model alpha. The
study revealed that standard mutual fund performance was unreliable and could result in false
inferences. In particular, it was easy to detect abnormal performance and market-timing ability
when none exists. The results also showed that the range of measured performance was quite
large even when true performance was ordinary. This provided a benchmark to gauge mutual
fund performance. Comparisons of their numerical results with those reported in actual mutual
fund studies raised the possibility that reported results were due to misspecification, rather than
abnormal performance. Finally, the results indicated that procedures based on the Fama-French
3-factor model were somewhat better than CAPM based measures.
One more paper evaluated whether or not the selected mutual funds were able to outperform the
market on the average over the studied time period. In addition to that by examining the strength
of interrelationships of values of PCMs for successive time periods , the study also tried to infer

about the extent to which the future values of fund performance were related to its past by using
single index model. The study revealed that there were positive signals of information
asymmetry in the market with mutual fund managers having superior information about the
returns of stocks as a whole. PCM also indicated that on an average mutual funds provided
excess (above-average) return, but only when unit of time period was longer (1 qtr or 4 qtr).
Therefore, they concluded that for assessing the true performance of a particular mutual fund, a
longer time horizon is better.
Another study examined the effect of incorporating lagged information variables into the
evaluation of mutual fund managers performance in Indian context with the monthly data for 89
Indian mutual fund schemes using Treynor - Mazuy Model, Merton-Henriksson Model. The
study revealed the use of conditioning lagged information variables causing the alphas to shift
towards the right and reducing the number of negative timing coefficients, though it could not be
concluded that alphas of conditional model were better compared to its unconditional counterpart
as they were not found to be statistically significant. The noticeably different results of the
unconditional timing models vis--vis conditional timing models testified superiority of the
model
One more study talked about a 4-step model for selecting the right equity fund and illustrated the
same in the context of equity mutual funds in Saudi Arabia. The 4 step model was as follows:
1. Compare returns across funds within the same category.
2. Compare fund returns with the returns of benchmark index.
3. Compare against the funds own performance.
4. Risk-related parameters: as indicated by the Standard Deviation (SD) and risk-adjusted returns
as calculated by the Sharpe Ratio (SR).
The study revealed that most of the funds invested in Arab stocks had been in existence for less
than a year and the volatility of the GCC stock markets contributed to the relatively poor
performance of these funds and the turnaround of these funds could take place only with the
rallying of GCC and other Arab markets. Out of the six categories of equity mutual funds in
Saudi Arabia discussed above, Funds invested in Asian and European stocks were more
consistent in their performance and yielded relatively higher returns than other categories,

though funds invested in Saudi stocks yielded higher 3-year returns. Given the future outlook of
Asian economies, particularly China and India and the newly emerging economies such as Brazil
and Russia, funds invested in the stocks of these countries are likely to continue their current
performance in near future.
One more paper studied the performance and portfolio characteristics of 828 newly launched
U.S. equity mutual funds over the time period 1991-2005 using Carhart (1997) 4-factor asset-
pricing model. Their study revealed new U.S. equity mutual funds outperformed their peers by
0.12% per month over the first three years. However, there were distinct patterns in this superior
risk-adjusted performance estimated using Carharts (1997) 4-factor model. The number of fund
that started to outperform older funds shrunk substantially after one to three years. These results
suggested that the initially favorable performance was to some extent due to risk taking and not
necessarily superior manager skill. Scrutinizing the returns further confirmed that the returns of
fund started to exhibit higher standard deviations and higher unsystematic risk that could not be
explained by the risk exposure to the four factors of the Car hart model.
Another paper, analyzed the Indian Mutual Fund Industry pricing mechanism with empirical
studies on its valuation. It also analyzed data at both the fund-manager and fund-investor levels.
It stated that mispricing of the Mutual funds could be evaluated by comparing the return on
market and return on stock. During the pricing period, if the return on stock is negative, then it
indicates overpricing and if are positive indicates under pricing. Relative performance
measurement was used to measure the performance of the MF with SENSEX and it used
Standard Deviation, Correlation analysis, Co-efficient of Determination and Null Hypothesis.
This study revealed that standard deviations of the 3-month returns were significant with the
increase in the period. The Standard Deviation increase indicated higher deviations from the
actual means. The variance and coefficient of variation (COV) were also significant. Variance
increases in the later periods indicated higher variability in the returns. As the time horizon
increased COV decreased implying value are less consistent as compared to small duration of
investments.
One more study, provided extensive evidence on portfolio characteristics of mutual funds and
studied the relation between fund performance and the fund manager's investment strategy using
both the traditional unconditional alpha model, as in Jensen (1968), and the conditional alpha,
following Ferson and Schadt (1996). The study showed that a weak negative relation exists

between performance and past stock returns in the portfolio. Investing in value stocks could help
to improve overall performance. It also showed that mutual funds with a more diversified
portfolio performed somewhat better than funds with a less diversified portfolio. However,
diversification could be achieved by extending the funds' investment universe and investing in
non-listed stocks. Elton, Gruber, Das and Hlavka (1993) showed that funds investing in these
types of assets could achieve superior performance simply because these assets were not
captured within the benchmark model. This paper, however, found no evidence to indicate that
investment outside the fund's primary investment universe would enhance performance.
Moreover, the effects of cash holdings on performance were explored, and some weak evidence
suggested that large cash holdings implied better tactical decisions.
Another paper examined the performance of equity and bond mutual funds that invested
primarily in the emerging markets using Treynors ratio, Sharpes ratio, Jensens measure. With
this research they found that on an average the U.S. stock market outperformed emerging equity
markets but the emerging market bonds outperformed U.S. bonds. They also found that overall
emerging market stock funds under-performed the respective MSCI indexes. These were evident
by their lower return, higher risk, and thus lower Sharpe ratios.
One more paper studied the performance of mutual funds around the world using a sample of
10,568 open-end actively managed equity funds from 19 countries using different models,
mainly, domestic market model, international market model, Carhart (1997) domestic four-
factor model, Carhart (1997) international four-factor model. With the help of this research they
came to a conclusion that the funds size was positively related with fund performance. Larger
funds performed better suggesting the presence of significant economies of scale in the mutual
fund industry worldwide. This conclusion is consistent among domestic and foreign funds, and
in several other robustness tests. Fund age is negatively related with fund performance indicating
that younger funds tend to perform better. This finding seemed mainly driven by the samples of
foreign and U.S. funds. When investing abroad, young mutual funds seemed to offer investors
higher returns.





















RESEARCH METHODOLOGY:
This Report is based on primary as well as secondary data, however primary data collection was
given more important since it is overhearing factor in attitude studies.
One of the most important users of Research Methodology is that it helps in identifying the
problem, collecting, analyzing the required information or data and providing an alternative
solution to the problem. It also helps in collecting the vital information that is required by the

Top Management to assist them for the better decision making both day to day decisions and
critical ones.
a) Research Design: Descriptive Design

b) Data Collection Method: Survey Method

c) Universe: Chandigarh

d) Sampling Method: The sample was collected through personal visits, formally and informal
talks and through filling up the Questionnaire prepared. The data has been analyzed by using
graphs and pie charts tools.
e) Sample Size: 100 respondents

f) Sampling Unit: Businessmen, Government Servant, Retired Individuals majorly HNIs

g) Data Source: Primary data

h) Data Collection Instrument: Structured Questionnaire

i) Sample Design: Data has been presented with the help of Bar Graph, Pie Chart, and Line
Graph etc.
j) Duration of the Study: The study was carried out for a period of 45 days, from 13
th
June to
28
th
July 2014.

OBJECTIVES OF THE RESEARCH
To get an idea about the age group and occupation of the HNIs who are investing in
mutual funds
To know the different factors that HNIs consider before making investment in mutual
funds
To get an idea about the normal time period for which the most of the HNIs hold their
mutual funds

To know that which schemes are favourite among the investors
To know about the source of knowledge that HNIs use for the mutual funds

















QUESTIONNAIRE TO ANALYZE PERCEPTIONS OF PEOPLES FOR MUTUAL
FUNDS

Please go through the following questionnaire and identify the appropriate responses for each of
them. There is no such thing as a correct answer, so feel free to respond. Please forward it as

many people as you can. Disclaimer: Your response via this questionnaire will be used strictly
for academic purposes. There will not be any commercial solicitation or usage of the response in
any kind / form whatsoever.

1. What's your Good name?
2. Whats your Age?
3. What is your Qualification?
(a) Under-graduation (b) Graduation (c) Post Graduation (d) Others
4. What is your Occupation?
(a) Government (b) Private (c) Business (d) Others
5. What is your monthly family income?
(a) <=30000 (b) 30000-50000 (c) 50001-100000 (d) >100000
6. In this highly volatile market, do you think Mutual Funds are a destination for
Investments?

YES
NO

7. Which Mutual Fund Plan do you consider the best?

Balanced Plan

Equity Plan

Income Plan

Other Plan

8. How long would you like to hold your Mutual Funds' Investments?


1 to 3 years

4 to 6 years

7 to 10 years

10 ears or more

9. How do you rate the risks associated with Mutual Funds?

Low

Moderate

High

10. Which among the following principles do you consider while selecting a Mutual Fund?

Enquiring about fund Managers

Finding about its Past Performance

Identifying your own objective

Other

11. Which end-scheme do you feel is good? *Open end type of mutual fund are those that
does not have restrictions on the amount of shares the fund will issue and Closed end
fund is a publicly traded investment company that raises a fixed amount of capital
through an initial public offering (IPO).

Open End


Close End


12. What do you think which risks usually affects Mutual Funds? Systematic risk is the
risks inherent to the entire market segment as interest rates and unsystematic risks are
specific risks as NEWS that affects specific stock.

Systematic

Unsystematic




13. Which are the primary sources of your knowledge about Mutual Funds as an
investment option?

Television
Internet
Newspaper/Journals
Friends/Relatives
Sales
Representatives


14. While investing your money, how these factors affect your decision? Corresponding to
your choices how would you rate their influence on your final Mutual Fund purchase
decision. Please rank them on a scale of 1-5 with 1 representing minimal influence and 5
representing Strong influence
1 2 3 4 5

Liquidity


High Return


Professional
Management

Diversification


Brand Image


Price


Risk





15.Which among the following is the safest Investment option?

Mutual Fund

Stock Market

Bank Deposit

Others

16. Which factors prevent you to invest in mutual fund?

Bitter Past Experience
Lack of Knowledge

Lack of Confidence in Service being provided
Difficulty in Selection of Schemes
Inefficient investment advisors
Other
17. Reason you make investment in mutual fund?
Higher return
Tax benefit
Professional management
Other



Anything you would like to add about mutual fund.
You are welcome




Data Analysis & Interpretation
1. Analyzing to according to Age



Interpretation - Here, it is been found that most of the investors i.e,35% of the investors
who invest in Mutual Fund lies in between the age group of 36-40, they are more reluctant as
well as experienced in this field of Mutual Fund.
Then the Second highest age group lies in between the age group of 41-45 (22%), they are also
aware of the benefits in investing in mutual fund. The least interested group is the Youth
Generations.
2. Analyzing according to Qualifiaction


Interpretation - Out of my survey of 100 people, 71% of the investors are Graduates and Post
Graduates and 16.67% are Under Graduates and Others, around 12.5%, which may include
persons who have passed their 10
th
standard or 12
th
standard invests in Mutual Funds.
3%
12%
35%
22%
18%
10%
Age of Investors
>=30 31-35 36-40 41-45 46-50 >50
0
20
40
60
80
N
o
.

o
f

I
n
v
e
s
t
o
r
s

Qualification
Qualification of Investors

3. Analyzing according to Occupation




Interpretation - Here it is amazed to see that around 46% of the investment is been invested by
the persons working in Private sectors, according to them investing in Mutual Funds is more
safer as well as more gainer.
Then we find that the businessmen of around 25%gives more preference in investing in mutual
funds, they think that investing in mutual fund is better than investing in shares as well as Post
office.
Next we see that the persons working in Government sectors of around 24% only invests in
Mutual Fund.


4. Analyzing according to Monthly Family Income
Governmen
t
24%
Private
46%
Business
25%
Others
5%
Investor's Proffession



Interpretation - Here , we find that HNI investors of around 35% with the monthly income of
Rs. 50001-100000 are the most likely to invest in Mutual fund , than followed by investors of
around 25% with monthly income of Rs 30001-50000 any other income group. And then 20% -
20 % by investors having monthly income of <30000and <100000
5. Analyzing investment in mutual fund on the basis of volatility in market

Interpretation- from the above pie chart it is clear that 70% of investors consider investment in
mutual fund as a destination in this highly volatile market where as 30% of investors consider
investment in mutual fund as a destination
20%
25%
35%
20%
<300000
30001-50000
50001-100000
<100000
0%
70%
30%
yes
no
mutual fund as an invetment in volatile market

6. Analysis on the basis of mutual fund plans investors consider

Interpretation- from the data collected through questionnaires I come to find that near
about 40% of investors invest in balanced funds i.e.. In both equity and in debt fund keeping
their portfolio balanced .30% of the investors that were covered in the research finds equity plans
better than others and believes in taking more and more risk. 10% invest in income plans which
are also known as debt schemes. These schemes generally invest in fixed income securities such
as bonds and corporate debentures. Capital appreciation in such schemes may be limited. and rest
20% invest in other plans such as tax saving plans, index plans etc










7. Analysis according to length of time to hold investment in mutual fund
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Blanced Equity plan Income plan Other
mutual fund plans



Interpretation- the above pie chart shows that most of the investors (40%) believe in investing
their in money in mutual funds for a period of 4-6 years, followed by 35% investors who do it
for 7-10 years ,20% investors invest in mutual funds for 1-3 years and only 5% do the same for
10 years
8. Analysis on the basis of risk associated with the mutual fund


20%
40%
35%
5%
time period of investing in mutual
funds
1-3 years
4-6years
7-10 years
10 years or more
0%
10%
20%
30%
40%
50%
60%
70%
low moderate high
risk associated with mutual funds
responses

Interpretation- near about 65% of the investors stated that they consider mutual funds as a
moderate risk as these are linked to the equity market moreover this risk is minimized by the
professional expertise of fund manager and diversification.20 % of the investors consider it as a
less risky and near about 15 % consider it as more risky due to its ultimate investment in equity
market
9. Analysis according to the principles investors consider while selecting a Mutual
Funds

Interpreation- from the above pie chart it is clear that 47 % of investors finds about the past
performance of the mutual funds before investing in to it. While 20 % of investors enquire about
the fund manager , 15% investors invest in mutual fund in accordance with their own objectives
which differ from person to person and near about 18% of investors consider other principals
than the above mentioned three principles




20%
47%
15%
18%
principal they consider while selecting
mutual fun
Enquiring about fund
Managers
Finding about its Past
Performance
Identifying your own
objective
other


10. Analysis on the basis of end scheme thae the investor feel good

Interepration- the above graph simply depicts that 70% of the investor consider open ended
mutual funds good as they can enter and exit at any time from these fundsand benefit of sip
where they can purchase more shares when the price of share is low.where as 30% of investors
consider closed ended funds better than open ended funds as they belive that its timein the that
akes difference not timing the market
11. Analysis acording to the risk (systematic and unsystematic)that affect themutual
fund more

70%
30%
end schemes (open and closed )
Open End
Close End
80%
20%
risk that affect mtual fund
systematic risk
unsystematic risk

Interpreation- near about 80% of investors feel that systematic risk ussauly affects the mutual
funds as these can not be diversified and for this reasion people condider it as a un-diversifiable
risk and some time market risk. Where as 20%of people also consider unsystematic risk who
deals in market for short time
12. Analysis on the basis of source of knowladge about mutual funds

Interpretation- among the 5 sources mentioned in the questioner most people(45%) get
knowladge about mutual fund through the sale representative , 20% through internet,near about
16% through newspaper and journals ,near about 14 percent through friends and relatives by
word of mouth and only 10 percent through television
(this may b because the research was conducted in chandigarh and for the HNIs )







0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
primary source of knowladge
responses

13. Analysis on the basis of the factors that affect investors decision While investing
your money

Interpretation:30% of the people look for high returns while making the investment and rank it
as a number 1st in overall research where as 20% of people look for risk assosiated with the
mutual funds and it was ranked as 2
nd
factor in overall research.17 % of investor look for the
liquidity of the mutual funds and this factor was ranked 3
rd
in overall research .price of mutual
fund is also considered vital by 13% of people and was ranked 4
th
in over all research,8%,8% of
people considered professional management and diversification and ranked them as 5
th
and 6
th

factor in overall research.and only 5% of people have cosidered brand image as important and it
is ranked 7
th
in over all research







0%
5%
10%
15%
20%
25%
30%
35%
factors that affect the decesion
responses

14. Analysis on the basis of safest investment option

Interpreation- the safest investment option that65% people consider is bank deposit and
thenfollowed by mutual fund where 25%people has mentioned it as safest and no one consider
stock market as safest.and 10 % of people feel that investment in gold, property etc is the most
safe
15. Analysis according to the factor that prevent investors to invest in mutual fund


0%
10%
20%
30%
40%
50%
60%
70%
Mutual Fund Stock Market Bank Deposit Others
safest Investment option
responses
23%
22%
23%
10%
20%
2%
factors that prevent investors to
invest in mutual fund
Bitter Past Experience
Lack of Knowledge
Lack of Confidence in
Service being provided
Difficulty in Selection of
Schemes
Inefficient investment
advisors
Other


Interpretation- from the above pie chart it is clear that 23%,23% of people avoid investing in
mutual funds beacause of bitter past experience and lack of confidence in service being provided,
22% of people dont have the proper knowladge about the mutual funds and therefore dont
invest in it. Where as 20% of the respondent feels that the tinvestment advisors are in sufficient
,10% finds difficulty in selection of schemes and 2% have other reasion that prevents them form
making investment
16. Analysis on the basis of pourpose of investment in mutual funds

Interpreation- the 45% of HNI investors invest in the mutual funds for the pourpose of tax
benefit, 30% of the investor do invetment to get high returns,15% for getting professional
management and rest 5% for the other reason






30%
45%
15%
5%
Reason you make investment in
mutual fund
Higher return
Tax benefit
Professional management
other


LIMITATION OF THE STUDY
The lack of information sources for the analysis part.
Though I tried to collect some primary data but they were too inadequate for the purposes
of the study.
Time and money are critical factors limiting this study.
The data provided by the prospects may not be 100% correct as they too have their
limitations






FINDINGS
HNIs who lie under the age group of 36-40 have more experience and are more
interested in investing in Mutual Funds.
Out of the total 100 investors near about 71% of investors are graduate or post graduate
and rest are under graduates
Most of the respondent who are investing are of working in private organisations then
followed by businessman and government employees
Most of the HNIs who are investing belongs to Rs 30001-50000 and 50001-100000
Near about 70% of HNIs said that investment in mutual fund is best in this highly
volatile market
Most of the HNIS invest in balanced funds thus making their portfolio lesser risky then
followed by the investors investing in equity mutual funds and then by debt funds
The HNIs respondents of this research said that they keep their mutual funds
investments foe 4-6 years and 7-10years as long term investment

When the question relating to the risk assosiated with the mutual fund was asked most of
the respondent said that it is of moderate risk
Most of the HNIs invest in the mutual funds only after evaluating the past performance
of mutual funds
When a question for open and closed ended mutual funds was asked near about 70% of
individual said that they invest in open ended schemes
Its the systematic risk which the investor consider that affect thie investment and returns
in mutual funds
The amazing finding of the research was that most the HNIs investor come to know
about various mutual fund schemes through the sale representative and through internet
Most of the HnI respondend look for the high rteturn in the mutual funds while making
the investment
Respondent consider bank deposit the safest investment followed by the investment in
mutual funds


When the respondent was asked about the factors that prevent them from investing in
mutual funds they said that the bitter past experience and lack of confidence in service
being provided are the factor for that
The HNIs also said that they also invest in tax saving schemes for saving their tax










SUGGESTIONS
The major obstacles that was faced during the project was public unawareness regarding
mutual fund and its various schemes.so first and formost it is important to undertake steps
to craete awareness about mutual funds
The investors have less tust on the professional managers of mutual funds so steps should
be taken in this regard also
The HNIs are interested in tax saving scheames so more such scheames should be
offered
The companies should make a proper research before investing the investors money in
different equities so that a higher return can be offered
The expectation of people from mutual funds is high . so the portfolio of the fund should
be prepared taking into consideration the expectation of the people
The company should also improve its service so that more and more people are attracted
and some special services should be provided to HNIs
Some people wants to invest their money feels that a huge part of their investment goes to
the fundmanager every know than so this thinking should be changed backed with the
facts that only at initial time and is very decent













CONCLUSION
After doing a thorough research I can conclude that the Mutual Funds now represent perhaps
most appropriate investment opportunity for most investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who provides the required
knowledge and professional expertise on successful investing
The stock market has been rising for over three years now. This in turn has not only protected the
money invested in funds but has also helped to grow these investments.
But still the mutual fund industry as a whole gets less than 2 per cent of household savings
against the 46 per cent that go into bank deposits.
We can also conclude that the HNIs are making their portfolio in mutual funds also by selecting
different schemes of mutual funds depending on their objectives and risk taking capacity. And
there is a huge potential in this market as we can see a continuous growth in this sector since
1964.more and more HNI can b attracted by just improving the services provided to them
On the basis of the research it can b concluded that the HNIs invest their money in different
schemes depending upon their financial need and most of them prefer to invest in tax saving and
balanced funds.




















BIBLIOGRAPHY


1. www.reliancemoney.com,
2. www.reliancecapital.co.in,
3. www.relianceadaggroup.com,
4. www.mutualfundsindia.com,
5. www.amfindia.com,
6. www.investopedia.com,
7. www.wikipedia.org,
8. www.reliancemoney.co.in,
9. www.google.com.
10. www.valueresearchonline.com
11. leap program book