Table of contents

Chapters Topic Page no.

1. Introduction 1-16

1.1 Preface 1
1.2 Objectives of the study 13
1.3 Research Methodology 14
1.4 Limitations of the study 16

2 Profile of the organisation 17-34

3 Analysis and interpretation of data 35-42

4 Conclusions and recommendations 43-44

Bibliography 45

Annexures 46-49

1
 INTRODUCTION

PREFACE

Mutual funds have been a significant source of investment in both government and
corporate securities. It has been for decades the monopoly of the state with UTI being the
key player, with invested funds exceeding Rs.300 bn. The state-owned insurance
companies also hold a portfolio of stocks. Presently, numerous mutual funds exist,

2
including private and foreign companies. Banks, mainly state-owned too have established
Mutual Funds (MFs). Foreign participation in mutual funds and asset management
companies is permitted on a case by case basis.

UTI, the largest mutual fund in the country was set up by the government in 1964, to
encourage small investors in the equity market. UTI has an extensive marketing network
of over 35, 000 agents spread over the country. The UTI scrips have performed relatively
well in the market, as compared to the Sensex trend. However, the same cannot be said of
all mutual funds.

All MFs are allowed to apply for firm allotment in public issues. SEBI regulates the
functioning of mutual funds, and it requires that all MFs should be established as trusts
under the Indian Trusts Act. The actual fund management activity shall be conducted
from a separate asset management company (AMC). The minimum net worth of an AMC
or its affiliate must be Rs. 50 million to act as a manager in any other fund. MFs can be
penalized for defaults including non-registration and failure to observe rules set by their
AMCs. MFs dealing exclusively with money market instruments have to be registered
with RBI. All other schemes floated by MFs are required to be registered with SEBI.
In 1995, the RBI permitted private sector institutions to set up Money Market Mutual
Funds (MMMFs). They can invest in treasury bills, call and notice money, commercial
paper, commercial bills accepted/co-accepted by banks, certificates of deposit and dated
government securities having unexpired maturity upto one year.

Mutual Fund

3
A mutual fund is a common pool of money in to which investors with common
investment objective place their contributions that are to be invested in accordance with
the stated investment objective of the scheme. The investment manager would invest the
money collected from the investor in to assets that are defined/ permitted by the stated
objective of the scheme. For example, an equity fund would invest equity and equity
related instruments and a debt fund would invest in bonds, debentures, gilts etc.

A 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 income earned through
these investments and the capital appreciation realised are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.

ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are:

• Diversification: The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example,
economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will respond

4
 to the same economic conditions by increasing in value. When a portfolio is balanced
in this way, the value of the overall portfolio should gradually increase over time,
even if some securities lose value.

• Professional Management: Most mutual funds pay topflight professionals to

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

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

• Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call,
and you've got the cash. You can liquidate your investments anytime you want. Most
mutual funds dispatch checks for redemption proceeds within two or three working
days. You also do not have to pay any penal interest in most cases. However, some
schemes charge an exit load.

• Convenience: You can usually buy mutual fund shares by mail, phone, or over the
Internet. Mutual funds offer tailor-made solutions like systematic investment plans and
systematic withdrawal plans to investors, which is very convenient to investors.
Investors also do not have to worry about the investment decisions or they do not have
to deal with their brokerage or depository, etc. for buying or selling of securities.

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

5
• Transparency: Mutual funds offer daily NAVs of schemes, which help you to monitor
your investments on a regular basis. They also send quarterly newsletters, which give
details of the portfolio, performance of schemes against various benchmarks, etc. They
are also well regulated and Sebi monitors their actions closely.

• Tax breaks: You do not have to pay any taxes on dividends issued by mutual funds.
You also have the advantage of capital gains taxation. Tax-saving schemes and pension
schemes give you the added advantage of benefits under Section 88. Investments up to
Rs 10,000 in them qualify for tax rebate.

DRAWBACKS OF MUTUAL FUNDS

6
Mutual funds have their drawbacks and may not be for everyone:

• No Guarantees: No investment is risk free. If the entire stock market declines in value,
the value of mutual fund shares will go down as well, no matter how balanced the
portfolio. Investors encounter fewer risks when they invest in mutual funds than when
they buy and sell stocks on their own. However, anyone who invests through a mutual
fund runs the risk of losing money.

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

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

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

Types of mutual fund scheme

7
 Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial
position, risk tolerance and return expectations etc. Mutual fund schemes are
classified on the basis of its structure and investment objective.

By Structure:-

Open–ended funds: Investors can buy and sell units of open-ended funds at NAV-
related price every day. Open-end funds do not have a fixed maturity and it is available
for subscription every day of the year. Open-end funds also offer liquidity to investments,
as one can sell units whenever there is a need for money.

Close-ended funds: These funds have a stipulated maturity period, which may vary from
three to 15 years. They are open for subscription only during a specified period. Investors
have the option of investing in the scheme during initial public offer period or buy or sell
units of the scheme on the stock exchanges. Some close-ended funds repurchase the units
at NAV-related prices periodically to provide an exit route to the investors.

Interval Funds: These funds combine the features of both open and close-ended funds.
They are open for sale and repurchase at a predetermined period.

By Investment objective:-

Growth funds: They normally invest most of their corpus in equities, as their objective
is to provide capital appreciation over the medium-to-long term. Growth schemes are
ideal for investors with risk appetite.

Income funds: As the name suggests, the aim of these funds is to provide regular and
steady income to investors. They generally invest their corpus in fixed income securities
like bonds, corporate debentures, and government securities. Income funds are ideal for
those looking for capital stability and regular income.

8
Balanced funds: The objective of balanced funds is to provide growth along with regular
income. They invest their corpus in both equities and fixed income securities as indicated
in the offer documents. Balanced funds are ideal for those looking for income and
moderate growth.

Money market funds: These funds strive to provide easy liquidity, preservation of
capital and modest income. MMFs generally invest the corpus in safer short-term
instruments like treasury bills, certificates of deposit, commercial paper and inter-bank
call money. Returns on these schemes hinges on the interest rates prevailing in the
market. MMFs are ideal for corporate and individual investors looking to park funds for
short periods.

Other schemes:-

Tax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax
rebates to investors under section 88 of the Income Tax Act. They generally have a lock-
in period of three years. They are ideal for investors looking to exploit tax rebates as well
as growth in investments.

Special schemes: These schemes invest only in the industries specified in the offer
document. Examples are Infotech funds, FMCG funds, pharma funds, etc. These schemes
are meant for aggressive and well-informed investors.

Index funds: Index Funds invest their corpus on the specified index such as BSE Sensex,
NSE index, etc. as mentioned in the offer document. They try to mimic the composition
of the index in their portfolio. Not only the shares, even their weightage is replicated.
Index funds are a passive investment strategy and the fund manager has a limited role to
play here. The NAVs of these funds move along with the index they are trying to mimic
save for a few points here and there. This difference is called tracking error.

9
Sector specific schemes: These funds invest only specified sectors like an industry or a
group of industries or various segments like ‘A’ Group shares or initial public offerings.

Mutual Funds Industry in India

10
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 1987when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen a dramatic imporvements, both
qualitywise as well as quantitywise. 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 rose 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 intellectuated 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.

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.

11
Second Phase - 1987-1993 (Entry of Public Sector Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 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

12
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

GROWTH IN ASSETS UNDER MANAGEMENT

13
Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of
the Unit Trust of India effective from February 2003. The Assets under management of
the Specified Undertaking of the Unit Trust of India has therefore been excluded from the
total assets of the industry as a whole from February 2003 onwards.

14
OBJECTIVES OF THE STUDY

• To study the working of mutual fund.

• To study the characteristics of mutual fund which attracts the investor.

• What an investor should consider for safe investment and better returns.

•To study the working and various schemes provided by UTI Mutual Funds.

15
RESEARCH METHODOLOGY

RESEARCH DESIGN: -

DESCRIPTIVE (Cross sectional) it is the deliberate manner to collect the information

and it describes the phenomena without establishing the association between the factors.
This is most commonly used when we want to know about the preferences of the
customer. The design is cross-sectional because it is suited and the respondent is
interviewed once.

METHOD OF ACCESSING THE DATA: -

• PRIMARY:- Through the structured questionnaire and the personal interview which are
interviewer administrated

• SECONDARY:- It will be from the websites, books.

16
DATA COLLECTION FORM: -

STRUCTURED form will be used in which open ended and close ended both type of
question would be asked.

• OPEN ENDED OUESTION

• CLOSE ENDED QUESTION: - Multiple choice, scales will be used, dichotomous

question.

SIMPLE RANDOM SAMPLING

SAMPLE SIZE: - 100

SAMPLE AREA: Delhi

17
LIMITATIONS OF THE STUDY

Although I had a wonderful experience in completing my project, yet I faced a couple of

difficulties. Every task has its own limitations, and so did this survey regarding the
investor’s choice about investing in mutual funds had. They were as follows:

• Being an opinion survey the personal biases of independent respondents might

have entered in his/her opinion.

• As the sample size is small & limited to 100 only, the opinions and beliefs of
respondents may not represent true universe.

• The study was taken up in Delhi and the responses may not be applicable to other
cities or states.

18
PROFILE OF THE ORGANISATION

19
UTI MUTUAL FUNDS

UTI Mutual Fund is managed by UTI Asset Management Company Private Limited
(Estb: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private
Limited for managing the schemes of UTI Mutual Fund and the schemes transferred /
migrated from UTI Mutual Fund.

The UTI Asset Management Company has its registered office at : UTI Tower, Gn Block,
Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide professionally
managed back office support for all business services of UTI Mutual Fund (excluding
fund management) in accordance with the provisions of the Investment Management
Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of
the schemes. State-of-the-art systems and communications are in place to ensure a
seamless flow across the various activities undertaken by UTI AMC.

UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)
Regulations, 1993 on February 3 2004, for undertaking portfolio management services
and also acts as the manager and marketer to offshore funds through its 100 % subsidiary,
UTI International Limited, registered in Guernsey, Channel Islands.

UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset
Management Company presently manages a corpus of over Rs. 34500 Crore.

20
UTI Mutual Fund has a track record of managing a variety of schemes catering to the
needs of every class of citizenry. It has a nationwide network consisting 70 UTI Financial
Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. With a
view to reach to common investors at district level, 4 satellite offices have also been
opened in select towns and districts. It has a well-qualified, professional fund
management team, who have been highly empowered to manage funds with greater
efficiency and accountability in the sole interest of unit holders. The fund managers are
also ably supported with a strong in-house equity research department. To ensure better
management of funds, a risk management department is also in operation.

It has reset and upgraded transparency standards for the mutual funds industry. All the
branches, UFCs and registrar offices are connected on a robust IT network to ensure cost-
effective quick and efficient service. All these have evolved UTI Mutual Fund to position
as a dynamic, responsive, restructured, efficient, and transparent and SEBI compliant
entity

21
HISTORY OF UTI Mutual Funds

The setting up of the Unit Trust of India (UTI) in 1963 heralded the birth of the Indian
mutual fund industry. In 1964, UTI mutual fund launched its flagship scheme US-64 and
went on to become a generic term for the mutual fund sector till the government allowed
public sector banks to start mutual funds in 1987.

Despite being the trendsetter in the segment, the UTI mutual fund could not sustain the
initial tempo and was on the verge of a collapse in 2001, before the government bailed it
out and restructured the fund. After the restructuring, the fund has somewhat redeemed
its credibility through professional management and a booming market.

The fund's sponsors are public sector financial giants like Life Insurance Corporation,
SBI, Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the
asset management company, UTI Asset Management Company Private Limited. UTI
Mutual Fund remains the largest fund in the country with assets of over Rs.35,028 crore
under management as of Aug 2006.

In 2003, UTI was divided into two parts, UTI Mutual Fund (UTI MF) and a specified
undertaking of UTI or UTI-I. UTI MF was brought under SEBI regulations while UTI-I
was kept under direct government control since its schemes offered guaranteed returns.

22
UTI MUTUAL FUNDS SCHEMES

The Various Schemes Of Mutual Funds Provided By UTI Mutual Funds

Liquid Funds Category

UTI - Money Market Fund-

An open-ended pure debt liquid plan, seeking to provide highest possible current income,
by investing in a divesified portfolio of short-term money market securities.

UTI - Floating Rate Fund-

To generate regular income through investment in a portfolio comprising substantially of
floating rate debt / money market instruments and fixed rate debt / money market
instruments.

UTI - Liquid Fund - Cash Plan-

The scheme seeks to generate steady & reasonable income with low risk & high level of
liquidity from a portfolio of money market securities & high quality debt.

23
Income Funds Category

UTI - G-Sec Fund-

Investment Plan An open-end Gilt-Fund with the objective to invest only in Central
Government securities including call money, treasury bills and repos of varying
maturities with a view to generate credit risk free return...

UTI - G-Sec Fund-

Short Term Plan An open-end Gilt-Fund with the objective to invest only in Central
Government securities including call money, overnment securities including call money,
treasury bills and repos of varying maturities with a view to generate credit risk free
return.

UTI - GILT Advantage Fund – LTP-

To generate credit risk-free return through investments in sovereign securities issued by
the Central and / or a State Government. LTP.

UTI – Children Career Plan-Bond

An open ended debt oriented fund with 100% investment in Debt/G-sec. Investment can
be made in the name of the children upto the age of 15 years...

24
 UTI - Bond Advantage Fund – LTP-
It aims to generate attractive returns consistent with capital preservation and liquidity.

UTI - Monthly Income Scheme-

An open-ended debt oriented fund investing a minimum of 90% in Debt and G-Sec and a
maximum of 10% in equity instruments. The fund aims to distribute income periodically.
Best suited to the investors.

UTI - Short Term Income Fund-

The scheme seeks to generate steady & reasonable income with low risk & high level of
liquidity from a portfolio of money market securities & high quality debt.

UTI - MIS - Advantage Plan-

To generate regular income through investments in fixed income securities and capital
appreciation / dividend income through investment of a portion of net assets of the
scheme in equity and equity related instruments so as to endeavor to make periodic
income distribution to Unit holders.

UTI - Bond Fund-

25
Open-end 100% pure debt fund, which invests in rated corporate debt papers and
government securities with relatively low risk and easy liquidity.

UTI - Capital Protection Oriented Scheme-

The scheme will invest in a portfolio predominantly of fixed income securities that are
maturing in line with duration of the respective plans. Each Plan will have a separate
portfolio. The debt component of the portfolio structure shall have the highest investment
grade rating. The equity components of the scheme will mainly focus on those companies
/ stocks that have potential to appreciate in the medium to long run.

Asset Allocation Funds Category

UTI - Variable Investment Scheme-

The UTI- Variable Investment Scheme is an open-ended scheme with dynamic allocation
between equity and debt classes.

Index Funds Category

UTI - Master Index Fund-

26
UTI MIF is an open-ended passive fund with the primary investment objective to invest
in securities of companies comprising the BSE sensex in the same weightage as these
companies have in BSE sensex.

UTI - Index Select Fund-

An open-ended equity fund with the objective to invest in select stocks of the BSE
Sensex and the S & P CNX Nifty. The fund does not replicate any of the indices but aims
to attain performance better than the performance of the indices.

UTI - Nifty Index Fund-

UTI NIF is an open-ended passive fund with the objective to invest in securities of
companies comprising of the S&P CNX Nifty in the same weightage as they have in S&P
CNX Nifty.

UTI – Sunder-
The objective of the scheme is to provide investment returns that, before expenses,
closely correspond to the performance and yield of the basket of securities underlying the
S&P CNX NIFTY Index.

UTI - Gold Exchange Traded Fund-

To endeavour to provide returns that, before expenses, closely track the performance and
yield of Gold. However the performance of the scheme may differ from that of the
underlying asset due to tracking error.

27
Equity Funds Category

UTI - Equity Tax Saving Plan-

An open-ended equity fund investing a minimum of 80% in equity and equity related
instruments. It aims at enabling members to avail tax rebate under Section 88 of the IT
Act and provide them with the benefits of growth.

UTI – MEPUS-
The scheme primarily aims at securing for the investors capital appreciation by investing
the funds of the scheme in equity shares of companies with good growth prospects

UTI - Mastreshare unit Scheme-

An open-end equity fund aiming to provide benefit of capital appreciation and income
distribution through investment in equity.

UTI - Master Plus Unit Scheme-

28
An open-ended equity fund with an objective of long-term capital appreciation through
investments in equities and equity related instruments, convertible debentures, derivatives
in India and also in overseas markets.

UTI - Mastergain Unit Scheme-

Mastergain is open-ended equity scheme with an objective of investing at least 80% of its
funds in equity and equity related instrument with medium to high risk profile and upto
20% in debt and money market instruments with low to medium risk profile.

UTI - Opportunities Fund-

This scheme seeks to generate capital appreciation and/or income distribution by
investing the funds of the scheme in equity shares and equity-related instruments.

UTI - Software Fund-

An open-ended fund which invests exclusively in the equities of the Software Sector
companies. One of the growth sectors funds aiming to invest in equity shares of
companies belonging to information technology sector to provide returns to investors
through capital growth as well as through regular income distribution.

UTI - Pharma & Healthcare Fund-

An open-ended fund which exclusively invests in the equities of the Pharma &
Healthcare sector companies. This fund is one of the growth sector funds aiming to invest

29
in companies engaged in business of manufacturing and marketing of bulk drug,
formulations and healthcare products and services.

UTI - Banking Sector Fund-

An open-ended equity fund with the objective to provide capital appreciation through
investments in the stocks of the companies/institutions engaged in the banking and
financial services activities.

UTI - Auto Sector Fund-

An open-ended equity fund with the objective to provide Capital appreciation through
investments in the stocks of the companies engaged in the automobile and auto-ancillary
industry.

UTI - Master Value Fund-

An open-ended equity fund investing in stocks which are currently under valued to their
future earning potential and carry medium risk profile to provide 'Capital Appreciation'.

UTI - Master Growth-

An open-ended equity fund for investment in equity shares, convertible & non-
convertible debentures and other capital and money market instruments with a provision
to invest upto 50% of its corpus in PSU’s equities and equity related products. The fund
aims to provide unit holders capital appreciation & income distribution.

30
 UTI - Mid Cap Fund-
An open-ended equity fund with the objective to provide 'Capital appreciation' by
investing primarily in mid cap stocks.

UTI - MNC Fund-

An open-ended equity fund with the objective to invest predominantly in the equity
shares of multinational companies in diverse sectors such as FMCG, Pharmaceutical,
Engineering etc.

UTI - Infrastructure Fund-

An open-ended equity fund with the objective to provide Capital appreciation through
investing in the stocks of the companies engaged in the sectors like Metals, Building
materials, oil and gas, power, chemicals, engineering etc. The fund will invest in the
stocks of the companies which form part of Basic Industries.

UTI - Services Sector Fund-

An open-ended fund which invests in the equities of the Services Sector companies of the
country. One of the growth sector funds aiming to provide growth of capital over a period
of time as well as to make income distribution by investing the funds in stocks of
companies engaged in service sector such as banking, finance, insurance, etc.

31
 UTI - Leadership Equity Fund-
This scheme seeks to generate capital appreciation and/or income distribution by
investing the funds of the scheme in stocks that are "Leaders" in their respective
industries/sectors/sub-sector.

UTI - Dividend Yield Fund-

UTI Dividend Yield Fund is an open-ended equity orientedscheme, which endeavours to
provide medium to long termcapital gains and/or dividend distribution by investing
predominantly in equity and equity related instruments thatoffer a high dividend yield.

UTI - SPrEAD Fund-

UTI SPrEAD FUND a market-neutral equity fund with the returns and safety of debt. A
fund that takes advantage of arbitrage opportunities between the spot and futures markets.
The fund where returns are not linked to the rise or fall of equity markets.

UTI - Contra Fund-

The fund aims to provide long-term capital appreciation/dividend distribution through
investments in listed equities and equity-related instruments. The Fund's investment
policies are based on insights from behavioral finance.

UTI - Long-Term Advantage Fund-

32
The investment objective of the scheme is to provide medium to long term capital
appreciation alongwith income tax benefit.

UTI - Wealth Builder Fund-

The objective of the scheme is to achieve long term capital appreciation by investing
predominantly in a diversified portfolio of equity and equity related instruments.

UTI - India Lifestyle Fund-

The investment objective of the scheme is to provide long term capital appreciation
and/or income distribution from a diversified portfolio of equity and equity related
instruments of companies that are expected to benefit from changing Indian
demographics, Indian lifestyles and rising consumption pattern.

Balanced Funds Category

UTI - Balanced Fund-

An open-ended balance fund investing between 40% to 60% in equality related securities
and the balance in debt (fixed income securities) with a view to generate regular income
together with capital appreciation.

33
 UTI - US 2002-
An Open-ended balance fund. The scheme aims at providing income distribution/
cumulation of income and capital appreciation over a long term from a prudent portfolio
mix of equity and fixed income securities

UTI - Mahila Unit Scheme-

An open-ended scheme with a minimum 70% investment in Debt/G-Sec and a maximum
30% investment in equity. The fund is designed to provide an enabler to adult female
persons in pooling their own savings and/ or gifts into an investment vehicle so as to get
periodic cash flow near to the time of any chosen festival/ occasion or to allow income/
gains redeployed in the scheme and repurchase units partially or fully as and when
desired.

UTI - Childrens Career Plan (Balanced)-

An open-ended debt oriented fund with investment in Debt/G-Sec of minimum 60% and
a maximum of 40% in Equity. Investment can be made in the name of the children upto
the age of 15 years so as to provide them, after they attain the age of 18 years, a means to
receive scholarship to meet the cost of higher education and/or to help them in setting up
a profession, practice or business or enabling them to set up a home or finance the cost of
other social obligation.

UTI – CRTS-
This is an open-end income oriented scheme. The scheme aims at catering to the
investment needs of charitable, religious, educational trusts and similar institutions to

34
provide them an investment vehicle to avail of tax exemption and also to have regular
income.

UTI – ULIP-
An open-ended balanced fund with an objective of investing not more than 40% of the
funds in equity and equity related instruments and balance in debt and money market
instruments with low to medium risk profile. Investment by an individual in the scheme
is eligible for exemption under section 88 of the IT Act 1961. In addition the scheme also
offers Life Insurance and Accident Insurance cover.

UTI - Retirement Benefit Pension Fund-

An open-ended balanced fund with a maximum equity allocation of 40% and the balance
in debt. This ensures to provide pension to investors particularly self-employed persons
after they attain age of 58 years, in the form of periodical cash flow upto the extent of
repurchase value of their holding through systematic withdrawal plan.

35
Performance of Mutual Funds in India

Let us start the discussion of the performance of mutual funds in India from the day the
concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited
investors or rather to those who believed in savings, to park their money in UTI Mutual
Fund.
For 30 years it goaled without a single second player. Though the 1988 year saw some
new mutual fund companies, but UTI remained in a monopoly position.
The performance of mutual funds in India in the initial phase was not even closer to
satisfactory level. People rarely understood, and of course investing was out of question.
But yes, some 24 million shareholders was accustomed with guaranteed high returns by
the begining of liberalization of the industry in 1992. This good record of UTI became
marketing tool for new entrants. The expectations of investors touched the sky in
profitability factor. However, people were miles away from the praparedness of risks
factor after the liberalization.
The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Let me
concentrate about the performance of mutual funds in India through figures. From Rs.
67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure
had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when stock prices started
falling in the year 1992. Those days, the market regulations did not allow portfolio shifts
into alternative investments. There were rather no choice apart from holding the cash or
to further continue investing in shares. One more thing to be noted, since only closed-end
funds were floated in the market, the investors disinvested by selling at a loss in the
secondary market.

36
The performance of mutual funds in India suffered qualitatively. The 1992 stock market
scandal, the losses by disinvestments and of course the lack of transparent rules in the
whereabout rocked confidence among the investors. Partly owing to a relatively weak
stock market performance, mutual funds have not yet recovered, with funds trading at an
average discount of 1020 percent of their net asset value.
The supervisory authority adopted a set of measures to create a transparent and
competitve environment in mutual funds. Some of them were like relaxing investment
restrictions into the market, introduction of open-ended funds, and paving the gateway for
mutual funds to launch pension schemes.
The measure was taken to make mutual funds the key instrument for long-term saving.
The more the variety offered, the quantitative will be investors.
At last to mention, as long as mutual fund companies are performing with lower risks and
higher profitability within a short span of time, more and more people will be inclined to
invest until and unless they are fully educated with the dos and donts of mutual funds.

37
ANALYSIS AND INTRPRETATION OF
DATA

38
ANALYSIS OF THE DATA-

While investing in mutual funds the Source of information used:-

Internet

Yes 16
No 84
Total 100
Out of the total respondents, 16% relied on Internet as the source of information while
investing in mutual funds and rest of the majority i.e. 84% said no to the same. Thus, it
can be concluded that the source of Internet is relatively not the factor affecting the sale
of Mutual Funds.

Magazine

Yes 23
No 77
Total 100
Out of the total respondents, 23% said yes that they use magazines as the source of
information while investing in mutual funds and rest 77% said no to the same.

Newspaper

39
Yes 46
No 54
Total 100
Out of the total respondents, 46% said yes that they use newspaper as the source of
information while investing in mutual funds and rest 54% said no to the same.
It is an effective source as almost half of the respondents are relying on the newspaper as
the source of true information.

Financial advisor

Yes 67
No 33
Total 100
Out of the total respondents, 67% said yes that they use financial advisor as the source of
information while investing in mutual funds and rest 33% said no to the same. The
respondents relied to a significant level on the Financial Advisors for getting Mutual fund
information.

Spouse

Yes 35
No 65
Total 100
Out of the total respondents, 35% said yes that they took the information from their
spouse while investing in mutual funds and rest 65% said no to the same.

Friends

40
Yes 49
No 51
Total 100
Out of the total respondents, 49% said yes that they took the information from their
friends while investing in mutual funds and rest 51% said no to the same.
Advertisement

Yes 62
No 38
Total 100
Out of the total respondents, 62% said yes that advertisements are the source of
Information used while investing in mutual funds and rest 38% said no to the
same

Regular or a new investor in mutual fund

Regular 58
New 42
Total 100
58% of the respondents are regular investors in mutual funds while rest 42% are new to
that. Though the number of regular investors is high but at the same time new investors
are showing significant participation in this field.

Investment portfolio consists:

Real estate
Yes 40

41
No 60
Total 100
Out of total respondents 40% said yes that investment portfolio consist of real estate and
60% said no.

Post office

Yes 67
No 33
Total 100
Out of total respondents 67% said yes that investment portfolio consist of Post office
schemes and the remaining 33% said no.

Mutual fund

Yes 74
No 26
Total 100
Out of total respondents 74% said yes that investment portfolio consist of mutual funds
and 26% said no.

Debt fund

Yes 17

42
No 83
Total 100
Out of total respondents 17% said yes that investment portfolio consist of debt funds and
83% said no.

Shares

Yes 36
No 64
Total 100
Out of total respondents 36% said yes that investment portfolio consist of shares while
the rest of the 64% said no.

Fixed deposit

Yes 72
No 28
Total 100
Out of total respondents, 72% said yes that investment portfolio consist of fixed deposit
while the rest of the 28% said no.

Type of fund you prefer the most

Regular income 30
Debt 3

43
Diversified equity 29
Sector funds 12
ELSS (tax shield) 26
Total 100
Out of total respondents, 30% preferred regular income type of fund, 29% preferred
diversified equity and 26% preferred ELSS (tax shield) while 12% preferred sector funds
followed by 3% debt.

Features that attract most while choosing a specific Mutual fund

Flexibility 3
Return 47

Managed by professional people 21

Risk diversion 29

Total 100

Out of total respondents, 47% are attracted to mutual funds due to the returns, 29%
because of risk diversion and 21% like to be managed by professional people while rest
3% are attracted due to the flexible mutual fund schemes.

Mutual fund scheme you prefer

Open ended scheme 64

Close ended scheme 36

44
Total 100

64% 0f the total respondents prefer open ended schemes for mutual fund and rest 36%
prefer close ended.

Type of return expected from mutual funds

Monthly 25
Quarterly 33
Semi annual 7
Annual 35

Total 100
35% of the respondents expect annual return from the mutual funds, 33% expect
quarterly, 25% expect monthly and rest 7% expect semi annual returns.

Investment horizon
Up to 6 months 66
Up to 1 year 15

Up to 2 year 34

Up to 3 year 37
Up to 5 year 8
Total 100

Out of total respondents, 66% prefer to invest up to 6 months, 37% prefer to invest up to
3 yrs, 34% up to 2 yrs, 15% Up to 1 yr and 8% prefer to invest up to 5 yrs.

45
Near future liabilities

Child marriage 26
Education 60

Loans 14

Total 100

Out of total respondents, 60% of the respondents have children education as future
liability, 26% have it as child marriage and rest 14% have the liability to pay off the
loans.

INTERPRETATION OF THE DATA

1. The investors give more preference to regular income funds besides the
considerations of Diversified Equity and Tax Saving Schemes. Thus if the
government encourages the investment in mutual funds in the current budget, then
more people will be investing in the MFs for tax saving. However people are also
not compliant to risk aversion. They are willing to invest in risky equity funds.

2. Another significant finding of the project is that investors are lured by the returns
MFs are showing. However at the same time they also want to minimize their
risk.

46
3. Investors desire or opt open-ended schemes than close-ended schemes. This
means that they want flexibility in the inflow and outflow of their funds.

4. The investment horizon, which is most liked by the investors, is 2-3 yrs.

5. The source of information the investors most rely is on advertisement. However

they also require the detailed information, which they take from Financial
Advisors. On other sources the investors are quite apprehensive.

6. Investor’s portfolio consists mainly of Fixed Deposits and Post Office schemes.
However portfolio of regular investors do contain significant proportion of
Mutual Funds.

47
 CONCLUSIONS AND
RECOMMENDATIONS

CONCLUSION

The Mutual fund industry is growing at a tremendous pace. A large number of plans have
come up from different financial resources. With the Stock markets soaring the investors
are attracted towards these schemes.

Only a small segment of the investors still invest in Mutual funds and the main sources of
information still are the financial advisors followed by advertisements in different media.
The Indian investor generally investors over a period of 2 to three years. Also there is a
greater tendency to invest in fixed deposits due to the security attached with it.

48
In order to excel and make mutual funds a success, companies still need to create
awareness and understand the Psyche of the Indian customer.

RECOMMENDATIONS

• There is lack of awareness among people about mutual funds so there should be more
advertising and other promotional campaigns to make them aware.

• People are more interested in investing in equity funds rather than debt funds because
companies are promoting more for equity funds. Companies should equally promote debt
funds also as the provide security to customers.

• Companies should give knowledge to its customer about its computerized operations to
save their time and to make the operations more easy.

49
BIBLIOBRAPHY

WEBSITES:-
• www.amfiindia.com
• www.mutualfundsindia.com
• www.utimf.com
• www.google.com

50
ANNEXURE

QUESTIONNAIRE ON MUTUAL FUNDS

Dear Respondent,

We would be grateful if you could spare some of your valuable time to respond to
the following questions. Your response would be treated as confidential and would
be used only for the purpose of the study.

51
NAME:…………………………………………
AGE:……………………….
OCCUPATION:………………………
MONTHLY INCOME:………………………….

1. What is your source of information while investing in mutual funds?

a) Internet [ ]
b) Magazine [ ]
c) Newspaper [ ]
d) Financial Advisor [ ]
e) Spouse [ ]
f) Friends [ ]
g) Advertisements [ ]

2. Are you a regular or a new investor in mutual fund?

Regular [ ]
New []

3. Your investment portfolio consists:(in %)

a) Real Estate [ ]
b) Post office schemes [ ]
c) Mutual Funds [ ]

52
d) Debt [ ]
e) Shares [ ]
f) Fixed Deposits [ ]

4. Which type of fund you prefer the most?

a) Regular income [ ]
b) Debt [ ]
c) Diversified Equity [ ]
d) Sector funds [ ]
e) ELSS (tax shield) [ ]

5 . Which Features attract you the most while choosing a specific Mutual Fund?

a) Flexibility [ ]
b) Return [ ]
c) Managed by professional people [ ]
d) Risk Diversion [ ]
e) Less Expenses [ ]

6. What type of Mutual Fund Scheme you prefer?

a) Open Ended Scheme [ ]
b) Close Ended Scheme [ ]

53
7. What type of return you expect?

Monthly [ ]
Quarterly [ ]
Semi annual [ ]
Annual [ ]

8. What is your investment horizon?

Up to 6 months [ ]
Up to 1 year [ ]
Up to 2 years [ ]
Up to 3 years [ ]
Up to 5 years [ ]
Up to 10 years [ ]

9. What are your near future liabilities?

Child marriage [ ]
Education [ ]
Any other please specify……

54
THANK YOU FOR YOUR COOPERATION

55