ACKNOWLEDGEMENT

I am greatly thankful to CONCEPT SECUTIRIES PRIVATE LIMITED for giving me an opportunity to work on their company. I wish to express my sincere thank to Mrs. M.N joshi Director of c.k pithawala institute of management, near malwan mandir, Dumas, who gave me the chance to do this project report. I wish to express my heartfelt gratitude to my internal guide Mr. NIRAVBHAI PATEL whose constant help and support at all stage of this project has enable me to complete it. I am thankful to my external guide Mr. TEJAS JARIWALA, without whom this project would not have been competed successfully. Last but not least, I thank all those who have helped me directly or indirectly during the course of this project.

KOSHTI RAKESH S.

DECLARATION
I, KOSHTI RAKESH S. from c.k pithawala institute of management, near malwan mandir, Dumas, here by declare that project report has been undertaken as a part of 2nd semester of post of master of business administration (MBA)syllabus of Gujarat technology university, Ahmadabad. I declare that this report has not been submitted to my other university or institute for any other purpose.

Date Place KOSHTI RAKESH S.

EXECUTIVE SUMMAY
The whole journey from beginning to completion of my research on mutual fund was really full of experience and full of learning and whole time during the execution of project report taught me, how the outcome of what I have learnt out of whole journey. Company is making 90% business for the equity and only 10% business for the mutual fund but now a day there has been dramatic modification in mutual fund industry , people invest their money in different types of mutual fund as per different preference like return, safety, tax saving, liquidity etc, to know be better to have a clear idea about mutual fund industry in India. May be still many people dont know about the mutual fund, as far as investment is concern and Indian market as one of the most well known place for the investment. In this project my objective is to know the investment behavior towards mutual fund and different avenues. I have used descriptive research design to attain my objective, I have collected information through questionnaire. In this research I have interviewed 15respondents. I have already defines all the component of my research in which contains type of research, size of research, size of sample, sampling design, data collection method, assumption, scope of survey and various other parameters.

From the analysis I have found the various investments need investment pattern of people according to their age and as well as the mutual fund awareness. I have also studied importance of the factor for the investment behavior and different investment options preference from the respondents. With completion of survey, I found myself standing on a very exciting but a very crucial stage of my research and that is findings presented Through analyzing the data.

SYNOPSIS
1.

ABOUT COMPANY:

Name: concept securities private limited

Service: Equity Equity Derivatives Commodity Derivatives Currency Derivatives Mutual Fund IPO Debt Depository Service Concept Wealth + (PMS)

Type of industry Financial Service

2. ABOUT COMPANY GUIDE:

Name: Tejas Jariwala Designation: Associate Research analyst Qualification: MBA with FINANCE

3.

AREA OF RESEARCH: Surat city RESEARCH TOPIC: Investment Behavior Towards Mutual funds

4.

5. OBJECTIVE OF RESEARCH: Primary Objective 1. To know the investment attitude towards mutual fund Secondary Objective 2. To know the awareness level of mutual fund. 3. To measure the criteria investing in mutual fund. 4. To compare various investment avenues. 5. To know out the investors opinion about mutual fund. 6. To know the awareness of various schemes offered by mutual fund. 6. RESEARCH METHODOLOGY: Research Design: In this study, researcher can use descriptive exploratory design based on primary data secondary data.

 Source of data collection: Both primary selected. secondary data has been

Primary data has been collected through wellequipped questionnaire. Selection period of scrip data: Sample Size: The total sample size is 15respondent.

Ch. No Particular 1 2 3 4 5 6 7 8 9 10 11 12
Executive summary Synopsis Introduction About Topic Theoretical Frame Work Company Profile Literature Review Research Objective Research Methodology Limitation of Study Comparison of Portfolio mgmt and Investment

Page No

Finding and conclusion Recommendation References Bibliography Annexure

Mutual Funds A mutual fund is a trust that pools the saving of number of investor who shares a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from share to debentures to money market instruments. The income earned thought these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned bye them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in diversified, professionally managed portfolio at a relatively low cost. Anybody with an inventible surplus of as little as a few thousand rupees can invest in mutual fund. Each mutual fund scheme has a defined investment objective and strategy. A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Market for equity shares, bond and other fixed income instrument, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skill, inclination and time to track event, understand their implication and act speedily. An individual also finds it difficulties to keep track of ownership of his assets, investments, brokerage dues and transactions etc. A mutual fund is the answerer to all situations. It appoints

professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effects, the mutual fund vehicle exploits economics of scale in all three areasresearch, investment and transaction processing. While the concept of individual coming together to invest money collectively is not new, mutual fund gained popularity only after the Second World War. Globally, there are thousand of firms offering tens of thousand of mutual fund with different investment objective. Today, mutual funds collectively manage almost as much as or more money as compared to banks. A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objective of the fund, the risk associated, the cost involve in the process and the board rules for entry into and exit from the fund and others area of the operation. In India, as in most countries, these sponsors need approval from a regulator, SEBI (security exchange board of India) in our case. SEBI looks at track records of the sponsor and its financial strength in grating approval to the find for commencing operation. A sponsor then hires an asset management company to invest the asset the fund according to the investment objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one it handle registry work for the unit holders of the fund. HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

THE MUTUAL FUND INDUSTRY in India started in 1963 with the formation of unit trust of India, At the initiative of the government of India and reserve bank .the history of mutual fund in India can be broadly divide into four distinct phases FirstPhase1964-87 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 corers 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 Can 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 corers. The Unit Trust of India with Rs.44,541 corers of assets under management was way ahead of other mutual funds. FourthPhase-sinceFebruary2003 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 corers (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 corers 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 corers under

Types of mutual fund

Mutual fund scheme may be classified on the basis of structure and its investment objective. By Structure: 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. 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. 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. 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 scheme: A Load fund is one that charges a commission for entry or exists. 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 fund: 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 weight age. 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. Industry specific scheme: Industry specific schemes invest only in the industries in the offer document. The investment of this fund is limited to specific industries like InfoTech, FMCG, pharmaceutical etc.

Mutual fund Net Asset Value (NAV) The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling of off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per units, which is the value, represented by the ownership of the units in the fund .it is the calculate simply by dividing net asset value of the fund by the number of units. However the most people refers to the NAV per unit as NAV, ignoring the per unit. We also abide by the same convention. Calculation of NAV The most important part of calculation is the valuation of asset Owned by the fund. Once it is calculate, the NAV is simply the net asset divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. Asset value is equal to Sum of market value of share/debenture +Liquid asset/case held, if any +Dividends/interest accrued Amount due on unpaid assets Expenses accrued but not paid

Detail on the above items For liquid share/debenture, valuation is done on the basis of the last or closing market price on the principal exchange where the security id traded. For illiquid and unlisted or thinly traded share/debenture, the value has to be estimated. For share, this could be the book value per share or an estimated market price if suitable benchmarks are available. For debenture and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. The value of fixed interest bearing security moves in the direction opposite to interest changes valuation of debenture and bond is the big problem since most of them are unlisted thinly traded. This give considerable leeway to the AMCs on valuation and some of the AMCs are believed to take advantage of this and adopt flexible valuation policies on the situation. Interest is payable on debenture/bond on periodic basis say every 6 month. But, with every passing day, interest is said to be occurred, at the daily interest rate, which is calculate by dividing the periodic interest rate payment with the number of days in each period. This accrued interest on particular day is equal to the daily interest rate multiplied by number of days since the last interest payment date. Usually, dividends are proposed at the time of the annual general meeting and become due on the recorded date. There is a gap between the dates on which it becomes due and the actual payment date. In the intermediate

period, it is deemed to be accrued. Expenses including management fees, custody charges etc. are calculated on the daily basis. Benefits of Investing In Mutual Funds Professional Management You avail of the services of experienced and skilled Professionals who are backed by a dedicated Investment research team which analyses the Performance and prospects of companies and Selects suitable investments to achieve the Objectives of the scheme.. Diversification Mutual Funds invest in a Number of companies across a broad cross-section of industries and sectors. This Diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification Through a Mutual Fund with far less money than you can do on your own. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you Avoid many problems such as bad deliveries, Delayed payments and unnecessary follow up with Rocker and companies. Mutual Funds save Your time and make investing easy and Convenient.

Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity: In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund Flexibility: Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, one can systematically invest or withdraw funds according to your needs and convenience.

Transparency

You get regular information on the value of your investment in addition to disclosure on the specific investment made by your scheme, the proportion invested in each class of asset and the fund managers investment strategy and outlook. Affordability Investor individually may lack sufficient fund to invest in high grade stocks. A mutual fund because of large corpus allows even a small investor to take the benefit of its investment strategy. Choice of scheme Mutual fund offer a family of scheme to suit your varying needs over a lifetime. Well regulated All mutual fund are registered with SEBI and they function within the provision of strict regulation designed to protect the interest of investor. The operation of mutual fund is regularly monitored by SEBI.

Disadvantage of Mutual Fund While its true that mutual fund is popular investment vehicle, they may not always be the best fit for your portfolio. There are many disadvantages that come with

mutual fund and you may want to consider other asses for your investment strategy. Asset like ETFs 1. Investment complexity When you buy or sell mutual fund, you are making multiple trade at multiple prices if you are trying to accomplish a particular investing goal with a mutual fund, targeting a certain price through your transaction can get very complex. Its not as easy as buying a simple asset like an exchange traded fund. 2. High free structure In conjunction with the trading complexity of mutual fund come the associated costs. Multiple trades translate into multiple commissions and management fees. Not to mention the advisory fees. With an active mutual fund portfolio, the investing costs can add up rather quickly. 3. Lack of liquidity Yes, there is lot of different mutual funds in the investment world, but that doesnt necessarily mean they are very liquid. With mutual fund, the final transaction isnt complete until the end of trading day. Its not until the final bell when you actual know the price of trades for the fund as whole. That creates difficulties on days when the market is a volatile time bomb. You need instant information in order to adjust your trading strategy. Mutual fund does not offer that option.

4. Tax disadvantage Mutual fund is not the most tax friendly investment in the world. Capital gain taxes are incurred as the shares within the mutual fund are traded during the life of the investment. Compare that to the tax advantage of ETGs, which only incur capital gains taxes when the exchange traded fund is sold. 5. Lack of transparency There is lack of information when it comes to mutual funds. What you are buying within the fund is not always transparent and some information is even delayed. This creates a challenge when you need fund information to make investment decision. 6. Transfer difficulties Complications arise with mutual funds when a managed portfolio is switched to a different financial firm. Sometimes the mutual fund positions have to be closed out before a transfer can happen. This can be a major problem for investor. Liquidating a mutual fund portfolio may increase risk, increase fees and commission, and create capital gains taxes.

Mutual fund market trends

A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. In spite of stiff competition and losing market share, UTI still remains a formidable force to reckon with. Last six years have been the most turbulent as well as existing ones for the industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with fund management industry like distribution, registration and transfer agents, and even the regulators have become mature and responsible. The industry is also having a profound impact on financial market. While UTI has always been a dominant player on the bourses as well as debt market, the new generations of private fund which have gained substantial mass are now seen flexing their muscles. Fund manager, by their selection criteria for stock have forced corporate governance on the industry. By rewarding honest and transparent management with higher valuation, a system of risk reward has been created where the corporate sector has more transparent then before. Fund has shifted their focused to the recession free sectors like pharmaceuticals, FMCG, and technology sector. Fund performance is improving. Fund collection which averaged at less than Rs.100bn per annum over five year period spanning 1993-98

doubled to Rs.210bn in 1998-99. In the current year mobilization till now have exceeded Rs.300bn. total collection for the current financial year ending March 2000 is expected to reach Rs.450bn. India is at the first stage of revolution that has already peaked in the U.S. the U.S boasts of an asset base that is much higher than its bank deposit. In India mutual fund asset are not even 10% of the bank deposit, but this trend is beginning to change. Recent figure indicate that in the first quarter of the current fiscal year mutual fund asset went up by 115% whereas bank deposit rose by only 17%. This is a forcing large number of bank to adopt the concept of narrow banking where in the deposit is kept in gilts and some other asset which improve liquidity and reduce risk. The basic fact lies that bank can not be ignored and they will not close down completely. Their role as intermediaries can not be ignored. It just that mutual fund is going to change the way banks do business in the future. BANKS V/S MUTUAL FUNDS

BANKS Returns Administrative exp. Risk Investment option Network Low High Low Less High penetration

MUTUAL FUNDS Better Low Moderate More

Low but improving Liquidity At a cost Better Quality of asset No transparent Transparent Interest Minimum balance Everyday calculation between 10th & 30th of every month Guarantee Maximum Rs.1lakh on None deposits Mutual fund global scenario Some basic facts: The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a corpus of $ 100 million in India. Out of the top mutual fund worldwide, eight are bank sponsored. Only fidelity and capital are non bank mutual fund in the group. In the U.S the total number of scheme is higher than of listed companies while India we have just 277 schemes.

Internationally, mutual fund is allowed to go short. In India the fund manager does not have such leeway. In the U.S about 9.7 million household will manage their asset on-line by the year 2003, such a facility is not yet of avail in India. On-line trading is a great idea to reduce management expenses from the current 2% of the total asset to about 0.75% of the total asset. 72% of the core customer base of mutual fund in the top 50working firms in the U.S are expected to trade on-line in 2003. Here are some of the basic changes that have taken place since the advent of the Net. Lower cost: the distribution of fund will be fall in the on-line trading regime by 2003. Mutual fund could bring down their administrative cost to 0.75% if trading is done on-line. As par SEBI regulation, bond fund can charge a maximum of 2.25% and equity fund can charge 2.5% at administrative fees. Therefore if the administrative cost is low, the benefit is passed down and hence mutual fund are able to attract mire investor and increase their asset base. Better advice: mutual fund could provide better advice to their investor through the net rather than the traditional investment routes where there is a traditional channel to deal with broker. Direct dealing with fund could help the investor with the financial planning. New investor would prefer online: mutual fund can target investors who are young individual and who are net savvy, since servicing them would be easier on the net. In India

around 1.6 million net users who are prime target for this fund and this could just be the beginning. The internal users are going to increase dramatically and mutual funds are going to be best beneficiary. Net base advertisement: There will be more sites involved in ads and promotion of mutual fund. In the U.S sites like AOL offer detailed research and financial details about the functioning of different funds and their performance statistics is witnessing a genesis in this area. Mutual fund-Future scenario: The asset base will continue to grow at annual rate of about 30to 35% over the next few years as investors shift their asset from banks and other traditional avenues. Some of the older public and private sector player will either close shop or be taken over. Out of ten public sector players five will sell out, close down or merge with stronger player in three to four years. In the private sector this trend has already started with two mergers and one takeover. Here too some of them will down their shutter in the near future to come. But this does not mean there is no room for other players. The market will witness a flurry of new player entering the arena. There will be a large number of offers the various asset management companies in the time to come. Some big name like fidelity, principle, Old mutual etc. are looking at Indian market seriously. One important reason for it is that most major player already has presence here and hence this big name would hardly like to get let behind.

In the U.S most mutual fund concentrate only on financial fund like equity and debt. Some like real estate fund and commodity funds also take an exposure to physical assets. The letter type of funds is preferred by corporate who want to hedge their exposure to the commodities they deal with. For instance, a cable manufacture who needs 100 tones of cooper in the month of January could buy an equivalent amount of copper by investing in copper funds. For example, permanent portfolio fund, a conservative U.S based fund invest in fixed percentage of its corpus in gold, silver, swiss, francs, specific stock on various bourses around the world, short term and long term U.S treasuries etc. The mutual fund industry is awaiting the introduction of DERIVATIVES in the country as this would enable it to hedge its risk and this in turn would be reflected in its Net Asset Value (NEV). SEBI is working out the norms for enabling the existing mutual fund scheme to trade in derivatives. Importantly, many market players have called on the regulator to initiate the process immediately, so that the mutual funds can implement the changes that are requited to trade in derivatives. Regulatory Aspect of Mutual Fund Scheme of mutual fund:

The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been field with the board. Every mutual fund shall along with offer document of each scheme pay filling fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on making investment proposed to be made by the scheme in the listed securities of the group company of the sponsor. No one shall issue any form of application for units of a mutual fund unless the form is accompanied by the memorandum containing such information as may be specify by the board. Every close ended scheme shall be listed in a recognize stock exchange within six month from the closure of the subscription. A close ended scheme shall be fully redeemed at the end of maturity period. Unless a majority of the unit holder otherwise decide for its rollover by passing a resolution. A mutual fund and asset management company shall be liable to refund the application money to the applicant. i. If the mutual fund fail to receive the minimum subscription amount referred to in clause (a) of subregulation(1);

If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of subregulation (1). Rules Regarding Advertisement:
ii.

The advertisement for each scheme shall disclose investment objective for each scheme. An advertisement shall be truthful, fair and clear and shall not contain a statement, promise or forecast which is untrue or misleading. Advertisement shall not be so framed as to exploit the Lack of experience of the investors. All advertisement issued by a mutual fund or its sponsor or asset management company, shall state all investment in mutual fund and securities are subject to market risk and NAV of the scheme may go up or down depending upon the factors and forces affecting the securities market. The advertisement shall not to compare one fund with another, implicitly or explicitly, unless the comparison is fair and all information relevant to the comparison is included in the advertisement. Investment objective and valuation policies: The money collected under any scheme of a mutual fund shall be invest only in transferable securities in the money market or in the capital market or in privately placed debenture or securities debts.

Provided that money collected under any money market scheme of mutual fund shall be invested only in money market instruments in accordance with directions issued by the reserve bank of India. The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual funds for the purpose of repurchase, redemption of units or payment of interest or dividend to the unit holder. The mutual fund shall not advance any loan for any purpose. Every mutual fund shall compute and carry out valuation of its investments in its portfolio and publish the scheme in accordance with the valuation norms specified in eighth schedule. Every mutual fund shall compute the Net asset value of each scheme by dividing the net asset of the scheme by the number of units outstanding on the valuation date. Net asset value of the scheme shall be calculated and published at least in two daily newspapers at interval of not exceeding one week.

General obligation: Every asset management company for each scheme shall keep and maintain proper books of accounts, records and documents, for each scheme so as to explain its transaction and to disclose at any point of time the financial position of each

scheme and in particular give a true and fair view of the state of affairs of the fund and intimate of the board the place where such books of accounts, record and documents are maintain. The financial year for the all scheme end as of march 31 of each year. Every mutual fund or asset management company shall prepare in respect of each financial year an annual report and annual statement of accounts of the scheme and the fund as specified in eleventh schedule. Every mutual fund shall have the annual statement of accounts audited by an auditor who is not any way associated with the auditor of the asset management company. Procedure for action in case of default: On and from the date suspension of the certificates or the approval, as the case may be, the mutual fund, trustees or asset Management Company, shall cease to carry on any activity as a mutual fund, trustee or asset Management Company, during the period of suspension, and shall be subject to the direction of the board with regard to any records, documents, or securities that may be in its custody or control, relating to its activities as mutual fund, trustees or asset management company. Restriction on investment: Approval of Board is sought for regulating exposure of mutual fund schemes to money market instruments of an issuer. This would

require amendment to Seventh Schedule of the SEBI (Mutual Fund) Regulations, 1996 (here in after referred to as the Regulations). In terms of clause (1) of Seventh Schedule of the Regulations, a scheme can not invest more than 15% of its NAV in investment grade debt instruments issued by an issuer. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and Board of AMC. These limits are not applicable to investments in Government securities and money market instruments. In addition, a mutual fund scheme can invest up to 10% of its NAV in unrated debt instruments issued by an issuer. No mutual fund under its entire scheme should own more than ten percent of any companys paid up capital carrying voting rights. Transfer of investment from one scheme to another scheme in the same mutual fund shall be allowed only if, such transfer are done at the prevailing market price for quoted instruments on spot basis.

Mutual fund-glossary

Data analysis
1.

Comparison between equity and debt product. What is Equity?

Equity refers to part ownership in a company, and in the Indian context equity and shares are used inter-changeably." If company has 100 shares in the market and if you bought 1 share of the company you would be the owner of 1% of the company. If company was valued at 1 lake rupees today, then your share would be worth Rs. 1,000. Equity products are generally considered to be high risk high return products for this reason. Examples of equity products. EX. Shares trading on the stock exchange are the most direct examples of equity products. EX. Equity Mutual Funds: Mutual funds that own shares are another example of equity products.

What is Debt?

Debt is loan, and carries a fixed rate of interest, and a promise to repay. Debt is generally safer than equity, and there is generally no upside in it. You get paid the promised interest, and as long as the company is not bankrupt youre safe. Examples of Debt products. EX. Company could issue debt of Rs. 1 lack at an interest rate of 15% per annum, and as long as company is not bankrupt you can expect your interest repayment, and also the repayment of your principal. EX. Fixed Deposits with banks are the prime example of debt products. Comparison of equity economic situation and debt base on

Product

BoomingRecessio Festival Interest Risk period n period period

Equity Debt

Interpretation

Mutual Funds
Before we understand what is mutual fund, its very important to know the area in which mutual funds works, the basic understanding of stocks and bonds. Stocks : Stocks represent shares of ownership in a public company. Examples of public companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market. Bonds : Bonds are basically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to be the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds. What Is Mutual Fund A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.

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. The flow chart below describes broadly the working of a mutual fund

Overview of existing schemes existed in mutual fund category

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

Type of Mutual Fund Schemes

BY STRUCTURE 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.

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.

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.

BY NATURE

Under this the mutual fund is categorized on the basis of Investment Objective. By nature the mutual fund is categorized as follow:

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.

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.

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.

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.

Types of returns:
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.

Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professional managed, by well qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments. 2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. 3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors. 4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks. 2. Costs The biggest source of AMC income, is generally from the entry & exit load which they charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. 3. Dilution - Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. 4. Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

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 a 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 rose the AUM to Rs. 470 in 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.

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 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.

Major Players Of Mutual Funds In India Period (Last&nbsp1 Week)

Rank 1

Scheme Name JM Core 11 Fund - Series 1 - Growth Tata Indo-Global Infrastructure Fund Growth Tata Capital Builder Fund Growth Standard Chartered Enterprise Equity Fund Growth DBS Chola Infrastructure Fund - Growth ICICI Prudential Fusion Fund - Series III Institutional - Growth DSP Merrill Lynch Micro Cap Fund - Regular Growth ICICI Prudential Fusion Fund - Series III - Retail Growth DBS Chola Small Cap Fund - Growth Principal Personal Taxsaver Benchmark Split Capital Fund - Plan A - Preferred Units ICICI Prudential FMP Series 33 - Plan A -

Date Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 26 , 2008 Mar 25 , 2008 Mar 26 , 2008 Mar 26 ,

NAV (Rs.) 8.45

Last 1 Week 5.12

Since Inception -94.64

8.26

5.05

-40.42

12.44

5.03

15.35

14.07

20.92

9.01

4.65

-17.17

10.2

4.62

23.69

9.93

4.56

-0.85

10.19

4.51

22.39

6.36

3.75

-81.78

10

124.66

3.44

29.97

11

141.51

3.14

13.71

12

9.89

2.91

-7.88

Growth 13 Tata SIP Fund - Series I Growth Sahara R.E.A.L Fund Growth

2008 Mar 26 , 2008 Mar 25 , 2008 10.25 2.38 2.39

14

7.64

1.86

-49.52