CHAPTER 1 INTRODUCTION

1.1 INTRODUCTION TO THE MUTUAL FUND INDUSTRY

The modern mutual fund was first introduced in Belgium in 1822. This form of investment soon spread to Great Britain and France. Mutual funds became popular in the United States in the 1920s and continue to be popular since the 1930s, especially open-end mutual funds. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 1990s. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities. Mutual funds have a fund manager who invests the money on behalf of the investors by buying / selling stocks, bonds etc. Currently, the worldwide value of all mutual funds totals more than $US 26 trillion.

There are various investment avenues available to an investor such as real estate, bank deposits, post office deposits, shares, debentures, bonds etc. A mutual fund is one more type of investment avenue available to investors. There are many reasons why investors prefer mutual funds. Buying shares directly from the market is one way of investing. But this requires spending time to find out the performance of the company whose share is being purchased, understanding the future business prospects of the company, finding out the track record of the promoters and the dividend, bonus issue history of the company etc. An informed investor needs to do research before investing. However, many investors find it cumbersome and time consuming to pore over so much of information, get access to

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so much of details before investing in the shares. Investors therefore prefer the mutual fund route.

1.2 CORPORATE PROFILE OF IPAMC

ICICI Prudential Asset Management Company Ltd. (IPAMC/ the Company) is the joint venture between ICICI Bank, a well-known and trusted name in financial services in India and Prudential Plc, one of UKs largest players in the financial services sectors. IPAMC was incorporated in the year 1993. The Company in a span of over 18 years since inception and just over 13 years of the Joint Venture, has forged a position of preeminence in the Indian Mutual Fund industry as the third largest asset management company in the country, contributing significantly to the growth of the Indian mutual fund industry. The Company manages significant Mutual Fund Asset Under Management (AUM), in addition to Portfolio Management Services and International Advisory Mandates for clients across international markets in asset classes like Debt, Equity and Real Estate with primary focus on risk adjusted returns. IPAMC has witnessed substantial growth in scale. From merely 2 locations and 6 employees during inception to the current strength of over 700 employees with reach across around 150 locations, the growth momentum of the Company has been exponential. The organization today is an ideal mix of investment expertise, resource bandwidth & process orientation. Corpus under management: Rs. 80183.07 Crores as on Oct 31, 2012 No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Gilt Fund 158 458 53 325 25 34 7

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ICICI BANK

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,538 branches and about 6,810 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Center and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). Prudential Plc (formerly known as Prudential Corporation plc)

Prudential plc of the United Kingdom is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America. Prudential plc is an international financial services group with significant operations in Asia, the US and the UK. They serve approximately, 25 million customers and have 290 billion in assets under management. They are among the leading

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capitalized insurers in the world with an Insurance Groups Directive (IGD) capital surplus estimated at 3.4 billion (as at 31 December 2009). The Group is structured around four main business units: Prudential Corporation Asia (PCA) PCA is a leading life insurer in Asia with presence in 12 markets and a top three position in seven key locations: Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, and Vietnam. PCA provides a comprehensive range of savings, protection and investment products that are specifically designed to meet the needs of customers in each of its local markets. PCAs asset management business in Asia has retail operations in 10 markets and it independently manages assets on behalf of a wide range of retail and institutional investors across the region. Jackson National Life Insurance Company Jackson is one of the largest life insurance companies in the US, providing retirement savings and income solutions to more than 2.8 million customers. It is also one of the top five providers of variable and fixed index annuities in the US. Founded nearly 50 years ago, Jackson has a long and successful record of providing effective retirement solutions for their clients. Prudential UK & Europe (PUE) PUE is a leading life and pensions provider to approximately 7 million customers in the UK. It has a number of major competitive advantages including significant longevity experience, multi-asset investment capabilities, a strong investment track record, a highly respected brand and financial strength. PUE continues to focus on its core strengths including its annuities, pensions and investment products where it can maximize the advantage it has in offering with-profits and other multi-asset investment funds. M&G M&G is Prudentials UK and European fund management business with total assets under management of 174 billion (as at December 31, 2009).M&G has been investing money for individual and institutional clients for nearly 80 years. Today it is among the largest investors in the UK stock market, as well as being a powerhouse in fixed-income investments.
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CHAPTER 2 MUTUAL FUNDS

2.1 CONCEPT OF MUTUAL FUNDS
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy. The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the schemes stated objectives. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit 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 holders.

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2.2 HISTORY OF MUTUAL FUNDS IN INDIA

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 of India. The history of mutual funds in India can be broadly divided into four distinct phases. 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) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. 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
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setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. The graph indicates the growth of assets over the years.

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Not all parts of the country are contributing equally into the mutual fund corpus. 8 cities account for over 60% of the total assets under management in mutual funds. These are issues which need to be addressed jointly by all concerned with the mutual fund industry. Market dynamics are making industry players to look at smaller cities to increase penetration. Competition is ensuring that costs incurred in managing the funds are kept low and fund houses are trying to give more value for money by increasing operational efficiencies and cutting expenses. As of today there are around 40 Mutual Funds in the country. Together they offer around 1051 scheme to the investor. Many more mutual funds are expected to enter India in the next few years. Mutual Fund Name No. of Corpus Asset Under Management (as Corpus (as Net

Schemes on Sep 30, on Jun 30, increase/decrease 2012) Axis Mutual Fund Baroda Pioneer Mutual Fund Birla Sun Life Mutual Fund BNP Fund BOI AXA Mutual Fund Canara Robeco Mutual Fund Daiwa Mutual Fund Deutsche Mutual Fund DSP Blackrock Mutual 14 205 194 788.67 16,807.04 30,227.33 709.54 13,852.45 30,001.76 79.13 2954.592 225.563 41 89 273.10 7,328.55 134.66 7,579.91 138.446 -251.357 Paribas Mutual 82 3,841.99 4,562.04 -720.046 308 72,904.49 67,205.95 5698.535 86 49 10,490.31 5,702.18 2012) 8,758.74 5,511.46 in corpus 1731.563 190.73

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Fund Edelweiss Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Mutual Fund Goldman Sachs Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ICICI Prudential Mutual Fund IDBI Mutual Fund IDFC Mutual Fund IIFL Mutual Fund Indiabulls Mutual Fund ING Mutual Fund JM Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund L&T Mutual Fund 81 3,883.12 3,046.17 836.949
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44 30 69 145

306.50 229.93 7,030.94 39,045.58

380.25 196.07 7,378.41 35,532.66

-73.747 33.86 -347.474 3512.923

Templeton

18

4,304.20

4,312.68

-8.475

303 89 477

97,773.66 4,991.68 76,387.61

92,624.52 4,553.88 73,049.66

5149.136 437.807 3337.943

41 306 9 14 82 Mutual 67

5,412.82 28,004.19 193.02 2,242.70 935.34 5,623.73

5,198.45 27,146.53 167.06 2,164.57 922.71 5,811.94

214.364 857.656 25.955 78.126 12.633 -188.21

Financial

56 183

8,988.82 30,316.03

5,280.80 25,323.53

3708.018 4992.506

LIC Nomura Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fund Motilal Fund Peerless Mutual Fund PineBridge Mutual Fund Pramerica Mutual Fund PRINCIPAL Fund Quantum Mutual Fund Reliance Mutual Fund Religare Mutual Fund Sahara Mutual Fund SBI Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund Union KBC Mutual Fund UTI Mutual Fund Mutual Oswal Mutual

68 30 22

6,355.67 500.88 2,353.55

5,919.22 463.90 2,250.35

436.452 36.979 103.2

528.61

453.09

75.525

32 43 35 56

4,791.59 977.02 1,978.23 4,770.51

4,008.97 738.84 2,386.76 4,660.34

782.616 238.178 -408.531 110.164

14 318 148 44 216 221 208 55 20 247

215.86 86,326.90 12,655.50 238.44 50,958.80 13,668.88 20,247.49 3,599.62 2,348.84 70,782.78

192.55 80,694.47 10,958.32 787.17 47,184.11 13,228.41 20,753.78 3,745.11 2,034.34 60,922.62

23.31 5632.434 1697.179 -548.727 3774.693 440.472 -506.288 -145.493 314.504 9860.169

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Investors need to understand the nuances of mutual funds, the workings of various schemes before they invest, since their money is being invested in risky assets like stocks/ bonds (bonds also carry risk). Top 5 funds (Last 12 months) 1. SBI Magnum Sector Funds Unbrella-FMCG 2. Reliance Media and Entertainment Fund-Growth 3. ICICI Prudential Banking and Financial Services Fund-Retail-Growth 4. ICICI Prudential FMCG-Growth 5. Escorts Leading Sectors Fund-Growth

Top 5 open ended funds (Last 12 months) 1. SBI Magnum Sector Funds Unbrella-FMCG 2. Reliance Media and Entertainment Fund-Growth 3. ICICI Prudential Banking and Financial Services Fund-Retail-Growth 4. ICICI Prudential FMCG-Growth 5. Escorts Leading Sectors Fund-Growth

Top 5 close ended funds (Last 12 months) 1. Reliance Equity Linked Saving Fund-Series 1-Growth 2. ICICI Prudential RIGHT Fund-Growth 3. SBI Tax Advantage Fund Series 1-Growth 4. IDFC Tax Saver (ELSS) Fund-Growth 5. UTI Long Term Advantage Fund-Growth

2.3 MUTUAL FUNDS: STRUCTURE IN INDIA

Mutual Funds in India follow a 3-tier structure. There is a Sponsor (the First tier), who thinks of starting a mutual fund. The Sponsor approaches the Securities & Exchange Board of India (SEBI), which is the market regulator and also the regulator
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for mutual funds. Not everyone can start a mutual fund. SEBI checks whether the person is of integrity, whether he has enough experience in the financial sector, his net worth etc. Once SEBI is convinced, the sponsor creates a Public Trust (the Second tier) as per the Indian Trusts Act, 1882. Trusts have no legal identity in India and cannot enter into contracts, hence the Trustees are the people authorised to act on behalf of the Trust. Contracts are entered into in the name of the Trustees. Once the Trust is created, it is registered with SEBI after which this trust is known as the mutual fund. It is important to understand the difference between the Sponsor and the Trust. They are two separate entities. Sponsor is not the Trust; i.e. Sponsor is not the Mutual Fund. It is the Trust which is the Mutual Fund. The Trustees role is not to manage the money. Their job is only to see, whether the money is being managed as per stated objectives. Trustees may be seen as the internal regulators of a mutual fund.

2.4 MANAGER OF INVESTORS MONEY

This is the role of the Asset Management Company (the Third tier). Trustees appoint the Asset Management Company (AMC), to manage investors money. The AMC in return charges a fee for the services provided and this fee is borne by the investors as it is deducted from the money collected from them. The AMCs Board of Directors must have at least 50% of Directors who are independent directors. The AMC has to be approved by SEBI. The AMC functions under the supervision of its Board of Directors, and also under the direction of the Trustees and SEBI. It is the AMC, which in the name of the Trust, floats new schemes and manage these schemes by buying
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and selling securities. In order to do this the AMC needs to follow all rules and regulations prescribed by SEBI and as per the Investment Management Agreement it signs with the Trustees. If any fund manager, analyst intends to buy/ sell some securities, the permission of the Compliance Officer is a must. A compliance Officer is one of the most important persons in the AMC. Whenever the fund intends to launch a new scheme, the AMC has to submit a Draft Offer Document to SEBI. This draft offer document, after getting SEBI approval becomes the offer document of the scheme. The Offer Document (OD) is a legal document and investors rely upon the information provided in the OD for investing in the mutual fund scheme. The Compliance Officer has to sign the Due Diligence Certificate in the OD. This certificate says that all the information provided inside the OD is true and correct. This ensures that there is accountability and somebody is responsible for the OD. In case there is no compliance officer, then senior executives like CEO, Chairman of the AMC has to sign the due diligence certificate. The certificate ensures that the AMC takes responsibility of the OD and its contents.

2.5 CUSTODIAN
A custodians role is safe keeping of physical securities and also keeping a tab on the corporate actions like rights, bonus and dividends declared by the companies in which the fund has invested. The Custodian is appointed by the Board of Trustees. The custodian also participates in a clearing and settlement system through approved depository companies on behalf of mutual funds, in case of dematerialized securities. In India today, securities (and units of mutual funds) are no longer held in physical form but mostly in dematerialized form with the Depositories. The holdings are held in the Depository through Depository Participants (DPs). Only the physical securities are held by the Custodian. The deliveries and receipt of units of a mutual fund are done by the custodian or a depository participant at the instruction of the AMC and under the overall direction and responsibility of the Trustees. Regulations provide that the Sponsor and the Custodian must be separate entities.

2.6 ROLE OF THE AMC

The role of the AMC is to manage investors money on a day to day basis. Thus it is imperative that people with the highest integrity are involved with this activity. The AMC cannot deal with a single broker beyond a certain limit of transactions. The
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AMC cannot act as a Trustee for some other Mutual Fund. The responsibility of preparing the OD lies with the AMC. Appointments of intermediaries like independent financial advisors (IFAs), national and regional distributors, banks, etc. is also done by the AMC. Finally, it is the AMC which is responsible for the acts of its employees and service providers. As can be seen, it is the AMC that does all the operations. All activities by the AMC are done under the name of the Trust, i.e. the mutual fund. The AMC charges a fee for providing its services. SEBI has prescribed limits for this. This fee is borne by the investor as the fee is charged to the scheme, in fact, the fee is charged as a percentage of the schemes net assets. An i mportant point to note here is that this fee is included in the overall expenses permitted by SEBI. There is a maximum limit to the amount that can be charged as expense to the scheme, and this fee has to be within that limit. Thus regulations ensure that beyond a certain limit, investors money is not used for meeting expenses.

2.7 NFO
Once the 3 tier structure is in place, the AMC launches new schemes, under the name of the Trust, after getting approval from the Trustees and SEBI. The launch of a new scheme is known as a New Fund Offer (NFO). We see NFOs hitting markets regularly. It is like an invitation to the investors to put their money into the mutual fund scheme by subscribing to its units. When a scheme is launched, the distributors talk to potential investors and collect money from them by way of cheques or demand drafts. Mutual funds cannot accept cash. (Mutual funds units can also be purchased on-line through a number of intermediaries who offer on-line purchase / redemption facilities). Before investing, it is expected that the investor reads the Offer Document (OD) carefully to understand the risks associated with the scheme.

2.8 ROLE OF A REGISTRAR AND TRANSFER AGENTS

Registrars and Transfer Agents (RTAs) perform the important role of maintaining investor records. All the New Fund Offer (NFO) forms, redemption forms (i.e. when an investor wants to exit from a scheme, it requests for redemption) go to the RTAs office where the information is converted from physical to electronic form. How many units will the investor get, at what price, what is the applicable NAV, how much money will he get in case of redemption, exit loads, folio number, etc. is all taken care of by the RTA.
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2.9 PROCEDURE FOR INVESTING IN AN NFO

The investor has to fill a form, which is available with the distributor. The investor must read the Offer Document (OD) before investing in a mutual fund scheme. In case the investor does not read the OD, he must read the Key Information Memorandum (KIM), which is available with the application form. Investors have the right to ask for the KIM/ OD from the distributor. Once the form is filled and the cheque is given to the distributor, he forwards both these documents to the RTA. The RTA after capturing all the information from the application form into the system, sends the form to a location where all the forms are stored and the cheque is sent to the bank where the mutual fund has an account. After the cheque is cleared, the RTA then creates units for the investor. The same process is followed in case an investor intends to invest in a scheme, whose units are available for subscription on an ongoing basis, even after the NFO period is over.

2.10 INVESTORS RIGHTS AND OBLIGATIONS

Investors are mutual, beneficial and proportional owners of the schemes assets. The investments are held by the trust in fiduciary capacity (The fiduciary duty is a legal relationship of confidence or trust between two or more parties). In case of dividend declaration, investors have a right to receive the dividend within 30 days of declaration. On redemption request by investors, the AMC must dispatch the redemption proceeds within 10 working days of the request. In case the AMC fails to do so, it has to pay an interest @ 15%. This rate may change from time to time subject to regulations. In case the investor fails to claim the redemption proceeds immediately, then the applicable NAV depends upon when the investor claims the redemption proceeds. Investors can obtain relevant information from the trustees and inspect documents like trust deed, investment management agreement, annual reports, offer documents, etc. They must receive audited annual reports within 6 months from the financial year end. Investors can wind up a scheme or even terminate the AMC if unit holders representing 75% of schemes assets pass a resolution to that respect.
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Investors have a right to be informed about changes in the fundamental attributes of a scheme. Fundamental attributes include type of scheme, investment objectives and policies and terms of issue.

Investors can approach the investor relations officer for grievance redressal. In case the investor does not get appropriate solution, he can approach the investor grievance cell of SEBI. The investor can also sue the trustees.

The offer document is a legal document and it is the investors obligation to read the OD carefully before investing. The OD contains all the material information that the investor would require to make an informed decision. It contains the risk factors, dividend policy, investment objective, expenses expected to be incurred by the proposed scheme, fund managers experience, historical performance of other schemes of the fund and a lot of other vital information. It is not mandatory for the fund house to distribute the OD with each application form but if the investor asks for it, the fund house has to give it to the investor. However, an abridged version of the OD, known as the Key Information Memorandum (KIM) has to be provided with the application form.

2.11 TYPES OF MUTUAL FUND SCHEMES

There are a wide variety of Mutual Fund schemes that cater to an investors need whatever be the age, financial position, risk tolerance and return expectations. (A) By Structure 1. Open-Ended Schemes: An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. 2. Close-Ended Schemes: These schemes have a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. Depending on the structure of the scheme there are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net
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asset value (NAV) of the scheme on account of demand and supply situation, expectations of unit holder and other market factors. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV; however one cannot buy units and can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor. 3. Interval Schemes Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. (B) BY NATURE 1. Equity Funds 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

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

2.12 TYPES OF RETURNS

There are three ways, where the total returns provided by mutual funds can be enjoyed by investors:
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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.

The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion.

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Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesnt mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatile.

2.13 REGULATIONS
Regulations ensure that schemes do not invest beyond a certain percent of their NAVs in a single security. Some of the guidelines regarding these are given below: No scheme can invest more than 15% of its NAV in rated debt instruments of a single issuer. This limit may be increased to 20% with prior approval of Trustees. This restriction is not applicable to Government securities. No scheme can invest more than 10% of its NAV in unrated paper of a single issuer and total investment by any scheme in unrated papers cannot exceed 25% of NAV. No fund, under all its schemes can hold more than 10% of companys paid up capital. No scheme can invest more than 10% of its NAV in a single company. If a scheme invests in another scheme of the same or different AMC, no fees will be charged. Aggregate inter scheme investment cannot exceed 5% of net asset value of the mutual fund. No scheme can invest in unlisted securities of its sponsor or its group entities. Schemes can invest in unlisted securities issued by entities other than the sponsor or sponsors group. Open ended schemes can invest maximum of 5% of net assets in such securities whereas close ended schemes can invest upto 10% of net assets in such securities. Schemes cannot invest in listed entities belonging to the sponsor group beyond 25% of its net assets.

2.14 INDUSTRY ASSOCIATION FOR THE MUTUAL FUND INDUSTRY

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AMFI (Association of Mutual Funds in India) is the industry association for the mutual fund industry in India which was incorporated in the year 1995. The Principal objective of AMFI are to: 1) Promote the interests of the mutual funds and unit holders and interact with regulators- SEBI/RBI/Govt./Regulators. 2) To set and maintain ethical, commercial and professional standards in the industry and to recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management. 3) To increase public awareness and understanding of the concept and working of mutual funds in the country, to undertake investor awareness programmes and to disseminate information on the mutual fund industry. 4) To develop a cadre of well-trained distributors and to implement a programme of training and certification for all intermediaries and others engaged in the industry.

2.15 ADVANTAGES OF MUTUAL FUNDS

Mutual Funds give investors best of both the worlds. Investors mo ney is managed by professional fund managers and the money is deployed in a diversified portfolio. Retail investors cannot buy a diversified portfolio for say Rs. 5000, but if they invest in a mutual fund, they can own such a portfolio. Mutual Funds help to reap the benefit of returns by a portfolio spread across a wide spectrum of companies with small investments. Investors may not have resources at their disposal to do detailed analysis of companies. Time is a big constraint and they may not have the expertise to read and analyse balance sheets, annual reports, research reports etc. A mutual fund does this for investors as fund managers, assisted by a team of research analysts, scan this data regularly. Investors can enter / exit schemes anytime they want (at least in open ended schemes). They can invest in an SIP, where every month, a stipulated amount automatically goes out of their savings account into a scheme of their choice. Such hassle free arrangement is not always easy in case of direct investing in shares.

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There may be a situation where an investor holds some shares, but cannot exit the same as there are no buyers in the market. Such a problem of illiquidity generally does not exist in case of mutual funds, as the investor can redeem his units by approaching the mutual fund.

As more and more AMCs come in the market, investors will continue to get newer products and competition will ensure that costs are kept at a minimum. Initially mutual fund schemes could invest only in debt and equities. Then they were allowed to invest in derivative instruments. Gold ETFs were introduced, investing in international securities was allowed and recently real estate mutual funds where also in the process of being cleared. We may one day have commodity mutual funds or other exotic asset classes oriented funds. Thus it is in investors best interest if they are aware of the nitty gritties of MFs.

Investors can either invest with the objective of getting capital appreciation or regular dividends. Young investors who are having a steady regular monthly income would prefer to invest for the long term to meet various goals and thus opt for capital appreciation (growth or dividend reinvestment options), whereas retired individuals, who have with them a kitty and would need a monthly income would like to invest with the objective of getting a regular income. This can be achieved by investing in debt oriented schemes and opting for dividend payout option. Mutual funds are therefore for all kinds of investors.

An investor with limited funds might be able to invest in only one or two stocks / bonds, thus increasing his / her risk. However, a mutual fund will spread its risk by investing a number of sound stocks or bonds. A fund normally invests in companies across a wide range of industries, so the risk is diversified.

Mutual Funds regularly provide investors with information on the value of their investments. Mutual Funds also provide complete portfolio disclosure of the investments made by various schemes and also the proportion invested in each asset type.

The large amount of Mutual Funds offer the investor a wide variety to choose from. An investor can pick up a scheme depending upon his risk/ return profile. All the Mutual Funds are registered with SEBI and they function within the provisions of strict regulation designed to protect the interests of the investor.

2.16 DISADVANTAGES OF MUTUAL FUNDS

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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.

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.

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

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

CHAPTER 3 THE PROJECT

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3.1 OBJECTIVES OF THE PROJECT

To know about the various schemes of ICICI Prudential Mutual Funds. To study the consumer awareness about mutual funds in the city of Ajmer. To know the investment preferences of the people.

3.2 RESEARCH METHODOLOGY AND TOOLS USED

Research tool: Schedule Interview Data type: Primary data Sample type: Perspective and existing customer Sample size: 50

3.3 WORKING OF THE PROJECT

Study of data available on the internet. Through references. Visiting the various organisations offices and know the level of awareness about mutual funds. Visiting prospective and existing consumers along with representatives.

3.4 SPECIFICATIONS OF THE SAMPLE

Age
5 10

21-30 30-50 >50

35

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Gender

20

Male
Female 30

Occupation

12 Salaried Self-employed 38

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Education
5 15 PG UG Others 30

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CHAPTER 4 FACTS, FIGURES AND FINDINGS

4.1 RESPONSES OF PEOPLE TO THE VARIOUS QUESTIONS

Question 1:

What kind of investment you prefer the most?

20

30

MF Others

Sample Size = 50

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Question 2:

While investing your money, which factor you prefer the most?

Sample Size = 50

15 25

Low Risk High Return Company Reputation 10

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Question 3:

Which feature of the mutual funds allures you the most?

Sample size = 50

8 17

Diversifiaction Better return and safety 12 Regular income Tax benefit

13

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Question 4:

From where do you purchase mutual funds?

Sample size = 20

3 6

Directly from AMC Brokers

11
Others

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Question 5:

Which AMC would you prefer to invest?

Sample size = 50
SBAMF 11 UTI Reliance 17 19 HDFC Kotak ICICI Prudential JM Finance 1

Others

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Question6:

How did you come to know about mutual funds?

Sample size = 50
Advertisement 16 15

Peer group
Banks

10

Financial advisors

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Question 7:

How would you like to receive the returns every year?

Sample size= 50
5 10 Dividend payment Dividend reinvestment Growth in NAV 35

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4.2 FINDINGS
Consumers are less aware about mutual funds. They mostly prefer insurance products. People consider diversification as more risky.

4.3 VARIOUS SCHEMES OFFERED BY ICICI PRUDENTIAL

INFRASTRUCTURE FUND It is an open-ended equity fund focused on capturing the opportunity presented by the long term growth potential of the Indian Infrastructure sector. It invests across infrastructure sectors such as Cement, Power, Telecom, Oil and Gas, Construction, Banking etc. Benefits: Multi-sector fund with much lesser concentration risks. The sector provides an attractive investment opportunity based on its long term growth potential. Investor Profile: Investors who prefer a long term investment in equity. Long term investors in debt products who now seek some exposure to equity with steady growth prospects. Key features: Type: Open-ended Equity Fund Investment Pattern: Equity and Equity related instruments in infrastructure sector 70% to 100% & Debt, Money Market Instruments and Call money 0% to 30%. Options: Growth and Dividend Option.

SERVICES INDUSTRIES FUND

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It is created to invest in the services sector encompassing the above drivers of India's growth through sectors like Auto components, Banking and Financial services, Health Care, Hotels, Media and Entertainment, Trade and Retail, IT and IT Enabled Services, Telecom, Transportation, etc. Benefits: Multi-sector fund with much lesser concentration risks. High and secular growth potential offered by the sector makes investment a promising proposition. Investor Profile: Investors seeking to capture the growth opportunity in the services sector by way of a long term investment in equity asset class. Key features: Type: Open-ended Equity Fund Investment Pattern: Equity and Equity related instruments in services sector 70% to 100% & Debt, Money Market Instruments and Call money 0% to 30%. Options: Growth, Dividend Payout and Dividend Reinvestment Option.

FMCG FUND It is a diversified sector fund that invests in companies which are benefiting from the consumption boom in the Indian economy. Benefits: Enables the investor to allocate his equity assets according to his sectoral preferences and use the fund to implement his views on the sector. The fund also enables investors to diversify in terms of style into sharply focused thematic fund investing in FMCG sector. Investor Profile: Investors who like to sacrifice some diversification, in the interest of pursuing a sector strategy. Investors who view the fund in the context of their existing portfolio, rather than choose the fund as a stand alone product. Investors who prefer the FMCG sector for their investments.
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Key features: Type: Open-ended FMCG Sectoral Fund Investment Pattern: Equity & Equity related in FMCG Companies 90% in & Debt, Money Market and Cash 10%. Options: Growth & Dividend.

DYNAMIC PLAN It is a diversified equity fund that could be your ideal choice to make the most of dynamic changes in the market. It has the agility to capture upside opportunities across value and growth , large and midcap , index and non-index stocks. On the flip side it also has ability to move into cash as markets get overvalued. Benefits: Has the agility, aimed at capturing upside opportunities in the market across market capitalizations. On the flip side, in case stock markets get into an over valued position, the plan has the ability to switch to cash thus seeking to limit the downside. Investor Profile: It is more suited for conservative or risk-averse investors who have a long term investing horizon of more than five years. Key features: Type: Open-ended Equity fund. Investment Pattern: 0 - 100% = Equity & Equity related securities. 0 - 100% = Debt & Money Market Instruments. Options: Growth & Dividend.

TAX PLAN It allows you to harness the benefits of long term equity investing in addition to helping you save tax. Benefits: Investments in ICICI Prudential Tax Plan are eligible for tax benefits, upto an amount of Rs. 1,00,000.

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Investor Profile: It is suited for patient investors who have a long term investing horizon of 3-5 years and at the same time are looking at tax saving. Key features: Type: Open-ended Equity Linked Saving Scheme Investment Pattern: Equity & Equity related instruments upto 90% & Debt, Money Market and Cash upto 10%. Default options: Dividend Reinvestment.

GROWTH PLAN If you are looking to build a core portfolio in equity then the ICICI Prudential Growth Plan could just be the investment option for you. Benefits: It allows you to invest in a portfolio targeted at large-cap stocks which are the best picks in their respective sectors. Your risk is expected to be mitigated as the fund is diversified across sectors.

Investor Profile: You seek long term capital appreciation through a diversified portfolio of largecap stocks. You seek lower volatility as large-cap stocks have better business stability over business cycles. Key features: Type: Open-ended Equity Fund Investment Pattern: Equity & Equity related 95% & Debt, Money Market and Cash 5%. Default options: Growth & Dividend.

INDEX FUND It offers a passive choice to investors, who like to stay invested in the CNX S&P Nifty index of 50 stocks. Such investors prefer that their portfolio closely maps the market index.
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Benefits: It enables investors to seek an exposure to the index stocks, in the same proportion as they are found in the index. Investor Profile: Investors who like the passive investment philosophy and do not expect out performance of an index, but simple tracking of the same. Key features: Type: Open-ended Index Linked Growth Scheme Investment Pattern: Equity stocks drawn from the components of the S&P CNX Nifty and the exchange traded derivatives on the S&P CNX Nifty - upto 100%. Money Market instruments - upto 10%. Options: Nifty Plan. Cumulative Option.

CHILDCARE STUDY OPTION PLAN It is an investment instrument specially designed to help you give your child a head start in life. Benefits: Scholarship Program: We have specially designed a scholarship programme to provide financial assistance to deserving and meritorious students to pursue their higher education. Personal Accident Cover (for resident applicants): Till your child attains the age of 18 or till units are redeemed (whichever is earlier), you as her parent / legal guardian will be eligible for a Personal Accident Cover equivalent to 10 times the value of the Units you have purchased (value at purchase price) subject to a maximum of limit of Rs. 5 lakhs. Investor Profile: Consider this plan if your child is in the age group of 13-17 years and you are looking to save over a short term horizon. Key features: Type: Open ended fund ( Study Plan)

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Investment Pattern: Equity and Equity related securities 0-15%, Debt Securities, Money Market Instruments, Securitised Debt and Cash (including money at call) 85-100%.

Options: Cumulative Option

BALANCED FUND It takes care of asset allocation by investing in equity for capital appreciation and debt for stable returns. It focuses on reducing volatility of returns by increasing / decreasing equity exposure based on the market outlook and using a core debt portfolio to do the rebalancing. Benefits: Balanced fund brings you the twin benefits of growth from equity markets and steady income from debt markets. Investor Profile: Investors seeking exposure to equity and debt markets in a single product, and are willing to accept the average returns from both markets as a trade-off for the benefit of lower risk from diversification. Key features: Type: Open ended Balanced Fund Investment Pattern: Equity and Equity related instruments - 65% to 80% & Debt, Money Market and Cash - 20% to 35%. Options: Growth & Dividend

INCOME MULTIPLIER FUND It is predominantly invested in fixed income securities. However, if you would like a measured and limited exposure to equity to enhance your returns. Benefits: Limited exposure to equity has the power to spike up the basic debt portfolio, adding some growth to the income from debt. The core portfolio being invested in debt provides stability to the investment.

Investor Profile:

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You invest in debt for income, but are concerned about interest rate risk in pure debt funds and therefore are willing to take a limited equity exposure. You are focused on income, and like growth only to the extent that it does not bring in larger risks.

Key features: Type: Open-ended Debt Fund which invests upto 30% in equity. Investment Pattern: Equity & Equity Related securities 0-30%, Debt Instruments 65-100%, Cash & Money Market Instruments 0-5%. Options: Cumulative & Dividend (Monthly) Option.

MONTHLY INCOME PLAN Inflation has been impacting your low fixed returns and you are now seeking a better performance for your investments that does not assume high risks. ICICI Prudential Monthly Income Plan is your kind of product. Seeking to generate regular income with stability, and lower risk. Benefits: Investment in a conservative debt portfolio with limited equity exposure. Opportunity to earn better risk-adjusted returns. Possibility of stable and regular income. Investor Profile: You invest in debt for income, but are concerned about interest rate risk in pure debt funds and therefore are willing to take a limited equity exposure. You are focused on income, and like growth only to the extent that it does not bring in larger risks. Key features: Type: Open-ended Income Fund with no assured returns Investment Pattern: Debt Securities, money market instruments, securitised debt and Cash upto 85%, Equity and equity related securities 15%. Options: Dividend (Monthly, Quarterly, Half Annually) and Cumulative. Automatic Encashment Plan (AEP) also offered. INCOME PLAN
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It is for those investors who seek to deploy part of their funds in fixed income products as a conscious investment option. The fund enables you to earn a total returnmade up of both interest income and changes in the value of capital, a facility that comes only with debt funds that do not restrict themselves to generating merely interest income. As market interest rates change, the value of your portfolio also changes, creating a total return portfolio in debt securities. Benefits: Strategic deployment of funds in the debt markets as part of an overall asset allocation to fixed income securities. Participation in markets that are large and institution-dominated. Potential to earn total return from both interest and capital gains, with the attendant risks of capital loss as well. Investor Profile: Investors seeking exposure to long term debt markets. Investors seeking to earn total return rather than interest income alone. Investors seeking to participate in a portfolio of debt securities over the long term. Key features: Type: Open-ended Debt Fund Investment Pattern: Debt Securities upto 75% & Money Market & Cash upto 25% Options: Growth/Growth-AEP (Appreciation & Regular) and Dividend (Quarterly & Half Yearly). GILT FUND (INVESTMENT PLAN) These kind of investments not just in debt securities, but also in instruments with zero default risk. Along with interest income from our investments, we want the security that comes from knowing that it originates from the highest quality borrower in the system, namely the Government of India. Benefits: Enables exposure to a pure Government security portfolio.
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Facilitates participation in the wholesale market for Government debt, even for smaller ticket-size exposures. Provides the benefits of professional management of investment portfolios.

Investor Profile Are mandated by their regulations to invest only in Government securities. Do not like to take any credit risks. Have a long term investing horizon and are willing to assume risks in the short to medium term. Key features: Type: Open-ended medium-term Gilt Fund Investment Pattern: Gilt Securities (incl. Treasury Bills). Average Maturity normally not to exceed 8 years. Options: Growth/Growth-AEP & Dividend (Half Yearly)

GILT TREASURY PLAN These kind of investments not just in debt securities, but also in instruments with zero default risk. Along with interest income from our investments, we want the security that comes from knowing that it originates from the highest quality borrowers in the system, namely the Government of India / State governments. ICICI Prudential Gilt Fund is completely focused on such debt securities issued by the Government. Benefits Enables exposure to a pure Government security portfolio. Facilitates participation in the wholesale market for Government debt, even for smaller ticket-size exposures. Provides the benefits of professional management of investment portfolios.

Investor Profile Are mandated by their regulations to invest only in government securities. Do not like to take any credit risks. Have short term investment horizon of 3-6 months. Want to take limited interest rate risk. Key features:
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Type: Open-ended short-term Gilt Fund Investment Pattern: Gilt Securities (incl. Treasury Bills). Average Maturity normally not to exceed 3 years. Options: Growth/Growth-AEP & Dividend (Quarterly & Half Yearly)

FLEXIBLE INCOME PLAN It seeks to actively manage such risks as a conscious investment strategy by allowing the fund manager to switch the allocation from a 100% debt stance to a 100% cash stance, which provides the flexibility to implement yield curve strategies. (or manage interest rate volatility better). Benefits: Strategic deployment of funds in the debt markets to take advantage of interest rate risks. Participation in markets that are large and institution-dominated. Ability to earn total return from both interest and capital gains, with the attendant risks of capital loss as well. Investor Profile: Seek exposure to long term debt markets. Want to earn total return rather than interest income alone.

Key features: Type: Open-ended Income Fund Investment Pattern: 10 - 100% = Money market and Debentures with residual maturity of less than 1 year. 0 to 90% = Debt instruments with maturity more than 1 year. Options: Cumulative and Dividend Reinvestment (Daily & Weekly

Frequencies) LONG TERM FLOATING RATE PLAN This Plan enables such a focus on interest rates, creating a portfolio that responds to these changes and minimises their impact. It further extends this benefit by tapping into products whose interest rates are benchmarked to longer term rates. Benefits:
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Focus on accrual income that derives from floating rate instruments. Reduced interest rate risk of longer term instruments.

Investor Profile Investors who believe that interest rates in the short to medium term could increase. Investors who prefer floating rate interest income, over gains / losses from changes in portfolio value Key features: Type: Open-ended Income Fund (Long Term Floating Rate Plan) Investment Pattern: 65 - 100% = Floating Rate Debt Instruments. 0-35% = Fixed rate debt instruments. Options: Cumulative and Dividend Reinvestment (Quarterly)

SHORT TERM PLAN It enables deploying of funds for shorter periods of time, from 3 months to 1 year. Benefits: Enables appropriate matching of investor time horizon. Funds that are not required for a short term need not be kept as liquid cash only. Enables participation in short term debt market, which is a large scale institutional market. Investor Profile: Investors with large fund flows pending deployment in long term products. Investors who have a known fund requirement in the near term in future.

Key features: Type: Open Ended Income Fund Investment Pattern: Debt Securities upto 100%,Money Market Instruments and Cash upto 50%. Options: Cumulative Option and Dividend Reinvestment Option (Fortnightly & Monthly) LIQUID PLAN
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The fund allows you to enjoy the flexibility of withdrawing the cash when you need, while earning on it when you don't. Benefits: Enables fruitful deployment of idle cash. Ensures high level of liquidity and flexibility to access cash invested at a day's notice. Offers a low risk option to invest in mutual funds.

Investor Profile: Large swings in cash balances. Cyclical patterns in cash flows

Key features: Type: Open-ended Liquid Income Fund Investment Pattern: Open-ended Liquid Income Fund Options: Growth, Dividend Payout (Quarterly, Half Yearly & Yearly), Dividend Reinvestment (Daily, Weekly, Monthly, Quarterly, Half Yearly & Yearly).

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CHAPTER 5 CONCLUSION
Only a few of the respondents have invested or are about to invest in different schemes of mutual fund companies. The investors prefer investing more in other alternatives, which shows that they want security, and assured returns. Others than Banks and post office the next preference of investors who go for risky preposition in shares and Mutual Funds. That is basically due to misconception that Mutual Fund Companies usually invest in equity market, which shakes trust of people in Mutual Fund. Mutual funds are also preferred because of the cost effectiveness and higher income by investing in equity schemes. Professional and Business class, which is considered to be the most knowledgeable class of the region, prefers Mutual Funds less compare to service class.

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REFERENCES

1. 2. 3. 4.
5.

http://www.icicipruamc.com http://www.google.co.in http://en.wikipedia.org http://www.amfiindia.com http://www.mutualfundsindia.com

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APPENDIX I QUESTIONNAIRE
1. What kind of investments you prefer the most? a. Savings Account b. Fixed Deposits c. Insurance d. Mutual Funds e. Post Office - NSC f. Shares/Debentures g. Gold/Silver h. Real Estate

2. While investing your money, which factor you prefer the most? a. Low Risk b. High Return c. Company reputation

3. Which feature of the mutual funds allures you the most? Diversification Better return and safety Regular income Tax benefit [ [ [ [ ] ] ] ]

4. From where you purchase mutual funds? Directly from the AMCs Brokers only Other sources [ [ [ ] ] ]

5. Which AMC would you prefer to invest? a. SBAMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI Prudential g. JM Finance 6. How did you come to know about mutual funds? a. Advertisement b. Peer Group c. Banks d. Financial Advisors

7. How would you like to receive the returns every year? a. Dividend payment b. Dividend re-investment c. Growth in NAV

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8. Personal Details: (a) Name: (b) Age: (c) Qualification: Post Graduate (d) Occupation: Salaried Self-employed Under Graduate Other

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APPENDIX II SOME KEY TERMS

NET ASSET VALUE (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date. SALE PRICE Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. REPURCHASE PRICE Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related. REDEMPTION PRICE Is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV related. SALES LOAD Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes. REPURCHASE OR BACK-END LOAD Is a charge collected by a scheme when it buys back the units from the unit holders.

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