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A
RESEARCH PAPER
ON

OPPORTUNITIES IN INDIAN MARKET
OF MUTUAL FUNDS INVESTMENT

























Submitted to Submitted By

Prof. Meghna Dangi Razin Gajiwala
Chirag Singhvi

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Table of Contents




INTRODUCTION 1
WHAT IS MUTUAL FUNDS 1
WORKING OF THE MUTUAL FUNDS 1
CONCEPTUAL FRAMEWORK 2
NET ASSET VALUE (NAV) 4
SALE PRICE 4
REPURCHASE PRICE 4
REDEMPTION PRICE 4
SALES LOAD 4
REPURCHASE OR BACK-END LOAD 4
ASSET 4
ASSET CLASS 4
BALANCED FUND 5
DEFINING MUTUAL FUNDS INDUSTRIES 6
ASSETS UNDER MANAGEMENT 6
OWNERSHIP MUTUAL FUNDS 6
HISTORY OF MUTUAL FUND INDUSTRY 6
TYPES OF MUTUAL FUNDS SCHEMES IN INDIA 8
1. OPEN - ENDED SCHEMES 8
2. CLOSE - ENDED SCHEMES 8
3. INTERVAL SCHEMES: 8
OVERVIEW OF EXISTING SCHEMES EXISTED IN MUTUAL FUND CATEGORY
9
1. EQUITY FUND 9
2. DEBT FUNDS: 9
3. BALANCED FUNDS: 10
TYPES OF RETURNS 12
RATIONALE OF THE PAPER 13
OBJECTIVES OF THE RESEARCH 13
LITERATURE REVIEW 14
METHODOLOGY 15

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MAJOR FINDING 16
INDIAN MUTUAL FUNDS FUTURE - GROWTH FACTS 17
TEN ADVANTAGES OF INVESTING IN MUTUAL FUNDS 18
DISCUSSION AND ANALYSIS OF RESULTS 19
REFERENCES 22


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DECLERATION







I hereby declare that this Research Paper entitled OPPORTUNITIES IN INDIAN
MARKET OF MUTUAL FUNDS INVESTMENT submitted for the assignment of
the requirement Bachelors of Business Administration (BBA) for Auro University is
based on secondary data found by me in various Companies fact sheets, books,
magazines and websites & Collected by me in under guidance of Prof. Meghna
Dangi.

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INTRODUCTION

What is 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 realized 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.

Working of the mutual funds







2
Conceptual Framework



Mutual fund is a trust that pools money from a group of investors (sharing common
financial goals) and invest the money thus collected into asset classes that match the
stated investment objectives of the scheme. Since the stated investment objectives of a
mutual fund scheme generally forms the basis for an investor's decision to contribute
money to the pool, a mutual fund can not deviate from its stated objectives at any
point of time.

Every Mutual Fund is managed by a fund manager, who using his investment
management skills and necessary research works ensures much better return than
what an investor can manage on his own. The capital appreciation and other incomes
earned from these investments are passed on to the investors (also known as unit
holders) in proportion of the number of units they own.









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4

Defining Variabls

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.

Asset:

Item of value. In this module, asset refers to financial assets, such as stocks and
bonds.
Asset class:

A category of financial asset, such as stocks, bonds or real estate.



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Balanced fund:

A mutual fund that invests in a mix of stocks and bonds to take advantage of both the
growth potential stocks provide and the income stream bonds typically provide and to
reduce risk. Also called a hybrid fund.

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Defining Mutual Funds Industries

Assets under management

The indian mutual funds industries a fast growing industry .
Indian mutual funs industries generated substaintial growth in under managment over
the past 10 years. Most of the money flow in equity funds it from indivisual
investment.
One notable charactric of indian mutual fund market is the high parcentage of share
owened by corporations.

Ownership Mutual Funds

According to association of mutual funds in india indivisual investors held slightly
under 50% of mutual funds assets and corporation held slightly over 50% as of the
end march 2007.







History of mutual fund industry



In India, the mutual fund industry started with the setting up of the erstwhile Unit
Trust of India in 1963. Public sector banks and financial institutions were allowed to
establishmutual funds in 1987. Since 1993, private sector and foreign institutions
were permitted to set upmutual funds.
In February 2003, following the repeal of the Unit Trust of India Act 1963 the
erstwhile UTI was bifurcated into two separate entities viz.The Specified Undertaking
of the UnitTrust of India, representing broadly, the assets of US 64 scheme, schemes
with assured returns and certain other schemes and UTI Mutual Fund conforming to
SEBI Mutual Fund Regulations.
As at the end of March 2008, there were 33 mutual funds, which managed assets of
Rs. 5,05,152 crores (US $ 126 Billion)* under 956 schemes. This fast growing
industry is regulated by the Securities and Exchange Board of India (SEBI).



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Types of Mutual Funds Schemes in India

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

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Overview of existing schemes existed in mutual fund
category
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

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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.

4. 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.




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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.



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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.

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Rationale of the paper

India is developing country there are always market rise and fall I want to find out
the opportunities for the investors through this research with the help of these research
we are able to find out when the mutual fund more risky .

We also know about the advantages and disadvantages of mutual fund investment in
Indian market










Objectives of the research



To know about the opportunities in Indian market.
To give a brief idea about the benefits available from Mutual Fund investment.
To give an idea of the types of schemes available.
To discuss about the market trends of Mutual Fund investment.
To give an idea about the regulations of mutual funds.


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Literature Review

May 2009 Project report by shailendra kaswan
The topic of project was mutual funds A case study and survey. After the research
works Mr. Shailendra Kaswan concluded that mutual fund industry is enlarging its
size in India investors are willing pour money in mutual funds. Despite some
temporary registrants, other economic modes are in favorable mode. Thus we need
proper management of advisory services more schemes financial advisor and
institution to cater the market.

Industry need to revise its business strategy. Investors perception is not prioritized
yet instead of completing target, advisors working under institutions should consider
the requirements of the investors. We need changing pattern of selling mutual funds.


December 2008 Project report by Mr. Vimal Joshi

The topic was A comparative study between mutual fund offered by various
companies in Indian market. After analysis Mr. Vimal Joshi concluded that Kodak
opportunity fund is diversified aggressive fund and it is an open ended equity scheme
and he said that in this time of fund the risk is high. And in frankline flaxicab fund is
also near about same as Kodak opportunity fund but in this fund the returns of more
then three AMCs (HDFC,RELAINCE and HSBC). In Reliance equity opportunity
the return is medium compare to other AMCs But in HSBC core and satellite fund
the return is low compare to other AMCs . And HSBC India opportunity fund is low
risky fund.

April 2008 Project report by Mr. Vikash kumar


The topic was a study of preferences of investors for investment in mutual funds for
the SBI mutual funds. Mr. Vikash kumar concluded that most of the investors dont
invest in Sbi mutual fund due to non awareness. And he adds that most of the
investors of patna had invested in reliance or UTI mutual funds and ICICI mutual
funds also has good brand position among them. And Sbi mf places after ICICI
mutual fund according to respondents. The most portfolio are equity second most is
balance and least prefer portfolio was debts portfolio. Most of the investors doesnt
want to invest in sectored fund. And he observed that many people have the fear of
mf. They need information brand place and important role and SBI mf UTI mf ICICI
mf etc. are well non brand so they are doing well.

September 2008. Project Report by Amit Yadav

The topic was A project report on comparison of various funds. After analyzing and
studying Mr. Amit yadav give the ranking to the fund on three yearly return basis that
DSPML equity vis on first, kotak 30 is on second, and HDFC equity he puts on third
while he put franklin India prima he put on fourth and on fifth he put the TATA pure.

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Methodology

Research Design

A method and system a statical analysis based on past history to facilitate the
investment process. respective fund using a principal factor such as cumulative
growth and stability. For tracking investment, upper and lower control limits are
defined according to standard deviation of average total return over predetermine
period of time to improve chances of the investors achieving a profit as well as a near
optimum performance. .


This research methodology helps us to give information about the opportunities of
mutual funds investment. It will help to study the market of mutual funds better.

Sample Design

All mutual fund companies and there return on investment.


Tools of data collection

There are many methods of data collection which can be used according to nature and
type of research. I will use following data for the research purpose.

My research only the basis of secondary data.

Secondary data
Articles
Factsheet
Management generals
Annual report
Research papers
Internet
Companies product voucher
News papers

Tools for data Analysis

1. Return on investment
2. Graph
3. Chart


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Major Finding


After valuvation of the data I am finding out some positive and some negative result
for Indian market mutual funds opportunities.

Positive results:

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.



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Future of Mutual Funds in India
Financial experts believe that the future of Mutual Funds in India will be very bright.
It has been estimated that by March-end of 2010, the mutual fund industry of India
will reach Rs 40,90,000 crore, taking into account the total assets of the Indian
commercial banks. The estimation was based on the December 2004 asset value of Rs
1,50,537 crore. In the coming 10 years the annual composite growth rate is expected
to go up by 13.4%. Since the last 5 years, the growth rate was recorded as 9%
annually. Based on the current rate of growth, it can be forecasted that the mutual
fund assets will be double by 2010.

Indian Mutual Funds Future - Growth Facts

In the past 6 years, Mutual Funds in India have recorded a growth of 100 %.
In India, the rate of saving is 23 %.
In the future, there lies a big scope for the Indian Mutual Funds industry to
expand.
Several asset management companies which are foreign based are now
entering the Indian markets.
A number of commodity Mutual Funds will be introduced in the future. The
SEBI (Securities Exchange Board of India) has granted the permission for the
same.
More emphasis is put on the effective Mutual Funds governance.

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There is also enough scope for the Indian Mutual funds to enter into the semi-
urban and rural areas.
Financial planners will play a major role in the Mutual Funds market by
providing people with proper financial planning.

TEN ADVANTAGES OF INVESTING IN MUTUAL FUNDS

_ Professional Management
_ Diversification
_ Convenient Administration
_ Return Potential
_ Low Costs
_ Liquidity
_ Transparency
_ Flexibility
_ Choice of Schemes
_ Well Regulated

Negative results:

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 him self, 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.




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Discussion and analysis of results

After evaluvating the result there are lots of opportunities in investment in Indian
market .
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 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 unit, which is the value,
represented by the ownership of one unit in the Fund. It is calculated simply by
dividing the net asset value of the Fund by the number of units. However, most people
refer loosely to the NAV per unit as NAV, ignoring the per unit. We also abide by
the same convention.
Calculation of NAV
The net asset value is the actual value of a unit on any business day. NAV is the
barometer of the performance of the scheme.
The net asset value is the market value of the assets of the scheme minus its liabilities
and expenses. The per unit NAV is the net asset value of the scheme divided by the
number of the units outstanding on the valuation date.

Interest Rate Risk: In a free market economy interest rates are difficult if not
impossible to predict. Changes in interest rates affect the prices of bonds as well as
equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be
negatively affected as well in a rising interest rate environment. A well-diversified
portfolio might help mitigate this risk.
some investment in equities might help mitigate this risk.



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Limitations

The time constraint was one of the major problems.
The study is limited to the different schemes available under the mutual funds
selected.
The study is limited to selected mutual fund schemes.
The lack of information sources for the analysis part.





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Conclusion


Looking at the past developments and combining it with the current trends it can be
concluded that the future of Mutual Funds in India has lot of positive things to offer to
its investors.






















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References





1. http://www.xylog.com.my/unitrust.html

2. http://www.sec.gov/rules/final/ic-26031.htm


3. http://www.3i-infotech.com/content/mutual_funds/mutual_fund_software.aspx

4. http://onlinetradinginvesting.com/2010/05/31/mutual-funds-of-india-a-great-
online-investment-opportunity/


5. http://www.getmoneyrich.com/investment-opportunities-in-india-
infrastructure-mutual-funds/

6. http://investing.blogandinfo.com/2010/08/14/various-segments-of-mutual-
funds-in-india/


7. http://www.jagoinvestor.com/2010/08/best-equity-diversified-mutualfund

8. http://discuss.itacumens.com/index.php?topic=8313.0#ixzz0jteFX6UP


9. http://www.nrimutualfunds.com

10. http://www.indiacatlog.com


11. http://www.itrust.in/forum/mutual-funds/list-of-top-10-mutual-fund-
companies-in-india/2193.page