PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

A
RESEARCH PAPER
ON

OPPORTUNITIES IN INDIAN MARKET OF

MUTUAL FUNDS INVESTMENT
PIONEER

(Since 1996)

Submitted to
Submitted By
Prof. Dr. V K Jain
Ravendra Kushwaha
RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

Prof. Nidhi Kothari
MBA 3rd sem
Roll. No. 09010118
DECLERATION

I hereby declare that this Research Paper entitled OPPORTUNITIES IN INDIAN MARKET
OF MUTUAL FUNDS INVESTMENT submitted for the extra co curriculum activities
fulfillment of the requirement of Master of Business Administration (MBA) of PIONEER
INSTITUTE OF PROFESSIONAL STUDIES INDORE 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. Nidhi Kothari.

DATE:

RAVENDRA KUSHWHA

Ravendra Kushwaha
MBA 3rd sem.
Roll no. 09010118

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

THE

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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

Difining 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.
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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

Difining Mutual Funds Industry
Assets under managment
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).

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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 closeended 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.

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.
RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

Short Term Plans (STPs): Meant for investment horizon for three to six months.
These funds primarily invest in short term papers like Certificate of Deposits (CDs)
and Commercial Papers (CPs). Some portion of the corpus is also invested in
corporate debentures.
Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments
like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are
meant for short-term cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on risk-return
matrix and are considered to be the safest amongst all categories of mutual funds.
3. Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment objective
of the scheme. These schemes aim to provide investors with the best of both the worlds.
Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter
viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
objective and invest accordingly.
By investment objective:
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of
these schemes is to provide capital appreciation over medium to long term. These
schemes normally invest a major part of their fund in equities and are willing to bear
short-term decline in value for possible future appreciation.
Income Schemes:Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes
generally invest in fixed income securities such as bonds and corporate debentures.
Capital appreciation in such schemes may be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These
schemes invest in both shares and fixed income securities, in the proportion indicated
in their offer documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer,
short-term instruments, such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money.
RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

Other schemes
Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to
time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings
Scheme (ELSS) are eligible for rebate.
Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that
constitute the index. The percentage of each stock to the total holding will be identical to the
stocks index weightage. And hence, the returns from such schemes would be more or less
equivalent to those of the Index.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries
as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer
Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may give higher returns,
they are more risky compared to diversified funds. Investors need to keep a watch on the
performance of those sectors/industries and must exit at an appropriate time.
Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:
Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution.
If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit. Funds
will also usually give you a choice either to receive a check for distributions or to
reinvest the earnings and get more shares.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

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

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

Technology used
Softwares

MFund / AM: A comprehensive client-server based application suite, that streamlines fund
accounting, valuation, investment management, and lending operations. It is designed for
mutual funds, unit trusts, asset management companies and other financial institutions
MFund / ISS: A Web-based Investor Services System that helps Unit Trust Management
Companies cost-efficiently streamline the growing and dynamic needs of managing and
serving the needs of investors of mutual fund schemes.
MFund / Dealing: A comprehensive front-office automation system for investment managers
addressing requirements in the dealing, pre-dealing, decision support, intent generation and
order management areas.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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
RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.
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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

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.

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11

PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE

References and Bibliography

Websites
http://www.xylog.com.my/unitrust.html
http://www.sec.gov/rules/final/ic-26031.htm
http://www.3i-infotech.com/content/mutual_funds/mutual_fund_software.aspx
http://onlinetradinginvesting.com/2010/05/31/mutual-funds-of-india-a-great-online-investmentopportunity/
http://www.getmoneyrich.com/investment-opportunities-in-india-infrastructure-mutual-funds/
http://investing.blogandinfo.com/2010/08/14/various-segments-of-mutual-funds-in-india/
http://www.jagoinvestor.com/2010/08/best-equity-diversified-mutualfund
www.wikipedia.com
http://discuss.itacumens.com/index.php?topic=8313.0#ixzz0jteFX6UP
http://www.nrimutualfunds.com
http://www.indiacatlog.com
http://www.itrust.in/forum/mutual-funds/list-of-top-10-mutual-fund-companies-inindia/2193.page
BIBLOGRAPHY
Kothari, C.R. (Research methodology, new delhi2001)
May 2009 . Shailendra Kaswan.
December 2008.. ..Mr. vimal Joshi
April2008. MR. Vikash Kumar
September 2008. ..Mr. Amit Yadav

RAVENDRA KUSHWHA

MBA III Sem.

Batch 2009-11