Report On Mutual Funds

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INTRODUCTION OF MUTUAL FUNDS

Mutual funds have become a very popular way to take some of the risk out of
investing in individual stocks by investors. Mutual funds are a collection of stocks
selected by mutual fund seller and sold to investors as shares in a fund. There are
several types of funds that you can invest in. Some of the more popular types are
technology funds, growth funds, security funds, and income funds. Mutual funds are
very popular because they allow you to invest in a numbers of stocks therefore
greatly reducing the risks associated with putting you money in an individual stock.
Mutual funds have become one of the most attractive ways for the average person
to invest their money. A mutual fund pools resources from thousands of investors
and then diversifies its investment into many different holdings such as stocks,
bonds, or government securities in order to provide high relative safety and returns.
Mutual Funds now represents perhaps the most appropriate opportunity for most
investors. It is no wonder that birthplace of mutual funds - the U.S.A.- the fund
industry has already overtaken the banking industry. The Indian industry has
already started opening up many of the exciting investment opportunities to Indian
investors.
Though not insured like banks, mutual funds generally provide more return than the
current one to two percent obtainable through banks while still being one of the
safest ways to grow your money. There are an endless variety of mutual fund
investment choices depending on the degree of risk you feel comfortable with.
Mutual Funds have emerged as professional intermediaries. Besides providing the
expertise in stock market investing, these funds allow investing in small amounts
and yet holding a diversified portfolio to a limit.
HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
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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 and started its
operations in 1964 with the issue of units under the scheme US-64. 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 LTI 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
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,
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functioning under an administrator and under the rules framed by Government of

India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000
crores of 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. As at the end of October 31, 2003, there
were 31 funds, which manage assets of Rs. 126726 crores under 386 schemes.
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking
of the Unit Trust of India effective from February 2003. The Assets under
management of the Specified Undertaking of the Unit Trust of India has therefore
been excluded from the total assets of the industry as a whole from February 2003
onwards.
Currently Public Sector Banks like SBI, Canara Bank, Bank of India, institutions
like IDBI, GIC, LIC Foreign Institutions like Alliance, Morgan Stanley, Templeton and
Private financial companies like HDFC, Prudential ICICI, DSP Merrill Lynch,
Sundaram, Kotak Mahindra etc. have floated their own mutual funds.
WHAT IS MUTUAL FUND

A Mutual Fund is a vehicle for investing in stocks and bonds. It is not an alternative
investment option to stocks and bonds; rather it pools the money of several
investors and invests this in stocks, bonds, money market instruments and other
types of securities. Buying a mutual fund is like buying a small slice of a big pizza.
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The owner of a mutual fund unit gets a proportional share of the fund's gains,
losses, income and expenses.
A Mutual Fund is a body corporate registered with the Securities and Exchange
Board of India (SEBI), that pools up the money from individual/ corporate investors
and invests the same on behalf of the investors /unit holders, in equity shares,
Government securities, Bonds, Call money markets etc., and distributes the profits.
In other words, a mutual fund allows an investor to indirectly take a position in a
basket of assets. A mutual fund pools together sums from individual investors and
invests it in various financial instruments. Each mutual fund has its own investment
objective.
Mutual funds have become one of the most attractive ways for the average
person to invest their money. A mutual fund pools resources from thousand of
investors and then diversifies its investment into many different holdings such as
stock, bonds, and securities in order to provide highly relative safety and returns.
Each Mutual Fund with different type of schemes is managed by respective Asset
Management Company (AMC). An investor can invest his money in one or more
schemes of Mutual Fund according to his choice and becomes the unit holder of the
scheme. The invested money in a particular scheme of a Mutual Fund is then
invested by fund manager in different types of suitable stock and securities, bonds
and money market instruments. Each Mutual Fund is managed by qualified
professional man, who use this money to create a portfolio which includes stock and
shares, bonds, gilt, money-market instruments or combination of all.
DISTINGUISHING CHARACTERISTICS OF MUTUAL FUND

The traditional, distinguishing characteristics of the mutual fund may include the
following:
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Investors purchase mutual fund shares from the fund itself (or through a
broker for the fund) instead of from other investors on a secondary market
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The price that investors pay for mutual fund shares is the fund's per share net
asset value (NAV) plus any shareholder fees that the fund imposes at the time of
purchase (such as sales loads).
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Mutual fund shares are "redeemable," meaning investors can sell their shares
back to the fund (or to a broker acting for the fund).
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Mutual funds generally create and sell new shares to accommodate new
investors. In other words, they sell their shares on a continuous basis, although
some funds stop selling when, for example, they become too large.
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The investment portfolios of mutual funds typically are managed by separate
entities known as "investment advisers" that are registered with the SEBI.
MAJOR RIGHTS AS A UNIT HOLDER IN A MUTUAL FUND
Some important rights are mentioned below:
Unit holders have a proportionate right in the beneficial ownership of the

assets of the scheme and to the dividend declared.
They are entitled to receive dividend warrants within 42 days of the date of
declaration of the dividend.
They are entitled to receive redemption cheques within 10 working days from
the date of redemption.
the
75% of the unit holders with the prior approval of SEBI can terminate AMC of
fund.
75% of the unit holders can pass a resolution to wind-up the scheme
REGULATORY BODY FOR MUTUAL FUNDS

Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual
funds mentioned above. All the mutual funds must get registered with SEBl. The
only exception is the UTI, since it is a corporation formed under a separate Act of
Parliament.
Broad Guidelines Issued by SEBI for a MF: SEBI is the regulatory authority of Mutual Funds. SEBl has the following broad
guidelines pertaining to mutual funds:
Mutual Funds should be formed as a Trust under Indian Trust Act and should
be operated
by Asset Management Companies (AMCs).
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Mutual Funds need to set up a Board of Trustees and Trustee Companies.

They should also have their Board of Directors.
The net worth of the AMCs should be at least Rs.5 crore.
AMCs and Trustees of a Mutual Fund should be two separate and distinct
legal entities
The AMC or any of its companies cannot act as managers for any other fund
AMCs have to get the approval of SEBI for its Articles and Memorandum of
Association
All Mutual Funds schemes should be registered with SEBI.
Mutual Funds should distribute minimum of 90% of their profits among the
investors
There are other guidelines also that govern investment strategy, disclosure norms
and advertising code for mutual funds.
ROLE OF A FUND MANAGER

Fund managers are responsible for implementing a consistent investment strategy
that reflects the goals and objectives of the fund. Normally, fund managers monitor
market and economic trends and analyze securities in order to make informed
investment decisions. Thus the role of fund manager is very crucial.
ACCOUNT STATEMENT
When the units are bought or get allotted a statement will be issued mentioning the
number of units allotted/bought and redeemed by you. The recording of entries
would be similar to the passbook entries in the bank. In mutual fund terminology it
is called Account Statement.
After investing in a mutual fund investor gets an account statement, which shows
his holding and the price at which bought units. The account statement is computer
generated and cannot be traded or transferred. The account statement shows the:
-S holding details
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holding details
the number of units outstanding
value of the holdings
All transactions relating to purchase units, redemption of units, dividend,

reinvestment, etc are shown in the account statement.
MUTUAL FUND STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund
established in the form of a trust by a sponsor to raise monies by the Trustees
through the sale of units to the public under one or more schemes for investing in
securities in accordance with these regulations.
These regulations have since been replaced by the SEBI (Mutual Funds) Regulations,
1996. The structure indicated by the new regulations is indicated as under.
THE SPONSOR: The Sponsor is the creator of the fund, establishes the mutual fund
and gets it registered with SEBI and will typically hold a number of voting shares
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(perhaps 100) in the fund, but these are not entitled to any distributions or share in
the equity. All of the equity belongs to the investors, typically in the form of nonvoting "preferred redeemable shares" The voting shares generally control
management of the fund, apart from limited major decisions. The sponsor is the
Settlor of the Trust that holds Trust property on behalf of investors who are the
beneficiaries of the Trust. The sponsor is also required to contribute at least 40% of
the capital of the asset management company, which is formed for managing the
assets of the Trust.
THE BOARD OF TRUSTEES: The mutual fund needs to be constituted in the form of a
trust and the instrument of the trust should be in the form of a deed registered
under the provisions of the Indian Registration Act, 1908. The supervisory role is
fulfilled by the Board of Trustees of the Investment Company. The board of trustees
manages the MF and the sponsor executes the trust deeds in favour of the trustees.
It is the job of the MF trustees to see that schemes floated and managed by the
AMC appointed by the trustees are in accordance with the trust deed and SEBI
guidelines.
THE ASSET MANAGEMENT COMPANY (AMC): The company that manages a mutual
fund is called an AMC. For all practical purposes, it is an organized form of a "money
portfolio manager". An AMC may have several mutual fund schemes with similar or
varied investment objectives. The AMC hires a professional money manager, who
buys and sells securities in line with the fund's stated objective.
All Asset Management Companies (AMCs) are regulated by SEBI and/or the RBI (in
case the AMC is promoted by a bank). In addition, every mutual fund has a board of
directors that represents the unit holders' interests in the mutual fund.
This entity that undertakes the designing and marketing of schemes, raises
money from the public under the schemes and manages the money on behalf of its
owners. To segregate the collected funds from this entity's own funds, the corpus is
placed in a legal vehicle. It is the character of this legal vehicle that determines the
character of the Fund itself. Irrespective of the nature of the structure, what is more
fundamental is that in view of the fiduciary role of the AMC or the fund manager
towards the public, there is a need for supervision of the activities of the AMC or
fund manager by a separate body. The assets of the Trust comprise of properties of
the schemes, which are floated by the asset management company with the
approval of the Trustees Schemes may have different characteristics - they may be
open or closed ended or may have a particular investment focus or portfolio
composition. Finally, the safe custody of assets of the Trust is entrusted to one or
more custodians.
THE CUSTODIAN: Custodian holds the fund's cash and investment assets.
Commonly, parts of the fund's assets are held by one or more brokers who execute
trades on behalf of the fund Custodial Fees can also be a fixed fee or a percentage
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of NAV. Where a broker acts as de facto custodian, it usually charges on a

transactional basis.
Apart from these four there is registrar or a transfer agent who acts as a key party
THE ADMINISTRATOR: Administrator acts as registrar and transfer agent, keeps the
books and records of the fund, and calculates the NAV. Depending on the complexity
of the fund, the administrator's fees could be as little as a few thousand dollars a
year or as much as 0.5 to 0.65 % of the NAV per annum. Sometimes the
administrator's fees are included within the management fee. In certain situations,
the administrator subcontracts a part of the work, particularly the NAV certification,
to the investment manager.
REGULATIONS OF MUTUAL FUNDS IN INDIA

In India SEBI and RBI act as regulators of mutual fund.
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SEBI (Mutual Fund) REGULATIONS,1996
The provisions of this regulations pertaining to AMC are:
All the schemes to be launched by the AMC need to be approved by the

trustees and copies of offer document of such schemes are to be filed with SEBI.
The offer document shall contain adequate disclosure to enables the investor
to make informed decision.
Advertisement in respect of schemes should be in conformity with the SEBI

prescribed advertisement code, and discloses the method and periodicity of the
valuation of investment sales and repurchase in addition to the investment
objectives.
The listing of close ended schemes is mandatory and every close ended
scheme should be listed on a recognized stock exchange with in six months from
the closure of subscription. However, listing is not mandatory in case the scheme
provides for monthly income or caters to the special classes of persons like senior
citizen, women, children, and physically handicapped. If the scheme discloses detail
of repurchase in the offer document: if the schemes opens for repurchase with in six
months of closure of subscription.
Units of a close ended scheme can be opened for sale or redemption at a

predetermined fixed interval if the minimum and maximum amount of sale,
redemption, and periodicity is disclosed in the offer document.
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Units of a close ended scheme can also be converted into an open ended
scheme with the consent of majority of the unit holder and disclosure is made in the
offer document about the option and period of conversion.
Units of a close ended scheme may be rolled over by passing resolution by a

majority of the shareholders.
No scheme other than unit linked schemes can be opened for more than 45
days.
The AMC must specify in the offer document about the minimum subscription
and the extent of over subscription, which is intended to be retained. In the case of
over subscription, all applicants applying up to 500 units must be given full
allotment subjected to over subscription.
The AMC must refund the application money if minimum subscription is not
received and also the excess over subscription with in the six weeks of closure of
subscription.
Guaranteed returns can be provided in a scheme if such returns are fully

guaranteed by the AMC or sponsor. In such cases, there should be a statement
indicating the name of the person, and the manner in which the guarantee is to be
made must be stated in the offer document.
A close ended scheme shall be wound up on redemption date, unless it is

rolled over, or if 75% of the unit holders of a scheme pass a resolution of winding up
of the scheme : if the trustee on happening of any event, requires the scheme to be
wound up: or if SEBI, so directed in the interest of investors.
Investment objectives and valuation policies :-
The price at which the units may be subscribed or sold and the price at which such
units may at any time repurchase by mutual fund shall be made available to the
investor.
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General obligation
Every asset management company for each scheme shall keep and maintain
proper books of account, records and document, for each scheme so as to explain
its transaction and to disclose at any point of time the financial position of each
scheme and in particular give true and fair view of state of affairs of the fund and
intimate to board the place where such books of account, record, and document are
maintained.
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The financial year for all the schemes shall end as on march 31 of each year.
Every mutual fund or the asset management company shall prepare in respect of
scheme and the fund as specific in eleventh schedule.
Every mutual fund shall have the annual statement of account audited by an
auditor who is nor in any way associated with the auditor of the asset management
company.
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Procedure in case of default
On and from the date of suspension of the certificate or the approval as the may be,
the mutual fund trustees or asset management company, shall cease to carry on
any activity as a mutual fund, trustee or asset management company , during the
period of suspension, and shall be subjected to the directions of the board with
regard to any records, documents, or securities that may be in its custody or
control, relating to its activities as mutual fund, trustee, or asset management
company.
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SEBI Guidelines (2001-02) Relating to Mutual Fund:-
A common format is prescribed for all mutual fund schemes to disclosed their
entire portfolio of half yearly basis so that the investors can get meaningful
information on the deployment of funds. Mutual funds are also required to disclose
the investment in various types of instruments and percentage of in each script to
the total NAV illiquid and non performing assets, investments in derivatives and in
ADRs and GDRs.
To enable the investor to make informed investment decision, mutual funds

have been directed to fully revise and update offer document and memorandum at
least once in two years.
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Mutual funds are also require to:-
i.
Bring uniformity in disclosure of various categories of advertisements, with a
view to ensuring consistency and comparability across schemes of various mutual
funds.
ii.
Reduce initial offer period from a maximum of 45 days to 30 days.
iii.
Dispatch statement of account once the minimum subscription amount
specified in offer document is received even before the closure of the issue.
iv.
Invest in mortgaged backed securities of investment grade given by credit
rating agency.
v.
Identify and make a provision for non performing asset (NPAs) according to
criteria for classification of n NPAs and treatment of income accrued on NPAs to
disclose NPAs in half yearly portfolio reports.
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vi.
Disclose information in a revised format on unit capital, reserves,
performance in terms of dividend and rise/fall in NAV during the half year period
annualized yield over the last 1, 3, 5 years in addition to percentage of
management fee, percentage of recurring expenses to net asset, investment made
in associate companies, payment made to associate companies, payment made to
associate companies for their services, and detail of large holding, since their
operation.
vii.
Declare their NAVs and sale/repurchase prices of all schemes updated on
regular basis on the AMFI website by 8.00 PM and declare NAVs of their close ended
schemes on every Wednesday.
The format for unaudited half yearly result for the mutual funds has been
revised by SEBI. These results are to be published before the expiry of one month
from the close of each half-year as against two month period provided earlier. These
results shall also be put in their websites by mutual fond.
All the schemes by mutual fund shall be launched with in six months from the
date of the letter containing observation from SEBI on the scheme offer document.
Otherwise, a fresh offer document along with filing fee shall be filled with SEBI.
Mutual funds are required to disclose large unit-holding in the scheme, which
are over 25% of the NAV.
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RBI as supervisor of bank owned Mutual Funds
The first non-UTI mutual funds were started by public sector banks. Banks come
under the regulatory jurisdiction of RBI. So Bank owned mutual funds are regulated
by RBI, but it has been clarified that all the mutual funds, being primarily capital
market players come under the regulatory framework of SEBI. Thus, the bank
owned fund continue to be under the joint supervision of both RBI and SEBI. It is
generally understood that all market related and investor related activities of the
fund are to be supervised by SEBI, while any issue concerning the ownership of the
AMC by bank fall under the regulatory ambit of RBI. But RBI on bank fund should not
conflict with SEBI guidelines.
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RBI as supervisor of money market mutual funds
RBI is the only Government agency that is charged with the sole responsibility of
overall entities that operates in money market. So money market mutual funds
were regulated by RBI guidelines till 23.11.1995. Recently it has been decided that
money market mutual funds of registered mutual fund will be regulated by SEBI
through the same guidelines issued for other mutual funds, i.e. SEBI (MF)
regulations, 1996. However RBI does retain the right to decide whether mutual
funds will be allowed to access inter-call money market. Accordingly, RBI has placed
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certain restrictions through latest credit policy, with the intention of moving toward
a pure inter bank money market.
CALCULATION OF NAV
Net asset value on a particular date reflects the realizable value of a mutual fund's
portfolio in per share or per unit terms. It is the worth of an investment with an
open-end mutual fund quoted in terms of its net asset value. That is also the
amount an investor can expect if he or she were to sell his or her units back to the
issuer. Daily closing prices of all securities held by the fund are used as a starting
point. Subtract this amount for liabilities (including expenses and commissions). And
divide the result by the number of outstanding shares.
If the realizable worth of the portfolio is Rs 12 million, divided it by shares
outstanding, let's say one million units, then the NAV is Rs 12 (12/1).
If a fund's NAV a year ago was Rs 10.5 and is currently Rs 12, then your pre-tax
return is 14.28 percent((12-10.5)/(10.5)*100).
An NAV signifies nothing more than the current worth of a portfolio. The NAV of a
fund only starts to make sense when compared to a benchmark index. First, it tells
you the extent to which the securities that comprise the fund's portfolio have
outperformed or under performed the index. Second, the use of certain statistical
measures can also tell you whether a fund was able to derive above-average, riskreturned schemes.
Having said this, a fund's historical NAV performance is not the best indicator of its
future performance. For equity funds, this NAV changes almost everyday with
fluctuations in stock prices. While the NAV of a fixed-income fund is driven more by
changes in rate of interest. On its own, a rising NAV only means that assets, which
form a part of the fund's portfolio, are rising and vice-versa.
TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its
investment objective.
ON THE BASIS OF STRUCTURE;
On the basis of structure mutual fund can be either open-ended or close-ended.
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Most mutual funds are open-end funds, which means the fund sells and redeems its
shares. As more shares are sold, the fund grows. Sometimes open-end funds are
closed to new investors when the funds become too large to be managed
effectively-though current shareholders can continue to invest money. When a fund
is closed this way, the investment company offering the fund often creates a similar
fund to capitalize on investor interest.
Closed-end fund are traded on the major exchanges, as stocks are. There are a fixed
number of shares available because a closed-end fund raises its money all at once
and does not buy back shares investors want to sell. Closed-end fund shares often
trade at a discount, or less than their net asset value, but you may pay a premium,
or more than the NAV, if the fund is in demand. Their prices change constantly
throughout the trading day, unlike open-end funds whose prices are set only once,
at the end of the day.
DIFFERENCE BETWEEN THE TWO
The difference between the two is in the way each operates after the initial public
offering. A close-ended scheme operates like any other public entity whose shares
are traded on the stock market. Thus, to buy or sell the shares of a close-ended
scheme, you have to transact on the BSE or on the NSE. That's why the market
price of its shares is also determined by > supply and demand for its shares (apart
from quality and performance of its portfolio). On the contrary, open-ended funds
continue to price, sell and repurchase shares after the initial offer on the basis of
the NAV. The mutual fund is ready to sell additional shares of the fund at the NAV (at
par or adjusted for expenses), or buy back (redeem) shares of the fund at the NAV
(at par or adjusted for expenses). That's why the unit capital of open-ended funds
can fluctuate on daily basis. But a close-ended fund may or may not offer more
shares after its listing. It may or may not also repurchase its shares. That is up to
the issuing company to decide.
So we can say that in an open-ended mutual fund there are no limits on the total
size of the corpus. Investors are permitted to enter and exit the open-ended mutual
fund at any point of time at a price that is linked to the net asset value (NAV). In
case of closed-ended funds, the total size of the corpus is limited by the size of the
initial offer.
OTHER SCHEMES:
TAX SAVING SCHEME Equity Linked Savings Schemes (ELSS):
Equity Linked Saving Schemes (ELSS) are open-ended funds investing
predominantly in equity-oriented instruments. Under Section 88 of the Income Tax
Act, 1961 investments up to Rs. 10000 in equity linked savings schemes (ELSS)
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qualifies for the tax rebate of 20% or 15%. (Investors with gross total income of up
to Rs.1.50 Lacs can claim a rebate of 20% while investors with gross total income of
Rs. 1.5 Lacs to Rs.5 Lacs can claim a rebate of 15%). The funds launched under this
plan are largely diversified equity funds. The investment strategy for most of the
funds is similar to investment strategy followed by the fund under diversified equity
funds.
ON THE BASIS OF INVESTMENT OBJECTIVE:
When it comes to investing in mutual funds, investors have literally thousands of
choices. Before investing in any given fund, decide whether the investment strategy
and risks of the fund are a good fit for you. The first step to successful investing is
figuring out financial goals and risk tolerance. Once you know what you're saving
for, when you'll need the money, and how much risk one can tolerate, one can more
easily narrow your choices.
Most mutual funds fall into one of three main categories equity funds (also called
"stock" funds), debt funds (also called "bond" funds) and balanced funds (also called
"hybrid" funds). Each type has different features and different risks and rewards.
Generally, the higher the potential return, the higher the risk of loss. The schemes
or funds (often used synonymously) can be classified as:
SCHEMES
Equity Funds
Debt Funds
Balanced funds
EQUITY FUNDS:
They are also known as growth funds. They focus on stocks that may not pay a
regular dividend but have potential for large capital gains. They promise pure
capital appreciation with equity shares. They buy shares in companies with high
potential for growth (some of which might not pay dividends). The NAV of such a
fund will tend to be erratic, since these so-called growth shares experience high
price volatility. They also make quick profits by investing in small cap shares and by
investing in initial public offerings of small companies. However, growth strategy
may differ from one fund to another. Not all growth funds operate similarly. Some of
the common equity funds are:
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Sector funds: The goal is once again pure capita! appreciation, but the
strategy is to buy into shares of only one industry. And not diversify like a growth
fund. Such funds forgo the principle of asset allocation for high returns. That's why
they are also the riskiest.
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Tax planning funds: Also known as equity linked savings schemes, they
operate like any other growth fund (and that's why are as risky). However, an
investor in these schemes gets an income-tax rebate of 20 per cent (for a maximum
of Rs 10,000) under Section 88 of the Income Tax Act. Essentially an incentive for
the investor (who is otherwise investing in fixed-income instruments like the Public
Provident Fund primarily for saving tax on his or her annual salary or business
income) a chance to participate in capital appreciation that can be delivered by
investing in equity shares. That's also why these schemes also come with a threeyear lock-in period. Also while other tax planning schemes guarantee returns, an
ELSS offers no such assurance.
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Index fund: Their goal is to match the performance of the markets. They do
not involve stock picking by so called professional fund managers. An index fund
essentially buys into the stock market in a way determined by some market index
(BSE Sensex or S&P CNX Nifty) and does almost no further trading. Index funds are
optimally diversified portfolios and only carry along with it the due to economy-wide
factors.
DEBT FUNDS:
They aim to provide safety of principal and regular (monthly, quarterly or semi
annually) income by investing in bonds, corporate debentures and other fixed
income instruments. The AMC in this case will also be guided by ratings given to the
issuer of debt by credit rating agencies. Wherever a debt instrument is not rated,
specific approval of the board of the AMC is required. Since most of corporate debt
is illiquid, the fund tries to provide liquidity by investing in debt of varying maturity.
Some of the common debt funds are:
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Money market funds: Also known as liquid plans, these funds are a play on
volatility in interest rates. Most of their investment is in fixed-income instruments
with maturity period of less than a year. Since they accept money even for a few
days, they are best used to park short-term money, which otherwise earns a lower
return in a savings bank account.
?
Gilt funds: They are aimed at generating returns commensurate with zero
credit risk, which is by investing securities created and issued by the central and/or
the state government securities and/or other instruments permitted by the Reserve
Bank of India. Since they ensure zero risk, instant liquidity, tax-free income, their
return is lower than an income fund.
?
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BALANCED FUNDS:
The idea is to get the best of both the world's equity shares and debt. These are
also known as hybrid funds. Investing in equities is supposed to bring home capital
appreciation, while that in fixed income is to impart stability and assure income for
distribution. The proportion of the two asset classes depends on the fund managers'
preference for risk against return. But because the investments are highly
diversified, investors reduce their market risk. Normally about 50 to 65 per cent of a
portfolio's assets are invested in equity shares.
TYPES OF LOADS
The AMC that manages your mutual fund has to bear a number of expenses. So it
recovers part of these expenses from its investors, for whom it is doing the favour of
managing funds. It is broken into two parts: annual management fee (up to 1.25 per
cent for funds less than Rs 1 billion and one per cent for funds above Rs. 1 billion)
and entry & exit loads.
ENTRY LOAD:
Loads normally apply to only open-ended schemes. An entry load is also called the
sales load. which is mainly to help the AMC recover expenses relating to sales
literature, distribution, advertising and agent/broker commissions. The price at
which an investor buys into the fund is a function of both the NAV and sales load. An
entry load is an additional cost that an investor pays at the point of entry. Assume
that your proposed investment is Rs. 10, OOO/-. Also assume that the current NAV
of the fund is Rs. 12.00 and that the entry load is Rs.0.50. Then you will receive
10000/12.50 = 800 units. The entry load could be different for each scheme; it
would also depend on the amount of investment and the time period of investment.
EXIT LOAD:
On the other hand, exit load (if you withdraw within a specified period) is charged
while redeeming your units. The latter is for more logical reasons, especially with
income or money market funds, where a quick withdrawal by too many investors
can put pressure on the fund's asset maturity profile. So to ensure that longer-term
investors are not penalized, short-term investors are charged an exit load. An exit
load is levy that an investor pays at the point of exit. This is levied to dissuade
investors from exiting the fund. Assume that the current NAV of the fund is Rs.
12.00 and that the exit load is Rs.0.50. Now if you sell 800 units then you stand to
receive 800X11.5 = Rs. 9200. The exit load could be different for each scheme. It
would also depend on the amount of investment and the time period of investment.
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VARIOUS PLANS OF MUTUAL FUNDS

That depends on the strategy of the concerned scheme. But generally there are 3
broad categories
that any Mutual Fund scheme offers: ?
A Dividend Plan entails a regular payment of dividend to the investors.
?
A Reinvestment Plan is a plan where these dividends are reinvested in the
scheme itself.
?
A Growth Plan is one where no dividends are declared and the investor only
gains through capital appreciation in the NAV of the fund.
The term 'growth' is often used in a very generic sense to denote every equity
mutual fund. Also 'growth' in fixed income funds, comes from reinvesting dividends.
That's why in such fixed income funds, investors have an option, and they can
choose either growth through reinvestment of dividends, or regular income by
ticking on the income option.
HOW TO CHOOSE A PLAN
It depends on investment object of the investor, which again depends on his
income, age, financial responsibilities, risk taking capacity and tax status. For
example a retired government employee is most likely to opt for monthly income
plan while a high-income youngster is most likely to opt for growth plan.
SYSTEMATIC INVESTMENT PLAN
Besides these three plans there is one another plan whish is becoming popular that
is systematic investment plan. A systematic investment plan is one where an
investor contributes a fixed amount every month and at the prevailing NAV the units
are credited to his account. Today many funds are offering this facility.
A systematic investment plan (SIP) offers 2 major benefits to an investor:
?
It avoids lump sum investment at one point of time
?
In a scenario of falling prices, it reduces your overall cost of acquisition by a
process of rupee-cost averaging. This means that at lower prices you end up getting
more units for the same investment.
HOW MUTUAL FUND WORKS

For retail investor who does not have the time and expertise to analyze and invest
in stocks and bonds, mutual funds offer a viable investment alternative.
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One can purchase shares in some mutual funds by contacting the fund directly or
other mutual fund shares are sold mainly through brokers, banks, financial planners,
or insurance agents. All mutual funds will redeem (buy back) the shares on any
business day and must send the payment within seven days. One can invest by
approaching a registered broker of Mutual funds or the respective offices of the
Mutual funds in that particular town/city. An application form has to be filled up
giving all the particulars along with the cheque or Demand Draft for the amount to
be invested.
The mutual fund issues shares of stock and bonds (just like any other corporation)
to investors in exchange for cash. It is interesting to note that funds do not issue a
pre-determined amount of stock, as do most corporations; new shares are issued as
each new investment is made. Investors thus become part owners of the fund itself,
and thereby the assets of the fund. The fund, in turn, uses investors' cash to
purchase securities, such as stocks and bonds. The primary assets of a fund are the
securities it invests in (other assets, such as equipment, are a relatively small part
of the total assets of a fund). Following are the various descriptions needed for the
working of mutual fund:
How mutual funds work
Buy shares
Receive incc-me in a fund
Invest;: in securities
Keturns increase tund value
STOCKS BONDS
PRICING AND VALUATION DESCRIPTION.

The value of the shares of an open-end mutual fund is readily determined Each day,
the accounting staff of a fund simply adds up the value of all the securities in the
portfolio, adds in other assets, deducts liabilities, and comes up with a net overall
value. It is then a simple matter to divide the net assets by the number of shares
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outstanding. This is called the net asset value, and is the price at which investors
buy and sell shares from the fund. The net asset value is listed in the financial
section of many major newspapers.'
LOAD AND NO-LOAD FUNDS DESCRIPTION

A load, or loaded, fund is one that has a sales charge. A no-load fund has no sales
charge. As noted above, not all funds have sales charges. Those that do simply add
them on to the net asset value of the fund, thus coming up with a new, higher
offering price per share It is important to note that the underlying value of the
fund's shares do not change, and further, that an
investor
selling
shares
will
still
receive
only
the
net
asset
value A no-load fund is simpler.
The net asset value is used for both the purchase price and the selling price.
Therefore, the two prices are always identical. In the case of a load fund, the broker
usually takes care of the details for you. In the case of a no-load fund, investors
usually deal directly with the fund in question.
BUYING AND SELLING FUND SHARES DESCRIPTION.

When you buy shares, you pay the current NAV per share plus any fee the fund
assesses at the time of purchase, such as a purchase sales load or other type of
purchase fee. When you sell your shares, the fund will pay you the NAV minus any
fee the fund assesses at the time of redemption, such as a deferred (or back-end)
sales load or redemption fee. A fund's NAV goes up or down daily as its holdings
change in value.
FUND OBJECTIVES AND PROSPECTUS DESCRIPTION

A fund's objective, described in the prospectus, gives broad indications of the types
of investments a fund may make. The most important aspect of a fund is its
investment objective. The fund's objective tells investors the goals the fund seeks
to achieve, and a good deal about how it intends to achieve them. A balanced fund
will generally hold stocks and bonds. A fund seeking growth fund will utilize stocks.
A fund seeking income with little or no concern for growth will generally hold bonds.
The objective of a fund is so fundamental that it generally determines the category
into which a fund will be assigned. Listed below are some examples of major
investment objective categories: -
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>
Preservation of Capital & LiquidityAchieved by investing in very short-term
bonds
>
IncomeAchieved by investing in bonds
>
BalancedAchieved by investing in bonds and stocks
>
GrowthAchieved by investing in stocks
The prospectus:
The Securities and Exchange Commission (SEC) requires all mutual funds to publish
a plain English prospectus and issue a copy to all potential investors either before
they buy or along with the confirmation of their initial investment.
The prospectus must explain the programs and policies the management follows to
achieve the fund's investment goals. The prospectus includes:
?
Statement of objective
Investor programs
Fund fees and expenses
Fund performance history
Results of investment
How to purchase and redeem shares
Shareholder services
HOW MUTUAL FUNDS CAN EARN MONEY

A mutual fund can earn money in three different ways.
Dividend Payments A fund may earn income in the form of dividends and interest
on the securities in its portfolio. The fund then pays its shareholders nearly all of the
income (minus disclosed expenses) it has earned in the form of dividends.
Capital Gains Distributions They are paid from any profits the fund realizes from
selling investments. The price of the securities a fund owns may , increase. When a
fund sells a security that has increased in price, the fund has a capital gain. At the
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end of the year, most funds distribute these capital gains DISTRIBUTIONS (minus
any capital losses) to investors.
Increased NAV If the market value of a fund's portfolio increases after deduction
of expenses and liabilities, then the value (NAV) of the fund and its shares
increases. The higher NAV reflects the higher value of your investment.
With respect to dividend payments and capital gains distributions, funds usually will
give a choice: the fund can send a check or other form of payment, or the dividends
or distributions reinvested in the fund to buy more shares (often without paying an
additional sales load.
A fund may sell investments for a number of reasons:
>
To capitalize on an investment's increased value
>
To achieve performance targets
>
To free up money to make new investments
>
To prevent additional losses in a security that is losing value
>
fund
To have enough cash to redeem shares its investors want to sell back to the
INFORMATION NEEDS TO EVALUATE MUTUAL FUNDS

There are three key pieces of information that help to evaluate a mutual fund.
PAST PERFORMANCE: It measures the fund's historical returns, whether the

returns are consistent, and how they stack up against the returns of comparable
funds. While there's no guarantee that a fund's future performance will equal its
current or past record.
RISK: It measures how likely you are to earn money or lose it. Risk isn't bad if
you're investing for the long term and you can tolerate some setbacks without
selling in a panic if the fund drops in value. But if you're investing to meet shortterm goals or preserve capital, you may want a fund that poses less risk to principal.
COST: It measures how much you pay in sales charges or commissions, fees,
and annual asset-based expenses. Since these costs directly affect your return, you
may want to compare the expense ratios and sales charges of various funds as part
of your evaluation process. Higher fees may correlate with higher risk if the fund
manager takes added risk to help reduce the impact of fees on return.
FACTORS TO CONSIDER
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Thinking about long-term investment strategies and tolerance for risk can help to
decide what type of fund is best suited. But one should also consider the effect that
fees and taxes will have on the returns over time.
DEGREES OF RISK
Mutual fund investments are not totally risk free. In fact, investing in mutual funds
contains the same risk as investing in the markets, the only difference being that
due to professional management of funds the controllable risks are substantially
reduced. A very important risk involved in mutual fund investments is the market
risk. When the market is in doldrums, most of the equity funds will also experience a
downturn. However, the company specific risks are largely eliminated due to
professional fund management
All funds carry some level of risk. One can lose some or all of the money invests
principal -because the securities held by a fund go up and down in value. Dividend
or interest payments may also fluctuate as market conditions change.
Before investing, be sure to read a fund's prospectus and shareholder reports to
learn about its investment strategy and the potential risks. Funds with higher rates
of return may take risks that are beyond your comfort level and are inconsistent
with your financial goals. Financial theory-states that an investor can reduce his
total risk by holding a portfolio of assets instead of only one asset. This is because
by holding all your money in just one asset, the entire fortunes of your portfolio
depend on this one asset. By creating a portfolio of a variety of assets, this risk is
substantially reduced.
HOW SAFE ARE MUTUAL FUNDS:
As financial intermediaries, they do not come without risk. Also when defined in
terms of losing money, the risk in mutual funds is not dramatically different than
that present in other financial instruments. Still, they are relatively safer and offer a
more convenient way on investing.
With mutual funds you can control risk by choosing a fund that given your risk
profile., you believe is the best. On the other hand, picking stocks individually that
will both meet your objectives and match your profile can be tough.
A mutual fund portfolio is also easier to monitor than individual shares. They also
come without systemic risks (like bad deliveries). They offer quick liquidity Most
private mutual funds can be redeemed in three to four working days, unlike a fixed
deposit that is more likely to be received a month after its maturity, or an equity
share after the end of its settlement period (or depending up on your broker). This
too cuts the overall risk associated with investing, often not so visible and hence not
accounted by many investors.
TAX CONSEQUENCES
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When an individual stock or bond is bought and hold, income tax has to be paid
each year on the dividends or interest received.
Mutual funds are different. When you buy and hold mutual fund shares, you will owe
income tax on any ordinary dividends in the year you receive or reinvest them. And,
in addition to owing taxes on any personal capital gains when you sell your shares,
you may also have to pay taxes each year on the fund's capital gains. That's
because the law requires mutual funds to distribute capital gains to shareholders if
they sell securities for a profit that can't be offset by a loss
Tax Exempt Funds
If you invest in a tax-exempt fund - - such as a municipal bond fund - - some or all of
your dividends will be exempt from federal (and sometimes state and local) income
tax.
But if you receive a capital gains distribution, you will likely owe taxes even if the
fund has had a negative return from the point during the year when you purchased
your shares. SEC rules require mutual funds to disclose in their prospectuses aftertax returns. In calculating after-tax returns, mutual funds must use standardized
formulas similar to the ones used to calculate before-tax average annual total
returns. When comparing funds, be sure to take taxes into account.
RETURNS
As per SEBI Regulations, mutual funds are not allowed to assure returns. However,
funds floated by AMCs of public sector banks and financial institutions were
permitted to assure returns to the unit holders provided the parent sponsor was
willing to give an explicit guarantee to honor such a commitment. But in general,
mutual funds cannot assure fixed returns to their investors.
Investors need to be clear that mutual funds are essentially medium to long-term
investments Hence, short-term abnormal profits will not be sustainable in the long
run. But in the medium to long run the mutual funds tend to outperform most other
avenues of investments at the same time avoiding the risk of direct investment
accompanied with professional fund management.
ADVANTAGES AND DISADVANTAGES

Every investment has advantages and disadvantages. But it's important to
remember that features that matter to one investor may not be important to you.
Whether any particular feature is an advantage for you will depend on your unique
circumstances. For some investors, mutual funds provide an attractive investment
choice because they generally offer the following advantages:
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Professional Management Professional money managers research, select, and

monitor the performance of the securities the fund purchases.
Diversification - - Diversification is an investing strategy that can be neatly summed
up as "Don't put all your eggs in one basket." Spreading your investments across a
wide range of companies and industry sectors can help lower your risk if a company
or sector fails. Some investors find it easier to achieve diversification through
ownership of mutual funds rather than through ownership of individual stocks or
bonds.
Affordability - - Some mutual funds accommodate investors who don't have a lot of
money to invest by setting relatively low amounts for initial purchases, subsequent
monthly purchases or both.
Liquidity & flexibility Mutual fund investors can readily redeem their shares at the
current NAV plus any fees and charges assessed on redemption at any time Through
features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to
your needs and convenience.
Easy entry and exit -- Filling a mutual fund application or a redemption form is all
that it takes while entering or exiting a mutual fund. But with equity shares, you
need to have an account with a stockbroker (for buying & selling) and another with
a depository participant. Some investors may find this cumbersome.
Tax benefits Section 88 for Equity Linked Saving Schemes, ability to reinvest your
proceeds from capital gains into mutual funds under section 54EA & 54EB and taxfree status for equity oriented funds for three years starting from April 1, 1999 are
popular benefits that investors in mutual funds can avail of.
TransparencyOne get regular information on the value of the investment in
addition to disclosure on the specific investments made by ones scheme, the
proportion invested in each class of assets and the fund manager's investment
strategy and outlook.
Well RegulatedAll Mutual Funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests of investors. The
operations of Mutual Funds are regularly monitored by SEBI.
But mutual funds also have features that some investors might view as
Disadvantages, such as:
?
Costs Despite Negative Returns -- Investors must pay sales charges, annual
fees, and other expenses regardless of how the fund performs. And, depending on
the timing of their investment, investors may also have to pay taxes on any capital
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gains distribution they receive even if the fund went on to perform poorly after they
bought shares.
?
Lack of Control - - Investors typically cannot ascertain the exact make-up of a
fund's portfolio at any given time, nor can they directly influence which securities
the fund manager buys and sells or the timing of those trades.
?
Price Uncertainty - - With an individual stock, you can obtain real-time (or
close to real time) pricing information with relative ease by checking financial
websites or by calling your broker. You can also monitor how a stock's price changes
from hour to hour or even second to second. By contrast, with a mutual fund, the
price at which you purchase or redeem shares will typically depend on the fund's
NAV, which the fund might not calculate until many hours after you've placed your
order. In general, mutual funds must calculate their NAV at least once every
business day.
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OBJECTIVES OF STUDY
Following are the objectives of the study:
1
To know about investors' investment preferences.
To check awareness level of people about mutual funds.
3.
To work out potential market for mutual funds.
4.
To access the satisfaction level of mutual funds investors and to find out the
reasons for dissatisfaction.
5.
To check factors considered by investors while investing in mutual funds.
6.
To work out the potential market for Mahindra & Mahindra Finsmart.
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RESEARCH METHODOLOGY
Research Methodology - is a way to systematically solve the research problem. The
Research Methodology includes the various methods and techniques for conducting
a research Marketing Research is the systemic design, collection, analysis and
reporting of data and finding relevant solution to a specific marketing situation or
problem."
D. Slesinger and M. Stephonson in the encyclopedia of Social Sciences define
research as "the manipulation of things, concepts or symbols for the purpose of
generalizing to extend, correct or verify knowledge, whether that knowledge aids in
construction of theory or in the practice of an art."
Research is, thus, an original contribution to the existing stock of knowledge making
for its advancement. The purpose of Research is to discover answers to he
questions through the application of scientific procedures. My project had a specific
framework for collecting data in an effective manner. Such framework is called
^'Research Design". I follow the research process consisted of following steps:
A. Defining the problems and research objectives: It is said, " a problem well defined
is half solved." The first step done was to define the project under study and
decided the research objective. The project undertaken by me was- Consumer
awareness about Mutual Funds The objective of my research was to know the
customer awareness about the working of Mutual funds provided by Mahindra &
Mahindra and to work out the potential market for Mahindra & Mahindra.
B Developing the research plan: The second stage of my study consisted of
developing the most efficient plan for gathering the relevant data. The method
adopted by me for carrying out study was as followed:
?
Sampling Plan: Sampling can be defined as the section of some part of an
aggregate or totality on the basis of which the judgment or an inference about
aggregate or totality is made The sampling plan helps in decision making in the
following areas: ?
Sampling units- The population that was targeted consists of businessmen,
service class, students, housewives etc.
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Sample size- The sample size for my study was -100.
Sampling procedure- Random sampling method was used.
C. Data Collection: Information was collected from both Primary and Secondary
data
?
Primary sources- Primary data are those, which are collected afresh and for
the first time, and thus happen to be original in character. 1 had collected Primary
data by conducting surveys through Questionnaire, which include both open-ended
and close-ended questions.
?
Secondary sources- Secondary data are those which have already been
collected by someone else and which already had been passed through the
statistical processes. I had collected secondary data through Magazines, Websites,
Newspapers, Books, Journals, Mahindra & Mahindra monthly magazine etc.
D.
Analysis of Data: After collecting the data the analysis of data had been
through various statistical tools and techniques. The analysis of data required a
number of closely related operations such as establishment of categories, the
application of these categories to raw data through coding, tabulation and then
drawing the statistical inferences. The unwieldy data was
condensed into few manageable groups and tables for further analysis. Thus it
helped to classify the raw data into some purposeful and usable categories.
E.
Interpretations: After analysis Interpretations were done i.e. to explain the
findings on the basis of analysis Tabulation of data was done wherein classified data
were to put in the form of tables. After tabulation the analysis work of my project
was based on the computation of various statistical formulae- Percentages, Values,
Pie charts and Graphs and Bar Diagrams.
LIMITATIONS
Besides following scientific methodologies the study has come across some
limitations. These are:
1.
The sample size is small as compared to the population, so it may not he the
true representative.
2.
Due to limited time countrywide survey was not possible. Hence only
Jalandhar city has been taken for the study.
3.
Some people were reluctant to fill the questionnaire. They were not willing to
disclose their investment plans.
4.
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The possibility of respondents being biased cannot be ruled out.
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Q1. Do you know about various financial institutions?

The objective of this question is to know how many people are familier with them
Responses
Yes
60.2%
No
39.8%
% Age of Respondents
Table No. 4.1 Percentage of Familier people
Chart No.4.1 Percentage of Respondents

Interpretation: From the above data we can conclude that 60.2% people are aware
of different financial institutions while 39.8% are unaware about it.
Q.2 Monthly income invested.

The objective of this question is to know that how much of the monthly income
people invest.
Responses
Less than Rs.5, 000
42.67%
5,000 - 10,000
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30%
More than 10,000 27.33%

Table No. 4.2 Monthly income invested
Chart No. 4.2 Monthly income invested

Interpretation: From the above data we can conclude that 42.67% of people invest
their monthly income less than Rs.5, 000, 30% of people invest Rs.5,000-10,000%
whereas 27.33% of people invest their monthly income more than 10, 000.
Q.3 Various options for investment and savings.

The objective of this question is to find out where people generally like to invest or
save.
Various Instruments
Savings
42.07%
RDs
6.76%
FDs
20.59%
RBI
0.59%
Shares
4.7%
Mutual Funds
Post Office
% Age of Responses
3.53%
21.76%
Table No. 4.3 Options for investing or saving
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Chart No. 4.3 Options for investing or savins

Interpretation: From the data we can conclude that 42.05% people like to invest in
savings account, 6.76% in RDs, 20.59% in FDs. 0.59% in RBI Bonds, 4.7% in shares.
3.53% in Mutual Funds and 21.76% in Post Office Deposits.
Q.4 Awareness about Mutual Fund as a source of investment.

The objective of this question is to know whether people are aware about that
Mutual Fund is also an alternate source of investing their money.
Response
Yes
37%
No
63%
Table No. 4.4 Awareness about Mutual Funds
CHART NO. 4.4 Awareness about Mutual Funds

Interpretation: From the above data we can conclude that only 37 % people are
aware about this fact while remaining 63% people are unaware of this.
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Q5. Percentage of investors in Mutual Funds.
Response
Yes
32.14%
No
67.86%
Table No.4.5 Percentage of investors in Mutual Funds
Chart No. 4.5Percentage of investors in Mutual Funds

Interpretation: From the above data we can conclude that only 32.14% people have
invested their money in Mutual Funds.
Q.6 Preferable type of mutual fund for investment.

The objective of this question is to find out the type of Mutual Fund in which the
people generally invest.
Responses
% Age of Responses
Open ended 87%
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Close ended 13%

Table No. 4.6Percentage of investors in different types
Chart No. 4.6 Percentage of investors in different types

Interpretation: From the above data we can conclude that 87% of people invest in
open-ended mutual funds whereas only 13 % of people invest in close-ended
mutual funds.
Q.7 a) Various factors persuade to invest in Mutual Funds.

The objective of this question is to find out the various factors that persuade the
people to invest in Mutual Funds.
Factors
Liquidity and Flexibility
32%
Tax benefits 40%

Less investment risks
8%
Safety12%
Fixed & Regular income
8%
Table No. 4.7a) Various factors persuading to invest
Chart No. 4.7a) Various factors persuading to invest
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Interpretation: From the above data we can conclude that 32% of people are
influenced by liquidity and flexibility factor, 40% by tax benefits, 8% by less
investment risk and fixed and regular income both and 12% by safety factor.
Q.7b Reasons of dissatisfaction.

The objective of this question is to know why people are not satisfied with their
Mutual Fund investment.
Factors
Irregular income
13%
Other alternatives 19%

Poor service 6%
Risks 49%
Any other reason
13%
Table No. 4.7b) Reasons of dissatisfaction
Chart No. 4.7b) Reasons of dissatisfaction

Interpretation: From the above data we can conclude that 49% of people are not
satisfied with their investment in Mutual Funds because of risk involved. 19%
because of other alternatives available, 6% because of poor service and 13%
because of irregular income and other reasons.
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Q.8 Awareness regarding advisory services of Mahindra & Mahindra.

The objective of this question is to know whether people are aware that Mahindra &
Mahindra acts as an advisory agent not only for one particular mutual funds but
also for other Mutual funds of various banks and institutions.
Responses
Yes
26.66%
No
73.34%
Table No. 4.8 Awareness regarding advisory services of Mahindra & Mahindra.
Chart No. 4.8 Awareness regarding advisory services of bank

Interpretation: From the above data we can conclude that only 26.66% people are
aware of this fact of Mahindra & Mahindra while 73.34% are unaware about this.
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Q9 Interest of people about their investments taken cared by Mahindra & Mahindra.
The objective of this question is to know whether people are interested that
Mahindra & Mahindra should take of their investments.
Responses
Yes
28.9%
No
71.1%
Table No. 4.9 Investments taken cared bv Mahindra & Mahindra
Yes
No
Chart No. 4.9 Investments taken cared by bank

interested that Mahindra & Mahindra should take care of their investments while
71.1% people not show any interest.
Q.10 Fear of risk involved in Mutual Funds

The objective of this question is to know how risky they find Mutual Funds are.
Responses
Very risky
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65.33
Risky 12
Neutral
3.3
Low risk
2.6
No response 16.6
Table No. 4.10 Fear of risk
Chart No. 4.10 Fear of risk
Interpretation: From the above data we can conclude that 65.33% people find
Mutual funds very risky, 12% find it risky, 3.33% find it neutral, only'2.6% find low
risk while 16.6% gave no response.
Q 11. Awareness regarding various tax schemes.

The objective of this question is to know the awareness level of people regarding
the tax exemptions while investing.
Responses
Yes
19.3%
No
80.67%
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Table No. 4.11 Awareness regarding tax schemes
YES
NO
Chart No. 4.11 Awareness regarding tax schemes

aware of the rebates in Mutual funds while 80.67% people do not have any
knowledge.
Q.12 Income generated by investing in Mutual funds.
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The objective of this question is to know the awareness level of people regarding
income generated by investing in various mutual funds.
Responses
Yes
26%
No
74%
Table No. 4.12 Income generation by Mutual funds
Chart No. 4.12Income generation bv Mutual funds

Interpretation: From the above data we can conclude that 26% people know that
they can earn regular income while investing in Mutual funds.
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Q.13 Satisfaction level of people.

The objective of this question is to find the satisfaction level of the people for the
services provided by Mahindra & Mahindra
Responses
Excellent
24
Very good
50
Good 21
Fair
. Table No. 4.13 Satisfaction level regarding services of Mahindra & Mahindra
Chart No. 4.13 Satisfaction level regarding services of Mahindra & Mahindra
Interpretation: from the above data we can conclude that half of the people i.e. 50%
analyzed find the services of the Mahindra & Mahindra very good, 24% find it
excellent, 21% find it good whereas 5% people are also their who are not satisfied
with the services of Mahindra & Mahindra
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CONCLUSION
From this study it is observed that few people like to invest in the Mutual Funds
because of ignorance, lack of knowledge or due to loss in faith. About half of the
people invest more than 10% of their income in various investments avenues.
Saving accounts and fixed deposits are the most preferred investment avenues
followed by the Post Office Savings Only 37.33% of the people are aware of the fact
that Mutual Fund is also a source of investing their money and only 32.14 % of
people have actually invested in Mutual Funds. Most of the people like to invest in
the open-ended type of Mutual Funds. The tax benefits and liquidity and flexibility
factors involved persuade most of the people to invest in Mutual funds along with
the factors like fixed and regular income. About 65% of the people considered that
to invest in Mutual Funds is a very risky task. Only 28% of the people know that they
can avail rebate under sec. 88 and only 26% of the people have the knowledge that
they can earn regular income by investing in Mutual funds.
About 27 % people know about this that Mahindra & Mahindra acts as an advisory
agent not only in Single Mutual Fund but also in other mutual funds offered by
Standard Chartered, Prudential 1C 1C I, Kotak Mahindra, Templeton Birla etc.
From this survey it is clear that besides providing various facilities by Mahindra &
Mahindra and other private Brokers most of the people still have their faith in
government banks. However most of the people are satisfied with the working of
the Mutual Funds.
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SUGGESTIONS
After the analysis of the consumer awareness level of the Mahindra & Mahindra
about mutual funds along with other products and services following suggestions
can be given: ?
The Mahindra & Mahindra should try to improve its market intelligence
system. This would keep it know its customer better and it will get more information
about the competitors and the forces affecting the market.
?
The Mahindra & Mahindra should increase its advertising budget to get the
benefits of good advertising so that consumers should aware of their existing
products and services as well as new one.
?
The Mahindra & Mahindra should increase its number of branches not only in
urban areas but also in rural and semi-urban areas for the ease of the public.
?
The customer should be fully satisfied and delighted so that they go a long
way with Mahindra & Mahindra
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BIBLIOGRAPHY
Bana Verma, " Mutual Fund Performance: Indian Studies", the ICFAI Journal of
Applied Finance
Dian Vujovich & Michael Lippu, "Straight Talk about Mutual Fund", -McGraw Hill
Gordon & Natrajan, "Financial Markets and Services", Himalaya Publishing House,
2003 Huji Mehndi Raja, "Mutual Fund Offer Wide Net for Investors", Safar, 2000 L. K
Bansal, " Merchant Banking and Financial Services", Unistar Books, 2003
WEBSITES:
www.Mahindra &Mahindra.com
www. amfiindia.com
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QUESTIONNAIRE
I am the student of MBA, of the Apeejay Institute of Management, Jalandhar
conducting a survey on the 'Consumer Perception about Mutual Funds' Kindly
cooperate in filling this questionnaire. Your information will be kept confidential
Q 1 Do you familier with Mahindra & Mahindra?

a) Yes
b) No
Q 2 How much of your monthly income do you invest?

a) Less than Rs.5,000
b) 5,000-10,000 c) More than Rs. 10,000
Q.3 In what type of instrument you generally invest or save your money
a)
Savings
e) Shares
b)
Recurring deposits f) Mutual Funds
c)
Fixed deposits
g) Post Office Deposits
d)
RBI Bonds
h) Other (please specify)..
..
Q.4 Do you know Mutual fund is also a source of investing your money?
a)Yes
b) No
Q5.Have you ever invested your money in Mutual Funds?

a) Yes
b) No
Q.6 In what type of Mutual Fund you have invested?
a) Open ended
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b) Close ended
Q.7 (a) Are you satisfied with your Mutual Fund investment?
If yes , then what factors persuade you to invest in mutual funds?
a)
Liquidity and flexibility
b)
Fixed and regular income G
c)
Less investment risks
I I d) Safety
e) More tax benefits
f) Any Other (specify) ..
Q.7 (b) If no, then please state the reason why?

a)
Low income
b)
Other alternatives
c)
Poor service
d)
Risks
e)
Other (please specify)
Q.8 Are you aware that the advices made by Mahindra & Mahindra in Mutual Funds
are made after understanding the customer appetite of risk, return, safety and
liquidity9
a)
Yes
b)No
Q .9 Would you like that Mahindra & Mahindra should take of your investments9
a) Yes
b) No
Q. 10 What do you think about 'fear of risk' in Mutual Fund

a)Very Risky
b) Risky
c) Neutral
d)Low
e) Very low
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Q. 11 Are you aware of the fact that you can avail rebate under sec.88 up to Rs 10,
000 by investing in Mutual Funds under ELSS scheme9
a) Yes D
b) No D
Q. 12 Do you know that you can earn regular income in the form of Dividends, MIP,
Dividend Reinvestment Option by investing in various Mutual Funds schemes?
a) Yes D
b) No D
Q. 13 How do you find the services provided by the Mahindra & Mahindra?
a) Excellent b) Very
Good c) Good
PERSONAL INFORMATION
NAME.
AGE
SEX.
OCCUPATION
TEL. NO. .
E-MAIL ID ..
d) Fair
e) Poor
MBAThesis.in

Report On Mutual Funds

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Report On Mutual Funds

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INTRODUCTION OF MUTUAL FUNDS

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

functioning under an administrator and under the rules framed by Government of

WHAT IS MUTUAL FUND

DISTINGUISHING CHARACTERISTICS OF MUTUAL FUND

Unit holders have a proportionate right in the beneficial ownership of the

REGULATORY BODY FOR MUTUAL FUNDS

Mutual Funds need to set up a Board of Trustees and Trustee Companies.

The net worth of the AMCs should be at least Rs.5 crore.

All Mutual Funds schemes should be registered with SEBI.

ROLE OF A FUND MANAGER

the number of units outstanding

value of the holdings

All transactions relating to purchase units, redemption of units, dividend,

MUTUAL FUND STRUCTURE

of NAV. Where a broker acts as de facto custodian, it usually charges on a

REGULATIONS OF MUTUAL FUNDS IN INDIA

SEBI (Mutual Fund) REGULATIONS,1996

The provisions of this regulations pertaining to AMC are:

All the schemes to be launched by the AMC need to be approved by the

Advertisement in respect of schemes should be in conformity with the SEBI

Units of a close ended scheme can be opened for sale or redemption at a

Units of a close ended scheme may be rolled over by passing resolution by a

Guaranteed returns can be provided in a scheme if such returns are fully

A close ended scheme shall be wound up on redemption date, unless it is

Investment objectives and valuation policies :-

Procedure in case of default

SEBI Guidelines (2001-02) Relating to Mutual Fund:-

To enable the investor to make informed investment decision, mutual funds

Mutual funds are also require to:-

Reduce initial offer period from a maximum of 45 days to 30 days.

RBI as supervisor of bank owned Mutual Funds

RBI as supervisor of money market mutual funds

TYPES OF MUTUAL FUNDS

VARIOUS PLANS OF MUTUAL FUNDS

A Dividend Plan entails a regular payment of dividend to the investors.

It avoids lump sum investment at one point of time

HOW MUTUAL FUND WORKS

Receive incc-me in a fund

PRICING AND VALUATION DESCRIPTION.

LOAD AND NO-LOAD FUNDS DESCRIPTION

BUYING AND SELLING FUND SHARES DESCRIPTION.

FUND OBJECTIVES AND PROSPECTUS DESCRIPTION

IncomeAchieved by investing in bonds

BalancedAchieved by investing in bonds and stocks

GrowthAchieved by investing in stocks

Fund fees and expenses

Fund performance history

How to purchase and redeem shares

HOW MUTUAL FUNDS CAN EARN MONEY

To capitalize on an investment's increased value

To achieve performance targets

To free up money to make new investments

To prevent additional losses in a security that is losing value

INFORMATION NEEDS TO EVALUATE MUTUAL FUNDS

PAST PERFORMANCE: It measures the fund's historical returns, whether the

ADVANTAGES AND DISADVANTAGES

Professional Management Professional money managers research, select, and

To know about investors' investment preferences.

To check awareness level of people about mutual funds.

To work out potential market for mutual funds.

To check factors considered by investors while investing in mutual funds.