PIONEER INSTITUTE OF PROFFESIONAL

STUDIES
2010 - 2011

Comprehensive Study

On

Mutual Fund Industry

Guided By: Submitted By:

PROF.VASUNDHRA LAAD RINKI NOKWAL
MBA (III SEM)
Sec.(Q)
INTRODUCTION

Starting out as an industry with a single player, the UTI, in 1963, the mutual fund
industry in India has come a long way since then. Today, close to 30 players,
offering over 460 schemes, dot the industry landscape.
A mutual fund is vehicle pool money from investors, with a promise that
the money would be invested in a particular manner, by professional managers
who are expected to honour the promise.
In four decades of its existence in India, the mutual fund industry has gone
through several structural changes. From the days of UTI’s monopoly to 1987,
when the industry was opened first to other public sector enterprises, and then to
private sector players in 1993, It has come a long way. The entry of private
player has galvanized the sector as on product innovation, market penetration,
identifying new channels of distribution, and last but not the least, improving
investor service.
Further, the emergence of India as a major investment destination has
done a world of good to the mutual fund industry in the country as it is witnessing
entry of many big names in the global players like Morgan Stanley, Principal, Sun
life, and Fidelity, while Vanguard is mulling over its India debut, augurs well for
the industry as not only these global investment management firms bring with
them the expertise gained internationally but also bring the best international
practices in terms of performances and investor services which will benefit the
industry and will go a long way in helping it catch up with its counter parts in
developed markets like US and the UK.
Mutual Fund
A mutual fund is nothing more than a collection of stocks and/or
bonds or money market funds. You can think of a mutual fund as a
company that brings together a group of people and invests their money in
stocks, bonds, and other securities. Each investor owns shares, which
represent a portion of the holdings of the fund.

A Mutual Fund is a trust that pools the savings of a number of investors

who share a common financial goal. It is essentially a diversified portfolio of
financial instruments - these could be equities, debentures / bonds or money
market instruments. The corpus of the fund is then deployed in investment
alternatives that help to meet predefined investment objectives. The income
earned through these investments and the capital appreciation realised are
shared by its unit holders in proportion to the number of units owned by them.
Thus a Mutual Fund is a 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.
Mutual Fund Operation Chart

Organization of Mutual Fund

History of Mutual Fund
 The Mutual Fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank
of India.

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It

was set up by the RBI and functioned under the Regulatory and
Administrative control of Reserve Bank of India. The first scheme launched
by UTI was Unit Scheme in 1964.

From 1987, many Public Sector Mutual Funds was entered in the market.
SBI Mutual Fund was non UTI mutual fund. After that Punjab National Bank
Mutual Fund, Indian Bank Mutual Fund, Bank of Baroda Mutual Fund etc.

From 1993, Private Sector Mutual Fund was also entered in the market and
giving the Indian Investors a wider choice of fund families. There were
many private sectors like DBS Chola Mutual Fund, Reliance Mutual Fund,
Standard Chartered Mutual Fund, etc.

In the year 1993, Securities and Exchange Board of India (SEBI) Act was
passed. The objectives of SEBI are - to protect the interest of investors in
securities and to promote the development of and to regulate the securities
market. As far as mutual funds are concerned, SEBI formulates policies and
regulates the mutual funds to protect the interest of the investors. SEBI notified
regulations for the mutual funds in 1993. SEBI has also issued guidelines to the
mutual funds from time to time to protect the interests of investors.

As at the end of September, 2004, there were 29 funds, which manage

assets of Rs.153108 crores under 421 schemes.

Literature review

Sisodiya Amit sing (2006) in “Indian Mutual Fund Industry – An

Introduction” highlights the journey of the mutual fund industry in the country,
with the Indian economy on a high growth trajectory, improved corporate
performance, ongoing economic reforms, rising income and higher savings levels
make the industry’s future look bright. There is no doubt that those with
capabilities- both in terms of size of the assets under management and
investment skills- are going to rule the investment management scene.

Christine Benz in “Morningstar Guide to Mutual Funds: Five-Star

Strategies” From one of the most trusted and respected names in the financial
industry comes the Morningstar Guide to Mutual Funds, Second Edition. This
valuable resource has been completely revised and updated to meet the needs
of today’s demanding investor. Filled with introductory material as well as more
advanced topics, it outlines the latest tools and techniques for analyzing and
selecting mutual funds. It also allows readers to take an objective and informed
look at their investments and learn what mutual funds are, when and how they
should be used, and what the advantages and disadvantages are of investing in
them. Written for both the seasoned investor and the beginner, Morningstar
Guide to Mutual Funds, Second Edition presents clear, easy-to-understand
guidance that readers can count on when looking to make wise investment
choices regarding mutual funds.

Lee Gremillion in “Mutual Fund Industry Handbook: A Comprehensive

Guide for Investment Professionals” The Mutual Fund Industry Handbook is a
remarkably important work...I am profoundly impressed by the broad and
comprehensive sweep of information and knowledge that this book makes
available to industry participants, college and business school students, and
anyone else with a serious interest in this industry."" -- From the Foreword by
John C. Bogle President, Bogle Financial Markets Research Center Founder and
former chief executive, The Vanguard Group A Foreword by John C. Bogle,
founder of The Vanguard Group and one of the most respected leaders in the
mutual fund industry, sets the stage for this authoritative book that explains the
complexities of the phenomenal industry in simple terms. Investors like the fact
that mutual funds offer professional management, easy diversification, liquidity,
convenience, a wide range of investment choices, and regulatory protection.
Mutual Fund Industry Handbook touches on all of those features and focuses on
the diverse functions performed in the day-to-day operations of the mutual fund
industry. You'll learn about: Front-office functions-analysis, buying, and selling.
Back-office functions, including settlement, custody, accounting, and reporting.
Commission structures-front-end loads, back-end loads, or level loads. The
various fund categories used by the Investment Company Institute, Morningstar,
and Lipper. The roles played by fund managers, investment advisors, custodial
banks, distributors, transfer agents, and other third-party service providers. If you
want a definitive reference on the mutual fund industry, this is the book for you.
Objective of the Study:

1) To exploring the investor’s preference towards the Mutual Fund.

2) To evaluate the risk and return in Mutual Fund.

Research Methodology:

1) A questionnaire will prepare which consist of 14 questions and it will be

administrate on the investor’s of Indore. 58 respondents will be chose.

2) Sampling Technique: - Simple Random Sampling.

3) Sampling Unit: - Respondents are from Indore (M.P.).

4) Tools for Analysis: - Z-test, Factor Analysis.

5) Hypothesis for Z-test: -

H0 = investor’s preference towards mutual fund is not satisfactory.

H1 = investor’s preference towards mutual fund is satisfactory.

References
1) Sisodiya, A. (2006). “Mutual Fund Industry in India: An Introduction”. The
ICFAI University Press, Hyderabad. Pg.3-10.

2) Pandian, P. (2007). “Security Analysis and Portfolio Management”. Vikas

Publishing House PVT LTD, New Delhi. Pg. 411-415.

3) www.amfiindia.com

4) www.moneycontrol.com
5) www.icicidirect.com

6) www.bseindia.com

7)www.nseindia.com

8) www.icfai.org