Chapter-1

1.1 Introduction to Mutual Funds

There are a lot of investment avenues available today in the financial market for an investor
with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds
where there is low risk but low return. He may invest in Stock of companies where the risk is
high and the returns are also proportionately high. The recent trends in the Stock Market have
shown that an average retail investor always lost with periodic bearish tends. People began
opting for portfolio managers with expertise in stock markets who would invest on their
behalf. Thus we had wealth management services provided by many institutions Mutual fund
industry has seen a lot of changes in past few years with multinational companies coming
into the country, bringing in their professional expertise in managing funds worldwide. In the
past few months there has been a consolidation phase going on in the mutual fund industry in
India. Now investors have a wide range of Schemes to choose from depending on their
individual My study gives an overview of mutual funds – definition, types, benefits, risks,
limitations, history of mutual funds in India, latest trends, global scenarios. I have analyzed a
few prominent mutual funds schemes and have given my findings.
The main purpose of doing this project was to know about mutual fund and its functioning.
This helps to know in details about mutual fund industry right from its inception stage,
growth and future prospects.
It also helps in understanding different schemes of mutual funds. Because my study depends
upon prominent funds in India and their schemes like equity, income, balance as well as the
returns associated with those schemes.
The project study was done to ascertain the asset allocation, entry load, exit load, associated
with the mutual funds. Ultimately this would help in understanding the benefits of mutual
funds to investors.
In my project the scope is limited to some prominent mutual funds in the mutual fund
industry. I analyzed the funds depending on their schemes like equity, income, balance. But
there is so many other schemes in mutual fund industry like specialized (banking,
infrastructure, pharmacy) funds, index funds etc.
My study is mainly concentrated on equity schemes, the returns, in income schemes the
rating of CRISIL, ICRA and other credit rating agencies.
1.2 History of Mutual Funds in India
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank of India. The history of mutual
funds in India can be broadly divided into four distinct phases

First Phase - 1964-1987

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988
UTI had Rs. 6,700 crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987
followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund
in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004
crores.

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year
in which the first Mutual Fund Regulations came into being, under which all mutual funds,
except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and acquisitions.
As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805
crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way
ahead of other mutual funds.
Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of
India with assets under management of Rs. 29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other schemes.
The Specified Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does not come under the purview of the
Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds,
the mutual fund industry has entered its current phase of consolidation and growth.
The graph indicates the growth of assets over the years.

The graph indicates the growth of assets over the years.

1.3 Advantages of Mutual Funds:

 Liquidity
Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit a
mutual fund scheme. You can sell your units at any point (when the market is
high). Do keep an eye on surprises like exit load or pre-exit penalty. Remember,
mutual fund transactions happen only once a day after the fund house releases that
day’s NAV.

 Diversification
Mutual funds have their share of risks as their performance is based on the market
movement. Hence, the fund manager always invests in more than one asset class
(equities, debts, money market instruments, etc.) to spread the risks. It is
called diversification. This way, when one asset class doesn’t perform, the other can
compensate with higher returns to avoid the loss for investors.

 Expert Management
A mutual fund is favoured because it doesn’t require the investors to do the research
and asset allocation. A fund manager takes care of it all and makes decisions on what
to do with your investment. He/she decides whether to invest in equities or debt.
He/she also decide on whether to hold them or not and for how long.
Your fund manager’s reputation in fund management should be an essential criterion
for you to choose a mutual fund for this reason. The expense ratio (which cannot be
 more than 1.05% of the AUM guidelines as per SEBI) includes the fee of the
manager too.

 Less cost of bulk transaction

You must have noticed how price drops with increased volume when you buy any
product. For instance, if a 100g toothpaste costs Rs.10, you might get a 500g pack
for, say, Rs.40. The same logic applies to mutual fund units as well. If you buy
multiple units at a time, the processing fees and other commission charges will be
less compared to when you buy one unit.

 Invest in smaller denomination

By investing in smaller denominations (SIP), you get exposure to the entire stock (or
any other asset class). This reduces the average transactional expenses – you benefit
from the market lows and highs. Regular (monthly or quarterly) investments, as
opposed to lump sum investments, give you the benefit of rupee cost averaging.

 Suit your financial goal

There are several types of mutual funds available in India catering to investors from
all walks of life. No matter what your income is, you must make it a habit to set
aside some amount (however small) towards investments. It is easy to find a mutual
fund that matches your income, expenditures, investment goals and risk appetite.

 Cost Efficiency
You have the option to pick zero-load mutual funds with fewer expense ratios. You
can check the expense ratio of different mutual funds and choose the one that fits in
your budget and financial goals. Expense ratio is the fee for managing your fund. It
is a useful tool to assess a mutual fund’s performance.

 Quick & Painless work

You can start with one mutual fund and slowly diversify. These days it is easier to
identify and handpicked fund(s) most suitable for you. Maintaining and regulating
the funds too will take no extra effort from your side. The fund manager, with the
help of his team, will decide when, where and how to invest. In short, their job is to
beat the benchmark and deliver you maximum returns consistently.\

 Tax efficiency
You can invest up to Rs.1.5 lakh in tax-saving mutual funds mentioned under 80C
tax deductions. ELSS is an example of that. Though a 10% Long-Term Capital Gains
(LTCG) is applicable for returns above Rs.1 lakh after one year, they have
consistently delivered higher returns than other tax-saving instruments like FD in
recent years.
 Automated Payment
It is common to forget or delay SIPs or prompt lumpsum investments due to any
given reason. You can opt for paperless automation with your fund house or agent.
Timely email and SMS notifications help to counter this kind of negligence.

 Safety
There is a general notion that mutual funds are not as safe as bank products. This is a
myth as fund houses are strictly under the purview of statutory government bodies
like SEBI and AMFI. One can easily verify the credentials of the fund house and the
asset manager from SEBI. They also have an impartial grievance redressal platform
that works in the interest of investors.

 Systematic or One time investment

You can plan your mutual fund investment as per your budget and convenience. For
instance, starting a SIP (Systematic Investment Plan) on a monthly or quarterly basis
suits investors with less money. On the other hand, if you have surplus amount, go
for a one-time lump sum investment.

1.4 Disadvantages of Mutual Funds

 Cost to manage the Mutual Funds
The salary of the market analysts and fund manager comes from the investors. Total
fund management charge is one of the first parameters to consider when choosing a
mutual fund. Higher management fees do not guarantee better fund performance.

 Lock-in Period
Many mutual funds have long-term lock-in periods, ranging from five to eight years.
Exiting such funds before maturity can be an expensive affair. A specific portion of
the fund is always kept in cash to pay out an investor who wants to exit the fund.
This portion cannot earn interest for investors.

 Dilution
While diversification averages your risks of loss, it can also dilute your profits.
Hence, you should not invest in more than seven to nine mutual funds at a time.
As you have just read above, the benefits and potential of mutual funds can
undoubtedly override the disadvantages, if you make informed choices. However,
investors may not have the time, knowledge or patience to research and analyse
different mutual funds.

 No Control
Unlike picking your own individual stocks, a mutual fund puts you in the passenger
seat of somebody else’s car.
 The Wisdom of Professional Management
That’s right, this is not an advantage. The average mutual fund manager is no better
at picking stocks than the average non-professional, but charge fees.

 Buried Cost
Many mutual funds specialize in burying their cost and in hiring salesmen who do
not make those cost to their clients.

 Managing A Portfolio Of Funds

Availability of a large number of funds can actually mean too much choice for the
investor. He may again advice on how to select a fund to achieve his objectives,
quite similar to the situation when he has individual shares or bonds to select.

 No Control over Cost

An investor in a mutual fund has no control of the overall costs of investing. The
investor pays investment management fees as long as he remains the fund, albeit in
return for the professional management and research. Fees are payable even if the
value of his investment is declining. A mutual fund investor also pays funds
distribution costs, which he would not incur in direct investing. However, this
shorting only means that there is a cost to obtain the mutual fund service.
1.5 Types of Mutual funds Schemes in India

A. By Structure
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors "an conveniently buy and sell
units at Net Asset Value (“NAV”) related prices. The key feature of open-end
schemes is liquidity.
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 "an 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:

A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified
period. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the schemes on the stock
exchanges: where they are listed. In order to provide an exit route t0 the
investors, some close-ended funds give an option of selling back the units to
the Mutual Fund through periodic repurchase at NAV related prices. SEBI
Regulations stipulate that at least One of the two exit routes is provided to the
investor.
 3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of
open-ended and close- ended schemes. The units may be traded on the
stock exchange or may be open for sale or redemption during pre-
determined intervals at NAV related prices.

B. By Nature
1. Equity Fund:
These funds invest the maximum part of their corpus into equities
holdings. The structure of the fund may vary different for different
schemes and the fund manager’s 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.
• MIP’s: Invests maximum of their total corpus in debt instruments
while they take minimum exposure in equities. It gets benefit of both
equity and debt market. These scheme ranks slightly high on the risk-
return matrix when compared with other debt schemes.
• Short Term Plans (STPs): Meant for investment horizon for three to
six months. These funds primarily invest in short term papers like
Certificate of Deposits (CDs) and Commercial Papers (CPs). Some
portion of the corpus is also invested in corporate debentures.
• Liquid Funds: Also known as Money Market Schemes, These funds
provides easy liquidity and preservation of capital, These schemes
invest in short-term instruments like Treasury Bills, inter-bank call
money market, CPs and CDs. These funds are meant for short-term
 cash management of corporate houses and are meant for an investment
horizon of 1 day 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.

C. By Investment Objective
1. 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.
2. 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.
3. Balanced Schemes:
Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they
can. These schemes invest in both shares and fixed income securities,
in the proportion indicated in their offer documents (normally 50:50).
4. 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.
 D. Other Schemes
1. 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.

2. 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.

3. 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.

1.6Different type of option of Mutual Fund

Various investment options in Mutual Funds offer To cater to different investment needs,
Mutual Funds offer various investment options. Some of the important investment options
include:

1. Growth Option: Dividend is not paid-out under a Growth Option

and the investor realizes only the capital appreciation on the
investment (by an increase in NAV).
2. Dividend Payout Option: Dividends are paid-out to investors
under the Dividend Payout Option. However, the NAV of the mutual
fund scheme falls to the extent of the dividend payout.
3. Dividend Re-investment Option: Here the dividend accrued on
mutual funds is automatically re-invested in purchasing additional
units in open-ended funds. In most cases mutual funds offer the
investor an option of collecting dividends or re-investing the same.
 4. Retirement Pension Option: Some schemes are linked with
retirement pension. Individuals participate in these options for themselves,
and corporates participate for their employees.

5. Insurance Option: Certain Mutual Funds offer schemes that

provide insurance cover to investors as an added benefit.

6. Systematic Investment Plan (SIP): Here the investor is

given the option of preparing a pre-determined number of post-dated
cheques in favour of the fund. The investor is allotted units on a
predetermined date specified in the offer document at the applicable NAV.

1.7 Regulation by SEBI

a. As far as mutual funds are concerned, SEBI formulates policies and regulates the
mutual funds to protect the interest of the investors.
b. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds
sponsored by private sector entities were allowed to enter the capital market.
c. The regulations were fully revised in 1996 and have been amended thereafter from
time to time.
d. SEBI has also issued guidelines to the mutual funds from time to time to protect
the interests of investors.
e. All mutual funds whether promoted by public sector or private sector entities
including those promoted by foreign entities are governed by the same set of
Regulations. The risks associated with the schemes launched by the mutual funds
sponsored by these entities are of similar type. There is no distinction in regulatory
requirements for these mutual funds and all are subject to monitoring and
inspections by SEBI.
f. SEBI Regulations require that at least two thirds of the directors of trustee
company or board of trustees must be independent i.e. they should not be
associated with the sponsors.
g. Also, 50% of the directors of AMC must be independent. All mutual funds are
required to be registered with SEBI before they launch any scheme.
h. Further SEBI Regulations, inter-alia, stipulate that MF’s cannot guarantee returns
in any scheme and that each scheme is subject to 20:25 condition [i.e. minimum 20
investors per scheme and one investor can hold more than 25% stake in the corpus
in that one scheme].
i. Also, SEBI has permitted MF’s to launch schemes overseas subject various
restrictions and also to launch schemes linked to Real Estate, Options and Futures,
Commodities, etc.
Chapter 2

Research Methodology
Research Methodology is a systematic method of discovering new facts or verifying old facts,
their sequence, inter-relationship, casual explanation and the natural laws which governs
them.
There are mainly two types of research methodology i.e. Primary research and Secondary
research.
To achieve the objective of studying the stock market data has been collected
This study is completely based on the secondary data. This data is collected from various sources
especially from the journals, magazines, articles, books and mainly from internet.

2.1 Scope of the study

In my project the scope is limited to some prominent mutual funds in the mutual fund
industry. I analyzed the funds depending on their schemes like equity, income, balance. But
there is so many other schemes in mutual fund industry like specialized (banking,
infrastructure, pharmacy) funds, index funds etc.
My study is mainly concentrated on equity schemes, the returns, in income schemes the
rating of CRISIL, ICRA and other credit rating agencies.

2.2 Objective of the Study

 To get a brief idea about the benefits available from Mutual Fund investment.
 To get an idea of the types of schemes available.
 To discuss about the market trends of Mutual Fund investment.
 To study some of the mutual fund schemes and analysis them.
 Observe the fund management process of mutual funds.
 Explore the recent developments in the mutual funds in India.
 To give an idea about the regulations of mutual funds.
2.3 Data Collection Method
A. Primary Data:
The primary information is taken from survey method by 100 respondent.
B. Secondary Data:
The secondary information is mostly taken from websites, books, journals, etc.

2.4 Limitation to the Study

1. The time constraint was one of the major problems.
2. The study is limited to the different schemes available under the mutual funds
selected.
3. The study is limited to selected mutual fund schemes.
4. The lack of information sources for the analysis part.
Chapter 3
Literature Review
 Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012), have studied Impact of
Sharpe Ratio & Treynor’s Ratio on Selected Mutual Fund Schemes. This paper examines
the performance of selected mutual fund schemes, that the risk profile of the aggregate
mutual fund universe can be accurately compared by a simple market index that offers
comparative monthly liquidity, returns, systematic & unsystematic risk and complete fund
analysis by using the special reference of Sharpe ratio and Treynor’s ratio.
 Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research on
Comparative Performance Analysis of Select Indian Mutual Fund Schemes. This study
analyzes the performance of Indian owned mutual funds and compares their performance.
The performance of these funds was analyzed using a five year NAVs and portfolio
allocation. Findings of the study reveals that, mutual funds out perform naïve investment.
Mutual funds as a medium-to-long term investment option are preferred as a suitable
investment option by investors.
 Dr. Yogesh Kumar Mehta (Feb 2012), has studied Emerging Scenario of Mutual Funds
in India: An Analytical Study of Tax Funds. The present study is based on selected equity
funds of public sector and private sector mutual fund. Corporate and Institutions who
form only 1.16% of the total number of investors accounts in the MFs industry, contribute
a sizeable amount of Rs. 2,87,108.01 crore which is 56.55% of the total net assets in the
MF industry. It is also found that MFs did not prefer debt segment.
 Dr Surender Kumar Gupta and Dr. Sandeep Bansal (Jul 2012), have done a
Comparative Study on Debt Scheme of Mutual Fund of Reliance and Birla Sunlife. This
study provides an overview of the performance of debt scheme of mutual fund of
Reliance, and Birla Sunlife with the help of Sharpe Index after calculating Net Asset
Values and Standard Deviation. This study reveals that returns on Debt Schemes are close
to Benchmark return (Crisil Composite Debt Fund Index: 4.34%) and Risk Free Return:
6% (average adjusted for last five year).
 Prof. V. Vanaja and Dr. R. Karrupasamy (2013), have done a Study on the
Performance of select Private Sector Balanced Category Mutual Fund Schemes in India.
This study of performance evaluation would help the investors to choose the best schemes
available and will also help the AUM’s in better portfolio construction and can rectify the
problems of underperforming schemes. The objective of the study is to evaluate the
 performance of select Private sector balanced schemes on the basis of returns and
comparison with their bench marks and also to appraise the performance of different
category of funds using risk adjusted measures as suggested by Sharpe, Treynor and
Jensen.
 E. Priyadarshini and Dr. A. Chandra Babu (2011), have done Prediction of The Net
Asset Values of Indian Mutual Funds Using Auto- Regressive Integrated Moving
Average (Arima). In this paper, some of the mutual funds in India had been modeled
using Box-Jenkins autoregressive integrated moving average (ARIMA) methodology.
Validity of the models was tested using standard statistical techniques and the future
NAV values of the mutual funds have been forecasted.
 Dr. Ranjit Singh, Dr. Anurag Singh and Dr. H. Ramananda Singh (August 2011),
have done research on Positioning of Mutual Funds among Small Town and Sub-Urban
Investors. In the recent past the significant proportion of the investment of the urban
investor is being attracted by the mutual funds. This has led to the saturation of the
market in the urban areas. In order to increase their investor base, the mutual fund
companies are exploring the opportunities in the small towns and sub-urban areas. But
marketing the mutual funds in these areas requires the positioning of the products in the
minds of the investors in a different way. The product has to be acceptable to the
investors, it should be affordable to the investors, it should be made available to them and
at the same time the investors should be aware of it. The present paper deals with all these
issues. It measures the degree of influence on acceptability, affordability, availability and
awareness among the small town and sub-urban investors on their investment decisions.
 Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a
Comparative Study On Performance Evaluation of Mutual Fund Schemes Of Indian
Companies. In this paper the performance evaluation of Indian mutual funds is carried out
through relative performance index, risk-return analysis, Treynor's ratio, Sharp's ratio,
Sharp's measure, Jensen's measure, and Fama's measure. The data used is daily closing
NAVs. The source of data is website of Association of Mutual Funds in India (AMFI).
The study period is 1st January 2007 to 31st December, 2011. The results of performance
measures suggest that most of the mutual fund have given positive return during 2007 to
2011.
 Dr. K. Mallikarjuna Rao and H. Ranjeeta Rani, (Jul 2013), have studied Risk
Adjusted Performance Evaluation of Selected Balanced Mutual Fund Schemes in India.
In this paper, an attempt has been made to study the performance of selected balanced
 schemes of mutual funds based on risk-return relationship models and various measures.
Balanced schemes of mutual funds are the ones which are mostly preferred by Indian
investors because of their balanced portfolio in equity and debt. A total of 10 schemes
offered by various mutual funds have been studied over the time period April, 2010 to
March, 2013 (3 years)
 L.M Bhole and his book “FINANCIAL INSTITUTIONS AND MARKETS” has
examined that the information of different type of scheme of mutual fund like open ended
scheme, close ended scheme, debt scheme, balanced scheme.
 V.K.Bhalla and his book “INVESTMENT MANAGEMENT” deals with concept and
theories of risk factor of mutual fund have been elaborately discussed in the book.
 Sushil Mukherjee’s book has studies the various type of advantages of mutual fund and
also examined that how the risk factor of mutual fund influenced the investment of
mutual fund.
 Abhipsa Mishra and his book “INDIAN MUTUAL FUND AND MARKET
DEVLOPMENT IN INDIA” concerned with history of mutual fund as well as how
mutual fund industry grow and developed and also deals with how mutual fund industry
influenced with a increase the saving of Household savings.
 Dr. Nishi Sharma (Aug 2012), has done research on Indian Investor’s Perception
towards Mutual Funds. This paper attempts to investigate the reasons responsible for
lesser recognition of mutual fund as a prime investment option. It examines the investor’s
perception with reference to distinct features provided by mutual fund companies to
attract them for investing in specific funds/schemes. The study uses principal component
analysis as a tool for factor reduction. The paper explored three factors named as
fund/scheme related attributes, monetary benefits and sponsor’s related attributes (having
respectively six, four and four variables) which may be offered to investors for securing
their patronage. The results are expected to provide fruitful insight to mutual fund
companies for tailoring their offers suitable to cater the needs and expectations of Indian
investors.
 Deepika Sharma, Poonam Loothra and Ashish Sharma (May 2011), Comparitive
Study of Selected Equity diversified Mutual Fund Schemes. The present investigation is
aimed to examine the performance of safest investment instrument in the security market
in the eyes of investors i.e., mutual funds by specially focusing on equity-diversified
schemes. Eight mutual fund schemes have been selected for this purpose. The
 examination is achieved by assessing various financial tests like Sharpe Ratio, Standard
Deviation and Alpha.
 Ms. K. HemaDivya (Apr 2012), has done A Comparative study on Evaluation of
Selected Mutual Funds in India. Mutual Funds industry has grown up by leaps & bounds,
particularly during the last 2 decades of the 20th century. Proper assessment of fund
performance would facilitate the peer comparison among investment managers, help
average investors successfully identify skilled managers. Further the growing competition
in the market forces the fund managers to work hard to satisfy investors & management.
Therefore regular performance evaluation of mutual funds is essential for investors and
fund managers also. The present study is confined to evaluate the performance of mutual
funds on the basis of yearly returns compared with BSE Indices..
 Ms. Archana Patro and Prof. A. Kanagaraj (Jun 2012), have done Exploring the
Herding Behaviour in Indian Mutual Fund Industry. The study analyzes the trading
activity of Indian mutual funds and investigates whether Indian mutual fund managers are
engaged in herding behaviour. Results are compared with previous studies in mature as
well as developing markets to determine the level of maturity of the Indian capital
market. Measure of herding developed by Lakonishok et al. (1992) has been used.
 C.Vijendra and D. Sakriya, (June 2013) have done a Study of Investor Behavior
regarding Investment Decisions in Mutual Funds. A survey was conducted among 384
mutual funds investors from the twin cities of Hyderabad & Secundrabad to study the
factors influencing the fund/scheme selection behavior of these investors. It is hoped that
this survey will underpin the AMCs with regards to planning and implementation of
designing, marketing and selling of innovative products.
Chapter 4
Data Analysis
 

According to the survey conducted out of 100 respondent:

 69% people invest is savings account.
 56% people invest in Fixed Deposits.
 46% people invest in Insurance.
 46% people invest in Mutual fund.
 52% people invest in Gold or silver.
 44% people invest in Shares or in Debentures.
According to my survey out of 100 respondent:
 19% people prefer investing in Liquidity.
 21% people prefer investing in Low Risk.
 24% people prefer to invest in High Risk.
 36% people prefer investing by looking company reputation.

According to my survey conducted out of 100 respondent:

 92% knew about the Mutual Funds.
 Only 8% don’t know about Mutual Funds.
According to the survey conducted out of 100 respondent:
 45% people are investor in Mutual Funds.
 55% people are not investor in Mutual Fund.

According to my survey conducted out of 100 respondent:

 36.5% people choose to invest in Monthly SIP.
 19% people choose to invest once in six months.
 27% people choose to invest to invest in once in a year pattern.
 22.2% people choose to invest lump sum amount in mutual funds.
  30.2% people choose to invest very rarely in mutual funds.

According to the survey conducted out of 100 respondent:

 56.4% people prefer to invest in Equity funds scheme.
 41.8% people prefer to invest in Debt fund scheme.
 36.4% people prefer to invest in Hybrid fund scheme.
 According to the survey conducted out of 100 respondent:
 37% people prefer to invest in diversified equity fund.
 42.6% people prefer to invest in mid-cap fund.
 38.9% people prefer to invest in sector specified funds.
 42.6% people prefer to invest in tax savings funds.

According to the survey conducted out of 100 respondent:

 37% people prefer to invest in short term plans.
 35.2% people prefer to invest in liquid funds.
 22.2% people prefer to invest in income funds.
  5.6% people prefer to invest in gilt funds.

According to the survey conducted out of 100 respondent:

 88.1% people have knowledge about the share market and its functioning.
 11.9% people doesn’t have knowledge of share market and its functioning.
According to the survey conducted out of 100 respondent:

 35.1% people found advantage of investing in mutual fund is professional

management.
 40.4% people found advantage of investing in mutual funds is diversification.
 47.7% people found advantage of investing in mutual is low cost.
 50.9% people found advantage of investing in mutual fund is liquidity.
 49.1% people found advantage of investing in mutual fund is transparency.
 40.4% people found advantage of investing in mutual fund is flexibility.
 24.6% people found advantage of investing in mutual fund is simplicity.

According to the survey conducted out of 100 respondent:

 33.3% people invest their money in mutual funds from one year.
 7.4% people invest their money in mutual funds from two years.
 24.1% people invest their money in mutual funds for three years.
 14.8% people invest their money in mutual funds for four years.
 14.8% people invest their money in mutual funds for five years.
 5.6% people invest their money in mutual funds for more than five years.
According to the survey conducted out of 100 respondent:

 46.3% invest in mutual fund schemes because it is a good investment instrument.

 59.9% invest in mutual fund schemes because it’s better to invest in Mutual funds
rather than investing directly in shares.
 53.7% invest in mutual fund schemes because they give assured and consistent return.
 59.3% invest in mutual fund schemes because they provide high return with low risk.
 46.3% invest in mutual fund schemes because Mutual Funds provide the benefit of
cheap access to expensive stocks.
 35.2% invest in mutual fund schemes because professional fund managers manage
them with in-depth research inputs from investment analysts.
 25.3% invest in mutual fund schemes because Mutual funds diversify the risk of the
investor by investing in a basket of assets.
According to the survey conducted out of 100 respondent:

 36.7% people do not invest in mutual funds because It’s not a lucrative investment
instrument.
 46.7% people do not invest in mutual funds because No satisfactory return on
investment when compared to other investment instruments.
 56.7% people do not invest in mutual funds because No safety for funds invested.
 46.7% people do not invest in mutual funds because No knowledge about how to
invest.
 41.75 people do not invest in mutual funds because It is related to share market, so it
is very risky and the returns are not guaranteed.
According to the survey conducted out of 100 respondent:

 28.2% people think that savings bank is the best investment instrument.
 31% people think that fixed deposit is the best investment instrument.
 5.6% people think that shares/debentures is the best investment instrument.
 21.1% people think that gold/silver is the best investment instrument.
 1.4% people think that postal savings is the best investment instrument.
 9.9% people think that real estate is the best investment instrument.
 2.8% people think that insurance is the best investment instrument.
According to the survey conducted out 100 respondent:

 19% people have experience highly satisfactory with mutual funds.

 24% people have experience satisfactory with the mutual funds.
 16% people have experience average with the mutual funds.
 8% people have experience dissatisfactory with the mutual funds.
 33% people have experience high dissatisfactory with the mutual funds.
According to the survey conducted out of 100 respondent:

 17.9% belongs to the age group of 18-20 who invest in mutual funds.
 16.8% belongs to the age group of 21-30 who invest in mutual funds.
 30.5% belongs to the age group of 31-40 who invest in mutual funds.
 20% belongs to the age group of 41-50 who invest in mutual funds.
 14.7% belongs to the group of 51-60 who invest in mutual funds.

According to the survey conducted out of 100 respondent:

 15.1% people came to know about mutual funds by pamphlets.

 18.9 people came to know about mutual funds by newspapers.
 32.1% people came to know about mutual funds by magazine.
 43.4% people came to know about mutual funds by television.
 47.2% people came to know about mutual funds by friends and relatives.
 50.9% people came to know about mutual funds by agents or consultants.
According to the survey conducted out of 100 respondent:

 40.6% people faced problem while selling the mutual funds because delay in getting
cash.
 50% people faced problem while selling the mutual funds because broker’s chargers
is more than commission.
 31.3% people faced problem while selling the mutual funds because no fixed center.
 15.6% people faced problem while selling the mutual funds because relie on broker
for sale.
According to the survey conducted out of 100 respondent:

 37.5% people are very much interested in learning about new mutual fund schemes.
 39.1% people are interested in learning about new mutual fund schemes to some
extent.
 14.1% people are not much interested in learning about new mutual fund schemes.
 9.4% people are not at all interested in learning about new mutual fund schemes.
 Suggestions

Four sequential steps will enable investor to decide effectively.

1. Divide the spectrum of Mutual Funds depending on major asset classes invested in.
Presently there are only two.
• Equity Funds investing in stocks.
• Debt Funds investing in interest paying securities issued by government, semi-government
bodies, public sector units and corporates.

2. a) Categorizing equities
 Diversified – invest in large capitalized stocks belonging to multiple sectors.
 Sectorial – Invest in specific sectors like technology, FMCG, Pharma, etc.
b) Categorized Debt
.• Gilt – Invest only in government securities, long maturity securities with average of 9 to 13
years, very sensitive to interest rate movement.
• Medium Term Debt (Income Funds) – Invest in corporate debt, government securities and
PSU bonds. Average maturity is 5 to 7 years.
• Short Term Debt – Average maturity is 1 year. Interest rate sensitivity is very low with
steady returns.
• Liquid – Invest in money market, other short term paper, and cash. Highly liquid. Average
maturity is three months.

3. Review Categories
• Diversified equity has done very well while sectorial categories have fared poorly in Indian
market.
• Index Funds have delivered much less compared to actively managed Funds.
• Gilt and Income Funds have performed very well during the last three years. They perform
best in a falling interest environment. Since interest rates are now much lower, short term
Funds are preferable.

4. Specific scheme selection

Rankings are based on criteria including past performance, risk and resilience in unfavorable
conditions, stability and investment style of Fund management, cost and service levels. Some
recommended schemes are:
• Diversified equity – Zurich Equity, Franklin India Bluechip, Sundaram Growth. These
Funds show good resilience giving positive results.
• Gilt Funds – DSP Merrill Lynch, Tata GSF, HDFC Gilt have done well.
• Income Fund – HDFC, Alliance, Escorts and Zurich are top performers
• Short Term Funds – Pru ICICI, Franklin Templeton are recommended

Within debt class, presently more is allocated towards short term Funds, because of low
prevailing interest rates.
However if interest rates go up investor can allocate more to income Funds or gilt Funds.
BIBLOGRAPHY