INTRODUCTION

We have seen that the mutual funds falling both in private sector and public
sector have displayed significant growth from 2000. However, this growth
has posed a difficulty to investors in making a selection of suitable schemes
as presently there are more than 402 schemes .The issues related to the
choice among the public and private sector balance fund, have become
highly important because even a single wrong decision may put the investors
in financial crisis, sometimes leading to their bankruptcy. A proper
performance evaluation measures will remove such confusion and help the
small investors in selecting various mutual fund Balance fund for
investment. Moreover, with growing competition in the market, the fund
managers also need to satisfy themselves that management fees and research
expensed are justified dripping in view the returns generated. In this context,
close monitoring and evaluation of mutual funds is very important for
'investors and fund managers both
 MUTUAL FUND

A mutual fund is a trust that pools the savings of a number of investors with
common financial goals. The collected money is invested in various
instruments like debentures, shares, etc. The income generated from these
instruments and the capital appreciation is shared by the investors in
proportion to the number of units owned by them.

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities.
The income earned through

these investments and the capital appreciation realized are shared by its unit
holders in proportion to the number of units owned by them. Thus a Mutual
Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. The flow chart below describes broadly
the working of a mutual fund:
 HISTORY OF INDIAN MUTUAL FUND INDUSTRY

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
the. 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 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 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 September, 2004, there were 29
funds, which manage assets of Rs.153108 crores under 421 schemes.
 REVIEW OF LITERATURE

The last two decades witnessed a rapid and sharp evolution of views on the
policy of financial system development. At the beginning, there was an
emphasis on achieving high saving rates and investments chiefly by ensuring
the security of small savers and avoiding excessive volatility in the financial
environment. Soon after, the focus of attention moved to promoting greater
efficiency through financial liberalization. Later the experience of post-
liberalization ‘booms-and-busts’ cleared the way for an emphasis on the
creation of a financial environment with a sound incentive system and
minimized involvement of the government in financial services.
To start reviewing the problem of why deposit insurance exits, one
should first elucidate the functions (services) of the modern banking firms.
Since Gurley and Shaw (1960), economists have viewed banks and other
financial institutions as intermediaries that perform special functions while
channeling credit from economic agents with excessive funds to economic
agents with fund shortages. Recent classification of the functions as
suggested by Bhattacharya and Thakor (1993). A prominent feature of such
classifications is an emphasis on the asset transformation functions
performed by the deposit-taking financial institutions (banks, mutual funds,
etc.). These institutions are considered to issue securities (deposits, mutual
fund shares) to the ultimate creditors and invest the proceeds on their own in
obligations (loans, bonds, etc.) of the ultimate borrowers.
Therefore, they combine lending and borrowing on their own and thus
perform the qualitative transformation of some assets into others. By
comparison, the intermediaries engaged in brokerage do not transform assets
but simply facilitate direct trade (credit transactions) between the ultimate
creditors and the ultimate borrowers.
In the world of perfect markets of Arrow-Debreu, financial
intermediaries are redundant institutions (Freixas and Rochet, 1997), and
economic theorists have to consider market imperfections to explain their
existence. By now the economic literature has suggested two types of market
frictions as raison d'etre of financial intermediaries. One approach (e.g.
Benston and Smith, 1976) employs a hypothesis that financial
intermediation arises to reduce transaction costs, both informational and
physical (i.e. costs of searching for a transaction counterpart, costs of fitting
the preferences of ultimate creditors and borrowers in respect of the term
and size of loans, etc.). Therefore, the view implies that financial
intermediation exists as far as there are imperfections in the financial market
infrastructure and, as asserted by Fama (1980), the only uniqueness of the
banks is that they happen to provide the most cost-efficient way of wealth
exchange in the economy. The approach, however, draws just a part of the
entire financial sector’s picture and fails to explain, for instance, why it is
effective to bundle the deposit-taking and lending activities in a single
intermediary institution.
These conceptual problems made academic attention focus on another
view of the market imperfections in the financial sector, a view suggesting
that financial intermediation is a natural response to the asymmetric
information environment (Leland and Pyle, 1977). The idea is that lenders
are less informed about the quality of the investment projects pursued by
borrowers, and to arrange sufficient financing with affordable costs the
lenders need information about the quality of the projects. Some firms may
specialize in producing such information. However, its public-good
properties and quality concerns would prevent the firms from capturing all
the returns from its production, if they simply tried to sell the information.

Chandra Prassana “Managing Investments 1st Edition”, 40-43, New

Delhi, Tata Mc-Graw Hill, 1998.

Mutual Fund is trust that pools the saving of a number of investors who
share a common financial goal….
Waghmare, Tushar, “The Future of Fund Management in India”, 91-
96, New Delhi, Tata Mc-Graw Hill, 1998.

The basic objective of a mutual fund is providing a diversified portfolio so

as to reduce the risk in investment at a lower cost….

Srivastava, R.M. & Nigam Divya, “Management of Indian Financial

Institute HDFC Bank Ltd. On edition III”, 35-37, New Delhi, Himalaya
Publication House, 1996.

The Indian mutual fund industry is dominated by the HDFC Bank Ltd.
which has a total corpus of. 700 billion collected from more than 20 million
investors….

Krishnamurthy, Suresh, “Mutual Funds”, Portfolio Organizer, 16-20,

March2007.
Worldwide, good mutual fund companies are known by their AMC’s and
this fame is directly linked to their superior stock selection skills………

Adajania, Kayejad E., “Best Mutual Funds 2007”, Outlook Money, 26-
31, March2007.

Fund ranking….
A survey of “ Investor perception by March Marketing Consultancy and
Research” attempts to know the mutual funds investor better. It examines
some interesting choices of the investor including the reason behind
investing in mutual funds and the investor’s knowledge about mutual funds.
Its objective was to measure the investor sensitivity to manage the portfolio
to achieve objective like tax incentives, capital gain, time horizon of
investment and risk, return expectations. Knowing the perception of the
customers is very important in any industry. This provides insights in to the
customer behavior and his expectations from the industry players. A proper
understanding of the perceptions would definitely benefits the players.
 OBJECTIVES OF THE STUDY

1. To know the investment preferences of the investor regarding various

investment schemes.
2. To study the factors influencing the decision of investment in Mutual
Funds.
3. To compare the various Income, Growth & Balanced Schemes and
Monthly Income plans offered by various Mutual Funds.
4. To study the satisfaction level of the investors from the investment
through Mutual Funds.
5. To know the problems faced by investors by investing through Mutual
Funds
6. To know about the various types of Open ended equity fund Schemes
and Different players working in Indian Market.
7. To evaluate the performance of Open ended equity fund Schemes in
private and public Mutual Funds player in India.
8. To compare portfolio of Open ended equity funds schemes.
 RESEARCH METHODOLOGY

Research in a common parlance refers to search of knowledge. Infact one

can define the research as scientific and systematic search for pertinent
information on specific topic.
Research comprises defining and redefining the problem, formulating
hypothesis, suggest solution, collecting, organizing, and evaluating data,
reaching at a specific conclusion and at the same time careful evaluation of
the conclusion.

Marketing research is a systematic and objective process of identifying and

formulating the market problems, setting research objectives and methods
for collecting, editing, coding, tabulating, analyzing, interpreting and
preventing data in order to find justified solutions for these problems.
Research methodology is a systematic way to solve the research problem.
The research process consists of a series of closely related activities and to
solve a research problem adopt the following process.

1. RESEARCH DESIGN
“A research design is the arrangement of condition for collection and
analysis of
Data in a manner that aims to combine the relevance to the research
purpose with
Ceremony of procedure.”
The preparation of research design appropriate for a particular research
problem involves usually the consideration of the following:
 Means of obtaining the information
- Personal observation
- Questionnaire

COLLECTION OF DATA
During the research process the critical stage is the stage of data collection.
It needs utmost attention of the researcher, as data is the base for the whole
of the research undertaken. So data collection should be accurately done
otherwise mistake of data collection will lead to errors and failures of the
research report.

The facts and figures were collected through primary as well as secondary
data.
a)The primary data was collected by personally interviewing the
brokers.Personal interview method was adopted taking into consideration
the availability of time and availability of other resources, whenever need
arouse various supplementary was also asked to gain maximum information
from the respondents.
b) The secondary data means data that are already available. It is
collected through published data which are available in books, magazines,
reports, publications .We also collect some data from various web sites.

SAMPLE DESIGN
Sample size and sample area are two important things in sample design.
Sample size means number of customers, clients visited during the project.
Sample area means area covered for conducting the research. This project
covers the study of both urban and rural markets for mutual funds. For this
purpose
SAMPLE SIZE
I plan a sample of 100 people out of which 50 would be from urban market
and 50 would be from rural market. This sample size would be covering
various categories of people viz. government employees, business class,
agriculturists, professionals.

SAMPLE AREA
Sample area means area in which research is conducted. For my project both
urban and rural markets are to be covered. For studying urban market areas
covered will be Patiala for rural market areas covered would be Rajpura and
adjoining villages.
 BIBLIOGRAPHY

1. ICFAI reader- Mutual fund distribution channel – Article by C.V.

Srivastava ( Page 31-43)
2. Economic & political weekly April-2006 – Article by V.S. Sharma (
Page 23-25)
3. Pandey, I.M., Financial Management, New Delhi, Vikas Publishing
House Pvt. Ltd., 2007.
4. Bhalla, V.K, Working Capital Management, New Delhi, Anmol
Publications House Pvt.Ltd 2007.
5. Gupta S.P., statistical methods-Sultan chand publications ,30th edition

– (Page 378-418)
6. Schaums-statistics outline-Tata Mcgraw Hill – (Page 152- 155) (Page
175-185)
7. Fisher & Jordan: security analysis & investment management-
(Page 321-338)
8. Pandian Punitawathy :Security Analysis & portfolio management –
( Page 145-165, Page 180-186)
9. Beri G.C.- Marketing Research 3rd edition- Page 98-101, page 94

10.Kothari C.R.- Business Research Methodology – page 138-146

11.Pandey I.M.-Financial Management by Vikas Publishing House
(Page 6.23-6.57)
12. Srivastva:Management of Indian Financial Institutions-Himalya
Publishing House 6th edition. –( page 272-285, page 313 to 335)
13.Indian journal of commerce-Jun, 2006
14. Journal of finance-Feb,2006
 15.SEBI Bulletin – July,2005

Websites:

a. www.amfiindia.com

b. www.mutualfundsindia.com

c. www.amfiindia.com

d. www.financeindiamart.com

e. www.hdfcfund.com

f. www.tatamutualfund.com

g. www.utimutualfund.com

h. www.valuereserachonline.com

i. www.yahoooffinance.com