Definition

According to AMFI
the moneypooled in by a large number of investors is what
makes up a MutualFund. This money is then managed by a
professional Fund Manager, whouses his investment
management skills to invest it in variousfinancial instruments.
According to SEBI Act, 1993
Mutual fund means a fund established in the form of a trust by
a sponsor to raise money by trustee through the sales of units
to the public under one or more schemes for investing in
securities in accordance with these regulations.

According to SEBI Act, 1996

a fund established in form of a trust to raise money
through the sales of units to public or a section of public
under one or more schemes investing in securities,
including money market instruments.

According to Mutual Fund fact book

A mutual fund is a Financial Service Organization that
receives money from shareholders to invest it, earn
returns on it, attempts to make it grow and agrees to pay
the shareholders cash on demand for the current value of
his investments.

Evolution
First phase 1964- 1987
Second Phase 1987-1993 (Entry of public
sector funds)
Third phase 1993-2003 ( Entry of private
sector funds)
Fourth Phase since February 2003

Organisations

1.Sponsor
Any person who acting alone or with another
body corporate establishes a mutual fund
SEBI registers mutual fund if following criteria
are satisfied(I)Sponsor should have been doing business in
financial services for not less than five years,
with positive net worth in all immediately
preceding 5 years
(II) The sponsor and any of the directors or
principle officers to be employed by the mutual
fund, should not have been found guilty any
moral turpitude or economic offences.

2. Trustees
Mutual fund in India is constituted in the
form of a public trust created under the
Indian Trusts Act, 1882
The sponsor forms the trust and register
with SEBI
At least 50% of the trustees shall be
independent trustees

3. Asset Management
Company
AMC is a company formed and registered
under the Companies Act, 1956
Acts as the investor manager to the Trust
under the supervision and direction of the
Trustees
AMC of a mutual fund must have a net
worth of at least 10 Crore at all times and
this net worth should be in the form of cash
Ex.- UTI Asset Management, Franklin
Templeton etc.

Terms Related to Mutual Fund

1. Units
. Each investors holding in a mutual fund is
represented in terms of units that is derived
from the amount invested
. They are offered through NFO
. For ex. A & B invests in GTX equity fund ,when
price of each unit is Rs. 10, Rs. 5000 & Rs.
10000 respectively. The numbers of units
allocated will be
For A 5000/10= 500 units
For B - 10000/10= 1000 units

2. Net Assets
Current value of the portfolio securities
held by a scheme
Total Assets of the scheme - fees and
expenses
It will go up whenever investors buy
additional units in the scheme or brings
in funds
It is not a fixed value

3. Net Asset Value

NAV= Net Assets/ Number of outstanding
units
All investors transaction are conducted at
the
current
NAV
Net Assets
Unit Outstanding
NAV
100000

10000

10

120000

10000

12

108000

9000

12

100000

9000

11.11

111110

1000

11.11

4. Open ended and close ended

Schemes
An open ended allows investors to invest
in additional units and redeem investment
continuously at current NAV
A close ended scheme is for a fixed period
or tenor and the units are offered at NFO
only
If an investor want to exit from close
ended scheme they can do so by selling
the units to other investors on stock

Regulatory Framework of Mutual Funds

SEBI is the primary regulator with the

regulations called as SEBI (Mutual Funds)
Regulations, 1996
RBI is involved for specific areas which
involves foreign exchange transactions
AMFI is the industry body that oversees
the functioning of the industry and
recommends best practices to be followed
by

Transaction/ Information

Period

Allotment of units in NFO

5 days from closing date

Scheme opening for continuous

transactions

5 business days from allotment

Despatch of account statement

5 days from request

Despatch of consolidated account

statement

End of every month if a transaction in

the folio else every six month

Conformation of unit allotment by

SMS or Email

5 days from purchase application

Despatch of dividend warrants

30 days from dividend declaration

Despatch of redemption proceeds

10 business days from redemption

request

Daily NAV of Scheme

Available by 9 pm on mutual fund and

AMFI website and published in
newspapers

Monthly portfolio disclosure

Scheme portfolio at the end of the

month made available on the mutual
funds website on or before 10th of
following month

Mutual Fund Products

1. Equity Funds
.
.
.
.
.

Passive and Active Funds

Diversified Equity Funds
Based on the Segment of the Market
Based on Investment Style
Equity Linked Saving Schemes

2. Debt Funds
Short term debt funds
Long term debt funds
3. Hybrid Funds
Debt oriented Funds
Equity oriented Funds
Asset Allocation Funds
Capital Protection Funds

4. Other Funds
Fund of funds
Exchange traded funds
Gold ETFs
International Funds
Real Estate Mutual Funds
Rajiv Gandhi Equity Saving Scheme
Infrastructure Debt Schemes

*Source: nism.ac.in ( SEBIs Institution)

Scheme wise Composition of Assets

*Source:https://www.amfiindia.com/intermediary/other-data/industry-data-analysis

Taxation on Mutual Fund Products

Tax on Dividend
Resident
Individual/
HUF

Domestic
Companies

NRI

Nil

Nil

Nil

Liquid and
25%
Money Market
Schemes

30%

25%

Other Debt
Funds

30%

25%

Equity
Oriented
Schemes

25%

Tax on Capital Gains

Resident
Individual/H
UF

Domestic
Companies

NRI

LTCG

Nil

Nil

Nil

STCG

15%

15%

15%

LTCG

20% with
indexation

20% with
indexation

20% with
indexation

STCG

Marginal Rate
of taxation

Marginal Rate
of taxation

Marginal Rate
of taxation

Equity
Oriented
Schemes

Non-Equity
Oriented
Schemes

Benefits of investing in Mutual

Funds
The advantages of investing in a Mutual Fund are:
Professional
Management
Diversification
Convenient
Administration
Return
Potential
Choice of schemes
Tax benefits
Well regulated