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m Concept of a Mutual Fund (MF)

m Operation of a MF
m Advantages and disadvantages
m Evolution of MF in India
m Structure of a MF
m Legal and regulatory framework
m Classification of MF
m How to invest in MFs

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A mutual fund is a pool of money collected
from investors and is invested according to
stated investment objectives´.

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= ïo control over costs

= ïo tailor-made portfolios

= Managing a portfolio of funds

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=¢ ase I -1964-87 : Growt of Unit Trust of India
=UTI -only mutual fund during 1963-1988 -monopoly status
= Governed by UTI Act, 1963
=In 1984 investible funds corpus of UTI :-Rs 600 crore
=By 1987-1988, assets under management of UTI :- Rs 6700
crore

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= SBI Mutual Fund ÿ 1st Bank sponsored mutual
fund
= SEBI got regulatory powers in 1992
= Assets under management increased to Rs
47,004 crore
= UTI still ad 80% market s are

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= ¢rivate sector players allowed to set up mutual
funds in 1993
= Kot ari ¢ioneer registered as t e first private MF
ouse in t e country
= Encouraged competition

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= SEBI Mutual fund regulations 1996
= Deregulation and liberalization of Indian economy
=impetus for growt
= increased competition
= SEBI and AMFI launc ed investor awareness programs
= In 1999 dividends from mutual funds were made tax
exempt in t e ands of investors

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= Emergence of a large uniform industry

= Creation of a level playing field

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=|  
 Birla Sun Life boug t out Alliance
Capital (2005), Infrastructure Development Finance Company
Limited (IDFC) took over Standard C artered AMC (2008)

=O    Fidelity, Franklin Templeton Mutual Fund.

=As at t e end of Marc 2008, t ere were 33 mutual funds,


w ic managed assets of Rs. 5,05,152 crores under 956
sc emes

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3-tier structure of Sponsor-Trustee-AMC.

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m Mutual funds are regulated by t e 2 O (Mutual
Fund) Regulations, 1996.
m Bank-sponsored mutual funds are jointly regulated
by 2 OO.
m Listed mutual funds are subject to t e listing
regulations of stock exc anges.
m a    |


O a|O )is an
industry association of mutual funds. (training,
investor awareness)

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= ïet Asset Value is t e market value of t e assets of
t e sc eme minus its liabilities.
= T e per unit ïAV is t e net asset value of t e sc eme
divided by t e number of units outstanding on t e
valuation date
= So if a fund ad net assets of Rs.50 lak and t ere
are one lak s ares of t e fund, t en t e price per
s are (or ï ) is Rs.50.00.
= T e ïAV increases (or decreases) w en t e value of
t e mutual fund's oldings increase (or decrease).

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Types of
mutual
funds

Maturity Investment Load


¢eriod objectives

Open Close
ended ended

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m Available for subscription all m Offers units for sale only in
t roug t e year. t e I¢O. It is t en listed on
t e stock market.
m T e corpus of open-ended
funds, c anges everyday. m T e corpus of a closed-end
fund remains unc anged.
m Do not ave a fixed
m Have a stipulated maturity
maturity.
period (2-15 years)
m Repurc ased at ïAV
m Sell at a discount or premium
to ïAV

O¢Eï EïDED CLOSED EïDED

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= Loads:- c arges imposed on investors to cover
distribution/sales/ marketing expenses
= Load types
=? ÿ   
= 
ÿ  

= Funds t at make no suc c arges or loads


for sales expenses are called  
 


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Oïï
 O

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ï?

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= Invest in equity s ares

= Objective -capital appreciation over t e medium


to long-term

= Returns are volatile since linked to t e stock


markets

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m Offer tax benefits to investors under section 80
C
m Invest primarily in equities (90%)
m 3 year lock in period
m Encourage investment in equities

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° Invest in t e same pattern as popular market
indices like S&¢ Cï ïifty Index/ SEïSE

° Value of t e index fund varies in proportion to


t e benc mark index

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= Invest in equity s ares of companies in a
particular sector

= Targeted at investors w o are extremely bullis


about a particular sector

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m Invest in ig ly liquid money market instruments
m S ort term

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m Invest bot in equity s ares and fixed-income-
bearing instruments (debt)
m Steady return, reduce volatility, providing some
upside for capital appreciation
m Ideal for medium- to long-term investors willing to
take moderate risks

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m Invest in fixed-income-bearing instruments like bonds, debentures,
government securities
m Best suited for t e medium to long-term investors
m Averse to risk and seek capital preservation
m ¢rovide regular income and safety to t e investor

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m Invest in Central and State Government securities
m Give secured return and ensure safety of t e principal
amount
m Best suited for t e medium to long-term investors w o
are averse to risk

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m OD -most important source of information for investors
m KIM is abridged version of t e OD, available wit
application form
m Cover page contains details of sc eme offered, names
of sponsor, trustee & AMC, mandatory disclaimer clause
of SEBI
m Closed end funds issue an offer document at t e time of
t e I¢O
m Open ended funds ave to update OD at least once in 2
years

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° Identify your investment needs
° C oose t e rig t Mutual fund
° Select t e ideal mix of sc emes
° Invest regularly
° Start early

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m Create wealt , by investing as little as Rs. 500/-
per mont

m Disciplined Investing Approac

m Benefits of Compounding

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¢   ? ¢ ï

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m Indian mutual funds retail market, growing at a CAGR of
about 30%, is forecasted to reac US$ 300 Billion by
2015
m Income and growt sc emes made up for majority of
Assets Under Management (AUM) in t e country
m At about 84% (as on Marc 31, 2008), private sector
Asset Management Companies account for majority of
mutual fund sales in India

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THAïK YOU

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