Sunteți pe pagina 1din 63

A Project On MUTUAL FUNDS AS A TOOL FOR FINANCIAL PLAN With special re erence to !OTA!


PREPARED BY Anupam jena Roll no: 56316ut11008

Corporate Guide : Mr. Arabinda Sahoo Deputy Manager (Sales)

Internal Guide : Ms. Disha Bhatt


Bapuji Nagar B!u"anes#ar B!u"anes#ar


I do hereby declare that the project entitled MUTUAL FUND AS A TOOL FOR FINANCIAL PLAN is submitted as a part of my summer internship program, carried out under the guidance of my internal guide Ms. Disha Bhatt, my external guide Mr. Arabinda Sahoo and has not been submitted to any other institute/university or any other organization apart from Kotak ahindra !sset anagement "ompany #td$ and %!& 'chool (f )usiness anagement, )hubanes*ar$



It is my pleasure to express a deep sense of gratitude, reverence and indebtness to Mr. Arabinda Sahoo, %eputy anager +!sset anagement, Kotak ahindra utual -und for giving me the opportunity for doing my summer training program in his organization and for his prompt guidance, valuable suggestions and constant direct inspiration, *hich helped me to complete this project$ I *ould also like to thank Mr. Ja)ara* Ra+, at Kotak ahindra !sset anagement "ompany #td$ -or his mentorship to help me do the necessary research *ork and thereby helping me in the final report$ .ith immense pride and sense of gratitude, I extend my sincere thanks to Miss. Disha Bhatt -aculty DA- S.hoo/ O0 B,sin1ss Mana21*1nt )hubanes*ar for her valuable suggestions and guidance throughout the period of this project$ I am extreamly grateful to the teaching staff of %') +%!& 'chool (f )usiness anagement, )hubanes*ar for their help and support in completion of the project *ork$ #ast but not the least I *ould also thank to the other staff members of Kotak utual -und, )hubanes*ar, *ho have directly or indirectly helped me in completing this project report It *as indeed a learning experience for me *here I got the first hand experience of the marketing field$



/his is to certify that r$ ANUPAM JENA3 0oll 1o$ 2 5!"#!UT##$$%3 a student of ))! 3th semester has undergone his summer internship programme at K(/!K !4I1%0! !sset anagement "ompany #td$, )hubanes*ar under my guidance$ /his is for the partial fulfilment of ))! programme of %!& 'chool (f )usiness anagement, )hubanes*ar 5 the project is a *ork of his o*n$

Miss. Disha Bhatt Fa.,/t) DSBM



Kotak ahindra is one of India6s leading financial institutions, offering complete financial solutions that encompass every sphere of life$ In the past 73 years, there have been dramatic changes in ho* mutual funds are sold to the investing public$ )efore 89:;, all funds had a single share class, and shares of a given fund *ere offered to all investors$ ost funds *ere sold through a broker, *ho provided advice, assistance, and ongoing service to the fund buyer$ /he share2 holder paid for these distribution services through a front2end sales charge *hen he or she bought the fund$ (ther funds sold shares directly to investors *ithout a sales charge$ Investors in these funds either did not receive advice and assistance or obtained and paid for these services separately$ -unds sold through financial professionals such as brokers have since adopted alternatives to the front2end sales charge$ /he alternative payment methods typically include a fee based on assets that may also be in combination *ith a front2end or back2end sales charge$ In many cases, funds offer several different share classes < all of *hich invest in the same underlying portfolio of assets, but each share class may offer shareholders different methods of paying for broker services$ In addition, -inancial planning is a planned and systematic approach to provide for the financial goals that *ill help people realise their needs and aspirations, and be happy$ /he objective of financial planning is to ensure that the right amount of money is available at the right time to meet the various financial goals of the
investor. This would help the investor realize his aspirations and experience happiness.




'r$no 1. 2. 3. 4. 5. 6. 7.

I1/0(%>"/I(1 ()?@"/I&@' (- '/>%A


9 1112 1415 1729 3137 3941



"(1"@=/ (->1%


(0B!1IC!/I(1 =0(-I#@

>/>!# ->1% !' ! /((#

-I1%I1B' 5 '>BB@'/I(1' "(1"#>'I(1

5557 58





utual funds have been a significant source of investment in both government and corporate securities$ It has been for decades the monopoly of the state *ith >/I being the key player, *ith invested funds exceeding 0s$D;; bn$ +>'E 8; bn$,$ /he state2o*ned insurance companies also hold a portfolio of stocks$ =resently, numerous mutual funds exist, including private and foreign companies$ )anks 2 mainly state2o*ned too have established + -s,$ -oreign participation in mutual funds utual -unds and asset

management companies is permitted on a case by case basis$ ! utual -und is a trust that pools the savings of a number of investors *ho share a common financial goal$ /he money thus collected is then invested in capital market instruments such as shares, debentures and other securities$ /he income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units o*ned by them$ /hus a utual -und 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 lo* cost$ /he flo* chart belo* describes broadly the *orking of a mutual fundF




OBJECTI-ES OF T5E PROJECT /he objectives of the study on this topic are as follo*sF /o find the a*areness among the investor about the utual -und$

/o find out the market position of different mutual funds$ /o study the scope of mutual fund industry$ /o come up *ith recommendations for investors and mutual fund companies in India based on the above study$ /o find out the best *ay to boost the mutual fund industry$

PURPOSE OF T5E PROJECT Investment in mutual funds gives you exposure to eGuity and debt markets$ /hese funds are marketed as a safe heaven or as smart investment vehicles for novice investors$ /he middle2class Indian investor *ho plays hot tips for a Guick buck at the bourses is the stuff of legends$ /he middle2class Indian investor *ho runs out of luck and loses not only his money but his peace of mind too is some*hat less famous by choice$ utual funds, on the other hand, sell us middling miracles$ "onseGuently proof enough for a research on utual -unds, *hich has exacting returns$ @very investor reGuires a healthy return on his/her investments$ )ut since the market is very volatile and due to lack of expertise they may fail to do so$ 'o a study of these mutual funds *ill help one to eGuip *ith un*arranted kno*ledge about the elements that help trade


risks and return thereby improving


! meticulous study on the scalability at *hich the mutual funds operate along *ith diagnosis of the market conditions *ould endure managing the investment portfolio efficiently$ /he study *ould also immunize on risks and foresee healthy returnsH incidentally in *orst of conditions it has given a return of 8: per cent SCOPE OF T5E PROJECT /he project covers the financial instruments mobilizing in the Indian "apital market in particular the analysed for their utual -unds$ /he mutual funds for their performance are

determined over a period of 3 years fluctuations and returns$ /he elements taken into consideration for choosing some of the top funds is on the basis of their respective sharp, beta, ratio$ /he project shelves some of the top asset management companies operating in India, segregated on the basis of their performance over a period of time$ 'cooping further the project inundates the success ratio of the funds administered by top ! "Is$




RESEARC5 MET5ODOLO(4 ! thorough study of literature on the mutual fund industry both in India and abroad *ill be done$ %ifferent measures *ill be adopted to understand and evaluate the risks and returns of funds efficiently and effectively$ !n extensive study of various articles and publications of '@)I, ! -I and government of India and other agencies *ith respect to the demographics of the population of the country and their investing pattern *ill be a part of the methodology adopted$ PRIMAR4 OBJECTI-ES6 /he research *as done by taking sample investors of kotak mutual fund$ =ersonal visits to different persons of different areas in the city$ Juestionnaire method SECONDAR4 OBJECTI-ES6 Internet 1I' book



LIMITATIONS 'ome of the persons *ere not responsive$ =ossibility of error in data collection happened because many investors have not given actual ans*ers$ /he research is confined to a certain part of )hubanes*ar$ 'ome investors *ere reluctant to give their personal information *hich affected the validity of all responses$ /ime factor stands on the *ay for *hich the analysis is made *ithin a limited period.





! mutual fund is a trust that pools the shaving of a number of investors *ho share a common financial goal$ /he money thus collected is then invested in capital market instruments such as shares, debentures and other securities$ /he income earned through these investments and the capital appreciation realized is share by its unit holders in proportion to the number of units o*ned by them$ /hus 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 lo*er cost$ /he diagram belo* describes *orking of mutual fundF

7.# O-ER-IE' OF MUTUAL FUNDS !ccording to '@)I K utual -undK means a fund established in the form of a

trust to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instrumentsHK/o the ordinary individual investor lacking expertise and specialized skill in dealing proficiently *ith the securities market a utual -und is the most suitable investment forum as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively lo* cost$ India has a burgeoning population of middle class no* estimated around D;; million$ ! typical Indian middle class

family can pool liGuid savings ranging from 0s$7 to 0s$8; #acs$ Investment of this money in )anks keeps the fund liGuid and safe, but *ith the falling rate of interest offered by )anks on %eposits, it is no longer attractive$ !t best a small part can be parked in bank deposits, but *hat are the other sources of remunerative investment possibilities open to the common manL utual -und is the ready ans*er, as direct investment is out of the scope of these individuals$ &ie*ed in this sense India is globally one of the best markets for utual -und )usiness, so also for Insurance business$ /his is the reason that foreign companies compete *ith one another in setting up insurance and mutual fund business shops in India$ /he sheer magnitude of the population of educated *hite2collar employees *ith raising incomes and a *ell2 organized stock market at par *ith global standards, provide unlimited scope for developm ent of financial services based on = ' like mutual fund and insurance$ /he alternative to mutual fund is direct investment by the investor in eGuities and bonds or corporate deposits$ !ll investments *hether in shares, debentures or deposits involve riskF share value may go do*n depending upon the performance of the company, the industry, state of capital market and the economy$ Benerally, ho*ever, longer the term, lesser is the risk$"ompanies may default in payment of interest/ principal on their debentures/bonds/depositsH the rate of interest on an investment may fall short of the rate of inflation reducing the purchasing po*er$ .hile risk cannot be eliminated, skilful management can minimize risk$ utual -unds help to reduce risk through diversification and utual -und managers in selecting professional management$ /he experience and expertise of portfolio that minimizes risk and maximizes returns$

fundamentally sound securities and timing their purchases and sales help them to build a diversified


/o protect the interest of the investors '@)I +'ecurities @xchange )oard of India, formulates policies and regulate the mutual fund$ It notified regulations in 899D and issues guidelines from time to time$ utual fund either promoted by public or private sector entities including one promoted by foreign entity is governed by these regulations$ '@)I approved !sset anagement "ompany +! ", manages the fund by making investment in various types of securities$ "ustodian, registered *ith '@)I holds the securities of various schemes of the fund in its custody$ !ccording to '@)I regulations t*o third of the directors of the trustee companies or board of trustee must be independent$ /he !ssociation of utual -und In India +! -I, reassures the investors in units of mutual funds that the mutual funds function *ithin the strict regulatory frame*ork$ Its objective is to increases the public a*areness of mutual fund industry$


.ide variety of mutual fund schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc$ It is easier to think of mutual funds in categories, mentioned belo*$ B) str,.t,r1 #. O81n91nd1d s.h1*1s

!n open2end fund is one that is available for subscription all through the year$ /hese do not have a fixed maturity$ Investors can conveniently buy and sell units at 1et !sset &alue +K1!&K, related prices$ /he key feature of open2end schemes is liGuidity$ 7. C/os1 1nd1d s.h1*1s. 'chemes that have a stipulated maturity period +ranging from 7 to 83 years, are called close ended schemes$ Aou can invest in the scheme at the time of the initial issue and thereafter you can buy or sell the units of the scheme on the stock exchanges *here they are listed$ /he market price at the stock exchange could vary from the schemeIs 1!& on account of demand and supply situation, unit holdersI expectations and other market factors$ (ne of the characteristics of the close2ended schemes is that they are generally traded at a discount to 1!&H but closer to maturityH the discount narro*s$ 'ome close2ended schemes give you an additional option of selling your units to the close ended schemes$ ". Int1r:a/ S.h1*1s /hese combine the features of open2ended and close2ended schemes$ /hey may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at 1!& related prices$ ;B< B) In:1st*1nt Ob+1.ti:1 (ro=th S.h1*1s !im to provide capital appreciation over the medium to long term$ /hese schemes normally invest a majority of their funds in eGuities and are *illing to bear short term decline in value for possible future appreciation$ /hese schemes are not for investors seeking regular income or needing their money back in the short term$ utual -und through periodic repurchase at 1!& related prices$ '@)I 0egulations ensure that at least one of the t*o exit routes are provided to the investor under the

In.o*1 S.h1*1s Income 'chemes !im to provide regular and steady income to investors$ /hese schemes generally invest in fixed income securities such as bonds and corporate debentures$ "apital appreciation in such schemes may be limited$ Ideal forF

0etired people and others *ith a need for capital stability and regular income$ Investors *ho need some income to supplement their earnings$

Ba/an.1d S.h1*1s


!im to provide both gro*th and income by periodically distributing a part of the income and capital gains they earn$ /hey invest in both shares and fixed income securities in the proportion indicated in their offer documents$ In a rising stock market, the 1!& of these schemes may not normally keep pace or fall eGually *hen the market falls$ Ideal forF

Investors looking for a combination of income and moderate gro*th$

Mon1) Mar>1t ? Li@,id S.h1*1s !im to provide easy liGuidity, preservation of capital and moderate income$ /hese schemes generally invest in safer, short term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money$

0eturns on these schemes may fluctuate, depending upon the interest rates prevailing in the market$ Ideal forF "orporate and individual investors as a means to park their surplus funds for short periods or a*aiting a more favourable investment alternative$ TaA Sa:in2 S.h1*1s ;E@,it) Lin>1d Sa:in2 S.h1*1 9 ELSS< /hese schemes offer tax incentives to the investors under tax la*s as prescribed from time to time and promote long term investments in eGuities through :;" $#ock in period three years$Ideal forF

utual -unds$ @ligible for deduction under section

Investors seeking tax incentives$

S81.ia/ S.h1*1s /his category includes index schemes that attempt to replicate the performance of a particular index such as the )'@ 'ensex, the 1'@ 3; +1I-/A, or sector specific schemes *hich invest in specific sectors such as /echnology, Infrastructure, )anking, =harmacy etc$ )esides, there are also schemes *hich invest exclusively in certain segments of the capital market, such as #arge "aps, id "aps, 'mall "aps, icro "aps, 6!6 group shares, shares issued through Initial =ublic (fferings +I=(s,, etc$


Ind1A 0,nd Index fund schemes are ideal for investors *ho are satisfied *ith a return approximately eGual to that of an index$ S1.tor1d 0,nd s.h1*1s 'ectored fund schemes are ideal for investors *ho have already decided to invest in a particular sector or segment$ FiA1d Mat,rit) P/an -ixed aturity =lans +- =s, are investment schemes floated by mutual funds and are close ended *ith a fixed tenure, the maturity period ranging from one month to three/five years$ /hese plans are predominantly debt2oriented, *hile some of them may have a small eGuity component$ /he objective of such a scheme is to generate steady returns over a fixed2maturity period and protect the investor against market fluctuations$ - =s are typically passively managed fixed income schemes *ith the fund manager locking into investments *ith maturities corresponding *ith the maturity of the plan$ - =s are not guaranteed products$

EA.han21 Trad1d F,nds @xchange /raded -unds are essentially index funds that are listed and traded on exchanges like Index fund schemes are ideal for investors *ho are satisfied *ith a return approximately eGual to that of an index$ Blobally, @/-s have opened a *hole ne* panorama of investment opportunities to retail as *ell as institutional investors$ @/-s enable investors to gain broad exposure to entire stock markets as *ell as in specific sectors *ith relative ease, on a real2time basis and at a lo*er cost than many other forms of investing$ !n @/- is a basket of stocks that reflects the composition of an index, like '5= "1M 1ifty, )'@ 'ensex, "1M )ank Index, "1M ='> )ank Index, etc$ /he @/-6s trading value is based on the net asset value of the underlying stocks that it represents$ It can be compared to a stock that can be bought or sold on real time basis during the market hours$ /he first @/- in India, )enchmark 1ifty )ees, opened for subscription on %ecember 87, 7;;8 and listed on the 1'@ on ?anuary :, 7;;7$ Ca8ita/ Prot1.tion Ori1nt1d S.h1*1s "apital =rotection (riented 'chemes are schemes that endeavour to protect the capital as the primary objective by investing in high Guality fixed income securities and generate capital appreciation by investing in eGuity / eGuity related instruments as a secondary objective$ /he first "apital =rotection (riented -und in India, -ranklin /empleton "apital =rotection (riented -und opened for subscription on (ctober D8,

7;;N$ Bold @xchange /raded -unds offer investors an innovative, cost2efficient and secure *ay to access the gold market$ Bold @/-s are intended to offer investors a means of participating in the gold bullion market by buying and selling units on the 'tock @xchanges, *ithout taking physical delivery of gold$ /he first Bold @/- in India, )enchmark B@/-, opened for subscription on -ebruary 83, 7;;O and listed on the 1'@ on !pril 8O, 7;;O$ B,antitati:1 F,nds ! Guantitative fund is an investment fund that selects securities based on Guantitative analysis$ /he managers of such funds build computer based models to determine *hether or not an investment is attractive$ In a pure KGuant shopK the final decision to buy or sell is made by the model$ 4o*ever, there is a middle ground *here the fund manager *ill use human judgment in addition to a Guantitative model$ /he first Juant based utual -und 'cheme in India, #otus !gile -und opened for subscription on (ctober 73, 7;;O$ F,nds In:1stin2 Abroad .ith the opening up of the Indian economy, utual -unds have been permitted to invest in foreign securities/ !merican %epository 0eceipts +!%0s, / Blobal %epository 0eceipts +B%0s,$ 'ome of such schemes are dedicated funds for investment abroad *hile others invest partly in foreign securities and partly in domestic securities$ .hile most such schemes invest in securities across the *orld there are also schemes *hich are country specific in their investment approach$ F,nd o0 F,nds ;FOFs< -und of -unds are schemes that invest in other mutual fund schemes$ /he portfolio of these schemes comprise only of units of other mutual fund schemes and cash / money market securities/ short term deposits pending deployment$ /he first -(- *as launched by -ranklin /empleton utual -und on (ctober 8O, 7;;D$ -und of -unds can be 'ector specific e$g$ 0eal @state -(-s, /heme specific e$g$ @Guity -(-s, (bjective specific e$g$ #ife 'tages -(-s or 'tyle specific e$g$ !ggressive/ "autious -(-s etc$ AD-ANTA(ES OF MUTUAL FUND If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forms and avenues of investing, particularly for investor *ho has limited resources available in terms of capital and ability to carry out detailed research and market monitoring$ /he follo*ing are the major advantages offered by mutual funds to all investorsF



Port0o/io Di:1rsi0i.ationF

utual funds normally invest in a *ell2diversified portfolio or securities$

@ach investor in a fund is a part o*ner of all the fundIs assets$ /his enables the investor to hold a diversified investment portfolio even *ith a small amount of investment that *ould other*ise reGuire a big capital$ 7$ Pro01ssiona/ Mana21*1ntF @ven if an investor has a big amount of capital available to the investor, he benefits from the professional management skills brought in by the fund in the management of the investorIs portfolio$ /he investment management skills, along *ith the needed research into available investment options, ensure a much better return than *hat an investor can manage by his o*n$ -e* investors have the skills and resources of their o*n to succeed in todayIs fast2moving, global and sophisticated markets$ D$ R1d,.tion? Di:1rsi0i.ation o0 Ris>F !n investor in a mutual fund acGuires a diversified portfolio, no matter ho* small his investment$ %iversification reduces the risk of loss, as compared to investing directly in one or t*o shares or debentures or other instruments$ .hen an investor invests directly, all the risk of potential loss is his o*n$ ! fund investor also reduces his risk in another *ay$ .hile investing in the pool of funds *ith other investors, any loss on one or t*o securities is also shared *ith other investors$ /his risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund$ P$ R1d,.tion o0 Transa.tion CostsF .hat is true of risk is also true of the transaction costs$ ! direct investor bears all the costs of investing such as brokerage or custody of securities$ .hen going through a fund, the investor has the benefit of economies of scaleH the funds pay lesser costs because of larger volumes, a benefit passed on to its investors$ 3$ Li@,idit)6 (ften, investors hold shares or bonds they cannot directly, easily and Guickly sell$ Investment in a mutual fund, on the other hand, is more liGuid$ !n investor can liGuidate the investment, by selling the units to the fund if open2end, or selling them in the market if the fund is closed2end, and collects funds at the end of a period specified by the mutual fund or the stock market$ N$ Con:1ni1n.1 and 0/1Aibi/it)6 information$ DRA'BAC&S OF MUTUAL FUND .hile the benefits of investing through mutual funds far out*eigh the disadvantages, an investor and his advisor *ill do *ell to be a*are of a fe* shortcomings of using the mutual funds as investment vehiclesF

utual fund management companies offer many investors cannot get$

Investors can easily transfer their holdings from one scheme to the other, get updated market

#. No .ontro/ o:1r Costs6 !n investor in a mutual fund has any control over the overall cost of investing$ 4e pays investment management fees as long as he remains *ith the fund, albeit in return for the professional management and research$ -ees are payable as a percentage of the value of his investments, *hether the fund value is rising or declining$ ! mutual fund investor also pays fund distribution costs, *hich he *ould not incur in direct investing$ 4o*ever, this shortcoming only means that there is a cost to obtain the benefits of mutual fund services$ 4o*ever, this cost is often less than the cost of direct investing by the investors$ 7. No Tai/or9*ad1 8ort0o/io6 Investors *ho invest on their o*n can build their o*n portfolios of shares, bonds and other securities$ Investing through funds means the investor delegates this decision to the fund manager$ /he very high2net2*orth individuals or large corporate investors may find this to

be a constraint in achieving their objectives$ 4o*ever, most mutual funds help investor overcome this constraint by offering families of schemes2a large number of different schemes2 *ithin the same fund$ !n investor can choose from different investment plans and construct a portfolio of his choice$ ". Mana2in2 a Port0o/io o0 0,nds6 !vailability of large number of funds can actually mean too much choice for the investor$ /he investor may again need advice on ho* to select a fund to achieve his objectives, Guite similar to the situation *hen he has to select individual shares or bonds to invest in$

7.5 5ISTOR4 OF MUTUAL FUND /he mutual fund industry in India started in 89ND *ith the formation of >nit /rust of India, at the initiative of the Bovernment of India and 0eserve )ank$ /he history of mutual funds in India can be broadly divided into four distinct phases$ First Phas1 #C!D9%E >nit /rust of India +>/I, *as established on 89ND by an !ct of =arliament$ It *as set up by the 0eserve )ank of India and functioned under the 0egulatory and administrative control of the 0eserve )ank of India$ In 89O: >/I *as de2linked from the 0)I and the Industrial %evelopment )ank of India +I%)I, took over the regulatory and administrative control in place of 0)I$ /he first scheme launched by >/I *as >nit 'cheme 89NP$ !t the end of 89:: >/I had 0s$N,O;; crores of assets under management$ S1.ond Phas1 #C%E9#CC" ;Entr) o0 P,b/i. S1.tor F,nds<

89:O marked the entry of non2 >/I, public sector mutual funds set up by public sector banks and #ife Insurance "orporation of India +#I", and Beneral Insurance "orporation of India +BI",$')I *as the first non2 >/I =unjab 1ational )ank )ank of )aroda utual -und established in ?une 89:O follo*ed by "anbank utual -und +!ug :9,, Indian )ank utual -und utual -und +%ec :O,,

utual -und +1ov :9,, )ank of India +?un 9;,,

utual -und +(ct 97,$ #I" established its mutual fund in ?une 89:9 *hile BI" had set up

its mutual fund in %ecember 899;$!t the end of 899D, the mutual fund industry had assets under management of 0s$PO,;;P crores$ Third Phas1 #CC"97$$" ;Entr) o0 Pri:at1 S1.tor F,nds< .ith the entry of private sector funds in 899D, a ne* era started in the Indian mutual fund industry, giving the Indian investors a *ider choice of fund families$ !lso, 899D *as the year in *hich the first utual -und 0egulations came into being, under *hich all mutual funds, except >/I *ere to be utual -und, 0egulations *ere registered and governed$ /he erst*hile Kothari =ioneer +no* merged *ith -ranklin /empleton, *as the first private sector mutual fund registered in ?uly899D$/he 899D '@)I + substituted by a more comprehensive and revised utual -und 0egulations in 899N$ /he industry

no* functions under the '@)I + utual -und, 0egulations 899N$/he number of mutual fund houses *ent on increasing, *ith many foreign mutual funds setting up funds in India and also the industry has *itnessed several mergers and acGuisitions$ !s at the end of ?anuary 7;;D, there *ere DD mutual funds *ith total assets of 0s$ 8,78,:;3 crores$ /he >nit /rust of India *ith 0s$PP,3P8 crores of assets under management *as *ay ahead of other mutual funds$ Fo,rth Phas1 sin.1 F1br,ar) 7$$" In -ebruary 7;;D, follo*ing the repeal of the >nit /rust of India !ct 89ND >/I *as bifurcated into t*o separate entities$ (ne is the 'pecified >ndertaking of the >nit /rust of India *ith assets under management of 0s$79,:D3 crores as at the end of ?anuary 7;;D, representing broadly, the assets of >' NP scheme, assured return and certain other schemes$ /he specified undertaking of >nit /rust of India, functioning under and administrator a n d u n d e r t h e r u l e s f r a m e d b y Bovernment of India and does not come under the purvie* of the utual -und 0egulations$

MAJOR MUTUAL FUND COMPANIES IN INDIA ABN AMRO *,t,a/ 0,nd !)1 ! 0( mutual fund *as setup on 83th !pril, 7;;P *ith !)1 ! 0( trustee +India, #td$ .as incorporated on Pth 1ovember, 7;;D$%eutsche )ank ! B is the custodian of !)1 ! 0( mutual fund.


BIRLA SUNLIFE M,t,a/ F,nd )I0#! '>1#I-@ mutual fund is the joint venture of !ditya )irla group and sun life financial$ 'un #ife financial is a global organization evolved in 8:O8 and is being represented in "anada, the >', the =hilippines, ?apan, Indonesia and )ermuda apart from India$ )I0#! '>1#I-@ mutual fund follo*s a conservative long2term approach to investment$ 0ecently it crossed !> Rs.#$3$$$.ror1s. of

BAN& OF BARODA M,t,a/ F,nd )!1K (- )!0(%! mutual fund or )() mutual fund *as setup on D; th (ctober, 8997 under the sponsorship of )ank of )aroda$ )() asset anagement "ompany limited is the ! " of )() mutual fund and *as incorporated on 3th 1ovember, 8997$%eutsche bank !B is the custodian$

FRAN&LIN TEMPLETON INDIA M,t,a/ F,nd /he group, -0!1K#I1 /@ =#@/(1 investments is a "alifornia +>'!, based company *ith a global !> of >'EP;9$7bn as of D; th !pril, 7;;3$It is one of the largest financial services groups in the *orld$ Investors can buy or sell the mutual fund through their financial adviser or through mail or through their *ebsite$

5DFC *,t,a/ 0,nd It *as set up on D;th ?une, 7;;; *ith t*o sponsors namely housing development finance corporation limited and standard life investments limited$

5SBC *,t,a/ 0,nd 4')" mutual fund *as setup on 7Oth 4')" utual -und$ ay, 7;;7 *ith 4')" 'ecurities and "apital arkets +India,

=vt$ #td as the sponsors$ )oard of /rustees, 4')"

utual -und acts as the trustee "ompany of


IN( -4S4A M,t,a/ F,nd I1B &A'A! mutual fund *as set up on 88 th -ebruary, 8999 *ith the same named /rustee "ompany$ It is a joint venture of &A'A! and I1B$ /he ! ", I1B investment management +India, =vt$ #td *as incorporated on Nth !pril, 899:$

ICICI PRUDENTIAL M,t,a/ F,nd /he mutual fund of I"I"I is a joint venture *ith =rudential =lc$ (f >K, one of the largest life insurance companies in the >'$ I"I"I =0>%@1/I!# mutual fund *as setup on 8D th of (ctober, 899D *ith t*o sponsors, =rudential =lc$ and I"I"I #td$ /he /rustee "ompany formed is I"I"I =0>%@1/I!# /0>'/ #td$ and the ! " is =rudential I"I"I !sset #imited incorporated on 77nd of ?une, 899D$ SA5ARA M,t,a/ F,nd '!4!0! mutual fund *as set up on 8:th ?uly 899N *ith 'ahara India -inancial "orporation #td$ as the sponsor$ 'ahara !sset anagement "ompany =rivate #imited incorporated on D8st !ugust ,8993 utual -und$ /he paid2up capital of the ! " stands at 0s 73$: corers$ *orks as the ! " of 'ahara anagement "ompany

STATE BAN& OF INDIA M,t,a/ F,nd '/!/@ )!1K (- I1%I! mutual fund is the first bank sponsored fund, the India )ank sponsored utual -und to launch offshore agnum -und *ith a corpus of n0s$773cr$ approximately$ /oday it is the largest utual -und in India$ /hey have already launched D3 'chemes o;ut of *hich 83

have already yielded handsome returns to investors$ '/!/@ )!1K (- I1%I! mutual fund has more than 0s$3, 3;; corers as !> $ 1o* it has an investor base of over :lacs spread over 8: schemes$ MOR(AN STANLE4 M,t,a/ F,nd India (0B!1 '/!1#@A is a *orld*ide financial services company and its leading in the market in securities, investment management and credit services$ organ 'tanley Investment anagement + 'I , *as established in the year 89O3$ It provides customized asset management services and products to governments, corporations, pension funds and non2profit organizations$ Its services are also extended to high net *orth individuals and retail investors$ In India it is kno*n as 'tanley Investment anagement =rivate + 'I


India, and its ! " is

(0B!1 '/!1#@A

mutual fund + ' -,$/his is the first close end diversified eGuity scheme serving the needs of Indian retail investors focusing on a long2term capital appreciation$ TATA M,t,a/ F,nd /!/! mutual fund +/ -, is a trust under the Indian /rust !ctH 8::7$/he sponsors for /ata !sset anagement #imited and its /ata /rustee "ompany =vt$ #td$ /ata !sset utual -und are /ata 'ons #td$, and /ata Investment "orporation #td$ /he investment manager is /ata anagement #imitedIs is one of the fastest in the country *ith more than 0s$O, O;Dcrores +as on !pril D;, 7;;3, of !> $ &OTA& MA5INDRA M,t,a/ F,nd K(/!K !4I1%0! !''@/ !1!B@ @1/ "( =!1A +K ! ", is a subsidiary of K )#$ ahindra utual -und offers schemes catering to investors It is presently having more than 8, 99,:8: investors in its various schemes$ K ! " started its operations in %ecember 899:$ Kotak only in government securities$ UNIT TRUST o0 INDIA ;UTI< M,t,a/ F,nd >/I !sset anagement "ompany =rivate #td, established in 89ND manages the >/I utual -und *ith the support of >/I /rustee "ompany =vt$ #td$ >/I !sset manages a corpus of over 0s$7;,;;; crore$ /he sponsors of >/I anagement "ompany presently utual -und are )ank (f )aroda, *ith varying risk2return profiles$ It *as the first company to launch dedicated gilt scheme investing

=unjab 1ational )ank, 'tate )ank of India and #ife Insurance "orporation of India$ LIC M,t,a/ F,nd #ife Insurance "orporation of India set up #I" mutual fund on 89 th ?une 89:9$ It contributed 0s 7 crores to*ards the corpus of the fund$ #I" mutual fund *as contributed as a trust in accordance *ith the provisions of the Indian /rust !ct, 8::7$ /he company started its business on 79 th !pril 899P$ /he trustees of #I" mutual fund have appointed ?@@&!1 )I ! '!4!A(B !sset "ompany #td$ anagement

ASSOCIATION OF MUTUAL FUNDS IN INDIA ;AMFI< .ith the increase in mutual fund players in India, a need for mutual fund association in India *as generated to function as a non2profit organization$ !ssociation of mutual funds in India *as incorporated on 77 nd !ugust, 8993$


! -I is an apex body of all asset management companies +! ", *hich has been registered *ith '@)I$ /ill date all the ! "s are that have launched mutual fund schemes are its members$ It functions under the supervision and guideline of its board of directors$ ! -I has brought do*n the mutual fund industry to a professional and healthy market *ith ethical lines and maintaining standards$ It follo*s the principals of both protecting and promoting the interest of mutual funds as *ell as unit holders$ Ob+1.ti:1s o0 AMFI /o define and maintain high professional and ethical standards in all areas of operation of mutual fund industry$ /o recommend and promote best business practices and code of conduct to be follo*ed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services$ /o interact *ith '@)I and to represent to '@)I on all matters concerning the mutual fund industry$ /o represent to the Bovernment, 0eserve )ank of India and other bodies on all matters relating to the mutual fund industry$ /o develop a cadre of *ell trained agent, distributers and to implement a programme of training and certification of all intermediaries and other engaged in the industry$ /o undertake nation*ide investor a*areness programme so as to promote proper understanding of the concept and *orking of mutual funds$ /o disseminate information on utual -und Industry and to undertake studies and research directly and in association *ith other bodies$







ahindra is one of India6s leading financial institutions, offering complete financial solutions that

encompass every sphere of life$ -rom commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate$ /he group has a net *orth of 0s$O, 988 corers and employs around 7;,;;; employees across its various businesses, servicing around O million customer accounts through a distribution net*ork of 8,O8N branches, franchisees and satellite offices across more than PO; cities and to*ns in India and offices in 1e* Aork, "alifornia, 'an -rancisco, #ondon, %ubai, Kotak ahindra !sset auritius and 'ingapore$

anagement "ompany #imited +K ! ",, a *holly o*ned subsidiary of K )#, is ahindra utual -und +K -,$ K ! " started operations in %ecember - offers schemes catering to investors *ith

the !sset

anager for Kotak

899: and has over 8; #ac investors in various schemes$ K investing only in government securities$ @stablished in 89:3, the Kotak -ebruary 7;;D, Kotak

varying risk 2 return profiles and *as the first fund house in the country to launch a dedicated gilt scheme

ahindra group has been one of India6s reputed financial organizations$ In

ahindra -inance #td, the group6s flagship company *as given the license to carry

on banking business by the 0eserve )ank of India +0)I,$ /his approval creates banking history since Kotak ahindra -inance #td$ is the first non2banking finance company in India to convert itself in to a bank as Kotak "ash Kotak ahindra )ank #td$ /he )ank offers comprehensive business solutions that include /rade 'ervices, anagement 'ervice and "redit facilities, keeping in mind the needs of the business community$ ahindra )ank has over 787 branches spread across 87P locations in the country offering both

traditional banking products and investment advisory services$ /he )ank has the products, the experience, the infrastructure and most importantly the commitment to deliver pragmatic, end2to2end solutions that really *ork$ PERFORMANCE In terms of performance too, the fund house is doing *ell$ (f its eGuity funds, Kotak "ontra +0s 39D corer, and Kotak id2"ap +0s DPN corer, *ere the largest funds in 'eptember 7;;3$ Kotak "ontra invests in companies that are fundamentally sound but under2valued, and *as launched in ?uly 7;;3$ Kotak (pportunities invests in a mix of large and mid2cap companies, based on their performance and potential$ )oth Kotak opportunities and Kotak mid2cap are doing Guite *ell since their launch and are top Guartile

performs for the past six months$ Kotak Blobal India invests in Indian companies that are globally competitive$ /his fund is a marginal underperformer to the average diversified eGuity fund$ Its diversified


eGuity fund, Kotak D; ,has been a middle of the road performer, since its launch in %ecember 899:$(n the debt side, Kotak has been a pioneer, being the first ! " to introduce gilt funds in India in 899:$ KodakIs -(- is an interesting offering$ Kotak @Guity -(- is a multi2manager fund of funds, *hich allo*s investors the diversification across styles and fund houses$ /hrough a change in executives at mutual fund companies is a given, Kotak has seen more changes in its "@( and eGuity fund manager in the past three2four years than the average ! "$ Benerally this is not a good sign, but Kotak appears to have coped *ith these changes$


1. OPEN ENDED EQUITY GROWTH S HEMES! "OTA" #$! It is an 2pen3en4e4 e5uity gr2#t! s6!e7e t!at in8ests pre427inantly in large36ap st269s t!at are 4i8ersi:ie4 a6r2ss se6t2rs an4 :2r7 a signi:i6ant pr2p2rti2n 2: t2tal 7ar9et 6apitali;ati2n< %2 generate 6apital appre6iati2n :r27 a p2rt:2li2 2: pre427inantly e5uity an4 e5uity relate4 se6urities< %!e p2rt:2li2 #ill generally 627prise 2: e5uity an4 e5uity relate4 instru7ents 2: ar2un4 +1 627panies #!i6! 7ay g2 upt2 +/ 627panies "ut #ill n2t e=6ee4 +/ at any p2int 2: ti7e<
"OTA" MID% AP! An 2pen3en4e4 s6!e7e t!at in8ests in 7i436ap 627panies t!at

!a8e a p2tential t2 "e627e t272rr2#>s large36aps< %!e 9ey :26us 2: t!e :un4 is t2 i4enti:y p2tential st269s t!at are li9ely t2 gr2# in t!e l2ng ter7< %!e essen6e is t2 >sp2t t!e7 y2ung an4 #at6! t!e7 gr2#>< It en4ea82rs t2 ta9e a48antage 2: t!e su66essi8e #a8es 2: 2pp2rtunity pr28i4e4 "y a transiti2ning e62n27y< %!e p2rt:2li2 is 4i8ersi:ie4 a6r2ss se6t2rs #it! a4e5uate :le=i"ility t2 728e #it!in se6t2rs< "OTA" OPPORTUNITIES! ?2ta9 Opp2rtunities is a 4i8ersi:ie4 e5uity 2pen3en4e4 s6!e7e t!at !as a :le=i"ility t2 in8est a6r2ss 7ar9et 6apitali;ati2n an4 se6t2rs< As 7ar9ets e82l8e @ gr2# ne# 2pp2rtunities 2: gr2#t! 9eep e7erging< %!e in8est7ent strategy is t2 7a9e strategi6 use 2: 4e"t an4 72ney 7ar9et se6urities< %!e s6!e7e in8ests atleast ,1A in large 6ap st269s an4 upt2 *1A in 7i4 6ap st269s< "OTA" &ASSI EQUITY! ?2ta9 6lassi6 e5uity is a 4i8ersi:ie4 e5uity s6!e7e t!at in8ests in :un4a7entally str2ng 627panies #!i6! are 6urrently un4er8alue4 4ue t2 te7p2rary B n2n3re6urring reas2ns t!us :2ll2#ing t!e 62ntrarian style 2: in8esting< %!e pre:eren6e is :2r "argain !unting rat!er t!an t!e 727entu7 appr2a6! t2 st269 pi69ing< %!e in8est7ent strategy is t2 !a8e ,+A3011A in e5uity an4 e5uity relate4 se6urities 13)+A in 4e"t @ 72ney 7ar9et se6urities<

"OTA" G&OBA& EMERGING MAR"ET 'UND C ?2ta9 $l2"al E7erging Mar9ets

S6!e7e is an 2pen en4e4 e5uity s6!e7e #it! an in8est7ent 2"je6ti8e 2: pr28i4ing l2ng ter7 6apital appre6iati2n "y in8esting in an 28erseas 7utual :un4 s6!e7e t!at in8ests in a 4i8ersi:ie4 p2rt:2li2 2: se6urities as pres6ri"e4 "y SEBI :r27 ti7e t2 ti7e in gl2"al e7erging 7ar9ets< %!e s6!e7e is 6urrently in8este4 in %<D2#e Eri6e SICAV Fun4s $l2"al E7erging Mar9ets #!i6! in8ests in 627panies 2perating in 8ari2us e7erging 7ar9ets gl2"ally< %!e s6!e7e is suita"le :2r l2ng ter7 in8est2rs #it! a !ig!er ris9 appetite an4 #!2 #is! t2 supple7ent e=isting !2l4ings #it! e=p2sure t2 in8est7ent 2pp2rtunities in gl2"ally e7erging e62n27ies<
"OTA" EQUITY ARBITRAGE 'UNDC An 2pen en4e4 e5uity 2riente4 s6!e7e t!at

ai7s t2 generate in627e an4 6apital appre6iati2n "y pre427inantly in8esting in ar"itrage 2pp2rtunities in t!e 6as! an4 4eri8ati8es seg7ent 2: t!e e5uity 7ar9et an4 in 4e"t an4 72ney 7ar9et se6urities< %!e s6!e7e e8aluates t!e 4i::eren6e "et#een pri6e 2: a st269 in :utures an4 sp2t 7ar9et an4 enters int2 2nly t!2se tra4es #!ere t!ere is a p2tential ar"itrage a8aila"le< %!e :un4 7anager 7ay s5uare 2:: 2r r2ll 28er t!e p2siti2ns 4epen4ing 2n t!e 2pp2rtunities a8aila"le< %!e s6!e7e is suita"le :2r in8est2rs #!2 !a8e an in8est7ent !2ri;2n 2: ) 72nt!s an4 a"28e an4 #!2 #ant t2 parti6ipate in e5uity ar"itrage 7ar9et :2r returns "etter t!an 6as! :un4s< "OTA" TA( SA)ER C ?2ta9 %a= Sa8er is a 4i8ersi:ie4 e5uity s6!e7e t!at in8ests in e5uity an4 e5uity relate4 se6urities an4 ena"les t!e in8est2rs t2 a8ail t!e in627e ta= re"ate as per7itte4 :r27 ti7e t2 ti7e< %!e in8est7ent strategy is t2 !a8e .13011A in e5uity an4 13'1A in 4e"t an4 72ney 7ar9et se6urities< %!is #ay t!e in8est2r 4eri8es t!e 4ual "ene:it 2: gaining returns :r27 in8est7ent in e5uities #!ile als2 a8ailing t!e ta= "ene:it< ?2ta9 %a= Sa8er s6!e7e uses "2tt273up st269 sele6ti2n t2 "uil4 its p2rt:2li2< Dis9 is "eing 7anage4 "y a4e5uate 4i8ersi:i6ati2n an4 "y sprea4ing in8est7ents 28er a range 2: in4ustries an4 627panies< %!e p2rt:2li2 2::ers a 4i8ersi:ie4 7i= a6r2ss 8ari2us se6t2rs< As it is a 6l2se en4e4 ar6!ite6ture t!e in8est2r !as t2 627puls2rily l269 in 2nes :un4 :2r ) years< "OTA" EMERGING EQUITY S HEME3 %!is is an 2pen en4e4 e5uity gr2#t! s6!e7e #it! an in8est7ent 2"je6ti8e t2 generate l2ng ter7 6apital appre6iati2n :r27 a p2rt:2li2 2: e5uity an4 e5uity relate4 se6urities< %!e :un4 in8ests pre427inantly in 7i4 an4 s7all 6ap 627panies #it! an i4eal in8est7ent !2ri;2n 2: 03) years<


"OTA" SE&E T 'O US 'UND% %!is is an 2pen en4e4 e5uity s6!e7e #it! an in8est7ent 2"je6ti8e t2 generate l2ng ter7 6apital appre6iati2n :r27 a p2rt:2li2 2: e5uity an4 e5uity relate4 se6urities generally :26use4 2n a :e# sele6te4 se6t2rs<


"OTA" MONTH&Y IN OME P&AN! ?2ta9 M2nt!ly In627e Elan in8ests .1A 3

011A in 4e"t an4 72ney 7ar9et instru7ents an4 1 3 '1A in e5uity relate4 instru7ents< %!e s6!e7e en4ea82rs t2 pr28i4e sa:ety 2: a 4e"t :un4 #it! superi2r returns 2: e5uity pr24u6t< %2 ensure sa:ety 2: a 4e"t :un4 t!e s6!e7e in8ests in t2p rate4 4e"t instru7ents t!ere"y ensuring g224 6re4it 5uality an4 li5ui4ity<
"OTA" BOND! %!e "ota+ Bond is a 4e"t s6!e7e #it! a 4i8ersi:ie4 p2rt:2li2

627prising g28ern7ent ESU an4 62rp2rate "2n4s an4 2::ers t#2 plansC Dep2sit Elan @ Degular Elan< ?2ta9 B2n4 ai7s t2 generate reas2na"le returns at t!e sa7e ti7e re4u6e ris9 "y in8esting in 62rp2rate "2n4s #it! 6re4it rating n2t "el2# AA< %!us t!e :un4 !as in8este4 in a 8ariety 2: 4e"t an4 72ney 7ar9et instru7ents 2: 8ari2us 7aturities #!ile 7aintaining an 2pti7al 7aturity 2n t!e p2rt:2li2 "ase4 2n t!e pre8ailing 7ar9et 62n4iti2ns<
"OTA" &IQUID! A 72ney 7ar9et s6!e7e t!at see9s t2 a6!ie8e t!e t#in 2"je6ti8e

2: superi2r returns 62uple4 #it! !ig! le8el 2: li5ui4ity< A6!ie8e7ent 2: 2"je6ti8e is ensure4 t!r2ug! in8est7ents in ju4i6i2us 7i= 2: 72ney 7ar9et instru7ents 62rp2rate "2n4s an4 s28ereign se6urities< %!e s6!e7e is i4eally suite4 :2r in8est2rs l229ing t2 par9 t!eir s!2rt3ter7 surplus :un4s< ?2ta9 Li5ui4 !as :2ur in8est7ent plans! R,-./ar P/an0 Instit.tiona/ P/an and Instit.tiona/ Pr,1i.1 P/an.
"OTA" GI&T IN)ESTMENT! ?2ta9 $ilt is a s6!e7e t!at all2#s t!e retail in8est2r t2

in8est in t!e 2t!er#ise #!2lesale g28ern7ent se6urities 7ar9et< It in8ests in g28ern7ent "2n4s an4 treasury "ills gi8ing a ;er2 6re4it ris9 in8est7ent 2pti2n< It re62gni;es t!at :2r retail in8est2rs sa:ety is 2: pri7e 62n6ern gi8ing t!e7 t!e li5ui4ity 2: a sa8ings a662unt #it! attra6ti8e returns< In2,st1,nt P/an 3R,-./ar4 ! I4eal :2r l2ng3ter7 in8est2rs t!is plan ai7s t2 en!an6e returns "y in8esting in l2nger 7aturity instru7ents< %!e p2rt:2li2 !as n2 restri6ti2n 2n t!e 7aturity 2: t!e se6urity< In2,st1,nt P/an 3P' 5 Tr.st4 ! %!is plan ai7s t2 generate ris93:ree returns t!r2ug! in8est7ents in s28ereign se6urities issue4 "y t!e Central $28ern7ent an4B2r a State

$28ern7ent an4B2r re8erse rep2s in su6! se6urities< %!e eligi"le in8est2rs areC Er28i4ent Fun4s Superannuati2n Eensi2n Fel:are an4 $ratuity Fun4s Deligi2us an4 C!arita"le %rusts an4 %rustees 2: Eri8ate %rusts aut!2ri;e4 t2 in8est in Mutual Fun4 S6!e7es un4er t!eir trusts 4ee4s<
"OTA" GI&T SA)ING! ?2ta9 $ilt is a s6!e7e t!at all2#s t!e retail in8est2r t2

in8est in t!e 2t!er#ise #!2lesale g28ern7ent se6urities 7ar9et< It in8ests in g28ern7ent "2n4s an4 treasury "ills gi8ing a ;er2 6re4it ris9 in8est7ent 2pti2n< It re62gni;es t!at :2r retail in8est2rs sa:ety is 2: pri7e 62n6ern gi8ing t!e7 t!e li5ui4ity 2: a sa8ings a662unt #it! attra6ti8e returns< Sa2in-s P/an! Sa8ings Elan is i4eal :2r a s!2rt3ter7 in8est2r< %!is plan in8ests in a p2rt:2li2 2: se6urities #it! Feig!te4 A8erage Maturity 2: less t!an :2ur years<
"OTA" '&E(I DEBT! ?2ta9 Fle=i De"t is an in627e s6!e7e an4 see9s t2

7a=i7i;e returns t!r2ug! a6ti8e 7anage7ent 2: a p2rt:2li2 2: De"t an4 72ney 7ar9et se6urities< It in8ests a6r2ss 7aturity spe6tru7 an4 a6r2ss t!e yiel4 6ur8e in 2r4er t2 6apitali;e 2n !ig! 6arry in627e pre8ailing at t!e 7i4 en4 2: t!e yiel4 6ur8e< %!e s6!e7e !as in8este4 in t2p rate4 5uality assets an4 !as relati8ely l2#er ris9B82latility pr2:ile as t!e 7ar9 t2 7ar9et 627p2nent is relati8ely l2#< It is i4eal :2r in8est2rs #it! 7e4iu7 ter7 in8est7ent 2utl229 #!2 #ant t!eir p2rt:2li2 t2 "e 7anage4 s7artly< "OTA" '&OATER &ONG%TERM! ?2ta9 Fl2ater L2ng %er7 in8ests in a 627"inati2n 2: :l2ating rate instru7ents 72ney 7ar9et instru7ents an4 :i=e4 rate instru7ents #it! an 2"je6ti8e t2 pr28i4e stea4y a66ruals t2 in8est2rs< %!e !ig! 6re4it 5uality 2: t!e p2rt:2li2 an4 t!e a66rual nature 2: its 627p2siti2n 7a9e it i4eal :2r in8est7ent #it! a 8ery s!2rt3ter7 perspe6ti8e G 0+ 4ays< "OTA" MU&TI ASSET A&&O ATION 'UND! ?2ta9 Multi Asset All26ati2n Fun4 is an 2pen en4e4 4e"t s6!e7e #it! an in8est7ent 2"je6ti8e is t2 ai7s t2 generate in627e "y pre427inantly in8esting in 4e"t an4 72ney 7ar9et instru7ents an4 t2 generate gr2#t! "y in8esting 724erately in e5uities an4 a6!ie8e 28erall 4i8ersi:i6ati2n "y in8esting in g2l4< In ter7s 2: asset all26ati2n t!e s6!e7e ai7s t2 in8est at least -+A t2 /1A in 4e"t an4 72ney 7ar9et instru7ent +A t2 '1A in e5uity an4 e5uity relate4 instru7ents an4 +A t2 '1A in $2l4< %!e s6!e7e ta9es e=p2sure t2 g2l4 t!r2ug! $2l4 E=6!ange %ra4e4 Fun4s (E%F)<


"OTA" BOND SHORT TERM! %!e ?2ta9 B2n4 S!2rt %er7 plan is a 4e"t s6!e7e #it! a 4i8ersi:ie4 p2rt:2li2 627prising g28ern7ent ESU an4 62rp2rate "2n4s< ?2ta9 B2n4 S!2rt ter7 plan ai7s t2 generate reas2na"le returns at t!e sa7e ti7e re4u6e ris9 "y in8esting in 62rp2rate "2n4s #it! 6re4it rating n2t "el2# AA< %!us t!e :un4 !as in8este4 in a 8ariety 2: 4e"t an4 72ney 7ar9et instru7ents 2: 8ari2us 7aturities #!ile 7aintaining an 2pti7al 7aturity (a8erage 7aturity 2: t!e p2rt:2li2 n2t e=6ee4ing ) years) 2n t!e p2rt:2li2 "ase4 2n t!e pre8ailing 7ar9et 62n4iti2ns< %!e s6!e7e !as gr2#t! 2pti2n an4 72nt!ly 4i8i4en4 re3in8est7ent 2pti2n< "OTA" '&OATER SHORT TERM! ?2ta9 Fl2ater S!2rt %er7 in8ests pre427inantly in :l2ating rate se6urities an4 72ney 7ar9et instru7ents in 2r4er t2 62ntain interest rate ris9< %!e s6!e7e !as greater e=p2sure t2 72ney 7ar9et instru7ents 2: !ig! 6re4it 5uality t!ere"y ensuring reas2na"le returns an4 l2#er 7ar9 t2 7ar9et 627p2nent< %!e s6!e7e is i4eal :2r an in8est7ent !2ri;2n 2: e8en less t!an a #ee9< "OTA" IN OME OPPORTUNITIES 'UND! %!e ?2ta9 In627e Opp2rtunities Fun4 is an 2pen en4e4 4e"t s6!e7e t!at see9s t2 7aintain reas2na"le li5ui4ity #it!in t!e :un4< ?2ta9 In627e Opp2rtunities Fun4 ai7s t2 generate in627e "y in8esting in 4e"t Ban4 72ney 7ar9et se6urities a6r2ss t!e yiel4 6ur8e an4 6re4it spe6tru7< %!us t!e :un4 !as in8este4 in a 8ariety 2: 4e"t 72ney 7ar9et instru7ents an4 g28ern7ent se6urities #!ile 7aintaining an 2pti7al 7aturity 2n t!e p2rt:2li2 "ase4 2n t!e pre8ailing 7ar9et 62n4iti2ns< "OTA" HYBRID 'TP SERIES 1! ?2ta9 Hy"ri4 Fi=e4 %er7 Elan 3 Series I a 6l2se3 en4e4 4e"t s6!e7e #it! '* 72nt!s 7aturity< %!e O"je6ti8e 2: t!e S6!e7e is t2 generate in627e an4 re4u6e interest rate 82latility "y in8esting in De"t @ M2ney Mar9et se6urities t!at 7ature 2n 2r "e:2re t!e 7aturity 2: t!e s6!e7e an4 als2 t2 generate 6apital appre6iati2n "y in8esting in e5uityB e5uity relate4 se6urities< %!e s6!e7e #2ul4 in8est in 4e"t instru7ents li9e 4e"entures "2n4s se6uriti;e4 4e"t an4 g28ern7ent se6urities an4 72ney 7ar9et instru7ents li9e CEs CDs an4 %3 "ills< %!e s6!e7e #2ul4 als2 in8est in e5uity @ e5uity relate4 se6urities< 6. BA&AN ED S HEME
"OTA" BA&AN E! A S6!e7e

in8esting in e5uity 4e"t an4 72ney 7ar9et

instru7ents< %!e in8est7ent strategy is t2 !a8e a +0A 3 -1A in e5uity p2rti2n an4 )1A 3 +1A in n2n3e5uity p2rti2n<


7. 'UND O' 'UND S HEMES "OTA" GO&D 'UND! %!e "ota+ Go/d '.nd o8 '.nd is an 2pen en4e4 :un4 2: :un4 s6!e7e #!i6! in8ests pre427inantly in units 2: ?2ta9 $2l4 E%F S6!e7e< %!e in8est7ent 2"je6ti8e 2: t!e s6!e7e is t2 generate returns "y in8esting in units 2: ?2ta9 $2l4 E=6!ange %ra4e4 Fun4< %!e s6!e7e is suita"le :2r in8est2rs #!2 see9 e=p2sure t2 p!ysi6al g2l4 as an in8est7ent an4 an asset 6lass t2 4i8ersi:y t!eir p2rt:2li2< It is als2 suita"le t2 t!2se #!2 :in4 t!e in8est7ents in $2l4 E%F>s t2 "e 6u7"ers27e :2r #ant 2: tra4ing an4 4e7at a662unt :2r in8esting 2n t!e e=6!anges< It is als2 suita"le t2 s7all in8est2rs #!2 6ann2t in8est in l2t 2: 6reati2n unit si;e 2: a $2l4 E%F 2r t!2se !a"ituate4 t2 4ealing #it! 7utual :un4s 4ire6tly< "OTA" EQUITY! ?2ta9 E5uity FOF 2::ers t!e gains :r27 in8esting in se8eral t2p3 per:2r7ing e5uity s6!e7es #it!2ut t!e in62n8enien6e 2: 7anaging t!e p2rt:2li2 an4 sele6ting t!e 7utual :un4 s6!e7es !i7sel: "y t!e in8est2r< ?2ta9 E5uity FOF is a Fun4 2: Fun4s t!at in8ests pri7arily in 4i8ersi:ie4 e5uity s6!e7es ("2t! large36ap an4 aggressi8e) :r27 a6r2ss 7utual :un4 !2uses in In4ia< %!us it is a single3asset 6lass 7ulti37anager Fun4 2: Fun4s< #. E( HANGE TRADED 'UND 3ET'4 S HEMES "OTA" NI'TY ET'! An Open en4e4 E=6!ange %ra4e4 Fun4< %!e in8est7ent 2"je6ti8e 2: t!e s6!e7e is t2 pr28i4e returns "e:2re e=penses t!at 6l2sely 62rresp2n4 t2 t!e t2tal returns 2: t!e S@E CNH Ni:ty su"je6t t2 tra69ing err2rs< %!e s6!e7e #ill in8est in t!e st269s t!at 627prise t!e S@E CNH Ni:ty an4 in t!e sa7e pr2p2rti2n as in t!e in4e=< "OTA" SENSE( ET'! An Open en4e4 E=6!ange %ra4e4 Fun4< %!e in8est7ent 2"je6ti8e 2: t!e s6!e7e is t2 pr28i4e returns "e:2re e=penses t!at 6l2sely 62rresp2n4 t2 t!e t2tal returns 2: t!e BSE SENSEH su"je6t t2 tra69ing err2rs< %!e s6!e7e #ill in8est in t!e st269s t!at 627prise t!e BSE Sense= an4 in t!e sa7e pr2p2rti2n as in t!e in4e=< "OTA" PSU BAN" ET'! An Open en4e4 E=6!ange %ra4e4 Fun4< %!e in8est7ent 2"je6ti8e 2: t!e s6!e7e is t2 pr28i4e returns t!at 6l2sely 62rresp2n4 t2 t!e t2tal returns 2: CNH ESU Ban9 In4e= su"je6t t2 tra69ing err2rs< %!e s6!e7e #ill in8est in t!e se6urities t!at 627prise t!e CNH ESU Ban9 In4e= an4 in t!e sa7e pr2p2rti2n as in t!e In4e=< "OTA" GO&D ET'! An Open en4e4 E=6!ange %ra4e4 Fun4< %!e in8est7ent 2"je6ti8e 2: t!e s6!e7e is t2 generate returns t!at are in line #it! t!e returns 2n

in8est7ent in p!ysi6al g2l4 su"je6t t2 tra69ing err2r< %!e Fun4 #2ul4 in8est in g2l4 an4 en4ea82r t2 tra69 t!e sp2t pri6e 2: g2l4< %!e Fun4 #2ul4 in8est all t!e resi4ual :un4s a:ter in8esting in g2l4 in 4e"t an4 72ney 7ar9et instru7ents<



-inancial planning is a planned and systematic approach to provide for the financial goals that *ill help people realise their needs and aspirations, and be happy$ -or example, a father *ants his son, *ho has just passed his 8;th standard )oard examinations, to become a doctor$ /his is an aspiration$ In order to realize this, formal education expenses, coaching class expenses, hostel expenses and various other expenses need to be incurred over a number of years$ /he estimated financial commitments to*ards these expenses become financial goals$ /hese financial goals need to be met, so that the son can become a doctor$ /he objective of financial planning is to ensure that the right amount of money is available at the right

time to meet the various financial goals of the investor. This would help the investor realize his aspirations and experience happiness.


.hile *orking on a comprehensive financial plan, it is useful to have a perspective on the #ife "ycle and .ealth "ycle of the investor$ #. LIFE C4CLE ANAL4SIS /hese are the normal stages that people go through, viz$F Chi/dhood

%uring this stage, focus is on education in most cases$ "hildren are dependents, rather than earning members$ =ocket money, cash gifts and scholarships are potential sources of income during this phase$ =arents and seniors need to groom children to imbibe the virtues of savings, balance and prudence$ &alues imbibed during this phase set the foundation of their life in future$ 4o,n2 Un*arri1d 6/he earning years start here$ ! fe* get on to high2paying salaries early in their career$ (thers toil their *ay up*ards$ /his is the right age to start investing in eGuity$ =ersonal plans on marriage, transportation and residence determine the liGuidity needs$ =eople for *hom marriage is on the anvil, and those *ho *ish to buy a car / t*o2*heeler or house may prefer to invest more in relatively liGuid investment avenues$ (thers have the luxury of not having to provide much for liGuidity needs$ !ccordingly, the size of the eGuity portfolio is determined$ 4o,n2 Marri1d .here both spouses have decent jobs, life can be financially comfortable$ /hey can plan *here to stay in / buy a house, based on job imperatives, life style aspirations and personal comfort$ Insurance is reGuired, but not so critical$ .here only one spouse is *orking, life insurance to provide for contingencies associated *ith the earning spouse are absolutely critical$ In case the earning spouse is not so *ell placed, ability to pay insurance premia can be an issue, competing *ith other basic needs of food, clothing and shelter$ %epending on the medical coverage provided by the employer/s, health insurance policy cover too should be planned$ any insurance companies have outsourced the claim settlement process$ In such cases, the outsourced service provider, and not the insurer, *ould be the touch point for processing claims$ Marri1d =ith 4o,n2 Chi/dr1n Insurance needs Q both life and health 2 increase *ith every child$ /he financial planner is *ell placed to advise on a level of insurance cover, and mix of policies that *ould help the family maintain their life style in the event of any contingency$ @xpenses for education right from pre2school to normal schooling to higher education is gro*ing much faster than regular inflation$ !deGuate investments are reGuired to cover this$ Marri1d =ith O/d1r Chi/dr1n /he costs associated *ith helping the children settle i$e$ cost of housing, marriage etc are shooting up$ If investments in gro*th assets like shares and real estate, are started early in life, and maintained, it *ould help ensure that the children enjoy the same life style, *hen they set up their independent families$

Pr19R1tir1*1nt )y this stage, the children should have started earning and contributing to the family expenses$ -urther, any loans taken for purchase of house or car, or education of children should have been extinguished$ /he family ought to plan for their retirement 2*hat kind of lifestyle to lead, and ho* those regular expenses *ill be met$ R1tir1*1nt !t this stage, the family should have adeGuate corpus, the interest on *hich should help meet regular expenses$ /he need to dip into capital should come up only for contingencies Q not to meet regular expenses$

'1a/th C)./1 /his is an alternate approach to profile the investor$ /he stages in the .ealth "ycle areF A..,*,/ation /his is the stage *hen the investor gets to build his *ealth$ It covers the earning years of the investor i$e$ the phases of the life cycle from Aoung >nmarried to =re20etirement$ Transition /ransition is a phase *hen financial goals are in the horizon$ @$g$house to be purchased, childrenIs higher education / marriage approaching etc$ Biven the impending reGuirement of funds,investors tend to increase the proportion of their portfolio in liGuid assets viz$ money in bank, liGuid schemes etc$ Int1r9(1n1rationa/ Trans01r %uring this phase, the investor starts thinking about orderly transfer of *ealth to the next generation, in the event of death$ /he financial planner can help the investor understand various inheritance and tax issues, and help in preparing .ill and validating various documents and structures related to assets and liabilities of the investor$ R1a8in2 ? Distrib,tion /his is the stage *hen the investor needs regular money$ It is the parallel of retirement phase in the #ife "ycle$ 'udden .ealth .inning lotteries, unexpected inheritance of *ealth, unusually high capital gains earned Q all these are occasions of sudden *ealth, that need to be celebrated$





'h) *,t,a/ 0,ndG

Instrument /ax )enefit 0eturn %uration



:$3;S :S :S 3$O; to :$3;S

#ong /erm #ong /erm #ong /erm 'hort /erm

-%Is Q )anks R 5 =ost (ffice 'enior 'avings 'cheme utual -unds >#I= 1=' %irect @Guity Bold 0eal @state R R R R R R "itizen R


#ong /erm

arket #inked arket #inked arket #inked arket #inked arket #inked arket #inked



'hort /erm #ong /erm #ong /erm #ong /erm 'hort /erm #ong /erm



/he above diagram gives an idea on the structure of an Indian mutual fund$ S8onsor6 'ponsor is basically a promoter of the fund$ -or example )ank of )aroda, =unjab 1ational )ank, 'tate )ank of India and #ife Insurance "orporation of India +#I", are the sponsors of >/I utual -unds$ 4ousing %evelopment -inance "orporation #imited +4%-", and 'tandard #ife Investments #imited are the sponsors of 4%-" mutual funds$ /he fund sponsor raises money from public, *ho become fund shareholders$ /he pooled money is invested in the securities$ 'ponsor appoints trustees$ Tr,st11s6 /*o third of the trustees are independent professionals *ho o*n the fund and supervises the activities of the ! "$ It has the authority to sack ! " employees for non2adherence to the rules of the regulator$ It safeguards the interests of the investors$ /hey are legally appointed i$e$ approved by '@)I$ AMC6 !sset anagement "ompany +! ", is a set of financial professionals *ho manage the fund$ It

takes decisions on *hen and *here to invest the money$ It doesnIt o*n the money$ ! " is only a fee2for2 service provider$ /he above D tier structure of Indian mutual funds is very strong and virtually no chance for fraud$ C,stodian6 ! "ustodian keeps safe custody of the investments +related documents of securities invested,$ ! custodian should be a registered entity *ith '@)I$ If the promoter holds 3;S voting rights in the custodian company it canIt be appointed as custodian for the fund$ /his is to avoid influence of the promoter on the custodian$ It may also provide fund accounting services and transfer agent services$ ?= of the leading custodians$ organ "hase is one


Trans01r A21nts6 /ransfer !gent "ompany interfaces *ith the customers, issue a fundIs units, help investors *hile redeeming units$ =rovides balance statements and fund performance fact sheets to the investors$ "! ' is a leading /ransfer !gent in India$

Ma>in2 *on1) 0ro* M,t,a/ 0,nd

Di:id1nds6 %ividends may be in the form of cash, stock or property$ ost secure and stable companies offer dividends to their stockholders$ /heir share prices might not move much, but the dividend attempts to make up for this$ 4igh2gro*th companies rarely offer dividends because all of their profits are reinvested to help sustain higher2than2average gro*th$ utual funds pay out interest and dividend income received from their portfolio holdings as dividends to fund shareholders$ In addition, realized capital gains from the portfolio6s trading activities are generally paid out +capital gains distribution, as a year2end dividend$ Int1r1st6 /he charge for the privilege of borro*ing money, typically expressed as an annual percentage$ rate$ /he amount of o*nership a stockholder has in a company, usually expressed as a percentage$ Interest is commonly calculated using one of t*o methodsF simple interest calculation, or compound interest calculation$ #ender make money from interest, borro*ers pay it$ 'omeone *ho holds more than 328;S of the stock in a company is said to hold significant interests$

Ca8ita/ (ain6 #ong2term capital gains are usually taxed at a lo*er rate than regular income$ /his is done to encourage entrepreneurship and investment in the economy$ /ax conscious mutual fund investors should determine a mutual fund6s unrealized accumulated capital gains, *hich are expressed as a percentage of its net assets, before investing in a fund *ith a significant unrealized capital gain component$ /his circumstance is referred to as a fund6s capital gains exposure$ .hen distributed by a fund, capital gains are a taxable obligation for the fund6s investors

S1/1.tin2 a *,t,a/ 0,nd

In:1st*1nt ob+1.ti:1 H ris> 8ro0i/16 /he investment goal of the fund must coincide *ith that of the investor$ /he objectives can be defined in terms of tax planning, regular income, high returns, long2term planning, etc$ @Guity funds are more tax2efficient compared *ith debt funds, short2term debt funds aim at regular income, *hereas closed2ended eGuity funds aim at long2term capital appreciation$ /he fund should be chosen according to the investor6s risk tolerance$ /he objective of high returns is generally associated *ith high risk$ /he !ssociation of utual -unds in India +! -I, defines three types of


risk tolerance levelsF lo* risk or cautious, moderate risk or cautiously aggressive and high risk or aggressive$ #o*2risk investors should consider debt funds, *hich invest in government securities or high rated debt papers$ funds$ F,nd 81r0or*an.1 H *ana21*1nt6 /hough the past performance of a fund does not define its future performance, it is important to consider ho* it has performed *ith respect to its benchmark or other similar funds$ ! fund should be compared *ith the same category of funds$ 'o, the performance of a mid2cap fund cannot be compared *ith that of a large2cap fund as the former is more volatile compared *ith the latter$ =ast performance also helps in assessing the Guality of fund management, the skills of the fund manager and his team$ /he stock picking and market timing abilities of the manager can be judged by comparing the fund performance *ith its benchmark$ /he funds that perform better than their benchmarks are considered outperformers, *hereas the funds that yield less than their benchmarks are underperformers$ F,nd siI16 /he size is important because a very large fund often faces difficulties in the optimum deployment of its corpus, *hich, in turn, negatively impacts its performance$ (n the other hand, a very small2sized fund is constrained *ith the problems of high costs$ /herefore, one should go for a mid2sized fund as it ideally balances the investment flexibility and costs$ F,nd .osts6 /hese involve the operating costs of running a fund and include marketing and selling expenses, audit fees, custodian fees, etc$ /hese costs can be gauged by looking at the fund6s expense ratio, *hich is reported in its annual report$ /he expense ratio should be compared *ith similar funds as those *ith high ratios significantly impact the long2term investors due to the effect of compounding$ oderate2risk investors should consider index funds, balanced funds and asset allocation funds$ 4igh2risk investors should look for eGuity funds +diversified and specialised,, offshore funds and mid2cap

STEPS IN-OL-ED IN IN-ESTIN( IN A MUTUAL FUND 'tep282 Identifying the investment needs
.hat are the investment objectives and needsL 4o* much risk the investor is *illing to takeL .hat are the cash flo* reGuirementsL


'tep272"hoose the right mutual fund

/he track record of performance over the last fe* years in relation to the appropriate )enchmark and similar funds in the same category $ 4o* *ell the mutual fund is organized to provide efficient, prompt and personalized service$ %egree of transparency as reflected in freGuency and Guality of their communications$

'tep2D2'elect the ideal mix of schemes

'elect the ideal mix of schemes$ Investing in just 8 scheme may not meet all your investment needs$ Aou may consider investing in a combination of schemes to achieve your specific goals$

IN-ESTMENT STRATE(IES S)st1*ati. in:1st*1nt P/anF under this a fixed sum is invested each month on a fixed date of a month$ =ayment is made through post dated cheGues or auto debit facilities$ /he investors get fe*er units *hen the 1!& is high and more units *hen the 1!& is lo*$ /his is called as the benefit of 0upee "ost !veraging$ S)st1*ati. Trans01r P/anF under this an investor invest in debt oriented form and give instruction to transfer affixed sum, at a fixed interval to an eGuity scheme of the same mutual fund$ S)st1*ati. 'ithdra=a/ P/anF if someone *ishes to *ithdra* from mutual fund then he can *ithdra* a fixed amount each month$

In:1st*1nt in *,t,a/ 0,nd thro,2h SIP

'I=2 'ystematic Investment =lan

It is a method of investing a fixed sum, at a regular interval, in a mutual fund$ It is very similar to monthly saving schemes like a recurring monthly deposit / post office deposit$

B1n10its o0 SIP6
8$ 'I= can be started *ith a minimum investment of 0s$ 3;;/2 per month or 0s$ 8;;;/2 per month$ 7$ It is good and effective *ay of creating *ealth for long term$

D$ @"' facility is available in case of Investment through 'I=$ P$ ! small *ithdra*al from the account doesnIt affect the bank balance of an individual as compared to a hefty *ithdra*al$ 3$ It can be for a year, t*o years, three years etc$ if a person at any point of time couldnIt be able to continue its 'I=, he may give instructions atleast 73 days before to the fund house$ 4is 'I= *ill be discontinued$ N$ !ll type of funds except #iGuid funds, cash funds and other funds *ho invest in very short fixed return investments offers the facility of 'I=$ O$ "apital gains, if applicable, are taxed on a first2in first2out basis$!s the investment made through 'I= are not at one time$ 'ome units bought at high price and some at lo* price, so chances of making gain through 'I= is higher than the on time investment$

SIP o0 Rs. #$$$ in:1st1d 81r *onth J %K 81r ann,* ti// th1 a21 o0 !$
Startin2 A21 73 D; D3 P; Tota/ A*o,nt Sa:1d P,7;,;;; D,N;,;;; D,;;,;;; 7,P;,;;; -a/,1 at th1 a21 o0 !$ 7D,;9,8O3 83,;;,793 9,3O,DNO 3,97,9PO

Ris>s in:o/:1d in *,t,a/ 0,nds s.h1*1s6

Ca// Ris>$ /he possibility that falling interest rates *ill cause a bond issuer to redeem<or call<its high2yielding bond before the bond6s maturity date$


Co,ntr) Ris>$ /he possibility that political events +a *ar, national elections,, financial problems +rising inflation, government default,, or natural disasters +an earthGuake, a poor harvest, *ill *eaken a country6s economy and cause investments in that country to decline$

Cr1dit Ris>$ /he possibility that a bond issuer *ill fail to repay interest and principal in a timely manner$ !lso called default risk$

C,rr1n.) Ris>$ /he possibility that returns could be reduced for !mericans investing in foreign securities because of a rise in the value of the >$'$ dollar against foreign currencies$ !lso called exchange2rate risk$

In.o*1 Ris>$ /he possibility that a fixed2income fund6s dividends *ill decline as a result of falling overall interest rates$

Ind,str) Ris>$ /he possibility that a group of stocks in a single industry *ill decline in price due to developments in that industry$

In0/ation Ris>$ /he possibility that increases in the cost of living *ill reduce or eliminate a fund6s real inflation2adjusted returns$

Int1r1st Rat1 Ris>$ /he possibility that a bond fund *ill decline in value because of an increase in interest rates$

Mana21r Ris>$ /he possibility that an actively managed mutual fund6s investment adviser *ill fail to execute the fund6s investment strategy effectively resulting in the failure of stated objectives$

Mar>1t Ris>$ /he possibility that stock fund or bond fund prices overall *ill decline over short or even extended periods$ 'tock and bond markets tend to move in cycles, *ith periods *hen prices rise and other periods *hen prices fall$

Prin.i8a/ Ris>$ /he possibility that an investment *ill go do*n in value, or Klose money,K from the original or invested amount$

Ris>9R1t,rn trad19o00


RIS& MEASURE 4igh average maturity and IMPLICATION IMPACT ON IN-ESTOR ore sensitive to interest rate 4igher volatility in returns

modified duration changes #o* average maturity and #ess sensitive to interest rate #o*er volatility in returns modified duration changes Breater allocation to high #o* risk default credit rated instruments Breater allocation to lo* 4igher risk default rated instruments #o*er yield *ith lo*er risk 4igher yield *ith greater risk


/here are five main indicators of investment risk that apply to the analysis of stocks, bonds and mutual fund portfolios$ /hey are !#=4!


02'0>!0@% 0!/I( '/!1%!0% %@&I!/I(1 and '4!0=@ 0!/I( /hese statistical measures are historical predictors of investment risk/volatility and are all major components of modern portfolio theory + =/,$ /he market benchmarks$ =/ is a standard financial and academic methodology used for assessing the performance of eGuity, fixed2income and mutual fund investments by comparing them to

!lpha is a measure of an investment6s performance on a risk2adjusted basis$ It takes the volatility +price risk, of a security or fund portfolio and compares its risk2adjusted performance to a benchmark index$ /he excess return of the investment relative to the return of the benchmark index is its alpha$ 'imply stated, alpha is often considered to represent the value that a portfolio manager adds or subtracts from a fund portfolio6s return$ ! positive alpha of 8$; means the fund has outperformed its benchmark index by 8S$ "orrespondingly, a similar negative alpha *ould indicate an underperformance of 8S$ -or investors, the more positive an alpha is, the better it is$

)eta, also kno*n as the Kbeta coefficient,K is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a *hole$ )eta is calculated using regression analysis, and you can think of it as the tendency of an investment6s return to respond to s*ings in the market$ )y definition, the market has a beta of 8$;$ Individual security and portfolio values are measured according to ho* they deviate from the market$ ! beta of 8$; indicates that the investment6s price *ill move in lock2step *ith the market$ ! beta of less than 8$; indicates that the investment *ill be less volatile than the market, and, correspondingly, a beta of more than 8$; indicates that the investment6s price *ill be more volatile than the market$ -or example, if a fund portfolio6s beta is 8$7, it6s theoretically 7;S more volatile than the market$ "onservative investors looking to preserve capital should focus on securities and fund portfolios *ith lo* betas, *hereas those investors *illing to take on more risk in search of higher returns should look for high beta investments$

02'Guared is a statistical measure that represents the percentage of a fund portfolio6s or security6s movements that can be explained by movements in a benchmark index$ -or fixed2income securities and

their corresponding mutual funds, the benchmark is the >$'$ /reasury )ill, and, like*ise *ith eGuities and eGuity funds, the benchmark is the '5= 3;; Index$ 02sGuared values range from ; to 8;;$ !ccording to *ould not perform like the index$ orningstar, a mutual fund *ith an 02sGuared value bet*een :3 and 8;; has a performance record that is closely correlated to the index$ ! fund rated O; or less

Standard D1:iation6
'tandard deviation measures the dispersion of data from its mean$ In plain @nglish, the more that data is spread apart, the higher the difference is from the norm$ In finance, standard deviation is applied to the annual rate of return of an investment to measure its volatility +risk,$ ! volatile stock *ould have a high standard deviation$ .ith mutual funds, the standard deviation tells us ho* much the return on a fund is deviating from the expected returns based on its historical performance$

Shar81 Ratio
%eveloped by 1obel laureate economist .illiam 'harpe, this ratio measures risk2adjusted performance$ It is calculated by subtracting the risk2free rate of return +>$'$ /reasury )ond, from the rate of return for an investment and dividing the result by the investment6s standard deviation of its return$/he 'harpe ratio tells investors *hether an investment6s returns are due to smart investment decisions or the result of excess risk$ /his measurement is very useful because although one portfolio or security can reap higher returns than its peers, it is only a good investment if those higher returns do not come *ith too much additional risk$ /he greater an investment6s 'harpe ratio, the better its risk2adjusted performance$

M,t,a/ F,nds R1d1*8tion Pro.1ss

If you have bought the mutual funds from an agent or from the ! " directly, then you *ill have to fill up the mutual fund redemption form $ /his form is available from the mutual funds ! " office +you can get its office address from internet,$ Aou *ill have to go to their office in person$ Aou can also go to the nearest "! ' office and fill up the mutual fund redemption form directly from there$ ItIs much convenient to visit "! ' office and directly redeem more than one mutual funds in one go$ /he redemption form is very easy to fill and all you need to put is your name, folio number +make sure you put correct folio number, else it *ill create issue later, and the number of units +exact number or !##, you *ant to redeem$ ?ust give this form to the "! ' processing assistant and they *ill put up your reGuest$


Important =oints 7. NA- A88/i.ab/16 If you give your redemption reGuest before DF;; pm, the same day closing 1!& *ill be applicable, else you *ill get next day 1!&$ 'o make sure you do the redemption *ell before DF;; pm if you *ant same day 1!&$ ". Ban> a..o,nts6 .here *ill you get the money *hen you redeem the mutual fundsL Aou *ill get the proceeds in your same account *hich is registered *ith your ! " +*hich you used to pay at the time of buying,$ If that account is not active, then there are fe* run around like you *ill have to attach the cancelled cheGue of your ne* bank account or copy of pass2book etc and if you donIt have that, then a declaration from the bank and sign of some bank manager etc$ 'o this can be a little frustrating if you are in urgent need of money$ In my case my old account *as active so it *as pretty easy for me$ D. CAMS do not hand/1 a// th1 AMCLs r1d1*8tion F "! ' do not handle each and every utual funds transaction$ It can happen that you *ill have to go to the ! " office itself for redemption$ #ike in my case I had to go to 'undaram ! " office to redeem my 'undaram /ax 'aver proceeds$ 'o check *ith "! ' *hich all mutual funds they handle, you can shoot an email to your city "! ' +their emails and addresses are there on "! ' *ebsite 5. 5o= *,.h ti*1 it ta>1s to 21t *on1)G 6 It generally takes D2P *orking days to get the money credited in your account$ )ut in my case I got it in next 7 days itself$ 'o if you redeem the funds on onday or /uesday, you can safely assume that you *ill get the money by the *eekend$ )ut if you have *eekend falling in bet*een, then it can take some time$

Pro.1ss o0 r1d1*8tion i0 ha:1 bo,2ht M,t,a/ 0,nds on/in16

If you bought your mutual funds from your demat account or some online brokers or if you activated your online account after buying from agent, then you can redeem your mutual funds online itself just by follo*ing the procedure mentioned by your online account$ ost of the people *ho buy tax saving mutual funds +@#'' funds, online can also redeem tax saver mutual funds online only$

R1d1*8tion o0 a *,t,a/ 0,nd6





FINDIN(S 'tudy found more young people are involved in financial activities$ /hey more visit banks$ 'o its an opportunity for the mutual funds industries to attract people$ 'tudy says many time advisors donIt get timely updates from the ! "s, *hich leads them not to offer some of the schemes that may give good returns$ =eople like to invest in secured funds$ 'ome of them have lack of trust or fear of loss of money$ ost people are not having the kno*ledge of schemes$ It reGuires aggressive marketing of funds$ )y this *ay the a*areness level can be improved among people$ ost of the respondents fall in the age group of D823; years$

It *as observed that the driving aspects of investments in mutual fund are fund performance, service, returns, and tax benefits$ /he reason of not being a*are about mutual funds schemes is lack of understanding of the schemes by the agents$ 0egarding the service Guality, investors are satisfied *ith kotak mutual fund )hubanes*ar$ /here are some potential customers *ho sho*ed their interest in investing in kotak mutual fund due to its past performance and service Guality$ %ifferent schemes are designed for different age groups$@xFeGuity schemes are for the young people aged bet*een 732D3$)ecause they have the more risk taking ability than the older$(lder people can invest in debt schemes *hich are less riskier and have the gilt funds+Bovernment,,*here it gives the assurance of returns *hen the market is bearish$'o investors get number of choices to invest$ /he investors can redeem the investment easily if they desire by follo*ing the legal rules of redemption that is directly going to the "! ' office$'o it is convenient and easy$

SU((ESTIONS -und managers should conduct continuous investor a*areness programs to make the investors a*are of the schemes of mutual funds and the return from the funds$ !gents, service personnel must be able to correctly guide the investors in different schemes as per their needs and reGuirements$ 'avings pooled by mutual funds are invested largely in industrial securities$ utual

funds raise resources from a large number of small savers and make funds available to industrial concerns *ho may find it a burden to raise finance directly from individual savers$ /hus by playing the role of financial intermediation mutual funds provides a convenient and effective link bet*een savings and investment$ /he mutual fund houses provide many types of schemes such as open2ended schemes, closed2ended schemes, gro*th schemes, etc$ so as to cater varying needs and preferences of large number of investors$ /he choice of a fund depends upon the investors risk profileH return reGuirements, expectations of returns, age bar etc$ /here is no one size that fits all the investors$ @ach fund has its o*n size of corpus$ )efore making investments, I-! should first enGuire about the risk tolerance, need and time of the investors$ 'I= is one of the innovative product launched by ! "s *hich is an easy investment option for the monthly salaried persons that provide facility for investment in @ I$ /he tax saving scheme and its benefits should be explained to the people *ell by the I-!$


Indians invest in order to secure the future and invest in those *hich *ill provide them guaranteed return *ith lo* risk$ 4igh risk is not considered as a right decision$ 'o people need a right direction for investment options$ /axation is another area that most investors are unclear about$ -inancial planners *ho are comfortable *ith the tax la*s can therefore help the investor *ith tax planning, so as to optimize the tax outflo*s$ /o increase the performance of funds, the funds must declare bonuses in favorable times to help book profits in a tax friendly manner$ It should also pay dividends during the rising 1!&Is

CONCLUSION utual funds play a very significant role in mobilizing the savings of those investors *ho have surplus income and channelization of these savings in those avenues *here there is a demand of funds$ /hese institutions employ their resources in such a manner as to afford for their investors the combined benefit of lo* risk, steady return, high liGuidity and capital appreciation through diversification and expert management - industry in India has a large untapped market in urban areas besides the virgin markets in semi urban and rural areas$ /his market potential can be tapped by scrutinizing investor behaviour to identify their expectations and find out the risk preference and then apply to an investment strategy$ @conomic environments and markets are dynamic$ =redictions about markets can go *rong$ .ith a prudent asset allocation, the investor does not end up in the unfortunate situation of having all the investments in an asset class that performs poorly. =resently more and more funds are entering the industry$ /he availability of more savings instruments *ith varied risk2return combination *ould make the investors more choosy$ 'o they should analyse the risk2return of all the schemes and invest accordingly$

%ue to lack of adeGuate information about the corporate securities, the common investor finds it difficult to participate and even if he does so his resources being small, he can at best hold one or t*o companies securities$ )ut mutual funds take care of both these difficulties$ /he institutions issuing mutual funds employ expert management investment analysis to allocate the assets in such *ay that the investors get maximum returns$ %iversification and expert investment kno*ledge ensure steady and regular earnings to the funds$ /he present study is an attempt to help investors kno* more about the - industry

and its advantages and by sho*ing the performances help them to choose the scheme that *ill best suit them and making a best financial plan *hich *ill provide satisfaction to the investors that he/she get the desired return from the investment made by them$

Boo>s Financial services, Gordon,natarajan Financial management, Sharma,gupta NISM book Jo,rna/s onthly fund fact sheets S1ar.h 1n2in1 ***$google$com '1bsit1s ***$mutualfundsindia$com

***$valueresearchonline$com ***$moneycontrol$com ***$kotakmutual$com ***$cafemutual$com ***$investopedia$com ***$amfiindia$com ***$investmart$com ***$nseindia$com ***$bseindia$com ***$mf$appuonline$com