INTRODUCTION

INTRODUCTION OF MUTUAL FUNDS

A Mutual Fund is an institutional arrangement which mobilizes savings of millions of
investors for investment in a diversified portfolio of securities, with a view to spread risk
and to ensure adequate and consistent return, both in the form of dividend and capital
appreciation. It is, in fact, a financial intermediary that receives money from
shareholders, invest it, earn on it, and make it grow to share it with them. These
institutions are managed by professional money managers who make portfolio investment
decision on behalf of unsophisticated investors. It is essentially a mechanism of pooling
together savings of a large number of investors with a collective investment and returning
them after some appreciation. Thus, mutual fund is a collective investment scheme
designed to provide benefits of diversified investment with reduced risk and expert
investment management to a large number of investors through institutionalized risk
pooling mechanism.
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
As per SEBI (Mutual Funds) Regulation Act 1996, Mutual Fund means a fund
established in the form of a trust to raise monies through sale of units to the public or a
section of the public under one or more schemes for investing in securities, including
money market instruments.
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organisational set up of a mutual fund:

Organization of a Mutual Fun
Why should you invest in Mutual Funds?
Reduce your risks - Mutual Funds diversify your portfolio by investing in various
securities & minimise the risk.
Maximise your opportunities - The fund managers with the strong research take
explore new investment options make available opportunities for your investments to
flourish.
Liquidity: Quick access to your money - Mutual Funds can be bought and sold on
any dealing day
Affordability - Of course you dont need to be millionaire to invest in mutual fund as
the minimum investment in mutual fund starts from Rs.500/-. A Mutual Fund because of
its large corpus allows even a small investor to take the benefit of its investment strategy.
Low Costs - Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in brokerage and
other fees translate into lower costs for investors.
Tax Benefits - The tax benefits that Mutual Funds investors enjoy at the moment is the
treatment of long-term capital gains.
Transparency - The investor gets regular information on the value of his investment
in addition to disclosure on the specific investments made by the fund, the proportion
invested in each class of assets and the fund manager's investment strategy and outlook.
Regulated for investor protection - All Mutual Funds in India are registered with the
regulator of the Indian securities industry - the Securities and Exchange Board of India
(SEBI). The funds function within the framework of regulations designed by SEBI and
these regulations are intended to protect the interests of investors. The operations of the
mutual funds are also regularly monitored by SEBI.


Risk Profiles
Diversification - Mutual Funds reduces the risk by investing in all the sectors. Instead of
putting all your money in one sector or company it's better to invest in various good
performing sectors as you reduces the risk of getting involved in a particular
sector/company which may perform or may not.

Types of Mutual Funds
Mutual fund schemes may be classified on the basis of its structure and its objective:-
Open-ended Funds
An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally ranging from
3 to 15 years. The fund is open for subscription only during a specified period. Investors
can invest in the scheme at the time of the initial public issue and thereafter they can buy
or sell the units of the scheme on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close-ended funds give an option of selling
back the units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided to the
investor.
Interval Funds
Interval funds combine the features of open-ended and close-ended schemes.
They are open for sale or redemption during pre-determined intervals at NAV related
prices.
Catagoried with the help of Table
Category Investment Objective Investment Pattern
Income Funds
To generate attractive return
from a portfolio comprising fixed
income and money market
securities
Corporate Debt,
Institutional/PSU Bonds,
Money Market Securities


Equity Funds
To generate long term capital
appreciation from a portfolio
comprising equity and equity-
related securities
Equity and Equity-related
securities
Balanced Funds
To generate long term capital
appreciation and current
income from a portfolio
comprising equity
as well as fixed income
securities
Mix of fixed income and
equity & equity related
securities
Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such as
treasury bills, certificates of deposit, commercial paper and inter-bank call money.
Returns on these schemes may fluctuate depending upon the interest rates prevailing in
the market. These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods.
Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each time you
buy or sell units in the fund, a commission will be payable. Typically entry and exit loads
range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history.
No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a no
load fund is that the entire corpus is put to work.



OTHERS SCHEMES:
Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also
provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing
in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the
amount is invested before September 30, 2000.
Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document.
The investment of these funds is limited to specific industries like InfoTech, FMCG,
Pharmaceuticals etc.

Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50

Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group of
industries or various segments such as 'A' Group shares or initial public offerings.
SYSTEMATIC INVESTMENT (SIP)
The SIP allows the unit holders to invest a fixed amount of rupees at regular intervals for
purchasing additional units of the schemes at NAV based prices. This concept is called
rupee cost averaging. Unit holders can benefit by investing specified rupee amounts at
regular intervals for a continuous period.Here the investor is given the option of
preparing a predetermined number of post-dated cheques in favor of the fund. He will get
units on the date of the cheques at the existing NAV.In SIP investors make periodical
investment.So in order to avoid short term capital gain tax redemption should be made
either after 1 year from the last installment or periodically.
ASSET ALLOCATION
There are three major asset classes where money can be put in, namely EQUITIES, FIXED
INCOME AND MONEY MARKET INSTRUMENTS. In order to decide how much of the money
goes into which investment class first few important factors (most of these will be tackled
by during the goal definition phase) have to be considered:
Return expected on the investment
Amount you will be able to save (present as well as future)
Cash outflows you might have at certain points of time in the future
Risk appetite
Amount you will require for your retirement
Liquidity
Age
Hence due to the variable nature of the investors finances and requirements there are no
set strategies used by financial consultants. A person has to decide in which category he
falls in according to his requirements and goals.
Investment protection leads to safer interest generating asset allocations where as
Investment Growth leads to higher volatility assets that may tend to grow over a period of
time.
INVESTMENT PROTECTION VS INVESTMENT GROWTH
INVESTOR CHARACTERISTIC INVESTMENT GROWTH INVESTMENT
PROTECTION
Time Horizon Short-term Long-term
Future Income Requirements Steady / High Variable / Low
Volatility Limit
(Risk Averseness)
Low High
Inflation Protection Low Protection
Needed
High Protection
Needed
Investor take on Equity Market Mostly Bearish Mostly Bullish
If an investor who broadly falls into the Investment Growth category, might be interested
in looking at an Aggressive portfolio. On the other hand if he is leaning towards an
interest income with minimal risk investments, he might look at a Conservative asset
allocation. Someone who wants a bit of steady income as well as asset growth might go
in for a moderate or a balanced asset allocation.
Another way to ascertain the right asset allocation is by looking at the life cycle. The
basis of this theory lies in the simple maxim that younger people with secure jobs will
normally opt for higher returns and take higher risks compared to older retired people.
One must remember that these are only indicative strategies and will probably have to be
fine-tuned to meet your individual needs.
AGE MAIN OBJECTIVES PORTFOLIO STRATEGY
20-29 Aggressive Growth Sow the seeds,
plan for housing and create a
safety cushion

50% - Growth Funds
30% - Balanced Funds
20% - Money Markets / Cash
30-39 Growth Save for housing, childrens 45% - Growth Funds
expenses (present and future
education etc.)
and safety cushion
30% - Balanced Funds
05% - Blue Chip Stocks
20% - Money Markets / Cash
40-49 Growth Childrens expenses
(present and future education etc.)
and safety cushion

40% - Growth Funds
30% - Balanced Funds
10% - Blue Chip Stocks
20% - Money Markets / Cash
50-59 Retirement Save for retirement and
Build on safety cushion
30% - Growth Funds
40% - Balanced Funds
10% - Blue Chip Stocks
20% - Money Markets / Cash
60-69 Safety Preserve investments/ savings
and opt for minimal growth
10% - Balanced Funds
15% - Income Funds
10% - Blue Chip Stocks
20% - Dividend Stocks
30% - Certificates of Deposits
(Shorter-term)
15% - Money Markets / Cash
70-79 Safety Preserve investments/ savings 30% - Income Funds
25%-DividendStocks
35% - Certificates of Deposits
(Shorter-term)
10% - Money Markets / Cash

PERFORMANCE MEASURES
Mutual fund companies over are known by their AMCs and this fame is directly linked to
their superior stock selection skills. For mutual funds to grow, AMCs must be held
accountable for their selection of stocks. In other words, there must be some performance
indicator that will reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of the performance of
a mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a
fund, in a general, can be defined as variability or fluctuations in the returns generated by
it. The higher the fluctuations in the returns of a fund during a given period, higher will
be the risk associated with it. These fluctuations in the returns generated by a fund are
resultant of two guiding forces. First, general market fluctuations, which affect all the
securities present in the market, called market risk or systematic risk and second,
fluctuations due to specific securities present in the portfolio of the fund, called
unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in
terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is
measured in terms of Beta, which represents fluctuations in the NAV of the fund vis--
vis market. The more responsive the NAV of a mutual fund is to the changes in the
market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund
with the returns in the market. While unsystematic risk can be diversified through
investments in a number of instruments, systematic risk can not. By using the risk return
relationship, we try to assess the competitive strength of the mutual funds vis--vis one
another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. The most
important and widely used measures of performance are:
Alpha
Beta & R- Squared
Standard Deviation
P E Ratio
Expense Ratio

ALPHA
Alpha can be seen as a measure of a fund manager's performance. This is what the fund
has earned over and above (or under) what it was expected to earn. Thus, this is the value
added (or subtracted) by the fund manager's investment decisions.
On the whole a positive alpha implies that a fund has performed better than expected,
given its level of risk. So higher the alpha better are returns.
BETA
Beta is a statistical measure that shows how sensitive a fund is to market moves.
This shows that a fund with a beta of more than one will rise more than the market and
also fall more than market. Clearly, if you'd like to beat the market on the upside, it is
best to invest in a high-beta fund. But you must keep in mind that such a fund will also
fall more than the market on the way down. So, over an entire cycle, returns may not be
much higher than the market.
Similarly, a low-beta fund will rise less than the market on the way up and lose less on
the way down. When safety of investment is important, a fund with a beta of less than
one is a better option. Such a fund may not gain much more than the market on the
upside, it will protect returns better when market falls.
Due to this reason, it is essential to take a look at a statistical value called R-squared
along with beta. The R-squared value shows how reliable the beta number is. It varies
between zero and one. An R-squared value of one indicates perfect correlation with the
index. Thus, an index fund investing in the Sensex should have an R-squared value of
one when compared to the Sensex. For equity diversified funds, an R-squared value
greater than 0.8 is generally accepted to mean that the underlying beta value is reliable
and can be used for the fund.
Beta and R-squared should thus be used together when examining a fund's risk profile.
They are as inseparable as risk and return.
Beta = = ( (return-mean) FUND * (return-mean) MARKET)/ (return-mean)
2
MARKET
P E RATIO
Some shares have higher PE ratio and some lower. Higher PE ratio signifies that investor
expectation from these shares is higher. This is because the growth in share price is
expected to follow earnings growth. So, if investors are willing to pay more for a share, it
is because they are expecting faster growth of profits. These stocks are often referred to
as growth stocks.At the other end are companies which have a low earnings multiple.
Here, investors are not expecting much growth, and these stocks are called value stocks.
The situation could change as a company that has been growing slowly can gather pace
and a fast-mover can slow down. Growth and value are thus not static concepts.
EXPENSE RATIO
Expense ratio states how much you pay a fund in percentage term every year to manage
your money. For example, if you invest Rs 10,000 in a fund with an expense ratio of 1.5
per cent, then you are paying the fund Rs 150 to manage your money. In other words, if a
fund earns 10 per cent and has a 1.5 per cent expense ratio, it would mean an 8.5 per cent
return for an investor.
SHARP RATIO
RATIO OF RISK PREMIUM TO FUND STANDARD DEVIATION
RISK PREMIUM
Difference between the Funds Average return and Risk free return on Government
Securities or Treasury Bills over a given period

For my project I will be doing the comparison between the following mutual funds
HDFC Top 200 FUND
RELIANCE VISION FUND
SBI MAGNUM GLOBAL.
PRU ICICI DYNAMIC FUND
FRANKLIN TEMPLETON PRIMA FUND
FIDELITY SPECIAL SITUATION FUND
For the above mentioned mutual funds I have done the comparison on the basis on the
returns and the risks involved. For the comparison there are two basis mutual fund family
and mutual fund category. In mutual fund family one mutual fund is compared with other
fund of the same family. In category mutual fund is compared with some other mutual
fund belonging to different family.
For the final report I will be doing the comparison by calculating the ratios

FRANKLIN TEMPLETON INDIA PRIMA FUND
Franklin India Prima Fund K.N. Sivasubramanian/
Satish Ramanathan
Investment Objective: Aims to provide long term capital
appreciation as primary objective and income as secondary
objective
Date of Allotment December 1, 1993
Latest NAV
Growth Plan Rs. 194.89
Dividend Plan Rs. 54.27
Fund Size Rs. 1583.62 Crores
Portfolio Turnover 61.95%
Expense Ratio 1.92%
Load Structure
Entry Load <Rs. 5 Crs : 2.25%; Rs. 5 Crs: Nil
Exit Load <Rs. 5 Crs : Nil; Rs. 5 Crs: 2% (if redeemed/ switched out within 1 year of
allotment)
Minimum Investment Rs. 5000

NAV Performance
FIPF (G) FIPF (D) S&P CNX500
Last 1 Year 6.88% 6.90% 16.88%
Last 3 Years* 39.19% 39.19% 29.09%
Last 5 Years* 50.79% 50.80% 32.25%
Last 7 Years* 26.68% 26.67% 11.10%
Last 10 Years* 33.92% 33.91% 16.97%
Since Inception* 25.12% 25.12% 10.34%

*Compounded and annualized dividends declared assumed to be invested


Pru ICICI Dynamic Plan
Fund Managers: Anil Sarin
Indicative Investment Horizon: 3 Yrs & more
Inception date: 31-10-2002
Fund Size: Rs. 1,008.20 Crores
NAV (Latest):
Growth Option: 63.63
Dividend option: 19.19
Performance Record* - Cumulative Option

An Open Ended Growth Scheme
NAV NAV Per Unit (Rs.)
Growth Plan 151.389
Dividend Plan
45.193
Relative Performance ^ (Growth Plan)
SBI MAGNUM GLOBAL FUND
Investment
Objective

To provide investors maximum growth
opportunity
through well researched investments in
Indian
equities, PCDs and FCDs from selected
industries with high growth
potential and in bonds
Name of the fund manager Mr. Sandip Sabharwal


Performance of the Scheme
Compounded
Annualized
Returns

MGLF
Returns
(%)
BSE 100
Returns
(%)

Returns for
the last 1 Year
90.54 17.38
Returns for the
last
3 Years
52.81 26.07
Returns for the
last
5 Years
6.99 3.71


Returns since
inception

9.95 5.23
Load Structure Entry Load 2.25% for investment upto and including Rs. 5
Crs, Nil for investments above Rs. 5 Crs;

Exit Load - Nil
Daily Net asset value
(NAV)
Publication
The NAV will be declared on all business days
And will be Published in 2 newspapers.



HDFC Top 200 Fund
Date Period NAV per unit Returns Benchmark
Mar 31, 06 Last 306 days 96.260 16.72 19.74
Jan 31, 06 Last 1 Year 84.599 32.81 35.18
Jan 30, 04 Last 3 Years 39.938 41.08 32.20
Jan 31, 02 Last 10 Years 14.450 50.68 36.97
Jan 31, 97 Last 10 Years 10.175 29.68 17.77
Oct 11, 96 Since inception 10.000 28.89 17.75

RELIANCE VISION FUND
Type of the Scheme An open-ended Equity Growth Scheme
Investment Objective The primary investment objective of the
scheme is to achieve long term growth of
capital by investment in equity and equity
related securities through a research
based investment approach.
Name of the Fund manager Mr. Ashwani Kumar
Benchmark Index BSE 100
Minimum Application amount /
number of units
Resident Indians: Rs. 5,000
Non-Resident Indians: Rs. 5000
Load Structure Entry Load:
For subscription below Rs. 2
Crores2.25%
For Subscription of Rs. 2 Crores
& above but below Rs. 5 Crores & above:
1.25%
For subscription of Rs. 5 Crore &
Above:
Nil
Exit Level: Nil

Compounded Annualized Returns
Period Scheme
Returns %
Benchmark Returns %
Last 1 Year 37.38 17.38
Last 3 Years 64.37 26.08
Last 5 Years 29.07 3.71
Returns Since
Inception
25.57 8.27
CALCULATIONS

Scheme name Alpha Beta R-squared
Standard
Deviation
Sharpe ratio
FIDELITY
SPECIAL
SITUATION
FUND

n/a n/a n/a 9.56 1.23
PRU ICICI
DYNAMIC
FUND
1.75 0.87 0.65 7.00 0.74
HDFC top 200 1.34 0.95 0.84 6.97 0.69
Reliance vision 2.63 0.89 0.72 7.06 0.83
FT Prima fund 2.36 0.81 0.53 7.45 0.71
MAGNUM
GLOBAL
3.26 0.79 0.68 6.47 0.95

A positive alpha implies that a fund has performed better than expected, given its level
of risk. So higher the alpha better are return .In equity diversified funds, SBI Magnum
global has highest alpha of 3.26 followed by Reliance vision and FT prima fund. Fidelity
Special Situation Fund, which is relatively a new fund as compared other funds, has
shown most inconsistent returns since inception. SBI Magnum is showing most
consistent returns and has got a decent Sharpe ratio as compared to other funds, second to
Fidelity Special Situation Fund. When market is rising it is better to invest in the funds
which has beta of greater than one. So if market gives a return of 10%, a beta with 1.2
gives you the return of 12%. But if safety is also important, then it is better to invest in
the fund with the value of beta with less than one. So if market falls then yours fund will
fall less than the market. So beta with greater than one or less than one, both are equally
important for different type of investors. HDFC Top 200 with a beta of 0.95 goes with the
pace of market. The R-squared value shows how reliable the beta number is. It varies
between zero and one. An R-squared value of one indicates perfect correlation with the
index. Thus, an index fund investing in the Sensex should have an R-squared value of
one when compared to the Sensex. For equity diversified funds, an R-squared value
greater than 0.8 is generally accepted to mean that the underlying beta value is reliable
and can be used for the fund. Fidelity Special Situation Fund has the highest sharpe ratio,
but its returns are also inconsistent.So comparing all these funds, SBI Magnum Global-
Growth comes out to be the best fund.
BANK DEPOSITS

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of
India (RBI) with regard to several policy and operational parameters..
The minimum deposit amount varies with each bank. It can range from as low as Rs. 100
to an unlimited amount with some banks. Deposits can be made in multiples of Rs. 100/-
.People who want to take less risk i.e. want some guarantee or security of their atleast
principle amount and interest may vary and also may not be very high prefer to deposit in
banks. Bank deposits are the safest investment after Post office savings because all bank
deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of India. It
is possible to get a loan up to75- 90% of the deposit amount from banks against fixed
deposit receipts.
The basic four types of accounts that can be opened in the bank by an individual are as
follows:
FIXED DEPOSIT: A fixed deposit is meant for those investors who want to deposit a
lump sum of money for a fixed period; say for a minimum period of 15 days to five years
and above, thereby earning a higher rate of interest in return. Investor gets a lump sum
(principal + interest) at the maturity of the deposit.
SAVINGS BANK ACCOUNT: A Saving Bank account (SB account) is meant to promote
the habit of saving among the people. It also facilitates safekeeping of money. In this
scheme fund is allowed to be withdrawn whenever required, without any condition.
Hence a savings account is a safe, convenient and affordable way to save your money.
The minimum amount to open an account in a nationalized bank is Rs 100. If
chequebooks are also issued, the minimum balance of Rs 500 has to be maintained.
However in some private or foreign bank the minimum balance is Rs 500 or more and
can be up Rs. 10,000. One cheque book is issued to a customer at a time.
RECURRING DEPOSIT: The Recurring deposit in Bank is meant for someone who
wants to invest a specific sum of money on a monthly basis for a fixed rate of return. At
the end, you will get the principal sum as well as the interest earned during that period.
The scheme, a systematic way for long term savings, is one of the best investment
options for the low income groups. The minimum investment of Recurring Deposit varies
from bank to bank but usually it begins from Rs 100/-. There is no upper limit in
investing.
CURRENT ACCOUNT: Current account is a running account supporting unlimited
withdrawals and deposits meant for convenience and not to save money. This account is
generally opened by businessman, joint stock companies, institutions, public authorities,
public corporations, and any business which has numerous banking transactions.
A BRIEF SUMMARY ABOUT THE RETURN, TAX BENEFIT AND LIQUIDITY
FEATURES OF BANK DEPOSITS


INSTRUMENT TENURE INTEREST LIMIT ON INVESTMENT
TAX
BENEFIT
LIQUIDITY
Savings account 6 months 3 years
3.5% p.a.,
Half yearly
Minimum balance of
Rs 5000,maximum Rs 50000
NIL
Any time withdrawal
limited to Rs 50000
Fixed Deposits 15 days 10 years
4.5%-6.25%
Monthly,
quarterly, half
yearly
Minimum deposit 10000,
after multiples of 1000
NIL
Withdrawal in
multiples of 1000,
Loan facility
Recurring Deposits 5,7,10 years 5.25-7.5%p.a.
Minimum deposit of Rs 100,
in multiples of 10.
NIL
Liquidity/ loan up to
90% of deposit amt at
cost of 1%.
Current Account No tenure NIL Unlimited deposit NIL Unlimited withdrawal



MUTUAL FUNDS AND BANK DEPOSITS:

Mutual funds are now also competing with commercial banks in the race for retail
investors savings and corporate float money. The power shift towards mutual funds has
become obvious. The coming few years will show that the traditional saving avenues are
losing out in the current scenario. Many investors are realizing that investments in
savings accounts are as good as locking up their deposits in a closet. The fund
mobilization trend by mutual funds in the current year indicates that money is going to
mutual funds in a big way.
India is at the first stage of a revolution that has already peaked in the U.S. The U.S.
boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund
assets are not even 10% of the bank deposits, but this trend is beginning to change. This
is forcing a large number of banks to adopt the concept of narrow banking wherein the
deposits are kept in Gilts and some other assets, which improves liquidity and reduces
risk. The basic fact lies that banks cannot be ignored and they will not close down
completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds
are going to change the way banks do business in the future.




BANKS VS MUTUAL FUNDS

BANKS MUTUAL FUNDS
Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but
improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance
Between 10
th
. & 30th.
Of every month

Everyday
Guarantee Maximum Rs.1 lakh
on Deposits

None
Tax benefits None Available
Lock-in period 3-10 yrs None except tax
Plan i.e. 3yrs












LITERATURE REVIEW


LITERATURE REVIEW

It is a matter of concern for the investing community that so far no active research has
been carried out on the evaluation of performance persistency of Indian mutual funds.
The researcher has made a pioneering attempt to evaluate the performance
persistency of Indian mutual funds. Since mutual funds has made a strong progress
in U.S.A. From 1920 onwards many authors have contributed their thoughts for the
evaluation of such funds. Though there are a few Indian studies which made an
anempt to rank the performance of schemes floated by d~fferent mutual fund
organisations, they have failed to give any definite clues based on strong statistical
significance. And further those stud~es have used data only for a penod of two years or
less. In this context, it is relevant to recall the different notions held by various authors
of research papers pertaining to US mutual funds.
STUDIES ON MUTUAL FUND -THE USA EXPERIENCE
The USA is the pace-setter for the mutual funds industries world wide. The first mutual
fund in the USA, Massachusetts Investors' Trust, was set up in 1924 The US mutual
funds have enjoyed different levels of popularity over the past 30 years Since the mutual
funds movement in India is a relatively recent phenomenon, it will be educative for us to
review the studies made by many researchers from developed countries such as the USA,
the UK and Japan. During the late 60's, mutual funds were a popular investment
choice. But during the 70's investor redemptions were greater than sales. However, in
the 80's net sales of mutual funds made a dramatic comeback. Over this time period
mutual funds have been studied in great detail.
Most of these studies have been concerned with measuring mutual fund performance,
with management's ability to "time" the market, or with management's ability to
select under-priced securities. Studies in these categories include those by Treynor and
Mazuy (1966). Jensen (1968). Kon and Jen (1979). Henriksson and Merton (1981),
Chang and Lewellen (1984), Henriksson (1984), and Jagannathan and Korajczyk
(1986). to name but a few. These studies have generally concluded that mutual fund
managen can not consistently time the market or select under-priced securities. This
has led to the conclusion that long-term individual mutual fund performance can best
be described as random. Very few studies have attempted to explain the flow of money
into and out of mutual funds. The remaining pages of this chapter are devoted to a
revlew of the studies related to this topic.
Harry Markowitz (1952)' prov~des a theory about how investors should select securities
for their investment portfolio given beliefs about future performance. He claims that
rational investors consider higher expected return as good and high variability of
those returns as bad. From this simple construct, he says that the decision rule
should be to diversify among all securities, securities which give the maximum
expected returns. His rule recommends the portfolio with the highest return is not the
one with the lowest variance of returns and that there is a rate at which an investor can
increase return by increasing variance. This is the cornerstone of portfolio theory as we
know it.













OBJECTIVE


OBJECT
1 To know the preference of customer while purchasing
mutual fund.
Ito study the risk level in mutual fund.
To study the preference of customer in investment.

.



DATA ANALYSIS &
INTERPRETATION

ANALYSIS
ANALYSIS


50% respondent are interested to invest in mutual fund and 50% are not.



Respondents Invest in different types of Mutual Funds


96%respondent are interested in equity
4%respondent are interested in debt.
.







Respondent Expect Return from Mutual Funds


4%respondent said that expected return iabelow 10%.
24%respondents said that expected return is 10%-20%.
36%respondent said that expected return is 20%-30%.
36%respondent said that expected return is above 30%.






Respondents view about Return in the Mutual Funds


8% respondent said that returns are low and very low in mutual fund.
16% respondent said that there is intermediate return.
.
20% respondents are said that there ios very high return in mutual fund.
56%respondents are said that there is high return in mutual fund.



8%


Respondents view about Risk in the Mutual Funds


16%respondents said that risk is high and very high in mutual fund.
64%respondents said that intermediate risk is there in mutual fund.
20%respondents said that rik is very low in mutual fund.
SSSSSSSs












FINDING








FINDING






























196% respondent are interested in equity and 4% respondents are interested in debts.
8% respondents said that there is very high and high risk in mutual fund.
69%respondents said that there is intermediate risk and 20%respondents are said that
there is low risk in mutual fund.
50%respondent are interested to invest in mutual fund and 50% are not.
.














RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY

A research methodology is the simple framework or plan for a study that is used as a guide for
conducting research. Research methodology is a way to systematically solve research problem.
It may be understood as a science of studying how research is done scientifically. In research, we
study the various steps that are generally adopted by a researcher in studying his research
problem along with the logic behind them. It is necessary for the researcher to know not only
how to develop certain indices or tests, how to calculate, how to apply particular research
techniques, but they also need to know which of these methods or techniques, are relevant and
which are not and what would they indicate and why.
The research frame for the study is detailed below. It is necessary to explain the methodology
for the research work done. The purpose of research is to discover the answers to question
through some specific procedure. The aim of research is to find out the truth which is hidden or
which has not been discovered as yet.

RESEARCH DESIGN

A research design is a framework or blueprint for conducting the marketing research project. It
details the procedures necessary for obtaining the required information and its purpose is to design
the study. The objective of the study gives a clear indication about the nature of the study. The
study is concerned with the analysis of non- banking financial corporations.
The research project commenced with exploratory research to obtain a deeper in sight of problem
in hand. The exploratory research design was particularly helpful in breaking broad and vague
statements into smaller and more specific ones.
After the exploratory research was completed a Questionnaire was prepared to generate
information about credit schemes and then these schemes were compared. As regards to the study
of profitability, ratios were calculated and analyzed.
DATA COLLECTION
Two types of data are required for the purpose of a descriptive research
Primary
Secondary
Both primary and secondary data will be collected for meeting the objectives of research using the
following methods
Primary Data
For collecting primary data personal interviews were conducted. An unbiased, undisguised and
structured questionnaire was prepared. It was done to study and compare credit schemes.
Secondary Data
For the purpose of collecting secondary data, a perusal of secondary sources of information, for example
annual reports, web sites, brochures etc were used.
SAMPLE DESIGN
The population for the study is spread over a large geographical area and also due to time constraint,
obtaining information about all the Karvy was not possible.
POPULATION
Karvy operating in whole India who deals in Mutual fund & shares
SAMPLING TECHNIQUE
These respondents were selected on the basis of convenience of the researcher. Thus, the non-
probability sampling technique that is convenience sampling will be used.
TOOLS USED
Ratio analysis was used for the purpose of examining profitability. Some of the profitability ratios are:-
1. Return On Share Holders Investment Or Net Worth Ratio (ROI):
It is a relationship between net profits (after interest and taxes) and proprietors funds. Share
holders funds include equity share capital, preference share capital, free reserves such as share
premium, revenue reserve, capital reserve, retained earnings and surplus, less accumulated losses, if
any.
ROI - Net Profits (after interest and taxes)
Share holders Funds
2. Return On Equity Capital
Ordinary share holders are the real owners of the company. They undertake the highest risk. The
rate of dividend varies with the availability of profits in case of equity share holders only. So they are
more interested in profitability of the company and the performance of the company is judged on
the basis of return on equity capital of the company.

ROE - Net Profit after Tax- Preference Dividend
Equity Share Capital (Paid Up)
3. Earning Per Share
Earning per Share is a small variation of return on equity capital and is calculated by dividing the net
profit after taxes and preference dividend by the total number of equity shares. It gives us a view of
comparative earnings or earning power of a firm.
According to accounting standard 20, if a company issues new share with in a financial year its
earning per share will be calculated by the formula:

EPS - Net Profit after Tax- Preference Dividend
Weighted avg. no. of shares outstanding

If a company does not issue shares in its financial year, its earning per share would be calculated
by the formula:

EPS - Net Profit after Tax- Preference Dividend
No. of Equity Shares












LIMITIONS

LIMITIONS

The primary limitation was the small size of customers. It was too
small size to draw valid & statistically verifiable conclusion about the
universe
Respondents did not had time to give all replies
I got less opportunity to go to market as compare to sit in office.
I have covered those respondents who are educate & having
reasonable income; so my study is related to some specific categories
of societies.; which can not depict views regarding all categories.









SUGGESTIONS





SUGGESTIONS
The people do not want to take risk. The AMC should launch more diversified funds
so that the risk becomes minimum. This will lure more and more people to invest in
mutual funds.
The expectation of the people from the mutual funds is high. So, the portfolio of the
fund should be prepared taking into consideration the expectations of the people.
Most of the people do not have knowledge of mutual funds. So, proper awareness of
mutual funds should be spread through effective communication channels like print
media, television


















REFERENCES

REFERENCES
PRIMARY SOURCES
Questionnaire
Tele Calling and personal visits
SECONDARY SOURCES
The secondary source of the proposed study would be the
Articles on the particular subjects of mutual funds,
AMFI STUDY MATERIAL
RelateInternetsite.www.amfiindia.com www.moneycontrol.com,www.karvy.com
www.mutual fundsindia.com
www.valueresearch online.com






ANNEXURE


ANNEXURE
Ques 1 Do you have knowledge of what a mutual fund is?
Yes No
Ques 2 If no then are you interested in investing in mutual fund?
Yes No
Ques 3 If yes, then are you satisfied with the returns?
Yes No
Ques 4 What are the expected returns from mutual funds ?
Below 10% B/w 10 to 20%
B/w 20 to 30% Above 30%
Ques 5 What are your views on the actual returns of the mutual fund?
Very high High
Intermediate Low
Very Low

Ques 6 What are your views regarding the risks involved in mutual funds?
Very high High
Intermediate Low
Very low
Ques 7 What are your views regarding the cost of mutual fund?
Very high High
Intermediate Low
Very low
Ques 8 In which of the following would you like to invest?
Fixed Deposits Mutual Funds
Post Office Saving Schemes ULIP


A
Research Report
ON

Distribution & Comparison of Mutual Fund

Submitted to
Kurukshetra University, Kurukshetra in partial
fulfilment for the degree of Master of Business
Administration (Session 2010-2012)
Under the supervision of:- Submitted By:-
Mr. Atul Garg Neha Madan
Faculty MBA Roll no. 1126
S.D.I.M.T. MBA-final.
Univ. Roll



S. D INSTITUTE OF MANAGEMENT & TECHNOLOGY
Huda Road, Jagadhri 135003 (Yamuna Nagar) Haryana
Affiliated To
KURUKSHETRA UNIVERSITY, KURUKSHETRA

ACKNOWLEDGEMENT

In this world of cut throat competition my project report is a combination of both theoretical as
well as practical efforts.
Distribution & Comparison of Mutual Fund
I thank almighty god to give me strength to work sincerely during the course of the project.
I express my sincere gratitude to Dr. Shelly Gupta (Director) without whose guidance, keen
interest and regular encouragement my project would not have been compiled. Im also
thankful to Dr. Shilpa Jain (HOD-MBA, SDIMT ) for his inspiration and helpful attitude. I would
also like to grab the opportunity to thank Mr. Atul Garg for his helping hand in the compilation
of the report.
Last but not the least I would like to thank my parents for their support.

(Neha Madaan)


TABLE OF CONTENTS
CONTENTS

Page No
Declaration
Acknowledgement
Executive summary
Introduction to NBFCs
Industry profile
Company Profile
Review of Literature
Research Methodology
Findings & Analysis
Recommendations &
Conclusions
Bibliography
Annexure

ABSTRACT
A Mutual Fund is a trust that pools the savings of a number of investors who
share common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them
There are three major asset classes where money can be put in, namely EQUITIES, FIXED
INCOME AND MONEY MARKET INSTRUMENTS. In order to decide how much of the money
goes into which investment class first few important factors.
Distribution and comparison of mutual funds: The objective of the project is to generate
new business by attracting new investors and maintaining the existing investors/clients
and to recommend on the type of investment depending upon the various objectives of
investment and resources available as on parameters of risk, return and liquidity,In order
to generate new business for the company the methodology being followed is tele calling,
cold calling and direct marketing. For generating new leads I am doing tele calling on the
data provided by the company guide. For generating new business I have already visited
PUDA, NABARD, UDYOG BHAVAN, IOC, SIDBI and GAIL. In order to compare the
various mutual funds I have selected some of the mutual funds as due to time constraint it
is not possible to cover every mutual fund. Mutual funds can be compared on the basis of
mutual fund family and category. The basis of the comparison is ALPHA, BETA, PE
RATIO etc. Mutual funds are also compared with other products like banks
deposits,ULIP and post office saving schemes .