Abstract

Over the past decades mutual funds have grown intensely in popularity and have
experienced a considerable growth rate. Mutual funds are popular because they make it
easy for small investors to invest their money in a diversified pool of securities. As the
mutual fund industry has evolved over the years, there have arisen many questions about
the nature of operations. This Report on Mutual Funds provides an in-depth coverage of
the mutual fund industry and its operations in an interactive format. It is intended ot
familiarize with the basic concepts related to mutual funds. The Report first provides the
fundamentals, explaining what mutual funds are and how they work. Recent trends in
Mutual funds have also been shown. Data Analysis of Indian Large-Cap Mutual fund
market has been done to give a comparative analysis of the top 6 funds in the category.
Various factors surrounding the performance of these mutual funds are then highlighted
along with a brief of various applications. Finally, the report depicts the conclusion.

CHAPTER I
INTRODUCTION

I.INTRODUCTION
Mutual funds basically pool money from many investors and invest that money in shares,
bonds, money market instruments, commodities like gold, among other things. In this
article lets continue from there and see the various benefits that mutual funds have to
offer. I will list the various benefits as points so that it would be easy for you to follow.
1) Professional Management
First and foremost, as I said in the previous article, mutual funds are managed by a
professional money manager so you can basically find some comfort in knowing that
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whoever is managing your money is a professional and knows what he is doing. The
manager does research with due diligence and only then makes a decision whether it be to
buy/sell shares in a company or to invest in corporate bonds of a company or be it to
invest in government bonds or to just sit tight in cash.
2) Diversification (Depends of the type of Mutual Fund)
Typically mutual funds dont invest all their money into one stock or bond. They rather
diversify by buying shares, bonds etc of various fundamentally strong companies. As a
rule of thumb, diversification helps to decrease the risk. The more diversified the
investment portfolio the less risky it is. However though all mutual funds diversify their
investments to some extent the degree of diversification varies a lot and depends on the
objectives of the mutual fund.
Imagine you invest in a sectoral mutual fund which focuses say, on the banking sector
(that is the fund comprises of shares of various banks) while there is diversification in the
sense that the fund comprises of investments in many banks the diversification is
somewhat misleading. If there were to be some problem in the economy, say as the
ongoing European sovereign debt crisis or the previous sub-prime mortgage crisis, all the
banks are more or less affected and the mutual funds NAV decreases even though its
diversified.
3) Lower Costs (Again Mutual Fund specific)
Imagine you wanted to diversify your investment and hence planned to buy shares of the
top 30 to 50 companies in your country. (Say like the Dow Jones Industrial Average in the
US or the Nifty/Sensex in India). How would you go about doing that? It would be quite
expensive and would require a large outflow of money.
However mutual funds make that easy. By spending just $50 (or say Rs 100 in India) you
can get the benefits of diversifying in 30-50 companies by investing in index funds.
It must be noted here that actively managed funds cost a lot more than passive index
funds and might actually be detrimental to you. (More on that in the next article on
disadvantages of mutual funds)
4) Convenience

Investing in shares via mutual funds is also very convenient as you dont have to worry
about various corporate actions like stock splits, bonuses, warrants, options, mergers,
dividends etc. You also dont need to keep track of individual shares in the fund as the
fund manager does that for you. You are only required to keep track of your funds NAV
periodically.
4) Transparent and Well regulated
Mutual funds, unlike hedge funds are required to be transparent and are regulated by the
SEC (in the US) and SEBI (in India). In other words, you can know in what way & how
much proportion of your money is being invested by getting regular letters from the
mutual fund itself. If you dont feel satisfied with any of the changes the fund may have
made you can simply exit that fund and invest in another one.
5) Liquid assets
Most mutual funds especially the equity oriented funds dont require a lock-in period and
hence are liquid. (lock-in period refers to the time period during which investors are not
allowed or are penalised for redeeming/selling their shares in the fund) Some debt
oriented funds & tax saving funds may require a lock-in such as say 6 months to one year
or more. This is because fund managers require some time to put the money to work
(especially if they had invested in illiquid assets).
6) Variety of funds
There is no shortage of variety in mutual funds. There are lots of types of mutual funds
(which I will discuss in the coming articles) to suit pretty much any investors need.
7) Returns
The bottom line of any investment is the returns. The mutual funds returns depend on
which asset class it invests in. Typically equity based funds give higher returns but are
more risky. Corporate debt funds are less riskier than equity but more risky than Gilt
funds and money-market funds. As a general rule of thumb, the more the returns expected
from the fund the more risky the investment is.
8) SIP

SIP stands for systematic investment plan. Its a wonderful method of investing in mutual
funds in which you set aside a portion of money and invest it systematically at regular
intervals. (Say once a month) This form of investing holds many benefits and is a whole
topic altogether which I will be dealing with in later articles. Most mutual funds have an
SIP option in which instead of investing lump-sum at one go you can invest slowly and
regularly. Its a very effective way of utilizing mutual funds.

LITERATURE
5

REVIEW

LITERATURE REVIEW
INTRODUCTION OF MUTUAL FUNDS
Mutual funds are financial intermediaries, which collect the savings of investors and
invest them in a large and well-diversified portfolio of securities such as money market
instruments, corporate and government bonds and equity shares of joint stock companies.
A mutual fund is a pool of common funds invested by different investors, who have no
contact with each other.

Mutual funds are conceived as institutions for providing small investors with avenues of
investments in the capital market. Since small investors generally do not have adequate
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time, knowledge, experience and resources for directly accessing the capital market, they
have to rely on an intermediary, which undertakes informed investment decisions and
provides consequential benefits of professional expertise. The advantages for the
investors are reduction in risk, expert professional management, diversified portfolios,
and liquidity of investment and tax benefits. By pooling their assets through mutual
funds, investors achieve economies of scale. The interests of the investors are protected
by the Securities & Exchange Board of India, which acts as a watchdog. Mutual funds are
governed by the SEBI (Mutual Funds) Regulations, 1993.
These funds can survive and thrive only if they can live up to the hopes and trusts of their
individual members. Constraints faced by the investors while making direct investments:
Limited resources in the hands of investors quite often take them away from stock market
transactions.
Lack of funds forbids investors to have a balanced and diversified portfolio.
Lack of professional knowledge associated with investment business restrains investors to
operate gainfully in the market. Small investors can hardly afford to have ex-pensive
investment consultations.
To buy shares, investors have to engage share brokers who are the members of stock
exchange and have to pay their brokerage.
They hardly have access to price sensitive information in time.
It is difficult for them to know the development taking place in share market and
corporate sector.
Firm allotments are not possible for small investors when there is a trend of over
subscription to public issues.

Mutual Fund Structure

The structure consists of:

Sponsor:

The sponsors initiate the idea to set up a mutual fund. It could be a registered
company, scheduled bank or financial institution. A sponsor has to satisfy certain
conditions, such as capital, record (at least five years operation in financial services),
default free dealings and general reputation of fairness. The sponsors appoint the
trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a
stakeholder. Sponsor must contribute at least 40% of the net worth of the Investment
Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not
responsible or liable for any loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund
Trust/ Board of Trustees:
The Mutual Fund is constituted as a trust in accordance with the provisions of the
Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian
Registration Act, 1908. Trustees hold a fiduciary responsibility towards unit holders by
protecting their interests. Trustees float and market schemes, and secure necessary
approvals. They check if the AMCs investments are within well-defined limits, whether
the funds assets are protected, and also ensure that unit holders get their due returns.
They also review any due diligence by the AMC. For major decisions concerning the
fund, they have to take the unit holders consent. They submit reports every six months
to SEBI; investors get an annual report. Trustees are paid annually out of the funds
assets 0.5 percent of the weekly net asset value. They carry the crucial responsibility
of safeguarding the interest of investors. They have wide ranging powers and they can
even dismiss Asset Management Companies with approval of the SEBI.
Fund Managers/ AMC:
The AMC actually manages the funds of the various schemes. The AMC employs a
large number of professionals to carry out research. The AMC submits a quarterly
report on the functioning of the mutual fund to the trustees who will guide and control
the AMC. A Funds AMC can neither act for any other fund nor undertake any
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business other than asset management. Its net worth should not fall below Rs.10crore.
And, its fee should not exceed 1.25 percent if collections are below Rs.100crore and 1
percent if collections are above Rs.100crore.
Registrar or Transfer agent:
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent
to the Mutual Fund. The Registrar processes the application form; redemption requests
and dispatches account statements to the unit holders. The Registrar and Transfer
agent also handles communications with investors and updates investor records
Custodian:
Often as an independent organization, it takes custody of securities and other assets of
mutual fund. Its responsibilities include receipt and delivery of securities, collecting
income-distributing dividends, safe keeping of the units and segregating assets and
settlements between schemes. Their charges range between 0.15-0.2 percent of the net
value of the holding.

Advantages of Mutual Funds

a)Channelizing savings for investment
Mutual funds act as a vehicle in galvanizing the savings of the people by offering
various schemes suitable to the various classes of customers for the development of the
economy as a whole. A number of schemes are being offered by mutual funds so as to
meet the varied requirements of the masses, and thus savings are directed towards
capital investments directly. In the absence of mutual funds, these savings would have
remained idle. Thus, the whole economy benefits due to cost efficient and optimum use
and allocation of scarce financial resources in the economy.

b)Offering wide Portfolio investment

Small and medium investors used to burn their fingers in the stock exchange
operations with a relatively modest outlay. If they invest in a few selected shares, some
maysink without a trace to never rise again. Now, these investors can enjoy the wide
portfolio of the investment held by the mutual fund.
The fund diversifies its risks by investing in large varieties of shares and bonds which
cannot be done by small and medium investors. This is in accordance with the maxim
not to lay all eggs in one basket. These funds have large amounts at their disposal,
and so, they carry a clout in respect of stock exchange transactions. They are in a
position to a have a balanced portfolio which is free from risks.
c)Offering Tax benefits
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Certain funds offer tax benefits to its customers. Thus, apart from the dividends,
interest & capital

apperciation, investors also stand to get the benefit of tax

concession.
d)Providing greater Affordability and Liquidity
Even a very small investor can afford to invest in Mutual fund. They provide an
attractive and cost effective alternative for direct purchase of shares. In the absence
of mutual funds, small investors cannot even think of participating in a number of
investments with such a meagre sum. Units can be sold to the fund at any time at net
asset value and thus quicker access to the liquid cash is assured. Branches of
sponsoring bank are always ready to provide loan facility against the unit certificates.
e)Professional Management
Mutual Funds provides the services of experienced and skilled professionals backed by
a dedicated investment research team that analyses the performance and prospects of
the companies and selects suitable investments to achieve the objectives of the scheme.
f)Diversification
Mutual Funds invest in number of companies across a broad cross-section of
industries and sectors. This diversification reduces the risk because seldom do all
stocks decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far lesser money than you can do on your
own.
g)Low Costs
Mutual Funds are relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and other
fees translate into lower costs for investors.

Disadvantages of Mutual Funds

Disadvantage 1: Mutual Funds Have Hidden Fees
If fees were hidden, those fees would certainly be on the list of disadvantages of mutual
funds. The hidden fees are lamented are properly referred to as 12b-1 fees. While these
12b-1 fees are no fun to pay, they are not hidden. The fee is disclosed in the mutual fund
prospectus and can be found on the mutual funds web sites. Many mutual funds do not
charge a 12b-1 fee. If you find the 12b-1 fee onerous, invest in a mutual fund that does
not charge the fee. Hidden fees cannot make the list of disadvantages of mutual funds
because they are not hidden and there are thousands of mutual funds that do not charge
12b-1 fees.

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 Disadvantage 2: Mutual Funds Lack Liquidity

How fast can you get your money if you sell a mutual fund as compared to ETFs
stocks and closed-end funds? If you sell a mutual fund, you have access to your cash the
day after the sale. ETFs, stocks and closed-end funds require you to wait three days after
you sell the investment. I would call the lack of liquidity disadvantage of mutual funds
a myth. You can only find more liquidity if you invest in your mattress.
Disadvantage 3: Mutual Funds Have High Sales Charges
Should a sales charge be included in the disadvantages of mutual funds list? Its difficult
to justify paying a sales charge when you have a plethora of no-load mutual funds. But
then again, its difficult to say that a sales charge is a disadvantage of mutual funds when
you have thousands of mutual fund options that do not have sales charges. Sales charges
are too broad to be included on my list of disadvantages of mutual funds.

Disadvantage 4: Mutual Funds and Poor Trade Execution

If you buy or sell a mutual fund, the transaction will take place at the close of the market
regardless of the time you entered the order to buy or sell the mutual fund.
I find the trading of mutual funds to be a simple, stress-free feature of the investment
structure. However, many advocates and purveyors of ERFs will point out that you can
trade throughout the day with ETFs. If you decide to invest in ETFs over mutual funds
because your order can be filled at 3:50 pm EST with ETFs rather than receive prices as
of 4:00 pm EST with mutual funds, I recommend that you sign up for the Stress
Management Weekly Newsletter at About.com.
Disadvantage 5: All Mutual Funds Have High Capital Gains Distributions
If all mutual funds sell holdings and pass the capital gains on to investors as a taxable
event, then we have a found a winner for the list disadvantages of mutual funds list. Oh
well, not all mutual funds make annual capital gains distributions

Marketing Strategies Adopted by the Mutual Funds

The present marketing strategies of mutual funds can be divided into three main headings:
1. Direct Marketing
This constitutes 20 percent of the total sales of mutual funds. Some of the
important tools used in this type of selling are

11

Personal Selling: In this case the customer support officer or the Relationship Manager
of the fund at a particular branch fixes an appointment with the potential prospect. Once
the appointment is fixed, the branch officer also called Business Development Associate
(BDA) in some funds, then meets the prospect and gives him all the details about various
schemes being offered by his fund. The conversion rate in this mode of selling is in
between 30%- 40%.
Telemarketing: In this case the emphasis is to inform the people about the fund. Some
fund houses have their database of investors and they cross sell their other products.
Sometimes people belonging to a particular profession are also contacted through phone
and are then informed about the fund. Generally the conversion rate in this form of
marketing is 15% - 20%.
Direct mail: This one of the most common method followed by all Mutual Funds.
Addresses of people are picked at random from telephone directory, business directory,
professional directory etc. The customer support officer (CSO) then mails the literature of
the schemes offered by the fund. The follow up starts after 3 4 days of mailing the
literature. The CSO calls on the people to whom the literature was mailed. He answers to
their queries and is generally successful in taking appointments with those people. It is
then the job of BDA to try his best to convert that prospect into a customer.
Advertisements in newspapers and magazines: Mutual funds regularly advertise in
business newspapers and magazines and also in leading national dailies. The purpose is to
keep the investors aware about the schemes offered by the fund and their performance in
recent past.
Advertisement in TV/FM Channel: Mutual funds are aggressively giving their
advertisements in TV and FM Channels to promote their funds.
Hoardings and Banners: In this case the hoardings and banners of the fund are put at
important locations of the city where the movement of the people is very high. The
hoarding and banner generally contains information either about one particular scheme or
brief information about all the schemes of the Mutual fund.

2. Selling through intermediaries

Intermediaries contribute towards 80% of the total sales of Mutual Funds. These are the
people/ distributors who are in direct touch with the investors. They perform an important
role in attracting new customers. Most of these intermediaries are also involved in selling
shares and other investment instruments. A lot depends on the after sale services offered
by the intermediary to the customer. Customers prefer to work with those intermediaries
who give them right information about the fund and keep them abreast with the latest
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changes taking place in the market especially if they have any bearing on the fund in
which they have invested.
Regular Meetings with distributors: Most of the mutual funds conduct monthly/bimonthly meetings with their distributors. The objective is to hear their complaints
regarding service aspects from funds side and other queries related to the market
situation. Sometimes, special training programs are also conducted for the new agents/
distributors. Training involves giving details about the products of the fund, their present
performance in the market, what the competitors are doing and what they can do to
increase the sales of the fund.

3. Joint Calls : This is generally done when the prospect seems to be a high net worth
(HNI) investor. The BDA and the agent (who is located close to the HNIs residence or
area of operation) together visit the prospect and brief him about the fund. The conversion
rate is very high in this situation, generally, around 60%. Both the fund and the agent
provide after sale services in this particular case.
Meetings with HNIs: This is a special feature of all the funds. Whenever a top official
visits a particular branch office, he devotes at least one to two hours in meeting with the
HNIs of that particular area. This generally develops a faith among the HNIs towards the
fund.

Market Research
Investment in mutual fund is not a one-time activity. It is a continuous activity. The same
investor, if satisfied, will come to the fund again and again. When the investor sends his
application, it is not only an application but it also contains vital information. Most of this
information, if tabulated and analyzed, would provide important insights into investor
needs, preferences and behavior and enables us to target customers need more accurately
to achieve better penetration, deeper loyalty and reduced costs. It is in this context that
direct marketing will assume increased importance. Knowing the customer thoroughly is
of utmost importance. Unlike the consumer goods industry, it is not possible for mutual
fund industry to test market and have pilot projects before launch. At the same time,
focusing and concentrating on a particular geographic area where the fund has a strong
presence and proven marketing network can help reduce issue expenses and ultimately
translate into higher returns for the investor. Very little research on investor preference is
available but the industry can collectively have a data bank and share the information for
appropriate use
.

Market Segmentation
13

Different segments of the market have different risk-return criteria, on the basis of which
they take investment decisions. Not only that, in a particular segment also there could be
different sub-segments asking for different risk-return attributes, and differential
preference for various investments attributes of financial product.
Different investment attributes an investor expects in a financial product are:Liquidity,
Capital appreciation,
Safety of principal,
Tax treatment,
Dividend or interest income,
Regulatory restrictions,
Time period for investment, etc.
On the basis of these attributes the mutual fund market may be broadly segmented into
five main segments as under.
1) Retail Segment:
This segment characterizes large number of participants but low individual volumes. It
consists of individuals, Hindu Undivided Families and firms. It may be further subdivided into:
I. Salaried class people;
ii. Retired people;
iii. Businessmen and firms having occasional surpluses;
iv. HUFs for long term investment purpose.
These may be further classified on the basis of their income levels. It has been observed
that prospects in different classes of income levels have different patterns of preferences
of investment. Similarly, the strategies for tapping this segment would differ on the basis
of differential life style, value and ethics, social environment, media habits, and nature of
work. Broadly, this class requires security of the principal, liquidity, and regular income
more than the capital appreciation. It lacks specialized investment skills in financial
markets and is highly susceptible to mob behavior. The marketing strategy involving
indirect selling through agency network and creating awareness through appropriate
media would be more effective in this segment.
2) Institutional Segment:
This segment characterizes less number of participants, and large individual volumes. It
consists of banks, public sector units, financial institutions, foreign institutional investors,
14

insurance corporations, provident and pension funds. This class normally looks for more
specialized professional investment skills of the fund managers and expects a structured
product rather than a ready-made product. The tax features and regulatory restrictions are
the vital considerations in their investment decisions. Each class of participants, such as
banks, provides a niche to the fund managers in this segment. It requires more of a
personalized and direct marketing to sustain and increase volumes.
3) Trusts:
This is a highly regulated, high volumes segment. It consists of various types of trusts,
namely, charitable trusts, religious trust, educational trust, family trust, social trust, etc.
each with different objectives. Its basic investment need would be safety of the principal,
regular income and hedge against inflation rather than liquidity and capital appreciation.
This class offers vast potential to the fund managers if the regulators relax guidelines and
allow the trusts to invest freely in the mutual funds.
4) Non-Resident Indians:
This segment consists of very risk sensitive participants, at times referred as fair weather
friends. They need the highest cover against political and exchange risk. They normally
prefer easy exit with repatriation of income and principal. They also hold a strategic
importance as they bring in crucial foreign exchange a crucial input for developing
country like ours. Marketing to this segment requires special kind of products depending
upon the provisions of tax treaties. A range of suitable products are required to be
designed to divert the funds flowing into bank accounts.
5) Corporates:
Generally, the investment need of this segment is to park their occasional surplus funds
that earn return more than what they have to pay on account of
them. Alternatively, they also get surplus fund due to the seasonality of the business
which typically become due for the payment within a year or quarter or even a month.
They need short term parking place for their fund. This segment offers a vast potential to
specialized money market managers. Given the relaxation in the regulatory guidelines,
fund managers are expected to design products to this segment.
Thus, each segment and sub-segment has their own risk return preferences forming niches
in the market. Mutual fund managers have to analyze in detail the intrinsic needs of the
prospects and design a variety of suitable products for them. Not only that the products
are also required to be marketed through appropriately different marketing strategies.

Classification of Mutual Fund Schemes

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Every mutual fund has an objective of earning income for the investors and/ or
getting increased value of their investments. To achieve these objectives, mutual
funds adopt different strategies and accordingly offer different schemes of
investments. On this basis the simplest way to categorize these schemes would be to
group them into two broad classifications:1. Operational Classification
(a) Open Ended Schemes:

As the name implies the size of the scheme (Fund) is open

i.e., not specified or pre-determined. It implies that the capitalization of the fund is
constantly changing as investors sell or buy their shares. Further, the shares or units
are normally not traded on the stock exchange but are repurchased by the fund at
announced rates. Open-ended schemes have comparatively better liquidity despite the
fact that they are not listed. The reason is that the investors can at any time approach
the mutual fund for sale of such units. Moreover, the realizable amount is certain since
repurchase is at a price based on the declared net asset value (NAV). No minute to
minute fluctuations in rates haunt the investors. The portfolio mix of such schemes has
to be the investments, which are actively traded in the market. Otherwise, it will not be
possible to calculate NAV. This is the reason that generally open-ended schemes are
equity based. Moreover, open-ended schemes hardly have in their portfolio, shares of
comparatively new and smaller companies since they are not generally traded. In such
funds, option to reinvest its dividend is also available. Since there is always a possibility
of withdrawals, the management of such funds becomes more tedious as managers
have to work from crisis to crisis. Crisis may be on two fronts; one is that unexpected
withdrawals require funds to maintain a high level of available cash every time. Fund
managers have to face questions like what to sell. He could very well have to sell his
most liquid assets. Second, by virtue of this situation such funds may fail to grab
favorable opportunities. Further, to match quick cash payments, funds cannot have
matching realization from their portfolio due to intricacies of the stock market. Thus,
the success of the open-ended schemes to a greater extent depends on the efficiency of
the capital market and the selection and quality of the portfolio.
(b) Close Ended Schemes: Such schemes have a definite period after which their shares/
units are redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e.,
their corpus normally do not change throughout the life period. Close ended fund units
trade among the investors in the secondary market since these are to be quoted on the
stock exchanges. Their price is determined on the basis of demand and supply in the
market. Their liquidity depends on the efficiency and understanding of the engaged
16

broker. Their price is free to deviate from NAV, i.e., there is every possibility that the
market price may be above or below its NAV. If one takes into account the issue
expenses, conceptually close ended fund units cannot be traded at a premium or over
NAV because the price of the package of investments cannot exceed the sum of the prices
of the investments constituting the package. Premium, if any, exists, would be on the
account of speculative activities. In India as per SEBI (MF) Regulations, every mutual
fund is free to launch any or both types of schemes.
2. Portfolio Classification of Fund: following are the portfolio classification of funds,
which may be offered. This classification may be on the basis of (a) Return, (b)
Investment Pattern, (c) Specialized sector of investment, (d) Leverage and (e) Others.
(a) Return based classification:
To meet the diversified needs of the investors, the mutual fund schemes are made to
enjoy a good return. Returns expected are in form of regular dividends or capital
appreciation or a combination of both.
I. Income Funds: For investors who are more curious for returns, Income funds are
floated. Their objective is to maximize current income. Such funds distribute periodically
the income earned by them. These funds can further be splitted up into categories: those
that stress constant income at relatively low risk and those that attempt to achieve
maximum income possible, even with the use of leverage. Obviously, the higher the
expected returns, the higher the potential risk of the investment.
ii. Growth Funds: Such funds aim to achieve increase in the value of the underlying
investments through capital appreciation. Such funds invest in growth oriented securities
which can appreciate through the expansion facilities in long run. An investor who selects
such funds should be able to assume a risk higher than the normal degree of risk.
iii. Conservative Funds: The fund with a philosophy of all things to all issue, offer a
document announcing objectives as: (I) To provide a reasonable rate of return, (ii) To
protect the value of investment and, (iii) To achieve capital appreciation consistent with
the fulfillment of the first two objectives. Such funds which offer a blend of immediate
average return and reasonable capital appreciation are known as middle of the road
funds. Such funds have been most popular and appeal to the investors who want both
growth and income.
(b) Investment Based Classification:
Mutual funds may also be classified on the basis of securities in which they invest.
Basically, it is renaming the subcategories of return based classification.

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I. Equity Fund: Such funds, as the name implies, invest most of their investable shares in
the equity shares of the companies and undertake the risk associated with the investment
in equity shares. Such funds are clearly expected to out do the other funds in rising
market because they have almost all their capital in equity. Equity funds again can be of
different categories varying from those that invest exclusively in high quality blue chip
companies to those that invest solely in the new, unestablished companies. The strength of
these funds is the expected capital appreciation. Naturally, they have a higher degree of
risk.
ii. Bond Funds: Such funds have their portfolio consisting of bonds, debentures, etc. This
type of fund is expected to be very secure with a steady income and little or no chance of
capital appreciation. Obviously risk is low in such funds. In this category we may come
across the funds called Liquid Funds which specialize in investing short-term money
market instruments. The emphasis is on liquidity and is associated with lower risks and
low returns.
iii. Balanced Fund: The funds, which have in their portfolio a reasonable mix of equity
and bonds, are known as balanced funds. Such funds will put more emphasis on equity
share investments when the outlook is bright and will tend to switch over to debentures
when the future is expected to be poor for shares.
(c) Sector Based Funds:
There are number of funds that invest in a specified sector of an economy. While such
funds do have the disadvantage of low diversification by putting their all eggs in one
basket, the policy of specializing has an advantage of the fund managers developing an
intensive knowledge of the specific sector in which they are investing. Sector based funds
are aggressive growth funds which make investments on the basis of assessed bright
future for a particular sector.

Other Schemes
Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax Act, 1961. Investments made in Equity Linked Savings Schemes (ELSS) and
Pension Schemes are allowed as deduction u/s 80C of the Income Tax Act, 1961.
The Act also provides opportunities to investors to save capital gains under the provisions
of section 54 of the Income Tax Act, 1961 by investing in Mutual Funds.

Special Schemes:
(a)Industry Specific Schemes:

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Industry Specific Schemes invest only in the industries specified in the offer
document. The investments of these funds are limited to the specific industries like
InfoTech, FMCG, Pharmaceuticals, etc.
(b)Index Schemes: Index Funds attempt to replicate the performance of a

particular index

such as the BSE Senses or the NSE 50

Research Gaps
1. In the world of globalization where money moves from one place to another, an
investor has number of investment opportunities.
2. Every investor is looking at high return yet at a low risk. Capital markets are an
avenue for the investors to park their funds. But trading in capital market requires
good experience and tracking the changes.
3. Mutual fund acts on behalf on investor [i.e. buying and selling of securities in the
capital market]. Mutual fund basically offers different types of schemes to suit the
investor requirement. Asset Management Company generally handles the funds
and designs a portfolio for it.
4. Equity funds are generally prone to high risk. These also offer high rate of return,
over a long period of time.
5. Since growth rate in equity share price is expected to follow the profitability of the
company and the investors should be able to withstand the risk.
6. This study is undertaken to evaluate the risk involved and the return earned by the
funds over a period of time.

OBJECTIVES OF THE STUDY

To determine the best performing mutual fund company.
To compare the NAvs of the selected secutirites
To compare investment pattern of the three funds.
19

To understand each company performance based on their NAVs.

To examine which fund is better to invest from these there securities

HYPOTHESIS

SCOPE OF THE STUDY

The scope of the project includes acquiring knowledge about the mutual funds industry.
As a whole this included the detailed study of mutual funds, their types, benefits, and
present scenario, equities as a part of mutual fund, the risk and return relationship related
to the investment avenues.
It has provided an opportunity to apply the financial planning process in practice and
recommend ting financial strategies to investors.
It enabled to create awareness among the investors and it also helps investors in
understanding the risk and return in the fund investing, recommending model portfolios
and selecting the right fund.
Period of the study
The period of the Research study is 45 days
20

LIMITATIONS OF THE STUDY

The study is conducted in short period due to which the study may not be detailed in all

aspects.
The study is limited due to non availability of analytical software.
Limited sample data has been used to analyze the fund performance.
Analysis of one index based fund across the three companies
The study is based on the secondary data available from monthly fact sheets, web sites,
offer documents, magazines and newspapers etc. as primary data was not accessible

METHODOLOGY
Methodology Data collection methods
The study is based on both primary and secondary data and examines the availability
of bank deposits v/s mutual funds. The results are drawn mainly from the secondary and
primary data collected.
Primary Data
Primary data has been collected from the interaction with the officials of the
company
Secondary Data
Secondary data has been collected from the various sources such as
Publications of the company, Business magazines, Journals, text books, Web sites
and Annual reports
In order to gain information on current practices and problems, the area chosen
for study are the emerging and competitive companies in and around Hyderabad city.

21

CHAPTER II
INDUSTRY PROFILE
COMPANY PROFILE

22

INDUSTRY PROFILE
STOCK EXCHANGE
HISTORY:
The only stock exchange operating in the 19 th century was Bombay Stock
Exchange set up in 1875 and Ahmadabad set up in 1894. There were organized as
voluntary non-profit making association of brokers to regulate and protect their interests.
Before the control on securities trading became a central subject under the constitution in
1950, it was a state subject and the Bombay securities contracts (control) Act if 1925 used
to regulate trading in securities. Under this Act, the Bombay Stock Exchange was
recognized in 1927 and Ahmadabad in 1937. During the war boom, a number of stock
exchanges were organized even in Bombay, Ahmadabad and other centers, but they were
not recognized. Soon after it became a central subject, central legislation was proposed
and a committee headed by A.D. Gorwala went into the bill for securities regulation. On
the basis of the committees recommendations and public discussion, the securities
contracts (regulation) Act became law in 1956.
DEFINITION OF STOCK EXCHANGE:
Stock Exchange means anybody or individuals whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities.
It is an association of member brokers for the purpose of self-regulation and
protecting the interests of its members.It can operate only if it is recognized by the
government under the securities contacts (regulation) Act, 1956. The recognition is
granted under section 3 of the Act by the central government, Ministry of Finance.
BY LAWS:

23

Besides the above act, the securities contracts (regulation) rules were also made in
1957 to regulate certain matters of trading on the stock exchanges. There are also by laws
of the exchanges, which are concerned with the following subjects.
Opening/Closing of Stock Exchanges, timing of trading, regulation of blank transfers,
regulation of badla or carryover business, control of the settlement and other activities of
the Stock Exchange, fixation of margins, fixation of market prices or making up prices.
Regulation of taravani business (jobbing), etc; regulation of brokers trading, brokerage
charges, trading rules on the exchange, arbitration and settlement of disputes, settlement
and clearing of the trading etc.
REGULATION OF STOCK EXCHANGE:
The Securities contracts (regulation) act is the basis for operations of the Stock
Exchanges in India. No exchange can operate legally without the Government permission
or recognition. Stock Exchanges are given monopoly in certain areas under section 19 of
the above Act to ensure that the control and regulation are facilitated. Recognition can
also be withdrawn, if necessary where there are no Stock Exchanges in its absence.
SECURITIES AND EXCHANGE BOARD OF INDIA [SEBI]:
SEBI was setup as an autonomous regulatory authority by the Government of India in
1988 to protect the interests of investors in securities and to promote the development and
to regulate the securities market and for matters connected there with or incidental there
to. It is empowered by two acts namely SEBI Act, 1992 and Securities Contract
(regulation) Act, 1956 to perform the function of protecting investors rights and
regulating the capital markets. SEBI was given statutory status by an Act of Parliament on
April 4, 1992. SEBI was authorized.
1) To regulate all merchant banks on issue activity
2) To lay guidelines, and supervise and regulate the working of mutual funds, and
NATIONAL STOCK EXCHANGE
The Organization:
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchange, which recommended
24

promotion of The National Stock Exchange by financial institutions to provide access to

investors from all across the country on an equal footing. Based on the recommendations,
NSE was promoted by leading Financial Institutions at the best of the Government of
India and was incorporated in November 1992 as a tax paying company unlike other
stock exchanges in the country.
On its recognition as a stock exchange under The Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market
(WDM) segment in June 1994. The capital market (Equity) segment commenced
operations in November 1994 and operations in Derivatives segment commenced June
2000. The National Stock Exchange (NSE) is Indias leading stock exchange covering
various cities and town across the country. NSE was set up by leading institutions to
provide a modern, fully automated screen based trading system with national reach. The
exchange has brought about unparalleled transparency, speed and efficiency, safety and
market integrity. It has set up facilities that serve as a model for the securities industry in
terms of system practices, and procedures.
NSE has played a catalytic role in reforming the Indian securities market in terms of
micro structure, market practices and trading volumes. The market today uses slate of
art information technology to provide an efficient and transparent trading, clearing and
settlement mechanism, and has witnessed several innovations in products and services
viz., dematerialization of stock exchange governance, screen based trading, compression
of settlement cycles, dematerialization and electronic transfer of securities, securities
lending and borrowing, professionalization of trading members, fine-turned risk
management systems, emergence of clearing corporations to assume counter party risks,
market of debt and derivative instruments and intensive use of information technology.
Technology:
Across the globe, developments in information, communication and network
Technologies have created paradigm shifts in the securities market operations.
Technology has enabled organizations to build new sources of competitive advantage,
bring about innovations in products and services, and to provide for new business
opportunities. Stock Exchanges all over the world have realized the potential of IT and
have moved over to electronic trading systems, which are cheaper, have wider reach and
provide a better mechanism for trade and post trade execution.
25

NSE believes that technology will continue to provide the necessary impetus for the
organization to retain its competitive edge and ensure timeliness and satisfaction in
customer service. In recognition of the fact that technology will continue to redefine the
shape of the securities industry, NSE stresses on innovation and sustained investment in
technology to remain ahead of competition.
Form around 400 cities spread all over the country. In the recent past, capacity
enhancement measures were taken up in regard to the trading systems so as to effectively
meet the requirements of increased users and associated trading loads. With up gradation
of trading hardware, NSE can handle up to 1 million trades per day. NSE has also put in
place NIBIS (NSEs Internet Based Information System) for on-line real time
dissemination of trading information over the Internet. In order to capitalize on in house
expertise in technology, NSE set up a separate company, NSE.IT, in October 1999. This
IT expertise to provide a platform for taking up new IT assignments both within and
outside India and attaining global exposure.
The telecommunications network uses x.25 protocol and is the backbone of the
automated trading system. Each trading member trades on the NSE with other members
through a PC located in the trading members office, anywhere in India. The Trading
members on the wholesale Debt Market segment are linked to the central computer at the
NSE through dedicated 64kbps leased lines and VSAT terminals. These leased lines are
multiplexed using dedicated 2 mbps, optical-fiber links. The WDM participants connect
to the trading system through dial-up links.
The exchange uses powerful RISC based UNIX services, procured from Digital and
HP for the back office processing. The latest software platforms like ORACLES 7,
RDBMS, and GUPTA- SQL/ORACLE FORMS 4.5 Front- Ends, etc.; have been for the
exchange applications. The Exchange currently manages its data center operations,
system and database administration, design and development of in-house systems and
design and implementation of telecommunication solutions.
NSE is one of the largest interactive VSAT based Stock Exchanges in the world.
Today it supports more than 3000 VSATs and is expected to grow to more than
4000VSATs in the next year. The NSE network is the largest private wide area network
in the country and the first extended C-B and VSAT network in the world. Currently more
than 9000 users are trading on the real time online NSE application. There are over 15
large computer systems, which include non-stop fault-tolerant computers and high-end
26

UNIX servers, operational less than one roof to support the NSE applications. This
coupled with the nationwide VSAT network makes NSE the countrys largest Information
Technology user.
NSE-NIFTY
The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new
Index which replaces the existing NSE-100 Index is expected to serve as an appropriate
Index for the new segment of futures and options. NIFTY means Nations Index for
Fifty Stocks. The NSE-50 comprises 50 companies that represent 20 broad industry
groups with an aggregate market capitalization of around Rs. 1,70000 crs. All companies
included in the Index have a market capitalization excess of Rs. 500crs each and should
have traded for 85% of trading days at an impact cost of less than 1.5%.
NSE- MIDCAP INDEX
The NSE midcap Index or the Nifty comprises 50 stocks that represent 21 boards
industry groups and will provide proper representation of the midcap segment of the
Indian Capital Market. All stocks in the Index should have market capitalization of
greater than Rs. 200crs and should have traded 85% of the trading days at an impact cost
of less 2.5%. The base period for the index is Nov 4, 1996 which signifies two years for
completion of operations of the capital market segment of the operations. The base value
of the Index has been set at 1000.
MISSION:
NSEs, mission is setting the agenda for change in the securities markets in India. The
NSE was set-up with the main objectives of:

Establishing a nationwide trading facility for equities, debt instruments and

hybrids.

Ensuring equal access to investors all over the country through an appropriate
communication network.

Providing a fair, efficient and transparent securities market to investors using

electronic trading systems.

Enabling shorter settlement cycles and book entry settlements systems and
27

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has become
industry benchmarks and is being emulated by other market participants. NSE is more
than a mere market facilitator. Its that force which is guiding the industry towards new
horizons and greater opportunities.
PROMOTERS:
NSE has been promoted by leading financial institutions, Banks, Insurance companies
and other financial intermediaries:
Industrial Development Bank of India Limited
Industrial Finance Corporation of India Limited
Life Insurance Corporation of India
State Bank of India
ICICI Bank Limited
IL & FS Trust Company Limited
Stock Holding Corporation of India Limited
SBI Capital Markets Limited
The Administrator of the Specified Undertaking of Unit Trust of India
Bank of Baroda
Canara Bank
General Insurance Corporation of India
National Insurance Company India
The New India Assurance Company Limited
The Oriental Insurance Company Limited
28

 Punjab National Bank

Oriental Bank of Commerce
Corporation Bank
Indian Bank
Union Bank of India
At present, there are 24 Stock Exchanges recognized under the Securities Contract
(Regulation) Act, 1956. They are:

NAME OF THE STOCK EXCHANGE

YEAR

Bombay Stock Exchange

1875

Ahmadabad Share and Stock Brokers Association Ltd.

1957

Calcutta Stock Exchange Association Ltd.

1957

Delhi Stock Exchange Association Ltd.

1957

Madras Stock Exchange Association Ltd.

1958

Indore Stock Exchange Association Ltd.

1968

Bangalore Stok Exchange

1943

Hyderabad Stock Exchange

1978

Cochin Stock Exchange

1982

Pune Stock Exchange

1982

U.P. Stock Exchange Association Ltd.

1983

Ludhiana Stock Exchange Association

1983

Jaipur Stock Exchange Ltd.

1984

Gauhathi Stock Exchange Ltd.

1985

Mangalore Stock Exchange Ltd.

1986

Maghad Stock Exchange Association Ltd.

1989

29

Bhubaneshwar Stock Exchange Association Ltd.

1989

Over the Counter Exchange of India, Bombay

1990

Saurashtra Kutch Stock Exchange Ltd.

1991

C Stock Exchange Ltd.

1991

Coimbatore Stock Exchange Ltd.

1991

The Meerut Stock Exchange Ltd.

1991

National Stock Exchange Ltd.

1991

Integrated Stock Exchange Ltd.

1999

COMPANY PROFILE
INDIA INFOLINE LIMITED
India Info line was founded in 1995 by a group of professionals with impeccable
educational qualifications and professional credentials. Its institutional investors include
Intel Capital (worlds leading technology company), CDC (promoted by UK
government), ICICI, TDA and ReeshanarIndia Info line group offers the in tire gamut of
investment products including Stock broking, Commodities broking, Mutual Funds, Fixed
Deposits, GOI Relief bonds, Post office savings and life Insurance. India Info line is the
leading corporate agent of ICICI Prudential Life Insurance Company, which is Indias
No .1 private sector life insurance company.www.indiainfoline.com has been the only
Indian Website to have been listed

by none other than Forbes in its Best of the Web

survey of global website, not just once but three times in a row and counting. a must
read for investors in south Asia is how they choose to describe India Info line. It has been
rated as No.1 in the category of Business News in Asia by Alexia rating.
Stock and Commodities broking is offered under the trade name 5paisa. India Infoline
Commodities Pvt. Ltd., a wholly owned subsidiary of India Infoline Ltd., holds
membership of MCX.
Products: The India infoline pvt. Ltd, offers the following products.
a. E-broking:
1. Equities
30

2. Derivatives
3. Commodities
The above three are traded as 5paisa.
b. Distribution:
1. Mutual funds.
2. Govt. of India bonds.
3. Fixed deposits.
C. Insurance:
1. Life insurance policies.
2. Corporate sector of ICICI
3. Prudential life insurance.

It was originally incorporated on October 18, 1995 as Probity Research and Services
Private Limited at Mumbai under the Companies Act, 1956 with Registration No:11
93797. We commenced our operations as an independent provider of information analysis
and research covering Indian businesses, financial markets and economy, to institutional
customers. We became a public limited company on April 28, 2000 and the name of the
Company was changed to Probity Research and Services Limited. The name of the
company was changed to India Infoline.com on May 23, 2000 and later to India Info line
Limited on March 23, 2001.
In 1999, the company identified the potential of the Internet to cater to a mass
retail segment and transformed our business model form providing information services
to institutional customers to retail customers. Hence the company launched Internet
portal, www.Indiainfoline.com and started providing news and market information,
independent research, interviews with business leaders and other specialized features.
In May 2000, the name of our company changed to India Infoline.com Limited. In
the year 2000, we leveraged our position as a provider of financial information and
analysis by diversifying into transactional services, primarily for online trading in shares
and securities and online as well as offline distribution of personal financial products, like
Mutual funds and RBI Bonds.

31

Our broking service as launched under the brand name of 5Paisa through our
subsidiary, India Infoline Securities Private Limited and www.5Paisa.com, the e-broking
portal, was launched for online trading in July 2000. Besides we also offer Real time
stock quotes, market news and price charts with multiple tools for technical analysis In
December 2000, our subsidiary, India Infoline Insurance Services Limited became a
corporate agent for ICICI Prudential Life Insurance Company Limited. And emerged as
one of the leading corporate agents for ICICI Prudential Life Insurance Company
Limited.
In the year 2004, company launched commodities broking through our subsidiary
India Info line commodities Private LTD.
At present company has a network of 73 branches across 36 cities in India. We
plan to set up 77 additional branches in 50 cities across India for our different business
including broking, insurance, commodities and distribution of mutual funds and other
investment products.
Key promoters of the company
Key promoters of our company are Mr. Nirmal Jain and Mr. Venkataraman,
professionals with a good academic and work experience.
Mr. Nirmal Jain has been the chairman and Managing Director of the Company since
its incorporation i.e., October 18, 1995.Mr. Jain holds a MBA degree form IIM
Ahmadabad and is a member Institute of Chartered Accountants of India and the Institute
of Cost Accountants of India. He started his career in 1989 with Hindustan Lever Limited,
a subsidiary of Unilever Plc, in their commodities trading and exports division Mr.Jain
has a total experience of more than 15 years.
Mr. R. Venkataraman joined the Board with effect from July 5 th, 1999. He holds a BTech degree in Electronics and Electrical Communications Engineering form IIT
Kharagpur and an MBA degree form IIM Bangalore. He has held senior managerial
positions in various divisions of ICICI limited, including ICICI securities limited, their
investment banking joint venture with J P Morgan of USA. He also worked as an equity
analyst with BZW and Taib Capital Corporation Limited. HE has also held the position
of Assistant Vice President with G E Capital Services India Limited in their private equity
division. He has varied experience of more than 14 years in the financial services sector

32

Business
Indi Infoline Limited
Content related services- Equity research & Online Media
Property

India Infoline Securities PVt. Ltd.

Equities & Derivative Broking.

Depository Services.

Portfolio Management Services.

India Infoline.com Distibution Company Ltd.

Mutual funds

RBI Bonds

Fixed Deposits etc.

India Infoline Insurance Services Ltd.

Corporate agents for ICICI Prudential

Life Insurance Company Ltd.

India Infoline Commodities Pvt. Ltd.

Commodities Broking.

India Infoline Investment Services Pvt. Ltd.

Margin funding & financing

BROKERAGE SERVICES
33

1. Online Brokerage: we offer subscribers real-time trading on The NSE and BSE.
Apart from this we also offer commodities trading on the MCX and NCDEX.
Customers can directly Place Orders to buy and sell securities through our
automated order Processing system.
2. Offline Brokerage: we began offering offline brokerage services as a back up to
our online brokerage offering through our branches. This was mainly to address
the internet access problems faced by some of our retail customers.
Competition
1. Broking: we face competition from small local brokers
a. (Traditional) and pan India Brokers like Kotak Securities Ltd.
b. S.S Kantilla Ishwarlal securities Ltd, India bulls Securities Ltd,
c. ICICI Web Trade Limited, Geojit Financial Services Ltd etc.
2. Distribution : We face competition from small retail distributors (typically
single outlet unorganized units), brokers who have a distribution setup, old and
established distribution companies like Blue chip Corporate Investment Centre
Limited,

Bajaj

Capital

Ltd,

Karvy

Securities

Ltd,

and

banks

including their PMS and Wealth Management desks.

3. Our Strength: Our strengths are our content and research online technology
platform and customer services.
Financial Performance:
Consolidated Financial Performance of India Infoline Ltd, (Excluding
intergroup revenue)
Revenue (in Rs. Million)

Year
ended
March 2012

31st

Year ended
March 2013

Income
Revenue from operations
Equities Brokerage & Related
income
Agency Commission & Fees

30.79

191.47

40.07

81.17

Commodities Brokerage

Policy Commission

7.03

17.92

Media & Content Income

7.63

16.82

Other income

21.03

52.56

34

31st

Total Income
106.54
359.94
Our consolidated total income has grown from Rs. 106.54 million in FY 2011 to
Rs. 359.94 million in FY 2012. That same year, we made a turnaround and reported a
consolidated cash profit of 103.84 million and a net profit of Rs. 74.8 million on the first
nine months of FY 2012; we have reported a consolidated total income of Rs. 475.03
million.
we had 28,215 customers for our broking services and we have sold mutual fund unit,
company deposits government bonds or small savings schemes to over 0.15 million
customers. India Infoline Ltd has 85 branches across 36 locations in India, controlled by
10 Regional Offices in India. It has a branch in Dubai also.
Expenditure:
The following table sets out expenses as a percentage of its total income
for the fiscal years ended March 31, 2008, 2009, and the nine months ended December
31, 2009.
Rs. Million
Particulars

Year ended
31st
March, 2012

Year ended
31st
March, 2013

Direct Costs

32.58%

30.12%

Employee Cost

29.41%

16.64%

48.43%

21.51%

1.46%

2.95%

32.31%

8.07%

144.18%

79.30%

Expenditure

Administration
Expense

&

Other

Interest
Depreciation & Amortization
Total Expenditure

Our Expenses as a percentage of its total Expenditure is come down from

1.44.18% o f 2008 to 79.30% in FY 2009. That same year we reduced the total

35

expenditure percentage of its Total income INS 13.98% in the first three Months of FY
2012, we have reported total expenditure % of its total income is 65.32%.

CHAPTER IV
DATA ANALYSIS
&
NTERPRETATION

36

ABOUT SBI

SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country
with an investor base of over 4.6 million. With over 20 years of rich experience in fund
management, SBI MF brings forward its expertise in consistently delivering value to its
investors.

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation.

The fund traces its lineage to SBI - Indias largest banking enterprise. The institution
has grown immensely since its inception and today it is India's largest bank, patronized
by over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Society
General Asset Management, one of the worlds leading fund management companies
that manages over US$ 500 Billion worldwide.
In twenty years of its operation, the fund has launched 38 schemes and successfully
redeemed fifteen of them. In the process it has rewarded its investors handsomely with
consistent high returns.
A total of over 4.6 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund.

37

Schemes of the Mutual fund have consistently outperformed benchmark indices and
have emerged as the preferred investment for millions of investors and HNIs.
Today, the fund manages over Rs.28500crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes.
The fund serves this vast family of investors by reaching out to them through network
of over 130 points of acceptance, 28 investor service centers, 46 investor service desks
and 56 district organizers. SBI Mutual Fund is the first bank-sponsored fund to launch
an offshore fund Resurgent India Opportunities Fund.

Scheme Profile - SBI Magnum Equity Fund (G)

Fund Type
Investment Plan
Asset Size (Rs cr)
Minimum Investment
Last Dividend
Bonus
Entry Load
Exit Load
Load Comments

Features

Open-Ended
Growth
1,216.9 Aug-28-2014
5000
N.A.
N.A.
N.A.
1.00%
Exit Load 1% if units are redeemed / switched-out
within 1 year from the date of allotment.
SBI One India Fund has been merge with SBI Magnum
Equity Fund w.e.f. August 10, 2012.

SBI Magnum Equity Fund (G) (as on Aug 28, 2014)

Equity
Sector
Tata Motors
Automotive
ICICI Bank
Banking/Finance
HDFC Bank
Banking/Finance
38

Value
94.43
91.84
83.45

Asset
7.76
7.55
6.86

SBI
Infosys
TCS
Reliance
ITC
Kotak Mahindra
Larsen

Banking/Finance
Technology
Technology
Oil & Gas
Tobacco
Banking/Finance
Engineering

71.35
68.29
60.59
58.96
53.27
51.8
50.39

Sector allocation:

Sector
Banking/Finance
Technology
Automotive
Oil & Gas
Pharmaceuticals
Engineering
SECTOR ALLOCATION OF SBI

%
32.84
15.66
15.26
10.29
7.53
6.24

1-Year
High
Low
33.86
24.51
19.55
13.38
16.77
8.98
12.73
11.49
8.72
5.32
4.84
3.07

Aug 28, 2014

Graph 1.

Assessment of SBI Fund NAVs

Date
NAV
1-Sep-14 67.0933
2-Sep-14 67.4767
39

5.86
5.61
4.98
4.84
4.38
4.26
4.14

3-Sep-14 67.8653
4-Sep-14 67.7047
5-Sep-14 67.8269
8-Sep-14 68.4464
9-Sep-14 68.3939
10-Sep-14 68.0151
11-Sep-14 68.2462
12-Sep-14 68.434
15-Sep-14 67.9887
16-Sep-14 66.5432
17-Sep-14 66.8218
18-Sep-14 68.0601
19-Sep-14 67.9278
22-Sep-14 68.2188
23-Sep-14 67.1742
24-Sep-14 66.8037
25-Sep-14 65.8357
26-Sep-14 66.5809
29-Sep-14 66.5522
30-Sep-14 66.5835
NAV = total value of all the securities in its portfolio liabilities
Outstanding share

Asset Allocation
Asset Allocation (%)

40

Equity

96.67

Others

Debt

3.68

Mutual Funds
Money Market
Cash / Call

0
0.29
-0.64

Analysis: graph shows and Banking/Finances has increased to 32.84% where as engineering
has decrease to 3.37% .

Interpretation: From the above analysis we can say that due to inflation in Banking/Finances,
SBI gets maximum return in Banking/Finances sector where as less return in Engineering

41

Genesis
In Jan 14, 2003, UTI Mutual Fund started to pave its path following the vision of UTI
Asset Management Company Limited, which has been appointed by the UTI Trustee
Pvt. Limited Co. for managing the schemes of UTI Mutual Fund and the schemes
transferred/migrated from the erstwhile Unit Trust of India.
The UTI Asset Management Company provides professionally managed back office
support for all business services of UTI Mutual Fund (excluding fund management) in
accordance with the provisions of the Investment Management Agreement, the Trust
Deed, the SEBI (Mutual Funds) Regulations and the objectives of the schemes. Stateof-the-art systems and communications are in place to ensure a seamless flow across
the various activities undertaken by UTI Mutual Fund.
UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)
Regulations, 1993, appointed on 3rd February 2004, for undertaking portfolio
management services and also acts as the manager and marketer to offshore funds
through its 100 % wholly- owned subsidiary, UTI International Limited, registered in
Guernsey, Channel Islands.

Assets under Management

UTI Asset Management Company presently manages a corpus of over Rs.52,
464Crores as on 29th Feb' 2008 (source: www.amfiindia.com). UTI Mutual Fund has
a track record of managing a variety of schemes catering to the needs of every class of
citizenry. It has a nationwide network consisting of 83 UTI Financial Centers (UFCs)
and UTI International offices in London, Dubai and Bahrain. With a view to reach to
common investors at the district level, 3 satellite offices have also been opened in select
towns and districts.
They have a well-qualified professional fund management team, who has been highly
empowered to manage funds with greater efficiency and accountability in the sole
interest of unit holders. The fund managers are also supported with a strong in-house
securities research department. To ensure better management of the funds, a risk
management department is also in operation.
42

Scheme Profile - UTI Balanced Fund (G)

Fund Type
Investment Plan
Asset Size (Rs cr)
Minimum Investment
Last Dividend
Bonus
Entry Load
Exit Load

Open-Ended
Growth
358.6 Mar-30-2013
1000
N.A.
N.A.
N.A.
1.00%
Exit Load 1% if redeemed within 1 Year from

Load Comments
Features

the date of allotment.

UTI Unit Scheme - 2002 has been merged with
UTI Balanced Fund , w.e.f. November 21, 2006.

UTI Balanced Fund (G) (as on Aug 28, 2014)

Equity
ICICI Bank
M&M
ITC
Infosys
HDFC Bank
Bharti Airtel
Wipro
TCS
Dr Reddys Labs
Grasim

Sector
Value Asset
Banking/Finance 40.18 3.45
Automotive
35.26 3.03
Tobacco
30.83 2.65
Technology
30.44 2.62
Banking/Finance 28.34 2.43
Telecom
28.29 2.43
Technology
27.75 2.38
Technology
26.94 2.31
Pharmaceuticals 26.85 2.31
Conglomerates
26.69 2.29
43

Sector Allocation (as

on Aug 28, 2014)

1-Year
High
Low
16.26
12.74
13.58
8.99
7.02
4.29
7.12
5.56
6.3
1.99
7.43
3.76

Sector
%
Banking/Finance 14.46
Technology
9.18
Pharmaceuticals
7.71
Automotive
7.53
Manufacturing
6.53
Oil & Gas
3.8

Assessment of NAV of September month

Date
1-Sep-14
2-Sep-14
3-Sep-14
4-Sep-14
5-Sep-14
8-Sep-14
9-Sep-14
10-Sep-14
11-Sep-14
12-Sep-14
15-Sep-14
16-Sep-14
17-Sep-14
18-Sep-14
19-Sep-14
22-Sep-14
23-Sep-14

UTI
117.635
118.339
119.142
119.101
119.48
120.418
120.597
120.215
120.607
120.781
120.819
119.235
119.606
121.137
121.24
121.424
119.931
44

24-Sep-14 119.617
25-Sep-14 118.349
26-Sep-14
119
29-Sep-14 119.59
30-Sep-14 119.694
NAV = total value of all the securities in its portfolio liabilities
Outstanding share

Asset Allocation
Asset Allocation (%)
Equity
Others
Debt
Mutual
Funds
Money
Market
Cash /
Call

73.39
0
16.74
0.12
4.76
5.02

45

Asset allocation:
Equity 73.39%
Debt 16.74%
Mutual funds - 0.12 %
Money Market 4.76%
Cash/call 5.02%
Analysis: the above graph shows the investment of UTI index funds in different sector.
It shows that the Banking/Finance sector has increased to 14.46% and on the other
hand the Oil & Gas has decreased to 3.76%
Interpretation: From the above analysis it has been found even though the risk involved is
more UTI index fund, the return generated by the scheme is less of beta of UTI is more the market
risk, sine NSE Nifty as taken as benchmark.

RELIANCE MUTUAL FUNDS

About reliance

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 90,938Crores (AAUM for Mar 08 )
and an investor base of over 66.87Lakhs.

Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one
of the fastest growing mutual funds in the country.
46

RMF offers investors a well-rounded portfolio of products to meet varying investor

requirements

and

has

presence

in

115

cities

across

the

country.

Reliance Mutual Fund constantly endeavors to launch innovative products and

customer service initiatives to increase value to the investors.
"Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management
Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up
capital of RCAM, the balance paid up capital being held by minority shareholders."
Reliance Capital Ltd. is one of Indias leading and fastest growing private sector
financial services companies and ranks among the top 3 private sector financial
services and banking companies, in terms of Networth..

Equity / Growth schemes:

The aim of the growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide different options to the
investors like dividend option, capital appreciation, etc. and the investors may choose
an option depending on their preferences. The investors must indicate the option in the
application form. The mutual funds also allow the investors to change the options at a
later date. Growth schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.

Scheme Profile - Reliance Equity Opportunities Fund Direct Plan (G)

Fund Type
Investment Plan
Asset Size (Rs cr)
Minimum Investment
Last Dividend
Bonus
Entry Load

Open-Ended
Growth
8,105.3 Aug-28-2014
5000
N.A.
N.A.
N.A.
47

Exit Load
Load Comments

1.00%
Exit load - 1% if redeemed/switched out on or before
completion of 1 yrs from the date of allotment.

Reliance Equity Opportunities Fund - Direct Plan (G) (as on Aug 28, 2014)
Equity
Divis Labs
HDFC Bank
Bharat Forge
Cummins
SBI
Infosys
ICICI Bank
Trent
Larsen
HCL Tech

Sector
Pharmaceuticals
Banking/Finance
Manufacturing
Engineering
Banking/Finance
Technology
Banking/Finance
Real Estate
Engineering
Technology

Value
426.37
421.79
372.1
336.15
319.89
318.49
295.79
287.42
253.4
251.14

Asset
5.26
5.2
4.59
4.15
3.95
3.93
3.65
3.55
3.13
3.1

NAV of Reliance Equity Opportunities Fund - GROWTH PLAN

Date
1-Sep-14
2-Sep-14
3-Sep-14
4-Sep-14
5-Sep-14
8-Sep-14
9-Sep-14
10-Sep-14
11-Sep-14
12-Sep-14
15-Sep-14
16-Sep-14
17-Sep-14
18-Sep-14
19-Sep-14
22-Sep-14
23-Sep-14
24-Sep-14

NAV
63.8789
64.3445
64.8092
64.6515
65.5248
66.5152
66.7724
66.5979
67.6906
67.6564
67.7511
65.9703
66.2191
67.3814
67.2878
67.4104
66.7556
66.1177

48

25-Sep-14
26-Sep-14
29-Sep-14
30-Sep-14

65.1278
65.6491
66.1575
66.2977

Sector wise allocation as on Aug 28, 2014

Sector
Engineering
Banking/Finance
Pharmaceuticals
Technology
Real Estate
Manufacturing

%
16.79
16.25
11.99
10.38
9.01
8.3

1-Year
High
Low
16.79
11.94
17.53
14.41
16.43
10.77
16.35
9.76
12.23
9.49
8.37
4.71

Sector allocation of Reliance as on Aug 28, 2014

49

Graph 3.

Asset Allocation
Asset Allocation (%)
Equity
97.95
Others
0.4
Debt
0
Mutual Funds
N.A
Money Market
2.37
Cash / Call
-0.72

50

Asset allocation
Equity 99.95
Debt 0
Cash/call -0.02
Analysis: The above graph shows the investment of Reliance equity opportunity fund in
different sectors, which shows that the Engineering sector has increased to 16.79% and
on the other hand the Manufacturing sector has decreased to 4.79 %.
Interpretation: From the above analysis it has been found that reliance fund has more
invested in Equity and not much in other instruments.

Comparison of NAVS of different sectors

Date
1-Sep-14
2-Sep-14
3-Sep-14
4-Sep-14
5-Sep-14
8-Sep-14
9-Sep-14
10-Sep-14
11-Sep-14
12-Sep-14
15-Sep-14
16-Sep-14

SBI
67.0933
67.4767
67.8653
67.7047
67.8269
68.4464
68.3939
68.0151
68.2462
68.434
67.9887
66.5432

UTI
117.635
118.339
119.142
119.101
119.48
120.418
120.597
120.215
120.607
120.781
120.819
119.235

Reliance Equity Opportunities Fund

63.8789
64.3445
64.8092
64.6515
65.5248
66.5152
66.7724
66.5979
67.6906
67.6564
67.7511
65.9703
51

17-Sep-14
18-Sep-14
19-Sep-14
22-Sep-14
23-Sep-14
24-Sep-14
25-Sep-14
26-Sep-14
29-Sep-14
30-Sep-14

66.8218
68.0601
67.9278
68.2188
67.1742
66.8037
65.8357
66.5809
66.5522
66.5835

119.606
121.137
121.24
121.424
119.931
119.617
118.349
119
119.59
119.694

66.2191
67.3814
67.2878
67.4104
66.7556
66.1177
65.1278
65.6491
66.1575
66.2977

Interpretation:
From the above graph we can understand that SBI has highest NAvs then the UTI and
Reliance, so investors can choose the SBI mutual funds to invest in it.

CHAPTER V
52

FINDINGS
SUGGESTIONS
CONCLUSION

Findings
1. Amongst these three funds SBI gives better NAVs in the market.
2. Amongst these companies Reliance & UTI as similar NAVs
3. Risk is found to be less in case of SBI Mutual Fund as compared to the other two funds
based on NAVs.
4. Market risk is found to be less in case of SBI mutual fund as compared to the other two
funds based on Allocation of funds
5. All funds shown are strongly correlated with the NIFTY index based on market value.
6. It is found that all the three securities as allocated there funds more in equity than the
other
53

7. SBI Mutual funds provides more & more returns compared to other securities.

SUGGESTIONS
Portfolio manager has to generate maximum returns by better allocation of assets
by constructing an ideal portfolio.
It is observed the Reliance asset allocation is more in cash and equivalent. Thats
why it performed better. It allows the company or fund manger to alter the
portfolio mix instantaneously and transfer the funds into an investment fund with
better yields.
Reliance succeeded in generating better returns by this strategic portfolio
management approach.
Predictability of the future trends and interpreting such trends for gainful
investment option is necessary. Minimizing the cost of fund management is also
important which also includes administrative as well hedging cost, market
participation cost etc.
54

 Return on Mutual Funds is found to be still unsatisfactory from the investors point
of view in the context of inflation and risk levels taken by the investors.
Asset management companies should focus on these aspects to increase the yield
pattern of funds.
The asset management company must make the most advantageous use of print
and electronic media in order to motivate the investors and potential investors to
invest in mutual funds.
Asset management must make sure to pay regular dividend to the investors.
All the investors need to be explained the risk and return that exits with the
investment plan
The investors investment plan needs to be carefully analyzed before coming to
the conclusion about his investment.

CONCLUSIONS

Mutual funds are safe bet for investors of different groups, motives and other
preferences.
Since Asset Management companies offer a range of Funds, an investor can benefit
only by investing in appropriate fund which shall meet his requirements.
It is said that the higher the risk, the higher is the return. But from the analysis it has
been found that even though the risk involved is more in UTI index fund, the return
generated by the scheme is less.
The information in this project report will provide the investors the basic knowledge
about Mutual Funds and enable them to choose the best investments scheme suiting
their risk/return profile.
The study of performance of various firms Mutual Funds and their comparative
analysis of investment is done through these one may conclude that the performance
55

of SBI mutual fund Growth is performed well by chunk of different securities through
maintaining a low risk

56

BIBLIOGRAPHY

BIBLIOGRAPHY

How Mutual Funds Work by Albert J. Fredman & Russ Wiles.

AMFI Mutual Fund Testing Programme for Distributors & Employees of Mutual Funds
in India.
Fact Sheets of various Mutual Funds
Economic Times
www.mutualfundsindia.com
www.reliancemutual.com
www.sbimf.com
www.uti.com
57

www.moneycontrol.com
www.amfiindia.com
www.nse-india.com

58