Age of Respond

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Mutual Funds

Introduction:

A mutual fund is a professionally-managed form of collective investments that pools mone

from many investors and invests it in stocks, bonds, short-term money market instruments

and/or other securities. Mutual funds belong to a group of financial intermediaries known a

investment companies, which are in the business of collecting funds from investors and poolin

them for the purpose of building a portfolio of securities according to stated objectives. I

India, investment companies are regulated by The Securities and Exchange Board of Indi

(Mutual funds), Regulations, 1996. The Act has prescribed accounting policies to be followe

by mutual funds for the preparation of their financial statements which, inter alias, require tha

for the purpose of all financial statements, all investment shall be marked to market an

investments shall be carried out in the balance sheet market value. However till, necessary

guidance notes are issued by the institute of chartered accountants of India to their members, i

the above matter, investments may be continued to be valued at cost, with the market valu

shown separately and the reconciliation statements for the changes in investments valued intwo different ways, shall be provided (Clause 2 (i) of eleventh schedule to the Regulations).

The investors in proportion to their investments share the profits and losses. The mutual fund

normally came out with a number of schemes with different investments objectives, which ar

launched time to time. A mutual fund is required to be registered with Securities and Exchang

Board of India (SEBI) which regulates securities markets before it can collect funds from th

public.

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which regulates securities markets before it can collect funds from the public.The flow cha

below describes broadly the working of a mutual fund:

A mutual fund provides many financial and non-financial benefits to the investors. Like share

all mutual funds provide returns in the form of dividends and capital appreciation and eve

bonus issues. But by far the most significant benefit is one of risk reduction or ri

diversification.

When one invests in the stock of anyone company, one is exposed to several random risks. F

instance, the company may go bankrupt, it may suffer huge unexpected losses or tmanagement may not be honest or efficient. Investing in a mutual fund protects investors fro

such random ornon- Systematic risks.

How does this protection work? It is well known from one's grandma that one should not put a

ones in a single basket. Thus, any investment portfolio must be well diversified. It is difficu

for a small investor to diversify the investment over 30 or 50 different securities or more. Als

being laypersons, it maybe wiser to leave the selection of securities to an expert agency. This

where the mutual fund steps in by pooling together investments from a large number of sma

investors and then investing the accumulated proceeds in a well diversified basket of securitie

Thus, investors get the benefit of diversification without actually doing so themselves.

It is therefore usually better for small investors to invest in a mutual fund directly rather tha

invest in 30 to 50 securities on their own. The capital required for investing in several securitie

on one's own is considerably higher than that needed for investing in a mutual fund. Fo

example, if one wants to invest Rs. 10,000, it is not sufficient to build a diversified portfoli

However, this amount can be easily invested in a, mutual fund, which typically invests in

large number of companies. Thus, a mutual fund offers the benefit of diversification even at

low level of investment. As a consequence of wide diversification, its expected returns tend 2


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be lower and less volatile than the returns from anyone security. Furthermore, transaction cos

for the investors tend to be lower while dealing with a single mutual fund as against transactin

in a large number of securities. There is also no need to research or track a large number o

different companies or regularly keep a check on the dividend returns from dozens of' differe

companies.

Thus, much of the value of mutual funds to small investor comes from risk diversification o

risk mitigation, professional management, switching among schemes, affordability, liquidit

lower transaction costs, research, international investment facilities, etc.

Mutual funds render a large range of services that are not available to an investor who invests

securities directly.

A mutual fund is thus, as much a financial product as a financial service. Of course, the servic

rendered by a mutual fund are not free. Nothing worthwhile ever is. Unit holders have to pay f

the recurring transactions, annual fees, entry and exit loads and so forth, irrespective

whether the fund generate returns or not.

All this should not create the impression that mutual fund investments are only for sma

investors. Large entities, including banks, insurance companies and financial institutio

routinely invest in mutual funds.

Investors subscribe to units of a mutual fund just as shareholders subscribe to shares of

company. Also, a mutual fund, like a company, does not guarantee any dividend.

Mutual fund managers use their discretion to decide whether or not to declare dividends, base

on the profitability of the fund, market conditions, etc.

Even when they do so, the dividend per unit may vary from period to period and thesvariations may be considerably higher than in the case of shares. This is because compani

normally like to smoothen out the equity dividends over a period of time. This means that the

strive hard to maintain dividends even in a bad year to convey the impression to the market th

all is well with the company. But such considerations do not constrain mutual funds since the

major preoccupation is to provide well-diversified portfolio returns, whatever they may be.

Mutual fund dividends can be paid only from the revenue income and realized capital gains o

the underlying portfolio and not from previous profits as in the case of shares.

Each unit of a mutual fund represents a unit holders proportionate ownership of the fundportfolio holdings. The investors of mutual funds are known as unit holders. The companies th

operate the mutual funds are known as Asset Management Companies (AMCs) or Investme

Managers. (Appendix 1 lists the AMCs operating in India). An AMC may float more than on

fund (also called schemes), each with an objective and investment mandate of its own. Th

terms mutual fund, fund or scheme are often used interchangeably.

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Meaning:

A mutual fund is an institutional device through which investors poll their funds to invest in

diversified portfolio of securities, thus spreading and reducing risk. It is an investment vehicl

through which small and large investors pool their funds under the direction of the investmen

manager. These funds are invested in such a way as to minimize the risk while ensuring stead

returns. Thus, shareholders pool their money to create the mutual fund which, in turn, contract

with an investment management firm to manage the assets.

Generally, mutual fund is an investment trust which is concerned with garnerin

savings essentially in corporate securities in such a manner as to ensure to its investors a tripl

benefit of steady return and capital appreciation along with low risk. There are basically tw

types of investment trusts, viz., open-end and closed-end. Open end investment tru

continuously offers new share for sale and always stands ready to buy securities at any time

Thus, the capitalization of rusts is constantly changing as investors buy and sell their share

directly with the funds. Closed-end trust has a fixed number of shares that can be owned by th

investing public. It is just like any other incorporated association with a fixed amount o

capital. The investors cannot buy or redeem directly with the investment trust.

Mutual fund or investment trust is not an investment company. An investmen

company is constituted under the Companies and it has the same type of capital structure as an

industrial or commercial company. In contrast, mutual fund is a trust at law. Further, mutua

funds obliged to buy back units whenever an investor desires to sell them, an investmen

company can not buy back its shares from its shareholders. Further, mutual funds cannot rais

long-term debt from the market while an investment company can do so. In the care of mutua

fund there always exists direct relation between the value of the unit and value of the fun

(underlying assets).

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This is not necessary so in the case of an investment company. Finally, while mutual fund ma

offer both open-end and closed-end schemes for mobilization of savings, investmen

companies are usually closed-end companies with fixed capitalization.

Mutual fund refers only to open-end investment trust whose distinctive feature i

regular sale and purchase of securities. Further, mutual funds may redeem their shares at th

funds current net asset value at the time the shareholders request redemption. In sum, mutua

fund is a form of collective investment brought in by a large group of investors. Each fund i

dived into equal portion or units. Anyone investing the funds is allocated units in proportion to

the size of ones investment. The price of these units is governed principally by value of th

underlying investments held by the funds.

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History of Mutual Funds in India

"No issuer of securities is subject to

more detailed regulation than mutual funds.

- Ray Garrett Jr

Unit trust of India, the first mutual fund organization of India, offers the small investors

share in Indias industrial growth & productive investments with minimum risk & reasonabl

returns.

UTI came into existence during a period market by great political and economi

uncertainty in India. With war of borders and economic turmoil that depressed the financia

market entrepreneur were hesitant to enter capital market. The already existing companie

found it difficult to raise fresh capital, as inventors did not respond adequately to new issues

Earnest efforts were required to channels savings of community into productive uses in order t

speed up the industrial growth.

The then finance minister T.T Krishnamachari set up the idea of a unit trust that would b

open to pay person or institution to purchase the units offered by the trust. His ideas took thform of the unit trust of India, an intermediary that would fulfill the twin objective o

mobilizing the retail saving and investing those savings in the capital market and passing on th

benefits so accrued to the small investors.

UTI commenced its operation from July 1964 under the Unit Trust of India Act, 1963

UTI does not have any share capital, so it operates on the principal of no profit no loss as al

incomes and gains net of all costs and development charges ultimately go back to investors o

respective schemes. Different provisions of the UTI Act laid down the structure o

management, scope of business, powers and functions of the trust as well as accounting

disclosure and regulatory requirements for the trust.

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The mutual fund industry in India started in 1963 with the formation of Unit Trust of India,at t

initiative of the Government of India and Reserve Bank of India. The history of mutual funds

India can be broadly divided into four distinct phases

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by thReserve Bank of India and functioned under the Regulatory and administrative control of th

Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industri

Development Bank of India (IDBI) took over the regulatory and administrative control in plac

of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI ha

Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector bank

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of Ind

(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followe

by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Ban

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LI

established its mutual fund in June 1989 while GIC had set up its mutual fund in Decemb

1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crore

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fun

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year

which the first Mutual Fund Regulations came into being, under which all mutual funds, exce

UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged wi

Franklin Templeton) was the first private sector mutual fund registered in July 1993

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive an

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutu

Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds settin

up funds in India and also the industry has witnessed several mergers and acquisitions. As at th

end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. Th

Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of othmutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcate

into two separate entities. One is the Specified Undertaking of the Unit Trust of India wi

assets under management of Rs.29,835 crores as at the end of January 2003, representin

broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specifie

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Undertaking of Unit Trust of India, functioning under an administrator and under the rul

framed by Government of India and does not come under the purview of the Mutual Fun

Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registere

with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of th

erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets und

management and with the setting up of a UTI Mutual Fund, conforming to the SEBI MutuFund Regulations, and with recent mergers taking place among different private sector fund

the mutual fund industry has entered its current phase of consolidation and growth.

The graph indicates the growth of assets over the years.

Note:

Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the UnTrust of India effective from February 2003. The Assets under management of the Specifie

Undertaking of the Unit Trust of India has therefore been excluded from the total assets of th

industry as a whole from February 2003 onwards.

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Structural arrangement of an average mutual fund

Mutual funds in India function under a 3-tier structure as indicated in Figure 79.1. Th

promoters or sponsors intending to float a mutual fund appoint trustees and set up an AMC

which in turn appoints a custodian/depository, registrars, transfer agents and auditors.

The mutual fund industry in India and all the participants involved in this business agoverned by SEBI. A sponsor or promoter first applies to SEBI to get a registration in order

start mutual fund activities. SEBI grants a certificate of registration if the sponsors fulfill th

necessary criteria of experience, profitability, positive net worth, etc.

Next, the sponsor forms a trustunder the provisions of the Indian Trusts Act, 1882, appoin

trustees and forms a board of trustees. The composition of the board of trustees is governed b

SEBI. For example, a certain number of trustees have to be independent persons, not associate

with the sponsors in any manner whatsoever.

Entities in a Mutual Fund Business

The trustees play a critical role as they 'hold in trust' the investments of the investors/ un

holders of the mutual fund. The trust deed contains clauses that are necessary for protecting th

interests of the unit holders. In general, the trustees act as a self- regulating body and protecto

of the unit holders' money.

The board of trustees does not manage the day-to-day activities of the mutual fund directl

Instead, it appoints an Asset Management Company (AMC) to perform that task. Normally a

AMC is registered under the Companies Act, 1956.

It may be a private limited company or a wholly owned subsidiary of a public limited compan

or even a joint venture. Table 79.1 lists three AMCs under different forms of ownership.

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SEBI also requires that AMCs have a certain minimum net worth contributed by th

sponsors. Thus, de facto an AMC manages a mutual fund scheme while, de jure the truste

manage them. The trustees also monitor the performance of the AMC and ensure that

complies with various regulations of SEBI.

A custodian holds the securities of various schemes of the fund in their custody. Befo

dematerialization of shares was introduced, share transfers were done in physical form. Amutual funds regularly buy and sell huge volumes of securities, the custodians used to receiv

transfer and hold the physical certificates on behalf of an AMC. However, following demat

securities; the term custodian has given way to the depository. A depository maintains an o

line record of ownership of securities bought and sold by a mutual fund in dematerialized form

just as a bank records the balance in one's account.

The registraris appointed in order to accept and process the unit holders' applications, an

inform the AMC regarding the amount received for subscription, redemption and so forth.

Transfer agents are responsible for issuing and redeeming units of the scheme and provid

other related services such as preparation of transfer documents and updating investor recordThey are the conduit through which fresh units are issued to new buyers or units sent back to th

AMC for redemption.

The trustees appoint the top management of the AMC, such as Chief Investment Officer

Chief Executive Officer as well as fund manager(s) for the various schemes. The trust compan

also appoints an auditorto audit the books of accounts of all the schemes. Auditing the financi

details for a specific scheme, is an important aspect as in the past there have been sever

instances where AMCs have resorted to inter-scheme transfer of securities to make a specif

scheme more attractive. Such manipulations acquire ominous proportions particularly when th

transfer of securities from one scheme to another is done at a price different from the markprice. In such cases, unit holders of one scheme benefit at the cost of another.

Having organized its structure comprehensively, an AMC is ready to float vario

schemes, each one tailored to the requirements of different sections of the public. An AMC m

appoint separate fund managers for each scheme under its umbrella or may assign two or thr

schemes to a specific fund manager.

One of the important aspects of this multi-tiered organization structure in the mutual fun

business is to clearly segregate the involvement of sponsors. The trust company and the boa

of trustees form the proverbial Chinese wall between the promoters of the mutual fund busine

and the money invested by millions of unit holders. Apart from their other supervisory roles, thtrustees also ensure that aggregate investment by the sponsor promoted AMC into the liste

securities of group companies of the sponsors, does not exceed a certain limit. In short, th

trustees ensure that sponsors do not use the AMC as a vehicle to channel the unit holder

money to their own group companies.

Example of the above structural arrangement10


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Let us consider the mutual funds floated by Kotak Mahindra. Kotak Mahindra Bank Limite

(KMBL), as the sponsor, established Kotak Mahindra Trustee Company Limited (KMTCL)

the trustee company. KMBL also floated Kotak Mahindra Asset Management Compan

Limited (KMAMC) as the AMC/Investment Manager. KMAMC offers many different kinds

schemes such as, Kotak Global India, Kotak Savings Plan, Kotak MNC, Kotak Tech, et

Computer Age Management Services Private Limited is the registrars, Deutsche Bank and ABAMRO are the custodians and Price Waterhouse is the auditors for the fund.

Offer Document of Mutual Fund

When launching any new scheme, the AMC prepares an offer document. This provides th

name of the scheme, its specific investment objectives, entry/exit load structure and oth

attributes such as, minimum investment requirement, face value, periodicity of dividen

payments and so forth. The document often contains so much information that it runs into 60-7pages, although in newspapers there is usually only a quarter-page highlights in the form of a

advertisement. Almost all mutual funds put their offer document on their websites.

Once the offer closes, the AMC issues the units of the scheme to the investors and th

funds mobilized are invested according to the broad investment objectives indicated in the off

document. For example, the investment objective or investments mandate of a certain schem

may be to invest at least 70 per cent in equity and equity-related securities issued by servi

sector companies and the balance in debt and money market instruments. Thus, such a schem

targets itself at those investors who feel that investing a sizeable amount in the services sectaffords a good opportunity of investment. This mandate indicates that if one is an investo

looking for a regular income from the investment and/ or if one has a very short-ter

investment horizon, then this scheme may not be suitable.

The offer document also indicates whether a unit holder will receive a - return throug

regular dividend or only the capital appreciation on the investment, or a combination of both.

may also require the unit holder to specify whether dividends should be paid daily, weekl

monthly or quarterly and so forth. The document also specifies the face value of a unit (whi

may vary depending on the scheme) and the minimum application amount for a single unholder, etc.

Costs associated with investing in mutual funds

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The offer document provides details of the various costs associated with investing in th

funds. Needless to say, an AMC incurs several expenses in managing the fund on behalf of th

investors. Some of these are recurring expenses while others are one-time.

The annual recurring expenses recovered as fund management fees from the investo

include trustee fees, custodian fees, registrar fees, investment management and advisory fe

and other recurring operating expenses. This includes ongoing marketing and selling expensebrokerage and transaction costs, audit fees, costs related to providing accounting statemen

dividend redemption cheques and warrants, insurance premium paid by the fund, salaries

staff, etc. In general, mutual funds cannot exceed the fund management fees indicated in th

offer document.

The AMC passes on these annual recurring expenses or fund management fees to th

investors as entry or exit loads. The annual recurring expense is normally expressed as

percentage of the net assets and is referred to as expense ratio. SEBI has given directives on th

expense ratio to be charged by AMCs. This ratio is a graded ratio. For example, equity fundmay charge up to 2.5 per cent of the average weekly net asset of the fund for the first Rs. 1,00

million, 2.25 per cent on the next Rs. 3,000 million, 2 per cent on the following Rs. 3,00

million and 1.75 per cent on any amount above this. Debt funds, balanced funds, and liqui

funds may charge different amounts as prescribed by SEBI. These expense ratios form an upp

limit. Given the structure of expenses, the bigger funds will obviously have lower expen

ratios.

Entry loador thefront-end charge is applied when investors buy units of a scheme. Thu

if the entry load is 2 per cent, then the AMC deducts 2 per cent of the total fund mobilizestraight away and invests the balance 98 per cent of the corpus to create the investors' portfoli

Hence, if the face value of a scheme is Rs. 10, the opening NAV will be only Rs. 9.80 and no

Rs. 10, since 2 per cent is deducted towards expenses.

Exit Load, or the back-end load, is levied when an investor exits the scheme (i.e. sells h

units). For example, if a fund charges an exit load of 2 per cent and the NAV of the scheme

Rs. 20 only Rs. 19.60 will be received when the units are redeemed or sold.

Normally AMCs do not charge both entry and exit loads for a given scheme. A scheme ma

also be a no-load scheme, if the AMC chooses not to levy any load whatsoever on a scheme.

There are some variations to these loads. One of them goes by a rather pompo

terminology as contingent deferred sales charges (or CDSC). CDSC is a back-end load with

difference. It varies depending upon the duration for which an investor remains invested in .th

scheme. Typically, it rewards an investor for loyalty that is, for remaining with the schem

longer. For example, a fund may levy a CDSC of 2 per cent if the investment is for less th

one year from the time of investing; 1.5 per cent if it is between one and two years; 1 per ce

for between two and three years; 0.5 per cent if it is between three and four years; and there 12


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no charge if the investment is for more than four years. CDSC is normally computed on the fa

value of the unit or the NAV whichever is lower. More often than not, CDSC is levied by de

funds more than equity funds.

Exit loads are generally structured so as to discourage large redemptions and in a certa

period they carry higher exit loads while smaller redemptions during the same period may car

smaller exit loads. Similarly, large investors are rewarded with lower or no entry load in ordto attract a bigger corpus while small investors are levied a higher load. Surprisingly, there hav

been occasions when some AMCs have inexplicably done the opposite, i.e. levied lower ex

load (in percentage terms) to be compared etc. NAVs and performance of other schemes of th

fund, both past and present and other relevant information, including financial informatio

about the sponsors and information about the board members of the mutual fund trust compan

etc. are also mentioned in this.

The offer document also lists out details of the growth or dividend options. For exampl

under dividend option it may mention the periodicity of dividends and reinvestment plans, etIt also clearly mentions the day of the week on which the AMC will declare the dividend. F

example, in the case of HSBC Floating Rate Short Term Plan-Monthly Dividend Option, th

dividend is declared on the last Friday of each month. Similarly, the exact date for quarterly an

weekly dividend is also mentioned.

While the offer document with its 60-70 pages of information might appear intimidating

the newly initiated, in reality these documents are fairly standardized and one soon learns whic

information is more relevant. It is however, very important to read the fine prints more tha

anything else. A simple and trivial sounding term like automatic renewalcould create a greproblem as it may give the AMC the right to shift the investment from a close-ended fund upo

its maturity to some other fund, unless redemption instructions are communicated to them o

time.

To sum up then, one should not only look for important factors that could affect the ris

and return of the investment in a scheme, but also develop the skill to read the fine prints. Th

devil, as they say, often lurks in the details.

Mutual Funds in Indian Capital Market

Retail investors usually want to participate in the Capital market but due to paucity of fundlack of expertise knowledge and limited risk - bearing capacity they have limited access tcapital market. Mutual funds provide a mechanism that helps the retail investors enter thcapital market. The mutual funds manage their funds for maximum gain at minimum risk and the most professional way and work as agent for growth and stability of capital market. Ti1964, there was no mutual fund in India. In 1963, UTI Act, 1963 was enacted for thestablishment of first mutual fund. The UTI launched its first scheme, US-64, in 1964 whiclater became the most popular unit scheme in India. In 1987, the RBI issued bank-sponsore

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mutual funds. Government of India also issued Guidelines in 1991 for setting up of mutufunds. In thefirst phase, i.e., from 1964 to 1987, there was single mutual fund (UTI) structurAfter 1987, some of the commercial banks started mutual fund schemes, and this second phascontinued till 1992. The third phase started after the set up of SEBI in 1992 when the privasector mutual funds were also encouraged. Since then, there h as been a growth in number omutual funds as well as the numbers and types of schemes. During last 10 years, mutual fundhave become very popular among retail investors. The increase in number of mutual funds an

their schemes speak of the underlying strength of the investors' confidence in them. Some of thmutual funds operating in India are as follows (in alphabetical order).

The multiplicity of mutual funds has intensified competition and led to product innovatio

Each of these mutual funds has a number of scheme operating with different features ancharacteristics. There are more than 400 schemes in operation at present.Immediately after i

constitution, SEBI issued the Mutual Fund Regulations in 1993. However, with the growth

mutual funds, it was imperative that they should follow uniform policies in respect of NA

valuation of investment, accounting practices, etc. SEBI prepared a Mutual Fund 2000 Repo

and on the basis of this report, it prepared more stringent and comprehensive regulations 1996 known as SEBI (Mutual Fund) Regulations, 1996. Since then, there have been number

amendments in Regulations, 1996. Besides, SEBI has also issued several Guidelines in respe

of working of mutual funds.

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Types of Mutual Funds:

STOCK FUNDS

These funds invest primarily in common stocks. There is a broad range of common stockfunds- from those that invest almost exclusively in high quality blue chip companies to thos

that invest only in the new, un-established companies

BOND/INCOME FUNDS

Income funds are named appropriately: their purpose is to provide current income on a steady

basis. When referring to mutual funds, the terms "fixed-income," "bond," and "income" arsynonymous. These terms denote funds that invest primarily in government and corporate deb

While fund holdings may appreciate in value, the primary objective of these funds is to provid

a steady cash flow to investors.

BALANCED FUNDS

The objective of these funds is to provide a balanced mixture of safety, income and capita

appreciation. The strategy of balanced funds is to invest in a combination of fixed income an

equities. A typical balanced fund might have a weighting of 60% equity and 40% fixed income

SPECIALTY FUNDS

This classification of mutual funds is more of an all-encompassing category that consists o

funds that have proved to be popular but don't necessarily belong to the categories we'v

described so far. This type of mutual fund forgoes broad diversification to concentrate on

certain segment of the economy.

SECTOR FUNDS

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These funds are targeted at specific sectors of the economy such as financial, technology

health, etc. Sector funds are extremely volatile. There is a greater possibility of big gains, bu

you have to accept that your sector may tank.

TAXATION FUNDS

Mutual funds designed to provide tax exemption benefits to the investors, whether in th

domestic or foreign capital markets are called taxation funds. Tax saving Magnum of SB

Capital Markets Limited is an example of the domestic type and UTIs US & Co. million Indi

fund based in the US is an example of the latter type. Offshore mutual funds avail the ta

exempt status in tax heavens.

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Merits & Demerits of Mutual Funds:

Merits:-

Professional Management - The primary advantage of funds (at least theoretically) is th

professional management of your money. Investors purchase funds because they do not hav

the time or the expertise to manage their own portfolios. A mutual fund is a relativel

inexpensive way for a small investor to get a full-time manager to make and monito

investments.

Diversification- By owning shares in a mutual fund instead of owning individual stocks o

bonds, your risk is spread out. The idea behind diversification is to invest in a large number oassets so that a loss in any particular investment is minimized by gains in others. It wouldn't b

possible for an investor to build this kind of a portfolio with a small amount of money.

Economies of Scale - Because a mutual fund buys and sells large amounts of securities a

a time, its transaction costs are lower than what an individual would pay for securitie

transactions.

Liquidity- Just like an individual stock, a mutual fund allows you to request that your shar

be converted into cash at any time.

Simplicity- Buying a mutual fund is easy! Pretty well any bank has its own line of mutua

funds, and the minimum investment is small. Most companies also have automatic purchas

plans whereby as little as Rs.100 can be invested on a monthly basis.

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Demerits:-

Professional Management - Did you notice how we qualified the advantage o

professional management with the word "theoretically"? Many investors debate whether or no

the so-called professionals are any better than you or I at picking stocks. Management is by no

means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'l

talk about this in detail in a later section.

Costs -Mutual funds don't exist solely to make your life easier - all funds are in it for

profit. The mutual fund industry is masterful at burying costs under layers of jargon. Thes

costs are so complicated that in this tutorial we have devoted an entire section to the subject.

Dilution - It's possible to have too much diversification. Because funds have small holding

in so many different companies, high returns from a few investments often don't make muc

difference on the overall return. Dilution is also the result of a successful fund getting too big

When money pours into funds that have had strong success, the manager often has troubl

finding a good investment for all the new money.

Taxes - When making decisions about your money, fund managers don't consider you

personal tax situation. For example, when a fund manager sells a security, a capital-gains tax i

triggered, which affects how profitable the individual is from the sale. It might have been mor

advantageous for the individual to defer the capital gains liability.

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Schemes of Mutual Funds:

A mutual fund may float several schemes which may be classified on the basis of its structure

its investment objectives and other objectives.

Open Ended Funds:

An open-ended fund is equitably divided into shares which vary in price in direct proportion to

the variation in value of the funds net asset value. Each time money is invested, new shares o

units are created to match the prevailing share price; each time shares are redeemed the asset

sold match the prevailing share price. In this way there is no supply or demand created fo

shares and they remain a direct reflection of the underlying assets. Open ended scheme is open

for subscription all through year. An investor can buy or sell the units at NAV (Net Asse

Value) related price at any time

Close Ended Funds:

A closed-ended fund issues a limited number of shares (or units) in an initial public offering (o

IPO). The shares are then traded on an exchange or directly through the fund manager to creat

a secondary market subject to market forces. If demand for the shares is high they may trade a

a premium to net asset value. If demand is low they may trade at a discount to net asset value

Further share (or unit) offerings may be made by the scheme if demand is high although thi

may affect the share price. A close ended fund is open for subscription only during a specified

period, generally at the time of initial public issue. The close ended fund scheme is listed on th

same stock exchanges where an investor can buy or sell the units of this type of scheme.

Internal Funds:

Internal funds combine both the features of open ended funds and close ended funds.

Growth Funds:

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The objective of growth fund scheme is to provide capital appreciation over the medium t

long term. This type of scheme is an ideal scheme for the investors seeking capital appreciatio

for a long period.

Income Funds:

The income fund schemes objective is to provide regular and steady income to investors.

Money Market Funds:

The objective of money market funds is to provide easy liquidity, regular income an

preservation of income.

Measuring the Performance of a Mutual Fund Scheme:

The performance of a scheme is reflected in its net asset value (NAV) which is disclosed o

daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes

The NAVs of Mutual Fund are required to be published in newspapers. The NAVs are also

available on the web sites of Mutual Funds. All Mutual Funds are also required to put thei

NAv on the website association of Mutual Fund in India (AMFI) www.amfindia.com and thu

the investors can access NAVs of all Mutual Funds at one place. The Mutual Fund are also

required to publish their performance in the form of half-yearly results which also include thei

returns/yields over a period of time i.e. last six months, 1 year, 3 years, inception of schemes.

Investors can also take into other details like percentage of expenses of total assets as thes

have an effect on the yield and other useful information in the same half-yearly format. Th

Mutual Fund is also required to send annual report or abridged annual report to the unit holder

at the end of the year. Various studies on Mutual Fund schemes including yields ofdifferen

schemes are being published by the financial newspapers on a weekly basis.

Net Asset Value of a Scheme:

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The net asset value, or NAV, is the current market value of a fund's holdings, usuall

expressed as a per-share amount. For most funds, the NAV is determined daily, after the clos

of trading on some specified financial exchange, but some funds update their NAV multipl

times during the trading day. Open-end funds sell and redeem their shares at the NAV, and soprocess orders only after the NAV is determined. Closed-end funds (the shares of which ar

traded by investors) may trade at a higher or lower price than their NAV; this is known as

premium or discount, respectively. If a fund is divided into multiple classes of shares, eac

class will typically have its own NAV, reflecting differences in fees and expenses paid by th

different classes

The specific formula for computing the NAV is as follows:

A. (Market Value of Investments + Receivables + Other Accrued Income + Other Assets)

Less

B. (Accrued Expenses + Other Payables + Other Liabilities)

Divided by

C. Number of units outstanding on the NAV computation date

TOP TEN SCHEMES NAME IN LAST 5 YEARS.21


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Rank Scheme Name Date NAV (Rs.) Last 5 Years

%

1 Reliance Diversified Power Sector Fund -

Growth

Apr 30 ,

2010

81.7225 41.342

2 Reliance Pharma Fund - Growth Apr 30 ,2010

49.6218 33.1288

3 HDFC Top 200 - Growth Apr 30 ,2010

187.894 30.3114

4 HDFC Equity Fund - Growth Apr 30 ,

2010

244.512 30.16

5 ICICI Prudential Dynamic Plan - Growth Apr 30 ,

2010

96.7763 30.0586

6 Reliance Growth - Growth Apr 30 ,

2010

457.7865 29.9803

7 SBI Magnum Multiplier Plus 93 - Growth Apr 30 ,

2010

78.22 29.5439

8 DSP BlackRock Top 100 Equity Fund - Growth Apr 30 ,

2010

92.173 29.4918

9 Reliance Banking Fund - Growth Apr 30 ,

2010

86.2162 29.4514

10 Sundaram BNP Paribas Select Midcap - Growth Apr 30 ,

2010

138.8306 29.1399

*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for more

than 1 year are compounded annualized.

Mutual Funds Companies in India

The following is the alphabetical list of companies dealing with Mutual Funds in India

22
http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC088http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC088http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC095http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=IT001http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=ZI006http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=PI058http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC009http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=SB002http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=DS020http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC030http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=SN017http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC095http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=IT001http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=ZI006http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=PI058http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC009http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=SB002http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=DS020http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC030http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=SN017http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC088http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=RC088


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ALLIANCE CAPITAL MUTUAL FUND

BIRLA MUTUAL FUND

BOB MUTUAL FUND

BOI MUTUAL FUND

CANBANK MUTUAL FUND

CHOLAMADALAM CAZE NOVE MUTUAL FUND

DSP MERRILL LYNCH MUTUAL FUND

DUNDEE MUTUAL FUND

ESCORTS MUTUAL FUND

FIRST INDIA MUTUAL FUND

HDFC MUTUAL FUND

IDBI- PRINCIPAL MUTUAL FUND

IL&FS MUTUAL FUND

INDIAN BANK MUTUAL FUND

ING SAVINGS MUTUAL FUND

JARDINE FLEMING MUTUAL FUND

JM MUTUAL FUND

KOTAK MAHINDRA MUTUAL FUND

LIC MUTUAL FUND

MORGAN STANLEY MUTUAL FUND

PIONEER ITI MUTUAL FUND

PNB MUTUAL FUND

PRUDENTIAL ICICI MUTUAL FUND RELIANCE MUTUAL FUND

SBI MUTUAL FUND

STANDARD CHARTERED MUTUAL FUND

SUNDARAM MUTUAL FUND

SUN F&C MUTUAL FUND

TATA MUTUAL FUND

TAURAS MUTUAL FUND

TEMPLETON MUTUAL FUND

UNIT TRUST OF INDIA ZURICH INDIA MUTUAL FUND

OBJECTIVES OF THE STUDY

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The present study relates with the MUTUAL FUND AS AN INVESTMENT TOOL.In fa

developing country like India, the standard of the people is also growing up. So more and mo

people prefer better invest in better environment. The specific objectives of the present stud

are as given below:-

To check awareness of Mutual Fund investors.

To compare mutual funds prevailing in the Market

To know the investor perception regarding mutual funds as an

investment tool.

Research Methodology

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Introduction:

The word research is derived from the French recherch, means "to search". Research is

human activity based on intellectual investigation and aimed at discovering, interpreting, an

revising human knowledge on different aspects of the world. It is an active, diligent an

systematic process of inquiry in order to discover, interpret or revise facts, events, behaviors, o

theories, or to make practical applications with the help of such facts, laws or theories. Th

term "research" is also used to describe the collection of information about a particular subjec

It is the process of gathering, recording and analyzing critical and relevant facts about any

subject or topic.

Nature of Research:

The nature of research is explaining and analytical. Explanatory research seeks to discove

relationship while research is designed to help executive to choose among various possibl

courses of action that is to make a decision. It is explanatory in sense the research has been

done on the basis of observations mode and the reliable the companies and documents. It i

analytical because facts have been analyzed and interpreted with the help of data gathered.

Definitions:

According to CONCISE OXFORD DICTIONARY, Research is defined as an endeavour t

discover new or collate old facts etc. by the scientific study of a subject or by a course o

critical investigation.

According to THOMAS KINNEAR, A research design is the basic plan that guides the dat

collection and analyzes the phases of project. It is the frame work plan that specifies the type o

information collected rest he companies of data and data collection procedure.

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Structure of Research:

Generally, all research projects share the same general structure. Though step order may var

depending on the subject matter and researcher, the following steps are usually part of mos

formal research, both basic and applied:

Research Methodology:A research methodology defines what the activity of research is, how to proceed, how to

measure progress, and what constitutes success. A brief description of the researc

methodology adopted for this study is as follows:-

UNIVERSE OF STUDY

The universe of the study for awareness of mutual funds as an investment tool in the public in

the Jalandhar and Amritsar city. Due to the time and cost constraints, it is impossible to collec

the preference of all people in the city. Hence, purposive selection of respondents for surve

will be done.

SAMPLE SIZE

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The data will be collected from 100 respondents and 100 responses are fit to deliver the

requisite levels of statistical accuracy. At the time of selecting the respondents every care

will be taken to select the respondents with different social economic background as to

make it fairly reprehensive.

SAMPLING

Sampling may be defined as the process of obtaining information about an entire

population by examining only a part of it. In any investigation of data are collected only

from a representative part of universe we say that the data are collected by sampling.

In this study we used convenience sampling for collecting the data. This involvescollecting the information from the respondents who are reachable for data collection.

CONVENIENCE SAMPLING

In convenience sampling, participants are selected based on how easy it is to reach them.

Convenience sampling does not produce a representative sample of the population

because people or items that can be reached easily and conveniently are likely to bedifferent to those that are harder to reach.

METHOD OF DATA COLLECTION:

Two types of data

(1)Primary data

(2)Secondary data

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Primary data

Primary data will be collected with the help of a structured questionnaire will be

designed in such a way that it could explore the awareness among the public.

(1)Questionnaire

(2)Secondary data

Secondary data are those collected by some other person for his purpose and published and a

available for the present study.

Magazines

Websites

Books

ANALYTICAL TOOL USEDThe analytical tool used in this study is percentage method and mean score. For the eas

analysis of data percentage method has been worked out.

For easy understanding of statistical data, diagrammatic representation has been made in th

form of chart.

PERCENTAGE ANALYSIS

Percentage refers to a special kind of ratio. It is used in making comparison between two

more series of data. They are used to describe relationships.

Percentage of respondents = No. of respondents 100

Total respondents

SCORING PROCEDURE

This study followed the scoring procedure as instructed by the Likert scale. The scoring is

five-point scale ranging from 1, 2,3,4,5.

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SAMPLE SIZE:-

Sample size s the size of data that we are going to collect and based on which Research Work

is done. Its the collected data from persons, society, environment accordingly.In our Research well collect data from common people specially from students, their parent

and working population.Well collect a sample size of 100.

COLLECTION AREA:-

For Research work well collect our data preferably from those areas where public gathering i

the most, so that can able to get unbiased and common view point. i.e investors of amritsar an

jalandhar .

SAMPLING TOOLS:-Sampling Tool signifies the techniques of data collection. there are several techniques fo

collecting data, like

Observation Method

Interviewing Method

Questionnaire method

Mailed questionnaire

Experimentation

In between all these methods well follow the QUESTIONNAIRE METHOD.

Literature Survey

Who invests in mutual funds?

The statistics seem to indicate that youth is splurging a lot more than saving for posterity. Cars

snazzy mobiles and Loius Vuitton bags are taking precedence over savings. More of them arealso buying houses leaving little to save. The average age of home buying has been falling. I

is down to 32 years. So EMI payments - and their movement above seem to be keeping them

occupied. With little to save, they arent probably investing much in mutual funds.

Does marital status affect the way you invest? Yes, if you are an Indian. Some insurers mentio

that the insurance policies are usually bought after marriage. This is because the concept of ris

seeps into the mind of an average Indian male only after he ties the knot.

29
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What about the responsibility towards you parents during the bachelor days? one may ask. Thi

is best left unanswered.

Also with investment (mutual fund) needs usually following that of risk protection, the

propensity to invest is lesser among the youth. The average mutual fund investor is 45 years ol

Probably at this age he is freed from home loan debt to actual start concentrating on investing

needs.

According to the survey, Indian MF investors were found to be fickle minded unlike the US

investors. In US, according to ICI survey 2007, average tenure of mutual fund investment was

five years. 13% of its investors had an average investment horizon of 10 or more years, 27%

with an investment horizon of 5 to 9 years, 15% for 3 to 4 years and 26% for 1 to 2 years. In

India, over the years the average investment tenure has, in fact, fallen from 18 months to less

than a year.

Heavy churning of MF portfolio thanks to unscrupulous distributors, is bringing down the

average holding period.

Whats the average number of mutual fund schemes that an investor holds? In the US, it is 4

mutual funds and the statistic in India is not very different (four). With its unique individual

characterisctics, the Indian investor is truly turning out to be an enigma for MF marketers.

50% fund managers underweight on India: ML survey

According to Merrill Lynch survey, 21% of the managers are overweight on India as

against 18% in August. 29% are neutral on India compared to 9% in August and 50% arunderweight on India Vs 68% in August. This suggests a strong contrarians buy signal fo

EM equities.

However the risks are still there significantly as against the global financial stability. 46%

fund managers feel that corporate profit growth would deteriorate slightly whereas 84%

see over 10% earnings growth in next 12 months. 71% fund managers say the markets ar

fairly valued whereas 25% feel that it is undervalued. All respondents prefer domestic

demand story to global demand story.

According to the survey most are bullish on Brazil, China, Russia and India ranks the

lowest. The fund managers are long on consumer discretionary, industrials, financials an

energy whereas they are short on materials, utilities and technology.

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SAMPLE DICRIPTIONAge of Respondent

Age Groups No of

Respondent

%age of

Respondent

18years 25 Years 18 18%

25 Years 35 Years 39 39%

Above 35 Years 43 43%

Total :- 100

18

3943

0

10

20

30

40

50

No.

ofRespondent

18years

25 Years

Above 35

DESCRIPTION:-

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This graph shows the age of the respondent. Since in this Research the

most of respondent are above 35 years. They are 43 out of 100.

Gender of Respondent

Gender No of

Respondents

%age of

Respondent

Male 88 88%

Female 12 12%

Total :- 100

88

12

0

20

40

60

80

100

No.ofRespondents

1

Gender of Respondent

M

F

DESCRIPTION:-

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This graph shows the gender of the respondent. Since in this Research the

most of respondent are male. This graph specifies 88 males & 12 females

out of 100 respondent.

Educational Qualification of Respondent

Educational

Qualification

No of

Respondent

%age of

Respondent

Diploma Holder 3 3%

Graduate 31 31%

Post Graduate 42 42%

Professional 21 21%

Any Other 3 3%Total:- 100

3

31

42

21

305

10

15

20

25

30

35

40

45

No.ofResponden

t

1/1/1900

Diplom

Gradua

Post Gr

Profess

Any Ot

DESCRIPTION:-

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This graph shows the Educational Qualification of the respondent. Since

in this Research the most of respondent are post graduate.

Occupation of Respondent

Occupation No of

Respondent

%age of

Respondent

Business 29 29%

Service 52 52%

Retired 7 42%

Student - 21%

House Wife - -Professional 12 12%

Any Other - -

Total:- 100

29

52

7

0 0

12

00

10

20

30

40

50

60

No.o

fRespondent

1/1/1900

Busi

Serv

Retir

Stud

Hou

Prof

Any

34


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DESCRIPTION:-

This graph shows the occupation of the respondent. Since in this Research

the most of respondent are in Service .

Annual Income of Respondent

Annual Income No of

Respondent

%age of

Respondent

Below 2 Lakh 26 26%

2 lakh 5 Lakh 52 52%

5 lakh 10 lakh 14 14%

Above 10 lakh 8 8%

Total:- 100

26

52

14

8

0

10

20

30

40

50

60

No.ofRespondent

1/1/1900

Below

2 lakh-

5 lakh

Above

DESCRIPTION:-

This graph shows the annual income of the respondent. Since in this

Research the most of respondent are lies in the slab of 2 lakh-5 lakh.

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DATA ANALYSIS

Q.How many people invest the Saving?

The People invest

there saving

No of

Respondents

%age of

Respondent

Yes 100 100%

No 0 0%

Total :- 100

100

00

20

40

60

80100

No.ofRespondents

1

INTERPRETATION:-

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In our research 100 % respondents invest there saving. From this we can

analysis that all person believes in saving.

The Part of Income Respondent want to invest

The Part of Income No of

Respondent

%age of

Respondent

5% - 10 % 36 36%

10% - 15% 19 19%

15% - 20% 27 27%

20% - 25% 11 11%

Above 25% 7 7%Total:- 100

36

19

27

11

7

0

5

10

15

20

25

30

35

40

No.ofResponden

t

1/1/1900

5%

10

15

20

Ab

INTERPRETATION:-

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In our research the maximum respondent invest there 5%-10% part of

income. They are 36% out of 100%. From this we can analysis the most

of respondent save the minimum part of income.

Q. How often do you make investment decision andexecute them too?

The investment

decision executed.

No of

Respondent

%age of

Respondent

Always 15 15%

Some time 64 64%

Rarely 21 21%

Never 0 0%

Total:- 100

15

64

21

00

10

20

30

40

50

60

70

No.ofRespondent

1/1/1900

(A)

So

Ra

Ne

INTERPRETATION:-

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In our research the maximum respondent execute there investment

decision Some. They are 64% out of 100%. From this we can analysis the

most of respondent taking decision some time for saving.

Q. Which of the following modes of investment do you

prefer?

Modes of

Investment

No of

Respondent

%age of

Respondent

Fixed Deposits 70 70%

Mutual Funds 60 60%

Shares 36 36%

Gold 32 32%

Land 36 36%

Bonds 3 3%

Any Other 1 1%

Total:- 238

70

60

3632

36

3 10

10

20

30

40

50

6070

No.ofRespondent

1/1/1900

Fixed

Mutual

Share

Gold

Land

BondsAny Ot

INTERPRETATION:-

In our research the maximum respondent invest there saving in Fixed

Deposits. They are 70% out of 100%. From this we can analysis the most39


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of respondent invest the saving in Fixed Deposits. We can also analysis

the 60% respondent invest in Mutual Funds.

Q. Whom do you consult before making an investment?

Consultant No of

Respondent

%age of

Respondent

Friends/Relatives 31 31%

Parents 19 19%

Spouse 16 16%

Agents/Advisors 83 83%

Total:- 149

31

1916

83

010

20

30

40

50

60

70

80

90

No.ofResponde

nt

1/1/1900

Consultant

Friends/R

Parents

Spouse

Agents/A

INTERPRETATION:-

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In our research the maximum respondent consult with Agents/Adviso

before making investment. They are 83% out of 100%.

The Mutual Funds Investors

The Mutual Fundsinvestors

No ofRespondents

%age ofRespondent

Yes 64 64%

No 36 36%

Total :- 100

64

36

0

10

20

30

40

50

60

70

No.ofResponden

ts

1

INTERPRETATION:-

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In our research the maximum respondent invest in Mutual Funds. They

are 64% out of 100%.

Q. According to you which sector provides better Mutua

Funds?

The Sectors of

Mutual Funds

No of

Respondents

%age of

Respondent

Public Sector 16 16%

Private Sector 48 50%

Total :- 64

16

48

0

10

20

30

40

50

No.ofRespondents

1

Public S

Private

INTERPRETATION:-

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In our research the maximum respondent says the Private sector Mutua

Funds are better then Public sector . They are 50 out of 64 Mutual Funds

investors.

Q. Which type of source you prefer for purchasing

mutual Funds?

Sources for Purchase

Mutual Funds.

No of

Respondent

%age of

Respondent

Agents 41 41%

Open market 20 20%

Bank 18 18%

Any other 0 0%

Total:- 149

41

2018

00

5

10

15

20

25

30

35

40

45

No.ofRespondent

1/1/1900

Age

Ope

Ban

Any

INTERPRETATION:-

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Since there was multiple choices answer. So that the total is exceeding

100. In our research the maximum respondent says the source o

purchasing Mutual Funds from the Agents.

Q. Would you be interested to know more about Mutual

Funds than what is your current knowledge?

The Mutual Funds

knowledge

No of

Respondents

%age of

Respondent

Yes 99 99%

No 1 1%

Total :- 100

99

10

20

40

60

80

100

No.ofRespondents

1

The Peo le want to knowlede e aboutINTERPRETATION:-

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In our research the maximum respondent wants to know more abou

Mutual Funds then there past knowledge. They are 99% out of 100%.

Q. Being a Mutual Fund investor: Are you aware of the

various schemes offered by the asset management

companies (AMC).

Awareness regarding

MFs Schemes.

No of

Respondent

%age of

Respondent

Mostly 38 38%

A Few 16 16%

Very Few 10 10%

None 0 0%

Total:- 64

38

16

10

00

5

10

15

20

2530

35

40

No.ofRespondent

1/1/1900

INTERPRETATION:-

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In our research the maximum respondent mostly aware of the variou

schemes offered by the Asset Management Companies. They are 38 ou

of 64 Mutual Funds investors.

Q. Are you satisfied with your MF company schemes?

Satisfaction about MF

company Schemes

No of

Respondent

%age of

Respondent

Highly Satisfied 8 8%

Dissatisfied 4 4%

Satisfied 52 52%

H. Dissatisfied 0 0%

Total:- 64

8

4

52

00

10

20

30

40

50

60

No.ofResponden

t

1/1/1900

Satisfaction Level

Highly Sati

Dissatisfie

Satisfied

Highly Dis

INTERPRETATION:-

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In our research the maximum respondent satisfied with there Mutual Fund

Company schemes. They are 52 out of 64 Mutual Funds investors.

Q. If you dont invest in MFs , What are the reason?

Reasons No of

Respondent

%age of

RespondentBitter past experience. 2 2%

Difficulty in selection schemes. 8 8%

Lack of Knowledge. 22 22%

In-efficient investment advisors. 2 2%

Lack of confidence in service being

provided.4 4%

Total:- 36

2

8

20

24

0

5

10

15

20

No.ofRespondent

1/1/1900

Bitter past ex

Difficulty in seSchemes

Lack of Know

In-efficient inv

advisorsLack of confid

service being

INTERPRETATION:-

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In our research the maximum respondents have lack of knowledg

regarding Mutual Funds thats why they are not invest in Mutual Funds

They are 20 out of 36 investors.

Q. Give the rank to investment tools according to yourpreference?

Least Important Most Important

Statements 1 2 3 4 5 Mean

Shares 20 18 20 21 21 3.05

Fixed Deposits 9 7 20 21 43 3.82

Company Debentures 17 29 38 12 4 3.45

Mutual Funds 21 21 10 2 27 3.12

Gold 8 17 19 33 23 3.46

Land 9 17 11 28 35 3.63

INTERPRETATION:-

In our research the maximum respondent give the rank as most importan

to Fixed Deposits. There mean is also maximum that is 3.82. And then

land is also most important tool for the investment in our research. There

mean is 3.63. And the Gold mean is 3.46. The Company Debentures mean

is 3.45. The Mutual Funds mean is 3.12. And the Share importance i

very low in our research there is 3.05. So that we analysis the Fixed

Deposits is most important in eyes of respondent as investment tool.

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1 2 3 4 5


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Rank them on a scale of 1-5 with 1 representing minimainfluence & representing Strong influence.

Least Influential Most Influential

Sources 1 2 3 4 5 Mean

Television 12 9 18 13 48 3.76

Internet 21 26 21 10 22 2.86

Newspaper 5 8 27 26 34 3.78

Journals/Articles 16 26 42 5 11 2.69

Friends/ Relation 9 23 32 22 14 3.09

Agents 7 10 9 33 41 3.91

INTERPRETATION:-

In our research the respondents mostly influential by the source of

information regarding investment tools from Agents. There mean is 3.91.

After Newspaper its mean is 3.78. and then they are influenced from theT.V its mean is 3.76.and after they get information from the Friends/

Relatives . Its mean is 3.09. After from Internet, very few respondent go

for information to Internet. There mean is 2.86. and at the last the

respondent least influence from the source Journals/Articles. There mean

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is 2.69.So that we can analysis most of the respondent influence from the

source Agents for knowledge regarding any investment tool.

Q. How important is price as a factor when considering

investment in Mutual Funds?

Least Important Most Important

Importance 1 2 3 4 5 Mean

Price as a factor 12 39 21 14 14 2.79

INTERPRETATION:-

In our research for the respondent the price as a factor when considering

investment in mutual Funds is Least Important. There mean is 2.79.So

that we can analysis the price factor is not important for considering

investment in the Mutual Funds.

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Q. Other things remaining favorable, if a Mutual Fund

as per your assessment is overpriced, would you stil

invest in the Funds?

Definitely not invest Definitely will invest

Importance 1 2 3 4 5 Mean

If Mutual Funds as per

assessment isoverpriced, would you

invest in the funds?

29 38 17 9 7 2.27

INTERPRETATION:-

In our when Mutual Funds as per your assessment is overpriced then the

mostly respondents are not invest in the Mutual Funds. There mean is2.27.

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FINDINGS

All the respondents agreed that they invest their saving because it is the nee

of hour. It may be due to the life is full of uncertain.

Majority of the respondents agreed they invest 5-10% part of there income .

Majority of the respondents agreed that its some time make investmen

decision and also execute them too.

Majority of the respondent invest in fixed deposits .it may be due to reasoless risk in this mode and fixed return is there.

Majority of the respondent consult advisor and agents before they invest the

money .It may be due to they help in chosing the schemes ..

Majority of the respondent invest their saving in mutual funds.it may b

because pool of people have same objectives and less risk involved.

Majority of the respondent go for private sector mutual fund companies

may be reason due to better services and return provide by private secto

companies.

Majority of the respondent think that agents are the best source of purchasin

mutual fund .it may be due to better knowledge of agents about schemes an

they also give free advise can discount on commissions earns by agents.

All the respondent interested to know more about Mutual Funds than thecurrent knowledge because majority of respondent do not invest due to lac

of knowledge.

Majority of the respondent are satisfied with their mutual fund compan

schemes.

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Majority of the respondent preferred to invest in land and fixed deposits.

SUGGESTIONS

Nothing is perfect in this world; there is always some scope

improvement. I suggest to the banks that they should diversify the

portfolio of investments especially M Fs.

Banks should try to reduce the entry and exit loads of M F s, so as to mak

it a best tool of investment and a potential business tool.

No doubt that recession had its impact on every tool of investme

including M F s but I suggest that banks should provide proper educatio

to the customers regarding the market updates by arranging trade fair

programmes at regular intervals

Recession is a temporary phenomenon so it will take some time

reconcile. Moreover it is an opportunity to invest in M F as the units wi

be allocated at low prices

Banks should focus on the customer service, relation and satisfaction b

delivering value to them

Banks should maintain transparency with the customers about their mod

of operation and code of conduct.

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The banks need to look at their advertising operations .Nowaday

advertising is the tool to reach the public faster .The bank should adopt th

strategic audit of advertising.

Since it is recession going on so the people should think of investing fo

long term in order to get the expected growth

LIMITATION OF THE STUDY

Sample chosen may not be the true representative of population. In certain cases the respondents were lazy and they filled the questionnair

without any seriousness.

Due to time constraint the study was limited in extent.

The cost for the study was one of the limitations.

Although every effort has been made to include respondents belonging t

various socio-economic backgrounds even then the sample may not be trul

representative of the universe.

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CONCLUSION

Mutual fund is one of the potential tool of investment and 64%of the sampwere aware about the mutual funds launched by the banks.

Majority of the respondents are comfortable with the investing in Savings an

FD s ,it is because of the recession that is going on.

Majority of the sample are not experienced with investing in mutual funds.

Among the sample 64%of the respondents invest with principle objective o

growth and income ,15%with aggressive growth who invest in shares.

Because of recession conditions prevailing in the market majority of th

people have shifted their investment to debt securities.

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Documents

Age of Respond