Performance Comparison and Investors Perception About Investing in Mutual Funds at NJ India Invest 2010

8/9/2019 Performance Comparison and Investors Perception About Investing in Mutual Funds at NJ India Invest 2010

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A SUMMER INTERSHIP PROJECT REPORT

ON

Performance Comparisonand

Investors Perception about Investing inmutual funds "

At

Udaipur, Rajasthan

IN THE PARTIAL FULFILLMENT FOR THE AWARD OF

OF MASTERS IN BUSINESS ADMINISTRATION

SUBMITTED TO

ADVENT INSTITUE OF MANAGEMENT STUDIES

UDAIPUR

UNDER THE GUIDANCE OF: SUBMITTED BY:

Mr. AMIT SONI VAIBHAV KUMAR JHANWAR ADVENT INSTITUTE OF MANAGEMENT STUDIES 1


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AUTHORISATION

This report is submitted as partial fulfillment of the requirement of MBA program of

RAJASTHAN TECHNICAL UNIVERSITY. The report on the title Performance

Comparison and Investors Perception about Investing in mutual funds " is an

original work and has not been submitted to any other institution or university for theaward of any degree or diploma.

Place: Udaipur

Date : VAIBHAV KUMAR JHANWAR

ADVENT INSTITUTE OF MANAGEMENT STUDIES 2


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ACKNOWLEDGEMENT

Apart from individual efforts, the success of any project depends largely on the

encouragement of many others involved directly and indirectly. I take this opportunity

to express my heartfelt gratitude to the people who have been influential in the progress

of this project. I consider it my pleasant duty to acknowledge my deep sense of

gratitude to Mr. Amit Soni, Branch Manager, NJ India Invest, Udaipur for his

continuous guidance and direction to the exercise.

I am also grateful to Mr. Yogesh Jain, Mr. Jitendra Jain - Sales Executive for his

cooperation and guidance in learning the nuances of MF Industry.I would like to thank all the people of NJ India Invest, Udaipur for the support they gave

for the completion of the project.

Date:

Place: Udaipur



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PREFACE Finance & its functions are the part of economic activity. Finance is very essentially

needed for all types of organizations viz; small, medium, large-scale industries & service

sector. Hence the role of finance manager & the subject finance accounting gained

maximum importance. Liberalization, globalization & privatization created new

challengers to entrepreneur & corporate in carrying theyre day to day activities. So,

finance is regarded as the life blood of a business organization.

Master of business administrator is professional course which develop a new body of

knowledge & skill set & make as available for those seeking challenging carriers in the of

liberalization & globalization.

The goal of the Summer Training is to give a corporate exposure to the students as well

as to give them an opportunity to apply theory into the practice. The real business

problems are drastically different from class-room case solving. Summer Project aims to

providing little insight into working of an organization to a management trainee. Among

every stage of knowledge being inculcated in students, practical training in the corporate

world plays a significant role in exhibiting and pruning their capabilities.The purpose behind writing a report is to put in to works the practical training that is

imparted into me that gives a better and a clear understanding of the experience I got.

Performance Comparison

and

Investors Perception about Investing in mutual funds

Table of Contents



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26. Performance Comparison of Different MF in India 49-53

27. Company Overview About NJ India Invest 54-55

28. Philosophy 55-5629. Vision and Mission 56

30. Division 57-58

31. Management 58-59

32. Products 59

33. People 60

34. Culture 6035. Service standards 61-62

36. Recognitions 62-63

37. 360 Advisory Platform 64-65

37. Mutual funds Advisor 66

38. Know your Client KYC 67-69

39. NISM for CPE Registration Form 70

40. Questionnaire 71-73

41. Responses 74

42. Suggestions 75

43. Conclusion 76

44. Recommendations 77

45. Bibliography and websites 78

OBJECTIVE OF STUDY

1 ) Understanding Mutual Funds



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2 ) Understanding Market Potential of Mutual funds.

3 ) Understanding which mutual fund is good for whom.

4) Analyzing Awareness of Mutual Funds among insurance advisors, Post Office -

RD/FD agents.

5) Analyzing risk and return involved in different schemes of mutual funds.

6) Recruitment of partners for NJ Invest.

7) Analyzing investors perception about investing in mutual funds.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth



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was slow, but it accelerated from the year 1987 when non-UTI players entered theIndustry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement,

both qualities wise as well as quantity wise. Before, the monopoly of the market hadseen an ending phase; the Assets Under Management (AUM) was \ 67 billion. Theprivate sector entry to the fund family raised the AUM to \470 billion in March 1993 andtill April 2004; it reached the height if \1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutualfund industry can be broadly put into four phases according to the development of thesector. Each phase is briefly described as under.

The history of mutual funds in India can be broadly di vided into four distinctphases:

First Phase: 1964-1987

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set upby the Reserve Bank of India and functioned under the Regulatory and administrativecontrol of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and theIndustrial Development Bank of India (IDBI) took over the regulatory and administrativecontrol in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At theend of 1988 UTI had \ 6,700 cores of assets under management.

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

In 1987 marked the entry of non- UTI, public sector mutual funds set up by publicsector banks and Life Insurance Corporation of India (LIC) and General InsuranceCorporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fundestablished in June1987followed by Canara bank Mutual Fund (Dec 87), Punjab National

Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutualfund industry had assets under management of \ 47, 004 cores.

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



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With the entry of private sector funds in 1993, a new era started in the Indian mutualfund industry, giving the Indian investors a wider choice of fund families. Also, 1993 wasthe year in which the first Mutual Fund Regulations came into being, under which allmutual funds, except UTI were to be registered and governed. The erstwhile KothariPioneer (now merged with Franklin Templeton) was the first private sector mutual fundregistered in July 1993. The industry now functions under the SEBI (Mutual Fund)Regulations1996.As at the end of January 2003; there were 33 mutual funds with totalassets of \ 1,21,805 crores. The Unit Trust of India with \ 44,541 crores of assets undermanagement was way ahead of other mutual funds.

Fourth Phase Since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI wasbifurcated into two separate entities. One is the Specified Undertaking of the Unit Trustof India with assets under management of \ 29, 835 crores as at the end of January2003, representing broadly, the assets of US 64 scheme, assured return and certainother schemes.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB andLIC. It is registered with SEBI and functions under the Mutual Fund Regulations. Thegraph indicates the growth of assets over the years.

Basic Organisation of a Mutual Fund



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There are many entities involved and the diagram below illustrates the organizational

set up of a Mutual Fund. These entities will be explained later in the report.

Mutual Funds diversify their risk by holding a portfolio of instead of only one asset.

This is because by holding all your money in just one asset, the entire fortunes of your

portfolio depend on this one asset. By creating a portfolio of a variety of assets, this

risk is substantially reduced.

Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds

contains the same risk as investing in the markets, the only difference being that dueto professional management of funds the controllable risks are substantially reduced. A

very important risk involved in Mutual Fund investments is the market risk. However,

the company specific risks are largely eliminated due to professional fund

management.

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND



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A Mutual Fund actually belongs to the investors who have pooled their Funds.

The ownership of the mutual fund is in the hands of the Investors.

A Mutual Fund is managed by investment professional and other Service

providers, who earns a fee for their services, from the funds.

The pool of Funds is invested in a portfolio of marketable investments.

The value of the portfolio is updated every day.

The investors share in the fund is denominated by units. The value of the

units changes with change in the portfolio value, every day. The value of one

unit of investment is called net asset value (NAV).

The investment portfolio of the mutual fund is created according to The stated

Investment objectives of the Fund.

OBJECTIVES OF A MUTUAL FUND



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To Provide an opportunity for lower income groups to acquire without muchdifficulty, property in the form of shares.

To cater mainly of the need of individual investors who have limited means. To Manage investors portfolio that provides regular income, growth, safety,

liquidity, tax advantage, professional management and diversification.

MUTUAL FUNDBUT WHY??

Here are some of the Advantages offered by Mutual Funds-:

Number of available options

Mutual funds invest according to the underlying investment objective as specified at the

time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many

others that cater to the different needs of the investor. The availability of these options

makes them a good option. While equity funds can be as risky as the stock markets

themselves, debt funds offer the kind of security that is aimed for at the time of making

investments. Money market funds offer the liquidity that is desired by big investors who

wish to park surplus funds for very short-term periods. Balance Funds cater to the

investors having an appetite for risk greater than the debt funds but less than the equity

funds.

Diversification



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Investments are spread across a wide cross-section of industries and sectors and so the

risk is reduced. Diversification reduces the risk because all stocks dont move in the

same direction at the same time. One can achieve this diversification through a Mutual

Fund with far less money than one can on his own.

Professional Management

Mutual Funds employ the services of skilled professionals who have years of experience

to back them up. They use intensive research techniques to analyze each investment

option for the potential of returns along with their risk levels to come up with the figures

for performance that determine the suitability of any potential investment.

LiquidityMutual Funds offer the benefit of liquidity which provides the investor with the option of

easy conversion to money. As in the case of fixed deposits, where the investor can get

his money back only on the completion of a fixed period, an investor can get his money

back as and when he wants. Investors can redeem their money at the prevailing NAVs

(Net Asset Values). Mutual funds directly re-purchase at the current NAV.

Well Regulated

Unlike the company fixed deposits, where there is little control with the investment

being considered as unsecured debt from the legal point of view, the Mutual Fund

industry is very well regulated. All investments have to be accounted for, decisions

judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on

the AMCs at fault. The regulations, designed to protect the investors interests are also

implemented effectively.

Transparency

Being under a regulatory framework, mutual funds have to disclose their holdings,

investment pattern and all the information that can be considered as material, before all

investors. This means that the investment strategy, outlooks of the market and scheme

related details are disclosed with reasonable frequency to ensure that transparency

exists in the system. On the other hand, the investor is totally clueless in case of the

other investment alternatives as nothing is disclosed.



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Savings

Tax saving schemes of Mutual Funds offer investor a tax rebate under section 88 of the

Income Tax Act. Under this section, an investor can invest up to \ 10,000 per Financial

year in a tax saving scheme. The rate of rebate under this section depends on the

investors total income

Flexible and Affordable

Mutual Funds offer a relatively less expensive way to invest when compared to other

avenues such as capital market operations. The fee in terms of brokerages, custodialfees and other management fees are substantially lower than other options and are

directly linked to the performance of the scheme. Investment in mutual funds also offers

a lot of flexibility with features such as regular investment plans, regular withdrawal

plans and dividend reinvestment plans enabling systematic investment or withdrawal of

funds. Even the investors, who could otherwise not enter stock markets with low

investible funds, can benefit from a portfolio comprising of high-priced stocks because

they are purchased from pooled funds.



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Disadvantages of mutual funds

Mutual funds are good investment vehicles to navigate the complex and unpredictableworld of investments. However, even mutual funds have some inherent drawbacks.Understand these before you commit your money to a mutual fund.

No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual fundsdo not offer assured returns and carry risk. For instance, unlike bank deposits, yourinvestment in a mutual fund can fall in value. In addition, mutual funds are not insuredor guaranteed by any government body (unlike a bank deposit, where up to \ 1 lakh perbank is insured by the Deposit and Credit Insurance Corporation, a subsidiary of theReserve Bank of India). There are strict norms for any fund that assures returns and itis now compulsory for funds to establish that they have resources to back suchassurances. This is because most closed-end funds that assured returns in the early-nineties failed to stick to their assurances made at the time of launch, resulting in lossesto investors. A scheme cannot make any guarantee of return, without stating the nameof the guarantor, and disclosing the net worth of the guarantor. The past performance of the assured return schemes should also be given.

Restrictive gains

Diversification helps, if risk minimization is your objective. However, the lack of investment focus also means you gain less than if you had invested directly in a singlesecurity.

Assume, Reliance appreciated 50 per cent. A direct investment in the stock wouldappreciate by 50 per cent. But your investment in the mutual fund, which had invested10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation.

Taxes

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70percent of the securities in their portfolios. If your fund makes a profit on its sales, youwill pay taxes on the income you receive, even if you reinvest the money you made.

Management risk



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When you invest in a mutual fund, you depend on the fund's manager to make the rightdecisions regarding the fund's portfolio. If the manager does not perform as well as youhad hoped, you might not make as much money on your investment as you expected.Of course, if you invest in Index Funds, you forego management risk, because thesefunds do not employ managers.

MUTUAL FUNDSTRUCTURE

A mutual fund is structured as mentioned above. Firstly, the investor invests his moneyin the fund. Every mutual fund organization has a sponsor who is required to contribute

a minimum of 40% of the net worth of the AMC. It is the duty of the sponsor toestablish a fund and apply to SEBI for its registration. A person or a group of personsknown as trustee is given an overall authority over the fund managers. They basicallysafeguard the assets of the fund. The fund is created which is managed by the AMCwhich is given the powers to take all decisions relating to the investment. There isanother entity known as the custodian, who basically stocks a funds securities andother assets. The registrar is an institution which maintains a register of all the unitholders of a fund along with their ownership. Finally, the SEBI is the ultimate authority.


Sponsor

Mutual fundTrustees

ASSETMANAGEMENTCOMPANY

Custodian Registrar


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MUTUAL FUNDwho invests?

Investor Profile:

An investor normally prioritizes his investment needs before undertaking an

investment. Different goals will be allocated to different proportions of the total

disposable amount. Investments for specific goals normally find their way into the debt

market as risk reduction is of prime importance, this is the area for the risk-averse

investors and here, Mutual Funds are generally the best option. One can avail of the

benefits of better returns with added benefits of anytime liquidity by investing in open-

ended debt funds at lower risk, this risk of default by any company that one has

chosen to invest in, can be minimized by investing in Mutual Funds as the fund

managers analyze the companies financials more minutely than an individual can do as

they have the expertise to do so.

Moving up the risk spectrum, there are people who would like to take some risk and

invest in equity funds/capital market. However, since their appetite for risk is also

limited, they would rather have some exposure to debt as well. For these investors,

balanced funds provide an easy route of investment, armed with expertise of

investment techniques, they can invest in equity as well as good quality debt thereby

reducing risks and providing the investor with better returns than he could otherwise

manage. Since they can reshuffle their portfolio as per market conditions, they are

likely to generate moderate returns even in pessimistic market conditions.



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Next comes the risk takers, risk takers by their nature, would not be averse to

investing in high-risk avenues. Capital markets find their fancy more often than

not, because they have historically generated better returns than any other

avenue, provided, the money was judiciously invested. Though the risk associatedis generally on the higher side of the spectrum, the return-potential compensates

for the risk attached.

ORGANISATION AND MANAGEMENT OF MUTUAL FUNDS

In India Mutual Fund usually formed as trusts, three parties are generally involved

viz.

Settler of the trust or the sponsoring organization.

The trust formed under the Indian trust act, 1982 or the trust company

registered under the Indian companies act, 1956 Fund mangers or The merchant-banking unit

Custodians.

MUTUAL FUNDS TRUST:

Mutual fund trust is created by the sponsors under the Indian trust act, 1982, w hich

is the main body in the creation of Mutual Fund trust.The main functions of Mutual

Fund trust are as follows:

Planning and formulating Mutual Funds schemes.

Seeking SEBIs approval and authorization to these schemes.

Marketing the schemes for public subscription.

Seeking RBI approval in case NRIs subscription to Mutual Fund is Invited

Attending to trusteeship function. This function as per guidelines can be

assigned to separately established trust companies too. Trustees are required to

submit a consolidated report six monthly to SEBI to ensure that the guidelines



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are fully being complied with trusted are also required to submit an annual

report to the investors in the fund.

FUND MANAGERS (OR) THE ASSET MANAGEMENT COMPANY (AMC)

AMC has to discharge mainly three functions as under:

I. Taking investment decisions and making investments of the funds through

market dealer/brokers in the secondary market securities or directly in the

primary capital market or money market instruments.

II. Realize fund position by taking account of all receivables and realizations,

moving corporate actions involving declaration of dividends,etc to compensate

investors for their investments in units; and

III. Maintaining proper accounting and information for pricing the units and arriving

at net asset value (NAV), the information about the listed schemes and the

transactions of units in the secondary market. AMC has to feed back the trustees

about its fund management operations and has to maintain a perfect information

system.

CUSTODIANS OF MUTUAL FUNDS:-

Mutual funds run by the subsidiaries of the nationalized banks had their respective

sponsor banks as custodians like canara bank, SBI, PNB, etc. Foreign banks with

higher degree of automation in handling the securities have assumed the role of

custodians for mutual funds. With the establishment of stock Holding Corporation

of India the work of custodian for mutual funds is now being handled by it for

various mutual funds. Besides, industrial investment trust company acts as sub-

custodian for stock Holding Corporation of India for domestic schemes of UTI, BOI

MF, LIC MF, etc

RESPONSIBILITY OF CUSTODIANS:-

Receipt and delivery of securities



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Holding of securities.

Collecting income

Holding and processing cost

Corporate actions etc

FUNCTIONS OF CUSTOMERS:-

Safe custody

Trade settlement

Corporate action

Transfer agents

FORMATION AND REGULATIONS

1. Mutual funds are to be established in the form of trusts under the Indian trusts

act and are to be operated by separate asset management companies (AMC s)

2. AMCs shall have a minimum Net worth of \ 5 crores;

3. AMCs and Trustees of Mutual Funds are to be two separate legal entities and

that an AMC or its affiliate cannot act as a manager in any other fund;

4. Mutual funds dealing exclusively with money market instruments are to be

regulated by the Reserve Bank Of India

5. Mutual fund dealing primarily in the capital market and also partly money

market instruments are to be regulated by the Securities Exchange Board Of

India (SEBI)

6. All schemes floated by Mutual funds are to be registered with SEBI

Schemes:-

1. Mutual funds are allowed to start and operate both closed-end and open-end

schemes;



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2. Each closed-end schemes must have a Minimum corpus (pooling up) of \

20 crore;

3. Each open-end scheme must have a Minimum corpus of \ 50 crore

4. In the case of a Closed End scheme if the Minimum amount of \ 20 crore

or 60% of the target amount, which ever is higher is not raised then the entire

subscription has to be refunded to the investors;

5. In the case of an Open-Ended schemes, if the Minimum amount of \ 50 crore

or 60 percent of the targeted amount, which ever is higher, is no raised then

the entire subscription has to be refunded to the investors.

Investment norms:-

1. No mutual fund, under all its schemes can own more than five percent of any

companys paid up capital carrying voting rights;

2. No mutual fund, under all its schemes taken together can invest more than 10

percent of its funds in shares or debentures or other instruments of any single

company;

3. No mutual fund, under all its schemes taken together can invest more than 15

percent of its fund in the shares and debentures of any specific industry, exceptthose schemes which are specifically floated for investment in one or more

specified industries in respect to which a declaration has been made in the offer

letter.

4. No individual scheme of mutual funds can invest more than five percent of its

corpus in any one companys share;

5. Mutual funds can invest only in transferable securities either in the money or in

the capital market. Privately placed debentures, securitized debt, and other

unquoted debt, and other unquoted debt instruments holding cannot exceed 10

percent in the case of growth funds and 40 percent in the case of income funds.

Distribution:



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Mutual funds are required to distribute at least 90 percent of their profits annually in

any given year. Besides these, there are guidelines governing the operations of mutual

funds in dealing with shares and also seeking to ensure greater investor protection

through detailed disclosure and reporting by the mutual funds. SEBI has also beengranted with powers to over see the constitution as well as the operations of mutual

funds, including a common advertising code. Besides, SEBI can impose penalties on

Mutual funds after due investigation for their failure to comply with the guidelines.

MUTUAL FUNDTYPES

1. OPEN-ENDED MUTUAL FUNDS:-

The holders of the shares in the Fund can resell them to the issuing Mutual Fund

company at the time. They receive in turn the net assets value (NAV) of the shares at

the time of re-sale. Such Mutual Fund Companies place their funds in the secondary

securities market. They do not participate in new issue market as do pension funds or

life insurance companies. Thus they influence market price of corporate securities.

Open-end investment companies can sell an unlimited number of Shares and thus

keep going larger. The open-end Mutual Fund Company Buys or sells their shares.

These companies sell new shares NAV plus a Loading or management fees and redeem

shares at NAV. In other words, the target amount and the period both are indefinite in

such funds.

2. CLOSED-ENDED MUTUAL FUNDS:-

A closedend Fund is open for sale to investors for a specific period, after which

further sales are closed. Any further transaction for buying the units or repurchasing

them, Happen in the secondary markets, where closed end Funds are listed. Therefore

new investors buy from the existing investors, and existing investors can liquidate

their units by selling them to other willing buyers. In a closed end Funds, thus the pool

of Funds can technically be kept constant. The asset management company (AMC)



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however, can buy out the units from the investors, in the secondary markets, thus

reducing the amount of funds held by outside investors. The price at which units can

be sold or redeemed Depends on the market prices, which are fundamentally linked to

the NAV. Investors in closed end Funds receive either certificates or Depositoryreceipts, for their holdings in a closed end mutual Fund.

MUTUAL FUND SCHEME TYPES

Equity Diversified Schemes:-

These schemes mainly invest in equity. They seek to achieve long-term capital

appreciation by responding to the dynamically changing Indian economy by moving

across sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.

Sector Schemes:-

These schemes focus on particular sector as IT, Banking, etc. They seek to generate

long-term capital appreciation by investing in equity and related securities of

companies in that particular sector.

Index Schemes:-

These schemes aim to provide returns that closely correspond to the return of aparticular stock market index such as BSE Sensex, NSE Nifty, etc. Such schemes

invest in all the stocks comprising the index in approximately the same weightage as

they are given in that index.

Exchange Traded Funds (ETFs):-



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ETFs invest in stocks underlying a particular stock index like NSE Nifty or BSE Sensex.

They are similar to an index fund with one crucial difference. ETFs are listed and

traded on a stock exchange. In contrast, an index fund is bought and sold by the fund

and its distributors.

Equity Tax Saving Schemes:-

These work on similar lines as diversified equity funds and seek to achieve long-term

capital appreciation by investing in the entire universe of stocks. The only difference

between these funds and equity-diversified funds is that they demand a lock-in of 3

years to gain tax benefits.

Dynamic Funds:-

These schemes alter their exposure to different asset classes based on the market

scenario. Such funds typically try to book profits when the markets are overvalued and

remain fully invested in equities when the markets are undervalued. This is suitable for

investors who find it difficult to decide when to quit from equity. Balanced Schemes:-

These schemes seek to achieve long-term capital appreciation with stability of

investment and current income from a balanced portfolio of high quality equity and

fixed-income securities.

Debt Schemes:-

These schemes basically invest in debt.

Medium-Term Debt Schemes:-

These schemes have a portfolio of debt and money market instruments where the

average maturity of the underlying portfolio is in the range of five to seven years.

Short-Term Debt Schemes



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These schemes have a portfolio of debt and money market instruments where the

average maturity of the underlying portfolio is in the range of one to two years.

Money Market Debt Schemes:-These schemes invest in debt securities of a short-term nature, which generally means

securities of less than one-year maturity. The typical short-term interest-bearing

instruments these funds invest in Treasury Bills, Certificates of Deposit, Commercial

Paper and Inter-Bank Call Money Market.

Medium-Term Gilt Schemes:-

These schemes invest in government securities. The average maturity of the securities

in the scheme is over three years.

Short-Term Gilt Schemes:-

These schemes invest in government securities. The securities invested in are of short to

medium term maturities.

Floating Rate Funds:-

They invest in debt securities with floating interest rates, which are generally linked to

some benchmark rate like MIBOR. Floating rate funds have a high relevance when

interest rates are on the rise helping investors to ride the interest rate rise.

Monthly Income Plans (MIPS):-

These are basically debt schemes, which make marginal investments in the range of 10-

25% in equity to boost the schemes returns. MIP schemes are ideal for investors who

seek slightly higher return that pure long-term debt schemes at marginally higher risk.

DIFFERENT MODES OF RECEIVING THE INCOME EARNED FROM

MUTUAL FUND INVESTMENTS

Mutual Funds offer three methods of receiving income:



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Growth Plan:-

In this plan, dividend is neither declared nor paid out to the investor but is built into

the value of the NAV. In other words, the NAV increases over time due to such

incomes and the investor realizes only the capital appreciation on redemption of his

investment.

Income Plan:-

In this plan, dividends are paid-out to the investor. In other words, the NAV only

reflects the capital appreciation or depreciation in market price of the underlying

portfolio.

Dividend Re-investment Plan

In this case, dividend is declared but not paid out to the investor, instead, it is

reinvested back into the scheme at the then prevailing NAV. In other words, the

investor is given additional units and not cash as dividend.

MUTUAL FUND INVESTING STRATEGIES

1. Systematic Investment Plans (SIPs)

These are best suited for young people who have started their careers and need to

build their wealth. SIPs entail an investor to invest a fixed sum of money at regular

intervals in the Mutual fund scheme the investor has chosen, an investor opting for SIP

in xyz Mutual Fund scheme will need to invest a certain sum on money every

month/quarter/half-year in the scheme.

2. Systematic Withdrawal Plans (SWPs)



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These plans are best suited for people nearing retirement. In these plans, an investor

invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at

regular intervals to take care of his expenses

3. Systematic Transfer Plans (STPs)

They allow the investor to transfer on a periodic basis a specified amount from one

scheme to another within the same fund family meaning two schemes belonging to

the same mutual fund. A transfer will be treated as redemption of units from the

scheme from which the transfer is made. Such redemption or investment will be at the

applicable NAV. This service allows the investor to manage his investments actively to

achieve his objectives. Many funds do not even charge any transaction fees for his

service an added advantage for the active investor.

MUTUAL FUNDSRISK ASSOCIATED

Investing in Mutual Funds, as with any security, does not come without risk. One of

the most basic economic principles is that risk and reward are directly correlated. Inother words, the greater the potential risk the greater the potential return. The types

of risk commonly associated with Mutual Funds are:

1) MARKET RISK:-

Market risk relates to the market value of a security in the future. Market prices

fluctuate and are susceptible to economic and financial trends, supply and demand,

and many other factors that cannot be precisely predicted or controlled.

2) POLITICAL RISK:-

Changes in the tax laws, trade regulations, administered prices, etc are some of the

many political factors that create market risk. Although collectively, as citizens, we

have indirect control through the power of our vote individually, as investors, we have

virtually no control.



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3) INFLATION RISK:-

Interest rate risk relates to future changes in interest rates. For instance, if an investor

invests in a long-term debt Mutual Fund scheme and interest rates increase, the NAV

of the scheme will fall because the scheme will be end up holding debt offering lower

interest rates.

4) BUSINESS RISK:-

Business risk is the uncertainty concerning the future existence, stability, and

profitability of the issuer of the security. Business risk is inherent in all business

ventures. The future financial stability of a company cannot be predicted or

guaranteed, nor can the price of its securities. Adverse changes in businesscircumstances will reduce the market price of the companys equity resulting in

proportionate fall in the NAV of the Mutual Fund scheme, which has invested in the

equity of such a company.

5) ECONOMIC RISK:-

Economic risk involves uncertainty in the economy, which, in turn, can have an

adverse effect on a companys business. For instance, if monsoons fail in a year,

equity stocks of agriculture-based companies will fall and NAVs of Mutual Funds, which

have invested in such stocks, will fall proportionately.



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PERFORMANCE MEASURES OF MUTUAL FUNDS

Mutual Fund industry today, with about 40 players and more than six hundredschemes, is one of the most preferred investment avenues in India. However, with a

plethora of schemes to choose from, the retail investor faces problems in selecting

funds. Factors such as investment strategy and management style are qualitative, but

the funds record is an important indicator too.

Though past performance alone cannot be indicative of future performance, it is,

frankly, the only quantitative way to judge how good a fund is at present. Therefore,

there is a need to correctly assess the past performance of different Mutual Funds.Worldwide, good Mutual Fund companies over are known by their AMCs and this fame

is directly linked to their superior stock selection skills.

For Mutual Funds to grow, AMCs must be held accountable for their selection of

stocks. In other words, there must be some performance indicator that will reveal the

quality of stock selection of various AMCs.



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Return alone should not be considered as the basis of measurement of the

performance of a Mutual Fund scheme, it should also include the risk taken by the fund

manager because different funds will have different levels of risk attached to them.

Risk associated with a fund, in a general, can be defined as Variability or fluctuationsin the returns generated by it. The higher the fluctuations in the returns of a fund

during a given period, higher will be the risk associated with it. These fluctuations in

the returns generated by a fund are resultant of two guiding forces. First, general

market fluctuations, which affect all the securities, present in the market, called

Market risk or Systematic risk and second, fluctuations due to specific securities

present in the portfolio of the fund, called Unsystematic risk. The Total Risk of a given

fund is sum of these two and is measured in terms of standard deviation of returns of

the fund.

Systematic risk, on the other hand, is measured in terms of Beta, which represents

fluctuations in the NAV of the fund vis--vis market. The more responsive the NAV of a

Mutual Fund is to the changes in the market; higher will be its beta. Beta is calculated

by relating the returns on a Mutual Fund with the returns in the market. While

Unsystematic risk can be diversified through investments in a number of instruments,

systematic risk cannot. By using the risk return relationship, we try to assess the

competitive strength of the Mutual Funds one another in a better way. In order to

determine the risk-adjusted returns of investment portfolios, several eminent authors

have worked since 1960s to develop composite performance indices to evaluate a

portfolio by comparing alternative portfolios within a particular risk class.

The most important and widely used measures of performance are:

The TreynorMeasure

The Sharpe Measure Jenson Model

Fama Model

The Treynor Measure:-



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Developed by Jack Treynor, this performance measure evaluates funds on the basis of

Treynor's Index. This Index is a ratio of return generated by the fund over and above

risk free rate of return (generally taken to be the return on securities backed by the

government, as there is no credit risk associated), during a given period andsystematic risk associated with it (beta). Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

Where,

Ri represents return on fund,

Rf is risk free rate of return, and

Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive

Treynor's Index shows a superior risk-adjusted performance of a fund, a low and

negative Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure :-

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which

is a ratio of returns generated by the fund over and above risk free rate of return and

the total risk associated with it.

According to Sharpe, it is the total risk of the fund that the investors are concerned

about. So, the model evaluates funds on the basis of reward per unit of total risk.

Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where,

Si is standard deviation of the fund,

Ri represents return on fund, and

Rf is risk free rate of return.



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While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of

a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the risk

premium by a numerical risk measure. The total risk is appropriate when we are

evaluating the risk return relationship for well-diversified portfolios. On the other hand,

the systematic risk is the relevant measure of risk when we are evaluating less than

fully diversified portfolios or individual stocks. For a well-diversified portfolio the total

risk is equal to systematic risk. Rankings based on total risk (Sharpe measure) andsystematic risk (Treynor measure) should be identical for a well-diversified portfolio,

as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that

ranks higher on Treynor measure, compared with another fund that is highly

diversified, will rank lower on Sharpe Measure.

Jenson Model:-

Jenson's model proposes another risk adjusted performance measure. This measure

was developed by Michael Jenson and is sometimes referred to as the differential

Return Method. This measure involves evaluation of the returns that the fund has

generated vs. the returns actually expected out of the fund1 given the level of its

systematic risk. The surplus between the two returns is called Alpha, which measures

the performance of a fund compared with the actual returns over the period. Required

return of a fund at a given level of risk (Bi) can be calculated as:

Ri = Rf + Bi (Rm - Rf)

Where,

Ri represents return on fund, and

Rm is average market return during the given period,

Rf is risk free rate of return, and

Bi is Beta deviation of the fund.



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After calculating it, Alpha can be obtained by subtracting required return from

the actual return of the fund. Higher alpha represents superior performance of the

fund and vice versa. Limitation of this model is that it considers only systematic risk

not the entire risk associated with the fund and an ordinary investor cannot mitigateunsystematic risk, as his knowledge of market is primitive.

Fama Model:-

The Eugene Fama model is an extension of Jenson model. This model compares the

performance, measured in terms of returns, of a fund with the required return

commensurate with the total risk associated with it. The difference between these two

is taken as a measure of the performance of the fund and is called Net Selectivity.

The Net Selectivity represents the stock selection skill of the fund manager, as it is the

excess returns over and above the return required to compensate for the total risk

taken by the fund manager. Higher value of which indicates that fund manager has

earned returns well above the return commensurate with the level of risk taken by

him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where,

Ri represents return on fund,

Sm is standard deviation of market returns,

Rm is average market return during the given period, and

Rf is risk free rate of return.

The Net Selectivity is then calculated by subtracting this required return from

the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and

Jenson model use Systematic risk is based on the premise that the Unsystematic risk is

diversifiable. These models are suitable for large investors like institutional investors

with high risk taking capacities as they do not face paucity of funds and can invest in a

number of options to dilute some risks. For them, a portfolio can be spread across aADVENT INSTITUTE OF MANAGEMENT STUDIES 33


34/85

number of stocks and sectors. However, Sharpe measure and Fama model that consider

the entire risk associated with fund are suitable for small investors, as the ordinary

investor lacks the necessary skill and resources to diversify. Moreover, the selection of

the fund on the basis of superior stock selection ability of the fund manager will alsohelp in safeguarding the money invested to a great extent. The investment in funds that

have generated big returns at higher levels of risks leaves the money all the more prone

to risks of all kinds that may exceed the individual investors' risk appetite.

Mutual Fund Companies in India

The concept of mutual funds in India dates back to the year 1963. The era between

1963 and 1987 marked the existance of only one mutual fund company in India with \

67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust

of India (UTI). By the end of the 80s decade, few other mutual fund companies in India

took their position in mutual und market. The new entries of mutual fund companies in

India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund,

Indian Bank Mutual Fund, Bank of India Mutual Fund.

The succeeding decade showed a new horizon in indian mutual fund industry. By the

end of 1993, the total AUM of the industry was \ 470.04 bn. The private sector funds

started penetrating the fund families. In the same year the first Mutual Fund Regulations

came into existance with re-registering all mutual funds except UTI. The regulations

were further given a revised shape in 1996.

Kothari Pioneer was the first private sector mutual fund company in India which has now

merged with Franklin Templeton. Just after ten years with private sector players

penetration, the total assets rose up to \ 1218.05 bn. Today there are 40 mutual fund

companies in India.



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MUTUAL FUNDS- DOs and DONTs

We all have come across ads which say that Mutual Funds are subject to market risk,

please read the offer document carefully before investing. Likewise there are many dos

and donts one has to keep in mind before getting into investing in mutual funds. The

following points might help one to optimize his/her investment decision

Assess yourself:

Self-assessment of ones needs; expectations and risk profile is of prime importance

failing which; one will make more mistakes in putting money in right places than

otherwise. One should identify the degree of risk bearing capacity one has and also

clearly state the expectations from the investments. Irrational expectations will only

bring pain.

Try to understand where the money is going:It is important to identify the nature of investment and to know if one is compatible

with the investment. One can lose substantially if one picks the wrong kind of mutual

fund. In order to avoid any confusion it is better to go through the literature such as

offer document and fact sheets that mutual fund companies provide on their funds.

Don't rush in picking funds, think first:



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One first has to decide what he wants the money for and it is this investment goal that

should be the guiding light for all investments done. It is thus important to know the

risks associated with the fund and align it with the quantum of risk one is willing to take.

One should take a look at the portfolio of the funds for the purpose. Excessive exposureto any specific sector should be avoided, as it will only add to the risk of the entire

portfolio. Mutual funds invest with a certain ideology such as the "Value Principle" or

"Growth Philosophy". Both have their share of critics but both philosophies work for

investors of different kinds. Identifying the proposed investment philosophy of the fund

will give an insight into the kind of risks that it shall be taking in future.

Invest. Dont speculate:

A common investor is limited in the degree of risk that he is willing to take. It is thus of

key importance that there is thought given to the process of investment and to the time

horizon of the intended investment. One should abstain from speculating which in other

words would mean getting out of one fund and investing in another with the intention of

making quick money. One would do well to remember that nobody can perfectly time

the market so staying invested is the best option unless there are compelling reasons to

exit.

Dont put all the eggs in one basket:

This old age adage is of utmost importance. No matter what the risk profile of a person

is, it is always advisable to diversify the risks associated. So putting ones money in

different asset classes is generally the best option as it averages the risks in each

category. Thus, even investors of equity should be judicious and invest some portion of

the investment in debt. Diversification even in any particular asset class (such as equity,

debt) is good. Not all fund managers have the same acumen of fund management and

with identification of the best man being a tough task, it is good to place money in thehands of several fund managers. This might reduce the maximum return possible, but

will also reduce the risks.

Be regular:

Investing should be a habit and not an exercise undertaken at ones wishes, if one has

to really benefit from them. As we said earlier, since it is extremely difficult to know



37/85

when to enter or exit the market, it is important to beat the market by being

systematic. The basic philosophy of Rupee cost averaging would suggest that if one

invests regularly through the ups and downs of the market, he would stand a better

chance of generating more returns than the market for the entire duration. The SIPs(Systematic Investment Plans) offered by all funds helps in being systematic. All that

one needs to do is to give post-dated cheques to the fund and thereafter one will not be

harried later. The Automatic investment Plans offered by some funds goes a step

further, as the amount can be directly/electronically transferred from the account of the

investor.

Find the right funds:

Finding funds that do not charge much fees is of importance, as the fee charged

ultimately goes from the pocket of the investor. This is even more important for debt

funds as the returns from these funds are not much. Funds that charge more will reduce

the yield to the investor. Finding the right funds is important and one should also use

these funds for tax efficiency. Investors of equity should keep in mind that all dividends

are currently tax-free in India and so their tax liabilities can be reduced if the dividend

payout option is used. Investors of debt will be charged a tax on dividend distribution

and so can easily avoid the payout options.Keep track of your investments:

Finding the right fund is important but even more important is to keep track of the way

they are performing in the market. If the market is beginning to enter a bearish phase,

then investors of equity too will benefit by switching to debt funds as the losses can be

minimized. One can always switch back to equity if the equity market starts to show

some buoyancy.

Know when to sell your mutual funds:

Knowing when to exit a fund too is of utmost importance. One should book profits

immediately when enough has been earned i.e. the initial expectation from the fund has

been met with. Other factors like non-performance, hike in fee charged and change in

any basic attribute of the fund etc. are some of the reasons for to exit. For more on it,

read " When to say goodbye to your mutual fund ."



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FUTURE OF MUTUAL FUND INDUSTRY IN INDIA

Why Invest in Gold?

Historically, gold has been a proven method of preserving value when a nationalcurrency was losing value. If your investments are valued in a depreciating currency,

allocating a portion to gold assets is similar to a financial insurance policy. In the pastyear, the climb in the price of gold above $700 per ounce is due to many factors, onebeing that the dollar is losing value.

Reasons favoring to invest to Gold

* The dollar is weak and getting weaker due to national economic policies which don'tappear to have an end.

* Gold price appreciation makes up for lost interest, especially in a bull market.

* The last four years are the beginning of a major bull move similar to the 70's whengold moved from $38 to over $800.

* Central banks in several countries have stated their intent to increase their goldholdings instead of selling.

* All gold funds are in a long term uptrend with bullion, most recently setting new all-time highs.



39/85

* The trend of commodity prices to increase is relative to gold price increases.

* Worldwide gold production is not matching consumption. The price will go up withdemand.

* Most gold consumption is done in India and China and their demand is increasing withtheir increase in national wealth.

* Several gold funds reached all-time highs in 2010 and are still trending upward.

* The short position held by hedged gold funds is being methodically reduced.

Gold Mutual funds

A relatively safe method of buying and owning gold stocks allows the owner to diversifyamong many stocks and allows the investing decisions to be made by a professional.Investment methods vary among funds and provide many different styles of portfoliomanagement for an investor to choose from. Prices move faster and further in bothdirections than the price of gold.

* Provide professional management and diversification within the gold sector.

* Are more volatile than the S&P index.

* May or may not have any correlation with the general market.* Move daily with the price of gold, but not always.

* Move proportionally more than gold, up and down.

* If you believe in 'buy low, sell high', gold is still low, but climbing.

The real estate sector and the road ahead

Real Estate Mutual Funds ('REMFs')

The SEBI Board has now approved the guidelines for the much awaited Real Estate

Mutual Funds. "Real Estate Mutual Fund Scheme" is defined to mean a scheme of a

mutual fund which has investment objective to invest directly or indirectly in real estate

property.



40/85

Governing Law

It is proposed that REMFs will be governed by the provisions and guidelines issued under

SEBI (Mutual Funds) Regulations. REMFs, shall initially, be close ended. The units of REMFs shall be compulsorily listed on the Stock Exchanges and Net Asset Value (NAV) of

the scheme shall be declared daily.

Custodian

The REMFs would be required to appoint a Custodian who has been granted a Certificate

of Registration to carry on the business of Custodian of securities by the SEBI Board.

The custodian would safe keep the title of real estate properties held by the REMFs.

Investment Criterion:

It is proposed that REMFs could invest in the following: -

* Directly in real estate properties within India;

* Mortgage (housing lease) backed securities;* Equity shares / Bonds / Debentures of listed / unlisted companies which deal inproperties and also undertake property development; and in

* Other securities.



41/85

Role of ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association inIndia was generated to function as a non-profit organization. Association of MutualFunds in India (AMFI) was incorporated on 22nd August 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has beenregistered with SEBI. Till date all the AMCs are that have launched mutual fund schemesare its members. It functions under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry toa professional and healthy market with ethical lines enhancing and maintainingstandards. It follows the principle of both protecting and promoting the interests of

mutual funds as well as their unit holders.

The Association of Mutual Funds of India works with 43 registered AMCs of the country.It has certain defined objectives which juxtaposes the guidelines of its Board of Directors.



42/85

The objectives are as follows:

This mutual fund association of India maintains a high professional and ethical standardin all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in theactivities of mutual fund and asset management. The agencies who are by anymeans connected or involved in the field of capital markets and financialservices also involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in themutual fund industry.

Association of Mutual Fund of India does represent the Government of India,the Reserve Bank of India and other related bodies on matters relating to theMutual Fund Industry.

It develops a team of well qualified and trained Agent distributors. Itimplements a programme of training and certification for all intermediaries andother engaged in the mutual fund industry.

AMFI undertakes all India awareness programme for investors in order topromote proper understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminateinformation on Mutual Fund Industry and undertakes studies and research

either directly or in association with other bodies.

With effect from June 1, 2010 AMFI Mutual Fund Certification program is discontinued.

Accordingly, test for AMFI Mutual Fund (Basic) Module and AMFI Mutual Fund (Advisors)

Module will not be conducted from June 1, 2010. National Institute of Securities Markets

(NISM) would be conducting Mutual Fund Distributors Certification Examination from

June 1, 2010 onwards.

AMFI Refresher Course stands discontinued with effect from June 1, 2010. Consequently

the mandate given to Indian Institute of Capital Markets (IICM) and Centre for

Education and Learning (CIEL) by AMFI for conducting Refresher Course stands

withdrawn. NISM is conducting 'Continuing Professional Education' (CPE) Program for

Mutual Fund Distributors from June 1, 2010.



43/85

SEBI guidelines for mutual fund

Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme inthe short-term deposits of a single bank, the Securities and Exchange Board of India.

Announcing guidelines for parking of funds in short-term deposits of scheduledcommercial banks (SCBs) by mutual funds, the regulator said that investment cap would

also take into account the deposit schemes of the bank's subsidiaries.The Sebi has also defined 'short term' for funds' investment purposes as a period notexceeding 91 days.

Besides, the parking of funds in short-term deposits of all SCBs has been capped at 15per cent of the net asset value (NAV) of a scheme, which can be raised to 20 per centwith prior approval of the trustees.

The parking of funds in short-term deposits of associate and sponsor SCBs togethershould not exceed 20 per cent of total deployment by the MF in short-term deposits, it

added.The Sebi said that these guidelines are aimed at ensuring that funds collected in ascheme are invested as per the investment objective stated in the offer document of anMF scheme.

The new guidelines would be applicable to all fresh investments whether in a newscheme or an existing one. In cases of an existing scheme, where the scheme has



44/85

already parked funds in short-term deposits, the asset management company havebeen given three-months time to conform with the new guidelines.

The Sebi has also asked the trustees of a fund to ensure that no funds are parked by a

scheme in short term deposit of a bank, which has invested in that particular scheme.

The Sebi guidelines say that asset management companies (AMCs) shall not bepermitted to charge any investment and advisory fees for parking of funds in short-termdeposits of banks in case of liquid and debt-oriented schemes.

What are the new SEBI guidelines all about?

Relevant extract of the SEBI circular released on June 30, 2009 (SEBI/IMD/CIRNo. 4/168230/09) is as follows:

'In order to empower the investors in deciding the commission paid to distributors inaccordance with the level of service received, to bring about more transparency inpayment of commissions and to incentivise long term investment, it has been decidedthat:

There shall be no entry load for all mutual fund schemes

The scheme application forms shall carry a suitable disclosure to the effect that

the upfront commission to distributors will be paid by the investor directly to thedistributor, based on his assessment of various factors including the service

rendered by the distributorOf the exit load or CDSC charged to the investor, a maximum of 1% of the

Redemption proceeds shall be maintained in a separate account which can be usedby the AMC to pay commissions to the distributor and to take care of othermarketing and selling expenses. Any balance shall be credited to the schemeimmediately



45/85

The distributors should disclose all the commissions (in the form of trail

commission or any other mode) payable to them for the different competing

schemes of various mutual funds from amongst which the scheme is beingrecommended to the investor.

This circular shall be applicable for :

Investments in mutual fund schemes (including additional purchases and

switch-in to a scheme from other schemes) with effect from August 1, 2009

Redemptions from mutual fund schemes (including switch-out from other

schemes) with effect from August 1, 2009

New mutual fund schemes launched on and after August 1, 2009; and

Systematic Investment Plans (SIPs) registered on or after August 1, 2009'

ULIPs vs Mutual Funds

ULIP MUTUAL FUND

INVESTMENT

AMOUNTS

Determined by theinvestor and can bemodified as well

Minimum investmentamounts aredetermined by the fundhouse

EXPENSES

No upper limits,expenses determinedby the insurancecompany

Upper limits forexpenses chargeable toinvestors have beenset by the regulator

PORTFOLIODISCLOSURE Not mandatory

Quarterly disclosuresare mandatory

MODIFYINGASSESTSALLOCATION

Generally permitted forfree or at a nominalcost

Entry/exit loads haveto be borne by theinvestor

TAX BENEFITS Section 80C benefits Section 80C benefitsADVENT INSTITUTE OF MANAGEMENT STUDIES 45


46/85

are available on allULIP investments

are available only oninvestments in tax-saving funds

GROWTH IN ASSETS UNDER MANAGEMENT

Latest Average Asset Under Management for all Mutual Fund houses, increase or decrease incorpus, sales & redemption figures..

Amount in \ Crores

Mutual Fund Name No. of Schemes* Asset Under Management

As on Corpus As on Corpus Net inc/decin corpus

AIG Global InvestmentGroup Mutual Fund

44 Jun 30,2010

1,014.66 May 31,2010

1,030.86 -16.202

Axis Mutual Fund 60 Jun 30,20102,999.19 May 31,

20104,715.89 -1716.705

Baroda Pioneer MutualFund

31 Jun 30,2010

3,075.20 May 31,2010

4,759.53 -1684.337

Benchmark Mutual Fund 17 Jun 30,20102,250.37 May 31,

20102,263.15 -12.779

Bharti AXA Mutual Fund 45 Jun 30,2010692.74 May 31,

2010724.17 -31.426

Birla Sun Life Mutual Fund 217 Jun 30,201063,111.55 May 31,

201073,828.03 -10716.484

Canara Robeco Mutual Fund 89 Jun 30,20108,533.44 May 31,

201010,661.95 -2128.507

Deutsche Mutual Fund 116 Jun 30,20109,016.87 May 31,

201010,102.46 -1085.587

DSP Blackrock Mutual Fund 98 Jun 30,201021,415.75 May 31,

201021,884.95 -469.201

Edelweiss Mutual Fund 41 Jun 30,2010282.76 May 31,

2010261.09 21.673

Escorts Mutual Fund 30 Jun 30, 195.50 May 31, 198.23 -2.729

http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM051http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM051http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM056http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM006http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM006http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM042http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM053http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM005http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM008http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM044http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM010http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM054http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM011http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM056http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM006http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM006http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM042http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM053http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM005http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM008http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM044http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM010http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM054http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM011http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM051http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM051


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2010 2010

Fidelity Mutual Fund 61 Jun 30,20107,878.87 May 31,

20107,457.84 421.031

Fortis Mutual Fund 111 Jun 30,

20105,162.39 May 31,

20107,537.44 -2375.053

Franklin Templeton MutualFund

172 Jun 30,2010

34,563.92 May 31,2010

35,774.79 -1210.867

HDFC Mutual Fund 173 Jun 30,201086,648.10 May 31,

2010101,863.31 -15215.214

HSBC Mutual Fund 84 Jun 30,20105,353.19 May 31,

20105,851.11 -497.918

ICICI Prudential MutualFund

328 Jun 30,2010

73,795.43 May 31,2010

87,709.81 -13914.385

IDBI Mutual Fund 6 Jun 30,2010

28.18 - - -

IDFC Mutual Fund 173 Jun 30,201020,965.76 May 31,

201026,614.77 -5649.013

ING Mutual Fund 92 Jun 30,20101,495.47 May 31,

20101,645.42 -149.951

JM Financial Mutual Fund 90 Jun 30,20105,657.99 May 31,

20108,950.43 -3292.441

JP Morgan Mutual Fund 31 Jun 30,20104,030.79 May 31,

20103,784.98 245.816

Kotak Mahindra MutualFund

123 Jun 30,2010

28,540.87 May 31,2010

40,657.52 -12116.648

L&T Mutual Fund 66 Jun 30,20103,693.42 May 31,

20105,170.69 -1477.279

LIC Mutual Fund 62 Jun 30,201030,049.38 May 31,

201038,962.82 -8913.437

Mirae Asset Mutual Fund 37 Jun 30,2010252.13 May 31,

2010236.50 15.633

Morgan Stanley MutualFund

11 Jun 30,2010

2,256.80 May 31,2010

2,253.67 3.128

Peerless Mutual Fund 20 Jun 30,2010921.26 May 31,

2010823.38 97.876

PRINCIPAL Mutual Fund 84 Jun 30,

20106,827.97 May 31,

20107,647.76 -819.785

Quantum Mutual Fund 11 Jun 30,2010101.04 May 31,

2010101.72 -0.685

Reliance Mutual Fund 193 Jun 30,2010101,320.15 May 31,

2010118,973.14 -17652.99

Religare Mutual Fund 92 Jun 30,201010,918.47 May 31,

201015,464.10 -4545.625

Sahara Mutual Fund 44 Jun 30,2010741.62 May 31,

2010765.23 -23.614

http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM047http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM047http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM046http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM037http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM037http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM041http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM043http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM043http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM024http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM024http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM058http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM040http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM038http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM019http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM019http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM049http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM033http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM033http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM009http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM021http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM052http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM022http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM022http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM016http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM048http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM025http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM050http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM012http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM047http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM046http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM037http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM037http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM041http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM043http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM024http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM024http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM058http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM040http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM038http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM019http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM049http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM033http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM033http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM009http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM021http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM052http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM022http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM022http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM016http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM048http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM025http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM050http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM012


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SBI Mutual Fund 116 Jun 30,201033,733.39 May 31,

201036,235.76 -2502.377

Shinsei Mutual Fund 11 Jun 30,2010273.08 May 31,

2010323.71 -50.627

Sundaram BNP ParibasMutual Fund

138 Jun 30,2010

12,717.49 May 31,2010

13,976.11 -1258.621

Tata Mutual Fund 169 Jun 30,201018,464.10 May 31,

201022,673.43 -4209.33

Taurus Mutual Fund 49 Jun 30,20102,438.65 May 31,

20103,056.16 -617.506

UTI Mutual Fund 212 Jun 30,201064,445.65 May 31,

201078,617.15 -14171.505

* indicates currently in operation

MUTUAL FUND DATA FOR THE MONTH ENDED - JUN 30 , 2010

Amount in \ Crores

Category

No. of new

schemeslaunched

duringthe

month

Sales Redem-ption Asset Under Management

New

schemesExistingschemes

Total Total as onJun 30 ,

2010

as onMay 31 ,

2010

Inflow/Outflow

B BankSponsored 4 732 106079 106811 127239 109815 130275 -20460

C Institutions 0 0 68385 68385 79151 30049 38963 -8914

D

Private Sector & Joint Venture :

Indian 14 1997 214500 216497 253087 208508 260790 -52282

PredominantlyIndian 11 4357 221387 225744 273178 257689 299262 -41573

PredominantlyForeign 0 0 24009 24009 26168 20931 22231 -1300

Grand Total(B+C+D) 29 7086 634360 641446 758823 626992 751521 -124529

http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM026http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM055http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM032http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM032http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM034http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM036http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM045http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM026http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM055http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM032http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM032http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM034http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM036http://www.mutualfundsindia.com/amc_snapshot.asp?amc_name=AM045


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ASSETS UNDER MANAGEMENT ASON JUNE 30, 2010

Amount in \ Crores

NatureStructure

OpenEnd

CloseEnd Total

Balanced 16540 1356 17896ELSS 21739 3129 24868FOF InvestingOverseas 2638 - 2638

Gilt 3229 - 3229GOLD ETF 1939 - 1939Growth 161850 16350 178200Income 274647 36868 311515Liquid/MoneyMarket 71871 - 71871

Other ETF 1135 - 1135Total 555588 57703 613291

Today there are over 40 AMCs offering a huge number of schemes giving the investor a

huge horizon to choose from. The market has become very competitive with the

companies fighting tooth and nail to attract and keep the investor from investing in their

competitors schemes. Today, Reliance Mutual Funds is the leading company in this

sector with total assets under management being \101,320.15 Crores. While HDFC being

in the second position with \ 86,648.10 Crores.ADVENT INSTITUTE OF MANAGEMENT STUDIES 49


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BCG Report on Equity MF

BCG

- Boston Consulting Group is a Global Management Consulting group

- World's leading Advisor on Business Strategy

- Founded in 1963, has presence in 40 countries with 69 offices

The Report

- Study done by BCG on Equity MF industry in colaaboration with CAMS

- Based on detailed analysis of Equity MF data of CAMS from 2003-2010

- Group discussions done with IFAs in various cities for the report

- Purpose of the report to track direction of Equity MF industry and recommend new

themes for future course

Numbers from the report

- MF investments as % of household savings have increased from 1.1% in 1994 to7.9% in 2008

- 90% of investment comes from ticket size of less than 1 Lac

- Inflows from SIP have gown from 2% in 2005 to 15% in 2009

- Share of top 10 cities in business has reduced from 90% in 2003 to 74% in 2010

Mumbai & delhi account for 45% of Total AUM



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Growth of Equity AUM

Citywise Split of Customer type



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Outside top10 Cities, around 80% of AUM is contributed by Retail investorsMF penetration almost negligible outside top 30 cities

REDEMPTION ANALYSIS: APRIL 2008-MARCH 2010

IS: A 87% of retail investors(


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GAINSIP inflows as a % of total inflows are now 19% With 97% of SIP in electronic mode,

SIP is becoming preferred mode of investment

ING MELSS INFLOW

ELSS is a highly popular product and one of the fastest growing product categoriesoutside top 10 cities

FUTURE COURSE OF IFAs



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RCH 2010

CITY TIERWISE DISTRIBUTION OF OTHER FINANCIAL PRODUCTS

Comparison of city tiers in urban India (2005-06)

The Bottom 5000 cities contribute 49% of Savings Deposits and 35% of LI premium, butless than 1% of Equity AUM.

MF industry skewed towards top 30 cities. (These cities contribute 96% of AUM)



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- The Equity MF industry is poised for a strong growth ahead

- The retail penetration for the product is still low

- SIP & ELSS are going to be 2 focus products for growth in the market

- Huge untapped opportunity for Mutual Fund industry outside the Top 20 cities- AMCs have to work on innovative products and efficient marketing plans to reach

out to maximum customers

- IFAs have to adapt to new scenario and change their value proposition to the

investors

IERWISE DISTRIBUTION OF

OTHER FINANCIAL PRODUCTS

Performance Comparison of Different Mutual funds in India

TOP 10 - EQUITY FUNDS - PERIOD (LAST 12 MONTHS)

Rank Scheme Name Date NAV(\)

Last 12Months %

1 Reliance Pharma Fund - Growth Aug 2 , 2010 52.3031 84.2481

2 Franklin Pharma Fund - Growth Aug 2 , 2010 57.503 69.4777

3 Religare Mid N Small Cap Fund - Growth Aug 2 , 2010 14.32 58.2766

4 UTI Growth Sector Fund - Pharma andHealthcare - Growth Aug 2 , 2010 36.11 57.3631

5 Reliance Equity Opportuniti

Documents

Performance Comparison and Investors Perception About Investing in Mutual Funds at NJ India Invest 2010