A synopsis report

on
A study on Growth &
Performance of Mutual Funds
Submitted to
K.Arjun Goud
Assistant Professor
Submitted by
A . Sravan adav
!"#K!$%%%!
Introduction
A Mutual Fund is a trust that pools the savin&s of a number of investors who share a
common financial &oal. 'he money thus collected is invested by the fund mana&er in different
types of securities dependin& upon the objective of the scheme. 'his could ran&e from shares to
debenture to money mar(et instruments. )ts unit holders in proportion to the number of units
owned by them *pro rate+ share the income earned throu&h this investment and capital
appreciation reali,ed by the scheme. 'hus a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified- professionally mana&ed
portfolio at a relatively low cost. Anybody with an invisible surplus of as little as a few thousand
rupees can invest in mutual funds. $ach mutual fund scheme has a defined investment objective
and strate&y. A mutual fund is the ideal investment vehicle for today.s comple/ and model
financial scenario. Mar(et for e0uity shares- bonds- and other fi/ed income instruments- real
estate- derivatives and other assets have become mature and information driven. Price chan&es
in this asset are driven by &lobal events occurrin& in faraway places. A typical individual is
unli(ely to have the (nowled&e- s(ills- inclination and time to (eep trac( of event- understand
their implications and act speedily. An individual also fined it difficult to (eep trac( of
ownership of his asset- investment- bro(era&e dues and ban( transaction etc.
A mutual fund is the answer to all these situations. )t appoints professionally 0ualified
and e/perienced staff that mana&es each of these functions on a full time basis. 'he lar&e pool of
money collected in the fund allows it to hire such staff at a very low cost to each investor. )n
effect- the mutual fund vehicle e/ploits economies of scale in all the three areas namely research-
investment and transaction processin&. 1hile the concept of individual comin& to&ether to invest
money collectively is not new- the mutual fund in its present form of "%
th
century phenomenon.
)n fact- the mutual fund &ained popularity only after the Second 1orld 1ar. Globally- there are
thousands of firm offerin& tens of thousands of mutual funds with different investment
objectives. 'oday- mutual funds collectively mana&e almost as much as or money as compared to
ban(s. A draft order document is to be prepared at the time of launchin& the fund. 'ypically- it
pre specifies the investment objectives of the fund- the ris( associated- the cost involved in the
process and the board rules for entry into and e/it from the fund and other areas of operations. )n
)ndia- as in most countries- these sponsors need approval from the re&ulator- S$#) *Securities
$/chan&e #oard of )ndia+ in our case. S$#! loo(s at the trac( record of the sponsors and its
financial stren&th in &rantin& approval to the fund for commencin& operations.
A sponsor then hires an Asset Mana&ement 2ompany to invest the funds accordin& to the
investment objective. )t also hires another entity to be the custodian of the asset of the fund and
perhaps a third one to handle re&istry wor( for the unit holders *subscribers+ of the fund. )n the
)ndian conte/t- the sponsors promote the Asset Mana&ement 2ompany also- in which it holds a
majority sta(e. )n many cases a sponsor can hold a !%%3 sta(e in the Asset Mana&ement
2ompany *AM2+.
4bjectives of Mutual Fund5
! 'o provide an opportunity for lower income &roup to ac0uire property without much
difficulty in the form of share 'o cater mainly to the needs of individual investor whose means
are small
! 'o mana&e investor.s portfolio in a manner that provides re&ular income- &rowth safety-
li0uidity and diversification
TYPES OF MUTUAL FUNDS
Mutual fund scheme may be classified on the basis of its structure its investment
objective.
1. By Structure
4pen6ended Funds
An open6end Fund is one that is available for subscription all throu&h the year. 'hese do not
have a fi/ed maturity. )nvestors can conveniently buy and sell units at 7et Asset 8alue *7A8+
related prices. 'he (ey feature of open6end scheme is li0uidity.
2losed6ended Funds
A closed end fund has a stipulated maturity period- which &enerally ran&es from 9 to !: years.
'he fund is open for subscription only durin& a specified period. )nvestors can invest in the
scheme at the time of initial public issue and there after they can buy or sell the units of the
scheme on the stoc( e/chan&es where they are listed. )n order to provide an e/it route to
investors- some close ended funds &ive an option of sellin& bac( the units of the mutual fund
throu&h periodic repurchase at 7A8 related prices. S$#) re&ulations stipulate that at least one of
the two e/it routes is provided to the investor. Salient differences between the closed end and
open6end schemes
NEED FOR THE STUDY
'he project.s idea is to project Mutual Fund as a better avenue for investment on a lon&6
term or short6term basis. Mutual Fund is a productive pac(a&e for a lay6investor with limited
finances- this project creates an awareness that the Mutual Fund is a worthy investment practice.
Mutual Fund is a &lobally proven instrument. Mutual Funds are ;<nit 'rust; as it is called in
some parts of the world has a lon& and successful history- of late Mutual Funds have become a
hot favorite of millions of people all over the world. 'he drivin& force of Mutual Funds is the
.safety of the principal. &uaranteed- plus the added advanta&e of capital appreciation to&ether
with the income earned in the form of interest or dividend. Mutual Funds offers an investor to
invest even a small amount of money- each Mutual Fund has a defined investment objective and
strate&y. Mutual Funds schemes are mana&ed by respective asset mana&ed companies sponsored
by financial institutions- ban(s- private companies or international firms. A Mutual Fund is the
ideal investment vehicle for today.s comple/ and modern financial scenario.
SCOPE OF THE STUDY
'he area of the study was restricted to companies and individual investors with in the
=yderabad and Secunderabad. 'he study is based on both primary and secondary data and
e/amines the availability of ban( deposits v>s mutual funds.
OBECTI!ES
'he study of ;A study on &rowth and performance of Mutual Funds; proposes the followin&5
! <nderstandin& the role of the investors for investin& in a mutual fund.
" Findin& out the ris( tolerance factors of investors.
9 2alculatin& the &rowth and performance of selected mutual funds.
METHODOLO"Y
Met#odo$o%y D&t& co$$ection 'et#od(
'he study is based on both primary and secondary data and e/amines the availability of mutual
funds. 'he results are drawn mainly from the secondary and primary data collected.
Pri'&ry D&t&
Primary data has been collected from the interaction with the officials of the company
Second&ry D&t&
Secondary data has been collected from the various sources such as
Publications of the company- #usiness ma&a,ines- ?ournals- te/t boo(s- 1eb sites and
Annual reports
LIMITATIONS
!+ 'he study is conducted in short period- due to which the study may not be detailed in all
aspects.
"+ 'he study is limited only to the analysis of different schemes and its suitability to
different investors accordin& to their ris( @ ta(in& ability.
9+ 'he study is based on secondary data available from monthly fact sheets- web sites- offer
documents- ma&a,ines and newspapers etc.- as primary data was not accessible.
A+ 'he study is limited by the detailed study of various schemes.
:+ 'he 7A8Bs are not uniform.
C+ 'he data collected for this study is not proper because some mutual funds are not
disclosin& the correct information.
D+ 'he study is not e/empt from limitations of Sharps- 'reynor and ?enson measures.
E+ <ni0ue ris( is completely i&nored in all the measure.