PROJECT REPORT

(Submitted for the Degree of B.Com. Honours in Accounting & Finance under the
University of Calcutta)

TITLE OF THE PROJECT

ANALYSIS OF MUTUAL FUNDS

Submitted by:
NAME OF THE CANDIDATE: PRIYANKA SARAWAGI
REGISTRATION NO: 034-1221-0541-13
UNIVERSITY ROLL NO:
NAME OF THE COLLEGE: SHRI SHIKSHAYATAN
COLLEGE

SUPERVISED BY:
NAME OF THE SUPERVISOR: SMT. SWAGATA MUKHERJEE
NAME OF THE COLLEGE: SHRI SHIKSHAYATAN COLLEGE
MONTH & YEAR OF SUBMISSION: FEBRUARY 2016
 ANNEXURE- IA

SUPERVISOR'S CERTIFICATE

This is to certify that Ms. PRIYANKA SARAWAGI, a student of B.COM.

HONOURS in ACCOUNTING & FINANACE of SHRI SHIKSHAYATAN COLLEGE

under the University of Calcutta has worked under my supervision and guidance for her

Project Work and prepared a Project Report with the title ANALYSIS OF MUTUAL

FUNDS which she is submitting, is her genuine and original work to the best of my

knowledge.

PLACE: KOLKATA SIGNATURE:

DATE: NAME: SMT. SWAGATA MUKHERJEE

DESIGNATION:

NAME OF THE COLLEGE:

(MORNING SHIFT)
ANNEXURE- IB

STUDENT'S DECLARATION

I hereby declare that the Project Work with the title ANALYSIS OF MUTUAL FUNDS
submitted by me for the partial fulfillment of the degree of B.COM. HONOURS in
ACCOUNTING & FINANCE under the University of Calcutta is my original work and has not
been submitted earlier to any other University/ Institution for the fulfillment of the requirement
for any course of study. I also declare that no chapter of this manuscript in whole or in part has
been incorporated in this report from any earlier work done by others or by me. However,
extracts of any literature which has been used for this report has been duly acknowledged
providing details of such literature in the references.

PLACE: KOLKATA SIGNATURE:

DATE: NAME: PRIYANAKA SARAWAGI
ADDRESS: BF-1/C, 1ST FLOOR,
RABINDRAPALLY,
KESTOPUR,
KOLKATA-700101

REGISTRATION NO: 034-1221-0541-13

 ACKNOWLEDGEMENT

I am highly indebted to our principal sir DR. ADITI DEY, our head of commerce department
DR. KAJAL GANDHI, my supervisor SMT. SWAGATA MUKHERJEE for their guidance
and constant supervision as well as for providing necessary information regarding the project &
also for their support in completing the project.

I would like to express my gratitude towards my parents & teachers of SHRI

SHIKSHAYATAN COLLEGE for their kind co-operation and encouragement which help me
in completion of this project.

I would like to express my special gratitude and thanks to professor for giving me such attention
and time.

My thanks and appreciations also go to my friends in developing the project and people who

have willingly helped me out with their abilities.

THANKING YOU
PRIYANKA SARAWAGI
 NEED FOR THE STUDY
The main purpose of doing this project was to know about mutual fund and its functioning. This
helps to know in details about mutual fund industry right from its inception stage, growth and future
prospects. It also helps in understanding different schemes of mutual funds. Because my study
depends upon prominent funds in India and their schemes like equity, income, balance as well as
the turns associated with those schemes. The project study was done to ascertain the asset
allocation, entry load, exit load, associated with the mutual funds. Ultimately this would help in
understanding the benefits of mutual funds to investors.

OBJECTIVE:

To give a brief about the benefits available from Mutual Fund Investment.

To give an idea of the types of schemes available.

To discuss about the market trends of Mutual Fund Investment.

To study some of the mutual fund schemes.

To study some mutual fund companies and their funds.

To observe the fund management process of mutual funds.

To explore the recent developments in the mutual funds in India.

 TABLE OF CONTENTS

SR. NO. TOPICS PAGE NO.

1 INTRODUCTION OF MUTUAL FUND 1

2 DEFINITION 2
3 MUTUAL FUND JARGON 3
4 TYPES OF MUTUAL FUND SCHEMES 4-6
ADVANTAGE AND DISADVANTAGE OF MUTUAL FUNDS
5 7-9

WORKING OF MUTUAL FUND

6 10

MUTUAL FUND IN INDIA

7 11-12

FUTURE PROSPECT OF MUTUAL FUND IN INDIA

8 13

14-20
RELIANCE MUTUAL FUND VS. UTI MUTUAL FUND
9

10 RESEARCH METHODOLOGY
21

11 FINDINGS, DATA ANALYSIS AND INTERPRETATION 22-37

12 38
CONCLUSION

13 44
LIMITATION

14 BIBLIOGRAPHY 45
CHAPTER 1 - INTRODUCTION

1.1 BACKGROUND
A mutual fund is a type of professionally-managed collective investment vehicle that pools
money from many investors to purchase securities. While there is no legal definition of mutual
fund, the term is most commonly applied only to those collective investment vehicles that are
regulated, available to the general public and open-ended in nature. Hedge funds are not
considered a type of mutual fund.
Mutual funds are classified by their principal investments. The four largest categories of funds
are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds.
Funds may also be categorized as index or actively-managed.
The first introduction of a mutual fund in India occurred in 1963, when the Government of India
launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual
fund market. Then a host of other government-controlled Indian financial companies came up
with their own funds. These included State Bank of India, Canara Bank, and Punjab National
Bank. This market was made open to private players in 1993, as a result of the historic
constitutional amendments brought forward by the then Congress-led government under the
existing regime of Liberalization, Privatization and Globalization (LPG). The first private sector
fund to operate in India was Kothari Pioneer, which later merged with Franklin Templeton.
Now investment expectations of the people are changing day by day Bank, LIC, Post are the type
of old investment. People want fast-quick investment option which growing their returns &
money also. That is the main reason people are preferring mutual fund & share market
investment .In Mutual Fund people have chance to invest their money in one time different
sector. This is the only one type of investment where people have so many choices of schemes,
fund to invest their money.

1.2 LITERATURE REVIEW

Literature on mutual fund performance evaluation is enormous. A few research studies that have
influenced the preparation of this paper substantially are discussed in this section.
(Kelly and Others, 2009), In their study A Case Study of Ethics and Mutual Funds
Mismanagement at Putnam, examines the failure of top management at Putnam to exercise
ethical behaviour in the face of their clear knowledge of corruption in the company. Market
timing by employees was expressly forbidden by Putnam. In spite of this six employees,
including two portfolio managers, were repeatedly engaged in market timing activities from 1998
to 2003, garnered over a million dollars in personal profit.
(Das and Others , 2008), on the basis of their study Mutual Fund vs. Life Insurance:
Behavioural Analysis of Retail Investors, found that that the post 1990 period, the service sector
in most of the Asian economies witnessed growth fuelled by significant changes in their financial
sector. They analyzed the role of Indian insurance and mutual fund industry in financial market
.To understand the retail investors behaviour towards different savings avenues on the basis of
their age, gender, education and profession. The study identified the features the retail investors
look for in investment products like the investors preference for fund/scheme selection. They
also identified the source of information that influences the fund/scheme selection decision and
tried to find out the behavioural pattern of retail investors towards two important investment
opportunities, i.e., mutual fund and life insurance.
(Tripathy,2007), in her book, Mutual Funds in India emerging Issues , discussed about the
basic concepts of mutual fund, operational policies, practices, investment in securities, some
aspects of portfolio management, selection, mutual fund marketing, and detailed analysis of the
latest developments in mutual fund industries. Apart from this, she also emphasize on the
fundamentals of research with details of statistical tools required for analysis in research work
and discussed in detail about the current status of development and future prospects of mutual
fund industry in India.
(Borensztein and Gelos, 2003), in their article, A Panic-Prone Pack? The Behaviour of
Emerging Market Mutual Funds, explored the behaviour of emerging market mutual funds
using a novel data base covering the holdings of individual funds over the period January 1996to
December 2000. On the basis of their findings they deduced that the degree of herding among
funds is statistically significant, but moderate. Herding is more widespread among open-ended
funds than among closed-ended funds, but not more prevalent during crises than during tranquil
times. They also found some evidence that funds tend to follow momentum strategies, selling
past losers and buying past winners. The study observed that degree of herding and momentum
trading is not enough to account for the large observed volatility on international capital markets.
(Lockwood, 1996), Macroeconomic Forces and Mutual Fund Betas developed a model in
which fund beta were linearly related to changes in macroeconomic factor using monthly returns.
Author selected 171 mutual funds over a period of 1978-91. On the basis of his study he
concluded that there was negative relationship between equity funds, beta and inflation changes
and default risk premium
(Bekaert and Urias, 1996), Diversification, Integration and Emerging Market Closed-End
Funds they studied a new class of unconditional and conditional mean-variance spanning tests
that exploits the duality between Hansen-Jagannathan bounds (1991) and mean- standard
deviation frontiers. They used it to examine the diversification benefits from emerging equity
markets using an extensive new data set on U.S. and U.K.-traded closed-ended funds. In their
study they found significant diversification benefits for the U.K. country funds, but not for the
U.S. funds. They relate this difference to portfolio holdings rather than to the behaviour of
premiums in the United States versus the United Kingdom. They concluded that emerging
market funds provide statistically significant diversification gains in unconditional tests, while
comparable U.S. funds do not .
Harry Markowitz (1952)' provides a theory about how investors should select securities for
their investment portfolio given beliefs about future performance. He claims that rational
investors consider higher expected return as good and high variability of those returns as bad.
From this simple construct, he says that the decision rule should be to diversify among all
securities, securities which give the maximum expected returns. His rule recommends the
portfolio with the highest return is not the one with the lowest variance of returns and that there
is a rate at which an investor can increase return by increasing variance. This is the cornerstone
of portfolio theory as we know it.

A study by Smith (1978) related mutual fund growth to fund performance and found some
positive relationships after adjusting for risk using Jensen's Alpha. In canying out the study,
Smith tested two hypotheses. The first was "Mutual funds that "improve" their performance In a
given period, experience a growth rate in assets under its management during the next period that
is no different from that of mutual funds that did not improve their performances ..." However,
Smith correctly recognized that the growth of a mutual fund's assets may be the result of both
new money flowing into the fund and to successful investment performance.

1.3 RESEARCH GAP

From the foregoing comprehensive literature review related to mutual funds industry in India, it
is evident that though few works has been done to find out the growth of mutual fund since the
inception of UTI. But no detailed study has been undertaken to assess the impact of liberalization
on the mutual funds industry in India. Also no empirical work has been done to find out
performance evaluation of HDFC mutual funds schemes. Therefore, the present study has been
done to find out the impact of liberalization on the net resource mobilized by mutual funds, its
impact on house hold sector savings. Also an elaborate empirical work is carried out to assess the
performance of HDFC mutual funds schemes in comparison to benchmark indices. The present
study differs from the earlier studies as it covers all aspects of mutual funds industry in India
since 1993. The year 1993 is important as it was in this year that SEBI Mutual Funds regulation
was enacted and also the private sector mutual funds were allowed to start operation in India. The
study makes an attempt to trace the impact of liberalization on the Indian mutual fund industry. It
also tries to find out the performance of HDFC mutual funds in comparison S & P CNX NIFTY
index and their portfolio composition and diversification of each scheme.

1.4 RESEARCH DESIGN

A. PRIMARY SURVEY : -

Questionnaire distributed among people having bank accounts. A sample questionnaire of 10

questions distributed to 50 people.
B. SECONDARY SURVEY :

Secondary data has been collected from different publication material and web site as
well as the books and material from different libraries, the hand note of the various
seminar and research related to the issue are taken into account.

C. CHAPTER PLANNING

Each chapter has been planned systematically. Firstly, under introduction background of the
topic is discussed and various aspects of mutual funds.

Secondly the conceptual overview of the topic is given.

Thirdly, analysis and findings is done on the basis of survey and questionnaire.
Finally the conclusion and overall summary is given.
CHAPTER 2 CONCEPTUAL FRAMEWORK

2.1 CONCEPT AND DEFINITION OF MUTUAL FUNDS

The securities and exchange board of India regulations 1993 defines a mutual fund as a fund
established in the form of a trust by a sponsor, to raise money through the sale of units to the
public, under one or more schemes, for investing in securities in accordance with these
regulations.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciation realized is shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.

Though still at a nascent stage, Indian Mutual Fund industry offers a large number of schemes
and serves broadly all types of investors. The range of products includes equity funds, debt,
liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small
and large investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard
investors interest, ensures that the investors are not cheated out of their hard earned money.

2.1.1 MUTUAL FUND JARGON

Net Asset Value (NAV): Net Asset Value is the market value of the assets of the scheme minus
its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of
units outstanding on the Valuation Date.
Sale Price: Sale price is the price you pay when you invest in a scheme. Also called Offer Price.
It may include a sales load.
Repurchase Price: Is the price at which a close-ended scheme repurchases its units and it may
include a back-end load. This is also called Bid Price.
Redemption Price: It is the price at which open-ended schemes repurchase their units and close-
ended schemes redeem their units on maturity. Such prices are NAV related.
Sales Load: It is a charge collected by a scheme when it sells the units. Also called as Front-
end load. Schemes that do not charge a load are called No Load schemes. Repurchase or
Back-end Load: It is a charge collected by a scheme when it buys back the units from the unit
holders.
2.1.2 HISTORY OF MUTUAL FUNDS IN INDIA

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. The history of mutual funds in India can
be broadly divided into four distinct phases.
a) FIRST PHASE (1964-1987)- The Beginning
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was setup by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India.
b) SECOND PHASE (1987-1993) - Entry of Public Sector Funds
The year 1987 marked the entry of non-UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed
by Canbank 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 1989 while GIC had set up its Mutual Fund in December
1990.
c) 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 Fund
industry, giving the Indian investors a wider choice of fund families. Also 1993 was the year in
which the first Mutual Fund regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
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 and revised Mutual
Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.
d) FOURTH PHASE (Since February 2003)
In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated
into two separate entities. One is the specified Undertaking of the Unit Trust of India with assets
under management of Rs. 29,835 crores as at the end of January 2003 representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.The
second is the UTI Mutual Fund Ltd. Sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund regulations. With the bifurcation of the erstwhile UTI
which had in March 2000 more than Rs 76,000 crores of assets under management and with
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations.
e) FIFTH PHASE (2004 Onwards ) - Growth and Consolidation
The industry has also witnessed several mergers and acquisitions recently, examples of which are
acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and
PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international Mutual Fund
players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 33
funds as at the end of March 2010. This is a continuing phase of growth of the industry through
consolidation and entry of new international and private sector players.
2.2 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. thus mutual funds has Variety of flavours, Being collection
of many stocks, an investors can go for picking a mutual fund might be easy. There are over
hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in
categories, mentioned below:

BY STRUCURE:

1. Open - Ended Schemes: An open-end fund is one that is available for subscription all through
the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net
Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
2. Close - Ended Schemes: Closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during a specified period.
Investors can invest in the scheme at the time of the initial public issue and thereafter they can
buy or sell the units of the scheme on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close-ended funds give an option of selling back the
units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations
stipulate that at least one of the two exit routes is provided to the investor.
 3. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-
ended and close-ended schemes. The units may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV related prices).

BY NATURE:
1. Equity Fund: These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund managers outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment objective, as
follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds
(ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the
risk-return matrix.

2. Debt Funds: The objective of these Funds is to invest in debt papers. Government authorities,
private companies, banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to the investors.

3. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government
of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk.
These schemes are safer as they invest in papers backed by Government

4. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities. Invests maximum of their total corpus in debt instruments while
they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme
ranks high on the risk-return matrix when compared with other debt schemes.

5. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short-term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs).
Some portion of the corpus is also invested in corporate debentures.

6. Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and
preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank
call money market, CPs and CDs. These funds are meant for short-term cash management of corporate
houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-
return matrix and are considered to be the safest amongst all categories of mutual funds.
7. Balanced Funds: As the name suggest they, are a mix of both equity and debt funds. They invest in
both equities and fixed income securities, which are in line with pre-defined investment objective of
the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part
provides growth and the debt part provides stability in returns. Further the mutual funds can be broadly
classified on the basis of investment parameter via, Each category of funds is backed by an investment
philosophy, which is pre-fined in the objectives of the fund. The investor can align his own investment
needs with the funds objective and invest accordingly.

2.3 BENEFITS & CHALLENGES

2.3.1 ADVANTAGES OF MUTUAL FUNDS

If mutual funds are emerging as the favourite investment vehicle, it is because of the many advantages
they have over other forms and the avenues of investing, particularly for the investor who has limited
resources available in terms of capital and the ability to carry out detailed research and market
monitoring. The following are the major advantages offered by mutual funds to all investors:

1. Portfolio Diversification: Each investor in the fund is a part owner of all the funds assets, thus
enabling him to hold a diversified investment portfolio even with a small amount of investment that
would otherwise require big capital.
2. Professional Management: Even if an investor has a big amount of capital available to him, he
benefits from the professional management skills brought in by the fund in the management of the
investors portfolio. The investment management skills, along with the needed research into available
investment options, ensure a much better return than what an investor can manage on his own. Few
investors have the skill and resources of their own to succeed in todays fast-moving, global and
sophisticated markets.

3. Reduction/Diversification Of Risk: When an investor invests directly, all the risk of potential loss
is his own, whether he places a deposit with a company or a bank, or he buys a share or debenture on
his own or in any other from. While investing in the pool of funds with investors, the potential losses
are also shared with other investors. The risk reduction is one of the most important benefits of a
collective investment vehicle like the mutual fund.

4. Reduction Of Transaction Costs: What is true of risk as also true of the transaction costs. The
investor bears all the costs of investing such as brokerage or custody of securities. When going through
a fund, he has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a
benefit passed on to its investors.

5. Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When
they invest in the units of a fund, they can generally cash their investments any time, by selling their
units to the fund if open-ended, or selling them in the market if the fund is close-end. Liquidity of
investment is clearly a big benefit.6. Convenience And Flexibility: Mutual fund management
companies offer many investor services that a direct market investor cannot get. Investors can easily
transfer their holding from one scheme to the other; get updated market information and so on.

6. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions
of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

7. Transparency: You get regular information on the value of your investment in addition to disclosure
on the specific investments made by your scheme, the proportion invested in each class of assets and
the fund managers investment strategy and outlook.
2.3.2 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

1. No Control over Costs: An investor in a mutual fund has no control of the overall costs of investing.
The investor pays investment management fees as long as he remains with the fund, albeit in return for
the professional management and research. Fees are payable even if the value of his investments is
declining. A mutual fund investor also pays fund distribution costs, which he would not incur in direct
investing. However, this shortcoming only means that there is a cost to obtain the mutual fund services.

2. No Tailor-Made Portfolio: Investors who invest on their own can build their own portfolios of
shares and bonds another securities. Investing through fund means he delegates this decision to the fund
managers. The very-high-net-worth individuals or large corporate
investors may find this to be a constraint in achieving their objectives.
However, most mutual fund managers help investors overcome this
constraint by offering families of funds- a large number of different
schemes- within their own management company. An investor can
choose from different investment plans and constructs a portfolio to his
choice.
3. Managing a Portfolio Of Funds: Availability of a large number of
funds can actually mean too much choice for the investor. He may again
need advice on how to select a fund to achieve his objectives, quite similar to the situation when he has
individual shares or bonds to select.
4. The Wisdom of Professional Management: hats right, this is
not an advantage. The average mutual fund manager is no better at
picking stocks than the average nonprofessional, but charges fees.

5. No Control: Unlike picking your own individual stocks, a

mutual fund puts you in the passenger seat of somebody elses car.

6. Dilution: Mutual funds generally have such small holdings of

so many different stocks that insanely great performance by a
funds top holdings still doesnt make much of a difference in a mutual funds total performance.

7. Buried Costs: Many mutual funds specialize in burying their costs and in hiring salesmen who do
not make those costs clear to their clients.
CHAPTER 3 ANALYSIS & FINDINGS

3.1 OBJECTIVE OF THE STUDY

To understand the working & management of a Mutual Fund.

To understand the calculation of Net-Asset Values of a Mutual Fund.
To evaluate investment performance of mutual fund in terms of risk and return.
To get an insight knowledge about mutual funds.
To find the right mutual fund for a specific customer.

3.2 SCOPE OF THE STUDY

Even today investing in mutual fund is a little difficult for laymen. Today in India there are more
than 800 mutual fund schemes. This is sufficed to baffle the investor. Researchers have shown
that those funds or schemes are normally chosen by the investors which are advertised heavily
and aggressive selling techniques are used.
So here is the need of this study, to provide a solid understanding about the different factors
governing the return which will make it easy for investors to choose their schemes as per their
needs.

For the requirement of the study our data is concerned on the 4 broad areas-

Working of Mutual Fund

Mutual Funds in India
Future Prospects of Mutual funds in India
Reliance Mutual Fund v/s UTI Mutual Fund

3.2.1 WORKING OF MUTUAL FUND

The mutual fund collects money directly or through brokers from investors. The money is
invested in various instruments depending on the objective of the scheme. The income generated
by selling securities or capital appreciation of these securities is passed on to the investors in
proportion to their investment in the scheme. The investments are divided into units and the
value of the units will be reflected in Net Asset Value or NAV of the unit. NAV is the market
value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of
the scheme divided by the number of units outstanding on the valuation date. Mutual fund
companies provide daily net asset value of their schemes to their investors.NAV is important, as
it will determine the price at which you buy or redeem the units of a scheme. Depending on the
load structure of the scheme, you have to pay entry or exit load.

3.2.2 MUTUAL FUNDS IN INDIA

In 1963, the day the concept of Mutual Fund took birth in India. Unit Trust of India invited
investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. For
30 years it goaled without a single second player. Though the 1988 year saw some new mutual fund
companies, but UTI remained in a monopoly position. The performance of mutual funds in India in
the initial phase was not even closer to satisfactory level. People rarely understood, and of course
investing was out of question. But yes, some 24 million shareholders were accustomed with
guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record
of UTI became marketing tool for new entrants. The expectations of investors touched the sky in
profitability factor. However, people were miles away from the preparedness of risks factor after
the liberalization. The net asset value (NAV) of mutual funds in India declined when stock prices
started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts
into alternative investments. There was rather no choice apart from holding the cash or to further
continue investing in shares. One more thing to be noted, since only closed-end funds were floated
in the market, the investors disinvested by selling at a loss in the secondary market. The
performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the
losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked
confidence among the investors. Partly owing to a relatively weak stock market performance,
mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of
their net asset value. The securities and Exchange Board of India (SEBI) came out with
comprehensive regulation in 1993 which defined the structure of Mutual Fund and Asset
Management Companies for the first time. The supervisory authority adopted a set of measures to
create a transparent and competitive environment in mutual funds. Some of them were like relaxing
investment. Restrictions into the market, introduction of open-ended funds, and paving the gateway
for mutual funds to launch pension schemes. The measure was taken to make mutual funds the key
instrument for long-term saving. The more the variety offered, the quantitative will be investors.
Several private sectors Mutual Funds were launched in 1993 and 1994. The share of the private
players has risen rapidly since then. Currently there are 34 Mutual Fund organizations in India
managing 1, 02,000 cores .At last to mention, as long as mutual fund companies are performing
with lower risks and higher profitability within a short span of time, more and more people will be
inclined to invest until and unless they are fully educated with the dos and donts of mutual funds.
Mutual fund industry has seen a lot of changes in past few years with multinational companies
coming into the country, bringing in their professional expertise in managing funds worldwide. In
the past few months there has been a consolidation phase going on in the mutual fund industry in
India. Now investors have a wide range of Schemes to choose from depending on their individual
profiles.

3.2.3 FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA

Financial experts believe that the future of Mutual Funds in India will be very bright. In the coming
10 years the annual composite growth rate is expected to go up by 13.4%
 100% growth in the last 6 years.

Number of foreign AMCs are in the queue to enter the Indian markets like Fidelity Investments,
US based, with over US$1trillion assets under management worldwide.

Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual
funds sector is required.

We have approximately 29 mutual funds which is much less than US having more than 800.There
is a big scope for expansion.

B and C class cities are growing rapidly. Today most of the mutual funds are concentrating on the
A class cities. Soon they will find scope in the growing cities.

Mutual fund can penetrate rural like the Indian insurance industry with simple and limited
products.

SEBI allowing the MFs to launch commodity mutual funds.

Emphasis on better corporate governance. Trying to curb the late trading practices.

Introduction of Financial Planners who can provide need based advice. Looking at the past
developments and combining it with the current trends it can be concluded that the future of Mutual
Funds in India has lot of positive things to offer to its investors.
3.2.4 RELIANCE MUTUAL FUND

VS.

UTI MUTUAL FUND

 EQUITY vs. GROWTH SCHEMES:

GROWTH SCHEMES:

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such
schemes normally invest a major part of their corpus in equities. Such funds have comparatively
high risks. Growth schemes are good for investors having a long-term outlook seeking appreciation
over a period of time.

RELIENCE MUTUAL FUND:

i. Reliance Infrastructure Fund (Open-Ended Equity):The primary investment objective of the

scheme is to generate long term capital appreciation by investing predominantly in equity and
equity related instruments of companies engaged in infrastructure (Airports, Construction,
Telecommunication, Transportation) and infrastructure related sectors and which are incorporated
or have their area of primary activity, in India and the secondary objective is to generate consistent
returns by investing in debt and money market securities. Investment Strategy: The investment
focus would be guided by the growth potential and other economic factors of the country. The Fund
aims to maximize long-term total return by investing in equity and equity-related securities which
have their area of primary activity in India.

ii. Reliance Equity Linked Saving Fund (A 10 Year Close-Ended Equity): The primary objective
of the scheme is to generate long-term capital appreciation from a portfolio that is invested
predominantly in equities along with income tax benefit. The scheme may invest in equity shares in
foreign companies and instruments convertible into equity shares of domestic or foreign companies
and in derivatives as may be permissible under the guidelines issued by SEBI and RBI.

DEBT/INCOME SCHEMES:

The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures, Government
securities and money market instruments. Such funds are less risky compared to equity schemes.
These funds are not affected because of fluctuations in equity markets. However, opportunities of
capital appreciation are also limited in such funds. The NAVs of such funds are affected because of
change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to
 increase in the short run and vice versa. However, long term investors may not bother about these
fluctuations.

i. Reliance Monthly Income Plan:(An Open Ended Fund, Monthly Income is not assured &
is subject to the availability of distributable surplus) The Primary investment objective of
the Scheme is to generate regular income in order to make regular dividend payments to unit
holders and the secondary objective is growth of capital.

ii. Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt Plan:(Open-
ended Government Securities Scheme) The primary objective of the Scheme is to generate
optimal credit risk-free returns by investing in a portfolio of securities issued and guaranteed
by the central Government and State Government.

iii. Reliance Income Fund:(An Open-ended Income Scheme) The primary objective of the
scheme is to generate optimal returns consistent with moderate levels of risk. This income
may be complemented by capital appreciation of the portfolio. Accordingly, investments
shall predominantly be made in Debt& Money market Instruments.

UNIT TRUST OF INDIA MUTUAL FUND

EQUITY FUND:

i. UTI Energy Fund (Open Ended Fund): Investment will be made in stocks of those
companies engaged in the following area) Petro sector - oil and gas products & processings)
All types of Power generation companies) Companies related to storage of energys)
Companies manufacturing energy development equipment related ( like petro and power).e)
Consultancy & Finance Companies.

ii. UTI Dividend Yield Fund (Open Ended Fund):It aims to provide medium to long term
capital gains and/or dividend distribution by investing predominantly in equity and equity
related instruments which offer high dividend yield.

iii. UTI Opportunities Fund (Open Ended Fund): This scheme seeks to generate capital
appreciation and/or income distribution by investing the funds of the scheme in equity shares and
equity-related instruments. The focus of the scheme is to capitalize on opportunities arising in the
market by responding to the dynamically changing Indian economy by moving its investments
amongst different sectors as prevailing trends change.

INDEX FUND:

i. UTI Master Index Fund (Open Ended Fund):UTI MIF is an open-ended passive fund with the
primary investment objective to invest insecurities of companies comprising the BSE sensex in
the same weight age as these companies have in BSE sensex. The fund strives to minimize
performance difference with the sensex by keeping the tracking error to the minimum.
ii. UTI Gold Exchange Traded Fund (Open Ended Fund):To Endeavour to provide returns that,
before expenses, closely track the performance and yield of Gold. However the performance of
the scheme may differ from that of the underlying asset due to racking error. There can be no
assurance or guarantee that the investment objective of UTI-Gold ETF will be achieved.

BALANCED FUND:

i. UTI Mahila Unit Scheme (Open Ended Fund):To invest in a portfolio of equity/equity
related securities and debt and money market instruments with a view to generate reasonable
income with moderate capital appreciation. The asset allocation will be Debt : Minimum 70%,
Maximum 100% Equity : Minimum 0%,Maximum 30%
ii. UTI Balanced Fund (Open Ended Fund):An open-ended balanced fund investing between
40% to 75% in equity /equity related securities and the balance in debt (fixed income securities)
with a view to generate regular income together with capital appreciation.
iii. UTI Retirement Benefit Pension Fund (Open Ended Fund):The objective of the scheme is to
provide pension to investors particularly self- employed persons after they attain the age of 58
years, in the form of periodical cash flow up to the extent of repurchase value of their holding
through a systematic withdrawal plan.

INCOME FUND (DEBT FUND):

i.UTI Bond Fund (Open Ended Fund):Open-end 100% pure debt fund, which invests in rated
corporate debt papers and government securities with relatively low risk and easy liquidity.
ii. UTI Floating Rate Fund STP (Open Ended Fund):To generate regular income through
investment in a portfolio comprising substantially offloading rate debt / money market instruments
and fixed rate debt / money market instruments.

iii. UTI Gilt Advantage Fund LTP (Open Ended Fund):To generate credit risk-free return
through investments in sovereign securities issued the Central and / or a State Government.

3.3 METHODOLOGY
The investors problems and needs can be best known from the investors themselves. My
methodology of study therefore relies primarily on in-depth interviews of investors through
structured questionnaires covering a variety of interrelated aspects, such as the investors
socioeconomic and financial position, including income and types of investment held, past
experiences, future investment intentions, problems being felt with regard to the investments, etc. A
survey of this kind is a rather difficult exercise, especially because many investors are reluctant to
disclose their personal financial data to outsiders. I have tried to overcome this problem by
informing the respondents that my objective is wholly focused on promoting the ordinary investors
interest and strengthening their protection, and that I am a non-profit body and my research is
purely for academic purpose.. Collecting of data from a large number of geographically dispersed
investors is a stupendous task. The data collected is meaningful, thus its reliability and genuineness
is ensured.

3.3.1 RESEARCH DESIGN-DESCRIPTIVE (Cross sectional) :

It is the deliberate manner to collect the information and it
describes the phenomena without establishing the association
between the factors. This is most commonly used when we want to
know about the preferences of the customer. The design is cross-
sectional because it is suited and the respondent is interviewed
once.

3.3.2 DATA TYPE : Both descriptive and statistical analysis of

the collected data will be done to study the problem. Data is mostly collected from different
locations of Kolkata.
3.3.3 SAMPLE SIZE: 50 samples were selected because few customers opt for e-banking and
data is collected from selective zones.

3.3.4 DATA SOURCE: Both Primary and Secondary data were used.

Primary Data: Data regarding the topic is collected directly by interacting with the customers by
using structured questionnaire.

Secondary Data: The secondary data was collected from the existing data sources, Catalogues,
internet and World Wide Web.

3.3.5 PERIOD OF STUDY: The study on this project was conducted on almost a period of five
years.

3.3.6 TOOLS USED: The questionnaire was developed to get the feedback from the various
respondents. The length of survey questionnaire was kept optimum to avoid the psychological
burden of responding for the sampled entrepreneurs.

3.3.7 DATA ANALYSIS: A survey was conducted on online banking in India for the primary data
among 50 people. The analysis of this survey or data is as follows:-

FINDINGS, DATA ANALYSIS AND INTERPRETATION

1. Why do you prefer a Mutual Fund?

Savings Returns Diversification

Risk Tolerance
FINDINGS:-

Options

savings Returns Diversification Risk tolerance

Percentages of
Government employees 43.75 25 12.5 18.75
respondents
Private sector employees 18.75 31.25 12.5 37.5

Businessman 6.25 18.75 31.25 12.5

Percentages of respondents
Government employees
Risk
toleranc
e
19%
INTERPRETATION:-Generally government
Diversifi savings
44% employees have secured (reliable and regular) source
cation
12% of income, therefore they opt mutual fund as
Returns
25% investment option mainly for saving followed by
returns purpose.

Percentages of respondents
Private sector employees

INTERPRETATION:-The survey reveals that

savings private sector employees opt mutual fund as an
Risk 19%
toleranc investment option for mainly for risk tolerance
e
38% followed by return. It is mainly due lack of reliability
Returns
31% and fluctuation in source of income to private sector
Diversifi
cation employees.
12%
 Percentages of respondents
Businessman
Risk savings
toleranc 9%
e INTERPRETATION:- Businessman generally
18%
favour mutual fund to diversify their source of income
Returns and minimise risk to obtain security during worst
27%
Diversifi business condition.
cation
46%

2. What do you think is the basic difference in investing in Mutual funds rather than Stocks?

Savings Risk Tolerance Diversification Tax Benefits

FINDINGS:-

Options

Risk
savings Returns Diversification tolerance
Percentages of
respondents Government employees 12.5 18.75 12.5 56.25

Private sector employees 12.5 37.5 0 50

Businessman 12.5 18.75 18.75 50

 Percentages of respondents
Government employees
savings
12% INTERPRETATION:-Government sector employees
prefer to invest in mutual funds rather than stock because
Return of tax benefit associated with mutual funds.
Risk s
toleran 19%
ce
56% Diversi
fication
13%

Percentages of respondents
INTERPRETATION:-Private sector Private sector employees

employees prefer to invest in mutual fund

over stocks because of tax benefit and risk savings
12%
tolerance attributes of mutual fund.
Risk
tolerance
50% Returns
38%

Diversifica
tion
0%
Percentages of respondents
Businessman
savings INTERPRETATION:-Business class people prefer to
12%
invest in mutual fund over stocks due tax benefit. A

Risk Returns small section of this class also prefer mutual fund for
toleranc 19%
its risk tolerance and diversification capacity.
e Diversifi
50% cation
19%
3. What is the reason for you to select this mutual fund company?

Reputation Provides good returns Experts Advice

Others, please mention

FINDINGS:-

Options

Provides goodExpert
Other
Reputation returns advice
Percentages of
Government employees 25 18.75 56.25 0
respondents
Private sector
employees 37.5 18.75 43.75 0

Businessman 25 37.5 31.25 0

Percentages of respondents
Other
Government employees
0% Reputat
ion INTERPRETATION:-The majority of government
25%
employees depend on expert advice to select their
mutual fund company. The reason behind this is that
Expert Provide
advice s good
they dont have knowledge about market, companies,
56% returns types policies available,
19%
 Percentages of respondents
Private sector employees
INTERPRETATION:-the study reveals that the
Other
0% dependence of private sector employees are less on
expert advice than government employees in selecting
Expert Reputat their mutual fund company. The risk of uncertainty in
advice ion
37% theier income pattern makes them to study funds detail
44%
before investment. Though a considerable section of this
Provide class about 44% depend on expert advice.
s good
returns
19%

INTERPRETATION:- No clear pattern has been Percentages of respondents Other

found among businessman about their ways of Businessman 0%

selecting mutual fund companies. But it is clear that Reputati

on
the reliance of this class on expert advice is less than 27%
Expert
other two classes advice
33%

Provides
. good
returns
4. Your investment is for a period of 40%

< 1 year 1-2 years 3 years >3 years

FINDINGS:-

Options

< 1 year 1-2 years 3 years > 3 year

Percentages of
Government employees 0 6.25 18.75 75
respondents
Private sector employees 6.25 12.5 25 56.25

Businessman 0 37.5 37.5 25

 INTERPRETATION:-The study reveals that
Percentages of respondents
Government employees government sector employees invest in mutual fund
1-2
< 1 year for a larger period, over 3 years because the purpose
years
0%
6% of these people behind investment in mutual fund is

3 years savings and earning returns.

19%

> 3 year
75%

Percentages of respondents
Private sector employees
< 1 year
6%

1-2 years
13%

> 3 year
3 years
56%
25%

INTERPRETATION:-the majority of private sector employees invest in mutual fund for a period
more than 3 years because motive of these class of people behind investment in mutual fund is
savings and earning returns. But a considerable section of these class of people invest in mutual
fund for a period 2 to 3 years and motive these people is to minimise risk.
 Percentages of respondents
Businessman INTERPRETATION:-It is clear that business class in
> 3 year < 1 year
0% mutual fund relatively for a shorter period than other
25%
1-2
class of people because they have knowledge of market
years
37% and they prefer to alter their investment to earn
3 years
38%
maximum from their money

5.What type of funds have you invested in?

Equity Fund Debt Fund Liquid Fund

Index Fund Asset Fund Balanced Fund

Income Fund

FINDINGS:-

Options

Equity Debt Liquid Index Asset Balanced

Fund Fund Fund Fund Fund fund

Percentages ofGovernment
respondents employees 18.75 6.25 18.75 12.5 12.5 3.125

Private sector
employees 31.25 18.75 12.5 6.25 6.25 25

Businessman 25 12.5 37.5 0 18.75 0.625

 Percentages of respondents
Government employees
Balance
INTERPRETATION:-The selection of fund by
d fund
Equity
Asset 4% Fund
government employees reveals that they prefer to invest
Fund 26%
17%
in relatively secure fund that guarantee long term and
Index Debt Liquid regular return with minimum risk.
Fund Fund Fund
18% 9% 26%

Percentages of respondents
Private sector employees

INTERPRETATION:-The selection of fund by

Balance private sector employees reveals that they prefer to
d fund Equity
25% Fund take risk to earn some extra return. But extent of risk is
31%
quite less
Asset
Fund
6% Liquid Debt
Index Fund Fund
Fund 13% 19%
6%

Percentages of respondents
Businessman
Balanced
fund
1%

Index Equity
INTERPRETATION:-the selection of fund by Fund Asset Fund
0% Fund 26%
business class people reveals that they are ready to 20%
take considerable amount of risk to earn good Liquid
return. The study also shows that liquid fund is Fund
Debt
40%
Fund
quite popular among this class. 13%
6. How often do you monitor the following? (Please tick appropriate column)

Particulars Monthly Quarterly Half yearly Yearly Never

Performance of your investments

(NAV)

Risk factors

Portfolio of securities

Profile of Fund manager

FINDINGS:-

Options

MonthlyQuarterlyHalf YearlyYearlyNever

Govt. employees 0 0 25 25 50
Performance of your
Private sector employees0 6.25 18.75 37.5 37.5
investments ( NAV)
Businessman 0 12.5 31.25 43.75 12.5

Risk Factor Govt. employees 0 0 25 25 50

Private sector employees0 6.25 18.75 37.5 37.5

Businessman 0 12.5 31.25 43.75 12.5

Portfolio Of securities Govt. employees 0 0 25 25 50

Private sector employees0 6.25 18.75 37.5 37.5

Businessman 0 12.5 31.25 43.75 12.5

Percentages of respondents

Govt. employees 0 0 25 25 50
Profile Of Fund
Private sector employees0 6.25 18.75 37.5 37.5
Manager
Businessman 0 12.5 31.25 43.75 12.5
 60
50
40
30
20
10
0
Govt. employees

Govt. employees

Govt. employees

Businessman
Private sector employees

Private sector employees

Private sector employees

Businessman

Businessman

Govt.employees
Private sector employees
Businessman
Options Monthly
Options Quaterly
Options Half Yearly
Options Yearly
Options Never

Performance of Risk Factor Portfolio Of Profile Of

your securities Fund
investments ( Manager
NAV)
Percentages of respondents

CONCLUSION:- The study reveals that government sector employees generally dont bother
to monitor their fund position. This may be due to following condition:-

a) Lack of knowledge about fund market etc.

b) The investment period is larger, say more than 3 years.

Unlike government sector employees about 63% of private sector employees monitor their fund
at least once in a year.

Majority of government business class people monitor their fund at least once in a year
because:-

a) They have knowledge of market, funds etc.

b) Risk of fluctuation in their source of income.
7.Which of the following risks do you think are attached to your investment?

Volatility Interest rate risk Credit risk Inflation Risk

FINDINGS:-

Options

VolatilityInterest rate risk Credit risk Inflation risk

Percentages of
Government employees 0 6.25 18.75 75
respondents
Private sector employees 6.25 12.5 25 56.25

Businessman 0 37.5 37.5 25

Percentages of respondents
Government employees
Volatility
0% Interest
INTERPRETATION:-Majority of government
rate risk
6% sector employees thinks that risk attached to their
Credit investment is interest risk and inflation risk, this
risk
19% may be due to present economic condition.
Inflation
risk
75%
 Percentages of respondents
Private sector employees
Volatility
6% Interest
rate risk
13%

Inflation Credit
risk risk
56% 25%

CONCLUSION:- Majority of private sector employees thinks that risk attached to their
investment is interest risk and inflation risk, this may be due to present economic condition.

Percentages of respondents
Businessman
Volatility
0%

Inflation
risk Interest
25% rate risk
37%

Credit risk
38%

CONCLUSION:- Majority of business class people thinks that risk involved to their investment is
inflation risk and volatility, the reason behind these may be current economic condition and their
aggressive investment attitude respectively.
8.Are you sure about the risks related to the schemes?

Yes To an Extent Not Sure

FINDINGS:-

Options

Yes To an extent Not sure

Percentages of
Government employees 12.5 112.5 37.5
respondents
Private sector employees 6.25 62.5 31.25

Businessman 12.5 75 12.5

Percentages of respondents
Government employees Percentages of respondents
Private sector employees Yes
6%
Yes
Not sure
8%
Not sure 31%
23%

To an
extent
69%
To an
extent
63%
 Percentages of respondents
Businessman
Not sure
13%
Yes
12%

To an
extent
75%

INTERPRETATION:-The study shows that awareness among business class people about the
risks associated with their fund is more than other two classes. On the other hand government
employees are less aware about the risk associated with their schemes.

9. High Returns involve high Risks. Do you agree?

Agree Partially Agree Disagree

FINDINGS:-

Options

Agree Partially Agree Disagree

Percentages of
Government employees 12.5 50 37.5
respondents
Private sector employees 6.25 62.5 31.25

Businessman 12.5 75 12.5

 Percentages of respondents
Percentages of respondents Private sector employees
Government employees Agree
Agree 6%
12%

Disagre
Disagre e
e 31%
38% Partiall Partially
y Agree Agree
50% 63%

Percentages of respondents
Businessman

Disagree Agree
13% 12%

Partially
Agree
75%

10. Rank the Objectives of the investment. Rank them From 14(1 for the most preferred to 4 the
least preferred)

Savings

Tax Benefits

Portfolio Management

Balanced Risk

Potential Returns
 CHAPTER 4 CONCLUSION & RECOMMENDATIONS

4.1 SUMMARY OBSERVATION

Mutual Fund investment is better than other raising fund.

A good brand is always welcomed over here people are more aware anD conscious for the brand
so they go for they are ready to spend some extra bucks for the quality.

At last all cons are concluded by that Reliance Money is still growing industry in India and is still
exploring its potential and prospects in here.

Mutual Funds now represent perhaps most appropriate investment opportunity for most investors.
As financial markets become more sophisticated and complex, investors need a financial intermediary
who provides the required knowledge and professional expertise on successful investing. As the
investor always try to maximize the returns and minimize the risk. Mutual fund satisfies these
requirements by providing attractive returns with affordable risks. The fund industry has already
overtaken the banking industry, more funds being under mutual fund management than deposited with
banks. With the emergence of tough competition in this sector mutual funds are launching a variety of
schemes which caters to the requirement of the particular class of investors. Risk takers for getting
capital appreciation should invest in growth, equity schemes. Investors who are in need of regular
income should invest in income plans. The stock market has been rising for over three years now. This
in turn has not only protected the money invested in funds but has also to help grow these investments.
This has also instilled greater confidence among fund investors who are investing more into the market
through the MF route than ever before. Reliance India mutual funds provide major benefits to a
common man who wants to make his life better than previous. Indias largest mutual fund, UTI, still
controls nearly 80 per cent of the market.

4.2 RECOMMENDATIONS FOR IMPROVEMENT

After analyzing the results, for the better future of the Indian Mutual Fund Industry the
following recommendations are given by the researcher:
 As mutual fund has entered into the Indian Capital market, which is growing profitable enough
to attract competitors into this cherished territory. Encouraging competition among all the
mutual fund operators, need to take some strategy to bring more confidence among investors for
which mutual fund would be able to project the image successfully.
The rise and fall of assets managed by mutual funds depends upon the money invested by
investors. The outflows of funds by corporates to meet tax and other working capital
requirement, the absence of Interest of a diverse retail base hurts the AUM. The industry needs
more common people to own mutual fund units and not just large corporate to park their money.
Despite immense growth potentials, limited involvement of the rural sector will prove to be a
hurdle for the growth of this industry. Due to lack of awareness, inferior distribution and limited
banking services in the rural regions, mutual funds are yet to gain significant recognition and
acceptance in the rural markets. It is absolutely necessary to harness the savings of the nation
especially from rural and semi-urban areas into financial assets and the units of mutual funds
should certainly become one such asset that can attract these savings through a wide spread and
efficient network of operations.
Mutual funds should build confidence in the existing unit holders as well as the public not
covered so far. Mutual funds have to prove as an ideal investment vehicle for retail investors by
way of assuring better returns in relation to the risk involved and by way of better customer
services.
A successful asset management business is evaluated on the basis of the equity assets it
manages. Therefore, the AMCs should meet the challenge of promoting the individuals to take
risks.
Mutual funds as institutional investors have to ensure professional market analysis, optimum
diversification of portfolio, minimizing of risk and optimizing of return.
The fund managers have to provide the benefits of professional management by way of market
timing and stock selection skills.
The Asset Management companies by way of superior management, efficient market
forecasting have to ensure not only out performance but also consistency in the performance.
While millions of potential investors are not fully aware of the modes of investments, most of
the investors who have invested are not fully aware of their rights and obligations. Hence, the
Government should arrange for more number of massive educational programs on investment
avenues besides publishing Investors guide enabling the investing public to take more
 informed investment decision. It would be more enlightening and effective if awareness
programs were organized at the collegiate level so that students could become aware of
investment avenues even before they start earning.
SEBI and AMFI could carry out research works to introduce many mutual fund products proved
successful in foreign countries but not yet introduced in India. Mutual fund activities could be
linked with the banking institutions, through electronic clearing and plastic money for easy
transactions and e-units of mutual funds.
The role of investors redress cell has to become more dynamic, efficient and wide spread so as
to reach out to investors rebuilding confidence among existing Chapter-6 Summary of
conclusions, Findings and Recommendations 225 unit-holders and generate interest among the
potential investors. Mutual fund Ombudsman could be established for early settlement of
disputes.
Public sector thrust into mutual funds distribution and focus on strengthening presence beyond
Tier 2 cities will entail training of the public sector employee base through the Train the Trainer
approach, so that they may be inducted as trainers to support customer awareness campaigns to
be facilitated by CII,NISM and AMFI.
Opening up of the public sector branch network in Tier 3 and Tier 4 towns will include India
post, Nationalized banks, Regional Rural Banks Cooperative Banks. This will also require a
boost to be provided to investor service centers through R &T Agents should not be given a
thrust.
Investment managers are today facing challenges through redemptions, lower sales, and a flight
to safety. The economic crisis has highlighted the benefits of mutual funds, particularly when
compared with derivatives-based structured products or direct stock investing. Recent
developments have sown the seeds for players to proactively anticipate and manage risks in a
dynamic economic environment, and focus on educating investors on diversification and a long-
term orientation in investing.
It is therefore an opportune time for the industry to introspect on the lessons learnt in the past
decade and develop a roadmap through a collaborative effort across all stakeholders, to achieve
sustained profitable growth.
As the investors are not willing to invest in mutual fund unless a minimum return is assured, it
is very essential to create in the mind of the investors that mutual funds are market instruments
and associated with market risk hence mutual fund could not offer guaranteed income.
Private sector and foreign companies should be given more freedom in floating mutual funds,
intensifying competition in this industry.

Due to operations of many mutual funds, there will be need for appropriate guidelines for self-
regulation in respect of publicity/advertisement and inter scheme transactions within each
mutual fund.
The growth of mutual fund tends to increase the shareholdings in good companies, give raise
the fear of destabilizing among industrial group, hence introduction of nonvoting shares and
lowering the debt-equity ratio help to remove these apprehension.
Steps should be taken for funds to make fair and truthful disclosures of information to the
investors, so that subscribers know what risk they are taking by investing in fund.
Mutual funds need to take advantage of modern technology like computer and
telecommunications to render service to the investors.
Mutual funds are made for investors and investors interest ought to be paramount by setting
standard of behaviors and efficiency through self regularisations and professionalism.

4.3 LIMITATIONS OF THE STUDY

The following limitations have been found by the team:

The research study has been done from a selective material on the internet.

Only selective journals, papers and articles have been put to use because of the time
factor.

There is the possibility of further updating of this research paper because of limited
sources.

There were several time constraints

Due to continuous change in environment, what is relevant today may be irrelevant

tomorrow.
The study is limited to selected mutual fund schemes.
4.4 SCOPE FOR FURTHER RESEARCH

The present research on the comparative study of Public and Private sector Mutual funds
explored many issues in line with the objectives set for the study. The present study has focused
on the comparison between the Public sector schemes and private sector schemes. On the basis of
secondary data, their performances were analyzed. But still I feel that a multi directional focus on
related areas is possible. In the context of limitations of the study, and the experience gained
during the study, some of the potential areas are identified for future researches. Potential areas
for research have been identified in the following areas:
The present work deals with the comparative study between Public and private sector
mutual funds in India. Similarly a comparative study can also be made within Public
sector mutual funds between Financial Institutions sponsored Mutual funds and Bank
sponsored Mutual funds. A study can also be done with in Private sector mutual funds
between Indian Mutual funds, Foreign Mutual funds and Joint Venture funds.
The present study is confined to the regulated environment of mutual fund industry and to
that of growth and balanced schemes. During the course of study it was observed that
technological and environmental changes have many social implications.
Government policies, changes in the financial environment, income status have
significant influence on the size of savings, preference for investment avenues and pattern
of holding investments. Thus, there are several other important issues relating to mutual
funds increasing the scope of this study. The mutual funds can also be studied in terms of
its influence on stock market sentiments, purchase and sale of securities. As very few
studies are available on money market mutual funds, studies could be carried out to
identify the role of money market mutual funds as a short-term financial instrument and
how far they are able to meet the demand and supply of short-term funds in the Indian
financial system.
To pick up the pace of economic growth, inflow of foreign currency is a must. Hence,
studies could be carried out to know the competency of offshore funds and to identify
ways and means of improving offshore mutual fund operations.
The past period had seen a lot of mergers and acquisitions in Mutual fund Industry. The
rate and nature of mutual fund attrition has its impact on the investing society and other
existing mutual funds in the industry. The correction of attrition is highly important to
avoid its negative impact on the earnings of the existing mutual fund schemes.

Hence, research could be carried out on mutual fund attrition and the effect of
survivorship bias on the other existing mutual fund schemes. These are the possible areas
of research work which can richly contribute towards the existing literature on mutual
funds.
 BIBLIOGRAPHY
REFERENCE BOOK:

FINANCIAL MARKET AND SERVICES

- Gordon and Natarajan
INVESTMENT MANAGEMENT
- V.K.Bhalla
Research Methodology
Kothari

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www.moneycontrol.com

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Business Today
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