investment preferences in mutual funds
TRANSCRIPT
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CHAPTER-I
INTRODUCTION
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MUTUAL FUNDS
The mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by the
pooling of a number of small investments into a large bucket. Yet, it has been the subject of
perhaps the most elaborate and prolonged regulatory effort in the history of the country.
The mutual fund industry has grown to gigantic proportions in countries like the US, in
!ndia it is still in the phase of infancy.
The origin of the !ndian mutual fund industry can be traced back to 1"#$ when the
!ndian %overnment, with a view to augment small savings within the country and to
channeli&e these savings to the capital markets, set up the Unit Trust of !ndia 'UT!(. The
UT! was setup under a specific statute, the Unit Trust of !ndia ct, 1"#). The Unit Trust of
!ndia launched its first open*ended e+uity scheme called Unit #$ in the year 1"#$, which
turned out to be one of the most popular mutual fund schemes in the country. !n 1"-, the
government permitted other public sector banks and insurance companies to promote
mutual fund schemes. ursuant to this rela/ation, si/ public sector banks and two insurance
companies viz. 0ife !nsurance orporation of !ndia and %eneral !nsurance orporation of
!ndia launched mutual fund schemes in the country.
Securities 2/change 3oard of !ndia, better known as S23!, formulated the 4utual
5und '6egulation( 1""), which for the first time established a comprehensive regulatory
framework for the mutual fund industry. This proved to be a boon for the mutual fund
industry and since then several mutual funds have been set up by the private sector as well
as the joint sector. 7othari ioneer 4utual fund became the first from the private sector to
establish a mutual fund in association with a foreign fund. Since then several private sector
companies have established their own funds in the country, making mutual fund industry
one of the most followed sector by critics and investors alike. The share of private sector
mutual funds too has gone up rapidly.
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!n the period between 1"#) and 1", when the UT! was the sole player in the
industry, the assets under management grew to about 6s.#- billion. !n the second phase
between 1"*1""$, when public sector banks and insurance companies were allowed to
launch mutual fund schemes, the total assets in the mutual fund industry grew to about 6s.
#19 billion with the total number of schemes increasing to 1#- by the end of 1""$. The
third phase of the mutual fund industry, which commenced in 1""$, witnessed e/ponential
growth of the industry, with the advent of private players therein. s on 4ay )1, 899$, the
total assets under management stood at 6s. 1:$9 billion and the total number of schemes
stood at )"".
;uring the last three and a half decades, UT! has been a dominant player in the
mutual fund industry. The total assets under the management of the UT! as on September
)9, 8998 were to the tune of 6s. $$8 billion, which amount to almost $1< of the total
assets under management in the domestic mutual fund industry. UT! has witnessed some
erosion of assets pursuant to the last year=s crisis arising on account of its Unit #$ scheme,
the scheme with largest amount of assets under management. This was the first scheme
launched by the UT! with a significant e+uity e/posure and the returns of which was not
linked to the market. This resulted in a payment crisis when the stock markets crashed
during the last two years, which resulted in some degree of loss of investors= confidence in
UT! leading to erosion of its assets under management. This period also gave opportunity
to the private players to demonstrate better returns thereby capturing a significant market
share.
>hatever may have happened to mutual funds in the past and whatever one is
seeing now, mutual funds are here to stay as long as they can deliver the aspirations of their
investors. ?ne must not forget that !ndia is a large nation with a population of more than 1
billion people and the potential continues to be huge. @owever, to be fair mutual fund
managers should also strive to improve their performance and not blame the vagaries of the
market all the times.
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History of the Indian Mutua Fund Industry
The mutual fund industry in !ndia started in 1"#) with the formation of Unit Trust of !ndia,
at the initiative of the %overnment of !ndia and 6eserve 3ank the. The history of mutual
funds in !ndia can be broadly divided into four distinct phases
First Phase ! "#$%-&'
Unit Trust of !ndia 'UT!( was established on 1"#) by an ct of arliament. !t was set up by
the 6eserve 3ank of !ndia and functioned under the 6egulatory and administrative control
of the 6eserve 3ank of !ndia. !n 1"- UT! was de*linked from the 63! and the !ndustrial
;evelopment 3ank of !ndia '!;3!( took over the regulatory and administrative control in
place of 63!. The first scheme launched by UT! was Unit Scheme 1"#$. t the end of 1"
UT! had 6s.#,-99 crores of assets under management.
Se(ond Phase ! "#&'-"##) *Entry of Pu+i( Se(tor Funds,
!n the year 1"- marked the entry of non* UT!, public sector mutual funds set up by public
sector banks and 0ife !nsurance orporation of !ndia '0!( and %eneral !nsurance
orporation of !ndia '%!(. S3! 4utual 5und was the first non* UT! 4utual 5und
established in Aune 1"- followed by anbank 4utual 5und ';ec -(, unjab Bational
3ank 4utual 5und 'ug "(, !ndian 3ank 4utual 5und 'Bov "(, 3ank of !ndia 'Aun "9(,
3ank of 3aroda 4utual 5und '?ct "8(. 0! established its mutual fund in Aune 1"" while
%! had set up its mutual fund in ;ecember 1""9.
t the end of 1""), the mutual fund industry had assets under management of
6s.$-,99$ crores.
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Third Phase ! "##)-..) *Entry of Pri/ate Se(tor Funds,
>ith the entry of private sector funds in 1""), a new era started in the !ndian
mutual fund industry, giving the !ndian investors a wider choice of fund families. lso,
1"") was the year in which the first 4utual 5und 6egulations came into being, under
which all mutual funds, e/cept UT! were to be registered and governed. The erstwhile
7othari ioneer 'now merged with 5ranklin Templeton( was the first private sector mutual
fund registered in Auly 1"").
The 1"") S23! '4utual 5und( 6egulations were substituted by a more
comprehensive and revised 4utual 5und 6egulations in 1""#. The industry now functions
under the S23! '4utual 5und( 6egulations 1""#.
The number of mutual fund houses went on increasing, with many foreign mutual
funds setting up funds in !ndia and also the industry has witnessed several mergers and
ac+uisitions. s at the end of Aanuary 899), there were )) mutual funds with total assets of
6s. 1,81,9: crores. The Unit Trust of !ndia with 6s.$$,:$1 crores of assets under
management was way ahead of other mutual funds.
Fourth Phase ! sin(e Fe+ruary ..)
!n 5ebruary 899), following the repeal of the Unit Trust of !ndia ct 1"#) UT! was
bifurcated into two separate entities. ?ne is the Specified Undertaking of the Unit Trust of
!ndia with assets under management of 6s.8",): crores as at the end of Aanuary 899),
representing broadly, the assets of US #$ scheme, assured return and certain other schemes.
The Specified Undertaking of Unit Trust of !ndia, functioning under an administrator and
under the rules framed by %overnment of !ndia and does not come under the purview of the4utual 5und 6egulations.
The second is the UT! 4utual 5und 0td, sponsored by S3!, B3, 3?3 and 0!. !t
is registered with S23! and functions under the 4utual 5und 6egulations. >ith the
bifurcation of the erstwhile UT! which had in 4arch 8999 more than 6s.-#,999 crores of
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assets under management and with the setting up of a UT! 4utual 5und, conforming to the
S23! 4utual 5und 6egulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of consolidation
and growth. s at the end of ?ctober )1, 899), there were )1 funds, which manage assets
of 6s.18#-8# crores under )# schemes.
The graph indicates the growth of assets over the years.
0RO1TH IN ASSETS UNDER MANA0EMENT
0o+a S(enario of Mutua Funds
The money market mutual 5und segment has a total corpus of C1.$ million in theU.S. against a corpus of C199 million in !ndia. ?ut of the top 19 4utual 5unds world wide,
are bank sponsored. ?nly 5idelity D capital are non*bank 4utual 5unds in this group. !n
U.S. the total number of schemes is higher than that of the listed companies while in !ndia
we have just 8-- Schemes.
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!nternationally, 4utual 5unds are allowed to go short. !n !ndia fund managers do
not have such leeway. !n about ".- million households will manage their assets online. 3y
the year 899$, such a facility is not available in !ndia. ?nline trading is a great idea to
reduce management e/penses from the current 8< of total assets to about 9.-:< of the
total assets. round -8< of the core customer base of 4utual 5unds in the top :9 broking
firms in the U.S. is e/pected to trade online.
The !ndian 4utual 5und !ndustry is dominated by the UT!, which has a total corpus
of 6s.-99 billion, collected from over 899 million investors. The 8ndlargest category of
4utual 5unds is the ones floated by the nationali&ed banks. an bank asset management
floated by anara 3ank D S.3.!. 5und 4anagement floated by S.3.!. are the largest of
these. The aggregate corpus of the funds managed by this category of sset 4anagement
ompanies is around 6s.1:9 billion among the private players the largest are E2ira
Ca3ita Asset Mana4e5ent Co53any6D rudential !!! sset 4anagement ompany.
The aggregate corpus of the asset managed by this category of sset 4anagement
companies is about 6s.#9billion.
FUND 2ASICS
4utual 5und is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could range
from shares to debentures to money market instruments. The income earned through these
investments and the capital appreciation reali&ed by the scheme is shared by its unit holders
in proportion to the number of units owned by them. Thus a 4utual 5und is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed portfolio at a relatively low cost. The small savings of
all the investors are put together to increase the buying power and hire a professional
manager to invest and monitor the money. nybody with an investible surplus of as little as
a few thousand rupees can invest in 4utual 5unds. 2ach 4utual 5und scheme has a
defined investment objective and strategy.
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Stru(ture of a
Mutua Fund
mutual
fund is set up in
the form of a
trust, which has
Sponsor, Trustees,sset
4anagement
ompany *AMC,and a ustodian. The trust is established by a sponsor or more than one
sponsor who is like a promoter of a company. The trustees of the mutual fund hold its
property for the benefit of the unit*holders. The 4, approved by S23!, manages the
funds by making investments in various types of securities. The custodian, who is
registered with S23!, holds the securities of various schemes of the fund in its custody. The
trustees are vested with the general power of superintendence and direction over 4.
They monitor the performance and compliance of S23! 6egulations by the mutual fund.
typical mutual fund structure in !ndia can be graphically represented as follows
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S3onsor
The sponsor is re+uired, under the provisions of the 4utual 5und 6egulations, to
have a sound track record, a reputation of fairness and integrity in all his business
transactions. dditionally, the sponsor should contribute at least $9< to the net worth of
the 4. @owever, if any person holds $9< or more of the net worth of an 4 shall be
deemed to be a sponsor and will be re+uired to fulfill the eligibility criteria specified in the
4utual 5und 6egulations. The sponsor or any of its directors or the principal officer
employed by the mutual fund should not be guilty of fraud, not be convicted of an offence
involving moral turpitude or should have not been found guilty of any economic offence.
Trustees
The mutual fund is re+uired to have an independent 3oard of Trustees, i.e. two
thirds of the trustees should be independent persons who are not associated with the
sponsors in any manner whatsoever. n 4 or any of its officers or employees are not
eligible to act as a trustee of any mutual fund. !n case a company is appointed as a trustee,
then its directors can act as trustees of any other trust provided that the object of such other
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trust is not in conflict with the object of the mutual fund. dditionally, no person who is
appointed as a trustee of a mutual fund can be appointed as a trustee of any other mutual
fund unless he is an independent trustee and prior approval of the mutual fund of which he
is a trustee has been obtained for such an appointment.
The trustees are responsible for F inter alia *ensuring that the 4 has all its
systems in place, all key personnel, auditors, registrars etc. have been appointed prior to the
launch of any scheme. !t is also the responsibility of the trustees to ensure that the 4
does not act in a manner that is favorable to its associates such that it has a detrimental
impact on the unit holders, or that the management of one scheme by the 4 does not
compromise the management of another scheme. The trustees are also re+uired to ensure
that an 4 has been diligent in empanelling and monitoring any securities transactions
with brokers, so as to avoid any undue concentration of business with any broker.
The 4utual 5und 6egulations further mandates that the trustees should prevent any
conflicts of interest between the 4 and the unit holders in terms of deployment of net
worth.
Asset Mana4e5ent Co53any
The sponsor or the trustees are re+uired to appoint an 4 to manage the assets of
the mutual fund. Under the 4utual 5und 6egulations, the applicant must satisfy certain
eligibility criteria in order to +ualify to register with S23! as an 4
The sponsor must have at least $9< stake in the 4
The directors of the 4 should be persons having ade+uate professional
e/perience in finance and financial services related field and not found guilty of
moral turpitude or convicted of any economic offence or violation of any securities
laws
The 4 should have and must at all times maintain, a minimum net worth of 6s.
19 rores
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The board of directors of such 4 has at least :9< directors, who are not
associates of or associated in any manner with, the sponsor or any of its subsidiaries
or the trustees
The hairman of the 4 is not a trustee of any mutual fund.
!n addition to the above eligibility criteria and other on going compliance re+uirements laid
down in the 4utual 5und 6egulations, the 4 is re+uired to observe the following
restrictions in its normal course of business. ny director of the 4 cannot hold office of
a director in another 4 unless such person is an independent director and the approval
of the board of the 4 of which such person is a director, has been obtainedG the 4
shall not act as a trustee of any mutual fundG the 4 cannot undertake any other business
activities e/cept activities in the nature of portfolio management services, management and
advisory services to offshore funds, pension funds, provident funds, venture capital funds,
management of insurance funds, financial consultancy and e/change of research on
commercial basis if any of such activities are not in conflict with the activities of the
mutual fund.
Custodian
The mutual fund is re+uired, under the 4utual 5und 6egulations, to appoint a
custodian to carry out the custodial services for the schemes of the fund. ?nly institutions
with substantial organi&ational strength, service capability in terms of computeri&ation, and
other infrastructure facilities are approved to act as custodians. The custodian must be
totally de*linked from the 4 and must be registered with S23!. Under the Securities
and 2/change 3oard of !ndia 'ustodian of Securities( %uidelines, 1""#, any person
proposing to carry on the business as a custodian of securities must register with the S23!
and is re+uired to fulfill specified eligibility criteria. dditionally, a custodian in which the
sponsor or its associates holds :9< or more of the voting rights of the share capital of the
custodian or where :9< or more of the directors of the custodian represent the interest of
the sponsor or its associates cannot act as custodian for a mutual fund constituted by the
same sponsor or any of its associate or subsidiary company.
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Asso(iation of Mutua Funds in India *AMFI,
ssociation of 4utual 5unds in !ndia '45!( is an ape/ body of asset management
companies of the 4utual 5und registered in !ndia. !t was incorporated on the ugust 88nd
1"": as a non*profit making organi&ation. !t is dedicated to developing the !ndian 4utual
5und industry on professional, healthy D ethical lines D to enhance and maintain standards
in all areas with a view to protecting D promoting the interests of 4utual 5unds D their
unit holders
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O27ECTI8ES
To recommend D implement healthy business practices, ethical code of conduct,
standard principles D practices to be followed by the members of the company Dothers engaged in the activities of 4utual 5unds D sset 4anagement including
agencies connected or involved in the field of capital 4arkets D financial Services.
To promote high standards of commercial honor D encourage D promote among
members D others the observance of securities laws including regulations D
directives issued by Securities D 2/change 3oard of !ndia 'S23!( D function in
the best of interest of the investing public.
To help in setting up professional standards for providing efficient services D
establishing standard practices for 4utual 5und D sset 4anagement activities.
To bring about better co*ordination in the field of 4utual 5unds D sset
4anagement !ndustry.
To promote D develop sound, progressive D dynamic principles, practices D
conventions in the activities of 4utual 5und D sset 4anagement.
To study various investment alternatives and in particular investors preference
towards mutual funds.
To study the preference of investors in today=s scenario 'less risk and more return(.
To assess the risk of investors with reference to diversifiable risk D non*
diversifiable risk.
To study market potentiality of mutual fund among investors.
To study whether the investors are considering 3irla Sun 0ife a better option or
not.
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ROLE OF MUTUAL FUNDS
Mutua Funds 9 Finan(ia Mar:et
!n the process of development !ndian mutual funds have emerged as strong
financial intermediaries D are playing a very important role in bringing stability to the
financial system D efficiency to resource allocation. 4utual 5unds have opened new vistas
to investors D imparted a much*needed li+uidity to the system. !n the process they have
challenged the hitherto role of commercial banks in the financial market D national
economy.
Mutua Fund 9 Ca3ita Mar:et
The active involvement of 4utual 5unds in promoting economic development can
be seen not only in terms of their participation in the savings market but also in their
dominant presence in the money D capital market. developed financial market is critical
to overall economic development, D 4utual 5unds play an active role in promoting a
healthy capital market. The asset holding pattern of mutual funds in the US indicates the
dominant role of 4utual 5unds in the capital market D money market. 4ore over they
have also rendered critical support to securities mortgage loans D municipal bond market
in the US. !n the US, 4utual 5unds provide very active support to the secondary market
in terms of purchase of securities.
!nvestor=s preferences pattern in !ndia has undergone a tremendous change during
recent times, along with the changes in the share of financial assets in the total annual
savings. !ndian investors have moved towards more li+uid D growth oriented trade able
instruments like=s sharesHdebentures D units of 4utual 5unds. The shift is asset holding
pattern of investors has been significantly influenced by the Ie+uity= D Iunit= culture while
the holders of company shares D debentures are concentrated in the urban areas,
smallHmedium investors in the semi*urban D rural areas are tending towards 4utual 5unds.
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4utual 5unds in !ndia have certainly created awareness among investors about e+uity
oriented investments D its benefits.
Ty3es of Mutua Fund S(he5es
There are a wide variety of 4utual 5und schemes that cater to investors need,
whatever your age, financial position, risk tolerance and return e/pectations. >hether as
the foundation of your investment program or as a supplement, 4utual 5und schemes can
help you meet your financial goals.
2y Stru(ture ! S(he5es (an +e (assified into ) ty3es
O3en-Ended S(he5es
These do not have a fi/ed maturity. !nvestors deal directly with the 4utual 5und for
their investments and redemptions. The key feature is li+uidity. They can conveniently buy
and sell their units at Bet sset Jalue 'KBJK( related prices.
Cose-Ended S(he5es
Schemes that have a stipulated maturity period 'ranging from 8 to 1: years( are
called close*ended schemes. !nvestors can invest directly in the scheme at the time of the
initial issue and thereafter they can buy or sell the units of the scheme on the stock
e/changes where they are listed. The market price at the stock e/change could vary from
the schemeLs BJ on account of demand and supply situation, unit holdersL e/pectations
and other market factors. ?ne of the characteristics of the close*ended schemes is that they
are generally traded at a discount to BJG but closer to maturity, the discount narrows.
Some close*ended schemes give them an additional option of selling their units
directly to the 4utual 5und through periodic repurchase at BJ related prices. S23!
6egulations ensure that at least one of the two e/it routes is provided to the investor.
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!nterval Schemes!nterval Schemes
These combine the features of open*ended and close* ended schemes. They may be
traded on the stock e/change or may be open for sale or redemption during pre*determined
intervals at BJ related prices.
2y In/est5ent O+;e(ti/e
0rouity S(he5es
im to provide capital appreciation over the medium to long term. These schemes
normally invest a majority of their funds in e+uities and are willing to bear short* term
decline in value for possible future appreciation. These schemes are not for investors
seeking regular income or needing their money back in the short*term.
In(o5e S(he5es
im to provide regular and steady income to investors. These schemes generally
invest in fi/ed income securities such as bonds and corporate debentures. apital
appreciation in such schemes may be limited.
2aan(ed S(he5es
im to provide both growth and income by periodically distributing a part of the
income and capital gains they earn. They invest in both shares and fi/ed income securities
in the proportion indicated in their offer documents. !n a rising stock market, the BJ of
these schemes may not normally keep pace, or fall e+ually when the market falls.
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Money Mar:et S(he5es
im to provide easy li+uidity, preservation of capital and moderate income. These
schemes generally invest in safer, short*term instruments, such as treasury bills, certificates
of deposit, commercial paper and inter* bank call money. 6eturns on these schemes may
fluctuate, depending upon the interest rates prevailing in the market.
Ta? Sa/in4 S(he5es
These schemes offer ta/ rebates to the investors under ta/ laws as prescribed from
time to time. This is made possible because the %overnment offers ta/ incentives for
investment in specified avenues. 5or e/ample, 2+uity 0inked Savings Schemes '20SS( and
ension Schemes. 6ecent amendments to the !ncome Ta/ ct provide further opportunities
to investors to save capital gains by investing in 4utual 5unds. The details of such ta/
savings are provided in the relevant offer documents.
S3e(ia S(he5es
This category includes inde/ schemes that attempt to replicate the performance of a
particular inde/, such as the 3S2 Sense/ or the BS2 :9, or industry specific schemes
'which invest in specific industries( or Sectoral schemes 'which invest e/clusively in
segments such as LL %roup shares or initial public offerings(. !nde/ fund schemes are ideal
for investors who are satisfied with a return appro/imately e+ual to that of an inde/.
Sectoral fund schemes are ideal for investors who have already decided to invest in a
particular sector or segment. 7eeping in mind that any one scheme may not meet all the
investors= re+uirements for all time
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Ad/anta4es of Mutua Fund
Professiona Mana4e5ent
!nvestors avail the services of e/perienced and skilled professionals who are backed
by a dedicated investment research team, which analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
Di/ersifi(ation
4utual 5unds invest in a number of companies across a broad cross*section of
industries and sectors. This diversification reduces the risk because seldom do all stocks
declare at the same time and in the same proportion. !nvestors achieve this diversification
through a 4utual 5und with far less money than they can do on their own.
Con/enient Ad5inistration
!nvesting in a 4utual 5und reduces paperwork and helps to avoid many problems
such as bad deliveries, delayed payments and unnecessary follow up with brokers and
companies. 4utual 5unds saves time and make investing easy and convenient.
Return Potentia
?ver a medium to long*term, 4utual 5unds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.
Lo< Costs
4utual 5unds are a relatively less e/pensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and
other fees translate into lower costs for investors.
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Li>uidity
!n open*ended schemes, !nvestors can get their money back promptly at net asset
value related prices from the 4utual 5und itself. >ith close*ended schemes, they can sell
their units on a stock e/change at the prevailing market price or avail of the facility of
direct repurchase at BJ related prices which some close*ended and interval schemes offer
periodically.
Trans3aren(y
!nvestors get regular information on the value of their investment in addition to
disclosure on the specific investments made by the scheme, the proportion invested in each
class of assets and the fund managerLs investment strategy and outlook.
Fe?i+iity
Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, !nvestors can systematically invest or withdraw funds
according to their needs and convenience.
Choi(e of S(he5es
4utual 5unds offer a family of schemes to suit the varying needs over a lifetime of
their !nvestors.
Disad/anta4es of Mutua Fund In/est5ent
No Contro o/er (osts
n investor in a mutual fund has no control over the overall cost of investing. @e
pays investment management fees as long as he remains with the fund, albeit in return for
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the professional management and research. 5ees are usually payable as a percentage of the
value of his investments, whether the fund value is rising or declining.
No Taior-5ade Portfoios
!nvestors who invest on their own can build their own portfolios of shares, bonds
and other securities. !nvesting through funds 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.
Mana4in4 a 3ortfoio of funds
vailability of a large number of funds can actually mean too much choice for the
investor. @e may again need advice on how to select a fund to achieve his objective, +uite
similar to the situation when has to select individual shares or bonds to invest in.
RIS@S OF IN8ESTIN0 IN MUTUAL FUNDS
Mar:et = Interest Ris:
Jolatility of prices leading to EfloatingM returns
0argely mitigated with a holding period of over # months
Credit Ris:
otential default of bonds on the portfolio
E>uity Ris:
ossibility of the fund manager not able to meet redemptions
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PLAERS IN MUTUAL FUND INDUSTR
B42 ?5 T@2 5UB; B?. ?5 S@242S SS2T UB;26
4B%242BT
'6s. 6?62(
00!B2 4UTU0 5UB; )# ))9".9)
32B@ 467 4UTU0 5UB; 1 #.1
3!60 4UTU0 5UB; ): $$)#.-"
3?3 4UTU0 5UB; )1
B 3B7 4UTU0 5UB; 1$ #"8.9$
@?0 4UTU0 5UB; 8: 18.#-
;S40 4UTU0 5UB; 1) 81:$.#-
;UB;22 4UTU0 5UB; 1" 89.-8
2S?6TS 4UTU0 5UB; 1) )."1
5!6ST !B;! 4UTU0 5UB; : 9.-
56B70!B T2420T!?B 4UTU0 5UB; 8: )"1".:8%! 4UTU0 5UB; 1) ))).8"
@;5 4UTU0 5UB; 88 $-9-.)8
!;3!*6!B!0 4UTU0 5UB; )) 1)$#.#1
!0 D 5S 4UTU0 5UB; 1 :)-.-8
!B% 4UTU0 5UB; 1: )"#.)1
A5 4UTU0 5UB; ) 891.
A4 4UTU0 5UB; 81 11"".8
7?T7 4UTU0 5UB; )9 1"9-.):
4?6%B STB02Y 4UTU0 5UB; 1 -").-
!?B226 !T! 4UTU0 5UB; #8 ):1-.--
B3 4UTU0 5UB; 1$".-#
6U !!! 4UTU0 5UB; :8 -99#.-8620!B2 !T0 4UTU0 5UB; 1: 8"1).8:
S3! 4UTU0 5UB; $8 )81:.$9
STB;6; @6T262; 4UTU0 5UB; )9 )8"$.#)
SUB 5D 4UTU0 5UB; 8# $1).11
SUB;64 4UTU0 5UB; 11 -98.8:
TT 4UTU0 5UB; 89 ")
TU6US 4UTU0 5UB; 11 :".-#
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NEED AND IMPORTANCE OF STUD
small investor is the one who is able to correctly plan D decide in which
profitable D safe instrument to invest. To lock up one=s hard earned money in a savings
bank=s account is not enough to counter the monster of inflation. Using simple concepts of
diversification, power of compound interest, stable returns D limited e/posure to e+uity
investment, one can ma/imi&e his returns on investments D multiply one=s savings.
!nvestment is a serious proposition one has to look into various factors before
deciding on the instruments in which to invest. To save is not enough. ?ne must invest
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wisely D get ma/imum returns. ?ne must plan investment in such a way that his
investment objectives are satisfied. sound investment is one which gives the investor
reasonable returns with a proper profitable management
This report gives the details about various investment objectives desired by an
investor, details about the concept D working of mutual fund. This report also covers the
different players in 4utual 5unds and different avenues of investment D in detail about
E3!60 SUB 0!52 4UTU0 5UB;SM.
RESEARCH METHODOLO0
Sour(es of data (oe(tion
Two sources of collecting data has been employed i.e. primary data and secondary data
Pri5ary data
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+uestionnaire is used as a tool for the systematic collection of relevant
information. well +uestionnaire consisting of simple +uestions has been prepared D
directed to the respondents. 'Nuestionnaire is attached at the end of the projects(
The +uestionnaire prepared consists of closed*ended +uestions which includes
4ultiple choice
6ating scale
The +uestionnaire also consists of open*ended +uestions.
The first section of +uestionnaire is prepared mainly for collecting the personal information
about the respondents.
The second section contains multiple choice +uestions. !t is prepared to collect the
information about customer perception.
The close* ended +uestions are very easy to answer from the +uestionnaire responded by
the respondents.
Se(ondary Data
Secondary data is collected from the company=s websites, fact sheet etc.
Sa53in4 Pro(edure
Sample si&eO 899
E?3orati/e a33roa(hBThis approach is one of the most popular approaches these days. !n
this approach, a problem is described by the researcher using +uestionnaire or schedule.
This approach enables a researcher to e/plore new areas of investigation.
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Resear(h instru5entB Nuestionnaire
>hich is used to collect the primary data by personnel interview.
S(o3e Of Mutua Funds
!t has grown enormously over the years. !n the first age of mutual funds, when the
investment management companies started to offer mutual funds, choices were few. 2ven
though people invested their money in mutual funds as these funds offered them diversified
investment option for the first time. 3y investing in these funds they were able to diversify
their investment in common stocks, preferred stocks, bonds and other financial securities.
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t the same time they also enjoyed the advantage of li+uidity. >ith 4utual 5unds, they got
the scope of easy access to their invested funds on re+uirement.
3ut, in today=s world, Scope of 4utual 5unds has become so wide, that people sometimes
take long time to decide the mutual fund type, they are going to invest in. Several
!nvestment 4anagement ompanies have emerged over the years who offer various types
of 4utual 5unds, each type carrying uni+ue characteristics and different beneficial features.
LIMITATIONS OF THE STUD
4uch interaction has not been possible with the customer due to
1. !ndifference or uninterested of the customers to interact with me
8. ;ifferent perceptions about the investment options
). The non*availability of time to them
4any investors think mutual funds and shares are the one and same
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!n survey, most of the respondents were male who could not take the
perceptions of the female investors.
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CHAPTER-IIICHAPTER-III
COMPAN PROFILECOMPAN PROFILE
22IRLAIRLASSUNLIFEUNLIFEMMUTUALUTUALFFUNDUND
3irla Sunlife 4utual 5und is a joint venture between Sun 0ife ssurance ompany,
the anada*based financial service organi&ation and the !ndian industrial house of ditya
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3irla, this 4 was launched in the mid*"9=s. 3oth the partners are well known in all
areas that they operate in. >hile ditya 3irla is a household name in !ndia and has
renowned brands in businesses spread across industries as wide ranging as luminium
'@indalco(, Te/tiles '%rasim(, 5ertili&ers '!ndo*%ulf(, 5inance '3irla %lobal 5inance 0td.(
and 6ayon '!ndia 6ayon(, Sun 0ife is a leading financial service organi&ation in Borth
merica. Sun 0ife provides services related to risk management, money management and
wealth management across globe. @aving established itself at Toronto in 1-1, it has now
spread its wings across sia acific, U.S.. and U.7. !t also has a significant presence
through 45S !nvestment 4anagement in U.S. and Spectrum United 4utual 5unds in
anada.
The major strengths of the group are its e/pertise drawn from managing assets over
the globe, a big agent network and an ability to cater to the need of people. ;rawing on the
e/pertise of a worldwide staff of over 19,999 people and a network of more than #:,999
agents and distributors, Sun 0ife is committed to providing not just products and services,
but solutions for clients financial and risk management needs.
3irla Sun 0ife 4utual 5und follows a conservative long*term approach to
investment, which is based on identifying companies that have good credit*worthiness and
are fundamentally strong. !t places a lot of emphasis on +uality of management and risk
control. This is done through e/tensive analysis that includes factory visits and field
research. !t has one of the largest team of research analysts in the industry. The company is
one of !ndiaLs leading private mutual funds with a large customer base.
3irla 4utual 5und has been constituted as a trust under the provisions of the !ndian
Trusts ct, 18 and registered with S23!. The objective of 4utual 5und is to offer to the
public and other eligible investors units in one or more schemes in the 4utual 5und for
making group or collective investments primary in !ndian Securities in accordance with
and as permitted under the directions and guidelines issued from time to time by S23!.
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The Sponsors of 3irla 4utual 5und are 3irla %lobal 5inance 0td. and Sun 0ife
'!ndia( 4 !nvestments !nc., which is wholly owned subsidiary of Sun 0ife 5inancial
Services ompany of anada. 3irla Sun 0ife Trustee ompany rivate 0td. '3S0T( is a
company incorporated with limited liability under the ompanies ct, 1":#. 3irla Sun 0ife
sset 4anagement ompany 0td. '3S04( is the investment manager of 3irla 4utual
5und.
8ision
To be the most trusted name in investment and wealth management, to be the
preferred employer in the industry and to be a catalyst for growth and e/cellence of the
asset management business in !ndia.
Mission
To consistently pursue investorLs wealth optimi&ation by
chieving superior and consistent investment results
reating a conductive environment to hone and retain talent
roviding customer delight
!nstitutionali&ing system*approach in all aspects of functioning
Upholding highest standards of ethical values at all times
S(he5es Offered +y 2ira Sunife Mutua Fund
E>uity S(he5es
!nvestments in e+uities are made with a long*term objective in mind. 2mpirical
studies have indicated that despite the short*term volatility that is characteristic of e+uities,
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over the longer term, e+uities have generated superior returns. This makes e+uities the best
instruments for long*term growth of capital. !nvesting in a diversified e+uity portfolio can
help minimi&e risk as the portfolio gets e/posure across various sectors, while enabling
investors to capitali&e on the fundamental upsides presented by these sectors. The various
2+uity schemes are
3irla dvantage 5und
3irla ;ividend Yield lus
3irla 4idcap 5und
3irla !ndia ?pportunities 5und
3irla 4B 5und
3irla 2+uity 5und
3irla !nde/ 5und
De+t S(he5es
3irla !ncome lus
3irla %ilt lus
3irla 3ond lus
3irla ash lus
3irla 4!
3irla 4!*!!
3irla 5loating 6ate 5und
3irla 3ond !nde/ 5und
Other S(he5es
3irla sset llocation 5und
3irla 3alance
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Offshore S(he5es
!ndia dvantage 5und
2/cel !ndia 5und
In/est5ent Pans Offered
0RO1 *0ain Re4uary On 1ithdraithdrawal lan '6>( * is the best alternative for investors
who need regular income. %6?> is available in two optionsO
Fi?ed 1ithdrahere investors specify amounts they wish to withdraw from
their investment on a monthlyH+uarterly basis.
A33re(iation 1ithdrahere they can withdraw "9< of their appreciated
amount on a monthlyH+uarterly basis.
REAP *Re4uar E?tra Ad/anta4e Pan,
The 62 formerly known as Systematic !nvestment lan 'S!( * lets investorsinvest small amounts of money on a monthly basis and gives them the option of increasing
these amounts as their investment capacity increases.
STEER *Syste5ati( Transfer to Earn E>uity Returns,
>hile investing in a debt, fund normally assures of fairly consistent returns,
e+uities have the potential to create wealth. 3ut the unpredictability in e+uity funds can be
+uite a deterrent when !nvestors make a choice. To combine the best of both worlds 3irla
presents ST226 formerly known as Systematic Transfer lan 'ST(.
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Uni>ue Features of 2ira
2ira 2ond E?(han4e
3irla 3ond 2/change is a uni+ue facility introduced by 3irla Sun 0ife 4 0td. to
help retail investors replace their e/isting portfolio of debt securities with a diversified debt
fund in order to optimi&e returns and improve li+uidity.
Readi(he>ues
product add*on available for 6esident !ndian investors in the growth plans of the
debt schemes, i.e. 3irla !ncome lus, 3irla ash lus, 3irla 3ond lus, 3irla 4! and 3irla
%ilt lus. 6eadiche+ues are pre*issued undated repurchase che+ues drawn in favour of the
first applicant. Under normal circumstances, when investor wishes to redeem, he needs to
fill up a repurchase re+uest and submit it to the !nvestor Service entre. Bormally the
repurchase warrant is delivered to the investor on the third working day from the date of
submitting the redemption re+uest. >ith 6eadiche+ues, all the investor needs to do is to
re+uest for preissued warrants in advance and deposit them as and when needed. Thus, the
hassles of filling in a redemption re+uest, submitting at an !nvestor Service entre and then
waiting for the redemption warrant to reach him are done away with this product add*on.
SCHEMES OF 2IRLA SUN LIFE
S(he5eB 2ira Ad/anta4e Fund
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Type ?pen ended growth scheme
!nvestment pattern -9< in e+uity D )9< in ;ebt
5und ?bjective 0ong term growth of capital
!nvestment hori&on 4in of one year
S(he5eB 2ira Di/idend ied 3us
Type ?pen ended %rowth Scheme
!nvestment pattern 199< in e+uity
5und objective apital growth D income
!nvestment hori&on 4in of one year
S(he5eB 2ira E>uity 3an
Type ?pen ended e+uity linked savings schemes
!nvestment 9< in e+uity D 89< in short term, money market D li+uid
instruments
5und objective 0ong term growth of capital along with income ta/ relief for
investment
!nvestment hori&on 4inimum of )years
S(he5eB 2ira Inde? Fund
Type ?pen ended inde/ 0inked Scheme
!nvestment pattern 199< in Securities
5und ?bjective %enerate 6eturns
!nvestment @ori&on 4in of one Year
S(he5eB 2ira India o33ortunities Fund
Type ?pen ended growth scheme
!nvestment pattern -9*199< in e+uity, )9< in cash D money market instruments
5und objective 0ong term growth of capital
!nvestment hori&on 4inimum of one year
S(he5eB 2ira Mid Ca3 Fund
Type ?pen ended growth scheme
!nvestment pattern #:*199< in e+uity related companies with market capitali&ation
of 6s.1:9 crores to 6s.1,:99 crores
):< in e+uity related companies with a market capitali&ation.
5und ?bjective 0ong term growth of capital
!nvestment hori&on 4inimum of 1 year
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S(he5eB 2ira MNC Fund *MNC,
Type ?pen ended growth scheme
!nvestment pattern Upto 199< in e+uity of 89< in debit
5und objective 0ong term growth of capital by marking !nvestments in securityof 4B=s.
!nvestment hori&on 4inimum of one year
S(he5eB 2ira 2aan(e Fund
Type ?pen ended balanced scheme
!nvestment pattern :9 to -:< in e+uity 8:*:9< in debt
5und object To balance income re+uirements with long term growth of capital
!nvestment hori&on 4inimum of one year
S(he5eB 2ira Asset Ao(ation Fund
Type ?pen ended fund of funds
!nvestment pattern ggressive plan -9*9< in e+uity 89*8:< indebt
4oderate plan $9*#9< in e+uity $9*#9< indebt
onservative plan 89*8:< in e+uity -:*9< indebt
5und objective !ncome D capital pplication with diversification in e+uity D
debt schemes in line with risk profile of investor
!nvestment hori&on 4inimum of one year
S(he5eB 2ira 0it Pus
Type ?pen ended governments securities schemes
!nvestment pattern 199< in securities permitted by 63!
5und objective To generate in income D capital appreciation through
investments in government securities.
!nvestment hori&on 0east # months to 1 year
S(he5eB 2ira Dyna5i( 2ond Fund
Type ?pen ended income scheme
!nvestment pattern :9*#:< in %overnment securities, 8:*):< in corporate bonds,
9*8:< in cash li+uid instruments.
5und objective To generate optimal returns with high li+uidity
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!nvestment hori&on 4inimum of one year
S(he5eB 2ira In(o5e Pus
Type ?pen ended income scheme
!nvestment pattern 199< in debt D money market5und objective To generate consistent income
!nvestment hori&on 4inimum of 1 year
CHAPTER-III CHAPTER-III
RE8IE1 OF LITERATURE RE8IE1 OF LITERATURE
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DEFNITION OF MUTUAL FUNDS
DEFNITIONB
mutual fund, also referred to as an open*end fund, is an investment company that
spreads its money across a diversified portfolio of securities ** including stocks, bonds, or
money market instruments.
Shareholders who invest in a fund each own a representative portion of those
investments, less any e/penses charged by the fund.
4utual fund investors make money either by receiving dividends and interest from
their investments, or by the rise in value of the securities. ;ividends, interest and profits
from the sale of any securities 'capital gains( are passed on to the shareholders in the form
of distributions. nd shareholders generally are allowed to sell 'redeem( their shares at any
time for the closing market price of the fund on that day.
4utual funds have been around for a long time, dating back to the early 1"th
century. The first modern merican mutual fund opened in 1"8$, yet it was only in the
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1""9=s that mutual funds became mainstream investments, as the number of households
owning them nearly tripled during that decade. >ith recent surveys showing that over