Mutual fund is an investment company that pools money from shareholders and

invests in a variety of securities, such as stocks, bonds and money market

instruments. Most open-end Mutual funds stand ready to buy back (redeem) its

shares at their current net asset value, which depends on the total market value of the

fund's investment portfolio at the time of redemption. Most open-end Mutual funds

continuously offer new shares to investors. Also known as an open- end investment

company, to differentiate it from a closed-end investment company. Mutual funds

invest pooled cash of many investors to meet the fund's stated investment objective.

Mutual funds stand ready to sell and redeem their shares at any time at the fund's

current net asset value: total fund assets divided by shares outstanding.

In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the

investors and investing funds in securities in accordance with objectives as disclosed in offer

document. Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not

move in the same direction in the same proportion at the same time. Mutual fund

issues units to the investors in accordance with quantum of money invested by them.

Investors of Mutual funds are known as unit holders. The profits or losses are shared by the

investors in proportion to their investments. The Mutual funds normally come out with a

number of schemes with different investment objectives which are launched from time to time.

In India, A Mutual fund is required to be registered with Securities and Exchange Board of

India (SEBI) which regulates securities markets before it can collect funds from the public. In

Short, a Mutual fund is a common pool of money in to which investors with common

investment objective place their contributions that are to be invested in accordance with the

stated investment objective of the scheme. The investment manager would invest the money

collected from the investor in to assets that are defined/ permitted by the stated objective

of the scheme. For example, an equity fund would invest equity and equity related instruments

and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a 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.

CONCEPT OF THE MUTUAL FUND

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 appreciations realized are 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. The flow chart below describes broadly the

working of a mutual fund:

Investor

Fundmanager

Securities

Returns

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

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

instruments, and other securities. In a mutual fund the fund manager who is also

known as the portfolio manager, trades the fund’s underlying securities, realizing

capital gains or losses, and collects the dividend or interest income. The investment

proceeds are then passed along to the individual investors.

Investor preference in mutual funds tells about the interest or willingness of investor to

invest in mutual funds. And also how many individuals know about the mutual fund as

a investment alternative. And what is the scenario in these days towards mutual funds

in terms of risk and return. There are a lot of investment avenues available today in the

financial market for an investor with an investable surplus. He can invest in bank

deposits, corporate debentures and bonds where there is low risk but low return. He

may invest in stock of companies where the risk is high and return is also

proportionately high. The recent trends in the stock market have shown that an average

retail investor always lost with periodic bearish tends. People began opting for

portfolio managers with expertise in stock markets who would invest on their behalf.

Thus are had wealth management services provided by many institutions. However

they proved too costly for a small investor. These investors have found a good shelter

with the 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 USA, in India it is still in the phase of infancy.

A small investor is the one who is able to correctly plan & decide in which Profitable

& 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. Investment is a serious

proposition one has to look into various factors before Deciding on the instruments in

which to invest. Using simple concepts of Diversification, power of compound

interest, stable returns & limited exposure to equity Investment, one can maximize his

returns on investments & multiply one’s savings.

Investment 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. One must

invest wisely & get maximum returns. One must plan investment in such a way that

his Investment objectives are satisfied. A sound investment is one which gives the

investor Reasonable returns with a proper profitable management.

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 USA, in India it is still in the phase of infancy. The origin of the Indian mutual

fund industry can be traced back to 1964 when the Indian Government, with a view to

augment small savings within the country and to channelize these savings to the

capital markets, set up the Unit Trust of India (UTI). The UTI was setup under a

specific statute, the Unit Trust of India Act, 1963. The Unit Trust of India launched its

first open-ended equity scheme called Unit 64 in the year 1964, which turned out to be

one of the most popular mutual fund schemes in the country. In 1987, the government

permitted other public sector banks and insurance companies to promote mutual fund

schemes. Pursuant to this relaxation, six public sector banks and two insurance

companies’ viz. Life Insurance Corporation of India and General Insurance

Corporation of India launched mutual fund schemes in the country. Securities

Exchange Board of India, better known as SEBI, formulated the Mutual Fund

(Regulation) 1993, 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. Kothari Pioneer Mutual 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. In the period

between 1963 and 1988, when the UTI was the sole player in the industry, the assets

under management grew to about Rs.67 billion. In the second phase between 1988-

1994, 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 Rs.

610 billion with the total number of schemes increasing to 167 by the end of 1994. The

third phase of the mutual fund industry, which commenced in 1994, witnessed

exponential growth of the industry, with the advent of private players therein. As on

May 31, 2004, the total assets under management stood at Rs. 1540 billion and the

total number of schemes stood at 399. During the last three and a half decades, UTI

has been a dominant player in the mutual fund industry. The total assets under the

management of the UTI as on September 30, 2002 were to the tune of Rs. 442 billion,

which amount to almost 41% of the total assets under management in the domestic

mutual fund industry. UTI has witnessed some erosion of assets pursuant to the last

year’s crisis arising on account of its Unit 64 scheme, the scheme with largest amount

of assets under management. This was the first scheme launched by the UTI with a

significant equity exposure 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 UTI 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.

Whatever 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. One must not forget that India is a large nation with a population of more

than 1 billion people and the potential continues to be huge. However, to be fair

mutual fund managers should also strive to improve their performance and not blame

the vagaries of the market all the times. Mutual fund is an investment company that

pools money from shareholders and invests in a variety of securities, such as

stocks, bonds and money market instruments. Most open-end Mutual funds

stand ready to buy back (redeem) its shares at their current net asset value, which

depends on the total market value of the fund's investment portfolio at the time of

redemption. Most open-end Mutual funds continuously offer new shares to investors.

Also known as an open-end investment company, to differentiate it from a closed-end

investment company. Mutual funds invest pooled cash of many investors to meet the

fund's stated investment objective. Mutual funds stand ready to sell and redeem their

shares at any time at the fund's current net asset value: total fund assets divided by

shares outstanding. In Simple Words, Mutual fund is a mechanism for pooling the

resources by issuing units to the investors and investing funds in securities in

accordance with objectives as disclosed in offer document. Investments in securities

are spread across a wide cross-section of industries and sectors and thus the risk is

reduced. Diversification reduces the risk because all stocks may not move in the same

direction in the same proportion at the same time. Mutual fund issues units to the

investors in accordance with quantum of money invested by them. Investors of Mutual

funds are known as unit holders. The profits or losses are shared by the investors in

proportion to their investments. The Mutual funds normally come out with a number

of schemes with different investment objectives which are launched from time to time.

In India, A Mutual fund is required to be registered with Securities and Exchange

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

from the public. In Short, a Mutual fund is a common pool of money in to which

investors with common investment objective place their contributions that are to be

invested in accordance with the stated investment objective of the scheme. The

investment manager would invest the money collected from the investor in

to assets that are defined/ permitted by the stated objective of the scheme. For

example, an equity fund would invest equity and equity related instruments and a debt

fund would invest in bonds, debentures, gilts etc. Mutual fund is a 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.

Meaning of mutual funds:

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

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

instruments, and other securities. In a mutual fund, the fund manager ,who is also

known as the portfolio manager, trades the fund’s underlying securities, Realizing

capital gains or losses and collects the dividend or interest income. The investment

proceeds are then passed along to the individual investors.

Definition

Mutual funds are “corporations which accept dollars from savers and then use these

dollars to buy stocks, long term bonds, and short term debt instruments issued by

business or government units, these corporations’ pools funds and thus reduce risk by

diversification”.

Mutual funds as “financial intermediaries which bring a wide variety of securities

within the reach of the most modest of investors”.

“It is a non depository or non banking financial intermediary which acts as an

important vehicle for bringing wealth holders and deficit units together indirectly”.

A 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 expenses

charged by the fund. Mutual fund investors make money either by

receiving dividends and interest from their investments, or by the

rise in value of the securities. Dividends, interest and profits from

the sale of any securities (capital gains) are passed on to the

shareholders in the form of distributions. And shareholders generally

are allowed to sell (redeem) their shares at anytime for the closing

market price of the fund on that day.

Mutual funds have been around for a long time, dating back to the

early 19th century. The first modern American mutual fund opened

in 1924, yet it was only in the 1990’s that mutual funds became

mainstream investments, as the number of households owning them

nearly tripled during that decade. With recent surveys showing that

over 88% of all investors participate in mutual funds, you're probably

already familiar with these investments, or perhaps even own some.

In any case, it's important that you know exactly how these

investments work and how you can use them to your advantage.

A mutual fund is a special type of company that pools together

money from many investors and invests it on behalf of the group, in

accordance with a stated set of objectives. Mutual funds raise the

money by selling shares of the fund to the public; much like any

other company can sell stock in itself to the public. Funds then take

the money they receive from the sale of their shares (along with any

money made from previous investments) and use it to purchase

various investment vehicles, such as stocks, bonds and money

market instruments. In return for the money they give to the fund

when purchasing shares, shareholders receive an equity position in

the fund and, in effect, in each of its underlying securities. For most

mutual funds, shareholders are free to sell their shares at any time,

although the price of a share in a mutual fund will fluctuate daily,

depending upon the performance of the securities held by the fund.

A mutual fund is simply a financial intermediary that allows a group

of investors to pool their money together with a predetermined

investment objective. The mutual fund will have a fund manager

who is responsible for investing the pooled money into specific

securities (usually stocks or bonds). When you invest in a mutual

fund, you are buying shares (or portions) of the mutual fund and

become a shareholder of the fund.

An open-ended fund operated by an investment company which

raises money from shareholders and invests in a group of assets, in

accordance with a stated set of objectives. Mutual funds raise money

by selling shares of the fund to the public, much like any other type

of company can sell stock in itself to the public. Mutual funds then

take the money they receive from the sale of their shares (along

with any money made from previous investments) and use it to

purchase various investment vehicles, such as stocks, bonds and

money market instruments. In return for the money they give to the

fund when purchasing shares, shareholders receive an equity

position in the fund and, in effect, in each of its underlying securities.

For most mutual funds, shareholders are free to sell their shares at

any time, although the price of a share in a mutual fund will

fluctuate daily, depending upon the performance of the securities

held by the fund. Benefits of mutual funds include diversification and

professional money management. Mutual funds offer choice,

liquidity, and convenience, but charge fees and often require a

minimum investment. A closed-end fund is often incorrectly referred

to as a mutual fund, but is actually an investment trust. There are

many types of mutual funds, including aggressive growth fund, asset

allocation fund, balanced fund, blend fund, bond fund, capital

appreciation fund, clone fund, closed fund, crossover fund, equity

fund, fund of funds, global fund, growth fund, growth and income

fund, hedge fund, income fund, index fund, international fund,

money market fund, municipal bond fund, prime rate fund, regional

fund, sector fund, specialty fund, stock fund, and tax-free bond fund.

History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation

of Unit Trust of India, at the initiative of the Government of India and

Reserve Bank. The history of mutual funds in India can be broadly

divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of

Parliament. It was set up by the Reserve Bank of India and

functioned under the Regulatory and administrative control of the

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

the Industrial Development Bank of India (IDBI) took over the

regulatory and administrative control in place of RBI. The first

scheme launched by UTI was Unit Scheme 1964. At the end of 1988

UTI had Rs.6700 crores of assets under management.

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

In 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 Can bank Mutual Fund (Dec 87), Punjab National

Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank

of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC

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

mutual fund in December 1990.At the end of 1993, the mutual fund

industry had assets under management of Rs.47004 crores

.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. The number of mutual fund houses went on increasing, with

many foreign mutual funds setting up funds in India and also the

industry has witnessed several mergers and acquisitions. As at the

end of January 2003, there were 33 mutual funds with total assets of

Rs. 121805 crores. The Unit Trust of India with Rs.44541 crores of

assets under management was way ahead of other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act

1963 UTI was bifurcated into two separate entities. One is the

Specified Undertaking of the Unit Trust of India with assets under

management of Rs.29835 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.76000 crores of assets under management and with the setting

up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund

Regulations, and with recent mergers taking place among different

private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of October

31, 2003, there were 31 funds, which manage assets of Rs.126726

crores under 386 schemes.

FUND BASICS

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

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 realized by the scheme 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 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. Anybody with an investible surplus of as

little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme

has a defined investment objective and strategy. 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

appreciations realized are 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.

Structure of a Mutual Fund

A mutual fund is set up in the form of a trust, which has Sponsor,

Trustees, asset Management Company (AMC) and a Custodian. 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 AMC, approved by

SEBI, Manages the funds by making investments in various types of

securities. The custodian, who is registered with SEBI, 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 AMC. They monitor the performance and compliance of SEBI

Regulations by the mutual fund.

Sponsor

The sponsor is required, under the provisions of the Mutual Fund

Regulations, to have a sound track record, a reputation of fairness

and integrity in all his business transactions. Additionally, the

sponsor should contribute at least 40% to the net worth of the AMC.

However, if any person holds 40% or more of the net worth of an

AMC shall be deemed to be a sponsor and will be required to fulfill

the eligibility criteria specified in the Mutual Fund Regulations. 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 required to have an independent Board of

Trustees, i.e. two thirds of the trustees should be independent

persons who are not associated with the sponsors in any manner

whatsoever. An AMC or any of its officers or employees are not

eligible to act as a trustee of any mutual fund. In 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 trust is not in

conflict with the object of the mutual fund. Additionally, 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 – inter alia -ensuring that the AMC

has all its systems in place, all key personnel, auditors, registrars

etc. have been appointed prior to the launch of any scheme. It is

also the responsibility of the trustees to ensure that the AMC 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 AMC does not compromise the management of

another scheme. The trustees are also required to ensure that an

AMC 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 Mutual Fund Regulations further

mandates that the trustees should prevent any conflicts of interest

between the AMC and the unit holders in terms of deployment of net

worth.

Asset Management Company

The sponsor or the trustees are required to appoint an AMC to

manage the assets of the mutual fund. Under the Mutual Fund

Regulations, the applicant must satisfy certain eligibility criteria in

order to qualify to register with SEBI as an AMC.

The sponsor must have at least 40% stake in the AMC.

The directors of the AMC should be persons having adequate

professional experience 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 AMC should have and must at all times maintain, a

minimum net worth of Rs 10 cr.

The board of directors of such AMC has at least 50% directors, who

are not associates of or associated in any manner with, the sponsor

or any of its subsidiaries or the trustees. The Chairman of the AMC

is not a trustee of any mutual fund. In addition to the above

eligibility criteria and other ongoing compliance requirements laid

down in the Mutual Fund Regulations, the AMC is required to observe

the following restrictions in its normal course of business. Any

director of the AMC cannot hold office of a director in another AMC

unless such person is an independent director and the approval of

the board of the AMC of which such person is a director, has been

obtained; the AMC shall not act as a trustee of any mutual fund; the

AMC cannot undertake any other business activities except 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 exchange 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 required, under the Mutual Fund Regulations, to

appoint a custodian to carry out the custodial services for the

schemes of the fund. Only institutions with substantial organizational

strength, service capability in terms of computerization, and other

infrastructure facilities are approved to act as custodians. The

custodian must be totally de-linked from the AMC and must be

registered with SEBI. Under the Securities and Exchange Board of

India (Custodian of Securities) Guidelines, 1996, any person

proposing to carry on the business as a custodian of securities must

register with the SEBI and is required to fulfill specified eligibility

criteria. Additionally, a custodian in which the sponsor or its

associates holds 50% or more of the voting rights of the share

capital of the custodian or where 50% 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.

Classification of mutual funds

There are a wide variety of Mutual Fund schemes that cater to

investors need, whatever your age, financial position, risk tolerance

and return expectations. Whether as the foundation of your

investment program or as a supplement, Mutual Fund schemes can

help you meet your financial goals.

Mutual funds can be classified under four different categories:

1. Operational classification

2. Portfolio classification

3. Geographical classification

4. Structural classification

Operational classification

Mutual funds are broadly categorized into three types, namely

Open-Ended mutual funds

These do not have a fixed maturity. Investors deal directly with the

Mutual Fund for their investments and redemptions. The key feature

is liquidity. They can conveniently buy and sell their units at Net

Asset Value ("NAV") related prices.

Close-Ended mutual funds

Schemes that have a stipulated maturity period (ranging from 2 to

15 years) are called close-ended schemes. Investors 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 exchanges

where they are listed. The market price at the stock exchange could

vary from the scheme's NAV on account of demand and supply

situation, unit holders' expectations and other market factors. One of

the characteristics of the close-ended schemes is that they are

generally traded at a discount to NAV; but closer to maturity, the

discount narrows. Some close-ended schemes give them an

additional option of selling their units directly to the Mutual Fund

through periodic repurchase at NAV related prices. SEBI Regulations

ensure that at least one of the two exit routes is provided to the

investor.

Interval mutual funds

These combine the features of open-ended and close- ended

schemes. They may be traded on the stock exchange or may be

open for sale or redemption during pre-determined intervals at NAV

related prices.

By portfolio classification

Mutual funds differ with reference to their instruments. Therefore, different mutual

funds are designed to meet the needs of the investors. This section discusses the types

of mutual funds classified on the basis of their portfolios.

Growth/Equity Schemes

Aim to provide capital appreciation over the medium to long term. These schemes

normally invest a majority of their funds in equities 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.

Income Schemes

Aim to provide regular and steady income to investors. These schemes generally

invest in fixed income securities such as bonds and corporate debentures. Capital

appreciation in such schemes may be limited.

Balanced Schemes

Aim 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 fixed income

securities in the proportion indicated in their offer documents. In a rising stock market,

the NAV of these schemes may not normally keep pace, or fall equally when the

market falls.

Money Market Schemes

Aim to provide easy liquidity, 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. Returns on these

schemes may fluctuate, depending upon the interest rates prevailing in the market.

Tax Saving Schemes

These schemes offer tax rebates to the investors under tax laws as prescribed from

time to time. This is made possible because the Government offers tax incentives for

investment in specified avenues. For example, Equity Linked Savings Schemes

(ELSS) and Pension Schemes. Recent amendments to the Income Tax Act provide

further opportunities to investors to save capital gains by investing in Mutual Funds.

The details of such tax savings are provided in the relevant offer documents.

Special Schemes

This category includes index schemes that attempt to replicate the performance of a

particular index, such as the BSE Sensex or the NSE 50, or industry specific schemes

(which invest in specific industries) or Sectoral schemes (which invest exclusively in

segments such as 'A' Group shares or initial public offerings). Index fund schemes are

ideal for investors who are satisfied with a return approximately equal to that of an

index. Sectoral fund schemes are ideal for investors who have already decided to

invest in a particular sector or segment. Keeping in mind that any one scheme may not

meet all the investors’ requirements for all time.

By Geographical classification

On the basis of geographical limits, mutual funds schemes can be classified as

Domestic mutual funds

Offshore mutual funds

Domestic mutual funds

Domestic mutual funds schemes mobilize the savings of the citizens of the country.

However the NRIs and foreign investors can invest in these schemes. All the schemes

in vogue in the country are the domestic mutual fund schemes.

Offshore mutual funds

These funds enable the NRIs and international investors to participate in Indian capital

market. Further these funds are governed by the rules and procedures laid down for the

purpose of approving and monitoring their performance by the department of

economic affairs, ministry of finance and the directions of RBI.

By structural classification

From the point of view of financial market structure, mutual funds can be divided into

two categories, namely,

a) Capital market fund

b) Money market mutual fund

Mutual funds generally invest the pooled resources in capital market instruments

where as money mutual funds invest in money market instruments.

NAV

Net asset value (NAV) represents a fund's per share market value. This is the price at

which investors buy ("bid price") fund shares from a fund company and sell them

("redemption price") to a fund company. It is derived by dividing the total value of all

the cash and securities in a fund's portfolio, less any liabilities, by the number of shares

outstanding. An NAV computation is undertaken once at the end of each trading day

based on the closing market prices of the portfolio's securities. For example, if a fund

has assets of $50 million and liabilities of $10 million, it would have a NAV of

$40 million. This number is important to investors, because it is from NAV that the

price per unit of a fund is calculated. By dividing the NAV of a fund by the number of

outstanding units, you are left with the price per unit. In our example, if the fund had 4

million shares outstanding, the price-per-share value would be $40 million divided by

4 million, which equals $10. 

This pricing system for the trading of shares in a mutual fund differs significantly from

that of common stock issued by a company listed on a stock exchange. In this instance,

a company issues a finite number of shares through an initial public offering (IPO), and

possibly subsequent additional offerings, which then trade in the securities. In this

market, stock prices are set by market forces of supply and demand. The pricing

system for stocks is based solely on market sentiment. 

Advantages of Mutual Fund

Professional Management

Investors avail the services of experienced 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.

Diversification

Mutual Funds 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. Investors achieve this diversification through a

Mutual Fund with far less money than they can do on their own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps to avoid

many problems such as bad deliveries, delayed payments and

unnecessary follow up with brokers and companies. Mutual Funds

save time and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to

provide a higher return as they invest in a diversified basket of

selected securities.

Low Costs

Mutual Funds are a relatively less expensive 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.

Liquidity

In open-ended schemes, Investors can get their money back

promptly at net asset value related prices from the Mutual Fund

itself. With close-ended schemes, they can sell their units on a stock

exchange at the prevailing market price or avail of the facility of

direct repurchase at NAV related prices which some close-ended and

interval schemes offer periodically.

Transparency

Investors 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

manager's investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular

withdrawal plans and dividend reinvestment plans, Investors can

systematically invest or withdraw funds according to their needs and

convenience.

Choice of Schemes

Mutual Funds offer a family of schemes to suit the varying needs

over a lifetime of their Investors.

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.

Disadvantages of Mutual Fund Investment

No Control over costs

An investor in a mutual fund has no control over the overall cost of

investing. He pays investment management fees as long as he

remains with the fund, albeit in return for the professional

management and research. Fees are usually payable as a

percentage of the value of his investments, whether the fund value

is rising or declining.

No Tailor-made Portfolios

Investors who invest on their own can build their own portfolios of

shares, bonds and other securities. Investing 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.

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 objective, quite similar to the situation when has

to select individual shares or bonds to invest in.

ROLE OF MUTUAL FUNDS

Mutual Funds & Financial Market

In the process of development Indian mutual funds have emerged as

strong financial intermediaries & are playing a very important role in

bringing stability to the financial system & efficiency to resource

allocation. Mutual Funds have opened new vistas to investors &

imparted a much-needed liquidity to the system. In the process they

have challenged the hitherto role of commercial banks in the

financial market & national economy.

Mutual Fund & Capital Market

The active involvement of Mutual Funds 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

& capital market. A developed financial market is critical to overall

economic development, & Mutual Funds play an active role in

promoting a healthy capital market. The asset holding pattern of

mutual funds in the USA indicates the dominant role of Mutual Funds

in the capital market & money market. More over they have also

rendered critical support to securities mortgage loans & municipal

bond market in the USA. In the USA, Mutual Funds provide very

active support to the secondary market in terms of purchase of

securities. Investor’s preferences pattern in India has undergone a

tremendous change during recent times, along with the changes in

the share of financial assets in the total annual savings. Indian

investors have moved towards more liquid & growth oriented trade

able instruments like’s shares/debentures & units of Mutual Funds.

The shift is asset holding pattern of investors has been significantly

influenced by the ‘equity’ & ‘unit’ culture while the holders of

company shares & debentures are concentrated in the urban areas,

small/medium investors in the semi-urban & rural areas are tending

towards Mutual Funds. Mutual Funds in India have certainly created

awareness among investors about equity oriented investments & its

benefits.

Objectives of the Study

To study the preference of investors in today’s scenario in terms of risk &return.

To know the opinion about mutual fund. To study the performance of mutual funds. To know the investment proportion in the mutual fund.

Need and Importance of study

Inflation is increasing day to day. So in order to overcome the inflation, investing in only less yielding opportunities gives no fruitful results.

Diversification, stable returns & limited exposure to equity investment maximize returns on investment &multiply one’s savings. Mutual funds can fulfill these requirements.

Just investment is not enough. One must plan investment in such a way that his investment objectives are satisfied.

This report gives the details about various investment objectives desired by an investor.

This report highlights the concept &working of mutual funds and different avenues of investment &in detail about RELIANCE MUTUAL FUND.

Methodology of the study:

Sources of data collection

Two sources of collecting data have been employing i.e. primary data and secondary data.

Primary data

Research instrument: Questionnaire which is used to collect the primary data by personnel interview.

Secondary Data

In this type of data collection information is already exiting. Secondary data is collected from the company’s websites.

Sampling technique: convenience sample technique

Sample size: 80

Limitations of the study

Much interaction is not been possible with the customer. Different perceptions about the investment options. The non-availability of time to them. Many investors think mutual funds and shares are the one and same. Time constraint. Limited sample size Report restricted to Kurnool only.

History of Mutual Funds has evolved over the years and it is sure to appear as

something very interesting for all the investors of the world. In present world, mutual

funds have become a main form of investment because of its diversified and liquid

features. Not only in the developed world, but in the developing countries also

different types of mutual funds are gaining popularity very fast in a tremendous way.

But, there was a time when the concepts of Mutual Funds were not present in the

economy. 

There is an ambiguity about the fact that when and where the Mutual Fund

Concept was introduced for the first time. According to some historians, the mutual

funds were first introduced in Netherlands in 1822. But according to some other belief,

the idea of Mutual Fund first came from a Dutch Merchant ling back in 1774. In 1822,

that idea was further developed. In 1822, the concept of Investment

Diversification was properly incorporated in the mutual funds. In fact, the Investment

Diversification is the main attraction of mutual funds as the small investors are also

able to allocate their little Funds in a diversified way to lower Risks.

After 1822 in Netherlands, the Mutual Funds Concept came in Switzerland in 1849

and thereafter in Scotland in the 1880s. After being popular in Great Britain and

France, Mutual fund concept traveled to U.S.A in the 1890s. In 1920s and 1930s, the

Mutual Fund popularity reached a new high. There was record investment done in

mutual funds. But, before 1920s, the mutual funds were not like the modern day

mutual funds. The modern day mutual funds came into existence in 1924, in Boston.

Massachusetts Investors Trust introduced the Modern Mutual Funds and the funds

were available from 1928. At present this Massachusetts Investors Trust is known

as MFS Investment Management Company. After the glorious year of 1928, Mutual

fund ideas expanded to different levels and different regulations came for well

functioning of the funds.

Still today, the funds are evolving and improving in order to offer people much wider

choices and better advantages for fulfillment of their various investment needs and

financial objectives

.

The mutual fund industry in India:

The mutual fund industry in India began in 1963 with the formation of the Unit Trust

of India (UTI) as an initiative of the Government of India and the Reserve Bank of

India. Much later, in 1987, SBI Mutual Fund became the first non-UTI mutual fund in

India.

Subsequently, the year 1993 heralded a new era in the mutual fund industry. This was

marked by the entry of private companies in the sector. After the Securities and

Exchange Board of India (SEBI) Act was passed in 1992, the SEBI Mutual Fund

Regulations came into being in 1996. Since then, the Mutual fund companies have

continued to grow exponentially with foreign institutions setting shop in India, through

joint ventures and acquisitions.

As the industry expanded, a non-profit organization, the Association of Mutual Funds

in India (AMFI), was established on 1995. Its objective is to promote healthy and

ethical marketing practices in the Indian mutual fund Industry. SEBI has made AMFI

certification mandatory for all those engaged in selling or marketing mutual

fund products.

The Evolution:

The formation of Unit Trust of India marked the evolution of the Indian mutual fund

industry in the year 1963. The primary objective at that time was to attract the small

investors and it was made possible through the collective efforts of the Government of

India and the Reserve Bank of India. The history of mutual fund industry in India can

be better understood divided into following phases:

 Phase1. Establishment and Growth of Unit Trust of India - 1964-87:

Unit Trust of India enjoyed complete monopoly when it was established in the year

1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it

continued to operate under the regulatory control of the RBI until the two were de-

linked in 1978 and the entire control was transferred in the hands of Industrial

Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as

Unit Scheme 1964 (US-64), which attracted the largest number of investors in any

single investment scheme over the years. 

UTI launched more innovative schemes in 1970s and 80s to suit the needs of different

investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's

Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share

(India’s first equity diversified scheme) in 1987 and Monthly Income Schemes

(offering assured returns) during 1990s. By the end of 1987, UTI's assets under

management grew ten times to Rs6700 crores.

PhaseII.EntryofPublicSectorFunds1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering

the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank

of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later

followed by can bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund,

Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the

assets under management of the industry increased seven times to Rs. 47004 crores.

However, UTI remained to be the leader with about 80% market share.

1992-93Amount

MobilizedAssets Under Management

Mobilization as % of gross

Domestic Savings

UTI 11,057 38,247 5.2%

Public Sector 1,964 8,757 0.9%

Total 13,021 47,004 6.1%

Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management

companies (most of them entering through joint ventures with Indian promoters) to

enter the mutual fund industry in 1993, provided a wide range of choice to investors

and more competition in the industry. Private funds introduced innovative products,

investment techniques and investor-servicing technology. By 1994-95, about 11

private sector funds had launched their schemes. 

Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the

SEBI after the year 1996. The mobilization of funds and the number of players

operating in the industry reached new heights as investors started showing more

interest in mutual funds. 

Investors' interests were safeguarded by SEBI and the Government offered tax benefits

to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996

was introduced by SEBI that set uniform standards for all mutual funds in India. The

Union Budget in 1999 exempted all dividend incomes in the hands of investors from

income tax. Various Investor Awareness Programmes were launched during this

phase, both by SEBI and AMFI, with an objective to educate investors and make them

informed about the mutual fund industry.

In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal

status as a trust formed by an Act of Parliament. The primary objective behind this

was to bring all mutual fund players on the same level. UTI was re-organized into two

parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund 

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past

schemes (like US-64, Assured Return Schemes) are being gradually wound up.

However, UTI Mutual Fund is still the largest player in the industry. In 1999, there

was a significant growth in mobilization of funds from investors and assets under

management which is supported by the following data:

GROSS FUND MOBILISATION (RS. CRORES)

FROM TO UTIPUBLIC SECTOR

PRIVATE SECTOR

TOTAL

01-April-98 31-March-99 11,679 1,732 7,966 21,377

01-April-99 31-March-00 13,536 4,039 42,173 59,748

01-April-00 31-March-01 12,413 6,192 74,352 92,957

01-April-01 31-March-02 4,643 13,613 1,46,267 1,64,523

01-April-02 31-Jan-03 5,505 22,923 2,20,551 2,48,979

01-Feb.-03 31-March-03 * 7,259* 58,435 65,694

01-April-03 31-March-04 - 68,558 5,21,632 5,90,190

01-April-04 31-March-05 - 1,03,246 7,36,416 8,39,662

01-April-05 31-March-06 - 1,83,446 9,14,712 10,98,158

ASSETS UNDER MANAGEMENT (RS. CRORES)

AS ON UTI PUBLIC SECTORPRIVATE SECTOR

TOTAL

31-March-99 53,320 8,292 6,860 68,472

Phase V. Growth and Consolidation - 2004 Onwards

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 29 funds as at the end of March 2006. This is

a continuing phase of growth of the industry through consolidation and entry of new

international and private sector players.

Regulatory of mutual fund in India

SEBI

The capital market regulates the mutual funds in India. SEBI requires all

mutual funds to be registered with them. SEBI issues guidelines for

all mutual funds operations- investment, accounts, expenses etc. Recently,

it has been decided that Money Market Mutual Funds of registered mutual

funds will be regulated by SEBI through (Mutual Fund) Regulations 1996.

RBI

RBI, a supervisor of the Banks owned Mutual Funds-As banks in India come

under the regulatory Jurisdiction of RBI, banks owned funds to be under

supervision of RBI and SEBI. RBI has supervisory responsibility over all

entities that operate in the money markets.

MINISTRY OF FINANCE (MOF)

Ministry of Finance ultimately supervises both the RBI and the SEBI and plays

the role of apex authority for any major disputes over SEBI guidelines.

COMPANY LOW BOARD

Registrar of companies is called Company Low Board. AMCs of

Mutual Funds are companies registered under the companies Act

1956 and therefore answerable to regulatory authorities empowered by the

Companies Act.

STOCK EXCHANGE

Stock Exchanges are Self-regulatory organizations supervised by SEBI. Many

closed ended funds of AMCs are listed as stock exchanges and are traded like

shares.

OFFICE OF THE PUBLIC TRUSTE

Mutual Fund being public trust is governed y the Indian Trust Act 1882. The

Board of trustee or the Trustees Company is accountable to the office of public

trustee, which in turn reports to the Charity commissioner.

ASSOCIATION OF MUTUAL FUNDS IN INDIA

AMFI is dedicated to develop the mutual funds industry in India along professional,

healthy, and ethical lines, and to enhance and maintain standards in all areas with a

view to protecting and promoting the interests of mutual funds and the unit holders.

AMFI has taken the initiative to position the mutual funds industry in its proper

perspective and convey the correct meaning and understanding of the concept working

of a mutual fund to the investors. The AMFI periodically publishes information that is

useful to investor.

ORIGIN/GROWTH OF AMFI:

SEBI tightened the disclosure norms for the mutual funds to help investors in taking

better informed decisions. SEBI laid-down investment and disclosure norms for

employees of AMCs and trustee companies in order to avoid any conflict of interest.

To promote venture capital activity, SEBI allowed the mutual funds to invest in the

listed or unlisted securities, or units of venture capital funds within the overall ceiling

for such investment. Detailed guidelines on the disclosure and reporting requirements

were issued to mutual funds for investment in foreign securities. With a view improve

professional standards; SEBI has decided to make it mandatory for all mutual funds to

appoint agents/distributors who have obtained association of mutual funds of India

(AMFI) certification.

With the increase in mutual fund players in India, a need for mutual fund association

in India was generated to function as a non-profit organization. Association of mutual

funds in India was incorporated on 22nd august,1995.The association of mutual funds

in India is dedicated to developing the Indian mutual fund industry on professional,

healthy, and ethical lines and to enhance and maintain standards in all areas with a

view to protect and promote the interests of mutual funds their unit holders.

Objectives of AMFI:

AMFI interacts with SEBI and works according to SEBI’s guidelines in the

mutual fund industry.

Association of mutual fund of India does represent the government of India,

The reserve bank of India, and other related bodies on matters relating to the

mutual fund industry.

AMFI undertakes all India awareness program for investors in order to

promote understanding of the concept and working of mutual funds.

Association of mutual fund of India also disseminate information’s on mutual

fund industry and undertakes studies and research either directly or in

association with other bodies.

Role of AMFI:

To define and maintain high professional and ethical standards in all areas

of operation of mutual fund industry.

To recommend and promote best business practices and code of conduct to

be followed by members and others engaged in the activities of mutual

fund and asset management including agencies connected or involved in

the field of capital markets and financial services.

To undertake nationwide investor awareness program so as to promote

proper understanding of the concept and working of mutual funds.

Fund Houses: Indian Mutual Fund Companies

Mutual Fund Name

No. of Schemes

(Incl Options)

31-Mar-14 31-Dec-13 Net Chg

AXIS Mutual Fund 465 16,285 14,729 1,555

Baroda Pioneer Mutual Fund

165 8,106 7,217 889

Birla Sun Life Mutual Fund

1,873 89,136 85,086 4,049

BNP Paribas Mutual Fund

843 3,446 3,674 [228]

BOI AXA Mutual Fund 149 1,991 1,760 231

Canada Robe co Mutual Fund

216 6,660 7,077 [417]

Deutsche Mutual Fund 1,029 18,795 18,596 199

DSP Blackrock Mutual Fund

1,063 31,966 32,641 [675]

Edelweiss Mutual Fund 126 169 167 2

Escorts Mutual Fund 66 269 280 [11]

Franklin Templeton Mutual Fund

396 46,406 45,331 1,076

Goldman Sachs Mutual Fund

28 3,764 3,847 [83]

HDFC Mutual Fund 2,040 113,354 109,393 3,961

HSBC Mutual Fund 412 7,659 7,652 7

ICICI Prudential Mutual Fund

1,988 106,941 97,318 9,623

IDBI Mutual Fund 227 6,018 5,303 715

IDFC Mutual Fund 1,635 41,454 41,362 92

IIFL Mutual Fund 58 234 225 9

India bulls Mutual Fund 78 1,097 1,225 [128]

ING Mutual Fund 375 794 964 [170]

JM Financial Mutual Fund

314 6,046 7,192 [1,145]

JP Morgan Mutual Fund 280 16,248 12,928 3,320

Kotak Mahindra Mutual 762 33,502 36,228 [2,726]

Fund

L&T Mutual Fund 553 18,255 17,003 1,253

LIC NOMURA Mutual Fund

316 10,584 10,010 574

Mirae Asset Mutual Fund

126 692 582 110

Morgan Stanley Mutual Fund

55 2,572 3,273 [701]

Motilal Oswald Mutual Fund

38 489 434 55

Peerless Mutual Fund 94 4,046 3,399 646

Pine Bridge Mutual Fund

110 649 814 [165]

PPFAS Mutual Fund 2 340 312 27

Pramerica Mutual Fund 153 2,411 2,043 367

PRINCIPAL Mutual Fund

283 4,134 4,547 [413]

Quantum Mutual Fund 13 372 344 28

Reliance Mutual Fund 1,522 105,293 104,412 881

Religare Invesco Mutual Fund

809 14,521 13,734 788

Sahara Mutual Fund 100 191 194 [4]

SBI Mutual Fund 977 66,311 65,415 896

Shriram Mutual Fund 4 24 24 1

Sundaram Mutual Fund 986 16,422 16,024 398

Tata Mutual Fund 897 21,954 19,723 2,231

Taurus Mutual Fund 183 3,532 3,223 309

Union KBC Mutual Fund

102 2,847 2,266 580

UTI Mutual Fund 1,347 74,233 74,351 [118]

Reliance Group Holdings has grown from a small office data-processing equipment

firm in 1961 into a major insurance and financial-services group in one generation

under one chief.

Reliance's insurance operations constitute the nation's 27th-largest property and

casualty operation. The parent company also includes a development subsidiary in

commercial real estate. Reliance's international consulting group contains several

subsidiaries in energy, environment, and natural resources consulting. A financial arm

invests in other businesses, primarily television stations. Reliance Insurance started as

the Fire association of Philadelphia in 1817, organized by 5 hose and engine fire

companies. It became the nation's first association of volunteer fire departments.

Reliance Capital Group, L.P. constituted the investment branch of the Reliance

conglomerate. In December 1989, Reliance Capital sold its investment, Days

Corporation, parent company of Days Inn of America, the world's third-largest hotel

chain; it had been purchased in 1984.

RELIANCE MUTUAL FUND

This group dominates this key area in the financial sector..This mega business houses

show that it has assets under management of Rs. 90938 crore (US$ 22.73billion) and

an investor base of over6.6 million Reliance’s mutual fund schemes are managed by

Reliance Capital Asset Management Limited RCAM), a subsidiary of Reliance Capital

Limited, which holds 93.37% of the paid-up capital of RCAM. The company notched

up a healthy growth of Rs. 16354 crore (US$ 4.09 billion) in assets under management

in February2008 and helped propel the total industry-wide AUM to Rs. 565459 crore

(US$ 141.36 billion) A sharp rise in fixed maturity plans (FMPs) and collection of Rs.

7000 crore (US$ 1.75 billion) through new fund offers (NFOs) created this surge. In

AU rankings, Reliance continues to be in the number one spot.

India's Best Offering: Reliance Mutual Fund

Investing has become global. Today, a lot of countries are waking up to the reality that

in order to gain financial growth, they must encourage their citizens to not only save

but also invest. Mutual funds are fast becoming the mode of investment in the world.

In India, a mutual fund company called the Reliance Mutual Fund is making waves.

Reliance is considered India's best when it comes to mutual funds. Its investors

number to 4.6 billion people. Reliance Capital Asset Management Limited ranks in the

top 3 of India's banking companies and financial sector in terms of net value.

Vision

Reliance Mutual Fund is so popular because it is investor focused. They show their

dedication by continually dishing out innovative offerings and unparalleled service

initiatives. It is their goal to become respected globally for helping people achieve

their financial dreams through excellent organization governance and customer care.

Reliance Mutual fund wants a high performance environment that is geared at making

investors happy.

Mission

RMF aims to do business lawfully and without stepping on other people. They want to

be able to create portfolios that will ensure the liquidity of the investment of people in

India as well as abroad. Reliance Mutual Fund also wants to make sure that their

shareholders realize reasonable profit, by deploying funds wisely. Taking appropriate

risks to reach the company's potential is also one of Reliance Mutual Fund's

objectives.

SchemesTo make their packages more attractive, Reliance Mutual Fund created proposals

called the Equity/ Growth scheme, Debt/Income Scheme, and Sector Specific Scheme.

Equity Schemes

Investments in equities are made with a long-term objective in mind.

Empirical studies have indicated that despite the short-term volatility

that is characteristic of equities, over the longer term, equities have

generated superior returns. This makes equities the best

instruments for long-term growth of capital. Investing in a diversified

equity portfolio can help minimize risk as the portfolio gets exposure

across various sectors, while enabling Investors to capitalize on the

fundamental upsides presented by these sectors. The various Equity

schemes are

1) Reliance diversified large cap

2) Reliance index

3) Reliance diversified mid cap & small cap

4) Reliance multi cap

5) Reliance balanced

6) Reliance sector

7) Reliance tax saver

8) Reliance arbitrage

9) Reliance ETF

Debt schemes:

1) Reliance liquid

2) Reliance ultra short term

3) Reliance short term

4) Reliance long term

5) Reliance dynamic

6) Reliance gilt

7) Reliance MIP

Gold schemes:

1) Reliance ETF

2) Reliance FOF

Equity Schemes of Reliance mutual funds

Reliance vision fund:

Type Open ended growth scheme

Investment pattern 99.90% in equity 0.105 in debt.

Fund objective Long term growth of capital

Investment horizon Minimum of one year

Scheme: Reliance NRI equity fund

Type Open ended growth fund

Investment pattern 95.85% in equity 4.15% in debt

Fund objective Long term growth of capital

Investment horizon Minimum of one year

Scheme: Reliance focused large cap fundType Open ended growth scheme

Investment pattern 96.96% in equity 3.04% in debt

Fund objective Long term capital growth

Investment horizon Minimum of one year

Scheme: Reliance index fund-Nifty plan

Type Open ended scheme

Investment pattern 99.32% in equity 0.68% in cash and other receivables

Fund objective Long term capital growth

Investment horizon Minimum of one year

Scheme: Reliance small cap fundType Open ended scheme

Investment pattern 85.34% in equity 14.66% in cash and other receivables.

Fund objective Long term capital growth

Investment horizon Minimum of one year

Scheme: reliance regular savings fund-equity optionType Open ended scheme

Investment pattern 97.60% in equity 2.40% in cash and other receivables

Fund objective Long term capital growth

Investment horizon Minimum of one year

Scheme: reliance banking fund

Type Open ended scheme

Investment pattern 98.52% I equity 1.48% in cash and other receivables

Fund objective Long term capital growth

Investment horizon Minimum of one year

Scheme: reliance tax saver fund

Type Open ended scheme

Investment pattern 99.44% in equity fund 0.56% in cash and other receivables.

Fund objective Long term capital growth

Investment horizon Minimum of one year

Debt scheme: reliance liquidity fundType Open ended scheme

Investment pattern 56.01% in banks 25.64% in cash and receivables 12.43% in miscellaneous 5.92% in others.

Fund objective Optimal returns with moderate levels of risk and high liquidity.

Investment horizon Minimum of one year

Scheme: Reliance short term fundType Open ended scheme

Investment pattern 49.67% in miscellaneous 29.40% in finance 5.37% in banks 15.56% in others

Fund objective Stable returns with a short term investment horizon

Investment horizon Short term

Scheme: Reliance dynamic bond fund

Type Open ended scheme

Investment pattern 80.20% in miscellaneous 12.32% in finance 7.48% in others.

Fund objective Optimal returns with moderate risk.

Investment horizon Minimum of one year

Scheme: Reliance monthly income plan

Type Open ended scheme

Investment pattern 49.69% in miscellaneous 10.73% in finance

Fund objective

Investment horizon Minimum of one year

Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing

mutual funds in India. RMF offers investors a well-rounded portfolio of products to

meet varying investor requirements and has presence in 179 cities across the country.

Reliance Mutual Fund constantly endeavors to launch innovative products and

customer service initiatives to increase value to investors. Reliance Capital Asset

Management Limited (‘RCAM’) is the asset manager of Reliance Mutual Fund.

RCAM is a subsidiary of Reliance Capital Limited (RCL). Presently, RCL holds

65.23% of its total issued and paid-up equity share capital and the balance of its issued

and paid up equity share capital is held by other shareholders which includes Nippon

Life Insurance Company (“NLI”), holding 26% of RCAM’s total issued and paid up

equity share capital.

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average

Assets under Management (AAUM) of Rs. 107749 Crores and an investor count of

over 72 Lakh folios. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai

Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers

investors a well-rounded portfolio of products to meet varying investor requirements

and has presence in 159 cities across the country. Reliance Mutual Fund constantly

endeavors to launch innovative products and customer service initiatives to increase

value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital

Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds

93.37% of the paid-up capital of RCAM, the balance paid up capital being held by

minority shareholders

Reliance Capital Ltd. is one of India’s leading and fastest growing private sector

financial services companies, and ranks among the top 3 private sector financial

services and banking companies, in terms of net worth. Reliance Capital Ltd. has

interests in asset management, life and general insurance, private equity and

proprietary investments, stock broking and other financial services. 

.Summary of Schemes

No of schemes : 886

Corpus under management: Rs. 105293.1567 crs. (as on 31-Mar-2014)

Fund of Funds (4)

 Interval Income Funds (95)

 Liquid Funds (38)

 ETFs (6)

 Equity Funds (142)

 Monthly Income Plans (6)

 Income Funds (38)

 Gilt Funds (15)

 Short Term Income Funds (8)

 Balanced Funds (6)

Ultra Short Term Funds (20)

 Arbitrage Funds (6)

Fixed Maturity Plans (482)

 Floating Rate Income Funds (20)

Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of India’s leading Mutual Funds,

with Average Assets Under Management (AAUM) of Rs. 103542 Crores (Jan to Mar

'14 Quarter) and 55.08 Lakh folios. (31st Mar 14) 

Reliance Capital Ltd. is one of India’s leading and fastest growing private sector

financial services companies, and ranks among the top 3 private sector financial

services and banking companies, in terms of net worth. Reliance Capital Ltd. has

interests in asset management, life and general insurance, private equity and

proprietary investment, stock broking and other financial services.

 

Sponsor Reliance Capital Limited

Trustee Reliance Capital Trustee Co. Limited

Investment Manager / AMC

Reliance Capital Asset Management Limited

Statutory DetailsThe Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956.

The Sponsor, the Trustee and the Investment Manager are incorporated under the

Companies Act 1956. Reliance Mutual Fund (formerly known as Reliance Capital

Mutual Fund), a Trust under Indian Trust Act, 1882 and registered with SEBI vide

registration number MF/022/95/1 dated June 30, 1995.

TABLE-1

AGE WISE CLASSIFICATION OF RESPONDENTS

AGE NO.OF.RESPONDENTS PERCENTAGE

BELLOW 20 NIL -

20-29 8 10%

30-39 24 30%

40-49 20 25%

50-59 24 30%

ABOVE 60 4 5%

TOTAL 80 100%

8

24

20

24

4

age wise no.of.respondents

20-2930-3940-4950-59ABOVE 60

INTERPRETATION : According to the survey the respondents were of different age groups. There are no respondents of age below 20 are in no number. The investors of age 20-29 are 08 in number with 10%. The investors of age 30-39 are 24 with 30%, 40-49 there are 20 investors with 25% and in between 50-59 there are 24 investors with 30% and above 60 there are 4 investors with 5%.

TABLE-2

GENDER OF THE RESPONDENTS

GENDER NO.OF.RESPONDENTS PERCENTAGE

MALE 64 80%

FEMALE 16 20%

TOTAL 80 100%

64

16

gender of respondents

MALEFEMALE

INTERPRATATION: In the survey number of male respondents is more in number that is about 80% & the next position has been occupied by female respondents they are about 20% of the sample so, mainly men prefer to go for investments.

TABLE-3

OCCUPATION OF THE RESPONDENTS

OCCUPATION NO.OF RESPONDENTS PERCENTAGE

SALARIED 32 40%

BUSINESS 32 40%

PROFESSIONAL 12 15%

RETIRED 4 5%

OTHERS 4 5%

TOTAL 80 100%

32

32

12

44

occupation of the respondents

SALARIEDBUSINESSPROFESSIONALRETIREDOTHERS

INTERPRETATION: According to the survey the respondents were of different occupations Respondents from the business are occupying 40%, then comes professional with 15 %, others 5%, retired people occupy 5%, with salaried occupying 40%.

TABLE-4

ANNUAL INCOME OF THE RESPONDENTS

ANNUAL INCOME NO.OF RESPONDENTS PERCENTAGE

1-5LAKH 48 60%

5-10LAKH 28 35%

ABOVE 10 LAKH 24 5%

TOTAL 80 100%

48

28

24

ANNUAL INCOME OF THE RE-SPONDENTS

1-5LAKH5-10LAKHABOVE 10 LAKH

INTERPRETATION: According to the survey, the respondents of the income group of less than 5 lacks are of 60%. They were about 35% of the respondents are of the income group between 5-10 lakh 5% of the respondents were of the income group above 10 lacks.

TABLE-5

DO THE RESPONDENT INVEST THEIR MONEY

INVESTMENTS NO.OF.RESPONDENTS PERCENTAGE

YES 72 90%

NO 8 10%

TOTAL 80 100%

72

8

RESPONDENTS INVEST THEIR MONEY

YESNO

INTERPRETATION: All the respondents considered in the sample, do invest their savings.Out of the total sample the respondents going for investments are total in numbers with the two hundred respondents considered in sample are going for complete investments with100%.

TABLE-6

AMOUNT THAT RESPONDENTS SAVE YEARLY

YEARLY SAVINGS NO.OF.RESPONDENTS PERCENTAGE

< 25000 12 15%

<50000 40 35%

<100000 48 10%

>100000 80 40%

TOTAL 80 100%

12

40

48

80

THE AMOUNT THE RESPONDENTS SAVE YEARLY

< 25000<50000<100000>100000

INTERPRETATION: According to the survey, the respondents who save< 25,000 yearly is about 15%, <50,000 is about 35% & the individuals who save less than 1,00,000 are 10%, followed by individuals who save more than 1,00,000 is 40%.

TABLE-7

INVESTORS OPPURTUNITIES FOR VARIOUS INVESTMENTS:

INVESTMENT OPPORTUNITIES

No.of.respondents percentage

BANK DEPOSITS 48 60%

LIC 4 5%

MUTUAL FUNDS 8 10%

SHARES 4 5%

OTHERS 8 10%

Total 72 90%

484

8

4

8

INVESTMENTS AVENUES OPTED BY INVESTORS

BANK DEPOSITSLICMUTUAL FUNDS SHARESOTHERS

Interpretation: It is observed from the above chart that 60% of the individuals prefer to bank deposits, 5% of the individuals prefer to shares, respondents preferring mutual funds are 10%,life insurance are 5% followed by other avenues with 10%.

Table-8

INVESTORS PREFERENCE FOR VARIOUS INVESTMENT OBJECIVES

Options No. Of. respondents Percentage rank

Security 42 58.8% 1

Yield 8 11.9% 2

Maturity 5 5.8% 4

Tax benefit 7 11.7% 3

liquidity 5 5.8% 4

goal 5 5.8% 4

Total 72 95% -

42

8

5

7

5

5

SecurityYield MaturityTax benefitliquiditygoal

Investment objectives opted by respondents.

Interpretation: Different types of investors look forward to different investment objectives. Most of the investors ranked 1st to security, 2nd rank to yield, 3rd rank has been given to tax benefit, 4th rank for maturity, liquidity & goal.

Table-9

AWARENESS OF MUTUAL FUNDS

Options No. Of. respondents Percentage

Yes 68 85%

No 12 15%

total 80 100%

68

12

awarness of the mutual funds

YesNo

Interpretation: According to the survey, most investors are aware of mutual funds. It can be observed from the above table that 85% of respondents are aware of Mutual Funds and the rest are not aware of Mutual Funds.

Table-10

AWARENESS OF MUTUAL FUNDS IS THROUGH

Option No. of respondents percentage

Advertisements 0 -

Friends 34 47%

Family members 8 11.7%

Financial advisors 30 41.1%

Relatives 0 -

Total 72 97%

34

8

30

Friends

Family members

Financial advisors

Influnce of investments decision through

Interpretation: According to the survey, the respondents are more aware of mutual funds through friends who occupy 47%, followed by financial advisors 41% & Family Members 10%.there is no influence through advertisements and relatives.

Table-11

Type of funds investors preferring

Type of funds No. of respondents Percentage

Debt funds 13 17.6%

Equity funds 54 76%

Liquid funds 5 29%

Total 72

13

54

5

TYPE OF FUNDS RESPONDENTS PREFER TO

Debt fundsEquity fundsLiquid funds

Interpretation: From the survey conducted the respondents prefer Equity funds more in number they occupy 76%, followed by liquid funds with 29% and a very few respondents prefer to debt funds with 17.6%.

Table-12

Opinion about mutual funds

Options No.of.respondents Percentage

Better option 38 53%

Not better option 30 41%

Can’t say 4 5.8%

Total 72 99.8%

3830

4

MUTUAL FUND IS A BETTER OPTION

Better optionNot better optionCan’t say

Interpretation: According to the survey, the respondents are mostly of the opinion that investing in Mutual funds is a Better option as it occupies 58%, a few respondents are of no opinion with 5.8%, & the rest feel that it is not a better option with only 41% of the total.

Table-13

Recommending mutual fund as a better option

Option No. of respondents Percentage

Yes 38 52.9%

No 34 47%

Total 72 99.8%

3834

IS MUTUAL FUND IS A RECOMMAND-ING OPTION

YesNo

Interpretation: According to the survey, the respondents are mostly of the opinion that recommending Mutual funds as a Better option as it occupies 52.9%, a few respondents are of no opinion with 47%.

Table-14

Awareness of the taxation on investment:

Taxation No. of respondents percentage

Yes 15 20.8%

No 57 79.16%

Total 72 99.96%

15

57

No. of respondents

YesNo

Interpretation: According to the survey most of the respondent’s i.e. 79% are

don’t know about the taxation of their investment. Remaining of the sample know

about the taxation.

FINDINGS

Majority of the respondents belong to age group of 30-39 and 50-59.

Major part of the respondents is male only. Annual income of the respondents between 1-5lacks prefers

more of investments. Respondents irrespective of major investment or small are investing in some other sources of investments.

Investor’s preference when going for an investment in primarily for security. Respondents prefer Bank Deposits as most secured avenue for investment, & then preference is given to mutual funds, others & then to shares and lic.

The role of Financial Advisors play a key role in making investors educated about mutual fund. Around 41.1% of the respondents choose financial advisors for guidance.

From the Survey conducted it is clear that 52.9% of the respondents feel that Mutual Fund is a good investment option.

From the survey it is clear that most of the respondents feel mutual fund as a better option

52.9% of the Respondents are recommending mutual fund as a better investment Opportunity.

Respondents who invested presently and have continuous monitoring are gaining good returns from mutual funds.

Respondents who invested in the years 90’s are faced losses and not having a good opinion on mutual funds.

Average investment proportion of the investors is 30000/-.

SUGGESTIONS: The awareness of mutual fund & its various schemes should be

increased among the people by proper advertising, promotion and conducting investors meets.

Proper guidance should be given by fund managers after investor invested the amount.

If there is certain security in equity funds many of the people might have shown interest to invest.

Conclusion: Mutual funds are the investment avenue to get returns. After completion of my survey I found that investors who are investing presently and have continuous monitoring are gaining more returns and they got satisfied with mutual funds. Investors who invested in last 10 years and having no monitoring they gained nothing at least they do not get back their principle amount. Because of no proper guidance and unawareness. Still most of the people have no awareness about mutual funds and available schemes.

Bibliography:

Financial Services & Marketing - E. Gordon, (Himalaya Publishing House, Mumbai)Financial services - Nalini Prava Tripathy

Security Analysis & Portfolio Management - Preethi Singh

Websites Visited:

www.amfiindia.com

www.mutual funds india.com

www.reliancemutual.com

www.moneycontrol.com

Questionnaire:

1. Name of the respondent:

2. Age group:

a) Below 20 b) 20 – 29 c) 30 – 39

d) 40 – 49 e) 50 – 59 f) Above

60

3. Sex:

a) Male b) Female

4. Address:

5. Occupation:

a) Salaried b) Business c)

Professional

d) Retired e) Student.

6. Annual Income

a) 1-5 Lakh b) 5– 10 Lakh

c) Above 10 Lakh

7. Do you invest any part of your savings?

a) Yes b) No

If yes

8. What amount do you save yearly?

a) < 25000 b) < 50000

c) < 100000 d) > 100000

9. Normally what investment opportunities you prefer to invest your savings? (Rank

them accordingly)

A) Mutual Funds b) LIC

C) Shares d) Bank deposits

10. What criteria you keep in your mind while selecting an investment opportunity

(Rank them accordingly)?

a) Security b) Yield c) Maturity

d) Tax Benefits e) Liquidity f) goal

11. Do you know about the Mutual Funds?

a) Yes b) No

I). If yes how did you come to know about mutual funds?

a) Advertisements b) Friends c) Family

members

d) Financial Advisors e) Relatives

12. Have you invested any amount in the Mutual Funds?

a) Yes b) No

13. What type of funds do you prefer?

a) Debt Funds b) Equity Funds c) liquid Funds

14. Risk involved in mutual funds.

a) High b) Moderate c) Neutral

d) Low e) Nil

15. Returns in mutual funds

a) Excellent b) good c)

average

d) Fair e) poor.

19. In your opinion, investment in Mutual Fund is a

a) Better option b) not a better option c) can’t say

22. Will you recommend Mutual Fund as a better investment alternative to your

friends?

a) Yes b) NO

23. If you have 100000/- how much money do you invest in mutual funds?

24. Have you aware of taxation on your investment?

a) yes b)no

25. What are your valuable suggestions for the improvement of Mutual?

Funds schemes?