48941761-Mutual-Funds (1).docx

8/10/2019 48941761-Mutual-Funds (1).docx

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B.K. SCHOOL OF BUSINESS MANAGEMENT

GUJARAT UNIVERSITY


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A

REPORT ON

ANALYSIS OF MUTUAL FUND

INVESTORS BEHAVIOUR

YEAR: 2010 [SEM III]

SUBMITTED TO

B.K. SCHOOL OF BUSINESS MANAGEMENTGUJARAT UNIVERSITY

SUBMITTED BY

JAY GANDHI (1919)MAHESH METKAL (1966)


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PREFACE

There is much difference beteen s!"in# !nd d$in#% &ith$ut 'r!ctic!(

)n$(ed#e !nd e*'erience n$ $ne c!n be 'erfect% In+estin# the m$ne" here

the ris) is (ess h!s !(!"s been ris)" t$ decide% The di+ersific!ti$n $f ris) h!s

#i+en the birth t$ the 'hen$men$n c!((ed mutu!( fund%

&e !re 're'!rin# c$m'rehensi+e re'$rt $f Mutu!( Fund industr" in

Indi!% The b!sic ide! $f !ssi#nment $f this 'r$,ect is t$ !u#ment $ur )n$(ed#e

!b$ut the industr" in its t$t!(it" !nd !''reci!te the use $f !n inte#r!ted ($$m% It

is c$ncerned the en+ir$nment!( issues !nd tribu(!ti$ns% This m!)es us m$re

c$nsci$us !b$ut Industr" !nd its '$se !nd m!)es us c!'!b(e $f !n!("-in#

Industr".s '$siti$n in the c$m'etiti+e m!r)et% This m!" !(s$ enh!nce $ur($#ic!( !bi(ities%

There !re +!ri$us !s'ects/ hich h!+e been studied in det!i( in the

'r$,ect !nd h!+e been !dded t$ this 'r$,ect re'$rt% The 'r$,ect 'r$+ides s$me

insi#hts in t$ the mutu!( fund industr"/ its $'er!ti$ns !nd 'r!ctices etc% the

$b,ecti+e behind this stud" is t$ )n$ the mech!nism $f mutu!( fund industr"%


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AC&3E45EMET

&e !re +er" h!''" t$ 'resent this re'$rt bef$re "$u% &e e*'ress

$ur #r!titude t$ the 5u,!r!t 6ni+ersit" !nd $ur c$((e#e/ 7%% sch$$( $f business

m!n!#ement t$ 'r$+ide us this $''$rtunit" f$r $ur 'r!ctic!( stud"%

&e !re +er" much th!n)fu( t$ $ur direct$r 4r% S!r(! Achut!n f$r

'r$+idin# us the 'r!ctic!( )n$(ed#e !nd s$urces $f inf$rm!ti$n !b$ut mutu!(

fund !nd its in+est$r.s beh!+i$r in mutu!( funds !s ! '!rt $f M%7%A%

curricu(um%

&e !re !(s$ th!n)fu( t$ Pr$f% 4h!rmesh Sh!h 8+isitin# f!cu(t"

#uide/ M7A9 under h$se #uid!nce e !re !b(e t$ 're'!re this 'r$,ect re'$rt%

&ith$ut their enc$ur!#ement/ this $r) $u(d h!+e ne+er been c$m'(eted%

At (!st but n$t (e!st/ e $u(d (i)e t$ be th!n)fu( t$ !(( th$se

h$ direct(" $r indirect(" c$ntributed t$ the 'r$,ect/ hich !re +er" usefu( t$ us

f$r 're'!rin# this re'$rt%


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4EC3ARATI

&e/ hereb"/ dec(!re th!t the Pr$,ect tit(ed ;study of mutual

fund investment< is $ri#in!( t$ best t$ $ur )n$(ed#e = h!s n$t

'ub(ished e(sehere% This is f$r the 'ur'$se $f '!rti!( fu(fi((ment $f

SEM>III/ M7A>II%

4!te:

Ahmed!b!d

?!" 5!ndhi 81@1@9

M!hesh met)!( 81@9


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EBEC6TIE S6MMERY

As ! '!rt $f m" stud" curricu(um it is necess!r" t$ c$nduct ! #r!nd

'r$,ect% It 'r$+ides us !n $''$rtunit" t$ underst!nd the '!rticu(!r t$'ic in de'th

!nd hich (e!ds t$ thr$u#h t$ th!t t$'ic% M" t$'ic f$r the #r!nd 'r$,ect is tit(ed!s ;P$rtf$(i$ m!n!#ement in mutu!( funds 'erf$rm!nce< in hich em'h!sis

#i+en t$ the stud" $f different mutu!( funds in res'ect t$ the ris) !nd return

in+$(+ed in it% Since mutu!( funds !re ! re(!ti+e(" recent 'hen$men$n in Indi!/

#ener!( 'ub(ic $r in+est$rs d$n.t h!+e c(!rit" !b$ut this c$nce't% As e h!+e

st!rted itnessin# the c$nce't $f m$re s!+in# n$ bein# entrusted t$ the funds

th!n t$ )ee'in# it in b!n)s%

This re'$rt h!s di+ided int$ t$ 'h!ses% First 'h!se c$+ered in+est$r.s

'$rtf$(i$ '!rt here e h!+e inc(uded/ Intr$ducti$n $f mutu!( funds/ Indi!n

mutu!( fund industr"/ In+estment $'ti$ns !+!i(!b(e ith indi+idu!(s Sec$nd'h!se the 'references $f the in+est$rs in the mutu!( funds%

Mutu!( funds !re !(s$ )n$n !s di+ersific!ti$n t$$( hich reduces

$+er!(( ris) in+$(+ed in the in+estment% The 'r$,ect re'$rt h!s inc(uded the

+!ri$us )inds $f ris) !ss$ci!ted ith mutu!( funds%


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RESEARCD METD435Y

Summery

Pr$,ect !b$ut The mutu!( funds in+est$r.s beh!+i$ur

4!t! c$((ecti$n meth$d structured 8c($sed9 uesti$nn!ire

S!m'(e si-e 100 mutu!( fund in+est$rs

Rese!rch !''r$!ches sur+e" meth$d

Objectives

T$ )n$ the in+est$r.s 'reference (e+e( !b$ut the mutu!( funds%

T$ )n$ in+est$r.s $'ini$n !b$ut the ser+ice 'r$+ided b" different

c$m'!nies%

T$ )n$ h$ the in+est$rs !re !ffected hen !n" ne scheme is $ffered%

Sources Of Data

A(( m!r)et rese!rch reuires ! +!st reser+$ir $f inf$rm!ti$n there m!" be

different t"'e $f inf$rm!ti$n !nd d!t! s$me $f the inf$rm!ti$n m!" be

'ub(ished hi(e s$me !re un'ub(ished% S$me !re c$m'(ete !nd re(i!b(e !nd

s$me !re m!" be bi!sed% The rese!rch 'r$b(em $r $b,ecti+e decides the n!ture

$f the s$urces $f d!t!%

The f$(($in# !re the t$ t"'es $f d!t! th!t !re c$((ected f$r the 'ur'$se $f

'r$,ect re'$rt%

Prim!r" d!t!

The 'rim!r" d!t! c!n be described !s the d!t! th!t h!+e been $bser+ed

!nd rec$rded b" rese!rcher f$r the first time t$ their $'ini$n $r )n$(ed#e%


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These d!t! !re $r#!ni-ed b" the rese!rcher f$r in+esti#!ti$n !t h!nd% The

t"'e $f d!t! hich e use t$ c$nduct m!r)et sur+e" is 'rim!r" d!t!%

i%e% sur+e"/ rese!rch etc%

Sec$nd!r" d!t!

The sec$nd!r" d!t! !re st!tistic n$ #!thered f$r the immedi!te use $r

stud" !t (e+e( but f$r s$me $ther 'ur'$se% The" m!" be described !s the d!t!

th!t h!+e been c$m'(ied b" s$me $ther 'ers$n $r !n" !#enc"%

i%e% m!#!-ines/ internet etc%

Sampling

S!m'(in# unit h$ is t$ be sur+e"edG

The m!r)et rese!rch must decide the t!r#et '$'u(!ti$n th!t i(( be s!m'(ed%

&e h!+e re!ched t$ the in+est$rs $f mutu!( funds !nd !s)ed !b$ut the mutu!(

fund ser+ices%

S!m'(in# si-e > h$ m!n" 'e$'(e sh$u(d be sur+e"edG

3!r#e s!m'(e #i+es m$re re(i!b(e resu(t th!n sm!(( s!m'(e% S$/ e did the

sur+e" $f 100 s!m'(es f$r #ettin# the 'rim!r" d!t!%

S!m'(in# 'r$cedures h$ sh$u(d the res'$ndent be ch$senG

T$ $bt!in re'resent!ti+e s!m'(e ! 'r$b!bi(it" s!m'(e $f the '$'u(!ti$n

sh$u(d be dr!n/ 'r$b!bi(it" s!m'(in# !(($s ! c!ten!ti$n $f c$nfidence (imits

f$r s!m'(in# err$r%


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Index

1. Introduction of mutual funds

1.1. What is a mutual fund?

1.2.Characteristics of mutual funds

1.3.Structure

1.4.Advantages of M

1.!."isadvantages of M

1.#.$ist of Assets Management Com%an&

2. 'istor& of mutual funds industr&

2.1.(hases in M

3. )egulator& *od& of M in India

4. +&%es of mutual funds

!. Calculation of net asset value ,-A/

#. +ax *enefits

0. Investors %s&cholog&

. When &ou *u& a mutual fund unit hat exactl& do &ou *u&?

. 'o to invest in mutual funds?

1.'o to read fee ta*le?

11. "ocuments re5uired in investment

12.6noledge re5uired in investment


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13.Investment %rocess of M

14.Investor7s right

1!.Anal&sis of surve&

1#.uture trends in mutual funds

10.Suggestions

1.Conclusion

1.8i*liogra%h&

2. Annexure

2.1. 9uestionnaire

2.2.:lossar&


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1. INTRODUCTION TO MUTUAL FUNDS

A Mutu!( Fund is ! trust th!t '$$(s the s!+in#s $f ! number $f in+est$rs h$sh!re ! c$mm$n fin!nci!( #$!(% The m$ne" thus c$((ected is in+ested b" the fund

m!n!#er in different t"'es $f securities de'endin# u'$n the $b,ecti+e $f the scheme%

These c$u(d r!n#e fr$m sh!res t$ debentures t$ m$ne" m!r)et instruments% The

inc$me e!rned thr$u#h these in+estments !nd the c!'it!( !''reci!ti$n re!(i-ed b" the

scheme is sh!red b" its unit h$(ders in 'r$'$rti$n t$ the number $f units $ned b"

them 8'r$ r!t!9% Thus ! Mutu!( Fund is the m$st suit!b(e in+estment f$r the c$mm$n

m!n !s it $ffers !n $''$rtunit" t$ in+est in ! di+ersified/ 'r$fessi$n!((" m!n!#ed

'$rtf$(i$ !t ! re(!ti+e(" ($ c$st% An"b$d" ith !n in+entib(e sur'(us $f !s (itt(e !s !

fe th$us!nd ru'ees c!n in+est in Mutu!( Funds% E!ch Mutu!( Fund scheme h!s !defined in+estment $b,ecti+e !nd str!te#"%

A Mutu!( Fund is the ide!( in+estment +ehic(e f$r t$d!".s c$m'(e* !nd m$dern

fin!nci!( scen!ri$% M!r)ets f$r euit" sh!res/ b$nds !nd $ther fi*ed inc$me

instruments/ re!( est!te/ deri+!ti+es !nd $ther !ssets h!+e bec$me m!ture !nd

inf$rm!ti$n dri+en% Price ch!n#es in these !ssets !re dri+en b" #($b!( e+ents

$ccurrin# in f!r!!" '(!ces% A t"'ic!( indi+idu!( is un(i)e(" t$ h!+e the )n$(ed#e/

s)i((s/ inc(in!ti$n !nd time t$ )ee' tr!c) $f e+ents/ underst!nd their im'(ic!ti$ns !nd

!ct s'eedi("% An indi+idu!( !(s$ finds it difficu(t t$ )ee' tr!c) $f $nershi' $f his!ssets/ in+estments/ br$)er!#e dues !nd b!n) tr!ns!cti$ns etc%

A Mutu!( Fund is the !nser t$ !(( these situ!ti$ns% It !''$ints 'r$fessi$n!(("

u!(ified !nd e*'erienced st!ff th!t m!n!#es e!ch $f these functi$ns $n ! fu(( time

b!sis% The (!r#e '$$( $f m$ne" c$((ected in the fund !(($s it t$ hire such st!ff !t !

+er" ($ c$st t$ e!ch in+est$r% In effect/ the Mutu!( Fund +ehic(e e*'($its ec$n$mies

$f sc!(e in !(( three !re!s > rese!rch/ in+estments !nd tr!ns!cti$n 'r$cessin#% &hi(e the

c$nce't $f indi+idu!(s c$min# t$#ether t$ in+est m$ne" c$((ecti+e(" is n$t ne/ the

Mutu!( Fund in its 'resent f$rm is ! 20th centur" 'hen$men$n% In f!ct/ Mutu!( Funds#!ined '$'u(!rit" $n(" !fter the Sec$nd &$r(d &!r% 5($b!(("/ there !re th$us!nds $f

firms $fferin# tens $f th$us!nds $f Mutu!( Funds ith different in+estment $b,ecti+es%

T$d!"/ Mutu!( Funds c$((ecti+e(" m!n!#e !(m$st !s much !s $r m$re m$ne" !s

c$m'!red t$ b!n)s%


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A dr!ft $ffer d$cument is t$ be 're'!red !t the time $f (!unchin# the fund%

T"'ic!(("/ it 're s'ecifies the in+estment $b,ecti+es $f the fund/ the ris) !ss$ci!ted/

the c$sts in+$(+ed in the 'r$cess !nd the br$!d ru(es f$r entr" int$ !nd e*it fr$m the

fund !nd $ther !re!s $f $'er!ti$n% In Indi!/ !s in m$st c$untries/ these s'$ns$rs need

!''r$+!( fr$m ! re#u(!t$r/ SE7I 8Securities e*ch!n#e 7$!rd $f Indi!9 in $ur c!se%SE7I ($$)s !t tr!c) rec$rds $f the s'$ns$r !nd its fin!nci!( stren#th in #r!ntin#

!''r$+!( t$ the fund f$r c$mmencin# $'er!ti$ns%

A s'$ns$r then hires !n !sset m!n!#ement c$m'!n" t$ in+est the funds

!cc$rdin# t$ the in+estment $b,ecti+e% It !(s$ hires !n$ther entit" t$ be the cust$di!n

$f the !ssets $f the fund !nd 'erh!'s ! third $ne t$ h!nd(e re#istr" $r) f$r the unit

h$(ders 8subscribers9 $f the fund%

In the Indi!n c$nte*t/ the s'$ns$rs 'r$m$te the Asset M!n!#ement C$m'!n"

!(s$/ in hich it h$(ds ! m!,$rit" st!)e% In m!n" c!ses ! s'$ns$r c!n h$(d ! 100H

st!)e in the Asset M!n!#ement C$m'!n" 8AMC9% E%#% 7ir(! 5($b!( Fin!nce is the

s'$ns$r $f the 7ir(! Sun 3ife Asset M!n!#ement C$m'!n" 3td%/ hich h!s f($!ted

different Mutu!( Funds schemes !nd !(s$ !cts !s !n !sset m!n!#er f$r the funds

c$((ected under the schemes%


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1.1 What is a Mutual Fu!"

A Mutu!( Fund is ! trust th!t '$$(s the s!+in#s $f ! number $f in+est$rs

h$ sh!re ! c$mm$n fin!nci!( #$!(% The m$ne" thus c$((ected is in+ested b" the fund

m!n!#er in different t"'es $f securities de'endin# u'$n the $b,ecti+e $f the scheme%These c$u(d r!n#e fr$m sh!res t$ debentures t$ m$ne" m!r)et instruments% The

inc$me e!rned thr$u#h these in+estments !nd the c!'it!( !''reci!ti$ns re!(i-ed b" the

scheme !re sh!red b" its unit h$(ders in 'r$'$rti$n t$ the number $f units $ned b"

them% Thus ! Mutu!( Fund is the m$st suit!b(e in+estment f$r the c$mm$n m!n !s it

$ffers !n $''$rtunit" t$ in+est in ! di+ersified/ 'r$fessi$n!((" m!n!#ed '$rtf$(i$ !t !

re(!ti+e(" ($ c$st% The sm!(( s!+in#s $f !(( the in+est$rs !re 'ut t$#ether t$ incre!se

the bu"in# '$er !nd hire ! 'r$fessi$n!( m!n!#er t$ in+est !nd m$nit$r the m$ne"%

An"b$d" ith !n in+estib(e sur'(us $f !s (itt(e !s ! fe th$us!nd ru'ees c!n in+est in

Mutu!( Funds% E!ch Mutu!( Fund scheme h!s ! defined in+estment $b,ecti+e !ndstr!te#"%

Mutual #u! $%& 'ha(t


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1.) Cha(a't*(isti's %# +utual #u!

The tr!diti$n!(/ distin#uishin# ch!r!cteristics $f the mutu!( fund m!" inc(ude the

f$(($in#:

1% In+est$rs 'urch!se mutu!( fund sh!res fr$m the fund itse(f 8$r thr$u#h ! br$)erf$r the fund9 inste!d $f fr$m $ther in+est$rs $n ! sec$nd!r" m!r)et

2% The 'rice th!t in+est$rs '!" f$r mutu!( fund sh!res is the funds 'er sh!re net

!sset +!(ue 8A9 '(us !n" sh!reh$(der fees th!t the fund im'$ses !t the time

$f 'urch!se 8such !s s!(es ($!ds9%

J% Mutu!( fund sh!res !re Kredeem!b(e/K me!nin# in+est$rs c!n se(( their sh!res

b!c) t$ the fund 8$r t$ ! br$)er !ctin# f$r the fund9%

L% Mutu!( funds #ener!((" cre!te !nd se(( ne sh!res t$ !cc$mm$d!te ne

in+est$rs% In $ther $rds/ the" se(( their sh!res $n ! c$ntinu$us b!sis/ !(th$u#h

s$me funds st$' se((in# hen/ f$r e*!m'(e/ the" bec$me t$$ (!r#e%

% The in+estment '$rtf$(i$s $f mutu!( funds t"'ic!((" !re m!n!#ed b" se'!r!te

entities )n$n !s Kin+estment !d+isersK th!t !re re#istered ith the SE7I


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1., Mutual #u! st(u'tu(*

The SE7I 8Mutu!( Funds9 Re#u(!ti$ns 1@@J define ! mutu!( fund 8MF9 !s !

fund est!b(ished in the f$rm $f ! trust b" ! s'$ns$r t$ r!ise m$nies b" the Trusteesthr$u#h the s!(e $f units t$ the 'ub(ic under $ne $r m$re schemes f$r in+estin# in

securities in !cc$rd!nce ith these re#u(!ti$ns%

These re#u(!ti$ns h!+e since been re'(!ced b" the SE7I 8Mutu!( Funds9 Re#u(!ti$ns/

1@@% The structure indic!ted b" the ne re#u(!ti$ns is indic!ted !s under%

Te sponsor: The S'$ns$r is the cre!t$r $f the fund/ est!b(ishes the mutu!( fund !nd

#ets it re#istered ith SE7I !nd i(( t"'ic!((" h$(d ! number $f +$tin# sh!res

8'erh!'s 1009 in the fund/ but these !re n$t entit(ed t$ !n" distributi$ns $r sh!re in the

euit"% A(( $f the euit" be($n#s t$ the in+est$rs t"'ic!((" in the f$rm $f n$n>+$tin#

K'referred redeem!b(e sh!resK The +$tin# sh!res #ener!((" c$ntr$( m!n!#ement $f the

fund/ !'!rt fr$m (imited m!,$r decisi$ns% The s'$ns$r is the Sett(er $f the Trust th!t

h$(ds Trust 'r$'ert" $n beh!(f $f in+est$rs h$ !re the benefici!ries $f the Trust% Thes'$ns$r is !(s$ reuired t$ c$ntribute !t (e!st L0H $f the c!'it!( $f the !sset

m!n!#ement c$m'!n"/ hich is f$rmed f$r m!n!#in# the !ssets $f the Trust%

Te board of trustees: The mutu!( fund needs t$ be c$nstituted in the f$rm $f ! trust

!nd the instrument $f the trust sh$u(d be in the f$rm $f ! deed re#istered under the

'r$+isi$ns $f the Indi!n Re#istr!ti$n Act/ 1@0N% The su'er+is$r" r$(e is fu(fi((ed b"


16/69

the 7$!rd $f Trustees $f the In+estment C$m'!n"% The b$!rd $f trustees m!n!#es the

MF !nd the s'$ns$r e*ecutes the trust deeds in f!+$ur $f the trustees% It is the ,$b $f

the MF trustees t$ see th!t schemes f($!ted !nd m!n!#ed b" the AMC !''$inted b"

the trustees !re in !cc$rd!nce ith the trust deed !nd SE7I #uide(ines%

Te asset management company !"M#$: The C$m'!n" th!t m!n!#es ! mutu!(

fund is c!((ed !n AMC% F$r !(( 'r!ctic!( 'ur'$ses/ it is !n $r#!ni-ed f$rm $f ! Km$ne"

'$rtf$(i$ m!n!#erK% An AMC m!" h!+e se+er!( mutu!( fund schemes ith simi(!r $r

+!ried in+estment $b,ecti+es% The AMC hires ! 'r$fessi$n!( m$ne" m!n!#er/ h$

bu"s !nd se((s securities in (ine ith the funds st!ted $b,ecti+e%

A(( Asset M!n!#ement C$m'!nies 8AMCs9 !re re#u(!ted b" SE7I !ndO$r the

R7I 8in c!se the AMC is 'r$m$ted b" ! b!n)9% In !dditi$n/ e+er" mutu!( fund h!s !

b$!rd $f direct$rs th!t re'resents the unit h$(ders interests in the mutu!( fund% This

entit" th!t undert!)es the desi#nin# !nd m!r)etin# $f schemes r!ises m$ne" fr$m the'ub(ic under the schemes !nd m!n!#es the m$ne" $n beh!(f $f its $ners% T$

se#re#!te the c$((ected funds fr$m this entit"s $n funds/ the c$r'us is '(!ced in !

(e#!( +ehic(e% It is the ch!r!cter $f this (e#!( +ehic(e th!t determines the ch!r!cter $f

the Fund itse(f% Irres'ecti+e $f the n!ture $f the structure/ h!t is m$re fund!ment!( is

th!t in +ie $f the fiduci!r" r$(e $f the AMC $r the fund m!n!#er t$!rds the 'ub(ic/

there is ! need f$r su'er+isi$n $f the !cti+ities $f the AMC $r fund m!n!#er b" !

se'!r!te b$d"% The !ssets $f the Trust c$m'rise $f 'r$'erties $f the schemes/ hich

!re f($!ted b" the !sset m!n!#ement c$m'!n" ith the !''r$+!( $f the Trustees

Schemes m!" h!+e different ch!r!cteristics > the" m!" be $'en $r c($sed ended $rm!" h!+e ! '!rticu(!r in+estment f$cus $r '$rtf$(i$ c$m'$siti$n% Fin!(("/ the s!fe

cust$d" $f !ssets $f the Trust is entrusted t$ $ne $r m$re cust$di!ns%

Te custodian: Cust$di!n h$(ds the funds c!sh !nd in+estment !ssets% C$mm$n("/

'!rts $f the funds !ssets !re he(d b" $ne $r m$re br$)ers h$ e*ecute tr!des $n

beh!(f $f the fund Cust$di!( Fees c!n !(s$ be ! fi*ed fee $r ! 'ercent!#e $f A%

&here ! br$)er !cts !s de f!ct$ cust$di!n/ it usu!((" ch!r#es $n ! tr!ns!cti$n!( b!sis%

Te administrator: Administr!t$r !cts !s re#istr!r !nd tr!nsfer !#ent/ )ee's the

b$$)s !nd rec$rds $f the fund/ !nd c!(cu(!tes the A% 4e'endin# $n the c$m'(e*it"

$f the fund/ the !dministr!t$rs fees c$u(d be !s (itt(e !s ! fe th$us!nd d$((!rs ! "e!r

$r !s much !s 0% t$ 0% H $f the A 'er !nnum% S$metimes the !dministr!t$rs

fees !re inc(uded ithin the m!n!#ement fee% In cert!in situ!ti$ns/ the !dministr!t$r

subc$ntr!cts ! '!rt $f the $r)/ '!rticu(!r(" the A certific!ti$n/ t$ the in+estment

m!n!#er%


17/69

%&' "dvantages of mutual funds

Mutu!( funds m!)e s!+in# !nd in+estin# sim'(e/ !ccessib(e/ !nd !ff$rd!b(e% The

!d+!nt!#es $f mutu!( funds inc(ude 'r$fessi$n!( m!n!#ement/ di+ersific!ti$n/ +!riet"/

(iuidit"/ !ff$rd!bi(it"/ c$n+enience/ !nd e!se $f rec$rd)ee'in#!s e(( !s strict

#$+ernment re#u(!ti$n !nd fu(( disc($sure%

Diversification(

The best mutu!( funds desi#n their '$rtf$(i$s s$ indi+idu!( in+estments i((

re!ct different(" t$ the s!me ec$n$mic c$nditi$ns% F$r e*!m'(e/ ec$n$mic

c$nditi$ns (i)e ! rise in interest r!tes m!" c!use cert!in securities in !

di+ersified '$rtf$(i$ t$ decre!se in +!(ue% ther securities in the '$rtf$(i$ i((

res'$nd t$ the s!me ec$n$mic c$nditi$ns b" incre!sin# in +!(ue% &hen !

'$rtf$(i$ is b!(!nced in this !"/ the +!(ue $f the $+er!(( '$rtf$(i$ sh$u(d

#r!du!((" incre!se $+er time/ e+en if s$me securities ($se +!(ue%

)rofessional Management(

M$st mutu!( funds '!" t$'f(i#ht 'r$fessi$n!(s t$ m!n!#e their in+estments%

These m!n!#ers decide h!t securities the fund i(( bu" !nd se((%

*egulatory oversigt(

Mutu!( funds !re sub,ect t$ m!n" #$+ernment re#u(!ti$ns th!t 'r$tect in+est$rsfr$m fr!ud%

+i,uidity(

Its e!s" t$ #et "$ur m$ne" $ut $f ! mutu!( fund% &rite ! chec)/ m!)e ! c!((/

!nd "$u+e #$t the c!sh%

#onvenience(

Y$u c!n usu!((" bu" mutu!( fund sh!res b" m!i(/ 'h$ne/ $r $+er the Internet%

+o- cost(Mutu!( fund e*'enses !re $ften n$ m$re th!n 1% 'ercent $f "$ur in+estment%

E*'enses f$r Inde* Funds !re (ess th!n th!t/ bec!use inde* funds !re n$t

!cti+e(" m!n!#ed% Inste!d/ the" !ut$m!tic!((" bu" st$c) in c$m'!nies th!t !re

(isted $n ! s'ecific inde*

Transparency


18/69

.le/ibility

Ta/ benefits


19/69

%&0 Dra-bac1s of mutual funds

2o 3uarantees($ in+estment is ris) free% If the entire st$c) m!r)et dec(ines

in +!(ue/ the +!(ue $f mutu!( fund sh!res i(( #$ d$n !s e((/ n$ m!tter h$

b!(!nced the '$rtf$(i$% In+est$rs enc$unter feer ris)s hen the" in+est in

mutu!( funds th!n hen the" bu" !nd se(( st$c)s $n their $n% D$e+er/

!n"$ne h$ in+ests thr$u#h ! mutu!( fund runs the ris) $f ($sin# m$ne"%

.ees and commissions( A(( funds ch!r#e !dministr!ti+e fees t$ c$+er their

d!">t$>d!" e*'enses% S$me funds !(s$ ch!r#e s!(es c$mmissi$ns $r K($!dsK t$

c$m'ens!te br$)ers/ fin!nci!( c$nsu(t!nts/ $r fin!nci!( '(!nners% E+en if "$u

d$nt use ! br$)er $r $ther fin!nci!( !d+iser/ "$u i(( '!" ! s!(es c$mmissi$n if

"$u bu" sh!res in ! 3$!d Fund%

Ta/es( 4urin# ! t"'ic!( "e!r/ m$st !cti+e(" m!n!#ed mutu!( funds se((

!n"here fr$m 20 t$ Q0 'ercent $f the securities in their '$rtf$(i$s% If "$ur

fund m!)es ! 'r$fit $n its s!(es/ "$u i(( '!" t!*es $n the inc$me "$u recei+e/

e+en if "$u rein+est the m$ne" "$u m!de%

Management ris1(&hen "$u in+est in ! mutu!( fund/ "$u de'end $n the

funds m!n!#er t$ m!)e the ri#ht decisi$ns re#!rdin# the funds '$rtf$(i$% If the

m!n!#er d$es n$t 'erf$rm !s e(( !s "$u h!d h$'ed/ "$u mi#ht n$t m!)e !s

much m$ne" $n "$ur in+estment !s "$u e*'ected% f c$urse/ if "$u in+est inInde* Funds/ "$u f$re#$ m!n!#ement ris)/ bec!use these funds d$ n$t em'($"

m!n!#ers%


20/69

%&4 Major mutual fund companies

A7 AMR Mutu!( Fund

AI5 5($b!( In+estment 5r$u'

Mutu!( Fund

7enchm!r) Mutu!( Fund

7ir(! Mutu!( Fund

77 Mutu!( Fund

C!n!r! R$bec$ Mutu!( Fund

47S Ch$(! Mutu!( Fund

4eutsche Mutu!( Fund

4SP Merri(( 3"nch Mutu!( Fund

Esc$rts Mutu!( Fund

Fide(it" Mutu!( Fund

Fr!n)(in Tem'(et$n In+estments

D4FC Mutu!( Fund

DS7C Mutu!( Fund

ICICI Prudenti!( Mutu!( Fund

I5 Mutu!( Fund

?M Fin!nci!( Mutu!( Fund

?PM$r#!n Mutu!( Fund

$t!) M!hindr! Mutu!( Fund

3IC Mutu!( Fund

3$tus Indi! Mutu!( Fund

M$r#!n St!n(e" Mutu!( Fund

PRICIPA3 Mutu!( Fund

u!ntum Mutu!( Fund

Re(i!nce Mutu!( Fund

S!h!r! Mutu!( Fund

S7I Mutu!( Fund

St!nd!rd Ch!rtered Mutu!(

Fund

Sund!r!m Mutu!( Fund

T!t! Mutu!( Fund

T!urus Mutu!( Fund

6TI Mutu!( Fund


21/69

). HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutu!( fund industr" in Indi! st!rted in 1@J ith the f$rm!ti$n $f 6nit Trust

$f Indi!/ !t the initi!ti+e $f the 5$+ernment $f Indi! !nd Reser+e 7!n) !nd st!rted its

$'er!ti$ns in 1@L ith the issue $f units under the scheme 6S>L% The hist$r" $f

mutu!( funds in Indi! c!n be br$!d(" di+ided int$ f$ur distinct 'h!ses: >

First Ph!se> 1@L>NQ

6nit Trust $f Indi! 86TI9 !s est!b(ished $n 1@J b" !n Act $f P!r(i!ment% It

!s set u' b" the Reser+e 7!n) $f Indi! !nd functi$ned under the Re#u(!t$r" !nd

!dministr!ti+e c$ntr$( $f the Reser+e 7!n) $f Indi!% In 1@QN 6TI !s de>(in)ed fr$m

the R7I !nd the Industri!( 4e+e($'ment 7!n) $f Indi! 8I47I9 t$$) $+er the

re#u(!t$r" !nd !dministr!ti+e c$ntr$( in '(!ce $f R7I The first scheme (!unched b"

6TI !s 6nit Scheme 1@L% At the end $f 1@NN 6TI h!d Rs%/Q00 cr$res $f !ssets

under m!n!#ement%

Sec$nd Ph!se> 1@NQ>1@@J 8Entr" $f Pub(ic Sect$r Funds9

1@NQ m!r)ed the entr" $f n$n> 6TI/ 'ub(ic sect$r mutu!( funds set u' b"

'ub(ic sect$r b!n)s !nd 3ife Insur!nce C$r'$r!ti$n $f Indi! 83IC9 !nd 5ener!(

Insur!nce C$r'$r!ti$n $f Indi! 85IC9% S7I Mutu!( Fund !s the first n$n> 6TIMutu!( Fund est!b(ished in ?une 1@NQ f$(($ed b" C!nb!n) Mutu!( Fund 84ec NQ9/

Pun,!b !ti$n!( 7!n) Mutu!( Fund 8Au# N@9/ Indi!n 7!n) Mutu!( Fund 8$+ N@9/

7!n) $f Indi! 8?un @09/ 7!n) $f 7!r$d! Mutu!( Fund 8ct @29% 3IC est!b(ished its

mutu!( fund in ?une 1@N@ hi(e 5IC h!d set u' its mutu!( fund in 4ecember 1@@0% At

the end $f 1@@J/ the mutu!( fund industr" h!d !ssets under m!n!#ement $f Rs%LQ/00L

cr$res%

Third Ph!se> 1@@J>200J 8Entr" $f Pri+!te Sect$r Funds9

&ith the entr" $f 'ri+!te sect$r funds in 1@@J/ ! ne er! st!rted in the Indi!nmutu!( fund industr"/ #i+in# the Indi!n in+est$rs ! ider ch$ice $f fund f!mi(ies%

A(s$/ 1@@J !s the "e!r in hich the first Mutu!( Fund Re#u(!ti$ns c!me int$ bein#/

under hich !(( mutu!( funds/ e*ce't 3TI ere t$ be re#istered !nd #$+erned% The

ersthi(e $th!ri Pi$neer 8n$ mer#ed ith Fr!n)(in Tem'(et$n9 !s the first 'ri+!te

sect$r mutu!( fund re#istered in ?u(" 1@@J


22/69

F$urth Ph!se > since Febru!r" 200J

In Febru!r" 200J/ f$(($in# the re'e!( $f the 6nit Trust $f Indi! Act 1@J 6TI

!s bifurc!ted int$ t$ se'!r!te entities% ne is the S'ecified 6ndert!)in# $f the 6nitTrust $f Indi! ith !ssets under m!n!#ement $f Rs%2@/NJ cr$res !s !t the end $f

?!nu!r" 200J/ re'resentin# br$!d("%/ the !ssets $f 6S L scheme/ !ssured return !nd

cert!in $ther schemes% The S'ecified 6ndert!)in# $f 6nit Trust $f Indi!/ functi$nin#

under !n !dministr!t$r !nd under the ru(es fr!med b" 5$+ernment $f Indi! !nd d$es

n$t c$me under the 'ur+ie $f the Mutu!( Fund Re#u(!ti$ns%

Current(" Pub(ic Sect$r 7!n)s (i)e S7I/ C!n!r! 7!n)/ 7!n) $f Indi!/ instituti$ns

(i)e I47I/ 5IC/ 3IC F$rei#n Instituti$ns (i)e A((i!nce/ M$r#!n St!n(e"/ Tem'(et$n

!nd Pri+!te fin!nci!( c$m'!nies (i)e D4FC/ Prudenti!( ICICI/ 4SP Merri(( 3"nch/

Sund!r!m/ $t!) M!hindr! etc% h!+e f($!ted their $n mutu!( funds%


23/69


24/69

,. RE-ULATIONS OF MUTUAL FUNDS IN INDIA

In Indi! SE7I !nd R7I !ct !s re#u(!t$rs $f mutu!( fund%

SE7I 8Mutu!( Fund9 RE563ATIS/1@@

The 'r$+isi$ns $f this re#u(!ti$ns 'ert!inin# t$ AMC !re:

A(( the schemes t$ be (!unched b" the AMC need t$ be !''r$+ed b" the

trustees !nd c$'ies $f $ffer d$cument $f such schemes !re t$ be fi(ed ith

SE7I%

The $ffer d$cument sh!(( c$nt!in !deu!te disc($sure t$ en!b(es the in+est$r t$

m!)e inf$rmed decisi$n%

Ad+ertisement in res'ect $f schemes sh$u(d be in c$nf$rmit" ith the SE7I

'rescribed !d+ertisement c$de/ !nd disc($ses the meth$d !nd 'eri$dicit" $f the+!(u!ti$n $f in+estment s!(es !nd re'urch!se in !dditi$n t$ the in+estment

$b,ecti+es%

The (istin# $f c($se ended schemes is m!nd!t$r" !nd e+er" c($se ended scheme

sh$u(d be (isted $n ! rec$#ni-ed st$c) e*ch!n#e ithin si* m$nths fr$m the

c($sure $f subscri'ti$n% D$e+er/ (istin# is n$t m!nd!t$r" in c!se the scheme

'r$+ides f$r m$nth(" inc$me $r c!ters t$ the s'eci!( c(!sses $f 'ers$ns (i)e

seni$r citi-en/ $men/ chi(dren/ !nd 'h"sic!((" h!ndic!''ed% If the scheme

disc($ses det!i( $f re'urch!se in the $ffer d$cument: if the schemes $'ens f$rre'urch!se ith in si* m$nths $f c($sure $f subscri'ti$n%

6nits $f ! c($se ended scheme c!n be $'ened f$r s!(e $r redem'ti$n !t !'redetermined fi*ed inter+!( if the minimum !nd m!*imum !m$unt $f s!(e/

redem'ti$n/ !nd 'eri$dicit" is disc($sed in the $ffer d$cument%

6nits $f ! c($se ended scheme c!n !(s$ be c$n+erted int$ !n $'en ended

scheme ith the c$nsent $f m!,$rit" $f the unit h$(der !nd disc($sure is m!de

in the $ffer d$cument !b$ut the $'ti$n !nd 'eri$d $f c$n+ersi$n%

6nits $f ! c($se ended scheme m!" be r$((ed $+er b" '!ssin# res$(uti$n b" !

m!,$rit" $f the sh!reh$(ders%

$ scheme $ther th!n unit (in)ed schemes c!n be $'ened f$r m$re th!n L

d!"s%

The AMC must s'ecif" in the $ffer d$cument !b$ut the minimum subscri'ti$n!nd the e*tent $f $+er subscri'ti$n/ hich is intended t$ be ret!ined% In the

c!se $f $+er subscri'ti$n/ !(( !''(ic!nts !''("in# u' t$ 00 units must be #i+en

fu(( !(($tment sub,ected t$ $+er subscri'ti$n%

The AMC must refund the !''(ic!ti$n m$ne" if minimum subscri'ti$n is n$t

recei+ed !nd !(s$ the e*cess $+er subscri'ti$n ith in the si* ee)s $f c($sure

$f subscri'ti$n%


25/69

5u!r!nteed returns c!n be 'r$+ided in ! scheme if such returns !re fu(("

#u!r!nteed b" the AMC $r s'$ns$r% In such c!ses/ there sh$u(d be ! st!tement

indic!tin# the n!me $f the 'ers$n/ !nd the m!nner in hich the #u!r!ntee is t$be m!de must be st!ted in the $ffer d$cument%

A c($se ended scheme sh!(( be $und u' $n redem'ti$n d!te/ un(ess it is r$((ed

$+er/ $r if QH $f the unit h$(ders $f ! scheme '!ss ! res$(uti$n $f indin# u'

$f the scheme : if the trustee $n h!''enin# $f !n" e+ent/ reuires the scheme t$

be $und u': $r if SE7I/ s$ directed in the interest $f in+est$rs%


26/69

. TYPES OF MUTUAL FUND SCHEME

Mutu!( fund schemes m!" be c(!ssified $n the b!sis $f its structure !nd itsin+estment $b,ecti+e%

BY ST*U#TU*E

%&Open5end .unds

An $'en>end fund is $ne th!t is !+!i(!b(e f$r subscri'ti$n !(( thr$u#h the "e!r% These

d$ n$t h!+e ! fi*ed m!turit"% In+est$rs c!n c$n+enient(" bu" !nd se(( units !t etAsset !(ue 8KAK9 re(!ted 'rices% The )e" fe!ture $f $'en>end schemes is (iuidit"%

6& #losed5end .unds


27/69

A c($sed>end fund h!s ! sti'u(!ted m!turit" 'eri$d hich #ener!((" r!n#in# fr$m J t$ 1 "e!rs% The

fund is $'en f$r subscri'ti$n $n(" durin# ! s'ecified 'eri$d% In+est$rs c!n in+est in the scheme !t the

time $f the initi!( 'ub(ic issue !nd there!fter the" c!n bu" $r se(( the units $f the scheme $n the st$c)

e*ch!n#es here the" !re (isted% In $rder t$ 'r$+ide !n e*it r$ute t$ the in+est$rs/ s$me c($se>ended

funds #i+e !n $'ti$n $f se((in# b!c) the units t$ the Mutu!( Fund thr$u#h 'eri$dic re'urch!se !t A

re(!ted 'rices% SE7I Re#u(!ti$ns sti'u(!te th!t !t (e!st $ne $f the t$ e*it r$utes is 'r$+ided t$ the

in+est$r%

7& Interval .unds

Inter+!( funds c$mbine the fe!tures $f $'en>ended !nd c($se>ended schemes% The" !re

$'en f$r s!(e $r redem'ti$n durin# 're>determined inter+!(s !t A re(!ted 'rices%

BYI28ESTME2TOB9E#TI8E

%& 3ro-t .unds

The !im $f #r$th funds is t$ 'r$+ide c!'it!( !''reci!ti$n $+er the medium t$ ($n#

term% Such schemes n$rm!((" in+est ! m!,$rit" $f their c$r'us in euities% It h!s been

'r$+ed th!t returns fr$m st$c)s/ h!+e $ut'erf$rmed m$st $ther )ind $f in+estments

he(d $+er the ($n# term% 5r$th schemes !re ide!( f$r in+est$rs h!+in# ! ($n#>term

$ut($$) see)in# #r$th $+er ! 'eri$d $f time%

6& Income .unds

The !im $f inc$me funds is t$ 'r$+ide re#u(!r !nd ste!d" inc$me t$ in+est$rs% Such

schemes #ener!((" in+est in fi*ed inc$me securities such !s b$nds/ c$r'$r!te

debentures !nd 5$+ernment securities% Inc$me Funds !re ide!( f$r c!'it!( st!bi(it"

!nd re#u(!r inc$me%

7& Balanced .unds

The !im $f b!(!nced funds is t$ 'r$+ide b$th #r$th !nd re#u(!r inc$me% Such

schemes 'eri$dic!((" distribute ! '!rt $f their e!rnin# !nd in+est b$th in euities !nd

fi*ed inc$me securities in the 'r$'$rti$n indic!ted in their $ffer d$cuments% In ! risin#

st$c) m!r)et/ the A $f these schemes m!" n$t n$rm!((" )ee' '!ce/ $r f!(( eu!(("

hen the m!r)et f!((s% These !re ide!( f$r in+est$rs ($$)in# f$r ! c$mbin!ti$n $f

inc$me !nd m$der!te #r$th%


28/69

'& Money Mar1et .unds

The !im $f m$ne" m!r)et funds is t$ 'r$+ide e!s" (iuidit"/ 'reser+!ti$n $f c!'it!(

!nd m$der!te inc$me% These schemes #ener!((" in+est in s!fer sh$rt>term instruments

such !s tre!sur" bi((s/ certific!tes $f de'$sit/ c$mmerci!( '!'er !nd inter>b!n) c!((

m$ne"% Returns $n these schemes m!" f(uctu!te de'endin# u'$n the interest r!tes

're+!i(in# in the m!r)et% These !re ide!( f$r C$r'$r!te !nd indi+idu!( in+est$rs !s !

me!ns t$ '!r) their sur'(us funds f$r sh$rt 'eri$ds%

OT:E* S#:EMES

%& Ta/ Saving Scemes

These schemes $ffer t!* reb!tes t$ the in+est$rs under s'ecific 'r$+isi$ns $f the

Indi!n Inc$me T!* (!s !s the 5$+ernment $ffers t!* incenti+es f$r in+estment in

s'ecified !+enues% In+estments m!de in Euit" 3in)ed S!+in#s Schemes 8E3SS9 !nd

Pensi$n Schemes !re !(($ed !s deducti$n uOs NN $f the Inc$me T!* Act/ 1@1% The

Act !(s$ 'r$+ides $''$rtunities t$ in+est$rs t$ s!+e c!'it!( #!ins uOs LEA !nd LE7b" in+estin# in Mutu!( Funds%

6& Special Scemes

Inde/ Scemes

Inde* Funds !ttem't t$ re'(ic!te the 'erf$rm!nce $f ! '!rticu(!r inde* such !s

the 7SE Sense* $r the SE 0

Sectoral Scemes

Sect$r!( Funds !re th$se th!t in+est e*c(usi+e(" in ! s'ecified sect$r% This

c$u(d be !n industr" $r ! #r$u' $f industries $r +!ri$us se#ments such !s A

5r$u' sh!res $r initi!( 'ub(ic $fferin#s%


29/69

There !re s$me $ther t"'es !(s$ hich !re !s f$(($/


30/69

Type of Mutual .und Objective Scope of Investments

Money mar1et .unds Inc$me $riented/ (iuidit"

!nd s!fet" f$r sh$rt term

Tre!sur" bi((s/ certific!te

$f de'$sit / c$mmerci!(

'!'ers = inter>b!n) c!((

m$ne" m!r)et

3ilt .unds( Inc$me $riented 5$+ernment '!'er> d!ted

securities

Debt .unds !or Income

.unds

Re#u(!r Inc$me $riented 4ebt instruments issued

b" #$+ernment !nd

'ri+!te c$m'!nies/ b!n)s

!nd fin!nci!( instituti$ns

Diversified Debt .unds Re#u(!r Inc$me riented 4ebt securities/ issued b"

entities !cr$ss !((

industries !nd the sect$rs

.ocused Debt .unds Re#u(!r inc$me $riented 4ebt securities/ issued b"

entities !cr$ss !((

industries !nd the sect$rs

:ig Yield Debt .unds Re#u(!r Inc$me riented debt instruments th!t !re

c$nsidered ;be($

in+estment #r!des


31/69

Offsore funds C!'it!( A''reci!ti$n In+est in euities in $ne

$r m$re f$rei#n c$untries

Small5#ap E,uity

.unds

C!'it!( A''reci!ti$n In+est in sh!res $f

c$m'!nies ith re(!ti+e("

($er m!r)etc!'it!(i-!ti$n

Diversified E,uity

.unds

C!'it!( A''reci!ti$n In+est $n(" in euities/

e*ce't f$r ! +er" sm!((

'$rti$n in (iuid m$ne"

m!r)et securities

E,uity Inde/ .unds 5r$th In+ests in sh!res th!t

c$nstitute the inde*

8alue .unds 5r$th sh!res th!t !re se((in# !t !

($ 'rice>e!rnin#s r!ti$s/

($ m!r)et t$ b$$) +!(ue

r!ti$s !nd !re

under+!(ued b" $ther

"!rdstic)s

E,uity Income .und( 5r$th !nd inc$me In+est m!in(" in sh!res $f

c$m'!nies ith hi#h

di+idends "ie(ds

Balanced .unds( Inc$me/ M$der!te C!'it!(

A''reci!ti$n And

Preser+!ti$n f C!'it!(

4ebt instruments/

c$n+ertib(e securities/ !nd

'reference !nd euit"

sh!res

3ro-t5and5Income

.unds(

5r$th !nd Inc$me St$c)s $f c$m'!nies ith

#$$d di+idend '!"in#

rec$rds !nd th$se ith

'$tenti!( f$r c!'it!(

!''reci!ti$n

/. HOW TO CALCULATE NAV


32/69


33/69

A8M!r)et +!(ue $f

In+estments O $% $f units9 Rs% Q/00/00/000

>>>>>>>>>>>>>>>>>>>>>>>

/00/00/000

Rs%1

Thus/ e!ch unit $f Rs% 10 is $rth Rs% 1%

0. TA BENEFITS

The t!* benefits f$r in+estin# in mutu!( funds !re !s f$(($s:

Tent" 'ercent $f the !m$unt in+ested in s'ecified mutu!( funds 8c!((ed euit"

(in)ed s!+in#s schemes $r E3SS !nd ($$se(" referred t$ !s Kt!* s!+in#s schemesK9 is

deductib(e fr$m the t!* '!"!b(e b" the in+est$r in ! '!rticu(!r "e!r sub,ect t$ !

m!*imum $f Rs2000 'er in+est$r% This benefit is !+!i(!b(e under secti$n NN $f the I%T%

Act% In+estment $f the entire 'r$ceeds $bt!ined fr$m the s!(e $f c!'it!( !ssets f$r !

'eri$d $f three "e!rs $r in+estment $f $n(" the 'r$fits f$r ! 'eri$d $f Q "e!rs/ e*em'ts

the !sset h$(der fr$m '!"in# c!'it!( #!ins t!*% This benefit is !+!i(!b(e under secti$n

LEA !nd LE7 $f the I%T% Act/ 'r$+ided the c!'it!( !sset h!s been s$(d 'ri$r t$ A'ri(

1/ 2000 !nd the !m$unt is in+ested bef$re Se'tember J0/ 2000%The mutu!( fund is

c$m'(ete(" e*em't fr$m '!"in# t!*es $n di+idendsOinterestOc!'it!( #!ins e!rned b" it%&hi(e this is ! benefit t$ the fund/ it is the indirect benefit $f unit h$(ders !s e((% This

benefit is !+!i(!b(e t$ the mutu!( fund under secti$n 10 82J49 $f the I%T% Act%

A mutu!( fund h!s t$ '!" ! ithh$(din# t!* $f 10H $n the di+idends

distributed b" it under the re+ised 'r$+isi$ns $f the I%T% Act 'uttin# them $n '!r ith

c$r'$r!te% D$e+er/ if ! mutu!( fund h!s in+ested m$re th!n 0H $f its !ssets int$

euit" sh!res/ then it is e*em't fr$m '!"in# !n" t!* $n the di+idend distributed b" it/

f$r ! 'eri$d $f three "e!rs/ b" !n $+erridin# 'r$+isi$n% This benefit is !+!i(!b(e under

secti$n 11R $f the I%T% Act% The in+est$r in ! mutu!( fund is e*em't fr$m '!"in# !n"

t!* $n the di+idend recei+ed b" him fr$m the mutu!( fund/ irres'ecti+e $f the t"'e $f

the mutu!( fund% This benefit is !+!i(!b(e under secti$n 108JJ9 $f the I%T% Act%

The units $f mutu!( funds !re tre!ted !s c!'it!( !ssets !nd the in+est$r h!s t$

'!" c!'it!( #!ins t!* $n the s!(e 'r$ceeds $f mutu!( fund units s$(d b" him% F$r

in+estments he(d f$r (ess th!n $ne "e!r the t!* is eu!( t$ J0H $f the c!'it!( #!in% F$r

in+estments he(d f$r m$re th!n $ne "e!r/ the t!* is eu!( t$ 10H $f the c!'it!( #!ins%


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Liquii!"

R#$%&'$# *#!u*'

S$+#!" &+ Fu'%

Investor E/pectation :ierarcy

Figure 2.1 Investor Expectation Hierarchy


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3. WHEN YOU BUY A MUTUAL FUND UNIT WHAT EACTLY

DO YOU BUY"

&hen "$u bu" ! mutu!( fund unit "$u !re bu"in# ! '!rt $f the euit" $r debt

'$rtf$(i$ $ned b" the mutu!( fund% In $ther $rds "$u !re bu"in# ! '!rt $nershi'

$f +!ri$us c$m'!nies !nd hen "$u bu" ! debt mutu!( fund "$u !re bu"in# ! '!rt

ri#ht t$ tit(e t$ debt securities% In $ther $rds "$u ste' int$ the sh$es $f $ners $r(enders indirect("% The +!(ue $f "$ur '!rt $f the !ssets i(( f(uctu!te in (ine ith the

+!(ue $f the indi+idu!( c$m'$nents $f the '$rtf$(i$ $n the st$c) $r the b$nd m!r)et%

In effect/ "$u !re bu"in# ! bund(e $f ser+ices !s f$(($s:

In+estment m!n!#ement hich me!ns in+estment !d+ice !nd e*ecuti$n r$((ed int$

$ne

4i+ersific!ti$n $f in+estment ris) bu"in# ! (!r#er b!s)et $f securities reduces the

$+er!(( ris) $f in+estment

Asset cust$d" hich me!ns re#istr!ti$n !nd 'h"sic!( cust$d" $f !ssets/ ensurin#

c$r'$r!te !cti$ns (i)e '!"ment $f di+idend !nd interest/

b$nus/ ri#hts entit(ements etc

P$rtf$(i$ inf$rm!ti$n hich me!ns c!(cu(!tin# !nd dissemin!tin# $nershi'

inf$rm!ti$n (i)e A/ !ssets $ned/ etc $n ! 'eri$dic

b!sis

3iuidit" Abi(it" t$ s'eedi(" disin+est !ssets !nd $bt!in disin+estment 'r$ceeds

The mutu!( fund e*'($its ec$n$mies $f sc!(e in rese!rch/ e*ecuti$n !nd

tr!ns!cti$n 'r$cessin# t$ 'r$+ide the first three ser+ices !t ($ c$sts% The '$$(in# $f

m$ne" m!)es it '$ssib(e t$ $ffer the f$urth ser+ice 8since !(( in+est$rs !re un(i)e(" t$

e*it !t the s!me time9% In !dditi$n/ $ne !(s$ #ets benefits (i)e s'eci!( t!* c$ncessi$ns%


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&h!t "$u d$ n$t #et is ! #u!r!nteed !" $f m!)in# m$ne"% There is n$ !" th!t !

mutu!( fund c!n insu(!te the in+est$r fr$m the +!#!ries $f the m!r)et '(!ce !nd ensure

th!t he !(!"s m!)es m$ne"% In !dditi$n/ $ne is im'(icit(" t!)in# the ris) $f b!d

ser+ice u!(it" in !n" $f the f$ur e(ements !b$+e inc(udin# in+estment m!n!#ement%

4. HOW TO INVESTMENT IN A MUTUAL FUND"

nce the in+est$r decides his in+estment needs/ he m!" in+est in mutu!( funds in

t$ !"s:

1 1%In+estin# in e*istin# funds

2 2%In+estin# in ne fund $ffers

'en>ended schemes $u(d !+!i(!b(e f$r in+estment $n !n" $r)in# d!" fr$m

the fund h$use% E*ch!n#e tr!ded funds !(s$ $u(d be !+!i(!b(e f$r in+estment%

An in+est$r c!n in+est in ! fund either direct(" fr$m ! fund h$use $r thr$u#h !nintermedi!r"% Mutu!( fund intermedi!r" is !(s$ )n$n !s mutu!( fund br$)er% ne c!n

in+est in m!n" funds thr$u#h ! mutu!( fund br$)er% If the in+est$r ch$$ses t$ in+est

direct("/ he h!s t$ !''r$!ch the fund h$uses himse(f%

e funds !re $ffered b" the fund h$use !nd i(( be $'en f$r subscri'ti$n/simi(!r t$ !n initi!( 'ub(ic $ffer $f ! sh!re% 7ut these t$ !re n$t the s!me% e funds/

!fter initi!( 'eri$d/ m!" be instituted !s $'en ended $r c($se ended funds%&h$ !re e(i#ib(e t$ in+est in mutu!( fundsG

F$(($in# 'ers$nsOentities !re e(i#ib(e t$ in+est in mutu!( funds in Indi!:

Resident Indi+idu!(s/ inc(udin# min$rs !nd h$usei+es

Dindu 6ndi+ided F!mi(ies

P!rtnershi' firms

C$m'!nies/ 7$dies C$r'$r!te/ Pub(ic Sect$r 6ndert!)in#s/

Ass$ci!ti$n $f Pers$ns $r b$dies $f indi+idu!(s !nd s$cieties

Re#istered under the S$cieties Re#istr!ti$n Act/ 1N0

Re(i#i$us !nd Ch!rit!b(e trusts

$nresident Indi!n 8RI9OPers$n $f Indi!n ri#in 8PI9

F$rei#n Instituti$n!( In+est$rs

Pr$+ident Funds/ Pensi$n Funds/ Su'er!nnu!ti$n Funds


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15. HOW TO READ A MUTUAL FUND FEE TABLE

There !re t$ b!sic t"'es $f c$sts !ss$ci!ted ith mutu!( funds% S$me funds

ch!r#e sh!reh$(der fees hen "$u 'urch!se $r redeem sh!res $f the fund/ i%e%/ s!(es

c$mmissi$ns% In !dditi$n/ !(( funds h!+e $'er!tin# e*'enses/ hich re'resent the

c$sts $f runnin# the fund% A mutu!( fund.s fees !nd e*'enses !re reuired b" (! t$ be

c(e!r(" disc($sed t$ in+est$rs in ! fee t!b(e !t the fr$nt $f the fund.s 'r$s'ectus%

Mutu!( funds c$m'ete +i#$r$us(" t$ )ee' c$sts ($/ since the 'erf$rm!nce fi#ures

re'$rted b" the fund /!nd the t$t!( +!(ue $f "$ur mutu!( fund !cc$unt/ !re 'r$+ided

!fter !(( fees !nd e*'enses h!+e been deducted% F$r e*!m'(e/ the fund returns

'ub(ished in nes'!'ers/ !d+ertisements/ !nd $ffici!( fund d$cuments !(re!d" !re;net< $f !n" fees the fund ch!r#es "$u% Thus/ !n" time "$u c$nsider ! fund.s '!st

'erf$rm!nce/ "$ur decisi$n ref(ects the im'!ct fees h!+e h!d $n the fund in the '!st%

P!rticu(!r(" im'$rt!nt t$ "$ur !ssessment $f c$sts is the fund.s e*'ense r!ti$% The

!+!i(!bi(it" $f this fi#ure in !(( fund 'r$s'ectuses !(($s "$u t$ e!si(" c$m'!re h$

much m$re $r (ess $ne fund c$sts +ersus !n$ther!n im'$rt!nt '!rt $f m!)in# !n

inf$rmed in+estment decisi$n%


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11. DOCUMENTS RE6UIRED FOR INVESTIN- IN AMUTUAL FUND

An in+est$r h$ ishes t$ in+est in ! mutu!( fund sh$u(d '$ssess Perm!nent

Acc$unt umber 8PA9 !(($tted b" Inc$me T!* 4e'!rtment% If !n in+est$r ishes t$

in+est Rs%0000O> $r m$re !t ! time/ he sh$u(d !dditi$n!( c$m'(ete n$ Y$ur C(ient8YC9 reuirements% YC needs !n in+est$r t$ 'r$+ide identit" !nd !ddress 'r$$fs

!($n# ith PA t$ centr!( rec$rd )ee'in# instituti$n !nd #et YC re#istr!ti$n d$ne%

In !dditi$n t$ the !b$+e reuirements/ mutu!( fund in+estment c!n be d$ne $n(" if thein+est$r h$(ds ! b!n) !cc$unt% De c!n in+est thr$u#h ! cheue $r dem!nd dr!ft !nd

c!sh is n$t !cce't!b(e%


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1. MA8OR RI-HTS AS A UNIT HOLDER IN A MUTUALFUND

S$me im'$rt!nt ri#hts !re menti$ned be($:

6nit h$(ders h!+e ! 'r$'$rti$n!te ri#ht in the benefici!( $nershi' $f the !ssets

$f the scheme !nd t$ the di+idend dec(!red%

The" !re entit(ed t$ recei+e di+idend !rr!nts ithin L2 d!"s $f the d!te $f

dec(!r!ti$n $f the di+idend%

The" !re entit(ed t$ recei+e redem'ti$n cheues ithin 10 $r)in# d!"s fr$m

the d!te $f redem'ti$n

%

QH $f the unit h$(ders ith the 'ri$r !''r$+!( $f SE7I c!n termin!te AMC $f

the fund%

QH $f the unit h$(ders c!n '!ss ! res$(uti$n t$ ind>u' the scheme


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%0& ANALYSIS OF SURVEY

%& Do you invest regularly in Mutual .und10H $f inc$me 2H

M$re th!n 10H $f inc$me 11H

34

:4

114

& ; 4 &+ i'/&7#4 ;1


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'& :o- you ta1e investment decision& "re you satisfied -it te performance of you Mutual .unds #ompany and

sceme -ic it as providedend Funds


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7% C($sed>end Funds

C% Inter+!( Funds

A% 5r$th Funds

7% M$ne" M!r)et Funds

C% Inc$me Funds

4% 7!(!nced Funds

A% T!* S!+in# Schemes

7% S'eci!( Schemes

>& "re you satisfied -it te performance of you Mutual .unds #ompany and sceme

-ic it as providedend in+estment c$m'!nies 8mutu!( funds9/ c($sed>end funds d$

n$t redeem their sh!res%

#ommercial )aper

Sh$rt>term/ unsecured 'r$miss$r" n$tes ith m!turities n$ ($n#er th!n 2Q0 d!"s%

The" !re issued b" c$r'$r!ti$ns/ t$ fund sh$rt>term credit needs%

#ustodian

The b!n) $r trust c$m'!n" th!t m!int!ins ! mutu!( funds !ssets/ inc(udin# its

'$rtf$(i$ $f securities $r s$me rec$rd $f them% Pr$+ides s!fe)ee'in# $f securities but

h!s n$ r$(e in '$rtf$(i$ m!n!#ement%

Daily Dividend .und

This term !''(ies t$ funds th!t dec(!re their inc$me di+idends $n ! d!i(" b!sis !nd

rein+est $r distribute m$nth("%

Diversification

The '$(ic" $f s're!din# in+estments !m$n# ! r!n#e $f different securities t$ reduce

the ris)s inherent in in+estin#%

*upee5#ost "veraging

The techniue $f in+estin# ! fi*ed sum !t re#u(!r inter+!(s re#!rd(ess $f st$c) m!r)et

m$+ements% This reduces !+er!#e sh!re c$sts t$ the in+est$r/ h$ !cuires m$re

sh!res in 'eri$ds $f ($er securities 'rices !nd feer sh!res in 'eri$ds $f hi#h 'rices%In this !"/ in+estin# ris) is s're!d $+er time%

E/5Dividend Date

The d!te $n hich ! funds et Asset !(ue 8A9 i(( f!(( b" !n !m$unt eu!( t$ the

di+idend !ndO$r c!'it!( #!ins distributi$n 8!(th$u#h m!r)et m$+ements m!" !(ter the


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funds c($sin# A s$meh!t9% M$st 'ub(ic!ti$ns hich (ist c($sin# As '(!ce !n

KBK !fter ! fund. n!me $n its e*>di+idend d!te%

E/pense *atio

The r!ti$ $f t$t!( e*'enses t$ net !ssets $f the fund% E*'enses inc(ude m!n!#ementfees/ the c$st $f sh!reh$(der m!i(in#s !nd $ther !dministr!ti+e e*'enses% The r!ti$ is

(isted in ! funds 'r$s'ectus% E*'ense r!ti$s m!" be ! functi$n $f ! funds si-e r!ther

th!n $f its success in c$ntr$((in# e*'enses%

.iscal Year

An !cc$untin# 'eri$d c$nsistin# $f 12 c$nsecuti+e m$nths%

3ro-t .und

A mutu!( fund h$se 'rim!r" in+estment $b,ecti+e is ($n#>term #r$th $f c!'it!(% Itin+ests 'rinci'!((" in c$mm$n st$c)s ith si#nific!nt #r$th '$tenti!(%

Income .und

A mutu!( fund th!t 'rim!ri(" see)s current inc$me r!ther th!n #r$th $f c!'it!(% It

i(( tend t$ in+est in st$c)s !nd b$nds th!t n$rm!((" '!" hi#h di+idends !nd interest%

Inde/ .und

A mutu!( fund th!t see)s t$ mirr$r #ener!( st$c)>m!r)et 'erf$rm!nce b" m!tchin# its

'$rtf$(i$ t$ ! br$!d>b!sed inde*/ m$st $ften the S=P CB ift" inde*%

Investment Objective

The fin!nci!( #$!( 8($n#>term #r$th/ current inc$me/ etc%9 th!t !n in+est$r $r !

mutu!( fund 'ursues%

+oad

A s!(es ch!r#e $r c$mmissi$n !ssessed b" cert!in mutu!( funds 8K($!d funds/K9 t$

c$+er their se((in# c$sts% The c$mmissi$n is #ener!((" st!ted !s ! '$rti$n $f the funds

$fferin# 'rice/ usu!((" $n ! s(idin# sc!(e fr$m $ne t$ N%H%

+oad .und

A mutu!( fund th!t (e+ies ! s!(es ch!r#e u' t$ H/ hich is inc(uded in the $fferin#

'rice $f its sh!res/ !nd is s$(d b" ! br$)er $r s!(esm!n% A fr$nt>end ($!d is the fee


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ch!r#ed hen bu"in# int$ ! fund ! b!c)>end ($!d is the fee ch!r#ed hen #ettin# $ut

$f ! fund%

Management .ee

The !m$unt ! mutu!( fund '!"s t$ its in+estment !d+iser f$r ser+ices rendered/inc(udin# m!n!#ement $f the funds '$rtf$(i$% In #ener!(/ this fee r!n#es fr$m %H t$

1H $f the funds !sset +!(ue%

Money Mar1et .und

A mutu!( fund th!t !ims t$ '!" m$ne" m!r)et interest r!tes% This is !cc$m'(ished b"

in+estin# in s!fe/ hi#h(" (iuid securities/ inc(udin# b!n) certific!tes $f de'$sit/

c$mmerci!( '!'er/ #$+ernment securities !nd re'urch!se !#reements% M$ne" M!r)et

funds m!)e these hi#h interest securities !+!i(!b(e t$ the !+er!#e in+est$r see)in#

immedi!te inc$me !nd hi#h in+estment s!fet"%

Mutual .und

An $'en>end in+estment c$m'!n" th!t bu"s b!c) $r redeems its sh!res !t current net

!sset +!(ue% M$st mutu!( funds c$ntinu$us(" $ffer ne sh!res t$ in+est$rs%

2et "sset 8alue )er Sare

The current m!r)et $rth $f ! mutu!( fund sh!re% C!(cu(!ted d!i(" b" t!)in# the funds

t$t!( !ssets securities/ c!sh !nd !n" !ccrued e!rnin#s deductin# (i!bi(ities/ !nd

di+idin# the rem!inder b" the number $f sh!res $utst!ndin#%

2o5+oad .und

A c$mmissi$n>free mutu!( fund th!t se((s its sh!res !t net !sset +!(ue/ either direct("

t$ the 'ub(ic $r thr$u#h !n !ffi(i!ted distribut$r/ ith$ut the !dditi$n $f ! s!(es ch!r#e%

)rospectus

An $ffici!( d$cument th!t e!ch in+estment c$m'!n" must 'ub(ish/ describin# the

mutu!( fund !nd $fferin# its sh!res f$r s!(e% It c$nt!ins inf$rm!ti$n reuired b" theSecurities !nd E*ch!n#e C$mmissi$n%

*egional .und


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A mutu!( fund th!t c$ncentr!tes its in+estments ithin ! s'ecific #e$#r!'hic !re!/

usu!((" the funds ($c!( re#i$n% The $b,ecti+e is t$ t!)e !d+!nt!#e $f re#i$n!( #r$th

'$tenti!( bef$re the n!ti$n!( in+estment c$mmunit" d$es%

*einvestment )rivilegeA ser+ice th!t m$st mutu!( funds $ffer hereb" ! sh!reh$(ders inc$me di+idends !nd

c!'it!( #!ins distributi$ns !re !ut$m!tic!((" rein+ested in !dditi$n!( sh!res%

Sector .und

A fund th!t $'er!tes se+er!( s'eci!(i-ed industr" sect$r '$rtf$(i$s under $ne umbre((!%

Tr!nsfers beteen the +!ri$us '$rtf$(i$s c!n usu!((" be e*ecuted b" te(e'h$ne !t (itt(e

$r n$ c$st%

Sort SellingThe s!(e $f ! securit" hich is n$t $ned b" the se((er% The Ksh$rt se((erK b$rr$s

st$c) f$r de(i+er" t$ the bu"er/ !nd must e+entu!((" 'urch!se the securit" f$r return t$

the (ender%

Under-riter

The $r#!ni-!ti$n th!t !cts !s the distribut$r $f ! mutu!( funds sh!res t$ br$)erOde!(ers

!nd the 'ub(ic%

8ariable "nnuityA t"'e $f insur!nce c$ntr!ct th!t #u!r!ntees future '!"ments t$ the h$(der/ $r

!nnuit!nt/ usu!((" !t retirement% The !nnuit"s +!(ue +!ries ith th!t $f the under("in#

'$rtf$(i$ securities/ hich m!" inc(ude mutu!( fund sh!res% A(( m$nies he(d in the

!nnuit" !ccumu(!te t!*>deferred%

8oluntary )lan

A f(e*ib(e '(!n f$r c!'it!( !ccumu(!ti$n/ in+$(+in# n$ s'ecified time fr!me $r t$t!(

sum t$ be in+ested%

YieldInc$me $r return recei+ed fr$m !n in+estment/ usu!((" e*'ressed !s ! 'ercent!#e $f

m!r)et 'rice/ $+er ! desi#n!ted 'eri$d% F$r ! mutu!( fund/ "ie(d is interest $r di+idend

bef$re !n" #!in $r ($ss in the 'rice 'er sh!re%

Fero #oupon Bond


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7$nd s$(d !t ! fr!cti$n $f its f!ce +!(ue% It !''reci!tes #r!du!(("/ but n$ 'eri$dic

interest '!"ments !re m!de% E!rnin#s !ccumu(!te unti( m!turit"/ hen the b$nd is

redeem!b(e !t fu(( f!ce +!(ue% $nethe(ess/ interest is t!*!b(e !s it !ccrues%

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