Growth of Mutual Fund

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UTTAR PRADESH TECHNICAL

UNIVERSITY

AProject Report

On

Growth History of Mutual Fund in India

In partial fulfillment of the requirement of two years full timeMasters of Business Administration (MBA) Program(2009-2011)

Of

UNDER THE GUIDANCE OF: SUBMITTED BY:

Prof.


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CONTENTS

Certificate

Declaration

PrefaceAcknowledgement

Research Methodology

Executive Summary

1 Introduction to Mutual Fund

2 Investors portfolio

2.1. Fixed Return Options

2.2. Variable Return Options

3 Concept of mutual fundsBy structure

By investment objective

5 Different styles of Mutual Funds

6 Process of Mutual Fund

7 Net Asset Value (NAV)

8 Companies in India

14 Conclusion15 Bibliography


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DECLARATION

I, hereby, declare that the Project titled Growth History of

Mutual Fund in India is original to the best to my knowledge& has not published elsewhere. This is for the purpose of partialfulfillment of Ambalika Institute of Management & technologyrequirement for the award of the degree ofMaster of BusinessAdministration.

MOHD. ASHRAF HUSSAIN


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PREFACE

Investing money where the risk is less has always been risky todecide. The first factor, which an investor would like to seebefore investing, is risk factor.

Diversification of risk gave birth to the phenomenon calledMutual Fund. We are preparing comprehensive report of MutualFund industry in India. The basic idea of assignment of thisproject is to augment our knowledge about the industry in itstotality and appreciate the use of an integrated loom. It isconcerned the environmental issues and tribulations. This makesus more conscious about Industry and its pose and makes uscapable of analyzing Industrys position in the competitive

market. This may also enhance our logical abilities.

The Mutual Fund Industry is in the growing stage in India,which is evident from the flood of mutual funds offered by theBanks, Financial Institutes & Private Financial Companies.There are various aspects, which have been studied in detail inthe project and have been added to this project report.

Hope this report would help one understand the Mutual FundIndustry of India in detail.


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ACKNOWLEDGEMENT

I am indebted to a multitude of persons who have provided mewith valuable help during our endeavor of research. The projectwould not have seen the illumination of the day without theefforts of the many who managed the show in the wings. I amthankful to all people who have put in great efforts and gave meguidance for the successful completion of the project. I amindeed grateful to Prof.XXXXXXX for providing me theguidance, advice, constructive suggestions and faith in myability inspired to perform well who gave me a valuableopportunity of involving me in studying this project. Preparing aproject of this nature is an arduous task and I am fortunateenough to get support from a large number of people to whom

we shall always remain grateful.Finally, I thank all those who directly and indirectly contributedto this project.


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Mutual Fund

A Mutual Fund is a body corporate that pools the savings of a

number ofinvestors and invests the same in a variety of different financial instruments, or

securities. A mutual fund is a professionally managed type of collective investment scheme that

pools money from many investors and invests it in stocks, bonds,

short-term money market instruments, and/or other securities

before we understand mutual funds in detail, its very important

to know the area in which mutual funds works, the basic

understanding of stocks and bonds.

Stocks: Stocks represent shares of ownership in a publiccompany. Examples of public Companies include Reliance,ONGC and Infosys. Stocks are considered to be the mostCommon owned investment traded on the market.

Bonds: Bonds are basically the money which you lend to the

government or a company, and in return you can receive intereston your invested amount, which is back over predeterminedamounts of time. Bonds are considered to be the most commonlending investment traded on the market. There are many othertypes of investments other than stocks and bonds (includingannuities, real estate, and precious metals), but the majority ofmutual funds invest in stocks and/or bonds.


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What Is Mutual Fund?

A mutual fund is just the connecting bridge or a financialintermediary that allows a group of investors to pool theirmoney together with a predetermined investment objective. Amutual fund is a company that pools the money of manyinvestors to invest in a variety of different securities. Investmentmay be in stocks, bonds, debentures, money market orcombination of these. These securities are professionallymanaged on the behalf of investor, by the fund manager.

The mutual fund will have a fund manager who is responsiblefor investing the gathered Money into specific securities (stocksor bonds). When we invest in a mutual fund, you are buyingunits or portions of the mutual fund and thus on investingbecomes a shareholder or unit holder of the fund. Mutual fundsare considered as one of the best available investments as

compare to others they are very cost efficient and also easy toinvest in, thus by pooling money together in a mutual fund,investors can purchase stocks or bonds with much lower tradingcosts than if they tried to do it on their own.

But the biggest advantage to mutual funds is Diversification, byMinimizing Risk & Maximizing Returns. Thus a Mutual Fund is

the most suitable investment for the common man as it offers anOpportunity to invest in a diversified, professionally managedbasket of securities at a relatively low cost.


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History of Mutual Funds in India

And Role of SEBI in Mutual Funds Industry

Unit Trust of India was the first mutual fund set up in India inthe year 1963. In early 1990s, Government allowed public sectorbanks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI)Act was passed. The objectives of SEBI are to protect theinterest of investors in securities and to promote thedevelopment of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policiesand regulates the mutual funds to protect the interest of theinvestors. SEBI notified regulations for the mutual funds in

1993. Thereafter, mutual funds sponsored by private sectorentities were allowed to enter the capital market. The regulationswere fully revised in 1996 and have been amended thereafterfrom time to time. SEBI has also issued guidelines to the mutualfunds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or privatesector entities including those promoted by foreign entities are

governed by the same set of Regulations. There is no distinctionin regulatory requirements for these mutual funds and all aresubject to monitoring and inspections by SEBI. The risksassociated with the schemes launched by the mutual fundssponsored by these entities are of similar type.


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How is a Mutual Fund set up?

A mutual fund is set up in the form of a trust, which hasSponsor, Trustees, Asset Management Company (AMC) AndCustodian. The trust is established by a sponsor or more thanone sponsor who is like promoter of a company. The trustees ofthe mutual fund hold its property for the benefit of the unitholders. Asset Management Company (AMC) approved bySEBI manages the funds by making investments in various typesof securities. Custodian, who is registered with SEBI, holds the

securities of various schemes of the fund in its custody. Thetrustees are vested with the general power of superintendenceand direction over AMC. They monitor the performance andcompliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directorsof trustee company or board of trustees must be independent i.e.they should not be associated with the sponsors. Also, 50% ofthe directors of AMC must be independent. All mutual funds arerequired to be registered with SEBI before they launch anyscheme.

The flow chart below describes broadly the

working of a

mutual fund.


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Mutual Fund Basic Terminologies

Asset Management Companyis the fund house or thecompany that manages the money.

The Mutual fund is a trust registered under the Indian TrustAct. It is initiated by a Sponsor. A sponsor is a person who actsalone or with a corporate to establish a mutual fund. The sponsorthen appoints an AMC to manage the investment, marketing,accounting and other functions pertaining to the fund.

Trust or Trustee Company -They form mutual funds under

existing Trust or Companies Acts. Trust managed by theTrustees and Trustee Companies are managed by the Board ofDirectors.

Asset Management Company (AMC) - Undertakes theadministration & investment activities of the fund.

Custodian- She/he is an independent entity who is responsible

forsafekeeping the funds assets.

Registrars/Transfer Agents- They handle sales and redemptionrelated activities of the fund. They also maintain records of theshareholders and send the payment cheques to the investors.

Distributors-They are the funds distributors / underwriters to

handle the sales of units. The underwriters act as wholesaleselling units to the brokers who in turn sell to the retailinvestors.


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Flow from SEBI to INVESTOR


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Types of Mutual Fund Schemes

BY STRUCTURE

Open Ended SchemesAn open-end fund is one that is available for subscription allthrough the year. These do not have a fixed maturity. Investorscan conveniently buy and sell units at Net Asset Value ("NAV")

related prices. The key feature of open-end schemes is liquidity.

Close Ended SchemesA closed-end fund has a stipulated maturity period whichgenerally ranging from 3 to15 years. The fund is open forsubscription only during a specified period. Investors can investin the scheme at the time of the initial public issue and thereafter

they can buy or sell the units of the scheme on the stockexchanges where they are listed. In order to provide an exit routeto the investors, some close-ended funds give an option ofselling back the units to the Mutual Fund through periodicrepurchase at NAV related prices. SEBI Regulations stipulate

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

Interval SchemesInterval Schemes are that scheme, which combines the featuresof open-ended and Close-ended schemes. The units may betraded on the stock exchange or may be open for sale orredemption during pre-determined intervals at NAV related

prices.


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BY NATURE

Under this the mutual fund is categorized on the basis of

Investment Objective. By nature the mutual fund is categorizedas follow:

1. Equity fund:These funds invest a maximum part of their corpus into equitiesholdings. The structure of the fund may vary different fordifferent schemes and the fund managers outlook on different

stocks. The Equity Funds are sub-classified depending upontheir investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thusEquity funds rank high on the risk-return matrix.

2. Debt fund:The objective of these Funds is to invest in debt papers.Government authorities, private companies, banks and financialinstitutions are some of the major issuers of debt papers. Byinvesting in debt instruments, these funds ensure low risk andprovide stable income to the investors. Debt funds are further

classified as: Gilt Funds: Invest their corpus in securities issued by

Government, popularly known as Government of India debtpapers. These Funds carry zero Default risk but are

associated with Interest Rate risk.


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These schemes are safer as they invest in papers backed by

Government. Income Funds: Invest a major portion into various debt

instruments such as bonds, corporate debentures and

Government securities.

MIPs: Invests maximum of their total corpus in debtinstruments while they take minimum exposure in equities.It gets benefit of both equity and debt market. Thesescheme ranks slightly high on the risk-return matrix whencompared with other debt schemes.

SIPs: Systematic Investment Plan is a vehicle offered bymutual funds to help you save regularly. It is just like arecurring deposit with the post office or bank where you

put in a small amount every month.The difference here is that the difference here is that theamount is invested in a mutual fund. The minimum amountto be invested can be as small as Rs 100 and the frequencyof investment is usuallymonthly or quarterly.

Short Term Plans (STPs): Meant for investment horizonfor three to six months. These funds primarily invest inshort term papers like Certificate of Deposits (CDs) andCommercial Papers (CPs). Some portion of the corpus is

also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes,These funds provides easy liquidity and preservation ofcapital. These schemes invest in short-term instruments like


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Treasury Bills, inter-bank call money market, CPs andCDs. These funds are meant for short-term cashmanagement of corporate houses and are meant for aninvestment horizon of 1day to 3 months. These schemes

rank low on risk-return matrix and are considered to be thesafest amongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix ofboth equity and debt funds. They invest in both equities andfixed income securities, which are in line with pre-defined

investment objective of the scheme. These schemes aim toprovide investors with the best of both the worlds. Equity partprovides growth and the debt part provides stability in returns.


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Further the mutual funds can be broadly classified on

the basis of Investment parameter viz,

Each category of funds is backed by an investment philosophy,which is pre-defined in the objectives of the fund. The investorcan align his own investment needs with the funds objective andinvest accordingly.

Growth Schemes: Growth Schemes are also known asequity schemes. The aim of these schemes is to providecapital appreciation over medium to long term. Theseschemes normally invest a major part of their fund inequities and are willing to bear Short-term decline invalue for possible future appreciation.


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Income Schemes: Income Schemes are also known asdebt schemes. The aim of these schemes is to provideregular and steady income to investors. These schemesgenerally invest in fixed income securities such as bonds

and corporate debentures. Capital appreciation in suchschemes may be limited.

Balanced Schemes: Balanced Schemes aim to provideboth growth and income by periodically distributing apart of the income and capital gains they earn. Theseschemes invest in both shares and fixed incomesecurities, in the proportion indicated in their offerdocuments (normally 50:50).

Money Market Schemes: Money Market Schemes aimto provide easy liquidity, Preservation of capital andmoderate income. These schemes generally invest insafer, Short-term instruments, such as treasury bills,certificates of deposit, commercial paper and inter-bank

call money.


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OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer taxrebates to the investors under tax laws prescribed from timeto time. Under Sec.88 of the Income Tax Act, contributionsmade to any Equity Linked Savings Scheme (ELSS) areeligible for rebate.

Index Schemes: Index schemes attempt to replicate theperformance of a particular index such as the BSE Sensexor the NSE 50. The portfolio of these schemes will consistof only those stocks that constitute the index. Thepercentage of each stock to the total holding will beidentical to the stocks index weightage.

Sector Specific Schemes: These are the funds/schemeswhich invest in the securities of only those sectors orindustries as specified in the offer documents. e.g.Pharmaceuticals, Software, Fast Moving Consumer Goods(FMCG), Petroleum stocks,etc. The returns in these fundsare dependent on the performance of the respectiveSectors/industries.


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Types of Returns

There are three ways, where the total returns provided by mutualfunds can be enjoyed by investors:

Income is earned from dividends on stocks and interest onbonds. A fund pays out nearly all income it receives overthe year to fund owners in the form of a distribution.

If the fund sells securities that have increased in price; thefund has a capital gain. Most funds also pass on these gainsto investors in a distribution.

If fund holdings increase in price but are not sold by thefund manager, the fund's Shares increase in price. You canthen sell your mutual fund shares for a profit. Funds willalso usually give you a choice either to receive a check fordistributions or to reinvest the earnings and get more

shares.


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NET ASSET VALUE (NAV)

The net asset value of the fund is the cumulative market value of

the assets fund net of its liabilities. In other words, if the fund isdissolved or liquidated, by selling off all the assets in the fund,this is the amount that the shareholders would collectively own.This gives rise to the concept of net asset value per unit, whichis the value, represented by the ownership of one unit in thefund. It is calculated simply by dividing the net asset value ofthe fund by the number of units. However, most people referloosely to the NAV per unit as NAV, ignoring the "per unit".

We also abide by the same convention.

Calculation of NAV

The most important part of the calculation is the valuation of theassets owned by the fund. Once it is calculated, the NAV is

simply the net value of assets divided by the number of unitsoutstanding. The detailed methodology for the calculation of theasset value is given below.Asset value =Sum of market value of shares/debentures+ Liquidassets/cash held, if any+ Dividends/interest accruedAmount dueon unpaid assetExpenses accrued but not paid

Mathematically NAV is expressed as:

*NAV = Total of all assetsless liabilities (other than to unit holders)Total number of outstanding units

*Always expressed per scheme


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EXAMPLE

Mr. A has invested in a regular investment SIP of Rs.100 for 10months. Mr. A has also paid the broker post-dated cheques to be

encashed on the 10th of every month starting 10th April 2010.The unit price of NAV is as follows starting April 2010Rs.11.79, Rs.12.11, Rs.11.17, Rs.11.62, Rs. 13.59, Rs. 13.82,Rs.11.82, Rs.10.30, Rs.10.38, Rs.9.74 what are the no of unitsacquired by Mr. A every month and also find out the AverageUnit price at the end of 10th month?


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HOW TO INVEST IN MUTUAL FUNDS?

Step One- Identify your investment needs.

Your financial goals will vary, based on your age, lifestyle,financial independence, family commitments, level of incomeand expenses among many other factors. Therefore, the first stepis to assess your needs. Begin by asking yourself thesequestions:

What are my investment objectives and needs?

1.Probable Answers: I need regular income orneed to buy ahome or finance a wedding or educate my children or acombination of all these needs.

2.How much risk I am willing to take?Probable Answers: I can only take a minimum amount ofriskor I am willing to accept the fact that my investmentvalue may fluctuate or that there may be a short-term lossin order to achieve a long-term potential gain.

3.What are my cash flow requirements?Probable Answers: I need a regular cash flow

or

I need alump sum amount to meet a specific need after a certainperiod or I don't require a current cash flow but I want tobuild my assets for the future.


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By going through such an exercise, you will know what youwant out of your investment and can set the foundation for asound Mutual Fund investment strategy.

Step Two - Choose the right Mutual Fund.

Once you have a clear strategy in mind, you have to choosewhich Mutual Fund and scheme you want to invest in. The offerdocument of the scheme tells you its objectives and providessupplementary details like the track record of other schemesmanaged by the same Fund Manager. Some factors to evaluatebefore choosing a particular Mutual Fund are:

The track record of performance over the last few years inrelation to the appropriate yardstick and similar funds in thesame category.

How well the Mutual Fund is organized to provideefficient, prompt and personalized service.

Degree of transparency as reflected in frequency andquality of their communications.

Step Three- Select the ideal mix of Schemes.

Investing in just one Mutual Fund scheme may not meet all yourinvestment needs. You may consider investing in a combinationof schemes to achieve your specific goals.

The following tables could prove useful in selecting a

combination of schemes that satisfy your needs.


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AGGRESSIVE PLAN

Money Market Schemes 5 %Income Schemes 10-15%

Balanced Schemes 10-20 %Growth Schemes 60-70 %

MODERATE PLAN

Money Market Schemes 10 %Income Schemes 20 %

Balanced Schemes 40-50 %Growth Schemes 30-40 %

CONSERVATIVE PLAN

Money Market Schemes 10 %Income Schemes 50-60 %

Balanced Schemes 20-30 %Growth Schemes 10 %

Step Four - Invest regularly

For most of us, the approach that works best is to invest a fixedamount at specific intervals, say every month. By investing afixed sum every month, you buy fewer units when the price ishigher and more units when the price is low, thus bringing downyour average cost per unit. This is called rupee cost averagingand is a disciplined investment strategy followed by investors all

over the world. With many open-ended schemes offeringsystematic investment plans, this regular investing habit is madeeasy for you.


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Step Five- Keep your taxes in mind

If you are in a high tax bracket and have utilized fully theexemptions under section 80L of the Income Tax Act, investingin growth funds that do not pay dividends might be more taxefficient and improve your post-tax return.

If you are in a low tax bracket and have not utilized fully theexemptions available under Section 80L of the Income Tax Act,selecting funds paying regular income could be more taxefficient. Further, there are other benefits available forinvestment in Mutual Funds under the provisions of the

prevailing tax laws.

You may therefore, consult your tax advisor or CharteredAccountant for specific advice.

Step Six - Start early

It is desirable to start investing early and stick to a regularinvestment plan. If you start now, you will make more than ifyou wait and invest later. The power of compounding lets youearn income on income and your money multiplies at thecompounded rate of return.

Step Seven - The final step

All you need to do now is to get a touch with a Mutual Fund oryour agent/broker and start investing. Reap the rewards in the

years to come. Mutual Funds are suitable for every kind ofinvestor - whether starting a career or retiring, conservative orrisk-taking, growth-oriented or income seeking.


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How to choose a scheme for investment from a

number of schemes available?

As already mentioned, the investors must read the offer

document of the mutual fund scheme very carefully. They mayalso look into the past track record of performance of thescheme or other schemes of the same mutual fund. They mayalso compare the performance with other schemes havingsimilar investment objectives. Though past performance of ascheme is not an indicator of its future performance and goodperformance in the past may or may not be sustained in thefuture, this is one of the important factors for making investment

decision. In case of debt oriented schemes, apart from lookinginto past returns, the investors should also see the quality of debtinstruments which is reflected in their rating. A scheme withlower rate of return but having investments in better ratedinstruments may be safer. Similarly, in equities schemes also,investors may look for quality of portfolio. They may also seekadvice of experts.

PerformanceThe past performance of a fund is important in analyzing amutual fund. But, as learnt earlier past performance is noteverything. It just indicates the funds ability to clock

returns across market conditions. And, if the fund has awell-established track record, the likelihood of it

performing well in the future is higher than a fund whichhas not performed well.

Under the performance criteria, we must make a note of thefollowing:


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1.Comparisons:A funds performance in isolation does not indicate

anything. Hence, it becomes crucial to compare the fundwith its benchmark index and its peers, so as to deduce a

meaningful inference. Again, one must be careful whileselecting the peers for comparison. For instance, itdoesnt make sense comparing the performance of a mid-cap fund to that of a large cap. Remember: Dontcompare apples with oranges.

2.Time period:

Its very important that investors have a long term(atleast 3-5 years) horizon if they wish to invest in equityoriented funds. So, it becomes important for them toevaluate the long term performance of the funds.However this does not imply that the short termperformance should be ignored. Besides, it is equallyimportant to evaluate how a fund has performed overdifferent market cycles (especially during the downturn).

During a rally it is easy for a fund to deliver above-average returns; but the true measure of its performanceis when it posts higher returns than its benchmark andpeers during the downturn. Remember: Choose a fundlike you choose a spouse one that will stand by you insickness and in health.

3.Returns:Returns are obviously one of the important parametersthat one must look at while evaluating a fund. Butremember, although it is one of the most important, it isnot the only parameter. Many investors simply invest ina fund because it has given higher returns. In our


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opinion, such an approach for making investments isincomplete. In addition to the returns, investors must alsolook at the risk parameters, which explain how much riskthe fund has taken to clock higher returns.

4.Risk:

We have seen in our Definitions section and on our Pathto Knowledge, that risk is normally measured byStandard Deviation (SD). SD signifies the degree of riskthe fund has exposed its investors to. From an investors

perspective, evaluating a fund on risk parameters is

important because it will help to check whether thefunds risk profile is in line with their risk profile or not.For example, if two funds have delivered similar returns,then a prudent investor will invest in the fund which hastaken less risk i.e. the fund that has a lower SD.

5.Risk-adjusted return:This is normally measured by Sharpe Ratio. It signifies

how much return a fund has delivered vis--vis the risktaken. Higher the Sharpe Ratio, better is the funds

performance. From an investors perspective, it is

important because they should choose a fund which hasdelivered higher risk-adjusted returns. In fact, this ratiotells us whether the high returns of a fund are attributedto good investment decisions, or to higher risk.

6. Portfolio Concentration: Funds that have a highconcentration in particular stocks or sectors tend to bevery risky and volatile. Hence, investors should invest inthese funds only if they have a high risk appetite. Ideally,


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a well diversified fund should hold no more than 40% ofits assets in its top 10 stock holdings. Remember: Makesure your fund does not put all its eggs in one basket.

7. Portfolio Turnover: The portfolio turnover ratemeasures the frequency with which stocks are boughtand sold. Higher the turnover rate, higher the volatility.The fund might not be able to compensate the investorsadequately for the higher risk taken. Remember: Investin funds with a low turnover rate if you want lowervolatility.

Fund ManagementThe performance of a mutual fund scheme is largely linked tothe fund manager and his team. Hence, its important that the

team managing the fund should have considerable experiencein dealing with market ups and downs. As mentioned earlier,investors should avoid funds that owe their performance to astar fund manager. Simply because if the fund manager is

present today, he might quit tomorrow, and hence the fundwill be unable to deliver its star performance without its

star fund manager. Therefore, the focus should be on thefund houses that are strong in their systems and processes.Remember: Fund houses should be process-driven and not'star' fund manager driven.

CostsIf two funds are similar in most contexts, it might not beworth buying the high cost fund if it is only marginally better


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than the other. Simply put, there is no reason for an AMC toincur higher costs, other than its desire to have highermargins.

The two main costs incurred are:

1.Expense Ratio:

Annual expenses involved in running the mutual fundinclude administrative costs, management salary, overheadsetc. Expense Ratio is the percentage of assets that gotowards these expenses. Every time the fund managerchurns his portfolio, he pays a brokerage fee, which isultimately borne by investors in the form of an ExpenseRatio. Remember: Higher churning not only leads to higherrisk, but also higher cost to the investor.

2.Exit Load:

Due to SEBIs recent ban on entry loads, investors now

have only exit loads to worry about. An exit load is chargedto investors when they sell units of a mutual fund within aparticular tenure; most funds charge if the units are soldwithin a year from date of purchase. As exit load is afraction of the NAV, it eats into your investment value.Remember: Invest in a fund with a low expense ratio andstay invested in it for a longer duration.

Among the factors listed above, while few can be easilygauged by investors, there are others on which information isnot widely available in public domain. This makes analysis ofa fund difficult for investors and this is where the importanceof a mutual fund advisor comes into play.


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Are the companies having names like mutual benefit

the same as mutual funds schemes?

Investors should not assume some companies having the name"mutual benefit" as mutual funds. These companies do not comeunder the purview of SEBI. On the other hand, mutual funds canmobilize funds from the investors by launching schemes onlyafter getting registered with SEBI as mutual funds.

Is the higher net worth of the sponsor a guarantee for

better returns?

In the offer document of any mutual fund scheme, financialperformance including the net worth of the sponsor for a periodof three years is required to be given. The only purpose is thatthe investors should know the track record of the company

which has sponsored the mutual fund. However, higher networth of the sponsor does not mean that the scheme would givebetter returns or the sponsor would compensate in case the NAVfalls.

Where can an investor look out for information on

mutual funds?

Almost all the mutual funds have their own web sites. Investorscan also access the NAVs, half-yearly results and portfolios ofall mutual funds at the web site of Association of mutual fundsin India (AMFI) www.amfiindia.com. AMFI has also publisheduseful literature for the investors.


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Investors can log on to the web site of SEBI www.sebi.gov.inand go to "Mutual Funds" section for information on SEBIregulations and guidelines, data on mutual funds, draft offerdocuments filed by mutual funds, addresses of mutual funds, etc.

Also, in the annual reports of SEBI available on the web site, alot of information on mutual funds is given.

There are a number of other web sites which give a lot ofinformation of various schemes of mutual funds including yieldsover a period of time. Many newspapers also publish usefulinformation on mutual funds on daily and weekly basis.Investors may approach their agents and distributors to guide

them in this regard.

Can an investor appoint a nominee for his investment

in units of a mutual fund?

Yes. The nomination can be made by individuals applying for /holding units on their own behalf singly or jointly. Non-individuals including society, trust, body corporate, partnership

firm, Karta of Hindu Undivided Family, holder of Power ofAttorney cannot nominate.

If mutual fund scheme is wound up, what happens to

money invested?

In case of winding up of a scheme, the mutual funds pay a sumbased on prevailing NAV after adjustment of expenses. Unitholders are entitled to receive a report on winding up from themutual funds which gives all necessary details.


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How can the investors redress their complaints?

Investors would find the name of contact person in the offerdocument of the mutual fund scheme that they may approach incase of any query, complaints or grievances. Trustees of amutual fund monitor the activities of the mutual fund. Thenames of the directors of Asset Management Company andtrustees are also given in the offer documents. Investors shouldapproach the concerned Mutual Fund / Investor Service Centreof the Mutual Fund with their complaints.

If the complaints remain unresolved, the investors may approach

SEBI for facilitating redressal of their complaints. On receipt ofcomplaints, SEBI takes up the matter with the concerned mutualfund and follows up with it regularly. Investors may send theircomplaints to:

Securities and Exchange Board of India

Office of Investor Assistance and Education (OIAE)

Plot No.C4-A, G Block, 1st Floor,

Bandra-Kurla Complex,

Bandra (E), Mumbai400 051.

Phone: 26449199-88-77


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What is the procedure for registering a mutual fund

with SEBI?

An applicant proposing to sponsor a mutual fund in India must

submit an application in Form A along with a fee of Rs.25, 000.The application is examined and once the sponsor satisfiescertain conditions such as being in the financial servicesbusiness and possessing positive net worth for the last fiveyears, having net profit in three out of the last five years andpossessing the general reputation of fairness and integrity in allbusiness transactions, it is required to complete the remainingformalities for setting up a mutual fund. These include inter alia,

executing the trust deed and investment management agreement,setting up a trustee company/board of trustees comprising two-thirds independent trustees, incorporating the asset managementcompany (AMC), contributing to at least 40% of the net worthof the AMC and appointing a custodian. Upon satisfying theseconditions, the registration certificate is issued subject to thepayment of registration fees of Rs.25.00 lacs .For details, see the

SEBI (Mutual Funds) Regulations, 1996.


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ESCORTS MUTUAL FUND

Escorts Mutual Fund is the premier Asset ManagementCompany offering Investment products across a broad cross-section of Financial Asset covering both Debt and Equity. It wasregistered with Securities and Exchange Board of India (SEBI)in 1996.The Company is the one of the earliest entrants into theIndian Mutual Funds Industry.

It is associated with Escorts Group - with Escorts Limited as itsFlagship Company, which is amongst India's leadingcorporations, operating in diverse fields of Agri Machinery,Construction and Railway Ancillaries and Financial Services.The genesis of Escorts goes back to 1944 and over the decades,Escorts has surged ahead and evolved into one of the India'sleading conglomerates. The group holds a great repute and trustamongst people.

Escorts Mutual Fund has been established as a trust inaccordance with the provisions of the Indian Trusts Act, 1882and the Deed of Trust dated 15th April, 1996 has been registeredunder the Indian Registration Act, 1908.


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Backed by one of the most trusted and valued brands in India,Escorts Mutual Fund has earned the trust of lakhs of investorswith its consistent performance and excellent service.

Escorts Mutual Fund, has made impressive gains by constantlyincreasing its retail client base over the years. We at EscortsMutual Fund aim to provide best risk-adjusted returns to ourclients. The Escorts philosophy is centered on seekingconsistent, long-term results. It aims at overall excellence,within the framework of transparent and rigorous risk controls.

SERVICE:

We offer a wide range of services to assist investors have afulfilling and rewarding financial planning experience with us.We have designed our services keeping in mind the needs of ourinvestors, giving them a smooth and hassle-free financialplanning process.

INVESTMENT PHILOSPHY:

We believe in a simple philosophy that different people havedifferent needs. That is why our investment strategies andproducts are geared towards fulfilling the needs of our investors.e derive our satisfaction from the fulfillment of the expectationsof those special people, who have exposed faith in us and haveinvested their savings in our schemes.

The following fundamentals define and guide our investments:

A Value-Based Approach

We believe in the concept of value investing and look for aconsistent track-record and the inherent fundamental soundness


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of the entities we invest our money in. We also give weightageto the future business prospects and the sustainability of theearnings .Such a value based investment approach ensures thatthe investors money grows with us.

Emphasis on Research

Our extensive research on the industry, the corporate and themoney markets helps us in planning our investments andformulating our strategies in a wise manner. In periods ofuncertainties and fluctuating market trends, the research workgives substance to strategies and ensure their soundness.

Discipline

In markets that are characterized by cyclical booms and busts, itis vey essential to be cautious and prudent. That is why, webelieve in well thought out and well planned investments and inhaving a healthy suspicion of volatile market situations. Weneed to do all this because we feel that we have a responsibility

towards our investors.


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ESCORTS MUTUAL FUND

Schemes

Escorts Income Bond, an open ended income scheme has theinvestment objective to generate current income by investingpredominantly in a well -diversified portfolio of Fixed Incomesecurities with moderate risk levels.

Escorts Income Plan, an open ended scheme, with the

investment objective to generate current income by investingpredominantly in a well-diversified portfolio of Fixed Incomesecurities with moderate risk levels.

Escorts Tax Plan, an open-ended Equity Linked SavingsScheme, with the investment objective to generate capitalappreciation by investing predominantly in a well-diversified

portfolio of Equity Shares with growth potential.

Escorts Opportunities Fund, an open ended Scheme with theinvestment objective to generate long term capital appreciationby predominantly moving investments in a portfolio of equityand equity related securities amongst different sectors, presentor future, expected to show high earnings such as TechnologySector, Media Sector, Entertainment Sector, Communications

Sector, FMCG Sector, Pharmaceuticals Sector, Cyclical Sector,Real Estate Sector, Space Sector, Cyber city Sector etc.

Escorts Balanced Fund, an open-ended balanced scheme, withthe investment objective to generate long term capital


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appreciation and current income from a portfolio of equity &fixed income securities.

Escorts Growth Plan, an open-ended growth scheme, with the

investment objective to generate capital appreciation byinvesting predominantly in a well-diversified portfolio of EquityShares with growth potential.

Escorts Gilt Plan, an open-ended income scheme, with theinvestment objective to generate of income and capitalappreciation through investments in government securitiesmarket. The aim is to generate returns commensurate withminimal credit by investing in securities created and issued bythe Central Government and / or a State Government and / orrepos / reverse repos in such government securities as may bepermitted by RBI.

Escorts High Yield Equity Plan, an open-ended growthscheme, with the investment objective to generate income by

investing predominantly in well diversified portfolio of equitystocks providing high dividend yield but at the same timecapture long term capital appreciation as and when theopportunity arises. This long term style of investment tries tolocate, in a disciplined manner, shares, which for a variety ofreasons are selling at prices which are substantially lower thanthe companys actual business value or future earnings potential,

and are also yielding a higher than normal dividend yield. Thesecompanies would be backed by stable earnings in the past whileoffering fair growth potential in the future.

Escorts Leading Sectors Fund, an open-ended growth scheme,has the investment objective to provide capital appreciation or


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income distribution by investing in companies from LeadingSectors, depending upon their growth prospects andsustainability of future earnings growth.Escorts Power & Energy Fund, an open-ended growth

scheme, has the investment objective to provide incomedistribution and / or medium to long-term capital gains byinvesting predominantly in equity/equity related instruments ofthe companies in the Power/ Energy Sector and /or Debt/MoneyMarket Instruments.


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Escorts Mutual Fund

NAV Performance Vs Benchmark Indices

Period

Escorts

Growth

PLAN

EscortsLeading

Sector

Fund

Escorts

Infrastructure

Fund

Nifty

Last 6 months 11.29% 5.02% 5.12% 3.25%

Last 1 year 101.42% 63.45% 67.15% 73.76%

Last 3 years 11.53% N.A N.A. 11.16%

Last 5 years 20.02% N.A N.A. 20.86%

Since launch of the Scheme 24.18% -49.57% -6.71%

13.12%ETP18.54%EGP

4.88%EIF18.14%ELSF

Debt Oriented Schemes

Period

Escorts

Income

Plan

Escorts

Income

Bond

Crisil

Composite

Bond Fund

Index

Last 6 months 3.08 -1.18% 2.79%

Last 1 year 7.56% 3.41% 5.41%

Last 3 years 8.83% 6.91% 7.00%

Last 5 years 7.00% 9.72% 5.59%

Since launch of the Scheme 9.48% 6.64% N.A


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Equity Oriented Schemes

Period

Escorts High

Yield Equity

Plan

CNX

100

Escorts

Power

Energy

Fund

BSE

Power

Index

Last 6 months 6.79% 5.00% 5.02% 0.31%

Last 1 year 64.53% 83.09% 63.45% 67.06%

Last 3 years 6.26% 11.91% N.A. N.A.

Last 5 years N.A. N.A. N.A. N.A.

Since launch of the Scheme 5.59% 9.69% 38.74% 12.04%

Balanced Schemes Liquid Scheme

PeriodI - Sec Mi-

BEX

Escorts

Opportunities

Fund

Escorts

Balanced

Fund

Crisil

Balanced

Fund Index

Escorts

Liquid

Plan

Escorts

Floating

Rate Fund

Crisil

Liquid

Fund Index

Last 6 months 2.57% 2.79% 6.12% 3.27% 2.17% 2.75% 1.60%

Last 1 year 4.99% 13.12% 58.78% 47.31% 6.29% 5.14% 3.69%

Last 3 years 8.31% 2.82% 9.66% 11.38% 8.19% 8.08% 6.66%

Last 5 years 6.65% 6.74% 17.18% 15.92% N.A. N.A. N.A

Since launch of theScheme

N.A. 11.26% 21.67% N.A. 7.43% 7.12%6.40%ELP,6.24%-EFR


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LOAD STRUCTURE

1. Following shall be the load structure in case of EscortsGrowth Plan, Escorts High Yield Equity Plan, Escorts LeadingSectors Fund and Escorts Power & Energy Fund with effectfrom 10th January, 2009:Entry Load: - 2.25% (Nil for direct applications)Exit Load:a. If the amount is withdrawn < = 6 months - 1.00%.

b. If the amount is withdrawn after 6 months and upto 1 year(> 6 months and


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CHANGE IN TERMS OF SYSTEMATIC

INVESTMENT PLAN /

INTRODUCTION OF AUTO DEBIT (ECS) FORM

Auto Debit (ECS) Form facility is being introduced in EscortsMutual Fund.Following shall be the terms of Systematic Investment Plan(SIP) under Escorts IncomeBond, Escorts Income Plan, Escorts Tax Plan, EscortsOpportunities Fund, Escorts

Growth Plan, Escorts Gilt Plan, Escorts Balanced Fund, EscortsHigh Yield Equity Plan,Escorts Leading Sectors Fund and Escorts Power & EnergyFund with effect from 10thJanuary, 2009:1. Minimum Investment AmountMonthly Option - Rs. 1,000/- per month subject to minimum 6installments.Quarterly Option - Rs. 1,500/- per quarter subject to minimum 4installments.However, for SIP under Escorts Opportunities Fund, theminimum and additional amounts applicable under variousoptions shall be as given above under Option A and Option B.2. SIP Dates1st, 10th and 25th of every month.3. Registration of SIP SIP to be registered by the investors

with Escorts Mutual Fund at least 30 clear days before the firstSIP date.4. Validity of SIP As indicated by the investors in theapplication form against SIP


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Start Date and SIP End Date. If SIP End Date is not filled theSIP Auto Debit will be considered perpetual till furtherinstructions are received from the investor.5. Termination of SIP If 3 consecutive SIPs fail, the SIP will

be automatically terminated without any notice to investors.However, in case the investor gives in writing to discontinueSIP, the instructions must reach Escorts Mutual Fund atleast 20clear days from the next SIP date.All other terms and conditions of the schemes will remainunchanged.This addendum forms an integral part of the Offer Documents ofEscorts Mutual Fund asAmended from time to time.Addendum dated 05.01.2009.Statutory Details: Escorts Mutual Fund has been constituted asa Trust under the Indian Trust Act, 1882 with Escorts FinanceLtd. as its sponsor/settler and Escorts Investment Trust Ltd. asits sole Trustee. Escorts Asset Management Ltd. has beenincorporated under the provisions of the Companies Act, 1956

and has been appointed as the investment manager of EscortsMutual Fund.Risk Factors: All Mutual Funds and securities investments aresubject to market risks and there is no assurance and noguarantee that the Fund's objectives will be achieved. As withany investment in stocks and shares, the Net Asset Value (NAV)of the Units issued under the Schemes can go up or down

depending on the factors and forces affecting the capital marketssuch as price and volume volatility in stock markets, interestrates, currency exchange rates, change in Government policies,taxation, political or economic developments and closure ofstock exchanges, liquidity and settlement systems in equity anddebt markets. Past performance of the Sponsor / Asset


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Management Company / Mutual Fund does not guarantee thefuture performance of the schemes of the Mutual Fund.Escorts Income Bond, Escorts Income Plan, Escorts Tax Plan,Escorts Opportunities Fund, Escorts Gilt Plan, Escorts

Growth Plan, Escorts Balanced Fund, Escorts High Yield EquityPlan, Escorts Leading Sectors Fund and EscortsPower & Energy Fund are only the names of the Schemes anddo not in any manner indicate either the quality of the Scheme orits future prospects and returns. Please read the OfferDocuments before investing.


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Taxation And Mutual Fund Investments

One key point to keep in mind when investing , is how thatinvestment is going to be taxed. Given below are the facts one

needs to know regarding taxation of mutual funds:

Equity Funds

As an investor if you have opted for the dividend option,for the reason that you want cash inflows to be managed

through dividends, then the dividends which you received

under the scheme is completely exempt from tax undersection 10(35) of the Income Tax Act, 1961.

If you are caught in the wrong habit of short-term (periodof less than 12 months) trading, then you better be ready to

forgo your profits/capital gains, if any, in the form ofShort

Term Capital Gains (STCG) tax. STCG are subject totaxation @ 15% plus a 3% education cess.

If an investor deploys his money for long-term (over aperiod of 12 months) and thus subscribe to a good habit of

long-term investing, then there is no tax liability towards

any Long Term Capital Gain (LTCG)

If an investor deploys his money in an Equity LinkedSaving Scheme (ELSS), then he enjoys a tax deductionunder section 80C of the Income Tax Act, which enableshim to reduce his Gross Total Income (GTI). However, this


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benefit can be availed by investors upto a maximum sum ofRs 1,00,000. Also at the time of exiting (after 3 years oflock-in) from the fund the investor will not be liable to

any LTCG tax

Investors will also have to bear a Securities TransactionTax (STT) @ 0. 25%; this is levied at the time of

redemption of mutual fund units.

Debt Funds

Similarly, in a debt funds too, if investors have opted forthe dividend option, to manage your cash inflows, then thedividend which the scheme declares will be subject to anadditional tax on income distributed. Hence, in such a caseinvestors are actually paying the tax indirectly.

Unlike equity funds, in debt funds, investors are liable topay a tax on theirLong Term Capital Gains (LTCG),

which is 10% without the benefit of indexation and 20%

with the benefit of indexation.

Similarly, in case ofShort Term Capital Gains (STCG),the individual assesses will be taxed at the rate, inaccordance to the tax slabsUnlike in case of equity mutual funds, investors will not

have pay any Securities Transaction Tax (STT)


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Chapter - 3


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Objectives and scope

OBJECTIVES OF THE STUDY

1. To find out the Preferences of the investors for AssetManagementCompany.2. To know the Preferences for the portfolios.3. To know why one has invested or not invested in EscortMutual fund4. To find out the most preferred channel.

5. To find out what should do to boost Mutual Fund Industry.

Scope of the study

A big boom has been witnessed in Mutual Fund Industry inresent times. A large number of new players have entered themarket and trying to gain market share in this rapidly improvingmarket.The research was carried on in Lucknow. I had been sent at oneof the branch of StateBank of India Lucknow where I completed my Project work. Isurveyed on myProject Topic Growth story of mutual fund in India with specialReference to Escort mutual fundportfolio, mode of investment, option for getting return and soon they prefer. This project report may help the company to

make further planning and strategy.


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Chapter4

Research Methodology


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RESEARCH METHODOLOGY

This report is based on primary as well secondary data, howeverprimary data

collection was given more importance since it is overhearingfactor in attitude studies.One of the most important users of research methodology is thatit helps in identifying the problem, collecting, analyzing therequired information data and providing an alternative solutionto the problem .It also helps in collecting the vital information that is requiredby the top management to assist them for the better decisionmaking bothday to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can beused only for the reference.Research has been done by primary data collection, and primarydata has been collected by interacting with various people. The

secondary data has been collected through various journals andwebsites.

Duration of Study:

The study was carried out for a period of two months, from 30thMay to 30th July 2008.

Sampling:Sampling procedure:

The sample was selected of them who are the customers/visitorsof Mutual fund


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Sample size:

The sample size of my project is limited to 200 people only. Outof which only 120

people had invested in Mutual Fund. Other 80 people did nothave invested in MutualFund.

Sample design:

Data has been presented with the help of bar graph, pie charts,line graphs etc.

Limitation:Some of the persons were not so responsive.Possibility of error in data collection because many of

investors may have notgiven actual answers of my questionnaire.

Sample size is limited to 200 visitors of Escort mutul fund,Lucknow out of these only 120 had invested in Mutual Fund.The sample. size may not adequately represent the wholemarket.

Some respondents were reluctant to divulge personalinformation which can affect the validity of all responses.

The research is confined to a certain part of Lucknow.


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Chapter5


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Data Analysis & Interpretation

ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Lucknow.

Age group of the Investors Investors invested in Mutual

FundAccording to this chart out of 120 Mutual Fund investors ofLucknow the most are in the age group of 36-40 yrs. i.e. 25%,the second most investors are in the age group of 41-45yrs i.e.20% and the least investors are in the age group of below 30 yrs.


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Out of 120 Mutual Fund investors 71% of the investors inDehradoon areGraduate/Post Graduate, 23% are Under Graduate and 6% areothers (under HSC).


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Occupation of investor in lucknow.

Figure 1

Govt.Service

Pvt.

Service

Business Agriculture Others

Occupation of the customers


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No. of Investors

Occupation No. of Investors

Govt. Service 30

Interpretation:

In Occupation group out of 120 investors, 38% are Pvt.Employees, 25% areBusinessman, 29% are Govt. Employees, 3% are in Agricultureand 5% are in others.

Income Group No. of Investors (d).Monthly Family Income


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(d).Monthly Family Income of the investors of Lucknow.

20,001 to Rs. 30,000, Second one i.e. 27% investors are in themonthlyincome group of more than Rs. 30,000 and the minimuminvestors i.e. 4%


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Interpretation: From the above graph it can be inferred that outof 200 people,


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97.5% people have invested in Saving A/c, 76% in Insurance,74% in Fixed Deposits,60% in Mutual Fund, 37.5% in Post Office, 25% in Shares orDebentures, 15% in

Gold/Silver and 32.5% in Real Estate.

Out of 200 People, 32% People prefer to invest where there isHigh Return, 30% preferto invest where there is Low Risk, 20% prefer easy Liquidityand 18% prefer Trust


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Interpretation:

From the above chart it is inferred that 67% People are aware ofMutual Fund and its


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operations and 33% are not aware of Mutual Fund and itsoperations.


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MUTUAL FUND COMPANIES IN INDIA

1.AIG Global Investment Group Mutual Fund
http://www.aiginvestments.co.in/http://www.aiginvestments.co.in/http://www.aiginvestments.co.in/http://www.aiginvestments.co.in/


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2.Bharti AXA Mutual Fund

3.Birla Sun Life Mutual Fund

4.Canara Robeco Mutual Fund

5.DBS Chola Mutual Fund

6.DSP BlackRock Mutual Fund

7.DWS Mutual Fund

8.Edelweiss Mutual Fund

9.Escort Mutual Fund

10.Fidelity Mutual Fund

11.Fortis Mutual Fund

12.Franklin Templeton Mutual Fund

13. HDFC Mutual Fund

14.HSBC Mutual Fund

15.ICICI Prudential Mutual Fund
http://www.bhartiaxa-im.com/http://www.bhartiaxa-im.com/http://www.bhartiaxa-im.com/http://www.birlasunlife.com/http://www.birlasunlife.com/http://www.birlasunlife.com/http://www.canararobeco.com/http://www.canararobeco.com/http://www.canararobeco.com/http://www.dbscholamutualfund.com/http://www.dbscholamutualfund.com/http://www.dbscholamutualfund.com/http://www1.dspblackrock.com/http://www1.dspblackrock.com/http://www1.dspblackrock.com/http://www.dws-india.com/http://www.dws-india.com/http://www.dws-india.com/http://www.edelweissmf.com/http://www.edelweissmf.com/http://www.edelweissmf.com/http://www.escortsmutual.com/http://www.escortsmutual.com/http://www.escortsmutual.com/https://www.fidelity.co.in/https://www.fidelity.co.in/https://www.fidelity.co.in/http://www.fortisinvestments.in/Main/index.aspxhttp://www.fortisinvestments.in/Main/index.aspxhttp://www.fortisinvestments.in/Main/index.aspxhttp://www.franklintempletonindia.com/http://www.franklintempletonindia.com/http://www.franklintempletonindia.com/http://www.assetmanagement.hsbc.co.in/http://www.assetmanagement.hsbc.co.in/http://www.assetmanagement.hsbc.co.in/http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.assetmanagement.hsbc.co.in/http://www.franklintempletonindia.com/http://www.fortisinvestments.in/Main/index.aspxhttps://www.fidelity.co.in/http://www.escortsmutual.com/http://www.edelweissmf.com/http://www.dws-india.com/http://www1.dspblackrock.com/http://www.dbscholamutualfund.com/http://www.canararobeco.com/http://www.birlasunlife.com/http://www.bhartiaxa-im.com/


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16.IDFC Mutual Fund

17.ING Mutual Fund

18.JM Financial Mutual Fund

19.JPMorgan Mutual Fund

20.Kotak Mahindra Mutual Fund

21.LIC Mutual Fund

22.Lotus India Mutual Fund

23.Mirae Asset Mutual Fund

24.Principal Mutual Fund

25.Reliance Mutual Fund

26.Sahara Mutual Fund

27.SBI Mutual Fund

28.Sundaram BNP Paribas Mutual Fund

29.Tata Mutual Fund
http://www.idfcmf.com/http://www.idfcmf.com/http://www.idfcmf.com/http://www.ingim.co.in/http://www.ingim.co.in/http://www.ingim.co.in/http://www.jmfinancialmf.com/http://www.jmfinancialmf.com/http://www.jmfinancialmf.com/http://www.jpmorganmf.com/http://www.jpmorganmf.com/http://www.jpmorganmf.com/http://www.kotakmutual.com/http://www.kotakmutual.com/http://www.kotakmutual.com/http://www.licmutual.com/http://www.licmutual.com/http://www.licmutual.com/http://www.lotusindiaamc.com/http://www.lotusindiaamc.com/http://www.lotusindiaamc.com/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.principalindia.com/http://www.principalindia.com/http://www.principalindia.com/http://www.reliancemutual.com/http://www.reliancemutual.com/http://www.reliancemutual.com/http://www.saharamutual.com/http://www.saharamutual.com/http://www.saharamutual.com/http://www.sbimf.com/http://www.sbimf.com/http://www.sbimf.com/http://www.sundarambnpparibas.in/http://www.sundarambnpparibas.in/http://www.sundarambnpparibas.in/http://www.tatamutualfund.com/http://www.tatamutualfund.com/http://www.tatamutualfund.com/http://www.tatamutualfund.com/http://www.sundarambnpparibas.in/http://www.sbimf.com/http://www.saharamutual.com/http://www.reliancemutual.com/http://www.principalindia.com/http://www.miraeassetmf.co.in/http://www.lotusindiaamc.com/http://www.licmutual.com/http://www.kotakmutual.com/http://www.jpmorganmf.com/http://www.jmfinancialmf.com/http://www.ingim.co.in/http://www.idfcmf.com/


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30.Taurus Mutual Fund

31.UTI Mutual Fund

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO AssetManagement (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank

A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun LifeFinancial. Sun Life Financial is a global organization evolved in 1871 and is beingrepresented in Canada, the US, the Philippines, Japan, Indonesia and Bermudaapart from India. Birla Sun Life Mutual Fund follows a conservative long-termapproach to investment. Recently it crossed AUM of Rs. 10,000 Crores.

Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992under the sponsorship of Bank of Baroda. BOB Asset Management CompanyLimited is the AMC of BOB Mutual Fund and was incorporated on November 5,1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namelyHousing Development Finance Corporation Limited and Standard LifeInvestments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital
http://www.taurusmutualfund.com/http://www.taurusmutualfund.com/http://www.taurusmutualfund.com/http://www.utimf.com/http://www.utimf.com/http://www.utimf.com/http://www.utimf.com/http://www.taurusmutualfund.com/


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Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC MutualFund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named

Trustee Company. It is a joint venture of Vysya and ING. The AMC, INGInvestment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one ofthe largest life insurance companies in the US of A. Prudential ICICI Mutual Fundwas setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICILtd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is

Prudential ICICI Asset Management Company Limited incorporated on 22nd ofJune, 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India FinancialCorporation Ltd. as the sponsor. Sahara Asset Management Company PrivateLimited incorporated on August 31, 1995 works as the AMC of Sahara MutualFund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund tolaunch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr.approximately. Today it is the largest Bank sponsored Mutual Fund in India. Theyhave already launched 35 Schemes out of which 15 have already yielded handsomereturns to investors. State Bank of India Mutual Fund has more than Rs. 5,500Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorsfor Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd.The investment manager is Tata Asset Management Limited and its Tata TrusteeCompany Pvt. Limited. Tata Asset Management Limited's is one of the fastest inthe country with more than Rs. 7,703 Crores (as on April 30, 2005) of AUM.


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Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary ofKMBL. It is presently having more than 1, 99,818 investors in its various schemes.KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund

offers schemes catering to investors with varying risk - return profiles. It was thefirst company to launch dedicated gilt scheme investing only in governmentsecurities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003,manages the UTI Mutual Fund with the support of UTI Trustee Company PrivateLimited. UTI Asset Management Company presently manages a corpus of overRs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB),

Punjab National Bank (PNB), State Bank of India (SBI), and Life InsuranceCorporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,Income Funds, Asset Management Funds, Index Funds, Equity Funds and BalanceFunds.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act,1882. The sponsor of RMF is Reliance Capital Limited and Reliance CapitalTrustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance

Capital Mutual Fund which was changed on March 11, 2004. Reliance MutualFund was formed for launching of various schemes under which units are issued tothe Public with a view to contribute to the capital market and to provide investorsthe opportunities to make investments in diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by

Standard Chartered Bank. The Trustee is Standard Chartered Trustee CompanyPvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMCwhich was incorporated with SEBI on December 20, 1999.

Franklin Templeton India Mutual Fund


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The group, Franklin Templeton Investments is a California (USA) based companywith a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largestfinancial services groups in the world. Investors can buy or sell the Mutual Fundthrough their financial advisor or through mail or through their website. They haveOpen end Diversified Equity schemes, Open end Sector Equity schemes, Open endHybrid schemes, Open end Tax Saving schemes, Open end Income and Liquidschemes, closed end Income schemes and Open end Fund of Funds schemes tooffer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in themarket in securities, investment management and credit services. Morgan StanleyInvestment Management (MISM) was established in the year 1975. It providescustomized asset management services and products to governments, corporations,

pension funds and non-profit organisations. Its services are also extended to highnet worth individuals and retail investors. In India it is known as Morgan StanleyInvestment Management Private Limited (MSIM India) and its AMC is MorganStanley Mutual Fund (MSMF). This is the first close end diversified equity schemeserving the needs of Indian retail investors focusing on a long-term capitalappreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as

its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMCwas incorporated on December 1, 1995 with the name Escorts Asset ManagementLimited.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with AllianceCapital Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAMTrust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India(Pvt) Ltd. with the corporate office in Mumbai.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche FinancialServices Pvt. Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as theTrustee Company. Incorporated on October 16, 2000 and headquartered inMumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.


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Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank actingas the sponsor. Canbank Investment Management Services Ltd. incorporated onMarch 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment &Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co.Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. Itcontributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was

constituted as a Trust in accordance with the provisions of the Indian Trust Act,1882. . The Company started its business on 29th April 1994. The Trustees of LICMutual Fund have appointed Jeevan Bima Sahayog Asset Management CompanyLtd as the Investment Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), aGovernment of India undertaking and the four Public Sector General InsuranceCompanies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co.

Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co.Ltd. (UII) and is constituted as a Trust in accordance with the provisions of theIndian Trusts Act, 1882.

TOP 10 MUTUAL FUND COMPANIES IN INDIA

1.HDFC Mutual FundInception DateJune 30th 2000

TrusteeHDFC Trustee Company Ltd.


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Top Performing SchemesAUM as on 30th April 09

HDFC Top 200 (2338 Cr) HDFC Equity (2759.30 Cr) HDFC MIP Long-term (887.90 Cr)

2.Tata Mutual FundInception DateJune 30th 1995

TrusteeTata Trustee Company Pvt. Ltd.

Top Performing SchemesAUM as on 30th April 09 Tata Pure Equity (269.95 Cr) Tata Index Nifty (6.77 Cr) Tata Short-term Bond (292.08 Cr)

3.SBI Mutual FundInception DateJune 29th 1987

TrusteeSBI Mutual Fund Trustee Company Pvt. Ltd.

Top Performing SchemesAUM as on 30th April 09

Magnum Contra (1,958.50 Cr) Magnum Balanced (333.11 Cr) Magnum Multiplier Plus (687.15 Cr)


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4.Reliance Mutual FundInception Date - June 30th 1995

TrusteeReliance Capital Trustee Company Ltd.

Top Performing SchemesAUM as on 30th April 09 Reliance MIP (168.52 Cr) Reliance Banking Retail (681.25 Cr) Reliance Diversified Power Sector Fund (3809.57 Cr)

5.DSP BlackRock Mutual FundInception DateDecember 16th 1996

TrusteeDSP Merrill Lynch Trustee Company Pvt. Ltd.

Top Performing SchemesAUM as on 30th April 09 DSPBR top 100 Equity (1167.08 Cr) DSPBR Equity (919.77 Cr) DSPBR GSF Longer Duration (425.67 Cr)

6.Kotak Mutual FundInception DateJune 23rd 1998

TrusteeKotak Mahindra Trustee Company Ltd.

Top Performing SchemesAUM as on 30th April 09 Kotak Bond Regular (445.69 Cr) Kotak 30 (688.14 Cr) Kotak Opportunities (658.50 Cr)


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7.Principal Mutual FundInception DateNovember 25th 1994

TrusteePrincipal Trustee Co. Pvt. Ltd

Top Performing SchemesAUM as on 30th April 09 Principal Child Benefit (19.81 Cr) Principal Index (21.88 Cr) Principal Personal Tax Saver (332.53 Cr)

8.Sundaram BNP Paribas Mutual FundInception DateAugust 24th 1996

TrusteeSundaram BNP Paribas Trustee Company Limited

Top Performing SchemesAUM as on 30th April 09 Sundaram BNP Paribas TaxSaver (703.54 Cr) Sundaram BNP Paribas Select Focus Fund (880.78 Cr) Sundaram BNP Paribas Bond Saver (59.12 Cr)

9.Franklin Templeton Mutual FundInception DateFebruary 19th 1996

TrusteeFranklin Templeton Trustee Services Pvt. Ltd.

Top Performing SchemesAUM as on 30th April 09 Franklin India Blue Chip Fund (1642.87 Cr) Templeton IGSF PF (32.68 Cr) Franklin India Prima Plus (1153.20 Cr)


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10. Birla Sun Life Mutual FundInception Date - December 24th 1994TrusteeBirla Sun Life Trustee Co. Ltd.

Top Performing SchemesAUM as on 30th April 09 Birla GSF Long Term (10.48 Cr.) Birla Frontline Equity (481.14 Cr) Birla'95 (127.12 Cr)


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1. Professional Management - The basic advantage of funds isthat, they are professional managed, by well qualifiedprofessional. Investors purchase funds because they do not havethe time or the expertise to manage their own portfolio. Amutual fund is considered to be relatively less expensive way tomake and monitor their investments.2. Diversification - Purchasing units in a mutual fund instead of

buying individual stocks or bonds, the investors risk is spreadout and minimized up to certain extent. The idea behinddiversification is to invest in a large number of assets so that aloss in any particular investment is minimized by gains inothers.


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3. Economies of Scale - Mutual fund buy and sell large amountsof securities at a time, thus help to reducing transaction costs,and help to bring down the average cost of the unit for their

investors.

4. Liquidity - Just like an individual stock, mutual fund alsoallows investors to liquidate their holdings as and when theywant.

5. Simplicity - Investments in mutual fund is considered to beeasy, compare to other available instruments in the market, andthe minimum investment is small. Most AMC also haveautomatic purchase plans whereby as little as Rs. 2000, whereSIP start with just Rs.50 per month basis.

6. Tax benefits -We do not have to pay any taxes on dividendsissued by mutual funds. We also have the advantage of capitalgains taxation. Tax-saving schemes andpension schemes give

us the added advantage of benefits under section88.


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DISADVANTAGES OF MUTUAL FUNDS:

1.Professional Management- Some funds dont perform inneither the market, as their management is not dynamicenough to explore the available opportunity in the market,thus many investors debate over whether or not the so-calledprofessionals are any better than mutual fund or investorhimself, for picking up stocks.

2.CostsThe biggest source of AMC income is generally fromthe entry & exit load which they charge from investors, at thetime of purchase. The mutual fund industries are thuscharging extra cost under layers of jargon.

3.Dilution - Because funds have small holdings across differentcompanies, high returns from a few investments often don't

make much difference on the overall return. Dilution is alsothe result of a successful fund getting too big. When moneypours into funds that have had strong success, the manageroften has trouble finding a good investment for all the newmoney.

4. Taxes-When making decisions about your money, fund

managers don't consider your personal tax situation.


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Mutual Funds Industry in India

The origin of mutual fund industry in India is with theintroduction of the concept of mutual fund by UTI in the year1963. Though the growth was slow, but it accelerated from theyear 1987 when non-UTI players entered the industry. In thepast decade, Indian mutual fund industry had seen dramaticimprovements, both quality wise as well as quantity wise.Before, the monopoly of the market had seen an ending phase;

the Assets under Management (AUM) were Rs. 67bn. Theprivate sector entry to the fund family raised the AUM to Rs.470 in March 1993 and till April 2004; it reached the height of1,540 bn. Putting the AUM of the Indian Mutual Funds Industryinto comparison, the total of it is less than the deposits of SBIalone, constitute less than 11% of the total deposits held by theIndian banking industry. The main reason of its poor growth isthat the mutual fund industry in India is new in the country.

Large sections of Indian investors are yet to be intellectuatedwith the concept. Hence, it is the prime responsibility of allmutual fund companies, to market the product correctly abreastof selling. The mutual fund industry can be broadly put into fourphases according to the development of the sector.

First Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act ofParliament. It was set up by the Reserve Bank of India andfunctioned under the Regulatory and administrative control ofthe Reserve Bank of India. In 1978 UTI was de-linked from the


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RBI and the Industrial Development Bank of India (IDBI) tookover the regulatory and administrative control in place of RBI.The first scheme launched by UTI was Unit Scheme 1964. Atthe end of 1988 UTI had Rs.6,700 Crores of assets under

management.

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

Entry of non-UTI mutual funds. SBI Mutual Fund was the firstfollowed by Canbank Mutual Fund (Dec 87), Punjab NationalBank Mutual Fund (Aug,89), Indian Bank Mutual Fund(Nov,89), Bank of India (Jun, 90), Bank of Baroda Mutual Fund(Oct 92). LIC in 1989 and GIC in 1990. The end of 1993marked Rs.47,004 as assets under management.

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era startedin the Indian mutual fund industry, giving the Indian investors a

wider choice of fund families. Also, 1993 was the year in whichthe first Mutual Fund Regulations came into being, under whichall mutual funds, except UTI were to be registered andgoverned. The erstwhile Kothari Pioneer (now merged withFranklin Templeton) was the first private sector mutual fundregistered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by

a more comprehensive and revised Mutual Fund Regulations in1996. The industry now functions under the SEBI (MutualFund) Regulations 1996.The number of mutual fund houses went on increasing, withmany foreign mutual funds setting up funds in India and also theindustry has witnessed several mergers and acquisitions. As at


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the end of January 2003, there were 33 mutual funds with totalassets of Rs. 1, 21,805 Crores. The Unit Trust of India withRs.44, 541 Crores of assets under management was way aheadof other mutual funds.

Fourth Phase - since February 2003

This phase had bitter experience for UTI. It was bifurcated intotwo separate entities. One is the Specified Undertaking of theUnit Trust of India with AUM of Rs.29, 835 Crores (as onJanuary 2003). The Specified Undertaking of Unit Trust ofIndia, functioning under an administrator and under the rulesframed by Government of India and does not come under thepurview 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 functionsunder the Mutual Fund Regulations. With the bifurcation of theerstwhile UTI which had in March 2000 more than Rs.76, 000Crores of AUM and with the setting up of a UTI Mutual Fund,

conforming to the SEBI Mutual Fund Regulations, and withrecent mergers taking place among different private sectorfunds, the mutual fund industry has entered its current phase ofconsolidation and growth. As at the end of September, 2004,there were 29 funds, which manage assets of Rs.153108 Croresunder 421 schemes.


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SWOT ANALYSIS

Strengths

SEBI/AMFI has taken an active role in protectinginvestors interest through regulations certifications andcode of conduct.

Open product architecture i.e. distributors offer a range ofMutual fund products to choose from.

Has often added as a counterbalance to equity marketvolatility and market liquidity.

Weakness

Limited channels of distribution i.e. banks and agentaccount for more than 70% of distribution of mutual funds.

Lack of effort of wealth managers in educating the marketabout the mutual products has been the cause of lowpenetration.

Absence of global policies on global mutual funds.Opportunities

Mutual fund investment as a % of Household savingsinvested in financial assets is less than 1%

Because of the economic growth, investors are activelydiversifying their income into various funds.

Mutual funds in India permitted to invest up to 10 % of thenet assets abroad in foreign securities


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Threats

Large number of substitutes available to Indian investor-Deposit, equities and real estate.

In India low risk investment products like PPF offer highreturns. As more foreign players enter India through the JV route,

investors in India will need to educate themselves aboutabroad risks.


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BIBLIOGRAPHY

WEBSITES

www.google.comwww.yahoo.comwww.wikipedia.comwww.indiainfoline.comwww.amfiindia.comwww.moneycontrol.comwww.escortsmutual.com

BOOKS

Financial Institutions and MarketsL.M BholeSecurities Laws and CompliancesICSI

NewspapersMintHindustan TimesEconomic Times

Growth of Mutual Fund

Documents

Transcript of Growth of Mutual Fund