A Study Of Mutual Fund At Mahindra Finance” 4q5n3t

A PROJECT REPORT ON

“A STUDY OF MUTUAL FUND AT MAHINDRA FINANCE” A detailed study done in “FINANCE” “Submitted in partial fulfillment of the requirement for the award of degree of Bachelor of Business istration (BBA) under Bharati Vidyapeeth Deemed University, Pune”. Submitted by MISS. JYOTI D SAWANT ROLL NO: 42 BATCH: 2011-2014 Under the guidance of PROF.VEENA CHAVAN

Bharati Vidyapeeth’s Institute of Management & Entrepreneurship Development Navi Mumbai

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(i) ACKNOWLEDGEMENT

Any project would be incomplete without felicitating those instrumental in its successful completion. The accolades for this project cannot just belong to one individual because it has been the result of consolidated efforts of many people to whom I would like to express my concern and gratitude. I express deep gratitude to my highly co-operative company guide Mr. Joseph Thomas for providing and guidance that he gave owing to his experience in this field for past many years. This project would not have been possible without his guidance and I extend sincere gratitude to my faculty guide Prof. Veena Chavan for her timely guidance and encouragement through the project. Her belief in my abilities constantly kept me motivated and helped me in successfully completing the project. I sincerely thank Dr.D.Y.PATIL for giving me opportunity for doing the summer project and enhancing my knowledge towards the field. This project has been a learning experience and it gives me immense pleasure in expressing my gratitude to the “Bharati Vidyapeeth's institute of management and research for providing us with an opportunity to do this study. My sincere appreciation to Mahindra finance for giving me the opportunity and helping me to, Mutual Funds in India and to understand the various instruments of MF product selection. This project has been a learning experience for me and this would not have been possible without the help of these people. Finally, not forgetting my family and my friend Arun Rana for providing their in the completion of the project. Thank You

Signature of the student (JOYTI D SAWANT)

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EXECUTIVE SUMMARY A Mutual Fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. A mutual fund is answer to all these situations. It appoints professionally qualified and experienced staffs that manage each of these functions on a fulltime basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investors need to know how risky individual assets are and what their contribution to the total risk of a portfolio would be. Plenty of Mutual Funds are available where the investors can put their money. Before investing they want to know which fund gives more return, which fund is performing well, which fund is more risky etc. All these can be found out using certain key statistics. With the help of these key statistics an investor can analyze different mutual funds and put his/her money in a fund which suits his/ her risk perception. Firstly data is collected and then analysis, this information help in proper decision making as to whether to invest or not to invest in the funds.

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TABLE OF CONTENTS PARTICULARS

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Acknowledgement

(i)

Certificates

(ii)

Executive Summary

(iii)

Chapter 1: Introduction of the Project

1

1.1: Concept & Significance of the Study

2

1.2: Objective of the Study

3

1.3: Scope and Limitations

4

1.4: Literature Review

5

Chapter 2: Introduction to Industry

6

2.1: Introduction to the Company

7

2.2: History

8

2.3: Product portfolio

9

2.4: Mutual fund distribution

11

2.5: Investment advisory services

12

Chapter3: Introduction of Mutual fund

15

3.1: Concept of mutual fund

16

3.2: Structure of Indian mutual fund

18

3.3: Advantages And Disadvantages of Mutual fund

20

3.4: Future outlook

23

3.5:Important step taken by SEBI for regulating

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mutual funds in India 3.6: How is a mutual fund Set up?

28

3.7: Types of mutual fund

30

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3.8: Mutual fund investing strategies

34

3.9: Different modes of receiving the income

35

Earned from Mutual fund investment. 3.10 Types of risk associated with mutual fund

36

Chapter4: Research Methodology

38

4.1: Types of study

39

4.2: Types of data

40

Chapter5: Data Analysis and Interpretation

42

Chapter6: Conclusion

51

Annexure Bibliography

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CHAPTER-1 INTRODUCTION

1.1 INTRODUCTION OF PROJECT MUTUAL FUND

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Mutual fund is a mechanism for pooling the resources by issuing units the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual funds have proven to be safe investments and hence, it is important to let individuals familiarize themselves with relevant information about mutual funds. This project consist a description of the Mutual Fund Industry in brief. It discusses about the different types of Mutual Funds available and the factors to be taken into consideration, for the selection and evaluation of performance of Mutual Funds. Approaching the field of mutual funds in a positive yet cautious manner is needed since an investor could receive negative returns as well. Mutual funds are a much safer bet compared to investing in the stock market directly, since the funds are handled by a fund manager who would have more knowledge about the market conditions due to his extensive research. Also the fund manager invests in various avenues so that the risk is spread evenly and losses if any are minimized.

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1.2 OBJECTIVE OF THE STUDY

1. To have a better understanding of Mutual Funds – Its working, its structure, types of Mutual Funds & history of Mutual Funds. 2. To understand the benefits of investing in Mutual Funds. 3. To conduct the survey to know about the awareness of mutual funds, among the people. 4. To study the various Mutual Funds schemes in India. 5. To study about the risk factors involved in the Mutual Funds and How to analyze it.

6. To study the factors considered while investing in Mutual funds.

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1.3SCOPE OF THE STUDY The study of mutual fund has the wider scope. Mutual fund is a professionally managed form of collective investment that pools money from many investors and invest it in stocks, bonds, short-term money market instruments and other securities. Dividend distributed on tax free Mutual Fund schemes is also tax free for the unit holders of Mutual fund. Taxable distribution can be either ordinary income or capital schemes which are equity schemes, debt and hybrid schemes.

LIMITATION OF STUDY The study also has the some limitations which are as follows: 1. The time is the main constraint so limited period of time is spent on this study. 2. The study only takes into consideration the returns provided by the funds 3. The from the management side may be limited due to their pre occupied meetings and work. 4. Not possible to get whole information because of their business secret and lack of awareness among people. 5. The other factors are not considered on while evaluating the performance of the Mutual Fund

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1.4Literature Review Analysis of mutual fund performance is not a new area. William Sharpe outlined methodologies to examine mutual fund performance within the context of three closely related areas: portfolio selection, the capital asset pricing model (CAPM), and the general behavior of stock market prices. Portfolio selection theory defines the roles of three market participants: the portfolio analyst, the security analyst, and the investor. The portfolio analyst estimates anticipated results through expected portfolio performance -- and its underlying risk – and selects the most efficient portfolio. The security analyst predicts the performance of individual securities (within the portfolio) including the relationships between different securities. The investor, presented with an array of efficient portfolios must then factor in his risk profile in selecting the portfolio that optimizes the combination of risk and expected returns. Sharpe maintains that the performance of mutual funds can vary because of risk. This risk can either be a high-risk strategy that did not succeed; or, just poor execution by the manager. CAPM, Sharpe (1964), defines a perfect market whereby participants use information to form their own portfolios -- that incorporate desired returns against risk. However, the analysis of the nature and definition of risk in portfolio selection and management indicates that the risk is multidimensional and is affected by a series of financial and stock market data, qualitative criteria and macroeconomic factors. Many of the models used in the past are based on undimensional approaches that do not fit to the multidimensional nature of risk. In the empirical literature for the evaluation of the performance of MF portfolios several indices regarding the performance of fund per unit of risk have been proposed. The most well known indices are those of Treynor (1965), Sharpe (1966), and Jensen (1968). At the same time, evaluation models have been developed to consider the market-timing and stock selection abilities of MF managers, in order to investigate whether the performance of MFs is due to occasional incidents or due to their superior investment management.

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CHAPTER-2 INTRODUCTION TO INDUSTRY

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2.1 INTRODUCTION OF AUTOMOBILE INDUSTRY The automotive industry in India is one of the larger markets in the world and had previously been one of the fastest growing globally, but is now seeing flat or negative growth rates, India's enger car and commercial vehicle manufacturing industry is the sixth largest in the world,, with an annual production of more than 3.9 million units in 2011. According to recent reports, India overtook Brazil and became the sixth largest enger vehicles in the world (beating such old and new auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, , Brazil), grew 16 to 18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as Asia's fourth largest exporter of enger car, behind Japan, South Korea, and Thailand. In 2010, India beat Thailand to become Asia's third largest exporter of enger cars. As of 2010, India is home to 40 million enger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second (after China) fastest growing automobile market in the world in that year. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015, no longer 5 million as previously projected. “The production of enger vehicles in India was recorded at 3.23 million in 2012-13 and is expected to grow at a compound annual growth rate (CAGR) of 13 per cent during 2012-2021, as per data published by Automotive Component Manufacturers Association of India (ACMA)”. The majority of India's car manufacturing industry is based around three clusters in the south, west and north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The western hub near Mumbai and Pune contributes to 33% of the market.

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2.2 INTRODUCTION OF THE COMPANY A subsidiary of Mahindra & Mahindra Limited, Mahindra Finance is one of India’s leading non-banking finance companies. Focused on the rural and semi-urban sector, Mahindra Finance provide finance for utility vehicles, tractors and cars and have the largest network of branches covering these areas. Our goal is to be the preferred provider of retail financing services in the rural and semi-urban areas of India, while Mahindra Finance strategy is to provide a range of financial products and services to the customers. Mahindra Finance are one of India’s leading non-banking finance companies focused on the rural and semi-urban sectors providing finance for Utility Vehicles (UVs), tractors and cars. Mahindra Finance is a subsidiary of Mahindra & Mahindra Limited, a leading tractor and UV manufacturer with over 60 years’ experience in the Indian market. Mahindra Finance’s goal is to be the preferred provider of retail financing services in the rural and semi-urban areas of India, while Mahindra Finance strategy is to provide a range of financial products and services to our customers through our nationwide distribution network. Mahindra Finance seeks to position ourselves between the organize banking sector and local money lenders, offering Mahindra Finance customers. Mahindra Finance principally finance UVs used both for commercial and personal purposes, tractors and cars. While we predominantly finance M&M UVs and tractors, we have continued to expand our lending to vehicles not manufactured by Mahindra & Mahindra Ltd.

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2.3HISTORY Mahindra Finance was incorporated on January 1, 1991 as Maxi Motors Financial Services Limited and received certificate of commencement of business on February 19, 1991. Our name was changed to Mahindra & Mahindra Financial Services Limited on November 3, 1992. Mahindra Finance is ed with the RBI as an NBFC with effect from September 4, 1998. Key events in our business history: 1993  Commenced financing of M&M UV’s 1995  Opened Mahindra Finance first branch outside Mumbai, at Jaipur 1996  Commenced financing M&M dealers for purchase of tractors 1998  Launched pilot project for retail tractor financing 1999  Commenced tractor retail financing in rural and semi-urban areas 2001  Total Assets crossed Rs. 10 billion

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2002  Received Tier II debt from International Finance Corporation  Made our first securitization transaction of Rs. 434.8 million  Commenced financing of non-M&M vehicles 2004  Received a long-term credit rating of AA+/Stable  Opened a branch in Port Blair  Listing of non convertible debentures on BSE on the wholesale debt market segment 2005  Tied up with HPCL  Made MIBL our wholly owned subsidiary 2006  Issued our IPO  Tied up with Maruti  Launched our marketing campaign  Reached a new benchmark with 400 branches

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2.4 PRODUCT PORTFOLIO Mahindra Finance provides a wide range of products and services, with something to suit everyone’s needs. Right from finance for two wheelers, tractors, farm equipments, cars and utility vehicles to commercial vehicles and construction equipment, we also have a group of experts providing investment advices and choosing the most suitable to our customers’ needs 

Vehicle Financing

Construction equipment Pre-owned vehicle financing: Loans for pre-owned cars, multi-utility vehicles, tractors and commercial vehicle 

SME Financing

Loans for varied purposes like project finance, equipment finance and working capital finance. 

Housing Finance

Loans for buying, renovating, extending and improving homes in rural and semiurban India through our subsidiary Mahindra Rural Housing Finance Limited 

Personal Finance

Offers personal loans typically for weddings, children’s education, medical treatment and working capital 

Insurance Broking

Insurance solutions to retail customers as well as corporations through our subsidiary Mahindra Insurance Brokers Limited

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2.5Mutual Fund Distribution Recently Mahindra Finance has received the necessary permission from Reserve Bank of India (RBI) to start the distribution of Mutual Fund products through our network. Hitherto we were only participating in the liability requirements of our customers but with a mutual fund distribution business, we can also participate in their asset allocation. When it comes to investing, everyone has unique needs based on their own objectives and risk profile. While many investment avenues such as fixed deposits, bonds etc. exist, it is usually seen that equities typically outperform these investments, over a longer period of time. Our Investment Advisory Services help you invest your money in equity through different Mutual Fund Schemes. We ensure the best for our clients by identifying products best suited to individual needs.

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2.6INVESTMENT ADVISORY SERVICES Mahindra finance smart offer investment advisory services which are: 

Personalized Service Mahindra Fin Smart believe in providing personalized service and individual attention to each client to ensure that we understand their investment goals and help to achieve it.

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Professional Advice Mahindra Fin Smart offer expert advice on equity and debt portfolios with an objective to provide consistent long-term return while taking calculated market risks. Our approach helps our clients build a proper mix of products, and not concentrate on just one individual product

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Long-term Relationship Mahindra Fin Smart believes that long-term vision is the only means to steady wealth creation. However to achieve this one also needs to take advantage of short-term market opportunities while not losing sight of long-term objectives. Hence we partner all our clients in realizing their long-term vision.

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Access to Research Report Mahindra Fin Smart provides our clients with access to the expert opinion of economists and analysts from CRISIL, one of the leading financial research and rating companies of India. This is because; we believe that unbiased research is the key to providing sound advice in making informed investment decisions.

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Transparency and Confidentiality Mahindra Fin Smart clients receive regular portfolio statements from us via email. They can also view the detailed performance of their investment portfolio on the web, the access to which is restricted to the client only. Moreover, our monitoring system enables us to detect any unauthorized access to the portfolio.

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Flexibility Mahindra Fin Smart facilitate smooth dealing and consistent attention, all our clients are serviced by their individual Relationship Executives. Relationship Executives provide you with completely hassle-free, customized services taking care of all the istrative aspects of your investments. This includes submission of application forms to fund houses and a monthly report on the overall performance of your investment portfolio.

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Additional services

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Information updates on a daily basis through email

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Ease of viewing their portfolio on the internet

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Investment advice at their convenience

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Weekly, fortnightly and monthly reports sent to them via email, on request

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The freedom to us, anywhere in India

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Access to the multiple products offered by Mahindra Finance through their Relationship Executive.

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CHAPTER-3 INTRODUCTION TO MUTUAL FUND

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3.1CONCEPT OF THE MUTUAL FUND A mutual fund is a common pool of money into which the investors place their contribution that is to be invested in accordance with a stated objective.

The

ownership of this fund is thus t or mutual. The fund belongs to all investors. A mutual fund uses the money collected from the investors to buy those assets which are specifically permitted by its stated investment objective. Since each investor is a part owner of a mutual fund, it is necessary to establish the value of his part. The value of the total assets of the fund when divided by the total number of unites issued by the mutual fund gives the value of one unit. This is generally called the Net Asset Value (NAV) of one unit or one share. Example :If the value of a fund assets stands at Rs. 1000 and it has 10 investors who have bought 10 units each, the total number of units issued are 100 and the value of one unit is Rs. 10 (1000/100). If a single investor holds 3 units, the value of his ownership of the fund will be Rs. 30 (3 * 10). Now the value of the fund will keep fluctuating with the markets movements causing Net Asset Value also to fluctuate. For example if the value of our fund’s assets increased from Rs.1000 to Rs.1200, the value of our investors holding will now be (1200/100 *3) Rs.36. The investment value can go up or down depending on the value of the fund’s assets. Mutual fund is set up in the form of a trust which has sponsor, trustees, asset management company (AMC). In India, the mutual fund is ed with SEBI. In 1992, Securities and Exchange Board of India (SEBI) was ed with the objective to protect the interest of investors. The below two charts describe broadly the working of a mutual fund:

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MUTUAL FUND FLOWCHART

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3.2STRUCTURE OF INDIAN MUTUAL FUND In India, the mutual fund industry is highly regulated with a view to imparting operational transparency and protecting the investor’s interest. In India the structure of a mutual fund is determined by Security Exchange Board of India (SEBI) regulation. These regulations require a fund to be established in the form of a trust under the Indian Trust Act 1882. A mutual fund is typically externally managed it is now an operating company with employees in the traditional sense. Instead a fund relies upon third parties either d organizations or independent contractors to carry out its business activities such as investing in securities. A mutual fund operates through a four-tier structure. The four parties that are required to be involved are sponsor, board of trustees, Asset Management Company.  Sponsor: A sponsor is a body corporate who establishes a mutual fund. It may be one person acting alone or together with another body corporate. Additionally, the sponsor should contribute at least 40% to the net worth of the AMC. However if any person holds 40% or more of the net worth of an AMC shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria specified in the Mutual Find Regulation.

 Board of Trustee: Mutual fund requires to have an independent board of Trustee, where two third of the trustees should be independent person who are not associated with the sponsor in any manner. The board of trustees of the trustee company holds the property of the mutual fund in trust for the benefit of the unit holders. The board of trustees is responsible for protecting the unit holder’s interest.

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 Asset Management Company: The role of Asset Management Company is highly significant in the mutual fund operation. They are the fund managers i.e. they invest the investors money in various securities ( equity, debt and money market instruments) after proper research of market conditions and the financial performance of

individual companies and

specific securities in the efforts to meet or beat average market return and analysis. Mutual funds provide an economical way for the average investor to obtain professional money management and diversification of investments much like large institution and wealthy investors receive. They also look after the istrative functions of a mutual fund for which they charge management fee.  Custodian: Mutual fund is required by law to protect their portfolio securities by placing them with a custodian. Nearly all mutual funds use qualified bank custodians. Only a ed custodian under the SEBI regulation can act as a custodian to a mutual fund.

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3.3ADVANTAGES OF MUTUAL FUNDS There are both advantages and disadvantages to investing in mutual funds. Following are some of the advantages of investing in Mutual Funds. One of the main reasons for the creation of mutual funds was to give investors who wanted to make smaller investments access to professional management. However, mutual funds offer many advantages to investors of all types. 

Diversification: Investing in a single stock or bond is very risky; owning a mutual fund that holds numerous securities reduces risk significantly. Mutual funds provide diversification, which is crucial to a well-balanced portfolio. Diversification is particularly crucial in small s.

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Professional management: It is difficult and time consuming to pick the best stocks and bonds for your portfolio and to try to beat the benchmarks on these stocks and bonds. Allowing a professional mutual fund manager to make decisions about stocks and bonds for you can save you time and frustration.

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Minimal transaction costs: Buying individual stocks and bonds is expensive in of transactions costs. Mutual funds offer the advantage of economies of scale in purchases and sales because mutual fund transactions are typically large. “Economies of scale” refers to the fact that mutual fund costs may decrease as the mutual fund’s asset size increases, since brokers may charge lower fees to try to get more of the mutual fund’s business.

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Liquidity: Money invested in mutual funds is generally liquid. You can usually sell your shares and collect money from open-ended funds (funds that can create and redeem shares on demand), usually within two business days. If the open-end funds are no-load funds, investors are not required to pay transactions costs when you buy or redeem shares. Closed-end funds are funds that trade on stock exchanges or over the counter that may trade above or below its net asset value or the value of the fund’s investments.

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Flexibility: Owning individual stocks and bonds does not allow for much flexibility in of liquidity, or the ability to access your money. You cannot write checks on individual stocks and bonds. However, many mutual funds allow for more flexibility by allowing you to write checks on your .

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Low up-front costs: Certain types of mutual funds have financial benefits that make them less expensive than individual stocks and bonds. For example, no-load mutual funds can be sold and redeemed without incurring any sales charges, and open-ended mutual funds can be purchased at the fund’s net asset value (NAV). A fund’s NAV is calculated daily by subtracting the fund’s liabilities from its assets and dividing the resulting amount by the number of outstanding shares. The benefit of open-ended funds is that you do not need to pay a or a sales charge to purchase or sell the shares.

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Service: Mutual fund companies generally have good customer service representatives who can answer your questions and help you open s, purchase funds, and transfer funds. Mutual fund companies may also offer other services, including automatic investment and withdrawal plans; automatic reinvestment of interest, dividends, and capital gains; wiring funds to and from your s; access via phone; optional retirement plans; check-writing privileges; bookkeeping services;

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Simplicity – Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

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Disadvantages of Mutual Fund There are some Disadvantages of investing through Mutual Funds 

No control over Costs – The biggest source of AMC income is generally from the entry & exit load which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.

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Dilution - Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

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Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

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No Tailor made Portfolios: Investors who invest on their own can have their own portfolios of shares, bonds and other securities. Investing through mutual funds means that he delegates this decision to the fund managers. The very high net worth individuals or large corporate investors may find this to be a constraint to achieving their objectives

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3.4 FUTURE OUTLOOK Mutual Fund in India has emerged as a critical institutional linkage among various financial segments like savings, capital markets and the corporate sector. As various taxes the government offers incentives and benefits on mutual funds investment, their role in the mobilization of savings and the development of the economy will assume more significance. They provide much needed impetus to direct and indirect to the corporate sector. Above all, mutual funds having given a new direction to the flow of personal savings and enables small medium investors in remote rural and semi rural area to reap the benefits of stock markets investments. Indian mutual funds are thus playing a very crucial development role in allocating resources in the emerging market economy. A perceptible change is sweeping across the mutual fund landscape in India. Factors such as changing investors need and their appetite for risk , emergence of internet as a powerful servicing platform and above all the growing commoditization of mutual fund products are acting as major catalysts putting pressure on industry players to formulate strategies to stay the course. In the changed scenario today product innovation is increasingly becoming one of the key determinants of success. Building and sustaining a powerful brand is also becoming an issue of paramount importance. Increased deregulation of the financial markets in the country coupled with the introduction of derivative products offer tremendous scope for the industry to design and sell innovative schemes to suit individual customer needs. Distribution has taken a whole new mode like banks, post offices and co-branded credit cards are bound meaning with the introduction of automated trading clearing and settlement system. Factors such as cross selling through modes like banks, post offices and co-branded credit cards are bounds to play decisive role in the success of the industry players. Globally it has seen that the top ten players for a greater pie of the market hare. With competition getting intense in the domestic industry churning in the industry looks imminent.

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3.5 Important steps taken by SEBI for regulating mutual funds in India (1) Formation: Certain structural changes have also been made in the mutual fund industry, as part of which mutual funds are required to set up asset management companies with fifty percent independent directors, separate board of trustee companies, consisting of a minimum fifty percent of independent trustees and to appoint independent custodians. This is to ensure an arm’s length relationship between trustees, fund managers and custodians, and is in contrast with the situation prevailing earlier in which all three functions were often performed by one body which was usually the sponsor of the fund or a subsidiary of the sponsor. Thus, the process of forming and floating mutual funds has been made a tripartite exercise by authorities. The trustees, the asset management companies (AMCs) and the mutual fund shareholders form the three legs. SEBI guidelines provide for the trustees to maintain an arm’s length relationship with the AMCs and do all those things that would secure the right of investors. With funds being managed by AMCs and custody of assets remaining with trustees, an element of counter-balancing of risks exists as both can keep tabs on each other. (2) Registration: In January 1993, SEBI prescribed registration of mutual funds taking into track record of a sponsor, integrity in business transactions and financial soundness while granting permission. This will curb excessive growth of the mutual funds and protect investor’s interest by ing only the sound promoters with a proven track record and financial strength. In February 1993, SEBI cleared six private sector mutual funds viz. 20th Century Finance Corporation, Industrial Credit & Investment Corporation of India, Tata Sons, Credit Capital Finance Corporation, Ceat Financial Services and Apple Industries. (3) Documents: The offer documents of schemes launched by mutual funds and the scheme particulars are required to be vetted by SEBI. A standard format for mutual fund prospectuses is being formulated. MUTUAL FUND

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(4) Code of ment: Mutual funds have been required to adhere to a code of ment. (5) Assurance on returns: SEBI has introduced a change in the Securities Control and Regulations Act governing the mutual funds. Now the mutual funds were prevented from giving any assurance on the land of returns they would be providing. However, under pressure from the mutual funds, SEBI revised the guidelines allowing assurances on return subject to certain conditions. Hence, only those mutual funds which have been in the market for at least five years are allowed to assure a maximum return of 12 per cent only, for one year. With this, SEBI, by default, allowed public sector mutual funds an advantage against the newly set up private mutual funds. As per basic tenets of investment, it can be justifiably argued that investments in the capital market carried a certain amount of risk, and any investor investing in the markets with an aim of making profit from capital appreciation, or otherwise, should also be prepared to bear the risks of loss. (6) Minimum corpus: The current SEBI guidelines on mutual funds prescribe a minimum start-up corpus of Rs.50 corer for a open-ended scheme, and Rs.20 corer corpus for closed-ended scheme, failing which application money has to be refunded. The idea behind forwarding such a proposal to SEBI is that in the past, the minimum corpus requirements have forced AMCs to solicit funds from corporate bodies, thus reducing mutual funds into quasi-portfolio management outfits. In fact, the Association of Mutual Funds in India (AMFI) has repeatedly appealed to the regulatory authorities for scrapping the minimum corpus requirements.

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(7) Institutionalization: The efforts of SEBI have, in the last few years, been to institutionalize the market by introducing proportionate allotment and increasing the minimum deposit amount to Rs.5000 etc. These efforts are to channel the investment of individual investors into the mutual funds. (8) Investment of funds mobilized: In November 1992, SEBI increased the time limit from six months to nine months within which the mutual funds have to invest resources raised from the latest tax saving schemes. The guideline was issued to protect the mutual funds from the disadvantage of investing funds in the bullish market at very high prices and suffering from poor NAV thereafter. (9) Investment in money market: SEBI guidelines say that mutual funds can invest a maximum of 25 per cent of resources mobilized into money-market instruments in the first six months after closing the funds and a maximum of 15 per cent of the corpus after six months to meet short term liquidity requirements. Private sector mutual funds, for the first time, were allowed to invest in the call money market after this year’s budget. However, as SEBI regulations limit their exposure to money markets, mutual funds are not major players in the call money market. Thus, mutual funds do not have a significant impact on the call money market. (10) Valuation of investment: The transparent and well understood declaration or Net Asset Values (NAVs) of mutual fund schemes is an important issue in providing investors with information as to the performance of the fund. SEBI has warned some mutual funds earlier of unhealthy market

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(11) Inspection: SEBI inspect mutual funds every year. A full SEBI inspection of all the 27 mutual funds was proposed to be done by the March 1996 to streamline their operations and protect the investor’s interests. Mutual funds are monitored and inspected by SEBI to ensure compliance with the regulations.

(12) Underwriting: In July 1994, SEBI permitted mutual funds to take up underwriting of primary issues as a part of their investment activity. This step may assist the mutual funds in diversifying their business.

(13) Conduct: In September 1994, it was clarified by SEBI that mutual funds shall not offer buy back schemes or assured returns to corporate investors. The Regulations governing Mutual Funds and Portfolio Managers ensure transparency in their functioning. (14) Voting rights: In September 1993, mutual funds were allowed to exercise their voting rights. Department of Company Affairs has reportedly granted mutual funds the right to vote as full-fledged shareholders in companies where they have equity investments.

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3.6HOW IS A MUTUAL FUND SET UP? STRUCTURE OF MUTUAL FUNDS

A mutual fund is set up in the form of a trust. There are various parties involved in mutual fund that can be categorized as follows: Sponsor, Trustee, AMC, Custodians, Distributors, Registrar and investors. Legal Framework: Across the world, the mutual fund sector is viewed as a critical mechanism to channel investor funds into the capital market. Since these investors are often not so well qualified to invest, the mutual fund business is highly regulated. Regulations vary from country to country. But, broadly, they provide for: • Checks and balances in legal structures • Pre-qualifications to start a mutual fund • Permissible schemes and investments • Control over marketing process • Level of operational flexibility In India, Association of Mutual Funds in India (AMFI) is a body that represents the interests of the industry. All the mutual funds in India are of AMFI.

Parties involved in a Mutual fund: 

The trust is established by a sponsor or more than one sponsor who is like



promoter of a company. Trustees: The trustees of the mutual fund hold its property for the benefit of the unit holders. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent.



Asset Management Company (AMC) approved by SEBI manages the funds



by making investments in various types of securities. Custodian: who is ed with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general

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power of superintendence and direction over AMC. They monitor the 

performance and compliance of SEBI Regulations by the mutual fund. Distributors: have a key role in selling suitable types of units to their clients i.e. the investors in the schemes. They need to the prescribed certification



test, and with AMFI. Registrars & Transfer Agents: maintain the s of investors for both the purposes of investment and disinvestment. They handle investor related services such as issuing units, redeeming units, sending fact sheets, annual



reports and so on. Investors: whoever invests in the units of mutual fund is an investor. He is the key person for the mutual fund industry.

All mutual funds are required to be ed with SEBI before they launch any scheme.

3.7 TYPES OF MUTUAL FUNDS

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Types Of Mutual funds/Schemes: Classification based on Structure: 1. Open-ended Funds: The funds which allow the flexibility to purchase & redeem units anytime during the course of the funds are known as Open-ended funds. The unit-holders of these funds purchase units of the scheme from the AMC and the AMC will have to purchase units back when an investor wants to redeem its units. The transaction takes on the NAV of the day. 2. Closed-ended funds: The fund issues units for a specified period & units cannot be purchased or sold to the AMC until maturity. The fund invests in instruments which match its maturity. These funds do not provide high liquidity but some funds may be traded on the exchange to provide liquidity to unit holders. FMPs are the best example of close-ended funds

Classification based on Investment type: 1.

Equity Funds

2.

Debt Funds

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3.

Hybrid Funds

3.Equity Funds: Equity Funds are schemes that invest in equity stocks and equity related instruments. These can be sub-categorized as below: • Index Funds: This type of fund represents the broad market performance by investing in similar composition of stocks as that of an index like Nifty. These funds replicate the index and move along with the index. • Dividend Yield Funds: A dividend-yield fund invests in stocks that offer attractive returns in the form of dividends • Diversified Funds: They invest in wide variety of stocks across different industries or sectors: services, manufacturing, infrastructure, technology, etc. • Thematic Funds: These funds are designed around specific themes. These funds invest in line with the theme. Say, a fund with ‘Green Energy’ theme would invest only in stocks of companies which produce green power. Infrastructure is a popular thematic fund. • Sector Funds: These funds invest in stocks of companies of a particular sector which it expects to be growing. Say, a FMCG fund would invest in stocks of FMCG companies only. • ELSS: Equity Linked Savings Scheme Mutual Funds are aimed at enabling investors to avail tax rebates under Section 80 C of the Income Tax Act.

4.Debt Funds: Debt Funds invest in fixed-interest securities bonds, CD/s & thus enjoy lower risk. • Liquid Funds: Liquid funds invest in short-term (maturing within one year) interest bearing/discount instruments. These securities are highly liquid and provide safety of investment, thus making liquid funds the safest investment option when compared with other mutual fund schemes. They carry no exit load. • Gilt Funds: Gilt Funds invest in sovereign papers issued by the central government and the state governments. The maturity period in these funds is medium to long-term depending upon an investor’s goals. • Income Funds: Income/Bond Funds invest in medium-term and long term instruments like government securities, corporate bonds, debentures, fixed deposits MUTUAL FUND

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• FMPs: Fixed Maturity Plan (FMP) is a close-ended scheme, and has an exit load, if redeemed, before the maturity period. Such schemes can have a maturity period of three months to three years. It generally selects an instrument, which corresponds to its maturity period. • Floating Rate funds: These Funds with an investment objective to predominantly invest in short term floating rate instruments • Short term funds: Short-term Funds invest in instruments maturing between one to three years. They are more liquid than income/gilt funds.

5. Hybrid Funds: Hybrid schemes, also referred to as balanced schemes, invest in a mix of equity and debt instruments. A hybrid scheme may be equity oriented or debt oriented or has a variable asset allocation. • Equity oriented Schemes: An equity oriented hybrid scheme is tilted in favor of equities which may for about 60 percent of the portfolio, the balance being invested in debt instruments. • Debt Oriented Schemes: A debt oriented hybrid scheme is tilted in favor of debt instruments. The most popular debt schemes I India are monthly income plans which typically have debt component of 85-90 percent and equity component of 10-15 percent

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3.8MUTUAL FUND INVESTING STRATEGIES 

Systematic Investment Plans (SIPs)

These are best suited for young people who have started their careers and need to build their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in the Mutual fund scheme the investor has chosen, an investor opting for SIP in xyz Mutual Fund scheme will need to invest a certain sum on money every month/quarter/half-year in the scheme. 

Systematic Withdrawal Plans (SWPs)

These plans are best suited for people nearing retirement. In these plans, an investor invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at regular intervals . 

Systematic Transfer Plans (STPs)

They allow the investor to transfer on a periodic basis a specified amount from one scheme to another within the same fund family – meaning two schemes belonging to the same mutual fund.

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3.9DIFFERENT

MODES

OF

RECEIVING

THE

INCOME

EARNED FROM MUTUAL FUND INVESTMENTS

 Growth Plan In this plan, dividend is neither declared nor paid out to the investor but is built into the value of the NAV. In other words, the NAV increases over time due to such incomes and the investor realizes only the capital appreciation on redemption of his investment.

 Income Plan In this plan, dividends are paid-out to the investor. In other words, the NAV only reflects the capital appreciation or depreciation in market price of the underlying portfolio.

 Dividend Re-investment Plan In this case, dividend is declared but not paid out to the investor, instead, it is reinvested back into the scheme at the then prevailing NAV. In other words, the investor is given additional units and not cash as dividend.

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3.10 TYPES OF RISKS ASSOCIATED WITH MUTUAL FUNDS: Investing in mutual funds as with any security, does not come without risk. One of the most basic economic principles is that risk and reward are directly correlated. In other words, the greater the potential risk, the greater the potential return. The types of risk commonly associated with mutual funds are:

 Market Risk: Market risk relate to the market value of a security in the future. Market prices fluctuate and are susceptible to economic and financial trends, supply and demand, and many other factors that cannot be precisely predicted or controlled.  Political Risk: Changes in the tax laws, trade regulations, istered prices etc. is some of the many political factors that create market risk. Although collectively, as citizens, we have indirect control through the power of our vote, individually as investors, we have virtually no control.  Inflation Risk: Inflation or purchasing power risk, relates to the uncertainty of the future purchasing power of the invested rupees. The risk is the increase in cost of the goods and services, as measured by the Consumer Price Index.  Interest Rate Risk: Interest Rate risk relates to the future changes in interest rates. For instance, if an investor invests in a long term debt mutual fund scheme and interest rate increase, the NAV of the scheme will fall because the scheme will be end up holding debt offering lowest interest rate.

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 Business Risk: Business Risk is the uncertainty concerning the future existence, stability and profitability of the issuer of the security. Business Risk is inherent in all business ventures. The future financial stability of a company cannot be predicted or guaranteed, nor can the price of its securities. Adverse changes in business circumstances will reduce the market price of the company’s equity resulting in proportionate fall in the NAV of mutual fund scheme, which has invested in the equity of such a company.  Economic Risk: Economic Risk involves uncertainty in the economy, which, in turn can have an adverse effect on a company’s business. For instance, if monsoons fail in a year, equity stocks of agriculture based company’s will fall and NAVs of mutual funds, which have invested in such stocks, will fall proportionately.

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CHAPTER-4 RESEARCH METHODOLOGY:

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4.1 RESEARCH METHODOLOGY: Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. In it we study the various steps that are generally adopted by a research in studying his research problem along with the logic behind them. Methodology refers to methods adopted to carry out the research and steps adopted to solve the problem finding solution.

4.2 Type of the study •Qualitative Study. The type of the study or research used in this project is a qualitative research design. It mainly involves surveys and facts findings enquiries of different kinds. The main objective of qualitative research is to describe the state of affairs as it exists at present. The major purpose of qualitative research is a description of the state of the affairs, as it exists at present. Thus a qualitative study is a fact finding investigation with adequate interpretation. It is the simplest type of research. It focuses on particular aspects or dimensions of the problem studied. It is designed that it gathers qualitative information and provides information for formulating more sophisticated studies. The criteria for selecting this particular design are that, the problem of the project must be described and not arguable. The data collected is amenable to statistical analysis and has accuracy and significance. It is possible to develop to valid standards of comparison. It tends itself to the verifiable procedure of collection and analysis of data. Qualitative study objective aim at identifying the various characteristics of a company problem under study.

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4.3 TYPE OF DATA: 

Primary Data:

The collection of data true questioner from the consumer or the people who will become the possible customer for the product. The sample is collected from the different age group. And field back from the customers 

Secondary data:

The data which is used for the research is secondary data. The secondary data is the data which is duplicate of primary data. “The data (published or unpublished) which have already been collected and processed by some agency or person and taken over from there and used by any other agency for their statistical work are termed as person and taken over from there and used by any other agency for their statistical work are termed as secondary data” as far as second agency is concerned. The second agency if and when it publishes and files such data becomes the secondary source to anyone who later uses these data. In other words secondary source is the agency who publishes for use by others the data which was not originally collected and processed by it.

Sources of data Unpublished sources: i. The data can be governments or private offices can be collected from these are unpublished data. ii. The research work, the secret documents. Published sources: i. Central and state government publication publishes the various statistics like crop production, population, statistic, wages expenses.

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ii. The commerce association, commerce and trade association, Indian chamber of commerce federation are publishes several data. iii. News paper, journals, periodicals etc. publishes the several data. iv. Some private organization, research berceuse, universities publishes several data’s.

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CHAPTER-5 Data Analysis And Interpretation

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Q1. Age of the People?

It was found that from 50customers who have mutual funds there ae around 10 i.e., 20% of them comes under the age of 20-30 years similarly for 30-40 years there are 40% i.e,20 of them, for 40-50 years there are 10% i.e., 5 and for more than 60 years are are 10.

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ssQ2. GENDER

During the survey it was found that 35 out of 50 were male and 15 of them were female

Q3).OCCUPATION

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Q4. What is your monthly family income approximately ?

It was found that 70% of them have monthly income of 60000-100000

Q 5. While investing your money, which factor will you prefer most?

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Q6 . Are you aware about Mutual Funds and their operations

Q7. If yes, how did you know about Mutual Fund?

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Q8. Have you ever invested in Mutual Fund?

Q9. If yes, in which Mutual Fund you have invested?

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Q 10. While investing in Mutual Funds, which mode of investment will you prefer?

Q11. Mutual funds are good form of investment for people , who don’t have enough knowledge about share market?

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Q12. How does you rate knowledge about Mutual fund?

Q13.What is your time horizon for investment?

Q14) What type of investment do you currently have? Please mark all applicable.

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 CONCLUSION Mutual funds are one of the most highly growing products in financial services market. Mutual funds are suitable for all types of investors from risk adverse to risk bearer. Mutual funds have many options of return, risk free return, constant return, market associated return etc. Mutual funds are suitable to all age of investors, businessmen, salary person, etc. In today’s scenario the market is very risky so the investors should be aware in returns on the investment. Investors need not to be expert in equity market; mutual funds can satisfy their need. Fund managers are expert in this area and invest fund in well diversified portfolio, high return with low risk is possible in mutual fund. In today’s world, investors are showing more trust in mutual fund than any other financial product. There is no need of a financial consultant, if you have good knowledge of mutual funds and their type to invest.

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ANNEXURE PART ‘ A’ (1) Name: Mrs/Ms/Mr _______________________________________ (2) Age a) Between 20 – 30 years b) Between 30 – 40 years c) Between 40 – 50 Years d) Between 50 – 60 Years e) More than 60 Years

(3) No. _______________________________

(4) Profession: _______________________________________

(5) .Gender: a) Male b) Female

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Part B (6) Qualification a) b) c) d)

SSC HSC GRADUATION POST GAADUATION

(7) Occupation a) Self employed b) Professional c) Student

(8) What is your monthly family income approximately a) b) c) d)

Up to 10,000 15,000- 30,000 30,000-60,000 60,000-1,00,000

(9) While investing your money, which factor will you prefer? a) b) c) d)

Liquidity Low risk High Return Trust

(10) Are you aware about Mutual Funds and their operations a) Yes b) No

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(11) If yes, how did you know about Mutual Fund? a) b) c) d)

ment Peer Group Banks Financial Advisors

(12) Have you ever invested in Mutual Fund? a) Yes b) No

(13) If yes, in which Mutual Fund you have invested? a) Mahindra b) HDFC c) Kotak d) Reliance e) Other

(14) When you invest in Mutual Funds which mode of investment will you prefer? a) One Time Investment b) Systematic Investment Plan (SIP)

(15)How do you rate your knowledge about Mutual fund? a) Extensive. b) Good. c) Limited. d) None.

(16). Mutual fund are good form of investment , for people , who don’t have enough knowledge about share market? a) Strongly agree MUTUAL FUND

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b) c) d) e)

Agree No opinion Disagree Strongly disagree

(17). Time Horizon for investment? a) b) c) d)

Less than 6 months 6 months – 1 year 1 year – 3 year More than 3 year

( 18). What type of investment do you currently have? Please mark all application. a) b) c) d) e)

Mutual fund Property Fixed deposit Bonds Equity

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