DEVELOPMENT OF MUTUAL FUND INDUSTRY IN THE LAST DECADE

A PROJECT SUBMITTED TO THE BHAVNAGAR UNIVERSITY OF BHAVNAGAR IN PARTIAL FULFILLMENT FOR THE DEGREE OF BECHEOLR OF BUSINESS ADMINISTRATION

BY NIKITA BHATT

GUIDED BY MS. POOJA MEHTA

SWAMI SAHAJANAND COLLEGE OF COMMERCE AND MANAGEMENT BHAVNAGAR UNIVERSITY BHAVNAGAR

BATCH:2008-11

PREFACE

The economic growth of a country is, to a great extent, linked with the growth of capital market which depends on the savings of the nation. In India, saving rate is law. The common man has not acquired the necessary know how for the selection of appropriate type of investment. Therefore, the savings are mainly directed towards bank deposits/ real estate/ gold etc. which have more capital appreciation & less scope for regular periodic return. The main attraction for him is the less risk and good return. If he finds any organization of repute which have necessary expertise to select appropriate avenues of investment, he will diverse his investment from -the sectors which have no scope for regular periodical return on investment to -the sectors having more scope of regular return on investment. In these circumstances, there is great scope for Mutual Funds to operate which would not only assure a reasonable capital appreciation on his investment but also provide a regular periodic return. In this present era, common man trusts on Mutual Funds. In the last decade, 2000 to 2009, Mutual Fund Industry has grown rapidly in India. In this research project, basic aspects of mutual fund are explained. Latest figures of recent Mutual Fund Industry are given. The main purpose of this research is to study about the recent development of Mutual Fund Industry in India as title of my project indicates.

ACKNOWLEDGEMENTS
Any accomplishment requires the effort of many people and this work is not different. At the outset, I would like to express my sense of gratitude to our college Swami Sahajanand College of Commerce & Management and especially Bhavnagar University for having me wonderful opportunity to make research project and to get practical knowledge from it. I would also like to express my heart-felt thanks to Mr. Naitik Shah, proprietor of Shah Investment Consultants for his practical guidance and support for doing research on Mutual Fund which was quite new subject for me. I express my special gratitude to Mr. Suresh Savani, Managing Trustee of SSCCM and our principal Ms. Hetal Mehta for giving me permission to do research work on Mutual fund. I think I will be failing in my duty if I do not thank our co-coordinator & my project guide Ms. Pooja Mehta who gave continuous guidance about project work. Finally, I would also like to thank to GOD who always gives me strength to do better for my bright career. Nikita H Bhatt Roll no: 15 T.Y.B.B.A.

EXECUTIVE SUMMARY
First I have put company profile of SHAH INVESTMENT

CONSULTANTS from which I have taken training for this project report. Some theoretical aspects are described about Mutual fund industry. That includes concept of Mutual Fund, classification of Mutual Fund, Mutual Fund set up, working of Mutual Fund, calculation of NAV, regulators of Mutual Fund in India, advantages and disadvantages of Mutual Funds. Here, my research methodology is described. Some limitations are also put by me. Overall development of Mutual Fund industry in the last five decades is given. Brief introduction of major Mutual Fund companies with their AUM is presented. Secondary data analysis is done by me and that shows that the vast changes and even increment have taken place in Mutual fund industry in India during last decade that is clearly shown in secondary data tables. From that it can be analyzed that in the last decade, redemption has more increased than sales. If we consider change in the no. of scheme in the last 10 years, there was a vast change in the no. of open ended schemes. In the last decade, overall increase in the total AUM was about 600% which shows the heavy growth of Mutual Fund industry.

Sr No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 18.1) 18.2) 18.3)

Particular
Preface Acknowledgement Executive Summary Company profile Concept of Mutual Fund What is Mutual Fund? Definition of Mutual Fund Working of Mutual Fund Net asset value Classification of Mutual Fund Types of returns Mutual Fund set up Regulators of Mutual Fund in India Mutual Fund vs. other investment Advantages of Mutual Fund Disadvantages of Mutual Fund SWOT analysis Research methodology Meaning of Research objectives of Research Types of RM

Page No.
2 3 4 8 11 13 14 15 16 17 22 23 26 29 30 32 34 36 37 38

19 20 21 22 23 24 25

18.4) Process of research 18.5) Research methodology 18.6) Limitations of the study Development of Mutual Fund in the last 5 decades Major Mutual Fund companies of India Secondary data analysis Findings Recommendations Conclusion Bibliography

40 41 42 43 48 59 74 75 76 77

COMPANY PROFILE
NAME ADDRESS : SHAH INVESTMENT CONSULTANTS : 23/24, Kaveri Complex, Navapara, Bhavnagar 364001 CONTACT NO. : 0278-2425984, 0278-2510714 98989 99811, 9825205006 FORM OF BUSINESS : Private Consultants

NAME OF MANAGING PARTNERS : Mr. Mukesh P Shah, Mr. Naitik M Shah ESTABLISHMENT YEAR SERVICES : 1979 : Mutual Funds, LIC, PPF, Share Trading Personal Portfolio Management Services Advisers for Insurance, Mutual funds,Planning for - Tax Benefits. Chief Agent & Franchisee of Unit Trust of India at Bhavnagar. Franchisee of Reliance Securities at Bhavnagar

PLACES OF BUSINESS : Bhavnagar, Jamnagar, Vadodara and Mumbai . INFRASTRUCTURE FACILITIES AVAILABLE: Spacious, Fully Furnished and air conditioned office premises situated at prime NAVAPARA location of Bhavnagar and at other cities. Fully computerized operations with state of the art Internet, Laptop etc. HUMAN RESOURCE : technology. Like

Day to day operations being looked after by a team of dedicated & young Professionals under the able and visionary guidance of Mr.Naitik Shah who himself is a hard core professional in the field of FINANCE AND INVESTMENTS.

CLIENTELE : Shah investment consultants services over 1000 high net worth Companies / Individuals, Top Company Senior Executives, Doctors, Advocates, Businessman, etc. QUALITY OF SERVICE :

Advise the strategic INVESTMENT PLANNING taking into account future needs of resource requirements for purposes like marriages, children education, etc. More so particularly, Shahs Income Protection / Retirement Plans help you get a predetermined amount at a particular age when you so wish to retire from your business/service. The companies' motto is that, "OUR CUSTOMERS RIGHT IS TO FORGET AND OUR JOB IS TO REMIND".

CONCEPT OF MUTUAL FUND

Of late, mutual funds have become a hot favorite of millions of people all over the world. The driving force of mutual funds is the safety of the principal guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. People will prefer Mutual funds to bank deposits, life insurance and even bonds because with a little money, they can get into the investment game.

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Thus, Mutual funds act as a gateway to enter into the big companies hitherto inaccessible to an ordinary investor with his small investment. In short, Originally mutual funds were heralded as a way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial pages of the Wall Street Journal, all you have to do is buy a mutual fund and you'd be set on your way to financial freedom. As you might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality, they haven't always delivered. Not all mutual funds are created equal, and investing in mutual fund isn't as easy as throwing your money. Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Thus in brief, a mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital & money markets instruments such as shares, debentures & other securities. However, unlike shareholders in a company, the shareholders in a MF do not have any voting rights.

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WHAT IS A MUTUAL FUND?

A Mutual Fund is a pool of money, which is collected from many investors and is invested by an asset management company to achieve some common objective of the investors.

Investor Investor A Ainvests invests Rs.5000. Rs.5000. A Investor Investor F Finvests invests Rs.5000. Rs.5000. Investor InvestorB B invests invests Rs.5000. Rs.5000.

B POOL OF MONEY Rs.30000

Investor Investor E Einvests invests Rs.5000. Rs.5000.

E D Investor Investor D Dinvests invests RS.5000. RS.5000.

Investor InvestorC C invests invests RS.5000. RS.5000.

If A has Rs. 5000 to invest, it may not fetch very much on its own. But, when it is pooled with Rs. 5000 each from a lot of other people i.e.B,C,D,E,& F, then, A can create a big fund large enough to invest in a wide varieties of shares and debentures on a commanding scale and thus, to enjoy the economies of large scale operations. Thus, It works on the principle of small drops of water make a big ocean.

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DEFINITION OF MUTUAL FUND : THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds) REGULATIONS, 1996 defines a mutual fund as a " a fund establishment in the form of a trust to raise money through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments." A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. Investing in mutual fund is an experts job in the present scenario. A systematic investment in this instrument is bound to give rich dividends in the long-run. That is why over 2 crore investors have faith in mutual funds. Mutual Fund units are investment vehicles that provide a means of participation in the stock market for people who have neither the time, nor the money, nor perhaps the expertise to undertake direct investment in equities successfully. On another level, they also provide a route into specialist markets where direct investment often demands both more time and more knowledge than an investor or his financial adviser may possess.

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WORKING OF A MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

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NET ASSET VALUE

It is the amount which a unit holder would receive if the mutual fund were wound up. An investor in mutual fund is a part owner of all its assets & Liabilities. Returns to the investor are determined by the interplay of two elements net asset value and cost of mutual fund. Net asset value is the mutual funds calling card. It is the basis for assessing the return that an investor has earned. There are thee aspects which need to be highlighted. 1) It is the net value of all assets less liabilities. NAV represents the market value of total assets of the fund less total liabilities attributable to those assets. 2) NAV changes daily. The value of assets and liabilities changes daily. NAV today will not be NAV tomorrow or day later. 3) NAV is computed as a value per unit of holding. The main activity of a mutual fund is investing the money raises from unit holders. Investments are assets that provide benefits eligible for distribution to unit holders or assets that appreciate in value. The evaluation of the performance of a Mutual fund rests largely on the reported results of such activity. Investment of mutual fund is long term. The RBI and SEBI guidelines provide that Mutual funds should adopt market value approach and not give credence to gains by way of appreciation in value until realized. Computation of NAV Net Asset Value (NAV): It is value of net assets of the funds. The Investors subscription is treated as the unit capital in the balance sheet of the fund and the investments on their behalf are treated as assets. The funds net assets are defined as the assets less liabilities. NAV= Net assets of the scheme Numbers of units outstanding. Where Net assets of the scheme = Market value of the Investment+ Receivables+ Other accrued income+ other assets- Accrued Expenses- Other payable- Other Liabilities.

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CLASSIFICATION OF MUTUAL FUNDS

Different products offered by a mutual fund are known as schemes or funds. Mutual fund schemes can be classified in several ways. (1) ACCORDING TO MATURITY PERIOD 1) Open-Ended Funds: An open ended fund gets its name from the fact that it does not have a maturity date. The end date of the fund is open. An open ended fund offers units to investors for the first time during the new fund offer (NFO) [Mutual funds are offered for the first time to investors is an NFO]. Investors can buy and sell units of an open ended fund on a continuous basis. The price per unit is determined by the Net asset value (NAV) of the open ended fund. 2) Close-Ended Funds: Close-ended mutual funds have a specified maturity date. They are created for a specific duration generally for the period of 3 years to 10 years which is specified at the start of the fund. It has fixed number of shares/units outstanding. After the initial issue, they trade on the stock exchanges. The price of the shares/units is determined by the supply of and demand of the shares/units. 3) Interval funds: These funds combine the features of both open-ended and close-ended funds wherein the fund is close-ended for the first couple of years and openended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity.

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(2) ACCORDING TO INVESTMENT OBJECTIVE 1) Income Funds: Income funds are named appropriately. Their purpose is to provide current income on a steady basis. When referring to mutual funds, the terms "fixedincome," "bond," and "income" are synonymous. These terms denote funds that invest primarily in government and corporate debt. The primary objective of these funds is to provide a steady cash flow to investors. As such, the audience for these funds consists of conservative investors and retirees. 2) Growth Funds: These funds aim for capital gains and hence invest large proportion of their funds in equity shares with high growth potential. They are also called equity funds. Generally, the investment objective of this class of funds is long-term capital growth with some income. There are, however, many different types of equity funds because there are many different types of equities. 3) Balanced Funds: Balanced funds combine the objectives of earning current income (income fund) and capital appreciation (growth funds) so their portfolio consists both equities and bonds. The objective of these funds is to provide a "balanced" mixture of safety, income, and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed-income and equities. A typical balanced fund might have a weighting of 60% equity and 40% fixed-income. 4) Money market mutual fund: These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with

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comparatively higher returns. These funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods. The money market consists of short-term debt instruments, mostly T-bills. This is a safe place to park money. One may not get great returns, but one will not have to worry about losing principal. (3)ACCORDING TO NATURE OF INVESTMENT 1) Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their 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, thus Equity funds rank high on the risk-return matrix. 2) Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide 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 debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

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Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. Monthly Income Plans (MIPs): Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial 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 of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

3) Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with predefined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns. (3) OTHER SCHEMES 1) Tax Saving Funds : Tax saving funds are targeted to the investors in high tax brackets. Income from these funds is tax exempt. Section 80C of the Income Tax Act gives benefit of the Tax Exemption.

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2) Index Funds: There are passive funds that invest in the shares that constitute a particular market index and in the same proportion as they are represented in the index. These funds take only overall market risk. 3) Sector based Fund: Mutual funds may offer opportunities to investors to invest in securities of specific sectors. For example, mutual funds have available several sector-based funds like Infrastructure, Technology, and pharmaceutical to investors. If an investor likes shares of the fast moving consumer goods (FMCG) companies, he can buy sector funds that invest in FMCG shares. Investing in sector funds adds diversification to the investors portfolio.

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TYPES OF RETURNS
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

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MUTUAL FUND SET UP

Mutual funds may be structured either as a company in which investors hold shares or as a trust in which investors are the beneficiaries. In USA, where Mutual Fund first began, they are set up as investment companies. In the UK, open-ended funds are created in the form of unit trusts while close-ended funds are set up as investment trusts or companies. In India, Mutual Fund are created as trusts. The investors are the beneficial owners of the investments held by the trust. The structure to be followed by mutual funds in India is laid down in SEBI (Mutual Fund ) Regulations,1996. Mutual Fund in India follow a three- tier structure of sponsor, trust and asset management company. SPONSOR The sponsor is the promoter of a Mutual Fund , who sets up the trust and the AMC, appoints the custodian, board of trustees and the board of directors of the AMC. The sponsor seeks regulatory approval for the Mutual Fund Sponsor can be Indian companies, banks or financial institutions, foreign entities or a joint venture between the two. TRUST The Mutual Fund itself is set up as a trust. Trustees are appointed by the sponsor, with SEBI approval, to act on behalf of the investors. Trustees act as

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the protectors of the unit holders interests and are the primary guardians of the unit holders funds and assets. The trustees have the responsibility of protecting the beneficiaries of the trust, namely the investors in the Mutual Fund. At least two thirds of the members of the board of trustees have to be independent of the sponsor. The board of trustees has to meet at least six times in a year. Trustees are paid a fee for their services. ASSET MANAGEMENT COMPANY AMC is the investment manager of the Mutual Fund. The AMC is set up by the sponsor, and registered with SEBI. AMCs can be structured as public or private limited company. Most AMCs in India are private limited companies. The capital of the AMC is contributed by the sponsor and its associates. AMC is appointed to manage a Mutual Fund by the trustees of the fund, in consultation with the sponsor and with the approval of SEBI. The rights and obligations of the AMC are specified in the investment management agreement signed between the trusees and the AMC. CUSTODIAN Custodians hold the cash and securities of the Mutual Fund and are responsible for their safekeeping. They hold actual custody of the assets of the Mutual Fund. Custodians are appointed by the sponsor. They represent the only constituent not directly appointed by the AMC. Custodians should be independent of the sponsor. That is, a sponsor cannot be a custodian of the fund well. Mutual Fund constituents ( except custodian) are appointed by the AMC with approval of the trustees. All constituents have to be registered with SEBI. Constituents are paid fees for their services.

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The following table lists the various constituents and their roles: Constituents Custodian R & T Agent Banks Auditor Distributors Brokers Role Hold funds & securities Keep and service investors records Enable collection and payment Audit scheme accounts Distribute fund products to investors Execute transactions in securities

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REGULATORS OF MUTUAL FUND IN INDIA Security & Exchange Board of India

Mutual Fund in India are regulated by SEBI (Mutual Fund) Regulations,1996. SEBI regulations provide for the following points: i. ii. iii. iv. v. vi. The structure and formation of Mutual Fund. The appointment of key functionaries. Operations of Mutual Fund. Accounting and disclosure norms. Rights and obligations of functionaries. Investment restrictions. Compliance and penalties.

vii.

Reserve Bank of india

Earlier position: Bank-sponsored Mutual Fund were jointly regulated by SEBI and RBI. Money market Mutual Fund were also regulated by the RBI.

Current position:

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All Mutual Funds are regulated by SEBI. RBI acts as regulator of sponsors of bank sponsored mutual funds, especially in case of funds offering guaranteed/assured returns. No Mutual Fund can bring out a guaranteed returns scheme without taking approval from RBI.

AMFI

Association of Mutual Funds in India (AMFI) was set up on 22nd August, 1995. It was established with the aim to function as a nonprofit organization. This association is the chief governing body of all Asset Management Companies (AMC) and is registered with Securities and Exchange Board of India (SEBI).

Important aspects of AMFI:

AMFI provides professionalism and a proper balance in the mutual fund industry. It promotes the highly-efficient business practices as well as the code of conduct in the mutual fund industry among its members and those who are involved in mutual fund investments.

AMFI is registered with SEBI and follows its suggestions while executing its activities. AMFI also represents the Government of India, the Reserve Bank of India and other related higher authority bodies in the mutual fund operations. It also provides training programs to hone the skills of those who are involved in mutual fund investments and also develops a team of efficient and skilled agents.

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AMFI also carries out various campaigns and awareness programs to inform the individuals about the basic concept of mutual fund investments.

Companies Act, 1956:

AMC and Trustee Company will be subject to the provisions of the companies Act,1956. Under the Act, company Law Board (CLB) is the regulator. CLB has to be approached for filing complaints against directors of AMC and Trustee company. Registrar of company(ROC) is responsible for compliances: The Registrar of companies oversees the compliance by the AMC and Trustee company, with the provisions of the companies Act. Periodic reports and annual accounts have to be filed by these companieswith the ROC.

Indian Trust Act, 1882:

As Trusts, Mutual Fund are governed by the Indian Trust Act, 1882. the Board or the Trustee company is accountable to the office of the public Trustee and the Charity commissioner.

Finance Ministry and SAT:

SEBI and RBI are governed by ACTS of Parliament ( SEBI Act, 1992 and RBI ACT, 1949 ) and are therefore supervised by the Ministry of Finance. The Securities Appellate Tribunal ( SAT ) hears appeals against the ruling of SEBI.

Stock Exchange:
If a Mutual Fund lists its schemes on a stock exchange, it will be subject to the listing regulations of the Stock exchange. Sometimes regulators empower an industry body to supervise the working of its members. Such bodies of players are known as self regulatory organization (SROs).

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SROs are the second tier in the regulatory structure. An SRO is an industry association and is registered with the regulatory body of an industry.

MUTUAL FUND VS. OTHER INVESTMENT

Category Mutual Funds Equity Corporate Debentures Bonds Bank Deposits Real Estate Gold

Return High High Moderate Moderate Low High Moderate

Safety High Low Moderate High High Moderate High

Vitality Moderate High Moderate Moderate Low High Moderate

Liquidity High High Low Moderate High Low Moderate

ADVANTAGES OF MUTUAL FUNDS

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The advantages of investing in a Mutual Fund are: (1) Diversification: The more stocks and bonds you own, the less any one of them can hurt you. Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. (2) Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell. The primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. (3) Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud. (4) Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash. Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time. (5) Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet. (6) Low cost: Since the Fund invests large sums of money, the transaction cost comes down. Small amounts of investors get benefits of the large pool. Mutual fund expenses are often no more than 1.5 percent of your investment. (7) Economies of Scale:

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Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay. (8) Simplicity: Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a monthly basis. (9) Tax saving: These schemes offer tax rebates to the investors under specific provisions of Income Tax act, 1961 as the government offers tax incentives for investment in specified avenues. E.g. Equity Linked Savings schemes.

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DRAWBACKS OF MUTUAL FUND

Mutual funds have some drawbacks also: (1) No Guarantee: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. (2)Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund. Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. (3)Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made. (4)Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

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(5)Dilution It's possible to have too much diversification. Because funds have small holdings in so many 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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SWOT ANALYSIS

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Str engths
Diversification Liquidity Simplicity Tax saving

W eakness
No Guarantee Management Risk Dilution Fees & Commissions

O ppor tunity
Growing economy Of Indian Market Increasing awareness about MF

Thr eats
Entry of various other sources of investment like PPF, Public Issue.

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MEANING OF RESEARCH
Basic meaning of RESEARCH is the search of knowledge. Research can be defined as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. REDMEN & MORY defines research as a systematized effort to gain new knowledge. Research is an academic activity and as such the term should be used in a technical sense. According to CLIFFORD WOODY, research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis. Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. It is the persuit of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research. The systematic approach concerning generalization and the formulation of a theory is also research.

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OBJECTIVES OF RESEARCH
The main aim of research is to fulfill the requirement of BBA programme of Bhavnagar University. Other objectives: To know each and every aspects and elements of Mutual funds in the India. To know the changes that have taken place in Mutual fund industry in India during last decade in terms of number of schemes, amounts, sales, redemption, etc. To know the factors those affect the overall Mutual funds in India. To know current attitude of individual investors towards investments in Mutual funds. To provide a brief concept about the advantages accessible for investing in mutual funds Last but not The least is to carry out a detailed survey on the current advancements in the Indian mutual funds sector

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TYPES OF RESEARCH
There are many types of research like Descriptive Research, Analytical Research, fundamental Research, Quantitative Research, Qualitative Research, conceptual research, empirical research etc. (1) Descriptive vs. Analytical Research Descriptive Research includes surveys and fact finding of different kinds. The major purpose of Descriptive research is description of the some affairs as it exists at present. The main characteristic of this method is that the research has no control over the variables, he can only present what has happened or what is happening. In Analytical research, on the other hand, the researcher has to use facts or information already available, and analyse these to make a critical evaluation of the material. (2) Applied vs. Fundamental Research Applied research aims at finding a solution for immediate problem facing a society or an industrial/business organization. Fundamental research is mainly concerned with generalization and with the formulation of a theory. (3) Quantitative vs. Qualitative Research Quantitative research is based on the measurement of the quantity or amount. It is applicable to phenomena that can be expressed in terms of quantity.

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Qualitative research, on the other hand, is concerned with qualitative phenomenon, i.e, phenomena relating to or involving quality or kind.

(4) Conceptual vs. Empirical Research Conceptual research is that related to some abstract theory. It is generally used by philosophers and thinkers to develop new concept reinterprete existing ones. Empirical research relies on experienced observation alone,often without due regard for system and theory. It is data based information coming up with conclusions which are capable of being verified by observation or experiment. My research mainly contains the description of the current affairs of Mutual Fund as it exists at present in India. Thus, this is a descriptive type of research, the main characteristic of this method is that the researcher has no control over the variables; he can only report what has happened or what is happening.

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PROCESS OF RESEARCH
Research Process consists of series of steps necessary to effectively carry out research and the desired sequencing of these steps. Following chart shows the research process:

Define Research Problem

Review concepts & theories

Review previous research finding

Formulate Hypothesis

Design Research (including sample design )

Collect data

Analyse data ( Test

hypotheses if any )

Interpret and report

40

RESEARCH METHODOLOGY
As per my research Project is concerned, this is wholly based on Secondary Data. Recent Development made in the last decade is presented as per my way. Mostly I have gathered information from amfiindia.com website. Besides, some news papers and magazines have become the main source. Here, it is useful to study the overall growth of mutual fund should be first analyzed before considering the increment in the preferences of investors individually towards the investment in particular type of Mutual funds. The whole data regarding the growth of Mutual Fund industry in the last decade presented here is gathered from website of association of Mutual Fund in India. In this project report, I have compared figures of the year 2000-01 with the figures of the year 2009-10 so that the growth rate of Mutual Fund industry in the previous year can be found. But as I cant find the figures of Asset Under management for the year 2000-01, I has presented figures of the year 2004-05 and these figures are compared by the figures of the year 2009-10.

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LIMITATIONS OF THE STUDY

As the possible and sufficient attention is given towards this project for taking care that no single important point is remained unnoticed but as it is clear from the project that it is the research project and it is natural that some manual errors can be there. As I have made research on the Development of Mutual Fund industry in the last decade, I should have compared the position of Mutual Fund industry in the year 2000-01 with the year 2009-10. But I was unable to find the data of asset under management of the different AMCs for the year 2000-01, I had to make comparison between the data of year 2004-05 and 2009-10. Besides, for the data regarding the Mutual Fund industry during last decade, I had only two references which were www.amfiindia.com & www.sebi.gov.in websites. I have collected maximum data from the amfi monthly. If I had another references, I could find more data which would make my project more clear. At last, time was a constraint, which prevented me from taking a large data that I can analyze to show overall growth of the Mutual Fund industry.

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DEVELOPMENT OF MUTUAL FUND IN THE LAST FIVE DECADES

Mutual funds go back to the times of the Egyptians and Phoenicians when they sold shares in caravans and vessels to spread the risk of these ventures. The foreign and colonial government Trust of London of 1868 is considered to be the fore-runner of the modern concept of mutual funds. The USA is, however, considered to be the Mecca of modern mutual funds. By the early - 1930s quite a large number of close ended mutual funds were in operation in the U.S.A. Much latter in 1954, the committee on finance for the private sector recommended mobilization of savings of the middle class investors through unit trusts. Finally in July 1964, the concept took root in India when Unit Trust of India was set up with the twin objective of mobilizing household savings and investing the funds in the capital market for industrial growth. Household sector accounted for about 80 percent of nations savings and only about one third of such savings was available to the corporate sector; It was felt that UTI could be an effective vehicle for canalizing progressively larger shares of household savings to productive investments in the corporate sector. The process of economic liberalization in the eighties not only brought in dramatic changes in the environment for Indian industries, Corporate sector and the capital market but also led to the emergence of demand for newer financial services such as issue management, corporate counseling, capital restructuring and loan syndication. The development of Mutual Fund in India can be understood in six phases, beginning in 1963 when Unit Trust Of India (UTI) was formed.

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Phase 1: 1964-1987 In 1963 UTI was formed by an Act of the Parliament called Unit Trust Of India Act 1963 UTI enjoyed monopoly status during the period 1963-1987 UTI was set by the RBI. The first scheme from UTI was Unit Scheme 1964 (US64) UTI launched several schemes for retail and institutional investors. It was also one of the early and large investors in the stock markets. The first Indian off shore fund was launched by UTI in 1986 and the first diversified equity scheme was launched by UTI in 1986 called UTI Master Share. Phase 2: 1987-1993 In 1987, the Income Tax Act was amended and banks, financial institutions and insurance companies in the public sector were allowed to set up Mutual Funds. SBI Mutual Fund, formed in 1987 was the second Mutual Fund in India. SEBI was set by in 1988 and regulatory powers in 1992. UTI was the largest Mutual Fund and held over 95% of the assets in the Mutual Fund industry. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders was accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of

44

investors touched the sky in profitability factor. However, people were miles away from the praparedness of risks factor after the liberalization. The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Phase 3: 1993-1996 With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of funds. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. Kothari Pioneer Mutual Fund (now merged with Franklin Templeton) was the first private sector Mutual Fund in India. Phase 4: 1996-1999 The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. SEBI (Mutual Fund ) Regulations required that Mutual Fund have a three tier structure of sponsor-trust-AMc. In 1999, all dividends declared by Mutual Funds were made tax free.

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Phase 5: 1999-2004 In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated (split) into two separate entities. One is the specified undertaking of the UTI, representing broadly, the assets of US 64 scheme, and the second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB (Punjab National Bank), BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. The assets under management of the industry crossed Rs. 150000 crore in 2001. From Rs. 67bn. the Assets Under Management in 1987 rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. Phase 6: 2004 onwards The period from 2004 is referred to as the consolidation and growth phase of the Indian Mutual Fund Industry. The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund players have entered in India like Fidelity, Franklin Templeton Mutual Fund etc. In the last ten years, India witnessed huge developments in the mutual fund industry. At the end of 1993 the total Mutual Fund 46

Assets Under Management (MF AUM) was Rs.18332 crores, which multiplied nearly 8 times by the end of the 2003 - 04 financial year, totaling to Rs. 137626 crores. With this growth rate, the mutual fund investments have become one of the most popular modes of investments. Many foreign players entered the Indian Mutual Fund Industry eying the opportunities.

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MAJOR MUTUAL FUND COMPANIES IN INDIA

BANK SPONSERED 1 joint ventures- predominantly Indian
(1) State Bank of India Mutual Fund

SBI Mutual Fund is India s largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI India s largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronized by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the world s leading fund
management companies that manages over US$ 500 Billion worldwide.

In March 2004, AUM was Rs. 5202 cr. In March 2010, AUM was Rs. 37417 cr.

2 others
(2) Baroda pioneer Mutual Fund (BOB Mutual Fund)

Baroda Pioneer Asset Management Company Limited was formed as a wholly owned subsidiary of Bank of Baroda in 1995 with the key focus of managing the assets of Baroda Pioneer Mutual Fund. Bank of Baroda entered into an agreement on 5 October, 2007 with Pioneer Investments (Pioneer Global Asset Management SpA), a global asset manager

48

with 80 years of experience and assets under management of just under 187.86 billion (as on September 30, 2008). Consequent to the agreement and necessary regulatory approvals, Pioneer Investments has acquired a stake of 51% in Baroda Pioneer Asset Management Company. The Fund and the AMC are being renamed as Baroda Pioneer Mutual Fund and Baroda Pioneer Asset Management Company Limited. The Fund currently manages five equity funds, one balanced fund, three debt funds and one liquid fund. In March 2004, AUM was Rs. 454 cr. In March 2010, AUM was Rs. 3574 cr.

(4) Unit Trust of India Mutual Fund

January 14, 2003 is when UTI Mutual Fund started to pave its path following the vision of UTI Asset Management Co. Ltd. (UTIAMC), which was appointed by UTI Trustee Co, Pvt. Ltd. for managing the schemes of UTI Mutual Fund and the schemes transferred/migrated from the erstwhile Unit Trust of India. UTIAMC provides professionally managed back office support for all business services of UTI Mutual Fund in accordance with the provisions of the Investment Management Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the schemes. State-of-the-art systems and communications are in place to ensure a seamless flow across the various activities undertaken by UTIMF. Since February 3, 2004, UTIAMC is also a registered portfolio manager under the SEBI (Portfolio Managers) Regulations, 1993 for undertaking portfolio management services. UTIAMC also acts as the manager and marketer to offshore funds through its 100 % subsidiary, UTI International Limited, registered in Guernsey, Channel Islands. In March 2004, AUM was Rs. 20617 cr. In March 2010, AUM was Rs. 80218 cr.

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INSTITUTUIONS
(8) LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed 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 LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund. In March 2004, AUM was Rs. 4209 cr. In March 2010, AUM was Rs. 42304 cr.

PRIVATE SECTORS 1 INDIAN

(9) Benchmark Mutual Fund

Benchmark Asset Management Company Pvt. Ltd. (BAMC) is a SEBI registered Asset Management Company launched in June 2001. BAMC is the first and only asset management company in India with a primary focus on indexing and using quantitative techniques in creating innovative products. Benchmark is run and co-promoted by professionals with a long experience in the Indian and International Financial Markets. In March 2004, AUM was Rs.71 cr.

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In March 2010, AUM was Rs. 1999 cr.

(10) Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited. In March 2004, AUM was Rs. 156 cr. In March 2010, AUM was Rs. 203 cr.

(11) Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC ) is sponsored by Kotak Mahindra Bank Limited, one of India's fastest growing banks, with a pedigree of over twenty years in the Indian Financial Markets. Kotak Mahindra Asset Management Co. Ltd., a wholly owned subsidiary of the bank, is KMAMCs Investment Manager. it made a humble beginning in the Mutual Fund space with the launch of its first scheme in December, 1998. Today it offers a complete bouquet of products and 51

services suiting the diverse and varying needs and risk-return profiles of its investors. In March 2004, AUM was Rs. 5290 cr. In March 2010, AUM was Rs. 34681 cr

(12) 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 Capital Trustee 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 Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. In March 2004, AUM was Rs. 7241 cr. In March 2010, AUM was Rs. 110413 cr.

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(13) Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. In March 2004, AUM was Rs. 349 cr. In March 2010, AUM was Rs. 635 cr.

(14) Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorers for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its trustee is Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country which offers investors a broad range of managed investment products in various asset classes and risk parameters, with operational flexibility to suit their varied investment needs. In March 2004, AUM was Rs. 5127 cr. In March 2010, AUM was Rs. 21935 cr

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2 JOINT VENTURES - PREDOMINANTLY INDIAN

(15) Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. In March 2004, AUM was Rs. 8873 cr. In March 2010, AUM was Rs. 62343 cr.

(16) HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing Development Finance Corporation Limited and Standard Life Investments Limited. In March 2004, AUM was Rs. 14985 cr. In March 2010, AUM was Rs. 88780 cr.

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(17) Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993. In March 2004, AUM was Rs. 15181 cr. In March 2010, AUM was Rs. 80989 cr.

3 JOINT VENTURES - PREDOMINANTLY FOREIGN

(19) Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company. It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving

55

schemes, Open end Income and Liquid schemes, closed end Income schemes and Open end Fund of Funds schemes to offer. In March 2004, AUM was Rs. 15187 cr. In March 2010, AUM was Rs. 33290 cr.

(20) HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees of HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund. In March 2004, AUM was Rs. 4528 cr. In March 2010, AUM was Rs. 33290 cr.

(21) 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, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998. In March 2004, AUM was Rs. 1553 cr. In March 2010, AUM was Rs. 1547 cr.

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(23) Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investment management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organizations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focusing on a long-term capital appreciation. In March 2004, AUM was Rs. 1361 cr. In March 2010, AUM was Rs. 2257 cr.

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58

DATA ANALYSIS

Development in the amount of all schemes in the last decade

In 2001 there was 174 open ended schemes & 126 close ended schemes. In this year only four new open ended schemes were launched. In March 2010, there was 641 open ended & 202 close ended schemes. In this year no. of new launching shemes are 74; 6 open ended & 69 close ended. Percentage changes are given below: PERCENTAGE CHANGE OF NO.OF SCHEMES (NEW LAUNCHED + EXISTING) AND AMOUNTS BETWEEN APRIL 2001 TO MARCH 2010

Year

Open Ended
No. of
Scheme

Close Ended
No. of
Scheme

Interval Fund
No. of
Scheme

Total
No. of
Scheme

Amount

Amount

Amou nt

Amou nt

2001- 167% 9278% 2010

71%

8811%

11%

124%

9347 %

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Analysis : Here, we can see that in the last decade there was a vast change in the no. of open ended scheme. Overall, amount has been increased by 14392 % indicates heavy growth of mutual fund industry in the last decade. In year 200910, 69 new close ended schemes were introduced. It has been observed in the last decade that the growth of new scheme launched in close ended scheme is more than that of open ended schemes. From that we can say, in India people prefer the mutual fund scheme with the maturity date. But overall (new + existing), growth in open ended scheme (9278%) is more than close ended schemes (8811%).

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PERCENTAGE DISTRIBUTION OF NUMBER OF SCHEMES FOR THE FINANCIAL YEAR 2000-2001.

No. of Schemes
Income Growth Balanced Liquid/Money Market Gilt ELSS Total
Open Ended Scheme 25 38 12 11 7 7 100 Close Ended Scheme 26 16 3 0 2 53 100 Interval Scheme 100 0 0 0 0 0 100 Total 32 28 8 7 5 20 100

PERCENTAGE DISTRIBUTION OF NUMBER OF SCHEMES FOR THE FINANCIAL YEAR 2009-10.

No. of Schemes
Income Equity Balanced Liquid/Money Market Gilt ELSS-Equity Gold ETF Other ETFs Fund Overseas Total
Open Ended Scheme 28 42 5 9 6 6 1 2 2 100.0 Close Ended Scheme 73 19 2.0 0 0 6 0 0 0 100 Interval Scheme 95 5 0 0 0 0 0 0 100 Total 42 35 4 6 4 5 1 1 2 100

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Analysis
In the year 2000-01, out of total fund income fund contributed 32% which is more than growth and ELSS fund. Balanced, liquid and guilt- each fund contributed less than 10%. In the year 2009-10 also income fund contributed the most i.e.,42% of the total fund. But at that time, ELSS- equity contributed only 5% which was 20% in the year 2000-01. Thus we can say that investors preference has grown to growth fund rather than tax saving ELSS fund. In the year 2000-01 in open-ended scheme growth fund contributed the most while in close-ended fund ELSS fund contributed the most. But in the year 2009-10, in close-ended fund income fund contributed the most and ELSS fund contributed only about 6% which was 53% in 2000-01. Thus we can say that recently in the fund with fixed maturity period, investors prefer regular income rather than tax saving.

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Sales of Mutual Fund schemes in the last decade

Sales of all schemes in the last decade

12000000

10000000

8000000

Sales ( in cr.)

6000000

4000000

2000000

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

1 92957 164523 314673 590190 839708 1098149 1938592 4464376 5426353 10019023 Year

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Analysis:
From the above chart, we can see that in the year 2000-01 sales of all schemes of Mutual Fund was about Rs.100000 while in the year 2009-10 sales was reached at about Rs. 10000000. Thus, the percentage increase of sales in the last decade is about 10000% shows the very heavy growth of sales in the last decade. In the year 2007-08, sales increased by about 130% which is the maximum increase in the last decade. Except the year 2007-08, in each year sales was increased by less than 100%. In the last decade 10000% increase in the total sales of the Mutual Fund shows the much huge growth of the Mutual Fund industry.

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Redemption of Mutual Fund schmes in the last decade.

Redemption of all schemes in the last decade

10000000

9000000

8000000

7000000

6000000 Redemption(i n cr.)

5000000

4000000

3000000

2000000

1000000

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

1 83829 157348 301225 543381 837508 1045370 1844512 4310575 5454650 9935942 Year

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Analysis:
Of course, with the increase in sales, redemption also increases. In the last decade redemption of Mutual Fund schemes increased by about 11000% . In the redemption also, in the year 2007-08 redemption had grown the most about 130%. Except this year, in each year redemption had grown by less than 100%. Thus we can say that year 2007-08 was the developmental year of the Mutual Fund industry with the highest sales and also redemption. In the last decade, increase in redemption was more than increase in sales which was unfavorable condition of Mutual Fund industry. Yet in the year 2009-10 sales was more than redemption which is hopeful situation for the investors of Mutual Fund industry.

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Comparision of Sales & Redemption

Sales ( Rs. in cr.) 92957 164523 314673 590190 839708 1098149 1938592 4464376 5426353 10019023

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Redemption
83829 157348 301225 543381 837508 1045370 1844512 4310575 5454650 9935942

comparision of sales & Redemption

12000000 10000000 Sales & Redemption 8000000 6000000 4000000 2000000 0 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 200901 02 03 04 05 06 07 08 09 10 Year

Analysis:
From the above chart we can see that, in the last decade in every year (except in year 2008-09) sales is more than redemption which is favorable for the Mutual Fund industry.

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ASSET UNDER MANAGEMENT

Percentage Distribution of different schemes in AUM in 2001 Income Equity Balanced Liquid/Money Market Gilt ELSS-Equity Total 54 15 21 4 3 3 100

3% 4%

3% Income

21% 54%

Equity Balanced Liquid/Money Market Gilt ELSS-Equity 15%

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Percentage Distribution of different schemes in AUM in 2010

Income Equity Balanced Liquid/Money Market Gilt ELSS-Equity Gold ETF Other ETFs Fund Overseas Total 51 28 3 12 1 4 Less than 1 Less than 1 Less than 1 100

1% 12%

4% Income Equity Balanced Liquid/Money Market 52% Gilt ELSS-Equity Gold ETF

3%

28%

Other ETFs Fund Overseas

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Analysis:
In the year 2001, Income Fund contributed the most. It had contributed 54% of the total AUM. In 2010 also Income Fund has remained the most contributing fund in total AUM. It has contributed more than half of the total AUM. In 2001, Balanced Fund had contributed more than Equity Fund, But in 2010, Equity is far more than Balanced fund. Balanced Fund has decreased from 21% to just 3%. Thus, we can say that in the year 2001, investors preferred funds with combination of safety of return and capital appreciation while in the year 2010, investors preferred funds which gives capital appreciation rather than quick return. Gold and other ETFs and overseas has contributed less than 1%. Thus, we can say that Income Fund has been the most preferred scheme by the investors in the last decade.

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Growth in Asset Under Management

Growth in AUM
700000 600000 500000 Rs. (cr.) 400000 300000 200000 100000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year 90587 100594 139616 79464 149600 326388 231862 417300 505152 613979

Analysis: In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Asset under Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the height of 1,540 bn while in the year March 2010 it has reached to 7000 bn shows the huge growth of Mutual Fund industry in the last six years. From the year 2000-01 to 2009-10, overall increase in the total AUM was about 600% which shows the very heavy growth of Mutual Fund industry.

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CONTRIBUTION OF MAJOR MUTUAL FUND COMPANIES IN ASSET UNDER MANAGEMENT March 2004
Asset management Company UTI Prudential ICICI HDFC Reliance Kotak Mahindra. Birla Sun Life Franklin Templeton SBI Funds LIC Tata TD Total AUM Average AUM 20617 15181 14985 7241 5290 8873 15187 5202 4209 5127 139616 (Rs in cr.)

March 2010

Asset management Company UTI Prudential ICICI HDFC 72

Average AUM 80218 80989 88780

Reliance Kotak mahindra Birla sun life Franklin templeton SBI funds LIC TATA Total AUM

110413 34681 62343 33290 37417 42304 21935 747525(Rs. in cr.)

Analysis: In 2004, UTI was the major player with the maximum contribution in AUM. Reliance had contributed only Rs 7241 cr. of total AUM. ICICI was better than HDFC. Franklin had good share in the total AUM. Birla sun life had also good share. In 2010, Reliance seems the most strong firm for contributing the maximum amount of AUM in 2010. UTIs share in the total AUM was much decreased as compared to its contribution of 2004. At this time HDFC is better than ICICI.

FINDINGS
In the last decade, overall amt of both new launched and existing scheme was increased by 14392%. Amount of open ended scheme was increased by 9278% while amount of close ended scheme was increased by 8811%. In the previous decade out of total fund, open-ended fund contributed the most. In the year 2000-01, tax saving ELSS fund contributed 20% which was only 5% in the year 2009-10.

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Percentage increase in sales of Mutual Fund in the last decade is about 10000%. On the other hand, redemption of Mutual Fund has increased by 11000%.

In the last decade, except year 2008-09, in all the years, sales was more than redemption which is favorable condition for the Mutual Fund industry. In the total AUM, income fund contributed the most. Overall increase in the total AUM was about 600%. In the year 2010, Reliance seems the strongest AMC for contributing the maximum amount of AUM. UTIs share was much decreased as compared to its contribution of the year 2004 in which UTI was the major player.

RECOMMENDATIONS
As mutual fund has entered into the Indian Capital market, growing profitable enough to attract competitors into this cherished territory encouraging competition among all the mutual fund operators, there is need to take some strategy to bring more confidence among investors for which mutual fund would be able to project the image successfully. The followings are some of the suggestions. As the investors are not willing to invest in mutual fund unless a

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minimum return is assured, it is very essential to create in the mind of the investors that mutual funds are market instruments and associated with market risk hence mutual fund could not offer guaranteed income. Due to operations of many mutual fund, there will be need for appropriate guidelines for self-regulation in respect of publicity/advertisement and interscheme transactions within each mutual fund. Unit holders should have voting rights in companies in which they have a holding. Mutual Funds should be permitted to borrow in certain cases. Lastly, mutual funds are made by investors and investors interest ought to be paramount by setting standard of behaviours and efficiency through self regularizations and professionalism.

CONCLUSION
Mutual Fund in India provide safety, liquidity and growth to investors. They are safe and readily available conduits for channeling savings into investments yielding income and growth. The funds provide stability to share prices, safety to investors and resources to promoter entrepreneurs. From the data interpretations presented in this project report, we can say that Indian Mutual fund industry has undergone a massive change in the last decade with the launch of many conglomerates in India. They have introduced professional dexterity and technology in handling capitals both nationally and

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internationally. Owing to this investors have spoilt choice for a diverse range of policies depending on their portfolios. In the recent time, stock market goes up. Therefore, investors turn to stock market to get heavy return. This is the main threat against Mutual Fund industry. In the year 2010, sensex has reached 20000 point. One of the reason for high index of stock market was the IPO of Call India. For the continuous growth of the Mutual Fund industry, investors of Mutual Fund must get the maximum return and for that the fund manager of the AMC should invest in the investment which can provide the maximum return. The continuous growth of the Mutual Fund industry indicates the growth of capital market which finally results into the high rate of economic growth of the country.

BIBLIOGRAPHY
Books 1) Sunita Abraham & Uma Shashikant, Understandin Mutual Funds second edition- July 2009. 2) Vasant Desai, The Indian financial system and development , second revised edition- 2007, Himalaya Publishing House. Websites

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1) www.amfiindia.com 2) www.sebi.gov.in 3) www.managementparadice.com 4) www.indiamart.com 5) www.businessmaps.com 6) www.inderscience.com

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