Study of Mutual Fund

Pulkit Saxena MBA III Sem Roll No 1439470068College Of Business Studies, Agra
Study Of Mutual Funds UTI & SBI

The Financial & Marketing Strategies
CONTENT
Introduction 3-4
History Of Mutual Funds 5-7
Organization Of A Mutual Fund 8-49
Benefits Of Mutual Funds
Classification Of Mutual Funds
Unit Trust Of India 50-59
State Bank Of India 60-64
Other Mutual Funds In India 65
Literature Review 66-72
Objective Of Study 73
Scope 74
Research Methodology 75-77
Finding 78-86
Suggestions 87
Conclusion 88-89
Questionnaire 90-92
Bibliography 93
INTRODUCTION
A mutual Fund is a pool of money, collected from the investors and is
invested according to the certain investment objectives. The fund collects the money
from the members and invests it in a diversified portfolio of financial assets with a
view reduced risk and to maximize their income and capital appreciation for
distribution to its members on pro-rata basis.
The mutual fund is a concept of mutual help of subscribers for portfolio
investment and management of these investments by experts in the field. These funds
are set-up under Indian Trust Act. A mutual fund business is to invest the fund
according to the wishes of the investors who created the pool. In India, mutual fund
operating for a long time since 1964 by the UTI, there after public sector bank also
setup the mutual fund since 1987 such as SBI.
Investors in the mutual fund industry have the choice of around 40 mutual
fund offering nearly five hundred products. The category of the product offers could
be classified under about dozen generic heads.
A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The income
earned through these investments and the capital appreciations realized are shared by
its unit holders in proportion to the number of units owned by them. Thus a Mutual
Fund is the most suitable investment for the common man as it offers an opportunity
to invest in a diversified, professionally managed basket of securities at a relatively
low cost. The flow chart below describes broadly the working of a mutual fund.
HISTORY OF MUTUAL FUNDS
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history
of mutual funds in India can be broadly divided into four distinct phases.
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched by
UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets
under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87),
Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89),
Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its
mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs.47,004 crores.
Third Phase 1993-2009 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.
Also, 1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 2000. The industry now
functions under the SEBI (Mutual Fund) Regulations 2000.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2009, there were 33 mutual funds
with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores
of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2009
In February 2009, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified Undertaking of the
Unit Trust of India with assets under management of Rs.29,835 crores as at the end of
January 2009, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March 2006 more than
Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual
Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers
taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth.

ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
Mutual Fund Operation Flow Chart
LEGAL STRUCTURE
Sponsor of Mutual Fund

Company, Bank of FI
Board of Trustees
Policy Making Body for
Fund raising and
Operations on the Fund
Actual Implementation of
Asset Management Company the Policy and investment
Operations
Custodian Acting as Registrars

Transfer agents and
Related services for the
Investors Mutual Fund
The Structure of Mutual Fund in India is governed by the SEBI (Mutual Fund)
Regulations, 2000. These regulations make it mandatory for mutual funds to have
three-tier structure:
a. Sponsor
b. Trustee
c. Asset Management Company (AMC)
The Sponsor is the promoter of mutual fund and appoints the trustee. The trustee is
responsible to the investor in mutual fund and appoints the AMC for managing the
investment portfolio. The AMC is the business face of mutual fund and it manages all
the affairs of the mutual fund. The mutual funds and the AMC have to be registered
with the SEBI. SEBI regulations also provide for who can be sponsor, trustee and
AMC and specify the format of agreement between these entities. The agreement
provide for the rights, duties and obligations of these entities.
The main duties of the sponsor are as under:
a. Sponsor appoints the trustee, custodian and the AMC with the prior
approval of the SEBI and its regulations.
b. Sponsor must be carrying on business in financial services for a minimum
period of five years and net worth of sponsor is positive in all preceding
five years and net worth in immediately preceding year is more than
capital contribution to AMC.

c. Sponsor must have profit making in at least three of immediately
preceding five year including fifth year.
d. Sponsor must contribute at least 40% of the net worth of AMC.
The Mutual Fund is managed by a trust company or board of trustees. Board of
Trustees and trust company are governed by the provision of Indian Trust Act. If the
trustee is a company, it is also subject to the provision of Indian Companies Act. It is
the responsibilities of the trustees to protect the interest of the investors, whose fund
is managed by AMC. The appointment of all trustees has to be done with the prior
approval of SEBI and there must be at least 4 members in the boards of Trustee and at
least 2/3 of the members of the board must be independent. The trustee of Mutual
Fund cannot be trustee of another Mutual Fund unless he is an independent trustee in
both cases and has the prior approval of the board.
ASSET MANAGEMENT COMPANY
The trustee on the advice of the sponsor appoints the AMC. The trustee is
authorizes to appoint the AMC. The AMC is usually a private company in which the
sponsor and their associates are joint venture partners are share holders. The AMC
has to be SEBI registered entity and should have a minimum net worth of Rs. 10
crore. The trustee signed the investment management agreement with the AMC.
There are following regulatory requirements for the AMC.
a. SEBI registered AMC can be appointed as investment manager of Mutual
Fund.
b. AMC must have minimum net worth of Rs.10 Crore all the time.
c. An AMC cannot be an AMC or trustee of another Mutual Fund.
d. At least half of members of the board of AMC have to independent.
There are various types AMCs are working in India :
1. AMC owned by the bank.
2. AMC owned by the financial institution.
3. AMC owned by the private sector company
4. AMC owned by the foreign institutional investor.
5. AMC owned jointly by the Indian & foreign sponsors.
Custodian
Custodians are responsible for the securities held in the mutual funds
portfolio. They discharge an important back office function, by insuring that
securities that are bought are delivered and transferred to the books of mutual funds
and fund to be paid out when the mutual funds buy the securities. They keep the
investment accounts of the mutual funds and also collect the dividend and interest due
on mutual fund investments. Custodian also track corporate action like bonus issue,
right offers, offers for Sale, buy back and open offer for acquisition.
Securities Exchange Board of India (SEBI)
Securities Exchange Board of India (SEBI) is the apex regulator of capital
market. Issuance and trading of Capital market instruments and the regulation of the
capital market intermediates is under the purview of SEBI. SEBI is primary regulator
of mutual fund in India. All mutual funds are required to mandatory registered with
SEBI. The structure and formation of mutual funds, appointment of key functionaries,
operation of mutual funds, accounting and disclosure norms right and functionaries of
investor, investment restriction, compliance and penalties are all defined under the
SEBI regulation. SEBI also is empowered to periodically inspect the mutual funds
organization to ensure compliance with SEBI Regulation.

BENEFITS OF MUTUAL FUNDS
Professional Management
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyses the performance and
prospects of companies and selects suitable investments to achieve the objectives of
the scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross-section of
industries and sectors. This diversification reduces the risk because seldom do all
stocks decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far less money than you can do on your
own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers and
companies. Mutual Funds save your time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
Low Cost
Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in brokerage,
custodial and other fees translate into lower costs for investors.
Well Regulated
All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors. The
operations of Mutual Funds are regularly monitored by SEBI.
Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units can be
sold on a stock exchange at the prevailing market price or the investor can avail of the
facility of direct repurchase at NAV related prices by the Mutual Fund.
Transparency
We can get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion invested
in each class of assets and the fund manager's investment strategy and outlook.
Flexibility
Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, you can systematically invest or withdraw funds
according to your needs and convenience.
Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks.
A mutual fund because of its large corpus allows even a small investor to take the
benefit of its investment strategy.

CLASSIFICATION OF MUTUAL FUNDS
FUNCTIONAL CLASSIFICATION
OPEN-ENDED FUND
An open-ended fund or scheme is one that is available for subscription and
repurchase on a continuous basis. These schemes do not have a fixed maturity period.
Investors can conveniently buy and sell units at Net Asset Value (NAV) related
prices, which are declared on a daily basis. The key feature of open-end schemes is
liquidity.
CLOSE-ENDED FUND
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years.
The fund is open for subscription only during a specified period at the time of launch
of the scheme. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme on the stock exchanges
where the units are listed. In order to provide an exit route to the investors, some
close-ended funds give an option of selling back the units to the mutual fund through
periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least
one of the two exit routes is provided to the investor i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose NAV
generally on weekly basis.

INVESTMENT OBJECTIVE
CLASSIFICATION
A scheme can also be classified on the basis of the investment
objectives that are they are designed to meet the objectives of different types of
savers. This classification can also be name as portfolio classification. Such schemes
may be open-ended or close-ended schemes. Such schemes may be classified mainly
as follows:
GROWTH / EQUITY ORIENTED SCHEME
The aim of growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in equities.
Such funds have comparatively high risks. These schemes provide different options to
the investors like dividend option, capital appreciation, etc. and the investors may
choose an option depending on their preferences. The investors must indicate the
option in the application form. The mutual funds also allow the investors to change
the options at a later date. Growth schemes are good for investors having a long-term
outlook seeking appreciation over a period of time.
INCOME / DEBT ORIENTED SCHEME
The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are
less risky compared to equity schemes. These funds are not affected because of
fluctuations in equity markets. However, opportunities of capital appreciation are also
limited in such funds. The NAVs of such funds are affected because of change in
interest rates in the country. If the interest rates fall, NAVs of such funds are likely to
increase in the short run and vice versa. However, long-term investors may not bother
about these fluctuations.
BALANCED FUND
The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the proportion
indicated in their offer documents. These are appropriate for investors looking for
moderate growth. They generally invest 40-60% in equity and debt instruments.
These funds are also affected because of fluctuations in share prices in the stock
markets. However, NAVs of such funds are likely to be less volatile compared to pure
equity funds.
MONEY MARKET OR LIQUID FUND
These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively in
safer short-term instruments such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money, government securities, etc. Returns on these
schemes fluctuate much less compared to other funds. These funds are appropriate for
corporate and individual investors as a means to park their surplus funds for short
periods.
LEVERAGED FUNDS
Leveraged funds or borrowed funds are used in order to increase the size of
the value of the portfolio and benefit the shareholders by gains exceeding the cost of
the borrowed funds. Funds are used in speculative and risky investments like short
sale to take advantage of declining market to realize gains in the portfolio. Short sales
decrease loss of the portfolio in a declining market and vice versa in rising market.
DUAL PURPOSE FUNDS
Income and growth are two objectives, which are achieved by offering
half of the amount of funds to those investors who wish regular income and half to
those who wish growth. The funds thus received are pooled together and used for
investment. Any income derived from the portfolio goes to the investors who hold
income shares. The investors who hold capital shares receive no income. Instead they
receive capital gains or losses that result from investments of total portfolio.
REAL ESTATE FUND
Real estate fund is of closed-end type. The fund is named so because of the
primary investment in real estate ventures. Such funds are of various types depending
upon real estate transactions.
PERFORMANCE FUNDS
The investment is made in buying equity shares of small-unseasoned
companies with relatively high price earnings ratio and higher price volatility. Such
funds were set up in USA in 1960s to seek large profits in high-flying common
stocks.
SPECIALITY FUNDS
The investment is made in good track record companies, which offer long-
term capital growth and provide handsome dividend income.
INDEX FUNDS
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the
securities in the same weight age comprising of an index. NAVs of such schemes
would rise or fall in accordance with the rise or fall in the index, though not exactly
by the same percentage due to some factors known as "tracking error" in technical
terms. Necessary disclosures in this regard are made in the offer document of the
mutual fund scheme. There are also exchange traded index funds launched by the
mutual funds, which are traded on the stock exchanges.
GILT FUND
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to change in
interest rates and other economic factors as are the case with income or debt oriented
schemes.
SPECIALIZED FUNDS
These are the funds/schemes, which invest in the securities of only those
sectors or industries as specified in the offer documents. e.g. Pharmaceuticals,

Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns
in these funds are dependent on the performance of the respective sectors/industries.
While these funds may give higher returns, they are more risky compared to
diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time. They may also seek advice of
an expert.
TAX SAVING SCHEMES
These schemes offer tax rebates to the investors under specific provisions of
the Income Tax Act, 1961 as the Government offers tax incentives for investment in
specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes
launched by the mutual funds also offer tax benefits. These schemes are growth
oriented and invest pre-dominantly in equities. Their growth opportunities and risks
associated are like any equity-oriented scheme.
LOAD OR NO-LOAD FUND
A Load Fund is one that charges a percentage of NAV for entry or exit. That
is, each time one buys or sells units in the fund, a charge will be payable. This charge
is used by the mutual fund for marketing and distribution expenses. Suppose the NAV
per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors
who buy would be required to pay Rs.10.10 and those who offer their units for
repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should
take the loads into consideration while making investment as these affect their
yields/returns. However, the investors should also consider the performance track
record and service standards of the mutual fund, which are more important. Efficient
funds may give higher returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the
investors can enter the fund/scheme at NAV and no additional charges are payable on
purchase or sale of units.
GEOGRAPHICAL CLASSIFICATION
Mutual funds can be classified from the angle of territorial jurisdiction of
operations in two types:
DOMESTIC MUTUAL FUNDS (DMFS)
Domestic mutual funds launch schemes, which are operational within political
territorial limits of a country for the residents or non-residents.
OFFSHORE MUTUAL FUNDS (OMFS)
Offshore mutual funds are cross border funds meant to attract foreign savings
for investment in India.
REGULATORY ASPECTS OF MUTUAL FUND
SCHEMES OF MUTUAL FUND
The asset management company shall launch no scheme unless the
trustees approve such scheme and a copy of the offer document has been
filed with the Board.
Every mutual fund shall along with the offer document of each scheme
pay filing fees.

The offer document shall contain disclosures which are adequate in order
to enable the investors to make informed investment decision including
the disclosure on maximum investments proposed to be made by the
scheme in the listed securities of the group companies of the sponsor.
No one shall issue any form of application for units of a mutual fund
unless the form is accompanied by the memorandum containing such
information as may be specified by the Board.
Every close ended scheme shall be listed in a recognized stock exchange
within six months from the closure of the subscription
The asset management company may at its option repurchase or reissue
the repurchased units of a close-ended scheme.
A close-ended scheme shall be fully redeemed at the end of the maturity
period. "Unless a majority of the unit holders otherwise decide for its
rollover by passing a resolution".
The mutual fund and asset management company shall be liable to refund
the application money to the applicants, -
(i) If the mutual fund fails to receive the minimum subscription
amount referred to in clause (a) of sub-regulation (1);
(ii) (ii) If the moneys received from the applicants for units are in excess
of subscription as referred to in clause (b) of sub-regulation (1).
The asset management company shall issue to the applicant whose application
has been accepted, unit certificates or a statement of accounts specifying the

number of units allotted to the applicant as soon as possible but not later than
six weeks from the date of closure of the initial subscription list and or from
the date of receipt of the request from the unit holders in any open ended
scheme.
RULES REGARDING ADVERTISEMENT:
The advertisement for each scheme shall disclose investment objective for
each scheme.
An advertisement shall be truthful, fair and clear and shall not contain a
statement, promise or forecast which is untrue or misleading.
Advertisements shall not be so framed as to exploit the lack of experience or
knowledge of the investors.
All advertisements issued by a mutual fund or its sponsor or Asset
Management Company shall state, "all investments in mutual funds and
securities are subject to market risks and the NAV of the schemes may go up
or down depending upon the factors and forces affecting the securities
market".
The advertisement shall not compare one fund with another, implicitly or
explicitly, unless the comparison is fair and all information relevant to the
comparison is included in the advertisement.
The offer document and advertisement materials shall not be misleading or
contain any statement or opinion, which are incorrect or false.

INVESTMENT OBJECTIVES
AND VALUATION POLICIES
The moneys collected under any scheme of a mutual fund shall be invested
only in transferable securities in the money market or in the capital market or
in privately placed debentures or securities debts.
Provided that moneys collected under any money market scheme of a mutual
fund shall be invested only in money market instruments in accordance with
directions issued by the Reserve Bank of India;
The mutual fund shall not borrow except to meet temporary liquidity needs of
the mutual funds for the purpose of repurchase, redemption of units or
payment of interest or dividend to the unit holders.
The mutual fund shall not advance any loans for any purpose.
Every mutual fund shall compute and carry out valuation of its investments in
its portfolio and publish the same in accordance with the valuation norms
specified in Eighth Schedule
Every mutual fund shall compute the Net Asset Value of each scheme by
dividing the net assets of the scheme by the number of units outstanding on
the valuation date.
The Net Asset Value of the scheme shall be calculated and published at least
in two daily newspapers at intervals of not exceeding one week:

The price at which the units may be subscribed or sold and the price at which
such units may at any time be repurchased by the mutual fund shall be made
available to the investors.
GENERAL OBLIGATIONS:
Every asset management company for each scheme shall keep and maintain
proper books of accounts, records and documents, for each scheme so as to
explain its transactions and to disclose at any point of time the financial
position of each scheme and in particular give a true and fair view of the state
of affairs of the fund and intimate to the Board the place where such books of
accounts, records and documents are maintained.
The financial year for all the schemes shall end as of March 31 of each year.
Every mutual fund or the asset management company shall prepare in respect
of each financial year an annual report and annual statement of accounts of the
schemes and the fund as specified in Eleventh Schedule.
Every mutual fund shall have the annual statement of accounts audited by an
auditor who is not in any way associated with the auditor of the asset
management company.
PROCEDURE FOR ACTION IN CASE OF DEFAULT:
On and from the date of the suspension of the certificate or the approval, as
the case may be, the mutual fund, trustees or asset management company,
shall cease to carry on any activity as a mutual fund, trustee or asset
management company, during the period of suspension, and shall be subject

to the directions of the Board with regard to any records, documents, or
securities that may be in its custody or control, relating to its activities as
mutual fund, trustees or asset management company.
RESTRICTIONS ON INVESTMENTS:
A mutual fund scheme shall not invest more than 15% of its NAV in debt
instruments issued by a single issuer, which are rated not below investment
grade by a credit rating agency authorized to carry out such activity under the
Act. Such investment limit may be extended to 20% of the NAV of the
scheme with the prior approval of the Board of Trustees and the Board of
asset management company
A mutual fund scheme shall not invest more than 10% of its NAV in unrated
debt instruments issued by a single issuer and the total investment in such
instruments shall not exceed 25% of the NAV of the scheme. All such
investments shall be made with the prior approval of the Board of Trustees
and the Board of Asset Management Company.
No mutual fund under all its schemes should own more than ten per cent of
any company's paid up capital carrying voting rights.
Transfers of investments from one scheme to another scheme in the same
mutual fund shall be allowed only if, -
1. Such transfers are done at the prevailing market price for quoted
instruments on spot basis.

2. The securities so transferred shall be in conformity with the investment
objective of the scheme to which such transfer has been made.
A scheme may invest in another scheme under the same asset
management company or any other mutual fund without charging any
fees, provided that aggregate inter scheme investment made by all
schemes under the same management or in schemes under the
management of any other asset management company shall not
exceed 5% of the net asset value of the mutual fund.
The initial issue expenses in respect of any scheme may not exceed
six per cent of the funds raised under that scheme.
Every mutual fund shall buy and sell securities on the basis of
deliveries and shall in all cases of purchases, take delivery of relative
securities and in all cases of sale, deliver the securities and shall in no
case put itself in a position whereby it has to make short sale or carry
forward transaction or engage in badla finance.
Every mutual fund shall, get the securities purchased or transferred in
the name of the mutual fund on account of the concerned scheme,
wherever investments are intended to be of long-term nature.
Pending deployment of funds of a scheme in securities in terms of
investment objectives of the scheme a mutual fund can invest the
funds of the scheme in short term deposits of scheduled commercial
banks.
No mutual fund scheme shall make any investment in;
Any unlisted security of an associate or group company of the
sponsor; or
Any security issued by way of private placement by an associate
or group company of the sponsor; or
The listed securities of group companies of the sponsor, which
is in excess of 30% of the net assets [of all the schemes of a
mutual fund]
No mutual fund scheme shall invest more than 10 per cent of its
NAV in the equity shares or equity related instruments of any
company. Provided that, the limit of 10 per cent shall not be
applicable for investments in index fund or sector or industry
specific scheme.
A mutual fund scheme shall not invest more than 5% of its NAV
in the equity shares or equity related investments in case of open-
ended scheme and 10% of its NAV in case of close-ended
scheme.
PRESENT MARKET TRENDS OF MUTUAL FUNDS
Alone UTI with just one scheme in 1964 now competes with as many as 400 odd
products and 34 players in the market. In spite of the stiff competition and losing
market share, UTI still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the
industry. New players have come in, while others have decided to close shop by
either selling off or merging with others. Product innovation is now pass with the
game shifting to performance delivery in fund management as well as service. Those
directly associated with the fund management industry like distributors, registrars and
transfer agents, and even the regulators have become more mature and responsible.
The industry is also having a profound impact on financial markets. While
UTI has always been a dominant player on the bourses as well as the debt markets,
the new generations of private funds, which have gained substantial mass, are now
seen flexing their muscles. Fund managers; by their selection criteria for stocks have
forced corporate governance on the industry. By rewarding honest and transparent
management with higher valuations, a system of risk-reward has been created where
the corporate sector is more transparent then before.
Funds have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performances are improving.
Funds collection, which averaged at less than Rs.200bn per annum over five-year
period spanning 2002-2009 doubled to Rs.410bn in 2009-2015. In the current year
mobilization till now have exceeded Rs.500bn. Total collection for the current
financial year ending March 2016 is expected to reach Rs.750bn.
What is particularly noteworthy is that bulk of the mobilization has been by
the private sector mutual funds rather than public sector mutual funds. Indeed private
MFs saw a net inflow of Rs.9819.34 crores during the first nine months of the year as
against a net inflow of Rs.804.40 crores in the case of public sector funds.
Mutual funds are now also competing with commercial banks in the race for
retail investors savings and corporate float money. The power shift towards mutual
funds has become obvious. The coming few years will show that the traditional
saving avenues are losing out in the current scenario. Many investors are realizing
that investments in savings accounts are as good as locking up their deposits in a
closet. The fund mobilization trend by mutual funds in the current year indicates that
money is going to mutual funds in a big way. India is at the first stage of a revolution
that has already peaked in the U.S. The U.S. boasts of an Asset base that is much
higher than its bank deposits. In India, mutual fund assets are not even 10% of the
bank deposits, but this trend is beginning to change. Recent figures indicate that in the
first quarter of the current fiscal year mutual fund assets went up by 215% whereas
bank deposits rose by only 27%. (Source: Thinktank, The Financial Express) This is
forcing a large number of banks to adopt the concept of narrow banking wherein the
deposits are kept in Gilts and some other assets, which improves liquidity and reduces
risk. The basic fact lies that banks cannot be ignored and they will not close down
completely. Their role as intermediaries cannot be ignored. It is just that Mutual
Funds are going to change the way banks do business in the future.
BANKS V/S MUTUAL FUNDS
BANKS MUTUAL FUNDS
Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance Everyday
between20th.
& 60th. Of every month
Guarantee Maximum Rs.2 lakh on None
deposits
TYPES OF MUTUAL FUND SCHEMES
Wide varieties of Mutual Fund Schemes exist to cater to the needs such as
financial position, risk tolerance and return expectations etc. The followings are given
an overview into the existing types of schemes in the Industry.
(A) By Structure
Open End Scheme

Close End Scheme
Interval Scheme
(B) By Investment Objectives
Growth Scheme
Income Scheme
Balance Scheme
(C) Other Scheme
Tax Saving Scheme
Special Scheme such as Index or Sector Specific Scheme
All mutual funds scheme are subject to market risk. NAV of Units issued may go up
or down depending on market risk.
MUTUAL FUND CONCEPTS & ROLE
The mutual fund is a concept of mutual help of subscribers for portfolio
investment and management of these investments by experts in the field. The mutual
fund is required to file with SEBI a detailed information memorandum, in a
prescribed format that provides all the information about the fund & scheme. This
document is also called offer documents or prospectus and it contain most of relevant
information that an investor is needed. The investor can get the summary of the offer
documents, in the abridged version which is called Key Information Memorandum.
Offer document is very important to an investor for the following reasons.
a. Information about the scheme, and its fundamental attributes as specified in
the offer documents.

b. Offer documents is a legal documents that specifies the details of the offer
made by the mutual funds and before buying the mutual funds products, an
investor must read and understand the term of offer.
Generally the offer documents are valid until it is changed and such changes must be
notified to SEBI and investor. Some major changes are as under:
Change in the AMC or Sponsor of Mutual Funds
Change in the Load Structure
Changes in the Fundamental attributes of the Scheme
Change in the investment option to investor, inclusion or deletion
The cover page of the offer documents should contain the following information:
Name of mutual funds
Name of the Scheme
Type of the Scheme (Growth, Income or Balance)
Name of the AMC
Classes of units offered for the Sale
Price of the Units
Name of the guarantor in the case of assured return scheme
The Opening & Closing and earliest closing date of the offer
Mandatory Statements
Investors buy the units of mutual funds. The numbers of the units bought by an
investor represent his holding in mutual funds. The price at which each unit is being
sold is announced by the mutual funds. This is usually called the Sales price. The
price of existing mutual funds is announced by the mutual funds every day and it is
based on the NAV of the fund. All the mutual funds specify the minimum amount
that has to be invested and the multiply thereof.
In an open ended scheme, the investor can invest on any given day, at the
price quoted by the mutual Funds. However in the close ended fund has an initial
offer period. During the period investor can buy units at the price fixed for the whole
period.
Tax Aspects
In the Mutual Fund investors received two types of income from investment,
i.e. Dividends declared time to time and capital gain arising out of redemption of
Mutual Fund units. Both the case comes under the provision of income tax act 1961.
At present, the following tax provision is applicable in the hand of the investors:
a. Dividend
i. Dividends from Mutual Fund are tax free in the hand of the investor.
ii. In case of Mutual Fund scheme has more than 50% in debt fund,
dividend distribution tax @10% + surcharge + education cess is to be
paid by the Mutual Fund.
iii.In case of Mutual Fund scheme with more than 50% in equity, the
dividend distribution tax is not to be paid.
b. Capital gain tax
Mutual Funds are securities under securities contract regulation act. Therefore
any holding for a period of less than 12 month is considered short term and
holding more than 12 months are considered long term. If units are redeemed
by the investors at the price that is higher than his acquisition price the
investor earn the capital gain. If holding period of investor is less than 12
month than it is considered short term capital gain and it is taxable @ 15% +
surcharge + education cess.
If the holding is higher than 12 months, the investor has the option to
calculate the long term capital gain. It is calculated in the following manner:
i. The investor can index the acquisition price according the cost of
inflation index published by CBDT and pay the capital gain tax @
20% + surcharge + education cess.
ii. If the investor chooses not the index the acquisition price, he can pay
the capital gain tax on the entire amount of difference between
acquisition price and redemption value @ 10% + surcharge +
education cess.
c. Investment in ELSS
Investment in specific equity linked saving scheme as notified by the Govt. of
India are eligible for tax rebate U/s 80C of the income tax act up to minimum
limit of Rs 1 lac.
Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities.
The unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date. The Mutual Funds units are priced by two ways
i.e. historical pricing and Prospective Pricing. If the investor received an NAV based
on the Market Price and valuation in the past, it is called historical pricing. When the
NAV is computed at the end of the business day called prospective pricing. Mutual
Funds usually announce the cut off time before applications have to be handed over in
the eligible for the end of the day NAV.
Every offer document define both applicable NAV and Business Day,
depending on which the NAV applicable to the investor for each scheme. Most of the
Mutual Funds make NAV of their scheme available over phone and on the website of
the Fund and AMFI Website.
PORTFOLIO MANAGEMENT OF MUTUAL FUND
Portfolio Management means to maximize the wealth of the investor by the optimum
mixing the fund in a best manner and reducing the risk at a minimum level. The
major tasks of the portfolio manager are: Constructing a portfolio of equity shares
that is consistent with an investment objective of the fund. Secondly managing and
constantly rebalancing the portfolio to produce capital appreciation and earning that
would reward the investor with best return. The following Portfolio can be manage
separately by Fund Manager:
A. Equity Market and mutual Funds
B. Debt Market and mutual Funds
(A) EQUITY MARKETS AND MUTUAL FUNDS
In the present scenario three major types of equity and equity linked security
are available:
a. Equity Share
Equity Shares represents part ownership in a company and risky instrument by
nature. There is no guarantee of return. Equity share holders are entitled to
vote and participate directly or indirectly in company decision making. Since
equity share are listed and traded, the price of share moves in accordance with
the expected future performance of the company.
b. Preferences Share
Preference share has the preferential right over the equity share in the payment
of dividend and in the receipt of liquidation proceed. Dividends are paid
according to the pre determined rate. A preferential share holder has no right
to vote.
c. Equity Warrant
Equity warrant represents a right to purchase a fixed number of shares at pre
determined price with in a specified period.
The equity shares are too risky to manage a difficult job. However, we calculate price
earning ratio (P/E ratio) to major the exact position of the equities.
P/E Ratio:
The ratio between share price and the post tax earning of a company is called
price earning ratio. The P/E multiply as an indicator of value the market assigned to
every rupee earned by a company. If a company earning per share in the last financial
year was rupees 30/- and if it is being traded in the market at a price Rs.450/-, the P/E
multiple is 450/30 = 15. This means that the market is paying 15 per rupee of earning
to this company.
P/E multiple is an important indicator of the valuation of a share. If market are
bullish P/E is high because investors are paying more & more, for every rupee of
earning. We call this as a situation of over valuation. If markets is bearish, even the
best corporate performance may not receive high valuation, as P/Es are low. We call
these as situations under valuation. The fund manager makes the judgment on the
value of earnings of the company, and looks for situations when the market valuation
varies from his own judgment.
Dividend Yield
Dividend paid out by the company, is usually a percentage of the face value of
a share. The number is called as dividend yield, and is computed as a ratio between
dividend paid and market price of a share. If the market price is higher, dividend yield
are lower. If the market price are lower, dividend yield are higher.
Dividend yield and P/E multiple are sensitive to the market price per share.
But market price is the numerator for the P/E multiple and denominator for dividend
yield. If the market price is higher, P/E multiple will be higher but dividend yield will
be lower and vice versa.
(B) DEBT MARKETS AND MUTUAL FUNDS
Debt market covered the fixed Income securities that pay the investor, income
at the rate that determined at the beginning of the transaction and are designed to be
tradable in the securities market. Fixed income securities represent a promise by the
borrowing entity to provide the investor a predetermined stream of Income on a
periodic basis and return the amount invested at the end of a specified period. The
periodic payments are called interest payment.
In case of equity shares the investors receive income in the form of dividend if
and when the company decides to pay the dividend. In the Indian market contest
Bonds means debt Structure issued by the Government, Semi Government bodies and
Public sector financial Institution and Companies. Fixed income helps the investor to
plan for a variety of needs that requires regular Income. An investor requires regular
monthly income can invest in a instruments like monthly Income Plan or regular
Income Bond, able to get a fixed sum of Money as interest at regular interval of Time.
Inflation indicates falls the purchasing power of the money. If the rate of
inflation is expected to be 10% of this year, Rs.100/- that we invest in fixed income
securities for a year will be worth only Rs.90 at the end of year, when the principal is
repaid because of the inflation. Therefore interest rates have to be considered the
effect of inflation on the investment. It is expected that rate of inflation will be higher;
we can expect interest rate to also get higher.
YIELD
Yield term is used to signify the actual rate earned on investment. Interest rate is
specified in the term of the face value of the bond. Therefore the yield to us is the
same as the interest rate is specified at its face value. Current yield is a simple
measure of the yield on a bond. But it considers only one cash flow and ignores future
cash flow as well as redemption value of the bond.

YIELD TO MATURITY OF A BOND (YTM)
YTM of bond equates the discounted value of the future Cash Flow to the current
market price. It is also called internal rate return of bond. YTM of bond assume that
all cash flow until maturity are received and reinvested at the YTM rate.
SIZE OF INDIAN DEBT MARKET
Market capitalization in the debt Market is as under;
Market
Security Type % of Total
Capitalization
Govt. Securities 529896.00 71.46
PSU Bonds 41566.00 5.61
State Loans 57955.00 7.82
Treasury Bills 24004.00 3.24
Mutual Funds 37467.00 5.05
Financial Institutions 26152.00 3.53
Corporate Bonds 16297.00 2.20
Others 8171.00 1.10
Total:- 741508.00 100
GOVERNMENT SECURITIES:
The Government is the largest issuer of fixed income securities. The Government
Issue the short term fixed income securities, which have the maturity less than one
year. These instruments are called treasury bills. Treasury bills are issued for tenure
of 91 days and 364 days. Long Term bonds are issued by the government for a period
over a year up to 30 years. The RBI issues these securities on behalf of the
Government through treasury auction where buyer can bid for them. Government
securities are popularly called treasury securities treasury bills and treasury bonds.
Government Securities are also called Guilt edged securities or Guilt.
CALL & PUT OPTION
Call & Put option depends on the term of the issue and the nature of option. An
option which can be exercised at any time is called American Style of option. On
other hand European style option can be exercised only at a specified point in time.
Investor has to read the document carefully to see the kind of option available to
them. If the interest rate are rising, but put option is available only at the time and
exercise date is further away, investor can not exercise their option. On the other
hand, if the interest rate is falling and issuer has an American Style Call option, he
might exercise it at the earliest possible time.
DEBT PORTFOLIO MANAGEMENT STRATEGIES
The following Debt portfolio management strategies are being adopted by the fund
manager:
a) Buy & hold: Fund Manager who invest in high yielding securities and
hold these to maturity with a view to earning the coupon interest on
them, Follow a buy and hold strategy. These fund managers will chose
good credit quality and avoid bonds with call options, so that the
coupon can be locked in. This strategy will fail to pay off if interest
rates increase.
b) Duration Management: Fund manager can actively manage their
portfolio by using duration as a tool. Fund manager may take an
interest rate view, and accordingly alter the duration of the portfolio
for maximizing gains. If the fund manager expects interest rates to fall,
he may increase the duration of portfolio. When rates do fall, the gains
in his portfolio value will be higher, because of the higher duration.
c) Credit Selection: Fund manager may create strategy that hinge on
expected changes in credit quality of borrowers. If credit upgrades are
expected, investing into lower grade bonds at lower prices will provide
scope for appreciation and better credit quality, if the credit rating is
upgraded.
d) Pre-payment and option features: Fund managers may take positions
in bonds based on their expectation of a put or call option for a bond
being exercised.
SEBI REGULATION GOVERNING THE INVESTMENT MANAGEMENT
SEBI Regulations requires that the investment policy be clearly mentioned in the
offer document. The internal investment guideline provides detail on the asset
allocation policy and other aspects on the investment policy. SEBI regulation
provides the prudential guideline regarding the investment management. The
following are some significant regulatory requirement.

a. Mutual Fund can invest only in marketable securities.
b. All investment by the Mutual Funds has to be on delivery basis i.e. Mutual
Fund has to pay for each buy transaction and delivery securities for every
sell transaction. It can not enter into trade with the view to squaring off the
positions.
c. A Mutual Fund under all the schemes cannot hold more than 10% of the
paid up capital of company.
d. Except in the case of sect oral funds and index funds, a Mutual Fund
scheme cannot invest more than 10% of its NAV in a single company.
e. Investment in rated investment grade issues of a single issuer cannot
exceed 15% of the net assets and can be extended 20%, with the approval
of trustees.
f. Investment in unrated securities of one issuer cannot exceed 10% of net
asset of scheme and investment in such securities cannot be exceeding
25% of net asset.
g. Investment in unlisted shares cannot exceed 5% of the net asset for open
ended schemes and 10 % of the net asset in close ended schemes.
h. Mutual Fund can invest in ADRs/ GDRs up to a maximum limit of 10% of
the net asset or 50 million Dollars, whichever is lower.
i. Mutual Fund can also invest in a limited manner in a treasury bond and
AAA rated corporate debt outside India.

PROCESS OF INVESTING IN MUTUAL FUNDS
Investors buy the Units of mutual funds. The number of units bought by an
investor represents his Holding in mutual funds. The Price at which each unit is
being sold is announced by the mutual funds. This is usually called sale price. In the
existing mutual fund scheme, the price is announced by the mutual funds every day
and is based on the NAV of the funds. The investor can either buy a fixed number of
units or can invest a fixed sum of money.
All mutual fund schemes specify the minimum amount that to e invested and
the multiple thereof. These restrictions are usually not applicable to inter scheme and
inter option switches and reinvestments.
Generally investors buy the units only from the mutual funds, if the scheme is
open ended the investor can invest on any given day, at the price quoted by the
mutual funds. Usually mutual funds have a distribution network, made up of
distributing agent, investor service centre and branches networks. An investor can
buy units of the fund from any of these agencies, who sell the units on behalf of the
mutual funds. In the case of close ended fund, the mutual funds have the initial offer
period. During this period, investors can buy units at a price that is fixed for the
whole period. After closer of the offer period the mutual fund closes further direct
sale to investor. Investor, who wants to invest in a close end fund after initial period
offer, has to buy the units from the Stock Market. Close ended fund have to list their
units on a Stock exchange to enable this. It may possible that units are not regularly
traded on the stock exchange, resulting in units not being available when the investor
wants to buy them.
There are four channels that are currently used for the distribution of Mutual
funds:
Individual Agents
Distribution companies
Banks and NBFCs
Direct Marketing Channels
Mutual funds have their own internal guidelines on the appointment and term of these
distributing agencies. There are no mandatory registrations for distributors. There are
also no regulatory requirements regarding who can be an agent, or the fees and
commissions payable to them.
Individual Agents is the largest distribution channels and it is estimated about
175000/- individual funds agent in the country. These agents usually sell schemes of
all mutual funds. AMFI has mandated the AMFI certification for the individual
agents so that they qualify themselves to be reliable financial advisors for the
investors. From November 2007, No new mutual funds agent can be appointed if he
or she does not have AMFI certification, which is awarded only after clearing the
AMFI Certification examinations.
The following categories of investor are usually eligible to invest in mutual
funds;
Resident Individuals
Indian companies
Indian trust and charitable institutions
Banks
Non banking finance companies
Insurance companies
Provident funds
Non resident Indians
SEBI registered foreign institutional investors
Investor can get the Account Statement, which shows their holding of an investor are
identified by the accounts number of folio number. The account statement is
computer generated and has no signature. This instrument cannot trade or transferred.
The account statement shows the holding details, the number of units outstanding and
the value of the holding. All transaction relating to purchase of units, redemption of
units, dividend, reinvestment etc are shown in the statement.
The following precautions should take the investor while investing in the mutual
funds:
Always keep a photocopy of the application forms
Keep the counterfoil / acknowledgement issued by the collecting agency.
It is preferable to have joint ownership, so that investment will pass to the
joint ownership in the event of death of the first holder.
It is important to fill up the nomination details in the application.

Cheque should be crossed and application number and name should be written
on the back of the cheque.
Existing investor can quote their account or folio number so that their holding
will be consolidated.
Some of the important right of the investor those investors in mutual fund have are:
a. Investor has the right to receive the dividend declared in the scheme with in
30 days.
b. Redemption proceed have to be sent to the investor with in 10 days from the
date of receipts of such request by the AMC.
c. If the investor fail to claim the dividend or redemption proceed, he has the
right to claim it up to 3 years from the due date and the then prevailing NAV.
After the expiry of this period investor will receive the NAV prevailing at the
end of the 3rd year.
d. Mutual funds have to allot units with in 30 days of the IPO and also open the
scheme for redemption if it is an open ended scheme.
e. Mutual fund to publish half yearly result at least on national daily and publish
their entire portfolio at least once in 6 months.
f. Trustees will have to ensure that any information having the material impact
on the unit holder investment should be made public by the mutual funds.
g. If 75% of the units holder so decide.
h. A scheme can be wound up
i. Meeting of the unit holder can be called

j. Appointment of the AMC of the mutual fund can be terminated
k. If there is any change in the fundamental attribute of a scheme, the unit
holders have to invite through letter.
l. Unit holder have the right to inspect the following documents:
Copy of Trust deed, investment management Agreement
Memorandum and Article of Association of the AMC
Unabridged Balance sheet of the mutual funds scheme, sponsor and
AMC
Text of the SEBI Regulations
There are some limitations of the investor rights:
a. Investor cannot sue the trust
b. Investor can not lodge complaints against trustee or the AMC. Investor
can also lodge complaints with SEBI for non compliance with SEBI
regulation, by sponsor, AMC or Trustees.
c. Investor can not be compensated, if the performance is below the
expectations.
d. There are no legal remedies for prospective investors.

UNIT TRUST OF INDIA
UNIT TRUST OF INDIA
Mission
To offer customer-oriented, innovative products by leveraging technology to
provide superior returns achieve the highest service standards and attain sustained
growth levels through principled human resources striving in a focused, transparent
ethical manner to exceed investor expectations.
Overview
UTI Mutual Fund has come into existence with effect from 1st February 2013.
UTI Asset Management Company presently manages 42 NAV based domestic SEBI
compliant schemes and 4 Offshore funds having a corpus Rs.15, 243 crore from about
20 million investor accounts.
UTI Mutual Fund has a track record of managing a variety of schemes
catering to the needs of every class of citizenry over a period of 39 years. It has a
nationwide network consisting 54 branch offices, 3 UTI Financial Centers (UFCs)
and representative offices in Dubai and London. With a view to reach to common
investors at district level, 18 satellite offices have also been opened in select towns
and districts. It has 2400 committed employees and over 10,000 active agents and 266
chief representatives to sell and service its schemes. It has a well-qualified,
professional fund management team, who has been highly empowered to manage
funds with greater efficiency and accountability in the sole interest of unit holders.
The fund managers are also ably supported with a strong in-house equity research
department. To ensure better management of funds, a risk management department is
also in operation.
It has reset and upgraded transparency standards for the mutual funds
industry. All the branches, UFCs and registrar offices are connected on a robust IT
network to ensure cost-effective quick and efficient service. All these have evolved
UTI Mutual Fund to position as a dynamic, responsive, restructured, efficient, and
transparent and SEBI compliant entity.
UTI Mutual Fund has recently opened out yet another investor friendly vista
for its investors on the Internet i.e. My UTI whereby an investor can transact
through the Internet. With this the investors need not visit UTI offices, or write letters
for non monetary changes, not involving any document submission for transactions
viz. change of address, bank particulars mandate (mode of payment), update income
tax details and view, and download.
As on January 31, 2012, almost all schemes/funds have outperformed the
respective benchmark indices over various periods. These schemes have distributed
income/bonuses consistently. Over and above the faith reposed by the investor
community on UTI has also been reflected by fresh sales mobilization over Rs.6,200
crores in the last 7 months, commencing 1st July 2010. US 95 has been awarded with
CNBC Mutual Fund Award for the year for the best performance in the open-end
balance fund category under the three year segment.
UTI Mutual Fund is poised to meet the challenges of the future with its
dedicated human resources, vast reservoir of funds and 38-year track record. Speed,
Quality and Transparency is the edifice on which it desires to stride ahead for the
benefit of its investors.
UTI set up as a statutory corporation under UTI Act 1963, started functioning
w.e.f. July 1st 1964. Every year millions of investor entrust their saving in the scheme
of UTI. The faith and confidence of investors liquidity and returns to the investor
have reflected in the position of UTI in the Mutual funds and Indian Capital Market.
In Jan 14, 2011 UTI is converted of UTI Asset Management Company
Limited, who has been appointed by the UTI Trustee Pvt. Limited Co. for managing
the schemes of UTI Mutual Fund and the schemes transferred/migrated from the
erstwhile Unit Trust of India.
The UTI Asset Management Company provides professionally managed back
office support for all business services of UTI Mutual Fund (excluding fund
management) 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.

UTI AMC is a registered portfolio manager under the SEBI (Portfolio
Managers) Regulations, 1993 on 3rd February 2010, for undertaking portfolio
management services and also acts as the manager and marketer to offshore funds
through its 100 % subsidiary, UTI International Limited, registered in Guernsey,
Channel Islands.
ASSETS UNDER MANAGEMENT
UTI Asset Management Company presently manages a corpus of over Rs.52,549
Crores as on 30th April 2014. UTI Mutual Fund has a track record of managing a
variety of schemes catering to the needs of every class of citizenry. It has a
nationwide network consisting 97 UTI Financial Centres and UTI International
offices in London, Dubai and Bahrain. With a view to reach to common investors at
district level, 3 satellite offices have also been opened in select towns and districts.
UTI Mutual Fund has a well-qualified, professional fund management team,
who has been highly empowered to manage funds with greater efficiency and
accountability in the sole interest of unit holders. The fund managers are also ably
supported with a strong in-house securities research department. To ensure better
management of funds, a risk management department is also in operation.
Investment Philosophy
UTI Mutual Funds investment philosophy is to deliver consistent and stable
returns in the medium to long term with a fairly lower volatility of fund returns
compared to the broad market. It believes in having a balanced and well-diversified
portfolio for all the funds and a rigorous in-house research based approach to all its
investments. It is committed to adopt and maintain good fund management practices
and a process based investment management.
UTI Mutual Fund follows an investment approach of giving as equal an importance to
asset allocation and sect oral allocation, as is given to security selection while
managing any fund. It combines top-down and bottom-up approaches to enable the
portfolios/funds to adapt to different market conditions so as to prevent missing an
investment opportunity.
In terms of its funds performance, UTI Mutual Fund aims to consistently remain in
the top quartile vis--vis the funds in the peer group.
Sponsors
Three leading public sector banks Bank of Baroda, Punjab National Bank
and State Bank of India and Life Insurance Corporation of India (LIC), the largest
public financial investment institution and life insurer in India are the sponsors of
UTI Mutual Fund.
Bank of Baroda:-
Bank of Baroda is a commercial bank performing activities in terms of Banking
Companies (Acquisition and Transfer of Undertakings Act 1970) under which the
Undertaking of the Bank was taken over by the Central Government. During the
period since inception, it has always maintained its practice of sound value based
banking to emerge as one of the premier public sector Banks of the country today. It
has a track record of uninterrupted profits since inception in 1908. The financial
strength of the Bank and its long tradition of efficient customer service are drawn
substantially from the extensive reach of its 2704 strong branch network (as of
31.03.2012) covering almost every State and Union Territory in the Country. The
Bank is also one of the few Indian Banks with a formidable presence overseas with
39 branches. Thus, the total branch network is 2,743 as at 31.03.2012.
Life Insurance Corporation of India:-
Life Insurance Corporation of India (LIC) is amongst the largest insurance
companies in the world, with 2048 branches and having a Fund size of Rs.
463147.62 crore.
Punjab National Bank:-
Punjab National Bank is a commercial bank performing activities in terms of
Banking Companies (Acquisition and Transfer of Undertakings Act 1970) under
which the Undertaking of the Bank was taken over by the Central Government. The
main object of the bank under the said Act is as below:- An act to provide for the
acquisition and transfer of the undertaking of certain banking companies, having
regard to their size, resources coverage and organization, in order to further to
control the heights of the economy, to meet progressively and serve better, the needs
of the development of the economy and to promote the welfare of the people, in
conformity with the policy of the State towards securing the principles laid down in
clause (b) and (c) of Article 39 of the Constitution of India and for matter connected
therewith or incidental therein. As on 31.03.2012 Punjab National Bank has 4065
branches, 2 subsidiaries and a deposit size of Rs.1,19,684.92 crores.

State Bank of India:
The State Bank of India is the largest public sector bank in India with 9177 branches
in India and 70 offices in 30 countries worldwide. In addition to this, SBI also has 21
subsidiaries.
The sponsors are not responsible nor liable for any loss resulting from the operation
of the scheme beyond the contribution of an amount of Rs.10,000/- made by them
towards setting up of the Mutual Fund.
Trustee
UTI Trustee Company Private Limited company incorporated under The Companies
Act, 1956 will be the Trustee of transferred/migrated schemes are the first and sole
trustee of the Mutual Fund under the Trust Deed dated December 9, 2008 executed
between the Sponsors and the Trustee Company (the Trustee).
Registered office:
UTI Tower, Gn Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051
Board of Directors
Shri Janki Ballabh, Dr. P G Apte
Chairman, Former Chairman, SBI Director, Indian Institute of Management,
Flat No. 605, Versova Vinayak Bangalore,
Co-op. Hsg. Soc., HSG Plot No. 415, IIMB Campus,
8, Near Versova Telephone Bannerghatta Road,
Exchange, Versova, Andheri (W), Bangalore - 560 076
Mumbai 400 053
Shri S P Oswal Shri Babasaheb Neelkanth Kalyani

Chairman & Managing Director-Vardhman Chairman & Managing Director -Bharat Forge
Textiles Ltd. Limited
Auro Mirra Bhawan, 2722, 'Amit' 221/A, Kalyani Nagar,
Gurdev Nagar, Pakhowal Road, Yerawada, Pune - 411 006
Ludhiana.
Shri Ashok K Kini Shri S Ravi
Flat No. B-202, Mantri Pride Senior Partner,Ravi Rajan & Co. Chartered
Apartment, 1st Cross Mountain Accountants
Road, Jayanagar, 1st Block, D-218, Saket,
Bangalore - 560011 New Delhi - 110 017
Asset Management Company
UTI Asset Management Company Limited is a company incorporated under The
Companies Act, 1956. Registered office: UTI Tower, Gn Block, Bandra - Kurla
Complex, Bandra (East), Mumbai - 400 051.
UTI Asset Management Company Limited has been appointed as the Asset
Management Company of the UTI Mutual Fund by the Trustee in terms of
Investment Management Agreement dated December 9, 2008 executed between UTI
Trustee Company Limited and UTI Asset Management Company Limited. The
AMC was approved by SEBI to act as the asset management company for UTI
Mutual Fund vide their letter no.MF/BC/PKN/03 dated January 14, 2009.
The paid up capital of the UTIAMC has been subscribed equally by the four
sponsors, viz. State Bank of India, LIC of India, Bank of Baroda and Punjab
National Bank. The AMC apart from managing the schemes of UTI Mutual Fund
will also manage the schemes transferred/migrated from the erstwhile Unit Trust of
India, in accordance with the provisions of the Investment Management Agreement,
the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the
schemes.
UTI AMC has entered into a service agreement with the Administrator of the
Specified Undertaking of The Unit Trust of India to provide back office support for
business processes but specifically excluding the making of decisions for the sale
and purchase for assets of the Specified Undertaking. UTI AMC has been registered
as a portfolio manager under the SEBI (Portfolio Managers) Regulations, 1993 on
February 3 2010, for undertaking portfolio management services.
UTI International Ltd., a 100 % subsidiary of UTI AMC, registered in Guernsey,
Channel Islands, and acts as manager to offshore funds and markets these offshore
funds abroad. Systems are in place to ensure that bank and securities accounts are
segregated and there is no conflict of interest between the various activities
undertaken by UTI AMC.
UTI International Ltd. (Guernsey based) a 100% subsidiary of UTI Asset
Management Company Ltd. (UTI AMC) of India and Shinsei Bank Limited
(Shinsei Bank) of Japan have signed a joint venture agreement to set up UTI
International (Singapore) Pte Limited (The Company).
UTI International is set up with the vision to engage in Investment Management and
Distribution of financial products in the South East Asian region. Besides structuring
investment products for customers in the region, the Company will also manage funds
investing in other jurisdictions. The company will also launch and manage structured
investment products to cater to the Japan South-East Asia corridor.
Funds
Name of Funds Type of Minimum Fund Size (In
Scheme Investment carore)
UTI Leadership Equity Fund Open ended Rs.5000/- 1192.00
UTI Master Share Unit Scheme Open ended Rs.5000/ 1852.00
UTI Master Value Fund Open ended Rs.5000/ 697.60
UTI Infrastructure Fund Open ended Rs.5000/ 509.00
UTI Dividend yield Fund Open ended Rs.5000/ 518.00
UTI Index Fund Open ended Rs.5000/ 257.00
UTI Mahila Unit Scheme Open ended Rs.5000/ 83.00
UTI Children Carrier Plan Open ended Rs.1000/ 2534.00
UTI Retirement Benefit Pension Open ended Rs.500/ 460.00
Plan
UTI Unit Linked Insurance Plan Open ended Rs.5000/ 3871.00
UTI MIS Advantage Plan Open ended Rs.5000/ 130.43
UTI Floating Rate Fund Open ended Rs.5000/ 1022.00
UTI Liquid Fund-Cash Plan Open ended Rs.100000/ 7790.00

STATE BANK OF INDIA
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the
country with an investor base of over 5.4 million. With over 20 years of rich
experience in fund management, SBI MF brings forward its expertise in
consistently delivering value to its investors.
SBI MF draws its strength from India's Largest Bank State Bank of India and
Socit Gnrale Asset Management, France
SBI Mutual Fund is Indias 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 - Indias 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 worlds leading fund
management companies that manages over US$ 500 Billion worldwide.
In twenty years of operation, the fund has launched 38 schemes and
successfully redeemed fifteen of them. In the process it has rewarded its
investors handsomely with consistently high returns.
A total of over 5.4 million investors have reposed their faith in th e wealth
generation expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark
indices and have emerged as the preferred investment for millions of investors
and HNIs.
Today, the fund manages over Rs. 31,794 crores of assets and has a diverse
profile of investors actively parking their investments across 36 active
schemes.
The fund serves this vast family of investors by reaching out to them through
network of over 130 points of acceptance, 28 investor service centers , 46
investor service desks and 56 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund
Resurgent India Opportunities Fund.
Growth through innovation and stable investment policies is the SBI MF
credo.
EQUITY SCHEME
The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher
returns which stock markets can provide. However they are also exposed to the
volatility and attendant risks of stock markets and hence should be chosen only by
such investors who have high risk taking capacities and are willing to think long term.
Equity Funds include diversified Equity Funds, Sect oral Funds and Index Funds.
Diversified Equity Funds invest in various stocks across different sectors while sect
oral funds which are specialized Equity Funds restrict their investments only to shares
of a particular sector and hence, are riskier than Diversified Equity Funds. Index
Funds invest passively only in the stocks of a particular index and the performance of
such funds move with the movements of the index. State Bank of India has promoted
various mutual funds: Summary of Equity Scheme is as under:
Name of Equity Funds Type of Scheme Remark
Magnum COMMA Fund Open ended
Magnum Equity Fund Open ended
Magnum Global Fund Open ended
Magnum Index Fund Open ended
Magnum Mid Cap Fund Open ended
Magnum Multi Cap Fund Open ended
Magnum Multiplier Plus 1993 Open ended

Magnum Sector Fund Umbrella: Open ended

MSFU Emerging Business Fund
MSFU IT Fund
MSFU Pharma Fund
MSFU Contra Fund
MSFU FMCG Fund
SBI Arbitrage Opportunity Fund Open ended
SBI Blue chip Fund Open ended
SBI Infrastructure Fund Open ended
SBI Magnum Tax Gain Scheme 93 Open ended
SBI Tax Advantage Fund S 1 Open ended
Balanced Schemes
Magnum Balanced Fund invests in a mix of equity and debt investments.
Hence they are less risky than equity funds, but at the same time provide
commensurately lower returns. They provide a good investment opportunity to
investors who do not wish to be completely exposed to equity markets, but is
looking for higher returns than those provided by debt funds.
Name of Equity Funds Type of Scheme Remark
Magnum Balanced Fund Open ended
Magnum NRI Investment Fund Open ended

Debt Schemes
Debt Funds invest only in debt instruments such as Corporate Bonds,
Government Securities and Money Market instruments either completely
avoiding any investments in the stock markets as in Income Funds or Gilt
Funds or having a small exposure to equities as in Monthly Income Plans or
Children's Plan. Hence they are safer than equity funds. At the same time the
expected returns from debt funds would be lower. Such investments are
advisable for the risk-averse investor and as a part of the investment portfolio
for other investors.
Name of Debt Funds Type of Scheme Remark
Magnum Childrens Benefit Plan Open ended
Magnum Gilt Fund Open ended
Magnum Income Fund Open ended
Magnum Insta Cash Fund
Magnum Insta Fund
Magnum Monthly Income Plan
Magnum NRI Investment Fund
SBI Capital Protection Oriented
Fund
OTHER MUTUAL FUNDS IN INDIA
Name of Mutual Funds Fund under
Management (In
carore)
Reliance Mutual Funds
ICICI Prudential mutual Funds
HDFC Mutual Funds
HSBC Mutual Funds
Birla Sun Life Mutual Funds
Franklin Templeton Mutual Funds
Kotak Mahindra Mutual Funds
Sundram BNP Paribas Mutual Funds
TATA Mutual Funds
Taurus Mutual Funds
LIC Mutual Funds
Lotus Mutual Funds

LITERATURE REVIEW
Why mutual funds in India performed so poorly
Most investors associate mutual funds with Master gain, Monthly Equity
Plans of SBI Mutual Fund and UTI Mutual Fund and of course Morgan Stanley
Growth Fund. This is so because these funds truly had participation from masses,
with a fund like Morgan Stanley having more than 1 million investors. Investors feel
that after 5 years, Morgan Stanley Growth Fund units still trade below the original
IPO price of Rs.10.
It is incorrect to think that all mutual funds have performed poorly. If one
looks at some income funds, they have come with reasonable returns. It is only the
performance of equity funds, which has been poor. Their poor performance has been
amplified by the closed end discounts i.e. units of these funds quoting at sharp
discounts to their NAV resulting in an even poorer return to the investor.
One must remember that a Mutual Fund does not provide assured returns and
neither can it "manufacture" returns out of thin air. Returns provided by mutual funds
are a function of the returns in the underlying asset class in which the fund invests.
Good funds can beat returns in their asset class to some extent but thats all. E.g. take
the case of a sector specific fund like a pharma fund, which invests only in shares of
pharmaceutical companies. If the Govt. comes with new regulation that severely
restricts the pricing freedom of these companies resulting in negative outlook for the
sector, the prices of all stocks in the sector could fall substantially resulting in severe
erosion in the NAV of the fund. No one can do anything about it. A good fund
manager would probably sell part of the fund before prices fall too much and wait for
an opportune time to reinvest at lower levels once the dust has settled. In that case,
the NAV of the fund would fall to a lesser extent but fall it will. If the investor in
the fund has invested in some stocks in the sector on his own, in all probability, his
personal investments may have depreciated to a larger extent.
Let us extend this example to an analysis of the investment climate in the last
7 years. The stock markets have done very badly in the last seven years. The BSE
Sensex crossed 3000 for the first time in early 1992. Since then it has gone up and
come down several times but has remained in the same range. Effectively, for a
seven-year investment period, the total return has been almost zero. The prices of
many leading stocks of yesteryear have fallen by more than 50% in these seven years.
If one considers the fact that the sensex has been changed several times, with all the
weak stocks having been weeded out, the effective returns on the old sensex, existing
in 1992, have been substantially negative. The following table gives some of the
prices of stocks considered "blue chips" in 1992, in 1994 and the prices prevailing at
present.
Price in Rs
Name of the Company 1992 high 1994 high Current price
Tata Steel 552 336 418.35
Grasim Industries 650 793 1212.85
Century Textiles 490 550 219.40

Reliance Industries 218 213 567.05
Raymond 250 263 312.85
Arvind Mills 353 290 115.75
SBI 290 197 398.10
It is quite obvious that if a fund had invested in any of these shares in 1992 or
subsequently in the 1994 boom, and if it remained invested in the share, then it would
be confronting a huge fall in NAV. This is exactly what has happened.
A similar table for prices of shares of Public Sector Undertakings (PSUs) is
given below.
Price in Rs
Name of the Company 1994 high Present price
MTNL 325 117.40
HPCL 550 310.75
Indian Oil n/a 431.60
ONGC n/a 860.95
SAIL 83 64.65
Most mutual fund managers took some time to realize the changed
circumstances wherein the open economy ushered in by the liberalization took the full
impact of the global deflation in commodity prices. This problem was compounded
further by the Asian crisis after which cheap imports from Asia caused severe
pressure on profits.
To add to this, most funds had invested some part of their portfolio in medium
sized "growth" companies. Many of these companies have performed even worse
than bigger ones and quite a few have seen share prices dip more than 90% from their
1994 highs. More important, funds could not sell these shares because of complete
lack of liquidity with, at best, few hundred shares being traded every day.
Meanwhile, shares of companies in sectors like consumer goods (FMCG) and
software were showing good growth and they went up rapidly in price. Most fund
managers were unwilling to sell shares of erstwhile "blue chips" at low prices and buy
shares of emerging "blue chips" at high prices. This resulted in poor performance and
negative returns.
One more issue is that the fund managers in many funds were not
"professionally qualified and experienced". This is especially true of some of the
funds floated by nationalized banks. Some of these individuals were transferred from
the parent organization and did not really know much about investment management.
Lastly, investors would do well to have a look at the investments, which they
made on their own. In most cases, they would have done much worse than the mutual
funds. We have received numerous requests for advice from individual investors on
what to do about their own investments. If that were any indicator, investors would
have done really badly.

Is it true that globally mutual funds under perform benchmark indices? Why
are smart money managers unable to do as well as the market? Or is it that they are
not smart at all? What are the limitations of mutual funds?
It is 100% true that globally; most mutual fund managers under perform the
asset class that they are investing in. It is not true that the fund managers are dumb;
this under performance is largely the result of limitations inherent in the concept of
mutual funds. These limitations are as follows:
Entry and exit costs: Mutual funds are a victim of their own success. When a
large body like a fund invests in shares, the concentrated buying or selling often
results in adverse price movements i.e. at the time of buying, the fund ends up paying
a higher price and while selling it realizes a lower price. This problem is especially
severe in emerging markets like India, where, excluding a few stocks, even the stocks
in the Sensex are not liquid, let alone stocks in the NSE 50 or the CRISIL 500. So,
there is simply no way that a fund can beat the Sensex or any other index, if it blindly
invests in the same stocks as those in the Sensex and in the same proportion. For
obvious reasons, this problem is even more severe for funds investing in small
capitalization stocks. However, given the large size of the debt market, excluding
UTI, most debt funds do not face this problem
Wait time before investment: It takes time for a mutual fund to invest money.
Unfortunately, most mutual funds receive money when markets are in a boom phase
and investors are willing to try out mutual funds. Since it is difficult to invest all
funds in one day, there is some money waiting to be invested. Further, there may be a
time lag before investment opportunities are identified. This ensures that the fund
under performs the index. For open-ended funds, there is the added problem of
perpetually keeping some money in liquid assets to meet redemptions.
Fund management costs: The costs of the fund management process are
deducted from the fund. This includes marketing and initial costs deducted at the time
of entry itself, called "load". Then there is the annual asset management fee and
expenses, together called the expense ratio. Usually, the former is not counted while
measuring performance, while the latter is. A standard 2% expense ratio means that,
everything else being equal, the fund manager under performs the benchmark index
by an equal amount.
Cost of churn: The portfolio of a fund does not remain constant. The extent to
which the portfolio changes are a function of the style of the individual fund manager
ie whether he is a buy and hold type of manager or one who aggressively churns the
fund. It is also dependent on the volatility of the fund size i.e. whether the fund
constantly receives fresh subscriptions and redemptions. Such portfolio changes have
associated costs of brokerage, custody fees, registration fees etc. that lowers the
portfolio return commensurately.
Change of index composition: World over, the indices keep changing to reflect
changing market conditions. There is an inherent survivorship bias in this process,
with the bad stocks weeded out and replaced by emerging blue chips. This is a severe
problem in India with the Sensex having been changed twice in the last 5 years, with
each change being quite substantial. Another reason for change index composition is
Mergers & Acquisitions. The weightage of the shares of a particular company in the
index changes if it acquires a large company not a part of the index.
Tendency to take conformist decisions: From the above points, it is quite clear
that the only way a fund can beat the index is through investment of some part of its
portfolio in some shares where it gets excellent returns, much more than the index.
This will pull up the overall average return. In order to obtain such exceptional
returns, the fund manager has to take a strong view and invest in some uncommon or
unfancied investment options. Most people are unwilling to do that. They follow the
principle "No fund manager ever got fired for investing in Hindustan Lever" i.e. if
something goes wrong with an unusual investment, the fund manager will be
questioned but if anything goes wrong with the blue chip, then you can always blame
it on the "environment" or "uncontrollable factors" knowing fully well that there are
many other fund managers who have made the same decision. Unfortunately, if the
fund manager does the same thing as several others of his class, chances are that he
will produce average results. This does not mean that if a fund manager takes "active"
views and invests in heavily researched "uncommon" ideas, the fund will necessarily
outperform the index. If the idea does not work, it will result in poor fund
performance. But if no such view is taken, there is absolutely no chance that the fund
will outperform the index.

OBJECTIVE OF STUDY
This research project work undertaken for the partial fulfilment of the MBA
degree programme fulfils the following objectives:
PRIMARY OBJECTIVE
To get acquainted with different aspects and framework of different
investment companies (mutual funds) of India.
SECONDARY OBJECTIVE
To know various types of mutual funds
To study the role of mutual funds in financial market.
To know about the regulatory aspects mutual funds
To study the current trends of the mutual fund industry and the future thereof.
To understand and compare different mutual funds of different companies on
basis of different criteria.

SCOPE OF STUDY
At the present time of cut thro competition in every industry every company want to
top the chart and want to show as big as possible figure of profits in its balance sheet.
It is quite clear today that at present time the growth of any organization is possible
only with the help of hard working and well focused staffs that are the backbone of
any organizations.
It was my great pleasure that I completed my summer training from State Bank of
India Mutual Fund & Unit Trust Of India where I got to know that in Mutual Fund
Industry the skills of the man power matters most and increasing number of mutual
fund Consultants help the organization to increase its mutual fund of policies which
in turn result in growth for the organization. So it is quite clear that mutual fund
Consultants matter most for State bank of India & Unit Trust Of India Mutual Fund.
RESEARCH METHODLOGY
As to compare, analyze and interpretation, the research has to be done so that
the right data is been collected.
I have tried to analyze different mutual funds of major companies they are
UTI and SBI. As to know the present position of different companys mutual funds it
necessary to go for data and information finding but it cannot be possible to get it
from the questionnaire as analysis and evaluation of different mutual funds are been
done by head office finance team members. So lot of work has been done to get the
data.
DATA
Data are simply facts, or recorded measures of certain phenomena.Data are in raw
form for all. But to use the data for any organization or work, we need it make it in
the suitable format. This form at is known as information.
Data can be in forms, one is primary data and other can be secondary data. Primary
data is that which is gathered and assembled specifically for the research project at
hand. This data is not published till now.
Secondary data or historical data are data previously collected and assembled for
some project other than the one in hand. This data can often be found inside the
company, in the library, and on the internet.
For this project, I used the secondary data, which is taken by the SBI MF. This data
is from the UTI & SBI MF fact sheet and some internet sites. For the justification of
the data, I directly meet with the investor of UTI & SBI- MF & the potential
investors.
METHODOLOGY:
Research is an organized inquiry designed and carried out to provide information to
solve the problem. Research is the process of systematically obtaining accurate
answers to significant pertinent questions by the use of gathering data, interpretation
and work.
DATA COLLECTION:
Data is collected through the company Unit Trust Of India & State Bank Of
India and the internet websites. Data collection is the most important part of any
research and mainly it should be trustable. For this purpose, I interact with the general
people from the lower class and middle class as well as the high class. By this, I am
able to surely and confidently say that collected data are trustable.
MODE OF COLLECTION:
Data collection is the collecting work of our team including four trainees from
various institutes with the help of UTI & SBI-MF staff members.
INTERPRETATION:
Interpretation is based on the financial concepts. Interpretations are very
important part of any research and it should base on the concepts. I tried to be
this project very particular as on concept.

DATA COLLECTION
Data are collected from two sources that are primary and secondary sources.
As in this case data are collected from primary written source. So data is collected
from secondary sources that are from companys last years Annual Reports, websites,
booklets, business magazines and other theoretical and conceptual books of mutual
fund. Different other sources are been used so as to get the theoretical aspect and to
understand the analysis and to give interpretation.

FINDING
FINANCIAL PLANNING AND MUTUAL FUNDS
Financial Planning Means Identifying and varying for need of money and
converting these needs into specific term of amount of money and the time when it is
required. Planning saving and investment in a manner that enable to the investor to
achieve the pre specified goal. The Objectives of the financial planning is to ensure
that investments are driven by pre determined financial goal and the investment are
suitable and adequate to meet these goals. A professional financial manager
understands the investment option and financial risk as well as return attributes. He
uses his knowledge and able to advice the investor in a financial planning and chose
the investment option that suit their need best.
Mutual funds help to the investor in financial planning:
a. Mutual funds offer a range of products which can be combined to create
tailor made solutions for the need of investor.
b. Mutual funds accommodate a Varity of saving and investment patterns
from regular, adhoc and lump sum of payments
c. Financial planner focus on assets allocation among the mutual fund
products rather than the individual securities
d. Mutual fund has the flexible option to invest and withdraw the funds and
alter the portfolio by changing the mix of the fund held by the investor.
STEPS IN FINANCIAL PLANNING
The following steps are involved in the financial planning:
Establish and define the financial goal
Understand the ability to save and need for cash flow
Understand the risk tolerance of the investor
Understand the tax liabilities and requirement of the investor
Create assets allocation of the investor
Enabling the actual investment
Review and rebalancing the investment
LIFE CYCLE STAGE GUIDE THE FINANCIAL PLANNING
Financial plan and goal depends to the large extent on the income, expenses
and cash flow requirement of the individual. The age of the investor is an important
determinant factor of financial goal. Therefore financial planning depends on their
life cycle as follows:
Life cycle stage Financial Needs Ability to Invest Choice of
investment
Products
Childhood stage Taken care of by Investment of gifts Long term
parents
Young married Intermediate and Limited due to Liquid plans and
Stage short term higher spending short term

investments, Some
exposure to equity
and pension
products.
Young Married Short and Limited due to Medium to long
Stage intermediate term higher spending. term investments.
Housing and Cash flow Ability to take
insurance needs requirements are risks.
Consumer finance also limited Fixed income,
needs insurance and
equity products.
Young Married Medium to long Limited. Financial Medium to long
with children term needs planning needs are term investments.
Childrens highest as this stage Ability to take
education is ideal for risks.
Holidays and disciplining Portfolio of
consumer spending and products, for
Finance Housing saving regularly growth and long
term
Married with older Medium term Higher saving Medium term
children needs for childrens ratios investments, with
education and recommended. high liquidity

marriage, need for Requirement for needs. Portfolio of
pension, insurance intermittent cash products including
and medical cover flows higher equity, debt and
higher pension plans.
Post family/Pre- Ensuring adequate Adequate income Maximum
retirement stage income to pressure and savings investment in
the standard of pension products.
living post
retirement
Retirement stage Short to medium Lower saving Medium term
term ratios, High investments.
requirement for Preference for
regular cash flows. liquid and income
generating
products. Low
appetite for risky
investments.
As per Bogles Asset Allocation Strategy, involves combining the investors age, risk
profile and preferences in asset allocation pattern. He recommends the following:
Older investors in the distribution phase : 50% equity, 50% debt
Younger investors in distribution phase : 60% equity, 40% debt
Older investors in accumulation phase : 70% equity, 30% debt

Younger investors in accumulation phase : 80% equity, 20% debt
The above rule is also called thumb impression rule for asset allocation. An
investors allocation to debt should be equal to his age, increasing as he ages.
Secondly, a model portfolio has been recommended by Jocobs for the investors is as
follows:
Investor Recommended Model Portfolio
Young unmarried professional 50% in aggressive equity fund
25% in high yield bond funds, growth and
income funds
25% in conservative money market fund
Young couple with 2 incomes and 30% in aggressive equity fund
2 children 25% in high yield bond funds, growth and
income funds
10% in money market fund
35% in municipal bond fund
Older couple single income 25% in moderately aggressive equity fund
30% in short term municipal bond fund
35% in long term municipal bond fund
10% emerging growth equity
Recently retired couple 35% in concervative equity fund
25% in moderately aggressive equity
40% in money market fund

WEALTH CYCLE CLASSIFICATION OF THE INVESTOR
Wealth cycle based classification of the investors financial needs refers to
using a generalized approach t saving and investment as the basis of classification
rather than age.
Stage Financial needs Investment preferences
Accumulation stage: Investing for long Growth options and
In this phase, investors look to build term identified long term products.
wealth for their financial goals, which financial goals. High risk appetite.
are still sometime away. Their primary
aim is long term wealth accumulation.
Transition stage: Near term needs Liquid and medium
This stage is one where one or more of for funds as pre term investments.
the goals of investors is about to be specified needs Lower risk appetite
approached in clear short term future. draw closer
Reaping stage: Higher liquidity Liquid and medium
This stage means that the goal for requirements term investments.
which the investor was accumulating Preference for income
wealth has arrived, and hence the and debt products.
investor will utilize wealth has arrived,
and hence the investor will utilize
wealth to fulfill the goal.
Inter generational transfer: Long term Low liquidity needs

This is a stage where investor starts to investment of Ability to take risk and
think of ways to state their wealth to inheritance invest for the long term.
near ones or to the next generation.
Sudden wealth surge: Medium to long Wealth preservation.
This stage is one where due to certain term Preference for low risk
event investors receives sudden cash products.
flow, which increases their wealth
significantly. These events may be like
winning lottery, inheriting estate, huge
appreciation of shares held etc.
Recommended Portfolio for Investor in accumulation phase:
Diversified equity: Sector and balanced funds : 65 80%
Income and gild funds : 15 30%
Liquid funds and Bank Deposit : 5%
Recommended Portfolio for Investor in Distribution / Reaping phase:
Diversified equity: Sector and balanced funds : 15 30%
Income and gild funds : 65 80%
Cash Fund : 5%
Principal of Financial Planning
The Investor should use the following principle of financial planning for their
investment strategy
a. Harness of power of compounding

b. Start early
c. Have Realistic expectation
d. Invest Regularly
The following are some of the strategy that are useful to investors in creating the
financial plan
a. Rupee cost averaging
b. Value averaging
c. Jacobs rebalancing strategy
d. Grahams 50:50 portfolio rebalancing
FREQUENTLY USED TERMS
Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities.
The per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may
include a sales load.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a
back-end load? This is also called Bid Price.
Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended
schemes redeem their units on maturity? Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called, Front-end
load. Schemes that do not charge a load are called No Load schemes.
Repurchase or Back-endLoad
Is a charge collected by a scheme when it buys back the units from the unit holders?
SUGGESTIONS
In order to render the existing mutual funds more effective and purposeful the
following steps should be taken:
There should be comprehensive legislation to control the operations of the mutual
funds including the UTI. Further, the guidelines governing the UTI are not the
same. It is, therefore, necessary that the Government should come out with single
set of comprehensive legislation, which will uniformly be applicable to public
sector and private sector mutual funds and the UTI.
So far mutual funds in India confined themselves to urban areas; leaving vast
saving potentials in rural hinterlands untapped. By penetrating in rural areas and
introducing saving schemes tailored to the diverse preferences of rural community
and by educating them about the benefits of the schemes, mutual funds can raise
burgeoning resources which can be gainfully employed for the national
development.Investors' confidence in mutual funds can be restored by rendering
their operations more transparent and providing better services.
While it is fine to advertise good performance of a particular scheme by a fund in
order to attract more investment, the times are fast approaching when an honest
view based approach would compel a mutual fund to advise investors on "sell" or
"switch" between schemes, as emphatically as it would advise on the purchase. So
as to attract investors, it is, therefore, advisable to mutual funds to offer this sort
of counseling which will certainly make a mutual fund different from other
institutions.
CONCLUSION
Mutual funds are financial intermediaries concerned with mobilizing savings
of those who have surplus and canalization of these savings in those avenues where
there is demand of funds. These institutions employ their resources in such a manner
as to afford for their investors the combined benefits of low risk, steady return, high
liquidity and capital appreciation through diversification and expert management.
The performance of a mutual fund is dependent on the prudence of the
management in selection of scrips, the diversity of investment in scrips and the extent
to which risks are minimized during investment. The future prospects of an ongoing
manufacturing company could be judged and predicted with a fair degree of
confidence, and investment strategies could be worked out accordingly. Whereas,
investment in a mutual fund is judged purely from the point of returns given to the
investor, management's expertise and the types of schemes offered to the public,
prediction of any scheme performing better than those of any other mutual funds is
generally not possible specially for a growth scheme. This is purely because the
investor is investing his money in mutual funds to enable the latter to further re-invest
in scrips, which provide both short-term and long-term gains. Therefore, this
intermediary (MF) is a decision-maker for public money investment.
Since mutual fund is a pool of public money, maximum care and caution is
taken to invest in the right scrip for capital appreciation and returns on investment for
its distribution to the investors. Therefore, the business of mutual fund is to re-invest
in any scrip in the market, and prove their performance through returns to investors.
Therefore, each mutual fund is a reinvestment agency.
For a mutual fund, its environment is the environment of all industries put
together. Its management's function is highly specialized, as they have to have the
knowledge or individual companies, their economic and commercial environment as
well as the government laws that regulate and promote that industry. In the absence of
this information, the mutual fund will not be in a position to meaningfully diversify
its investment in various scrips to maximize profit and minimize risks.

QUESTIONNAIRE
1. Personal Details:
(a). Name:-
(b). Add: - Phone:-
(c). Age:-
(d). Qualification:-
Graduation/PG Under Graduate Others
(e). Occupation. Pl tick ()
Govt. Ser Pvt. Ser Business Agriculture Others
(g). What is your monthly family income approximately? Pl tick ().
Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001

Rs.10,000 15000 20,000 30,000 and above
2. What kind of investments you have made so far? Pl tick (). All applicable.
a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, f. g. Gold/ Silver h. Real Estate
etc Shares/Debentures
3. While investing your money, which factor will you prefer?

.
(a) Liquidity (b) Low Risk (c) High Return (d) Trust
4. Are you aware about Mutual Funds and their operations? Pl tick (). Yes
No
5. If yes, how did you know about Mutual Fund?
a. Advertisement b. Peer Group c. Banks d. Financial Advisors
6. Have you ever invested in Mutual Fund? Pl tick (). Yes No
7. If not invested in Mutual Fund then why?
(a) Not aware of MF (b) Higher risk (c) Not any specific reason
8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable.
a. SBIMF b. UTI c. d. Reliance e. Kotak f. Other. specify

HDFC
9. If invested in SBIMF, you do so because (Pl. tick (), all applicable).
a. SBIMF is associated with State Bank of India.

b. They have a record of giving good returns year after year.
c. Agent Advice
10. If NOT invested in SBIMF, you do so because (Pl. tick () all applicable).
a. You are not aware of SBIMF.

b. SBIMF gives less return compared to the others.
c. Agent Advice
11. When you plan to invest your money in asset management co. which AMC will
you prefer?
Assets Management Co.

a. SBIMF
b. UTI
c. Reliance
d. HDFC
e. Kotak
f. ICICI
12. Which Channel will you prefer while investing in Mutual Fund?
(a) Financial Advisor (b) Bank (c) AMC
13. When you invest in Mutual Funds which mode of investment will you prefer? Pl.
tick ().
a. One Time Investment b. Systematic Investment Plan (SIP)
14. When you want to invest which type of funds would you choose?
a. Having only debt b. Having debt & equity c. Only equity portfolio.
portfolio portfolio.
15. How would you like to receive the returns every year? Pl. tick ().
a. Dividend payout b. Dividend re- c. Growth in NAV

investment
16. Instead of general Mutual Funds, would you like to invest in sectorial funds?
Please tick (). Yes No
BIBLIOGRAPHY
BOOK NAME AUTHOR NAME
Mutual Funds in India S. Krishnamurti
Financial Sector Reforms B.B Tandon and
A.K. Vashisht
Manual of Merchant Banking Dr. J.C. Verma
Mutual fund K.G Sahadevan
Management of Indian Financial
Institution R.M. Srivastava
Research methodology C.R. Kothari
WEBSITES
www.unittrustofindia.com
www.kmutual.com
www.google.com
MAGAZINE
OUTLOOK
INVESTMENT MONITOR
ANALYST
ANALYST
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Pulkit Saxena MBA III Sem Roll No 1439470068College Of Business Studies, Agra

Study Of Mutual Funds UTI & SBI

distribution to its members on pro-rata basis.

The mutual fund is a concept of mutual help of subscribers for portfolio

setup the mutual fund since 1987 such as SBI.

be classified under about dozen generic heads.

to invest in a diversified, professionally managed basket of securities at a relatively

HISTORY OF MUTUAL FUNDS

First Phase 1964-87

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

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

Third Phase 1993-2009 (Entry of Private Sector Funds)

private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

functions under the SEBI (Mutual Fund) Regulations 2000.

of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2009

not come under the purview of the Mutual Fund Regulations.

entered its current phase of consolidation and growth.

ORGANISATION OF A MUTUAL FUND

organizational set up of a mutual fund:

Mutual Fund Operation Flow Chart

Sponsor of Mutual Fund

Custodian Acting as Registrars

c. Asset Management Company (AMC)

provide for the rights, duties and obligations of these entities.

The main duties of the sponsor are as under:

approval of the SEBI and its regulations.

b. Sponsor must be carrying on business in financial services for a minimum

capital contribution to AMC.

c. Sponsor must have profit making in at least three of immediately

preceding five year including fifth year.

d. Sponsor must contribute at least 40% of the net worth of AMC.

The Mutual Fund is managed by a trust company or board of trustees. Board of

trustee is a company, it is also subject to the provision of Indian Companies Act. It is

Fund cannot be trustee of another Mutual Fund unless he is an independent trustee in

both cases and has the prior approval of the board.

ASSET MANAGEMENT COMPANY

There are following regulatory requirements for the AMC.

a. SEBI registered AMC can be appointed as investment manager of Mutual

c. An AMC cannot be an AMC or trustee of another Mutual Fund.

d. At least half of members of the board of AMC have to independent.

There are various types AMCs are working in India :

1. AMC owned by the bank.

2. AMC owned by the financial institution.

3. AMC owned by the private sector company

4. AMC owned by the foreign institutional investor.

5. AMC owned jointly by the Indian & foreign sponsors.

portfolio. They discharge an important back office function, by insuring that

Securities Exchange Board of India (SEBI)

Securities Exchange Board of India (SEBI) is the apex regulator of capital

organization to ensure compliance with SEBI Regulation.

BENEFITS OF MUTUAL FUNDS

Mutual Funds provide the services of experienced and skilled professionals,

prospects of companies and selects suitable investments to achieve the objectives of

Mutual Funds invest in a number of companies across a broad cross-section of

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

higher return as they invest in a diversified basket of selected securities.

Mutual Funds are a relatively less expensive way to invest compared to

provisions of strict regulations designed to protect the interests of investors. The

operations of Mutual Funds are regularly monitored by SEBI.

facility of direct repurchase at NAV related prices by the Mutual Fund.

We can get regular information on the value of your investment in addition to

Through features such as regular investment plans, regular withdrawal plans