A SUMMER TRAINING PROJECT

ON“COMPARISON OF MUTUAL FUND

WITH OTHER FINANCIAL INSTRUMENTS”

THE PROJECT REPORT IS SUBMITTED AS A PARTIALLY FULFILLMENT OF

THE REQUIREMENT FOR THE AWARD OF THE DEGREE, MASTER IN
BUSSINESS ADMINISTRAION, UNDER BPUT

SUBMITTED BY:

KAIBALYA SAHOO

REGD NO:1806247043

REGIONAL COLLEGE OF MANAGEMENT

2018-20

UNDER THE GUIDANCE OF :

INTERNAL GUIDE: EXTERNAL GUIDE:

Dr. SisiraKanti Mishra Mr. Tara Prasad Behera

Professor in Finance Asst. Manager
Regional College of Management NJ India Invest Pvt.Ltd.

1
 DECLARATION OF THE STUDENT:

I, KAIBALYA SAHOO, a student of Regional college of Management, Bhubaneswar herebydeclare

that this project I report entitled “COMPARISON OF MUTUAL FUNDWITH OTHER
FINANCIAL INSTRUMENTS” in NJ INDIA INVEST PVT.LTD is genuine report carried out by
me and it is a confide record of work done guidance of Prof.SisiraKanti Mishra of Regional college
of management, Bhubaneswar towards the partially fulfillment of the Master of Business
Administration Degree.

Place-Bhubaneswar KAIBALYA SAHOO

Regd. No:1806247043

2
 EXTERNAL GUIDE CERTIFICATE

This is to certified that KaibalyaSahoo, RedgNO: 1806247043 a student in Master of Business

Administration from Regional collegeof Management has done his summer training in our
organization NJ India Invest Pvt. Ltd. At Bhubaneswar branch. The training commenced from
17thJune 2019 and completed on 31stJuly 2019.

The project work is entitled “COMPARISON OF MUTUAL FUNDWITH OTHER FINANCIAL

INSTRUMENTS”.

He was sincere and his conduct was satisfactory.

I wish all the success in his life.

MR. TARA PRASAD BEHERA

Sr. Asst. manager
NJ India Invest Pvt. Ltd.

3
 INTERNAL GUIDE CERTIFICATE

This is to certified that the projectentitle“COMPARISON OF MUTUAL FUNDWITH OTHER

FINANCIAL INSTRUMENTS”in NJ INDIA INVEST PVT.LTDasbeen prepared under my
guidance and supervision. The report is submitted in partially fulfillment of the requirement for the
award of Master of Business Administration course (Approve by AICTE) byKaibalya Sahoo,
RegdNo-1806247043 and his report has not formed a basis for the any degree in any university.

I further declare that result of the work has not been previously submitted for the award of any
degree.

Signature:

Prof. (Dr.) SisiraKanti Mishra

Regional College of Management

4
 ACKNOWLEGMENT

I would like to express my gratitude to all those who have gave me the opportunity to complete this
project. I would like to thanks the institute authorities and my internal guide Prof. Sisir Kanti Mishra
first for providing me the opportunities the work with one of the most prestigious organization.

I would like to thanks the company guide Mr. Tara prasad Behera and the other executive of NJ
India Invest Pvt. Ltd. To give a conferment this permission and encourage me to ahead with my
training. I want to thank the branch manager Mr. Manoranjan Sahoo for giving me permission to
commence this summer training project in the first instance.

I am deeply indebted to my faculty guide Prof. SisiraKantimishra who is constant help, stimulating
suggestions and encouragement help me in giving the final shape to this project.

Date: Kaibalya Sahoo

5
 EXECUTIVE SUMMARY
Each investment alternatives has its Sown strength and weaknesses. Some options seek to
achieve superior returns but with corresponding higher risk. Other provide safety but at the expense of
liquidity and growth. Other options such as FDs offer safety and liquidity, but at the cost of return.
Mutual funds seek to combine the advantages of investing in arch of these alternatives while
dispensing with the shortcomings. Indian stock market is semi-efficient by nature and is considered as
one of the most respected stock market, where information is quickly and widely disseminated,
thereby allowing each security’s price to adjust rapidly in an unbiased manner to new information so
that, it reflects the nearest investment value.

One needs to invest and earn return on their idle resources and generate a specified sum of
money for a specified sum of money for a specific goal in life and make a provision for an uncertain
future. One of the important reasons why one needs to invest wisely is to meet the cost of inflation.
Inflation is the rate at which the cost of living increases. By investing early you allow your
investments more time to grow, whereby the concepts of compounding increases your income, by
accumulating the principal and interest or dividend earned on it, year after year.

6
7
 CHAPTER-1
Company profile:

1. Introduction
2. Organization structure
3. Management team
4. About NJ INDIA PVT. LTD.
5. SWOT Analysis

8
INTRODUCTION

“Success is a journey, not a destination.” If we look for examples to prove this quote then we can find
many but there is none like that of NJ India Invest Pvt. Ltd. Back in the year 1994, two people created
history by establishing NJ India Invest Pvt. Ltd leading advisors and distributors of financial products
and services in India.

NJ has over a decade of rich exposure in financial investments space and portfolio advisory services.
From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality
conscious and customer focussed financial / investment advisory & distribution firm.

NJ prides in being a professionally managed, quality focused and customer centric

organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and
the delivery of sustainable value to clients with support from cutting-edge technology platform,
developed in-house by NJ.

At NJ we believe in …
 having single window, multiple solutions that are integrated for simplicity and sapience
 making innovations, accessions, value-additions, a constant process
 providing customers with solutions for tomorrow which will keep them above the curve, today

NJ has over INR 70000 cores+ of mutual fund assets under advice with a wide presence in over 96
locations* in 19 states* and 700+ employees in India. The numbers are reflections of the trust,
commitment and value that NJ shares with its clients

NJ Wealth Advisors, a division of NJ, focuses on providing financial planning and portfolio advisory
services to premium clients of high net-worth. At NJ Wealth Advisors, we have developed processes
that focus on providing the best in terms of the advice and the ongoing management of your portfolio
and financial plans.

At NJ, our experience, knowledge and understanding enables us to provide you with the expected
value, in an enhanced way. As a leading player in the industry, we continue to successfully meet the
expectations of our clients, through meaningful and comprehensive solutions offered by NJ Wealth
Advisors.

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 ORGANIZATION STRUCTURE
People:

Enthusiasm, Enterprise, Education and Ethics form the four pillars at NJ. At NJ one can witness the
vibrant energy, enthusiasm and the enterprising drive to excel flowing freely throughout the
organization. At NJ can also experience the creativity, one-to-one responsiveness, collaborative
approach and passion for delivering value.

At NJ people evolve to be more effective, efficient, and result oriented. Knowledge is inherent due
to the education-centric approach and the experience in handling different clients groups
across diverse product profiles.

NJ understands that the people are the most important assets of the company and it is not the
company that grows but the people. NJ hence undertakes rigorous training and educational
activities for enhancing the entire team at NJ.

For people at NJ success is not a new word, but is a regular stepping - stone to realising the
one vision that everyone shares.

Culture:

At NJ we believe in transforming the lives of our customers. We exist to create a difference a

change towards a better life. The culture at NJ reflects this responsibility, this dream
of transforming lives. And we at NJ are always excited and enthused in doing so.

We believe in keeping ‘You First’, providing you with products and services that meet your stated
and unstated needs. Client satisfaction and client service is the Mantra we constantly recite. This
service oriented philosophy runs throughout the organization, from top to bottom.

Employees are given ample freedom in their work. The objective is to keep an open, healthy
environment with ample scope for enterprise, improvement, innovations and out-of-the box solutions

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 MANAGEMENT TEAM

The management at NJ brings together a team of people with wide experience and knowledge in the
financial services domain. The management provides direction and guidance to the whole
organization. The management has strong visions for NJ as a globally respected company providing
comprehensive services in financial sector.

The 'Customer First' philosophy in deeply ingrained in the management at NJ. The aim of the
management is to bring the best to the customers in terms of -

 Range of products and services offered

 Quality Customer Service

All the key members of the organization put in great focus on the processes & systems under the
diverse functions of business. The management also focuses on utilizing technology as the key
enabler for all the activities and to leverage the technology for enhancing overall
customerexperience.

The key members of the management are:

Mr. Neeraj Choksi Jt. Managing Director

Mr. Jignesh Desai Jt. Managing Director

Key Sales Team:

Mr. Misbah Baxamusa National Head

Mr. Naveen Rathod V.P. (Sales)

Mr. KulbhushanNandwani A.V.P. (Marketing)

Mr. Prashant Kakkad A.V.P. (Sales)

11
Key Executive Team :

Mr. Shirish Patel Information Technology

Mr. Abhishek Dubey Business Process

Mr. Vinayak Rajput Operations

Mr. Dhaval Desai Human Resources

Mr. Col. Dixit Administration

Mr. TejasSoni Finance

Mr. Viral Shah Research

Mr. Rakesh Tokarkar Compliance

ABOUT NJ INDIA INVEST

SERVICES OF NJ :
As NJ Wealth Advisor’s Global Private Client, you get comprehensive set of services that ensure you
stay informed, insightful, in command, of your investments at all times.

Customer Service:

NJ realizes the true importance of quality customer service. The service commitments are to
guide the actions taken at NJ. Clearly stated, customers can freely communicate any such
actions/events wherein they feel that the following commitments have been breached. At NJ
we desire to honour our commitments at all points of time and to all customers without any
bias.

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 QUALITY SERVICE:

 You will receive regular portfolio reports in hard copies to serve as record
 All records are maintained for the plans and recommendations and minutes of all the meetings are
kept.
 Dedicated Account Manager directly oversees the operational support to you Quality Advisory.

 True, unbiased recommendations.

 Each plan is unique in nature to suit your needs and profile.
 Defined Process followed in investment consultancy / portfolio management.
 All the plans are prepared and/or approved in line with the set process by Chief Portfolio
Manager with inputs from the Research Team.

Quality Communications support:

Daily market update Email

Daily MF tracker-for sort term debt fund Email

Weekly performance report Email/ Hard copy

Comprehensive monthly fact sheet Hardcopy

Research articles and reports Email / Hardcopy

Products of NJ:
There are several products in NJ INDIA INVEST.

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 360° – ADVISORY PLATFORM:-

With this philosophy, we try to offer all possible products, services and support which an Advisor
would need in his business.

SWOT ANALYSIS

STRENGTH
 In NJ India Invest is present is more then 100 locations in 19 states.
 NJ India Invest has given the very good research support to his advisor.
 NJ India Invest provide 360 degree support to his advisors.
 Seminar and partner meets are conducted by the company that will create a healthy
environment among the advisor and company also.
 The company provide the bizmall services to his partners.

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WEAKNESS
 The first and foremost lacking element in the company is that the awareness about company
is very less in the market.
 NJ funds is only dominant only in mutual funds. They have also focused on other financial
instruments.

OPPORTUNITY
 They have very wide scope in financial market.
 The NJ India Invest can increase there office in 29 state of india.

THREATS
 Prudent Pvt. Ltd.
 Blue-chip India Ltd.

CHAPTER-2
Theoretical framework of the study

15
MUTUAL FUND
INTRODUCTION:-

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.

A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI)
that pools up the money from individual/corporate investors and invests the same on behalf of the
investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and
distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position
in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in offer
document. Investments in securities are spread among a wide cross-section of industries and sectors
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at same time. Investors of mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The mutual funds normally
come out with a number of schemes with different investment objectives which are launched from

16
time to time. A Mutual Fund is required to be registered with Securities Exchange Board of India
(SEBI) which regulates securities markets before it can collect funds from the public.

Characteristics:

 A mutual fund actually belongs to the investors who have pooled their funds.

 A mutual fund is managed by investment professionals and other service providers, who
earn a fee for their services, from the fund.

 The pool of funds is invested in a portfolio of marketable investments. The value of the
portfolio is updated every day.

 The investor’s share in the fund is denominated by ‘units’. The value of the units changes
with change in the portfolio’s value, every day. The value of one unit of investment is
called the Net Asset Value or NAV.

HISTORY OF THE INDIAN MUTUAL FUND

INDUSTRY

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. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI players entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise
as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets
Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the
AUM to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry
can be broadly put into four phases according to the development of the sector. Each phase is briefly
described as under.

TYPES OF MUTUAL FUND

 Schemes according to maturity period : -

A mutual fund scheme can be classified into open-ended scheme or close ended scheme depending on
its maturity period.

 Open ended fund/scheme:

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An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous
basis. These schemes not have a fixed maturity period. Investors can conveniently buy and sell units at
Net Asset Value (NAV) related prices which are on a daily basis. The key feature of open-end
schemes is liquidity.

 Close ended Fund/scheme:

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 investors i.e. either repurchase facility or through listing on stock exchanges.
These mutual funds schemes disclose NAV generally a weekly basis.

 Schemes according to investment objective:

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A scheme can also be classified as growth scheme, income scheme, or balance scheme considering its
investment objective. Such schemes may be open-ended or close-ended scheme as described earlier.
Such schemes may be classified mainly as follows:

 Equity funds: These funds invest in equities and equity related instruments. With
fluctuating share prices, such funds show volatile performance, even losses. However, short
term fluctuations in the market, generally smoothens out in the long term, thereby offering
higher returns at relatively lower volatility. At the same time, such funds can yield great capital
appreciation as, historically, equities have outperformed all asset classes in the long term.
Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can
be further classified as:

1. Growth Fund: Aim to provide capital appreciations over the medium to long term. These
schemes normally invest a majority of their funds in equities and are willing to bear short term
decline in value for possible future appreciation. These schemes are not for investors seeking
regular income or needing their money back in the short term.

2. Diversified Equity Fund: Diversified equity funds are the most popular among investors.
They invest in many stocks across many sectors, and because they have the freedom to chop
and churn their portfolios as they like, diversified equity funds are a good proxy to the stock
market. If a general exposure to equities is what you want, they are a good option. They can
invest in all listed stocks, and even in unlisted stocks. They can invest in which ever sector
they like, in what ever ratio they like.

3. Equity – Linked Savings Schemes (ELSS): Equity – linked savings schemes (ELSS) are
diversified equity funds that additionally offer income tax benefits to individuals. ELSS is one
of the many section 80c instruments, along with the more popular debt options like the PPF,
NSC and infrastructure bonds. In this Section 80c grouping. ELSS is unique. Being the only
instrument to offer a total equity exposure.

4. Index Fund: An index fund is a diversified equity fund; with a difference- a fund manager has
absolutely no say in stock selection. At all times, the portfolio of an index fund mirrors an
index, both in its choice of stocks and their percentage holding. As of March 2004, equity
index funds tracked either the Sensex or the Nifty. So, an index fund that mirrors the Sensex
will invest only in the 30 Sensex stocks, which too in the same proportion as their weight age
in the index.

5. Sector Fund: Sector funds invest in stocks from only one sector, or a handful of sectors. The
objective is to capitalize on the story in the sectors, and offer investors a window to profit from
such opportunities. It’s a very narrow focus, because of which sector funds are considered the
riskiest among all equity funds.

6. Mid – Cap Fund: These are diversified funds that target companies on the fast –growth
trajectory. In the long run, share prices are driven by growth in a company’s turnover and
profits. Market players refer to them as ‘mid-sized companies’ and ‘mid-cap stocks’ with size
in this context being benchmarked to a company’s market value. So, while a typical large cap
19
 stock would have a market capitalization of over Rs 1,000 crores, a mid-cap stock would have
a market value of Rs 250-2,000 crores.

Mutual Fund Equity schemes have delivered very attractive returns in last 5 years, giving over
51% returns annually

3 7 10
Scheme Name 5 Years
Years Years Years

Average of Diversified Mutual fund 20.98 35.10 31.92 27.79

Schemes
BSE 30 (Sensex) 23.7 29.19 23.4 12.69

NSE 50 23.08 27.78 22.11 12.9

No. of Diversified Schemes considered 46 30 20 6

 DEBT FUNDS:-These Funds invest a major portion of their corpus in debt papers.
Government authorities, private companies, banks and financial institutions are some of the
major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and
provide stable income to the investors.

Debt funds are further classified as:

1. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as GOI
debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk.
These schemes are safer as they invest in papers backed by Government.

2. Income Funds: Income funds aim to maximize debt returns for the medium to longer term.
Invest a major portion into various debt instruments such as bonds, corporate debentures and
Government securities.

3. MIPs: Invests around 80% of their total corpus in debt instruments while the rest of the portion
is invested in equities. It gets benefit of both equity and debt market. These scheme ranks
slightly high on the risk-return matrix when compared with other debt schemes.

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4. Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6 months.
These funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

5. Liquid Funds: Also known as Money Market Schemes, These funds are meant to provide
easy liquidity and preservation of capital. These schemes invest in shortterm instruments like
Treasury Bills, inter-bank call money market etc. These funds are meant for short-term cash
management of corporate houses and are meant for an investment horizon of 1day to 3 months.
These schemes rank low on risk-return.

6. Floating Rate Funds: These income funds are more insulated from interest rate than their
conventional peers. In other words, interest rate changes, which cause the NAV of a
conventional debt fund to go up or down, have little, or no, impact on NAVs of floating rate
funds.

 HYBRID FUNDS:-

1. BALANCED FUNDS:-These funds, as the name suggests, are a mix of both equity and debt
funds. 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 shares prices in the stock markets. However, NAVs of such funds are likely
to be less volatile compared to pure equity funds. Following are balanced funds classes:-

a. Debt-oriented funds -Investment below 65% in equities.

b. Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

2. Growth and Income Fund: Funds that combine features of growth funds and income
funds are known as Growth-and-Income Funds. These funds invest in companies having
potential for capital appreciation and those known for issuing high dividends. The level
of risks involved in these funds is lower than growth funds and higher than income funds.

3. Asset Allocation Fund: Mutual funds may invest in financial assets like equity, debt,
money market or non-financial (physical) assets like real estate, commodities etc.. Asset
allocation funds adopt a variable asset allocation strategy that allows fund managers to switch
over from one asset class to another at any time depending upon their

4. outlook for specific markets. In other words, fund managers may switch over to equity if they

21
 expect equity market to provide good returns and switch over to debt if they expect debt
market to provide better returns.

MUTUAL FUND STRUCTURE

The Structure Consists:

The structure of mutual funds in India is governed by the SEBI Regulations, 1996. These regulations
make it mandatory for mutual funds to have a 3-tier structure of Sponsors- Trustee-AMC (Asset
Management Company). The Sponsor is the promoter of mutual fund, and appoints the Trustee. The
Trustees are responsible to the investors in the mutual funds, and appoint the AMC for managing the
investment portfolio. The AMC is the business face of the mutual funds, as it manages all the affairs
of mutual funds. The mutual funds and AMC have to be registered by the SEBI.

Sponsor:

A sponsor is a body corporate who establishes a mutual fund. It may be one person acting alone or
together with another body corporate. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss
or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it
towards setting up of the Mutual Fund.

Board of Trustee:

22
Mutual fund requires to have an independent board of Trustee, where two third of the trustees should
be independent person who are not associated with the sponsor in any manner. The board of trustees
of the trustee company holds the property of the mutual fund in trust for the benefit of the unit holders.
The board of trustees is responsible for protecting the unit holder’s interest.

Asset Management Company (AMC):

The role of asset Management Company is highly significant in the mutual fund operation. The AMC
is appointed by the Trustee. They are the fund managers i.e. they invest the investors money in various
securities ( equity, debt and money market instruments) after proper research of market conditions and
the financial performance of individual companies and specific securities in the efforts to meet or beat
average market return and analysis. The AMC is required to be approved by the Securities and
Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. At least
50% of the directors of the AMC are independent directors who are not associated with the Sponsor in
any manner. The AMC must have a net worth of at least 10 crores at all times. They also look after the
administrative functions of a mutual fund for which they charge management fee.

Registrar and Transfer Agent:

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual
Fund. The Registrar processes the application form, redemption requests and dispatches account
statements to the unit holders.

Custodian:

Mutual fund is required by law to protect their portfolio securities by splacing them with a custodian.
Nearly all mutual funds use qualified bank custodians. Only a registered custodian under the SEBI
regulation can act as a custodian to a mutual fund. A custodian handles the investment back office of a
mutual fund.

SEBI:
The regulator for markets in India, SEBI (Securities and Exchange Board of India), works for the
protection of investors’ interest in securities while regulating and promoting the securities’ market.
The organization has created guidelines for investors to gain awareness regarding the manner in which
mutual funds function by offering the required information. The regulator aims to simplify the wide
variety of schemes that tend to confuse investors due to their complexity. The guidelines regarding the
consolidation and merger of MF schemes are created in an effort to make it easier for investors to
compare different schemes made available by mutual fund companies.

23
  SEBI GUIDELINES:
 Guidelines Regarding Structure
The guidelines regarding the structure of schemes define a Guarantor as someone who introduces a
mutual fund. The guarantor’s role is to generate revenue through the launch of a mutual fund. The
fund is then handed to a fund manager.

A sponsor, according to the guidelines, is defined as someone who sets up schemes in keeping with
the regulations of the Indian Trust Act, 1882. Sponsors primarily have the role of listing the schemes
with the Securities and Exchange Board of India.
The Securities and Exchange Board of India is responsible for making policies related to mutual
funds. It also has the responsibility of regulating the industry and laying down the law so that
investors’ interest is safeguarded. So far as ‘asset allocation’ and ‘investment strategy’ are concerned,
mutual funds can be very different from one another. The new guidelines have focused on uniformity
so far as the functioning of schemes is concerned. Investors will, therefore, find it easier to make
investment decisions. To make things standard and to introduce uniformity in schemes that are similar
to one another, the following is the manner in which mutual funds are categorised:

 Equity funds
 Debt funds
 Balanced or hybrid funds
 Solution-oriented funds
 Other funds

 SEBI Regulations for Investment in Mutual Funds

The following are the major highlights of the regulator’s guidelines regarding mutual funds:

 Mutual funds have been categorised into 5 groups – equity, debt, balanced, solution-oriented,
and others.
 Definitions of small, mid, and large cap have been made clearer to facilitate uniformity.
 Solution-oriented funds come with a lock-in period.
 Only one scheme is permitted in each category, apart from ETFs or index funds, thematic or
sectoral funds, and fund of funds.
Apart from laying down the law, the Securities and Exchange Board of India has also created
guidelines for investors.

 SEBI Guidelines for Investors

 Assessing personal finances: Mutual funds are highly diverse investment options. As a result,
they carry some risk with them. Investors are urged to be clear when they assess their financial
standing. They are also asked to be careful when assessing their ability to bear risk in case a

24
 scheme does not perform as expected. The risk appetite of investors must be considered
individually in keeping with each scheme.
 Research information regarding schemes: Before making investments in mutual funds, it is
essential for investors to attain detailed information regarding the scheme in which they wish
to invest. Equipping yourself with all the details regarding your investment options will make
it easy to make the right decision.
 Diversification of portfolios: Investors can spread their investments carefully by diversifying
their portfolios. As a result, the potential to mitigate risks or maximise profits of potentially
major losses increases. Diversification of portfolios is instrumental in gaining sustainable long-
term financial results.
 Refrain from cluttering portfolios: Select the right funds to create a portfolio needs
professional management of the schemes in addition to careful monitoring. Investors should
ensure that their portfolio is not cluttered while choosing the number of schemes to add to their
portfolio in order to ensure that the schemes can be well-managed individually as well as
collectively.

 ADVANTAGES OF MUTUAL FUND

1.Portfolio Diversification
Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a
diversified investment portfolio (whether the amount of investment is big or small).

2.Professional Management

Fund manager undergoes through various research works and has better investment
management skills which ensure higher returns to the investor than what he can manage on his
own.

3.Less Risk

Investors acquire a diversified portfolio of securities even with a small investment in a Mutual
Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.

4.Low Transaction Costs

Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction
costs. These benefits are passed on to the investors.

5.Liquidity

An investor may not be able to sell some of the shares held by him very easily and quickly, whereas
units of a mutual fund are far more liquid.

6.Choice of Schemes

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Mutual funds provide investors with various schemes with different investment objectives. Investors
have the option of investing in a scheme having a correlation between its investment objectives
and their own financial goals. These schemes further have different plans/options

7.Flexibility

Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors
can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of
systematic (at regular intervals) investment and withdrawal is also offered to the investors in most
open-end schemes.

9.SafetyMutual Fund industry is part of a well-regulated investment environment where the interests
of the investors are protected by the regulator. All funds are registered with SEBI and complete
transparency is forced.

 DISADVANTAGE OF MUTUAL FUND

1.Costs Control Not in the Hands of an Investor

Investor has to pay investment management fees and fund distribution costs as a percentage
of the value of his investments (as long as he holds the units), irrespective of the performance of the
fund.

2.No Customized Portfolios

The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors
have no right to interfere in the decision making process of a fund manager, which some investors find
as a constraint in achieving their financial objectives.

3.Difficulty in Selecting a Suitable Fund Scheme

Many investors find it difficult to select one option from the plethora of funds /
schemes / plans available. For this, they may have to take advice from financial planners in order to
invest in the right fund to achieve their objectives.

4. Delay in Redemption:

The redemption of the funds though has liquidity in 24-hours to 3 days takes formal application as
well as needs time for redemption. This becomes cumbersome for the investors.

 NET ASSET VALUE

26
Net Asset Value (NAV):

The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In
other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the
amount that the shareholders would collectively own. This gives rise to the concept of net asset value
per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated
simply

by dividing the net asset value of the fund by the number of units. However, most people refer loosely
to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention.

Definition of NAV
Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the portfolio
including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a
mutual fund unit is nothing but the 'book value.'

Calculation of NAV
The most important part of the calculation is the valuation of the assets owned by the fund. Once it is
calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The
detailed methodology for the calculation of the asset value is given below.

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any
+ Dividends/interest accrued
Amount due on unpaid assets
Expenses accrued but not paid
Other liabilities
NAV per unit = ------------------------------------------------------------------
No. of units outstanding of the scheme

27
NAV and its impact on the returns:

We feel that a MF with lower NAV will give better returns. This again is due to the wrong perception
about NAV. An example will make it clear that returns are independent of the NAV. Say, you have Rs
10,000 to invest. You have two options, wherein the funds are same as far as the portfolio is
concerned. But say one Fund X has an NAV of Rs 10 and another Fund Y has NAV of Rs 50. You
will get 1000 units of Fund X or 200 units of Fund Y. After one year, both funds would have grown
equally as their portfolio is same, say by 25%. Then NAV after one year would be Rs 12.50 for Fund
X and Rs 62.50 for Fund Y. The value of your investment would be 1000*12.50 = Rs 12,500 for Fund
X and 200*62.5 = Rs 12,500 for Fund Y. Thus your returns would be same irrespective of the NAV. It
is quality of fund, which would make a difference to your returns. In fact for equity shares also
broadly this logic would apply.

 FACTORS AFFECTING MUTUAL FUND

1. Governmental Influences

Mutual fund business is a highly regulated business throughout the world as it seeks to ensure that
quality and fairly priced schemes are available. Governmental intervention thus in mutual fund market
usually is most needed to ensure that insurers are reliable. And in the developing countries the
additional goal may be promotion of domestic mutual fund industry and ensuring the national mutual
fund industry contributes to overall economic development. In a non technical sense mutual fund is
purchased in a good faith so the duty of government intervention in mutual fund industry is to ensure
that this principle of mutual fund is never defeated. The ideology of government plays an important
role in mutual fund industry also. For example in the past during 1991, the P .V Narsimha Rao
government strongly believed in liberalization also liberalized the mutual fund sector which helped to
allow private players in the industry from 1993 and enhancing joint ventures with foreign companies.
The present government with more focuses on foreign direct investments has declared to favour the
rise FDI in mutual fund to 49% which further enhances competition in the industry.

2. Taxation Policy

Social equity being one of the motives behind tax collections, government give certain exemptions
from such levying. One such exemption is deduction incurred by taxpayers towards investment in
mutual fund coverage. Similarly, capital invested in infrastructure bonds etc is offered with certain
concession under tax laws. The central idea behind such exemptions is that the capitals so allocated by
individuals reduce the ultimate burden on the public infrastructure or helps in creating such
infrastructural facilities.

3. Foreign Trade Regulations

28
With the vast potential for mutual fund in India due its large population in the country many foreign
companies are ready to enter into the Indian market. But companies can be permitted in India through
joint ventures with an Indian partner as well as come separately and the foreign equity shall be
restricted to only 25%. Another statement also tells that Indian subsidiaries of foreign companies shall
not be allowed to participate in banking sector unless they entered in to joint ventures with the Indian
partners. But at present the mutual fund regulator is in favor of hike in FDI cap from 25% to 49%, and
is finalizing a report that will be submitted to the government for a comprehensive legislation for the
industry. The security exchange board of India and association of mutual fund India have been
advocating a hike in FDI limit for mutual fund

companies so that the foreign partners can infuse additional funds in these companies to sustain their
growth. The government will need to amend the separate mutual fund Act for FDI capital as well as
domestic company as this is the statutory provision unlike sectors like civil aviation and telecom,
which have come through notification.

4. National Income

The relative importance of the mutual fund Market within a country will also be dependent upon
economic development. With greater rates of economic growth, consumption of investment should
increase as a result of increased income, and an increased stock of assets requiring mutual fund.
Furthermore, the development of mutual fund is likely to facilitate greater economic growth, implying
that economic growth may be endogenous. Consistent with these arguments, studies
find that the level of financial development and economic development are positively related to the
level of mutual fund across emerging markets.

5. Employment

The effect of employment on mutual fund industry is as direct as that on economic development of
any country. With the rising levels of employment the effect on mutual fund industry is positive
because employment adds to the insured properties and assets from every prospective be it due to
organized or unorganized.

6. Inflation

The midterm policy review the strong macroeconomic indicators and RBI has revised its GDP growth
estimates to the upper limit of the earlier projection range 8% inflation (WPI) has been steadily
moving up in recent times and RBI has highlighted that primary articles prices have been on of the key
contributors. However one needs to keep in mind thatrecent increase in global oil prices.

7. Money supply

The central banks has indicated that credit growth and money supply number are likely to be above its
prosecution for the current fiscal year, the statement “to consider promptly all possible measures as
29
appropriate to the evolving global and domestics situation “is indicative of phased increase in FII
limits for gilt investment could help in depending the securities market and is part of the road map
towards fuller convertibility

8. Interest

Interest is major factor for investment when a person find less return from investment tool than people
move towards the higher returns tool of investment.

9. Risk factor

All investments in Mutual Fund and securities are subject to market risks and the NAV of the fund
may go up or down depending on the factors and forces affecting the security market. There can be no
assurance that the fund’s objective will be achieved. Past performance of the sponsors/Mutual
fund/schemes/AMC is not necessarily indicative ofthe future results. The name of the schemes does
not in any manner indicate their quality, their future prospects or returns.The specific risk would be
credit, market, illiquidity, judgmental error, interest rate, swaps and forward rates.

 MUTUAL FUND PLAYERS

The Indian mutual fund industry is mainly divided into three kinds of categories. These categories
include public sector players, nationalized banks and private sector and foreign players.

UTI Mutual Fund was one of the leading Mutual Fund companies in India till May 2018 and it is the
public sector mutual fund. Bank of Baroda, Punjab National Bank, Can Bank and SBI are the major
nationalized banks mutual fund. At present mutual fund industry is mainly dominated by private and
foreign sector players which include major players like Prudential ICICI Mutual Fund, HDFC Mutual
Fund, Reliance Mutual Fund etc. are private sector mutual funds players while Franklin Templeton
etc. are major foreign mutual fund players. At present there are more than 39 players operating in
Indian.

30
 CHAPTER-3
Data analysis and interpretation

31
ANALYSIS
A project is incomplete without data analysis. It is also worthless. By analysis I know about the
various factor essential for wealth creation on mutual fund over all other financial asset.

 GROWTH OF MUTUAL FUND :

Growth of mutual fund in last 15 years which the AUM growth 3 times in 5 years with 25% anuall
growth.

 NOTE-DATA COLLECT FROM AMFI

32
 PRODUCTED MF
INDUSTRY GROWTH

It is the data analysis on future growth on mutual fund industries.

 NOTE-DATA COLLECT FROM AMFI

33
 DATA ANALYSIS ON
MUTUAL FUND RETURNS:-

EARNING ON
LUMPSUM INVESTMENT

 NOTE-DATA COLLECT FROM AMFI

34
 COMPARISON MUTUAL FUND
BUTWEEN DIFFERENT PRODUCTS:-
:

 NOTE-DATA COLLECT FROM AMFI

35
 DATA ANALYSIS ON ROLES OF MUTUAL FUND IN WEALTH
CREATION OVER OTHER FINANCIAL ASSETS:-

 MUTUAL FUND VS BANK FIXED DEPOSITE:

MUTUAL FUND BANK FD

Returns Better Low

Administrative exp. Low High

Risk Moderate Low

Investment option More Less

liquidity Better At a cost

Interest calculation Everyday ½ly / Annually

Guarantor Not Needed Needed

An investment of Rs 1 lakh for 15 years.

Return of MF (Avg. 16%), Return of Bank F.D. (Avg. 8%)

YEAR M.F. [$] BANK F.D. [$]

1 1,16,000 1,08,000

2 1,34,560 1,16,640

3 1,56,090 1,58,687

5 2,10,034 1,46,933

10 4,41,144 2,15,892

15 9,26,552 3,17,217

 NOTE-DATA COLLECT FROM AMFI & NJ India Invest PVT. LTD.

36
  MUTUAL FUND VS COMPANY FIXED DEPOSITE:

MUTUAL FUND COMPANY F.D.

Returns Better Low

Administrative exp. Low High

Risk Moderate High

Investment option More Less

liquidity Better At a cost

Interest calculation Everyday ½ly / Annually

Guarantor Not Needed Needed

An investment of Rs 1 lakh for 15 years.

Return of MF (Avg. 16%), Return of Company FD (Avg. 7%)

YEAR M.F. [$] COMPANY F.D. [$]

1 1,16,000 1,07,000

2 1,34,560 1,14,490

3 1,56,090 1,22,504

5 2,10,034 1,40,255

10 4,41,144 1,96,715

15 9,26,552 2,75,903

 NOTE-DATA COLLECT FROM AMFI & NJ India Invest PVT. LTD.

37
  MUTUAL FUND (debt scheme) VS BOND & DEBENTURE:

MUTUAL FUND BOND & DEBENTURE

Returns Better Low

Administrative exp. Low High

Risk Moderate Low

Investment option More Less

liquidity Better At a cost

Interest calculation Everyday Everyday

Guarantor Not Needed Not Needed

An investment of Rs 1 lakh for 15 years.

Return of MF (Avg. 16%), Return Bond & Debenture (Avg. 13%)

YEAR M.F. [$] BOND & DEBENTUR [$]

1 1,16,000 1,13,000

2 1,34,560 1,27,690

3 1,56,090 1,44,290

5 2,10,034 1,84,244

10 4,41,144 3,39,457

15 9,26,552 6,25,427

 NOTE-DATA COLLECT FROM AMFI & NJ India Invest PVT. LTD.

38
  MUTUAL FUND VS POSTAL:

MUTUAL FUND POSTAL

Returns Better Low

Administrative exp. Low Low

Risk Moderate Low

Investment option More Less

liquidity Better At a cost

Interest calculation Everyday ½ly / Annually

Guarantor Not Needed Needed

An investment of Rs 1 lakh for 15 years.

Return of MF (Avg. 16%), Return of Postal (Avg. 7%)

YEAR M.F. [$] POSTAL [$]

1 1,16,000 1,07,000

2 1,34,560 1,14,490

3 1,56,090 1,22,504

5 2,10,034 1,40,255

10 4,41,144 1,96,715

15 9,26,552 2,75,903

 NOTE-DATA COLLECT FROM AMFI & NJ India Invest PVT. LTD. & POSTAL.

39
  MUTUAL FUND VS PUBLIC PROVIDEND FUND:

MUTUAL FUND PPF

Returns Better Low

Administrative exp. Low High

Risk Moderate HIGH

Investment option More Less

liquidity Better At a cost

Interest calculation Everyday Everyday

Guarantor Not Needed Not Needed

An investment of Rs 1 lakh for 15 years.

Return of MF (Avg. 16%), Return of PPF (Avg. 8%)

YEAR M.F. [$] PPF [$]

1 1,16,000 1,08,000

2 1,34,560 1,16,640

3 1,56,090 1,58,687

5 2,10,034 1,46,933

10 4,41,144 2,15,892

15 9,26,552 3,17,217

 NOTE-DATA COLLECT FROM AMFI & NJ India Invest PVT. LTD.

40
  MUTUAL FUND VS GOLD SCHEME:

MUTUAL FUND GOLD SCHEME

Returns Better Average

Administrative exp. Low High

Risk Moderate Moderate

Investment option More Less

liquidity Better At a cost

Interest calculation Everyday Every moment

Guarantor Not Needed Not Needed

An investment of Rs 1 lakh for 15 years.

Return of MF (Avg. 16%), Return of Gold scheme (Avg. 11%)

YEAR M.F. [$] GOLD SCHEME [$]

1 1,16,000 1,11,000

2 1,34,560 1,23,210

3 1,56,090 1,36,763

5 2,10,034 1,68,506

10 4,41,144 2,83,943

15 9,26,552 4,78,459

 NOTE-DATA COLLECT FROM AMFI & NJ India Invest PVT. LTD.

41
 CHAPTER-4
REVIEW OF LITERETURE

1.Friend and Vickers (1965) evaluated the performance of mutual fund against the randomly
constructed portfolios. The study concludes that MFs on the whole have not performed superior to
random portfolios.

The emergence of Markowittz’s portfolio theory, followed by the development of capital assets
pricing model gave a new direction to the evaluation of portfolio performance. Following the CAPM,
Treynor (1965), Sharpe (1966) and Jensen (1960) made remarkable contribution by developing
models to evaluate the portfolio performance. The later works mostly followed the methodology of
Treynor, Sharpe and Jensen.

2.Sharpe (1966) study concludes that out of 34 funds selected, 19 had outperformed the bench-mark
in term of total risk. Treynor (1966) evaluated the performance of Mutual funds managers in terms of
their ability in market timing. The evidence on 57 MFs shows that, none of the fund managers has
outguessed the markets. Jenson (1968) evaluated the ability of the fund managers in selecting the
undervalued securities. He concludes that for the sample of 115 MFs, the fund managers were not able
to forecast security prices well enough to recover research expenses and fees. Friend, Blume and
Crockett (1970) compared the performance of 86 MFs with random portfolios. The study concludes
that, MFs did worse than the randomly selected portfolios in terms of total risk. Further, the funds with
high turnover seem to outperform the funds with low turnover and the fund size has no impact on the
performance.
Risk adjusted performance evaluation is also made by Carlson (1970) and SEC study (1971).
The broad conclusions arrived by them are, that some of the funds had outperformed the bench-marks,
but there is no consistency in performance.

3.John McDonald (1974) examined the relationship between the stated fund objectives and their
risk and return attributes. The study concludes that, on an average the fund managers appeared to keep
their portfolios within the stated risk. But there is considerable overlap between funds in different
groups. Some funds in the lower risk groups possessed higher risk than funds in the most risky group.
Ang and Chua (1982) conducted a similar study. The study concludes that a majority of fund
managers did not” deliver the goods” although they stated different investment objectives. Further, all
funds at one time or other provided superior performance relative to the bench-mark, however only
half the funds consistently achieved this degree of relative performance.

4.Norman E. Mains (1977) applied neutral risk adjusted performance measure and concludes that
approximately 66% of the funds (out of 75) had larger net returns adjusted for systematic risk.
Klemosky (1977) concludes that past risk adjusted performance is not a good guide to future
performance.

42
 5.James R.F. Guy (1978) evaluated the risk adjusted performance of UK investment trust
through the application of Sharpe and Jensen measures. The study concludes that no trust had
exhibited superior performance, compared to the London Stock Exchange Index.

6.Kon and Jen (1979), Viet and Cheney (1982), Henricson (1984), and Chang and Lewellen
(1984) evaluated the performance of the mutual funds managers in terms of their ability in market
timings and selectivity. The broad conclusion of these studies is that the fund managers did not
possess these abilities. Even if any little evidence is there regarding selectivity, the additional returns
earned are not able to cover the research expenses. The developments in the asset pricing theory is the
emergence of Arbitrage Price Theory(APT) , in its simplest form it states that , the expected return on
the security is a linear function of the security’s sensitivity to various common factors in addition to
sensitivity of changes in the market portfolio (as stated by CAPM).

7.Lehmann and Modest (1987) study found that, the Jensen measure and the Treynor – Black
appraisal ratios of individual mutual funds are quite sensitive to the
method used to construct the APT bench-marks. This study suggests the importance of knowing the
appropriate model for risk and return.

8.Jayadev M. (2000) discussed the Performance Evaluation of Managers. It is an Empirical Evidence

on Indian Mutual Funds. The average monthly return of mutual fund schemes is 1.29 percent and the
average risk is 7.5 percent. Thirty three schemes are in conformity with the linear relationship of
return and risk. However, around half of the schemes do not demonstrate this relationship. On an
average fund managers appeared to keep their portfolios with in the risk classes define by their
investment objective, but there is considerable overlap the funds in the same category.

9.Madhusoodanan T. (2000) described the performance analysis with India stock market return
under his case study. He used a CAPM type of set up to form optimal portfolios of risky assets and
tested their performance during the next period. The investment strategy he employed is that supplied
by the theory and he has not used any subjective assessment of the situation. He neither added nor
deleted any of the assets from the list of possible investment opportunities. He did a subjective
analysis about the investment climate and investment avenues.

10.Jatana R. and Keros J. (2003) discussed about the Mutual funds and development- pricing the
bubbles with mutual fund priorities. The fourth growth depends upon participation of small investors
(household savers) in capital market, variety of instruments and break-through of mutual funds from
the large city limit to rural parts, a geographical spread, etc. Mutual funds are integrating modern
technology driven system for better efficiency, these become a one stop service-center by providing a
wide range of products and services the investor has a plethora of options to choose from, enhancing a
quality-conscious assessment, comparison among the competing products in the market through
product differentiation. As the mutual fund industry expands; interest in mutual fund portfolios
diversification techniques increase, though on the flip-side the investor is thrown to more dilemma,
without enough information, perhaps improvement of ethical standards is a remaining task.
43
 CHAPTER-5
1. Objective of the study
2. Scope of the study
3. Research Methodology

44
 OBJECTIVE OF STUDY

The purpose of the analysis is to determine the investment perception of investors and investment
preferences for the same. Investors’ perceptions will provide a way to accurately measure how the
investors think about the products and services provided by the company.

 To study the basic of mutual fund as on industry prospective.

 To study the role of NJ in wealth creation through its advisors or partner.
 To study the difference financial assets available in India.
 To study the Indian mutual fund industry past present and future.
 To study mutual fund as a wealth creation tools over other financial assets.
 To give an idea about the regulation of mutual fund.
 To study some of mutual fund scheme and analyse them.

SCOPE OF THE STUDY

In my project the scope is limited to some prominent mutual fund in the mutual fund industry. I
analyzed the funds depending on their schemes like equity, income, balance. But there is so many
other schemes in mutual fund industry like specialized (banking, infrastructure, pharmacy ) funds,
index funds etc.

My study is mainly concentrated on equity schemes, the returns, in income schemes the rating of
CRISIL, ICRA and other credit rating agencies.

45
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