Mutual Funds In India

T.Sita Ramaiah
Center head
INC - Guntur

SIP PRESENTATION
Don’t run after money, make it
come to you
 Birla sun life equity fund (an open ended
growth scheme)
 Rs. I lac invested on Aug 27,1998 in
Birla Sun Life equity fund is worth Rs.
24.03 lacs as on September 30,2007.
 A similar investment in the benchmark
BSE 200 would have been worth Rs.
6.82 lacs.
Introduction
 The mutual funds industry is still not as mature and
developed as it is in USA, UK and Japan

 The entry of the private sector and foreign institutions in

1993, provided a boost to the Indian Mutual Funds
Industry

 GOI took initiative of developing the mutual funds

industry by offering various tax sops in the budget
 Types of Mutual Funds

 Term of fund :Open - ended and close - end

 Investment objective : Growth funds, income funds, balanced

funds, specialized funds

 Types of investors : Offshore funds, pension funds etc.,

 Management Style : Managed funds, Index funds

 Load : Load funds, No-load funds

 Classification Based on the Term of
the Fund:
 An opened-ended fund remains open for issue and redemption of
its share throughout its unlimited duration.

 Ex. Alliance-95, Birla Advantage, Unit Scheme 64

 A close-end fund can issue shares of mutual fund only in the

beginning, and cannot redeem them till the end of their fixed
duration

 Ex. UTI Master Equity Plan 98, Reliance FTS dividend, Canpep-
9S, ICICI Power etc.,
 SEBI Guidelines:
 A close-ended scheme as any scheme in which the period
maturity of the scheme is specified

 An open-ended scheme is defined as a scheme which offers

units for sale without specifying any duration for redemption

 Every close-ended scheme is required to be listed on

recognized stock exchange within six months from the closure
of subscription

 A close-ended fund may redeem its shares and reissue them

at its choice
 A close-ended scheme may be converted into an open-
ended scheme

 A close-ended scheme is allowed to be rolled over at

the end of the maturity period

 Both funds are not allowed to borrow , except for

temporary liquidity requirements for the redemption of
units or payment of interest or dividend to the unit
holders.

 Borrowing capacity is limited to 20% of the NAV

Classification based on Investment
Objectives

 Growth Fund:
This scheme is to provide capital appreciation over the
medium to long-term

Major portion of funds in equities and are willing to bear short

tem decline in value

This scheme is suitable for investor in their prime earning

years or investors seeking growth over the long-term

Ex: Alliance Basic Industries, Reliance Growth, Tata GSF-G

Income Fund:

 Objective of fund is to provide regular and

steady income to investors

 Funds generally invest in fixed income such as

bonds and corporate debentures

 Capital appreciation may be limited

 Birla Income Plus-D, Chola Freedom Income-D,

HDFC Income etc.,
 Balance Fund:
 To provide both growth and income by periodically
distributing a part of the income and capital
appreciation to the investors or reinvesting to
enhance the NAV

 They invest in both shares and fixed income

securities

 HDFC Balanced-G, JM Balance-G etc

Specialized Fund:

 Sectoral Fund
 Money Market Funds
 Gilt Fund
 Real Estate Funds
 Offshore funds
 Tax Saving Fund
Gilt fund

 These funds invest in different

types of long and medium term
government securities and highly
rated corporate debt, and money
market instruments. Gilt funds stick
to high quality – low risk debt,
invest mainly in government
securities.
Offshore funds

 Funds that invest solely in foreign

markets are referred to as international
funds ( offshore). Funds that invest both
in domestic markets and international
markets are referred to as Global funds
Classification based on Types of
Investors

 Some categories of funds are different from

other funds because of their investor profile.

 Ex Pension Funds

 These funds manage the pension moneys of

their clients.

 Ex: Kothari Pioneer Pension Plan Fund

Classification based on Management
Style
 The corpus of the fund may be managed either
actively or passively

 Active management of funds involves gathering

of security specific information, analyzing it, and
selecting securities.

 Passive management of funds involves

selection of a market index.
Classification on the basis of Load
A fund incurs two types of costs:
Marketing cost
Operating cost

On the basis of chargeability of marketing costs to

the scheme, funds can be classified into:
Load funds
Non-Load funds
 Load funds charge the marketing costs to the
scheme, while the no-load funds do not

 The no-load funds recover the marketing costs

as part of the management fee

 Load funds are of two types:

Front Load: The load is charged at the time the

investor invest in the fund.

Back Load : The load is charged at the time of

exiting from the fund
Other Pooled Investments

 Hedge fund
 Fund of funds
 Exchange Traded Fund
Hedge Fund:
 It is defined as a pooled investment vehicle
that is privately organized, administered by
professional investment manager, not widely
available to the public, subject to far less
regulatory oversight. Their investors include
high net worth people (Rs10 lacs)

 Two reasons for investment in hedge funds:

High rate of return
More diversification
The difference between MF / HF

The difference between the two are

2. Regulatory requirements
3. Fees
4. Leveraging practices
5. Pricing and liquidity
6. Investor characteristics
Fund of Funds:
 It is a mutual fund that does not invest directly
into equity or debt market; instead it invests in
other mutual funds.
 A fund of funds which allocates the fund in a
debt and equity mix is called a balance fund.
 Two players
Franklin Templeton Mutual Fund
Prudential ICICI Mutual Fund
Birla Mutual Fund
Exchange Traded Fund {ETF}
 It is a type of investment company whose
investment objective is to achieve the same
return as a particular market index.

 It is an index fund in that it will primarily invest

in the securities of companies that are
included in a selected market index.

 It will invest in either all of the securities or a

representative same of the securities included
in the index
The Players in MF industry
 SEBI
 Asset Management Company
 Intermediaries
 Investors
Intermediaries

 They act as a link between the mutual

fund companies and the investors. They
include brokers, sub-brokers, investment
houses like Bajaj Capital, not only help in
the subscription of units but also provide
guidance to the investors.
 The other intermediaries are Registrars
and transfer agents.
The Structure of Mutual Funds
 In India, the structure of a mutual fund is
determined by SEBI regulations.

 These regulations require a fund to be

established in the form of a trust under the
Indian Trusts Act,1882 to raise money.

 The money can be raised by the sale of a units,

either to the public in general or a particular
section of the public.
Structure of Mutual Fund, an
example
 Sponsor : JM Financials Ltd
 Name of the Fund: JM Equity Fund
 Trustee : JM Financial Trustee Company
 AMC : JM Financial A.M Pvt Ltd
 Registrars & Custodians: Karvy Pvt Ltd
Custodians
 The custodians are appointed by the sponsors
and registered under the SEBI Act to look after
the transfer and storage of securities. The
functions of custodians are 1. safe keeping of
securities bid settlements, 2. transfer
agent,3.fund accounting, 4.cash management
and 5.other similar functions like daily
settlements of purchase and redemption of
units, collect the data from the Distributors,
looking after the switch-ins and switch-outs
 Key Information Memorandum
Name of the scheme
Type of the scheme
Investment objective
Asset allocation pattern of
the scheme
Risk profile of the scheme
Plans and options
Min application amount
JM Equity Fund
Open ended, growth scheme
To provide optimum capital
growth and appreciation
80% in Equity
20% in debt money market
Subject to market risks
Dividend and growth
Rs.5000/-
 Key Information Memorandum

Face value of the unit Rs.10, minimum 50 units

Additional purchases In multiples of Rs1/-

Bench mark index BSE sensex

Name of the fund manager Sandip Sabharwal

Performance of the fund JM equity – 50.79 (5Years)

BSE sensex – 43.10(5Years)
Expenses of the scheme Entry load – 2.25% of NAV
Exit load – 0.5% of NAV
 Key Information Memorandum
No entry load will be charged By the SEBI Circular
for direct applications
received by the AMC
Date of inception 01-04-1995
 Taxable securities transaction
Taxable securities transaction Rates Payable by

Purchase of a unit of an equity 0.125% Purchaser

oriented fund

Sale of a unit of an equity 0.125% Seller

oriented fund

Sale of a unit of an equity 0.25% Seller

oriented fund to the mutual
fund itself
 Risk factors
 Mutual funds and securities investments are
subject to market risks and there can be no
assurance or guarantee that the objectives of
the scheme will be achieved. As with any
money markets. Past performance of the
sponsors / investment manages / mutual
funds does not indicate the future
performance of the scheme and may not
necessarily provide a basis of comparison
with other investments
Risk factors

 The name of the scheme does not , in

any manner indicate either the quality of
the scheme or their future prospects or
returns. Unit holders in the scheme are
not being offered any guarantee,
assured returns. Investors should read
their offer document / key information
Memorandum available at investor
service centers.
 Top Equity funds & Fund
Managers
Fidelity equity Sandeep kothari 0.1840
Birla mid cap Jayesh Gandhi 0.1742
HSBC midcap Mihir vora 0.1651
Principal R. Srinivasan 0.1597
Resurgent India (Sharpe
ratio)
HDFC growth Ravuri Srinivas rao 0.1596
SBI Magnum Gopal Agarwal 0.1568
UTI dividend Swathi Kulkarni 0.1564
Top Holdings of Fidelity Equity
 Reliance industries SANDEEP KOTHARI
 Bharati Air Tel
FUND MANAGER OF THE YEAR
 BHEL
FIDELITY FUND MANAGEMENT
 SBI
 Infosys AUM – Rs 4,100 CR
 L&T 1 YEAR RETURNS – 44 %
 ICICI Bank
 TCS
 Grasim
 HDFC Bank
 Cipla
Thank You