A STUDY REPORT ON MUTUAL

FUND IN INDIA

INTRODUCTION
The Indian financial system based on four basic components like Financial
Market, Financial Institutions, Financial Service, Financial Instruments. All are
play important role for smooth activities for the transfer of the funds and
allocation of the funds. The main aim of the Indian financial system is that
providing the efficiently services to the capital market. The Indian capital
market has been increasing tremendously during the second generation
reforms. The first generation reforms started in 1991 the concept of LPG.
(Liberalization,

privatization, Globalization). Then after 1997 second

generation reforms was started, still the its going on, its include reforms of
industrial investment, reforms of fiscal policy, reforms of ex- imp policy,
reforms of public sector, reforms of financial sector, reforms of foreign
investment through the institutional investors, reforms banking sectors. The
economic development model adopted by India in the post independence era
has been characterized by mixed economy with the public sector playing a
dominating role and the activities in private industrial sector control
measures emaciated form time to time. The last two decades have been a
phenomenal expansion in the geographical coverage and the financial
spread of our financial system. The spared of the banking system has been a
major factor in promoting financial intermediation in the economy and in the
growth of financial savings with progressive liberalization of economic
policies, there has been a rapid growth of capital market, money market and
financial services industry including merchant banking, leasing and venture
capital, leasing, hire purchasing. Consistent with the growth of financial
sector and second generation reforms its need to fruition of the financial
sector. It's also need to providing the efficient service to the investor mostly
if the investors are supply small amount, in that point of view the mutual
fund play vital for better service to the small investors. The main vision for
the analysis for this study is to scrutinize the performance of five star rated
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
mutual

funds,

given

the

weight

of

risk,

return,

and

assets

under

management, net assets value, book value and price earnings ratio.

Concept of Mutual Fund:

Mutual fund is the pool of the money, based on the trust who invests the
savings of a number of investors who shares a common financial goal, like
the capital appreciation and dividend earning. The money thus collect is then
invested in capital market instruments such as shares, debenture, and
foreign market. Investors invest money and get the units as per the unit
value which we called as NAV (net assets value). Mutual fund is the most
suitable investment for the common man as it offers an opportunity to invest
in diversified portfolio management, good research team, professionally
managed Indian stock as well as the foreign market, the main aim of the
fund manager is to taking the scrip that have under value and future will
rising, then fund manager sell out the stock. Fund manager concentration on
risk return trade off, where minimize the risk and maximize the return
through diversification of the portfolio. The most common features of the
mutual fund unit are low cost.

Growth of Mutual Fund Industry:

The history of mutual funds dates support to 19th century when it was
introduced in Europe, in particular, Great Britain. Robert Fleming set up in
1868 the first investment trust called Foreign and colonial investment trust
which promised to manage the finances of the moneyed classes of Scotland
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
by scattering the investment over a number of different stocks. This
investment trust and other investment trusts which were afterward set up in
Britain and the U.S., resembled today close ended mutual funds. The first
mutual fund in the U.S., Massachusetts investors trust, was set up in March
1924. This was the open ended mutual fund. The stock market crash in
1929, the Great Depression, and the outbreak of the Second World War
slackened the pace of growth of the mutual fund industry. Innovations in
products and services increased the popularity of mutual funds in the 1950s
and 1960s. The first international stock mutual fund was introduced in the US
in 1940. In 1976, the first tax exempt municipal bond funds emerged and in
1979, the first money market mutual funds were created. The latest
additions are the international bond fund in 1986 arm funds in 1990. This
industry witnessed substantial growth in the eighties and nineties when
there was a significant increase in the number of mutual funds, schemes,
assets ,and shareholders. In the US the mutual fund industry registered s ten
fold growth the eighties. Since 1996, mutual fund assets have exceeds
bank deposits. The mutual fund industry and the banking industry virtually
rival each other in size.

organisation of a mutual fund:

There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund. Mutual funds have a unique structure
not shared with other entities such as companies of firms. It is important for
employees & agents to be aware of the special nature of this structure,
because it determines the rights & responsibilities of the funds constituents
viz., sponsors, trustees, custodians, transfer agents & of course, the fund &
the Asset Management Company(AMC) the legal structure also drives the
inter-relationships between these constituents. The structure of the mutual
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
fund India is governed by the SEBI (Mutual Funds) regulations, 1996. These
regulations make it mandatory for mutual funds to have a structure of
sponsor, trustee, AMC, custodian. The sponsor is the promoter of the mutual
fund,& appoints the trustees. The trustees are responsible to the investors in
the mutual fund, & appoint the AMC for managing the investment portfolio.
The AMC is the business face of the mutual fund, as it manages all affairs of
the mutual fund. The mutual fund & the AMC have to be registered with SEBI.
Custodian, who is also registered with SEBI, holds the securities of various
schemes of the fund in its custody.
Sponsor:- The sponsor is the promoter of the mutual fund. The
sponsor establishes the Mutual fund & registers the same with SEBI. He
appoints the trustees, Custodians & the AMC with prior approval of
SEBI, & in accordance with SEBI regulations. He must have at least five
year track record of business interest in the financial markets. Sponsor
must have been profit making in at least three of the above five years.
He must contribute at least 40% of the capital of the AMC.
Trustees:- The Mutual Fund may be managed by a Board of trustees a
of individuals, or a trust company a corporate body. Most of the funds
in India are managed by board of trustees. While the board of trustees
is governed by the provisions of the Indian trust act, where the trustee
is the corporate body, it would also be required to comply with the
provisions of the companies act, 1956. the board of trustee company,
as an independent body, act as protector of the unit-holders interest.
The trustees dont directly manage the portfolio of securities. For this
specialist function, they appoint an AMC. They ensure that the fund is
managed by AMC as per the defined objectives & in accordance with
the trust deed & SEBI regulations. The trust is created through a
document called the trust deed i.e., executed by the fund sponsor in
favor of the trustees. The trust deed is required to be stamped as
registered under the provision of the Indian registration act &
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
registered with SEBI. The trustees begin the primary guardians of the
unit-holders funds & assets, a trustee has to be a person of high repute
& integrity.
Asset Management Company (AMC):- The role of an Asset
management companies is to act as the investment manager of the
trust. They are the ones who manage money of investors. An AMC
takes decisions, compensates investors through dividends, maintains
proper accounting & information for pricing of units, calculates the
NAV, & provides information on listed schemes. It also exercises due
diligence on investments & submits quarterly reports to the trustees.
AMCs have been set up in various countries internationally as an
answer to the global problem of bad loans. Bad loans are essentially of
two types: bad loans generated out of the usual banking operations or
bad lending, and bad loans which emanate out of a systematic banking
crisis. It is in the latter case that banking regulators or governments try
to bail out the banking system of a systematic accumulation of bad
loans which acts as a drag on their liquidity, balance sheets and
generally the health of banking. So, the idea of AMCs or ARCs is not to
bail out banks, but to bail out the banking system itself.

A STUDY REPORT ON MUTUAL

FUND IN INDIA
Types of AMCs in Indian Context:
The following are the various types of AMCs we have in India.

AMCs
AMCs
AMCs
AMCs
AMCs

owned
owned
owned
owned
owned

by
by
by
by
by

banks.
financial institutions.
Indian private sector companies.
foreign institutional investors.
Indian & foreign sponsors.

Custodian:- Often an independent organization, it takes custody all

securities & other assets of mutual fund. Its responsibilities include
receipt & delivery of securities collecting income-distributing dividends,
safekeeping of the unit & segregating assets & settlements between
schemes. Mutual fund is managed either trust company board of
trustees. Board of trustees & trust are governed by provisions of Indian
trust act. If trustee is a company, it is also subject Indian Company Act.
Trustees appoint AMC in consultation with the sponsors & according to
SEBI regulation. All mutual fund schemes floated by AMC have to be
approved by trustees. Trustees review & ensure that net worth of the
company is according to stipulated norms, every quarter. Though the
trust is the mutual fund, the AMC is its operational face. The AMC is the
first functionary to be appointed, & is involved in appointment of all
other functionaries. The AMC structures the mutual fund products,
markets them & mobilizes fund, manages the funds & services to the
investors. A draft offer document is to be prepared at the time of
launching the fund. Typically, it pre-specifies investment objectives of
the fund, the risk associated, the cost involved in the process & the
broad rules to enter & to exit from the fund & other areas of operation.
In India as in most countries, these sponsors need approval from a
regulator, SEBI in our case. SEBI looks at track records of the sponsor &
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
its financial strength granting approval to the fund for commencing
operations. A sponsor then hires an asset management company to
invest the funds according to the investment objective. It also hires
another entity to be the custodian of the assets of the fund & perhaps
the third one to handle registry work for the unit holder of the fund.
Registrars & Transfer Agent (R & T Agent):- The Registrars &
Transfer Agents(R & T Agents) are responsible for the investor servicing
function, as they maintain the records of investors in mutual funds.
They process investor applications; record details provide by the
investors on application forms; send out to investors details regarding
their investment in the mutual fund; send out periodical information on
the performance of the mutual fund; process dividend payout to
investor; incorporate changes in information as communicated by
investors; & keep the investor record up-to-date, by recording new
investors & removing investors who have withdrawn their funds.

tax planning and mutual fund :

Investors in India have option for the tax-saving mutual fund schemes for the
simple reason that it helps them to save money. The tax-saving mutual funds
or the equity-linked savings schemes (ELSS) receive certain tax exemptions
under Section 88 of the Income Tax Act. That is one of the reasons why the
investors in India add the tax-saving mutual fund schemes to their portfolio.
The tax-saving mutual fund schemes are one of the important types of
mutual funds in India that investors can option for. There are several
companies in India that offer tax saving mutual fund schemes in the country.
While planning our investments we spend a considerable amount of time
evaluating various options and determining which suits us the best. But
when it comes to planning out investments from a tax saving perspective,
more often than not, we simply go the traditional way and do the exact same
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
thing that we did in the earlier years. Well, in case you were not aware the
guidelines governing such investments are a lot different this year and
lethargy on your part to rework your investment plan could cost you dear.
tax saving scheme:
Equity Linked Saving Schemes (ELSS): Equity Linked Saving Scheme (ELSS) is
also a type of mutual fund and falls under the Equity Mutual Fund category.
As the name indicates, ELSS mutual fund invests major portion of its corpus
into equity and equity related instruments. But there are some distinct
features which makes ELSS plans different from other equity mutual funds.
Investments made in ELSS plans are eligible for deduction from the taxable
income under Section 80C of the Income Tax Act. There is no limit for
investments in ELSS plans, but investments of up to Rs 1,00,000 qualify for
income tax benefits. Investments made in normal mutual funds (other than
ELSS plans) do not qualify for income tax deduction.
Features of an ELSS Plan :

ELSS is an equity linked tax saving investment instrument.

Money collected under ELSS plan is mainly invested in equity and

equity related instruments.

This financial product is more suited to those investors who are willing

to take high risk and looking for high returns.

There is no upper limit on investments that can be made in ELSS.
However investments upto INR 1,00,000 made in ELSS in a financial
year qualify for deduction from taxable income under Section 80C of

the Income Tax Act.

ELSS comes with a 3 year lock in period.
Long term capital gains earned on investments from ELSS are tax free.
Also dividends earned from ELSS plan are tax free in the hands of the
investor

A STUDY REPORT ON MUTUAL

FUND IN INDIA
SWOT ANALYSIS:
SWOT Analysis presents the information about external and internal
environment of mutual fund in structured from where by key external
opportunity and threats can be compared systematically with internal
capabilities and weakness. The basic objectives of SWOT analysis is provide
a framework to reflect on the industry capabilities to avail opportunities or to
overcome threats presented by environment.

STRENGHT:

WEAKNESS:

Full benefit of diversification

Lesser return compared to equity

Tax benefit

Poor technology and service level

Transperancy and flexibility

Lack of prop marketing

Expert investment management

OPPORTUNITY:

THREATS:

Government policies and tax

Arrival of more private and foreign

concession

players

Setting up a specific fund

Introduction of more debt

Technology development

investment in market.

BANKS V/S MUTUAL FUND:

A STUDY REPORT ON MUTUAL

FUND IN INDIA
CHARACTERISTICS
Returns
Network
Administrative exp.
Liquidity
Risk
Quality of assets
Interest calculation

BANKS
Low
High penetration
High
At a cost
Low
Not transperance
Minimum balance

MUTUAL FUND
Better
Low but improving
Low
Better
Moderate
Transparent
Everyday

between 10th and 30th of

Investment option

every month
Less

More

DEFINITION OF MUTUAL FUNDS

Mutual

funds

are

open-ended investment companies

that

pool

investors' money into a fund operated by a portfolio manager. This manager

then turns around and invests this large pool of shareholder money in a
portfolio of various assets, or combinations of assets.

How it works/Example:
Mutual funds may include investments in stocks, bonds, options, futures,
currencies, treasuries and money market securities. Depending on the stated
objective of the fund, each will vary in regard to content and risk.
Funds issue and redeem shares on demand at the fund's NAV, or net asset
value. Mutual fund management fees typically range between 0.5% and 2%
of assets per year, but 12b-1 fees, exchange fees and other administrative
charges also apply.
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A STUDY REPORT ON MUTUAL

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Additionally, a given mutual fund will issue different classes of its shares to
investors. The most common variations of share classes for load mutual
funds are front-load A shares, back-end load B shares, and level-load C
shares.

Class A Shares A mutual fund's A Shares charge a front-end load at the

time of purchase. This is a sales fee that is charged as a percentage of
the

total investment and

is

used

to

compensate

the

financial

representative who sells the fund. The amount of the front-end load is
subtracted from the original investment. For example: If an investor
places $10,000 in a mutual fund with a front-end load of 2%, then the
total sales charge would be $200. The remaining $9,800 will go toward
the purchase of shares in the fund. A shares may also impose an assetbased sales charge. Investors do not pay these charges directly.
Instead, they are taken from the fund's assets. The fund then uses
these fees to market and distribute its shares. The 12b-1 fee, which
can equal a maximum of 0.25% per year, is an example of an assetbased sales charge.

Class B Shares: B Shares charge back-end loads. When an investor

purchases the B shares of a mutual fund, the sales charge is deferred
until the fund is sold. This deferred load usually decreases each year. B
shares typically charge a higher asset-based sales charge than Class A
Shares. For example: The B shares of a mutual fund may carry a 5%
load if shares are sold within the first year. This back-end load of 5%,
however, could be reduced by 1 % every year, until it is eliminated in
the 5th year. Some B shares automatically convert to A shares after a
specified period of time, which reduces the 12b-1 fees.

Class C Shares: Class C shares typically do not impose a front-end load,

but will often charge a nominal fee if the shares are sold within one
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A STUDY REPORT ON MUTUAL

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year. Class C shares often impose a high asset-based sales charge, but
will not convert to A shares when the load reverts to zero.

DIFFERENT TYPES AND KINDS OF MUTUAL FUNDS

Mutual fund industry of India is continuously evolving. Along the way, several
industry bodies are also investing towards investor education. Yet, according
to a report by Boston Analytics, less than 10% of our households consider
mutual funds as an investment avenue. It is still considered as a high-risk
option. In fact, a basic inquiry about the types of mutual funds reveals that
these are perhaps one of the most flexible, comprehensive and hassle free
modes of investments that can accommodate various types of investor
needs.Various types of mutual funds categories are designed to allow
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A STUDY REPORT ON MUTUAL

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investors to choose a scheme based on the risk they are willing to take, the
investable amount, their goals, the investment term, etc.Let us have a look
at some important mutual fund schemes under the following three
categories based on maturity period of investment:

I. OPEN-ENDED - This scheme allows investors to buy or sell units at any

point in time. This does not have a fixed maturity date.

1. Debt/ Income - In a debt/income scheme, a major part of the investable

fund are channelized towards debentures, government securities, and other
debt instruments. Although capital appreciation is low (compared to the
equity mutual funds), this is a relatively low risk-low return investment
avenue which is ideal for investors seeing a steady income.

2. Money Market/ Liquid - This is ideal for investors looking to utilize their
surplus funds in short term instruments while awaiting better options. These
schemes invest in short-term debt instruments and seek to provide
reasonable returns for the investors.

3. Equity/ Growth - Equities are a popular mutual fund category amongst

retail investors. Although it could be a high-risk investment in the short term,
investors can expect capital appreciation in the long run. If you are at your
prime earning stage and looking for long-term benefits, growth schemes
could be an ideal investment.

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A STUDY REPORT ON MUTUAL

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3.i. Index Scheme - Index schemes is a widely popular concept in the west.
These follow a passive investment strategy where your investments replicate
the movements of benchmark indices like Nifty, Sensex, etc.

3.ii. Sectoral Scheme - Sectoral funds are invested in a specific sector like
infrastructure, IT, pharmaceuticals, etc. or segments of the capital market
like large caps, mid caps, etc. This scheme provides a relatively high riskhigh return opportunity within the equity space.

3.iii. Tax Saving - As the name suggests, this scheme offers tax benefits to its
investors. The funds are invested in equities thereby offering long-term
growth opportunities. Tax saving mutual funds (called Equity Linked Savings
Schemes) has a 3-year lock-in period.

4. Balanced - This scheme allows investors to enjoy growth and income at

regular intervals. Funds are invested in both equities and fixed income
securities; the proportion is pre-determined and disclosed in the scheme
related offer document. These are ideal for the cautiously aggressive
investors.

II. CLOSED-ENDED - In India, this type of scheme has a stipulated maturity

period and investors can invest only during the initial launch period known as
the NFO (New Fund Offer) period.

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A STUDY REPORT ON MUTUAL

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1. Capital Protection - The primary objective of this scheme is to safeguard
the principal amount while trying to deliver reasonable returns. These invest
in high-quality fixed income securities with marginal exposure to equities and
mature along with the maturity period of the scheme.

2. Fixed Maturity Plans (FMPs) - FMPs, as the name suggests, are mutual fund
schemes with a defined maturity period. These schemes normally comprise
of debt instruments which mature in line with the maturity of the scheme,
thereby earning through the interest component (also called coupons) of the
securities in the portfolio. FMPs are normally passively managed, i.e. there is
no active trading of debt instruments in the portfolio. The expenses which
are charged to the scheme, are hence, generally lower than actively
managed schemes.

III. INTERVAL - Operating as a combination of open and closed ended

schemes, it allows investors to trade units at pre-defined intervals.

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A STUDY REPORT ON MUTUAL

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INTRODUCTION TO COMPANIES

1] HDFC ASSET MANAGEMENT COMPANY LIMITED.

HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an
Asset Management Company for the HDFC Mutual Fund by SEBI vide its
letter dated July 3, 2000. HDFC Mutual Fund is one of the largest mutual
funds and well-established fund house in the country with consistent fund
performance across categories since its incorporation on December 10,
1999. While our past experience does make us a veteran, but when it comes
to investments, we have never believed that the experience is enough.
Investment Philosophy. The single most important factor that drives HDFC
Mutual Fund is its belief to give the investor the chance to profitably invest in
the financial market, without constantly worrying about the market swings.
To realize this belief, HDFC Mutual Fund has set up the infrastructure required
to conduct all the fundamental research and back it up with effective
analysis. Our strong emphasis on managing and controlling portfolio risk
avoids chasing the latest "fads" and trends. In terms of the Investment
Management Agreement, the Trustee has appointed the HDFC Asset
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A STUDY REPORT ON MUTUAL

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Management Company Limited to manage the Mutual Fund. The paid up
capital of the AMC is Rs. 25.169 core. Zurich Insurance Company (ZIC), the
Sponsor of Zurich India Mutual Fund, following a review of its overall
strategy, had decided to divest its Asset Management business in India. The
AMC had entered into an agreement with ZIC to acquire the said business,
subject to necessary regulatory approvals. On obtaining the regulatory
approvals, the following Schemes of Zurich India Mutual Fund have migrated
to HDFC Mutual Fund on June 19, 2003. Zurich Insurance Company (ZIC), the
Sponsor of Zurich India Mutual Fund, following a review of its overall
strategy, had decided to divest its Asset Management business in India. The
AMC had entered into an agreement with ZIC to acquire the said business,
subject to necessary regulatory approvals.
*HDFC Sovereign Gilt Fund has been wound up in March 2006
The AMC is also providing portfolio management / advisory services and
such activities are not in conflict with the activities of the Mutual Fund. The
AMC has renewed its registration from SEBI vide Registration No. - PM /
INP000000506 dated February 12, 2013 to act as a Portfolio Manager under
the

SEBI

(Portfolio

Managers)

Regulations,

1993.

The

Certificate

Registration is valid from January 1, 2013 to December 31, 2015.

AWARDS & RECOGNITION :

ICRA Mutual Fund Awards 2012

Bloomberg UTV Financial Leadership Awards, 2012
Outlook Money Awards 2011
CNBC-TV18-CRISIL Mutual Fund Awards 2012

HDFC TAXSAVER (ELSS)

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The nature of the scheme is open ended equity linked savings (ELSS) scheme
with a lock-in period of 3 years. It will be comes in market at March 31, 1996.
The minimum application amount is for new & existing investors Rs.500 and
in multiples of Rs. 500 thereafter.

2] SBI FUNDS MANAGEMENT LIMITED (SBIFM).:

SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund.
SBI Mutual Fund has been constituted as a trust, sponsored by State Bank
India. Today the Fund has an investor base of over 2.8 million spread over 23
schemes. With a large network of collecting branches and investor service
centers, SBI Mutual Fund constantly endeavors to get closer to its growing
family of investors. SBI Mutual Fund (SBI MF) is one of the largest mutual
funds in the country with an investor base of over 4.6 million. With over 20
years of rich experience in fund management, SBI MF brings forward its
expertise in consistently delivering value to its investors. Proven Skills in
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A STUDY REPORT ON MUTUAL

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wealth generation: SBI Mutual Fund is India's largest bank sponsored mutual
fund and has an enviable track record in judicious investments and
consistent wealth creation. The fund traces its lineage to SBI - India's largest
banking enterprise. The institution has grown immensely since its inception
and today it is India's largest bank, patronized by over 80% of the top
corporate houses of the country. SBI Mutual Fund is a joint venture between
the State Bank of India and Society General Asset Management, one of the
world's leading fund management companies that manages over US$ 500
Billion worldwide.
Exploiting expertise, compounding growth:
In twenty years of operation, the fund has launched 38 schemes and
successfully redeemed fifteen of them. In the process it has rewarded it's
investors handsomely with consistently high returns A total of over 5.4
million investors have reposed their faith in the wealth generation expertise
of the Mutual Fund. Schemes of the Mutual fund have consisently out
performed

benchmark

indices

and

have

emerged

as

the

preferred

investment for millions of investors and HNIs. Today, the fund manages over
Rs. 51,461 cores 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.
Currently the SBI Mutual Fund offers 177 schemes in with different
investment objective and needs, as follows. Sbi mutual fund schemes offers:
NO . OF SCHEMES INCLUDING

177

OPTIONS
Equity schemes

36

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A STUDY REPORT ON MUTUAL

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Debt schemes
Short term debt schemes
Equity and debt
Money market
Gilt fund

115
11
3
0
12

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 Indias
largest bank patronized by over 80% of the top corporate houses of the
country. Started in July 198 7, the fund has launched 67 schemes and
successfully redeemed 15 schemes. In the process, it has rewarded its
investors handsomely with consistently high returns. A total of over 3.5
million investors have reposed their faith in the wealth generation expertise
of the mutualfund. Schemes of the mutual fund have consistently
outperformed benchmarks indices and have emerged as the preferred
investment

for

the

millions

of

investors.

Today

the

fund

manages

Rs.29492.9685 core as on Mar 31, 2012 of assets and has diversified profile
of investors actively parking their investments across 37 active schemes.
SBI MAGNUM TAX GAIN (ELSS) :The nature of the scheme is open ended
equity linked savings (ELSS) scheme with a lock-in period of 3 years. It will be
comes in market at 1996.
3] RELIANCE MUTUAL FUND. :

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A STUDY REPORT ON MUTUAL

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Reliance Mutual Fund ('RMF') is one of India leading Mutual Funds, with
Average Assets under Management (AUM) of Rs. 90,636 Cores and an
investor count of over 58.42 and 64.53 Lakh folios. Reliance Mutual Fund, a
part of the Reliance Group, is one of the fastest growing mutual funds in
India. RMF offers investors a well-rounded portfolio of products to meet
varying investor requirements and has presence in 179 cities across the
country. Reliance Mutual Fund constantly endeavors to launch innovative
products and customer service initiatives to increase value to investors.
Reliance Capital Asset Management Limited (RCAM) is the asset manager
of Reliance Mutual Fund. RCAM is a subsidiary of Reliance Capital Limited
(RCL). Presently, RCL holds 65.23% of its total issued and paid-up equity
share capital and the balance of its issued and paid up equity share capital is
held by other shareholders which includes Nippon Life Insurance Company
(NLI), holding 26% of RCAMs total issued and paid up equity share capital.
NLI acquired the said 26% share holding in RCAM on August 17, 2012.
Reliance Capital Ltd. is one of Indias leading and fastest growing private
sector financial services companies, and ranks among the top 3 private
sector financial services and banking companies, in terms of net worth.
Reliance Capital Ltd. has interests in asset management, life and general
insurance, private equity and proprietary investments, stock broking and
other financial services. Reliance Mutual Fund (RMF) was initially set up as a
Trust in accordance with the provisions ofthe Indian Trust Act, 1882 by
Reliance Capital Limited acting as a Settler /Sponsor, vide a Trust Deed dated

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A STUDY REPORT ON MUTUAL

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April 25, 1995 (the Original Trust Deed).The Original Trust Deed was duly
registered under the Indian Registration Act, 1908. The Original Trust Deed
was subsequently amended from time to time. In order to consolidate all
amendments to the Original Trust Deed in one document, an Amended and
Restated Trust Deed was executed on March 15, 2011 (the Amended and
Restated Trust Deed). The Amended and Restated Trust Deed was
subsequently registered under the Indian Registration Act, 1908 and the
Amended and Restated Trust Deedwas duly filed with SEBI. Reliance Capital
Trustee Co. Limited entered into an Investment Management Agreement
dated May 12, 1995 with Reliance Capital Asset Management Ltd. (RCAM) to
function as the Investment Manager for all the Schemes of RMF.
Reliance Mutual Fund, a part of the Reliance Anil Dhirubhai Ambani Group is
the No. 1 Mutual Fund in India. Reliance Mutual Fund offers investors a well
rounded portfolio of products to meet varying investor requirements.
Reliance Mutual Fund has a presence in over 100 cities across the country,
an investor base of over 3.9 million and manages assets over Rs. 67,598
Cores as on August 31, 2007. Reliance Mutual Fund constantly endeavors to
launch innovative products and customer service initiatives to increase value
to investors. Reliance Mutual Fund schemes are managed by Reliance Capital
Asset Management Ltd. a wholly owned subsidiary of Reliance Capital Ltd.
Reliance Capital Ltd. is one of Indias leading and fastest growing private
sector financial services companies, and ranks among the top 3 private
sector financial services and banking companies, in terms of net worth.
Reliance Capital Ltd. has interests in asset management and mutual funds,
life and general insurance, private equity and proprietary investments, stock
broking and other financial services. This group dominates this key are in the
financial sector..This mega business houses show that it has assets under
management of Rs. 90,938 crore (US$ 22.73 billion) andan investor base of
over6.6 million .Reliances mutual fund schemes are managed by Reliance
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
Capital Asset Management Limited RCAM), a subsidiary of Reliance Capital
Limited, which holds 93.37% of the paid-up capital of RCAM. The company
not ched up a healthy growth of Rs. 16,354 crore (US$ 4.09 billion)in assets
under management in February2008 and helped propel the Total industrywide

AUM

to

Rs.

565,459

crore

(US$

141.36

billion)(Source:

indiainvestments.com). A sharp rise in fixed maturity plans (FMPs) and

collection of Rs. 7000 crore (US$ 1.75 billion) through new fund offers (NFOs)
created this surge. In A Urankings, Reliance continues to be in the number
one spot. The Anil Dhirubhai Ambani Group owns Reliance; they are the
fastest growing investment company in India so far. To meet the erratic
demand of the financial market, Reliance Mutual Fund designed a distinct
portfolio that is sure to please potential investors. Reliance Capital Asset
Management Limited manages RMF.

4] FRANKLIN TEMPLETON MUTUAL FUND.:

FTMF has been constituted as a Trust on January 4, 1996 in accordance with

the provisions of the Indian Trusts Act, 1882 and the Deed of Trust is
registered under the Indian Registration Act, 1908. FTMF has been sponsored
by Templeton International Inc. (liability restricted to the seed corpus of Rs. l
lakh) with Franklin Templeton Trustee Services Pvt. Ltd. (Trustee) as the
Trustee. The Trustee has entered into an Investment Management Agreement
dated January 5, 1996 with Franklin Templeton Asset Management (India)
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
Pvt. Ltd. (AMC) appointing the AMC as the Investment Manager for all the
schemes of FTMF. FTMF is registered with SEBI on February 19, 1996.
Templeton International Inc. is a part of the Franklin Templeton Group, which
is one of the largest Investment Management Company with US$683.5 bln
(approximately Rs.3,856,478 core) in assets under management as on May
31, 2012 and around 26 million Shareholder Accounts. Franklin Templeton
has offices in over 30 countries including the United States of America,
Bahamas, Canada, Argentina, France, Germany, Italy, Luxembourg, Poland,
Russia, the United Kingdom, Hong Kong, Singapore, Korea, India, China,
Australia and South Africa. Review of activities of Franklin Templeton Mutual
Fund: During the year under review, the Mutual Fund continued to focus on
launching meaningful products with investment objectives that are relevant
to investors. The Mutual Fund launched Templeton India Corporate Bond
Opportunities Fund, an open end debt fund investing in corporate bonds,
mobilizing over Rs.250 core, FT India Feeder - Franklin U.S. Opportunities
Fund, a fund of funds scheme investing in the units of Franklin U. S.
Opportunities Fund, an overseas fund that invests primarily in U. S.
securities, mobilizing over Rs.100 core and Franklin Templeton Fixed Tenure
Fund Series XVI mobilizing over Rs.68 core. As a part of product
rationalization process to make the offerings more meaningful and easy to
understand for investors and to reduce product overlap between similar
schemes, few schemes / plans were merged during the year. The Liquid Plan
of Templeton India Treasury Management Account (TITMA) was merged into
Regular Plan of TITMA effective September 4, 2011. Franklin FMCG Fund and
Franklin Pharma Fund merged into Franklin India Prima Plus effective
September 9, 2011. Franklin India Index Tax Fund (FITF) merged into Franklin
India Index Fund NSE Nifty Plan effective September 9, 2011. Franklin India
Index Tax Fund (FITF) was launched in February 2001 as open end passively
managed ELSS scheme. The scheme invested in companies, whose securities
are part of the S&P CNX Nifty, with the aim to generate returns
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
commensurate with S&P CNX Nifty. As part of our product rationalization
process and with a view to reduce overlap between similar schemes, it was
decided to merge FITF with the Growth Option under the Nifty Plan of
Franklin India Index Fund. The effective date of the merger was September 9,
2011. As on March 31, 2012, the Mutual Fund served more than 20 lakh
active investors through its 34 branches and 105 offices of our collection
partners across India.
FRANKLINE INDIA TAX SHEILD:
The nature of the scheme is open ended equity linked savings (ELSS) scheme
with a lock-in period of 3 years. It will be comes in market at April 10 1999.
The minimum application amount is for new & existing investors Rs.500 and
in multiples of Rs. 500 thereafter.
MUTUAL FUNDS :
Franklin Templeton has over 200 different open-ended mutual funds and 7
closed-end funds in the fund family. Included in these are 36 state and
federal tax free income funds, an area of investment pioneered by Franklin.
Prominent funds in the fund family include the world's largest equity fund
Templeton Growth Fund, Inc. (opened 1954, $29.5bn assets), the Mutual
Shares fund (opened 1949, $7.9bn assets), and the Mutual Discovery Fund
(opened $1992, 7.6bn assets) and the Templeton Growth (Euro) Fund A (acc)
($6.1bn assets). The Franklin Income Fund (FKINX, assets $33.6bn) is a
mutual fund in

Morningstar's

"conservative

allocation" category

and

"large/value" style box. The fund was created in 1948 and has paid
uninterrupted dividends for 60 years. The Franklin Income Fund is
constructed primarily of dividend-paying stocks and bonds (2%).

OBJECTIVES OF STUDY
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
The main objective of the study is to make investors aware of performance
and provide
information on the comparison of tax saving funds of selected asset
management companies. The
specific objectives are:

To understand the organisation of mutual fund industry.

To compare the performance of selected tax saving schemes in
comparison with standard
deviation.
To offer suggestions based on the findings arrived from the study.

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A STUDY REPORT ON MUTUAL

FUND IN INDIA

SCOPE OF STUDY
The study is all about understanding the customers perception to the tax
benefit in mutual fund. The purpose of this study of performance evaluation
of tax saving mutual funds by taking fours elected companies which are
HDFC, Franklin Templeton, SBI and Reliance is to employ the resources in
such a manner as to afford for the investors combine benefits of low risk,
steady returns, high liquidity and capital appreciation through diversification
and expert management.

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A STUDY REPORT ON MUTUAL

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LIMITATIONS OF STUDY
The study was limited by the time constraint; hence extent to study is
not possible.
The study was limited to 5 companies only.
The policy and application are applicable to the particular assessment
year only.
The analysis and interpretation purely based on the data collected
from various website.
The accuracy of interpretation depends upon the accuracy of these
data.
The return from the mutual fund depends upon the returns of the
securities involved in the portfolio. The return from the market
depends upon the efficiency of the market and other various factor
affecting the fund and economy as a whole. So the researcher doesnt
claim the 100% accuracy of the result conducted from the study.

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A STUDY REPORT ON MUTUAL

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BENEFITS OF INVESTING IN A MUTUAL FUND

As an investor, you would like to get maximum returns on your investments,
but you may not have the time to continuously study the stock market to
keep track of them. You need a lot of time and knowledge to decide what to
buy or when to sell. A lot of people take a chance and speculate, some get
lucky, most don t. This is where mutual funds come in. Mutual funds offer
you the following advantages :

Professional management: Qualified professionals manage your money,

but they are not alone. They have a research team that continuously
analyses the performance and prospects of companies. They also select
suitable investments to achieve the objectives of the scheme. It is a
continuous process that takes time and expertise which will add value to
your investment. Fund managers are in a better position to manage your
investments and get higher returns.

Diversification: The clich, "don't put all your eggs in one basket" really
applies to the concept of intelligent investing. Diversification lowers your risk
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A STUDY REPORT ON MUTUAL

FUND IN INDIA
of loss by spreading your money across various industries and geographic
regions. It is a rare occasion when all stocks decline at the same time and in
the same proportion. Sector funds spread your investment across only one
industry so they are less diversified and therefore generally more volatile.

More choice: Mutual funds offer a variety of schemes that will suit your
needs over a lifetime. When you enter a new stage in your life, all you need
to do is sit down with your financial advisor who will help you to rearrange
your portfolio to suit your altered lifestyle.

Affordability: As a small investor, you may find that it is not possible to buy
shares of larger corporations. Mutual funds generally buy and sell securities
in large volumes which allow investors to benefit from lower trading costs.
The smallest investor can get started on mutual funds because of the
minimal investment requirements. You can invest with a minimum of Rs.500
in a Systematic Investment Plan on a regular basis.

Tax benefits: Investments held by investors for a period of 12 months or

more qualify for capital gains and will be taxed accordingly. These
investments also get the benefit of indexation.

Liquidity: With open-end funds, you can redeem all or part of your
investment any time you wish and receive the current value of the shares.
Funds are more liquid than most investments in shares, deposits and bonds.
Moreover, the process is standardised, making it quick and efficient so that
you can get your cash in hand as soon as possible.
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A STUDY REPORT ON MUTUAL

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Rupee-cost averaging: With rupee-cost averaging, you invest a specific

rupee amount at regular intervals regardless of the investment's unit price.
As a result, your money buys more units when the price is low and fewer
units when the price is high, which can mean a lower average cost per unit
over time. Rupee-cost averaging allows you to discipline yourself by
investing every month or quarter rather than making sporadic investments.

Transparency: The performance of a mutual fund is reviewed by various

publications and rating agencies, making it easy for investors to compare
fund to another. As a unitholder, you are provided with regular updates, for
example daily NAVs, as well as information on the fund's holdings and the
fund manager's strategy.

Regulations: All mutual funds are required to register with SEBI (Securities
Exchange Board of India). They are obliged to follow strict regulations
designed to protect investors. All operations are also regularly monitored by
the SEBI.

DISADVANTAGE OF INVESTING IN A MUTUAL FUND

There are certainly some benefits to mutual fund investing, but you should
also be aware of the drawbacks associated with mutual funds.No Insurance:
Mutual funds, although regulated by the government, are not insured against
losses. The Federal Deposit Insurance Corporation (FDIC) only insures against
certain losses at banks, credit unions, and savings and loans, not mutual
funds. That means that despite the risk-reducing diversification benefits
31

A STUDY REPORT ON MUTUAL

FUND IN INDIA
provided by mutual funds, losses can occur, and it is possible (although
extremely unlikely) that you could even lose your entire investment. Dilution:
Although diversification reduces the amount of risk involved in investing in
mutual funds, it can also be a disadvantage due to dilution. For example, if a
single security held by a mutual fund doubles in value, the mutual fund itself
would not double in value because that security is only one small part of the
funds holdings. By holding a large number of different investments, mutual
funds tend to do neither exceptionally well nor exceptionally poorly.Fees and
Expenses: Most mutual funds charge management and operating fees that
pay for the funds management expenses (usually around 1.0% to 1.5% per
year for actively managed funds). In addition, some mutual funds charge
high sales commissions, 12b-1 fees, and redemption fees. And some funds
buy and trade shares so often that the transaction costs add up significantly.
Some of these expenses are charged on an ongoing basis, unlike stock
investments, for which a commission is paid only when you buy and sell .
Poor Performance: Returns on a mutual fund are by no means guaranteed.
In fact, on average, around 75% of all mutual funds fail to beat the major
market indexes, like the S&P 500, and a growing number of critics now
question whether or not professional money managers have better stockpicking capabilities than the average investor.
Loss of Control: The managers of mutual funds make all of the decisions
about which securities to buy and sell and when to do so. This can make it
difficult for you when trying to manage your portfolio. For example, the tax
consequences of a decision by the manager to buy or sell an asset at a
certain time might not be optimal for you. You also should remember that
you are trusting someone else with your money when you invest in a mutual
fund.

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A STUDY REPORT ON MUTUAL

FUND IN INDIA
Trading Limitations: Although mutual funds are highly liquid in general,
most mutual funds (called open-ended funds) cannot be bought or sold in the
middle of the trading day. You can only buy and sell them at the end of the
day, after theyve calculated the current value of their holdings.
Size: Some mutual funds are too big to find enough good investments. This
is especially true of funds that focus on small companies, given that there
are strict rules about how much of a single company a fund may own. If a
mutual fund has $5 billion to invest and is only able to invest an average of
$50 million in each, then it needs to find at least 100 such companies to
invest in; as a result, the fund might be forced to lower its standards when
selecting companies to invest in.
Inefficiency of Cash Reserves: Mutual funds usually maintain large cash
reserves as protection against a large number of simultaneous withdrawals.
Although this provides investors with liquidity, it means that some of the
funds money is invested in cash instead of assets, which tends to lower the
investors potential return.
Too Many Choices: The advantages and disadvantages listed above apply
to mutual funds in general. However, there are over 10,000 mutual funds in
operation, and these funds vary greatly according to investment objective,
size, strategy, and style. Mutual funds are available for virtually every
investment strategy (e.g. value, growth), every sector (e.g. biotech,
internet), and every country or region of the world. So even the process of
selecting a fund can be tedious.

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A STUDY REPORT ON MUTUAL

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RESEARCH METHODOLOGY
What is Research:Different investment avenues are available to investors. Mutual funds also
offer good investment opportunities to the investors. Like all investments,
they also carry certain risks. The investors should compare the risks and
expected yields after adjustment of tax on various instruments while taking
investment decisions. The investors may seek advice from experts and
consultants including agents and distributors of mutual funds schemes while
making investment decisions. With an objective to make the investors aware
of performance of mutual funds, an attempt has been made to provide
information on the comparison of tax saving funds of selected Asset
Management Companies such as HDFC, FRANKLIN INDIA, RELIANCE, SBI and
which may help the investors in taking investment decisions. The analysis is
also compared with the calculations based on the Average return and
Standard deviation for the period 2008-12. This paper is carried out to find
out the returns of funds thereby studying the performance of the selected
tax saving schemes in the market. The investor invests the funds based on
the returns, net asset value and also the trend prevailing in the market.
Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. Mutual funds are one of the best investments
34

A STUDY REPORT ON MUTUAL

FUND IN INDIA
ever created because they are very cost efficient and very easy to invest in.
Investors in India opt for the tax-saving mutual fund schemes for the simple
reason that it helps them to save money. The tax-saving mutual funds or the
equity-linked savings schemes (ELSS) receive certain tax exemptions under
Section 80C of the Income Tax Act. That is one of the reasons why the
investors in India add the tax-saving mutual fund schemes to their portfolio.
The tax-saving mutual fund schemes are one of the important types of
mutual funds in India that investors can opt for. The present study is carried
out to find out the returns of funds thereby studying the performance of the
tax saving funds in the market. The investor invests the funds based on the
returns, net asset value and also the trend prevailing in the market. Since the
market being high volatile there is a need to study the performance and
comparative statement of various tax saving funds performing in the market.

Data collection Methods:The following research methodology has been adopted for assessing the
performance of tax
saving funds of selected Asset Management Companies in the market.

Sources of data:
The present study is purely based on secondary data. Top five ELSS schemes
were as per their AUM . The sample ELSS schemes are HDFC Tax Saver, DSP
BlackRock Tax saver fund, Reliance Tax Saver, SBI Magnum Tax Gain and
Franklin India Tax shield. The data is collected from the fact sheets, reports,
35

A STUDY REPORT ON MUTUAL

FUND IN INDIA
websites, magazines, books and journals etc. are considered. The deviations
are properly analyzed. For each of the scheme, the risk ratios (Average
return and Standard Deviation) were also observed carefully and correlated
with the returns. Accordingly, proper findings were found out and conclusions
were drawn about the best performance scheme among all.

DATA ANALYSIS & INTERPRETATION

CALCULATION OF STANDARD DEVIATION OF SELECTED FUNDS

1]. HDFC Tax Saver
Table 1.1 Standard Deviation for HDFC Tax Saver

YEAR

RETURN

AVERAGE
RETURN

36

DY=(Y-Y)

DY2

A STUDY REPORT ON MUTUAL

FUND IN INDIA
2008
2009
2010
2011
2012
Total

-51.55
99.07
26.42
-22.62
26.59
77.91

15.58
15.58
15.58
15.58
15.58

-35.97
83.49
10.84
38.2
11.01

1293.84
6970.58
117.55
1459.24
121.22
9962.43

Standard Deviation (S.D) =

= 49.90

2]. Franklin India Tax Shield

Table 1.2 Standard Deviation for Franklin India Tax Shield

YEAR

RETURN

AVERAGE

DY=(Y-Y)

DY2

2008
2009
2010
2011

-49.22
78.81
23.47
-15.19

RETURN
13.45
13.45
13.45
13.45

-62.67
65.36
10.02
-28.64

3827.53
4271.93
100.40
820.24

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A STUDY REPORT ON MUTUAL

FUND IN INDIA
2012
Total

29.38
67.25

13.45

15.93

253.76
9373.86

Standard Deviation (S.D) =

= 48.41

3]. SBI Magnum Tax Gain

Table 1.4 Standard Deviation for SBI Magnum Tax Gain

YEAR

RETURN

AVERAGE

DY=(Y-Y)

DY2

2008
2009
2010
2011

-54.86
86.41
12.98
-23.50

RETURN
11.06
11.06
11.06
11.06

-65.92
75.35
1.92
-34.56

4345.45
5677.62
2.69
1194.39

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A STUDY REPORT ON MUTUAL

FUND IN INDIA
2012
Total

34.29
55.32

11.06

23.23

539.63
11759.78

Standard Deviation (S.D) =

= 54.22

4] Reliance Tax Saving Fund

Table 1.5 Standard Deviation for Reliance Tax Saving Fund

YEAR

RETURN

AVERAGE

DY=(Y-Y)

DY2

2008
2009
2010
2011

-52.35
82.01.
22.49
-24.23

RETURN
14.79
14.79
14.79
14.79

-67.14
67.22
7.7
-39.02

4507.78
4518.53
59.29
1522.56

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A STUDY REPORT ON MUTUAL

FUND IN INDIA
2012
Total

46.05
73.97

14.79

31.26

977.19
11585.35

Standard Deviation (S.D) =

= 53.82

standard deviation and return of selected tax saving schemes

Table 1.6 Return vs. Risk estimated of selected tax saving schemes

FUND
HDFC
Frankin
SBI
reliance

40

RETURN

STANDARD

15.58
13.45
11.06
14.79

DEVIATION
49.90
48.41
54.22
53.82

A STUDY REPORT ON MUTUAL

FUND IN INDIA

Interpretation: From the table 1.6 shows that average return and standard
deviation details. From the table it can be seen that DSP Blackrock fund
making highest average return of 18.75% during the period. However

its

also facing highest risk of 64.22 of all the four funds. The SBI fund, HDFC
fund, Franklin India funds and Reliance fund are making similar amount
average return but risk is not much higher.

CONCLUSIONS & FINDINGS

CONCLUSION :
Mutual funds are one of the best investments ever created because they are
very cost efficient and very easy to invest in. All the selected schemes have
allocated majority of corpus to large cap stock and some schemes also have
allocation to mid cap. Various external causes affect the fund performance. It
is suggestible for the investors to choose the right scheme according to their
risk apatite tolerance and objective of the scheme. And it is always

41

A STUDY REPORT ON MUTUAL

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suggested to invest in equity schemes for longer tenure. Investors while
investing in the mutual funds is very cautious.

SUMMARY OF FINDINGS:
In order to know the performance of the tax saving schemes in mutual fund
as per the research design from five selected AMC company data was
collected. Further the data was analyzed in previous chapter evaluating by
(Average return and standard deviation determination methods of mutual
fund) to getting some finding.
An Individual can take an advantage of this funds and schemes to save
tax by investing
maximum of Rs 1,00,000.
After analyzing the data, it is understood that the DSP BlackRock Tax
Saver, Reliance
Tax Saving, Franklin India Tax Shield and HDFC Tax saver fund have
performed better
with average return of 18.75, 14.49, 13.45 and 15.58% respectively.
Further, DSP BlackRock Tax Saver has a higher risk (standard deviation)
of 64.22, which
has given the highest return among selected schemes. In the case of return,
the SBI
Magnum Tax Gain has given less return with a high risk (standard deviation)
of 54.22%

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A STUDY REPORT ON MUTUAL

FUND IN INDIA

SUGGESTIONS & RECOMMENDATIONS

Investors can go ahead in investing in Reliance Tax Saving, Franklin
India Tax Shield and HDFC Tax saver fund for acquiring better returns
as well as tax savings.
SBI AMC has to revise SBI Magnum Tax Gain portfolio to increase fund
returns and provide to the investors a more secure investment option
along with tax saving.
The Franklin India Tax Shield scheme tends to hold portfolio that were
less risky than the market portfolio.
According return against the risk schemes will be ranked accordingly
HDFC fund 1st, Reliance fund is 2 nd ,Frankline fund is 3rd and SBI fund is
4th
AMCs should take more efforts on spreading awareness about taxing
mutual funds as these investment instruments provides a higher return
with tax saving
It should also induce technology that reduces turnaround time for
services like investment, redemptions and transfers and bring them on
par with bank in turnaround time.

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A STUDY REPORT ON MUTUAL

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REFERENCE
WEBLIOGRAPHY

WWW.GOOGLE.COM
SLIDE SHARE
MANAGEMENT PARADISE

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