PRODUCT PROFILE PRESENTATION

BANKS: MUTUAL FUNDS

BY: MUKESH TIWARI (16)
 PGDM (FINANCE +
MARKETING)
 Acknowledgement

Intellectual alertness, creativity and innovation go side by side in

making of a Manager. In this context, the role of successful execution of the
project work can not be denied. My heartfelt Veneration in due to Prof. Benegal
, Director at Suryadatta Institute Of Management, pune, for his guidance on
various facets of the project work and for his timely advice to improve upon
shortcomings and I am thankful to him for his approval to perform this
dissertation.On this note, I feel inexpedient to express my profound
indebtedness and sincere thanks to our venerable Mr. Toley, guide from the
institute respectively, for his indefatigable cooperation, analytical guidance and
boundless endeavors, which gave me great help and revitalization at every
step in completing my project.
I would also like to take this opportunity to convey my respect
and special gratitude towards Mr. Amarnath (All India Head, Mahindra) who
considered me worthy of doing project in their esteemed establishment
and never failed to satisfy my over-zealous thirst to
obtain information.

I also want to thank Miss Ujjwala (State Head, Mahindra Financial

Services Limited) and Miss Deepali Parkar(Relationship Manager,
Mahindra financial Services Limited) for their kind support for
successful completion of this project.Working on this project has been a
great experience. I am thankful to all concerned people who have played
active role in the successful completion of this project.
 INDEX

1) INTRODUCTION

2) PROJECT TITLE
3) OBJECTIVES
4) PURPOSE

5) SCOPE
6) LIMITATION
7) METHODOLOGY
8) OVERVIEW OF MUTUAL FUNDS

9) CURRENT SCENARIO

10) ORGANIZATION OF MUTUAL FUNDS

11) TYPES OF MUTUAL FUNDS SCEMES

12) PERFORMANCE MEASURES OF
MUTUAL FUNDS

13) RISK FACTORS

14) DIFFERENT AMC’S IN INDIA

15) REFERNECES
 ABOUT THE COMPANY

A subsidiary of Mahindra & Mahindra Limited, we are one of India’s

leading non-banking finance companies. Focused on the rural and
semi-urban sector, we provide finance for utility vehicles, tractors and
cars and have the largest network of branches covering these areas.
Our goal is to be the preferred provider of retail financing services in
the rural and semi-urban areas of India, while our strategy is to provide
a range of financial products and services to our customers through
our nationwide distribution network.

Vision of company
“Is to be the leading rural finance company and continue to retain the
leadership position for Mahindra product.”

INVESTMENT ADVISIORY SERVICES

We at Mahindra Finance are all-encompassing of clients’ needs. So
while we believe in making assets easily available, we also believe in
catering to those who want to create wealth from these assets. Our
Investment Advisory Services act as an avenue to help create and
multiply wealth.

Mutual Fund Distribution

Recently we have received the necessary permission from Reserve
Bank of India (RBI) to start the distribution of Mutual Fund products
through our network. Hitherto we were only participating in the liability

5
requirements of our customers but with a mutual fund distribution
business, we can also participate in their asset allocation.
When it comes to investing, everyone has unique needs based on their
own objectives and risk profile. While many investment avenues such
as fixed deposits, bonds etc. exist, it is usually seen that equities
typically outperform these investments, over a longer period of time.
Hence we are of the opinion that, systematic investment in equity
allows one to create substantial wealth.
However, investing in equity is not as simple as investing in bonds or
bank deposits, because only proper allocation of portfolio gives
maximum returns with moderate risk, and this requires expertise and
time.
Our Investment Advisory Services help you invest your money in equity
through different Mutual Fund Schemes. We ensure the best for our
clients by identifying products best suited to individual needs.
 ABSTRACT

The rise in the level of capital market has manifested the

importance Mutual Funds as investment medium. Mutual Funds
are now are becoming a preferred investment destination for the
investors as fund houses offer not only the expertise in managing
funds but also a host of other services.
Over the last five year period from Mar’03 to Mar’08, the money
invested by FIIs was Rs.2,09,213cr into the stock market as
compared to Rs.38,964cr by mutual funds, yet MFs collectively
made an annualized return of 34% while it was 30% in case of
FIIs.
Total Assets under Management (AUM) in India as of today is
$92b.Volatile markets and year end accounting considerations
have shaved 6% off in March, but much of that money should flow
back in April. The next five years will see the Indian Asset
Management business grow at least 33% annually says a study by
McKinsey. Funds in the diversified equity category which has the
largest number of funds(194) as well as the highest investor
interest lost an average of 28.3% in Q4,2007-08 but gained an
average of 21.4% over the four quarters. Equity funds are
estimated to have had net inflows of Rs.7000cr for March
2008.More than 80% of equity funds managed to outperform
Sensex in terms of returns over the last five years.
Investor’s money inflow to mutual funds has sidelined for the time
Being but the overall long term fundamental outlook on the
economy remains intact. To lower the impact of volatility one can
stay invested in diversified equity funds over a longer period of
time through the route of Systematic Investment Plan.
 Mutual Fund Distribution

Recently we have received the necessary permission from

Reserve Bank of India (RBI) to start the distribution of Mutual
Fund products through our network. Hitherto we were only
participating in the liability Requirements of our customers but
with a mutual fund distribution business, we can also participate
in their asset allocation.
When it comes to investing, everyone has unique needs based on
their own objectives and risk profile. While many investment
avenues such as fixed deposits, bonds etc. exist, it is usually
seen that equities typically outperform these investments, over a
longer period of time.
Hence we are of the opinion that, systematic investment in equity
allows one to create substantial wealth.
However, investing in equity is not as simple as investing in
bonds or bank deposits, because only proper allocation of
portfolio gives maximum returns with moderate risk, and this
requires expertise and time.
Our Investment Advisory Services help you invest your money in
equity through different Mutual Fund Schemes. We ensure the
best for our clients by identifying products best suited to
individual needs.
INTRODUCTION:

Mutual funds have been a significant source of investment in

both
Government and corporate securities. It has been for decades the
monopoly of the state with UTI being the key player, with
invested
funds exceeding Rs.300 bn. (US$ 10 bn.). The state-owned
insurance companies also hold a portfolio of stocks. Presently,
numerous mutual funds exist, including private and foreign
companies. Banks – mainly state-owned too have established
Mutual Funds (MFs). Foreign participation in mutual funds and
asset management companies is permitted on a case by case
basis.
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:
“PORTFOLIO MANAGEMENT THROUGH MUTUAL FUNDS”

OBJECTIVE OF THE PROJECT

The objectives of the study on this topic are as follows:

Primary objective:

• To study the influence and role of mutual funds in managing a

portfolio.

• To analyze the various risk-return characteristics of Mutual funds

and attempt to establish a link between the demographics (age,
income, employment status etc), risk tolerance of investors.

• To analyze the performance of Top Mutual Funds in India.

Secondary objectives:

• Understanding the various characteristics of different Mutual

funds.
• Understanding the Investment pattern of AMC’s

• To get additional clients for the company and making them aware
about the benefits of mutual funds.

• To come up with recommendations for investors and mutual fund

companies in India based on the above study.
PURPOSE OF THE PROJECT

Investment in mutual funds gives you exposure to equity and debt

Markets. These funds are marketed as a safe haven or as smart
investment vehicles for novice investors.
The middle-class Indian investor who plays hot tips for a quick buck at the
bourses is the stuff of legends. The middle-class Indian investor who runs
out of luck and loses not only his money but his peace of mind too is
somewhat less famous by choice. Mutual funds, on the other hand, sell us
middling miracles. Consequently proof enough for a research on Mutual
Funds, which has exacting returns.
Every investor requires a healthy return on his/her investments. But since
the market is very volatile and due to lack of expertise they may fail to do
so. So a study of these mutual funds will help one to equip with
unwarranted knowledge about the elements that help trade between risk
and return thereby improving effectiveness. A meticulous study on the
scalability at which the mutual funds operate along with diagnosis of the
market conditions would endure managing the investment portfolio
efficiently. The study would also immunize on risks and foresee healthy
returns; incidentally in worst of conditions it has given a return of 18 per
cent.

SCOPE OF THE PROJECT

The project covers the financial instruments mobilizing in the

Indian Capital market in particular the Mutual Funds.
The mutual funds analyzed for their performance are determined
over a period of 5 years fluctuations and returns. The elements
taken into Consideration for choosing some of the top funds is on
the basis of their respective Sharpe, beta, ratio, .
The project shelves some of the top asset management
companies operating in India, segregated on the basis of their
performance over a period of time. Scooping further the project
inundates the success ratio of the funds administered by top
AMC’s.
LIMITATIONS
Would not help to draw a line of difference between portfolio
managed through mutual funds and the former.
The median used to choose the top AMC’s and the mutual funds
to be analyzed is relative and personalized and need not be
accepted industry wide. A well managed portfolio of various
individual scripts which is rare,
Inaccessibility to certain information and data relating to the
project on account of it being confidential.
Market volatility would affect individual’s perception which would
rather not be likely the way it is expressed, thus resulting in a
very relative data.

METHODOLOGY

A thorough study of literature on the mutual fund industry both in

India and abroad will be done. Different measures will be adopted
to understand and evaluate the risks and returns of funds
efficiently and effectively.
An extensive study of various articles and publications of SEBI,
AMFI and government of India and other agencies with respect to
the demographics of the population of the country and their
investing pattern will be a part of the methodology adopted. The
project will be carried out mainly through two researches:
Primary research:
• Field visits
• Meeting with the clients
Secondary research:
• Internet.
• AMFI book.
• Fact sheets of various mutual fund houses.

Overview of Indian Mutual Fund Industry

Assets under management
As of the end on 31 January 2008, the mutual fund industry had a
debt and equity assets of Rs 5,50,157 crore. Its equity corpus
of Rs 2,20,263 lakh crore accounts for over 3 per cent of the
total market capitalization of BSE, at Rs 58 lakh crore. Its
holding in Indian companies ranges between 1 per cent and
almost 29 per cent, making them an influential shareholder.
Together with banks, insurance companies and FIIs- collectively
called institutional investors- they have the ability to ask
company managements some tough questions.
India’s market for mutual funds has generated substantial growth
in assets under management over the past 10 years.
Ownership of mutual fund shares
One notable characteristic of India’s mutual fund market is the
high percentage of shares owned by corporations. According to
the Association of Mutual Funds in India (AMFI), Individual
investors held slightly under 50% of mutual fund assets, and
corporations held over 50% as of the end of March 2007. This
high percentage of corporate ownership can be traced back to
tax reforms instituted in 1999 that lowered the tax rate on
dividend and interest income from mutual funds, and made that
rate lower than the corporate tax levied on income from
securities held directly by corporations.
Although there is no official data regarding the type investor in
each class, the typical pattern seems to be that individual
investors primarily invest in equity funds, while corporate
investors favor bond funds, particularly short-term money market
products that provide a way for corporations to invest surplus
cash.
HISTORY OF MUTUAL FUNDS:

The mutual fund industry in India started in 1963 with the

formation of Unit Trust of India, at the initiative of the
Government of India and Reserve Bank. The history of mutual
funds in India can be broadly divided into four distinct phases.

First Phase – 1964-87

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

Parliament. It was set up by the Reserve Bank of India and
functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI
and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI had Rs.6,700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector

Funds)
1987 marked the entry of non- UTI, public sector mutual funds
set up by public sector banks and Life Insurance Corporation of
India (LIC) and General Insurance Corporation of India (GIC). SBI
Mutual Fund was the first non- UTI Mutual Fund established in
June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct
92). LIC established its mutual fund in June 1989 while GIC had
set up its mutual fund in December 1990. At the end of 1993, the
mutual fund industry had assets under management of Rs.47,
004 crores.

Third Phase – 1993-2003 (Entry of Private Sector

Funds)

With the entry of private sector funds in 1993, a new era started
in the Indian mutual fund industry, giving the Indian investors a
wider choice of fund families. Also, 1993 was the year in which
the first Mutual Fund Regulations came into being, under which
all mutual funds, except UTI were to be registered and governed.
The erstwhile Kothari Pioneer (now merged with Franklin
Templeton) was the first private sector mutual fund registered in
July 1993. The 1993 SEBI (Mutual Fund) Regulations were
substituted by a more comprehensive and revised Mutual Fund
Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.The number of mutual fund
houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003,
there were 33 mutual funds with total assets of Rs.
1,21,805 crores. The Unit Trust of India with Rs.44, 541 crores of
assets under management was way ahead of other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India
Act 1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under
management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return
and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the
rules framed by Government of India and does not come under
the purview of the Mutual Fund Regulations.

CURRENT SCENARIO:

The fund industry has grown phenomenally over the past couple
of years, and as on 31 January 2008, it had a debt and equity
assets of Rs 5,50,157 crore. Its equity corpus of Rs 2,20,263
lakh crore accounts for over 3 per cent of the total market
capitalization of BSE, at Rs 58 lakh crore. Its holding in Indian
companies ranges between 1 per cent and almost 29 per cent,
making them an influential shareholder. Together with banks,
insurance companies and FIIs collectively called institutional
investors- they have the ability to ask company managements
some tough questions.
More significant than this stupendous growth has been the
regulatory changes that the capital market watchdog, Securities
and Exchange Board of India, introduced in the past two years.
Outgoing Sebi Chairman M.Damodaran’s two year stint as
chairman of Unit Trust of India helped him reform the industry by
making it much more transparent than before. In the process,
mutual funds have become a tad cheaper.
Until 2007, for instance, initial issue expenses on close-ended
funds, which could be as high as 6 per cent of the amount raised,
could be amortized over the tenure of the fund. This basically
meant that even if an investor put in Rs 1 lakh, effectively only Rs
94,000 got invested by the fund. The initial expenses of the fund
include commissions paid to distributors and money spent on
billboards for advertising the new offer. In 2006, the regulator
had scrapped the amortization benefit for open-ended schemes.
Not surprisingly, asset management companies started launching
closed-ended funds. Of the 34 new fund offers in 2007, 24 were
closed-ended. In January this year, SEBI said all closedended
Mutual fund schemes too will meet sales and marketing
Expenses from the entry load. This made it more transport for
investors, because funds had to either hike their expense ratio
(Management fee and operating charges as a percentage of
assets under management) or change higher entry load.

More about Mutual funds

According to SEBI "Mutual Fund" means a fund established in the

form of a trust to raise monies through the sale of units to the
public or a section of the public under one or more schemes for
investing in securities, including money market instruments;"
To the ordinary individual investor lacking expertise and
specialized skill in dealing proficiently with the securities market
a Mutual Fund is the most suitable investment forum as it offers
an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost. India has a
burgeoning population of middle class now estimated around 300
million. A typical Indian middle class family can pool liquid
savings ranging from Rs.2 to Rs.10 Lacs. Investment of this
money in Banks keeps the fund liquid and safe, but with the
falling rate of interest offered by Banks on Deposits, it is no
longer attractive.
At best a small part can be parked in bank deposits, but what are
the other sources of remunerative investment possibilities open
to the common man? Mutual Fund is the ready answer, as direct
PMS investment is out of the scope of these individuals. Viewed
in this sense India is globally one of the best markets for Mutual
Fund Business, so also for Insurance business. This is the reason
that foreign companies compete with one another in setting up
insurance and mutual fund business shops in India. The sheer
magnitude of the population of educated white-collar employees
with raising incomes and a well-organized stock market at par
with global standards, provide unlimited scope for development
of financial services based on PMS like mutual fund and
insurance.
The alternative to mutual fund is direct investment by the
investor in equities and bonds or corporate deposits. All
investments whether in shares, debentures or deposits involve
risk: share value may go down depending upon the performance
of the company, the industry, state of capital markets and the
economy. Generally, however, longer the term, lesser is the risk.
Companies may default in payment of interest/ principal on their
debentures/bonds/deposits; the rate of interest on an investment
may fall short of the rate of inflation reducing the purchasing
power. While risk cannot be eliminated, skillful management can
minimize risk. Mutual Funds help to reduce risk through
diversification and professional management. The experience
and expertise of Mutual Fund managers in selecting
fundamentally sound securities and timing their purchases and
sales help them to build a diversified portfolio that minimizes risk
and maximizes returns.
ORGANISATION OF A MUTUAL FUND:

There are many entities involved and the diagram below

illustrates the organizational set up of a mutual fund:

The Advantages of Investing in a Mutual Fund

The advantages of investing in a Mutual Fund extending
PMS to the small investors are as under:

•Professional Management - The investor avails of the

services of experienced and skilled professionals who are backed
by a
Dedicated investment research team, which analyses the
Performance and prospects of companies and selects suitable
investments to achieve the objectives of the scheme.
• Diversification - Mutual Funds invest in a number of
companies across a broad cross-section of industries and sectors.
This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion. You achieve
this diversification through a Mutual Fund with far less money
than you can do on your own.

• Convenient Administration - Investing in a Mutual Fund

reduces paperwork and helps you avoid many problems such as
bad deliveries, delayed payments and unnecessary follow up with
brokers and companies. Mutual Funds save your time and make
investing easy and convenient.

• Return Potential Over a medium to long-term - Mutual

Funds have the potential to provide a higher return as they invest
in a diversified basket of selected securities.

• Low Costs - Mutual Funds are a relatively less expensive way

to invest compared to directly investing in the capital markets
because the benefits of scale in brokerage, custodial and other
fees translate into lower costs for investors.
• Liquidity - In open-ended schemes, you can get your money
back promptly at net asset value related prices from the Mutual
Fund itself. With close-ended schemes, you can sell your units on
a stock exchange at the prevailing market price or avail of the
facility of direct repurchase at NAV related prices which some
close-ended and interval schemes offer you periodically.

• Transparency - You get regular information on the value of

your investment in addition to disclosure on the specific
investments made by your scheme, the proportion invested in
each class of assets and the fund manager's investment strategy
and outlook.

• Flexibility - Through features such as regular investment

plans, regular withdrawal plans and dividend reinvestment plans,
you can systematically invest or withdraw funds according to
your needs and convenience.

• Choice of Schemes - Mutual Funds offers a family of schemes

to suit your varying needs over a lifetime.

• Well regulated - All Mutual Funds are registered with SEBI and
they function within the provisions of strict regulations designed
to protect the interests of investors. The operations of Mutual
Funds are regularly monitored by SEBI.

Other Special Features of MFs in terms of Portfolio

Functions

These are special safeguards for the investor prescribed by SEBI.

• Portfolio Investment operations are entrusted to a professional

company, i.e. The Asset Management Company. (AMC). Thus
while MFs offer PMS functions on behalf of its unit holders, the
actual PMS services are rendered by the AMCs.
• Physical custody of the securities is not with the AMC but with a
custodian, an independent organization, appointed for the
purpose. For instance, the Stock Holding Corporation of India Ltd.
(SCHIL) is the custodian for most fund houses in the country.
Disadvantages:

1. No Control over Costs

2. No Tailor-made Portfolios
3. Managing a Portfolio of Funds.

Types of mutual fund schemes

The expertise and professional skill developed by different Mutual

Funds in Portfolio Management can be better expressed by listing the different
financial products they have developed to be offered to the investors:

1. 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 or scheme is one that is available for subscription and
repurchase on a continuous basis. These schemes do not have a fixed maturity
period

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. These mutual funds schemes disclose NAV generally on weekly
basis.

2.Schemes according to Investment Objective :

A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes may be
open-ended or close-ended schemes as described earlier. Such schemes may be
classified mainly as follows:

Growth / Equity Oriented Scheme : The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such schemes normally invest a major
part of their corpus in equities. Such funds have comparatively high risks.
These schemes provide different options to the investors like dividend option,
capital appreciation, etc. and the investors may choose an option depending on
their preferences. The mutual funds also allow the investors to change the options at a
later date. Growth schemes are good for investors having a long-term outlook
seeking appreciation over a period of time.

Income / Debt Oriented Scheme: The aim of income funds is to provide regular and
steady income to investors. Such schemes generally invest in fixed income securities
such as bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These funds are
not affected because of fluctuations in equity markets. However, opportunities
of capital appreciation are also limited in such funds. The NAVs of such funds
are affected because of change in interest rates in the country. If the interest rates fall,
NAVs of such funds are likely to increase in the short run and vice versa. However,
long term investors may not bother about these fluctuations.
Balanced Fund : The aim of balanced funds is to provide both growth and
regular income as such schemes invest both in equities and fixed income
securities in the proportion indicated in their offer documents. These are
appropriate for investors looking for moderate growth. They generally invest
40-60% in equity and debt instruments. These funds are also affected
because of fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.

3.Money Market or Liquid Fund :These funds are also income funds and their aim is
to provide easy liquidity, preservation of capital and moderate income.
These schemes invest exclusively in safer short-term instruments such as treasury
bills, certificates of deposit, commercial paper and inter-bank call money, government
securities, etc. Returns on these schemes fluctuate much less compared to other funds.
These funds are appropriate for corporate and individual investors as a
means to park their surplus funds for short periods.

4.Gilt Fund :These funds invest exclusively in government securities.

Government securities have no default risk. NAVs of these schemes also
fluctuate due to change in interest rates and other economic factors as is the case
with income or debt oriented schemes.

5.Index Funds :Index Funds replicate the portfolio of a particular index such as the
BSE Sensitive index, S&P NSE 50 index (Nifty), etc.These schemesinves in the
securities in the same weight age comprising of an index. NAVs of such schemes
would rise or fall in accordance with the rise or fall in the index, though
not exactly by the same percentage due to some factors known as "tracking error" in
technical terms. Necessary disclosures in this regard are made in the offer document
of the mutual fund scheme. There are also exchange traded index funds launched
by the mutual funds which are traded on the stock exchanges.
6.Sector specific funds/schemes :
These are the funds/schemes, which invest in the securities of only those sectors,
or industries as specified in the offer
documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may give
higher returns, they are more risky compared to diversified funds. Investors
need to keep a watch on the performance of those sectors/industries and
must exit at an appropriate time. They may also seek advice of an expert.

7.Tax Saving Schemes :

These schemes offer tax rebates to the investors under specific provisions of the
Income Tax Act, 1961 as the Government offers tax incentives for investment in
specified avenues e.g. Equity Linked Savings Schemes (ELSS). Pension schemes
launched by the mutual funds also offer tax benefits. These schemes are
growth oriented and invest pre-dominantly in equities. Their growth
opportunities and risks associated are like any equity-oriented scheme

8.Load or no-load Fund:

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, eac
time one buys or sells units in the fund, a charge will be payable. This charge is
used by the mutual fund for marketing and distribution expenses. However, the
investors should also consider the performance track record and service standards of
the mutual fund, which are more important. Efficient funds may give higher returns
in spite of loads.

9.No-load fund :
This is one that does not charge for entry or exit It means the investors can enter the
fund/scheme at NAV and no additional charges are payable on purchase or sale of
units.
10.Monthly Income Plan:

•To generate regular income through investments in debt and money market
instruments and also to generate long-term capital appreciation by investing a portion
in equity related instruments.

•Fund Objective :-Investors seeking regular income through investments in fixed

income securities so as to get monthly/quarterly/half yearly dividend. The
secondary objective of the scheme is to generate long term capital appreciation by
investing a portion of scheme’s assets in equity and equity related instruments.
Suitable for investor with medium risk profile and seeking regular income.

11.FMP’s ( Fixed Maturity Plans ): These are close-ended income schemes with a
fixed maturity date. The period could range from fifteen days to as long as two years
or more. When the period comes to an end, the scheme matures and money is paid
back. Like an income scheme, FMPs invest in fixed income instruments i.e. bonds,
government securities, money market instruments etc. The tenure of these
instruments depends on the tenure of the scheme.

•FMPs effectively eliminate interest rate risk. This is done by employing a specific
investment strategy. FMPs invest in instruments that mature at the same time their
schemes come to an end. So a 90-day FMP will invest in instruments that mature
within 90 days.
•For all practical purposes, an FMP is an income scheme of a mutual fund. Hence, the
tax incidence would be similar to that on traditional income schemes. The dividend
from an FMP will be tax free in the hands of an individual investor. However,it would
be subject to the dividend distribution tax.
•Redemptions from investments held for less than a year will be short-term gains
and added to the investor's income to be taxed at slab rates applicable. If such an
investment were held for more than a year, the long-term gains would get taxed at 20
per cent with indexation or at 10 per cent without. These rates are subject to the
surcharge and education cess as normally applicable. One can avail the benefit of
double indexation and save tax on FMPs held for more than one year.

PERFORMANCE MEASURES OF MUTUAL

FUNDS
Mutual Fund industry today, with about 34 players and more than five hundred
schemes, is one of the most preferred investment avenues in India. However, with a
plethora of schemes to choose from, the retail investor faces problems in selecting
funds. Factors such as investment strategy and management style are qualitative, but
the funds record is an important indicator too. Though past performance alone cannot
be indicative of future performance, it is, frankly, the only quantitative way to judge
how good a fund is at present. Therefore, there is a need to correctly assess the past
performance of different mutual funds.Worldwide, good mutual fund companies
over are known by their AMCs and this fame is directly linked to their superior
stock selection skills. For mutual funds to grow, AMCs must be held accountable for
their selection of stocks. In other words, there must be some performance
indicator that will reveal the quality of stock selection of various AMCs.Return alone
should not be considered as the basis of measurement of the performance of a mutual
fund scheme, it should also include the risk taken by the fund manager
because different funds will have different levels of risk attached to them. Risk
associated with a fund, in a general, can be defined as variability or fluctuations in the
returns
generated by it. The higher the fluctuations in the returns of a fund during a given
period, higher will be the risk associated with it. These fluctuations in the returns
generated by a fund are resultant of two guiding forces. First, general market
fluctuations, which affect all the securities present in the market, called market risk or
systematic risk and second, fluctuations due to specific securities present in
the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is
sum of these two and is measured in term of standard deviation of returns of
the fund. Systematic risk, on the other hand, is measured in terms of Beta, which
represents fluctuations in the NAV of the fund vis-à-vis market. The more responsive
the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta
is calculated by relating the returns on a mutual fund with the returns in the market.
While unsystematic risk can be diversified through investments in a number of
instruments, systematic risk cannot. By using the risk return relationship, we try
to assess the competitive strength of the mutual funds vis-à-vis one another in a
better way.
In order to determine the risk-adjusted returns of investment
portfolios, several eminent authors have worked since 1960s to develop
composite performance indices to evaluate a portfolio by comparing
alternative portfolios within a particular risk class. The most important and
widely used measures of performance are:

Ø The Treynor Measure

Ø The Sharpe Measure
Ø Jenson Model
Ø Fama Model
 RISK FACTOR
All investments involve some form of risk. Even an insured bank account is
subject to the possibility that inflation will rise faster than your earnings, leaving you
with less real purchasing power than when you started (Rs. 1000 gets you less than it
got your father when he was your age).The discussion on investment objectives
would not be complete without a discussion on the risks that investing in a
mutual fund entails.
At the cornerstone of investing is the basic principle that the greater the risk you take,
the greater the potential reward. Remember that the value of all financial investments
will fluctuate. Typically, risk is defined as short-term] price variability. But on a long-
term basis, risk is the possibility that your accumulated real capital wil be
insufficient to meet your financial goals. And if you want to reach your
financial goals, you must start with an honest appraisal of your own personal comfort
zone with regard to risk. Individual tolerance for risk varies, creating a distinct
"investment personality" for each investor. Some investors can accept short-term
volatility with ease, others with near panic. So whether you consider your investment
temperament to be conservative, moderate or aggressive, you need to focus on
how comfortable or uncomfortable you will be as the value of your
investment moves up or down.

Managing risks
Mutual funds offer incredible flexibility in managing investment risk. Diversification
and Systematic Investing Plan (SIP) are two key techniques you can use to
reduce your investment risk considerably and reach your long-term financial goals.

Diversification
When you invest in one mutual fund, you instantly spread your risk over a number of
different companies. You can also diversify over several different kinds of
securities by investing in different mutual funds, further reducing your potential risk.
Diversification is a basic risk management tool that you will want to use throughout
your lifetime as you rebalance your portfolio to meet your changing needs and goals.
Investors, who are willing to maintain a mix of equity shares, bonds and money
market securities have a greater chance of earning significantly higher returns
over time than those who invest in only the most conservative investments.
Additionally, a diversified approach to investing -- combining the growth potential of
equities with the higher income of bonds and the stability of money markets -- helps
moderate your risk and enhance your potential return.

Types of risks:
Consider these common types of risk and evaluate them against potential
rewards when you select an investment.
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due
to broad outside influences. When this happens, the stock prices of both, an
outstanding, highly profitable company and a fledgling corporation may be affected.
This change in price is due to "market risk.”

Inflation Risk
Sometimes referred to as "loss of purchasing power." Whenever inflation sprints
forward faster than the earnings on your investment, you run the risk that you'll
actually be able to buy less, not more. Inflation risk also occurs when prices
rise faster than your returns.

Credit Risk
In short, how stable is the company or entity to which you lend your money when you
invest? How certain are you that it will be able to pay the interest you are promised
or repay your principal when the investment matures?

Interest Rate Risk

Changing interest rates affect both equities and bonds in many ways. Investors are
reminded that "predicting" which way rates will go is rarely successful. A
diversified portfolio can help in offsetting these changes.

Effect of loss of key professionals and inability to adapt

business to the rapid technological change
An industries' key asset is often the personnel who run the business i.e. intellectual
properties of the key employees of the respective companies. Given the ever-
changing complexion of few industries and the high obsolescence levels,
availability of qualified, trained and motivated personnel is very critical for the
success of industries in few sectors. It is, therefore, necessary to attract key personnel
and also to retain them to meet the changing environment and challenge the sector
offers. Failure or inability to attract/retain such qualified key personnel may
impact the prospects of the companies in the particular sector in which the fund
invests.
Exchange Risks
A number of companies generate revenues in foreign currencies and may have
investments or expenses also denominated in foreign currencies. Changes in
exchange rates may, therefore, have a positive or negative impact on companies
which in turn would have an effect on the investment of the fund.

Investment Risks
The sectoral fund schemes, investments will be predominantly in equities of
select companies in the particular sectors. Accordingly, the NAV of the schemes are
linked to the equity performance of such companies and may be more volatile
than a more diversified portfolio of equities.

Changes in the Government Policy

Changes in Government policy especially in regard to the tax benefits may impact the
business prospects of the companies leading to an impact on the investments
made by the fund.
What drives portfolio performance?
According to Mahindra Finance team of wealth management, the most important step
in wealth management is asset allocation. But the least time is spent on this
investment decision. This step affects almost 92% of the returns expected from any
portfolio.
Different AMC’s in India
The Mutual Fund Industry in India has grown steadily over the last
couple of years and is today managing assets in excess of Rs 5,50,000 crore meeting
different investment needs of millions of retail and institutional clients across
debt, equity and hybrid asset class.

List of Asset Management Companies

Deutsche Bank has compiled a shortlist of top-performing funds
from India’s leading fund houses. These have been chosen through
a rigorous selection procedure and constantly undergo a
comprehensive review. They cover all the fund categories and cater
to varied investor needs and risk profile. Choose from the following
fund
houses:
• ABN Amro Asset Management Pvt Ltd
• AIG GIG Asset Management Pvt Ltd
• Benchmark Asset Management Pvt Ltd
• Birla Sun Life Asset Management Pvt Ltd
• Deutsche Asset Management Pvt Ltd
• DSP Merrill Lynch Asset Management Pvt Ltd
• Fidelity Asset Management Pvt Ltd
• Franklin Templeton Asset Management Pvt Ltd
• HDFC Asset Management Pvt Ltd
• HSBC Asset Management Pvt Ltd
• ICICI Prudential Asset Management Pvt Ltd
• ING Asset Management Pvt Ltd
• JP Morgan Asset Management Pvt Ltd
• Kotak Mahindra Asset Management Pvt Ltd
• Optimix Asset Management Pvt Ltd
• Principal PNB Asset Management Pvt Ltd
• Reliance Asset Management Pvt Ltd
• SBI Asset Management Pvt Ltd
• Standard Chartered Asset Management Pvt Ltd
• Sundaram BNP Paribas Asset Management Pvt Ltd
• Tata Asset Management Pvt Ltd
• UTI Asset Management Pvt Ltd