A

SUMMER INTERNSHIP REPORT

ON

“A STUDY OF MUTUAL FUND AND SIP”

Submitted to:

Savitribai Phule University of Pune

IN PARTIAL FULLFILMENT OF

MASTER IN BUSSINESS ADMINISTRATION

UNIVERSITY OF PUNE

Submitted by

PRATIKSHA GOKUL BADAME

MBA II (FINANCE)

Under the guidance of

DR.D.K.MUKHEDKAR

MVP‘S Institute of Management Research and Technology, Nasik

2018-2019

1
 DECLARATION

I, the undersigned, hereby declare that the project report entitled ―TO STUDY OF MUTUAL
FUND and SIP.‖ Written and submitted by me to the Savitribai Phule University of Pune, in
partial fulfillment of the requirement for the award of Master of Business Administration under
the guidance of Prof. Mr. DR.D.K.MUKHEDKAR is my original work and the conclusions
drawn there in are based on material collected by myself.

2
ACKNOWLEDGEMENT

I would like to convey my heartiest gratitude to several people, for their support and guidance
which helped me complete my Summer Internship.

First and foremost I would like to thanks PRUDENT CORPORATE ADVISARY SERVICES
LIMITED Management for giving me an opportunity to do my Dissertation in their esteemed
organization. My special thanks to Mr. Nakul Ghodke for his constant encouragement
throughout this period.

My special thanks to the guide Dr. D .K.MUKHEDKAR for their guidance and support during
the project.

Date: Name: Pratiksha G .Badame

Place: Nashik

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 INDEX

CHAPTER Page
NO. TOPIC NAME No.
1. INTRODUCTION 1
1.1 OBJECT OF THE PROJECT 7
1.2 ORGANIZATIONAL PROFILE 8
1.3 OBJECTIVES OF STUDY 9
1.4 SCOPE OF STUDY 10
1.5 RATIONALE OF THE STUDY 11
1.6 LIMITATION 12
2. RESEARCH DESIGN & METHODOLOGY 13
2.1 RESEARCH DESIGN 14
2.2 SAMPLING DESIGN 18
2.3 COLLECTION OF DATA 23
2.4 PRESENTATION OF DATA ANALYSIS & 25
INTERPRETATION OF DATA
3. COMPANY PROFILE 28

3.1 HISTORY OF THE ORGANIZATION 29

3.2 ORGANIZATIONAL STRUCTURE 34
3.3 PRODUCT PROFILE 37
3.4 CORPORATE & FUNCTIONAL PRACTICES 38
4. LITERATURE REVIEW 45
4.1 MEANING & CONCEPT OF THE TOPIC 46

4.2 BASIC THEORIES OF THE TOPIC 51

4.3 REVIEW OF RESEARCH ON THE SELECTED TOPIC 63
5 ANALYSIS OF DATA 1 71
6 ANALYSIS OF DATA 2 78

7 7.1 CONCLUSION & FINDINGS 83

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 7.2 OBSERVATION 89
7.3 SUGGESTION 86
7.4 BIBLIOGRAPHY 87

List of Table
SR NO Table No Description Page No
1 2.1.3 Types of research 12
2 2.3 Collection of data 14
3 3.1.2 Journey of prudent 47
4 3.1.4 Milestone of prudent 50
5 3.2.2 Organisation structure 55

6 4.1.3 Organisation of mutual fund 62

7 4.3 Types of mutual fund 67

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  INTRODUCTION

Mutual fund is a trust that pools the saving of a number of investors who share a common
financial goal .This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus ―mutual‖, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital market instrument such as shares, debentures and other
securities. The income earned through these investments and the capital appreciation realized are
shared by its unit holder i n proportion 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. A Mutual Fund
is an investment tool that allows small access to a small well-diversified portfolio of equities,
bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are
can issued and can be redeemed as needed. The fund‘s Net Asset Value (NAV) is determined
each day.

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1.1 OBJECT OF THE PROJECT

It is important to do the project as it is a part of the MBA curriculum. It is training for the
students for acquiring knowledge and observing practical knowledge about the work

This project study aims at gaining knowledge about new trend which is more important
nowadays for betterment of any business. Understanding how the firm works, which services are
provided by firm, how do they deal with their client was kwon by doing this project.

To have an interface with the industry and to study actual business practices. The duration of the
project that was 60 days gave an opportunity to observe, analyze and learn the recent techniques
in use for the topic of the project.

7
1.2 SELECTION OF THE TOPIC FOR STUDY

Topic selection is always been an important aspect of summer internship project. As it was
decided the course of action, to be followed. The topic selected should be such that it helps in
understanding the excise concept clearly, as was given the topic by the company itself.

This topic given by project guide was ―A Study of Mutual Fund& SIP‖. Covers all the things
related to this topic.

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1.3 OBJECTIVES OF THE STUDY

 To Study the concept of Mutual Fund at Prudent Corporate Advisory service limited.

 To study Mutual fund & SIP product at Prudent Corporate Advisory service limited.

 To study the various financial tools and services at Prudent Corporate Advisory service
limited.

 To study how to choose investment product.

 To do the comparative study of Mutual Fund and other investment Techniques.

 To create awareness about investors.

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1.4. SCOPE OF THE STUDY

 Practical exposure: Gives exposure to practical aspects of the business world. A long
with satisfying the requirement of curriculum, a project work helps the student to know
the environment in which he is expected to work in future.

 Skill Development: A Project work gives the opportunity to the student to

 Enhance skill like analytical skills, communication skills, research skills, and decision
making skills while working in the actual business environment.

 Training in problem solving: By going extensively through all the stages of the project
work, a student gets real life exposure to the different problem arising in the business and
corporate world.

 Understanding the theoretical concept: a student gets a chance to see how the different
management concept learned are applicable in the

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1.5. LIMITATIONS

 As this study was conducted for 50 days only, therefore limited time is one of the great
constraints of this study.
 Majority of analysis is based on secondary data so it could not be reliable because it can
be outdated or it may be false data.
 Study was conducted within the limited area therefore responses collected may not be the
true representor of data.

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1.6. RATIONALE OF THE STUDY

Rationale of the study refers to the worth, benefit and utility of the study from the future point of
view. The project gives the live experience of the various aspects that is helpful from future point
of view. The project provides the opportunity to understand the how organization works in actual
& day to day transactions. This project provides opportunity to understand different functions of
financial management. This study gives us an opportunity to experience various technological
developments in an organization. It gives the experience to practice the theoretical knowledge in
organization. This study gives the overview of functional flow from one department to another
and maintaining synchronization between different departments.

This project study is very beneficial & quite useful from the future point of view. It would be
possible to adopt some working activities & facilities in future.

The contribution of the present study is useful to the various factors as follows:

I. The student:
This study makes researcher well acquainted (familiar) with the new concepts &
techniques of the subjects which are very useful in the perspective life.
II. The organization:
It will help organization to analyze different opportunities to expand the scope of
business. This study will help organization to identify their strengths and will also help
them to work on their weaknesses. This study will help organization to achieve their
yearly mission.

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 CHAPTER 2

RESEARCH METHODOLOGY

13
2.1 METHOD OF STUDY

Methodology is the analysis of the principles or procedure of inquiry on a particular field. It is

particular method or procedure with rules in research. In today business world there is rapid
growth in business organization. All the business activities are integrated with human, social,
politically and other factors.

So, research becomes very necessary. As any mistake can lead to increase in cost will directly
adverse effect on business. Research is an activity which helps to gain fresh inside into
something. It is an investigation process to find answers to question.

Research is commonly known as for knowledge. It is scientific and systematic search for
information on the specific topic. Research is composed of two words ‗Re‘ and ‗search‘ which
means to search again. It is the movement from the unknown. Research is result oriented.
Research is Important for personal life as well as development of society.

2.1.1. RESEARCH DEFINITATION

In the Random House Dictionary of the English language, research is defined as, ―a diligent and
systematic inquiry or investigation into a subject in order to discover or revise facts, theories,
applications, etc.‖

2.1.2. CHARACTRISTICS OF RESEARCH

1. Research is directed toward the solution of a problem.

2. Research emphasizes the development of generalization of principles of theories that will

help in predicting future occurrence.

3. Research is based upon observable experience or empirical evidence.

4. Research demand accurate observation and description.

5. Research involves gathering new data from primary or firsthand sources or using existing
data for a new purpose.

6. Research activities are more often characterized by carefully designed procedures, always
applying rigorous analysis.
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 7. Research requires expertise i.e. skill necessary to carry out investigation, search the
related literature and to understand and analyzed the data gathered.

2.1.3. TYPS OF RESEARCH

RESEARCH

On the basis on the basis on the basis On the basis of

Of Application of Objectives of Extent to Theory Methodology

Theoretical Empirical
Pure Applied

Exploratory Descriptive Causal Qualitative Quantitative

2.1.3.1 On the basis of Application –

Based on application, research can be classified in two types:
A. Basic Pure Research–Pure research is also known as ―basic research‖ or
―fundamental research‖. It is the most basic form of research. The objective of
this research is to provide models and theories regarding some phenomenon. This
type of research seeks to obtain knowledge about a particular subject rather than
its practical usage, testing of theories.
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 B. Applied Research – Applied research is also called as ―practical research‖,
―action based research‖. While basic research emphasizes on enhancing the
exiting knowledge without any practical application, applied research on the other
hand, applies the existing knowledge, theories, and methods to solve particular
issues.

2.1.3.2 On the basis of Objective –

Following research can be conducted on the basis of objective:
A. Exploratory Research - Exploratory research is also known as ―formulation
research‖. The basic objective of this research is to explore the unknown facts or
phenomena that are not previously defined. In this research, research seek to gain
better knowledge about a situation, and formulate new concepts are theories by
developing and testing hypotheses.
B. Descriptive Research – This research is based on the concept of ‗reflective
thinking‘ that discusses about the objectives and assumptions and regarding
research study. Descriptive research is concerned with answering the questions
like who, what, when, where, and how regarding a phenomenon or situation.
C. Experimental Research – It is also called ―causal research‖, is carried out to
identify the causes behind any effect. It determines the effects on dependent
variable due to changes in independent variable.
2.1.3.3 On the basis of Extent of Theory –
On the basis of extent of theory research can be classified two types:
A. Theoretical Research – This research seek to add new knowledge by discovering
new ideas and theories with the help of existing theories and explanations.
B. Empirical Research – This research is data oriented. This kind of research
provides in insights through observation of experiences. In this research the
primary data are collected, analyzed and test to prove some hypotheses. Empirical
research can be conducted through both the qualitative and quantitative
approaches.

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2.1.3.4 On the basis of Methodology –
Based on methodology adopted, research can be of two types:
A. Qualitative Research – This is conducted to study and analyses the human
behavior. It is considered as a preliminary stage of quantitative research.
Qualitative research is carried out when there is a need to develop new ideas and
theories that can be test and analyze after wards using quantitative measures.
B. Quantitative Research – It is contrary to qualitative research. It is scientific
techniques that attempts to analyze the data using statistical measured for
concluding the outcomes a research problem. Various researches on science,
social science, education etc. are conducted with the help ho quantitative research.

After studying classification of research based on various parameters and comparing those with
this study‘s objectives I could understand that this study is Descriptive research.

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2.2 SAMPLING:

Introduction of Sampling:
Sampling is a process used in statistical analysis in which a predetermined number of
observations are taken from a larger population. Sampling is a process in which the fixed
numbers of observations are taken randomly from a larger population. A technique which is
fundamental for behavioral research is known as sampling and without using it, research work is
not possible. It is impracticable and impossible to study the whole population due to practical
limitations of cost, time and other factors that are indispensable and operative in studying the
whole population. For the sole reason of making the research findings economical and accurate,
the concept of sampling has been introduced.

Sampling Methods:

The plan, method, or technique through which a researcher identifies and selects the potential
sampling units from the sampling frame or the target population, to form a relevant sample
for the study is termed as "sample design". Sample designing is the working principle of any
research process. Without proper designing of sample it is not possible to start a survey, as it
is the base which provides the responses of relevant members of the population. The
designing of sample may be simple or complex depending on the method used for it.
The two factors namely, the element selection technique and the representation basis are
responsible for different types of sample technique. The sample, based on representation,
may be either probability sampling (random sampling) or non-probability sampling (non-
random sampling). On the basis of element selection the sample can be restrictive or
unrestrictive sampling. When each sample element is selected individually from the large
population then it is termed as `unrestrictive sample' and all the other types of sampling are
termed as 'restrictive sampling'.
Thus, sample designs are basically of two types, viz., probability sampling and non-
probability sampling as shown in figure below:

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 Types of Sampling

Probability Sampling Non-Probability Sampling

A] Probability Sampling:

Probability samples are selected in such a way as to be representative of the population. They
provide the most valid or credible results because they reflect the characteristics of the
population from which they are selected (e.g., residents of a particular community, students at an
elementary school, etc.). There are two types of probability samples: random and stratified.

 Simple Random sampling:

The term random has a very precise meaning. Each individual in the population of interest
has an equal likelihood of selection. This is a very strict meaning -- you can't just collect
responses on the street and have a random sample.

 Stratified sampling :

Stratified sample is a mini-reproduction of the population. Before sampling, the population is

divided into characteristics of importance for the research. For example, by gender, social class,
education level, religion, etc. Then the population is randomly sampled within each category or
stratum. If 38% of the population is college-educated, then 38% of the sample is randomly
selected from the college-educated population.

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  Cluster Sampling :
It is one of the most frequently used sampling design in large scale studies, as it is the least
expensive. In cluster sampling the entire population is divided into various clusters in such a way
that the elements within the clusters are heterogeneous. However there is homogeneity between
the clusters. This design is thus the opposite of stratified sampling. Cluster sampling is usually
used when there is need for more economy and the sampling frame is unavailable.

 Area Sampling :
In area sampling we make use of geographical units as a cluster. This type of cluster sampling is
called as area sampling. Suppose we want to find the political attitude of voters in different
wards in a city. First we can select a number of wards randomly, then from each of these wards
we select certain survey no's at random and interview all the adults in these survey numbers or
select a sample using random sampling.

B] Non-probability sampling (non-representative sampling):

As they are not truly representative, non-probability samples are less desirable than probability
samples. However, a researcher may not be able to obtain a random or stratified sample, or it
may be too expensive. A researcher may not care about generalizing to a larger population. The
validity of non-probability samples can be increased by trying to approximate random selection,
and by eliminating as many sources of bias as possible.

 Convenience Sampling :
The researchers obtain a convenience sample by selecting whatever sampling units are
conveniently available. The researcher may select the first 50 people visiting a mall, who are
willing to be interviewed or the researcher may get a questionnaire filled from professionals
attending a seminar or a conference

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  Purposive Sampling :
This sampling design confirming to a certain criteria is called as purposive sampling. There are
two types of purpose sampling design.

i) Judgment and ii) Quota Sampling

i) Judgment Sampling :

This is a sampling design when a researcher selects sample units confirming to some criteria.
The researcher selects sampling units subjectively (on the basis of judgment in a attempt to
obtain a sample that appears to be representative of the population. That is, the chance that a
particular sampling unit will be included in the sample depends on the subjective judgment of
the researcher.

ii) Quota Sampling:

Example: A researcher is interested in the attitudes of members of different religions towards

the death penalty. In Iowa a random sample might miss Muslims (because there are not many
in that state). To be sure of their inclusion, a researcher could set a quota of 3% Muslim for
the sample. However, the sample will no longer be representative of the actual proportions in
the population. This may limit generalizing to the state population. But the quota will
guarantee that the views of Muslims are represented in the survey.

 Snowball Sampling:
This type of design is used when it is difficult to identify the members of the desired
population e.g. Forced women entrepreneurs, drug addicts, families with triplets, people
owning a vintage car, etc. These types of population can be best identified through referral
networks. In this design, each respondent after being interviewed is asked to identify one or
more sampling unit. Here the sample unit selected in the initial stage may or may not be
selected through probability methods. The initial sample units are used to refer other units
who possess similar characteristics, who in turn refer other units and so on.

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 NON-PROBABILITY SAMPLING PROBABILITY SAMPLING

1. Convenience sampling 1. Simple random sampling

2. Purposive sampling 2. Systematic sampling

3. Judgment sampling 3.Stratified Random sampling

4. Quota sampling 4.Area sampling

5. Snowball sampling 5.Cluster sampling

As the scope of the study was limited for the Mutual Funds and SIP only, therefore sample is
selected by using non probability purposive method of sampling

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2.3 COLLECTION OF DATA

DATA

PRIMARY DATA SECONDARY DATA

A. PRIMARY DATA - The primary data are those, which are fresh and are collected for
the first time and thus happen to be original in character. For the primary data-collection,
the various methods used, are:
1. Observation
It refers to watching/understanding the behavior of the other person or any operation over
time, without manipulating and controlling it and to record the findings in specific manner.

2. Personal Interview
It is a ‗face-to-face‘ situation to obtain the data with minimum basis and maximum
efficiency. It is comprises of meeting the particular person, face to face, who is responsible
for the corresponding course of action.

3. Focus Group Interview

These are unstructured interviews with small groups, which can be used to examine not only
‗what people think‘ but also ‗how they think‘ and ‗why‘.

4. Questionnaire
It is considered to be that heart or core-part of any survey. It is very effective source of
collecting the data and information.

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 B. SECONDARY DATA - These are sources that contain the data which have been
collected and compiled. The secondary sources consist of readily-available statistical
statement and reports. They include the published records as well as the unpublished
ones.
The secondary sources include:
 Internet
 Magazines
 Journals
 Books
 VISIT

While conducting any research the most important factor which has a huge share in success of
research is data collection. There are various factors which may contaminate the collected data;
therefore to select the correct and effective data collection method is of utmost importance.

While conducting this research both the primary and secondary methods were been used. For
collecting primary data Observation, Interview and Questionnaire these techniques were been
used while for collecting secondary data various sources were been used. For e.g. to study
research methodologies a book named as Business research methods by Donald Cooper.
Similarly various secondary data collection sources, like Internet, Books, Journals and
Magazines, were been used.

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2.4 ANALYSIS & INTERPRETATION OF DATA:

Introduction Appropriate analytical tools are used to convert raw data into information that can
be used in marketing research. Percentile and ratios are some elementary methods of data
analysis. Some statistical methods such as mean, median, mode, percentage, and standard
deviation should be used as per requirement. Tests of significance, factor analysis, multiple
discriminate analysis, and regression analysis can also be used as advanced statistical tools.

Data analysis can be defined as the process of gathering, modeling and transforming data so as to
get useful information, suggestions and conclusions in decision-making. Interpretation is the
process of making sense of numerical data that has been collected, analyzed, and presented.
People interpret data when they turn on the television and hear the news anchor reporting on a
poll, when they read advertisements claiming that one product is better than another, or when
they choose grocery store items that claim they are more effective than other leading brands.

A common method of assessing numerical data is known as statistical analysis, and the activity
of analyzing and interpreting data in order to make predictions is known as inferential statistics.
Informed consumers recognize the importance of judging the reasonableness of data
interpretations and predictions by considering sources of bias such as sampling procedures or
misleading questions, margins of error, confidence intervals, and incomplete interpretations.

Types of Data Analysis

1) Descriptive and Causal Analysis:

The descriptive analysis is mainly employed for the purpose of elaborating the data
(taken from the population) which is under the sampling observation either graphically or
numerically. It is possible to carry out the analysis of one, two or more than two variables
at the same time. Thus, based on the number of variables used, data analysis can be
defined as:

i) Univariate Analysis:

It is one of the simplest forms of data analysis. In this method summarization of the data
depends on the separate variables of a data set. The use of this technique is mainly related
to those cases when the investigator likes to take individual measurement of the sample,

25
 or in case when there are many measurements but the researcher studies only one variable
at a time.

ii) Multivariate Analysis:

Due to the complexity of the research problem in present days, the data analysis has both
multiple independent and .dependent variables. So, this analysis is used by the
researchers when they take two or more variables for the measurement at the same time.

2) Inferential Analysis/Statistical Inference:

It is used by the investigators when they have acquired the data from the sample through
a random procedure (using probability method) and with a high response rate. If the data
collection is done through non-probability method with the lower response rate, then this
method is not used for the analysis. The two main groups of the problems which are dealt
with the statistical deduction are as follows:

i) Estimation: Estimation is .a procedure which is employed in the case of the

statistics (which is acquired from the sample) for the purpose of estimating the
'unknown parameter' of the population under study.

ii) Hypotheses Testing: Hypothesis testing is the procedure to examine the

hypothesis of the main population from where the sample has-been drawn.

As discussed earlier raw data can be processed through various analytical or statistical tools
available and then can be present in organized manner further. After collecting data whole
information is the segregated in the form of tables and figures through various techniques and the
data would be going to be presented through different graphs, tables or charts.

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  Research methodology design:

Title of research A STUDY OF MUTUAL FUND and SIP

Type of Research Descriptive Research

Scope of study MUTUAL FUNDS AND SIP

Sample unit PRUDENT CORPORATE ADVISARY

SERVICES LIMITED

Sources of data collection Primary sources Secondary sources

1. observation 1. Books

2. Interviews 2. Journals

3. Internet

Analysis of data Percentage, Averages, graphs & charts

27
 CHAPTER 3
PROFILE OF THE ORGANIZATION

28
3.1 General Information:

Prudent Corporate Advisory Services Limited (PCAS) is one of India's leading and successful
platform providers for the distributors in the financial services industry. Born as Prudent Fund
Manager in 2000, PCAS entered into teens in 2006 with the introduction of Platform services
and is now venturing into adulthood with the launch of Prudent InvestOn (Online facility to buy
and sell various financial products) in 2013.Prudent CAS provides a comprehensive platform to
its Channel Partners which empowers the Channel Partners to select from wide array of financial
and non financial products. It is backed by a very strong team of IT and customer care. Prudent
CAS is very well known in the industry for it human touch while dealing with the partners.
Today it boasts of 5847 Channel Partners spread across 45 branches in 10 states. Inspired by its
motto ‗Money through Wisdom‘, PCAS has built the platform in such a manner as to enrich both
the Channel Partners as well as the clients. The platform is dynamically built to cater the
scalability, change management and regulatory compliance.

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3.1.1 HISORY OF PRUDENT

Incorporated in year 2000 as Prudent Corporate Advisory Services Ltd with a clear vision of
providing professional services in the area of personal and corporate investments, Prudent today
is an integrated wealth management group with diversified business verticals across Mutual
Funds distribution, Equities, Derivatives, and Third Party Products, Fixed income Products, Life
& General Insurance, Commodities and Real Estate.

3.1.2 JOURNEY OF PRUDENT

2000 Launched Prudent

2002 Won First ICICI Prudential Chairman Gold Award

2004 First Branch In Vadodara

2008 Member Of BSC, NSC And Others

2009 Launched Prudent Properties

2009- 2014 Won CNBC Tv18: Best Financial Advisor Award

2014 Launches Gennext Insurance Brokers Pvt. Ltd

2016 Launched Fund Bazar

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3.1.3 PRUDENT GROWTH IN NUMBERS

HAPPY CLIENTS

564867

LIVE SIP‘S

762666

ASSET UNDER MANAGEMENT

18013CR

AMFI REGISTERED CHANNEL PARTNER

11497

31
3.1.4 Milestone of Prudent Corporate Advisory Service ltd.

2014-15 Achieved Milestone of 5000 cr AUM in Mutual Fund. Prudent

Broking Adjudged runner up for ZEE Market Analyst Award. Obtained IRDA License for life &
General Insurance Broking of all companies
2013-14 Best Financial Advisors Award for West Region-5th time

2012-13 Won CNBC TV 18 Best Financial Advisors Award for West Region-4th time

2011-12 Won CNBC TV 18 Best Financial Advisors Award for West Region-3td time

2010-11 Won CNBC TV 18 Best Financial Advisors Award for West Region-2nd time
Won Wealth Forum Advisors Award 2010 (Won 9 Out of 10 Awards) Acquired
Membership of NSE, CDSL, MCXSX and MCX.
2009-10Won CNBC TV 18 Best Financial Advisor Award for West Region.Started Prudent
Properties to Cater Property Needs of Our Client.
2008-09 Acquired Membership of Bombay Stock Exchange (BSE).

2007-08 Lunched Distribution of Insurance Products.

2006-07 First Branch outside Gujrat at Mumbai.

2004-05 First Branch in Vadodara.

2002-03 Won First Prudential ICICI Chairman Gold Award.

2000-01 Started as Prudent Fund Manager.

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  VISION STATEMENT

To be a globally respected wealth creator with an emphasis on customer care and a culture of
good corporate governance

 MISION STATEMENT

To create and nurture a world-class, high performance environment aimed at delighting our
customers.

33
3.2 ORGANISATION

3.2.1 PRUDENT COMPANY INFORMATION

SUBSIDIARIES OF PRUDENT

An Integrated Wealth Management Group

Prudent is the exercise of good judgment, common sense and caution, especially in the conduct
of practical matters

Incorporated in 2000 with a clear vision of providing professional services in the area of personal
and corporate investments, it has created a niche segment over a period of time with an excellent
quality client base with in-house capability of analyzing various products on various parameters
before suggesting them to clients.

The team approach worked wonders and in the short span of over one decade, the Prudent
Group expanded its horizon by offering specialized services in the areas of Personal & Corporate
Investment Planning through Mutual Funds, Equities, Derivatives, Third Party Products, Fixed
income Products, Life/General Insurance, Commodities and Real Estate through various business
vertical.

Prudent Corporate Advisory Services Ltd.

Being a flagship company, Prudent Corporate Advisory Services Ltd remains the primary arm of
the Prudent Group. It offers specialized services in the area of Personal and Corporate
Investment Planning through distribution of Mutual Funds, Bonds and Third party products.

Besides having a large pool of its own clients, the company also manages its geographically
spread business operations through a unique platform for independent financial advisors (IFA's)
which helps them to grow and expand their services by providing them training & consultation,
technology, operations, back-office and support for sales and marketing.

34
PruTech Financial Services Pvt. Ltd.

The Company provides Financial Planning solutions to clients with the help of excellent
Financial Planning software. It is a SEBI registered Investment advisory (RIA) company.

Prudent Properties

Property is one of the important asset classes. The efforts and paperwork involved in purchasing
the same can be intimidating. Prudent Property provides real estate solutions not only in creating
an asset class but is also helping the customers in buying their dream realty, whether it is home
or office. We also help our clients for their housing loan needs through our tie up with various
Housing Finance Companies (HFCs).

Prudent Broking Services Pvt. Ltd.

Incorporated in 2004, Prudent Broking Services Pvt. Ltd. is a Stock Broking and Depository
Participant. Company is a member with Bombay Stock Exchange (BSE), National Stock
Exchange (NSE), MCX Stock Exchange (MCXSX) & Central Depositary Services (India)
Limited (CDSL). With solid research, well trained people, State of the art infrastructure and
Strong IT, Prudent broking is fastest growing company in the field of stock broking.

Prudent Comder Private Limited

The Company was incorporated in 2010 with an objective to provide Commodities Broking
services. It has the membership of Multi Commodity Exchange (MCX) and National Commodity
& Derivatives Exchange Limited (NCDEX)

Prudent Fin trade Pvt. Ltd.

It is a Non-Banking Finance Company registered with RBI engaged in business of providing

Loan against Securities to clients registered with it.

35
3.2.2 ORGANISATIONAL STRUCTURE:

Managing Director

(Sanjay Shaha)

Chief Executive Officer

(Shirish Patel)

Cluster Head

(BhanuTomar)

Area Manager

(ParimalBhawdhankar)

Branch Manager

Relationship Manager

NakulGhodke DevidasYeola DishankNirbhavne Sham Shinde

36
3.3 PRODUCTS/ ACTIVITIES

Prudent Channel since its inception has a strong hold in the market through its Direct Force. It
also has strong hold on the corporate channel - it now wants to have a greater reach to its clients
which it has already developed through its 2000+ certified brokers just the beginning of the force
that will grow in leaps and bounds.

Know more than how much money you need to retire - or how much you should save for your
future expenses. It is about determining short-term and long-term objectives. Prudent CAS Ltd
serves you with array of financial products and services.

If financial models were food, then we could cook up anything nourishing on the menu, from
soup to steak to nuts. If financial models were clothing, we could help produce any outfit, from
making original sketches to stitching together skirts to inventorying racks of gowns.

Of course, financial models are neither food, nor clothing. For the more technical, in a typical
assignment, the Group might do any or all of the following:

 Mutual Funds
 Investment Consultancy
 Equity and Derivatives broking
 RBI Relief funds and Infrastructure Bonds

37
3.4 CORPORATE AND FUCTIONAL PRACTICES

FIVE BASIC FUNCTIONS OF MANAGEMENT

1) PLANNING ACTIONS

Planning actions as a function evaluates the goals of the company and then sets a course for
success. This function evaluates the existing activities and goals. Managers then schedule
activities that will lead to achieving those goals. Leaders must become problem solvers able to
see the big picture while also identifying specific things that affect overall success. For example,
if the goal is to improve the time it takes for customers to get their order fulfilled, then an
operational strategy is executed to improve product fulfillment.

2) ORGANIZING RESOURCES

The organizing function brings resources together to achieve the goals established in the
planning function. Resources include materials, personnel and financial backing. Leaders need to
identify what activities are necessary, assign those activities to specific personnel, effectively
delegating tasks. Leaders need to coordinate tasks to keep resources moving efficiently toward
goals. It is important to prioritize which resources are essential at any given time. For example, if
more inventories is needed but the company doesn't have the financial resources to obtain the
inventory, then the priority is to tackle the financial need.

3) STAFFING STRUCTURE

When a business is short-handed, it cripples the company's ability to serve customers, and it also
overwhelms existing staff. Management needs to identify key staff positions, and to ensure that
the proper talent is serving that specific job duty. Once the right staffing structure is established,
leaders need training, professional development, pay rates and monitoring performance.
Effective leaders are able to develop talent and identify those ready for promotion.

4) DIRECTING ACTIVITIES

Directing activities is a key function. Letting staff know what needs to be done, and also by
when is a responsibility of managers. However, bosses tell people what to do, while leaders

38
motivate people to contribute in meaningful ways. The directing function requires leaders to do
more than simply give orders, even though tasks must be completed for business success. This
function begins with supervising subordinates while simultaneously motivating teams through
guided leadership communicated in clear ways.

5) CONTROLLING SYSTEMS

Controlling systems refers to all the processes that leaders create to monitor success. Sports
coaches have a saying, "Winners keep score," meaning that winners know where they are and
know what is necessary to achieve a goal. This business function requires leaders to establish
performance standards, measure actual performance and compare the metrics to determine
anomalies. For example, a sales leader is focused on more than only the final sales numbers; he
considers the leading activities such as the number of minimum pitches and outbound calls.
Leaders review the data and make adjustments in processes, policies, training or personnel to
address failures based on that data. Winning leaders don't look at poor performance as failures
but as opportunities to solve a problem that gets the desired result

FUNCTIONS OF INFORMATION TECHNOLOGY DEPARTMENT

The average IT department is generally responsible for keeping your organization‘s technology
running and fixing it when it‘s broke. A modern day IT department oversees computers, servers,
networks, probably telephones (PBX and/or mobile), maybe web sites, and potentially
audio/visual. For all of these types of systems IT is responsible for:

Preventive maintenance and backups - This is the biggest IT responsibility that most people
don‘t think about. IT has to keep servers and line-of-business applications up to date and
protected from data loss. Not doing this can expose the organization to problems down the road.

Hardware/software deployment and upgrades - When your org wants to start using a shiny new
(could be a device, a service, an application, etc.) it‘s job to figure out how to make it work and
then make it work. IT is also responsible for staying on top of hardware life cycles and Windows

39
life cycles. For instance, when support for Windows Server 2012 R2 ends in 2022 my
department will have to migrate all of our servers to a modern version of Windows.

User support and technical training - perhaps the most visible IT task.

Development - not every IT department is expected to develop their own applications for internal
use, but some do.

Web site maintenance - This is better left to web designers these days, but some smaller orgs
may leave their web sites to IT for keeping their web site up to date.

Staying on top of technological trends - IT has to keep their ears to the ground and sometimes
make changes that people didn‘t specifically ask for or know about. For instance, upgrading to
fiber Internet instead of cable or T1. IT always has to be looking a few years ahead.

FUNCTIONS OF FINANCE DEPARTMENT

1. BOOKKEEPING AND PAYABLES/RECEIVABLES

Bookkeeping is the most basic financial activity in a company. Before a business owner ever
considers hiring a CFO, they bring in a bookkeeper, who tracks all of the transactions in the
organization, covering both sales and expenses. As the organization grows, they might hire more
specialized payables and receivables clerks, to take over functions such as corresponding with
vendors and suppliers, above and beyond recording transactions.

2. FINANCIAL REPORTING AND CONTROL

Financial Reporting and Control is the function that takes raw accounting entries and transforms
them into usable and comparable financial statements. Requiring far more judgment than the
bookkeeper‘s role, this function involves everything from ruling on how to implement
accounting principles to designing financial processes of the organization, selecting accounting
systems, liaising with external auditors, and ensuring that there are no gaps or oversights in
existing processes.

40
3. TAX AND COMPLIANCE

Running a business involves paying tax, and paying tax means doing a lot of calculations and
filling out a lot of forms. Often using the financial statements as a basis, along with various other
configurations of the information produced by Bookkeeping and Payables/Receivables, the Tax
and Compliance function will make sure all of the government forms and filings are sent
complete and on-time to the taxman. A strong Tax and Compliance function will go one step
beyond simple compliance, and will find ways to minimize tax, so as to maximize the company‘s
net income.

4. STRATEGIC PLANNING AND FINANCIAL PLANNING & ANALYSIS

This function, ―FP&A‖ for short, is the true bridge between the Past and the Future. FP&A
regularly creates strategic and financial plans that forecast what financial results (sales and
expenses) will look like in future periods. Then, they compare actual results—prepared with the
assistance of the Financial Reporting and Control function—to determine areas where the
business can improve. With this ―variance analysis‖ complete, they can then prepare more
accurate forecasts for the future. A strong FP&A function will not only generate annual forecasts
but will be able to update them even over the course of a day or two, and to run many scenarios
that examine the effects of, say, losing a big customer or an economic contraction.

5. TREASURY & WORKING CAPITAL MANAGEMENT

The key role of Treasury is to make sure that the company doesn‘t run out of cash. This means,
among other things, forecasting the upcoming working capital (receivables, payables and
inventory) needs of the

Company, investing surplus cash in short-term instruments to generate modest interest income,
and managing currency risk.

41
6. CAPITAL BUDGETING

Capital Budgeting is the function responsible for selecting between the various uses of capital, or
capital projects. After all, most organizations will have money available to invest in the business,
with the hopes of either growing sales or reducing expenses. But the opportunities for spending
typically exceed the amount available to spend, so Capital Budgeting develops business cases to
evaluate and identify the most effective projects. A strong Capital Budgeting function will not
only forecast project benefits, but will also track these benefits over time to determine whether
the use of capital was as effective as originally anticipated.

FUNCTIONS OF HR DEPARTMENT

HIRING AND RECRUITING

One of the primary functions of the human resources department is to oversee hiring and
recruiting within an organization. The department actively recruits, screens, interviews and hires
qualified candidates for open positions. The department administers skills assessment and
personality tests to match candidates with the right job within the company. The human
resources department also develops employee handbooks that explain company policies and
procedures to new hires.

TRAINING AND DEVELOPMENT

The human resources department handles the training and development of an organization. It
creates training programs and conducts training for new hires and existing employees. The
human resources department also works in conjunction with department managers and
supervisors to determine the training needs of employees. They also are responsible for training
contracts and budgeting.

42
COMPENSATION

The human resources department is responsible for various aspects of employee compensation.
The department typically handles employee payroll and ensures employees are paid accurately
and on time. Human resources departments also manage compensation programs that include
pensions and other fringe benefits offered by the employer.

EMPLOYEE BENEFITS

The human resources department manages all aspects of employee benefits, including health and
dental insurance, long-term care or disability programs as well as employee assistance and
wellness programs. The department keeps track of employee absences and job-protected leave,
such as family medical leave. Human resources department representatives ensure employees
receive the proper disclosures regarding benefit eligibility or if benefits are no longer available
because of a layoff or termination.

EMPLOYEE RELATIONS

The human resources department handles employee relations matters within an organization.
Employee relations involves employee participation in different aspects of organizational
activities. The department maintains the relationship between employees and management by
promoting communication and fairness within the company. The department also handles
disputes between employees and management, as well as disputes between the company and
labor unions or employee rights organizations.

LEGAL RESPONSIBILITIES

The human resources department is responsible for interpreting and enforcing employment and
labor laws such as equal employment opportunity, fair labor standards, benefits and wages, and
work hour requirements. The department also investigates harassment and discrimination
complaints and ensures company officials remain compliant with United States Department of
Labor regulations.

43
FUNCTIONS OF OPERATIONS DEPARTMENT

An operations department is responsible for running your business successfully. It has the
ultimate accountability for profit and loss, and seeks to maximize return on investment for the
shareholders. The members of this department are ultimately responsible for the success of your
business, and as such, maintain considerable power in your company. While the operations
department is responsible for the bottom line, it also oversees the other departments in your
organization, as well as the development of your employees and customers.

CSR

The Prudent Corporate Advisory Services Limited (hereby referred to as ―The Company‖
Corporate Social Responsibility (CSR) Policy has been developed in accordance with section
135 of the Companies Act 2013 (referred to as the Act in this policy) on CSR and in accordance
with the CSR rules (here by referred to as the Rules in this policy) notified by the Ministry of
Corporate Affairs, GOI on 27th February 2014. (The Policy shall apply to all CSR
projects/programmers undertaken by the Company in India as per Schedule VII of the A

44
 Chapter 4
Review of Literature

45
Mutual funds are financial instruments offered to the public by the finance corporations.
These funds are resourcefully managed collective investments, which pools money from a
number of investors and use that money as investment in various stocks, short-term money
market financial instruments, bonds, and other securities to earn interest and distribute it as
dividends.

46
SYSTEMATIC INVESTMENT PLAN

A Systematic Investment Plan allows you to invest regularly a fixed sum in your favorite
mutual fund scheme. In SIP, a fixed amount is deducted from your savings account every
month and directed towards the mutual fund you choose to invest in. It allows you to buy
units continuously without worrying about the market ups and downs. Not only does
investing in an SIP brings financial discipline but also helps you plan your budget and
expenses better.

47
 ORGANISATION OF MUTUAL FUND IN INDIA

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in
the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the
public under one or more schemes for investing in securities in accordance with these
regulations. These regulations have since been replaced by the SEBI (Mutual Funds)
Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual
fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian.
The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs
to be constituted in the form of a trust and the instrument of the trust should be in the form of a
deed registered under the provisions of the Indian Registration Act, 1908. The sponsor is required
to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management
company. The board of trustees manages the MF and the sponsor executes the trust deeds in
favor of the trustees. It is the job of the MF trustees to see that schemes floated and managed by
the AMC appointed by the trustees are in accordance with the trust deed and guidelines.

48
 Organization of mutual fund

 Mutual Fund Shareholders: The Mutual Fund Shareholders, like the other shareholders
have the right to vote. The voting rights include, the right to elect directors during the
directorial elections, voting right to approve the alterations investment advisory contract
pertaining to the fund and provide approval for changing investment objectives or policies.

 Board of directors: The Board of directors supervise the functional activities, which
include approval of the contract Asset Management Company and other various service
providers.

 Investment management company or Asset Management Company: This body handles

the mutual fund portfolio as per the objectives and policies mentioned in the prospectus of
the mutual funds.

 Custodians: The custodians protect the portfolio securities. Mostly qualified bank
custodians are used for mutual funds.

 Transfer Agents: The transfer agent for the purpose of maintaining records and similar
functions. The maintenance of the shareholder's accounts, calculation of dividends to the be

49
 disbursed, sending information to the shareholders about the account statements, notices,
and income tax information. Some of the transfer agent sends information to the
shareholders about the shareholder transactions and account balances. They also maintain
customer service departments in order the cater to the queries of the shareholders.

 SEBI: The primary aim of the Securities Exchange Board of India is to protect the interest
of the mutual fund investors. The SEBI has formulated several policies for better
functioning and controls the mutual funds. In the year 1993, SEBI issued guidelines
pertaining to the mutual funds. All mutual funds, private sector and public sector are
regulated by the guidelines of the SEBI. The Asset Management Company managing the
funds has to be approved by the SEBI.

50
4.2 BASIC THEORIES OF THE TOPIC

4.2.1 HISTORY OF MUTUAL FUND

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 of India. The history of mutual
funds in India can be broadly divided into four distinct phases

First Phase - 1964-1987

Unit Trust of India (UTI) was established in 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

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). 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

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.

51
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds,
the mutual fund industry has entered its current phase of consolidation and growth.

ADVANTAGES OF MUTUAL FUND

1. Diversification

To diversify is to reduce risk .The advantage of mutual funds is that diversification is

automatically done. Instead of buying shares, bonds, and other investments on your own, you
outsource the task to an expert.

2. PROFESSIONAL MANAGEMENT

The advantage of mutual funds is that they are managed by professional experts. Thus, to
ensure your money is invested in the right place, you have to choose the right mutual fund.

3. SIMPLICITY

Mutual fund dealers allow you to compare the funds based on different metrics, such as level
of risk, return, and price. And because the information is easily accessible, the investor will
be able to make wise decisions.

4 LIQUIDITY

Liquidity risk refers to the difficulty to redeem an investment without incurring a loss in the
value of the instrument. It can also occur when a seller is unable to find a buyer for the
security.

52
5 COSTS

Mutual funds are one of the best investment options considering the costs involved Mutual
funds are relatively cheaper and deduct only 1% to 2% of the expense ratio. Debt mutual
funds usually deduct even lesser. Read more about expense ratio

6. TAX EFFICIENCY
Mutual funds are relatively more tax-efficient than other types of investments. Long-term
capital gain tax on equity mutual fund is zero, which means, if you sell your investment one
year after purchase, you don‘t have to pay tax.

10. SAFE AND TRANSPARENT

Investments in mutual funds are very transparent. All mutual fund companies come under the
purview of SEBI and they need to make necessary disclosure

 DISADVANTAGES OF MUTUAL FUND

1. COST

Some mutual funds have a high cost associated with them. Mutual funds charge for managing
the funds, fund managers salary, distribution costs etc. Depending on the fund, these charges
can be significant.

2. DILUTION

This is the most prominent of all disadvantages. Diversification has an averaging effect on
your investments. While diversification saves you from suffering any major loss

53
  The flow chart below describes broadly the working of a mutual
fund:

RISK FACTORS ON MUTUAL FUND

1 MARKET RISK

Market risk is the risk inherent in all types of investments that results from the fickle
nature of the market and of the global economy in general. Market risk is simply the
possibility the market or economy will decline, causing individual investments to lose
value regardless of the performance or profitability of the issuing entity

2 CREDIT RISK

Credit risk basically means that the issuer of the scheme is unable to pay what was promised
as interest. Usually, agencies which handle investments are rated by rating agencies

3 CONCENTRATION RISK

Concentration generally means focusing on one thing. Concentrating a huge amount of a

person‘s investment in one particular scheme is not a good option. Profits will be huge if
lucky, but losses will be more.

54
4 INTEREST RATE RISK

Interest rate changes depending upon the credit available with lenders and the demand from
borrowers. They are inversely related to each other. Increase in the interest rates during the
investment period may result in a reduction of the price of securities

5 LIQUIDITY RISK
Liquidity risk refers to the difficulty to redeem an investment without incurring a loss in the
value of the instrument. It can also occur when a seller is unable to find a buyer for the
security.

FEATURES OF MUTUAL FUND

1. Schemes managed by professional fund manager

2. Mutual fund offer a wide variety of schemes that you can choose as per your need and
convenience
3. Mutual fund diversify the risk by investing in a number of companies across a broad range
of sectors
4. Mutual fund has the potential to deliver higher returns over medium to long term
5. Mutual fund is relatively less expensive to invest in equities compared to directly investing
in share market
6. Some of the mutual fund schemes provide liquidity
7. Mutual fund provide transparency in the form of disclosing the investment strategy,
proportion of asset class for investment, value of your investment and periodic statement
8. Mutual fund are regulated by SEBI
9. Few mutual fund schemes like (ELSS) provide tax benefit.

55
  VARIOUS TYPES OF SCHEMES OF MUTUAL FUND

BY STRUCTURE

1) OPEN ENDED SCHEME

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

2) CLOSE ENDED SCHEMES

Close-ended fund or scheme has a stipulated maturity period eg five and seven 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.

56
SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor
ie either repurchase facility or through listing on stock exchanges. These mutual funds
schemes disclose NAV generally on weekly basis

3) INTERVAL SCHEME

Interval schemes combine the features of open-ended and close-ended funds. Description:
The units may be traded on the stock exchange or may be open for sale or redemption during
pre-determined intervals at NAV-related prices.

BY NATURE

1. EQUITY FUND
An equity fund is a mutual fund that invests principally in stocks. It can be actively or
passively (index fund) managed. Equity funds are also known as stock funds. Stock mutual
funds are principally categorized according to company size, the investment style of the
holdings in the portfolio and geography.

Large Cap Fund

A mutual fund that invests in securities issued by very large companies with a market
capitalization, typically in the range of at least $5 billion.

MID CAP FUND

.
A mid-cap fund is a type of investment fund that focuses its investments on companies with a
capitalization in the middle range of stocks in the investable market.

SMALL CAP FUND

Small cap funds invest predominantly in small companies and small-cap stocks that have the
potential for growth. These stock can double or triple in a short span of time of just a few
years, but this also implies that the return from these funds is subject to high volatility.

57
 3. DEBT FUND

Debt funds are mutual funds that invest in fixed income securities like bonds and
treasury bills. Gilt fund, monthly income plans (MIPs), short term plans (STPs), liquid funds,
and fixed maturity plans (FMPs) are some of the investment options in debt funds. Apart
from these categories, debt funds include various funds investing in short term, medium term
and long term bonds.

BY INVESTMENT OBJECTIVE

1. GROWTH SCHEME
Growth Schemes are also known as equity schemes. A growth fund is a diversified portfolio
of stocks that has capital appreciation as its primary goal, with little or no dividend payouts
.Growth funds are typically split by market capitalization, with funds representing small-cap,
mid-cap and large-cap groupings. Foreign large-cap

2. INCOME 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, The
government securities and money market instruments. Such funds are less risky compared to
equity schemes.

3. BALANCED SCHEME
Balanced Schemes aim to provide both growth and income by periodically distributing a part
of the income and capital gains they earn. These schemes invest in both shares and fixed
income securities, in the proportion indicated in their offer documents (normally 50:50).

4. MONEY MARKET SCHEMES

A money market fund might also hold short-term U.S. Treasury securities, such as T-bills,
certificates of deposit (CDs); and corporate commercial paper. Other investments with
comparable returns, such as money market deposit accounts, online savings accounts and
certificates of deposit, are covered.
58
Other schemes

1. TAX SAVING SCHEMES

Sec 80C of the Income Tax Act allows you to claim deductions from your taxable income by
investing in certain investments. One of the most popular Sec 80C investments is in tax
saving mutual funds or Equity Linked Savings Scheme (ELSS).

2. INDEX SCHEMES
An index fund is a type of mutual fund with a portfolio constructed to match or track the
components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index
mutual fund is said to provide broad market exposure, low operating expenses and low
portfolio turnover

3. SECTOR SPECIFIC 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

59
  MUTUAL FUND FEES AND EXPENSES

1. Transaction fees
A. PURCHASE FEE

It is a type of fee that some funds charge their shareholders when they buy shares. Unlike a
front-end sales load, a purchase fee is paid to the fund (not to a Stockbroker) and is typically
imposed to defray some of the fund's costs associated with the purchase.

B. REDEMPTION FEES

Redemption Fee another type of fee that some funds charge their shareholders when they sell
or redeem shares. Unlike a deferred sales load, a redemption fee is paid to the fund (not to a
Stockbroker) and is typically used to defray fund costs associated with a shareholder's
redemption.

C. EXCHANGE FEE

Exchange Fee a fee that some funds impose on shareholders if they exchange (transfer) to
another fund within the same family of funds".

2. PERIODIC FEES

A. MANAGEMENT FEE

Management fees are fees that are paid out of fund assets to the fund's investment adviser for
investment portfolio management, any other management fees payable to the fund's
investment adviser or its affiliates, and administrative fees payable to the investment adviser
that are not included in the "Other Expenses" category (discussed below). They are also
called maintenance fees.

B. ACCOUNT FEE

Account fees are fees that some funds separately impose on investors in connection with the
maintenance of their accounts. For example, some funds impose an account maintenance fee
on accounts whose value is less than a certain dollar amount.

60
C. DISTRIBUTION AND SERVICE FEE

Distribution and service fees are fees paid by the fund out of fund assets to cover the costs of
marketing and selling fund shares and sometimes to cover the costs of providing shareholder
services. They are also called 12b-1 fees after section 12 of Investment Company Act of
1940"

3. OTHER OPERATING EXPENSES

TRANSACTION COSTS

These costs are incurred in the trading of the fund's assets. Funds with a high turnover ratio,
or investing in illiquid or exotic markets usually face higher transaction costs. Unlike the
Total Expense Ratio these costs are usually not reported.

LOADS

Definition of a Load:

Load funds exhibit a "Sales Load" with a percentage charge levied on purchase or sale of
shares. A load is a type of commission. Depending on the type of load a mutual fund exhibits,
charges may be incurred at time of purchase, time of sale, or a mix of both. The different
types of loads are outlined below.

FRONT-END LOAD

Often associated with class 'A' shares of a mutual fund. Also known as Sales Charge, this is a
fee paid when shares are purchased. Also known as a "front-end load", this fee typically goes
to the brokers that sell the fund's shares. Front-end loads reduce the amount of your
investment. For example, let's say you have $1,000 and want to invest it in a mutual fund
with a 5% front-end load. The $50 sales load you must pay comes off the top, and the
remaining $950 will be invested in the fund. The Maximum sales load under the Investment
Company Act of 1940 is 9%. The maximum sales load under NASD Rules is 8.5%

61
BACK-END LOAD

Associated with class "B" mutual fund shares. Also known as Deferred Sales Charge, this is a
fee paid when shares are sold. Also known as a "back-end load", this fee typically goes to the
Stockbrokers that sell the fund's shares. Back-end loads start with a fee about 5 to 6 percent,
which incrementally discounts for each year that the investors own the fund‘s shares. The rate
at which the fee declines is disclosed in the prospectus. The amount of this type of load will
depend on how long the investor holds his or her shares and typically decreases to zero if the
investor holds his or her shares long enough.

EL LOAD/LOW LOAD

It's similar to a back-end load in that no sales charges are paid when buying the fund. Instead
a back-end load may be charged if the shares purchased are sold within a given time frame.
The distinction between level loads and low loads as opposed to back-end loads is that this
time frame where charges are levied is shorter.

NO-LOAD FUND

Associated with Class "C" Shares. As the name implies, this means that the fund does not
charge any type of sales load. But, as outlined above, not every type of shareholder fee is a
"sales load". A no-load fund may charge fees that are not sales loads, such as purchase fees,
redemption fees, exchange fees, and account fees. Class "C" shares have the highest annual
expense charges.

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4.3 REVIEW OF RESEARCH ON SELECTED TOPIC

1. Name of article: - Mutual Fund Industry in India: Recent trends &

progress

Author: - Anand Singh

Abstract

Mutual Fund is an institutional arrangement wherein savings of millions of investors are

pooled together for investment in a diversified portfolio of securities to spread risk and to
ensure steady returns. These funds bring a wide variety of securities within the reach of the
most modest of investors. It is essentially a mechanism of pooling together savings of large
number of investors for collective investment with an approved objective of attractive yield
and appreciation in value. The Mutual Funds offers different investment objectives such as
growth, income and Tax planning. In the recent times the Indian Capital Market has
witnessed new trends, one of them being the spectacular growth of Mutual Funds. There are
more than 600 schemes offered by Mutual Funds, and these funds have mobilized substantial
amount of the household savings. The present paper focuses on the growth of Mutual Fund
Industry in India over the past few years.

2. Name of article: - Investors’ Awareness and perception About

Mutual Funds

Author: - SimranSaini; Dr Bimal Anjum

ABSTRACT

Indian mutual fund has gained a lot of popularity from the past few years. Earlier only UTI
enjoyed the monopoly in this industry but with the passage of time many new players entered
the market, due to which the UTI monopoly breaks down and the industry faces a severe
competition. As the time passes this industry has become a buzz word in the Indian financial

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system. So it is very important to know the investor‘s perception about this industry. The
present study analyses the mutual fund investments in relation to investor‘s behavior.
Investors‘ opinion and perception has been studied relating to various issues like type of
mutual fund scheme,main objective behind investing in mutual fund scheme, role of financial
advisors and brokers,investors‘ opinion relating to factors that attract them to invest in mutual
funds, sources of information, deficiencies in the services provided by the mutual fund
managers, challenges before the Indian mutual fund industry etc.

3. NAME OF ARTICLE:-A STUDY OF MUTUAL FUNDS

Author: -The author is Managing Director, Centre for Investment

Education and Learning.

ABSTRACT

Three Boston executives in 1924 pooled their money with no idea of how popular the
assemblage would become. The formation of Unit Trust of India, 1963 along with the
inventiveness of Government of India and Reserve Bank, led to the dawn of new industry i.e.
mutual fund industry in India. Its huge corpus enables diversification, thereby minimizing the
risks and maximizing the returns. In order to become customer‘s preference now-a-days,
numerous specialised plans in specific to retirement, children etc have also been fabricated.
The present paper is an attempt to know about Mutual Fund, it‘s various schemes and analyse
the different risk factors involved.

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4. Name of article:-Comparative Study On Performance Evaluation Of

Mutual Fund Schemes Of Indian Companies

Author :-Prof. Mahesh K Patel (Assistant Professor)

ABSTRACT

In this paper the performance evaluation of Indi an mutual funds is carried out through
relative performance index, risk-return analysis, Tenor‘s ratio, Sharp's ratio, Sharp's measure,
Jensen's measure, and Fame‘s measure. The data used is daily closing NAVs. The source of
data is website of Association of Mutual Funds in India (AMFI). The study period is
1stJanuary 2007 to 31stDecember, 2011. The results of performance measures suggest that
most of the mutual fund have given positive return during 2007 to 2011.

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AMFI

The Association of Mutual Funds in India (AMFI) is dedicated to developing the

Indian Mutual Fund Industry on professional, healthy and ethical lines and to
enhance and maintain standards in all areas with a view to protecting and
promoting the interests of mutual funds and their unit holders.

AMFI, the association of SEBI registered mutual funds in India of all the
registered Asset Management Companies, was incorporated on August 22, 1995,
as a non-profit organization. As of now, all the 42 Asset Management Companies
that are registered with SEBI, are its members.

ASSET MANAGEMENT COMPANY

An Asset Management Company is the fund house or the company that manages the money
.The mutual fund is a trust registered under the Indian Trust Act. It is initiated by a sponsor.
A sponsor is a person who acts alone or with a corporate to establish a mutual fund. The
sponsor then appoints an AMC to manage the investment, marketing, accounting and other
functions pertaining to the fund. For instance, ABN AMRO Trustee (India) Private Limited is
appointed as the trustee to the ABN AMRO mutual fund. ABN AMRO Asset Management
(India) Limited is appointed as its investment manager. Various funds with different
objectives can be floated under the umbrella of one parent. So ABN AMRO Equity Fund,
ABN AMRO Opportunities Fund and ABN AMRO Flexi Debt Fund are all independent
schemes of ABN AMRO Mutual Fund. They are managed by the ABN AMRO AMC.

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ASSET UNDER MANAGEMENT
Assets under management (AUM) are the total market value of assets that an investment
company or financial institution manages on behalf of investors. Assets under management
definitions and formulas vary by company.
Some financial institutions include bank deposits, mutual funds and cash in their calculations.
Others limit it to funds under discretionary management, where the investor assigns
responsibility to the company.

The graph shows that the AUM of top five mutual funds in India.

AUM
10000000

8000000

6000000

4000000
AUM
2000000

NET ASSET VALUE

A Mutual Fund is a fund which is operated by an investment company which collects
money from various shareholders connected with the mutual fund and invests them in a
group of assets. The money generated from the selling of shares is used in buying various
investment instruments like stocks, bonds, and money market vehicles.
The shareholders receive an equity position in the fund depending on the units they hold
and succumbing to the underlying securities of the fund.

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TERMINOLOGIES OF MUTUAL FUND

1 NAV

The Net Asset Value is the price of a unit of a fund. When a fund comes out with an NFO, it
is priced Rs 10. Later, depending on the value of the investments, that price could rise or fall.

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

NAV = (Assets – liability)/ No. of units

= (((1000*1300) + (1000*1650) +1000000) – 0)/100000

= ₹39.5

2. AUM

AUM is an abbreviation of Asset under management. This value refers to total market value
of assets managed by a mutual fund.

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For example: If a mutual fund has 1000 reliance shares with market value ₹1300 and 1000
HDFC shares with market value ₹1650 and some cash of ₹10,00,000.

AUM = (1000*1300) + (1000*1650) +1000000

= ₹39, 50,000

3. AMC

AMC means Asset Management Company. These are companies that get license from SEBI
to manage assets of a mutual fund. They usually take the investment decisions. SBI, HDFC,
ICICI Prudential, DSP Blackrock, Reliance Nippon, Birla sun life and etc., are few leading
asset management companies in India.

4. NFO

NFO means new fund offer, this usually happens when a mutual fund company launches a
new open/closed ended mutual fund.

5 CAGR

Compound annual growth rate (CAGR) is a metric that provides more clarity on returns that
are more than one year. The main reason to use this metric is to compare returns from
different asset classes such as equity, FD, bonds etc.,

CAGR = (Current value/original investment value) (1/No. of years) – 1

If I had invested ₹10,000 rupees before 10 years in a mutual fund and now the value is
grown to ₹75000, The CAGR will be 22.32%

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6 IRR

Internal rate of return is used to calculate returns when investments are done at constant
interval of time such as monthly or 3 months or 6 months or yearly etc.

7 Absolute Returns

Absolute return is a return that asset (such as mutual fund) delivers over a period of time.
Absolute returns doesn‘t take period of investment for calculation.

Absolute returns = (Selling Price – Cost Price)/ (Cost Price)*100

For example If I had invested ₹10,000 rupees before 10 years in a mutual fund and now the
value is grown to ₹75000 the absolute return will be 650%.

8 Benchmark

A benchmark is a standard against which performance of a mutual fund is measured. In 2012

SEBI made it mandatory to AMC to declare a benchmark index for its mutual funds based on
individual funds objective. NIFTY 50, CNX Midcap are few benchmark indices against
which mutual funds are compared.

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 Chapter 5

Presentation, analysis& interpretation of data (1)

71
  WHAT ARE MUTUAL FUND AND HOW THEY DO WORK?

A mutual fund. A professional manager chooses investments that match the fund's goals for
risk and return. You can redeem your fund units at any time.+ read full definition is a
collection of investments, such as stocks, bonds and other funds owned by a group of
investors and managed by a professional money manager.

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WHAT IS SYSTEMATIC INVESTMENT PLAN?

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in
mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval
(weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and
helps you inculcate the habit of saving and building wealth for the future Systematic
Investment Plans (SIP) is an investment technique whereby the investor invests a fixed sum
of money at regular intervals, say once a month or once a quarter.

Systematic Investment Plan (SIP) is a fixed amount one invests at regular intervals in a
financial instrument. The SIP calculator helps you find the future value of your invested
money by taking into account SIP for a specified duration at the expected interest rate.

SIP: Under Systematic Investment Plans (SIPs), the investor invests a specific sum of
money at regular intervals. This specific amount is directly deducted from the
investor‘s bank account. It disregards the timing of the market.

Lump Sum: These investments allow the investor to purchase the number of units he
wants at one go. This method is usually chosen to create extra wealth and liquidity.
Lump sum method makes use of the timing of the market strategy

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How to Choose the Best Mutual Funds to Invest

 Investment Objective – Knowing whether you want consistent returns or high capital
appreciation. The risk to the principal amount will vary accordingly, as potentially
higher returns indicate a higher level of risk.

 Past Performance – How the proposed investment has performed in the past 3-5
years. Though this is no guarantee of future performance, it does help gauge the
possible direction of the fund and how capable its management it.

 Fund Type and Fund House – Equity, Debt or Hybrid and whether to go with a
reputed fund house or an upcoming one. Equity funds are the riskiest option with the
highest potential of returns, debt funds are considered the least risky hence their
returns also tend to be lower. Hybrid funds, on the other hand, lie somewhere in
between in terms of both risk and return. Going with a reputed fund house as
compared to a lesser known one might be beneficial as established AMC often have
dedicated teams in place that are capable of managing the fund‘s requirements no
matter what the eventuality.

 Expense Ratios/Exit Load – Higher expense ratios and exit loads decrease payout
benefits even if marginally, so are they worth it? Most investors prefer to seek out
funds that have lower expense ratios and if possible no exit load. Alternately, you
might choose to stay invested for the period during which the exit load applies, if the
scheme is providing the desired/expected returns.

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7 Benefits to Start an SIP

1. BRINGS IN FINANCIAL DISCIPLINE

As SIP requires investing a specified amount every month, it automatically

inculcates the habit of saving regularly

2. RUPEE COST AVERAGING

Helps buy more units in a declining market and less when markets are rising.
Investing a pre-defined amount every month averages out the cost of purchase.

3 .POWER OF COMPOUNDING

Time is the key element for compounding, so the best way ia to start early and have a
higher time horizon.

4. CONVENIENCE

Even a low income earner can start investing through SIP, as it allows you to invest
with a very small amount without putting strain on your pocket.

5 .NO NEED TO TIME THE MARKET

It smoothens out market ups and down &helps in reducing the risk arising due to
market volatility as more and more units gets accumulated at different market levels.

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6. HELPS IN ACHIEVING FINANCIAL GOALS

SIP is considered to be the most efficient tool that helps in achieving various
financial goals in a painless manner.

7. FLEXIBILITY

It is very flexible, as you can start, stop, pause, increase the amount, increase the
period, etc

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  COMPARISON OF MUTUAL FUND WITH OTHER PRODUCTS

Mutual Fund vs. Public Provident Fund (PPF)

PPF (Public Provident Fund) is till date one of the most popular options. However, over time,
the reduced returns on Public Provident Fund (PPF) have made, PPFs are less attractive.

Also, the low returns come at the expense of liquidity and growth. Public Provident Fund
(PPF) has a lock-in period of 15 years.

Mutual Fund vs. Bank Deposits

The returns on bank deposits become negligible after you account for inflation and pay tax.
As compared to a mutual fund in which the dividend/returns received is completely tax
exempt (on equity mutual funds, after one year) and the liquidity provided is higher than that
of bank deposits.

Mutual Funds vs. Institutional or Corporate Bonds

Although financial institution bonds have high compound returns, they are unsecured and
more prone to interest rate risks as compared to mutual funds. Mutual funds are much more
diversified as they invest in a variety of instruments like debt and money market.

Also, investors need to be extremely careful about such investments and must ascertain that
the issuing company is credit rated. Corporate bonds also have less liquidity as compared to
mutual funds.

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 Chapter 6

Presentation analysis and interpretation of data

(2)

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SIP INVESTMENT AND LUMPSUM INVESTMENT CALCULATION

 SIP :

FOR SHORT TERM

Monthly investment ₹1000

Return expected 15%

Investment period 3 years

Inflation rate 4.8%

Maturity amount ₹45679

Invested amount ₹36000

Returns accrued ₹9679

FOR LONG TERM

Monthly investment ₹5000

Expected return 20%

Invested period 10 years

Inflation rate 6%

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Maturity amount ₹1911818

Invested amount ₹600000

Returns accrued ₹1311818

LUMPSUM : FOR SHORT TERM

Lumpsum investment ₹600000

Return expected 16%

Investment period 3 years

Inflation rate 4.8%

Maturity amount ₹966574

Invested amount ₹600000

Returns accrued ₹366574

For long term

Lumpsum investment ₹1000000

Return expected 22%

Investment period 10 years

Inflation rate 6%

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Maturity amount ₹8846983

Invested amount ₹1000000

Returns accrued ₹7846983

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  COMPARISON BETWEEN SIP INVESTMENT AND LUMPSUM
INVESTMENT OF PRUDENT :

Investors 2018

Lump sum 36%

SIP 64%

Inference: From above table and chart it is observed that in Prudent for year 2018 number of
investors of Lump sum investment are 36% of the total investors while it is 64% for SIP
investors.

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 CHAPTER 7

CONCLUSION & SUGGESSION

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7.1 CONCLUSION

 The risk pertaining to the Mutual Funds is quite low as the total investment is
distributed in several industries and different stocks.

 The Mutual funds are available in units so it is highly affordable due to the very large
principal sum.
 The fees pertaining to the custodial, brokerage and others are very low
.
 The investments pertaining to the Mutual Fund offers the public a lot of flexibility by
means of dividend reinvestment, systematic investment plans and systematic
withdrawal plans.

 The Mutual Funds sector is regulated by the SEBI to safeguard the rights of the
investor

 The Fund Managers pertaining to the Mutual Funds gather data from the leading
economists and financial analysts, so they are better equipped to analyze the scopes of
lucrative return from the investments

 In case of Open Ended Mutual Fund schemes, the investors have the option of
redeeming or withdrawing money at any point of time at the present rate of net value
asset

 The Mutual Funds are professionally managed. The experienced Fund

Managers pertaining to the Mutual Funds examine all options based on research and
experience

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7.2 OBSERVATION

 Mutual fund is subject to market risk as rn on investment in mutual fund are received
as per the NAV of the fund which changes daily as per the market.

 Investor may invest in the mutual funds considering various factors that are the
objectives of investment, the risk involved in the fund, the age factor, the amount to
be invested, the time period for investment.

 Investor can invest in the mutual fund as per their choice of scheme based on various
factors as there are many schemes available.

 The most important factor in investing in mutual fund is diversification of the amount
invested which reduces the risk as well as losses.

 One of the benefit of investing in the mutual fund manager who manages all the fund
invested in mutual fund due to which the burden or worries of the investor is
comparatively less.

 The return in investing directly in the stock may be more but even the risk is more as
compared to mutual funds which also gives good return with less risk involved.

 Every fund carries a different level of risk which is to be considered by the investors
at the time of investment.

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7.3 SUGGESTIONS
 The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should
be made to realize that ignorance is no longer bliss and what they are losing by not
investing.

 Mutual funds offer a lot of benefit which no other single option could offer. But most
of the people are not even aware of what actually a mutual fund is? They only see it as
just another investment option. So the advisors should try to change their mindsets.
The advisors should target for more and more young investors. Young investors as
well as persons at the height of their career would like to go for advisors due to lack
of expertise and time.

 Mutual Fund Company needs to give the training of the Individual Financial Advisors
about the Fund/Scheme and its objective, because they are the main source to
influence the investors.

 Before making any investment Financial Advisors should first enquire about the risk
tolerance of the investors/customers, their need and time (how long they want to
invest). By considering these three things they can take the customers into
consideration.

 Younger people aged less than 35 will be a key new customer group into the future,
so making greater efforts with younger customers who show some interest in
investing should pay off.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies very recently in the industry. SIP is easy for monthly salaried person
as it provides the facility of do the investment in EMI. Though most of the prospects and
potential investors are not aware about the SIP. There is a large scope for the companies to
tap the salaried persons.

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BIBLIOGRAPHY
www.prudentcorporate.com

www.fundbazar.com

www.google.com

www.moneycontrol.com

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