Project Report On Mutual Funds

CONTENTS:
1.EXECUTIVE SUMMARY. 2.COMPANY PROFILE.

ABOUT KARVY. VISION & MISSION. ORGANISATION STRUCTURE. DEPARTMENTS. HISTORY OF MUTUAL FUND. CONCEPT OF MUTUAL FUND. DEFINITIONS OF MUTUAL FUND. TYPES OF MUTUAL FUND SCHEMES. LIST OF MUTUAL FUND IN INDIA. RISK FACTORS. PROS & CONS OF MUTUAL FUND. PRINCIPLES OF INVESTING. FACTORS AFFECTING THE GROWTH OF MUTUAL FUND. ASSET MANAGEMENT COMPANY.

3. INDUSTRY ANALYSIS.

4. SWOT ANALYSIS. 5. CONCLUSION.

EXECUTIVE SUMMARY

SECURITY EXCHANGE BOARD OF INDIA(SEBI). Unit Trust of India was the first mutual fund set up in India in the year 1963.In early early 1990s,Government allowed public sector banks and institutions to set up mutual Funds.In the year 1992,Securities and exchange Board of India(SEBI) Actwas passed. The objectives of SEBI are- to protect the interest of investors in securities and to promote the development of and to regulate the securities market,Asfar as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter,mutual funds sponsored by Private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996and have been amended thereafter from time to time to protect the interests of investors. All mutual funds whether promoted by public sector or private sector entities including Those promoted by foreign entities are governed by the same set of regulations.There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. Regulatory structure of Mutual Fund in India: The structure of Mutual Fund in India is Governed by the SEBI ( Mutual Fund) Regulation,1996 (here referred to as regulation). These regulations make it mandatory for mutual funds. To have a tire structure of sponsor-

Trustee-Asset Management Company (AMC). The sponsor is the promoter of mutual fund and appoints the trustees. The trustees are responsible to the investors in the mutual fund and appoint AMC for managing the investment portfolio. The AMC is the business face of the fund, as it manages all affairs of the mutual fund. The mutual fund and the AMC have to be registered with SEBI.

About The Project: 1.Back ground of the project:

The project is carried out at karvy stock broking limited,Dharwad & project is totally focused on the basics of mutual funds. . Primary investment objective of an individual or organization is to maximize the returns and minimizing Market risk through effective diversification. Mutual funds have become latest buzz word for the average person to invest their money. It is said that the bank investment is the first priority of people to invest their savings and next and safer investment place is in mutual funds. A Mutual fund pools resources from thousands of investors and then diversifies its investment into many different holdings such as in stocks ,bonds/debt instruments, Government securities etc. in order to provide more safer and relatively high returns as compared with Fixed deposits etc. The Project is basically FINANCE PROJECT which tries to explain in laymans language about the history, growth and pros & cons of investing in mutual funds.

In the second part of this project it will cover the performance track & analysis of the volatility factors of the Mutual fund schemes such as: 1. ICICI PRUDENTIAL INFRASTRUCTURE FUND with RELIANCE REGULAR SAVINGS FUND. 2. ICICI PRUDENTIAL POWER FUND with RELIANCE DIVERSIFIED POWER FUND.

2. Importance of the project In this report analysis of the mutual fund companies and types of different types of mutual fund schemes its structure, classification, features, advantages, disadvantages volatility factors & comparison of different mutual fund schemes. 3. Scope of the study: 1. This study will help us to know the workings and concept of Mutual funds. 2. This research helps to find how much return can earned by investing in Mutual funds as compared with FDs. 3. It will also help to convince the others regarding how Mutual Funds are better risk adjusted as compared with direct investment through shares.

4. Rationale:
I have chosen this topic because equity schemes are risky but they yield a high return compared to debt funds. Mutual funds fluctuate from period to period depending upon the market conditions, portfolio, fund manager etc. among which market conditions plays a vital role in performance of the mutual fund. 5. Project title :

A DETAILED STUDY ON MUTUAL FUNDS IN KARVY STOCK BROKING LTD., DHARWAD 6. Company where the project is undertaken: KARVY STOCK BROCKING LTD., SRI BHANASHANKARI AVENUE, OPP.N.T.T.F,RAMNAGAR, Dharwad- 580 001

7. Objectives of the project: To study in detail about the Mutual Fund fundamentals. To compare different mutual funds available & find out which fund is performing good & preferable to invest. To study the performance of schemes compared to common benchmark 8. Methodology:The study is Descriptive research is study of existing facts to a conclusion. In this research the attempt has been made to analyze the performance of the funds and also how much risk associated with the Sources of Data a.Primary data: Discussion with company Guide and with other officials, The basic data for the study has been collected from the interaction with the executives of the karvy the stock broking ltd., Dharwad which formed the primary data for the study. b.Secondary Data: 1. Materials Provided by Organization like [1] Research reports 2. Business Magazines like [1] Mutual funds insight [2] Money Today etc. [2] Monthly fact sheets

9. Limitations of the Study: The following are the limitations of the study: Consideration of two funds of the 2 different sectors such as infrastructure & power when many funds of other sectors are existing. I have compared only few mutual funds schemes, which may not represent the entire mutual fund industry. Collection of information is very tedious & it is as per the fact sheet of June. The duration of the project was 1 months so the study of the entire mutual fund industry is not possible.

COMPANY PROFILE
About KARVY:
The Karvy group was formed in 1983 at Hyderabad, India. Karvy ranks among the top player in almost all the fields it operates. Karvy Computer share Limited is Indias largest Registrar and Transfer Agent with a client base of nearly 500 blue chip corporate, managing over 2 crore accounts. Karvy Stock Brokers Limited, member of National Stock Exchange of India and the Bombay Stock Exchange, ranks among the top 5 stock brokers in India. With over 6, 00,000 active accounts, it ranks among the top 5 Depositary Participant in India, registered with NSDL and CDSL. Karvy COM trade, Member of NCDEX and MCX ranks among the top 3 commodity brokers in the country. Karvy Insurance Brokers is registered as a Broker with IRDA and ranks among the top 5 insurance agent in the country. Registered with AMFI as a corporate Agent, Karvy is also among the top Mutual Fund mobilizer with over Rs. 5,000 crores under management. Karvy Realty Services, which started in 2006, has quickly established itself as a broker who adds value, in the realty sector. Karvy Global offers niche off shoring services to clients in the US. KARVY has 575 offices over 375 locations across India and overseas at Dubai and New York. Over 9,000 highly qualified people staff Karvy.

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GROWTH AND DEVELOPMENT OF KARVY

Over the last 20 years Karvy has traveled the success route, towards building a reputation as an integrated financial services provider, offering a wide spectrum of services. And Karvy have made this journey by taking the route of quality service, path breaking innovations in service, versatility in service and finallytotality in service. Karvys highly qualified manpower, cutting-edge technology, comprehensive infrastructure and total customer-focus has secured for Karvy the position of an emerging financial services giant enjoying the confidence and support of an enviable clientele across diverse fields in the financial world. Karvys values and vision of attaining total competence in its servicing has served as the building block for creating a great financial enterprise, which stands solid on its fortresses of financial strength - its various companies.With the experience of years of holistic financial servicing behind it and years of complete expertise in the industry to look forward to, Karvy have now emerged as a premier integrated financial services provider. And today, Karvy can look with pride at the fruits of its mastery and experience comprehensive financial services that are competently segregated to service and manage a diverse range of customer requirements.

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VISION AND MISSION OF KARVY

Vision of Karvy:
To be amongst most trusted power utility company of the country by providing environment friendly power on most cost effective basis, ensuring prosperity for its stakeholders and growth with human face.

Mission of Karvy:
To ensure most cost effective power for sustained growth of India. To provide clean and green power for secured future of countrymen. To be a technology driven, transparent organization, ensuring dignity and respect for its team members. To continuously upgrade & update knowledge & skill set of its human resources. To achieve excellence in every activity we undertake.

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Quality policy of Karvy:

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by combining its human and technological resources, to provide superior quality financial services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives:As per the Quality Policy, Karvy will:

Build in-house processes that will ensure transparent and harmonious relationships with its clients and investors to provide high quality of services.

Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers. Provide high quality of work life for all its employees and equip them with adequate knowledge & skills so as to respond to customer's needs. Continue to uphold the values of honesty & integrity and strive to establish unparalleled standards in business ethics. Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and regulatory authorities) proud and satisfied.

CUSTOMER RELATIONS:

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Employees who deal with clients are expected to handle them with the utmost care. The client deserves immediate and total attention. No client issue should ever be postponed.

ORGANISATION STRUCTURE OF KRAVY:

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Board of Directors CMD, MD, & other Directors

Karvy Stock Broking Limited

Karvy Consultants Limited

Karvy Investor Service Limited

Karvy Global Service Limited

Karvy Inc.

Karvy Computer share Pvt. Limited

Karvy Insurance Broking Private Limited

Karvy Commodities Broking Private Limited

Karvy Regional HQs / Branches

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Regional Branch Head ISO CELL

Operations Divisions

Support Functions

Branches

RIS

ACCOUNTS

FPD

SYSTEM

BROKING DP

HRD

ADMN, PURCHASE, & STORES

BRANCHES

Operations Divisions

Support Functions

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VARIOUS DEPARTMENTS OF KARVY:

In Karvy the functions are mainly divided into two parts namely Operational Functions and the Supporting Functions. OPERATING FUNCTIONS: Registry and Investor Services (RIS) in which Karvy carry out functions as Registrar & transfer Agent (RTA), and Registrar to the Issues. Financial Product Distribution (FPD), Here financial products include Mutual Funds, Fixed income securities, bonds, fixed deposits, Tax-saving Products, Insurance, etc. Stock Broking Services and Depository Participant (DP), which are explained in Service Profile of the Karvy group of companies.

SUPPORTING FUNCTIONS:
Administration - Purchase and Stores Department HOD

Assistant HOD

Administration Team

Responsibilities: 17

To ensure preventive breakdown of equipment/accessories including computer hardware To ensure speedy breakdown maintenance To ensure that the maintenance status of all equipment/ accessories is entered in the service To ensure that the maintenance is carried out efficiently

Maintenance department:
Maintenance includes preventive, breakdown and general maintenance.Preventive maintenance shall be done as per the prefixed time schedule by the subcontractors for the purpose. The administration in charge shall make necessary arrangements for this purpose.

Accounts Department:
Finance operations in Karvy are centralized at the Head Office Account. Periodic fund requirement at the regional level will be sort as and when required. But all cheques and such instruments would be signed by the local regional manager.

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System Administration Department :

Dy. General Manager Dy.Manager Asst. Manager

In this department the functions include Trouble shooting, desktop queries, Network problems, Software and Hardware problems, Installation of new systems, creating new networks.

Human resource Department

The human resource Department (HRD) caters to the entire recruitment and employee upbringing in the company. The HR functions and practices, which are practiced at the Karvy, are: Manpower Planning: The departmental heads are entrusted with the responsibility of assessing the present and the future manpower requirement in their departments. Manpower planning is being done in the company in order to secure a confidence and capability Recruitment: Advertising in newspaper and other media, private employment agencies, personal contacts, colleges and universities are the sources used by Karvy.

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Training: The personnel department gives training for all new employees. Performance Appraisal: The HOD of the department, to which the employees belongs, presents a report of the employees, to be appraised. In addition to that other managers to whom the employee is associated is also evaluating the performance of the employee. Motivation: The Company provides both extrinsic and intrinsic motivation to the employees. Extrinsic motivation is considered with external motivators which employees get through pay, promotion, fringe benefits, holidays etc. Intrinsic motivation is concerned with the feeling of having accomplished something worthwhile i.e. the satisfaction one gets after doing ones work well, praise, responsibility, recognition, participation are the examples. Job rotation is undertaken to reduce the monitoring and burden of the employees. Morale: For improving employees morale positive measures like job rotation, building responsibility into job etc are introduced. Both upward and downward communication takes place within the company. Participation is the key to commitment.

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SERVICES RENDERED BY KARVY

Product and Services:1. 2. 3. 4. 5. 6. 7. 8. Equity and Derivative Internet trading Depository services Equity Research Mutual Funds, Bonds, IPOs Life Insurance General Insurance Portfolio Management Services.

9.Commodity Futures

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INDUSTRY PROFILE
History of Mutual Fund Industry :
The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it reached the height of 1,540 bn. Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling. The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. 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

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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) Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management. 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 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India,

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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.

ABOUT MUTUAL FUND

Mutual Fund ConceptA 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 appreciation realized is 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. Mutual fund industry today is a booming investment sector with more than 30 players. and these players bring plenty of schemes to there investor. Some of them gained the trust of there investors, and still some gained the mutual fund awards from the industry. Between these healthy competitions the investors are getting some good investment schemes. However with a plethora of schemes to choose from, the investor faces many problems that is he will get struck in thinking that should I take more risk or should I invest in some other investment sector for ex. In Banking A vehicle for investing in stocks and bonds A mutual fund is not an alternative investment option to stocks and bonds, rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities. Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the funds gains, losses, income and expenses

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World wide good mutual companies over are known by their AMCs and this fame is directly linked to their superior stocks selection skill. For mutual fund 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 equality of stock selection of various AMC.

We have seen that many of the mutual fund schemes are giving good returns to its investors, here we should not assume that the good return giving schemes are better to invest, because return alone should not be consider as the basis of measuring of the performance of a mutual fund scheme. It should also include the risk taken by the fund manager, because as we know that the fund manager invest the pooled fund into securities in this securities there are many companies like large cap companies small cap companies and mid cap companies while investing into these share market the fund manager has to study the companies and invest, if he invest in high risk yielding companies then there will be very risk in investing into such type of Risk associated with a fund, in a general, can be defined as variability or fluctuations in the returns generated by it. The higher the fluctuation 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 result 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 terms 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 visa versa market. 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, by

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using risk return relationship, we try to assess the competitive strength of the mutual funds visa versa one another in a better way.

CONCEPT OF MUTUAL FUND:

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 appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is one of the most suitable investment for the common man as it offers an opportuniy 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.

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DEFINITIONS OF MUTUAL FUND:

The SEBI,1993defines a Mutual Fund 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. According to Weston J.Fred and Brigham,Eugene,unit trusts are, corporations which accept dollars from savers and then use these dollars to buy stocks,long term bonds and short term debt instruments issued by business or government units; these are corporations pool funds and thus reduce the risk of diversification..

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TYPES OF MUTUAL FUND SCHEMES

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Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund/ Scheme: 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. The key feature of open-end schemes is liquidity. Close-ended Fund/ Scheme: A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

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:

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Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to longterm. 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 investors must indicate the option in the application form. 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.

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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.

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.

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 schemes invest in the securities in the same weightage 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.

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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. 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.

Fund of Funds (FoF) scheme: A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds is known as a FoF scheme. An FoF scheme enables the investors to achieve greater diversification through one scheme. It spreads risks across a greater universe.

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LIST OF MUTUAL FUNDS IN INDIA

Sponsors Mutual Fund BOB Asset Management Co. Ltd Bank of Baroda Can Bank Investment Management Canara Bank Services Ltd., S.B.I. Funds Management Ltd., UTI Asset Management Co., Pvt. Ltd., Institutions G.I.C. Asset Management Co. Ltd., State Bank of India SBI, PNB, BOB, LIC General Year Entry 1992 1987 1987 1963 of

Insurance 1990

Corporation & other 4 Jeevan Bhima Sahyoga PSU GIC Asset LIC 1989

Management Co. Ltd., Private Sectors Benchmark Asset Management Co. NICHE Pvt. Ltd., Services Chola Mandalam Asset Management Chola Co. Ltd., Escorts Asset Management Ltd., J. M. Capital Management Pvt. Ltd.,

Financial 2001 Mandalam 1997

Investments Escorts Finance 1996 J.M. Shares and Stock 1994 1998 1995 1996 1996 1995 1994

Brokers Kotak Mahindra Asset Management Kotak Mahindra Bank Co. Ltd., Reliance Capital Asset Management Reliance Capital Co. Ltd., Sahara Asset Management Co. Pvt. Sahara India Finance Ltd., Sundaram Asset Management Co. Ltd., Sunadaram Finance Tata Asset Management Pvt. Ltd., Tata Sons Joint Ventures Predominantly Indian Birla Sun Life Asset Management Pvt. Birla Global Finance

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Ltd., D.S.P. Merrill Lynch Fund Manager D.S.P. Merrill Lynch Ltd., HDFC Asset Management Co. Ltd., HDFC & Std

1996 Life 2000

Investment Joint Ventures Predominantly Foreign Alliance Capital Asset Management Alliance Pvt. Ltd., Deutsche Asset Management Pvt. Ltd., Management Deutsche Capital 1994 Asset 2002 Templeton 1996 2002 1999 1993 1993 Financial 1994 2000

Management Franklin Templeton Asset Management Franklin Pvt. Ltd., HSBC Asset Manageent Pvt. Ltd., ING Inveatment Management Pvt. Ltd., Morgan Stanley Investment

Investments HSBC Security ING Group Morgan Stanley

Management Pvt. Ltd., Prudential ICICI Asset Management Prudential ICICI Pvt. Ltd., Principal Asset Management Co. Pvt. Principal

Ltd., Service Standard Charted Asset Management Standard Charted Bank Ltd.,

(Source: Outlook Money: Laymens guide to MUTUAL FUND)

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RISK FACTORS

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Risk factors associated with investing in mutual funds:

Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the schemes will be achieved As with any investment in securities, the NAV of the units issued under the schemes can rise or fall depending on the factors and forces affecting capital markets. Either the past performance of the mutual funds managed by the sponsors and their affiliates / associates nor the past performance of the sponsors, asset management companies (AMC) or fund is necessarily indicative of the future performance of the schemes. Equity Funds are open to market risk i.e. there is a possibility that the price of the stocks in which the Fund has invested may decrease. Of course, the prices may also go up, making it possible for the Fund to earn profits. Debts Funds are open to two main risks - Credit Risk and Interest Rate Risk. Credit Risk refers to the possibility that the company that has issued the bond or debenture in which the Fund has invested may default on interest or on principal payments. Debt Fund managers take care of this by investing in bonds which have good credit rating Interest Rate Risk refers to the possibility that the price of the bond in which the Fund has invested may go down because of an increase in the interest rates in the economy. In general, it is useful to remember that this is a "see-saw" relationship - a bond price (and therefore, NAV) goes up when interest rates drop and drops when interest rates rise.

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TABLE SHOWING THE RISK FACTORS INVOLVED IN MUTUAL FUND

Risk Tolerance/Return Focus Expected Low Debt Suitable Products Benefits MFs offered by

Bank/ Company FD, DebtLiquidity, Better Post-

Medium

High

based Funds Tax returns Partially Balanced Funds, Some Liquidity, Better PostDiversified Equity Funds Tax returns, Better Debt, and some debt Funds, Management, Partially Mix of shares and Fixed Diversification Equity Deposits Diversification, Capital Market, Equity Expertise in stock Equity Funds (Diversified as picking, Liquidity, Tax well as Sector) free dividends

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PROS & CONS OF MUTUAL FUND

Advantages of mutual funds:
Affordability: Investors individually may lack sufficient funds to invest in high grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefits of its investment strategy. Convenient administration: Investment in mutual fund reduces paper work and helps in avoiding many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual fund saves time and makes investing easy and convenient. Diversification: Mutual funds invest in 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. 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. In open-end schemes, the investor gets the money back promptly at net asset value related prices from the mutual fund. In closed-end schemes the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the mutual fund.

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 Low costs: Mutual funds are a relatively less expensive way to invest capital markets because the benefits of scale in brokerage, custodial and other fees transaction into lower costs for investors. Professional management: Mutual funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 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. Choice of scheme: Mutual funds offer a family of schemes to suit your varying needs over a lifetime. 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 managers investment strategy and outlook. Well regulated: All mutual funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interest of investors. The operations of mutual funds are regularly monitored by SEBI.

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Disadvantages of Mutual Funds:

No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commissions: All funds charge administrative fees to cover their dayto-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if we don't use a broker or other financial adviser, we will pay a sales commission if we buy shares in a Load Fund. Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If our fund makes a profit on its sales, we will pay taxes on the income we receive, even if we reinvest the money made. Management risk: When we invest in a mutual fund, we depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as we had hoped, we might not make as much money on our investment as we expected. Of course, if we invest in Index Funds, we forego management risk, because these funds do not employ managers. Their appeal is not just limited to these categories of investors. Specific goals like career planning for children and retirement plans are also catered to by mutual funds. Children funds have found their way in a big way with many of the fund houses already having launched a children fund. Essentially debt oriented, these schemes invite investments, which are locked till the child attains majority and requires money for higher education. 43

You can invest today and assure financial support to your child when he/she requires them. The schemes have given very good returns of around 14 percent in the last oneyear period.

Principles of Investing in Mutual Funds:

Learn before you begin If you want to build an investment portfolio to achieve your goals throughout your you will need to learn the basics. It is very important to understand the

lifetime, objective.

investment philosophy of the fund and ensure that it gels well with your investment

Regular & Disciplined Approach

This will go a long way in achieving your long-term investment objectives. Regular investments in mutual funds provide an easy way to grow your investment over time, taking advantage of market cycles and ensuring that your investment programs stays on track. And it's a good time habit to form. Diversification

Spread your Investments over various Mutual Funds and different schemes within them. By doing so, you increase the chances of averaging attaining an above average return and also spread your risk.

Think Long Term

Give your investments time. Do not expect short-term gains from Mutual funds. Also do not expect superb performance from your fund every year.

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Each mutual fund has a specific stated objective:

The funds objective is laid out in the fund's prospectus, which is the legal document that contains information about the fund, its history, its officers and its performance Fund Objective What the fund will invest in Equity (Growth) Only in stocks Debt (Income) Only in fixed-income securities Money Market (includingIn short-term money market Gilt) Balanced

instruments

(including

government securities) Partly in stocks and partly in fixed-income securities, in order to maintain a 'balance' in returns and risk

Who Can Invest in Mutual Fund?

Mutual Fund in India is open to invest by: Resident Indian Individuals Indian Companies. Indian Trusts /Charitable Institutions. Banks Non-Banking finance companies Insurance Companies. Provident Funds Non-Resident including Non-Resident Indians, and Overseas Corporate Bodies (OCBs) Foreign entities, viz. Foreign Institutional Investors (FIIs) registered with SEB

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Recent Trends in Mutual Fund Industry:

The most important trend in the mutual fund industry is the aggressive expansion of the Foreign owned mutual fund companies and the decline of the companies floated by Nationalized Banks and smaller Private Sector players. Many Nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organization. Some schemes offered guaranteed returns and their parent organization had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions they have serious plans of continuing the activity in a major way. The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to Foreign owned companies, some have merged with others and there is general restructuring going on.

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ASSET MANAGEMENT COMPANY

It is a company set up primarily for managing the investment of mutual funds and makes investment decisions in accordance with the scheme objectives, deed of Trust and other provisions of the Investment Management Agreement. For Tata Mutual Fund, Tata Asset Management Limited is the Asset Management Company

GROWTH IN ASSETS UNDER MANAGEMENT

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FACTS FOR THE GROWTH OF MUTUAL FUND

Some facts for the growth of mutual funds in India 100% growth in the last 6 years. Our saving rate is over 23%, highest in the world. Only canalizing these savings in mutual funds sector is required. We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.

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SWOT ANALYSIS:
STRENGTHS: Co-operative and experienced staff Good data base Karvy Brand Reasonable charges WEAKNESS: Lots of hidden rules Competition from other stock broking companies OPPORTUNITIES: Increased spending power Unpredictable sensex Changing mindset of customers THREATS: Stiff competition from existing players in the stock market Lack of loyal clientage 49

Findings:
There are wide varieties of mutual fund schemes available in the If an investor who is ready to take moderate risk and a moderate If an investor is not ready to take any invest in gilt funds. There are mutual funds like Equity Linked Savings Scheme where There are special funds like capital protected funds where the market which will suit the individual investors perspective return can invest in balanced funds.

you can invest and save tax from your income. movement. Before recommending any mutual funds to any investor If an investor who is aggressive and ready to take high risk and carefully study the volatility factors of mutual funds. high return can invest in diversified equity funds. investors principal amount will not be lost irrespective of market up/down

Suggestions:
If an investor who is ready to take moderate risk and a moderate return There are mutual funds like Equity Linked Savings Scheme where you can invest in balanced funds. can invest and save tax from your income 50

The investor who is aggressive & ready to take high risk & expect

high return can invest in mutual fund.

Conclusion:
From the study of mutual fund it is found that even though mutual fund is subject to market risk, there are funds which protects the investors capital irrespective of market performance and many more funds depending on the investors investing behavior like an aggressive investor who is ready to take risk can investing behavior like an aggressive investor who is ready to take risk can invest in equity funds, a cautious investor who is ready to take risk & interested in minimum returns can invest lump sum amount can opt for systematic investment plan which also minimizes the risk. The most important observation from the study is that even though there are various types of mutual funds are available to suit the different types investors ,people are not aware of the basics of mutual funds. Karvy is one of the leading stock brokers in India & with wide range of product lines compared to any other stock broking companies . karvy is the number one service provider but it should make still more efforts to educate its investors regarding mutual funds & online products rather than only selling the products

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BIBLIOGRAPHY:
Web sites:www.google.com www.amfiindia.com www.mutualfundsindia.com www.bseindia.com www.nseindia.com

News papers:Business line Business standard Mutual Fund Insight

Books:Security analysis and portfolio management ---V. A. AVADHANI

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