UNIT TRUST OF INDIA

HQ-MUMBAI
MD-LEO PURI

BACKGROUND
F IRST PHASE
UTI-1963,set up by RBI but was delinked in 1978 from RBI and taking over the regulatory and
administrative control by the RBI.
Govt.enjoyed the sole monopoly.
SECOND PHASE
Made the economy more open.
Entry of more public sector units
LIC,GIC-SBI mutual fund was the first non UTI mutual fund,1987.
THIRD PHASE
Entry of pvt sector.
New era for mutual funds
Broader choice, foreign fund management companies.
The Kothari pioneer(now merged with Franklin Templeton)
FOURTH PHASE
Better regulated, uniform standard of funds
Since 1999-SEBI+Association of mutual funds of India launched Investor awareness
program.

OBJECTIVES
To encourage and pool the saving of the middle & low
income group.
Opportunity to share the benefits of rapid
industrialization in India.
Offering alternative lucrative channels of investments to
small savers.

PITFALLS
Corruption
No right to investors to attend the annual general
meetings of the trust.
Extra-Costs for exiting.

TYPES OF FUNDS:
A. BASED ON MATURITY PERIOD

. OPEN-ENDED FUND/SCHEME
Available for subscription and repurchase on a continuous basis.
No fixed maturity period.
Investors can conveniently buy and sell units at Net Asset Value
(NAV)
related prices, which are declared on a daily basis.
Liquidity.
. CLOSE-ENDED FUND/SCHEME
Has a stipulated maturity period e.g. 5-7 years.
Open for subscription only during a specified period at the time of
launch of the
scheme.
Investors can invest at the time of the IPO and thereafter can buy
or sell the units on the stock exchanges where the units are listed.

B. BASED ON INVESTMENT OBJECTIVE

Growth-/Equity-Oriented

Scheme
Provide capital appreciation over the medium to long-term.
Invest a major part of their corpus in equities.
High risks.

Income-/Debt-Oriented Scheme
Provide regular and steady income to investors.
Invest in fixed income securities such as bonds, corporate
debentures,
Government securities and money market instruments.
Less risky compared to equity schemes.
Balanced Fund
Provide both growth and regular income funds.
Appropriate for investors looking for moderate growth.

 Money Market or Liquid Fund

Also income funds.
Provide easy liquidity, preservation of capital and moderate
income.
Invest exclusively in safer short-term instruments such as
treasury bills, certificates of deposit, commercial paper and inter
bank call money, government securities, etc.
Gilt Fund
These funds invest exclusively in government securities.
No default risk.
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.

FUNCTIONS
The UTI functions are discussed below:
To accept discount, purchase or sell bills of exchange
promissory note, bill of lading, warehouse receipt, documents
of title to goods etc.
To grant loans and advances.
To provide merchant banking and investment advisory service.
To provide leasing and hire purchase business.
To extend portfolio management service to persons residing
outside India.
To buy or sell or deal in foreign exchange dealings.
To formulate unit scheme or insurance plan in association with
or as agent of GIC.
To invest in any security floated by the Central Government,
RBI or foreign bank.

ADVANTAGES
Advantages of stock portfolio diversification.
The investment is safe and the risk is spread over a wide
range of securities.
The Unit-holders will be getting regular and good income,
as 90 percent of its income will be distributed.
Dividends up to Rs. 1,000 received by the individual are
exempt from income-tax.
There is a high degree of liquidity of investment as the
units can be sold back to the trust at any time at prices
fixed by trust.
Trading cost of buying & selling stocks are generally lower than
those of individual investors.