MINOR PROJECT REPORT ON MUTUAL FUNDS

Mutual Fund refers to the meaning of Mutual Fund, which is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the properly in the right direction. The investors who invest their money investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner. Before investing they carry out thorough research and detailed analysis on the market conditions and market trends of stock and bond prices.

The mutual fund industry started in India in a small way with the UTI Act creating what was effectively a small savings division within the RBI. Over a period of 25 years this grew fairly successfully and gave investors a good return, and therefore in 1989, as the next logical step, public sector banks and financial institutions were allowed to float mutual funds and their success emboldened the government to allow the private sector to foray into this area. The initial years of the industry also saw the emerging years of the Indian equity market, when a number of mistakes were made and hence the mutual fund schemes, which invested in lesser-known stocks and at very high levels, became loss leaders for retail investors. From those days to today the retail investor, for whom the mutual fund is actually intended, has not yet returned to the industry in a big way. But to be fair, the industry too has focused on brining in the large investor, so that it can create a significant base corpus, which can make the retail investor feel more secure.

The ownership is in the hands of the investors who have pooled in their funds. It is managed by a team of investment professionals and other service providers. The pool of funds is invested in a portfolio of marketable investments. The investors share is denominated by units whose value is called as Net Asset Value (NAV) which changes everyday. The investment portfolio is created according to the stated investment objectives of the fund.

Portfolio Diversification: Mutual funds invest in a number of companies. This diversification reduces the risk because it happens very rarely that all the stock s decline at the same time and in the same proportion. So this is the main advantage of mutual funds. Professional Management: Mutual funds provide the services of experienced and skilled professionals, assisted by investment research team that analysis the performance and prospects of companies and select the suitable investments to achieve the objectives of the scheme. Low Costs: Mutual funds are a relatively less expensive way to invest as compare to directly Investing in a capital markets because of less amount of brokerage and other fees.

Liquidity: This is the main advantage of mutual fund that is whenever an investor needs money he can easily get redemption, which is not possible in most of other options of investment. In open-ended schemes of mutual fund, the investor gets the money back at net asset value and on the other hand in close-ended schemes the units can be sold in a stock exchange at a prevailing market price. Transparency: In mutual fund, investors get full information of the value of their investment, the proportion of money invested in each class of assets and the fund manager s investment strategy. Flexibility: Flexibility is also the main advantage of mutual fund. Through this investors can systematically invest or withdraw funds according to their needs and convenience like regular investment plans, regular withdrawal plans, dividend reinvestment plans etc. Convenient Administration: Investing in a mutual fund reduces paperwork and helps investors to avoid many Problems like bad deliveries, delayed payments and follow up with brokers and Companies. Mutual funds save time and make investing easy. 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 benefit of its investment strategy. Well Regulated: All mutual funds are registered with SEBI and they function with in the provisions of strict regulations designed to protect the interest of investors. The operations of mutual funds are regularly monitored by SEBI.

DISADVANTAGES
y 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 mutual fund runs the risk of losing the money.

y Fees and Commissions: All funds charge administrative fees to cover their day to day

expenses. Some funds also charge sales commissions or loads to compensate brokers, financial consultants, or financial planners. Even if you don t use a broker or other financial advisor, you will pay a sales commission if you buy shares in a Load Fund.

y Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20

to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even you reinvest the money you made.

y Management Risk: When you invest in mutual fund, you depend on fund manager to

make the right decisions regarding the fund s portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in index funds, you forego management risk because these funds do not employ managers.

TYPES OF MUTUAL FUND

y Open Ended Funds- An open ended fund is one that is available for

subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. The key feature of open ended schemes is liquidity. which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the same time of the initial public issue and thereafter they can buy and sell the units of the scheme on the stock exchanges where they are listed.

y Close Ended Funds- A close ended fund has a stipulated maturity period

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.
y Interval Funds- Interval funds combine the features of open ended and close

ended schemes. They are open for sales or redemption during pre-determined intervals at their NAV.

According to Investment Objective

y

Growth Funds- The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks are much better than the other investments had over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time. Income Funds- The aim of the income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Income funds are ideal for capital stability and regular income. Balanced Funds- The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. Money Market Funds- The main aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safe short term instruments such as treasury bills, certificates of deposit, commercial paper and inter bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.

HDFC
STRENGTHS:
y a) Wide range of products: The AMC has got good number of differentiated

products in the entire asset class. 10 years.

y b) Consistent performance: The funds have given consistent performance over y c) Experienced team: HDFC has fund managers with rich experience whose

consistent performance has made this AMC CRISIL level one fund house. rules to protect the interest of the investors.

y d) Strong Compliance: The AMC has very strong compliance of industry set y e) Risk management team: AMC has a separate risk management team which

constantly monitor the risk exposure related to different fund management.

WEAKNESSES:

a) Restrictive reach: HDFC business is more concentrated on urban areas. HDFC has very limited offices.

b) Less Aggressive in Marketing and execution: HDFC does match the aggressiveness required in the industry and are slow in execution.

TATA
Strengths: y Trusted parent company: Tata asset Management Company is a part of the Tata group, one of India s largest and most respected industrial groups. Jamshedpur is the home ground of Tata MF and they enjoy great support and trust. y High payout structure: They pay more incentive and brokerage to their distributors in comparison of other AMCs, which gives them some edge to attract the distributors to sell the product.

Weaknesses: a) Focused on one product: At Jamshedpur, Tata MF is focussed on only one product that is Tata Infrastructure Fund which some how narrows their product diversification. b) Lack of Aggression: The team in Jamshedpur lack aggression and activeness, they do not push there products too much in the markets. Products get sold of there brand presence. c) Services: The AMC is not giving good service and the response time is slow.

Infrastructure
scheme Fund class Average mkt. Cap. (in crores) Inception date HDFC Infrastructure Equity diversified 75406.10 May 2009 TATA Infrastructure Equity diversified 21304.00 May 2009

NAV performance
NAV of HDFC growth fund is Rs. NAV 58.91, Date is 2nd July, 2009. NAV of TATA growth fund is Rs. 31.4833, Date is 2nd July, 2009. & NAV of HDFC equity fund is Rs. NAV 177.86, Date is 2nd July, 2009. NAV of TATA PURE growth fund is Rs. 72.34, Date is 2nd July, 2009.

Dividend history
HDFC growth fund current dividend is 25.02 TATA growth fund current dividend is 14.04 & HDFC equity fund current dividend is 35.702 TATA equity fund current dividend is 28.6397
y So by above data we can analyse that HDFC growth

fund is better for investor who look for high dividends.

The above chosen funds have had a market presence of at least three years. Also the government of India has a large interest in Indian growth story which is in complete without have a much impetus in infrastructure sector. Hence, with this fact we can have a fair idea of their acceptability in the market. The basic rationale of choosing these funds is to have and present a brief idea of the current mutual funds market and to understand the latest trends in the market.

CONCLUSION
HDFC Equity Fund has an ability to spot the sector trends & it has delivered handsomely. In Current status it emerged as the third best- performing diversified equity fund.