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A project report on mutual fund as an investment avenue.

1. INTRODUCTION
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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). 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 portfolio at a relatively low cost. Anybody with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy A Mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc. A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the process and the broad rules for entry into and exit from the fund and other areas of operation. In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities exchange Board of India) in our case. Track records of the sponsor and its financial strength in granting approval to the fund for commencing operations. A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. In the Indian context, the sponsors promote the Asset Management Company also,in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management Company Ltd., which has floated different mutual funds schemes and also acts as an asset manager for the funds collected under the schemes

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.Characteristics: A mutual fund actually belongs to the investors who have pooled their funds . A mutual fund is managed by investment professionals and other service providers, who earn a fee for their services, from the fund. The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day . The investors share in the fund is denominated by units. The value of the units changes with change in the portfolios value, every day. The value of one unit of investment is called the Net Asset Value or NAV

2. HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases .First Phase: 1964-1987An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the RBI. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700crores of AUM. Second Phase: 1987-1993 (Entry of Public Sector Funds)In 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June1987 .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 industry now functions under the SEBI (Mutual Fund) Regulations1996.As at the end of January 2003; there were 33 mutual funds with total assets of Rs., 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase Since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.The graph indicate the growth of assets over the years. Structure Consist sThe structure of mutual funds in India is governed by the SEBI Regulations, 1996. Theseregulations make it mandatory for mutual funds to have a 3-tier structure of Sponsors-Trustee-AMC (Asset Management Company). The Sponsor is the promoter of mutualfund, and appoints the Trustee. The Trustees are responsible to the investors in the mutualfunds, and appoint the AMC for managing the investment portfolio. The AMC is thebusiness face of the mutual funds, as it manages all the affairs of mutual funds. The mutual funds and AMC have to be registered by the SEBI,Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemesbeyond the initial contribution made by it towards setting up of the Mutual Fund Trust The Mutual Fund is constituted as a trust in accordance with the provisions of the IndianTrusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian RegistrationAct, 1908. Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body ofindividuals). The main responsibility of the Trustee is to safeguard the interest of the unitholders and inter-alia ensure that the AMC functions in the interest of investors and inaccordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,1996, the provisions of the Trust Deed and the Offer Documents of the respectiveSchemes. At least 2/3rd directors of the Trustee are independent directors who are notassociated with the Sponsor in any manner .Asset Management Company (AMC) The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. TheAMC is required to be approved by the Securities and Exchange Board of India (SEBI) toact as an asset management company of the Mutual Fund. At least 50% of the directors ofthe AMC are independent directors who are not associated with the Sponsor in anymanner. The AMC must have a net worth of at least 10 crores at all times.., .,Registrar and Transfer Agent The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent tothe Mutual Fund. The Registrar processes the application form, redemption requests anddispatches account statements to the unit holders .Custodian A custodian handles the investment back office of a mutual fund. Its responsibilitiesinclude receipt and delivery of securities, collection of income, distribution of dividends,and segregation of assets between schemes. The sponsor of a mutual fund cannot act as acustodian to the fund. For example, Deutsche Bank is a custodian, but it cannot serviceDeutsche Mutual Fund, its mutual fund arm.

Depository Indian capital markets are moving away from having physical certificates for securities, to ownership of these securities in dematerialized form with a Depository.., 4. MUTUAL FUND OPERATION Mutual Fund Operation Flow Chart Fund managers investors Invest in Pass to Investor stock &securities Generate return., . 5.TYPES OF MUTUAL FUND A Mutual Fund may float several schemes, which may be classified on the basis of its structure, its investment objectives and other objectives .Open Ended Schemes As the name implies the size of the scheme (fund) is open i.e. not specified or pre- determined. Entry to the fund is always open, the investor who can subscribe at anytime. Such fund stands ready to buy or sell its securities at anytime. The key feature of Open- ended schemes is Liquidity. It implies that the capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the funds at announced rates. Open- ended schemes have comparatively better liquidity despite the fact that these are not listed. The reason is that investors can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since.,repurchase is at a price based on declared net asset value (NAV). The portfolio mix of such schemes has to be investments, which are actively traded in the market. Otherwise it will not be possible to calculate NAV. This is the

reason that generally open-ended schemes are equity based. In Open-ended schemes, the option of dividend reinvestment is available. 2. Close-Ended Schemes A Close ended schemes have a definite period after which their shares/units are redeemed. The scheme is open for subscription only during a specified period at the time of launch of a 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. In these types of schemes, the size of the fund kept to be constant. 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.I nterval schemes Interval Schemes combine the features of both open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV based prices.Mutual Fund schemes by Investment Objectives:.,

EQUITY FUNDS These funds invest a major part of their corpus in equities. The composition of the fundmay vary from scheme to scheme and the fund managers outlook on various scrips.The Equity Funds are sub-classified depending upon their investment objective, asfollows: 1. Growth Fund: Aim to provide capital appreciations over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the shortterm 2. Diversified Equity Fund: Diversified equity funds are the most popular among investors. They invest in many stocks across many sectors, and because they have the freedom to chop and churn their portfolios as they like, diversified equity funds are a good proxy to the stock market. If a general exposure to equities is what you want, they are a good option. They can invest in all listed stocks, and even in unlisted stocks. They can invest in which ever sector they like, in what ever ratio they like. 3. Equity Linked Savings Schemes (ELSS): Equity linked savings schemes (ELSS) are diversified equity funds that additionally offer income tax benefits to individuals. ELSS is one of the many section 80c instruments, along with the more popular debt options like the PPF, NSC and infrastructure bonds. In this Section 80c grouping. ELSS is unique. Being the only instrument to offer a total equity exposure.Index Fund: An index fund is a diversified equity fund; with a difference- a fund manager has absolutely no say in stock selection. At all times, the portfolio of an.,index fund mirrors an index, both in its choice of stocks and their percentage holding. As of March 2004, equity index funds tracked either the Sensex or the Nifty. So, an index fund that mirrors the Sensex will invest only in the 30 Sensex stocks, which too in the same proportion as their weight age in the index. 5. Sector Fund: Sector funds invest in stocks from only one sector, or a handful of sectors. The objective is to capitalize on the story in the sectors, and offer investors a window to profit from such opportunities. Its a very narrow focus, because of which sector funds are considered the riskiest among all equity funds.

6. Mid Cap Fund: These are diversified funds that target companies on the fast growth trajectory. In the long run, share prices are driven by growth in a companys turnover and profits. Market players refer to them as midsized companies and mid-cap stocks with size in this context being benchmarked to a companys market value. So, while a typical large cap stock would have a market capitalization of over Rs 1,000 crores, a mid-cap stock would have a market value of Rs 250-2,000 crores. DEBT FUNDS These Funds invest a major portion of their corpus in debt papers. Government authorities,private companies, banks and financial institutions are some of the major issuers of debtpapers. By investing in debt instruments, these funds ensure low risk and provide stableincome to the investors.Debt funds are further classified as : 1. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as GOI debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.. Income Funds: Income funds aim to maximize debt returns for the medium to longer term. Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. 3. MIPs: Invests around 80% of their total corpus in debt instruments while the rest of the portion is invested in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. 4. Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6 months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. 5. Liquid Funds: Also known as Money Market Schemes, These funds are meant to provide easy liquidity and preservation of capital. These schemes invest in short- term instruments like Treasury Bills, inter-bank call money market etc. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds. 6. Floating Rate Funds: These income funds are more insulated from interest rate than their conventional peers. In other words, interest rate changes, which cause the.,NAV of a conventional debt fund to go up or down, have little, or no, impact on NAVs of floating rate funds .BALANCED FUNDS These funds, as the name suggests, are a mix of both equity and debt funds. They invest inboth equities and fixed income securities, which are in line with pre-defined investmentobjective of the scheme. These schemes aim to provide investors with the best of both theworlds. Equity part provides growth and the debt part provides stability in returns.Each category of funds is backed by an investment philosophy, which is pre-defined in theobjectives of the fund. The investor can align his own investment needs with the fundsobjective and invest accordingly .HYBRID FUNDS:1. Growth and Income Fund: Strike a balance capital appreciation and income for the investors. In these funds portfolio is a mix between companies with good dividend paying record and those with potential capital appreciation. These funds are less risky than growth funds bit more than income funds.

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Asset Allocation Fund: These funds follow variable asset allocation policy. These move in an out of an asset class (equity, debt, money market or even non-financial assets). Asset allocation funds are those, which follow more stable allocation policies like balanced funds. Those, which flexible allocation policies, are like aggressive speculative funds.., InvestMutual Investment Who Should ment Risk Fund Objective Portfolio Invest Horiz on 3Equity Long-term Capital Aggressive investors High Risk Stocks & Shares years +Funds Appreciation Long term Inv. Capital Balanced ratio of Balanced Growth & Regular Market Risk equity and debt funds Moderate & 2Funds Income and Interest to ensure higher Aggressive years + Risk returns at lower risk To generate returns that are NAV varies Portfolio indices like 3Index Funds commensurate with with index Aggressive investors. BSE, NIFTY etc years + returns of performance respective indices 12 Interest Rate Government Salaried & conservativeGilt Funds Security & Income months Risk securities investors + Credit Risk & Debentures, 12 Salaried & conservativeBond Funds Regular Income Interest Rate Govt securities, months investors Risk Corporate Bonds + Treasury Bills, Liquidity + Certificate of Park funds in current 2 daysMoney Moderate Income + Negligible Deposits, A/cs or short-term - 3Market Reservation of Commercial Papers, Bank Dep. weeks Capital Call MoneyShort-term Call Money,Funds 3 weeks CommPapers,(Floating - Liquidity + Little Interest Those with surplus - Treasury Bills, CDs,short-term) Moderate Income Rate short-term funds 3 Short-term Govt. months securities..,

,7.ADVANTAGES OF MUTUAL FUND

. 1. Affordability : Small investors with low investment fund are unable to invest in high-grade or blue chip stocks. An investor through Mutual Funds can be benefited from a portfolio including of high priced stock. 2. Diversification : Investors investment is spread across different securities (stocks, bonds, money market, real estate, fixed deposits etc.) and different sectors (auto, textile, IT etc.). This kind of a diversification add to the stability of returns, reduces the risk for example during one period of time equities might., under perform but bonds and money market instruments might do well do well and may protect principal investment as well as help to meet return objectives. 3. Variety : Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors 4. Professional Management: Mutual Funds employ the services of experienced and skilled professionals and dedicated investment research team. The whole team analyses the performance and balance sheet of companies and selects them to achieve the objectives of the scheme. 5. Tax Benefits: Depending on the scheme of mutual funds, tax shelter is also available. As per the Union Budget99, income earned through dividends from mutual funds is 100% tax free. Under ELSS of open-ended equityoriented funds an exemption is provided up to Rs. 100,000/- under section 80C. 6. Regulation: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. 8. DISADVANTAGES OF MUTUAL FUND: The following are the disadvantages of investing through mutual fund:

No control over cost: Since investors do not directly monitor the funds operations, they cannot control the costs effectively. Regulators therefore usually limit the expenses of mutual funds. No tailor-made portfolio: Mutual fund portfolios are created and marketed by AMCs, into which investors invest. They cannot made tailor made portfolio. Managing a portfolio of funds: As the number of funds increase, in order to tailor a portfolio for himself, an investor may be holding portfolio funds, with the costs of monitoring them and using hem, being incurred by him.., Delay in Redemption: The redemption of the funds though has liquidity in 24- hours to 3 days takes formal application as well as needs time for redemption. This becomes cumbersome for the investors. Non-availability of loans: Mutual funds are not accepted as security against loan. The investor cannot deposit the mutual funds against taking any kind of bank loans though they may be his assets. 9. RISK INVOLVED IN MUTUAL FUND :THE RISK-RETURN TRADE-OFF The most important relationship to understand is the risk-return trade-off. Higher the riskgreater the returns/loss and lower the risk lesser the returns/loss.Hence it is up to you, the investor to decide how much risk you are willing to take. Inorder to do this you must first be aware of the different types of risks involved with yourinvestment decision ,MARKET RISK: Sometimes prices and yields of all securities rise and fall. Broad outside influencesaffecting the market in general lead to this. This is true, may it be big corporations orsmaller mid-sized companies. This is known as Market Risk. A Systematic InvestmentPlan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might helpmitigate this risk. CREDIT RISK: The debt servicing ability (may it be interest payments or repayment of principal) of acompany through its cash flows determines the Credit Risk faced by you. This credit riskis measured by independent rating agencies like CRISIL who rate companies and theirpaper. An AAA rating is considered the safest whereas a D rating is considered poorcredit quality. A well-diversified portfolio might help mitigate this risk. INFLATION RISK: Things you hear people talk about: Rs. 100 today is worth more than Rs. 100 tomorrow.Remember the time when a bus ride costed 50 paisa?Mehangai Ka Jamana Hai.The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot oftimes people make conservative investment decisions to protect their capital but end upwith a sum of money that can buy less than what the principal could at the time of theinvestment. This happens when inflation grows faster than the return on your investment.A well-diversified portfolio with some investment in equities might help mitigate this risk .INTEREST RATE RISK: In a free market economy interest rates are difficult if not impossible to predict. Changesin interest rates affect the prices of bonds as well as equities. If interest rates raise the.,prices of bonds fall and vice versa. Equity might be negatively affected as well in a risinginterest rate environment. A well-diversified portfolio might help mitigate this risk. POLITICAL/GOVERNMENT POLICY RISK:

Changes in government policy and political decision can change the investmentenvironment. They can create a favorable environment for investment or vice versa. LIQUIDITY RISK: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.Liquidity Risk can be partly mitigated by diversification, staggering of maturities as wellas internal risk controls that lean towards purchase of liquid securities . 11. BASIC CONCEPTS OF LOADS : 1. Entry Load: The load charged at the time of investment is known as entry load. Its meant to cover the cost that the AMC spends in the process of acquiring subscribers commission payable to brokers, advertisements, register expenses etc. The load is recovered by way of charging a sale price higher than the prevailing NAV.., 2. Exist Load:

Some AMC do not charge an entry load but they charged an exist load i.e., they deduct a load before paying out the redemption proceeds. Psychologically, investors are much more willing to pay exist loads as compared to entry loads . 3. Unit: Units mean the investment of the unit holders in a scheme. Each unit represents one undivided share in the assets of a scheme. The value of each unit changes, depending on the performance of the fund. 12.FACTORS AFFECTING MUTUAL FUND 1. Governmental Influences Mutual fund business is a highly regulated business throughout the world as it seeks toensure that quality and fairly priced schemes are available. Governmental intervention thusin mutual fund market usually is most needed to ensure that insurers are reliable. And inthe developing countries the additional goal may be promotion of domestic mutual fundindustry and ensuring the national mutual fund industry contributes to overall economicdevelopment. In a non technical sense mutual fund is purchased in a good faith so the dutyof government intervention in mutual fund industry is to ensure that this principle ofmutual fund is never defeated.The ideology of government plays an important role in mutual fund industry also. Forexample in the past during 1991, the P .V Narsimha Rao government strongly believed inliberalization also liberalized the mutual fund sector which helped to allow private playersin the industry from 1993 and enhancing joint ventures with foreign companies.The present government with more focuses on foreign direct investments has declared tofavor the rise FDI in mutual fund to 49% which further enhances competition in theindustry..,
2. Taxation Policy

Social equity being one of the motives behind tax collections, government give certainexemptions from such levying. One such exemption is deduction incurred by taxpayerstowards investment in mutual fund coverage. Similarly, capital invested in infrastructurebonds etc is offered with certain concession under tax laws. The central idea behind suchexemptions is that the capitals so allocated by individuals reduce the ultimate burden onthe public infrastructure or helps in creating such infrastructural facilities.The income tax rules related to the mutual fund transactions can be classified under: [A] Exemptions available to companies or businesses [B] Exemptions available to insured individuals [A] Exemptions available to companies Expenses deductible from commission earned by distributor, banker, national distributor. Tax concessions under risk management practices of an enterprise In growth option equity schemes there no long term capital gain by company. In dividend option equity schemes there no tax. Return received by charitable trust is total exempted from tax . Else schemes give to advantage of tax saving, growth potential and return. [B] Tax rules governing investment by individuals Deduction in respect of ELSS schemes (sec 80C):Investment in this fund would enable you to avail the benefits under clause (xiii) of asection 80C of the Income Tax Act investment made in the schemes up to 1 lakh by theeligible investor for deduction under this section of the Act.Since it will be an income deduction an investment of Rs 1 lakh in this fund can save offRs. 33600 from your tax payable liability (assuming you are in the highest tax bracket)Investor will receive tax free dividend in above case.Investor will also receive tax free dividend by investing equity schemes in dividend optionInvestors also receive tax free return by investing equity schemes in growth option for longterm capital gain . C Tax plannings An individual can think of health ELSS schemes purchase as a tool of tax planningexercise. For example people who are marginally affected by tax liability can be as wellpurchase a ELSS fund get benefits of Rs. 33600 from tax. In this way tax burden isbecome less by purchasing ELSS fund.Thus tax law offer benefit to individuals/companies by way of exemptions/deductions ofexpenditure incurred towards purchase of mutual fund various schemes coverage fromtotal taxable income .3. Foreign Trade Regulations With the vast potential for mutual fund in India due its large population in the countrymany foreign companies are ready to enter into the Indian market. But companies can bepermitted in India through joint ventures with an Indian partner as well as come separatelyand the foreign equity shall be restricted to only 25%. Another statement also tells thatIndian subsidiaries of foreign companies shall not be allowed to participate in bankingsector unless they entered in to joint ventures with the Indian partners.But at present the mutual fund regulator is in favor of hike in FDI cap from 25% to 49%,and is finalizing a report that will be submitted to the government for a comprehensivelegislation for the industry. The security exchange board of India and association of mutualfund India have been advocating a hike in FDI limit for mutual fund companies so that theforeign partners can infuse additional funds in these companies to sustain their growth..The government will need to amend the separate mutual fund Act for FDI capital

as wellas domestic company as this is the statutory provision unlike sectors like civil aviation andtelecom, which have come through notification .4. National Income The relative importance of the mutual fund Market within a country will also be dependentupon economic development. With greater rates of economic growth, consumption ofinvestment should increase as a result of increased income, and an increased stock ofassets requiring mutual fund. Furthermore, the development of mutual fund is likely tofacilitate greater economic growth, implying that economic growth may be endogenous.Consistent with these arguments, studies find that the level of financial development andeconomic development are positively related to the level of mutual fund across emergingmarkets .5. Consumptions and Savings The gross capital formation of any country is important for indication of its growth in thefuture years. It is quite necessary to set up the rate of capital formation so that a large stockof machines, tools and equipments are accumulated in a country. Experience ofdevelopment in other countries suggests that a high rate of capital formation was achievedto trigger rapid rate of economic growth. With the hike in foreign capital coming to Indiathe rate of capital formation is becoming boom to insurers, which has given themopportunities. It is heartening to them to note that latest savings rate of 28% is highest tillnow and with the growth rate near to 8% is bringing a pool of buyers purchasing power.This directly influences the demand for mutual fund products.., 6. Employment The effect of employment on mutual fund industry is as direct as that on economicdevelopment of any country. With the rising levels of employment the effect on mutualfund industry is positive because employment adds to the insured properties and assetsfrom every prospective be it due to organized or unorganized. 7. Inflation The midterm policy review the strong macroeconomic indicators and RBI has revised itsGDP growth estimates to the upper limit of the earlier projection range 8% inflation (WPI)has been steadily moving up in recent times and RBI has highlighted that primary articlesprices have been on of the key contributors. However one needs to keep in mind thatrecent increase in global oil prices

.8. Money supply The central banks has indicated that credit growth and money supply number are likely tobe above its prosecution for the current fiscal year, the statement to consider promptly allpossible measures as appropriate to the evolving global and domestics situation isindicative of phased increase in FII limits for gilt investment could help in depending thesecurities market and is part of the road map towards fuller convertibility .9. Interest Interest is major factor for investment when a person find less return from investment toolthan people move towards the higher returns tool of investment.., 10. Risk factor

All investments in Mutual Fund and securities are subject to market risks and the NAV ofthe fund may go up or down depending on the factors and forces affecting the securitymarket. There can be no assurance that the funds objective will be achieved. Pastperformance of the sponsors/Mutual fund/schemes/AMC is not necessarily indicative ofthe future results. The name of the schemes does not in any manner indicate their quality,their future prospects or returns.The specific risk would be credit, market, illiquidity, judgmental error, interest rate, swapsand forward rates .11. Demographic environment The demographic environment significantly affects the demand for the mutual fundindustry. Factors like the average age of the population, levels of education, householdstructures income distribution, life style and the extent of industrialization as well asurbanization terribly influences the demand of mutual fund schemesIn India the average age of the population is at an increasing trend following the improvedmedical technology and better awareness of health care requirements. As a result, the riskof investment death is decreasing while connectivity is increasing. Simultaneously thedemand for pension funds and income fund is expected to grow. Forexample at the time of independence the average age of dying for Indians was 45.Presently it has increased to 65 following better healthcare, improvements in medicalscience and more health consciousness among the common man. By 2010 it is expected torise to 75. Hence risk profile is also changing. Earlier people are thanking about safely butat present people thinking about capital growth.., 12. Social Factors The social environment covers the customs, habits, level of education, tastes and standardof living of people in the society. Todays social environment is greatly influenced to amajor extent by the changes in technological aspects. With the rapid progress intechnology and economic liberalization, the physical boundaries are gradually vanishing.As a result, the social life of the people and their views towards risk and uncertainty of lifeand health are gradually changing.These factors of social life are affecting human motivations and emotions related to thephysical and mental incapacities, loss of health and death. In general there are extremesapprehensions of ones death, though it is certain. The perception of an individual towardrisk and capital growth depends on the social culture and religious belief. In the urbanizedarea people does think about investment and capital growth. These beliefs ultimatelyinfluence the buying behavior of a consumer.

13. Education Education is major factor of demand for mutual fund product. if the education levels ishigher than the people know the benefits of mutual fund the use mutual fund as investmenttool and also take rise capital growth. MUTUAL FUND PLAYERS The Indian mutual fund industry is mainly divided into three kinds of categories. These categories include public sector players, nationalized banks and private sector and foreign players.UTI Mutual Fund was one of the leading Mutual Fund companies in India till May 2006with a corpus of more than Rs.31, 000 Crore and it is the public sector mutual fund.,Bank of Baroda, Punjab National Bank, Can Bank and SBI are the major nationalizedbanks mutual fund.At present mutual fund industry is mainly dominated by private and foreign sector playerswhich include major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund,Reliance Mutual Fund etc. are private sector mutual funds players while FranklinTempleton etc. are major foreign mutual fund players. At present there are more than 33players operating in Indian. The brief introduction of major players is given as follows. ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India)Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India)Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABNAMRO Mutual Fund .Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun LifeFinancial. Sun Life Financial is a global organization evolved in 1871 and is beingrepresented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart fromIndia. Birla Sun Life Mutual Fund follows a conservative long-term approach toinvestment. Recently it crossed AUM of Rs. 10,000 Crore. Bank of Baroda Mutual Fund Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 underthe sponsorship of Bank of Baroda. BOB Asset Management Company Limited is theAMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche BankAG is the custodian.HDFC Mutual Fund.HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely HousingDevelopment Finance Corporation Limited and Standard Life Investments Limited. HSBC Mutual Fund HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and CapitalMarkets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fundacts as the Trustee Company of HSBC Mutual Fund. ING Vysya Mutual Fund ING Vysya Mutual Fund was setup on February 11, 1999 with the same named TrusteeCompany. It is a joint venture of Vysya and ING. The AMC, ING InvestmentManagement (India) Pvt. Ltd. was incorporated on April 6, 1998. Prudential ICICI Mutual Fund The mutual fund of ICICI is a joint venture with Prudential PLC of America; one of thelargest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setupon 13th of October 1993 with two sponsors, Prudential PLC. and ICICI Ltd. The TrusteeCompany formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI AssetManagement Company Limited incorporated on 22nd of June 1993. Sahara Mutual Fund Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial CorporationLtd. as the sponsor. Sahara Asset Management Company Private Limited incorporated onAugust 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of theAMC stands at Rs 25.8 crore.., State Bank of India Mutual Fund State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launchoffshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Todayit is the largest Bank sponsored Mutual Fund in India. They have already launched 35Schemes out of which 15 have already yielded handsome returns to investors. State Bankof India Mutual Fund has more than Rs. 5,500 Crore as AUM. Now it has an investor baseof over 8 Lakhs spread over 18 schemes .Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for TataMutual Fund is Tata Sons Ltd., and Tata Investment Corporation Ltd. The investmentmanager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited.Tata Asset Management Limiteds is one of the fastest in the country with more than Rs.7,703 Crore (as on April 30, 2005) of AUM .Kotak Mahindra Mutual Fund Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It ispresently having more than 1,99,818 investors in its various schemes. KMAMC started itsoperations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering toinvestors with varying risk - return profiles. It was the first company to launch dedicatedgilt scheme investing only in government securities .Reliance Mutual Fund Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited isthe Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund, whichwas changed on March 11, 2004. Reliance Mutual Fund was formed for launching of.,various schemes under which units are issued to the Public with a view to contribute to thecapital market and to provide investors the opportunities to make investments indiversified securities . Standard Chartered Mutual Fund Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by StandardChartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. StandardChartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated withSEBI on December 20,1999. Templeton India Mutual Fund The group, Franklin Templeton Investments is a California (USA) based company with aglobal AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financialservices groups in the world. Investors can buy or sell the Mutual Fund through theirfinancial advisor or through mail or through their website. They have Open endDiversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes,Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Incomeschemes and Open end Fund of Funds schemes to offer. Morgan Stanley Mutual Fund India Morgan Stanley is a worldwide financial services company and its leading in the marketin securities, investment management and credit services. Morgan Stanley InvestmentManagement (MISM) was established in the year 1975. It provides customized assetmanagement services and products to governments, corporations, pension funds and non-profit organizations. Its services are also extended to high net worth individuals and retailinvestors. In India it is known as Morgan Stanley Investment Management Private Limited(MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the firstclose end diversified equity scheme serving the needs of Indian retail investors focusing ona long-term capital appreciation.., Escorts Mutual Fund Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as itssponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC wasincorporated on December 1, 1995 with the name Escorts Asset Management Limited. Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark AssetManagement Company Pvt. Ltd. is the AMC. Can bank Mutual Fund Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as thesponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993is the AMC. The Corporate Office of the AMC is in Mumbai.Chola Mutual FundChola Mutual Fund under the sponsorship of Cholamandalam Investment & FinanceCompany Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is theTrustee Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. Itcontributed Rs. 2 Crore towards the corpus of the Fund. LIC Mutual Fund was constitutedas a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Companystarted its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointedJeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers forLIC Mutual Fund.., GIC Mutual Fund GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), aGovernment of India undertaking and the four Public Sector General InsuranceCompanies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd.(NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII)and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act,1882.., (B) COMPANY INFORMATION 1. HISTORY NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financialproducts and services in India. Established in year 1994, NJ has over a decade of richexposure in financial investments space and portfolio advisory services. From a humblebeginning, NJ over the years has evolved out to be a professionally managed, qualityconscious and customer focused financial / investment advisory & distribution firm. NJ prides in being a professionally managed, quality focused and customer centricorganization. The strength of NJ lies in the strong domain knowledge in investmentconsultancy and the delivery of sustainable value to clients with support from cutting-edgetechnology platform, developed in-house by NJ.At NJ we believe in having single window, multiple solutions that are integrated for simplicity and sapience making innovations, accessions, value-additions, a constant process providing customers with solutions for tomorrow which will keep them above the curve, today NJ has over INR 30 billion* of mutual fund assets under advice with a widepresence in over 135 locations* in 21states* in India. The numbers are reflections of thetrust, commitment and value that NJ shares with its clients. NJ Wealth Advisors, a division of NJ, focuses on providing financial planning andportfolio advisory services to premium clients of high net-worth. At NJ Wealth Advisors,we have developed processes that focus on providing the best in terms of the advice andthe ongoing management of your portfolio and financial plans. At NJ, our experience, knowledge and understanding enables us to provide you withthe expected value, in an enhanced way. As a leading player in the industry, we continueto successfully meet the expectations of our clients, through meaningful andcomprehensive solutions offered by NJ Wealth Advisors.,

2.VISION & MISSION OF NJ India invest VisionTo be the leader in our field of business through, Total Customer Satisfaction Commitment to Excellence Determination to Succeed with strict adherence to compliance Successful Wealth Creation of our Customers Mission Ensure creation of the desired value for our customers, employees and associates,through constant improvement, innovation and commitment to service & quality. Toprovide solutions which meet expectations and maintain high professional & ethicalstandards along with the adherence to the service commitments .

(C) RESEARCH METHODOLOGY 1. RESEARCH PROBLEM: To know investors behavior regarding mutual fund as an investment avenue.2. RESEARCH OBJECTIVES (PRIMARY) : To know investors behavior regarding mutual fund as an investment avenue. RESEARCH OBJECTIVES (SECONDARY) To identify the objectives of the investors for investing in a mutual fund. To identify the investment patterns of investors. To find out which scheme is better according to investors. To study investors perceptions about level of satisfaction while investing in mutualfunds .3. RESEARCH PLAN: DATA SOURCE we have used primary data source to collect the data regarding investors behavior formutual fund as an investment avenue. The survey was conducted across jammu. RESEARCH APPROACH Survey approach was under taken to know the behavior of investor regarding mutualfund as an investment avenue. RESEARCH INSTRUMENT Questionnaire was the instrument of collecting data SAMPLING PLAN., Sample unit: All the investors who are occasionally or regularly investing in financialassets and non-financial assetsSample size: Survey population comprises of the total reputed businessman, Professionals, andindividual

investor was approx 70.Sampling method:In this study as suggested by the company a sample of reputed Businessman,Professionals, and individual investors was selected and it was selected through non-probability, convenience sampling method. Because all the Businessman, Professionals,and individual investors could not be interviewed as per our requirement but according totheir availability and accessibility we meet them.Contact methodThe total sample size for survey was 70 investors by personal interview., ,5. LIMITATION OF THE STUDY: Every research has its own limitation and present research work is no exception to this general rule the inherent limitation of the study are as under: Interview method, which was followed in the present research work, is relatively more time consuming. In addition to this it is very expensive method, especially when spread geographic sample is taken. Questionnaire method can be used only when respondents are literate and co-operative. Sample size was 70 that are not enough to study the awareness of Independent individuals. As sampling techniques is convenient sampling so it may result in personal bias. Even respondent give bias answers. Time is main constraint of the research as we have been given project as well as study simultaneously.., 6.FINDINGS AND RECOMMENDATIONS :From the above analysis, I found that even though certainly not the best or deepest ofmarkets in the world, it has ignited the growth rate in mutual fund giving more benefit of the investments to their clients. Independent Financial Advisors who are not suggesting their clients to invest in mutual funds due to their lack of knowledge of mutual funds. So, NJ India Invest should ar- range mutual fund awareness Program of their and other independent Financial Advi- sors on regular basis. By industry to providereasonable options for an ordinary man to invest his savings.With the help of Give more importance to safety and return attributes because Independent Financial Advisors are more concern about safety and of providing better service NJ India Invest should try to attract the Independent Finan- cial Advisors to join with them. NJ India Invest should arrange special mutual fund awareness program for gener- al public. So they can directly work with NJ India Invest as direct client. Majority of the Government employees take into consideration tax benefits before make- in any investment. So NJ India Invest should highlight tax benefits in mutual funds. NJ India Invest should launch its brand awareness campaign to be successful in Mutual fund advisory service provider NJ India invest should also concentrate on youngster who are interested in savings so make them aware about different schemes for investment and arrange seminars for coolloge going students, by this company gets more customers connected for long periods Put hoardings outside the colleges making NJ INDIA known to them and try to attract them. While the age group above 30years concentrates on safety and tax saving and they even take care of the liquidity.., Here the objective of the investor between the age of 20-30 is to earn the higher return. Objectives of the investor are to get something in return for their investment and the risk they are taking. Most of the investors give importance to return, tax saving etc. It is necessary to make Mutual Fund more popular in the eyes of investors as well as distributors and also cater trust which has been lost due to US-64. Knowledge about mutual funds and their various schemes is moderate among in- vestors. Growth scheme is the most preferred for investment Most of the investors give importance to the fact that their investment should grow in value over a period of time. Around 50% of the investors invest to maximize their returns and they are ready to take moderate risks in their investment portfolio.., Key Findings: -

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