A REPORT On

A Study on The Working of Mutual funds in India

Under the Guidance of

Mr.Nitin walia
Submitted By:

Nishant bansal

01461101810 BBA (3rd SEM)

Report submitted in partial fulfillment of the requirements for the award of the degree of BACHELOR OF BUSINESS ADMINISTRATION BANKING AND INSURANCE SESSION: (2010-13)

Maharaja Agrasen Institute Of Management Studies

Sector-22 Rohini, New Delhi-8

CERTIFICATE
This is to certify that this is a bonafide record of the project work done by mr. Nishant bansal Enrollment number 01461101810 in partial fulfillment of BBA Programme. This report on the topic has not been submitted for any other examination and does not form part of any other course undergone by the candidate.

________________________ SIGN OF PROJECT GUIDE PLACE: DATE:

STUDENT UNDERTAKING
I, Nishant bansal hereby declare that the project report mutual fund for the fulfillment of the requirement of my course from BBA is an original work of mine and the data provided in the study is authentic, to the best of my knowledge. The Project is submitted to Maharaja Agrasen Institute Of Management Studies, New Delhi, as a part of final semester project for Bachelor of Business Administration Programme.

Project Guide:

_______________

Nishant bansal (01461101810)

ACKNOWLEDGEMENT
It is great pleasure for me to acknowledge the kind of help and guidance received to me during my project work. I was fortunate enough to get support from a large number of people to whom I shall always remain grateful. I would like to express my sincere gratitude to Mr.Nitin walia For giving me this opportunity to undergo this lucrative project for her great guidance and advice on this project, without which I will not be able to complete this project. I am very thankful to my friends for giving me valuable suggestion and encouragement to bring out a good project.

Nishant bansal
01461101810

SUMMARY

Indian Stock market has undergone tremendous changes over the years. Investment in Mutual Funds has become a major alternative among Investors. The project has been carried out to have an overview of Mutual Fund Industry and to understand investors perception about Mutual Funds in the context of their trading preference, explore investors risk perception & find out their preference over Top Mutual funds.

OBJECTIVE
The objective for taking up this project is to study about the benefits available from Mutual Fund investment and different types of schemes available and to compare mutual fund with other . The idea here is to understand the current market trend and scenario of Mutual Fund business in India and recent developments in the Mutual fund industry and its future scope or renovation. To study various regulations passed and prescribed by SEBI and AMFI.

INDEX

Sr.No. 1. 2. 3. 4. 5. 6. 7. Introduction

Chapter Name

Page no.

Mutual Fund in India Profile of ING Vysya ING Vysya Mutual Fund Scheme Research Methodology Data Analysis Finding Conclusion Bibliography

CHAPTER NO 1 Introduction of Mutual Fund

METHODOLOGY
Data source are the data resources or collection of data to obtain results. There are two types of data sources: Primary data and secondary data.

Primary Data: Primary data are those data which are collected for the first time , taking sample, representing a population. It is not a published data, it is probably specified data collection by the researcher, first time. Secondary Data: Secondary data are those data which are already published . It maybe used by many other people than then researchers who has published it. There are various sources for secondary data collection. These sources can be government sources, commercial sources, industry sources and miscellaneous sources. Business firms always have a great deal of internal secondary data in market with them. sales statistics constitute the most important component of secondary data in marketing and the researcher researches it extensively. All the output of the MIS of the firm generally constitutes internal secondary data. This data is readily available, the market researcher gets it without much efforts, time and money. I have used secondary data for making my project.

Introduction of Mutual Fund

Lots of investment opportunity are available to investors. Mutual fund also offers good investment opportunity to investor. Like other option of investment mutual fund also carry certain risk factor. The investor should compare the risk expected yields after adjustment of tax on various instruments while taking investment decisions. For purchasing the good mutual fund they take the advantages of expert like agent and distributors. One can invest in Bank Deposits, Corporate Debentures, and Bonds where there is low risk but low return. He may invest in Stock of companies where the risk is high and the returns are also proportionately high. The recent trends in the Stock Market have shown that an average retail investor always lost with periodic bearish tends. People began opting for portfolio managers with expertise in stock markets who would invest on their behalf. Thus we had wealth management services provided by many institutions. However they proved too costly for a small investor. These investors have found a good shelter with the mutual funds.

Mutual fund industry has seen a lot of changes in past few years with multinational companies coming into the country, bringing in their professional expertise in managing funds worldwide. In the past few months there has been a consolidation phase going on in the mutual fund industry in India. Now investors have a wide range of Schemes to choose from depending on their individual profiles. My study gives an overview of mutual funds definition, types, benefits, risks, limitations, history of mutual funds in India, latest trends, global scenarios

Definition
Mutual fund can be defined as is a from of collective investment that is useful in spreading risks and optimising returns

What is Mutual Fund?

Mutual Fund is the mechanism for pooling the recourses by issuing unit to the

investors and investing the funds in securities in accordance with objectives as disclosed in offer of document. Investment is securities are spread across a wide cross section industries and Diversification reduces the risk because the investors money bifurcates into In mutual fund units are allotted to investors in proportion of the investment of A mutual fund is just the connecting bridge or a financial intermediary that sectors and the risk is reduced. small part and invests in different sectors. money. allows a group of investor to pool their money together with a predetermined investment objective. The Mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual fund are considered as one of the best available investment as compare to other they are very cost efficient and also easy to investing, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimising risk and maximising returns.

Investors earn from a Mutual Fund in three ways:

1. Income is earned from dividends declared by mutual fund schemes from time to time.

2. If the fund sells securities that have increased in price, the fund has a capital gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain.

3. If fund holdings increase in price but are not sold by the fund manager, the fund's unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain. Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small and large investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard investors interest, ensures that the investors are not cheated out of their hard-earned money. All in all, benefits provided by them cut across the boundaries of investor category and thus create for them, a universal appeal. Investors of all categories could choose to invest on their own in multiple options but opt for mutual funds for the sole reason that all benefits come in a package.

Advantage of Mutual Fund

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. This risk of default by any company that one has chosen to invest in, can be minimized by investing in mutual funds as the fund managers analyze the companies financials more minutely than an individual can do as they have the expertise to do so. They can manage the maturity of their portfolio by investing in instruments of varied maturity profiles.

Well Regulated: - India mutual fund are regulated by the Securities and Exchange Board of India, which helps provide comfort to the investor. Sebi forces transparencies on the mutual fund, which help the investor, make an informed choice. Sebi requires the mutual fund to disclose their portfolios at least six monthly, which help you keep track whether the fund is investing in line with its objectives or not.

Tax Advantages: - Investing in mutual funds also enjoys several tax advantages. Dividends from Mutual fund are tax-free in the hands of the investor (This however depends upon change in Finance Act).Also Capital Gain accrued from Mutual fund Investment for a period of over one year is treated as long term capital appreciation and is tax free.

Liquidity: - Mutual funds are typically very liquid investment. Unless they have a pre-specified lock-in, your money will be available to you anytime you want. Typically funds take a couple of day for returning your money to you, Since they are very integrated with the banking system, most funds can send money directly to your banking account.

Easy of process: - If you have a bank account and a PAN card, you are ready to invest in a mutual fund; it is as simple as that! You need to fill in the application form, attach your PAN (typically for transaction of greater than Rs.50, 000) and sign your cheque and you investment in a fund is made.

Helps to fulfil our dream: - The investments we make are ultimately for some objectives such as to buy a house, childrens education, marriage etc. And many of them require a huge one-time investment. As it would usually not be possible raise such large amount at short notice, we need to build the corpus over a longer period of time, through small but regular investment. This is what SIP is all about. Small investments, over period of time, results in large wealth and help fulfil our dreams & aspirations.

Simplicity: - Begins a Mutual fund is easily well back has its upon line or mutual fund & minimum investment is small. Most company also has automatics purchase. Plan where buy as little as $100 can be intervened as on monthly basis.

Economic of scale: - Because a mutual fund buys sale large amount or securities at a line its transaction cost are lover than you as on individual would pay.

Disadvantage of Mutual Fund

Cost: - Mutual Fund does not exist solely to make you like easier all funds are

in it profit. The mutual fund in industry at buying cost under layers of Jargon.

There cost is so complicated that in this tutorial we have devoted an entire to the subject. Dilution: - It is possible to handle too much diversification because fund have

small holding in so many different company high return from few institute often do not make such difference on the overall return. Dilution is also the result or a successfully way getting too big. When money power into funds that have strong success to market often has trouble finding a new concept to all investment is now new money concept.

No control over costs: - The costs of the fund management process are

deducted from the fund. This includes marketing and initial costs deducted at the time of entry itself, called, Load. Then there is the annual asset management fee and expenses, together called the expense ratio. Usually, the former is not counted while measuring performance, while the latter is. A Standard 2 percent expense ratio means that, everything else being equal, the fund manager under performs the benchmark index by an equal amount. No Guarantee of return: - 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.

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 if you reinvest the money you made.

Management risk: - When you invest in a mutual fund, you 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 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.

INVESTMENT STRATEGIES 1. Systematic Investment Plan: under this a fixed sum is invested each month
on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund
and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual

fund then he can withdraw a fixed amount each month.

CHAPTER NO 2 History Of Mutual Fund

History of Mutual Fund

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases

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 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)

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 June 1987 followed by Can bank 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 established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all 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

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. 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. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. The graph indicates the growth of assets over the years.

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 2006 with 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 nationalized banks mutual fund. At present mutual fund industry is mainly dominated by private and foreign sector players which include major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund, Reliance Mutual Fund etc. are private sector mutual funds players while Franklin Templeton etc. are major foreign mutual fund players. At present there are more than 33 players operating in Indian.

Chapter no 3 Types Of Mutual Fund Schemes

Types Of Mutual Fund Schemes

A wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

By structure:
a) open-ended schemes b) close-ended schemes

By investment objective:
a) growth schemes b) income schemes c) Balanced schemes d) money market schemes

Other schemes:
a) Tax saving schemes b) special schemes c) index schemes d) sector specific schemes

By Structure
a) Open-ended schemes Open-ended or open mutual funds are much more common than closed-ended funds and meet the true definition of a mutual fund a financial intermediary that allows a group of investors to pool their money together to meet an investment objective to make money! An individual or team of professional money managers manage the pooled assets and choose investments, which create the funds portfolio. They are established by a fund sponsor, usually a mutual fund company, and valued by the fund company or an outside agent. This means that the funds portfolio is valued at "fair market" value, which is the closing market value for listed public securities. An openended fund can be freely sold and repurchased by investors.

Buying and Selling:

Open funds sell and redeem shares at any time directly to shareholders. To make an investment, you purchase a number of shares through a representative, or if you have an account with the investment firm, you can buy online, or send a check. The price you pay per share will be based on the funds net asset value as determined by the mutual fund company. Open funds have no time duration, and can be purchased or redeemed at any time, but not on the stock market. An open fund issues and redeems shares on demand, whenever investors put money into the fund or take it out. Since this happens routinely every day, total assets of the fund grow and shrink as money flows in and out daily. The more investors buy a fund, the more shares there will be. There's no limit to the number of shares the fund can issue. Nor is the value of each individual share affected by the number outstanding, because net asset value is determined solely by the change in prices of the stocks or bonds the fund owns, not the size of the fund itself. Some open-ended funds charge an entry load (i.e., a sales charge), usually a percentage of the net asset value, which is deducted from the amount invested.

Advantages:

Open funds are much more flexible and provide instant liquidity as funds sell shares daily. You will generally get a redemption (sell) request processed promptly, and

receive your proceeds by check in 3-4 days. A majority of open mutual funds also allow transferring among various funds of the same family without charging any fees. Open funds range in risk depending on their investment strategies and objectives, but still provide flexibility and the benefit of diversified investments, allowing your assets to be allocated among many different types of holdings. Diversifying your investment is key because your assets are not impacted by the fluctuation price of only one stock. If a stock in the fund drops in value, it may not impact your total investment as another holding in the fund may be up. But, if you have all of your assets in that one stock, and it takes a dive, youre likely to feel a more considerable loss. Risks:

Risk depends on the quality and the kind of portfolio you invest in. One unique risk to open funds is that they may be subject to inflows at one time or sudden redemptions, which leads to a spurt or a fall in the portfolio value, thus affecting your returns. Also, some funds invest in certain sectors or industries in which the value of the in the portfolio can fluctuate due to various market forces, thus affecting the returns of the fund.

b) Close-ended schemes Close-ended or closed mutual funds are really financial securities that are traded on the stock market. Similar to a company, a closed-ended fund issues a fixed number of shares in an initial public offering, which trade on an exchange. Share prices are determined not by the total net asset value (NAV), but by investor demand. A sponsor, either a mutual fund company or investment dealer, will raise funds through a process commonly known as underwriting to create a fund with specific investment objectives. The fund retains an investment manager to manage the fund assets in the manner specified.

Buying and Selling:

Unlike standard mutual funds, you cannot simply mail a check and buy closed fund shares at the calculated net asset value price. Shares are purchased in the open market similar to stocks. Information regarding prices and net asset values are listed

on stock exchanges, however, liquidity is very poor. The time to buy closed funds is immediately after they are issued. Often the share price drops below the net asset value, thus selling at a discount. A minimum investment of as much as $5000 may apply, and unlike the more common open funds discussed below, there is typically a five-year commitment.

Advantages:

The prospect of buying closed funds at a discount makes them appealing to experienced investors. The discount is the difference between the market price of the closed-end fund and its total net asset value. As the stocks in the fund increase in value, the discount usually decreases and becomes a premium instead. Savvy investors search for closed-end funds with solid returns that are trading at large discounts and then bet that the gap between the discount and the underlying asset value will close. So one advantage to closed-end funds is that you can still enjoy the benefits of professional investment management and a diversified portfolio of high quality stocks, with the ability to buy at a discount. Risks: Investing in closed-end funds is more appropriate for seasoned investors. Depending on their investment objective and underlying portfolio, closed-ended funds can be fairly volatile, and their value can fluctuate drastically. Shares can trade at a hefty discount and deprive you from realizing the true value of your shares. Since there is no liquidity, investors must buy a fund with a strong portfolio, when units are trading at a good discount, and the stock market is in position to rise.

By 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: a) Growth / Equity Oriented Schemes 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. Equity funds As explained earlier, such funds invest only in stocks, the riskiest of asset classes. With share prices fluctuating daily, such funds show volatile performance, even losses. However, these funds can yield great capital appreciation as, historically, equities have outperformed all asset classes. At present, there are four types of equity funds available in the market. In the increasing order of risk, these are: Index funds These funds track a key stock market index, like the BSE (Bombay Stock Exchange) Sensex or the NSE (National Stock Exchange) S&P CNX Nifty. Hence, their portfolio mirrors the index they track, both in terms of composition and the individual stock weightages. For instance, an index fund that tracks the Sensex will invest only in the Sensex stocks. The idea is to replicate the performance of the benchmarked index to near accuracy. Investing through index funds is a passive investment strategy, as a funds performance will invariably mimic the index concerned, barring a minor "tracking error". Usually,

theres a difference between the total returns given by a stock index and those given by index funds benchmarked to it. Termed as tracking error, it arises because the index fund charges management fees, marketing expenses and transaction costs (impact cost and brokerage) to its unit holders. So, if the Sensex appreciates 10 per cent during a particular period while an index fund mirroring the Sensex rises 9 per cent, the fund is said to have a tracking error of 1 per cent. To illustrate with an example, assume you invested Rs 1,000 in an index fund based on the Sensex on 1 April 1978, when the index was launched (base: 100). In August, when the Sensex was at 3.457, your investment would be worth Rs 34,570, which works out to an annualised return of 17.2 per cent. A tracking error of 1 per cent would bring down your annualised return to 16.2 per cent. Obviously, the lower the tracking error, the better the index funds. Diversified funds Such funds have the mandate to invest in the entire universe of stocks. Although by definition diversified fund depend a lot on the fund managers capabilities to make the right investment decisions. On your part, watch out for the extent of diversification prescribed and practiced by your fund manager. Understand that a portfolio concentrated in a few sectors or companies is a high risk, high return proposition. If you dont want to take on a high degree of risk, stick to funds that are diversified not just in name but also in appearance. Tax-saving funds Also known as ELSS or equity-linked savings schemes, these funds offer benefits under Section 88 of the Income-Tax Act. So, on an investment of up to Rs 10,000 a year in an ELSS, you can claim a tax exemption of 20 per cent from your taxable income. You can invest more than Rs 10,000, but you wont get the Section 88 benefits for the amount in excess of Rs 10,000. The only drawback to ELSS is that you are locked into the scheme for three years. In terms of investment profile, tax-saving funds are like diversified funds. The one difference is that because of the three year lock-in clause, tax-saving funds get more time to reap the benefits from their stock picks, unlike plain diversified funds, whose portfolios sometimes tend to get dictated by redemption compulsions.

Sector funds The riskiest among equity funds, sector funds invest only in stocks of a specific industry, say IT or FMCG. A sector funds NAV will zoom if the sector performs well; however, if the sector languishes, the schemes NAV too will stay depressed. Barring a few defensive, evergreen sectors like FMCG and pharma, most other industries alternate between periods of strong growth and bouts of slowdowns. The way to make money from sector funds is to catch these cyclesget in when the sector is poised for an upswing and exit before it slips back. Therefore, unless you understand a sector well enough to make such calls, and get them right, avoid sector funds.

b) 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. Such funds attempt to generate a steady income while preserving investors capital. Therefore, they invest exclusively in fixed-income instruments securities like bonds, debentures, Government of India securities, and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. There are basically three types of debt funds. Income funds By definition, such funds can invest in the entire gamut of debt instruments. Most income funds park a major part of their corpus in corporate bonds and debentures, as