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Mutual Funds
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Mutual fund is an investment company that pools money from shareholders and
invests in a variety of securities, such as stocks, bonds and money market
instruments. Most open-end Mutual funds stand ready to buy back (redeem) its
shares at their current net asset value, which depends on the total market value of the
fund's investment portfolio at the time of redemption. Most open-end Mutual funds
continuously offer new shares to investors. Also known as an open- end investment
company, to differentiate it from a closed-end investment company. Mutual funds
invest pooled cash of many investors to meet the fund's stated investment objective.
Mutual funds stand ready to sell and redeem their shares at any time at the fund's
current net asset value: total fund assets divided by shares outstanding.
In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in offer
document. Investments in securities are spread across a wide cross-section of industries and
sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not
move in the same direction in the same proportion at the same time. Mutual fund
issues units to the investors in accordance with quantum of money invested by them.
Investors of Mutual funds are known as unit holders. The profits or losses are shared by the
investors in proportion to their investments. The Mutual funds normally come out with a
number of schemes with different investment objectives which are launched from time to time.
In India, A Mutual fund is required to be registered with Securities and Exchange Board of
India (SEBI) which regulates securities markets before it can collect funds from the public. In
Short, a Mutual fund is a common pool of money in to which investors with common
investment objective place their contributions that are to be invested in accordance with the
stated investment objective of the scheme. The investment manager would invest the money
collected from the investor in to assets that are defined/ permitted by the stated objective
of the scheme. For example, an equity fund would invest equity and equity related instruments
and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a suitable
investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
CONCEPT OF THE MUTUAL FUND
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciations realized are shared by its unit holders in proportion
to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for
the common man as it offers an opportunity to invest in a diversified, professionally managed
basket of securities at a relatively low cost. The flow chart below describes broadly the
working of a mutual fund:
Investor
Fundmanager
Securities
Returns
A mutual fund is a professionally managed form of collective investments that pools
money from many investors and invests it in stocks, bonds, short-term money market
instruments, and other securities. In a mutual fund the fund manager who is also
known as the portfolio manager, trades the fund’s underlying securities, realizing
capital gains or losses, and collects the dividend or interest income. The investment
proceeds are then passed along to the individual investors.
Investor preference in mutual funds tells about the interest or willingness of investor to
invest in mutual funds. And also how many individuals know about the mutual fund as
a investment alternative. And what is the scenario in these days towards mutual funds
in terms of risk and return. There are a lot of investment avenues available today in the
financial market for an investor with an investable surplus. He 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 return is 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 are 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.
The mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by the
pooling of a number of small investments into a large bucket. Yet, it has been the
subject of Perhaps the most elaborate and prolonged regulatory effort in the history of
the country. The mutual fund industry has grown to gigantic proportions in countries
like the USA, in India it is still in the phase of infancy.
A small investor is the one who is able to correctly plan & decide in which Profitable
& safe instrument to invest. To lock up one’s hard earned money in a savings Bank’s
account is not enough to counter the monster of inflation. Investment is a serious
proposition one has to look into various factors before Deciding on the instruments in
which to invest. Using simple concepts of Diversification, power of compound
interest, stable returns & limited exposure to equity Investment, one can maximize his
returns on investments & multiply one’s savings.
Investment is a serious proposition one has to look into various factors before
Deciding on the instruments in which to invest. To save is not enough. One must
invest wisely & get maximum returns. One must plan investment in such a way that
his Investment objectives are satisfied. A sound investment is one which gives the
investor Reasonable returns with a proper profitable management.
The mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by the
pooling of a number of small investments into a large bucket. Yet, it has been the
subject of perhaps the most elaborate and prolonged regulatory effort in the history of
the country. The mutual fund industry has grown to gigantic proportions in countries
like the USA, in India it is still in the phase of infancy. The origin of the Indian mutual
fund industry can be traced back to 1964 when the Indian Government, with a view to
augment small savings within the country and to channelize these savings to the
capital markets, set up the Unit Trust of India (UTI). The UTI was setup under a
specific statute, the Unit Trust of India Act, 1963. The Unit Trust of India launched its
first open-ended equity scheme called Unit 64 in the year 1964, which turned out to be
one of the most popular mutual fund schemes in the country. In 1987, the government
permitted other public sector banks and insurance companies to promote mutual fund
schemes. Pursuant to this relaxation, six public sector banks and two insurance
companies’ viz. Life Insurance Corporation of India and General Insurance
Corporation of India launched mutual fund schemes in the country. Securities
Exchange Board of India, better known as SEBI, formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive regulatory
framework for the mutual fund industry. This proved to be a boon for the mutual fund
industry and since then several mutual funds have been set up by the private sector as
well as the joint sector. Kothari Pioneer Mutual fund became the first from the private
sector to establish a mutual fund in association with a foreign fund. Since then several
private sector companies have established their own funds in the country, making
mutual fund industry one of the most followed sector by critics and investors alike.
The share of private sector mutual funds too has gone up rapidly. In the period
between 1963 and 1988, when the UTI was the sole player in the industry, the assets
under management grew to about Rs.67 billion. In the second phase between 1988-
1994, when public sector banks and insurance companies were allowed to launch
mutual fund schemes, the total assets in the mutual fund industry grew to about Rs.
610 billion with the total number of schemes increasing to 167 by the end of 1994. The
third phase of the mutual fund industry, which commenced in 1994, witnessed
exponential growth of the industry, with the advent of private players therein. As on
May 31, 2004, the total assets under management stood at Rs. 1540 billion and the
total number of schemes stood at 399. During the last three and a half decades, UTI
has been a dominant player in the mutual fund industry. The total assets under the
management of the UTI as on September 30, 2002 were to the tune of Rs. 442 billion,
which amount to almost 41% of the total assets under management in the domestic
mutual fund industry. UTI has witnessed some erosion of assets pursuant to the last
year’s crisis arising on account of its Unit 64 scheme, the scheme with largest amount
of assets under management. This was the first scheme launched by the UTI with a
significant equity exposure and the returns of which was not linked to the market. This
resulted in a payment crisis when the stock markets crashed during the last two years,
which resulted in some degree of loss of investors’ confidence in UTI leading to
erosion of its assets under management. This period also gave opportunity to the
private players to demonstrate better returns thereby capturing a significant market
share.
Whatever may have happened to mutual funds in the past and whatever one is seeing
now, mutual funds are here to stay as long as they can deliver the aspirations of their
investors. One must not forget that India is a large nation with a population of more
than 1 billion people and the potential continues to be huge. However, to be fair
mutual fund managers should also strive to improve their performance and not blame
the vagaries of the market all the times. Mutual fund is an investment company that
pools money from shareholders and invests in a variety of securities, such as
stocks, bonds and money market instruments. Most open-end Mutual funds
stand ready to buy back (redeem) its shares at their current net asset value, which
depends on the total market value of the fund's investment portfolio at the time of
redemption. Most open-end Mutual funds continuously offer new shares to investors.
Also known as an open-end investment company, to differentiate it from a closed-end
investment company. Mutual funds invest pooled cash of many investors to meet the
fund's stated investment objective. Mutual funds stand ready to sell and redeem their
shares at any time at the fund's current net asset value: total fund assets divided by
shares outstanding. In Simple Words, Mutual fund is a mechanism for pooling the
resources by issuing units to the investors and investing funds in securities in
accordance with objectives as disclosed in offer document. Investments in securities
are spread across a wide cross-section of industries and sectors and thus the risk is
reduced. Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of Mutual
funds are known as unit holders. The profits or losses are shared by the investors in
proportion to their investments. The Mutual funds normally come out with a number
of schemes with different investment objectives which are launched from time to time.
In India, A Mutual fund is required to be registered with Securities and Exchange
Board of India (SEBI) which regulates securities markets before it can collect funds
from the public. In Short, a Mutual fund is a common pool of money in to which
investors with common investment objective place their contributions that are to be
invested in accordance with the stated investment objective of the scheme. The
investment manager would invest the money collected from the investor in
to assets that are defined/ permitted by the stated objective of the scheme. For
example, an equity fund would invest equity and equity related instruments and a debt
fund would invest in bonds, debentures, gilts etc. Mutual fund is a suitable investment
for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
Meaning of mutual funds:
A mutual fund is a professionally managed form of collective investments that pools
money from many investors and invests it in stocks, bonds, short –term money market
instruments, and other securities. In a mutual fund, the fund manager ,who is also
known as the portfolio manager, trades the fund’s underlying securities, Realizing
capital gains or losses and collects the dividend or interest income. The investment
proceeds are then passed along to the individual investors.
Definition
Mutual funds are “corporations which accept dollars from savers and then use these
dollars to buy stocks, long term bonds, and short term debt instruments issued by
business or government units, these corporations’ pools funds and thus reduce risk by
diversification”.
Mutual funds as “financial intermediaries which bring a wide variety of securities
within the reach of the most modest of investors”.
“It is a non depository or non banking financial intermediary which acts as an
important vehicle for bringing wealth holders and deficit units together indirectly”.
A mutual fund, also referred to as an open-end fund, is an
investment company that spreads its money across a diversified
portfolio of securities -- including stocks, bonds, or money market
instruments. Shareholders who invest in a fund each own a
representative portion of those investments, less any expenses
charged by the fund. Mutual fund investors make money either by
receiving dividends and interest from their investments, or by the
rise in value of the securities. Dividends, interest and profits from
the sale of any securities (capital gains) are passed on to the
shareholders in the form of distributions. And shareholders generally
are allowed to sell (redeem) their shares at anytime for the closing
market price of the fund on that day.
Mutual funds have been around for a long time, dating back to the
early 19th century. The first modern American mutual fund opened
in 1924, yet it was only in the 1990’s that mutual funds became
mainstream investments, as the number of households owning them
nearly tripled during that decade. With recent surveys showing that
over 88% of all investors participate in mutual funds, you're probably
already familiar with these investments, or perhaps even own some.
In any case, it's important that you know exactly how these
investments work and how you can use them to your advantage.
A mutual fund is a special type of company that pools together
money from many investors and invests it on behalf of the group, in
accordance with a stated set of objectives. Mutual funds raise the
money by selling shares of the fund to the public; much like any
other company can sell stock in itself to the public. Funds then take
the money they receive from the sale of their shares (along with any
money made from previous investments) and use it to purchase
various investment vehicles, such as stocks, bonds and money
market instruments. In return for the money they give to the fund
when purchasing shares, shareholders receive an equity position in
the fund and, in effect, in each of its underlying securities. For most
mutual funds, shareholders are free to sell their shares at any time,
although the price of a share in a mutual fund will fluctuate daily,
depending upon the performance of the securities held by the fund.
A mutual fund is simply a financial intermediary that allows a group
of investors to pool their money together with a predetermined
investment objective. The mutual fund will have a fund manager
who is responsible for investing the pooled money into specific
securities (usually stocks or bonds). When you invest in a mutual
fund, you are buying shares (or portions) of the mutual fund and
become a shareholder of the fund.
An open-ended fund operated by an investment company which
raises money from shareholders and invests in a group of assets, in
accordance with a stated set of objectives. Mutual funds raise money
by selling shares of the fund to the public, much like any other type
of company can sell stock in itself to the public. Mutual funds then
take the money they receive from the sale of their shares (along
with any money made from previous investments) and use it to
purchase various investment vehicles, such as stocks, bonds and
money market instruments. In return for the money they give to the
fund when purchasing shares, shareholders receive an equity
position in the fund and, in effect, in each of its underlying securities.
For most mutual funds, shareholders are free to sell their shares at
any time, although the price of a share in a mutual fund will
fluctuate daily, depending upon the performance of the securities
held by the fund. Benefits of mutual funds include diversification and
professional money management. Mutual funds offer choice,
liquidity, and convenience, but charge fees and often require a
minimum investment. A closed-end fund is often incorrectly referred
to as a mutual fund, but is actually an investment trust. There are
many types of mutual funds, including aggressive growth fund, asset
allocation fund, balanced fund, blend fund, bond fund, capital
appreciation fund, clone fund, closed fund, crossover fund, equity
fund, fund of funds, global fund, growth fund, growth and income
fund, hedge fund, income fund, index fund, international fund,
money market fund, municipal bond fund, prime rate fund, regional
fund, sector fund, specialty fund, stock fund, and tax-free bond fund.
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 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.6700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
In the year 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.47004 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. 121805 crores. The Unit Trust of India with Rs.44541 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.29835 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.76000 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 October
31, 2003, there were 31 funds, which manage assets of Rs.126726
crores under 386 schemes.
FUND BASICS
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
appreciation realized by the scheme is shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund is the most suitable investment
for the common man as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively low cost. The small savings of all the
investors are put together to increase the buying power and hire a professional
manager to invest and monitor the money. Anybody with an investible 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 a trust that pools
the savings of a number of investors who share a common financial goal. The money
thus collected is then invested in capital market instruments such as shares, debentures
and other securities. The income earned through these investments and the capital
appreciations realized are shared by its unit holders in proportion to the number of
units owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.
Structure of a Mutual Fund
A mutual fund is set up in the form of a trust, which has Sponsor,
Trustees, asset Management Company (AMC) and a Custodian. The
trust is established by a sponsor or more than one sponsor who is
like a promoter of a company. The trustees of the mutual fund hold
its property for the benefit of the unit-holders. The AMC, approved by
SEBI, Manages the funds by making investments in various types of
securities. The custodian, who is registered with SEBI, holds the
securities of various schemes of the fund in its custody. The trustees
are vested with the general power of superintendence and direction
over AMC. They monitor the performance and compliance of SEBI
Regulations by the mutual fund.
Sponsor
The sponsor is required, under the provisions of the Mutual Fund
Regulations, to have a sound track record, a reputation of fairness
and integrity in all his business transactions. Additionally, the
sponsor should contribute at least 40% to the net worth of the AMC.
However, if any person holds 40% or more of the net worth of an
AMC shall be deemed to be a sponsor and will be required to fulfill
the eligibility criteria specified in the Mutual Fund Regulations. The
sponsor or any of its directors or the principal officer employed by
the mutual fund should not be guilty of fraud, not be convicted of an
offence involving moral turpitude or should have not been found
guilty of any economic offence.
Trustees
The mutual fund is required to have an independent Board of
Trustees, i.e. two thirds of the trustees should be independent
persons who are not associated with the sponsors in any manner
whatsoever. An AMC or any of its officers or employees are not
eligible to act as a trustee of any mutual fund. In case a company is
appointed as a trustee, then its directors can act as trustees of any
other trust provided that the object of such other trust is not in
conflict with the object of the mutual fund. Additionally, no person
who is appointed as a trustee of a mutual fund can be appointed as
a trustee of any other mutual fund unless he is an independent
trustee and prior approval of the mutual fund of which he is a trustee
has been obtained for such an appointment.
The trustees are responsible for – inter alia -ensuring that the AMC
has all its systems in place, all key personnel, auditors, registrars
etc. have been appointed prior to the launch of any scheme. It is
also the responsibility of the trustees to ensure that the AMC does
not act in a manner that is favorable to its associates such that it has
a detrimental impact on the unit holders, or that the management of
one scheme by the AMC does not compromise the management of
another scheme. The trustees are also required to ensure that an
AMC has been diligent in empanelling and monitoring any securities
transactions with brokers, so as to avoid any undue concentration of
business with any broker. The Mutual Fund Regulations further
mandates that the trustees should prevent any conflicts of interest
between the AMC and the unit holders in terms of deployment of net
worth.
Asset Management Company
The sponsor or the trustees are required to appoint an AMC to
manage the assets of the mutual fund. Under the Mutual Fund
Regulations, the applicant must satisfy certain eligibility criteria in
order to qualify to register with SEBI as an AMC.
The sponsor must have at least 40% stake in the AMC.
The directors of the AMC should be persons having adequate
professional experience in finance and financial services
related field and not found guilty of moral turpitude or
convicted of any economic offence or violation of any
securities laws.
The AMC should have and must at all times maintain, a
minimum net worth of Rs 10 cr.
The board of directors of such AMC has at least 50% directors, who
are not associates of or associated in any manner with, the sponsor
or any of its subsidiaries or the trustees. The Chairman of the AMC
is not a trustee of any mutual fund. In addition to the above
eligibility criteria and other ongoing compliance requirements laid
down in the Mutual Fund Regulations, the AMC is required to observe
the following restrictions in its normal course of business. Any
director of the AMC cannot hold office of a director in another AMC
unless such person is an independent director and the approval of
the board of the AMC of which such person is a director, has been
obtained; the AMC shall not act as a trustee of any mutual fund; the
AMC cannot undertake any other business activities except activities
in the nature of portfolio management services, management and
advisory services to offshore funds, pension funds, provident funds,
venture capital funds, management of insurance funds, financial
consultancy and exchange of research on commercial basis if any of
such activities are not in conflict with the activities of the mutual
fund.
Custodian
The mutual fund is required, under the Mutual Fund Regulations, to
appoint a custodian to carry out the custodial services for the
schemes of the fund. Only institutions with substantial organizational
strength, service capability in terms of computerization, and other
infrastructure facilities are approved to act as custodians. The
custodian must be totally de-linked from the AMC and must be
registered with SEBI. Under the Securities and Exchange Board of
India (Custodian of Securities) Guidelines, 1996, any person
proposing to carry on the business as a custodian of securities must
register with the SEBI and is required to fulfill specified eligibility
criteria. Additionally, a custodian in which the sponsor or its
associates holds 50% or more of the voting rights of the share
capital of the custodian or where 50% or more of the directors of the
custodian represent the interest of the sponsor or its associates
cannot act as custodian for a mutual fund constituted by the same
sponsor or any of its associate or subsidiary company.
Classification of mutual funds
There are a wide variety of Mutual Fund schemes that cater to
investors need, whatever your age, financial position, risk tolerance
and return expectations. Whether as the foundation of your
investment program or as a supplement, Mutual Fund schemes can
help you meet your financial goals.
Mutual funds can be classified under four different categories:
1. Operational classification
2. Portfolio classification
3. Geographical classification
4. Structural classification
Operational classification
Mutual funds are broadly categorized into three types, namely
Open-Ended mutual funds
These do not have a fixed maturity. Investors deal directly with the
Mutual Fund for their investments and redemptions. The key feature
is liquidity. They can conveniently buy and sell their units at Net
Asset Value ("NAV") related prices.
Close-Ended mutual funds
Schemes that have a stipulated maturity period (ranging from 2 to
15 years) are called close-ended schemes. Investors can invest
directly in the scheme at the time of the initial issue and thereafter
they can buy or sell the units of the scheme on the stock exchanges
where they are listed. The market price at the stock exchange could
vary from the scheme's NAV on account of demand and supply
situation, unit holders' expectations and other market factors. One of
the characteristics of the close-ended schemes is that they are
generally traded at a discount to NAV; but closer to maturity, the
discount narrows. Some close-ended schemes give them an
additional option of selling their units directly to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations
ensure that at least one of the two exit routes is provided to the
investor.
Interval mutual funds
These combine the features of open-ended and close- ended
schemes. They may be traded on the stock exchange or may be
open for sale or redemption during pre-determined intervals at NAV
related prices.
By portfolio classification
Mutual funds differ with reference to their instruments. Therefore, different mutual
funds are designed to meet the needs of the investors. This section discusses the types
of mutual funds classified on the basis of their portfolios.
Growth/Equity Schemes
Aim to provide capital appreciation 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 short-term.
Income Schemes
Aim to provide regular and steady income to investors. These schemes generally
invest in fixed income securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.
Balanced Schemes
Aim to provide both growth and income by periodically distributing a part of the
income and capital gains they earn. They invest in both shares 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.
Money Market Schemes
Aim to provide easy liquidity, preservation of capital and moderate income. These
schemes generally invest in safer, 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.
Tax Saving Schemes
These schemes offer tax rebates to the investors under tax laws as prescribed from
time to time. This is made possible because the Government offers tax incentives for
investment in specified avenues. For example, Equity Linked Savings Schemes
(ELSS) and Pension Schemes. Recent amendments to the Income Tax Act provide
further opportunities to investors to save capital gains by investing in Mutual Funds.
The details of such tax savings are provided in the relevant offer documents.
Special Schemes
This category includes index schemes that attempt to replicate the performance of a
particular index, such as the BSE Sensex or the NSE 50, or industry specific schemes
(which invest in specific industries) or Sectoral schemes (which invest exclusively in
segments such as 'A' Group shares or initial public offerings). Index fund schemes are
ideal for investors who are satisfied with a return approximately equal to that of an
index. Sectoral fund schemes are ideal for investors who have already decided to
invest in a particular sector or segment. Keeping in mind that any one scheme may not
meet all the investors’ requirements for all time.
By Geographical classification
On the basis of geographical limits, mutual funds schemes can be classified as
Domestic mutual funds
Offshore mutual funds
Domestic mutual funds
Domestic mutual funds schemes mobilize the savings of the citizens of the country.
However the NRIs and foreign investors can invest in these schemes. All the schemes
in vogue in the country are the domestic mutual fund schemes.
Offshore mutual funds
These funds enable the NRIs and international investors to participate in Indian capital
market. Further these funds are governed by the rules and procedures laid down for the
purpose of approving and monitoring their performance by the department of
economic affairs, ministry of finance and the directions of RBI.
By structural classification
From the point of view of financial market structure, mutual funds can be divided into
two categories, namely,
a) Capital market fund
b) Money market mutual fund
Mutual funds generally invest the pooled resources in capital market instruments
where as money mutual funds invest in money market instruments.
NAV
Net asset value (NAV) represents a fund's per share market value. This is the price at
which investors buy ("bid price") fund shares from a fund company and sell them
("redemption price") to a fund company. It is derived by dividing the total value of all
the cash and securities in a fund's portfolio, less any liabilities, by the number of shares
outstanding. An NAV computation is undertaken once at the end of each trading day
based on the closing market prices of the portfolio's securities. For example, if a fund
has assets of $50 million and liabilities of $10 million, it would have a NAV of
$40 million. This number is important to investors, because it is from NAV that the
price per unit of a fund is calculated. By dividing the NAV of a fund by the number of
outstanding units, you are left with the price per unit. In our example, if the fund had 4
million shares outstanding, the price-per-share value would be $40 million divided by
4 million, which equals $10.
This pricing system for the trading of shares in a mutual fund differs significantly from
that of common stock issued by a company listed on a stock exchange. In this instance,
a company issues a finite number of shares through an initial public offering (IPO), and
possibly subsequent additional offerings, which then trade in the securities. In this
market, stock prices are set by market forces of supply and demand. The pricing
system for stocks is based solely on market sentiment.
Advantages of Mutual Fund
Professional Management
Investors avail the services of experienced and skilled professionals
who are backed by a dedicated investment research team, which
analyses the performance and prospects of companies and selects
suitable investments to achieve the objectives of the scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross-
section of industries and sectors. This diversification reduces the risk
because seldom do all stocks declare at the same time and in the
same proportion. Investors achieve this diversification through a
Mutual Fund with far less money than they can do on their own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps to avoid
many problems such as bad deliveries, delayed payments and
unnecessary follow up with brokers and companies. Mutual Funds
save time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to
provide a higher return as they invest in a diversified basket of
selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest compared
to directly investing in the capital markets because the benefits of
scale in brokerage, custodial and other fees translate into lower
costs for investors.
Liquidity
In open-ended schemes, Investors can get their money back
promptly at net asset value related prices from the Mutual Fund
itself. With close-ended schemes, they can sell their units on a stock
exchange at the prevailing market price or avail of the facility of
direct repurchase at NAV related prices which some close-ended and
interval schemes offer periodically.
Transparency
Investors get regular information on the value of their investment in
addition to disclosure on the specific investments made by the
scheme, the proportion invested in each class of assets and the fund
manager's investment strategy and outlook.
Flexibility
Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, Investors can
systematically invest or withdraw funds according to their needs and
convenience.
Choice of Schemes
Mutual Funds offer a family of schemes to suit the varying needs
over a lifetime of their Investors.
Well Regulated
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.
Disadvantages of Mutual Fund Investment
No Control over costs
An investor in a mutual fund has no control over the overall cost of
investing. He pays investment management fees as long as he
remains with the fund, albeit in return for the professional
management and research. Fees are usually payable as a
percentage of the value of his investments, whether the fund value
is rising or declining.
No Tailor-made Portfolios
Investors who invest on their own can build their own portfolios of
shares, bonds and other securities. Investing through funds means
he delegates this decision to the fund managers. The very high net
worth individuals or large corporate investors may find this to be a
constraint in achieving their objectives.
Managing a portfolio of funds
Availability of a large number of funds can actually mean too much
choice for the investor. He may again need advice on how to select a
fund to achieve his objective, quite similar to the situation when has
to select individual shares or bonds to invest in.
ROLE OF MUTUAL FUNDS
Mutual Funds & Financial Market
In the process of development Indian mutual funds have emerged as
strong financial intermediaries & are playing a very important role in
bringing stability to the financial system & efficiency to resource
allocation. Mutual Funds have opened new vistas to investors &
imparted a much-needed liquidity to the system. In the process they
have challenged the hitherto role of commercial banks in the
financial market & national economy.
Mutual Fund & Capital Market
The active involvement of Mutual Funds in promoting economic
development can be seen not only in terms of their participation in
the savings market but also in their dominant presence in the money
& capital market. A developed financial market is critical to overall
economic development, & Mutual Funds play an active role in
promoting a healthy capital market. The asset holding pattern of
mutual funds in the USA indicates the dominant role of Mutual Funds
in the capital market & money market. More over they have also
rendered critical support to securities mortgage loans & municipal
bond market in the USA. In the USA, Mutual Funds provide very
active support to the secondary market in terms of purchase of
securities. Investor’s preferences pattern in India has undergone a
tremendous change during recent times, along with the changes in
the share of financial assets in the total annual savings. Indian
investors have moved towards more liquid & growth oriented trade
able instruments like’s shares/debentures & units of Mutual Funds.
The shift is asset holding pattern of investors has been significantly
influenced by the ‘equity’ & ‘unit’ culture while the holders of
company shares & debentures are concentrated in the urban areas,
small/medium investors in the semi-urban & rural areas are tending
towards Mutual Funds. Mutual Funds in India have certainly created
awareness among investors about equity oriented investments & its
benefits.
Objectives of the Study
To study the preference of investors in today’s scenario in terms of risk &return.
To know the opinion about mutual fund. To study the performance of mutual funds. To know the investment proportion in the mutual fund.
Need and Importance of study
Inflation is increasing day to day. So in order to overcome the inflation, investing in only less yielding opportunities gives no fruitful results.
Diversification, stable returns & limited exposure to equity investment maximize returns on investment &multiply one’s savings. Mutual funds can fulfill these requirements.
Just investment is not enough. One must plan investment in such a way that his investment objectives are satisfied.
This report gives the details about various investment objectives desired by an investor.
This report highlights the concept &working of mutual funds and different avenues of investment &in detail about RELIANCE MUTUAL FUND.
Methodology of the study:
Sources of data collection
Two sources of collecting data have been employing i.e. primary data and secondary data.
Primary data
Research instrument: Questionnaire which is used to collect the primary data by personnel interview.
Secondary Data
In this type of data collection information is already exiting. Secondary data is collected from the company’s websites.
Sampling technique: convenience sample technique
Sample size: 80
Limitations of the study
Much interaction is not been possible with the customer. Different perceptions about the investment options. The non-availability of time to them. Many investors think mutual funds and shares are the one and same. Time constraint. Limited sample size Report restricted to Kurnool only.
History of Mutual Funds has evolved over the years and it is sure to appear as
something very interesting for all the investors of the world. In present world, mutual
funds have become a main form of investment because of its diversified and liquid
features. Not only in the developed world, but in the developing countries also
different types of mutual funds are gaining popularity very fast in a tremendous way.
But, there was a time when the concepts of Mutual Funds were not present in the
economy.
There is an ambiguity about the fact that when and where the Mutual Fund
Concept was introduced for the first time. According to some historians, the mutual
funds were first introduced in Netherlands in 1822. But according to some other belief,
the idea of Mutual Fund first came from a Dutch Merchant ling back in 1774. In 1822,
that idea was further developed. In 1822, the concept of Investment
Diversification was properly incorporated in the mutual funds. In fact, the Investment
Diversification is the main attraction of mutual funds as the small investors are also
able to allocate their little Funds in a diversified way to lower Risks.
After 1822 in Netherlands, the Mutual Funds Concept came in Switzerland in 1849
and thereafter in Scotland in the 1880s. After being popular in Great Britain and
France, Mutual fund concept traveled to U.S.A in the 1890s. In 1920s and 1930s, the
Mutual Fund popularity reached a new high. There was record investment done in
mutual funds. But, before 1920s, the mutual funds were not like the modern day
mutual funds. The modern day mutual funds came into existence in 1924, in Boston.
Massachusetts Investors Trust introduced the Modern Mutual Funds and the funds
were available from 1928. At present this Massachusetts Investors Trust is known
as MFS Investment Management Company. After the glorious year of 1928, Mutual
fund ideas expanded to different levels and different regulations came for well
functioning of the funds.
Still today, the funds are evolving and improving in order to offer people much wider
choices and better advantages for fulfillment of their various investment needs and
financial objectives
.
The mutual fund industry in India:
The mutual fund industry in India began in 1963 with the formation of the Unit Trust
of India (UTI) as an initiative of the Government of India and the Reserve Bank of
India. Much later, in 1987, SBI Mutual Fund became the first non-UTI mutual fund in
India.
Subsequently, the year 1993 heralded a new era in the mutual fund industry. This was
marked by the entry of private companies in the sector. After the Securities and
Exchange Board of India (SEBI) Act was passed in 1992, the SEBI Mutual Fund
Regulations came into being in 1996. Since then, the Mutual fund companies have
continued to grow exponentially with foreign institutions setting shop in India, through
joint ventures and acquisitions.
As the industry expanded, a non-profit organization, the Association of Mutual Funds
in India (AMFI), was established on 1995. Its objective is to promote healthy and
ethical marketing practices in the Indian mutual fund Industry. SEBI has made AMFI
certification mandatory for all those engaged in selling or marketing mutual
fund products.
The Evolution:
The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
India and the Reserve Bank of India. The history of mutual fund industry in India can
be better understood divided into following phases:
Phase1. Establishment and Growth of Unit Trust of India - 1964-87:
Unit Trust of India enjoyed complete monopoly when it was established in the year
1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it
continued to operate under the regulatory control of the RBI until the two were de-
linked in 1978 and the entire control was transferred in the hands of Industrial
Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the largest number of investors in any
single investment scheme over the years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's
Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share
(India’s first equity diversified scheme) in 1987 and Monthly Income Schemes
(offering assured returns) during 1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs6700 crores.
PhaseII.EntryofPublicSectorFunds1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering
the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank
of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later
followed by can bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund,
Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the
assets under management of the industry increased seven times to Rs. 47004 crores.
However, UTI remained to be the leader with about 80% market share.
1992-93Amount
MobilizedAssets Under Management
Mobilization as % of gross
Domestic Savings
UTI 11,057 38,247 5.2%
Public Sector 1,964 8,757 0.9%
Total 13,021 47,004 6.1%
Phase III. Emergence of Private Sector Funds - 1993-96
The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to
enter the mutual fund industry in 1993, provided a wide range of choice to investors
and more competition in the industry. Private funds introduced innovative products,
investment techniques and investor-servicing technology. By 1994-95, about 11
private sector funds had launched their schemes.
Phase IV. Growth and SEBI Regulation - 1996-2004
The mutual fund industry witnessed robust growth and stricter regulation from the
SEBI after the year 1996. The mobilization of funds and the number of players
operating in the industry reached new heights as investors started showing more
interest in mutual funds.
Investors' interests were safeguarded by SEBI and the Government offered tax benefits
to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996
was introduced by SEBI that set uniform standards for all mutual funds in India. The
Union Budget in 1999 exempted all dividend incomes in the hands of investors from
income tax. Various Investor Awareness Programmes were launched during this
phase, both by SEBI and AMFI, with an objective to educate investors and make them
informed about the mutual fund industry.
In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament. The primary objective behind this
was to bring all mutual fund players on the same level. UTI was re-organized into two
parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund
Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past
schemes (like US-64, Assured Return Schemes) are being gradually wound up.
However, UTI Mutual Fund is still the largest player in the industry. In 1999, there
was a significant growth in mobilization of funds from investors and assets under
management which is supported by the following data:
GROSS FUND MOBILISATION (RS. CRORES)
FROM TO UTIPUBLIC SECTOR
PRIVATE SECTOR
TOTAL
01-April-98 31-March-99 11,679 1,732 7,966 21,377
01-April-99 31-March-00 13,536 4,039 42,173 59,748
01-April-00 31-March-01 12,413 6,192 74,352 92,957
01-April-01 31-March-02 4,643 13,613 1,46,267 1,64,523
01-April-02 31-Jan-03 5,505 22,923 2,20,551 2,48,979
01-Feb.-03 31-March-03 * 7,259* 58,435 65,694
01-April-03 31-March-04 - 68,558 5,21,632 5,90,190
01-April-04 31-March-05 - 1,03,246 7,36,416 8,39,662
01-April-05 31-March-06 - 1,83,446 9,14,712 10,98,158
ASSETS UNDER MANAGEMENT (RS. CRORES)
AS ON UTI PUBLIC SECTORPRIVATE SECTOR
TOTAL
31-March-99 53,320 8,292 6,860 68,472
Phase V. Growth and Consolidation - 2004 Onwards
The industry has also witnessed several mergers and acquisitions recently, examples of
which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun
F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously,
more international mutual fund players have entered India like Fidelity, Franklin
Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is
a continuing phase of growth of the industry through consolidation and entry of new
international and private sector players.
Regulatory of mutual fund in India
SEBI
The capital market regulates the mutual funds in India. SEBI requires all
mutual funds to be registered with them. SEBI issues guidelines for
all mutual funds operations- investment, accounts, expenses etc. Recently,
it has been decided that Money Market Mutual Funds of registered mutual
funds will be regulated by SEBI through (Mutual Fund) Regulations 1996.
RBI
RBI, a supervisor of the Banks owned Mutual Funds-As banks in India come
under the regulatory Jurisdiction of RBI, banks owned funds to be under
supervision of RBI and SEBI. RBI has supervisory responsibility over all
entities that operate in the money markets.
MINISTRY OF FINANCE (MOF)
Ministry of Finance ultimately supervises both the RBI and the SEBI and plays
the role of apex authority for any major disputes over SEBI guidelines.
COMPANY LOW BOARD
Registrar of companies is called Company Low Board. AMCs of
Mutual Funds are companies registered under the companies Act
1956 and therefore answerable to regulatory authorities empowered by the
Companies Act.
STOCK EXCHANGE
Stock Exchanges are Self-regulatory organizations supervised by SEBI. Many
closed ended funds of AMCs are listed as stock exchanges and are traded like
shares.
OFFICE OF THE PUBLIC TRUSTE
Mutual Fund being public trust is governed y the Indian Trust Act 1882. The
Board of trustee or the Trustees Company is accountable to the office of public
trustee, which in turn reports to the Charity commissioner.
ASSOCIATION OF MUTUAL FUNDS IN INDIA
AMFI is dedicated to develop the mutual funds industry in India along professional,
healthy, and ethical lines, and to enhance and maintain standards in all areas with a
view to protecting and promoting the interests of mutual funds and the unit holders.
AMFI has taken the initiative to position the mutual funds industry in its proper
perspective and convey the correct meaning and understanding of the concept working
of a mutual fund to the investors. The AMFI periodically publishes information that is
useful to investor.
ORIGIN/GROWTH OF AMFI:
SEBI tightened the disclosure norms for the mutual funds to help investors in taking
better informed decisions. SEBI laid-down investment and disclosure norms for
employees of AMCs and trustee companies in order to avoid any conflict of interest.
To promote venture capital activity, SEBI allowed the mutual funds to invest in the
listed or unlisted securities, or units of venture capital funds within the overall ceiling
for such investment. Detailed guidelines on the disclosure and reporting requirements
were issued to mutual funds for investment in foreign securities. With a view improve
professional standards; SEBI has decided to make it mandatory for all mutual funds to
appoint agents/distributors who have obtained association of mutual funds of India
(AMFI) certification.
With the increase in mutual fund players in India, a need for mutual fund association
in India was generated to function as a non-profit organization. Association of mutual
funds in India was incorporated on 22nd august,1995.The association of mutual funds
in India is dedicated to developing the Indian mutual fund industry on professional,
healthy, and ethical lines and to enhance and maintain standards in all areas with a
view to protect and promote the interests of mutual funds their unit holders.
Objectives of AMFI:
AMFI interacts with SEBI and works according to SEBI’s guidelines in the
mutual fund industry.
Association of mutual fund of India does represent the government of India,
The reserve bank of India, and other related bodies on matters relating to the
mutual fund industry.
AMFI undertakes all India awareness program for investors in order to
promote understanding of the concept and working of mutual funds.
Association of mutual fund of India also disseminate information’s on mutual
fund industry and undertakes studies and research either directly or in
association with other bodies.
Role of AMFI:
To define and maintain high professional and ethical standards in all areas
of operation of mutual fund industry.
To recommend and promote best business practices and code of conduct to
be followed by members and others engaged in the activities of mutual
fund and asset management including agencies connected or involved in
the field of capital markets and financial services.
To undertake nationwide investor awareness program so as to promote
proper understanding of the concept and working of mutual funds.
Fund Houses: Indian Mutual Fund Companies
Mutual Fund Name
No. of Schemes
(Incl Options)
31-Mar-14 31-Dec-13 Net Chg
AXIS Mutual Fund 465 16,285 14,729 1,555
Baroda Pioneer Mutual Fund
165 8,106 7,217 889
Birla Sun Life Mutual Fund
1,873 89,136 85,086 4,049
BNP Paribas Mutual Fund
843 3,446 3,674 [228]
BOI AXA Mutual Fund 149 1,991 1,760 231
Canada Robe co Mutual Fund
216 6,660 7,077 [417]
Deutsche Mutual Fund 1,029 18,795 18,596 199
DSP Blackrock Mutual Fund
1,063 31,966 32,641 [675]
Edelweiss Mutual Fund 126 169 167 2
Escorts Mutual Fund 66 269 280 [11]
Franklin Templeton Mutual Fund
396 46,406 45,331 1,076
Goldman Sachs Mutual Fund
28 3,764 3,847 [83]
HDFC Mutual Fund 2,040 113,354 109,393 3,961
HSBC Mutual Fund 412 7,659 7,652 7
ICICI Prudential Mutual Fund
1,988 106,941 97,318 9,623
IDBI Mutual Fund 227 6,018 5,303 715
IDFC Mutual Fund 1,635 41,454 41,362 92
IIFL Mutual Fund 58 234 225 9
India bulls Mutual Fund 78 1,097 1,225 [128]
ING Mutual Fund 375 794 964 [170]
JM Financial Mutual Fund
314 6,046 7,192 [1,145]
JP Morgan Mutual Fund 280 16,248 12,928 3,320
Kotak Mahindra Mutual 762 33,502 36,228 [2,726]
Fund
L&T Mutual Fund 553 18,255 17,003 1,253
LIC NOMURA Mutual Fund
316 10,584 10,010 574
Mirae Asset Mutual Fund
126 692 582 110
Morgan Stanley Mutual Fund
55 2,572 3,273 [701]
Motilal Oswald Mutual Fund
38 489 434 55
Peerless Mutual Fund 94 4,046 3,399 646
Pine Bridge Mutual Fund
110 649 814 [165]
PPFAS Mutual Fund 2 340 312 27
Pramerica Mutual Fund 153 2,411 2,043 367
PRINCIPAL Mutual Fund
283 4,134 4,547 [413]
Quantum Mutual Fund 13 372 344 28
Reliance Mutual Fund 1,522 105,293 104,412 881
Religare Invesco Mutual Fund
809 14,521 13,734 788
Sahara Mutual Fund 100 191 194 [4]
SBI Mutual Fund 977 66,311 65,415 896
Shriram Mutual Fund 4 24 24 1
Sundaram Mutual Fund 986 16,422 16,024 398
Tata Mutual Fund 897 21,954 19,723 2,231
Taurus Mutual Fund 183 3,532 3,223 309
Union KBC Mutual Fund
102 2,847 2,266 580
UTI Mutual Fund 1,347 74,233 74,351 [118]
Reliance Group Holdings has grown from a small office data-processing equipment
firm in 1961 into a major insurance and financial-services group in one generation
under one chief.
Reliance's insurance operations constitute the nation's 27th-largest property and
casualty operation. The parent company also includes a development subsidiary in
commercial real estate. Reliance's international consulting group contains several
subsidiaries in energy, environment, and natural resources consulting. A financial arm
invests in other businesses, primarily television stations. Reliance Insurance started as
the Fire association of Philadelphia in 1817, organized by 5 hose and engine fire
companies. It became the nation's first association of volunteer fire departments.
Reliance Capital Group, L.P. constituted the investment branch of the Reliance
conglomerate. In December 1989, Reliance Capital sold its investment, Days
Corporation, parent company of Days Inn of America, the world's third-largest hotel
chain; it had been purchased in 1984.
RELIANCE MUTUAL FUND
This group dominates this key area in the financial sector..This mega business houses
show that it has assets under management of Rs. 90938 crore (US$ 22.73billion) and
an investor base of over6.6 million Reliance’s mutual fund schemes are managed by
Reliance Capital Asset Management Limited RCAM), a subsidiary of Reliance Capital
Limited, which holds 93.37% of the paid-up capital of RCAM. The company notched
up a healthy growth of Rs. 16354 crore (US$ 4.09 billion) in assets under management
in February2008 and helped propel the total industry-wide AUM to Rs. 565459 crore
(US$ 141.36 billion) A sharp rise in fixed maturity plans (FMPs) and collection of Rs.
7000 crore (US$ 1.75 billion) through new fund offers (NFOs) created this surge. In
AU rankings, Reliance continues to be in the number one spot.
India's Best Offering: Reliance Mutual Fund
Investing has become global. Today, a lot of countries are waking up to the reality that
in order to gain financial growth, they must encourage their citizens to not only save
but also invest. Mutual funds are fast becoming the mode of investment in the world.
In India, a mutual fund company called the Reliance Mutual Fund is making waves.
Reliance is considered India's best when it comes to mutual funds. Its investors
number to 4.6 billion people. Reliance Capital Asset Management Limited ranks in the
top 3 of India's banking companies and financial sector in terms of net value.
Vision
Reliance Mutual Fund is so popular because it is investor focused. They show their
dedication by continually dishing out innovative offerings and unparalleled service
initiatives. It is their goal to become respected globally for helping people achieve
their financial dreams through excellent organization governance and customer care.
Reliance Mutual fund wants a high performance environment that is geared at making
investors happy.
Mission
RMF aims to do business lawfully and without stepping on other people. They want to
be able to create portfolios that will ensure the liquidity of the investment of people in
India as well as abroad. Reliance Mutual Fund also wants to make sure that their
shareholders realize reasonable profit, by deploying funds wisely. Taking appropriate
risks to reach the company's potential is also one of Reliance Mutual Fund's
objectives.
SchemesTo make their packages more attractive, Reliance Mutual Fund created proposals
called the Equity/ Growth scheme, Debt/Income Scheme, and Sector Specific Scheme.
Equity Schemes
Investments in equities are made with a long-term objective in mind.
Empirical studies have indicated that despite the short-term volatility
that is characteristic of equities, over the longer term, equities have
generated superior returns. This makes equities the best
instruments for long-term growth of capital. Investing in a diversified
equity portfolio can help minimize risk as the portfolio gets exposure
across various sectors, while enabling Investors to capitalize on the
fundamental upsides presented by these sectors. The various Equity
schemes are
1) Reliance diversified large cap
2) Reliance index
3) Reliance diversified mid cap & small cap
4) Reliance multi cap
5) Reliance balanced
6) Reliance sector
7) Reliance tax saver
8) Reliance arbitrage
9) Reliance ETF
Debt schemes:
1) Reliance liquid
2) Reliance ultra short term
3) Reliance short term
4) Reliance long term
5) Reliance dynamic
6) Reliance gilt
7) Reliance MIP
Gold schemes:
1) Reliance ETF
2) Reliance FOF
Equity Schemes of Reliance mutual funds
Reliance vision fund:
Type Open ended growth scheme
Investment pattern 99.90% in equity 0.105 in debt.
Fund objective Long term growth of capital
Investment horizon Minimum of one year
Scheme: Reliance NRI equity fund
Type Open ended growth fund
Investment pattern 95.85% in equity 4.15% in debt
Fund objective Long term growth of capital
Investment horizon Minimum of one year
Scheme: Reliance focused large cap fundType Open ended growth scheme
Investment pattern 96.96% in equity 3.04% in debt
Fund objective Long term capital growth
Investment horizon Minimum of one year
Scheme: Reliance index fund-Nifty plan
Type Open ended scheme
Investment pattern 99.32% in equity 0.68% in cash and other receivables
Fund objective Long term capital growth
Investment horizon Minimum of one year
Scheme: Reliance small cap fundType Open ended scheme
Investment pattern 85.34% in equity 14.66% in cash and other receivables.
Fund objective Long term capital growth
Investment horizon Minimum of one year
Scheme: reliance regular savings fund-equity optionType Open ended scheme
Investment pattern 97.60% in equity 2.40% in cash and other receivables
Fund objective Long term capital growth
Investment horizon Minimum of one year
Scheme: reliance banking fund
Type Open ended scheme
Investment pattern 98.52% I equity 1.48% in cash and other receivables
Fund objective Long term capital growth
Investment horizon Minimum of one year
Scheme: reliance tax saver fund
Type Open ended scheme
Investment pattern 99.44% in equity fund 0.56% in cash and other receivables.
Fund objective Long term capital growth
Investment horizon Minimum of one year
Debt scheme: reliance liquidity fundType Open ended scheme
Investment pattern 56.01% in banks 25.64% in cash and receivables 12.43% in miscellaneous 5.92% in others.
Fund objective Optimal returns with moderate levels of risk and high liquidity.
Investment horizon Minimum of one year
Scheme: Reliance short term fundType Open ended scheme
Investment pattern 49.67% in miscellaneous 29.40% in finance 5.37% in banks 15.56% in others
Fund objective Stable returns with a short term investment horizon
Investment horizon Short term
Scheme: Reliance dynamic bond fund
Type Open ended scheme
Investment pattern 80.20% in miscellaneous 12.32% in finance 7.48% in others.
Fund objective Optimal returns with moderate risk.
Investment horizon Minimum of one year
Scheme: Reliance monthly income plan
Type Open ended scheme
Investment pattern 49.69% in miscellaneous 10.73% in finance
Fund objective
Investment horizon Minimum of one year
Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing
mutual funds in India. RMF offers investors a well-rounded portfolio of products to
meet varying investor requirements and has presence in 179 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative products and
customer service initiatives to increase value to investors. Reliance Capital Asset
Management Limited (‘RCAM’) is the asset manager of Reliance Mutual Fund.
RCAM is a subsidiary of Reliance Capital Limited (RCL). Presently, RCL holds
65.23% of its total issued and paid-up equity share capital and the balance of its issued
and paid up equity share capital is held by other shareholders which includes Nippon
Life Insurance Company (“NLI”), holding 26% of RCAM’s total issued and paid up
equity share capital.
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average
Assets under Management (AAUM) of Rs. 107749 Crores and an investor count of
over 72 Lakh folios. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai
Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers
investors a well-rounded portfolio of products to meet varying investor requirements
and has presence in 159 cities across the country. Reliance Mutual Fund constantly
endeavors to launch innovative products and customer service initiatives to increase
value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital
Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds
93.37% of the paid-up capital of RCAM, the balance paid up capital being held by
minority shareholders
Reliance Capital Ltd. is one of India’s leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private equity and
proprietary investments, stock broking and other financial services.
.Summary of Schemes
No of schemes : 886
Corpus under management: Rs. 105293.1567 crs. (as on 31-Mar-2014)
Fund of Funds (4)
Interval Income Funds (95)
Liquid Funds (38)
ETFs (6)
Equity Funds (142)
Monthly Income Plans (6)
Income Funds (38)
Gilt Funds (15)
Short Term Income Funds (8)
Balanced Funds (6)
Ultra Short Term Funds (20)
Arbitrage Funds (6)
Fixed Maturity Plans (482)
Floating Rate Income Funds (20)
Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of India’s leading Mutual Funds,
with Average Assets Under Management (AAUM) of Rs. 103542 Crores (Jan to Mar
'14 Quarter) and 55.08 Lakh folios. (31st Mar 14)
Reliance Capital Ltd. is one of India’s leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private equity and
proprietary investment, stock broking and other financial services.
Sponsor Reliance Capital Limited
Trustee Reliance Capital Trustee Co. Limited
Investment Manager / AMC
Reliance Capital Asset Management Limited
Statutory DetailsThe Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956.
The Sponsor, the Trustee and the Investment Manager are incorporated under the
Companies Act 1956. Reliance Mutual Fund (formerly known as Reliance Capital
Mutual Fund), a Trust under Indian Trust Act, 1882 and registered with SEBI vide
registration number MF/022/95/1 dated June 30, 1995.
TABLE-1
AGE WISE CLASSIFICATION OF RESPONDENTS
AGE NO.OF.RESPONDENTS PERCENTAGE
BELLOW 20 NIL -
20-29 8 10%
30-39 24 30%
40-49 20 25%
50-59 24 30%
ABOVE 60 4 5%
TOTAL 80 100%
8
24
20
24
4
age wise no.of.respondents
20-2930-3940-4950-59ABOVE 60
INTERPRETATION : According to the survey the respondents were of different age groups. There are no respondents of age below 20 are in no number. The investors of age 20-29 are 08 in number with 10%. The investors of age 30-39 are 24 with 30%, 40-49 there are 20 investors with 25% and in between 50-59 there are 24 investors with 30% and above 60 there are 4 investors with 5%.
TABLE-2
GENDER OF THE RESPONDENTS
GENDER NO.OF.RESPONDENTS PERCENTAGE
MALE 64 80%
FEMALE 16 20%
TOTAL 80 100%
64
16
gender of respondents
MALEFEMALE
INTERPRATATION: In the survey number of male respondents is more in number that is about 80% & the next position has been occupied by female respondents they are about 20% of the sample so, mainly men prefer to go for investments.
TABLE-3
OCCUPATION OF THE RESPONDENTS
OCCUPATION NO.OF RESPONDENTS PERCENTAGE
SALARIED 32 40%
BUSINESS 32 40%
PROFESSIONAL 12 15%
RETIRED 4 5%
OTHERS 4 5%
TOTAL 80 100%
32
32
12
44
occupation of the respondents
SALARIEDBUSINESSPROFESSIONALRETIREDOTHERS
INTERPRETATION: According to the survey the respondents were of different occupations Respondents from the business are occupying 40%, then comes professional with 15 %, others 5%, retired people occupy 5%, with salaried occupying 40%.
TABLE-4
ANNUAL INCOME OF THE RESPONDENTS
ANNUAL INCOME NO.OF RESPONDENTS PERCENTAGE
1-5LAKH 48 60%
5-10LAKH 28 35%
ABOVE 10 LAKH 24 5%
TOTAL 80 100%
48
28
24
ANNUAL INCOME OF THE RE-SPONDENTS
1-5LAKH5-10LAKHABOVE 10 LAKH
INTERPRETATION: According to the survey, the respondents of the income group of less than 5 lacks are of 60%. They were about 35% of the respondents are of the income group between 5-10 lakh 5% of the respondents were of the income group above 10 lacks.
TABLE-5
DO THE RESPONDENT INVEST THEIR MONEY
INVESTMENTS NO.OF.RESPONDENTS PERCENTAGE
YES 72 90%
NO 8 10%
TOTAL 80 100%
72
8
RESPONDENTS INVEST THEIR MONEY
YESNO
INTERPRETATION: All the respondents considered in the sample, do invest their savings.Out of the total sample the respondents going for investments are total in numbers with the two hundred respondents considered in sample are going for complete investments with100%.
TABLE-6
AMOUNT THAT RESPONDENTS SAVE YEARLY
YEARLY SAVINGS NO.OF.RESPONDENTS PERCENTAGE
< 25000 12 15%
<50000 40 35%
<100000 48 10%
>100000 80 40%
TOTAL 80 100%
12
40
48
80
THE AMOUNT THE RESPONDENTS SAVE YEARLY
< 25000<50000<100000>100000
INTERPRETATION: According to the survey, the respondents who save< 25,000 yearly is about 15%, <50,000 is about 35% & the individuals who save less than 1,00,000 are 10%, followed by individuals who save more than 1,00,000 is 40%.
TABLE-7
INVESTORS OPPURTUNITIES FOR VARIOUS INVESTMENTS:
INVESTMENT OPPORTUNITIES
No.of.respondents percentage
BANK DEPOSITS 48 60%
LIC 4 5%
MUTUAL FUNDS 8 10%
SHARES 4 5%
OTHERS 8 10%
Total 72 90%
484
8
4
8
INVESTMENTS AVENUES OPTED BY INVESTORS
BANK DEPOSITSLICMUTUAL FUNDS SHARESOTHERS
Interpretation: It is observed from the above chart that 60% of the individuals prefer to bank deposits, 5% of the individuals prefer to shares, respondents preferring mutual funds are 10%,life insurance are 5% followed by other avenues with 10%.
Table-8
INVESTORS PREFERENCE FOR VARIOUS INVESTMENT OBJECIVES
Options No. Of. respondents Percentage rank
Security 42 58.8% 1
Yield 8 11.9% 2
Maturity 5 5.8% 4
Tax benefit 7 11.7% 3
liquidity 5 5.8% 4
goal 5 5.8% 4
Total 72 95% -
42
8
5
7
5
5
SecurityYield MaturityTax benefitliquiditygoal
Investment objectives opted by respondents.
Interpretation: Different types of investors look forward to different investment objectives. Most of the investors ranked 1st to security, 2nd rank to yield, 3rd rank has been given to tax benefit, 4th rank for maturity, liquidity & goal.
Table-9
AWARENESS OF MUTUAL FUNDS
Options No. Of. respondents Percentage
Yes 68 85%
No 12 15%
total 80 100%
68
12
awarness of the mutual funds
YesNo
Interpretation: According to the survey, most investors are aware of mutual funds. It can be observed from the above table that 85% of respondents are aware of Mutual Funds and the rest are not aware of Mutual Funds.
Table-10
AWARENESS OF MUTUAL FUNDS IS THROUGH
Option No. of respondents percentage
Advertisements 0 -
Friends 34 47%
Family members 8 11.7%
Financial advisors 30 41.1%
Relatives 0 -
Total 72 97%
34
8
30
Friends
Family members
Financial advisors
Influnce of investments decision through
Interpretation: According to the survey, the respondents are more aware of mutual funds through friends who occupy 47%, followed by financial advisors 41% & Family Members 10%.there is no influence through advertisements and relatives.
Table-11
Type of funds investors preferring
Type of funds No. of respondents Percentage
Debt funds 13 17.6%
Equity funds 54 76%
Liquid funds 5 29%
Total 72
13
54
5
TYPE OF FUNDS RESPONDENTS PREFER TO
Debt fundsEquity fundsLiquid funds
Interpretation: From the survey conducted the respondents prefer Equity funds more in number they occupy 76%, followed by liquid funds with 29% and a very few respondents prefer to debt funds with 17.6%.
Table-12
Opinion about mutual funds
Options No.of.respondents Percentage
Better option 38 53%
Not better option 30 41%
Can’t say 4 5.8%
Total 72 99.8%
3830
4
MUTUAL FUND IS A BETTER OPTION
Better optionNot better optionCan’t say
Interpretation: According to the survey, the respondents are mostly of the opinion that investing in Mutual funds is a Better option as it occupies 58%, a few respondents are of no opinion with 5.8%, & the rest feel that it is not a better option with only 41% of the total.
Table-13
Recommending mutual fund as a better option
Option No. of respondents Percentage
Yes 38 52.9%
No 34 47%
Total 72 99.8%
3834
IS MUTUAL FUND IS A RECOMMAND-ING OPTION
YesNo
Interpretation: According to the survey, the respondents are mostly of the opinion that recommending Mutual funds as a Better option as it occupies 52.9%, a few respondents are of no opinion with 47%.
Table-14
Awareness of the taxation on investment:
Taxation No. of respondents percentage
Yes 15 20.8%
No 57 79.16%
Total 72 99.96%
15
57
No. of respondents
YesNo
Interpretation: According to the survey most of the respondent’s i.e. 79% are
don’t know about the taxation of their investment. Remaining of the sample know
about the taxation.
FINDINGS
Majority of the respondents belong to age group of 30-39 and 50-59.
Major part of the respondents is male only. Annual income of the respondents between 1-5lacks prefers
more of investments. Respondents irrespective of major investment or small are investing in some other sources of investments.
Investor’s preference when going for an investment in primarily for security. Respondents prefer Bank Deposits as most secured avenue for investment, & then preference is given to mutual funds, others & then to shares and lic.
The role of Financial Advisors play a key role in making investors educated about mutual fund. Around 41.1% of the respondents choose financial advisors for guidance.
From the Survey conducted it is clear that 52.9% of the respondents feel that Mutual Fund is a good investment option.
From the survey it is clear that most of the respondents feel mutual fund as a better option
52.9% of the Respondents are recommending mutual fund as a better investment Opportunity.
Respondents who invested presently and have continuous monitoring are gaining good returns from mutual funds.
Respondents who invested in the years 90’s are faced losses and not having a good opinion on mutual funds.
Average investment proportion of the investors is 30000/-.
SUGGESTIONS: The awareness of mutual fund & its various schemes should be
increased among the people by proper advertising, promotion and conducting investors meets.
Proper guidance should be given by fund managers after investor invested the amount.
If there is certain security in equity funds many of the people might have shown interest to invest.
Conclusion: Mutual funds are the investment avenue to get returns. After completion of my survey I found that investors who are investing presently and have continuous monitoring are gaining more returns and they got satisfied with mutual funds. Investors who invested in last 10 years and having no monitoring they gained nothing at least they do not get back their principle amount. Because of no proper guidance and unawareness. Still most of the people have no awareness about mutual funds and available schemes.
Bibliography:
Financial Services & Marketing - E. Gordon, (Himalaya Publishing House, Mumbai)Financial services - Nalini Prava Tripathy
Security Analysis & Portfolio Management - Preethi Singh
Websites Visited:
www.amfiindia.com
www.mutual funds india.com
www.reliancemutual.com
www.moneycontrol.com
Questionnaire:
1. Name of the respondent:
2. Age group:
a) Below 20 b) 20 – 29 c) 30 – 39
d) 40 – 49 e) 50 – 59 f) Above
60
3. Sex:
a) Male b) Female
4. Address:
5. Occupation:
a) Salaried b) Business c)
Professional
d) Retired e) Student.
6. Annual Income
a) 1-5 Lakh b) 5– 10 Lakh
c) Above 10 Lakh
7. Do you invest any part of your savings?
a) Yes b) No
If yes
8. What amount do you save yearly?
a) < 25000 b) < 50000
c) < 100000 d) > 100000
9. Normally what investment opportunities you prefer to invest your savings? (Rank
them accordingly)
A) Mutual Funds b) LIC
C) Shares d) Bank deposits
10. What criteria you keep in your mind while selecting an investment opportunity
(Rank them accordingly)?
a) Security b) Yield c) Maturity
d) Tax Benefits e) Liquidity f) goal
11. Do you know about the Mutual Funds?
a) Yes b) No
I). If yes how did you come to know about mutual funds?
a) Advertisements b) Friends c) Family
members
d) Financial Advisors e) Relatives
12. Have you invested any amount in the Mutual Funds?
a) Yes b) No
13. What type of funds do you prefer?
a) Debt Funds b) Equity Funds c) liquid Funds
14. Risk involved in mutual funds.
a) High b) Moderate c) Neutral
d) Low e) Nil
15. Returns in mutual funds
a) Excellent b) good c)
average
d) Fair e) poor.
19. In your opinion, investment in Mutual Fund is a
a) Better option b) not a better option c) can’t say
22. Will you recommend Mutual Fund as a better investment alternative to your
friends?
a) Yes b) NO
23. If you have 100000/- how much money do you invest in mutual funds?
24. Have you aware of taxation on your investment?
a) yes b)no
25. What are your valuable suggestions for the improvement of Mutual?
Funds schemes?