PART-I

❖ CHAPTER 1: INTRODUCTION
1.1 General introduction about the sector
1.2 Industry Profile

Introduction to Mutual Funds

A mutual fund is the ideal investment vehicle for today’s complex & modern financial scenario.
Markets for enquiry shares bonds and other fixed income instruments, real estate, derivatives and
other assets have become mature and information driven. Price changes in these assets are driven
by global events occurring in faraway places. A typical individual is unlikely to have the knowledge,
skills, inclination and time to keep track of events, understand their implications and act speedily. An
individual also finds it difficult to keep track of ownership of this assets, investments, brokerage dues
& bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified and
experienced staff that manages each of these functions on a full time bases. The large pool of money
collected in the fund allows it to hire such staff at a very; low cost to each investor. In effect the
mutual fund vehicle exploits economies of scale in all three areas – research, investments,
transaction processing. While the concept of individual coming together to invest the money
collectively is not new, the mutual fund in its present form is a 20th century phenomenon. In fact
mutual funds gained popularity only after the Second World War. Globally there are thousands of
firms offering tens of thousands of mutual funds with different investment objectives. Today mutual
funds collectively manage almost as much as or more money as compared to banks.

To get a better understanding of mutual funds it is necessary to know the industry in detail. In the
following sections a detailed descriptions of the mutual funds industry will be discussed.

Concept of a mutual fund

A mutual fund is a common pool of money into which investors place their contributions that are to
be invested with a stated objective. The ownership of the fund is thus joint or mutual and the fund
belongs to all investors. A single investors ownership of the fund is in the same ratio as the amount
of contribution made by him or bears to the total amount of the fund.

Meaning of Mutual Fund

Mutual Funds are investment products that operate on the principles of ‘Strength in Numbers’. They
collect money from a large group of investors, pool it together, and invest it in various securities in
line with their objective. They are an alternative to investing directly. A more convenient alternative
yet no less rewarding. Take stocks, trading into the market by yourself would mean knowing at the
very least, how to analyze and track companies, the way of the market and the intermediaries who
will help you buy and sell shares. A mutual fund that invests in stocks relieves you of all such hassles,
while giving you the same investment option for individual’s handicapped by a lack of investing
acumen or time, or generally disciplined to take charge of their personal finances.

Mutual funds are not magic investment vehicles that do it all you’ll have to come to terms with the
fact that they assure neither returns nor the value of yours original investment. You’ll have to accept
the reality that even they, who are supposedly experts in investments matter, can go wrong. These
are inherent risks, but these can be managed. Mutual funds offer several advantages that make
them a powerful and convenient wealth creation vehicle worthy of yours consideration

Characteristics of a Mutual Fund

➢ A Mutual fund actually belongs to the investors who have pooled their funds. The ownership of
the mutual funds is in the hands of the investors.
➢ In case of mutual fund the contributors and the beneficiaries of the funds are the same class of
people namely the investors.
➢ Investment professionals manage a mutual fund and other service providers, who earn a fee for
their services provided, from the fund.
➢ The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio
is updated every day.

The investor’s share in the fund is denominated by “UNITS”. The value of the units changes with the
change in the portfolio’s value, everyday. The value of one unit of investment is called as the net
asset value or NAV

HOW ARE THE MUTUAL FUNDS STRUCTURED?

Mutual funds can be structured in the following ways:

• Company form, in which investors hold shares of the mutual fund. In this structure, management
of the fund is in the hands of an elected board, which in turn appoints investment managers to
manage the fund.
• Trust form, in which the funds of the investors are held by a trust, on behalf of the investors. The
trust appoints investment managers and monitors their functioning in the interest of investors.

The company form of organization is very popular in the United States. In India, mutual funds
are organized as trusts. The trust is created by sponsor, who is the actually the entity interested in
creating the mutual fund business. The trust is either managed by a Board of trustees, or by a
trustee company, formed for this purpose. The investor’s funds are held by the trust.
Types of Mutual Funds

Open-End Funds

An open-ended fund is one that has unit’s available foe sale and repurchase at all times. An investor
can buy or redeem units from the fund itself at a price based on the Net Asset Value (NAV) per unit.
NAV per unit is obtained by dividing the amount of the market value of the fund’s assets by the
number of units outstanding. The number of outstanding goes up or down every time the fund
issues new units or repurchase existing units.

Closed-End Funds

Unlike an open-end fund, the ‘unit capital ‘of a closed-ended fund is fixed, as it makes a one-time
sale of a fixed number of units. Closed-ended funds do not allow investors but or redeem units
directly from the funds. However, to provide the much-needed liquidity to investors, any closed-end
funds get themselves listed on stock exchanges. Trading through a stock exchange enables investors
to buy or sell units of a closed-end mutual fund from each other.

Load and No-Load Funds

Marketing of a new mutual fund scheme involves initial expenses. These expenses may be recovered
from the investors in different ways at different times. Three usual ways in which a fund's sales
expenses may recover from the investors are:
1. At the time of investor's entry into the fund/scheme, by deducting a specific amount from his
Initial contribution, or
2. By charging the fund/scheme with a fixed amount each year, during the stated number of years,
or

3. At the time of the investor's exit from the fund/scheme, by deducting a specified amount from the
redemption proceeds payable to the investor.

These charges made by the fund managers to the investors to cover distribution/sales/marketing
expenses often called "loads". The load charged to the investor at the time of his entry into a
scheme is called “front-end or entry load". The load amount charged to the scheme over period of
time is called a deferred load. The load that the investor pays at the time his exit is called a "back-
end or exit load".

Some funds may also charge different amounts of loads to the investors, depending upon how many
years the investor is stayed with the fund; the longer the investor stays with the fund, less the
amount of” exit load" he charged. This is called “contingent deferred sales charge".

Funds that charge front-end, back-end or deferred loads are called load funds. Funds that make no
such charges or loads for sales expenses are called no-load funds.

A load fund's declared NAV does not include the loads. Hence, a new investor must add any front-
end load amount per unit the NAV per unit to calculate his purchase price. An outgoing investor
needs to deduct the amount of any back-end load per unit from his sale price per unit to get to know
the net sale proceeds he would receive.

Tax Exempt and Non-Tax Exempt Funds

Generally, when a fund invests in tax-exempt securities, it is called a tax-exempt fund. In the U.S.A,
For example, municipal bonds pay interest that is tax-free, while interest on corporate and other
bonds is taxable. In India, after the 1999 Union Government Budget, all of the dividend income
received from many of the Mutual funds is tax-free in the hands of the investor.

However, funds other than Equity Funds have to pay a distribution tax, before distributing income to
investors. In other words, equity mutual fund schemes are tax-exempt investment avenues, while
other funds are taxable for distributable income.

While Indian Mutual funds currently offer tax-free income, any capital gains arising out of sale of
fund nits are taxable. All these tax considerations are important in the decision on where to invest as
the tax exemptions or concessions alter returns obtained from these investments. Hence,
classification Of Mutual funds from the taxability perspective has great significance for investors.

Broad Fund types by Nature of Investments

Mutual funds may invest in equities, bonds or other fixed income securities, or short-term money
market securities. So we have Equity, Bond and Money Market Funds. All of them invest in financial
assets. But there are funds that invest in physical assets. For example, we may have Gold or other
Precious Metals Funds, or Real Estate Funds.
Broad Fund Types by Investment Objective

Investors and hence the mutual funds pursue different objectives while investing. Thus, Growth
Funds invest for medium to long-term capital appreciation. Income Funds invest to generate regular
income, and less for capital appreciation. Value Funds invest in equities that are considered under-
valued today, whose value will be unlocked in the future.

Broad Fund Types by Risk Profile

The nature of a fund's portfolio and its investment objective imply different levels of risk
undertaken. Funds are therefore often grouped in order of risk. Thus, Equity funds have a greater
risk of capital loss than a Debt Fund that seeks to protect the capital while looking for income.
Money Market Funds are exposed to less risk than even the Bond Funds,' since they invest in short-
term fixed income securities, as compared to longer-term portfolios of Bond Funds.

Money Market Funds

Often considered the lowest rung order of risk level, Money Market Funds invest in securities of a
short-term nature, which generally means securities of less than one-year maturity. The typical,
short-term interest-bearing instruments these funds invest in include Treasury Bills issued by
governments. Certificates of Deposit issued by banks and Commercial Paper issued by companies. In
India Money market Mutual funds also invest in the inter-bank call money market. The major
strengths of money market funds are the liquidity and safety or principal that investors can normally
expect from short-term investments.
Gilt Funds

Gilts are government securities with medium to long-term maturities, typically of over one year
(under one-year instruments being money market securities). In India we have now seen the
emergence of Government Securities or Gilt Funds that invest in government paper called dated
securities (unlike Treasury Bills that mature less These funds have little risk of default and hence
offer better protection of principal.
However, investors have to recognize the potential changes in values of debt securities held by the
funds that are caused 'by changes in the market price of debt securities quoted on the stock
exchanges (Just like the equities).Debt securities' prices fall when interest rate levels increase (and
vice versa).

Debt Funds (or Income Funds)

Next in the order of risk level, we have the general category Debt Funds. Debt funds invest in debt
instruments issued not only by governments, but also by private companies, banks and financial
institutions and other entities such as infrastructure companies/utilities.

By investing in debt, these funds target low risk and stable income for the investor as their key
objectives. However, as compared to the money market funds, they do have a higher price
fluctuation risk, since they invest longer-term securities. Similarly compared to Gilt Funds, general
debt funds do have a higher risk of default by their borrowers.

Debt Funds are largely considered as Income Funds as they do not target capital appreciation, look
for high current income, and therefore distribute a substantial part of their surplus to investors.
Income funds that target returns substantially above market levels can face more risks. The Income
Funds fall largely in the category of Debt Funds as they invest primarily in fixed income generating
debt instruments. Again, different investment objectives set by the fund managers would result in
different risk profiles.

Diversified Debt Funds

A debt fund that invests in all available types of debt securities, issued by entities across all
industries and sectors is a properly diversified debt fund.
While debt funds offer high income and less risk than equity funds, investors need to recognize that
debt securities are subject to risk of default by the issuer on payment of interest or principal.

A diversified debt fund has the benefit of risk reduction through diversification and sharing of any
default-related losses by a large number of investors. Hence a diversified debt fund is less risky than
a narrow-focus fund that invests in debt securities of a particular sector or industry.

Focused Debt Funds

Some debt funds have a narrower focus, with less diversification in its investments. Examples
include sector, specialized and offshore debt funds.
These funds are similar to the funds described later in the equity category except that debt funds
have a substantial part of their portfolio invested in debt instruments and are therefore more
income oriented and inherently less risky than equity funds. However 'the Indian financial markets
have demonstrated that debt funds should not be automatically considered to be less risky than
equity funds, as there have been relatively large default by issuers of debt and many funds have
non-performing assets in their debt portfolios. It should also be recognized that market values of
debt securities will also fluctuate more as Indian debt markets witness more trading and interest
rate volatility in the future.

High Yield Debt Funds

Usually, Debt Funds control the borrower default risk by investing in securities issued by borrowers
who are rated by credit rating agencies and are considered to be of "investment grade". There are
High Yield Debt Fund that seek to obtain higher returns by investing in debt instruments that are
considered "below investment grade”.’ Clearly, these funds are exposed to higher risk.

In U.S.A., funds that invest in debt instruments that are not backed by tangible assets and rated
below investment grade (popularly known as junk bonds) are called Junk Bond Funds. These funds
tend to be more volatile than other debt funds, although they may earn higher returns as a result of
the higher risks taken.

Assured Return Funds

Fundamentally, mutual funds hold assets in trust for investors. All returns and risks are for account
of the investor. The role of the fund Manager is to provide the professional management service and
to ensure the highest possible return consistent with the investment objective of the fund. Assured
return debt fund certainly reduce the risk level.

Fixed Term Plans

Fixed Term Plans are closed-end, but usually for shorter term-less than a year. Being of short
duration, they are not listed on a stock exchange.
As investors move from Debt Fund category to Equity Funds they face increased risk level.

However, there is a large variety of Equity Funds and all of them are not equally risk-prone. Investors
and their advisors need to sort out and select the right equity fund that suits their risk appetite

Equity funds invest a major portion of their corpus in equity shares issued by companies, acquired
directly in initial public offerings or through the secondary market. Equity funds would be exposed to
the equity price fluctuation risk at the market level at the industry or sector level and at the
company-specific level. Equity Funds Net Asset Values fluctuate with all these price movements.
These prices are caused by all kinds of external factors, political and social as well as economic.
Hence, Equity Funds are generally considered at the higher end of the risk spectrum among all funds
available in the market. Equity funds adopt different investment strategic resulting in different levels
of risk. Hence, they are generally separated into different types in terms of their investment styles.
Some of the major types of equity funds, arranged in order of higher to lower risk level.

Aggressive Growth Funds

There are many types of stocks/shares available in the market; Blue Chips that are recognized
market leaders, less researched stocks that are considered to have future growth potential, and
even some speculative stocks of somewhat unknown or unproven issuers. Fund managers seek out
and invest in different types of stocks in line with their own perception of potential returns and
appetite for risk.

Aggressive growth funds target maximum capital appreciation, invest in less researched or
speculative shares and may adopt speculative investment strategies to attain their objective of high
returns for the investor. Consequently, they tend to be more volatile and riskier than other funds.

Growth Funds

These funds invest in companies whose earnings are expected to rise at an above average rate.
These companies may be operating in sectors like technology considered having a growth potential,
but not entirely unproven and speculative. The primary objective of Growth Funds is capital
appreciation over a three to five year span. Growth funds are therefore less volatile than funds that
target aggressive growth.

Specialty Funds

These funds have a narrow portfolio orientation and invest in only companies that meet pre-defined
criteria. For example, at the height of the South African apartheid regime, many funds in the U.S.
offered plans that promised not to invest in South African companies. Some funds may build
portfolios that will exclude Tobacco companies. Funds that invest in particular regions such as the
Middle East or the ASEAN countries are also an example of specialty funds. Within the Specialty
Funds category, some funds may be broad-based in terms of the types of investments in the
portfolio. However, most specialty funds tend to be concentrated funds, since diversification is
limited to one type of investment. Clearly, concentrated specialty funds tend to be more volatile
than diversified funds.

Sector Funds

Sector funds' portfolios consist of investments in only one industry or sector of the market such as
Information on Technology, Pharmaceuticals or Fast Moving Consumer Goods that have recently
been launched in India. Since sector funds do not diversify into multiple se Offshore Funds.

Offshore Funds
These funds invest in equities in one or more foreign countries thereby achieving diversification
across the country's borders. However they also have additional risks - such as the foreign exchange
rate risk - and their performance depends on the economic conditions of the countries they invest
in. Offshore Equity Funds may invest in a single country (hence riskier) or many countries (hence
more diversified).

Small Cap Equity Funds

These funds invest in shares of companies with relatively lower market capitalization than that of
big, blue chip companies. They may thus be more volatile than other funds, as smaller companies'
shares are not very liquid in the markets. In terms of risk characteristics, small company funds may
be aggressive-growth or just growth type.

Option Income Funds

Option Income Funds write options on a significant part of their portfolio. While options are viewed
as risky instruments, they may actually help to control volatility, if properly used. Conservative
option funds invest in large, dividend paying companies, and then sell options against their stock
positions. This ensures a stable Income stream in the form of premium income through selling
options and dividends.

Diversified Equity Funds

A fund that seeks to invest only in equities except for a very small portion in liquid money market
securities, but is not focused on any one or few sectors or shares, may be termed a diversified equity
funds seek to reduce the sector or stock specific risks through diversification. They have mainly
market risk exposure. Diversified funds arc clearly at the lower risk level than growth funds

Equity Linked Saving Schemes: An Indian Variant

In India, the investors have been given tax concessions to encourage them to invest in equity
markets through these special schemes. Investment in these schemes entitles the investor to claim
an income tax rebate, but usually has a lock-in period before the end of which funds cannot be
withdrawn. These funds are subject to the general SEBI investment guidelines for all equity funds,
and would be in the Diversified Equity Fund category. However, as there are no specific restrictions
on which sectors these funds ought to invest in, investors should clearly look for where the Fund
Management Company proposes to invest and accordingly judge the level of risk involved.

Equity Index Funds

An index fund tracks the performance of a specific stock market index. The objective is to match the
performance of the stock market by tracking an index that represents the overall market. The fund
invests in shares that constitute the index and in the same proportion as the index. Since they
generally invest in a diversified market index portfolio, these funds take only the overall market risk,
while reducing the sector and stock specific risks through diversification.

Value Funds

Value Funds try to seek out fundamentally sound companies whose shares arc currently under-
priced in the market. Value Funds will add only those shares to their portfolios that are selling at low
price-earnings ratios, low market to book value ratios and are undervalued by other yardsticks.

Value funds have the equity market price fluctuation risks, but stand often at a lower end of the risk
spectrum in comparison with the Growth Funds. Value Stocks may be from a large number of sectors
and therefore diversified.

Equity Income funds

Usually income funds are in the Debt Funds category, as they target fixed income investments.
However, there are equity funds that can be designed to give the investor a high level of current
income along with some steady capital appreciation, investing mainly in shares of companies' with
high dividend yields.

Hybrid Funds – Quasi Equity/Quasi Debt

Money market holdings will constitute a lower proportion in the overall portfolios of debt or equity
funds. There are funds that, however, seek to hold a relatively balanced holding of debt and equity
securities in their portfolio. Such funds are termed "hybrid funds" as they have a dual equity/bond
focus.

Balanced Fund

A balanced fund is one that has a portfolio comprising debt instruments, convertible securities, and
Preference equity shares. Their assets are generally held in more or less equal proportions between
debt/money market securities and equities. By investing in a mix of this nature, balanced funds seek
to attain the objectives of income, moderate capital appreciation and preservation of capital, and
are ideal for investors with a conservative and long-term orientation.

Growth-and-Income Funds

Unlike income-focused or growth-focused funds, these funds seek to strike a balance between
capital appreciation and income for the investor. Their portfolios are a mix between companies with
good dividend paying records and those with potential for capital appreciation. These funds would
be less risky than pure growth funds, though more risky than income fund.
Commodity Funds

Commodity funds specialize in investing in different commodities directly or through shares of

commodity companies or through commodity future contracts. Specialized funds may invest in a
single commodity or a commodity group such as edible oils or grains, while diversified commodity
funds will spread their assets over many commodities.

Real Estate Funds

Specialized Real Estate Funds would invest in Real Estate directly, or may fund real estate
developers, or lend to them, or buy shares of housing finance companies or may even buy their
securities assets.

The funds may have a growth orientation or seek to give investors regular income. There has
recently been an initiative to offer such an income fund by the HDFC.

TYPES OF MUTUAL FUND:-

MUTUALFUND TYPE
WHO SHOULD INVEST
Objective
Investment portfolio
Risk
Ideal investment
Diversified equity funds
Moderate and aggressive investors
High growth
Equity shares
High
1-3years
Sector fund
Aggressive investors
High growth
Equity shares
Very high
1-3years
Index fund
Moderate investors
To generate returns which are similar to the returns of the respective index
Portfolio like BSE. Sensex, Nifty,etc
Returns of NAV, very with index performance
1-3years
Equity linked saving scheme(ELSS)
Moderate and aggressive investors
Long-term growth with tax saving
Equity shares
High
1-3years
Balance fund
Moderate and aggressive investors
Growth and regular income
Balance ratio of equity and debt fund to ensure higher returns at lower risk
Capital market risk and interest rate risk
Over 2 years
Bond funds
Salaried and conservative investors
Regular income
Predominantly debenture government securities, corporate bonds
Credit risk and interest rate risk
Over
9-12months

Gilt fund
Salaried and conservative investors
Security and income
Government securities
Interest rate risk
Over 12 months
Short-term funds
Investors with surplus short-term fund
Liquidity and moderate income
Call money commercial papers, treasury bill short-term
G-secs
Linked interest rate risk
3weeks
3months
Liquidity funds
Investors who park their fund in current account or short term bank fixed deposits
Liquidity +moderate income preservation of capital
Treasury bills, certificate of deposits , commercial papers, securities call money
Negligible
Risk
2days
3weeks

Benefits of Mutual Fund

➢ Portfolio Diversification

Return on investment from just one industry or sector are subject to how well or poorly the industry
fares. But with mutual fund one’s money is invested across different sector. This reduces the risk of
low returns on investments, because rarely do different sectors decline at the same time.

➢ Professional Management
A mutual fund draws on the professional expertise of a team of research analysts and fund managers
in investing one’s saving in a number of securities.

➢ Reduction of Transaction Costs

The purchase or sale of financial assets through the exchanges entails a certain proportion of
changes known as transaction made. Investments through mutual fund reduce these costs
considerably as they enjoy the benefits of economies of scale.

➢ Liquidity

If one invests in an open-ended mutual fund, one can claim the money at net asset value related
prices from the mutual fund itself.

➢ Convenience and Flexibility

One has access to up-to-date information on the value of the investment in addition to the
investments that have been made by the scheme, the proportion allocated to different assets and
the fund manager’s investment strategy.

➢ Return Potential

Investing in a Mutual Fund reduces paperwork and helps to avoid many problems such as bad
deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save time
and make investing easy and convenient.

➢ Transparency

Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, one can systematically invest or withdraw funds according to once needs and
convenience.

➢ Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because
of its large corpus allows even a small investor to take the benefit of its investment strategy.

➢ Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.
Mutual Fund Industry-A Profile
Origin of Mutual Funds

The Mutual Fund industry traces its roots to England in the mid – 1800’s. The enactment of two
British laws, the joint stock companies Acts of 1862 and 1867, permitted investors, for the first time
to share in the profits of an investments enterprise, and limited investor liability to the amount of
investment capital devoted to the enterprise. Shortly thereafter, in 1868, the Foreign and Colonial
Government Trust formed in London. This trust resembled a mutual fund in basic structure,
providing “the investor of moderate means the same advantage as the large capitalists… by
spreading the investment over a number of different stocks.”

This concept of offering the investment potential of financial markets to all individuals spawned
additional “investment companies” in Britain and Scotland and among other things helped finance
the development of the post-civil was US economy. Most of the early British investment companies
or trusts resembled today’s closed-end funds by issuing a fixed number of shares to groups of
investors whose “pooled” assets were invested in various companies. The Scottish American
Investment Trust, formed on February 1, 1873 by fund pioneer Robert Fleming, was significant
because it invested in the economic potential of the United States Chiefly through American railroad
bonds. Many other trusts followed that not only target investment in America, but more importantly
led to the introduction of investment fund concept on U. S shares in the late 1800’s and early 1900’s.

History of the Indian Mutual Fund Industry

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

--------------------------------------------------------------------------------

First Phase – 1964-87

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.
LIST OF MUTUAL FUNDS IN INDIA

Mutual Fund
Sponsors
Year of Entry

Bank sponsored

BOB Asset Management Co. Ltd

Bank of Baroda
1992
Can Bank Investment Management Services Ltd.,
Canara Bank
1987
S.B.I. Funds Management Ltd.,
State Bank of India
1987
UTI Asset Management Co., Pvt. Ltd.,
SBI, PNB, BOB, LIC
1963
Institutions
G.I.C. Asset Management Co. Ltd.,
General Insurance Corporation & other 4 PSU GIC
1990
Jeevan Bhima Sahyoga Asset Management Co. Ltd.,
LIC
1989
Private Sectors
Benchmark Asset Management Co. Pvt. Ltd.,
NICHE Financial Services
2001
Chola Mandalam Asset Management Co. Ltd.,
Chola Mandalam Investments
1997
Escorts Asset Management Ltd.,
Escorts Finance
1996
J. M. Capital Management Pvt. Ltd.,
J.M. Shares and Stock Brokers
1994
Kotak Mahindra Asset Management Co. Ltd.,
Kotak Mahindra Bank
1998
Reliance Capital Asset Management Co. Ltd.,
Reliance Capital
1995
Sahara Asset Management Co. Pvt. Ltd.,
Sahara India Finance
1996
Sundaram Asset Management Co. Ltd.,
Sunadaram Finance
1996
Tata Asset Management Pvt. Ltd.,
Tata Sons
1995
Joint Ventures Predominantly Indian
Birla Sun Life Asset Management Pvt. Ltd.,
Birla Global Finance
1994
D.S.P. Merrill Lynch Fund Manager Ltd.,
D.S.P. Merrill Lynch
1996
HDFC Asset Management Co. Ltd.,
HDFC & Std Life Investment
2000
Joint Ventures Predominantly Foreign
Alliance Capital Asset Management Pvt. Ltd.,
Alliance Capital Management
1994
Deutsche Asset Management Pvt. Ltd.,
Deutsche Asset Management
2002
Franklin Templeton Asset Management Pvt. Ltd.,
Franklin Templeton Investments
1996
HSBC Asset Manageent Pvt. Ltd.,
HSBC Security
2002
ING Inveatment Management Pvt. Ltd.,
ING Group
1999
Morgan Stanley Investment Management Pvt. Ltd.,
Morgan Stanley
1993
Prudential ICICI Asset Management Pvt. Ltd.,
Prudential ICICI
1993
Principal Asset Management Co. Pvt. Ltd.,
Principal Financial Service
1994
Standard Charted Asset Management Ltd.,
Standard Charted Bank
2000
( Source: Outlook Money : Laymen’s guide to MUTUAL FUND )
Sales Practices in the Indian Mutual Fund Market

Agent commissions

Agents are compensated by the funds through commissions, commission rates.

In India there are no rules prescribed for governing the minimum r maximum commissions payable
by a fund to its agents. Each fund has discretion to decide the commission structure for its agents.
Thus sundaram pays commission to its agents as a basic rates plus an incentive that depends on the
volume of business. In recent times funds have been paying commissions in the range of 1.5-2 % on
equity oriented funds and 0.4-0.8 % on debt based funds. Higher commissions are generally paid in
case of investments that are made with the purpose of taking tax benefits, since investors are
required to lock in their funds for a longer period.

SEBI Regulations

Although SEBI does not prescribe the minimum or maximum amount of commission payable by a
fund to agents under SEBI (MF) Regulations, 1996, all initial expenses including Brokerage paid to
agents are limited to 6 % of resources raised under the schemes. In additions, SEBI regulated open-
end funds are authorized to charge the investors are “entry & exit” loads to cover the fund
distribution expenses. These loads should not exceed the percentage specified in the scheme’s offer
document. In case the agents commissions paid by the fund result in over all distribution expenses
are to be borne by AMC i.e. the excess cannot be passed on to the unit holders.
A no – load, charging no entry or exit loads is authorized to charge the schemes with the
commissions paid to agents as part of the regular management & marketing expenses allowed by
SEBI. SEBI puts a cap on the total expenses (including commissions) that can be charged to a scheme
each year. Any excess over allowable expenses is required to be borne by the AMC.

Marker Practice

Some funds pay the entire commission up- fronts to the agents (i.e. at the time of sale of units),
while others pay apart of it up-front and the balance in phases. The latter practice is known as trail
commission. Some funds follow the practice of non-paying the balance to the agent if the investor
exits the scheme before a specified period or stop paying the commission after the investor exits
whenever he does.
On the issue of commissions, is that of rebating by the agent to the investor of a part of the
commission received from the fund on the sale to that investor. Although agent commissions in the
in the mutual industry are not at the same levels as in insurance, investors have come to expect such
rebates from agents of all financial products. It is possible in future such rebates might reduce in
future & may even disappear. He distributors themselves will tend to realize that they provide useful
processing and advisory services to investors, & have to incur costs in the process that need to be
covered from their well deserve commissions received from the funds

Agents Obligation

Commission/other arrangements are between the fund and agent/broker. Sub-brokers serve as
agents of the principle agent and the fund is not answerable for their activities. Clearly, given the
need for and widespread existence of a sub-broker network in India their role cannot be washed
away. But the distributors need to make the investors aware of whom they are dealing with, whom
the commission rebate is received from, & whom should they contact in case of any problems.
Agents are well advised to practice honesty & transparency in explaining the commission structure &
the timing of any rebate payment to the investors, whose trust will build a long-term relationship.

The AMFI Code of Ethics

One of the objects of the Association of Mutual Funds in India (AMFI) is to promote the investors’
interest by defining and maintaining high ethical and professional standards in the mutual fund
industry. In pursuance of this objective, AMFI had constituted a Committee under the Chairmanship
of Shri A. P. Pradhan with Shri S. V. Joshi, Shri C. G. Parekh and Shri M. Laxman Kumar as members.
This Committee, working in close co-operation with Price Waterhouse–LLP under the FIRE Project of
USAID, has drafted the Code, which has been approved and recommended by the Board of AMFI for
implementation by its members. I take opportunity to thank all of them for their efforts.

The AMFI Code of Ethics, “The ACE” for short, sets out the standards of good practices to be
followed by the Asset Management Companies in their operations and in their dealings with
investors, intermediaries and the public. SEBI (Mutual Funds) Regulation 1996 requires all Asset
Management Companies and Trustees to abide by the Code of conduct as specified in the Fifth
Schedule to the Regulation. The AMFI Code has been drawn up to supplement that schedule, to
encourage standards higher than those prescribed by the Regulations for the benefit of investors in
the mutual fund industry.

This is the first edition of the Code and it may be supplemented further as may be necessary. I hope
members of AMFI would implement the code and ensure that their employees are made fully aware
of the Code.

1.0 INTEGRITY

1.1 Members and their key personnel, in the conduct of their business shall observe high standards
of integrity and fairness in all dealings with investors, issuers, market intermediaries, other members
and regulatory and other government authorities.
1.2Mutual Fund Schemes shall be organized, operated, managed and their portfolios of securities
selected, in the interest of all classes of unit holders and not in the interest of
❖ Sponsors
❖ Directors of Members
❖ Members of Board of Trustees or directors of the Trustee company
❖ Brokers and other market intermediaries
❖ Associates of the Members
❖ A special class selected from out of unit holders

2.0 Due Diligence

2.1Members in the conduct of there Asset Management business shall at all time.
❖ Render high standards of service.
❖ Exercise due diligence.
❖ Exercise independent professional judgement.

2.2Members shall have and employ effectively adequate resources and procedures, which are
needed for the conduct of Asset Management activities.

3.0 Disclosures

3.1 Members shall ensure timely dissemination to all unit holders of adequate, accurate, and
explicit information presented in a simple language about the investment objectives, investment
policies, financial position and general affairs of the scheme.

3.2 Members shall disclose to unit holders investment pattern, portfolio details, ratios of expenses
to net assets and total income and portfolio turnover wherever applicable in respect of schemes on
annual basis.
3.3 Members shall in respect of transactions of purchase and sale of securities entered into with
any of their associates or any significant unit holder.
❖ Submit to the Board of Trustees details of such transactions, justifying its fairness to the scheme.
❖ Disclose to the unit holders details of the transaction in brief through annual and half yearly
reports.
3.4All transactions of purchase and sale of securities by key personnel who are directly involved in
investment operations shall be disclosed to the compliance officer of the member at least on half
yearly basis and subsequently reported to the Board of Trustees if found having conflict of interest
with the transactions of the fund.

4.0 Professional Selling Practices

4.1 Members shall not use any unethical means to sell, market or induce any investor to buy their
products and schemes
4.2 Members shall not make any exaggerated statement regarding performance of any product or
scheme.
4.3 Members shall endeavor to ensure that at all times
❖ Investors are provided with true and adequate information without any misleading or
exaggerated claims to investors about their capability to render certain services or their
achievements in regard to services rendered to other clients,

❖ Investors are made aware of attendant risks in members’ schemes before the investors make any
investment decision,
❖ Copies of prospectus, memoranda and related literature is made available to investors on
request,
❖ Adequate steps are taken for fair allotment of mutual fund units and refund of application
moneys without delay and within the prescribed time limits and,
❖ Complaints from investors are fairly and expeditiously dealt with.

4.4 Members in all their communications to investors and selling agents shall
❖ Not present a mutual fund scheme as if it were a new share issue
❖ Not create unrealistic expectations
❖ Not guarantee returns except as stated in the Offer Document of the scheme approved by SEBI,
and in such case, the Members shall ensure that adequate resources will be made available and
maintained to meet the guaranteed returns.
❖ Convey in clear terms the market risk and the investment risks of any scheme being offered by
the Members.
❖ Not induce investors by offering benefits, which are extraneous to the scheme.
❖ Not misrepresent either by stating information in a manner calculated to mislead or by omitting
to state information which is material to making an informed investment decision.

5.0 Investment Practice

5.1Members shall manage all the schemes in accordance with the fundamental
investment objectives and investment policies stated in the offer documents and take investment
decisions solely in the interest of the unit holders.

5.2 Members shall not knowingly buy or sell securities for any of their schemes from or to
❖ Any director, officer, or employee of the member
❖ Any trustee or any director, officer, or employee of the Trustee Company

6.0 Operations

6.1 Members shall avoid conflicts of interest in managing the affairs of the schemes and shall keep
the interest of all unit holders paramount in all matters relating to the scheme.
6.2 Members or any of their directors, officers or employees shall not indulge in front running
(buying or selling of any securities ahead of transaction of the fund, with access to information
regarding the transaction which is not public and which is material to making an investment
decision, so as to derive unfair advantage).
6.3 Members or any of their directors, officers or employees shall not indulge in self- dealing (using
their position to engage in transactions with the fund by which they benefit unfairly at the expense
of the fund and the unit holders).
6.4Members shall not engage in any act, practice or course of business in connection with the
purchase or sale, directly or indirectly, of any security held or to be acquired by any scheme
managed by the members, and in purchase, sale and redemption of units of schemes managed by
the members, which is fraudulent, deceptive or manipulative.
6.5Members shall not, in respect of any securities, be party to-
❖ Creating a false market,
❖ Price rigging or manipulation

❖ Passing of price sensitive information to brokers, Members of stock exchanges and other players
in the capital markets or take action, which is unethical or unfair to investors.
6.6Employees, officers and directors of the Members shall not work as agents/ brokers for selling of
the schemes of the Members, except in their capacity as employees of the Member or the Trustee
Company.
6.7 Members shall not make any change in the fundamental attributes of a scheme, without the
prior approval of unit holders except when such change is consequent on changes in the regulations.
6.8 Members shall avoid excessive concentration of business with any broking firm, and excessive
holding of units in a scheme by few persons or entities.

7.0 Reporting Practices

7.1Members shall follow comparable and standardized valuation policies in with the SEBI Mutual
Fund Regulations.
7.2 Accordance Members shall follow uniform performance reporting on the basis of total return.
7.3Members shall ensure scheme wise segregation of cash and securities accounts.

8.0 Unfair Competition

Members shall not make any statement or become privy to any act, practice or competition, which is
likely to be harmful to the interests of

other Members or is likely to place other. Members in a disadvantageous position in relation to a

market player or investors, while competing for investible funds.

9. OObservance of Statutes, Rules and Regulations

Members shall abide by the letter and spirit of the provisions of the Statutes, rules and regulations,
which may be applicable, and relevant to the activities carried on by the members.

10.0Enforcement

Members shall
❖ Widely disseminate the AMFI Code to all persons and entities covered by it
❖ Make observance of the Code a condition of employment
❖ Make violation of the provisions of the code, a ground for revocation of contractual arrangement
without redress and a cause for disciplinary action
❖ Require that each officer and employee of the Member sign a statement that he/she has received
and read a copy of the Code
❖ Establish internal controls and compliance mechanisms, including assigning supervisory
responsibility
❖ Designate one person with primary responsibility for exercising compliance with power to fully
investigate all possible violations and report to competent authority
❖ File regular reports to the Trustees on a half yearly and annual basis regarding observance of the
Code and special reports as circumstances require
❖ Maintain records of all activities and transactions for at least three years, which records shall be
subject to review by the Trustees
❖ Dedicate adequate resources to carrying out the provisions of the Code

Procedure for registering a mutual fund with SEBI.

An applicant proposing to sponsor a mutual fund in India must submit an

Application in Form A along with a fee of Rs.25, 000. The application is examined and once the
sponsor satisfies certain conditions such as being in the financial services business and possessing
positive net worth for the last five years, having net profit in three out of the last five years and
possessing the general reputation of fairness and integrity in all business transactions, it is required
to complete the remaining formalities for setting up a mutual fund. These include inter alias,
executing the trust deed and investment management agreement, setting up a trustee
company/board of trustees comprising two- thirds independent trustees, incorporating the asset
management company (AMC), contributing to at least 40% of the net worth of the AMC and
appointing a custodian. Upon satisfying these conditions, the registration certificate is issued subject
to the payment of registration fees of Rs.25.00 lacs.

Structure of Mutual Funds in India

Like other countries, India has a legal framework within which mutual funds be constituted. Unlike in
the UK, where two distinct ‘trust’ and ‘corporate’ structures are followed with separate regulations,
in India open-end and closed end funds operate under the same regulatory structure and are
constituted along one unique structure – as unit trusts. A mutual fund in India is allowed to issue
open-end and closed-end schemes under a common legal structure. Therefore, a mutual fund may
have several different schemes (open-end and closed-end) under it. That is under one unit trust, at
any point of time.
The structure is required to be followed by mutual funds in India is laid down under SEBI (mutual
fund) regulations, 1996. In the following paragraphs, we look at the structure of each of the fund
constituent

SEBI

TRUSTEE SPONSOR

OPERATIONS AMC

FUND MANAGER MARKET / SALES

MUTUAL FUND

SCHEMES

INVESTOR

Sponsor

What a promoter is to a company, a sponsor is to a mutual fund. The sponsor initiates the idea to set
up a mutual fund. It could be a financial services company, a bank or a financial institution. It could
be Indian of foreign. It could do it alone or through a joint venture. In order to run a mutual fund in
India, the sponsor has to obtain a license from SEBI. For this, it has to satisfy certain conditions, such
as a capital and profits, back records (at least five years in financial services), default free dealings
and a general reputation for fairness.

Asset Management Company (AMC)

An AMC is the legal entity formed by the sponsor to run a mutual fund. It’s the AMC that employs
fund managers and analyst, and other personnel. It’s the AMC that handles all operational matters
of a mutual fund – from launching schemes to managing them to interacting with investors.

The people in the AMC who should matter the most to you are those who take investment decisions.
There is the head of the fund house, generally referred to as the chief executive officer (CEO). Under
him comes the chief investment officer (CIO), who shapes the funds investment philosophy and fund
managers who manage its schemes. A team of analysts, who track markets, sectors and companies,
assists them.

Trustees

Trustees are like internal regulations in a mutual fund, and their job is to protect the interests of unit
holders. Trustees are appointed or corporate bodies. In order to ensure they are impartial and fair,
SEBI rules mandate that at least two thirds of the trustees be independent that is, not have any
association with the sponsor.

Trustees appoint the AMC, subsequently seeks their approval for the work it does and reports
periodically to them on how the business is being run. Trustees float and market schemes and
secure necessary approvals. They check if the AMC investments are within defined limits and
whether the funds accountable for financial irregularities in the mutual fund.

Custodian

A custodian handles the investment back office of a mutual fund. Its responsibilities include receipt
and delivery of securities, collection of income, and distribution of dividends and segregation of
assets between schemes. The sponsor of a mutual fund cannot act as a custodian to the fund. This
condition, formulated in the interest of investors, ensures that the assets of a mutual fund are not in
the hands of its sponsor. For example Deutsche Bank is a custodian but it cannot service Deutsche
Mutual Fund, its mutual fund arm.

Registrar

Registrars also known as transfer agents, handles all investor related services. This includes issuing
and red reaming units. Sending fact sheet and annual reports. Some fund houses handle such
functions in house. Others outsource it to registrars; Karvy and CAMS are the more popular ones. It
doesn’t really matter which model your mutual fund opts for, as long as it is prompt and efficient in
servicing you. Most mutual funds in addition to registrars also have investor service centers of their
own in some cities.

Recent Trends in Mutual Fund Industry

The most important trend in the mutual fund industry is the aggressive expansion of the Foreign
owned mutual fund companies and the decline of the companies floated by Nationalized Banks and
smaller Private Sector players.

Many Nationalized banks got into the mutual fund business in the early nineties and got off to a
good start due to the stock market boom prevailing then. These banks did not really understand the
mutual fund business and they just viewed it as another kind of banking activity. Few hired
specialized staff and generally chose to transfer staff from the parent organization. The performance
of the schemes floated by these funds was not good.

Some schemes offered guaranteed returns and their parent organization had to bail out these AMCs
by paying large amounts of money as the difference between the guaranteed and actual returns.
The service levels were also very bad. Most of these AMCs have not been able to retain staff, float
new schemes etc. and it is doubtful whether, barring a few exceptions they have serious plans of
continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was also very
similar. They quickly realized that the AMC business, which makes money in the long term and
requires deep-pocketed support in the intermediate years. Some have sold out to Foreign owned
companies, some have merged with others and there is general restructuring going on.

The Foreign owned companies have deep pockets and come in here with the expectation of a long
haul. They can be credited with introducing many new practices such as new product innovation,
sharp improvement in service standards and disclosure, usage of technology, broker education and
support etc. In fact they have forced the industry to upgrade itself and service levels of organizations
like UTI have improved dramatically in the last few years in response to the competition provided by
these companies.

Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35% over the next few years as
investors shift their assets from banks and other traditional avenues. Some of the older and private
sector players will either close shop or be taken over.

In the coming years the market will witness a flurry of new players entering the arena. There will be
a large number of offers from various AMCs in the time to come. Some big names like Fidelity,
Principal, Old Mutual etc. are looking at Indian market seriously. One important reason for it is that
most major players already have presence here and hence these big names would hardly like to get
left behind. The mutual fund industry is awaiting the introduction of

Derivatives in India as this would enable it to hedge its risk and this in turn would be reflected in its
NAV.
SEBI is working out the norms for enabling the existing mutual fund schemes to trade in derivatives.
Importantly, many market players have called on the regulator to initiate the process immediately,
so that the mutual funds can implement the changes that are required to trade derivatives.

Global Scenario
Some basic facts

➢ The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a
corpus of $ 100 million in India.

➢ Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital
are non-bank mutual funds in this group.

➢ In the U.S. the total number of schemes is higher than that of the listed companies while in India
we have just 277 schemes

➢ Internationally, mutual funds are allowed to go short. In India fund managers do not have such
leeway.

➢ In the U.S. about 9.7 million households will manage their assets on-line by the year 2003, such a
facility is not yet of avail in India.

➢ On- line trading is a great idea to reduce management expenses from the current 2 % of total
assets to about 0.75 % of the total assets.

➢ 85% of the core customer bases of mutual funds in the top 50-broking firms in the U.S. are
expected to trade on-line by 2003.

Internationally, on- line investing continues its meteoric rise. Many have debated about the success
of e- commerce and its breakthroughs, but it is true that this aspect of technology could and will
change the way financial sectors function. However, mutual funds cannot be left far behind. They
have realized the potential of the Internet and are equipping themselves to perform better.

In fact in advanced countries like the U.S.A, mutual funds buy- sell transactions have already begun
on the Net, while in India the Net is used as a source of Information.

Such changes could facilitate easy access, lower intermediation costs and better services for all. A
research agency that specializes in Internet technology estimates that over the next four years
Mutual Fund Assets traded on- line will grow ten folds from $ 128 billion to $ 1,227 billion; whereas
equity assets traded on-line will increase during the period from $ 246 billion to $ 1,561 billion. This
will increase the share of mutual funds from 34% to 40% during the period. Such increases in
volumes are expected to bring about large changes in the way Mutual Funds conduct their business.

Here are some of the basic changes that have taken place since the advent of the Net.

Lower Costs

Distribution of funds will fall in the online trading regime by 2003. Mutual funds could bring down
their administrative costs to 0.75% if trading is done on- line. As per SEBI regulations, bond funds can
charge a maximum of 2.25% and equity funds can charge 2.5% as administrative fees. Therefore if
the administrative costs are low, the benefits are passed down and hence Mutual Funds are able to
attract mire investors and increase their asset base.

Better advice

Mutual funds could provide better advice to their investors through the Net rather than through the
traditional investment routes where there is an additional channel to deal with the Brokers. Direct
dealing with the fund could help the investor with their financial planning. In India, brokers could get
more Net savvy than investors and could help the investors with the knowledge through get from
the Net.

New investors would prefer online

Mutual funds can target investors who are young individuals and who are Net savvy, since servicing
them would be easier on the Net.
India has around 1.6 million net users who are prime target for these funds and this could just be the
beginning. The Internet users are going to increase dramatically and mutual funds are going to be
the best beneficiary. With smaller administrative costs more funds would be mobilized .A fund
manager must be ready to tackle the volatility and will have to maintain sufficient amount of
investments which are high liquidity and low yielding investments to honor redemption.
Net-based advertisements

There will be more sites involved in ads and promotion of mutual funds. In the U.S. sites like AOL
offer detailed research and financial details about the functioning of different funds and their
performance statistics. a is witnessing a genesis in this area . There are many sites such as
indiainfoline.com and indiafn.com that are doing something similar and providing advice to investors
regarding their investments.

In the U.S. most mutual funds concentrate only on financial funds like equity and debt. Some like
real estate funds and commodity funds also take an exposure to physical assets. The latter type of
funds are preferred by corporate who want to hedge their exposure to the commodities they deal
with.

For instance, a cable manufacturer who needs 100 tons of Copper in the month of January could buy
an equivalent amount of copper by investing in a copper fund. For Example, Permanent Portfolio
Fund, a conservative U.S. based fund invests a fixed percentage of it’s corpus in Gold, Silver, Swiss
francs, specific stocks on various bourses around the world, short –term and long-term U.S.
treasuries etc.

In U.S.A. apart from bullion funds there are copper funds, precious metal funds and real estate funds
(investing in real estate and other related assets as well.). In India, the Canada based Dundee mutual
fund is planning to launch a gold and a real estate fund before the year-end.
In developed countries like the U.S.A there are funds to satisfy everybody’s requirement, but in India
only the tip of the iceberg has been explored. In the near future India too will concentrate on
financial as well as physical funds.

Corpus:-

Investing in a scheme is a simple process. Juts walk into any office of the mutual fund or that of
its representatives. Fill up a short and simple form, and hand over a cheque. Yours money gets
added to the pool already with the scheme, given to it by numerous other investors like you. The
total money available with a scheme at any point in time is referred to as the “Corpus” or Asset
under management ’the mutual fund, on your and other investors behalf invests this corpus in
various securities in line with its sated objectives

Units:

Mutual fund issues you ‘units’ against your investment. A unit is the currency of a fund. What a
share is to company, a unit is to a fund.

Net asset value (NAV):

NAV: (Net asset of the scheme /number of unit’s o/s)

(Number of units outstanding as at the NAV)

You are allotted units on the basis of a scientific mechanism. This price, measured per unit, is called
the Net Asset Value (NAN) of the unit. Just as share or land is bought and sold at its NAV. if for
example, you were to invest Rs 10000 in scheme when it’s NAV
Is Rs 10. You will be allotted 1000 units (10000/10) roughly – the fund charges a nominal processing
fee.

The NAV of any scheme tells how much each units of its is worth at any point in time, and is
therefore the simplest measure of how it is performing. Schemes NAV is its net assets (Market value
of the securities its own minus it owes) divided by the number of units it has issued.

A scheme NAV is dynamic figure. The market value of a schemes portfolio, changes from day to
day, as prices of shares and bonds move up or down. The number of units outstanding also changes
as new investors come into the scheme and told ones leave. If the NAV of your scheme rises from Rs
10 to Rs, 11 over a period of time, your scheme is said to have generated a return of 10%. Similarly,
if its NAV falls from Rs 10 to Rs 9, it is said to have lost 10%

Fund house have to calculate and disclose the NAV’s of their schemes daily fund NAV’s can be
easily looked up. While dailies give a random listing of schemes the financial papers are more
exhaustive in their coverage. NAV information is also available on website, of the mutual fund
concerned and of independent data providers. When invested in a scheme, its NAV is the figure to
track as it qualifies your returns and your purchase price and sale price will be based on it.
Load:-

Although the NAV represents scheme current market value it is not the exact price at which an
investor enters or exits the scheme. Fund houses levy a nominal charge, on most of their schemes,
to meet their processing costs and to discourage investors from lacking. This charge is referred to as
‘load’ and it is price you pay over and above the fund NAV when you buy or cell units.

You pay an ‘entry load’ at the time buying units and an ‘exit load’ while selling. Loads are always
expressed as percentage of the NAV, and have the effect of reducing your returns. An entry load
increases your NAV, which places fewer units in your hands. An exit load decrease you’re NAV of Rs
10 and it levies an entry and exit load of 1% (10 paisa) each. So when you buy units you’ll pay Rs 10.1
(10+0.10)per unit, not Rs 10. Similarly if you sell you’ll get Rs 9.90(10-0.10) per unit, not Rs 10. Under
SEBI rules, the sum of entry and exit loads charged by a scheme cannot exceed 7%

Cost of investment in mutual fund:-

Another entry that eats into your return is ‘expenses’ this is what your fund charges you for
managing your only. Fund managers have to be paid a fee, as do the other constraints involved in
managing your money. All this entails costs, which your scheme recovers from you, within limits.
Every year, a fund charges same amount to your schemes NAV reducing your returns by that
amount. SEBI rules allow equity schemes to charge a maximum of 2.5%of corpus as expenses every
year, the corresponding figure for debt schemes is 2.25%

SEBI also decides what kind of expenses a fund can charge its unit holders and what it cannot. For
e.g.: the cost of running a campaign about a fund having won an award cannot be charged to
investors.

Disclosures:-

From time to time, your fund house will share with you information relating to your scheme.
It does this in various ways, in various degrees. Under SEBI rules, fund houses have to send to all unit
holder’s annual reports disclosing the complete portfolio of all units holders’ annul reports disclosing
the complete portfolio of all units holders’ annul reports disclosing the compete portfolio of all their
schemes and publish half-yearly results in newspapers. These document shade light on your
schemes performing over various time periods, and how it stands up, given market conditions.

Some fund house goes beyond such mandatory information sharing. Whatever information is
relevant to your investment they send it to you on a quarterly basis, through fax and newsletters.
Most fund houses update their scheme portfolio on their website even quicker, the norm being on a
monthly basis. This information you can use to make an investment in the schemes

Redemption:-

Whenever you want, you can sell your units, partly or fully back to your fund. Although it’s sale
from your point of view in mutual fund parlance it is called ‘ repurchase ‘or redemption’ you’ll have
to fill up another short and simple from your Mutual fund will pay you the schemes NAV prevailing
on that date minus the exit load,
Mail you a cheque within three to five days.

DISTRIBUTION COMPANIES.

A distribution company has several agents and distributors working for it, and is the
transitional interface with the mutual fund. It is institutional agent for a mutual fund, and earns
commissions on funds mobilized. Distribution companies are a very popular channel with mutual
fund today.

❖ CHAPTER 2: COMPANY PROFILE

2.1 Origin of the organization
2.2 Vision, Mission & Quality Policy
2.3 Growth and development of the organization
2.4 Present status of the organization
2.5 Functional departments of the organization
2.6 Organization structure and organization chart
2.7 Product and service profile of the organization/ competitors
2.8 Market profile of the organization (Competitors’ information, SWOT analysis, Future growth)

❖ CHAPTER 2: COMPANY PROFILE

2.1 Origin of the organization
Key Information

Mutual Fund
BSL Mutual Fund
Setup Date
Jun-29-1987
Incorporation Date
Feb-07-1992
Sponsor
Aditya Birla Financial Services limited,Sunlife(India) AMC Investments Inc.
Trustee
Birla Sunlife Trustee Company Private Limited(BSLTC)
Chairman
Mr. Kumar Mangalam Birla
CEO / MD
Mr. A Balasubramanian
CIO
Mr. Mahesh Patil(Debt),Mr.Maneesh Dangi(Equity)
Compliance Officer
Mr.Parag Joglekar(Head –compliance risk and finance and accounts),Ms Hemanti Wadhwa

Investor Service Officer

Ms. Keerti Gupta
Assets Managed
Rs. 195049.01crore (march-30-2017)

Other Details

Auditors
V P Aditya And Company
Custodians
Citi Bank.
Registrars
Computer Age Management Services Pvt. Ltd.
Address
Ist floor,Ahura center,Mahakali Caves Road,Andheri East,Mumbai
Telephone Nos.
1-800-270-7000
Fax Nos.
022 – 67425687
E-mail
www.admin@birlasunlife.com

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life
Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services
Inc. of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian
market and Sun Life's global experience.Since its inception in 1994, Birla Sun Life Mutual fund has
emerged as one of India's leading Mutual Funds managing assets of a large investor base. The fund
offers a range of investment options, which include diversified and sector specific equity schemes,
fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury
products and offshore funds.

BSLAMC follows a long-term, fundamental research based approach to investment. The approach is
to identify companies, which have excellent growth prospects and strong fundamentals. The
fundamentals include the quality of the company’s management, sustainability of its business model
and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has
one of the largest team of research analysts in the industry, dedicated to tracking down the best
companies to invest in. Birla Sun Life AMC strives to provide transparent, ethical and research-based
investments and wealth management services.
2.2 Vision, Mission & Quality Policy

VISION
• To be the most trusted name in investment and wealth management, to be the preferred
employer in the industry and to be a catalyst for growth and excellence of the asset management
business in India.

MISSION
▪ To consistently pursue investor's wealth optimization by:
▪ Achieving superior and consistent investment results.
▪ Creating a conducive environment to hone and retain talent.
▪ Providing customer delight.
▪ Institutionalizing system-approach in all aspects of functioning
▪ Upholding highest standards of ethical values at all times.
VALUES
▪ Integrity
▪ Commitment
▪ Passion
▪ Seamlessness
▪ Speed

COMPANY SHAREHOLDERS

2.3 Growth and development of the organization

The Aditya Birla Group is India's first truly multinational corporation. Global in vision, rooted in
Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple
stakeholders.

The Aditya Birla Group’s products and services offer distinctive customer solutions worldwide. The
Group has operations in 20 countries - India, Thailand, Laos, Indonesia, Philippines, Egypt, China,
Canada, Australia, USA, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland,
Malaysia and Korea.

A US $24 billion corporation with a market cap. of US $31.5 billion and in the League of Fortune 500,
the Aditya Birla Group is anchored by an extraordinary force of 100,000 employees, belonging to 25
different nationalities. Over 50 per cent of its revenues flow from its operations across the world.It's
66 state-of-the-art manufacturing units and sectoral services span India, Thailand, Indonesia,
Malaysia, Philippines, Egypt, Canada, Australia and China.

The Aditya Birla Group is a dominant player in all of the sectors in which it operates. These sectors
include viscose staple fibre, non-ferrous metals, cement, viscose filament yarn, branded apparel,
carbon black, chemicals, fertilisers, sponge iron, insulators and financial services.

The Group has also made successful forays into the IT and BPO sectors.In India, the Group has been
adjudged “The Best Employer in India and among the top 20 in Asia” by the Hewitt-Economic Times
and Wall Street Journal Study 2007.

Sun Life Financial Inc. is a leading financial services organization headquartered in Toronto, Canada,
operating in key markets around the world.

The Sun Life Financial group of companies and their joint ventures offer individuals and corporate
customers a diverse range of financial products and services that fall into two principal business
areas: wealth management and protection. Throughout its international operations, Sun Life
Financial has an employee base of approximately 13,800 people plus an extensive global distribution
network of career sales forces, independent agents, investment dealers and financial planners.

Tracing its roots back to 1865, Sun Life Financial Inc. and its partners today have operations in key
markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the
Philippines, Indonesia, India and China. As on 30th June 2007, Sun Life Financial Inc. manages assets
worth CDN $435 billion.

2.4 Present status of the organization

Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock
exchanges under ticker symbol "SLF". Services Pvt. Ltd., JM Morgan Stanley Securities Pvt. Ltd., John
Fowler (India) Pvt. Ltd., Larsen & Toubro Ltd., Man Financial (India) Pvt. Ltd., Renfro India Pvt. Ltd.,
Refco (India) Private Limited, Rediffusion-Dentsu, Young & Rubicam Pvt. Ltd., Sandvik Asia Ltd.,
Shrenuj & Co Ltd., Solvay Pharma India Ltd., Snowcem Paints Pvt. Ltd., Swiss Re Shared Services
(India) Pvt. Ltd., Showdiff Worldwide Pvt. Ltd., Sonata Software Limited, Warner Bros Pictures (India)
Pvt. Ltd., Albright & Wilson Chemicals India Ltd., Beck India Ltd.

Why Birla Sun Life Mutual Fund?

Birla Sun Life Mutual Fund was set up in the year 1994. It provides a range of investment products
on equity and fixed income asset classes. It is one of the leading Mutual Funds in India and has been
recipient of various awards for its investment performance.

Heritage

Birla Sun Life Mutual Fund is a joint venture between the Aditya Birla Group and Sun Life Financial
Inc. of Canada. Birla Sun Life Mutual Fund offers a Wide range of top quality financial services
solutions for resident and non-resident Indians.

The Aditya Birla Group

The Aditya Birla Group is one of India's largest business houses. Global in vision, rooted in Indian
values, the Group is driven by a performance ethic pegged on value creation for its multiple
stakeholders.

The Group's operations span 66 state of the art, straddling India, Thailand, Malaysia, Indonesia,
Egypt, Philippines, Canada, Australia and China.

A US $24 billion corporation with a market cap. of US $31.5 billion and in the League of Fortune 500,
the Aditya Birla Group is anchored by an extraordinary force of 100,000 employees, belonging to 25
different nationalities. Over 50 per cent of its revenues flow from its operations across the world.

The Aditya Birla Group is a dominant player in all its areas of operations viz; Aluminium, Copper,
Cement, Viscose Staple Fibre, Carbon Black, Viscose Filament Yarn, Fertilisers, Insulators, Sponge
Iron, Chemicals, Branded Apparels, Insurance, Mutual Funds, Software and Telecom. The Group has
Strategic joint ventures with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group
and NGK Insulators (Japan), and has ventured into the BPO sector with the acquisition of
TransWorks, a leading ITES/BPO company.

Track Record:

With a proven track record of 12 years, Birla Sun Life Mutual Fund has been a Catalyst towards the
growth of the private sector asset management business.

GEOGRAPHIC RESEARCH:

Today, BSLAMC is present in 111 locations, including 74 branches.

PRODUCT OFFERINGS:
Birla Sun Life Mutual Fund offers a range of investment options, which include diversified and sector
specific equity schemes, fund-of-fund schemes, hybrid and monthly income funds, a wide range of
debt and treasury products and offshore funds. BSLAMC also provides Private Wealth Management
services

Birla Sunlife Mutual Fund

Birla Sunlife Mutual Fund is one of India's leading mutual funds with assets of over Rs.17,098 crore
under management as of Aug 2006. Birla Sun Life Asset Management Company Limited, the
investment manager of Birla Sunlife Mutual Fund, is a joint venture between the Aditya Birla Group
and Sun Life Financial Services, leading international financial services organization. Established in
1994, Birla Sunlife

AMC provides investors a range of 18 investment options, which include diversified and sector
specific equity schemes, a wide range of debt and treasury products, and two offshore funds. Both
the sponsors have equal stakes in the AMC.
In recognition to its high quality investment products, Birla Sun Life AMC became India's first asset
management company to be awarded the coveted ISO9001:2000 certification by DNV
NETHERLANDS.

Here is a list of mutual funds of Birla Sunlife which includes Equity, Debt Schemes, Hybrid Schemes
and Offshore Schemes.
Latest NAV
Scheme Name
NAV (Net Asset Value)
Date
Birla Bond Index Fund-Dividend Plan (Plan A)
10.0666
25-Oct-2008
Birla Bond Index Fund-Growth Plan (Plan B)
12.4108
25-Oct-2008
Birla Sun Life Liquid Plus-Insititutional Dividend
10.5712
25-Oct-2008
Birla Sun Life Liquid Plus-Institutional Growth
15.3325
25-Oct-2008
Birla Sun Life Liquid Plus-Retail – Dividend
11.3489
25-Oct-2008
Birla Sun Life Liquid Plus-Retail Growth
15.1309
25-Oct-2008
Birla Dynamic Bond Fund-Retail Plan-Growth
12.7773
25-Oct-2008
Birla Dynamic Bond Fund-Retail Plan-Quarterly Dividend
10.6178
25-Oct-2008
Birla Income Plus (Dividend)
10.5316
25-Oct-2008
Birla Income Plus (Growth)
34.5021
25-Oct-2008
Birla Sun Life Short Term Fund- Retail Plan A(Monthly Dividend)
10.5896
25-Oct-2008
Birla Sun Life Short Term Fund- Retail Plan B(Growth)
14.7382
25-Oct-2008
Birla Advantage Fund-Plan A (Dividend)
100.44
25-Oct-2008
Birla Advantage Fund-Plan B (Growth)
139.97
25-Oct-2008
Birla Dividend Yield Plus-Plan A (Dividend)
11.15
25-Oct-2008
Birla Dividend Yield Plus-Plan B (Growth)
49.64
25-Oct-2008
Birla Index Fund-Plan A (Dividend)
19.9604
25-Oct-2008
Birla Index Fund-Plan B (Growth)
51.5887
25-Oct-2008
Birla India Gennext Fund-Dividend Option
16.14
25-Oct-2008
Birla India Gennext Fund-Growth Option
18.29
25-Oct-2008
Birla India Opportunities Fund-Plan A (Dividend)
21.21
25-Oct-2008
Birla India Opportunities Fund-Plan B (Growth)
49.38
25-Oct-2008
Birla Infrastructure Fund-Plan A (Dividend)
13.90
25-Oct-2008
Birla Infrastructure Fund-Plan B (Growth)
14.97
25-Oct-2008
Birla MIDCAP Fund-Plan A (Dividend)
25.68
25-Oct-2008
Birla MIDCAP Fund-Plan B (Growth)
83.53
25-Oct-2008
Birla MNC Fund-Plan A (Dividend)
62.30
25-Oct-2008
Birla MNC Fund-Plan B (Growth)
124.29
25-Oct-2008
Birla Sun Life Buy India Fund-Plan A(Divivdend)
21.05
25-Oct-2008
Birla Sun Life Buy India Fund-Plan B(Growth)
29.98
25-Oct-2008
Birla Sun Life Basic Industries Fund-Plan A(Dividend)
36.36
25-Oct-2008
Birla Sun Life Basic Industries Fund-Plan B(Growth)
88.68
25-Oct-2008
Birla Sun Life Equity Fund-Plan A(Dividend)
73.03
25-Oct-2008
Birla Sun Life Equity Fund-Plan B(Growth)
226.65
25-Oct-2008
Birla Sun Life Frontline Equity Fund-Plan A (Divivdend)
23.11
25-Oct-2008
Birla Sun Life Frontline Equity Fund-Plan B(Growth)
65.83
25-Oct-2008
Birla Sun Life New Millenium Fund-Plan A(Divivdend)
16.44
25-Oct-2008
Birla Sun Life New Millenium Fund-Plan B(Growth)
19.28
25-Oct-2008
Birla Top 100-Dividend Option
16.5892
25-Oct-2008
Birla Top 100-Growth Option
18.2899
25-Oct-2008
Birla Balance-Plan A (Dividend)
21.33
25-Oct-2008
Birla Balance-Plan B (Growth)
32.07
25-Oct-2008
Birla Sun Life Cash Manager-Plan A(Institutional Daily Dividend)
10.0030
27-Apr-2008
Birla Sun Life Cash Manager-Plan B(Growth)
19.9543
27-Apr-2008
Birla Sun Life Cash Manager-Plan C(Institutional Growth)
13.5954
27-Apr-2008
Birla Sun Life Cash Manager-Plan D(Weekly Dividend)
10.0111
27-Apr-2008
Birla Sun Life Cash Manager-Plan E(Institutional Weekly Dividend)
10.0113
27-Apr-2008
Birla Sun Life Govt, Securities Long Term Fund-Plan A (Divivdend)
9.7326
25-Oct-2008
Birla Sun Life Govt, Securities Long Term Fund-Plan B (Growth)
19.8274
25-Oct-2008
Birla Sun Life Govt, Securities Short Term Fund-Plan A(Dividend)
10.0537
25-Oct-2008
Birla Sun Life Govt, Securities Short Term Fund-Plan B(Growth)
16.6165
25-Oct-2008
Birla Equity Plan Dividend Option
60.48
25-Oct-2008
Birla Equity Plan Growth Option
12.71
25-Oct-2008
Birla Sun Life Relief 96 - Dividend Option
93.66
25-Oct-2008

2.5 Functional departments of the organization

Senior Management Team

Mr. A Balasubramanian
Chief Executive Officer
A Balasubramanian is the Chief Executive Officer for Birla Sun Life Asset Management Company. He
has been with BSLAMC since its inception.
Read More

Mr. Mahesh Patil

Co-Chief Investment Officer

Mr. Maneesh Dangi

Co-Chief Investment Officer
Ms. Keerti Gupta
Chief Operation Officer

Mr. Parag Joglekar

Head – Compliance, Risk and Finance & Accounts

Ms. Hemanti Wadhwa

Head Legal, Compliance and Secretarial

Ms. Molly Kapoor

Head Marketing

Mr. Bhavdeep Bhatt

Head - Institutional Sales & PMS Business

Mr. Anil Shyam

Co-Head - Retail Sales and Distribution

Mr. Deepak Gupta

Sales Enablement and Emerging Markets

Mr. Sidharth Damani

Co-Head - Retail Sales and Distribution

Mr. Girish Kamath

Head of Human Resources, Administration and Business Excellence

Mr. KS Rao
Head – Investor Education and Distribution Development

2.6 Organization structure & Organization Chart

There are many entities involved & the diagram below illustrates the organizational set up of a
mutual fund.

❖ Three tier structure of mutual funds

The Structure consists of- The Structure of mutual fund is governed by SEBI (Mutual fund)
Regulations 1996. These regulations make it mandatory to have three-tier structure of Sponsor,
Trustees & Asset Management Company.
SEBI

Custodian

Transfer Agent

The Mutual Fund

AMC

Sponsors

Unit Holders

Trustees

Sponsor- Sponsor is the person who is acting alone or in combination with another body corporate
establishes a mutual fund, sponsor must contribute at least 40% of the net worth of the investment
managed & meet the eligibility criteria prescribed under SEBI (mutual fund) Regulations, 1996. The
sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the
schemes beyond the initial contribution made by it towards setting up of the mutual funds.
Trustees- the mutual fund, which is a trust, is managed by the trust company or board of trustees.
Board of trustees & trust companies are governed by the provisions of the indian trust Act. The
appointment of all the trustees has to be done with prior approval of SEBI.
Asset Management Company (AMC)
Asset Management Company, registered with SEBI, can be appointed as investment manager of
mutual funds. AMC must have minimum net worth of 10 crore at all times. An AMC cannot be an
AMC or trustee of another mutual fund. AMC appoints the fund manager in consultation with the
trustees.

2.7 Product and service profile of the organization/ competitors

Balanced Advantage
Birla Sun Life Balanced Advantage Fund
Balanced Schemes
Birla Sun Life Balanced '95 Fund
Large Cap Funds
Birla Sun Life Frontline Equity Fund
Birla Sun Life Top 100 Fund
Diversified Equity Scheme
Birla Sun Life Advantage Fund
Birla Sun Life Equity Fund
ELSS Schemes
Birla Sun Life Tax Plan
Birla Sun Life Tax Relief 96
Midcap Focus Funds
Birla Sun Life Emerging Leaders Fund - Series 5 - Regular Plan
Birla Sun Life Mid Cap Fund
Small Cap Fund
Birla Sun Life Small & Midcap Fund
Banking & Financial Fund
Birla Sun Life Banking & Financial Services Fund - Regular Plan
Sector-FMCG Schemes
Birla Sun Life India GenNext Fund
Make in India
Birla Sun Life Manufacturing Equity Fund - Regular Plan
Diversified Equity
Sector-MNC Schemes
Birla Sun Life MNC Fund
Closed-Ended Funds
Birla Sun Life Emerging Leaders Fund - Series 3 - Regular Plan
Birla Sun Life Emerging Leaders Fund - Series 4 - Regular Plan
Birla Sun Life Emerging Leaders Fund - Series 5 - Regular Plan
Birla Sun Life Emerging Leaders Fund - Series 6 - Regular Plan
Birla Sun Life Emerging Leaders Fund - Series 7 - Regular Plan
Infrastructure Funds
Birla Sun Life Infrastructure Fund
Sector-Dividend Yield Schemes
Birla Sun Life Dividend Yield Plus Fund
Value Funds
Birla Sun Life Pure Value Fund
Special Situation Funds
Birla Sun Life Special Situations Fund
BSL Reforms
Birla Sun Life India Reforms Fund
Opportunities Funds
Birla Sun Life India Opportunities Fund
RGESS
Birla Sun Life Focused Equity Fund - Series 3 - Regular Plan
Birla Sun Life Focused Equity Fund - Series 4 - Regular Plan
Birla Sun Life Focused Equity Fund - Series 5 - Regular Plan
Birla Sun Life Focused Equity Fund - Series 6 - Regular Plan
Domestic + International Scheme
Birla Sun Life International Equity Fund - Plan B
Pure International Plan
Birla Sun Life International Equity Fund - Plan A
Equity Saving Scheme
Birla Sun Life Equity Savings Fund - Regular Plan
Birla Sun Life Monthly Income Plan II - Wealth 25 Plan
Emerging Leaders 4 Schemes
Birla Sun Life Emerging Leaders Fund - Series 4 - Regular Plan
Sector-Technology Schemes
Birla Sun Life New Millennium Fund
Resurgent Series
Birla Sun Life Resurgent India Fund - Series 1 - Regular Plan
Birla Sun Life Resurgent India Fund - Series 2 - Regular Plan
Birla Sun Life Resurgent India Fund - Series 3 - Regular Plan

Competitors:
UTI Mutual Fund
UTI Mutual Fund has a track record of managing a variety of schemes catering to the needs of every
class of citizens. It has a nationwide network consisting 150 UTI Financial Centres (UFCs) and UTI
International offices in London, Dubai and Singapore.

UTIAMC has a well-qualified, professional fund management team, which has been fully empowered
to manage funds with greater efficiency and accountability in the sole interest of the unit holders.
The fund managers are ably supported by a strong in-house securities research department. To
ensure investors' interests, a risk management department is also in operation.
• ICICI Prudential Asset Management Company Ltd.
ICICI Prudential Asset Management Company Ltd. is the second largest asset management company
(AMC) in the country (as per average assets under management as on February 28, 2015) focused on
bridging the gap between savings & investments and creating long term wealth for investors through
a range of simple and relevant investment solutions(Datasource:AMFI)
The AMC is a joint venture between ICICI Bank, a well-known and trusted name in financial services
in India and Prudential Plc, one of UK’s largest players in the financial services sectors. Throughout
these years of the joint venture, the company has forged a position of pre-eminence in the Indian
Mutual Fund industry.
The AMC manages significant Assets under Management (AUM) in the mutual fund segment. The
AMC also caters to Portfolio Management Services for investors, spread across the country, along
with International Advisory Mandates for clients across international markets in asset classes like
Debt, Equity and Real Estate.
The AMC has witnessed substantial growth in scale; from 2 locations and 6 employees at the
inception of the joint venture in 1998, to a current strength of more than 1000 employees with a
reach across around 120 locations reaching out to an investor base of around 3 million investors. The
company’s growth momentum has been exponential and it has always focused on increasing
accessibility for its investors.
Driven by an entirely investor centric approach, the organization today is a suitable mix of
investment expertise, resource bandwidth and process orientation. The AMC endeavours to simplify
its investor’s journey to meet their financial goals, and give a good investor experience through
innovation, consistency and sustained risk adjusted performance.
➢ RELIANCE MUTUAL FUND
Reliance Mutual Fund (RMF) is one of India's leading mutual funds, with Average Assets Under
Management (AAUM) of ` 1,44,693 Crores (April 2015 - June 2015 Quarter) and 56.23 lakh folios (as
on 30th June 2015).
Reliance Mutual Fund, a part of the Reliance Anil Dhirubhai Ambani (ADA) 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 160 cities across the country. RMF
constantly endeavours to launch innovative products and customer service initiatives to increase
value to investors.
Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with
Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital Trustee Co. Limited
(RCTC), as the Trustee.
Reliance Mutual Fund has been registered with the Securities & Exchange Board of India (SEBI) vide
registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund
was changed to Reliance Mutual Fund effective March 11,2004 vide SEBI's letter no.
IMD/PSP/4958/2004 dated March 11,2004. RMF was formed to launch various schemes under which
units are issued to the public with a view to contribute to the capital MARKET and to provide
investors the opportunities to make investments in diversified securities.

2.8 Market profile of the organization ( SWOT analysis, Future growth)

❖ SWOT Analysis

➢ Strengths:-

• Goodwill of the company

• SBI is the largest bank in India in terms of market share, revenue & assets
• Strong market position which sustains customer’s confidence
• Strong capital position
• It has a wide distribution network
• It is government owned.
• Recently bank did well on loan recoveries & looks promising in its future earnings
➢ Weakenesses
• Employee shows reluctance to solve issues quickly.
• Customer’s waiting period is long when compared to private banks
• It lags modernization.
• Recently it has been seen that higher provisions against Non-performing Assets (NPA’s) and
marginal growth in other income dented the bank’s profit margin.
➢ Opportunities
• Merger of associated banks with SBI
• The Bank is modernizing few of its operations, there is a better scope of using advanced
technologies & software to improve customer relations.
• New branches, ATMS & various types of other services provided by SBI like GCC, GRC, Agricultural
gold loans etc.
• Expansion on foreign soil.
• Young & Talented pool of graduates & B schools are in rise to open new horizon to so called ” old
government bank.”
➢ Threats
• Customer prefer to switch to private banks & financial service providers for loans and mortgages,
SBI involves stringent verification procedures and take long time for processing.

PART-II
CHAPTER 3 STUDY OF THE SELECTED
RESEARCH PROBLEM

CHAPTER 3: STUDY OF THE SELECTED RESEARCH PROBLEM

3.1 Statement & Introduction of the research problem
“Role of Financial Advisors in Mutual Funds Industry”
Mutual funds are ideal as long term investment avenues for retail investors. To encourage
investments in this avenue, the Government of India offers investors a spate of tax benefits thus
ensuring maximum benefit from mutual funds held beyond a year.
Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The funds performance is
measured in comparison with the benchmark. If the fund generates a greater return than the
benchmark then it is said that the fund has outperformed benchmark , if it is equal to benchmark
then the correlation between them is exactly 1. And if in case the return is lower than the
benchmark then the fund is said to be underperformed.
some of the benchmarks are:
1.equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU, BSE 500 index, BSE
bankex, and other sectoral indices.
2.debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex Total Return Index,
JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds.
3. liquid funds: Short Term Government Instruments’ Interest Rates as Benchmarks, JPM T-Bill Index

To measure the fund’s performance, the comparisons are usually done with:
I)with a market index.
ii)funds from the same peer group.
iii)other similar products in which investors invest their funds.

Financial planning for investors( ref. to mutual funds):

Investors are required to go for financial planning before making investments in any mutual fund.
The objective of financial planning is to ensure that the right amount of money is available at the
right time to the investor to be able to meet his financial goals. It is more than mere tax planning.
Steps in financial planning are:

Asset allocation.
Selection of fund.
Studying the features of a scheme.

In case of mutual funds, financial planning is concerned only with broad asset allocation, leaving the
actual allocation of securities and their management to fund managers. A fund manager has to
closely follow the objectives stated in the offer document, because financial plans of users are
chosen using these objectives.
Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the market
flooded with a variety of investment options which includes mutual funds, equities, fixed income
bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life insurance, gold, real
estate etc. all these investment options could be judged on the basis of various parameters such as-
return, safety convenience, volatility and liquidity. measuring these investment options on the
basis of the mentioned parameters, we get this in a tabular form

Return
Safety
Volatility
Liquidity
Convenience
Equity
High
Low
High
High
Moderate
Bonds
Moderate
High
Moderate
Moderate
High
Co. Debentures
Moderate
Moderate
Moderate
Low
Low
Co. FDs
Moderate
Low
Low
Low
Moderate
Bank Deposits
Low
High
Low
High
High
PPF
Moderate
High
Low
Moderate
High
Life Insurance
Low
High
Low
Low
Moderate
Gold
Moderate
High
Moderate
Moderate
Gold
Real Estate
High
Moderate
High
Low
Low
Mutual Funds
High
High
Moderate
High
High

We can very well see that mutual funds outperform every other investment option. On three
parameters it scores high whereas it’s moderate at one. comparing it with the other options, we find
that equities gives us high returns with high liquidity but its volatility too is high with low safety
which doesn’t makes it favourite among persons who have low risk- appetite. Even the convenience
involved with investing in equities is just moderate.
Now looking at bank deposits, it scores better than equities at all fronts but
lags badly in the parameter of utmost important ie; it scores low on return , so it’s not an happening
option for person who can afford to take risks for higher return. The other option offering high
return is real estate but that even comes with high volatility and moderate safety level, even the
liquidity and convenience involved are too low. Gold have always been a favourite among Indians
but when we look at it as an investment option then it definitely doesn’t gives a very bright picture.
Although it ensures high safety but the returns generated and liquidity are moderate. Similarly the
other investment options are not at par with mutual funds and serve the needs of only a specific
customer group. Straightforward, we can say that mutual fund emerges as a clear winner among all
the options available.
The reasons for this being:
I)Mutual funds combine the advantage of each of the investment products: mutual fund is one such
option which can invest in all other investment options. Its principle of diversification allows the
investors to taste all the fruits in one plate. just by investing in it, the investor can enjoy the best
investment option as per the investment objective.

II)dispense the shortcomings of the other options: every other investment option has more or les
some shortcomings. Such as if some are good at return then they are not safe, if some are safe then
either they have low liquidity or low safety or both….likewise, there exists no single option which can
fit to the need of everybody. But mutual funds have definitely sorted out this problem. Now
everybody can choose their fund according to their investment objectives.

III)returns get adjusted for the market movements: as the mutual funds are managed by experts so
they are ready to switch to the profitable option along with the market movement. Suppose they
predict that market is going to fall then they can sell some of their shares and book profit and can
reinvest the amount again in money market instruments.

IV)Flexibility of invested amount: Other then the above mentioned reasons, there exists one more
reason which has established mutual funds as one of the largest financial intermediary and that is
the flexibility that mutual funds offer regarding the investment amount. One can start investing in
mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100 in some cases.
How do investors choose between funds?
When the market is flooded with mutual funds, it’s a very tough job for the investors to choose the
best fund for them. Whenever an investor thinks of investing in mutual funds, he must look at the
investment objective of the fund. Then the investors sort out the funds whose investment objective
matches with that of the investor’s. Now the tough task for investors start, they may carry on the
further process themselves or can go for advisors like KARVY. Of course the investors can save their
money by going the direct route i.e. through the AMCs directly but it will only save 1-2.25% (entry
load) but could cost the investors in terms of returns if the investor is not an expert. So it is always
advisable to go for MF advisors. The mf advisors’ thoughts go beyond just investment objectives and
rate of return. Some of the basic tools which an investor may ignore but an mf advisor will always
look for are as follow:

1.
Rupee cost averaging: the investors going for Systematic Investment Plans(SIP) and Systematic
Transfer Plans(STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging
allows an investor to bring down the average cost of buying a scheme by making a fixed investment
periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs. 100. In this case, the
investor is always at a profit, even if the market falls. In case if the NAV of fund falls, the investors
can get more number of units and vice-versa. This results in the average cost per unit for the
investor being lower than the average price per unit over time.
The investor needs to decide on the investment amount and the frequency. More frequent the
investment interval, greater the chances of benefiting from lower prices. Investors can also benefit
by increasing the SIP amount during market downturns, which will result in reducing the average
cost and enhancing returns. Whereas STP allows investors who have lump sums to park the funds in
a low-risk fund like liquid funds and make periodic transfers to another fund to take advantage of
rupee cost averaging.

2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up and investing
in the asset class that is down. Trigger and switching are tools that can be used to rebalance a
portfolio. Trigger facilities allow automatic redemption or switch if a specified event occurs. The
trigger could be the value of the investment, the net asset value of the scheme, level of capital
appreciation, level of the market indices or even a date. The funds redeemed can be switched to
other specified schemes within the same fund house. Some fund houses allow such switches without
charging an entry load.
To use the trigger and switch facility, the investor needs to specify the event, the amount or the
number of units to be redeemed and the scheme into which the switch has to be made. This ensures
that the investor books some profits and maintains the asset allocation in the portfolio.

3. Diversification: Diversification involves investing the amount into different options. In case of
mutual funds, the investor may enjoy it afterwards also through dividend transfer option. Under this,
the dividend is reinvested not into the same scheme but into another scheme of the investor's
choice.
For example, the dividends from debt funds may be transferred to equity schemes. This gives the
investor a small exposure to a new asset class without risk to the principal amount. Such transfers
may be done with or without entry loads, depending on the MF's policy.

4. Tax efficiency: tax factor acts as the “x-factor” for mutual funds. Tax efficiency affects the final
decision of any investor before investing. The investors gain through either dividends or capital
appreciation but if they haven’t considered the tax factor then they may end loosing.
Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and education
cess) on dividends paid out. Investors who need a regular stream of income have to choose between
the dividend option and a systematic withdrawal plan that allows them to redeem units periodically.
SWP implies capital gains for the investor.
If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket.
Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and
should choose the dividend option.
If the capital gain is long-term (where the investment has been held for more than one year), the
growth option is more tax efficient for all investors. This is because investors can redeem units using
the SWP where they will have to pay 10 per cent as long-term capital gains tax against the 12.50 per
cent DDT paid by the MF on dividends.
All the tools discussed over here are used by all the advisors and have helped investors in reducing
risk, simplicity and affordability. Even then an investor needs to examine costs, tax implications and
minimum applicable investment amounts before committing to a service.

Statement of the research objective

➢ OBJECTIVE OF THE STUDY
The objective of the research was as under:

• To find out the awareness of customers regarding mutual funds.

• To find out the preferences of consumers in choosing different schemes.
• To know why one choose to invest in mutual funds.
• To know which schemes are favorite among the investors.
• To find out most preferred channel of selling.
• To know preferences regarding portfolio.
3.3 Scope of Study
A large no. of players have entered in the market
3.4 Limitations of the research
• Fund management fees may be unreasonable for the services rendered.

• The fund manager may not pass transaction savings to investors.

• There may be too many transactions in the fund resulting in higher fee/cost to the investor - This is
sometimes called as “Churn and Earn".

• Prospectus and Annual report are hard to understand.

• Investor may feel loss of control of his investment dollars.

• There may be restrictions on when and how an investor sells/redeems his mutual fund shares.

•
3.5 Research design and methodology
My research project has a specified framework for collecting data in an effective manner.
The research process followed by me consists of following steps:

A. OBJECTIVE
The objective was to study the role of Financial .Advisors in Mutual Funds Industry.
B. DEVELOPING RESEARCH PLAN

➢ Data Source
I focused on gathering information through PRIMARY DATA i.e. through survey (Questionnaire).
➢ Research Instrument
A questionnaire was constructed for my survey. It consists of set of questions to be filled by various
respondents.
➢ Sampling Plan
SAMPLE UNIT: I had completed my survey in Kanpur.
SAMPLE SIZE: The sample consists of 100 respondents.

C. COLLECTION OF INFORMATION
I have collected the information from respondents with the help of questionnaire.
D. ANALYZE INFORMATION
After collecting the information, I have collected and analyzed the data through frequency
distributions and graphs on:
➢ Occupation & Income of the Investors.
➢ Preference for Online & Offline Banking & Mutual Fund.
➢ Risk on the basis of occupation.
➢ Expertise of personal financial advisor.

CHAPTER 4

DATA ANALYSIS & INTERPRETATION

❖ CHAPTER 4 DATA ANALYSIS & INTERPRETATION
4.1 Analysis and interpretation of the data Collected with relevant tables and graphs.
ANALYSIS

Q1 AGE DITRIBUTION OF INVESTORS?

Age Group
<= 30
31-35
36-40
41-45
46-50
50<
No. of Investors
10
15
30
20
15
10

INTERPRETATION-: According to this chart out of 100 Mutual Fund investors kanpur the most are in
the age group of 36-40 yrs. i.e. 30%, the second most investors are in the age group of 41-45yrs i.e.
20% and the least investors are in the age group of below 30 yrs.

Q.2 Do you aware of the term mutual fund ?

A) YES B) NO

INTERPRETATION-:
According to the above chart it can be concluded that out of 100 people 60% people are not aware
of the term mutual fund only 30% people aware of it.

Q.3 INFORMATION YOU GOT FROM?

Source of information
No. of Respondents
Advertisement
5%
colleague
15%
Banks
55%
Financial Advisors
25%

INTERPRETATION-:
Above chart is showing how the mutual fund investor came to know about mutual out of 100 people
55% came to know from bank25% from the financial advisor 15%from colleague and only 5% from
advertisement

Q.4 Respondents current investment in Mutual Fund

Response
No. of Respondents
YES
25
NO
75
Total
100

INTERPRETATION-:
The above data is showing current investor investment in mutual fund of 4 different banks United
Bank of India , Oriental Bank of Commerce medical college branch, Bank of India, oriental bank of
commerce collectorate branch out of 100 people of different bank only 25 respondents are have
current investment in mutual fund.

Q.5. Reason for not invested in Mutual Fund

Reason
No. of Respondents
Not Aware
75
Higher Risk
5
Not any Specific Reason
10

INTERPRETATION-:
Out of 90 people, who have not invested in Mutual Fund, 75% are not aware of Mutual Fund,
5% said there is likely to be higher risk and 10% do not have any specific reason.
Q.6 Do you aware of mutual fund schemes?
A)YES B)NO

RESPONSE
NO. OF RESPONDENTS
YES
26
NO
74

INTERPRETATION-:
Out of 100 people 74 are not fully aware of mutual fund schemes only 26% are aware of that.

Q.7Do you know about option and plan in mutual fund?

A) YES B) NO

INTERPRETATION-:
out of 25 people who have invested in mutual fund 57% are not aware of option and plan under
mutual fund but 43% are aware of it.

Q.8Monthly Family Income of the Investors of KANPUR.

Income Group
No. of Investors
Below-10,000
7
10,001-20,000
15
20,001-30,000
30
30,001-40,000
23
Above-40,000
25

\
INTERPRETATION-:
In the Income Group of the investors kanpur out of 100 investors, 30% investors that is the
maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 25%
investors are in the monthly income group of more than Rs. 40,000 and the minimum investors
i.e.7% are in the monthly income group of below Rs. 10,000

Q.9Preferred Portfolios by the Investors

Portfolio
No. of Investors
Equity
25
Debt
15
Balanced
Gold
17
46

INTERPRETATION-:
out of 100people 45% people prefer to invest in gold saving fund17% prefer in balance fund 15%
prefer in debt and 25% n equity

Q.10Total no. of avenues of investment you know?

A) FD
B) RD
C) SAVING A/C
D) INSURANCE
E) REAL ESTATE
F) MUTUAL FUND
G) INVESTMENTS IN CAPITAL MARKET
H) INVESTMENT IN MONEY MARKET
I) GOLD AND SILVER
J) IF OTHERS SPECIFY……………………………………….

INTERPRETATION-:Above showing avenues of investment people know 93% people know about F.D
.90% know R.D. 94% know about saving account 80% know about insurance 64% know about real
estate only 30% know about the mutual fund.

Q.11Which feature of the investment attracts you most?

A) Risk Diversification
B) Max. return with max. risk
C) Min.risk with min. return
D) Moderate risk with moderate return.

INTERPRETATION-: Above data showing the feature that investors consider while investing 45%
consider risk diversification factor 26% consider max. return with max. risk 20% consider min. risk
with min. return factor while 19% consider moderate with moderate.

Q12. Which types of advices does customers expect from the Financial Advisors?

Service
Respondents
Research based advice
25
Monthly fund update
30
Literature to update your knowledge
20
Handling customer queries
25

Q13. Are you availing the services of personal financial advisors?

Yes
87
No
48

INTERPRETATION-: From the above pie chart it can be concluded that 64% of population in Kanpur
is availing the services of financial advisors while 36% of population is not availing the services of
financial advisors in Kanpur.

Q14.Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment recommendation

43
Planning to achieve specific financial goals
35
Managing assets in retirement
30
Access to specialists in areas such as tax planning
27

INTERPRETATION-: Out of them 87 were already availing the services of financial advisors whereas
48 didn’t. When asked about the expertise of financial advisors which they liked most? 43 of them
favored portfolio review and investment recommendation, followed by planning to achieve long
term goals, managing assets in retirement and access to specialists in area such as tax planning.
Q15. What is the major reason for using financial advisors?

Want help with asset allocation

42
Don’t have enough time to make own decision
23
To explain various investment options
37
Want to have surety about financial goals
33

INTERPRETATION-: : 42 participants regarded asset allocation as the major reason for going for
financial advisors. 37 of them needed them to explain them the various investment options
available.33 of them wanted to make sure that they were saving enough to meet their financial
goals. While just 23 gave the reason- lack of time.

Q16. What is the major reason for not using financial advisor?

Have access to all resources needed

18
Believe advisors are too expensive
53
Unsure how to find a trustworthy advisor
21
Want to be in control of own investments
43

INTERPRETATION-: When asked about one reason for not availing the services of financial advisors,
about 53 of them pointed the advisors as expensive. 43 of them wished to be in control of their own
assets.21 of them said that they find it difficult to get trustworthy advisors. Whereas 18 of them said
they have access to all the necessary resources required.

Q17. Where from you purchases mutual funds?

Directly from the AMCs

33
Brokers only ( large intermediaries)
28
Broker/ sub-brokers
59
Other sources
15

❖ INTERPRETATION-: 33 participants buy forms directly from the AMCs, 28 from brokers only, 55
from brokers and sub-brokers even then 15 people buy from other sources. The brokers and sub
brokers have the maximum reach so they should try to make those investors aware f the
happenings, even the AMCs should follow it.

Q18. According to you which is the most suitable stage to invest in mutual funds?

Young unmarried stage

55
Young Married with children stage
32
Married with older children stage
21
Pre retirement stage
27

INTERPRETATION-: Most of the investor preferred to invest at a young unmarried stage. Even 32
persons were ready to invest at a stage of young married with children but person with older
children avoid investing due to increased expenses. But again the number rose to 27 at pre-
retirement stage

Results obtained by using statistical tools (If any)

The statistical test, in which the test statistics follow a chi-square distribution, is called the chi-
square test. Therefore chi-square test is a statistical test, which tests the significance of difference
between observed frequencies and the corresponding theoretical frequencies of a distribution,
without any assumption about the distribution of the population. Chi-square test is one of the
simplest and most widely used non-parametric test in statistical work. This test was developed by
Prof. Karl Pearson in 1900.
HYPOTHESIS 1

H0 : There is no significance difference between customers opinion about affordability of Birla

Sunlife Mutual Fund.
H1 :There is significance difference between customers opinion about affordability of Birla Sunlife
Mutual Fund.

O
E
(O – E) 2
(O – E ) 2
E
Strongly agree
12
10
4
.4
Some what agree
15
10
25
2.5
Disagree
10
10
0
0
Strongly disagree
12
10
4
.4
Neutral
1
10
81
8.1

50
50

11.4

X2 = S (O – E)2 = 11.4
E
Degree of freedom, n-1 = 5 – 1 = 4
Significance level = 0.05
Table value = 9.488
Interpretation
Table value is less than calculated value so we reject null hypothesis and accept alternate
hypothesis.
\ There is significanct difference between customers’ opinion about affordability of Birla Sunlife
Mutual Fund
Hypothesis 2
H0 : There is no significance difference between customers’ opinion about product range provided
by Birla Sunlife Mutual Fund.
H1 :There is significance difference between customers’ opinion about product range provided by
Birla Sunlife Mutual Fund
O
E
(O – E) 2
(O – E ) 2
E
Strongly agree
13
10
9
.9
Some what agree
15
10
25
2.5
Disagree
11
10
1
.1
Strongly disagree
6
10
16
1.6
Neutral
5
10
25
2.5

50
50

7.6

X2 = S (O – E)2 = 7.6
E
Degree of freedom, n-1 = 5 – 1 = 4
Significance level = 0.05
Table value = 9.488
Interpretation
Table value is greater than calculated value so we accept null hypothesis.
\ There is no significance difference between customers’ opinion about product range provided by
Birla Sunlife Mutual Fund

CHAPTER 5 SUMMARY AND CONCLUSIONS

5.1 Summary of learning experience/ Findings

➢ In kanpur the investors in the Age Group of 36-40 years were more in numbers. The second most
Investors were in the age group of 41-45 years and the least were in the age group of below 30
years.
➢ In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most
were in the Income group between Rs.30,000-40,000 and the least were in the group of below Rs.
10,000.
➢ About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only26%
Respondents invested in Mutual fund.
➢ Mostly Respondents preferred High Return while investment, the second most preferred Low Risk
then liquidity and the least preferred Trust.
➢ Only 30% Respondents were aware about Mutual fund and its operations and 60% were not.
➢ Among 100 Respondents only 26% had invested in Mutual Fund and 74% did not have invested in
Mutual fund.
➢ Most of the Investors had invested in LIC and preferred to invest in that due to security.

.
Conclusion and recommendations

Running a successful mutual fund requires a complete understanding of peculiarities of Indian Stock
Market & also the psyche of small investors.

➢ The most vital problem spotted is of ignorance. Investors should be made aware of the benefits.
Nobody will invest until and unless he is fully convinced. Investors should be made to realize that
what they are losing by not investing.
➢ Mutual funds offer lots of benefit which no other single option could offer. But most of the
people are not even aware of what actually a mutual fund is? They only see it as just another
investment option. So the advisors should try to change their mindsets. The advisors should target
for more and more young investors. Young investors as well as persons at the height of their career
would like to go for advisors due to lack of expertise and time.
➢ Birla Sunlife Mutual Fund needs to give the training of the Individual Financial Advisors(bankers)
about the Fund/Scheme and its objective, because they are the main source to influence the
investors.
➢ Before making any investment Financial Advisors should first enquire about the risk tolerance of
the investors/customers, their need and time (how long they want to invest). By considering these
three things they can take the customers into consideration.
➢ Younger people aged under 35 will be a key new customer group into the future, so making
greater efforts with younger customers who show some interest in investing should pay off.
➢ Customers with graduate level education are easier to sell and there is a large untapped market
there. To succeed however, advisors must provide sound advice and high quality.
➢ Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management
companies in the industry. SIP is easy for monthly salaried person as it provides the facility of do the
investment in EMI. Though most of the prospects and potential investors are not aware about the
SIP. There is a large scope for the companies to tap the salaried persons.

BIBLIOGRAPHY

BIBILOGRAPHY

www.birlasunlifemutualfunds.com
www.moneycontrol.com

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

MAGAZINES:
A) OUTLOOK BUSINESS (June-July, 2017)
B) BUSINESS STANDARD (April-July 2017)
C) 4P’S OF BUSINESS AND MARKETING (June 2017)
D) BUSINESS TODAY - Pick and Choose

ANNEXURE
APPENDIX

Questionnaire on need of financial advisors in Mutual Funds Industry:

Name of respondent –
Mobile No. –
Occupation -
Please tick in front of the option of your choice:

Q1.Age distribution of Investors?

1) Less than or equal to 30 years
2)31-35 years
3)36-40 years
4)41-45 years
5)46-50 years
6) Greater than 50 years

Q2. Do you aware of Mutual Fund ?

1) Yes
2)No

Q3. Respondents current investment in Mutual funds?

1) Yes
2) No

Q4. Do you know about plan and options in mutual funds?

1)Yes
2)No

Q5.what is the most important reason for not investing in mutual funds?
1)Not aware
2)Not any specific reason
3)High risk

Q6. Which types of advices does customers expect from the financial advisors?.
1) Research based advice
2) Monthly fund update
3) Literature to update your knowledge
4) customer handling queries

Q7.where from you purchase mutual funds?

1) Directly from the AMCs [ ]
2)Brokers only [ ]
3) Brokers/ sub-brokers [ ]
4) Other sources [ ]

Q8.which feature of the mutual funds allure you most?

1)Risk Diversification [ ]
 2)Maximum return with Minimum risk [ ]
3)Minimum risk with Minimum return [ ]
4)Moderate risk with Moderate return [ ]

Q9. Are you availing the services of personal financial advisors?

1) YES [ ] 2) NO [ ]

Q10.which expertise of the personal financial advisor is demanded most?

1) Portfolio review & investment recommendation [ ]
2) Planning to achieve specific financial goals [ ]
3) Managing assets in retirement [ ]
4) Access to specialist in areas such as tax planning [ ]

Q11.what is the major reason for using financial advisors?

1) Want help with asset allocation [ ]
2) Dont have time to make my own investment decision [ ]
3) To explain various investment options [ ]
4) Want to make sure I am investing enough to meet my financial goals [ ]

Q12.what is the major reason for not using financial advisor?

1) Have access to all resources needed to invest on own [ ]
2) Believe advisors are too expensive [ ]
3) Unsure how to find a trustworthy advisor [ ]
4) Want to be in control of own investment [ ]

Q13. Which are the primary sources of your knowledge about Mutual Funds as an
investment option?
1)Advertisement
2)Banks
3)Friends
4)Financial Advisors

Q14. Total no of avenues of investments you know?

1)FD
2)RD
3)savings a/c
4) Real Estate
5)Insurance
6)MF
7)Investments in Capital Market
8)Investments in Money Market
9)Gold & Silver
10)if others specify…………………

Q15. Do you aware of term Mutual Fund schemes?

1) Yes
2) No
Q16.Monthly family income of investors in Kanpur?
1)Below-10,000
2)Rs.10,001-20,000
3)Rs 20,001-30,000
4)Rs.30,001-40,000
5)Above-Rs 40,000

Q17. Preferred Portfolios by investors?

1)Debt
2)Gold
3)Equity
4)Balanced

Q18. According to you which is the most suitable stage to invest in mutual funds?
1) Young unmarried stage [ ]
2)Young Married with children stage [ ]
3)Married with older children stage [ ]
4)Pre-retirement stage [ ]