Mutual Fund... Rohit.v.rohra .... Roll No -27

8/2/2019 Mutual Fund... Rohit.v.rohra .... Roll No -27

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CHAPTER 1:-

Financial market

Introduction:

In economics, a financial market is a mechanism that allows people to buy and sell(trade) financial securities (such as stocks and bonds), commodities (such asprecious metals or agricultural goods), and other fungible items of value atlow transaction costs and at prices that reflect the efficient-market hypothesis.

Both general markets (where many commodities are traded) and specialized

markets (where only one commodity is traded) exist. Markets work by placingmany interested buyers and sellers in one "place", thus making it easier for them tofind each other. An economy which relies primarily on interactions between buyersand sellers to allocate resources is known as a market economy in contrast either toa command economy or to a non-market economy such as a gift economy.


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What does financial market means?

Broad term describing any marketplace where buyers and sellers participate in the

trade of assets such as equities, bonds, currencies and derivatives. Financialmarkets are typically defined by having transparent pricing, basic regulations on

trading, costs and.

fees and market forces determining the prices of securities that trade .Some

financial markets only allow participants that meet certain criteria, which can be

based on factors like the amount of money held, the investors geographical

location, knowledge of the markets or the profession of the participant.

Definition:

The term marketmeans the aggregate of possible buyers and sellers of a certain

good or service and the transactions between them.


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History:

India Financial market is one of the oldest in the world and is considered to be

the fastest growing and best among all the markets of the emerging economies.

The history of Indian capital markets dates back 200 years toward the end of the

18th century when India was under the rule of the East India Company. The

development of the capital market in India concentrated around Mumbai where no

less than 200 to 250 securities brokers were active during the second half of the

19th century.

The financial market in India today is more developed than many other sectors

because it was organized long before with the securities exchanges of Mumbai,

Ahmadabad and Kolkata were established as early as the 19th century.

By the early 1960s the total number of securities exchanges in India rose to eight,

including Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur, Delhi,

Bangalore and Pune. Today there are 21 regional securities exchanges in India in

addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the

Counter Exchange of India).

However the stock markets in India remained stagnant due to stringent controls on

the market economy that allowed only a handful of monopolies to dominate their

respective sectors. The corporate sector wasn't allowed into many industry

segments, which were dominated by the state controlled public sector resulting in

stagnation of the economy right up to the early 1990s. Thereafter when the Indian

economy began liberalizing and the controls began to be dismantled or eased out,

the securities markets witnessed a flurry of IPOs that were launched. This resulted


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in many new companies across different industry segments to come up with newer

products and services.

A remarkable feature of the growth of the Indian economy in recent years has been

the role played by its securities markets in assisting and fuelling that growth with

money rose within the economy. This was in marked contrast to the initial phase of

growth in many of the fast growing economies of East Asia that witnessed huge

doses of FDI (Foreign Direct Investment) spurring growth in their initial days of

market decontrol. During this phase in India much of the organized sector has been

affected by high growth as the financial markets played an all-inclusive role in

sustaining financial resource mobilization. Many PSUs (Public Sector

Undertakings) that decided to offload part of their equity were also helped by the

well-organized securities market in India.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the

Counter Exchange of India) during the mid 1990s by the government of India was

meant to usher in an easier and more transparent form of trading in securities. The

NSE was conceived as the market for trading in the securities of companies from

the large-scale sector and the OTCEI for those from the small-scale sector. While

the NSE has not just done well to grow and evolve into the virtual backbone of

capital markets in India the OTCEI struggled and is yet to show any sign of growth

and development. The integration of IT into the capital market infrastructure has

been particularly smooth in India due to the countrys world class IT industry. This

has pushed up the operational efficiency of the Indian stock market to globalstandards and as a result the country has been able to capitalize on its high growth

and attract foreign capital like never before. The regulating authority for capital

markets in India is the SEBI (Securities and Exchange Board of India). SEBI came

into prominence in the 1990s after the capital markets experienced some


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turbulence. It had to take drastic measures to plug many loopholes that were

exploited by certain market forces to advance their vested interests. After this

initial phase of struggle SEBI has grown in strength as the regulator of Indias

capital markets and as one of the countrys most important institutions.


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Different Types of Financial Markets:

Capital Market

Capital Market consists of primary market and secondary market. In primary

market newly issued bonds and stock share exchanged and in secondary market

buying and selling of already existing bonds and stocks take place. So, the Capital

Market can be divided into Bond Market and Stock Market. Bond Market provides

financing by bond issuance and bond trading. Stock Market provides financing by

shares or stock issuance and by share trading. As a whole, Capital Market

facilitates raising of capital.

Money Market


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Money Market facilitates short term debt financing and capital.

Derivatives market

Derivatives Market provides instruments which help in controlling financial risk.

Foreign Exchange market

Foreign Exchange Market facilitates the foreign exchange trading.


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CHAPTER 2:-

CAPITAL MARKET

INTRODUCTION:

A capital market is a market for securities (debt or equity), where businessenterprises (companies) and governments can raise long-term funds. It is definedas a market in which money is provided for periods longer than a year, as theraising of short-term funds takes place on other markets (e.g., the money market).The capital market includes the stock market (equity securities) and the bondmarket (debt). Financial regulators, such as the UK's Financial ServicesAuthority (FSA) or the U.S. Securities and Exchange Commission (SEC), overseethe capital markets in their designated jurisdictions to ensure that investors areprotected against fraud, among other duties.

What does capital markets mean?

A market in which individuals and institutions trade financial securities.

Organizations/institutions in the public and private sectors also often sell securitieson the capital markets in order to raise funds. Thus, this type of market iscomposed of both the primary and secondary markets.

Definition:It is defined as a market in which money is provided for periods longer than a year,as the raising of short-term funds takes place on other markets
http://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Bond_markethttp://en.wikipedia.org/wiki/Bond_markethttp://en.wikipedia.org/wiki/Financial_Services_Authorityhttp://en.wikipedia.org/wiki/Financial_Services_Authorityhttp://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commissionhttp://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commissionhttp://en.wikipedia.org/wiki/Financial_Services_Authorityhttp://en.wikipedia.org/wiki/Financial_Services_Authorityhttp://en.wikipedia.org/wiki/Bond_markethttp://en.wikipedia.org/wiki/Bond_markethttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Market


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History:

The history of the Indian capital markets and the stock market, in particular can betraced back to 1861 when the American Civil War began. The opening of the Suez

Canal during the 1860s led to a tremendous increase in exports to the UnitedKingdom and United States. Several companies were formed during this periodand many banks came to the fore to handle the finances relating to these trades.With many of these registered under the British Companies Act, the StockExchange, Mumbai, came into existence in 1875.

It was an unincorporated body of stockbrokers, which started doing business in thecity under a banyan tree. Business was essentially confined to company ownersand brokers, with very little interest evinced by the general public. There had beenmuch fluctuation in the stock market on account of the American war and the

battles in Europe. Sir Premchand Roychand remained a kingpin for many years.

Sir Phiroze Jeejeebhoy was another who dominated the stock market scene from1946 to 1980. His word was law and he had a great deal of influence over bothbrokers and the government. He was a good regulator and many crises wereaverted due to his wisdom and practicality. The BSE building, icon of the Indiancapital markets, is called P.J. Tower in his memory.

The planning process started in India in 1951, with importance being given to theformation of institutions and markets. The Securities Contract Regulation Act 1956

became the parent regulation after the Indian Contract Act 1872, a basic law to befollowed by security markets in India. To regulate the issue of share prices, theController of Capital Issues Act (CCI) was passed in 1947.

The stock markets have had many turbulent times in the last 140 years of theirexistence. The imposition of wealth and expenditure tax in 1957 by Mr.T.T.Krishnamachari, the then finance minister, led to a huge fall in the markets.The dividend freeze and tax on bonus issues in 1958-59 also had a negative impact.War with China in 1962 was another memorably bad year, with the resultant

shortages increasing prices all round. This led to a ban on forward trading incommodity markets in 1966, which was again a very bad period, together with theintroduction of the Gold Control Act in 1963.

The markets have witnessed several golden times too. Retail investors beganparticipating in the stock markets in a small way with the dilution of the FERA


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in1978. Multinational companies, with operations in India, were forced to reduceforeign share holding to below a certain percentage, which led to a compulsorysale of shares or issuance of fresh stock. Indian investors, who applied for theseshares, encountered a real lottery because those were the days when the CCIdecided the price at which the shares could be issued. There was no free pricingand their formula was very conservative.The next big boom and mass participation by retail investors happened in 1980,with the entry of Mr. Dhirubhai Ambani Dhirubhai can be said to be the father ofmodern capital markets. The Reliance public issue and subsequent issues onvarious Reliance companies generated huge interest. The general public was sounfamiliar with share certificates that Dhirubhai is rumored to have distributedthem to educate people.

Mr. V.P. Singhs fiscal budget in 1984 was path breaking for it started the era of

liberalization. The removal of estate duty and reduction of taxes led to a swell inthe new issue market and there was a deluge of companies in 1985. Mr.Manmohan Singh as Finance Minister came with a reform agenda in 1991 and thisled to a resurgence of interest in the capital markets, only to be punctured by theHarshad Mehta scam in 1992. The mid-1990s saw a rise in leasing companyshares, and hundreds of companies, mainly listed in Gujarat, and got listed in theBSE. The end-1990s saw the emergence of Ketan Parekh and the information,communication and entertainment companies came into the limelight. This periodalso coincided with the dotcom bubble in the US, with software companies beingthe most favored stocks. There was melt down in software stock in early 2000. Mr.P Chidambaram continued the liberalization and reform process, opening up of thecompanies, lifting taxes on long-term gains and introducing short-term turnovertax. The markets have recovered since then and we have witnessed a sustainedrally that has taken the index over 13000.Several systemic changes have taken place during the short history of moderncapital markets. The setting up of the Securities and Exchange Board (SEBI) in1992 was a landmark development. It got its act together, obtained the requisitepowers and became effective in early 2000. The setting up of the National StockExchange in 1984, the introduction of online trading in 1995, the establishment of

the depository in 1996, trade guarantee funds and derivatives trading in 2000, havemade the markets safer. The introduction of the Fraudulent Trade Practices Act,Prevention of Insider Trading Act, Takeover Code and Corporate GovernanceNorms, are major developments in the capital markets over the last few years thathas made the markets attractive to foreign institutional investors.


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Features of capital market:

Mobilization of savings & acceleration of capital formation. Promotion of industrial growth. Raising long term capital. Proper channelization of fund


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Types of capital market:

Government Securities Market: This is also known as the Gilt-edged market.

This refers to the market for government and semi-government securities backed

by the Reserve Bank of India (RBI).

Industrial Securities Market: This is a market for industrial securities i.e. market

for shares and debentures of the existing and new corporate firms. Buying and

selling of such instruments take place in this market. This market is further

classified into two types such as the New Issues Market (Primary) and the Old

(Existing) Issues Market (secondary). In primary market fresh capital is raised by

companies by issuing new shares, bonds, units of mutual funds and debentures.

However in the secondary market already existing i.e. old shares and debentures

are traded. This trading takes place through the registered stock exchanges. In


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India we have three prominent stock exchanges. They are the Bombay Stock

Exchange (BSE), the National Stock Exchange (NSE) and Over the Counter

Exchange of India (OTCEI).

Development Financial Institutions (DFIs): This is yet another important

segment of Indian capital market. This comprises various financial institutions.

These can be special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI,

etc. These financial institutions provide long term finance for those purposes for

which they are set up.

Financial Intermediaries: The fourth important segment of the Indian capital

market is the financial intermediaries. This comprises various merchant banking

institutions, mutual funds, leasing finance companies, venture capital companies

and other financial institutions.

These are important institutions and segments in the Indian capital market.


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Chapter 3:-

Mutual Funds

Before we understand what is mutual fund, its very important to know the area in

which mutual funds works, the basic understanding of stocks and bonds.

Stocks: Stocks represent shares of ownership in a public company. Examples of

public companies include Reliance, ONGC and Infosys. Stocks are considered to

be the most common owned investment traded on the market


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Bonds: Bonds are basically the money which you lend to the government or a

company, and in return you can receive interest on your invested amount, which is

back over predetermined amounts of time. Bonds are considered to be the most

common lending investment traded on the market. There are many other types of

investments other than stocks and bonds (including annuities, real estate, and

precious metals), but the majority of mutual funds invest in stocks and/or bonds.

What Is Mutual Fund?

A mutual fund is just the connecting bridge or a financial intermediary that allowsa group of investors to pool their money together with a predetermined investmentobjective. The mutual fund will have a fund manager who is responsible forinvesting the gathered money into specific securities (stocks or bonds). When youinvest in a mutual fund, you are buying units or portions of the mutual fund andthus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare toothers they are very cost efficient and also easy to invest in, thus by pooling moneytogether in a mutual fund, investors can purchase stocks or bonds with much lowertrading costs than if they tried to do it on their own. But the biggest advantage tomutual funds is diversification, by minimizing risk & maximizing returns.


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Thus a Mutual Fund is the most suitable investment for the common man as it

offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the

working of a mutual fund

Definition of mutual fund:

An investment vehicle that is made up of a pool of funds collected from many

investors for the purpose of investing in securities such as stocks, bonds, money

market instruments and similar assets. Mutual funds are operated by moneymanagers, who invest the fund's capital and attempt to produce capital gains and

income for the fund's investors.

History of the Indian mutual fund industry:

The mutual fund industry in India started in 1963 with the formation of Unit Trust

of India, at the initiative of the Government of India and Reserve Bank. The

history of mutual funds in India can be broadly divided into four distinct phases.

First Phase1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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


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Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under

management.

Second Phase1987-1993 (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), Bankof 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 Phase1993-2003 (Entry of Private Sector Funds)

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 morecomprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of

January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.


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Fourth Phasesince February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI

was bifurcated into two separate entities. One is the Specified Undertaking of the

Unit Trust of India with assets under management of Rs.29, 835 crores as at the

end of January 2003, representing broadly, the assets of US 64 scheme, assured

return and certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It

is registered with SEBI and functions under the Mutual Fund Regulations.

Consolidation and growth. As at the end of September, 2004, there were 29 funds,

which manage assets of Rs.153108 crores under 421 schemes.


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Guidelines of the SEBI for Mutual Fund Companies:

To protect the interest of the investors, SEBI formulates policies and regulates the

mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues

guidelines from time to time.

SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities.

According to SEBI Regulations, two thirds of the directors of Trustee Company orboard of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units

of mutual funds that the mutual funds function within the strict regulatory

framework. Its objective is to increase public awareness of the mutual fund

industry. AMFI also is engaged in upgrading professional standards and in

promoting best industry practices in diverse areas such as valuation, disclosure,

transparency etc.


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Advantages of Investing Mutual Funds:

1. Professional Management :-The basic advantage of funds is that, they are professional managed, by well

qualified professional. Investors purchase funds because they do not have

the time or the expertise to manage their own portfolio. A mutual fund is

considered to be relatively less expensive way to make and monitor their

investments.

2. Diversification :-

Purchasing units in a mutual fund instead of buying individual stocks or

bonds, the investors risk is spread out and minimized up to certain extent.

The idea behind diversification is to invest in a large number of assets so

that a loss in any particular investment is minimized by gains in others.

3. Economies of Scale :-

Mutual fund buy and sell large amounts of securities at a time, thus help to

reducing transaction costs, and help to bring down the average cost of the

unit for their investors.


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4. Liquidity :-

Just like an individual stock, mutual fund also allows investors to liquidate

their holdings as and when they want.

5. Simplicity:-

Investments in mutual fund are considered to be easy, compare to other

available instruments in the market, and the minimum investment is small.

Most AMC also have automatic purchase plans whereby as little as Rs.

2000, where SIP start with just Rs.50 per month basis.


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Disadvantages of Investing Mutual Funds:

1. Professional Management:-

Some funds doesnt perform in neither the market, as their management is

not dynamic enough to explore the available opportunity in the market, thus

many investors debate over whether or not the so-called professionals are

any better than mutual fund or investor himself, for picking up stocks.

2. Costs :-

The biggest source of AMC income is generally from the entry & exit load

which they charge from an investors, at the time of purchase. The mutual

fund industries are thus charging extra cost under layers of jargon.

3. Dilution :-

Because funds have small holdings across different companies, high returns

from a few investments often don't make much difference on the overall

return. Dilution is also the result of a successful fund getting too big. When

money pours into funds that have had strong success, the manager often has

trouble finding a good investment for all the new money.


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4. Taxes :-

When making decisions about your money, fund managers don't consider

your personal tax situation. For example, when a fund manager sells a

security, a capital-gain tax is triggered, which affects how profitable the

individual is from the sale. It might have been more advantageous for the

individual to defer the capital gains liability.


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Chapter 4:-

1,


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2,

3,


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How to Calculate Net Asset Value (NAV) per Share of

Mutual Funds?

Net Asset Value is the current market price of 1 share of a mutual fund. NAV is

calculated at the end of each business day by adding up market values of all

investments within the mutual fund minus management fees & commissions. This

total is then divided by total number of shares outstanding in the mutual fund (also

known as weighted average # of shares). Net Asset Value is also the price at which

investors buy 1 share of the mutual fund (bid price) and sell (redemption price). In

accounting terms, NAV can also be thought of as the "book value" of the mutual

fund.

Net Asset Value (NAV) is NOT a true indicator of mutual fund's performance.

You should not check the newspaper every morning for opening price of your

mutual fund to see how well it is doing, because management fees/expenses can

throw off the NAV. It makes sense that mutual funds with higher management

expenses will have a lower NAV than those that do not have as much higherexpenses. Also be aware that if you redeem your shares of the mutual fund, you

might be charged a redemption fee depending on the terms set out in the

prospectus. For instance, for TD Canadian bond mutual fund that I am invested in,

I get charged 1% of total purchase cost if I redeem within the first month after

purchase. Any redemptions after that point are free and no penalties apply.


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Net Asset Value Formula:-

Let's calculate NAV based on the formula generated above.

Net Asset Value = (Total Market Value of Mutual Fund Shares - Current

Liabilities)

Weighted Average # of Shares

As an example, if a mutual fund has total investments' value of $100 million while

its current liabilities such as management fees/commissions stand at $22 million

and total number of shares issued to the market are 500,000, what is net asset value

per share?

Net Asset Value = ($100 million - $22 million) / 500,000 shares

Net Asset Value = $78 million / 500,000 shares

Net Asset Value per Share = $156

This $156 value is calculated & reported in major newspapers & on Internet

finance websites at the close of each day. An investor willing to buy 1 share of this

mutual fund has to pay $156 while an investor who sells his shares (redeems)

would normally receive the same $156. The net asset value per share changes daily

because the underlying net assets change as well as the number of shares thus

doesnt be surprised to find a new NAV per share each single day.


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Chapter 5:-

Types of mutual funds:

Most funds have a particular strategy they focus on when investing. For instance,some invest only in Blue Chip companies that are more established and arerelatively low risk. On the other hand, some focus on high-risk startup companiesthat have the potential for double and triple digit growth. Finding a mutualfund that fits your investment criteria and style is important.

Value stocks:

Stocks from firms with relative low Price to Earning (P/E) Ratio usually pay good

dividends. The investor is looking for income rather than capital gains.

Growth stock:

Stocks from firms with higher low Price to Earning (P/E) Ratio usually pay small

dividends. The investor is looking for capital gains rather than income.

Based on company size, large, mid, and small cap

Stocks from firms with various asset levels such as over $2 Billion for large; in

between $2 and $1 Billion for mid and below $1 Billion for small.


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Income stock:

The investor is looking for income which usually comes from dividends or interest.

These stocks are from firms which pay relative high dividends. This fund may

include bonds which pay high dividends. This fund is much like the value stock

fund, but accepts a little more risk and is not limited to stocks.

Index funds:

The securities in this fund are the same as in an Index fund such as the Dow Jones

Average or Standard and Poor's. The number and ratios or securities are

maintained by the fund manager to mimic the Index fund it is following.

Enhanced index:

This is an index fund which has been modified by either adding value or reducing

volatility through selective stock-picking.

Stock market sector:

The securities in this fund are chosen from a particular marked sector such as

Aerospace, retail, utilities, etc.


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Defensive stock:

The securities in this fund are chosen from a stock which usually is not impacted

by economic down turns.

International

Stocks from international firms.

Real estate:

Stocks from firms involved in real estate such as builder, supplier, architects and

engineers, financial lenders, etc.

Socially responsible:

This fund would invest according to non-economic guidelines. Funds may make

investments based on such issues as environmental responsibility, human rights, or

religious views. For example, socially responsible funds may take a proactive

stance by selectively investing in environmentally-friendly companies or firms

with good employee relations. Therefore the fund would avoid securities from

firms who profit from alcohol, tobacco, gambling, pornography etc.

Balanced funds:

The investor may wish to balance his risk between various sectors such as assetsize, income or growth. Therefore the fund is a balance between various attributes

desired.


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Tax efficient:

Aims to minimize tax bills, such as keeping turnover levels low or shying away

from companies that provide dividends, which are regular payouts in cash or stock

that are taxable in the year that they are received. These funds still shoot for solid

returns; they just want less of them showing up on the tax returns.

Convertible:

Bonds or Preferred stock which may be converted into common stock.

Junk bond:

Bonds which pay higher that market interest but carry higher risk for failure and

are rated below AAA.

Mutual funds of mutual funds:

This funds that specializes in buying shares in other mutual funds rather than

individual securities.

Closed end:

This fund has a fixed number of shares. The value of the shares fluctuates with the

market, but fund manager has less influence because the price of the underlining

owned securities has greater influence.

Exchange traded funds (ETFs)

Baskets of securities (stocks or bonds) that track highly recognized indexes.

Similar to mutual funds, except that they trade the same way that a stock trades, on

a stock exchange.


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Chapter 6:-

Mutual Fund Companys

AEGON Asset Management Company Pvt. Ltd

.

AEGON Mutual Fund has been constituted as a Trust in accordance with theprovisions of the Indian Trusts Act, 1882 (2 of 1882), with its first Sponsors/Settlers as Religare Securities Limited and AEGON International B.V. AEGONMutual Fund (erstwhile Religare AEGON Mutual Fund) was set up vide a JointVenture (JV) Agreement dated December 28, 2006 entered into between ReligareEnterprises Ltd. (Religare) the holding Company of Religare Securities Limited(RSL) and AEGON International B.V. (AEGON) for setting up of assetmanagement business in India. AEGON held shares in the AMC through itswholly owned subsidiary, viz., AEGON India Holdings B.V.(AEGON India). TheTrust Deed has been executed on July 24, 2008 and registered under the IndianRegistration Act, 1908. Religare AEGON Mutual Fund was registered with SEBIvide Registration No. MF/059/08/04 dated September 25, 2008. The InvestmentManager to Religare AEGON Mutual Fund was Religare AEGON AssetManagement Company Private Limited and Religare AEGON Trustee CompanyPrivate Limited was the Trustee

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AIG Global Asset Management Company (India) Private Limited

AIG Global Asset Management Company (India) Private Limited (the Company)was incorporated on October 30, 2006 as a private limited company under the

Companies Act, 1956. On February 12, 2007, the Securities and Exchange Boardof India (SEBI) registered AIG Global Investment Group Mutual Fund (the Fund)and simultaneously gave us permission to act as the asset Management companyfor the Fund. This Company now manages the investment portfolios of the Fundand provides various administrative services to the Fund and AIG TrusteeCompany (India) Private Limited as per the Investment Management Agreementdated December 15, 2006. AIG India Equity Fund, a diversified general purposeequity fund was launched as the first scheme of The Fund in May 2007. The NewFund Offer (NFO) for this scheme opened for subscription on May 3, 2007 andclosed on May 31, 2007. Units aggregating Rs. 1103 Crores were allotted to

87535 subscribers on June 22, 2007 and the scheme opened for ongoing offer onJune 28, 2007. The distribution pattern was also very healthy and in line withindustry averages. The NFO received subscriptions from 1798 distributors in 99locations. The top 10 distributors accounted for 55% ofthe subscription by value while the top 25 accounted for 68% by value. Bynumber of applications, the top 10 distributors accounted for 39% of applicationswhile the top 25 accounted for 48% of Applications. Banks accounted for 47.5%of the distribution by value.

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Birla Sun Life Asset Management Company Limited

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investmentmanagers of Birla Sun Life Mutual Fund, is a joint venture between the AdityaBirla Group and the Sun Life Financial Services Inc. of Canada. The joint venturebrings together the Aditya Birla Group's experience in the Indian market and SunLife's global experience.

Established in 1994, Birla Sun Life Mutual fund has emerged as one of India'sleading flagships of Mutual Funds business managing assets of a large investorbase. Our solutions offer a range of investment options, including diversified andsector specific equity schemes, fund of fund schemes, hybrid and monthly incomefunds, a wide range of debt and treasury products and offshore funds.

Birla Sun Life Asset Management Company has one of the largest team ofresearch analysts in the industry, dedicated to tracking down the best companies

to invest in. BSLAMC strives to provide transparent, ethical and research-basedinvestments and wealth management services.

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Canara Robeco Asset Management Company Limited

Canara Robeco Asset Management Company Ltd. is a privately ownedinvestment manager. The firm provides its services to individual and institutionalclients. It manages mutual funds for its clients. The firm invests in public equityand fixed income markets across the globe. It operates as a subsidiary of CanaraBank Ltd. Canara Robeco Asset Management Company Ltd was founded in 1993and is based in Mumbai, India.

Edelweiss Asset Management Limited

Edelweiss Mutual Fund is an important fiduciary business of Edelweiss Group. It

is a trust sponsored by Edelweiss Capital Ltd. Edelweiss Asset Management

Limited, a subsidiary of Edelweiss Capital Limited, acts as the Investment

Manager to Edelweiss Mutual Fund.

Escorts Asset Management Limited


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Franklin Templeton Asset Management (India) Private Limited

Franklin Templeton Asset Management (India) Private Limited (FTAMIL) is acompany incorporated under the Companies Act, 1956 on October 6, 1995,having its Registered Office at Level 4, Wockhardt Towers, Bandra - Kurla

Complex, Bandra (East), Mumbai 400051. FTAMIL has offices in 33 cities acrossIndia FTAMIL had obtained a certificate from SEBI dated November 8, 2000 toact as a Portfolio Manager under Securities and Exchange Board of India(Portfolio Managers) Regulations, 1993 vide registration no. INP000000464.Further, a renewal of the registration certificate was granted up to November 15,2009 vide SEBI letter no. IMD/SP/79741/2003 dated November 14, 2006.FTAMIL has also obtained a No-Objection letter from SEBI under Regulation24(2) of Securities and Exchange Board of India (Mutual Funds) Regulations,1996 for commencing the Portfolio Managers activity, vide letter dated January

16, 2002. FTAMIL has been appointed the Asset Management Company /Investment Manager of Franklin Templeton Mutual Fund (Mutual Fund) byFranklin Templeton Trustee Services Pvt. Ltd, the Trustee of the Mutual Fundvide Investment Management Agreement (IMA) dated January 5, 1996, executedbetween the Trustee and FTAMIL, as amended by the Supplemental InvestmentManagement Agreement dated August 26, 2005. FTAMIL was approved by SEBIto act as the Asset Management Company for the Mutual Fund vides their letterno. IIMARP/406/96 dated February 19, 1996. Franklin Templeton Mutual Fundhas over Rs.23,500 crores of assets under management (as of June 30, 2008)


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HDFC Asset Management Company Limited

HDFC Asset Management Company Ltd. is a privately owned investment

manager. The firm primarily manages equity, fixed income, and balanced mutual

funds for its clients. It invests in public equity and fixed income markets. The firm

employs fundamental analysis to make its investments. It was founded in 1999

and is based in Mumbai, Maharashtra. HDFC Asset Management Company Ltd.

operates as a subsidiary of Housing Development Finance Corp. Ltd

HSBC Asset Management (India) Private Ltd.

HSBC Asset Management (India) Private Ltd is a privately owned investment

manager. It manages mutual fund for its clients. The firm invests in public equity

and fixed income markets. It operates as a subsidiary of HSBC Securities and

Capital Markets (India) Private Limited. HSBC Asset Management (India) Pvt.

Ltd was founded in 2001 and is based in Mumbai, India.


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ICICI Prudential Asset Management Company Limited

ICICI Prudential Asset Management Company Limited is a privately owned

investment manager. The firm provides its services to individuals and institutions.

It manages separate client-focused equity, fixed income, and balanced mutual

funds. The firm invests in the public equity and fixed income markets of India. It

operates as a subsidiary of ICICI Bank Ltd. ICICI Prudential Asset Management

Company Limited was founded in 1998 and is based in Mumbai, India.

IDFC Asset Management Company Limited

IDFC Private Equity manages a corpus of US$ 630 million and is Indias largest

and most active private equity fund focused on infrastructure. The two funds

under management are India Development Fund (IDF) and IDFC Private Equity

Fund II.


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IDFC, along with Citigroup and India Infrastructure Finance Company Limited

(IIFCL) launched a landmark US$ 5 billion initiative for financing infrastructure

projects in India. The equity fund will be solely managed by IDFC.

IDFC plans to raise approximately $1.7 billion in private and project equity funds

focused on infrastructure. The objective is to build a large asset management

platform focused on private investments and public markets through a variety of

domestic and offshore products

ING Investment Management (India) Pvt. Ltd.

ING Investment Management (India) Pvt. Ltd. is a privately owned investment

manager. The firm provides its services to individual and institutional clients. It

manages separate client focused equity and fixed income portfolios. The firm also

manages mutual funds and fund of funds for its clients. It invests in public equity

and fixed income markets of the world. The firm employs fundamental and

quantitative methodologies with top-down and bottom-up analysis to makeinvestments. It conducts in-house research to make investments. The firm is based

in Mumbai, India. ING Investment Management (India) Pvt. Ltd. operates as a

subsidiary of ING Investment Management LLC.


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Kotak Mahindra Asset Management Company Limited(KMAMCL)

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly

owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual

Fund (KMMF). KMAMC started operations in December 1998 and has over 10

Lac investors in various schemes. KMMF offers schemes catering to investors

with varying risk - return profiles and was the first fund house in the country to

launch a dedicated gilt scheme investing only in government securities

L&T Investment Management Limited

An investment portfolio in stocks, fixed income, structured products and other

assets, managed by a professional money manager, that can potentially be tailored

to meet specific investment objectives


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LIC NOMURA Mutual Fund Asset Management Company Limited

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989and contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fundwas constituted as a Trust in accordance with the provisions of the Indian TrustAct, 1882. The settlor is not responsible for the management of the Trust. Thesettlor is also not responsible or liable for any loss or shortfall resulting in any

of the schemes of LIC Mutual Fund.The Trustees of the LIC Mutual Fund have exclusive ownership of Trust Fundand are vested with general power of superintendence, discretion andmanagement of the affairs of the Trust. LIC Mutual Fund Asset ManagementCompany Ltd. was formed on 20th April 1994 in compliance with theSecurities and Exchange Board of India (Mutual Funds) Regulations, 1993. TheCompany commenced business on 29th April 1994. The Trustees of LICMutual Fund have appointed LIC Mutual Fund Asset Management CompanyLtd. as the Investment Managers for LIC Mutual Fund. The Trustees are

responsible for appointing a Custodian. The Trustees should also ensure thatthe activities of the Trust and the Asset Management Company are inaccordance with the Trust Deed and the SEBI Mutual Fund Regulations asamended from time to time. The Trustees have also to report periodically toSEBI on the functioning of the Fund.

Mirae Asset Global Investments (India) Pvt. Ltd.

Mirae Asset Global Investments (India) Pvt. Ltd. is a wholly owned subsidiary of

Mirae Asset Financial Group head quartered in Seoul, South Korea. Globally, the


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diversified businesses of Mirae Asset Financial Group offer a range of services

including asset management, life insurance, securities and capital & venture

investments

Motilal Oswal Asset Management Company Limited

Motilal Oswal Asset Management Company Ltd. (AMC) is a limited company

incorporated under the Companies Act, 1956 on November 14, 2008, having its

Registered Office at 81/82, Bajaj Bhavan, Nariman Point, Mumbai 400021.

Motilal Oswal Asset Management Company Ltd. has been appointed as the

Investment Manager to Motilal Oswal Mutual Fund by the Trustee vides

Investment Management Agreement (IMA) dated May 21, 2009, executed

between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset

Management Company Ltd.

Motilal Oswal Mutual Fund is registered with SEBI under Securities Exchange

Board of India (Mutual Funds) Regulations, 1996 vide Registration Code

MF/063/09/04 dated December 29, 2009. The Mutual Fund launched its first

Mutual Fund scheme - Motilal Oswal Most Shares M50 Exchange Traded Fund

(An Open Ended ETF) India's first Fundamentally Weighted ETF Based on Nifty.


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Principal Pnb Asset Management Co. Pvt. Ltd.

Principal Mutual Fund (formerly known as IDBI-PRINCIPAL Mutual Fund) has

been constituted as a Trust in accordance with the provisions of the Indian Trusts

Act, 1882 (2 of 1882). The Mutual Fund is registered with SEBI underRegistration No. MF/019/94/0, dated December 13, 1994. The underlying

objective of Principal Mutual Fund is to mobilize savings from the public, provide

investment expertise to achieve optimal returns on their investments.

The Fund was initially set up by Industrial Development Bank of India (IDBI) in

1994 by execution of a Trust Deed dated November 25, 1994, under which IDBI

was the sole Settlor, Subsequently, on March 31, 2000, Principal FinancialServices Inc. USA became the deemed sponsor (along with the IDBI) by

acquiring 50% stake in IDBI-PRINCIPAL Asset Management Company Limited.

In June 2003, Principal Financial Services Inc. USA became the sole sponsor by

acquiring 100% stake in IDBI-PRINCIPAL Asset Management Company

Limited, through its wholly owned subsidiary Principal Financial Group

(Mauritius) Limited (Principal Mauritius). Principal Mauritius has become the

sole settlor of the Fund. Name of the Asset Management Company was changed

to Principal Asset Management Company Private Limited, to reflect the change in

ownership.


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Reliance Capital Asset Management Ltd.

Reliance Mutual Fund (RMF) is Indias largest Mutual Fund, with Average

Assets Under Management (AAUM) of Rs. 1,01,576 crore (US$ 22 billion) for

the quarter ended March 31, 2011.

RMF offers a well-rounded portfolio of products that meet varying investor

requirements. Reliance Mutual Fund constantly endeavors to launch innovative

products and customer service initiatives to increase value to investors.

RMF has over seven million investor folios and a wide distribution network with

presence in 200 cities and over 75,000 touch points in India. In addition it has

offices in Dubai, Singapore, Mauritius and UK.

Religare Asset Management Company Limited

Religare Asset Management Company Limited is a wholly owned subsidiary of

Religare Securities Limited (RSL), which in turn is a 100% subsidiary of Religare

Enterprises Limited. It operates out of 60* locations across 57 cities in India. As

on 31st May 2010, the AMC has an Average AUM of over INR 154 bn with over

230,000 investor folios.


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Sahara Asset Management Company Private Limited

Sahara Mutual Fund is sponsored by the Sahara India Financial Corporation

Limited (SIFCL), the flagship company of Sahara India Group. Incorporated in

1987, SIFCL is the First Residuary Non-Banking Company (RNBC) in India that

has been granted certificate of registration by RBI and is a leading public deposit

mobilization company in the Private sector.

Sahara Asset Management Company Private Limited, the AMC of Sahara Mutual

Fund, was incorporated on August 31, 1995.

SBI Funds Management Private Limited

SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country

with an investor base of over 5.8 million and over 20 years of rich experience in

fund management consistently delivering value to its investors.


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SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of

India' one of India's largest banking enterprises, and Socit Gnrale Asset

Management (France), one of the world's leading fund management companies

that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 38,782 crores of assets and has a diverse

profile of investors actively parking their investments across 36 active schemes.

In 20 years of operation, the fund has launched 38 schemes and successfully

redeemed 15 of them, and in the process, has rewarded our investors with

consistent returns. Schemes of the Mutual Fund have time after time

outperformed benchmark indices, honored us with 15 awards of performance and

have emerged as the preferred investment for millions of investors and HNI's. The

trust reposed on us by over 4.6 million investors is a genuine tribute to our

expertise in fund management.SBI Funds Management Pvt. Ltd. serves its vast

family of investors through a network of over 130 points of acceptance, 28

Investor Service Centers, 46 Investor Service Desks and 56 District Organizers.

Tata Asset Management Limited

Tata Asset Management Limited is the asset management arm of Tata Sons

Limited. The firm primarily provides its services to individuals and institutional

investors. It also manages mutual funds for its clients. The firm invests in the

public equity and fixed income markets. Tata Asset Management Limited was

founded in 1995 and is based in Mumbai, India.


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Taurus Asset Management Company Limited

Taurus Mutual Fund was amongst the first few private sector Mutual Funds to be

registered with SEBI. It was constituted as a Trust on August 20, 1993 in

accordance with the provisions of the Indian Trusts Act, 1882. The Mutual Fund

was registered with SEBI on Sept 21, 1993 under Mutual Fund Registration Code

No. MF/002/93. HB Portfolio Limited is the present sponsor of the Fund & the

Taurus Investment Trust Company Ltd is the Trustee.

Taurus Mutual Fund launched its first scheme Taurus Star share in early 1994

which is operational even today. Needless to say, it is because of its consistent

performance through these past 15 years that this scheme exists even today.

Taurus Mutual Fund was perhaps the first private sector fund house to receive

permissions to launch fully repatriable investments by NRIs/FIIs. The scheme has

since received investments from IFC, Washington, the European Economic

Community, Brussels & EFM, UK.

In 1999, a merger was announced between HB Mutual Fund & Taurus Mutual

Fund. On amalgamation, the HB Asset Management Co. Ltd was renamed Credit

capital Asset Management Co. Ltd. which then was re-christened Taurus Asset

Management Co. Ltd. i.e. April 21, 2006. Subsequently in March 2002, Taurus

Mutual Fund also took over the schemes of BOI Mutual Fund. Currently, the


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shares of the Taurus Asset Management Co. Ltd are held by HB Portfolio Ltd

along with other HB Group Companies.

UTI Asset Management Company Ltd

UTI Asset Management Co. Ltd. (UTIAMC) is a company incorporated under

The Companies Act, 1956.UTIAMC was appointed as the Asset Management

Company of the UTI Mutual Fund in terms of the Investment Management

Agreement executed between UTI Trustee Co. Pvt. Ltd. and UTIAMC on

December 9, 2002. UTIAMC was registered by SEBI to act as the assetmanagement company for UTI Mutual Fund vides its letter of January 14, 2003.

The paid up capital of UTIAMC has been subscribed by four sponsors: State Bank

of India, Life Insurance Corporation of India, Bank of Baroda and Punjab

National Bank. UTIAMC, apart from managing the schemes of UTI Mutual Fund,

also manages the schemes transferred/migrated from the erstwhile Unit Trust of

India, in accordance with the provisions of the Investment Management

Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the

objectives of the schemes.


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Running a successful Mutual Fund requires complete understanding of thepeculiarities of the Indian Stock Market and also the psyche of the smallinvestors. This study has made an attempt to understand the financial

behavior of Mutual Fund investors in connection with the preferences ofBrand (AMC), Products, Channels etc. I observed that many of peoplehave fear of Mutual Fund. They think their money will not be secure inMutual Fund. They need the knowledge of Mutual Fund and its relatedterms. Many of people do not have invested in mutual fund due to lack ofawareness although they have money to invest. As the awareness andincome is growing the number of mutual fund investors are also growing.

Brand plays important role for the investment. People invest in thoseCompanies where they have faith or they are well known with them. There aremany AMCs in India but only some are performing well due to Brand awareness.Some AMCs are not performing well although some of the schemes of them aregiving good return because of not awareness about Brand. Reliance, UTI, SBIMF,ICICI Prudential etc. they are well known Brand, they are performing well andtheir Assets Under Management is larger than others whose Brand name are notwell known like Principle, Sunderam, etc. Distribution channels are alsoimportant for the investment in mutual fund. Financial Advisors are the mostpreferred channel for the investment in mutual fund. They can change investorsmind from one investment option to others. Many of investors directly invest their

money through AMC because they do not have to pay entry load. Only thosepeople invest directly who know wellabout mutual fund and its operations andthose have time.


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BIBLOGRAPHY

WEBSITES:-

www. Google.com

www. Studystandard.com

www.Wikipedia.com

BOOKS REFERED :-

Gordan Natranjan

Sundar Sankaran

Amitabh Gupta books


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Mutual Fund... Rohit.v.rohra .... Roll No -27

Documents

Transcript of Mutual Fund... Rohit.v.rohra .... Roll No -27