NEED FOR THE STUDY:

The main purpose of doing this project was to know about mutual fund and itsfunctioning. This
helps to know in details about mutual fund industry right from its inceptionstage, growth and
future prospects.
It also helps in understanding different schemes of mutual funds. Because my studydepends upon
prominent funds in India and their schemes like equity, income, balance as well asthe returns
associated with those schemes.
The project study was done to ascertain the asset allocation, entry load, exit load,associated with
the mutual funds. Ultimately this would help in understanding the benefits ofmutual funds to
investors.

OBJECTIVE:
 To give a brief idea about the benefits available from Mutual Fund investment.
 To give an idea of the types of schemes available.
 To discuss about the market trends of Mutual Fund investment.
 To study some of the mutual fund schemes.
 To study some mutual fund companies and their funds.
 Observe the fund management process of mutual funds.
 Explore the recent developments in the mutual funds in India.
 To give an idea about the regulations of mutual funds.

LIMITATIONS:
• The lack of information sources for the analysis part.
• Though I tried to collect some primary data but they were too inadequate for the purposes of the
study.
• Time and money are critical factors limiting this study.
• The data provided by the prospects may not be 100% correct as they too have their limitations.
• The study is limited to selected mutual fund schemes.

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EXECUTIVE SUMMERY
A mutual fund is a scheme in which several people invest their money for a commonfinancial
cause. The collected money invests in the capital market and the money, which theyearned, is
divided based on the number of units, which they hold. The mutual fund industry started in India
in a small way with the UTI Act creating whatwas effectively a small savings division within the
RBI. Over a period of 25 years this grewfairly successfully and gave investors a good return, and
therefore in 1989, as the next logicalstep, public sector banks and financial institutions were
allowed to float mutual funds and theirsuccess emboldened the government to allow the private
sector to foray into this area. The advantages of mutual fund are professional management,
diversification, economiesof scale, simplicity, and liquidity. The disadvantages of mutual fund are
high costs, over-diversification, possible taxconsequences, and the inability of management to
guarantee a superior return. The biggest problems with mutual funds are their costs and fees it
include Purchase fee,Redemption fee, Exchange fee, Management fee, Account fee & Transaction
Costs. There aresome loads which add to the cost of mutual fund. Load is a type of commission
depending on thetype of funds. Mutual funds are easy to buy and sell. You can either buy them
directly from the fundcompany or through a third party. Before investing in any funds one should
consider some factorlike objective, risk, Fund Manager’s and scheme track record, Cost factor etc.
There are many, many types of mutual funds. You can classify funds based Structure(open-ended
& close-ended), Nature (equity, debt, balanced), Investment objective (growth, Income, money
market) etc. A code of conduct and registration structure for mutual fund intermediaries, which
weresubsequently mandated by SEBI. In addition, this year AMFI was involved in a number
ofdevelopments and enhancements to the regulatory framework.
The most important trend in the mutual fund industry is the aggressive expansion of theforeign
owned mutual fund companies and the decline of the companies floated by nationalizedbanks and
smaller private sector players. Reliance Mutual Fund, UTI Mutual Fund, ICICI Prudential Mutual
Fund, HDFC MutualFund and Birla Sun Life Mutual Fund are the top five mutual fund company
in India. Reliance mutual funding is considered to be most reliable mutual funds in India.
Peoplewant to invest in this institution because they know that this institution will never dissatisfy
themat any cost. You should always keep this into your mind that if particular mutual funding
schemeis on larger scale then next time, you might not get the same results so being a careful
investoryou should take your major step diligently otherwise you will be unable to obtain the
highreturns.

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 INDEX
SRNO. TOPICS PAGE NO.
INTRODUCTION OF MUTUAL FUND 

WORKING OF MUTUAL FUND

MUTUAL FUND IN INDIA

RELIANCE MUTUAL FUND vs. UTI MUTUAL FUND

MUTUAL FUND vs. OTHER INVESTMENT 

FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA

M F JARGON 

CONCLUSION 

BIBLOGRAPHY

Chapter: 1 INTRODUCTION OF MUTUAL FUND

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There are a lot of investment avenues available today in the financial market for an investor
withan investable surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds
wherethere is low risk but low return. He may invest in Stock of companies where the risk is high
andthe returns are also proportionately high. The recent trends in the Stock Market have shown
thatan average retail investor always lost with periodic bearish tends. People began opting
forportfolio managers with expertise in stock markets who would invest on their behalf. Thus
wehad wealth management services provided by many institutions. However they proved too
costlyfor a small investor. These investors have found a good shelter with the mutual funds.

CONCEPT OF MUTUAL FUND:

A mutual fund is a common pool of money into which investors place their contributionsthat are
to be invested in accordance with a stated objective. The ownership of the fund is thusjoint or
“mutual”; the fund belongs to all investors. A single investor’s ownership of the fund isin the
same proportion as the amount of the contribution made by him or her bears to the totalamount of
the fund.
Mutual Funds are trusts, which accept savings from investors and invest the same indiversified
financial instruments in terms of objectives set out in the trusts deed with the view toreduce the
risk and maximize the income and capital appreciation for distribution for themembers. A Mutual
Fund is a corporation and the fund manager’s interest is to professionallymanage the funds
provided by the investors and provide a return on them after deductingreasonable management
fees.
The objective sought to be achieved by Mutual Fund is to provide an opportunity forlower income
groups to acquire without much difficulty financial assets. They cater mainly tothe needs of the
individual investor whose means are small and to manage investors portfolio in amanner that
provides a regular income, growth, safety, liquidity and diversificationopportunities.

DEFINITION:
“Mutual funds are collective savings and investment vehicles where savings of small(or
sometimes big) investors are pooled together to invest for their mutual benefit and
returnsdistributed proportionately”. “A mutual fund is an investment that pools your money with
the money of an unlimitednumber of other investors. In return, you and the other investors each
own shares of the fund.The funds assets are invested according to an investment objective into the
funds portfolio ofinvestments. Aggressive growth funds seek long-term capital growth by
investing primarily instocks of fast-growing smaller companies or market segments. Aggressive
growth funds are alsocalled capital appreciation funds”.

Why Select Mutual Fund?

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The risk return trade-off indicates that if investor is willing to take higher risk
thencorrespondingly he can expect higher returns and vice versa if he pertains to lower
riskinstruments, which would be satisfied by lower returns. For example, if an investors opt
forbank FD, which provide moderate return with minimal risk. But as he moves ahead to invest
incapital protected funds and the profit-bonds that give out more return which is slightly higher
ascompared to the bank deposits but the risk involved also increases in the same proportion. Thus
investors choose mutual funds as their primary means of investing, as Mutual fundsprovide
professional management, diversification, convenience and liquidity. That doesn’t meanmutual
fund investments risk free. This is because the money that is pooled in are not invested only in
debts funds which areless riskier but are also invested in the stock markets which involves a
higher risk but can expecthigher returns. Hedge fund involves a very high risk since it is mostly
traded in the derivativesmarket which is considered very volatile.

HISTORY OF MUTUAL FUNDS IN INDIA:

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The mutual fund industry in India started in 1963 with the formation of Unit Trust ofIndia, at the
initiative of the Government of India and Reserve Bank. The history of mutual fundsin 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 upby the
Reserve Bank of India and functioned under the Regulatory and administrative control ofthe
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the IndustrialDevelopment
Bank of India (IDBI) took over the regulatory and administrative control in placeof RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI hadRs.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 sectorbanks 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 followedby Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian BankMutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LICestablished its
mutual fund in June 1989 while GIC had set up its mutual fund in December1990. At the end of
1993, the mutual fund industry had assets under management of Rs.47,004crores.

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 fundindustry,
giving the Indian investors a wider choice of fund families. Also, 1993 was the year inwhich the
first Mutual Fund Regulations came into being, under which all mutual funds, exceptUTI were to
be registered and governed. The erstwhile Kothari Pioneer (now merged withFranklin Templeton)
was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensiveand 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 fundssetting 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 ofother mutual funds.

FOURTH PHASE – SINCE FEBRUARY 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI wasbifurcated into
two separate entities. One is the Specified Undertaking of the Unit Trust of Indiawith assets under
management of Rs.29,835 crores as at the end of January 2003, representingbroadly, the assets of
US 64 scheme, assured return and certain other schemes. The SpecifiedUndertaking of Unit Trust
of India, functioning under an administrator and under the rulesframed by Government of India
and does not come under the purview of the Mutual FundRegulations. The second is the UTI
Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It isregistered with SEBI and functions
under the Mutual Fund Regulations. With the bifurcation ofthe erstwhile UTI which had in March

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 2000 more than Rs.76,000 crores of assets undermanagement and with the setting up of a UTI
Mutual Fund, conforming to the SEBI MutualFund Regulations, and with recent mergers taking
place among different private sector funds, themutual fund industry has entered its current phase
of consolidation and growth. As at the end ofSeptember, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421schemes.

ADVANTAGES OF MUTUAL FUNDS:

If mutual funds are emerging as the favorite investment vehicle, it is because of the
manyadvantages they have over other forms and the avenues of investing, particularly for the
investorwho has limited resources available in terms of capital and the ability to carry out
detailedresearch and market monitoring. The following are the major advantages offered by
mutualfunds to all investors:
ßß
1. Portfolio Diversification:
Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to hold a
diversified investment portfolio even with a small amount of investment that would otherwise
require big capital.
2. Professional Management:
Even if an investor has a big amount of capital available to him, he benefits from the professional
management skills brought in by the fund in the management of the investor’s portfolio. The
investment management skills, along with the needed research into available investment options,
ensure a much better return than what an investor can manage on his own. Few investors have the
skill and resources of their own to succeed in today’s fast moving, global and sophisticated
markets.
3. Reduction/Diversification Of Risk:
When an investor invests directly, all the risk of potential loss is his own, whether heplaces a
deposit with a company or a bank, or he buys a share or debenture on his own or in anyother from.
While investing in the pool of funds with investors, the potential losses are alsoshared with other
investors. The risk reduction is one of the most important benefits of acollective investment
vehicle like the mutual fund.
4. Reduction Of Transaction Costs:
What is true of risk as also true of the transaction costs. The investor bears all the costs
ofinvesting such as brokerage or custody of securities. When going through a fund, he has
thebenefit of economies of scale; the funds pay lesser costs because of larger volumes, a
benefitpassed on to its investors.
5. Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly sell. Whenthey
invest in the units of a fund, they can generally cash their investments any time, by sellingtheir
units to the fund if open-ended, or selling them in the market if the fund is close-end.Liquidity of
investment is clearly a big benefit.

6. Convenience And Flexibility:

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 Mutual fund management companies offer many investor services that a direct marketinvestor
cannot get. Investors can easily transfer their holding from one scheme to the other; getupdated
market information and so on.
7. Tax Benefits:
Any income distributed after March 31, 2002 will be subject to tax in the assessment ofall Unit
holders. However, as a measure of concession to Unit holders of open-ended equity-oriented
funds, income distributions for the year ending March 31, 2003, will be taxed at aconcessional
rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction uptoRs. 9,000
from theTotal Income will be admissible in respect of income from investments specified in
Section 80L,including income from Units of the Mutual Fund. Units of the schemes are not
subject to Wealth-Tax and Gift-Tax.
8. Choice of Schemes:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

9. 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.
10. Transparency:
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and the
fund managers investment strategy and outlook.

DISADVANTAGES OF INVESTING THROUGH MUTUALFUNDS:

1. No Control Over Costs:
An investor in a mutual fund has no control of the overall costs of investing. The investorpays
investment management fees as long as he remains with the fund, albeit in return for
theprofessional management and research. Fees are payable even if the value of his investments
isdeclining. A mutual fund investor also pays fund distribution costs, which he would not incur
indirect investing. However, this shortcoming only means that there is a cost to obtain the
mutualfund services.

2. No Tailor-Made Portfolio:
Investors who invest on their own can build their own portfolios of shares and bonds andother
securities. Investing through fund means he delegates this decision to the fund managers.The
very-high-net-worth individuals or large corporate investors may find this to be a constraint in
achieving their objectives. However, most mutual fund managers help investors overcome
thisconstraint by offering families of funds- a large number of different schemes- within their
ownmanagement company. An investor can choose from different investment plans and
constructs aportfolio to his choice.

3. Managing A Portfolio Of Funds:

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 Availability of a large number of funds can actually mean too much choice for theinvestor. He
may again need advice on how to select a fund to achieve his objectives, quitesimilar to the
situation when he has individual shares or bonds to select.

4. The Wisdom Of Professional Management:

That’s right, this is not an advantage. The average mutual fund manager is no better atpicking
stocks than the average nonprofessional, but charges fees.

5. No Control:
Unlike picking your own individual stocks, a mutual fund puts you in the passenger seatof
somebody else’s car

6. Dilution:
Mutual funds generally have such small holdings of so many different stocks thatinsanely great
performance by a funds top holdings still doesn’t make much of a difference in amutual funds
total performance.

7. Buried Costs:
Many mutual funds specialize in burying their costs and in hiring salesmen who do notmake those
costs clear to their clients. 

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

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Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection
of many stocks, an investors can go for picking a mutual fund might be easy. There are over
hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in
categories, mentioned below.

A).BY STRUCTURE
1. Open - Ended
Schemes:
An open-end fund is one
that is available for
subscription all through the
year. These donot have a
fixed maturity.
Investors can
conveniently buy and sell
units at Net Asset
Value("NAV")
related prices. The key
feature of open-end
schemes is liquidity.
2. Close - Ended Schemes:
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15years.
The fund is open for subscription only during a specified period. Investors can invest inthe
scheme at the time of the initial public issue and thereafter they can buy or sell the units ofthe
scheme on the stock exchanges where they are listed. In order to provide an exit route to
theinvestors, some close-ended funds give an option of selling back the units to the Mutual
Fundthrough periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least
oneof the two exit routes is provided to the investor.

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-ended
schemes. The units may be traded on the stock exchange or may be open for sale orredemption
during pre-determined intervals at NAV related prices.

B). BY NATURE
1. Equity Fund:
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These funds invest a maximum part of their corpus into equities holdings. The structureof the fund
may vary different for different schemes and the fund manager’s outlook on differentstocks. The
Equity Funds are sub-classified depending upon their investment objective, asfollows: •
Diversified Equity Funds • Mid-Cap Funds • Sector Specific Funds • Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high onthe risk-
return matrix.
2. Debt Funds:
The objective of these Funds is to invest in debt papers. Government authorities,
privatecompanies, banks and financial institutions are some of the major issuers of debt papers.
Byinvesting in debt instruments, these funds ensure low risk and provide stable income to
theinvestors. Debt funds are further classified as:
• Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
• Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.
• MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly
high on the risk-return matrix when compared with other debt schemes.
• Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.
• Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity
and preservation of capital. These schemes invest in short-term instruments like Treasury Bills,
inter-bank call money market, CPs and CDs. These funds are meant for short-term cash
management of corporate houses and are meant for an investment horizon of 1day to 3 months.
These schemes rank low on risk-return matrix and are considered to be the safest amongst all
categories of mutual funds.
3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in bothequities
and fixed income securities, which are in line with pre-defined investment objective ofthe scheme.
These schemes aim to provide investors with the best of both the worlds. Equity partprovides
growth and the debt part provides stability in returns.Further the mutual funds can be broadly
classified on the basis of investment parameter viz,Each category of funds is backed by an
investment philosophy, which is pre-defined in theobjectives of the fund. The investor can align
his own investment needs with the funds objectiveand invest accordingly.

C).BY INVESTMENT OBJECTIVE:

Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is toprovide capital
appreciation over medium to long term. These schemes normally invest a majorpart of their fund
in equities and are willing to bear short-term decline in value for possiblefuture
appreciation.Income Schemes: Income Schemes are also known as debt schemes. The aim of
these schemes is to provideregular and steady income to investors. These schemes generally

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invest in fixed incomesecurities such as bonds and corporate debentures. Capital appreciation in
such schemes may belimited.Balanced Schemes: Balanced Schemes aim to provide both growth
and income by periodically distributing apart of the income and capital gains they earn. These
schemes invest in both shares and fixedincome securities, in the proportion indicated in their offer
documents (normally 50:50).
Money Market Schemes:
Money Market Schemes aim to provide easy liquidity, preservation of capital andmoderate
income. These schemes generally invest in safer, short-term instruments, such astreasury bills,
certificates of deposit, commercial paper and inter-bank call money.
Load Funds: A Load Fund is one that charges a commission for entry or exit. That is, each time
youbuy or sell units in the fund, a commission will be payable. Typically entry and exit loads
rangefrom 1% to 2%. It could be worth paying the load, if the fund has a good performance
history.
No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or exit.
That is, nocommission is payable on purchase or sale of units in the fund. The advantage of a no
load fundis that the entire corpus is put to work.

OTHER SCHEMES

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from timeto time.
Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked SavingsScheme
(ELSS) are eligible for rebate.Index Schemes: Index schemes attempt to replicate the performance
of a particular index such as the BSESensex or the NSE 50. The portfolio of these schemes will
consist of only those stocks thatconstitute the index. The percentage of each stock to the total
holding will be identical to thestocks index weightage. And hence, the returns from such schemes
would be more or lessequivalent to those of the Index.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries
asspecified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer
Goods(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the
performance ofthe respective sectors/industries. While these funds may give higher returns, they
are more riskycompared to diversified funds. Investors need to keep a watch on the performance
of thosesectors/industries and must exit at an appropriate time.

NET ASSET VALUE (NAV):

Since each owner is a part owner of a mutual fund, it is necessary to establish the value ofhis part.
In other words, each share or unit that an investor holds needs to be assigned a value.Since the
units held by investor evidence the ownership of the fund’s assets, the value of the totalassets of
the fund when divided by the total number of units issued by the mutual fund gives usthe value of
one unit. This is generally called the Net Asset Value (NAV) of one unit or oneshare. The value of
an investor’s part ownership is thus determined by the NAV of the number ofunits held.

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Calculation of NAV:
Let us see an example. If the value of a fund’s assets stands at Rs. 100 and it has 10investors who
have bought 10 units each, the total numbers of units issued are 100, and the valueof one unit is
Rs. 10.00 (1000/100). If a single investor in fact owns 3 units, the value of hisownership of the
fund will be Rs. 30.00(1000/100*3). Note that the value of the fund’sinvestments will keep
fluctuating with the market-price movements, causing the Net Asset Valuealso to fluctuate. For
example, if the value of our fund’s asset increased from Rs. 1000 to 1200,the value of our
investors holding of 3 units will now be (1200/100*3) Rs. 36. The investmentvalue can go up or
down, depending on the markets value of the fund’s assets.

MUTUAL FUND FEES AND EXPENSES

Mutual fund fees and expenses are charges that may be incurred by investors who holdmutual
funds. Running a mutual fund involves costs, including shareholder transaction costs,investment
advisory fees, and marketing and distribution expenses. Funds pass along these coststo investors
in a number of ways.

1. TRANSACTION FEES
i) Purchase Fee: It is a type of fee that some funds charge their shareholders when they buy
shares. Unlike a front-end sales load, a purchase fee is paid to the fund (not to a broker) and is
typically imposed to defray some of the funds costs associated with the purchase.
ii) Redemption Fee: It is another type of fee that some funds charge their shareholders when they
sell or redeem shares. Unlike a deferred sales load, a redemption fee is paid to the fund (not to a
broker) and is typically used to defray fund costs associated with a shareholders redemption.
iii) Exchange Fee: Exchange fee that some funds impose on shareholders if they exchange
(transfer) to another fund within the same fund group or "family of funds.
2. PERIODIC FEES
i) Management Fee: Management fees are fees that are paid out of fund assets to the funds
investment adviser for investment portfolio management, any other management fees payable to
the funds investment adviser or its affiliates, and administrative fees payable to the investment
adviser that are not included in the "Other Expenses" category. They are also called maintenance
fees.
ii) Account Fee: Account fees are fees that some funds separately impose on investors in
connection with the maintenance of their accounts. For example, some funds impose an account
maintenance fee on accounts whose value is less than a certain dollar amount.

3. OTHER OPERATING EXPENSES

Transaction Costs: These costs are incurred in the trading of the funds assets. Funds with a high
turnover ratio, or investing in illiquid or exotic markets usually face higher transaction costs.
Unlike the Total Expense Ratio these costs are usually not reported. LOADSDefinition of a load
Load funds exhibit a "Sales Load" with a percentage charge levied on purchase or sale ofshares. A
load is a type of Commission (remuneration). Depending on the type of load a mutualfund

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exhibits, charges may be incurred at time of purchase, time of sale, or a mix of both. Thedifferent
types of loads are outlined below.
Front-end load: Also known as Sales Charge, this is a fee paid when shares are purchased. Also
known asa "front-end load," this fee typically goes to the brokers that sell the funds shares. Front-
endloads reduce the amount of your investment. For example, lets say you have Rs.10,000 and
wantto invest it in a mutual fund with a 5% front-end load. The Rs.500 sales load you must
paycomes off the top, and the remaining Rs.9500 will be invested in the fund. According to
NASDrules, a front-end load cannot be higher than 8.5% of your investment.
Back-end load: Also known as Deferred Sales Charge, this is a fee paid when shares are sold.
Alsoknown as a "back-end load," this fee typically goes to the brokers that sell the funds shares.
Theamount of this type of load will depend on how long the investor holds his or her shares
andtypically decreases to zero if the investor holds his or her shares long enough.
Level load / Low load: Its similar to a back-end load in that no sales charges are paid when
buying the fund.Instead a back-end load may be charged if the shares purchased are sold within a
given timeframe. The distinction between level loads and low loads as opposed to back-end loads,
is thatthis time frame where charges are levied is shorter.
No-load Fund: As the name implies, this means that the fund does not charge any type of sales
load. But,as outlined above, not every type of shareholder fee is a "sales load." A no-load fund
may chargefees that are not sales loads, such as purchase fees, redemption fees, exchange fees,
and accountfees.

SELECTION PARAMETERS FOR MUTUAL FUND

Your objective:
The first point to note before investing in a fund is to find out whether your objectivematches with
the scheme. It is necessary, as any conflict would directly affect your prospectivereturns.
Similarly, you should pick schemes that meet your specific needs. Examples: pensionplans,
children’s plans, sector-specific schemes, etc.Your risk capacity and capability:
This dictates the choice of schemes. Those with no risk tolerance should go for debtschemes, as
they are relatively safer. Aggressive investors can go for equity investments.Investors that are
even more aggressive can try schemes that invest in specific industry orsectors.
Fund Manager’s and scheme track record:
Since you are giving your hard earned money to someone to manage it, it is imperativethat he
manages it well. It is also essential that the fund house you choose has excellent trackrecord. It
also should be professional and maintain high transparency in operations. Look at theperformance
of the scheme against relevant market benchmarks and its competitors. Look at theperformance of
a longer period, as it will give you how the scheme fared in different marketconditions.
Cost factor:
Though the AMC fee is regulated, you should look at the expense ratio of the fund
beforeinvesting. This is because the money is deducted from your investments. A higher entry
load orexit load also will eat into your returns. A higher expense ratio can be justified only
bysuperlative returns. It is very crucial in a debt fund, as it will devour a few percentages from
yourmodest returns.
Also, Morningstar rates mutual funds. Each year end, many financial publications list theyears
best performing mutual funds. Naturally, very eager investors will rush out to purchaseshares of

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 last years top performers. That’s a big mistake. Remember, changing market conditionsmake it
rare that last year’s top performer repeats that ranking for the current year. Mutual fundinvestors
would be well advised to consider the fund prospectus, the fund manager, and thecurrent market
conditions. Never rely on last year’s top performers.
Types of Returns on Mutual Fund:
There are three ways, where the total returns provided by mutual funds can be enjoyed
byinvestors:
• Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.
• If the fund sells securities that have increased in price, the fund has a capital gain. Most funds
also pass on these gains to investors in a distribution.If fund holdings increase in price but are not
sold by the fund manager, the funds shares increasein price. You can then sell your mutual fund
shares for a profit. Funds will also usually give youa choice either to receive a check for
distributions or to reinvest the earnings and get moreshares.
RISK FACTORS OF MUTUAL FUNDS:
1. The Risk-Return Trade-Off:
The most important relationship to understand is the risk-return trade-off. Higher the riskgreater
the returns / loss and lower the risk lesser the returns/loss. Hence it is upto you, the investor to
decide how much risk you are willing to take. Inorder to do this you must first be aware of the
different types of risks involved with yourinvestment decision.
2. Market Risk:
Sometimes prices and yields of all securities rise and fall. Broad outside influencesaffecting the
market in general lead to this. This is true, may it be big corporations or smallermid-sized
companies. This is known as Market Risk. A Systematic Investment Plan (“SIP”) thatworks on
the concept of Rupee Cost Averaging (“RCA”) might help mitigate this risk.
3. Credit Risk:
The debt servicing ability (may it be interest payments or repayment of principal) of acompany
through its cashflows determines the Credit Risk faced by you. This credit risk ismeasured by
independent rating agencies like CRISIL who rate companies and their paper. A‘AAA’ rating is
considered the safest whereas a ‘D’ rating is considered poor credit quality. Awell-diversified
portfolio might help mitigate this risk.
4. Inflation Risk:
Things you hear people talk about:"Rs. 100 today is worth more than Rs. 100 tomorrow. The root
cause, Inflation. Inflation is the loss of purchasing power over time.This happens when inflation
grows faster than the return on your investment. A well-diversified portfolio withsome investment
in equities might help mitigate this risk.

5. Interest Rate Risk:

In a free market economy interest rates are difficult if not impossible to predict. Changesin
interest rates affect the prices of bonds as well as equities. If interest rates rise the prices ofbonds
fall and vice versa. Equity might be negatively affected as well in a rising interest
rateenvironment. A well-diversified portfolio might help mitigate this risk.
6. Political / Government Policy Risk:

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 Changes in government policy and political decision can change the investmentenvironment.
They can create a favourable environment for investment or vice versa.
7. Liquidity Risk:
Liquidity risk arises when it becomes difficult to sell the securities that one haspurchased.
Liquidity Risk can be partly mitigated by diversification, staggering of maturities aswell as
internal risk controls that lean towards purchase of liquid securities.

Chapter: 2 WORKING OF MUTUAL FUNDS

The mutual fund collects money directly or through brokers from investors. The money isinvested
in various instruments depending on the objective of the scheme. The income generatedby selling
securities or capital appreciation of these securities is passed on to the investors inproportion to
their investment in the scheme. The investments are divided into units and thevalue of the units

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will be reflected in Net Asset Value or NAV of the unit. NAV is the marketvalue of the assets of
the scheme minus its liabilities. The per unit NAV is the net asset value ofthe scheme divided by
the number of units outstanding on the valuation date. Mutual fundcompanies provide daily net
asset value of their schemes to their investors. NAV is important, asit will determine the price at
which you buy or redeem the units of a scheme. Depending on theload structure of the scheme,
you have to pay entry or exit load.
STRUCTURE OF A MUTUAL FUND:
India has a legal framework within which Mutual Fund have to be constituted. In Indiaopen and
close-end funds operate under the same regulatory structure i.e. as unit Trusts. AMutual Fund in
India is allowed to issue open-end and close-end schemes under a common legalstructure. The
structure that is required to be followed by any Mutual Fund in India is laid downunder SEBI
(Mutual Fund) Regulations, 1996.
The Fund Sponsor:
Sponsor is defined under SEBI regulations as any person who, acting alone or incombination of
another corporate body establishes a Mutual Fund. The sponsor of the fund isakin to the promoter
of a company as he gets the fund registered with SEBI. The sponsor forms atrust and appoints a
Board of Trustees. The sponsor also appoints the Asset ManagementCompany as fund managers.
The sponsor either directly or acting through the trustees will alsoappoint a custodian to hold
funds assets. All these are made in accordance with the regulationand guidelines of SEBI.
As per the SEBI regulations, for the person to qualify as a sponsor, he must contribute atleast 40%
of the net worth of the Asset Management Company and possesses a sound financialtrack record
over 5 years prior to registration.

Mutual Funds as Trusts:

A Mutual Fund in India is constituted in the form of Public trust Act, 1882. The Fundsponsor acts
as a settlor of the Trust, contributing to its initial capital and appoints a trustee tohold the assets of
the trust for the benefit of the unit-holders, who are the beneficiaries of thetrust. The fund then
invites investors to contribute their money in common pool, by scribing to“units” issued by
various schemes established by the Trusts as evidence of their beneficialinterest in the fund. It
should be understood that the fund should be just a “pass through” vehicle. Under theIndian
Trusts Act, the trust of the fund has no independent legal capacity itself, rather it is theTrustee or
the Trustees who have the legal capacity and therefore all acts in relation to the trustsare taken on
its behalf by the Trustees. In legal parlance the investors or the unit-holders are thebeneficial
owners of the investment held by the Trusts, even as these investments are held in thename of the
Trustees on a day-to-day basis. Being public trusts, Mutual Fund can invite anynumber of
investors as beneficial owners in their investment schemes.
Trustees:
A Trust is created through a document called the Trust Deed that is executed by the fundsponsor
in favour of the trustees. The Trust- the Mutual Fund – may be managed by a board of trustees- a
body of individuals, or a trust company- a corporate body. Most of the funds in Indiaare managed
by Boards of Trustees. While the boards of trustees are governed by the IndianTrusts Act, where
the trusts are a corporate body, it would also require to comply with theCompanies Act, 1956. The

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Board or the Trust company as an independent body, acts as aprotector of the of the unit-holders
interests. The Trustees do not directly manage the portfolio ofsecurities. For this specialist
function, the appoint an Asset Management Company. They ensure that the Fund is managed by
AMC as per the defined objectives and in accordance with thetrusts deeds and SEBI regulations.
The Asset Management Companies:
The role of an Asset Management Company (AMC) is to act as the investment managerof the
Trust under the board supervision and the guidance of the Trustees. The AMC is requiredto be
approved and registered with SEBI as an AMC. The AMC of a Mutual Fund must have anet
worth of at least Rs. 10 Crores at all times. Directors of the AMC, both independent and non-
independent, should have adequate professional expertise in financial services and should
beindividuals of high morale standing, a condition also applicable to other key personnel of
theAMC. The AMC cannot act as a Trustee of any other Mutual Fund.
Besides its role as a fundmanager, it may undertake specified activities such as advisory services
and financial consulting,provided these activities are run independent of one another and the
AMC’s resources (such aspersonnel, systems etc.) are properly segregated by the activity.
The AMC must always act in theinterest of the unit-holders and reports to the trustees with respect
to its activities.
Custodian and Depositories:
Mutual Fund is in the business of buying and selling of securities in large volumes.Handling these
securities in terms of physical delivery and eventual safekeeping is a specializedactivity. The
custodian is appointed by the Board of Trustees for safekeeping of securities orparticipating in
any clearance system through approved depository companies on behalf of theMutual Fund and it
must fulfill its responsibilities in accordance with its agreement with theMutual Fund. The
custodian should be an entity independent of the sponsors and is required tobe registered with
SEBI. With the introduction of the concept of dematerialization of shares thedematerialized shares
are kept with the Depository participant while the custodian holds thephysical securities. Thus,
deliveries of a fund’s securities are given or received by a custodian ora depository participant, at
the instructions of the AMC, although under the overall direction andresponsibilities of the
Trustees.

Bankers:
A Fund’s activities involve dealing in money on a continuous basis primarily with respectto
buying and selling units, paying for investment made, receiving the proceeds from sale of
theinvestments and discharging its obligations towards operating expenses. Thus the Fund’s
banker comply an important role to determine quality of service that the fund gives in timely
delivery of remittances etc.

Transfer Agents:
Transfer agents are responsible for issuing and redeeming units of the Mutual Fund andprovide
other related services such as preparation of transfer documents and updating investorrecords. A
fund may choose to carry out its activity in-house and charge the scheme for theservice at a
competitive market rate. Where an outside Transfer agent is used, the fund investorwill find the

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agent to be an important interface to deal with, since all of the investor services thata fund
provides are going to be dependent on the transfer agent.

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.Theseregulations
make it mandatory for mutual fund to have three structures of sponsor trustee andasset
Management Company. The sponsor of the mutual fund and appoints the trustees. Thetrustees are
responsible to the investors in mutual fund and appoint the AMC for managing theinvestment
portfolio. The AMC is the business face of the mutual fund, as it manages all theaffairs of the
mutual fund. The AMC and the mutual fund have to be registered with SEBI.

SEBI REGULATIONS:
• As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds
to protect the interest of the investors.
• SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by
private sector entities were allowed to enter the capital market.
• The regulations were fully revised in 1996 and have been amended thereafter from time to time.
• SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of
investors.
• All mutual funds whether promoted by public sector or private sector entities including those
promoted by foreign entities are governed by the same set of Regulations. The risks associated
with the schemes launched by the mutual funds sponsored by these entities are of similar type.
There is no distinction in regulatory requirements for these mutual funds and all are subject to
monitoring and inspections by SEBI.
• SEBI Regulations require that at least two thirds of the directors of trustee company or board of
trustees must be independent i.e. they should not be associated with the sponsors.
• Also, 50% of the directors of AMC must be independent. All mutual funds are required to be
registered with SEBI before they launch any scheme.
• Further SEBI Regulations, inter-alia, stipulate that MFs cannot guarantee returns in any scheme
and that each scheme is subject to 20 : 25 condition [I.e minimum 20 investors per scheme and
one investor can hold more than 25% stake in the corpus in that one scheme].
• Also SEBI has permitted MFs to launch schemes overseas subject various restrictions and also to
launch schemes linked to Real Estate, Options and Futures, Commodities, etc.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):

With the increase in mutual fund players in India, a need for mutual fund association inIndia was
generated to function as a non-profit organisation. Association of Mutual Funds inIndia (AMFI)
was incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has beenregistered
with SEBI. Till date all the AMCs are that have launched mutual fund schemes are itsmembers. It
functions under the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry toa
professional and healthy market with ethical lines enhancing and maintaining standards. Itfollows

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the principle of both protecting and promoting the interests of mutual funds as well astheir unit
holders.
The Objectives of Association of Mutual Funds in India:
The Association of Mutual Funds of India works with 30 registered AMCs of thecountry. It has
certain defined objectives which juxtaposes the guidelines of its Board ofDirectors.
The objectives are as follows:
• This mutual fund association of India maintains high professional and ethical standards in all
areas of operation of the industry.
• It also recommends and promotes the top class business practices and code of conduct which is
followed by members and related people engaged in the activities of mutual fund and asset
management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association.
• AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.
• Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of
India and other related bodies on matters relating to the Mutual Fund Industry.
• It develops a team of well qualified and trained Agent distributors. It implements a programme
of training and certification for all intermediaries and other engaged in the mutual fund industry.
• AMFI undertakes all India awareness programme for investors in order to promote proper
understanding of the concept and working of mutual funds.
• At last but not the least association of mutual fund of India also disseminate information on
Mutual Fund Industry and undertakes studies and research either directly or in association with
other bodies.

AMFI Publications:
AMFI publish mainly two types of bulletin. One is on the monthly basis and the other isquarterly.
These publications are of great support for the investors to get intimation of theknowhow of their
parked money

Chapter: 3 MUTUAL FUNDS IN INDIA

In 1963, the day the concept of Mutual Fund took birth in India. Unit Trust of Indiainvited
investors or rather to those who believed in savings, to park their money in UTI MutualFund.

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For 30 years it goaled without a single second player. Though the 1988 year saw somenew mutual
fund companies, but UTI remained in a monopoly position.
The performance of mutual funds in India in the initial phase was not even closer tosatisfactory
level. People rarely understood, and of course investing was out of question. But yes,some 24
million shareholders were accustomed with guaranteed high returns by the beginning
ofliberalization of the industry in 1992. This good record of UTI became marketing tool for
newentrants. The expectations of investors touched the sky in profitability factor. However,
peoplewere miles away from the preparedness of risks factor after the liberalization.
The net asset value (NAV) of mutual funds in India declined when stock prices startedfalling in
the year 1992. Those days, the market regulations did not allow portfolio shifts intoalternative
investments. There was rather no choice apart from holding the cash or to furthercontinue
investing in shares. One more thing to be noted, since only closed-end funds werefloated in the
market, the investors disinvested by selling at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992 stock marketscandal,
the losses by disinvestments and of course the lack of transparent rules in thewhereabouts rocked
confidence among the investors. Partly owing to a relatively weak stockmarket performance,
mutual funds have not yet recovered, with funds trading at an averagediscount of 1020 percent of
their net asset value. The securities and Exchange Board of India (SEBI) came out with
comprehensiveregulation in 1993 which defined the structure of Mutual Fund and Asset
ManagementCompanies for the first time.
The supervisory authority adopted a set of measures to create a transparent andcompetitive
environment in mutual funds. Some of them were like relaxing investment restrictions into the
market, introduction of open-ended funds, and paving the gateway formutual funds to launch
pension schemes.
The measure was taken to make mutual funds the key instrument for long-term saving.The more
the variety offered, the quantitative will be investors. Several private sectors Mutual Funds were
launched in 1993 and 1994. The share of theprivate players has risen rapidly since then. Currently
there are 34 Mutual Fund organizations inIndia managing 1,02,000 crores.
At last to mention, as long as mutual fund companies are performing with lower risks andhigher
profitability within a short span of time, more and more people will be inclined to investuntil and
unless they are fully educated with the dos and don’ts of mutual funds.
Mutual fund industry has seen a lot of changes in past few years with multinationalcompanies
coming into the country, bringing in their professional expertise in managing fundsworldwide. In
the past few months there has been a consolidation phase going on in the mutualfund industry in
India. Now investors have a wide range of Schemes to choose from dependingon their individual
profiles.

MUTUAL FUND COMPANIES IN INDIA:

The concept of mutual funds in India dates back to the year 1963. The era between 1963and 1987
marked the existence of only one mutual fund company in India with Rs. 67bn assetsunder
management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By theend of

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the 80s decade, few other mutual fund companies in India took their position in mutualfund
market.
The new entries of mutual fund companies in India were SBI Mutual Fund, CanbankMutual Fund,
Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of IndiaMutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry. By the endof 1993,
the total AUM of the industry was Rs. 470.04 bn. The private sector funds startedpenetrating the
fund families. In the same year the first Mutual Fund Regulations came intoexistance with re-
registering all mutual funds except UTI. The regulations were further given arevised shape in
1996.
Kothari Pioneer was the first private sector mutual fund company in India which has nowmerged
with Franklin Templeton. Just after ten years with private sector players penetration, thetotal
assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.

Major Mutual Fund Companies in India

• ABN AMRO Mutual Fund
• Standard Chartered Mutual Fund
• Birla Sun Life Mutual Fund
• Franklin Templeton India Mutual Fund
• Bank of Baroda Mutual Fund
• Morgan Stanley Mutual Fund India
• HDFC Mutual Fund
• Escorts Mutual Fund
• HSBC Mutual Fund
•Alliance Capital Mutual Fund
• ING Vysya Mutual Fund
• Benchmark Mutual Fund
• Prudential ICICI Mutual Fund
• Canbank Mutual Fund
• State Bank of India Mutual Fund
• Chola Mutual Fund
• Tata Mutual Fund
• LIC Mutual Fund
• Unit Trust of India Mutual Fund
• GIC Mutual Fund
• Reliance Mutual Fund
For the first time in the history of Indian mutual fund industry, Unit Trust of India MutualFund
has slipped from the first slot. Earlier, in May 2006, the Prudential ICICI Mutual Fund wasranked
at the number one slot in terms of total assets.
In the very next month, the UTIMF had regained its top position as the largest fund housein India.
Now, according to the current pegging order and the data released by Association ofMutual Funds
in India (AMFI), the Reliance Mutual Fund, with a January-end AUM of Rs39,020 crore has
become the largest mutual fund in India On the other hand, UTIMF, with an AUM of Rs 37,535
crore, has gone to secondposition. The Prudential ICICI MF has slipped to the third position with
an AUM of Rs 34,746crore.

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It happened for the first time in last one year that a private sector mutual fund house has reachedto
the top slot in terms of asset under management (AUM). In the last one year to January, AUMof
the Indian fund industry has risen by 64% to Rs 3.39 lakh crore.
According to the data released by Association of Mutual Funds in India (AMFI), thecombined
average AUM of the 35 fund houses in the country increased to Rs 5,512.99 billion inApril
compared to Rs 4,932.86 billion in March
Reliance MF maintained its top position as the largest fund house in the country with Rs74.25
billion jump in AUM to Rs 883.87 billion at April-end.The second-largest fund house HDFC MF
gained Rs 59.24 billion in its AUM at Rs 638.80billion.
ICICI Prudential and state-run UTI MF added Rs 46.16 billion and Rs 57.35 billion respectively
to their assets last month. ICICI Prudential`s AUM stood at Rs 560.49 billion at theend of April,
while UTI MF had assets worth Rs 544.89 billion.
The other fund houses which saw an increase in their average AUM in April include-
CanaraRobeco MF, IDFC MF, DSP BlackRock, Deutsche MF,Kotak Mahindra MF and LICMF.

Chapter: 4 RELIANCE MUTUAL FUND Vs UTI MUTUAL FUND

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RELIANCE MUTUAL FUND Reliance Mutual Fund (RMF) was established as trust under
Indian Trusts Act, 1882. Thesponsor of RMF is Reliance Capital Limited and Reliance Capital
Trustee Co. Limited is theTrustee. It was registered on June 30, 1995 as Reliance Capital Mutual
Fund which was changedon March 11, 2004. Reliance Mutual Fund was formed for launching of
various schemes underwhich units are issued to the Public with a view to contribute to the capital
market and to provideinvestors the opportunities to make investments in diversified securities.
RMF is one of India’s leading Mutual Funds, with Average Assets Under Management(AAUM)
of Rs. 88,388 crs (AAUM for 30th Apr 09) and an investor base of over 71.53 Lacs.Reliance
Mutual Fund, a part of the Reliance - Anil DhirubhaiAmbani Group, is one of thefastest growing
mutual funds in the country. RMF offers investors a well-rounded portfolio ofproducts to meet
varying investor requirements and has presence in 118 cities across the country.
Reliance Mutual Fund constantly endeavours to launch innovative products and customerservice
initiatives to increase value to investors. "Reliance Mutual Fund schemes are managed byReliance
Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, whichholds
93.37% of the paid-up capital of RCAM, the balance paid up capital being held byminority
shareholders.

"Sponsor : Reliance Capital

Limited Trustee : Reliance Capital Trustee Co. Limited.
Investment Manager : Reliance Capital Asset Management Limited.
The Sponsor, the Trustee and the Investment Manager are incorporated under theCompanies Act
1956.
Vision Statement
“To be a globally respected wealth creator with an emphasis on customer care and aculture of
good corporate governance.
Mission Statement
To create and nurture a world-class, high performance environment aimed at delightingour
customers.

The Main Objectives Of The Trust:

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 • To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise
various collective Schemes of savings and investments for people in India and abroad and also
ensure liquidity of investments for the Unit holders;
• To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their
savings and
• To take such steps as may be necessary from time to time to realise the effects without any
limitation.

SCHEMES
A).EQUITY/GROWTH SCHEMES:
The aim of growth funds is to provide capital appreciation over the medium to long-term. Such
schemes normally invest a major part of their corpus in equities. Such funds havecomparatively
high risks. Growth schemes are good for investors having a long-term outlookseeking
appreciation over a period of time.
1. Reliance Infrastructure Fund(Open-Ended Equity):
The primary investment objective of the scheme is to generate long term capital appreciation by
investing predominantly in equity and equity related instruments of companies engaged in
infrastructure (Airports, Construction, Telecommunication, Transportation) and infrastructure
related sectors and which are incorporated or have their area of primary activity, in India and the
secondary objective is to generate consistent returns by investing in debt and money market
securities.
Investment Strategy:
The investment focus would be guided by the growth potential and other economic factors of the
country. The Fund aims to maximize long-term total return by investing in equity and equity-
related securities which have their area of primary activity in India.
2. Reliance Quant Plus Fund/Reliance Index Fund (Open-Ended Equity):
The investment objective of the Scheme is to generate capital appreciation through investment in
equity and equity related instruments. The Scheme will seek to generate capital appreciation by
investing in an active portfolio of stocks selected from S & P CNX Nifty on the basis of a
mathematical model. An investment fund that approach stock selection process based on
quantitative analysis.
3. Reliance Natural Resources Fund (Open-Ended Equity):
The primary investment objective of the scheme is to seek to generate capital appreciation &
provide long-term growth opportunities by investing in companies principally engaged in the
discovery, development, production, or distribution of natural resources and the secondary
objective is to generate consistent returns by investing in debt and money market securities.
Natural resources may include, for example, energy sources, precious and other metals, forest
products, food and agriculture, and other basic commodities.

4. Reliance Equity Linked Saving Fund (A 10 Year Close-Ended Equity ):

The primary objective of the scheme is to generate long-term capital appreciation from a portfolio
that is invested predominantly in equities along with income tax benefit. The scheme may invest
in equity shares in foreign companies and instruments convertible into equity shares of domestic

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 or foreign companies and in derivatives as may be permissible under the guidelines issued by
SEBI and RBI.
5. Reliance Equity Advantage Fund (Open-Ended Diversified Equity):
The primary investment objective of the scheme is to seek to generate capital appreciation &
provide long-term growth opportunities by investing in a portfolio predominantly of equity &
equity related instruments with investments generally in S & P CNX Nifty stocks and the
secondary objective is to generate consistent returns by investing in debt and money market
securities.
6. Reliance Equity Fund (Open-Ended Diversified Equity) :
The primary investment objective of the scheme is to seek to generate capital appreciation &
provide long-term growth opportunities by investing in a portfolio constituted of equity & equity
related securities of top 100 companies by market capitalization & of companies which are
available in the derivatives segment from time to time and the secondary objective is to generate
consistent returns by investing in debt and money market securities.
7. Reliance Tax Saver (ELSS) Fund (Open-Ended Equity):
The primary objective of the scheme is to generate long-term capital appreciation from a portfolio
that is invested predominantly in equity and equity related instruments.Tax Benefits: • Investment
uptoRs 1 lakh by the eligible investor in this fund would enable you to avail the benefits under
Section 80C (2) of the Income-tax Act, 1961. • Dividends received will be absolutely TAX FREE.
• The dividend distribution tax (payable by the AMC) for equity schemes is also NIL
8. Reliance Growth Fund (Open-Ended Equity):
The primary investment objective of the Scheme is to achieve long term growth of capital by
investment in equity and equity related securities through a research based investment approach.
9. Reliance Vision Fund (Open-Ended Equity) :
The primary investment objective of the Scheme is to achieve long term growth of capital by
investment in equity and equity related securities through a research based investment approach.
10. Reliance Equity Opportunities Fund (Open-Ended Diversified Equity):
The primary investment objective of the scheme is to seek to generate capital appreciation &
provide long-term growth opportunities by investing in a portfolio constituted of equity securities
& equity related securities and the secondary objective is to generate consistent returns by
investing in debt and money market securities.
11. Reliance NRI Equity Fund (Open-Ended Diversified Equity):
The Primary investment objective of the scheme is to generate optimal returns by investing in
equity or equity related instruments primarily drawn from the Companies in the BSE 200 Index.
12. Reliance Long Term Equity Fund (Open-Ended Diversified Equity):
The primary investment objective of the scheme is to seek to generate long term capital
appreciation & provide long-term growth opportunities by investing in a portfolio constituted of
equity & equity related securities and Derivatives and the secondary objective is to generate
consistent returns by investing in debt and money market securities. It is a 36-month close ended
diversified equity fund with an automatic conversion into an open ended scheme on expiry of 36-
months from the date of allotment. It aims to maximize returns by investing 70-100% in Equities
focusing in small and mid cap companies.

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 13. Reliance Regular Savings Fund (Open-Ended Equity):
Reliance Regular Savings Fund provides you the choice of investing in Debt, Equity or Hybrid
options with a pertinent investment objective and pattern for each option. Invest as little as
Rs.100/-every month in the Reliance Regular Savings Fund. For the first time in India, your
mutual fund offers instant cash withdrawal facility on your investment at any VISA-enabled ATM
near you. With a choice of three investment options, the fund is truly, the smart new way to
invest.
B).DEBT/INCOME SCHEMES:
The aim of income funds is to provide regular and steady income to investors. Suchschemes
generally invest in fixed income securities such as bonds, corporate debentures,Government
securities and money market instruments. Such funds are less risky compared toequity schemes.
These funds are not affected because of fluctuations in equity markets.However, opportunities of
capital appreciation are also limited in such funds. The NAVs of suchfunds are affected because
of change in interest rates in the country. If the interest rates fall,NAVs of such funds are likely to
increase in the short run and vice versa. However, long terminvestors may not bother about these
fluctuations.

1. Reliance Monthly Income Plan :

(An Open Ended Fund, Monthly Income is not assured & is subject to the availability of
distributable surplus) The Primary investment objective of the Scheme is to generate regular
income in order to make regular dividend payments to unit holders and the secondary objective is
growth of capital.
2. Reliance Gilt Securities Fund –
Short Term Gilt Plan & Long Term Gilt Plan : (Open-ended Government Securities Scheme) The
primary objective of the Scheme is to generate optimal credit risk-free returns by investing in a
portfolio of securities issued and guaranteed by the central Government and State Government.

3. Reliance Income Fund : (An Open-ended Income Scheme)

The primary objective of the scheme is to generate optimal returns consistent with moderate levels
of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly,
investments shall predominantly be made in Debt & Money market Instruments.
4. Reliance Medium Term Fund :
(An Open End Income Scheme with no assured returns) The primary investment objective of the
Scheme is to generate regular income in order to make regular dividend payments to unit holders
and the secondary objective is growth of capital
5. Reliance Short Term Fund :
(An Open End Income Scheme) The primary investment objective of the scheme is to generate
stable returns for investors with a short investment horizon by investing in Fixed Income
Securities of short term maturity.
6. Reliance Liquid Fund :
(Open-ended Liquid Scheme) The primary investment objective of the Scheme is to generate
optimal returns consistent with moderate levels of risk and high liquidity. Accordingly,
investments shall predominantly be made in Debt and Money Market Instruments.
7. Reliance Floating Rate Fund :

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 (An Open End Liquid Scheme) The primary objective of the scheme is to generate regular income
through investment in a portfolio comprising substantially of Floating Rate Debt Securities
(including floating rate securitised debt and Money Market Instruments and Fixed Rate Debt
Instruments swapped for floating rate returns). The scheme shall also invest in fixed rate debt
Securities (including fixed rate securitised debt, Money Market Instruments and Floating Rate
Debt Instruments swapped for fixed returns.
8. Reliance NRI Income Fund :
(An Open-ended Income scheme) The primary investment objective of the Scheme is to generate
optimal returns consistent with moderate levels of risks. This income may be complimented by
capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in
debt Instruments.
9.Reliance Liquidity Fund :
(An Open - ended Liquid Scheme) The investment objective of the Scheme is to generate optimal
returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments.
10.Reliance Interval Fund :
(A Debt Oriented Interval Scheme) The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio.
11.Reliance Liquid Plus Fund:
(An Open-ended Income Scheme) The investment objective of the Scheme is to generate optimal
returns consistent with moderate levels of risk and liquidity by investing in debt securities and
money market securities.
12.Reliance Fixed Horizon Fund–I:
(A closed ended Scheme) The primary investment objective of the scheme is to seek to generate
regular returns and growth of capital by investing in a diversified portfolio.
13. Reliance Fixed Horizon Fund –II:
(A closed ended Scheme.) The primary investment objective of the scheme is to seek to generate
regular returns and growth of capital by investing in a diversified portfolio.
14. Reliance Fixed Horizon Fund –III:
(A Close-ended Income Scheme.) The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio.
15. Reliance Fixed Tenor Fund :
(A Close-ended Scheme) The primary investment objective of the Plan is to seek to generate
regular returns and growth of capital by investing in a diversified portfolio.
16. .Reliance Fixed Horizon Fund -Plan C :
(A closed ended Scheme.) The primary investment objective of the scheme is to seek to generate
regular returns and growth of capital by investing in a diversified portfolio.
17. Reliance Fixed Horizon Fund - IV:
(A Close-ended Income Scheme.) The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio.
18. Reliance Fixed Horizon Fund - V:
(A Close-ended Income Scheme.) The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio of: Central

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 and State Government securities and Other fixed income/ debt securities normally maturing in line
with the time profile of the scheme with the objective of limiting interest rate volatility
19. Reliance Fixed Horizon Fund – VI :
(A Close-ended Income Scheme) The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio of: - Central
and State Government securities and Other fixed income/ debt securities normally maturing in line
with the time profile of the series with the objective of limiting interest rate volatility
20. Reliance Fixed Horizon Fund – VII :
(A Close-ended Income Scheme.) The primary investment objective of the scheme is to seek to
generate regular returns and growth of capital by investing in a diversified portfolio of: - Central
and State Government securities and Other fixed income/ debt securities normally maturing in line
with the time profile of the series with the objective of limiting interest rate volatility.

C).SECTOR SPECIFIC SCHEMES:

These are the funds/schemes which invest in the securities of specified sectors orindustries e.g.
Pharmaceuticals, Software, FMCG, Petroleum stocks, etc. The returns in thesefunds are
dependent on the performance of the respective sectors/industries. While these fundsmay give
higher returns, they are more risky compared to diversified funds.
1. Reliance Banking Fund :
Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has the primary
investment objective to generate continuous returns by actively investing in equity / equity related
or fixed income securities of banks.
2. Reliance Diversified Power Sector Fund :
Reliance Diversified Power Sector Scheme is an Open-ended Power Sector Scheme. The primary
investment objective of the Scheme is to seek to generate consistent returns by actively investing
in equity / equity related or fixed income securities of Power and other associated companies.
3. Reliance Pharma Fund :
Reliance Pharma Fund is an Open-ended Pharma Sector Scheme. The primary investment
objective of the Scheme is to generate consistent returns by investing in equity / equity related or
fixed income securities of Pharma and other associated companies.4. Reliance Media &
Entertainment Fund : Reliance Media & Entertainment Fund is an Open-ended Media &
Entertainment sector scheme. The the primary investment objective of the Scheme is to generate
consistent returns by investing in equity / equity related or fixed income securities of media &
entertainment and other associated companies.

D).RELIANCE GOLD EXCHANGE TRADED FUND:

(An open-ended Gold Exchange Traded Fund) The investment objective is to seek to
providereturns that closely correspond to returns provided by price of gold through investment
inphysical Gold (and Gold related securities as permitted by Regulators from time to
time).However, the performance of the scheme may differ from that of the domestic prices of
Gold dueto expenses and or other related factors. 

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UNIT TRUST OF INDIA MUTUAL FUND
Unit Trust of India was created by the UTI Act passed by the Parliament in 1963. Formore than
two decades it remained the sole vehicle for investment in the capital market by theIndian citizens.
In mid- 1980s public sector banks were allowed to open mutual funds. The realvibrancy and
competition in the MF industry came with the setting up of the Regulator SEBI andits laying
down the MF Regulations in 1993.UTI maintained its pre-eminent place till 2001,when a massive
decline in the market indices and negative investor sentiments after KetanParekh scam created
doubts about the capacity of UTI to meet its obligations to the investors.This was further
compounded by two factors; namely, its flagship and largest scheme US 64 wassold and re-
purchased not at intrinsic NAV but at artificial price and its Assured Return Schemeshad
promised returns as high as 18% over a period going up to two decades.
In order to distance Government from running a mutual fund the ownership wastransferred to four
institutions; namely SBI, LIC, BOB and PNB, each owning 25%. UTI lost itsmarket dominance
rapidly and by end of 2005,when the new share-holders actually paid theconsideration money to
Government its market share had come down to close to 10%.
A new board was constituted and a new management inducted. Systematic study of itsproblems
role and functions was carried out with the help of a reputed international consultant.Once again
UTI has emerged as a serious player in the industry. Some of the funds have wonfamous awards,
including the Best Infra Fund globally from Lipper. UTI has been able tobenchmark its employee
compensation to the best in the market.
Besides running domestic MF Schemes UTI AMC is also a registered portfolio managerunder the
SEBI (Portfolio Managers) Regulations.
This company runs two successful funds with large international investors being
activeparticipants. UTI has also launched a Private Equity Infrastructure Fund along with HSH
NordBank of Germany and Shinsei Bank of Japan

Vision:To be the most Preferred Mutual Fund.

Mission:
• The most trusted brand, admired by all stakeholders.
• The largest and most efficient money manager with global presence• The best in class customer
service provider
• The most preferred employer
• The most innovative and best wealth creator

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 • A socially responsible organisation known for best corporate governanceAssets Under
Management: UTI Asset Management Co. LtdSponsor:
• State Bank of India
• Bank of Baroda
• Punjab National Bank
• Life Insurance Corporation of IndiaTrustee: UTI Trustee Co. Limited.Reliability UTIMF has
consistently reset and upgraded transparency standards. All the branches,UFCs and registrar
offices are connected on a robust IT network to ensure cost-effective quickand efficient service.
All these have evolved UTIMF to position as a dynamic, responsive,restructured, efficient and
transparent entity, fully compliant with SEBI regulations.
SCHEMES
A).EQUITY FUND
1. UTI Energy Fund (Open Ended Fund): Investment will be made in stocks of those companies
engaged in the following are:
a) Petro sector - oil and gas products & processing
b) All types of Power generation companies.
c) Companies related to storage of energy.
d) Companies manufacturing energy development equipment related ( like petro and power )
e) Consultancy & Finance Companies
2. UTI Transportation And Logistics Fund
(Auto Sector Fund) (Open Ended Fund):
Investment Objective is “capital appreciation” through investments in stocks of the companies
engaged in the transportation and logistics sector. At least 90% of the funds will be invested in
equity and equity related instruments. Atleast 80% of the funds will be invested in equity and
equity related instruments of the companies principally engaged in providing transportation
services, companies principally engaged in the design, manufacture, distribution, or sale of
transportation equipment and companies in the logistics sector. Upto 10% of the funds will be
invested in cash/money market instruments.
3. UTI Banking Sector Fund (Open Ended Fund):
An open-ended equity fund with the objective to provide capital appreciation through investments
in the stocks of the companies/institutions engaged in the banking and financial services activities.
4. UTI Infrastructure Fund (Open Ended Fund):
An open-ended equity fund with the objective to provide Capital appreciation through investing in
the stocks of the companies engaged in the sectors like Metals, Building materials, oil and gas,
power, chemicals, engineering etc. The fund will invest in the stocks of the companies which form
part of Infrastructure Industries
5. UTI Equity Tax Savings Plan (Open Ended Fund):
An open-ended equity fund investing a minimum of 80% in equity and equity related instruments.
It aims at enabling members to avail tax rebate under Section 80C of the IT Act and provide them
with the benefits of growth.
6. UTI Growth Sector Fund – Pharma (Open Ended Fund):
An open-ended fund which exclusively invests in the equities of the Pharma & Healthcare sector
companies. This fund is one of the growth sector funds aiming to invest in companies engaged in

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 business of manufacturing and marketing of bulk drug, formulations and healthcare products and
services.
7. UTI Growth Sector Fund – Services (Open Ended Fund):
An open-ended fund which invests in the equities of the Services Sector companies of the country.
One of the growth sector funds aiming to provide growth of capital over a period of time as well
as to make income distribution by investing the funds in stocks of companies engaged in service
sector such as banking, finance, insurance, education, training, telecom, travel, entertainment,
hotels, etc.
8. UTI Growth Sector Fund – Software (Open Ended Fund):
An open-ended fund which invests exclusively in the equities of the Software Sector companies.
One of the growth sectors funds aiming to invest in equity shares of companies belonging to
information technology sector to provide returns to investors through capital growth as well as
through regular income distribution
9. UTI Master Equity Plan Unit Scheme (Close Ended Fund):
The scheme primarily aims at securing for the investors capital appreciation by investing the
funds of the scheme in equity shares of companies with good growth prospects. 
10. UTI Master Plus Unit Scheme (Open ended Fund):
An open ended equity fund with an objective of long term capital appreciation through investment
in equity and equity related instruments, convertible debentures, derivatives in India and also in
overseas market.
11. UTI Master Value Fund (open ended fund):
An open ended equity fund investing in stocks, which are currently undervalued to their future
earning potential and carry medium risk profile to provide “Capital Appreciation”.
12. UTI Equity Fund (Open Ended Fund):
An open ended equity scheme with an objective of investing atleast 80% funds in equity and
equity related instrument with medium to high risk profile and upto 20% in debt and money
market instruments with low to medium risk profile.
13. UTI Top 100 Fund (Open ended Fund):
An open ended equity fund for investment in equity shares, convertible and non-convertible
debentures and other capital and money market instruments with a provision to invest upto 50%
corpus in PSU’s and equities and equity related products. The fund aims to provide unitholder’s
capital appreciation and income distribution.
14. UTI Mastershare Unit Scheme (Open ended fund):
An open ended equity fund aiming to provide benefit of capital appreciation and income
distribution through investment in equity.
15. UTI Mid Cap Fund (Open Ended Fund):
An open equity find with an objective to provide “Capital appreciation” by investing primarily in
mid cap stocks.
16. UTI MNC fund (Open ended fund):
An open ended equity fund with an objective to invest predominantly in equity shares of
multinational companies FMCG, Pharmaceuticals.
17. UTI Dividend Yield Fund (Open ended fund):
It aims to provide medium to long term capital gains by investing predominantly in equity and
equity related instruments which offer high dividend yield.

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18. UTI Opportunities fund (Open ended fund):
This scheme seeks to generate capital appreciation by investing the funds of the scheme in equity
and equity related instruments. The focus is to capitalise on the opportunities available in the
market by responding to dynamically changing Indian economy.
19. UTI Leadership Fund (Open ended fund):
This scheme seeks to generate capital appreciation by investing in stocks that are “Leaders” in
their respective industries, sectors etc.
20. UTI Contra Fund (Open ended Fund):
A scheme with an objective to provide long term capital appreciation by investing in listed
equities and equity related instruments. It offers an opportunity to benefit from the impact of non
rational investors behaviour by focusing on stocks that are currently undervalued.
21. UTI Spread Fund (Open ended fund):
The investment objective is to provide capital appreciation through arbitrage opportunities arising
out of differences between the cash and derivative market by investing predominantly in equity
and equity related securities.
22. UTI Wealth Builder Fund (Closed ended fund):
The objective is to achieve long term capital appreciation by investing in diversified portfolio of
equity and equity related instruments.
23. UTI Long term Advantage fund – Series 1 (Closed ended fund):
The objective of this scheme is to provide medium to long term capital appreciation along with
income tax benefit.
24. UTI India Lifestyle Fund (closed ended fund):
The objective is to provide long term capital appreciation by investing in equity and equity related
instruments that are expected to benefit from changing trends and Indian Lifestyle.

A. INDEX FUND
1) UTI Master Index Fund (Open ended fund):
It is an open ended passive fund with primary investment objective to invest in securities of
companies comprising the BSE Sensex. It strives to minimise performance difference by tracking
error to the minimum.
2) UTI Gold Exchange Traded Fund (Open Ended Fund):
To endeavour to provide returns that before expenses closely track the performance and yield of
gold. However the performance may differ from underlying asset.
3) UTI Sunder (Open ended fund):
To provide investment returns that before expenses closely correspond to performance and yield
of basket of securities.

B. ASSET FUND
UTI Variable Investment Scheme:
An open ended scheme with the objective of providing investors with a product that would enable
them to diversify their risk through suitable allocation between debt and equity classes.

C. BALANCED FUND
1). UTI Mahila Unit scheme (Open ended fund):

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 To invest in equity and equity related securities, debt, money market instruments with a view to
generate reasonable income through moderate capital appreciation.
2). UTI Balanced Fund (Open ended fund):
An open ended balanced fund investing 40-75% in equity and equity related securities and
balance in debt with a view to generate regular income.
3). UTI Retirement benefit Pension Fund (Open ended fund):
The objective is to provide pension to investors particularly self employed people after 58 years of
age.
4) UTI Unit Link Insurance plan (Open ended fund):
To provide return through growth in NAV through dividend distribution and reinvestment.

5) UTI CCP and Advantage Fund :

An open ended balanced fund with investment of 70-100% in equity. Investment can be for
children upto 15 years of age after they achieve 18 years as a means to achieve scholarship for
higher education.
6) UTI Charitable Religious Trust and Registered Society (Open ended fund):
Open ended income scheme with an objective of investing not more than 30% in equity related
instruments and balance in debt and money market instruments with low to medium risk profile.

D. INCOME FUND (DEBT FUND):

1). UTI Bond Fund (Open ended fund):
Open ended pure 100%debt fund which invested in rated corporate debt papers and government
securities with low to medium risk profile.
2). UTI Floating rate fund:
To generate regular income through investment in portfolio substantially comprising of floating
rate debt or money market instruments.
3). UTI Gilt Advantage fund:
To generate credit risk free return through investment in sovereign securities issued the central or
state government.
4). UTI G-Sec STP:
The objective is to invest only in central government securities including call money and treasury
bills with a view to generate credit risk free return.
5). UTI G-Sec Investment Plan:
While selecting maturity profile of investment in government securities the need for maximisation
of returns and meeting of liquidity requirements is kept in view.
6). UTI Treasury Advantage Fund (Open ended fund):
It aims to generate attractive returns consistent with capital preservation and liquidity.
7). UTI Monthly Income Scheme:
An open ended debt oriented scheme with no assured returns.
8). UTI Mis Advantage Plan:
Endaevours to make periodic income distribution to income holders through investment in fixed
income securities.
9). UTI Short term income fund:

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This scheme seeks to generate steady and reasonable income with low risk and high level of of
liquidity from a portfolio.
10). UTI Capital Protection Oriented Scheme (Open ended fund):
The investment objective is to protect capital by investing in high quality fixed income securities
as primary objective and generate capital appreciation by investing in equity related instruments.

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 CHAPTER 5
MUTUAL FUNDS AND OTHER INVESTMENTS

From investors viewpoint mutual funds have several advantages such as:
 Professional management and research to select quality securities.
 Spreading risk over a large quantity of stock whereas the investor has limited to buy only a
handful of stocks.
 Ability to add funds at set amounts and smaller quantities such as $100 per month.
 Ability to take advantage of stock market which has generally outperformed other
investment.
 Fund manager are able to buy securities in large quantities thus reducing brokerage fees.

However there are some disadvantages with mutual funds such as:
 The investor must rely on the integrity of the professional fund manager.
 Fund management fees may be unreasonable for the services rendered.
 The fund manager may not pass transaction savings to the investor.
 The fund manager is not liable for poor judgment when the investor’s fund loses value.
 There may be too many transactions in the fund resulting in higher fee.
 Prospectus and annual report are hard to understand.

Fixed Deposits versus Mutual Funds

CRITERIA MUTUAL FUND FIXED DEPOSITFIXED

Mutual Fund returns are linked to the market Fixed deposits offer fixed and
they invest in and are completely dependent guaranteed returns at a predefined rate
Returns
on the performance of the stock market. of return over a specific time period.

The risk involved in a mutual fund varies from FDs carry zero risk as the depositor
Risk fund to fund, it is mostly influenced by the will receive guaranteed returns at a
market. fixed interest rate.

Mutual Funds carry certain charges and FDs do not come with any expenses
Expenses expenses which are deducted as a part of over the course of initiation or tenure
managing the fund. of deposit.

You can withdraw from a mutual fund free of

Depositors who wish to make a
charge after a given point of time. For
Withdrawa withdrawal will have to break their
withdrawing before the stipulated time
l FD and pay the penalty for the same
charges levied will be that of 1% in the form
during premature withdrawal.
of exit load.

Taxation All mutual funds are subject to short term and FDs are subject to 10% TDS on
long term capital gains tax. STCG is charged interest earned above ₹10,000 over a
at a flat rate of 15% whereas LTCG is charged financial year.

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 CRITERIA MUTUAL FUND FIXED DEPOSITFIXED

at 10% of the earnings above ₹1 lakh. In case

of debt funds, LTCG is 20% post indexation.

Mutual Funds Bonds

Investors do not own a stake but Similar to mutual funds, investors are not offered ownership
Ownership
units of a scheme. in a firm.

Fetch high returns and comes Investors will be provided with fixed returns. There are no
Returns
with minimal risks. risks involved.

Investors may sometimes suffer

Losses Investors receive fixed returns without any losses.
losses but it will be minimal.

Duration can be short-term or

Duration Duration is mostly long-term (more than 5 years).
long-term.

Interest rates are not fixed. If

Interest markets perform well, the The principal amount and interest are fixed.
dividends will be high.

Bonds versus Mutual Funds

Difference between Investment in Mutual Funds and Direct Investment in Stocks

The following are the key differences between investment in mutual funds and shares:

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 Shares are a part of a business’s growth strategy, while mutual funds are investment
options for individuals.
 Trading in shares requires you to have a demat account. Mutual funds do not need a
demat account, though if you have one, you can use it to handle mutual funds.
 Mutual funds being a portfolio of stocks of companies pre-determined and altered by
a fund manager, you as an investor have no control over the actual choice or trade of stocks. You
also cannot choose to exit from 1 or 2 of the stocks from the portfolio.
 Mutual funds are managed by a fund manager in an AMC. This external management
of portfolio ensures that there is direct involvement on the part of the investor except at the time
of choosing the fund. For this reason, mutual funds are ideal for a new investor who does not
know much about the stock market. Direct investment in shares, on the other hand, requires strong
knowledge of the stock market and company performances. It is a hands-on activity involving
quick market decisions and is better for experienced stock traders.
 The passive nature of mutual funds makes it easier for anyone and everyone with
money to take part in it. For direct investment, you need more time and dedication.
 You can invest in mutual funds through a fixed monthly Systematic Investment Plan
(SIP), as it is managed by a professional. You cannot make such a fixed investment in shares
directly as the prices fluctuate constantly and need personal attention and prompt trade decision.
 Because mutual funds hold a diversified portfolio, negative returns are cushioned by
the other stocks that do well. For example, if your portfolio contains 35 stocks, of which 3 are
dropping, even the slightest growth in the other 32 will prevent your overall fund value from
coming down. Direct investment in stocks does not offer you this protection and makes your
stocks volatile. Unless you are dealing in a significant number of stocks at the same time, your
money will be at high risk.
 Mutual funds have a longer-term growth trajectory and will give good returns only
after 5-7 years, while shares could give you quick returns if you buy and sell at the right time and
choose high-growth stocks.
 In mutual funds, you need to pay fund management charges, a front-end load upon
initial purchase, back-end load upon sale, early redemption charges, etc. In direct investment in
shares you need to pay brokerage to the stock broker.

Advantagesof mutual funds over stocks.

 No need to pick and track stocks
When you invest in a mutual fund, you get the benefit of a fund manager’s expertise.
38 | P a g e
 Picking stocks, tracking them, making sector and asset allocation, booking profits when
required— everything is done by a professional fund manager.

 No tax on short-term gains

When you manage your own portfolio, there will be some buying and selling. If stocks are
sold within one year, you have to pay 15% short-term capital gains tax. For a mutual fund,
there is no capital gains tax on stocks sold by the fund.

 Lower cost of investing

Fund houses negotiate with intermediaries, and therefore have lower costs. If you buy and
sell shares, you will probably pay 0.5-1% as brokerage. You also have to pay demat
charges. However, due to their scale, mutual funds pay only a fraction of the brokerage
charged to individual investors.

Future Prospects of Mutual Funds In India

The Future of Mutual Funds In India is quite bright. Mutual Funds are one of the most popular
forms of investments as these funds are diversification, professional management, and liquidity. In
the year 2004, the mutual fund industry in India was worth Rs 1,50,537 crores. The mutual fund
industry is expected to grow at a rate of 13.4% over the next 10 years.

Important aspects related to the future of mutual funds in India are -

 The growth rate was 100 % in 6 previous years.
 The saving rate in India is 23 %.
 There is a huge scope in the future for the expansion of the mutual funds industry.
 A number of foreign based assets management companies are venturing into Indian
markets.
 The Securities Exchange Board of India has allowed the introduction of commodity
mutual funds.
 The emphasis is being given on the effective corporate governance of Mutual Funds.
 The Mutual funds in India has the scope of penetrating into the rural and semi urban
areas.
 Financial planners are introduced into the market, which would provide the people
with better financial planning.
 Emphasis on better corporate governance.
 Trying to curb late trading practices.
 Introduction of financial planners who can provide need based services.

Looking at past developments and combining it with current trends it can be concluded that future
if mutual funds in India has lot of positive things to offer to its investors.

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 CONCLUSION
Mutual Funds nowrepresent perhaps most appropriate investment opportunity for most investors.
As financial markets become more sophisticated and complex investors need a financial
intermediary who provides required knowledge and professional expertise on successful investing.
Mutual funds satisfy these requirements by providing attractive returns with affordable risks.
The fund industry has already overtaken banking industry more funds being under mutual und
management than deposited with banks. Risk takers for getting capital appreciation should invest
in growth equity schemes, investors who are in need of regular income should invest in income
plans.
The stock market has been rising for over three years now. This in turn has not only protected the
money invested in funds but also to help grow these investments.
Reliance India Mutual funds provide major benefits o common man who want to make life better.
India’s largest mutual fund UTI still controls 80% of market. Also the mutual fund industry gets
less than 2% of savings against 46% that goes in bank deposits.
“if mutual funds succeed in chipping away at bank deposits even a triple digit growth is possible
over the next few years”.

BIBLIOGRAPHY

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REFERENCE BOOK:
FINANCIAL MARKETS AND MUTUAL FUNDS IN INDIA
WEBSITES:
www.utimf.com
www.reliancemutual.com

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