A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor of Commerce (Banking and Insurance)
Under the Faculty of Commerce

By
Aishwarya Murugan
Under guidance of
Name of the Guiding Teacher
Vivek college of commerce
Sidharth Nagar, Goregaon(west),
Mumbai-400104.
 Certificate

This is to certify that Ms/Mr Aishwarya Murugan has worked and duly completed her/his
Project Work for the degree of Bachelor in Commerce (Banking and Insurance) under the
Faculty Commerce in the subject of
and his/her project is entitled, “A study on Comparative analysis of Mutual fund schemes”
under my supervision.

I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any degree or Diploma of any
University.
It is her/his own work and facts reported by hir/his personal findings and investigations.
INDEX Title of chapter Page no.

Chapter No. 1 introduction of mutual fund

1.1 History of mutual fund
1.2 Why select mutual fund
1.3 Advantages of mutual fund
1.4 disadvantages of mutual fund
Chapter No. 2
Chapter No.3
chapter No.4
chapter No.5
 Chapter No.1

Introduction of mutual funds

1.1 INTRODUCTION

Mutual fund is the pool of the money, Based on the trust who invests the savings of a

number of investors who shares a common financial goal, like the capital appreciation

and dividend earning. The money thus collect is then in invested in capital market

instruments such as shares, debentures, and foreign market. Investors invest money

and get the units as per the unit value which we called as NAV (net value asset).

Mutual fund is the most suitable investments for the common man as if offers an

opportunity to invest in diversified portfolio management, good research team,

professionally managed Indian stock as well as the foreign market, the main aim of

the mutual fund manager is to taking the scrip that have under value and future will

rising, the fund manager sell out the stock. Fund manager concentration on risk – return

trade off, where minimize the risk and maximize the return through diversification of the

portfolio. The most common features of the mutual fund unit are low cost.

Most open-end mutual funds continuously offer new shares to investors. It also known

as open ended investment company. It is different from close ended companies.

Investment in securities are spread across a wide cross section of industries and sectors

thus the risk is reduced. Diversification reduces the risk because not all stocks may move
 in the same direction in same proportion at same time. Mutual funds issues units to the

investors in accordance with quantum of money invested by them.

1.2 HISTORY OF MUTUAL FUNDS

Unit Trust of India was the first mutual fund set up in India In the year 1963.

In early 1990s, Government allowed public sector banks and institutions to set up

mutual funds. In the year 1992, Securities and Exchange Boards of India (SEBI) Act

was passed. The objectives of SEBI are – to protect the interest of investors in

securities and to promote the development and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulate 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.

There are four Phases in which mutual funds have evolved.

 FIRST PHASE – 1964 – 1987

Unit Trust of India (UTI) was established on1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control other
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit scheme 1964.
 SECOND PHASE – 1987-1993 (Entry of Public sector funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks
and Life insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual fund was the first non-UTI Mutual fund established in June 1987 followed
 by Can bank mutual fund (Dec 87), Punjab National Bank Mutual fund (Aug 89), Indian Bank
Mutual fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 1992). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
 THIRD PHASE – 1993-2003 (Entry of private sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year
in which the first Mutual fund Regulation came into being, under which all mutual funds,
except UTI were to be registered and governed. The erstwhile Kothari Pioneer was the first
private sector mutual fund registered In July 1993. The 1993 SEBI (Mutual Fund) Regulations
were substituted by a more comprehensive and revised Mutual Fund regulations 1996. The
number of mutual fund houses went on increasing, with many foreign mutual funds setting
up in India and also the industry has witnessed several mergers and acquisitions.
 FOURTH PHASE- since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the specified Undertaking of the Unit Trust of India with
assets under management of Rs.29,835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under the rules
framed by Government of India and does not come under the preview of the mutual Fund
Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. with the bifurcation
of the erstwhile UTI which had in March 2000 more than RS.76,000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations and with recent mergers taking place among different private sector funds,
the mutual fund industry has entered its current phase of consolidation and grow.

1.3 WHY SELECT MUTUAL FUND?

 Built-in diversification
When you buy a mutual fund, your money is combined with the money from other
 Investors and allows you to buy part of a pool of investments. A mutual fund holds a
variety of investments which can make it easier for investors to diversify than through
ownership of individual stocks or bonds. Not all investments perform well at the same
time. Holding a variety of investments may help offset the impact of poor performers,
while taking advantage of the earning potential of the rest. This is known as diversification.
 Professional management
You may not have skills and knowledge to manage your own investments or want
to spend the time. Mutual fund allows you to pool your money with other investors
and leave the specific investment decisions to a portfolio manager. Portfolio managers
decide where to invest money in the fund and when to buy and sell investments.

 Easy to buy and sell

Mutual funds are widely available through banks, financial planning firms, investment firms,
credit union and trust companies. You can sell your fund units or shares at almost any time
if you need to get access to your money. But you may get backs less than you invested.
 A wide range of funds to choose from
Mutual fund can be used to meet a variety of financial goals. For example:
 A young investor with a stable income and many years to invest may feel

comfortable taking more risk to achieve greater potential return. They may

invest in equity fund

 A mid-career investor trying to balance risk and return more moderately could

invest in a balance mutual fund that buy a mix of stocks and bonds.

 An investor approaching retirement might be less comfortable with risk and

more interested in fixed income investments.

1.4 ADVANTAGES OF MUTUAL FUND

 Tax-efficiency
You can invest up to Rs. 1.5 lakh in tax-saving mutual funds mentioned under 80C
tax deductions. ELSS is an example for that. Through a 10% Long Term Capital Gains (LTCG)
 is applicable for returns in excess of RS. 1 Lakh after one year, they have consistently
delivered higher returns than other tax-saving investments like FD in the recent years.
 Automated payments
It is common to forget or delay SIPs or prompt lump sum investments due to an given
reason. You can opt for paperless automation with your fund house or agent. Timely
email and SMS notifications help to counter this kind of negligence.
 Liquidity

Another nice advantage to mutual fund is that the assets are liquid. In financial language,
liquidity basically refers to converting your assets to cash with relative ease. Mutual funds
are considered liquid assets since there is high demand for many of the funds in the
marketplace.

 Professional Management
Mutual funds do not require a great deal of time or knowledge from the Investor because
they are managed by professional managers. They can be a big help to inexperienced investor
who is looking to maximize their financial goals.
 Ease of companies
Mutual funds are also convenient because they are easy to compare. This is because many
mutual fund dealer allow the investor to compare the funds on metrics such as level of risk,
return price. Because information is easily available, the investor is able to make wise
decisions.
 Less risk
Investors acquire a diversified portfolio of securities even with a small investment in a
mutual fund. The risk in diversified portfolio is lesser than investing in 2 or 3 securities.
 Low transaction cost
Due to Economics of scale mutual funds pay lesser transaction cost. The benefit are passed on
to investors.
 Transparency
Funds provide investors with updated information pertaining to market & schemes. All
material facts are disclosed to the investor as required by regulator.
 Safety
Mutual funds industry is a part of well-regulated investment environment where interest
of the investors is protected by the regulators. All funds are registered with SEBI & complete
transparency is followed.
 Systematic or one-time investment
You can plan your mutual fund investment as per your budget and convenience. For instance,
starting an SIP (Systematic Investment Plan) on a monthly or quarterly basis suits investors
with less money. On the other hand, if you have surplus amount, go for a one-time lump sum
investment.

1.5 DISADVANTAGES OF MUTUAL FUNDS

 Cost
The downside of mutual fund is that they have a high cost associated with them in relation to
the returns they produce. This is because investors are not only charged for the price of the
fund but they will often face additional fees. Depending on the fund, commission charges can
be significant. You will need to pay fee that will go towards the fund manager.
 No control over Investment
You have absolutely no control over what the fund manager Des with you money. You can’t
advise him on how your money is to be invested. You only sit back and hope for the best.
 Lock-in period
Many mutual funds have lock-in periods, ranging from 5 to 8 years. Existing such funds before
maturity can be expensive affair. A certain portion of the fund is always kept in cash to pay
out an investor who wants to exist the fund. This portion in cash cannot earn interest for
investors.
 Poor Trade Execution
If you place your mutual fund trade anytime before the cut-off time for same- day NAV,
you’ll receive the same closing price NAV for your buy or sell on the mutual fund.
For investors looking for faster execution times, maybe because of short investment horizons,
day trading or timing the market, mutual provide a weak execution strategy.
 Management Abuses
 Churning, turnover, window dressing may happen if your manager is abusing his or her
authority. This includes Unnecessary trading, excessive replacement and selling the losers
prior to quarter-end to fix the books.
 High Expense Ratios and Sales Charges
If you’re not paying attention to mutual fund expense ratios and sales charges, they can get
out of hand. Be very cautions when investing in funds with expense ratios higher than
1.20%, as they are considered to be on the higher cost end. There are several good fund
companies out there that have no sales charges. Fees reduce overall investment returns.
 Personal tax situation is not considered
When you invest in a mutual fund, your money is pooled together with others and your
personal tax situation is not considered while making Investment decisions. The most you
can do is to choose between growth fund.

1.6 OBJECTIVES OF STUDY OF MUTUAL FUND

The objective of study of the study is to analyses, in detail the growth of the mutual fund
industry in India and to evaluate performance of different schemes floated by most
preferred Mutual Fund in public fund and private fund

The main objective of this project:

 To study about mutual fund in India

 To study about returns of the mutual funds
 To give brief idea about mutual funds available in India
 To give idea about the schemes available
 To study market trends in mutual funds
 To study some mutual fund companies and their funds
 To give idea about the regulation of mutual fund

Many individuals own mutual funds today. Indeed mutual fund industry is very big.
It comprises of many investors financial assets, whether for retirement or taxable saving
purposes. To a large extent, mutual funds are investment vehicle for the majority of
households in India

CHAPTER 2

CRITERIA FOR SELECTING THE BEST MUTUAL FUNDS

 Each individuals investor is unique in his investment decisions. They may be driven by
various decisions and motives to choose a mutual fund to invest into. When choosing to
invest in mutual fund plans, the investors must carefully look into select criteria for
choosing the best plan which suits them the best. It becomes very important to align ones
financial position, decision, financial objectives and risk appetite with the mutual fund
plan that they choose to invest in.

2.1 OBJECTIVES OF MUTUAL FUND INVESTMENT

 Investment Objectives
It is important to assess the objective of investing in mutual funds. Any investment made is
done for a fixed period of time. Investments may range from short to mid to long-term and
hence require a thoughtful approach while choosing one. The investment objective may help
assess the risk factor that one may be willing to take over the period of investment made. An
investment objective helps in deciding the macro-level selection of the mutual fund types.
Choosing to invest in long-term investment decision.
 The outlook for the economy
It is highly unlikely that the assessment of the economic outlook, present or in foreseeable
future, may help in making an exact prediction of a mutual funds performance in the present
situation or in the coming future. Nevertheless, a judgemental approach is a must to have an
informed mind about the overall outlook for the economy. There are various factors that
affect the economy ranging from government decisions to industrial and market
performances. It is a matter of anticipation and hence the most advisable option is to
diversify the investments keeping in mind the short-term and long-term objectives.

 Consistency in performance
Consistency in the performance of the mutual fund plans gives investors a heads-up on how
good a mutual fund plans is over a past period of time. The previous 1 year, 3 year or 5 year
performance of the mutual fund may suggest how consistent or fluctuating has the mutual
fund been in the market conditions.
 Expense Ratio
 The expense ratio is an important consideration while choosing a scheme as they are known
to take away a substantial chunk of the returns. As per industry standards, an expense ratio
of 105% is a viable deal. Good performing schemes with high expense ratio may not affect
adversely either. However, in an event of the bad performance, the same expense ratio may
adversely impact the returns.
 Exit Load
The mutual fund schemes are time bound. In an event of early withdrawal from the scheme
before the maturity period, the investor is required to pay an exit load. Financial needs of
individual are unpredictable and in case of emergency, one may be required to withdraw
from mutual fund schemes prematurely to gain liquidity of assets. It is advisable to avoid
schemes with stringent exit load and choose schemes with minimal exit load to minimize its
impact on the returns earned. The well-informed choice of plans of schemes, when aligned
with investment objectives, may help gain returns over the period of time.

2.2 FACTORS OF MUTUAL FUND

 Market Risk
Market risk is basically a risk which may result in losses for any investor due to a poor
performance of the market. There are a lot of factors which affect the market. A few examples
are inflation, recession, fluctuations of interest rates. Market risk is also known as systematic
risk. Diversifying a person’s portfolio won’t help in these scenarios. The only thing which the
investor can do is wait for the storm to calm.
 Liquidity Risk
Liquidity risk refers to the difficulty to redeem an investment without incurring a loss in the
value Of the instrument. It can also occur when a seller is unable to find a buyer for the
security. In mutual funds, like ELSS, the lock-period may result in liquidity risk. Nothing can
be done during the lock-in period. In yet another case, Exchange traded funds (ETFs) might
suffer from liquidity risk. As you may know, ETFs can be bought and sold on the stock
exchange like shares. Sometimes due to lack of buyers in the market, you might be unable to
redeem your investments when you need them the most. The best way to avoid this is to have
a very a very diverse portfolio and making fund selection diligently.

 Credit Risk
 Credit risk basically means that the issue of the scheme is unable to pay what was promised
as interest. Usually, agencies which handle investments are rated by rating agencies on this
criteria. So, a person will always see that a firm with a high rating will pay less and vice-versa.
Mutual funds, particularly debt funds, also suffer from credit risk. In debt funds, the fund
manager has to incorporate only investment-grade securities. But sometimes it might happen
that to earn higher returns, the fund manager may include lower credit-rated securities.
 The Risk-Return Trade-off
The most important relationship to understand is the risk-return trade-off. Higher the risk
greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to you, the
investor to decide how much risk you are willing to take. In order to do this you must first be
aware of the different types of risks involved with your investment decisions.

FEATURES OF MUTUAL FUNDS

Variety

There are four types of mutual funds: equity (also called stock), bond, hybrid and money market. Equity
funds concentrate their investments in stocks. Similarly, bond funds primarily invest in bonds. Hybrid funds
typically invest in a combination of stocks, bonds and other securities. Equity, bond and hybrid funds are
called long term funds. Money market funds are referred to as short term funds because they invest in
securities that generally mature in about one year or less. Of the total $6.975 trillion invested in mutual
funds at the end f 2001,
 CHAPTER 3

WORKNIG OF MUTUAL FUNDS

3.1 HOW DO MUTUAL FUNDS WORK?

A mutual fund is a collective fund where individuals of the same mind pool in money to invest
chosen

asset class. This gives you the ability to invest in an asset class which you could probably not
afford

alone or not to be able to due to lack of knowledge, experience and information. This collected
money

is then managed by an expert who decides when and where the entire amount or part of money
is to

be invested to make profits. So, the expert, called the fund manager, is similar to a well-informed

individual who makes his own investments in equity or debt markets to make money. The only

difference here is that the fund manager is vital, as he is the one deciding on where the money is
to be

invested to make it grow for investors. However, this expert management of money comes with
a
small annual fee. The total profit made is then returned to the investors, depending on their
share in

the entire pool of money.

3.2 TYPES OF MUTUAL FUND SCHEMES

Based on their structure, mutuals funds are classified as:

 Close-ended schemes:

Close-ended funds come with a fixed maturity period. Fund houses issue the units of these
schemes only at the time of their New Fund Offer or NFO. After the NFO period, these
schemes are listed on stock exchanges. Investors can trade their units on the stock
exchanges if they want to leave these schemes before the maturity period ends.

On maturity, the schemes are dissolved and the money is returned to the investors at the
Net Asset Value, or NAV, of the day. Less volatility in NAV is the most significant benefit of
this mutual fund type. As cash in and outflows are restricted, their NAV shows lesser
fluctuations.

Close-ended funds are ideal for those with a long-term investment perspective. It's also apt
for those seeking an avenue to park a hefty sum for an extended period.

 Open-ended schemes:
As the name suggests, the units of these schemes are open for buying and selling even after
the NFO. That is, investors can buy/sell the units of an open-ended fund according to their
convenience. Moreover, there is no restriction on the number of units that can be issued. A
higher level of liquidity is the most striking feature of open-ended funds. Investors can sell
the units on the NAV of the day. Additionally, investors can take advantage of systematic plans
for entering and exiting these plans. Open-ended funds are a good choice for those who want
a highly liquid investment option and are willing to take on moderate to high risk.
 Interval schemes:
Interval schemes are the hybrid version of both open-ended and close-ended funds. The units
of these schemes are available for buying and selling only during specified transaction
periods called intervals. Similar to close-ended schemes, listing the units of interval schemes
 on stock exchanges is mandatory. Interval funds are apt for investors who seek exposure to
unconventional assets like forestry tracts or commercial property.

Types of Mutual Fund Schemes based on Asset Classes

The different types of mutual funds based on their asset classes are as follows:

 Equity funds:
Equity funds mainly invest their assets in the shares of companies. As per the guidelines, an
equity mutual fund scheme should invest at least 65% of its assets in equities or equity-
related investments. The remaining funds are invested in other, more secure asset classes to
offset the risk. The returns from these funds depend on the performance of the shares they
invest.
 Multi-Cap Fund
Cap Fund is an open-ended equity scheme that invests in shares of large-cap, mid-cap, and
small-cap companies. A multi-cap fund allocates a minimum of 65% of the total assets for
equity & equity related instruments. Multi-cap funds are the most diversified equity funds.
Hence, you have a lower risk as compared to individual large, mid or small-cap focused funds.
You get the benefit of stability from large-cap and returns from mid and small-cap stocks.
Multi-cap funds are suitable for creating long-term wealth. These are of great value to create
a multipurpose corpus.

 Large Cap Fund

Large-cap mutual funds are an open-ended equity scheme with a majority investment in the
stocks of large-cap companies. Large-cap mutual funds allocate a minimum of 80% of the
pool for investment in equity & equity related instruments of large-cap companies. These
mutual funds invest in stable companies with a long track record of robust financial
performance with established operations. They can have the lowest volatility among equity
mutual funds because large-cap companies’ stock prices fluctuate less and these companies
have years of business experience. You have the scope for a steady wealth creation
opportunity by investing in large-cap funds.
 Mid Cap Fund
 The mid-cap mutual fund schemes are an open-ended equity mutual fund that predominantly
invests in shares of mid-cap companies. Mid-cap mutual funds have a minimum investment of
65% of the total assets in equities & equity related instruments of the mid-cap companies.
The mid-cap companies are in a growing phase and have expansion plans. Hence, the mid-cap
mutual funds are more aggressive than large-cap mutual funds. The mid-cap mutual funds
offer higher returns but also carry a higher amount of risk due to investment in midcap
companies.
 Small Cap Fund
A small-cap fund is an open-ended equity scheme that invests a major portion in small-cap
stocks. The fund invests a minimum of 65% of the total assets of the small-cap mutual fund in
equity & equity-related instruments of small-cap companies. Small-cap companies are future
companies with very high growth potential. They have the highest risk but also have the
potential to generate the highest returns.
 Value Fund
Value funds are an open-ended equity scheme that follows a value investment strategy. The
portfolio of value funds is constructed on the principles of value investment strategy. The
minimum investment in equity & equity-related instruments is 65% of the total assets. You
benefit from value funds by the long-term wealth creation opportunities.
 Contra Fund
Contra funds are an open-ended equity scheme that follows a contrarian investment strategy.
The strategy involves buying and selling in contra (opposite) to the present market
sentiments. Contra fund schemes follow a contrarian investment strategy. The fund has a
minimum of 65% of total assets invested in equity & equity related instruments. The contra
fund helps investors benefit from the contrarian theory by capitalizing on the changing
market conditions.
 Sectoral/ Thematic Fund
A Sectoral fund is an open-ended equity scheme investing in a particular sector like the
pharma, auto or IT sector. Thematic funds are open-ended equity schemes following a
particular theme across different sectors. For example export & services fund, business cycle
fund, infrastructure fund. Sectoral funds invest a minimum of 80% of total assets in equities
& equity-related instruments of a particular sector. A thematic fund invests a minimum of
 80% of total assets in equities & equity-related instruments of a particular theme. The sector
and thematic funds have high risks of cycles changing or themes dying. Hence, they are high-
risk and high return investments.
 Equity Linked Savings Scheme (ELSS)
ELSS is an open-ended equity-linked savings scheme with a statutory lock-in of 3 years.
These funds invest a minimum of 80% of total assets in equity & equity related instruments
in accordance with Equity Linked Saving Scheme, 2005 notified by the Ministry of Finance.
ELSS investments allow tax deductions of up to Rs. 1.5 Lakhs under the Income Tax Act, 1961.
Compared to other tax saving options ELSS have the lowest lock-in period of three years.
ELSS funds have a lock-in period that helps in the reinvestment of returns and ultimately end
up generating higher returns. Thus, ELSS serves the dual purpose of tax saving/ planning and
generating higher returns from equity investment. Apart from that, you benefit from
diversification, professional fund management and low-cost investment through SIP when
you invest in an ELSS fund.
 Debt funds:
Debt funds invest their assets in fixed-income instruments, such as corporate/government
bonds, T-bills, or certificates of deposits. Compared to equity funds, debt funds are less risky
and have lower expense ratios. Moreover, they give better returns than traditional investment
options like fixed deposits. Hence, they can be a better choice for those seeking regular
income.
 Overnight Fund
An overnight mutual fund is an open-ended debt scheme that invests in overnight securities.
The overnight securities have a residual maturity of a single day. Examples of overnight
securities are T-Bills, call money and certificate of deposits having a single day maturity. The
overnight fund invests in overnight securities having a maturity of 1 day. They are highly
liquid and offer a highly safe investment avenue. Overnight funds help investors park their
funds for a few days. They have returns higher than the savings rate offered by many banks.
 Liquid Fund
Liquid funds are open-ended debt mutual funds that invest in highly liquid securities. The
securities are usually money market instruments like T-Bills, call money, collateral
borrowings (CBLO), certificate of deposit (CD’s), and commercial papers (CP’s). A liquid
 mutual fund invests in debt and money market securities with maturity of up to 91 days only.
They are highly liquid and offer a highly safe investment avenue. A liquid mutual fund helps
you park excess money for a few weeks up to 3 months. Liquid funds are ideal for creating an
emergency fund for various life events like temporary financial crises from job loss and
medical emergencies. You can also use liquid funds to manage your monthly expenses and for
making provisions. The best part is that your money is accessible in a day or two of the
redemption requests. Thus, the liquid fund helps you earn a higher return than the savings
account rate.
 Money Market Fund
Money Market Fund is an open mutual fund scheme that invests majorly into money market
instruments like T-bills, CPs, and CDs. These funds invest in money market instruments
having maturity up to 1 year. They are highly liquid and offer a highly safe investment avenue.
Money market funds are best for a risk-averse investor that combines a better yield and safe
investments.
 Short Duration Fund
Short duration fund is an open-ended short term debt scheme investing in instruments with
Macaulay duration between 1 year and 3 years. They offer a stable investment avenue with
good returns. Short duration funds are best in a rising interest rate scenarios. You benefit
from additional interest income and a reinvestment opportunity. The low duration fund is
best for conservative investors who want to grow their money without fluctuations. The short
duration fund is suitable for life goals of expensive foreign vacations and meeting wedding
expenses.
 Medium Duration Fund
Medium duration fund is an open-ended scheme that invests in debt securities that have a
Macaulay duration between 3 years and 4 years. These funds offer a relatively stable
investment avenue with good returns. The fund provides capital protection and higher yields.
The fund consists of debt & money market instruments like Government securities, T-bills,
CDs and CPs. Medium duration funds are helpful in creating a corpus of funds for
conservative investors who want to build capital without taking a risk like aggressive equity
investors
 Long Duration Fund
 Long duration mutual fund is an open-ended scheme that invests primarily in debt
instruments with Macaulay duration greater than 7 years. These long duration funds are best
in a falling interest rate scenarios. Because the interest rate is inversely proportional to bond
prices. Generally, the long duration funds have the highest yield among all the duration funds.
They also carry the highest interest rate risk among the duration funds. The fund invests in
corporate bonds, Govt. securities, T-bills, CDs and CPs such that the Macaulay duration of the
portfolio is greater than 7 years
 Dynamic Bond Fund
A dynamic bond fund is an open-ended dynamic debt scheme that invests in debt
instruments across the duration. The fund offers flexibility to manage duration in different
market scenarios. In a sense, they increase maturity in falling interest rate scenarios so that
you can enjoy higher interest income. Likewise, they decrease the maturity in a rising interest
rate scenario. Hence, you do not need to manage the fund actively.
 Corporate Bond Fund
Corporate bond funds are an open-ended scheme that invests predominantly in the highest-
rated corporate bonds. The fund investments are in AAA-rated bonds from established large
companies. The fund invests a minimum 80% of the total assets in the highest-rated (AAA)
corporate bonds. The instruments include bonds, debentures, commercial papers, and
structured obligations.

Types of Mutual Fund Schemes based on Portfolio Management

 Active portfolio management

In active funds, the fund managers actively manage the portfolio by deciding which securities
to buy and sell. These funds are designed to outperform a specific benchmark index or
achieve higher returns through active management strategies.
 Passive portfolio management
Passive funds are designed to replicate the performance of a particular market index. They
aim to match the returns of the index they track instead of outperforming it. They are called
'passive' funds because they do not involve active stock selection or market timing strategies.
 Discretionary portfolio management
 Discretionary Portfolio Management is a professional investment service provided by wealth
managers or Portfolio Managers who make investment decisions for their clients. In
discretionary management, the portfolio manager can buy, sell, and make changes to the
portfolio without obtaining explicit consent for each transaction.
 Non-discretionary Portfolio Management
Non-discretionary Portfolio Management is an investment approach where the Portfolio
Manager provides investment advice and recommendations to clients, but the final decision-
making authority rests with the clients themselves. In non-discretionary management, clients
retain complete control over their investment decisions and must provide explicit consent for
each transaction.

Types of Mutual Fund Schemes based on the Investment Objective

 Growth
Growth funds focus on investing in the stocks of companies that are expected to register
above-average growth rates compared to the overall market or their industry peers. These
mutual funds are designed to provide high returns to investors. Hence, they carry a higher
level of risk.
 Safety of Capital
While there is no such thing as an absolutely safe and secure investment or one that is
completely risk free. If your primary objective is safety, you will look for investments that
have a minimal risk level. But then, the safest investments tend to have the lowest rates of
return and may not even keep up with inflation. Safe investments include government issued
securities, money market instruments and securities guaranteed by banks
 Income
Investors can rely on income funds for a steady income stream. They provide regular income
through interest payments or dividends. These funds typically invest in various assets that
generate income, such as bonds, stocks that pay dividends, and other fixed-income securities.
Income funds suit retirees or those seeking to supplement their current income.
 Liquid
 Liquid funds invest in short-term debt instruments with high liquidity and low risk. They
generally invest in securities with maturities of not more than 91 days. Liquid funds are
designed to provide investors with a safe and liquid investment option, allowing them to
easily convert their mutual fund investments into cash without incurring significant losses.
Returns from liquid funds depend upon the short-term interest rate prevalent in the market.

Types of Mutual Fund Schemes based on Risk Appetite

 Market Risk
Market risk is a risk which may result in losses for any investor due to the poor performance
of the market. There are a lot of factors that affect the market. A few examples are a natural
disaster, inflation, recession, political unrest, fluctuation of interest rates, and so on. Market
risk is also known as systematic risk. Diversifying a person’s portfolio won’t help in these
scenarios. The only thing that an investor can do is to wait for the things to fall in place.
 Concentration Risk
Concentration generally means focusing on just one thing. Concentrating a considerable
amount of a person’s investment in one particular scheme is never a good option. Profits will
be huge if lucky, but the losses will be pronounced at times. The best way to minimise this
risk is by diversifying your portfolio. Concentrating and investing heavily in one sector is also
risky. The more diverse the portfolio, the lesser the risk is.
 Interest Rate Risk
Interest rate changes depending on the credit available with lenders and the demand from
borrowers. They are inversely related to each other. Increase in the interest rates during the
investment period may result in a reduction of the price of securities.
For example, an individual decides to invest Rs.100 with a rate of 5% for a period of x years. If
the interest rate changes for some reason and it becomes 6%, the individual will no longer be
able to get back the Rs.100 he invested because the rate is fixed. The only option here is
reducing the market value of the bond. If the interest rate reduces to 4% on the other hand,
the investor can sell it at a price above the invested amount.
 Liquidity Risk
 Liquidity risk refers to the difficulty to redeem an investment without incurring a loss in the
value of the instrument. It can also occur when a seller is unable to find a buyer for the
security. In mutual funds, like ELSS, the lock-in period may result in liquidity risk. Nothing
can be done during the lock-in period. In yet another case, exchange-traded funds (ETFs)
might suffer from liquidity risk.
 Credit Risk
Credit risk means that the issuer of the scheme is unable to pay what was promised as
interest. Usually, agencies which handle investments are rated by rating agencies on these
criteria. So, a person will always see that a firm with a high rating will pay less and vice-versa.
Mutual Funds, particularly debt funds, also suffer from credit risk.
In debt funds, the fund manager has to incorporate only investment-grade securities. But
sometimes it might happen that to earn higher returns, the fund manager may include lower
credit-rated securities. This would increase the credit risk of the portfolio. Before investing in
a debt fund, have a look at the credit ratings of the portfolio composition.

Types of Mutual Fund Schemes based on Speciality

Speciality funds are also known as sector-specific or thematic funds. They focus on specific
industries, themes, or sectors of the economy. These funds aim to capitalise on the growth
potential of a particular sector or theme by investing in companies operating within that
domain. In India, there are several speciality funds available to investors. A few examples of
thematic funds are as follows:

 Sector funds:
Mutual funds that invest in a particular industry are called sector funds. Returns from these
funds entirely depend on the performance of these sectors. Technology funds and real estate
funds are a few examples of sector funds.
 Index funds:
Index funds invest in a diversified portfolio of stocks that comprise the chosen index and in
the same proportion as the index. Their investment strategy is passive, intending to replicate
the performance of the index they are tracking.
 Global funds:
 Global funds, also known as international funds, allow Indian investors to invest in foreign
securities and markets. Exposure to international markets helps investors to diversify their
portfolios.
 Fund of funds:
Fund of funds or multi-manager funds invest in a portfolio of other mutual funds instead of
directly investing in individual securities or assets. By investing in multiple funds, these funds
aim to spread the investment risk and potentially achieve higher returns.
 Retirement funds: Retirement mutual funds are specifically designed to aid individuals in
accumulating wealth for their retirement years. These funds invest the pooled money in
stocks, bonds, and other securities.
 Emerging market funds:
Emerging market funds focus on investing in securities from emerging market economies.
These economies are typically characterised by rapid economic growth, expanding
populations, and increasing industrialisation. Investing in emerging market funds allows
investors to participate in the growth potential of these economies.

3.3 Benefits of Mutual Funds

While seasoned investors may know the benefits of mutual funds, it is important for
novices to understand them. There are multiple reasons why you should invest in mutual
funds:

 Diverse Portfolio
The first and foremost advantage of a mutual fund is the diversification of investments. The
corpus collected from various investors is invested in equities, debt, gold, overseas securities,
and various asset classes. It is invested across different sectors, industries, and companies of
various capital sizes. A diverse portfolio helps to attract gains from a mixture of asset classes
as well as results in risk reduction. Single asset class investment, like that of stocks, is highly
volatile because you may lose the value of an entire investment if there is market turbulence.
But in mutual funds, each asset class is segregated from the market volatility. Hence, not all
assets, or not even all stocks can rise or fall in tandem.
 Good Returns
 Mutual funds offer good returns on investment and have the potential to build capital over
time while beating inflation. As it invests in a mixture of assets, sectors, and industries, it has
a higher exposure to the investment fund and a balanced risk-return ratio. Also, with SIPs
(Systematic Investment Plans), you can invest small amounts periodically for a few years
instead of a lump sum. You purchase fewer units when the unit price of the fund is high, and
more when the price is down. This is called the benefit of Rupee Cost Averaging, where the
average cost of units is reduced and therefore, has a higher return on investment (ROI).

 Professional Management
This is one of the best and biggest benefits of mutual fund schemes that they have fund
managers to manage and monitor professionally. Generally, most investors lack the time,
inclination, and even the skill set to research and analyze multiple stocks and asset classes.
So, you need not outsource an expert for yourself to have a diverse investment portfolio but
invest in mutual fund plans. The AMCs have qualified managers and assist teams that decide
how to allocate funds to different securities and when to do so. They buy and sell various
money market instruments and make timely entries and exits to earn interest for the funds
and the investors.
 Low Investment Cost
Mutual Funds are a diversified portfolio of investments with a pool of money collected from
numerous customers. As an investor, you become a unitholder representing your share in the
mutual fund. If you buy several stocks, other assets, or plan to have such a diversity in
investments, you will need a large capital outlay. But with mutual funds, you can become a
beneficial owner of diverse investment portfolios with smaller amounts. It is because mutual
funds trade securities in large volumes and the transaction costs get lesser. When you buy or
sell units in bulk, per unit transaction costs are cheaper than what retail investors would
incur through stockbrokers. This is called economies of scale in transaction costs and
therefore, makes mutual funds cost-effective.
However, do check the expense ratio of the mutual fund scheme when you plan to invest. The
expense ratio is an annual fee that the fund houses or Asset Management Companies (AMCs)
charge for the management of a mutual fund.
 Flexible Payments for Investment
You have the liberty to make flexible payments for investment in mutual funds through
varying amounts and modes of payments. There is no limit to the amount you can invest in a
mutual fund scheme and can opt out of various modes of payment. You can make one-time
lump sum payments, or go for Systematic Investment Plans (SIPs), Systematic Transfer Plans
(STPs), and Systematic Withdrawal Plans (SWPs). SIPs allow you to make small contributions
through monthly or quarterly payments. You can also increase or decrease the SIP amount.
 Tax Benefits
In case you are looking for an investment that offers both high returns and tax benefits, you
can choose the Equity Linked Saving Scheme (ELSS). It is a mutual fund plan that is tax-
exempt up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961. It comes with a
lock-in period of 3 years that is lower than any of its alternatives, like fixed deposits and PPF,
and offers better returns than them.
 Liquidity
Mutual Funds, except those that come with a lock-in period like ELSS, can be redeemed
anytime. You can easily withdraw the money and sell the units which makes it highly liquid.
There is a quick disbursal of money and you receive it in your bank account within a few
days. However, there could be an Exit Load, which is the pre-exit penalty when you redeem
before the maturity period.
 Attracts Large Scale Investors
As mutual funds invest in a mixture of assets and have many types, they offer a variety of
schemes to suit the large scale of investors. There are equity funds for risk-tolerant investors
and debt funds for those who want fixed returns with low risks. You can choose ELSS for tax
benefits, and liquid funds as an alternative to FD to have better returns in the short term. If
you want to opt for a safer investment in equity funds, then you can go for large-cap funds.
This is because the fund managers invest a major corpus amount in stocks of blue chip
companies.
 Blue chip or large-capitalization companies are the top 100 companies with the biggest
capital structure listed by SEBI (Securities & Exchange Board of India). If you have a higher
risk appetite then you can go for mid-cap or small-cap funds. They invest in medium-sized
or small company stocks that carry higher risks but can give very high returns in the long
term. You can have an assorted portfolio to match your investment goals and risk-bearing
capacity.

 Easy Investment
Mutual funds, as mentioned earlier are low-cost and high returns giving investments.
Especially with SIPs, it becomes affordable for many people where they can start their
investment with an amount as low as Rs. 500. Apart from its fair pricing, you can invest in
mutual funds through different platforms. You can invest via AMCs (online or offline),
brokerage firms, agents, banks, registrars, and various mutual fund investment sites and
apps. You need no Demat account but just provide the essential information and documents.
 Transparent & Regulated
Mutual Funds are a highly transparent investment because the SEBI kays down the norms
and regulates them. Also, the fund houses and AMCs (Asset Management Companies) have
formed an Association of Mutual Funds in India (AMFI) which is a self-regulatory body. The
AMFI is a regulator under the purview of SEBI that seeks to develop the mutual fund industry
on ethical and professional standards.

SEBI is a watch dog that lays out various mandates that the AMCs must follow. It directs
them to provide proper disclosures about all their mutual fund (MF) schemes and their
investment portfolios. You can verify the credentials of the fund managers, Assets Under
Management (AUMs) by fund houses, and risk levels of each MF scheme. The disclosures
must have standard information of specific investments with the percentage of corpus
amount allocated in each asset and sector.

3.4 ORGANIZATIONAL STRUCTURE OF MUTUAL FUND:

 Tier 1: Sponsor

The sponsor forms the first layer in the structure of a mutual fund. A sponsor can be an
individual or an entity whose primary objective is to earn money through fund
management. The sponsor can execute the fund management through another associate
company. Moreover, the sponsor can be a promoter of the associate company. To become a
sponsor of a mutual fund, a person or an entity must approach SEBI and seek its
permission to set up a mutual fund. Once SEBI agrees to this, the sponsor must form a
public trust under the Indian Trust Act 1882 and must register it with SEBI. Once the trust
is registered, the sponsor can appoint a board of trustees (BOT) who will be responsible
for adhering to the SEBI Mutual Funds Regulations and protecting the unit holder’s
interests. Once the trustees are appointed, the sponsor can create an AMC under the
Companies Act 1956.

 To become a sponsor, there is an eligibility criterion that must be fulfilled.

 The sponsor should have a minimum of five years of experience in the financial services
industry.
 The net worth of the business must be positive in the last five years.
 The sponsor’s net worth must be higher than the capital contribution of the AMC.
  The business should have earned a profit in the last three out of five years, including the
preceding year.
 The sponsor should be of sound mind and physically fit.
 The sponsor must contribute at least 40% of the net worth of the AMC.
 Existing or new mutual fund sponsors should not be convicted of any offence.
 From the above eligibility criteria, it isn’t wrong to conclude that the sponsor’s role is vital
for a mutual fund. Hence, sponsors should have high credibility and enough liquidity and
must be faithful to return investors’ money in case of a financial collapse.
 Tier 2: Trust and Trustees

The second layer of the mutual fund structure is the trust and trustees. The fund sponsor
employs the trustees to protect and safeguard the investors. The trust is created through a
trust deed, and the trust is registered under the Companies Act, 1956. The trustees are
governed by the India Trust Act 1882. Trustees do not directly manage the securities and
mutual funds. Instead, they oversee the entire fund management and ensure that the
regulations are being followed by the AMCs.

A mutual fund house has at least four trustees, and the following are their duties.

 Trustees should check the work of AMC, including the back office system, dealing room,
and accounting work, before the launch of a scheme.
 They must ensure that AMCs have not given any undue advantage to an associate, which is
not in the best interest of the unit holders.
 Ensure the AMC performs its transactions as per the SEBI’s regulations.
 Take remedial steps in case the AMC doesn’t follow laws and regulations.
 Must review all transactions of the trust and AMC every quarter and report them to SEBI.
 Check customer’s complaints and how they are handled by the AMC.
 The trustee must submit a report with the details of the activities of the trust and the
trustee’s certificate that they are satisfied with the AMC’s work to the board on a half-
yearly basis.
 Must oversee and approve AMC’s request of floating a new fund, provided all the
regulations are met.
 From the above, it is clear that a trustee must act independently and ensure the investor’s
trust and interests are maintained at all times.
 Tier 3: Asset Management Company
The final tier of the mutual fund structure has asset management companies. They float
mutual funds with different objectives based on the investor’s needs. The AMC also acts as a
fund manager for the trust. AMCs must be registered with SEBI under the Companies Act,
1956. AMCs are appointed by the sponsor and are responsible for managing the portfolio of
various mutual funds they float. The appointed AMC can be terminated by the vote of a
majority of trustees or 75% of unit holders.
 To become an eligible AMC, the following criteria must be met.
 The board of directors must work under the supervision of the trustees and SEBI.
 AMCs shouldn’t undertake any other business apart from financial services.
 50% of the directors of the AMC should not be related to the sponsor or trustees.

Following are the functions of the AMC

 AMCs must adhere to the investment scheme in line with the trust deed, provide all related
information to the unit holders, and manage risk as per the guidelines of SEBI.
 AMCs are responsible for launching mutual fund schemes, receiving and processing
applications of investors, sending refund orders, maintaining records, repurchasing and
redeeming units, and issuing dividends and warrants. For this work, AMCs can choose to do it
by themselves or hire a registrar and transfer agent (RTA).
 The fund managers of the AMC must manage the investments of investors. They are also
responsible for selecting the securities, the price, time and quantity at which they will be
bought or sold.
 AMCs must collect the net asset value (NAV) of each fund and submit it to the SEBI and AMFI
daily. They must also prepare and distribute reports of the scheme and record accounting
transactions regularly.
 Act as an intermediary between advertising agencies and collection centres.
 Mobilise the funds with the help of a lead manager and attract funds.
 Hire investment advisors who can analyse securities and market conditions and auditors to
inspect and verify accounts of the firm. Also, hire legal advisors to undertake all the legal
work of the scheme right from inception to launch.

 Other participants in mutual funds

Every mutual fund has other participants that ensure the smooth running of the fund. There
are seven participants that are important for a mutual fund, and the following are their roles
and functions.
 Custodian
A custodian is an entity registered with SEBI and is responsible for the safekeeping, transfer,
and delivery of securities. They also help investors update their holdings and keep track of
their investments. Custodians also manage the collection of dividends, interest, bonus issues,
and other corporate benefits.
 Registrar and Transfer Agent
Registrar and Transfer Agents (RTAs) are an intermediary between the fund managers and
investors. They are SEBI-registered entities and process mutual fund applications, assist in
KYC (know your customer), process investor requests, manage and provide periodic
investment statements, and update investor’s records.
 Fund accountant
A fund account is responsible for calculating the daily NAV of the different mutual fund
schemes of the AMC. The AMC can either do this internally or appoint a third party.
 Auditor
An auditor is responsible for checking whether the AMC is keeping all records of transactions
and is doing its accounting work as per the law. They must also verify that the AMC is not
undertaking any fraudulent activity when reporting its accounts. Auditors must take samples
of transactions in a year to check whether the purchase and sale are done at the correct NAV
and must cross-verify the same with the RTA.
 Broker
Brokers act as a liaison between investors and AMCs. They are institutions registered with
SEBI and hold a license to operate trading accounts through which investors can invest in the
 markets. Brokers keep track of the market and make reports to update investors about the
best funds in the market.
 Dealers
Dealers help AMCs to successfully place a deal of purchase and sale in the capital markets.
They are also responsible for fulfilling the formalities of purchase and sale through brokers.
 Intermediaries
Intermediaries are entities or individuals that can help investors buy and sell mutual funds.
Banks, individual agents, distribution companies, post offices, or online platforms, anyone
can be an intermediary. They are the important link between the investors and the fund
house as they are the ones that help in mobilising the funds from investors to fund houses.
Intermediaries also recommend to investors which funds to invest in, facilitate the
transactions, and, in turn, take a small fee from the fund house for their service.
 REVIEW OF LITERATURE

 Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012), have studied Impact of Sharpe
Ratio & Treynor’s Ratio on Selected Mutual Fund Schemes. This paper examines the
performance of selected mutual fund schemes, that the risk profile of the aggregate mutual
fund universe can be accurately compared by a simple market index that offers comparative
monthly liquidity, returns, systematic & unsystematic risk and complete fund analysis by
using the special reference of Sharpe ratio and Treynor’s ratio.
 Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research on Comparative
Performance Analysis of Select Indian Mutual Fund Schemes. This study analyze the
performance of Indian owned mutual funds and compares their performance. The
performance of these funds was analyzed using a five year NAVs and portfolio allocation.
Findings of the study reveals that, mutual funds out perform naïve investment. Mutual funds
as a medium-to-long term investment option are preferred as a suitable investment option by
investors.
 Dr. Yogesh Kumar Mehta (Feb 2012), has studied Emerging Scenario of mutual Funds in India:
An Analytical Study of Tax Funds. The present study is based on selected equity funds of
public sector and private sector mutual fund. Corporate and Institutions who form only
1.16% of the total number of investors accounts in the MFs industry, contribute a sizeable
amount of Rs.2,87,108.01 crore which is 56.55% of the total net assets in the MF industry. It
is also found that MFs did not prefer debt segment.
 Dr Surender Kumar Gupta and Dr. Sandeep Bansal (Jul 2012), have done a Comparative Study
on Debt Scheme of Mutual Fund of Reliance and Birla Sunlife. This study provides an
overview of the performance of debt scheme of mutual fund of Reliance, and Birla Sunlife
with the help of Sharpe Index after calculating Net Asset Values and Standard Deviation. This
study reveals that returns on Debt Schemes are close to Benchmark return (Crisil Composite
Debt Fund Index: 4.34%) and Risk Free Return: 6% (average adjusted for last five year).
 Prof. V. Vanaja and Dr. R. Karupasamy (2013), have done a Study on the Performance of select
Private Sector Balanced Category Mutual Fund Schemes in India. This study of performance
evaluation would help the investors to choose the best schemes available and will also help
the AUM’s in better portfolio construction and can rectify the problems of underperforming
 schemes. The objective of the study is to evaluate the performance of select Private sector
balanced schemes on the basis of returns and comparison with their benchmarks and also
to appraise the performance of different category of funds using risk adjusted measures as
suggested by Sharpe, Treynor and Jensen.

 E. Priyadarshini and Dr. A. Chandra Babu (2011), have done Prediction of The Net Asset
Values of Indian Mutual Funds Using Auto- Regressive Integrated Moving Average (Arima). In
this paper, some of the mutual funds in India had been modeled using Box-Jenkins
autoregressive integrated moving average (ARIMA) methodology. Validity of the models was
tested using standard statistical techniques and the future NAV values of the mutual funds
have been forecasted.
 Dr. Ranjit Singh, Dr. Anurag Singh and Dr. H. Ramananda Singh (August 2011), have done
research on Positioning of Mutual Funds among Small Town and Sub-Urban Investors. In the
recent past the significant proportion of the investment of the urban investor is being
attracted by the mutual funds. This has led to the saturation of the market in the urban areas.
In order to increase their investor base, the mutual fund companies are exploring the
opportunities in the small towns and sub-urban areas. But marketing the mutual funds in
these areas requires the positioning of the products in the minds of the investors in a
different way. The product has to be acceptable to the investors, it should be affordable to the
investors, it should be made available to them and at the same time the investors should be
aware of it. The present paper deals with all these issues. It measures the degree of influence
on acceptability, affordability, availability and awareness among the small town and sub-
urban investors on their investment decisions.
 Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a Comparative Study
On Performance Evaluation of Mutual Fund Schemes Of Indian Companies. In this paper the
performance evaluation of Indian mutual funds is carried out through relative performance
index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure,
and Fama's measure. The data used is daily closing NAVs. The source of data is website of
Association of Mutual Funds in India (AMFI).

.
 C.Srinivas Yadav and Hemanth N C (Feb 2014), have studied Performance of Selected Equity
Growth Mutual Funds in India: An Empirical Study during 1st June 2010 To 31st May 2013.
The study evaluates performance of selected growth equity funds in India, carried out using
portfolio performance evaluation techniques such as Sharpe and Treynor measure. S&P CNX
NIFTY has been taken as the benchmark. The study conducted with 15 equity growth
Schemes (NAV ) were chosen from top 10 AMCs ( based on AUM) for the period 1st June 2010
to 31st may 2013(3 years).
 Rashmi Sharma and N. K. Pandya (2013), have done an overview of Investing in Mutual Fund.
In this paper, structure of mutual fund, comparison between investments in mutual fund and
other investment options and calculation of NAV etc. have been considered. In this paper, the
impacts of various demographic factors on investors’ attitude towards mutual fund have been
studied. For measuring various phenomena and analyzing the collected data effectively and
efficiently for drawing sound conclusions, drawing pie charts has been used and for analyzing
the various factors responsible for investment in mutual funds.
 Rahul Singal, Anuradha Garg and Dr Sanjay Singla (May 2013), have done Performance
Appraisal of Growth Mutual Fund. The paper examines the performance of 25 Growth Mutual
Fund Schemes. Over the time period January 2004 to Dec 2008. For this purpose three
techniques are used (I) Beta (II) Sharpe Ratio (III) Treynor Ratio. Rank is given according to
result drawn from this scheme and comparison is also made between results drawn from
different schemes and normally the different are insignificant.
 Dhimen Jani and Dr. Rajeev Jain (Dec 2013), have studied Role of Mutual Funds in Indian
Financial System as a Key Resource Mobiliser. This paper attempts to identify, the
relationship between AUM mobilized by mutual fund companies and GDP growth of the India.
To find out correlation coefficient Kendall’s tau b and spearman’s rho correlation ship was
applied, the data range was selected from 1998-99 to 2009-10.
 Dr. R. Narayanasamy and V. Rathnamani (Apr 2013), have done Performance Evaluation of
Equity Mutual Funds (On Selected Equity Large Cap Funds). This study, basically, deals with
the equity mutual funds that are offered for investment by the various fund houses in India.
This study mainly focused on the performance of selected equity large cap mutual fund
schemes in terms of risk- return relationship. The main objectives of this research work are
 to analysis financial performance of selected mutual fund schemes through the statistical
parameters such as (alpha, beta, standard deviation, r-squared, Sharpe ratio).
 Dr. Ashok Khurana and Kavita Panjwani (Nov, 2010), have analysed Hybrid Mutual Funds.
Mutual fund returns can be compared using Arithmetic mean & Compounded Annual Growth
Rate. Risk can be analyzed by finding out Standard Deviation, Beta while performance
analysis is based on Risk-Return adjustment. Key ratios like Sharpe ratio and Treynor ratio
are used for Risk-Return analysis. Funds are compared with a benchmark, industry average,
and analysis of volatility and return per unit to find out how well they are performing with
respect to the market Value at Risk analysis can be done to find out the maximum possible
losses in a month given the investor had made an investment in that month. Based on the
quantitative study conducted company a fund is chosen as the best fund in the Balance fund
growth schemes.
 Dr. D. Rajasekar (Sep 2013), has done a Study on Investor`s Preference Towards Mutual Funds
With Reference To Reliance Private Limited, Chennai - An Empirical Analysis. The data was
analyzed using the statistical tools like percentage analysis, chi square, weighted average. The
report was concluded with findings and suggestions and summary. From the findings, it was
inferred overall that the investor are highly concerned about safety and growth and liquidity
of investments. Most of the respondents are highly satisfied with the benefits and the service
rendered by the Reliance mutual funds.
 Dr. Mamta Shah (Dec 2012) has done research on Marketing Practices of Mutual Funds.
Development of an economy necessarily depends upon its financial system and the rate of
new capital formation which can be achieved by mobilizing savings and adopting an
investment pattern, be its self-financing (i.e. direct or indirect) where financial
intermediaries like banks, insurance and other financial companies come in the picture and
mediate between savers and borrowers of funds. In the same way there are different types of
Investors and each category of investors differs in its objectives and hence it is imperative for
Investment managers to choose an appropriate investment policy for the group they are
dealing with, further managing the investment is a dynamic and an ongoing process.
 Rajiv G. Sharma (Aug 2013) has done a Comparative Study on Public and Private Sector
Mutual Funds in India. The study at first tests whether there is any relation between
demographic profile of the investor and selection of mutual fund alternative from among
public sector and private sector. For the purpose of analysis perceptions of selected investors
from public and private sector mutual funds are taken into consideration. The major factors
influencing the investors of public and private sectors mutual funds are identified. The

factors under consideration to compare between perceptions of public and private sector
mutual fund investors are Liquidity, Security, Flexibility, Management fee, Service Quality,
Transparency, Returns and Tax benefits.

 Dr. E. Priyadarshini (2013), has done Analysis of the Performance of Artificial Neural Network
Technique for Forecasting Mutual Fund Net Asset Values. In this paper, the Net Asset Values of
four Indian Mutual Funds were predicted using Artificial Neural Network after eliminating
the redundant variables using PCA and the performance was evaluated using standard
statistical measures such as MAPE, RMSE, etc.
 Vibha Lamba (Feb 2014), has done an analysis of Portfolio Management in India. The purpose
of present study is to analyse the scope and importance of portfolio management in India.
This paper also focuses on the types and steps of portfolio management which a portfolio
manager should take to provide maximum returns and minimum risk to his clients for their
investments.
 Dr. N. K. Sathya Pal Sharma and Ravikumar. R (2013), have done the Analysis of the Risk and
Return Relationship of Equity Based Mutual Fund in India. In this paper an attempt has been
made to analyze the performance of equity based mutual funds. A total of 15 schemes offered
by 2 private sector companies and 2 public sector companies, have been studied over the
period April 1999 to April 2013 (15years). The analysis has been made using the risk-return
relationship and Capital Asset Pricing model (CAPM).
 Abhishek Kumar(October 2012), have studied Trend in Behavioural Finance and Asset
Mobilization in Mutual Fund Industry of India. This paper tries to analyze some of the key
issues noted below:

1. To understand the growth and the potential of Mutual Fund industry and

analyze its success.

2. An exhaustive cross performance study of Mutual fund industry by analyzing

around 1025 mutual fund schemes of India.

3. Performance analyses of various mutual fund schemes and its contributions

to assets management during the study period (2002-2009).

4. Insight about the performance of the mutual fund under short term and long

term period and

5. Investor’s behavior in allocating their investments among various assets

available in the market compared to Mutual funds in the changing economic

Scenario.

 B. Raja Manner and Dr. B. Ramachandra Reddy (Oct 2012), Review and Performance of Select
Mutual Funds Operated By Private Sector Banks: Axis Equity and Kotak 50 Funds – Growth
Option. The two mutual funds (i) Axis Equity (G) and (ii) Kotak 50 (G) are reviewed in detail
with a brief introduction of the fund houses itself. The funds are then statistically evaluated
by correlation with the benchmark. S&P CNX Nifty, standard deviation, Sharpe’s Index.
Treynor’s Ratio, Jenson’s alpha, Fama’s Measure and M2
 Mrs.V. Sasikala and Dr. A. Lakshmi (Jan 2014) have studied The Mutual Fund Performance
Between 2008 And 2010: Comparative Analysis. The paper entitled “comparative analysis of
mutual fund performance between 2008 & 2010. The paper was undertaken to know the
after meltdown period risks and returns of 2008 top hundred mutual funds and compare
with 2010 top hundred mutual funds published in Business today. The analysis of alpha, beta,
standard deviation, Sharpe ratio and R-squared are declare high, low, average, above average
and below average of risks and return of funds.
 S. Palani and P. Chilar Mohamed (Dec 2013) have done study of Public and Private Sector
Mutual Fund in India. Development of capital market in a country is an important
prerequisite which only would enable industrial development, Business growth and there by
contribution towards economic development. Without any doubt it could be stated that
economic development, measured in the form of growth in GDP or NNP is one of the
objectives of every country in the world. A well integrated Financial System alone could
hasten economic growth which it does through channelizing productive resources towards
industrial growth and development.
 Jafri Arshad Hasan, (2013), has studied The Performance Evaluation of Indian Mutual Fund
Industry past, Present and Future. This article will discuss the past performance of the Indian
mutual fund industry and the pace of growth it achieved after being succumbed to regulatory
changes by SEBI, international factors and its non performance that affected the industry and
its sentiments. It will also analyse the future implications of the current changes that are
being implemented by the regulator.
 Dr. S. Vasantha, Uma Maheswari and K.Subashini, (Sep 2013), Evaluating the Performance of
some selected open ended equity diversified Mutual fund in Indian mutual fund Industry. The
main objective of this research paper is to evaluate the performance of selective open ended
equity diversified Mutual fund in the Indian equity market. For the purpose of conducting this
study HDFC top 200 fund(g).Reliance top 200(g).ICICI Prudential top 200(g). Canara Robeco
equity diversified fund(g).Birla Sun Life frontline equity (g) mutual funds have been studied
over the period of 60 months data which is from January 2008 to December 2012.The
analysis has been made on the basis of Sharpe ratio, Treynor ratio and Jenson .
 Dr. K. Mallikarjuna Rao and H. Ranjeeta Rani, (Jul 2013), have studied Risk Adjusted
Performance Evaluation of Selected Balanced Mutual Fund Schemes in India. In this paper, an
attempt has been made to study the performance of selected balanced schemes of mutual
funds based on risk-return relationship models and various measures. Balanced schemes of
mutual funds are the ones which are mostly preferred by Indian investors because of their
balanced portfolio in equity and debt. A total of 10 schemes offered by various mutual funds
have been studied over the time period April, 2010 to March, 2013 (3 years).
 Sowmiya. G, (Jan 2014), has studied Performance Evaluation of Mutual Funds in India. The
objectives of this are to know the basic concepts and terminologies of the mutual funds in
 public limited companies and private limited companies. To analyze performance and growth
of selected mutual funds schemes with their NAV and their returns. To identify the return
variance and to provide suggestions based on the analysis.
 Ms. Shalini Goyal and Ms. Dauly Bansal (2013) have done A Study on Mutual Funds in India.
This paper focuses on the entire journey of mutual fund industry in India. Its origin, its fall
and rise throughout all these years and tried to predict what the future may hold for the
Mutual Fund Investors in the long run. This study was conducted to analyze and compare the
performance of different types of mutual funds in India and concluded that equity funds
outperform income funds.
 Megha Pandey, (2013) has done Comparative Study of Performance of Actively Managed
Funds and Index Funds in INDIA. Actively Managed funds always overlapped passively
managed funds or Index Funds this research deals with a comparative analysis between the
performance of both of the funds, actively managed and passively managed. T test is applied
to compare their means and by this research the derived results shows that though actively
managed funds gives more returns.
 `Sarita Bahl and Meenakshi Rani, (Jul 2012) have done A Comparative Analysis of Mutual
Fund Schemes in India. The present paper investigates the performance of 29 open-
ended Growth - oriented equity schemes for the period from April 2005 to March 2011
(six years) of transition economy. Monthly NAV of different schemes have been used to
calculate the returns from the fund schemes. BSE- Sensex has been used for market
portfolio. Historical performance of select schemes were evaluated on the basis of
Sharpe, Treynor and Jensen’s measure whose results will be useful for investors for
taking better investment decisions.
 Dr. R. Karupasamy and Professor V. Vanaja, (Jul. 2013), A Study on the Performance of
Selected Large Cap and Small & Mid Cap Mutual Fund Schemes In India. The objective of the
study is to evaluate the performance of different mutual fund schemes (Large Cap, Small &
Mid cap Equity Schemes) on the basis of returns and comparison with their benchmarks and
also to appraise the performance of different category of funds using risk adjusted measures
as suggested by Sharpe, Treynor and Jensen. The study revealed the investors for investment
below 2 years can choose large cap schemes and investment beyond 3 years can be made in
Small & mid cap schemes.
G. Prathap and Dr. A. Rajamohan(Dec 2013), have done A Study on Status of Awareness among
Mutual Fund Investors in Tamil Nadu. Mutual funds have become an important intermediary
between households and financial markets, particularly the equity market. Mutual funds have
enabled an increasing number of households to enter financial markets and the diversified
investment structure of mutual funds and diversified risk contributed tremendously in the
growth of mutual funds. It is important to study the awareness of mutual fund among the
investors.

 Dr. Naila Iqbal (Jul 2013) has studied Market Penetration and Investment Pattern of Mutual
Fund Industry in India. Market penetration is a term that indicates how deeply a product or
service has become entrenched with a given consumer market. The degree of penetration is
often measured by the amount of sales that are generated within the market itself. A product
that generates twenty percent of the sales made within a given market would be said to have
a higher rate of market penetration that a similar product that realizes ten percent of the total
sales within that same market. Determining what constitutes the consumer market is key to
the process of properly calculating market penetration.
 Dr. Binod Kumar Singh, (Mar 2012) has done A Study on Investors’ Attitude towards Mutual
Funds as an Investment Option. In this paper, structure of mutual fund, operations of mutual
fund, comparison between investment in mutual fund and bank and calculation of NAV etc.
have been considered. In this paper the impacts of various demographic factors on investors’
attitude towards mutual fund have been studied. For measuring various phenomena and
analyzing the collected data effectively and efficiently for drawing sound conclusions.
 Dr. B. Saritha, (Feb 2012) has studied Mutual Fund Investment Decisions by using Fama
Decomposition Models. Mutual Funds are dynamic Financial Institutions (FI) which play a
crucial role in an economy by mobilizing savings and investing them in the capital market.
Thus, establishing a link between savings and capital market. Therefore, the activities of
mutual funds have both short and long term impact on the savings & capital markets and the
national economy.
 Dr. S.M.Tariq Zafar, Dr. D.S.Chaubey and Syed Imran Nawab Ali, (Feb 2012), have done An
Empirical Study on Indian Mutual Funds Equity Diversified Growth Schemes and Their
Performance Evaluation. This paper aims to know how the performance of mutual funds is
assessed and ranked after analyzing the NAV and their respective returns so as to measure
investment avenues. For the purpose thirteen most preferred public and private sector equity
diversified growth schemes over a period of one year viz.2007-08 have been taken through
judgment sampling and Yield on 10 yr. govt. bond has been taken as the surrogate for the risk
free rate of return viz.7.56% p.a.
 Dr. Sandeep Bansal, Sanjeev Kumar, Dr. Surender Kumar Gupta and Sachin Singla (Jun 2012)
have done a Study of Selected Dividend Mutual Fund Schemes with Jenson’s Alpha Model. In
this present paper we apply a risk-adjusted measure known as Jensen's Alpha Model on ten
randomly selected dividend mutual fund schemes that estimates how much a manager's
forecasting ability contributes to the fund's returns. We use a sample of 10 mutual fund
schemes (dividend) for the period of 4 years from May 2005 to April 2009 on monthly basis
and calculated their NAV.
 Dr. Sandeep Bansal and Sanjeev Kumar, (Feb 2012), have done an Evaluation of Risk-Adjusted
Performance of Mutual Funds in India. In this paper an attempt has been made to study the
performance of selected mutual funds schemes based on risk-return relationship models and
return on mutual funds are also compared with return on equity shares of different sectors of
Indian economy. Return on ten mutual funds schemes and return on equity shares of three
sectors namely fastmoving Capital Goods, Information Technology and Power sectors have
been studied over the time period Jan.2006 to Jan 2009 (3 years).
 Mr. Jay R. Joshi, (Mar 2013), Mutual Funds: An Investment Option from Investors’ Point of
View. This study is of descriptive type research. The target population will be individual
investor in Anand – Vidyanagar area of relatively affluent western State of Gujarat (India).
The survey will be based on convenience sampling having 100 investors as sample size. The
study will try to identify the consumers’ preference for various mutual funds and the main
reasons for investment in mutual fund schemes. The study will also try to investigate various
factors that investor is thinking before selecting a mutual fund company. Overall, the study is
focusing on the behaviour of individual investors and hence form a part of behavioural
finance area.
 N. Geetha and M. Ramesh, (2011), have studied Investors’ Perception On Mutual Funds With
Reference To Chidambaram Town. The main objective of the study is to elucidate the
perceptions and behaviours of the small investors located in the town of Chidambaram, Tamil
Nadu, South India towards the mutual funds and also suggest some measures to increase the
quantum of investors and investments as well.
 C.Vijendra and D. Sakriya, (June 2013) have done a Study of Investor Behaviour regarding
Investment Decisions in Mutual Funds. A survey was conducted among 384 mutual funds
investors from the twin cities of Hyderabad & Secunderabad to study the factors influencing
the fund/scheme selection behaviour of these investors. It is hoped that this survey will
underpin the AMCs with regards to planning and implementation of designing, marketing
and selling of innovative products.
 Ms. Archana Patro and Prof. A. Kanagaraj(Jun 2012), have done Exploring the Herding
Behaviour in Indian Mutual Fund Industry. The study analyzes the trading activity of Indian
mutual funds and investigates whether Indian mutual fund managers are engaged in herding
behaviour. Results are compared with previous studies in mature as well as developing
markets to determine the level of maturity of the Indian capital market. Measure of herding
developed by Lakonishok et al. (1992) has been used.
 Ms. K. Hema Divya(Apr 2012), has done A Comparative study on Evaluation of Selected
Mutual Funds in India. Mutual Funds industry has grown up by leaps & bounds, particularly
during the last 2 decades of the 20th century. Proper assessment of fund performance would
facilitate the peer comparison among investment managers, help average investors
successfully identify skilled managers. Further the growing competition in the market forces
the fund managers to work hard to satisfy investors & management. Therefore, regular
performance evaluation of mutual funds is essential for investors and fund managers also.
The present study is confined to evaluate the performance of mutual funds on the basis of
yearly returns compared with BSE Indices.
 Deepika Sharma, Poonam Loothra and Ashish Sharma (May 2011), Comparative Study of
Selected Equity diversified Mutual Fund Schemes. The present investigation is aimed to
examine the performance of safest investment instrument in the security market in the eyes
of investors i.e., mutual funds by specially focusing on equity-diversified schemes. Eight
 mutual fund schemes have been selected for this purpose. The examination is achieved by
assessing various financial tests like Sharpe Ratio, Standard Deviation and Alpha.
 Dr. Nishi Sharma(Aug 2012), has done research on Indian Investor’s Perception towards
Mutual Funds. This paper attempts to investigate the reasons responsible for lesser
recognition of mutual fund as a prime investment option. It examines the investor’s
perception with reference to distinct features provided by mutual fund companies to attract
them for investing in specific funds/schemes. The study uses principal component analysis as
a tool for factor reduction. The paper explored three factors named as fund/scheme related
attributes, monetary benefits and sponsor’s related attributes (having respectively six, four
and four variables) which may be offered to investors for securing their patronage. The
results are expected to provide fruitful insight to mutual fund companies for tailoring their
offers suitable to cater the needs and expectations of Indian investors.

LARGE CAP FUNDS

Large Cap Mutual Funds are equity funds that invest a bigger proportion of their total assets in
companies with a large market capitalisation. These companies are highly reputed and have an
excellent track record of generating wealth for their investors over a long period.

Large Cap Funds are hence known to generate regular dividends and steady compounding OF
wealth. Also, these schemes carry a lower risk as compared to the small-cap or mid-cap schemes
and are known to generate steadier returns. They are a good option for investors with a
relatively lower risk appetite and a long-term investment horizon.

According to SEBI, large cap companies fall in the top 100 of the list of companies according to
market capitalisation. Hence, investing in these companies is considered to be less risky and
steady.

MID CAP FUNDS

Mid Cap funds invest in equity and equity-related instruments of Mid Cap companies. According to the
Securities and Exchange Board of India (SEBI), Mid Cap companies are those that are ranked between
101 and 250 in the list of companies according to market capitalization.
Since Mid Cap companies fall between the small-cap and large-cap companies, they offer certain
advantages and disadvantages to both of them. These funds usually offer better returns than large-cap
funds but are more volatile than them. On the other hand, they are more stable than small-cap funds but
tend to offer lesser returns.

In a nutshell, Mid Cap mutual funds are the perfect combination of risk and return. As an investor, if
you select the schemes prudently, with a great selection of stocks, diversification across sectors, and
good fund manager, you can expect much better returns.

SMALL CAP FUNDS

Small-cap funds are necessarily equity funds that allocate a major section of the funds to small
company stocks. The Securities and Exchange Board of India (SEBI) lays down the list of top
companies as well as the norms for the investment portfolio of different kinds of funds. Small-
cap stocks are the ones that are beyond the top 250 companies in the SEBI list and are often
unheard of. Fund managers look out for such small-capitalization stocks that are constantly
performing in the market and sometimes outperforming the benchmark indices and large-
cap stocks. They invest in such stocks that have the capacity to be big businesses in the future
and deliver good returns to investors. Therefore, small-cap fund investors can ditch the
institutional and large-cap investors to capitalize over small-sized companies. Small-cap
funds can deliver better returns than large-cap or medium-cap funds in the bull markets as
small companies can grow up to their full potential.
Small Cap Funds – Meaning & Investment Profile

Small-cap funds are necessarily equity funds that allocate a major section of the funds to small
company stocks. The Securities and Exchange Board of India (SEBI) lays down the list of top
companies as well as the norms for the investment portfolio of different kinds of funds. Small-
cap stocks are the ones that are beyond the top 250 companies in the SEBI list and are often
unheard of. Fund managers look out for such small-capitalization stocks that are constantly
performing in the market and sometimes outperforming the benchmark indices and large-
cap stocks. They invest in such stocks that have the capacity to be big businesses in the future
and deliver good returns to investors. Therefore, small-cap fund investors can ditch the
institutional and large-cap investors to capitalize over small-sized companies. Small-cap
funds can deliver better returns than large-cap or medium-cap funds in the bull markets as
small companies can grow up to their full potential.