CHAPTER:1

INTRODUCTION OF MUTUAL FUNDS

1.1 Concept of mutual fund

1.2 Definition

1.3 Advantage of mutual funds

1.4 Disadvantage of mutual funds

1.5 History of mutual funds

1.6 Types of mutual fund schemes

1.7 Why select mutual funds

1.8 Selection Parameters of Mutual funds

1.9 Types of return on mutual funds

1.10 Risk factor of mutual funds

1.11 Structure of mutual funds

1.12 Regulatory structure of mutual fund in India

1.13 Mutual fund companies in India

1
There is a lot of opportunity for an investor to invest in financial market with an investable
surplus. There are various investment opportunities such as such as Bank its corporate
debenture, and Bonds where there are low risks involved but mean while returns are also
low. Simultaneously he can opt for stock of companies where returns and risks on
investments both are very high. The recent trends in the stock market shows a result that
an average retail investor always lost with periodic bearish trends. So, by such trends
people starts opting for portfolio managers with in stock markets who invest on their behalf.
Thus, we had wealth management services provided by many institutions. However, they
proved too costly for a small investor. Therefore, there investors have found a good shelter
with the mutual funds.

2
1.1 CONCEPT OF MUTUAL FUND:
A mutual fund pools money from multiple investors to invest in a diversified
portfolio of stocks, bonds, or other securities. Managed by professional fund manager, it
offers investors a way to access a diverse range of investments without directly buying
individual securities. Investors own shares of the mutual fund, and the value of these shares
fluctuates based on the fund’s performance. Mutual funds provide diversification,
professional management, and liquidity, making them popular for those seeking a hands-
off approach to investing. Mutual funds are categorized based on their investment
objectives, such as equity funds (investing in stocks), bonds funds (investing in fixed-
income securities), or hybrid funds (a mix of stocks and bonds). Mutual funds also offer
the advantage of liquidity, allowing investors to buy or sell shares on any business day at
the fund’s net asset value (NAV). They provide a convenient way for individuals to
participate in the financial markets with the expertise of professional fund managers.
However, it’s crucial to consider fees, past performance, and investment strategies before
choosing a mutual fund.

1.2 DEFINITIONS:

“A mutual fund is a company that pools money from many investors and invests the
money in securities such as stocks, bonds, and short-term debt. The combined holdings of
the mutual fund are known as its portfolio. Investors but shares in mutual funds. Each share
represents an investor’s part ownership in the fund and the income it generates. The Mutual
fund investors own share of he companies whose business is buying shares in other
companies or in government bonds and other securities. As a mutual investor, you cannot
own the stocks in the company directly that the fund purchases, but you share the profits
or the losses of the total fund’s equally”.

3
1.3 ADVANTAGES OF MUTUAL FUNDS:
Investors can benefit from competent management, diversification, liquidity,
low costs, tax advantages, affordability, safety, and transparency when they invest in
mutual funds, among other advantages. However, before making a mutual fund
investment, investors need to take a few things into account.
1. Professional Management:
Mutual funds are managed by professional individuals. The person who
have years of experience in the financial markets. These professionals make
investment decisions on behalf of the fund’s investors.
2. Diversification:
Mutual fund invests in a variety of securities, which helps in reducing
the risk for the investors. It’s a strategy to achieve a balanced portfolio and
potentially enhance long-term returns while managing risk.
3. Liquidity:
Mutual funds are highly liquid investments, which means the investors
can easily buy and sell their units at any time.
4. Tax Benefits:
Mutual funds offer tax benefits depending on the factors like the type of
funds and the investor’s holding period. Equity linked saving schemes (ELSS) in
India, offers a tax deduction under Section 80C.
5. Affordable:
Mutual fund is a type of investment that allows investors to start with
small amount of money. An investor can invest in 100+ mutual fund schemes based
on his/her affordability.
6. Safe and Transparent:
Mutual funds are regulated by the Securities and Exchange Board of
India (SEBI), which ensures that they are operated in a safe and transparent
manner.

4
7. Low cost for bulk transactions:
In a mutual fund if a person buys multiple units at a time then the cost
of processing fees and other charges like commission will be lesser as compare to
buying one unit of mutual fund.
8. Quick and hassle-free process:
An investor can buy one mutual fund and can slowly diversify across
funds to build their portfolio. It will be much easier if a investor handpicked their
funds which match their investment objective and risk tolerance.
9. Choice of scheme:
Mutual fund offers a family of schemes to suit your varying needs over
lifetime. An investor can choose from 1000+ mutual fund schemes based on their
need and affordability.

5
1.4 DISADVANTAGES/ LIMITATIONS OF MUTUAL FUNDS:

1. No Control Over Costs:

An Investor in a mutual funds has no control of the overall costs of
investing. The investor pays investment management fees as long as he remains
with funds, albeit in return for the professional management and research. Fees are
payable even if the value of his investment is declining.
2. High Expense Ratios and Sales Charges:
If an investor is not paying attention to mutual fund expense ratios and
sales charges, they can get out of hand. The investor needs to be very cautious
when investing in the funds which includes expense ratio higher then 1.50%, as
they are considered to be on the higher cost end. The Investor also needs to be wary
of 12b-1 advertising fees and sales charges in general.
3. Tax Inefficiency:
An investor does not have a choice when it comes to capital gains
payouts in mutual funds. Due to the turnover, redemptions, gains, and losses in
security holding throughout the year, investors typically receive distributions from
the fund that are an uncontrollable tax event.
4. Entry or Exit Load:
Certain mutual funds may impose an exit load, an entry load, or both.
They mostly impose this fee to cover employee wages and operational expenses.
The fee may occasionally reach a maximum of 3% of the net investment amount.
But for the most part, it stays at 1%.
Although funds that charge a large load typically offer substantially higher returns
than conventional mutual funds, the load may appear to be one of the major
drawbacks of mutual funds. Therefore, even though the load reduces your return,
you should consider the fund's historical performance before making a decision.
5. Difficult phases:
Even while long-term investors almost never lose money, if you happen
to invest before a terrible period, you can have to pay a capital loss. Returns on

6
 mutual funds are never assured. It is therefore advisable to have some knowledge
about the fund industry and the economy prior to making an investment.
6. Liquidity:
Schemes with fixed maturities and ELSS have lock-in periods. ELSS
typically has a three-year lock-in period. The lock-in duration of a fixed maturity
plan also varies according to the investment vehicle it uses. You are not allowed
to withdraw the units before the five-year period, for instance, if it invests in a bond
with a five-year maturity.
7. Dilution:
Mutual Funds generally have such small holdings of so many different
stocks that insanely great performance by a funds top holding still doesn’t make of
a difference in a mutual fund’s total performance.
8. Managing a portfolio of funds:
Availability of a large number of funds can actually mean too much
choice for the investor. He may again need advice on how to select a fund to
achieve on how to select a fund to achieve his objective quite similar to the
situation when he has individual shares or bonds to select.

7
1.5 HISTORY OF MUTUAL FUNDS IN INDIA:
The mutual fund industry in India started in 1963 with the formation of
unit trust of India, at the initiative of the government of India and Reserve Bank of
India. The history of mutual fund in India can be broadly divided into distinct
phases.

FIRST PHASE- 1964-84:

Unit Trust of India (UTI) was established on 1963 by an act of
parliament. It was set up by the reserve bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI
was de-linked from the RBI and the industrial Development bank of India (IDBI)
took over the regulatory and administrative control in place of RBI. The first
scheme launched by UTI was unit scheme 1964. At the end of 1988 UTI had Rs.
6,700 crores of assets under management.

SECOND PHASE- 1987-1993 (ENTRY OF PUBLIC SECTOR

FUNDS):
1987 marked the entry of non-UTI, 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 funds (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov
89), Bank of India (June 90), Bank of Baroda Mutual Fund (Oct 92), LIC establish
its Mutual Fund in June 1989 while GIC had set its Mutual Fund in December
1990.
At the end of 1993, mutual fund industry had assets under
management of Rs. 47,004 crores.

8
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
funds families. Also, 1993 was the year in which the first Mutual Fund Regulations
came into being, under which all Mutual funds, except UTI were to be registered
and governed. The erstwhile Kothari Pioneer (now merged with Frankl in
Templeton) was the private sector mutual fund registered in July 1993.

FOURTH PHASE – SINCE FEBRUARY 2003:

In February 2003, Following the repeal of the Unit Trust Act 1963
UTI was bifurcated ir.to 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.

9
1.6 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA:
As a successful avenue for investing, mutual funds have seen a
significant increase in popularity recently. In the financial market, mutual funds are
important in determining the value of tradable assets like stocks and bonds. Upon the
deduction of relevant expenses, investors receive the increased value of their
investment based on the number of units they own. Depending on your investing
objective, you can select the best kind of fund for your needs. Continue reading to
learn more about the many mutual fund kinds available in India

10
A) BY STRUCTURE:

 Open-Ended Schemes:
Open-ended schemes are always available for subscription and
repurchase at the current NAV on all business days. They are permanent in
nature.

 Close- Ended Schemes:

Plans that are closed-ended have a set date for maturity. Only at
maturity may the units be redeemed; they are issued at the time of the original
offer. Closed-ended scheme units must be listed on stock exchanges in order to
allow for an exit strategy prior to scheme maturity. They can also be bought and
sold there.

 Interval Schemes:
Purchases and redemptions are permitted under interval schemes
during predetermined transaction windows. A minimum of two days must pass
within the transaction time, and there must be a minimum of fifteen days
between each transaction period. Interval scheme units are also required to be
listed on stock exchanges.

11
B) BY NATURE:

 Equity Fund:
The returns on equity funds' investments in company shares are
contingent upon the performance of the stock market. Despite the potential for
large profits, these funds are regarded as risky. Based on their characteristics,
they can be further divided into groups such as ELSS, Focused Funds, Mid-Cap
Funds, Small-Cap Funds, and Large-Cap Funds. If you have a long-time
horizon and a strong tolerance for risk, invest in equities funds.

 Debt Fund:
The objective of these funds is to invest in debt papers. Government
authorities, private companies, banks and financial institutions are some of the
major issues of debt papers. By investing in debt instruments, these funds
ensure low risk and provide stable income to the investors. Debt funds are
further classified as:
 Gilt Funds: Gilt Funds are debt funds which only invest in
bonds and fixed interest-bearing securities issued by the state
and central governments. These investments are made in
instruments having varying maturities. Since the money is
invested with the government, these funds are said to carry
minimal risk.
 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 benefits of both equity and debt market. These schemes
rank slightly high on the risk return matrix when compared with
other debt schemes.

12
  Short Term Plans (STPs): Meant for investing 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.

 Balanced Funds:

A balanced fund is a Mutual fund that typically contains a

component of stocks and bonds. A mutual fund is a basket of securities in
which investors can purchase. Typically, balanced funds stick to a fixed asset
allocation of stocks and bonds, such as 70% stocks and 30% bonds. Bonds are
debt instruments that usually pay a stable, fixed rate of return.

The investment objective for a balanced mutual fund tends to be a

mixture of growth and income, which leads to the balanced nature of the fund.
Balanced mutual funds are geared toward investors who are looking for a
mixture of safety, income, and modest capital appreciation.

13
C) BY INVESTMENT OBJECTIVE:

 Growth Schemes:
A growth scheme in mutual funds refers to a specific type of investment
strategy employed by the fund. The primary objective of a growth scheme is
capital appreciation, aiming to increase the value of the invested capital over
the long term. In the context of mutual funds, this typically involves investing
in stocks of companies with high growth potential. Investors opting for growth
schemes are often willing to take on higher risk in pursuit of potentially higher
returns.
 Income Schemes:
An income scheme in mutual funds focuses on generating regular income
for investors rather than capital appreciation. These funds primarily invest in
fixed-income securities like bonds, debentures, and government securities. The
goal is to provide a steady stream of income through interest payments and
dividends. Income schemes are suitable for investors seeking regular cash flow
and are generally considered less risky than growth schemes. However, they
may have lower potential for capital appreciation compared to growth-oriented
funds.
 Balanced Schemes:
Balanced Schemes aim to provide easy liquidity, preservation of capital
and moderate income. These schemes generally invest in safer, short-term
instruments, such as treasury bills, certificates of deposit, commercial paper and
inter-bank call money.
 Money Market Schemes:
A money market scheme in mutual funds primarily invests in short-term,
highly liquid, and low-risk instruments such as Treasury bills, commercial
paper, certificates of deposit, and other money market instruments. The
objective of these schemes is to provide investors with a safe and stable avenue
for parking their funds while earning a modest return.

14
  Loan Funds: Loan funds" can refer to mutual funds or investment funds that
primarily invest in loans or debt instruments. These funds deploy capital in
loans provided to corporations, governments, or other entities, generating
returns through interest payments on these loans.

D) OTHER SCHEMES:

 Tax Saving Schemes:

Tax-saving schemes in mutual funds, often referred to as Equity Linked
Savings Schemes (ELSS) in India, are designed to offer tax benefits to investors
while providing an opportunity for capital appreciation. These funds primarily
invest in equities and come with a lock-in period, typically three years.
 Index Schemes:
Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will
consist of only those stocks that constitute the index. The percentage of each
stock to the total holding will be identical to the stocks index weightage. And
hence, the returns from such schemes would be more or less equivalent to those
of the Index.
 Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those
sectors or industries as specified 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 of the respective
sectors/industries. While these funds may give higher returns, they are riskier
compared to diversified funds. Investors need to keep a watch on the
performance of those sectors/industries and must exit at an appropriate time.

15
1.7 WHY SELECT MUTUAL FUNDS?

Investing in mutual funds gives you access to a diversified portfolio, which

lessens the effect of underperforming individual stocks. Professionals skilled at
assessing markets and choosing investments are in charge of them. Investors
who might lack the time or expertise to actively manage their investments may
find this advantageous.

In addition, mutual funds allow for flexibility with regard to time horizon, risk
tolerance, and investing objectives. Mutual fund products come in a variety of
forms, each addressing a distinct set of goals—growth, income, or both. Fund
selection is based on the financial objectives of the investor.

Mutual fund shares are a practical choice because they are simple to buy and
sell. Investors can redeem their shares at the current net asset value thanks to
their liquidity.

16
1.8 SELECTION PARAMETERS OF MUTUAL FUNDS:
YOUR OBJECTIVE:
The first point to note before investing in a fund is to find out whether your
objective matches with the schemes. It is necessary, as any conflict would directly affect
your prospective returns. As a investor you should pick a scheme that will meet your needs
like pension plan, children’s plan, equity mutual fund.

RISK CAPACITY AND CAPABILITIES:

It includes the choice of scheme investor will choose. The scheme with no risk
tolerance should go for debt scheme, as they are relatively safer. Aggressive investor can
go for equity investments.

FUND MANAGER’S AND SCHEME TRACK RECORD:

The fund manager manages work of someone, and for that he charges money
to mange it well. It is also essential that the fund house you choose has excellent track
record. The fund house should be professional and manage its operations well and should
maintain high transparency. Look at the performance of the scheme against relevant market
benchmarks and its competitors.

COST FACTOR:

Investors should check the performance of AMCs just like they check
the fund performance. All fund houses have plenty of schemes under them, and some
investment decisions are made at the AMC level. For instance, you may find certain
stocks in most of the schemes that were selected by the CIO (Chief Investment Officer)
at the AMC level. Some funds may underperform but the overall track record of an
AMC matters the most. It reflects the investment decisions that are made and how
fund schemes may perform in the future

17
1.9 TYPES OF RETURN ON MUTUL FUNDS:

 ABSOLUTE RETURNS:
The absolute return refers to the investment growth achieved in terms
of percentage irrespective of the investment tenure. The growth is expressed in
absolute terms and not in relative or comparative terms.

 ANNUALIZED RETURNS:

Annualized return refers to the return received by the investor

annually. Annualized return or CAGR (Compounded Annual Growth Rate) also
considers the effect of the compounded interest rate.

 TOTAL RETURNS:

The total return of a mutual fund refers to the fund's overall gain,
including any interest, dividend, distributions, and capital appreciation over a
period. It may sometimes happen that two companies A and B, deliver the same
growth percentage in a year. However, company A has additionally paid out a
portion as a dividend for its investors. In such a case, company A is showcasing
a better performance when compared with company B.

 POINT TO POINT RETURNS:

The annual return generated by a mutual fund between two points in time is
referred to as point-to-point returns.

18
1.10 RISK FACTORS OF MUTUAL FUND:

Risk Return Trade-off:

The most important relationship to understand is the risk-return trade-off. Higher
the risk greater the return and lower the risk lesser the return. 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 the investment decisions.

Market Risk:

Market risk is a type of risk that arise from the fluctuations in financial market
prices. It includes factors such as interest rates, currency exchange rates, and stock prices
that can impact the value of financial instruments. Investors and businesses often manage
market risk through diversification, hedging and other risk management strategies.

Credit Risk:

Credit risk is the risk of financial loss resulting from the failure of a borrower
or counterparty to meet their contractual obligations, such as repaying a loan or fulfilling a
financial derivative contract. Lenders, investors, and financial institutions assess credit risk
to determine the likelihood of default by borrowers. Credit risk management involves
evaluating creditworthiness, setting credit limits, and implementing risk mitigation
strategies to minimize potential losses.

Inflation Risk:

Inflation risk is the potential for the purchasing power of money to decrease
over time due to a general rise in prices. When inflation occurs, each unit of currency buys
fewer goods and services. Investors and businesses face the challenge of protecting their
assets and income against the eroding effects of inflation. Common strategies to mitigate
inflation risk include investing in assets that historically outpace inflation, such as real
estate or certain equities, and utilizing inflation-indexed securities.

19
Interest Rate Risk

Interest rate risk is the potential for changes in interest rates to negatively
impact the value of financial instruments, such as bonds or loans. When interest rates
fluctuate, the prices of existing fixed rate securities may change, affecting their market
value. This risk is particularly relevant to bondholders and financial institutions.

Political/Government Policy Risk:

Political policy risk encompasses the potential adverse effects on businesses

and investments resulting from changes in government policies. This risk arises when shifts
in regulations, tax laws, trade policies, or other government actions impact economic
conditions. Investors and businesses need to monitor and analyze political policy changes
to anticipate and adapt to potential challenges, such as shifts can influence market
dynamics and operational environments.

Liquidity Risk:

Liquidity risk refers to the possibility of not being able to quickly buy or
sell an asset without causing a significant impact on its price. It arises when there is a lack
of market participants willing to trade a particular asset or when trading volumes are low.
Investments in less liquid assets may be more susceptible to liquid risk, potentially leading
to difficulty in selling the assets at desired prices.

20
1.11 STRCTURE OF A MUTUAL FUND
A mutual fund’s structure is three-tiered, and it starts with the setting up of a trust,
which includes a sponsor, trustees, and an AMC. The sponsors of a trust work like a
promoter of any company. The trustees who form part of the trust hold the property of the
mutual funds for the unit holders with the approval of SEBI (Securities and Exchange
Board of India).

Any mutual fund will first start by polling money from various investors, and this
money is then invested in securities as per the pre-specified objectives of the fund. The
benefit or return earned on these securities is distributed to each investor after AMC
deducts the expenses.

21
3- Tier Structure of Mutual Fund

A mutual fund's three tier structure consists of the sponsor, trustees, and AMC. Under "The
Indian Trust Act, 1882," all mutual funds are established as trusts, and the "SEBI (Mutual
Funds) Regulations 1996" govern their operations. In the three-tiered arrangement, the
sponsors—the inventor and management of the funds—come in second and third,
respectively, to the trustees.

The sponsor or a group of sponsors who are thinking about launching a mutual house are
involved in the first layer. They must obtain authorization from the SEBI for this, and the
SEBI will review the sponsor's background, assets, and other information.

The public trust, or second layer, is established when the sponsor persuades the SEBI.
Trustees are individuals who act on behalf of the trust and form it. The trust, which is now
known as a mutual fund, will be registered with SEBI after it is constituted. A sponsor and
a trust are two distinct things, not the same thing. The trustees serve as an internal trust
regulator. Trust is similar to a mutual fund.

The third tier, AMC, is chosen by the trustees to oversee the money with SEBI's consent.
They will then demand fees, which they will subtract from the total amount of money they
have received from different investors (i.e., the expense ratio). The AMC oversees the
buying and selling of securities made in the trust's name, as well as the new mutual fund
scheme that is floating.

Sponsor in Mutual Funds

A sponsor is a person or organization that resembles the promoter of any business

considering launching a mutual fund company. A sponsor is a person who can launch a
mutual fund on their own or in collaboration with another organization, according to SEBI.
They are able to establish a trust, name the trustees (BOT), and then name the fund manager
or alternatively, the AMC. The trust deed, draft memorandum, and AMC articles of
association must be submitted to SEBI by the sponsor.

22
In order to perform on-site due diligence on the sponsor's business, the SEBI can assess the
sponsor's compliance philosophy and procedures, complaint and grievance management
history, and current client service infrastructure.

Trust and Trustee in Mutual Funds

A sponsor establishes a trust through trust deeds, and the Companies Act of
1956 governs this trust company. These trusts, which are controlled under the Indian Trust
Act of 1882, are domestically managed by the trustees and board of trustees. While
launching the fund, they keep an eye on whether AMC is adhering to the requirements
instead of managing the securities directly.

Each mutual fund house should appoint an AMC with a minimum of four directors, two-
thirds of whom should be independent, and have a minimum of four trustees. The mutual
fund sponsors employ them. The same group that AMC hires cannot appoint them.

Asset Management Companies

AMCs are the firms that oversee the portfolio management of the fund and the
securities it invests in. Trustees or the sponsor choose these organizations. They are
governed by trustees and SEBI, and they have their own board of directors. The majority
of trustees or 75% of unit holders may vote to remove the appointed AMC.

It manages the trust's investments and shouldn't engage in any other line of work outside
of finance. No sponsor or trustee should have a direct relationship with more than 50% of
the AMC's board.

The AMC's responsibilities include managing risk in accordance with AMFI and SEBI
norms, adhering to the investment plan in accordance with the trust deed, and providing
unit holders with all pertinent information. The AMC has the option of hiring outside third-
party services or handling everything themselves.

23
1.12 Regulatory Structure of Mutual Fund in India:

1. Securities and Exchange Board of India (SEBI):

 The main regulating body in India for mutual funds is SEBI.
 To safeguard investor interests, it creates regulations and policies for the mutual
fund business.
 Mutual funds are required to abide by the norms, regulations, and circulars
issued by SEBI.

2. Association of Mutual Fund in India (AMFI):

 The mutual fund sector in India is represented by AMFI, an industry body.
 It is essential to advancing and defending the interests of investors in mutual
funds.

3. Registrar and Transfer Agent (RTAs):

 Mutual funds designate RTAs as organizations to manage investor
transactions, keep track of information, and offer a range of services
pertaining to mutual fund units.
 They serve as a middleman between mutual funds and investors.

4. Custodians:
 The custody of securities and other assets belonging to the mutual fund falls
under the purview of custodians.
 They are essential to maintaining the integrity and security of the assets of
the mutual fund.

5. Asset Management Companies (AMCs):

 Mutual funds are managed and run by AMCs.

24
  They are in charge of coming up with and overseeing mutual fund plans,
choosing investments, and making sure SEBI rules are followed.

6. Trustee Company:
 The mutual fund appoints the trustee company to supervise the AMC's
operations and activities.
 They make certain that the fund runs in the owners' best interests.

7. Mutual Fund Distributors:

 These are organizations or people with the authority to offer investors
mutual fund products.
 They assist with transactions, educate investors, and offer guidance on
mutual fund investments.

8. Investor Services Centers:

 Investors in mutual funds can get assistance with transactions, account
statements, and scheme information from these centers.

25
1.13 MUTUAL FUND COMPANIES IN INDIA:

A considerable segment of the Indian populace is transitioning from traditional

investment methods to mutual funds.

Conventional investment strategies, such gold, real estate, bank savings, etc., are
gradually becoming less and less common. The primary factor making mutual funds a well-
liked investment vehicle is its capacity to yield larger returns than more traditional
approaches to investing, including the ones just discussed.

Industry analysts claim that the Indian mutual fund business, which as of November
30, 2018, managed assets valued at Rs. 24,03,134 crores, has enormous development
potential. Over the course of ten years, the industry's AUM (Assets Under Management)
has increased six times, and this rise is anticipated to continue in the years to come.

Major Mutual Fund Companies in India:

 HDFC Mutual Fund
 ICICI Prudential Mutual Fund
 Reliance Nippon Life Asset Management (RNAM
 SBI Mutual Fund
 Aditya Birla Sun Life Mutual Fund
 Axis Mutual Fund
 Kotak Mahindra Mutual Fund
 UTI Mutual Fund (UTI AMC)
 DSP Mutual Fund
 Franklin Templeton Mutual Fund
 Mirae Asset Mutual Fund
 Nippon India Mutual Fund (formerly Reliance Mutual Fund)
 L&T Mutual Fund
 IDFC Mutual Fund

26
  Edelweiss Mutual Fund
 Mahindra Mutual Fund
 Motilal Oswal Mutual Fund
 Tata Mutual Fund
 Invesco Mutual Fund
 Principal Mutual Fund

In conclusion, investing in mutual fund houses can significantly grow your wealth and help
you achieve your financial goals. Moreover, with the help of professional fund managers,
you can diversify your portfolio and potentially earn higher returns than if you invested in
individual stocks.

However, it's essential to thoroughly research the fund and its management team before
investing and understand the fees and risks associated with mutual funds. Additionally,
consult with a financial advisor to ensure that a mutual fund investment aligns with your
overall financial strategy.

27
 CHAPTER: 2
RESEARCH METHODOLOGY

2.1 Objective
2.2 Scope of the Study
2.3 Limitations of the Study
2.4 Need of the Study
2.5 Sampling Technique
2.6 Sampling Size
2.7 Data Collection

28
2.1 Objectives:

1. To Study about different mutual fund schemes of HDFC and SBI

2. To Analyses which provides better return from HDFC and SBI
3. To Understand the financial performance of HDFC and SBI
4. To know about customer satisfaction

2.2 Scope of the Study:

1. To measure and compare the performance of mutual fund schemes of HDFC and
SBI.
2. To Provide information regarding advantages and disadvantages of mutual fund.
3. To make people aware about the mutual fund.
4. To advice where to invest or not to invest.
5. To provide information regarding types of mutual funds which beneficial for
whom.

2.3 Limitation of the Study:

1. It is difficult to cover all the functions of the company

2. Because of the limited time period, the survey work was conducted in the Thane
region and the sample size was taken as 50 respondents only.
3. Investors chosen for study are not fully aware of all the terms and conditions related
to mutual fund. So, it is very difficult to construct right information from them.
4. I had the shortage of time because of that I was not able to do my study in a good
manner.
5. The study is manly carried out based on the secondary data.
6. The study is based on the historical data and information provided in the
Newspaper, magazines, journals and websites.

29
 7. The accuracy of the study depends on the accuracy of the data provided. Hence had
to depend fully on secondary data only.

2.4 Need of the Study:

1. To compare the risk profiles of mutual fund schemes offered by HDFC and SBI.
2. To assess the expense ratios of mutual fund schemes.
3. To know the risk and return associated with mutual fund.
4. To choose best company for mutual fund between HDFC and SBI.

2.5 Sampling Techniques:

1. Exploratory
2. Descriptive

2.6 Sampling Size:

Sampling refers to the process of selecting a subset of elements from a larger population to
represent and draw conclusions about the entire group. It is a practical method used in
research and statistics to study a portion of a population rather than the entire population.
It also represents how many candidates you have chosen to fill your questionnaire or
candidates upon whom you have studied. I have chosen a sample size of 50 candidates.

2.7 Data Collection:

Source of data

Primary Data: I have used questionnaire as a primary source for collecting data for my
study.

Secondary Data: I have collected my secondary data from websites, journals and research
paper.

30
 CHAPTER: 3
REVIEW OF LITERATURE

Our review of literature on mutual funds reveals that unlike developed countries, the
subject of mutual fund has not got adequate attention in India. Looking upon the type of
studies, our review shows that most of the studies have tried to evaluate the performance
of mutual funds. Accordingly, in our review of literature, we have given more weight to
performance studies.

The review of literature is divided into two parts. First part covers the studies made on
investment performance and other aspects of mutual funds in developed and developing
countries while, second part covers the studies made on the same aspects for mutual funds
in India. Our review of literature is not exhaustive in nature. We have reviewed only
selected studies.

2.1 Studies on mutual funds in developed and developing countries:

The subject of mutual funds has extensively been studied in US and other developed
countries. Going by the volume of literature, we observe that number of studies pertaining
to mutual funds in US are far more than that in any developed and developing countries.
Our review of literature thus, focuses more on studies pertaining to US as compared to
other countries. It is pertinent to mention here that the concept of mutual fund is quite new
in developing countries. As a result, studies pertaining to mutual funds in developing
countries are limited in terms of number and coverage.

In our review of literature on mutual funds pertaining to countries other then India, we will
first look upon studies regarding the performance of mutual funds and later examine the
studies covering other aspects of mutual funds.

31
2.1.1 Investment Performance:

Already in 1966, Sharpe (1966) did a study on mutual fund performance. Findings from
the study showed a positive relationship between low expense ratios and fund performance
(Sharpe, 1966, p. 132). Moreover, Sharpe (1966, p. 133) investigated if fund size affected
fund performance and found a positive relationship, although not statistically significant.
Sharpe (1966) argued if the market is not efficient, bigger funds can access more resources,
achieve better analysis and spend less of their income on the analysis (Sharpe, 1966, p.
131). Therefore, if the market is efficient those funds which spend the least should show
the best performance (Sharpe, 1966, p. 131). However, Sharpe (1996) argued that larger
funds require more analysis (Sharpe, 1966, p. 131). Fund performance can be due to
differences in management or expense ratios (Sharpe, 1996, p. 131). The largest factor for
fund performance in the study was the expense ratio and the Treynor index (Sharpe, 1966,
p. 134). Sharpe concluded by comparing funds to an index and showed that nineteen of the
funds perform better than the index, and fifteen perform worse. Thereby, no conclusions
were drawn whether mutual funds underperform or over perform the market (Sharpe, 1966,
p. 137). The study from Sharpe has provided insight and knowledge about mutual fund
performance and therefore shows a great relevance to include this in our study. Whether
mutual funds underperform or overperform the index variable is an interesting perspective
into our study, since a majority of the previous studies presented below conclude that index
funds perform better. The study has also given us inspiration to include the expense ratio
since Sharpe (1966, p. 134) argued the expense ratio is one of the largest factors for fund
performance.

Jensen (1968) did a study on the mutual fund performance in the period 1955-1964. The
sample was 115 open end mutual funds (Jensen, 1968, p. 396). Jensen argued the difficulty
to measure the performance of the portfolio which is explained by the difficulty of
understanding and measuring risk (Jensen, 1968, p. 396). Findings in the study concluded
that the 115 mutual funds were not, on average, able to predict security prices such that it
would be able to outperform a buy-the-market-and-hold policy (Jensen, 1968, p. 415).
Jensen (1986, p. 415) concluded that mutual funds underperform the market. Since Jensen
(1986, p. 415) concluded the opposite result from what Sharpe (1966, p. 137) did where no

32
conclusions can be drawn regarding index and actively managed funds, this will be an
important perspective into our study.

A study made by Ippolito (1989) was conducted about mutual fund performance of 143
mutual funds between 1965 and 1984 in the US. The findings of the study concluded that
mutual funds, when subtracting fees and expenses, performed better than index funds
(Ippolito, 1989, p. 20). Ippolito (1989, p. 21) discussed the limitations about the time period
of data, since yearly performance-data was used which is also an issue we need to consider
when conducting our study. Further, he argued that if the market is efficient active funds
should access higher return than index funds in order to pay for the extra expenses (Ippolito,
1989, p. 2). As the side purpose in this study is to examine the efficiency of the Swedish
Market this is an interesting aspect. This has also given us the inspiration to continue further
research on the Efficient Market Hypothesis. Ippolito (1989, p. 3) concluded that there is
little evidence that turnover, fees, expenses are correlated with worse returns, excluding
fees and expenses. The method used in the study was to test if the alphas are significantly
positive or negative (Ippolito, 1989, p. 6). This is an inspiration to our study to find the
alpha for the funds and its characteristics. The study concluded that there are no fees,
expenses and turnover ratios that did not have a statistically significant relationship with
alpha (Ippolito, 1989, cited in Fama, 1991, p. 1605). This is an interesting perspective to
our study that the results could present a nonstatistical significance between the variables
and fund performance.

Another research by Gruber (1996, p. 783) discussed the increased popularity of actively
managed mutual funds even though he argued that index funds perform better. According
to Gruber this can be explained by the pricing because funds were sold at net asset value
(Gruber, 1996, p. 784). He argued that performance is predictable due to the management
ability that exists which is not included in the price (Gruber, 1996, p. 784). The findings of
the study showed that investors should buy funds that have low expense ratios (Gruber
1996, p. 794). The study gave us inspiration to include the expense ratio variable in our
study. Also, considering the method, performance has been calculated with monthly return
which has given us the inspiration to collect monthly data. A study about the Swedish
mutual fund industry was made in 2000 by Dahlquist et al. (2000). The study included

33
funds from 1993 to 1997 (Dahlquist et al., 2000, p. 410). Some of the fund characteristics
studied were size, expense ratio, past performance and flows (Dahlquist et al., 2000, p.
409). The study included equity funds, money market funds and bond funds and excluded
funds investing in foreign countries (Dahlquist et al., 2000, p. 411). The results showed
that size has a negative relationship with performance (Dahlquist et al., 2000, p. 419). A
negative relationship between fee and performance was concluded (Dahlquist et al., 2000,
p. 419). Furthermore, findings showed that actively managed funds perform better than
passive funds (Dahlquist et al., 2000, p. 422). This study is interesting since it only focuses
on the Swedish market, thus being an important perspective and inspiration to further
investigate the Swedish market. Also, the time span was different from ours, and this can
be an interesting aspect to see if there will be different results for the different years in
Sweden. However, the study includes different types of funds, in this case we argue for
only included equity funds due to different funds being built up differently and equity funds
most common for the average investor. Moreover, the study has given us inspiration to
include a geographical focus in which country the fund is sold, since Dahlquist et al. (2000)
does not consider this variable. We believe it would be an interesting aspect to include this
variable. Also, conclusion made that active managed funds perform better than passively,
which makes it interesting to go further to examine whether index or active funds perform
better in Sweden.

A study is made on the mutual fund industry in Europe by Otten and Bams (2002). The
study researched the years 1991-1998 (Otten & Bams, 2002, p. 79). The number of funds
in the study was 506 from different European countries (Otten & Bams, 2002, p. 75).
Findings showed that smaller funds excessed higher returns (Otten & Bams, 2002, p. 84).
Conclusions were drawn with a negative relationship with expense ratio, however no
significant relationship was found (Otten & Bams, 2002, p. 99). Looking at persistence 10
in mutual fund performance in Europe, France and Germany are weak while Italy shows
strong persistence (Otten & Bams, 2002, p. 96). The UK funds show significant results
from the persistence analysis and are lowered by excluding momentum effects (Otten &
Bams, 2002, p. 96). According to Otten and Bams (2002) a reason why they are weak and
significant for other countries in Europe could be due to a smaller number of funds, which
we need to consider to allocate the required amount to be able to investigate it. A negative

34
relationship between age and risk-adjusted performance were presented, however only a
significant result was presented for UK and Germany funds, all other results were
insignificant (Otten & Bams, 2002, p. 99). This study will give us a perspective that these
results may differ in countries and therefore it gives us the inspiration to only focus on the
Swedish fund market. Moreover, the study has given us the inspiration to include size and
age as variables.

Chen et al. (2004) did a study on mutual equity funds performance in the US between 1962
and 1999. The study applied regression models to determine fund characteristics in relation
to fund performance. Findings from the study showed that fund size had a negative
relationship with fund performance (Chen et al., 2004, p. 1282). Further, the negative
relationship between fund size and fund performance can be explained by the liquidity
hypothesis, where bigger funds are more liquid which increases their confidence and thus
act more passive than smaller funds (Chen et al., 2004, p. 1289-1299). Conclusions were
drawn that expense ratio and fund performance had a negative relationship (Chen et al.,
2004, p. 1287). Age and fund flow did not have a statistically significant effect (Chen et
al., 2004, p. 1287). Considering management structure, a conclusion was drawn that team-
managed funds underperform compared to solomanged funds (Chen et al., 2004,1297-
1298). This study has given us inspiration to include the characteristics of management
structure. Koellner et al. (2005, p. 54-55) argue the sustainability focus has increased in the
financial environment. Investors have become more aware of social and ecological
consideration when investing in funds (Koellner et al., 2005, p. 54). This has led to an
increase in funds having a sustainability rating (Koellner et al., 2005, p. 55). On the other
hand, the study argued the difficulty for investors to know the different sustainable ratings

(Koellner et al., 2005). The study also mentioned that funds don't necessarily increase fund
performance due to ecological impact (Koellner et al., 2005,). Since sustainability has
become a current topic and is more considered by investors, the study has given us the
inspiration to include a sustainability rating in relation to fund performance.

A study made by Fama and French (2010) investigated active equity funds in the US and
their abnormal returns. The study concluded that it is difficult for active funds to achieve
benchmark-adjusted return when costs are included (Fama & French, 2010,). However,

35
they argued some managers may have the skill to cover the costs, but it is difficult (Fama
& French, 2010, p. 1941). However, when only net returns are considered the active funds,
looking at long performance it can be argued that alpha is negative for most active funds
(Fama & French, 2010, p. 1916). This means that EMH holds to a great extent, however
this study has given the inspiration to test if this is the case on Swedish fund market.

2.2 Study of Mutual Fund in India:

Mutual fund industry has passed more then forty-five years of its presence in India. But,
there exits very few research studies, which examined the performance and other aspects
of mutual funds in India. A brief account of the review of Indian studies on mutual funds
is presented as under:

2.2.1 Investment Performance:

John G. McDonald (1974) examined performance of 123, mutual funds relating it to the
given objective of every fund. The results indicate a positive relationship between objective
and risk measures, i.e., risk increasing with the target becoming more aggressive. Rate of
return generally with aggressiveness and needless to say, there is a positive relationship
between return and risk. The relationship between objective and risk-adjusted indicates that
funds that are more aggressive experienced better results, although only one-third of the
funds do better than the aggregate market.

Sapar Rao Narayan & Madava Ravindran (2003) analyzed the performance of 269 mutual
fund schemes during a market using relative performance index, risk-return analysis,
Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and Fama's. The results
obtained expressed that the majority of the mutual fund schemes within the sample
extraordinarily performed the investor's expectations by giving excessive return over
expected return supported premium for systematic risk and total risk.

36
Sathya Swaroop Debasish (2009) analyzed the overall performance of 23 mutual fund
schemes offered by six private sector mutual funds and three public sector mutual funds
supported as risk-return relationship models and helped to measure it over the period of
time of 13 years (April 1996 to March 2009). The analysis has been made on the basis of
mean, beta, coefficient of determination, Sharpe ratio, Treynоr's ratio and Jensen Alpha.
The general
analysis finalizes that Franklin Templeton and Unit Trust of India are the best performers
and Birla Sun Life, HDFC and LIC mutual funds showing below-average performance
when measured against the risk-return relationship models.

Madhusudhan V. Jambodekar (1996) conducted a study to measure the awareness of MFs

among investors to identify the knowledge influencing the buying decision and therefore
the factors affecting the selection of a specific fund. The study finds out that the Income
Schemes and Open Ended Schemes of mutual funds are more preferred than Growth
Schemes and Close Ended Schemes during the prevailing market conditions.

Garg (2011) analyzed the performance of top ten mutual funds that were selected on the
basis of previous years return. The study found the performance on the basis of return,
standard deviation, beta as well as Treynor, Jensen and Sharpe indexes. The study also
used Carhart’s four-factor model to examine the performanceof mutual funds. The results
reveal that Reliance Regular Saving Scheme Fund has achieved the best final score.

Deepak Agarwal (2011), He analyzed the price mechanism of Indian Mutual Fund
Industry, data related to the fund-manager as well as fund-investor levels. In their study
evaluated the performance of public-sector and private sector mutual funds for the period
of time from 2005 to 2007. Selected funds had been analyzed by using some statistical
tools like mean, standard deviation and coefficient of variance. The performance of all the
funds has shown volatility during the time of study making it difficult to ear mark one
particular fund which could be extraordinary and perform the opposite consistently.

37
Selvam et. al. (2011) analyzed the risk- return relationship of Indian mutual fund schemes.
The study determined that out of thirty-five sample mutual fund schemes, eleven schemes
show significant t values and all other twenty-four sample schemes don’t prove efficient
relationship between the risk and return. Consistent with t-alpha values, thirty-two of the
sample schemes returns aren’t significantly different from their market returns and small
numbers of sample
schemes return is significantly different from their market returns during the study period.

38
 CHAPTER: 4
DATA ANALYSIS & INTERPRETATION

1. Gender of the respondent?

TABLE NO: 5.1
Gender No of Respondents
Male 34
Female 15
Total 49

Source: Primary Data

GENDER

15

34

Male Female Prefer not to say

CHART NO (5.1)

39
Interpretation:

My Survey consist of 50 responses of whom 34 are male and 15 are female.

2. Age of the respondent?

TABLE NO (5.2)
Age Group Number of Respondent
18-25 32
26-35 17
36-45 1
Total 50

Source: Primary Data

35
32

30

25
AGE RESPONSE

20
17

15

10

5
1
0
18-25 26-35 36-45
AGE GROUP

CHART NO (5.2)

Interpretation:

40
Out of 50 responses, 32 individuals fall within the age group of 18-25, 17 individuals fall
within the age group range of 26-35, and 1 individual falls within the age group range of
36-45.

3. How would you rate your current knowledge about mutual fund
investments?
TABLE NO (5.3)

Rate your current knowledge No of Respondent

Very Low 11
Low 8
Moderate 18
High 4
Very High 9

Source: Primary Data

VERY HIGH 9

HIGH 4

MODERATE 18

LOW 8

VERY LOW 11

0 2 4 6 8 10 12 14 16 18 20

41
CHART NO (5.3)

Interpretation:

Out of 50 responses, 11 respondents have very low knowledge about mutual funds, 8
respondents have low knowledge about mutual fund, 18 respondents have moderate
knowledge, 4 respondents have high knowledge and 9 respondents have very high
knowledge about mutual funds.

4. What is your primary financial goal for investing in mutual funds?

TABLE NO (5.4)

Primary financial goal for investing No of Responses

Wealth accumulation 24
Retirement Planning 6
Education Funding 12
Emergency Fund 6

Source: Primary Data

30

25

20

15

10

0
Wealth accumulation Retirement planning Education Funding Emergency Fund

42
CHART NO (5.4)

Interpretation:

Out of 50 respondents, wealth accumulation is the primary financial goal for investing in
mutual funds for 24 respondents, retirement planning is the primary goal for 6 respondents,
education funding is the primary goal for 12 respondents, and for the remaining 6
respondents, the primary goal is building an emergency fund.

5. When it comes to risk, which statement best describes your

preference?
TABLE NO (5.5)
Statements you prefer No of Responses
I prefer low risk, stable returns. 19

I’m open to a balanced mix of risk and 12

return.

I’m willing to take moderate risks for 16

potential higher returns.

I’m comfortable with high-risk 3

investments for maximum returns.

Source: Primary Data

43
 19

16

12

I prefer low risk, stable returns. I'm open to a balanced mix of I'm willing to take moderate I'm comfortable with high-risk
risk and return. risks for potential higher investments for maximum
returns. returns.

CHART NO (5.5)

Interpretation:
Out of 50 respondents, 19 respondents are willing to take low risk for stable returns in
mutual funds, 12 respondents are willing to take a balanced mix of risk and return, 16
respondents are willing to take moderate risk for potentially higher returns, and 3
respondents are comfortable with high-risk investments for maximum returns.

6. How familiar are you with the different types of mutual funds?
TABLE NO (5.6)
Familiarity No of Responses
Not at all familiar 13

Somewhat familiar 17
Moderately familiar 14

Very familiar 6

44
 Source: Primary Data

18 17

16
14
14 13

12

10

8
6
6

0
1

Not at all familiar Somewhat familiar Moderately familiar Very familiar

CHART NO (5.6)
Interpretation:
Out of 50 respondents, 13 respondents are not at all familiar with mutual fund
schemes, 17 respondents are somewhat familiar, 14 respondents are moderately
familiar and 6 respondents are very familiar with mutual fund schemes.

7. What is your preferred investment time horizon for mutual funds?

TABLE NO (5.7)
Investment Time horizon No of Responses
Short-term (1-3 years) 10
Medium-term (3-5 years) 18
Long-term (5+ years) 22

Source: Primary Data

45
 TIME HORIZON

Short-term (1-3 years)

20%

Long-term (5+ years)

44%

Medium-term (3-5
years)
36%

CHART NO (5.7)

Interpretation:
Out of 50 responses, 20% respondents want to invest in short-term time horizon, 36%
respondents want to invest in Medium-term time horizon and remaining 44% respondents
prefer to invest in Long-term time horizon.

8. What percentage of your monthly income are you willing to invest

in mutual funds?
TABLE NO (5.8)
Percent to Invest of your No of Responses
Monthly Income
Less than 5% 5
5-10% 25
10-15% 13
15% or more 7

46
 Source: Primary Data

Monthly Income

Less than 5% 5-10% 10-15% 15% or more

CHART NO (5.8)

Interpretation:
Out of 50 responses, 5 respondents are willing to invest less than 5% of their monthly
income in mutual funds, 25 respondents are willing to invest 5-10% of their monthly
income, 13 respondents are willing to invest 10-15% of their monthly income, and the
remaining 7 respondents are willing to invest 15% or more of their monthly income.

9. Which type of mutual fund scheme are you more inclined towards?
TABLE NO (5.9)
Types of Mutual Funds No of Responses
Equity Funds 30
Debt Funds 5
Hybrid Funds 14

Source: Primary Data

47
 Types of Mutual Funds

30

14

EQUITY FUNDS DEBT FUNDS HYBRID FUNDS

CHART NO (5.9)
Interpretation:
Out of 50 responses, 30 respondents are willing to invest in Equity funds, 5
respondents are willing to invest in Debt funds and 14 respondents are willing to
invest in Hybrid funds. Based on my data people prefer Equity funds more then
debt and hybrid funds
.
10. Have you consulted with a financial advisor regarding your
mutual fund investments?
TABLE NO (5.10)
Yes No
18 32

Source: Primary Data

48
 Yes No

CHART NO (5.10)

Interpretation:
Out of 50 responses, 18 respondents have consulted with a financial advisor
regarding their mutual funds, and the remaining 32 respondents have not yet
consulted with a financial advisor.

11. How would you rate your comfort level with market fluctuation?
TABLE NO (5.11)
Level of market fluctuation No of Responses
Very Uncomfortable 3
Uncomfortable 7
Neutral 29
Comfortable 9
Very Comfortable 2

Source: Primary Data

49
 35

30
29
25

20

15

10
9
5 7

3 2
0
Very Uncomfortable Uncomfortable Neutral Comfortable Very Comfortable

CHART NO (5.11)

Interpretation:
Out of 50 responses, 3 respondents are very uncomfortable with market fluctuations, 7
respondents are uncomfortable, 29 respondents have responded Neutral, 9 respondents are
comfortable and 2 respondents are Very comfortable with market fluctuation.

12. Are you interested in mutual funds that focuses on specific sectors
or industries?
TABLE NO (5.12)
Yes No Not sure
24 10 16

Source: Primary Data

50
 Series1

30

25

20

15

10

0
YES NO NOT SURE

CHART NO (5.12)
Interpretation:
Out of 50 responses, 24 respondents are interested in mutual funds that focus on
specific sector or industry, 10 respondents are Not interested and remaining 16
respondents are Not sure about their interest.

13. Which of the following best describes your investment knowledge

sources?
TABLE NO (5.13)
Knowledge Sources No of Responses
Financial news and articles 7
Professional advice from financial 9
advisors
Online forum and communities 5
Self-education through books and 5
courses

51
 Combination of the above 24

Source: Primary Data

30

25
24
20

15

10
9
5 7
5 5

0
Financial news and Professional advice Online forums and Self-education through Combination of the
articles from financial advisors communities books and cources above

CHART NO (5.13)
Interpretation:
Out of 50 responses, 7 respondents acquire knowledge about mutual funds from
financial news and articles, 9 respondents seek advice from financial advisors, 5
respondents gather knowledge from online forums and communities, 5 respondents
educate themselves through books and courses, and the remaining 24 respondents
utilize all sources to gather knowledge about mutual funds.

14. What is your attitude towards taxation on mutual fund returns?

TABLE NO (5.14)
I prioritize tax-efficient investment 21
strategies.
Tax considerations are important but not 23
the primary focus.

52
 I don't consider tax implications when 6
making investment decisions.

Source: Primary Data

I don't consider tax implications when making investment

decisions.

Tax considerations are important but not the primary

focus.

I prioritize tax-efficient investment strategies.

0 5 10 15 20 25

CHART NO (5.14)
Interpretation:
Out of 50 responses, 21 respondents indicated that they prioritize a tax-efficient
investment strategy, 23 respondents stated that tax considerations are important but
not their primary focus, and the remaining 6 respondents mentioned that they don't
consider tax implications.

15. In Case of an Unexpected financial need, how likely are you

redeem your mutual fund investment?
TABLE NO (5.15)
Likely to Redeem No of Respondents
1 5

53
 2 7
3 25
4 11
5 2

Source: Primary Data

25

11

7
5

1 2 3 4 5

TABLE NO (5.15)

Interpretation: Out of 50 respondents, 5 respondents have selected option 1, 7

respondents have selected have selected option 2, 25 respondents have selected option 3
i.e. neutral, 11 respondents have selected option 4 and 2 respondents have selected option
5.

16. How often do you review your Investment portfolio?

TABLE NO (5.16)

How Often do you review your No of respondents

portfolio
Monthly 17
Quarterly 17

54
 On the daily basis 9
Semi-annually 7
Annually 3
Rarely/Never 3

Source: Primary Data

18

16

14

12

10

0
Monthly Quarterly On the daily basis Semi-annually Annually Rarely/Never

CHART NO (5.16)
Interpretation: Out of 50 responses, 17 respondents review their portfolio
monthly, 11 respondents review their portfolio quarterly, 9 respondents review their
portfolio on daily basis, 7 respondents review their portfolio semi-annually, 3
respondents review their portfolio annually, and remaining 3 review their portfolio
rarely.

17. Are you open to exploring newer or lesser-known mutual fund

schemes, or do you prefer established one?
TABLE NO (5.17)

Open to exploring newer options 21

Prefer established and well-known 29
schemes

Source: Primary Data

55
 29

21

Open to exploring newer options Prefer established and well-known schemes

CHART NO (5.17)
Interpretation: Out of 50 responses, when asking about are they open to exploring
newer or lesser-known mutual funds, 21 responded that they are open to newer
options and remaining 29 responded that they prefer established and well-known
schemes.

18. In future would you like to Invest in Mutual Fund?

TABLE NO (5.18)

Yes 41
No 1
Maybe 8

Source: Primary Data

56
 16%

2%
Yes
No
Maybe

82%

CHART NO (5.18)
Interpretation: Out of 50 responses, when asking if in future do they invest in
mutual funds, 82% responded that they are interested in investing and 2%
responded No they are not going to invest and 16% responded that they are not
sure.

57
 CHAPTER 5
FINDINGS AND SUGGESTIONS

FINDINGS:

 This study has provided a comparative analysis of mutual fund schemes of HDFC
AND SBI
 By examined various factors such as age, gender, their knowledge about mutual
funds, their interest, how much income they would like to invest in mutual funds
etc. several key findings have emerged.
 The majority of individuals within this demographic are young males, typically
ranging between the ages of 18 and 25. This age group is renowned for its high
level of activity and energy. It's a time of life when individuals are more inclined
to take risks and explore opportunities. Consequently, it's often regarded as the
optimal period for investing and generating income for future endeavors. (Chart
no 5.1 & 5.2)
 Upon analysis, it becomes evident that a considerable portion of the population
lacks familiarity with mutual funds, yet there exists a keen interest in understanding
them better. For many, the primary motivation for investing in mutual funds is
wealth accumulation, driven by the desire for a more prosperous future and an
elevated quality of life. Interestingly, when confronted with the prospect of risk,
individuals exhibit a willingness to accept moderate levels of risk in exchange for
potentially higher returns. This inclination is reflective of contemporary attitudes
toward wealth acquisition, where the aspiration for financial gain is tempered by a
desire to minimize exposure to uncertainty and volatility. (Chart no 5.3, 5.4 & 5.5)
 In discussions about their investment preferences, a notable trend emerges wherein
a majority express a willingness to allocate only 5-10% of their monthly income to
mutual funds. Despite this openness to investment, there exists a palpable unease
regarding market fluctuations. The inherent volatility of markets introduces an
element of unpredictability, causing concern among investors. This apprehension
stems from the understanding that market fluctuations can lead to fluctuations in

58
 the invested amount, thereby impacting potential returns. Consequently,
individuals exhibit a preference for stability and predictability in their investment
endeavors, as they strive to navigate the complexities of financial planning with
confidence and security. (Chart no 5.8, 5.11)
 Research reveals that while a considerable portion of the population is well-
informed about mutual funds and interested in investing, the utilization of financial
advisors remains relatively low. Surprisingly, a minority of individuals have sought
guidance from professional financial advisors for their mutual fund investments.
Rather than consulting experts, many have opted to gather information from
financial news sources and articles. This reliance on alternative sources reflects a
growing trend where individuals prefer to educate themselves independently,
potentially driven by accessibility to information and a desire for self-reliance in
financial decision-making. (Chart No 5.13)

SUGGESTIONS:
 In the dynamic world of investment, young males aged 18 to 25 represent a
demographic known for their vigor and willingness to take risks. As they embark
on their journey towards financial independence, it's essential to start with
education. By immersing themselves in resources that cover investment
fundamentals and risk management strategies, they can build a solid foundation for
informed decision-making. Setting clear long-term goals, whether it's saving for
education, homeownership, or retirement, provides a roadmap for investment
choices. Diversifying investments across various asset classes like stocks, bonds,
and real estate can mitigate risk and optimize returns over time. For those eager to
embrace risk, allocating a portion of investments to higher-risk assets such as
growth stocks or cryptocurrencies may offer potential for higher rewards, but with
caution. While independence is valued, seeking guidance from financial advisors
can provide personalized insights and ensure investment strategies align with
individual goals. Leveraging technology through investment platforms and apps
streamlines the process, while staying informed with market trends and economic
indicators enables adaptability. Ultimately, patience and discipline remain

59
 paramount, as investing is a long-term endeavor that rewards perseverance and
strategic planning.
 To address the prevalent lack of familiarity with mutual funds among a
considerable portion of the population, proactive measures must be taken to
promote education and understanding. Initiating educational campaigns and
financial literacy programs can play a pivotal role in increasing awareness and
empowering individuals to grasp the concept and benefits of mutual fund
investments. By making information easily accessible through digital platforms and
encouraging engagement with certified financial advisors, individuals can gain
personalized guidance tailored to their financial goals and risk appetite.
Emphasizing effective risk management strategies, such as diversification and
maintaining a long-term perspective, can help individuals navigate uncertainties
and volatility associated with mutual fund investments. Transparent
communication about fund performance and fees fosters trust and enables
individuals to make informed decisions aligned with their aspirations for wealth
accumulation and an enhanced quality of life. Moreover, promoting the idea of
starting small and gradually increasing investments can alleviate concerns and
encourage broader participation in mutual fund investments. By addressing barriers
and misconceptions, stakeholders can pave the way for a more inclusive and
informed approach to mutual fund investing, ultimately empowering individuals to
secure their financial futures.

CONCLUSION:
After an in-depth comparative analysis of mutual fund schemes offered by HDFC
and SBI, several key insights have emerged. Both companies offer a diverse range
of mutual fund options catering to various investor needs and risk appetites.
HDFC's schemes have demonstrated consistent performance over the years, with
some funds outperforming their benchmarks and peers. On the other hand, SBI's
schemes exhibit stability and resilience, providing investors with steady returns
even during market downturns.

60
However, it is important to note that each company has its own set of strengths and
weaknesses. HDFC's funds might have higher expense ratios compared to SBI, but
they often justify this through superior returns and active management strategies.
SBI, on the other hand, focuses on offering cost-effective options with moderate
returns, making them suitable for conservative investors.

Investors should carefully assess their investment objectives, risk tolerance, and
time horizon before selecting a mutual fund scheme. While HDFC may be more
suitable for those seeking potentially higher returns and are willing to bear slightly
higher expenses, SBI might be preferable for risk-averse investors looking for
stable, long-term growth with lower costs.

Ultimately, the choice between HDFC and SBI mutual fund schemes depends on
individual preferences and financial goals. It is recommended that investors consult
with a financial advisor to make informed decisions tailored to their specific needs.

61
 REFERENCE

BIBLIOGRAPHY/WEBOLIGRAPHY

 LITERATURE REVIEW
1. Sharpe (1966)
2. John G. McDonald (1974)
3. Sapar Rao Narayan & Madava Ravindran (2003)
4. Madhusudhan V. Jambodekar (1996)
5. Sathya Swaroop Debasish (2009)
6. Garg (2011)
7. Deepak Agarwal (2011)
8. Selvam et. al. (2011)

 BIBLIOGRAPHY:
BOOKS
1. Common sense on mutual funds: New Imperatives for the Intelligent
Investor.
Author- John.C. Bogle
2. The Mutual fund Industry
Author- R. Glenn Hubbard
3. 108 Questions & Answers on Mutual Funds & SIP

 WEBOLIOGRAPHY:

a. https://www.researchgate.net/publication/359984845_Comparative_Anal
ysis_of_Mutual_Funds_Schemes_-
A_Study_on_Top_5_Midcap_Equity_Funds

62
b. https://www.vnsgu.ac.in/iqac/naac/c1/c13/c134/files/12sYFXIAO5OpbO
O6X9JBXSLDSypIiR8ZC.pdf
c. https://www.researchgate.net/publication/359984845_Comparative_Anal
ysis_of_Mutual_Funds_Schemes_-
A_Study_on_Top_5_Midcap_Equity_Funds
d. https://www.researchgate.net/publication/368685126_Comparative_Study
_of_Various_Mutual_Funds_Schemes_in_India
e. https://www.jetir.org/papers/JETIR2302302.pdf
f. https://economictimes.indiatimes.com/mf/analysis/analysing-
performance-of-your-mf-scheme-using-comparative-
analysis/articleshow/58787342.cms?from=mdr0

63
 ANNEXURE A

(QUESTIONARE)

1. Name
2. Gender
3. Age
4. How would you rate your current knowledge about mutual fund
investments? (1 is being very likely...5 is very unlikely)

o Very Low
o Low
o Moderate
o High
o Very High

5. What is your primary financial goal for investing in mutual funds?

 Wealth accumulation
 Retirement Planning
 Education Funding
 Emergency Fund

6. When it comes to risk, which statement best describes your preference?

 I prefer low risk, stable returns.

 I'm open to a balanced mix of risk and return.
 I'm willing to take moderate risks for potential higher returns.
 I'm comfortable with high-risk investments for maximum returns.

7. How familiar are you with the different types of mutual funds?
 Not at all familiar
 Somewhat familiar
 Moderately familiar

64
  Very familiar
8. What is your preferred investment time horizon for mutual funds?
 Short-term (1-3 years)
 Medium-term (3-5 years)
 Long-term (5+ years)

9. What percentage of your monthly income are you willing to invest in

mutual funds?
 Less than 5%
 5-10%
 10-15%
 15% or more

10. Which type of mutual fund scheme are you more inclined towards?
 Equity funds
 Debt funds
 Hybrid funds

11. Have you consulted with a financial advisor regarding your mutual fund
investments?
Yes
No

12. How would you rate your comfort level with market fluctuations? (1 is
being very uncomfortable...5 is very comfortable)
 Very Uncomfortable
 Uncomfortable
 Neutral
 Comfortable
 Very Comfortable

65
13. Are you interested in mutual funds that focus on specific sectors or
industries?
 Yes
 No
 Not Sure

14. Which of the following best describes your investment knowledge sources?
 Financial news and articles
 Professional advice from financial advisors
 Online forums and communities
 Self-education through books and courses
 Combination of the above

15. What is your attitude towards taxation on mutual fund returns?

 I prioritize tax-efficient investment strategies.
 Tax considerations are important but not the primary focus.
 I don't consider tax implications when making investment
decisions.

16. In case of an unexpected financial need, how likely are you to redeem your
mutual fund investments? (1 is being very likely...5 is very unlikely)
 Very Likely
 Likely
 Neutral
 Unlikely
 Very unlikely

17. How often do you review your investment portfolio?

 Monthly
 Quarterly
 On the daily basis

66
  Semi-annually
 Annually
 Rarely/Never

18. Are you open to exploring newer or lesser-known mutual fund schemes, or
do you prefer established ones?
 Open to exploring newer options
 Prefer established and well-known schemes

19. In future would you like to invest in mutual fund?

 Yes
 No
 Maybe

67