Internship Report

On

SYSTEMATIC INVESTMENT PLAN (SIP)

IN
MUTUAL FUND

Submitted to the Biju Patnaik University of Technology, Odisha

in fulfillment of requirement for the award of
Master of Business Administration
(2021-22).
Submitted by- Internal Guide-

Chandrakant Rana Singh Asst. Prof. Dibyajyoti Sahoo

(HM School of Business Mgmt., Khordha)

HM SCHOOL OF BUSINESS MANAGEMENT,

At- Phulachhanchuni, Po- Gudum, Dist- Khordha (Odisha)-752056
E-mail: hmsbmodisha@gmail.com
1
 Letter of Transmittal

Date: 18th January, 2023

To
Mr. Dibyajyoti Sahoo
(Asst. Professor)

HM School of Business Management, Khordha

Subject: Submission of Internship Report “Systematic Investment Plan (SIP) in Mutual Fund”

Dear Sir,
I would like to thank you for supervising and helping me throughout my internship program in
completing my MBA. This internship program has given me opportunity to experience one of

the latest and unexplored areas of business and has expanded my present knowledge manifold.

This report is a study on ‘Systematic Investment Plan (SIP) in Mutual Fund’ with special
focusing on organizational as well as managerial skill with which I was assigned during my
internship. The report also contains in-depth review of the human resource practices in the
Systematic Investment Plan (SIP) in Mutual Fund.

Please feel free in contacting me if you have any queries. I would be glad to provide any
clarification regarding the project.

Thank you.

Sincerely,

Chandrakant Rana Singh

Master in Business Administration (MBA)

( HM School of Business Management, Khordha )

2
 CERTIFICATE

This is to certify that the report entitled: “SIP IN MUTUAL FUND” Submitted by Mr.
Chandrakant Rana Singh Department of finance, HM School of Business Management,
Khordha, Odisha towards partial fulfilment of the requirement for the award of the Degree of Master
in Business Administration (MBA) bonafide record of the work carried out by her under my
supervision and guidance.

Signature Internal Guide Signature Extranal Guide

Name: Asst. Prof. Dibyajyoti Sahoo Name: Mr.Bipin Dutta
HM School of Business Management Odisha Capital Market
Place: Khordha Place: Bhubaneswar
Date: Date:

3
 ACKNOWLEDGEMENT

I take this proud privilege to acknowledge gracefully the help we received from different sources in
preparation of this report.

I offer my heartfelt thanks to Asst. Prof. Dibyajyoti Sahoo, Dept. of finance, HM School of Business
Management, Khordha, Odisha for encouragement and valuable suggestions, which he extended, to us
from time to time in course of completion of our Management In practice. I deeply indebted to Mr.
Bipin Dutta, Manager, Odisha Capital Market (formally known as Bhubaneswar Stock Exchange) who
rendered inestimable support in addition to his guidance, critical interest and kind encouragement
throughout the course of this work.

Finally, we acknowledge the help of various persons in the office as well as in the college for the
suggestions rendered from time to time towards the preparation of this report.

Signature Internal Guide

Name: Asst. Prof. Dibyajyoti Sahoo
HM School of Business Management
Place: Khordha
Date:

4
 Declaration

I hereby declare that this project report title “SIP in mutual fund” submitted by me is a bonafide work
undertaken by me and it is not submitted to any other institution or university for the award of any
degree or diploma or certificate or published any time before.

Chandrakant Rana Singh

Master in Business Administration (MBA)

(HM School of Business Management, Khordha )

Table of Content

5
 Page no
Executive Summary
Chapter 1 Introduction of Report 2
1.1 Introduction 2
1.2 Objectives 2
1.3 Methodology 2-5
1.4 Scope 5
1.5 Limitations 5
Chapter 2 Organizational overview 6
2.1 Overview 7
2.2 Vision, Mission & Values 8
2.3 Product and Services 8
2.4 History 9
Chapter 3 Job Description 10
3.1 Job Description 11
3.2 Personal Experiences 12-13
Chapter 4 Recruitment and Selection 14
4.1 Recruitment and Selection Process 15-22
4.2 SWOT Analysis 22-25
Chapter 5 Analysis and Findings 26
5.1 PLEST Analysis 27-28
5.2 Job Satisfaction 29-30
5.3 Finding 31-32
Chapter 6 Recommendations and conclusion 33
6.1 Conclusion 34
6.2 Recommendations 35
References 36
Appendix

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 Executive summary

As part of my MBA program, I have completed my three months internship program from a
well known industry named “LUDIFU.COM”. During my internship period in “LUDIFU.COM”, I
have gained valuable knowledge and experience in the field of Human Resource. So based
on my learning and experience from the organization I have completed my internship report
on the recruitment and selection activities of “LUDIFU.COM”. In this paper I have tried to
focus and analyze the core Human Resource functions of “LUDIFU.COM” and what kind of
value added services they are providing to their employees. In the report I have discussed
what kind of activities I have done describes in details. The services include CV screening,
Data entry, Job posting, Assist in interviews, Help candidate in the time of joining etc.

In CV screening I have basically discussed about the Executive Search of candidates from
BD jobs or other relevant sources .In LUDIFU.COM joining process is very strict and
confidential. In case of training I have tried to explain the different area of recruitment
and selection. These are: current situation of recruitment, how to advertise and attract
candidates, succession planning etc. In methodology I have mentioned 30 population size
and 7 sample size. In recommendations how the industry can improve and also give some
suggestions. In this report the problems, scope, limitations and various analyses are also
done.

In this report I have also tried to analyze the benefits of these services as well as my learning
from the organization. From my personal view the learning aspect was fruitful and the
experience there will help me in the future. I have learnt many aspects of HR, working
with different sections of the company. Mainly working with recruitment and selection
section of the company was a great learning opportunity.

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 NEED FOR THE STUDY:
The main purpose of doing this study is to learn about the activities of mutual fund
investment objective, benefit for the investors and its contribution to economy as a whole.

The study also includes learning in details about the industry write from inception till date
and also to forecast its feature.

The study covers understanding different schemes of mutual fund including mode of
investment i.e., lump sum or systematic investment plan. And to arrive at a conclusion
how those schemes are beneficial to the investors.

OBJECTIVE OF THE STUDY:

 To give an idea about the regulations of mutual funds.
 To give a brief idea about the benefits available from mutual fund investment.
 To give an idea of the types of schemes available.
 To discuss about the market trends of SIP.
 To study some of the SIP schemes.
 Explore the recent developments in the mutual fund in India.

8
 INTRODUCTION
A Mutual Fund pools the money of people with certain investment goals. The money
invested in various securities depending on the objectives of the mutual fund scheme and
the profits (or loss) are shared among investors’ in proportion to their investment.

Investments in securities are spread across a wide cross-section of industries and sectors.
Diversification reduces the risk because all stocks may not move in the same direction in
the same proportion at the same time.

Mutual fund issues units to the investors’ in accordance with quantum of money invested
by them. Investors’ of mutual funds are known as unit holders. The profits or losses are
shared by the investors’ in proportion to their investment.

The mutual funds normally come out with a number of schemes with different investment
objectives which are launched from time to time. A mutual fund is required to be
registered with Securities and Exchange Board of India (SEBI) which regulates securities
markets before it can collect funds from the public.

A Mutual fund is a trust that pools the savings of a number of investors’ who share a
common financial goal. The money collected from investors’ is invested in capital market
instrument such as shares, debentures and other securities.

The income earned through these investments and the capital appreciations realized are
shared by its unit’s holder in proportion to the number of units owned by them. Thus a
Mutual Fund is the most suitable investment to the common man as it offers an
opportunity, to invest in a diversified, professionally managed basket of securities at
relatively low cost. Mutual funds can be invested in many different kinds of securities. The
most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock
funds invest primarily in the shares of a particular industry, such as technology or utilities.
These are known as sector funds. Bond funds can vary according to risk (e.g., high-yield or
junk bonds, investment-grade corporate bonds), type of issuers (e.g., government agencies,
corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock
and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and
foreign securities (global funds), or primarily foreign securities (international funds).

9
Most mutual funds' investment portfolios are continually adjusted under the supervision of
a professional manager, who forecasts the future performance of investments appropriate
for the fund and chooses those which he or she believes will most closely match the fund's
stated investment objective. A mutual fund is administered through a parent management
company, which may hire or fire fund managers. Mutual funds are liable to a special set of
regulatory, accounting, and tax rules. Unlike most other types of business entities, they are
not taxed on their income as long as they distribute substantially all of it to their
shareholders. Also, the type of income they earn is often unchanged as it passes through to
the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-
free to the shareholder. Taxable distributions can be either ordinary income or capital
gains, depending on how the fund earned those distributions. A mutual is a set up in the
form of trust, which has sponsor, trustee, assets management company (AMC) and
custodian. Sponsor is the person who acts alone or in combination with another body
corporate and establishes a mutual fund.

Sponsor must contribute at least 40% of the net worth of the investment managed and meet
the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual
Funds) regulations, 1996. The sponsor is not responsible or liable for any loss or shortfall
resulting from the operation of the schemes beyond the initial contribution made by it
towards setting up of Mutual Fund. The Mutual International Journal of Research in
Management ISSN 2249-5908 Issue2, Vol. 2 (March-2012) Page 63 Fund is constituted as
a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor.
Trustee is usually a company (corporate body) or a board of trustees (body of individuals).
The main responsibility of the trustee is to safeguard the interest of the unit holders and
also ensure that AMC functions in the interest of investors’ and in accordance with the
Securities and Exchange Board of India (Mutual Fund) Regulations 1996 the provisions of
the Trust deed and the offer Document of the respective schemes.

The AMC is appointed by the Trustees as the investment Manager of the Mutual Fund.
The AMC is required to be approved by SEBI to act as an asset management company of
the Mutual Fund. The AMC if so authorized by the Trust Deed appoints the Registrar and
Transfer Agent to agent the mutual fund. The registrar processes the application form,
redemption requests and dispatches account statements to the unit holders. The Registrar
and Transfer agent also handles communications with investors’ and updates investor
records.
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2.1 Definition
A mutual fund is a professionally managed investment scheme, usually run by an asset
management company that brings together a group of people and invests their money in
stocks, bonds and other securities.

What is a Mutual Fund?

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and
investing funds in securities in accordance with objectives as disclosed in offer document.
Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced.

Diversification reduces the risk because all stocks may not move in the same direction in
the same proportion at the same time.

Mutual fund issues units to the investors in accordance with quantum of money invested
by them.

Investors of mutual funds are known as unit holders.The profits or losses are shared by the
investors in proportion to their investments

The mutual funds normally come out with a number of schemes with different investment
objectives which are launched from time to time.

A mutual fund is required to be registered with Securities and Exchange Board of India
(SEBI) which regulates securities markets before it can collect funds from the public.

11
 Structure of Mutual Funds

The Mutual Funds in India are regulated by SEBI MF Regulations, 1996. Under the
regulations mutual fund is formed as a Public Trust under the Indian Trusts Act, 1882.
These regulations stipulate a three tiered structure of entities- sponsor (creation), trustees,
and Asset Management Company (fund management) – for carrying out different
functions of a mutual fund, but place the primary responsibility on the trustees.

12
1. The Fund Sponsor – SEBI regulations define Sponsor as any person who either
itself or in association with another body corporate establishes a mutual fund. Sponsor
sets up a mutual fund to earn money by doing fund management through its
subsidiary company which acts as Investment manager of the fund.
 A sponsor can be compared with a promoter of a company.
 Sponsors activities include setting up a Public Trust under Indian Trust Act,
1882 (the mutual fund), appointing trustees to manage the trust with the
approval of SEBI, creating an Asset Management Company under Companies
Act, 1956 (the Investment Manager) and getting the trust registered with
SEBI.
2. Trustees – The trust is created through a document called the trust deed which is
executed by the fund sponsor in favor of the trustees.
 Trustees manage the trust and are responsible to the investors in the mutual
funds. They are the primary guardians of the unit-holders funds and assets.
 Trustees can be formed in either of the following two ways -Board of
Trustees, or a Trustee Company. The provisions of Indian Trust Act, 1882,
govern board of trustees or the Trustee Company. A trustee company is also
subject to provisions of Companies Act, 1956.
3. Asset Management Company – The Asset Management Company (AMC) is the
investment Manager of the Trust.
 The sponsor, or the trustees is so authorized by the trust deed, appoints the
AMC as the “Investment Manager” of the trust (Mutual Fund) via an
agreement called as ‘Investment Management Agreement’.
 An AMC is a company registered under the Companies Act, 1956. Sponsor
creates the asset management company and this is the entity, which manages
the funds of the mutual fund (trust).
 The mutual fund pays a small fee to the AMC for management of its fund.
The AMC acts under the supervision of Trustees and is subject to the
regulations of SEBI too.
4. Custodian – Though the securities are bought and held in the name of trustees, they
are not kept with them.
 The responsibility of safe keeping the securities is on the custodian. Securities,
which are in material form, are kept in safe custody of a custodian and

13
 securities, which are in “De-Materialized” form, are kept with a Depository
participant, who acts on the advice of custodian.
 Custodian performs a very important back office operation. They ensure that
delivery has been taken of the securities, which are bought, and that they are
transferred in the name of the mutual fund.
 They also ensure that funds are paid out when securities are bought.
Custodians keep the investment account of the mutual fund.
 They collect and account for the dividends and interest receivables on mutual
fund investments.
 They also keep track of various corporate actions like bonus issue, rights
issue, and stock split; buy back offers, open offer etc and act on these as per
instructions of the Investment manager.
Responsibility of custodian Following are the responsibilities of a
custodian:
I. Provide post-trading and custodial services to the Mutual Fund;
II. Keep securities and other instruments belonging to the Scheme in safe custody;
III. Ensure smooth inflow/outflow of securities and such other instruments as and
when necessary, in the best interests of the unit holders;
IV. Ensure that the benefits due to the holdings of the Mutual Fund are recovered; and
V. Be responsible for loss of or damage to the securities due to negligence on its part
or on the part of its approved agents.
The Custodian normally charge portfolio fee, transaction fee and out-of -pocket expenses
in accordance with the terms of the Custody Agreement and as per any modification made
thereof from time to time.
5. Other constituents – Regulation imposes responsibility on the trustees to ensure that
the AMC has proper system and procedures in place and has appointed key personnel
and other constituents like R&T agents, brokers etc.
1. Registrar and transfer agent – A mutual fund manages money of many unit-
holders across cities and towns of the country. Investor servicing not only
becomes important but challenging as well. This would typically include
processing investors’ application, recording the details of investors, sending
them account statements and other reports on periodical basis, processing
dividend payouts, making changes in investor details and keeping investor

14
 records updated by adding details of new investors and by removing details of
investors who withdraw their funds from the mutual funds. It is very impractical
and expensive for any mutual fund to have adequate workforce all over India for
this purpose. Instead, they use entities called as Registrars and transfer agents,
which generally provide services to many mutual funds. This ensures quality
services across all location and keeps the costs lower for the unit-holders.
2. Auditor – Investor money is held by the trustees in trust. Regulation has ensured
proper accounting norms to ensure fair and responsible record keeping of
investor’s money. Separate books of account are maintained for each scheme of
the mutual fund and individual annual report is prepared. The books of accounts
and the annual reports of the scheme are audited by auditors. The AMC is a
company under companies act, 1956 and therefore is required to get its accounts
audited as per the provisions of the companies act. In order to maintain high
standards of integrity and transparency regulations stipulate that the auditor of
the mutual fund schemes and the auditor of the AMC will have to be different.
3. Brokers – Brokers are registered members of the stock exchange whose services
are utilized by AMCs to buy and sells securities on the stock exchanges. Many
brokers also provide the Investment Manager (AMC) with research reports on
the performance of various companies, sector and market outlook, investment
recommendations etc. Regulations have imposes restrictions on the involvement
of brokers in the investment process of any mutual fund in the following ways-
a. If a broker is related to the sponsor or its associate, then the AMC shall not
purchase or sell securities through that broker in excess of 5% of the aggregate
of purchase and sale of securities made by the mutual fund in all its schemes. b.
For transactions through any other broker the AMC can exceed the limit of 5%
provided it has recorded justification in writing and report of such exceeding has
been sent to the trustee on a quarterly basis

15
Regulation
Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in
India. SEBI is also apex regulator of capital markets. Issuance and trading of capital
market instruments and the regulation of capital market intermediaries is under the
purview of SEBI. Apart from SEBI, mutual funds follow the regulations of other
regulators in limited manner.

1. RBI – RBI acts as regulator of sponsors of bank-sponsored mutual funds, especially

in case of funds offering guaranteed/assured returns. No mutual fund is allowed to
bring out a guaranteed returns scheme without taking approval from RBI
2. Companies Act, 1956 – Asset Management Company and Trustee Company will be
subject to the provisions of the Companies Act, 1956.
3. Stock Exchange – Closed-end funds might list their units on a stock exchange. In
such a case, the listings are subject to the listing regulation of stock exchanges.
Mutual funds have to sign the listing agreement and abide by its provisions, which
primarily deal with periodic notifications and disclosure of information that may
impact the trading of listed units.
4. Indian Trusts Act, 1882 – Recall that mutual funds are formed and registered as a
public trusts under the Indian trusts Act, 1882. Hence, they have to follow the
provisions of the Indian Trusts Act, 1882.
5. Ministry of Finance (MoF) – The finance ministry is the supervisor of both the RBI
and SEBI. The MoF is also the appellate authority under SEBI regulations. Aggrieved
parties can make appeals to the MoF on the SEBI rulings relating to mutual funds.
 

16
CLASSIFICATION OF MUTUAL FUNDS

Indian Scenario of Mutual Funds

The inception of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The basic objective at that time was to attract the small investors
or retail investors for investment and it was made possible through the collective efforts of
the Government of India and the Reserve Bank of India. The history of mutual fund
industry in India can be better understood divided into following stages:
Stage 1. Establishment and Growth of Unit Trust of India - 1964-87
Unit Trust of India enjoyed complete monopoly when it was established in the year 1963
by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to
operate under the regulatory control of the RBI until the two were delinked in 1978 and the
entire control was transferred in the hands of Industrial Development Bank of India
(IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64),
which attracted the largest number of investors in any single investment scheme over the
years. UTI launched more innovative schemes in 1970s and 80s to suit the needs of
different investors. It launched ULIP in 1971, six more schemes between1981-84,
Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master
share (India’s first equity diversified scheme) in 1987 and Monthly Income Schemes
(offering assured returns) during 1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs 6700 crores.
Stage II. Entry of Public Sector Funds - 1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering the
market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of
India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed
by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India
Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under
management of the industry increased seven times to Rs. 47,004 crores. However, UTI
remained to be the leader with about 80% market share.
Stage III. Emergence of Private Sector Funds - 1993-96
The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to enter
the mutual fund industry in 1993, provided a wide range of choice to investors and more

17
competition in the industry. Private funds introduced innovative products, investment
techniques and investor-servicing technology. By 1994-95, about 11 private sector funds
had launched their schemes.
Stage IV. Growth and SEBI Regulation - 1996-2004
The mutual fund industry witnessed robust growth and stricter regulation from the SEBI
after the year 1996. The mobilizations of funds and the number of players operating in the
industry reached new heights as investors started showing more interest in mutual funds.
Investors' interests were safeguarded by SEBI and the Government offered tax benefits to
the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was
introduced by SEBI that set uniform standards for all mutual funds in India. The Union
Budget in 1999 exempted all dividend incomes in the hands of investors from income tax.
Various Investor Awareness Programs were launched during this stage, both by SEBI and
AMFI, with an objective to educate investors and make them informed about the mutual
fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its
Special legal status as a trust formed by an Act of Parliament. The primary objective
behind this was to bring all mutual fund players on the same level.
UTI was re-organized into two parts:
1. The Specified Undertaking,
2. The UTI Mutual Fund Presently Unit Trust of India operates under the name of UTI
Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are being
gradually wound up. However, UTI Mutual Fund is still the largest player in the industry.
In 1999, there was a significant growth in mobilizations of funds from investors and assets
under management
Stage V. Growth and Consolidation - 2004 Onwards
The industry has also witnessed several mergers and acquisitions recently, examples of
which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C
Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more
international mutual fund players have entered India like Fidelity, Franklin Templeton
Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing
stage of growth of the industry through consolidation and entry of new international and
private sector players.

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CONCEPT OF NAV

NET ASSET VALUE: The net asset value(NAV), is the current market value of a fund's
holdings, usually expressed as a per-share amount.

For most funds, the NAV is determined daily, after the close of trading on some specified
financial exchange, but some funds update their NAV multiple times during the trading
day.

 Open-end funds sell and redeem their shares at the NAV, and so process orders
only after the NAV are determined.
 Closed-end funds (the shares of which are traded by investors’) may trade at a
higher or lower price than their NAV; this is known as a premium or discount,
respectively.
 If a fund is divided into multiple classes of shares, each class will typically have its
own NAV, reflecting differences in fees and expenses paid by the different classes.
 Some mutual funds own securities which are not regularly traded on any formal
exchange. These may be shares in very small or bankrupt companies; they may be
derivatives; or they may be private investments in unregistered financial
instruments (such as stock in a non-public company).
 In the absence of a public market for these securities, it is the responsibility of the
fund manager to form an estimate of their value when computing the NAV. How
much of a fund's assets may be invested in such securities is stated in the fund's
prospectus.

CALCUATION OF NAV:

Net Asset value =Sum of market value of shares/debentures + Liquid assets/cash held
(if any) +Dividends/interest accrued-Amount due on unpaid assets -Expenses accrued
but not paid

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The Indian mutual funds industry has transformed totally Association of
Mutual Fund in India

With the increase mutual fund players in India, a need for mutual fund association in India
was generated to function as a non-profit organization.

AMFI was incorporated on 22nd august, 1995. AMFI is an apex body of all asset
management company which has been registered with SEBI. Till date all the AMCs are
that have launched mutual fund schemes are its member. It function under the supervision
and guidelines of its boards of directors.

AMFI has brought down the Indian mutual fund industry to a professional and healthy
market with ethical line enhancing and maintaining standards. It follows the principle of
both protecting and promoting the interest of mutual funds as well as their unit holders.

The Objectives of Association of Mutual Fund In India

The Association of Mutual Fund of India works with a 30 registered MNCs of the country.
It has certain defined objectives which juxtaposes the guidelines of its BODs. The
objectives as follows

 This mutual fund association of India maintains high professionals and ethical
standard in all areas of operation of the industry.
 It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the activities
of mutual fund and asset management. The agencies who are by any means
connected or involved in the field of capital markets and financial services also
involved in this code of conduct of the association.
 AMFI interacts with SEBI and works according to SEBIs guideline in the mutual
fund industry.
 Associate of mutual fund of India do represent the government of India, the
Reserve Bank of India and other related bodies on matters relating to the mutual
fund industry.

20
  It develop a team of well qualified and trained agent distributors. It implements a
program of training and certification for all intermediaries and other engaged in the
mutual fund industry.

Terminologies

1. Active Portfolio Management: It is a systematic and proactive approach to

investment that involves the constant review of the portfolio of the fund. The basic
objective behind such investing style is to beat the market. This investing style is
based on the argument that markets are not efficient and at any point of time there
is always a scope to earn abnormal profits through an active investment style.  

2. Asset Allocation: Asset Allocation involves the allocation of the total corpus or
fund available with the Mutual Funds to different class of assets like equities,
bonds, derivatives etc. The asset allocation is done in keeping the objective of the
scheme into consideration.
3. Balanced fund: Balanced fund is the fund that invests in equity, bond and money
market instruments. This fund is made for those investors who seek both capital
appreciation and regular income.  

4. Closed-ended fund: This refers to the type of fund where investors have to
commit their money for a particular period of time. The units of the fund can be
availed from the fund house only during the NFO period, after which the units of
the fund can be purchased from the market. Closed-ended funds have to be
necessarily listed on recognized stock exchanges and an investor can exit from the
fund at any point of time.  
5. Contingent Deferred Sales Charge (CDSC): Exit load imposed by certain funds
on shares redeemed within a specific period of purchase. Generally longer the
holding period, smaller will be the exit load. Similarly, shorter the holding period,
higher will be the exit load.  
6. Corpus: This refers to the total deployable funds available with a mutual fund at
any point of time. This is also termed as AUM (Asset Under Management).  
7. Dated Security: It is a type of long term debt instrument redeemable on a fixed
date.  

21
8. Default Risk: There is always a risk that the issuer of a fixed income security may
not be able to make timely payment of interest and repayment of principal. It is
also referred to as credit risk.  
9. Debt fund: A fund invests its corpus in debt securities like Government securities,
treasury Bills, corporate Bonds etc. yielding steady returns. These funds carry low
returns, as the risk involved is low. These funds are generally preferred by
investors with low risk appetite and who need regular returns from their
investment.  
10. Dematerialization: It is the process of converting the physical shares into
Electronic form. SEBI had made it mandatory to get the shares dematerialized. In
this process the investor opens an account with a Depository Participant (DP) and
the holdings of the investor is shown in this account.  
11. Depository Participant: An authorized entity that is involved in dematerialization
of shares and maintaining demat accounts of the investors.  
12. Distributor: An individual or a corporation serving as principal underwriter of a
mutual fund's units, buying shares directly from the fund, and reselling them to
other investors like retailer and institutional. 
13. Efficient Portfolio: A portfolio that ensures maximum return for a given level of
risk or a minimum level of risk for an expected return. There are various theories
available to construct an efficient portfolio.  
14. Entry Load: When an investor purchases units of the mutual fund scheme an
initial amount charged by a fund for its administrative expenses or for paying
commissions to brokers. This charge is termed as the entry load. Entry load is
levied as a percentage of NAV. (Also see exit load).  

15. Equity fund: This refers to the funds that invest primarily in equity and equity
related instruments with an objective to provide capital appreciation.  

16. Exit Load: When an investor wants to withdraw his or her money back from the
fund, a kind of redemption charge that the investor is required to pay. The idea
behind the levy of such charges is to discourage investors from making an exit
from the fund. Exit load is levied as a percentage of NAV. (Also see entry load).  
17. Expense Ratio: It is the ratio of total expenses to net assets of the fund. Total
expenses include management fees, the cost of shareholder mailings and other

22
 administrative expenses. A low expense ratio means that the fund is able to
maintain the fund at low expenses. As the size of the fund increases, the expense
ratio decreases.

18. Fixed income Security: A type of security that pays fixed interest at regular
intervals of time ranging from month to a year. These securities include gilt-edged
securities, bonds (taxable as well as tax-free), preference shares and debentures.
Since there is low risk as compared to the equity, there is no or little scope of
capital appreciation.

19. Fund Manager:   A professional manager appointed by the Asset Management
Company (AMC) to invest money in accordance with the objective of the scheme.
20. Gilt-edged Security: These are the securities issued by the Government usually at
a low interest rate. These are considered as the safest investments, as the
government security is free from default risk.  
21. Gilt fund: This refers to the funds that invest mainly in government securities and
treasury bills. The objective here is the safety of principal and adequate liquidity.  
22. Income Fund: The objective of such fund is to provide a regular income to the
investors by investing in fixed income securities like debentures, bonds, and high
dividend shares. The fund pays dividends to the investors out of its earnings.  
23. Index Fund: This refers to the fund that at any point of time has same composition
of asset as that of its benchmark. These funds rigorously follow their benchmark.
These come under the passive investment style. Such an investment style believes
that the market is efficient and all the information are fully reflected in the stock
prices.  
24. Interest Rate Risk: The prices of a debt security are subject to the interest rate
fluctuations in the market. An increase in the interest rates results in decrease in
value of the bond. Therefore debt oriented mutual fund schemes; this interest rate
risk affects the NAV of the fund.  

25. Liquid Fund:   A fund that invests its corpus in short term instruments like call
markets, treasury bills, Commercial Paper (CP), Certificate of Deposit (CD).
Generally returns are very low in these funds. These funds are meant for the big
corporate to park their fund for a very short period of time like one week.  

23
26. Liquidity Risk: The liquidity risk is involved in both type of securities i.e. fixed
income security as well as equity and refers to the situation when these securities
may not be sold in the market at close to their value.  
27. Load: A charge is levied by the fund when an investor purchase (entry load) or
sells (exit load) units in the fund.
28. No-Load Fund: There is a category of mutual fund schemes in which units can be
purchased directly from the fund without any sales charge or brokerage. US-64 is
an example of a no-load fund. 

29. Record Date: It is the date announced by the mutual fund, which is a cut-off date
for receiving corporate benefits like dividends, rights, bonus etc. Only investors
whose names appear in the AMC registers on that date are eligible for the said
benefits.
30. Reinvestment Plan: It is a plan where the earnings of a mutual fund scheme are
not returned to the investors but get reinvested back in the fund. Upon increase in
NAV the investor gets the capital appreciation.   
31. Systematic Risk: This is that part of the total risk that is posed by the factors that
are beyond the control of the company. This also termed as the market risk and is
essentially non-diversified in nature. This risk is caused by macro level factors like
inflation, interest rates, budget announcements political unrest, weather conditions,
general state of economy etc.  

32. Tax saving fund: Investment in these funds allow the investors to claim a rebate
under the Income tax Act. Generally these funds carry a lock-in period with them
in order to claim such rebate.  
33. Unsystematic Risk: This is the part of the total risk that is peculiar to a particular
company. This risk could arise due to company specific factors like operational
factors, financial distress, labor turnover etc. This type of risk can be reduced to a
great extent with the help of diversification. 

24
Concept of NEW FUND OFFERING:
A new fund offer is similar to an initial public offering . Both represent attempts to raise
capital to further operations. New fund offers are often accompanied by
aggressive marketing campaigns, created to entice investors to purchase units in the fund.
However, unlike an initial public offering (IPO), the price paid for shares or units is often
close to a fair value. This is because the net asset value of the mutual fund typically
prevails. Because the future is less certain for companies engaging in an IPO, investors
have a better chance to purchase undervalued shares.
Definition: A new fund offer (NFO) is the first time subscription offer for a new scheme
launched by the asset management companies (AMCs). A new fund offer is launched in
the market to raise capital from the public in order to buy securities like shares, govt.
bonds etc. from the market.

New fund offerings

Mutual fund houses Schemes Type
Edelw Edelweiss Fixed Maturity Plan - close ended
eiss Mutual Fund Series 42
ICICI Prudential mutual ICICI Prudential Fixed Maturity close ended
Plan - Series 81 - 1101 Days Plan
fund C
Kotak Mahindra Mutual Fund Kotak FMP Series 203 Close ended
Mahindra Mutual Fund Mahindra Mutual Fund Open ended
BalVikasYojana
Mahindra Mutual Fund Mahinfra Mutual Fund open ended
BadhatYojana
Reliance Mutual Fund Reliance Dual Advantage Fixed Close ended

25
 Tenure Fund XI- Plan A
Reliance Mutual Fund Reliance Fixed Horizon Fund Close ended
XXXIII- Series 10
Reliance Mutual Fund Reliance Fixed Horizon Fund Close ended
XXXIII- Series 9
Sundaram Mutual Fund SUNDARAM HYBRID SERIES U Close ended
Sundaram Mutual Fund SUNDARAM LONG TERM MICRO Close ended
CAP TAX ADVANTAGE SERIES V
Sundaram Mutual Fund SUNDARAM SELECT MICRO Close ended
CAP SERIES XIV
Union Mutual Fund Union FocussedLargecap Fund Open ended
UTI Mutual Fund UTI Capital Protection Oriented Close ended
Scheme Series IX-I (1467 Days)
UTI Mutual Fund UTI FTIF Series XXVI-XII (1096 Close ended
Days)

The risk-return trade off:

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

Hence it is the upto the investor to decide how much risk the investor is willing to take. In
order to do the investor first need to be aware of different risk involved in the investment
decision.

 Market risk:
Sometimes price and yields of all securities rise and fall. Broad outside influences
affecting the market in general lead to this. This is true, may it be big corporations
or small mid -sized companies. This is known as market risk.
A SIP that works on the concept of rupee cost averaging (“ RCA”) might help
mitigate the risk.
 Credit risk:
The debt servicing ability (may it be interest payments or repayments of principal)
of a company through its cash flows determine the credit risk faced by investor.
The risk is measured by independent rating agencies like CRISIL who rate
companies and their paper. A ‘AAA’ rating is considered the safest whereas ‘D’
rating is considered poor credit quality.
 Inflation risk:
When inflation grows faster than the return on your investment. A well-diversified

26
 Portfolio with some investment in equities might help mitigate this risk.
 Interest rate risk:
In a free market economy interest rate are difficult if not impossible to predict.
Changes in interest rate affect the price of bonds as well as equities. If interest rate
rise the prices of bonds fall and vice versa. Equity might be negativity affected as
well in a rising interest rate environment. A well-diversified portfolio might help
mitigate this risk.
 Political/ government policy risk:
Change in government policy and political decision can change the investment
environment. They can create a favorable environment for investment or vice
versa.

 Liquidity risk:

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.
Liquidity risk can be partly mitigated by diversification, staggering of maturities as well as
internal risk control that lean towards purchase of liquid securities

TYPES OF MUTUAL FUND SCHEMES IN INDIA

Wide variety of mutual fund schemes exists to cater to the needs such as financial position,
risk tolerance and return expectation etc. Thus mutual funds variety of flavor being a
collection of many stocks, an investors can go for picking a mutual fund might be easy.
There are over hundred of mutual funds scheme to choose from.

1. Mutual fund by company size:

 Large cap funds
 These funds invest a large portion of their corpus in companies with large
market capitalization.
 If these funds generally offer stable and sustainable returns over a periods
of time.
 These funds are classified as “less volatile, less risk, less returns”.

27
  Mid cap funds
 These funds invest a large portion of their corpus in companies with
mid size market capitalization.
 These funds generally offer medium returns over a period of time.
 These funds are classified as “medium volatile, medium risk medium
returns” type.
 Small cap funds
 These funds invest a large portion of their corpus in companies with
small market capitalization.
 These funds generally offer more returns over period of time.
 These funds are classified as “more volatile, more risk, more
returns” type.
2. Mutual funds by structure :
 Open ended schemes
 These schemes don’t have a fixed maturity
period.
 Investor can buy and sell the units at any time of
the year as per NAV prices.
 The key feature of this scheme is liquidity.
Investor can takeout money anytime.
 These schemes announce NAV on daily basis.
 Close ended schemes
 These schemes come with a fixed maturity
period.
 Investors can invest in these schemes only at the
time of initial issue called “New fund
offer(NFO)”.
 Investor can sell the units only at /after a
specified maturity date.
 In addition, these schemes are listed on the stock
exchange where investor can buy or sell units of
fund.

28
  These schemes announce NAV on a weekly
basis.
 Interval schemes:
 These schemes combine the feature of both open
ended and close ended schemes.
 Investors can buy or sell the units at pre-
determined interval at NAV price.
 In addition, these schemes are listed on the stock
exchange where investor can buy and sell units of
the fund.

3. Mutual fund by investment objective

 Equity schemes:
 These schemes are known as” high risk, high
return”.
 These schemes generally invest a majority of
their funds in equities and these are high risk
investment.
 These schemes aim to provide capital
appreciation over long exit age and hence suitable
for long exit investor.
 These schemes are not suitable for those who
want regular income or who need money in short
exit.
 Income or debt schemes:
 These are known as “less risk, less return”.
 Invest a majority of their funds in fixed income
securities like bonds, corporate debenture,
government securities and money market
instruments.
 These are low risk investments.

29
  Aim is to provide regular and steady income
hence suitable for short exit investors and retied
people.
 These schemes are not suitable for long exit
investors as there will not be much capital
appreciation.
 Balanced schemes:
 These schemes are known as ‘’ medium risk,
medium return’’.
 These schemes invest in both equity and fixed
income instruments.
 These schemes aim to provide a combination of
regular income and moderate capital appreciation.
 These schemes are suitable for investors looking for
moderate growth.
 Money market or liquid schemes:
 These schemes provide easy liquidity.
 These schemes can invest in safe and short exit
age instrument such as treasury bills, CODs.
 Aims to provide capital protection and moderate
income.
 The returns from these schemes may fluctuate
based on the interest in the market.
 Tax saving schemes:
 These schemes provide tax benefits to investors
as per the Income Tax Act.
 For example: Equity linked saving schemes
(ELSS).
 Aim of these schemes is to provide capital
appreciate and tax benefit.
 These schemes come with a lock in period.
 These schemes invest mainly in equities and
hence they are high risk oriented schemes.

30
 Gilt schemes:
 These schemes invest exclusively in government
securities.
 NAVs of these schemes fluctuate due to change
in interest rates.
 Index schemes:
 These schemes represent the portfolio of a
particular index such as BSE Index and NSE
Index etc.
 These schemes invest in the shares that represent
an index.
 NAVs of these schemes will rise or fall according
to the rise or fall in the underlying index.
 Sector schemes:
 These schemes in shares that are part of a special
sector.
 For example: technology sector schemes will
invest in Infosys technology, wipro technologies
etc.
 Returns from these schemes depends on the
performance of the chosen sector.
 These schemes are high risky compared to
diversified equity funds.

 Exchange traded schemes:

 These schemes contain a basket of shares that
represent the combination of index like BSE
Index and NSE Index etc.
 Investors can buy or sell the funds anytime
during trading hour’s price.
 This has advantage over the index funds that
allows you to buy or sell based on the end of the
day NAV only.

31
  Fund of funds schemes:
 These schemes in other mutual fund schemes.
 This helps investors to diversify the risk through
one scheme.
 The returns depend on the performance of the
target mutual fund scheme.
4. Mutual fund by payout:
 Growth schemes:
 As the name implies, growth option aims for
capital appreciation over long exit age.
 The numbers of unit that you bought will remain
the same till you sell them.
 NAV of the schemes will increase or decrease
depend upon the performance of the scheme.
 In these scheme, you will get money only when
you sell the units.
 This is suitable for those who expects a growth
over long exit age and those who is not in need of
money during short exit age.
 Dividend payout schemes:
 Dividends are nothing but profit made by the
mutual fund schemes.
 This schemes pays out dividends to investors
from time to time.
 But the amount and the frequency of the
dividends are not guaranteed.
 The number of units will remain the same but the
NAV of the scheme come down after the
dividend is declared.
 This is suitable for those who expect to receive
income flow on regular basis.
 Dividend re-invest schemes:

32
  This schemes declare dividends but it is not paid
to the investors.
 Instead they are re-invested into the scheme. This
way, you stay invested in the schemes.
 NAV get re-adjusted after the dividends are
declared and re-invested.
 The number of units will increase as the
dividends are re-invested.
5. Other Schemes:
 Tax Saving Scheme:
 These schemes offer tax rebates to the investors
under specific provisions of the Income Tax Act,
1961 as the Government offers tax incentives for
investment in specified avenues.
 E.g. Equity Linked Savings Schemes (ELSS).
Pension schemes launched by the mutual funds
also offer tax benefits.
 These schemes are growth oriented and invest
pre-dominantly in equities. Their growth
opportunities and risks associated are like any
equity-oriented scheme.
 Index Schemes:
 Index Funds replicate the portfolio of a particular
index such as the BSE Sensitive index, S&P NSE
50 index (Nifty), etc.
 These schemes invest in the securities in the
same weightage comprising of an index.
 NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index,
though not exactlyby the same percentage due to
some factors known as "tracking error" in
technical terms.

33
  Necessary disclosures in this regard are made in
the offer document of the mutual fund scheme
for the ease of the investors.
 There are also exchange traded index funds
launched by the mutual funds which are traded
on the stock exchanges.
 Sector Specific Scheme:
 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 more risky compared to diversified funds.
 Investors need to keep a watch on the
performance of those sectors/industries and must
exit at an appropriate time. They may also seek
advice of an expert.

Advantages and dis-advantage of mutual fund

Advantages:

1. Professional management. Qualified professionals manage your money, but they

are not alone. They have a research team that continuously analyses the
performance and prospects of companies. They also select suitable investments to
achieve the objectives of the scheme. It is a continuous process that takes time and
expertise which will add value to your investment. Fund managers are in a better
position to manage your investments and get higher returns.
2. Diversification. The cliché, "don't put all your eggs in one basket" really applies to
the concept of intelligent investing. Diversification lowers your risk of loss by
spreading your money across various industries and geographic regions. It is a rare

34
 occasion when all stocks decline at the same time and in the same proportion.
Sector funds spread your investment across only one industry so they are less
diversified and therefore generally more volatile.
3. More choice. Mutual funds offer a variety of schemes that will suit your needs
over a lifetime. When you enter a new stage in your life, all you need to do is sit
down with your financial advisor who will help you to rearrange your portfolio to
suit your altered lifestyle.
4. Affordability. As a small investor, you may find that it is not possible to buy
shares of larger corporations. Mutual funds generally buy and sell securities in
large volumes which allow investors to benefit from lower trading costs. The
smallest investor can get started on mutual funds because of the minimal
investment requirements. You can invest with a minimum of Rs.500 in a
Systematic Investment Plan on a regular basis.
5. Tax benefits. Investments held by investors for a period of 12 months or more
qualify for capital gains and will be taxed accordingly. These investments also get
the benefit of indexation.
6. Liquidity. With open-end funds, you can redeem all or part of your investment any
time you wish and receive the current value of the shares. Funds are more liquid
than most investments in shares, deposits and bonds. Moreover, the process is
standardised, making it quick and efficient so that you can get your cash in hand as
soon as possible.
7. Rupee-cost averaging. With rupee-cost averaging, you invest a specific rupee
amount at regular intervals regardless of the investment's unit price. As a result,
your money buys more units when the price is low and fewer units when the price
is high, which can mean a lower average cost per unit over time. Rupee-cost
averaging allows you to discipline yourself by investing every month or quarter
rather than making sporadic investments.
8. Transparency. The performance of a mutual fund is reviewed by various
publications and rating agencies, making it easy for investors to compare fund to
another. As a unitholder, you are provided with regular updates, for example daily
NAVs, as well as information on the fund's holdings and the fund manager's
strategy.

35
9. Regulations. All mutual funds are required to register with SEBI (Securities
Exchange Board of India). They are obliged to follow strict regulations designed to
protect investors. All operations are also regularly monitored by the SEBI.
Dis-advantages:

1. No Insurance: Mutual funds, although regulated by the government, are not

insured against losses. The Federal Deposit Insurance Corporation  (FDIC) only
insures against certain losses at banks, credit unions, and savings and loans, not
mutual funds. That means that despite the risk-reducing diversification benefits
provided by mutual funds, losses can occur, and it is possible (although extremely
unlikely) that you could even lose your entire investment.

2. Dilution: Although diversification reduces the amount of risk involved in investing

in mutual funds, it can also be a disadvantage due to dilution. For example, if a
single security held by a mutual fund doubles in value, the mutual fund itself would
not double in value because that security is only one small part of the fund's
holdings. By holding a large number of different investments, mutual funds tend to
do neither exceptionally well nor exceptionally poorly.
3. Fees and Expenses: Most mutual funds charge management and operating fees  that
pay for the fund's management expenses (usually around 1.0% to 1.5% per year for
actively managed funds). In addition, some mutual funds charge high sales
commissions, 12b-1 fees, and redemption fees. And some funds buy and trade
shares so often that the transaction costs add up significantly. Some of these
expenses are charged on an ongoing basis, unlike stock investments, for which a
commission is paid only when you buy and sell.
4. Poor Performance: Returns on a mutual fund are by no means guaranteed. In fact,
on average, around 75% of all mutual funds fail to beat the major market indexes,
like the S&P 500, and a growing number of critics now question whether or not
professional money managers have better stock-picking capabilities than the
average investor.
5. Loss of Control: The managers of mutual funds make all of the decisions about
which securities to buy and sell and when to do so. This can make it difficult for
you when trying to manage your portfolio. For example, the tax consequences of a
decision by the manager to buy or sell an asset at a certain time might not be

36
 optimal for you. You also should remember that you are trusting someone else with
your money when you invest in a mutual fund.
6. Trading Limitations: Although mutual funds are highly liquid in general, most
mutual funds (called open-ended funds) cannot be bought or sold in the middle of
the trading day. You can only buy and sell them at the end of the day, after they've
calculated the current value of their holdings.
7. Size: Some mutual funds are too big to find enough good investments. This is
especially true of funds that focus on small companies, given that there are strict
rules about how much of a single company a fund may own. If a mutual fund has
$5 billion to invest and is only able to invest an average of $50 million in each,
then it needs to find at least 100 such companies to invest in; as a result, the fund
might be forced to lower its standards when selecting companies to invest in.
8. Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves
as protection against a large number of simultaneous withdrawals. Although this
provides investors with liquidity, it means that some of the fund's money is
invested in cash instead of assets, which tends to lower the investor's potential
return.
9. Too Many Choices: The advantages and disadvantages listed above apply to
mutual funds in general. However, there are over 10,000 mutual funds in operation ,
and these funds vary greatly according to investment objective, size, strategy, and
style.

SYSTEMATIC INVESTMENT PLANS (SIP):

“Little drops of water make the mighty ocean”

It is an investment strategy wherein an investor needs to invest the same amount of money
in a particular mutual fund at every stipulated time period.

37
What is SIP?
The systematic investment plan or SIP is an investment strategy offered by fund house to
investors, making it convenient to invest small sum of money in their mutual fund.

Key features of systematic investment plan:

Remember the days when you saved small amounts of money every month to buy an
expensive gift you would not buy otherwise. It’s a type of regular saving, which is a very
good habit. Systematic Investment Plan (SIP) is quite similar to the same old technique;
the magic here is in the returns over the term of investments. In other words, SIP is a plan
where you can invest in Mutual Fund Schemes at regular intervals. In SIP Investors
majorly benefit from the Rupee Cost Averaging and compounded returns.
1. Small and regular investment
Systematic Investment Plan helps you achieve your bigger financial goals even with a
small sum of amount invested every periodic interval. SIP is lighter on your wallet. It
allows you to invest a small amount as per your wallet size with as low as Rs. 500/- with
periodic intervals of investments such as weekly, fortnightly, monthly, quarterly. It is a
simple and affordable way for beginners to start investing in Mutual Fund Schemes.

2. Disciplined Investment
Investors often fail to maintain the habit of investing over the period of time. A
dedicated approach and focus is the key to any investment. As the name says, systematic
investment plan is a system to invest a particular amount regularly. This naturally brings a
discipline to your investing habits. Inculcating a habit of investing with a regular
investment of a small sum is practically much easier than investing lump sum amount
every year. It is recommended to start an SIP if you haven’t yet inculcated the discipline of
investing.
38
 3. Ease of investing
SIP can be implemented in two ways; Online and Offline SIP. Traditionally, you

can invest in SIP by filling up a mandate, however, in the current digital wave, you can

invest in SIP via invest online platforms. Invest Online portal avails you a paperless

transaction with quicker transactions and hassle free procedures. You can opt to link your

portfolio to your bank account, so that you can enable uninterrupted automatic

investments.  Usually, salaried employees choose to map their SIP accounts to their salary

accounts so that the process continues to be regular and linear. This rectifies the issues of

regularity failures. You need to be a KYC complaint to start investing.

4. Power of compounding
The biggest force that drives investments ahead is the power of compounding.
Although, systematic investments are smaller, investors can benefit higher with the power
of compounding. Starting to invest early can build opportunities of higher returns. Simply,
the small amounts that you invest every month generate returns over the invested period
and similarly the returns upon the previous investment gets added to your new
investments. An amount of Rs. 2000/- invested every month for 5 years with an
assumption of 10% CAGR will generate Rs. 1,54,874. Find out your monthly SIP
investment amounts to achieve your goals with our SIP Returns Calculator.

Example:

Illustration: Estimated returns from SIP into an Equity Mutual Fund (at

an assumed rate of 12% p.a.)

PERSON A PERSON B PERSON C

No. of years 10 20 30
No. of months 120 240 360
invested
Monthly inv. Amount 15000 7500 5000
Mutual fund returns 12% 12% 12%
(assumed)
Monthly returns 0.95% 0.95% 0.95%
Total amt. invested 1800000 1800000 1800000
Est. redemption amt. Rs. 3,360,538 6,898,930 15,404,866

39
It shows that in time pace and long run systematic investment in SIP mutual fund
increasing in long run due to compounding effect.

Advantages of systematic investment plan -

1) Stress-free way of investing: Investor doesn't have to worry about timing the
market. It stress-free. Once the mechanism is set-up, fixed amount will be
deducted from your account.
2) Short-term fluctuation doesn't harm as much: If the price goes down by 10
% in the next month. You have a consolation that you ar1e also buying at
reduced price too. And if the market recovers to previous level, you actually
make money overall.
3) It encourage saving habit in you: A little every month by month can make to
huge amount at the end of 40 years. If one invests 20,000 Rupees every month for
40 years in a mutual fund, and assume that mutual fund give annual returns of 20
% over a period of 40 years, and then at the end of 40 years, he will have 340
crores.

Disadvantages:

1) If price of underlying (investment vehicle) doubles in first month and

don't move much after that, then he won't have handsome returns.
2) f investors have significant amount of cash to begin with, then it doesn't
make much sense to do SIP and keep the rest of amount as cash in
initial period.
3) SIP averages out short-term fluctuation and gives returns similar to
long-term growth of underlying. Bad part is, investors invest the same
amount at market highs and lows. Wouldn't it be better, if he could
invest more at lows and less at highs? This is generally referred to as
Value investment Plan (VIP).

How does SIP differ from Lump Sum Investment?

40
In case of a lump sum investment, a large amount of money needs to be invested all at
once and this can significantly strain the finances of most individuals especially if they are
salaried.

It is much easier for investors to set aside a small sum of money every month through SIP
and invest those in mutual funds in order to generate wealth in the long term for future
expenses. Additionally, in case of lump sum investment, all the mutual fund units bought
would feature the same price, hence the profit/loss incurred at the time of liquidating the
units will be exactly the same, on the other hand, in case of an SIP the units are bought at
separate times and at separate times, hence the profits would also differ from one set of
units to another.

How does SIP work?

Systematic Investment Plan(SIP) works more or less like a mutual fund. The
handling of your money is done by money market experts and is none of your
headache. But it is good to know how SIP makes your money grow. Well, there are
two underlying mechanisms behind the working of SIP.

Effect of Compounding

Unlike simple interest, the compounding involves making the interest earned, a part
of your base capital and the subsequent interest is calculated on the basis of this
new increased capital. Thus, Compound Interest leads to an exponential growth of
your money. The effect of compounding increases as the investment tenure
increases. The table below illustrates the fact.

Types of SIP SIP Rate of Return at Total

investment investment interest the end of output
Interest
tenure tenure
Input in Rs.
Simple 100 5 years 10% 50 150
interest
Compound 100 5 years 10% 61 161
interest

41
 
As can be seen, there is a 7% rise in the total output when the interest is calculated
on a compounding basis. This seemingly small difference in the final output
becomes staggering as the period of investment lengthens. The table below shows
the figures when calculated for a period of 20 years. As you can see, the difference
becomes even more than twice in the long run, when the effect of compounding is
playing up.
Types of SIP SIP Rate of Return at Total
interest investment investment interest the end of output
tenure tenure
Input in Rs.
Simple 100 20 years 10% 200 300
interest
Compound 100 20 years 10% 573 673
interest
 
Example:Consider a scenario –
Gaurav decides to invest in a SIP
 Buy the market units by investing Rs
1000/month
 Invest for 6 months.
 Condition- if NAV is low, unit will be more
If NAV is high, units will be less
Hashmi decide to invest in lump sum
 Buy units for Rs 6000 at the current NAV.
Who do you think is going to end up with a lower cost per unit at the end of the 6
months period?

Month NAV Monthly No. Average One Time No. Average

(Rs) Investment of Cost Per Investment of Cost Per
made in Units Unit made in a Units Unit
SIP (Rs) plain Mutual
Fund (Rs)

1 st 15 1000 67 12.42 6000 400 15

Rs/Unit Rs/Unit
2 nd 12 1000 83    

42
 3 rd 10 1000 100    

4 th 12 1000 83    

5 th 15 1000 67    

6 th 12 1000 83    

Total   6000 483    

As can be seen from the table above:

1) Gaurav will be enjoying a gain of Rs 2.58 per unit over Hashmi.
2) Gaurav played up smart by investing consistently for a period of time.
3) In the long run he’ll be less and less affected by the ups and downs of
market, as the time period will lead to an averaging of the market
fluctuations.
4) This effect is called as Rupee Cost Averaging and is primarily responsible
for making SIP a lucrative investme nt.

Rupee Cost Averaging

Systematic Investment Plan (SIP enables an investor to regularly invest in a fund in the
same way as one invests in a recurring deposit scheme of a bank. In a SIP, investors buy
units of the mutual funds by contributing a fixed (and often small) amount of money at
regular intervals. In the SIP, investors do not have to worry about market timing. In other
words, the issue of determining the best time to invest does not arise. Basically, SIP is
governed by the principle of Rupee Cost Averaging (RCA).

Analysis:

RCA is a strategy that helps to avoid the perennial concern about the right time to invest.
“To buy low and sell high” is every investor’s ambition. However, one cannot predict the
future with any degree of accuracy. So, the best way to avoid the nagging regrets of
missing out the best time to buy or sell is to rely on RCA which takes the guess work out
of timing the markets.

43
Two Tables followed by two respective trend charts of RCA in a falling market as well as
in a rising market are presented below in support of the principle:

Table - 1
RCA in a Falling Market
Date of Investment Monthly Price Units
Investment

1st January 1000.00 32 31

1st February 1000.00 22 45

1st March 1000.00 22 45

1st April 1000.00 18 56

1st May 1000.00 16 63

1st June 1000.00 11 91

WAP=331
Total investment 6000.00 SAP=298
WAP = Weighted Average Price, SAP = Simple Average Price

100

90

80

70

60

50 price
units
40

30

20

10

0
Jan/01 Feb/01 Mar/01 Apr/01 May/01 Jun/01

Table – 2

RCA in a Rising Market

44
 Date of Investment Monthly Price Units
Investment

1st January 1000.00 11 91

1st February 1000.00 16 63
1st March 1000.00 18 56
1ST April 1000.00 22 45
1ST May 1000.00 22 45
1st June 1000.00 32 31
Total investment 6000.00 WAP=18.12 331
SAP=20.17 298
WAP = Weighted Average Price, SAP = Simple Average Price
100

90

80

70

60

50 price
units
40

30

20

10

0
Jan/01 Feb/01 Mar/01 Apr/01 May/01 Jun/01

Interpretation:

Assume that Rs.1000 is invested monthly for a period of six months in the units of a
certain SIP. Table 1 shows the declining prices of the units of the scheme from January
through June i.e. from the level of Rs.32 to a level of Rs.11 in a falling market that enable
an investor to get an increased number of units on his investment from month to month till
June.

Table 1 also shows that at the end of six months if the plan of investing Rs.1000 every
month is followed, on total investment of Rs.6000 the investor gets 331 units of a scheme
at a Weighted Average Price (WAP) of Rs.18.12 per unit. On the other hand, if one
worries about when to invest such entire Rs.6000 into the scheme at one time knowing that
the market is falling but never knowing when it is likely to be flatten out, one is likely to
45
invest this sum at the Simple Average Price (SAP) of Rs.20.17 per unit. In this way, one
would be able to purchase an average of only 298 units. Clearly, RCA works out to be a
better strategy.

Similarly, using the same SIP, one can consider a situation where the market is rising as
shown in Table 2. Here the prices are reversed and increase from a low of Rs.11 to a high
of Rs.32 by June.

Findings:

The two tables show that in following the SIP of investing Rs.1000 every month, one has
331 units of the scheme at a WAP of Rs.18.12 per unit. However, in case one invests the
entire Rs.6000 in one go on a random date, the expected price will be Rs.2017 and one will

have only 298 units on an average. Thus, the RCA system is a winner.

That is why the RCA principle is also called the no-brainer strategy. Incidentally, it
should be noted that SIPs normally do not charge an entry load. However, AMCs often do
charge an exit load if an SIP investor redeems the units prematurely. The offer document
indicates the lock-in period during which exit load is applicable.

46
 Case Study:

On Verification, I have found out some Mutual Fund product line which is
furnished below:
Since it is not possible to study and analysis each and every product line taken
below, I have considered their performance in the market and have taken top 2
schemes from each category according to records furnished and status available on
Public domain.
This data has been taken from Money control as it is the best site considered for
Capital related market.
Analyses are further carried out on product line as proceeded below in the further
sections.

LARGE CAP RETURN

Kotak Select Focus fund- Direct 29.7%
ICICI Pru Top 100 Fund- Direct 29.2%
Kotak Select Focus Fund- Regular 28.2%
ICICI Pru Top 100 Fund 27.8%
SBI Blue chip Fund- Direct 18.2%
SMALL & MID CAP
L&T Midcap Fund- Direct 42.0%
Mirae Emerging Blue chip Fund- Direct 41.1%
L&T Midcap Fund 40.9%
Mirae Emerging Blue chip Fund 40.0%
DSP-Black rock Micro cap Fund- Direct 36.9%
DIVERSIFIED EQUITY
Tata Equity P/E Fund- Direct 44.2%
Tata Equity P/E Fund 43.2%
Principal Emerging-Blue chip- Direct 37.5%

47
 Sundaram Rural India Fund-Direct 37.5%
Sundaram Rural India Fund 36.5%
BALANCED – Hybrid
ICICI Pru Balanced Fund- Direct 26.4%
ICICI Pru Balanced Fund 24.7%
MIP AGGRESSIVE- Hybrid
Birla SL MIP 2-Wealth 25 19.0%
Kotak Monthly Income Plan- Direct 14.8%

1.1 Product analysis:

I have chosen the schemes on the basis of their magnificent performance as shown
above. Out of these schemes, I have taken 2 from each of the following categories on
the basis of highest growth rate or rate of return as shown below. The returns are as on
20th April, 2017.

LARGE CAP RETURN

Kotak Select Focus fund- 29.7%
Direct
ICICI Pru Top 100 Fund- 29.2%
Direct

Both of these schemes are direct plans which mean the investor deals with the
AMC directly. The major advantage here is they don’t have to pay any
commission fees and gradually it helps translating corpus into more returns every
year. Direct plan was launched by SEBI in 2012.
Starting from Kotak Select Focus fund- Direct (G), below follows the details
preceding benefits and further information.

a) Kotak Select Focus fund- Direct:

Launch Date Jan 01, 2013
Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are long-term capital appreciation
from a portfolio of equity and equity related
securities, generally focusing on a few
selected sectors.

48
 Investment Type Equity
Fund Family Kotak Mahindra Mutual Fund

Calculations after 1, 2, 3, 4, 5years.

Corpus time Return:

After 1 year (in 2014) 24.6%
After 2 years (in 2015) 13.9%
After 3years (in 2016) 29.1%
After 4 years (in 2017) 21.2%
5 years hence till April 20th,2017 17.1% (Absolute Return)
AVERAGE RATE OF RETURN 20.98%
Source: Money Control

b) Performance of the Scheme from the date of Issue:

NAV of Scheme from it's Inception

35

30 30.4439999999999

26.181
25 22.745
23.5859999999999
20 Trend of NAV Since 2013
Linear (Trend of NAV Since 2013)
15 14.079
13.488
10

0
01-01- 01-01- 01-01- 01-01- 01-01- After April
2013 2014 2015 2016 2017

Explanation: As NAV is only significant for open-end mutual funds. This is

calculated using (current market value of the fund’s net assets-Liabilities including
items such as fees, etc.) / Number of shares outstanding. So, each time market
value appreciates or depreciates these NAV changes accordingly. And here, it

49
 shows the market value has been appreciating thus leading to gradual growth in
NAV.

c) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:

i. Point-to-point or absolute return: Whatever the nature of a mutual fund scheme

is, its value is reflected in the NAV. Absolute returns on this, helps one to calculate
the simple returns on the initial investment.
Absolute return = (current NAV - initial NAV)/ initial NAV x 100
So, to demonstrate this in this case;
CASE-1:AR= (30.607-13.488)/13.488 x 100= 1.269 or 126.9%

Interpretation: This means that if anybody has invested on the day of issue, i.e.
here Jan 4th, 2013 at 13.488 and after 4+ years wants to know the return as on 20 th
April, 2017, he/she has earned a growth of 126% according to the absolute return
method. (This is considering all the highs and lows)

CASE-2: But in case, if a person invests at Face value of Rs. 10 at the time of
launching with a minimum investment size of 5000 is likely to get 500 units
i.e. 5000/10=500units.So, as on 20th April, 2017, he/she will hold the
investment value of:

500*30=15000 (today’s return); 30=NAV as on April 20, 2017, 500= Units

held.

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 14.079* 500=7039.5 7039.5-5000=2,039.5
After 2 years 22.171*500=11085.5 11085.5-5000=6,085.5
After 3 years 23.586*500=11793 11793-5000=6,793
For 4 years + 30*500=15000 15000-5000=10,000
Note: NAV’s are as on Jan 3rd of every year

Interpretation:

As we go through the table mentioned above it is evident that each time

NAV is increasing the overall investment return is also increasing twofold.

50
 If we take a case of a person who, at the time of launch, invests Rs.5000
will after 4 years earn a total of Rs.10, 000 at Rs.30 NAV.
Though the growth is slow, but the returns are guaranteed taking into
consideration various risk factors such as Economic policy, Market
volatility, other calamities, etc.
ii. Annualized Return:Two investment options have indicated their returns since
inception on 5% and 3% respectively. If the first investment was in existence for 6
months and the second for 4 months, then the two returns are obviously not
comparable. Therefore, Annualisation helps to compare the returns of two different
time periods.
Simple Returns x12
Period of Simple Return (in months)

Investment 1 Investment 2
5% x 12 3% x 12
6 4
i.e. 10% i.e. 9%

Interpretation:
From the survey I chose 2 participants who invested and withdrew their
corpus after 6 months and 4 months respectively. Since inception, its return
has been 5% and 3% respectively but on finding the annualized return it has
been calculated as 10% from 5% and 9% from 3% respectively. This shows
a great increment in returns.

1.1.1 ICICI Pru Top 100 Fund- Direct:

Launch Date Jan 01, 2013

Scheme Type Open Ended
Face Value (price at which it was issued) Rs. 10
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are to generate long term capital
appreciation by investing predominantly in
equities that is 95% in equities while the
rest would be invested in debt and money
market instruments.
Investment Type Equity
Fund Family ICICI Prudential Mutual Fund

a) Performance of the Scheme from the date of Issue:

51
 NAV of Scheme from it's Inception
350

300 303.69
268.85
250 241.43
240.81

200 Trend of NAV from 2013

168.56 Linear (Trend of NAV from 2013)
150 157.21

100

50

0
01-01- 01-01- 01-01- 01-01- 01-01- April Mid
2013 2014 2015 2016 2017

Explanation:
NAV of Direct plans will always be higher than that of regular plans as schemes do
not pay a fee to distributors and consequently have a lower expense ratio.
So taking this into consideration, though NAVs are showing gradual shift upwards,
it represents the fund’s intrinsic worth and hence high and low criterion should not
be choosed while selecting the fund type/scheme.
Nevertheless, higher NAV shows that it has been working under good operative
and managerial company.

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return of ICICI
PRUDENTIAL Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
=(303.69-157.21) /157.21 x100= 0.931 or 93.17%
Interpretation: This shows that, as compared to previous scheme of Kotak,
NAV here is higher than the NAV of Kotak. Though the high and low have
been fluctuating in the whole year, the returns are high enough from its
inception. So, returns are independent of how much the NAV is over time
as discussed earlier in the previous Sections.

CASE 2:But in case, if a person invests at Face value of Rs. 10 at the time of
launching with a minimum investment size of 5000 is likely to get 500 units
i.e. 5000/10=500units.So, as on 20th April, 2017, he/she will hold the
investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 168.56* 500=84,280 84,280-5000=79,280
After 2 years 241.43*500=120,715 120,715-5000=115,715
After 3 years 240.81*500=120,405 120,405-5000=115,405

52
 For 4 years + 303.69*500=151,845 151,845-5000=146,845
Note: NAV’s are as on Jan 3rd of every year

Interpretation:

This has higher NAV because they must have some past track record of Earnings.
But since NAV shouldn’t be the criteria to decide the good or bad about any fund,
if any person considers investing at face value at Rs. 10, he/she will now get a
return of Rs. 1, 46, 845 after 4 years due to higher NAV.

ii. Annualized Return:

Simple Returns x12
Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in ICICI
Prudential. And on interviewing them, I found out that one has invested for
10 months and has earned 12% return since inception, and the other 11%
interest for 10.5 months (This can be showed through the data collected
through Survey method and interviewing the most efficient once).

Investment 1 Investment 2
12% x 12 11% x 12
10 10.5
i.e. 14.4% i.e. 12.57%

Note: XIRR was used to find their annualised internal rate of return (12%
& 11% respectively)
Interpretation:
This shows that annualised return year-on-year keeps on increasing as shown here-
1; from 12% to 14% and 2; 11% to 12.57% respectively.

1.1.2 Comparison of term deposit bank rate between Kotak Focus Fund and
ICICI Prudential top 100 Fund.
This Comparison of Investment in Mutual Fund with Investment in term
deposit by Compounding Method is an efficient method as discussed below.
Compounded Return: To see the compounding return, suppose we place Rs.
10,000 in a cumulative bank deposit for 3 years at 10% interest, compounded
annually.
The bank would calculate the interest in each of the 3 years as follows:

Table 1 Compounded Interest Rate

Year Interest Closing

Opening (10% on Balance

53
 Balance Opening)
1 10,000 1000 11000
2 11,000 1100 12100
3 12,100 1210 13310

Interpretation: Thus at the end of 3 years period, the principal of Rs. 10,000
would have grown to Rs.13, 310. If on the other hand, the bank had calculated
interest on simple basis, it would have calculated interest at Rs. 1000 for each of
the 3 years and given us Rs. 13,000. The difference between Rs.13, 310 and Rs.
13,000 is the effect of compounding. Longer the period of investment holding,
higher would be the error, if compounding is not considered.

Now, taking this as a base, we will calculate the returns of the above mentioned
banks and see which one benefits the most as compared to the Mutual fund
investment.

Earlier, banks used to compound quarterly or annually but now they have
considered half yearly compounding. So taking half yearly compounding we will
now assume the investment size to be 1 lakh.

AIM: My main aim is to find out what would be the annualised rate of return after
5 years in each case of Kotak and ICICI.

Using the Compounded Interest formula, we have that; For ICICI @ 7%

P=1, 00,000, r=6.90/100=0.069, n= 2, t=5Yrs. A= 1,
00,000(1+0.07/2) 2(5)

Therefore, for KOTAK @ 6.90% ~141,060 approx.

A=P (1+r/n) NT
A= 1, 00,000 (1+0.069/2)2(5)
~140,380 approx.
Showing it in tabulation form, the results are same as computed in Compounding
formula above:

KOTAK ICICI
Year Opening Interest Closing Bal. Opening Interest Closing
s Bal. (6.90%) Bal. (7%) Bal.
annually annually
1 100000 6900 106900 100000 7000 107000
2 106900 7376 114276 107000 7490 114490
3 114276 7885 122161 114490 8014 122504
4 122161 8429 130590 122504 8575 131079
5 130590 9010.7 140,380approx 131079 9175 141,060
. approx.

54
 This serves my question of whether my investment in mutual fund is more
than the return accrued on account of my term deposit at given interest rate.

Interpretation:

The compounding return half yearly is yielded more in case of ICICI bank as
compared to Kotak because of its annual return.
But when it comes to differentiating Mutual fund with term deposit, it is evident
that Mutual fund is yielding higher return, i.e. 126% in case of Kotak and 93.17%
in ICICI fund. Compounding method in term deposit yields good return but the
calculations are half-yearly as shown above.
So, if the total average rate of return of Mutual fund is above the bank rate, this
signifies it is a good way and one can consider investing in Mutual fund Scheme.

1.2Small and Mid-Cap

Next category is small and mid-cap which has also been taken on the basis of their
returns rate.

SMALL & MID CAP Return

L&T Midcap Fund- Direct 42.0%
Mirae Emerging Blue chip 41.1%
Fund- Direct

1.2.1 L&T Midcap Fund- Direct Plan (G)

Launch Date Jan 01, 2013

Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are to generate capital appreciation
by investing primarily in midcap stocks.
The Scheme will invest primarily in
companies whose market capitalization falls
between the highest and the lowest
constituent of the Nifty Free Float Midcap
100 Index.
Investment Type Equity
Fund Family L&T Investment Management Limited

The above information is gathered from Money control site which gives
approximately relevant data as to carry forward with the analysis.

55
a) Performance of the Scheme from the date of Issue:

NAV of Scheme from its inception

140
126.62
120

100 103.34
84.95 93.55
80 Trend since inception
Linear (Trend since inception)
60
45.49
40 43.29

20

0
01-01- 01-01- 01-01- 01-01- 01-01- April mid
2013 2014 2015 2016 2017

Explanation: NAV since its inception has been increasing significantly as

shown in the graph. It has always been a matter of units that these NAV change
bring in.
Significance: One important thing can be established here as to higher NAV
would probably work against us when we get dividends as the pay out on face
value of the scheme. The scheme with higher NAV has fewer numbers of units.
Hence when we have a higher NAV we get a lower absolute dividend here.

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return of L&T
Midcap Fund- Direct Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (126.62-43.29) /43.29 x100= 1.924 or 192.4%
Interpretation:

As we can see the percentage of return has been high from its inception
i.e. 192.4% irrespective of the low start. The main reason of sudden
increase in NAV from 2013 and 2014 of 45 to around 85 in 2015 and
2016 is due to the IPO that hit its capital market.
56
 So once the mobilisation was seen, NAV went up but units
consequently fell down by not disturbing the returns of schemes.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the

time of launching with a minimum investment size of 5000 is likely to
get 500 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she
will hold the investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 45.49* 500=22,745 22,745-5000=17,745
After 2 years 84.95*500=42,475 42,475-5000=37,475
After 3 years 93.55*500=46,775 46,775-5000=41,775
For 4 years + 126.62*500=63,310 63,310-5000=58,310
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
Higher NAV have resulted the corpus yield of investment manyfold.
But eliminating that as a criterion as we see, on considering 1st January
NAV of each year, 5000/- investment has fetched us 58,310/- currently.
ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in L&T
midcap fund. And on interviewing them, I found out that one has invested
for 13 months and has earned 14% return since inception, and the other 9%
interest for 10 months (This can be showed through the data collected
through Survey method and interviewing the most efficient once).

Investment 1 Investment 2
14% x 12 9% x 12
13 10
i.e. 12.92% i.e. 10.8%

Note: XIRR was used to find their annualised internal rate of return (14%
& 9% respectively)
Interpretation:
This shows that 12.92% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 10.8% is the
annualized rate for Investment 2.
And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.

57
1.2.2 Mirae Emerging Blue chip Fund- Direct
Launch Date Feb 01, 2013
Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are to generate income and capital
appreciation from a diversified portfolio
predominately investing in Indian equities
and equity related securities of companies
which are not part of the top 100 stocks by
market capitalization and have market
capitalization of at least Rs. 100 crore at the
time of investment.
Investment Type Equity
Fund Family Mirae Asset Mutual Fund

a) Performance of the Scheme from the date of Issue:

Trend of NAV since Inception

50
45 45.554
40 40.368
35
29.77 30.717
30 Trend of NAV since Inception
Linear (Trend of NAV since In-
25 ception)
20
15 15.201
10 13.809

5
0
01-02- 01-02- 01-02- 01-02- 01-02- April Mid
2013 2014 2015 2016 2017

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return of L&T
Midcap Fund- Direct Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (45.54-13.8) /13.8 x100= 2.3 or 23%
Interpretation:

58
 As we can see the percentage of return isn’t much high i.e. 23% now
due to the policy changes that has been happening in the company. But
riskometer being moderately high can give high returns; as it is evident
that higher risk gives higher return.
As Mirae benchmarks with Nifty free float Midcap, the change has been
steadily low when compared to Nifty free float scheme.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the time
of launching with a minimum investment size of 5000 is likely to get 500
units i.e. 5000/10=500units.So, as on 20 th April, 2017, he/she will hold the
investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 15.20* 500=7,600 7,600-5000=2,600
After 2 years 29.77*500=14,885 14,885-5000=9,885
After 3 years 30.71*500=15,355 15,355-5000=10,355
For 4 years + 45.554*500=22,777 22,777-5000=17,777
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
Higher NAV have resulted the corpus yield of investment more than
threefold. But eliminating that as a criterion as we see, on considering
1st January NAV of each year, 5000/- investment has fetched us 17,780
approx. currently.
ii. Annualized Return:
Simple Returns x12
Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in Mirae
Emerging blue-chip fund. And on interviewing them, I found out that one
has invested for 18 months and has earned 14% return since inception, and
the other 9% interest for 20 months (This can be showed through the data
collected through Survey method and interviewing the most efficient once).

Investment 1 Investment 2
14% x 12 9% x 12
18 20
i.e. 9.33% i.e. 5.4%
Note: XIRR was used to find their annualised internal rate of return (14%
& 9% respectively)

Interpretation:

59
 This shows that 9.33% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 5.4% is the
annualized rate for Investment 2.
And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.
So this shows that person with 14% interest investing since 18 months
is getting a higher return when compared to the other who has been
investing 2 months ahead and still getting 5.4% as annualised return. So
he should reconsider the percentage being provided to him/her in this
scheme.

1.3 Diversified Equity: Next category is Diversified group of equity fund. Below
follows the information for each scheme type. Both are direct plan and growth
oriented funds.

DIVERSIFIED EQUITY RETURNS

Tata Equity P/E Fund- Direct 44.2%
(G)
Tata Equity P/E Fund 43.2%

1.3.1 Tata Equity P/E Fund- Direct

Launch Date Jan 01, 2013

Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme Benefits are the fund seeks to provide
capital appreciation by investing 70% of the
total assets in stocks having a trailing P/E
ratio less than that of the BSE Sensex at the
time of investment.
Investment Type Equity
Fund Family Tata Mutual Fund
Here the benefits seems to be alluring as 70% of stocks invested will be according
to the P/E ratio less than of BSE Sensex as its current P/E ratio is 20.62.As stocks
with high P/E ratio can be overpriced, so whatever the investments are made it will
be invested on less than 20.62.

a) Performance of the Scheme from the date of Issue:

60
 Trend line since inception
140
126.0233
120

100 103.63
88.84
89.23
80 Trend line since inception
Linear (Trend line since inception)
60
51.52
51.46
40

20

0
01-01- 01-01- 01-01- 01-01- 01-01- April Mid
2013 2014 2015 2016 2017

Explanation:NAV is gradually increasing here thus causing the unit holders with
fewer units in their hand. But the returns are high as we can see 44.2% as shown in
the table.

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return of Tata Equity
P/E Fund- Direct Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (126.3-51.46) /51.46 x100= 1.45 or 145.5%
Interpretation:

As we can see the percentage of absolute return on investment is

145.5% which is pretty high as compared to its return at the initial 1-
2years, 44.2%.
As Tata equity benchmarks with S&P BSE Sensex, the change has been
comparatively high when compared to BSE Sensex.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the time
of launching with a minimum investment size of 5000 is likely to get 500
units i.e. 5000/10=500units.So, as on 20 th April, 2017, he/she will hold the
investment of:

61
 Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 51.52* 500=25,760 25,760-5000=20,760
After 2 years 88.84*500=44,420 44,420-5000=39,420
After 3 years 89.23*500=44,615 44,615-5000=39,615
For 4 years + 126*500=63,000 63,000-5000=58,000
Note: NAV’s are as on Jan 3 of every year
rd

Interpretation:
Higher NAV have resulted the corpus yield of investment more than
threefold. But eliminating that as a criterion as we see, on considering
1st January NAV of each year, 5000/- investment has fetched us Rs.58,
000 currently.
ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested Tata equity
P/E fund direct plan. And on interviewing them, I found out that one has
invested for 22 months and has earned 12% return since inception, and the
other10 % interest for 24 months (This can be showed through the data
collected through Survey method and interviewing the most efficient once).

Investment 1 Investment 2
12% x 12 10% x 12
22 24
i.e. 6.54% i.e. 5%
Note: XIRR was used to find their annualised internal rate of return (12%
& 10% respectively)
Interpretation:
This shows that 6.54% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 5% is the
annualized rate for Investment 2.
And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.
So this shows that person with 12% interest investing since 22 months
is getting a higher return when compared to the other who has been
investing 2 months ahead and still getting 5% as annualised return. So
he should reconsider the percentage being provided to him/her in this
scheme and as the return is shown low the scheme is not giving much
return in long run when annualized.

1.3.2 Tata Equity P/E Fund

62
 Launch Date Jan 15, 2004
Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme It aims to provide reasonable and regular
income along with possible capital
appreciation to its unitholder.
Investment Type Equity
Fund Family Tata Mutual Fund

a) Performance of the Scheme from the date of Issue:

NAV Trend line

140
118.03
120 122.76

100
91.69
80 81.72 Trend line
Linear (Trend line)
60 56.51
45.21
40 44.455

20

0
01-04- 01-04- 01-04- 01-04- 01-04- 01-04- April 20th
2012 2013 2014 2015 2016 2017

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return on Tata equity
P/E Fund- Regular Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (122.76-44.455) /44.455 x100= 1.76 or 176.15%
Interpretation:

As we can see the percentage of return has been high from its inception
i.e. 176.15% irrespective of the low start. The main reason of sudden
increase in NAV from 2013 and 2014 of 44 to around 120 in 2015 and
2016 is due to the high liquidity and earnings in the company.
So once the mobilisation was seen, NAV went up but units
consequently fell down by not disturbing the returns of schemes.

63
 CASE 2: But in case, if a person invests at Face value of Rs. 10 at the
time of launching with a minimum investment size of 5000 is likely to
get 500 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she
will hold the investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 45.21* 500=22,605 22,605-5000=17,605
After 2 years 56.51*500=28,255 28,255-5000=23,255
After 3 years 91.69*500=45,845 45,845-5000=40,845
After 4 years 81.72*500=40,860 40,860-5000=35,860
After 5 + 122.76*500=61,380 61,380-5000=56,380
years
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
Higher NAV have resulted the corpus yield of investment manifold. But
eliminating that as a criterion as we see, on considering 1st January
NAV of each year, 5000/- investment has fetched us 56,380/- currently.
It is minutely low as compared to Tata Equity P/E Fund- Direct and
therefore there was a necessity to bring in the regular plan.
ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in Tata equity
P/E fund. And on interviewing them, I found out that one has invested for 9
months and has earned 3% return since inception, and the other 5% interest
for 10 months (This can be showed through the data collected through
Survey method and interviewing the most efficient once).

Investment 1 Investment 2
3% x 12 5% x 12
9 10
i.e. 4% i.e. 6%

Note: XIRR was used to find their annualised internal rate of return (3% &
5% respectively)

Interpretation:
This shows that 4% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 6% is the
annualized rate for Investment 2 which is higher than 4%.

64
 And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.
1.4 Next category is Balanced- Hybrid

BALANCED – Hybrid Returns

ICICI Pru Balanced Fund- Direct 26.4%
ICICI Pru Balanced Fund 24.7%

1.4.1 ICICI Prudential Balanced Fund- Direct

Launch Date Jan 01, 2013

Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme Provides the twin benefits of growth from
equity markets and steady income from
debt markets. It also provides lower
volatility of returns and lower risk through
diversification.
Investment Type Balanced
Fund Family ICICI Prudential Mutual Fund

a) Performance of the Scheme from the date of Issue:

65
 NAV since inception
140

120 119.38
109.49
100 92.04
94.89
80 NAV since inception
Linear (NAV since inception)
60 62.51
56.89
40

20

0
01-01- 01-01- 01-01- 01-01- 01-01- April Mid
2013 2014 2015 2016 2017

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return on Tata
Regular P/E Fund- Regular Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (119.38-56.89) /56.89 x100= 1.09 or 109.84%
Interpretation:

The absolute return is giving more than 100% here. This is possible
only when companies are doing exceptionally well. ICICI being one of
the best fund houses has been giving a 110% return approx.
Here, by investing in equity for capital appreciation and debt for stable
returns, we can reduce instability of returns by increasing/decreasing
exposure to various markets based on such outcome.
So ICICI balanced fund takes care of the asset allocation by constantly
investigating market outlook and performance and accordingly by
increasing/decreasing equity exposure based on the market outlook and
using a core debt portfolio to do the rebalancing.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the

time of launching with a minimum investment size of 5000 is likely to
get 500 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she
will hold the investment of:

66
 Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 62.51* 500=31,255 31,255-5000=26,255
After 2 years 92.04*500=46,020 46,020-5000=41,020
After 3 years 94.89*500=47,445 47,445-5000=42,445
After 4+ 119.38*500=59,690 59,690-5000=54,690
years
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
Higher NAV have resulted the corpus yield of investment manifold. But
eliminating that as a criterion as we see, on considering 1st January
NAV of each year, 5000/- investment has fetched us 54,690/- currently.

ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in ICICI Pru
balanced fund. And on interviewing them, I found out that one has invested
for 9 months and has earned 7% return since inception, and the other 5%
interest for 10 months (This can be showed through the data collected
through Survey method and interviewing the most efficient once).

Investment 1 Investment 2
7% x 12 5% x 12
9 10
i.e. 9.33% i.e. 6%

Note: XIRR was used to find their annualised internal rate of return (3% &
5% respectively)

Interpretation:
This shows that 9.3% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 6% is the
annualized rate for Investment 2.

67
 And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.
This shows that if the percentage of interest they provide is high,
automatically the returns earned over years also increases with time.

1.4.2 ICICI Pru Balanced Fund

Launch Date Oct 07, 1999

Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme It seeks to generate long-term capital
appreciation and current income from a
portfolio that is invested in equity and
equity related securities as well as in fixed
income securities.
Investment Type Balanced
Fund Family ICICI Prudential Mutual Fund

a) Performance of the Scheme from the date of Issue:

NAV of Scheme from it's Inception

140

120 114.63
114.15
100 92.81
89.46
80 Trend of NAV from 2012
Linear (Trend of NAV from 2012)
66.56
60
53.85
48.54
40

20

0
01-04- 01-04- 01-04- 01-04- 01-04- 01-04- April
2012 2013 2014 2015 2016 2017 mid

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return on Tata
Regular P/E Fund- Regular Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (114.15-48.54) /48.54 x100= 1.35 or 135.16%

68
 Interpretation:

The regular scheme of ICICI balanced fund gives much better absolute
return as compared to ICICI balanced direct fund. Regular scheme is
when investor invests through a distributor or advisor. So the allocation
of funds in schemes is according to the advisor and therefore must have
fetched good yield.
So ICICI balanced fund takes care of the asset allocation by constantly
investigating market outlook and performance accordingly by
increasing/decreasing equity exposure based on the market outlook and
using a core debt portfolio to do the rebalancing.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the

time of launching with a minimum investment size of 5000 is likely to
get 500 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she
will hold the investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 53.85* 500=26,925 26,925-5000=21,925
After 2 years 66.56*500=33,280 33,280-5000=28,280
After 3 years 92.81*500=46,405 46,405-5000=41,405
After 4 years 89.46*500=44,730 44,730-5000=39,730
After 5+ 114.15*500=57,075 57,075-5000=52,075
years
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
Higher NAV have resulted the corpus yield of investment manifold. But
eliminating that as a criterion as we see, on considering 1st January
NAV of each year, 5000/- investment has fetched us 52,075/- currently.

ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in ICICI Pru
balanced fund-regular scheme. And on interviewing them, I found out that
one has invested for 36 months and has earned 28% return since inception,
and the other 19% interest for 48 months (This can be showed through the
69
 data collected through Survey method and interviewing the most efficient
once).

Investment 1 Investment 2
28% x 12 19% x 12
36 48
i.e. 9.33% i.e. 4.75%

Note: XIRR was used to find their annualised internal rate of return (28%
& 19% respectively)
Interpretation:
This shows that 9.3% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 4.75% is the
annualized rate for Investment 2.
As time increases, investment also increases by 9.33% in Investment 1
and 2nd by 4.75% annually.
And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.

1.5 Next and the final category is MIP (Monthly Income Plan) aggressive funds-
Hybrid type:

MIP AGGRESSIVE- Hybrid

Birla SL MIP 2-Wealth 25 19.0%
Kotak Monthly Income Plan- 14.8%
Direct

1.5.1 Birla SL MIP 2- Wealth 25

Launch Date April 30, 2004

Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme The scheme primarily seeks to generate
regular income through a predominant
exposure to debt and money market

70
 instruments. It also aims at capital growth
through an equity exposure of maximum
25%.
Investment Type Debt
Fund Family Birla Sun life Mutual Fund

The concept of Monthly Income Plan (MIP) is originated from the requirement of
providing higher returns to conservative investors. In a scenario where debt returns
have come down because of historic low interest rates, the MIP product relies on
small dosages of equities in a predominantly debt portfolio to provide the return
faster. The study shows, concept of a debt portfolio with equity boosters has been
very successful in the past.
a) Performance of the Scheme from the date of Issue:

NAV since its inception

40
36.12
36.583
35

30 29.43 30.06

25
22.92 NAV since its inception
20 Linear (NAV since its inception)
19.003
15

10

0
01-04- 01-04- 01-04- 01-04- 01-04- April Mid
2013 2014 2015 2016 2017

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return on Tata equity
P/E Fund- Regular Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (36.58-19) /19x100= 0.925 or 92.52%
Interpretation:

As we can see the percentage of return has been high from its inception
i.e. 19% due to its low start. The NAV has been steadily increasing
from 19% to 36.5%.
Though less NAV leads to more units, or more NAV tends to give less
units, it will give its absolute return of 92.5% currently.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the time
of launching with a minimum investment size of 5000 is likely to get 500

71
 units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she will hold the
investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 22.92* 500=11,460 11,460-5000=6,460
After 2 years 29.43*500=14,715 14,715-5000=9,715
After 3 years 30.06*500=15,030 15,030-5000=10,030
After 4 years 36.58*500=18,290 18,290-5000=13,290
Note: NAV’s are as on Jan 3 of every year
rd

Interpretation:
Higher NAV have resulted the corpus yield of investment manifold. But
eliminating that as a criterion as we see, on considering 1st January
NAV of each year, 5000/- investment has fetched us 13,290/- currently.
The returns are comparatively low as compared to other schemes but
have the features of very less risk and guaranteed return.
ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in Birla SL
MIP 2- wealth 25 funds. And on interviewing them, I found out that one has
invested for 9 months and has earned 2% return since inception, and the
other 3% interest for 9 months (This can be showed through the data
collected through Survey method and interviewing the most efficient once).

Investment 1 Investment 2
2% x 12 3% x 12
9 9
I.e. 3% (approx...) i.e. 4%

Note: XIRR was used to find their annualised internal rate of return (2% &
3% respectively)
Interpretation:
This shows that 3% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 4% is the
annualized rate for Investment 2 which is higher than 4%.
2% has yielded 3% return now after 9 months and 3% has yield 4% in 9
months. So annualized return here is helping in gaining good return.
And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.
1.5.2 Kotak Monthly Income Plan- Direct

72
 Launch Date Jan 01, 2013
Scheme Type Open Ended
Face Value (price at which it was Rs. 10
issued)
Minimum Investment Rs. 5000
Benefit of the Scheme This scheme aims to enhance returns over a
portfolio of debt instruments with a
moderate exposure in equity and equity
related instruments.
Investment Type Debt
Fund Family Kotak Mahindra Mutual Fund

a) Performance of the Scheme from the date of Issue:

NAV since inception

35

30 29.26
28.4004999999999
25 23.1075 24.56

20 NAV since inception

19.1501
18.3705 Linear (NAV since inception)
15

10

0
01-01- 01-01- 01-01- 01-01- 01-01- April Mid
2013 2014 2015 2016 2017

b) Quantitative Study- An Analysis as a Proof:

To calculate the rate of return using following methods:
i. Point-to-point or Absolute Return: To calculate the return on Tata equity
P/E Fund- Regular Plan Scheme,
CASE 1: Absolute return = (current NAV - initial NAV)/ initial NAV x
100
= (29.26-18.37) /18.37x100= 0.59 or 59.28%
Interpretation:

As we can see the percentage of return has been high from its inception
i.e. 19% due to its low start. The NAV has been steadily increasing
from 19% to 30% (approx.)
The absolute return turns out to be very less because of the slow growth
of the fund of Kotak monthly income plan.

73
 Though less NAV leads to more units, or more NAV tends to give
fewer units, it will give its absolute return of 59.28% currently.

CASE 2: But in case, if a person invests at Face value of Rs. 10 at the time
of launching with a minimum investment size of 5000 is likely to get 500
units i.e. 5000/10=500units.So, as on 20th April, 2017, he/she will hold the
investment of:

Table1: Showing Returns as on

Time NAV* Units Return after

After 1 year 19.15* 500=9,575 9,575-5000=4,575
After 2 years 23.1*500=11,550 11,550-5000=6,550
After 3 years 24.56*500=12,280 12,280-5000=7,280
After 4+ 29.26*500=14,630 14,630-5000=9,630
years
Note: NAV’s are as on Jan 3rd of every year

Interpretation:
Higher NAV have resulted the corpus yield of investment manifold. But
eliminating that as a criterion as we see, on considering 1st January
NAV of each year, 5000/- investment has fetched us 9,630/- currently.
Rs. 5000 turning up to Rs. 9630 is a very slow growth while looking at
year-on-year return. The one who has invested should reconsider and
transfer their schemes from one category to other.
But, looking at the other side, as it is a debt scheme which yields steady
income the returns are not that bad because with lower risk 9630/- can
still be extracted.

ii. Annualized Return:

Simple Returns x12

Period of Simple Return (in months)
Out of Survey, I have picked up 2 people who have invested in Kotak
Monthly Income plan direct fund. And on interviewing them, I found out
that one has invested for 9 months and has earned 2% return since
inception, and the other 4% interest for 9 months (This can be showed
through the data collected through Survey method and interviewing the
most efficient once).

Investment 1 Investment 2
2% x 12 4% x 12
9 9

74
I.e. 3% (approx...) i.e. 5.33%

Note: XIRR was used to find their annualised internal rate of return (2% &
4% respectively)
Interpretation:
This shows that 3% is the annualized rate at which capital has
compounded over time for investment 1. Similarly, 5.33% is the
annualized rate for Investment 2.
2% has yielded 3% return now after 9 months and 4% has yield 5.33%
in 9 months. So annualized return here is helping in gaining good return
according to the time and rate of return.
And as studies show, Mutual fund returns should be compared in
Annualized returns in order to be compared with other products. So it
serves beneficial to follow this method.

MUTUAL FUND VS OTHER INVESTMENT AVENUES

75
76
 SURVEY

Introduction

Every earning person must save and saving must be converted into investment for
tomorrow considering future needs and Time Value of Money. In so far as the question of
investment is concerned there are so many investment avenues available with us.

A person before investing his/her surplus money should examine such avenues and go for
investments according to his/her needs and capabilities even though his primary objective
of an investor is to maximise his/her return.

However, the aspect of maximize of return always entitles risk. In that situation if anybody
wants to go for better return he/she has to take risk. But that risk must be affordable.
Mutual Fund is such an investment avenue which provides the possibility of better return
with a relatively low risk.

On the backdrop of the above questionnaire or a survey of the investor is aimed at

ascertaining the awareness and the perception of the investors towards investment option
available through Mutual Fund schemes.

In the above context, a survey was conducted in order to gain the market insight and
investor awareness and perception.

Questionnaire was the tool selected to conduct this survey. So, a questionnaire of 20
questions was prepared to carry out the process. The questionnaire was prepared to
gather as much information as possible in a short span of time. It was necessary to design
the questionnaire simple and easy so that the respondents can easily give their view points
within 5-10 minutes.

DATA COLLECTION

For the survey, 100 respondents were targeted who were either regular investors or
were prospective investors. The survey was conducted through two channels:

 In person, one to one and

 Online
The entire survey was conducted over a period of 5 days from 17 th April 2017 to 21th
April 2017

77
Henceforth the data collected was organized and studied in detail. The data was then
analysed through graphical methods and results were drawn. These results were then used
to draw inferences so that recommendations and suggestions could be documented.

DATA ANALYSIS

All the raw data collected is not useful in its original form to carry out analysis and obtain
results. The data has to be organized and filtered before it can be used for carrying out
analysis and obtaining results. The data collected during survey was organized and some
parameters were selected which would be used in carrying out the analysis. Graphical
method of analysis seemed to be the most suitable method of carrying out the analysis.
With the help of Pie Charts, Column Graphs and Bar Graphs the data has been
studied and inferences drawn.

Only close ended questions have been taken into the analysis as they fit suitably in the
graphical method of data analysis.

The parameters selected for survey and consequences result of survey are analysed
below:

Age (years)

Parameter Number of Votes

Less than 30 37
30-35 29
36-40 21
41-45 4

Education background

Graduate 21
Post graduate 74
Others 5
Total 100
Employee status

Full time 57

78
 Part time 11
Self-employed 14
Retried 1
Others 17
Total 100

Aggregate monthly income

Below Rs.20,000 24
Rs.20,001 - Rs.40,001 23
Rs.40,001 – Rs.60,000 17
Rs.60,001 – Rs.80,000 18
Above Rs.1,00,000 18
Total 100
Do you save money?

Yes 86
No 12
Maybe 2
Total 100
How long do you plan to invest savings?

Upto 1 year 15
1-3 years 36
3-5 years 13
5-10 years 15
More than 10 year 21
Total 100
Yearly investment amount

Up to Rs.25,000 37
Rs.25,001 - Rs.35,000 26
Rs.35,001 – Rs.50,000 7
Rs.50,001 – Rs.75,000 6
Rs.75,001 – Rs.1,00,000 13
Above Rs.1,00,000 11
Total 100

Investment objective

Tax exemption 6
Income and/or Growth of capital 27
Safety 13
Inflation protection 4
Marketability/ liquidity 1

79
All the above 49
Total 100
Investment avenues

Post office 5
Shares and securities 5
Gold 1
Mutual fund 40
Real estate 5
Bank Fixed Deposit 18

Diversified investment 26
Total 100
Do you invest in mutual fund

Yes 87
No 12
Total 100
Why do you invest in mutual fund?

Less risk and better return

Diversified portfolio of several securities with lesser investment
Professionally managed
Liquidity
All the above
Total
How did you know about investment?

Advertisement 22
TV/Radio/Website 10
Friends and relatives 12
Family me 15
Financial advisers 25
All the above 16
Total 100
Mutual fund scheme preferred

Open ended 51.52%

Close ended 31.31%
Interval Scheme 17.17%
Total 100%
Which of the following Schemes do you prefer?

Equity/ Growth 34
Debt/ Income 5
Balanced 29
All the above 14

80
Total 82
Manner of investment in mutual fund

Lump sum 15
Systematic Investment Plan (SIP) 85
If yes, why do you prefer
It offers easy habitual investment like recurring deposit 26
It provides facility of rupee cost averaging as per the 17
market condition
Both of the above 57
Do you know what NAV of a Mutual Fund scheme is?

Yes 57
No 21
May be 22
Total 100
Which brand of Mutual Fund do you prefer?

ICICI Prudential 37
HDFC 29
Birla Sunlife 25
SBI 29
Kotak 11
Other 23
Black rock 14
Total 100

Why do you prefer a particular brand of Mutual Fund?

Performance 18
Well diversification 13
Investment strategy 5
Professional Fund Manager 23
All the above 41
Total 100

Level of your satisfaction with Mutual Fund investment

Excellent
Very Good

81
 Good
Average
Below Average
Total

Where can you lodge your complaint against a Mutual Fund?

Reserve Bank of India (RBI)

Insurance Regulatory Development Authority (IRDA)
Securities and Exchange Board of India (SEBI)
Not Aware
Total

GRAPHS AND INTERPRETION

1. Education background of respondent:

Fig. no-1

21

5 Graduate
Others
Post graduate

74

82
Interpretation:

Educational background vis-à-vis knowledge of investment of the respondent

It is observed from (fig.no-1) that most of the respondent are post graduate which
constitute 74, of the total respondent.
And it also shows that 21 respondent are graduated, which so that the respondent
are highly qualified.
As the majority of respondent are highly qualified, they actually understood the
necessity of investment in present scenario.
As coming to investment and there inference, a well- educated person only can
understand the needs and benefits of the investment without a guide in comparison
to an uneducated person.

2. Age group to which the sample population belongs

Fig. no-2

Total

29

37
30-35 yrs 36-40 yrs

41-45 yrs Over 45 yrs

Under 30 yrs
21
9
3

Interpretation:

Age group vis-à-vis risk taking appetite of the respondent

It is observed that majority of respondent’s lies within an age group of

under 30 years.

83
 This is an age where a person can take high risk so that he/she can gain
more return to complete his/her desire or needs.
At an age of 40 or above 45 don’t have that much of appetite to take risk
and lose the invested amount.
Rather to go for fixed deposit or we can say that riskless saving like bank
term deposits.

3. Annual Income pattern of sample population

Total

18 24

Below Rs. 20,000

Rs.20,001-Rs.40,000
Rs.40,001-Rs.60,000

18
Rs.60,001-Rs.80,000
Rs.80,001 and above
Fig. no-3
(blank)

16 23 Interpretation:

Annual income vis-à-vis

amount of investors of the respondent

It exhibits that the higher the annual income the proportion the investment will be.
In this case if a person is earning Rs.200000 p.a. he is going to invest only 10k to
20k not more than that, because other obligation he may have.
In the above fig. 23 respondents are below 20k and 23 respondents earn 20k-40k
per month so they can invest a little bit high amount.so that they can earn a
handsome profit.
Income is directly proportion to investment.

4. Employment status of the sample population

Fig. no-4

84
 14
1

11
Full time
Others
Part time
Retired
57 Self employed

17

Interpretation:

Employee status vis-à-vis period of holding the investment

It is viewed the 57 respondents works as full timers.

It has been found that respondents hold for long term purpose.
If a person is regular worker then he/she can invest for a long term, so that they can
gain a good yield. If a person is not a regular worker in case working as a part timer
or retired person due to irregular income source he may be an irregular investor and
can’t hold for a longer period of time.

5. Do you save money for investment?

Fig. no- 5 fig. no-6

85
 Total
2
12

Maybe
No
Yes

86

Total

15

36 1-3 yrs
3-5 yrs
5-10 yrs
More than 10 yrs
21
Upto 1 yr

15 13

Interpretation:

Saving vis-à-vis investment pattern of respondent

It is observed that 86 respondents said “yes” they save money for investment.
2 respondent don’t save as they don’t earn more.
12 respondent said that they may plan for investment in future.
It is observed in (fig. no-6) that 21 respondents wants to invest for more than 10
years because as we know that the longer the holding period, better the return and
also capital appreciation.
Whereas 15 respondents investment pattern is for 1-3 year as they wants to liquefy
the investment for short term period. Which shows “moderate risk moderate
return”.

86
6. Amount of money respondents invest yearly

Fig. no-7

Total

11

Above Rs.1,00,000
37 Rs.25001-Rs.35,000
Rs.35,001-Rs.50,000
Rs.50,001-Rs.75,000
26
Rs.75,001-Rs.1,00,000
Upto Rs.25,000

7
13
6

Interpretation:

It is exhibited from (fig. no-7) that 37 respondents have invested up to 25k

accordance with their income pattern.
Then 26 respondents has invested 35k, similarly a minor group of respondent has
invested above Rs.100000 i.e., 11 respondent.
“more income, more investment, more risk, more return”
6. Objective of investment of respondents from sample population
Fig. no-8

Total

13
6

1 All of the above

4 Income and/or Growth of Capital
49 Inflation protection
Marketability/liquidity
Safety
Tax exemption

27

87
Interpretation:

It has been observed that from (fig. 8) 49 respondents objective is to cope up with
inflation rate as day-by-day the rate of goods and services are increasing it has to
be managed by these investment. For safety purpose, emergency need, tax benefits,
income or growth etc are other objective of respondents.
Whereas 27 respondents said that their main objective is to get the income from the
investment.

8. Respondents investment areas from the sample population

Fig. no-9

Total
5
5
18
5

1 Bank fixed Deposit

Gold
I diversify my investment avenues
Mutual Fund
Post office
Real estate
Shares & securities

26
40

Interpretation:

Response towards investment avenues of the respondents

Fig. no-9 explore that the majority of respondents prefer mutual fund as investment
as it is managed by professionals in a diversified manner which leads to
diversification risk.
Also it has been observed that 26 respondents are having diversified portfolio like
mutual fund, post office deposits, real estate and bank fixed deposits.
“Don’t put all your investment in one basket”

88
9. Investment in mutual fund yes or no?

Fig. no-10 fig. no-11

Total

12

No
Yes

87

Total
3 2
4

24 All of the above

10 Diversified portfolio of several secu-
rities with lesser investment
Less risk and better return
Liquidity
Professionally managed
Tax benefits
(blank)

35

Interpretation:

If yes what is the reason of investment in Mutual Fund

From the fig. 10 it is seen that 87 respondents invested in Mutual Fund.

And the reasons are less risk and better return Diversified portfolio of
several securities with lesser investment, professionally managed,
Liquidity and Tax benefit of mutual fund investment.
35 respondents has diversified portfolio.

10. Source of knowing about mutual fund investments

Fig. no-12

89
 Total

10 12

15
22 Advertisement
All of the above
Family members
Financial advisers
Friends & relatives
TV/Radio/Website
(blank)

15
25

Interpretation:

It is observed from fig. 12 that majority with 25 respondents have come to know
about mutual fund from their financial advisers.
The reason is that now a days almost all companies providing financial knowledge
to all the needy customers who opt for the service.
Respondents also share that they come across their friends and relative those who
have invested previously in mutual funds.
Active advertisements also helps the investors to know about pros and corns of
these type of investments.

11. Preferences/choosing of the schemes from sample population

Fig. no-13

Total
14

34

All of the above

Balanced
Debt/Income
Equity/Growth
(blank)

29
5

Interpretation:

It is seen that from fig. no-13, 34 respondents preferred the balanced fund the
reason behind it is that (60 equity-40 debt) so that the risk of total loss will be not
there.

90
 It is also seen that majority go for equity/growth funds for better return.

12. Manner of investment in mutual fund

Fig. no-14

Total

15

Lump sum
Systematic investment plan (SIP)

85

Interpretation:

If SIP, why do you preferred

It shows that 85 respondents preferred systematic investment plan (SIP).

The reason behind investment in the SIP is, it provide a regular investment
habit and it also helps in dividing the amount of investment.
Whereas it also seen that only 15 respondents have invested in lump sum, as
per their wish.
But respondents view point is that why to take at a time burden.

91
 Fig.no-15

Fig.no-15

Total

17

Both of the above

It offers easy habitual investment
like recurring deposit
It provides facility of rupee cost av-
57 eraging as per the market conditions
26

It is seen that from the fig. 15, 57 respondents prefer SIP due to the
reason that it offer habituated investment and also facility of RCA as
per market condition.
Rupee Cost Averaging is tool or we can say technic to hedge the
risk.
It is also been observed that 26 respondents prefer it because it is
providing easy of payment.

13. Preferences in case of mutual fund schemes

Fig. no-16

92
 Total

31; 31%
Close ended
Interval Scheme
Open ended
51; 52% (blank)

17; 17%

Interpretation:

It is observed from fig. no-16, that 51.52% of respondents preferred open ended
schemes.
The reason they shared is that any time they can enter and any time they can
dissolved the scheme.
31.31% of respondents also gone for close ended schemes that they can fixed that
investment for a particular time period so that they can get high yield.

14. Awareness of net asset value (NAV) among respondents

Fig. no-17

Total
57

Total
22

21

Mayb e No Yes

Interpretation:

93
 Fig. no-17 exhibit that awareness among respondents are high. That respondents
know about net asset value of a schemes in mutual fund.
It is also seen from fig that 21 respondents said that they are not aware of the term
NAV the reason is that the funds are manage fully by mutual fund companies only
they pay the amount due.

15. Brand preference of respondents in mutual fund

Fig. no-18

Interpretation:

It can be seen from the fig. 18 that most of the respondents had preferred HDFC
mutual fund schemes as it is a leading brand in recent trends.
And also ICICI PRUDENTIAL is a 2nd highest leading brand in the mutual fund
industries.
Similarly all other brands of mutual funds are also performing.

16. Perception towards the brand of mutual fund of the respondents

Fig. no-19

94
 Total
41
45
40
35
30 23
25 18
20 13
Total
15
5
10
5

er
0
y

on
ag
e

eg

ce
ov

ti
an
t

an

a
ab

ra

fic
m
m
st
he

si
or

nd
t

er
en
t

rf

Fu

iv
of

Pe
tm

ld
l
ll

na
s
A

el
ve

io

W
In

ss
e
of
Pr

Interpretation:

From the fig. no-19 it is observed that perception of 41 respondents that

they prefer a particular brand due to the performance, reliability, as it is
manage by fund managers, as it is well diversified.
And also it can be seen that 23 respondents are preferring a particular brand
because of professional management bodies.

17. Satisfaction level of respondents towards investment on mutual fund

Fig. no-20

Interpretation:

It is seen that 37.8% respondents are very much satisfied with service provided by
the respective mutual funds companies.

95
 As now a days due to strict regulation of sebi and other constitutions the mutual
fund institutions are providing better options and also sharing all kinds of charges
and documentation. So the 29.31% of respondents are rated excellent.

18. Awareness of respondents in case of grievance redressal procedure

Fig. no-21

Interpretation:

It explore from the fig. 21 that majority of respondents are well aware of redressal
mechanism i.e., they have to lodge a complaint with SEBI in case of any dispute
arises from mutual fund related issues.
Still now 15% of respondents are not aware of these compliant mechanism.

96
 Findings

 It was found that most of them choose to be conservative and less aggressive in
nature while investing into mutual funds schemes.
 People generally like to save their savings in fixed deposits and saving accounts as
there was very less risk.
 The most popular medium of investment in mutual fund is through SIP and moreover
people like to invest in equity funds though it is risky.
 It was found that post graduates qualified investors were more in numbers when
compared to under graduate qualified investors. This shows people are taking risk
when they are experienced in well terms.
 It was seen that most of the people have invested in mutual funds due to risk
diversification though SIP.
 People having age of 25-40 where a person can take high risk so that he/she can gain
more return to complete his/her desire or needs.
 It has been observed that investment objective is to cope up with inflation rate as day-
by-day the rate of goods and services are increasing it has to be managed by these
investment. For safety purpose, emergency need, tax benefits, income or growth etc
are other objectives.

97
 Suggestion and recommendation

 It is seen that still now a big part of society is untapped by mutual fund companies
due to lack of awareness. Therefore massive financial campaigning is required the
channels may be radio, television, newspaper, seminars, and work shop.
 Though investors are showing interest for investment the portfolio manager should
carefully mobilize and utilize the fund in a productive manner so that more and
more
Investors can be attracted.
 In case any company is involved in any type of manipulation activities there should
be a statutory body to handle this kind of situations, that’s why grievance redressal
mechanism should be strengthen. So that investor’s interest can be protected.
 One more facility can provided by the mutual funds companies i.e., step to be taken
to reach the door step of the investors.
 Investors service system should be strengthen, if investors are paying for the
services they must avail a good service.
 SIP is one of the innovative products launched by AMC in the industry. SIP is easy
for monthly salaried person as it provides the facilities of do the investment in
EMIs.
 Though most of the prospects and potential investors are not aware about the SIP.
There is a large scope for the companies to trap the salaried persons.
 Mutual fund companies needs to give the training of the individual financial
advisor about the funds/schemes and its objectives, because they are the main
source of influence the investors.
 Young people aged under 35 will be a key new customers group into the future, so
making greater efforts with younger customer who show some interest in investing
should be pay off.

98
 Limitations
1. Time constraint due to shortage and less availability of period it may be possible
that all the related and concerned aspects may not be covered in this project.
2. It was not possible to expand the coverage of beyond 100 people due to constraint
of time.
3. Survey task was to cope of with the cooperation of the respondents covered under
survey.
4. All the targeted respondents were not fully aware of the investment prospective of
mutual fund.
5. All the respondents covered under survey were not equally aged, qualified and
earning capable for facilitation of making a balanced or uniform conclusion of the
survey.
6. Many of respondents hesitated and show reluctant to share their personal
information.

99
 Conclusion
The Indian mutual fund industry has transformed totally for good since last decade and has
shown growth and potential. Though the asset under management and number of schemes
has increased significantly, but it is yet to be household product, and needs to cover the
retail segment effectively. Moreover, there are still many remote and potential areas which
lack the required knowledge and infrastructure of mutual funds.

Mutual fund is an excellent product offering great flexibility and liquidity, which can be
tailored to suit any investor’s objective and it is affordable for the all people of different
income levels and saving habits. Mutual funds now represent perhaps most appropriate
investment opportunity for most investor’s. As financial markets become more
sophisticated and complex, investor’s need a financial intermediary who provides the
required knowledge and professional expertise on successful investing. As the investor
always try to maximize the returns with affordable risk. Mutual fund satisfies these
requirements by providing attractive returns with affordable risks.

After doing study it is concluded that yes mutual funds are much better investment option
but as future is uncertain so no one can give a sure guarantee of good returns, no matter
whether it is equity or a mutual fund. Investors can minimize their risk by doing little
research before investing in the markets which will help them to decide the right
investment plan or product.1

10
0
 APPENDIX

Questionnaires Survey on Investor Awareness on Mutual Fund

1. Your current age is within which of the following categories:

a) Under 30
b) 30-35
c) 36-40
d) 41-45
e) Over 45
2. What is your educational background:

a) Higher secondary
b) Graduate
c) Post graduate
d) Others (please specify). ________________

3. Your employment status:

a) Full time
b) Part time
c) Self employed
d) Retired
e) Others
4. Your aggregate monthly income:

a) Below Rs.20,000
b) Rs.20,001 - Rs.30,000
c) Rs.30,001 – Rs.50,000
d) Rs.50,001 – Rs.80,000
e) Rs.80,001 – Rs.1,00,000
f) Above Rs.1,00,000
5. Do you save money for investment?

a) Yes
b) No

If yes, how long do you plan to invest your savings?

a) Upto 1 year
b) 1-3 years
c) 3-5 years
d) 5-10 years
e) More than 10 years
6. What amount of money do you invest yearly?

a) Up to Rs.25,000
b) Rs.25,001 - Rs.35,000

10
1
 c) Rs.35,001 – Rs.50,000
d) Rs.50,001 – Rs.75,000
e) Rs.75,001 – Rs.1,00,000
f) Above Rs.1,00,000
7. What is the objective of your investment?

a) Tax exemption

b) Income and/or Growth of capital

c) Safety

d) Inflation protection

e) Marketability/ liquidity

8. Where do you invest normally?

a) Post office
b) Shares and securities
c) Gold
d) Mutual fund
e) Real estate
f) Bank Fixed Deposit
9. Do you invest in Mutual Fund?

a) Yes
b) No
10. Why do you invest in Mutual Fund?

a) Less risk and better return

b) Diversified portfolio of several securities with lesser investment
c) Professionally managed
d) Liquidity
e) Tax benefit
f) All the above
11. How did you know about investment in Mutual Fund?

a) Advertisement
b) TV/Radio/Website
c) Friends and relatives
d) Family members
e) Financial advisers
f) All the above
12. Which Mutual Fund Schemes do you prefer?

a) Open ended
b) Close ended
c) Interval Scheme
13. Which of the following Schemes do you prefer?

a) Equity/ Growth
10
2
 b) Debt/ Income
c) Balanced
d) All the above
14. What is the manner of your investment in Mutual Fund?

a) Lump sum
b) Systematic Investment Plan (SIP)

If SIP, why do you prefer it?

a) It offers easy habitual investment like recurring deposit

b) It provides facility of rupee cost averaging as per the market condition

c) Both (a) & (b)

15. Which type of scheme do you prefer in equity fund (SIP)?

a) Advantage fund

b) MID Cap

c) Equity plan

d) Index fund

e) MNC fund

f) Dividend yield plus

16. Do you know what NAV of a Mutual Fund scheme is?

a) Yes

b) No

17. Which brand of Mutual Fund do you prefer?

a) ICICI Prudential

b) HDFC

c) Birla Sunlife

d) SBI

e) Kotak

10
3
 f) Other

18. Why do you prefer a particular brand of Mutual Fund?

a) Performance

b) Well diversification

c) Investment strategy

d) Professional Fund Manager

e) All the above

19. What is the level of your satisfaction with Mutual Fund investment?

a) Excellent

b) Very Good

c) Good

d) Average

e) Below Average

20. Where can you lodge your complaint against a Mutual Fund?

a) Reserve Bank of India (RBI)

b) Insurance Regulatory Development Authority (IRDA)

c) Securities and Exchange Board of India (SEBI)

d) Not Aware

Bibliography:

Websites

1) www.mutualfundindia.com
2) www.mututalfunds.com
3) www.sebi.com
4) www.moneycontrol.com
5) www.rbi.org.in
6) www.capitalmarket.com

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4
7) www.shamdham.org
8) www.cybersurat.com
9) www.amfi.com
10) www.bseindia.com
11) www.sebi.gov.in

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