PROJECT

ON

A STUDY ON “AWARENESS OF MUTUAL FUND IN INDIA’’ in ICICI Prudential

Submitted in Partial Fulfilment of the Requirement

Of the Degree of
MASTER OF MANAGEMENT STUDIES (MMS)
Submitted By
MR. UBAID ABDUL LATIF DHANSAY
Registration No. (2202202022077)
Under the Guidance of
PROF. MR. AWESH BHORNYA
2021-22

1
 CERTIFICATE

This is to certify that MR. UBAID ABDUL LATIF DHANSAY (MMS 1 year in specialization of
Finance) who I the student of ANJUMAN-I-ISLAM ALLANA INSTITUTE OF MANAGEMENT
STUDIES has worked on project titled A STUDY ON ‘AWARENESS OF MUTUAL FUND IN
INIDA” in ICICI Prudential and has successfully completed the project work in partial fulfillment
of award of degree of MASTERS OF MANAGEMENT STUDIES (MMS) this report is the record
of the student’s own effort’s under supervision and guidance’s

Signature of Student

Name of Student

Certified By,

----------------

Prof. Awesh Bhornya

Project Guide

AIAIMS

----------------

Dr. Bernadette D’ Silva Mam

Director of AIAIMS

Date:

2
 DECLARATION
I, UBAID ABDUL LATIF DHANSAY declare that this written submission of my MMS 1 year
dissertation project represents my ideas in my own words, and where other’s ideas or words have
been included, I have been adequately cited and referenced the original sources. I also declared that
I have adhered to all principles of academic honesty and integrity and have not misrepresented or
fabricated or falsified any idea/data/facts/source in my submission.

I also declare that I have not taken any material/ content from copyrighted sources. I understand that
any violation of the above will be cause for disciplinary action by the Institute or University of
Mumbai as per the existing law and can also evoke penal action from the sources which have thus
not been properly cited or from whom proper permission has not been taken when needed.

(Signature)

----------------------------

Name of Student

Date

3
 ACKNOWLEDGEMENT

It gives me immense pleasure to present this project report on “Awareness of mutual fund in India”
in ICICI prudential. No work could be carried out without the help and guidance of various persons.

I am grateful to ALLANA INSTITUTE OF MAMAGEMENT STUDIED (AIAIMS) for giving me

an opportunity to work on this project. I wish to thank Dr. Bernadette D’Silva Mam the Director
of ALLANA INSTITUTE OF MANAGEMENT STUDIES, who has been a perpetual source of
inspiration and offered valuable suggestion to improve this project work.

I would fail in my duty if I do not express my deep sense of gratitude towards Prof. AWESH
BHORNYA Without his guidance it wouldn’t have been possible for me to complete this project.

I would like to express my gratitude towards my parents for their kind cooperation and
encouragement which overall helped me in completion of this project.

4
 INDEX

SR.NO TOPIC PAGE

NO.

1 Executive Summary 06
2 Introduction 07-11
3 Company Profile 12-15
4 Research Objective 16
5 Literature Review 28-31
6 Research Methodology 32
7 Analysis and Interpretation 33-36
8 Finding 37
9 Suggestion and Recommendation 38
10 Conclusion 39
11 References 40

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 EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s financial well Being, Mutual
Funds have not only contributed to the India growth story but have also Helped families tap into the
success of Indian Industry. As information and awareness is rising more and more people are
enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual
fund investors remains small is that nine in ten people with incomes in India do not know that
mutual funds exist but once People are aware of mutual fund investment opportunities, the number
who decide to Invest in mutual funds increases to as many as one in five people. The trick for
Converting a person with no knowledge of mutual funds to a new Mutual Fund Customer is to
understand which of the potential investors are more likely to buy Mutual funds and to use the right
arguments in the sales process that customers will accept as important and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me enough scope to
implement my analytical ability. The analysis and advice presented in This Project Report is based
on market research on the saving and investment practices Of the investors and preferences of the
investors for investment in Mutual Funds.

A mutual fund is an investment company that collects money from many people and invests it in a
variety of securities .the company then manages the money on an ongoing basis for individuals and
businesses. Mutual funds are an efficient way to invest in stocks, bonds, and other securities for
three reasons:

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 INTRODUCTION

Mutual fund is an investment company that pools money from shareholders and invests in a variety
of securities, such as stocks, bonds and money market instruments. Most open-end Mutual funds
stand ready to buy back (redeem) its shares at their current net asset value, which depends on the
total market value of the fund's investment portfolio at the time of redemption. Most open-end
Mutual funds continuously offer new shares to investors also known as an open-end investment
company, to differentiate it from a closed-end investment company. Mutual funds invest pooled
cash of many investors to meet the fund's stated investment objective. Mutual funds stand ready to
sell and redeem their shares at any time at the fund's current net asset value: total fund assets
divided by shares outstanding.

In Simple Words, 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. In India, 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. In Short, a Mutual fund is a common pool of money in to which
investors with common investment objective place their contributions that are to be invested in
accordance with the stated investment objective of the scheme. The investment manager would
invest the money collected from the investor in to assets that are defined/ permitted by the stated
objective of the scheme. For example, an equity fund would invest equity and equity related
instruments and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a suitable
investment for the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.

7
The mutual fund industry in India is one of the emerging industries in India. Today, the Indian
mutual fund industry has 40 players. The number of public sector players has reduced from 11 to 5.
The public sector has gradually receded into the background, passing on a large chunk of market
share to private sector players. The Association of Mutual Funds in India (AMFI) is the industry
body set up to facilitate the growth of the Indian mutual fund industry. It plays a pro-active role in
identifying steps that need to be taken to protect investors and promote the mutual fund sector. It is
noteworthy that AMFI is not a Self-Regulatory Organization (SRO) and its recommendations are
not binding on the industry participants. By its very nature, AMFI has an advisor’s or a counselor’s
role in the mutual fund industry. Its recommendations become mandatory if and only if the
Securities and Exchange Board of India (SEBI) incorporates them into the regulatory framework it
stipulates for mutual fund

8
 Concept of Mutual Fund
Many investors with common financial objectives

Pool their money

Investors, on a proportionate basis get mutual fund

Units for the sum contributed to the pool

The money collected from investors is invested

Into shares, debentures and other securities by the

Fund manager

The fund manager realizes gains or losses, and

Collects dividend or interest income

Any capital gains or losses from such investments

Are passed on to the investors in proportion of the

Number of units held by them

When an investor subscribes for the units of a mutual fund, he becomes part owner of

The assets of the fund in the same proportion as his contribution amount put up with the

Corpus (the total amount of the fund) Mutual Fund investor is also known as a mutual

Fund shareholder or a wit holder.

Any change in the value of the investments made into capital market instruments (such

As shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.

NAV is defined as the market value of the Mutual Fund scheme’s assets net of its

Liabilities. NAV of a scheme is calculated by dividing the market value of schemes

Assets by the total number of units issued to the investors.

9
HISTORY OF THE MUTUAL FUND INDUSTRY IN INDIA
The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India at the initiative of the Government of India and Reserve Bank. Though the

Growth was slow, but it accelerated from the year 1987 when non-UTI players entered

The Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both

Qualities wise as well as quantity wise. Before, the monopoly of the marker had seen an

Ending phase; the Assets under Management (AUM) was Rs67 billion. The private

Sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till

April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual

Fund industry can be broadly put into four phases according to the development of the

Sector. Each phase is briefly described as under.

First Phase: 1964 – 1987

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
RBI. In 1978, UTI was delinked from RBI and the IDBI took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme,
1964. At the end of 1988 UTI had Rs. 6700 crores of AUM.

Second Phase: 1987 – 1993 (Entry of Public Sector Funds)

In 1987, it was the entry of non-UTI, public sector mutual funds setup by public sector banks
and the Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987.

Third Phase: 1993 – 2003 (Entry of Private Sector Funds)

With the entry of the private sector funds in 1993, a new era started in the Indian Mutual Fund
Industry, giving the investors a wider choice of fund families. Also, 1993 was the year 10 in
which first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer ( now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993. The
industry now functions under SEBI Regulations, 1996. At the end of January 2003, there were
33 mutual funds with total assets of Rs. 121805 crores. The UTI with Rs. 44,541 crores of
AUM was way ahead of other mutual funds.

10
 Fourth Phase – Since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with
assets under management of Rs.29, 835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes.

11
 COMPANY PROFILE:

ICICI Prudential Life Insurance Company Limited is a life insurance company in

India established as a joint venture between ICICI Bank and Prudential plc ICICI Prudential is
engaged in life insurance and asset management business. The firm offers long term life
insurance plans and is headquartered in Mumbai. In 2016, the firm became the first insurance
company in India to be listed in the domestic stock exchanges.

ICICI Prudential Life Insurance Company Limited (ICICI Prudential Life) is promoted by ICICI
Bank Limited and Prudential Corporation Holdings Limited.
ICICI Prudential Life began its operations in the fiscal year 2001. On a retail weighted received
premium basis (RWRP), it has consistently been amongst the top companies in the Indian life
insurance sector. Our Assets under Management (AUM) at 30th June 2021 were `2,231.71 billion.
At ICICI Prudential Life, we operate on the core philosophy of customer-centricity. We offer long
term savings and protection products to meet different life stage requirements of our customers. We
have developed and implemented various initiatives to provide cost-effective products, superior
quality services, consistent fund performance and a hassle-free claim settlement experience to our
customers.

12
In FY 2015 ICICI Prudential Life became the first private life insurer to attain assets under
management of `1 trillion. ICICI Prudential Life is also the first insurance company in India to be
listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)

ICICI Prudential Life Insurance Company

Limited

Type Public

Traded as • BSE: 540133

• NSE: ICICIPRULI

Industry Financial services

Founded 2000

Headquarters Mumbai, India

Key people Narayanan Srinivasa Kannan MD[1]

Products Life insurance

Revenue ₹2,652 crore (US$370 million)

(2020)[2]

Operating income ₹1,067 crore (US$150 million)

(2020)[2]

Net income ₹1,066 crore (US$150 million)

(2020)[2]

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 Total assets ₹156,030 crore (US$22 billion)
(2020)[2]

Total equity ₹5,842 crore (US$820 million)

(2020)[2]

Number of 14,630
employees

Parent ICICI Bank

Website www.iciciprulife.com

History
ICICI Prudential Life Insurance started its operations in 2001. The life insurance arm was
established as a joint venture between ICICI Bank and Prudential Corporation Holdings
Limited with assets under management (AUM) of approx. ₹100 crore (US$14 million).
In 2010, the firm had grown up to ₹50,000 crore (US$7.0 billion) mark in assets under management
(AUM).
In 2015, the firm had crossed ₹1 trillion (US$14 billion) mark in assets under
management (AUM) It became the first insurance company in the industry to benchmark in AUM.
In 2016, ICICI Prudential became the first insurance company to be listed in Indian stock market,
namely Bombay Stock Exchange and National Stock Exchange The IPO, where the parent company
ICICI Bank offloaded 12.65 per cent of its shares, was termed as biggest in the Indian market since
2010 with its market capitalisation of ₹5,000 crore (US$700 million). Temasek Holdings, Premji
Invest and Government of Singapore are other major shareholders of the company.
In 2017, ICICI Prudential was requested took over Sahara Life’s insurance business on request from
the regulator IRDA in a motive to resolve the crisis at the Sahara's life insurance arm. The merger
was later revoked by Securities Appellate Tribunal.
In 2020, ICICI Prudential had crossed ₹2 trillion (US$28 billion) mark in assets under management
(AUM). The total premium income was ₹32,000 crore (US$4.5 billion) of which ₹12,000
crore (US$1.7 billion) was from the new business premium while approx. ₹21,000
crore (US$2.9 billion) was of the renewal premium.

14
 Key People

• N S Kannan - Managing Director and CEO

• M S Ramachandran - Chairman, Independent Director.
• Amit Palta - Chief Distribution Officer
• Judhajit Das - Chief Human Resource Officer
• Satyan Jambunathan - Chief Financial Officer (CFO)
• Ganessan Soundiram - Chief Technology Officer
• Manish Dubey - Chief Marketing Officer

Product
The company offers services in life insurance, pensions and health insurance to individuals and
groups and conducts operations in participating, non-participating and unit linked lines of
businesses and for segments which include par life, par pension, non-par, annuity non par, health,
linked life, linked pension, linked health and linked group. The organisation offers various products
on retail, mortgage and group platforms and its current products are:

• ICICI Prudential Guaranteed Income for Tomorrow (GIFT) - a long-term savings plan that
provides guaranteed income and life cover
• ICICI Prudential Signature - a Unit Linked Insurance Plan (ULIP), it is an insurance policy and
an investment plan
• ICICI Prudential iProtect Smart plan - a protection term insurance policy that provides a life
cover and optional critical illness cover
• ICICI Prudential Precious Life the firm had introduced this product in November 2019 for those
people who are facing it difficult to get access to life coverage because of their existing health
conditions.
• ICICI Prudential Guaranteed Pension Plan - a retirement plan to receive regular income on
retirement

Partnership

• In December 2019, the company collaborated with Pay tm so that users can get the iProtect
Smart plan benefits through it.
• In January 2021, the company collaborated with PhonePe so that users can get term life
insurance instantly via the app without any health check-ups and paperwork.

15
 RESEARCH OBJECTIVE

❖ To study the types mutual Fund schemes in India

❖ To study the types of risks with Mutual fund

❖ To study the advantage and disadvantages of Mutual fund

❖ To study the structure of mutual funds

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TYPES OF MUTUAL FUND SCHEMES
1. BY STRUCTURE
• Open – Ended Schemes.
• Close – Ended Schemes.
• Interval Schemes.

2 BY INVESTMENT OBJECTIVE

• Growth Schemes.
• Income Schemes.
• Balanced Schemes.

3 OTHER SCHEMES

• Tax Saving Schemes.

• Special Schemes
o Index Schemes.
o Sector Specific Schemes.

1 OPEN – ENDED SCHEMES:

The units offered by these schemes are available for sale and repurchase on any business day at
NAV based prices. Hence, the unit capital of the schemes keeps changing each day. Such
schemes thus offer very high liquidity to investors and are becoming increasingly popular in
India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at
all times, and may stop issuing further subscription to new investors. On the other hand, an
open-ended fund rarely denies to its investor the facility to redeem existing units

2. CLOSED – ENDED SCHEMES

The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of
units. These schemes are launched with an initial public offer (IPO) with a stated maturity
period after which the units are fully redeemed at NAV linked prices. In the interim, investors
can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes,
the unit capital in closed-ended schemes usually remains unchanged. After an initial closed
period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes
are usually more illiquid as compared to open-ended schemes and hence trade at a discount to
the NAV. This discount tends towards the NAV closer to the maturity date of the scheme

17
3. INTERVAL SCHEMES
These schemes combine the features of open-ended and closed-ended schemes. They may be
traded on the stock exchange or may be open for sale or redemption during pre-determined
intervals at NAV based prices.

4. GROWTH SCHEMES
These schemes, also commonly called Equity Schemes, seek to invest a majority of their funds
in equities and a small portion in money market instruments. Such schemes have the potential
to deliver superior returns over the long term. However, because they invest in equities, these
schemes are exposed to fluctuations in value especially in the short term.

5. INCOME SCHEMES
These schemes, also commonly called Debt Schemes, invest in debt securities such as
corporate bonds, debentures and government securities. The prices of these schemes tend to be
more stable compared with equity schemes and most of the returns to the investors are
generated through dividends or steady capital appreciation. These schemes are ideal for
conservative investors or those not in a position to take higher equity risks, such as retired
individuals. However, as compared to the money market schemes they do have a higher price
fluctuation risk and compared to a Gilt fund they have a higher credit risk.

6. BALANCED SCHEMES
These schemes are commonly known as Hybrid schemes. These schemes invest in both
equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain
the objective of income and moderate capital appreciation and are ideal for investors with a
conservative, long-term orientation.

7. TAX SAVING SCHEMES

Investors are being encouraged to invest in equity markets through Equity Linked Savings
Scheme (“ELSS”) by offering them a tax rebate. Units purchased cannot be assigned /
transferred/ pledged / redeemed / switched – out until completion of 3 years from the date of
allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of
India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance
(Department of Economic Affairs), Government of India regarding ELSS. Subject to such
conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961.

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8. INDEX SCHEMES
The primary purpose of an Index is to serve as a measure of the performance of the market as a
whole, or a specific sector of the market. An Index also serves as a relevant benchmark to
evaluate the performance of mutual funds. Some investors are interested in investing in the
market in general rather than investing in any specific fund. Such investors are happy to receive
the returns posted by the markets. As it is not practical to invest in each and every stock in the
market in proportion to its size, these investors are comfortable investing in a fund that they
believe is a good representative of the entire market. Index Funds are launched and managed for
such investors.

9. SECTOR SPECIFIC SCHEMES

. Sector Specific Schemes generally invests money in some specified sectors for example: “Real
Estate” Specialized real estate funds would invest in real estates directly, or may fund real
estate developers or lend to them directly or buy shares of housing finance companies or may
even buy their securitized assets.

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TYPES OF RISKS

All investments involve some form of risk. Even an insured bank account is subject to the
possibility that inflation will rise faster than your earnings, leaving you with less real
purchasing power than when you started (Rs. 1000 gets you less than it got your father when he
was your age). Consider these common types of risk and evaluate them against potential
rewards when you select an investment.

• Market Risk
at times the prices or yields of all the securities in a particular market rise or fall due to broad
outside influences. When this happens, the stock prices of both an outstanding, highly profitable
company and a fledgling corporation may be affected. This change in price is due to "market
risk"

. • Inflation Risk
Sometimes referred to as “loss of purchasing power." Whenever inflation sprints forward faster
than the earnings on your investment, you run the risk that you'll actually be able to buy less,
not more. Inflation risk also occurs when prices rise faster than your returns.

• Credit Risk
In short, how stable is the company or entity to which you lend your money when you invest?
How certain are you that it will be able to pay the interest you are promised, or repay your
principal when the investment matures?

• Interest Rate Risk

Changing interest rates affect both equities and bonds in many ways. Investors are reminded
that "predicting" which way rates will go is rarely successful. A diversified portfolio can help in
offsetting these changes

. • Exchange Risk
A number of companies generate revenues in foreign currencies and may have investments or
expenses also denominated in foreign currencies. Changes in exchange rates may, therefore,
have a positive or negative impact on companies which in turn would have an effect on the
investment of the fund.

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 • Investment Risk
The sectoral fund schemes, investments will be predominantly in equities of select companies
in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity
performance of such companies and may be more volatile than a more diversified portfolio of
equities.

• Changes in Government Policy

Changes in Government policy especially in regard to the tax benefits may impact the business
prospects of the companies leading to an impact on the investments made by the fund.

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 ADVANTAGES OF MUTUAL FUND

❖ Liquidity

Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit a mutual fund
scheme. You can sell your open-ended equity mutual fund units when the stock market is high and
make a profit. Do keep an eye on the exit load and expense ratio of the mutual fund.

❖ Diversification

Equity mutual funds have their share of risks as their performance is based on the stock market
movements. Hence, the fund manager spreads your investment across stocks of companies across
various industries and different sectors called diversification. In this way, when one asset class
doesn’t perform, the other sectors can compensate to avoid loss for investors.

❖ Expert Management

A mutual fund is good for investors who don’t have the time or skills to do the research and asset
allocation. A fund manager takes care of it all and makes decisions on what to do with your
investment. The fund manager and the team of researchers decide on the appropriate securities such
as equity, debt or a mix of both depending on the investment objectives of the fund. Moreover, the
fund manager also decides on how long to hold the securities.

Your fund manager’s reputation and track record in fund management should be an essential
criterion for you to choose a mutual fund. The expense ratio (which cannot be more than 2.25%
annualized of the daily net assets as per SEBI) includes the fees of the fund manager.

22
 ❖ Less cost for bulk transactions

You must have noticed how price drops with the purchase of increased volumes. For instance, if a
100g toothpaste costs Rs 10, you might get a 500g pack for say, Rs 40.The same logic applies to
mutual fund units as well. If you buy multiple mutual fund units at a time, the processing fees and
other commission charges will be lesser as compared to buying one mutual fund unit.

❖ Invest in smaller denominations

By investing in smaller denominations of as low as Rs 500 per SIP installment, you can stagger
your investments in mutual funds over some time. This reduces the average cost of investment –
you spread your investment across stock market lows and highs. Regular (monthly or quarterly)
investments, as opposed to lump sum investments, give you the benefit of rupee cost averaging.

❖ Suits your financial goals

There are several types of mutual funds available in India catering to investors across all walks of
life. No matter what your income is, you must make it a habit to set aside some amount (however
small) towards investments. It is easy to find a mutual fund that matches your income, time horizon,
investment goals and risk appetite.

❖ Cost-efficiency

You can check the expense ratio of different mutual funds and choose the one with the lowest
expense ratio. The expense ratio is the fee for managing your mutual fund.

❖ Quick and hassle-free process

You can start with one mutual fund and slowly diversify across funds to build your portfolio. It is
easier to choose from handpicked funds that match your investment objectives and risk tolerance.
Tracking mutual funds will be a hassle-free process. The fund manager, with the help of his team,
will decide when, where and how to invest in securities according to the investment objectives. In
short, their job is to beat the benchmark index and deliver maximum returns to investors,
consistently.

❖ Tax-efficiency

You can invest in tax-saving mutual funds called ELSS which qualifies for tax deduction up to Rs
1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. Though a 10% tax on Long-
Term Capital Gains (LTCG) above Rs 1 lakh is applicable, they have consistently delivered higher
returns than other tax-saving instruments in recent years.

❖ Automated payments

It is common to delay SIPs or postpone investments due to some reason. You can opt for paperless
automation with your fund house or agent by submitting a SIP mandate, where you instruct your

23
bank account to automatically deduct SIP amounts when it’s due. Timely email and SMS
notifications make sure you stay on track with mutual fund investments.

❖ Safety

There is a general notion that mutual funds are not as safe as bank products. This is a myth as fund
houses are strictly under the purview of statutory government bodies like SEBI and AMFI. One can
easily verify the credentials of the fund house and the asset manager from SEBI. They also have an
impartial grievance redressed platform that works in the interest of investors.

❖ Systematic or one-time investment

You can plan your mutual fund investment as per your budget and convenience. For instance,
starting a SIP (Systematic Investment Plan) on a monthly or quarterly basis in an equity fund suits
investors with less money. On the other hand, if you have a surplus amount, go for a one-time lump
sum investment in debt funds.

DISADVANTAGE OF MUTUAL FUND

24
 ❖ Costs of managing the mutual fund

The salary of the market analysts and fund manager comes from the investors along with the
operational costs of the fund. Total fund management charges are one of the first parameters to
consider when choosing a mutual fund. Higher management fees do not guarantee better fund
performance.

❖ Exit Load

You have exit load as fees charged by AMCs when exiting a mutual fund. It discourages investors
from redeeming investments for some time. It also helps the fund manager garner the required funds
to purchase the appropriate securities at the right price and time.

❖ Dilution

While diversification averages your risks of loss, it can also dilute your profits. Hence, you should
not invest in many mutual funds at a time.

As you have just read above, the benefits of mutual funds can undoubtedly override the
disadvantages, if you make informed choices. However, investors may not have the time,
knowledge or patience to research and analyses different mutual funds. Investing with Clear Tax
could solve this problem as we have already done the homework for you by handpicking the top-
rated funds from the best fund houses in the country.

25
 MUTUAL FUND STUCTURE:
We have seen many aspects of mutual funds, whether it was about their performance, portfolio, how
to choose them and how to compare them. In this post, we will see the structure of mutual funds in
India. Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI).
As running of a mutual fund involves managing of investors’ money, SEBI prescribes a complete
set of guidelines for operating the mutual fund (MF) through the “SEBI MF regulations 1996”.
These regulations designate that a mutual fund must be a three-tired structure consisting of:

1. A Sponsor
2. A Trustee
3. An asset management company (AMC)

While the above-mentioned play the most vital roles in creating and running a fund house, registrar
and transfer agent (RTA), the custodian, the auditors and the fund accountants play an important
supporting role in helping the smooth functioning of the mutual fund

Sponsor –

The Sponsor is the main body that establishes the Mutual Funds. The Sponsor can be correlated to a
promoter of a company. The duty of the sponsor involves appointing the trustees with the consent
of SEBI and setting up an Asset Management Company under the Companies Act 1956 while
making the trust registered with SEBI. As the Sponsors play the most vital role in the functioning of
a mutual fund, SEBI has a set of stringent guidelines for the eligibility of a sponsor. Some of them
26
are as follows: the sponsor should have a good track record of conducting business in the financial
services field for not less than 5-7 years. A Sponsor also needs to have made profits in at least 3 of
the 5 years including the latest year.

During the same period, it is also essential that the sponsor has had a positive net value. It should be
contributing at least of 40 percent net worth of the AMC. It is also important that the sponsor has a
good track record of fairness and integrity in all its transactions. For example, ICICI Bank and
Prudential Plc are sponsors for ICICI Mutual Fund. For Birla Sun Life Mutual Fund, Aditya Birla
Financial Services and Sun Life (India) AMC Investments Inc. are sponsors.

Trustee –

In the structure of mutual funds, the foremost role of a trustee is to secure that the interest of the
unit holders is shielded while making sure that the mutual fund complies with all the regulations of
SEBI. Either, the sponsor should select four trustees or establish a trustee company with at least
four independent directors. Additionally, at least two-thirds of the trustees or the directors should be
independent not associated with the sponsor in any way.

Some of the important responsibilities of the trustees involve entering into an investment
management contract with the AMC to define its functioning. Trustees are also accountable for
ensuring that the AMC has all the necessary procedures, processes, and systems in place while
ensuring that all the key persons such as the CIO, CEO, the fund managers and the analysts are
selected after the due care. All the schemes launched by the AMC have to be approved by the
trustees before launch. The trustees also review all the transactions of the AMC on a quarterly basis
whilst filing reports to SEBI, generally on a half yearly basis.

Asset Management Company (AMC) –

AMC’s are the investment manager of the trust. They take care of the everyday operation of the
mutual fund and managing the investor’s money as well. The AMC is appointed either by the
Sponsor or the Trustee after getting the approval of SEBI. The Asset Management Company
consists of the Chief Investment Officer, analytics, and the fund managers, who are together
responsible for managing the different schemes started. The compliance officer makes sure
compliance of all the actions of the AMC are in line with SEBIs laws and regulations. For example;
Axis AMC is the Asset Management Company for Axis Mutual Fund.

Custodian –

He has the custody of the all the shares and numerous other securities purchased by the AMC. The
custodian is responsible for safe custody of all the securities. The custodian is accountable for
managing the investment account of the mutual fund.

Registrar and Transfer Agent (RTA) –

It maintains and updates all the investor’s records. The primary function is investor servicing
through its office and many other branches. Its functions involve processing of investor application,
purchase and redemption transaction history by investors in different fund schemes and pla

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 LITERATURE REVIEW:

Author: Dr. Prabhuram Tripathy and Dr. Pramod Kumar Patjoshi

Topic: Study on awareness of mutual fund in India

Published date: 17 February 2020

Published on: Gedrag and organisatie review – ISSN 0921-5077

Mutual Fund is suitable to put resources into a differentiated and most appropriate
way for the investors, as it offers a chance to manage professionally at a minimal effort. As
Mutual funds is apparently the simplest and minimum risky approach to put resources in the
stock. Due to this suitability, investors are ready to put little measures of cash into the reserve
for making a sensible benefit in future. Investments in different Mutual Funds schemes provide
a chance to the investors to expect a higher return through lesser risk as associate to other types
of investment avenues. Mutual Funds companies mobilizes the funds from various investors
and invest in different financial securities in the stock market, thus investment in Mutual Funds
are subjected to market risk. Therefore, this research study is mainly emphasis to examine the
perception as well as awareness of mutual fund among various investors.

Findings:
In the active financial situation, there are many investment avenues can be accessible
to the investors in the security markets. Investors can invest in shares, bonds, debentures, gold,
bank deposits where variability in risk is there. Currently investors favor to diversify of their
risks in addition to the returns should be high. From the analysis, it found that the mutual funds
industry is still in its phase of growth and as most of the respondent are not fully aware of
mutual funds. The research approves that various demographic variables like education and age
have a significant impact on investor’s awareness. The significant bases of information for them
are that of bankers and Friend & relatives. The company has to conduct the regular customers’
awareness programmers for safe guarding their customers and influences them to invest in
mutual funds as they aware about the mutual funds.

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Author: R Padmaja

Topic: A Study on awareness of mutual fund in India in ICICI Prudential

Published date: 2 April 2013

Published: International Journal of Management Research and Business Strategy

In India mutual funds are divided in to balanced funds, Income fund, Growth
funds, Sector funds, etc. Equity funds mainly consist of common shares and stocks of
companies listed in the stock exchanges. They are considered risky but are likely to give higher
return in the longer run. Fixed income funds: Also known as low risk funds, these funds mainly
invest in government and corporate securities (debentures) with fixed amount of returns, which
are generally moderate. Balanced funds are basically a combination of both bonds and stocks,
which involves moderate to little risk. . Mutual funds have advantages compared to direct
investing in individual securities. These include increased diversification, daily liquidity,
professional investment management, ability to participate in investments that may be available
only to larger investors, service and convenience, government oversight and ease of
comparison. Mutual funds have disadvantages as well, which include fees, less control over
timing of recognition of gains, less predictable income and no opportunity to customize. Top 10
mutual funds in India are ICICI Prudential.

Findings:
Mutual funds are good source of returns for majority of households and it is
particularly useful for the people who are at the age of retirement. However, average investors
are still restricting their choices to conventional options like gold and fixed deposits when the
market is flooded with countless investment opportunities, with mutual funds. This is because
of lack of information about how mutual funds work, which makes many investors hesitant
towards mutual fund investments. In fact, many a times, people investing in mutual funds too
are unclear about how they function and how one can manage them. So the organizations which
are offering mutual funds have to provide complete information to the prospective investors
relating to mutual funds. The government also has to take some measures to encourage people
to invest in mutual funds even though it is offering schemes like Rajiv Gandhi Equity Savings
Scheme to the investors. It is believed that some of these measures could lift the morale of the
mutual fund industry which has been crippled for the last three years.

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Author: Dr. Vedala Naga Sailaja

Topic: Awareness of mutual fund in INDIA

Published Date: 3 March 2018

Published on: International journal of civil Engineering and technology

The scientist did the review with intend to quantify the awareness towards mutual
fund. It centers its consideration towards the conceivable outcomes of measuring the desires
and fulfillment level of more shared reserve items. It additionally intends to recommend
strategies to enhance the present level of recognition. Mutual fund is an investment instrument
which mobilizes the savings of millions of small and retail consumers into huge capital
formation. The basic objective behind investment in mutual fund is good return with relative
risk. There are expert available in market, which are in constant touch with micro and macro
aggregates or the economy.

Findings:
Distribution channels are also important for the investment in mutual fund.
Financial advisors are the most preferred channels for the investment in mutual fund. They can
change investors mind from one investment option to others. Many of investors directly invest
their money through AMC because they do not have to pay entry load. Only those people invest
directly who know well about mutual fund and its operations and those have time. Sometimes
due to lack of detailed awareness about mutual fund schemes the investors seek advice of
distributors. People will not accept the entry load if the company would any such type loads
during NFO because during NFO the investors were not sure whether the given scheme can
really give them better return or not.

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 Author: Sonali senapati and Shaila Srivastava

Topic: Awareness about the investment in mutual funds.

Published date: 05 December 2018

Published on: The Empirical Economics Letters, 17(special issue) ISSN 1681
8997

The mutual fund industry in India has a vast untapped market, the objectives of
this study are to analyze the overall growth of mutual fund in India and also to understand the extent
of awareness about mutual fund. With the growth story of India both per capita as well as the
disposable income has gone up. Some of the popular asset classes are investments in equity, bond
and debentures, gold and real estate. But there are retail investor who are not much aware of the
dynamics of these asset classes, this has resulted in emergence of mutual funds companies. The
mutual fund industry in India has a vest untapped market. According to SEBI annual report (2017-
2018) the average asset under management of mutual fund industry for the year 2017-18 was 21.46
lakh crore.

Findings:
The result suggests that the growth of investment in mutual fund has
increased significantly between 2000 and 2018. Majority of the respondents save less than 20%
of their income and maximum respondents prefer investing in mutual funds. The reason given
for their preference for mutual fund was high returns, diversified portfolio and 58% of their
income and maximum respondents prefer investing mutual funds. Most of the respondents get
information about mutual funds from news paper/internet while mostly respondents get it from
financial institutions. Very few studies have been conducted on the awareness about mutual
funds. The findings of the study are useful for fund managers in the industry.

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 RESEARCH METHODOLOGY:

Research methodology is a way to systematically solve the research problem. The

research methodology include the various methods and techniques for conducting
a research marketing research is the systemic design, collection, analysis and
reporting of data and filling relevant solution .

This project is based on secondary data.

Secondary data has been collected from magazines, newspapers company
literature and websites. Analyzing codes to each question were awarded. There
after which are written and analyzed.

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 ANALYZING AND INTERPRETATION:

❖ Reason for not invested in mutual fund:

Reason No. of Respondents

Not aware 65
Higher risk 5
Not any specific reason 10

Not aware
Higher risk
Not any specific reason

Interpretation:

Out of 80 people, who have not invested in mutual fund, 81% are not aware of
mutual fund, 13% said there is likely to be higher risk and 6% do not have any
specific reason

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 ❖ Reason for invested in ICICI

Reason No. of Respondents

ICICI Prudential 35
Better Return 5
Agents advice 15

Sales

Associated with ICICI

Better return
Agents Advice

Interpretation:

Out of 55 investors of ICICI 64% have invested because of its association with brand
ICICI, 27% invested on agent advisors, 9% invested because of better return.

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 ❖ Source of information for customers about Mutual Fund

Source of information No. of respondents

Advertisement 18
Peer Group 25
Bank 30
Financial Advisors 62

Advertisement
Peer Group
Bank
Financial Advisors

Interpretation:

From the above chart it can be inferred that the Financial Advisor is the most important

source of information about Mutual Fund. Out of 135 Respondents, 46% know about

Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group

13% through Advertisement.

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 ❖ Which types of funds would you like to prefer for your investment in mutual fund?

Investment preference No. of respondents

Equity fund 65
Debt fund 11
Balance fund 24
Total 100

Equity fund
Debt fund
balance Fund

Interpretation:

We observe that 65% of all the respondents prefer investment in equity fund, 11% of all the
respondents prefer investment in Debt fund, and remaining 24% of all the respondents prefer
investment in balanced fund.
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 FINDINGS

❖ Out of 80 Respondents 81% were not aware of mutual fund, 13% told there is not any
specific reason for not invested in mutual fund and 6% told there is likely to be higher risk

❖ Out of 55 investors of ICICIMF 64% have invested because of its association with
brand ICICI, 27% invested on agent advisors, 9% invested because of better
return.

❖ Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22%
through Bank, 19% through Peer Group 13% through Advertisement.

❖ We observe that 65% of all the respondents prefer investment in equity fund, 11% of all the
respondents prefer investment in Debt fund, and remaining 24% of all the respondents prefer
investment in balanced fund.

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 SUGGESTION AND RECOMMENDATION

There is need to build awareness of the new funds among the investors with constantly being in
contact with them.

Some of investors have asked for periodical market report about stock market so that they can get
the knowledge properly

ICICI must try to locate hard working distributors who are providing good business in their
respective geographical area.

The company should advertise their tax saving plan more so that they can gain more customers

The most vital problem spotted is of ignorance. Investors should be made aware of benefits.
Nobody will invest until and unless he is fully convinced. Investors should be realize that ignorance
is no longer bliss and what they are losing by not investing

Mutual funds offer lot of benefits which no other single option could offer. But most of the people
are not even aware of what actually a mutual fund is? They only see it s just another investment
option. So the advisors should try to change their mindset. The advisors should target for more and
more young investor. Young investors as well as person at the height of their career would like to
go for advisors due to lack of expertise and time.

Before making any investment financial advisors should first enquire about the risk tolerance of the
investors/customers, their need and time (how long they want to invest). By considering these three
things they can take the customers into consideration.

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 COCLUSIONS

Mutual funds are a popular investment avenue among investors, as they are easy to invest in and
give higher returns as compared to other traditional asset classes such as FDs or saving bank
deposits. If you have still not invested in mutual funds, make your investments soon. The mutual
fund investors prefer more of the equity fund as they want more return on their money. They avoid
going in the debt fund because they can get same amount of return on their banks that is also
without taking any risk. Usually people preferred to invest in mutual fund during NFO rather than
seeing the performance of mutual fund scheme. Sometimes due to lack of detailed awareness about
mutual fund schemes the investors seek advice of distributors. People will not accept the entry load
if the company would any such type loads during NFO because during NFO the investors were not
sure whether the given scheme can really give them better return or not.

Distribution channels are also important for the investment in mutual fund. Financial advisors are
the most preferred channels for the investment in mutual fund. They can change investors mind
from one investment option to others. Many of investors directly invest their money through AMC
because they do not have to pay entry load. Only those people invest directly who know well about
mutual fund and its operations and those have time. A mutual fund brings together a group of
people and invests their money in stocks, bonds, and other securities. The advantages of mutuals are
professional management, diversification, and economies of scale, simplicity and liquidity. The
biggest problems with Mutual Funds are their costs and fees.

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 REFERENCES

❖ Economic times Newspaper

❖ https://www.icicipruamc.com/

❖ http://www.ijstr.org/final-print/jan2020/A-Study-On-The-Awareness-Of-
Mutual-Funds-Investment-In-India.pdf

❖ https://cleartax.in/s/advantages-disadvantages-mutual-funds

❖ https://cleartax.in/s/mutual-fund-types

❖ https://www.valueresearchonline.com/

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