Understanding Mutual Funds and Portfolio Management

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INTRODUCTION
Mutual funds have become a hot favorite of millions of people all over the world.
The driving force of mutual fund is the ‘safety of the principal’ guaranteed, plus the
added advantage of capital appreciation together with the income earned in the form of
interest or dividend. People prefer Mutual Funds to bank deposits, life insurance and even
bond because with a little money, they can get into the investment game. One can own
string blue chips like ITC, TISCO, Reliance etc., through mutual funds. Thus, mutual
funds act as a gateway to enter into big companies hitherto inaccessible to an ordinary
investor with his small investment.
In the current economic scenario interest rates are falling and fluctuation I the
share market have put investors in confusion. One finds it difficult to take decision on
investment. This is primarily, because of investments are risky in nature and investors
have to consider various factors before investing in investment avenues.
Over the past decades mutual funds have grown intensely in popularity and have
experienced a Considerable growth rate. Mutual funds are popular because they make it
easy for small investors to invest their money in a diversified pool of securities. As the
mutual fund industry has evolved over the years, there have arisen many questions about
the nature of operations and characteristics of these funds.
Mutual funds are considered as one of the best available investments as compare
to others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. But the biggest advantage to mutual
funds is diversification, by minimizing risk & maximizing returns.
The study will guide the new investor who wants to invest in equity and mutual
fund schemes by providing knowledge about how to measure the risk and return of
particular scrip or mutual fund scheme. Mutual fund industry today is one of the most
preferred investment avenues in India. Like all investment, they also carry certain risks.
The investors compare the risks & expected fields after adjustment to tax on various
instrument while taking investments decision.
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Stock markets have been one of the major avenues for investing. Investors have
been focusing their attention mostly on large capitalization stocks. They used to invest
most of their money only in large capitalization stocks. But, lately it has been observed
that few medium capitalization stocks have been giving returns better than large
capitalization stocks.
Portfolio manager evaluates his portfolio performance and identifies the source of
strength and weakness. The evaluation of portfolio provides a feed back about the
performance to evolve better management strategy. Even though evaluation of portfolio
performance is considered to be the last stage of investment process, it is a continuous
process. The managed portfolios are commonly known as mutual funds. Various
managed portfolio are prevalent in the capital market. Each shareholder participates in the
gain or loss of the fund. Units are issued and can be redeemed as needed. The fund’s Net
Asset value (NAV) is determined each day.
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.
Meanings:
Mutual Fund
A mutual fund is a professionally managed type of collective investment scheme
that pools money from many investors and invests it in stocks, bonds, short-term money
market instruments, and/or other securities.
Portfolio
A collection of various company shares, fixed interest securities or money-market
instruments. People may talk grandly of 'running a portfolio' when they own a couple of
shares but the characteristic of a serious investment portfolio is diversity. It should show a
spread of investments to minimize risk - brokers and investment advisers warn against
'putting all your eggs in one basket'.

Portfolio Management
Portfolio management involves deciding what assets to include in the portfolio,
given the goals of the portfolio owner and changing economic conditions. Selection
involves deciding what assets to purchase, how many to purchase, when to purchase
them, and what assets to divest. These decisions always involve some sort of performance
measurement, most typically expected return on the portfolio, and the risk associated with
this return (i.e. the standard deviation of the return).
Portfolio Evaluation
Portfolio evaluation refers to the evaluation of the performance of the portfolio. It
is essentially the process of comparing the return earned on a portfolio with the return
earned on one or more other portfolios or on a benchmark portfolio. Portfolio evaluation
essentially comprises two functions, performance measurement and performance
evaluation.
Equity Funding
The term equity funding is the exchange of money for a share of business. This
allows you to obtain funds for your business without incurring any debt. Selling equity
means taking on investors. Many small businesses raise equity by bringing in investors to
make their business succeed and get a return on investment.
Debt Funding
The term debt funding refers to money that it borrowed and has to be repaid over a
period of time; this is normally re-paid with interest. This debt funding can either be short
term or long term. In a short term sense the full amount to be repaid is done so within a
year. In a long term sense the repayments will go on for over a year.

Advantages of mutual fund
· Portfolio Diversification
· Professional management
· Reduction / Diversification of Risk
· Liquidity
· Flexibility & Convenience
· Reduction in Transaction cost
· Safety of regulated environment
· Choice of schemes
· Transparency
Disadvantages of mutual fund
· No control over Cost in the Hands of an Investor
· No tailor-made Portfolios
· Managing a Portfolio Funds
· Difficulty in selecting a Suitable Fund Scheme

1.1 Problem statement
In the current economic scenario interest rates are falling and fluctuation in the
share market has put investors in confusion. One finds it difficult to take decision on
investment. This is primarily, because investments are risky in nature and investors have
to consider various factors before investing in investment avenues
1.2 Objectives:
 To get an insight knowledge about mutual fund
 Understanding the different ratio and portfolios so as to tell the distributors about
these terms ,by this ,managing relationship with the distributors
 To evaluate consumer feedback on Mutual Fund
 To know the mutual fund performance levels on present market
 To know the awareness of mutual fund among different groups of investors
1.3 Scope of the study
A big boom has been witnessed in Mutual Fund Industry in recent times. A large
number of new players have entered the market and trying to gain market share in this
rapidly improving market.
The study will help to know the preferences of the customers, which company, portfolio,
mode of investment, and option for getting return and so on they prefer. This project
report may help the company to make further planning and strategy
1.4 Research Methodology
This report is based on primary as well secondary data, however primary data
collection was given more importance since it is overhearing factor in attitude studies.
One of the most important users of research methodology is that it helps in identifying the
problem, collecting, analyzing the required information data and providing an alternative
solution to the problem .It also helps in collecting the vital information that is required by

the top management to assist them for the better decision making both day to day decision
and critical ones.
1.4.1 Sample size:
The sample size of my project is limited to 200 people only. Out of which only
120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual
Fund.
1.4.2 Sample design:
Sampling is a practice a researcher uses to draw data on people, places, or things to
study. Sampling allows statisticians to draw conclusions about a whole by examining a
part. It enables us to estimates characteristics of a population by openly observing a
portion of the entire population. The whole that the researcher wants to know something
about is the population is called a sample. Data has been presented with the help of bar
graph, pie charts, line graphs etc.
1.4.3 Procedure data collection methods
The sample was selected of them who are the customers/visitors of Allegro
advisor private limited, irrespective of them being investors or not or availing the services
or not. It was also collected through personal visits to persons, by formal and informal
talks and through filling up the questionnaire prepared. The data has been analyzed by
using mathematical/Statistical tool.
1.4.4 Techniques for data analysis
Research is totally based on primary data. Secondary data can be used only for the
reference. Research has been done by primary data collection, and primary data has been
collected by interacting with various people. The secondary data has been collected
through various journals and websites.

1.5 Limitation of the study
 Some of the persons were not so responsive.
Possibility of error in data collection because many of investors may have not given
actual answers of my questionnaire.
 Sample size is limited to 200 visitors of Allegro advisor private limited out of the
120 had invested in Mutual Fund.
 The sample size may not adequately represent the whole market

COMPANY PROFILE
2.1 Industry Scenario
Mutual fund provides an opportunity for an investor. The benefit of diversification and
the advantages of the return of capital market with less risk. Mutual fund's birth place is
America. It was registered in 1882, until the beginning of foreign company by holding
establishing their business in India. UTI was only mutual funds Company by holding
almost all entire market shares.
In simple mutual fund in India was a monopoly market for UTI. Why do investors pour
money in Unit trust funds? The whole point is to leave the direct investing; stock or bond
picking decision to the professionals, as they don't have the time, knowledge, skills and
expertise to manage the money themselves. When selecting a unit trust fund, investors
tend to trust and rely on the fund's track record. It is course greatly determined by the
investments mangers behind the fund. We frequently have expectations of events in our
lives. We expect the traffic to be smooth because of school holidays. We also expect that
when it rains heavily, the traffic will be bad, based on historical experience.
It's no different for the fund managers. They set their expectations of markets and plan
their investments strategies and decisions accordingly. Expectations are constantly built
into markets especially after an anticipated event (economic or otherwise) to explain why
a particular stock or the market in general went up or down.
The explanation for this behavior is pretty simple. Investors, especially professional
investors, are rational human beings. They set their expectations on how things are going
to pan out and then make key investment decisions based on these expectations.
A Successful fund manager must be creative, innovative and understand all the essential
financial concepts like the cost of capital, price earnings ratio, dividend yields, discounted
cash flows and portfolio theory. With these concepts, he supposedly can derive valuations
of stock. Then, he buys an undervalued stock and sells it becomes overvalued.

One must have an interest in markets not only when they're hot but also when they're
cold. A good fund manager has the ears of a fox and is able to figure out the huge amount
of noise coming from the various markets in order to pick the right pieces of pies.
The experience of the fund manager plays a large part in fund managing. Experience
gives a fund manager the material with to mix and match hypothesis. While history rarely
repeats itself, as the timing may be off or the reaction may be more intense, it gives a
guide with to forecast future outcomes.
The fund manager should be rational about his view of the markets or a particular stock,
draw a conclusion and instinctively act on it. In more difficult situation, a fund manager
must keep an open mind; markets can go either way and the fund manager is merely
waiting for the appropriate data to confirm or deny his hypothesis. A great fund can sense
when they’re in sync with the market; when they feel that the 'force' is with them.
However, even the best fund manager can lose his hearing and sight just when he thinks
he has skills down pat. A successful fund manager is one who is able to pick to himself
up and start searching again for the right decision. It’s an art to be able to hold strongly
onto one's beliefs even through paper losses and volatility.
A good fund manager has to know macroeconomics and valuation methodologies well,
but it's still not enough. He has to be able to make expectations well. In other words, he
has to anticipate what the market, comprising all investors and market participants, will
focus on next, extrapolate the outcome and position his portfolio ahead of time for that
out come to materialize.
This must be done over and over again and often is revised because the fund
manager will sometimes be wrong. Markets will always test a fund manager's conviction
or expectations. A great fund manager will understand rational expectations in markets
and constantly feel its pulses. Managing money successfully is purely a form of art.
A mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities (stocks or bonds). When you invest in a mutual
fund, you are buying units or portions of the mutual fund and thus on investing becomes a
shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
Mutual Fund like most developed and developing countries the mutual fund cult has
been catching on in India. There are various reasons for this. Mutual funds make it easy
and less costly for investors to satisfy their need for capital growth, income and/or income
preservation. And in addition to this a mutual fund brings the benefits of diversification
and money management to the individual investors, providing an opportunity for the
financial success that was once available only to a select few.
Understanding Mutual funds is easy as their such a simple concepts: a mutual fund is
a company that pools the of money of many investors – its shareholders – to invest in a
variety of different securities. Investments may be in stock, bonds, money market security
or some combination of these. Those securities are professionally managed on behalf of
the shareholder, and each investor holds a pro rata share of the portfolio – entitled to any
profits when the securities are sold, but subject to any losses in value as well.
For the individual investors, mutual funds provides the benefits of having someone
else manage your investments and diversify your money over many different securities
that may not be available or affordable to you otherwise. Today, minimum investment
requirements on many funds are low enough that even the smallest investors can get
started in mutual funds. A mutual fund by its very nature is diversified – its assets are
invested in many different securities. Beyond that, there are many different types of
mutual funds with different objectives and levels of growth potential, furthering your
chances to diversification.

2.2 Company Profile
Allegro Capital Advisors Pvt. Ltd. is a leading Indian full service investment
bank that builds value across a spectrum of clients, including the government,
corporations, financial institutions, high net worth individuals and professionals.
2.2.1 Overview
Allegro Capital Advisors Pvt. Ltd. is a leading Indian full service investment bank that
builds value across a spectrum of clients, including the government, corporations,
financial institutions, high net worth individuals and professionals. We are in the business
of managing the assets of individuals and corporate. Our collective experience at doing so
dates back several decades and our team is rated to be amongst the best wealth managers
in India today. This bears testimony in the fact that our ever growing list of corporate
clients includes senior and middle management from organizations that include Intel,
IBM, HP, Coke, Pepsi, Whirlpool Corporation, Hindustan Levers, 3M, Gillette and Cisco
amongst others.
Allegro's Services are broadly classified into:
 Capital Markets advisory services
 Corporate Finance Services including equity and debt placement, debt
restructuring and Mergers &Acquisitions
 Investment Advisory Services covering retail and corporate investment and
wealth management services, Portfolio Management Services, Secondary market
execution services and Insurance Advisory Services
Asset Management that involves building a INR 1 billion restructuring fund
At Allegro, there is the realization that every one of its clients has a distinct
financial goal broken down into unique needs, a distinct investment history, a defined
propensity to save and finally a varying appetite at being exposed to investment risks.
Allegro's approach at managing the wealth of its clients is built on the foundation
that every one of its financial advisors is a custodian of his client's wealth. Furthermore,
each client relationship is driven by the need to fulfill the financial goal that a client has
set at the beginning of the relationship. And since the financial goal lays out an
investment plan across an extended period of time, this relationship with a client is
virtually set in perpetuity.

Allegros' advisors are trained to take a highly analytical and solution - driven
approach while making investment decisions for their clients, an approach that sees
clients move closer to achieving their financial goal with every passing year.
Allegro neither 'sells' financial products nor does it lay pre-conditions to investing.
Its fee based advisory services ensures that it adopts a consultative approach to managing
wealth. Advice therefore, is independent and client centric.
Allegros' service offering is perhaps the widest in industry. The scope of its
services encompasses the entire spectrum of financial needs of an individual right from
planning to investing, managing and complying with Indian tax regulations.
Allegro maintains perhaps the lowest client to advisor ratio in industry. Its multi tiered
relationship approach ensures continuity in a relationship besides ensuring seamlessness
so that a client is supported by expert whenever required.
2.2.2 Management Team
naKasp -
Chairman and
CEO
Kunal Kashyap -Chairman and CEO

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 Shyam Powar

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 Sanjay Mansabdar

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 Sandeep Lalwani
2.2.3 Value Advantage
 Independent
Allegro is an independent, unbiased advisor to its clients. Our advice is free from
the compulsions associated with representing manufacturers of financial products. It is
unaffected by the limitations of operating in a compartmentalized business group. We,
therefore, have the credibility and operational edge to be independent while consistently
placing our client's interest first.
 Informed
The diverse experience and skills of our team together with top sources of market
and industry information, enables us to provide the best advice to our clients - corporate,
institutions or individuals. Our methodology, people development, analysis and research
processes are of the highest standard. We make it our business to be fully informed about
our client needs, while closely following products and industry trends.
 Innovative
Solutions at Allegro are the result of innovative tools and investment ideas that
seamlessly integrate business lines based on trends, expertise and a time-tested approach
to being custodians of our clients' financial interests. Alternative investment strategies,
the focus on restructuring debt or our pioneering initiative to advise corporations on

public offerings, bear testimony to Allegro's ability to offer solutions that are out-of-the-
box.
We believe there are no packaged, off-the-shelf solutions. Every recommendation
made by our team fits into a customized plan that is outlined at the commencement of a
relationship. Each proposal is backed by proprietary, focused research, fund management
expertise and the lowest client-to-advisor ratio in the industry.
2.2.4 Security and Privacy Policy
The site you are about to view follows Allegro's Privacy Policy. The site is
maintained by Allegro Capital.
Allegro's Web site collects no personally identifying information about
individuals except when specifically and knowingly provided by such individuals. In
addition, Allegro's site may place a "cookie" in the browser files of a user's computer. The
cookie itself does not contain any personally identifying information although it will
enable the site to relate a user's use of the site to information that the user has specifically
and knowingly provided to Allegro. Allegro may use a user's personally identifying
information for editorial purposes. Allegro may also use such information for marketing
and promotional purposes and may share the information with companies that it has pre-
screened. Individuals always have the ability to stop their information from being used for
such purposes.
 Terms of Use
The site you are viewing follows Allegro's Privacy Policy. The site is maintained
by Allegro Capital.
 Linked Web sites
The Allegro Web site may include links to and/or advertisements by other
companies or Web sites. These other entities may collect personal information, including
identification information from you. Please be advised that Allegro is not responsible for

the privacy practices or the content of such Web sites and this privacy statement does not
cover the information practices of such sites.
Allegro does not receive any personal information about visitors to the Allegro
Web site from any third party, including any information collected by or through links to
third party Web sites and/or advertisements on the Allegro Web site.
 Online Security
While Allegro strives to protect its user's personal information and privacy, no
data transmission over the Internet can be guaranteed to be 100% secure. As a result,
while Allegro stores your personal information in data networks that are password
protected, we cannot ensure or warrant the security of any information you transmit to or
receive from us through our Web site and online services.
 Trademarks
All logos used and products named are trade names and trademarks of their
2.2.5 Marketing Offices
North India South India
Kota Trivandrum
Ajmer Kottayam
Udaipur Calicut
Jodhpur Vijayawada
Ludhiana Mangalore
Jalandhar
West India
Madgaon ,Vasco
 Branch Offices/ Corporate Office
Bangalore
'C'Block,SiliconTerraces,30/1HosurMainRoad,
Koramangla,Bangalore-560095,India
Phone+918060607888

FaxNo+918041216785
Contact-: mailto:bangalore@allegroadvisors.com
North India South India
Delhi Chennai
Contact-: Contact-: chennai@allegroadvisors.com
mailto:delhi@allegroadvisors.com Hyderabad
Gurgaon Contact-: hyderabad@allegroadvisors.com
Contact-: gurgaon@allegroadvisors.com Cochin
Jaipur Contact-: cochin@allegroadvisors.com
Contact-: jaipur@allegroadvisors.com Coimbatore
Chandigarh Contact-: coimbatore@allegroadvisors.com
Contact-: chandigarh@allegroadvisors.com
West India Goa
Mumbai Contact-: goa@allegroadvisors.com
Contact-:
Pune
mailto:mumbai@allegroadvisors.com
Contact-: pune@allegroadvisors.com
 LOGO OF ALLEGROADVISORS
We bring to bear our extensive relationship with financial institutions to
address the unique needs of our clients

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 Mergers & Acquisitions
Our team drawn from Big 4 firms and banks, with deep investment banking
experience positions us attractively to identify targets, structure and execute
transactions across a spectrum of industries Acquisitions/ JV assistance

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 Distressed Assets
Allegro is widely acknowledged as the leader in distressed assets advisory and has
advised on some of the most high profiles deals in India Debt take-out
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 Debt Restructuring
Assisting in business plan finalization
Assessing capital structure
Negotiating with existing lenders on restructuring package
Project management
 Investment Management
Allegro's Investment Management Group is responsible for managing assets on a
discretionary basis across retail, high net worth and corporate clients. Allegro Capital
Advisors Pvt Ltd is registered as a Portfolio Manager with the Securities and Exchange
Board of India (Registration Number: INP000002437). On this platform Allegro has
created distinct investment strategies to suit a wide variety of client goals and risk
preferences that are able to constitute core elements of most asset allocation strategies.
These strategies encompass most of the liquid asset classes including equities, mutual
funds fixed income and precious metals, among others. The Investment Management
Group aims to bring Institutional quality investing to all our clients.

2.2.7 Investment Management Philosophy:
 A Fundamental Basis
Allegro portfolios have a strong grounding in research, both at a macro level, as
well as down to specific securities. The investment process is in general a combination of
top down and bottom up processes. The former essentially focuses on identifying, and
allocating capital to the economic themes and trends that are likely to be profitable over
the next six to twelve months while the objective of the latter is security and trade
selection that will implement, most effectively, those themes and trends to which capital
has been allocated. Overlaid over this philosophy is a robust portfolio and risk
management process that controls market and credit risk and ensures that client portfolios
are not exposed to risks beyond what is reasonably allowable for the strategy. We focus
on real numbers and analysis rather than merely judgment and employ analysts dedicated
to quantitative research, portfolio construction and management.
 Risk Management
We believe that operational and settlement risks are equally critical to the process
of generating returns and have put in place strong operations and technology processes to
ensure that such risks are monitored and accounted for. We partner with financially strong
and well capitalized institutions in the financial services and technology space for our
third party requirements in order to be able to provide quality services to our clients.
 Process and people
We do not believe in clustering business around star managers - instead we put
our faith in time tested investment and portfolio management processes that stay true to
investment goals. While we believe that our people are biggest asset, our faith is in the
processes that a team has put together, not a single individual.
 Transparent and Client Aligned
Last, but not least, we believe in a transparent approach to our business and
implement this via disclosures, reporting and where necessary, explanation of our views
and strategy and their risks and limitations.

2.2.8 The Team:
Allegro's Investment Management Team draws on considerable experience in the
Asset Management and Financial Markets area. Our Portfolio Managers, Analysts and
Operations staffs have considerable experience in International and Domestic markets
across a variety of asset classes. We believe that an amalgamation of this eclectic
experience allows us to translate ideas to successful actions in the process of return
generation.
2.2.9 Private Banking
With a mission to help accumulate, grow and manage the wealth of high net worth
individuals, professionals, family groups and businesses, Allegro's Private Banking
Practice offers personalized financial planning and legal advisory services. Our advice
covers investments across asset classes and ranges from capital markets, debt instruments,
real estate, and private equity opportunities, to select corporate finance requirements. For
clients with multiple asset managers and a diverse portfolio, we offer a holistic 'Fund of
Funds' approach that is in complete synergy with the unbiased nature of our advice. We
also collaborate with specialists for estate advisory, tax and legal services, so becoming a
"family office" to our clients. Pioneers of independent lifecycle management services in
India, Allegro runs the largest fee paying investment advisory service in the country. Our
advice covers the entire spectrum of an individual's financial need, from investment
planning and execution to tax planning and compliance. Goals, set across a perpetuity, are
assiduously worked upon by advisors keeping in mind the gradual and limited growth in
corpus and the risk profile of this segment.
2.2.10 Retail
On July 1, 2007 Allegro Capital launched India's first true "Supermarket" of
financial products. Every Allegro branch offers over 18 different categories of financial
products from over a 100 companies representing the entire spectrum of what's available
anywhere in India. Stock Broking, Life & General Insurance, Gold, Mutual Funds, Gold
traded funds, IPO's, Loans & Advances, Money transfer, Private Banking, Portfolio
Management Services, Real Estate & Property Management Services and International

Investments Products are on offer to every customer who walks into a branch , but
without bias of a company and in a seamless borderless manner. The customer gets
choice, comparisons and advice on what is best suited to him or her.
This approach keeps the clients financial interest at the centre of its business model
and is at a complete variance of the existing approach of most financial institutions such
as banks and insurance companies to "sell" their products, whatever the need of the client.
For instance, if the customer walks into an Allegro branch with INR 10000, he or she can
invest the money in a mutual fund, in insurance, in shares, in gold, in gold chits, or RBI
bonds with no pressure to choose the kind of products or the company it comes from.
Advisors, specialized in the range of asset classes would help customers look at options
and choose a product that is best suited to their requirements.
Allegro represents all leading financial brands, and services of India and the state
we are present in. Mutual funds from all Asset Management companies including
Reliance, ABN, Fidelity, ICICI etc, Broking on the NSE, BSE, Post office savings
instruments, gold loans, General and Life Insurance from all private and public
companies including LIC, ICICI Prudential, Kotak Mutual, HDFC Standard life, MetLife,
Gold from Tanishq and International investment products from Close Brothers are just
some of the investment products on offer.
The financial supermarket branches are now spread across Kerala, Karnataka,
Tamil Nadu and Andra Pradesh. The All India phase 1 launch will be complete by March
2008.
2.2.11 Network
Allegro Capital Advisors Pvt. Ltd. with a wide regional and national presence has the
ability to reach its clients with ease. Our teams of financial advisors and specialists have
the expertise, local and global contacts and awareness to create optimum solutions that
meet our client's financial needs and goals. Our highly experienced, well connected team
works on all types of Corp Finance transactions - including Domestic and Cross border
Mergers & Acquisitions, IPO Advisory, Private Equity, Distressed Assets, Corporate &
Capital Restructuring. Our strategic partnership with Close Brothers Group, amongst the
largest international investment banking advisory groups in the mid market segment,
offers us the unique advantage of offering Indian corporations a seamless service across
Europe, North America, Asia, Africa and Australia.

2.2.12 Swot Analysis
 Strength:
 It is one of the biggest Businesses in India
 It portfolios up to 12 different investment companies.
 It includes huge number of employees
 It is having merger & acquisition with 5 and more companies to increase its
growth.
 It elaborates its Network throughout the world.
 Weakness:
 Comparatively it has less branch offices geographically.
 It has high level competition
 Opportunities:
 It has unlimited geographical locations for business
 It has an opportunity to serve different kinds of customers
 Due to consistent level of competition there is an opportunity to improve its
performance
 Threats:
 It has different tax rates & policies for different locations
 Difficult to manage every company’s response

REVIEW OF LITERATURE
3.1 Introduction of Mutual Fund
A Mutual Fund is a trust that pools the savings of a number of investors who share
a common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
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.
The SEBI (MF) Regulations, 1993 defines mutual fund as “A fund established in
the form of a trust by a sponsor to raise monies by the trustees through the sale of units to
the public under one or more schemes for investing in securities in accordance with these
regulations.”
 An overview
Mutual fund industry in India began with setting up of Unit Trust of India (UTI)
in 1964 by the government of India. During last 39 years UTI has grown to be a dominant
player in the industry. The UTI is governed by a special legislation, the Unit Trust of
India Act 1963. In 1987 public sector banks and insurance companies were permitted to
set up mutual funds and accordingly in 1987 six public sectors banks have set up mutual
funds. Also the two insurance companies LIC and GIC established the mutual funds.
Securities Exchange Board of India (SEBI) formulated the mutual fund regulation in
1993, which for the first time established a comprehensive regulatory framework for the
mutual fund industry. Since then several mutual funds have been set up the private and
joint sectors.
3.2 What is mutual fund?
A mutual fund collects the savings from small investors, invest them in
government and other corporate securities and earn income through interest and

dividends, besides capital gains. It works on the principle of ‘small drops of water make a
big ocean’
A mutual fund is just the connecting bridge or a financial intermediary that allows
a group of investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities (stocks or bonds). When you invest in a mutual
fund, you are buying units or portions of the mutual fund and thus on investing becomes a
shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare
to others they are very cost efficient and also easy to invest in, thus by pooling money
It works principle of ‘small drops of water make a big ocean’. For instance, if one
has Rs 1000 to invest, it may not fetch very much on its own .But when it is pooled with
Rs.1000 each from a lot of other people, then, one could create a ‘big fund’ large enough
to invest in a wide varieties of shares and debentures on a commanding scale and thus, to
enjoy the economies of large scale operations. Hence, a mutual fund is nothing but a form
of collective investment. It is formed by the coming together of a number of investors
who transfer their surplus funds to a professionally qualified organization to manage it.
To get the surplus funds from investors, the fund adopts a simple technique. Each fund is
divided into a small fraction called “units” of equal value. Each investor is allocated units
in proportion to the size of his investment. Thus, every investor, whether big or small, will
have a stake in the fund and can enjoy the wide portfolio of the investment held by the
fund. Hence, mutual funds enable millions of small and large investors to participate in
and derive the benefit of the capital market growth.

Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. This pool of money is invested in accordance with a stated
objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all
investors. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and
the capital appreciations realized are shared by its unit holders in proportion the number
of units owned by them. Thus a Mutual Fund is the most 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. A Mutual Fund is an investment tool that
allows small investors access to a well-diversified portfolio of equities, bonds and other
securities. Each shareholder participates in the gain or loss of the fund. Units are issued
and can be redeemed as needed. The fund’s Net Asset value (NAV) is determined each
day.
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 fund are known as unit holders.

3.2.1 Definition
Mutual Funds Definition refers to the meaning of Mutual Fund, which is a fund,
managed by an investment company with the financial objective of generating high Rate
of Returns. These asset management or investment management companies collects
money from the investors and invests those money in different Stocks, Bonds and other
financial securities in a diversified manner. Before investing they carry out thorough
research and detailed analysis on the market conditions and market trends of stock and
bond prices. These things help the fund managers to speculate properly in the right
direction
3.3 History Of Mutual Funds In India
The end of millennium marks 36 years of existences of mutual funds in this
country. The ride through these 36 years is not been smooth. Investor’s opinion is still
divided. While some are for mutual funds others are against it.
UTI commenced its operation from July 1964. The impetus for establishing a formal
institution came from the desire to increase propensity of the middle and lower groups to
save and invest. UTI came into existence during a period market by great political and
economical uncertainty in India. With war on borders and economic turmoil that
depressed the financial market, entrepreneurs were hesitant to enter capital market.
The already existing companies found it difficult to raise fresh capital, as investors did
not respond adequately to new issues.
UTI commenced its operation from July 1964 “With a view to encouraging savings and
investments and participations in the income, profits and gains accruing to the corporation
from the acquisition, holding management and disposal of securities”. Different
provisions of the UTI Act laid down the structure of management, scope of business,
power and function of the Trust as well as accounting, disclosures and regulatory
requirements for the trust.
 1999-2000 year of the fund:
Mutual funds have been around for a long period of time, to be precise for 36
years but the year 1999 saw immense future potential and developments in this sector.
This year signaled the year of resurgence of Mutual funds and the regaining of investors’
confidence in these mutual funds. This time around all the participants are involved in the
revival of the funds, the AMC's, the unit holders. The other related parties. However, the
sole factor that gave life to the revival of the funds was the Union Budget. The Budget

brought a large number of changes in the on one stroke. An insight of the Union Budget
on Mutual funds taxation in provided later.
The fund started to regulate them and was all out on winning and trust and
confidence of the investors under the agencies of the ASSOCIATION OF MUTUAL
FUNDS IN INDIA (AMFI). The quest to attract investors extended beyond just new
schemes.
One can say that industry is moving from infancy to adolescence, the industry is maturing
and the investors and funds are frankly opening discussing difficulties opportunities and
compulsions.
3.4 Growth Of Mutual Fund 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. The history of
mutual funds in India can be broadly divided into four distinct phases.
 First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the
RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.
 Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National
Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual
fund industry had assets under management of Rs.47, 004 corers.

 Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families. Also,
1993 was the year in which the first Mutual Fund 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 1993 SEBI (Mutual Fund) Regulations were
substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of
mutual fund houses went on increasing, with many foreign mutual funds setting up funds
in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 corers.
The Unit Trust of India with Rs.44, 541 corers of assets under management was way
ahead of other mutual funds.
 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 corers as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.

3.5 Overview of existing schemes existed in mutual fund category
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview
into the existing types of schemes in the Industry.
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 & other securities by the fund manager
The fund manger realizes gains or losses, & collects
divided 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 unit 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 scheme's assets by the total number of units issued to the investors

3.6 Scope Of Mutual Fund
As stated earlier, a mutual fund is nothing but a pool of the investor’s fund. The
special feature of a mutual fund is that the contributors and the beneficiaries of the fund
are one and the same class of people i.e., investors. Nobody else can claim that fund.
Since the investors themselves contribute to the pool of fund and enjoy it and its fruits,
the term’ Mutual ‘have been employed.
The important features of a mutual fund are the following:
1. A mutual fund belongs to those who have contributed to that fund and thus, the
ownership of the fund lies in the hands of the investors.
2. The pool of funds collected is invested in a portfolio of marketable securities.
3. Generally the investment portfolio of the mutual fund is created according to the
objective of the fund. For example a sectoral mutual fund invests its funds in a specific
sector like IT sector, oil sector etc.
4. The investors share in the fund is represented by “units “just like shares in the case of
share capital of a company. The unit value depends upon the value of the portfolio held
by the fund. Hence, the value changes almost every day and it is called Net Asset Value.

The entire mutual fund industry operates in a very organized way. The investors, known
as unit holders, handover their savings to the AMCs under various schemes. The
objective of the investment should match with the objective of the fund to best suit the
investors’ needs. The AMCs further invest the funds into various securities according to
the investment objective. The return generated from the investments is passed on to the
investors or reinvested as mentioned in the offer document.

3.7 Importance Of Mutual Funds
The mutual fund industry has grown at a phenomenal rate in the recent past. One
can witness a revolution in the mutual fund industry in view of its importance to the
investors in general and the country’s economy at large. The following are some of the
important advantages of mutual funds.
 Channelizing Savings for Investment:
Mutual funds act as a vehicle in galvanizing the savings of the people by offering
various schemes suitable to the various classes of customers for the development of the
economy as a whole. A number of schemes are being offered by MFs so as to meet the
varied requirements of the masses, and thus, savings are directed towards capital
investments directly.
 Providing Better Yields:
The pooling of funds from a large number of customers enables the fund to have
large funds at its disposal. Due to these large funds, mutual funds are able to buy cheaper
and sell dearer than the small and medium investors. Thus, they are able to command
better market rates and lower rates of brokerage .So; they provide better yields to their
customers.
 Promoting Industrial Development:
The economic development of any nation depends upon its industrial
advancement and agricultural development. All industrial units have to raise their funds
by resorting to the capital market by the issue of shares and debentures. The mutual funds
not only create a demand for these capital instruments but also supply large sources of
funds to the markets, and thus, the industries are assured of their capital requirements. In
fact the entry of mutual funds has enhanced the demand for India’s stocks and bonds.
Thus, mutual funds provide financial resources to the industries at market rates.

 Keeping the Money Market Active:
Individual investors can not have any access to money market instruments since
the minimum amount of investment is out of his reach. On the other hand, mutual funds
keep the money market active by investing money on the money market instruments. In
fact ,The availability of more money market instruments itself is a good sign for a
developed money market which is essential for the successful functioning of the central
bank in a country.
Thus mutual funds provide stability to share prices, safety to investors and resources to
prospective entrepreneurs.
 Introducing Flexible Investment Schedule:
Some mutual funds have permitted the investors to exchange their units from one
scheme to another and this flexibility is a great boon to investors. Income units can be
exchanged for growth units depending upon the performance of the funds. One cannot
derive such flexibility in any other investments.
 Providing Greater Affordability and Liquidity:
Even very small investors can afford to invest in Mutual Funds. They provide an
attractive and cost effective alternative to direct purchase of shares. In the absence of
MFs, small investors cannot think of participating in a number of investments with such a
merge sum. Again, there is greater liquidity. Units can be sold to the Fund at any time at
the Net Asset Value and thus quick access to liquid cash is assured.
 Simplified Record Keeping:
An investor with just an investment in 500 shares or so in 3 or 4 companies has to
keep proper records of dividend payments, bonus issues, price movements, purchase or
sale instruction, brokerage and other related items. It is tedious and it consumes a lot of
time. One may even forget to record the rights issue and may have to forfeit the same.
Thus, record keeping is the biggest problem for small and medium investors. Now,
mutual funds offers a single investment source facility, i.e., a single buy order of 100
units from a mutual fund is equivalent to investment in more than 100 companies.

 Reducing the Marketing Cost of New Issues:
The mutual fund helps to reduce the marketing cost of the new issues. The
promoters used to allot a major share of the Initial Public Offering to the mutual funds
and thus they are saved from the marketing cost of such issues.
 Providing Research Service:
A mutual fund is able to command vast resources and hence it is a possible for it
to have an in depth study and carry out research on corporate securities. Each fund
maintains a large research team which constantly analyses the companies and the
industries and recommends the fund to buy or sell a particular share. Thus, investments
are made purely on the basis of a thorough research. Since research involves a lot of
times, efforts and expenditure, an individual investors cannot take up this work. By
investing in a mutual fund, the investor gets the benefit of the research done by the fund.

3.8 Advantages Of Mutual Fund
 Diversification: An investor undertakes risk if he invests all his funds in a single
scrip. Mutual funds invest in a number of companies across various industries and
sectors. This diversification reduces the risk of the investment.
 Professional Management: An investor lacks the knowledge of the capital market
operations and does not have large resources to reap the benefits of investment.
Hence, he requires the help of an expert. Mutual funds are managed by
professional managers who have the requisite skills and experiences to analyses
the performance and prospectus of companies.
 Regulatory oversight: Mutual funds are subject to many government regulations
that protect investors from fraud.
 Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a
call, and you've got the cash.
 Convenience: You can usually buy mutual fund shares by mail, phone, or over the
Internet. It reduces paperwork, saves time and makes investment easy.
 Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are
not actively managed. Instead, they automatically buy stock in companies that are
listed on a specific index
 Transparency: Mutual funds transparently declare their portfolio every month.
Thus, an investor knows where his/her money is being deployed and in case they
are not happy with the portfolio they can withdraw at a short notice.
 Tax benefits: Mutual fund investors now enjoy income tax benefits. Dividends
received from mutual funds’ debt schemes are tax exempt to the overall limit of
Rs 9000 allowed under section SOL of the Income Tax Act.

3.9 Disadvantage Of Mutual Fund
 No Guarantees: No investment is risk free. If the entire stock market declines in
value, the value of mutual fund shares will go down as well, no matter how
balanced the portfolio. Investors encounter fewer risks when they invest in mutual
funds than when they buy and sell stocks on their own. However, anyone who
invests through a mutual fund runs the risk of losing money.
 Fees and commissions: All funds charge administrative fees to cover their day-to-
day expenses. Some funds also charge sales commissions or "loads" to
compensate brokers, financial consultants, or financial planners. Even if you don't
use a broker or other financial adviser, you will pay a sales commission if you buy
shares in a Load Fund.
 Taxes: During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund makes a
profit on its sales, you will pay taxes on the income you receive, even if you
reinvest the money you made.
 Management risk: When you invest in a mutual fund, you depend on the fund's
manager to make the right decisions regarding the fund's portfolio. If the manage
does not perform as well as you had hoped, you might not make as much money
on your investment as you expected

3.10 Organization of a Mutual Fund
UNIT HOLDERS
Sponsors
AMC
THE MUTUAL FUND Transfer Agent
Custodian
SEBI
3.11 Investment
1. Systematic Investment Plan: under this a fixed sum is invested each month
on a fixed date of a month. Payment is made through post dated cheques or
direct debit facilities. The investor gets fewer units when the NAV is high and
more units when the NAV is low. This is called as the benefit of Rupee Cost
Averaging (RCA)
2. Systematic Transfer Plan: under this an investor invest in debt oriented fund
and give instructions to transfer a fixed sum, at a fixed interval, to an equity
scheme of the same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual
fund then he can withdraw a fixed amount each month

3.12 RISK V/S. RETURN:
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vice versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt
for bank FD, which provide moderate return with minimal risk. But as he moves ahead to
invest in capital protected funds and the profit-bonds that give out more return which is
slightly higher as compared to the bank deposits but the risk involved also increases in the
same proportion

3.13 CATEGORIES OF MUTUAL FUND:
Mutual funds can be classified as follows:
In the investment market, one can find a variety of investors with different needs,
objectives and risk capacities. For instance, a young businessman would like to get more
capital appreciation for his funds and he would be prepared to take greater risks than a
person who is just on the verge of his retiring age. So, it is very difficult to offer one fund
to satisfy all the requirements of investors. One fund is not suitable to meet the vast
requirements of all investors. Therefore, many types of funds are available to the
investors. It is completely left to the discretion of the investors to choose any one of them
depending upon has requirements and his risk taking capacity.
 Based on their structure:

 Open-ended funds: Under this scheme, the size of the fund and /or the period of
the fund are not pre-determined. The investors can buy and sell the units from the
fund, at any point of time. For instance, the unit scheme (1964) of the Unit Trust
of India is open –ended one, both in terms of period and target amount. Anybody
can buy this unit at any time and sell it also at any time at his discretion.
· The Main Features of the Open-ended Funds are:
1. The main objective of this fund is income generation. The investors get dividend,
rights or bonuses as rewards for their investments.
2. These units are not publicly traded but, the fund is ready to repurchase them and
resell them at any time.
3. Generally the listed prices are very close to their Net Asset Value .The Fund fixes
different prices for their purchases and sales.
 Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made into the fund.
If the fund is listed on a stocks exchange the units can be traded like stocks (E.g.,
Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-
ended funds provided liquidity window on a periodic basis such as monthly or
weekly. Redemption of units can be made during specified intervals. Therefore,
such funds have relatively low liquidity.
· The main features of the close-ended funds are:
1. The main objective of this fund is capital appreciation.
2. The whole fund is available for the entire duration of the scheme and there will
not be any redemption demands before its maturity .Hence, the fund manager can
manage the investments efficiently and profitably without the necessity of
maintaining any liquidity.
3. From the investors’ point of view, it may attract more tax since the entire. Capital
appreciation is realized in at one stage itself.
4. Generally the prices of close-end scheme units are quoted at a discount of up to
40 percent below their Net Asset Value (NAV).

 Based on their investment objective:
 Equity funds: These funds invest in equities and equity related instruments. With
fluctuating share prices, such funds show volatile performance, even losses.
However, short term fluctuations in the market, generally smoothens out in the
long term, thereby offering higher returns at relatively lower volatility. At the
same time, such funds can yield great capital appreciation as, historically, equities
have outperformed all asset classes in the long term. Hence, investment in equity
funds should be considered for a period of at least 3-5 years. It can be further
classified as:
 Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition
and individual stock weightages.
 Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.
 Dividend yield funds- it is similar to the equity diversified funds except that they
invest in companies offering high dividend yields.
 Thematic funds- Invest 100% of the assets in sectors which are related through
sometheme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
 Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking
sector fund will invest in banking stocks.
 Balanced fund: Their investment portfolio includes both debt and equity. As a
result, on the risk-return ladder, they fall between equity and debt funds. Balanced
funds are the ideal mutual funds vehicle for investors who prefer spreading their
risk across various instruments. Following are balanced funds classes:
 Debt-oriented funds -Investment below 65% in equities.
 Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

 Debt fund: They invest only in debt instruments, and are a good option for investors
averse to idea of taking risk associated with equities. Therefore, they invest
exclusively in fixed-income instruments like bonds, debentures, Government of India
securities; and money market instruments such as certificates of deposit (CD),
commercial paper (CP) and call money. Put your money into any of these debt funds
depending on your investment horizon and needs.
 Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.
 Gilt funds ST- They invest 100% of their portfolio in government securities of
and T-bills.
 Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
 Arbitrage fund- They generate income through arbitrage opportunities due to
mis-pricing between cash market and derivatives market. Funds are allocated to
equities, derivatives and money markets. Higher proportion (around 75%) is put in
money markets, in the absence of arbitrage opportunities.
 Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
 Income funds LT- Typically; such funds invest a major portion of the portfolio in
long-term debt papers.
METHODOLOGY
4.1 Type of Research:
Descriptive method has been used in this research for the collection of data .As the
research is related to the study of consumer behavior, which can more effectively be
studied through direct question, experimental research will not be much effective. Also,
considering the constraint, descriptive research is the most suitable design for this
research.
 Qualitative research

Qualitative research allows you to explore perceptions, attitudes and motivations
and to understand how they are formed. It provides depth of information which can be
used in its own right or to determine what attributes will subsequently be measured in
quantitative studies. Verbatim quotes are used in reports to illustrate points and this brings
the subject to life for the reader. However, it relies heavily on the skills of the moderator,
is inevitably subjective and samples are small. Techniques include group
discussions/workshop sessions, paired interviews, individual in-depth interviews and
mystery shopping (where the researcher plays the role of a potential student, etc in order
to replicate the overall experience).
 Quantitative research
Quantitative research is descriptive and provides hard data on the numbers of
people exhibiting certain behaviors’, attitudes, etc. It provides information in breadth and
allows you to sample large numbers of the population
.
 Descriptive research:
Descriptive research is used to obtain information concerning the current status of
the phenomena to describe "what exists" with respect to variables or conditions in a
situation. The methods involved range from the survey which describes the status quo, the
correlation study which investigates the relationship between variables, to developmental
studies which seek to determine changes over time.
 Statement of the problem.
 Identification of information needed to solve the problem.
 Selection or development of instruments for gathering the information.
 Identification of target population and determination of sampling procedure.
 Design of procedure for information collection.
 Collection of information.
 Analysis of information.

 Generalizations and/or predictions.
4.2 Source of Data:
Data which is collected for the first time is called primary data. In the study primary
data includes the data which is collected from the customer directly with interaction. The
study includes data got with personal interaction.
 Primary and Secondary Data:
The appraiser or market analyst must know what they are and what affects them.
All data used in appraisals and market studies should be current, relevant, reliable,
accurate, and conceptually correct. This article presents a discussion of each of these
terms and their significance in the context of the data and in the analysis. The article then
discusses the nature of potential errors that can affect primary and secondary data. Several
categories of errors can exist. The analyst needs to be able to recognize the error,
understand its significance and evaluate the applicability of that data in the analysis.
Secondary data--Information from secondary sources, i.e., not directly compiled by
the analyst; may include published or unpublished work based on research that relies on
primary sources of any material other than primary sources used to prepare a written
work.
Secondary data has been gathered by others for their own purposes, but the data
could be useful in the analysis of a wide range of real property. In general, secondary data
exists in published sources.
 Methods for Obtaining Primary Data:
The analyst can obtain primary data through the process of direct observation or
by explicit questioning of people.
 Observation:

Observation as a data gathering technique focuses attention on an observable fact
or inanimate entity such as a building or on an observable action or behavior by an
animate entity such as a homeowner or shopper. Observation of an inanimate object is the
easier of the two activities, but it is not free from error or misinterpretation.
4.3 Data collection instrument
This report is based on primary as well secondary data, however primary data
collection was given more importance since it is overhearing factor in attitude studies.
One of the most important users of research methodology is that it helps in identifying the
problem, collecting, analyzing the required information data and providing an alternative
solution to the problem .It also helps in collecting the vital information that is required by
the top management to assist them for the better decision making both day to day decision
and critical ones.
4.4 Sample size:
The sample size of my project is limited to 200 people only. Out of which only 120
people had invested in Mutual Fund. Other 80 people did not have invested in Mutual
Fund.
4.5 Sample design:
Sampling is a practice a researcher uses to draw data on people, places, or things to
study. Sampling allows statisticians to draw conclusions about a whole by examining a
part. It enables us to estimates characteristics of a population by openly observing a
portion of the entire population. The whole that the researcher wants to know something
about is the population is called a sample. Data has been presented with the help of bar
graph, pie charts, line graphs etc.
4.6 Procedure data collection methods

The sample was selected of them who are the customers/visitors of Allegro advisor
private limited, irrespective of them being investors or not or availing the services or not.
It was also collected through personal visits to persons, by formal and informal talks and
through filling up the questionnaire prepared. The data has been analyzed by using
mathematical/Statistical tool.
4.7 Techniques for data analysis
Research is totally based on primary data. Secondary data can be used only for the
reference. Research has been done by primary data collection, and primary data has been
collected by interacting with various people. The secondary data has been collected
through various journals and websites.
DATA INTERPRETATION & ANALYSIS
1. (a) Age distribution of the Investors of Allegro Advisor Private
Limited
Age Group <= 30 31-35 36-40 41-45 46-50 >50
No. of 12 18 30 24 20 16
Investors

Investors invested in
Mutual Fund
35
30
25
20
15 30
10 18
24
20
16
125
0
<=30 31-35 36-40 41-45 46-50 >50
Age group of the Investors
Interpretation:
According to this chart out of 120 Mutual Fund investors of Allegro Capital Advisors
Pvt. Ltd. Private Limited the most are in the age group of 36-40 yrs. i.e. 25%, the second
most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the
age group of below 30 yrs.
(b). Educational Qualification of investors of Allegro Capital
Advisors Pvt. Ltd. Private Limited
Educational Qualification Number of Investors
Graduate/ Post Graduate 88
Under Graduate 25
Others 7
Total 120

6%
23%
71%
Graduate/Post Graduate Under Graduate Others
Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Allegro Capital Advisors Pvt.
Ltd. Private Limited are Graduate/Post Graduate, 23% are Under Graduate and 6% are
others.

(C). Occupation of the investors of Allegro Capital Advisors Pvt.
Ltd. Private Limited
No. of
Investors
Occupation No. of Investors
Govt. Service 30
Pvt. Service 45
Business 35
Agriculture 4
Others 6
.
50
45
40
35
30
25
45
20
35
15 30
10
5
4 6
0
ServiceService Business Agricu lture Others. .
Govt Pvt
Occupation of the customers
Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are
Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

(d). Monthly Family Income of the Investors of Allegro Capital
Advisors Pvt. Ltd. Private Limited
No. of
Investors
Income Group No. of Investors
<=10,000 5
10,001-15,000 12
15,001-20,000 28
20,001-30,000 43
>30,000 32
50
45
40
35
30
25
43
20
3215 28
10
12
5
5
0
<=10 10-15 15-20 20-30 >30
Income Group of the Investorsn (Rs. in Th.)
Interpretation:
In the Income Group of the investors of Allegro Capital Advisors Pvt. Ltd.
Private Limited , out of 120 investors, 36% investors that is the maximum investors are in
the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in
the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are
in the monthly income group of below Rs. 10,000
(2) Investors invested in different kind of investments.

Kind of Investments No. of Respondents
Saving A/C 195
Fixed deposits 148
Insurance 152
Mutual Fund 120
Post office (NSC) 75
Shares/Debentures 50
Gold/Silver 30
Real Estate 65
Kinds of
Investment
Gold/Silver
NSC)
Office(
Post Insurance
Saving
A/c
65
30
50
75
120
152
148
195
0 50 100 150 200 250
No.of Respondents
Interpretation:
From the above graph it can be inferred that out of 200 people, 97.5% people have invested
in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in
Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.
3. Preference of factors while investing

Factors (a) Liquidity (b) Low (c) High (d) Trust
Risk Return
No. of 40 60 64 36
Respondents
18% 20%
32% 30%
Liquidity Low Risk High Return Trust
Interpretation:

Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to
invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust
4. Awareness about Mutual Fund and its Operations
Response Yes No
No. of Respondents 135 65
33%
67%
Yes No
Interpretation:

From the above chart it is inferred that 67% People are aware of Mutual Fund and its
operations and 33% are not aware of Mutual Fund and its operations.
5. Source of information for customers about Mutual Fund
Source of information
Advertisement
Peer Group
Bank
Financial Advisors
70
No.ofRespondent
s
60
50
40
30
20
2510 18
0
Advertisement Peer Group
No. of Respondents
18
25
30
62
62
30
Bank Financial
Advisors
Source of Information
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
and 13% through Advertisement.

6. Investors invested in Mutual Fund
Response No. of Respondents
YES 120
NO 80
Total 200
Yes No
60% 40%
Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in
Mutual Fund.

7. Reason for not invested in Mutual Fund
Reason No. of Respondents
Not Aware 65
Higher Risk 5
Not any Specific Reason 10
6%
13%
81%
Not Aware Higher Risk Not Any
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.

8. Investors invested in different Assets Management Co. (AMC)
Name of AMC No. of Investors
SBIMF 55
UTI 75
HDFC 30
Reliance 75
ICICI Prudential 56
Kotak 45
Others 70

Name
of
AMC
Others 70
HDFC 30
Kotak 45
SBIMF 55
ICICI 56
Reliance 75
UTI 75
0 20 40 60 80
No. of Investors
Interpretation:
In Allegro Capital Advisors Pvt. Ltd. Private Limited most of the Investors preferred UTI
and Reliance Mutual Fund. Out of 120 Investors 62.5% have invested in each of them,
only 46% have invested in SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in
HDFC.

9. Reason for invested in SBIMF
Associated with SBI 35
Better Return 5
Agents Advice 15
27%
9% 64%
Associated with SBI Better Return Agents Advice
Interpretation:
Out of 55 investors of SBIMF 64% have invested because of its association with Brand
SBI, 27% invested on Agent’s Advice, 9% invested because of better return.
10. Reason for not invested in SBIMF

Not Aware 25
Less Return 18
Agent’s Advice 22
34%
38%
28%
Not Aware Less Return Agent's Advice
Interpretation:
Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF,
28% do not have invested due to less return and 34% due to Agent’s Advice.
11. Preference of Investors whether to invest in Sectoral Funds
Response No. of Respondents
Yes 25
No 95

21%
79%
Yes No
Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there
is maximum risk and 21% prefer to invest in Sectoral Fund.
12. Preference of Investors for future investment in Mutual Fund
Name of AMC No. of Investors
SBIMF 76
UTI 45
HDFC 35
Reliance 82
ICICI Prudential 80
Kotak 60

Others 75
Name
of AMC
Others 75
60
ICICI Prudential 80
82
HDFC 35
45
SBIMF 76
0 20 40 60 80 100
No. of Investors
Interpretation:

Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in
SBIMF, 62.5% in others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.
13. Channel Preferred by the Investors for Mutual Fund Investment
Channel Financial Advisor Bank AMC
No. of 72 18 30
Respondents
25%
15%
60%
Financial Advisor Bank AMC
Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through
AMC and 15% through Bank.

14. Mode of Investment Preferred by the Investors
Mode of Investment One time Investment Systematic Investment Plan
(SIP)
No. of Respondents 78 42
35%
65%
One time Investment SIP
Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through
Systematic Investment Plan.

15. Preferred Portfolios by the Investors
Portfolio No. of Investors
Equity 56
Debt 20
Balanced 44
37%
46%
17%
Equity Debt Balance
Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17%
preferred Debt portfolio

16. Option for getting Return Preferred by the Investors
Option Dividend Payout Dividend Growth
Reinvestment
No. of Respondents 25 10 85
21%
8%
71%
Dividend Payout Dividend Reinvestment Growth
Interpretation:
From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and
8% preferred Dividend Reinvestment Option.

FINDINGS AND SUGGESTIONS
Findings
 In Hassan in the Age Group of 36-40 years were more in numbers. The second most
Investors were in the age group of 41-45 years and the least were in the age group of
below 30 years.
 In Hassan most of the Investors were Graduate or Post Graduate and other there were
very few in numbers.
 In Occupation group most of the Investors were Govt. employees, the second most
Investors were Private employees and the least were associated with Agriculture.
 In family Income group, between Rs. 20,001- 30,000 were more in numbers, the
second most were in the Income group of more than Rs.30,000 and the least were in
the group of below Rs. 10,000.
 About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits,
Only 60% Respondents invested in Mutual fund.
 Mostly Respondents preferred High Return while investment, the second most
preferred Low Risk then liquidity and the least preferred Trust.
 Only 67% Respondents were aware about Mutual fund and its operations and 33%
were not.
 Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not
have invested in Mutual fund.
 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 in Mutual Fund.
 Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential
has also good Brand Position among investors, SBIMF places after ICICI Prudential
according to the Respondents.
 Out of 55 investors of SBIMF 64% have invested due to its association with the
Brand SBI, 27% Invested because of Advisor’s Advice and 9% due to better return.
 Most of the investors who did not invested in SBIMF due to not Aware of SBIMF, the
second most due to Agent’s advice and rest due to Less Return.
 For Future investment the maximum Respondents preferred Reliance Mutual Fund,
the second most preferred ICICI Prudential, SBIMF has been preferred after them.

 60% Investors preferred to Invest through Financial Advisors, 25% through AMC
(means Direct Investment) and 15% through Bank.
 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode
of Investment.
 The most preferred Portfolio was Equity, the second most was Balance (mixture of
both equity and debt), and the least preferred Portfolio was Debt portfolio.
 Maximum Number of Investors Preferred Growth Option for returns, the second most
preferred Dividend Payout and then Dividend Reinvestment.
 Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to
invest in Sectoral Fund.

Suggestions
 The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should
be made to realize that ignorance is no longer bliss and what they are losing by not
investing.
 Mutual funds offer a lot of benefit 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 as
just another investment option. So the advisors should try to change their mindsets.
The advisors should target for more and more young investors. Young investors as
well as persons at the height of their career would like to go for advisors due to lack
of expertise and time.
 Mutual Fund Company needs to give the training of the Individual Financial Advisors
about the Fund/Scheme and its objective, because they are the main source to
influence the investors.
 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.
 Younger people aged under 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing
should pay off.
 Customers with graduate level education are easier to sell to and there is a large
untapped market there. To succeed however, advisors must provide sound advice and
high quality.
 Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies very recently in the industry. SIP is easy for monthly salaried
person as it provides the facility of do the investment in EMI. Though most of the
prospects and potential investors are not aware about the SIP. There is a large scope
for the companies to tap the salaried persons.

CONCLUSION
Running a successful Mutual Fund requires complete understanding of the peculiarities of
the Indian Stock Market and also the psyche of the small investors. This study has made
an attempt to understand the financial behavior of Mutual Fund investors in connection
with the preferences of Brand (AMC), Products, Channels etc. I observed that many of
people have fear of Mutual Fund. They think their money will not be secure in Mutual
Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do
not have invested in mutual fund due to lack of awareness although they have money to
invest. As the awareness and income is growing the number of mutual fund investors are
also growing.
“Brand” plays important role for the investment. People invest in those Companies where
they have faith or they are well known with them. There are many AMCs in Allegro
Capital Advisors Pvt. Ltd. Private Limited but only some are performing well due to
Brand awareness. Some AMCs are not performing well although some of the schemes of
them are giving good return because of not awareness about Brand. Reliance, UTI,
SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and
their Assets Under Management is larger than others whose Brand name are not well
known like Principle, Sunderam, etc.
Distribution channels are also important for the investment in mutual fund. Financial
Advisors are the most preferred channel for the investment in mutual fund. They can
change investors’ mind from one investment option to others

BIBLIOGRAPHY
Books:
Gorden, Nataraj “Financial Markets & services” Fifth Revised Edtion-2009, Himalaya
Publication, 312-347
Article, Journal:
· Mutual fund hand book
· Fact sheet and statement
Web Sites:
· www.sbimf.com
· www.moneycontrol.com
· www.amfiindia.com
· www.onlineresearchonline.com
· www. mutualfundsindia.com

ANNEXURE
Questionnaire
A study of preferences of the investors for investment in mutual funds.
1. Personal Details:
(a). Name:-
(b). Add: - Phone:-
(c). Age:-
(d). Qualification:-
Graduation/PG Under Graduate Others
(e). Occupation. Plz tick (√)
Gvt. Sector Pvt. Sector Business Agriculture Others

(f). What is your monthly family income approximately? Plz tick (√).
Upto Rs.10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001 &
Rs.10,000 15000 20,000 30,000 above
2. What kind of investments you have made so far? Please tick (√). All applicable.
a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund
e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate
3. While investing your money, which factor will you prefer?
.
(a) Liquidity (b) Low Risk (c) High Return (d) Trust
4. Are you aware about Mutual Funds and their operations?
Please tick (√). Yes No
5. If yes, how did you know about Mutual Fund?
a. Advertisement b. Peer Group c. Banks d. Financial Advisors
6. Have you ever invested in Mutual Fund?
7. If not invested in Mutual Fund then why?

(a) Not aware of MF (b) Higher risk (c) Not any specific reason
8. If yes, in which Mutual Fund you have invested? Please. tick (√). All applicable.
a. SBIMF b. UTI c. HDFC d. Reliance e. Kotak f. Other. Specify
9. If invested in SBIMF, you do so because (Please Tick (√), all applicable).
a. SBIMF is associated with State Bank of India.
b. They have a record of giving good returns year after year.
c. Agent’ Advice
10. If Not invested in SBIMF, you do so because (Please tick (√) all applicable).
a. You are not aware of SBIMF.
b. SBIMF gives less return compared to the others.
c. Agent’ Advice
11. Instead of general Mutual Funds, would you like to invest in sectorial funds?
12. When you plan to invest your money in Asset Management Co. which AMC will you
prefer?

Assets Management Co.
a. SBIMF
b. UTI
c. Reliance
d. HDFC
e. Kotak
f. ICICI
13. Which Channel will you prefer while investing in Mutual Fund?
(a) Financial Advisor (b) Bank (c) AMC
14. When you invest in Mutual Funds which mode of investment will you prefer? Please
tick (√).
a. One Time Investment b. Systematic Investment Plan (SIP)
15. When you want to invest which type of funds would you choose?
a. Having only debt b. Having debt & equity c. Only equity portfolio.
portfolio portfolio.
16. How would you like to receive the returns every year? Please. tick (√).
a. Dividend payout b. Dividend re-investment c. Growth in NAV

Understanding Mutual Funds and Portfolio Management

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