INVESTMENT OPTIONS IN

MUTUAL FUNDS FOR AN INVESTOR

INTRODUCTION:

Introduction Mutual funds are financial intermediaries, which collect the savings of
investors & invest them in a large & well diversified portfolio of securities such as money
market instruments, corporate & government bonds & equity shares of joint stock
companies. A Mutual fund is a pool of common funds invested by different investors,
who have no contact with each other. Mutual funds are conceived as institutions for
providing small investors with avenues of investments in the capital market. Since small
investors generally do not have adequate time knowledge, experience & resources for
directly accessing the capital market, they have to rely on an intermediary which
undertakes informed investment decisions & provides consequential benefits of
professional expertise. The advantages for the investors are reduction in risk, expert
professional management, diversified portfolios, & liquidity of investment & tax benefits.
By pooling their assets through mutual funds, investors achieve economies of scale. The
interests of the investors are protected by the SEBI, Which acts as a watchdog. Mutual
funds are governed by the SEBI (Mutual funds) regulations, 1993.

From its inception the growth of mutual funds is very slow and it took
really long years to evolve the modern day mutual funds. Mutual Funds emerged for the
first time in Netherlands in the18th century and then got introduced to Switzerland,
Scotland and then to United States in the 19th century. The main motive behind mutual
fund investments is to deliver a form of diversified investment solution. Over the years
the idea developed and people received more and more choices of diversified investment
portfolio through the mutual funds. In India, the mutual fund concept emerged in 1960.
The credit goes to UTI for introducing the first mutual fund in India. Monetary Funds
benefited a lot from the mutual funds.
OBJECTIVES:

 A study on investment performance for short term.

 A study on investments performance in growth funds.
 A study on investments performance in hybrid and equity funds.
 A study on investments performance in retirement corpse.

NEED OF THE STUDY:

It is well known that mutual funds offer their investors benefits difficult to obtain
through other investment vehicles. Benefits such as diversification, access to equity and
debt markets at low transaction costs and liquidity are some such advantages.
Tax-saving investment options come into focus towards the end of financial year,
as the time draws near to finalize end of the year tax saving declarations. Investors revisit
the best possible options and choose the one that makes most sense. Equity-linked saving
schemes (ELSS) form a part of the tax saving investment basket as they not only reduce
the tax outgo but are also an efficient long-term investment tool.
Traditional tax-saving investments like PPF and fixed deposits don’t have the
capacity to earn inflation-beating returns.

SCOPE OF THE STUDY:

Scope of Mutual Funds has grown enormously over the years. In the first age of mutual
funds,when the investment management companies started to offer mutual funds, choices
were few. Even though people invested their money in mutual funds as these funds
offered them diversified investment option for the first time. By investing in these funds
they were able to diversify their investment in common stocks, preferred stocks, bonds
and other financial securities. At the same time they also enjoyed the advantage of
liquidity. With Mutual Funds, they got the scope of easy access to their invested funds on
requirement.
 But, in today’s world Scope of Mutual Funds has become so wide, that people
sometimes take long time to decide the mutual fund type, they are going to invest in.
Several Investment Management Companies have emerged over the years who offer
various types of Mutual Funds, each type carrying unique characteristics and different
beneficial features.

Growth Funds-These funds invest in the stocks, which are under valued
compared to their worth. As these stock prices tends to rise in future and
carry good growth potential, Growth Funds go for these kind of stocks.

Balanced Fund These funds invest both in Stocks and Bonds and thus offer
a well diversified investment portfolio.

Limitations of mutual funds:

 Mutual funds are subject to market risk.
 No guarantee of returns.
 Diversification of portfolio doesn't maximize returns.
 Selecting right financial securities is not easy.
 Cost management not proportional to performance.
 CHAPTER 2
RIVIEW OF LITREATURE

LITERATURE REVIEW
 Kahneman and Tversky (1979) found in their work, “Prospect Theory -
An Analysis of Decision under Risk”, individuals make decisions
based on the potential value of losses and gains rather than the final
outcome, and people evaluate these losses and gains using interesting
heuristics.

Phillip (1995) reported

changes in financial
decision-making and
investor behaviour as a
result
Ippolito (1992) and
Bogle (1992) reported
that fund
 Phillip (1995) reported changes in financial decision-making and investor
behaviour as a result of participating in investor education programs sponsored by
employees. In India, SEBI started such awareness program for small investors,
which has started giving benefits, in terms of value investing and informed
investing from retail investors.
 Ippolito (1992) and Bogle (1992) reported that fund selection by investors
is based on past performance of the funds and money flows into winning funds
more rapidly than they flow out of losing funds.
 Kavita Ranganathan’s (2004) conducted a survey in Mumbai revealed that
investors prefers performance records, brand name, expense ratio, portfolio of
investment, reputation portfolio manager, withdrawal/exit facility, products with
tax benefits and load charges for taking decision on investment.
 Singh and Chander (2004) study reveals that salaried investors prefer daily
disclosure of NAV by funds and also wished for higher tax rebates on investment
in Mutual Funds.
 Madhusudhan (1996) conducted a study and revealed that income schemes
and open-ended schemes are preferred over growth schemes and close-ended
schemes during the prevalent market conditions. Investors look for Safety of
Principal, Liquidity and Capital Appreciation in order of importance in the
selection of mutual funds.

 Sikidar and Singh (1996) carried out a survey of the investors of the
North Eastern region towards equity and mutual funds investment portfolio. The
survey revealed that the salaried and self-employed formed the major investors in
MFs primarily due to tax concessions.
 NCAER in its survey of three lakhs individual investors in 2010 revealed, Bank
Deposit has an appeal across all income class; 43% of the non-investor
households lack awareness about stock markets; It also reveals that mutual funds
have not truly become the investment vehicle for small investors; the number of
households owning units of mutual funds is merely 9%.
 Chalam , G.V. (2003), used the primary data of about 200 investors to know the
determinants of investment in various types of assets including in mutual funds
for the five years period (1997-2002). He observed that the return, capital
appreciation and Tax savings are the most influencing factors in inducing most of
the investors to opt for the MF schemes.
  M savithri (year2013)Mutual Funds in India are turning into a perfect
speculation decision contrasted with safe ventures, for example, Fixed Deposits
and postal which gives relatively low returns. Since the year 2003 from which the
present phase of bull run in the Indian capital markets started, the shared store
industry While the development as far as the AUM was repressed over the period
from 2009-2013, it has picked up exceptional force over the four year period until
March 2013. Mutual funds are vehicles to invest in the securities markets. There
are two primary ways to channel savings into productive investments. This study
deals with the origin, growth and features of mutual funds in India.
 Vidyasagar (year2012)The success story of any economy can only be scripted on
the basis of sound financial system of the country. Economic reform process of
1991 had a great impact on the financial system of the country leading to the
overall development of the Indian economy. Today, India’s financial system is
considered to be sound and stable as compared to many other Asian countries
where the financial market is facing many crises. During last one decade or so,
role of Indian mutual funds industry as a significant financial service in financial
market has really been noteworthy. In fact, Mutual funds have emerged as an
important segment of financial market of India, especially as a result of the
initiatives taken by the Govt. of India for resolving problems relating to UTI’s
US-64 and to liberalize tax liabilities.

CHAPTER 3
INDUSTRY AND COMPANY PROFILE

Company Profile

SPA Group
SPA Group was promoted by a team of finance professionals in 1995 with an objective
to provide value added financial services.

Initially, the Group focused as a niche financial solutions provider in corporate finance
and wealth management to Indian companies and high net worth individuals. In January
2000, the Group expanded its operations and the range of services. Today, SPA provides
services for securities broking, merchant banking, wealth management, financial
advisory, corporate finance, risk management and insurance broking.

SPA is being managed by its promoters along with a young and dynamic team of over
500+ professionals with rich experience, in their respective fields. The Group has
established itself as one of India’s leading financial advisory house, offering various
financial solutions to its Institutional, corporate and individual clients.

Customer centric approach of SPA’s dedicated professional team has helped carve a niche
for itself in financial services arena and won confidence of its clients. Clients of SPA are
from a wide spectrum and comprise of Banks and other financial institutions, Mutual
funds, Insurance companies, foreign institutional investors, public sector undertakings
and government departments, private corporate, trusts and individuals.

Promoters
M R . S A N D E E P PA RWA L , B . C O M ( H O N S ) , F C A
New Delhi, India

Mr. Sandeep Parwal is the founder of the group. He started his career as a practicing
chartered accountant- Sandeep Parwal and Associates 30 years ago.
He set up SPA Group offering varied financial services as per the requirements of his
varied clients. Since then, he has been ahead of the market curve, be it Mutual Funds
advisory, Securities Broking, Merchant Banking, Investment Banking, Insurance
Broking, Consulting, Stressed Asset Management and the latest being Start-up
Investments and Advisory. His Vision of the future with an eye for regulatory framework
has been a cornerstone in explosive growth of this group. He has led the team to the
present status of SPA being amongst leaders in the country in various financial services
categories and still climbing the charts.
Mr. Sandeep enjoys a distinct position in the Industry as an advisor to both corporate and
personal entities of large corporate houses. His unique blend of financial knowledge with
technology update has kept the group abreast with the International trends and provides
customized solutions to its customers with focus on their best interests.
He monitors and hand holds all business division of the group across India.

Vision
SPA believes in attaining customer satisfaction, on continuing basis, by providing highest
standard of financial services in India. The philosophy at SPA is to provide services to
clients after assessment of their profile, needs and risk-appetite. The basic work theme at
SPA is:

 Dedicated, competent and honest team of professionals

 Customer centric
 Work environment
 Insight of customers’ perspectives
 Strong research base
 Clear understanding of applicable laws
 Consistency and passion to excel
 Technology savvy
Milestones
Since 1994, with the coming into existence of the SPA Group, we have diversified into a
complete financial solution providing house, catering varied needs of our clients ranging
from investment advisory services to investment banking, corporate re-structuring,
distribution and broking services, risk management and insurance advisory. Within a
short span of time, the Group has made a place for itself in the midst of the top financial
solutions provider in the country.

Group Companies
SPA Group of companies is the flagship Company of the Group and is engaged in
providing Wealth Management and Financial Advisory services to institutions, corporate ,
and individuals since 1995. The Company is a leading distributor of Mutual Funds in the
country and presently has assets around 12000 crores under its management. The
Company has successfully positioned itself as a strategic advisor to its customers for
wealth management with its customer centric approach and innovative solutions.
The Company is registered with Reserve Bank of India as a Non Banking Financial
Company. Presently the shares of the Company are listed on the Delhi Stock Exchange.

Group Companies

 SPA Capital Services Limited

 SPA Securities Limited
 SPA Insurance Broking Services Limited
 SPA Capital Advisors Limited
SPA CAPITAL SERVICES LIMITED:
SPA Capital Services Limited is the flagship Company of the Group and is
engaged in providing Wealth Management and Financial Advisory services to
institutions, corporates, and individuals since 1995. The Company is a leading distributor
of Mutual Funds in the country and presently has assets over Rs.22,000 crore under its
management. The Company has successfully positioned itself as a strategic advisor to its
customers for wealth management with its customer centric approach and innovative
solutions.

SPA CAPITAL ADVISORS LIMITED:

 SPA Capital Advisors Limited offers comprehensive investment banking
solutions and highest quality independent financial advice to corporates sector and
entrepreneurs. SPA service offering covers private placement of debt instruments and
debt syndication for both public and private sector 14 corporates, Capital raising services
through private placement of equity, managing capital issues (IPO, FPO and Right
Issues). Besides, SPA also cater to the entire spectrum of capital market needs through
other services such as Corporate and Infrastructure advisory, Valuations, Managing
Takeovers, Buy Back and Delisting. SPA have team comprising of multidisciplinary
professionals with a vast financial advisory and investment banking experience, who
structure various financial products as per the requirements of the clients.

SPA have the Category –I Merchant Banking license from Securities and
Exchange Board of India (SEBI), the Indian Securities Market Regulator.

The Company has made notable and considerable progress in a short span in the
debt merchant banking activities successful various debt primary issues. This is also
reflected through the ranking by Prime Database, which has ranked the Group amongst
the top 10 service providers in this segment. The Company was able to achieve above
ranks on the basis of its performance in just two financial years since it commenced
investment & merchant banking activities.

Since the commencement of merchant banking services, the Company has

syndicated funds for various Public Sector Undertakings (PSUs), Designated Financial
Institutions(DFIs), Banks and several State Level Undertakings (SLUs).

The Company for its Merchant & Investment Banking activities has found
patronage as an Arranger with various central public sector undertakings like HUDCO,
NTC, ITI, MECON, IISCO SAIL, REC, KRCL, public sector banks and financial
institutions. Also the Company has had privilege to provide its services to various state
level undertakings of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, West Bengal,
Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir, Maharashtra, Gujarat and
Rajasthan. In the private sector, the Company has provided its services to various
domestic and MNC corporates.
 The achievements corroborate our untiring and sincere efforts towards building
and preserving mutually rewarding and sustainable relationships with our clients and
giving them our value added services with meaningful performance.

SPA have started providing equity capital market related services in the beginning
of 2007 and advise Corporates, Banks and Businesses which are seeking to mobilize
capital from Investor. We offer following opportunities to clients to raise funds through
the following:

 Private Equity Advisory

 Initial Public Offering (IPOs)

 Follow on Public Offering (FPOs)

 Qualified Institutional Placements (QIPs)

 Right Issues

 Preferential Allotments and

 Foreign Currency convertible bonds (FCCBs).

SPA team as Lead Manager/BRLM has successfully managed/ are managing
transactions for client across various industry sectors including:

 Information technology

 Telecommunication

 Infrastructure

 Power equipment’s

 Steel

 Sugar

 Textiles
SPA for execution of a transaction, combine our various strengths including in
depth knowledge of regulatory environment, understanding of industry and market
dynamics, distribution capabilities and networking with institution investors of our
associate concerns. We built our business on strong relationships, innovative ideas and
ethical standards.

SPA SECURITIES LIMITED:

SPA Securities Limited is a SEBI registered securities broking Company. The

Company is a member of Wholesale Debt Market, Capital Market and Futures and
Options Segment of the National Stock Exchange of India Limited. The Company is also
a registered member of the Over the Counter Exchange of India. The Company is focused
primarily on providing securities broking services to institutional clients and is
empanelled as a approved securities broker with all the major Nationalized, Private and
Cooperative banks, Corporate houses, Insurance Companies, Financial Institutions, Asset
Management Companies and Provident Fund Trusts. The Company had a turnover of
Rs.25000 crores at NSE-WDM for the financial year ended March 2005. Equity broking
for institutions was commenced in 2004 end. In its first full year of the operations, the
Company achieved a turnover of over Rs.1500 crores in calendar year 2005.

SPA INSURANCE BROKING SERVICES LIMITED:

SPA Insurance Broking Services Limited is the arm of the SPA Group
providing entire range of insurance service in insurance right from meeting insurance
need of clients to cover its risk spectrum, advisory, claim settlement and also meet
requirement of clients if they wish to outsource entire gamut of insurances related
functions. The Company is registered with Insurance Regulatory Development Authority
as approved Broker. The Company is empanelled with almost all the life and general
insurance companies as a Direct Broker. The Company is functioning as life and general
insurance direct broker and risk assessors.

Clients
SERVICES PROVIDED BY SPA CAPITAL

 MERCHANT BANKING

 INSURANCE

 MUTUAL FUNDS

 SECURITIES BROKING

 EQUITY BROKING

 VALUATION SERVICES
  FINANCIAL PLANNING

Merchant Banking
SPA Capital Advisors Limited is engaged in private placement of debt instruments,
structuring of the various financial products as per the requirements of the borrowers
along with various other pre-issue and post issue services.
The Company has made notable and considerable progress in a short span in the debt-
oriented merchant banking activities by successful placement of various debt primary
issues. This is also reflected through the ranking by Prime Database, which has ranked
the Group amongst the top 10 service providers in this segment. The Company was able
to achieve above ranks on the basis of its performance in just two financial years since it
commenced investment & merchant banking activities.
Since the commencement of merchant banking services, the Company has syndicated
funds for various Public Sector Undertakings (PSUs), Designated Financial
Institutions(DFIs), Banks and several State Level Undertakings (SLUs).
The Company for its Merchant & Investment Banking activities has found patronage as
an Arranger with various central public sector undertakings like HUDCO, NTC, ITI,
MECON, IISCO SAIL, REC, KRCL, public sector banks and financial institutions. Also
the Company has had privilege to provide its services to various state level undertakings
of Andhra Pradesh, Karnatka, Kerela, Tamil Nadu, West Bengal, Punjab, Haryana,
Himachal Pradesh, Jammu & Kashmir, Maharashtra, Gujarat and Rajasthan. In the
private sector, the Company has provided its services to various domestic and MNC
corporates.
The achievements corroborate our untiring and sincere efforts towards building and
preserving mutually rewarding and sustainable relationships with our clients and giving
them our value added services with meaningful performance.
Now, the Company has started providing Equity Oriented Merchant Banking services to
its customers on strength of its research based structuring capabilities and strong
distribution network. Presently, the Company is providing services for private placement
of equities, public issues and right issues.
SERVICES PROVIDED UNDER MERCHANT BANKING
 EQUITY MERCHANT BANKING
Public Offering
SPA Capital Advisors Limited offers comprehensive Investment Banking solutions and
highest quality independent financial advice to corporates sector and entrepreneurs. Our
service offering includes raising of funds from the public through Initial / Follow-on
Public Offerings and Rights Issue of securities for, both public and private sector
corporates. We have team comprising of multi-disciplinary professionals with a vast
financial advisory and investment banking experience, who structure various financial
products as per the requirements of the clients. Our team as Book Runner / Lead Manager
has successfully managed / are managing transactions for client across various industry
sectors including:

 Information technology
 Telecommunication
 Infrastructure
 Power equipments
 Steel
 Sugar
 Textiles
We, for execution of a transaction, combine our various strengths including in-depth
knowledge of regulatory environment, understanding of industry and market dynamics,
distribution capabilities and networking with institution investors of our associate
concerns. We built our business on strong relationships, innovative ideas and ethical
standards.
Buy Back of Securities
Buy-back is the process through which a cash rich Company purchase its own shares or
other securities from its members and cancel them after such purchase. Buy back is
undertaken by any Company as capital re-structuring strategy through which excess paid
up share capital is extinguished. We have successfully completed buy back offers
including for Rs. 2,370 million by Patni Computer Solutions Limited in 2008.

Open Offers
With opportunities arising in the markets for acquisition of existing businesses and fuel
the growth of an organization through inorganic route, takeover is the most favorable
route. We assist entrepreneurs in acquiring control or management of any listed Company
by acting as Merchant Banker to undertake all the required statutory compliances under
SEBI Regulations and Stock Exchange Guidelines. We also perform the duties of
Merchant Banker required in case of substantial acquisition of shares of a listed company
by an entity.
Delisting of Securities
The Promoters of a Company opting for voluntary delisting are required to give an offer
to the other shareholders of the Company for acquisition of their shares under the
delisting offer through reverse book building. The Promoters are required to appoint a
Merchant Banker, who shall manage the delisting offer. With our team of our experienced
persons, we assist the Promoters in delisting of securities from the Stock Exchange.

Qualified Institutional Placement

Qualified institutional placement (QIP) is a capital raising tool available to a listed
company, whereby it can issue equity shares, fully and partly convertible debentures, or
any securities other than warrants, which are convertible into equity shares, to a Qualified
Institutional Buyer (QIB). QIP scores over other methods of raising funds, as it does not
involve many of the common procedural requirements, such as the submission of pre-
issue filings to the market regulator.
We have a team of Professionals with experience in placement of securities with
Institutional Investors.

Private Equity
SPA Private Equity practice represents participants in all aspects of private equity
investing throughout India. With a team of 5 professional all over India who specializes
in buy as well as sell side of private equity transactions, we combine our corporate and
financing expertise to provide clients with sophisticated and commercial advice. We
actively do private equity transactions in most major industries, both regulated and non-
regulated, including power & energy, technology and e-commerce, financial services,
gaming, healthcare, media, pharmaceutical, satellite finance and investment,
telecommunications and transportation.
Working with our clients from the earliest stages of a transaction, we assist in structuring,
negotiating, and executing the full range of private equity transactions, including
leveraged and management buyouts, “going-private” transactions and exit transactions. In
our practice, SPA regularly acts for:

 private equity investors on negotiated acquisitions, public takeovers, buyouts and

investments
 private equity investors, banks, underwriters, hedge funds and other finance providers
on the financing of LBOs and similar transactions,
 public, private and family owned businesses engaging in transactions with private
equity investors
 private equity investors and portfolio companies on recapitalizations, restructurings
and exit transactions (including IPOs), and
Boards of directors and management teams in their roles in private equity transactions.

FCCB / GDR
Foreign Currency Convertible Bonds are optionally convertible bonds issued in a
currency other than Indian Rupees. A convertible bond is a mix between a debt and equity
instrument. It acts like a bond by making regular coupon and principal payments, but
these bonds also give the bondholder the option to convert the bond into shares at the
expiry of the term of the Bond.
Global Depository Receipt means any instrument in the form of a depository receipt or
certificate created by the overseas depository bank outside India and issued to non-
resident investors against the issue of ordinary shares of the Issuing Company. Global
Depository Receipt facilitates trade of shares, especially those from emerging markets.
Prices of GDR's are often close to values of underlying shares.

Track Record of Public Issues

Securities and Exchange Board of India vide its circular no. CIR/MIRSD/1/2012 dated
January 10, 2012 has mandated certain information with respect to track record of the
Public issues managed by a merchant banker in the past 3 years to be disclosed on the
website of the Merchant Banker

 Information on Public Issue of Equity

 SRS Limited
 Cantabil Retail India Limited
 Parabolic Drugs Limited
 Infinite Computer Solutions (India) Limited.
Information on Public Issue of Debt
 SREI Infrastructure Limited (May 2014)
 Kamarajar Port Limited
 SREI Infrastructure Limited (September 2012)
 CORPORATE ADVISORY
 MERGERS & ACQUISTIONS
 ESOP ADVISORY
 DEBT RESTRUCTURING & FINANCIAL ENGINEERING

 CORPORATE OR STRUCTURED FINANCE

 COMMERICAL PAPER & CERTIFICATE OF DEPOSIT
 SHORT TERM NON CONVERTIBLE DEBENTURES
 STRUCTURED FINANCE
 LEVERAGE BUYOUTS

 PROJECT FINANCE & DEBT SYNDICATION

 PROJECT & INFRASTRUCTURE FINANCE
 PRIVATE PLACEMENT OF DEBT
 PU BLIC ISSUE OF DEBT
 PUBLIC & FIXED DEPOSIT MARKETING

 INVESTMENT ADVISORY
 RETIREMENT FUND ADVISORY
 LIQUIDITY & SURPLUS FUND ADVISORY
 FINANCIAL & TAX PLANNING
Insurance
SPA Insurance Broking Services Ltd is the insurance broking company of the group
providing life and general insurance advisory services.
Life Insurance advisory services are process oriented, which include identification of the
needs of the clients, offering the best product available, resolution of their queries and
post sales service. The company has covered over 2000 lives in 18 months of business
with sum assured of over Rs. 20 billion and premium collection of over Rs.3.5 billion.
Life Insurance
Life Insurance advisory services are process oriented, which include identification of the
needs of the clients, offering the best product available, resolution of their queries and
post sales service. The company has covered over 2000 lives in 18 months of business
with sum assured of over Rs. 20 billion and premium collection of over Rs.3.5 billion.
SIMPLIFYING CHILDREN PLANS

Why do need a child Plan ?

As a parent, your priority is your children's future and being able to meet their
dreams and aspirations. In today's era, providing good education, establishing a
bright career or even arranging for a marriage is expensive. To meet future needs
of your child, it is very important to plan in advance.

What are Children Plan and how do these help ?

Life is uncertain and you would not want to take a chance when if comes to your
children's future. Even at the time of death of a parent, CHILDREN PLAN
provides lump sum to the child at the time of maturity. Double benefits occur both
at the time of death and maturity.

Types of Children Plan

Unit Linked Insurance Plan (ULIP): Your premium paid is invested in unit
linked funds which allow you to withdraw money, at any time after three years.
Endowment Plan : This is a traditional plan in which you enjoy bonus declared
by the Insurance Company and also the facility of withdrawing a minimum
amount of 15% on different milestones.
Advantages of taking up Children plan ?
 In the unfortunate event of death of policyholder during the policy term benefits like
future premium waived off., are available.
 Sum assured would be received immediately in the event of death of policyholder.
 Policy benefit continues for your Child's financial needs.
 In case of ULIP, fund value will be paid at the time of maturity.
 Your Child's dreams for higher education etc., would be fulfilled.
Premium Payment Option:
One can opt for yearly, half yearly quarterly or monthly mode of payment.

Tax Benefit:
Under Section 80C, premiums up to Rs. 100,000 are allowed as deduction form
your taxable income. Maturity & Death Benefit are tax free under Section
10(10D) of the Income Tax Act, 1961.
How does the plan of different insurance Companies differs ?
Plans of different insurance companies mainly differ on following:
 Minimum & maximum entry age of child
 Policy term
 Minimum & maximum premium
 Variety of optional riders
 Minimum & maximum sum assured
 Switches
 Premium allocation charges
 Funds Options
Is there a minimum amount of sum assured or minimum premium* ?
Different Insurance companies offer different minimum premium or sum assured.
E.g. Marriage Endowment Plan of LIC can be subscribed for a minimum sum
assured of Rs. 50,000 and for a term of 25 years, premium is as low as Rs. 170 per
month. In case of Smart kid of ICICI, the minimum premium is Rs. 700 per
month for Endowment Plan and Rs. 833 per Month for ULIP, both for a term of
20 years.Plans of different insurance companies mainly differ on following:
Why do you need an advisor ?
An advisor is needed to:
 Understand your requirement
 Analyze the same and then
 Recommend the right type of plan
How can an Insurance Broker helps?
An Insurance Broker is an Organisation licensed by Insurance Regulatory and
Development Authority (ww.irdaindia.org), authorized to work for all the
Insurance companies. Thus, it is not obliged/motivated to advise you CHILDREN
PLAN of only a particular company. This may not be possible when you deal with
an Insurance agent representing a particular Insurance Company or with an
advisor or a consultant or a sales manager employed by a particular Insurance
Company.
Besides, the professional advisors employed by SPA Insurance Broker Services
Limited will provide a comparison of key features of different plans and explain
you the intricacies in a SIMPLE manner. He also helps you as and when the
benefits becomes payable.
YOU NEED UNBIASED PROFESSIONAL ADVICE:
 For access to all products of all insurance companies
 To understand the comparison among different products
 To help you in selecting the most appropriate plan
 To review the suitability of your existing policies &
 Uncompromising after sale services.

General Insurance
Every business has unique insurance needs
Any business you are engaged in comes with embedded risks. You can protect yourself
against most of risks by insuring yourself rightly. Generally your insurance needs would
be to protect your

 Physical Assets: building, plant & machinery, stocks, equipment, etc

 Business from legal liabilities to your employees and third parties
 Loss of Profits
And to evaluate your insurance requirement you need to know:
 What are your risks?
 What insurance options are available for adequate risk coverage?
 What will be the cost of covering the risks?
 What should be the right sum to be insured?
 What other factors should be taken into account?
 On what criteria you should evaluate various insurance options?
 Have you bought an insurance policy or a risk coverage solution?
Your evaluation can make the difference between not being ‘truly’ protected and having
an appropriate protection.
Your insurance needs are best met by having an appropriate insurance
program:
Taking a comprehensive view of your business so that an appropriate insurance program
ensures:

 No shocks and surprises to your business when a risk e.g. fire, earthquake etc
materializes
 ‘Knowledge’ based decision making to transfer or retain a risk
 Construction of Policy Terms in a manner where the claim becomes your legal right
and not an extension of ex-gratia payment by insurer
 You get the most competitive price from your preferred insurer, without diluting
coverage
 You evaluate your business risks on continuing basis
 All insurance activities like placement of business, endorsement, declaration,
settlement of claims etc happen in a smooth manner.

How do you manage your insurance program:

You have multiple choices
 By creating and running your dedicated insurance department. This may not be
warranted unless your business is large enough and associated risks are complex.
 By assigning responsibility of managing your insurance program to any employee
alongwith his primary jobs. This is the most commonly observed scenario but will
have its own limitations.
 Engaging an insurance advisor from a reliable broking firm (‘broker’)
 A reliable advisor will always be available at your doorstep on shortest notice and
on all critical junctures.
 The advisor will help you in getting best out of your insurance program with his
professional competence and industry expertise without having the hassles of
running a dedicated department.
 By engaging an advisor to capitalize on efficiencies and advantages a broker brings
in while ultimate decision making remains your privilege as usual.
  An Insurance Broker in India is licensed and regulated by the Insurance Regulatory
and Development Authority (IRDA) to safeguard the interest of insurance buyers
 This could be most cost effective method for most of the businesses.
How does your insurance program get enriched with engagement of a
Broker rather than going directly to an insurer?
A simple question would arise in almost everyone’s mind except our clients that why to
use an Insurance Broker as advisor and why not to go directly to Insurance Company
even when there is no dedicated insurance department.

 A broker as your advisor is licensed to approach all the insurance companies you
want.
 A broker works in your interest as the broker is mandated to represent his clients.
 With a plethora of options/policies available, riders attached, add on clauses and
decisions required to be made at your end, insurance decisions are quite complex for
which you will need technical support.
 Getting the right policy to cover the maximum risks, at the lowest premium, to
determining right value to be insured, to receiving hassle free settlement of claims and
so on, it’s a cumbersome process everywhere.
 It does not cost you more to engage a broker as he is remunerated by the insurer.
With the given set of knowledge, expertise and its networking, Insurance Broker can
work as your own “Trusted Experts” who can easily take you through. Isn’t having a
team of “Trusted Experts” to hand hold you throughout a good idea?
How do we hand hold you?
As a broker we will help you in complete cycle of your insurance program, providing a
single window service for all your Insurance requirements.

 Understanding your Business and Risk Analysis

 We begin with understanding your business and risk environment
 Identification & analysis of all the risks that may pose on your business

 Reviewing the Portfolio

 We scrutinize & analyze existing Insurance Coverage in detail and will suggest you
possible improvement, avoiding overlapping of coverage
 Arranging need based risk inspection and valuation
 Mapping your existing coverage on the risks that need to be covered.
  Identification of any uncovered risk and gap in the insurance cover
 Developing Comprehensive Insurance Program covering all risks to be transferred
with target of optimizing insurance cost.


 Underwriting and Premium Placement
 Finalising insurance covers to be secured
 Discussion on sum insured, perils to be covered, deductible/excess, excluded perils,
add on covers and taking a final view on each of these issues
 Selection of the best insurer/s.
 Draft request for Offer, obtain & evaluate (‘technically and commercially’) Offers
received from various Insurers for finding the best solutions.
 Negotiate with the shortlisted insurer/s to customize the policy cover and to obtain
best rates.
 Placement of insurance business and ensuring that the policies are worded as
agreedupon.

 Claims Management and Assistance

 Develop Standard Operating Procedure/ Manuals to deal with the claims.
 Educating selected officials on risks covered, benefits available and also “Do and
Donot” when a claim occurs, by holding presentation and seminar.
 Complete hand holding with end-to-end service starting from notification of claim
to insurer, survey to negotiations till the final settlement.
 PROPERTY & ENGINEERING INSURANCE
 Fire
 Burglary
 Electronic Equipment
 Cash in Transit/Cash in Safe
 Boiler Explosion
 Deterioration of Stock
 Corporate Fleet/Commercial Vehicles
 Contractors All Risk
  Contractors Plant and Machinery
 Marine cum Erection All Risk
 Erection All Risk
 MachineryBreakdown

 EMPLOYEE BENEFITS
 Group Gratuity
 Group Mediclaim
 Group Personal Accident
 Group Term Life
 Group EDLI
 Group Superannuation
 Workmen’sCompensation

 LIABILITY
 Directors & Officers Liability
 Errors & Omissions (Professional Indemnity)
 Product Liability
 Public Liability
 Public Offering of Securities (IPO)
 Technology&MediaLiability

 FINANCIAL
 Loss of Profit (Business Interruption)
 Credit
 Advance Loss of Profit (Delay in Start up)

 PERSONAL LINES
 Vehicle
 Health /Critical Illness
  Overseas Medical
 Home /Other Personal Assets
 Personal Accident
 LifeInsurancePlans

 Children Plan
 Term Plan
 Pension
 Single/Regular Premium ULIP
 Endowment Plan

Mutual Fund

The SPA Group, on strength of its research based customer centric approach and
impeccable servicing, is recognized as one of the leading financial advisory service
providers in the country.

SPA Capital Services Ltd. , the flagship company of the group provides investment
advisory services. The company is engaged in advisory and distribution services of
mutual funds and is ranked amongst top 10 intermediaries in the country. The Company
provides customized solutions to the requirements of High Net worth Individuals and
Corporate clients. Our strength lies in our ability to advise on investment strategies and
structures, develop innovative products and distribute amongst a wide network of
investors across the country. We have constantly endeavored to develop new instruments,
tailor made to the requirements of our clients, enabling them to earn efficient post tax
returns in accordance with their specific risk, return and maturity profiles. The company
also has a distribution network of 200 sub-brokers across India being serviced by its eight
branches. The company is currently having Asset Under Management of over Rs. 22,000
crore with above 1 lac satisfied customers. Additionally, the company provides advisory
services for alternate investment options like portfolio management services in equity,
debt and commodities besides investment in venture capital funds.
Distribution
SPA Capital Services Ltd. , the flagship company of the group provides investment
advisory services. The company is engaged in advisory and distribution services of
mutual funds and is ranked amongst top 10 intermediaries in the country. The Company
provides customized solutions to the requirements of High Net worth Individuals and
Corporate clients. Our strength lies in our ability to advise on investment strategies and
structures, develop innovative products and distribute amongst a wide network of
investors across the country. We have constantly endeavored to develop new instruments,
tailor made to the requirements of our clients, enabling them to earn efficient post tax
returns in accordance with their specific risk, return and maturity profiles. The company
also has a distribution network of 200 sub-brokers across India being serviced by its eight
branches.
The company is currently having Asset Under Management of over Rs.22,000 crore with
above 1 lac satisfied customers.
Additionally, the company provides advisory services for alternate investment options
like portfolio management services in equity, debt and commodities besides investment in
venture capital funds.

Securities Broking
SPA Securities Ltd. is registered member of NSE-WDM segment, Capital Market
segment and Futures and Options segment. The company is also a member of The Stock
Exchange, Mumbai. SPA Comtrade Pvt. Ltd. is the commodities broking company of the
group and is a member of NCDEX and MCX. The Company has dedicated teams
operating from a state of the art dealing room in Mumbai for equity, debt and derivatives
broking supported by a strong in-house research team.
DebtBroking
The division is engaged in providing debt advisory and broking services to institutional,
semi-institutional and retail customers. The company caters to a wide range of investors
across the country ranging from Provident Funds, Banks, Corporate Treasuries, Financial
Institutions, Mutual Funds, Educational, Religious and Charitable Trusts, Insurance
Companies, HNI's etc. The company deals in Government Securities, Treasury Bills,
Commercial Papers, Certificate of Deposits, PSU, SLU and Corporate Bonds and other
debt instruments. With its nationwide network providing institutional broking services the
company has executed business of over Rs. 300 Billion in last 3 years.
Equity Broking
SPA Group was promoted by a team of finance professionals in 1995 with an objective
to provide value added financial services. Initially, the Group focused as a niche financial
solutions provider in corporate finance and wealth management to Indian companies and
high net worth individuals. In January 2000, the Group expanded its operations and the
range of services. Today, SPA provides services for securities broking, merchant banking,
wealth management, financial advisory, corporate finance , risk management and
insurance broking.
SPA is being managed by its promoters along with a young and dynamic team of over
1000+ professionals with rich experience, in their respective fields. The Group has
established itself as one of India’s leading financial advisory house, offering various
financial solutions to its Institutional, corporate and individual clients.

Valuation Services
As a financial consulting firm, our major specialty is valuing businesses and
corporate securities. We are providing valuation services to various corporate and have
done more than 2000 valuations across industries. Our clientele consist of domestic and
multinational companies including various Fortune 500 companies. The Team consists of
very senior professional from Industry, Chartered Accountants, CFAs, and Company
Secretaries.

Range and Services

As a financial consulting firm, our major specialty is valuing businesses and
corporate securities. We are providing valuation services to various corporate and have
done more than 2000 valuations across industries. Our clientele consist of domestic and
multinational companies including various Fortune 500 companies. The Team consists of
very senior professional from Industry, Chartered Accountants, CFAs, and Company
Secretaries.
We prepare independent, unbiased business and professional practice valuations
for a variety of reasons including acquisition, investment, disposal, buyout, merger,
restructuring, accounting, statutory / legal etc. The valuation services we provide broadly
cover the following:
Business Valuation
 Acquisition, Domestic and International
 Assessment of Merger Swap Ratio
 Valuation of business segments/divisions for spin off/restructuring
 Fairness Opinion
 Share Purchase/Investment/Fund Raising
 Good will Impairment testing (US GAAP/IFRS/Indian GAAP)
 Investment Impairment testing for accounting purposes
 Fair valuation for statutory/regulatory purposes
 Asset valuation for purchase price allocation for accounting for business
combinations (US GAAP/IFRS)

Intangible Asset valuation

 Brand valuation
 Intellectual property valuation
ESOP valuation
 Employee Stock Options Valuation
 Equity Shares/Common Stock for FBT/Perquisites Purposes
 Stock Options through Black Scholes and Binomial or Lattice technique
Portfolio Valuations

FINANCIAL PLANNING

Plan Your Money

Even though one of the most significant factors in our life is the state
of our personal finances, we rarely spend time on managing them
since unlike businesses, we are not accountable to any one for our
personal financial goals and results.
 We can make a much larger contribution in every area of our life
when our personal finances, investments and taxation are properly
planned.
The Fundamental corner stones of successful investing
Save regularly, invest regularly
Start early
Use tax shelter
Investment returns should exceed the inflation.

Pyramid of investment avenues

SPA CAPITAL SERVICES BRANCHES

SPA Is Present at 12 Cities through its 13 Branches. Those are

 New Delhi 7. Delhi-NSP

 Agra 8. Kolkata-Park Street

 Ahmadabad 9. Chennai

 Benguluru 10. Mumbai-Goregoan & -Mettal

Court
  Bhubaneswar 11. Noida

 Chandigarh 12. Patna

HEAD OFFICE:
NEW DELHI 25,
C-Block Community Centre,
JanakPuri
New Delhi - 110 058
011-25517371 / 25515086
011-25532644
info@spacapital.com

BRANCH OFFICE:

No. 6-3-1090 / 5 & 6,

2nd Floor,

G.S.Mall,

Somajiguda,

Hyderabad – 500082

info@spacapital.com
 CHAPTER 4
THEORITICAL FRAMEWORK

Mutual fund defined:

The global financial market has witnessed several dynamic developments in the past
three decades. One of such developments has been, the phenomenal growth of the capital
market- both domestic and international resulting in the advent of ‘equity cult’ among the
household sector. This has accelerated the process of disintermediation whereby
industrial security are directly issued by corporate borrowers to end investors bypassing
the banking systems .However, the household sector, being more averse to risks,
necessitates the creation of institutional shields which may act as intermediaries. One of
the most significant and popular financial intermediary has been the “mutual funds”.

Concept of mutual fund:

In a mutual fund, many investors contribute to form a common pool of money.
Pool of money is invested in accordance with a stated objective. The ownership of the
fund is thus joint” mutual”; the fund belongs to all investors. A single investors
Ownership of the fund is in the same proportion as the amount of the contribution made
By him bears to the total amount of the fund.

A mutual fund uses the money collected from investors to buy those assets which
are specifically permitted by its stated investment objective. Thus, a growth fund would
buy mainly equity assets-ordinary shares, preference shares and warrants. An income
fund would mainly buy debt instruments such as debentures and bonds. The fund’s assets
are owned by the investors in the same proportion as their contribution bears to the total
contributions of all investors put together.
 When a person buys “shares” of a joint stock company, the purchase makes the
Investor a part owner of the company and its assets. In the same way, when an investor
Subscribes to a mutual fund, he becomes part owner of fund’s assets. In fact, in the
U.S.A. a mutual fund is constituted as an investment company and an investor ‘buys into
the fund’, meaning he buys the shares of the fund. In India, a mutual fund is constituted
As a Trust and the investor subscribes to the ‘units’ of a scheme launched by the fund,
Which is where the term Unit Trust comes from. However, whether the investor gets
fund Shares or units are only a matter of legal distinction. In any case, a mutual fund
shareholder or unit-holder is a part owner of the fund’s assets . An investor can buy the
shares from a company only when the company makes a
Share issue. At other times, a share can be purchased from another investor through the
Stock exchange if the share is listed.

A shareholder can sell the share to the company onlyWhen the company announces
‘share buyback’. At other times, he can sell share to
Another Investor through a stock exchange . The price observed in a stock exchange is a
Reasonable estimate of the fair value of the share.

An open-ended mutual fund is quite different in this respect. In an open-ended

Mutual fund, investors can buy units from the fund and sell units to the fund
Continuously. The stock exchange is not in the picture. To ensure that there is fairness,
Sale and purchase has to take place at fair value of the unit. In other words, each share or
Unit that an investor holds needs to be assigned a value. Since the units held by an
investor evidence the ownership of the fund’s assets, the value of the total assets of
the Value of one unit. This is generally called the Net Asset Value (NAV) of one unit or
one Share. The total value of an investor’s part ownership is thus determined by
multiplying The NAV with the number of units held.

Origin and growth of mutual funds

The mutual fund industry in India started in 1963 with the formation of Unit
Trust Of India , at the initiative of the Reserve Bank of India and the Government of
India. The objective then was to attract the small investors and introduce them to market
investments. Since then, the history of mutual funds in India can be broadly divided into
six distinct phases.

Phase 1(1964-87): Growth of Unit Trust of India

In 1963, UTI was established by an Act of Parliament. As it was the only entity
Offering mutual funds in India, it was a monopoly. Operationally, UTI was set up by the
Reserve Bank of India, but was later de-linked from the RBI. The first scheme, and for
Long one of the largest, launched by UTI was Unit Scheme 1964. Over the years, US-64
Attracted the largest number of investors in any single investment scheme. It was also
atleast partially the first open-ended scheme in the country.Later in 1970s and 80s, UTI
started innovating and offering different schemes to suit the needs of different classes of
investors. Unit Linked Insurance Plan (ULIP) was launched in 1971. Six new schemes
were introduced between 1981 and 1984. During 1984-87, new schemes such as
Children’s Gift Growth Fund (1986) and Mastershare (1987) were launched. Mastershare
could be termed as the first diversified equity Investment scheme in India. The first
Indian offshore fund, India Fund, was launched in August 1986. During 1990s, UTI
catered to the demand for income-oriented schemes by launching Monthly Income
Schemes, a somewhat unusual mutual fund product offering “assured returns”. In
absolute terms, the investible funds corpus of UTI was about Rs.600 crores in 1984. By
1987-88, assets under management of UTI had grown ten times to

Phase 2 (1987-1993): Entry of Public Sector Funds

The year 1987 marked the entry of other public sector mutual funds. With the
opening up of the economy, many public sector banks and financial institutions were
Allowed to establish mutual funds. State Bank of India established the first non-UTI
Mutual fund - SBI Mutual Fund - in November 1987. This was followed by Canbank
Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund,
GIC Mutual Fund and PNB Mutual Fund. These funds helped in enlarging the
investorCommunity and the investible funds. From 1987 to 1992-93, the assets under
management Increased from Rs. 6,700 cores. to Rs. 47,004 crores nearly seven times.g
this period, investors showed a marked interest in mutual funds, allocating a larger part of
their savings to investments in the funds (3.1% in 1988 and 5.2% in 1992).UTI was still
the largest segment of the industry, with about 80% market share.

Phase 3 (1993-1996): Emergence of Private Funds

A new era in the mutual fund industry began in 1993 with the permission
granted For the entry of private sector funds. This gave the Indian investors a broader
choice of fund families and increasing competition to the existing public sector funds.

Quite significantly, foreign fund management companies were also allowed to

operate mutual funds, most of them coming into India through their joint ventures with
Indian promoters. These private funds have brought in with them the latest product
innovations, investment management techniques and investor - servicing technology that
make the Indian mutual fund industry today a vibrant and growing financial
intermediary.During the year 1993-94, five private sector mutual funds launched their
schemes, Followed by six others in 1994-95. Initially, mobilisation of funds by the
private mutual funds was slow. But, this segment of the fund industry began to witness
much greater investor confidence in due course. One influencing factor was the
development of SEBI’s Regulatory framework for the Indian mutual fund industry. Yet
another important factor Has been the steadily improving performance of several fund
houses. Investors in India now clearly saw the benefits of investing through mutual funds
and became discerning and selective

Phase 4 (1996-99): Growth and SEBI Regulation

Since 1996, the mutual fund industry in India saw tighter regulation and
higher Growth. It scaled new heights in terms of mobilisation of funds and number of
players. Deregulation and liberalization of the Indian economy had introduced
competition and Provided impetus to the growth of the industry. Finally, most investors-
small or large- started showing interest in mutual funds.

Measures were taken both by SEBI to protect the investor, and by the
Government to enhance investors’ returns through tax benefits. A comprehensive set of
regulations for all mutual funds operating in India was introduced with SEBI (Mutual
Fund) Regulations, 1996. These regulations set uniform standards for all funds. The
erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes. Similarly, the
budget of Union Government in 1999 took a big step in exempting all mutual fund
dividends from income tax in the hands of investors. Both the 1996 regulations and the
1999 Budget have been considered of historic importance, given their far-reaching impact
on the fund industry.During this phase, both Securities and Exchange Board of India and
Association of Mutual Funds in India (AMFI) launched Investor Awareness Programmes
Aimed at educating the investors about investing through mutual funds. AMFI published
its booklet titled “Making Mutual Funds Work for you- the Investors’ guide”.

Phase 5 (1999-2004): Emergence of a Large and Uniform Industry

The other major development in the fund industry has been the creation of a level
playing field for all mutual funds operating in India. This happened in February 2003,
when the UTI act was repealed. Unit Trust of India no longer has a special legal status as
a trust established by an Act of Parliament. Instead, it has also adopted the same structure
as any other fund in India - a Trust and an Asset Management Company. UTI Mutual
Fund is the present name of the erstwhile Unit Trust of India. While UTI functioned
under a separate law of Indian parliament earlier, UTI Mutual Fund is now under the
SEBI’s (Mutual Funds) Regulations, 1996 like all other mutual funds in India. UTI
Mutual Fund is still largest player in the Indian fund industry. All SEBI compliant
schemes of the erstwhile UTI are under its charge. All new schemes offered by UTI
Mutual Fund are SEBI approved. Other schemes (US 64, Assured Return Schemes) of
Erstwhile UTI have been placed with a special undertaking administered by the

Government of India. These schemes are being gradually wound up.The

emergence of a uniform industry with the same structure, operations and regulations
makes it easier for distributors and investors to deal with any fund house in India. 1999
marked the beginning of a new phase in the history of the mutual fund industry in India, a
phase of significant growth in terms of both amounts mobilised frominvestors and assets
under management.

UTI was re-organised into two parts; one, The Specified Undertaking; two, the UTI
Mutual Fund. In the above tables, UTI Mutual Fund’s data is included under ‘public
sector’.Between 1999 and 2005, the size of the industry has doubled in terms of assets
under management which have gone from about Rs. 68,000 cores to over Rs. 1,50,000
crores. Within the growing industry, the relative market shares of different players in
terms of amount mobilised and assets under management have also undergone changes.

Phase 6 (From 2004 onwards): Consolidation and Growth

The industry has lately witnessed a spate of mergers and acquisitions, most recent
ones being the acquisition of schemes of Alliance Mutual Fund by Birla Sun Life Mutual
Fund, Sun F & C Mutual Fund by Principal Mutual Fund and PNB Mutual Fund by
Principal Mutual Fund. At the same time, more international players continue to enter
India, including Fidelity, one of the largest funds in the world. The stage is set now
forGrowth through consolidation and entry of new international and private sector
players. As at the end of March 2006, there were 29 funds.

Types of Mutual Funds

As mutual fund industry of India is continuously changing as impact of emerging
trend, several industry bodies are also investing. Yet, according to a report by Boston
Analytics, less than 10% of our households consider mutual funds as an investment
avenue. As assumption of the investors that make investment in mutual fund as
considered as a high-risk option. However, as it is one of the best options to the investors
to make investment in mutual fund. As investment of mutual funds shows that investment
in mutual fund is one of the most suitable and flexible, comprehensive modes of
investments that can accommodate various types of investor needs. Now days different
types of mutual funds and categories are designed to allow investors to choose a scheme
based on the risk. They are willing to take investments amount, their desire goals, as
investment term, etc.
 As important mutual fund schemes under the under mentioned three categories
based on their tenure on maturity period of mutual fund investment:

I. Open-Ended - As this is scheme has allows investors to buy or sell units at any time.
So, such fund does not have fixed maturity date.

1. Debt/ Income – Under this schemes fund have to investments in the fixed income
instrument or schemes like debentures or bond, government securities or other debt
instruments. Such schemes, a major part of the investable fund are channelized towards
debentures, government securities, and other debt instruments. Further, such fund has got
fixed income and such funds have low risk as compared investment in equity fund.

2. Money Market/ Liquid – Some investors have thing to grab opportunity in the short
period. Such investors have surplus funds they have to make investment in the money
market to get opportunity looking to utilize their surplus funds in short term instruments.
It is possible that to get maximum return in short period.

3. Equity/ Growth – As proverb in English like that high risk high return. Those
investors to think in respect to maximize return. They offered risky investment like
equities mutual fund. As possible appreciation capital and also get more return in
coming future.

3. i. Index Scheme – Now new engineering in the capital market various schemes have
to come in market it is one of the index schemes. However, most schemes of mutual
firstly come in the foreign capital market and same concepts in Indian capital market
apply for the grab various opportunity indices like Nifty, Sensex, etc.

3. ii. Sectoral Scheme – As diversification fund has to investment in different sector. As

result sectors funds investment it may possible risk averse and get more return.

This scheme provides a relatively high risk-high return opportunity within the equity
space.

Sectors are such as invested in a specific sector like pharmaceuticals, infrastructure, IT.,
or other, etc. or money market segments of the capital market like large caps, mid caps,
etc.

3. iii. Tax Saving – Some investors turn towards investments in mutual fund as a twice
object like one is tax saving and another to earn some return on investment. As result of
these investors has got good opportunity to earn income. Such fund has lock in period 3
years. Tax saving mutual funds called Equity Linked Savings Schemes (ELS).

4. Balanced - Under This scheme the fund‟s investment in equity growth fund as well
as debt fund. So, the both opportunity of market can be avail by the investor‟s. While
funds offer such schemes at that time all information well in advance given in the offers
documents.

II. Closed-Ended - In India, this type of scheme has contrary of open ended fund. In
these schemes investors has buy or made investment in the initial period and has
maturing period. As initial launch period known as the NFO (New Fund Offer) period

1. Capital Protection – Under this schemes prime objective to protect principal amount
of investment. So, the funds have to be investment in less risky funds. As result of that
return should be get very minimum or fixed income as specified.

2. Fixed Maturity Plans (FMPs) – As FMPs, name suggests that specified maturity
period in offered documents. Such schemes like debt an instrument, so the return has got
earning through the interest components like coupons of the scrip‟s or instruments.
Moreover, such fund does not have any trading. Similar, such funds have charges
minimum cost by professionals.

III. Interval – The combination of open and closed ended schemes, such schemes permit
investors to trade units at specified intervals pre-defined intervals.

Industry AUM:

Assets under management (AUM) is the total market value of assets that an investment
company or financial institution manages on behalf of investors. Assets under
management definitions and formulas vary by company.
Some financial institutions include bank deposits, mutual funds and cash in their
calculations. Others limit it to funds under discretionary management, where the investor
assigns responsibility to the company.
Assets under management describes how much of investors’ money an investment
company control. Investments are held in various investment vehicles including mutual
funds, exchange-traded funds (ETFs) and hedge funds. Products are managed by
a venture capital company, brokerage company or portfolio manager.
AUM may also be an important consideration for new fund investors and wealth
management services comprehensively. Products with higher AUM can typically have
higher market trading volumes which positively influence the liquidity of a product.
For investors, AUM may also be an important consideration for fees. Investment products
can charge management fees that are a fixed percentage of assets under management.
Financial advisors also often charge clients by their total assets under management.
Therefore, it is important for investors to understand AUM, both from an investment
company and personal wealth perspective, and to understand how it is calculated.
TOP 10 AMC’S with AUM:
  HDFC Mutual Fund - 3,06,840.72 Cr

 ICICI Prudential Mutual Fund – 2,93,338 Cr

 Aditya Birla Sun Life Mutual Fund - 2,41,107 Cr

 Reliance Mutual Fund – 2,36,255 Cr

 SBI Mutual Fund - 2,05,273 Cr

 UTI Mutual Fund - 1,53,364 Cr

 Kotak Mahindra Mutual Fund - 1,19,800 Cr

 DSP Mutual Fund - 86,255 Cr

 IDFC Mutual Fund - 71,388 Cr

 Franklin Templeton Mutual Fund – 51,907 Cr

STP (Systematic Transfer Plan):

STP is a variant of SIP. STP is essentially transferring investment

from one asset or asset type into another asset or asset type. The transfer happens
gradually over a period.

Systematic Transfer Plan is of two types; fixed STP, and capital

appreciation STP. A fixed STP is where investors take out a fixed sum from one
investment to another. A capital appreciation STP is where investors take the profit part
out of one investment and invest in the other.

Example of STP
Suppose you have invested 5 lakhs in debt funds because you thought market is trading
at close to peak. The PE ratio of the market is 25 and hence you think that fall is
imminent. Hence you invested your money in debt fund. Now assume that your
prophecy was right and the market indeed fell to a level where you can make entry to
equities. However, there are overall weak sentiments which may push market further
down. What is the best strategy in this case?

You can take out 5 lakhs out of debt fund and invest in equity oriented mutual fund.
The risk is that if the market goes further down, your fund value will also fall. This is a
risky strategy. Moreover, if the weak sentiments prolong for some time, you will lose
on the opportunity cost because your money is stuck with an investment which has
gone down in value.

There is other way which can really minimize the risk. The way is called STP. In this
case, you can withdraw a fixed amount from your debt fund investment and invest in
equity -oriented fund. This can go on for several months depending upon your choice.
For example, if you want to continue STP for 3 years, you can direct your fund to do
this and the fund will withdraw money automatically from your debt fund and put into
equity- oriented fund every month. What this strategy achieves is that it essentially acts
as a defence against any adverse movement of the market.

STT (Securities Transaction Tax):

Securities Transaction Tax (STT) is a tax levied on the transaction value of

stocks, derivatives and mutual funds when you transact in these instruments. It only
applies to transactions made through a stock exchange or directly with an AMC (fund
house), in case of mutual funds. It does not cover private, off-market transactions. With
regards to mutual funds, STT is levied only on the sale of equity and balanced funds. It
is not levied on debt funds. STT is levied on direct and regular plans of mutual
funds. No STT is levied on mutual fund NFOs (New Fund Offers).

STT was introduced in 2004 along with abolition of long

term capital gains tax (LTCG) on stocks and equity mutual funds. LTCG was
reintroduced by the 2018 Budget, but STT has still been retained.

How is STT deducted:

STT is imposed on the redemption of mutual funds by you. It is imposed on

transactions directly with an AMC or through a stock exchange. How-ever the latter
route faces a lower rate of STT.

For example, let’s assume that you invested Rs 1 lakh in an equity

fund. The fund’s NAV grew and your investment became Rs 1.5 lakh in value. At this
point, you decided to redeem your MF units. At the time of redemption, the concerned
AMC will deduct Rs 0.0010% or just Rs 1.5 towards STT. A higher rate of 0.025%
applies to non-delivery based mutual fund sales such as intra-day sales. These types of
transactions which involve a purchase and sale in such a short span of time that you do
not actually take delivery of the mutual fund units. They are rarely done by retail
investors.

Redemption:

A redemption is the return of an investor's principal in a fixed-

income security, such as a preferred stock or bond, or the sale of units in a mutual fund.
Fixed-income securities are redeemed at par value on the maturity date, and called
bonds are redeemed at a premium price above par. On the other hand, mutual fund
investors redeem mutual funds shares, and the some mutual funds have
minimum holding periods and back-end sales charges.
How Mutual Fund Redemptions Work

The redemption of fund shares from a mutual fund company must

occur within seven days of receiving a request for redemption from the investor. Some
mutual funds may have redemption fees attached, in the place of a back-end load. A
back-end load is a sales charge, and the charge is a percentage of the fund's value,
which declines over time. If the investor holds the fund shares for a longer amount of
time, the back-end load charged when the shares are redeemed is smaller. Investments
in mutual funds are designed for individuals who buy and hold fund shares for the long
term, and selling fund shares after a short period of time results in higher costs to the
investor. The investor pays sales charges and annual fees for professional portfolio
management and the fund's accounting and legal costs.
Because mutual funds are priced only once per day, investors wishing to
redeem their money must place the order before the market's close, or the time set by
the mutual fund. Money is redeemed at the fund's net asset value (NAV) for the day,
which is calculated as the sum of the value of the assets of a fund less its liabilities.
Once the sale goes through, clients typically receive their funds including any gains via
check or direct deposit to their bank account.

SIP (Systematic Investment Plan):

Systematic Investment Plan or “SIP in mutual funds” is a method to invest fixed
amounts of money into a mutual fund on a periodic basis. Generally, investments are
done on the daily, weekly, monthly or quarterly basis on a fixed date. Monthly and
quarterly SIP in mutual funds is the most common ones however; daily SIP in mutual
funds are also becoming popular.

So how does a SIP in mutual funds work? Well, units of mutual fund will be bought
into the investor’s account for a fixed amount and on a fixed date (chosen by the
individual) at the available price or Net Asset Value (NAV).

Example: Sujith has opted for the SIP option of Rs 2000 on every 5th of the month.
Thus, on 5th of every month, mutual fund units worth Rs 2000 will be bought in
Sujith’s account.

Equity diversified funds are the preferred mutual funds however, many fund houses
offer SIPs on Debt or Balanced funds as well.

One Time Investment:

A lump sum investment refers to investing the entire amount in one go.
Lump sum investments are mostly undertaken by experienced investors who choose to
time markets and invest in asset classes that are likely to appreciate in the long term.
This improves the chances of an investment being profitable in the long term.

SWP (Systematic Withdraw Plan):

If you want a pension after retirement, SWP will be the ideal way for it from
Mutual Fund route.
 Systematic Withdrawal Plan allows you to withdraw your accumulation at a
fixed date of your choice. Furthermore, you can request for withdrawal of a prefixed
amount at fixed intervals. The amount withdrawn is treated as redemption of units at
the applicable NAV. You can opt for cheque payment or direct credit to your bank
account. After retirement, you can set up a SWP from your accumulation, which will
act as a regular pension.

Benefits of Mutual Funds:

Benefits of Mutual Funds

An investor can invest directly in individual securities or indirectly through a financial

intermediary or professional expert. Globally, mutual funds have established themselves
as the means of investment for the retail investor.

01. Professional management: Generally, the process of investment in capital market is

very critical. Hence, need of expert or to hire the services of expert. A further inventor
does not have the knowledge at stock market. They need assist expert or hire the expert.
However, while investor have to make investment under mutual fund, at such time the
expert of professional to take care while to make investment. Moreover, to „hire the
services‟ of an expert but it is more difficult to identify a real expert. Professional
managers have requisite skills and experience to analyse the performance and potential
growth of companies.
02. Portfolio diversification: As minimize of risk of the fund, that funds have to be
make diversification of various sectors. As result of these investors has get more return
and fund become safe. Diversification reduces the riskiness of the investments.

03. Reduction in transaction costs: While investors have to make directly investments
in shares market at that time they have to requires paying more cost. As compared to
make an investment in the mutual fund.

04. Liquidity: When investors to sell or redemption the mutual fund unit .They can
easily encase their investment. As compared to direct investment in share market.

05. Convenience: Investing in mutual fund reduces paperwork, saves time and makes
investment easy.

06. Flexibility: Under Mutual funds investment various schemes that funds have
transferred one funds to another as desired by investor. So, as get more benefits to the
share holders.

07. Tax benefits: Under the mutual funds it is income earn though dividend and interest
it is exempt from income tax and also TDS of the Income Tax Act.

08. Transparency: As provided in the SEBI guidelines to provide all information and
declare all information. All the concern has to get clear information for investment
decision and so on.

09. Stability to the stock market: Amount investment in mutual fund that investment in
stock market and money market. It is fluctuation continues in stock market it is effect of
some extent on invested mutual fund but it is result both positive and negative. Moreover,
the funds have handle by professional expert they can absorb any losses in the stock
market and continue investment. In addition they get more liquidity.

10. Equity research: As more professionals expert have to continue doing work in
mutual fund industry. They continue probe in era of investment. They actual have
research information and those benefits had to get AMC.

Mutual Fund Drawbacks

(1) No guarantee of Return – There are three issues involved:
(a) All Mutual Funds cannot be winners, as continuously fluctuation in stock market
simultaneously international impact on capital market. Some investment funds
underperform the benchmark index i.e. it may not even perform well.

(b) Even stock market perform better but if the fund ‟s investment risk averse fund or
risk free investments. Then it is not possibility to get good return or gain to the investors.

(c) If, mutual fund investment not take care and investors also not interested to return.
On contrary the principal amount of mutual would be decrease in value.

(2) Diversification – A mutual fund helps to create a diversified portfolio. Though

diversification minimises risk, it does not ensure maximizing returns. The return that
mutual funds offer is less than what an investor can achieve.

(3) Selection of Proper Fund – It may be easier to select the right share rather than the
right fund. For stocks, one can base his selection on the parameters of economic, industry
and company analysis. In case of mutual funds, past performance are the only criteria to
fall back upon. But past cannot predict the future.

(4) Cost Factor – Mutual Funds carry a price tag. Fund Managers are the highest paid
executives. As investing in mutual fund, as required to pay entry load and while leaving
or redemption fund to pay for exit load. Such costs reduce the return or gain from
mutual fund. Such fees paid to the AMC are in no way related to performance.

(5) Unethical Practices – Even though Laws regulation and Act some unfair practice is
going on it actual suffer by the common man i.e., investors of mutual funds and
substantially decrease value or lessen return or gain

Advantages of Mutual Funds

If mutual fund is emerging as the favourite investment vehicle, it is because of the Many
advantages it has over other forms and avenues of investing, particularly for the investor
who has limited resources available in terms of capital and ability to carry out detailed
research and market monitoring. The following are the major advantages offered by
mutual funds to all investors.

Portfolio Diversification
Mutual Funds normally invest in a well-diversified portfolio of securities. Each investor
in a fund is a part owner of all of the fund’s assets. This enables him tohold a diversified
investment portfolio even with a small amount of investment, which would otherwise
require big capital.

Professional Management
Even if an investor has a big amount of capital available to him, he benefits from the
professional management skills brought in by the fund in the management of the
investor’s portfolio. The investment management skills, along with the needed research
into available investment options, ensure a much better return than what an investor can
manage on his own. Few investors have the skills and resources of their own to succeed
in today’s fast-moving, global and sophisticated markets

Reduction/Diversification of Risk
An investor in a mutual fund acquires a diversified portfolio, no matter how small his
investment. Diversification reduces the risk of loss, as compared to investing directly in
one or two shares or debentures or other instruments. When an investor invests directly,
all the risk of potential loss is his own. While investing in the pool of funds with other
investors, any loss on one or two securities is also shared with other investors. This risk
reduction is one of the most important benefits of a collective investment vehicle like the
mutual fund

Reduction of Transaction Costs

What is true of risk is also true of the transaction costs. A direct investor bears all the
costs of investing such as brokerage or custody of securities. When going through a fund,
he has the benefit of economies of scale; the funds pay lesser costs because of larger
volumes, a benefit passed on to its investors.

Liquidity
Often, investors hold shares or bonds they cannot directly, easily and quickly sell.
Investment in a mutual fund, on the other hand, is more liquid. An investor can
liquidatethe investment by selling the units to the fund if it is an open-ended fund, or by
selling the units in the stock market if the fund is a close-ended fund, since close - ended
funds have to be listed on a stock exchange. In any case, the investor in a close - ended
fund receives the sale proceeds at the end of a period specified by the mutual fund or the
stock exchange.

Safety
Mutual Fund industry is well-regulated and all funds are registered with SEBI which lays
down rules to protect the investors. Thus, investors also benefit from the safety of a
regulated investment environment

Convenience and Flexibility

Mutual fund management companies offer many investor services that a direct market
investor cannot get. Within the same fund family, investors can easily transfer/switch
their holdings from one scheme to another. They can also invest or withdraw their money
at regular intervals in most open - ended schemes. Mutual fund investment process has
been made further more convenient with the facility offered by funds for investors to buy
or sell their units through the internet or email or using other communication means. The
investors also get updated market information from the funds. The information about the
schemes is also shared by the fund managers in a transparent manner, with all material
facts required by regulators to be disclosed to the investors.

Disadvantages of Investing through Mutual Funds

While the benefits of investing through mutual funds far outweigh the disadvantages, an
investor and his advisor will do well to be aware of a few shortcomings of using the
mutual fund as an investment vehicle.

No Control over Costs

An investor in a mutual fund has no control over the overall cost of investing. He pays
investment management fees as long as he remains with the fund, albeit in return for the
professional management and research. Fees are usually payable as a percentage of the
value of his investments, whether the fund value is rising or declining. A mutual fund
investor also pays fund distribution costs, which he would not incur in direct investing.
However, this shortcoming only means that there is a cost to obtain the benefits of mutual
fund services, and this cost is often less than the cost of direct investing by the investors.
Besides, the regulators have prescribed a ceiling on the maximum expenses that the fund
managers can charge to the schemes, thus limiting the investor’s expense of investing
through mutual funds.

No Tailor-made Portfolio
Investors who invest on their own can build their own portfolio of shares, bonds And
other securities. Investing through funds means he delegates this decision to the fund
Managers. High -net-worth individuals or large corporate investors may find this to be a
constraint in achieving their objectives. However, most mutual funds help investors
overcome this constraint by offering families of schemes- a large number of different
schemes within the same fund. In each scheme there are various plans and options. An
investor can choose from different investment schemes/plans/options and construct an
investment portfolio that meets his investment objectives.

Managing a Portfolio of Funds

Availability of a large number of options from mutual funds can actually mean too much
choice for the investor. He may again need advice on how to select a fund to achieve his
objectives, quite similar to the situation when he has to select individual shares or bonds
to invest in. Fortunately, India now has a large number of AMFI registered and tested
fund distributors and financial planners who are capable of guiding the investors.

MUTUAL FUND COMPANIES IN INDIA:

The concept of mutual funds in India dates back to the year 1963. The era between 1963
and 1987 marked the existence of only one mutual fund Company in India with RS. 67bn
assets under Management (AUM), by the end of its monopoly era, the unit trust of India
(UTI). By the end Of the 80s decade, few other mutual fund companies in India took their
position in mutual fund Market.

The new entries of mutual fund companies in India were SBI mutual fund, canara mutual
fund, Punjab national bank mutual fund, Indian bank mutual fund, bank of India Mutual
fund. The succeeding decade showed a new horizon in Indian mutual fund industry. By
the end of 1993, the total AUM of the industry was RS. 470.04 bn. The private sector
funds started penetrating the fund families. In the same year the first mutual fund
regulations came into Existence with re-registering all mutual funds except UTI. The
regulations were further given a revised shape in 1996. Kothari pioneer was the first
private sector mutual fund company in India which has now merged with Franklin
Templeton. Just after ten years with private sector player’s penetration, the Total assets
rose up to RS. 1218.05 bn. Today there are 44 mutual fund companies in India.
Axis asset management company ltd. www.axismf.com
Baroda pioneer asset management company ltd www.barodapioneer.in
Birla sun life asset management company ltd www.birlasunlife.com
BNP Paribas asset management India pvt ltd www.bnpparibasmf.in
BOI AXA investment managers pvt ltd www.boiaxa-im.com
Canara robeco asset management company ltd www.canararobeco.com
Daiwa asset management (India) pvt ltd www.daiwafunds.in
Deutsche asset management (India) pvt. Ltd. www.dws-india.com
DSP Blackrock investment managers pvt. Ltd. www.dspblackrock.com
Edelweiss asset management ltd www.edelweissmf.com
Escorts asset management ltd www.escortsmutual.com
Fil fund management private ltd fidelity.co.in
Franklin Templeton asset management (India) pvt
www.franklintempletonindia.com
ltd.
Goldman sachs asset management (india) pvt ltd. www.gsam.in
HDFC asset management company ltd www.hdfcfund.com
HSBC asset management (India) pvt. Ltd. www.assetmanagement.hsbc.com/in
ICICI prudential asset management company ltd www.icicipruamc.com
IDBI asset management ltd. www.idbimutual.co.in
IDFC asset management company ltd www.idfcmf.com
India info line asset management co. Ltd. www.iiflmf.com
India bulls asset management company ltd. www.indiabullsmf.com
ING investment management (India) pvt. Ltd. www.ingim.co.in
JM financial asset management pvt limited www.jmfinancialmf.com
JPMorgan asset management India pvt. Ltd. www.jpmorganmf.com
Kodak Mahindra asset management company ltd. www.kotakmutual.com
L&T investment management ltd. www.lntmf.com
LIC numeral mutual fund asset management
www.licnomuramf.com
company ltd.
Mirage asset global investments (India) pvt. Ltd. www.miraeassetmf.co.in
Morgan Stanley investment management pvt.ltd. www.morganstanley.com/indiamf
www.motilaloswal.com/assetmanage
Motilal oswal asset management company ltd.
ment/
Peerless funds management co. Ltd. www.peerlessmf.co.in
Pine bridge investments asset management
www.aiginvestments.co.in
company (India) pvt. Ltd.
Pramerica asset managers private ltd www.pramericamf.com
Principal PNB asset management co. Pvt. Ltd. www.principalindia.com
Quantum asset management company private ltd. www.quantumamc.com
Reliance capital asset management ltd. www.reliancemutual.com
Religare asset management company private ltd. www.religaremf.com
Sahara asset management company private ltd www.saharamutual.com
SBI funds management private ltd. www.sbimf.com
Sundaram asset management company ltd www.sundarammutual.com
Tata asset management ltd www.tatamutualfund.com
Taurus asset management company ltd www.taurusmutualfund.com
Union kbc asset management company pvt ltd www.unionkbc.com
UTI asset management company ltd www.utimf.com

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

Securities and Exchange Board of India (SEBI)

The Government of India constituted Securities and Exchange Board of India, by an Act
of Parliament in 1992, the apex regulator of all entities that ei there raise funds in the
capital markets or invest in capital market securities such as shares and debentures listed
on stock exchanges. Mutual funds have emerged as an important institutional investor in
capital market securities. Hence they come under the purview of SEBI. SEBI requires all
mutual funds to be registered with them. It issues guidelines for all mutual fund
operations including where they can invest, what investment limits and restrictions must
be complied with, how they should account for income and expenses, how they should
make disclosures of information to the investors and generally act in the interest of
investor protection. To protect the interest of the investors, SEBI formulates policies and
regulates the mutual funds. MF either promoted by public or by private sector entities
including one promoted by foreign entities is governed by these Regulations. SEBI
approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody. According to SEBI Regulations,
two thirds of the directors of Trustee Company or board of trustees must be independent.

Association of Mutual Funds in India (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association
in India was generated to function as a non-profit organization. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August, 1995. AMFI is an apex body of
all Asset Management Companies (AMC) which has been registered with SEBI. Till date
all the AMCs are that have launched mutual fund schemes are its member. It functions
under the supervision and guidelines of its Board of Directors. Association of Mutual
Funds India has brought down the Indian Mutual Fund Industry to a professional and
healthy market with ethical line enhancing and maintaining standards. It follows the
principle of both protecting and promoting the interests of mutual funds as well as their
unit holders.

The objectives of Association of Mutual Funds in India the Association of Mutual Funds
of India works with 30 registered AMCs of the country. It has certain defined objectives
which juxtaposes the guidelines of its Board of Directors. The objectives are as follows:

 This mutual fund association of India maintains high professional and ethical
standards in all areas of operation of the industry.

 It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by any
means connected or involved in the field of capital markets and financial services
also involved in this code of conduct of the association.

 AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual
fund industry.

 Associations of Mutual Fund of India do represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual
Fund Industry.

 It develops a team of well qualified and trained Agent distributors. It implements

a program of training and certification for all intermediaries and other engaged in
the mutual fund industry.

 AMFI undertakes all India awareness program for investors in order to promote
proper understanding of the concept and working of mutual funds.
 At last but not the least association of mutual fund of India also disseminate
information on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.
LITERATURE REVIEW

Sikidar