A

RESEARCH REPORT

ON

A STUDY ON THE GROWTH OF MUTUAL FUNDS

SUBMITTED TO

SUBMITTED BY:

Apoorv Kaushik (77122315875)

NMIMS
(Narsee Monjee Institute of Management Studies)

Post Graduate Diploma in Business Management – Finance

MBA PROGRAMME

2022 - 24
 ACKNOWLEDGEMENT

I am pleased to submit this project titled "A Study on the Growth of Mutual
funds" to the Department of Finance.

I would like to express my gratitude to my college and the Department of

Finance, as well as our director, for providing me with the opportunity to work
on this real-time project.

“It is often said that no project report can be completed without the help and
support of others, and this one is no exception.”

I am deeply grateful to my parents and family members, whose unwavering

moral and financial support has been invaluable to me.

I would also like to take this opportunity to sincerely thank all my professors.
Their teachings have provided me with the conceptual understanding and clarity
of thought that have significantly contributed to the completion of this project.
 INDEX

CHAPTERS CONTENTS PAGE NO.

1. INTRODUCTION 4

2. OBJECTIVES 5

3. HISTORY OF MUTUAL FUNDS 6

INDUSTRY

4. RESEARCH METHODOLOGY 7

5. ANALYSIS AND FINDINGS 8 -10

6. CONCLUSIONS 11

6. LIMITATIONS 12

7. REFERENCES 13
 INTRODUCTION

Mutual funds are investment trusts that gather savings from investors and
allocate these funds into a range of diversified financial instruments, in line with
the goals specified in the trust deed. The aim is to minimize risk while
maximizing income and capital growth, which is then distributed to the fund's
members. A mutual fund functions as a corporation, where the fund manager is
responsible for professionally managing the investors' capital and delivering
returns, after accounting for reasonable management fees. Essentially, a mutual
fund is a collective pool of money contributed by investors, which is then
invested according to a defined objective. Ownership of the fund is shared
among all investors, with each person’s share based on the amount they
contributed.

Investors can contribute either directly or through brokers, and the fund's money
is invested in various financial instruments depending on the scheme's
objectives. Any income generated—whether from selling securities or from
their capital appreciation—is distributed to investors in proportion to their share
in the fund. The investments are divided into units, and the value of these units
is reflected in the Net Asset Value (NAV), which is calculated by subtracting
the fund's liabilities from the market value of its assets.

A significant trend in the mutual fund industry is the rapid growth of foreign-
owned mutual fund companies, while mutual funds from nationalized banks and
smaller private sector firms have seen a decline. Leading mutual fund
companies in India include Reliance Mutual Fund, UTI Mutual Fund, ICICI
Prudential Mutual Fund, HDFC Mutual Fund, and Birla Sun Life Mutual Fund.

The Indian mutual fund industry has changed significantly over the past few
years because of these two factors: it has become more accessible for people
across all social classes to invest their money through mutual funds than ever
before, and people are starting earlier than ever before so that they can take
advantage of better returns from investing early on instead of waiting until later.
 OBJECTIVES

Mutual funds are a popular investment option for small investors, offering the
opportunity to invest in a diversified and professionally managed portfolio at a
relatively low cost. A mutual fund is a trust that pools the savings of multiple
investors who share a common financial objective. The objectives of this study
are as follows:

1. To examine the growth trends of Indian mutual funds.

2. To assess the performance of selected schemes using performance

metrics such as the Sharpe ratio, Jensen's alpha, and Treynor measure to
evaluate risk-adjusted returns.

3. To analyze the performance of selected equity growth schemes and

compare it with the benchmark to determine if there is a consistency in
returns.

4. To compare the risk and return of equity and debt funds over a 10-year
period to evaluate their long-term performance.

5. To explore the relationship between age, education, gender, marital

status, occupation, and income with investors' preferences for mutual
funds.

6. To investigate if there is any correlation between selected factors and

investors' perceptions of mutual funds.

7. To propose recommendations for strengthening mutual funds in India.

 History of the Mutual Fund Industry

The mutual fund industry began to grow rapidly in 1963. Below is a

chronological overview of key events:

 1963: The government established the Unit Trust of India (UTI).

 1964: UTI launched its first scheme, the Unit Scheme.

 1987: The entry of public sector fund houses, with SBI Mutual Fund
becoming the first PSU fund house.

 1993: The emergence of private sector fund houses, with Franklin

Templeton (formerly Kothari Pioneer) becoming the first private sector
fund house.

 1993-2003: This decade saw significant developments, including SEBI

assuming regulatory control over mutual funds. During this period, the
industry experienced numerous mergers and acquisitions, and foreign
funds were introduced.

 2009: The entry load was removed.

 2012: A portion of the Total Expense Ratio (TER) was allocated for
investor education. Additionally, the Rajiv Gandhi Equity Savings
Scheme (RGESS) was launched.

 2013: The Securities Transaction Tax (STT) on equity funds was

reduced, and a direct plan for mutual fund schemes was introduced.

 2014: The definition of long-term investment for debt mutual funds was
revised to 36 months (from the previous 12 months). The Section 80C
exemption limit was increased to Rs 1.5 lakh.

 2017: Tax benefits for RGESS were discontinued, and SEBI

recategorized mutual funds, requiring fund houses to implement these
changes.
 RESEARCH METHODOLOGY

One of the primary purposes of research methodology is to help identify

problems, collect and analyze the necessary information, and provide alternative
solutions. It also plays a crucial role in gathering vital data needed by top
management to support effective decision-making, both for routine and critical
decisions.

Research methodology is a systematic approach to solving research problems,

often regarded as the science of conducting research in a structured and
scientific manner.

Primary Data: No primary data was used in this research.

Secondary Data: Secondary data refers to information that has already been
collected and is readily available from other sources. The sources of secondary
data for this research include newspapers, news channels, websites, magazines,
books, libraries, and other projects.

The scope of the project primarily focuses on various categories of mutual

funds, such as equity funds, debt funds, and other types of funds. The main
objective of this project is to gain a deeper understanding of mutual funds and
their functioning. This includes exploring the history, growth, and future
prospects of the mutual fund industry. Additionally, the study aims to
comprehend different mutual fund schemes, focusing on prominent funds in
India and their specific schemes, such as equity, income, and balanced funds, as
well as the returns associated with these schemes.
 ANALYSIS & FINDINGS

Analysis of Preferred Financial Products of the Respondents: There could be

various reasons for an investor to invest in a particular type of financial product.
A study of the current investments held by the respondents will provide insight
on the various financial products preferred by investors.

Investment Avenues No. of Respondents Percentage Shared

Mutual Funds 37 51.4%

Banks And Fixed Deposits 30 41.7%

Public Provident Fund 10 13.9%

National Savings Certificate 5 6.9%

Post Office Savings 13 18.1%

Government Securities 16 22.2%

Life Insurance 18 25%

Corporate Bonds and Debentures 9 12.5%

Real Estate 13 18.1%

Gold Silver 30 41.7%

As shown in the table, the majority of respondents (51.4%) hold mutual funds,
followed by bank and fixed deposits (41.7%), gold and silver (41.7%), and life
insurance (25%). Other financial product holdings were comparatively lower.

Findings:

 A wide range of mutual fund products are available in the Indian market.

 A mutual fund is a financial vehicle that pools money from many

investors to invest in securities such as stocks, bonds, money market
instruments, and other assets.

 Mutual funds are managed by professional money managers who allocate

the fund's assets and aim to generate capital gains or income for the
investors. The fund's portfolio is structured to align with the investment
objectives outlined in its prospectus.

 The financial services market is highly competitive, attracting individuals

with varying risk appetites and preferences for the markets they invest in.
 Mutual funds have been identified as a key factor driving up the market
prices of securities.

 Based on respondents' input, it is evident that most people are investing in

mutual funds, believing it to be one of the best available investment
options.

 The majority of investors prefer investing through the Systematic

Investment Plan (SIP) method.

Growth of Mutual Fund Industry Expected in India in the Current Year

and the Forthcoming Years

In 2022, it is estimated that there will be around 1.88 crores registered mutual
fund investors in India as against 1.86 crore households with an annual income
of more than Rs 10 lakh per annum. The number of mutual funds being offered,
compared to previous years, is also increasing at an exponential rate.
A few years ago, only three major funds were being offered by all the leading
financial institutions like HDFC MF and ICICI Prudential MF etc., whereas today
there are nearly 50 different schemes available with every financial institution
offering a wide range of products under various categories such as equity funds,
balanced funds etc., which makes it difficult for investors to choose from among
them.

However, despite this competition among mutual funds which has increased
manifold over the years, their performance has been consistently good over time
and investors have benefitted immensely from them.

The industry has grown rapidly over the last few years, with a growth rate of
almost 40% per year. In 2022, it is expected that this rate will remain at around
30%.

The main reason for this growth is the increase in demand for financial products
among investors. This has led to an increase in the number of people investing
their money in mutual funds which have been able to meet this demand.

In addition to this, there is also an increased demand for equity-oriented mutual

funds as people become interested in investing more money into stock markets.
This trend is expected to continue into 2022 as well with no significant changes
expected in terms of investment options available on exchanges or other methods
by which investors can invest their money into stocks.
 Conclusion

The mutual fund industry in India has experienced remarkable growth over the
years. Just five years ago, the industry had around 200 funds, and today, it has
expanded to over 1000.

This growth can be attributed to the rising demand for investment options from
investors. As people increasingly invest in sectors such as real estate, gold, and
commodities, they have become more inclined to invest in mutual funds.

Furthermore, many individuals have recognized that mutual funds offer greater
flexibility compared to traditional investment options like bank deposits and
fixed deposits. For instance, if you wish to withdraw funds from your mutual
fund account, you can do so without the concern of losing value due to inflation
or declining interest rates.
 LIMITATIONS

• The study depend only secondary data. Secondary Data has a

disadvantage that we cannot control who the data is collected from. It also
restricts the researcher to may have difficulty obtaining information
specific to his or her needs.

• The study is limited to the different schemes available under the mutual
funds selected.

• The study is limited to selected mutual fund schemes.

• The lack of information sources for the analysis part .

 REFERENCES

Websites :

 Groww
 Google
 IEM EDU
 NISM