INTRODUCTION:
Mutual funds have been a significant source of investment in both
government and corporate securities. It has been for decades the
monopoly of the state with UTI being the key player, with invested
funds exceeding Rs.300 bn. (US$ 10 bn.). The state-owned insurance
companies also hold a portfolio of stocks. Presently, numerous mutual
funds exist, including private and foreign companies. Banks - mainly
state-owned too have established Mutual Funds (MFs). Foreign
participation in mutual funds and asset management companies is
permitted on a case by case basis.
A Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal. The money thus collected is then
invested in capital market instruments such as shares, debentures and
other securities. The income earned through these investments and
the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund
is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. The flow chart below describes
broadly the working of a mutual fund:
OBJECTIVE
The objectives of the study on this topic are as follows:
Primary objective:
• To study the influence and role of mutual funds in managing a
portfolio.
• To analyze the various risk-return characteristics of Mutual funds
and attempt to establish a link between the demographics (age,
income, employment status etc), risk tolerance of investors.
• To analyze the performance of Top Mutual Funds in India.
Secondary objectives:
• Understanding the various characteristics of different Mutual
funds.
• Understanding the Investment pattern of AMC’s
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• To get additional clients for the company and making them
aware about the benefits of mutual funds.
• To come up with recommendations for investors and mutual fund
companies in India based on the above study.
SCOPE
The project covers the financial instruments mobilizing in the Indian
Capital market in particular the Mutual Funds.
The mutual funds analysed for their performance are determined over
a period of 5 years fluctuations and returns. The elements taken into
consideration for choosing some of the top funds is on the basis of
their respective sharpe , beta, ratio, .
The project shelves some of the top asset management companies
operating in India , segregated on the basis of their performance over
a period of time. Scooping further the project inundates the success
ratio of the funds administered by top AMC’s.
LIMITATIONS
A well managed portfolio of various individual scripts which is rare,
would not help to draw a line of difference between portfolio managed
through mutual funds and the former.
The median used to choose the top AMC’s and the mutual funds to be
analysed is relative and personalized and need not be accepted
industry wide. Inaccessibility to certain information and data relating to
the project on account of it being confidential.
Market volatility would affect individuals perception which would rather
not be likely the way it is expressed, thus resulting in a very relative
data.
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METHODOLOGY
A thorough study of literature on the mutual fund industry both in India
and abroad will be done. Different measures will be adopted to
understand and evaluate the risks and returns of funds efficiently and
effectively.
An extensive study of various articles and publications of SEBI, AMFI
and government of India and other agencies with respect to the
demographics of the population of the country and their investing
pattern will be a part of the methodology adopted. The project will be
carried out mainly through two researches:
Primary research:
• Field visits
• Meeting with the clients
Secondary research:
• Internet.
• AMFI book.
• Fact sheets of various mutual fund houses.
Portfolio Management
The goal of Portfolio Management is to assemble various securities
and other assets into portfolios that address investor needs and then
to manage these portfolios so as to achieve investment objectives. The
investor’s needs are defined in terms of risk, and the portfolio manager
maximizes return for investment risk undertaken.
Portfolio Management consists of three major activities: 1) Asset
Allocation, 2) Shifts in weighting across major assets classes, and 3)
Security selection within asset classes. Asset allocation can best be
characterized as the blending together of major asset classes to obtain
the highest long-run return at the lowest risk. Managers can make
opportunistic shifts in asset class weightings in order to improve return
prospects over the longest-term objective.
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