Member in Group:

1.Mantasha kazi
2.Ayesha shaikh
3.Shamina khan
4.Afsar khan
Topic: Mutual Fund
Mutual Fund:
 Introduction:
A mutual fund is a company that pools money from many
investors and invests the money in securities such as stocks,
bonds, and short-term debt. The combined holdings of the
mutual fund are known as its portfolio. Investors buy shares in
mutual funds.
 Generally speaking, there are four broad types of mutual
funds:
 Equity mutual funds.
 Bond mutual funds.
 Short-term debt mutual funds.
 Hybrid mutual funds.
History in India:
 A strong financial market with broad participation is
essential for a developed economy. With this broad
objective India’s first mutual fund was establishment in
1963, namely, Unit Trust of India (UTI), at the initiative of
the Government of India and Reserve Bank of India ‘with
a view to encouraging saving and investment and
participation in the income, profits and gains accruing to
the Corporation from the acquisition, holding,
management and disposal of securities’.
A Detailed History Of Mutual Funds In India:
 Since its inception, the industry has witnessed significant
developments and constantly working on broadening the
investment opportunities for investors. Below is listed a
detailed history of mutual funds in India.
 1st Phase (1964 – 1987)
The beginning of the history of mutual funds in India is marked
by the establishment of the Unit Trust of India in 1963. UTI
dominated the entire phase and, in 1964, introduced its
flagship scheme, which grabbed the attention of the public for
its safety and assured returns. This first phase primarily laid
the foundation of mutual funds in India and encouraged the
participation of small investors in capital markets.
2nd Phase (1987 – 1993)
In the second phase, the public sector banks, along with various financial
institutions, took entry into the mutual fund market. SBI Mutual Fund,
which was established in 1987, stands as the first non-UTI mutual fund in
the history of mutual funds in India. The second phase also marks the
beginning of new different schemes by UTI as well as other mutual funds,
which opened various options for investors.
 3rd Phase (1993 – 2003)
The third phase entertains a significant turning point in the history of
mutual funds in the country. The government opened the industry of
mutual funds for private players in 1993, which led to the entrance of
several private-sector AMCs.
The phase saw increased competition among various mutual fund
companies and rapid growth. Moreover, the introduction of SIPs
(Systematic Investment Plans) in 1993 Laos brought about a revolution in
the approach concerning investment, making it more systematic and
affordable for retail investors.
4th Phase (February 2003 – April 2014)
Further regulatory reforms are witnessed by the fourth phase brought about
by SEBI for improving transparency and strengthening the protection of the
investors. There was an increased focus on awareness campaigns and
education of the investors.
The introduction of the New Fund Offer (NFO) process and consolidation of
different schemes of mutual funds assist in streamlining the industry and
enhancing the experience of the investors.
5th Phase (Current Phase – Since May 2014)
The current phase, or the fifth phase, experiences rapid growth in the mutual
fund industry with the introduction of the Direct Plan option that offers
investors a cost-effective way to invest in mutual funds. The industry also saw
growth in the adoption of various digital platforms for investing and mutual
fund portfolio management.
Advantages of Mutual Funds:
 Mutual funds come with many advantages, such as advanced portfolio
management, dividend reinvestment, risk reduction, convenience, and fair
pricing.
There are many reasons why investors choose to invest in mutual
funds with such frequency. Let's break down the details of a few:
 Advanced Portfolio Management:
When you buy a mutual fund, you pay a management fee as part of your
expense ratio, which is used to hire a professional portfolio manager
who buys and sells stocks, bonds, etc. This is a relatively small price to
pay for getting professional help in the management of an investment
portfolio.1
 Dividend Reinvestment:
As dividends and other interest income sources are declared for the
fund, they can be used to purchase additional shares in the mutual
fund, therefore helping your investment grow.
 Risk Reduction (Safety):
Reduced portfolio risk is achieved through the use
of diversification, as most mutual funds will invest in anywhere
from 50 to 200 different securities—depending on the focus.
Numerous stock index mutual funds own 1,000 or more
individual stock positions.
 Convenience and Fair Pricing:
Mutual funds are easy to buy and easy to understand. They
typically have low minimum investments and they are traded
only once per day at the closing net asset value (NAV). This
eliminates price fluctuation throughout the day and
various arbitrage opportunities that day traders practice.
Different schemes:
 Different Types of Mutual Fund Schemes In India:
 Mutual Funds are investment instruments that pool money from multiple
investors to invest in a diversified portfolio of assets. Asset Management
Companies (AMCs) offer mutual fund (MF) schemes as a key investor
offering. The objective is to service a variety of investor needs. MF
schemes have well-defined attributes that cater to these needs.
Categorising these scheme attributes helps investors to group schemes in
four different ways:
1.Based on Asset Class:
The return and risk profile for MF schemes is largely defined by the
underlying asset class the MF scheme invests in. There are four basic
asset class combinations:
 Equity Funds: Invest mainly in equities
 Fixed Income/Debt Funds: Invest in debt and money market
instruments.
 Commodity Funds: Invest in commodities such as gold or silver
Hybrid Funds: Invest in a combination of different asset classes
2.Based on whether Active or Passive:
Mutual fund schemes invest in a portfolio of securities. The securities in
the MF scheme’s portfolio are selected based on the MF scheme’s asset
class category. For instance, equity MF schemes invest mainly in equity-
oriented securities; fixed income schemes invest in debt securities. For
active schemes, the MF scheme’s portfolio manager, based on the research
by backed by a team of research professionals and market circumstances,
actively decides which securities to buy and which securities to sell. In
other words, for active schemes, the portfolio manager takes active bets/
decision. The goal in active fund management is to outperform (seek
better returns) the scheme’s benchmark index (such as NIFTY 50 or Sensex
for equities).
For passive schemes, the portfolio manager has a relatively less-active role
to play. The goal for passive schemes is to track the benchmark index as
closely as possible. Passive schemes endeavour to invest in securities that
are part of an underlying index (for example NIFTY 50 or Sensex) in the
same proportion as the index, to the extent possible.
 3.Based on sector or theme:
This categorisation is mainly for equity-oriented fund schemes. As noted
earlier, equity MF schemes invest mainly in equities. Sector funds look to invest
in a particular sector. For instance, the Pharma theme-based MF schemes
invest mainly in pharmaceutical companies (securities). Banking sector
schemes will invest predominantly in banking companies.
Thematic funds are similar to sector funds. MF schemes in the thematic
category invest in securities that belong to a group of securities that share
traits. For example, MNC funds (multinational companies) invest in MNC
stocks. However, thematic schemes have a broader market to invest in
compared to Sectoral Schemes.
4. Open-ended and Closed-ended:
This type of MF scheme classification is based on the availability of units for
purchase.
Open-ended Funds: Investors can buy and sell units on a continuous basis.
Close-ended Funds: Units are issued at the time of a New Fund Offer (NFO).
After the NFO period, investors can buy or sell units on the stock exchanges.
Close-ended schemes can be equity or debt schemes.
Interval Funds: These funds are a mix of open-ended and closed-ended funds,
that can be bought or sold during the New Fund Offer and post that at
designated intervals; intervals are pre-decided time periods.