VARIOUS SEGMENTS OF MUTUAL FUNDS IN INDIA

VARIOUS SEGMENTS OF MUTUAL FUNDS INdiversification of the portfolio. Further, the
INDIAInternational mutual funds also help in capitalizing
INTRODUCTION-on some of the world's best opportunities.
Mutual fund in India is a kind of collectiveInternational mutual funds can offer its investors
investment that is managed professionally. Inwith high returns if chosen properly. One of the
Mutual fund in India, the money is collected from asignificant features of the International mutual
large number of investors and then it is investedfunds are that it accrues profit when some
in bonds, stocks, and various other securitiesmarkets are rising and others are falling in the
The fund manager of Mutual fund in India collectsinternational market. A strict vigil on the foreign
the interest income which is then distributedcurrencies and world markets is needed while
among the individual investors on the basis of theinvesting in the International mutual funds.
number of units that they hold. Mutual fund's valueSECTOR FUNDS-
of a share is calculated on a daily basis and isThe Sector Funds are those types of mutual
known as per share Net Asset Value (NAV).funds which accumulate stocks of particular
Classification of Mutual Funds in India has beensector.
done on the basis of their investment objectiveIn other words sector funds invest in a single
and structure. Classification of Mutual Funds intype of industry, like Information Technology,
India has be done into main types such as IncomeTelecommunication, Pharmaceuticals,
Funds, Sector- Specific Funds, Large Cap Funds,Infrastructure, etc.
Fixed- Income Funds, Interval Funds, Closed- EndThe Sector Funds are structured in this particular
Funds, and Tax Saving Funds. Income Funds inmanner in order to take advantage of growth of
India are a kind of mutual fund whose aim is toparticular type of industry. The Sector Funds can
provide to the investors with steady and regularoffer tremendous profit to the investor if the
income. They usually invest their principal infunds are carefully chosen. The authorities to the
securities such as corporate debentures, bonds,Sector Funds in India are the Association of
and government securities.Mutual Funds of India (AMFI), which operates in
Sector- Specific Funds in India are funds thataccordance with the laid down guidelines of the
make investments in specified sectors only. TheySecurities and Exchange Board of India (SEBI).
give importance to one sector only such asMoreover, investments in Sector Funds offer tax
pharmaceuticals, software, infrastructure, andexemptions to the investors (Chapter III of the
health care. Large Cap Funds in India are a kind ofIncome Tax Act, 1961). With the growth of the
mutual fund that makes investment in the sharesIndian industries the financial markets have
of large blue chip companies. Fixed- Income Fundsundergone tremendous transformation. The rise
in India makes investment in debt securities thatof different sectors has necessitated structuring
have been issued either by the banks,of sector specific funds to attract substantial
government, or companies. They are also knownamount of money for the growth of a specific
as income funds and debt funds.sector in India.
Interval Funds in India are a combination of bothFUNDS OF FUNDS-
the open and close ended funds. They offer theAmongst the wide variety of mutual funds are
investors flexibility for they can be sold andavailable in India, fund of funds is a type of mutual
repurchased at the period of time that has beenfund wherein, the corpus accumulated is invested
predetermined. Closed- End Funds in India are ain types of other mutual funds. Further, the most
kind of mutual fund that has a maturity periodsignificant feature of fund of funds is that it holds
that has been specified and which usually variesshares of a variety of mutual funds. Furthermore,
from three to fifteen years. Tax Saving Funds inFunds of funds are structured in such a way so
India offer tax rebates to the investor under theas to attain a more diversified approach than
Section 88, Income Tax Act. They are alsowhat the other types of mutual funds offer.
known as equity- linked savings scheme.Generally, the Fund of Funds costs higher than
INTERVAL FUNDS-any other type of mutual fund. This is due to the
Interval Funds in India combine the characteristicsfact that the cost of Fund of Funds involves part
of both the close ended funds and open endedof the expense fees charged by the component
funds. This means that Interval Funds in India canfunds.
be repurchased and sold at the time that hasINCOME FUNDS-
been predetermined. Interval Funds in India areIncome Funds in India usually invest their principal
usually repurchased every six or twelve monthsin companies that give high payouts of dividends
or as has been unveiled in the annual report andand also in securities of fixed income such as
prospectus of the fund. Interval Funds in India arecorporate debentures, government securities, and
sold and repurchased at the prices that arebonds. The advantage of Income Funds in India is
related to the Net Asset Value (NAV)that it provides regular income to the investor
Mutual Fund companies that have launchedeither on a monthly or quarterly basis. Further the
Interval Funds in India are:advantage of Income Funds in India is that it also
- Birla Sun Life Mutual Fundprovides stability of capital to the investor. Income
- Prudential ICICI Mutual FundFunds share prices are not fixed for they have a
- ABN-AMRO Mutual Fundtendency to grow with the fall in interest rates
TAX SAVINGS FUND-and fall with the rise of the interest rates. The
Tax Saving Funds in India offer to the investorsbonds that are there in Income Funds are usually
rebates in taxes under the Income Tax Act,of the investment grade. The other bonds are of
Section 88 and they are also known assuch credit quality that they assure the protection
equity-linked savings schemes. Tax Saving Fundsof the capital.
in India usually have a period of lock- which isMutual fund companies that have launched Income
generally of three years. As a result of this, theFunds in India are:
manager of the fund is not concerned about- Prudential ICICI Mutual Fund
factors such as the pressures of redemption,- HDFC Mutual Fund
performance of the fund during a short time, and- Reliance Mutual Fund
thus does his job by keeping in view the long- Birla Sun Life Mutual Fund
term goal. The fund manager of the Tax Saving- Franklin Templeton India Mutual Fund
Funds in India invests the money in instruments- Tata Mutual Fund
that are related to equity.SECTOR SPECIFIC FUNDS-
Tax Saving Funds in India are suitable for thoseSector- Specific Funds in India are those funds
investors who want to increase their investmentsthat make investments only in those industries or
and also want to benefit from the rebates insectors that have been specified in the
taxes. The advantage of Tax Saving Funds inprospectus of the funds. Sector- Specific Funds in
India is that they grant the investors anIndia usually make investments in sectors such as
opportunity to make investments in an avenuepower, pharmaceuticals, petroleum, and
that is market- linked and at the same time claimtechnology. The amount of returns that Sector-
benefits in taxes. The dividends that are earned inSpecific Funds in India give depends totally on the
Tax Saving Funds in India are tax free.performance of the industries or sectors in which
Major Tax Saving Funds in India are:investments have been made. Sector- Specific
- Franklin India Tax ShieldFunds in India give very high returns but at the
- HDFC Tax Saversame time they are also very risky in comparison
- Sundaram Tax Saverto the funds that are diversified. This is the
- HDFC Long Term Advantagereason that the investors that have invested in
- Prudential ICICI Tax PlanSector- Specific Funds in India need to carefully
- Birla Equity Planwatch the operation of those industries or
- UTI Equity Tax Savingssectors and then at the correct time make an
- Tata Tax Saving Fundexit.
- Magnum Tax GainMain mutual fund companies that have launched
FIXED INCOME FUND-Sector- Specific Funds in India are:
Fixed- Income Funds in India are also known as- Prudential ICICI Mutual Fund
debt funds or income funds. Fixed- Income Funds- Birla Sun Life Mutual Fund
in India make investments in debt securities that- Franklin Templeton India Mutual
have been issued either by the banks,CLOSE ENDED FUNDS-Closed- End Funds in India
government or companies. The debt securities inhave a fixed period of maturity which can vary
which Fixed- Income Funds in India makesbetween three to fifteen years. Closed- End
investments are also known as commercialFunds in India can be subscribed to only during the
papers of deposit or treasury bills if the duration isperiod of time that has been specified. Investors
less than one year and in case the duration iscan make investments in Closed- End Funds in
more than one year then the debt securities areIndia either during the period of public offer or
known as bonds or debentures. The issuer of thebuy the funds from the stock exchanges.
debt securities has the obligation to pay theIn Closed- End Funds in India, the number of
interest and principal on the time schedule thatshares that are sold in the public offer is fixed and
has been fixed.after this the selling and buying of the units are
Fixed- Income Funds in India have a face valuepossible only in the stock exchanges. Certain
and it is on this that the calculation of interestClosed- End Funds in India repurchase the units
takes place. Investors who are investing in Fixed-periodically at related prices of Net Asset Value
Income Funds in India are mainly concerned with(NAV) in order to provide the investors an exit
the time period, maturity value, rate of interestroute.
payment, rate of interest, and face value. Fixed-Major Closed- End Funds in India are:
Income Funds in India are usually held till maturity.- UTI Wealth Builder
- Sundaram BNP Paribas Mutual Fund- HDFC Long-Term Equity
- Franklin Templeton India Mutual Fund- Standard Chartered Enterprise Equity
- Fidelity Fund Management- Franklin India Smaller Companies
- Reliance Mutual Fund- Birla Long-Term Advantage
OPEN ENDED FUND-- Tata Capital Builder
Open- End Funds in India is such that the- ING Vysya C.U.B.
investors can sell as well as buy all through out- Prudential ICICI Fusion
the year. The investors sell and buy units of- Tata Equity Management
Open- End Funds in India at the related prices ofLARGE CAPITAL FUNDS-
Net Asset Value (NAV) each day. An investor canLarge Cap Funds in India are a kind of mutual fund
buy Open- End Funds in India either from athat looks for appreciation of capital by investing
brokerage house or through the mutual fundmainly in the shares of companies that are big
company. Open- End Funds in India have no fixedblue chip. The big blue chip companies in which
date of maturity. The main advantage of Open-Large Cap Funds in India make their investments
End Funds in India is that it offers liquidity to thehave above- average potential for growth in
investors for they can sell the units wheneverearnings. The large cap companies in which Large
they need the money.Cap Funds in India makes investments are usually
Major Open- End Funds in India are:companies that have a market capitalization that
- UTI Gold Exchange Traded Fundis more than Rs. 1000 crores. The main
- Standard Chartered Premier Equity Fundadvantage of Large Cap Funds in India is that
- Sahara Mid- Cap Fundthey are considered to be of low return and low
- Lotus India Tax Planrisk category. This ensures that the investments
- Reliance Tax Saver (ELSS) Fundof the investors are relatively safe.
- Canara Robeco Equity Tax Saver- 93Major Large Cap Funds in India are:
- DSP Merrill Lynch Tax Saver Fund- Franklin India Blue Chip
- Tata Life Sciences and Technology Fund- DSPML Top 100 Equity
- JM Arbitrage Advantage Fund- HDFC Top 200
- Kotak Gold ETFEQUITY FUNDS-
MID CAP FUNDS-Equity funds also known as stock mutual funds
Mid-cap funds are a special type of mutual fundare a special type of mutual fund wherein, the
wherein, the corpus accumulated is invested incorpus accumulated through this fund is invested
small or medium sized companies. In the absencein stocks of public companies. Holding of stocks or
of any standardized definition or definiteequity in a company means having part ownership
classification of small or medium sized company,or equity in that particular company. The main
each mutual fund classifies small and medium sizedobjective of holding stocks of a company is to
companies according to its own policies. In general,reap profit on investment in such stocks after the
companies with a market capitalization up to Rscompany makes a profit in its business.
500 crores are regarded as small and companiesThese stocks are generally classified as small,
with a market capitalization over Rs 500 croresmedium, and large sized stocks, which is further
but below Rs 1,000 cores are defined as mediumdefined according to their individual market
sized by the mutual fund industry. Mid-cap fundscapitalization. The equity managers are trained
bear high risk factors and thus offer high returnsprofessionals who format and pick stocks for
in case of positive movements of the indexes.investments. The formation of equity portfolios
Further, opportunity of investment in Mid-capare generally made either by applying
funds is high due to low identification factor in thevalue-approach or by growth-approach. In the
market. Another important feature of thesevalue-approach method the stocks with lesser
Mid-Cap Funds is that they tend to grow in sizevalue than its competitors are picked and in the
as more investors gets involved. The net effectgrowth-approach method the stocks with higher
is that, huge amount of money are investedgrowth opportunity than its competitors or
against few stocks. Experts are of the opinionmarkets are picked for investments. In another
that investments in Mid-Cap Funds should followtype of approach, both the value and growth
investment patterns of sectoral funds and onebased stocks are picked for investments.
should not focus only on these funds alone.GROWTH FUNDS-
Further, investment in Mid-Cap Funds should haveGrowth Funds are special type of mutual funds,
long term perspective.the objective of which is to achieve capital
With the rise of large caps the heavy weightappreciation by investing in growth stocks.
investors like the mutual funds and ForeignGenerally, the corpus accumulated in the Growth
Institutional Investors are increasingly investing inFunds is invested in stocks of those companies,
mid cap funds. However investment in Mid-capwhich are registering prominent earnings or
funds should be undertaken with caution sincerevenue growth. In other words, the growth
these tend to be volatile because of the high riskfunds focus on the fastest-growing companies in
involved.the market. One of the significant features of the
BALANCED FUND-Growth fund is that it offers tremendous growth,
Balanced funds also known as the hybrid fundswhen the financial market is bullish. Market trend
wherein, the corpus accumulated is invested inshows that investments in these growth funds
combination of common stock, preferred stock,are generally made by aggressive investors.
bonds and short-term bonds. In other words, it isEXCHANE TRADED FUNDS-
a combination of many stocks and bonds, which isOne of the striking features of the Exchange
structured to strike a balance of income andTraded Funds is that they are not volatile like
capital appreciation. This combination is essentiallyother mutual funds and thus remain much more
done to minimize the risk involved in suchstable during bearish market. Further, Exchange
investments. Thus, the balanced funds provide theTraded Funds cost less and are transparent.
investors with an opportunity to invest in a singleFurthermore, these funds can be traded and as
mutual fund that offers growth and income at thewell as diversified simultaneously.
same time. The stocks meet the growthMONEY MARKET FUNDS-
requirements and the bonds meet the incomeMoney Market Funds is a special type of mutual
requirements. Further, this combination helps tofund that invests in the money market
negate any fall in the value of the stocks in theinstruments only. The Money market instruments
financial market.that are being used to structure the money
NO LOAD FUND-he mutual funds in India aremarket mutual funds are highly liquid debt
broadly classified as Load funds and No load Fund.instruments like the treasury bills. These Money
Out of the basic two types of mutual funds - themarket funds generally bear less risk and are
investment in No Load Funds does not attractregarded as the safest type of mutual funds. The
any commission for such investments. In othermain objective of investment in a money-market
words, No Load Funds can be bought withoutfund is to safeguard principal investment while
paying any commission. Another most significantearning a modest return on such investments. In
feature of the No Load Funds is that it can beother words, investments in a Money-market
held for a longer term and the proceeds aremutual fund are similar to a high-yield bank
generally reinvested further.account with a decent risk factor. Caution should
Furthermore, the profit accrued by investing in Nobe exercised with respect to the interest rate
Load Funds shows the exact profit earned onthat is being offered while investing in a
such investments. The Chapter III of the Incomemoney-market fund.
Tax Act, 1961 provides tax exemption onREGIONAL MUTUAL FUNDS-
investment on No Load Funds. With the rise ofThe Regional Mutual Fund as the name suggests,
the Indian mutual fund market, the popularity ofis a special type of mutual fund, wherein the
no load funds has increased considerably much toinvestment made in such funds are confined to
the satisfaction of the fund managers.the securities from a specified geography. In
VALUE FUND-other words, the investments made in the
Amongst the wide variety of mutual funds areRegional Mutual Fund are dependent on the
available in India, value funds is a type of mutualgeographical origin of the fund. The most
fund wherein the main focus is on the safety ofimportant feature of this fund is that it invests in
the investment and not on the growth of theportfolio of companies operating in a particular
investment made on such funds. Value fundsgeographical area. The main objective of investing
represent stocks of mature companies, whosein the Regional Mutual Funds is to take leverage of
growth has become stagnant. Further, thesethe geographical growth of that particular area.
stocks of the value funds utilize their earnings toThese funds are created on regions which are
pay off dividends to the investors.supposed to undergo tremendous modernization.
One of the typical characteristics of the valueThe Regional Mutual Funds picks up securities that
fund is that, they generate income from theare not confined to geographical criteria.
dividends and they also offer long term growthINDEXED FUNDS-
from capital appreciation. The returns on ValueThe Index funds are those types of funds which
funds are more conservative in nature. Anotheraccumulates stocks of each and every company
important feature of the value funds is that, theythat make up a particular index. The performance
invest in stocks of companies that have lesserof the Index fund thus depends on the
appeal to the mainstream investors and theperformance of that particular index. Investments
stocks have lost its sheen. The value funds inin Index funds are cheaper and are regarded as
India operate as per the guidelines of according topassive form of investments. Another advantage
the guidelines laid down by the Association ofof investing in the Index funds is that their values
Mutual Funds of India (AMFI) and Securities andare so high that most of the other funds fail to
Exchange Board of India (SEBI). The value fundssupersede the value of the Index funds. The
offer tax exemption on value fund investmentsmost popular type of Index funds is the Standard
according to Chapter III of the Income Tax Act,& Poor's 500. Investments in index funds are
1961.subject to income tax exemptions.
INTERNATIONAL MUTUAL FUND-CONCLUSIONS:-
International mutual funds are a very special typeThere are several types of mutual funds in India;
of mutual fund, wherein investments are beinginvestors are so many options to invest in the
made in the non-domestic securities marketsfund which are preferable to them.
across the world. The popularity of theReference:
International mutual funds has gone up in theMutual fund India .
recent years since it provides a high level of