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Mutual fundsPresented by IRRFAN BHAT ANDNADEEMULLAH.
SCOPE:* Scope of Mutual Fund Automatic  diversification at various levels.  Access to financial markets  worldwide. Access...
OVERVIEW OF MUTUAL FUND•A Mutual Fund is a trust that pools the savings of a number ofinvestors who share a common financi...
HISTORY OF MUTUAL FUND•   First Phase – 1964-87 -Unit Trust of India (UTI) was established on 1963 by    an Act of Parliam...
CONT….•   Third Phase – 1993-2003 (Entry of Private Sector    Funds) Kothari Pioneer (now merged with Franklin    Templeto...
ADVANTAGES OF INVESTING IN A MUTUAL FUND•   Affordability     A mutual fund invests in a portfolio of assets, i.e. bonds, ...
•TransparencyBeing under a regulatory framework, mutual funds have to disclosetheir holdings, investment pattern and all t...
RISKS ASSOCIATED WITH MUTUAL FUNDS   Professional Management- Some funds don’t perform in the market,    as their managem...
TAXING IN MUTUAL FUND•   Since, April 1, 2003, all dividends, declared    by debt-oriented mutual funds (i.e. mutual    fu...
•   Section 2(42A):     Under Section 2(42A) of the Act, a unit of a mutual fund is    treated as short-term capital asset...
•   Section 112: Under Section 112 of the Act,    capital gains, not covered by the exemption    under Section 10(38), cha...
BANKING          INSTITUTIONS:Banking institutions form an indispensable     part of modern country. They perform varied f...
TYPES OF BANKING INSTITUTIONS:01.Commercial banks02.Investmet banks03.Exchange banks04.Cooperative banks05.Land developmen...
1. Commercial Banks:The banks, which perform all kinds of banking business andgenerally finance trade and commerce, are ca...
4. Exchange Banks:Exchange banks deal in foreign exchange and specialisein financing foreign trade. They facilitate intern...
6. Central Bank:Central bank is the apex institution, which controls, regulates andsupervises the monetary and credit syst...
NON BANKING SECTORNon banking Financial       Residuary Non-banking                Non-banking company(NBFC)              ...
FINANCIAL                INSTITUTIONSA non-bank financial institution (NBFI) is afinancial institution that does not have ...
CONTENTS:1 Role in Financial System1 Growth2.Stability2. Types of Non-Bank FinancialInstitutions1. Risk Pooling Institutio...
CONT:NBFIs supplement banks by providing theinfrastructure to allocate surplus resources toindividuals and companies with ...
Bhat irrfan
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Bhat irrfan

  1. 1. Mutual fundsPresented by IRRFAN BHAT ANDNADEEMULLAH.
  2. 2. SCOPE:* Scope of Mutual Fund Automatic diversification at various levels. Access to financial markets worldwide. Access to all major asset classes. A broad selection of fund types. A diversity of investing styles. Professional management. Elimination of the need for individuals to perform detailed and ongoing securities analysis. The option of making
  3. 3. OVERVIEW OF MUTUAL FUND•A Mutual Fund is a trust that pools the savings of a number ofinvestors who share a common financial goal. The money thuscollected is then invested in capital market instruments such asshares, debentures and other securities.•The income earned through these investments and the capitalappreciation realized is shared by its unit holders in proportion tothe number of units owned by them. Thus a Mutual Fund is themost suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managedbasket of securities at a relatively low cost.
  4. 4. HISTORY OF MUTUAL FUND• First Phase – 1964-87 -Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. . The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.• Second Phase – 1987-1993 (Entry of Public Sector Funds) -SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92
  5. 5. CONT….• Third Phase – 1993-2003 (Entry of Private Sector Funds) Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores.• Fourth Phase – since February 2003 -In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities.
  6. 6. ADVANTAGES OF INVESTING IN A MUTUAL FUND• Affordability A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.5000/-.• Diversification We must spread our investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.).• Variety Mutual funds offer a tremendous variety of schemes.• Professional Management Qualified investment professionals who seek to maximize returns and minimize risk monitor investors money.
  7. 7. •TransparencyBeing under a regulatory framework, mutual funds have to disclosetheir holdings, investment pattern and all the information that can beconsidered as material, before all investors. SEBI acts as a watchdogand safeguards investors’ interests• LiquidityA distinct advantage of a mutual fund over other investments is thatthere is always a market for its unit/ shares. Its easy to get one’smoney out of a mutual fund. Redemptions can be made by filling aform attached with the account statement of an investor.
  8. 8. RISKS ASSOCIATED WITH MUTUAL FUNDS Professional Management- Some funds don’t perform in the market, as their management is not dynamic enough to explore the available opportunity in the market. Costs – The biggest source of AMC income is generally from the entry & exit load which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. Dilution - Because funds have small holdings across different companies, high returns from a few investments often dont make much difference on the overall return. Taxes - when making decisions about your money, fund managers dont consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale.
  9. 9. TAXING IN MUTUAL FUND• Since, April 1, 2003, all dividends, declared by debt-oriented mutual funds (i.e. mutual funds with less than 50% of assets in equities), are tax-free in the hands of the investor. A dividend distribution tax of 12.5% (including surcharge) is to be paid by the mutual fund on the dividends declared by the fund. Long-term debt funds, government securities funds (G-sec/gilt funds), monthly income plans (MIPs) are examples of debt- oriented funds.
  10. 10. • Section 2(42A): Under Section 2(42A) of the Act, a unit of a mutual fund is treated as short-term capital asset if the same is held for less than 12 months.• Section 10(38): Under Section 10(38) of the Act, long term capital gains arising from transfer of a unit of mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid to the appropriate authority. Short-term capital gains on equity-oriented funds are chargeable to tax @10%, Long-term capital gains on debt-oriented funds are subject to tax @20% of capital gain after allowing indexation benefit or at 10% flat without indexation benefit, whichever is less.
  11. 11. • Section 112: Under Section 112 of the Act, capital gains, not covered by the exemption under Section 10(38), chargeable on transfer of long-term capital assets are subject to following rates of tax:• Resident Individual & HUF -- 20% plus surcharge, education cess.• Partnership firms & Indian companies -- 20% plus surcharge.• Foreign companies -- 20% (no surcharge). Capital gains will be computed after taking into account the cost of acquisition as adjusted by Cost Inflation Index, notified by the central government.
  12. 12. BANKING INSTITUTIONS:Banking institutions form an indispensable part of modern country. They perform varied functions to meet the demands in various sections of the society.
  13. 13. TYPES OF BANKING INSTITUTIONS:01.Commercial banks02.Investmet banks03.Exchange banks04.Cooperative banks05.Land developmentbank06.Saving bank07.Central bank
  14. 14. 1. Commercial Banks:The banks, which perform all kinds of banking business andgenerally finance trade and commerce, are called commercialbanks. Since their deposits are for a short period, these banksnormally advance short-term loans to the businessmen andtraders and avoid medium-term and long-term lending.2. Industrial Banks:Industrial banks, also known as investment banks, mainlymeet the medium-term and long-term financial needs of theindustries. Such long-term needs cannot be met by thecommercial banks, which generally deal with short-termlending.The main functions of the industrial banks are:(a) They accept long-term deposits.(b) They grant long-term loans to the industrialists to enablethem to purchase land, construct factory building, purchaseheavy machines
  15. 15. 4. Exchange Banks:Exchange banks deal in foreign exchange and specialisein financing foreign trade. They facilitate internationalpayments through the sale, purchase of bills ofexchange, and thus play an important role in promotingforeign trade.05. Cooperative Banks:Cooperative banks are operated on the cooperative lines. InIndia, coopera-tive credit institutions are organised under thecooperative societies law and play an important role in meetingfinancial needs in the rural areas.06. Saving Banks:The main purpose of saving banks is to promote saving habitsamong the general public and mobilise their small savings. InIndia, postal saving banks do this job. They open accounts andissue postal cash certificates.
  16. 16. 6. Central Bank:Central bank is the apex institution, which controls, regulates andsupervises the monetary and credit system of the country.Important functions of the central bank are:(a) It has the monopoly of note issue;(b) It acts as the banker, agent and financial adviser to the state;(c) It functions as the bank of central clearance, settlement andtransfer; and(d) It acts as the controller of credit. Besides these functions,Indias central bank, i.e., the Reserve Bank of India, also performsmany developmental functions to promote economic developmentin the country.
  17. 17. NON BANKING SECTORNon banking Financial Residuary Non-banking Non-banking company(NBFC) company(RNBC Non-financial company Insurance, Stock broking 01.Equipment leasing. Housing Finance 02.Hire-purchase. 03.Loan company. 04.Mutual benefit company i.e. Nidhi company 05.Miscellaneous 06.Non-banking company, i.e. chit fund company
  18. 18. FINANCIAL INSTITUTIONSA non-bank financial institution (NBFI) is afinancial institution that does not have a fullbanking license or is not supervised by a nationalor international banking regulatory agency.. NBFIs facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashiers check issuers, check cashing locations, payday lending, currency exchanges, and microloan
  19. 19. CONTENTS:1 Role in Financial System1 Growth2.Stability2. Types of Non-Bank FinancialInstitutions1. Risk Pooling Institutions2. Contractual Savings Institutions3. Market Makers4. Specialized Sectoral Financiers
  20. 20. CONT:NBFIs supplement banks by providing theinfrastructure to allocate surplus resources toindividuals and companies with deficits. Additionally,NBFIs also introduces competition in the provision offinancial services. While banks may offer a set offinancial services as a packaged deal, NBFIsunbundle and tailor these service to meet the needsof specific clients. Additionally, individual NBFIs mayspecialize in one particular sector and develop aninformational advantage. Through the process ofunbundling, targeting, and specializing, NBFIsenhances competition within the financial servicesindustry.

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