Vous êtes sur la page 1sur 31



Knowledge is an experience gained in life, it is the choicest possession, which should not be shelved but happily shared with others I wish to pay gratitude to my guide Ms. Zarna shah and the guide from Kotak Mutual Funds , Mr. Karan Bhatia for providing me assistance and helping me in completing my project. I am highly obliged for their support throughout the training.


MBA is a stepping stone to the management carrier and to develop good manager it is necessary that theoretical knowledge must be supplemented with the exposure to real environment. Theoretical knowledge just provides the base and its not sufficient to produce a good manager thats why practical knowledge is important. Therefore the research project is an essential requirement for the student of MBA. This research project not only helps the student to utilize his skills in learning the realities but also provides a chance to the organization to find out talent among the budding managers in the very beginning. In accordance with the requirement of MBA course I have prepared project on the topic Comparative analysis of top 5 large cap mutual funds vs. Kotak 50 . The main objective of the research project was to study the best scheme of 5 different mutual funds and make comparison with the scheme Kotak 50. The information regarding the project research was collected through the factsheets and use of Internet.



A mutual fund is made of money that is pooled together by a large no. of investors who give their money to a fund manager to invest in a large portfolio of funds and stocks. Mutual fund is kind of a trust that manages the pool of money collected from various investors and it is managed by a team of fund managers for a small fee. A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of investors/unit holders, in equity shares, government securities, bonds, call money markets etc and distributes the profits. Investments in securities are spread among a wide cross-section of industries and sectors, thud risk is reduced. The main risk involved in mutual funds is the market risk. However, the company specific risks are largely eliminated due to professional fund management.

Characteristics of a mutual fund

1. Shares of mutual funds are bought from the fund itself or from the broker of the fund; they cant be bought on a secondary market like NYSE or NASDAQ. 2. The ownership of mutual funds is in the hands of investors.

3. The investors share in the profit is denominated by units. The value of the units change with the changes in the portfolio value, everyday. The value of one unit of investment is called net asset value (NAV). 4. Redemption is a feature which allows shares of a mutual fund to be sold back by the investor to the fund at their approximate NAV minus exit loads. 5. The investment portfolio of mutual funds typically are managed by separate entities known as investment advisors that are registered with SEC.

Advantages of a mutual fund

a) Professional Management : Professional money managers research, select and monitor the

performance of the securities the fund purchase. b) Diversification : Spreading your investment across a wide range of companies and industry sectors can help lower your risk. Some investors find it easier to achieve diversification through ownership of mutual funds rather than through ownership of individual stocks or bond. Affordability : Some mutual funds accommodate investors who don't have a lot of money to invest by setting relatively low dollar amounts for initial purchases, subsequent monthly purchases, or both. Liquidity : Mutual fund investors can readily redeem their shares at the current NAV plus any fees and charges assessed on redemption at any time.



Disadvantages of a mutual fund

a) Costs Despite Negative Returns : Investors must pay sales charges, annual fees, and other

expenses (which we'll discuss below) regardless of how the fund performs. And, depending on the timing of their investment, investors may also have to pay taxes on any capital gains distribution they receive even if the fund went on to perform poorly after they bought shares. b) Lack of Control : Investors typically cannot ascertain the exact make-up of a fund's portfolio at any given time, nor can they directly influence which securities the fund manager buys and sells or the timing of those trades. Price Uncertainty : With an individual stock, you can obtain real-time (or close to real-time) pricing information with relative ease by checking financial websites or by calling your broker. You can also monitor how a stock's price changes from hour to hour or even second to second. By contrast, with a mutual fund, the price at which you purchase or redeem shares will typically depend on the fund's NAV, which the fund might not calculate until many hours after you've placed your order. In general, mutual funds must calculate their NAV at least once every business day, typically after the major U.S. exchanges close.


Types of mutual fund

When it comes to investing in mutual funds, investors have literally thousands of choices. Before you invest in any given fund, decide whether the investment strategy and risks

of the fund are a good fit for you. The first step to successful investing is figuring out your financial goals and risk tolerance either on your own or with the help of a financial professional. Once you know what you're saving for, when you'll need the money, and how much risk you can tolerate, you can more easily narrow your choices. Mutual Funds fall into three main categories : 1. 2. 3. Money Market Funds Bond Funds Stock funds

Money Market Funds :

Money market funds have relatively low risks, compared to other mutual funds (and most other investments). By law, they can invest in only certain high-quality, short-term investments issued by the U.S. government, U.S. corporations, and state and local governments. Money market funds try to keep their net asset value (NAV) which represents the value of one share in a fund at a stable $1.00 per share. But the NAV may fall below $1.00 if the fund's investments perform poorly. Investor losses have been rare, but they are possible. Money market funds pay dividends that generally reflect shortterm interest rates, and historically the returns for money market funds have been lower than for either bond or stock funds. That's why "inflation risk" the risk that inflation will outpace and erode investment returns over time can be a potential concern for investors in money market funds.

Bond Funds :
Bond funds generally have higher risks than money market funds, largely because they typically pursue strategies aimed at producing higher yields. Unlike money market funds, the SEC's rules do not restrict bond funds to high-quality or short-term investments. Because there are many different types of bonds, bond funds can vary dramatically in their risks and rewards. Some of the risks associated with bond funds include: Credit Risk : The possibility that companies or other issuers whose bonds are owned by the fund may fail to pay their debts (including the debt owed to holders of their bonds). Credit risk is less of a factor for bond

funds that invest in insured bonds or U.S. Treasury bonds. By contrast, those that invest in the bonds of companies with poor credit ratings generally will be subject to higher risk. Interest Rate Risk : The risk that the market value of the bonds will go down when interest rates go up. Because of this, you can lose money in any bond fund, including those that invest only in insured bonds or Treasury bonds. Funds that invest in longer-term bonds tend to have higher interest rate risk. Prepayment Risk : The chance that a bond will be paid off early. For example, if interest rates fall, a bond issuer may decide to pay off (or "retire") its debt and issue new bonds that pay a lower rate. When this happens, the fund may not be able to reinvest the proceeds in an investment with as high a return or yield.

Stock Funds :
Although a stock fund's value can rise and fall quickly (and dramatically) over the short term, historically stocks have performed better over the long term than other types of investments including corporate bonds, government bonds, and treasury securities. Overall market risk poses the greatest potential danger for investors in stock funds. Stock prices can fluctuate for a broad range of reasons such as the overall strength of the economy or demand for particular products or services.

Types of Mutual Funds Schemes :

1. By Stucture 1.1 Open ended schemes 1.2 Closed ended schemes


Interval schemes

2. By Investment Objective 2.1 Growth scheme 2.2 Income scheme 2.3 Balanced scheme 3. Other schemes 3.1 Tax saving scheme 3.2 Special scheme 3.2.1 Index scheme 3.2.2 Sector specific scheme


The units offered by these schemes are available for sale and repurchase of any business day at NAV prices. Such schemes offer high liquidity to investors.


The unit capital of closed ended product is fixed as it makes a one time sale of fixed no. of units. These schemes are more illiquid as compared to open ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to maturity date.

These schemes combine the feature of open ended and closed ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV based prices.

These schemes seek to invest majority of their funds in equities and small portion in money market instruments. Such schemes have potential to deliver superior returns over the long term. However because they invest in equities, these schemes are exposed to fluctuations in short term.

These schemes are called debt schemes, invest in debt securities such as corporate bonds, debentures and government securities. The process of these schemes tend to be

more stable compared with equity schemes and most of the returns to investors are generated through dividends or steady capital appreciation.

BALANCED SCHEMES These schemes are commonly known as Hybrid schemes. These schemes invest both in equities as well as debt. These schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long term orientation. TAX SAVING SCHEMES
Investors are being encouraged to invest in equity markets through Equity Linked Savings Scheme by offering them a tax rebate.

The primary purpose of an Index is to serve as a measure of performance of the market as a whole, or a specific sector of the market. Some investors are interested in investing in the market in general rather than investing in any specific fund.


Sector specific schemes invest money in some specified sectors. For example : real estate

Development of Mutual Funds in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. 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)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). 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). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. 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. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

organization of mutual funds

The Organization of a Mutual Fund is how the mutual funds are controlled. A number of entities are involved in the Organization of a Mutual Fund. This helps in the proper management of the mutual fund portfolio. The organization of mutual funds contains entities such as : (a) Mutual Fund Shareholders: The Mutual Fund Shareholders, like the other share holders have the right to vote. The voting rights include, the right to elect directors during the directorial elections, voting right to approve the alterations investment advisory contract pertaining to the fund and provide approval for changing investment objectives or policies. (b) Board of Directors: The board of directors supervise the functional activities, which include approval of the contract Asset Management Company and other various service providers. (c) Investment management company or Asset Management Company: This body handles the mutual fund portfolio as per the objectives and policies mentioned in the prospectus of the mutual funds. (d) Custodians: The custodians protect the portfolio securities. Mostly qualified bank custodians are used for mutual funds. (e) Transfer Agents: The transfer agent for the purpose of maintaining records and similar functions. The maintenance of the shareholder's accounts, calculation of dividends to the be disbursed, sending information to the shareholders about the account statements, notices, and income tax information. Some of the transfer agent sends information to the share holders about the shareholder transactions and account balances. They also maintain customer service departments in order the cater to the queries of the shareholders.

(f) SEBI: The primary aim of the Securities Exchange Board of India is to protect the interest of the mutual fund investors. The SEBI has formulated several policies for better functioning and controls the mutual funds. In the year 1993, SEBI issued guidelines pertaining to the mutual funds. All mutual funds, private sector and public sector are regulated by the guidelines of the SEBI. The Asset Management Company managing the funds has to be approved by the SEBI.

Kotak Mahindra is one of the Indias leading financial institutions, offering complete financial solutions that encompasses every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of corporates and individuals.

The group has a net worth of Rs.7911 crores and employs around 20,000 employees across its various businesses, servicing around 7 million customer accounts through a distribution network of 1716 branches, franchisees and satellite offices across more than 470 cities and towns in India and offices in New York, California, San Francisco, London, Dubai, Mauritius and Singapore. Kotak Mahindra Asset Management Company Ltd, a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund. KMAMC started its operations in December 1998 and has over 10lac investors in various schemes. KMMF offers schemes catering to investors with varying risk-return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.

Dr. Shankar Acharya Mr. Uday Kotak Mr. Anand Mahindra Mr. K.M. Gherda Mr. Cyril Shroff

Mr. Pradeep Kotak Mr. Shivaji Dam Mr. C. Dayaram Mr. Deepak Gupta Ms. Bina Chandarana


Ms. Lakshmi Iyer Mr. Abhishek Bisen Mr. Deepak Agrawal Mr. Emmanuel Elango Mr. Pankaj Tibrewal Mr. Pradeep Kumar Mr. Deepak Gupta

Established in 1985, the Kotak Mahindra group has been one of Indias reputed financial organizations. In February 2003, Kotak Mahindra Finance Ltd, the groups flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval creates banking history since Kotak Mahindra Finance Ltd. Is the first non banking finance company in India to convert itself into a bank as Kotak Mahindra Bank Ltd. The bank offers comprehensive business solutions that includes trade

sevices, cash management services and credit facilities, keeping in minds the needs of business community. Kotak Mahindra Bank has over 212 branches spread across 124 locations in the country offering both traditional banking products and investment advisory services. The bank has the products, the experience, the infrastructure and most importantly the commitment to deliver pragmantic, end-to-end solutions that really work.


Every member of Kotak AMC is committed to 5 core values: i. ii. iii. iv. v. Integrity Customer comes first Boundaryless Ownerships Passion


ABN AMRO Mutual Fund Benchmark Mutual Fund Birla Sun Life Mutual Fund Bharti AXA Mutual Fund BOB Mutual Fund Canara Robero Mutual Fund Deutsche Mutual Fund DSP Black Rock Mutual Fund

Escorts Mutual Fund Fidelity Mutual Fund Forties (ABN) Mutual Fund Franklin Templeton Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ING Vyasya Mutual Fund JM Financial Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Principal Mutual Fund ICICI Prudential Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund TATA Mutual Fund Taurus Mutual Fund UTI Mutual Fund

The objective of the study is to compare the performance of Kotaks large cap fund against the top 5 large cap mutual funds of India. The study is done to compare the return and risk involved in all of these funds. The main objectives of this project are :

To study Mutual Fund market in India. To study the various mutual fund schemes in India. To study about risk factors and other needed ratios to select a good mutual fund to invest. To study the performance indices that can be used for mutual fund comparison. To compare the mutual funds of selected companies and Kotak on the basis of their returns.


Kotak 50 is an open ended scheme. There are three options available in this scheme. Dividend Payout Dividend Reinvestment Growth

Why should one invest in Kotak 50? The objective of the investment in Kotak 50 is to generate capital appreciation from a Portfolio of predominantly equity and equity related securities. The portfolio will generally comprise of equity and equity related instruments of around 50 companies which may go upto 59 but will not exceed 59 at any point of time. Load Structure. There is no entry load in the scheme. But if an investor exits before 12 months he has to pay 1% charge. There is no exit load after 12 months. Minimum Investment. The minimum investment criteria is Rs.5000 The Benchmark of kotak 50 is S&P CNX Nifty.

RETURNS The NAV for different periods 1. Kotak 50

Period 1 month 3 months 6 months 1 year 3 years 5 years Returns(%) 0.3 0.1 Rank 7 10 40 39 36 18

-1.1 -7.6
-5.3 4.1

As we can see that the returns for the fund is good in the long term as the return for 3 years is 5.3% and in 5 years it is 4.1%. The short term returns are low so it is good to invest in long term.


FUNDS RETURNS Scheme 1 month 2.1 6 months 1 year 0.9 3.9 6.3 1.7 -1.4 4.5 -8.1 -1.4 -4.5 -5.2 -8.9 -6.8 3 years 5.7 10.2 4 9.2 -3.4 8.3 5 years 3.4 6.2 1.5 6.2 -0.9 3.7

Kotak 50 ICICI 0.7 Pru Top 100 fund SBI 1.9 Bluechip fund Franklin 1.4 India Bluechip Reliance -0.1 Equity fund Birla 1.3 Sun Life top 100

KOTAK 50 VS. ICICI PRUDENTIAL TOP 100 FUND : Scheme Kotak 50 ICICI Pru Top 100 fund 1 month 2.1 0.7 6 months 1 year 0.9 3.9 -8.1 -1.4 3 years 5.7 10.2 5 years 3.4 6.2


m 3 5 1 on ont ye ye a ye a hs th rs rs ar


ICICI Pru Top 100 fund Kotak 50





KOTAK 50 VS. SBI BLUECHIP FUND: Scheme 1 month 2.1 6 months 1 year 0.9 6.3 -8.1 -4.5 3 years 5.7 4 5 years 3.4 1.5

Kotak 50 SBI 1.9 Bluechip fund

6 5 TIME 4 3 2 1 -10 0 RETURNS IN % 10 SBI Bluechip fund Kotak 50 Scheme



Kotak 50 Franklin 1.4 India Bluechip Fund

1 month 2.1

6 months 1 year 0.9 1.7 -8.1 -5.2

3 years 5.7 9.2

5 years 3.4 6.2

7 6 5 TIME 4 3 2 1 -10 -5 0 5 10 15 Franklin India Bluechip Fund Kotak 50 Scheme


KOTAK 50 VS. RELIANCE EQUITY FUND: Scheme 1 month 2.1 6 months 1 year 0.9 -1.4 -8.1 -8.9 3 years 5.7 -3.4 5 years 3.4 -0.9

Kotak 50 Reliance -0.1 equity fund

5 years 3 years TIME 1 year 6 months Reliance equity fund Kotak 50

1 month -10 0 RETURNS IN % 10

KOTAK 50 VS. BIRLA SUN LIFE TOP 100 FUND: Scheme 1 month 2.1 6 months 1 year 0.9 4.5 -8.1 -6.8 3 years 5.7 8.3 5 years 3.4 3.7

Kotak 50 Birla 1.3 Sun Life Top 100 fund


3 5 on 1 y ye ye e a ar ar th s s s r


Birla Sun Life Top 100 fund Kotak 50


on th



INTERPRETATION: 1. Kotak 50 is performing better than ICICI Prudential Top 100 fund since last month. Otherwise , if we view the previous returns ICICI Prudential Top 100 fund was giving better returns than Kotak 50.

SBI Bluechip Fund is giving low returns than Kotak 50. If we Compare the returns of last 3 years kotak 50 is giving returns of 5.7 % whereas SBI Bluechip Fund is giving only 4 % returns. The same scenario can be seen in the performance of last 5 years.

3. Kotak 50 is little behind than Franklin India Bluechip Fund In terms of returns. Franklin India Bluechip Fund was giving good returns except the previous month. In the previous month, Kotak 50 take over and start performing better than Franklin India Bluechip Fund with the returns of 2.1 %. 4. The returns of Reliance Equity Fund are declining Continuously since last 5 years whereas Kotak 50 is giving positive returns. So, we can say that Kotak 50 is better than Reliance Equity Fund. 5. Since 1month, Kotak 50 is giving 2.1 % returns whereas Birla Sun Life Top 100 fund is giving only 1.3 % returns. But if we see the performance since 6 months, the scenario changes, Birla Sun Life Top 100 Fund is giving returns of 4.5 %.

COMPARISON OF FUNDS ON THE BASIS OF RISK FACTOR RISK FACTORS Scheme Kotak 50 ICICI Prudential top 100 fund SBI Bluechip fund Franklin India Bluechip fund Reliance Sharpe Ratio 0.26 0.41 Beta() 0.78 0.77 Standard Deviation 16.54 % 16.87%










Equity fund Birla Sun Life top 100 fund




FREQUENTLY USED TERMS 1. SHARPE RATIO It is a ratio developed by Nobel Laureate William F. Sharpe to measure risk-adjusted performance. The sharpe ratio is calculated by subtracting the risk free rate from the rate of return of portfolio and dividing the result by standard deviation of the portfolio returns. The sharpe ratio formula is:

A high and positive sharpe ratio shows a superior riskadjusted performance of a fund whereas a low and negative sharpe ratio is an indication of unfavourable performance. 2. BETA () A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that

calculates the expected return of an asset based on its beta and expected market returns.. Also known as "beta coefficient". Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. The formula for calculating beta() is: = [ Cov(r,Km) ] / [ StdDev(Km) ]2 Where: r is the return rate of the investment; Km is the return rate of the asset class. 3. STANDARD DEVIATION Standard deviation is a representation of the risk associated with a given security (stocks, bonds, property, etc.), or the risk of a portfolio of securities. Risk is an important factor in determining how to efficiently manage a portfolio of investments because it determines the variation in returns on the asset and/or portfolio and gives investors a mathematical basis for investment decisions. The overall concept of risk is that as it increases, the expected return on the asset will increase as a result of the risk premium earned - in other words, investors should expect a higher return on an investment when said investment carries a higher level of risk.