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INTRODUCTION
Mutual Funds are professionally managed pool of money from a group of in

vestors. A Mutual Fund manager invests your funds in securities including stocks
and bonds, Money Market instruments or some combination and decides the best ti
me to buy and sell. By pooling your resources with other investors in mutual fun
ds, you can diversity even a small investment over a wide spectrum.
With the emergence of the capital market at the center stage of the Indi
an financial system from its marginal role a decade earlier, the Indian capital
market also witnessed during the same period a significant institutional develop
ment in the form of diversified structure of Mutual Funds. A Mutual fund is a sp
ecial type of investment institution which acts as an investment conduit.
It pools the savings, particularly of the relatively small investors, an
d invests them in a well-diversified portfolio of sound investment. As an invest
ment intermediary, it offers a variety of services/advantages to the relatively
small investors who on their own cannot successfully construct and manage invest
ment portfolio mainly due to the small size of their funds, lack of expertise an
d experience, and so on. These services include the diversification of portfolio
, expertise of the professional management, liquidity of investment, tax shelter
, reduced risk and reduced cost.
Mutual fund is the most suitable investment mode for the common man as i
t offers an opportunity to invest in a diversified, professionally managed portf
olio at a relatively low cost. Anybody with an investible surplus of as little
as a few thousand rupees can invest in mutual funds. Each Mutual fund scheme has
a defined investment objective and strategy.
The most important trend in the Mutual Fund industry is the aggressive expansion
of the foreign owned Mutual Fund companies and the decline of the companies flo
ated by nationalized banks and smaller private sector players.
Funds issue and redeem shares on demand at the fund's net asset value (NAV). Mu
tual fund management fees typically range between 0.5% and 2% of assets per year
, exchange fees and other administrative charges also apply.
According to SEBI - Mutual Fund is defined as - “A fund established in t
he form of a trust to raise money’s through the sale of units to the public or a s
ection of the public under one or more schemes for investing in securities, incl
uding money market instruments.”
Mutual Fund is a mechanism for pooling the resources by issuing units to
the investors and investing funds in securities in accordance with objectives a
s disclosed in the offer document.
Mutual funds are not taxed on their income as long as they comply with certain r
equirements established in the Internal Revenue Code. Specifically, they must di
versify their investments, limit ownership of voting securities, distribute most
of their income to their investors annually, and earn most of the income by inv
esting in securities and currencies. Mutual funds pass taxable income on to thei
r investors. The type of income they earn is unchanged as it passes through to t
he shareholders. For example, mutual fund distributions of dividend income are r
eported as dividend income by the investor. There is an exception: net losses in
curred by a mutual fund are not distributed or passed through to fund investors.
Mutual funds first became popular in the United States in the 1920s. The first f
unds were of the closed-end type with shares that trade on an exchange. The firs
t open-end mutual fund, the Massachusetts Investors Trust was established on Mar
ch 21, 1924. It is now part of the MFS family of funds. This was the first fund
with redeemable shares. However, closed-end funds remained more popular than ope
n-end funds throughout the 1920s. By 1929, open-end funds accounted for only 5%
of the industry s $27 billion in total assets.
GROWTH AND INCOME FUNDS
The Growth and income funds seek long-tern growth of capital as well as
current income. The investment strategies used to reach these goals vary among f
unds. Some invest in a dual portfolio consisting of growth stocks, convertible s
ecurities or fixed-income securities such as corporate bonds and money market in
struments. Other may invest in growth stocks and earn current income by selling
covered call options on their portfolio stocks.
Growth and income funds have low to moderate stability of principal and
moderate potential for current income and growth. They are suitable for investor
s who can assume some risk to achieve growth of capital but who also want to mai
ntain a moderate level of current income.
OTHER SCHEMES
1) Tax saving scheme: These Schemes offer tax rebates to the investors
under specific provisions of the income tax act, 1961 as the Government offer t
ax incentives for investment in specified avenues. E.g. equity linked saving sch
emes (ELSS).
2) Pension schemes: Launched by the Mutual Funds also offer tax benefits. T
hese schemes are growth oriented and invest pre-dominantly in equities. Their gr
owth opportunities and risk associated are like any equity oriented scheme.
3) Gilt Scheme: These funds invest exclusively in government securities.
Government securities have no default risk. NAV’s of these schemes also fluctuate
due to change in interest rates and other economic factors as it he case with i
ncome or debt oriented schemes.
4) Index Scheme: These funds replicate the portfolio of a particular index such
as the BSE Sensitive index, S&P NSE 50 index (NIFTY), etc. These schemes invest
in the securities in the same weight age comprising of an index. NAV’s of such sc
hemes would rise of fall in accord with the rise or fall in the index, though no
t exactly by the same percentage due to some factors known as tracking error in
technical terms. Necessary disclosures in this regard are made in the offer docu
ment of the Mutual Fund scheme. There are also exchange traded index funds launc
hed by the Mutual Funds, which are traded on the stock exchanges.
5) Specialty/Sector funds: These funds invest in securities of a specific indus
try of the economy such as health care, technology, leisure, utilities or precio
us metals. The funds enable conservative approach than investing directly in one
particular company.
6) Leverage funds: Leveraged funds or borrowed funds are used in order to incre
ase the size of the value of the portfolio and benefit the shareholders by gains
exceeding the cost of the borrowed funds. Such funds are used in speculative an
d risky investments like short sale to take advantage of declining market to rea
lize gains in the portfolio short sales.
ADVANTAGES OF MUTUAL FUNDS
The key advantages of both open and close-end Mutual Funds is that they
put professional managers with experience and access to sophisticated financial
research to work for you this, and other wide range of key benefits are as follo
ws;
1) Professional Management:-Experienced portfolio managers carefully select a fu
nd’s holdings according to the fund’s seated investment objective. The portfolio man
agement team continuously monitors and evaluates the fund’s holdings to help make
sure it keeps pace with changing market conditions. The team decides when to buy
and sell securities. There is a fee associated with this professional managemen
t.
2) Diversification:-A Single diversified Mutual Fund may invest in dozens – even
hundreds of different holdings. This approach may reduce the impact on your retu
rn if any one investment held by the fund declines. Diversification spreads your
assets among different types of holdings and may be one of the best ways to pro
tect yourself amid the complexity and uncertainty of the financial markets.
3) Compounding:-In a Mutual Fund, you may choose to reinvest your earnings autom
atically to buy more shares. When you reinvest, not only do you have the potenti
al to earn money on your initial investment, you may also have the opportunity t
o earn money on the dividends and capital gains you accumulate. Compounding may
increase the impact of what you contribute and can help your money grow faster.
And the longer you invest, the greater the potential growth.
4) Systematic Investing :-You can invest in most mutual funds automatically thr
ough regular payments directly from your bank account; you can start building a
long-term investment program. With systematic investing you invest a fixed amoun
t of money at regular intervals regardless of market conditions, helping out mar
ket fluctuations.
5) Hassle-free operations :-With most Mutual Funds, buying and selling shares,
changing distribution options, and obtaining information can be accomplished con
veniently by telephone, by mail, or online. Although a fund’s shareholder is relie
ved of the day-to-day tasks involved in researching, buying and selling securiti
es, an investor will still need to evaluate a Mutual Fund based on investment go
als and risk tolerance before making a purchase decision. Investors should alway
s read the prospectus carefully before investing in any Mutual Fund.
6) Buying Power :-When you invest in a mutual fund, you join the other investor
s in a pool of investment money. The result is that you have a “partial stake” in ea
ch company the fund holds for a relatively small amount of principal invested, w
hile potentially offsetting some of the risk associated with holding individual
securities.
7) Choice :-There is an incredible array of mutual funds – more than 10,000 – avail
able to meet your specific Investment objective. Funds have different investment
objectives and degrees of investment risk – often indicated through asset classes
and sub-classes, such as money market funds, fixed income funds, balanced funds
, growth and income funds, growth funds and aggressive growth funds.
DISADVANTAGES OF MUTUAL FUNDS
1) Over Diversification :-Diversification is usually a good thing because it re
duces risk, but Mutual Funds sometimes make small investments in so many securit
ies that they become over diversified. In other words, the Mutual Fund’s holdings
in each security may be so small that it is difficult to realize substantial ret
urn from any of those holdings, which in turn means that the overall return for
each investor is small.
2) Unused Cash :-Your cash may occasionally serve as liquidity insurance rather
than work for you as an investment. The constant availability of shares is cert
ainly convenient for investors in a mutual fund, but it can also operate as a di
sadvantage. A Mutual Fund manager must always prepare for the possibility than a
n investor will cash in his or her shares. As a result Mutual Funds must maintai
n a ready cash supply at all times.
3) Fluctuating Returns :-Mutual funds are like many other investments without a
guaranteed return. There is always the possibility that the value of your mutua
l fund will depreciate. Unlike fixed-income products, such as Bonds and Treasury
Bills, mutual funds experience price fluctuations along with stocks that make u
p the fund.
4) Costs Despite Negative Returns :- Investors must pay sales charges, annual f
ees, service charges and other expenses regardless of how the fund performs. In
addition, depending on the timing of their investment, investors may also have t
o pay taxes on any capital gains distribution they receive – even if the fund went
on to perform poorly after they bought shares.
5) Misleading Advertisements :-The misleading advertisements of different funds
can guide investors down the wrong path. Some funds may be incorrectly labeled
as growth funds, while others are classified as small-cap or income.
6) Evaluating Funds :-Not offer investors the opportunity to compare the P/E rat
io, sales growth, earnings share, etc. A Mutual Fund’s Net Asset Value gives the i
nvestors the total value of the Another limitation of mutual fund is the difficu
lty they pose for investors interested in researching and evaluating the differe
nt funds. Unlike stocks, mutual funds do fund’s portfolio less liabilities.
RISK RETURN GRID

RISK TOLERANCE/
RETURN EXPECTED FOCUS SUITABLE PRODUCTS
BENEFITS OFFERED BY MF’S
Low Debt Bank/company FD, Debt based Funds Liquidity, Better Post-T
ax return
Medium Partially Debt, Partially Equity Balanced Funds, some Diversified

Equity Funds are some debt Funds, Mix of share and Fixed Deposits Liquidit
y, Better Post-Tax returns, Better Management, Diversification
High
Equity Capital Market, Equity Funds (Diversified as well as Sector) Diversif
ication, Expertise in stock picking, Liquidity, Tax free dividends
COST INVOLVED IN MUTUAL FUNDS

An investor must know that there are certain costs can be classified into 2 broa
d categories:
Operating expenses - Which are paid out of the funds earnings
Sales charges - That are directly deducted from your i
nvestment. It is not
compulsory that every mutual fund levy sales charges but they certainly h
ave operating expenses. No doubt they influence returns on investment in a fund.
Operating expenses
These referred to cost incurred to operate a mutual fund. Advisory fees
paid to investment managers, Audit fees to chartered accountant, custodial fees,
register and transfer agent fees, trustee fee, agent commission. Operating expe
nses also known as expenses ratio which is annual expenses expressed as a percen
tage of the funds average daily net assets mutual funds. The break up of these e
xpenses is required to be reported in the schemes offer document (or) prospectus
Operating expenses
Expenses Ratio = -----------------------------
Average Net Assets
For instant, if funds Rs. 100 Crores and expenses 20 lakhs. Then expense
s ratio is 2% expenses ratio is available in the offer document and from histori
cal per unit statistics included in the financial results of the fund which are
published by annually. UN audited for the half year ending Sep’30 and audited for
the physically year end in March 30.
Depending upon schemes and net asset, operating expenses are determined
by limits mandated by SEBI Mutual fund regulation Act. Any excess over specified
limits as to be born by Asset Management Company, the trustees or sponsors.
Sales charges:
These are known commonly sales loads; these are charged directly to inve
stor. Sales loads are used by mutual fund for the payment of agent’s commission, d
istribution and marketing expensed. These charges have not effect on the perform
ance of the scheme. Sales loads are usually express in percentage and or of two
type’s front-end and back end.
Front-end load:
It is a one time fixed fee paid by an investor when buying a m
utual fund scheme. It determines public offer price which intern decides how muc
h of your initial investment actually get invested the standard practice of arri
ving a public offer price is as follows:
Net Asset Value
Public offer price = ----------------------
----
(1-
front end load)
Let us assume, an investor invests Rs.10, 000 in a schem
e that charges a 2%front end load at a NAV per unit RS. 10 using the formula pub
lic offer price =10/ (1-0.02) is Rs. 10.20. So only 980 units are allotted to th
e investor.
Amount invested
Number of units allotted = ------------------------
Public offer price
10,000/10..20= 980 units at a NAV of
Rs. 10
This means units worth 9800 are allotted to him on an initial in
vestment of Rs. 10,000. Front end loads tent to decrease as initial investment a
mount increase.
Back end load:

May be a fixed fee redemption (or) a contingent deferred sales charges-a
redemption load continues so long as the redeeming or selling of the units of t
he units of a fund does not take place in the event of back end load is applied.
The redemption price is arriving at using following formula.
Net Asset Value
Redemption price = --------------------------
----
(1+ back end load)
Let us assume an investor redeems units valued at Rs. 10,000 in a scheme that ch
arges a 2% back end load at a NAV per unit of Rs. 10. Using the formula redempti
on price 10/ (1+0.02) = Rs. 9.8
So, what the investor gets in hand is 9800(908*1000)
Contingent Deferred Sales Charges (CDSC):
Contingent deferred sales charges are a structured back end load. It is
paid when the units are redeemed during the initial years of ownership. It is fo
r a pre determined period only and reduced over the time you’re invested for a fun
d. The longer the investor remains in fund the lower the CDSC.
The SEBI (mutual fund Regulation 1996) stipulate that a CDSC may be char
ge only for first 4 years after purchase of units and also stipulate the maximum
CDSC that can we charge every year. The SEBI Mutual funds Regulation 1996 do no
t allow either the front end load or back end load to any combination is higher
that 7%.
Transaction cost:
Some funds may also impose a switch over fee which is a charge on transf
er of investment from one scheme to another with in a same mutual fund family an
d also to switch from on plan (short term) to another (long term) within same sc
heme.
SYSTEMATIC INVESTING PLANS (SIPs)
It is an investment vehicle, where you need to deposit a fixed amount at
regular intervals (monthly, quarterly, etc.) in a MF scheme; just like you do i
n a recurring deposit account with a bank or the post office.
Regular Investing is not easy. Owing to lack of time, most people invest
sporadically. The result? The returns are rarely optimal. However, there is a f
oolproof way of investing a fixed amount of money at regular intervals: Chola Mu
tual Fund’s “Systematic Investment Plan” (SIP). SIP uses the concept of rupee cost ave
raging, ensuring investors buy more when prices are low; and fewer units when pr
ices are high.
Benefits of Systematic Investment Plans
Discipline Saving: Inculcating discipline in your investment has been easier. Yo
ur investment is done on a regular basis by the mutual fund without any interven
tion required by you. The best part is that you will not feel the pain of having
to save since the money will move from your bank account automatically.
Rupee Cost Averaging:
The SIP helps you take advantage of the fluctuation in the stocks market
by rupee cost averaging. The investor buys more units when the prices are low a
nd fewer units cost. Assume you are investing Rs.1000/- each for next four month
s.
Month
Amount Invested
Purchase Price
No of Units Purchased
1
1000
10
100
2
1000
09
111.11
3
1000
10
100
4
1000
11
90.9
Total Investment = Rs. 4000; No of units purchased is 402.21. The averag
e cost per units work out to be Rs9.95.
As illustrated, over time you have a lower average cost
per unit. By investing a fixed amount of money at regular intervals, you as an i
nvestor stand to gain reasonable returns and create significantly wealth-over ti
me.
Lower Cost of Investing:
Getting into SIP program does not required large investment amounts at r
egular intervals. Even as small as Rs. 1000 can be invested at regular intervals
.
\
Builds Investment Kitty:

You have to give Post-Dated cheque (PDCs) to the mutual fund for deposit
on specific dates, for the amount you want to invest. These cheques are present
ed to your bank account on these dates and the funds are withdrawn from your acc
ount for investment in the mutual fund scheme at the prevailing NAV. Other than
making the initial investment and issuing the cheques at the beginning, no furth
er efforts are required from you.
Overcoming market volatility:
SIPs help you avoid missing market falls because of lack of time to trac
k the market. You don’t have the responsibility of actively monitoring market move
ment to be able to enter during falls.
Market timing doesn’t work:
Trying to time the markets, i.e. entering when the markets fall and exit
ing when the markets rise, usually does not work. It is best to take the systema
tic investment approach to stay above market
Redemption of Units:
The units can be redeemed (i.e. sold back to the mutual fund) or switche
d-out subject to completion of lock in period, on every business day at the rede
mption price. The redemption/switch out request can be made by way of a written
request, on a pre printed form or by using the relevant tear off section of the
transaction slip enclosed with the account statement, which should be submitted
at/may be sent by mail to any of the ISC’s.
Redemption price:
Redemption price will be calculated on the basis of the loads of differe
nt plans/options. The redemption price per unit will be calculated using the fol
lowing formula:
Redemption Price = Application NAV * (1 – exit Load, if any)
Example for calculation of redemption Price

If the application NAV is Rs.10.00; Exit/redemption load is 2%, then the redempt
ion price will be calculated as follows:
= Rs.10.00 *(1-0.02)
= Rs.10.00 * (0.98)
= Rs.9.80
ASSOCIATION OF MUTUAL FUNDS OF INDIA
With the increase in Mutual Fund players in India, a need for mutual fun
d association in India was generated to function as a non-profit organization. A
ssociation of Mutual Funds in India (AMFI) was incorporated on 22nd August 1995.
AMFI is an APEX body of all Asset Management Companies (AMC), which has
been registered with SEBI. Till date all the AMC’s are that have launched mutual f
und schemes are its members. It functions under the supervision and guidelines o
f its Board of Directors.
Association of Mutual Funds of India has brought down the Indian Mutual
Fund Industry to a professional and healthy market with ethical lines enhancing
and maintaining standards. It follows the principle of both protecting and promo
ting the interests of mutual funds as well as their unit holders.
Objectives
The AMFI works with 30 registered AMC’s of the country. It has certain def
ined objectives, which juxtaposes the guidelines of its Board of Directors. The
objectives are as follows:
This mutual fund association of India maintains high professional and ethical st
andards in all areas of operation of the industry.
It also recommends and promotes the top class business practices and code of con
duct which is followed by members and related people engaged in the activities o
f MF and asset management. The agencies who are by any means connected or involv
ed in the field of capital markets and financial services also involved in this
code of conduct of the association.
AMFI interacts with SEBI and works according to SEBI’s guidelines in the mutual fu
nd industry.
AMFI do represent the Government of India, the Reserve Bank of India and other r
elated bodies on matters relating to the Mutual Fund Industry.
It develops a term of well-qualified and trained Agent distributors. It implemen
ts a programmed of training and certification for all intermediaries and other e
ngaged in the mutual fund industry.
AMFI undertakes all India awareness programmed for investors in order to promote
proper understanding of the concept and working of mutual funds.
At last but not the least association of mutual fund of India also disseminate i
nformation on Mutual funds Industry and undertakes studies and research either d
irectly or in association with other bodies.
INDUSTRY PROFILE
INDUSTRY OVERVIEW
The securities market achieves one of the most important functions of channeling
idle resources to productive resources or from less productive resources to mor
e productive resources. Hence in the broader context the people who save and inv
estors who invest focus more towards the economy’s abilities to invest and save re
spectively. This enhances savings and investments in the economy, the two pillar
s for economic growth. The Indian Capital Market has come a long way in this pro
cess and with a strong regulator it has been able to usher an era of a modern ca
pital market regime. The past decade in many ways has been remarkable for securi
ties market in India. It has grown exponentially as measured in terms of amount
raised from the market, the number of listed stocks, market capitalization, trad
ing volumes and turnover on stock exchanges, and investor population. The market
has witnessed fundamental institutional changes resulting in drastic reduction
in transaction costs and significant improvements in efficiency, transparency an
d safety.
Stock Exchange:
A stock exchange, share market or bourse is a corporation or mutual organization
which provides facilities for stock brokers and traders, to trade company stock
s and other securities. Stock exchanges also provide facilities for the issue an
d redemption of securities, as well as, other financial instruments and capital
events including the payment of income and dividends. The securities traded on a
stock exchange include: shares issued by companies, unit trusts and other poole
d investment products and bonds. To be able to trade a security on a certain sto
ck exchange, it has to be listed there. Usually there is a central location at l
east for recordkeeping, but trade is less and less linked to such a physical pla
ce, as modern markets are electronic networks, which gives them advantages Of sp
eed and cost of transactions. Trade on an exchange is by members only. The initi
al offering of stocks and bonds to investors is by definition done in the primar
y market and subsequent trading is done in the secondary market. A stock exchang
e is often the most important component of a stock market. Supply and demand in
stock a market is driven by various factors which, as in all free markets, affec
t the price of stocks (see stock valuation).
There is usually no compulsion to issue stock via the stock exchange itself, nor
must stock be subsequently traded on the exchange. Such trading is said to be o
ff exchange or over-the-counter. This is the usual way that bonds are traded. In
creasingly, stock exchanges are part of a global market for securities.
History of stock exchanges:
In 12th century France the courratiers de change were concerned with managing an
d regulating the debts of agricultural communities on behalf of the banks. As th
ese men also traded in debts, they could be called the first brokers.
Some stories suggest that the origins of the term "bourse" come from the Latin b
ursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perh
aps three purses), hung on the front of the house where merchants met.
However, it is more likely that in the late 13th century commodity traders in Br
uges gathered inside the house of a man called Van deer Burse, and in 1309 they
institutionalized this until now informal meeting and became the "Bruges Bourse"
. The idea spread quickly around Flanders and neighboring counties and "Bourses"
soon opened in Ghent and Amsterdam.
In the middle of the 13th century, Venetian bankers began to trade in government
securities. In 1351, the Venetian Government outlawed spreading rumors intended
to lower the price of government funds. There were people in Pisa, Verona, Geno
a and Florence who also began trading in government securities during the 14th c
entury. This was only possible because these were independent city states ruled
by a council of Influential citizens, not by a duke.
The Dutch later started joint stock companies, which let shareholders invest in
business ventures and get a share of their profits - or losses. In 1602, the Dut
ch East India Company issued the first shares on the Amsterdam Stock Exchange. I
t was the first company to issue stocks and bonds. In 1688, the trading of stock
s began on a stock exchange in London. Stock Exchang.
The role of stock exchanges:
Stock exchanges have multiple roles in the economy, this may include the followi
ng:
1. Raising capital for businesses:- The Stock Exchange provides companies with t
he facility to raise capital for expansion through selling shares to the investi
ng public.
2. Mobilizing savings for investment:-When people draw their savings and invest
in shares, it leads to a more rational allocation of resources because funds, wh
ich could have been consumed, or kept in idle deposits with banks, are mobilized
and redirected to promote business activity with benefits for several economic
sectors such as agriculture, commerce and industry, resulting in a stronger econ
omic growth and higher productivity levels.
3. Facilitating company growth:-Companies view acquisitions as an opportunity to

expand product lines, increase distribution channels, hedge against volatility,
increase its market share, or acquire other necessary business assets. A takeov
er bid or a merger agreement through the stock exchange is one of the simplest a
nd most common ways for a company to grow by acquisition or fusion. The companie
s are looking at expanding their market to explore the opportunities.
4. Redistribution of wealth:- Stocks exchanges do not exist to redistribute weal
th although casual and professional stock investors through stock prices increas
es and dividends get a chance to share in the wealth of profitable businesses.
5. Corporate governance:- By having a wide and varied scope of owners, companies
generally tend to improve on their management standards and efficiency in order
to satisfy the demands of these shareholders and the more stringent rules for p
ublic corporations imposed by public stock exchanges and the government. Consequ
ently, it is alleged that public companies. tend to have better management recor
ds than privately held companies. However, some well-documented cases are known
where it is alleged that there has been considerable slippage in corporate gover
nance on the part of some public companies (pets.com (2000), Enron corporation (
2001), One.tel (2001), Sunbeam (2001), Web van (2001), Adelphia (2002), Mick wor
ld com (2002), or paramilitary(2003), are among the most widely scrutinized by t
he media).
6. Creating investment opportunities for small investors:- As opposed to other b
usinesses that require huge capital outlay, investing in shares is open to both
the large and small stock investors because a person buys the number of shares t
hey can afford. Therefore the Stock Exchange provides the opportunity for small
investors to own shares of the same companies.
7. Government capital-raising for development projects:- Governments at various
levels may decide to borrow money in order to finance infrastructure projects su
ch as sewage and water treatment works or housing estates by selling another cat
egory of securities known as bonds. These bonds can be raised through the Stock
Exchange whereby members of the public buy them, thus loaning money to the gover
nment. The issuance of such municipal bonds can obviate the need to directly tax
the citizens in order to finance development, although by securing such bonds w
ith the full faith and credit of the government instead of with collateral, the
result is that the Government must tax the citizens or otherwise raise additiona
l funds to make any regular coupon payments and refund the principal when the bo
nds mature.
8. Barometer of the economy:- At the stock exchange, share prices rise and fall
depending, largely, on market forces. Share prices tend to rise or remain stable
when companies and the economy in general show signs of stability and growth. A
n economic recession, depression, or financial crisis could eventually lead to a
stock market crash. Therefore the movement of share prices and in general of th
e stock indexes can be an indicator of the general trend in the economy.
Major stock exchanges:
Twenty Largest Stock Exchanges by Market Capitalization as of July 12, 2007 (in
trillions of US dollars)
• NYSE Euro next
• Tokyo Stock Exchange
• NASDAQ
• London Stock Exchange
• Hong Kong Stock Exchange
• Toronto Stock Exchange
• Frankfurt Stock Exchange (Deutsche Brose)
• Shanghai Stock Exchange
• Madrid Stock Exchange (BME Spanish Exchanges)
• Australian Securities Exchange
• Swiss Exchange
• Nordic Stock Exchange Group OMX (Copenhagen, Helsinki, Iceland,
• Stockholm, Tallinn, Riga and Vilnius Stock Exchanges)
• Milan Stock Exchange (Boras Italian)
• Bombay Stock Exchange
• Korea Exchange
• Sao Paulo Stock Exchange Bovespa
• National Stock Exchange of India
• Moscow Interbank Currency Exchange
• Johannesburg Securities Exchange
• Taiwan Stock Exchange
STOCK EXCHANGE & SHARES
The market or place, where securities, viz. shares are exchange / traded or simp
ly where buying and selling takes place, is called stock exchange or stock marke
t.
Presently, the stock market in India consists of twenty three regional stock exc
hanges and two national exchanges, namely, the National Stock Exchange (NSE) And
Over the Counter Exchange of India (OTC).
The Bombay Stock Exchange (BSE) is the largest Stock Exchange, in the country, w
here maximum transactions, in terms of money and shares take place. The other ma
jor stock exchanges are Calcutta, Madras and Delhi Stock Exchanges. Other one at
Ahmadabad, Jaipur, Bangalore, Kanpur, Rajkot, Hyderabad, Cochin, Pune, Bhubanes
war, Guwahti, Indore, Mangalore, Ludhiana, Patna, Saurashtra, Vadodara, Coimbato
re, Meerut, and Surat.
FUNCTIONING OF STOCK EXCHANGE:

LISTING:
Listing of shares, on a stock exchange, means, such shares can be bought and sol
d, in stock exchange.
A Company, which intends to issue shares, through prospectus, shall have to appl
y to one or more stock exchanges, for getting its shares listed.
The detailed and elaborate procedure of getting the shares listed on a stock exc
hange is monitored by SEBI. The SEBI, issues guidelines and notifications, from
time to time, with regard to listing of securities.
Once the shares are listed, the are divided into two categories:
1. GROUP “A” SHARES
2. GROUP “B” SHARES
GROUP "A" SHARES:- Are referred to as “Cleaned Securities” or “specified shares". The
facility for carrying forward a transaction from one account period to another i
s available for these shares. Group "A" shares represent companies, with huge am
ount of capital, and equally a large scope for investment. These shares are freq
uently traded and command higher price earnings multiples.
GROUP "B" SHARES:- Are referred to as, none cleaned securities or non-specified
shares. For these groups facility of carrying forward is not available.
Whenever a share is moved from Group "B" to Group "An" its market price rises; l
ikewise, when a share is shifted from Group "A" to Group "B", its market price d
eclines. There are some criteria and guide lines, laid down by stock exchange, f
or shifting stocks from the non-specified list to the specified list.
PRIMARY MARKET
Since 1991/92, the primary market has grown fast as a result of the removal of i
nvestment restrictions in the overall economy and a repeal of the restrictions i
mposed by the Capital Issues Control Act. In 1991/92, Rs62.15 billion was raised
in the primary market. This figure rose to Rs276.21 billion in 1994/95. Since 1
995/1996, however, smaller amounts have been raised due to the overall downtrend
in the market and tighter entry barriers introduced by SEBI for investor protec
tion .SEBI has taken several measures to improve the integrity of the secondary
market. Legislative and regulatory changes have facilitated the corporatization
of stockbrokers.
Capital adequacy norms have been prescribed and are being enforced. A mark-to-m
arket margin and intraday trading limit have also been imposed. Further, the sto
ck exchanges have put in place circuit breakers, which are applied in times of e
xcessive volatility. The disclosure of short sales and long purchases is now req
uired at the end of the day to reduce price volatility and further enhance the i
ntegrity of the secondary market.
The primary is that part of the capital markets that deals with the i
ssuance of new securities. Companies, governments or public sector institutions
can obtain funding through the sale of a new stock or bond issue. This is typica
lly done through a syndicate of securities dealers. The process of selling new i
ssues to investors is called underwriting. In the case of a new stock issue, thi
s sale is an initial public offering (IPO). Dealers earn a commission that is bu
ilt into the price of the security offering, though it can be found in the prosp
ectus.
FEATURES OF PRIMARY MARKET ARE
1. This is the market for new long term capital. The primary market is the marke
t where the securities are sold for the first time. Therefore it is also called
New Issue Market (NIM).
2. In a primary issue, the securities are issued by the company directly to inve
stors.
3. The company receives the money and issue new security certificates to the inv
estors
4. Primary issues are used by companies for the purpose of setting up new busine
ss or for expanding or modernizing the existing business.
5. The primary market performs the crucial function of facilitating capital form
ation in the economy.
6. The new issue market does not include certain other sources of new long term
external finance, such as loans from financial institutions. Borrowers in the ne
w issue market may be raising capital for converting private capital into public
capital; this is known as ‘going public’.
Methods of issuing securities in the Primary Market
1. Initial Public Offer;
2. Rights Issue (For existing Companies); and
3. Preferential Issue
SECONDARY MARKET
The secondary market is the financial market for trading of securities that have
already been issued in an initial private or public offering. Alternatively, se
condary market can refer to the market for any kind of used goods. The market th
at exists in a new security just after the new issue is often referred to as the
aftermarket. Once a newly issued stock is listed on a stock exchange, investors
and speculators can easily trade on the exchange, as market makers provide bids
and offers in the new stock
FUNCTIONS:
In the secondary market, securities are sold by and transferred from one investo
r or speculator to another. It is therefore important that the secondary market
be highly liquid (Originally, the only way to create this liquidity was for inve
stors and speculators to meet at a fixed place regularly. This is how stock exch
anges originated; see History of the Stock Exchange).
Secondary marketing is vital to an efficient and modern capital market. Fundamen
tally, secondary markets mesh the investor s preference for liquidity (i.e., the
investor s desire not to tie up his or her money for a long period of time, in
case the investor needs it to deal with unforeseen circumstances) with the capit
al user s preference to be able to use the capital for an extended period of tim
e. For example, a traditional loan allows the borrower to pay back the loan, wit
h interest, over a certain period. For the length of that period of time, the bu
lk of the lender s investment is inaccessible to the lender, even in cases of em
ergencies. Likewise, in an emergency, a partner in a traditional partnership is
only able to access his or her original investment if he or she finds another in
vestor willing to buy out his or her interest in the partnership. With a securit
ized loan or equity interest (such as bonds) or tradable stocks, the investor ca
n sell, relatively easily, his or her interest in the investment, particularly i
f the loan or ownership equity has been broken into relatively small parts. This
selling and buying of small parts of a larger loan or ownership interest in a v
enture is called secondary market trading.
Under traditional lending and partnership arrangements, investors may be less li
kely to put their money into long-term investments, and more likely to charge a
higher interest rate (or demand a greater share of the profits) if they do. With
secondary markets, however, investors know that they can recoup some of their i
nvestment quickly, if their own circumstances change.
PRIVATE EQUITY SECONDARY MARKET
In finance, the private equity secondary market (also often called private equit
y secondary or secondary) refers to the buying and selling of pre-existing inves
tor commitments to private equity and other alternative investment funds. Seller
s of private equity investments sell not only the investments in the fund but al
so their remaining unfunded commitments to the funds. By its nature, the private
equity asset class is illiquid, intended to be a long-term investment for buy-a
nd-hold investors. For the vast.
Majority of private equity investments, there is no listed public market; howeve
r there is a robust and maturing secondary market available for sellers of priva
te equity assets.
Driven by strong demand for private equity exposure, a significant amount of cap
ital has been committed to dedicated secondary market funds from investors looki
ng to increase and diversify their private equity exposure.
Laws governing capital market

The four main legislations governing the securities market are:
(a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop a
nd Regulate the Markets.
(b) The Companies Act, 1956, which sets out the code of conduct for the corpora
te sector in relation to issue, allotment and transfer of securities, and discl
osures to be made in public issues.
(c) The Securities Contracts (Regulation) Act, 1956, read with the Securities Co
ntracts (Regulation) Rules, 1957 which provide for regulation of transactions in
securities through control over stock exchanges; and
(d) The Depositories Act, 1996 which provides for electronic maintenance and tra
nsfer of ownership of dreamt securities.
Regulators
SEBI is the primary regulator of the Securities Market and the entities operatin
g therein. The SEBI Act and the Depositories Act are mostly administered by SEBI
. The rules under the securities laws are framed by government and regulations b
y SEBI. All these are administered by SEBI. The powers under the Companies Act r
elating to issue and transfer of securities and non-payment of dividend are admi
nistered by SEBI in case of listed public companies and public companies proposi
ng to get their securities listed.
Market Value
The current quoted price at which investors buy or sell a share of common stock
or a bond at a given time. Also known as "market price” The market capitalization
plus the market value of debt. Sometimes referred to as "total market value".
In the context of securities, market value is often different from book value be
cause the market takes into account future growth potential. Most investors who
use fundamental analysis to pick stocks look at a company s market value and the
n determine whether or not the market value is adequate or if it s undervalued i
n comparison to its book value, net assets or some other measure.
Stock
A type of security that signifies ownership in a corporation and represents a Cl
aim on part of the corporation’s assets and earnings. There are two main types of
stock: common and preferred. Common stock usually entitles the owner to vote at
shareholders meetings and to receive dividends. Preferred stock generally does
not have voting rights, but has a higher claim on assets and earnings than the c
ommon shares. For example, owners of preferred stock receive dividends before co
mmon shareholders and have priority in the event that a company goes. Bankrupt a
nd is liquidated. Also known as "shares" or "equity".
A holder of stock (a shareholder) has a claim to a part of the corporation s ass
ets and earnings. In other words, a shareholder is an owner of a company. Owners
hip is determined by the number of shares a person owns relative to the number o
f outstanding shares. For example, if a company has 1,000 shares of stock outsta
nding and one person owns 100 shares, that person would own and have. Claim to 1
0% of the company’s assets Stocks are the foundation of nearly every portfolio. Hi
storically, they have outperformed most other investments over the long run.
Shareholder
Any person, company, or other institution that
3 own at least 1 share in a company. A shareholder may also be referred to as a
stockholder.
Shareholders are the owners of a company. They have the potential to profit if t
he company does well, but that comes with the potential to lose if the company d
oes poorly.
Share
A unit of ownership interest in a corporation or financial asset. While owning s
hares in a business does not mean that the shareholder has direct control over t
he business s day-to-day operations, being a shareholder does entitle the posses
sor to an equal distribution in any profits, if any are declared in the form of
dividends. The two main types of shares are common shares and preferred shares.
In the past, shareholders received a physical paper stock certificate that indic
ated that they owned "x" shares in a company. Today, brokerages have electronic
records that show ownership details. Owning a paperless share makes conducting t
rades a simpler and more streamlined process, which is a far cry from the days w
ere stock certificates needed to be taken to a. Brokerage before a trade could b
e conducted. While shares are often used to refer to the stock of a corporation,
shares can also represent ownership of other classes of financial assets, such
as mutual funds.
BSE INDICES
INDEX: An Index is used to summarize the price movements of a unique set of goo
ds in the financial, commodity, forex or any other market place. Financial indic
es are created to measure price movements of stocks, bonds, T-bills and other ty
pe of financial securities. More specifically, a stock index is created to provi
de investors with the information regarding the average share price in the stock
market. Broad indices are expected to capture the overall behavior of equity ma
rket and need to represent the return obtained by typical portfolios in the coun
try
SENSEX:SENSEX is India s first Index compiled in 1986. It is a basket of 30 cons
tituent stocks representing a sample of large, liquid and representative compani
es.
The base year of BSE-SENSEX is 1978-79 and the base value is 100. The index is w
idely reported in both domestic and international markets through print as well
as electronic media. Due to its wide acceptance amongst the investors, SENSEX is
regarded to be the pulse of the Indian stock market. All leading business newsp
apers and the business channels report SENSEX, as it is the language that all in
vestors understand.
SENSEX is calculated using a market capitalization weighted method. As per this
methodology, the level of the index reflects the total market value of all 30- c
omponent stocks from different industries related to particular base period. The
total market value of a company is determined by multiplying the price of the s
tock by the number of shares outstanding Statisticians call the index of a set o
f combined variables (such as price and No. of shares) a composite index. An ind
exed number is used to represent the results of this calculation in order to mak
e the value easier to work with and track over a time. It is much easier to grap
h a chart based on indexed values than one used on actual values.
In practice, the daily calculation of SENSEX is done by dividing the aggregate m
arket value of the 30 Companies in the index by a number called the Index Diviso
r. The Divisor is the only link to the original based period value of the SENSEX
. The Divisor keeps the Index comparable over a period of time and the reference
point for the entire index maintenance adjustments. SENSEX is widely used to de
scribe the mood in the Indian Stock Markets
COMPANY PROFILE
INTRODUCTION:
Inter-connected Stock Exchange of India Limited (ISE) is a national-level sto
ck exchange, providing trading, clearing, settlement, risk management and survei
llance support to its Trading Members. It has 841 Trading Members, who are locat
ed in 131 cities spread across 25 states. These intermediaries are administrativ
ely supported through the regional offices at Delhi, Kolkata, Patna, Ahmadabad,
Coimbatore and Nagpur, besides Mumbai.
ISE aims to address the needs of small companies and retail investors b
y harnessing the potential of regional markets, so as to transform them into a l
iquid and vibrant market using state-of-the art technology and networking.
ISE has floated ISE Securities & Services Limited (ISS) as a wholly-owne
d subsidiary under the policy formulated by the Securities and Exchange Board of
India (SEBI) for “Revival of Small Stock Exchanges”. The policy enunciated by SEBI
permits a stock exchange to float a subsidiary, which can take up membership of
larger stock exchanges, such as the National Stock Exchange of India Limited (NS
E), and Bombay Stock Exchange Limited (BSE). ISS has been registered by SEBI as
a Trading-cum-Clearing Member in the Capital Market segment and Futures & Option
s segment of NSE and Capital Market segment of BSE. Trading Members of ISE can a
ccess NSE and BSE by registering themselves as Sub-brokers of ISS. Thus, the tra
ding intermediaries of ISS can access other markets in addition to the ISE marke
t. ISS thus provides the investors in smaller cities, a one-stop solution for co
st-effective and efficient trading and settlement services in securities.
Complementing the stock trading function, ISE’s depository participant (DP
) services reach out to intermediaries and investors at industry-leading prices.
The full suite of DP services is offered using online software, accessible thro
ugh multiple connectivity modes - leased lines, VSATs and internet. Operation of
the demat account by a client requires just a few mouse clicks.
The Research Cell has been established with the objective of carrying o
ut quality research on various facets of the Indian financial system in general
and the capital market in particular.
It brings out a monthly newsletter titled “NISE” and a fortnightly public
ation titled “V share”. The Research Cell plans to expand its activities by publishi
ng a host of value based research publications, covering a number of areas, such
as equities, derivatives, bonds, mutual funds, risk management, pension funds,
money markets and commodities. The ISE Training Centre conducts class-room train
ing programmers on different subjects related to the capital market, such as equ
ities trading and settlement, derivatives trading, day trading, arbitrage operat
ions, technical analysis, financial planning, compliance requirement, etc. Throu
gh these courses, the training centre provides knowledge to stock brokers, sub-b
rokers, professionals and investors to also appear for the certificate courses c
onducted by the stock exchanges.
It also aims to make and build the professional careers of MBAs, post gr
aduates and graduates, with a view to enabling them to work effectively in secur
ities trading, risk management, financial management, corporate finance discipli
nes or function as intermediaries.
MILESTONES
July 6, 1996 A report on Inter-connected Market System (ICMS) submitted to th
e Federation of Indian Stock Exchange (FISE).
October 26, 1996 Steering Committee was constituted by FISE at Hyderabad.
January 4, 1997 Pricewater House Coopers,the management consultancy firm, submit
ted a feasibility report and recommended the establishment of ICMS.
January 22, 1998 ISE incorporated as a company limited by guarantee.
November 18, 1998 SEBI grants recognition to ISE.
February 26, 1999 Commencement of trading on ISE.
December 31, 1999 Induction of 450 Dealers commences.
January 18, 2000 Incorporation of ISS as a company limited by share capit
al.
February 24, 2000 SEBI registers ISS for the Capital Market segment of NSE
.
May 3, 2000 Commencement of trading by ISS in the Capital Market segment of
NSE.
January 10 , 2001 Turnover in the Capital Market segment of NSE crosses Rs
. 1000 million per day.
February 28, 2001 Turnover of Rs. 1508.80 million recorded by ISS in the C
apital Market segment of NSE.
May 4, 2001 Internet trading for clients started by ISS for the NSE segment
through DotEx Plaza.
May 19, 2001 ISE’s website, www.iseindia.com, launched.
February 13, 2002 SEBI registers ISS for the Futures & Options segment of
NSE.
May 6, 2002 ISS commences trading in the Futures & Options segment of NSE.
March 12, 2003 ISS admitted as a member of the Equities segment of BSE.
April 1, 2003 DP services through CDSL launched by ISE.
June 21, 2003 First Investor Education Program under the Securities Market Awa
reness Campaign (SMAC) of SEBI conducted at Vashi.
January 9, 2004 Peak turnover of Rs. 3034.90 million recorded by ISS in the Capi
tal Market segment of NSE.
May 17, 2004 First DP branch office opened at Coimbatore by ISE.
July 17, 2004 First Investor Point opened at the Vashi Railway Station Complex
by ISE.
July 24, 2004 Second DP branch opened at New Delhi by ISE.
September 3, 2004 Third DP branch opened at Kolkata by ISE.
December 27, 2004 Trading in the BSE equities segment started by ISS.
September 15, 2005 Approval of ISE’s Corporatisation and Demutualisation Sche
me by SEBI.
October 20, 2005 Switchover to Direct Client Dealing commences in ISS.
November 24, 2005 ISE re-registered as a “for profit” company, limited by shar
es.
November 24, 2005 Board of ISE reconstituted in tune with the Corporatizat
ion and Demutualization provisions.
MISSION
ISE shall endeavor to provide flexible and cost-effective access to mul
tiple markets to its intermediaries across the country using the latest technolo
gy.
OBJECTIVE
• Create a single integrated national-level solution with access to multiple marke
ts by providing high cost-effective service to investors across the country.
• Create a liquid and vibrant national-level market for all listed companies in ge
neral and small capital companies in particular.
• Optimally utilizing the existing infrastructure and other resources of Participa
ting Stock Exchanges, which are under-utilized now.
• Provide a level playing field to small Trading Members by offering opportunity t
o participate in a national market for investment-oriented business.
• Provide clearing and settlement facilities to the Trading Members across the cou
ntry at their doorstep in a decentralized mode.
• Spread demats trading across the country.
BOARD OF DIRECTORS
• Sri K. Rajendran Nair - Chairman, Public Interest Director
• Sri A. K. Mago - Public Interest Director
• Sri H. C. Parekh - Public Interest Director
• Sri K. V. Thomas - Shareholder Director
• Sri K. D. Gupta - Shareholder Director
• Sri A. K. Chakrawal - Shareholder Director
• Sri Debraj Biswal - Shareholder Director
• Sri Dharmendra B. Mehta - Shareholder Director
• Sri P. Sivakumar - Shareholder Director
• Sri Surendra Holani - Trading Member Director
• Sri Rajeeb Ranjan Kumar - Trading Member Director
• Sri P. J. Mathew - Managing Director.
RESEARCH METHODOLOGY AND LITERATURE REVIEW

All information related to the topic needs to be carefully scrutinized to avoid
the risk of biased analysis. Having once identified which information is relevan
t and need to be collected, we will have to define how this will be done.
The Method employed in the investigation depends on the purpose and scope of the
study.
Research Design:
Research design is some statement or specification of procedures for collecting
and analyzing the information required for the solution of some specific problem
. Here, the exploratory research is used as investigation and is mainly concerne
d with determining the trends and returns in Mutual Funds and Bank returns.
Data Collection Methods:
The key for creating useful system is selectivity in collection of data and link
ing that selectivity to the analysis and decision issue of the action to be take
n. The accuracy of collected data is of great significance for drawing correct a
nd valid conclusions from the research.
Sources of Information:
Data available in marketing research are either primary or secondary. Primary Da
ta is not included in this study, only secondary data is taken in to account sin
ce, it is a comparative analysis.
SECONDARY DATA
Secondary data can be defined as - “data collected by someone else for purpose oth
er than solving the problem being investigated”. Secondary data is collected from
external sources which include information from published material of SEBI and s
ome of the information is collected online. The data sources also include variou
s books, magazines, newspapers, websites etc. The organization profile is collec
ted from the Inter –connected Stock Exchange of India Ltd.
TOOLS USED FOR ANALYSIS
TABULATION:
A Table is a systematic arrangement of statistical data in rows and columns. Ro
ws are horizontal arrangements whereas columns are vertical arrangements. Tabula
tion is a systematic presentation of data in a form suitable for analysis and in
terpretation.
PRESENTATION OF DATA:
The impression created by a picture has much greater impact than detailed explan
ation. Statistical data can be effectively presented in the form of diagrams and
graphs. Graphs and Diagrams make complex data simple and easily understandable.
They help to compare related data and bring out subtle data with amazing clarit
y. The diagrams used are as follows.
PIE CHARTS:
The Pie charts are used to represent a component on a percentage basis. Each par
t of a component is shown as the percentage of whole component. Pie Charts are
used to represent the percentage share of Equity, Debt & Money Market component
s of Balanced Growth Fund.
BAR DIAGRAMS:
The Bar Diagrams are used specifically for categorical data series. They consist
of the group of equidistant rectangles, one for each group or category of data
in which the values of magnitudes are represented by length or height of rectang
les.
OBJECTIVES OF THE STUDY

(1) To study and analyze Open-Ended Balanced growth schemes of three Mutual
Funds.
(2) To compare the performance of funds and rank each of them according to t
heir performance.
(3) To identify and to analyze the diversified investment pattern of funds i
n various sectors.
(4) To identify the risk and returns associated with mutual fund investment.
(5) To suggest the investors and companies to channelize their money as pro
fitable savings.
SIGNIFICANCE OF THE STUDY
(1) The Study presents basic concept and trends in the Mutual fund Industry.
(2) The Study enables a fresh investor to understand easily the various bene
fits offered by Mutual Funds and their working in the Market.
(3) The Study provides a clear idea on growth of Mutual Funds from past to t
he present scenario and its scope in the future.
(4) The Study gives a brief idea on the Open- Ended Balanced Growth Schemes
of three major organizations.
(5) At the end of the study, one can conclude what type of investments would
be ideal with reference to the risk taking abilities of the investors and which
type of investments would suit their financial needs and goals.
NEED FOR THE STUDY

The basic purpose of the study is to give broad idea on Mutual Funds and to anal
yze various schemes to highlight the diversified investment that Mutual Fund off
ers to its investors. Through this study one can understand how to invest in Mut
ual Funds and turn the raw investment into ripen fruits by taking wise decisions
, taking the risk factors into account.
SCOPE OF THE STUDY
The Study covers the basic meaning, concept, structure and the organization of
the Mutual Funds. The Study is restricted to explain only the returns provided
by the Mutual Funds from various schemes of SBI, UTI and LIC. Under this study i
nvestments relating to Open-Ended Balanced Growth Fund of Mutual Funds are taken
into account. The tools used for graphical representation of data include Pie c
harts, Bar diagrams, and other accessories. The Study is made to equip the inves
tors with the information, which will enable them to choose the type of Scheme d
epending upon their investing objective and respective Risk return grid.
LIMITATIONS
The data that is considered for the Comparative analysis of various Mutual Funds
returns of Open-Ended Balanced Growth Fund are only for a period of five year (
31st Dec, 2006 to 31st Dec, 2010) and performance during this period may not be
same in future.
Mutual Funds of only three organizations are taken into account for analyzing th
eir performance, because the time duration of the project is short and limited.
The performances of these funds since inception are not considered.
The study is restricted to Open-Ended Balanced Schemes only. The core details a
re untouched.
The data taken into account for analysis is very general. Confidential data is i
gnored as it is highly sensitive. As a result the information presented in the r
esearch report is limited.
LITERATURE REVIEW
1. Grinblatt and Titman [1994] conducted a study that analyzed the performa
nce evaluation techniques and the determinants of mutual fund performance, inclu
ding the effect of the load status on performance. Their data consisted of 279 m
utual funds between 1974 and 1984. Their findings suggest that there is no stati
stically significant relationship between performance and expense ratios and net
asset values, but there is a statistically significant relationship between per
formance and both management fees and loads.
2. Drom and Walker [1994] reviewed international mutual funds by using a po
oled cross-sectional/time series regression model to determine whether load/no-l
oad status, asset size, expense ratios, and turnover rate were related to unadju
sted and risk-adjusted returns. They found no performance difference between no-
load and load funds when using unadjusted and risk-adjusted returns. In fact, pe
rformance was not related to asset size, expense ratio, turnover, or load status
. Their conclusion is that there is no reward for paying a load fee when investi
ng in mutual funds. They assert that mutual funds in the aggregate, whether load
or no-load, earn comparable returns. Their analysis does not support the common
marketing argument that load funds result in incentives for better investment p
erformance.
3. Ippolito [1989] focused on evaluating the overall mutual fund industry a
nd how the performance of a random selection of mutual funds compared to an inde
x fund. Ippolito also considered turnover rates. The data in this study consiste
d of 143 mutual funds during the period of 1965-1984. The results of this study
indicate that mutual funds with higher turnovers, fees, and expenses earn rates
of return sufficiently high to offset the higher charges. These results were con
sistent with the notion that mutual funds are efficient in their trading and inf
ormation-gathering activities.
4. James L. Kuhle and Ralph A. Pope analyzed the load vs. no-load issue in
relation to the investment horizon. They hypothesized that there is an investor’s
indifference period. That is, assuming that there is no significant difference i
n risk-adjusted gross return performance between load and no-load funds and that
annual expenses are greater for no-load funds than load funds, a point is reach
ed in which the returns for a no-load and load funds are the same. Further, give
n an expanded investment horizon, it was hypothesized that the overall performan
ce of the load fund investor would surpass that of the no-load investor. The res
ults of this study indicate that there is no statistical difference in the magni
tude of the expense ratio between load and no-load funds, with no-loads having a
higher average expense ratio. However, the difference in average net returns wa
s not statistically significant.
5. Lybos Pastor and Robert F. Stambaugh (2000) developed and applies a fram
ework in which beliefs about pricing models and managerial skill play roles in b
oth performance evaluation and investment decisions. Evaluating and Investing in
Mutual Funds combines both data and Judgement. Using a sample of 2,069 U.S. equ
ity mutual funds, they demonstrate that the returns on non-benchmark assets cont
ain substantial information about fund performance. Compared to the usual estima
tes, the estimates of alpha that incorporate the information in the non-benchmar
k assets tend to exhibit less variation across different specifications of the b
enchmarks. An important practical motivation for mutual-fund performance evaluat
ion is to help an investor decide in which funds to invest.
6. Chen, (1984) performed a cross-sectional analysis focusing on security s
election and market timing abilities of mutual fund managers. This study also in
cluded an analysis of the relationship of load vs. no-load status to overall per
formance. They found that there was no difference between load and no-load funds
when selectivity is considered. Funds with load charges performed no better tha
n those with no-load charges from the period January 1972 to March 1984. Consequ
ently, investors in load funds did worse than those in no-load funds for the giv
en time period.
7. Spuma M. Rao (1996) specifies that an investment company which stands r
eady at all times to purchase its own shares at or near their net asset value is
termed an open-end investment company (or open-end mutual fund). Most of these
companies, commonly known as mutual funds, also continuously offer new shares to
the public for a price at or near their net asset values. Hence their capitaliz
ation is open, with the number of shares outstanding changing on a daily basis.
Some open end companies, known as no-load funds, sell their shares at a price eq
ual to net asset value. Others known as load funds, offer shares through brokers
or other selling organizations, which add a percentage load charge to the net a
sset value. The percentage charged is usually smaller, the greater the amount in
vested, and by law cannot exceed 8.5% of the amount invested. This study examine
s the empirical relation between 12b-1 plans and the mutual fund expense ratios
in a cross sectional sample of 964 mutual funds. By developing a model of factor
s influencing expense ratios, the impact of 12b-1 plan was examined simultaneous
ly with other factors such as size, age, objective, load vs no-load status. The
main conclusion is that the 12b-1 plan did not offer economic value to sharehold
ers; in fact, the existence of the plan resulted in increased expense ratio.
8. Arnold L. Redman, N.S. Gullett and Herman Manakyan (2000) demonstrated t
hat the Investors can choose to purchase shares in various domestic funds or fur
ther diversify their holdings by investing a portion of their portfolios in inte
rnational and/or global mutual funds. The financial success of an internationall
y diversified mutual fund portfolio depends partly on the ability of the total p
ortfolio to generate risk-adjusted returns equal to or greater than the domestic
stock market. Success is also determined by the ability of the international fu
nds within the portfolio to match or outperform market benchmarks. Generally, th
ere are potential diversification benefits to adding global funds to portfolios
of domestic mutual funds. Mutual funds that invest solely in foreign securities
or in combinations of U. S. stocks outperformed the U. S. market over the past t
en years. A portfolio of funds investing in Pacific Rim issued stocks tended to
have greater risk-adjusted returns compared to a portfolio of funds investing in
European stocks and only a small relationship to returns in the U.S. stock mark
et. It is also interesting to note that the relative risk-adjusted performance o
f U.S. and international equity funds may differ substantially depending on the
period examined
9. Haslem, Baker and Smith (2008) investigate the relation between performa
nce and expense ratios of 1,779 domestic, actively managed retail equity funds.
They conclude that superior performance, on average, occurs among large funds wi
th low expense ratios, low trading activity and no or low front-end loads.
10. Massa and Patgiri (2008) studied the impact of contractual incentives on
the performance of mutual funds. They found that high incentive contracts induc
e managers to take more risk and actually reduce the funds’ likelihood of survival
. These funds, even with high risk, deliver higher risk-adjusted returns. The to
p incentive quintile of funds outperforms the bottom quintile by 2.70% per year.
Moreover, high-incentive winner funds from one year have a positive alpha of 0.
41% per month in the following year. Focusing on funds’ holdings, they show that a
ctive portfolio rebalancing is the main channel through which incentives increas
e performance.
11. Yan (2008) examined U.S. actively managed funds from 1993 to 2002 to det
ermine the effect of liquidity and investment style on the relation between fund
size and fund performance. He found a significant inverse relation between fund
size and fund performance, especially those funds holding less liquid portfolio
s.
12. Ang, Chen, and Lin (1998) explored equity mutual fund management reactio
n to poor performance using data beginning in 1994. They observed that managemen
t had good reason to be concerned about poor performance, as management compensa
tion is based upon the amount of money under management and performance of the f
und. Their analysis explores possible management reactions to poor performance.
Management could trade more often, reduce costs, take more risks, or adopt a mor
e aggressive marketing strategy. They found that the management of lower perform
ing funds did more trading and had greater expense ratios than the management of
funds that had good performance. We examine these issues and contribute to the
understanding of mutual fund performance by studying a later time period with a
larger sample and by including xed income as well as equity funds. We also contri
bute by considering the role of economies of scale both at the level of the indi
vidual fund and the level of the fund family.
13. Malhotra and McLeod (1997) argue that investors ignore aspects of fund m
anagement other than performance. They also argue that this behavior is suboptim
al in that net performance after consideration of fees and taxes is a more appro
priate measure. They found that fund expenses and tax costs do signi cantly reduce
returns. They found that tax costs are of greater magnitude than the costs of m
anaging the fund.
14. Droms and Walker (2001) studied 151 mutual funds over a 20-year period f
ound no long-term persistence in returns, expenses, or turnover rates. They exam
ine a longer time period than this study, but a smaller sample of investment com
panies. Their ndings could support various explanations. Changes in returns, expe
nses, and turnover rate could be due to changes in fund management or management
philosophy. The possibility that the quality of oversight from the independent
trustees varies over time.
15. Dowen, R. J., & Mann, T. (2004) studied some aspects of mutual fund beha
vior. They found that over time, the managers of larger funds and larger fund fa
milies produce greater returns at lower cost. Much of the difference in performa
nce is related to differences in portfolio objective and may be due to the time
period studied. The mutual fund industry is a concentrated industry with nearly
three fourths of the equity assets and more than 65% of the xed income assets hel
d by the largest size. These larger funds had the lowest tax cost ratio. For the
individual investor, the conclusion that larger funds that are members of large
fund families are more likely to produce superior returns at lower cost.
References:
1. Grinblatt, Mark, and Sheridan Titman, “A Study of Monthly Mutual Fund Returns a
nd Performance Evaluation Techniques,” Journal of Financial and Quantitative Analy
sis, Vol. 29, No. 3, September 1994, pp. 419-444.
2. Droms, William G., and David A Walker, “Investment Performance of International
Funds,” The Journal of Financial Research, Vol. XVII, No. 1, Spring 1994, pp. 1-1
4.
3. Ippolito, Richard A., “Efficiency with Costly Information: A Study of Mutual Fu
nd Performance, 1965-1984,” The Quarterly Journal of Economics, Vol. CIV, February
1989, pp.
4. James L. Kuhle and Ralph A. Pope “A Comprehensive Long term Performance analysi
s of Load Vs No-Load Mutual Funds” Journal of Financial and Strategic Decisions Vo
lume 13 Number 2 Summer 2000, p.1-10
5. Lubos Pastor and Robert F. “Evaluating and Investing in Equity Mutual Funds”
Stambaugh May 18, 2000 p.1-49
6. Chen, Carl R., “A Cross-Sectional Analysis of Mutual Funds’ Market Timing and Sec
urity Selection Skill,” Journal of Business and Finance Accounting, Vol. 19, No. 5
, September 1984, p. 659-675.
7. Spuma M. Rao “ Does 12B-1 Plan offer Economic Value to Shareholders on Mutual f
unds? ,”The Journal Of Financial And Strategic Decisions Volume 9 Number 3 Fall 19
96 p. 1-36
8. Arnold L. Redman*, N.S. Gullett* and Herman Manakyan “ The Performance of Globa
l and International Mutual Funds” Journal of Financial and Strategic Decisions Vol
ume 13 Number 1 Spring 2000 p.75-84
9. Haslem, John A., Baker and Smith, “Performance and Characteristics of Actively
Managed Retail Equity Mutual Funds with Diverse Expense Ratios,” Financial Service
s Review, Vol 17, Issue 1, Spring 2008, pages 49-68.
10. Massa, Massimo and Rajdeep Patgiri, “Incentives and Mutual Fund Performance: H
igher Performance or Just Higher Risk Taking?” The Review of Financial Studies, Vo
l. 22, Issue 5, May 2009, pages 1777-1815.
11. Yan, Xuemin, “Liquidity, Investment Style, and the Relation Between Fund Size
and Fund Performance,” Journal of Financial and Quantitative Analysis, Vol. 43, No
. 3, September 2008, pages 741-768.
12. Ang, J., Chen, C. R., & Wuh Lin, J. (1998). Mutual fund managers’ efforts and
performance. Journal of Investing, 7, 68 –75.
13. Malhotra, D. K., & McLeod, R. W. (1997). An empirical analysis of mutual fun
d expenses. Journal of Financial Research, 20, 175–190.
14. Droms, W., & Walker, D. A. (2001). Persistence of mutual fund operating cha
racteristics: Returns, turnover rates,and expense ratios. Applied Financial Econ
omics II, 457– 466.
15. Dowen, R. J., & Mann, T. (2004). Mutual fund performance,management behavior
, and investor costs. Financial Services Review, 13, 79–9
Data analysis and interpretation

SBI MUTUAL FUNDS
SBI BALANCED FUND
Types of scheme : Open Ended
Nature : Equity & Debt
Option : Growth
Inception date : Oct 9, 1995
Face value : 10
Fund size in Rs. Cr : 520.13 as on Nov 30, 2010
Minimum investment : 1000
Entry load : Entry Load is 0%.
Exit load : If redeemed bet. 0 Year to 1 Yea
r; Exit
load is1%.
OBJECTIVE:-
To provide investors long term capital appreciation along with the liqui
dity of an open-ended scheme by investing in a mix of debt and equity. The schem
e will invest in a diversified portfolio of equities of high growth companies an
d balance the risk through investing the rest in a relatively safe portfolio of
debt.
ASSET ALLOCATION (%)

EQUITY 68.19
DEBT 21.29
CASH & EQUIVALENT 10.52
TOP 10 HOLDINGS
Stock Sector P/E Percentage of Net Assets Qty Value Percenta
ge of Change with last month
Cash Current Assets NA 10.52 NA 54.72 174.78
GOI Sovereign NA 8.59 NA 44.68 27.43
Bajaj Finance Ltd. NBFC 17.1 5.84 NA 30.38 -0.44
Reliance Industries Ltd Petrol, Gas 17.46 3.6 189,983 18.72 -10.1
Bharti Airtel Ltd Telecom 16.15 3.44 496,808 17.89 10.66
Larsen & Toubro Limited Engi and Cap Goods 34.92 3.37 89,887 17.53
-3.69
ICICI BANK LTD. Banks 30.06 3.19 145,278 16.59 136.57
ITC Ltd FMCG 29.32 2.65 801,833 13.78 -0.23
State Bank of India Banks 19.48 2.65 46,065 13.78 -5.01
Tata Motors Ltd Auto & Ancillaries 40.57 2.62 110,348 13.63 17.88
SECTOR ALLOCATION
Auto & Auto Ancillaries 3.29
Banks 8.56
Construction and Infrastructure 1.72
Consumer Durables and Electronics 2.11
Current Assets 10.52
Custodial, Depository, Exchanges and rating agencies 1.5
Electronics & Electrical Equipments 2.44
Engineering and Capital Goods 7.45
FI 3.89
FMCG 2.65
HFC 3.5
Media and Entertainment 1.94
NBFC 7.72
Paper and Natural fibre 1.01
Petroleum, Gas and petrochemical products 5.48
Pharmaceuticals & Biotechnology 4.49
Power & Control equipment Manufacturer 2.05
Power Generation 0.71
Power Transmission 1.79
Realty 0.94
Retailers 3.65
Software and Consultancy Services 6.6
Sovereign 8.59
Steel and Ferrous Metal 1.03
Telecom Services 3.44
Tourism and Hospitality 1.32
Utilities - Gas, Power 1.61
SECTOR ALLOCATION(%)
SBI OPEN ENDED BALANCED GROWTH FUND

YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 48.46 28.73 40.67 33.84 31.44
PERFORMANCE OF THE FUND (2006-2010)
RISK&RETURN
Scheme Performance (%) as on Dec 24, 2010
1 Month 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception
-0.15 -1.53 7.71 11.83 1.54 15.07 16.04
LIC MUTUAL FUNDS

LIC BALANCED FUND
Option : Growth
Inception date : Feb 3, 1999
Face value : 10
Fund size in Rs. Cr : 26.73 as on Nov 30, 2010
r; Exit
load is
1%.
Objective:-
The Scheme aims to provide regular flow of dividend and capital apprecia
tion especially when the units are held for a longer period.
ASSET ALLOCATION
Equity Debt Cash & Equivalent
66.64 19.15 14.21
SECTOR ALLOCATION
TOP 10 HOLDINGS
Magma Shrachi Finance Ltd. NBFC 11.95 14.98 40 4 -0.75
Cash Current Assets NA 14.21 NA 3.8 241.21
Hindustan Lever Ltd FMCG 31.68 7.27 65,000 1.94 1.48
Hindalco Industries Ltd Non Ferrous metals 19.15 6.17 80,000 1.65
-2.02
Larsen & Toubro Limited Engi Cap Goods 34.92 5.84 8,000 1.56 -3.55
Gas Authority Of India Ltd Petroleum, Gas 17.37 5.5 30,000 1.47
19.96
Ranbaxy Laboratories Ltd Pharmaceuticals & Biotechnology 15.97 5.34
25,000 1.43 -1.34
HCL Technologies Ltd. Software and Consultancy Services 29.01 5.29
35,000 1.41 74.42
Industrial Development Bank of India Ltd. Banks 12.51 5.19 85,000
1.39 -3.82
PTC India Ltd. Utilities - Gas, Power 36.24 4.51 100,660 1.2 -11.03
Banks 11.65
Construction materials 2.63
Current Assets 14.21
FI 6.96
FMCG 7.27
Mining and Minerals 4.61
NBFC 14.98
Non Ferrous metals 6.17
LIC OPEN ENDED BALANCED FUND

YEAR 31-03-2006 31-03-2007 31-03-2008 31-03-2009 31-03
-2010
NAV 19.8465 19.1692 22.4469 14.458 24.9041
PERFORMANCE OF MUTUAL FUND (2006-2010)
UTI BALANCED FUND
UTI BALANCED FUND
Option : Growth
Inception date : Jan 20, 1995
Face value : 10
Fund size in Rs. Cr : 0 as on Nov 30, 2010
r; Exit load is 1%
Objective:-
Aims to invest in portfolio of equity/equity related securities and fixed income
securities (debt & money market instruments) with a view to generating regular
income together with capital appreciation.
ASSET ALLOCATION
74.05 20.25 5.7
TOP 10 HOLDINGS
Shriram Transport Finance Company Ltd NBFC 16.78 5.21 NA NA
NA
Emmar MGF Land Pvt. Ltd. Realty NA 5.03 NA NA NA
Infosys Technologies Ltd Software and Consultancy Services 29.54
2.99 NA NA NA
Reliance Industries Ltd Petroleum, Gas and petrochemical products 17.46
2.69 NA NA NA
Bharti Airtel Ltd Telecom Services 16.15 2.55 NA NA
NA
State Bank of India Banks 19.48 2.48 NA NA NA
Housing Development Finance Corporation Ltd HFC 32.5 2.46 NA
NA NA
ICICI BANK LTD. Banks 30.06 2.42 NA NA NA
Tata Consultancy Services Ltd. Software and Consultancy Services 33.12
2.35 NA NA NA
Axis Bank Ltd Banks 19.34 2.29 NA NA NA
SECTOR ALLOCATION (%)
Banks 17.1
Current Assets 0.37
Diversified 1.18
FI 0.99
FMCG 1.92
Food & Food Processing, Beverages 1.1
HFC 2.46
NBFC 11.11
Realty 6.48
Retailers 1.03
Shipping 1.51
Sugar 1.28
Textiles 0.17
UTI OPEN ENDED BALANCED FUND

YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 74.18 44.81 60.53 52.49 50.63
RISK&RETURN
0.04 -0.44 9.25 15.5 4.33 13.69 14.79
RETURNS
Mean -0.34 Treynor -0.48
Standard Deviation 3.61 Sortino -0.22
Sharpe -0.12 Correlation 0.93
Beta 0.91 Fama -0.05
SBI MUTUAL FUNDS
SBI EQUITY MUTUAL FUND
Scheme : Open Ended
Nature : Equity
Option : Growth
Face value : 10
Fund size : 459.25 as on Nov 30, 2010
r; Exit load is1%.
Objectives:-
To provide the investor Long-term capital appreciation by investing in high grow
th companies along with the liquidity of an open-ended scheme through investment
s primarily in equities and the balance in debt and money market instruments.
ASSET ALLOCATION
92.49 0 7.51
TOP 10 HOLDINGS
State Bank of India Banks 19.48 7.17 110,046 32.93 112.47
Coal India Ltd. Mining and Minerals 52.89 4.95 NA 22.73 NA
Oil & Natural Gas Corpn Ltd Petroleum, Gas and petrochemical products
16.81 4.62 170,379 21.22 -4.28
HDFC Bank Ltd Banks 31.38 4.49 90,226 20.62 36.35
Bharti Airtel Ltd Telecom Services 16.15 4.32 550,868 19.84
10.87
Cadila Healthcare Ltd. Pharmaceuticals & Biotechnology 24.66 3.51 209,836
16.12 29.52
Bharat Heavy Electricals Ltd Power & Control equipment Manufacturer 22.53
3.36 70,012 15.43 -9.99
Page Industries Ltd Garments, Fashionwear, Lifestyle 32.87 2.83
89,540 13 NA
Cipla Ltd Pharmaceuticals & Biotechnology 27.87 2.77 370,555 12.72
-2.58
SECTOR ALLOCATION
Auto & Auto Ancillaries 10
Banks 15.89
Chemicals 2.13
Current Assets 7.51
FMCG 2.61
Garments, Fashionwear, Lifestyle 2.83
NBFC 2.29
Textiles 1.81
Transportation, Supply Chain and Logistics Services 1.93
SBI OPEN ENDED EQUITY MUTUAL FUND

YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 39.87 20.49 33.05 26.61 27.84
RISK & RETURN
1.56 -0.81 13.16 14.51 -4.83 11.85 11.54
LIC MUTUAL FUNDS

LIC EQUITY MUTUAL FUNDS
Scheme : Open Ended
Nature : Equity
Option : Growth
Inception date : Feb 15, 1999
Face value : 10
r; Exit load is 1%.
Objective:-
The primary objective of the scheme is to obtain maximum possible capital growth
consistent with reasonable levels of safety and security by investing the funds
mainly in equities and also in debts and other permitted instruments of capital
and money market
ASSET ALLOCATION
96.7 0 3.3
TOP 10 HOLDINGS
8.53 88,750 8.76 -9.92
5.94 20,000 6.1 2.71
ICICI BANK LTD. Banks 30.06 5.57 50,000 5.72 -1.52
Bharat Heavy Electricals Ltd Power & Control equipment Manufacturer 22.53
4.19 19,500 4.3 -9.84
Larsen & Toubro Limited Engineering and Capital Goods 34.92 4.08 21,500
4.19 -15.41
Housing Development Finance Corporation Ltd HFC 32.5 4.06 60,551
4.17 0.29
ITC Ltd FMCG 29.32 3.65 219,194 3.75 22.27
Kotak Mahindra Bank Ltd. Banks 48.05 3.24 70,000 3.33 2.34
Banks 21.02
Current Assets 2.37
Fertilizers, Pesticides & Agrochemicals 0.22
FI 1.78
FMCG 3.65
HFC 4.06
Realty 0.03
NAV
YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 24.9041 14.458 22.4469 19.1692 19.8465
Risk & Return

1.56 -0.81 13.16 14.51 -4.83 11.85 11.54
UTI MUTUAL FUNDS
UTI EQUITY MUTUAL FUNDS
Scheme : Open Ended
Nature : Equity
Option : Growth
Inception date : Apr 20, 1992
Face value : 10
Fund size : 0 as on Nov 30, 2010
r; Exit load is 1%.
Objective
The principal investment objective is to provide long term capital appreciation
through investment in the securities market in India.
ASSET ALLOCATION
95.86 1.04 3.1
TOP 10 HOLDINGS
4.49 NA NA NA
4.05 NA NA NA
3.97 NA NA NA
Tata Motors Ltd Auto & Auto Ancillaries 40.57 3.84 NA NA NA
Sun Pharmaceuticals Industries Ltd Pharmaceuticals & Biotechnology 37.4
3.75 NA NA NA
Axis Bank Ltd Banks 19.34 3.63 NA NA NA
Larsen & Toubro Limited Engineering and Capital Goods 34.92 3.35 NA
NA NA
Lupin Ltd. Pharmaceuticals & Biotechnology 32.91 2.77 NA NA
NA
16.81 2.75 NA NA NA
Banks 20.44
Chemicals 0.58
Current Assets 3.1
FI 0.35
FMCG 3.75
Green Transportation 0.89
NBFC 0.02
Printing, Publishing and Packaging 0.8
Retailers 1.6
Sugar 2.59
UTI OPEN ENDED EQUITY GROWTH FUND
YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 48.39 26.67 38.22 30.7 32.12
RISK & RETURN

1.21 1.48 15.34 19.07 7.52 17.04 10.45
SBI MUTUAL FUNDS
SBI INDEX FUND
Scheme : Open Ended
Nature : Equity
Option : Growth
Face value : 10
Entry load : Amount greater than 0 then and Amount greater
than then Entry L
oad is 0%. and Amount greater than 0 then and Amount greater than 0 then Entry l
oad is 0%.
Exit load : If redeemed bet. 0 Days to 7 Days; If redeemed bet. 0 D
ays to 7 Days; If redeemed bet. 0 Days to 7 Days; Exit load is 1%.
Objective
The scheme will adopt a passive investment strategy. The scheme will invest in s
tocks comprising the S&P CNX Nifty index in the same proportion as in the index
with the objective of achieving returns equivalent to the Total Returns Index of
S&P CNX Nifty index by minimizing the performance difference between the benchm
ark index and the scheme. The Total Returns Index is an index that reflects the
returns on the index from index gain/loss plus dividend payments by the constitu
ent stocks.
ASSET ALLOCATION
99.03 0 0.97
TOP 10 HOLDINGS
9.53 19,548 1.93 -9.64
8.4 5,566 1.7 3.1
1.19 -3.86
ITC Ltd FMCG 29.32 5.15 60,569 1.04 0.66
1.03 0.69
3.11 5,843 0.63 2.65
11.29
Banks 20.41
Current Assets 0.97
FI 1.22
FMCG 6.93
HFC 5.07
NBFC 0.42
Realty 0.64
SBI OPEN ENDED INDEX GROWTH FUND
YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 44.609 25.8283 41.577 34.8498 30.4901
RISK & RETURN

2.36 -0.36 13.02 16.15 -1.1 15.22 20.05
LIC MUTUAL FUNDS
LIC INDEX FUND
Scheme : Open Ended
Nature : Equity
Option : Growth
Inception date : Dec 6, 2002
Face value : 10
Exit load : If redeemed bet. 0 Year to 1 Year; Exit load is 1%.
OBJECTIVE
An open ended Index linked equity scheme seeking to provide capital growth by in
vesting in index stocks.
ASSET ALLOCATION
99.88 0 0.12
TOP 10 HOLDINGS
9.6 63,266 6.24 -15.08
8.46 18,013 5.5 -3.02
ICICI BANK LTD. Banks 30.06 7.55 42,957 4.91 -7.15
3.87 -9.22
ITC Ltd FMCG 29.32 5.22 197,097 3.39 -4.74
3.32 -5.76
HDFC Bank Ltd Banks 31.38 4.66 13,252 3.03 -4.85
3.14 18,968 2.04 -3.52
4.39

Banks 20.55
Current Assets 0.12
FI 1.14
FMCG 7.02
HFC 5.12
NBFC 0.42
Realty 0.64
LIC OPEN ENDED INDEX GRPWTH FUND

YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 28.918 17.2522 27.7435 23.397 21.9931
RISK & RETURN

2.59 -0.25 12.96 16.29 -2.27 12.54 16.56
UTI MUTUAL FUNDS

UTI INDEX FUND
Scheme : Open Ended
Nature : Equity
Option : Growth
Inception date : Jun 1, 1998
Face value : 10
Fund size : 0 as on Nov 30, 2010
Exit load : If redeemed bet. 0 Year to 1 Year; Exit load is
1%.
Objective
Aims to Invest in securities of companies comprising the BSE Sensex in same weig
ht age as that of BSE Sensex with the intention of minimizing the performance di
fference between the Sensex and Fund.
ASSET ALLOCATION
99.96 0.01 0.03
TOP 10 HOLDINGS
11.53 NA NA NA
9.66 NA NA NA
Larsen & Toubro Limited Engineering and Capital Goods 34.92 6.92 NA
NA NA
ITC Ltd FMCG 29.32 5.98 NA NA NA
Housing Development Finance Corporation Ltd HFC 32.5 5.87 NA
NA NA
State Bank of India Banks 19.48 5.55 NA NA NA
HDFC Bank Ltd Banks 31.38 5.5 NA NA NA
4.1 NA NA NA
16.81 3.47 NA NA NA

Banks 19.58
Current Assets 0.03
FMCG 8.1
HFC 5.87
Petroleum, Gas and petrochemical products 15
Realty 0.85
UTI OPEN ENDED INDEX GROWTH FUND

YEAR 31-03-2010 31-03-2009 31-03-2008 31-03-2007 31-03-20
06
NAV 53.9695 29.9861 48.6347 41.0394 35.2881
RISK & RETURN
3.17 0.17 13.48 16.15 0.06 16.53 15.65
PERFORMANCE EVALUATION BALANCED FUND

NAVt-1 = march 2006
NAVt = march 2010
SBI OPEN ENDED BALANCED FUND
NAVt-1 NAVt Dt(NAVt- NAVt-1)
31.44 48.46 17.02
NAVt + Dt
Appling the formula we get : ____________ -1
NAVt-1
48.46 + 17.02
= _________________ -1
31.44
=1.0827 X 100
=108.27
LIC OPEN ENDED BALANCED FUND
24.9041 19.8465 -5.0576
19.8465 + (- 5.0576 )
= -------------------------- -1
24.9041
14.7889
= ------------------------- -1
24.9041
= - 0.406166 X 100
= - 40.617
UTI OPEN ENDED BALANCED FUND
50.63 74.18 23.55
74.18 + 23.55
= -------------------------- -1
50.63
= 1.93027 - 1
= 0.93027 X 100
= 930.27
SBI EQUITY MUTUAL FUND

27.84 39.87 12.03
39.87 + 12.03
= -------------------------- -1
27.84
= 4.31- 1
= 30314 X 100
= 331.4
LIC EQUITY MUTUAL FUND
24.9041
19.8465 -5.0576
24..9041 + (-5.0576)
= -------------------------- -1
19.8465
= 0.50967 X 100
= 50.967
UTI EQUITY MUTUAL FUND

32.12 48.39 -5.0576
48.39 + 16.27
= -------------------------- -1
32.12
= 1.01307 X 100
= 101.307
SBI INDEX FUND
30.4901 44.609 14.1189
44.609 + 14.1189
= -------------------------- -1
30.4901
= 0.92613 X 100
= 92.613
LIC INDEX FUND
21.9931 28.918 6.9249
28.918 + 6.9249
= -------------------------- -1
21.9931
= 0.62973X 100
= 62.973
UTI INDEX FUND

35.2881 53.9695 18.6814
53.9695 + 18.6814
= -------------------------- -1
35.2881
= 1.05879 X 100
= 105.879
FUND PERFORMANCE RANKING:.

NAME OF THE FUND NAV RANK
SBI OPEN-ENDED FUND 331.4 1
LIC OPEN-ENDED FUND 50.967 3
UTI OPEN-ENDED FUND 101.307 2
Findings, suggestions and conclusion

FINDINGS
The Biggest advantage with Mutual Funds is that the investor don’t need huge a
mount to be invested in all his favorite stocks and bonds. Most Mutual Funds hav
e a minimum investment of Rs.1000 to Rs.5000.
As most of the investors in the market have less risk taking capabilities, t
he Balanced fund investments are suitable one.
The Balanced fund investments are a combination of Equity, Debt & Cash/Call.
As such, the investments are diversified and the risk is balanced.
The Balanced Fund Investments provide, steady and assured returns to the inv
estors. This is one of the important reasons, for choosing the balanced investme
nts.
It is evident from the analysis that ‘The SBI Open-Ended Balanced Growth Fund’
outperformed all the other four. It recorded a Net Asset Value of 331.4%
NAV’s are used to know the performance of the funds. By using this we can say
that the SBI Liquid Funds are performing better than the others.
Balanced fund schemes invest in both Equity (like shares) and Debts ( like f
ixed deposits) where as Liquid fund schemes invest only in Debts.
In Treynor’s measure of Liquid Fund the SBI Liquid Funds is showing a rapid gr
owth where as others (UTI and LIC) has been in a decline stage.
In Sharpe’s measure of Liquid Fund except the SBI Liquid Fund all the other ar
e showing the negative returns.
In Treynor’s measure of balanced fund all the three are having a similar value
s there is only little variation in this also the SBI is having a better a retur
n.
In Sharpe,s measure of Balanced Fund all the three are giving a negative ret
urns. Which shows that in this we cannot expect the returns constantly.
The Liquid funds are more beneficial than the Balanced Funds since it will ha
ve constant returns.
The Balanced fund investments are a combination of Equity, Debt & Money marke
ts. As such, the investments are diversified and the risk is balanced.
The investors who are interested in taking the risks and earning the higher
returns will invest in the Balanced Funds.
SUGGESTIONS
• Mutual funds are a relatively less expensive way to invest compared to directly
investing in the capital markets. Therefore investment in Mutual funds is advisa
ble for small investors also.
• Systematic investment plan in Mutual Funds is the best tool for sound investment
to small investors who prefer investments in installments.
• Technology used for servicing of investors and investment decision making is poo
r and general efficiency and timeliness are lacking i.e. telex, telephone and co
mmunication systems are poor and antiquated. So, it is suggested to use the tech
nology through wide decisions can be made.
• Liquid funds will be invested in Debts in which the returns will be constant. So
, it is better to invest in Liquid funds in which we can expect the returns even
in the Bearish period.
• Balanced funds will be invested in Debts, Equity and the others (cash & equivale
nts) in which the returns will not be constant. In this case it will be better i
f we invest in bullish period only
• It is important to select the fund carefully. The most important factor while se
lecting a fund is the suitability. A fund may be best available in the market if
it doesn’t match the requirement, skip the fund.
• Diversification is the best strategy to mitigate the downside risk in an investm
ent portfolio. Investments should be made in various funds so that one is expose
d to all market capitalizations.
CONCLUSION
The information in this project report will provide the investors the basic know
ledge about Mutual Funds and enable them to choose the best investments suiting
their risk/return profile. Basing on the information in this project, recommenda
tions made to investors are as follows:-
Mutual funds provide regular and steady income to investors.
Systematic investment plan in Mutual Funds is the best tool for sound investment
to small investors who prefer investments in installments.
Liquidity, transparency, well regulated and flexibility are some of the features
of Mutual funds which is very advantageous to investors.
The entry load and exit load in Mutual Funds is very low which does not affect t
he ultimate yields.
Safety of funds & positive rate of return over inflation are the basic two needs
of traditional investor. Mutual Fund is well equipped to cater to these basic d
esires of investors.
BIBLIOGRAPHY
BOOKS
1. Thomas S Y Ho: Security valuation, Oxford University Press, New Delhi, 2009 2
. S.Kevin: Security Analysis and Portfolio Management, PHI Learning, New Delhi,
2009
2. Punithavathy Pandian: Security Analysis and Portfolio Management, Vikas Publi
shing House, New Delhi, 2009
3. Sudhendra Bhat: Security Analysis Portfolio Management, Excel Books, New Delh
i, 2009.
4. Shashi K Gupta: Security Analysis Portfolio Management, Kalyani Publishers, N
ew Delhi, 2010
NEWS PAPERS
The Economic Times
The New Indian Express
MAGAZINES
Business World
WEBSITES
www.mutualfundsindia.com
www.stockholding.com
www.moneypore.com
www.amfiindia.com
www.moneycontrol.com

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INTRODUCTION

Mutual Funds are professionally managed pool of money from a group of in

RISK RETURN GRID

Medium Partially Debt, Partially Equity Balanced Funds, some Diversified

COST INVOLVED IN MUTUAL FUNDS

Back end load:

Builds Investment Kitty:

Redemption Price = Application NAV * (1 – exit Load, if any)

Example for calculation of redemption Price

3. Facilitating company growth:-Companies view acquisitions as an opportunity to

FUNCTIONING OF STOCK EXCHANGE:

Laws governing capital market

RESEARCH METHODOLOGY AND LITERATURE REVIEW

OBJECTIVES OF THE STUDY

NEED FOR THE STUDY

Data analysis and interpretation

ASSET ALLOCATION (%)

SBI OPEN ENDED BALANCED GROWTH FUND

LIC MUTUAL FUNDS

LIC OPEN ENDED BALANCED FUND

UTI OPEN ENDED BALANCED FUND

SBI OPEN ENDED EQUITY MUTUAL FUND

LIC MUTUAL FUNDS

Risk & Return

RISK & RETURN

RISK & RETURN

SECTOR ALLOCATION (%)

LIC OPEN ENDED INDEX GRPWTH FUND

RISK & RETURN

UTI MUTUAL FUNDS

SECTOR ALLOCATION (%)

UTI OPEN ENDED INDEX GROWTH FUND

PERFORMANCE EVALUATION BALANCED FUND

SBI EQUITY MUTUAL FUND

UTI EQUITY MUTUAL FUND

UTI INDEX FUND

FUND PERFORMANCE RANKING:.

Findings, suggestions and conclusion

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