GROWTH OF MUTUAL FUND SINCE ITS INCEPTION with reference to KARVY CONSULTANTS Limited, Submitted By Vara Prasad R no:

095A1E0002

INTRODUCTION

Mutual Fund was introduced in the year 1963 in India. UTI is the first concern to deal with mutual fund in India. The Growth of mutual fund started going high after liberalization in the.

Mutual fund came into existence in India in the year 1963. Unit Trust of India was the first association to launch the concept of Mutual Fund in India. It invited a lot of investors to invest in UTI Mutual Funds in order to make savings. UTI Mutual Fund ruled India for around 30 years and there were no competitors till 1988 when some new mutual fund companies came into existence. In spite of this, UTI Mutual Fund had always remained in the leading position. The performance of Mutual Funds in India started climbing the ladder of success with the consistently good performance of UTI Mutual Fund. Initially, people in India were not very much familiar with the Mutual Funds. In the year 1992, that is, in the post-liberalization era around 24 million shareholders or investors in the UTI Mutual Fund were assured high returns on investing in Mutual Funds. UTI Mutual Funds schemes actually sold the idea of getting benefited by investing in mutual funds to the Indian population which proved to be a successful measure in attracting investors. There was 0% risks involved in mutual funds schemes after liberalization and the number of investors started increasing rapidly thereafter. The Assets under Management of UTI Mutual Fund stood at Rs. 67 billion by the end of the year 1987. It rose to Rs. 470 billion in March 1993 and by April 2004, the figure reached thrice the amount of March 1993 and stood at Rs. 1,540 billion. The net asset value (NAV) of mutual funds started to go down with the falling of share prices in 1992. Portfolio shifts were not allowed into alternative investments during the crisis period. The closed-end funds were floated in the Indian market at that time which made the investors sell the shares at a loss in the secondary market.

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.

You can make money from a mutual fund in following ways: gain. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund share Income is earned from dividends on stocks and interest on bonds. If the fund sells securities that have increased in price, the fund has a capital

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder.

Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated bzzy dividing the market value of scheme's assets by the total number of units issued to the investors.

For example: If the market value of the assets of a fund is Rs. 100,000 The total number of units issued to the investors is equal to 10,000. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00 Now if an investor 'X' owns 5 units of this scheme Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by the NAV of the scheme)

NEED OF THE STUDY: This study purely assists the retail investors for their small investments. Mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The study also helps the investors to opt best scheme as per their availability of income and risk bearing capacity. This helps the investors to measure risk and return on various schemes. Each Mutual fund scheme has a defined investment objective and strategy. To know the types of mutual funds

SCOPE OF THE STUDY: 1. The study of mutual funds is confined to Karvy Company. 2. The operations of mutual funds is confined to karvy company 3. The resources used for study of growth of mutual funds since its inceptions are confined to only web information. 4. The historical performance of the fund is compared with the performance of the market (sensex). 5. Both the historical data of the fund and the market is used for analysis. The internal factors contributing for the performance of this specific fund is not included in the scope of the study. 6. The market being a major factor affecting the mutual funds performance, the market conditions play a critical role despite the precautions taken by the fund managers. 7. This study covers the analysis of 5 mutual fund companies and its schemes for 1year.

OBJECTIVES OF STUDY:
1. To study about growth of mutual funds since its inception in India.

2. To provide opportunity for the lower income groups to acquire return without difficulty in the form of mutual funds through calculating risk &return. 3. To study about the types of mutual funds. 4. To study the types of mutual funds dealt by karvy company. 5. To study valuation of mutual funds risk associated with mutual funds 6. To study the operations of karvy company in relation to mutual funds 7. Observe the fund management process of mutual funds. 8. To give a brief idea about the benefits available from Mutual Fund investment.

CHAPTER 2

RESEARCH & METHODOLOGY: The study regarding the growth of mutual funds in India is one of hot topics in the present global scenario. The main theme behind selecting this topic is to help an average investor in mapping up his savings in different investment avenues, in which he can get handsome returns. Primary data: The Primary data are those which are collected fresh and for the first time and thus happen to be original in character. Primary data can be obtained through observation or through personal direct communication with respondents is one form or through interviews. Thus it means that there are several methods of collecting the primary data. The following are the important sources: Secondary data: In today's world correct information is the key to success. Data or information is of two types; primary data and secondary data. Primary data is information collected by the researcher or person himself where as secondary data is collected by others but utilized or used by the researcher. Secondary data is data that has already been collected and collated by somebody for some reason other than the current study. It can be used to get a new perspective on the current study, to supplement or compare the work or to use parts of it, as another study may prove costly and time consuming e.g. the census. collected for another purpose by somebody else, it may not be fully useful, the context could have changed or data could have been doctored. Secondary data is the data that have been already collected by and readily available from other sources. Such data are cheaper and more quickly obtainable than the primary data and also may be available when primary data cannot be obtained at all.

ADVANTAGES OF SECONDARY DATA:

It is economical. It saves efforts and expenses. 10

It is time saving. It helps to make primary data collection more specific since with the help of

secondary data, we are able to make out what are the gaps and deficiencies and what additional information needs to be collected. It helps to improve the understanding of the problem. It provides a basis for comparison for the data that is collected by the

researcher.

DISADVANTAGES OF SECONDARY DATA:

Secondary data is something that seldom fits in the framework of the marketing research factors. Reasons for its non-fitting are: Unit of secondary data collection-Suppose you want information on disposable income, but the data is available on gross income. The information may not be same as we require.

11

CHAPTER 3

12

INDUSTRY PROFILE
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank .The objective then is to attract the small investors and introduce them to market investments. Since then, the history of mutual funds in India can be broadly divided into four distinct phases. First Phase 1964-87: Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. The mutual Funds Industry in India not only started with UTI, but still count UTI as its largest Player with the largest corpus of investible funds among all Mutual Funds currently opening in India. Second Phase 1987-1993: 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. Third Phase 1993-2003: With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile

13

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase: In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes. The graph indicates the growth of assets over the years

14

CHAPTER-4

15

COMPANY PROFILE

The Karvy group was formed in1983 at Hyderabad, India. Karvy among the top player in almost all the fields it operates. Karvy Computershare limited is India largest Registrar and Transfer Agent with a client base of nearly 500 blue chip corporate, managing over 2 crore accounts. Karvy Stock Brokers Limited, member of National Stock Exchange of India and the Bombay Stock Exchange, ranks among the top 5 stock brokers in India. With over 6,00,000 active accounts, it ranks among the top 5 Depositary Participant in Indi a, registered with NSDL and CDSL. Karvy Comtrade, Member of NCDEX and MCX ranks Among the top 3 commodity brokers in the country. Karvy Insurance Brokers is registered as a Broker with IRDA and ranks among the top 5 insurance agent in the country. Registered with AMFI as a corporate Agent, Karvy is also among the top Mutual Fund mobilizer with over Rs. 5,000 crores under management. Karvy Realty Services, which started in 2006, has Quickly established it as a broker who adds value, in the realty sector. Karvy Global Offers niche off shoring services to clients in the US. Karvy has 575 offices over 375 locations across India and overseas at Dubai and New York. Over 9,000 highly qualified people staff Karvy. Organization: Karvy was started by a group of five chartered accountants in 1979. The partners decided to offer, other than the audit services, value added services like corporate advisory services to their clients. The first firm in the group, Karvy Consultants Limited was incorporated on 23rd July, 1983. In a very short period, it became the largest Registrar and Transfer Agent in 16

India. This business was spun off to form a separate joint venture with Computershare of Australia, in 2005. Karvy foray into stock broking began with marketing IPOs, in 1993

. Karvy was among the first few members of National Stock Exchange, in 1994 and became a Member of The Stock Exchange, Mumbai in 2001. Dematerialization of shares gathered pace in mid-90s and Karvy was in the forefront educating investors on the advantages of Dematerializing their shares. Today Karvy is among the top 5 Depositary Participant in India. While the registry business is a 50:50 Joint Venture with Computershare of Australia, we have equity participation by ICICI Ventures Limited and Barings Asia Limited, in KarvyStock Broking Limited. For a snapshot of our organization structure, please click here. Karvy has always believed in adding value to services it offers to clients. A top-notch research team based in Mumbai and Hyderabad supports its employees to advise clients ontheir investment needs. With the information overload today, Karvy team of analysts help investors make the right calls, be it equities, mf, insurance. On a typical working day

Karvy:

Has more than 25,000 investors visiting our 575 offices Publishes / broadcasts at least 50 buy / sell calls Attends to 10,000+ telephone calls Mails 25,000 envelopes, containing Annual Reports, dividend cheques / advises, allotment / refund advises Executes 150,000+ trades on NSE / BSE

Executes 50,000 debit / credit in the depositary accounts

17

Branches& Turnover;

Karvy has 575 offices over 375 locations across India and overseas at Dubai and new York. In Hyderabad 37 branches are existing. Annual Turnover of Karvy Consultants ltd for year 2010 Rs 200 cr

RANGE OF SERVICES: ISSUE SERVICING: Registered as a category I a registrar with securities and exchange board of India (SEBI) Karvy reacted positively to the tremendous growth in the capital market as registrars to Issues. Starting with 4 IPOs in the first year of operation, the company has so far handled nearly 550 public issues. The growth has earned it has coveted position of the No1 Registrars in India. CORPORATE SHARE HOLDER SERVICING: Karvy offers a vast spectrum of services its corporate clients which are directed towards Fulfilling the share holder servicing needs from processing inquiries to effective transfers Acting on way of over 175 corporate clients. Krvys shareholder servicing division manages relations with over 78 lakh investors. MUTUAL FUND INVESTOR SERVICING: As a part of its service range, Karvy provides mutual fund investor services to about 40%

18

Of the asset management companies in India and as a result, is now strategically placed to make rapid strides in this area of business Karvy provides purchase, redemption and Cash management support through its wide network, virtually across the counter, their By investors a high degree of liquidity on their investments. KARVY DEPOSITERS SERVICES: A separate and strong distribution arm has been structured for seeking fixed returns.

retailing fixed income products to investors

Marketing fixed deposits programs of over 250 companies, this division has mobilized funds from the different parts of the country Karvys own fixed deposited scheme has been rated MAA by ICRA.

INVESTOR SERVICES: Karvys role as a pioneer in providing quality investor services is evident from its wide net work of 62 investor service centers established across the country. Manned by compe Tent professionals , these centers provide comprehensive services under one roof facilitating easy transactions for individual investors .A unique concept of mobile investor service center as also been successfully tested in Bangalore and the same will Be extended to other cities.

KARVY SECURITIES LIMITED: Within a short span of time Karvy securities ltd has become one of the top fund mobilizes in the country for the equity market .A member of the Hyderabad stock 19

Exchange, KSL is also engaged in trading on the secondary market.

KARVY STOC BROKING LIMITED: Karvy stock broking limited has been incorporated to exchange service to cater to their Trading requirements on the national stock exchange of India limited.

BOARD OF DIRECTORS:

Chairman

William Stuart Crosby

Managing Director

: C Parthasarathy

Managing Director

: M Yugandhar

Managing Director

: M S Ramakrishna

CEO

: V Ganesh

Managing Director Shareholder Director

: P. J. Mathew : Sanjeev Puri : Rajiv Vohra

- Trading Member Director

VISION AND MISION OF COMPANY:

VISION STATEMENT:

20

To be a globally respected wealth creator, with an emphasis on customer care and a culture of good corporate governance. MISION STATEMENT: To create and nurture a world-class, high performance environment aimed at delighting their customers.

21

CHAPTER 5 Theoretical frame work

22

1 INTRODUCTION OF MUTUAL FUNDS: A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the Fund manager in different types of securities depending upon the objectives of the scheme. These could range from equity and debt in money market instruments. The income earned through these investments at a capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is a most suitable investment for a common man has as its offers an opportunity to invest in a diversified, professional managed portfolio at a relatively low cost. Anybody with in investment able surplus of as little as a few thousand rupees can invest in mutual fund. Each mutual fund scheme has a define investment object and strategy. A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario market for equity shares, bonds and other fixed income instrument, real estate, derivatives and other assets have become mature and information driven. Prices changes in these assets are driven by global events occurring faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implication and act speedily; an individual also finds it difficult to keep track of ownership of his assets, investment, brokerage dues and bank transaction etc. A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the Mutual Fund vehicle exploits economies of scale in all three areas- research, investments and transaction processing.

23

Mutual Fund Operation Flow Chart

24

ORGANISATION OF A MUTUAL FUND: Mutual Fund Structure: Structure of mutual fund in India is governed by the SEBI Regulations 1996. These regulations make it mandatory for mutual fund to have three tier structure of SPONSOR TRUSTEE-ASSET MANSGEMENT COMPANY (AMC). The SPONSOR is the promoter of the mutual fund, and appoints the trustees. The TRUSTEES are the mutual fund and appoint the AMC for managing the Investment Portfolio. The AMC is the business face of the mutual fund as it manages all the affairs of the mutual fund. The mutual fund and the AMC have to be registered with SEBI. SEBI regulations also provide for who can be sponsor, trustee and AMC and specify the formal of agreements between these entities. The agreements provide for the rights, duties and obligations of these entities.

Sponsor: Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund; sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Fund) Regulation, 1996. The sponsor is not responsible or 25

liable for any loss or shortfall resulting from the operations of the schemes beyond the initial contribution made by it towards setting up of the mutual fund. Trust: The Mutual Fund is constituted as trust accordance with the provision of the Indian Trust Act, 1882 by the sponsor. The trust deed is registered under the Indian Regulation Act, 1908. Trustee: Trustee is usually a company or a Board of trustee. The main responsibility of the trustee is to safeguard the interest of the unit holder and inter alia ensure that the AMC functions in interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Fund0 Regulations, 1996, the provisions of the trust Deed and the offer Documents of the respective schemes. At least 2/3rd directions of the Trustee are independent directors who are not associated with the sponsor in any manner.

Rights of the trustees: 1. Trustee appoints AMC on consultation with sponsor and with SEBI regulations. 2. The entire Mutual Fund scheme floated by the AMC is to be approved by the trustee. 3. Trustee can seek information on operations from AMC. 4. Trustees can seek remedial actions from AMC in extreme situation of dissatisfaction with performance. Obligations of the Trustees: 1. Trustees must ensure that the transactions must be in accordance with the trust deed. 2. Trustees must ensure that the AMC has system and procedures in place. 3. Trustees must ensure due diligence on the part of AMC in appointment of constituents and business associates. 4. Trustee must furnish a report of activities to SEBI on half yearly basis. 26

5. Trustees must ensure that activities of mutual fund are in compliance with SEBI.

Duties of the Trustees: 1. Appointment of AMC and its directors. 2. Observance of AMC functioning. 3. Protection of trust property. 4. Ensuring that all constituent and associates are register under entities. 5. Review the service of contract and terms. 6. Reporting to SEBI any development in the mutual fund.

7. Appointment of independent auditors and review of periodical reports. 8. Periodic compliance reports from AMC. 9. Communicate deficiencies and recommendations in writing to the AMC.
10. Prescribe a code for the trustee and the personnel of the AMC.

Asset Management Company (AMC): The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the mutual fund. At least 50% of the directors of the AMC are independent directors who are not associated with the sponsor in any manner. The AMC must have a net worth of at least 10 corers at all times. Types of AMC are in Indian context: 1. AMCs owned by banks. 2. AMCs owned by financial institution. 3. AMCs owned by India private sector companies. 27

4. AMCs owned by foreign institutional investors. 5. AMCs owned by Indian & foreign sponsor

Partners: Register and Transfer agent The AMC if so authorized by the Trust Deed appoints the Register and Transfer Agent to the Mutual Fund. The register processes the application form, redemption request and dispatch accounts statements to the unit holder. The Register and Transfer agents also handle communications with investors and updates investor records. Brokers: One who sells financial products whether in insurance, real estate, stocks or

mutual fund. Brokers are registered members of stock exchange. They charge commission for their services. Brokers support the Investment Management function of the mutual fund by enabling the investment manager to buy and sell securities. Brokers also provide investment manager with research report on the performance of various companies and industrial sector. They are important source of information to fund managers. Custodians: Custodians as a financial term, refers to (Custodian Bank), agent or other organization responsible for safeguarding a firms or individuals financial assets. Custodians are responsible for the securities held in the mutual funds portfolio. Depository participant (DP): DPs hold securities of mutual funds in dematerialized form. The depository participant through whom the demit accounts are operated acts as an agent of the depository. The National Securities Depository Ltd (NSDL) and Central Depository Ltd are the two recognized depositories in India. Corporation Bank has started the depository services in association with NSDL who is the major player in the market. The depository through the Depository participants is offering the following services to their clients. 28

1. Opening of accounts 2. De-materialization 3. Re-materialization 4. Settlement of transaction 5. Pledge and hypothecation 6. Stock lending and barrowing

Benefits: 1. Immediate transfer of securities 2. No stamps duty on transfer of securities 3. Elimination of risks associated with loss, forged transfer, bad delivery, fake certificates 4. Reduction in paperwork involved in transfer of securities 5. Reduction in transaction cost 6. nomination facilities 7. Easy and fast recording of change of address and avoids multiple correspondence SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI): Securities and

exchange board of India was set up in 1988 and given the saturation status in January in 1992 for healthy regulation of the capital markets. The controllers of capital issue (CCI) were abolished and companies have to approach market directly, subject to SEBI guidelines relating to disclosures and other measures of investors protection.SSS

FUNCTIONS OF SEBI:

29

1. 2.

To regulate the business and stock exchanges. To register and regulate intermediaries associated with securities market as well as working of mutual funds.

3. 4.

Promote and regulate self regulating organization. Prohibit fraudulent and unfair trade practices relating to securities transactions.

Features of MF: 1. 2. 3. 4. 5. 6. 7. 8. Short Term to Medium Term Investment Fund Management Expenses will be high (2.5%) No entry load No tax benefits on Mutual Fund (Only Equity Mutual Funds has some income tax benefits) Varieties of Mutual funds / Sectoral Funds are available In case of open end mutual funds, investors have high liquidity Growth oriented investment Investor can easy to understand

Investor who can view only Investment can go for Mutual Fund

30

Role of Mutual Fund: Mutual Fund acts as a vehicle to canalize the savings and investments in the economy. The primary role of Mutual Fund is they act as wealth creation and capital preservation instruments. They are a product like none other in the investment market, offerings varied and diverse options and advantages to investments. Mutual Fund as an investments avenue has become a very large sector managing nearly Rs.170, 000crores of investments for about 10 millions investors in India. Worldwide, the asset management business is the largest financial service with around assets of $ 4 trillion and about 500 million customers. They play an effective and efficient part in the economic space

PROBLEMS OF MUTUAL FUNDS IN INDIA 1. Liquidity crisis. 2. Lack of Innovation. 3. A Inadequate research. 4. Conventional pattern of investment. 5. No provision for performance guarantee. 6. Inadequate disclosures.

31

TYPES OF MUTUAL FUND SCHEMES: Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

BY STRUCTURE: Open - ended Schemes: In India majority of mutual funds are open-ended. Fund that float open-ended schemes, can sell as many units as investors demand. These do not have a fixed maturity period. Investors can buy or sell units at NAV-related prices from and to the mutual fund on any business day. Most people prefer open-ended mutual funds
funds because they offer liquidity. Such

can issue and redeem units any time during the life of a scheme. Hence, unit capital of

open-ended funds can fluctuate on a daily basis. Close - ended Schemes: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell 32

the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Schemes: Interval Schemes combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. BY INVESTMENT OBJECTIVE: Growth Schemes These schemes typically emphasize capital appreciations, with generation of current income being a secondary concern. There were 55 growth schemes launched by Indian Mutual funds as of 31st march 1996. Under these schemes there is no guarantee or assurance of returns. The funds seek to achieve max capital appreciation and invest around 80% in equities. Growth schemes are usually close ended and listed in tock exchanges. By the end of mar 1995, 55 growth schemes had mobilized 18.4% of the total funds Example: UTI Master shares. Income Schemes This scheme can be Open ended or Close ended. These schemes provide a fairly predictable stream of income over a period of time, consistent with preservation of capital value. The investments are in avenues like debentures of private sector companies, public sector bonds, and government securities. In order to obtain regular flow of income, these funds invest around 70-80% assets in income generating securities, such as debentures and bonds. Prior to 1993 all the mutual funds floated monthly or yearly schemes with assured returns. This was subsequently prohibited in 1993-94, but allowed in 1995. The 1996 regulations allowed mutual funds to launch guaranteed schemes subject to fulfillment of certain conditions. The Income schemes are the most popular types in India, the important variants in income schemes available in India are.
1. 2.

Open end regular income schemes Open end cumulative schemes

33

3. 4. 5. 6.

Open end recurring investment schemes Closed end regular income schemes Closed end deferred income schemes Closed end multi option schemes

Balanced Schemes: The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. Example: GIC Balanced Fund Scheme Money Market Schemes: The aim of money market funds is to provide easy liquidity,

preservation of capital and moderate income. These schemes generally invest in safer shortterm instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market.
These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods

OTHER SCHEMES: Tax Saving Schemes All the mutual funds floated by public sector banks and insurance companies have launched tax saving schemes these schemes are designed on the basis of tax policy with special tax incentive to taxpaying investors. Previously special tax benefits under these schemes were available under Section 80 cc of income tax act 1961, now available under section 80ccb of the act. These are close ended schemes and investment is made for a period of 10 years, although investor can avail themselves of encashment facility after three years, usually the schemes contain several options; There are option for income as well as growth and capital appreciation. Up to March 1996 the number of tax savings schemes was 50 which collectively mobilized 6.4% of total funds. Indian mutual funds have also launched schemes keeping in view the special needs of investors and sometimes in order to give impetus to industrial development. UTI is the pioneer. 34

Special Schemes: Index schemes Index funds are schemes that try to invest in those equity shares, which make up a particular index. For example, an Index fund trying to mirror the BSE-30 (Sensex) will invest in only those 30 scripts that constitute this particular index. Investment in these scripts is also made in proportion to each stocks weight in the index. Sector specific Schemes Sector specific Schemes or Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings. The returns are high but the risks taken are also very high. This type of investment is for short term. Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

ADVANTAGES OF MUTUAL FUNDS:

35

The reason that mutual funds are so popular is that they offer the ability to easily invest in increasingly more complicated financial markets. A large part of the success of mutual funds is also the advantages they offer in terms of diversification, professional management and liquidity. Flexibility - Mutual Fund investments also offers you a lot of flexibility with features such as systematic investment plans, systematic withdrawal plans & dividend reinvestment. Affordability - They are available in units so this makes it very affordable. Because of the large corpus, even a small investor can benefit from its investment strategy. Liquidity - In open ended schemes, you have the option of withdrawing or redeeming your money at any point of time at the current NAV. Diversification - Risk is lowered with Mutual Funds as they invest across different industries & stocks. Professional Management - Expert Fund Managers of the Mutual Fund analyses all options based on experience & research. Transparency In mutual fund, investors get full information of the value of their investment, the proportion of money invested in each class of assets and the fund managers investment strategy Potential of return -The fund managers who take care of your Mutual Fund have access to information and statistics from leading economists and analysts around the world. Because of this, they are in a better position than individual investors to identify opportunities for your investments to flourish. Low Costs - The benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Regulated for investor protection - The Mutual Funds sector is regulated to safeguard the investor's interests. Investment Mix 36

Mutual Funds in India invest in three broad kinds of instruments, they are
1. 2. 3.

Equity shares and equity related instruments ( convertible debentures, warrants) Debt instruments ( non convertible debentures, public sector bonds, Govt securities) Money market instruments ( certificates of deposits, treasury bills, commercial bills)

The asset mix of a mutual fund scheme is influenced by the objective of the schemes. Equity Debt Instruments Growth Schemes Income Schemes Balanced Schemes 70-90% 20-30% 40-60% 5-20% 60-70% 40-50% Money Market Instruments 0-10% 0-15% 0-10%

DISADVANTAGES OF MUTUAL FUNDS: Mutual funds have their following drawbacks:

No Guarantees:

No investment is risk free. If the entire stock market declines in value,

the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through mutual fund runs the risk of losing the money. Fees and Commissions: All funds charge administrative fees to cover their day to day expenses. Some funds also charge sales commissions or loads to compensate brokers, financial consultants, or financial planners. Even if you dont use a broker or other financial advisor, you will pay a sales commission if you buy shares in a Load Fund. Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20

to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even you reinvest the money you made. Management Risk: When you invest in mutual fund, you depend on fund manager to make the right decisions regarding the funds portfolio. If the manager does not perform as well as

37

you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in index funds, you forego management risk because these funds do not employ managers. Managing a portfolio: As the numbers of mutual funds increase, in order to tailor a portfolio for himself, an investor may be holding a portfolio of funds, with the costs of monitoring them and using them, being incurred by him. Berried costs: Many mutual funds specialize in burying their costs and in hiring salesman who do not make those costs clear to their clients.

Positioning of funds in various categories and ratios Value funds category A Mutual fund that primarily holds value stocks deemed to be undervalued in price.The premise of value investing is that the market has inherent inefficiencies that enable companies to trade at levels below what they are actually worth. In theory, once the market corrects these inefficiencies the value investor will see the share price rise. A common misconception is that value investors simply seek out low P/E stocks. Although this can be a characteristic of an undervalued company, this is not the sole feature that astute value investors seek. Growth funds category Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. They focus on those companies, which are experiencing significant earnings or revenue growth, rather than companies that pay out dividends. Growth funds tend to look for the fastest-growing companies in the market. Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with above-average earnings momentum or price appreciation. In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear markets. Large cap funds

38

Large cap stock funds seek to provide long-term growth potential and current income by investing in the stocks of large companies - those with market capitalizations generally above $5 billion. Large cap funds tend to offer greater growth potential than bonds, but tend to be more volatile. Mid cap funds Mid cap stock funds invest in the stocks of midsize companies - those with market capitalization of $1-10 billion - and seek to provide long-term growth of capital. Mid cap funds tend to offer more growth potential than large company stock funds with less volatility than small company stock funds. Small cap funds Small cap stock funds seek to provide above-average long-term growth by investing in the stocks of small, fast-growing companies - those with market capitalization generally below $2 billion. Small cap stock funds tend to have a wider spectrum of risk and return potential than investments in larger companies. RISK ASSOCIATED WITH MUTUAL FUND INVESTMENT: At the cornerstone of investing is the basic principle that the greater the risk you take, the greater the potential reward. Typically risk is defined as short-term price variability. But on a long-term basis, risk is the possibility that your accumulated real capital will be insufficient to meet your financial goals. And if you want to reach your financial goals you must start with an honest appraisal of your own personal comfort zone with regard to risk, individual tolerance for risk varies, creating a distinct investment personality for each investors. Some investor can accept short-term volatility with ease, others with near panic. So whether you consider your investment temperament to be conservative, moderate or aggressive you need to focus on how comfortable or uncomfortable you will be as the value of your investment moves up or down. Mutual Funds offer incredible flexibility in managing Investment risk. Diversification and Automatic Investing (SIP) are two key techniques you can to reduce your investment risk considerably and reach your long-term financial goals. TYPES OF RISKS:

39

All investment involves some form of risk. Even an insured bank account is subject to the possibility that inflation will rise faster than your earning, leaving you with less real purchasing power than when you started (Rs. 1000 gets you less than it got your father when he was your age). Consider these common types of risk and evaluate them against potential rewards when you select an investment .MARKETS RISK At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influence. to market risk. Inflation Risks: Sometimes referred to as loss of purchasing power. Whenever inflation When this happen, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due

sprints forward faster than earnings on your investment, you run the risk that youll actually be able to buy less not more. Inflation risk also occurs when prices rise faster than your returns.

Credit Risk: In short, how stable is the company or entity to which you lend your money when you invest. How certain are you that it will able to pay the interest you are promised, or repay your principal when the investment matures? Interest Risk: Changing interest rates affect both equities and bonds in many ways. Investors are reminded that predicting which way rates wick go is rarely successful. A diversified portfolio can help in offsetting these changes. KEY CONCEPTS: Net Asset Value (NAV) The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to 40

the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention. Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding.

Sale Price It is the price you pay when you invest in a scheme. It is also called as Offer Price. It may include a sales load. Repurchase Price It is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price. Redemption Price It is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load It is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes. Repurchase or Back End Load It is a charge collected by a scheme when it buys back the units from the unit holders.

VALUATION OF MUTUAL FUND: 41

The net assets value of the Fund is the cumulative market value of the assets Fund net of its liabilities. The Fund is dissolved or liquidated, by selling off all the assets in the Fund, this is the amount shareholders would collectively own. This gives rise to the concept of the net assets value per unit, which is the represented by the ownership of one unit in the Fund. It is calculated simply by dividing the net assets value Fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the units. We also abide by the same convention NET ASSET VALUE (NAV): (THE CONCEPT): The net assets value of the fund is the cumulative market value of the assets fund net of its liabilities. This is the value that a unit holder gets if he redeems his funds or a fresh has to pay if he buys unit in his referred to as NAV p.u. Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the Fund. Once it is calculated the NAV is simply the net value of the assets divided by The number of units outstanding. The detailed method for the calculation of the net asset value is given below the net asset value is the actual value of a unit on any business day. NAV is the barometer of the performance of the scheme. The net asset value is the market value of the assets of the schemes minus its liabilities and expenses. The NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation NAV is calculated as follows: Market value of Fund investment + receivables + accrued income- liabilities accrued expenses Number of units outstanding

Total market value of all MF holdings-All MF liabilities NAV of MF = No. of MF units or shares

42

VOLATILITY MEASUREMENT OF MUTUAL FUND: When considering a funds volatility, an investor may find it difficult to decide which fund will provide the optimal risk-reward combination. OPTIMAL PORTFOLIO THEORY AND MUTUAL FUNDS: One examination of the relationship between portfolio returns and risk is the efficient frontier, a curve that is a part of the modern portfolio theory. The curve forms from a graph plotting return and risk indicated by volatility, which is represented by standard deviation. According to the modern portfolio theory, funds lying on the curve are yielding the maximum return possible given the amount of volatility. Standard Deviation (): The standard deviation essentially reports a funds volatility,

which indicates the tendency of the returns to rise or fall drastically in a short period of time. A security that is volatile is also considered higher risk because its performance may change quickly in either direction at any moment. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return, the average return of a fund over a period of time. A fund that has a consistent four-year return of 3%, for example, would have a mean, or average, of 3%. The standard deviation for this would be 0 because the funds return in any given year does not differ from its four-year mean of 3%. On the other hand, a fund that in each of the last four-year returned- 5%, 17%, 2%, and 30% will have a mean return of the 11%. The fund will also exhibit a high standard deviation because each year. The return of the fund differs from the mean return. This fund is therefore more risky because it fluctuates widely between negative and positive returns within a short period. Beta (): While standard deviation determines the volatility of a fund according to the

disparity of its return over a period of time, beta, another useful statistical measure, determines the volatility, or risk, of a fund in comparison to that of its index or benchmark. A fund with a beta very close to 1 means the funds performance closely matches the index or benchmarka beta greater than 1 indicates greater volatility than the overall market, and beta less than 1 indicates less volatility than the benchmark. R-Square (R): The R-square of a fund advises investors if the beta of a mutual fund is

measured against an appropriate benchmark. Measuring the correlation of a funds movements to that of an index, R-squared describe the level of association between the 43

funds volatility and market risk, or more specifically, the degree to which a funds volatility is a result of the day-to-day fluctuations experienced by the overall market. R-squared values range between 0 and 1, where 0 represents the least correlation and 1 represents full correlation. If a funds beta has an R-squared value that is close to 1, the beta of the fund should be trusted. On the other hand, an R-squared value that is close to 0 indicates that the beta is not particularly use full because the fund is being compared against an appropriate benchmark. Alpha (): Up to this point, we have learned how to examine figures that measure risk

posed by volatility, how so we measure the extra return rewarded to you for taking on risk posed by factors other than market volatility? Enter alpha, which measure how much if any of this extra risk helped the fund outperform its corresponding benchmark. Using beta, alphas computation compares the funds performance to that of the benchmarks risk-adjusted returns and establishes if the funds returns outperformed the markets given the same amount of risk. For example, if a fund has an alpha of 1, it means the fund outperformed the benchmark by 1%. Negative alphas are bad in that they indicate that the fund under performed for the amount of extra, fund-specific risk that the funds investors undertook. Conclusion This explanation of these four statistical measure provide with the basic knowledge on using them apply the premises of the optimal portfolio theory, which uses volatility to establish risk and states a guideline for determining how much of a funds volatility carries a higher potential for return.

Benchmarks used in Mutual Fund Industry The BSE Sensex and S&P CNX Nifty are used as a benchmark for actively managed all equity portfolios. If the equity portfolio is broader based, S&P CNX 500 is used as the benchmarks. For bond funds, the Ibex, an index for government bonds is used as benchmark.

44

GROWTH OF MUTUAL FUND

Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

Performance of mutual funds analysis:

45

UTI -Equity Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01Apr2010

48.590

30June2010

50.420

3.76%

Q2

01July2010

50.000

30Sep2010

57.020

14.84%

Q3

01-Oct2010

58.080

31Dec2010

58.660

0.99%

Q4

01-Jan2010

58.970

31Mar2010

55.540

-5.81%

Bond Fund (G)

46

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

26.600

30-June2010

27.151

2.07%

Q2

01-July2010

27.179

30-Sep2010

27.388

0.76%

Q3

01-Oct2010

27.378

31-Dec2010

27.675

0.97%

Q4

01-Jan2010

27.652

31-Mar2010

28.102

1.62%

Balanced Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

74.540

30-June2010

76.640

2.81%

Q2

01-July2010

76.240

30-Sep2010

84.140

10.36%

Q3

01-Oct2010

85.360

31-Dec2010

84.660

-0.82%

Q4

01-Jan2010

85.010

31-Mar2010

80.730

-5.03%

DSP BLACK ROCK- Equity Fund (G)

47

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

14.866

30-June2010

15.554

46.28%

Q2

01-July2010

15.467

30-Sep2010

17.804

15.10%

Q3

01-Oct2010

18.067

31-Dec2010

17.585

-2.66%

Q4

01-Jan2010

17.675

31-Mar2010

16.571

-6.24

Bond Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

30.466

30-June2010

31.194

2.38%

Q2

01-July2010

31.207

30-Sep2010

31.245

0.12%

Q3

01-Oct2010

31.205

31-Dec2010

31.362

0.50%

Q4

01-Jan2010

31.367

31-Mar2010

31.666

0.95%

Balanced Fund (G)

48

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

60.252

30-June2010

62.214

3.25%

Q2

01-July2010

62.356

30-Sep2010

69.359

11.23%

Q3

01-Oct2010

70.110

31-Dec2010

68.894

-1.73%

Q4

01-Jan2010

69.163

31-Mar2010

66.140

-4.37%

ICICI PRUDENTIAL-Equity Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

12.46

30-June2010

12.61

0.01%

Q2

01-July2010

12.63

30-Sep2010

12.89

0.02%

Q3

01-Oct2010

12.90

31-Dec2010

13.23

0.02%

Q4
Bond Fund (G)

01-Jan2010

13.23

31-Mar2010

13.55

0.02%

49

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

24.25

30-June2010

24.60

0.01%

Q2

01-July2010

24.58

30-Sep2010

25.18

0.02%

Q3

01-Oct2010

25.58

31-Dec2010

25.58

0.01%

Q4

01-Jan2010

25.59

31-Mar2010

25.81

0%

Balanced Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

41.60

30-June2010

42.44

2.01%

Q2

01-July2010

42.21

30-Sep2010

46.97

2.60%

Q3

01-Oct2010

46.97

31-Dec2010

47.49

1.10%

Q4

01-Jan2010

47.57

31-Mar2010

46.49

-2.27%

SBI MAGNUM-Equity Fund (G)

50

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

40.63

30-June2010

41.55

2.26%

Q2

01-July2010

41.19

30-Sep2010

46.44

12.74%

Q3

01-Oct2010

47.16

31-Dec2010

45.92

-2.62%

Q4

01-Jan2010

46.12

31-Mar2010

44.02

-4.55%

Bond Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

14.63

30-June2010

14.80

0.01%

Q2

01-July2010

14.81

30-Sep2010

15.01

0.01%

Q3

01-Oct2010

15.02

31-Dec2010

15.28

0.01%

Q4

01-Jan2010

15.28

31-Mar2010

15.58

0.01%

Balanced Fund (G)

51

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

26.42

30-June2010

26.40

-0%

Q2

01-July2010

26.24

30-Sep2010

28.84

0.09%

Q3

01-Oct2010

29.17

31-Dec2010

28.81

-0.01%

Q4

01-Jan2010

28.93

31-Mar2010

24.87

-0.14%

RELIANCE-Equity Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

443.71

30-June2010

458.64

14.93%

Q2

01-July2010

456.76

30-Sep2010

509.43

52.67%

Q3

01-Oct2010

518.46

31-Dec2010

500.78

-17.68%

Q4
Bond Fund (G)

01-Jan2010

504.34

31-Mar2010

459.37

-44.97%

52

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

19.10

30-June2010

19.33

0.23%

Q2

01-July2010

19.33

30-Sep2010

19.60

0.27%

Q3

01-Oct2010

19.60

31-Dec2010

19.91

0.31%

Q4

01-Jan2010

19.92

31-Mar2010

20.34

0.42%

Balanced Fund (G)

Quarters

From date

NAV(Rs.)

To date

NAV(Rs.)

Absolute Returns

Q1

01-Apr2010

254.02

30-June2010

265.45

11.43%

Q2

01-July2010

263.53

30-Sep2010

298.72

35.19%

Q3

01-Oct2010

303.87

31-Dec2010

290.35

-13.52%

Q4

01-Jan2010

292.06

31-Mar2010

270.27

-21.79%

MARKET VALUES

53

Quarters

From date

Closing values

To date

Closing values

Absolute Values

Q1

17-Apr2010

5249.2

30-June2010

5312.2 5

1.21

Q2

21-July2010

5086.2 5

30-Sep2010

5415.4 5

6.47

Q3

01-Oct2010

5403.0 5

31-Dec2010

6314.5

13.53

Q4

01-Jan2010

6177.4 5

31-Mar2010

5833.7 5

-5.56

UTI Schemes (G)

SCHEMES

STANDARD DEVIATION

BETA

EQUITY

5.95

0.18

BOND

0.51

0.06

BALANCED

5.65

-0.73

DSP BLACK ROCK SCHEMES (G)

54

SCHEMES

STANDARD DEVIATION

BETA

EQUITY

22.63

-0.07

BOND

0.85

-0.01

BALANCED

5.94

0.20

ICICI PRUDENTIAL SCHEMES (G)

SCHEMES

STANDARD DEVIATION

BETA

EQUITY

0.01

BOND

0.01

BALANCED

1.88

0.20

SBI SCHEMES (G)

55

SCHEMES

STANDARD DEVIATION

BETA

EQUITY

6.70

0.33

BOND

BALANCED

0.08

RELIANCE SCHEMES (G)

SCHEMES

STANDARD DEVIATION

BETA

EQUITY

35.41

0.45

BOND

19.97

BALANCED

0.07

0.17

COMPARISION OF RETURNS ON SCHEMES IN DIFFERENT COMPANIES 56

DIFFERENT

MUTUALFUND

SCHEMES CONAMES EQUITY BOND BALANED

UTI

3.44

1.35

1.83

DSP

13.12

0.95

2.09

ICICI

0.01

0.01

0.86

SBI

1.95

0.01

-0.15

RELIANCE

1.23

0.30

2.82

INTERPRETATION

57

From the above chart we can observe that DSP Equity fund is earning more returns as compared to equity funds i.e. 13.12% and ICICI Equity fund is performing less return compared to other equity funds i.e. 0.01%.

From the above chart we can observe that UTI Bond fund is earning more returns as compared to bond funds i.e. 1.35% and ICICI & SBI Bond funds are performing less return compared to other Bond funds i.e. 0.01%.

From the above chart we can observe that Reliance Balanced fund is earning more returns as compared to Bond funds i.e. 2.82% and SBI Blanced fund is performing less return compared to other Balanced funds i.e. 0.01%.

58

COMPARISION OF RETURN AND RISK OF UTI MUTUAL FUND SCHEMES

SCHEMES

RETURNS

RISK

EQUITY

3.44

5.95

BOND

1.35

0.51

BALANCED

1.83

5.65

59

INTERPRETATION
From the above chart we can observe that UTI Equity Scheme is performing more returns i.e. 3.44% with a Risk of 5.95% when compared to other schemes. From the above chart we can observe that UTI Bond Scheme is performing less return i.e. 1.35% with a Risk of 0.51% when compared to other schemes. From the above chart we can observe that UTI Balanced Scheme is performing less return i.e. 1.83% with a Risk of 5.65% when compared to other schemes than UTI Equity scheme and also performing more Returns and Risk when compared with bond schemes.

60

COMPARISION OF RETURN AND RISK OF DSP BLACK ROCK MUTUAL FUND SCHEMES

SCHEMES

RETURNS

RISK

EQUITY

13.12

22.63

BOND

0.98

0.85

BALANCED

2.09

5.94

61

INTERPRETATION
From the above chart we can observe that DSP BLACK ROCK Equity Scheme is performing more returns i.e. 13.12% with a Risk of 22.63% when compared to other schemes. From the above chart we can observe that DSP BLACK ROCK Bond Scheme is performing less return i.e. 0.98% with a Risk of 0.85% when compared to other schemes. From the above chart we can observe that DSP BLACK ROCK Balanced Scheme is performing less return i.e. 2.09% with a Risk of 5.94%. Than DSP BLACK ROCK Equity scheme and also performing more Returns and Risk when compared with bond schemes.

62

COMPARISION

OF

RETURN

AND

RISK

OF

ICICI

PRUDENTIAL MUTUAL FUND SCHEMES

SCHEMES

RETURNS

RISK

EQUITY

0.01

0.01

BOND

0.01

0.01

BALANCED

0.86

1.88

INTERPRETATION
63

From the above chart we can observe that ICICI PRUDENTIAL Equity Scheme is performing less returns i.e. 0.01% with a Risk of 0.01% when compared to other schemes.

From the above chart we can observe that ICICI PRUDENTIAL Bond Scheme is performing less return i.e. 0.01% with a Risk of 0.01% when compared to other schemes.

From the above chart we can observe that ICICI PRUDENTIAL Balanced Scheme is performing more return i.e. 0.86% with a Risk of 1.88%. Than DSP BLACK ROCK Equity scheme and also performing more Returns and Risk when compared with bond schemes.

COMPARISION OF RETURN AND RISK OF SBI MAGNUM MUTUAL FUND SCHEMES

64

SCHEMES

RETURNS

RISK

EQUITY

1.95

6.70

BOND

0.01

BALANCED

-0.15

0.08

INTERPRETATION

65

From the above chart we can observe that SBI Equity Scheme is performing more returns i.e. 1.95% with a Risk of 6.70% when compared to other schemes.

From the above chart we can observe that SBI Bond Scheme is performing less return i.e. 0.01% with a Risk of 0% when compared to other schemes.

From the above chart we can observe that SBI Balanced Scheme is performing less return i.e. -0.15% with a Risk of 0.08%. Than SBI Equity scheme and also performing less Returns and Risk when compared with bond schemes.

66

COMPARISION

OF

RETURN

AND

RISK

OF

RELIANCE

MUTUAL FUND SCHEMES

SCHEMES

RETURNS

RISK

EQUITY

1.23

35.41

BOND

0.30

19.97

BALANCED

2.82

0.07

67

INTERPRETATION
From the above chart we can observe that RELIANCE Equity Scheme is performing less return i.e. 1.23% with a Risk of 35.41% when compared to other schemes. From the above chart we can observe that RELIANCE Bond Scheme is performing less return i.e. 0.30% with a Risk of 19.97% when compared to other schemes. From the above chart we can observe that RELIANCE Balanced Scheme is performing more return i.e. 2.82% with a Risk of 0.07%. Than RELIANCE Equity scheme and also performing more Returns and Risk when compared with bond schemes.

68

PERFORMANCE RATIO

EVALUTION

OF

EQUITY

MUTUAL

FUND IN DIFFERENT COMPANIES USING TREYNOR

Treynor Ratio = Average rate of return on portfolio p Average rate of return on a risk free investment

Beta of portfolio p

TREYNOR RATIO CO NAMES UTI DSP ICICI SBI RELIANCE 3.44 13.12 0.01 1.95 1.23 10 10 10 10 10 0.18 -0.07 0 0.33 0.45 Rp Rf Beta Treynor Ratio -36.44 -44.57 0 -24.39 -19.48

69

INTERPRETATION
By using the above chart one can conclude that the ICICI mutual fund has good returns when compared with other company profiles (0). Reliance comes second on list of returns there after SBI comes third on the list. UTI and DSP stands last on return when equity mutual fund is been compared.

PERFORMANCE EVALUTION OF BOND MUTUAL FUND IN DIFFERENT COMPANIES USING TREYNOR RATIO

Treynor Ratio = Average rate of return on portfolio p Average rate of return on a risk free investment

Beta of portfolio p

TREYNOR RATIO CO NAMES UTI 1.35 10 0.06 Rp Rf Beta Treynor Ratio -144.16

70

DSP ICICI SBI RELIANCE

0.98 0.01 0.01 0.30

10 10 10 10

-0.01 0 0 0

902 0 0 0

INTERPRETATION
By seeing the above chart one can conclude that the DSP mutual fund has good returns when compared with other company profiles (902). ICICI, SBI, Reliance comes second on list of returns there after third on the list. UTI stands last on return when bond evaluation is been concerned.

71

PERFORMANCE EVALUTION OF BALANCED MUTUAL FUND IN DIFFERENT COMPANIES USING TREYNOR RATIO

Treynor Ratio = Average rate of return on portfolio p Average rate of return on a risk free investment

Beta of portfolio p

TREYNOR RATIO CO NAMES UTI DSP ICICI SBI RELIANCE 1.83 2.09 0.86 -0.15 2.82 10 10 10 10 10 -0.73 0.20 0.20 0 0.17 Rp Rf Beta Treynor Ratio 11.19 -39.55 -45.7 0 -42.23

72

INTERPRETATION
By seeing the above chart one can conclude that the UTI mutual fund has good returns when compared with other company profiles (11.19). SBI comes second on list of returns there after DSP stands third on the list. ICICI & RELIANCE stands last on return when balanced evaluation is been concerned.

73

PERFORMANCE EVALUTION OF EQUITY MUTUAL FUND IN DIFFERENT COMPANIES USING SHARPE RATIO

Sharpe Ratio = Average rate of return on portfolio p Average rate of return on a risk free investment

Standard deviation of return of portfolio p

SHARPE RATIO CO NAMES UTI DSP ICICI SBI RELIANCE Rp 3.44 13.12 0.01 1.95 1.23 Rf 10 10 10 10 10 Standard deviation 5.95 22.63 0.01 6.70 35.41 Sharpe Ratio -1.10 0.13 -9.99 -1.20 -0.24

74

INTERPRETATION
By seeing the above chart one can conclude that the DSP mutual fund has good returns when compared with other company profiles (0.13). RELIANCE comes second on list of returns there after UTI & SBI stands third on the list. ICICI stands last on return when equity mutual fund is been compared.

75

PERFORMANCE EVALUTION OF BOND MUTUAL FUND IN DIFFERENT COMPANIES USING SHARPE RATIO

Sharpe Ratio = Average rate of return on portfolio p Average rate of return on a risk free investment

Standard deviation of return of portfolio p

SHARPE RATIO CO NAMES UTI DSP ICICI SBI RELIANCE Rp 1.35 0.98 0.01 0.01 0.30 Rf 10 10 10 10 10 Standard deviation 0.51 0.85 0.01 0 19.97 Sharpe Ratio -16.96 -10.61 -9.99 0 -0.48

76

INTERPRETATION
By seeing the above chart one can conclude that the SBI mutual fund has good returns when compared with other company profiles (0). RELIANCE comes second on list of returns there after UTI & DSP stands third on the list. ICICI stands last on return when bond evaluation is been concerned.

PERFORMANCE EVALUTION OF BALANCED MUTUAL FUND IN DIFFERENT COMPANIES USING SHARPE RATIO

Sharpe Ratio = Average rate of return on portfolio p Average rate of return on a risk free investment

Standard deviation of return of portfolio p

SHARPE RATIO CO Standard deviation 77

NAMES UTI DSP ICICI SBI RELIANCE

Rp 1.83 2.09 0.86 -0.15 2.82

Rf 10 10 10 10 10 5.65 5.94 1.88 0.08 0.07

Sharpe Ratio -1.44 -1.33 -4.86 -126.87 -102.57

INTERPRETATION
By seeing the above chart one can conclude that the DSP mutual fund has good returns when compared with other company profiles (-1.33). UTI comes second on list of returns there after ICICI stands third on the list. RELIANCE & SBI stands last on return with negative returns when bond evaluation is been concerned.

78

PERFORMANCE EVALUTION OF EQUITY MUTUAL FUND IN DIFFERENT COMPANIES USING JENSEN RATIO

Jensen Ratio = Average return on portfolio p Risk free return + Portfolio beta Average return on market portfolio-Risk free return

JENSEN RATIO CO NAMES Rp Rf Rm Beta Jensen Ratio UTI DSP ICICI SBI RELIANCE 3.44 13.12 0.01 1.95 1.23 10 10 10 10 10 3.91 3.91 3.91 3.91 3.91 0.18 -0.07 0 0.33 0.45 -5.46 2.69 -9.99 -6.04 -6.02

79

INTERPRETATION
By seeing the above chart one can conclude that the DSP mutual fund has good returns when compared with other company profiles (2.69). UTI comes second on list of returns there after RELIANCE stands third on the list. ICICI stands last on return with negative return when equity evaluation is been concerned.

80

PERFORMANCE EVALUTION OF BOND MUTUAL FUND IN DIFFERENT COMPANIES USING JENSEN RATIO

Jensen Ratio = Average return on portfolio p Risk free return + Portfolio beta Average return on market portfolio-Risk free return

JENSEN RATIO CO NAMES Rp Rf Rm Beta Jensen Ratio UTI DSP ICICI SBI RELIANCE 1.35 0.98 0.01 0.01 0.30 10 10 10 10 10 3.91 3.91 3.91 3.91 3.91 0.06 -0.01 0 0 0 -8.28 -9.08 -9.99 -9.99 -9.7

81

INTERPRETATION
By seeing the above chart one can conclude that the UTI mutual fund has good returns when compared with other company profiles (-8.28). DSP comes second on list of returns there after RELIANCE stands third on the list. ICICI & SBI stands last on return when bond evaluation is been concerned.

82

PERFORMANCE EVALUTION OF BALANCED MUTUAL FUND IN DIFFERENT COMPANIES USING JENSEN RATIO

Jensen Ratio = Average return on portfolio p Risk free return + Portfolio beta Average return on market portfolio-Risk free return

JENSEN RATIO CO NAMES Rp Rf Rm Beta Jensen Ratio UTI DSP ICICI SBI RELIANCE 1.83 2.09 0.86 -0.15 2.82 10 10 10 10 10 3.91 3.91 3.91 3.91 3.91 -0.73 0.20 0.20 0 0.17 -2.61 -6.69 -7.92 -10.15 -6.14

83

INTERPRETATION
By seeing the above chart one can conclude that the UTI mutual fund has good returns when compared with other company profiles (-2.61). DSP & RELIANCE comes second on list of returns there after ICICI stands third on the list. SBI stands last on returns when balanced evaluation is been concerned.

84

FINDINGS
DSP Mutual Funds earns highest returns when compared with other mutual funds when all schemes is concerned while. DSP Mutual Funds is having highest return and risk and ICICI is having lowest return and risk when equity scheme is concerned. UTI Mutual Fund is having highest return and risk and ICICI and SBI mutual fund is having lowest return and risk when bond scheme is concerned. Reliance Mutual Fund is having highest return and risk and SBI is having negative return and risk when balanced scheme is been concerned. ICICI earns highest Treynor Ratio as 0 and DSP is having lowest return as -44.57 with negative trend when equity scheme is concerned. DSP earns highest Treynor Ratio as 902 and UTI is having lowest return as -144.16 with a negative trend when bond scheme is concerned. UTI earns highest Treynor Ratio as 11.19 and ICICI is having lowest return as -45.7 with a negative trend when balanced scheme is concerned. DSP earns highest Sharpe Ratio as 0.13 and ICICI is having lowest return as -9.99 with a negative trend when equity scheme is concerned. SBI earns highest Sharpe Ratio as 0 and UTI is having negative trend with lowest value -16.96 when bond scheme is concerned. Sharpe Ratio values of all the companies are negative which shows the the negative effect on risk associated with the balanced scheme. DSP earns highest Jensen Ratio as 2.69 and ICICI is having lowest returns as -9.99 when equity is been concerned. Jensen Ratio values of all the companies are negative which shows the negative effect on risk associated with the bond scheme. Jensen Ratio values of all the companies are negative which shows the negative effect on risk associated with the balanced scheme.

85

SUGGESTIONS
I would suggest DSP would give good return because of the strong bottom line of the organization. The beta values in bond scheme of different companies are negative hence once should avoid these stocks because the systematic risk associated with these stocks are quite high which shows a negative impact on the stocks. When an investor opts to enter the stock market he/she should first gather sufficient information about the type of investment options available to him/her. The investor should be in a position to decide where and how much of funds are he ready to invest in particular security. He should diversify his investment portfolio so that he can maximize his risk. Investor should not depend entirely on the past returns as the future is uncertain and the stock market is highly volatile. The investor must be in a position to determine the degree of risk involved and then invest in any security. He should not follow the foot of others while investing because usually people tend to go by the trend. An investor must be in a position to judge which is the right time to enter into the market and quit the market. Before investing in any company the investor should study the fundamental trend and technical charts of the company for a good investment profile.

86

CONCLUSION

As a whole the stock market is sometime highly volatile. It depends upon the investors how he can make use of this in order to get the money which he has put in the market.

An investor should be in the position to analyze the various investment options available to him/her and thus minimize the risk and maximize the returns. The investor should analyze the market on a continuous basis which will help them to pick the right companies to invest their funds. The beta value, standard deviation and variance help the investors in arriving at decision. However the above methods help to understand the risk and return associated with the stock but one need to do fundamental and technical analysis for a better investment horizon.

The investors should be in a position to interpret the data in the right manner to arrive at important conclusions and investment decision. It is to be concluded that mutual funds investments are subject to market risk. Investors should read the offered documents before investment. I hope the dissertation will help the investors as a guiding record in the future and help them to make appropriate investment decisions.

87

BIBLIOGRAPHY
ANNUAL RECORDS

Books:
Investments Bodi.Kane.Marcus Mutual Funds In India H.Sadak Response Books, New Delhi. Financial Services & Marketing -E.Gordon & Natarajan Himalaya publishing House, Mumbai. Websites:
www.amfiindia.com www.rediffmoney.com www.navreport.asp www.valueresearch.com www.moneycontrol.com

www.google.com

88