A Project Report on

PERFORMANCE OF MUTUAL FUNDS WITH COMPARISION OF SENSEX

AT
ANGEL BROKING LIMITED,
HYDERABAD.
Submitted to the Department of
Business Administration
Osmania University
In partial fulfillment for the award of
Degree in
Master of Business Administration
Submitted By
C.CHANDRA MOHAN REDDY
098060103

DECLARATION
I hereby declare that this project report titled performance of Mutual funds with comparison
of sensex

submitted by me to the department of ST. PAULS P.G COLLEGE is a

bonofied student work undertaken by me and it is not submitted to any other university or institution for the award of
any degree diploma/certificate or published any time before.

NAME & ADDRESS OF THE STUDENT

C.CHANDRA MOHAN REDDY
098060103

SIGNATURE OF THE STUDENT

ACKNOWLEDGEMENT

At the very outset, I would like to place my sincere thanks to Mr.G.J. SHARMA (Branch
manager) to permit me to undertake this project entitled PERFORMANCE OF MUTUAL
FUNDS WITH COMPARISIOM OF SENSEX.
I would like to express my deep gratitude to Mr. KALYAN CHAKRAVATHI mutual
funds in charge), Mr. Seshu Krishna murthy who helped me to get all the information needed
to fulfill this project.

I also would like to take this opportunity to profusely thank our Mrs. UMARANI H.O.D of the M.B.A
stream and Mr. VISWANAT SARMA (ASSISTANT PROFESSOR), and I am very grateful to for the
guidance through out the project.

CONTENTS
Page no

Introduction

Purpose of study

Significance of study

Scope of study

Period of study

Overview of the capital market

10

Overview of the equities

14

Overview of the mutual funds

15

Company profile of Angels

Mutual funds Theoretical perspective

Details of sensex

16

19
31

Introduction to index

Introduction to sensex &nifty

31
32

Portfolio analysis

Portfolio analysis of reliance growth fund

41

Portfolio analysis of icici prudential growth fund

50

Portfolio analysis of birla sun life equity fund

59

Portfolio of analysis of Hdfc growth fund

68

Suggestion

79

Conclusion

80

Bibliography

83

Performance of Mutual Funds with Comparison of Sensex

CHAPTER 1

Scope & Objectives

Introduction to study
Tomorrow reflects the reactions of the actions taken today. The performance of our country for the past
two years has been very good. We have seen steadily improving business scenario due to aggressive and
fast actions taken by the Government and corporate to make India really shine on the global business
map.
However, equities are a risky instrument by nature and direct investing in equities is a risky affair since
we do not have proper expertise to figure the Equities, which all will fetch us good appreciation over a
period of time. But the fact of that matter remains; they have always generated better returns in the long
run than any other investment avenues. As we have seen a lot of changes in the Mutual Fund Industry in

the past few years with Multinational Mutual Fund coming into the country bringing in their professional
expertise in managing funds worldwide and even there has been a consolidation phase in the Mutual Fund
Industry. Thus, we have tried to arrive at few Mutual funds as an indirect route of investing in markets.
The study explains basics of Mutual Funds & SENSEX and hopefully clears up some of myths around
them, which even gives the basics ideas behind the investments and options available for investing. By
taking some prominent Equity Diversified Schemes which are the suggested portfolios to the clients of
the ANGEL BROKING LTD and analyzing their performance with benchmark indices in these highly
volatiles market, will be helpful to give the suggestions to the Angels investors regarding their
investment decision.

Purpose of the Study

I have certain objectives behind of my study. They are as follows:

To understand the various functions of a Broking firm.

To analyze the overall performance of the selected funds i.e. Reliance Growth Fund, Sundaram BNP
Paribas Select Mid Cap Fund, ICICI Prudential Dynamic Plan, Birla Sun life Equity Fund, HDFC Growth
Fund & DSP ML Top100 Equity Fund. With the bench mark index i.e. SENSEX.

To assess the Risk & Return of each scheme with SENSEX.

To make the comparative analysis among the selected schemes & make rank of them (By using certain
Parameters)

To give investment suggestions to the clients of Angel Broking Ltd. according to the investment appetite.

To identify the future outlook of Stock Market as well as of Mutual Fund Industry in India.

SIGNIFICANCE OF THE STUDY

Studies of the type are useful to Academicians, Research Scholars to have better insight over
Mutual Funds and Equity Market.

This type of studies is useful to investors for making better investment decisions.

Mutual Fund companies can be able to benefit from this sort of studies to gauge the performance
of different schemes and to alter their portfolios, their potential growth, future possibilities etc.

Stock broking firms like Angel can able to know the performance of various schemes & to make
right judgment in offering suggestions to the investors rich.

Scope of the Study

There have been many research works done on Mutual Funds on their performance and their comparative
analysis by using the statistical tools such as Mean, Variance, and Correlation etc. But in this particular
study I have used the most effective & significant tools such as The Sharpe ratio, The Trynor ratio, Jenson
Model, R-Square, Returns, Beta, Risk Stdev., Diversifications, Information ratio & Absolute & expected
returns in order to assess the fund managers efficiency in investing the fund, details portfolio structure of
those funds, their relative performance, Risk factors, returns & risk adjusted performance also. As I
compared all the funds with the most prominent Benchmark SENSEX so it will provide a fair view of the
funds performance in compare to the market. This study will also be very much helpful for the investors

as it will provide the suggestion to the investors where they should invest both in long, medium and short
term period. This will help them to make their investment decision properly. This study will also help us
to know about the future prospects of both stock market as well as mutual funds industry. We will
understand about future possibilities, upcoming facts, and potential growth of the funds as well as the
market. So, it will help us to take proper step in future.

Period of Study

The actual study was for a period of 2 months and the study of performance of Mutual Fund schemes &
sensex and comparison was done for a period of last 3 financial years i.e. from 2004 to 2007.

INTRODUCTION

Overview of Capital Market

Capital Market is the market in which corporate equity and longer-term debt securities (those maturing in
more than one year) are issued and traded. The capital market (securities markets) is the market for
securities, where companies and the government can raise long-term funds. The capital market includes
the stock market and the bond market. The capital markets consist of the primary market, where new
issues are distributed to investors, and the secondary market, where existing securities are traded.
Evolution of Indian Capital Market

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The
earliest records of security dealings in India are meagre and obscure. The East India Company was the
dominant institution in those days and business in its loan securities used to be transacted towards the
close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay.
Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks
and merchants during 1840 and 1850.
In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was
stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250.
However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of
Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in
a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact
business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers'
Association" (which is alternatively known as The Stock Exchange "). In 1895, the Stock Exchange
acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at
Bombay was consolidated.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump. But, in
1943, the situation changed radically, when India was fully mobilized as a supply base.
On account of the restrictive controls on cotton, bullion, seeds and other commodities, those dealing in
them found in the stock market as the only outlet for their activities. They were anxious to join the trade
and their number was swelled by numerous others. Many new associations were constituted for the
purpose and Stock Exchanges in all parts of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940) and
Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi Stocks
and Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi Stock
Exchange Association Limited.
Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange was closed
during partition of the country and later migrated to Delhi and merged with Delhi Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well
established exchanges, were recognized under the Act.
Growth Pattern of the Indian Stock Market

As

on

31st 1946

1961

1971

1975 1980 1985

1991

1995

2007

20

22

22

1203

1599

1552 2265 4344

6229

8,470 12,375

Sl.No.
December
No.

of 7

Stock Exchanges

No.

of

1125

14

Listed Cos.

No.

of

Issues

Stock 1506

2111

2838

3230 3697 6174

8967

10,750 14,800

Listed 270

753

1812

2614 3973 9723

32041 59583 120300

1292

2675

3273 6750 25302

110279 478121 2412375

63

113

168 175 224

514

693

996

107

167

211 298 582

1770

5564

14312

170

148

126 170 260

344

803

1135

of

3
Listed Cos.
Capital
4

of

Cos. (Cr. Rs.)

Market

value

Capital

of

of 971

Listed

5
Cos. (Cr. Rs.)
Capital
Listed

per 24
Cos.

(4/2)

6
(Lakh Rs.)
Market

Value

of 86

Capital per Listed

7

Cos.

(Lakh

Rs.)

(5/2)
Appreciated value 358
8

of

Capital

per

Listed Cos. (Lak Rs.)

Capital Market Participants

There are three categories of participants in capital market namely, the issuers of the securities, investors
in the securities and the intermediaries.
Capital Market instruments

Shares

Government Securities

Derivative Products

Units of Mutual Fund

Overview of Equities:
Total equity capital of the company is divided into equal units of small denominations, each called share
or equity. They represent an ownership or equity position in a corporation. Its as if you buy a piece of the
company you invest in falters or fails altogether; you could lose some or all of your investment. A
stockholder lays claim to a proportionate share in the corporations assets and profits and is often paid
dividends when the company makes money. Stock share prices will rise as the corporation grows and
there is greater demand for its stocks. The idea is to buy stocks when the company is still small, hold onto
it for a number of years while the company grows and becomes financially stronger, and then sell it for a
profit once the stock price gas risen as result of new demand.
Factors that affects the price of the stocks or shares:
Traditionally, share prices are higher when countrys economy is doing stronger and lower when the
country experiences poor economic performance.

Interest rates play a major role in determining stock market trends. Bull markets (those in an upward
market) are usually associated with low interest rates, and bear markets (those in a downward trend) with
high interest rates
Company profits are very much an issue in share investment. Companies doing well in their business
activities are likely to attract more investors, thereby resulting in high demand of their shares. Entities
which are not doing well business wise may result in investors selling their shares on the market. Selling
en masse will result in more shares flooding the market and consequently bringing the price down an
abundance of a commodity leads to price decline.
A political development inside or outside the country - may have bearing on share price. Usually this
factor cut across all the shares on the market, in other words it is factor that impacts on all the shares
irrespective of the sector classification. The political factor is visible through regulatory processes and its
influence

inshare

price

becomes

the

eventuality.

Perception factors have their own fair share of contribution to share price fluctuation. The fact that South
Africa is classified as developing economy, it means that general perceptions towards developing
economies will impact on local share prices as well.
International Market: There is a great influence on Indian Stock price, if International market changes
drastically. E.g. If there is a upward trend in London Stock Exchange or New York Stock Exchange then
that will also create an impact on Indian Stock Market.

FDIs & FIIsIf the amount Foreign investment increases on certain sectors then price
of the shares of that particular sector will also increase & will strengthen the market also.

Overview of Mutual Funds:

A Mutual Fund is a body of corporate registered with SEBI that pools money from Individuals/corporate
investors and invest same in a variety of different financial instruments or securities such as equity shares,
Government securities, Bonds, debentures etc. This can be considered as financial intermediaries in the
investment business. A fund may be comprised of stocks, bonds, cash instruments,, or any combination

thereof. We purchase shares in a mutual fund, just as we would an individual stock. Only a mutual fund
is inherently diversified, holding shares in greater number of securities than any single investor is likely to
buy on his or her own. Just as the mutual funds shareholders share the cost of buying securities, they also
share in the proceeds from the funds growth. The cost efficient to the investor and are an easy way to
invest. They are easy, as we do not have to pick and choose among stocks or bonds.

COMPANY PROFILE OF ANGELS

About Angel Group:

In a short span of 18 years since inception, the Angel Group has emerged as one of the top five retail
stock broking houses in India with group concerns having memberships on BSE, NSE, and NCDEX &
MCX. It also registered as a DP with CDSL. Angel is 100% focused on retail stock broking business
unlike any other larger national broking house.
Facts & Figures:

Central Support office or corporate office in Mumbai.

It is having 16Regional offices.

It is having 80 Branch offices.

It has 2, 15,847 Retail clients.

2,590sub-brokers and business associates registered under its fold.

There are 1,970direct employees under it.

Total Trade Terminals are 6,370.

Total no. of V-SAT is 433.

Companies under Angel Group:

ANGEL GROUP COMPANIES

Angel Broking Ltd.

Member on the BSE Depository Participant with CDSL

Membership on the NSE Cash and Futures & Options

Angel Capital & Debt Market Ltd.

Segment
Angel Commodities Broking Pvt. Ltd. Member on the NCDEX & MCX
Angel Securities Ltd.

Member on the BSE

Angel Infin Pvt. Ltd.

NBFC registered with RBI

Mimansa Systems Pvt. Ltd.

for Software Development

Objectives of the Angel Group:

Understanding individual customer needs and with an urge to provide several investment products and
tailor made value added services to its clients, it focuses on small and mid cap research which is
considered a core activity and not merely a business accessory.

Their motto is to make available services to all their clients 24hours a day, 7 days a week, and 365 days
in a year. It has also been the groups constant endeavor to provide quality services with maximum
features at minimal cost to all our clients.

Strengths of the Angel Group:

Its biggest strengths is that they understand the needs of retail investors very well. Strict adherence to our
business philosophy of providing the best value for money to their customers has enabled them and their
associates to grow rapidly in an increasingly competitive market.
Vision of Angel Group:
To Provide Best Value For Money To Investors Through Innovative Products, Trading / Investment
Strategies, State Of The Art Technology And Personalized Service.
Business Philosophy:
Ethical practices & Transparency in All Their Dealings, Customer Interest above Their Own Always
Deliver What We Promise Effective Cost Management.

Services offered by Angel Group:

E- Broking Services

E-broking provides you on-line trading facilities on BSE / NSE (Cash and F&O), NCDEX and MCX
through its 3 unique e-trading software especially designed for traders as well as investors.

 Trading in securities / commodities using the internet platform is a convenient option.

They provide you an opportunity to trade on BSE / NSE (Cash and F&O), NCDEX and
MCX from the comfort of your home or office.
E-broking products offered by Angel group:

Angel trade

Mutual fund: A Theoretical Perspective

Origin of mutual funds

As with many other innovative financial products, Mutual Funds, as an attractive investment source
started in the USA. MF is an investment company created under the Investment Company Act of 1940
that pools the resources of investors to buy a variety of securities, depending on the fund's stated
objectives and management style. The investments typically are chosen by a professional manager.
Mutual funds offered diversification and convenience even to small investors, and the thousands of
mutual funds that came to be established cater to every conceivable investment need and taste.

What is Mutual Fund?

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 then invested in capital market instruments such as shares, debentures
and other securities. The income earned through these investments and the capital appreciation realized
are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund
is the most suitable investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost. The flow chart below describes
broadly the working of a mutual fund:

Advantages

of

Mutual

Funds

Risk-Return Grid: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 Funds)
Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the
operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund.

Mutual

Funds

Organization

in

India

There are many entities involved and the diagram below illustrates the organizational set up of a mutual
fund in India:

Organization of a Mutual Fund

Trust:
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts
Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.

Trustee:
Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main
responsibility of the Trustee is to safeguard the interest of the unit holders and inter alia ensure that the
AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the
respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not
associated with the Sponsor in any management.
Asset Management Company:
The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. 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 crore at
all times.
Registrar or Transfer agent:
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual
Fund. The Registrar processes the application form; redemption requests and dispatches account
statements to the unit holders. The Registrar and Transfer agent also handles communications with
investors and updates investor records.

Performance of Mutual Funds in India

In the year 1963, Unit Trust of India invited investors or rather to those who believed in savings, to park
their

money

in

UTI

Mutual

Fund.

For 30 years it goaled without a single second player. Though the 1988 year saw some new mutual fund
companies,

but

UTI

remained

in

monopoly

position.

The performance of mutual funds in India in the initial phase was not even closer to satisfactory level.
People rarely understood, and of course investing was out of question. But yes, some 24 million
shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the
industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of
investors touched the sky in profitability factor. However, people were miles away from the preparedness
of

risks

factor

after

the

liberalization.

The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the
performance of mutual funds in India through figures. From Rs. 67bn. the Assets under Management rose
to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose
as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year
1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There
was rather no choice apart from holding the cash or to further continue investing in shares. One more
thing to be noted, since only closed-end funds were floated in the market, the investors disinvested by
selling

at

loss

in

the

secondary

market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandals, the
losses by disinvestments and of course the lack of transparent rules in the where about rocked confidence
among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not
yet recovered, with funds trading at an average discount of 1020 percent of their net asset value.

The supervisory authority adopted a set of measures to create a transparent and competitive environment
in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of
open-ended funds, and paving the gateway for mutual funds to launch pension schemes.
At last to mention, as long as mutual fund companies are performing with lower risks and higher
profitability within a short span of time, more and more people will be inclined to invest until and unless
they are fully educated with the dos and donts of mutual funds.

Calculation of NAV
Asset value is equal to
Sum of market value of shares/debentures
+ Liquid assets/cash held, if any
+ Dividends/interest accrued
Amount due on unpaid assets
Expenses accrued but not paid

Total market value of all MF holdings - All MF liabilities

NAV

of

MF

------------------------------------------------------------No. Of MF units or shares

(OR)

Market value of Scheme's Investments +

Receivables Accrued
Income + Other Assets - Accrued
Expenses - Payables - Other Liabilities
NAV of MF = --------------------------------------------------------------------No. Of Units outstanding under the Scheme

Details on the above items

For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the
principal exchange where the security is traded

For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. For
shares, this could be the book value per share or an estimated market price if suitable benchmarks are
available.

For debentures and bonds, value is estimated on the basis of yields of comparable liquid
securities after adjusting for liquidity. The value of fixed interest bearing securities moves in a direction
opposite to interest rate changes Valuation of debentures and bonds is a big problem since most of them
are unlisted and thinly traded. This gives considerable leeway to the AMCs on valuation and some of the
AMCs are believed to take advantage of this and adopt flexible valuation policies depending on the
situation.

Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with every
passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the

periodic interest payment with the number of days in each period. Thus, accrued interest on a particular
day is equal to the daily interest rate multiplied by the number of days since the last interest payment date.

Usually, dividends are proposed at the time of the Annual General meeting and become due on
the record date. There is a gap between the dates on which it becomes due and the actual payment date. In
the intermediate period, it is deemed to be "accrued".

Expenses including management fees, custody charges etc. are calculated on a daily basis. Every
mutual fund shall compute and carry out valuation of its investments in its portfolio and publish the same
in accordance with the valuation norms specified in Eighth Schedule. It should be published at least in
two daily newspapers at intervals of not exceeding one week.

Calculation of Unit Price

While determining the prices of the units, the mutual fund shall ensure that the repurchase price is not
lower than 93% of the Net Asset Value and the sale price is not higher than 107% of the Net Asset Value.
Provided that the repurchase price of the units of a close ended scheme shall not be lower than 95% of the
Net Asset Value:
Provided further that the difference between the repurchase price and the sale price of the unit shall not
exceed 7% calculated on the sale price.
The price of units shall be determined with reference to the last determined Net Asset Value as mentioned
in sub-regulation.
Regulatory bodies of Mutual Funds in India
SEBIREGULATIONS

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It
notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either
promoted by public or by private sector entities including one promoted by foreign entities are governed
by

these

Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by making investments in
various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the
fund in its custody. The general power of superintendence and direction over AMC is vested with the
trustees.
According to SEBI Regulations, two thirds of the directors of trustee company or board of trustees must
be independent. They should not be associated with the sponsors. 50% of the directors of AMC must be
independent. All mutual funds are required to be registered with SEBI before they launch any scheme.

ROLE OF AMC (Asset Management Company)

Disintermediation appears simple in theory, but could be complex in practice. For, it is physically
impossible for people with funds to pool the resources and centrally invest the money, without assistance
from experts. Thus evolved the agency companies called asset management companies whose role is, in
theory, to assist the investors in wisely investing a pool of funds. Typically, instead of investors a going in
search of an AMC, the latter went looking for investors. Thus, an AMC will think of collecting money for
a mutual fund and float an investment scheme. Anyone desirous of contributing is invited to do so. While
floating the scheme, the boundary rules for investment whether in shares or bonds and the
management objectives of the AMC are clearly spelt out.
Association of Mutual Funds in India (AMFI)

Technical terms associated with Mutual Fund:

Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is
the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Repurchase Price
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
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.

Repurchase or Back-end Load

Is a charge collected by a scheme when it buys back the units from the unit holders.
Expense Ratio
AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries, advertising
expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges Rs1.50 for every Rs100 in
assets

under

management.

A fund's expense ratio is typically to the size of the funds under management and not to the returns
earned. Normally, the costs of running a fund grow slower than the growth in the fund size - so, the more

assets in the fund, the lower should be its expense ratio.

Load
Some AMCs have sales charges, or loads, on their funds (entry load and/or exit load) to compensate for
distribution costs. Funds that can be purchased without a sales charge are called no-load funds.

Asset Management Company: - A company formed and registered under the companies act,1956.an
AMC undertakes to formulate mutual fund schemes, distribute units, invest the funds in capital/money
markets and distribute income as per agreement
Back End Load:- A Fee charged by a mutual fund from unit holders at the time of redemption of units.
Bottom-up investing: - An investment strategy which concentrates on the fundamentals of individual
stocks before considering the industrial and economic scenario
Capital Appreciation: - an increase in the value of an asset, such as shares, debentures, bonds and other
type of investment.
Conversion Privilege: - The right of a unit holder of a mutual fund to switch from one scheme to another
scheme.

PUBLIC OFFER PRICE:

Units multiplied by latest NAV gives the market value. But in some cases / for some schemes it is not
applicable straightly. Maintenance of a scheme and servicing investors come at a cost to Asset
Management Company. This is particularly more in case of select schemes which have additional
overheads. For such schemes investors will have to pay extra premium called Load. This load can be
either the time of investment called Entry load or at the time of redemption. (Exit load) or both.

The entry load / exit load is normally between 1 to3 %

With both together it can't be more than 7%
NAV plus or minus load is called Public Offer Price.
POP = NAV*(1 +/-load)
For a subscription:
NAV of a scheme X
Entry load

Rs. 1 0
2%

POP

Rs. 10.20 [10*(1 +0.02}]

Amount invested

Rs. 10,000

Units allotted

980.392

[10,000/10.20]

For a Redemption
NAV of a scheme X
Entry load

Rs 1 0
2%

POP

Rs.9.8

[10*(1-0.02)]

Amount invested

Rs. 10,000

Units allotted

1020.408 [10000/9.8

Details of Sensex
INTRODUCTION TO INDEX
An Index is used to summarize the price movements of a unique set of goods in the financial,
commodity, forex or any other market place. Financial indices are created to measure price
movements of stocks, bonds, T-bills and other type of financial securities. More specifically, a
stock index is created to provide investors with the information regarding the average share price
movement in the stock market. Broad indices are expected to capture the overall behavior of the
equity market and need to represent the returned obtained by typical portfolios in the country.

The primary function of a stock index is to serve as a barometer of the Equity market. The ups &
downs in the index represent the movement of the equity market. Any investor can look at the

performance of the index to find out how the Equity market is doing.
The availability of an index lends itself to forecasting of the market conditions by technical
analysts. Technical analysts believe that historical share price movements can be used to predict
the future price movements. They use the stock index data to forecast the direction in which the

market is likely to move in the near future.

The most important use of an equity market index is to act as a benchmark for a portfolio of
stocks. All diversified portfolios, belonging either to retail investors or mutual funds, use the
common stock index as a yardstick for their returns.
Finally Indices are useful in modern financial applications of derivatives. Indices serve as the
underlying for futures and options products and also for the Exchange Traded Funds.
There two main Indices in India. They are Sensex & Nifty. Sensex is the benchmark of Bombay
Stock Exchange and Nifty is the benchmark of National Stock Exchange.

INTRODUCTION TO SENSEX & NIFTY:

BSE SENSEX

The BSE SENSEX is the benchmark Equity index of the Indian stock market in 20 years young
in 2006. The SENSEX which was first born in 1986 underwent a metamorphosis and emerged in
its international avtar as Indias first free float index in only its 17 th year, i.e. 2003. In that
respect the SENSEX has many firsts to its credit- it was the first stock index in the Indian Stock
market, the first Indian index to adopt the internationally accepted free float methodology, the
first underlying on which an exchange traded financial derivatives product (the SENSEX futures)
was launched in June 2000.
NSE NIFTY
The NSE NIFTY is relatively a new comer in Indian market. S&P CNX Nifty is a 50 stock index
accounting for 23 sectors of the economy. It is used for purposes such as benchmarking fund
portfolios, index based derivatives and index funds.
The base prices selected for computing the Nifty are the close prices as on November 3, 1995,
which marked the completion of one year of operations of NSEs capital market segment. The
base value of index was set at 1000.
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which
is a joint venture between NSE and CRISIL. IISL is a specialized company focused upon the
index as a core product.
INDEX CONSTRUCTION
Nifty is calculated on the Full Market Capitalization methodology.
SENSEX is the only Broad market index in India that is constructed on the Free- Float Market
Cap methodology. This is the globally accepted methodology that is followed by most of the
leading index providers.
SENSEX was initially calculated based on the full market capitalization methodology but was
shifted to the free-float methodology with effect from September 1, 2003.
THE SENSEX

The SENSEX- Indias first capital market index was compiled in 1986. It is a basket of 30
constituent stocks representing a sample of large, liquid and representative companies.
The base year of BSE-SENSEX is 1978-79 and the base value is 100. The index covers 11 broad
sectors of the economy and is widely reported in both domestic and international markets through
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 newspapers and the
business channels report market movements in terms of the SENSEX, as it is the language that all
investors understand.

The SENSEX which is a proprietary product of the Bombay Stock Exchange Limited is a
Registered Trademark with the US Patents & Trademark office in the USA.
In June 2006, the BSE obtained a No-action letter from the US Commodity Futures
Trading Commission, Washington, USA for the offer and sale in the United States of the
BSEs SENSEX Futures contract . This essentially means that US investors can now Buy
and Sell SENSEX Futures Contract in the USA.

INDUSTRY REPRESENTATION
A good index should be fairly representative of the entire market. All or at least most sectors
should be represented in the index in the same weight as they are in the market cap of the entire
market.

SENSEX

Nifty

Oil & Gas

15.80%

21.80%

IT

18.30%

18.70%

Finance

17.00%

11.00%

FMCG

9.80%

7.60%

Transport Equipment

7.70%

7.10%

# Source: BSE Index Cell

The analysis of above table shows interesting results:
The largest sector represented in Nifty is oil & gas, which covers nearly 21.8% of Index. It is
observed that the scrip ONGC alone accounts for 50% of this weight, on account of its weight of
around 11% in the Nifty.
It is interesting to note here that in the investible universe of listed stocks, the oil & gas sector
enjoys a weight of around 12.5%, which is reasonably reflected by the SENSEX on account of its
weightage of 15,8%, while the Nifty appears to be over-weighted. It would thus appear that the
Nifty is skewed towards the oil and gas sector and more specifically to ONGC Ltd., which had
made the Nifty dance to its tunes in the months of May 2004 and 2006.
SENSEX on the other hand, neatly avoids sector bias and includes blue chip companies. The
wide and balanced industry representation in the SENSEX thus makes it the ideal benchmark for
fund managers to compare the performance of their fund.

ABSOLUTE RETURNS:
(As of end Nov 2007) (For I year)
SENSEX

49.88%

Nifty

43.16%

The absolute returns given by the SENSEX over the one year period from September 2005 to
August 2006, is 49.88% as compared to the Nifty, which gave a return of only 43.16%. This
shows the SENSEX to be more attractive portfolio for investment, offering more returns.
Absolute Return on various other major indices for the one year period ended on August
2006:
1 month

3 month

6 months

1 year

SENSEX

8.89

12.51

12.81

49.88

BSE Mid-Cap

11.50

-5.03

0.17

18.05

BSE IT

8.49

17.67

15.65

43.40

BSE BANKEX

11.02

11.28

1.99

18.79

BSE 500

9.79

6.40

7.11

35.16

S&P CNX Nifty

8.61

11.16

11.03

43.16

CNX Midcap

11.07

-2.10

-2.02

17.58

CNX IT Index

8.07

14.88

11.90

39.92

10.20

0.90

12.27

6.55

5.60

32.05

S&P

CNX 12.27

Banks
S&P CNX 500

9.58

*Source: BSE Index Cell

SENSEX has given higher annual return as compared to Nifty for all the mentioned Indices like
Midcap, IT Index, Bank Index etc.

BSEs IT Index gave a higher return as compared to the Nifty IT Index for the one year period
ended on 31st August 2006.

COMPARISON OF SENSEX WITH INTERNATIONAL INDICES

The table below compares the SENSEX with other indices of developed as well as emerging
markets in terms of average daily returns and volatility. The USA, UK and France are developed
markets and China, Korea, Mexico, Indonesia and India are the emerging markets.
Return for the year ended on 31st August 2006
INDEX

Return (%)

S&P 500 INDEX

6.84

NASDAQ COMPOSITE INDEX

1.47

DOW JONES INDUSTRIAL AVERAGE

8.58

FTSE-100 INDEX

11.50

CAC FRANCE INDEX

17.40

CHINA A SHARE INDEX

42.67

KOSPI INDEX

24.87

MEXICO BOLSA INDEX

47.79

JAKARTA COMPOSITE INDEX

36.30

BSE SENSEX

49.88

*Source: BSE Index Cell

SENSEX has given the highest return for the year ended on 31 st August 2006 in comparison with
the above indices.

While comparing SENSEX with indices of the developed countries like USA, UK and France,
SENSEX has reported considerably higher return than these indices.

While comparing SENSEX with Indices of the developing countries like China, Indonesia, etc.
the SENSEX has again reported higher return than these Indices.
Thus SENSEX seems to be a better Index as compared not only to most Indices of the emerging
markets but also Indices of the developed market.

VOLATILITY
Volatility is a measure of deviation of the current price of an asset from its average past prices.
Greater this deviation, greater is the volatility. Since volatility is a standard measure of financial
vulnerability, it plays a key role in assessing the risk & return trade-offs.

Comparative Volatility (1 Std Dev.):

1 Year

9 Months

6 Months

3 Months

SENSEX

1.66

1.78

2.05

2.22

Nifty

1.69

1.80

2.10

2.20

*Source: BSE Index Cell

The volatility of the SENSEX is lower than that of the Nifty for the calculated periods of six, nine
and twelve months while it is marginally higher for 3 month period.

Portfolio Analysis

Portfolio Analysis of Reliance Growth Fund

(As on 30th Nov 2007)
Reliance Asset Management Company Ltd.

Reliance mutual fund, promoted by the Anil Dhirubhai Ambani (ADAG) group, is one of the
fastest growing mutual funds in India having doubled its assets over the last one year. In March,
2006, the Reliance mutual fund emerged as the largest private sector fund house in the country,
overtaking Prudential ICICI which has been holding that position for many years.
As of end August 2006, Reliance mutual fund has Rs 28,753 crore of assets under management.
Reliance Equity Fund, launched by Reliance MF in early 2006, is the largest mutual find scheme
in the country with a fund size of over Rs 5,500 crore.
Investment Category: Open Ended Equity Growth Scheme
Investment Objective: The scheme aims at long term growth of capital through research based
investment approach. The funds will be invested in Equity and equity related instruments, and
there will be an exposure to debt and money market instruments also.
Investment Style:

1. Selection of stocks would be dependent on blend potential specially in Mid Cap space

in the

given segment.
2. Selective Exposure to Large Cap continuously reassessing valuations and accordingly adjusting
the portfolio.

Date of Allotment

: 25th September, 1995

Fund Managers

: Sunil Singhania

Fund Size

: Rs. 3555.73 Crore

Minimum Application Amount

Resident Indians:

Rs.5000

Non-Resident Indians:

Rs.5000

Loading Charges
Maximum Entry Load:

2.00%

Maximum Exit Load :

Nil

Asset Allocation

Debt, Derivatives & Call

Equity

Portfolio Characteristics

(As on 30/11/07)

Average Mkt Cap (Rs Cr)

4,447.19

Market Capitalization

% of Portfolio

Giant
13.01
Large

14.89

Mid

47.36

Plan and Options

Growth Plan

Dividend Plan

Growth & Bonus options

Dividend Payout & Re-investment

Options

Bench Mark

BSE Sensex

Top 10 Holdings
Company

Nature

% Hold

Other Equities

EQ

18.68

JSW Steel Ltd.

EQ

5.07

Reliance Industries Ltd.

EQ

3.65

Bharat Earth Move

EQ

3.40

Divas Lab

EQ

3.06

Lupin

EQ

2.90

Jaiprakash Associates Ltd.

EQ

2.06

Cambridge Solution

EQ

2.03

Reliance Communication

EQ

2.01

Who can invest in this scheme?

Individuals
NRI
Association of Persons
Partner Ship Firm
Societies
OCBs

Minors
Company
Trust
FIIs

Sector Allocation

Metals & Metal Products

13.02
Energy
7.18
Health Care
6.71
6.47
Technology

6.36
Chemicals

Basic/Engineering

4.53

Financial Services
4.52
Services
4.18
Automobile
3.52
Diversified
3.44
FMCG
2.55
Textiles
1.49

From the portfolio facts of the Reliance Growth Fund it is clear that the asset allocation pattern of
the fund is to invest 85%-100% in Equities and up to 15% in debt and derivative instruments or
other assets. Out of its total investment fund manager in equities it has invested around 3.65% of
its total assets in its own company i.e. Reliance Industries Ltd. and followed by Bharat Earth
Movers. The fund manager was concentrating mainly in the sectors such as Steel,
Pharmaceuticals, Technology, and Textiles etc. The fund manager has a selective exposure to
Large Cap, continuously reassessing valuations and accordingly adjusting the portfolio.

From the above chart we can say that in compare to the scheme category the Reliance Growth
Fund has been giving comparatively good return. Even when scheme has given negative return as
a whole it has also given negative but lesser than scheme due to its efficiency. Last 5 years, as a
whole Equity Diversified scheme has given return of 42.18% where as the fund has given 60.49%
of return. Last 3years, the scheme has given 40.08% of return whereas the fund has given 83.22%
of return, last 2 years the scheme has given 40.59% of return as a whole but the fund has given
111.645 of return. This is due to the fund managers efficiency in forecasting the time and the
sectors where he invested the money. But in last 1 year the fund has not performed well due to
market fall. But recently in last 6 months it again recovered from that & return reached upto
6.87% than of schemes return of 6.36%.

Performance (Return %) of the scheme as on 30th Nov 07

So, from the above graph we can observe that this fund has been giving good return during last 2
& 3 years compare to the SENSEX return. This is due to fund managers efficiency in investing
to the growth sectors like IT, Healthcare, Metal, Energy etc. During this time frame the fund gave
the return of 83.32% & 111.64% respectively in compare to SENSEX return of 50.90% &
97.90% respectively. But during last 1 year time period due to fall in the price of the specific
sector, the fund has given lower return (12.96%) than the SENSEX return (15.90%) which
resulted the fall in the value of the overall portfolio in the market.
Analyst Review about this fund
RELIANCE Growth Fund is a mid-cap focused fund that can provide a kicker to your returns; but
it comes with a fairly high risk profile.
The fund has consistently made the best of bull markets, with an aggressive investment strategy
that milks the potential of momentum stocks.

Investors with a penchant for risk can consider adding the fund to their portfolio, as it has
consistently demonstrated the ability to deliver market- and competition-beating returns,
especially in buoyant market conditions. But its investment style and mid-cap focus could make
for volatile returns.
Therefore, it may be advisable to limit it to a small portion of your portfolio. It should not be the
only equity fund you invest in and may be unsuitable for first-time investors in equity funds.
Mid-cap stocks with a market capitalizations ranging from Rs 1,000 to Rs 5,000 crore make up
the bulk of the Reliance Growth Fund's portfolio. The fund adheres roughly to a 70:30 mix
between mid-cap and large-cap stocks. Its stock choices are adventurous and unconventional.
The fund seems to follow an investment approach that focuses on individual stocks, rather than
on sectoral allocations. At times, this leads to concentrated exposures to select sectors. In recent
months, for instance, the portfolio has been overweight in capital goods stocks, the sector
accounting for 21 per cent of assets by April-end.
The fund's performance record is impressive. Over a five-year period, it has delivered a
substantial out-performance of the CNX Midcap 200 index. This is an impressive record because
the CNX Midcap 200 has been a much more difficult index to beat than Sensex or Nifty.
Reliance Growth Fund has managed a 27 per cent compound annual return on its NAV since
January 2000, compared to the Midcap 200's returns of 20 per cent.
On a year-to-year basis, the fund's performance has been impressive in bullish phases, but not
very consistent. Reliance Growth Fund figured among the top performing equity funds in 2002,
2003 and 2004 years when the market was in a buoyant or a bullish phase.

In the bear markets of 2000 and 2001, the fund shed considerable value and lagged a number of
its peers.
The track record makes the fund unsuitable for a conservative investor interested in containing
downside risk.

Portfolio Analysis of Prudential ICICI Dynamic Plan

(As on 30th Nov, 2007)
Prudential ICICI Asset Management Company Limited
Prudential ICICI Mutual Fund is the largest private sector mutual fund in India with assets of over
Rs.34,119 crore under management as of Aug 2007. The asset management company, Prudential
ICICI Asset Management Company Limited, is a joint venture between Prudential Plc, Europe's
leading insurance company and ICICI Bank, India's premier financial institution.

Prudential Plc holds 55 per cent of the asset management company and the balance by ICICI
Bank. In a span of just over six years, Prudential ICICI Asset Management Company has
emerged

as

one

of

the

largest

asset

management

companies

in

the

country.

Investment Category

: Open Ended Equity Growth Scheme

Investment Objective

: The scheme aims to invest primarily in equities and for defensive

consideration in fixed income securities including money market instruments with the aim of
generating capital appreciation. The actual percentage of investments in will be decided after
considering the prevailing market and economic condition

Investment Style

1. Selection of Stocks would be dependent upon growth potential in the given segment.
2. The choice of stocks is restricted to those companies with large market capitalization between
2500-5000 crores.
3. The top 10 holders of the fund are holding around 56.66% of net assets of the fund.
Date of Allotment

: 31st October, 2002

Fund Managers

: Sankaran Naren

Fund Size

: Rs. 2218.23 crores

Application Amount
Minimum Investment: Rs. 5000
Subsequent Investment: Rs. 500
Minimum Withdrawal : Rs. 500
Minimum Balance
Loading Charges:

: Rs. 5000

Entry Load: 2.25 % for investment up to Rs. 4.999 Cr.

Exit Load

: Nil

Options :
Growth option
Dividend option

Benchmark:

BSE SENSEX

Asset Allocation:

75.05
%
1.67
1.28%
Cash

7.21%

&

2.86%

Nifty

Other

Futures

Assets

15.27%

Current Term

CPs/CDs Equity
Call

Who can invest in this fund?

Deposits

Individuals
NRI
Association of Persons
Partnership Firm
Societies
OCBs

Minors
Company
Trust
FIIs
Huf

Portfolio Characteristics

As on 30/11/07

Average Mkt Cap (Rs Cr)

23,086.08
%

of

Market Capitalization
Portfolio
Giant

59.87

Large

8.35

Mid

20.20

Small

11.58

The Top 10 Holdings

Company

Nature

% Hold

Reliance Inds.

EQ

7.04

ONGC

EQ

5.92

TCS

EQ

5.10

Infosys Tech

EQ

5.08

Deccan Chronicle

EQ

4.91

Tata Steel

EQ

4.46

ICICI Bank

EQ

3.36

St Bk of India

EQ

2.98

ITC

EQ

2.89

HDFC Bank

EQ

2.77

Sectors Allocation

As on 30/11/07

% Net Assets
14.29

Technology
Energy

12.99

Financial Services

12.16

Metals & Metal Products

9.08

Services

8.33

FMCG

4.06

Diversified

3.76

Health Care

3.65

Automobile

2.66

Chemicals

2.43

Basic/Engineering

1.12

Construction

0.52

From the above portfolio fact it is clear that the fund manager has invested 75% of total
Assets in Equity market and rest of the portion in cash and derivative market. Major
portion of this 75% are invested in IT sector followed by Energy sector, Financial
Services sector etc. The fund manager generally invested the total assets in growth and
Diversified sector in order to give the high and stable return to its investors. The fund
Manager has generally concentrated on growth sectors with large market capitalization.

Relative Performance ( Fund vs. Category Average)

So, from the graph it is clear that ICICI Dynamic plan has been giving higher return than the
scheme since last 3 years. The fund manager made it possible due to his efficiency in forecasting
the time of investing, proper forecasting regarding the profitable sectors to invest. He has
invested the major portion in the IT, Energy, Financial Services & metal sectors. These are the
sectors which have become the most prominent & profitable sectors now-a-days. Due to this, the
fund has given handsome return during last couple of years. But we can see that only during the
last year the fund has not given good return as it gives. This happened mainly due to the
drastically market fall during last financial year. But again recently market has started to recover
its position and we hope the fund will again give its normal after some period.

Performance of the Scheme (% of Return) as on 30.11.2007

From the above graph it is clear that like all the other funds under equity diversified scheme this
fund also has been giving more return than the SENSEX. Due to fund mangers efficiency in
investing the capital in the growth sectors with high market capitalization the has made it possible
to give higher rate of return than the sensex return. During last financial year, most of the funds
have given less return as compared to the sensex but inspite of that this has given higher return
than the sensex. This is due to the fund managers efficiency in forecasting the time to invest in
proper sectors & shuffling the money in the invested sectors.
Analysts Review about this fund
Prudential ICICI Mutual Fund, Indias largest private sector mutual fund, has launched a new
scheme, Pru ICICI Dynamic Plan, which facilitates active participation and investment agility to
make the most of market conditions.
The Indian stock markets are increasingly sector-driven. Over a period of time, the indices may
show a gradual increasing decreasing or even range-bound trend. And there could be
intermittent bouts of volatility. However, because the constituent sectors drive the overall indices
(and the sectors might be few or many), investors need an investment solution with the flexibility
to invest across sectors based on their attractiveness at various points in time.

Also, if the situation calls for the need to be diversified, then the fund should also have the ability
to diversify across various sectors. The Pru ICICI Dynamic Plan has the capability of making the
most of these situations.
In case of a prolonged decline in the equity markets, the Dynamic Plan has the ability to switch to
cash and / or debt instruments, which would attempt to arrest any further decline in the
investments. Hence the investor need not stay invested in equities at all times, especially when
the markets exhibit a prolonged decline.
In the case of an investor investing directly into equity, he faces a disadvantage due to the
incidence of short-term capital gains tax, which can be as high as 30 per cent while booking
profits on investments held for less than a year. (Active management of equity portfolios by
investors directly investing in equities requires regular profit booking, which leads to short-term
capital gains.)
By investing in the Dynamic Plan for over an year, the investor not only gets the advantage of
active and astute equity management, but also the advantage of tax benefits, as the investor needs
to pay only a minimal of 10 per cent tax on long-term capital gains.
The Dynamic Plan is ideal for investors who are seeking avenues for possible long-term capital
appreciation, and looking to invest in equities. The plan is suitable for investors with an
investment horizon of two to three years. From the tax point of view, it is advisable for the
investor to look at a minimum one-year-plus horizon.

Portfolio Analysis of Birla Sun life Equity Fund

( As on 30th Nov, 2007)

Birla Sun life Asset Management Company Limited

Birla Sun life Mutual Fund is one of India's leading mutual funds with assets of over Rs.17, 098
crore under management as of Aug 2007. Birla Sun Life Asset Management Company Limited,
the investment manager of Birla Sun life Mutual Fund, is a joint venture between the Aditya Birla
Group and Sun Life Financial Services, leading international financial services organization.

Established in 1994, Birla Sun life AMC provides investors a range of 18 investment options,
which include diversified and sector specific equity schemes, a wide range of debt and treasury
products, and two offshore funds. Both the sponsors have equal stakes in the AMC.

Investment Category: Open Ended Equity Growth Scheme

Investment Objective: The fund seeks long-term growth of capital and regular income through
90% investment in equities and 10% in debt and money market portfolio.

Investment Style:

1. Here, fund manager investing the capital in a diversified sector, both in growth sector as well as
value sector according to the market situation.
2. The choice of stock is restricted to those companies with market capitalization between Rs. 10002000 crores.

Date of Allotment: 17th August, 1998

Fund Manager : Mahesh Patel
Fund Size

: Rs. 651.37 Crores

Application amount:
Minimum Investment

: Rs. 5000

Incremental Investment: Rs. 1000

Loading Charges:
Entry Load: 2.25 % for investment upto Rs. 4.999 Cr.
Exit Load

: Nil

Who is eligible to invest?

Individual

HUF

NRI
Association of Persons
Partnership Firm
Societies
OCBs

Minors
Company
Trust
FIIs

Planning & Options

Growth option

Dividend option

No Reinvestment option
Benchmark: BSE SENSEX

Asset Allocation:

88.33%

10.49
1.17%
Cash & Current Asset

%
Equity

Money Market Instruments

Portfolio Characteristics:

As on 30/11/07

Average Mkt Cap (Rs Cr)

2,236.55

Market Capitalization

% of Portfolio

Giant

1.11

Large

6.88

Mid

66.67

Small

25.35

The Top 10 Holdings

Company

Nature

% Hold

Bhrti Airtel

EQ

5.04

Infosys Tech.

EQ

4.79

Crompton Greaves

EQ

4.29

Siemens

EQ

4.20

M&M

EQ

3.26

BHEL

EQ

3.16

ICICI Bank

EQ

2.90

Satyam Computer

EQ

2.85

VSNL

EQ

2.82

Maruti Udyog

EQ

2.75

Sectors Allocation
As on 30/11/07
% Net Assets

Basic/Engineering

14.83

Services

13.57

Financial Services

13.45

Metals & Metal Products

11.65

Automobile

11.47

Diversified

7.34

Technology

4.72

Construction

3.98

Health Care

3.00

FMCG

2.76

Consumer Durable

2.71

Textiles

0.42

From the above portfolio fact, we can understand that the fund manager has invested around 88%
of the net assets in equity market and the rest portion in the cash market and money market
instruments. In equity market, he mainly invested in Engineering sectors followed by services
sector, financial service sector & metal sector. Metal & service sector have become very growing
sector now-a-days. As a result of this fund is able to give high and steady return to its investors.
Relative Performance (Fund vs. scheme category)

From the graph it is clear that the fund has been giving steady and high return since last 3 years.
Due to the fund managers efficiency in choosing the right and profitable sector for investing, the
fund has given a steady growth through out the time horizon. The fund has given a greater capital
appreciation to its investors by giving high return. The fund manager has maintained a diversified
portfolio in order to spread the risk & make the investment more liquid. After getting the high
return from the respected sectors he has again reinvested that in the growing sectors to increase
the in the portfolio. Due to the market fall during last financial year has created a great impact on
it and as a result of this the funds return also decreased.

Performance of the Scheme (% of Return) as on 30.11.2007

So, from the above diagram it is clear that the fund has given on an average around 60% of return
which is quite healthy in mutual fund industry. Since last 2 years the fund has given more than
100% of return. They also announced additional dividend to its clients. As he invested in top
growing sector, the fund has shown high & stable return. Though during the last financial year
due to fall in the market price, the fund also gave the less return than the sensex, but recently it
has started to recover the market in order to sustain the return.
Analyst Review regarding this Fund
No more erratic performances and concentrated portfolios. This fund has evolved to be a
steady offering over the years.
It shot to fame in 1999 with a dazzling performance of 280 per cent. Investors then had to deal
with two terrible years (2001 and 2002) when it underperformed the category average by a wide
margin. But the fund pulled up socks and in the 15 quarters since 2003, the fund underperformed
in just three.
It also worked at toning down its dangerously concentrated portfolio. The fund manager would
bet heavily on some sectors and try to nullify the risk by investing in many stocks.

The fund had 46 stocks in its portfolio as on December 31, 2006 and the top three sectors
occupied around 40 per cent of its portfolio.
The fund manager gets in and out of stocks and does not really buy to hold. Just a handful Siemens, Pantaloon Retail, Tata Motors, Bharti Airtel, Maestros Mediline Systems, United
Breweries (Holdings) Ltd, United Breweries - have consistently been with the fund for years.
Trent, first appeared in the June 1999 portfolio, was sold after some months and bought again in
April 2002. Cadila Healthcare was picked up in 2000, sold within a year and bought in January
2004.
Like his philosophy with stocks, the fund manager does not favour any particular market cap.
Large-cap allocation was high in 2001 (79 per cent), kept decreasing till 2004 (37.58 per cent)
and moved up in 2005 (54.68 per cent). Last year it has decreased (from 66 per cent in January to
46.97 per cent in December).
Last year, th
e fund seemed to be doing well with a return of 42.84 per cent (category average: 34.69 per cent).
Its one-year, two-year, three-year and five-year returns were all ahead of the category average.

Portfolio analysis of HDFC Growth Fund

(As on 30th Nov, 2007)
HDFC Asset Management Company Limited
HDFC Mutual Fund has been one of the best performing mutual funds in the last few years.
HDFC Asset Management Company Limited (AMC) functions as an Asset Management
Company

for

the

HDFC

Mutual

Fund.

AMC is a joint venture between housing finance giant HDFC and British investment firm
Standard Life Investments Limited. It conducts the operations of the Mutual Fund and manages
assets of the schemes, including the schemes launched from time to time. As of Aug 2006, the
fund

has

assets

of

Rs.25,892

crores

under

management.

Investment Category : Open Ended Equity Growth Scheme

Investment Objective: The scheme is aimed at generating long-term capital appreciation by
investing 80-100 per cent of its assets in equity and equity-related instruments. Exposure to debt
and money market instruments would be around 20 % of the corpus.
Investment Style

1.

Here, fund managers are investing the money of their clients in the growth sectors like IT

sector, FMCG sector, Real Estate areas etc. in order to get high return within specific period of
time.
2.

The choice of stocks is restricted to those companies with large market capitalization

between 2500-5000 crores.

Date of Allotment

: 20th July, 2000

Fund Manager

: Srinivas Rao Ravuri

Fund Size

: Rs. 415.97 Crores

Application Amount:
Minimum Investment

: Rs. 5000

Subsequent Investment: Rs. 1000

Minimum Withdrawal: Rs. 500
Loading Charges

Entry Load: 2.25 % for investment upto Rs. 4.999 Cr.

Exit Load : 1 % for redemption between 0 - 365 days and investment upto Rs. 4.999 Cr.
Options:

Growth Plan

Dividend Plan

Benchmark: BSE SENSEX

Who is eligible to invest?

Individual
NRI
Association of Persons
Partnership Firm
Societies
OCBs

Minors
Company
Trust
FIIs
HUF

Asset Allocation:

97.94
%

1.94
2.38%
CPs/CDs

1.62%
Debt

%
Debt & Others

Equity

The asset allocation under the Scheme will be as follows:

SR.NO. TYPE

OF NORMAL

NORMAL

RISK

DEVIATION (% OF
ALLOCATION(% OF
INSTRUMENTS

NORMAL

PROFILE

NET ASSETS)
ALLOCATION)
Equities

&

Equity
Medium to

related instruments

80 - 100

0
High

Debt Securities, Money

Market instruments &
2

Low
0 - 20

Cash (including money

Medium

at call)

Portfolio Characteristics:
As on 30th April, 2007
Average Mkt Cap (Rs Cr)

11,591.66

Market Capitalization

% of Portfolio

to

Giant

44.04

Large

5.05

Mid

36.22

Small

12.12

Tiny

--

Top 10 Holdings:
Company

Nature

% Hold

Divi's Lab

EQ.

7.69

Reliance Inds.

EQ.

6.19

Crompton Greaves

EQ.

5.99

Infosys Tech.

EQ.

5.57

Bharti Airtel

EQ.

5.46

BHEL

EQ.

4.78

ITC

EQ.

4.42

ONGC

EQ.

4.34

Thermax

EQ.

4.18

Sun Pharma.

EQ.

4.06

Sectors Allocation:

As on 30/04/07

% Net Assets

Basic/Engineering

19.24

Health Care

15.63

Energy

14.38

Technology

14.01

Automobile

9.15

FMCG

7.47

Financial Services

5.91

Chemicals

4.28

Construction

2.52

Consumer Durable

2.39

Metals & Metal Products

1.99

Textiles

0.55

Diversified

0.42

From the above portfolio fact it can be observed that the fund manager has invested the capital
mainly in the growth sector with high market capitalization. He has invested the major amount in
Engineering, Healthcare, Energy & IT sector which are giving most prominent return now-a-days.
He has invested almost 97% of the total assets in equity market instruments and the rest portion in
debt & other cash market instruments. The portfolio is made with high risk- high return objective.
Here the fund managers main target is to generate long term capital appreciation and give the
time to the capital to grow up more and get a long term return in the future.

Relative Performance (Fund vs. Scheme Category)

If we see the relative performance between this fund and scheme we can understand that this fund
is the average performer under this scheme. Though it has given good return to its investors but
not what everyone expected to get. This fund was mainly invested in IT, Energy, Healthcare and
Engineering sectors. But during the financial year 04-05 & 05-06 the health care sector was not a
good performer relative to the sector. But the fund manager has invested 15.63% of the corpus in
that field. He also invested 7.47% of the corpus in the FMCG sector which is not a prominent
sector to invest. He invested only 1.99% & 0.55% in metal and textile sector respectively but
those were the most growing sectors during this period.
Performance of the Scheme (% of Return) as on 30.4.2007

Form the above graph it is understood that the fund has not been performing well in compare with
the SENSEX. This is mainly due to the choosing not proper sectors to invest at the proper time.

During last 3 financial years this fund has given almost less return than the SENSEX return. The
fund manager has invested only 1.99% & 0.55% to the metal & textiles industry but these are the
which has given more return in compare to the other sectors & he has invested 7.47% of the
corpus in FMCG sector which were not able to give expected return.
Analyst Review about this fund:
HDFC Growth Fund has trailed the narrow market indices, such as the BSE Sensitive Index and
the S&P CNX Nifty, over the past six months.
This is disturbing, especially because the fund had a significant cash position even as late as
November 2000.
This should normally have shielded the NAV from the declining equity values. However, since
the fund is still in its first year of operation, it is early days yet to judge the performance.
Investors in the fund can retain their units for the present.
Portfolio overview: A study of the fund' portfolio over the past 10 months reveals the following
features:
*As the fund was launched after the meltdown in the technology sector and the broad market was
well underway, it has not started out with as much of a handicap in timing as other funds which
debuted at the peak of the IT boom.
*The fund has consistently remained diversified, both in its stock-specific and sectoral exposures.
No single stock has accounted for over 8 per cent of the net assets since launch, and sectoral
allocations have been pegged at less than 20 per cent to each sector, except on a single occasion
when the fund was overweight in IT stocks.

*The fund started out with a high cash position in the initial months which has gradually been
invested in equities. This phasing out of investments, at a time when the broad market was on a
steady decline would have helped bring down the cost of the initial portfolio.
*The fund's cash position declined from 64 per cent of the net assets in September 2000 to around
37 per cent by November 2000. However, it continues to be wary of the equity market, and had
acquired a small debt exposure in addition to a significant cash position.
*By May 2001, the fund had around 13 per cent of its net assets invested in cash equivalents and
debt. The fund had stipulated at the time of its initial offer that it may invest up to 20 per cent of
its assets in debt or cash equivalents.
*HDFC Growth Fund has remained consistently overweight in the FMCG sector, with sectoral
allocations rising from 15 to 22 per cent of net assets between September 2000 and May 2001.
Given the signs of a distinct slowdown in this sector and relatively high price earnings multiples
of these stocks, this part of the portfolio could make for limited upside potential.
*In contrast, the fund has changed its stance on IT stocks quite dramatically since its launch.
After starting out with an IT exposure of 18 per cent in September 2000, the fund pegged up its
IT exposure to around 21 per cent by February 2001, but subsequently trimmed this sharply to
around 5 per cent of the assets. This strategy could have cost the fund in terms of performance,
since the high IT exposure in February 2001 would have made the fund particularly vulnerable to
the subsequent markdown in these stocks.
*In place of IT stocks, the fund has acquired a range of pharma and cyclical stocks over the past
three months. Capital goods, cement and metals are some of the sectors where the fund acquired
fresh exposures. This has led to a considerable churning in the ranks of the fund's top holdings,

where stocks such as NIIT and Visualsoft have been replaced with the likes of Hoechst Marion,
Marico and ITC.
*The stock selection strategy has been rather unconventional with the fund including some stocks
which do not normally figure in the fund portfolios. ITW Signode, Unichem Labs, MRO-TEK
and Marico Industries are a few instances of this.

People looking to invest get in many options and mutual funds happen to be one of
such preferred destination for people who want more returns then their fixed
deposits would earn them its also a preferred option for the people who are
circumspect about investing into stocks directly and believe that mutual funds can
manage risk and funds better than they could.

Suggestions

The risk factor of the funds can be known through the Beta value of the fund.
Investors who are willing to invest in mutual funds and at the same time willing to take
up more risk can consider funds based on the beta of the funds.

A good knowledge about the funds performance can be known through various ratios,
which were discussed earlier.

The investor when looking to invest in mutual funds to look at the Sharpe, and
treynor ratios, higher these ratios better is the performance of the fund.

Conclusion
So, it can be concluded by stating that based on my objective of the study I have analyzed and
understood the various departmental function of a Broking firm. For this I have discussed with
different departmental persons of the Angel Broking Ltd. being a part of my study this
helped me to understand how a Broking firm works generally.
As a part of my study it has been understood that how market has been performing since last 3
financial years, what are the ups and downs & why. I have also analyzed briefly the Mutual Fund

Industry in India, how it has been performing since last 3financial years, what are the advantages
are there to invest in a fund rather than sensex, the growth pattern of the mutual fund industry in
India, what are the schemes available to invest for a investor etc.
Then the concentration has been given mainly on Equity Diversified Funds because this scheme
has been giving very prominent return since its inception. From the name itself we can
understand that these funds are totally invested in diversified sectors of the market to earn
high profit by taking considerable risk. Since last 3 years the equity diversified schemes has
been giving the return of 44.08% of return which is not too far from the sensex return also
i.e. 52.05% since last 3 years. Under the category average, the Equity Diversified schemes
have given the best result. As this type of fund is invested in both Large, Mid & Small cap of the
market so it is quite related with market movements also. The performance of this scheme is quite
related with SENSEX movements. According to the different asset management co. now-a-days
the mutual fund investors are mostly interested in this scheme due to its excellent performance .
Due to its strong potentiality we can expect that within coming 2 years this scheme will
become the best scheme among the various schemes offered by Mutual Fund.
The importance has been given to know the trends in stock market, what are the factors
that are influencing the stock market more, what are the ups & downs in the market, how
the market is performing in compare to international market, volatility of the market etc.
The comparative analysis are made for selected fund in order to know each funds
performance, their portfolio structure, asset allocation, market capitalization, analysis of
their return in compare to the category average & also with SENSEX as a benchmark. As a
result of this we are able to understand the details of each fund & their performance & their
objective.
For getting a fair picture regarding their performance we have compared the performance
of each fund with the benchmark BSE SENSEX. Taking Index as Benchmark is very much
essential to judge & evaluate the funds performance fairly. The measures described earlier

are absolute, meaning that none of the measures should be used to evaluate the fund
performance in isolation. A fund's performance can only be judged in relation to investor's
expectations. However, it is important for the investor to define his expectations in relation
to certain "guide posts" on what is possible to achieve, or moderate his expectations with
realistic investment alternatives available to him in the financial markets. These guide posts
or indicators of performance can be thought of as benchmarks against which a fund's performance
ought to be judged. For example, an investor's expectations of returns from an equity fund should
be judged against how the overall stock market performed, in other words how much the stock
market index itself moved up or down, and whether the fund gave a return that was better or
worse than the index movement. In this example, we can use a market index like S&P CNX Nifty
or BSE SENSEX as "benchmarks" to evaluate our investor's mutual fund performance.
While an advisor needs to look at the absolute measures of performance, he needs to select the
right benchmark to evaluate a fund's performance, so that he can compare the measured
performance figures against the selected benchmark.
To evaluate the performance of an equity fund, therefore we still need to select an
appropriate benchmark and compare its returns to the returns on benchmark: usually this
means using the appropriate market index. The appropriate index to be used to evaluate a
broad-based equity fund should be decided on the basis of the size and the composition of
the fund's portfolio.
If the fund in question has a large portfolio, a broader market index like BSE 100 OR 200
OR NSE 100 or BSE SENSEX may have to be used as the benchmark rather than S&P
CNX NIFTY. An actively managed fund expects to be able to beat the index, in other words
give higher returns than the index itself.
After that I have used certain parameters like Returns, Risk StDev, Beta, Sharpe Measures,
Trynor Measure, R-square, Information ratio etc. to get the comparative performance analysis

between sensex & selected funds. By using these parameters we are able to make the rank of
those funds on the basis of their overall performance.
We have also made the Risk-Return analysis & Risk adjusted Performance analysis of both
SENSEX & Mutual Fund Schemes in order to assess their potential growth.

As We have analysed both funds & SENSEXs customer base, investment

objective, long term as well as short term aims, future possibilities, potential
growth etc. So, We have given suggestion to the Angels investors both Long term,
Mid term, Short term (For Aggressive as well as Conservative) investors where
they should investEither in SENSEX or selected funds & why? If they invest in
selected funds then which fund is suitable for which type of Angels investors?

BIBLIOGRAPHY

.WWW.NSEINDIA.COM
WWW.MUTUALFUNDS.COM

www.angelstrade.com
www.hormony@angeltrade.com