Professional Documents
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INTRODUCTION
MUTUAL FUNDS
Mutual fund industry is rapidly becoming popular in our country .The
reason being for this is that it diversify the investment made by the investors and
giving good return .So this industry is having a lot of potential and that is why this
industry is also becoming very competitive. Presently more than five hundred
schemes are running in our country so it becomes difficult for the investor to select
the right option of investment. Therefore financial advisor companies are doing the
job for the investor and recommending them the funds which are best suited to their
risk profile. And for the purpose they analyze the schemes in terms of their risk
factors. The project Comparative analysis of mutual fund schemes in India is
basically a two way analysis at one side it will analyze the various schemes and on the
other hand it will analyze the investor behavior.
Mutual Fund Investment Is Darling to the investor
Indian economy has achieved what it has been hoping for quite some time. The
Feel Good Factor. Perhaps at no time during the post-liberalization period, Indian
economy has shown such kind of optimism. It is poised to enhance its real economic
growth rate by more than two full percentage points in the current year, holding a
huge reserve of foreign exchange.
The growth of Mutual Fund in any economy is an indicator of the
development of financial sector and the extent to which investor have faith in the
regulatory environment. In the last decade the mutual fund industry has been one of
the fastest growing industries in the financial services sector, with the assets under
management growing at a CAGR of 13% from 1993 to 2005.
A Mutual fund is a trust that pools the saving of the 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 objective of the scheme. These could
range from share to debentures these investments and the capital appreciation realized
by the scheme are shared by its unit holders in proportion to the number of units
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owned by them (prorate). 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 portfolio at a relatively low cost. Anybody with an investment in mutual
funds. Each mutual funds scheme has a defined investment objective and strategy.
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The flow chart below describes broadly the working of a mutual fund:
Investors
Passed
back to
pool their
money with
Returns
Fund
Manager
Generates
Invest in
Securities
A mutual fund is the ideal investment vehicle for todays complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in fare way places. A typical individual is unlikely to have the knowledge,
skills inclination and time to keep track of events, understand their implications and
act speedily. An individual also finds it difficult to keep track of ownership of his
assets, investments, brokerage dues and bank transactions etc.
A mutual fund is the answer to all these situations. It appoints professionally qualified
and experience staff that manages each of these functions on a full times basis. The
large pool of money collected in the fund allows it to hire such at a very low cost to
each investor. In effect, the mutual fund vehicle exploits economics of scale in all
three areas-research, investments and transaction processing. While the concept of
individual coming together the invest money collectively is now new, the mutual fund
its present from is 20th century phenomenon. In fact, mutual funds gained popularity
only after the second world war. Globally there are thousand of funds offering ten of
thousands of mutual funds with different investment objectives. Today, mutual funds
collectively mange almost as much as or more money as compared to banks.
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A draft offer document is to be prepared at the time of lunching the fund. Typically, it
pre species the investment objectives of the fund, the risk associated, the costs
involved in the process and the broad rules fro entry in to and exit from the fund and
other areas of operation. In India, as in countries, these sponsors need approval from a
regulator, SEBI (Security and Exchange Board of India) in our case SEBI looks at
track records of the sponsor and its financial strength in grating approval to the fund
for commencing operations.
A sponsor then hires an asset management company to invest the funds according to
the investment objective. It also hires another entity to bt the custodian of the assets of
the fund and perhaps a third one to handle registry work for the unit holders
(subscribers) of the fund.
In the Indian context, the sponsors promote the asset Management Company also, in
which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the
asset management Company (AMC). E.g. Birla Global Finance is the sponsor of the
Birla Sun Life Asset Management Ltd. Which has floated mutual funds schemes and
also acts as a manger for the funds collected under the schemes?
EVOLUTION
The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
India and the Reserve Bank of India. The history of mutual fund industry in India can
be better understood divided into following phases:
single
investment
scheme
over
the
years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's
Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share
(Inida's first equity diversified scheme) in 1987 and Monthly Income Schemes
(offering assured returns) during 1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs 6700 crores.
Phase
II.
Entry
of
Public
Sector
Funds
1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering
the market in the year 1987. In November 1987, SBI Mutual Fund from the State
Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was
later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual
Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By
1993, the assets under management of the industry increased seven times to Rs.
47,004 crores. However, UTI remained to be the leader with about 80% market share.
Phase III.
Emergence
The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to
enter the mutual fund industry in 1993, provided a wide range of choice to investors
and more competition in the industry. Private funds introduced innovative products,
investment techniques and investor-servicing technology. By 1994-95, about 11
private sector funds had launched their schemes.
Phase
IV.
Growth
and
SEBI
Regulation
1996-2004
The mutual fund industry witnessed robust growth and stricter regulation from the
SEBI after the year 1996. The mobilisation of funds and the number of players
operating in the industry reached new heights as investors started showing more
interest
in
mutual
funds.
Investors' interests were safeguarded by SEBI and the Government offered tax
benefits to the investors in order to encourage them. SEBI (Mutual Funds)
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Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual
funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands
of investors from income tax. Various Investor Awareness Programmes were launched
during this phase, both by SEBI and AMFI, with an objective to educate investors and
make
them
informed
about
the
mutual
fund
industry.
In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament. The primary objective behind this
was to bring all mutual fund players on the same level. UTI was re-organised into two
parts:
1.
The
Specified
Undertaking,
2.
The
UTI
Mutual
Fund
Presently Unit Trust of India operates under the name of UTI Mutual Fund and its
past schemes (like US-64, Assured Return Schemes) are being gradually wound up.
However, UTI Mutual Fund is still the largest player in the industry.
Phase
V.
Growth
and
Consolidation
2004
Onwards
The industry has also witnessed several mergers and acquisitions recently, examples
of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun
F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously,
more international mutual fund players have entered India like Fidelity, Franklin
Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is
a continuing phase of growth of the industry through consolidation and entry of new
international and private sector players.
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s.
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the industry has grown at a compounded average growth rate of 26.34% to its current
size Rs. 1130 ban.
The period 1986-1993 can be termed as the period of public sector mutual funds
(PMFs). From one player in 1985 the number increased to 8 in 199. The party did not
last long. When the private sector made its debut in 1993-94, the stock market was
booming. The opening up of the assets management business to private sector in 1993
saw international along with the host of domestic players join the party. But for the
equity funds, the period of 1994-96 was one of the worst in the history of Indian
mutual funds.
1999-2000 years of the funds: Mutual funds have been around for a long period of
time precise for 36 yrs. But the year 1999 saw immense future potential and
developments in this sector. This year signalled the year of resurgence of mutual
funds and the regaining of investor confidence in these MFs this time around all the
participants are developments in this sector. This year signaled the year of resurgence
of mutual funds and the regaining of investor confidence in these MFs. this time
around all the participants are involved in the revival of the funds the AMCs the unit
holders, the other related parties. However the sole factor that give lift to the revival
of the funds was the union budget. The budget brought about a large number of
changes in one stroke. An insight of the union budget on mutual funds taxation
benefits is provided later.
It provided centre stage to the mutual funds, made them more attractive and provides
acceptability among the investors. The union budget exempted mutual fund dividend
given out by equity-oriented schemes from, both at the hands of the investor as well
as the mutual fund. No longer were the mutual funds interested in selling the concept
of mutual funds they wanted to talk business which would mean to increase asset
base, and to get asset base and investor base they had to be fully armed with a whole
lot of schemes for every investor. So new schemes for new IPOs were inevitable. The
quest to attract investors extended beyond just new schemes. The funds started to
regulate themselves and were all out on wining the trust and confidence of the
investors under the ages of the Association of Mutual funds of India (AMFI)
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One can say that the industry is moving from infancy to adolescence, the industry is
maturing and the investor and funds are frankly and openly discussing difficulties
opportunities and compulsions.
FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to 35 % over the
next few years as investors shift their assets from banks and other traditional
avenues. Some of the older public and private sector players will either close shop or
be taken over.
Out of ten public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with
two mergers and one takeover. Here too some of them will down their shutters in the
near future to come.
But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like
Fidelity, Principal, Old Mutual etc. are looking at Indian market seriously. One
important reason for it is that most major players already have presence here and
hence these big names would hardly like to get left behind.
In the U.S. most mutual funds concentrate only on financial funds like equity and
debt. Some like real estate funds and commodity funds also take an exposure to
physical assets. The latter type of funds are preferred by corporate who want to hedge
their exposure to the commodities they deal with.
For instance, a cable manufacturer who needs 100 tons of Copper in the month of
January could buy an equivalent amount of copper by investing in a copper fund. For
Example, Permanent Portfolio Fund, a conservative U.S. based fund invests a fixed
percentage of its corpus in Gold, Silver, Swiss francs, specific stocks on various
bourses around the world, short term and long-term U.S. treasuries etc.
In U.S.A. apart from bullion funds there are copper funds, precious metal funds and
real estate funds (investing in real estate and other related assets as well.).In India, the
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Canada based Dundee mutual fund is planning to launch a gold and a real estate fund
before the year-end.
In developed countries like the U.S.A there are funds to satisfy everybodys
requirement, but in India only the tip of the iceberg has been explored. In the near
future India too will concentrate on financial as well as physical funds.
The mutual fund industry is awaiting the introduction of DERIVATIVES in the
country as this would enable it to hedge its risk and this in turn would be reflected in
its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to trade
in Derivatives. Importantly, many market players have called on the Regulator to
initiate the process immediately, so that the mutual funds can implement the changes
that are required to trade in Derivatives.
\
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Equity FundsEquity funds are considered to be the more risky funds as compared
to other fund types, but they also provide higher returns than other funds. It is
advisable that an investor looking to invest in an equity fund should invest for long
term i.e. for 3 years or more. There are different types of equity funds each falling into
different risk bracket. In the order of decreasing risk level, there are following types
of equity funds:
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Speciality
funds
are
concentrated
ii.
iii.
f. Value Funds - Value Funds invest in those companies that have sound
fundamentals and whose share prices are currently under-valued. The portfolio
of these funds comprises of shares that are trading at a low Price to Earning
Ratio (Market Price per Share / Earning per Share) and a low Market to Book
Value (Fundamental Value) Ratio. Value Funds may select companies from
diversified sectors and are exposed to lower risk level as compared to growth
funds or speciality funds. Value stocks are generally from cyclical industries
(such as cement, steel, sugar etc.) which make them volatile in the short-term.
Therefore, it is advisable to invest in Value funds with a long-term time horizon
as risk in the long term, to a large extent, is reduced.
g. Equity Income or Dividend Yield Funds - The objective of Equity Income or
Dividend Yield Equity Funds is to generate high recurring income and steady
capital appreciation for investors by investing in those companies which issue
high dividends (such as Power or Utility companies whose share prices
fluctuate comparatively lesser than other companies' share prices). Equity
Income or Dividend Yield Equity Funds are generally exposed to the lowest
risk level as compared to other equity funds.
2.
Debt
Income
Funds
a. Diversified Debt Funds - Debt funds that invest in all securities issued by
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entities belonging to all sectors of the market are known as diversified debt
funds. The best feature of diversified debt funds is that investments are
properly diversified into all sectors which results in risk reduction. Any loss
incurred, on account of default by a debt issuer, is shared by all investors which
further reduces risk for an individual investor.
b. Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are
narrow focus funds that are confined to investments in selective debt securities,
issued by companies of a specific sector or industry or origin. Some examples
of focused debt funds are sector, specialized and offshore debt funds, funds that
invest only in Tax Free Infrastructure or Municipal Bonds. Because of their
narrow orientation, focused debt funds are more risky as compared to
diversified debt funds. Although not yet available in India, these funds are
conceivable and may be offered to investors very soon.
c. High Yield Debt funds - As we now understand that risk of default is present
in all debt funds, and therefore, debt funds generally try to minimize the risk of
default by investing in securities issued by only those borrowers who are
considered to be of "investment grade". But, High Yield Debt Funds adopt a
different strategy and prefer securities issued by those issuers who are
considered to be of "below investment grade". The motive behind adopting this
sort of risky strategy is to earn higher interest returns from these issuers. These
funds are more volatile and bear higher default risk, although they may earn at
times higher returns for investors.
d. Assured Return Funds - Although it is not necessary that a fund will meet its
objectives or provide assured returns to investors, but there can be funds that
come with a lock-in period and offer assurance of annual returns to investors
during the lock-in period. Any shortfall in returns is suffered by the sponsors or
the Asset Management Companies (AMCs). These funds are generally debt
funds and provide investors with a low-risk investment opportunity. However,
the security of investments depends upon the net worth of the guarantor (whose
name is specified in advance on the offer document). To safeguard the interests
of investors, SEBI permits only those funds to offer assured return schemes
whose sponsors have adequate net-worth to guarantee returns in the future. In
the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of
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UTI) that assured specified returns to investors in the future. UTI was not able
to fulfill its promises and faced large shortfalls in returns. Eventually,
government had to intervene and took over UTI's payment obligations on itself.
Currently, no AMC in India offers assured return schemes to investors, though
possible.
e. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end
schemes having short term maturity period (of less than one year) that offer a
series of plans and issue units to investors at regular intervals. Unlike closedend funds, fixed term plans are not listed on the exchanges. Fixed term plan
series usually invest in debt / income schemes and target short-term investors.
The objective of fixed term plan schemes is to gratify investors by generating
some expected returns in a short period.
3. Gilt Funds
Also known as Government Securities in India, Gilt Funds invest in government
papers (named dated securities) having medium to long term maturity period. Issued
by the Government of India, these investments have little credit risk (risk of default)
and provide safety of principal to the investors. However, like all debt funds, gilt
funds too are exposed to interest rate risk. Interest rates and prices of debt securities
are inversely related and any change in the interest rates results in a change in the
NAV of debt/gilt funds in an opposite direction.
5. Hybrid Funds
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As the name suggests, hybrid funds are those funds whose portfolio includes a blend
of equities, debts and money market securities. Hybrid funds have an equal proportion
of debt and equity in their portfolio. There are following types of hybrid funds in
India:
a. Balanced Funds - The portfolio of balanced funds include assets like debt
securities, convertible securities, and equity and preference shares held in a
relatively equal proportion. The objectives of balanced funds are to reward
investors with a regular income, moderate capital appreciation and at the same
time minimizing the risk of capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment horizon.
b. Growth-and-Income Funds - Funds that combine features of growth funds
and income funds are known as Growth-and-Income Funds. These funds invest
in companies having potential for capital appreciation and those known for
issuing high dividends. The level of risks involved in these funds is lower than
growth funds and higher than income funds.
c. Asset Allocation Funds - Mutual funds may invest in financial assets like
equity, debt, money market or non-financial (physical) assets like real estate,
commodities etc.. Asset allocation funds adopt a variable asset allocation
strategy that allows fund managers to switch over from one asset class to
another at any time depending upon their outlook for specific markets. In other
words, fund managers may switch over to equity if they expect equity market
to provide good returns and switch over to debt if they expect debt market to
provide better returns. It should be noted that switching over from one asset
class to another is a decision taken by the fund manager on the basis of his own
judgment and understanding of specific markets, and therefore, the success of
these funds depends upon the skill of a fund manager in anticipating market
trends.
6. Commodity Funds
Those funds that focus on investing in different commodities (like metals, food grains,
crude oil etc.) or commodity companies or commodity futures contracts are termed as
Commodity Funds. A commodity fund that invests in a single commodity or a group
of commodities is a specialized commodity fund and a commodity fund that invests in
all available commodities is a diversified commodity fund and bears less risk than a
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specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in
gold, gold futures or shares of gold mines) are common examples of commodity
funds.
9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other
mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund
of Funds maintain a portfolio comprising of units of other mutual fund schemes, just
like conventional mutual funds maintain a portfolio comprising of equity/debt/money
market instruments or non financial assets. Fund of Funds provide investors with an
added advantage of diversifying into different mutual fund schemes with even a small
amount of investment, which further helps in diversification of risks. However, the
expenses of Fund of Funds are quite high on account compounding expenses of
investments into different mutual fund scheme.
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Mutual fund schemes may be classified on the basis of its Structure and its Investment
objectives.
By Structure:
Open-ended funds
An open-end fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at net asset
value (NAV) related prices. The key feature of the open-end schemes is liquidity.
Closed-ended Funds
A closed-end-fund has a stipulated maturity period generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investor can
invest in the scheme at the time of the initial public issue and thereafter they can by or
sell the units of the stock exchanges where they are listed. In order to 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 Funds
Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during predetermined intervals at NAV related prices.
By Investment Objective:
Growth Funds
The aim of growth is to provide capital appreciation over the medium to long-term.
Such schemes normally invest a majority of their corpus in equities. It has been
proven that returns from stocks, have outperformed most other kind of investments
held over the long term. Growth schemes are ideal for investors having a long term
out look seeking growth over a period of time.
Income Funds
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The aim of income fund is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities. Income Funds are ideal for
capital stability and regular income.
Balanced Income
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 securities in the proportion indicated in their offer documents. In a rising
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.
Load funds
A load Fund is one that charges a commission for entry or exit. That is each time you
buy or sell units in the fund, a commission will be payable. Typically entry or exit
loads range from 1% to 2% It could be worth paying the load if the fund has a good
performance history.
No-load Fund
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A No-Load Fund is one that does not charge a commission for entry or exit. That is,
no commission is payable on purchase or sale of units in the fund. The advantage of a
no load fund is that the entire corpus is put to work.
Other Schemes:
Tax Saving Schemes
These schemes offer tax rebate to the investors under specific provision of the Indian
income tax law as the Government offers tax incentives for investment in specified
avenues. Investment made in Equity Liquid Saving Schemes (ELSS) and Pension
schemes are allowed as deduction u/s 88 of the income Tax act, 1961. The Act also,
provides opportunities to investors to save capital gains u/s 54 EA and 54 EB by
investing in Mutual Funds, provided the capital asset has been sold prior to April 1,
2000 and the amount is invested before September 30, 2000.
Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in offer document.
The investment of these funds is limited to specific industries like Info Tech, FMCG,
Pharmaceuticals, HDFC BANK LTD. calls etc.
Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the
BSE sensex or the NSF 50
Sectoral Schemes
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
REGULATORY ASPECT
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(ii)
If the money received from the applicants for units are in excess of
subscription amount referred to in clause (a) of sub-regulation (1).
The asset management company shall issue to the applicant whose application has
been accepted as soon as possible but not later than six week from the date of closure
of the initial subscription list and or from the date of receipt of the request from the
unit holders in any open ended scheme.
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The offer document and advertisement materials shall not be misleading or contain
any statement or opinion, which are incorrect or false.
General obligations:
Every asset management company for each scheme shall keep and maintain proper
books of accounts, records and documents, for each scheme so as to explain its
transaction and the disclose at any point of time the financial position of each scheme
and in particular give a true and fair view of the state of affairs of the fund intimate to
the board the place where such books of accounts, records and documents are
maintained.
The financial year of all the schemes end as of March 31 of each year. Every mutual
fund or the asset management company shall prepare in respect of each financial year
an annual report and annual statement of accounts of the schemes and the fund as
specified in Eleventh Schedule.
Every mutual fund shall have the annual statement of accounts audited by an auditor
who is not in any way associated with the auditor of the asset management company.
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Such transfers are done at the prevailing market rate for quoted instruments on spot
basis.
The securities so transferred shall be in conformity with the investment objective of
the scheme to which such transfer has been made.
A scheme may invest in another scheme under the same asset management company
or any other mutual fund without charging any fees, provided that aggregate inter
scheme investment made by all schemes under the same management company shall
not exceed 5% of the net asset value of the mutual fund.
The initial issue expense in respect of any scheme may not exceed six percent of the
funds raised under that scheme.
Every mutual fund shall, get the securities purchased or transferred in the name of
mutual fund on the account of the concerned scheme, wherever investments are
intended to be of long-term nature.
Pending deployment of funds of a scheme in securities in terms of investment
objectives of the scheme a mutual fund can invest the funds of the scheme in short
term deposits of scheduled commercial banks. No mutual fund scheme shall make any
investment in :
(i)
(ii)
The listed securities of proup companies of the sponsor which is an excess of 30% of
the net assets of all the schemes of a mutual fund.
No mutual fund scheme shall invest more than 10% of its NAV in the equity shares or
equity relates instruments of any company. Provided that, the limit of 10% shall not
be applicable for investments in index fund or sector or industry specific scheme.
A mutual fund scheme shall not invest more than 5% of its NAV in the equality
related investment s in case of open-ended scheme and 10% of its NAV in case of
close ended schemes.
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Diversification
Investing in Mutual Fund reduces paperwork and helps you avoid many problems
such as bad deliveries, delayed payments and follow up with brokers and companies.
Mutual Funds save your time and make investing easy and convenient.
Return Potential
Over a medium to a long-term, Mutual Funds have the potential to provide a higher
returns as they invest in a diversified basket of selected securities.
Low Costs
Mutual funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial
and other fees translate into lower costs for investors.
Liquidity
In open end schemes, the investor gets the money back promptly at net asset value
related prices from the mutual funds. In closed end schemes, the units can be sold on a
stock exchange at the prevailing market price or the investor can avail of the facility
of direct repurchase at NAV related prices by Mutual fund.
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Transparency
You get regular information on the value of your investment in addition to disclosure
on the specific investment made by you r scheme, the proportion invested in each
class of assets and the fund managers investment strateer5gy and outlook.
Flexibility
Through features such as regular investment plans, regular withdraw plans and
dividend reinvestment plans, you can systematically invest or withdraw funds
according to your needs and convenience.
Choice of schemes
Mutual funds offer a family of schemes of suit your varying needs over a lifetime.
Well regulated
All mutual funds are registered with SEBI and there function with the provisions of
strict regulations designed to protect the interest of investors. The operations of
mutual funds are regularly monitored by SEBI.
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Yet to be tested
But an analysis of trends in Indian mutual fund flows over a five-year period shows
that it may be early days yet to expect such a jump. It is only in the 22 months since
August 2003 that equity fund flows accelerated sharply, and this has been a
particularly buoyant period for the stock market.
Judging from the experience until 2003, investors appear typically comfortable
entering an equity fund midway through a stock market rally, when the NAVs (net
asset values) are trending steadily upwards.
Few investors venture into equity funds in a moribund market, confident that they will
gain upon recovery.
Robust monthly inflows into equity funds usually follow a month or two of good
stock market returns. In this respect, the period since August 2003 has been quite
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conducive to equity fund sales. The stock market has either notched up positive
monthly returns or has stayed flat in 18 of the 22 months between May 2003 and
February 2005. With the market marching predictably upwards and the returns on
equity funds outpacing the market by a big margin, recent investors have tasted the
rewards of equity investing, without experiencing its risks.
Disconcerting trend
However, the one disconcerting feature of the recent inflows is that new funds
garnered a significant portion of the money flowing into equity funds. Over the past
year, about 16 per cent of all inflows into equity funds (or Rs 5,168 crore) poured into
initial public offerings from fund houses. Though old funds with an established record
have garnered much more (Rs 27,000 crore), investments routed through an IPO
suffer from a couple of disadvantages.
One, many investors who take the IPO route make one-off investments in equity
funds and are not regular investors. This may not be the ideal way to invest in equity
funds, as the returns from such an investment would depend heavily on the timing of
the IPO. Should the market enter a corrective phase, these investors may be
vulnerable to sharp erosion in the value of their entire investment.
Two, many investors who prefer a new fund over an established one do so under the
mistaken notion that entering a fund at an NAV of Rs 10 reduces the downside risk
associated with an equity investment.
These investors may be less prepared (than those who invest in established funds) for
a blip in the value of their investments, in the event of a market correction.
Instead of rolling out new funds, fund houses need to put greater effort into
persuading investors to place faith in established funds that have a good track record.
Regular monthly investments in mutual funds also need to encouraged, rather than
one-off investments prompted by a booming stock market.
They have made a beginning on this, by announcing entry load waivers on
investments routed through the systematic investment route.
Page 31
If the fund industry, through its distributors, does manage to convince a larger
proportion of investors to make systematic investments in equity funds, one can look
forward to fund flows that are not too influenced by the ebb and flow of the stock
market.
Page 32
Page 33
LITERATURE
REVIEW
Page 34
LITERATURE REVIEW
Literature on mutual fund performance evaluation is enormous. A few
research studies that have influenced the preparation of this paper
substantially are discussed in this section.
1. Sharpe, William F. (1966) suggested a measure for the evaluation of
portfolio performance. Drawing on results obtained in the field of portfolio
analysis, economist Jack L. Treynor has suggested a new predictor of mutual
fund performance, one that differs from virtually all those used previously by
incorporating the volatility of a fund's return in a simple yet meaningful
manner.
2. Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio
performance (Jensens alpha) that estimates how much a managers
forecasting ability contributes to funds returns.
3. Mc. Donald (1974) examined the relationship between the stated fund
objectives and their risk-return attributes and concludes that on an average, the
fund managers appeared to keep their portfolios within the stated risk and
ensured superior returns, but they were offset by expense and load charges.
4. Ippolito (1989) however, finds no significant relationship between
performance, after expense and turnover and investment fees.
5. Barua,et.al (1991) concluded that the fund performed better than the
market but not so well as compared to the Capital Market Line.
6. Ippolito (1993) suggest that mutual fund returns, after expense (but before
load fund), are equivalent or superior to those available from a risk-adjusted
market index implying that mutual fund managers may have access to useful
private information.
Page 35
Page 38
Page 39
77
293
Equity Schemes
29
Debt Schemes
240
14
Money Market
Gilt Fund
Fund Managers
Anand Laddha , Anil Bamboli , Chirag Setalvad, Mustafa Mehmood , Prashant
Jain, Rajeev Shastri, Shabbir Kapasi, Shobhit Mehrotra , Srinivas Rao Ravuri .
the Fund has an investor base of over 2.8 million spread over 23 schemes. With a
large network of collecting branches and investor service centres, SBI Mutual
Fund constantly endeavours to get closer to its growing family of investors. SBI is
the largest public sector Bank in India with 8,836 branches all over India. SBI is
the leader in providing loans to trade & industry. It also provides related services,
which generate significant fee-based income. It has also identified project finance
and consumer banking as key areas.
No. of schemes
48
141
Equity Schemes
34
Debt Schemes
79
10
Money Market
Gilt Fund
12
Key Personnel
Achal K Gupta (MD&CEO), Didier Turpin (Deputy Chief Exe. Off) ,C.A. Santosh
(CM Cust Serv), Ms Aparna Nirgude (CRO), R.S. Srinivas Jain (CMO), Mr.
Parijat Agrawal (FM - Fixed Income) , Ms. Vinaya Datar (CS & Compliance
Officer), Navneet Munot(CIO)
Fund Managers
Arun Agrawal , Ganti Murthy, Mr. David Pezarkar , Mr. Jayesh Shroff , Pankaj
Gupta , Parijat Agrawal , Rajiv Radhakrishnan , Ritesh Sheth , Sanjay Sinha,.
Act, 1956 with limited liability. Reliance Capital Limited holds 93.37% of the
paid-up capital of RCAM. Reliance Capital Limited is a member of Reliance
Group and has been promoted by Reliance Industries Limited (RIL), one of
India s largest private sector enterprise. Setting a fast pace of growth, RCL in a
short span of time has established its presence in the finance sector by rapidly
expanding its operations into Leasing, Bill discounting, Merchant Banking,
investment Banking and a member of OTCEI.
No. of schemes
72
325
Equity Schemes
73
Debt Schemes
220
18
Money Market
Gilt Fund
10
Key Personnel
Sundeep Sikka (CEO), K Rajagopal (CIO), Madhusudan Kela (Hd-Equity),
Manish Kumar (Hd HRD), Pratap Pandit (Mrkg Comm), Geeta Chandran
(VPO), Sanjay Wadhwa (CFO), Milind Nesarikar (IRO), Sures T. Viswanathan
(Compliance), Pankaj Gupta (Risk Manager).
Fund Managers
Amit Tripathy, Amitabh Mohanty , Arpit Malaviya, Arun Khairesan , Ashwani
Kumar , Hiren Chandaria , Krishan Daga , Omprakash Kuckien , Prashant
R.Pimple, Ramesh Rachuri , Sailesh Raj Bhan , Shiv Chanani , Sunil Singhania
.
Page 43
Page 44
UTI Asset Management Company Private Limited, established in Jan 14, 2003,
manages the UTI Mutual Fund with the support of UTI Trustee Company Private
Limited. UTI Asset Management Company presently manages a corpus of over
Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB),
Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance
Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,
Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance
Funds.
No. of schemes
97
305
Equity Schemes
61
Debt Schemes
213
10
Money Market
Gilt Fund
10
Key Personnel
U K Sinha(Chairman & MD), A K Sridhar (CIO), A Rama Mohan Rao
(Compliance Officer), K P Ghosh (IRO), S L Pandian(COO), Anoop
Bhaskar(Head Equity), Amandeep S Chopra ( Head Fixed Income), Jaideep
Bhattacharya (CMO)
Fund Managers
Puneet Pal, Anagha Hannurkar, V Suresh, Alok Sahoo , Amandeep Chopra, Anoop
Bhaskar , Arun Khurana , Deb Bhattacharya , Harsha Upadhyaya, Manis Joshi ,
Puneet Pal, Sanjay Dongre, Swati Kulkarni, Vinay Kulkarni .
Page 45
Page 46
Most of respondents prefer big name they want to invest only in schemes
of major players of the market. On the basis of customer response I select
the various fund houses and compare their schemes. The top five fund
houses that preferred by the customer is selected for the comparative
analysis of their schemes. The fund houses selected for the analysis are
Reliance, Tata, SBI, HDFC and Birla.
Page 47
RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem. It may
be understood as a science of studying how research is done scientifically. Research is
an academic activity and the term is used in a technical sense. Research is defined as
the systematic and objective process of gathering, recording and analysing data for aid
in making decisions.
and reaching conclusion; and at last carefully testing the conclusion to determine
whether fit the formulating hypothesis.
RESEARCH DESIGN
Research Design is the conceptual structure within which the research is conducted.
Research design as a blue print for the collection, measurement and analysis of data.
Research design is the plan, structure and strategy of investigation conceived so as to
obtain answer to research questions and to control variances.
TYPES OF RESEARCH
DESIGN
EXPLORATORY
RESEARCH
DESIGN
DESCRIPTIVE
&
DIAGNOSTIC
RESEARCH DESIGN
EXPERIMENTAL
RESEARCH
DESIGN
Exploratory Research Design: Exploratory research design is termed as formulating research studies. The main
purpose of study is that of formulating a problem. The major emphasis in such study
is on discovery of new ideas and insights. As such the research design appropriate for
such studies must be flexible enough to provide opportunity for considering different
aspects of problem.
Descriptive and Diagnostic Research Design: Descriptive research designs are those design which are concerned with describing
the characteristics of particular individual or of the group.
Whereas diagnostic research studies determine the frequency with which something
occurs or its association with some else. In descriptive and diagnostic study the
Page 49
researcher must be able to define clearly what he wants to measure and must find
adequate method for measuring it.
Experimental Research Design: These are those studies where the researcher tests the hypothesis of casual
relationship between variables. Such study requires procedure that will not only
reduce biasness and increase reliability but will permit drawing influence about
casuality. Usually experiments meets this requirement, hence these research designs
are prepared for experiment.
Research design in study: In the study research design is descriptive research. As descriptive research design
is the description of state of affairs, as it exists at present.
SAMPLING SIZE
Sample size for the research comprises of 4 Mutual Fund Companies
SAMPLING UNIT
Sample Unit for the research is consists of:2 Private Sectors Sponsored Mutual Funds
Reliance Mutual Funds
HDFC Bank Mutual Funds
2 Public Sectors Sponsored Mutual Funds
Page 50
STUDY PERIOD
Study Period for Research consists of: 2006-2007
2007-2008
HYPOTHESIS
Hypothesis for the research report is:H0: Both public and private mutual funds are equally efficient
H1: Private mutual funds are performing more efficiently than public mutual funds
DATA COLLECTION
After the research problem has been identified and selected the next step is to gather
the requisite data. While deciding about the method of data collection to be used for
the researcher should keep in mind two types of data i.e. primary and secondary.
Contd..
TYPES OF DATA
PRIMARY
DATA
SECONDRY
DATA
Page 51
Primary Data: The primary data are those, which are collected afresh and for the first time, and thus
happened to be original in character. We can obtain primary data either through
observation or through direct communication with respondent in one form or another
or through personal interview.
OBSERVATION
METHOD
INTERVIEW
METHIOD
QUETIONAIRE
METHOD
SCHEDULE
METHOD
Secondary Data : The secondary data on the other hand, are those which have already been collected by
someone else and which have already been passed through the statistical processes.
When the researcher utilizes secondary data then he has to look into various sources
from where he can obtain them. For eg. Books, magazine, newspaper, Internet,
publications and reports.
Methods used for the collection of data through the secondary sources such as:
Books
Magazines
Newspapers
Internet
ANALYTICALTOOL USED
Sharpe
Sharpes performance index gives a single value to be used for the performance
ranking of various funds or portfolio. Sharpe index measures the risk premium of the
portfolio relative to the total amount of risk in the portfolio. This risk premium is the
difference between the portfolios average rate of return and the riskless rate of return.
The Sharpe's index is measured as
S = RP Rf /p
Where,
S = Sharpe's Index
rp = average monthly return of fund.
rf = risk free return *.
* risk free return (rf) is taken as 6% per annum
Treynor
Treynor measures the funds performance in relation to the market performance. The
ideal funds return rises at a faster rate than the general market performance when the
market is moving upwards and its rate of return declines slowly than the market
return, in the decline.
Treynor is measured as:Tn = rP rf /p
where
Tn = Treynor's index
Page 53
Jenson
The absolute risk adjusted return measure was developed by Michael Jenson and
commonly known as Jensons Measure.
Jenson index compares the actual or realised return of the portfolio with the calculated
or predicted return. Better performance of the fund depends on the predictive ability
of the managerial personnel of the fund.
Rp = rf + (rm - rf ) p
Where,
Rp= average return of the portfolio.
rf = risk free return
rm= average market return
= A measure of systematic risk
Page 54
explorative manner. Hence various areas and various people belong to different
profession remained uncovered.
TIME CONSTRAINTS
Time has also affected the research due to less availability of number of days
information was conducted in few days.
.
RESOURCE CONSTRAINT
Availability of data was a constraint due to only those mutual funds data is
considered, which is available, and also there are some MFs whose data was not
available so their duration was shortened.
PERIOD OF ANALYSIS
Generally longer period gives us more accurate estimates of beta. In this case period
of analysis is only 2 years.
COMPLEX CALCULATIONS
Though every - "precaution has taken due to large data and complex calculations there
may be chances of error.
Page 55
Year
2009
2008
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
8.7
7.7
Y=16.4
Y
0.5
-0.5
y=0
=Y/n
RM =X/n
Here,
n=2
Y
=16.4/2
=8.2
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1
)2
P= (7.7-8.2)2+ (8.7-8.2)2
= (-0.5)2 + (0.5)2
P =0.71
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
9.1
6.8
Y=15.9
y
1.15
-1.15
y=0
=Y/n
RM =X/n
Here,
n=2
Page 58
=15.9/2
=7.95
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1
)2
P= (9.1-7.95)2+ (6.8-7.95)2
=(1.15)2 + (-1.1.5)2
P =1.63
2. P = change in return in security/change in market index
= 9.1-6.8 / 31.59-11.99
P= 0.117
3. Sharpes Ratio = RP Rf /p
RP= 7.95% or 0.0795
RF=6% 0r 0.06
P=1.63
Sharpes Ratio = 0.0795-0.06 /1.63
= 0.012
4. Treynor Ratio = RP Rf /p
RP= 7.95% or 0.0795
RF=6% 0r 0.06
P= 0.117
Treynor Ratio= 0.0795-0.06 / 0.117
= 0.166
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.117
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.117(0.2179-0.06)
= 0.06+0.0185
= 0.0785 or 7.85%
Page 59
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
9.0
8.1
Y=17.1
y
0.45
-0.45
y=0
=Y/n
RM =X/n
Here,
n=2
Y
=17.1/2
=8.55
Page 60
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1
)2
P= (9.0-8.55)2+ (8.1-8.55)2
=(0.45)2 + (-0.4.5)2
P =0.636
2. P = change in return in security/change in market index
= 9.0-8.1 / 31.59-11.99
P= 0.0459
3. Sharpes Ratio = RP Rf /p
RP= 8.55% or 0.0855
RF=6% 0r 0.06
P=0.636
Sharpes Ratio = 0.0855-0.06 /0.636
= 0.0401
4. Treynor Ratio = RP Rf /p
RP= 8.55% or 0.0855
RF=6% 0r 0.06
P= 0.0459
Treynor Ratio= 0.0855-0.06 / 0.0459
= 0.566
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.0459
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.0459(0.2179-0.06)
= 0.06+0.0072
= 0.06725 or 6.72%
Page 61
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
8.7
5.9
Y=14.6
y
1.4
-1.4
y=0
=Y/n
RM =X/n
Here,
n=2
Y
=14.6/2
=7.3
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1
)2
P= (8.7-7.3)2+ (5.9-7.3)2
=(1.4)2 + (-1.4)2
P =1.97
2. P = change in return in security/change in market index
= 8.7-5.9 / 31.59-11.99
P= 0.143
3. Sharpes Ratio = RP Rf /p
RP=7.3% or 0.073
RF=6% 0r 0.06
P=1.97
Sharpes Ratio = 0.073-0.06 /1.97
= 0.0065
4. Treynor Ratio = RP Rf /p
RP= 7.3% or 0.073
RF=6% 0r 0.06
P= 0.143
Page 62
Sharpes Ratio of HDFC liquid fund is higher than other mutual fund schemes
i.e. UTI liquid fund, SBI liquid fund and Reliance liquid fund. So HDFC
liquid fund is performing best than other mutual fund schemes.
ii.
Treynors Ratio of HDFC liquid fund is greater than the other mutual fund
schemes i.e. SBI liquid fund, UTI liquid fund and Reliance liquid fund. So
HDFC liquid fund is performing best among the other three because it
provides the maximum risk premium in comparison to the other three funds.
iii.
Jensens Ratio of SBI liquid fund has the maximum value 8.25% in
comparison to other three fund schemes i.e. HDFC liquid fund, Reliance liquid
fund and UTI liquid fund. So we can say that the SBI liquid fund is the best
fund as it provides the maximum risk prem
Page 63
EQUITY FUND
A. UTI Leadership Equity Fund (G)
Year
2009
2008
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
15.9
6.8
Y=22.7
y
4.55
-4.55
y=0
=Y/n
RM =X/n
Here,
n=2
Y
=22.7/2
=11.35
Page 64
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1
)2
P= (15.9-11.35)2+ (6.8-11.35)2
=(4.55)2 + (-4.55)2
P =6.438
2. P = change in return in security/change in market index
= 15.9-6.8 / 31.59-11.99
P= 0.464
3. Sharpes Ratio = RP Rf /p
RP=11.35% or 0.1135
RF=6% 0r 0.06
P=6.438
Sharpes Ratio = 0.1135-0.06 /6.438
= 0.0083
4. Treynor Ratio = RP Rf /p
RP=11.35% or 0.1135
RF=6% 0r 0.06
P= 0.464
Treynor Ratio= 0.1135-0.06 / 0.464
= 0.1153
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.464
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.464(0.2179-0.06)
= 0.06+0.0732
= 0.1332 or 13.3%
Page 65
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
24.81
7.71
Y=35.52
y
8.55
-8.55
y=0
=Y/n
RM =X/n
Here,
n=2
Y
RM
=35.52/2
=16.26
= 43.58 / 2
=21.79
Page 66
n
1. P=(Y- Y
i=1
)2
P= (24.81-16.26)2+ (7.71-16.26)2
=(8.55)2 + (-8.55)2
P =12.09
2. P = change in return in security/change in market index
= 24.81-7.71 / 31.59-11.99
P= 0.872
3. Sharpes Ratio = RP Rf /p
RP=16.26% or 0.1626
RF=6% 0r 0.06
P=12.09
Page 67
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
21.2
9
Y=30.2
y
6.1
-6.1
y=0
=Y/n
RM =X/n
Here,
n=2
Y
RM
=30.2/2
=15.1
= 43.58 / 2
=21.79
Page 68
n
1. P=(Y- Y
i=1
)2
P= (21.2-15.1)2+ (9-15.1)2
=(6.1)2 + (-6.1)2
P =8.63
2. P = change in return in security/change in market index
= 21.2-9 / 31.59-11.99
P= 0.622
3. Sharpes Ratio = RP Rf /p
RP=15.1% or 0.151
RF=6% 0r 0.06
P=8.63
Sharpes Ratio = 0.151-0.06 /8.63
= 0.0105
4. Treynor Ratio = RP Rf /p
RP= 15.1% or 0.151
RF=6% 0r 0.06
P= 0.622
Treynor Ratio= 0.151-0.06 / 0.622
= 0.146
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.622
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.622(0.2179-0.06)
= 0.06+0.09821
= 0.1582 or 15.82%
Page 69
X(Nifty)
31.59
11.99
X=43.58
Y(Return)
21.4
12.2
Y=33.6
y
4.6
-4.6
y=0
=Y/n
RM =X/n
Here,
n=2
Y
=33.6/2
=16.8
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1
)2
P= (21.4-16.8)2+ (12.2-16.8)2
Page 70
= (4.6)2 + (-4.6)2
P =6.51
2. P = change in return in security/change in market index
=21.4-12.2 / 31.59-11.99
P= 0.469
3. Sharpes Ratio = RP Rf /p
RP=16.8% or 0.168
RF=6% 0r 0.06
P=6.51
Sharpes Ratio = 0.168-0.06 /6.51
= 0.0165
4. Treynor Ratio = RP Rf /p
RP= 16.8% or 0.168
RF=6% 0r 0.06
P= 0.469
Treynor Ratio= 0.168-0.06 / 0.469
= 0.230
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.469
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.469(0.2179-0.06)
= 0.06+0.0741
= 0.1341 or13.41%
Sharpes Ratio shows the risk adjusted return. Higher the Sharpe Index better
the fund. In this case SBI equity fund have the maximum value i.e. 0.0165 in
Page 71
comparison to other three funds. So we can say that the SBI equity fund is the
best fund among the three funds.
ii.
Treynor Index of SBI equity fund has the maximum value i.e. 0.230 in
comparison to other three funds. So we can say that the SBI equity fund is the
best fund as it provides the maximum risk premium in comparison to the other
three funds.
iii.
Jensens Index shows the risk adjusted return. Higher the Jensen Index better
the fund. In this case Reliance equity fund have the maximum value i.e.
19.76% in comparison to other three funds. So we can say that Reliance equity
fund is the best fund as it provides the maximum risk premium in comparison
to the other three fund
Return
8.2
Sharpes
Index
0.031
7.3
0.0065
8.55
0.0401
7.95
0.012
Page 72
Interpretation:From the above evaluation of liquid mutual fund it reveals that:Sharpes Index of HDFC liquid fund have maximum value i.e. 0.0401in comparison
to the other schemes i.e. SBI liquid fund, UTI liquid fund and Reliance liquid fund
and returns is also higher than other three mutual fund schemes i.e. 8.55% which
considered the best performing fund. So we can say that HDFC liquid fund is the best
fund as it provides the maximum risk premium in comparison to the other three funds.
Page 73
b)
Return
Treynor Index
8.2
0.431
7.3
0.091
8.55
0.56
7.95
0.166
Page 74
Interpretation:From the above evaluation of liquid mutual fund it reveals that:Treynors Index of HDFC liquid fund have maximum value i.e. 0.56 in comparison
to the other schemes i.e. SBI liquid fund, UTI liquid fund and Reliance liquid fund
and returns is also higher than other three mutual fund schemes i.e. 8.55% which
considered the best performing fund. So we can say that HDFC liquid fund is the best
fund as it provides the maximum risk premium in comparison to the other three funds.
Page 75
c)
Return
Treynor Index
8.2
6.805%
7.3
8.25%
8.55
6.72%
7.95
7.85%
Page 76
Interpretation:From the above evaluation of liquid mutual fund it reveals that:Jensens Index of SBI liquid fund have maximum value i.e. 8.25% in comparison to
the other schemes i.e. HDFC liquid fund, UTI liquid fund and Reliance liquid fund
and returns is less than other three mutual fund schemes i.e. 7.3% which is the lowest
among all the mutual funds but risk adjusted returns is higher than other fund
schemes. So we can say that SBI liquid fund is the best fund as it provides the
maximum risk premium in comparison to the other three funds.
Page 77
EQUITY FUND
a)
Mutual Fund
Schemes
UTI Equity
Fund
SBI Equity
Fund
HDFC Equity
Fund
Reliance
Equity Fund
Return
11.35
Sharpes
Index
0.0083
16.8
0.0165
15.1
0.0105
16.26
0.0084
Page 78
Interpretation:From the above evaluation of liquid mutual fund it reveals that:Sharpes Index of SBI equity fund have maximum value i.e. 0.0165 in comparison to
the other schemes i.e. HDFC equity fund, UTI equity fund and Reliance equity fund
and returns is also higher than other three mutual fund schemes i.e. 16.8% which
considered the best performing fund. So we can say that SBI equity fund is the best
fund as it provides the maximum risk premium in comparison to the other three
funds........
Page 79
Return
11.35
Treynors
Index
0.1153
16.8
0.230
15.1
0.146
16.26
0.1176
Page 80
Interpretation:From the above evaluation of liquid mutual fund it reveals that:Treynors Index of SBI equity fund have maximum value i.e. 0.230 in comparison to
the other schemes i.e. HDFC equity fund, UTI equity fund and Reliance equity fund
and returns is also higher than other three mutual fund schemes i.e. 16.8% which
considered the best performing fund. So we can say that SBI equity fund is the best
fund as it provides the maximum risk premium in comparison to the other three funds.
Page 81
Return
11.35
Jensens
Index
13.3%
16.8
13.41%
15.1
15.82%
16.26
19.76%
Page 82
Interpretation:From the above evaluation of liquid mutual fund it reveals that:Jensens Index of Reliance equity fund have maximum value i.e. 19.76% in
comparison to the other schemes i.e. HDFC equity fund, UTI equity fund and SBI
equity fund and returns is slightly less than other three mutual fund schemes i.e.
0.54% but considered the best performing fund regarding the risk adjusted returns. So
we can say that Reliance equity fund is the best fund as it provides the maximum risk
premium in comparison to the other three funds.
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SUGGESTIONS
1) Mutual fund may develop their own modern market research. It may be
helpful for better and efficient portfolio management.
2) If investors have invested in a fund with a reasonably long track record and
have an entry reasonably well, they should hold the investment for atleast 3
years. They should not panic on every dip in the funds value.
3) To provide greater liquidity for the investors mutual funds, may development
of a wide network of self- sufficient branches is required.
4) There is an urgent need for exclusive and comprehensive legislation for the
mutual fund industry. The Government should pass a law without losing any
time.
5) Mutual fund institutions may be allowed to borrow from the market up to a
particular extent so that they may meet their requirements at the time of
redemption and provide extra funds for the managers to enable them to invest
in the stock market.
6) The fund manager may include portfolios of securities that show higher
returns when compared to the market.
7) For the people who want capital appreciation over a long tenure, they may go
for a growth fund which yields good return for a long period.
8) It is always better to analyse the NAV and the number of units so that the
unsystematic risk can be avoided.
If these suggestions are followed, the efficiency and popularity of the mutual fund
may increase and they may have speedy and healthy growth in this era of
miraculous changes
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CONCLUSIONS
The investor should evaluate not only the returns on the scheme but also the NAV
fluctuations. The 3 utmost important factors taken into consideration by investor
are safety, liquidity and profitability. The 3 utmost important factors taken into
consideration by investor are
safety
liquidity
profitability.
Fund manager should take into consideration the trends of the market . For e.g. Indian
Financial market do not have desired liquidity from the last couple of years so the
more funds can be invested in long term debt funds. Instead of going with the
investment in the stock market directly investor should go with the mutual fund
as in this case the level of risk is less.
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BIBLIOGRAPHY
WEBSITES
http://www.amfiindia.com/showhtml.aspx?page=mfindustry
http://literacy.kent.edu/Oasis/grants/publicVSprivate.html
http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/20/snapshot/imde
sc/UTI%20Money%20Market%20Fund%20(G)/ffdesc/UTI%20Asset
%20Mgmt%20Company%20Pvt.%20Ltd./imid/MUT028/imffid/UTi
http://www.moneycontrol.com/mutualfundindia/
http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/11/snapshot/imde
sc/Reliance%20Equity%20Fund%2020Retail%20Plan%20(G)/ffdesc/Reliance
%20Capital%20Asset%20Management%20Ltd.
%20/imid/MRC103/imffid/RC
http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/15/snapshot/imde
sc/HDFC%20Equity%20Fund%20(G)/ffdesc/HDFC%20Asset
%20Management%20Co.%20Ltd./imid/MZU001/imffid/HD
http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/18/snapshot/imde
sc/SBI%20Magnum%20Equity%20Fund%20(G)/ffdesc/SBI%20Funds
%20Management%20Private%20Limited/imid/MSB085/imffid/SB
http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/21/snapshot/imde
sc/UTI%20Leadership%20Equity%20Fund%20(G)/ffdesc/UTI%20Asset
%20Mgmt%20Company%20Pvt.%20Ltd./imid/MUT096/imffid/UT I
http://indianmutualfund.blogspot.com/2008/05/gem-gaze-index-funds.html
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http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM025
http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM026
http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM041
http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM021
www.hdfcmutualfund.com
www.reliancemutualfund.com
www.utimtualfund.com
www.sbimutualfund.com
www.mutualfundsindia/navreports.jsp
http://www.appuonline.com/mf/knowledge/industry.html
http://www.appuonline.com/mf/knowledge/concept.html
JOURNALS
ICFAI reader- Performance of Mutual Funds in India- Article by Navdeep
Aggarwal & Mohit Gupta
(Page 5-15)
(Page 26-41)
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