Professional Documents
Culture Documents
PROJECT REPORT
ON
MUTUAL FUNDS
AT
INDIABULLS SECURITIES LIMITED
TABLE OF CONTENTS
ABSTRACT
CHAPTER-1: INTRODUCTION
1.1 Introduction
1.2. Need Of The Study
1.3. Scope of the Study
1.4. Objectives of the Study
1.5. Research Methodology
1.5.1 Research Design
1.5.2 Data Collection
1.5.3 Secondary Data
1.5.4 Statistical Tools Used:
1.6. Limitations of the Study
1.7 Chapeterisation
CHAPTER-2: INDUSTRY AND COMPANY PROFILE
2.1 Introductions to the Industry
2.2 History and Growth Mutual Fund Industry
2.3 Evolution of Mutual Fund Industry
2.4 Recent News
2.5 Introduction to the Indiabulls Securities Ltd.
2.6 Company Mission, Vision And Objectives
2.7 Organization Structure And Board Of Directors
2.8 Types Products Of Products And Services Offered By Company
2.9 Achievements
2.10
Future Projects
ABSTRACT
The study is basically made to analyze the various mutual fund schemes of different
sectors to highlight the diversity of investment that Mutual Fund offer.
Through the study one would understand how an investor could fruitfully convert a
pittance into great penny by wisely investing into the right scheme according to his risk
taking abilities. The main aim of the project is to show Mutual Fund as a better avenue for
better return with risk free investment to the potential investors.
The study here has been limited to analyze the performance of mutual funds in selected
sectors with different fund houses. Each fund is analyzed according to its performance
against the other, based on factors like Sharpes Ratio, (Beta) Co-efficient, (NAV)
Returns.
Based on the performance of funds through their return and risk profile, the
observations and findings has been found. And suggest which fund is best for the investor
based on his risk and return profile and classified the performance of funds on the basis of
good performer and non performer for the selected period of time.
CHAPTER-1
INTRODUCTION
1.1 INTRODUCTION
A mutual fund is just the connecting bridge or a financial intermediary that allows a group
of investors to pool their money together with predetermined investment objectives. A mutual
fund is a portfolio, or collection, of individual securities (some combination of stocks, bonds,
or money market instruments) managed according to a specific objective spelled out in the
fund's prospectus. A mutual fund allows investors to pool their money, then the fund invests it
on their behalf.
Unlike individual stocks, whose value fluctuates minute by minute, mutual funds are
priced at the end of each day the market is open, based on what the securities in the portfolio
are worth. The price per share, or net asset value (NAV). A mutual fund operation flowchart
is mentioned below:
Mutual funds can be classified based on the structure and investment objective. By
Structure, mutual funds are closed-end fund and open-end fund.
Closed-End Fund
A closed-end fund looks much like a stock of a publically traded company: it's traded on
some stock exchange, you buy or sell shares in the fund through a broker just like a stock
(including paying a commission), the price fluctuates in response to the fund's performance
and (very important) what people are willing to pay for it. Also like a publically traded
company, only a fixed number of shares are available.
These funds have a stipulated maturity period generally ranging from 3 to 15 years. The
fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of
the scheme on the stock exchanges where they are listed.
The market price of closed-end funds is determined by supply and demand and not by netasset value (NAV), as is the case in open-end funds. Usually closed mutual funds trade at
discounts to their underlying asset value.
Open-End Fund
An open-end fund is the most common variety of mutual fund. Both existing and new
investors may add any amount of money they want to the fund. In other words, there is no
limit to the number of shares in the fund. Investors buy and sell shares usually by dealing
directly with the fund company, not with any exchange. The price fluctuates in response to
the value of the investments made by the fund, but the fund company values the shares on its
own; investor sentiment about the fund is not considered.
Open-end funds keep some portion of their assets in short-term and money market securities
to provide available funds for redemptions. A large portion of most open mutual funds
is
invested in highly liquid securities, which enables the fund to raise money by selling
securities at prices very close to those used for valuations.
By Investment Objective
Growth Funds: The aim of growth funds is to provide capital appreciation over the medium
to long term. Such schemes normally invest a majority of their corpus in equities. Growth
schemes are ideal for investors who have a long-term outlook and are seeking growth over a
period of time.
Income Funds: The aim of Income Funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as bonds, corporate
debentures and Government securities.
Income Funds are ideal for capital stability and regular income. Capital appreciation in such
funds may be limited, though risks are typically lower than that in a growth fund.
Balanced Funds: The aim of Balanced Funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest both in equities and
fixed income securities in the proportion indicated in their offer documents. This proportion
affects the risks and the returns associated with the balanced fund - in case equities are
allocated a higher proportion, investors would be exposed to risks similar to that of the equity
market.
Balanced funds with equal allocation to equities and fixed income securities are ideal for
investors looking for a combination of income and moderate growth.
Money Market Funds: The aim of Money Market Funds is to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer shortterm instruments such as Treasury Bills, Certificates of Deposit, Commercial Paper and InterBank Call Money. Returns on these schemes may fluctuate depending upon the interest rates
prevailing in the market. These are ideal for corporate and individual investors as a means to
park their surplus funds for short periods.
Tax Saving Schemes: These schemes offer tax rebates to the investors under specific
provisions of the Indian Income Tax laws, as the Government offers tax incentives for
investment in specified avenues. Investments made in Equity Linked Savings Schemes
(ELSS) and Pension Schemes are allowed as deduction under Section 88 of the Indian
Income Tax Act, 1961.
Index Schemes: Index Funds attempt to replicate the performance of a particular index such
as the BSE Sensex or the NSE S&P CNX 50.
Sectoral Funds: Sectoral Funds are those which invest exclusively in specified sector(s)
such as infrastructure, , Pharmaceuticals, Information Technology, banking, service and fmcg
etc. These schemes carry higher risk as compared to general equity schemes as the portfolio
is less diversified, i.e. restricted to specific sector(s) / industry.
1.2. NEED OF THE STUDY
Mutual fund is an investment that pools money from shareholders and invest in a
variety of securities, such as stocks, bonds and money market instrument. The need of the
study is to analyze the performance of mutual funds in different sectors like infrastructure,
Pharmaceuticals, Information Technology, banking, fmcg and service and to identify the new
market trends in the above mentioned sectors. And look after the potential impact on
stakeholders in to order to make an assessment of the possible impact of the entry load
removal on stakeholders, the main aim of the project is to project Mutual Fund as a better
avenue for investment on a long-term or short-term basis and other essential needs are:
This project creates an awareness that the Mutual Fund is a worthy investment
practice.
Mutual Funds areUnit Trust as it is called in some parts of the world has a long
and successful history.
The driving force of Mutual Funds is the safety of the principal guaranteed.
We have attempted to draw up possible scenarios of what could happen in the short
term and long term and its overall impact on the industry.
Hence, the researcher felt the need to study the analyze of sect oral funds in mutual
fund with reference to SEBIs (Securities and Exchange Board of India) directives,
By this underlying research, the researcher can identify the sectors which give highest
return with less risk to the investors and also provide the less volatility with superior risk
adjustment and return that are believed to have growth.
Investors, meanwhile, should continue to choose funds with a good track record and
should not be persuaded to buy products that they dont want. In each sector mutual fund
plays a crucial role and provides different schemes to the investors and also provides the
advisory services to the potential investors.
The basic advantage of funds is that, they are professional managed, by well qualified
professional. Investors purchase funds because they do not have the time or the
expertise to manage their own portfolio.
Purchasing units in a mutual fund instead of buying individual stocks or bonds, the
investors risk is spread out and minimized up to certain extent.
Mutual fund buy and sell large amounts of securities at a time, thus help to reducing
transaction costs, and help to bring down the average cost of the unit for their
investors.
Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity.
The importantly, investors should not hesitate to pay a higher fee if they receive sound
investment advice and quality service from the distributors.
PRIMARY OBJECTIVES:
A Study on Mutual Funds at Indiabulls Securities Limited
SECONDARY OBJECTIVES:
The Methodology involves randomly selecting the different schemes of different fund
houses in different sectors of the country.
than the index. A fund with a beta very close to 1 means the fund's performance closely
matches the index or benchmark.
Investors expecting the market to be bullish may choose funds exhibiting high betas,
which increase investors' chances of beating the market. If an investor expects the market to
be bearish in the near future, the funds that have betas less than 1 are a good choice because
they would be expected to decline less in value than the index.
Sharpes performance index
Sharpes performance index gives a single value to be used for the performance ranking of
various funds or portfolios. 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.
2
Coefficient of Determination ( R ) --- a measure of reliability of Beta
Beta depends on the index used to calculate it. It can happen that the index bears no
correlation with the movements in the fund. Due to this reason, it is essential to take a look at
statistical value called Coefficient of Determination along with Beta. It shows how reliable
the beta number is. It varies between zero and one. Value of 1 indicates perfect correlation
2
with the index. Thus, an If ( R ) =0.64 it implies that 64% of the variation in the portfolio
NOTE:
Where X and Y are returns on the portfolio and returns on the market respectively.
2
Beta and ( R ) should thus be used together when examining a funds risk profile.
1.5.5 Period of Study
1.7 CHAPETERISATION
CHAPTER-2
INDUSTRY AND COMPANY PROFILE
the direction of an investment manager. Mutual funds bridged the gap between the supply and
demand for funds in the financial market.
In India, the need for the establishment of mutual funds was felt in 1931 and the concept of
mutual fund was coined in 1964, by the intuitive vision of Sri T.T.Krishnamachari,the then
finance minister. Taking into consideration the recommendations of the Central Banking
Enquiry Committee and Shroff Committee, the Central Government established Unit Trust of
India in 1964 through an Act of Parliament, to operate as a financial institution as well as an
investment trust by way of launching UTI Unit Scheme 64.
The overwhelming response and the vast popularity of UTI Unit Scheme 64 and the
Mastershare Scheme in 1986 attracted the attention of banks and other financial institutions
to this industry and paved the way for the entry of public sector banks.
The financial sector reforms were introduced in India as an integral part of the economic
reforms in the early 1990s with the principal objective of removing structural deficiencies
and improving the growth rate of financial markets. Mutual fund reforms attempted for the
creation of a competitive environment by allowing private sector participation. Since 1991,
several mutual funds were set up by private and joint sectors. Many private mutual funds
opted for foreign collaboration due to the technical expertise of their counterparts and past
track record of success.
The SEBI formulated the Mutual Fund Regulations in 1993, establishing a comprehensive
regulatory framework for the first time, while the Indian Mutual Fund Industry (IMFI) had
already passed through two phases of developments. The first phase was between 1964 and
1987 when the UTI was the only player, managing total assets of Rs.4,564 crores by the end
of March 1987.
In 1986, the first growth scheme, Mastershare was launched by UTI and was the first to
be listed on stock exchange. The second phase was between 1987 and 1993 during which
period eight funds were established (six by banks and one each by LIC and GIC). SBI Mutual
Fund was thefirst non UTI mutual fund established in June 1987, followed by Canbank
Mutual fund in December 1987. SBI Mutual Fund launched its first scheme namely, Regular
Income Scheme (RIS) 1987 with 5 years of duration assuring 12 percent return. Canbank
Mutual Fund launched its first scheme, Canshare in December 1987 mopping up Rs.4 crores.
The total assets managed by the industry shot upto Rs.47,004 crores by the end of March
1993.
Since October 1999, Money Market Mutual Funds was brought under the supervisory
control of SEBI on par with liquid funds. The acquisition of Pioneer ITI by Templeton in
August 2000 was one of the biggest mergers in the IMFI. At the end of January 2003, there
were 33 mutual funds managing total assets of Rs.1,21,805 crores after witnessing several
mergers and acquisitions.
The total Assets Under Management (AUM) of the mutual fund houses in the country
crossed Rs.One trillion in June 2003, a decade after the entry of private sector in mutual fund
business.82 The fourth phase had its beginning from February 2003, following the repeal of
the Unit Trust of India Act 1964, bifurcating UTI into two separate entities, namely UTI
Specified Undertaking regulated by Government of India and UTI Mutual Fund Ltd regulated
by SEBI. With mergers taking place among mutual funds, the mutual fund industry entered
its fourth phase of consolidation and growth.
2.4 RECENT NEWS
India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an
Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even
10% of the bank deposits, but this trend is beginning to change. Recent figures indicate that in the
first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits
rose by only 17%. (Source: Thinktank, the Financial Express September, 99) This is forcing a
large number of banks to adopt the concept of narrow banking wherein the deposits are kept in
Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that
banks cannot be ignored and they will not close down completely. Their role as intermediaries
cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in
the future.
Introduction
Indiabulls Securities Ltd is engag. in the busine. of Internet based trading and is registered
with SEBI as a stockbroker, trading and clearing member of NSE, member of B. and as a
depositary participant with National Securities Depository Limited CNSDL") and Central
Depository Services (India) Limited CCDSL"). ISL is also a member of the National
Securities Clearing Corporation Limited.
History
Indiabulls Securities Limited (ISL) was incorporated as GPF Securities Private Limited on
June 9, 1995.
The name of the company was changed to Orbis Securities Private Limit. on December 15,
1995 to change the profile of the company and subsequently due to the conversion of the
company into a public limit. company; the name was further changed to Orbis Securities
Limited on January 5, 2004.The name of the company was again changed to Indiabulls
Securities Limit. on February 16, 2004 so as to capitalize on the brand image of the term
"Indiabulls" in the company name. ISL is a corporate member of capital market & derivative
segment of The National Stock Exchange of India Ltd.
Trading With Indiabulls
This section will introduce us about the process and instruments used to help a customer or a
client to trade with Indiabulls securities. This process is almost similar to any other trading
firm but there will be some difference in the cost of brokerage commission.
Trading:
It is a process by which a customer is given facility to buy and sell share this buying and
selling can only be done through some broker and this is where Indiabulls help its customer.
A customer willing to trade with any brokerage house need to have a demat account, trading
account and saving account with a brokerage firm. Anyone having following document can
open all the above mentioned account and can start trading.
Document Required
bill.
A crossed Cheque favoring "India bulls Securities Ltd". of the required
amount. The amount for Demat as well as trading will be Rs. 900/ -(free
Demat
+900 Trading Account) the minimum amount being Rs. 900 a cheque can be
given for a larger amount.
Copy of PAN Card is mandatory.
Registration Kit
CDSL Demat Kit
Bank and address proof declaration. (Master undertaking)
PAN name discrepancy form
These documents may not be consumer friendly but it is to avoid illegal transaction and to
prevent block money this ensures that money invested is account.
Online business.
Offline business
Other Sales
Online business: serving clients primarily through an Internet based relationship targeted
towards clients who vale anytime, anywhere access and can be serviced at low incremental
costs. The Online sales force .1Is all products and services and follows the relationship
manager model.
Offline business: serving clients primarily through an office based relationship targeted
towards clients who else physical interaction and are typically larger accounts. The Offline
Sal. Force .1Is all products and services and follows the relationship manager model.
The Institutional business serving clients such as mutual funds and pension funds is
considered. Part of the offline business due to largely similar client servicing and channel
needs as required for high net worth clients. Indiabulls Securities Limit. has established
relationships with some large institutional players in India and is qualified broker for
Equities, F8,0 and Debt markets for 145 such institutional clients.
Other Sal: includes insurance, research services and other offerings
A depository is a place where the stocks of investors are held in electronic form.
The depository has agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details of all
accounts held is like the depository. And the DPs are the branches that cater to individuals.
There are only two depositories in India
Rapidly increase the number of client relationships by providing a broad array of products
offering to emerge as a clear market leader.
Vision:
To be the largest and most profitable financial services organization in Indian market and
become one stop shop for all non banking financial products and services for the retail
customers.
Objectives:
Consolidation
Aim to be among the top 3 players in existing products within next 3 years.
No New Products
Focus on gaining size and scale in existing core products.
No Capital Market Fund Raising
All businesses are well funded to achieve growth and size. Avoiding excessive debt
from the capital market.
Goal
FY 2017/2018, target of US $ 1.4 bn in cash generation from 3 companies (real estate,
finance and power).
Functioning Online: serving clients primarily through an Internet based relationship targeted
towards clients who vale anytime, anywhere access and can be serviced at low incremental
costs.
Functioning Offline: serving clients primarily through an office based relationship targeted
towards clients who value physical interaction.
Online & offline business consist of following departments
Administration
Operations & Service quality
Technology
Finance
Corporate affairs
Human resources
Marketing
Corporate communi.ons
Legal
Organization Structure
Board of Directors:
Gagan Banga
Executive Director
Rajiv Rattan
CEO
Shamsher Singh
Director
Aishwarya Katoch
Director
Karan Singh
Director
Director
Saurabh K Mittal
Executive Director
Amit Jain
Company Secretary
is the advanced online trading platform from Indiabulls Ventures Limited (Formerly
Indiabulls Securities Limited). PIB provides the best in the class internet trading features and
delivers a seamless and rich online trading experience for its users. PIB comes with a whole
host of online features for the internet trading users ranging from real-time stock prices, to
live trading reports, charting, News Room. PIB provides an integrated online trading platform
for the internet trading community to invest in equity, F&O, Online IPOs and base their
decision on sound fundamental research and technical analysis. It also provides various kinds
of trading reports, each developed to cater to internet trading users distinct needs.
With whole host of advanced online trading features, PIB aims to fulfill the needs of every
genre of investors & help them gain profits in every possible way
Ease of trading With Indiabulls Signature account you have the flexibility to place
your orders either by logging on the website, calling at the branch or walking in the
branch.
Dedicated Service Branch and Relationship Manager: You can get in touch with
your Relationship Manager and Service Branch for all your trading related requirements.
Power Indiabulls (PIB): You can trade smarter and faster using the Power Indiabulls
application. Access the broad spectrum of sophisticated trading tools and get an edge in
the stock markets.
Online Payment Gateways: Use our online payment gateways facility and get
instant credit in your Trading Account. We currently provide online gateway payment
facility with five major banks HDFC, ICICI, AXIS, Yes Bank and IDBI.
IPOs Indiabulls provides you the flexibility to apply in ongoing IPOs through either
online or offline channels. For applying online, you do not need to fill tedious forms and
write cheques. You can apply conveniently in IPOs from the comfort of your home /
office through our Website/PIB. For applying offline, you can contact your Relationship
Manager/ Service Branch.
Portfolio Tracker: You can track your investments online through our portfolio
tracker functionality. You can conveniently track the daily movement, notional / booked
profits and losses in your portfolio.
News Room: The News Room provides real-time news from stock-markets,
corporate sector, economy and other segments that have a bearing on the market
sentiment.
Electronic Contract Notes on Email: This facility enables you to get digitally signed
Electronic Contract Notes on email within 24 hours of executing trades in your Trading
Account.
Stock or Index Futures contracts. Currency Future Contracts, with INR: USD exchange
rate as the underlying, are available with a monthly expiry.
Depository Services
Indiabulls is a depository participant with the National Securities Depository Limited and
Central Depository Services (India) Limited for trading and settlement of dematerialised
shares. Indiabulls performs clearing services for all securities transactions through its
accounts. We offer depository services to create a seamless transaction platform execute
trades through Indiabulls Ventures Limited (Formerly Indiabulls Securities Limited) and
settle these transactions through the Indiabulls Depository Services. Indiabulls Depository
Services is part of our value added services for our clients that create multiple interfaces with
the client and provide for a solution that takes care of all your needs.
Currency Derivatives
Indiabulls offers trading in the Currency Derivatives Segment in National Stock Exchange
(NSE)
Currency Derivatives are similar in nature to Stock Futures & Option contracts. Currency
Derivatives Contracts (USD-INR, EUR-INR, GBP-INR and JPY-INR) at exchange rate as the
underlying are available for trading with a monthly expiry. At any given time, Currency
Derivatives Contracts are available for trading for the next 12 months expiry for futures
whereas 3 months expiry and 1 quarterly expiry for Options. The Mark-to-Market for
Currency Derivatives is settled on a daily basis in a manner similar to Equity Futures &
Options.
The market for Currency Derivatives is open from 9 A.M to 5 P.M (Monday to Friday).
Registration for Currency Derivatives Segment (CDS) and Online Trading Facility You can
initiate trading in Currency derivatives Segment by following a simple registration procedure.
Indiabulls also offers you the convenience of Online Trading in Currency Derivatives. For
registration in CDS and availing Online Trading facility, please contact your Service Branch /
Relationship Manager.
IPO Online
For various reasons, we often miss the opportunity of subscribing to anIPO. It can either be
because we could not procure the application form or we did not have the time to fill up the
form and submit it. The most important benefit of the 'ONLINE IPO facility offered by
Indiabulls Ventures Limited (Formerly Indiabulls Securities Limited). is the convenience in
submission of applications from anywhere breaking the limitations of time and geography.
You dont need to submit the application in paper form, or write a cheque or go to submit it
anywhere.
Now you have the convenience at your fingertip. You can quickly and seamlessly apply to the
latest public offerings with just a few clicks. Indiabulls Ventures Ltd. offers ONLINE IPO
facility to its registered trading customers at absolutely no cost.
To use theONLINE IPO feature, you need to fulfill the following criteria :
You
You
You
You
To sign the agreement for online IPO facility, please get in touch with your relationship
manager or branch
potential strength and investment risk by doing in-depth and exhaustive analysis of
operational and financial performance of company, Peer group analysis, present Industry
scenario using advanced and sophisticated forecasting tools and models. These research
reports identify, examine and distill attractive investment opportunities to help you in
building and maintaining your ideal portfolio.
Salient features of Indiabulls Equity Analysis:
These reports are available to clients without any additional cost. If you are not a client and
wish to view a sample report, please share your details with us.
2.9 Achievements
1) Indiabulls was conferred the status of a Business Superbrand by The Brand
Council, Superbrands India in 2008.[30]
2) Indiabulls Housing Finance was awarded the Presidential Award for The
Fastest Growing Company' by NAREDCO in 2014.[31]
3) IBHFL was awarded "Best Employer Brand", June 2012 for its human
resource practice by The Institute of Public Enterprises.[32]
4) Indiabulls Housing was awarded the Best HFC of the year, 2013 at
ASSOCHAM Real Estate Excellence Awards.[33]
5) Indiabulls Real Estate project, Indiabulls Greens, Chennai won the
Construction Industry Award 2014 for excellence in Gated Community
Projects.[34]
6) Indiabulls Real Estate project, Indiabulls Golf City, Mumbai was awarded by
International Property Awards as the Best Golf Development in India for
Asia Pacific 2015.[35]
7) Indiabulls Real Estate commercial project, One Indiabulls Center, was
awarded as the Best Commercial Property at the Awaaz CRISIL CREDAI
Real Estate Awards in 2009.
2.10 Future projects
CHAPTER-3
THEORETICAL FROM WORK
Fund manager concentration on risk return trade off, where minimize the risk and maximize
the return through diversification of the portfolio. The most common features of the mutual
fund unit are low cost. The below I mention the how the transactions will done or working
with mutual fund
Definition
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 is 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.
By Investment Objective
Growth Schemes
Income Schemes
Balanced Schemes
Money Market
Schemes
Other Schemes
Special Schemes
Index Schemes
their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in
the Mutual fund scheme the investor has chosen, an investor opting for SIP in xyz Mutual
Fund scheme will need to invest a certain sum on money every month/quarter/half-year in
the scheme.
2.
These plans are best suited for people nearing retirement. In these plans, an investor
invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at
regular intervals to take care of his expenses
3.
scheme to another within the same fund family meaning two schemes belonging to the
same mutual fund. A transfer will be treated as redemption of units from the scheme from
which the transfer is made. Such redemption or investment will be at the applicable NAV.
This service allows the investor to manage his investments actively to achieve his
objectives. Many funds do not even charge any transaction fees for his service an added
advantage for the active investor.
Mutual Funds in India follow a 3-tier structure. There is a Sponsor (the First tier), who
thinks of starting a mutual fund. The Sponsor approaches the Securities & Exchange Board of
India (SEBI), which is the market regulator and also the regulator for mutual funds.
SEBI checks whether the person is of integrity, whether he has enough experience in the
financial sector, his net-worth etc. Once SEBI is convinced, the sponsor is allowed to create a
Public Trust (the Second tier) as per the Indian Trusts Act, 1882. Trusts have no legal identity
in India and cannot enter into contracts, hence the Trustees are the people authorized to act
on behalf of the Trust. Contracts are entered into in the name of the Trustees.
Once the Trust is created, it is registered with SEBI after which this trust is known as the
mutual fund. It is important to understand the difference between the Sponsor and the Trust.
They are two separate entities. Sponsor is not the Trust; i.e. Sponsor is not the Mutual Fund.
It is the Trust which is the Mutual Fund. The Trustees role is not to manage the money.
Their job is only to see, whether the money is being managed as per stated objectives.
Trustees may be seen as the internal regulators of a mutual fund.
AMC forms the third tier of the mutual fund structure. Trustees appoint the Asset
Management Company (AMC), to manage investors money. The AMC in return charges a
fee for the services provided and this fee is borne by the investors as it is deducted from the
money collected from them. The AMCs Board of Directors must have at least 50% of
Directors who are independent directors. The AMC has to be approved by SEBI. The AMC
functions under the supervision of its Board of Directors, and also under the direction of the
Trustees and SEBI.
It is the AMC, which in the name of the Trust, floats new schemes and manages these
schemes by buying and selling securities. In order to do this the AMC needs to follow all
rules and regulations prescribed by SEBI and as per the Investment Management Agreement
it signs with the Trustees.
If any fund manager, analyst intends to buy/ sell some securities, the permission of the
Compliance Officer is a must. A compliance Officer is one of the most important persons in
the AMC. Whenever the fund intends to launch a new scheme, the AMC has to submit a Draft
Offer Document to SEBI. This draft offer document, after getting SEBI approval becomes the
offer document of the scheme.
The Offer Document (OD) is a legal document and investors rely upon the
information provided in the OD for investing in the mutual fund scheme. The Compliance
Officer has to sign the Due Diligence Certificate in the OD.
This certificate says that all the information provided inside the OD is true and
correct. This ensures that there is accountability and somebody is responsible for the OD. In
case there is no compliance officer, then senior executives like CEO, Chairman of the AMC
has to sign the due diligence certificate. The certificate ensures that the AMC takes
responsibility of the OD and its contents.
Custodian
A custodians role is safe keeping of physical securities and also keeping a tab on the
corporate actions like rights, bonus and dividends declared by the companies in which the
fund has invested.
The Custodian is appointed by the Board of Trustees. The custodian also participates in a
clearing and settlement system through approved depository companies on behalf of mutual
funds, in case of dematerialized securities. In India today, securities and units of mutual funds
are no longer held in physical form but mostly in dematerialized form with the Depositories.
The holdings are held in the Depository through Depository Participants (DPs). The
deliveries and receipt of units of a mutual fund are done by the custodian or a depository
participant at the instruction of the AMC and under the overall direction and responsibility of
the Trustees. Regulations provide that the Sponsor and the Custodian must be separate
entities.
3.2 Books Referred For the Study
Security analysis and portfolio management work book
3.3 Case Referred During the Study
3.4 Journals Referred For the Study
The Economic Times
Business Standard
Fact sheet and statements of various fund houses.
3.5 Web Sites Visited For Reference and Collecting Data
www.mutualfundsindia.com
www.valueresearchonline.com
www.moneycontrol.com
www.the-finapolis.com
CHAPTER-4
DATA ANALYSIS
AND
INTERPRETATION
Based on NAV mentioned in fund card the returns for selected sector funds are analyzed for
2013-2016
FUNDS
SBI MAGNUM SECTOR
PHARMA FUND
UTI PHARMA &HEALTH
CARE FUND
FRANKLIN TEMPLETON
PHARMA FUND
RELIANCE PHARMA FUND
AVERAGE
RETURN FOR
2015-2016
129.96
AVERAGE
RETURN FOR
2014-2015
3.55
AVERAGE
RETURN FOR
2013-2014
11.98
96.93
16.80
16.00
155.82
23.62
22.69
171.61
33.59
30.75
CHART 2.1.1
10
9
8
7
6
5
4
3
2
1
0
171.61%
155.82%
129.96%
96.93%
NAV
50
0
SBI MAGNUM
SECTOR
PHARMA FUND
UTI PHARMA
&HEALTH CARE
FUND
TEMPLETON
PHARMA FUND
RELIANCE
PHARMA FUND
FUNDS
INTREPRETATION:
It shows that the Reliance pharma fund had the highest return 171.61% for 2015-2016and
33.59% for 2014-2015 and 30.75% for 2013-2014 among the selected funds.
CHART 2.1.2
AVERAGE RETURNS FOR 2015-2016(%)
FUNDS
ICICI INFRASTRUCTURE
FUND
CANARA ROBECO
INFRASTRUCTURE FUND
BIRLA SUNLIFE
INFRASTRUCTURE FUND
UTI INFRASTRUCTURE
FUND
AVERAGE
RETURN FOR
2015-2016
AVERAGE
RETURN FOR
2014-2015
54.42
17.56
AVERAGE
RETURN
FOR 20132014
-
73.66
17.51
89.46
13.61
55.79
10.39
23.79
INTREPRETATION:
It shows that the Birla sunlife infra fund had the highest return 89.46% for 2015-2016and
ICICI infra fund had the highest return 17.56% for 2014-2015 and UTI infra fund had the
highest return 23.79% for 2013-2014 among the selected funds.
CHART 2.1.3
76.92
30.59
AVERAGE
RETURN FOR
2013-2014
23.75
40.45
78
76.92%
NA 77
V
76
75
74
73.18%
73
72
71
ICICI PRUDENTIAL POWER
RELIANCE DIVERSIFIED
POWER
FUNDS
INTREPRETATION:
It shows that the Reliance diversified power fund had the highest return 76.92%for 20152016and 30.59% for 2014-2015 and 40.45% for 2013-2014 among the selected funds.
FUNDS
RELIANCE BANKING
FUND
AVERAGE
RETURN FOR
2015-2016
96.56
AVERAGE
RETRUN FOR
2014-2015
30.65
AVERAGE
RETURN FOR
2013-2014
26.27
91.73
21.98
23.39
CHART 2.1.4
97
NAV
96
95
94
93
91.73%
92
91
90
89
RELIANCE BANKING FUND
FUNDS
INTREPRETATION:
It shows that the Reliance banking fund had the highest return 96.56% for 2015-2016and
30.65% for 2014-2015 and 26.27% for 2013-2014 among the selected funds.
AVERAGE
RETURN FOR
2015-2016
85.75
83.62
AVERAGE
RETURN FOR
2014-2015
5.70
2.72
AVERAGE
RETURN FOR
2013-2014
16.86
-
102.26
67.98
7.03
7.59
19.38
-
CHART 2.1.5
NAV
120
100
102.26%
85.75%
83.62%
67.98%
80
60
40
20
0
UTI SERVICE
FUND
ICICI
PRUDENTIAL
SERVICE FUND
FUNDS
TATA SERVICE
FUND
PRINCIPAL
SERVICE FUND
FUNDS
SBI MAGNUM SECTOR FMCG
FUND
ICICI PRUDENTIAL FMCG
FUND
FRANKLIN TEMPLETON
FMCG FUND
AVERAGE
RETURN FOR
2015-2016
AVERAGE
RETURN FOR
2014-2015
87.55
19.83
AVERAGE
RETURN
FOR 20132014
17.53
75.62
10.74
23.46
74.66
17.78
21.72
INTREPRETATION:
It shows that the Tata service fund had the highest return 102.26% for 2015-2016and
Principal Service fund had the highest return 7.59% for 2014-2015 and Tata service fund had
the highest return 19.38% for 2013-2014 among the selected funds.
NAV
90
87.55%
85
80
75.62%
74.66%
ICICI PRUDENTIAL
FMCG FUND
FRANKLIN TEMPLETON
FMCG FUND
75
NAV
70
65
SBI MAGNUM SECTOR
FMCG FUND
FUNDS
INTREPRETATION:
It shows that the SBI magnum fmcg fund had the highest return 87.55% for 2015-2016and
SBI magnum fmcg fund had the highest return 19.83% for 2014-2015 and ICICI prudential
fmcg fund had the highest return 23.46% for 2013-2014 among the selected funds.
IT SECTOR FUNDS
TABLE 2.1.7
FUNDS
AVERAGE
RETURN
FOR 20152016
146.54
AVERAGE
RETURN FOR
2014-2015
2.15
AVERAGE
RETURN
FOR 20132014
15.81
160.10
-0.11
17.55
159.73
-5.01
16.90
CHART 2.1.7
165
160.1%
159.73%
ICICI PRUDENTIAL IT
FUND
160
155
150
146.54%
145
140
135
TEMPLETON IT FUND
FUNDS
INTREPRETATION:
It shows that the SBI magnum IT fund had the highest return 160.10% for 2015-2016and
Franklin Templeton IT fund had the highest return 2.15% for 2014-2015 and SBI magnum IT
fund had the highest return 17.55% for 2013-2014 among the selected funds.
STATISTICAL TOOLS
ANALYSIS OF TOTAL RISK (S.D) FOR SELECTED SECTOR FUNDS
The selected funds are ranked based on the total risk (standard deviation) for the
selected sectors.The lowest value of standard deviation secured 1 st rank and the next ranks
are given by gradually increase in their standard deviation values.
FORMULA
Standard Deviation = (i - Ri )2 /n
PHARMACEUTICAL SECTOR FUNDS
TABLE 2.2.1A
FUNDS
RANK
STANDARD
DEVIATION
37.52
FUND
UTI PHARMA &HEALTH CARE
26.13
FUND
FRANKLIN TEMPLETON PHARMA
27.37
FUND
RELIANCE PHARMA FUND
35.99
STANDARD
DEVIATION
36.55
42.96
RANK
41.42
35.57
39.23
1
3
2
5
STANDARD
DEVIATION
33.13
RANK
1
38.47
TABLE 2.2.1C
BANKING SECTOR FUNDS
FUNDS
RELIANCE BANKING FUND
UTI BANKING FUND
STANDARD
DEVIATION
40.17
RANK
40.64
TABLE 2.2.1D
SERVICE SECTOR FUNDS
TABLE 2.2.1E
FUNDS
STANDARD
DEVIATION
35.31
RANK
37.12
41.84
33.78
RANK
2
3
1
IT SECTOR FUNDS
TABLE 2.2.1G
FUNDS
STANDARD
DEVIATION
RANK
33.68
38.42
35.50
Sharpe index =
SHARPES RATIO
VALUE
RANK
ICICI INFRASTRUCTURE
FUND
CANARA ROBECO
INFRASTRUCTURE FUND
BIRLA SUNLIFE
INFRASTRUCTURE FUND
UTI INFRASTRUCTURE FUND
0.52
0.49
0.41
0.33
SAHARA INFRASTRUCTURE
FUND
0.43
SHARPES RATIO
VALUE
0.24
RANK
2
0.79
SHARPES RATIO
VALUE
RANK
0.10
0.46
0.66
0.79
TABLE 2.2.2C
SHARPES RATIO
VALUE
0.73
RANK
0.52
TABLE 2.2.2D
SERVICE SECTOR FUNDS
TABLE 2.2.2E
FUNDS
SHARPES RATIO
VALUE
0.19
RANK
0.14
0.25
0.25
BETA 0.23
RANK 3
0.53
RANK
1.13
0.86
0.85
SHARPES RATIO
VALUE
1.07
1
RANK
0.06
-0.12
-0.04
IT SECTOR FUNDS
TABLE 2.2.2G
TABLE 2.2.3B
FUNDS
BETA
RANK
1.00
CANARA ROBECO
INFRASTRUCTURE FUND
BIRLA SUNLIFE INFRASTRUCTURE
FUND
UTI INFRASTRUCTURE FUND
1.18
1.12
0.97
1.06
BETA
RANK
0.91
1.03
TABLE 2.2.3C
BANKING SECTOR FUNDS
FUNDS
BETA
RANK
0.81
0.84
TABLE 2.2.3D
SERVICE SECTOR FUNDS
TABLE 2.2.3E
FUNDS
BETA
RANK
0.95
0.99
1.09
0.90
BETA
RANK
0.78
0.98
0.78
IT SECTOR FUNDS
TABLE 2.2.3G
FUNDS
BETA
RANK
0.96
0.93
0.81
R=
n {( x x mean ) ( y y mean )}
-----------------------------------------------
(x x
mean
) 2 ( y y mean ) 2
RANK
0.94
CANARA ROBECO
INFRASTRUCTURE FUND
BIRLA SUNLIFE INFRASTRUCTURE
FUND
FUNDS
UTI INFRASTRUCTURE FUND
0.95
0.93
R2
0.94
RANK
3
0.92
0.78
0.93
0.82
0.75
FUNDS
RANK
0.95
0.91
RANK
0.95
0.98
FUNDS
TABLE 2.2.4D
SERVICE SECTOR FUNDS
TABLE 2.2.4E
R2
RANK
0.93
0.90
0.86
0.91
FUNDS
RANK
0.57
0.71
0.75
FUNDS
IT SECTOR FUNDS
R2
RANK
0.99
0.72
0.64
FUNDS
TABLE 2.2.4G
CHAPTER-5
5.1 FINDINGS
Findings are made from the data analysis and interpretation. The following findings
are drawn from the analysis of sector funds.
Best fund by
Best fund by
Best fund by
Best fund by
Best fund by Sharpes ratio value - Tata and Principal service (0.25)
Best fund by
Best fund by Beta value - SBI magnum and Franklin Templeton fmcg (0.78)
Best fund by
IT SECTOR FUNDS:
5.2 SUGGESSTIONS
Following are the suggestions for the selected funds in the selected sectors:
In pharma sector franklin templeton pharma seems to be good only by the beta value
but in case of return it does not seems to be good so that franklin templeton pharma
should concentrate on increasing its return to the investors.
In case of infra structure sector birla sunlife infra has performed well for 20152016and in future it may be the best fund for the investors.
In service sector both tata and principal service has performed well in all parameter
against other funds.
In Banking Sector Reliance was only fund which qualified but it was not good
performer in all parameters.
The fund house has to reduce the total risk involved in the fund in order to increase
the return with good portfolio construction.
Karvy should keep Mutual Fund Awareness Programmes on regular basis for
investors and clients as future belongs to mutual fund in India specially Sectoral
Mutual Funds.
5.3 CONCLUSION
Good Performers:
Following 6 funds have scored well on all parameters,
Reliance pharma
SBI magnum IT
SBI fmcg
Franklin Templeton fmcg
Reliance diversified power
Tata service
Both Reliance and SBI has performed well in all sectors.
Non Performers:
The funds which can be identified as non performing on the basis of the parameters
considered in the study are: Principal service
UTI infra
ICICI fmcg
Franklin Templeton IT
The conclusion made to the study is that both good and non performing funds are available
in the trade, so the investor has to make decision on the investment by taking highest risk for
highest return under the guidance of financial service companies.
NOTE:
The data mentioned above shows that the fund houses are classified as good performer and
non performer based on the performance of its funds and it confirmed only for the particular
period of study.
BIBLIOGRAPHY
Websites:
www.mutualfundsindia.com
www.valueresearchonline.com
www.moneycontrol.com
www.the-finapolis.com
Journals & Other References:
The Economic Times
Business Standard
Security analysis and portfolio management work book
Fact sheet and statements of various fund houses.