Professional Documents
Culture Documents
REPORT
ON
By:
Priyanka Agrawal
PICT-SITM
Pune
Kotak Mahindra Asset Management Company
Limited
A
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REPORT
ON
MUTUAL FUND INDUSTRYANALYSIS & RECENT TRENDS
By:
Priyanka Agrawal
PICT-SITM
A report submitted in partial fulfillment of
the requirement of MBA Program
Submitted to:
Mr.Balaramchandran
Faculty Member
PICT-SITM, Pune
&
Mr. Rohit Kaushal
Relationship Manager
Kotak Mahindra Asset Management Company Limited
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ACKNOWLEDGEMENT
The success behind the completion of any good job is the support and the
joint team effort of a number of people. There are many persons, whose help
& cooperation, made this project successful.
My deepest sense of gratitude, profound respect and sincere thanks to
Mr. Balaramchandran (faculty member PICT-SITM Pune ) my project
guide, for his valuable assistance, keen interest and constant motivation at
each step of the project. It would not have been possible for me to reach this
stage without his support & guidance.
My special thanks to Mr. Rohit Kaushal (Relationship Manager- Kotak
Mahindra Asset Management Co. Ltd.), my company guide who has been
there with me throughout the entire project. He always had the answers to
my queries, be it regarding any concept related to mutual funds. His warmth
support, practical guidance and easy explanations not only regarding the
project matters but others too add to the success of my project. His
continuous interaction and support made it possible for the successful
completion of the project.
I would also like to thank my parents and my friends for all their time-totime assistance. Last but not the least I would like to thank God because
without his divine grace nothing would have been possible.
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TABLE OF CONTENTS
Page No.
Acknowledgements... 3
List of Illustrations... 6
Abstract 7
1. Introduction
a. Purpose 8
b. Objective...... 8
c. Proposed Methodology....... 9
d. Limitations of the Project 9
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4. Distribution Model
a. Multi-Channel Distribution Model 31
b. Distribution Channels.... 32
c. Challenges in Distribution.. 33
d. Curbing Unethical Practices... 34
e. Spreading Mutual Fund Culture 35
6. Measuring
&
Performance
Evaluating
Mutual
Fund
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7. Conclusion.. 88
8. Recommendations.. 89
9. Appendices.. 91
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TABLE OF ILLUSTRATIONS
1. Working of Mutual Funds 12
2. Structure of Mutual Funds... 24
3. Mutual Fund Classification.. 24
4. Multi-Channel Distribution Model 31
5. Investor Earning Opportunities.... 37
6. Expenses charged by AMC. 41
7. Investor in Different Phases.. 49
8. Portfolio Model (By Jacobs).. 50
9. Wealth Cycle Classification 51
10.Comparison of Investment Products
a. By Nature of Investment.. 52
b. By Performance. 53
11.Risk-Return Grid 54
12. Bank v/s Mutual Fund 55
13. Diagrams showing
a. Beta.. 57
b. R Squared. 58
c. Treynor Ratio.. 59
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d. Sharpe Ratio 60
14. Fund Analysis (On the basis of NAV). 70
15. Different Funds which are compared. 71
16. Calculation showing Mutual Fund Performance
a. Equity Fund Scheme 73
b. Debt Fund Scheme.. 76
c. ELSS Tax Saver Scheme 79
d. Monthly Income Plans 82
e. Cash Funds.. 85
s
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ABSTRACT
If size is the measure of dominance, then the Indian mutual fund industry can
now boast on that. With the total Asset Under Management (AUM)
increasing from Rs.1,01,565 Crores in Jan 2000 to Rs.5,67,601.98 Crores
by April 2008, according to the Association of Mutual Funds in India
(AMFI), the industrys growth has been nothing but exceptional. It has
indeed come a long way from being a single player, single scheme (US-64)
industry to having 34 players and more than 480 schemes.
What has driven the growth? Numbers of factors have contributed to the
surge in the industrys growth. First and foremost, a buoyant domestic
economy coupled with a booming stock market has been one of the major
drivers of the growth in recent times particularly in the last five-year.
Another significant factor facilitating this growth has been a conducive
regulatory regime, thanks to increased effort by SEBI to improve market
surveillance and protect investors interests. Further, incentives, such as
making dividend tax free in the hands of investors have also provided strong
impetus to the growth.
This research covers various aspect of mutual funds industry in India.
Starting with basic concept of mutual fund and its advantages it would give
detail about the growth of mutual fund industry in India, its present scenario.
It also throws some light on major mutual fund companies in India, the
different types of mutual funds on the basis of structure, investment, load and
schemes and also it covers the different phases of growth of mutual fund
industry. Then it covers the calculation of NAV, the various investment
plans, factors that help in calculating the mutual fund performance.
In the end mutual fund analysis have been done on the basis of Standard
Deviation, Beta, Alpha, R Squared, Treynor Ratio & Sharpe Ratio on various
schemes like Equity based Funds, Debt based Funds, Monthly Income Plans,
Cash Funds & ELSS Tax Saver Schemes.
INTRODUCTION
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Proposed Methodology
In broader perspective the whole project can be divided into three sections.
Under SECTION I, on the basis of past and present the industry has been
analyzed and based on which future outlook has been projected. This section
covers following things:
i. Concept of Mutual Funds and its Advantages.
ii. Types of Mutual Funds.
iii. Size of Industry
iv. Growth trends
SECTION II focuses on the distribution Channel used by different AMC in
order to sell their schemes. This section also tries to cover
i. Distribution models.
ii. Challenges in distribution.
iii. Curbing Unethical Practices
iv. Spreading Mutual Fund Culture
Section III focuses on the different tools used to measure & evaluate the
performance of different Mutual Funds. This section covers the following
things:
i. The performance of the Mutual Funds is evaluated on the basis of
Standard Deviation, Beta, Alpha, R Squared, Treynor Ratio & Sharpe
Ratio.
ii. Recent Trends in the Mutual Fund industry
iii. Impact on Mutual Funds of the Union Budget.
Finally on the basis of findings and observation suitable recommendations
will be given.
Limitations
The analysis is completely based on the past performance and not
confirms the future performance.
The research is based on secondary data collected from other sources
like magazines, newspapers and websites etc.
Reliability of the sources could also be limitation for the project.
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The new entries of mutual fund companies in India were SBI Mutual Fund,
Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank
Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund
industry. By the end of 1993, the total AUM of the industry was Rs. 470.04
bn. The private sector funds started penetrating the fund families. In the same
year the first Mutual Fund Regulations came into existence with reregistering all mutual funds except UTI. The regulations were further given a
revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India
which has now merged with Franklin Templeton. Just after ten years with
private sector player penetration, the total assets rose up to Rs. 1218.05 bn.
Today there are 34 mutual fund companies in India.
A Mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective.
The ownership of the fund is thus joint or mutual; the fund belongs to all
investors. A single investors ownership of the fund is in the same proportion
as the amount of the contribution made by him bears to the total amount of
the fund.
A mutual fund uses the money collected from investors to buy those assets,
which are specifically permitted by its stated investment objective. Thus, an
equity fund would buy mainly equity assets-ordinary shares, preference
shares, warrants, etc. a bond fund would mainly buy debt instruments, such
as debentures, bonds, or government securities. It is these assets, which are
owned by the investors in the proportion of their investments.
When an investor subscribes to a mutual fund, he or she buys a part of the
assets or the pool of funds that are outstanding at that time. It is no different
from buying shares of a joint stock company, in which case the purchase
makes the investor a part owner of the company and its assets. In fact, in the
USA, a mutual fund is constituted as an investment company and an investor
buys in to the fund meaning he buys the shares of the fund. In India, a
mutual fund id constituted as a trust an investor subscribes to the units
issued by the fund, which is where the term Unit Trust comes from. . Mutual
funds issues units to the investors in accordance with quantum of money
invested by them. Investors of Mutual funds are known as Unit Holders.
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SOURCE: AMFI
Advantages of Mutual Funds
If mutual funds are emerging as the favorite investment vehicle, it is because
of the many advantages they have over other forma and avenues of investing,
particularly for the investor who has limited resources available in terms of
capital and ability to carry out detailed research and market monitoring. The
following are the major benefits offered by mutual funds to all investors:
i) Portfolio Diversification
Mutual Funds spread the investment across different securities (stocks,
bonds, money market instruments, real estate, fixed deposits etc.) by
investing in a number of companies across a broad cross-section of industries
and sectors (auto, textile, information technology etc.). This kind of a
diversification may add to the stability of your returns and reduces the risk
with far less money than you can do on your own. For example during one
period of time equities might underperform but bonds and money market
instruments might do well enough to offset the effect of a slump in the equity
markets.
ii) Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with
brokers and companies.
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iv) Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. 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 the
Mutual Fund.
v) Affordability
Investors individually may lack sufficient funds to invest in high-grade
stocks. A mutual fund because of its large corpus allows even a small
investor to take the benefit of its investment strategy.
vi) Variety
Mutual funds offer a tremendous variety of schemes. This variety is
beneficial in two ways: first, it offers different types of schemes to investors
with different needs and risk appetites; secondly, it offers an opportunity to
an investor to invest sums across a variety of schemes, both debt and equity.
vii) Tax Benefits
In case of Individuals and Hindu Undivided Families a deduction up to Rs.
9,000 from the Total Income will be admissible in respect of income from
investments specified in Section 80L, including income from Units of the
Mutual Fund. Units of the schemes are not subject to Wealth-Tax and GiftTax.
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viii) Transparency
Open-ended mutual funds disclose their Net Asset Value (NAV) daily and
the entire portfolio monthly. This level of transparency, where the investor
himself sees the underlying assets bought with his money, is unmatched by
any other financial instrument.
period, the total asset of the industry grew to about Rs. 610bn with the total
number of schemes increasing to about 167 by the end of 1994.
iii) Third Phase of (1993-2003) Private players enter the scene
This phase marked the entry of private sector funds. The phase also signaled
the intensification of competition. Both domestic and foreign players entered
the market, offering a wide variety of schemes to investors. Kothari Pioneer
Mutual Fund was the first private sector fund to establish in association with
the foreign fund. Private players like Morgan Stanley, Jardine Fleming, JP
Morgan, George Soros and Capital International entering the market. The
total AUM by the end of Jan 31, 2003 increased to $ 34,927mn from
$23,260mn in March 1995 with a CAGR of 6.92%.
iv) Fourth Phase (since Feb 2003) UTIs restructuring and beyond
In Feb 2003 UTI ACT 1963 was replaced and UTI was bifurcated into two
separate entities: Specified undertaking of Unit Trust of India, which is still
under the Govt. of India and the UTI Mutual Fund Ltd. This was done in the
wake of the sever payment crisis that UTI suffered on account of its assured
return schemes of US-64 that finally resulted in an adverse impact on the
India capital markets. US-64 was the first scheme launched by UTI with a
significant equity exposure and the returns of which were not linked to the
market. However, the industry has overcome that shock and is hoped to have
learnt its lesson.
1995 as Reliance Capital Mutual Fund which was changed on March 11,
2004. Reliance Mutual Fund was formed for launching of various schemes
under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make
investments in diversified securities.
vi) ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO
Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO
Asset Management (India) Ltd. was incorporated on November 4, 2003.
Deutsche Bank AG is the custodian of ABN AMRO Mutual Fund.
vii) Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and
Sun Life Financial. Sun Life Financial is a global organization evolved in
1871 and is being represented in Canada, the US, the Philippines, Japan,
Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund
follows a conservative long-term approach to investment. Recently it crossed
AUM of Rs. 10,000 crores.
viii) Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,
1992 under the sponsorship of Bank of Baroda. BOB Asset Management
Company Limited is the AMC of BOB Mutual Fund and was incorporated
on November 5, 1992. Deutsche Bank AG is the custodian.
ix) HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and
Capital Markets (India) Private Limited as the sponsor.
through their website. They have Open end Diversified Equity schemes,
Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax
Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.
xvi) Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its leading in
the market in securities, investment management and credit services. Morgan
Stanley Investment Management (MISM) was established in the year 1975.
It provides customized asset management services and products to
governments, corporations, pension funds and non-profit organizations. Its
services are also extended to high net worth individuals and retail investors.
In India it is known as Morgan Stanley Investment Management Private
Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund
(MSMF).
xvii) Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance
Limited as its sponsor. The Trustee Company is Escorts Investment Trust
Limited. Its AMC was incorporated on December 1, 1995 with the name
Escorts Asset Management Limited.
xviii) Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with
Alliance Capital Management Corp. of Delaware (USA) as sponsor. The
Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital
Asset Management India Private Ltd. with the corporate office in Mumbai.
companies and foreign institutional investors. SEBI has laid down the rules
and regulations regarding the obligations of the entities involves in a mutual
fund, its establishment and launch of different schemes, investments and
valuation, financial reporting, conduct and operations of mutual funds.
Asset Management Company (AMC)
Its role is highly significant in the mutual funds operation. They are the fund
managers i.e. they invest the investors money in various securities after
proper research and analysis. They also look after the administrative
functions of a mutual fund for which they charge management fee.
Intermediaries
They act as a link between the mutual fund companies and the investors. The
intermediaries include brokers, sub- brokers, and investment houses. The
other intermediary- registrar and transfer agents perform activities, which are
associated with maintaining records concerning units already issued or to be
issued by the company. The registrar also performs other activities such as
dividend payment, investor grievance, etc.
Investors
Investors subscribe to the units issued by the mutual funds in the hope of
getting a return commensurate with the risk involved. SEBI protects the
interest of the investors through the guidelines laid down under SEBI
(Disclosure and Investor Protection) Guidelines, 2000. The mutual fund
investor mainly includes individual, HUF, corporate and trusts.
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SOURCE: http://amfiindia.com
Mutual Fund Classification
SOURCE: http://amfiindia.com
By Structure
i) 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. Hence, the unit capital of
the schemes keeps changing each day. Such schemes thus offer very high
liquidity to investors and are becoming increasingly popular in India. Please
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By Investment Objective
i) 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. It has been proven that returns from stocks, have outperformed most
other kind of investments held over the long term. Growth schemes are ideal
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Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc.
iii) 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. In these funds or schemes the investor invests in the
securities of only those sectors or industries which are specified in the offer
documents. E.g. Pharmaceuticals, software, Fast Moving Consumers goods
(FMCG), petroleum stocks, etc. the return on these funds is dependent on the
performance of the respective sector/industries. While these funds may give
higher returns, they are more risky compared to the diversified funds.
Investors need to keep a watch on the performance of these sectors and must
exit at an appropriate time. They may seek an advice of an expert.
Performance Advertisements
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Distribution Model
AMC
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Direct Sales
Brokers
Institutional Brokers
Large
Corporate
Corporate
Banks
Tied Agency
Internet
IFAs
HNW
Customer
Retail
Customer
Customer Segments
Distribution Channels
In highly competitive environment, product innovation or development has
become a necessity for mutual fund players to stay ahead. Increasing
commoditization and growing needs of the customers are forcing players to
shift to solution based models from production based ones. In either model,
the role of distribution channel remains critical as it helps stave off
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Challenges in Distribution
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Lack of awareness
Risk aversion
Extensive availability of the central govt. assured return
Delay (in Liquidity)
Tardy inter-city payment system
Transaction cost of establishing contact centers
It has been a big challenge for the Mutual Fund Industry. As most of the
investors are still not aware how it functions. They sometime feel that it is a
costly affair. Educating investors about the advantages of investing in mutual
funds compared to risk-free savings instrument is a big task for the industry.
According to the Securities Market Infrastructure- Leveraging Expert
(SMILE), the transaction cost of establishing contact centers, delay in fund
transfer and tardy inter-city payment system are the major impediments. So
enhancing the reach through the existing distribution model will require
more investments.
As of now, mutual fund investments are confined to the metros, tier 1 and 2
cities (about 50 cities). A major reason for this is high cost of developing
retail infrastructure. So, scaling up the operation by increasing investment in
other cities doesnt seem feasible.
There is also a regulatory entanglement in fund realization. Allotment of
units Net Asset Value (NAVs) is done before realization of funds, except in
liquid and money market schemes. Such delay is quite pervasive in smaller
towns, where it can be 3-5 days or more. Such hassle could prevent investors
from investing in mutual funds. However, these problems are being resolved
with appointment of registrars to meet the time-lines of recording the
transactions. In addition, technological advancements of remittance
instruments such as Electronic clearing Services (ECS), Electronic Funds
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Transfer (FT) and Real- Time Gross settlement System (RTGS), is a making
the process fast and reducing delay in fund transfer across cities.
The extensive availability of the central govt. assured return on small
products are restricting the competition as well as penetration of wide
variety of mutual fund products, particularly in the smaller towns where
investors are not willing to take risk. This poses a great challenge for the
industry to realize its potential.
Offer Document
When an AMC or a Fund Sponsor wishes to launch a new mutual fund
scheme, they are required to formulate the details of the schemes and register
it with SEBI before announcing the scheme and inviting the investors to
subscribe to the fund. Launch of a new mutual fund scheme is called a New
Fund Offer (NFO). The document containing the details of the new fund
offer that the AMC or the Sponsor prepares and circulates to the prospective
investors is called the Offer Document.
Offer Document issued by mutual funds serve the same purpose of inviting
investors and giving them the information about the new fund offer. The
offer document of the closed-end fund is issued only once at the time of
issue, as the units are normally not re-purchasable for investors. But, the
open-end fund could issue and repurchase units on an ongoing basis. This
means that the offer document of the open-end funds is valid for all the time,
until amended, though it will be first issued at the time of launch of the
scheme. SEBI requires the offer document of the open-end fund to be revised
every two years.
Growth Option: The investors who do not want to receive any part of
profits of the mutual fund before its redemption. Rather they want to
retain the profits made in the pool and want their returns to grow by
being compounded. Whenever they need to get some money or profits
back, they would sell a part of their units. This is Growth Option.
Yes
Yes
Dividend
Reinvestment
Growth Option
Yes
Yes
No
Yes
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Purchases:
In respect of valid applications received upto 3 p.m. by the
Mutual Fund, same days closing NAV shall be applicable.
In respect of valid applications received after 3 p.m. by the
Mutual Fund, the closing NAV of the next business day shall be
applicable.
Redemption:
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Liquid funds
Purchases:
In respect of valid applications, closing NAV of the day
immediately before the day on which funds are available for
utilization by the fund shall be applicable. However, in respect
of any application received after 1 p.m. by the Mutual Fund and
the funds are available for utilization by the fund on the same
day, closing NAV of the same day shall be applied.
Redemption
In respect of valid applications received upto 10:00 a.m. by the
Mutual Fund, previous days closing NAV shall be applicable.
In respect of valid applications received after 10:00 a.m.by the
Mutual Fund, same days NAV shall be applicable.
Pricing Of Units
Although NAV per unit defines the fair value of the investors holding in the
fund, the fund may not repurchase the investors units at the same price as
NAV. There can be entry or exit loads. The Sale price is NAV + Entry Load
and the Repurchase price is NAV Exit Load. SEBI requires that fund must
ensure that repurchase price is not lower than 93% of NAV (95% in the case
of a closed-end fund). On the other side, the fund may sell new units at a
price that is different from the NAV, but the sale price cannot be higher than
107% of NAV. Also, the difference between the repurchase price and the
sale price of the unit is not permitted to exceed 7% of the sale price.
Sale Price: Applicable NAV * (1 + Entry Load)
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Total Expenses:
Total Expenses charged by the AMC to a scheme, excluding issue or
redemption expenses but including investment management &
advisory fees, are subject to the following limits:
On the first Rs.100 Crores of daily or average weekly net assets
On the next Rs.300 Crores of daily or average weekly net assets
On the next Rs.300 Crores of daily or average weekly net assets
On the balance of daily or average weekly net assets
2.5%
2.25%
2.0%
1.75%
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2.25%
2.0%
1.75%
1.5%
Investment Plans
The term investment plans generally refers to the portfolio flexibility that
the funds to investors offering different ways to invest or reinvest. The
different investment plans are an important consideration in the investment
decision, because they determine the level of flexibility available to the
investor. Also, the investment plan offered by a fund allows the investors
freedom with respect to investing one time or at regular intervals, making
transfers to different schemes within the same fund family, or receiving
income at specified intervals or accumulating distributions. These are some
of the investment plans offered by mutual funds in India:
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Many funds offer 2 options under the same scheme- the Dividend
Option & the Growth Option. The ARP allows the investor to
reinvest the amount of dividends or other distributions made by the
fund in the same fund & receive additional units, instead of receiving
them in cash.
Systematic Investment Plan (SIP):
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Tax Provisions
Income earned by any mutual fund registered with SEBI (Mutual Fund)
Regulation, 1996 is fully exempt from tax under section 10 (23D) of the IT act.
However, income distributed to unit-holders by a closed-end or debt fund is
liable to a dividend distribution tax at a rate stipulated by the Government. This
tax is not applicable to distributions made by open-end-equity-oriented funds
(funds with more than 50% of their portfolio in Equity).
Dividend Distribution Tax is payable by the fund on its distributions and out of
its income, the investor pays indirectly since the funds NAV and the value his
investment will come down by the amount of tax paid by the fund.
Example: If a closed-end or a debt fund declares a dividend distribution of
Rs.100, Rs.10.20 (Tax Rate 10.2%) will be the tax in the hands of the fund.
While the investor will get Rs.100, the fund will have Rs.10.20 less to invest.
The funds current cash flow diminish by Rs.10.20 paid as tax, and its impact
will be reflected in the lower value of the funds NAV and hence investors
investment on a compound basis in future periods.
Since the tax is on distributions, it makes income schemes less attractive in
comparison to growth schemes, as the objective of income schemes is to pay
regular dividends.
The fund cannot avoid the tax even if the investor chooses to reinvest the
distribution back into the fund.
Example: The fund will still pay Rs.10.20 tax on the announced distribution,
even if the investor chooses to reinvest his dividends in the concerned scheme.
What is risk?
Risk can be defined as the potential for harm. But when anyone analyzing
mutual funds uses this term, what is actually being talked about is volatility.
Volatility is nothing but the fluctuation of the Net Asset Value (price of a
unit of a fund). If there is high volatility, then there will be greater
fluctuations in NAV.
Generally, past volatility is taken as an indicator of future risk and for the
task of evaluating a mutual fund, this is an adequate approximation.
How risk is measured?
There are 2 ways in which you can determine how risky a fund is.
Standard Deviation
Standard Deviation is a measure of how much the actual performance
of a fund over a period of time deviates from the average performance.
Since Standard Deviation is a measure of risk, a low Standard
Deviation is good.
Sharpe Ratio
The Sharpe Ratio of a fund measures whether the returns that a fund
delivered were commensurate with the kind of volatility it exhibited.
This ratio looks at both, returns and risk, and delivers a single measure
that is proportional to the risk adjusted returns.
Since Sharpe Ratio is a measure of risk-adjusted returns, a high
Sharpe Ratio is good.
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Important Points:
Don't just look at the NAV, also look at the risks-returns
Kotak 30 has 3 stars & Kotak Opportunities has 4 stars. That does not
mean that their NAV is approximately the same. In fact, the NAV of
Kotak 30 is 90.22 & NAV of Kotak Opportunities is 40.48
However, Kotak 30 took a below average risk and delivered an above
average return, while Kotak Opportunities took an average risk to get
the high returns. So, dont just look at the NAV also consider the
risks-returns of the fund.
Higher rating does not mean better returns
A fund with more stars does not indicate a higher return when
compared with the rest. All it means is that you will get a good return
without putting your money at too much risk.
ICICI Prudential Liquid Fund has a 4-star rating while ICICI
Prudential Growth Fund has a 3-star rating. However, the fund with
the 3-star rating has a higher NAV (109.08) than the one with the 4star rating (11.73).
Higher rating does not mean more risk
HDFC Top 200 has an NAV of 140.47 while UTI Infrastructure has an
NAV of 36.60
This does not necessarily mean that HDFC Top 200 is offering a
higher risk since the return is higher.
In fact, according to the ratings, HDFC Top 200, a 5-star fund has a
low risk while UTI Infrastructure, a 5-star fund has an average risk.
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Most fund houses are already offering this STP facility to investors. In
the first week of May, JP Morgan AMC launched Optimiser
Systematic transfer plan, wherein investors can invest a lump sum in
JP Morgan India Liquid Fund or JP Morgan India Liquid Plus Fund
through STP. An amount predetermined by the investor would be
transferred periodically (daily, weekly, monthly or quarterly) from this
fund to any of the existing equity schemes managed by JP Morgan
Mutual Fund.
STP is definitely going to gain ground as aspirations, possibilities and
opportunities increase among the youth. However, fund managers feel,
STP is yet to be promoted in India to its full extent. Investors need to
be adequately informed about it.
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A brand image is very important for mutual funds and investors base
their decisions on known and dependable brands. Brand-building
exercises are mostly taken up by foreign players and big industrial
houses which have deep pockets, while fund houses with lower corpus
can only attract investors by showing good performance.
51 | P a g e
The asset base of the industry has grown by 7.33% to Rs. 567601.98
Crores.
Compared to the last month, April has been great for the mutual fund
industry as 28 AMCs out of 34 posted positive growth in their AAUM.
Reliance Mutual Fund has topped the chart with an AAUM of Rs
96,386.40 Crores. ICICI Prudential MF and UTI MF continue to be at
the second and third position respectively.
Reliance Mutual Fund is the first mutual fund in India to cross this
mark. On April 30, the total Assets Under Management (AUM) of the
fund was Rs 100812 Crores, including Rs 34000 Crores in equity
schemes and Rs 66800 Crores in debt funds.
Incentives for equities should be continued and the status quo on longterm capital gain tax and STT should be maintained.
Category
Rating
3 Year
Equity: Diversified
Return
45.64
Tata Infrastructure
Equity: Diversified
45.31
57 | P a g e
Magnum Contra
Equity: Diversified
44.80
Kotak Opportunities
Equity: Diversified
43.72
UTI Infrastructure
Equity: Diversified
43.18
Equity: Diversified
43.05
Reliance Growth
Equity: Diversified
42.00
Equity: Diversified
41.06
Equity: Diversified
39.65
BoB Growth
Equity: Diversified
38.55
Hybrid: Equity-oriented
36.93
Magnum Balanced
Hybrid: Equity-oriented
31.37
HDFC Prudence
Hybrid: Equity-oriented
29.27
Debt: Medium-term
8.37
Debt: Medium-term
7.54
Debt: Medium-term
7.47
Equity: Diversified
44.86
Equity: Diversified
44.10
Equity: Diversified
43.39
Equity: Diversified
42.69
Kotak 30
Equity: Diversified
42.68
Equity: Diversified
42.55
Magnum Equity
Equity: Diversified
42.23
Fund
Kotak 30 Growth
Kotak Bond Short Term
Kotak Tax Saver Scheme Growth
58 | P a g e
HDFC
Category
Equity Fund Scheme
Debt Fund Scheme
ELSS Tax Saver
Monthly Income Plan
Cash Fund
Fund
HDFC Equity Fund- Growth
HDFC HI Short Term
HDFC Tax Saver Scheme- Growth
HDFC MIP- Short Term
HDFC Liquid
UTI
Category
Equity Fund Scheme
Debt Fund Scheme
ELSS Tax Saver
Monthly Income Plan
Cash Fund
Fund
UTI Equity Fund- Growth
UTI Short Term Income Regular
UTI ETSP- Growth
UTI- MIS
UTI Liquid Cash Instrument
ICICI
Category
Equity Fund Scheme
Debt Fund Scheme
ELSS Tax Saver
Fund
ICICI Prudential Dynamic Plan- Growth
ICICI Prudential Short Term
ICICI Prudential Tax Plan
59 | P a g e
Reliance
Category
Equity Fund Scheme
Debt Fund Scheme
ELSS Tax Saver
Monthly Income Plan
Cash Fund
Fund
Reliance Growth
Reliance Short Term
Reliance Tax Saver
Reliance MIP
Reliance Liquid Cash
60 | P a g e
Treynor
Ratio
Beta
R Square Alpha
Kotak
25.48
1.39
3.09
.96
.88
4.98
HDFC
23.61
1.34
2.65
.91
.92
2.75
UTI
23.06
1.06
2.13
.88
.89
-3.28
ICICI
25.10
1.43
1.95
.87
.77
7.78
Reliance
27.93
1.29
2.97
.98
.76
4.74
Findings
Standard
Deviation
Kotak
4
HDFC
2
UTI
1
ICICI
3
Reliance 5
Sharpe
Ratio
2
3
5
1
4
Treynor
Ratio
1
3
4
5
2
Beta
4
3
2
1
5
R
Square
3
1
2
4
5
Alpha
Total
2
4
5
1
3
16
16
19
15
24
Analysis
61 | P a g e
62 | P a g e
But the analysis cant be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio ICICI Prudential Growth fund (1.43) stands out
clear with 1st rank, followed by Kotak 30 Growth fund (1.39).
In case of Treynor ratio, Kotak 30 Growth fund (3.09) value is higher so it
has been given the 1st rank among the others which is followed by Reliance
Equity fund (2.97).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, ICICI Prudential Dynamic Growth Plan (7.78) is
the best followed by Kotak-30 Growth fund (4.98).
Thus, ICICI Prudential Dynamic Growth Plan is the best Equity fund for the
investor for investment purpose. It is the best fund as far as Alpha, Beta &
Sharpe ratio is concerned. Though R Square is not so convincing which
means that the fund is not so diversified. It stands at 3 rd position in Standard
Deviation after UTI Equity Growth fund & HDFC Equity Growth fund and
last when Treynor ratio is considered. But when we combine all the 6
parameters which are considered to measure the performance of a Mutual
Fund, ICICI Prudential Dynamic Growth Plan is the best Equity Fund when
compared with rest of the Equity funds.
63 | P a g e
Beta
.48
.42
.51
.62
.46
R
Square
.55
.54
.49
.44
.59
Alpha
2.27
2.95
.77
1.45
2.72
Findings
Standard
Deviation
Kotak
3
HDFC
1
UTI
4
ICICI
5
Reliance 2
Sharpe
Ratio
3
1
5
4
2
Treynor
Ratio
1
2
4
5
3
Beta
3
1
4
5
2
R
Square
2
3
4
5
1
Alpha
Total
3
1
5
4
2
15
9
26
28
12
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, HDFC HI Short Term stands out
64 | P a g e
with rank 1 (.52) & following HDFC HI is Reliance Short Term fund (.54)
which suggest that these funds are stable in their returns & also are less risky.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in todays competitive
world there is a quote Higher the risk higher the return if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also HDFC HI Short
Term has lowest beta (.42) among these funds which is followed by Reliance
Short Term fund (.46). But beta of 1 is preferable because of the returns it is
considered safe for the value of 1 in this analysis almost most of the funds
have beta of less than 1 which means that these funds are managed in
keeping the people risk at a manageable level, which help investors to earn
safe returns. As we have to do the analysis we have to take one stand so in
this case, according to me 1st rank should be given to that beta value which is
lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, Reliance Short
Term fund has the maximum R Square (.59) followed by Kotak Bond Short
Term (.55). HDFC HI Short term fund is on the 3rd place (.54).
But the analysis cant be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
65 | P a g e
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio HDFC HI Short Term fund (7.10) stands out clear
with 1st rank, followed by Reliance Short Term fund (6.55).
In case of Treynor ratio, Kotak Bond Short Term fund (3.42) value is higher
so it has been given the 1st rank among the others which is followed by
HDFC HI Short Term fund (3.11).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, HDFC HI Short Term fund (2.95) is the best
followed by Reliance Short Term fund (2.72).
Thus, HDFC HI Short Term fund is the best Debt fund when compared with
the other funds of Kotak, ICICI, UTI & Reliance. It has the smallest
Standard Deviation & also the smallest Beta when compared with all the
funds. This shows the fund is less risky and will give good returns to its
investors. When taken R Square into consideration, this fund stands at the 3rd
position after Kotak Bond Short Term & Reliance Short Term. This shows
that the fund is less diversified. The fund is the best performer as far as
Sharpe ratio is concerned and is the 2nd best when Treynor ratio is
considered. The fund is a good performer as it has the highest Alpha. So, if a
66 | P a g e
person wants to invest in Debt for a short term then he can go in for HDFC
HI Short Term fund.
Treynor
Ratio
Beta
R
Square
Alpha
Kotak
25.65
.76
1.41
.96
.78
-4.55
HDFC
25.22
1.05
1.93
.92
.84
-3.11
UTI
24.49
.91
1.94
.96
.86
-7.11
ICICI
29.02
.90
1.80
.94
.66
-4.04
Reliance
27.54
.86
1.62
1.03
.61
-5.32
Findings
Kotak
HDFC
UTI
ICICI
Reliance
Standard
Deviation
3
2
1
5
4
Sharpe
Ratio
5
1
2
3
4
Treynor
Ratio
5
2
1
3
4
Beta
R Square Alpha
Total
3.5
1
3.5
2
5
3
2
1
4
5
22.5
9
13.5
19
26
3
1
5
2
4
67 | P a g e
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, UTI ETSP- Growth fund stands
out with rank 1 (24.49) followed by HDFC Tax Saver Scheme- Growth fund
(25.22) which suggest that these funds are stable in their returns & also are
less risky.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in todays competitive
world there is a quote Higher the risk higher the return if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also HDFC Tax Saver
Scheme Fund has lowest beta (.92) among these funds which is followed by
ICICI Prudential Tax Plan (.94). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns and in this case beta is approximately equal to 1. As we have to
do the analysis we have to take one stand so in this case, according to me 1st
rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
68 | P a g e
So, higher R Square means a well diversified portfolio. So, UTI ETSPGrowth fund has the maximum R Square (.86) followed by HDFC Tax Saver
Scheme- Growth Fund (.84)
But the analysis cant be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In case of Sharpe Ratio, an HDFC Tax Saver Scheme- Growth fund (1.05)
stand out clear with 1st rank, followed by UTI ETSP Growth fund (.91) &
just next is ICICI Prudential Tax Plan (.90).
In case of Treynor ratio, it is the just the opposite of Sharpe Ratio, UTI ETSP
Growth fund (1.94) value is higher so it has been given the 1st rank among
the others which is followed by HDFC Tax Saver Scheme fund (1.93).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, all the funds have a negative figure which means
that all the funds are not performing good. But, when compared among these
5 funds HDFC Tax Saver Scheme (-3.11) is the best followed by ICICI
Prudential Tax Plan (-4.04).
Thus, HDFC Tax Saver Scheme is the best Tax Saver Fund. It stands 2nd in
case of Standard Deviation after UTI ETSP Growth Fund and is the best fund
69 | P a g e
Kotak
HDFC
UTI
ICICI
Standard Sharpe
Deviation Ratio
Treynor
Ratio
Beta
R Square Alpha
5.63
4.24
4.18
4.48
5.50
4.04
2.97
3.65
4.71
3.03
.20
.17
.22
.18
.15
.69
.81
.55
.71
.63
.28
-.07
.76
.47
-.25
Reliance
Note: The data is collected on 8th May, 2008
2.70
1.67
2.34
3.13
2.02
Findings
Kotak
HDFC
UTI
ICICI
Reliance
R
Square
Alpha Total
5
2
1
3
4
3
1
5
2
4
2
5
3
1
4
3
4
1
2
5
2
5
3
1
4
4
2
5
3
1
19
19
18
12
22
70 | P a g e
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, UTI stands out with rank 1 (4.18)
& following UTI is HDFC (4.24) which suggest that these funds are stable in
their returns.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in todays competitive
world there is a quote Higher the risk higher the return if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also Reliance MIP has
lowest beta (.87) among these funds which is followed by HDFC MIP- Short
term (.88). But beta of 1 is preferable because of the returns it is considered
safe for the value of 1 in this analysis almost most of the funds have beta of
less than 1 which means that these funds are managed in keeping the people
risk at a manageable level, which help investors to earn safe returns. As we
have to do the analysis we have to take one stand so in this case, according to
me 1st rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
71 | P a g e
So, higher R Square means a well diversified portfolio. So, HDFC MIPshort Term fund has the maximum R Square (.81) followed by ICICI
Prudential MIP fund (.71).
But the analysis cant be done on these two parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio UTI MIP fund (.76) stands out clear with 1 st rank,
followed by ICICI Prudential MIP fund (.47). HDFC MIP & Reliance MIP
have negative Sharpe ratio.
In case of Treynor ratio, ICICI Prudential MIP (4.71) value is higher so it has
been given the 1st rank among the others which is followed by Kotak Income
Plus fund (4.04).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
In case of Alpha ICICI MIP (3.13) is the best fund followed by Kotak
Income Plus (2.70) & UTI MIS (2.34) in the third place.
ICICI Prudential MIP is recommended to the investors. ICICI is the 3rd
highest in standard deviation after UTI MIS fund and HDFC MIP fund. It is
also 3rd as far as beta of the fund is considered after Reliance MIP & HDFC
MIP- Short Term. It is 2nd best in Sharpe ratio after UTI MIS and it is the
72 | P a g e
best in Treynor ratio followed by Kotak Income plus. ICICI Prudential MIP
should be considered by the investors. Also ICICI Prudential MIP is the best
fund when Alpha is considered. But, if the investor wants to take less risk
then he can go in for HDFC MIP- Short Term fund as this fund is 2md best
in both Standard Deviation & Beta. But, after considering all the 6
parameters ICICI Prudential MIP is the best fund.
Cash Funds
1. Kotak Liquid Instrument
2. HDFC Liquid
3. UTI Liquid Cash Instrument
4. ICICI Prudential Liquid
5. Reliance Liquid Cash
Kotak
HDFC
UTI
ICICI
Reliance
Standard Sharpe
Deviation Ratio
Treynor
Ratio
Beta
R Square Alpha
.12
.15
.15
.14
.38
169.89
154.23
152.66
157.78
121.79
.10
.13
.09
.15
.30
.20
.23
.10
.33
.17
17.20
16.91
16.40
15.91
1.44
1.84
2.24
1.98
1.98
.03
Findings
Kotak
HDFC
UTI
ICICI
Reliance
R
Alpha Total
Square
1
3.5
3.5
2
5
3
2
5
1
4
1
2
3
4
5
1
3
4
2
5
2
3
1
4
5
4
1
2.5
2.5
5
12
14.5
19
15.5
29
73 | P a g e
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, Kotak Liquid Instrument stands
out with rank 1 (.12) & ICICI Prudential Liquid (.14) which suggest that
these funds are stable in their returns. HDFC Liquid & UTI Liquid Cash
Instrument shares the 3rd position as they both have the same standard
deviation.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in todays competitive
world there is a quote Higher the risk higher the return if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also UTI Liquid Cash
Instrument has lowest beta (.09) among these funds which is followed by
Kotak Liquid Instrument (.10). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns. But in this case, beta of all the funds is much below than 1. As
we have to do the analysis we have to take one stand so in this case,
according to me 1st rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
74 | P a g e
So, higher R Square means a well diversified portfolio. So, ICICI Liquid
Cash Instrument fund has the maximum R Square (.33) followed by HDFC
Liquid fund (.23).
But the analysis cant be done on these two parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio Kotak Liquid Instrument fund (17.20) stands out
clear with 1st rank, followed by HDFC Liquid fund (16.91).
In case of Treynor ratio, Kotak Liquid Instrument fund (169.89) value is
higher so it has been given the 1st rank among the others which is followed
by ICICI Prudential Liquid fund (157.78).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, HDFC Liquid fund (2.24) followed by UTI
Liquid Cash Instrument (1.98) & ICICI Prudential Liquid fund (1.98) each.
Kotak Liquid Instrument fund is recommended to all the investors as it has
the least standard deviation i.e. the risk is least as compared to all other
mutual funds. Beta is also 2nd lowest just after UTI Liquid Cash Instrument
and is also very close as it has the beta of (.10) and UTI Liquid Cash
instrument has of (.09). When compared the Sharpe ratio & the Treynor
75 | P a g e
ratio, Kotak Liquid Instrument has the highest ratio. Though it is the 3rd best
in R Square i.e. it is less diversified as compared to ICICI Prudential Liquid
& HDFC Liquid. Keeping in mind all the 6 parameters, Kotak Liquid
instrument fund is the best Cash Fund when compared with rest of the cash
funds.
CONCLUSION
After analyzing the mutual funds under 5 categories like Equity based, Debt
based, ELSS Tax Saving, Monthly Income Plans & Cash funds under 6
parameters like Standard deviation, Beta, Alpha, R Squared, Treynor Ratio
& Sharpe Ratio, I have come to a conclusion that there are different funds
which are performing best under different categories. No fund is the best in
all the categories.
Category
Equity Fund Scheme
Debt Fund Scheme
ELSS Tax Saver
Fund
ICICI Prudential Dynamic Plan- Growth
HDFC HI- Short Term
HDFC Tax Saver Scheme
76 | P a g e
So, it can be seen that ICICI Prudential is the best in Equity Fund Scheme &
Monthly Income Plan but HDFC is the best in Debt Fund Scheme & ELSS
Tax Saver Scheme. Kotak is the best in Cash Fund & when the NAV of past
3 years is compared T.I.G.E.R. fund is the best fund with a NAV of 45.64
and among these 5 funds Kotak Opportunities is the best fund with an NAV
of 43.72 of the past 3 years.
Investors have added to their portfolios well-managed diversified equity
funds with proven track records over longer time frames. On the basis of the
performance of diversified equity funds and how domestic markets are
placed, risk-taking investors would do well, who hold a larger portion of
their portfolio in actively managed diversified equity funds.
RECOMMENDATIONS
Diversify
One should diversify the investments between a few funds (the
actual number depends entirely on the amount of investment). This
strategy ensures that the portfolio is not dependent on the
performance of one single fund. However, one needs to avoid overdiversification as that would achieve nothing.
Investor can also plan like one mutual fund of diversified equity
plan, second mutual fund of balanced type and third one you can
plan of debt type etc. In this manner the money will get diversified,
risk is reduced and the investor will get excellent profit.
77 | P a g e
78 | P a g e
proved their mettle and investors should opt for them because they
have a track record.
APPENDICES
Kotak
Kotak 30- Growth
Objective
The investment objective of the scheme is to generate capital appreciation from a
portfolio of predominantly equity and equity related securities. The portfolio will
79 | P a g e
Open Ended
Nature
Equity
Option
Growth
Inception Date
Face
Value
(Rs/Unit)
10
Dividend
Krishna Sanghvi,
Sanjib Guha .
SIP
STP
SWP
Last
Declared
Fund Manager
Expense ratio(%)
2.24
Portfolio
Turnover
Ratio(%)
131.26
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
80 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
Debt
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Deepak Agrawal
Expense ratio(%)
0.60
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Krishna Sanghvi
Expense ratio(%)
2.31
Portfolio
Turnover
Ratio(%)
84.31
NA
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
Objective
To enhance returns over a portfolio of debt instruments with a moderate exposure
in equity and equity related instruments.
Type of Scheme
Nature
Open Ended
Debt
Option
Growth
Inception Date
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Fund Manager
Ritesh Jain,
Krishna Sanghvi,
Sanjib Guha
SIP
STP
SWP
Expense ratio(%)
2.22
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
83 | P a g e
Type of Scheme
Open Ended
Nature
Option
Growth
Inception Date
Face
Value
(Rs/Unit)
Dividend
Ritesh Jain,
Deepak Agrawal.
SIP
STP
SWP
10
Last
Declared
Fund Manager
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
10000000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
84 | P a g e
HDFC
HDFC Income Fund- Growth
Objective
Aims at providing capital appreciation through investments predominantly in equity
oriented securities
Type of Scheme
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
on
Prashant Jain
Expense ratio(%)
1.82
Portfolio
Turnover
Ratio(%)
56.62
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
85 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
Debt
SIP
Option
Growth
STP
Inception Date
Feb 6, 2002
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Shabbir Kapasi
Expense ratio(%)
0.40
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
1000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
86 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
on
Vinay R Kulkarni
Expense ratio(%)
2.02
Portfolio
Turnover
Ratio(%)
50.91
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
87 | P a g e
Portfolio
Turnover
Ratio(%)
NA
Last
Dividend
NA
Declared
Minimum
Investment (Rs)
5000
88 | P a g e
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
HDFC Liquid
Objective
The primary objective of the Scheme is to enhance income consistent with a high
level of liquidity, through a judicious portfolio mix comprising of money market
and debt instruments.
Type of Scheme
Open Ended
Fund Manager
Nature
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Minimum
Investment (Rs)
on
Shobhit Mehrotra
Expense ratio(%)
0.55
Portfolio
Turnover
Ratio(%)
NA
NA
10000
89 | P a g e
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
UTI
UTI Equity Fund
Objective
The principal investment objective is to provide long term capital appreciation
through investment in the securities market in India.
Type of Scheme
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Anoop Bhaskar
Portfolio
Turnover
Ratio(%)
51.31
90 | P a g e
Last
Declared
Dividend
Minimum
Investment (Rs)
2000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
Open Ended
Fund Manager
Nature
Debt
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Amit Jain
NA
91 | P a g e
Last
Dividend
NA
Declared
Minimum
Investment (Rs)
10000000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
92 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Swati Kulkarni
Expense ratio(%)
2.33
Portfolio
Turnover
Ratio(%)
38.39
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
93 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Fund Manager
Option
Growth
SIP
Inception Date
STP
Face
Value
(Rs/Unit)
10
SWP
Last
Declared
Dividend
Amandeep
Chopra
Expense ratio(%)
1.40
Portfolio
Turnover
Ratio(%)
32.31
NA
Minimum
Investment (Rs)
1000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
Type of Scheme
Open Ended
Nature
Option
Growth
SIP
Inception Date
STP
Fund Manager
Amandeep
Chopra
Face
Value
1000
(Rs/Unit)
SWP
Expense ratio(%)
0.24
Portfolio
Turnover
Ratio(%)
NA
Last
Declared
Dividend NA
Minimum
Investment (Rs)
100000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
ICICI Prudential
ICICI Prudential Dynamic Plan- Growth
Objective
95 | P a g e
Open Ended
Nature
Equity
Fund Manager
Option
Growth
SIP
Inception Date
STP
Face
Value
(Rs/Unit)
Dividend
Amit
SWP
10
Last
Declared
S Naren,
Mehta .
on
Expense ratio(%)
1.90
Portfolio
Turnover
Ratio(%)
225
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
96 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Fund Manager
Option
Growth
SIP
Inception Date
STP
Face
Value
(Rs/Unit)
SWP
10
Last
Declared
Chaitanya Pande,
Amit Mehta .
Dividend
NA
NA
Minimum
Investment (Rs)
25000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
97 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Fund Manager
Option
Growth
SIP
Inception Date
Aug 9, 1999
STP
Face
Value
(Rs/Unit)
10
Dividend
Amit
SWP
Last
Declared
S Naren,
Mehta
Expense ratio(%)
2.11
Portfolio
Turnover
Ratio(%)
187
NA
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
98 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Fund Manager
Prashant Kothari,
Rahul Goswami,
Amit Mehta
SIP
STP
SWP
Expense ratio(%)
1.95
Portfolio
Turnover
Ratio(%)
42
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
99 | P a g e
Type of Scheme
Open Ended
Nature
Fund Manager
Option
Growth
SIP
Inception Date
STP
Face
Value
(Rs/Unit)
10
SWP
Last
Declared
Dividend
Chaitanya Pande,
Amit Mehta
Expense ratio(%)
0.25
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
10000000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
Reliance
Reliance Growth
Objective
Seeks to provide Long Term Capital Appreciation
100 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
Oct 7, 1995
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
on
Sunil Singhania
Expense ratio(%)
1.81
Portfolio
Turnover
Ratio(%)
50
Dividend NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
101 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
Debt
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Prashant Pimple
Expense ratio(%)
0.65
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
50000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
Type of Scheme
Open Ended
Fund Manager
Nature
Equity
SIP
Option
Growth
STP
Inception Date
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
on
Ashwani Kumar
Expense ratio(%)
1.89
Portfolio
Turnover
Ratio(%)
98
Dividend NA
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
103 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Fund Manager
Option
Growth
SIP
Inception Date
STP
Face
Value
(Rs/Unit)
SWP
10
Last
Declared
Dividend
Ashwani Kumar
Prashant Pimple
Expense ratio(%)
1.99
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
10000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
104 | P a g e
Type of Scheme
Open Ended
Fund Manager
Nature
SIP
Option
Growth
STP
Inception Date
Dec 4, 2001
SWP
Face
Value
(Rs/Unit)
10
Last
Declared
Dividend
Amit Tripathy
Expense ratio(%)
0.40
Portfolio
Turnover
Ratio(%)
NA
NA
Minimum
Investment (Rs)
25000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Exit Load
105 | P a g e
References:
http://amfiindia.com
http://mutualfundindia.com
http://valueresearchonline.com
http://investopedia.com
AMFI Workbook
TREYNOR J.: How to Rate Management of Investment Funds,
Harvard Business Review, 1965/1
SHARPE W.: Asset Allocation: Management style and Performance
Measurement. The Journal of Portfolio Management, Winter 1992
106 | P a g e
107 | P a g e