Professional Documents
Culture Documents
By
Athmanath.Sivaramakrishnan : Roll No 67
Ayushi.Nigam : Roll No 68
Bharath.Krishnan : Roll No 69
These Funds are trusts, which are accepted savings by investors and invest
the same through diversified financial means in terms of objectives set out in
the trusts deed with the intension to
reduce the risk and increase the income and capital appreciation for
distribution for the members. A Mutual Fund is a corporation and the interest
of fund manager to professionally manage the funds given by the investors
and provide him back the return on the invested amount after deducting
some management fees.
The objective behind investing on Mutual Fund is to provide an opportunity
for lower and middle income groups to acquire without much hurdles in
financial assets. They cater mainly to the needs of the individual investor
whose means are small and to manage investors portfolio in a
manner that provides a regular income, growth, safety, liquidity and diversifi
cation opportunities.
Investment in both stock and mutual funds are subjected to market risk.
Incase of stock market the brokers work is highly dynamic and risky. Many
stocks are available to be bought and sold, each has its own patterns and
characteristics that cannot be predicted. With so many options and
considerations to be taken care off, it is an very difficult task for a broker to
investigate each aspects of the stock market and provide effective advice to
their clients consistently.
Thus, doing traded is an day-to-day tasks for the stock holders which they do
with the aid of a broker system. These system provide tools for interacting
with exchanges and performing analysis. As a result, these broker systems
are quite large and complicated by themselves.
This project on stock market and mutual funds aims to analysis both
Stock broker & Mutual funds on the basis of their services, products, growth,
and their competitiveness.
A mutual fund offers a good deal of diversification starting with the very
first dollar invested, because a mutual fund may own tens or hundreds of
different securities. This diversification helps reduce the risk of loss
because even if any one holding tanks, the overall value doesn't drop by
much. If you're buying individual stocks, you can't get much diversity
unless you have $10K or so.
Small sums of money get you much further in mutual funds than in stocks.
First, you can set up an automatic investment plan with many fund companies
that lets you put in as little as $50 per month. Second, the commissions for
stock purchases will be higher than the cost of buying no-load fund (Of course,
the fund's various expenses like commissions are already taken out of the
NAV). Smaller sized purchases of stocks will have relatively high commissions
on a percentage basis, although with the $10 trade becoming common, this is
a bit less of a concern than it once was.
You can exit a fund without getting caught on the bid/ask spread.
The opposite of the diversification issue: If you own just one stock and it
doubles, you are up 100%. If a mutual fund owns 50 stocks and one
doubles, it is up 2%. On the other hand, if you own just one stock and it
drops in half, you are down 50% but the mutual fund is down 1%. Cuts
both ways.
You can take your profits when you want to and won't inadvertently buy a
tax liability
You can do a covered write option strategy.
You can structure your portfolio differently from any existing mutual fund
portfolio.
You can buy smaller cap stocks which aren't suitable for mutual funds to
invest in.
You have a potential profit opportunity by shorting stocks.
The argument is offered that the funds have a "herd" mentality and they
all end upowning the same stocks. You may be able to pick stocks better
Purpose of Study :
The main reason for doing this project is to know about stock market and
mutual funds, its functioning. By this study it will help us to know both
industry rights from its stage, growth and future prospects.
This study will make us understand different ways to invest in the market
with comparing pros and cons of different types of getting into the market,
ultimately it would help selecting the best option to save and grow your
money.
Research Methodology:
Study is based on authentic published primary data and information taken
from various sources and sighted wherever necessary
Limitation:
The study is limited to selected stock market and mutual funds of
Pharmaceutical companies
Though the entire analysis is done on primary data but they are still
inadequate for study
The study was restricted to 7 stocks in the Pharma sectors as we could
collect data only for the same
Reliance Pharma
88.3587 134.574 52.3042
Fund - Direct (G)
Similarly considering a person investing a split of 100000 Rs in these mutual
funds, a person would be left with 1217 units and would have earned a
return of 68.18% i.e a profit of Rs 68180. Thus a person who invested in this
time period has gained 7 times more than bank deposit i.e he has covered
his investment appreciation goal of the next 7 years. Similarly even if a
person ran a business he would expect returns to the cap of 30%. Thus the
person has gained 2 times more than any business. As a result although its
a win situation the quantum of profits earned is comparatively half less than
the equity investments and even if we compare a mutual fund with any
single stock it would still loose considerably in case of returns. Thus equity
investments won over mutual funds for the time period Mar2014-Mar2015.
Even on the basis of risk equity investments have outperformed for this time
period.
In the year 2016, if you had invested on those 7 stocks have earned a return
as follows-
Thus if you had invested Rs 100000 split equally in these 7 stocks, you would
lose 11.12% of your investment i.e Rs 11120 and thus the value of your
stock will become Rs 88880. Thus investing in pharma sector in the year
2016 would prove very costly and risky resulting in a loss. However if you
had done proper analysis there and invested in only Shilpa medicare or
Ajanta Pharma you would have earned a positive return and thus could have
successfully beaten the market gaining a return of either 37.3695 or
33.8539%.
The below table shows the analysis of NAV prices of mutual funds in 2016-
Reliance Pharma
153.157 144.56 -5.6133
Fund - Direct (G)
From the above table you can understand that you would have lost money if
you had invested either individually or through a diversified investment.
However if you quantify the losses in mutual funds, its way lower than what
you would have incurred in equity investments had you invested individually.
Similarly even if you had an diversified investment the quantum of losses is
lower than the equity investments.
Conclusion :
Hence we can conclude that mutual funds are better than stocks. To support
my conclusion if we begin With stocks, you have to open a DEMAT and a
share trading account, do complex analysis on companies and sectors to
understand which stock to buy, know when to sell stocks, pay commission on
each trade you make, and more where as no such hustle and bustle is
required for Mutual funds.
When a Mutual Fund is managed, a custodian will handle all settlements and
safety of assets. It is the job of the custodian to ensure settlements happen
safely and investor assets are secured. Its also a tightly regulated industry.
One of the main benefit a Mutual Fund provides is that you don't have to pick
stocks. Picking stocks, tracking them, making sector and asset allocation,
buying and selling stocks when required, are all best done by a professional
fund manager.
As per the study shown in this project comparing the data of the years 2015
and 2016 of various companies we find that the mutual funds provide slow
but steady gain whereas the stocks are a way too risky and possibility of gain
is low.
Mutual fund is not that much volatile by nature, as the diversification is very
large and at a time 50-100 stocks are covered. Different kinds of stocks from
different sectors and market capitalization are involved in mutual fund and
the over all change in value is thus less volatile.
References:
1. http://www.moneycontrol.com/mutual-funds/performance-
tracker/returns/sector-pharma-and-healthcare.html
3. http://www.business-standard.com/article/markets/12-of-top-25-
pharma-shares-rally-over-100-in-fy15-115033100451_1.html