CHAPTER – I

INTRODUCTION TO MUTUAL FUND

1
Introduction to Mutual Funds
Mutual fund is a mechanism for pooling the resources by issuing units to
the investors and investing funds in securities in accordance with
objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of

industries and sectors and thus the risk is reduced. Diversification
reduces the risk because all stocks may not move in the same direction
in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them.
Investors of mutual funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their

investments. The mutual funds normally come out with a number of
schemes with different investment objectives which are launched from
time to time. A mutual fund is required to be registered with Securities
and Exchange Board of India (SEBI) which regulates securities markets
before it can collect funds from the public.

A mutual fund is set up in the form of a trust, which has sponsor,

trustees, asset Management Company (AMC) and custodian. The trust is
established by a sponsor or more than one sponsor who is like promoter
of a company. The trustees of the mutual fund hold its property for the
benefit of the unit holders. Asset Management Company (AMC) approved
by SEBI manages the funds by making investments in various types of
securities. Custodian, who is registered with SEBI, holds the securities of
various schemes of the fund in its custody. The trustees are vested with
the general power of superintendence and direction over AMC. They
monitor the performance and compliance of SEBI Regulations by the
mutual fund.

2
Mutual fund in India
Unit Trust of India was the first mutual fund set up in India in the year
1963. In early 1990s, Government allowed public sector banks and
institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was
passed. The objectives of SEBI are to protect the interest of investors in
securities and to promote the development of and to regulate the
securities market.

As far as mutual funds are concerned, SEBI formulates policies and

regulates the mutual funds to protect the interest of the investors. SEBI
notified regulations for the mutual funds in 1993. Thereafter, mutual
funds sponsored by private sector entities were allowed to enter the
capital market. The regulations were fully revised in 1996 and have been
amended thereafter from time to time. SEBI has also issued guidelines to
the mutual funds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector

entities including those promoted by foreign entities are governed by the
same set of Regulations. There is no distinction in regulatory
requirements for these mutual funds and all are subject to monitoring
and inspections by SEBI. The risks associated with the schemes launched
by the mutual funds sponsored by these entities are of similar type

You can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on
bonds.

3
2) If the fund sells securities that have increased in price, the fund has
a capital gain.
3) If fund holdings increase in price but are not sold by the fund
manager, the fund's shares increase in price. You can then sell your
mutual fund shares for a profit.

Advantages of Mutual Funds:

• Professional Management - The primary advantage of funds is
the professional management of your money. Investors purchase
funds because they do not have the time or the expertise to
manage their own portfolios. A mutual fund is a relatively
inexpensive way for a small investor to get a full-time manager to
make and monitor investments.
• Diversification - By owning shares in a mutual fund instead of
owning individual stocks or bonds, your risk is spread out. The idea
behind diversification is to invest in a large number of assets so
that a loss in any particular investment is minimized by gains in
others.
• Economies of Scale - Because a mutual fund buys and sells large
amounts of securities at a time, its transaction costs are lower than
what an individual would pay for securities transactions.
• Liquidity - Just like an individual stock, a mutual fund allows you to
request that your shares be converted into cash at any time.
• Simplicity – Minimum investment is small.

Disadvantages:

4
• Dilution - It's possible to have too much diversification. Because funds
have small holdings in so many different companies, high returns from a
few investments often don't make much difference on the overall return.
• Taxes - When making decisions about your money, fund managers
don't consider your personal tax situation.

Different Types of Funds

It's important to understand that each mutual fund has different risks and
rewards. In general, the higher the potential return, the higher the risk of
loss. Although some funds are less risky than others, all funds have some
level of risk - it's never possible to diversify away all risk.
Each fund has a predetermined investment objective that tailors the
fund's assets, regions of investments and investment strategies. At the
fundamental level, there are three varieties of mutual funds:
1) Equity funds (stocks)
2) Fixed-income funds (bonds)
3) Money market funds
4)
Money Market Funds
The money market consists of short-term debt instruments, mostly
Treasury bills.

Bond/Income Funds
Income funds are named appropriately: their purpose is to provide
current income on a steady basis. When referring to mutual funds, the
terms "fixed-income," "bond," and "income" are synonymous.
Bond funds are likely to pay higher returns than certificates of deposit
and money market investments, but bond funds aren't without risk.
Balanced Funds
The objective of these funds is to provide a balanced mixture of safety,
income and capital appreciation. The strategy of balanced funds is to

5
invest in a combination of fixed income and equities. A typical balanced
fund might have a weighting of 60% equity and 40% fixed income. The
weighting might also be restricted to a specified maximum or minimum
for each asset class.

A similar type of fund is known as an asset allocation fund. Objectives are

similar to those of a balanced fund, but these kinds of funds typically do
not have to hold a specified percentage of any asset class.

Equity Funds
Funds that invest in stocks represent the largest category of mutual
funds. Generally, the investment objective of this class of funds is long-
term capital growth with some income. There are, however, many
different types of equity funds because there are many different types of
equities. A way to understand the universe of equity funds is to use a

style box, an example of which is below.

The idea is to classify funds based on both the size of the companies
invested in and the Investment style of the manager

Global/International Funds
An international fund (or foreign fund) invests only outside your home
country. Global funds invest anywhere around the world, including your
home country.
6
Index Funds
The last but certainly not the least important are index funds. An investor
in an index fund figures that most managers can't beat the market. An
index fund merely replicates the market return and benefits investors in
the form of low fees.

The Value of Your Fund

Net asset value (NAV), which is a fund's assets minus liabilities, is the
value of a mutual fund. NAV per share is the value of one share in the
mutual fund, and it is the number that is quoted in newspapers.
When you buy shares, you pay the current NAV per share plus any sales
front-end load. When you sell your shares, the fund will pay you NAV less
any back-end load.

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

Organization of a Mutual Fund

CONCEPT
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

7
invested in capital market instruments such as shares, debentures and
other securities. The income earned through these investments and the
capital appreciation realised are shared by its unit holders in proportion
to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working of
a mutual fund:

8
SCOPE OF THE STUDY:
The study is limited to the analysis made on two major types of schemes
offered by six banks. Each scheme is calculated in term of their risk and
return using different performance measurement theories. The reasons
for such performance in immediately analyzed in the commentary.
Column charts are used to reflect the portfolio risk and return.

OBJECTIVES OF THE STUDY:

• To understand what Mutual fund companies are.

• To understand Mutual fund companies viz. UTI, SBI, ABN AMRO, ICICI,
HSBC & ING VYSYA BANK.

• To understand each company performance basing on weekly wise

data starting from Monday.

• To understand the investment strategies followed by each company.

HYPOTHESIS

9
The Market data that has been used to see whether the risk and return
calculated can be used has an indicator to the investor to minimize the
risk and maximize the returns on its investment.

RESEARCH METHODOLOGY:
For, the purpose of the study, the data collected from primary and
Secondary has sanitized edited and presented in the from of tables and
statements. The analysis of the data has been made with the help of
certain mathematical techniques lie percentages etc. Where ever feasible
and opportiate graphs and diagrams are used.
The collection of data is done through two principles sources viz
1. Primary Data
2. Secondary Data

PRIMARY DATA
It is the information collected directly without any reference. In the study,
it mainly interviews with concerned officers and staff either individually
or collectively. Some of the information had been verified or
supplemented with personal observation, the data collected through
conducting personal interview with the officer of the India bulls.
SECONDARY DATA:
The data that is used in this project is of secondary nature. The data has
been collected from secondary sources such has various websites,
journals, newspapers, books, etc.

10
METHOD OF STUDY:
The data collected for the two sectors are of three months data i.e., Nov
2008 – Jan 2009.The data for study purpose is taken on weekly basis .The
data taken into consideration is every Monday.

NATIONALISED BANKS: SBI, UTI, ING VYSYA

CORPORATE BANKS: ABN AMRO, HSBC, ICICI

TIME PERIOD

The time duration of the study for analyzing the data is from Dec 2008
to Jan 2009.. Data is collected from websites and ECONOMIC TIMES

LIMITATIONS OF THE STUDY:

• The study is conducted in short period, due to which the study may
not be detailed in all aspects.
• The study is limited only to the analysis of different schemes and
its suitability to different investors according to their risk-taking
ability.

11
• The study is based on secondary data available from monthly fact
sheets, web sites, offer documents, magazines and newspapers
etc. as primary data was not accessible.
• The study is limited by the detailed study of various schemes.

12
 CHAPTER-II
COMPANY PROFILE
MUTUAL FUND THEORY

13
 CORPORATE PROFILE

ICICI Prudential Asset Management Company enjoys the strong

parentage of Prudential plc, one of UK's largest players in the
insurance & fund management sectors and ICICI Bank, a well-known
and trusted name in financial services in India. ICICI Prudential Asset
Management Company, in a span of just over eight years, has forged a
position of pre-eminence in the Indian Mutual Fund industry as one
of the largest asset management companies in the country with assets
under management of Rs. 37,906.24 crores (as of March 31, 2007).
The Company manages a comprehensive range of schemes to meet
the varying investment needs of its investors spread across 68 cities
in the country.

As on May 1998 As on March 31, 2007

Assets Under
Rs. 160 crores Rs. 37,906.24 crores
Management
Number of Funds
2 30
Managed

Our Guiding Principles

PruICICI will conduct its business with

➢ Honesty and trust worthiness in all interactions.

➢ A pioneering spirit and excellence in action.
➢ Collaboration and teamwork.
➢ An understanding of customer needs and the desire to satisfy them.
➢ The highest service standards.

14
➢ A consistently above average performance.

Board of Directors of the AMC

The Prudential ICICI AMC Board comprises reputed people form the
finance industry both from India and abroad.

* Mr. K. V. Kamath -
Chairman
* Mr. Barry Stowe
* Mr. Ajay Srinivasan
* Ms. Kalpana Morporia
* Mr. K. S. Mehta
* Mr. Dadi Engineer
* Mr. B. R. Gupta
* Dr. (Mrs.) Swati A. Piramal
* Ms. Shikha Sharma
* Mr. Vikram B. Trivedi
* Mr. Vijay Thacker
* Mr. Pankaj Razdan

Directors of the Trustee Company

* Mr. Eruch B. Desai -

Chairman
* Mr. Keki Bomi Dadiseth
* Mr. D. J. Balaji Rao
* Mr. M. S. Parthasarathy
*Ms. Vishakha Mulye

15
Established in London in 1848, Prudential plc, through its businesses in
the UK, US and Asia, provides retail financial services products and
services to more than 21 million customers, policyholders and unit
holders worldwide with over US$400 (as of 31st December, 2005)
billion in funds under management. Prudential employs some 23,000
staff worldwide.
In Asia, Prudential has life insurance and funds management
operations across twelve countries - China, Hong Kong, India,
Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan,
Thailand and Vietnam. Prudential has championed customer-centric
products and services for over 80 years, supported by an extensive
network of over 145,000 staff and agents across the region.

ICICI Bank is India's second-largest bank with total assets of about Rs.
2,513.89 bn (US$ 56.3 bn) at March 31, 2006 and profit after tax of Rs.
25.40 bn (US$ 569 mn) for the year ended March 31, 2006 (Rs. 20.05
bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank has a
network of about 614 branches and extension counters and over 2,200
ATMs. ICICI Bank offers a wide range of banking products and financial
services to corporate and retail customers through a variety of delivery
channels and through its specialised subsidiaries and affiliates in the
areas of investment banking, life and non-life insurance, venture
capital and asset management. ICICI Bank set up its international
banking group in fiscal 2002 to cater to the cross border needs of
clients and leverage on its domestic banking strengths to offer
products internationally. ICICI Bank currently has subsidiaries in the
16
United Kingdom, Russia and Canada, branches in Singapore, Bahrain,
Hong Kong, Sri Lanka and Dubai International Finance Centre and
representative offices in the United States, United Arab Emirates,
China, South Africa and Bangladesh. Our UK subsidiary has established
a branch in Belgium.

17
 MUTUAL FUND

Mutual fund is a trust that pools money from a group of investors

(sharing common financial goals) and invest the money thus collected
into asset classes that match the stated investment objectives of the
scheme. Since the stated investment objective of a mutual fund
scheme generally forms the basis for an investor's decision to
contribute money to the pool, a mutual fund can not deviate from its
stated objectives at any point of time.

Every Mutual Fund is managed by a fund manager, who using his

investment management skills and necessary research works ensures
much better return than what an investor can manage on his own. The
capital appreciation and
other incomes earned from
these investments are
passed on to the investors
(also known as unit holders)
in proportion of the number
of units they own.

18
When an investor subscribes for the units of a mutual fund, he
becomes part owner of the assets of the fund in the same proportion
as his contribution amount put up with the corpus (the total amount of
the fund). Mutual Fund investor is also known as a mutual fund
shareholder or a unit holder.
Any change in the value of the investments made into capital market
instruments (such as shares, debentures etc) is reflected in the Net
Asset Value (NAV) of the scheme. NAV is defined as the market value
of the Mutual Fund scheme's assets net of its liabilities. NAV of a
scheme is calculated by dividing the market value of scheme's assets
by the total number of units issued to the investors.

For example:

A. If the market value of the assets of a fund is Rs. 100,000

B. The total number of units issued to the investors is equal to

10,000.

C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or

10.00
19
D. Now if an investor 'X' owns 5 units of this scheme

E. Then his total contribution to the fund is Rs. 50 (i.e. Number of

units held multiplied by the NAV of the scheme)

ADVANTAGES OF MUTUAL FUND

1. Portfolio Diversification Mutual Funds invest in a well-diversified
portfolio of securities which enables investor to hold a diversified
investment portfolio (whether the amount of investment is big or
small).
2. Professional Management Fund manager undergoes through
various research works and has better investment management skills
which ensure higher returns to the investor than what he can manage
on his own.
3. Less Risk Investors acquire a diversified portfolio of securities even
with a small investment in a Mutual Fund. The risk in a diversified
portfolio is lesser than investing in merely 2 or 3 securities.

20
4. Low Transaction Costs Due to the economies of scale (benefits of
larger volumes), mutual funds pay lesser transaction costs. These
benefits are passed on to the investors.
5. Liquidity An investor may not be able to sell some of the shares
held by him very easily and quickly, whereas units of a mutual fund are
far more liquid.
6. Choice of Schemes Mutual funds provide investors with various
schemes with different investment objectives. Investors have the
option of investing in a scheme having a correlation between its
investment objectives and their own financial goals. These schemes
further have different plans/options
7. Transparency Funds provide investors with updated information
pertaining to the markets and the schemes. All material facts are
disclosed to investors as required by the regulator.
8. Flexibility Investors also benefit from the convenience and
flexibility offered by Mutual Funds. Investors can switch their holdings
from a debt scheme to an equity scheme and vice-versa. Option of
systematic (at regular intervals) investment and withdrawal is also
offered to the investors in most open-end schemes.
9. Safety Mutual Fund industry is part of a well-regulated investment
environment where the interests of the investors are protected by the
regulator. All funds are registered with SEBI and complete
transparency is forced.

DISADVANTAGES OF MUTUAL FUND

1.Costs Control Not in the Hands of an Investor Investor has to
pay investment management fees and fund distribution costs as a
percentage of the value of his investments (as long as he holds the
units), irrespective of the performance of the fund.

21
2. No Customized Portfolios The portfolio of securities in which a
fund invests is a decision taken by the fund manager. Investors have
no right to interfere in the decision making process of a fund manager,
which some investors find as a constraint in achieving their financial
objectives.
3. Difficulty in Selecting a Suitable Fund Scheme Many investors
find it difficult to select one option from the plethora of
funds/schemes/plans available. For this, they may have to take advice
from financial planners in order to invest in the right fund to achieve
their objectives.

TYPES OF MUTUAL FUNDS

General Classification of Mutual Funds

22
Open-end Funds / Closed-end Funds
Open-end Funds

Funds that can sell and purchase units at any point in time are
classified as Open-end Funds. The fund size (corpus) of an open-end
fund is variable (keeps changing) because of continuous selling (to
investors) and repurchases (from the investors) by the fund. An open-
end fund is not required to keep selling new units to the investors at all
times but is required to always repurchase, when an investor wants to
sell his units. The NAV of an open-end fund is calculated every day.
Closed-end Funds

Funds that can sell a fixed number of units only during the New Fund
Offer (NFO) period are known as Closed-end Funds. The corpus of a
Closed-end Fund remains unchanged at all times. After the closure of
the offer, buying and redemption of units by the investors directly from
the Funds is not allowed. However, to protect the interests of the
investors, SEBI provides investors with two avenues to liquidate their
positions:

1. Closed-end Funds are listed on the stock exchanges where

investors can buy/sell units from/to each other. The trading is generally
done at a discount to the NAV of the scheme. The NAV of a closed-end
fund is computed on a weekly basis (updated every Thursday).

2. Closed-end Funds may also offer "buy-back of units" to the unit

holders. In this case, the corpus of the Fund and its outstanding units
do get changed.

23
Load Funds/no-load funds

Load Funds

Mutual Funds incur various expenses on marketing, distribution,

advertising, portfolio churning, fund manager’s salary etc. Many funds

recover these expenses from the investors in the form of load. These

funds are known as Load Funds. A load fund may impose following

types of loads on the investors:

• Entry Load – Also known as Front-end load, it refers to the load

charged to an investor at the time of his entry into a scheme. Entry

load is deducted from the investor’s contribution amount to the fund.

• Exit Load – Also known as Back-end load, these charges are

imposed on an investor when he redeems his units (exits from the

scheme). Exit load is deducted from the redemption proceeds to an

outgoing investor.

• Deferred Load – Deferred load is charged to the scheme over a

period of time.

• Contingent Deferred Sales Charge (CDSS) – In some

schemes, the percentage of exit load reduces as the investor stays

longer with the fund. This type of load is known as Contingent Deferred

Sales Charge.

No-load Funds
24
All those funds that do not charge any of the above mentioned loads
are known as No-load Funds.

Tax-exempt Funds/ Non-Tax-exempt Funds

Tax-exempt Funds

Funds that invest in securities free from tax are known as Tax-exempt
Funds. All open-end equity oriented funds are exempt from distribution
tax (tax for distributing income to investors). Long term capital gains
and dividend income in the hands of investors are tax-free.

Non-Tax-exempt Funds

Funds that invest in taxable securities are known as Non-Tax-exempt

Funds. In India, all funds, except open-end equity oriented funds are
liable to pay tax on distribution income. Profits arising out of sale of
units by an investor within 12 months of purchase are categorized as
short-term capital gains, which are taxable. Sale of units of an equity
oriented fund is subject to Securities Transaction Tax (STT). STT is
deducted from the redemption proceeds to an investor

25
BROAD MUTUAL FUND TYPES

26
1. Equity Funds

Equity funds are considered to be the more risky funds as compared to

other fund types, but they also provide higher returns than other
funds. It is advisable that an investor looking to invest in an equity
fund should invest for long term i.e. for 3 years or more. There are
different types of equity funds each falling into different risk bracket. In
the order of decreasing risk level, there are following types of equity
funds:

a. Aggressive Growth Funds - In Aggressive Growth Funds, fund

managers aspire for maximum capital appreciation and invest in less
researched shares of speculative nature. Because of these speculative
investments Aggressive Growth Funds become more volatile and thus,
are prone to higher risk than other equity funds.

b. Growth Funds - Growth Funds also invest for capital

appreciation (with time horizon of 3 to 5 years) but they are different
from Aggressive Growth Funds in the sense that they invest in
companies that are expected to outperform the market in the future.
Without entirely adopting speculative strategies, Growth Funds invest
in those companies that are expected to post above average earnings
in the future.

c. Speciality Funds - Speciality Funds have stated criteria for

investments and their portfolio comprises of only those companies that
meet their criteria. Criteria for some speciality funds could be to
invest/not to invest in particular regions/companies. Speciality funds

27
are concentrated and thus, are comparatively riskier than diversified
funds. There are following types of speciality funds:

1. Sector Funds: Equity funds that invest in a particular

sector/industry of the market are known as Sector Funds. The exposure
of these funds is limited to a particular sector (say Information
Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer
Goods) which is why they are more risky than equity funds that invest
in multiple sectors.

2. Foreign Securities Funds: Foreign Securities Equity Funds have

the option to invest in one or more foreign companies. Foreign
securities funds achieve international diversification and hence they
are less risky than sector funds. However, foreign securities funds are
exposed to foreign exchange rate risk and country risk.

3. Mid-Cap or Small-Cap Funds: Funds that invest in companies

having lower market capitalization than large capitalization companies
are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-
Cap companies is less than that of big, blue chip companies (less than
Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap
companies have market capitalization of less than Rs. 500 crores.
Market Capitalization of a company can be calculated by multiplying
the market price of the company's share by the total number of its
outstanding shares in the market. The shares of Mid-Cap or Small-Cap
Companies are not as liquid as of Large-Cap Companies which gives
rise to volatility in share prices of these companies and consequently,
investment gets risky.

4. Diversified Equity Funds - Except for a small portion of

investment in liquid money market, diversified equity funds invest
mainly in equities without any concentration on a particular sector(s).
These funds are well diversified and reduce sector-specific or
company-specific risk. However, like all other funds diversified equity

28
funds too are exposed to equity market risk. One prominent type of
diversified equity fund in India is Equity Linked Savings Schemes
(ELSS). As per the mandate, a minimum of 90% of investments by
ELSS should be in equities at all times. ELSS investors are eligible to
claim deduction from taxable income (up to Rs 1 lakh) at the time of
filing the income tax return. ELSS usually has a lock-in period and in
case of any redemption by the investor before the expiry of the lock-in
period makes him liable to pay income tax on such income(s) for which
he may have received any tax exemption(s) in the past.

d. Equity Index Funds - Equity Index Funds have the objective to

match the performance of a specific stock market index. The portfolio
of these funds comprises of the same companies that form the index
and is constituted in the same proportion as the index. Equity index
funds that follow broad indices (like S&P CNX Nifty, Sensex) are less
risky than equity index funds that follow narrow sectoral indices (like
BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified
and therefore, are more risky.

2.Debt/IncomeFunds
Funds that invest in medium to long-term debt instruments issued by
private companies, banks, financial institutions, governments and
other entities belonging to various sectors (like infrastructure
companies etc.) are known as Debt / Income Funds. Debt funds are low
risk profile funds that seek to generate fixed current income (and not
capital appreciation) to investors. In order to ensure regular income to
investors, debt (or income) funds distribute large fraction of their
surplus to investors. Although debt securities are generally less risky
than equities, they are subject to credit risk (risk of default) by the
issuer at the time of interest or principal payment. To minimize the risk
of default, debt funds usually invest in securities from issuers who are
29
rated by credit rating agencies and are considered to be of
"Investment Grade". Debt funds that target high returns are more
risky. Based on different investment objectives, there can be following
types of debt funds:

a. Diversified Debt Funds - Debt funds that invest in all securities

issued by entities belonging to all sectors of the market are known as
diversified debt funds. The best feature of diversified debt funds is that
investments are properly diversified into all sectors which results in
risk reduction. Any loss incurred, on account of default by a debt
issuer, is shared by all investors which further reduces risk for an
individual investor.

b. Focused Debt Funds* - Unlike diversified debt funds, focused

debt funds are narrow focus funds that are confined to investments in
selective debt securities, issued by companies of a specific sector or
industry or origin. Some examples of focused debt funds are sector,
specialized and offshore debt funds, funds that invest only in Tax Free
Infrastructure or Municipal Bonds. Because of their narrow orientation,
focused debt funds are more risky as compared to diversified debt
funds. Although not yet available in India, these funds are conceivable
and may be offered to investors very soon.

c. Assured Return Funds - Although it is not necessary that a fund

will meet its objectives or provide assured returns to investors, but
there can be funds that come with a lock-in period and offer assurance
of annual returns to investors during the lock-in period. Any shortfall in
returns is suffered by the sponsors or the Asset Management
Companies (AMCs). These funds are generally debt funds and provide
investors with a low-risk investment opportunity. However, the security
of investments depends upon the net worth of the guarantor (whose
name is specified in advance on the offer document). To safeguard the
interests of investors, SEBI permits only those funds to offer assured

30
return schemes whose sponsors have adequate net-worth to guarantee
returns in the future. In the past, UTI had offered assured return
schemes (i.e. Monthly Income Plans of UTI) that assured specified
returns to investors in the future. UTI was not able to fulfill its promises
and faced large shortfalls in returns. Eventually, government had to
intervene and took over UTI's payment obligations on itself. Currently,
no AMC in India offers assured return schemes to investors, though
possible.

d. Fixed Term Plan Series - Fixed Term Plan Series usually are
closed-end schemes having short term maturity period (of less than
one year) that offer a series of plans and issue units to investors at
regular intervals. Unlike closed-end funds, fixed term plans are not
listed on the exchanges. Fixed term plan series usually invest in debt /
income schemes and target short-term investors. The objective of fixed
term plan schemes is to gratify investors by generating some expected
returns in a short period. nds | Closed-end 3.GiltFunds
Also known as Government Securities in India, Gilt Funds invest in
government papers (named dated securities) having medium to long
term maturity period. Issued by the Government of India, these
investments have little credit risk (risk of default) and provide safety of
principal to the investors. However, like all debt funds, gilt funds too
are exposed to interest rate risk. Interest rates and prices of debt
securities are inversely related and any change in the interest rates
results in a change in the NAV of debt/gilt funds in an opposite
direction.

4. Money Market/Liquid Funds

Money market / liquid funds invest in short-term (maturing within one
year) interest bearing debt instruments. These securities are highly
liquid and provide safety of investment, thus making money market /
liquid funds the safest investment option when compared with other
mutual fund types. However, even money market / liquid funds are
31
exposed to the interest rate risk. The typical investment options for
liquid funds include Treasury Bills (issued by governments),
Commercial papers (issued by companies) and Certificates of Deposit
(issued by banks).

5. HybridFunds

As the name suggests, hybrid funds are those funds whose portfolio
includes a blend of equities, debts and money market securities.
Hybrid funds have an equal proportion of debt and equity in their
portfolio. There are following types of hybrid funds in India:

a. Balanced Funds – The portfolio of balanced funds include

assets like debt securities, convertible securities, and equity and
preference shares held in a relatively equal proportion. The objectives
of balanced funds are to reward investors with a regular income,
moderate capital appreciation and at the same time minimizing the
risk of capital erosion. Balanced funds are appropriate for conservative
investors having a long term investment horizon.

b. Growth-and-Income Funds – Funds that combine features of

growth funds and income funds are known as Growth-and-Income
Funds. These funds invest in companies having potential for capital
appreciation and those known for issuing high dividends. The level of
risks involved in these funds is lower than growth funds and higher
than income funds.

6. Commodity Funds

Those funds that focus on investing in different commodities (like

metals, food grains, crude oil etc.) or commodity companies or
commodity futures contracts are termed as Commodity Funds. A
commodity fund that invests in a single commodity or a group of

32
commodities is a specialized commodity fund and a commodity fund
that invests in all available commodities is a diversified commodity
fund and bears less risk than a specialized commodity fund. “Precious
Metals Fund” and Gold Funds (that invest in gold, gold futures or
shares of gold mines) are common examples of commodity funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate

developers or invest in shares/securitized assets of housing finance
companies, are known as Specialized Real Estate Funds. The objective
of these funds may be to generate regular income for investors or
capital appreciation.
8. ExchangeTradedFunds (ETF)

Exchange Traded Funds provide investors with combined benefits of a

closed-end and an open-end mutual fund. Exchange Traded Funds
follow stock market indices and are traded on stock exchanges like a
single stock at index linked prices. The biggest advantage offered by
these funds is that they offer diversification, flexibility of holding a
single share (tradable at index linked prices) at the same time.
Recently introduced in India, these funds are quite popular abroad.
9. Fund of FundsMutual funds that do not invest in financial or
physical assets, but do invest in other mutual fund schemes offered by
different AMCs, are known as Fund of Funds. Fund of Funds maintain a
portfolio comprising of units of other mutual fund schemes, just like
conventional mutual funds maintain a portfolio comprising of
equity/debt/money market instruments or non financial assets. Fund of

33
Funds provide investors with an added advantage of diversifying into
different mutual fund schemes with even a small amount of
investment, which further helps in diversification of risks. However, the
expenses of Fund of Funds are quite high on account of compounding
expenses of investments into different mutual fund schemes.

Risk Hierarchy of Different Mutual Funds Thus, different mutual

fund schemes are exposed to different levels of risk and investors
should know the level of risks associated with these schemes before
investing. The graphical representation hereunder provides a clearer
picture of the relationship between mutual funds and levels of risk
associated with these funds:

34
35
MUTUAL FUND STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF)
as a fund established in the form of a trust by a sponsor to raise
monies by the Trustees through the sale of units to the public under
one or more schemes for in vesting in securities in accordance with
these regulations.

These regulations have since been replaced by the SEBI (Mutual

Funds) Regulations, 1996. The structure indicated by the new
regulations is indicated as under.

A mutual fund comprises four separate entitles, namely sponsor,

mutual fund trust, AMC and custodian. The sponsor establishes the
mutual fund and gets its registered with SEBI.

The mutual fund needs to be constituted in the form of a trust and the
instrument of the trust should be in the form of a deed registered
under the provisions of the Indian Registration Act, 1908.

The sponsor is required to contribute at lease 40% of the minimum net

worth (Rs.10 crore) of the asset management company. The board of
trustees manages the MF and the sponsor executes the trust deeds in
favour of the trustees. It is the job of the MF trustees to see that
schemes floated and managed by the AMC appointed by the trustees
are in accordance with the trust deed and SEBI guidelines.

36
Distributors
Sponsor
Establishes
Managed
Mutual
Hold
AMC
Float
Provide
Custodian
Registrar
Provides
unit-holders
MFFund
custodial
Company
registrar
the
funds
bythe
anetwork
Board
MFservices
funds
and
asof
for
atransfer
trust
in MF
Registers
Trustees
(E.g.
enter
(e.g.
Manages
services
distribution
prudential
Prudential,
into the
the
anofagreement
fund
MFthe
ICICI
ICICI)
ICICI,
with
as
scheme
per
Asset
SEBI
Mutual
with
SEBI
to
Fund)
SEBI
Management
guidelines
the investors
and ensure
andCompany)
AMC
compliance
agreement

37
Choosing a fund
The first step to investing in Mutual Fund is to define the objective of
investing. You should clearly lay down the purpose for which you desire
to invest. There are several schemes tailor made to meet certain
personal financial goals (children's education, marriage, retirement
etc.) which can be availed of. You should define the tenure of

38
investment and the risk appetite you have. Thereafter, you can select
a fund type that best meets your need i.e. income schemes, liquid
schemes, tax saving schemes, equity schemes etc. Given the plethora
of fund options available to you, you can then choose the particular
fund that you are comfortable with.
You can choose the fund on various criteria but primarily these can be
the following:
• The track record of performance of schemes over the last few
years managed by the fund
• Quality of management and administration
• Parentage of the Mutual Fund
• Quality and adequacy of disclosures
• Service levels
• The price at which you can enter/exit (i.e. entry load / exit load)
the scheme and its impact on overall return
• The market price of the units of the scheme (where available) to
see the discount/premium that the market .assigns to the stated NA V
of the scheme
• Independent rating of the schemes, if available
You could be investing in a mutual fund either at the initial stage when
the mutual fund approaches the market through an offer document
route or at a subsequent stage.
If you choose to invest at the initial stage, the offer document would
detail the schemes being offered and the manner of investing. The
manner is usually similar to that of investing any public issue of any
security (equity/debt).
If you are planning to purchase the units subsequently. Then the
following choices exist:
1. A close ended scheme. If the desired, units are of a close-ended
scheme, then the investor would be able to purchase them at the stock
exchange where the MF has listed them. This purchase would resemble

39
the purchase of an equity share wherein the investor would pay the
quoted price of the unit as well as a brokerage for the purchase
transaction. In the case of a close ended scheme, the sale also is
affected through the stock exchange mechanism and resembles the
sale of equity share. The pricing for the transaction, as was mentioned
earlier, is driven by the price the units quote. This is driven by the NA V
(Net Asset Value) of the scheme. The price, however, may be either at
a discount or premium to the NA V.

2. Purchasing a unit in a open-ended scheme is different as there is

no exchange where these units are traded. Their price ret1ects the NA
V of the scheme. The mutual fund in an open-ended scheme sells
these units to the investor at the NA V (plus a sale / entry load).

Selling units in an open-ended scheme is similar to the way they are

purchased. It is the mutual fund that buys back the units and at a price
based on the NA V. The actual price is the NA V less the exit load. The
exit load is similar in concept to the entry load.
The Ground rules of Mutual Fund Investing

Moses gave to his followers 10 commandments that were to be

followed till eternity. The world of investments too has several ground
rules meant for investors who are novices in their own right and wish
to enter the myriad world of investments. These come in handy for
there is every possibility of losing what one has if due care is not
taken.

1. Assess yourself: Self-assessment of one's needs; expectations

and risk profile is of prime importance failing which; one will make
more mistakes in putting money in right places than otherwise. One
should identify the degree of risk bearing capacity one has and also

40
clearly state the expectations from the investments. Irrational
expectations will only bring pain.

2. Try to understand where the money is going: It is important

to identify the nature of investment and to know if one is compatible
with the investment. One can lose substantially if one picks the wrong
kind of mutual fund. In order to avoid any confusion it is better to go
through the literature such as offer document and fact sheets that
mutual fund companies provide on their funds.

3. Don't rush in picking funds, think first: one first has to

decide what he wants the money for and it is this investment goal that
should be the guiding light for all investments done. It is thus
important to know the risks associated with the fund and align it with
the quantum of risk one is willing to take. One should take a look at the
portfolio of the funds for the purpose. Excessive exposure to any
specific sector should be avoided, as it will only add to the risk of the
entire portfolio. Mutual funds invest with a certain ideology such as the
"Value Principle" or "Growth Philosophy". Both have their share of
critics but both philosophies work for investors of different kinds.
Identifying the proposed investment philosophy of the fund will give an
insight into the kind of risks that it shall be taking in future.
4. Invest. Don't speculate: A common investor is limited in the
degree of risk that he is willing to take. It is thus of key importance
that there is thought given to the process of investment and to the
time horizon of the intended investment. One should abstain from
speculating which in' other words would mean getting out of one fund
and investing in another with the intention of making quick money.
One would do well to remember that nobody can perfectly time the

41
market so staying invested is the best option unless there are
compelling reasons to exit.
5. Don't put all the eggs in one basket: This old age adage is of
utmost importance. No matter what the risk profile of a person is, it is
always advisable to diversify the risks associated. So putting one's
money in different asset classes is generally the best option as it
averages the risks in each category. Thus, even investors of equity
should be judicious and invest some portion of the investment in debt.
Diversification even in money in the hands of several fund managers.
This might reduce the maximum return possible, but will also reduce
the risks.
6. Be regular: Investing should be a habit and not an exercise
undertaken at one's wishes, if one has to really benefit from them. As
we said earlier, since it is extremely difficult to know when to enter or
exit the market. It is important to beat the market by being systematic.
The basic philosophy of Rupee cost averaging would suggest that if
one invests regularly through the ups and downs of the market, he
would stand a better chance of generating more returns than the
market for the entire duration. The SIPs (Systematic Investment Plans)
offered by all funds helps in being systematic.

Performance Measures of Mutual Funds

Mutual Fund industry today, with about 34 players and more than five
hundred schemes, is one of the most preferred investment avenues in
India. However with a plethora of schemes to choose from the retail
investor faces problems in selecting funds. Factors such as investment
strategy and management style are qualitative, but the funds record is
an important indicator too. Though past performance alone cannot be
indicative of future performance, it is, frankly, the only quantitative

42
way to judge how good a fund is at present. Therefore, there is a need
to correctly assess the past performance of different mutual funds.
Worldwide, good Mutual fund companies over are known by their AMCs
and this fame is directly linked to their superior stock selection skills.
For mutual funds to grow, AMCs must be held accountable for their
selection of stocks. In other words, there must be some performance
indicator that will reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of
the performance of a mutual fund scheme. It should also include the
risk taken by the fund manager because different funds will have
different levels of risk attached to them. Risk associated with a fund, in
a general, can be defined as variability or fluctuations in the returns
generated by it. The higher the t1uctuations in the returns of a fund
during a given period, higher will be the risk associated with it. These
fluctuations in the returns generated by a fund are resultant of two
guiding forces. First, general market fluctuations, which affect all the
securities present in the market, called market risk or systematic risk
and second, t1uctuations due to specific securities present in the
portfolio of the fund, called unsystematic risk. The Total Risk of a
given fund is sum of these t\VO and is measured in terms of standard
deviation of returns of the fund. Systematic risk. On the other hand is
measured in terms of Beta, which represents t1uctuations in the NA V
of the fund vis-à-vis market. The more responsive the NA V of a mutual
fund is to the changes in the market; higher will be its beta. Beta is
calculated by relating the returns on a mutual fund with the returns in
the market. While unsystematic risk can be diversified through
investments in a number of instruments, systematic risk can not.

By using the risk return relationship, we try to assess the competitive

strength of the mutual funds vis-à-vis one another in a better way:

43
In order to determine the risk-adjusted returns of investment
portfolios, several eminent authors have worked since 1960s to
develop composite performance indices to evaluate a portfolio by
comparing alternative portfolios within a particular risk class.

The most important and widely used measures of performance are:

 The Treynor Measure
 The Sharpe Measure
 Jenson Model
 Fama Model

The Trevnor Measure

Developed by Jack Treynor, this performance measure evaluates funds
on the basis of Treynor's Index. This Index is a ratio of return
generated by the fund over and above risk free rate of return
(generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given
period and systematic risk associated with it (beta). Symbolically, it
can be represented as:
Treynor's index (Ti) = (Ri - Rf)/Bi

Where, Ri represents return on fund, Rf is risk free rate of return and

Hi is beta of the fund.
All risk-averse investors would like to maximize this value. While a high
and positive Treynor's Index shows a superior risk-adjusted
performance of a fund, a low and negative Treynor's Index is an
indication of unfavorable performance.
The Sharpe Measure
In this model, performance of a fund is evaluated on the basis of
Sharpe Ratio, which is a ratio of returns generated by the fund over
and above risk free rate of return and the total risk associated with it.
According to Sharpe, it is the total risk of the fund that the investors

44
are concerned about. So, the model evaluates funds on the basis of
reward per unit of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri – Rf)/Si

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted

performance of a fund, a low and negative Sharpe Ratio is an
indication of unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both
divide the risk premium by a numerical risk measure. The total risk is
appropriate when we are evaluating the risk return relationship for well
diversified portfolios. On the other hand, the systematic risk is the
relevant measure of risk when we are evaluating less than fully
diversified portfolios or individual stocks. For a well-diversified portfolio
the total risk is equal to systematic risk. Rankings based on total risk
(Sharpe measure) and systematic risk (Treynor measure) should be
identical for a well-diversified portfolio,a s t h total
e risk is reduced to
systematic risk. Therefore, a poorly diversified fund that ranks higher
on Treynor measure, compared with another fund that is highly
diversified, will rank lower on Sharpe Measure.
Jenson Model
Jenson’s model proposes another risk adjusted performance measure.
This measure was developed by Michael Jenson and is sometimes
referred to as the Differential Return Method. This measure involves
evaluation of the returns that the fund has generated vs. the returns
actually expected out of the fund given the level of its systematic risk.
The surplus between the two returns is called Alpha, which measures
the performance of a fund compared with the actual returns over the

45
period. Required return of a fund at a given level of risk (Bi) can be
calculated as:
Ri = Rf+ Bi (Rm – Rf)
Where, Rm is average market return during the given period. After
calculating it alpha can be obtained by subtracting required return
from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice
versa. Limitation of this model is that it considers only systematic risk
not the entire risk associated with the fund and an ordinary investor
can not mitigate unsystematic risk, as his knowledge of market is
primitive.

Fam a M odel
The Eugene Fama model is an extension of Jenson model. This model
compares the performance, measured in terms of returns, of a fund
with the required return commensurate with the total risk associated
with it. The difference between these two is taken as a measure of the
performance of the fund and is called net selectivity.
The net selectivity represents the stock selection skill of the fund
manager, as it is the excess return over and above the return required
to compensate for the total risk taken by the fund manager. Higher
value of which indicates that fund manager has earned returns well
above the return commensurate with the level of risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm – Rf)
Where, Sm is standard deviation of market returns. The net selectivity
is then calculated by subtracting this required return from the actual
return of the fund. Among the above performance measures, two
models namely, Treynor measure and Jenson model use systematic
risk based on the premise that the unsystematic risk is diversifiable.
These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds

46
and can invest in a number of options to dilute some risks. For them, a
portfolio can be spread across a number of stocks and sectors.
However, Sharpe measure and Fama model that consider the entire
risk associated with fund are suitable for small investors, as the
ordinary investor lacks the necessary skill and resources to diversified.
Moreover, the selection of the fund on the basis of superior stock
selection ability of the fund manager will also help in safeguarding the
money invested to a great extent. The investment in funds that have
generated big returns at higher levels of risks leaves the money all the
more prone to risks of all kinds that may exceed the individual
investors’ risk appetite.

47
LIST OF AMC’S

48
ABN AMRO Mutual fund
Birla Mutual fund
Deutsche Mutual fund
DSP Merrill Lynch Mutual fund
Franklin Templeton Mutual fund
HDFC Mutual fund
HSBC Mutual fund
ING Vysya Mutual fund
JM Financial Mutual fund
Kotak Mahindra Mutual fund
LIC Mutual fund
Morgan Stanley Mutual fund
Principal Mutual fund
Prudential ICICI Mutual fund
Reliance Mutual fund
SBI Mutual fund
Sundaram Mutual fund
TATA Mutual fund
Unit Trust of India Mutual fund
UTI Mutual fund

LIST OF SCHEMES IN PRUICICI

Open-Ended Schemes

49
Prudential ICICI Aggressive Plan - Dividend
Prudential ICICI Aggressive Plan - Growth
Prudential ICICI Balanced Plan -Dividend
Prudential ICICI Balanced Plan -Growth
Prudential ICICI Discovery Fund – Institutional option -1
Prudential ICICI Dynamic Plan - Dividend
Prudential ICICI Dynamic Plan - Growth
Prudential ICICI Dynamic Plan – Institutional option-1
Prudential ICICI Emerging Star - Dividend
Prudential ICICI Emerging Star - Growth
Prudential ICICI Emerging Star – Institutional option-1
Prudential ICICI FMCG Fund - Dividend
Prudential ICICI FMCG Fund -Growth
Prudential ICICI Flexible income plan – Daily Dividend
Prudential ICICI Flexible income plan – Monthly Dividend
Prudential ICICI Floating rate plan A - Dividend
Prudential ICICI Floating rate plan B - Growth
Prudential ICICI Gilt Fund - Investment plan -Dividend
Prudential ICICI Gilt Fund - Investment plan -Growth
Prudential ICICI Growth plan - Dividend
Prudential ICICI Growth plan - Growth
Prudential ICICI Income multiplier fund – Dividend
Prudential ICICI Income multiplier fund - Growth
Prudential ICICI Income plan - Dividend
Prudential ICICI Income plan - Growth
Prudential ICICI Index Fund
Prudential ICICI Infrastructure Fund – Dividend
Prudential ICICI Infrastructure Fund – Growth
Prudential ICICI Liquidity Institutional plan - Growth
Prudential ICICI Liquidity Institutional plus plan – Dividend
Prudential ICICI Liquid plan – Dividend

50
Prudential ICICI Liquid plan –Growth
Prudential ICICI Liquid super Institutional plan –Growth
Prudential ICICI Long term plan – Dividend
Prudential ICICI MIP – cumulative
Prudential ICICI Power - Dividend
Prudential ICICI Power - Growth
Prudential ICICI Services industries Fund – Dividend
Prudential ICICI Services industries Fund –Growth
Prudential ICICI Tax plan – Dividend
Prudential ICICI Tax plan-Growth
Prudential ICICI Technology Fund – Dividend
Prudential ICICI Technology Fund –Growth
Prudential ICICI Very Aggressive plan –Growth
Prudential ICICI Very Cautious plan - Dividend

IN PRUICICI MANY SCHEMES ARE AVAILABLE MORE SCHEMES, LIKE

OPEN –ENDED, CLOSED-ENDED, REDEEMED SCHEMES.
BUT HERE SELECTED TWO SCHEMES ONLY FROM OPEN-ENDED.

51
ABOUT CHOOSED SCHEMES

Prudential ICICI TAX Plan

ICICI Prudential Tax Plan is an open-ended equity linked saving

scheme (ELSS). It has a lock-in period of 3 years, which ensures that
you compulsorily remain invested over this period. This 3 year lock-in
gives the fund manager the flexibility to make strategic long term
investments in a diversified portfolio comprising a mix of large and
medium sized stocks, chosen after careful fundamental research. All
these stocks are growth oriented and have a patient, long term style.
ICICI Prudential Tax Plan is suited for patient investors who have a
long term investing horizon of 3-5 years and at the same time are
looking at tax saving.

52
Key Features ICICI Prudential Tax Plan
Type Open-ended Equity Linked Saving Scheme
Equity & Equity related instruments upto
Investment Pattern 90% & Debt, Money Market and Cash upto
10%.
To seek to generate long-term capital
appreciation from a portfolio that is invested
Investment Objective
predominantly in equity and equity related
securities
Growth & Dividend
Default Option Dividend Reinvestment
Application Amount Rs.500/- (plus in multiples of Re. 1)
Min. Additional
Rs.500/- and in multiples thereof
Investment
(i) For investments of less than Rs. 5 Crores :
Entry Load Entry load at 2.25% of applicable NAV.(ii)For
investments of Rs. 5 crores and Above : Nil
Exit Load Nil
Generally Within 3 business day for Specified
Redemption Cheques RBI locations and additional 3 Business Days
Issued for Non-RBI locations after lock-in period of 3
Years.
Minimum
Rs. 500/-
Redemption Amt.
Monthly: Minimum Rs. 500 or multiples
Systematic thereof & 5 post-dated cheques for a
Investment Plan minimum of Rs. 500 for a block of 5 months
in advance.
Systematic
Not available
Withdrawal Plan
Recurring
Expenses
Investment Mangmt.
1.25%
Exp.
Other Recurring
1.25%
Expenses
53
 Total 2.50%

Prudential ICICI GROWTH Plan

ICICI Prudential Growth Plan seeks to invest in large, profitable and

well known companies, and aims to benefit from the best long term
investments that the market has to offer in the large-cap space. The
investments are spread across sectors to ensure risk diversification,
and stocks are selected through rigorous fundamental bottom up
analysis.

key Features ICICI Prudential Growth Plan

Type Open-ended Equity Fund
Equity & Equity related 95% & Debt, Money
Investment Pattern
Market and Cash 5%.
To seek to generate long-term capital
appreciation from a portfolio that is invested
Investment Objective
predominantly in equity and equity related
securities
Options Growth & Dividend
Default Option Dividend Reinvestment

54
Application Amount Rs.5,000/- (plus in multiples of Re. 1)
Min. Additional Rs.500/- and in multiples thereof
Investment
(i) For investments of less than Rs. 5 Crores :
Entry Load
Entry load at 2.25% of applicable NAV.(ii)For
investments of Rs. 5 crores and Above : Nil
Exit Load Nil
Generally Within 3 business day for Specified
Redemption Cheques
RBI locations and additional 3 Business Days
Issued
for Non-RBI locations
Minimum
Rs. 500/-
Redemption Amt.
Monthly: Minimum Rs. 1000 + 5 post-dated
Systematic
cheques for a minimum of Rs. 1000 each.
Investment Plan
Quarterly: NA
Systematic
Minimum of Rs.500/- and Multiples thereof
Withdrawal Plan
Recurring
Expenses
Investment Mangmt.
1.25%
Exp.
Other Recurring
1.25%
Expenses
Total 2.50%
• .
MUTUAL FUND:

Phases of mutual funds in India

In India, the Mutual fund Industry has been monopolized by the Unit
Trust of India ever since 1963. Now, the commercial banks like the
state bank of India, Canara Bank, Indian Bank, Bank of India and
Punjab National bank have entered into the field. To add to list are the
LIC of India and the private sector banks and other financial
institutions. These institutions have successfully launched a “variety of
schemes to meet the diverse needs of millions of small investors. The
Unit Trust of India has introduced huge portfolio of schemes like
55
unit64, Master gain, Master share etc. It is the country ‘s largest
mutual fund company with over 25 millions investors and a corpus
exceeding Rs.55,000 crores ,accounting for nearly 10% of the
country’s stock market capitalization. The total corpus of the 13
other mutual funds in the country is less than Rs. 15,000crores. The
SBI fund has a corpus of Rs. 2925 crores deployed in its 16 schemes
servicing over

2.5 million Shareholders.

The mutual fund industry in India started in 1963 with the formation of Unit
Trust of India, At the Initiative of the government of India and Reserve bank.
The history of mutual funds In India can be broadly divided into four distinct
Phases.
First phase-1964-87
Unit trust of India (UTI) was established on 1963 by an act of
parliament. It was up the Reserve Bank of India and functioned under
the Regulatory and administrative control of The Reserve Bank of
India. In 1987 UTI was de- linked from the RBI and the Industrial
Development of India (IDBI).Took over the regulatory and
administrative control in place Of RBI. The first scheme Launched by
UTI scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of
assets under management.

Second phase-1987-1993 (Entry of public sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up
by public sector Banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC).

SBI Mutual funds was the first non-UTI Mutual fund established in June
1987 followed By Can Bank Mutual Fund (Des87), Punjab National Bank
Mutual Fund (Aug 89), Indian Bank Fund (Nov89), Bank of India (Jun
90), Bank of Baroda Mutual Fund (oct92).LIC Established its mutual

56
fund in June 1989 while GIC had set up its mutual fund in December
1990. At the end of 1993, the mutual fund Industry had assets under
management of Rs.47, 004 crores.

Third phase-1992-2003(Entry of private sector Funds)

With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund Industry, Giving the Indian investor a wide choice of
fund families. Also, 1993 was the Year in which the first Mutual fund
Regulation came into being, under which all mutual funds, expect UTI
were to be Registered and governed. The erstwhile kothari pioneer
(Now merged with Franklin temple ton) was the First private sector
mutual fund registered In July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulation in 1996. The
industry now functions under the SEBI (Mutual Funds) Regulation 1996

Fourth Phase –since February 2003

In February 2003, following the repeal of the Unit Trust of India Act
1963 was bif-acurated into separate Entities. One is the specific under
taking of the Unit trust of India with assets under management Of Rs.
29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 schemes, Assured return and certain other schemes.
The specified under taking of Unit Trust India, functioning under an
administrator and the rules framed by government of India and does
not come under the purview of the mutual fund regulations. The
second is UTI mutual fund Ltd. sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the mutual funds
Regulations. With the bif-acuration of the Rest while UTI Mutual Fund,

57
conforming to the SEBI Mutual Fund Regulations, and with recent
mergers Taking place among different private sector funds, the mutual
fund industry has entered its current phase of consolidation and
growth. As the end of October 31, 2003, there were 31 funds which
manage assets Of Rs 126726 crores under 386 schemes.

TYPES OF MUTUAL FUND SEHEMES

BY STRUCTURE
 Open-Ended Schemes
 Close-Ended Schemes
 Interval Schemes
BY INVESTMENT OBJECTIVE
 Growth Schemes
 Income Schemes
 Balanced Schemes
 Money Market Schemes
OTHER SCHEMES
 Tax saving Schemes
 Special Schemes
 Index Schemes
 Sector Specific Schemes

58
Mutual fund schemes may be classified on the basis of its structure and
its investment objective.
By Structure:
Open-ended funds
An open ended fund is one that is available for subscription all through
the year. These do not have a fixed maturity. Investors can conveniently
buy and sell units at Net Asset Value (“NAV”) related prices. The key
feature of open-end schemes is liquidity.

Closed-ended funds
A closed end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during
a specific 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.

Interval funds
These combine the features of open-ended and closed-ended schemes.
They are open for sale or redemption during pre-determined intervals at
NAV related prices.
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 the majority of their
corpus in equities. It has been proven that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook
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

59
as bonds, corporate debentures and government securities. Income funds
are ideal for capital stability and regular income.

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
investment both in equities and fixed income securities in the proportion
indicated in their offer documents. In a rising stock market, the NAV of
these schemes may not normally keep pace, or fall equally when the
market falls. These are ideal for investors looking for a combination of
income and moderate growth.

Money market funds

For over 30 years, money market funds have treated investors well.
Money market funds have been around for 30 years and are a very
popular place for investors to park their money.

Money market funds are a type of mutual fund that invests in short-term
(less than a year) debt securities of agencies of the U.S. Government,
banks and corporations and U.S. Treasury Bills. They are fixed at $1 per
share and only the yield fluctuates.

Load Funds

A load fund is one that charges a commission for entry of exit. That is,
each time you buy or sell units in the fund, a commission will be payable.
Typically entry exit loads range from 1% to 2%. It could be corpus is put
to work.

No-Load Funds

60
A No-Load fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the
fund. The advantage of a No-Load fund is that the entire corpus is put to
work.

Other Schemes:

Tax saving Schemes:

These schemes offer tax rebates to the investor under specific provisions
of the Indian income tax laws as the Government offers tax incentives for
investment in Equity Linked Saving Scheme (ELSS) and Pension Schemes
are allowed as deduction u/s 88 of the Income Tax Act. The Act also
provide opportunities to investors to save capital gains u/s 54EA and
54EB by investing in Mutual funds, provided the capital asset has been
sold to April 1,2000 and the amount is invested before September
30,2000.

Special Schemes:

Industry Specific Schemes

Industry Specific Schemes invest in the industries specified in the offer

document. The investment of these funds is limited to specific like Info
Tech, FMCG, and Pharmaceuticals etc.

Index Schemes:

Index Funds attempt to replicate the performance of a particular index

such as the BSE sensex or the NSE.

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.

FREQUENTLY USED TERMS

Net Asset Value (NAV)

61
Net Asset Value is the market value of the assets of the scheme minus its
liabilities. The per unit NAV is the net asset value of the scheme divided
by the number of units outstanding on the Valuation Date.
Is the price at which a close-ended scheme repurchases its units and it
may include a back-end load. This is also called Bid Price.

Redemption Price
Is the price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. Such prices are
NAV related.

Sales Load
Is a charge collected by a scheme when it sells the units. Also called,
‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’
schemes.

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units from the
unit holders.

62
 CHAPTER – III
DATA ANALYSIS AND INTERPRETATION

63
 • SBI
• ING VYSYA
• UTI
• HSBC
• ICICI
• ABN AMRO

STATE BANK OF INDIA

State Bank of India is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr.
approximately. Today it is the largest Bank sponsored Mutual Fund in
India. They have already launched 35 Schemes out of which 15 have
already yielded handsome returns to investors. State Bank of India

64
Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an
investor base of over 8 lakhs. Spread over 18schemes
NAV History – Historical value for a period of
5-Nov-2009 to 28-Jan-2010
SBI MUTUAL FUND
Magnum Equity Fund – Growth & Dividend
DATE DIVIDEN GROWTH
D
05-Nov- 42.14 42.17
2009
12-Nov- 35.57 40.47
2009
19-Nov- 37.84 43.06
2009
26-Nov- 38.33 43.61
2009
03-Dec- 39.31 44.73
2009
10-Dec- 40.06 45.58
2009
17-Dec- 38.80 44.15
2009
24-Dec- 39.68 45.15
2009
31-Dec- 41.52 47.24
2009
07-Jan- 42.51 48.36
2010
14-Jan- 41.46 47.17
2010
21-Jan- 33.74 43.24
2010
28-Jan- 34.89 39.70

65
 2010

SBI MAGNUM EQUITY FUND – Dividend & Growth

The above graph indicates that the Equity Fund - Growth and Dividend
from the 1st week of Dec is almost performing same but in 2nd week of
Jan the performance of Growth has drastically changed when compared
to Dividends, and again the performance showed is similar in rest of the
weeks. Because of declaring Dividends frequently, the performance of
Dividend always shows less when compared with others.

ING VYSYA BANK

ING Vysya Bank Ltd., is an entity formed with the Vysya Bank Ltd, a
premier bank in the Indian Private Sector and a global financial
powerhouse, ING (International Nederlanden Group) of Dutch origin, in
the year 2002.
The origin of the Vysya Bank dates back to 1930. Since then the Bank
has grown in size and stature and has reached the coveted position of
number one private sector bank in India.

In 1948, the Bank acquired the status of Scheduled Bank. In 1992, its
deposits crossed Rs. 1000 crores. The very next year, ING Vysya crossed
300 branches.

ING Vysya Bank's Deposit Scheme

The following two types of deposits are offered by ING Vysya Bank:
Access Plus
Features:
A single Current Account, with access from 8 cities in India

66
Separate cheque books for each centre for easy reconciliation
Pooling of funds in the city of residence
A cost effective product
A perfect product for the trading community
Current Account
Eligibility:
Individuals for single account
More than one individual for joint account
Sole proprietary concerns
Partnership concerns
Private and Public Limited companies
Clubs, associations, benevolent and friendly societies
Co-operative organizations
Statutory bodies, municipalities and such other Quasi-Government
Institutions

NAV History – Historical value for a period of

5-Nov-2009 to 28-Jan-2010
ING VYSA
ING Balanced Fund – Growth & Dividend
DATE DIVIDEND GROWTH
05-Nov-2009 17.17 24.54
12-Nov-2009 16.78 23.99
19-Nov-2009 17.77 25.40
26-Nov-2009 17.60 25.15
03-Dec-2009 17.91 25.60
10-Dec-2009 18.14 25.93
17-Dec-2009 17.89 25.56
24-Dec-2009 18.14 25.93
31-Dec-2009 18.67 26.69
07-Jan-2010 18.88 26.98
14-Jan-2010 18.74 26.78
21-Jan-2010 16.51 23.59
67
 28-Jan-2010 16.80 24.02

ING VYSA EQUITY FUND – Dividend & Growth

The above graph indicates that Growth is performing well when

compared to Dividends. From the starting month Growth is high. There
are slight fluctuations in both Growth and Dividend. Because of declaring
Dividends frequently, the performance of Dividend always shows less
when compared with others. As compared to SBI the performance
showed is better.

UNIT TRUST OF INDIA (UTI)

UTI, the first bank to begin operations as new private banks in 1994 after
the Government of India allowed new private banks to be established. UTI
Bank was jointly promoted by the Administrator of the specified
undertaking of the Unit Trust of India (UTI-I), Life Insurance Corporation of
India (LIC) and General Insurance Corporation Ltd. Also with associates

68
viz. National Insurance Company Ltd., the New India Assurance Company,
The Oriental Insurance Corporation and United Insurance Company Ltd.

UTI Bank in India today is capitalized with Rs. 232.86 Crores with 47.50%
public holding other than promoters. It has more than 200 branch offices
and Extension Counters in the country with over 1250 UTI Bank ATM
proving to be one of the largest ATM networks in the country. UTI Bank
India commits to adopt the best industry practices internationally to
achieve excellence. UTI Bank has strengths in retail as well as corporate
banking.

By the end of December 2004, UTI Bank in India had over 2.7 million
debit cards. This is the first bank in India to offer the AT PAR Cheque
facility, without any charges, to all its Savings Bank customers in all the
places across the country where it has presence.

The latest offerings of the bank along with Dollar variant is the Euro and
Pound Sterling variants of the International Travel Currency Card. The
Travel Currency Card is a signature based pre-paid travel card which
enables travellers global access to their money in local currency of the
visiting country in a safe and convenient way.

Stock Exchange where the shares of UTI Bank are listed:

Stock Code No. ISIN No.

69
 Exchange
Ahmedabad Code No. 63134
Code No. 532215 – A
Mumbai
Group
NSE Code No. UTIBANKEQ
Code No. Permitted
OTCEI
Security
NSDL ISIN No. INE238A01026
CDSL ISIN No. INE238A01026

Share Capital of UTI Bank

Authorised Share Capital: Rs. 300 Crores
Paid Up Share Capital: Rs. 232.86 Crores
Declared Rate of Interests by UTI Bank

Year 1998-99 - 10% (Pro-rata)

Year 1999-00 - 12%
Year 2000-01 - 15%
Year 2001-02 - 20%
Year 2002-03 - 22%
Year 2003-04 - 25%

UTI Mutual Fund is managed by UTI Asset Management Company Private

Limited (Estb: Jan 14, 2003) who has been appointed by the UTI Trustee
Company Private Limited for managing the schemes of UTI Mutual Fund
and the schemes transferred / migrated from UTI Mutual Fund.
The UTI Asset Management Company has its registered office at: UTI
Tower, Gn Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400
051 will provide professionally managed back office support for all
business services of UTI Mutual Fund (excluding fund management) in
accordance with the provisions of the Investment Management

70
Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the
objectives of the schemes. State-of-the-art systems and communications
are in place to ensure a seamless flow across the various activities
undertaken by UTI AMC.
UTI AMC is a registered portfolio manager under the SEBI (Portfolio
Managers) Regulations, 1993 on February 3 2004, for undertaking
portfolio management services and also acts as the manager and
marketer to offshore funds through its 100 % subsidiary, UTI International
Limited, registered in Guernsey, Channel Islands.
UTI Mutual Fund has a track record of managing a variety of schemes
catering to the needs of every class of citizenry. It has a nationwide
network consisting 70 UTI Financial Centers (UFCs) and UTI International
offices in London, Dubai and Bahrain. With a view to reach to common
investors at district level, 4 satellite offices have also been opened in
select towns and districts. It has a well-qualified, professional fund
management team, who have been highly empowered to manage funds
with greater efficiency and accountability in the sole interest of unit
holders.

NAV History – Historical value for a period of

5-Nov-2009 to 28-Jan-2010
UTI MUTUL FUND
UTI Equity Fund – Growth & Dividend
DATE DIVIDEND GROWTH
05-Nov-2009 41.42 44.89
12-Nov-2009 39.88 43.22
19-Nov-2009 42.09 45.60
26-Nov-2009 40.80 44.21
03-Dec-2009 41.63 45.11
10-Dec-2009 41.30 45.20
17-Dec-2009 41.85 45.36
24-Dec-2009 42.73 46.31
31-Dec-2009 44.30 48.02
71
 07-Jan-20010 45.68 49.51
14-Jan-2010 44.91 48.68
21-Jan-2010 38.30 41.50
28-Jan-2010 39.10 42.39

UTI EQUITY FUND – Dividend & Growth

From the above graph we can observe that Growth is showing more
performance than Dividends. In the month of Feb we can see that Growth
has fallen down in the last week and raised in first week and the Dividend
has also raised in the 1st week of Feb. Because of declaring Dividends
frequently, the performance of Dividend always shows less when
compared with others

HSBC
HSBC is the largest bank in Hong Kong and second largest group in the
world after Citicorp. Before moving its headquarter to London in 1990, it
was headquartered in Hong Kong. HSBC India is having branches in
Ahmedabad, Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon,
Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana, Mumbai, New Delhi, Noida,
Pune, Thane, Trivandrum and Visakhapatnam.

72
HSBC NRI centres are located in Asia-Pacific, the Middle East, Europe and
North America. HSBC NRI centres provide full range of personal and
private banking products in India and overseas. HSBC Internet banking
adds to the services of HSBC India abroad.
HSBC India, along with HSBC Investment product and HSBC Insurance, it
offers international Gold Card and Classic Credit Cards from VISA and
MasterCard and debit cards from Visa. HSBC in India gives 24 hour
banking services, extensive network of ATMs, integrated Call Centre and
also HSBC e-banking.
HSBC Bank India Fact File
The HSBC Group develops and applies advanced technology to the
efficient and convenient delivery of banking and related financial
services. HSBC Bank India provides the following:
 Self-service banking with over 150 in-branch and off-branch
ATMs and 24-hour phone banking.
 Trade and corporate banking services with real-time access to
a centralised information database
 Instantaneous inter-city transactions through online
connections between all branches

73
NAV History – Historical value for a period of
5-Nov-2009 to 28-Jan-2010
HSBC MUTUAL FUND
HSBC Equity Fund – Growth & Dividend
DATE DIVIDEND GROWTH

05-Nov-2009 44.25 106.75

12-Nov-2009 42.82 103.31

19-Nov-2009 45.02 108.62

26-Nov-2009 43.96 106.06
03-Dec-2009 45.27 109.22

10-Dec-2009 46.10 111.23

17-Dec-2009 45.20 109.06

24-Dec-2009 46.12 111.27

31-Dec-2009 47.68 114.92

07-Jan-2010 48.95 118.11

14-Jan-2010 48.40 116.78
21-Jan-2010 41.49 100.10
28-Jan-2010 42.67 102.96

HSBC EQUITY FUND – Dividend & Growth

74
The above graph there is little fluctuations in the values of Dividends and
Growth. But here we can see that Growth is again performing well. It
showed a less performance in the last week and Dividend showed similar
performance in all the weeks. Because of declaring Dividends frequently,
the performance of Dividend always shows less when compared with
others.

ICICI BANK
ICICI Limited was established in 1955 by the World Bank, the Government
of India and the Indian Industry, for the promotion of industrial
development in India by giving project and corporate finance to the
industries in India.
ICICI Bank has grown from a development bank to a financial
conglomerate and has become one of the largest public financial
institutions in India. ICICI Bank has financed all the major sectors of the
economy, covering 6,848 companies and 16,851 projects. As of March
31, 2000, ICICI had disbursed a total of Rs. 1, 13,070 crores, since
inception.

ICICI Bank Fact Files

75
 Total assets: Rs.146, 214 crore (December 31, 2004)
Network : 530 branches
ATMs : Over 1,880
Abroad Subsidiaries : United Kingdom and Canada
Abroad branches : Singapore and Bahrain
Representative offices : United States, China, United Arab Emirates,
Bangladesh and
South Africa.

NAV History – Historical value for a period of

5-Nov-2009 to 28-Jan-2010
ICICI PRUDENTIAL MUTUAL FUND
ICICI EMERGING STAR FUND Growth & Dividend
DATE DIVIDEND GROWTH

05-Nov-2009 24.13 36.87

12-Nov-2009 23.63 36.10

19-Nov-2009 25.86 39.51
26-Nov-2009 25.14 38.42
03-Dec-2009 26.05 39.80

10-Dec-2009 27.85 42.56

17-Dec-2009 28.07 41.95

24-Dec-2009 28.06 42.88

31-Dec-2009 30.19 46.12

07-Jan-2010 31.14 47.58
14-Jan-2010 29.62 45.26
21-Jan-2010 23.25 38.30
28-Jan-2010 23.55 38.80
76
 ICICI EQUITY FUND – Dividend & Growth

From the above graph it indicates that the Growth and Dividend are
performing similar but in the month of Feb both of them have
declined .It had drastically fallen in the month of the Feb. From the
1st week of Dec to 1st week of Feb both have increased and the
performance showed is well. Because of declaring Dividends
frequently, the performance of Dividend always shows less when
compared with others.

ABN AMRO
Profile
ABN AMRO is an international bank with European roots. We have a clear
focus on consumer and commercial clients in our local markets and focus
globally on select multinational corporations and financial institutions, as

77
well as private clients. Our business mix gives us a competitive edge in
our chosen markets and client segments.
Our strategy is built on leveraging our advantages as a Group to create
the best value for ? and with ? our clients.
We are active in four principal customer segments: Personal Banking,
Private Banking, Business and Commercial and Corporate and
Institutional.
Although we serve a broad range of clients, our strategic focus is on the
mid-market segment. This is the client area where we have a strong and
distinctive competitive advantage and where we feel we can be most
profitable in the future.
The ABN AMRO Corporate Values and Business Principles provide the
framework within which we carry out our operations.

In brief...
ABN AMRO is a prominent international bank, our history going back to
1824. ABN AMRO ranks eighth in Europe and 12th in the world based on
total assets, with more than 4,000 branches in 53 countries, a staff of
more than 99,000 full-time equivalents and total assets of EUR
1,120.1 bln (as at 1 November 2008).

Organisation
We implement our strategy through a number of Business Units (BUs).
These units are responsible for managing a distinct region, client
segment or product segment, while also sharing expertise and
operational excellence across the Group.
We have five regional Client BUs: the Netherlands, Europe, North
America, Latin America and Asia. These BUs serve about 20 million
consumer clients and small to larger businesses worldwide. ABN AMRO is

78
among the world's leading players in these businesses.
We have two global Client BUs to serve clients with global needs. The
BU Private Clients provides private banking services to wealthy
individuals and families and has EUR 150 bln in Assets under
Administration (as at July 2008). The BU Global Clients serves our 550
multinational clients.
We have three Product BUs: Global Markets, Asset Management and
Transaction Banking.
• Global Markets develops products for our commercial clients
across the globe.
• Transaction Banking is our product organisation covering all
payments and trade in the bank for our retail, private client,
and commercial markets.
• Asset Management, which is one of the world's leading asset
managers, operates from over 20 locations worldwide and
manages EUR 211 bln worth (as at July 2008) of assets for
private investors and institutional clients.

Services
Services was established to create cost savings through consolidation
and standardisation. It focuses on further exploiting new market solutions
for support services with the aim to achieve better products and services
for our clients at lower costs.
Group Functions
Group Functions collaborates with the BUs in maximising client and
shareholder value. Its basic functions are governance (facilitating the
implementation of Managing Board policy throughout the bank), standard
and policy setting (setting the parameters that the BUs work within), and
sharing expertise across the company.
Segments

79
To provide all our clients with even better products and services, we also
have a cross-BU Consumer Client Segment and a cross-BU Commercial
Client Segment. These segments focus on aligning the Client BUs with
the Product BUs, sharing best practices and exchanging winning formulas
across the Group in order to deliver high-quality solutions to our client
bases across the world
Corporate Values
Our Corporate Values provide the foundation for the bank's
Business Principles. The bank formulated these Corporate Values in 1997.
Our values and principles also help us on our journey to sustainable
development. By living according our defined Corporate Values and
Business Principles we can meet the needs of our organisation and
stakeholders today, thus protecting, sustaining and enhancing human,
natural and financial capital for the future. Read more about ABN AMRO
and sustainable development.

Integrity: Above all, we are committed to integrity in all that we do,

always, everywhere.
Teamwork: It is the essence of our ability to succeed as a trusted
preferred supplier of financial solutions to our clients. Our overriding
loyalty is to the good of the whole organisation. We learn from each other
and share our skills and resources across organisational boundaries for
our clients' benefit and our own.
Respect: We respect every individual. We draw strength from equal
opportunity and diversity, at the same time supporting personal growth
and development. We value and we all benefit from the entrepreneurial
spirit of each individual.
Professionalism: We are committed to the highest standards of
professionalism, we pursue innovation, we deploy imagination, we are
open to new ideas and we act decisively and consistently. We are

80
determined to deliver outstanding quality so that our relationships with
our clients will be long lasting and close.
Business Principles
A compass to guide us on our journey
ABN AMRO is an ambitious institution, committed to continuous
improvement in everything we do. Our success depends on excellent
performance and a solid reputation. Transparency and dialogue are of
crucial importance in all our relationships if we are to maintain our
reputation as a respectable and reliable institution.

Based on our four Corporate Values, we have formulated Business

Principles to guide all our employees in their daily work. Defining them
clarifies what we stand for and unites us as a group.
These Business Principles are:
• We are the heart of our organisation
• We pursue excellence
• We aim to maximise long-term shareholder value
• We manage risk prudently and professionally
• We strive to provide excellent service
• We build our business on confidentiality
• We assess business partners on their standards
• We are a responsible institution and a good corporate citizen
• We respect human rights and the environment
• We are accountable for our actions and open about them

Business Principles alone are not the answer to every problem, but they
do challenge us to translate their spirit into our daily practice and shift
our horizons beyond short-term profit to long-term value creation through
sustainable development.

81
NAV History – Historical value for a period of
ABN AMRO MUTUAL FUND
ABN AMRO Equity Fund Growth & Dividend
DATE DIVIDEND GROWTH
05-Nov-2009 22.48 41.10
12-Nov-2009 21.67 39.62
19-Nov-2009 23.00 42.04
26-Nov-2009 22.24 40.64
03-Dec-2009 23.04 42.12
10-Dec-2009 23.78 43.46
17-Dec-2009 23.26 42.52
24-Dec-2009 17.61 43.46
31-Dec-2009 18.54 45.76
07-Jan-2010 19.33 47.71
14-Jan-2010 18.75 46.28
21-Jan-2010 15.20 37.52
28-Jan-2010 15.55 38.41

ABN AMRO EQUITY FUND – Dividend & Growth

82
In this you can see that right from the starting month Growth is
showing good performance compare to Dividends. There are some
fluctuations in growth, but in dividends the values shown are
almost constant. Because of declaring Dividends frequently, the
performance of Dividend always shows less when compared with
others.

83
 NAV History – Historical NAV for a Period from 1-Dec-2008
to 28-Feb-2009

NATIONAL BANKS COPERATE BANKS

SBI ING UTI HSBC ICICI ABN

AMRO
DAT Divi Gro Divi Gro Divi Gro Divi Gro Divi Gro Divi Gro
E den wt den wt den wt den wt den wt den wth
d h d h d h d h d h d

05/1 42.1 42. 17.1 24. 41.4 44. 44.2 106 24.1 36. 22.4 41.
1/09 4 17 7 54 2 89 5 .75 3 87 8 10

12/1 35.5 40. 16.7 23. 39.8 43. 42.8 103 23.6 36. 21.6 39.
1/09 7 47 8 98 8 22 2 .31 3 10 7 62

19/1 37.8 43. 17.7 25. 42.0 45. 45.0 108 25.8 39. 23.0 42.
1/09 4 06 7 40 8 60 2 .62 6 51 0 04

26/1 38.3 43. 17.6 25. 40.8 44. 43.9 106 25.1 38. 22.2 40.
1/09 3 61 0 15 0 21 6 .06 4 42 4 64

03/1 39.3 44. 17.9 25. 41.6 45. 45.2 109 26.0 39. 23.0 42.
2/09 1 73 1 60 3 11 7 .22 5 80 4 12

10/1 40.0 45. 18.1 25. 41.3 45. 46.1 111 27.8 42. 23.7 43.
2/09 6 58 4 93 0 20 0 .23 5 56 8 46

17/1 38.8 44. 17.8 25. 41.8 45. 45.2 109 28.0 41. 23.2 42.
2/09 0 15 9 56 5 36 0 .06 7 95 6 52

24/1 39.6 45. 18.1 25. 42.7 46. 46.1 111 28.0 42. 17.6 43.
2/09 8 15 4 93 3 31 2 .27 6 88 1 46

31/1 41.5 47. 18.6 26. 44.3 48. 47.6 114 30.1 46. 18.5 45.
2/09 2 24 7 69 0 02 8 .92 9 12 4 76

07/0 42.5 48. 18.8 26. 45.6 49. 48.9 118 31.1 47. 19.3 47.
84
1/10 1 36 8 98 8 51 5 .11 4 58 3 71

14/0 41.4 47. 18.7 26. 44.9 48. 48.4 116 29.6 45. 18.7 46.
1/10 6 17 4 78 1 68 0 .78 2 26 5 28

21/0 33.7 43. 16.5 23. 38.3 41. 41.4 100 23.2 38. 15.2 37.
1/10 4 24 1 59 0 50 9 .10 5 30 0 52

28/0 34.8 39. 16.8 24. 39.1 42. 42.6 102 23.5 38. 15.5 38.
1/10 9 70 0 02 0 39 7 .96 5 80 5 41

85
 PERFORMANCE CHART OF DIVEDEND

PERFORMANCE CHART OF GROWTH

The above graph clearly indicates the overall performance of Equity

Fund-Dividend and Growth of all the banks taken into consideration. In
SBI, from the 1st week of Dec both are almost performing same but in
2nd week of Jan the performance of Growth has drastically changed when
compared to Dividends, and again the performance showed is similar in
rest of the weeks. In ING VYSYA, Growth is performing well when
compared to Dividends. From the starting month Growth is high. There
are slight fluctuations in both Growth and Dividend. In UTI, we can
observe that Growth is showing more performance than Dividends. In the
month of Feb we can see that Growth has fallen down in the last week
and raised in first week and the Dividend has also raised in the 1st week
of Feb. In HSBC, there are little fluctuations in the values of Dividends
and Growth. But here we can see that Growth is again performing well. It
showed a less performance in the last week and Dividend showed similar
performance in all the weeks. In ICICI, it indicates that the Growth and
Dividend are performing similar but in the month of Feb both of them
have declined .It had drastically fallen in the month of the Feb. From the
1st week of Dec to 1st week of Feb both have increased and the
performance showed is well. In HDFC, right from the starting month
Growth is showing good performance compare to Dividends. There are
some fluctuations in Growth, but in dividends the values shown are
almost constant. Because of declaring Dividends frequently, the
performance of Dividend always shows less when compared with others.

86
From the above graph it clearly indicates that the HDFC bank is showing
excellent performance when compared to other Banks. The Corporate
Banking sectors are showing good performance than nationalized
Banking sectors.

87
 CHAPTER-IV
FINDING & SUGGESTIONS
CONCULSION
BIBLIOGRAPHY

88
 FINDINGS & SUGGESTIONS:
1. From the table 1 (i.e.) SBI bank we can see that both Dividend and
Growth are similar to each other .where as growth has been
increased in the 2nd week of Jan with a value of 29.64%.

2. In UTI bank table we can see that growth has performed well when
compared to dividends. There was a slight fluctuation in the values
of dividends and growth.

3. In ING VYSYA bank table we can see that performance of growth

was good. The dividends was constant in there values. During the
first week of Feb the NAV values of both Dividends and Growth
were high.

4. When we see corporate banks (i e) HDFC the performance of

Growth is very good when compared to Dividends. This bank has
been shown a positive performance when compared to other banks
were it is good for investing in this bank.

5. When we see ICICI bank both the Dividends and Growth are equal
or similar to each other there is no change in them. In the month of
Feb it raised in the first week but it had a drastic fall in all the
following weeks.

6. When we see HSBC bank here again growth has been performed
well when we compare to dividends. This increase in the value has
been reached to certain extent and it has been declined in last
week of Feb.

7. If we compare Nationalized and Corporate banks we can see that

corporate banks have performed well during these 3 months.

8. Nationalized banks performed well up to certain extent and it

values were declining further. This decline may cause due to
89
 declaration of any dividends in those banks and so it was showing
low values.

9. In Nationalized banks we can see internally in Dividends SBI bank

has performed well and if wee see Growth UTI bank has performed
well.

10.In corporate banks we can see internally in Dividends and Growth

HDFC bank has performed relatively well when compare to other
banks. Both the values are high in this bank. It had reached to a
maximum height.

11.So its better for investors to invest in corporate sectors rather than
investing in Nationalized sector which gives them maximum
number of return for their investment.

CONCLUSION:
1. Corporate sectors provide good services if we see through
customer point of view. They are very caring to their customers.

2. With the increase in infrastructure, technology, introduction of

various schemes and services, online trading its clear that any one
wants to invest will surely invest in corporate banks.

3. Now u can see most of them are opening their account in corporate
banks instead of nationalized banks this is due to extra benefit &
services which they are getting from that sector.

TIPS FOR MUTUAL FUND INVESTORS:

These are the few exact as regards investment in MF’s taken from the
book with “Marketing for the 90’s” given by the Wall Street. Check your

90
letter of offer of funds prospectus to guard yourselves against any hidden
fees.
Ensue that the funds track record is the same as that of the current
management.
Avoid mutual funds that charge exit fees at the back end door (fees
charged by MF from the unit holders at the time to redemption of the
units).
Buy the funds with no sale charged loads. (a load is a charge by the fund
when investor buys it is called the entry load or when he sells is called
the exit load).

If the charge is heavy by the mutual fund to discourage the investors

from taking short positions in the funds units because too many investors
sell their units at a time then the fund has to sell its holdings to meet the
obligations that yield into vital of the fines overall return. Most short
funds like guilt funds (these are the funds which can be invested only in
government securities and treasury bills thus the investors have an
opportunity to buy risk free securities). These funds yield a better return
than a money market fund. It is good for the investors who desire safety
of principal amount. Money market funds (these funds in views in money
market instruments such as treasury bills, govt.bonds, certificates of
bank deposits, commercial deposits). They charge no loads, however
loads are limited by SEBI to 7%.
Check funds performance in bear as well as the bull market.
Guard fund risk by checking its portfolio for diversification volatility.

91
 BIBLIOGRAPHY

Books References:

1. Security Analysis and Portfolio Management

(Fischer & Jordan)

2. Investment Decisions

(V.K. Bhalla)

3. Security Analysis & Portfolio Management

(Robbins)

WEBSITES

www.mutualfundsindia.com
www.reliancemutual.com
www.sbimf.com
www.uti.com
www.moneycontrol.com
www.amfiindia.com

92
www.nse-india.com

93