A Study On

MUTUAL FUNDS

IN

ANGEL BROKING LTD.

Project submitted in partial fulfillment for the award of degree of

MASTER OF BUSINESS ADMINSTRATION

BY

B HARIKRISHNA

ROLL NO. 08951E0013

Under the supervision of

G SAIREKHA

Head of the Department

INSTITUTE OF AERONAUTICAL ENGINEERING

DUNDIGAL VILLAGE, QUTHBULLAPUR (MANDAL), R.R.DISTRICT

HYDERABAD-500043(India)

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 DECLARATION

I here by declare that this Project Report titled “ Mutual Funds” with special reference

to Magnum Equity Fund, UTI Equity Fund- Growth, HDFC Growth Fund” submitted by me to

the Department of Management Studies in Institute of Aeronautical Engineering, is a bonafied

work undertaken by me and it is not submitted to any other university or Institute for the award

of any degree/diploma/certificate ‘or published any time before.

Name and address of the student Signature of the student

Date:

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 ACKNOWLEDGEMENT

I would like to express my gratitude for all the people, who extended unending support

at all the stages of the project.

This report is product of not only my sincere effort but also the guidance and morale

support given by the management of the ANGEL BROKING LIMITED company.

I express my sincere gratitude to my guide Mrs. G.SAI REKHA for sparing the

valuable information and suggestions all through, for the successful completion of the project.

I also thanks to my guide and also management and staff of my college for providing

the guidance and support.

Last but not least I thanks all my friends and parents who have directly or indirectly

contributed for the successful completion of the project.

Place: Name:

Date: Roll.No.:

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 TABLE OF CONTENTS
Contents Pg.nos

Chapter-I 1 – 35
Introduction 1
Definition, History 3
Advantages & Disadvantages 7
Performance of MF in India 14
Types of Mutual Funds, Role of SEBI in Mutual Funds 18-35

Chapter-II 36 – 37

Research problem 36
Objectives of the study 36

Need of the study 37

Limitations & Assumptions of the study 37

Chapter-III 38 – 38

Research design 38

Research methodology & Data collection 38

Chapter-IV

Literature review 39 - 46

Chapter-V
Introduction to company/organization 47 - 70

Chapter-VI

Data analysis and interpretation 71 - 86

Chapter-VII

Findings/suggestions/summary/conclusions 87 - 92

BIBLIOGRAPHY 93

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 Chapter 1

Introduction
To
Mutual Funds

Introduction to Mutual Funds:

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A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money collected & invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and its unit holders in proportion to the number of units
owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus, a
Mutual Fund is the most suitable investment for the common person as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. Anybody with an investible surplus of as little as a few thousand rupees can
invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective
and strategy

A mutual fund is the answer to all these situations. It appoints professionally qualified
and experienced staff that manages each of these functions on a full time basis. The
large pool of money collected in the fund allows it to hire such staff at a very low cost
to each investor. In effect, the mutual fund vehicle exploits economies of scale in all
three areas - research, investments and transaction processing. While the concept of
individuals coming together to invest money collectively is not new, the mutual fund in
its present form is a 20th century phenomenon. In fact, mutual funds gained popularity
only after the Second World War. Globally, there are thousands of firms offering tens of
thousands of mutual funds with different investment objectives. Today, mutual funds
collectively manage almost as much as or more money as compared to banks.

Definitions

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• A mutual fund is a trust that pools the savings of a number of investors with common
financial goals. The collected money is invested in various instruments like debentures,
shares, etc. The income generated from these instruments and the capital appreciation is
shared by the investors in proportion to the number of units owned by them.
• A mutual fund is a professionally managed type of collective investment scheme that
pools money from many investors and invests typically in investment securities (stocks
bonds, short-term money market instruments, other mutual funds, other securities,
and/or commodities such as precious metals).[1] The mutual fund will have a fund
manager that trades (buys and sells) the fund's investments in accordance with the
fund's investment objective. In the U.S., a fund registered with the Securities and
Exchange Commission (SEC) under both SEC and Internal Revenue Service (IRS) rules
must distribute nearly all of its net income and net realized gains from the sale of
securities (if any) to its investors at least annually. Most funds are overseen by a board
of directors or trustees (if the U.S. fund is organized as a trust as they commonly are)
which is charged with ensuring the fund is managed appropriately by its investment
adviser and other service organizations and vendors, all in the best interests of the fund's
investors

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Short History

The government of India set up Unit Trust of India in 1963 by an act on parliament.
UTI functioned under the regulatory and administrative control of the Reserve Bank of
India till 1978. The Industrial Development Bank of India took over the regulatory and
administrative control that year. The first scheme launched by UTI was Unit Scheme
1964 or the infamous Unit 64. The second phase of the mutual fund industry began with
the public sector banks and Life Insurance Corporation of India and General Insurance
Corporation of India setting up their own mutual funds in 1987. Finally, in 1993 Kothari
Pioneer (now merged with Franklin Templeton) became the first private sector mutual
fund to start operations in the country. A host of private sector as well as foreign funds
set up shop after that. In 1996, a comprehensive and revised Mutual Fund regulation
was put in place. The industry now functions under Sebi (Mutual Fund) regulations,
1996.

The industry faced its toughest challenge when the US 64 fiasco shattered the
confidence of investors. However, in 2003, the government bifurcated the erstwhile
UTI. One entity manages the assets of US 64 and some assured return schemes. The
other is a regular mutual fund working under the Sebi regulations. Thanks to the boom
in the stock market, UTI managed to clean up its act and continue to enjoy the
confidence of several investors. The whole industry also came out of the controversy
without any major setbacks.

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Mutual Funds Operations flow chart;

Organizational Structure of Mutual Funds;

The above diagram gives an idea on the structure of an Indian mutual fund.

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SPONSOR:

Any corporate body, which initiates the launching of a mutual fund, is referred to as
‘the sponsor’. Sponsor is basically a promoter of the fund. The agency, which is
expected to have a sound track record and experience in the relevant field of financial
services for a minimum period of 5 years, ensures complying with the various
formalities required in establishing a mutual fund. According to SEBI norms, the
sponsor should have professional competence, financial soundness and a general
reputation for fairness and integrity in business transactions. There must be a minimum
contribution by the sponsor to the tune of 40 per cent of the net worth of the Asset
Management Company. Trustees – Trustees holds mutual fund property for the
benefit of unit holders.

TRUSTEES:
Persons who hold the property of the mutual fund in trust for the benefit of the unit
holders are called ‘trustees’. Trustees look after the mutual fund, which is contributed as
a trust under the provisions of the Indian Trust Act. For this purpose, a company is
appointed as a trustee to manage the mutual fund with prior approval from SEBI. Two
third of the trustees must be independent professionals who own the fund and
supervises the activities of the AMC to ensure fair dealings.

ASSET MANAGEMENT COMPANY:

The investment manager of a mutual fund is technically known as the ‘Asset
Management Company (AMC)’ and is appointed by the sponsor or the trustees. The
Asset Management Company manages the affairs of the mutual fund. It is responsible
for operating all the schemes of the fund, and can act as the AMC of only one mutual
fund. Only activities which are in the nature of management and advisory services to
offshore funds, pension funds, provident funds, and venture capital funds, management
of insurance funds, financial consultancy and exchange of research on commercial basis
can be undertaken by the AMC. With the permission of SEBI, it can also operate as an

10
underwriter. It takes decisions on when and where to invest the money. It doesn’t own
the money. AMC is only a fee-for-service provider

CUSTODIAN:
An agency that keeps custody of the securities that are brought by the mutual fund
managers under the various schemes is called ‘the Custodians’. Custodian ensures safe
custody of the investments (related documents of securities invested). According to
SEBI norms, the custodian who is so appointed should in no way be associated with the
AMC and cannot act as sponsor or trustee to any mutual fund. A custodian should be a
registered entity with SEBI. If the promoter holds 50% voting rights in the custodian
company it can’t be appointed as custodian for the fund.

TRANSFER AGENTS:
Transfer Agent Company interfaces with the customers, issue a fund’s units, help
investors while redeeming units. Provides balance statements and fund performance fact
sheets to the investors. CAMS is a leading Transfer Agent in India.

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Advantages of Mutual Funds;
• Portfolio Diversification

• Professional management

• Reduction / Diversification of Risk

• Liquidity

• Flexibility & Convenience

• Reduction in Transaction Cost

• Safety of regulation environment

• Choice of schemes

• Transparency

Mutual funds are preferred for their cost-effectiveness and easy investment process. By
investing all the money in a mutual fund, investors can buy stocks or bonds at lower
trading charges. This is indeed one of the main benefits, which is not available
otherwise. You don't need to see which stock or bond would be better to buy. Another
advantage is diversification. Diversification stands for diffusing money across various
different categories of investments. There is every possibility that when one investment
is down, the other can be up. In simple terms, this is helpful in reducing risks.
Transparency, flexibility, professional investment management, variety and liquidity are
some of the other benefits of the mutual funds, which are not found in case of other
investments to such an extent.

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Disadvantages of Mutual Funds:

• No Control over Cost in the hands of an investor

• No tailor-made portfolio

• Managing a portfolio funds

• Difficulty in selecting a Suitable Fund scheme

• Mutual Funds Have Hidden Fee

• Mutual Funds Lack Liquidity

• Mutual Funds Have High Sales Charges

• Poor Trade Execution

• High Capital Gains Distributions

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Risks of investing in a mutual fund:

The biggest risk of investing in a mutual fund is one of underperformance. When an

investor decides to invest in a particular asset class, he typically expects to get the return
that the benchmark of the asset provides.

For example, if someone is investing in large-cap equity stocks, he would expect to

make at least as much return (with similar risk) as a benchmark index, say Sensex or
Nifty.

Mutual funds try to maximize the returns on the funds invested through them -- but all
of the funds cannot succeed an outperforming each other or the benchmark. Hence,
some of them under-perform the benchmark.

Similarly, the cost of investing in a mutual fund (discussed below), eats in the returns.
In high return years (like the last few years, where returns have been in the high 30% in
equity, 2% costs may not make a material impact: however, at more moderate or
negative returns, costs can be a big inch).

The other risk with mutual funds is 'style drift.' If you invest in a large cap fund and it
begins to invest in mid cap stocks, or if you invest in a long term debt fund but it starts
to invest a greater proportion in cash instruments, you might not the type of risk-return
reward that you have been expecting.

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Change of the fund manager can also introduce an element of risk into your portfolio.
There is a wide debate as to whether investing is a science or an art: most authorities
concede that it is a blend of the two. If so, the artist may contribute to the success of the
returns.

Hence, if you invest based on the ability of a fund manager who decides to move on, it
presents you with a risk. Change of a fund manager can also cause style drift.

Costs of investing in a mutual fund:

Typically there are three types of charges in a mutual fund: entry load, asset
management charges and exit loads. As the names suggest, these charges are applicable
when you invest, while you are with the fund and when you exit the fund, respectively.
You also get hit by the 'buy-sell spread.'

 Entry load:

An entry load is the charge that the fund charges you for marketing and distributing the
fund to you. This money is typically paid to your mutual fund broker. This can range
from as low as 0.25% (or lower) in case of debt funds to as high as 2.25% in case of old
equity funds. Typically, new equity funds require a lot more marketing and distribution
effort and in order to compensate your broker for selling you a fund based only on
promises, the entry load is higher (up to 5%).

Now you may say that when you invested in the last new fund offering (NFO), you did
not see an entry load. The Rs 1000 that you invested showed as 100 units of Rs 10 each
-- how then was the entry load charged (or the broker compensated)?

Well, the fund company creates a Contingent Deferred Sales Charge (CDSC) which is
the total expenditure that the company has incurred in launching the NFO. It amortizes

15
this amount daily over the course of 3 to 5 years (the lock-in period) which reduces the
NAV slightly every day (but with such a miniscule amount that it is hardly noticeable!)

 Asset management charges:

While the fund house manages your money, it needs to incur costs in research,
brokerage, salaries of hiring the best talent for you, office rentals and overheads, etc. In
order to recoup such costs, the fund house charges you a certain percentage of your
assets as asset management expenses.

In equity funds, this typically ranges between 1.5% to 2% of the assets per year while in
debt funds, it is typically lower than 0.5%.

If you are investing for the long run, you will realize that a low cost fund (in its
category) is the best choice for you. Incidentally, the lowest cost equity funds are 'index
funds' which manage your assets passively by investing based on an index.

While academic research and mutual fund industry veterans (for example, John Bogle)
show that these funds perform better and at lower cost over the long run, these funds
seem not to have caught the fancy of investors in India.

 Exit loads:

Exit loads are loads that the mutual fund charges you when you leave the fund. Exit
loads are charged by some funds on a reducing basis on time: hence the load decreases
as time passes. This promotes a long term investment from the investor. Also, the fund
may charge you an exit load to recover some of the charges of from you.

 Buy-sell spread:

When you buy a fund, you will typically be invited to buy at a premium to the
prevailing Net Asset Value (NAV) of the fund. Similarly, while selling some funds
might require you to sell at prices below the NAV. Hence, you get hit on both the sides.

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This spread is limited by SEBI to 6%, but typically the range is much lower, indicating
a mature market. When you buy a mutual fund, be careful: while these are great
avenues of investment, you need to know the costs and the risks. Now that we have
mastered them, we will look at the taxation aspects of the funds.

GROWTH IN ASSETS UNDER MANAGEMENT:-

The mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under.

The Securities and Exchange Board of India (SEBI):

(Mutual Funds) REGULATIONS,1996 defines a mutual fund as a " fund establishment

in the form of a trust to raise money through the sale of units to the public or a section

17
of the public under one or more schemes for investing in securities, including money
market instruments."

Mutual Funds have been a significant source of investment in both government and
corporate securities. It has been for the decades the monopoly of the state with UTI
being the key player with invested funds exceeding Rs. 300 bn. (US $ 10 bn.). The state
owned insurance companies also hold a portfolio of stocks. Presently, numerous mutual
funds exist, including private and foreign companies. Banks - mainly state owned too
have established Mutual Funds (MFs). Foreign participation in mutual funds and asset
management companies permitted on a case-by-case basis.

Some of the AMCs operating currently are:

Name of the AMC Nature of

ownership
Alliance Capital Asset Management (I) Private Limited Private foreign
Birla Sun Life Asset Management Company Limited Private Indian
Bank of Baroda Asset Management Company Limited Banks
Bank of India Asset Management Company Limited Banks
Can bank Investment Management Services Limited Banks
Cholamandalam Cazenove Asset Management Company Private foreign
Limited
Dundee Asset Management Company Limited Private foreign
DSP Merrill Lynch Asset Management Company Private foreign
Limited
Escorts Asset Management Limited Private Indian
First India Asset Management Limited Private Indian
GIC Asset Management Company Limited Institutions
IDBI Investment Management Company Limited Institutions
Indfund Management Limited Banks
ING Investment Asset Management Company Private Private foreign
Limited
J M Capital Management Limited Private Indian

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 Jardine Fleming (I) Asset Management Limited Private foreign
Kotak Mahindra Asset Management Company Limited Private Indian
Kothari Pioneer Asset Management Company Limited Private Indian
Jeevan Bima Sahayog Asset Management Company Institutions
Limited

Performance of Mutual Funds in India:

Let us start the discussion of the performance of mutual funds in India from the day the
concept of mutual fund took birth in India. The year was 1963. Unit Trust of India
invited investors or rather to those who believed in savings, to park their money in UTI
Mutual Fund. The performance of mutual funds in India in the initial phase was not
even closer to satisfactory level. People rarely understood, and of course investing was
out of question. But yes, some 24 million shareholders were accustomed with
guaranteed high returns by the beginning of liberalization of the industry in 1992. This
good record of UTI became marketing tool for new entrants. The expectations of
investors touched the sky in profitability factor. However, people were miles away from
the preparedness of risks factor after the liberalization.

The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me
concentrate about the performance of mutual funds in India through figures. From Rs.
67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure
had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. The
net asset value (NAV) of mutual funds in India declined when stock prices started
falling in the year 1992. Those days, the market regulations did not allow portfolio
shifts into alternative investments. There was rather no choice apart from holding the
cash or to further continue investing in shares. One more thing to be noted, since only
closed-end funds were floated in the market, the investors disinvested by selling at a
loss in the secondary market.

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The performance of mutual funds in India suffered qualitatively. The 1992 stock market
scandal, the losses by disinvestments and of course the lack of transparent rules in the
whereabouts rocked confidence among the investors. Partly owing to a relatively weak
stock market performance, mutual funds have not yet recovered, with funds trading at
an average discount of 1020 percent of their net asset value. The measure was taken to
make mutual funds the key instrument for long-term saving. The more the variety
offered, the quantitative will be investors. At last to mention, as long as mutual fund
companies are performing with lower risks and higher profitability within a short span
of time, more and more people will be inclined to invest until and unless they are fully
educated with the dos and don'ts of mutual funds.

Recent trends in mutual fund industry:

The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by
nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties and got
off to a good start due to the stock market boom prevailing then. These banks did not
really understand the mutual fund business and they just viewed it as another kind of
banking activity. Few hired specialized staff and generally chose to transfer staff from
the parent organizations. The performance of most of the schemes floated by these
funds was not good. Some schemes had offered guaranteed returns and their parent
organizations had to bail out these AMCs by paying large amounts of money as the
difference between the guaranteed and actual returns. The service levels were also very
bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and
it is doubtful whether, barring a few exceptions, they have serious plans of continuing
the activity in a major way.The experience of some of the AMCs floated by private
sector Indian companies was also very similar. They quickly realized that the AMC
business is a business, which makes money in the long term and requires deep-pocketed
support in the intermediate years. Some have sold out to foreign owned companies,
some have merged with others and there is general restructuring going on.

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They can be credited with introducing many new practices such as new product
innovation, sharp improvement in service standards and disclosure, usage of
technology, broker education and support etc. In fact, they have forced the industry to
upgrade itself and service levels of organizations like UTI have improved dramatically
in the last few years in response to the competition provided by these.

Tracking mutual fund’s performance:

Objective parameters:

The NAV of the scheme will reflect the performance of the scheme. The fund will also
give you returns for various periods such as one month, three months, six months, one
year, three years, since inception, etc. This will give you an idea about the performance
of the fund. Funds also provide comparison with relevant benchmarks. This should tell
you whether the fund manager has performed better than the benchmark. However,
financial experts believe that these returns do not give the complete picture. They
believe that the return should be risk-adjusted. Various publications and Internet sites
provide such returns. The computation is complicated and they use various formulas for
this purpose.

Subjective parameters:

The performance alone does not make a fund house a winner. Equally important is the
service standards and transparency in actions. It is also essential that the fund offer
speedy solutions to grievances of investors. The reputation of the fund house among its
investors and public at large indicates how well the fund scores on this front.

Information sources:

Every financial daily offers daily NAV of all mutual fund schemes. Magazines also
come out with annual survey of mutual funds. There are even magazines dedicated

21
entirely towards mutual fund industry. Internet is also a great place for information.
There are dedicated sites as well as financial sites, which offer information on mutual
funds. Association of Mutual Funds of India (AMFI) home page is also a great place for
information.

Resolving grievances:

Mutual funds are regulated by SEBI (mutual fund) regulation 1996. Therefore, an
investor always has the recourse to approach the watchdog. Various investor forums
also take up the case of individual investors. You can also turn to judiciary as a last
resort.

Glossary:

NAV: NAV 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.

Sale price: The price you pay when you invest in a scheme. It is also called offer price.

Repurchase price: The price at which a close-ended scheme repurchases its units. It is
also called bid price.

Redemption price: The price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. This price is NAV related.

Entry load: The extra amount you pay when you invest in a scheme. It is also called
front-end load or sales load.

Exit load: Amount collected when you are selling or redeeming units.

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Various Mutual Fund schemes and their implications & Types:

Mutual fund schemes are classified on the basis of its structure and investment
objective.

By Structure

Open-ended funds: Investors can buy and sell units of open-ended funds at NAV-
related price every day. Open-end funds do not have a fixed maturity and it is available
for subscription every day of the year. Open-end funds also offer liquidity to
investments, as one can sell units whenever there is a need for money.

Close-ended funds: These funds have a stipulated maturity period, which may vary
from three to 15 years. They are open for subscription only during a specified period.
Investors have the option of investing in the scheme during initial public offer period or
buy or sell units of the scheme on the stock exchanges. Some close-ended funds
repurchase the units at NAV-related prices periodically to provide an exit route to the
investors.

Interval Funds: These funds combine the features of both open and close-ended funds.
They are open for sale and repurchase at a predetermined period.

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By Investment objective

Growth funds: They normally invest most of their corpus in equities, as their objective
is to provide capital appreciation over the medium-to-long term. Growth schemes are
ideal for investors with risk appetite.

Income funds: As the name suggests, the aim of these funds is to provide regular and
steady income to investors. They generally invest their corpus in fixed income securities
like bonds, corporate debentures, and government securities. Income funds are ideal for
those looking for capital stability and regular income.

Balanced funds: The objective of balanced funds is to provide growth along with
regular income. They invest their corpus in both equities and fixed income securities as
indicated in the offer documents. Balanced funds are ideal for those looking for income
and moderate growth.

Money market funds: These funds strive to provide easy liquidity, preservation of
capital and modest income. MMFs generally invest the corpus in safer short-term
instruments like treasury bills, certificates of deposit, commercial paper and inter-bank
call money. Returns on these schemes hinges on the interest rates prevailing in the
market. MMFs are ideal for corporate and individual investors looking to park funds for
short periods.

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Other schemes

Tax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax
rebates to investors under section 88 of the Income Tax Act. They generally have a
lock-in period of three years. They are ideal for investors looking to exploit tax rebates
as well as growth in investments.

Special schemes: These schemes invest only in the industries specified in the offer
document. Examples are Infotech funds, FMCG funds, pharma funds, etc. These
schemes are meant for aggressive and well-informed investors.

Index funds: Index Funds invest their corpus on the specified index such as BSE
Sensex, NSE index, etc. as mentioned in the offer document. They try to mimic the
composition of the index in their portfolio. Not only is the share, even their weightage
replicated. Index funds are a passive investment strategy and the fund manager has a
limited role to play here. The NAVs of these funds move along with the index they are
trying to mimic save for a few points here and there. This difference is called tracking
error.

Sector specific schemes: These funds invest only specified sectors like an industry or a
group of industries or various segments like �A� Group shares or initial public
offerings.

25
Types of mutual funds:

Most funds have a particular strategy they focus on when investing. For instance, some
invest only in Blue Chip companies that are more established and are relatively low
risk. On the other hand, some focus on high-risk start up companies that have the
potential for double and triple digit growth. Finding a mutual fund that fits your
investment criteria and style is important.
On the basis of their structure and objective, mutual funds can be classified into
following major types:
Closed-end funds
A closed-end mutual fund has a set number of shares issued to the public through an
initial public offering.
Open-end funds
Open end funds are operated by a mutual fund house which raises money from
shareholders and invests in a group of assets
Large cap funds
Large cap funds are those mutual funds, which seek capital appreciation by investing
primarily in stocks of large blue chip companies
Mid-cap funds
Mid cap funds are those mutual funds, which invest in small / medium sized companies.
As there is no standard definition classifying companies
Equity funds
Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest
pooled amounts of money in the stocks of public companies.

26
Equity funds
Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a
combination of common stock, preferred stock, bonds, and short-term bonds
Growth funds
Growth funds are those mutual funds that aim to achieve capital appreciation by
investing in growth stocks.

No load funds
Mutual funds can be classified into two types - Load mutual funds and No-Load mutual
funds.
Exchange traded funds
Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an
exchange, similar to a stock. Hence, unlike conventional mutual funds
Value funds
Value funds are those mutual funds that tend to focus on safety rather than growth, and
often choose investments providing dividends as well as capital appreciation.
Money market funds
A money market fund is a mutual fund that invests solely in money market instruments.
Money market instruments are forms of debt that mature in less than one year and are
very liquid.
International mutual funds
International mutual funds are those funds that invest in non-domestic securities
markets throughout the world.
Regional mutual funds
Regional mutual fund is a mutual fund that confines itself to investments in securities
from a specified geographical area, usually, the fund's local region.
Sector funds
Sector mutual funds are those mutual funds that restrict their investments to a particular
segment or sector of the economy.

27
Why invest through a Mutual Fund:

Affordability: Mutual funds allow you to start with small investments. For example, if
you want to buy a portfolio of blue chips of modest size, you should at least have a few
lakhs of rupees. A mutual fund gives you the same portfolio for meagre investment of
Rs 1,000-5,000. A mutual fund can do that because it collects money from many people
and it has a large corpus.

Professional management: The major advantage of investing in a mutual fund is that

you get a professional money manager for a small fee. You can leave the investment
decisions to him and only have to monitor the performance of the fund at regular
intervals.

Diversification: Considered the essential tool in risk management, mutual funds makes
it possible for even small investors to diversify their portfolio. A mutual fund can
effectively diversify its portfolio because of the large corpus. However, a small investor
cannot have a well-diversified portfolio because it calls for large investment. For
example, a modest portfolio of 10 blue-chip stocks calls for a few a few thousands.

Convenience: Mutual funds offer tailor-made solutions like systematic investment

plans and systematic withdrawal plans to investors, which is very convenient to
investors. Investors also do not have to worry about the investment decisions or they do
not have to deal with their brokerage or depository, etc. for buying or selling of
securities. Mutual funds also offer specialized schemes like retirement plan, children�s
plan, industry specific schemes, etc. to suit personal preference of investors. These

28
schemes also help small investors with asset allocation of their corpus. It also saves a lot
of paper work.

Cost effectiveness: A small investor will find that a mutual fund route is a cost
effective method. AMC fee is normally 2.5% and they also save a lot of transaction
costs as they get concession from brokerages. Also, they get the service of a financial
professional for a very small fee. If they were to seek a financial advisor's help directly,
they may end up pay more. Also, the size of the corpus should be large to get the
service of investment experts, who offer portfolio management.

Liquidity: You can liquidate your investments anytime you want. Most mutual funds
dispatch checks for redemption proceeds within two or three working days. You also do
not have to pay any penal interest in most cases. However, some schemes charge an exit
load.

Tax breaks: You do not have to pay any taxes on dividends issued by mutual funds.
You also have the advantage of capital gains taxation. Tax-saving schemes and pension
schemes give you the added advantage of benefits under Section 88. Investments up to
Rs 10,000 in them qualify for tax rebate.

Transparency: Mutual funds offer daily NAVs of schemes, which help you to monitor
your investments on a regular basis. They also send quarterly newsletters, which give
details of the portfolio, performance of schemes against various benchmarks, etc. They
are also well regulated and Sebi monitors their actions closely.

29
Selection parameters:

Your objective: The first point to note before investing in a fund is to find out whether
your objective matches with the scheme. It is necessary, as any conflict would directly
affect your prospective returns. For example, a scheme that invests heavily in mid-cap
stocks is not suited for a conservative equity investor. He should be better off in a
scheme, which invests mainly in blue chips. Similarly, you should pick schemes that
meet your specific needs. Examples: pension plans, children’s plans, sector-specific
schemes, etc.

Your risk capacity and capability: this dictates the choice of schemes. Those with no
risk tolerance should go for debt schemes, as they are relatively safer. Aggressive
investors can go for equity investments. Investors that are even more aggressive can try
schemes that invest in specific industry or sectors.

Fund Manager’s and scheme track record: Since you are giving your hard earned
money to someone to manage it, it is imperative that he manages it well. It is also
essential that the fund house you choose has excellent track record. It also should be
professional and maintain high transparency in operations. Look at the performance of
the scheme against relevant market benchmarks and its competitors. Look at the
performance of a longer period, as it will give you how the scheme fared in different
market conditions.

Cost factor: Though the AMC fee is regulated, you should look at the expense ratio of
the fund before investing. This is because the money is deducted from your
investments. A higher entry load or exit load also will eat into your returns. A higher

30
expense ratio can be justified only by superlative returns. It is very crucial in a debt
fund, as it will devour a few percentages from your modest returns.

List of Mutual Fund Companies in India:

Some of the popular firms that deal in mutual funds in India are:

• Reliance Mutual Funds

• HDFC

• ABN Amro
• AIG

• Bank of Baroda
• Canara Bank
• Birla Sun Life
• DSP Merrill Lynch
• DBS Chola Mandalam AMC
• Escorts Mutual
• Deutsche Bank
• ING

• HSBC

• ICICI Prudential
• LIC

• JP Morgan
• Kotak Mahindra
• Lotus India
• JM Financial
• Morgan Stanley
• State Bank of India (SBI)

31
• Sahara Mutual Funds
• Sundaram BNP Paribas
• Taurus Mutual Funds
• Tata

• UTI

Best Mutual Funds in India:

Before knowing about the arguably best mutual funds in India, it is important to know
the factors that actually decide their fate in the market.

In order to get an actual ideal of the best performing mutual funds in the market, one
needs to track its current Net Asset Value or NAV. NAV stands for the latest market
value of the holdings of a fund that brings down the fund's liabilities, which are
generally indicated in terms of per share amount. On a daily basis, most of the funds'
NAV is decided. This is determined after the trade closes on certain financial
exchanges. The net asset value of the mutual funds is ascertained at the end of the
trading day. An increase in NAV signifies rise in the holdings of the shareholder. The
Fund Firm will then do the transaction on the shares along with the sales fees. While
open-ended net asset value of the mutual funds is issued daily, the close-ended NAV of
the mutual fund is released on a weekly basis. You can calculate net asset value of the
mutual fund easily. Track the latest market value of the net assets of the fund and then
subtract that by the number of outstanding shares.

Top mutual funds in India :

Here are some of the top mutual funds in India that are listed below :

• Fund Reliance Mutual Fund

• The DSP ML Tiger Fund
• SBI Magnum Contra Fund
• HDFC Equity Fund
• Prudential ICICI Dynamic Fund
• SBI Mutual

32
SCOPE FOR DEVELOPMENT OF MUTUAL FUND BUSINESS IN
INDIA:-
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. India has a burgeoning population of middle class now estimated
around 300 million. A typical Indian middle class family can have liquid savings
ranging from Rs.2 to Rs.10 Lacs today. Investments in Banks are liquid and safe, but
with the falling rate of interest offered by Banks on Deposits, it is no longer attractive.
At best a part can be saved in bank deposits, but what are the other sources of
investment for the common man? Mutual Fund is the ready answer. Viewed in this
sense globally India is one of the best markets for Mutual Fund Business, so also for
Insurance business. This is the reason that foreign companies compete with one another
in setting up insurance and mutual fund business units in India. The sheer magnitude of
the population of educated white collar employees provides unlimited scope for
development of Mutual Fund Business in India.
The alternative to mutual fund is direct investment by the investor in equities and bonds
or corporate deposits. All investments whether in shares, debentures or deposits involve
risk. While risk cannot be eliminated, skillful management can minimize risk.
Mutual Funds help to reduce risk through diversification and professional management.
The experience and expertise of Mutual Fund managers in selecting fundamentally
sound securities and timing their purchases and sales help them to build a diversified
portfolio that minimizes risk and maximizes returns.

ROLE OF SEBI IN MUTUAL FUNDS:

To protect the interest of the investors, SEBI formulates policies and regulates the
mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues
guidelines from time to time. MF either promoted by public or by private sector entities

33
including one promoted by foreign entities are governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody. The general power of
superintendence and direction over AMC is vested with the trustees.

According to SEBI Regulations, two thirds of the directors of trustee company or board
of trustees must be independent . They should not be associated with the sponsors. 50%
of the directors of AMC must be independent. All mutual funds are required to be
registered with SEBI before they launch any scheme.

Increase of load more than the level mentioned in the offer document is applicable only
to prospective investments by the MFs. For original investments, the offer documents
has to be amended to make investors aware of loads at the time of investments.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):

With the increase in mutual fund players in India, a need for mutual fund association in
India was generated to function as a non-profit organization. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund
schemes are its members. It functions under the supervision and guidelines of its Board
of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry
to a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.

34
The objectives of Association of Mutual Funds in India:
The Association of Mutual Funds of India works with 30 registered AMCs of the
country. It has certain defined objectives which juxtaposes the guidelines of its Board of
Directors. The objectives are as follows:

• This mutual fund association of India maintains a high professional and ethical
standards in all areas of operation of the industry.

• It also recommends and promotes the top class business practices and code of conduct
which is followed by members and related people engaged in the activities of mutual
fund and asset management. The agencies who are by any means connected or involved
in the field of capital markets and financial services also involved in this code of
conduct of the association.

• AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual
fund industry.

The sponsors of Association of Mutual Funds in India:

Bank Sponsors

• SBI Fund Management Ltd.

• BOB Asset Management Co. Ltd.
• Canbank Investment Management Services Ltd.
• UTI Asset Management Company Pvt. Ltd.

Institutions

• GIC Asset Management Co. Ltd.

• Jeevan Bima Sahayog Asset Management Co. Ltd.

35
Private Sector Indian:

• BenchMark Asset Management Co. Pvt. Ltd.

• Cholamandalam Asset Management Co. Ltd.
• Credit Capital Asset Management Co. Ltd.
• Escorts Asset Management Ltd.
• JM Financial Mutual Fund

Predominantly India Joint Ventures:

• Birla Sun Life Asset Management Co. Ltd.

• DSP Merrill Lynch Fund Managers Limited
• HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:

• ABN AMRO Asset Management (I) Ltd.

• Alliance Capital Asset Management (India) Pvt. Ltd.
• Deutsche Asset Management (India) Pvt. Ltd.
• Fidelity Fund Management Private Limited
• Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.
• HSBC Asset Management (India) Private Ltd.
• ING Investment Management (India) Pvt. Ltd.
• Morgan Stanley Investment Management Pvt. Ltd.

36
MUTUAL FUND INDUSTRY SNAPSHOT – MARCH 2010:
Mutual fund AMU down in March:
In spite of the risk in sensex in the month of March the average assets Under
Management of the Mutual Fund industry fell by 4.37%. The main reason behind the
fall was pulling out of money by Banks and Corporate to meet their liquidity
requirements for advance tax payments and other requirements at the end of the fiscal
year. The MF Industry AAUM for the Month of March 10 stood at Rs.747525 crs,
compared to Rs.781711Crs, in Feb 2010. Huge outflows in Income funds were also a
main reason for fall in industry AAUM. The fall in the month of March AAUM is a
general trend observed during the end every fiscal where banks and corporate have
increased liquidity requirements.
AUM Movement-Month on Month Analysis:
• The increase in AAUM witnesses in the previous month could not be sustained in the
month of March and the industry assets fell by 4.37%, as corporate and Banks
withdrew2 money mainly from Income Schemes.

• Out of the 5 largest Fund houses in terms of AUM, only 2 witnessed an increase while
the rest saw a fall in their AUM

• The three largest fund houses Reliance MF, HDFC MF and Birla MF had a fall of
4.61%, 6.70% and 6% respectively in their AAUM in March.

• Highest increase in AUM was witnessed by Edelweiss MF, DSP Blackrock MF and
Quantum MF to the extent of 30%, *% and 5.5% respectively.

• The highest decrease was seen by JP Morgan MF, AIG Global Investment Group MF
to the extent of 24% and 22% respectively.

37
MF and FII Activities:
• MFs were net sellers in both equity market and bebt market to the extent of
Rs,4082Crs. And Rs.9349Crs. respectively for the month ended March 10.

FIIs were net buyers in the equity as well debt markets to the extent of Rs. !804crs. &
Rs. 9432crs respectively.

38
Top 10 Mutual Funds ( March 2010 )

Net Flows in Mutual Funds:

39
• In the month of March the MF industry witnessed huge net outflows to the extent Rs.
162165 crs, with income funds witnessing the highest outflows. Net Flows were
positive in the month of Feb 2010.

• The outflow was owing to pulling out of money by Banks and corporate for liquidity
requirements.

• The highest net outflows were witnessed in Income schemes to the extent of Rs.
164487crs.

• Second in line were equity schemes witnessing redemptions to the extent of

Rs.2016crs.

• Liquid and Money Market schemes has a net inflow of Rs. 3971crs

40
 Chapter-II

Research problem
&
Objectives of the study

41
RESEARCH PROBLEM:
• To know what is a Mutual Fund.

• What are the various schemes available in mutual fund.

• How a lay investor can measure the performance of the fund before
investing in any mutual fund.

OBJECTIVE OF THE STUDY:

Main objective of the project is to find out the strategies of different E-Broking firms
and evaluate them. Project is about to penetrate the competitors of ANGEL BROKING
LTD. Conclusion of this project can give an idea of strategies of different companies
which may

• Understand the concept of financial performance.

• Understand the ways through which we can calculate the financial
performance
• To analyse existing financial performance of Angel broking ltd and
difficulties involved in it.

42
 • To evaluate the performance of 3 different equity schemes based on
BETA and rate of return.
• To compare the NAV trend of the funds to that of the NSE Nifty.

NEED OF THE STUDY

• To know the effective utilization of the financial performance in the

company.
• To know how management makes use of various financial
techniques,, for administering the financial affairs of the firm in the most
effective and efficient way.
• Therefore it means that entire guaranty of managerial efforts
devoted to the management of finance.

LIMITATION:
• The study is limited to 3 equity schemes of mutual funds.
• Only one month NAV is taken into consideration to evaluate the performance of
equity schemes.
• There may be scope for committing statistical errors.

43
 • The schemes that are more than 1 years old have been considered for evaluation.
• Only open-ended funds are considered for evaluation.
• Among growth and dividend schemes, only growth schemes have been taken so as
to avoid repetition (as portfolio remains identical for both the options).

ASSUMPTIONS:-

• NSE Nifty is taken as benchmark.

• Risk free rate is assumed to be 7%.

Chapter-III

Research design
Research methodology & Data collection

44
RESEARCH DESIGN:
Three mutual funds are chosen, their risk, return and performance is calculated and
analysis is made.
RESEARCH METHODOLOGY:

The collection method includes both the primary and secondary collection methods.

Primary data methods: This method includes the data collection from the personal
discussion with the authorities’ clerks and members of the exchange.

Secondary data: This method includes the lectures of the superintend of the
department of market operations and so on.., also the data collected from the news,
magazines and newspapers.

Data collection:

45
The present study is based on Secondary data. The various source of secondary data
include
• Share prices of different BSE Sensex companies.
• Information provided by ANGEL BROKING LTD.
• Magazines
• Websites
 nseindia.com
 investopedia.com
 angelbroking.com
 mutualfundsindia.com
 hdfcfund.com
 moneycontrol.com

Chapter-IV

Literature review

46
4 Common Mistakes Made by Mutual Fund Investors

1) Believing Distorted Performance Comparisons

Wall Street enjoys having the performance of its investment funds compared to
inaccurate yardsticks. Not only does it help to distort true performance but it gives
funds an artificial look of superiority.

Take recent analysis by Bloomberg, which concluded that only 2 of the 10 largest
mutual funds in the U.S. are beating their primary benchmarks this year. (through early
June 2010). It shows how even large media enterprises can be misled by true fund
performance.

47
One of the funds Bloomberg analyzed is the Fidelity Contra fund whose performance
was compared to the S&P 500, a large cap U.S. stock yardstick. Only problem is,
FCNTX, a so-called domestic equity fund, had around 16% of its assets invested in
international stocks at the end of April. The only way to fairly compare FCNTX's true
performance would be to use a blended benchmark of indexes that accurately replicate
the fund's asset mix over the same time period.

Because Wall Street uses misleading yardsticks of performance, such as peer group
comparisons, incongruent indexes and other minutia, the public is misled.

Here's the bottom line: The fund industry and analysts should be forced by the
Securities and Exchange Commission to use blended benchmarks for an accurate
measure of the performance for their funds. And furthermore, the Inspector Closeouts
running the SEC should've long ago had rules in place to enforce this.

2) Buying into Mutual Fund Ratings

Many people have the misinformed view that selecting mutual funds with the best
performance, the most stars or the highest rating is the surest way to get ahead. But the
facts say otherwise.

A gander at the marketing practices of the mutual fund industry are a good lesson in
caveat emptor. Magazine covers and advertisements touting hot performing mutual
funds with top rankings are everywhere. Unfortunately, these ads prey on unsuspecting
buyers by giving them the false impression that top performing funds will consistently
repeat their former success. 'Star ratings have little predictive value,' states John Boggle,
in Common Sense on Mutual Funds (John Wiley & Sons 2010). Put another way, fund
ratings are an effective sales and marketing tool but not an effective research tool.

48
Similarly, a research piece by Advisor Perspectives analyzed fund ratings and arrived at
a similar conclusion. 'We concur that (mutual fund) ratings are not an effective forward-
looking measure, but that is not how they are used in the industry,' states the report's
author Robert Huebscher. The report also suggested that mutual fund ratings should be
renamed 'Historical Performance Measures' or something similar. This would help
investors to avoid confusing fund ratings as forward looking benchmarks of
performance.

Instead of analyzing historical performance, fund investors should be paying attention

to costs, tax-efficiency and making sure the funds they choose compliment their
investment goals.

3) Implicit Faith in Fund Managers

Despite experiencing the worst stock market drop since the Great Depression in 2008
and a 'lost decade' of subpar performance, surely mutual fund managers have helped
their investors to get ahead, right?

After evaluating 2008's bear market performance, Dalbar reported in its Quantitative
Analysis of Investor Behavior that in 2008 stock fund investors lost 41.6% compared to
the 37.7% loss for the S&P 500 Index. Why are these findings significant and what do
they prove?

Since the S&P 500 (NYSEArca:) is a fully invested index, with no cash or bonds, it
theoretically should've underperformed compared to actively managed funds designed
to beat it. But it didn't. This contradicts one of the famous sales pitches given for buying

49
actively managed funds that attempt to beat benchmarks like the S&P 500, which is that
portfolio managers can protect their shareholders during a bear market by going into
cash, whereas an index fund or index ETF cannot.

Instead of proving that, it proves something quite different.

The fact that stock fund investors performed worse than a fully invested benchmark like
the S&P 500, shows 1) portfolio managers are ineffective market timers, 2) portfolio
managers have done a good job of not protecting shareholder's capital and 3) protection
during bear markets from portfolio managers is largely a myth.

If you're a mutual fund investor that believes your fund manager can protect you from
the next big crisis or whatever, it's probably time to re-think your blind faith.

4) Ignoring Taxes

People invest in mutual funds as if taxes don't matter. And the results have been
disastrous.

A 2009 Lipper study found that buy-and-hold investors with stock mutual funds in a
taxable account surrendered between 1.13% to 2.13% of their annual returns over the
past 10 years. If that doesn't sound like a lot, just remember it does not include the
additional burden of annual fund expenses, sales charges, and internal brokerage trading
costs. Added up all together, the annualized performance drag could be anywhere from
3 to 6 percent.

50
Lipper states, 'Fund families and their boards should place more importance on serving
the taxable investor by stressing after-tax performance and by providing improved
compensation packages rewarding tax efficient behavior at the fund level.'

5 Ways to Measure Mutual Fund Risk

By Richard Lath

There are five main indicators of investment risk that apply to the analysis of stocks,
bonds and mutual fund portfolios. They are alpha, beta, r-squared, standard deviation
and the Sharpe ratio. These statistical measures are historical predictors of investment
risk/volatility and are all major components of modern portfolio theory (MPT). The
MPT is a standard financial and academic methodology used for assessing the
performance of equity, fixed-income and mutual fund investments by comparing them
to market benchmarks.

51
All of these risk measurements are intended to help investors determine the risk-reward
parameters of their investments. In this article, we'll give a brief explanation of each of
these commonly used indicators.

1. Alpha
Alpha is a measure of an investment's performance on a risk-adjusted basis. It takes the
volatility (price risk) of a security or fund portfolio and compares its risk-adjusted
performance to a benchmark index. The excess return of the investment relative to the
return of the benchmark index is its "alpha".

Simply stated, alpha is often considered to represent the value that a portfolio manager
adds or subtracts from a fund portfolio's return. A positive alpha of 1.0 means the fund
has outperformed its benchmark index by 1%. Correspondingly, a similar negative
alpha would indicate an underperformance of 1%. For investors, the more positive an
alpha is, the better it is.

2. Beta
Beta, also known as the "beta coefficient," is a measure of the volatility, or systematic
risk, of a security or a portfolio in comparison to the market as a whole. Beta is
calculated using regression analysis, and you can think of it as the tendency of an
investment's return to respond to swings in the market. By definition, the market has a
beta of 1.0. Individual security and portfolio values are measured according to how they
deviate from the market.

A beta of 1.0 indicates that the investment's price will move in lock-step with the
market. A beta of less than 1.0 indicates that the investment will be less volatile than the
market, and, correspondingly, a beta of more than 1.0 indicates that the investment's

52
price will be more volatile than the market. For example, if a fund portfolio's beta is 1.2,
it's theoretically 20% more volatile than the market.

Conservative investors looking to preserve capital should focus on securities and fund
portfolios with low betas, whereas those investors willing to take on more risk in search
of higher returns should look for high beta investments.

3. R-Squared
R-Squared is a statistical measure that represents the percentage of a fund portfolio's or
security's movements that can be explained by movements in a benchmark index. For
fixed-income securities and their corresponding mutual funds, the benchmark is
the U.S. Treasury Bill and, likewise with equities and equity funds, the benchmark is
the S&P 500 Index.

R-squared values range from 0 to 100. According to Morningstar, a mutual fund with an
R-squared value between 85 and 100 has a performance record that is closely correlated
to the index. A fund rated 70 or less would not perform like the index.

Mutual fund investors should avoid actively managed funds with high R-squared ratios,
which are generally criticized by analysts as being "closet" index funds. In these cases,
why pay the higher fees for so-called professional management when you can get the
same or better results from an index fund?

4. Standard Deviation
Standard deviation measures the dispersion of data from its mean. In plain English, the
more that data is spread apart, the higher the difference is from the norm. In finance,
standard deviation is applied to the annual rate of return of an investment to measure its
volatility (risk). A volatile stock would have a high standard deviation. With mutual

53
funds, the standard deviation tells us how much the return on a fund is deviating from
the expected returns based on its historical performance.

5. Sharpe Ratio
Developed by Nobel laureate economist William Sharpe, this ratio measures risk-
adjusted performance. It is calculated by subtracting the risk-free rate of return (U.S.
Treasury Bond) from the rate of return for an investment and dividing the result by the
investment's standard deviation of its return.

The Sharpe ratio tells investors whether an investment's returns are due to smart
investment decisions or the result of excess risk. This measurement is very useful
because although one portfolio or security can reap higher returns than its peers, it is
only a good investment if those higher returns do not come with too much additional
risk. The greater an investment's Sharpe ratio, the better its risk-adjusted performance.

Conclusion
Many investors tend to focus exclusively on investment return, with little concern for
investment risk. The five risk measures we have just discussed can provide some
balance to the risk-return equation. The good news for investors is that these indicators
are calculated for them and are available on several financial websites, as well as being
incorporated into many investment research reports. As useful as these measurements
are, keep in mind that when considering a stock, bond, or mutual fund investment,
volatility risk is just one of the factors you should be considering that can affect the
quality of an investment.

54
Chapter-V

55
Introduction to company/organization

Profile of the Organization :

In a shot span of 18 years since inception, the Angel Group has emerged as one of the
top five retail stock broking houses in India, having membership of BSE,NSE and the
two leading Commodity Exchanges in the country i.e. NCDEX &MCX. Angel Broking
is also registered as a Depository Participant with CDSL.The group is promoted by Mr.
Dinesh Thakkar, who started this business as a sub-broker in 1987 with a team of 3.
Today the angel group is managed by a team of 1937 direct employees and has a
nationwide network comprising of 12Regional hubs, 64 branches and 2759 sub brokers
& business associates. Angelis 100% focused on retail stock broking business unlike

56
any other larger national broking house. The group currently services more than 226030
retail clients.
Angel habitually generates value added features without the cost burden being passed
on to the clients as they strongly believe that better understanding of client’s needs and
wants is their top priority. Their e-broking facility is one such effort, which gives the
client a platform to access state of the art trading facility at the click of a button.
Angel has always strived for delivering customer delight and developing strong long
term bonds with its clients as well as channel partners. Angel thrives on a vision to
introduce new and innovative products and services constantly. Moreover, Angel has
been among the pioneers to introduce the late technological innovations and integrate
them efficiently within its business.

The mainline Business Activities of Angel are:

• Stock Broking
• Derivatives Trading
• Online Trading
• Wholesale debt market operations
• Depository services with CDSL
• IPO Distribution and Advisory
• Mutual Fund Distribution and Advisory
• Commodities Trading

57
58
“Angel Broking” is the retail broking arm of SSKI, an organization with more than
eight decades of trust & credibility in the stock market. It is India's leading retail
financial Services Company with We have over 250 share shops across 115cities in
India. While our size and strong balance sheet allow us to provide you with varied
products and services at very attractive prices, our over 750 Client Relationship
Managers are dedicated to serving your unique needs. Angel Broking is lead by highly
regarded management team that has invested cores of rupees into a world-class
Infrastructure that provides our clients with real-time service & 24/7 access to all
information and products. Our flagship Angel Broking Professional Network offers
real-time prices, detailed data and news, intelligent analytics, and electronic trading
capabilities, right at your fingertips. This powerful technology complemented by our
knowledgeable and customer focused Relationship Managers. We are creating world of
Smart Investor. Angel Broking offers a full range of financial services and products
ranging from Equities to Derivatives enhance your wealth and hence, achieve your
financial goals. Angel Broking' Client Relationship Managers are available to you to
help with your financial planning and investment needs. To provide the highest possible
quality of service, Angel Broking provides full access to all our products and services
through multi-channels

59
About Broking Angel:

Mr. Dinesh Thakkar established Angel Broking in 1987, and today it is one of the
leading Indian stock broking and wealthmanagement
houses, with an absolute focus on retail business and a commitment to provide “real
value for money” to its clients. The Angel Group is a member of the Bombay Stock
Exchange, the National Stock Exchange, and the country’s two
leading commodity exchanges, the NCDEX and MCX. Angel is also registered as a
Depository Participant with CDSL.
The International Finance Corporation (IFC) in Washington, a World Bank affiliate,
recognized the great value proposition of Angel’s unique Retail Focused Business
Model by acquiring a 12.3% stake in the group’s holding company in December 2007.
Angel provides a wide range of personalized wealth-management and investment
services to its retail clients. These include Stock and Commodity Trading, Portfolio
Advisory and Management Services, Investment Advisory Services, distribution of
Mutual Funds, IPOs, Personal Loans and Insurance, as well as E-broking & Depository
services – all supported by intensive research and a six sigma-backed Quality Assurance
program.
Angel Group provides its value-added services to over 5.1 lakh individual retail
investors through its nationwide network of 164 branches, including 20 regional hubs &
25 distribution offices , 5,430+ sub-brokers/business associates and 5,900+ direct and
15, 000 indirect employees. Angel Broking has one of the largest trading terminal bases
(11,997 terminals) in the country, and the largest sub-broker network on the NSE. It
records daily business volumes of 3,500 crores in equities, 650 crores in
commodities, and 550 crores through online broking. With over 1,500 outlets connected
through its state-of-the-art IT network, Angel offers personalized and world-class
services.
The company has top-quality, retail-focused research, as well as expert dealing
facilities. Modern, centralized helpdesks answer investor queries and address any
concerns 24x7. Angel’s web-enabled, value-added back office is staffed by a brilliant

60
team of experts for Quality Assurance.
Vision of the Company

To provide best value for money to investors through innovative products,

trading / investment strategies, state-of-the-art technology and
personalized service

Philosophy of the Company

Ethical practices & transparency in all our dealings customer interest above
our own always deliver what we promise effective cost management.

Quality Assurance Policy

We are committed to being the leader in providing World Class Product &
Services which exceed the expectations of our customers Achieved
by teamwork and a process of continuous improvement

History:

“Angel Broking” is the retail broking arm of SSKI, an organization with more

than eight decades of trust & credibility in the stock market. It is India's leading retail
financial Services Company with We have over 250 share shops across 115 cities in
India. While our size and strong balance sheet allow us to provide you with varied
products and services at very attractive prices, our over 750 Client Relationship
Managers are dedicated to serving your unique needs. Angel Broking is lead by a highly
regarded management team that has invested crores of rupees into a world class
Infrastructure that provides our clients with real-time service & 24/7 access to all
information and products. Our flagship Angel Broking Professional Network offers
real-time prices, detailed data and news, intelligent analytics, and electronic trading
capabilities, right at your fingertips. This powerful technology complemented by our

61
knowledgeable and customer focused Relationship Managers. We are creating a world
of Smart Investor. Angel Broking offers a full range of financial services and products
ranging from Equities to Derivatives enhance your wealth and hence, achieve your
financial goals. Angel Broking' Client Relationship Managers are available to you to
help with your financial planning and investment needs. To provide the highest possible
quality of service, Angel Broking provides full access to all our products and services
through multi- channels.

Angel Booking’s tryst with excellence in customer relations began in 1987. Today,
Angel has emerged as one of the most respected Stock-Broking and Wealth
Management Companies in India. With its unique retail-focused stock trading business
model, Angel is committed to providing ‘Real Value for Money’ to all its clients.

The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock
Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX &
MCX. Angel is also registered as a Depository Participant with CDSL.

62
Core Values:
Our Vision
To provide best value for money to investors through innovative products,
trading/investments
strategies, state of the art technology and personalized service.
Our Motto
To have complete harmony between quality-in-process and continuous improvement to
deliver exceptional service that will delight our Customers and Clients.
Our CRM Policy : Customer is King
“A Customer is the most Important Visitor on our premises. He is not dependent on us,
but we are dependent on him. He is not an interruption in our work. He is the purpose of
it. He is not an outsider in our business. He is part of it. We are not doing him a favour
by serving him. He is doing us a favour by giving us an opportunity to do so.”
Business Philosophy

• Ethical practices & transparency in all our dealings

• Customers interest above our own
• Always deliver what we promise

• Effective cost management

Our Quality Assurance Policy

We are committed to providing world-class products and services which exceed
the expectations of our customers, achieved by teamwork and a process of
continuous improvement.

63
Management

Mr. Dinesh Thakkar: Founder Chairman & Managing Director

Mr. Lalit Thakkar: Director – Research
Mr. Amit Majumdar: Executive Director – Strategy and Finance
Mr. Rajiv Phadke: Executive Director – HR & Corp
Mr. Vinay Agrawal: Executive Director – Equity Broking
Mr. Nikhil Daxini: Executive Director - Sales and Marketing
Mr. Hitungshu Debnath: Executive Director - Distribution & Wealth
Management
Mr. Mudit Kulshreshtha: Executive Director – Operation

Milestones:
Awarded with 'Broking House with Largest Distribution Network' and 'Best Retail
Broking House' at Dun & Bred street Equity Broking Awards 2009
August,2008 Crossed 500000 trading accounts

● November,2007 ‘Major Volume Driver’ for 2007

● October,2006 ‘Major Volume Driver’ award for 2006

● September,2006 Launched Mutual Fund and IPO business

● July,2006 Launched the PMS function

● October,2005 ‘Major Volume Driver’ award for 2005

● September,2004 Launched Online Trading Platform

● April,2004 Initiated Commodities Broking division

64
● April,2003 First published research report

● November,2002 Angel’s first investor seminar

● March,2002 Developed web-enabled back office software

● November,1998 Angel Capital and Debt Market Ltd. Incorporated

● December,1997 Angel Broking Ltd. Incorporated

Services and Commodities:

Equity:
Investing in shares or stock market is inarguably the best route to long-term wealth
accumulation. However, it can also be a very risky proposition due to high risk-return
trade-off prevalent in the stock market. Hence, it is more appropriate to take help of an
experienced and trustworthy expert who will guide you as to when, where and how to
invest.

Angel provides guidance in the exciting world of stock market with suitable trading
solutions and value-added tools and services to enhance your trading experience.

Online Trading

• Three different online products tailored for traders & investors

• Customized single screen Market Watch for multiple exchanges
• Real-time rates
• Flash news & intra-day calls
• Intra-day & historical charts with technical tools
• Online research
• E-broking & back-office software training

65
Quality Research

• Wide range of daily, weekly and special Research reports

• Expert Sector Analysts with professional industry experience

Advisory

• Real-time market information with News updates

• Investment Advisory services
• Dedicated Relationship Managers
• Portfolio Management Services

Support

• 24x7 Web-enabled Back Office

• Centralized Help Desk
• Live Chat support system etc…

66
Products of Angel Broking:

E-Broking
Angle has 3 different products and voila trading on BSC, NSC,F&O, MCX & NCDEX.
It provides three software’s to customers for online trading.
1. Angel Diet
• Application based ideal for traders.
• User friendly & simple navigation
• Robust & speedier execution of trade
• BSC, NSC, F&O, MCX & NCDEX
2. Angel Trade
• Browser based for investor
• No installation required
• Advantage of mobility

3. Angel Anywhere
• Application based ideal for traders using technical tool
• Intra-day/historical charts with various indicators
• BSC, NSC, Cash & Derivatives

67
Investment and Advisory Services;
To derive optimum returns from equity as an asset class requires professional guidance
and advice. Professional assistance will always be beneficial in wealth creation.
Investment decisions
Without expert advice would be like treating ailment without the help of a doctor.
• Expert Advice: Their expert investment advisors are based at various
branches across India to provide assistance in designing and monitoring
portfolios.
• Timely Entry & Exit: Their advisors will regularly monitor customer’s
investments and guide customers to book timely profits. They will also guide
them in adopting switching

Commodities
A commodity is a basic good representing a monetary value. Commodities are most
often used as a inputs in the production of other goods or services. With the advent of
new online exchange, commodities can now be traded in futures markets. When they
are traded on an exchange,
Commodities must also meet specified minimum standards known as a basic grade.

Depositary Participant Service;

Angel Broking Ltd. Is a DP services provider though CDSL.We offer depository
services to create a seamless transaction platform to execute trades through Angel group
of companies and
Settle these transactions through Angel Depository services.
• Wide branch coverage
• Personalized/attentive services of trained a dedicated staff
• Centralized billing & accounting
• Acceptance & execution of instruction on fax
• Daily statement of transaction & holdings statement on email
• No charges for extra transaction statement

68
Portfolio management Services:

Successful investing in Capital Markets demands ever more time and expertise.
Investment Management is an art and a science in itself. Portfolio Management Services
(PMS) is one such service that is fast gaining eminence as an investment avenue of
choice for High Net worth Investors (HNI). PMS is a sophisticated investment vehicle
that offers a range of specialized investment strategies to capitalize on opportunities in
the market. The Portfolio Management Service combined with competent fund
management, dedicated research and technology, ensures a rewarding experience for its
clients .Angel PMS brings with it years of experience, expertise, research and the
backing of India's leading stock broking house. At Angel, experienced portfolio
management is the difference. It will advise you on a suitable product based on factors
such as your investment horizon, return expectations and risk tolerance.

Mutual Funds:
To enable clients to diversify their investment in the right direction. Angel Broking has
added another product in its range with mutual funds.
• Access to in-depth research & proper selection from diversified
funds based on your preferred criteria
• Rating and rankings of all mutual funds from our in house expert
analysts
• News and alert for your Mutual fund Portfolio and performance
tracking with watch lists
• Current and historical performance of different funds enabling
comparisons

69
Benefits
• No risk of loss, wrong transfer, mutilation or theft of share
certificates.
• Hassle free automated pay-in of your sell obligations by your
clearing members
• Reduced paper work.
• Speedier settlement process. Because of faster transfer and
registration of securities in your account, increased liquidity of your
securities.
• Instant disbursement of non-cash benefits like bonus and rights into
your account.
• Efficient pledge mechanism.
• Wide branch coverage. Personalized/attentive services of trained
help desk. Zero’ upfront payment. No charges for extra transaction
statement & holding statement.

70
Fundamental Services:
The Sunday Weekly Report
This weekly report is ace of all the reports. It offers comprehensive market overview
and likely trends in the weekahead.It also presents top picks based on an in-depth
analysis of technical
and fundamental factors. It gives short term and long-term outlook on these scripts,
their price targets and advice trading strategies. Another unique feature of this report is
that it provides an
Updated view of about 70 prominent stocks on an ongoing basis.

Stock Analysis
Angel’s stock research has performed very well over the past few years and angel
model portfolio has consistently outperformed the benchmark indices. The
fundamentals of select scripts are thoroughly analyzed and actionable advice is
provided along with investment rationale for each scrip

Flash News
Key developments and significant news announcement that are likely to have an impact
on market / scripts are flashed live on trading terminals. Flash news keeps the market
men updated on an online basis and helps them to reshuffle their holdings

71
Technical Services:
Intra-Day Calls
For day traders angel provides intraday calls with entry, exit and stop loss levels during
the market hours and our calls areflashed on our terminals. Our analysts continuously
track the calls and provide the recommendations according to the market movements.
Past performance of these calls in terms of profit/losses also available to our associates
to enable them to judge the Success rate.

Posting Trading Calls

Angels “Position Trading Calls” are based on a thorough analysis of the price
movements in selected scripts and provides calls for taking positions with a 10 - 15 days
time span with stop losses and targets. These calls are also flashed on our terminals
during market hour

Derivative Strategies
Our analyst take a view on the NIFTY and selected scripts based on derivatives and
technical tools and devise suitable “Derivative Strategies” , which are flashed on our
terminals and Published in our derivative reports

72
SWOT ANALYSIS:

STRENGTHS:
• Understanding the needs of a channel partner and retail investor
very well.
• Deriving inspiration from their vision of providing the best value for
money to their clients.

73
 • Strict adherence to compliance norms.
• Timely research based advice to their clients.
• 50 member research / advisory team comprising of experienced
fundamental and technical analysis, sector specialties, derivative
strategist and commodity analysts
• Strong Communication Network.
• Good Image and strong back ground.
WEAKNESSES:
• High Employee Turnover.
• No lifetime facility for Demat A/c
• No funding facility

OPPORTUNITIES:
• To get into the segment of such investors who are less risky.
• Marketing at rural and semi-urban areas.
THREATS:
• Increasing number of local players.
• Past image of Stock market

REGIONAL OFFICES:

• Ahmadabad
• Bangalore
• Chennai
• Hyderabad
• Indore
• Jaipur
• Kolkata
• Mumbai
• New Delhi

74
 • Pune
• Rajkot
• Surat

Angel Broking- Mutual Fund Model Portfolios:

Investors who want to participate in the capital markets for wealth creation but do not
have the expertise to do so, or investors looking to diversify their investment portfolios,
Mutual Funds are the best way of doing so. At Angel Broking we have designed five
Mutual Fund model portfolios to suit investment needs of different types of investors
based on their risk profile which can be Very Aggressive.

Angel Broking- Mutual Fund Model Portfolios:

75
Angel - Mutual Fund Research & Advisory:
Three Unique MF Model Portfolios for Investors based on their Risk-Return
Appetite
1 Investment Planning:

76
2 Investor Profile

77
3 M F Portfolio Composition;

78
Customers of Angel Broking:
79
Reliance Mutual Fund Feb 24 1995 Indian Private
5241111819.00
HDFC Mutual Fund Dec 10 1999 Indian Private
344294702.80
ICICI Prudential Mutual Fund Jun 22 1993 Joint Venture
755783063.90
UTI Mutual Fund Nov 14 2002 Indian Public
482679456.70
Birla Sun Life Mutual Fund Sep 5 1994 Joint Venture
663369531.80
LIC Mutual Fund Apr 20 1994 Indian Public
19440507.20
SBI Mutual Fund Feb 7 1992 Indian Public
411439826.30
Franklin Templeton Mutual Fund Oct 6 1995 Foreign
502334911.90
Kotak Mahindra Mutual Fund Aug 5 1994 Indian Private
272333845.30
IDFC Mutual Fund Dec 20 1999 Indian Private
511625623.20
Tata Mutual Fund Mar 15 1994 Joint Venture
532122051.30
DSP BlackRock Mutual Fund May 13 1996 Joint Venture
33621948.80
Sundaram BNP Paribas Mutual Fund Feb 26 1996 Joint Venture
342714361.20
Religare Mutual Fund May 20 2005 Indian Private
241313829.30
Deutsche Mutual Fund Mar 21 2002 Foreign
231910111.60

80
Canara Robeco Mutual Fund Mar 2 1993 Indian Public
20510050.80
JM Financial Mutual Fund Jun 9 1994 Indian Private
2688568.80
Fidelity Mutual Fund Jul 2 2004 Foreign
1407795.22
PRINCIPAL Mutual Fund Nov 20 1991 Indian Public
2577470.15
Fortis Mutual Fund Nov 4 2003 Foreign
14136902.15
HSBC Mutual Fund Dec 12 2001 Joint Venture
1956005.03
Baroda Pioneer Mutual Fund Nov 5 1992 Indian Public
1004362.69
L&T Mutual Fund Apr 30 1996 Indian Private
1874125.69
JPMorgan Mutual Fund Sep 20 2006 Foreign
804114.75
Taurus Mutual Fund Jul 27 1993 Joint Venture
1082347.23
Morgan Stanley Mutual Fund Oct 12 1993 Foreign
402305.89
Benchmark Mutual Fund Oct 16 2000 Indian Private
1101930.53

81
 Chapter-VI

Data analysis and interpretation

82
MAGNUM EQUITY FUND

SCHEME AND PLAN DATE NAV(X) X-Xbar X-Xbar2

NAME
Magnum Equity Fund- Growth 30-01-2009 19.98 -10.09 101.81
Magnum Equity Fund- Growth 27-02-2009 18.94 -11.13 123.87
Magnum Equity Fund- Growth 31-03-2009 20.49 -9.58 91.77
Magnum Equity Fund- Growth 28-04-2009 23.32 -6.75 45.56
Magnum Equity Fund- Growth 28-05-2009 30.9 0.83 0.69
Magnum Equity Fund- Growth 30-06-2009 31.25 1.18 1.39
Magnum Equity Fund- Growth 31-07-2009 34.03 3.96 15.68
Magnum Equity Fund- Growth 31-08-2009 34.61 4.54 20.61
Magnum Equity Fund- Growth 29-09-2009 36.04 5.97 35.64
Magnum Equity Fund- Growth 30-10-2009 35.17 5.1 26.01
Magnum Equity Fund- Growth 30-11-2009 37.35 7.28 52.99
Magnum Equity Fund- Growth 31-12-2009 38.81 8.74 76.39
360.89 592.41
Calculation of Mean

= 360.89
12
= 30.07

83
Calculation of Standard Deviation:-

σ means 'standard deviation'.

Σ means 'the sum of'.
means 'the mean'

σ = 7.02

Sharpe index ratio:-

Sp =Rp – Rf
σp
= 30.07 - 0.07
7.02
Sp = 4.27

84
 Calculation of beta:-

R r=(R - R’) r2 Index M m=M- rm r2m

Record P1-P0 x100 R’=6.06 P1-P0x100 M’
Date NAV(X) P0 P0 m’= 5.48
30-01- 19.98 0 0 0 2874.80 0 0 0 0
2009
27-02- 18.94 -5.20 -11.26 126.7 2763.65 -3.86 -9.34 105.16 -1184.12
2009 8
31-03- 20.49 8.18 2.12 4.49 3020.95 9.31 3.83 8.12 17.19
2009
28-04- 23.32 13.81 7.75 60.06 3362.35 11.30 5.82 45.10 349.55
2009
28-05- 30.9 32.50 26.44 699.0 4448.95 32.31 26.83 709.38 18756.05
2009 7
30-06- 31.25 1.13 -4.93 24.30 4291.10 -3.55 -9.03 44.51 -219.43
2009
31-07- 34.03 8.89 2.83 8.01 4636.45 8.05 2.57 7.27 20.58
2009
31-08- 34.61 1.61 -4.45 19.80 4662.10 0.55 -4.93 21.93 -97.61
2009
29-09- 36.04 4.13 -1.93 3.72 5006.85 7.39 1.91 -3.68 7.10
2009
30-10- 35.17 -2.41 -8.47 71.74 4711.70 -5.89 -11.37 96.30 -815.68
2009
30-11- 37.35 6.19 0.13 0.01 5032.70 6.81 1.33 0,17 0.01
2009
31-12- 38.81 3.91 -2.15 4.62 5201.05 3.34 -2.14 4.60 -9.88
2009
360.89 72.74 6.08 50012.6 65.76 5.48 1038.8 16823.76
5 6

Beta = [N∑rm] – [∑r * ∑m]

N∑r2m - ∑m
N=12
∑rm = 1038.86
∑r = 6.08
∑m = 5.48
∑r2m = 16823.76
Substituting the above values in the formula, we get

85
Beta = [12*1038.86] – [6.08*5.48]
[12*16823.76] – [5.48]

= 12466.32 – 33.32
201885.12 – 5.48

= 12433
201879.64

Beta = 0.06

TREYNOR PORTFOLIO PERFORMANCE MEASURE:-

Tp = Rp – Rf
β

Rp = return on portfolio
Rf = risk free rate
β = beta

Rp = 30.07
Rf= 7% or 0.07
β = 0.06

substituting the above values in the formula

Tp = Rp – Rf
β

= 30.07 – 0.07
0.06

Tp = 500

86
JENSEN PORTFOLIO PERFORMANCE MEASURE:-

Rp= rf + β(m-rf)

Rf = risk free rate

β = beta
m = market rate of return on portfolio

Rf = 0.07
β = 0.06
m = 26.6

Substituting the above values in the formula, we get…

Rp = 0.07 + 0.06(26.6 - 0.07)

= 0.07 + 0.06(26.53)

= 0.07 +1.59

Rp = 1.66

87
88
HDFC EQUITY FUND

SCHEME AND PLAN NAME DATE NAV X-Xbar X-Xbar2

HDFC Equity Fund- Growth 30-01- 103.75 -66.01 4357.32
2009
HDFC Equity Fund- Growth 27-02- 98.16 -71.6 5126.56
2009
HDFC Equity Fund- Growth 31-02- 108.85 -60.91 3710.03
2009
HDFC Equity Fund- Growth 29-04- 127.09 -42.67 1820.73
2009
HDFC Equity Fund- Growth 28-05- 169.89 0.13 0.01
2009
HDFC Equity Fund- Growth 30-06- 172.87 3.11 9.67
2009
HDFC Equity Fund- Growth 31-07- 187.63 17.87 319.33
2009
HDFC Equity Fund- Growth 31-08- 193.00 23.24 540.09
2009
HDFC Equity Fund- Growth 30-09- 211.82 42.06 1769.04
2009
HDFC Equity Fund- Growth 30-10- 209.02 39.26 1541.34
2009
HDFC Equity Fund- Growth 30-11- 224.13 54.37 2956.09
2009
HDFC Equity Fund- Growth 31-12- 231.01 61.25 3751.56
2009
2037.2 25901.77
2

Calculation of Mean

= 2037.22
12
= 169.76

89
Calculation of Standard Deviation:-

σ means 'standard deviation'.

Σ means 'the sum of'.
means 'the mean'

σ = 46.46

Sharpe index ratio:-

90
 Sp =Rp – Rf
σp
= 169.76 - 0.07
46.46
= 3.65

Calculation of beta:-

R r=(R - R’) r2 Index M m=M- rm r2m

Record P1-P0 x100 R’=7.31 P1-P0x100 M’
Date NAV(X) P0 P0 m’= 5.48
30-01-2009 103.75 0 0 0 2874.80 0 0 0 0
27-02-2009 98.16 -5.38 -12.69 161.0 2763.65 -3.86 -9.34 118.52 -
3 1504.0
2
31-02-2009 108.85 10.89 3.58 12.81 3020.95 9.31 3.83 13.71 49.06
29-04-2009 127.09 16.75 9.44 89.11 3362.35 11.30 5.82 54.94 518.62
28-05-2009 169.89 33.67 26.36 694.8 4448.95 32.31 26.83 707.24 18642.8
5 3
30-06-2009 172.87 1.75 -5.56 30.91 4291.10 -3.55 -9.03 50.20 -279.13
31-07-2009 187.63 8.54 1.23 1.51 4636.45 8.05 2.57 3.16 3.88
31-08-2009 193.00 2.86 -4.45 19.80 4662.10 0.55 -4.93 21.94 -97.61
30-09-2009 211.82 9.75 2.44 5.95 5006.85 7.39 1.91 4.66 11.36
30-10-2009 209.02 -1.32 -8.63 74.47 4711.70 -5.89 -11.37 98.12 -846.72
30-11-2009 224.13 7.23 -0.08 0.00 5032.70 6.81 1.33 -0.10 0
31-12-2009 231.01 3.06 -4.25 18.06 5201.05 3.34 -2.14 9.09 -38.65
2037.22 87.8 7.39 1108. 50012.6 65.76 5.48 1081.4 16459.
5 5 8 62

91
Beta = [N∑rm] – [∑r * ∑m]
N∑r2m - ∑m
N=12
∑rm = 1081.48
∑r = 7.39
∑m = 5.48
∑r2m = 16459.62

Substituting the above values in the formula, we get

Beta = [12*1081.48] – [7.39 * 5.48]
[12*16459.62] – [5.48]

= 12977.76 – 40.49
197515.44 – 5.48

= 12937.27
197509.96
Beta = 0.06

TREYNOR PORTFOLIO PERFORMANCE MEASURE:-

Tp = Rp – Rf
β

Rp = return on portfolio
Rf = risk free rate
β = beta

Rp = 169.76
Rf= 7% or 0.07
β = 0.06

substituting the above values in the formula

92
Tp = Rp – Rf
β

= 169.76 – 0.07
0.06

Tp = 2828.16

JENSEN PORTFOLIO PERFORMANCE MEASURE:-

Rp= rf + β(m-rf)
Rf = risk free rate
β = beta
m = market rate of return on portfolio
Rf = 0.07
β = 0.06
m = 45.2

Substituting the above values in the formula, we get…

Rp = 0.07 + 0.06(45.2 - 0.07)

= 0.07 + 0.06(45.13)

= 0.07 +2.70

93
 Rp = 2.77

UTI EQUITY FUND

SCHEME AND PLAN NAME DATE NAV X-Xbar X-Xbar2

UTI Equity Fund- Growth 30-01- 26.66 -10.45 109.20
2009
UTI Equity Fund- Growth 27-02- 24.82 -12.29 151.04
2009
UTI Equity Fund- Growth 31-03- 26.47 -10.64 113.21
2009
UTI Equity Fund- Growth 29-04- 29.30 -7.81 60.99
2009
UTI Equity Fund- Growth 29-05- 35.79 -1.32 1.74
2009
UTI Equity Fund- Growth 30-06- 35.92 -1.19 1.41
2009
UTI Equity Fund- Growth 31-07- 40.22 3.11 9.67
2009
UTI Equity Fund- Growth 31-08- 41.45 4.34 18.83
2009
UTI Equity Fund- Growth 30-09- 45.05 7.94 63.04
2009
UTI Equity Fund- Growth 29-10- 43.94 6.83 46.65
2009
UTI Equity Fund- Growth 30-11- 47.06 9.95 99
2009
UTI Equity Fund- Growth 31-12- 48.68 11.57 133.86

94
 2009
445.3 808.64
6

Calculation of Mean

= 445.36
12
= 37.11

Calculation of Standard Deviation:-

95
 σ means 'standard deviation'.
Σ means 'the sum of'.
means 'the mean'

σ = 67.38

Sharpe index ratio:-

Sp =Rp – Rf
σp
= 37.11 - 0.07
67.38
= 0.55

Calculation of beta:-

R r=(R - R’) r2 Index M m=M- rm r2m

Record P1-P0 x100 R’=5.39 P1-P0x100 M’
Date NAV(X) P0 P0 m’= 5.48
30-01-2009 26.66 0 0 0 2874.80 0 0 0 0
27-02-2009 24.82 -6.90 -12.29 151.0 2763.65 -3.86 -9.34 114.79 -1410.71
4
31-03-2009 26.47 6.64 1.25 1.56 3020.95 9.31 3.83 4.78 5.97
29-04-2009 29.30 10.69 5.3 28.09 3362.35 11.30 5.82 30.84 163.48
29-05-2009 35.79 22.15 16.76 280.8 4448.95 32.31 26.83 449.67 7536.28

96
 9
30-06-2009 35.92 0.36 -5.03 25.3 4291.10 -3.55 -9.03 45.42 -228.46
31-07-2009 40.22 11.97 6.58 43.29 4636.45 8.05 2.57 16.91 111.25
31-08-2009 41.45 3.06 -2.33 5.43 4662.10 0.55 -4.93 11.48 -26.77
30-09-2009 45.05 8.68 3.29 10.82 5006.85 7.39 1.91 6.28 20.66
29-10-2009 43.94 -2.46 -7.85 61.62 4711.70 -5.89 -11.37 89.25 -700.62
30-11-2009 47.06 7.10 1.71 2.92 5032.70 6.81 1.33 2.27 3.88
31-12-2009 48.68 3.44 -1.95 3.80 5201.05 3.34 -2.14 4.17 -8.13
445.36 64.73 5.44 614.7 50012.6 65.76 5.48 775.86 5466.83
6 5

Beta = [N∑rm] – [∑r * ∑m]

N∑r2m - ∑m
N=12
∑rm = 775.86
∑r = 5.44
∑m = 5.48
∑r2m = 5466.83

Substituting the above values in the formula, we get

Beta = [12*775.86] – [5.44 * 5.48]
[12*5466.83] – [5.48]

= 9310.32 – 29.81
65601.96 – 5.48

= 9280.51
65596.48

Beta = 0.14
TREYNOR PORTFOLIO PERFORMANCE MEASURE:-

Tp = Rp – Rf
β

Rp = return on portfolio

97
Rf = risk free rate
β = beta

Rp = 37.11
Rf= 7% or 0.07
β = 0.14

substituting the above values in the formula

Tp = Rp – Rf
β

= 37.11 – 0.07
0.14

Tp = 264.57

JENSEN PORTFOLIO PERFORMANCE MEASURE:-

Rp= rf + β(m-rf)
Rf = risk free rate
β = beta

98
m = market rate of return on portfolio

Rf = 0.07
β = 0.14
m = 28.2

Substituting the above values in the formula, we get…

Rp = 0.07 + 0.14(28.2 - 0.07)

= 0.07 + 0.14(28.13)

= 0.07 +3.94
Rp = 4.01

Chapter-VII

99
 Findings/suggestions/summary

SHARPE INDEX RATIO:

Name of the scheme Performance Ranks

100
1. Magnum Equity Fund 4.27 I
2. HDFC Equity Fund 3.65 II
3. UTI Equity Fund 0.55 III

• According to the Sharpe index ratio among the above three mutual funds Magnum
Equity Fund got first rank because it’s performance will be as 4.27,
• And HDFC Equity Fund placed in second rank with performance of 3.65
• Finally the UTI Equity Fund stands in last place with the performance 0.55 and got last
rank

TREYNOR PORTFOLIO PERFORMANCE MEASURE:-

Name of the scheme Performance Ranks

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1. Magnum Equity Fund 500 II
2. HDFC Equity Fund 2828.16 I
3. UTI Equity Fund 264.17 III

• According to Treynor Portfolio performance Measure among the above three mutual
funds HDFC Equity Fund placed on first rank because it’s performance will be as
2828.16.
• And Magnum Equity Fund got second rank with performance of 500,
• Finally the UTI Equity Fund stands in last place with low performance that is 264.17 and
got last rank

JENSEN PORTFOLIO PERFORMANCE MEASURE:-

Name of the scheme Performance Ranks

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1. Magnum Equity Fund 1.66 III
2. HDFC Equity Fund 2.77 II
3. UTI Equity Fund 4.01 I

• In JENSEN PORTFOLIO PERFORMANCE MEASURE among the above three mutual

funds UTI Equity Fund placed on first with the performance of 4.01,
• And HDFC Equity Fund got second rank with performance of 2.77,
• Finally the Magnum Equity Fund stands in last place with low performance that is 1.66
and got last rank.

Magnum Equity Fund:

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• If we see the trends of magnum equity fund, it has a constant growth rate.

• In the start of the year i.e, 31-01-2009 the NAV is around 19.98 where as at the end of
the year i.e, 31-12-2009 it has reached upto 38.81.

• It has increased in all the months except in the months February and October.

UTI Equity Fund:

• It we see the trends of UTI Equity Fund, it has some ups and downs in the trends.

• In the start of the year i.e, 31-01-2009 the NAV is around 26.66 where as at the end of
the year i.e, 31-12-2009 it has reached upto 48.68.

• It has increased in all the months except in the months February and October.

HDFC Equity Fund:

• If we see the trends of HDFC Equity Fund, it has a constant growth rate.

• In the start of the year i.e, 30-01-2009 the NAV is around 100 where as at the end of
the year i.e, 31-12-2009 it has reached upto 230.01.

• It has increased in all the months except in the date of 27-02-2009.

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 Magnum Performance Measure
• Here we have done performance meassure bu using Sharpe, Jensen and Treynor
methods.
• When we see the performance of Magnum Through Sharpe Index Model it has
reached upto 4.27.
• When we see the performance of Magnum through Treynor Method it has reached
upto 500.
• When we see the performance of Magnum through Jensen Model the performance has
reached upto 1.66.
HDFC Performance measure
• Here we have done performance meassure bu using Sharpe, Jensen and Treynor
methods.
• When we see the performance of HDFC Through Sharpe Index Model it has reached
upto 3.65.
• When we see the performance of HDFC through Treynor Method it has reached upto
2828.16.
• When we see the performance of HDFC through Jensen Model the performance has
reached upto 2.77.
UTI Performance Measure
• Here we have done performance meassure bu using Sharpe, Jensen and Treynor
methods.
• When we see the performance of UTI Through Sharpe Index Model it has reached
upto 0.55.

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• When we see the performance of UTI through Treynor Method it has reached upto
264.57.
• When we see the performance of UTI through Jensen Model the performance has
reached upto 4.01.

• Affordability: Mutual funds allow you to start with small investments

• Professional management: : The major advantage of investing in a mutual fund is

that you get a professional money manager for a small fee.

• Diversification: Considered the essential tool in risk management

• A mutual fund can effectively diversify its portfolio because of the large corpus.

• Convenience: Mutual funds offer tailor-made solutions like systematic investment

plans and systematic withdrawal plans to investors,

• Investors also do not have to worry about the investment decisions

• Cost effectiveness: A small investor will find that a mutual fund route is a cost
effective method.

• AMC fee is normally 2.5% and they also save a lot of transaction costs as they get
concession from brokerages.

• Liquidity: You can liquidate your investments anytime you want.

• Most mutual funds dispatch checks for redemption proceeds within two or three
working days.

• Tax breaks: You do not have to pay any taxes on dividends issued by mutual funds.

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• You also have the advantage of capital gains taxation. Tax-saving schemes and
pension schemes give you the added advantage of benefits under Section 88.

• Transparency: Mutual funds offer daily NAVs of schemes,

• If you are looking at open end funds you can always purchase them from the company
at the NAV minus some loads or expenses.

BIBLIOGRAPHY

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BIBLIOGRAPHY

http://www.mutualfundsindia.com/mfbasic.asp
http://www.seninvest.com/article5.htm
http://www.moneycontrol.com/mutual-funds/performance-tracker/eqd/ab
http://www.investopedia.com/articles/mutualfund/08/dump-mutual-fund.asp
http://www.angelmf.com/Pdf/model_portfolio_performance.pdf
http://finance.indiamart.com/india_business_information/mutual_funds_industry.html
http://www.iloveindia.com/finance/indian-mutual-funds/index.html
http://www.moneylife.in/article/81/6921.html
http://www.fundsavvy.com/mutual_funds_articles/mutual-funds-investing.htm
http://www.indobase.com/markets/mtfi-india/sbi-magnum-equity-fund.php
http://www.indobase.com/markets/mtfi-india/hdfc-equity-fund.php

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http://www.indobase.com/markets/mtfi-india/uti-equity-fund.php

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