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At present scenario there are a wide range of investment alternatives available for the investors. Mutual funds are one of the investment vehicles which mobilize funds from small and retail investors. Investor who finds it difficult to invest directly in the equity share and debt instrument of a company can invest these financial assets through mutual fund. The investor is overwhelmed by the choice offered by the choice offered by the mutual fund companies. The intervention of the regulatory body securities and exchange board of India (SEBI) has made fund operation more transparent and costs are reduced, thereby making mutual fund more attractive to the investors and also it has lunched online terminal for mutual funds and made the investors easier to trade these without any entry load & exit load. Apart from among the above merits, mutual fund are becoming more popular among the investors because they are managed by the highly skilled professionals who have sound knowledge about the securities market and wide experience in undertaking investment and are also good at the online terminal procedure . The risk is also minimized because the funds are invested in diversified portfolio. In spite of reduced risk and low cost, mutual funds have been found wanting on adequate return frontier all over the world. On the other hand mutual funds also given higher returns than the market. The study was conducted at way2wealth brokers private limited, Bangalore. The present study on the online trading of mutual funds & the performance evaluation of mutual funds while these are trading online, by using the performance measure models developed by Treynor, Sharpe and Jenson. Based on the measure the five funds considered study are ranked. The individual funds return are compared with the market returns i.e. the NIFTY returns as a benchmark.
1. INDUSTRY PROFILE INTRODUCTION OF ORIGIN OF INDIAN STOCK MARKET T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 1
The origin of the stock market in India goes back to the end of the eighteenth century, when long-term negotiable securities were first issued. However, for all practical purpose, the real beginning occurred in the middle of the nineteenth century after the enactment of the old companies act in 1850, which introduced the feature of limited liability and generated investor interest in corporate securities. An important early event in the development of the stock market in India was the formation of the native share and stock brokers association at Bombay in 1875, the precursor of the present day Bombay stock exchange. This was followed by the formation of associations exchange in Ahmadabad (1894), Calcutta (1908), and Madras (1937). Stock exchange means anybody of individuals whether incorporated or not, constituted for the purpose of regulating or controlling the business of buying, selling or dealing in securities. These securities include:
I. Shares, scrips, stocks, bonds, debenture stock or other marketable securities of a like
nature or of any incorporated company or other body corporate
EXCHANGE OF INDIA:
The stock exchange, Mumbai (BSE) and the national stock exchange (NSE) are the countrys two leading exchanges . both the exchanges have switched over from the open outcry trading systems to a fully automated computerized mode of trading known T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
BSE: Bombay stock exchange is the oldest stock exchange in Asia with rich heritage
of over 133 years of existence . What is now popularly known as BSE was established as the native share & stock brokers association in 1875. BSE is the first stock exchange in the country which obtained permanent recognition from the government of India under the securities contacts (regulation) Act (SCRCA) 1956. BSEs pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. BSE has two worlds prominent exchanges, deutsche Borse and Singapore exchange, as its strategic partners. Today, BSE is the top in the number of listed companies and handling SENSEX, is Indias derivatives. worlds 5 th in
of transaction through its electronic trading systems. The BSE Index, first and most popular stock market benchmark index and it
provides an efficient and transparent market for trading in equity, debt instrument and
NSE: NSE was set up by leading institutions to provides a modern, fully automated
screen-based trading systems with national reach. The exchanges have brought about unparalleled transparency, speed efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in the world terms of systems, practices and procedures. NSE is the third largest stock exchanges in the world in terms of the number of trades in equities it is the second fastest growing stock exchanges in the world with a recorded growth of percent. A stock broker is someone who buys and sells stock on the behalf of clients for a predetermined commissions . the stock broker basically works as an coordinating the activities of the buyer and seller on stock exchanges. Along with the trading of stocks, many stock broker indulge in giving advice to the clients as to which stocks, mutual funds , debentures to buy or sell brokers have been trading of stocks and securities for over300 T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
accordance with The provisions of the securities and exchange board of India act
BROKING INSIGHT
The Indian broking industry is one of the oldest trading industries that has been around even before the establishments of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its sustainable growth. with the purpose of gaining a deeper understanding about the role of the Indian stock broking industry in the countrys economy. Booming stock markets and growing retail interest in equity and equity related investments; Indian stock broking firms are on an expansions drive to increase their network into more cities and town to lure clients into stock investments. Having witnessed a high level of consolidation in the last 3-4 years, the domestic stock broking houses could tap the IPO market to raise funds for their expansions, besides merger and acquisitions. Considering the ongoing macroeconomics bullishness in India, more stock broking companies should opt for private or public (or both) funding routes. The stock broking business has come to hog the limelight with increase in FLL inflows, transparency and improved tax regime. The volumes on stocks exchange have grown markedly over the years. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
FINANCIAL MARKET
The financial markets have been classified as cash market, derivatives markets, debt market and commodities market. Cash market, also known as spot is the most sought after amongst investors. Majority of the sample broking firms are dealing in the cash market, followed by derivatives and commodities. 27 percent firm is dealing only in the cash market, whereas 35 percent are into cash and derivatives. Almost 20 percent firms trade in cash, derivatives and commodities market. Firms that are into cash, derivatives and debt are 7 percent. On the other hand, firms into cash and commodities are 3% cash & debt market and commodities alone are 2 percent 4 percent firms trade in all the markets.
TYPES OF BROKER
Discount Broker
Direct Access-broker
Broker
Full service Broker A Full service broker can provide a bunch of service such as investments research advice, tax planning and retirement planning. Discount Broker- A discount Broker lets you buy and sell stocks at a low rate but doesnt provide any investment advice. Direct access broker a direct access broker lets you trade directly with the electronic traders tent to use access broker.
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GROWTH The last decade has been exceptionally good for stock markets in India. in the back of wide ranging reforms in regulation and market practice as also the growing participation of foreign institutional investments, stock markets in India have showed phenomenal growth in the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the gross domestic product as compared to about 25 percent of the latter in the early 2000s. Investor base continued to grow from domestic and international markets. The value of share trading witnessed a sharp jump too. Stock markets became intensely technology and process driven giving little scope for manual interventions that has been the source of market abuse in the past. Electronic trading, digital certification, straight through processing, electronic contract notes, online broking have emerged as major trend in technology. Risk management became robust reducing the recurrence of payment defaults. Product expansions took place in a speedy manner .Indian equity market now offer, in addition to trading in equities, opportunity in trading of derivatives in future and options in index and stocks. ETFs are showing Gradual growth. Within five year of introduction of derivatives, Indian stock market now is ranked first in stock future and fourth in index futures. The stock market helps channel savings in our economy. This is the most amusing assumption the lot. At the best of times, the primary market has generated some savings from the public who saluted the spirit of entrepreneurship of several business groups, including the Oswals, the Bhansalis,The Orkay Mehras, the Deepaks and the Ruias.
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2. COMPANY PROFILE 2.1) BACKGROUND OF THE COMPANY Way2wealths legacy dates back to Sivan securities (1984), a premier financial intermediary and business incubator for IT start up firms, spun off its securities broking arm as way2wealth. Launched with aim of making investing simpler, more understandable and profitable for investors, way2wealth has established in itself as one of Indias premier investments consultancy firms. Way2wealth offer an extensive range of products and services under one roof, for the convenience and benefit of our customer, the company having more services, over 1 lakh customer relationships through a team of 750 wey2wealth manager across over 125 easily accessible investment outlets in country. i).PARENT COMPANY Coffee Day Holdings, billion group more popularly known for creating business such as Amalgamated Bean Coffee Trading Company Ltd, (Indias largest Coffee Conglomerate and coffee exporter ), caf coffee day and providing venture capital to companies viz; kshema technologies, mind tree ltd, I-Vega, Tanglin Developments,ittiam etc. ii). THE VISIONRY The visionary behind way2wealth, Mr.V.G.Siddhartha, founded Sivan securities and has been involved in the Indian capital markets since 1984. His business interests spreads across coffee retailing, plantations, real estates, venture capital, and financial services. 2.2) NATURE OF BUSINESS CARRIED Way2wealth securities (p) ltd., investment Consultancy Company, provides broking and financial advisory services in India. It offers trading services in equity, equity derivatives, and commodity derivatives. And currency derivatives. The company provides investments products, including mutual funds and insurance; portfolio management, which includes risk T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
One-stop shop for investments needs &consultancy across products. Personalized service through designated relationship managers. Hassle free and seamless execution for the administrative aspects of your investments process. Excellent back office operation. Proven risk management system. Equipped to institutional and retail
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i). Equity trading (NSE&BSE): the Indian market is almost wholly dominated by two major stock exchanges- national stock exchange of India ltd. (NSE) and the Bombay stock exchange (BSE). The benchmark indices of two exchanges nifty of NSE and Sensex of BSE are closely followed. The two exchanges also have an F&O (futures and options) segment for trading in equity derivatives including the indices. The major player in the Indian equity market is mutual funds, financial institutions and FIIs representing mainly venture capital funds and private equity Funds.
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TRAINING FACILITIES
Excellence in Administration & facilities infrastructure development through arrangement of primarily responsible & for mobilization administration facilities
Management to develop new branches, infrastructure, vendors administration policies for the companys services & manage exciting relationships. A combination of which leads to customer & employee good will and market visibility. Training and knowledge needs- the company have training programs for our business associates and their staff on an ongoing basis to keep them abreast of latest market developments, product innovations etc . Additionally, specific programs are available to help prepare for relevant regulatory certification exams.
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NSE/ BSE
BROKERS
CLIENT (ONLINE
SUB-BROKERS
DEMAT
BANK
BROKERS
BROKER
NSE
the stock exchange of NSE and BSE, from which the datas will flow to respective brokers, from that it goes to sub broker, and even individual trader through online, clients has to open Demat and bank account which will be given to broker who will submit to the exchange. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
PLACING ORDER
DECUSION TO TRADE
TRADE EXECUTION
TRANSACTION CYCLE
FUNDS / SECURITIES
CLEARING OF TRADES
SETTLEMENT OF TRADE
2.11) FUTURE GROWTH AND PROSPECTS OFWAY 2 WEALTH: Way2wealth, investment advisory firms, is on the lookout for a strategic partner to fuel its growth plans. According to a senior official of the company, it is going in for this strategic divestment to fuel its aggressive growth plan of spreading its networks to tap the new partner in control to drive future growth the investment boom in the markets. The company has close to 500 professional in its rolls and has a strong 50 plus points of presence in the country.
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A COFFEE DAY VENTURE Going forward The company NBFC will be functional to roll out products. company endeavor to become the market leader ,and have recently added to our
existing product offering , investments banking , merchant banking, M&A advisory, PE advisory
To cater to the unique needs of institution, FIs bank etc. will be setting up dedicated
Services, institutional quality desk based out of Mumbai. NRI desk will be set up in foreign location. other business to be added are Real Estate Broking Exclusive tie up for distribution of personal loan
For successful implementation of a strategy large or small the management needs take to account of all seven factors. They are all interdependence, if one element changes then this will affect all the rest. Change in hr systems like internal career plan and management training will have an impact on the organizational culture (management style) and thus will affect the structure, process and finally characteristics competencies of the organization.
For successful implementation of a strategy large or small the management needs to take to account of all seven factors. They are all interdependent, if one element changes then this will affect all the rest. A change in HR-systems like internal career plan management training will have an impact on the organizational culture (management style) and thus will affect the structure, process and finally characteristics competencies of the organization.
3.1) STRUCTURE: Organizational structure is relatively more durable under organizational arrangements and relationships. It prescribes the formal relationships among various position and activities. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
VP
Head
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COMPANY STRUCTURE: RELATIONSHIP FUNDAMENT TECHNICAL BRANCH DEALERS AL. ANALYST ANALYST MANAGER AND HEAD MARKET EXECUTIVE
3.2) SKILLS: It is a distinctive capability of personnel of the organization as a whole. They undertake weekly cash course for updating the staff to get to know about different strategy followed by the organization. The training is given to the staff in such a way that the errors committed by him are minimized and accuracy in the execution of order. In addition in addition to this when NSE /BSE comes with new products, proper training is given to the staffs.
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In case of buying of the shares function key 1 or + sign used In case of sharing shares function key 2 or - sign is used
The software used by the organization is ODIN, META STOCK& EMTRADE. Page 2
2. Merit rating systems The shares or stock the company is rated on the basis of earning per share (EPS), market price and the brand value of the company. 3.6) STAFF Staffing is the process of acquiring human recourses for the organization and assuring that they have potential to contribute to the achievements of the organizations goals. It includes selection, placements, training and development of appropriate qualified employee. Total employees 1001-2500. It consist of staffs like Fundamental analyst Technical analyst Dealers Back office Relationship manager Powers and responsible of head of departments 1. As a fundamental analyst, he prepares the balance sheet for the organization. He also works on EPS &P/E ratio. Apart from this, he is entitled to recommend the short, medium and long term investment. 2. As a technical analyst, he works on chart this is akin to an ECG of patient this can tick by tick (seconds) to hours. This can be mainly useful for day trader. He also gives recondition to the investors 3. Dealers are the people who execute the orders. They require speed and knowledge of all the companies and not afford to make mistakes (i.e.) he is suppose to be very active. In case of dealers who handle number of accounts has, to have an idea about their portfolios (i.e.) when to buy and sell their securities
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4. SWOT ANALYSIS
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4.1) STRENGHTS:
2. It has 750 wealth managers across the country with a research desk for
fundamental way2wealt 3. Way2wealth online is far more cost effective than offline trading; hence there is no additional cost. 4. One of the largest financial investors of India, comprising many branches in major state of India. 5. Live streaming quotes for all segments. That is equal importance is given to all category of investors. and technical analyst, which has been a great strength of the
1. Way2wealth has its branches only its branches only in some major states of India; it
does not have any global presence. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
4.3) OPPORTUNITIES: 1. Widen new market segments. 2. To expand to foreign markets. 3. Attract more people of providing customer centric products. 4. Apply R&D skills in new areas.
4.4) THREATS: 1. Threats from existing stock brokers are who has global presence in the market. 2. Frequent changes in the policy of SEBI may affect the company policy and strategy. 3. Threats from new entrance of stock broking firms with most competitive strategy.
6. LEARNING EXPERIENCE It has been good learning in way2wealth. I have got practical knowledge about what exactly the stock broking firms do and how they trade. In the organization learned about how to T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 1
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The flow chart below describe broadly the working of a Mutual Fund
MUTUAL OPERATION FLOW CHART
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The investment portfolio is created according to the stated investment objectives of the
fund.
ORGANISATION OF A MUTUAL FUND There are many entities involved in a mutual fund organization and the diagram below illustrates the organizational set up.
Sponsor
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Mutual fund shall be established in the form of trusts under Indian Trust Act
and will be authorized for business by SEBI. Mutual funds shall be operated only by Established Asset Management Companys setup for the purpose. At least 50% of the board of AMC must be independent directors with no interest in the sponsoring organization.
The minimum net worth to be maintained at all times is prescribed at Rs 5 crore. SEBI
vested with powers to withdraw authorization given to AMC in case investor interests are not taken care of business activity. MUTUAL FUNDS AS AN INSTRUMENT FOR INVESTMENT Diversification It means that investor must spread his investment across different securities .Individual investor can scarcely achieve such diversification. Liquidity Unit or share of mutual fund can be traded in the secondary market or sold back at the notified repurchase price. Assured allotment Investors are assured of allotment when they apply for the unit or shares of mutual fund. Small Investments The minimum investment ranges from Rs 1000 to Rs 5000. No other avenue of investments offers such a wide range of choice for such an affordable sum. Tax advantage They dont have to pay tax on their interests and dividend income as well as capital gains. Secondly dividends distributed by mutual funds are tax exempt in the hands recipient. TYPES OF MUTUAL FUND SCHEMES T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
Tax savings schemes Investors are being encouraged to invest in equity markets through equity linked savings schemes by offering them a tax rebate. Units purchased cannot be assigned / transferred/pledged/redeemed/ switched-out until completion of 3 years from the date of allotment of the respective units. Sector specific schemes A sector specific schemes invests its corpus in the equity stocks of a given sector such as information technology, telecommunication , these schemes appeal to investors interested in taking a bet on specific sectors. Index schemes index schemes replicate the portfolio of a particular index such as the BSE sensitive index, S&P NSE 50 index (NIFTY), etc these schemes invest in the securities in the same weight age comprising of an index. NAV of such schemes would rise or fall in accordance with the risk or fall in the index. Though not exactly by the same percentage due some as tracking error in technical terms. TRADING OF MUTUAL FUNDS ON STOCK EXCHANGES
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Objectives
Reduce the paper work and ensuring errors Enable transparency to customers
Provide customer with a single, mutual funds / distributors- independent view of his
portfolio. Advantages
Investors:
T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
A COFFEE DAY VENTURE Elimination of paper work: Application forms, cheques, collection
statements, etc.
Convenience: Existing investors can invest through same channel and same point as secondary market.
Members: More products to offer: Now investors can buy mutual fund units
through their Member.
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Benefits of Online Trading Transparency: Online trading provides transparency on all the information related to
the time of order placement till the final settlement. Every step of online trading is subject to scrutiny, since this provides transparency to the trading process.
Best prices: Investors, by way of online trading, can get the best quotes for mutual
funds because of high transparency in the system.
Added convenience and liquidity: One can carry out online trading anytime during
business hours. This also helps in providing liquidity to investors.
Low commissions: Investors can make transactions frequently, without the need to
worry about the burden of commissions; thus making day trading and short-term trading more feasible.
Dangers of Online Trading Technology problems: Delays in transactions may be caused due to Internet
connection outages or power failures. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
A COFFEE DAY VENTURE A mentor's absence: As there is no guidance from professionals, online trading may
involve formulation of improper trading strategies which in turn would lead to huge losses
Overtrading: Online traders usually have a long term strategy before investing.
However, the attraction of capitalizing on short term movements might make them buy and sell more often. Since the commission levels in online trading are low, investors are lured into day trading. This takes them away from their well-researched and long term trading strategy, causing great losses in the long run. 7.2 RESEARCH DESIGN The research design is descriptive in nature, the study attempts to analyze and evaluate the existing data system, through the financial data. For the purpose, risk adjusted performance measures suggested by Jenson, Treynor and Sharpe are employed. Here the comparison is done on the various well performed Schemes selected from different fund houses or asset Management companies. The analysis is done on the percentage of return from the period starting from March 09, 2010 to march 08, 2011. 7.3 STATEMENT OF THE PROBLEM The retail investor faces problems in selecting funds. Factor such as investment strategy and management style are qualitative, though past performance alone cannot be indicative of future performance, it is only quantitative way to judge how good a fund is at present. Therefore, there is a need to correctly assess the past performance of different mutual funds. The online trading now made customers convoluted to buy and purchase the mutual funds. The online trading terminal is difficult to understand for the common people. In this study attempt is made to evaluate the performance of equity diversified growth oriented mutual fund schemes of different asset Management Company on the basis monthly return compared with bench mark returns and know the procedure of online trading. 7.4 OBJECTIVES OF THE STUDY a) To compare the performance of various Asset Management Companies offering equity diversified growth oriented schemes. b) To know the price fluctuation of different schemes when these are traded online. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 1
e) To measure and analyze the returns of sampled mutual fund equity diversified
growth oriented schemes and compares them with the market returns. 7.5 SCOPE OF THE STUDY a) The return of the schemes is compared with the bench mark which is nifty index.
b) The sample 5 diversified growth oriented schemes selected for the study represents
the population of equity diversified growth oriented schemes offered by different asset management companies.
c) The performance of the mutual fund schemes are evaluated based on the quarterly
returns for the year starting from 09,March 2010 to 08,March 2011.
d) The study considers only equity diversified growth oriented mutual fund schemes.
7.6 LIMITATIONS OF THE STUDY a) Only FIVE growth oriented mutual funds are compared and analyzed. b) The study is limited to equity diversified growth schemes. c) The major portion of the study is based on the secondary data
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1. ICICI Pru growth(Growth) 2. BIRLA Sun life (Growth) 3. Kotak opportunity fund(Growth) 4. HDFC equity Fund(Growth) 5. Sundaram BNP Paribas Growth Fund(Growth) ICICI PRUDENTIAL MUTUAL FUND
ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank, Indias second largest commercial bank & a well-known and trusted name in the financial services in India, & Prudential Plc, One of the United Kingdoms largest players in the financial services sectors. In a span of just over 12 years, The Company has forged a position of pre-eminence as one of the largest Asset Management Companys in the country, contributing significantly towards the growth of the Indian mutual fund industry. . As an Asset Management Company, We have over 15 years of experience and are currently managing a comprehensive range of schemes of more than 46 Mutual funds and a wide range of PMS Products for our investors, spread across the country. We service this investor base with our own branch network of over 160 branches and a distribution reach of over 42,000 channel partner
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a). Return =
Ending NAV- Beginning NAV + Dividend paid during the period Beginning NAV
x100
RA-RA*2 N-1
c) Beta =
(RA-RA*) (Rm-Rm*)
RM-RM*2
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e)
2M(Variance) =
Whereas; RA: Return of the portfolio A RM: Return of the market M N : Number of periods
2M: Variance
RM*: Average return of market RA*: Average return of portfolio A
f) Net Asset Value (NAV) In simple words, net asset value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day today basis. It is the current price of every unit of a fund. Formula for the Calculation Net Asset Value (NAV)
Treynor Measure
Sharpe Measure Jenson Measure Mean Standard Deviation Beta Variance
a) Statistical Tools
Treynor Measure =
Rp-Rf p
Whereas; Rp: Average rate of return on portfolio Rf: Risk free return
p: Beta of portfolio A
Sharpes performance Index Page 1
The Sharpes measure is similar to the Treynors measure except that it employs standard deviation and not beta value as the measure of risk.
Sharpe Measure =
Rp Rf p
Whereas; Rp: Average rate of return on portfolio Rf: Risk free return
Jenson Measure = Rp -
Rf + Rm- Rf
Whereas; Rp: Average rate of return on portfolio Rf: Risk free return Rm: Average return on market portfolio
: Portfolio beta
T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 2
Mean
The mean is the mathematical average of a set of numbers .The average is calculated by adding up two or more scores and dividing the total by the number of scores. Mean = Whereas: X: Value in the set N: Number of values in the set Standard Deviation X N
It measures how widely values are dispersed from the average. Dispersion is the difference between the actual value and the average value, The large the difference between the closing price and the average price, the higher the standard deviations will be and the higher the volatility and vice versa.
RA-RA*2
N-1
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Objective of the fund To seek to generate long-term capital appreciation from a portfolio that is invested predominantly in equity related securities TABLE NO 1.1 Table showing the schemes returns
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Mean (RM*)
( RM RM *)
RMRM*2
(RA-RA) (RM-RM*)
Quarterly Nifty opening 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 09Dec10 08Mar11 TOTAL 5924.25 5608.30 4985.05 5121.05
(Thousands) (Thousands) (RM) 1.53 1.53 1.53 1.53 4.21 9.57 3.47 8.33 17.7241 91.5849 12.0409 69.3889 19.968 85.909 6.450 53.80 166.127
Date
Opening
(RA RA*)
RA-RA*2
Quarterly NAV(Rs) 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 09Dec10 08Mar11 TOTAL 137.38 133.69 119.09 120.90
TABLE NO 1.3 Table for Performance Measure Calculations Particulars Average Return Beta Risk Treynor Sharpe Jenson ICIC PRU 2.643 0.8710 6.919 -5.9207 0.7453 0.30417 S&P CNX NIFTY 1.53 1 7.937 -6.27 0.7899 0
INTERPRETATION From the above table, ICICI Pru Fund Growth Earned an average return of 2.643 percent as against the market return of 1.53 percent. Beta value indicates that 1 percent decrease in the market portfolio returns results in 0.8710 percent.
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A COFFEE DAY VENTURE The positive alpha value (jenson ratio) indicates superior performance fund in
comparison to the market. The low variability ratio (Sharpe ratio) indicates that the investor is not able to earn superior returns than the market for the additional risk taken.
The reward to variability ratio (Treynor ratio) is higher than the bench mark.
GRAPH NO 1.1 Chart showing the Growth scheme and market returns of ICICI Pru Growth
KOTAK OPPORTUNITIES FUND (Growth) Fund Name Asset Size (Rs cr) Launch Date Fund Manager : Open-Ended : 936.17 (31-01-2011) : 09-09-2004 : Mr. Krishna Sangavi
Objective of the Fund The Scheme aims to generate capital appreciation from a diversified portfolio of equity and equity related securities. T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE Page 1
TABLE NO 1.4 Table showing the schemes return Date Quarterly 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 09Dec10 08Mar11 TOTAL X=7.062 301.669 Source: The Historical NAV is retrieved from moneycontrol.com 47.14 43.69 -7.31 1.76 9.07 82.26 49.51 48.56 -1.918 1.76 3.678 13.527 42.35 49.14 16.03 1.76 14.27 203.632 Opening NAV(Rs) 41.99 Closing NAV(Rs) 42.10 Quarterly Mean (RA RA*) RA-RA*2 -1.5 2.25 Returns(RA) (RA*) 0.26 1.76
TABLE NO 1.5 Table showing market returns Date S&P CNX S&P CNX Nifty closing (Thousands) 4987.10 5607.85 Quarterl y Returns (RM) -2.68 11.10 1.53 1.53 4.21 9.57 17.7241 91.5849 6.315 136.56 Mean (RM*) ( RM RM *)
RMRM*2
(RA-RA) (RM-RM*)
Quarterly Nifty opening (Thousands) 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 5608.30 4985.05 5121.05
5903.70
5.00
1.53
3.47
12.0409
12.762
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5924.25
5520.80
-7.30
1.53
8.33
69.3889
75.55 218.557
TABLE NO 1.6 Table for Performance Measure Calculations Particulars Average Return Beta Risk Treynor Sharpe Jenson KOTAK Opportunity Fund-Growth 1.76 1.145 10.027 -5.275 0.602 1.07915 1.53 1 7.937 -6.27 -0.7899 0 S&P CNX NIFTY
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A COFFEE DAY VENTURE Earned an average return of 1.76 percent as against the market return of 1.53
percent.
Beta value indicates that 1 percent decrease in the market portfolio returns results in
1.145 percent.
The positive alpha value (Jenson ratio) indicates superior performance fund in
comparison to the market. The low variability ratio (Sharpe ratio) indicates that the investor is not able to earn superior returns than the market for the additional risk taken.
The reward to variability ratio (Treynor ratio) is higher than the bench mark
GRAPH NO 1.2 Chart showing the Growth scheme and market returns of Kotak Opportunities Growth
SUNDARAM BNP PARIBAS GROWTH FUND (Growth) Fund Name Asset Size (Rs cr) Launch Date : Open-Ended : 136.73 (31-01-2011) : 24-04-1997 Page 1
Objective of the fund To achieve capital appreciation by investing in a well-diversified basket of equities & equity related instrument mainly large-caps. Date Quarterly 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 09Dec10 08Mar11 TOTAL X=6.763 TABLE NO 1.7 Table showing the schemes return Source: The Historical NAV is retrieved from moneycontrol.com 96.75 88.86 -8.155 1.69 9.845 96.92 98.02 100.25 2.23 1.69 .54 .29 82.90 97.49 14.59 1.69 12.9 166.41 Opening NAV(Rs) 84.09 Closing NAV(Rs) 82.49 Quarterly Mean Returns (RA) -1.902 (RA*) 1.69 3.592 12.902 (RA RA*)
RA-RA*2
TABLE NO 1.8 Table showing market returns Date S&P CNX S&P CNX Nifty closing Quarterly Mean Returns (RM) (RM*) ( RM RMRM *) (RA-RA*) (RM-RM*)
RM* 2
(Thousands) (Thousands) 09Mar10 08June10 T JOHN INSTITUTE OF TECHNOLOGY, BANGALORE 5121.05 4987.10 -2.68 1.53 4.21
17.724 1
15.122
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TABLE NO 1.9 Table for Performance Measure Calculations Particulars Average Return Beta Risk Treynor Sharpe Jenson INTERPRETATION From the above table, Sundaram BNP Paribas-growth Sundaram BNP Paribas 1.69 1.166 9.6007 -3.67 -5.238 4.317 S&P CNX NIFTY 1.53 1 7.937 -6.27 -0.7899 0
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A COFFEE DAY VENTURE Earned an average return of 1.69 percent as against the market return of 1.53
percent.
Beta value indicates that 1 percent increase in the market portfolio returns results in
1.166 percent.
The positive alpha value (Jenson ratio) indicates superior performance fund in
comparison to the market. The low variability ratio (Sharpe ratio) indicates that the investor is not able to earn superior returns than the market for the additional risk taken.
The reward to variability ratio (Treynor ratio) is higher than the bench mark.
GRAPH NO 1.3 Chart showing the Growth scheme and market returns Sundaram BNP Paribas Growth
Objective of the fund Long term growth, through a portfolio with a target allocation of 90% equity 10% debt and money market securities. TABLE NO 1.10 Date Quarterly 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 09Dec10 08Mar11 TOTAL Table showing the schemes return Source: The Historical NAV is retrieved from moneycontrol.com X=3.801 356.107 273.59 247.54 -9.52 .950 10.47 109.62 285.74 281.17 -1.599 .950 2.549 6.497 244.56 284.35 16.27 .950 15.32 234.70 Opening NAV(Rs) 247.24 Closing NAV(Rs) 243.89 Quarterly Mean Returns (RA) -1.35 (RA*) .950 2.3 5.29 (RA RA*)
RA-RA*2
TABLE NO 1.11 Table showing market returns Date S&P CNX opening S&P CNX Nifty closing Quarterly Mean ( RM (RMReturns (RM*) RM *) (RM) (RA-RA*) (RM-RM*)
Quarterly Nifty
RM*)2
TABLE NO 1.12 Table for Performance Measure Calculations Particulars Average Return Beta Risk Treynor Sharpe Jenson Birla Sun Life 0.950 1.521 10.895 -4.50 0.6290 2.6867 S&P CNX NIFTY 1.53 1 7.937 -6.27 -0.7899 0
Beta value indicates that 1 percent increase in the market portfolio returns results in
1.521 percent.
The positive alpha value (Jenson ratio) indicates superior performance fund in
comparison to the market. The low variability ratio (Sharpe ratio) indicates that the investor is not able to earn superior returns than the market for the additional risk taken.
The reward to variability ratio (Treynor ratio) is higher than the bench ma
GRAPH NO 1.4 Chart showing the Growth scheme and market returns BIRLA SUN Life Growth
HDFC EQUITY FUND (Growth) Fund Name Asset Size (Rs cr) : Open-Ended : 8,288.98 (31-01-2011) Page 1
Objective of the fund The schemes is aims at providing capital appreciation through investments predominantly in equity oriented securities TABLE NO 1.13 Table showing the schemes return Date Quarterly 09Mar10 08June10 09June10 08Sep10 09Sep10 08Dec10 09Dec10 08Mar11 TOTAL X=18.11 293.07 286.01 268.22 -6.22 4.53 10.75 115.56 285.29 293.81 2.896 4.53 -1.544 2.3839 241.37 284.17 17.732 4.53 13.202 174.29 Opening NAV(Rs) 231.14 Closing NAV(Rs) 239.49 Quarterly Returns 3.612 Mean (RA*) 4.53 (RA RA*) -.918
RA-RA*2
.843
TABLE NO 1.14 Table showing market returns Date Quarterly S&P CNX Nifty opening (Thousands) S&P CNX Nifty closing (Thousands) Quarterly Returns (RM) Mean (RM*) ( RM RM *)
(RM-
(RA-RA*)
RM*)2 (RM-RM*)
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TABLE NO 1.15 Table for Performance Measure Calculations Particulars Average Return Beta Risk Treynor Sharpe HDFC Equity Fund 4.53 1.1397 9.883 -2.869 0.3308 S&P CNX NIFTY 1.53 1 7.937 -6.27 -0.7899
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Earned an average return of 4.53 percent as against the market return of 1.53
percent.
Beta value indicates that 1 percent increase in the market portfolio returns results in
1.1397 percent.
The positive alpha value (Jenson ratio) indicates that the performance of the fund is
superior to the market performance.
The high variability ratio (Sharpe ratio) indicates that the investor is can earn
superior returns by taking greater risk than the market
The reward to variability ratio (Treynor ratio) is higher than the bench mark which
indicates its superior performance..
GRAPH NO 1.5 Chart showing the Growth scheme and market returns HDFC Equity Fund Growth
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RANKINGS TABLE NO 1.16 Table showing the performance of the mutual funds schemes using the Treynors ratio SL NO 1 2 3 4 5 FUND NAME ICICI Pru Growth (Growth) Kotak Opportunities Fund (Growth) Sundaram BNP Paribas Growth (Growth) Birla Sun Life Equity(Growth) HDFC Equity Fund (Growth) TREYNORS -5.9207 -5.275 -3.67 -4.50 -2.869 RANK 5 4 3 2 1
TABLE NO 1.17 Table showing the performance of the mutual funds schemes using the Sharpes ratio SL NO 1 2 3 4 5 FUND NAME ICICI Pru Growth (Growth) Kotak Opportunities Fund (Growth) Sundaram BNP Paribas Growth (Growth) Birla Sun Life Equity(Growth) HDFC Equity Fund (Growth) SHARPES 0.7453 0.602 -5.238 0.6290 0.3308 RANK 1 3 2 5 4
TABLE NO 1.18 Table showing the performance of the mutual funds schemes using the Jensons ratio SL NO 1 2 FUND NAME ICICI Pru Growth (Growth) Kotak Opportunities Fund (Growth) JENSONS 0.304 2.687 RANK 5 3 Page 1
TABLE NO 1.19 Table showing the performance of the mutual fund schemes using the average of all the three ratios SL NO 1 2 3 4 5 ICICI Pru Growth (Growth) Kotak (Growth) Sundaram BNP Paribas Equity -3.67 -4.50 -2.869 -5.238 0.6290 0.3308 3.876 1.079 4.317 -1.290 -4.2613 0.5929 2 5 1 Growth (Growth) Birla Sun Life (Growth) HDFC Equity Fund (Growth) Opportunities Fund FUND NAME Treynor Sharpes s Ratio -5.9207 -5.275 Ratio 0.7453 0.602 Jensons Average Rank Ratio 0.304 2.687 -1.623 -2.8543 3 4
CHAPTER-9 FINDINGS & CONCLUSION 9.1 FINDINGS OF THE STUDY The findings of the analysis are as follows:
1.The bench mark was done to compare the schemes returns with a benchmark and to
judge whether the scheme is performing above the benchmark or below the benchmark set. The benchmark was done with the S&P CNX NIFTY. It is found that all the mutual fund schemes for the study have performed above the benchmark .the risk free rate is the 91 days treasury bills with 7.8 percent.
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A COFFEE DAY VENTURE 2.According to the Treynors ratio, the best performing mutual fund schemes is
ICICI PRU Growth. The top three performing mutual fund schemes according to him are: I. ICICI PRU Growth
II. Kotak Opportunities Fund (Growth) III. Sundaram BNP Paribas Growth(Growth)
3. According to the Sharpes ratio, the best performing mutual fund schemes is ICICI PRU Growth . The top three performing mutual fund schemes according to him are: I. ICICI PRU Growth
II. III.
5. On the basis of an average ranking the top three performing mutual fund schemes are
I. II. III.
Sundaram BNP Paribas Fund (Growth) Kotak Opportunities Fund (Growth) ICIC Pru Growth Fund (Growth)
6. It is found that at the indicial stage of online trading of mutual funds, the returns were low in all schemes due to newly introduction of online terminal for mutual fund & many of the investors were unaware of the trading pattern of the mutual funds. As per the market, there are some chances that the return may go up. As it is much easier for investors to buy &sells the mutual fund online rather than the older , they can through online more easily than the earlier one & can avail more returns, the risk may also increase with this,
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9.2 CONCLUSION The study has shown performance of the mutual fund schemes selected in the sample by using different performance measure to know about the return & risk before & after introduction of online terminal for mutual fund, from the above analysis it can be conclude that most of the equity diversified mutual fund growth oriented schemes have better in comparison with the market. But return alone should not be considered as the basis of measurement of the performance of mutual fund schemes, it should also include the risk taken by the fund manager because different funds will have different level of risk attached to them. Risk associated with funds, in general, can be different as variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns, higher will be the risk associated with it. and also the return after introduction of online terminal has shown very blow as it was the pioneer stage as many of the investors are not aware of the online terminal ,slowly the returns may go higher once the all the investors come to know about the trading terminal. Investment in mutual funds enable the investors to reap the benefit of diversification , specialized services low cost etc. by investing in mutual funds an investor can optimize his risk and return. An investor is advised to keep revising his portfolio. Some funds give a very high rate of return and the same time they involve high risk as they are now started trading online. so an investor must evaluate both , risk and returns associated with the fund. Sometimes the low
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A good investment is one which helps an investor to earn a high rate of return with the same risk or a same rate of return at a lower risk. Most of the scheme selected on the sample has performed better than benchmark. There are some sachems with high risk and high return and high return, so an investor must make his investments based on not only the return but also his risk taking ability.
Investor are advised to invest in mutual fund as compared to individual stocks because
they minimize the risk .The risk is reduced due to diversification also they may gain more returns as the online terminal is introduced . The online terminal will widen the reach of mutual fund and also give convenience to mutual fund investors. This will open the doors to one step shop i.e. have a common broker for equities and mutual fund .this initiative also reduce the paper work. Through trading way, investors just need to call the broker or opt for the online broking account. The company should really have to step into global market as early as possible because with the growing market the number of competitor has increased in the domestic market. As it is one of Indias broking company it can go for the largest share in the world by establishing their branches in global market with the sub broker or business associates.
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CHAPTER-11 APPENDIX
x100
= -2.10
2.) Mean =
X N
10.572
4 = 2.643
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