A Project ReportA Project Report

On

“RISK & PERFORMANCE ON “RISK & PERFORMANCE ON MUTUAL FUNDS ” MUTUAL FUNDS ”

Submitted in partial fulfillment for the requirement of MBA Submitted in partial fulfillment for the requirement of MBA

MAHARISH MARKANDSHWER UNIVERSITYMAHARISH MARKANDSHWER UNIVERSITY

MULLANAMULLANA

SUBMITTED TO: - SUBMITTED BY:-

ISHA CHUGMBA 4TH SEM.

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Table of Contents

Acknowledgement Introduction

History of the Company

Products profile

Managerial usefulness of study

Definition of the concepts used in the study

Objectives

Scope of work

Research Methodology

○ Research Design

○ Sample

○ Collection of data

Data Analysis Findings

Recommendations

Limitations

Bibliography/References

Annexures

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Acknowledgment

I would like to take this opportunity to acknowledge the support and

cooperation of all those who enabled the successful completion of this

project.

We would like to extend our sincere gratitude towards MISS. SHILPI

GUPTA under whose guidance we undertook this project, for extending

the advice and direction that is required to carry on a study of this

nature, and for helping us with the intricate details of the project every

step of the way.

I am also thankful to Mr. RAJESH MAKKAR(Manager) to give me right

direction.

Finally we would like to thank all the employees who helped us and took

out time to answer our questions and helped complete this project. It

was a wonderful learning experience for me.

DHEERAJ

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Introduction to the project

Role of financial systems to enthuse economic development. As investor are getting more

educated, aware and prudent they look for innovative investment instruments so that they are

able to reduce investment risk, minimize transaction costs and maximize return along with

certain level of conveniences as a result there has been an advent of numerous innovative

financial instruments such as bonds company deposits, insurance and mutual funds all of

which could be marked with individuals investment needs

Mutual funds score over all other investment options in terms of safety , liquidity returns and

are a transparent convenient as it can get goal of mutual funds is to provide an efficient way

to make money. In India there are 36 mutual funds with different investment strategies and

goals to choose from. Different mutual funds have different risks, which differ because of the

funds goals, funds managers and investment styles.

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Intdustry Profile

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is then invested in capital market instruments such

as shares, debentures and other securities. The income earned through these investments and

the capital appreciation realized is shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the working of a

mutual fund:

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ORGANISATION OF A MUTUAL FUND

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

History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at

the initiative of the Government of India and Reserve Bank the. The history of mutual funds

in India can be broadly divided into four distinct phases

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by

the Reserve Bank of India and functioned under the Regulatory and administrative control of

the Reserve Bank of India. At the end of 1988 UTI had Rs.6,700 crores of assets under

management

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Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year

in which the first Mutual Fund Regulations came into being, under which all mutual funds,

except UTI were to be registered and governed.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other schemes.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations.

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Parties Involved In Mutual Fund

Mutual Fund Manager : Establishes one or more mutual funds, markets them and oversees their general administration.

Portfolio Adviser : The professional money manager appointed by the Mutual Fund Manager to direct the fund's investments. The Mutual Fund Manager also often acts as the Portfolio Adviser.

Principal Distributor : Coordinates the sale of the fund to investors, either directly or through a network of registered dealers.

Custodian : The bank or trust company appointed by the Mutual Fund Manager to hold all of the securities owned by the fund.

Transfer Agent and Registrar : The group responsible for maintaining a list of all investors in the fund.

Auditor : The independent accountants retained by the Mutual Fund Manager to audit each year, and report on the financial statements of the fund.

Trustee : The entity that has title to the securities owned by the fund on behalf of the unit holders.

Mutual funds are generally categorized according to their investment objectives. Some

mutual funds focus on stocks, others on bonds, money market instruments or other securities.

Some mutual funds invest primarily in Canada, others invest internationally, and some

specialize in countries or specific industries. Some mutual funds will invest in only low-risk

investments, while others may hold much riskier securities. If you decide to become a mutual

fund investor, choosing funds whose investment objectives and risk profile are right for you

will be one of your most important decisions.

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Asset

classMajor types Reasons to choose

Major

risk

Stocks

Common, preferred

Large cap, mid cap, small cap

Growth, value

Int'l/domestic

High return potential

May provide income

Long-term horizon

High

Bonds

Government, agency

Municipal

Corporate

Mortgage-backed, asset-backed

Int'l/domestic

Regular income

Potential for price

appreciation

Possible tax advantages

Medium

Cash

equivale

nts

Treasury bills

Commercial paper

CDs and banker's acceptances

Money markets

Regular income

Relative price stability

Liquidity

Low

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VARIOUS MUTUAL FUNDS COMPANIES IN INDIA

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO

Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO

Asset Management (India) Ltd. was incorporated on November 4, 2003.

Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun

Life Financial. Sun Life Financial is a golbal organisation evolved in 1871 and

is being represented in Canada, the US, the Philippines, Japan, Indonesia and

Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative

long-term approach to investment. Recently it crossed AUM of Rs. 10,000

crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,

1992 under the sponsorship of Bank of Baroda. BOB Asset Management

Company Limited is the AMC of BOB Mutual Fund and was incorporated on

November 5, 1992. Deutsche Bank AG is the custodian.

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HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely

Housing Development Finance Corporation Limited and Standard Life

Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and

Capital Markets (India) Private Limited as the sponsor. Board of Trustees,

HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America,

one of the largest life insurance companies in the US of A. Prudential ICICI

Mutual Fund was setup on 13th of October, 1993 with two sponsorers,

Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential

ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management

Company Limited incorporated on 22nd of June, 1993.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to

launch offshor fund, the India Magnum Fund with a corpus of Rs. 225 cr.

approximately. Today it is the largest Bank sponsored Mutual Fund in India.

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They have already launched 35 Schemes out of which 15 have already yielded

handsome returns to investors. State Bank of India Mutual Fund has more than

Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread

over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The

sponsorers for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment

Corporation Ltd. The investment manager is Tata Asset Management Limited

and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's

is one of the fastest in the country with more than Rs. 7,703 crores (as on April

30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of

KMBL. It is presently having more than 1,99,818 investors in its various

schemes. KMAMC started its operations in December 1998. Kotak Mahindra

Mutual Fund offers schemes catering to investors with varying risk - return

profiles. It was the first company to launch dedicated gilt scheme investing only

in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003,

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manages the UTI Mutual Fund with the support of UTI Trustee Company

Privete Limited. UTI Asset Management Company presently manages a corpus

of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of

Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and

Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund

are Liquid Funds, Income Funds, Asset Management Funds, Index Funds,

Equity Funds and Balance Funds.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act,

1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital

Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as

Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance

Mutual Fund was formed for launching of various schemes under which units

are issued to the Public with a view to contribute to the capital market and to

provide investors the opportunities to make investments in diversified

securities.

Franklin Templeton India Mutual Fund

The group, Frnaklin Templeton Investments is a California (USA) based

company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one

of the largest financial services groups in the world. Investors can buy or sell

the Mutual Fund through their financial advisor or through mail or through their

website. They have Open end Diversified Equity schemes, Open end Sector

Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes,

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Open end Income and Liquid schemes, Closed end Income schemes and Open

end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in

the market in securities, investmenty management and credit services. Morgan

Stanley Investment Management (MISM) was established in the year 1975. It

provides customized asset management services and products to governments,

corporations, pension funds and non-profit organisations. Its services are also

extended to high net worth individuals and retail investors. In India it is known

as Morgan Stanley Investment Management Private Limited (MSIM India) and

its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end

diversified equity scheme serving the needs of Indian retail investors focussing

on a long-term capital appreciation.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance

Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee is

ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset

Management India (Pvt) Ltd. with the corporate office in Mumbai.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial

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Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd.

as the Trustee Company. Incorporated on October 16, 2000 and headquartered

in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank

acting as the sponsor. Canbank Investment Management Services Ltd.

incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC

is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment &

Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee

Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989.

It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund

was constituted as a Trust in accordance with the provisions of the Indian Trust

Act, 1882. . The Company started its business on 29th April 1994. The Trustees

of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management

Company Ltd as the Investment Managers for LIC Mutual Fund.

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.

Religare, a Ranbaxy promoter group company, is one of India’s largest and fastest growing integrated financial services institutions. The company offers a large and diverse bouquet of services ranging from equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal finance services, Investment banking and institutional broking services. The services are broadly clubbed across three key business verticals- Retail, Wealth management and the Institutional spectrum. Religare Enterprises Limited is the holding company for all its businesses, structured and being operated through various subsidiaries.

Religare’s retail network spreads across the length and breadth of the country with its presence through more than 900 locations across more than 300 cities and towns. Having spread itself fairly well across the country and with the promise of not resting on its laurels, it has also aggressively started eyeing global geographies

For more information contact us at info@religare.in

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Vision - To build Religare as a globally trusted brand in the financial services domain and present it as the ‘Investment Gateway of India’

Mission - Providing financial care driven by the core values of diligence and transparency.

Brand Essence - Religare is driven by ethical and dynamic processes for wealth creation.

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Religare Brand Identity

NameReligare is a Latin word that translates as 'to bind together'. This name has been chosen to reflect the integrated nature of the financial services the company offers. The name is intended to unite and bring together the phenomenon of money and wealth to co-exist and serve the interest of individuals and institutions, alike.

SymbolThe Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is used to define the rare quality of good fortune that is the aim of every financial plan. It has traditionally been considered good fortune to find a single four leaf clover considering that statistically one may need to search through over 10,000 three-leaf clovers to even find one four leaf clover.

Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

   The first leaf of the clover represents Hope. The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundations on which a person reaches for the stars.

 

   

 The second leaf of the clover represents Trust. The ability to place ones own faith in another. To have a relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to all not  in the binding but in the bond that is built.

 

  The third leaf of the clover represents Care. The secret ingredient that is the cement in every relationship. The

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truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth of service and the ability to adapt to evolving environments with consideration to all.

   The fourth and final leaf of the clover represents Good Fortune. Signifying that rare ability to meld opportunity and planning with circumstance to generate those often looked for remunerative moments of success.

 

   Hope. Trust. Care. Good fortune. All elements perfectly combine in the emblematic and rare, four-leaf clover to visually symbolise the values that bind together and form the core of the Religare vision.

Accent usageThe diacritical tilde mark ( ˜ ) over the letter A in the Religare typeface indicates a palatal emphasis sound of the letter A.

Pronunciationrel•i•ga•re (rel'i-gâir)

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Our Top Management Team

Mr. Sunil Godhwani - CEO & Managing Director, Religare Enterprises Limited

Mr. Sunil Godhwani is the CEO and Managing Director of our Company. He is a graduate in chemical engineering and has a master’s degree in industrial engineering and finance from Polytechnic Institute, New York. He has more than 20 years experience in business.

Mr. Godhwani joined our Board on July 13, 2006. He was appointed as CEO and Managing Director of our Company on April 9, 2007. Mr. Godhwani is also the managing director of Fortis Financial Services Limited. Prior to becoming the Managing Director of our Company, he was Managing Director of Religare Securities Limited since April 15, 2002

Mr. Shachindra Nath - Group Chief Operating Officer, Religare Enterprises Limited

Mr. Shachindra Nath (Group Chief Operating Officer) aged 36 years, carries the overall responsibility for managing the key operations of our group. He joined RSL on May 8, 2000. RSL, at that relevant point of time, was a subsidiary of Fortis Financial Services Limited, our Promoter Group company. He received a bachelor’s degree in law from the Banaras University, Varanasi, and a post graduate diploma in intellectual property rights from the Amity Law College, Delhi.

Prior to joining us, he was at Abhipra Capital Limited as a Senior Consultant and Divisional Incharge and held several key positions there from 1998 until 2000. In the past, he has also worked with Obeetee Textiles Limited, R. D & Company and Garware Wall Ropes Limited. He has over 14 years of experience in the financial services industry.

Mr. Anil Saxena- Group Chief Finance Officer, Religare Enterprises LimitedMr. Anil Saxena (Group Chief Finance Officer), aged 38 years, carries the overall responsibility for management and supervision of our group and has played a key role in driving its growth. He joined RSL on August 1, 2001. RSL, at that relevant point of time, was a subsidiary of Fortis Financial Services Limited, our

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Promoter Group Company. He received a bachelor’s degree in commerce from the University of Delhi.

He is a member of the Institute of Chartered Accountants of India as well as the Institute of the Cost and Works Accountants of India. Prior to joining us, he was at Kotak Securities Limited as their Vice-President. In the past, he has also worked with Fortis Financial Services Limited and R. Singhania & Co. He has over 15 years of experience in the financial services industry.

Board of Directors - Religare Enterprises Limited

Mr. Malvinder Mohan Singh - Chairman (Non Executive) Mr. Sunil Godhwani - CEO & Managing Director Mr. Shivinder Mohan Singh - Non Executive Director Mr. Harpal Singh - Non Executive Director Mr.Deepak Ramchand Sabnani - Independent Director Mr.Padam Bahl - Independent Director Mr.J.W. Balani - Independent Director Mr. Baldev Singh Johal - Independent Director Mr. R. K. Shetty - Alternate to Mr. J. W. Balani

Capt.G.P.S.Bhalla - Alternate to Mr. Deepak Sabnani

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New Initiatives

Religare is on a fast and ambitious growth trajectory with some interesting plans in the pipeline

AEGON Religare Life Insurance - Life Insurance Company, a Joint Venture with Aegon

Religare AEGON AMC - Asset Management Company, a Joint Venture with Aegon

Religare Finance - Personal Loans / Credit Cards / Loan against Property / Mortgage & Reverse Mortgage

Trading in Equities with Religare truly empowers you for your investment needs. A highly process driven, diligent approach backed by powerful Research & Analytics and one of the “best in class” dealing rooms ensures that you have a superlative experience. Further, Religare also has one of the largest retail networks, with its presence in more than 900 locations across more than 320 towns & cities. This means, you can walk into any of these branches and connect to our highly skilled and dedicated relationship managers to get the best services. You could also choose to enjoy the freedom to execute your own trade through our online mechanism.

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There are three types of facilities providing by religare.

1. Retail Spectrum – To cater to a large number of retail clients by offering all products under one roof through the Branch Network and Online mode.

2. Institutional Spectrum –

To Forge & build strong relationships with Corporate and Institutions.

3. Wealth Spectrum –

To provide customized wealth advisory services to High Networth Individuals.

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Equity tradingCommodies tradingOnline investment portalPersonal financial servicesPersonal credit

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Equity trading

Trading in Equities with Religare truly empowers you for your investment needs. A highly process driven, diligent approach backed by powerful Research & Analytics and one of the “best in class” dealing rooms ensures that you have a superlative experience.

Further, Religare also has one of the largest retail networks, with its presence in more than 900 locations across more than 320 towns & cities. This means, you can walk into any of these branches and connect to our highly skilled and dedicated relationship managers to get the best services. You could also choose to enjoy the freedom to execute your own trades through our online mechanism.

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Commodities

Religare Commodities Limited (RCL) was initiated to spearhead Exchange based Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL is a trade facilitator providing the platform to trade in commodities. Grounded in the Religare philosophy, highly skilled and dedicated professionals strive to offer the clients "best-fit" investment solutions in the country.

The Operating Fabric-Commodities BusinessIn terms of the business structure, RCL caters to retail clients; it has a structured arbitrage desk which focuses on spot futures arbitrage, RCL is also present in close to 40 Mandi locations across the country and also caters to the Corporate / Institutional business through one of the “best in class” Corporate Desks.

Our business philosophy is to treat each client situation as unique, requiring customized solutions. Our list of corporate clients reads like a Who’s Who of the Indian Industry and we have been successful in providing them with practical customized solutions for their requirements. We are propelled by our group vision and desire to strive tirelessly and aim to be the best within this category.

The Religare Edge Pan India footprint Ethical business practices Nationwide presence including Mandi Locations for in-depth and firsthand information Offline/Online delivery models Powerful research and analytics supported by a pool of highly skilled Research Analysts Single window for all investments needs through you unique

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Online investment portal

Investing online will never be the same again with our 360 degree portal www.religareonline.com Now you can not just invest online in Equities, IPOs, Mutual Funds, Commodities and much more but, also get TRADE REWARDS each time you invest.

Besides this, we also offer you a host of other revolutionary features such as Zero Percent Brokerage; Interest on cash margin, exposure upto 20 times your cash margin etc... on our select product schemes available through our highly sophisticated and customized platform R-ACE (Religare Advanced Client Engine).

So get empowered, enrich your experience of investing online and open yourself to a whole new world of possibilities.

For more information log on to www.religareonline

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Personal financial services

Religare has recently entered into personal financial advisory services. It caters to the financial needs of individuals by advising them on various financial plans. Religare’s Personal financial advisors, also called financial planners or financial consultants, use their knowledge of investments, tax laws, and insurance to recommend financial options to individuals in accordance with the individual’s short-term and long-term goals. Some of the issues that planners address are general investments, retirement and tax planning.

Why Financial Planning?

Financial planning is the process of meeting your life goals through proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement. Financial planning services are offered to individuals to put together a financial plan for managing financial resources.

Advantage - Financial Planning Provides direction and meaning to your financial decisions Helps understanding how each financial decision you make affects other areas of your finances Helps assessing the level of risk you are willing to take with your investments You can also adapt more easily to life changes and feel more secure that your goals are on track.

Product offerings

Mutual Funds Insurance - Life & Non - Life Bonds Deposits IPO’s Small Savings Instruments

PHILOSOPHY

At Religare we believe “Our clients are people, not accounts” hence successful investment management relationship begins with a clear understanding of each clients specific needs, concerns and long term objectives. Our investment philosophy

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applies a disciplined approach to building a customized strategy designed to meet your individual financial goals and tolerance for risk.

PROCESS

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Credit finance

Religare as part of its NBFC business being operated through Religare Finvest Ltd. offers Personal Credit to cater to the growing wave of consumerism in India.

Through our Loan against Shares (LAS) and Personal Lending Services (PLS) offerings, we have entered into consumer lending business activities. Our PLS service offering is marketed as “Personal Credit” services and developed by leveraging our branch network to generate opportunities from existing equity customers. Our PLS business consists of unsecured consumer loans to our retail customers. Our LAS business consists of loans secured by shares held by our retail customers and helps them leverage their equity market positions to take increased exposure.

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Wealth advisoryPortfolio management servicesArts intiativePriority equityclient services

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Wealth advisor

Wealth…Grow It, Protect It, Spend It, Share It….. Copyright- Book by the same name by Stuart Lucas

"At Religare, we are always at It, partnering with you relentlessly…..

We would want you to sleep in peace , but never would we want your wealth to sleep or go into a slumber…Ethical, dynamic and diligent processes is what we are truly about…” Wealth Management @ Religare

To provide investment advisory and execution services To work hand in hand with clients to identify and analyze their long-term goals, risk tolerance and existing asset base To Utilise our full-suite platform with an open architecture along with a fully focussed client centric approach to offer customized solutions for clients Supported by dedicated team of highly skilled and qualified wealth managers and research professionals.

Our Value Proposition Strong lineage and pedigree Young, professional, innovative and fully client centric human capital Full suite platter of services from the Religare umbrella National and International Foot print An open architecture and client centric philosophy “Not just lip service”

Product Recommendations Equities (Including International) Debts Commodities Structured Products Emerging Investment Classes.

Critical Steps in our Client Centric Operating Process Risk Profiling Research & Asset Allocation Product Recommendations

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Review & Rebalancing

To know more about us mails us at info@religare.in

International Advisory Fund Management Services (AFMS) - A new horizon for international investments

We provide our wealth clients an opportunity to invest in international financial instruments (currently limited to the US). Equities, Mutual Funds and Debts are some the key instruments available and the clients have the option to choose from various asset allocation modules.

Why Invest Overseas? Avenues for enhancing returns, minimizing risk and portfolio diversification Global outreach of opportunities Pre approved route for resident individuals to invest (Healthy Govt. Patronage and favorable regulatory developments)

Religare's Edge

Exclusive Tie-ups with full suite broking firms in the US and top of the line institutional research service providers

To know more about us mails us at international.equity@religare.in  

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Portfolio management services

Religare offers PMS to address varying investment preferences. As a focused service, PMS pays attention to details, and portfolios are customised to suit the unique requirements of investors.

Religare PMS currently extends five portfolio management schemes, viz Panther, Tortoise, Elephant,Caterpillar and Leo. Each scheme is designed keeping in mind the varying tastes, objectives and risk tolerance of our investors

Investment Philosophy

We believe that our investors are better served by a disciplined investment approach, which combines an understanding of the goals and objectives of the investor with a fine tuned strategy backed by research.

Stock specific selection procedure based on fundamental research for making sound investment decisions.

Focus on minimizing investment risk by following rigorous valuation disciplines.

Capital preservation.

Selling discipline and use of Derivatives to control volatility.

Overall to enhance absolute return for investors.

Our Schemes

Panther

The Panther portfolio aims to achieve higher returns by taking aggressive positions across sectors and market capitalizations. It is suitable for the “High Risk High Return” investor with a strategy to invest across sectors and take advantage of various market conditions.

Tortoise

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The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time by way of careful and judicious investment in fundamentally sound companies having good prospects. The scheme is suitable for the “Medium Risk Medium Return” investor with a strategy to invest in companies which have consistency in earnings, growth and financial performance.

Elephant

The Elephant portfolio aims to generate steady returns over a longer period by investing in Securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the “Low Risk Low Return” investor with a strategy to invest in blue chip companies, as these companies have steady performance and reduce liquidity risk in the market.

Caterpillar

The Caterpillar portfolio aims to achieve capital appreciation over a long period of time by investing in a diversified portfolio. This scheme is suitable for investors with a high risk appetite. The investment strategy would be to invest in scrips which are poised to get a re-rating either because of change in business, potential fancy for a particular sector in the coming years/months, business diversification leading to a better operating performance, stocks in their early stages of an upturn or for those which are in sectors currently ignored by the market.

Leo

Leo is aimed at retail customers and structured to provide medium to long-term capital appreciation by investing in stocks across the market capitalization range. This scheme is a mix of moderate and aggressive investment strategies. Its aim is to have a balanced portfolio comprising selected investments from both Tortoise and Panther. Exposure to Derivatives is taken within permissible regulatory limits.

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The Religare Edge

We serve you with a diligent, transparent & process driven approach and ensure that your money gets the care it deserves.

No experts, only expertise. Religare PMS comes to you from Religare, a Ranbaxy promoter group company with a solid reputation for an ethical and scientific approach to financial management. While we offer you the services of a Dedicated Relationship Manager who is at your service 24x7, we do not depend on individual expertise alone. For you, this means lower risk, higher dependability and unhindered continuity. Moreover, you are not limited by a particular individual’s investment style.

No hidden profits. We ensure that a part of the broking at Religare Portfolio Management Services is through external broking houses. This means that your portfolio is not churned needlessly. Using more broking firms gives us access to a larger number of reports and analysis, enabling us to make better, more informed decisions. Furthermore, your portfolio is customised to suit your investment objectives.

Daily disclosures. Religare Portfolio Management Services gives you daily updates on your investment. You can pinpoint where your money is being invested, 24x7, instead of waiting till the end of the month to keep track.

No charge till you profit*.So sure are we of our approach to Portfolio Management that we do not charge you for our services, until your investments start showing profit. With customised investment options Religare Portfolio Management Services invites you to invest across five broad portfolios to suit your investment needs.

* Except fixed administrative charges.

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For Portfolio Management Services(Client Login) log on to http://wealth.religare.in/webfincrm/login.jsp

Arts intiative

Religare Arts Initiative (RAI)The Indian arts Industry is currently valued as one of the growing industries of the world market. Art prices in India are escalating every year.

The Religare Arts Initiative is a venture of Religare Enterprises Limited with a view to provide a quality platform and infrastructure for Arts. This initiative has been envisioned as a true champion "for the cause of arts".

The RAI will provide a platform for artists of all ages, genres, and statures. We are already in the process of creating a transparent and highly rich infrastructure that would involve cataloguing, documentation, art research, and the development of an art aesthetic on an institutional basis. RAI will work closely with the Indian art and design schools on the issues such as the curriculum and resources to bring them into the same quality domain as their international counterparts.

RAI's envisaged activities include building infrastructure for arts, creation of an arts awareness program, creation of spaces / canvases for the artists, creation of International quality Gallery Spaces, providing Art Advisory Services and much more.

Keep watching this space for more action in the times to come

For more logon to www.religarearts.comor mail us at: - info@religarearts.com

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Priority equityclient services

Priority Client Group Services (PCG) At Religare we strongly beleive in not just providing you with incisive investment advice but we are equally focussed to ensure timely execution of your important trades. With this as our driving philosophy we have created a unique client centric business model that revolves around optimum service delivery. Further, our investment advisory is underpinned by comprehensive fundamental and technical research – helping you to time your investment decisions perfectly.

Invest smart Our goal is to cut through the labyrinth of potential investment avenues and bring you only the most rewarding investment ideas. As our compass, we have a team of highly qualified research professionals with collectively close to 100 man-years of equity research experience and a keen market perception. We don’t simply focus on recognised companies, but also strive to unearth "hidden gems" – companies where value is waiting to be unlocked. Our fresh insights come from a vast business network and a research approach that emphasises fundamentals over sentiments.

Incisive research – the hallmark of our servicesAs a part of our Priority Client Group, you get exclusive access to our research reports. We bring you fundamental analysis covering a wide spectrum of companies across sectors, supported by the latest and most reliable research inputs. Religare’s team of fundamental research analysts specialise in specific industry sectors and monitor sectoral developments keenly, while tracking individual companies – so you never lose sight of the bigger picture. Moreover, our comprehensive derivatives trading reports, intra-day technical calls and technical strategies keep you abreast of the latest market trends.

Professional team of dealersOur experienced team of dealers maintain a close watch on the market to ensure that information reaches clients at the earliest. Moreover, our state-of-the-art infrastructure and superior execution systems help us serve you more efficiently.

Avail of personalised servicesPersonalised services form the hallmark of the Religare PCG offerings. We examine the risk profile and financial objective of every client, so as to chart out highly purposeful, result-oriented

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plans. A dedicated back office team complements our services to ensure that all your transactions are concluded in a prompt and efficient manner.

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Institutional broking servicesBanking investmentCorporate financeInsurance advisory

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Institutional Broking Services

The mission of this division is to institutionalize and implement a process driven approach to cater to the needs of leading corporate houses and institutions.

The division would like to be seen as a one stop investment gateway and knowledge repository for its clients servicing their unique and sophisticated needs.

The division is structured as a separate SBU and is housed out of Mumbai, manned by a small yet fleet footed and extremely skilled group of top notch professionals drawn from the best in the industry.

The key highlights of our service platter are:

Highly skilled, dedicated dealing, research and sales teams Dealing capabilities on the NSE, BSE and in the cash and derivatives segment In-depth, detailed and insightful coverage of more than 60 stocks across diverse sectors. The sectors covered are FMCG, Hotels, Media, Pharma, Auto, Cement, Steel pipes, Logistics, Telecom, Construction and much more.

Our Current clientele includes some major domestic mutual funds, insurance companies, banks and FII’s

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Investment Banking

We provide innovative, integrated and best-fit solutions to our corporate customers. It is our continuous endeavor to provide value enhancement through diverse financial solutions on an on-going basis, through offerings like corporate debt, private equity, IPO, ECB, FCCB, GDR/ADR etc.

Religare's Investment Banking Division offers the following services:

Corporate Finance We focus on finding partners for our clients, who not only help in adding value , but also improve the future valuation of the organization. We specialize in structured financing and in providing advisory services related to financial planning, modeling and advising on financial requirements.

Placement of Debt Syndication of Domestic Loan / Foreign Currency Loan Securitisation Debt Swap & Loan Restructuring Short Term Corporate Debt Working Capital (Cash Credit & Short term Loan) Capital Market Instruments Overseas Acquisition

Placement of Equity (Private Equity) Both for listed and unlisted companies

Merchant Banking

IPO/FPO/RIGHTS Mergers & Acquisitions Corporate Advisory Services ADR/GDR/FCCB Buy Back Of Shares

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Corporate Finance

We focus on finding right and relevant partners for our clients, who not only help in adding value but also improve the future

valuation of the organization. We specialize in structured financing and providing advisory services related to financial planning, modeling and advising on financial requirements.

Corporate finance products offered by us:

 Placement of Debt

Syndication of Domestic Loan / Foreign Currency Loan Securitisation Debt Swap & Loan Restructuring Short Term Corporate Debt Working Capital (Cash Credit & Short term Loan) Capital Market Instruments Overseas Acquisition

Placement of Equity (Private Equity) Both for listed and unlisted companies

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Insurance Advisory

Religare Insurance Broking, a Religare Enterprises Limited venture, is one of India's leading insurance broking firms, with one of the largest retail networks in the country. The company holds a composite broking license operating in the Life, Non-Life and Reinsurance domains.

The company not only services and provides customized solutions to individual retail households / clients but also to some leading corporate houses and institutions across the country.

True to the spirit of its existence, the company proactively represents and champions the interests of its clients tirelessly to principal insurance companies.

Within a short span it has inked MoU’s with all the leading insurance companies in the country and is backed by passionate professionals, a robust IT infrastructure and strong risk analysis teams adept at identifying and analyzing risks to offer tailor-made solutions.

The team across the country is driven by the core philosophy of creating and delivering value to its customers.

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Managerial Usefulness of Study

This study will give us an insight risk & performance of various mutual

funds and no ways to investing in mutual funds.

It will provide complete details on Systematic Investment Plan (SIP)

which is rapidly become popular among the people of all sectors.

This study will make the concept of SIP clear and explain its pros and

cons. SIP is coming up as a good investment of option because of certain

benefits that are available only with SIPs.

Moreover, the study focuses on various aspects associated with SIPs that

will make us understand it much better. Besides, an analysis has been

done based on the real data available through some resources which

makes the study more reliable.

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Scope

Mutual Funds can be a conundrum for people who are not closely associated with the industry.  Even many who have been part of the industry for several years continue to have some misconceptions.

INTRODUCTION

1.  What is a mutual fund?

  1. Pooled Vehicle

A mutual fund (MF) is a vehicle to pool money from investors, with a promise that the money would be invested in a particular manner, by professional managers who are expected to honour the promise.  

Mutual funds in India are governed by the regulations of Securities and Exchange Board of India (SEBI). 

2. Professional Management

The idea behind a MF is that investors lack the time or the inclination or the skills to manage their own investments.  Professional managers, acting on behalf of the MF, manage the investments for the benefit of investors, in return for a management fee.   

3. Schemes

Investors have their individual preferences on how they would like their money invested and how much risk they are willing to take.   

Professional managers can choose to manage each individual investor’s money as per the investor’s preferences.  Such personal treatment, often referred to as Portfolio Management Scheme (PMS) in India, entails significant demands on the time of the managers 

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It is possible to balance the time and cost required to manage investments by grouping investors together based on their preferences.  In this manner, the focus of the investment activity can be shifted from a single investor (in the case of PMS) to a group of investors having similar expectations (in the case of a MF).   

For ease of management and reporting, such a group of investors is identified with a ‘mutual fund scheme’.  In commercial terminology, the investors have invested in a scheme – and the professional managers manage the scheme.   A MF can, and typically does, have several schemes to cater to different investor preferences. 

4. Money in Trust

The MF manages investments of the scheme for the benefit of its investors.  Every scheme has an:

investment portfolio (Portfolio Statement)

account of income and expenditure (Revenue Account)

account of assets and liabilities (Balance Sheet).

 In order to ensure fairness to investors, the expenditure that can be charged to the scheme, whether as management fees or as other expenses, is regulated by SEBI.   

The gains of any scheme (after accounting for income, permitted expenses, profits and losses from the investment activity) would belong to

its investors.  Similarly losses, if any, would need to be borne by its investors, upto the amount invested.  Thus, the MF manages the moneys in trust for the benefit of investors. 

5. Legal framework

Across the world, the MF sector is viewed as a critical mechanism to channel funds of investors into the capital market. Since these investors are often not so well qualified to invest, the mutual fund

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business is highly regulated.  Regulations vary from country to country. 

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Performance Measures Of Mutual Funds

Mutual Fund industry today, with about 34 players and more than five hundred

schemes, is one of the most preferred investment avenues in India. However,

with a plethora of schemes to choose from, the retail investor faces problems in

selecting funds. Factors such as investment strategy and management style are

qualitative, but the funds record is an important indicator too. Though past

performance alone can not be indicative of future performance, it is, frankly, the

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.

Worldwide, good mutual fund companies over are known by their AMCs and

this fame is directly linked to their superior stock selection skills. For mutual

funds to grow, AMCs must be held accountable for their selection of stocks. In

other words, there must be some performance indicator that will reveal the

quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the

performance of a mutual fund scheme, it should also include the risk taken by

the fund manager because different funds will have different levels of risk

attached to them. Risk associated with a fund, in a general, can be defined as

variability or fluctuations in the returns generated by it. The higher the

fluctuations in the returns of a fund during a given period, higher will be the

risk associated with it. These fluctuations in the returns generated by a fund are

resultant of two guiding forces. First, general market fluctuations, which affect

all the securities present in the market, called market risk or systematic

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risk and second, fluctuations due to specific securities present in the portfolio of

the fund, called unsystematic risk. The Total Risk of a given fund is sum of

these two and is measured in terms of standard deviation of returns of the

fund. Systematic risk, on the other hand, is measured in terms of Beta, which

represents fluctuations in the NAV of the fund vis-à-vis market. The more

responsive the NAV of a mutual fund is to the changes in the market; higher

will be its beta. Beta is calculated by relating the returns on a mutual fund with

the returns in the market. While unsystematic risk can be diversified through

investments in a number of instruments, systematic risk can not. By using the

risk return relationship, we try to assess the competitive strength of the mutual

funds vis-à-vis one another in a better way.

In order to determine the risk-adjusted returns of investment portfolios, several

eminent authors have worked since 1960s to develop composite performance

indices to evaluate a portfolio by comparing alternative portfolios within a

particular risk class. The most important and widely used measures of

performance are:

Ø The Treynor Measure

Ø The Sharpe Measure

Ø Jenson Model

Ø Fama Model

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The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the

basis of Treynor's Index. This Index is a ratio of return generated by the fund

over and above risk free rate of return (generally taken to be the return on

securities backed by the government, as there is no credit risk associated),

during a given period and systematic risk associated with it (beta).

Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

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

of the fund.

All risk-averse investors would like to maximize this value. While a high and

positive Treynor's Index shows a superior risk-adjusted performance of a fund,

a low and negative Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio,

which is a ratio of returns generated by the fund over and above risk free rate of

return and the total risk associated with it. According to Sharpe, it is the total

risk of the fund that the investors are concerned about. So, the model

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evaluates funds on the basis of reward per unit of total risk. Symbolically, it can

be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where, Si is standard deviation of the fund.

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

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

unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the

risk premium by a numerical risk measure. The total risk is appropriate when

we are evaluating the risk return relationship for well-diversified portfolios. On

the other hand, the systematic risk is the relevant measure of risk when we are

evaluating less than fully diversified portfolios or individual stocks. For a well-

diversified portfolio the total risk is equal to systematic risk. Rankings based on

total risk (Sharpe measure) and systematic risk (Treynor measure) should be

identical for a well-diversified portfolio, as the total risk is reduced to

systematic risk. Therefore, a poorly diversified fund that ranks higher on

Treynor measure, compared with another fund that is highly diversified, will

rank lower on Sharpe Measure.

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Jenson Model

Jenson's model proposes another risk adjusted performance measure. This

measure was developed by Michael Jenson and is sometimes referred to as the

Differential Return Method. This measure involves evaluation of the returns

that the fund has generated vs. the returns actually expected out of the fund

given the level of its systematic risk. The surplus between the two returns is

called Alpha, which measures the performance of a fund compared with the

actual returns over the period. Required return of a fund at a given level of risk

(Bi) can be calculated as:

Ri = Rf + Bi (Rm - Rf)

Where, Rm is average market return during the given period. After calculating

it, alpha can be obtained by subtracting required return from the actual return of

the fund.

Higher alpha represents superior performance of the fund and vice versa.

Limitation of this model is that it considers only systematic risk not the entire

risk associated with the fund and an ordinary investor can not mitigate

unsystematic risk, as his knowledge of market is primitive.

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Fama Model

The Eugene Fama model is an extension of Jenson model. This model compares

the performance, measured in terms of returns, of a fund with the required

return commensurate with the total risk associated with it. The difference

between these two is taken as a measure of the performance of the fund and is

called net selectivity.

The net selectivity represents the stock selection skill of the fund manager, as it

is the excess return over and above the return required to compensate for the

total risk taken by the fund manager. Higher value of which indicates that fund

manager has earned returns well above the return commensurate with the level

of risk taken by him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where, Sm is standard deviation of market returns. The net selectivity is then

calculated by subtracting this required return from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure

and Jenson model use systematic risk based on the premise that the

unsystematic risk is diversifiable. These models are suitable for large investors

like institutional investors with high risk taking capacities as they do not face

paucity of funds and can invest in a number of options to dilute some risks. For

them, a portfolio can be spread across a number of stocks and sectors. However,

Sharpe measure and Fama model that consider the entire

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risk associated with fund are suitable for small investors, as the ordinary

investor lacks the necessary skill and resources to diversified. Moreover, the

selection of the fund on the basis of superior stock selection ability of the fund

manager will also help in safeguarding the money invested to a great extent.

The investment in funds that have generated big returns at higher levels of risks

leaves the money all the more prone to risks of all kinds that may exceed the

individual investors' risk appetite.

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CONSIDERATION WHILE SELECTING A MUTUAL FUND

For most investors, choosing a qualified financial adviser is an important first

step in any investment program. With the help of financial adviser, we can

establish our investment goals, assess our risk tolerance, and develop a personal

investment strategy.

Once we have identified some funds that seem to meet our investment needs,

we must consider the following parameters.

Investment Objectives: Are the fund's investment objectives consistent with

our own? Can the fund provide the level of regular income you need? Does it

provide the type of diversification we're looking for? If we have other

investments, how will this fund affect the overall balance of our portfolio?

Risk: Are we comfortable with the level of risk associated with the fund? If we

have other investments, would this fund tend to increase or decrease our overall

risk exposure? Unlike GICs or savings accounts, mutual funds are not covered

by deposit insurance. Values of most mutual funds will fluctuate and we can

lose money depending on changes in the marketplace.

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Time Horizons: Does the investment fit with our expected investment time

horizon? For example, if we're investing for a relatively short time, will sales

charges and redemption fees offset any possible gains? Might the value of the

fund be down just when we need to redeem we investment?

Expected Return: Does the fund have the potential to provide the returns you

need to meet our goals? Remember, predicting the return of any mutual fund

requires that we predict the future - something that can never be done with

certainty. Past performance will tell us about the fund's historical volatility and

its performance relative to competing funds, but it is not a reliable indicator of

future performance. The return we can expect from a mutual fund is closely

related to its risk. The lower the risk of the fund, the lower the return we should

expect.

Costs: Fees and commissions associated with mutual funds will affect our

overall return and can vary widely from one fund to the next. Higher fees and

commissions do not necessarily mean better performance. We should check and

compare fees and commissions before investing.

Flexibility: Will we be entitled to switch our investment to other funds in the

same fund family'? Can we afford the minimum initial investment? Does the

fund offer other features such as regular monthly purchase plans or redemption

plans that are attractive to us?

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Tax Considerations: Is the mutual fund a qualifying investment for our

Registered Retirement Income Fund (RRIF) or other registered plan? If we are

investing in the fund outside a registered plan, do we understand the tax

implications of the distributions of income or capital gains that the fund may

make to us?

RISK FACTORS IN GENERAL

We take risks when we invest in any mutual fund. We may lose some or all of

the money we invest (our principal) because the securities held by a fund go up

and down in value. What we earn on our investment (dividends and interest)

also may go up or down. The various types of risk are:

Volatility: The unpredictability of changes in stock prices.

Interest-rate risk: The fluctuation in bond prices due to interest rate changes.

Credit risk: The likelihood that payments of bond interest and principal will not

be made as promised.

Inflation risk: The risk that the lowered purchasing power of the dollar will

erode our return.

Each kind of mutual fund has different risks and rewards. Generally, the higher

the potential return, the higher the risk of loss. The following

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discussion of risk for the various types of funds is intended to aid us in choosing a fund that

meets our requirements as an investor.

Type of Mutual Fund Potential Risk and Return

Money Market Funds Low

Fixed Income Funds Low

Balanced Funds Moderate

Growth and Equity Funds High

Specialty Funds High

Index Funds (Equity) High

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Objectives of the Project

The objectives of the project are as under

To study about the Mutual Funds in detail

To evaluate investment performance of selected mutual funds in terms of

risk and return

To analyze the returns given by different kind of funds selected for study

The project of my SIP is about Comparative Analysis of various types of

Mutual Funds and risk analysis of various Mutual funds based on some

selective parameters.

Invented in the 1920s, mutual funds are pools of money managed by an investment company or advisor. Different mutual funds have different goals. For example, funds may seek growth, growth and income, specific market cap sizes, sectors, etc

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RESEARCH METHODOLOGY

Meaning: Research means a search for knowledge. Research is an art of

scientific investigation. It is a careful investigation or inquiry especially

through search for new facts in any branch of knowledge.

Some people consider research as a movement, a movement from the known

to unknown. It is actually a voyage of discovery.

Research is an academic activity and as such the term should be used in a

technical sense. Research comprises defining and redefining problem,

formulating hypothesis or suggested solutions, collecting, organizing and

evaluating data, making deductions and reaching conclusions and at last

carefully testing the conclusions to determine whether they fit the

formulated hypothesis.

Research Methodology is a way to systematically solve the research

problem. It is a science of studying how research is done scientifically.

For Example, an architect, who designs a building, has to consciously

evaluate the basis of his decisions i.e; he has to evaluate why and what basis

he selects particular size, number and location of doors, windows and

ventilators, uses particular material and not others and the like.

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Similarly, in research the scientist has to expose the research decisions to

evaluations before they are implemented. He has to specify very clearly and

precisely what decisions he selects and why he selects them so that they can

be evaluated by others also.

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Type of Research

The type of research that I took is descriptive as well as analytical.

Descriptive research includes surveys and fact-finding enquiries of

different kinds. The major purpose of descriptive research is description

of the state of affairs as it exists at presents. The main characteristic of

this method is that the researcher has no control over the variables; he

can only report what has happened or what is happening.

Research Design

A research design is the arrangement of condition for collection and analysis of

data in a manner that aims to combine relevance to the research purpose with

economy in procedure.

Research design is divided into the following parts:

1. The sampling design - methods of selecting items to be observed

2. The observational design – relates to the condition under which the

observations are to be made

3. Statistical design – it is concerned with the observation and analysis

of the data.

4. The operational design – the techniques by which the procedures

like sampling observational designs etc. can be carried out.

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Sample

The sample taken for this research are funds of a few AMCs – Franklin India

Prima Plus Fund, UTI Master Value Fund , HSBC Blue Chip fund etc. I

personally visited the offices of the AMCs – Franklin Templeton to collect the

data. The research revolves around the performances of these fund houses.

Collection of data

Data can be collected in two ways primary and secondary. The data that is used

in this research is secondary data. Secondary data is the data which is already

available i.e. the data which have already been collected and analysed by

someone else. This data may either be published or unpublished data such as

reports and publications of various associations connected with business and

industry, banks, stock exchange etc. unpublished biographies and published

biographies available with research workers, scholars etc.

The Secondary sources were:

Performance and NAV sheets

Fact sheets of AMCs etc.

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RISK ANALYSIS

Risk analysis has been done in two parts.

1) Quantitative Analysis

2) Qualitative Analysis

Quantitative analysis ;it is a form of analysis, which uses numbers and ratios

derived from a company's financials to assess its prospects. Under quantitative

analysis various types of funds have been evaluated based on some selective

parameters

The entry of private mutual funds (since 1993) has injected a sense of

competition and the industry has been witnessing a structural transformation

from a public sector monopoly to monopolistic industry. A proper evaluation

will help small investors to decide about level of investments in various mutual

funds schemes, so as to maximize the returns. Present study is confined to

evaluate the performance of mutual funds on the basis of average returns of last

three years compared with the risk free securities returns and BSE index. In this

project funds have been divided on the basis of their investments in different

type of securities e.g.

1) Large cap funds – Mutual funds which have invested most of their

corpus in large cap equities

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2) Medium cap funds – Mutual funds which have invested most of

their corpus in medium cap equities

3) Aggressive funds – Mutual funds which have invested most of

their corpus in small cap equities.

4) Balanced funds – Mutual funds which have invested their corpus

in all kinds of securities

5) Thematic funds – Mutual funds which invest only in some

particular kind of stocks based on a particular theme.

6) Four funds have been taken under each type and therefore the samples

size consists of 20 mutual funds on one year basis. The broad 50 share

based BSE 50 has been used as a proxy to find out whether the scheme is

able to beat the market or not.

The collection of information is based on the primary and secondary

data. The primary data has been collected through discussion with the

mutual funds institutes officials, to get the first hand information

Secondary information has been collected through various books,

studies and annual reports of various institutes like Kotak, UTI,

HDFC etc. In addition many internet sites like

mutualfundsofindia.com , myiris.com etc will be referred

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Alpha, beta, and R-squared are components of Modern Portfolio Theory (MPT),

which is a standard financial and academic method for assessing the risk of a

fund, relative to a benchmark. A mutual fund's alpha and beta are calculated in

relation to a market index. Each fund is linked to an appropriate index based on

its investment category.

The parameters that have been taken for the evaluation of funds are as under.

(a) Risk- The difference between the required rate of return on mutual fund

investment and risk free is the risk premium. The sources that determine risk

premium includes market risk, financial risk, credit risk, liquidity risk etc.

(b) Beta - Beta coefficient compares the variability of funds returns to the

market as a whole. It is a relative measure unlike absolute measure. Beta, a

component of Modern Portfolio Theory statistics, is a measure of a fund's

sensitivity to market movements. It measures the relationship between a fund's

excess return over T-bills and the excess return of the benchmark index. Equity

funds are compared with the S&P 500 index; bond funds are compared with the

Lehman Brothers Aggregate Bond index.

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By definition, the beta of the benchmark (in this case, an index) is 1.00.

Accordingly, a fund with a 1.10 beta has performed 10% better than its

benchmark index--after deducting the T-bill rate--than the index in up markets

and 10% worse in down markets, assuming all other factors remain constant.

Conversely, a beta of 0.85 indicates that the fund has performed 15% worse

than the index in up markets and 15% better in down markets. A low beta does

not imply that the fund has a low level of volatility, though; rather, a low beta

means only that the funds market-related risk is low. A specialty fund that

invests primarily in gold, for example, will often have a low beta, relative to the

S&P 500 index, as its performance is tied more closely to the price of gold and

gold-mining stocks than to the overall stock market. Thus, though the specialty

fund might fluctuate wildly because of rapid changes in gold prices, its beta

relative to the S&P may remain low.

(c) Jensen Alpha – It represents the difference between a mutual fund’s

actual performance that would be expected on the level of risk taken by the

manager. If a fund produces the expected return at the level of risk assumed, the

fund would have an alpha equal to zero. Alpha measures the difference between

a fund's actual returns and its expected performance, given its level of risk (as

measured by beta). A positive alpha figure indicates the fund has performed

better than its beta would predict. In contrast, a negative alpha indicates a fund

has underperformed, given the expectations established by the fund's beta.

Some investors see alpha as a measurement of the value added or subtracted by

a fund's manager. There are limitations to alpha's ability to accurately depict a

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manager's added or subtracted value. In some cases, a negative alpha can result

from the expenses that are present in the fund figures but are not present in the

figures of the comparison index. Alpha is dependent on the accuracy of beta: If

the investor accepts beta as a conclusive definition of risk, a positive alpha

would be a conclusive indicator of good fund performance.

(d) Standard Deviation - Standard deviation is a statistical measure of

the range of a fund's performance, and is reported as an annual number. When a

fund has a high standard deviation, its range of performance has been very

wide, indicating that there is a greater potential for volatility.

(e) Sharpe Ratio -A measure of a fund's excess return relative to the total

variability of the fund's holdings. The higher the Sharpe ratio, the better the

fund's historical risk-adjusted performance.

(f) Treynor Ratio - A measure of the excess return per unit of risk, where

excess return is defined as the difference between the portfolio's return and the

risk-free rate of return over the same evaluation period and where the unit of

risk is the portfolio's beta.

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Qualitative Analysis- It is an analysis that gathers information, which is

varied, in-depth and rich. The information sought is about how something is experienced and

not specifically about facts and figures. Information from qualitative research is often more

difficult to interpret, partly because it cannot be ‘measured'. The emphasis is on the quality

and depth of information. In the Qualitative analysis first hand information has been through

personal interviews . Through this person buying behavior can be judged, in case of mutual

funds and what they think about the returns from particular mutual funds. For this, sample

size of 50 has been taken.

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Methodology Used

The analysis and interpretation is based upon following methodology.

Of the 20 funds selected, the following parameters have been calculated:

Return

The return will be calculated as under:

Portfolio Return (R it) = NAV t – NAV t-1

NAV t-1

Where R it is the difference between markets indexes of two consecutive days

divided by market index for the preceding day

Market Return (R mt) = M.Ind t – M.Ind t-1

M.Ind t-1

Where R mt is the difference between markets indexes of two consecutive days

divided by market index for the preceding day.

Sharpe ratio –Sharpe performance index gives a single value to be used

for the performance ranking of various funds. Sharpe index measures the risk

premium of the portfolio relative to the total amount of risk in the portfolio. The

risk premium is the difference between the portfolio average rate of return and

the risk less rate of return.

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Sharpe Index = Portfolio average return ( R p ) – Risk free rate of interest

( R f )

Standard deviation of the portfolio return (p )

Treynor’s Performance index –It is expressed as ratio of returns to

systematic risk (beta). Precisely, it is reward to volatility ratio and is defined as:

Treynor Index = Portfolio average return ( R p ) – Risk free rate of

interest ( R f )

Beta coefficient of portfolio ( p)

It measures portfolio risk in term of beta that is the weighted average of

individual security betas. The ratio is relevant to investors, for whom the fund

represents only a fraction of their total assets. The higher the ratio better is the

performance.

Jensen’s Measure –It is regression of excess fund return with excess

market return. It is expressed as:

R pt –R f = R m –R f ) + e i

Where:

Alpha = intercept

80

Beta = Systematic risk

R m = Market return

R f = Return on risk free asset

R pt = Fund return for time period t

After finding all these parameters for the sample size selected, I will plot all the

funds on the Risk-Return graph.

Benchmark Index For this study, broad 500 shares based BSE 500 has

been used as a proxy for market index. This is because BSE 500 is

comparatively far broad based than BSE Sensex which is constituted of 30

shares only.

81

82

Mutual funds selected for the study

Large-cap Funds

DSP-MERILL LYNCH TIGER FUND-GROWTH

KOTAK OPPORTUNITIES

BIRLA SUNLIFE EQUITY FUND-GROWTH

TATA PURE EQUITY FUND-GROWTH

Mid Cap Funds

SUNDARAM SELECT MIDCAP – GROWTH

BIRLA MIDCAP FUND – DIVIDEND

CHOLA MIDCAP FUND – GROWTH

SHARA MIDCAP FUND –GROWTH

Aggressive Funds

PRUDENTIAL ICICI EMERGING STAR FUND – GROWTH

FRANKLIN INDIA PRIMA FUND-GROWTH

HDFC CAPITAL BUILDERS

SBI MAGNUM GLOBAL 94-GROWTH

83

Balanced Funds

KOTAK BALANCE

SBI MAGNUM BALANCED FUND –GROWTH

PRUDENTIAL ICICI BALANCED FUND –GROWTH

JM BALANCED FUND

Thematic Funds

BIRLA SUNLIFE BUY INDIA FUND-GROWTH

UTI THEMATIC BASIC INDUSTRIES FUND-GROWTH

KOTAK MNC FUND

BIRLA MNC FUND-GROWTH

Returns given by the funds in one year (10th April 05 – 10th April 06)

84

Funds NAV (Last year )

NAV (This Year)

Return ( % )

DSP-MERILL LYNCH TIGER FUND-GROWTH

10 19.8 98

KOTAK OPPORTUNITIES 12.89 26.1 102.4

BIRLA SUNLIFE EQUITY FUND-GROWTH 35.18 68.6 95TATA PURE EQUITY FUND-GROWTHSUNDARAM SELECT MID CAP – GROWTH

KOTAK MID CAP-GROWTH 10.20 20.51 101

BIRLA MID CAP FUND – DIVIDEND 13.75 24.75 80 CHOLA MIDCAP FUND – GROWTH

SHARA MIDCAP FUND –GROWTH 10.21 18.33 79.4

PRUDENTIAL ICICI EMERGING STAR FUND – GROWTH

12.84 25.7 100.1

FRANKLIN INDIA PRIMA FUND- GROWTH 117.34 203 73HDFC CAPITAL BUILDERS 36.6 62.9 71.8SBI MAGNUM GLOBAL FUND 94- GROWTH 37.89 37.89 113.06

KOTAK BALANCE-GROWTH 14 23.9 70.6SBI MAGNUM BALANCED FUND –GROWTH 18.70 32.7 74.83PRUDENTIAL ICICI BALANCED FUND –GROWTH

19.88 31.75 59.7

JM BALANCED FUND-GROWTH 12.97 20.75 59.9ESCORTS BALANCED FUND 26.42 44 66.5BIRLA SUNLIFE BUY INDIA FUND-GROWTH

13.81 25.83 86.93

UTI THEMATIC BASIC INDUSTRIES FUND-GROWTH

12.5 24.98 99.8

KOTAK MNC FUND 16.31 28.2 72.9BIRLA MNC FUND-GROWTH 68.33 124.5 82.2

85

LARGE CAP

DSP-MERILL LYNCH TIGER FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 13.71      2 31/05/05 14.52 5.90809628 -0.75390372 0.5683708193 30/06/05 14.58 0.41322314 -6.24877686 39.047212244 31/07/05 16.36 12.2085048 5.546504801 30.763715515 31/08/05 17.97 9.841075795 3.179075795 10.106522916 30/09/05 19.45 8.235948804 1.573948804 2.4773148367 31/10/05 17.81 -8.431876607 -15.09387661 227.8251118 30/11/05 20.16 13.19483436 6.532834363 42.677924819 31/12/05 21.5 6.646825397 -0.015174603 0.000230269

10 31/01/06 23.62 9.860465116 3.198465116 10.230179111 28/02/06 24.46 3.556308213 -3.105691787 9.64532147312 31/03/06 27.36 11.85609158 5.194091578 26.97858732      6.662681535   36.39277185

Sigma =6.03

KOTAK OPPORTUNITIES

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 13.68      2 31/05/05 14.41 5.33625731 -0.79774269 0.63639343 30/06/05 14.68 1.87369882 -4.26030118 18.150166144 31/07/05 16.65 13.41961853 7.285618529 53.080237345 31/08/05 17.48 4.984984985 -1.149015015 1.3202355056 30/09/05 17.95 2.688787185 -3.445212815 11.869491347 31/10/05 16.54 -7.855153203 -13.9891532 195.69640738 30/11/05 18.6 12.45465538 6.320655381 39.950684449 31/12/05 20.45 9.946236559 3.812236559 14.53314758

10 31/01/06 22.02 7.677261614 1.543261614 2.38165640811 28/02/06 23.22 5.449591281 -0.684408719 0.46841529512 31/03/06 25.89 11.49870801 5.36470801 28.78009204      6.13405877   33.3515388

Sigma =5.77

86

BIRLA SUNLIFE EQUITY FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 81.75      2 31/05/05 90.37 10.54434251 4.346342508 18.890693193 30/06/05 92.72 2.600420494 -3.597579506 12.942578314 31/07/05 100.7 8.606557377 2.408557377 5.8011486395 31/08/05 108.2 7.447864945 1.249864945 1.5621623826 30/09/05 117.04 8.170055453 1.972055453 3.8890027097 31/10/05 106.09 -9.355775803 -15.5537758 241.91994178 30/11/05 119.73 12.8570082 6.659008201 44.342390229 31/12/05 126.52 5.671093293 -0.526906707 0.277630678

10 31/01/06 134.98 6.686689851 0.488689851 0.23881777111 28/02/06 139.49 3.341235739 -2.856764261 8.16110204512 31/03/06 155.69 11.61373575 5.415735752 29.33019373      6.198475255   33.39596922

Sigma =5.78

TATA PURE EQUITY FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 30.19      2 31/05/05 32.41 7.353428288 1.550428288 2.4038278753 30/06/05 32.87 1.419315026 -4.383684974 19.216693954 31/07/05 35.2 7.088530575 1.285530575 1.6525888595 31/08/05 37.75 7.244318182 1.441318182 2.0773981016 30/09/05 40.19 6.463576159 0.660576159 0.4363608627 31/10/05 36.84 -8.335406818 -14.13840682 199.89454738 30/11/05 41.24 11.94353963 6.140539631 37.706226969 31/12/05 43.22 4.801163919 -1.001836081 1.003675534

10 31/01/06 47.6 10.13419713 4.331197131 18.7592685911 28/02/06 49.56 4.117647059 -1.685352941 2.84041453612 31/03/06 55.31 11.60209847 5.799098467 33.62954302      5.802946147   29.05641324

Sigma =5.39

87

Risk Vs Return for Large Cap funds

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

105.00%

0.9 0.99 1.04 1.23

Beta

Retu

rn

Beta Va Alpha

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.9 0.99 1.04 1.23

Beta

Alp

ha

88

Mid Cap Funds

SUNDRAM SELECT MIDCAP-GROWTHS.No Date NAV Returns Deviation (D) D Square

1 30/04/05 38.59      2 31/05/05 41.16 6.659756414 0.210756414 0.0444182663 30/06/05 41.07 -0.218658892 -6.667658892 44.45767514 31/07/05 46.04 12.10129048 5.65229048 31.948387675 31/08/05 50.22 9.079061685 2.630061685 6.9172244696 30/09/05 51.66 2.867383513 -3.581616487 12.827976667 31/10/05 47.9 -7.278358498 -13.7273585 188.44037138 30/11/05 52.37 9.331941545 2.882941545 8.3113519519 31/12/05 57.57 9.929348864 3.480348864 12.11282821

10 31/01/06 62.26 8.146604134 1.697604134 2.88185979611 28/02/06 66.02 6.039190491 -0.409809509 0.16794383312 31/03/06 75.45 14.28355044 7.834550439 61.38018059      6.449191834   33.59001981

Sigma =5.79

BIRLA MIDCAP FUND-GROWTHS.No Date NAV Returns Deviation (D) D Square

1 30/04/05 32.43      2 31/05/05 34.36 5.951279679 0.463279679 0.2146280613 30/06/05 33.8 -1.629802095 -7.117802095 50.663106674 31/07/05 37.55 11.09467456 5.606674556 31.434799585 31/08/05 41.15 9.587217044 4.099217044 16.803580376 30/09/05 42.69 3.742405832 -1.745594168 3.0470989987 31/10/05 39.79 -6.793159991 -12.28115999 150.82689078 30/11/05 44.35 11.46016587 5.972165871 35.666765199 31/12/05 47.68 7.508455468 2.020455468 4.082240298

10 31/01/06 50.58 6.082214765 0.594214765 0.35309118711 28/02/06 50.57 -0.01977066 -5.50777066 30.3355376512 31/03/06 57.34 13.38738382 7.899383824 62.40026481      5.488278572   35.07527305

Sigma =5.92

89

CHOLA MIDCAP FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 14.97      2 31/05/05 15.66 4.609218437 -0.107581563 0.0115737933 30/06/05 15.72 0.383141762 -4.333658238 18.780593724 31/07/05 17.09 8.715012723 3.998212723 15.985704985 31/08/05 18.75 9.713282621 4.996482621 24.964838596 30/09/05 19.59 4.48 -0.2368 0.056074247 31/10/05 18.15 -7.350689127 -12.06748913 145.62429388 30/11/05 19.9 9.641873278 4.925073278 24.25634689 31/12/05 21.31 7.085427136 2.368627136 5.610394508

10 31/01/06 22.14 3.894885031 -0.821914969 0.67554421711 28/02/06 22.44 1.35501355 -3.36178645 11.3016081312 31/03/06 24.54 9.35828877 4.64148877 21.543418      4.716859471   24.43730826

Sigma =4.94

SHARA MIDCAP FUND –GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 10.29      2 31/05/05 10.85 5.442176871 0.309176871 0.0955903373 30/06/05 10.95 0.921658986 -4.211341014 17.735393134 31/07/05 11.85 8.219178082 3.086178082 9.5244951555 31/08/05 13.5 13.92405063 8.791050633 77.282571236 30/09/05 14.02 3.851851852 -1.281148148 1.6413405787 31/10/05 12.94 -7.703281027 -12.83628103 164.77011068 30/11/05 13.97 7.959814529 2.826814529 7.9908803799 31/12/05 14.93 6.871868289 1.738868289 3.023662927

10 31/01/06 15.71 5.224380442 0.091380442 0.00835038511 28/02/06 15.84 0.827498409 -4.305501591 18.5373439512 31/03/06 17.57 10.92171717 5.788717172 33.50924649      5.132810385   30.3744532

Sigma =5.51

90

Risk Vs Return for Mid Cap funds

0

0.2

0.4

0.6

0.8

1

1.2

0.6 0.72 0.8 0.8

Beta

Retu

rn

Beta Vs Alpha

0

0.1

0.2

0.3

0.4

0.5

0.6

0.6 0.72 0.8 0.8

Beta

Alp

ha

91

Aggressive Funds

PRUDENTIAL ICICI EMERGING STAR FUND – GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 12.18      2 31/05/05 13.47 10.591133 3.638533005 13.238922433 30/06/05 13.51 0.296956199 -6.655643801 44.297594414 31/07/05 15.21 12.58327165 5.630671651 31.704463245 31/08/05 17.73 16.56804734 9.615447337 92.45682756 30/09/05 18.38 3.666102651 -3.286497349 10.801064837 31/10/05 16.3 -11.31664853 -18.26924853 333.76544198 30/11/05 18.68 14.60122699 7.648626994 58.501494899 31/12/05 20.25 8.404710921 1.452110921 2.108626126

10 31/01/06 21.76 7.456790123 0.504190123 0.25420768111 28/02/06 22.04 1.286764706 -5.665835294 32.1016895812 31/03/06 24.76 12.34119782 5.388597822 29.03698649      6.952686625   58.93339264

Sigma =7.67

FRANKLIN INDIA PRIMA FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 118.08      2 31/05/05 124.54 5.470867209 0.573167209 0.3285206493 30/06/05 122.89 -1.324875542 -6.222575542 38.720446384 31/07/05 136.37 10.96915941 6.071459411 36.862619385 31/08/05 154.47 13.27271394 8.37501394 70.14085856 30/09/05 158.65 2.70602706 -2.19167294 4.8034302757 31/10/05 149.4 -5.830444374 -10.72814437 115.09308178 30/11/05 164.69 10.23427041 5.336570415 28.478983799 31/12/05 174.03 5.671261157 0.773561157 0.598396864

10 31/01/06 180.17 3.528127334 -1.369572666 1.87572928611 28/02/06 182.34 1.20441805 -3.69328195 13.6403315712 31/03/06 196.88 7.974114292 3.076414292 9.464324896      4.897785359   29.0915203

Sigma =5.39

92

HDFC CAPITAL BUILDERS

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 35.93      2 31/05/05 37.66 4.814917896 -0.125082104 0.0156455333 30/06/05 37.47 -0.504514073 -5.444514073 29.642733494 31/07/05 41.82 11.60928743 6.66928743 44.479394825 31/08/05 45.95 9.87565758 4.93565758 24.360715756 30/09/05 48.85 6.311207835 1.371207835 1.8802109267 31/10/05 44.94 -8.004094166 -12.94409417 167.54957388 30/11/05 49.43 9.991099243 5.051099243 25.513603579 31/12/05 51.96 5.118349181 0.178349181 0.03180843

10 31/01/06 54.1 4.118552733 -0.821447267 0.67477561311 28/02/06 55.29 2.199630314 -2.740369686 7.50962601512 31/03/06 60.17 8.826189184 3.886189184 15.10246638      4.941480287   28.79641403

Sigma =5.37

SBI MAGNUM GLOBAL 94-GROWTHS.No Date NAV Returns Deviation (D) D Square

1 30/04/05 17.8      2 31/05/05 19.34 8.651685393 2.065085393 4.2645776813 30/06/05 19.07 -1.396070321 -7.982670321 63.723025454 31/07/05 21.11 10.69743052 4.110830519 16.898927565 31/08/05 24.03 13.83230696 7.245706964 52.50026946 30/09/05 25.74 7.116104869 0.529504869 0.2803754067 31/10/05 23.79 -7.575757576 -14.16235758 200.57237218 30/11/05 26.25 10.34047919 3.753879193 14.0916099 31/12/05 28.27 7.695238095 1.108638095 1.229078426

10 31/01/06 30.66 8.454191723 1.867591723 3.48789884311 28/02/06 31.64 3.196347032 -3.390252968 11.4938151912 31/03/06 35.26 11.44121365 4.854613654 23.56727373      6.586651777   35.64629298

Sigma =5.97

93

Risk Vs Return for Aggresive funds

0

0.2

0.4

0.6

0.8

1

1.2

0.58 0.67 0.8 0.8

Beta

Retu

rns

Beta Vs Alpha

0

0.1

0.2

0.3

0.4

0.5

0.6

0.58 0.67 0.8 0.8

Beta

Alp

ha

94

Balanced Funds

KOTAK BALANCES.No Date NAV Returns Deviation (D) D Square

1 30/04/05 17.3      2 31/05/05 17.42 0.693641618 -2.172358382 4.7191409383 30/06/05 18.08 3.788748565 0.922748565 0.8514649144 31/07/05 19.66 8.738938053 5.872938053 34.491401385 31/08/05 20.6 4.78128179 1.91528179 3.6683043376 30/09/05 21.3 3.398058252 0.532058252 0.2830859847 31/10/05 20.05 -5.868544601 -8.734544601 76.292269398 30/11/05 21.44 6.932668329 4.066668329 16.53779139 31/12/05 21.79 1.632462687 -1.233537313 1.521614304

10 31/01/06 23.45 7.618173474 4.752173474 22.5831527311 28/02/06 24.85 5.970149254 3.104149254 9.63574258912 31/03/06 23.32 -6.15694165 -9.02294165 81.41347602      2.866239616   22.90885853

Sigma =4.786

SBI MAGNUM BALANCED FUND –GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 18.43      2 31/05/05 19.81 7.487791644 2.448091644 5.9931526983 30/06/05 20.36 2.776375568 -2.263324432 5.1226374854 31/07/05 22.1 8.546168959 3.506468959 12.295324565 31/08/05 23.66 7.058823529 2.019123529 4.0768598276 30/09/05 24.57 3.846153846 -1.193546154 1.4245524217 31/10/05 23.76 -3.296703297 -8.336403297 69.495619938 30/11/05 25.64 7.912457912 2.872757912 8.2527380249 31/12/05 26.41 3.003120125 -2.036579875 4.147657588

10 31/01/06 27.97 5.906853465 0.867153465 0.75195513111 28/02/06 28.55 2.07365034 -2.96604966 8.79745058812 31/03/06 31.44 10.12259194 5.082891944 25.83579051      5.039753094   13.29033989

Sigma =3.64

PRUDENTIAL ICICI BALANCED FUND –GROWTH

95

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 19.25      2 31/05/05 20.33 5.61038961 1.21488961 1.4759567653 30/06/05 20.75 2.065912445 -2.329587555 5.4269781784 31/07/05 22.37 7.807228916 3.411728916 11.639894195 31/08/05 24.02 7.375949933 2.980449933 8.8830818036 30/09/05 25.04 4.246461282 -0.149038718 0.0222125397 31/10/05 23.68 -5.431309904 -9.826809904 96.566192898 30/11/05 25.5 7.685810811 3.290310811 10.826145239 31/12/05 26.77 4.980392157 0.584892157 0.342098835

10 31/01/06 28.51 6.499813224 2.104313224 4.42813414411 28/02/06 28.37 -0.49105577 -4.88655577 23.8784272912 31/03/06 30.64 8.00140994 3.60590994 13.0025865      4.395545695   16.04470076

Sigma =4

JM BALANCED FUND

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 12.71      2 31/05/05 13.19 3.776553895 -0.534446105 0.285632643 30/06/05 13.43 1.819560273 -2.491439727 6.2072719144 31/07/05 13.97 4.020848846 -0.290151154 0.0841876925 31/08/05 14.82 6.084466714 1.773466714 3.1451841876 30/09/05 15.48 4.453441296 0.142441296 0.0202895237 31/10/05 14.4 -6.976744186 -11.28774419 127.41316888 30/11/05 15.87 10.20833333 5.897333333 34.778540449 31/12/05 16.53 4.15879017 -0.15220983 0.023167832

10 31/01/06 17.63 6.654567453 2.343567453 5.49230840711 28/02/06 18.42 4.480998298 0.169998298 0.02889942112 31/03/06 20.03 8.740499457 4.429499457 19.62046544      4.311028686   17.91810148

Sigma =4.23

96

Risk Vs Return for Balanced Funds

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

1.08 1.15 1.23 1.33

Return

Beta

Beta Vs Alpha

-0.5

-0.45

-0.4

-0.35

-0.3

-0.25

-0.2

-0.15

-0.1

-0.05

0

1.08 1.15 1.23 1.33

Beta

Alp

ha

97

Thematic Funds

PRUDENTIAL ICICI FMCG-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 18.85      2 31/05/05 20.85 10.61007958 5.031579576 2.1097327523 30/06/05 21.48 3.021582734 -2.556917266 6.5378259064 31/07/05 24.21 12.70949721 7.130997207 50.851121165 31/08/05 27.87 15.11771995 9.53921995 90.996717266 30/09/05 29.72 6.637961966 1.059461966 1.1224596587 31/10/05 27.04 -9.017496635 -14.59599664 213.04311788 30/11/05 29.96 10.79881657 5.220316568 27.251705079 31/12/05 32.48 8.411214953 2.832714953 8.024274006

10 31/01/06 34.11 5.018472906 -0.560027094 0.31363034611 28/02/06 35.43 3.869832894 -1.708667106 2.91954328112 31/03/06 39.46 11.37454135 5.796041349 33.59409532      7.141111224   39.70583841

Sigma =6.30

UTI THEMATIC BASIC INDUSTRIES FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 12.3      2 31/05/05 12.92 5.040650407 -1.191549593 1.4197904343 30/06/05 13.13 1.625386997 -4.606813003 21.222726054 31/07/05 14.14 7.692307692 1.460107692 2.1319144735 31/08/05 15.93 12.65912306 6.426923055 41.305339966 30/09/05 16.54 3.829252982 -2.402947018 5.7741543727 31/10/05 14.94 -9.673518742 -15.90571874 252.99188878 30/11/05 16.72 11.91432396 5.682123963 32.286532739 31/12/05 17.68 5.741626794 -0.490573206 0.24066207

10 31/01/06 19.32 9.2760181 3.0438181 9.26482862311 28/02/06 20.03 3.67494824 -2.55725176 6.53953656312 31/03/06 23.39 16.77483774 10.54263774 111.1472106      6.232268839   44.02950769

Sigma =6.635

98

KOTAK MNC FUND

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 16.849      2 31/05/05 18.081 7.312006647 2.542006647 6.4617977953 30/06/05 17.798 -1.565178917 -6.335178917 40.134491914 31/07/05 19.11 7.371614788 2.601614788 6.7683995065 31/08/05 20.67 8.163265306 3.393265306 11.514249446 30/09/05 20.521 -0.720851476 -5.490851476 30.149449937 31/10/05 19.31 -5.901271868 -10.67127187 113.87604338 30/11/05 21.55 11.60020715 6.830207147 46.651729669 31/12/05 23.24 7.842227378 3.072227378 9.438581063

10 31/01/06 24.675 6.174698795 1.404698795 1.97317870511 28/02/06 25.51 3.383991895 -1.386008105 1.92101846812 31/03/06 27.758 8.812230498 4.042230498 16.3396274      4.77026729   25.92986974

Sigma =5.09

BIRLA MNC FUND-GROWTH

S.No Date NAV Returns Deviation (D) D Square1 30/04/05 67.86      2 31/05/05 73.1 7.721780136 2.239980136 5.0175110083 30/06/05 73.88 1.067031464 -4.414768536 19.490181234 31/07/05 79.23 7.241472658 1.759672658 3.0964478655 31/08/05 82.73 4.417518617 -1.064281383 1.1326948636 30/09/05 87.34 5.572343769 0.090543769 0.0081981747 31/10/05 82.05 -6.056789558 -11.53858956 133.1390498 30/11/05 93.97 14.527727 9.045926996 81.828795219 31/12/05 98.07 4.363094605 -1.118705395 1.251501762

10 31/01/06 105.13 7.198939533 1.717139533 2.94856817611 28/02/06 108.13 2.853609816 -2.628190184 6.90738364112 31/03/06 120.45 11.39369278 5.911892777 34.95047621      5.481856437   26.34280065

Sigma =5.13

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Risk Vs Return for Thematic funds

0

0.2

0.4

0.6

0.8

1

1.2

0.66 0.72 0.74 0.91

Beta

Retu

rns

Beta Vs Alpha

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.66 0.72 0.74 0.91

Beta

Alp

ha

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DATA ANLAYIS OF PERFROMANCE OF VARIOUS MUTUAL

FUNDS ON THE BASIS OF RISK V/S RETURN

Large Cap Funds

If we look at the graph of Risk Vs Return in case of large cap funds, then DSP

Merrill Lync tiger fund has given maximum returns with minimum Beta. On the

other hand Tata pure Equity fund has given the minimum returns with high risk

involved in the portfolio. Whereas opportunities and Birla Sunlife equity funds

have given returns as per the risk in their portfolios

Mid Cap Funds

Sundram select Mid Cap fund has given maximum returns with low risk

(Beta=0.6). Chola Mid Cap and Sahara Mid Cap Funds have almost same Beta

values but Sahara Mid Cap funds have given better returns than Chola Mid Cap

Fund. Birla Mid Cap fund has given returns proportional to the Beta of its

portfolio.

Aggressive Funds

If we look at the graph of Aggressive funds then we find some surprising

results, HDFC Capital Builders have given proportionate returns as compared to

the Risk evolved in its portfolio ( Beta = 0.58 ). On the other hand SBI Magnum

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Global 94 and Prudential ICICI emerging star fund have almost same risk in

their portfolio but Prudential ICICI emerging star fund has given better returns

than SBI Magnum Global 94. Franklin India Prima fund has given better returns

than HDFC Capital Builders.

Balanced Funds

Prudential ICICI Balanced Fund has high risk but has given lowest return if

compared to other funds in its category. Kotak Balance has given less return

than SBI Magnum Balanced Fund with high risk. JM Balanced Fund has given

better returns than Prudential ICICI Balanced Fund even with less risk in its

portfolio as compared to that in portfolio of ICICI Balanced Fund.

Thematic Funds

Kotak MNC Fund has given lowest returns among the Funds selected in its

category with Beta of 0.66. Also Birla MNC fund has given fewer returns as

compared to Prudential ICICI FMCG Funds in spite of having more risky

portfolio. Returns given by UTI Thematic Basic Industries fund is good as it

has more risk in its portfolio as compared to other funds in this category.

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Overall Risk Vs Return Analysis of the Funds selected for the

study

S.No Fund Name Last year Beta

    Return  

       

1 DSP-MERILL LYNCH TIGER FUND-GROWTH 99.56% 0.9

2 KOTAK OPPORTUNITIES 0.8925 0.99

3 BIRLA SUNLIFE EQUITY FUND-GROWTH 0.9044 1.04

4 TATA PURE EQUITY FUND-GROWTH 0.832 1.23

5 SUNDRAM SELECT MIDCAP-GROWTH 0.955 0.6

6 BIRLA MIDCAP FUND-GROWTH 0.7681 0.72

7 CHOLA MIDCAP FUND-GROWTH 0.6392 0.8

8 SAHARA MIDCAP FUND –GROWTH 0.7074 0.8

9

PRUDENTIAL ICICI EMERGING STAR FUND – GROWTH 1.0328 0.8

10 FRANKLIN INDIA PRIMA FUND-GROWTH 0.667 0.67

11 HDFC CAPITAL BUILDERS 0.6746 0.58

12 SBI MAGNUM GLOBAL 94-GROWTH 0.9808 0.8

13 KOTAK BALANCE 0.71 1.23

14 SBI MAGNUM BALANCED FUND –GROWTH 0.75 1.15

15 PRUDENTIAL ICICI BALANCED FUND –GROWTH 0.5916 1.33

16 JM BALANCED FUND 0.633 1.08

17 PRUDENTIAL ICICI FMCG FUND- GROWTH 1.093 0.74

18 UTI THEMATIC BASIC INDUSTRIES FUND-GROWTH 0.9016 0.91

19 KOTAK MNC FUND 0.685 0.66

20 BIRLA MNC FUND-GROWTH 0.775 0.72

If we study the above table we see that only two funds have given returns more

than 100% and seventeen out of twenty funds have given returns more than the

market return which is approximately 65.2 %. Only three funds Chola mid cap

fund, JM Balanced Fund and Prudential ICICI Balanced Fund has given returns

less than the market returns.

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S.No of Fund Last year Standard Beta Sharpe Index

Treynor's Index Jensen's Alpha

  Return deviation ( Sr ) ( Tn )

             

1 99.56% 6.03 0.9 0.151840796 1.017333333 0.40116

2 0.8925 5.77 0.99 0.140814558 0.820707071 0.246616

3 0.9044 5.78 1.04 0.142629758 0.792692308 0.229936

4 0.832 5.39 1.23 0.139517625 0.611382114 0.048932

5 0.955 5.79 0.6 0.151122625 1.458333333 0.53204

6 0.7681 5.92 0.72 0.116233108 0.955694444 0.276548

7 0.6392 4.94 0.8 0.113198381 0.699 0.10192

8 0.7074 5.51 0.8 0.113865699 0.78425 0.17012

9 1.0328 7.67 0.8 0.12422425 1.191 0.49552

10 0.667 5.39 0.67 0.10890538 0.876119403 0.204028

11 0.6746 5.37 0.58 0.110726257 1.025172414 0.263072

12 0.9808 5.97 0.8 0.150887772 1.126 0.44352

13 0.71 4.78 1.23 0.131799163 0.512195122 -0.073068

14 0.75 3.64 1.15 0.184065934 0.582608696 0.01266

15 0.5916 4.01 1.33 0.127581047 0.384661654 -0.248628

16 0.633 4.23 1.08 0.130732861 0.512037037 -0.064328

17 1.093 6.3 0.74 0.160793651 1.368918919 0.590016

18 0.9016 6.63 0.91 0.123921569 0.902857143 0.301444

19 0.685 5.09 0.66 0.118860511 0.916666667 0.227744

20 0.775 5.13 0.72 0.135477583 0.965277778 0.283448

All the parameters for different funds have been calculated and shown in the

above table and a graph between risk and return for all the funds have been

made as shown on the next page. From the above table we note that the alpha

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values for most of the balanced funds is negative. This shows that these funds

have under performed, given the expectations established by the fund's beta.

Beta Vs Return for the Funds selected

0

0.2

0.4

0.6

0.8

1

1.2

0.58 0.6 0.66 0.67 0.72 0.72 0.74 0.8 0.8 0.8 0.8 0.9 0.91 0.99 1.04 1.08 1.15 1.23 1.23 1.33

Beta

Ret

urn

If we look at the above graph, it is clear that many funds have given almost

same returns even with different amount of risks in their portfolio. Two funds

of ICICI (Prudential ICICI Emerging Star Fund and Prudential ICICI FMCG

Fund) have given more than 100% returns even with very less beta whereas one

fund of ICICI (Prudential ICICI Balanced Fund- Growth ) has given very less

returns as compared to the beta of its portfolio.

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QUALITATIVE ANALYSIS

Consumer behavior is the study of how people buy, what they buy, when they

buy and why they buy. It is a subcategory of marketing that blends elements

from psychology, sociology, socio psychology, anthropology and economics. It

attempts to understand the buyer decision making process, both individually

and in groups. It studies characteristics of individual consumers such as

demographics, psychographics, and behavioral variables in an attempt to

understand people's wants. It also tries to assess influences on the consumer

from groups such as family, friends, reference groups, and society in general.

Detailed Model of Factors Influencing behavior

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Cultural Factors

Cultural factors exert the broadest and deepest influence on consumer behavior.

In general, the marketer’s distinguish three different cultural factors:

Culture

Subculture

Social class (this is a social factor, too)

Culture

Culture (or civilization) is the highest entity of personal identification with the

society. These entities were in the past the nations and could be in the future the

civilizations (Western, Muslim, Hindi, Chinese).

Humane behavior is largely learned. The growing child acquires a set of values,

perceptions, preferences and behaviors through a process of socialization

involving.

the family and other education institutions.

Subculture

Each culture consists of smaller subcultures that provide more specific

identification and socialization for its members.

We can distinguish several subcultures in the different countries.

Not only in the India, but also in European countries we can distinguish:

National groups (immigrants, Europeans and non-Europeans)

Religious groups (Catholics, Protestants, Orthodoxs, Muslims, Jews)

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Geographical areas (Regions, regional identity in Germany and in other

European countries)

Social Class

“Social classes are relatively homogeneous and enduring divisions in a society,

which are hierarchically ordered and whose members share similar values

interests and behavior”. Social classes show distinct product and brand

preferences in such areas as clothing, home furnishing, leisure activities,

automobiles, and food and beverages.

Social Factors

The consumer’s behavior is also influenced by (other) social factors as

Reference groups

Family

Social rules and statuses

Reference Groups

“A person’s reference groups consist of all social groups that have a direct (face

to face) or indirect influence on the person’s attitudes or behavior”

We distinguish different reference groups:

Membership groups are the groups, to which the person belongs,

- Family, friends, neighbors, coworkers (primary groups)- Religious, political, professional groups (secondary groups)

Non-membership groups are the groups to which a person not belongs, but

which influence the attitudes and behavior of the person.

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- Aspirational groups are groups to which a person would like to belong.

- Dissociative groups are groups whose values or behavior are rejected.

Family

Family members constitute the most influential primary reference group shaping the buyer’s behavior.

We distinguish between two types of families in the consumer’s life:

- the family of orientation (family of origin) consists of one’s parents.

From parents a person acquires an orientation towards religion, ethics, politic

and economic behavior and also food patterns.

- the family of procreation (own family) consists of one’s spouse and children.

This family is the most important consumer-buying organization in society.Roles and Statuses

A person participates in many groups throughout life:

- Family, clubs, organizations.

The person’s position in each group can be defined in terms of role and

status.

A role consists of the activities that a person is expected to perform according

to the persons around him or her.

Each role carries a status reflecting the esteem accorded to it by society.

Roles and statuses are at the same time dynamic and static phenomena:

- They change with the economic and social progress (land owner,

entrepreneur)

- People with higher status like to remain their position

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People choose products that communicate their role and status in society.

But status symbols vary for social classes and also geographically.

Personal Factors

A buyer’s decisions are also strongly influenced by personal characteristics, so

the

- Age and Life-cycle Stage,

- Occupation or Profession,

- Economic Situation,

- Lifestyle.

Age and Life-cycle Stage

People buy different goods and services over their lifetime. They eat baby food

in the early years, most foods in the growing and maturing years, and special

diets in the later years.

Occupation

A person’s consumption pattern is also influenced by his or her occupation. A

white-collar worker will buy other clothing and food as a blue-collar worker.

Economic circumstances

People economic circumstances consist of their

- Spendable income

- Savings and assets

- Borrowing power

- Attitude toward spending and saving.

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Lifestyle

People coming from the same subculture, social class, occupation but may lead

different lifestyles.

A person’s lifestyle is the person’s pattern of living in the world as expressed

in the person’s activities, interests, and opinions. Lifestyle portrays the

“whole person” interacting with his or her environment. Personality and Self-

concept lead to the Psychological factors. Personality means the person’s

distinguishing psychological characteristics. Self concept (or self image)

means our image of ourselves.

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FINDINGS

In my study i have concentrated on two major issues one deals with the

performance of various mutual funds and the other one is risk in various method

s of investing in mutual funds. findings of my study are follows :

IN RESPECT TO PERFORMANCE :

Large Cap Funds

If we look at the graph of Risk Vs Return in case of large cap funds, then DSP

Merrill Lync tiger fund has given maximum returns with minimum Beta. On the

other hand Tata pure Equity fund has given the minimum returns with high risk

involved in the portfolio. Whereas opportunities and Birla Sunlife equity funds

have given returns as per the risk in their portfolios

Mid Cap Funds

Sundram select Mid Cap fund has given maximum returns with low risk

(Beta=0.6). Chola Mid Cap and Sahara Mid Cap Funds have almost same Beta

values but Sahara Mid Cap funds have given better returns than Chola Mid Cap

Fund. Birla Mid Cap fund has given returns proportional to the Beta of its

portfolio.

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Aggressive Funds

If we look at the graph of Aggressive funds then we find some surprising

results, HDFC Capital Builders have given proportionate returns as compared to

the Risk evolved in its portfolio ( Beta = 0.58 ). On the other hand SBI Magnum

Global 94 and Prudential ICICI emerging star fund have almost same risk in

their portfolio but Prudential ICICI emerging star fund has given better returns

than SBI Magnum Global 94. Franklin India Prima fund has given better returns

than HDFC Capital Builders.

Balanced Funds

Prudential ICICI Balanced Fund has high risk but has given lowest return if

compared to other funds in its category. Kotak Balance has given less return

than SBI Magnum Balanced Fund with high risk. JM Balanced Fund has given

better returns than Prudential ICICI Balanced Fund even with less risk in its

portfolio as compared to that in portfolio of ICICI Balanced Fund.

Thematic Funds

Kotak MNC Fund has given lowest returns among the Funds selected in its

category with Beta of 0.66. Also Birla MNC fund has given fewer returns as

compared to Prudential ICICI FMCG Funds in spite of having more risky

portfolio. Returns given by UTI Thematic Basic Industries fund is good as it

has more risk in its portfolio as compared to other funds in this category.

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WITH RESPECT TO METHOD OF INVESTING :

In some of the above examples we see that an investor who has invested lump

sum gains much better that the one who invests through SIP. This is due to the

fact that the former invested at the time when the unit price of the fund was low.

Though the market fluctuated and the price of the unit fell poorly, mostly we

saw a rise in the prices. When spread the investment over a period of 3 years

ultimately the price at the time of selling was much higher which gave the lump

sum investor an upper hand. Still we cannot completely go against the SIP on

this basis. Because SIP is the best option for small investors and those who

don’t want to take any chances or risks. Moreover, it inculcates the saving

tendencies among the people who otherwise never think of investing for the

future. Besides this it usually gives them an advantage of the rising market

trends and economic booms which they would otherwise miss if they had not

thought of investing in the mutual funds. This is not that a SIP investor is

always a loser to a lump sum investor. Nobody can fully predict the market

trends. Sometimes it rises steadily, at other times it falls and they rise,

sometimes it rises and then falls. Think of a scenario when the at the time of

initiation of a SIP the market price of the unit is low, then it rises for a few

months and then falls for a very long time and suddenly rises. In that case the

SIP investor can gain a lot more than the lump sum investor. I am neither in

favour of nor totally against lump sum or SIP. Instead, I would like to

emphasize on the fact that gain or loss to a large extend depends on the market

trend and so many other factors. Right timing is the key to getting success in the

money market. It is true also for a SIP investor.

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116

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RECOMMENDATIONS

Following are some recommendations to reduce the losses through

investments in mutual funds .

Mutual funds are not guaranteed or insured by any government

agency — even if you buy through a bank and the fund carries the

bank's name. You can lose money investing in mutual funds.

 

Past performance is not a reliable indicator of future performance.

So don't be dazzled by last year's high returns. But past performance

can help you assess a fund's volatility over time.

As per the National Stock Exchange, the Mid-Cap Universe is defined as stocks having average six months market capitalisation between Rs 75 crore and Rs 750 crore such as Amtek Auto, Federal Bank, Allahabad Bank, BEML etc.

Market capitalisation means the number of shares issued multiplied by their market value. Generally these are mid sized businesses.

And hence display high rates of growth in a growing economy. But being mid-sized in nature, they are very susceptible to changes in the economy and could suffer more in a bad period than a large company. Hence, mid cap stocks are good to have in a portfolio, but in a limited proportion, as compared to large cap stocks. In times of panic or crises, we have seen mid caps falling much more than large caps.

Stock prices never grow in a straight line, unlike deposits. Their values keep swinging based on perceptions (of buyers and sellers) of the company’s business prospects.

This nature of “swinging” is called volatility. Moreover, the swinging does not occur in a set pattern. So the swinging nature combined with an

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irregular pattern renders stock prices unpredictable in the short run.

Greater the volatility, lesser the predictability. High volatility also implies that you could have purchased the stock at an abnormal high or an abnormal low.

Buying low is beneficial whereas buying high is not! The chart above shows the NAVs of two funds, one more volatile than the other.

The blue line fund is more volatile than the black line. You will observe that the blue line dips lower and rises further, too. But if you are the sort with a weak stomach, you will lose sleep over the steep falls. Hence my advise that conservative investors have more of less volatile funds. But the aggressive investor can opt for higher volatility, as long as it returns him more eventually, like in the chart below. Mid caps are more volatile than large caps.

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Limitations of the study

The study is limited to some particular Mutual funds and can’t be generalized to

other funds. The study is limited to a particular year of returns and can’t be

generalized for future returns Funds which have been selected under a particular

category is based on the following assumptions.

1) Funds which have given maximum returns in last one year.

2) No two funds from a same company have been selected under one

category.

3) A fund selected is at least one year old.

4) Only open ended schemes have been taken for analysis.

5) Minor change in the portfolio of a fund is not taken into consideration.

6) There is very less time to complete the study.

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References

www.amfiindia.com

NAVIndia.com

Bloomberg.com

Investopedia.com

www.bseindia.com

www.kotak.com

www.kotakmutual.com

www.mutualfundsindia.com

www.myiris.com

www.nseindia.com

Kotak’s Asset Management Company (AMC )

NSE course for AMFI

Moneycontrol.com

Nav.com

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