Thesis - Portfolio Management

Property of Project Guru, www.projectguru.co.
cc
Introduction to Portfolio Management
Investing in securities such as shares, debentures, and bonds is profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well artistic skill. In such investments both rationale and emotional responses are involved. Investing in financial securities is now considered to be one of the best avenues for investing one savings while it is acknowledged to be one of the best avenues for investing one saving while it is acknowledged to be one of the most risky avenues of investment. It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called portfolio. Creation of a portfolio helps to reduce risk, without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success.
Property of Project Guru, www.projectguru.co.cc
Portfolio Management
An investor considering investment in securities is faced with the problem of choosing from among a large number of securities and how to allocate his funds over this group of securities. Again he is faced with problem of deciding which securities to hold and how much to invest in each. The risk and return characteristics of portfolios. The investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios.
As the risk return characteristics of individual securities as well as portfolios also change. This calls for periodic review and revision of investment portfolios of investors.
An investor invests his funds in a portfolio expecting to get good returns consistent with the risk that he has to bear. The return realized from the portfolio has to be measured and the performance of the portfolio has to be evaluated.
It is evident that rational investment activity involves creation of an investment portfolio. Portfolio management comprises all the processes involved in the creation and maintenance of an investment portfolio. It deals specifically with the security analysis, portfolio analysis, portfolio selection, portfolio revision & portfolio evaluation. Portfolio management makes use of analytical techniques of analysis and conceptual theories regarding rational allocation of funds. Portfolio management is a complex process which tries to make investment activity more rewarding and less risky.
Selection of Portfolio
The selection of portfolio depends upon the objectives of the investor. The selection of portfolio under different objectives are dealt subsequently
Objectives and asset mix
If the main objective is getting adequate amount of current income, sixty percent of the investment is made in debt instruments and remaining in equity. Proportion varies according to individual preference.
Growth of income and asset mix
Here the investor requires a certain percentage of growth as the income from the capital he has invested. The proportion of equity varies from 60 to 100 % and that of debt from 0 to 40 %. The debt may be included to minimize risk and to get tax exemption.
Capital appreciation and Asset Mix
It means that value of the investment made increases over the year. Investment in real estate can give faster capital appreciation but the problem is of liquidity. In the capital market, the value of the shares is much higher than the original issue price.
Safety of principle and asset mix
Usually, the risk adverse investors are very particular about the stability of principal. Generally old people are more sensitive towards safety.
Risk and return analysis
The traditional approach of portfolio building has some basic assumptions. An investor wants higher returns at the lower risk. But the rule of the game is that more risk, more return. So while making a portfolio the investor must judge the risk taking capability and the returns desired.
Diversification Once the asset mix is determined and risk return relationship is analyzed the next step is to diversify the portfolio. The main advantage of diversification is that the unsystematic risk is minimized.
Evolution of Portfolio Management

Portfolio management is essentially a systematic method of maintaining ones investment efficiently. Many factors have contributed to the existence and development of the concept.
In the early years of the century analyst used financial statements to find the value of the securities. The first to be analyzed using this was Railroad Securities of the USA. A booklet entitled The Anatomy of the Railroad was published by Thomas F. Woodlock in 1900. As the time progressed this method became very important in the investment field, although most of the writers adopted different ways to publish there data.
They generally advocated the use of different ratios for this purpose. John Moody in his book The Art of wall Street Investing, strongly supported the use of financial ratios to know the worth of the investment. The proposed type of analysis later on became the common-size analysis.
The other major method adopted was the study of stock price movement with the help of price charts. This method later on was known as Technical Analysis. It evolved during 1900-1902 when Charles H. Dow, the founder of the Dow Jones and Co. presented his view in the series of editorials in the Wall Street Journal in USA. The advocates of technical analysis believed that stock prices movement is ordered and systematic and the definite pattern could be identified. There investment strategy was build around the identification of the trend and pattern in the stock price movement.
Another prominent author who supported the technical analysis was Ralph N. Elliot who published a book in the year 1938 titled The Wave Principle. After analyzing 75 years data of share price, he concluded that the market movement was quite orderly and followed a pattern of waves. His theory is known as Elliot Wave Theory.
According to J.C. Francis the development of investment management can be traced chronologically through three different phases.
First phase is known as Speculative Phase. Investment was not a wide spread activity, but a cake of few rich people. The process is speculative in nature. Investment management was an art and needed skills. Price manipulation was resorted to by the investors. During this time period pools and corners were used for manipulation. The result of this was the stock exchange crash in the year 1929. Finally the daring speculative ventures of investors were declared illegal in the US by the Securities Act of 1934.
Second phase began in the year 1930. The phase was of professionalism. After coming up of the Securities Act, the investment industry began the process of upgrading its ethics, establishing standard practices and generating a good public image. As a result the investments market became safer place to invest and the people in different income group started investing. Investors began to analyze the security before investing. During this period the research work of Benjamin Graham and David L. Dood was widely publicized and publicly acclaimed. They published a book Security Analysis in 1934, which was highly sought after. There research work was considered first work in the field of security analysis and acted as the base for further study. They are considered as pioneers of security analysis as a discipline.
Third phase was known as the scientific phase. The foundation of modern portfolio theory was laid by Markowitz. His pioneering work on portfolio management was described in his article in the Journal of Finance in the year 1952 and subsequent books published later on.
He tried to quantify the risk. He showed how the risk can be minimized through proper diversification of investment which required the creation of the portfolio. He provided technical tools for the analysis and selection of optimal portfolio. For his work he won the Noble Prize for Economics in the year 1990.
The work of Markowitz was extended by the William Sharpe, John Linter and Jan Mossin through the development of the Capital Asset Pricing Model (CAPM).
If we talk of the present the last two phases of Professionalism and Scientific Analysis are currently advancing simultaneously with investment in various financial instruments becoming safer, with proper knowledge to each and every investor.
10
Role of Portfolio Management
There was a time when portfolio management was an exotic term. A practice which is beyond the reach of the small investor, but the time has changed now. Portfolio management is now a common term and is widely practiced in INDIA. The theories and concepts relating to portfolio management now find there way in the front pages of the financial newspapers and magazines. In early 90s India embarked on a program of economic liberalization and globalization, with high participation of private players. This reform process has made the Indian industry efficient, with rapid computerization, increased market transparency, better infrastructure and customer services, closer integration and higher volume. The markets are dominated by large institutional investors with their diversified portfolios. A large number of mutual funds have come up in the market since 1987. With this development investment in securities has gained considerable momentum
Along with the spread of the securities investment way among Indian investors have changed due to the development of the quantitative techniques. Professional portfolio management, backed by research is now being adopted by mutual funds, investment consultants, individual investors and big brokers. The Securities Exchange Board of India (SEBI) is a regulatory body in INDIA. It ensures that the stock market is free from fraud, and of course the main objective is to ensure that the investors money is safe.
11
With the advent of computers the whole process of portfolio management has become quite easy. The computer can absorb large volumes of data, perform the computations accurately and quickly give out the results in any desired form. Moreover simulation, artificial intelligence etc provides means of testing alternative solutions.
The trend towards liberalization and globalization of the economy has promoted free flow of capital across international borders. Portfolio not only now include domestic securities but foreign too. So financial investments cant be reaped without proper management.
Another significant development in the field of investment management is the introduction to Derivatives with the availability of Options and Futures. This has broadened the scope of investment management.
Investment is no longer a simple process. It requires a scientific knowledge, a systematic approach and also professional expertise. Portfolio management is the only way through which an investor can get good returns, while minimizing risk at the same time.
So portfolio management objectives can be stated as: -
Risk minimization. Safeguarding capital. Capital Appreciation. Choosing optimal mix of securities. Keeping track on performance.
12
13
WHAT IS MUTUAL FUND??
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities.
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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme 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 portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.
The flow chart below describes broadly the working of a mutual fund.
14
A mutual fund is a managed group of owned securities of several corporations. These corporations receive dividends on the shares that they hold and realize capital gains or losses on their securities traded. Investors purchase shares in the mutual fund as if it was an individual security. After paying operating costs, the earnings (dividends, capital gains or loses) of the mutual fund are distributed to the investors, in proportion to the amount of money invested.
A mutual fund may be either an open-end or a closed-end fund. An open-end mutual fund does not have a set number of shares; it may be considered as a fluid capital stock. The number of shares changes as investors buys or sell their shares. Investors are able to buy and sell their shares of the company at any time for a market price. However the openend market price is influenced greatly by the fund managers. On the other hand, closedend mutual fund has a fixed number of shares and the value of the shares fluctuates with the market. But with close-end funds, the fund manager has less influence because the price of the underlining owned securities has greater influence
Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time.
15
Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time. The concept of mutual fund originated in Belgium by the Society Generale de Belgique in the year 1822. Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds. SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day-to-day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV
16
per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.
17
TYPES OF MUTUAL FUNDS SCHEMES

Mutual fund schemes may be classified on the basis of its structure and its investment objective-:
A)
By Structure
1) Open-ended Fund
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. The term Mutual fund is the common name for an open-end investment company. Being open-ended means that at the end of every day, the investment management company sponsoring the fund issues new shares to investors and buys back shares from investors wishing to leave the fund.
18
2) Closed-end Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges.
3) Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.
B)
By Investment Objective
1) Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved
19
that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors for a period of time.
2) Income Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.
3) Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. 4) Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. Money market funds have relatively low risks, compared to other mutual funds (and most other investments). By law, they can invest in only certain high-quality, short-term investments issued by the U.S. government, U.S. corporations, and state and local governments. Money market funds try to keep their
20
net asset value (NAV) which represents the value of one share in a fund at a stable $1.00 per share. But the NAV may fall below $1.00 if the fund's investments perform poorly. Investor losses have been rare, but they are possible. Money market funds pay dividends that generally reflect short-term interest rates, and historically the returns for money market funds have been lower than for either bond or stock funds. That's why "inflation risks" the risk that inflation will outpace and erode investment returns over time can be a potential concern for investors in money market funds.
21
HISTORY OF 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
22
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. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990 At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores Third Phase 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. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996 The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and
23
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual fund 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 Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. 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. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
GROWTH IN ASSETS UNDER MANAGEMENT
24
ORGANISATION OF MUTUAL FUND There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
25
26
Trends in Transactions on Stock Exchanges by Mutual Funds (since January 2000)
Equity (Rs in Crores) Gross Purchase

11070.54 17375.78 12098.11 14520.89 36663.58 45045.25 100435.90 12752.47 18345.43 7843.52 7552.18 8851.58 10345.23 9944.46 12675.21 13181.43 11643.60 12697.09 3844.74 129676.94
Debt (Rs in Crores) Gross Sales

11492.19 20142.76 15893.99 16587.59 35355.67 44597.23 86133.70 9631.91 10452.07 9820.47 7633.89 8425.14 9005.54 9947.97 12700.04 11554.38 12985.83 12971.14 4568.60 119696.98
Time
Jan 2000-March 2000. April 2000 -March 2001. April 2001-March 2002. April 2002-March 2003 April 2003-March 2004 April 2004-March 2005 April 2005-March 2006 April 2006. May 2006. June 2006. July 2006. August 2006. September 2006. October 2006. November 2006. December 2006. January 2007. February 2007. March 2007 (upto 10th) Total (April '06 - March '07)
Net Purchase/ Gross Sales Purchase

-421.65 -2766.98 -3795.88 -2066.70 1307.91 448.02 14302.20 3120.56 7893.36 -1976.95 -81.71 426.44 1339.69 -3.51 -24.83 1627.05 -1342.23 -274.05 -723.86 9979.96 2764.72 13512.17 33583.64 46663.83 63169.93 62186.46 109804.91 11227.96 15386.47 14235.54 15982.62 16169.28 12878.65 10314.44 13296.65 7584.70 10830.62 10351.99 4784.63 143043.55
Gross Sales
1864.29 8488.68 22624.42 34059.41 40469.18 45199.17 73003.67 6800.08 7774.06 8906.90 8266.41 11853.22 9591.24 7929.50 6961.92 6256.15 8427.46 7682.98 2660.08 93110.00
Net Purchase/ Sales

900.43 5023.49 10959.22 12604.42 22700.75 16987.29 36801.24 4427.88 7612.41 5328.64 7716.21 4316.06 3287.41 2384.94 6334.73 1328.55 2403.16 2669.01 2124.55 49933.55
27
Trends in Transactions on Stock Exchanges by Mutual Funds
Equity (Rs in crores) Debt (Rs in crores) Gross Net Gross Net Transactio Purchase Gross Purchase Purchase Gross Purchase n Date s Sales s / Sales s Sales s/ Sales 01.03.07 767.80 796.92 -29.12 845.18 411.54 433.64 02.03.07 442.25 567.57 -125.32 238.24 272.74 -34.50 05.03.07 707.38 541.24 166.14 981.15 591.73 389.42 06.03.07 528.54 460.10 68.44 1148.53 243.93 904.60 07.03.07 338.20 717.76 -379.56 690.76 282.95 407.81 08.03.07 578.23 617.99 -39.76 533.50 524.92 8.58 09.03.07 482.34 867.02 -384.68 347.27 327.74 19.53 10.03.07 0.00 0.00 0.00 0.00 4.53 -4.53 4568.6 2660.0 Total 3844.74 0 -723.86 4784.63 8 2124.55
28
Union Budget 2007-08 & the Mutual Fund Industry
The 2007-08 budget presented by the Finance Minister was also a low impact budget, compared with the last year, whose fundamental message was for overall growth of the economy and a positive emphasis to be put on agricultural and rural development, as well as education, which will certainly give a long term boost to the growth of the economy. The reduction in fiscal deficit is also a positive step and the government will also increase spending on education by 34%.
Markets have seen a major correction over the last few trading sessions. On 28 th the markets was hit hard from both sides, internally as well as externally. The budget had a few shockers when the dividend distribution tax was hiked, and on the other side the global market saw major meltdown with the Asian market were beaten the most, Chinese markets alone lost around 9% over the day. The Indian markets could not sustain the beating it got from both ends and saw the maximum decline witnessed in the last eight months. The market was around 200 points down after the markets opened for the day.
29
But the announcement of the FM to hike dividend distribution tax saw another fall of more than 300 points which the markets was not able to recover till the end of the day. Among the major sectors Cement is clearly the most hit, and to some extent IT services also got hit, because of bringing both the sector under MAT.
The announcement of MAT of 11.3 % on IT companies was misinterpreted by the market on the budget day, by responding in negative, but saw some recovery, in the next trading day when markets realized that MAT can be used as a deferred tax asset by IT companies post FY 2010 to offset taxes, Secondly SEZs are still MAT free. Hence the impact is not severe as was thought on the budget day. Secondly, as per Finance Minister FBT on ESOP is still under notification.
The Indian Mutual Fund industry also suffered on announcement of the hike in dividend distribution tax. The DDT for the money market and liquid mutual funds has been proposed to be brought at par at 25%. Currently the rate is 12.5% for retail investor and 23% for institutional investors. The FM said that this was being done to restrict the arbitrage opportunities used by these schemes.
Another proposal put up by the Finance Minister was for Mutual Funds to play a bigger role in infrastructure development by launching and operating dedicated infrastructure funds which would directly invest into core sector projects. The Indian Mutual Fund industry already have schemes which are sector specific and invest into infrastructure sector through equities. Now after this particular proposal Mutual Funds can directly invest into infrastructure projects.
FM also allowed delivery based short selling for institutional participants. Mostly in all developed countries short selling is allowed. In India, till recently only the retail investors
30
were allowed to enjoy this. Along with FII, Mutual Fund houses are also allowed for delivery based short selling.
FM has proposed to bring the asset management services offered by individuals under the service tax bracket. The individuals who provide investment fund management advisory services will now have to pay service tax. The managers will have to register themselves with the Central Excise department and have to pay service tax, if their service fee is more than Rs.8 lakh per annum.
Along with the above the FM also proposed for the retail investor to invest abroad through Mutual Funds. Currently the industry has quite a few mutual fund schemes which invest dedicatedly abroad. A few more schemes invest partially abroad.
On a whole, the budget other than the DDT hike for the liquid and the money market mutual funds and the infrastructure funds didnt have much in store for the Mutual Fund industry.
To summarize, the Budget will sustain high economic growth through larger investments, increased savings and building of manpower capabilities.
31
32
USAGE OF MUTUAL FUND
Mutual funds can invest in many different kinds of securities. The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (high yield or junk bonds, investment-grade corporate bonds), type of issuers (government agencies, corporations, or municipalities), or maturity of the bonds (short or long term). Both stock and bond funds can invest in primarily US securities (domestic funds), both US and foreign securities (global funds), or primarily foreign securities (international funds). By law, mutual funds cannot invest in commodities and their derivatives or in real estate. However, there do exist real estate investment trusts, or REITs, which invest solely in real estate or mortgages, and mutual funds are allowed to hold shares in REITs. A mutual fund may restrict itself in other ways. These restrictions, permissions, and policies are found in the prospectus, which every open-end mutual fund must make available to a potential investor before accepting his or her money. Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses the ones which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers.
33
Mutual funds are subject to a special set of regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can either be ordinary income or capital gains, depending on how the fund earned it.
ADVANTAGES AND DISADVANTAGES OF MUTUAL FUND
ADVANTAGES
Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
Convenient Administration
34
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.
35
Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.
Choice of Schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.
36
DISADVANTAGES
Costs Despite Negative Returns Investors must pay sales charges, annual fees, and other expenses (which we'll discuss below) regardless of how the fund performs. And, depending on the timing of their investment, investors may also have to pay taxes on any capital gains distribution they receive even if the fund went on to perform poorly after they bought shares.
Lack of Control Investors typically cannot ascertain the exact make-up of a fund's portfolio at any given time, nor can they directly influence which securities the fund manager buys and sells or the timing of those trades.
Price Uncertainty With an individual stock, you can obtain real-time (or close to real-time) pricing information with relative ease by checking financial websites or by calling your broker. You can also monitor how a stock's price changes from hour to hour or even second to second. By contrast, with a mutual fund, the price at which you purchase or redeem shares will typically depend on the fund's NAV, which the fund might not calculate until many hours after you've placed your order. In general, mutual funds must calculate their NAV at least once every business day, typically after the major U.S. exchanges close.
37
HOW TO INVEST IN MUTUAL FUND??
Step One - Identify your Investment needs
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.
Step Two - Choose the right Mutual Fund
38
The important thing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications. For selecting the right scheme as per your specific requirements,
Step Three - Select the ideal mix of Schemes Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals. Step Four - Invest regularly The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds.
Step Five- Start early It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding
39
lets you earn income on income and your money multiplies at a compounded rate of return.
Step Six - The final step All you need to do now is to for online application forms of various mutual fund schemes and start investing. You may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor - whether starting a career or retiring,
conservative or risk taking, growth oriented or income seeking
RIGHTS OF A MUTUAL FUND UNIT HOLDER
A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is entitled to: 1) Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund.
2) Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme.
40
3) Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase.
4) Vote in accordance with the Regulations to: Approve or disapprove any change in the fundamental investment policies of the scheme, which are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit holder has a right to redeem the investment. Change the Asset Management Company. Wind up the schemes.
5). Inspect the documents of the Mutual Funds specified in the scheme's offer document.
CRITICISM OF MUTUAL FUNDS
The primary criticism of actively managed mutual funds comes from the historical fact that, over long periods of time, most have not returned as much as an index fund would. There are also other criticisms levied against mutual funds as a consequence of the first criticism. One critique covers the concept of the sales load, an upfront or deferred fee as high as 8.5 percent of the amount invested in a fund. Firstly, some critics do not believe that this should be charged on a percentage basis instead of a flat fee basis. A so-called flat fee, annual fee or wrap fee does very little for an investor other than insure that they will pay an advisor a commission for as many years as their relationship exists. It helps
41
an advisor create predictable (and since most investments trend upwards) increasing income flow. Secondly this payment for advice and other services seems dubious to these critics because with so many mutual funds underperforming, but yet visibly attracting money, the advice given seemingly would be bad advice. Mutual funds are also seen by some to have a systemic conflict of interest with regards to their size. Fund companies typically make money by charging a management fee of anywhere between 0.5-2.5 percent of the funds total assets. Although theoretically this could motivate them to cause the fund to perform well, since a well performing fund would cause the amount invested in the fund to rise and thus increasing the fee earned, it also could motivate the fund to focus on attracting more and more new investors, as the new investors adding money to the fund would also cause the assets of the fund to increase. Many investors believe however that the larger the pool of money one works with, the harder it is to invest. Thus the harder it becomes for the mutual fund to perform well. Thus a fund company can be focused on attracting new customers, hurting its existing investors' performance. A great deal of the funds costs are flat and fixed costs, such as the salary for the manager. Thus it can be more profitable to the fund to try and allow it to grow as large as possible, instead of limiting its assets. Other practices of mutual funds have been criticized from time to time, such as funds allowing market timing. More recent criticisms have focused on the fund managers accepting extravagant gifts in exchange for trading stocks through certain investment banks, who presumably overcharge the fund compared to what another, non-gifting investment bank would charge
42
TABLE OF MUTUAL FUND SCHEMES
Mutual Fund Type Liquidity Money Market Moderate Income Reservation of Capital + Negligible + Objective Risk
Investment Portfolio Treasury Certificate Deposits, Commercial
Who invest
should Investment horizon
Bills, Those who park of their funds in 2 days - 3 weeks
current accounts or short-term
Papers, Call Money bank deposits
43
Shortterm Funds (Floating shortLiquidity Moderate Income + Little Interest Rate Call Money, Those surplus short-term funds with Commercial Papers, Treasury
3 weeks 3 months
Bills, CDs, Shortterm Government
term)
securities.
Bond Funds Regular (Floating Income - Longterm) Gilt Funds Security Income & Interest Rate Risk
Predominantly Credit Risk Debentures, & Interest Government securities, Corporate Bonds Salaried conservative investors Aggressive High Risk Stocks investors with 3 years plus & Salaried conservative investors & More than 9 12
Rate Risk
months
Government securities
12 months & more
Equity Funds
Long-term Capital Appreciation To generate that NAV varies Portfolio indices
long term out look.
returns Index Funds are
commensurate with with
index like BSE, NIFTY
Aggressive investors.
3 years plus
returns performance etc
of respective indices Balanced Growth Funds Regular & Capital Balanced ratio of Moderate and debt Aggressive & 2 years plus
Market Risk equity
44
Income
and Interest funds Risk
to
ensure
higher returns at lower risk
FREQUENTLY USED TERMS
Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. Per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. It is calculated as Total market value of the assets or securities liabilities in the portfolio of the fund
45
Number of funds units (shares) outstanding
Sale Price It is the price you pay when you invest in a scheme. It is also called as Offer Price. It may include a sales load.
Repurchase Price It is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.
Redemption Price It is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.
Sales Load It is a charge collected by a scheme when it sells the units. Also called as Front-end load. Schemes that do not charge a load are called No Load schemes. Generally it is 2.25% for subscription below Rs. 2 Crores, 1.25% for Rs. 2 Crore to Rs. 5 Crore and nil above Rs. 5 Crore. However the load structure varies from company to company.
Repurchase or Back-end Load It is a charge collected by a scheme when it buys back the units from the unit holders. It is 2.25% and is charged if the investment is redeemed before six months from the date of investment in a mutual fund.
46
47
RESEARCH METHODOLOGY
RESEARCH:-
48
Research is a voyage of discovery, a movement from unknown to known. In common parlance, it refers to a scientific and systematic search for pertinent information on a specific topic. It is the pursuit of truth with the help of study, observation, comparison and experiment.
RESEARCH METHOD:-
Research methods may be understood as all those method / techniques that are used by the researcher during the course of studying his research problem.
RESEARCH METHODOLOGY:-
Research methodology is a way to solve the problem scientifically and systematically. In this we study the various steps that are generally adopted by researcher in studying his research problem along with the logic behind them. When we talk about research methodology, we not only talk of the research methods but also the comparison of the logic behind the method we use in the context of our research study and explain why we are using a particular method and why not others. Research Objectives
To compare performance of different mutual funds in last 1 year. To compare the return of a mutual fund using different investment ways. To develop a new investment way in mutual funds.
49
To compare the different portfolios being maintained by selected mutual funds. To understand the concept and importance of Mutual Fund & Portfolio Management in todays scenario.
RESEARCH DESIGN: -
A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. The research design used in my study is basically exploratory in nature.
METHOD OF DATA COLLECTION: -
The study made in use secondary sources. SECONDARY DATA COLLECTION: Secondary data have been collected from various Books and websites..
SAMPLING DESIGN: -
A sample design is a definite plan for obtaining a sample from a given population .It refers to the technique or the procedure the researcher would adopt in selecting items for
50
the sample i.e. the size of the sample. Judgment sampling has been adopted to select the Mutual Funds.
SAMPL E SIZE: Nine
ANALYSIS OF DATA: -
The data after collection has to be processed and analyzed with the outline laid for the purpose at the time of developing the research plan. This is essential for a scientific study and for insuring that we have all relevant data for making contemplated comparison and analysis. Technically speaking processing implies editing, coding, classification and tabulation of collected data so that they are amenable to analysis. The term analysis refer to the computation of certain measures along with searching for patterns of relationship that exist among data groups .To analyze the data percentages, graphs, pie charts etc are used. After that interpretations are drawn and finally, a list of suggestions and recommendations is put forward. I hope the study will be interesting for a layman, a good experience for the teacher and a key for the industrial pioneers in understanding and facing challenges.
51
Introduction to the Topic
52
The topic of study is Comparative Analysis of Different Mutual Funds and Investing Ways. In it 9 mutual funds have been selected and there performance is compared in last 1 year starting from 1 st February 2006 to 31st January 2007. For this there Net Asset Values is used and portfolio maintained is studied. Further returns of different investing ways will be compared in the same mutual fund like One Time Investment, Systematic Investment Plan. Further study would be done to find out that can we develop a new way of investing in them and if yes than what the pre requisite for its implementation. The whole study will be carried out in a manner like firstly different mutual funds will be selected. Than there NAVs will be noted from 1 st February 2006 to 31st January 2007. Using some calculations performance will be compared. Using the Fact Sheet of the selected mutual fund minute details of each will be studied. The Mutual Funds under study are as follows: SBI MAGNUM CONTRA RELIANCE GROWTH FUND FRANKLIN INDIA PRIMA FUND HDFC EQUITY FUND DSPML OPPORTUNITIES FUND KOTAK BOND REGULAR FUND JM INCOME FUND LIC MF BOND UTI BOND
53
SBI MUTUAL FUND
54
Incorporated
29 JUNE 1987
Ownership
Public
Ownership Pattern
Foreign - 37%, Domestic-63%
Sponsor
State Bank of India, Society General Asset Management
Fund
The fund takes contrarian call on the markets. It has given compounded annual returns of 67% in past 5 years against the category average of 46%. It is the top wealth creator for the year 2006-07. The fund has mainly shifted its focus to large cap space. It also contains a large cash component of Rs 120 Crore, which amounts to about 10% of its portfolio. This prudence, along with its successful bet on banking stocks has helped the fund out perform the category.
Magnum Contra-G
Fund Rating
55
Current Stats & Profile Latest NAV 34.63 (12/03/07)
Trailing Returns As on 12 Mar 2007 Fund Category
52-Week High
39.91 (06/02/07)
Year to Date
-7.65
-8.15
52-Week Low
25.02 (14/06/06)
1-Month
-9.08
-8.49
Fund Category
Equity: Diversified
3-Month
-0.83
-1.40
Type
Open End
1-Year
13.17
6.47
Launch Date
July 1999
3-Year
57.66
33.18
Risk Grade
Below Average
5-Year
53.60
37.90
Return Grade
High
Return Since Launch
32.58
--
Net Assets (Cr)
1,448.78 (28/02/07)
Returns upto 1 year are absolute and over 1 year are annualized.
Benchmark
BSE 100
Relative Performance (Fund Vs Category Average)
Portfolio
Security Praj Industries Reliance Industries Hindustan Zinc
Instrument % Net Assets Equity Equity Equity 4.97 4.89 3.78
56
Mahindra & Mahindra Jai Prakash Associates Aditya Birla Nuvo India Cements F A G Bearings India Jai Prakash Associates Motor Industries Co. Motor Industries Co. Kansai Nerolac Paints Torrent Pharmaceuticals India Infoline C C L Products (I) Cummins India T V S Motor Co. Ashok Leyland Merck Ltd. Esab India Federal Bank Sundaram Fasteners Ruchi Soya Inds. Sesa Goa Raymond Indraprastha Gas Infotech Enterprises Ansal Prop & Infra TIL Ciba Speciality Chemicals
Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity
3.73 3.49 7.47 5.19 4.95 4.63 4.42 4.31 3.1 3.1 2.97 2.88 2.85 2.84 2.61 2.53 2.48 2.09 1.86 1.81 1.8 1.72 1.36 1.31 1.27 1.26 1.24
57
Top Sectors in Portfolio
Basic/Engineering Diversified Health Care Construction Automobile FMCG Services Chemicals Financial Services Technology Metals & Metal Products Textiles Energy
15.67 13.61 12.62 12.37 11.13 5.6 5.53 4.34 3.77 2.21
% Coposition
Composition of Various Sectors 18 16 14 12 10 8 6 4 2 0

Services Financial Services Health Care Basic/Engineerin Automobile Metals & Metal Energy
Composition of Various Sectors
1.8 1.72 10.83
Sector
58
RELIANCE MUTUAL FUND
Incorporated
30 June 1995
Ownership
Private
Ownership Pattern
Sponsor
Reliance Capital Ltd
About Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee.
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective from March 2004. Reliance Mutual Fund was formed to launch 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.
59
The main objectives of the Trust are: To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders; To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their savings and To take such steps as may be necessary from time to time to realize the effects without any limitation.
RELIANCE GROWTH FUND
It is a mid cap fund with around 75% in mid cap and a maximum of 25% in large caps. Large cap exposure gives fund tremendous liquidity but not in bearish time. It uses opportunistic style of investment i.e. looking at companies that are scalable in sectors with growth and management passion to grow. It invests nearly in 60 stocks with a bottom up approach. In top holdings, 5.3% of the assets are invested in Reliance Industries. The fund also invests across sectors such as steel, infrastructure, textile & cement, which move with economic and GDP growth. It is also one of the wealth creators in the year 2006-07. Last year return of this fund is 34.22%.
FUND DATA
Structure Inception Date Corpus Minimum Investment Fund Manager
Open-ended Equity Growth Scheme October 8, 1995 Rs 3214.06 crore (January 31, 2007) Rs 5,000 Mr. Sunil Singhania
60
Entry Load Exit Load Benchmark SPECIAL FEATURE INVESTMENT OBJECTIVE
<2cr - 2.25%; >_2cr<5cr - 1.25 %;> _5cr - Nil Nil BSE 100 Index Reliance Any Time Money Card To achieve long-term growth of capital by investing in Equity and equity related securities through a researchBased investment approach.
PORTFOLIO OF RELIANCE GROWTH FUND Holdings Equities JSW Steels Ltd Reliance Industries Ltd Bharat Earth Movers Ltd Jindal Saw Ltd Divis Laboratories Ltd Jaiprakash Associates Northgate Technologies Ltd Gujarat State Fertilizers & Chemicals Ltd Cambridge Solutions Ltd Adani Enterprises Ltd Bombay Dyeing & Mfg Company Ltd Bank Of Baroda Escort India Ltd Jain Irrigation Systems Ltd Strides Arcolabs Ltd Lupin Ltd HCL Technologies Ltd State Bank Of India Greaves Cotton Ltd Dena Bank Weightage (%) 87.87 4.51 3.93 3.74 3.44 2.84 2.63 2.55 2.22 2.15 2.03 2.03 1.94 1.94 1.93 1.89 1.87 1.82 1.77 1.61 1.55
61
AIA Engineering Ltd United Phosphorous Ltd Jindal Steel & Power Ltd Crompton Greaves Ltd Maharashtra Seamless Ltd Radico Khaitan Ltd Gujarat Mineral Development Corporation Bharati Shipyard Ltd Orient Paper & Industries Ltd Shivvani Oil And Gas Exploration Allcargo Global Logistics Ltd NIIT Technologies Ltd Mahanagar Telephone Nigam Ltd Bharat Petroleum Corp Ltd Gammon India Ltd Tamilnadu Newsprint Ltd GHCL Ltd Hexaware Technologies Ltd Tata Motors Educomp Solutions Ltd Equity < 1% Of Corpus Derivatives, Cash & Other Receivables Grand Total
1.52 1.47 1.45 1.45 1.40 1.40 1.39 1.38 1.34 1.29 1.26 1.24 1.19 1.17 1.16 1.11 1.06 1.03 1.02 1.02 14.11 12.13 100.00
SECTOR ALLOCATION Industry Ferrous Metals Industrial Capital Goods Software Pharmaceuticals % Allocation 10.81 9.72 8.08 6.89
62
Banks Petroleum Products Chemicals Construction Auto Industrial Products Fertilizers Consumer Non Durables Auto Ancillaries Information Technology Trading Pesticides Minerals/Mining Cement Oil Transportation Telecom - Services Paper Textiles Cotton
5.27 5.11 4.53 4.14 3.94 3.54 3.39 2.93 2.72 2.55 2.03 1.47 1.39 1.34 1.29 1.26 1.19 1.11 0.97
Net Asset Value Date Wednesday, February 01, 2006 Wednesday, March 01, 2006 Monday, April 03, 2006 Monday, May 01, 2006 Thursday, June 01, 2006 Monday, July 03, 2006 Tuesday, August 01, 2006 Friday, September 01, 2006 Net Asset Value 201.18 210.22 229.75 251.68 215.11 199.51 193.2 218.12
63
Tuesday, October 03, 2006 Wednesday, November 01, 2006 Friday, December 01, 2006 Tuesday, January 02, 2007
234.47 250.23 261.78 270.05
FRANKLIN INDIA PRIMA FUND
Fund
FRANKLIN India Prima Fund is a 12 year old diversified equity fund with a specific focus on mid/small cap stocks from Indias emerging businesses. The investment approach is style-agnostic i.e. neither pure growth nor value addition. This style is chosen keeping in mind that different styles tend to out perform in different market conditions. If Rs. 1,000 is invested every month for last five years than there present value would have been Rs 2.12 lakh. Its NAV shoot up from Rs 19.95 in 2001 to Rs. 174.84 in 2006. The fund holds around 40 stocks in its portfolio, with the top 10 holdings accounting for 43.04% of its net assets. The fund holds about Rs 172 Crore as cash. The corpus of the fund is Rs 2,418 Crore. The main feature of the fund is that it hasnt seen heavy redemption pressures throughout its 12 years. It is also one of the wealth creator funds. Last year return of this fund is 20.56%.
Fund Style
64
Fund Facts Asset Allocation Portfolio Concentration
Equity 94% Debt Other 0% 6%
Top 3 sectors Top 5 holdings Top 10 holdings
41.90% 26.67% 43.04%

Fund Rating
Franklin India Prima-G

Current Stats & Profile Trailing Returns
Latest NAV
184.17 (12/03/07)
As on 12 Mar 2007
Fund
Category
52-Week High
220.51 (16/01/07)
Year to Date
-14.08
-8.15
52-Week Low
139.55 (14/06/06)
1-Month
-11.76
-8.49
Fund Category
Equity: Diversified
3-Month
-6.78
-1.40
Type
Open End
1-Year
-2.52
6.47
Launch Date
November 1993
3-Year
35.98
33.18
Risk Grade
Average
5-Year
48.12
37.90
Return Grade
Above Average
Return Since Launch
24.51
--
Net Assets (Cr)
1,583.62 (28/02/07)
Returns upto 1 year are absolute and over 1 year are annualised.
Benchmark
S&P CNX 500
Relative Performance (Fund Vs Category Average)
65
Portfolio
Stock Aditya Birla Nuvo India Cements F A G Bearings India Jai Prakash Associates Motor Industries Co. Ipca Laboratories Kansai Nerolac Paints Torrent Pharmaceuticals India Infoline C C L Products (I) Cummins India T V S Motor Co. Ashok Leyland Merck Ltd. Esab India Federal Bank Sundaram Fasteners Ruchi Soya Inds. Sesa Goa Raymond Indraprastha Gas Infotech Enterprises Ansal Prop & Infra TIL Ciba Chemicals Speciality
Instrument % Net Assets Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity Equity 7.47 5.19 4.95 4.63 4.42 4.31 3.1 3.1 2.97 2.88 2.85 2.84 2.61 2.53 2.48 2.09 1.86 1.81 1.8 1.72 1.36 1.31 1.27 1.26
Equity
1.24
66
Top Holdings in Portfolio
% Sector Composition
18 16 14 12 10 8 6 4 2 0
Basic/Engineering % Composition
% Composition
Basic/Engineering 15.67 Diversified Health Care Construction Automobile FMCG Services Chemicals 13.61 12.62 12.37 11.13 5.6 5.53 4.34
Diversified
Services
Financial Services
Health Care
Construction
Technology
Automobile
Financial Services 3.77 Technology Metals & Metal Products Textiles 1.8 1.72 2.21
Sector
Net Asset Value
Date Wednesday, February 01, 2006 Wednesday, March 01, 2006 Monday, April 03, 2006 Monday, May 01, 2006 Thursday, June 01, 2006 Monday, July 03, 2006 Tuesday, August 01, 2006
Net Asset Value 179.74 185.56 201.75 209.27 173.9 162.61 160.48
67
Metals & Metal Products
Chemicals
Textiles
FMCG
Friday, September 01, 2006 Tuesday, October 03, 2006 Wednesday, November 01, 2006 Friday, December 01, 2006 Tuesday, January 02, 2007
176.04 185.8 196.98 209.88 216.71
HDFC MUTUAL FUND
Incorporated Ownership Ownership Pattern
30 June 2000 Private Foreign - 0%, Domestic-100%
Sponsor
Housing Development Finance Corporation Ltd.
Fund Speak
The main feature of this fund is that it has beaten its category for eight consecutive years. The fund is not having large portfolio with number of stocks between 30 40. Top 5 stocks account for 35-40%. The funds investment policy is to buy quality and sustainable businesses at a reasonable price. So even if a sector dont perform well now, but has potential to perform in future, the fund will hold on to it. The fund is also known for quick sector move. The fund doesnt o ffer good returns in 1-2 years, but in long term. It is also the wealth creator fund. Last year return of this fund is 31% nearly.
68
Portfolio
Name of Instrument
Industry +
Quantity
Market/ Fair Value (Rs. Lakhs) In
% to
NAV
EQUITY RELATED
&
EQUITY
Lanco Infratech Ltd Subtotal
Engineering
48,119
125.59 125.59
0.33 0.33
(a) Listed / awaiting listing on Stock Exchanges Divis Laboratories Ltd. Infosys Technologies Ltd. Pharmaceuticals Software Industrial Capital Bharat Heavy Electricals Ltd. Goods Telecom Bharti Airtel Ltd. Services Industrial Capital Crompton Greaves Ltd. State Bank of India Reliance Industries Ltd. Goods Banks Petroleum 700,000 140,000 140,000 1,854.30 1,843.87 1,742.23 4.84 4.81 4.55 310,000 1,955.17 5.10 80,000 2,004.60 5.23 87,707 117,602 2,635.60 2,563.37 6.88 6.69
69
Products Apollo Tyres Ltd. Sun Pharmaceutical Industries Ltd. Pharmaceuticals Consumer ITC Ltd. Durables Consumer Kansai Nerolac Paints Ltd. Durables Industrial Capital Thermax Ltd. Oil & Natural Gas Oil Auto Ancillaries Cement Consumer Hindustan Lever Ltd. Satyam Computer Services Ltd. Hindustan Corporation Ltd. Tata Motors Ltd. Aditya Birla Nuvo Ltd. Birla Corporation Ltd. Software Petroleum Petroleum Products Auto Textile Products Cement 325,000 110,000 75,928 224,964 1,174,66 ISMT Ltd. Hanung Toys & Textiles Ltd Solar Explosives Ltd. Eimco Elecon (India) Ltd. Voltamp Transformers Ltd Phoenix Lamps Ltd. Metals Textile Products Chemicals Engineering Power Auto Ancillaries 8 519,066 424,937 145,072 75,890 308,766 811.70 670.37 590.45 507.10 452.61 389.82 2.12 1.75 1.54 1.32 1.18 1.02 915.85 890.07 881.83 825.84 2.39 2.32 2.30 2.16 240,000 1,102.80 2.88 Durables Non 500,000 1,176.00 3.07 172,500 112,000 47,500 1,487.55 1,367.02 1,321.90 3.88 3.57 3.45 Goods 416,969 1,588.23 4.15 Non 186,000 1,589.93 4.15 Non 900,000 1,665.90 4.35 164,531 1,670.24 4.36 Auto Ancillaries 472,796 1,726.18 4.51
Corporation Ltd. Sundaram Clayton Ltd. Grasim Industries Ltd.
70
Global Vectra Helicorp Ltd Chennai Corporation Ltd. Great Eastern Shipping
Transportation
159,810
256.26
0.67
Petroleum Petroleum Products 98,859 218.23 0.57
Company Ltd.
Transportation Consumer Non
96,000
209.81
0.55
EID Parry (India) Ltd. Great Offshore Ltd. Subtotal Total
Durables Transportation
144,640 24,000
201.92 145.41 37,262.16 37,387.75
0.53 0.38 97.27 97.60
MONEY MARKET INSTRUMENTS Reverse Repos Subtotal Total OTHERS Net Current Assets Net Assets 42.14 38,303.44 0.12 100.00 873.55 873.55 873.55 2.28 2.28 2.28
Top Holding
Sectoral Industrial Capital Goods Consumer Non Durables Pharmaceuticals Software Auto Ancillaries Petroleum Products Cement Telecom - Services Banks
Assets(%) 14.22 12.10 11.24 9.57 9.10 7.51 5.61 5.10 4.81
71
Textile Products Oil Auto Metals Engineering Transportation Chemicals Power Money Instruments/Net Receivables Market
4.05 3.88 2.32

% Assets
Assets(%) 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
Industrial Capital Goods Pharmaceuticals Auto Ancillaries Transportation Oil Metals Banks Cement Power
2.12 1.65 1.60 1.54 1.18
2.40
Sector
Net Asset Value Date Wednesday, February 01, 2006 Wednesday, March 01, 2006 Monday, April 03, 2006 Monday, May 01, 2006 Thursday, June 01, 2006 Monday, July 03, 2006 Tuesday, August 01, 2006 Friday, September 01, 2006 Tuesday, October 03, 2006 Wednesday, November 01, 2006 Friday, December 01, 2006 Tuesday, January 02, 2007 Net Asset Value 112.483 119.495 130.819 134.053 112.237 114.59 115.648 128.063 132.634 140.191 147.937 147.286
72
DSP Merrill Lynch Opportunities Fund
Fund The fund maintains a complicated portfolio. The fund has constantly figured in the top 25% of its category. The funds mandate is to move around promising sectors. The portfolio is highly diversified. Technology stock is the favourite, but fund also has automobiles, FMCG, metals and engineering. If a sector isnt performing the fund believes in buy and hold strategy. There is no mid and small cap stock in the portfolio as the exposure doesnt typically exceeds 30%. Its fund managers are Mr. Anup Maheshwari and Mr. Soumendra Lahiri. It is also a wealth creator fund. Last year return of this fund is 36.4%. Type of Scheme: Options available: Open ended growth scheme Growth Dividend Payout Reinvest
Minimum amount:
Application First Purchase - Rs. 5,000/-
Subsequent Purchase - Rs. 1,000/Entry Load:
For Regular investments
73
2.25% : For investments < Rs 5.0 crs Nil : For investments >= Rs 5.0 crs
For SIP investments 1%
Exit Load: Contingent Deferred
NIL
For SIP investments 1.25% : If investment is redeemed before the completion of 2 years Nil : If investment is redeemed on or after the completion of 2 years
Sales Charge (CDSC):
Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Indicative Asset Allocation Instrument Equity and equity-related Indicative Allocation (% of Corpus) 80% - 100% Risk Profile
securities Fixed income securities
Medium to High
(debt* and money market 0% - 20% securities)
Low to Medium
*Debt securities/instruments are deemed to include securitised debts.
HIGHLIGHTS Cut Off Time - Subscription 3:00 PM
74
Cut Off Time -Redemption Cut Off Time - Switching Redemption cheques issued^ Systematic Investment Plan (SIP) Minimum Investment for SIP Systematic Withdrawal Plan (SWP) Minimum Withdrawal for SWP Systematic Transfer Plan (STP) Minimum Transfer for STP
3:00 PM 3:00 PM Normally within 3 Business Days of the receipt of redemption request Monthly and Quarterly Options available Rs. 2000/- (Effective November 15,2006) Weekly, Monthly and Quarterly Options available Rs. 1,000/Weekly, Monthly and Quarterly Options available Rs. 1000/-
INVESTMENT OBJECTIVE
An Open Ended growth Scheme, seeking to generate long term capital appreciation and whose secondary objective is income generation and the distribution of dividend from a Portfolio constituted of equity and equity related securities concentrating on the Investment Focus of the Scheme.
ASSET ALLOCATION Equity & Equity related securities: 80% - 100% Fixed Income securities (Debt* & Money market securities): 0% - 20%. Debt securities/ instruments are deemed to include securitised debts
75
Portfolio
Sr.No.
Name of the Instrument
Industry Market Value (Rs. In lakhs)
% to Net Assets
EQUITY & EQUITY RELATED (a) Listed / awaiting listing on the stock exchanges 1 Reliance Industries Petroleum Products 2 L&T Industrial Capital Goods 3 Infosys Technologies Software 4 Tata Consultancy Services Software 5 Reliance Communication 6 Grasim Industries Cement 7 Bharti Televentures Telecom - Services 8 ONGC Oil 6,338.44 5,621.09 5,553.37 4,632.03 4,279.49 4,105.98 4,095.93 4,072.42 4.26% 3.78% 3.73% 3.11% 2.88% 2.76% 2.75% 2.74% 2.73% 2.67% 2.51% 2.39% 2.35% 2.30%
9 Zee Entertainment Media & Entertainment 4,061.53 10 Satyam Computer Services Software 11 Aditya Birla Nuvo Textile Products 12 Tata Motors Auto 13 Jaiprakash Industries Construction 14 Crompton Greaves Industrial Capital Goods 15 Deccan Chronicle Holdings Media & Entertainment 16 BHEL Industrial Capital Goods 17 State Bank of India Banks 18 ITC Consumer Non Durables 19 Sterlite Industries Non - Ferrous Metals 3,228.42 3,189.03 3,066.23 2,763.33 3,277.04 3,972.92 3,736.21 3,556.37 3,502.68 3,420.59
2.20%
2.17% 2.14% 2.06% 1.86%
76
20 Century Textiles Cement 21 Gujarat Ambuja Cements Cement 22 Mahindra & Mahindra Auto 23 ICICI Bank Banks
2,756.03 2,689.09 2,657.02 2,503.18
1.85% 1.81% 1.79% 1.68% 1.48% 1.46% 1.37% 1.34% 1.32% 1.26% 1.20% 1.18% 1.16% 1.09% 1.09% 1.05% 0.98% 0.92% 0.88% 0.85% 0.84% 0.81% 0.80% 0.78% 0.74% 0.73% 0.72% 0.71% 0.70% 0.68%
24 Dr. Reddys Laboratories Pharmaceuticals 2,198.83 25 TV 18 Media & Entertainment 2,167.36
26 Hindustan Lever Consumer Non Durables 2,035.25 27 MphasiS BFL Software 28 Ansal Properties Construction 29 Siemens Industrial Capital Goods 1,995.66 1,961.41 1,880.10
30 Bharat Electronics Industrial Capital Goods1,784.84 31 Amtek Auto Auto Ancillaries 1,754.56
32 Wire and Wireless Media & Entertainment 1,722.55 33 Voltas Consumer Durables 34 Lanco Infratech Engineering 35 HCL Technologies Software 36 Hindustan Construction Construction 37 Karur Vysya Bank Banks 38 United Phosphorus Pesticides 39 BPCL Petroleum Products 40 ACC Cement 41 Tech Mahindra Software 42 Birla Corporation Cement 1,627.39 1,623.97 1,559.48 1,463.70 1,374.13 1,307.21 1,268.59 1,245.82 1,199.95 1,194.11
43 Jindal Saw Pipes Industrial Capital Goods 1,162.32 44 Cipla Pharmaceuticals 45 IOC Petroleum Products 46 SAIL Ferrous Metals 47 Hindalco Non - Ferrous Metals 48 IPCL Petroleum Products 49 Bombay Dyeing Chemicals 1,094.23 1,087.51 1,075.56 1,051.35 1,047.60 1,009.92
77
50 Graphite India Industrial Products 51 Colgate Consumer Non Durables 52 Hexaware Technologies Software 53 GE Shipping Transportation 54 Mcleod Russell Consumer Non Durables 55 NRB Bearings Industrial Products 56 Sun TV Media & Entertainment 57 Pantaloon Retail Retailing 58 B L Kashyap & Sons Construction 59 HPCL Petroleum Products 60 Hindalco Rights Non - Ferrous Metals 61 DCM Shriram Consolidated Fertilisers 62 Financial Technologies Software 63 Mastek Software 64 Nestle Consumer Non Durables 65 Bannari Amman Sugar Consumer Non Durables 66 Karur Vysya Bank - Rights Banks 67 Sesa Goa Ferrous Metals 68 I-Flex Solutions Software 69 Centurion Bank of Punjab Banks 70 Bajaj Auto Auto 71 Maruti Udyog Auto 72 Voltamp Transformers Industrial Capital Goods 73 Network18 Media & Entertainment Total DERIVATIVES 74 ICICI Feb 2007 Banks 75 BHEL Feb 2007 Industrial Capital Goods
949.62 936.43 918.13 869.41 776.29 764.44 755.82 752.44 741.82 717.67 690.61 652.77 634.71 601.11 579.26 567.27
0.64% 0.63% 0.62% 0.58% 0.52% 0.51% 0.51% 0.51% 0.50% 0.48% 0.46% 0.44% 0.43% 0.40% 0.39% 0.38%
540.97 315.16 291.70 284.10 277.22 274.24 114.52
0.36% 0.21% 0.20% 0.19% 0.19% 0.18% 0.08%
78.90 140,056.43
0.05% 94.11%
1,293.32 622.16
0.87% 0.42%
78
76 Bharti Feb 2007 Telecom - Services 77 Century Textiles Feb 2007 Cement Total MONEY MARKET INSTRUMENTS Cash & Equivalent CBLO / Reverse Repo Investments Net Receivables / (Payables) Total Grand Total
315.72 230.92 2,000.28
0.21% -0.16% 1.34%
6,417.46 347.60 6,765.06 148,821.77
4.31% 0.23% 4.55% 100.00%
Major Holdings Sector MEDIA ENTERTAINMENT CEMENT PETROLEUM PRODUCTS BANKS TELECOM - SERVICES CONSUMER DURABLES CONSTRUCTION AUTO NON METALS OIL TEXTILE PRODUCTS PHARMACEUTICALS AUTO ANCILLARIES INDUSTRIAL FERROUS 3.03 2.74 2.51 2.21 1.18 1.15 NON 5.35 5.15 4.55 7.03 6.17 5.84 & 8.11 7.9 % Assets
79
PRODUCTS CONSUMER DURABLES 1.09 ENGINEERING FERROUS METALS PESTICIDES CHEMICALS FERTILISERS CASH & EQUIVALENT SOFTWARE INDUSTRIAL CAPITAL GOODS 11.98 1.09 0.93 0.88 0.68 0.44 4.55 14.35
% Assets
% Assets 16 14 12 10 8 6 4 2 0
TELECOM PETROLEUM MEDIA &
CONSTRUCTION
TEXTILE
CHEMICALS
CONSUMER
NON - FERROUS
Sector
Transportation has a share of 0.58% and Retailing has a share of 0.51% in the portfolio. Net Asset Value
Date Wednesday, February 01, 2006 Wednesday, March 01, 2006 Monday, April 03, 2006 Monday, May 01, 2006 Thursday, June 01, 2006 Monday, July 03, 2006 Tuesday, August 01, 2006 Friday, September 01, 2006 Tuesday, October 03, 2006 Wednesday, November 01, 2006 Friday, December 01, 2006 Tuesday, January 02, 2007
Net Asset Value 41.66 44.4 49.51 51.84 42.71 43.44 43.12 47.2 49.27 52.37 55.86 56.809
80
INDUSTRIAL
RETAILING
AUTO
FERROUS
CASH &
KOTAK MAHINDRA MUTUAL FUND
Incorporated
23 June 1998
Ownership
Private
Ownership Pattern
Sponsor
Kotak Mahindra Finance Ltd
Corpus Ideal Investment Horizon Fund Manager
Rs. 52.38 Crore 1-2 year Mr. Ritesh Jain
Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates. The group has a net worth of around Rs.2,900 crore and employs around 8,800 employees across its various businesses servicing around 2 million customer accounts through a distribution network of branches, franchisees, representative offices and
81
satellite offices across 282 cities and towns in India and offices in New York, London, Dubai and Mauritius.
Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. Fund This fund has generated a decent income for its investors with reasonably low level of volatility. 60-70% of its portfolio consists of high yield assets such as bonds, commercial paper, corporate deposits and securitised debts. The balance is employed in riskier government securities. Risk management is most important for this fund. Emphasis on high yield portfolio has kept the funds volatility low. It is the fourth best performing income fund in past six months based on returns. The portfolio of the scheme consists of debt and money market instruments. The investment strategy is to invest across wide maturity horizons and different kind of issuers in debt market, the G-Sec component is normally maintained between 30-50% and it generally doesnt invest in corporate bonds with less than AA rating. It is to be noted that NAV of this fund never fell down, even when the Sensex was down. The fund is income generator. Last year return of this fund is 7%.
82
Net Asset Value Date Wednesday, February 01, 2006 Wednesday, March 01, 2006 Monday, April 03, 2006 Monday, May 01, 2006 Thursday, June 01, 2006 Monday, July 03, 2006 Tuesday, August 01, 2006 Friday, September 01, 2006 Tuesday, October 03, 2006 Wednesday, November 01, 2006 Friday, December 01, 2006 Tuesday, January 02, 2007 Net Asset Value 18.2249 18.2803 18.3392 18.4542 18.5166 18.6115 18.704 18.9008 19.0739 19.1858 19.3916 19.501
83
Portfolio
84
JM INCOME FUND
85
Inception Fund Manager Bench Mark Index Corpus Investment Objective
1st April, 1995 Mr. Dwijendra Srivastava CRISIL COMPOSITE BOND FUND INDEX Rs 26.58 Crore.
To generate stable long term returns with low risk strategy and capital appreciation/ accretion through investment in debt instruments and related securities besides preservation of capital. JM Financial Mutual Fund is one of India's first private sector mutual funds-an integral part of the first wave that commenced operations in 1993-94. Today, they are among the top most mutual funds in the country, ranked by assets managed, and enjoy a superior performance record. The Group's origins can be traced back to the 1950s when the Kampani family began to get involved in India's then nascent capital markets. J.M. Financial and Investment Consultancy Services was founded on September 15, 1973. Under the leadership of Chairman Nimesh N. Kampani, the JM Group has played a stellar and multi-faceted role in the development of India's capital markets. Apart from helping companies raise finance, JM has also been instrumental in educating a burgeoning and prospering middle
86
class about the advantages of investing in blue chip companies. In 1999, they commenced a joint venture with Morgan Stanley Dean Witter, that today spans investment banking, broking, fixed income and retail distribution. JM Financial Asset Management Private Limited, the Asset Management Company of JM Financial Mutual Fund, is not a part of this joint venture. Sponsored by J.M. Financial and Investment Consultancy Services Pvt. Ltd., and co-sponsored by JM Financial Ltd., JM Financial Asset Management Private Limited started operations in December 1994 with a simultaneous launch of three funds-JM Liquid Fund (now JM Income Fund), JM Equity Fund and JM balanced Fund. Today, JM Financial Mutual Fund offers a bouquet of funds that caters to the diverse needs of both its institutional and individual investors. Their mission is to manage risk effectively while generating top quartile returns across all product categories. They believe that to cultivate investor loyalty, they must provide a safe haven for their investments. They are focused on helping their investors realize their investment goals through prudent advice, judicious fund management, impeccable research, and strong systems of managing risk scientifically. Fund The fund has given a one year return of 2.6% and five year return of 7.7%. The philosophy behind investment is that invest in papers that offers value to the investor i.e. they consider the relative value and the spread offered by the paper in a maturity bucket instead of just the absolute yield. The fund is in medium risk-return segment. The net assets are mainly invested in AAA rated instruments. The top 5 holdings account for 55.6% of total assets. The major risks associated are Interest Rate Risk, Liquidity Risk, and Reinvestment Risk. Nearly 25% of total assets are held as cash. The portfolio basically includes corporate bonds, money market instruments, g-sec investments. The fund is income generator. Last year return of this fund is 3%.
87
Portfolio
88
Net Assets Value
Net Asset Value 27.7296 27.6479 27.7041 27.8435 27.9194 27.8875 27.9256 28.1315 28.2684 28.3517 28.437 28.5386
89
UTI BOND FUND
UTI Mutual Fund is managed by UTI Asset Management Company Private Limited who has been appointed by the UTI Trustee Company Private Limited for managing the schemes of UTI Mutual Fund and the schemes transferred / migrated from UTI Mutual Fund.
The UTI Asset Management Company has its registered office at : UTI Tower, Gn Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide professionally managed back office support for all business services of UTI Mutual Fund (excluding fund management) in accordance with the provisions of the Investment Management Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the schemes. State-of-the-art systems and communications are in place to ensure a seamless flow across the various activities undertaken by UTI AMC.
UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers) Regulations, 1993 on February 3 2004, for undertaking portfolio management services and also acts as the manager and marketer to offshore funds through its 100 % subsidiary, UTI International Limited, registered in Guernsey, Channel Islands.
UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset Management Company presently manages a corpus of over Rs. 34500 Crore.
UTI Mutual Fund has a track record of managing a variety of schemes catering to the
90
needs of every class of citizenry. It has a nationwide network consisting 70 UTI Financial Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. With a view to reach to common investors at district level, 4 satellite offices have also been opened in select towns and districts. It has a well-qualified, professional fund management team, who has been highly empowered to manage funds with greater efficiency and accountability in the sole interest of unit holders. The fund managers are also ably supported with a strong in-house equity research department. To ensure better management of funds, a risk management department is also in operation.
It has reset and upgraded transparency standards for the mutual funds industry. All the branches, UFCs and registrar offices are connected on a robust IT network to ensure costeffective quick and efficient service. All these have evolved UTI Mutual Fund to position as a dynamic, responsive, restructured, efficient, and transparent and SEBI compliant entity.
Fund
It is a income scheme with relatively low volatility and stable returns. Time horizon of investment is medium. Investing way being conservative, so a portfolio of Corporate Bonds and g-sec is made. The fund has seen a slow but sure growth in NAV. The fund avoids extreme swings in either maturity or duration. It has a corpus of Rs. 388.98 Crore. The top 10 holdings has major share of corporate bonds than g-sec. nearly 61.7% holding is of AAA rated bonds. Emphasis is on adding value through multiple, diversified strategies combined with volatility analytics, and adjustment to traditional variables such as sector, coupon & quality of companies. The average maturity of its portfolio is 3 years. Its fund manager is Mr. Amandeep Chopra. Last year return of this fund is 4.7%.
Portfolio
NAME OF THE INSTRUMENT Debt Instruments QUANTITY MARKETVALUE % TO NAV
91
(a) Listed/awaiting listing on Stock Exchanges NCDR 7.86% UTI BANK LTD. MATURING 25/07/2012 NCD 6% TATA TEA LTD. MATURING 08/06/2007 NCD 8.65% CITIFINANCIAL CONSUMER FINANCE INDIA LTD. MATURING 05/08/2008 NCDR 7.45% HDFC LTD. MATURING 10/08/2009 NCD 8.7% HINDALCO INDUSTRIES LTD. MATURING 23/04/2007 NCD 8.78% POWER FINANCE CORPORATION LTD. MATURING 11/12/2016 NCD 14.75% RELIANCE INDUSTRIES LTD. MATURING 13/02/2008 NCD 8.71% INDIAN RAILWAYS FIN CORPN LTD. MATURING 15/03/2007 NCD 9.25% LIC HOUSING FINANCE LTD. MATURING 18/02/2009 NCD 6.98% INDIAN RAILWAYS FIN CORPN LTD. MATURING 31/03/2007 TOTAL:(a) Listed/awaiting listing on Stock Exchanges (b) Unlisted NCDR 6.58% INDUSTRIAL DEVELOPMENT BANK OF INDIA LIMITED. MATURING 23/08/2010 PTC 8.8479% ICICI BANK LTD MATURING 22/10/2009 NCD 6.58% TATA SONS LTD. MATURING 14/05/2008 PTC 0% TATA MOTORS LTD. MATURING 14/01/2008 NCD 13.05% HONGKONG & SHANGHAI BANKING CORP.LT MATURING 10/08/2009 NCD 8.75% CITICORP FINANCE INDIA LTD. MATURING 12/09/2009 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/05/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/07/2013 PTC 0% ICICI BANK LTD MATURING 07/02/2009 NCD 11.75% CITIBANK N.A. MATURING 31/01/2010 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/10/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/06/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/02/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/04/2013 PTC 11.85% LIC HOUSING FINANCE LTD. MATURING 01/04/2007 PTC 11.85% HDFC LTD. MATURING 01/06/2007 PTC 10.25% LIC HOUSING FINANCE LTD. MATURING 01/05/2007 TOTAL:(b) Unlisted TOTAL:Debt Instruments Others GSEC 7.59% RESERVE BANK OF INDIA MATURING 23/03/2015 C D KOTAK MAHINDRA BANK LTD. MATURING 21/12/2007 GSEC 7.44% RESERVE BANK OF INDIA MATURING 23/03/2012 TOTAL:
300 20 150 100 200 100 1000000 50 3 30
3001.23 2278.06 1484.03 1004.8 1001.46 976.21 686.39 500.72 299.8 299.78 11532.48
9.58 7.27 4.74 3.21 3.2 3.12 2.19 1.6 0.96 0.96
250 25 15 15 10 100 1000000 900000 20 5 500000 500000 511000 167000 25 20 7
2500 2366.27 1452.54 1090.64 1079.8 986.82 736.73 594.03 536.45 530.98 380.41 369.19 364.79 106.52 0.64 0.63 0.25 13096.69 24629.17
7.98 7.55 4.64 3.48 3.45 3.15 2.35 1.9 1.71 1.69 1.21 1.18 1.16 0.34 * * *
150000000 100000000 85000000
1450.35 928.03 826.64 3205.02
4.63 2.96 2.64
NET CURRENT ASSETS C P EXIM BANK MATURING 12/07/2007 TOTAL: TOTAL:Others -
0 80000000
2729.61 769.08 3498.69 6703.71
8.71 2.45
92
TOTAL:UTI-Bond Fund
31332.88
Net Asset Value
Net Asset Value 20.579 20.5851 20.6422 20.7818 20.8577 20.8763 20.9533 21.1273 21.2952 21.3934 21.529 21.5554
93
LIC Mutual Fund Bond
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989 and 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 Settlor is not responsible for the management of the Trust. The Settlor is also not responsible or liable for any loss or shortfall resulting in any of the schemes of LIC Mutual Fund.
The Trustees of the LIC Mutual Fund have exclusive ownership of Trust Fund and are vested with general power of superintendence, discretion and management of the affairs of the Trust. LIC Mutal Fund Asset Management Company Ltd. was formed on 20th April 1994 in compliance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1993. The Company commenced business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed LIC Mutual Fund Asset Management Company Ltd. as the Investment Managers for LIC Mutual Fund. The Trustees are responsible for appointing a Custodian. The Trustees should also ensure that the activities of the Trust and the Asset Management Company are in accordance with the Trust Deed and the SEBI Mutual Fund Regulations as amended from time to time. The Trustees have also to report periodically to SEBI on the functioning of the Fund.
94
The investors under the schemes can obtain a copy of the Trust Deed, the text of the concerned Scheme as also a copy of the Annual Report, on a written request made to the LIC Mutual Fund Asset Management Company Ltd.
Fund
Life Insurance Corporation Mutual Fund Bond is one of the consistent performers in the income category fund. This is due to high exposure to corporate bonds. In August 2006 it was having 87.4% of its net assets as corporate bonds. It is the only income fund that doesnt give exposure to government security. The average maturity of its po rtfolio is 1.3 years. Ten year yield of the fund is nearly 7.6-7.7%. In its portfolio 24.3% holding is of AA- & AA+ bonds. The annual average return is 7.75% in comparison to the category average of 7.34%. Last year return of this fund is 4.43%.
Net Assets Value
Date Wednesday, February 01, 2006 Wednesday, March 01, 2006 Monday, April 03, 2006 Monday, May 01, 2006 Thursday, June 01, 2006 Monday, July 03, 2006 Tuesday, August 01, 2006 Friday, September 01, 2006 Tuesday, October 03, 2006 Wednesday, November 01, 2006 Friday, December 01, 2006
Net Asset Value 19.0122 19.0542 19.1114 19.2687 19.3326 19.3877 19.5848 19.6944 19.7949 19.882 19.9989
95
Tuesday, January 02, 2006
19.8549
Portfolio
Debt Instruments - Bonds/Debentures Listed / Awaiting Listing on Stock Exchanges I C I C I BANK TISCO ACC Banks Ferrous Metals Cement AAA AAA AA+ AA+ 1800 1,839.23 17.1 16.67 4.79 4.65 4.59 4.57 3.44
1650000 1,794.02 50 50 5 515.7 500 493.58 491.55 370
SUNDARAM FINANCE Finance
FINOLEX INDUSTRIES Chemicals AAGOVT. SECURITIES Govt Securities
Sovereign 500000 P1+ 37
RABO INDIA FINANCE Finance Privately placed / Unlisted JSW STEEL DSP ML CAPITAL KOTAK PRIME Securitised Debt INDIAN RETAIL ABS TRUST ASSET Finance MAHINDRA Ferrous Metals Finance Finance
AA-
2200000 1,209.30 1,000.00 1,000.00
11.24 9.29 9.29
AAA(FSO) 100 AA+ 100
AAA(SO) 3 AAA(SO) 14
294.86 128.95
2.74 1.2
SECURITIES Finance
96
TRUST Total: Money Market & Net Receivables/Payables Cash 'n' Call, Current Assets & Receivables Total: Scheme Total: Graphical Representation of the Portfolio 1,121.64 1,121.64 10.43 10.43 9,637.19 89.57
10,758.83 100
Net Assets I C I C I BANK 1.2 2.74 9.29 10.43 17.1 TIS CO ACC SUNDARAM FINANCE FINOLEX INDUSTRIES GOVT. SECURITIES RABO INDIA FINANCE 9.29 11.24 4.65 4.79 16.67 JSW STEEL DSP ML CAPITAL KOTAK MAHINDRA PRIME INDIAN RETAIL ABS TRUST ASSET SECURITIES TRUST Cash 'n' Call, Current Assets & Receivables
3.44
4.57
4.59
97
98
Different Investing ways in Mutual Fund
There are basically two ways to invest in a Mutual Fund. These are: One Time Investment Systematic Investment Plan (SIP)
Let us discuss each.
One time investment
In this way of investment investor pays the entire investment amount in one time only. The minimum amount that must be invested in such a way is Rs. 5,000/- only. An entry load of 2.25% (nearly every fund charges) has to be paid by the investor. Depending upon the Net Asset Value (NAV) of the fund units are allotted to the investor. Let us understand it with the help of an example. Let an investor wants to invest Rs 12,000/- in one time only in Reliance Equity Fund. At the date of investment let the NAV of the fund be Rs 12/- per unit. Than the number of units that the investor will get is as follows: -
Total Investment Rs 12,000/NAV Rs 12/-
99
Entry Load 2.25% Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)] i.e. 12 + (2.25*12)/100 = Rs 12.27/Units actually purchased by investor = Rs 12,000 / Rs 12.27 = 978 Units. This way of investment is recommended for those investors who are sensitive because "emotions" may make the investor susceptible to "mistakes in timings of his purchases and sales". However with this way of investment the investor might loose future opportunities as available in SIP due to fluctuations in Sensex.
Systematic Investment Plan (SIP) SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is very similar to regular saving schemes like a recurring deposit. An SIP allows you to buy units on a given date each month, so that you can implement an investment / saving plan for yourself. Once you have decided on the amount you want to invest every month and the mutual fund scheme in which you want to invest, you can either give post-dated cheques or ECS instruction, and the investment will be made regularly. SIPs generally start at minimum amounts of Rs 500 per month and the upper limit for using an ECS is Rs 25000 per instruction. Therefore, if you wish to invest Rs 100,000 per month, you may need to do it on 4 different dates. In this way of investment investor pays the entire investment amount over a time period generally 1 year. The minimum amount that must be invested in such a way is Rs. 6,000/only i.e. Rs 500/- a month at least continuously for one year. An investor can invest any amount in multiple of 5. Entry load of 2.25% (nearly every fund charges) has to be paid by the investor every month. Depending upon the Net Asset Value (NAV) of the fund units are allotted to the investor. Let us understand it with the help of an example.
100
Let an investor wants to invest Rs 12,000/- in SIP in Reliance Equity Fund on 1st January, 2004. At the date of investment let the NAV of the fund be Rs 12/- per unit. Than the number of units that the investor will get is as follows: -
Total Investment Rs 12,000/Investment on 1st January (Monday) 2004 Rs 1,000/(Total Investment / Number of months) NAV Rs 12/Entry Load 2.25% Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)] i.e. 12 + (2.25*12)/100 = Rs 12.27/Units actually purchased by investor = Rs 1,000 / Rs 12.27 = 81.50 Units. Now let NAV on 1st February (Wednesday) be Rs 12.50 Entry Load 2.25% Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)] i.e. 12.50 + (2.25*12.50)/100 = Rs 12.78/Units actually purchased by investor = Rs 1,000 / Rs 12.78 = 78.24 Units. So in the month of February the total units holded by the investor are 81.50 + 78.24 = 159.74 units. In the same way investor will invest Rs 1000/- every month continuously for next 10 months. Depending upon the NAV every month investor will get units after deducting the entry load. The main advantage in SIP is that if Sensex is down on the day of investment than previous day investor will get more units as NAV will also fall generally. The investor can invest using SIP every month, quarterly, half yearly. It is to be noted that Investor can do additional purchase any time both in One time investment as well as SIP.
101
Value Averaging as an Investment way
An investment strategy designed to reduce volatility in which securities, typically mutual funds, are purchased at regular intervals in amounts which increase when the market drops and decrease when the market rises
Instead of simply adding X-amount into your portfolio every month (week, semester, year...) you decide in the beginning, how much your portfolio shall be worth any given time. (I.e. you start with a sum X to start with, and you decide to increase your portfolio by a certain sum per month.)
The value of your portfolio will of course fluctuate according the movements of the markets, and thus will you have to put in more money every month, when the markets drop (to keep up with your projected growth) or less when the markets rise. There might even be times when you will have to withdraw moneys when markets make a big jump up.
This all seems logic in an academic sense, as it really forces you to buy low, and sell high. This investment way is not practiced till time.
But there are certain drawbacks:
102
The administration of such a portfolio amounts to a fair-sized Excel sheet, and needs careful attention at regular intervals. One will have to make a calculation of how much a portfolio will have to grow every month. Something that is filled with rough guesswork at best of times. Of course can you say: I will need X amount when I'm 45 in order to retire early, and then work out how much you have to save every month. But even this number can be nothing short of arbitrary, as there are factors like: Inflation, live expectation, change of lifestyle, health, development of social security... Many people in their accumulation phase would be hard put to suddenly even out ones portfolio after a 20% market decline. As John Mayard said: Markets can remain irrational longer than you can remain solvent.
Comparison of returns from a fund in same time period using different investment ways
Assumptions 1 There is no withdrawals from the selected funds from 1 st February, 2006 to 2nd January, 2007 by the investor.
2 Units are issued to the investor as soon as he made the investment.
Fund: RELIANCE GROWTH FUND
Investment Way Lump sum. Total Investment = Rs 12,000/NAV as on Feb 1, 2006 = Rs 201.18 Entry load @ 2.25% (NAV of the day) = Rs 4.53
103
Effective NAV = 201.18 + 4.53 = Rs 205.70 Units Got = 12,000 / 205.70 = 58.33 NAV as on Jan 2, 2007 = Rs 270.05 Units Value = 58.33 * 270.05 = 15752 1 year return = [(15752-12000)*100]/ 12000 = 31.27%. Average Price = Total of NAVs in which investment is made / number of times investment made = 201.18 / 1 = Rs 201.18/Average Cost = Total Investment / Units Purchased = 12000 / 58.33 = Rs 205.70/-
Investment Way SIP Date February 01, 2006 March 01, 2006 April 03, 2006 May 01, 2006 June 01, 2006 July 03, 2006 August 01, 2006 September 01, 2006 October 03, 2006 November 01, 2006 December 01, 2006 January 02, 2007 Total NAV 201.18 210.22 229.75 251.68 215.11 199.51 193.2 218.12 234.47 250.23 261.78 270.05 2735.3 Investment Load@2.25% Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 12,000 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Units 4.86 4.65 4.25 3.88 4.54 4.90 5.06 4.5 4.17 3.90 3.73 3.62 52.06
Calculations
Investment per month = Rs 1,000/Load @ 2.25% on Rs 1,000/- = Rs 22.5/-
104
Effective value at which unit will be purchased = Rs 977.5/NAV on 1st Feb, 2006 = Rs 201.18/Units Purchased = 4.86
In the same way units purchased for the next 11 months has been calculated. On 2nd Jan, 2007
Total Units Purchased = 52.06 NAV = Rs 270.05/Investment Value = 52.06 * 270.05 = Rs 14,059/Return = [(14059 12000)* 100]/12000 = 17.15%. Average Price = 2735.3 / 12 = Rs 227.94/Average Cost = 120000 / 52.06 = Rs 230.5/-
Investment Way Value Averaging Here our objective is that in 1 st month the value of our investment should be Rs 1,000/and in 2nd month it should be Rs 2,000/-. Similarly in the beginning of 12 th month it should be Rs 12,000/-.
Calculations
Investment per month = Rs 1,000/Load @ 2.25% on Feb 01, 2006 on NAV Rs 201.18 = Rs 4.53/Effective value at which unit will be purchased = Rs 205.71/Units Purchased = 4.86.
Now On March 01, 2006
105
NAV = Rs 210.22/Units Holded = 4.86 Current Value = NAV* Total Units Holded = 210.22 * 4.86 = Rs 1021/Since we are in second month of investment so as per the rules we want our investment to be of value Rs 2,000/-. Thus Investment Required = Rs 2,000- Rs 1,021 = Rs 979/Now Load @ 2.25% on March 01, 2006 on NAV Rs 210.22 = Rs 4.73/Effective value at which unit will be purchased = Rs 214.95/Units Purchased = 979 / 214.95 = 4.55 So Total Units Holded in 2 nd Month = 4.86 + 4.55 = 9.41.
In the same way we will calculate the investment require to be made in next ten months. It is being assumed that Entry Load will be charged every month like in case of SIP.
Returns
Value of the investment as on January 02, 2007 = 44.38 * 270.05 = Rs 11,985/Total Investment Made = Rs 9914/One year return = [(11985-9914)* 100]/9914 = 20.88%. Average Price = 2735.3 / 12 = Rs 227.94/Average Cost = 9914 / 44.38 = Rs 223.38/-
Date
NAV (Rs)
Current Load Value (Rs)
Investment Units Got
(2.25%) Made + NAV (Rs) (Rs)
February 01, 2006
201.18
--------
205.71
1000
4.86
106
March 01, 2006 April 03, 2006 May 01, 2006 June 01, 2006 July 03, 2006 August 01, 2006 September 01, 2006 October 03, 2006 November 01, 2006 December 01, 2006 January 02, 2007 Total
210.22 229.75 251.68 215.11 199.51 193.2 218.12 234.47 250.23 261.78 270.05 2735.3
1021 2162 3267 3405 4605 5780 7872 8596 9594 10450 11334
214.95 234.9 257.34 219.95 204 197.55 223 240 255.86 267.67 276.12
979 838 733 1595 1395 1220 128 404 406 550 666 9914
4.55 3.57 2.85 7.25 6.84 6.17 0.57 1.68 1.58 2.05 2.41 44.38
Kotak Mahindra
Investment Way Lump sum. Total Investment = Rs 12,000/NAV as on Feb 1, 2006 = Rs 18.2249 Entry load @ 2.25% (NAV of the day) = Rs .4096 Effective NAV = Rs 18.6345 Units Got = 12,000 / 18.6345 = 643.96 NAV as on Jan 2, 2007 = Rs 19.501 Units Value = 12558 1 year return = [(12558-12000)*100]/ 12000 = 4.65%. Average Price = Total of NAVs in which investment is made / number of times investment made = 18.2249 / 1 = Rs 18.2249/Average Cost = Total Investment / Units Purchased = 12000 / 643.96 = Rs 18.6345/-
Investment Way SIP
107
Date February 01, 2006 March 01, 2006 April 03, 2006 May 01, 2006 June 01, 2006 July 03, 2006 August 01, 2006 September 01, 2006 October 03, 2006 November 01, 2006 December 01, 2006 January 02, 2007 Total
NAV 18.2249 18.2803 18.3392 18.4542 18.5166 18.6115 18.704 18.9008 19.0739 19.1858 19.3916 19.501 225.1838
Investment Load@2.25% Units Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 1000 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 Rs 22.5 53.63 53.47 53.30 52.97 52.79 52.52 52.26 51.71 51.24 50.94 50.40 50.12 625.35
Using the same way and method as used in calculation of return of Reliance using SIP we will find that One year return = 1.625% Average Price = Rs 18.7653 Average Cost = Rs 19.1892
Investment Way Value Averaging Date NAV (Rs) Current Value (Rs) Load (2.25%) + NAV (Rs) February 01, 2006 March 01, 2006 April 03, 2006 May 01, 2006 18.2249 18.2803 18.3392 18.4542 --------980 1984 2996 18.6345 18.6916 18.7518 18.8694 1000 1020 1016 1004 53.63 54.57 54.18 53.20 Investment Made (Rs) Units Got
108
June 01, 2006 July 03, 2006 August 01, 2006 September 01, 2006 October 03, 2006 November 01, 2006 December 01, 2006 January 02, 2007 Total
18.5166 18.6115 18.704 18.9008 19.0739 19.1858 19.3916 19.501 225.1838
3990 5004 6007 7052 8052 9032 10086 11041
18.9332 19.0302 19.1248 19.326 19.503 19.6175 19.828 19.9398
1010 996 993 948 948 968 914 959 11776
53.34 52.33 51.92 49.05 48.60 49.34 46.10 48.09 614.29
Using the same way and method as used in calculation of return of Reliance using Value Averaging we will find that One year return = 1.73% Average Price = Rs 18.7653 Average Cost = Rs 19.17
109
FINDINGS
Like a traveler, who after completing his long and arduous journey reaches his destination and looks back upon the area covered by him for recalling the important landmarks and experiences he came across; similarly, it would be desirable to review the various aspects of the present study. So prior to winding up this study, an attempt is made to summarize its major findings and suggestions on the basis of forgoing chapters.
110
Findings: -
1. All the Equity related funds invested in high growth, current high importance sectors Like Energy, Infrastructure, IT, Telecom, Oil, Auto etc.
2. To maintain liquidity all the mutual funds have cash holdings of nearly 10% out of there total assets. Maintaining cash also enables them to invest in any lucrative instrument as it comes.
3. NAV of all the equity related funds fell down in June, July, and August 2006 due to Fall in the Sensex. However those funds which invested in safer instruments like Bonds, Government Securities there NAV were not much affected.
4. The main reasons for Sensex fall were found to be:
The interest rate hike in the US by the Federal Reserve Bank. BSE Metal Index lost 22 per cent. This putted lot of impact as infrastructure development is in Boom in INDIA. Some people viewed that Sensex growth was valuated higher. Markets in US and Japan were attracting liquidity and inflation scare was also there, so a lot of emerging markets pulled back. Industry feared more tax brackets. Many reports were issued which criticized the growth shown by Sensex. It was speculated by experts that Sensex may touch 9000 mark. FIIs were net sellers in emerging markets to book profits. The rise in the level of margin trading was very high. International Crude Oil Prices were rising.
5. The one year equity related funds is higher than other funds. It proves the principal of high risk, high return.
111
6. DSP Merrill Lynch Mutual Fund gave one year return of 36.4%. Total number of instruments in its portfolio is 77. However HDFC Mutual Fund gave one year return of nearly 34%, with number of instruments in its portfolio close to 60. So its important what instrument we include in portfolio rather than the number of securities. More number of securities only complexes the portfolio management.
7. As the NAV increases, the number of units which an investor gets decreases and viceversa.
8. Average Price which a investor has to pay to invest in a mutual fund was found to be less in one time investment than opting for SIP or Value Averaging (if available).
9. Average Price which an investor has to pay to invest in a mutual fund was found to be equal in SIP and Value Averaging.
10. Average Cost associated with a mutual fund was found to be least in one time investment than Value Averaging, whose average cost was further less than that associated with SIP.
11. Average Price, Average Cost in one time investment was found to be less in comparison to other investing ways. This is one of the reasons why its one year returns are more.
12. To practically implement value averaging the minimum amount condition like in SIP has to be eliminated. As we have seen in the calculations at one time investor was investing Rs. 1596/- and at other Rs 158/- only.
13. One year return in One time investment was found to be more than in Value Averaging investment way, which was further high than one year return using SIP.
112
14. Growth fund option gives investors good returns as well as capital appreciation.
113
Suggestions
1. Best time to invest in stock market is when it is down because with same investment money he will get more value.
2. Mutual Fund is the best way to enter into market particularly for those investors who want good returns with minimum risk as fund of mutual funds is handled by an expert.
114
3. To get good returns investor must invest considering the time horizon of at least two to three years. This will help him in getting good returns.
4. Portfolio management is a difficult task. So fund managers must choose optimal number of securities which meets the objectives of fund.
5. Mutual Fund Companies must devise fund considering the end investor in mind.
6. Individual investors must also choose a basket of securities instead of making investment in only one or two instruments, so that even if one instruments return is negative other instruments return can compensate that.
7. Since there are large number of mutual funds in which an investor can invest, so he must choose the fund in which investment is to be made by clearly understanding the little aspects associated with it.
8. Those investors who are risk averse must invest in open ended funds because he can look at the past performance of the fund under consideration.
9. Diversification of portfolio is must as it will reduce the unsystematic risk and give the return an edge.
115
Limitations
The researcher was inexperienced.
116
The scope of the study was very wide as there are hundreds of mutual funds of different types but only few have been studied. The portfolio published by the various Asset Management Companies might not be the real one. As, if it would be so than any individual can invest in the manner similar to portfolio of funds. The objective of including a particular sector in the portfolio by the fund manager couldnt be known. The portfolio being maintained by different funds changes with market conditions. The portfolio being actually maintained under different market conditions in last one year couldnt be ascertained. To develop a new way of investment lot of calculations needs to be done, but here only few has been done. The actual hurdles in making value averaging as an investment way in portfolio couldnt be found.
117
Conclusion
118
Thus on the whole it can be concluded that there is no conclusive evidence which suggest that performance of mutual fund scheme portfolio is superior to others. But it is for sure performance of the most of the funds in better.
Each investment alternative has its own strengths and weaknesses. Equity related funds give more returns, but the risk associated is also very high. It would be clearer from the fact that when Sensex was down in the middle of 2006, the NAV of all the equity related funds fell down. On the other hand investing in safer instruments like Bank Deposits, Government Bonds.gives investor the assured return with nearly no risk. But the returns are very less in comparison to other instruments. So if an investor wants to get good returns with minimum risk he must invest in basket of securities. Selecting a fund is not an easy task. So he must do his homework very clearly. While choosing the fund it is also very necessary that he chose funds investing in different sectors. Mutual Funds are probably the best investment tool for those persons who dont know the basics of Stock Market but wish to invest in it. As mutual fund investments are taken, care by expert fund managers so chances of making a loss in the investment are very less.
Right now practical application of investing in mutual fund by using Value Averaging appears to be difficult. But if it is applied than by investing a small amount an investor will be able to get good returns in comparison to SIP. A lot of research has to be done onto it. In last we can conclude that those investors who wish to get good returns with minimum risk they must invest in mutual funds. But while investing they must consider there investment objectives, expected returns, risk taking capability. Depending upon these they must choose the instrument in which they should invest. Further they should insure that they make investment in basket of instruments as this will give those advantages of various sectors, at the same time minimize the risk.
119
BIBLIOGRAPHY
120
Websites www.reliancemutual.com www.sbimf.com www.franklintempletonindia.com www.hdfcfund.com www.dspmlmutualfund.com www.kotakmutual.com www.jmmutual.com www.licmutual.com www.utimf.com www.valueresearchindia.com www.amfiindia.com www.mutualfundindia.com Books Verma, Dr J.C., Mutual Funds & Investment Portfolio , Bharat Publications, 2nd Edition. Pandian, Punithavathy, Security Analysis and Portfolio Management , Vikas Publications, 2nd Reprint. Kothari, C.R., Research Methodology, New Age International Publishers, 2005.
121

Thesis - Portfolio Management

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Thesis - Portfolio Management

Uploaded by

Copyright:

Available Formats

Property of Project Guru, www.projectguru.co.

Introduction to Portfolio Management

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Objectives and asset mix

Growth of income and asset mix

Capital appreciation and Asset Mix

Safety of principle and asset mix

Property of Project Guru, www.projectguru.co.cc

Risk and return analysis

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Evolution of Portfolio Management

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Role of Portfolio Management

So portfolio management objectives can be stated as: -

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

WHAT IS MUTUAL FUND??

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

TYPES OF MUTUAL FUNDS SCHEMES

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

HISTORY OF INDIAN MUTUAL FUND INDUSTRY

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

GROWTH IN ASSETS UNDER MANAGEMENT

Property of Project Guru, www.projectguru.co.cc

organizational set up of a mutual fund:

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Trends in Transactions on Stock Exchanges by Mutual Funds (since January 2000)

Equity (Rs in Crores) Gross Purchase

Debt (Rs in Crores) Gross Sales

Net Purchase/ Gross Sales Purchase

Net Purchase/ Sales

Property of Project Guru, www.projectguru.co.cc

Trends in Transactions on Stock Exchanges by Mutual Funds

Property of Project Guru, www.projectguru.co.cc

Union Budget 2007-08 & the Mutual Fund Industry

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

USAGE OF MUTUAL FUND

Property of Project Guru, www.projectguru.co.cc

ADVANTAGES AND DISADVANTAGES OF MUTUAL FUND

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

Property of Project Guru, www.projectguru.co.cc

HOW TO INVEST IN MUTUAL FUND??

Step One - Identify your Investment needs

Step Two - Choose the right Mutual Fund

Property of Project Guru, www.projectguru.co.cc