Submitted for the partial fulfillment of the requirement for the award


ROLL NO. 0823170017

External: Mr. Vishal Thakur (S.R.M.) Internal: Mrs. Poonam Singh (Lecturer)

Department Of Management


I hereby declare that this project report prepared in lieu of a compulsory paper for the partial fulfilment of Management of Business Administration (Marketing and Human Resourse) is my original work which I have submitted in Gulf Bulls Securities Pvt. Ltd. to my guide Mr. Mandip Kumar No part of it has been submitted to any other university or organisation.

All the information and data in my project are authentic to the best of my knowledge and taken from reliable sources.



Project work is never the work of an individual. It is more a combination of views, ideas, suggestions, contribution and work involving many individuals. I wish to express my deepest gratitude to Gulf Bulls Securities’ management for giving me an opportunity to be a part of their esteem organization and enhance my knowledge by granting permission to do my summer training project under their guidance. I am grateful to Mr. Sachin Gupta, my guide, for his invaluable guidance and cooperation during the course of the project. He provided me with his assistance and support whenever needed that has been instrumental in completion of this project. The project could not have completed without the guidance of Mr. Shailendra, Mr. Vishal, Ms. Neha Goel, Ms. Anuja Shukla and last but not the least Mr. Mandip Kumar. Their continuous guidance helped me immensely during the project work



The stock market in India has been a kind of mysterious place for many people who think that the persons investing their money in the market are sort of gambling on their money. There is usual misconception in the minds of the common man that because of the volatility of the market, their hard earned money is not safe in the stock market. However, this fear can be checked by proper research on a interested to invest on. The market doesn’t behave in an but certain trends are repeated over the time again and responsive towards the economic activities taking place in around the whole world. share someone is arbitrate manner again. It is quite India as well as

The broad objective of the project is to understand the behavioural pattern of Mutual Funds over the past one year and a half so that one can

understand the movement of the share on a particular trading session as well as the impact of news coming from different quarters of the market. The project will provide a tool in the hands of the investors to take the decisions regarding their investment in Mutual Funds It will also give them the answer that whether it is right time to invest in this share or not, and what could be the best time to invest in this share.





6. 7. 8. 9.








This project offers a valuable opportunity to take a glimpse of the mutual fund in India. In today’s increasingly competitive and complex world there are large numbers of mutual funds claiming to provide maximum return with minimum risk. It is become very difficult to select the best mutual fund. There are more than 1000 schemes available for the investors in India. It is very difficult to select a particular scheme on the basis of their past records. This project will try to analyze few popular mutual funds statistically on the basis of the risk involved in each fund and the return of the same. Also an in-depth analysis of their portfolio will be done which will give a better view for a fund’s resultant performance. This project identifies the key factors that is making a fund perform better then is competitor. The factors identified in this study will help fund manager design their fund’s portfolio and provide optimum return to its investors. Also the said project will be used by Tata Asset Management Company in the Eastern Zone to train its Relationship Managers in helping them giving an indepth view about their fund



A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describe mutual fund:


Mutual Fund gets their earnings in two ways: 1. First is the most organic way, which is the dividend they get on the securities they hold. 2. If the fund sells securities that have increased in capital gain. This is reflected in NAV of each unit. 3. Third is by the redemption of their units by investors will be at discount to the current NAV[net asset value]. STATISTICAL ANALYSIS CONCEPT


About company Gulf Bulls Securities Pvt. Ltd. is a company registered under the Companies Act, 1956 .It is a professionally managed group headed by the directors, having vast experience in the stock market. The company is serving a diverse customer base of institutional and retail investors The Company has a balanced mix of revenues from emerging markets and is well positioned to leverage the growth potential offered by these markets. GBS provides investors a robust platform to trade in Equities in NSE and BSE, and derivatives in NSE. The company has a worldwide vision and it along with its associates is currently providing state of the art stock broking services through all the major stock exchanges, trading through NSE & BSE, depository services through CDSL and all the services are available under the one roof. With its ability to evolve with the changing environment the Company has been able to put itself to the forefront of stock broking activities. With its network spreading across various parts of India, it has made a distinct mark among the stock broking houses and high net worth corporate as well as individuals. The company offers financial information, analysis, investment guidance, news & views, which are designed to meet the requirements of everyone from a beginner to a savvy and well-informed trader. “Our vision is to grow our business and make our presence across the world.”

“Our mission is to create and introduce the new definition of investments around the globe.”

Management Team:

Name Mr. Vivek Rana

Designation Chairman / Managing Director

Mr Rajiv Balhara


Mr. Kuldeep Sharma


Mr. Yajur Chaudhary


Mr. Rajneesh Aggarwal


Mr. Vipin Kumar


Mr. Gajraj Singh


Mr. Anil Kaushik


Prominent feature of Gulf Bulls Securities


• • •

Strong research department located at Faridabad office. Well structured infrastructure for trading. Highly skilled and experience staff. Dedicated user friendly website for its customers, named

www.monepore.com and www.moneyporeexpress.com. • Money pore express, software developed by Gulf Bulls Securities provides retail investors better opportunity to trade at home and that to at greater speed and convenience.

Areas of Expertise Gulf Bulls offers real time trading opportunities on the NSE. It also offers depository and online services to clients for account accessing and information through its online portal catering to the needs of mobile trader as well as the net savvy investor. Gulf Bulls offers state-of –the–art online trading through its website (www.gulfbullsecurity.co.in). Regular updates during trading hours, and access to information, analysis and research, and a range of monitoring tools is available. The company has steadily building up a comprehensive portfolio of products and services apart from conventional broking. High speed anywhere trading through the net, online depository services, commodities trading and retail debt products are increasingly areas of special emphasis for the company.


What Is a Mutual Fund?
A mutual fund is a company that invests in a diversified portfolio of securities. People who buy shares of a mutual fund are its owners or shareholders. Their investments provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual fund can make money from its securities in two ways: a security can pay dividends or interest to the fund or a security can rise in value. A fund can also lose money and drop in value.

Different Funds, Different Features
There are three basic types of mutual funds—stock (also called equity), bond, and money market. Stock mutual funds invest primarily in shares of stock issued by Indian or foreign companies. Bond mutual funds invest primarily in bonds. Money market mutual funds invest mainly in shortterm securities issued.





Why Invest in a Mutual Fund?
Mutual funds make saving and investing simple, accessible, and affordable. The advantages of mutual funds include professional management,

diversification, variety, liquidity, affordability, convenience, and ease of recordkeeping—as well as strict government regulation and full disclosure.

Professional Management: Even under the best of market conditions, it takes an astute, experienced investor to choose investments correctly, and a further commitment of time to continually monitor those investments. With mutual funds, experienced professionals manage a portfolio of securities for you full-time, and decide which securities to buy and sell based on extensive research. A fund is usually managed by an individual or a team choosing investments that best match the fund’s objectives. As economic conditions change, the managers often adjust the mix of the fund’s investments to ensure it continues to meet the fund’s objectives.








investments can help reduce the adverse impact of a single investment. Mutual funds introduce diversification to your investment portfolio

automatically by holding a wide variety of securities. Moreover, since you

pool your assets with those of other investors, a mutual fund allows you to obtain a more diversified portfolio than you would probably be able to comfortably manage on your own—and at a fraction of the cost. In short, funds allow you the opportunity to invest in many markets and sectors. That’s the key benefit of diversification.

Variety: Within the broad categories of stock, bond, and money market funds, you can choose among a variety of investment approaches. Today there are more then 1000 types of mutual fund available for the Indian investors.

Low Costs: Mutual funds usually hold dozens or even hundreds of securities like stocks and bonds. The primary way you pay for this service is through a fee that is based on the total value of your account. Because the fund industry consists of hundreds of competing firms and thousands of funds, the actual level of fees can vary. But for most investors, mutual funds provide professional management and diversification at a fraction of the cost of making such investments independentlyTUAL FUNDS

Liquidity: Liquidity is the ability to readily access your money in an investment. Mutual fund shares are liquid investments that can be sold on any business day. Mutual funds are required by law to buy, or redeem, shares each business day. The price per share at which you can redeem

shares is known as the fund’s net asset value (NAV). NAV is the current market value of all the fund’s assets, minus liabilities, divided by the total number of outstanding shares.

Convenience: You can purchase or sell fund shares directly from a fund or through a broker, financial planner, bank or insurance agent, by mail, over the telephone, and increasingly by personal computer. You can also arrange for automatic reinvestment or periodic distribution of the dividends and capital gains paid by the fund. Funds may offer a wide variety of other services, including monthly or quarterly account statements, tax

information, and 24-hour phone and computer access to fund and account information.

Protecting Investors: Not only are mutual funds subject to compliance with their self-imposed restrictions and limitations, they are also highly regulated by the federal government through the U.S. Securities and Exchange Commission (SEC). As part of this government regulation, all funds must meet certain operating standards, observe strict antifraud rules, and disclose complete information to current and potential investors. These laws are strictly enforced and designed to protect investors from fraud and abuse. But these laws obviously cannot help you pick the fund that is right for you or prevent a fund from losing money. You can still lose money by


investing in a mutual fund. A mutual fund is not guaranteed or insured by the FDIC or SIPC, even if fund shares are purchased through a bank. ADVANAL


Types of Mutual Fund Scheme



Open Ended Schemes: These do not have a fixed maturity. You deal directly with the Mutual Fund for your investments and redemptions. The key feature is liquidity. You can conveniently buy and sell your units at Net Asset Value related prices.

Close Ended Schemes: Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called closed ended schemes. You can invest directly in the scheme at time of the initial issue and thereafter you can buy and sell the units of the scheme on the stock exchanges where they are listed. The market price of the stock exchange could from the scheme’s NAV on account of demand and supply situation, unit holders expectation and other market factors. Interval Schemes: These combine the features of open ended and closed ended schemes. They may be traded at stock exchange or may be open for sale or redemption during pre determined intervals at NAV related prices.



Growth Schemes: Aim to provide capital appreciation over the medium to long term. These schemes normally invest a majority of their funds n equities and are willing to bear short term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the short term.

Income Schemes: aim to provide regular and steady income to investors. hese schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes: Aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. They invest both in shares and fixed income securities in the proportion indicated in their offer documents.

Money market Schemes: Aim to provide easy liquidity, preservation of capital gains and moderate income. These schemes generally invest in safer, short term instruments such as treasury bills, certificate of deposits, commercial


papers etc. Return on these schemes may fluctuate, depending upon the interest rates prevailing in the market.


Tax Saving Schemes: These schemes offer tax rebates to the investor under tax law as prescribed from time to time. This is made possible because the government offers tax incentives for investment in specified avenues. For example Equity Linked Saving Schemes, and Pension Schemes. Special Schemes: This category includes index schemes that attempt to replicate the performance of a particular index such as BSE Sensex or the NSE or industry specific schemes or sectoral schemes.

Index Fund Schemes: They are ideal for investors who are satisfied with a return approximately equal to that of an index.

Sectoral Fund: These schemes are ideal for investors who have already decided to invest in a particular sector or segment




COMPANY OVERVIEW Backed by one of the most trusted and valued brands in India, Tata Mutual Fund has earned the trust of lakhs of investors with its consistent performance and world-class service.

Tata Mutual Fund manages around Rs. 22,980.76 crores (as on March 31, 2008) worth of assets across its varied offerings. Tata Mutual Fund offers an investment option for everyone, whether you are a businessman or salaried professional, a retired person or housewife, an aggressive investor or a conservative capital builder.

The Tata Asset Management (TAM) philosophy is centered on seeking consistent, long-term results. Tata Asset Management aims at overall excellence, within the framework of transparent and rigorous risk controls.

Areas of Business
A leading player in the mutual fund arena, TAM offers a wide array of product for institutional and individual investors at various life stages across the risk- reward spectrum. The company offers investment products under


three main categories for every financial need and under varied market conditions: • • • • The core strength of TAM stems not only from its sound systems and processes but also from the quality of its intellectual capital, which is made up of the best and brightest minds. At the same time, the company provides a robust risk management framework with inbuilt controls and balances. Equity funds Balanced funds Debt funds

The title of the project is “Investors Perception About Mutual Fund” This will through light on how investors view our funds as a potential investment with detailed perception. Quantify the results of our fund marketing strategy and improve the quality of our investor communications with valuable investor feedback.MUTUAL FUNDS SCHEMES

Core Values
The Tata Group has always sought to be a value-driven organization. These values continue to direct the Group's growth and businesses. The five core Tata values that underpin the way we do business are:


Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.

Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve.

Excellence: We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide.

Unity: We must work cohesively with our colleagues across the Group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation.

Responsibility: We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comesfrom the people goes back to the people many times over.


Statistical Tools Mean

An average of the sub-period returns, calculated by summing the sub eturns and dividing by the number of sub This shows the average return earned by a good comparative tool to assess different types of fund.

Standard Deviation

Standard deviation is a representation of the risk associated with a given security stocks, bonds, property, etc.), or the risk of a portfolio of securities. Risk is an important factor in determining how to efficiently manage a portfolio of investments because it determines the variation in returns on the asset and/or portfolio and ives investors a mathematical basis for

investment decisions. The overall concept of risk is that as it increases, the expected return on the asset will increase as a result of the risk premium earned higher return on an investment when said investment carries a higher level of risk


where, σ2 denoted standard deviation N is number of period, X2 is average return of a security, x is number actual return, The larger the Standard Deviation in a period, the greater risk the security carries.

STATISTICAL ANALYSIS Beta A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Also known as "beta coefficient".

Where, ra measures the rate of return of the asset, rp measures the rate of return of the portfolio of which the asset is a part, Cov(ra, rp,) is the covariance between the rates of return. Beta is calculated using regression analysis, and you can think of beta as the

tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A Beta less than 1 means, the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

Many utilities stocks have a beta of less than 1. Conversely, most high-tech Sensex-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk.

Sharpe Ratio A ratio developed by Nobel laureate William F. Sharpe to measure riskadjusted performance. The Sharpe ratio is calculated by subtracting the riskfree rate – such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.


R is return from the security Rf is the Risk free return σ= standard deviation The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk performance has been.

A variation of the Sharpe ratio is the Sortino ratio, which removes the upward price movements on standard deviation to measure only return against downward price volatility.

Sortino Ratio A ratio developed by Frank A. Sortino to differentiate between good and bad volatility in the Sharpe ratio. This volatility allows the calculation to provide a risk fund's performance without penalizing it for upward price changes. It it is calculated as follows:


The Sortino ratio is similar to the Sharpe ratio, except it uses downside deviation for the denominator instead of standard deviation, the use of which doesn't discriminate between up and down volatility.

P/E ratio The P/E ratio (price-to-earnings ratio) of a stock (also called its "earnings multiple", or simply "multiple", "P/E", or "PE") is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. It is a valuation ratio included in other financial ratios. The reciprocal of the P/E ratio is known as the earnings yield.


AL ANALYSIS Treynor Ratio A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. The Treynor ratio is calculated as:

(Average Return of the Portfolio - Average Return of the Risk-Free Rate) / Beta of the Portfolio In other words, the Treynor ratio is a risk-adjusted measure of return based on systematic risk. It is similar to the Sharpe ratio, with the difference being that the Treynor ratio uses beta as the measurement of volatility.

Also known as the "reward-to-volatility ratio". STATISTICAL TOOLS Fama A factor model that expands on the capital asset pricing model (CAPM) by adding size and value factors in addition to the market risk factor in CAPM. This model considers the fact that value and small cap stocks outperform markets on a regular basis. By including these two additional factors, the


model adjusts for the outperformance tendency, which is thought to make it a better tool for evaluating manager performance.

Here r is the portfolio's return rate, Rf is the risk-free return rate, and Km is the return of the whole stock market. The "three factor" β is analogous to the classical β but not equal to it, since there are now two additional factors to do some of the work. SMB and HML stand for "small [Market Capitalization] minus big" and "high [book-to-price ratio] minus low"; they measure the historic excess returns of small caps over big caps and "value stocks" over "growth stocks".

Fama and French attempted to better measure market returns and, through research, found that value stocks outperform growth stocks; similarly, small cap stocks tend to outperform large cap stocks. As an evaluation tool, the performance of portfolios with a large number of small cap or value stocks would be lower than the CAPM result, as the three factor model adjusts downward for small cap and value outperformance. STATISTICAL TOOLS STATISTICAL ANALYSIS



An Infrastructure fund is a managed vehicle through which investors gain exposure to the underlying characteristics of infrastructure assets.

Infrastructure is emerging strongly as an asset class which can be particularly well suited to pension funds and other investors with a long-term outlook. Infrastructure assets tend to display comparatively stable, longterm real return and provide a good match for longdated liabilities.

They invest in private infrastructure companies, but the fnds themselves can be listed or unlisted. For example, Macquarie has been investing in infrastructure for more than a decade and now manages over 20 infrastructure funds around the world. Half of these are listed on the stock exchange, with investors from pension funds and other institutions to retail investors. The rest are unlisted funds in which the investors are largely pension funds and other institutions.

The fund tens to either specialize in one class of infrastructure - for example invest only in airport or only in toll-roads – or they invest across various infrastructure sectors which meet specified investment criteria. For example

The infrastructure assets can include telecommunications and broadcast infrastructure, utilities, toll road, airport and other transport infrastructure.


Fundamentally, infrastructure assets are distinguished by displaying the following key characteristics: • • • Provide essential community services Have strategic competitive advantage Have predictable long-term cash flow

These characteristics lead to the investment benefits outlined below.

Infrastructure assets display unique characteristic. Their essential and longterm nature, combined with strong competitive position, lead to stable and predictable consumer demand and cash generation. These assets tend to have a high fixed capital base with comparatively low operating costs – on average of between 10% and 30% of revenue. Along with the long-term operating license and predictable demand, often in a regulated environment, this allows the manager to forecast cash flows with accuracy.

Infrastructure assets have a low correlation to equity markets and other asset classes. For the reason, it can provide valuable diversification in an investment.




This project has been taken for GULF BULL stock broking limited. The objective of the study is to know the role and performance of mutual funds & also help in determining the preference of investors while investing in various types of mutual fund schemes. The company has established a strong investor’s base in FARIDABAD so the key findings of the project will help the company to understand their investors better, their needs, and expectations of the investors from a broker and the potential of mutual funds scheme in Faridabad.

Many individuals find investments to be fascinating because they can participate in the decision making process and see the results of their choices. Not all investments will be profitable, as investor wills not always make the correct investment decisions over the period of years; however,


one should earn a positive return on a diversified portfolio. In addition, there is a delight from the major success.

Investing is not a game but a serious subject that can have a major impact on investor's future well being. Virtually everyone makes investments. Even if the individual does not select specific assets such as stock, mutual funds, investments are still made through participation in pension plan, and employee saving programmed or through purchase of life insurance or a home. Each of this investment has common characteristics such as potential return and the risk you must bear. The future is uncertain, and one must determine how much risk you are willing to bear since higher return is associated with accepting more risk.

The individual should start by specifying investment goals and would like to have true value of his wealth. Once these goals are established, the individual should be aware of the mechanics of investing and the environment in which investment decisions are made. These include the process by which securities are issued and subsequently bought and sold, the regulations and tax laws that have been enacted by various levels of government, and the sources of information concerning investment that are available to the individual.




A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. Each unit of any scheme represents the proportion of pool owned by the unit holder (investor). The value of each unit of mutual fund is termed as Net Asset Value. Appreciation or reduction in value of investments is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual Funds schemes are managed by respective Asset Management Companies sponsored by financial institutions, banks, private companies or international firms. An investor can invest his money in one or more schemes of Mutual Fund according to his choice and becomes the unit holder of the scheme. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Mutual Fund offers an investor the opportunity to invest even a small amount of money. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. Each Mutual Fund scheme is managed by qualified professionals, who use this money to create a portfolio that includes stock and shares, bonds, gilt, money-market instruments or combination of all. Thus, Mutual Fund will diversify one’s portfolio over a variety of investment vehicles thereby reducing the risk.

Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (one doesn't have to figure out which stocks or bonds to buy).


By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification.

Mutual Funds offer several benefits to an investor such as potential return, liquidity, transparency, income growth, good post tax return and reasonable safety. But before investing in a Mutual Fund an investor must identify his needs and preferences. He must also take in to consideration the risks associated with such investments.




The FIGURE below illustrates the organizational set up of a mutual fund:

Indian mutual funds are governed by two different structures. The Unit Trust of India follows one defined by the UTI Act, 1963, and its subsequent amendments. All other mutual funds follow the Securities and Exchange Board of India's (Mutual Funds) Regulations, 1996, which are more rigorous from the viewpoint of disclosure and accountability. Despite the differences, all mutual funds comprise four constituents -- sponsors, trustees, asset management companies (AMC’s) and custodians.


A mutual fund in India is constituted in the form of a Public Trust created under the Indian Trusts Act, 1882. The Fund Sponsor acts as the Settler of the Trust, contributing to its initial capital and appoints a Trustee to hold the assets of the Trust for the benefit of the unit-holders, who are the beneficiaries of the Trust. The fund then invites investors to contribute their money in the common pool, by subscribing to “units” issued by various schemes established by the trust, units being the evidence of their beneficial interest in the fund.

The sponsor initiates the idea to set up a mutual fund. It could be a registered company, scheduled bank or financial institution. For Example: For Birla Mutual Fund, the sponsor is Birla Growth Funds. In a joint venture like Sun F&C Mutual Fund, Foreign & Colonial Emerging Markets is the sponsor and SUN Securities (India) Ltd, the co-sponsor

A sponsor has to satisfy certain conditions, such as on capital, track record (at least five years' operation in financial services), default-free dealings and a general reputation of fairness. The sponsor appoints the trustees, AMC and

custodian. Once the AMC is formed, the sponsor is just a stakeholder. However, sponsors do play a key role in bailing out an AMC during a crisis (Canara Bank's rescue of Canbank Mutual Fund).

Trustees hold a fiduciary responsibility towards unit holders by protecting their interests. Sometimes, as with Canara Bank, the trustee and the sponsor are the same. For others, like SBI Funds Management, State Bank of India is the sponsor and SBI Capital Markets the trustee. Trustees float and market fund schemes, and secure necessary approvals. They check if the AMC's investments are within defined limits, whether the fund's assets are protected, and also ensure that unit holders get their due returns. Trustees also review any due diligence done by the AMC. For major decisions concerning the fund, they have to take unit holders' consent. They submit reports every six months to SEBI; investors get an annual report. Trustees are paid annually out of the fund's assets -- 0.05 per cent of the weekly average net asset value.

They are the ones who manage funds money. An AMC takes investment decisions, compensates investors through dividends, maintains proper

accounting and information for pricing of units, calculates the NAV, and provides information on listed schemes and secondary market unit


It also exercises due diligence on investments, and submits quarterly reports to the trustees. A fund's AMC can neither act for any other fund nor undertake any business other than asset management. Its net worth should not fall below Rs. 10 crore. And, its fee should not exceed 1.25 per cent if collections are below Rs.100 crore and 1 per cent if collections are above Rs.100 crore. Sebi can pull up an AMC if it deviates from its prescribed role.

Transfer agents are responsible for issuing and redeeming units of the mutual fund and provide other related services such as preparation of transfer documents and updating investor records. A fund may choose to carry out this activity in-house and charge the scheme for the service at a competitive market rate. Where an outside Transfer Agent is used, the fund investor will find the agent to be an important interface to deal with, since all of the investor services that a fund provides (besides the investment management) are going to be dependent on the transfer agent.


In India, besides brokers, independent, individuals are appointed as ‘agents” for the purpose of selling the fund schemes to investors. These agents are not brokers in a formal sense and do not belong to any stock exchange or organized self-regulatory body of brokers. While individuals constitute the largest segment in the category of mutual fund “distributors”, other distributors include Banks, Non Banking Finance Companies and Distribution Companies.

Often an independent organization, it takes custody of securities and other assets of a mutual fund. Among public sector mutual funds, the sponsor or trustee generally also acts as the custodian.

A custodian's responsibilities include receipt and delivery of securities, collecting income, distributing dividends, safekeeping of units and

segregating assets and settlements between schemes. Their charges range between 0.15-0.2 percent of the net value of the holding. Custodians can service more than one fund.SEBI's regulations specify each constituent's role clearly. How well they act in concert determines the quality of the investor's experience with the mutual fund.

A mutual fund is a common investment vehicle where the assets of the fund belong directly to the investors. Investors’ subscriptions are accounted for by the fund not as liabilities or deposits but as Unit Capital. On the other hand, the investments made on behalf of the investors are reflected on the assets side and are the main constituent of the balance sheet. There are, however, liabilities of a strictly short-term nature that may be part of the balance sheet. The fund’s Net Assets are therefore defined as the assets minus the liabilities. As there are many investors in a fund, it is common practice for mutual funds to compute the share of each investor on the basis of the value of Net Assets Per Share/Unit, commonly known as the Net Asset Value (NAV).

The following are the regulatory requirements and accounting definitions laid down by SEBI. NAV = Net Assets of the scheme/Number of Units outstanding i.e. Market value of investments + Receivables + Other Accrued Income + other assets.

Accrued Expenses – Other payables – Other liabilities


No. Of units outstanding as at the NAV date For the purpose of the NAV calculation, the day on which NAV is calculated by a fund is known as the valuation date. • • • • • A fund’s NAV is affected by four sets of factors: Purchase and sale of investment securities Valuation of all investment securities held Other assets and liabilities, and Units sold or redeemed

Professional expertise: Fund managers are responsible for implementing a consistent investment strategy that reflects the goals of the fund. Fund managers monitor market and economic trends and analyze securities in order to make informed investment decisions. Diversification: In order to reduce this risk, one needs to invest in different types of securities such that they do not move in a similar fashion. Typically, when equity markets perform, debt markets do not yield good returns. Note the scenario of low yields on debt securities over the last three years while equities yielded handsome returns

Low cost of asset management: Since mutual funds collect money from millions of investors, they achieve economies of scale. The cost of running a mutual fund is divided between larger pools of money and hence mutual funds are able to offer you a lower cost alternative of managing your funds. Equity funds in India typically charge you around 2.25% of your initial money and around 1.5% to 2% of your money invested every year as charges. Investing in debt funds costs even less. If you had to invest smaller sums of money on your own, you would have to invest significantly more for the professional benefits and diversification.

Liquidity: Mutual funds are typically very liquid investments. Unless they have a pre-specified lock-in, your money will be available to you anytime you want. Typically funds take a couple of days for returning your money to you. Since they are very well integrated with the banking system, most funds can send money directly to your banking account.

Well regulated: India mutual funds are regulated by the Securities and Exchange Board of India, which helps provide comfort to the investors. SEBI forces transparency on the mutual funds, which helps the investor make an


informed choice. SEBI requires the mutual funds to disclose their portfolios at least six monthly, which helps one keep track whether the fund is investing in line with its objectives or not.

No Guarantees-There is no guarantee that the mutual fund will always do well and provide good returns to its unit holders, as no investment is risk free. However, risk is minimized to some extent by investing in mutual funds. Fees and Commissions- All funds charge administrative fees to cover their operational expenses. Some funds also charge sales commissions or “loads” to compensate financial consultants or planners, brokers etc.

Taxes- Most actively managed funds sell anywhere from 20% to 70% of the securities in their portfolio during a typical year. If the fund makes a profit on its sales, the investor has to pay tax on the income he receives even if he reinvests the money he made.


Management risk- the risk that an investor is taking here is that someone else is managing his money. He depends on the fund manager to make the right decision regarding the portfolio. If the manager does not perform as one had hoped then the investor may not make as much money as he had expected.

The first stage of Mutual funds in India started with the setup of giant public sector mutual fund UTI in 1964. This stage continued till 1987. In this stage UTI was the only player in the mutual fund market. At the beginning of 1988 the total assets under management of UTI were 6700 crores.

PHASE TWO (1987-1993):
In 1987 govt. allowed six PSU banks, LIC and GIC to set up mutual funds. This increased the number of players in the mutual fund to nine. At the end of 1994 there were 107 Mutual fund schemes with 61028 Crores worth of assets under management.

This stage saw the real boom of mutual fund industry. The GOI allowed private mutual fund to operate. Kothari Pioneer is the first private sector Mutual Fund of India. As on 31st March 2000 there were 32 mutual funds with 1,13,005 crores worth of assets under management out of which 70,547 crores were in UTI alone. And on august 2000 there were a total of 33 mutual fund schemes with 391 schemes and asset base of 1,02,844 crores. Today, we have 34 mutual funds with numerous schemes for the investor’s to invest in.








Deregulation and liberalization of the Indian economy introduced competition and provided impetus to the growth of the industry. Finally, most investors – small or large –started shifting towards mutual funds as opposed to banks or direct market investments. More investor friendly regulatory measures were taken both by SEBI to protect the investor, and by the Government to enhance investors’ return through tax benefits. A comprehensive set of regulations for all mutual funds

operating in India was introduced with SEBI (Mutual Fund) Regulations, 1996. 1999 marked the beginning of a new phase in the history of the mutual fund industry in India, a phase of significant growth in terms of both amounts mobilized from investors and assets under management. Consider the growth in assets as seen in the figures below: The size of the industry grew rapidly, as seen in the figure of assets under management which shot up from over Rs. 68000 crores to Rs. 113005 crores, a growth of nearly 60% in just one year. Within the growing industry, by March 2000, the relative market shares of different players in terms of amount mobilized and assets under management underwent a change.

Mutual funds had been around for a long period of time to be precise for 36 yrs but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MF’s. This time around all the participants were involved in the revival of the funds - the AMC’s, the unit holders, the other related parties. However, the sole factor that gave lift to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke.


It provided centre stage to the mutual funds, made them more attractive and provided acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business which would mean to increase asset base, and to get asset base and investor base they had to be fully armed with a whole lot of schemes for every investor .So new schemes for new IPO’s were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI)

One can say that today, the industry has moved from infancy to adolescence, it is now maturing and the investors and funds are frankly and openly discussing difficulties, opportunities and compulsions.


A Mutual Fund may float several schemes, which may be classified on the basis of its structure, its investment objectives and constitution.

Schemes can be classified by way of their stated investment objective such as Growth Fund, Balanced Fund, and Income Fund etc


These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term because the market boom and depression phases get evened out over a longer time span. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short-term.Equity schemes are hence not suitable for investors seeking regular income or needing to use their investments in the short-term. They are ideal for investors who have a long-term investment horizon. The NAV prices of equity fund fluctuates with market value of the underlying stock which are influenced by external factors such as social, political as well as economic. HDFC Growth Fund, HDFC Tax Plan 2000 and HDFC Index Fund are examples of equity schemes.


These schemes restrict their investing to one or more pre-defined sectors, e.g. technology sector, pharmaceutical, information technology etc. Since they depend upon the performance of select sectors only, these schemes are inherently more risky than general-purpose schemes. They are suited for informed investors who wish to take a view and risk on the concerned sector.

The primary purpose of an Index is to serve as a measure of the performance of the market as a whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in investing in the market in general rather than investing in any specific fund. Such investors are happy to receive the returns posted by the markets. As it is not practical to invest in each and every stock in the market in proportion to its size, these investors are comfortable investing in a fund that they believe is a good representative of the entire market. Index Funds are launched and managed for such investors. An example to such a fund is the HDFC Index Fund.


Investors (individuals and Hindu Undivided Families (“HUF’s”)) are being encouraged to invest in equity markets through Equity Linked Savings Scheme (“ELSS”) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched – out until completion of 3 years from the date of allotment of the respective Units.

The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS.

Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961, subscriptions to the Units not exceeding Rs.10, 000 would be eligible to a deduction, from income tax, of an amount equal to 20% of the amount subscribed. HDFC Tax Plan 2000 is such a fund.

Specialized real estate funds would invest in real estates directly, or may fund real estate developers or lend to them directly or buy shares of housing finance companies or may even buy their securitized assets.



These schemes, also commonly called Income Schemes, invest in debt securities such as corporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.


These schemes invest in money markets, bonds and debentures of corporate with medium and long-term maturities. These schemes primarily target current income instead of capital appreciation. They therefore distribute a substantial part of their distributable surplus to the investor by way of dividend distribution. Such schemes usually declare quarterly dividends and are suitable for conservative investors who have medium to long-term investment horizon and are looking for regular income through dividend or steady capital appreciation. HDFC Income Fund, HDFC Short Term Plan and HDFC Fixed Investment Plans are examples of bond schemes.

Similar to the Income scheme but with a shorter maturity than Income schemes. An example of this scheme is the HDFC Liquid Fund

These schemes invest in short-term instruments such as commercial paper (“CP”), certificates of deposit (“CD”), treasury bills (“T-Bill”) and overnight money (“Call”). The schemes are the least volatile of all the types of

schemes because of their investments in money market instrument with short-term maturities. These schemes have become popular with

institutional investors and high net worth individuals having short-term surplus investible funds.

This scheme primarily invests in Government Debt. Hence, the investor usually does not have to worry about credit risk since Government Debt is generally credit risk free. HDFC Gilt Fund is an example of such a scheme.

These schemes are commonly known as balanced schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, longterm orientation. HDFC Balanced Fund and HDFC Children’s Gift Fund are examples of hybrid schemes.



SEBI MUTUAL FUNDS REGULATIONS, 1996 The regulatory framework for Mutual Fund Schemes as given by the SEBI Regulations is as follows: PROCEDURE FOR LAUNCHING OF SCHEMES The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor.


No one shall issue any form of application for units of a mutual fund unless the form is accompanied by the memorandum containing such information, as may be specified by the Board.

DISCLOSURES IN THE OFFER DOCUMENT The offer document shall contain disclosures, which are adequate in order to enable the investors to make informed investment decision (including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor). The Board may in the interest of investors require the asset management company to carry out such modifications in the offer document as it deems fit. In case no modifications are suggested by the Board in the offer document within 21 [working] days from the date of filing, the asset management company may issue the offer document. No one shall issue any form of application for units of a mutual fund unless the form is accompanied by the memorandum containing such information as may be specified by the Board.



The moneys collected under any scheme of a mutual fund shall be invested only in transferable securities in the money market or in the capital market or in privately placed debentures or securitized debts. Provided that moneys collected under any money market scheme of a mutual fund shall be invested only in money market instruments in accordance with directions issued by the Reserve Bank of India. The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual funds for the purpose of repurchase, redemption of units or payment of interest or dividend to the unit holders. The mutual fund shall not advance any loans for any purpose. Every mutual fund shall compute and carry out valuation of its investments in its portfolio and publish the same in accordance with the valuation norms specified in Eighth Schedule Every mutual fund shall compute the Net Asset Value of each scheme by dividing the net assets of the scheme by the number of units outstanding on the valuation date. The Net Asset Value of the scheme shall be calculated and published at least in two daily newspapers at intervals of not exceeding one week:


The price at which the units may be subscribed or sold and

the price at

which such units may at any time be repurchased by the mutual fund shall be made available to the investors.

RESTRICTIONS ON INVESTMENTS A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset Management Company. A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company. No mutual fund under all its schemes should own more than 10% of any company's paid up capital carrying voting rights. Transfers of investments from one scheme to another scheme in the same mutual fund shall be allowed only if, 62

Such transfers are done at the prevailing market price for quoted instruments on spot basis. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate inter scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund. The initial issue expenses in respect of any scheme may not exceed 6% of the funds raised under that scheme. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature.


Pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks. No mutual fund scheme shall make any investment in: Any unlisted security of an associate or group company of the sponsor; or Any security issued by way of private placement by an associate or group company of the sponsor; or The listed securities of group companies of the sponsor, which is in excess of 30% of the net assets (of all the schemes of a mutual fund) No mutual fund scheme shall invest more than 10% of its NAV in the equity shares or equity related instruments of any company. Provided that, the limit of 10% shall not be applicable for investments in index fund or sector or industry specific scheme. A mutual fund scheme shall not invest more than 5% of its NAV in the equity shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of close-ended scheme. PRICING OF UNITS Although NAV per unit defines the value of the investor’s holding in the fund, the fund may not repurchase the investor’s units at the same price as NAV.


However, SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a closed-end fund). On the other side, a fund may sell new units at a price that is different from the NAV, but the sale price cannot be higher than 107% of NAV. Also, the difference between the repurchase price and the sale price of the unit is not permitted to exceed 7% of the sale price. ADVERTISEMENT MATERIAL The advertisement for each scheme shall disclose investment objective for each scheme. An advertisement shall be truthful, fair and clear and shall not contain a statement, promise or forecast which is untrue or misleading. Advertisements shall not be so framed as to exploit the lack of experience or knowledge of the investors. All advertisements issued by a mutual fund or its sponsor or Asset Management Company shall state, "all investments in mutual funds and securities are subject to market risks and the NAV of the schemes may go up or down depending upon the factors and forces affecting the securities market".


The advertisement shall not compare one fund with another, implicitly or explicitly, unless the comparison is fair and all information relevant to the comparison is included in the advertisement. MISLEADING STATEMENTS The offer document and advertisement materials shall not be misleading or contain any statement or opinion, which are incorrect or false.

LISTING OF CLOSE-ENDED SCHEMES Every close-ended scheme shall be listed in a recognized stock exchange within six months from the closure of the subscription. Provided that listing of close-ended scheme shall not be mandatory –

if the said scheme provides for periodic repurchase facility to all the unit holders with restriction, if any, on the extent of such repurchase; or if the said scheme provides for monthly income or caters to special classes of persons like senior citizens, women, children, widows or physically handicapped or any special class of persons providing for repurchase of units at regular intervals; or if the details of such repurchase facility are clearly disclosed in the offer document; or if the said scheme opens for repurchase within a period of six months from the closure of subscription. REPURCHASE OF CLOSE-ENDED SCHEMES The asset management company may at its option repurchase or reissue the repurchased units of a close-ended scheme.


The units of close-ended schemes referred to in the provision to regulation 32 may be open for sale or redemption at fixed pre-determined intervals if the maximum and minimum amount of sale or redemption of the units and the periodicity of such sale or redemption have been disclosed in the offer document.


An Infrastructure fund is a managed vehicle through which investors gain exposure to the underlying characteristics of infrastructure assets.

Infrastructure is emerging strongly as an asset class which can be particularly well suited to pension funds and other investors with a long-term outlook. Infrastructure assets tend to display comparatively stable, long-

term real return and provide a good match for longdated liabilities.

They invest in private infrastructure companies, but the fnds themselves can be isted or unlisted. For example, Macquarie has been investing in

infrastructure for more than a decade and now manages over 20 infrastructure funds around the world. Half of these are listed on the stock exchange, with investors from pension funds and other institutions to retail investors. The rest are unlisted funds in which the investors are largely pension funds and other institutions.

The fund tens to either specialize in one class of infrastructure - for example invest only in airport or only in toll-roads – or they invest across various infrastructure ectors which meet specified investment criteria. For example

The infrastructure assets can include telecommunications and broadcast nfrastructure, utilities, toll road, airport and other transport infrastructure. Fundamentally, infrastructure assets are distinguished by displaying the following ey characteristics: • • • Provide essential community services Have strategic competitive advantage Have predictable long-term cash flow

These characteristics lead to the investment benefits outlined below. Infrastructure assets display unique characteristic. Their essential and longterm nature, combined with strong competitive position, lead to stable and predictable consumer demand and cash generation. These assets tend to have a high fixed capital base with comparatively low operating costs – on average of between 10% and 30% of revenue. Along with the long-term operating license and predictable demand, often in a regulated environment, this allows the manager to forecast cashflows with accuracy. Infrastructure assets have a low correlation to equity markets and other asset classes. For the reason, it can provide valuable diversification in an


investment portfolio. It also provides a good match for the long-dated liabilities of
ension funds due its long-life and inflation protected returns. This stability in

operating cashflows can reduce the overall volatility of returns for investors and, in our experience; investors are finding this combination of sustainable yields, lower volatility and inflation-linked return increasingly appealing. But there are only five that have a sizeable money under management; and these four were launched before 2006: These funds include: 1.DSP ML TIGER Fund 2. Prudential ICICI Infrastructure Fund 3. Tata Infrastructure Fund 4. UTI Thematic Infrastructure Fund

These are are open-ended funds; this means you can invest in them whenever you like. We expect some more infrastructure funds to hit the market but most of them would be close-ended (in open-ended funds, investors are free to sell their units anytime; in close-ended funds, investors cannot sell their units for a minimum period of time -- this minimum period is decided by the fund). INFRASTRUCTURE MUTUAL FUNDS Infrastructure, as a theme, covers several sectors like power utilities, power equipment and construction companies best, technology sector funds could

software stocks it traditionally invests in), infrastructure funds are a few sectors.


DSP Merllynch Tiger Fund
Here's a fund suitable for all types of investors. The aggressive ones will like the returns it offers while the conservative ones will find peace in its diversification.

DSP T.I.G.E.R. Fund was launched at a very opportune time when the Sensex was around begun to witness high grow launched in April 2004. In the past four years DSP India has performed excellent and has become one of the best funds for the investor. open ended fund which can Its Market capitalization as at 31/03/08 was 19,005.59 cr. Its

The broad investment mandate, large alleviate all their fears. An acron Reforms, the fund focuses on sectors that are likely to prosper from growth related to economic reforms and infrastructure development. With this as a starting point, the fund manager follows a top resorting to bottom-up stock


picking. Unlike other infrastructure offerings, its broader mandate has enabled it to tap into sectors that core infrastructure funds do not healthcare, FMCG, textiles, consumer non-durables.

ICICI Prudential Infrastructure Fund
ICICI Prudential Infrastructure has protected the downside well while growing at a fast pace. In fact the fund emerged as the fourth best diversified in 2006.

ICICI Prudential Infrastructure fund was launched in August 2005. It is an open ended fund having market capitalization last 52 weeks highest NAV was 36.61. UTUAL FUNDS As infrastructure funds go, the fund is structured to exclude technology, FMCG and pharmaceutical companies. But beyond this similarity, there exist discernible characteristics in the fund's portfolio that set based funds.

Tata Infrastructure Fund
Tata Infrastructure Fund is one of the best fund and highly rated fund. It has 2004.


It is an open ended fund having market capitalization of Rs. at 31/03/08. Its last 52 weeks highest NAV was 45.515 and lowest was 23.1237.

The fund achieved this essentially on the back of a large with some help from the mid caps. To some extent one can attribute this stellar performance to the sector exposure that most infrastructure funds maintain. But the real clincher had been the f has truly augmented the fund's returns.

UTI Thematic Infrastructure Fund
India’s infrastructure sector is expected to witness huge investments in the coming years. To enable you to take advantage of this Infrastructure Advantage Fund.

As a 3 year close ended fund it focuses on investing in high growth infrastructure sectors such as Airports, Banking, Construction, Engineering, Energy, Mining, Ports and Power among others. The category pioneer, UTI


Infrastructure has been going great guns. A runaway hit in 2005 and an exemplary success in 2006 & 2007, the fund is on a roll with the future looks just as promising. he first infrastructure fund to be launched, it was a classic example of the early bird getting the worm. It found a spot in the top quartile of the category in 2005, generating 57 per cent returns and outdoing the average peer by a marginL apart from other infrastructure recently received as a best equity fund award by CRISIL. It is considered as one of the best infrastructure fund. TATA Infrastructure's astute ability to spot sector trends has handsomely. Tata Infrastructure Fund was launched in December . 24,081.68 cr. As s large-cap growthwith fund manager's ability to spot sector trends which boom, UTI now launches the UTI delivered oriented focus, fund of more than 10 per cent. In 2006, it leapt to the

topmost slot with returns of 61.48 per cent .

UTI Infrastructure fund was launch having market capitalization of Rs. 24,247.71 cr. as at 31/03/08. thematic fund, it has a reasonably diversified portfolio of 40 capital goods, construction and energy dominate the portfolio, but this infrastructure fund also has a significant exposure to metals and technology. This ne makes for a worthy and dive expenditure wave

sweeping across the country. MA





The above graph shows that ICICI Prudential Infrastructure Fund has maximum fund under management as compared to other fund houses. It is followed by UTI Infrastructure fund, Tata Mutual Fund and DSP Merllynch Tiger Fund respectively.



Calculated value of Mean andfund is shown in the chart below:

Mean Calculated above is for the period of past one year. We can see that there is not much difference between the returns of these mutual funds. T.I.G.E.R fund has provided maximum return of 4 been most successful fund for the past DSP Merllynch T.I.G.E.R fund it is the least volatile fund of th earner and comparatively low risk earner highest return with least volatility.


If Beta less than 1 means, the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. As seen from the above table UTI Infrastructure Fund is most volatile followed by Tata, DSP and ICICI Prudential respectively. Now if market rise, UTI Infrastructure Fund will rise at faster rate than other fund, but if market falls, UTI Infrastructure Fund will fall at faster rate too.

Treynor ratio is a risk-adjusted measure of return based on systematic risk. Greater the value of Treynor Ratio, better is the fund. Here again ICICI Prudential Infrastructure fund scores higher than other funds. Expense Ratio allowed by SEBI is 2.5% of the total asset under management. All the above funds mentioned are below the mentioned ratio. But UTI Infrastructure fund is having maximum expense ratio of 2.03%. Here again ICICI Infrastructure fund has least expense ratio. The reason might be that it is well established fund house and hence requires comparatively less expense in marketing expenditure. PORTFOLIO ANALYSIS


Portfolio of the fund describes compositions of various industries equity shares. Mutual funds have much diversified portfolio as per the requirement of the fund. Infrastructure fund has majority of its portfolio in industries like Energy, Engineering, Metal, Construction, and Technology Industries.



There has been quite rational move by all the fund houses in including and excluding right firm in their portfolio. ICICI Prudential made a huge change in its portfolio by introducing 4 new companies and withdrawing from 4 existing companies. It invested into companies like ONGC, Gujarat Ambuja Cement ltd, India Cement Ltd and Mahindra & Mahindra Ltd, all having huge market potential. It let away with HDFC, GAIL which are at the moment hit by the market factors.

Both UTI & DSP Merllynch had similar changes this month with both buying the share of Reliance Industries Infrastructure Ltd shares and selling Reliance Energy. DSP Merllynch T.I.G.E.R Fund also purchased some shares in Idea Cellular Ltd. It is expected that Idea Cellular is expected to do well in the recent future; hence it might be a good move. Tata Infrastructure also did a positive move by Reliance Petroleum which is expected to do well. Bharti Airtel is expected to merge with MTN of South Africa. This merger is expected to benefit Bharti Airtel by giving global markets. Hence it’ll help its shareholder.





The above shown graph describes the movement of the selected

infrastructure funds with the benchmark. Here the benchmark chosen in BSE Sensex. The data selected for the above graph is for the past1 year. investing into Bharti Airtel and ARHMARK INDEX STATISTICAL ANALYSIS It can be seen that when the BSE Sensex was on the rise, all the funds were performing extremely well. The return is well above 100%. It can be seen that Tata Infrastructure Fund was performing extremely well till Dec 07. It had provided maximum return as compared to other fund houses and was rated best fund of the year by CRISIL and ICRA. But when Sensex crashed in the January ’08 we saw a steep fall in all the funds. The fall was more the 100% to the Sensex. Thereafter, there was change in the high performer with ICICI Infrastructure fund out performing other infrastructure funds. It can be seen in the graph that ICICi Infrastructure performing best followed by Tata Mutual Fund, UTI Infrastructure Fund and DSP Merllynch Fund. COMPARSION WITH THE BENCHMARK INDEX




The term Equity Investment refers to the buying and holding of stocks in the stock market by individuals & companies, then expecting income from dividends and capital gains when there is a rise in the stock value. It also refers to the acquirement of ownership / equity participation in a start-up company or a private company. When you invest in a start-up company, the investment is termed as Venture Capital and is likely to be at a higher risk than the on-going concerns.

The Equity Funds, also known as Stock Fund, is a fund that invests in equities / stocks. These funds are generally held in stock or cash unlike securities or bonds. This may be done by means of a mutual fund or exchange traded fund. The main objective of investing in an equity fund is to have long-term growth via capital appreciation apart from dividends and interest as sources of revenue. Explicit equity funds may have their focus on specific market sector and also include certain amount of risk. The Equity Funds are either via the mutual funds or by any other pooled investment vehicle. These vehicles have their prices quoted, listed and publicized. The mutual funds are generally under the management of renowned fund management firms. Under these types of holdings, the investors can have diversified funds with the help and services of skilled professionals known as fund managers. These fund managers are in charge of these funds.


Each equity fund can be distinguished from the other. For example, a fund can be growth specific or and another can value specific. These funds can be invested only in securities from one or more countries. Fund managed by the fund managers are actively managed and the Index Fund reflects the specific market indices.


HDFC Top 200 fund has the highest market capitalization as compared to other funds. Reliance being the oldest fund has not been able to attract large number of investors. Tata P/E Equity fund has the lowest market capitalization. The reason may be, it is the youngest fund of the lot launched in December 2004.


hrough Mean & Standard

In the above show chart, we can see SBI Magnum Contra Fund out performing other funds. It has given a average return of 42.24 in the past 1 year followed by Reliance Growth Fund, HDFC Top lowest average mean of 37.71.

While calculating their standard deviation, we see HDFC Top 200 having least SD of all. It means that HDFC is least volatile fund of the lot. The most volatile fund is Reliance Growth Fund. Tata is also on the higher side with SD of 27.14.

So looking at the above chart, we can say that SBI Magnum is better fund as its average return is highest and SD is low, though not lowest. 0 10



Looking at the above given data, we have quite mixed reactions about these funds.

Beta of three funds is less than 1. It means that if market falls, there will comparatively small fall in these funds, while if the market rises, there rise will also be comparatively less. So we can say that these funds are less risky but will also give less return. Tata P/E equity fund is having beta of more than 1 i.e. 1.01, which means 100% change in market will bring 101% change in the fund. So this is comparatively more risky fund but is expected to give higher return. In the present market scenario where it is very difficult to say if market would rise or fall, it is very hard to say whether a fund should have Beta more than 1 or less than 1. Sharpe Ratio shows smart portfolio’s composition. HDFC Top 200 is having the highest Sharpe Ratio of 1.44, followed by SBI Magnum Contra Fund, Reliance Growth Fund and Tata P/E Equity Fund. Tata P/E is having the least at 1.19 which refers this fund as high returns but with high risk. Treynor Ratio measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. Reliance Growth fund out scores other funds in this ratio with Treynor Ratio equal to 1.41, followed by Tata P/E Equity Fund at 1.28, SBI Magnum Contra Fund at 1.18 and HDFC Top 200 at 0.97. The Sortino ratio measures the risk-adjusted return of an investment asset,


portfolio or strategy. The ratio is the actual rate of return in excess of the investor's target rate of return, per unit of downside risk. Here again Reliance Growth is the best performer with Sortiino Rotio of 0.58 followed by Tata P/E Equity Fund at 0.52, SBI Magnum at 0.48 and again the last is HDFC Top 200 fund at 0.42.

The P/E ratio (price-to-earnings ratio) of a fund is a measure of the price paid for a fund relative to the annual income or profit earned by the fund per unit. Investor who opts to purchase a fund would prefer low P/E, while a seller would like to sell a fund whose P/E is high. Among the above funds, investor would prefer to invest into SBI Magnum and Tata P/E Fund as it has low P/E, i.e. it is not listed at a high price. Reliance Growth and HDFC Top200 is listed at a high price and hence expensive to purchase for an investor. Expense incurred by Tata is very high at 2.36% of the fund. The reason might be that it is comparatively new fund house and needs to incur some advertisement expenses. Also the market capitalization of the fund is comparatively low, hence the ratio might seem to be quite big as compared to other. Reliance Growth fund has lowest expense ratio. Analysis through statistical


Portfolio Analysis

The above graph shows the portfolio of the selected fund. From the graph it can be seen that Reliance Growth and SBI different sector.

Here HDFC Top 200 Fund is having around 20% exposure in the financial market. Financial market is on the back side, with the sub months Indian

financial market is on the back foot. Also are not very impressive. So the retur Equity Fund is comparatively lower. Also the exposure of Tata P/E Equity fund is more than 27% in Metal and metal product. The return from this fund largely depends upon this sector. If any uncertainty hits this sector, the loss to this fund will be enormous.

We can also see that it is only HDFC Top 200 have invested in consumer durables. While Reliance Growth Fund have invested in Textile sector. It should also be noted that Reliance Growth Fund is having around 20% of the fund in cash which is very large amount on which the fund is not earning any return. It might be that the fund manager would be waiting for the right time to invest in this volatile market. SBI Magnum is having very small portion of the fund in cash so the return will be received on the entire fund, but at the time of bulk return the fund manager might find problem.


We can see that from the previous portfolio there is not much difference in the present portfolio.

Reliance Growth bought Kotak Mahendra Bank Ltd to its portfolio which is very smart move. Though there are number of bank’s equity shares loosing grip in the market but Kotak Mahendra has performed well in the last few months and the results were also quite satisfying. It also took a rational step by selling off JSW Steel Ltd, as steel industry is in huge pressure from the


government on keeping the price of the product low and also international rise in raw metal. Portfolio Analysis Tata P/E Equity fund kept itself away from investing in the high volatile market but it sold couple of its shares. One of which was ONGC, the stock which expert suggest is not going to do well. So the move seems to be a rational one from the Tata Fund House.


th the Benchmark Index The above given diagram shows the movement of the each fund’s NAV with the Benchmark. Here benchmark is BSE Sensex. The NAV of past 1 year is taken into study. We see very less gap between the NAV of these funds during the first 5 months. For the next two months when the Sensex was at its peak, two funds namely Tata P/E Equity Fund and Reliance Growth Fund outperformed other funds. When the Sensex fall in the mid Jan, highest fall was in Reliance and Tata Equity Fund, but still the remained above other funds. It can be seen that Tata P/E Equity Fund outperforms the other fund thro Tata P/E was highest followed by Reliance Growth, HDFC Top 200 and SBI Magnum Contra Fund.

An investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are fixed income investments. A debt fund may invest in short-term or long-term bonds, securitized products, money market

instruments or floating rate debt. The fee ratios on debt funds are lower, on average, than equity fundsbecause the overall management costs are lower.

The main investing objectives of a debt fund will usually be preservation of capital and generation of income. Performance against a benchmark is

considered to be a secondary consideration to absolute return when investing in a debt fund.

A debt fund has lots going for it as an investment. For most, it's the only way to invest in income-generating instruments without having to commit huge sums of money, or stressing out about assorted worries such as transaction costs, stamp duty or lack of liquidity. In fact, many of the most attractive debt instruments are unavailable directly to the retail investor. Debt itself has the advantage of being much less risky than equities. Equities may return more, but their volatility can be distressing. If steady, predictable returns are what you expect, a debt fund will deliver precisely that. That's why it's an essential portfolio component for people who take a keen interest in money management, like 54-year-old housewife "Openended debt funds provide regular income, liquidity and tax advantages minus the sleepless nights of equity." There's also the tax-saving angle. Budget 99 made dividends tax-free in the hands of the investor. Further, investors can claim indexation benefits, which have the effect of reducing the tax liability on their capital gains arising from the sale or redemption of units of debt funds.

Debt Fund in consideration.
• • Birla Sun Life Income Fund HSBC Income Investment Fund

Kotal Income Plus Fund Tata Income FundALYSIS

Birla Sun Life Income Fund

This fund was launched on March 1997. It is the oldest fund of the selected lot. This fund house is considered as the best fund house for the debt based fund. It has been rated as Five Star Fund from the Value Research. The fund’s investment has been largely diversified with investment in all highly rated funds. Its Asset Under Management is more than Rs. 275 Cr.

It can be seen that the fund has always outperformed the benchmark when the Debt Medium-term index is on the rise. Also when it falls, Birla Sun Life Income Fund falls at greater pace.

HSBC Income Investment Fund HSBC Income Investment Fund (HIF) seeks to generate regular returns by investing in bonds, debentures, government securities and short term instruments like commercial papers, repos etc. For a time horizon greater than a year and if one seek regular returns, then one can invest in the Investment Plan of HSBC Income Investment Fund.bout Debt Fu

Kotak Income Plus Fund Kotak Income Plus invests 80% - 100% in debt and money market instruments and 0 - 20% in equity related instruments. The scheme endeavors to provide safety of a debt fund with superior returns of equity

product. To ensure safety of a debt fund the scheme invests in top rated debt instruments thereby ensuring good credit quality and liquidity. It was launched in the year 2003.

Tata Income Fund Tata launched the fund way back in 1997. The objective of the scheme is to provide income distribution and/ or medium to long term capital gains while at all times emphasising the importance of safety and capital appreciation. It is having its investment spread through only 14 debt funds.



Size The above given figure shows the net asset of each fund as on 30 April 08.

It can be clearly seen that in type of fund that we have selected, Birla Sun Life Income Fund leads others with its fund size of more than 250 crs. launched 10 years ago and has been able to attract huge amount of their fund. The oldest fund of all, HSBC Income Investment Fund has not been able to attract and keep large number of investment. This might be the reason for its fulowest of the lot.

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Tata Mutual fund has also been launched very small as to Birla Sun Life Income fund it is doing better than other two funds.

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We can see here that Birla Sun Life Income Fund has out the form of average return. It has provided return more than 10% while less than 8% of return. So we can say that Birla Fund house has performed exceptionally well. HSBC Income Investment Fund is giving second highest return at 7.3% while Kotak and Tata fund houses follow them respectively.

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While looking at the deviation from their mean, we find HSBC Income Investment Plan is having lowest volatility at 1.77% followed by Tata Income Fund Birla Sun Life Income Fund at 2.98 and Kotak Income Plus Fund at 5.63%. Kotak Income Plus Fund is most volatile fund as its Standard Deviation is very high as compared to other such schemes. A rational investor will always prefer a fund giving high return with least standard deviation. Also in debt fund, the investors are low risk takers and avoid I the funds having Standard Deviation high. So for them Birla Sun Life Income Fund will be considered as the optimal plan. 0

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2 Beta of all the fund is more than 1 which means if its benchmark quotes increase by 100% all the fund’s NAV will increase by more than 100%. The biggest change will be in Tata Income Fund as its Beta is highest at 1.09. So if the benchmark will be on the rise, Tata will rise at fastest rate of all other fund followed by HSBC and Kotak fund with Birla being the last of the lot. Analysis through Statistical Tools
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Sharpe ratio concentrates on the composition of the fund. It calculates how smart the fund is structured. Without a doubt, Birla Fund House tops the ratio followed by Kotak Income Plus fund. Both HSBC Income Investment fund and Tata Income fund are having lowest Sharpe Ratio. Sortino Ratio calculated only downward movement of the fund with its benchmark. Higher the ratio better the fund is. Here again Birla Sun Life Income Fund Tops the list with ratio of 0.76. Second place is taken by Kotak Income Fund followed by HSBC and Tata Income Fund respectively. Here again we see that Tata Income Fund is having highest expense ratio of 2.25 of the total asset. It is having very high expense throughout its entire funds. Even Kotak Income Plus Fund is also having very high expense. Both HSBC Income Investment Fund and Birla Sun Life Income Fund is having lowest expense ratio of the lot. So reviewing the above table we can say Birla Sun Life Income Fund is the best of the lot in almost all the ratios and hence most attractive fund.

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A good mutual fund is that fund which is optimally Income Investment Fund having more than 85% of the fund invested in the AAA Rated Funds which may not be that much rational. Also its cash in hand is in negative. It implies that it has taken money on credit to invest in the m this case, if there is any large redemption from the investors, in that case the fund manager might not be able to provide timely money to the investors.

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Birla Sun Life Income Fund is having properly diversified portfolio with its investment in all high credit rated funds. We can see that its investment is less in the GOL securities as in these securities risk is very less or we can say, there is no risk but return is very less which does not help in earning more of a return. Its high investment in money market helps the fund in receiving more return from the investment. So it is well balanced fund Looking at the above graph we can see that Kotak Income Plus Fund is slightly more risky as compared to other funds as it is having its investment in th companies with not the top level of Rating. It is also having investment in the companies with credit rating AA+ which makes it slightly more risky than other funds. Also it is only Kotak which has invested in AA+ rated companies. Tata Income fund is also well diversified fund with its investment in all top credit rated companies. It is having highest investment in GOI securities which makes this fund least risky but also reduces the opportunity of earning more from other companies. Mov

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the Ben Source: www.mutualfundsindia.com

The above NAV graph has been drawn taken the NAV of period of past 1 year. The benchmark selected for the formulation for this graph is CRISIL Composite Bond Fund Index.

It can be seen in the graph that Kotak Income Plus Fund has been most volatile fund and has fluctuated a lot f growth was similar to other funds but

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in the month of September we saw a big fall in the NAV of Kotak Income fund. This fall led to its NAV even below Benchmark. Tata Income Fund But thereafter for the next 4 months there was a big gain in its NAV. Its NAV was highest for that period outperforming all other funds. But it again noticed a major fall, ending the year with lowest NAV for the year. The reason for such volatility can be its portfolio composition having AA+ rated bond funds. As far as Birla Sun Life Income Fund is concerned, it has constantly provided high return. It can be seen from the graph that when there is an increase in the benchmark index, Birla Fund saw a greater rise, but there was not greater fall when there was a fall in the Benchmark Index. This really makes fund most attractive and desirable for the investors. It ended the year with staying on the top of the selected fund. This is the reason it was accredited with five star rated fund from CRISIL. HSBC Income Investment fund performed fairly well with always staying above the benchmark Index. It has never fallen below the benchmark and this makes this fund second most preferred fund as there is least volatility and steady growth. It ended the year with second highest NAV of the selected funds.

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Tata Income Fund has not performed well. For the most of the period its NAV stayed below the benchmark index. Though we don’t see much of the volatility in the fund, which makes it less risky but investor do demand returns at least as that of its benchmark if not more. But for 9 months its NAV was below CRISIL Composite Bond Fund Index. At the end of the year, we saw some upward movement in the NAV ending third of the selected funds. NAV Graph

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Companys are comparatively a young company. It is having best of the personals who can take Tata Mutual Funds to great heights. I have following suggestion which I feel might help them in achieving their desire goals.

Companys should diversify their investment throughout the different sector and avoid keeping majority funds only in a particular sector.

It should reduce its Expense Ratio which is very high as compared to other fund houses

Its changes in portfolio compared to previous are very rational but it should also try to reduce its share in the financial sector which is at the downside.

Companys are

not doing very good in the Debt Fund category. It

should try to reduce its share from the GOI securities and participate more in the money market. DSP Merllynch Tiger Fund • Here's a fund suitable for all types of investors. The aggressive ones will like the returns it offers while the conservative ones will find peace in its diversification.

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DSP T.I.G.E.R. Fund was launched at a very opportune time when the Sensex was around begun to witness high grow . ICICI Prudential Infrastructure Fund • ICICI Prudential Infrastructure has protected the downside well while growing at a fast pace. In fact the fund emerged as the fourth best diversified in 2006. UTI Thematic Infrastructure Fund India’s infrastructure sector is expected to witness huge investments in the coming years. To enable you to take advantage of this Infrastructure Advantage Fund. As a 3 year close ended fund it focuses on investing in high growth infrastructure sectors such as Airports, Banking, Construction, Engineering, Energy, Mining, Ports and Power among others. Tata Infrastructure Fund Tata Infrastructure Fund is one of the best fund and highly rated fund. It has 2004. It is an open ended fund having market capitalization of Rs. at 31/03/08. Its last 52 weeks highest NAV was 45.515 and lowest was 23.1237The fund achieved this essentially on the back of a large with some help from the mid caps. To some extent one can attribute this stellar performance to the sector exposure that most infrastructure funds maintain. But the real clincher had been truly augmented the fund's returns.

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CRISIL Rating Symbols For Long Term Ratings Investment Grade Ratings

AAA (Triple A) Highest Safety Instruments rated 'AAA' are judged to offer the highest degree of safety with regard to timely payment of financial obligations. Any adverse changes in circumstances are most unlikely to affect the payments on the instrument

AA (Double A) High Safety Instruments rated 'AA' are judged to offer a high degree of safety with regard to timely payment of financial obligations. They differ only marginally in safety from `AAA' issues.

A(Adequate Safety) Instruments rated 'A' are judged to offer an adequate degree of safety with regard to timely payment of financial obligations. However, changes in circumstances can adversely affect such issues more than those in the higher rating categories.

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Appendix II Few of the Funds Provided By Tata Mutual Funds Equity fund • • • • • • • • • • • Tata Pure equity fund Equity opportunity fund Equity P/E fund Select equity fund Growth fund Index fund Life science & Tech fund Div Yield fund Infrastructure Fund Mid Cap Fund Contra Fund

Debt Fund • • • • • • • Tata Short Term Bond Fund Income Fund Gilt Securities Fund Gilt Short Maturity Fund Income plus Fund Liquid Fund Floating rate Fund- short run

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• • • •

Floating rate fund- long run Floater Fund Liquidity Management fund Dynamic Bond Fund

Balance Scheme • • Tata Balanced Fund Young Citizens’ Fund

Monthly Income Scheme • • Tata Monthly Income Fund Scheme (Debt Fund) Tata MIP Plus Fund (Debt Fund)

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• • • • • • • • • • • • • • • • • • Khan & Jain www.mutualfundindia.com www.amfiindia.com www.tatamutualfund.com www.pruiciciamc.com www.principleindia.com www.bobmf.com www.jpmorganmf.com www.hdfcfund.com www.taurusmutualfund.com www.reliancemutual.com www.moneycontrol.com www.valueresearchonline.com www.investopedia.com www.wikipedia.com AMFI study material Mutual Fund Insight magazine Capital market magazine

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