CHAPTER ONE: 1) INTRODUCTION: 1.1.

1 MUTUAL FUND: The SEBI regulations, 1993 defines a mutual fund as “a fund in the form of a trust by a sponsor, to raise money by the trustees trough the sale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations” A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager, who is also known as the portfolio manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. 1.1.2 HISTORY OF THE MUTUAL FUND: In the beginning: Historians are uncertain of the origins of investment funds; some cite the closed-end investment companies launched in the Netherlands in 1822 by King William I as the first mutual funds, while others point to a Dutch merchant named Adriaan van Ketwich whose investment trust created in 1774 may have given the king the idea. Van Ketwich probably theorized that diversification would increase the appeal of investments to smaller investors with minimal capital. The name of van Ketwich's fund, EENDRAGT MAAKT MAGT, translates to "unity creates strength". The next wave of near-mutual funds included an investment trust launched in Switzerland in 1849, followed by similar
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vehicles which is followed by many kind of companies created in Scotland in the 1880s. The idea of pooling resources and spreading risk using closed-end investments soon took root in Great Britain and France, making its way to the United States in the 1890s. The Boston Personal Property Trust, formed in 1893, was the first closed-end fund in the U.S. The creation of the Alexander Fund in Philadelphia, Pennsylvania, in 1907 was an important step in the evolution toward what we know as the modern mutual fund. The Alexander Fund featured semi-annual issues and allowed investors to make withdrawals on demand.

The Arrival of the Modern Fund :

The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded the arrival of the modern mutual fund in 1924. The fund went public in 1928, eventually spawning the mutual fund firm known today as MFS Investment Management. State Street Investors' Trust was the custodian of the Massachusetts Investors' Trust. Later, State Street Investors started its own fund in 1924 with Richard Paine, Richard Saltonstall and Paul Cabot at the helm. Saltonstall was also affiliated with Scudder, Stevens and Clark, an outfit that would launch the first no-load fund in 1928. A momentous year in the history of the mutual fund, 1928 also saw the launch of the Wellington Fund, which was the first mutual fund to include stocks and bonds, as opposed to direct merchant bank style of investments in business and trade.

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Regulation and Expansion:

By 1929, there were 19 open-end mutual funds competing with nearly 700 closedend funds. With the stock market crash of 1929, the dynamic began to change as highlyleveraged closed-end funds were wiped out and small open-end funds managed to survive. Government regulators also began to take notice of the fledgling mutual fund industry. The creation of the Securities and Exchange Commission (SEC), the passage of the Securities Act of 1933 and the enactment of the Securities Exchange Act of 1934 put in place safeguards to protect investors: mutual funds were required to register with the SEC and to provide disclosure in the form of a prospectus. The Investment Company Act of 1940 put in place additional regulations that required more disclosures and sought to minimize and minimize grievience of investor of different catogeries conflicts of interest. The mutual fund industry continued to expand. At the beginning of the 1950s, the number of open-end funds topped 100. In 1954, the financial markets overcame their 1929 peak, and the mutual fund industry began to grow in earnest, adding some 50 new funds over the course of the decade. The 1960s saw the rise of aggressive growth funds, with more than 100 new funds established and billions of dollars in new asset inflows. Hundreds of new funds were launched throughout the 1960s until the bear market of 1969 cooled the public appetite for mutual funds. Money flowed out of mutual funds as quickly as investors could redeem their shares, but the industry's growth later resumed. Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924, and, after one year, had 200 shareholders and $392,000 in assets. The

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performance and compliance of SEBI regulations by the mutual fund. However.1. 50% of the directors of AMC must be independent. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. Asset Management Company (AMC) and custodian. Asset management company (AMC) approved by SEBI managers the fund by making investments in various schemes of the in its custody. These laws require that a fund be registered with the (SEC) . 1. The trustees are vested with the general power of superintendence and direction over AMC. They share the same risks associated They monitor the 2 . In response to the stock market crash. the transaction costs are divided among all the mutual fund shareholders. Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934.e. The performance of a particular scheme of a mutual fund is denoted by net value (NAV). which included a few closed-end funds. mutual funds are not immune to risks. trustees. who also benefit by having a third party (professional fund managers) apply expertise and dedicate time to manage and research investment options. Also.4 MUTUAL FUND VS OTHER INVESTMENT: Mutual funds offer several advantages over investing in individual stocks. represented less than $10 million in 1924.3 SETUP OF MUTUAL FUNDS: A mutual fund is set up in the form of a trust. For example. 1.1. despite the professional management. which has sponsor.entire industry. SEBI regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i. they should not be associated with the sponsors.. All mutual funds are required to be registered with SEBI before they launch any scheme. The trustees of the mutual fund hold its property for the benefit of the unit holders. The stock market crash of 1929 slowed the growth of mutual funds.

retail. In this channel most investors can invest through websites. But each class will have different shareholder services and/or distribution arrangements with different fees and expenses 1. the company does not provide any investment advice. Each class will invest in the same pool (or investment portfolio) of securities and will have the same investment objectives and policies. The fund companies provide several tools to investors who invest through this channel.1. this cahannel has also 2 . corporate and indiual financial adviser. • The Direct Channels: In the direct channel. and maintaince of records. In the recent years. • The banking channel: The large customer base of banks. In most cases . 1. processing of transaction. have played an important role in the selling MFs. or receive information through telephonic services provided by the company. This includes monthly a/c statement. If the fund invests primarily in stocks.5 SHARE CLASES: Many mutual funds offer more than one class of shares. so these investors have to carry out their own research and select schemes themselves.6 DISTRIBUTION CHANNELS IN THE MUTUAL FUND INDUSTRY: In India. in devolped countries. you may have seen a fund that offers "Class A" and "Class B" shares. banking. For example. AMCs work with five distinct distribution channels those are direct . About 10-20% of the total sales of an AMC come through this direct channel. it is usually subject to the same ups and downs and risks as the stock market. customers invest in the schemes directly through AMC.with the investments made.1.

instead of taking trouble of dealing with several agents.opened up in india. Banks operating in india . The banking and retail channel generally contribute to about 50-70% of the total Asset Under Management(AUM). Some of the major players in India in this in this channel are national players lke Karvey. The banking channel is likely to develop as the most vital distribution channel for fund companies there are several reaons for the same. including public sector. private and foreign banks have established tie-up with various fund companies for providind distribution and servicing. The key factor for this channel to sell a company’s fund used to be the brokerage paid. The retail channel offer the benefits of specialist knowledge and established client contact and. Customers remain invested in banks for long periods of time and therefore banks maintain a relationship of trust with their customers. Customers are rely on advice provided to them by bankers as they are always on the look out for better investment avenues. therefore private fund houses are generally prefer this channel. An additional advantage that banks provide is that the concerned customer becomes a permanent contact of the banks and therefore can be reached during launch of (new fund offer) NFO or new schemes any time in the future. • The corporate channel: 2 . Birla sunlife IL&FS and cholamandalam. Managers are guiding to customers about various funds. Distribution companies sell the schemes of several fund houses simultaneously and brokerage is paid by the AMC whose funds they sell. • The retail channel: A customer can deal with directly with a sub broker belonging to a distribution company.

An agent who basically acts as an interface between the customer and the fund house there is a unique systems in place in India . In order to provide information to such clients. or through an intermediary such as a distribution house or a bank. over one lakh agents are registered to sell mutual funds and other financial products such as insurance across the country. The smaller companies and start-up firms. ii. trust. however. these are businesses. are wellversed with the performance and composition of various funds. need to be educating on several aspects of mutual funds. For institutional investors. thus ensure larger market penetration and geographic coverage. In recent times with the emergence significantly decreased. Corporate exhibit varying degrees ‘of awareness of mutual fund products. and even state and local governments. Corporate can either invest directly in mutual funds.The corporate channel includes a variety of institutions that invest in shares on the company’s name. As per AMFI. wherein several sub-brokers are working under one main broker. fund companies usually organize presentation for these companies or set-up meetings with the finance managers. such as the TVS industries in Hyderabad. 2 . Most of the established corporate. fund managers prefer to create special funds and share classes. • Individual Financial Advisors(IFA) or Agents: i. The huge network of sub-brokers. The IFA channel is the oldest channel for distribution and was widely employed at the time when UTI monopoly in the market.

redemption of units. Such borrowings shall not exceed 20% of the net asset of the scheme and the duration of the borrowing shall not exceed 6 months. c. for the purpose of repurchase. The securities so transferred shall be in conformity with the investment objectives of the schemes to which such transfer has been made. The fund may borrow from permissible entities at prevailing market rates and may offer the assets of the schemes as collateral for such borrowings.1. The registration and accounting of the transactions is completed and ratified in the next meeting of the board of trustees. Presently following restrictions apply.1. b. 2 . under all its schemes taken together. will not own more than 10 % of any company’s paid up capital carrying voting rights. provided that the aggregate inter – scheme investment made by all the schemes under the same management. provided • A scheme may invest in another sheme under the same asset management company or any other mutual fund without charging any fees. A scheme may invest in another scheme under the same asset management company or any other mutual fund withought charging any fees. Such transfers are done at the prevailing market price for quoted instruments on spot basis.7 SEBI REGULATION ON THE INVESTMENT OF A MUTUAL FUND: The investments of a mutual fund are subjected to a set of regulations prescribed by SEBI. • A mutual fund may borrow to meet liquidity needs. • Transfers of investment from one scheme to another scheme of mutual fund permitted provided that: a. A mutual fund. • • No term loan shall be granted by a mutual fund scheme. or repayment of interest or dividend to the unitholders.

8 TAX SAVING ON MUTUAL FUND: 2 . It cannot make short sales or engage in carry forward transactions.• A scheme shaal not invest more than 15% of its NAV in debt instruments issued by a single issuer which are rated not below investment grade by an authorized credit rating agencu. Any security issued by way of private placement by an associate or group company of the sponsor c.1. A scheme may invest in ADRs/GDRs of Indian companies listed on overseas stock exchanges to the extent and in a manner approved by RBI . • • A mutual fund will buy and sell securities on the basis of deliveries. b. • The investment manager may invest in a scheme from time to time. Any unlisted security of an associates or group company of the sponsor . • A scheme shaal 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. 1. • • A scheme shall not invest more than 10% of its NAV in the equity shares or equity related instruments of any one company. This limit. The listed securities of group companies of the sponsor in exess of 25% of the net assets. A scheme shall not invest more than 5% of its NAV in unlisted euity shares or equity related instruments in case of an open ended schemes and 10% of its NAV in case a of closed ended scheme. The percentage of such investments to the total net assets may vary from time to time and can be upto 100% of the net assets of the schemes. however. is not applicable for investment in governments securities and money market instruments. A scheme shall not make any investment in a. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of Board of Trusttes and the Board of Asset Management Company.

Here's an example. Although an average tax-saving mutual fund delivered 16. From the tax point of view. the range of returns was extreme. in that year. the NAV of the fund drops in a proportion that is identical to the ratio at which bonus funds are issued. across time periods. If today you decide to sell 2 . You made the purchase less than a year ago at an NAV of Rs 12. which have a three-year lock-in. the best tax-saving fund delivered 42.A.000—receive a tax rebate of 0 to 20 per cent depending on the income slab. equity-linked savings schemes (ELSS) and pension funds.000 units of a fund whose NAV is Rs 15. Thus. which have a debt orientation.36 per cent in 2002. pension funds are hybrid schemes. Suppose you hold 10. whenever they are sold.61 per cent and the worst was down 3. Investments here—subject to a maximum of Rs 10. Franklin Templeton's Templeton India Pension Fund and UTI's Retirement Benefit Plan. and carry the same tax benefit as ELSS. Diversification can be across funds and. more importantly. but somewhat more complex. As these are equity instruments they have the maximum risk-return potential among all asset classes. The other route for saving taxes is pension funds. What this means is that return has a propensity to vary with great intensity.16 per cent. Introduced for the first time in 1997. This fall in the NAV is a capital loss as far as the original units are concerned and it is here that tax benefits can be realised. The bonus units carry a high tax liability though since you will pay taxes on the entire sale price. even though there are currently only two such funds in operation. There are two types of tax-saving funds. bonus units are conceptually similar to dividend stripping. Bonus units that a fund issue is deemed to have been acquired at zero cost. Thus. ELSS schemes are basically diversified equity schemes. The original units can be sold off with a capital loss. The best way to overcome the vagaries of stock markets is to diversify. However. By investing regularly every year in these funds one can set up a long-term systematic investment plan. which can be used to set off other capital gains. at the time of issue of bonus. the entire sale price is treated as capital gains.

because of their mall size and slower growth in the recent past.000—30 per cent of gains.10 Mutual Funds – FAQs: (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. Mutual funds being institutional investors.1.9 ROLE OF MUTUAL FUND IN STOCK EXCHANGE: Mutual funds are an ideal vehicle for investment by retail investors in the stock market for several reasons. 1. out of which Rs 30. Mutual fund can diversify the portfolio in better way as compared with individual investors due to the expertise and availability of funds. you will fetch Rs 1. ii. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. . Mutual funds in india.000 will be short-term capital gain. which was declined to 3. It pools investments of small investors together increasingly thereby the participation in the stock market. can invest in market analysis generally not available or accessible to individual investors.5 lakh. Sale Price Is the price you pay when you invest in a scheme. On this. 2 4. 1.these units. iii.the share of mutual funds in total turnover of the stock market (BSE+NSE).6% by January 2003. i. have tended to play only a limited role in the stock market. you are likely to pay a tax of Rs 9.1.9% in January 2000. Also called Offer Price. It may include a sales load. providing therefore informed decisions to small investors.

Sales Load Is a charge collected by a scheme when it sells the units. Repurchase or ‘Back-end’ Load Is a charge collected by a scheme when it buys back the units from the unit holders. OPERATING EXPENSES: These refer to cost incurred to operate a mutual fund. Schemes that do not charge a load are called ‘No Load’ schemes. Operating expenses also known as expenses ratio which 2 . 1. agent commission. trustee fees. This is also called Bid Price. audit fees to charted accountant. register and transfer agent fees. ‘Front-end’ load.1.Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. custodial fees.11 COST INVOLVED IN MUTUAL FUNDS: An investor must know that there are certain costs involved while investing in mutual funds. Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Advisory fee is paid to investment managers. Such prices are NAV related. Also called.

2 . Then expenses ratio is 2% expenses ratio is available in the offer document and fro historical per unit statistics included in the financial results of the fund which are published by annually. These charges have no effect on the performance of the scheme. Any excess over specified limits as to born by Management Company. It determines public offer price which intern decides how much of your initial investment actually get invested the standard practice of arriving a public offer price is as follows.is annual expenses expressed as a percentage of these expenses is required to be reported in the schemes offer document or prospectus. Sales loads are usually expression percentage and or of two types front-end and back-end. 20 lakhs. Depending upon scheme and net asset. Operating expenses Expenses ratio= Average net assets For instant. the trustees or sponsors. 100 crores and expenses Rs. if funds Rs. these are charged directly to investor. operating expenses are determined by limits mandated by SEBI mutual funds regulation act. FRONT-END LOAD: It is a one time fixed fee paid by an investor when buying a Mutual funds scheme. distribution and marketing expenses. un audited for the half year ending September 30th and audited for the physically year end 1st March 30th . SALES CHARGES: These are known commonly sale loads. Sales loads are used by mutual fund for the payment of agent’s commission.

20.10. BACK END LOAD: 2 .Net asset value Public offer price= (1-front end load) Let us assume. 10. So only 980 units are allowed to the investor. an investor invests Rs.000 front end loads tend to decrease as initial investment amount increase. Number of units allotted= Amount invested Public offer price 10. 10 using the formula public offer price = 10/(1-0.000/10.20= 980 units at a NAV of Rs.000 in a scheme that charges it 2% front end load at a NAV per unit Rs. 10.02) is Rs. 10. This means units worth 9800 are allotted to him an initial investment Rs.

10 using the formula Redemption price 10/ (1+0. 9. It is paid when the units are reading during the initial years of ownership.The real estate mutual funds sector is now being considered as the engine of economic growth. TRANSACTION COST: Some funds may also impose a switch over fee which is charge on transfer of investment from one scheme to another within a same mutual funds family and also to switch from one plan to another within same scheme.02)= Rs. 2 . what the investor gets in hand is 9800(9. This is the SEBI mutual funds regulations 1996 do not allow either the front end load or back end load to any combination is higher than 7%. Net asset value Redemption price = (1+back end load) Let us assume an investor redeems units valued at Rs. end load at a NAV per units of Rs.8 s. It is for a predetermined period only and reduced over the time you invested for a fund.8*1000). CONTINGENT DEFERRED SALES CHARGES (CDSC): Contingent differed sales charges of a structured back end load.May be fixed fee redemption or a contingent differed sales charged a redemption so load continues so long as the redeeming or selling of the units of a fund does not take place in the event of a back end load is applied.000 in a scheme that charges a 2% back. The longer remains in a fund the lower the CDSC. 10. The SEBI stipulate the a CDSC may be charge only for first four years after purchase of units and also stipulate the maximum CDSC that can we charge every year. The redemption price is arrive or using following formula.

• Association of Mutual Fund of India do represent the Government of India. • AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. 2 .12 The objectives of Association of Mutual Funds in India: The Association of Mutual Funds of India works with 30 registered AMCs of the country. The objectives are as follows: • This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry. • It develops a team of well qualified and trained Agent distributors. • It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. • AMFI undertakes all India awarness programme for investors inorder to promote proper understanding of the concept and working of mutual funds. the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.1. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors.1.

JM Financial Mutual Fund Kotak Mahindra Asset Management Co. Institutions: • • GIC Asset Management Co. Cholamandalam Asset Management Co. Tata Asset Management Private Ltd. Ltd. Ltd. Reliance Capital Asset Management Ltd. Ltd.• At last but not the least association of mutual fund of India also disseminate informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies. Canbank Investment Management Services Ltd. Pvt. UTI Asset Management Company Pvt. Ltd Sundaram Asset Management Company Ltd. Private Sector: Indian:• • • • • • • • • • BenchMark Asset Management Co. Ltd. BOB Asset Management Co. Credit Capital Asset Management Co. Escorts Asset Management Ltd. 2 . Ltd. Ltd. Ltd.13 The sponsorers of Association of Mutual Funds in India: Bank Sponsored : • • • • SBI Fund Management Ltd.1. Jeevan Bima Sahayog Asset Management Co. Ltd. Pvt. 1. Sahara Asset Management Co.

Deutsche Asset Management (India) Pvt. 1. HSBC Asset Management (India) Private Ltd. Alliance Capital Asset Management (India) Pvt. Ltd. Predominantly Foreign Joint Ventures:• • • • • • • • • • • ABN AMRO Asset Management (I) Ltd. Pvt. Ltd. Ltd. Principal Asset Management Co. Though the 1988 year saw 2 . Unit Trust of India invited investors or rather to those who believed in savings. Ltd. to park their money in UTI Mutual Fund.1. Fidelity Fund Management Private Limited Franklin Templeton Asset Mgmt.Predominantly India Joint Ventures:• • • Birla Sun Life Asset Management Co. Ltd.14 Performance of Mutual Funds in India: Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. Pvt. ING Investment Management (India) Pvt. Ltd. Prudential ICICI Asset Management Co. Ltd. Standard Chartered Asset Mgmt Co. Morgan Stanley Investment Management Pvt. Ltd. DSP Merrill Lynch Fund Managers Limited HDFC Asset Management Company Ltd. For 30 years it goaled without a single second player. (India) Pvt. Ltd. The year was 1963.

1. 470 bn. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. by the end of 1987. people were miles away from the praparedness of risks factor after the liberalization. 67bn.some new mutual fund companies. the losses by disinvestments and of course the lack of transparent rules in the whereabout rocked confidence among the investors. However. CRORES) FROM T U PUB PRIV TOT 2 . and of course investing was out of question. From Rs. GROSS FUND MOBILISATION (RS. The 1992 stock market scandal. Partly owing to a relatively weak stock market performance. The expectations of investors touched the sky in profitability factor. the Assets Under Management rose to Rs. Let me concentrate about the performance of mutual funds in India through figures. more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual fund. But yes.The performance of mutual funds in India suffered qualitatively. mutual funds have not yet recovered. It rose as high as Rs. some 24 million shareholders was accustomed with guaranteed high returns by the begining of liberalization of the industry in 1992. The Assets Under Management of UTI was Rs. in March 1993 and the figure had a three times higher performance by April 2004.540bn. People rarely understood. At last to mention. with funds trading at an average discount of 1020 percent of their net asset value. This good record of UTI became marketing tool for new entrants. . as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time. but UTI remained in a monopoly position. 67bn.

6 7 9 1.03 9 42.19 2 74.35 2 92.6 13 1. 5 3 6 4. 6 13.966 21.73 2 7.95 7 1 3.64. 4 1 3 6. 523 1 2.O T I LIC SEC TOR ATE SECT OR AL 31 01April98 M ar ch 99 31 01April99 M ar ch 00 31 01April00 M ar ch 01 0131 4.74 8 1 1.17 3 59.2 67 1.37 7 2 .46.

7.20.5 51 2.69 4 - 68.03 M ar ch 03 31 01April03 M ar ch 04 0131 1.25 9* 58.4 8.21.M April01 ar ch 02 31 01April02 Ja n03 31 01Feb. 190 . 5 0 5 22.90. 2 4 3 5.43 5 65. 979 * 7.5 58 5.03.9 23 2.6 32 5.48.36.39.

Last six years have been the most turbulent as well as exiting ones for the industry.M Aprilar ch 04 05 31 01April05 M ar ch 06 1. while others have decided to close shop by either selling off or merging with others. In spite of the stiff competition and losing market share. Product innovation is now passé with the game shifting to performance delivery in fund management as well as service.14.7 12 10. New players have come in. now competes with as many as 400 odd products and 34 players in the market.83.1.98 . UTI still remains a formidable force to reckon with.158 246 16 662 1. Those directly associated 2 .15 MARKET TREND: A lone UTI with just one scheme in 1964. 446 9.

100bn per annum over five-year period spanning 1993-98 doubled to Rs. Fund managers. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The coming few years will show that the traditional saving avenues are losing out in the current scenario. The U. Funds have shifted their focus to the recession free sectors like pharmaceuticals. the new generation of private funds which have gained substantial mass are now seen flexing their muscles. and even the regulators have become more mature and responsible. Funds performances are improving. by their selection criteria for stocks have forced corporate governance on the industry. Funds collection. mutual fund assets are not even 10% of the bank deposits. but this trend is beginning to change.S.210bn in 1998-99. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way.with the fund management industry like distributors. towards mutual funds has become obvious. FMCG and technology sector. The industry is also having a profound impact on financial markets. 99) This is forcing a large number of banks to adopt 2 . In India.300bn. By rewarding honest and transparent management with higher valuations. The Financial Express September.S. a system of risk-reward has been created where the corporate sector is more transparent then before. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. boasts of an Asset base that is much higher than its bank deposits.450bn. In the current year mobilization till now have exceeded Rs. which averaged at less than Rs. registrars and transfer agents. (Source: Thinktank. While UTI has always been a dominant player on the bourses as well as the debt markets. Total collection for the current financial year ending March 2000 is expected to reach Rs. India is at the first stage of a revolution that has already peaked in the U.

It is just that Mutual Funds are going to change the way banks do business in the future. In the last 5 years there is an annual growth rate of 9%. It is estimated that by 2010 March-end. AND BETWEEN OF EVERY MUTUAL FUND BETTER LOW MORE LOW BUT IMPROVING BETTER TRANSPARENT EVERY DAY 30TH ADMINISTRATION EXPENSES GUARANTEE HIGH MAX.537 crore by March 2004. PARTICULAR RETURN RISK INVESTMENT OPTION NETWORK LIQUIDITY QUALITY OF ASSETS INTEREST CALCULATION BANKS LOW HIGH LESS HIGH PENETRATION AT A COST NOT TRANSPARENT MINIMUM BALANCE 10TH MONTH.16 FUTURE OF MUTUAL FUND: Indian mutual fund industry reached Rs 1.1 1.the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk.000 crore. the total assets of all scheduled commercial banks should be Rs 40. According to the current growth rate.4% during the rest of the decade.1. The annual composite rate of growth is expected 13.90.50. • 100% growth in the last 6 years. Mutual fund India assets will be double. The basic fact lies that banks cannot be ignored and they will not close down completely. LOW RS 1LACK ON DEPOSIT NONE Table 1. by year 2010. Their role as intermediaries cannot be ignored. 2 .

mutual funds) .1 Investment management : Is the professional management of various securities (shares. real estate). Emphasis on better corporate governance. Only channelizing these savings in mutual funds sector is required.2) ABOUT SPECIFIC AREA OF THE TOPIC CHOOSEN: 1.2. to meet specified investment goals for the benefit of the investors. pension funds. We have approximately 29 mutual funds. bonds etc) assets (e. corporations etc. • • • Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products.g. Soon they will find scope in the growing cities. Trying to curb the late trading practices • • • The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investor’s shift their assets from banks and other traditional avenues. Some of the older public and private sector players will either close shop or be taken over. with over US$1trillion assets under management worldwide • Our saving rate is over 23%. 'B' and 'C' class cities are growing rapidly.• Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments.g. 1. US based. There is a big scope for expansion.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e. Today most of the mutual funds are concentrating on the 'A' class cities. 2 . SEBI allowing the MF's to launch commodity mutual funds. Investors may be institutions (insurance companies. highest in the world. which is much less than US having more than 800.

The advisor then recommends appropriate investments. the skill of a successful investment manager 2 . asset selection. whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. euro. plan implementation and ongoing monitoring of investments. Some research suggests that allocation among asset classes has more predictive power than the choice of individual holdings in determining portfolio return. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called "private banking". pounds and yen. thus. and different interaction effects. the allocation of monies among asset classes will have a significant effect on the performance of the fund. A certified company investment advisor should conduct an assessment of each client's individual needs and risk profile.2. Arguably.The term asset management is often used to refer to the investment management of collective investments. stock selection. The provision of 'investment management services' includes elements of financial analysis. 1. Coming under the remit of financial services many of the world's largest companies are at least in part investment managers and employ millions of staff and create billions in revenue.2 Investment managers and portfolio structures: At the heart of the investment management industry are the managers who invest and divest client investments. • ASSET ALLOCATION: The different asset classes and the exercise of allocating funds among these assets (and among individual securities within each asset class) is what investment management firms are paid for. Asset classes exhibit different market dynamics. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars.

institutions measure the performance of each fund (and usually for internal purposes components of each fund) under their management. • DIVERSIFICATION: Against the background of the asset allocation. so as to outperform certain benchmarks (e. and in the institutional context accurate measurement is a necessity. The leading performance measurement firms 2 . and performance is also measured by external firms that specialize in performance measurement. For example. The list will indicate what percentage of the fund should be invested in each particular stock or bond. this is because equities are riskier (more volatile) than bonds which are themselves more risky than cash. fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned holdings accordingly.. and cross-correlations between the returns. The theory of portfolio diversification was originated by Markowitz and effective diversification requires management of the correlation between the asset returns and the liability returns.resides in constructing the asset allocation. • LONG TERM RETURN: It is important to look at the evidence on the long-term returns to different assets. For that purpose. over very long holding periods (eg. and to holding period returns (the returns that accrue on average over different lengths of investment).g. issues internal to the portfolio (individual holdings volatility). and bonds have generated higher returns than cash. bond and stock indices).3 Performance measurement: Fund performance is the acid test of fund management. 10+ years) in most countries. and separately the individual holdings. According to financial theory. 1. equities have generated higher returns than bonds.2. the peer group of competing funds.

g.g. but investors' tax positions may vary. The Sharpe ratio is the simplest and best known performance measure. such as the measure of risk taken. information ratio) or differential returns compared to benchmarks (alphas). Several other aspects are also part of performance measurement: The need to answer all these questions has led to the development of more sophisticated performance measures.. This measure is said to be absolute. 3 to 5 years) to smooth out very short term fluctuations in performance and the influence of the business cycle. be they risk-adjusted ratios (Sharpe ratio. • RISK ADJUSTED PERFORMANCE: Performance measurement should not be reduced to the evaluation of fund returns alone. many of which originate in modern portfolio theory. compared to the total risk of the portfolio. showing how funds in general performed against given indices and peer groups over various time periods.(e. e. Aftertax measurement represents the benefit to the investor. The Capital Asset Pricing Model (CAPM) developed by Sharpe (1964) highlighted the notion of rewarding risk and produced the first performance indicators. In a typical case (let us say an equity fund). Generally speaking. as it does not refer to any benchmark.g. it is probably appropriate for an investment firm to persuade its clients to assess performance over longer periods (e. but must also integrate other fund elements that would be of interest to investors.g. An enduring problem is whether to measure before-tax or after-tax performance. +4. then the calculation would be made (as far as the client is concerned) every quarter and would show a percentage change compared with the prior quarter (e. Frank Russell in the USA) compile aggregate industry data. It measures the return of a portfolio in excess of the risk-free rate. Modern portfolio theory established the quantitative link that exists between portfolio risk and return. 2 ....3% total return in US dollars). avoiding drawbacks related to a poor choice of benchmark.

The investment proceeds are then passed along to the individual investors.3. that one factor is not enough to explain the returns and that other factors have to be considered. who is also known as the portfolio manager. proposed by Jensen (1968). to raise money by the trustees trough the sale of units to the public.3) ABOUT THE TOPIC: 1. the fund manager. for investing in securities in accordance with these regulations” 1.Portfolio normal return may be evaluated using factor models.3. and collects the dividend or interest income.2 DEFINITION: The SEBI regulations. realizing capital gains or losses. short-term money market instruments. under one or more schemes. trades the fund's underlying securities.3. In a mutual fund.. 1. It quickly becomes clear. is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding 1. relies on the CAPM and explains portfolio normal returns with the market index as the only factor. The value of a share of the mutual fund. 1993 defines a mutual fund as “a fund in the form of a trust by a sponsor.3 CONCEPT OF MUTUAL FUND: 2 . bonds.1 MEANING: A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks. however. and/or other securities. known as the net asset value per share (NAV). The first model.

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. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified.4 ENTITIES IN MUTUAL FUND OPERATIONS: 2 . Mutual Fund Operation Flow Chart: Figure1. debentures and other securities. The flow chart below describes broadly the working of a mutual fund. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them.1 1. professionally managed basket of securities at a relatively low cost.3.

the trustees. 2 . • Sponsor: The sponsor of a mutual fund is like the promoter of a company. secure necessary approval. The AMC should have a certificate from sebi to act as portfolio manager under SEBI rules and regulations. The trusees appoint the asset management company(AMC). The sponsor may be a bank. Appointment by the sponsor. the following are involved in a mutual fund operations: the sponsor. the custodian.In India. the trustees can be either individuals or a corporate body. is a separate company appointed by the trustees to run the mutual fund. and hold the properties of the various schemes in trust for the benefits of investors. periodically monitor how the AMC fuctions. Typically it is the latter. The sponsor is responsible for setting up and establishing the mutual fund. and the registrars and transfer agents. • Asset Management Company: It also reffered to as the investment manager. the asset management company. • Trustees: A trust is a notional entity that cannot contract in its own name. and registered with SEBI. so. the trust enters into contracts in the name of the trustees. The sponsor delegates the trustee fuction to the trustees. It may be indian or foreign. a financial institution. 1881. or a financial service company. the mutual fund. • Mutual fund : The mutual funds constitued as a trust under the Indian trust act. The sponsor is the settler of the mutual fund trust. 1993.

collection of income. • Registrars and transfer agents: The registrars and transfer agents handle investor related services such as issuing units. 2 OF MAKING BODY FOR FUND . while others outsource it tobSEBI approved registrars and transfer agents like karvy and CAMS.The legal structure and organization of mutual funds as laid down by SEBI guidelines is as follows.BANK) BORD TRUSEE POLICY RAISING. The sponsor of a mutual fund cannot act as its custodian. ASSET COMPANY MANAGEMENT ACTUAL IMPLIMENTATION OF THE POLICY AND INVESTMENT OPERATIONS. distribution of dividends. redeeming units. and so on. It looks after the receipt and delivery of securities. sending fact sheets and annual reports.• Custodian: The custodian handles the investment back office operations of a mutual fund. andsegregation of assets between schemes. ORGANISATION OF MUTUAL FUND: SPONCER OF MUTUAL FUND- (COMPANY . Some funds handle such fuctions in house.

&income and growth fund) Investment based (equity.2 1. INVESTOR Figure 1. TRANSFER AGENT AND RELATED SERVICE FOR MUTUAL FUND. balanced funds) 2 .growth. liquid.5 Schemes of Mutual funds : Types of mutual fund scheme: Operational classification portfolio classification Open ended Return based: close ended (income.3.CUSTODIAN ACTING AS REGISTRAR.

special.g.3 (hedge and offshore funds) 1. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. Close-ended Scheme: A close-ended fund or scheme has a stipulated maturity period e. Open-ended Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. The key feature of open-end schemes is liquidity. index-linked funds) Leverage based Others Figure 1. These schemes do not have a fixed maturity period.3. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed.Sector based (real estate. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme.5 Schemes according to Maturity Period OR by structure: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. 2 . In order to provide an exit route to the investors.

Such schemes may be open-ended or close-ended schemes as described earlier. or balanced scheme considering its investment objective. Government securities and money market instruments. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. Such schemes generally invest in fixed income securities such as bonds. These schemes provide different options to the investors like dividend option. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to longterm.3. Such funds have comparatively high risks. Such schemes normally invest a major part of their corpus in equities. either repurchase facility or through listing on stock exchanges. These funds are not affected because of fluctuations in equity markets. Such funds are less risky compared to equity schemes. 1.6 Schemes according to Investment Objective: A scheme can also be classified as growth scheme. Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors.some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices.e. capital appreciation. Balanced Scheme: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their 2 . and the investors may choose an option depending on their preferences. etc. income scheme. These mutual funds schemes disclose NAV generally on weekly basis. corporate debentures.

Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. S&P NSE 50 index (Nifty). Returns on these schemes fluctuate much less compared to other funds. NAV’s of such schemes would rise or fall in accordance with the rise or fall in the index.offer documents. certificates of deposit. Gilt Fund: These funds invest exclusively in government securities. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. Government securities have no default risk. NAVs of such funds are likely to be less volatile compared to pure equity funds. These funds are also affected because of fluctuations in share prices in the stock markets. etc. these schemes invest in the securities in the same weightage comprising of an index. preservation of capital and moderate income. However. Load Funds 2 . These are appropriate for investors looking for moderate growth. commercial paper and interbank call money. They generally invest 40-60% in equity and debt instruments. though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. government securities. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity. These schemes invest exclusively in safer short-term instruments such as treasury bills. etc.

each time you buy or sell units in the fund. It could be worth paying the load. a commission will be payable. Typically entry and exit loads range from 1% to 2%. no commission is payable on purchase or sale of units in the fund. if the fund has a good performance history. That is.A Load Fund is one that charges a commission for entry or exit. 2 . The advantage of a no load fund is that the entire corpus is put to work. No-Load Funds A No-Load Fund is one that does not charge a commission for entry or exit. That is.

Special Schemes • Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. 1961 as the Government offers tax incentives for investment in specified avenues. Software. e. Their growth opportunities and risks associated are like any equity-oriented scheme. FMCG.3. These schemes are growth oriented and invest pre-dominantly in equities. Pension schemes launched by the mutual funds also offer tax benefits. Indian academy school of management studies 38 .g. etc.g. 1.8 IMPORTANCE OR BENEFITS OF MUTUAL FUND: The mutual fund industry has grown at a phenomenal rate in the recent past. Petroleum stocks. Equity Linked Savings Schemes (ELSS). The returns in these funds are dependent on the performance of the respective sectors/industries.1. The following are some of the important advantages of mutual funds. • Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50 • Sectoral Schemes Sectoral Funds are those.3. e.7 Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. Fast Moving Consumer Goods (FMCG). Pharmaceuticals. The investment of these funds is limited to specific industries like InfoTech. which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act. Pharmaceuticals etc.

This is in accordance with the maximum ‘not to lay all eggs in one basket • Providing better yields: Due to the large funds. So they provide better yield to their customers .• Channelizing savings for investment: A number of schemes are being offered by MFs so as to meet the varied requirements of the peoples and savings are directed towards capital investments directly. The intermediation fee is the lowest being 1% in the case of a mutual fund. Mutual funds are able buy cheaper and sell dearer than the small and medium investors. Thus. In the absence of MFs these savings would have remained idle. Thus investment are made purely on the basis of a thorough research.they also enjoy the economics of large scale and can reduce the cost of capital market participation • Redering expertise investment service at low cost: The management of the fund is generally assigned to professionals who are well trained and have adequate experience in the field of investment. which constantly analyses the companies and the industries and recommends the fund to buy or sell a particular share. The fund diversifies its risks by investing in large varieties of shares and bonds which cannot be done by small and medium investor. investor are assured of quality services in there best interest. Indian academy school of management studies 39 . • Offering wide portfolio investment: Now the investors can enjoy the wide portfolio investment held by the mutual fund. • Providing research services: Each fund maintains large research team. This is investors. Thus they are able to the command better market rates and lower rates of brokerage.

• Promoting industrial development: All industrial units have to raise their funds by resorting to the capital market by the issue of shares and debentures. investments in MFs are exempted up to Rs. 5 lakhs. They provide an attractive and cost effective alternative to direct purchase of shares. the MF sends statements very often to the investors. Besides. • Introducing flexible investment schedule: Some mutual funds are permitted the investor exchange their units from one schemes to another and this flexibility is a great boon to investors. interest and capital appreciation. Even if he does not keep a record. The mutual funds not only create a demand for these capital market instruments but also supply a large source of funds to the market. branches of the sponsoring bank are always ready to provide loan facility against the unit certificates. • Simplified record keeping: The investor has to keep a record of only one deal with the mutual fund. Thus. Again there is greater liquidity. • Providing greater affordability and liquidity: Even a very small investor can afford to invest in mutual funds.• Offering tax benefits: Certain funds offer tax benefits to its customers. Under the wealth tax act. apart from dividend. Indian academy school of management studies 40 . Mutual funds also provide a valuable liquidity to the capital market. and thus the market is made very active and stable. Units can be sold to the fund at any time at the net asset value and thus quick access to liquid cash is assured. investors also stand to get the benefit of tax concession. • Supporting capital market: The savings of the people are directed towards investments in capital market through these mutual funds.

financial consultants. Some funds also charge sales commissions or "loads" to compensate brokers. economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Even if you don't use a broker or other financial adviser. Indian academy school of management studies 41 . Other securities in the portfolio will respond to the same economic conditions by increasing in value. If the manager does not perform as well as you had hoped. if you invest in Index Funds. For example. When a portfolio is balanced in this way. you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If your fund makes a profit on its sales. you will pay taxes on the income you receive. 1. you forego management risk. even if you reinvest the money you made. even if some securities lose value. no matter how balanced the portfolio. you will pay a sales commission if you buy shares in a Load Fund. anyone who invests through a mutual fund runs the risk of losing money. • Fees and commissions: All funds charge administrative fees to cover their day-today expenses.• Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. • Management risk: When you invest in a mutual fund. the value of mutual fund shares will go down as well. However.3. Of course.8 Drawbacks of Mutual Funds: Mutual funds have their drawbacks and may not be for everyone: • No Guarantees: No investment is risk free. you might not make as much money on your investment as you expected. because these funds do not employ managers. If the entire stock market declines in value. • Taxes: During a typical year. most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. or financial planners. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. the value of the overall portfolio should gradually increase over time.

the gains of the scheme are paid out at regular intervals in the form of dividends. ii. mutual funds offer the following: dividend and growth options.2 Value-added services : Mutual funds offer value-added services like redemption over phone. The SWP allows the investor to withdraw a fixed amount every month. quarterly. half-yearly. Under the dividend option. and new points of purchase. iv. Systematic investment plan Under the systematic investment plan (SIP). weekly. Redemption over phone Prudential ICICI for example offers investors the facility of making a redemption request or switch between schemes over the phone. and systematic withdrawal plan. Funds may offer daily. Dividend and growth options When you join a scheme. Though the returns from both the dividend and growth options will be the same. you can shoose the dividend option or the growth option.1. Under the growth option. monthly. and annual dividend options. iii. the investor can invest regular sums of money every month to buy units of a mutual fund scheme. As the investment is made regularly. i. • Options: With respect to a number of schemes.3. To cut down this Indian academy school of management studies 42 . investment gains are ploughed back into the scheme and no dividends are declared. ii. Cheque book facility Fund houses take few days to process a redemption request and then further time is lost when the redemption cheque is in transit.9 OPTIONS AND VALUE-ADDED SERVICES: Thanks to the heightened competition in the mutual fund industry. mutual funds now offer various options and value-added services to attract and retain customers. cheque book facility. systematic investment plan. i. Systematic withdrawal plan A systematic withdrawal plan (SWP) works like a systematic investment plan in the opposite direction. the tax implications may be different. • 8. the investor buys more units when the price is low and fewer units when the price is high. triggers and alerts.

at the time of investment itself. Indian academy school of management studies 43 . the fund showing on the risk-adjusted return front is vital as well. however.e. • The fund manager/management style: The fund manager and his approach to fund management play a vital role in determining the fund’s success or otherwise. at the scheme’s NAV on the day the cheque is deposited. • Portfolio management: The fund’s portfolio can reveal a lot about the fund. • The fund’s performance: The return clocked by a fund are an important parameter to judge its worth as an investment avenue. Encashment of the cheque is deemed as withdrawal. It serves as an indicator of what the fund is capable of performing. pick the one that suits your risk – appetite and profile the best. the return it has delivered. A higher sharp ratio is indicative of the fact that the fund has adequately compensated its investors for risk borne. Ideally a fund should display a high degree of consistency in its holdings. some fund houses give investors in certain schemes (typically debt scemes).3.delay. • Risk-adjusted return and volatility: We havw discussed about importance of a fund’s performance i. 1. the some limit. similarly the portfolio should be a well-spread one. • The fund offering: Investors having wide range of offering to choose from different fund each fund is a distinct offering. Evaluate the fund manager’s past track record in the schemes he manages.9 HOW TO PICK UP CHOOSEN ONE: There are few tips which helps the investors to choose right fund. while the fund’s return are historical in nature.

Indian academy school of management studies 44 .• Expense ratio and load: Expenses incuured by the fund have a significant impact on its performance. • The fund house: The fund house is an important entity and due attention must be to it as well. The right investment plan an important role in enabling you to achieve you financial goals and objectives. Similarly entry/exit load are vital too. The expenses are incurred for a variety of reasons ranging from management fees to marketing and selling expenses. • Seek advice: Utilize the services of a financial planner before making investments in mutual funds. An entry load reduces the amount invested proportionately and only the balance is utilized for generating returns. Investors comfort levels would surely be higher if the fund house is a reputed one has a history of producing funds that have superior returns. A financial planner will help you create a portfolio comprising of schemes that are “right” for you. • The PMS option: Investors who have a large investible surplus can explore the option of utilizing a portfolio performance management services (PMS) can be explored.

” Research methodology is a way to systematically solve the research problem. the median or the standard deviation or chi-suare. Introduction: Research refers to a search for knowledge. In it we study the various steps that are generally adopted by a research in studying his research problem along with the logic behind them.1. and what would they mean and Indian academy school of management studies 45 . how to apply particular research technique. the mode. are relevant and which are not. It is necessary for the researcher to know how to develop certain indices or tests. but they also need to know which of these methods or techniques. It may be understood as a science of studying how research is done scientifically. how to calculate the mean.CHAPTER TWO: RESEARCH DESIGN: 2. The advanced learner’s dictionary of current english lays down the meaning of research as “ a careful investigation or enquiry specially through search for new facts in any branch of knowledge.

Thus. Initially. Considering the importance of mutual funds.2 Review of literature: A research should be preliminary orientation and background knowledge about the topic and he should collect the basic concept and information regarding the final in which the topic includes due to this reasons review of the literature has an important role in research study. Researchers also by which they can decide that certain techniques and procedures will be applicable to certain problems and other will not. several researchers have tried to study the various factors and their impact on fund performance. their studies have focused on timing and investment abilities of fund managers. the results of the early studies prevailed as general conclusions in the erstwhile literature. which also indicated that managers of these funds did not appear to possess private information. the impact of fund expenses and economies of scale. several academicians have tried to study the performance of various funds. These results were in sync with the findings of Treynor 91965) and Sharpe (1966). Thus.indicate and why. These factors include potential measurement errors from survivorship bias and misspecification of the benchmark. Later. 2. All this means that it is necessary for the researcher to design his methodology. Performance of professionally managed funds also was not any better than the performance of risk-adjusted index portfolio. Jenson’s (1968) study on mutual fund performance of 115 funds over a period spanning from 1945 60 1964. The research methodology has wider dimension and wider scope than that of research methods. when we talk of research methodology we not only talk of research methods but also consider the logic behind the methods we use in the context of our research methods but also consider the logic behind the methods we use in the context of our research study and explain why we are using a particular method or technique and why we are not using other so that research results are capable of being evaluated either by the researcher himself or by others. to the personal characteristics of fund managers. Indian academy school of management studies 46 . came out with contradictory conclusions. Various studies that focused on factors such as the ability of fund managers to consistently outperform the market and the fund specific organizational and managerial aspects. confirmed the efficient market hypothesis. His analysis has shown that the performance of expense-adjusted fund returns was markedly lower than those randomly chosen portfolios of a similar risk category.

Patel and Zeckhauser (1993). debt and hybrid schems. Mutual fund is a professionally managed form of collective investment that pools money from many investors and invest it in stocks. Taxable distribution can be either ordinary income or capital schems which are equity schemes . On the other hand the Malkiel (1995) study considers both benchmark errors and survivorship bias and concludes that the previous results indicating market inefficiency were affected by these factors. Further studies by Grinblatt and Titman (1992). in fact. short-term money market instruments and other securities. a number of later studies on the topic. Das and Hlavka (1993). a study by Ippolity (1993) found mutual fund returns after expenses (before loads) to be superior than the returns offered by risk-adjusted market indices. Goetzmann and Ibbotson (1994). Hendricks. Scope of the study: The study of mutual fund has the wider scope. the mutual fund managers may produce such excess returns that can offset the expenses of the fund. Mutual fund distributors of tax free municipal bonds income are also tax free to the share holders.However. nonetheless. Wermers (2000) decomposed mutual fund returns into a stock picking talent.” 2.3 Statement of the problem: “ A study on Analysis of the performance of mutual fund with reference to mutual fund industry. which indicated that mutual fund managers may have access to the useful private information. Indian academy school of management studies 47 . features of stockholding and trading costs and expenses. Recently. bonds. For instance. and Volkman and Wohar (1995) were in support of market efficiency as they discovered instances of repeated winners amongst fund managers. While doing away with survivorship bias. 2. Malkiel (1995) and Carhart (1997) reinforce the early conclusion of Jensen (1968). carhart (1997) has shown that the common factors that drive stock returns are responsible for consistency in mutual fund performance. Thus. Other studies by Elton. The decomposition helped him show that stock picking of funds. enabled the managers to cover their costs. Gruber.4. go against the early findings.

ING Tax saving fund. xii. Treynor Index and Jensen’s Alpha measure. iv. ING L. HDFC Growth fund. ING selected stock fund.  To appraise investment performance of mutual funds with risk adjustment.The present study includes five-year return of the mutual fund companies and funds in India. HDFC Capital builder fund. and only those schemes and funds are included in this study. The schemes covered under the study are: i. 2. ING domestic opportunities fund. Objectives of the problem: The major objectives of study are as follows. Indian academy school of management studies 48 . viii. To evaluate the performance of schemes and funds. which are performed well during from last few years. iii. the theoretical parameters as suggested by Sharpe. v. HDFC top 200 fund. HDFC index fund(Sensex plan).  To examine the funds sensitivity to the market fluctuations in terms of beta. ii. HDFC Equity fund.O. ix.  To evaluate investment performance of mutual funds in terms of risk and return. INg dividend yield fund. Out of all mutual fund companies we have selected only two companies those are ING mutual fund and HDFC mutual fund.N fund . vii.I.  To find out the financial performance of mutual fund schemes. ING nifty plus fund. the researcher applied Sharpe Index. x. xi. HDFC Index fund(Nifty plan). Treynor and Jensen.5. vi.

1 Type of the study: • Descriptive study: The type of the study or research used in this project is a descriptive research design. The main objective of descriptive research is to describe the state of affairs as it exists at present. It mainly involves surveys and facts findings enquiries of different kinds. Descriptive study objective aim at identifying the various characteristics of a company problem under study. It can reveal potential relationships between variables with exploratory research. The major purpose of descriptive research is a description of the state of the affairs. Methodology refers to methods adopted to carry out the research and steps adopted to solve the problem finding solution 2. To analyze the performance of various schemes of mutual funds. Thus a descriptive study is a fact finding investigation with adequate interpretation. It is designed that it gathers descriptive information and provides information for formulating more sophisticated studies. In it we study the various steps that are generally adopted by a research in studying his research problem along with the logic behind them. Indian academy school of management studies 49 . It tends itself to the verifiable procedure of collection and analysis of data.  To provide valuable suggestions and recommendations.  To identify the sector where the mutual fund and how invested. It is the simplest type of research. The criteria for selecting this particular design are that.6. It is possible to develop to valid standards of comparison. as it exists at present. 2. It may be understood as a science of studying how research is done scientifically. The data collected is amenable to statistical analysis and has accuracy and significance. Methodology: Methodology is a way to systematically solve the research problem.6. There is a cause effective relationship. It focuses on particular aspects or dimensions of the problem studied. the problem of the project must be described and not arguable.

6.2.3 Sources of data: Unpublished sources: i. 2. In other words secondary source is the agency who publishes for use by others the data which was not originally collected and processed by it. Central and state government publication publishes the various statistics like crop production.6. wages expenses. The data can be governments or private offices can be collected from these are unpublished data. The second agency if and when it publishes and files such data becomes the secondary source to anyone who later uses these data. The secondary data is the data which is duplicate of primary data. the secret documents.2 Type of data: Secondary data: The data which is used for the research is secondary data. population. The research work. Published sources: i. statistic. Indian academy school of management studies 50 . “The data (published or unpublished) which have already been collected and processed by some agency or person and taken over from there and used by any other agency for their statistical work are termed as person and taken over from there and used by any other agency for their statistical work are termed as secondary data” as far as second agency is concerned. ii.

com Nytimes. Periodicals: ICFAI journals Internet: google. iii.7 Tools for analysis: 2. the indication is that stock is less risky in comparison to market. research berceuse. Standard deviation is used in the concept of risk of a portfolio of investments.com AMFI.3 Sharpe index: Indian academy school of management studies 51 . Negative beta is rare. By convention.1 Standard deviation: It is used to measure the variation in individual returns from the average expected return over a certain period. 2. Some private organization. more volatile or less volatile. market will have beta 1.7. 2. 2. higher standard deviation means a greater fluctuation in expected return. The commerce association.7. publishes the several data. If beta is zero then the risk is the same as that of the market. iv.0 Mutual fund is said to be volatile. universities publishes several data’s. If beta is greater than 1 the stock is said to be riskier than market.2 Beta: Beta measures the systematic risk and shows how prices of securities respond to the market forces. journals. If beta is less than 1.7. News paper.ii.com Value research online. It is calculated by relating the return on a security with return for the market.com News papers: financial express Company journals: Factsheets of ING investment and HDFC. Indian chamber of commerce federation are publishes several data. commerce and trade association. periodicals etc.

7.Sharpe index measures risk premium of a portfolio. The characteristics line has drawn a relationship between the market return and a specific portfolio without taking into consideration any direct adjustment for risk. Portfolio Average Return (R ) – Risk Free Rate of Interest (R ) p t Standard Deviations of the Portfolio Return Sharpe Index = 2.7. JM = Average return of the portfolio – SML Indian academy school of management studies 52 .5 Jensen Measures: It measures the difference between market risk and actuel performance of the fund. Sharpe index summarizes the risk and return of a portfolio in a single measure that categorizes the performance of funds on the risk-adjusted basis. It is also known as reward to volatility ratio and is defined as: Treynor Index = Portfolio Average Return (R )-Risk Free Rate of p Interest (R ) t Beta Coefficient of Portfolio 2.4 Treynor’s Index : Treynor’s model is on the concept of the characteristics straight line. relative to the total amount for risk in the portfolio. the portfolio over performance the market and vice versa. The larger the Sharpe Index.

9.2.8 Limitations of the study: The study also has the some limitations which are as follows:  The study is restricted to secondary data only  The time is the main constraint so limited period of time is spent on this study. CHAPTER SCHME: Chapter NO.  The support from the management side may be limited due to their pre occupied meetings and work. 2. conclusion and Indian academy school of management studies 53 . 1 2 3 4 5 Contents Introduction Research Design Profile of the organization Analysis and interpretation of data Summary suggestions.  Mutual fund industries are so developed as compared to stock market.  Not possible to get whole information because of their business secret and lack of awareness among people. of findings.

There are 29 mutual funds as on March 31st.600 cr (Table1).6 Bibliography (Annexure) CHAPTER THREE: 3. Phase II (19871992). Large sections of Indian investors are yet to be intellectuated with the concept. private and foreign players have started setting up mutual funds in India. which was the only player in the mutual fund industry up to 1987. 1. 2005 with Assets under Management (AUM) of rs. mutual funds are one of the fast-growing sectors in India. the government permitted public sector banks and financial institutions to join the fray. Hence. Phase III (1992-1997) and Phase IV (beyond 1997). Today. it is the prime responsibility of all mutual fund Indian academy school of management studies 54 . The main reason of its poor growth is that the mutual fund industry in India is new in the country. In 1987. Besides. Mutual fund industry started in India with the establishment of Unit Trust of India (1964). a vast majority of equity schemes outperformed the market. From 1993 onwards the industry was opened up for private participation. 1. The Indian Mutual Fund industry has grown tremendously in the last decade.1 PROFILE OF THE INDUSTRY: The Indian mutual fund industry has evolved over distinct stages. The growth of the mutual fund industry in India can be divided into four phases: Phase I (1964-87).00.49.000 cr during the year 1999-2000 recording a growth rate fo 65%. Thus. AUM crossed Rs. The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963.

with many foreign mutual funds Indian academy school of management studies 55 . Bank of India (Jun 90).700 crores of assets under management. the up with condition to market the product correctly abreast of selling.1 First Phase – from 1964-87: Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.companies.3 Third Phase . except UTI were to be registered and governed.1. 3. The end of 1993 marked Rs. Also. The industry now functions under the SEBI and (MutualFund)Regulations1996. 3.2 Second Phase .47.1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. Punjab National Bank Mutual Fund (Aug 89). 3.1. 1993 was the year in which the first Mutual Fund Regulations came into being. giving the Indian investors a wider choice of fund families.1987-1993 (Entry of Public Sector Funds): Entry of non-UTI mutual funds.6. At the end of 1988 UTI totally had Rs. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. a new era started in the Indian mutual fund industry.1. Indian Bank Mutual Fund of (Nov 89). SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87). under which all mutual funds. The mutual fund industry can be broadly put into four phases according to the development of the sector.004 as assets under management. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. LIC in 1989 and GIC in 1990. The number of mutual fund houses went on increasing. Bank of Baroda Mutual Fund (Oct 92). Each phase is briefly described as under.

835 crores (as on January 2003). One is the Specified Undertaking of the Unit Trust of India with AUM of Rs. and with recent mergers taking place among different private sector funds. the mutual fund can industry has entered its current phase of consolidation and growth.since February 2003 This phase had bitter experience for UTI. It is with registered with SEBI and functions under the Mutual Fund Regulations.setting up funds in India and also industry has witnessed several mergers and acquisitions.805 crores. The Specified Undertaking of Unit Trust of India. there were 33 mutual funds with total assets of Rs.153108 crores under 421 schemes. 3. 2004. sponsored by SBI.21. conforming to the SEBI Mutual Fund Regulations. which manage assets of Rs. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.29. there were 29 funds. The second is the UTI Mutual Fund Ltd.44. As at the end of January 2003. The Unit Trust of India with Rs. 1.000 crores of AUM and with the setting up of a UTI Mutual Fund.2 The major players in the Indian Mutual Fund Industry are: Indian academy school of management studies 56 . It was bifurcated into two separate entities. BOB and LIC. 3. functioning under an and administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. As at the end of September. PNB.541 crores of assets under management was way ahead of other mutual funds.4 Fourth Phase .76.1.

GROWTH IN ASSETS UNDER MANAGEMENT: Figure 1.4 STRUCTURE OF MUTUAL FUND INDUSTRY IN INDIA: MUTUAL FUND INDUSTRY Indian academy school of management studies 57 .

SEBI ASSOCIATION OF MUTAUL FINDS MUTUAL FUNDS SPONSOR BOARD OF TRUSTEES ASSET MANAGEMENT COMPANY CUSTODIA N INVESTOR S PUBLIC SECTOR PRIVATE SECTOR FI SPONSORED UTI BANKS SPONSORE D MUTUAL FUND SCHEMES Figure 1.5 3.3 Rating of Mutual fund schemes in mutual fund industry: Indian academy school of management studies 58 .

Its ranking is based on four criteria. There is a big scope for expansion. It currently ranks schemes in five categories. the top 10 percent are consideree five star. CRISIL Credit Rating nd Information Services of India Limited (CRISIL) carries out Composite Performance Rankings that cover all open-ended schemes that disclose their entire portfolio composition and have NAV information for at least two years.5 percent four star. and the last 10 percent one star. the next 40 percent average. the next 22.within each category. • We have approximately 29 mutual funds which is much less than US having more than 800. CRISIL. viz. US based. highest in the world. and the last 10 percent poor. thenext 20 percent good. Today most of the mutual funds are concentrating on the 'A' class cities. • Our saving rate is over 23%. the next 35 percent three star. and Liquid Schemes. the next 22. Only channelizing these savings in mutual funds sector is required. Number of foreign AMC's are in the que to enter the Indian markets like Fidelity Investments. the top 10 percent are considered vbery good. Balanced Schemes. 3. with over US$1trillion assets under management worldwide. Within each category.4 Some facts for the growth of mutual fund industry in India: • • 100% growth in the last 6 years. and Economic Times are three such institiutions whose rankings or evaluations are currently very popular. • Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. and asset size. • 'B' and 'C' class cities are growing rapidly. Value research India like CRISIL. liquidity. Debt Schemes. Gllit Schemes. Value Research India. viz.. risk-adjusted return of the scheme’s NAV.5 percent two star. value research India rates schemes in different categories. Soon they will find scope in the growing cities. Indian academy school of management studies 59 . Equity Schemes. The weights assigned to these criteria vary from category to category. Each scheme is assigned a risk grade and a return grade and a composite measure of performance is calculated by subtracting the risk grade from the return grade.. diversification of the portfolio.Mutual fund schemes are periodically evaluated by independent institutions. the next 20 percent below average.

1998. Currently.52. This is combined with a range of innovative options to deliver healthy returns combined with a high degree of security. It is the world's fourth largest financial services group. was incorporated on April 6. The AMC.AMFIINDIA.677 with Rs. Emphasis on better corporate governance. With a presence in 34 locations. we currently manage 21 schemes. (ING Group) and HDFC mutual fund(HDFC GROUP) 3. Indian academy school of management studies 60 . It is a joint venture of Vysya and ING. ING Investment Management (India) Pvt. 3. ING Vysya Mutual Fund aims to provide investors with the most practical and secure investment opportunities to invest their valuable savings. Trying to curb the late trading practices.• • • • SEBI allowing the MF's to launch commodity mutual funds. the fund offers four equity. 3. 1999 with the same named Trustee Company.2 ING Investment Management: In India ING Investment Management (I) Pvt Ltd has an investor base of over 1.97 crores as of June 30th. ’07 (SOURCE: WWW. five debt and two hybrid schemes to its investors.5. 5080.5 FOLLOWED BY THAT OF COMPANY Here in this project we considered two companies for analysis part ING Investment pvt. Ltd.ltd.1 ING Group management structure: ING Vysya Mutual Fund: ING Vysya Mutual Fund was setup on February 11. corporate and institutional clients in 50 countries.COM ). Introduction of Financial Planners who can provide need based advice. ING Group is known for its philosophy of 'keeping it simple' covering some 60 million private.5.

(ING Select Debt Fund). The rating is also not an opinion on the stability if the NAV of the fund. (Mahilanivesh) ING Dynamic Asset Allocation Fund was awarded “Most Innovative Product” by Asia Asset Monitor. The rating of the fund is not an opinion of the asset management company’s willingness or ability to make timely payments to the investor.ING Investment Management (I) Pvt Ltd has been associated with innovation and responsive adaptability with sharp minds at work. Financial markets: ING Vysya Bank Financial Markets is a leading player in the Indian Financial Markets providing one of the widest ranges of products for large corporate. ING Investment Management has enjoyed many firsts and has always maintained a pioneering outlook. First Asset Manager to launch a debt fund based on Credit risk with a portfolio based on credit monitor. • • • • • • • * The assigned rating of AAAf is valid only for ‘ING Floating Rate Fund’ and ‘ING Liquid Fund’. (ING Liquid Fund & ING Floating Rate Fund). small and medium enterprises as well as individual needs. 61 Indian academy school of management studies . Two CRISIL AAAf * products in Debt Fund space. ING Mutual Fund recently launched India’s first DAILY TRANSFER PLAN called Zoom Investment Pac (ZIP). Awarded “Abby Gold 2006” for its advertising Campaign for ING LION Fund. Supported by state-of-the-art systems and the capabilities of the ING Group. we offer competitive pricing and efficient execution across markets and a comprehensive suite of products. which could vary with market developments. A few achievements are highlighted below: • First Investment Manager to launch a packaged concept in Asset Management Industry. ING Mutual Fund has also pioneered a new reality show on television called Indian Investor of the Year. First Private Sector Mutual Fund to launch a concept dedicated to women. ING Investment Management has sealed a position of strength and is considered as one of the top contenders to challenge the market leaders.

to name a few. transactional and electronic banking products. Securitization: We advise our clients on securitising their assets with a view to sell them. capital and debt structuring and restructuring. including working capital finance. the bank has an advanced product portfolio that includes the following. including plain vanilla debt and structured dedt. The bank offers a wide array of client-focused corporate banking services. Financial advisory service: for mergers and acquisitions. we offer an entire range of trade finance products. trade and transactional services. thus giving the customer the advantage of being a full fledged Commercial Bank along with investment banking. As a Category I merchant banker registered with SEBI. investment banking services are provided to a range of Indian as well as offshore clients. lead manage and place. foreign exchange and cash management. assist in obtaining ratings for the portfolios & sell-down of the portfolio. local debt syndication and securitization: The bank is uniquely positioned to be able to advise. structuring portfolios.Wholesale banking: Wholesale Banking is a reflection of ING Vysya Bank's ability to provide its corporate clients in India a full range of commercial. For cross border transactions involving global clients. This includes onshore as well as offshore. private capital raising and structured financing. the investment-banking group works closely with ING Bank's global corporate finance and investment banking office. The product suite. Local debt distributin: both in loan and bond forms. Isnvestment banking. Our services include advisory. Trade finance and commodities: As an innovative solution provider of international and domestic trade flows of our clients. offered in close coordination with the ING global network of structured trade finance units includes Indian academy school of management studies 62 .

ING Group Welcome to ING Vysya Bank. Accounts and deposits: • • • Rupee savings accounts NRE and NRO savings accounts NRE and NRO current accounts Indian academy school of management studies 63 . Core objective is to provide integrated financial solution to the supply and distribution channels of our corporate clients. Export credit: ING Vysya provides extensive export credit for pre-shipment and postshipment requirements of exporter borrowers in rupees and foreign currencies. consumed by big manufacturers and thereafter sold to ultimate consumers through dealers. Private banking: believe that trust can be built over time by continuously providing quality advice to our customers. guarantees. Bill Discounting: Bill discounting involves financing of short-term trade receivables through negotiable instruments/ invoices discounting. supply chain financing. Private Banking Division. Chairman. Letter of credit: letter of credit facilities (inland/ foreign) are provided to the customers for meeting working capital requirement needs as well as for capital requirements purchases.documentary credit."-Michel Tilmant. bills/ invoices discounting. Our integrated global business in insurance. asset management and banking enables us to offer clients innovative financial solutions few others can match. pre/postexport finance and structured commodity finance. We also arrange discounting of bills under export LCs by overseas banks at competitive pricing with/ without recourse to the exporters. ING Asia Private Banking has been ranked as # 1 for Best quality advice in the Asia Money 2007 survey amongust clients with AUM exceeding 25 million. Supply chain financing: SCF refers to trade credit extended by the Bank to partners involved in comprehensive supply chain process (commodities to cash) commencing from conversion of raw material into parts/ components. This has gained considerable importance in recent past in view of self-liquidating in nature.

HDFC Mutual Fund: HDFC Mutual Fund was setup on June 30. 3. 2003.Foregn currency deposit: Earn Indian Interest Rates on your Foreign Currency deposits with our Foreign Currency Non-Resident deposit. as part of the RBI's liberalisation of the Indian Banking Industry in 1994. incorporated with the SEBI on December 10. The Trustee Company of HDFC Mutual Fund is HDFC Trustee Company Limited and AMC is HDFC Asset Management Company Limited.1999. Standard Life Investments Limited became the dedicated investment management company of the Standard Life Group and is owned 100% by The Standard Life Assurance Company. The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited'. India. with its registered office in Mumbai. Standard Life Investments Limited is one of the world's major investment companies and is responsible for investing money on behalf of five million retail and institutional clients worldwide.2 HDFC GROUP: The housing development finance corporation (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. With global assets under management of approximately US$126 billion as at May 15. In 1998.5. HDFC Bank commenced operations as a Scheduled Commercial Bank in january 1995. 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited. The products of HDFC Mutual Fund are as follows: • • • Equity Funds Balance Funds Debt Funds Apart from this it also provides the following value added services: Indian academy school of management studies 64 .

one amongst the firsts of the new generation. 2006 was Rs. The Bank was promoted by the Housing Development Finance Corporation Limited. governnments. mutual funds. 1. a premier housing finance company (set up in 1977) of India. HDFC PRODUCT RANGE: HDFC Bank India provides the following range of products: • Savings Account 65 Indian academy school of management studies . HDFC bank also have the different banking fuction: • • • Personal banking Wholesale banking NRI banking Branch network: Currently HDFC Bank has 753 branches. after the Reserve Bank of India allowed setting up of Banks in the private sector. Net Profit for the year ended March 31. Results of the latest quarter ended June 2007. was incorporated in August 1994. and all branches of the bank are linked on an online real-time basis. in 320 cities in India.716 ATMs. insurance companies.141 crores. partnerships. The bank offers many innovative products & services to individuals. corporates. 1. It is the pathbreaker in the indian banking sector.• • • SIP (Systematic Investment Plan) STP (Systematic Transfer Plan) SWAP (Systematic Withdrawal Advantage Plan) HDFC Bank : (NYSE: HDB). indicate that the bank continues to grow in a steady manner. tech-savvy commercial banks of India. trusts. financial institutions.

3 SPECIFIC DEPARTMENT WHICH YOU STUDIED: Indian academy school of management studies 66 .• • • • • • • HDFC Bank Preferred Sweep-In Account Super Saver Account HDFC Bank Plus Demat Account HDFC Mutual Fund HDFC Standard Life Insurance HDFC India innovative services • • • • • • • HDFC Phone Banking HDFC ATM HDFC Inter-city/Inter-branch Banking HDFC Net Banking HDFC International Debit Card HDFC Mobile Banking HDFC Bill Pay HDFC Bank Loans • • • • • HDFC Personal Loan HDFC New Car Loan and Used Car Loan HDFC Loan Against Shares HDFC Two Wheeler & Consumer Loan HDFC Home Loan 3.

power and telephone connections. It is a well equipped department which endeavours to provide efficient and timely services to its shareholders in share transfers and related operations. Thereafter. visitors visa.3. Karvy serves over 250 corporate clients and renders service to an investor base of Indian academy school of management studies 67 . operating licenses. it has been decided that the share registration and allied operations relating to the equity shares of the Company will be outsourced to Karvy Computershare Private Limited (Karvy) who are Category I Registrars & Transfer Agents registered with SEBI and possess almost 20 years experience in handling share registry operations. The main focus of activity is to enable investors in the manufacturing and services sectors to secure all clearances and approvals necessary to set up and operate business in the country from under one roof. factory buildings. social prerequisites. The Company has evaluated the option of outsourcing the investor service function in order to add further value and to overcome certain limitations like not being able to service shareholders directly across the counter at various places across the Country where the shareholders are based.2 INVESTOR SERVICES All share transfers and related operations have so far been conducted in-house by Hindustan Lever's Investor Service Department. The Department literally takes the investor by the hand and helps them walk through all formalities until the business is established.1 Investment service department: The Department provides investor needs and aftercare to both new and existing foreign and citizen enterprises through its One Stop Service Centre (link to How can we help you). 3. investors are paid periodic visits which enable interactions necessary to preempt any difficulties that they may encounter in their day to day operations. better infrastructure to serve the investors across the Country. the Company has come to the conclusion that it will benefit the shareholders if the investor service function is outsourced to an outside agency which has in addition to specialised expertise.3. residence and work permits as well as infrastructural facilities such as land. The assistance provided includes company registration. Accordingly. utilities. which is registered with the SEBI as a Category 2 Registrar. After a careful evaluation.3. This facility operates with liaison officers from various government and parastatal institutions that have a direct bearing in providing services to investors.

request for issue of duplicate share certificates. ING select stock fund (an open ended growth scheme) Objective: to provide long term capital appreciation from a portfolio that is invested predominately in equity and equity related securities. We are happy to inform you that all requisite steps in connection with shifting the investor service operations from Company's office at Navi Mumbai to Karvy's central office at Hyderabad have been completed and Karvy is fully operational in respect of the Company's share registry work with effect from 16th July. The Company has appointed M/s.Karvy Computershare Private Limited (Karvy) as Registrars and Transfer Agents with effect from 1st July.2004. therefore. In case adequate investment opportunities are not available due to valuation considerations etc. exchange of merged Company's shares. change of address. demat. Accordingly all operations/correspondence relating to share transfers and allied operations e. amongst the primary investment opportunities amongst the general investment universe.g. ING dividend yield fund :( an open ended equity scheme) Indian academy school of management studies 68 .over 16 million. transmission of shares.2004. You are. payment of dividend etc.2004. requested to send all documents/correspondence in relation to the above to Karvy at the following address after the said date: 3. It is the largest Registrar & Share Transfer Agents in the Country and serves the investors through its 193 branches across 135 cities.4 DISCUSSION ABOUT THE PRODUCTS THEY PRODUCE IS DESIRABLE: ING domestic opportunity fund:(an open ended equity scheme) Objective: to provide long-term capital appreciation from a portfolio that is primarily invested in companies. will be handled by Karvy and not by Company's office at Navi Mumbai wih effect from 16th July . which derive significant propotion of their revenue from domestic Indian market place/economy..

ING L. which offer high dividend yield. ING nifty plus fund :( an open ended indexed equity scheme) Objective: the objective of fund is to invest in companies whose securities are included in the S&P CNX Nifty index.O. which are financially sound but are undervalued.Objective: to provide medium to long term capital appreciation and / or dividend distribution by investing predominantly in equity and equity related instruments.B (competitive upcoming businesses): (open-ended balanced scheme) Indian academy school of management studies 69 . ING tax saving fund :( an open ended indexed equity savings scheme) Objective: to generate medium to long-term growth of capital along with income tax rebates ING ATM (against money market): (open-ended diversified equity scheme) Objective: to generate capital appreciation from a diversified portfolio of equity and equity related instruments by investing in the stock of companies.I. The level of risk is somehow what higher than a fund focused on large and liquid schemes. ING midcap fund :( an open ended equity scheme) Objective: an open-ended scheme.N. ING C. :( Open ended diversified equity scheme) Objective: it seeks to provide medium to long-term capital appreciation by investing in stocks across the entire market capitalization. seeking to provide long-term growth of capital at controlled level of risky by investing primarily in midcap stocks.U.

ING liquid plus fund: Objective: The scheme would aim to provide an investment avenue for investors preferring good liquidity and an investment horizon of 2 to 6 months. money market instruments. ING liquid fund: Objective: to provide reasonable returns while providing a high level of liquidity and low risky by investing primarly in money market and debt securities. The aim is to optimize returns while providing liquidity. ING floating rate fund: Indian academy school of management studies 70 . ING Dynamic asset: Objective: the primary investment objective of scheme is to seek to generate capital appreciation by actively investing in equity/ equity related securities. Exposure to debt securities would be in line with the fund manager’s caution on the equity market. The scheme may invest in debt. The scheme would be able to achieve its objectives by investing in a portfolio of money market and debt instruments. ING liquid call fund: Objective: The aim is to optimize returns and take advantage of phases of high overnight rates and inverted curves while providing liquidity .Objective: seeking to provide long-trm capital appreciation by investing predominantly in a diversified portfolio of equity and equity related securities of companies of small market capitalization. to the extent permitted under the regulations. In case of –ve view on equity markets the fund manager may choose to have 100% allocation to debt securities.

ING MIP Fund plan-A and ING MIP Fund plan-B Objective: The primary objective of the scheme is to generate regular income by investing in diversified portfolio of debt and money market instruments of varying maturities and at the same provide continuous liquidy along with adequate safety. The scheme will not make investment in any other type of security such shares. Under normal circumstances 65% of corpus will be invested in floating rate instruments and upto 35% in fixed rate instruments. safety and liquidity. ING Gilt fund: Objective: The primary objective of the scheme is to generate relatively risk free return by investing in sovereign instruments issued by the central/state government as defined u/s of public debt act 1944. ING Global Real Estate fund: Indian academy school of management studies 71 . ING select debt fund: Objective: To generate income by investing in higher yielding fixed income securities by maintaining a higher expose in AA rated securities and money market instruments of varying maturity dates with view to maximize income while maintaining optimum balance of yield. Under plan B the scheme will also seek to generate capital appreciation by investing a smaller portion of corpus in equity and equity related securities. debentures etc.Objective: the primary objective of scheme is to provide income consistent with the prudent risk from a portfolio comprising substantially of floating rate instruments. ING income fund: Objective: to generate attractive income by investing in a diversified portfolio of debt and money market instruments of varying maturities. and at the same time provide continuous liquidity along with adequate safety.

HDFC Premier Multi-Cap fund: Objective: To generate capital appreciation in long term through equity investment by investing in a diversify portfolio of MidCap and Large Cap ‘blue chip’ companies. HDFC Equity fund: Objective: To achieve capital appreciation. HDFC Core & Satellite Fund: Objective: To generate capital appreciation through equity investment in companies whose shares are quoting at prices below their true value. HDFC Index fund: Indian academy school of management studies 72 .Objective: The primary aim of the scheme is to seek capital appreciation by investing predominantly in ING Global Real Estate Securities Fund. HDFC MUTUAL SCHEMES: HDFC Growth fund: Objective: To generate long term capital appreciation from a portfolio that is predominantly invested equity and equity related instruments. HDFC Top 200 schemes: Objective: To generate long term capital appreciation from a portfolio of equity and equity related instruments primarily drawn from the companies in BSE 200 index. HDFC Capital Builder fund: Objective: To achieve capital appreciation in long term. The scheme may invest a certain portion of its corpus in money market instruments in order to meet liquidity.

debt and money market instruments. HDFC Prudence Fund: Objective: To provide periodic returns and capital appreciation over a long period of time from a judicious mix of equity and debt to minimize capital erosion. HDFC Balanced fund: Objective: To generate capital appreciation along with current income from a combined portfolio of equity. Sensex Plus Plan: to invest 80 to 90% of the assets of the plan in companies whose securities are included in sensex and between 10 to 20% of the net assets in companies whose securities are not included in the sensex. HDFC Arbitrage fund: Objective: To generate income through arbitrage opportunities between cash and derivative segment and by deployment of surplus cash in debt securities and money market instruments. HDFC Long Term Advantage fund: Indian academy school of management studies 73 .Objective: Nifty plan: to generate returns those are commensurate with the performance of nifty. Sensex plan: to generate returns those are commensurate with the performance of nifty. subject to tracking errors. subject to tracking errors. HDFC Children’s gilt fund: Objective: To generate long term capital appreciation.

yield and security. HDFC Multiple Yield Fund: Objective: To generate positive returns over medium time frame with low risk of capital loss over medium time frame. yield and liquidity. HDFC MF Monthly Income Plan: Objective: To generate the regular return through investment primarily in debt and money market instruments. HDFC Income Fund: Objective: To optimize returns while maintaining a balance of safety. HDFC Short Term Plan (STP): Objective: To generate regular income through investment in debt securities and money market instruments. HDFC High Interest Fund (HHIF) Objective: To generate income by investing in a range of debt and money market instruments of various maturity dates with a view to maximize income with safety.Objective: To generate long term capital appreciation from a portfolio that is predominantly invested equity and equity related instruments. HDFC Tax Saver: Objective: To achieve long term growth of capital. HDFC Liquid Fund (HLF): Indian academy school of management studies 74 .

HDFC Floating Rate Income Fund: Objective: To generate regular income through investment in a portfolio comprising substantially of floating rate debt/money market instruments. HDFC Cash Management Fund: Objective: Savings and call plan. through a judicious portfolio mix comprising of money market and debt instruments. HDFC Gilt Fund: Objective: To generate credit risk-free return through instruments in sovereign securities issued by the central government and or a state govern. CHAPTR FOUR:- Indian academy school of management studies 75 . fixed rate debt/ money market instruments swapped for floating rate return and fixed rate debt securities and money market instruments.Objective: To enhance income consistent with a high level of liquidity.

• Type of data: o Secondary data: “The data (published or unpublished) which have already been collected and processed by some agency or person and taken over from there and used by any other agency for their statistical work are termed as person and taken over from there and used by any other agency for their statistical work are termed as secondary data”.  To examine the funds sensitivity to the market fluctuations in terms of beta.  To find out the financial performance of mutual fund schemes. Objectives:  To evaluate investment performance of mutual funds in terms of risk and return.” 2.  To analyze the performance of various schemes of mutual funds. Statement of the problem: “Analyses the performance of mutual fund with reference to mutual fund industry. • Type of the study: o Descriptive study: The type of the study or research used in this project is a descriptive research design. the theoretical parameters as suggested by Sharpe.“DATA ANALYSIS AND INTERPRETATION”. Treynor and Jensen. It may be understood as a science of studying how research is done scientifically. 3. Indian academy school of management studies 76 . Methodology: Methodology is a way to systematically solve the research problem. The main objective of descriptive research is to describe the state of affairs as it exists at present. 1. It mainly involves surveys and facts findings enquiries of different kinds.  To appraise investment performance of mutual funds with risk adjustment.

36.1 ING Domestic Opportunities Fund: Nature of the scheme: An open ended equity scheme Scheme objective : To provide long term capital appreciation from a portfolio that is Primarily invested in companies. No entry load on Investment of more than 1 cr. 0.1 Date of launch Fund size : 12-09-2002 : 112.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr.1 cr.28 : BSE-100 Indian academy school of management studies 77 . 16.28 : Rs.5000 and in multiples of Rs.69 : Rs. which derive significant Proportion of their revenues from domestic Indian market economy. 36. Exit load/CDSC : 1% on the investment below 1 cr. : Rs.25% for investment of less than Rs.ANALYSIS AND DISCUSSION: 4.29 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Bonus Option Benchmark Load structure Entry load : 2. Investment pattern: Minimum Rs. And redeemed within 180 days.

34 2.79 1.49 3.70 3.4.1Port folio construction as on 31th January 2008: Assets under Management: Rs. 112.construction steel Passenger / utility vehicles cigarettes Transmission towers Oil exploration/production Construction projects Consumer electronics Housing finance Plastic products NBFC Cement Computer-hardware Pharmaceuticals Gas transmission/marketing Fabrics and garments Fertilizers-nitrogenous Power Industrial equipment and others % of portfolio 15.01 1.64 2.59 17.27 9.92 1.76 6.74 4.68 5.82 1.50 2.09 2.1.08 4. Table 1.1 Sectors and companies Banks Refineries/marketing Telecom – services Power equipments Diversified.64 1.29 crores.5 Indian academy school of management studies 78 .11 2.80 1.40 3.98 i.15 2.

19 because it measures the reward to the total risk.99 Interpretation: By comparing these three ratios the fund giving fair return that is 0.918 23. Indian academy school of management studies 79 .3 Sharpe ratio Treynor ratio Jensen ration 0.2 Fund performance as on 31th January 2008: Table 1.04 4.31 Benchmark rturn 17.1.02 41.19 43.58 42.12 38.28 46.918 by taking into consideration of total risk of 23.69 returns by talking into consideration of total market risk this fund gave the good return but it can’t perform up to the benchmark return for last two years so it gave negative result in the Jensen ratio. By evaluating treynor ratio this fund performing well it gives 23.3 Quantitative data: Table 1.69 -4.4.92 42.1.10 31.95 32.2 Period Last one year Last two year Last three year Last four year Last five year Actual return 16.

25% for investment of less than Rs. 36. No entry load on Investment of more than 1 cr.55 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Entry load : 2.2 ING Select Stock Fund: Nature of the scheme: An open ended growth scheme Scheme objective : To provide long term capital appreciation from a portfolio that is Primarily invested in equity and equity related securities.5000 and in multiples of Rs. 0. Exit load/CDSC : 1% on the investment below 1 cr.44 : BSE-100 Indian academy school of management studies 80 . And redeemed within 180 days. Investment pattern: Minimum Rs. : Rs.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr.1 cr.1 Date of launch Fund size : 06-05-1999 : 36.4. 19.80 : Rs.

2.36.90 1.4 Sectors and companies Banks Refiniries/marketing Computers-software Telecom-services Steel Financial institutions Diversified-constructions Power equipments Housing finance Construction projects Cement Oil exploration/production Industrial minarals Cigarates Residential/commercial/sez projects Construction civil Plastic products Fabrics and garments NBFC Passenger/utility vehicles Pharmaceuticals Printing and publishing Ship building Stock broking and allied Oil exploration CBLO/Repo/FD/Cash/Other assets % portfolio 11.81 2.36 8.88 2.2.12 81 Indian academy school of management studies .33 4.49 8.72 31.44 2.84 1.86 1.24 4.4.56 4.67 2.84 1.95 32.86 1.47 2.5 Period Last one year Last two year Actual return 17.69 3.27 1.85 Benchmark return 17.06 3.55crores: Table 1.27 6.2 Fund performance as on 31th January 2008: Table 1.81 1.88 6.04 5.80 2.50 3.99 1.90 1.1 Portfolio construction as on 31th January 2008: Asset under management Rs.

Because it gave less negative value -1. This fund consistently performing well.92 42.3 ING Dividend Yield Fund: Nature of the scheme: An open ended equity scheme.Last three year Last four year Last five year 41.01. Scheme objective : To provide long term capital appreciation and / or dividend Indian academy school of management studies 82 .94 Interpretation: By comparing these ratios the sharp ratio shows that the fund performing better and giving fair return that is 0.58 22.6 Sharp ratio Treynor ratio Jensen ratio 0.07 38.2.88 -1. it shows that fund generating good returns.3 Quantitative data: Table 1.17 38.49 4. 4.88 by considering market risk of 1.83 16.9466.9466 23. by evaluating treynor ratio this fund able to give good returns that is 23.94.

1 Portfolio construction as on 31th January 2008: Asset under management Rs.distribution by investing predominantly in equity and equity related instruments. 15.89 crores: Table 1. 13.1 Date of launch Fund size : 24-10-2001 : 28. which offer high dividend yield.25% for investment of less than Rs.3.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr : Rs.74 : Rs.12 : BSE-100 4. And redeemed within 180 days.5000 and in multiples of Rs.1 cr. Investment pattern: Minimum Rs. 15.89 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Bonus option Benchmark Load structure Entry load : 2.12 : Rs.7 Indian academy school of management studies 83 . No entry load on investment of more than 1 cr. Exit load/CDSC : 1% on the investment below 1 cr. 0.28.

Sectors and companies Banks Refineries/marketing Fertilizers-nitrogenous Electrodes Computer software Fertilizers-phosphatic LPG/CNG/PNG/LNG SUPPLIERS Motor cycles/scooters Shipping Diversified consumer goods Oil exploration/ production Industrial minerals Axles Ship building Spinning cotton/blended Steel Steel products Cement Stock broking and allied Petrochemicals NBFC CBLO/Repo/FD/Cash/Other assets

% Portfolio 15.26 8.71 7.14 5.79 5.40 4.70 4.53 4.49 4.48 4.30 4.27 3.68 3.08 2.85 2.04 1.90 1.87 1.62 1.11 0.70 0.09 5.11

4.3.2 Performance of fund as on 31 th 2008: Table 1.8 Period Actual return Benchmark return

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Last one year Last two year Last three year Last four year Last five year

15.77 28.14 35.08 40.02 19.97

17.95 32.12 38.92 42.58 43.03

4.3.3 Quantitative data: Table 1.9 Sharp ratio Treynor ratio Jensen ration 0.874 33.48 -6.19

Interpretation: By comparing these ratios the sharp ratios shows that the fund performing well and gives return like 0.874 by taking total risk 26.07 by evaluating treynor ratio this fund able to give good return 33.48 by considering market risk of 0.83. This fund gave Jensen of -6.19 more – ve value because first and last year it perform poor.

4.4 ING L.I.O.N: (Large cap, Intermediate cap, Opportunities, New Offering) Fund:
Nature of the scheme: An open ended diversified equity scheme.

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Scheme objective

: To provide medium to long term capital appreciation by investing In stocks across the entire capital market capitalization range.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1 Date of launch Fund size : 28-12-2001 : Rs.53.96 Crores

NAV per unit as on 31th January 2008 Growth Option Dividend Option Bonus option Benchmark Load structure Entry load : 2.25% for investment of less than Rs,1 cr. No entry load on investment of more than 1 cr. Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days, 0.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr. : Rs. 16.07 : Rs. 16.07 : Rs. 16.07 : BSE-100

4.4.1 Portfolio construction as on 31th January 2008: Asset under management Rs. 53.96 crores: Table 1.10
Indian academy school of management studies 86

44 Benchmark return 17.12 38.00 1.58 37.2 Performance of fund as on 31 th 2008: Table 1.44 7.79 1.11 Period Last one year Last two year Last three year Last four years Last five years Actual return 15.14 0.36 2.82 40.76 2.20 8.52 2.12 25.09 4.95 32.35 1.20 26.85 2.4.06 3.74 35.48 1.03 3.08 4.78 2.72 3.07 4.92 42.36 2.75 4.35 1.11 4.78 2.96 1.84 6.Sectors and companies Banks Refineries/marketing Computer –software Telecom-services Steel Financial institutions Diversified-construction Power equipment Housing finance Pharmaceuticals Construction projects Cement Residential/commercial/sez projects cigarettes Oil exploration/production Fabrics and garments Gas transmission/marketing Industrial minerals Passenger/utility vehicles Ship building Plastic products NBFC Stock broking/allied Oil exploration Fertilizers-phosphatic Transmission towers CBLO/Repo/FD/Cash/Other assets % portfolio 13.16 5.25 2.3 Quantitative Data: Indian academy school of management studies 87 .4.91 5.

Investment pattern: Minimum Rs. shows that this fund is performing well. 4.1 Date of launch Fund size : 23-02-2002 : Rs.5000 and in multiples of Rs. By compairing treynor ratio it shows that the fund gave the more return of -3.12 Sharp ratio Treynor ratio Jensen ratio 0.Table 1.10.92 Interpretation: This fund gave the return of 0.5 ING Nifty plus Fund: Nature of the scheme: An open ended index linked equity scheme.90 Crores NAV per unit as on 31th January 2008 Growth Option : Rs.64 -3.982 24.982 with total risk of 24. 25. Scheme objective : The objectives of the fund is to invest in companies whose Securities are included in the S & P CNX Nifty Index.08.92 which shows that the fund can’t out perform even for one time.78 Indian academy school of management studies 88 .

90 crores: Table 1.47 7. And redeemed within 180 days. 17. No entry load on investment of more than 1 cr.60 Indian academy school of management studies 89 .13 Sectors and companies Banks Telecom-services Refineries/marketing Computers-software Oli exploration/production Power % Portfolio 11.78 : S & p CNX Nifty Index.25% for investment of less than Rs.1 cr.07 8.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr.20 10. 0.Dividend Option Bonus option Benchmark Load structure Entry load : Rs.70 9. 4.36 11.5. 10.16 : Rs. 25. Exit load/CDSC : 1% on the investment below 1 cr.1 Portfolio construction as on 31th January 2008: Asset under management Rs. : 2.

86 2.18 1.83 35.69 1.5.85 27.14 Period Last one year Last two year Last three year Last four year Last five year Actual return 11.3 Quantitative Data: Indian academy school of management studies 90 .5.2 Performance of fund as on 31 th 2008: Table 1.30 1.10 0.39 7.66 37.89 1.46 1.44 25.60 2.57 30.70 33.21 4.43 2.57 3.Power equipments Steel Diversified-construction Cigarettes Housing finance Pharmaceuticals Cement Residential/commercial/sez project Aluminium Diversified-consumer goods Copper & copper products Passenger/utility vehicles Motor cycles/scooters Gas transmission/marketing Commercial vehicles T V broadcosting and software production CBLO/Repo/FD/Cash/Other assets 6.39 4.53 1.17 Benchmark return 13.53 0.44 35.38 1.09 1.26 22.35 4.

07. by evaluating treynor ratio. Scheme objective : The objectives of the fund is to generate medium to long term Growth of capital along with income tax rebate. fund performing well during five years history with total risk of 26.15 Sharp ratio Treynor ratio Jensen ratio 0.91 and fund performing well during five years of history because it gaves very less difference between actual and benchmark return -0.16 -0.6 ING Tax Savings Fund: Nature of the scheme: An open ended equity linked savings scheme.76 Crores NAV per unit as on 31th January 2008 Growth Option : Rs. 4.356 Interpretation: This fund gave the more sharp ratio that is 0.939 23. 29.37 Indian academy school of management studies 91 .1 Date of launch Fund size : 28-03-2002 : Rs.16 with little more market risk of 0.Table 1.5000 and in multiples of Rs.58. the fund gave return of 23. Investment pattern: Minimum Rs.939 showed that.356.

0.45 3. 14.4 : CNX Midcap : 2.Dividend Option Bonus option Benchmark Load structure Entry load : Rs.49 : Rs.70 7.16 Sectors and companies Construction projects Pharmaceuticals Banks LPG/CNG/LNG SUPPLIER Refineries/marketing Power equipments Trading Personal care Paints Fertilizers-phosphate Residential/commercial/sez projects Indian academy school of management studies % Portfolio 8.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr.40 6.1 Portfolio construction as on 31th January 2008: Asset under management Rs. 4.64 4. No entry load on investment of more than 1 cr.54 3. And redeemed within 180 days.45 3.69 4.6.25% for investment of less than Rs.41 3.77 4.76 crores: Table 1.28 5. 29.1 cr. Exit load/CDSC : 1% on the investment below 1 cr.36 92 . 58.

32 Benchmark return 18.18 Sharp ratio Treynor ratio 0.17 Period Last one year Last two year Last three year Last four year Last five year Actual return 0.89 1.2 Performance of fund as on 31 th 2008: Table 1.64 Indian academy school of management studies 93 .50 1.03 3.Financial institution Ship building Industrial minerals Plastic products Fabrics and garments Hotels Stockbroking and allieds Steel Fertilizers and nitrogeneous Steel products Retailing Industrial equipment Printing and publishing Sugar Electrodes Computer software Oil exploration Air conditioner NBFC Aluminium CBLO/Repo/FD/Cash/Other assets 3.89 2.49 1.93 1.36 4.62 5.6.52 1.33 0.63 49.28 32.30 38.38 2.50 1.95 2.6.42 36.3 Quantitative data: Table 1.03 3.90 1.31 33.55 2.17 2.63 2.37 46.94 1.60 4.741 20.02 2.39 38.06 1.09 0.

100 thereafter. 4. 68.01. 33. Date of launch Fund size : 11-09-2000 : Rs. That is this fund gave the return of 0. Because of new category og fund the Jensen ratio also very less that is -9.432 : Rs.100 thereafter.1000 and in multiples of Rs.707 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Indian academy school of management studies 94 : Rs.714 with risk of 26. For existing investor Rs.518 shows that fund performance not able to beat the benchmark return.Jensen ratio -9.894.518 Interpretation:Sharp ratio shows the reward to total risk associated with fund.64 because they have to create awqrness of the fund to the people. Investment pattern: for new investor Rs. the treynor ratio shows that the fund performance by considering market risk it gave less return 20.714 : Sensex .7 HDFC Growth Fund: Nature of the scheme: An open ended growth scheme. Scheme objective : The objectives of the fund is to generate long term capital Appreciation from a portfolio that is invested predominantly in Equity and equity related instruments.5000 and in multiples of Rs.

Indian academy school of management studies % Portfolio 6.66 95 .7.33 1. and no exit load on the investment of more than 5 cr. Exit load/CDSC : 1% on the investment below 5 cr.1 Portfolio construction as on 31th January 2008: Asset under management Rs. And redeemed within 365 days.14 5.58 47.53 5.32 4. Jindal Saw ltd.25% for investment of less than Rs.02 4.15 3.35 4.Entry load : 2.19 Sectors or industry Petroleum products Banks (state bank of india) Consumer non durable goods Pharmaceuticals Finance Banks (icici bank) Telecom services Industrial capital goods Industrial capital goods Industrial capital goods Total of ten equity holdings Total equity and equity related holdings ICICI Bank ltd. 4.707 crores: Table 1.60 93.5 cr.30 3. 894.68 4. No entry load on investment of more than 5 cr.88 5.80 3.

7.7.006 shows that the fund performing better during five year history with the tatal risk of 7.25 39.32 51.72 Benchmark return 13. by evaluating Treynor ratio the fund gave the return of Indian academy school of management studies 96 .49 25.42 29.24 19.20 Period Last one year Last two year Last three year Last four year Last five year Actual return 16.61 4.3 Quantitative data: Table 1.89 42.00 30.55 39.707cr 4.Tatal debt/money market instrument Other current assets (Repo and CBLO) Grand total Net assets 4. 4.86 100 894.21 Sharp ratio Treynor ratio Jensen ratio 4.39 Interpretation: This fund gave the more sharp ratio.2 Performance of fund as on 31 th 2008: Table 1.11 40.75.89 8.99 1.

30.4. 188.420 : Rs. Exit load/CDSC : Nil : Rs.5000 and in multiples of Rs. 716 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure: Entry load : 2. 4.444 : S & P CNX 500 Indian academy school of management studies 97 .25% for investment of less than Rs. for existing investor Rs. the Jensen gave the positive return of 8.100 thereafter.1000 and in multiples of Rs.30 it shows that actual return is more than benchmark return during 5 year history because it is difference between actual and benchmark return.100 thereafter.003 it shows that even though in volatile condition the fund perform well. 49.89 by considering the beta value of 1. Date of launch Fund size : 01-01-1995 : Rs.5 cr. Scheme objective : The objectives of the fund is to generate long term capital appreciation Investment pattern : For new investor Rs. No entry load on investment of more than 5 cr.8 HDFC Equity Fund: Nature of the scheme: An open ended growth scheme.

63 4. 4.73 4.30 3.42 4.50 3.29 3.01 1.20 3.68 Indian academy school of management studies 98 .1 Portfolio construction as on 31th January 2008: Asset under management Rs.68 1.14 3.4.27 98.8.92 3.22 Sectors and industry banks Media and entettainment Industrial capital goods Industrial capital goods Banks Pharmaceuticals Consumer non durables Pesticides Pharmaceuticals Industrial capital goods Total equity holdings Total equity and equity related holdings Jindal saw ltd. Total debt/money market instrument % Portfolio 9.716 crores: Table 1.09 43.

98 8.74 32.44 Interpretation: This fund gave the sharp ratio of 3.74 that is reward of 3.98 means it gave the good Indian academy school of management studies 99 .31 100 4716 cr 4.47 with risk of 7-77% and giving good return to the investor.8.23 Period last one year last two year Last three year Last four year Last five year Actual return 9.42 Benchmark return 14.43 53.24 Sharp ratio Treynor ratio Jensen ratio 3.13 21.34 24.02 40.94 28.3 Quantitative data: Table 1.2 Performance of fund as on 31 th 2008: Table 1.Other Current Aseets Grand total Net assets 0. Treynor ratio gave the value of 32.98 42.46 43.99 4.8.17 34.

26 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Entry load : 2. for existing investor Rs.9 HDFC Top 200 Fund: Nature of the scheme: An open ended growth scheme.return with overcoming market risk of 0. Date of launch Fund size : 11-10-1996 : Rs.858 : BSE Sensex .100 thereafter. No entry load on investment of more than 5 cr.363.44. 4.1000 and in multiples of Rs.718 : Rs.883 and succeed in the performance. Scheme objective : The objectives of the fund is to generate long term capital Appreciation from a portfolio of equity and equty-linked Instruments primarily drawn from the companies in BSE 200 index Investment pattern: For new investor Rs. 48.5 cr. Indian academy school of management studies 100 : Rs.100 thereafter. The Jensen ratio measure that fund beat the benchmark return and gave the return of 8.5000 and in multiples of Rs.25% for investment of less than Rs.2. 147.

52 3. and no exit load on the investment of more than 5 cr.29 4.26 crores: Table 1.10 96.42 1.75 6.63 0. ICICI bank Ltd.15 2.70 2.48 Indian academy school of management studies 101 .65 3.65 41.Exit load/CDSC : 1% on the investment below 5 cr.363.25 Sectors and industry Banks (ICICI Bank) Petroleum products Software Consumer non durables Industrial capital goods Banks(SBI) Pharmaceuticals Telecom services Total of top ten equity holdings total equity and equity related holdings Debt/money market instrument Rabo india finance privaye ltd.9.05 % Portfolio 8. 4.1 Portfolio construction as on 31th January 2008: Asset under management Rs.66 3. 2. And redeemed within 365 days. total debt/money market instrument 0.

22 Interpretation: This fund perform well and gave the sharp value of 4.27 Sharp ratio Treynor ratio Jensen ratio 4.17 4.9.79 32.23 21.363.25 and treynor ratio shows that the fund succeed in overcoming market risk and gave return of Indian academy school of management studies 102 .2 Performance of fund as on 31 th 2008: Table 1.65 4.11 by considering total risk 7.Other Current Assets(including reverse repos’/CBLO Grand total Net Assets Net assets (in laks) 2.09 53.43 8.00 2.75 31.75 31.86 36.17 34.326.26 Period Last one year Last two year Last three year Last four year Last five year Actual return 15.3 Quantitative data: Table 1.9.47 43.24 Benchmark return 17.47 100.26 236.93 42.

4.43% and Jensen gave positive return 8.22 means that fund beat the benchmark return in it’s five year history.100 thereafter.25% for investment of less than Rs. 88. : Rs.100 thereafter.1000 and in multiples of Rs.5000 and in multiples of Rs.510 : S & P CNX 500 Indian academy school of management studies 103 .5 cr.367 : Rs.10 HDFC Capital Builder Fund: Nature of the scheme: An open ended growth scheme.750. 31. No entry load on investment of more than 5 cr.63 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Entry load : 2. Date of launch Fund size : 01-02-1994 : Rs. Scheme objective : The objectives of the fund is to generate long term capital appreciation in long term Investment pattern: for new investor Rs.43. for existing investor Rs.

10.06 5.Exit load/CDSC : Nil 4.26 crores: Table 1.363.47 4.18 95.94 3.02 3.2.93 3.11 6.54 4.1 Portfolio construction as on 31th January 2008: Asset under management Rs.12 4.74 104 .43 46.46 4.28 Sectors and industry Banks Industrial products Banks Industrial capital goods Auto ancillaries Industrial capital goods Pharmaceuticals Ferrous metals Industrial products Chemicals Total top ten equity holdings Total equity and equity related holdings Indian academy school of management studies % portfolio 6.

10. Total debt/money market instruments Other current Assets(Including reverse repo’s/CBLO Grand total Net assets 1.17 34.29 33.17 -9.27 Benchmark return 14.29.10.89 37.17% with considering market risk of 0.98 2.98 1.99 4.29 Period Last one year Last two year Last three year Last four year Last five year Actual return 14.28 100.Debt/money market instruments Jindal saw Ltd.30 Sharp ratio Treynor ratio Jensen ratio 4.09 36.8708 and able to beat the market risk . Indian academy school of management studies 105 .3 Quantitative data: Table 1.98 42. treynor gave the return of 33.94 28.00 750.2 Performance of fund as on 31 th 2008: Table 1.13 21.50 52.56 30.20 Interpretation: This fund able to compensate the risk and possible of giving return of 4.63 4.

100 thereafter. Indian academy school of management studies 106 .20 shows that the fund beat the benchmark return and gave the good return to the investors.1000 and in multiples of Rs. Scheme objective : The objectives of the fund is to generate returns that are commensurate With the performance of the sensex. 4. for existing investor Rs.5000 and in multiples of Rs. Date of launch Fund size : 17-07-2002 : Rs. And redeemed within 365 days.100 thereafter.2977 : Sensex Exit load/CDSC : 1% on the investment below 5 cr.11 HDFC Index Fund:(Sensex plan): Nature of the scheme: An open ended index linked scheme. Investment pattern: for new investor Rs. 154. subject to tracking record.78.Jensen gave the value of 9.02 Crores NAV per unit as on 31th January 2008 Growth Option Benchmark Load structure Entry load : Nil : Rs.

31 Sectors and industry Pertrolium products Banks(ICICI) Industrial capital goods Software Finance Telecom services Banks(SBI) Consumer Non durables Bank(HDFC) Telecom communication) services % Portfolio 14.39 7. 4.24 3.58 Indian academy school of management studies 107 .68 (Reliance 3.and no exit load on the investment of more than 5 cr.02 5.11. 78.02 crores: Table 1.29 4.58 4.95 6.1 Portfolio construction as on 31th January 2008: Asset under management Rs.73 4.85 10.

37 36.37 27.68 Benchmark return 14.50 4.32 Period Last one year Last two year Last three year Last four year Last five year Actual return 8.Total top ten equity holdings Total equity and equity related holdings Other Current Assets(Repo/CBLO) Grand total Net Assets 65.69 108 Indian academy school of management studies .29 98.33 Sharp ratio Treynor ratio Jensen ratio 2.11.62 22.34 32.02 crs.11.45 -10.75 42.59 1.47 18.41 100 78.43 39. 4.64 44.68 35.2 Performance of fund as on 31 th 2008: Table 1.3 Quantitative data: Table 1.

Interpretation: This fund able to compensate the risk and possible to give the return of 2. Investment pattern: for new investor Rs.69.45 with beta of 0. Date of launch Fund size : 17-07-2002 : Rs. Nature of the scheme: An open ended index linked scheme. for existing investor Rs. treynor gave the normal return of 22.949 by considering Jensen ratio we come to know that the fund has not performed well during five year of history which gave the –ve value of -10. 4. Scheme objective : The objectives of the fund is to generate returns that are commensurate with the performance of the nifty subject to tracking record.5000 and in multiples of Rs. 46.1000 and in multiples of Rs.6758 : S & P CNX Nifty .100 thereafter.6.12 HDFC Index Plan (Nifty Plan).100 thereafter.49.42 crores NAV per unit as on 31th January 2008 Growth Option Benchmark Load structure Indian academy school of management studies 109 : Rs.

42 crores: Table 1.94 5. 49.31 4.83 6. 4.1 Portfolio construction as on 31th January 2008: Asset under management Rs. And redeemed within 365 days.Entry load : Nil Exit load/CDSC : 1% on the investment below 5 cr.14 4.05 3.50 Indian academy school of management studies 110 .12.34 Sectors and industry Pertoleum products Oil Telecom services(Bharati airtel) Power Banks(ICICI Bank) Telecom services(reliance communication) Banks(SBI) Industrial capital goods(Larsen and Turbo) % Portfolio 11.87 3. and no exit load on the investment of more than 5 cr.35 5.

12.47 37.67 40.31 2.42 crs.06 17.85 4.12.21 96.13 35. 4.91 31.66 3.35 Period Last one year Last two year Last three year Last four year Last five year Actual return 7.91 51.85 31.36 Sharp ratio Treynor ratio 2.45 23.Industrial capital goods(BHEL) Ferrous metals Total of top ten equity holdings Total of equity and equity related holdings Other Current Assets(Includind Repo/CBLO) Grand total Net Assets 3.2 Performance of fund as on 31 th 2008: Table 1.90 27.3 Quantitative data: Table 1.06 Indian academy school of management studies 111 .34 100 49.26 Benchmark return 13.86 34.

The funds are not able to cross the benchmark return so fund houses should concentrate on the market conditions.45% with risk of 7. CHAPTER FIVE: 5. Some funds are not able to perform well because of total risk involved in the funds.06 with beta of 0.1 SUMMARY OF FINDINGS: Following are the findings of the ING and HDFC funds: • Sharp ratio indicates that fund performance by considering overall total risk.Jensen ratio -2. • Because of volatility in the market conditions.49. So it is not possible to diversify the risk associated with funds. • ING investing funds in the some selected sectors. so they having more standard deviation.894.49 Interpretation: This fund gave the return of 2. Jensen ratio provide that the fund performing well and not so good and it gave the negative value of -2. by compairing the treynor ratio this fund gave the normal return of 23. the fund not able to provide better return to the investor. Indian academy school of management studies 112 .98.

2 CONCLUSION: “Mutual fund is booming sector now a days and it has lot of scope to generate income and providing return to the investor. • From portfolio construction shows that. • Out of six funds last two funds that is sensex and index got –ve value based on Jensen ratio because they gave more preference for bank deposits. • By considering treynor ratio it shows that the fund performs well during 5 years of history and able to overcome the market risk. the mutual fund is one of the way to development of country and helps to mobilizing dead money in the economy which helps to develop the economic conditions of the country and people. • Out of six equity schemes many funds are crossed the benchmark return because of the well management of funds and well diversifying of risk. • In HDFC all funds are having very less standard deviation and it helps the fund to generate good returns on the fund. Indian academy school of management studies 113 . the fund diversifies it’s risk for some extent so the fund able to give +ve return based on Jensen ratio.• By considering Jensen ratio it shows that no fund has not crossed more time benchmark return so that’s why Jensen ratio can’t give the +ve return for many funds. 5.

Mutual fund helps the people for studying the market conditions, it providing lot of opportunities to the people for research work and helps the people to know the new things going on around the world. It gave the more knowledge to the person, because it diversifies the risk by investing in different securities.”

5.3 SUGGESSTIONS: Following are the suggestions for the both funds. • The fund house has to reduce the total risk involved in the fund in order to increase the return with good portfolio construction.

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The fund house should select the innovative way of portfolio construction and should see the attracting areas of investing funds.

The fund houses should concentrate on the market conditions according to that they have to set the benchmark and invest in different sectors.

The fund houses should invest in good and attracting sectors to reduce standard deviation.

The fund house should try to reduce little more beta in order to generate more returns to investors.

In ING Jensen never gave the +ve value so fund house try to cross the benchmark return and achieve the objectives of the fund.

HDFC fund house gave the good return it showed by sharp ratio even though they have to reduce the total risk by diversifying their portfolio and achieving objectives.

The HDFC investing in diversifies areas but not in upcoming areas like real estate and infrastructure better to invest in those areas to increase return.

HDFC still it has to reduce the standard deviation to generate more return by reducing total risk factors associating with mutual funds, and analyses all the factors.

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HDFC has to concentrate on those funds which are performing less than thir benchmark return and take actions and analyse the market conditions and take correct steps

5.4 BIBLIOGRAPHY: BOOK REFERENCES: V.A.AVADHANI (2006): Security analysis and portfolio management, Himalaya publishing house. 6th Edition. L.M.BHOLE (2005) : Financial institutions and market, Tata Mcgraw – hill. FISHER AND JORDEN (2000): Security analysis and portfolio management, Prentice hall. WEBSITES: www.valueresearchonline.com www.amfindia.com www.google.com www.ingim.co.in www.hdfcfund.com www.investorsideas.com Company’s fact sheet and journals. PUBLISHED MAGAZINES AND ARTICLES: Thomos davenport (2007): “Mutual fund investment”, investors India. Sanjay j bhayani ss(2008): “An empirical analysis of performance evaluation of mutual fund schemes in india”, capital market(Icfai journals): P.Prasad Rao(2007): “distribution channels in the mutual fund industry”, Money market(Icfai journals).

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Siddhartha Srivastava(2008): “real estate fund . present conditions and future of the fund” Capital market(Investment management). Indian academy school of management studies 117 .