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Wealth Management- Financial Planning & Research And Analysis of Indian Mutual Fund Industry

Summer Internship Program

A REPORT ON WEALTH MANAGEMENT – FINANCIAL PLANNING & RESEARCH AND ANALYSIS OF INDIAN MUTUAL FUND INDUSTRY

By

Suhail M M A report submitted in partial fulfillment of the requirements of MBA Program of ICFAI Business School
Submitted To:

Corporate Guide:
Mr. Nikunj Shah Area Sales Manager India Infoline Ltd.

College Guide:
Dr. Sangeeta Mathur IBS, Mumbai

Acknowledgement
“Interdependence is a higher value than Dependence”
This report is a synergistic product of many minds. It began on 13th February 2006, the day I was inducted as a summer trainee at India Infoline Ltd. As an Amateur to the corporate environment, this training at India Infoline has been a very insightful and exciting experience.

I am grateful for the inspiration and wisdom of many people for their insights and encouragement. I cannot possibly mention the names of all those people who have enriched and improved my thinking through their conversations. But without the names of some people this project report would not be possible. This report has been analyzed and sharpened by their intellectual prowess.

First and foremost, I would like to express my sincere regards to my project guides Mr. Nikunj Shah and Ms. Neha Shah (Corporate Relationship Managers). Their vision and the valuable time that they shared with me will always be a source of inspiration for me.

Then I would like to thank my Faculty guide, Dr. Sangeeta Mathur, (Professor, ICFAI Mumbai), who let me to initiate the project and provided valuable suggestions and guidance during the whole project. Her perspective has encouraged me to incorporate a different dimension to the project.

Then I would like to thank Prof. Narayan Murthy, (Professor, ICFAI Mumbai), who gave valuable suggestions and guidance throughout the project.

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TABLE OF CONTENTS

Abstract Project – A: Wealth Management and Financial Planning 1. Introduction 1.1. Company Profile 1.2. Rationale of the Project 1.3. Objective of the Project 1.4. Methodology 2. Strategy used in Planning and Managing Money 3. Investment Strategy 4. Benefits of Systematic Investment Planning 5. Comparative Analysis of ULIP 6. Findings 6.1. Case 6.2. Achievements 6.3. Recommendations Project – B: Research and Analysis of Indian Mutual Fund Industry 1. Introduction 1.1. Rationale of the Project 1.2. Objective of the Project 1.3. Methodology 1.4. Limitations 2. Mutual Fund Industry in India 2.1. Mutual Fund – An Introduction 2.2. History of Indian Mutual Fund Industry 2.3. SEBI Regulations, 1996 2.4. Mutual Fund Structure 2.5. Type of Funds 2.6. Why invest in Mutual Funds? 3. Evaluation of Fund Houses and their Schemes

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3 3 4 4 4 5 6 8

11 14 14

16 17 17 17

18 19 21 21 22 23

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3.5.3. Analysis of Long Term Debt Schemes 4. Risk and Return Analysis 4.3. Growing Household Savings 5. Conclusions 8.2. Selection of Mutual Fund Houses 3. Investment through Mutual Funds versus other Investment 5. Return Analysis 3. Small Saving Schemes at a Glance 5. Risk Adjusted Performance of the Schemes 4.2.5. Risk and Reward Relationship 4. Analysis of Equity Linked Saving Schemes 3. Analysis of Short Term Debt Schemes 3. Recommendations 7.1.4.1. Ways to Measure Risks 4.3.2.4. ELSS Advantage 6.1. Types of Risks 4. References 9. Analysis of Balanced Schemes 3. Analysis of Equity Diversified Schemes 3.7. Annexure 25 26 29 35 39 41 46 48 49 51 54 61 62 63 64 65 67 68 69 iii . Tips to Minimize Risks 5.6.

10 18 20 33 FIGURE NO. NO.List of tables: TABLE NO. NO 7. 1 2 3 4 5 SIP Vs Single Investment TITLE Market Shares of Premium collected by Insurance Companies Mutual Fund Operation Flow Chart Growth of Asset Under Management NAV Performance Vs BSE Sensex for funds with more than 3 year of inception iv . 24 25 30-31 4 5 6 36 39 41-42 7 8 9 10 11 46-47 54 57 59 60 62 63 List of Figures: PG. 1 2 3 TITLE Comparison of Investment Options Selected Mutual Fund Houses Point to Point and Rolling Returns of Equity Diversified Funds Point to Point and Rolling Returns of Balanced Funds Point to Point and Rolling Returns of ELSS funds Point to Point and Rolling Returns of Short Term Debt Funds Point to Point and Rolling Returns of Long Term Debt Funds Risk and Ranking of Equity Diversified Schemes Risk and Ranking of Balanced Schemes Risk and Ranking of ELSS Schemes Risk and Ranking of Short Term Debt Schemes Distribution of Equity Investor Household based on Income type 10 Small Saving Schemes at a Glance PG.

6 7 8 9 NAV Performance Vs BSE Sensex for funds with less than 3 year of inception NAV Performance Vs Crisil Balanced Index for funds NAV Performance Vs BSE Sensex for ELSS NAV Performance Vs Crisil Short Term Index for Short Term Debt Funds with more than 3 years of inception NAV Performance Vs Crisil Short Term Index for Short Term Debt Funds with more than 3 years of inception Risk Vs Return of different types of Mutual Funds Relative Risk Analysis of Equity Diversified Schemes Relative Risk Analysis of Balanced Schemes Relative Risk Analysis of ELSS Schemes Relative Risk Analysis of Short Term Debt Schemes 34 38 40 44 10 11 12 13 14 15 45 48 55 57 59 60 ANNEXURE 1 Risk and Return Ratios of Equity Diversified Schemes 69 2 3 4 Risk and Return Ratios of Balanced Schemes Risk and Return Ratios of ELSS Schemes Risk and Return Ratios of Short Term Debt Schemes 69 70 70 v .

The objective of this study is to make people aware of the mutual fund industry. risks in Mutual funds investment etc. Indian MF industry offers a plethora of schemes and serves broadly all type of investors. it has ignited the growth rate in mutual fund industry to provide reasonable options for an ordinary man to invest his savings. vi . With savings invested in various options available to the people. National Saving Certificate. Investing in Mutual Funds Vs Other Investment products. With objectives defying any range. there is still a large mass of people in India who harbour confusion & hesitation in mind regarding mutual funds. Kisan Vikas Patra. various schemes offered by it. Bank and Company Deposits. which scheme is suitable for them. Mutual Funds and Portfolio Management Services. Indian financial scene too presents multiple investment avenues like Shares. the money acts as the driver for growth of the country. Investment goals vary from person to person. Here arises a problem. it is obvious that the products required will vary as well. Though still at a nascent stage. PPF etc.  Project B – ―Research Analysis of Mutual Fund Industry‖ – Savings form an important part of the economy of any nation. Bonds and Debentures. The investment options that indiainfoline is dealing with are Life Insurance.Abstract  Project A – ―Wealth management & Financial Planning‖ – This project deals with understanding the different investment avenues and creation of appropriate portfolio for the investor in the best possible way with minimum risk and maximum returns. Though certainly not the best or deepest of markets in the world.

Wealth Management – Financial Planning Wealth Management & Financial Planning 1 .

We plan for generally everything we do in life. success. GoI bonds and other small savings instruments to loan products and Investment banking.2. we do not have the time to think about our own financial management. economy and financial markets. expertise and research capabilities.1 Company Profile India Infoline was founded by a group of professionals in 1995. India Infoline Ltd and its subsidiaries. we 2 . It challenges advisers. personal finance. The breadth and depth of research content is unmatched .5paisa. the research coverage has grown to cover practically all companies. Mutual Funds.Wealth Management – Financial Planning 1. taxation and economy. vary as widely as the number of practitioners who are moving into this area. comprising the holding company. Most of the times. Over the last few years.stock markets. a seemingly distant past in the Internet age. travel. we may lack the required knowledge. The components. 1. Hence. 1. Life Insurance. The quality of research of India Infoline was highly acclaimed and soon became the industry benchmark.2. Financial Planning . www. Introduction 1. straddles the entire financial services space with offerings ranging from Equity research. the Stock Exchange.com and www.1. sectors. . especially those with high-net-worth clients. and the methods of approaching them. viz. Commodities trading.indiainfoline. Portfolio Management Services. The India Infoline group. mutual funds. If we do have the time. Fixed deposits.Introduction Wealth Management is the next step in financial planning. to bring together all aspects of a client's financial life into a single plan-from investment advice to estate planning to long-term-care insurance. Equities and derivatives trading. But most of us do not plan for financial security and hence peace of mind. shopping or family. Rationale of the Project The main principle behind the project is Financial Planning. be it career. India Infoline also owns and manages the websites.com. India Infoline Ltd is listed on both the leading stock exchanges in India. Mumbai (BSE) and the National Stock Exchange (NSE).

Financial Planner has to guide clients on all financial matters that have or will have an impact on their life today and in future.Wealth Management – Financial Planning often make decisions but after a while realize its incorrectness. Portfolio Management Services. A Financial Planner have to study and analyze gamut of investment products in the Indian market ranging from Equities and derivatives trading. Managing money is getting more complicated hence Planning is as important as earning it nowadays. THE CREATION OF A FINANCIAL PLAN Having a professionally made financial plan would provide solutions to the following issues and many more. then execute the plan and finally keep monitoring their assets lifelong for the fulfillment of all their financial objectives.  How to manage changing financial needs & requirements from time to time         How to manage loans and other short & long term liabilities How to ensure that the budget never goes into a deficit What are the best strategies for hedging income & managing liabilities How to do a comprehensive planning for education funding during the time span of the child‟s career What provisions need to be made for retirement funding so as to have ample cash flow during retired years and not make any compromises whatsoever How to be prepared for anything in life so as to have ample financial security How not to be left grappling for funds when we need them the most What is a good roadmap for long term wealth creation 3 . The primary responsibility of a financial planner is to plan their financial affairs. Life Insurance. Mutual Funds. Commodities trading. It is like a blueprint for the management of all our financial affairs for our entire life. GoI bonds and other small savings instruments. Financial Planning is a critical need and the implementation of a well crafted Financial Plan. Fixed deposits.

3. Safety margin constitutes the amount required for protecting client‟s family against liabilities and the loss of income in his absence for which he needs an insurance cover. To understand the various investment portfolio‟s in the market like Equities and derivatives trading.4. Financial planners have to fix up an appointment with the HNIs (High Net worth Individuals) and meet them either at residence or office based on their convenience. Life Insurance. Make appropriate portfolio for the clients according to their requirements. Once this cover is in place. GoI bonds and other small savings instruments 2. The Financial Planner then estimates the fund requirements for retirement. 2. Commodities trading. Strategy used in planning and managing the money Firstly. 4 . Deducting the amounts needed for the above.    Training has been given to all the financial planners on Life Insurance. do the analysis and create an appropriate portfolio based on the client‟s risk appetite. Portfolio Management Services. Fixed deposits. Financial planners have to identify and analyse the requirements of the clients and make an appropriate portfolio based on their risk appetite. Objective of the study 1. Financial Planner estimates an amount that is required for keeping as a safety margin. Financial Planner estimates the contingency funds that are needed to manage emergencies. holiday‟s and other financial goals. child‟s education.3.Wealth Management – Financial Planning 1. Financial Planner would then prepare an investment plan. all the balance funds find their way into assets capable of delivering highest possible returns. Mutual Funds and Portfolio Management Services. 1. To ensure that the client achieves his/her lifetime financial objectives in the most scientific & pragmatic manner. Methodology India Infoline is one of the first corporate agents to be licensed by IRDA and have tied up with ICICI Prudential Life Insurance Company. Mutual Funds.

economy on a growth trajectory and opportunities abound in practically every field. The returns were pretty good. Today it is not such a challenge to be able to earn reasonably well with double income households. our needs have expanded even more. Most other requirements would be fulfilled via fixed deposits. whether it is to provide the best future for children or a very comfortable retirement. PPF & pension policies would comfortably fund retirement years. The impending challenge is then how to best channel the surplus. In fact we are generating far more investment surplus than our previous generations ever did! Alongside with increasing income and surplus. The cost is perhaps 2-3 months salary and installments tend to make life easier. 5 . RD‟s. Further. Investment strategy Let‟s understand where we come from and where we are today… Say 20 years back. be it the NSC/PPF/Bonds/Insurance policies or even bank deposits. it was a challenge to be in an employment that would pay well & provide consistent opportunities to grow both financially and professionally. given that most fixed interest instruments today do not even beat inflation and that the impact of tax reforms will make the situation even worse. The traditional investment returns have shrunk and the old investment strategies will just not work going forward. insurance policies and bonds. For e. A holiday abroad was a lifetime dream for most Indians and today we think in terms of a long weekend in Venice or an evening in Paris literally. there were defined benefits for retirement. bonds etc. On the other hand. It was a different world then.Wealth Management – Financial Planning 3. The mantra to get more out of life at every stage of life. It is not advisable to invest any money into FD‟s. job loyalty & security was the norm. or simply living and enjoying life. Most people would stay with fixed interest instruments. expectations were mediocre and our family values took care of most issues and difficulties. The returns are rather low and they do not even come close to providing a hedge against inflation. In short.g. things are far more achievable today than before and we want even more. The obvious thing to do then is to look at alternate investment strategies for wealth creation and those are quite complex today and will get even more complex tomorrow. investment strategies those days were rather straightforward. There is but one flip side to all this. or the ability to spend and buy what we desire.

The markets at this juncture no longer look cheap and valuations seem to be stretched when compared with the other emerging markets. you end up buying more number of units when the markets are down and the NAV is low and less number of units when the markets are up and the NAV is high. 6 . this is certainly a time of caution for the retail investors as they could be caught on the wrong foot. Investing in a mutual fund or ULIPs solves the issue of „where‟ to invest and SIP helps to overcome the problem of „when‟ to invest. they are still unwilling to miss out on any opportunity to make the best of these booming conditions. The market is charting its own course. However. It thus makes the market timing totally irrelevant. as it facilitates the advantages of rupee cost averaging and is effective in handling the upswings and downswings of the markets. Investment in a staggered manner through the systematic investment plan (SIP) route is the safest bet as far as playing the markets is concerned.Wealth Management – Financial Planning 4. SIP is a disciplined investment approach irrespective of the state of the market. Dow Jones and FTSE 100 trade at multiples of about 18. The Bull Run. The market behavior has left the investors in a dilemma and with new landmarks being set. 18. And it makes all the more sense now when markets are booming. the small investor‟s confusion is mounting. China and South Korea are trading at multiples of around 12. Though apprehensive. which started in 2003-04. is the longest in the history of Indian capital markets and has rewarded investors handsomely. proving market analysts and players wrong. As a fixed amount is invested regularly in a SIP. The two most difficult decisions to be taken in equity investment are „when‟ to invest and „where‟ to invest. the highest among emerging markets. The BSE Sensex is currently quoting at a P/E of around 21 times. Investors generally stay away from buying when the markets are down and tend to invest when the markets are rising.5 and 15 respectively while emerging markets such as Brazil. Benefits of Systematic Investment Planning (SIP) The BSE Sensex 30 has crossed the 11000 level and the upward march doesn‟t seem to be stopping.5 and 11 respectively on a trailing 12-month P/E basis. Investors should enter mutual funds or ULIPs irrespective of the market conditions.

71. which actually is the best time to buy.552 for the same investment of Rs.000 in the BSE Sensex Stocks at the beginning of Jan-2000 has got 112. a person who has invested a single investment of Rs. Investment in small amounts instead of bulk investing 4.717 Rs whereas. 71. 145. the BSE Sensex 30 is plotted against the time between Jan-2000 to Nov-2005.000 7 Nov-05 Jan-01 Jan-02 Jan-03 Jan-04 Mar-01 Mar-02 Mar-03 Mar-04 Jan-05 Mar-05 . Lower risk and better returns SIP Outperforms Single Investment 160000 140000 120000 100000 80000 71000 60000 40000 20000 0 Jan-00 Mar-00 SIP Inv Value of SIP SIP Value Investment Lumpsum Single Investment SIP Investment 145552 112717 71000 36726 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 May-00 May-01 May-02 May-03 May-04 May-05 Sep-00 Nov-00 Sep-01 Nov-01 Sep-02 Nov-02 Sep-03 Nov-03 Sep-04 Nov-04 Jul-05 Sep-05 BSE SENSEX 30 Interpretation In the graph. a person as invested as SIP has got Rs. The major benefits of SIP are: 1. Instills discipline in investing 2. We can see from the graph that. Benefit of rupee cost averaging 3.Wealth Management – Financial Planning SIP works as a good discipline as it forces us to buy even when the markets are low.

The ULIP plans offered by different companies can be compared using the following parameter. Almost all the features offered by both these companies are the same.a) & transaction charges for equity & debt investments. but there are other charges like fixed annual administration charges (escalating @ 5% p.a. 10000 p. 8 . Although Bajaj Allianz has lower fund allocation & administrative charges (24%).a.) is higher than that of Bajaj Allianz (Rs. There is not a huge marginal difference in the market share & total fund value for the 2 policies. BAJAJ ALLIANZ V/S ICICI PRUDENTIAL The Min Premium for ICICI Pru (Rs 18000 p. charged separately. majority of the premium of Bajaj Allianz is through single premium scheme.). But. A comparative analysis has done between various products offered by ICICI Prudential and other Life Insurance Products given by other companies has done.Wealth Management – Financial Planning 5. Hence. Bajaj Allianz is the biggest & the closest competitor to ICICI Pru. Comparative Analysis of the ULIP plans ULIP (Unit link Insurance Plan) plan is a combination of investment and insurance policy. where a major part of insurance premium received on such policy is invested in stock market depending on the need and risk taking ability of the clients.          Min Premium Returns (Last year) Charges Total Fund Surrender Value Sum Assured Features Market Share Inception India Infoline is the corporate agent of ICICI Prudential Life Insurance Company.

bonus.) as well as other charges (5% p. 25000 & has a minimum premium amount of Rs. Fund allocation charges are also lower but the policy acquires surrender value after 6 years. Rigid pattern of increasing sum assured for BIRLA SUN LIFE. Increase or decrease in sum assured & premium. SBI V/S ICICI PRUDENTIAL Administrative charges although lower for SBI Life. There is a separate policy for single premium option (LIFE LINK SUPER). those who are paying higher premiums Aviva attracts them by rewarding 1% additional premium & almost not charging anything as administrative charges. switches. but LIC has other fixed charges. Total Fund Value & market share is almost 4. but it keeps a higher monthly fixed charge. LIC policy acquires 100% surrender value only after 1. 18000.m. Returns for LIC much lower that of ICICI Pru. LIC V/S ICICI PRUDENTIAL LIC gives an option of a single premium Rs. BIRLA SUN LIFE V/S ICICI PRUDENTIAL Administrative charges although lower for Birla Sun Life. The range for sum assured for SBI Life is also less than that of ICICI Pru.1 times higher for ICICI Pru. 9 . Initial administrative charges are lower for ICICI.Wealth Management – Financial Planning AVIVA LIFE INSURANCE V/S ICICI PRUDENTIAL Aviva offers a more customized product to its clients. In case of AVIVA switches & bonus options are not available & even the withdrawals are subject to certain charges. 5000.8 times higher for ICICI Pru. Total Fund Value & market share is almost 3. it keeps a flat allocation charge of 1%. on Value of Investments). Though in the initial phases. premium holidays are not available for SBI Life.5 years as against 3 years for ICICI Pru. Since the other charges levied by Aviva are much higher than that of ICICI Pru. but it keeps a higher monthly fixed charge. LIC market share is 10 times that of ICICI Pru. The total fund value & the market share of ICICI Pru are almost 6 times higher than that of Aviva. there are high fixed month charges (Rs55 p. It depends on their needs & risk taking ability. Whereas in ICICI Pru minimum premium being Rs.a. but no option available for decreasing it. The fund allocation charge for LIC is again lower.

00% 20.00% 70.00% Market Share Market share(as on march'04) 60.10% in 2005 and in 2006 it is around 72. the business is still dominated by LIC.76% in 2004.75% in individual non single premium segment.20%.29%. 4. Among the private sector Bajaj Allianz.51% in 2005 and in 2006. 7. Bajaj Allianz with 7. which has a vast network of 2048 branches and more than 1 million agents. But one interesting observation is still they are growing in terms of premium received around 79% in individual single premium segment and 13. to 78.20%.Wealth Management – Financial Planning Market shares of premiums collected by Insurance companies Market Share As Per Premium Received 100.00% TA TA ST AI AN G DA RD LI FE IC IC IP BI RL RU A SU N LI FE VY RE SY LI A AN CE LI FE AH IN DR A NE W YO RK M ET LI SA FE HA RA LI FE IA NZ AV IV A LI FE LI C Market share(as on march'05) Market share(as on march'06) AL L BA JA J IN G SB I M TA K Interpretation: Despite of opening up of the life insurance business to private participation.17%in 2004. 6. it becomes 2.00% 40.00% 10. around 0. They just almost double their market share.29% is currently number one private life insurance industry. ICICI Prudential also increased their market share steadily. But LIC‟s market share is steadily decreasing from 87.00% 90. ICICI Prudential.77% in 2005 and in the year 2006 they have around 7.00% 50. 10 HD FC KO M AX . HDFC Standard Life are the doing well.00% 0.00% 30.00% 80.84%in 2004.

Findings 6.1. which is conveniently located near his and his son‟s work place. 11 . a) Short-term goals (less than 3 years): Mehra plans to take a home loan after a year to purchase a flat in Nerul.000 per annum towards repayment of the education loan. He plans to source the same by selling off his flat at Thane for Rs 3 lakh and he plans to take a home loan for the remaining amount of Rs 7 lakh. He estimates the cost to be around Rs10 lakh. The annual earning and expenses of the family are listed in the table. Mehra doesn‟t have a provident fund account with his employer. In spite of being a man with limited resources. which is leased out currently. Case Personalized financial planning can benefit anybody and everybody. his financial assets are negligible. Mehta owns a studio apartment in Thane. who works in a BPO company. Goals: By defining and quantifying the goals we will be able to set a financial strategy. The most important thing that a financial planner looks for in his client‟s portfolio is not his present bank balance but the amount he should have in future to meet his basic needs and fulfill his dreams. His family consists of his wife (non-earning) and his only son (23 years). and since then Mehra has been repaying Rs 24. He is living in a rented apartment at Nerul in Navi Mumbai. Apart from the apartment at Thane. c) Long-term goals (greater than 10 years): He would like to create wealth for his son (Rs 25 lakh in the next 25 years). b) Medium-term goals (3-10 years): Mehra would like to get his son married in next 4 years. J.Wealth Management – Financial Planning 6. His son secured a job in August 2005. which will be completed in 5 years.K Mehra (46) is working as an accountant in a private company in Mumbai. which is currently valued at around Rs 3 lakh. he has always tried to provide the best possible education to his son. In this pursuit he has taken an educational loan for his son‟s computer course.

we fine tuned his finances to take care of his basic needs. We have conducted a thorough prognosis of his finances and recommended certain measures.000 per annum seem appropriate considering the present high cost of living. The probability of a radical increase in his future income is highly unlikely. he 12 . Recommendations: 1) Mehra should let his son repay the educational loan. 4) Mehta‟s next priority is to start a program for his retirement savings. we advised him to stretch his work life to a minimum 65 years. This may also involve investing in building up certain additional skills. 5) If he can pull back his Rs 2000 per month (Rs 1000 from savings in educational loan outgo and Rs 1000 from part-time assignments) into balanced mutual funds for the next 20 years. 2) His current household expenses of Rs 90. thereby building an emergency fund for the next 2-5 years. Mehra does not have a proper insurance cover to protect his assets from unforeseen contingencies. since his son has started his career as a professional and in all probability will come under the tax net within a short span of time. He still has not started building up a retirement nest. 3. Considering his present situation. He may continue with the same company or may always look for some alternative assignment postretirement. Mehra‟s savings are very less for his age.Wealth Management – Financial Planning Diagnosis and comments: 1. Mehra can put 50% in a bank account as an emergency fund. 2. still we would like him to do a thorough analysis of each of the head of expenditures. 3) Mehra would be able to save around Rs 2000 per month if his son starts paying the education loan. instead of contributing towards his retirement fund. Out of this. He will be taking up another liability of home loan in a year‟s time. wherein we advised him to re-prioritize his financial goals. which will suit him. Mehra is still repaying his son‟s education loan. On the basis of the revised goals.

which will be big enough for his family in this budget.500 per month to Rs 2. as and when his income is enough to comfortably substantiate the needs of his future family. his resources do not allow an allocation for a life cover because it will be too expensive. where he may move in at a more appropriate time.500. high maintenance costs. 9) Mehra should plan to get his son married. are some of the factors indicating that buying a new house will give him no benefits. which will eventually reach the desired target of funds for him. his savings potential (excluding the statutory savings) will get reduced from the present Rs 4.500 shall be invested monthly in a basket of diversified equity mutual fund for the next 25 years. 7) Further. since he will start repaying the educational loan. any additional money that may come in his way can be put into this retirement fund studiously. Rather he should maintain his Thane flat. prices of property peaking. He needs to take a term life insurance policy of a minimum of Rs 10 lakh along with a family health insurance policy. Though highly necessary. 25% of the remaining money shall be put into an emergency fund in a bank. 10) The remedial actions may be implemented with stringent discipline and the success be reviewed for best results. Further. 6) We strongly discourage him to take a home loan at this stage because neither he has the additional cash flow to repay the loan nor he will be able to purchase an accommodation. besides the point that he will not get tax benefit on the loan.Wealth Management – Financial Planning can expect a savings of around Rs 20 lakh (expecting a market return of 12% per annum for the next 20 years). (The names are changed in order to protect the identity of the person) 13 . Rs 1. 8) So far as his son is concerned. high interest rates on loan. The two covers will come at an approximate cost of Rs 500 per month.

He is a part of it. He does not disturb our work. We do not do him a favour when we serve him.Mahatma Gandhi 14 . He is not dependent on us. Clients respond to charismatic guidance and a high level of attention. ICICI Prudential ULIP worth 3 lakh 6. He is the purpose of it. The following four competencies address customer needs that enable firms to create sustainable competitive advantage in attractive customer segments.Wealth Management – Financial Planning 6. Mutual Funds worth 2 lakh 2. He does us a favour by giving us an opportunity to do it. Firms that go above and beyond expected levels of service will reap substantial rewards. wealth management firms must be perceived as competent. 1. dependable and empathetic.3. 3. Clients must also perceive that they are paying a justified price for the value that they are receiving. Perception To win new customers and retain existing ones. -. The customer is the most important visitor in our premises. word of mouth and marketing. He is not a stranger in our business. Recommendations As firms enter the wealth management arena. Client opinion is formed through a combination of personal experience. they will have to answer important questions about the methods used to deliver their unique value proposition to their chosen customers.2 Achievements 1. Successful advisors develop a relationship with clients by demonstrating that the clients‟ interests are the advisor‟s paramount concern. 2. the role of technology in serving those customers profitably and their strategy for differentiating themselves in a fiercely competitive market. We depend on him. Personal touch A major component of successful wealth management offerings is human touch. Advisory Relationship The core of any successful wealth management offering is the relationship developed between the advisor and the client. they feel valued when their queries are addressed promptly and personally.

Research and Analysis of Indian Mutual Fund Industry RESEARCH AND ANALYSIS OF INDIAN MUTUAL FUND INDUSTRY 15 .

fiscal concession and change in preference of investors. the number of MFs far exceeds the number of listed securities. MFs have overtaken bank deposits and total assets of insurance funds. MFs. This was the original appeal of mutual funds (MFs) which offer a path to stock market far simpler and safer than the traditional call-abroker-and-buy-securities route. The number of households owning units of MFs exceeds the number of households owning equity and debentures. The process gathered momentum in view of regulatory protection. the Unit Trust of India (UTI) was set up in 1964. Introduction 1. Starting with an asset base of Rs. which can pool their marginal resources. The investors benefit in terms of reduced risk. the industry has grown exponentially to Rs. This caught the fancy of small investors leading to proliferation of MFs. In developed financial markets. not trust in money' entices the small investors. bonds or money market instruments in accordance with objectives disclosed in the offer document issued for the purpose of pooling resources. The industry was opened up to private sector in 1993 providing Indian investors a broader choice. 25 crore in 1964.862 crore at the end of March 2006.1. 231. 16 . who generally lack expertise to invest on their own in the securities market and prefer some kind of collective investment vehicles. This was followed by entry of MFs promoted by public sector banks and insurance companies in 1987. The profits or losses are shared by investors in proportion to their investments.Research and Analysis of Indian Mutual Fund Industry 1. The first ever MF in India. In the USA. invest in securities and distribute the returns there from among them on co-operative principles. thus. operate as CIV (Collective Investment Vehicle) that pools resources by issuing units to investors and collectively invests those resources in a diversified portfolio comprising of stocks. Rationale of the Project 'Put your money in trust. and higher returns arising from professional expertise of fund managers employed by such investment vehicle.

Collection of information from websites.2. investing through mutual funds versus other investment products. magazines & newspaper Articles 1.3. 1. Objective of the Project Measuring and evaluating fund performance of fund houses. 17 . journals.4. and selecting the right funds. Analysis & Conclusion of this Study may not hold good in future. developing an investment portfolio. risks in fund investing. Methodology: Interaction with India InfoLine officials.Research and Analysis of Indian Mutual Fund Industry 1. Limitations of the Study As Mutual Fund Investment is Subject to Market Risk the Findings.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. Investors of mutual funds are known as unit holders. Mutual fund issues units to the investors in accordance with quantum of money invested by them.Research and Analysis of Indian Mutual Fund Industry 2. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. The profits or losses are shared by the investors in proportion to their investments.1 Introduction Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Mutual Fund Industry in India 2. The flow chart below describes broadly the working of a mutual fund: Mutual Fund Operation Flow Chart 18 .

47. SBI Mutual Fund was the first non. Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.6. giving the Indian investors a wider choice of fund families. Also. the mutual fund industry had assets under management of Rs. at the initiative of the Government of India and Reserve Bank the. 1993 was the year in which the first Mutual Fund Regulations came into being. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.004 crores. except UTI were to be registered and governed.2. 19 . Punjab National Bank Mutual Fund (Aug 89).700 crores of assets under management.UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87). 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. Third Phase – 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. under which all mutual funds.Research and Analysis of Indian Mutual Fund Industry 2. Bank of India (Jun 90). The history of mutual funds in India can be broadly divided into four distinct phases. History of the Indian Mutual Fund Industry The mutual fund industry in India started in 1963 with the formation of Unit Trust of India. At the end of 1993. Indian Bank Mutual Fund (Nov 89). The industry now functions under the SEBI (Mutual Fund) Regulations 1996.UTI. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. At the end of 1988 UTI had Rs. a new era started in the Indian mutual fund industry. The first scheme launched by UTI was Unit Scheme 1964. First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). Second Phase – 1987-1993 (Entry of Public Sector Funds) The year 1987 marked the entry of non.

000 crores of assets under management and with the setting up of a UTI Mutual Fund. The second is the UTI Mutual Fund Ltd.835 crores as at the end of January 2003. 231862 crores under 592 schemes. there were 29 funds. the assets of US 64 scheme.29. At the end of March 2006. PNB. BOB and LIC. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. and with recent mergers taking place among different private sector funds. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The Specified Undertaking of Unit Trust of India.Research and Analysis of Indian Mutual Fund Industry Fourth Phase – since February 2003 In February 2003. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. which manage assets of Rs. the mutual fund industry has entered its current phase of consolidation and growth. It is registered with SEBI and functions under the Mutual Fund Regulations. sponsored by SBI. (Source AMFI) 20 . representing broadly. The graph indicates the growth of assets over the years. assured return and certain other schemes.76. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. conforming to the SEBI Mutual Fund Regulations.

SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. But close ended scheme would not be allowed to charge any entry loads.Research and Analysis of Indian Mutual Fund Industry 2. These schemes have to recover the marketing & distribution expenses from the entry load itself. Securities and exchange Board of India (SEBI) Act was passed.3. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. The regulations were fully revised in 1996 and have been amended thereafter from time to time. Asset Management Company (AMC) approved by SEBI 21 . SEBI notified regulations for the mutual funds in 1993. Mutual Funds Structure Mutual fund is set up in the form of a trust. which they will write off during their lifetime. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. The trustees of the mutual fund hold its property for the benefit of the unit holders. SEBI‗s New Amendment Open-Ended Schemes launched after 4th April 2006 will not be allowed to charge the initial issue expenses. As far as mutual funds are concerned. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. trustees. Securities and Exchange Board of India (Mutual Funds) Regulations. 1996 In the year 1992. Only close ended schemes will be allowed to charge the NFO expenses. which has sponsor. Asset Management Company (AMC) and custodian. mutual funds sponsored by private sector entities were allowed to enter the capital market. 2.4. SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. The objectives of SEBI are – to protect the interest of investors in securities and to promote the development of and to regulate the securities market. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. Thereafter.

They monitor the performance and compliance of SEBI Regulations by the mutual fund. either repurchase facility or through listing on stock exchanges. Also. In order to provide an exit route to the investors. These schemes do not have a fixed maturity period. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. who is registered with SEBI. Close-ended Fund/ Scheme: A close-ended fund or scheme has a stipulated maturity period e. The key feature of open-end schemes is liquidity. The trustees are vested with the general power of superintendence and direction over AMC. The fund is open for subscription only during a specified period at the time of launch of the scheme.g.5. 5-7 years. All mutual funds are required to be registered with SEBI before they launch any scheme. 2. some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. 50% of the directors of AMC must be independent.e. 22 . they should not be associated with the sponsors. Custodian. Type of Funds Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. These mutual funds schemes disclose NAV generally on weekly basis.Research and Analysis of Indian Mutual Fund Industry manages the funds by making investments in various types of securities. Open-ended Fund/ Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. holds the securities of various schemes of the fund in its custody. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. 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.

close-ended Income / Debt Fund: A mutual fund that invests in all types of fixed-Income securities. or balanced scheme considering its investment objective. Money Market or Liquid Fund: A mutual fund which invests solely in short. Such schemes may be classified mainly as follows: Equity Funds: A mutual fund that invests predominantly in Equity shares of companies. Exchange Traded Fund: An exchange traded fund representing a basket of stocks that trades on the exchange through out the day with intra-day pricing.6. Why invest in Mutual Funds? Benefits of Mutual Funds: There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer. government bonds and Unit Trust certificates so as to balance gain with risk. debentures. trade bills etc.term debt instruments like treasury bills. income scheme. such as the S&P CNX Nifty. which are unmatched by most other investment avenues. Balanced fund: A mutual fund which invests in equity shares. Gilt Fund: A mutual fund which invests in government guaranteed securities. Such schemes may be open-ended or schemes as described earlier. 2. Index Funds: A mutual fund whose portfolio of shares is identical to a well known index.Research and Analysis of Indian Mutual Fund Industry Schemes according to Investment Objective: A scheme can also be classified as growth scheme. Sector Fund: A mutual Fund that invests in equity shares of companies operating in a particular sector of the economy. 23 .

Choice of schemes 10. Liquidity 7. Flexibility 9. return. Transparency 8. Return Potential 5. volatility. safety. liquidity and convenience Investment Option Equity FI Bonds CD‘s Convenience Return Safety Volatility Liquidity High Moderate Moderate High Moderate Moderate Moderate Moderate Moderate Low Low High High Low High Moderate Low High High High High Moderate High High Moderate Moderate Low Low Low Low Moderate High Moderate High Moderate Low Low High Moderate Low Moderate Low High Company FD‘s Moderate Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds High Moderate Moderate Moderate Low High 24 . Professional Management 2. Low Costs 6. Convenient Administration 4.Research and Analysis of Indian Mutual Fund Industry 1. Diversification 3. Well regulated The table below compares the investment options under the broad heads viz. Tax benefits 11.

64 23502. For a Mutual Fund to perform well in market it needs a sufficient Corpus size. Of. So that it can invest in various options available in the market and reduce its risk accordingly.78 9219. Selection of Mutual Fund Houses Till 31st march 2006 there were 30 Mutual Fund Houses in India.52 9716. It‟s not necessary that any fund house with large corpus size will perform better but larger the corpus – greater the diversification of risk. of schemes and corpus is given in Annexure 1.59 21549.45 17826.Research and Analysis of Indian Mutual Fund Industry 3. Evaluation of Fund Houses and Their Schemes 3. the fund houses with corpus size more then 9000 crores are selected. Therefore. 1 2 3 4 5 6 7 8 9 10 11 12 Mutual Fund Name Birla Mutual Fund DSP Merrill Lynch Mutual Fund Franklin Templeton Investments HDFC Mutual Funds HSBC Mutual Funds Kotak Mahindra Mutual Funds Prudential ICICI Mutual Fund Reliance Mutual Fund SBI Mutual Fund Standard Charted Mutual Fund Tata Mutual Fund UTI Mutual Fund No.64 10795.76 9940. Schemes 157 60 136 95 70 90 172 106 85 136 145 140 Corpus – in Crores 15012. The name of these Mutual Fund Houses with their respective no.12 24669.1.55 9411.68 29519 25 . their number of schemes and corpus as on 31st mar 2006 – Serial No.65 13185. Out of the 30 Mutual Fund House we picked up the Mutual Fund Houses with more than 9000 Cr of Assets under Management (AUM). The funds with AUM more then 9000 crores are as follows – Selected Mutual Fund Houses.

26 . Absolute return differs from relative return in that it is concerned with the return of the asset being looked at and does not compare it to any other measure. It is usually quoted as a percentage.1. This measure simply looks at the percent appreciation or depreciation that an asset faces over a period of time. Return Analysis Performance Evaluation Parameters  Point to point return  Rolling return  Benchmarking the fund  Expense ratio 3. Absolute Return (less than a year)  The return that an asset achieves over a period of time.e.Research and Analysis of Indian Mutual Fund Industry 3. usually a stock or mutual fund. Return Return is the gain or loss for a security in a particular period. It takes into account the fact that the return of an investment over all the periods under measurement is compounded. consisting of income plus capital gains relative to investment.2. the fund's returns in previous periods are accrued. i. For example if there has been a 100% increase in the NAV of a fund over the past year then the holders of that fund have achieved a absolute return of 100% over the past year Annualized Returns (more than or equal to 1 year) It standardizes returns generated in a greater than a year to a per year basis thereby facilitating easy measurement and comparison of performance. The general rule is: the more risk you take the greater the potential for higher return and loss.2.

As markets are not rational. there is no methodology in the world to scientifically predict stock 27 . Short-term volatile price movements would distort any comparison over a shorter period. Here there are only two data points i. calculated on a daily. Rolling Return In the rolling return the returns are between two different dates here for e. from 1-Apr-2003 to 1-Apr-2006. Here the returns will be calculated between the NAV prevailing on 31st Mar – 2003 & on 31st Mar – 2006. monthly or yearly basis. one should compare the performance of equity or an index fund over a 1-2 year horizon. The relevant index can be chosen after taking into consideration the asset class of the scheme.2006.g. Similarly. Benchmarking the Fund All mutual funds schemes have different objectives and therefore their performance would vary. But switching the benchmarks. Here normalization is done by applying month difference to the NAV Values. weekly. 3. Point to Point Return In the point to point to point return the returns are calculated as of a particular date.4. the ideal comparison period for a debt fund would be 6-12 months while that for a liquid/money market fund would be 1-3 months.3.2. Benchmarking also requires a relevant time period of comparison. The time period between 31st Mar – 2003 to 31st Mar-2006 is not taken into consideration. 31st Mar – 2003 and 31st Mar-2006. Here while comparing the performance of the schemes with the benchmark index first we have to normalize the each individual schemes with the benchmark index. In this Study the returns are calculated as Of 31st Mar. In this Study it is calculated on a monthly basis.2.Research and Analysis of Indian Mutual Fund Industry 3. In this case the performance of NAVs Vs Benchmark Index has been taken on a 3 Year Basis computed on monthly basis.2. conclusions could be misleading. 3. Ideally. But are there some standards for comparison? Schemes are usually benchmarked against commonly followed market indexes. It is more appropriate measure of performance than Point To Point returns since here the returns are calculated on a monthly basis between two different time periods. Here the 3 year return will be calculated from as on 31st Mar – 2003 to 31st Mar-2006.e.2.

the more assets in the fund.so. the costs of running a fund grow slower than the growth in the fund size . Normally. 3. trustee fees. cost of fund transfer.5.5% expense ratio means the AMC charges Rs1. Entry and exit loads are not taken into consideration. The index calculations have been done using the chain-link method. The NAVs used are adjusted to account for corporate events such as dividend declarations. 28 . These include investment management and advisory fees (AMC fees).  The lower this figure. the more cost-effective the fund. Therefore it is not possible for anyone to beat the market on a consistent basis and hence there is no guarantee that the fund manager would perform well all the while.Research and Analysis of Indian Mutual Fund Industry prices. custodian fees. where past values are used on a daily rolling basis to determine present values. broker remuneration. A 1. the lower should be its expense ratio. The Benchmark Indexes used in our analysis are:     BSE Sensex 30 – Equity Diversified Fund BSE Sensex 30 – ELSS Fund CRISIL Balanced Funds Index – Balance Fund CRISIL Composite Debt Fund Index – Income Funds The indices are based on each fund‟s outstanding units at the end of each month and its daily NAV. registrar‟s fees. It is also referred to as the management expense ratio (MER).2. as it will devour a few percentages from your modest returns. Annual recurring expenses are charged to the fund on a regular basis. audit fees. The index computation is done monthly.50 for every Rs100 in assets under management. Expense Ratio Expense Ratio is the percentage of assets that are spent to run a mutual fund. cost of providing account statements to investors. rights or bonus issues. A higher expense ratio can be justified only by superlative returns. cost of statutory advertisements and other expenses. It is very crucial in a debt fund.

Only those funds which outperform the BSE Sensex 30 were considered for the further analysis.Research and Analysis of Indian Mutual Fund Industry 3. The point to point return of the BSE Sensex 30 for the same period is also calculated.3. The Top-23 funds.A. 2 years and 3 years point to point returns of all the equity diversified funds of the 10 fund houses are calculated as on 31st March 2006. Analysis of Equity Diversified Schemes The 6 month.T. are as follows: Birla SunLife Equity Fund DSP ML Opportunities Fund DSP ML Tiger Fund Franklin India Flexi Cap Fund Franklin India Opportunity Fund HDFC Equity Fund HDFC Top 200 Fund HSBC India Opportunities Fund Kotak 30 Fund Kotak Opportunities Fund Pru ICICI Discovery Fund Pru ICICI Power Fund Pru ICICI Dynamic Plan Fund Pru ICICI Emerging S.R Fund Reliance Equity Opportunities Fund Reliance Growth Fund SBI Magnum Global Fund SBI Magnum Midcap Fund SBI Magnum Multiplier Plus 93 Fund Tata Equity opportunity Fund Tata Infrastructure Fund Tata Select Equity Fund UTI Thematic Mid-cap Fund 29 . 1 year. which came into analysis.

45 66.92 6 91.72 93.31 2.00 2.99 45.24 5 85.40 78.68 56.88 101.58 84.25 55.47 80.01 85.97 2.93 98.03 74.23 91.27 7 89.96 2.71 36.30 37.55 81.28 68.R(G) Tata Infrastructure Fund Reliance Equity Opportunities Fund Sbi Magnum Midcap Franklin India Flexi Cap Fund UTI Thematic Mid-cap Expense Ratio 2.14 92.18 2.50 92.35 1.59 37.73 81.40 2 92.91 34.73 36.Research and Analysis of Indian Mutual Fund Industry The Point to Point Returns of the funds are calculated on an annualized basis from 31st March 2003 to 31st March 2006.48 4 89.85 55.04 86.27 73.83 8 83.57 73.A.33 34.54 3 109.64 63.71 54.Growth DSP Tiger HSBC India oppurtunities Fund PruICICI Emerging S.T.69 39.18 2.92 42.18 67.02 38.63 37.71 42.23 40.94 42.63 53.58 93.50 2.26 2.02 83.85 37.94 90.71 30.98 56.67 42.83 36.47 79.90 2. For those funds which started after March 2003 are calculated from 31st March 2005 to 31st March 2006.64 111.62 80.71 35.30 2.40 30.16 2.50 1.80 9 Average BSE Sensex 30 .30 2.35 93.28 103.45 67.51 85.95 2.20 2.76 75.48 37.23 90.79 59.50 2.25 2.67 1 2 3 4 5 6 7 8 9 10 11 12 13 Scheme SBI Magnum Multiplier Plus 93 Reliance Growth SBI Magnum Global Fund 94 Tata Select Equity Fund Birla SunLife Equity Fund PruICICI Dynamic Plan(G) Tata Equity oppurtunty Fund HDFC Equity Fund Pru ICICI Power (G) HDFC Top 200 Fund DSP ML Opportunities Fund Franklin India Opportunity Fund Kotak 30 Average Index BSE Sensex Equity Diversified From 31st Mar 2005 to 31st Mar 2006 Point to Point Returns Scheme Kotak Opportunities Fund .06 32.35 2.16 6 month Actualized 44.58 72.88 1 year AnnualizedRank 102.73 76.13 1.12 92.68 57.90 1 98.96 33.00 2.98 31.95 74.50 1.26 42.43 85. From 31st March 2003 to 31st March 2006 Equity Diversified Point to Point Return Expense 6 month 1 year 2 year 3 year Ratio Actualized Annualized Annualized Annualized Avg Rank 2.

50 31.Growth Sbi Magnum Midcap Kotak Opportunities Fund .33 57.48 55.81 59.30 2.00 2. 1 year.Research and Analysis of Indian Mutual Fund Industry The Rolling Returns of the funds are calculated from 31st March 2002 to 31st March 2006 on a monthly basis for 6 months.16 Actualized Rank 40.50 2.50 2.13 1.R(G) DSP Tiger Franklin India Flexi Cap Fund .16 2.Growth Ratio 2.13 34.A.31 2.79 3 year 79.45 23.41 76.78 51.95 70.04 57.T.60 65.30 1.25 2.98 31.10 26.36 27.51 56.62 1 2 3 4 5 6 7 8 9 10 11 12 13 Scheme Reliance Growth .80 31.36 2.02 62.15 30.10 61.89 47.86 26.88 60.12 47.86 47.83 53.02 52.08 56.18 1.55 65.35 2.95 2.Growth Ratio 1.50 2.47 40.26 Actualized AnnualizedAnnualized Annualized Avg Rank 33.43 58.14 28.15 66.72 59.20 62.56 2 year 78.13 24.25 67.32 58.11 26.00 2. 2 years and 3 years. the rolling returns are calculated from 31st March 2005 to 31st March 2006.98 58.97 53.53 36.32 24.21 50.06 57.17 33.60 55.48 28.88 1 2 3 4 5 6 7 8 9 HSBC India oppurtunities Fund UTI Thematic Mid-cap Tata Infrastructure Fund Reliance Equity Opportunities Fund Average BSE Sensex 31 .93 63.90 2.35 2.50 2.47 28.00 39.02 54.99 Tata Equity oppurtunity Fund Birla sunlife equity fund HDFC Top 200 Fund HDFC Equity Fund Tata Select Equity Fund PruICICI Dynamic Plan(G) PruICICI Power (G) Sbi Magnum Multiplier Kotak 30 Sbi Magnum Global Franklin India Opportunities Fund DSP ML Opportunities Fund Average Equity Diversified From 31st Mar 2005 to 31st Mar 2006 Rolling Return Expense 6 month Scheme PruICICI Emerging S.49 26.97 2.76 47.18 2.51 33. From 31st Mar 2002 to 31st Mar 2006 Equity Diversified Rolling Return Expense 6 month 1 year 82.77 36.96 2. For those funds which started after March 2002.37 35.97 35.35 60.20 2.38 49.53 64.19 22.51 52.

Reliance Growth 2. SBI Magnum Global fund Top 3 funds based on Rolling Returns 1. DSP Tiger 3. Reliance Growth 3. Franklin India Flexi Cap 32 . Tata Equity Opportunity 3. SBI Magnum Multiplier 93 2. Birla Sunlife Equity Inception period less than 3 years Top 3 funds based on Point to Point Returns 1.Research and Analysis of Indian Mutual Fund Industry Inception period more than 3 years Top 3 funds based on Point to Point Returns 1. Pru ICICI Emerging STAR 2. DSP Tiger 3. HSBC India Opportunities Top 3 funds based on Rolling Returns 1. Kotak Opportunities 2.

00 30.00 25.00 10. 2 y.000.00 0. 2 p.00 5.000. 2 n.000. 2 n.00 Research and Analysis of Indian Mutual Fund Industry 15. 2 v. 2 l l l l ar ar ar ar a a a a o o o o Ju Se Ju Se Ju Se Ju Se Ja Ja Ja Ja M M M M N N N N M M M M 1 1 1 0 1 1 1 0 9 0 31 30 31 30 31 30 30 30 1 1 1 1 3 3 3 31 3 3 3 3 3 2 3 30 3 3 3 3 Pru ICICI Power Fund . 2 . 2 .000.000. 2 . 2 v. 2 n. 2 y. 2 v.000. 2 y. 2 p. 2 p. 2 .33 NAV Performance Vs BSE Sensex Sensex HDFC Equity Fund Tata Select Equity Fund HDFC Top 200 Fund Tata Equity Opportunity Fund Reliance Growth Fund Magnum global Fund Franklin Opportunity Fund Magnum Multiplier Fund Kotak 30 Fund DSP ML Opportunity Fund Birla Equity Fund 2 00 3 00 3 00 3 00 3 00 3 00 3 00 4 00 4 00 4 00 4 00 4 00 4 00 5 00 5 00 5 00 5 00 5 00 35. 2 p.000.00 20. 2 . 2 y. 2 . 2 v.00 2 00 2 00 2 00 2 00 6 5 00 00 . 2 n. 2 .

Sensex

34
NAV Performance Vs BSE Sensex
SENSEX Kotak OPP. Fund(G) Tata Infrastructure Fund Reliance E Opp Fund HSBC India Opp Fund DSP ML Tiger F Frank.I Flexi-cap SBI M Mid-cap P ICICI Emer. STAR UTI Thematic Midcap P ICICI Dyn.
31 31 30 M 30 M ar A pr ay n Ju 30 0 ,2 0 ,2 l Ju 05 0 ,2 0 ,2 05 05 05 20 , 31 A 05 ug 0 ,2 05 S 30 ep 0 ,2 05 31 O ct 0 ,2 05 N 30 ov 0 ,2 05 D 30 ec 0 ,2 05 n Ja 31 06 20 , 28 F 00 ,2 eb 6 31 06 20 , ar M

14,000.00

13,000.00

12,000.00

11,000.00

10,000.00

9,000.00

Research and Analysis of Indian Mutual Fund Industry

8,000.00

7,000.00

6,000.00

5,000.00

4,000.00

Months-March 05 to March 06

Research and Analysis of Indian Mutual Fund Industry

3.4. Analysis of Balanced Funds
The 6 month, 1 year, 2 years and 3 years point to point returns of all the Balanced Funds of the 10 fund houses are calculated as on 31st March 2006. The point to point return of the Crisil Balanced Fund Index for the same period is also calculated. Only those funds which outperform the Index were considered for the further analysis. The Top-14 funds, which came into analysis, are as follows: 1. HDFC Prudence 2. DSP Balanced fund 3. Birla 95 4. Tata Balanced Fund 5. Pru ICICI CCP Gift 6. Pru ICICI Balanced Fund 7. SBI Magnum Balanced Fund 8. FT India Balanced Fund 9. Franklin India Balanced Fund 10. Birla Balance Fund 11. HDFC Balanced Fund 12. UTI Balanced Fund 13. Kotak Balance 14. UTI Unit Scheme 2002

35

Research and Analysis of Indian Mutual Fund Industry

From 31st March 2003 to 31st March 2006

Balanced Schemes
Point to Point Return
Expense 6 month 1 year 2 year 3 year Ratio Actualized Annualized Annualized Annualized Avg Rank 2.50 2.01 2.46 2.30 2.04 2.28 2.45 2.38 2.38 2.21 2.30 2.30 2.44 2.31 27.96 22.23 29.59 25.33 26.83 22.36 18.61 20.55 20.53 19.30 23.30 21.47 20.21 22.94 17.97 68.49 60.90 52.80 56.91 53.58 54.98 53.90 47.59 47.55 44.57 43.74 42.82 42.35 51.55 38.34 53.92 44.84 41.74 37.36 37.22 39.88 37.23 30.72 31.52 31.40 27.02 29.98 27.22 36.16 22.38 51.12 58.47 50.32 51.10 49.99 48.43 49.70 44.41 42.68 40.99 33.57 40.41 42.57 46.44 31.60 1 2 3 4 5 6 7 8 9 10 11 12 13

Scheme
SBI Magnum Balanced Fund - Growth

HDFC Prudence Tata Balnaced Fund Pru ICICI CCP Gift (G)
DSP ML Balanced Fund - Growth

Pru ICICI balanced fund (G)
Birla 95 Fund FT India Balanced Fund - Growth Franklin India Balanced Fund

HDFC Balanced Fund UTI unit scheme-2002(G) UTI Balanced fund (G)
Birla Balance

Average Index Crisil Balanced Fund Index

Balance Fund
From 31st Mar 2002 to 31st Mar 2006 6 month 1 year 51.37 40.44 39.67 39.14 38.90 38.00 38.15 36.07 34.83 34.10 32.08 30.69 37.79 23.46

Rolling Return
2 year 46.21 38.90 37.94 36.59 36.94 35.74 33.82 34.89 33.27 32.10 30.82 30.30 35.63 22.26 3 year 49.94 39.58 38.74 38.20 37.93 37.33 36.86 35.08 34.19 33.18 32.22 30.30 36.96 22.94 1 2 3 4 5 6 7 8 9 10 11 12 Actualized AnnualizedAnnualized Annualized Avg Rank 22.33 17.85 17.28 17.32 17.22 17.17 17.16 15.95 15.62 15.05 14.49 13.79 16.77 11.06

Scheme
HDFC Prudence
DSP ML Balance d Fund - Growth Birla 95 Fund

Tata Balnaced Fund Pru ICICI CCP Gift (G) Pru ICICI balanced fund (G)
SBI Magnum Balance d Fund FT India Balance d Fund - Growth Franklin India Balance d Fund Birla Balance

HDFC Balanced Fund UTI Balanced fund (G) Average Index Crisil Balanced Fund Index

36

Tata Balance Top 3 funds based on Rolling Returns 1.Research and Analysis of Indian Mutual Fund Industry All the top 14 funds are started before 3 years Top 3 funds based on Point to Point Returns 1. HDFC Prudence 3. HDFC Prudence 2. SBI Magnum Balance 2. DSP ML Balance 3. Birla 95 37 .

00 0. 20 . 20 .00 0 2 0 3 03 03 0 3 0 4 04 04 0 4 0 5 05 05 0 5 0 6 06 02 02 03 03 04 04 05 05 02 02 20 . 20 . 20 . 20 .00 500. 20 . 20 . 20 . 2 0 . 20 . 20 .00 3500. 20 .00 4000.Index 38 NAV Performance Vs Index Crisil Balanced Index SBI Magnum Balanced Franklin India Balanced FT India Balanced Birla 95 Birla Balance DSP ML Balanced Pru ICICI balanced Pru ICICI CCP Gift UTI Balanced HDFC Prudence HDFC Balance Tata Balance Date 5000.00 1000.00 Research and Analysis of Indian Mutual Fund Industry 2000. 20 .00 4500.00 2500. 20 . 20 . y y y y ul ep ul ep ul ep ul ep ar ar ar ar ar ov Ja n ov Ja n ov Ja n ov Ja n M Ma 1 J N M Ma 1 J N M Ma 1 J N M Ma 0 J N M S S S S 1 31 1 31 1 31 1 31 0 0 9 0 0 3 3 3 3 3 3 3 3 3 3 2 3 3 30 30 30 30 31 31 31 31 . 2 0 . 2 0 .00 1500. 20 .00 3000. 2 0 . 20 . 20 . 20 . 20 . 20 .

410 42 115.62 82.62 65.06 73. are as follows: 1.23 67.15 32. SBI Magnum Tax Gain Scheme 5.050 60. Analysis of Equity Linked Saving Schemes (ELSS) The 6 month.202 54 1 4 2 5 3 SBI Magnum Tax Gain Scheme 93 Birla SunLife TaxRelief 96 HDFC Tax Saver HDFC Long Term Advantage Pru ICICI tax plan(G) Average INDEX .10 38. HDFC Tax Saver 39 .13 25.SENSEX From 31st Mar 2002 to 31st Mar 2006 6 month Rolling Return 1 year 2 year 3 year Scheme Actualized AnnualizedAnnualizedAnnualizedAvg Rank Pru ICICI Tax Gain 31. Pru ICICI Tax Gain 2.870 32.34 76.87 83.56 73.Research and Analysis of Indian Mutual Fund Industry 3.981 39.65 86.110 103.38 41.58 37.60 75.85 71.821 34. Birla SunLife Tax Relief 96 Top 2 Funds based on Rolling Returns 1.08 43. SBI Magnum Tax Gain Scheme 2.63 73.5.72 3 Birla SunLife Capital Tax Relief 96 20.970 80. 2 years and 3 years point to point returns of all the ELSS funds of the 10 fund houses are calculated as on 31st March 2006.870 78 96.02 2 HDFC Long Term Advantage 30. The point to point return of the BSE Sensex 30 for the same period is also calculated.49 90.33 Index BSE Sensex 18.91 35.22 88. which came into analysis.23 80. The Top-5 funds. HDFC Long Term Advantage 4.00 4 Average 28.23 71.94 63.30 71.99 96.57 1 HDFC Tax Saver 30.04 73.85 66. Only those funds which outperform the BSE Sensex 30 were considered for the further analysis. Pru ICICI Tax Gain 2. 1 year.830 91. Birla Sunlife Capital Tax Relief 96 Point To Point Returns Scheme Name 6 month 1 year 2 year 3 year Actualised Actualised Annualised Annualised 60.55 37. HDFC Tax Saver 3.670 82.41 46.29 Top 2 Funds based on Point to Point Returns 1.360 94.28 71.

20 .NAV 40 NAV Performance Vs Sensex Sensex Birla SunLife Taxrelief 96 Pru ICICI Tax Gain HDFC Long Term Advantage HDFC TAX Saver Date 25. 2 0 .000. 20 .00 5. 20 . 20 .00 0 2 02 02 02 02 03 0 3 03 03 03 03 04 0 4 04 04 04 04 05 0 5 05 05 05 05 06 20 . 20 . 20 .00 Research and Analysis of Indian Mutual Fund Industry 10.000. 2 0 . 20 . 20 . 20 . t t t t pr un ug Oc ec eb Apr Jun ug Oc ec eb Apr Jun ug Oc ec eb Apr Jun ug Oc ec eb A J D F D F D F D F A 1 A 1 A 0 A 1 0 29 1 28 30 30 30 1 28 30 30 31 1 28 30 30 31 0 28 3 3 3 3 3 3 3 3 3 31 . 2 0 . 20 . 20 . 20 .00 20.000. 20 . 20 .00 15. 20 .00 0. 2 0 . 20 .000. 20 . 20 . 20 .000.

06 4. Analysis of Short Term Debt Schemes The 6 month.04 4.36 4.Plan A Tata Income Plus . UTI G-sec fund-STP 10.17 5.66 1.89 2.17 2. Tata Dynamic Bond. DSP ML Short Term Fund 4. Tata Income Fund (App) 9. Templeton GSF .35 4.Plan B (STD) 6.Plan B 8.31 4. The point to point return of the Crisil Short Term Index for the same period is also calculated.50 5.58 4.14 6.42 5.61 4.6.25 4.Treasury Plan 5.45 5.34 4. Pru ICICI short term plan 2.03 5. Tata Short Term Bond Fund 3.Plan A 11.29 6.Research and Analysis of Indian Mutual Fund Industry 3. UTI Children‘s career bond Schemes Pru ICICI short term plan Tata Short Term Bond Fund DSP ML Short Term Fund Templeton GSF Treasury Plan DSP ML G Sec Fund .70 0.48 2. Tata Income Plus .73 5.29 2.06 4. Tata Dynamic Bond. which came into analysis.93 1. 1 year.41 3 5. Tata Income Plus . Only those funds which outperform the Index were considered for the further analysis. are as follows: 1.63 2.Plan A 7.63 2 5.13 3.Plan B 12. DSP ML G Sec Fund .33 4.97 1.00 2.71 5.32 5.Point to Point Return 3 yr 2 yr 1 yr 6 mth Average Ranking 5.41 4 5 6 7 41 .73 1 5.Plan B (STD) Tata Income Plus . 2 years and 3 years point to point returns of all the Short Term Debt Funds of the 10 fund houses are calculated as on 31st March 2006.24 2.23 5.72 5.33 2.Plan B CRISIL Short Term Bond Fund Index Debt Short Term . The Top-12 funds.

27 1.20 5 Schemes Tata Dynamic Bond Fund .51 4.Option A UTI G-sec fund-STP UTI Children‘s Career Bond TATA Income Fund 3 yr - 42 .36 5.85 9.91 5.95 5.03 3 5.04 1.77 2.Option B Tata Dynamic Bond Fund .39 2.53 4.25 2.69 4.30 4.49 5.51 6.69 4.73 3.Rolling Return 2 yr 1 yr 6 mth Ranking 2.59 2 2.64 4 5.46 2 4.15 4 2.61 1 2.46 3 1.42 6.78 6.99 5.00 3.46 3.19 4.99 9.11 5.Plan A Tata Dynamic Bond.45 2.Point to Point Return 3 yr 2 yr 1 yr 6 mth Ranking 4.58 Schemes Templeton GSF Treasury plan Pru ICICI short term plan Tata Short Term Bond Fund DSP ML Short Term Fund DSP G-Sec Fund STD Tata Income Plus Plan A Debt Short Term .53 5 5.32 2.16 2.69 4.44 5.55 5.88 3.75 5.37 5 4.34 3 4.Plan B UTI Children‘s career bond CRISIL Short Term Bond Fund Index Debt Short Term .85 6 Debt Short Term Plan .29 4.80 4.02 5.25 2.19 2 5.23 6.Research and Analysis of Indian Mutual Fund Industry Schemes Tata Income Fund (App) UTI G-sec fund-STP Tata Dynamic Bond.40 6.01 3.79 1 4.68 4.22 4.89 1 5.75 4 -0.87 5.72 6.Rolling Return 3 yr 2 yr 1 yr 6 mth Average Ranking 6.65 2.29 0.

Research and Analysis of Indian Mutual Fund Industry Inception period more than 3 years Top 3 funds based on Point to Point Returns 1. Pru ICICI short term plan 2. Tata Dynamic Bond Fund . Tata Dynamic Bond Fund . Pru ICICI short term plan 3.Option A 3. Templeton GSF Treasury plan 2.Option B 2. Tata Short Term Bond Fund Inception period less than 3 years Top 3 funds based on Point to Point Returns 1. Tata Short Term Bond Fund 3.Plan A Top 3 funds based on Rolling Returns 1. UTI G-sec fund 43 . Tata Dynamic Bond. DSP ML Short Term Fund Top 3 funds based on Rolling Returns 1. Tata Income Fund (App) 2. UTI G-sec fund-STP 3.

20 . 20 . 20 20 . 2 0 . 20 . 20 . 20 .Index 44 NAV Performance Vs Crisil Index crisil short term fund index DSP GSEC-STD HDFC HIF STP UTI BOND G UTI GILT LTP TEMP GSF Months-March 02 to March 06 1500 1400 1300 1200 Research and Analysis of Indian Mutual Fund Industry 1100 1000 900 800 2 03 3 04 4 05 5 06 02 02 02 02 0 03 03 03 03 0 04 04 04 04 0 05 05 05 05 0 06 20 20 . ul ep ov a n ar ul ar J J J J M Ma 1 J S e N M M 1J S N M M 1J S N M M 0J S N M 3 30 30 31 31 31 3 30 29 31 31 31 3 30 30 31 31 31 3 30 30 31 31 30 31 . 20 . 20 . 20 20 . 20 . 20 . ul ep ov a n ar ay. 2 0 . 2 0 . 20 . ul ep ov a n ar ay. p ov a n ar ay. 20 . y. 20 . 20 20 . 20 . 2 0 .

20 . 20 . 20 . 2 0 . 20 . 20 .Index 45 NAV Performance Vs Index Index Tata Inc Plan A Uti Gilt Adv PF Tata Dyn -A Tata Income Tata ST Bond Pru ICICI STP Uti G Sec STP Uti CCB-G Dsp ML STP Tata Dyn-B Months. 20 . 20 . 2 0 . 20 .March 04 to March 06 1300 1250 1200 Research and Analysis of Indian Mutual Fund Industry 1150 1100 1050 1000 04 05 0 5 05 04 04 05 05 0 4 04 04 04 05 05 0 5 05 0 6 06 0 4 04 0 5 05 04 05 06 20 . 20 . 20 . 20 . 20 . 20 . 2 0 . 20 . 20 . 20 . 20 . 2 0 . 20 . 20 . t t r r r pr ay ul ul ar ug ep Oc Nov Dec Ja n Feb Ma Ap ug ep Oc Nov Dec Ja n Feb Ma un un ay A M A S 0 A S 1 M 0J 1J M 0J 0J 0 1 28 0 1 28 3 3 3 3 3 3 3 3 3 3 31 30 31 31 30 30 31 31 30 31 30 31 31 . 20 .

UTI Gilt Adv -LTP PF (PDAR) Schemes Pru ICICI long term plan UTI Bond fund Pru ICICI gilt(TP) HDFC High Interest STP Pru ICICI flexible income UTI Gilt Advantage -LTP 3 yr 8.94 Debt Long Term . are as follows: 1.28 2.76 3.Point to Point Return 2 yr 1 yr 6 mth Average Ranking 8.Research and Analysis of Indian Mutual Fund Industry 3.Rolling Return 2 yr 1 yr 6mth Average Ranking 5.82 8. The point to point return of the Crisil Short Term Index for the same period is also calculated. Pru ICICI long term plan 2.65 5.51 3.38 4. 1 year. UTI Bond fund 3.44 6.74 7.58 2.22 5.07 3. UTI Gilt Advantage -LTP 7.41 6. which came into analysis.90 9.14 1.81 5.79 5.48 5.32 4. Pru ICICI flexible income 6.66 5.67 9.09 8.61 6. HDFC High Interest STP 5.85 4.10 6.80 1 2.07 1. Pru ICICI gilt(TP) 4.43 5.38 4.44 1 4.79 1 2 3 4 5 Schemes UTI Gilt Advantage -LTP PF UTI Gilt Adv -LTP PF (PDAR) 3 yr Schemes Pru ICICI long term plan (G) UTI Gilt Advantage LTP UTI Bond Fund .Growth Pru ICICI Gilt TP G Pru ICICI Flexible Income G 3 yr 46 . Analysis of Long Term Debt Schemes The 6 month.37 6.37 7.Point to Point Return 2 yr 1 yr 6 mth Ranking 2.10 5.49 5.94 4.00 4.85 1.70 3 4.87 2 4.45 5.18 5.89 3.79 3.36 8.89 6.77 6 Debt Long Term . 2 years and 3 years point to point returns of all the Long Term Debt Funds of the 10 fund houses are calculated as on 31st March 2006.18 6.7.01 4.89 5 2. The Top-8 funds.19 5.67 7. Only those funds which outperform the Index were considered for the further analysis.18 5.03 9.68 4 3.80 2 Long Term Plans .43 3.79 1. UTI Gilt Advantage -LTP PF 8.19 5.10 1.53 6.

37 1 Schemes UTI Gilt Advantage Fund .PF Plan – PDAR Inception period more than 3 years 3 yr - Top 3 funds based on Point to Point Returns 1.69 1.Rolling Return 2 yr 1 yr 6 mth Ranking 2.L T . Pru ICICI gilt(TP) Top 3 funds based on Rolling Returns 1. Pru ICICI long term plan (G) 2.PF Plan . UTI Bond Fund Inception period less than 3 years Top 2 funds based on Point to Point Returns 1. UTI Bond fund 3. UTI Gilt Advantage LTP 3. UTI Gilt Advantage Fund .59 2. UTI Gilt Adv -LTP PF (PDAR) Top 3 funds based on Rolling Returns 1. UTI Gilt Advantage -LTP PF 2.Research and Analysis of Indian Mutual Fund Industry Debt Long Term . Pru ICICI long term plan 2.PDAR 47 .L T .

and 7%.Research and Analysis of Indian Mutual Fund Industry 4. 13%. 11%. Stock B: 16%. 22%. To begin with. let us understand the concept of risk on an investment. 12%. Before investing. higher the volatility (variability) of the returns.morningstar. Consider the returns generated by two equity stocks. Both Stock A and Stock B have provided average returns of 14% during the 5-year period. It‟s the uncertainty around the potential performance of the investment that can sometimes cause concern. and sometimes even minimized. As you can see from the chart. A and B. 4%. you should consider the risk profile of the mutual fund you plan to purchase. Risk and Return Analysis 4. 17% and 13%. The important thing to remember is that risk can be managed.1. In other words. it is clearly evident that Stock A is a riskier investment because its returns have fluctuated more widely than that of Stock B. However. Stock A: 25%. (Source: www. Risk and Reward Relationship Most investments usually involve some element of risk. greater will be the risk of the investment. choosing the right mutual fund should not depend entirely on the mutual fund's returns. over a 5-year period.com) 48 . The aim of most investors is to invest in assets that will generally provide the best returns for their money within the level of risk they are comfortable with.

A rise in even a few of these scripts can push up the NAV considerably. where the volatility is lower. Scrip Concentration: Although one of the key benefits of mutual funds is that investments are diversified across many instruments. depending upon the fund‟s management style and its objective. All went well till the sector crashed. Although SEBI doesn‟t stipulate the debt-equity proportion for balanced funds. varies from scheme to scheme: debt funds are less volatile than equity funds because the former invest more in fixed-income. most balanced funds are equity-oriented 49 . Volatility: As the instruments that the funds invest in are marked to market (tradable at a certain price in the market).2. This ensures that its fortunes do not ride on a few sectors alone. as in a sector fund. NAV‟s came tumbling down and investors incurred huge losses 4. however. 2. Based on phenomenal gains made by InfoTech companies during this period.Research and Analysis of Indian Mutual Fund Industry 4. This ensures that the fund‟s investment and management policies are not skewed towards a few select investors. Take the case of the IT boom in 2000. Neither the principal nor the returns are assured: in fact. 3. it‟s important that one should know the different types of risk involved 1. Which means the NAV may move down just as surely as it moves up. nongovernment securities. say. a fall in even one pulls it down as sharply. schemes sometimes concentrate on a few scripts. Mutual fund plans have varying degrees of risk. many equity-diversified funds went overboard on IT. or the equity fund investing significantly in equity instruments or your debt fund investing significantly in debt instruments. the fund needs to diversify across sectors as well–unless otherwise mandated. their NAVs are automatically subject to the price movements of these securities. Risk is as inherent to mutual funds as. This is risky. 5. its fund manager is. Sector concentration: Like scrip diversification. One cannot wholly eliminate risk in mutual fund investments. SEBI does not allow it. one can only reduce it to an extent. The volatility. Types of Risks Mutual funds are not immune to risk. Large individual holding: It‟s important for a fund to have a diversified investor base. Strategy risk: This refers to the balanced fund dividing its corpus between equity and debt. as the NAV movement will then depend largely on the performance of these few securities.

Inflation Risk: Sometimes referred to as "loss of purchasing power. one run the risk that he'll actually be able to buy less. It is okay if the fund breaches these limits once in a while. Changes in the Government Policy: Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund. Liquidity Risk can be partly mitigated by diversification. highly profitable company may be affected. A diversified portfolio can help in offsetting these changes. invest between 40 and 60 per cent in equity instruments and the balance in debt. not more. This change in price is due to "market risk". 7. It is also known as systematic risk. Inflation risk also occurs when prices rise faster than your returns. Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Exchange risk: A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. 12. therefore. 50 . When this happens. 11. how stable is the company or entity to which one lends his money when one invests? How certain is one that it will be able to pay the interest one is promised. Changes in exchange rates may. 8. Investors are reminded that "predicting" which way rates will go is rarely successful. Market Risk: At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. or repay the principal when the investment matures? 9. Credit Risk: In short. the stock prices of both an outstanding. therefore. avoids it." Whenever inflation rises forward faster than the earnings on your investment. 10. have a positive or negative impact on companies which in turn would have an effect on the investment of the fund. Continuous breaching of set limits is a warning. but if it does so regularly. Interest Rate Risk: Changing interest rates affect both equities and bonds in many ways. as the deviation from mandate can give returns inconsistent with expectations 6.Research and Analysis of Indian Mutual Fund Industry and.

Symbolically. risk-adjusted measures of return are needed to evaluate the performance of funds. it is more volatile. the fund may go overboard on the risk parameter. 3. this performance measure evaluates funds on the basis of Treynor's Index. how much the returns will deviate from the average. If the beta ratio for a stock is 1. the greater the variability in the returns i. The formula is SR (x) = | R . Sharpe Ratio: This ratio measures how much return a security has given per unit of risk. the better the risk / reward relationship of the investment.e.4 times the market. a low and negative Treynor's Index is an indication of unfavorable performance 51 .e. The Treynor Ratio: Developed by Jack Treynor. r is the best available rate of return of a risk-free like T-Bill. higher the risk. 4.4 then that stock can rise or fall 1.3. it can be represented as: Treynor's Index (Ti) = (Ri . 2. This Index is a ratio of return generated by the fund over and above risk free rate of return during a given period and systematic risk associated with it (beta).r| / StdDev (R) Where. in a bid to generate super-normal returns.Rf)/Bi. Ri represents return on fund. SR is the Sharpe ratio . Where.Research and Analysis of Indian Mutual Fund Industry 4. It measures the risk adjusted performance of any security against a risk-free asset like T-Bill. It is the true relationship between returns given by a security and the benchmark index.e. The greater the standard deviation. R is the average annual rate of return of x . Ways to measure risks An investor would naturally be interested in finding out the return generated for the risk undertaken. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. Standard Deviation: It measures the variability i. where risk is measured by Standard Deviation. as. i. Therefore. All risk-averse investors would like to maximize this value. x is amount of investment . Beta ratio: It is a widely used measure of risk. There are several such measures prominent among which are as follows: 1. Rf is risk free rate of return and Bi is beta of the fund. StdDev(R) is the standard deviation of R The higher the Sharpe ratio.

Sm is standard deviation of market returns. The net selectivity is then calculated by subtracting this required return from the actual return of the fund. 52 . the systematic risk is the relevant measure of risk when we are evaluating less than fully diversified portfolios or individual stocks. Expected return is calculated by using the market return. since they both divide the risk premium by a numerical risk measure. Required return can be calculated as: Ri = Rf + Si/Sm*(Rm . Rankings based on total risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-diversified portfolio.Research and Analysis of Indian Mutual Fund Industry Comparison of Sharpe and Treynor Sharpe and Treynor measures are similar in a way. as it is the excess return over and above the return required to compensate for the total risk taken by the fund manager. will rank lower on Sharpe Measure. a poorly diversified fund that ranks higher on Treynor measure. Within a group of funds the highest alpha represents the best performing fund. portfolio beta and risk free rate of return. The net selectivity represents the stock selection skill of the fund manager. Therefore. 5. The total risk is appropriate when we are evaluating the risk return relationship for well-diversified portfolios.Rf) Where. On the other hand. A portfolio with a consistently positive excess return (adjusted for risk) will have a positive alpha. measured in terms of returns of a fund with the required return commensurate with the total risk associated with it. Positive Jensen‟s measure indicates that the fund has been able to outperform the benchmark index. Jensen‘s alpha: Jensen‟s Measure represents the extra return over and above the expected return. as the total risk is reduced to systematic risk. The difference between these two is taken as a measure of the performance of the fund and is called net selectivity. For a well-diversified portfolio the total risk is equal to systematic risk. Higher value of which indicates that fund manager has earned returns well above the return commensurate with the level of risk taken by him. compared with another fund that is highly diversified. 6. This model compares the performance. Fama Model: The Eugene Fama model is an extension of Jenson model.

as the ordinary investor lacks the necessary skill and resources to diversify. Treynor measure and Jenson model use systematic risk based on the premise that the unsystematic risk is diversifiable. the selection of the fund on the basis of superior stock selection ability of the fund manager will also help in safeguarding the money invested to a great extent. two models namely. Sharpe measure and Fama model that consider the entire risk associated with fund are suitable for small investors. For them. However. 53 . Moreover. a portfolio can be spread across a number of stocks and sectors.Research and Analysis of Indian Mutual Fund Industry Among the above performance measures. These models are suitable for large investors like institutional investors with high risk taking capacities as they do not face paucity of funds and can invest in a number of options to dilute some risks. The investment in funds that have generated big returns at higher levels of risks leaves the money all the more prone to risks of all kinds that may exceed the individual investors' risk appetite.

GROWTH Equity Diversified Schemes Ranking Scheme SBI Magnum Multiplier Plus 93 .Growth HSBC India Opportunitites Fund .2 20 22 21 21 21 21.     First Quadrant – High Risk & High Return Second Quadrant – Low Risk & High Return Third Quadrant – Low Risk & Low Return Fourth Quadrant – High Risk & Low Return 4. Fama. Treynor and Jenson ratios of all the funds in each category is calculated on a daily basis from 31st March 2005 to 31st March 2006. Risk Adjusted Performance of the Schemes Methodology: The Sharpe.8 2 4 3.4.4. If the fund‟s standard deviation is above the average standard deviation in that category.Appr Tata Equity Opportunity Fund .Growth UTI Thematic Mid Cap Fund .2 4 5 5.Growth Kotak 30 .4 1 1 1.8 15 14 15 16 16 15.1.Growth Reliance Growth .4 9 9 10 10 11 11. A BCG matrix is created based on the standard deviation and average returns.4 6 7 8.8 22 23 23 23 54 . those funds are considered as more risky. The average of the standard deviation and average returns of the funds in each category is considered as a benchmark.4 5 6 7.2 11 13 13.2 12 12 13.Growth Tata Select Equity Fund . The funds are then separately ranked on all the parameters in each category.4 7 8 8.4 8 12 9.Growth Prudential ICICI Power .4 18 20 17 19 19 18.Growth Franklin India Flexi Cap Fund .8 3 3 5. General Equity---Diversified--.Growth Prudential ICICI Dynamic Plan .2 13 10 14.8 17 17 16.Growth Prudential ICICI Emerging STAR Fund .2 14 14 14.Growth Reliance Equity Opportunities Fund .Growth DSP ML Opportunities Fund .Open Ended --.Growth Tata Infrastructure Fund .Growth SBI Magnum Global Fund 94 . The average of these ranks are calculated in each category and ranked accordingly.Research and Analysis of Indian Mutual Fund Industry 4.Growth Average Return Sharpe Ratio Treynor Ratio Fama 1 1 2 3 2 1 5 3 4 2 10 3 7 4 7 9 7 10 6 9 11 16 5 6 11 6 12 14 8 9 4 15 5 17 11 13 13 15 15 18 18 8 12 18 17 10 19 14 15 16 16 8 20 18 19 13 19 20 17 20 21 21 21 22 22 22 23 23 23 1 2 3 8 4 5 9 7 6 10 21 12 11 17 13 18 16 19 14 15 20 22 23 Jensen's Alpha Average Ranking Composite Ranking 2 1.Growth Franklin India Opportunity Fund .Growth SBI Magnum Midcap Fund .Growth Birla SunLife Equity Fund .Growth HDFC Equity Fund .Growth DSP ML Tiger Fund . The standard deviation and average returns of the funds are plotted in each category.Growth Prudential ICICI Discovery Fund .Growth Kotak Opportunities Fund .Growth HDFC Top 200 . The average returns of the funds are also calculated on a daily basis for the same period.

Research and Analysis of Indian Mutual Fund Industry Relative Risk Return Analysis (Equity Diversified Schemes) Low Risk High Return SBI Magnum Global Kotak Opportunities DSP ML Tiger High Risk High Return SBI Magnum Multiplier Plus 93 Pru ICICI Emerging STAR SBI Magnum Midcap Pru ICICI Dynamic Plan Franklin India Flexicap Franklin India Opportunity Birla Sunlife Equity Tata Select Equity Tata Infrastructure Returns (1 year) HDFC Equity Pru ICICI Power Kotak 30 HDFC Top 200 Pru ICICI Discovery DSP ML Opportunities Reliance Growth Reliance Equity Opportunities HSBC India Opportunities Tata Equity Opportunity UTI Thematic Mid Cap Low Risk Low Return Standard Deviation High Risk Low Return (1 year) 55 .

The (3) Quadrant shows funds with High risk & Low return.Research and Analysis of Indian Mutual Fund Industry In the Risk Adjusted Returns of the Equity Diversified Funds.1 in the ranking of 3 out of 5 parameters. The Reliance Equity Opportunities Fund is having lowest ranking in all the measures and is considered as highly risky. This fund might be risky for investing as it is in (2) Quadrant. The standard deviation tells us how much the return on the fund is deviating from the expected normal returns. the performance of SBI Magnum Multiplier Plus 93 is the best. Higher these measures the better a fund‟s returns have been relative to the amount of investment risk it has taken. The performance of the SBI Magnum Global Fund is almost at par with the magnum multiplier fund. HSBC Equity Opportunity Fund falls in this category as it is highly volatile with low returns. SBI Magnum Multiplier 93 Fund is giving high returns but is slightly more volatile than SBI Magnum Global Fund.  The higher the number. SBI Magnum Global Fund is the safest fund as it gives high returns with low volatility. Therefore. investors. 56 . this fund is good for conservative investors. It is No. Reliance Growth and Equity Opportunity Fund falls in (4) Quadrant is a fund with Low Risk & Low Returns. the more volatile the fund.

Growth UTI Balanced Fund .GROWTH Scheme SBI Magnum Balanced Fund . Balanced--.4 1 2 3 4 5 6 7 8 9 10 11 12 13 Low Risk High Return High Risk High Return SBI Magnum Balanced Fund HDFC Prudence Fund Returns (1 year) Kotak Balance Fund Prudential ICICI Balanced Fund Tata Balanced Fund DSP ML Balanced Fund Birla SunLife 95 Fund Unit Scheme 2002 Fund UTI Balanced Fund Birla Balance Fund FT India Balanced Fund Franklin India Balanced Fund HDFC Balanced Fund Standard Deviation (1 year) Low Risk Low Return High Risk Low Return 57 .Growth Tata Balanced Fund .4.2 9 11 10 9 10.8 7 8 5 6 6.Growth Average Return Fama 1 3 2 5 7 4 6 11 8 13 9 12 10 Sharpe Treynor Jensen Average Ranking Rank 1 2 2 1 1.Growth Birla SunLife 95 .Growth HDFC Prudence Fund .Growth Birla Balance Fund .Growth Kotak Balance .4 11 10 11 11 10.Growth FT India Balanced Fund .4 2 1 1 2 1.Growth HDFC Balanced Fund .Open Ended --.Growth Franklin India Balanced Fund .8 3 4 3 3 3 4 3 7 5 4.Growth Unit Scheme 2002 .4 8 7 8 8 8.Research and Analysis of Indian Mutual Fund Industry 4.Growth Prudential ICICI Balanced .4 12 12 9 10 11 13 13 13 13 12.2.Growth DSP ML Balanced Fund .8 5 5 4 4 5 6 6 6 7 5.4 10 9 12 12 10.

1 in the ranking of 3 out of 5 parameters. It is No. Higher these measures the better a fund‟s returns have been relative to the amount of investment risk it has taken. The HDFC Balanced Fund is having lowest ranking in all the measures and is considered as highly risky. This fund might be risky for investing. the performance of SBI Magnum Balanced Fund is the best. 58 . The performance of the HDFC Prudence Fund is almost at par with the Magnum Balanced fund. SBI Magnum Balanced Fund and Kotak Balanced Fund are giving high returns but are also highly volatile. The standard deviation tells us how much the return on the fund is deviating from the expected normal returns.Research and Analysis of Indian Mutual Fund Industry In the Risk Adjusted Returns of the Balanced Funds. HDFC Prudence is the safest fund as it gives high returns with low volatility.

Growth SBI Magnum Tax Gain Scheme 93 Returns (1 year) HDFC Long Term Advantage Fund Prudential ICICI Tax Plan Standard Deviation (1 year) Low Risk Low Return High High Risk Low Return In the Risk Adjusted Returns of the Equity Linked Saving Schemes.Growth Prudential ICICI Taxplan .Open Ended --.3.Growth Average Return 2 4 1 3 Sharpe 1 2 3 4 Treynor 1 2 4 3 Fama Jensen's Alpha Avg Ranking Rank 1 1 1. SBI Magnum Tax Gain Scheme is the safest fund as it gives high returns with low volatility.4. HDFC Tax Saver has given the highest return. General Equity---ELSS--. All the 4 ELSS perform pretty well in all the parameters.Research and Analysis of Indian Mutual Fund Industry 4.2 1 2 2 2.8 3 4 4 3. The standard deviation tells us how much the return on the fund is deviating from the expected normal returns.4 2 3 3 2.1 in the ranking of 4 out of 5 parameters.GROWTH Ranking Scheme SBI Magnum Tax Gain Scheme 93 HDFC Long Term Advantage Fund HDFC Taxsaver . the performance of SBI Magnum Tax Gain Scheme is the best. It is No.6 4 Low Risk High Return High Risk High Return HDFC Taxsaver . 59 . but the volatility is also high.

(Option A) Tata Short Term Bond Fund Tata Income Plus Fund .S T D UTI Childrens Career Bond Plan DSP ML Short Term Fund Templeton GSF .Option B Tata Income Plus Fund .Plan B .Open Ended --. 60 .STP DSP ML G Sec Fund . General Debt—Short Term-. The standard deviation tells us how much the return on the fund is deviating from the expected normal returns.HIP . Tata Income fund gives high returns with high volatility.4. the performance of Tata Dynamic bond (Option A) is the best.Sec Fund Prudential ICICI STP DSP ML G-Sec Fund Standard Deviation (1 year) Low Risk Low Return High High Risk Low Return In the Risk Adjusted Returns of the Short Term Debt funds.Research and Analysis of Indian Mutual Fund Industry 4.GROWTH Scheme Tata Dynamic Bond Fund . Tata Income Fund is good in all the parameters except the Fama Model.RIP .(Option B) Prudential ICICI STP UTI G-Sec Fund . wherein it got the last rank. Majority of the Short Term Funds are in the “low risk low return quadrant”.4.Treasury Plan Average Fama Sharpe Treynor Jensen Rank 2 1 3 4 6 5 7 8 9 11 10 12 6 12 7 9 2 10 1 4 3 11 5 8 1 2 3 4 7 5 9 10 12 6 11 8 2 1 3 4 7 5 10 8 12 6 11 9 2 1 3 5 6 4 7 9 8 12 10 11 1 2 3 4 5 6 7 8 9 10 11 12 Low Risk High Return High Risk High Return Tata Income Fund Tata Dynamic Bond Fund (Option A) Tata Dynamic Bond Fund (Option B) Tata Income plus Fund-RIP (Plan A) Tata Income plus Fund-RIP (Plan A) Returns (1 year) UTI Children‟s Career Bond Plan Templeton GSF.Treasury plan Tata Short Term Bond Fund DSP ML Short Term Fund UTI G.Option A Tata Income Fund Tata Dynamic Bond Fund .

3. Alternatively. Understand the Risk profile: It is important for one to understand your risk profile. Set the investment objectives: Work out how much return will make one happy and meet One‟s needs. while others may fall. Risk profile depends on two things:   Risk capacity: Risk capacity depends on One‟s financial situation and how much risk you can take. 6. Diversify the investments: By spreading investments around. one is not as affected by (or “exposed to”) the movements of just one market. 4. as there is more time for one to ride out the peaks and troughs of investment performance. The longer one has to invest. Proper asset allocation takes all kinds of securities into consideration and uses them effectively to achieve higher returns at a given level of risk 2. Know the timeframe: The amount of time available to invest is also critical in determining which investments may suit One‟s needs and in managing investment risks. investors nearing retirement may wish to invest in low risk investments where the likelihood off fluctuation in investment performance is significantly reduced. Manage Asset Allocation: One can reduce risks by having a proper asset allocation plan. some of which may rise. It is not a 100% guaranteed way of removing all kinds of risks. generally the more risks one can take with your investments. What are the future goals and what kind of investments can help achieve these goals? 5. but it is a way by which One can protect One self from market fluctuations by considering them and balancing his investment portfolio.Research and Analysis of Indian Mutual Fund Industry 4. Risk tolerance: It depends on how much risk one can take psychologically.5. 61 . Tips to Minimize Risk 1. Regular Investment: One can protect oneself against market fluctuations over a long period of time by investing regularly.

are conservative in their habits. PPF.Research and Analysis of Indian Mutual Fund Industry 5. It was more between the income levels of Rs 10001-15000 & above 15000 categories of households. and it would take many years substantially to change behavior particularly when it comes to the use of their savings. The table below shows the SEBI-NCAER Survey of Indian Investors. Investment through Mutual Funds versus other Investment 5. 62 . March 2003 showed the Distribution of Equity Investor Households by Type of Income. Growing Household Savings India has a high household savings ratio. like most people anywhere.1. It can be clearly viewed from the table that holdings of Mutual Fund Units were extremely less as compared to Fixed deposit. Indians. LIC etc.

50 %-2 year 7.5.a.Research and Analysis of Indian Mutual Fund Industry 5.5. 100.10.5% per year Minimum Rs. 200. National Savings Certificate 8% p. premature withdrawal is possible.1000.600.000 Rs. 2. further deposit in multiple of Rs. Rs.a.2.000 Minimum Rs. and withdrawal is possible after 3 years without any discount and without bonus. No Half Yearly maximum limit. can be extended for further 5 years One withdrawal up to 50% of the balance allowed after 1 year.500.100. Account can be opened for 1 year to 5 year. 63 .000 in case of single account and Rs. No maximum limit Minimum Rs.100 per year. upto max of 25% of balance at the end of preceding year. compounded Yearly DENOMINATION AND INVESTMENT LIMITS Maximum Rs.10 per month or any amount in multiples of Rs.90 on maturity Minimum Rs.70.100. 50 any Withdrawal anytime without further deposit in multiple notice. premature withdrawal allowed denominations of Rs.000 and Rs. Small Saving Schemes at a Glance SCHEME Public Provident Fund RATE 8% p. 100. No maximum limit Maturity after 5 years. of Rs.3. No maximum limit Kisan Vikas Money doubles in 8 Patra years and 7 months Time Deposit 6. Compounded Minimum Rs. Part withdrawal allowed after 7 years.5 years account can be closed after one year with discounted rate of interest.000 in joint acc. 200. loan available after 3 years and onwards.50 %-4 year Savings Bank Account 3. 5 with maximum balance of Rs.10 per month returns Rs.000 in case of joint account Minimum Rs.5 LIQUIDITY Maturity after 15 years.25 %-3 year 7. Premature withdrawal is possible after one year upto 3 years with 5% discount. closure allowed after 3 years with different rate of interest Maturity period is 6 Years.1000. up to Rs. No Maturity after 6 years. in lump sum or in 12 installments with amount in multiples of Rs.000 in case of individual and Rs.728.25 %-1 year 6. account can be closed after completion of 6 months but before 1 year with no interest. Recurring Deposit Account Monthly Income Scheme 8% per annum plus 10% bonus on maturity Minimum Rs. Rs. Rs.300.1000. Maturity period 8 years 7 months.

Equity Linked Savings Schemes (ELSS) is an ideal way to save on tax as well as staying invested in equity mutual funds.Research and Analysis of Indian Mutual Fund Industry 5. The ELSS Advantage Tax Savings is a very important part of financial planning. Post tax returns are what really matters at the end of the day as the real income from investments comes from what you earn after paying all taxes.3. ELSS is basically equity-diversified scheme and has a lock in period of three-years. ELSS schemes have been introduced in India to promote investments in equity markets by giving tax concessions to the investors. 64 .

Reducing the level of returns on these schemes will also bring India more into line with the usual risk/return ratios whereby lower risk products only offer lower returns: the fact that high returns are available currently on low risk products is skewing Indian investors‟ perceptions of risk. more distinctive and more comprehensible to ordinary people Make disclosure more relevant. Recommendations 1. Asset management companies of mutual funds should be encouraged or even instructed to open offices or develop distribution in areas outside the major cities. defined contribution pensions. It is quite clear from the above that:  Government-sponsored instruments „crowd out‟ mutual funds since for the majority of Indians. Make mutual funds more comprehensible   Make fund structures and investment objectives (and investment and borrowing powers) clearer. mutual funds. Continue to reduce the attractiveness of government guaranteed schemes Unless the attractiveness of the government guaranteed schemes continues to be reduced it will be impossible for any adviser honestly to recommend investment in mutual funds until after their clients have achieved the maximum exposure to government guaranteed schemes that is permitted. deposits. the main market at present. simpler and clearer and more capable of comparison 3. Today most of the mutual funds are 65 . buying mutual funds before they have their full complement of government-backed savings instruments would be both wrong and foolish 4. Channel small savings from the household sector to the mutual fund industry over the period 2004-2010 To channelize the savings from the household sector. life products. Give Professionalized financial advice & Educate Investors As the affluence of Indians increases and the range of financial products available to meet people‟s needs expands – mortgages. which are growing at a rapid pace.Research and Analysis of Indian Mutual Fund Industry 6. we need to concentrate on the „B‟ and „C‟ class cities. etc – the need for financial advice will increase. 2.

improving service standards and by launching innovative products. Rural Penetration Mutual fund can penetrate into rural population by taking the clues from the Indian insurance industry whereby they have separate set of products for the urban as well as rural sector. 5. Measures needed to be implemented to develop (a) Investors confidence (b) Promote best practices amongst mutual funds. The products in the rural sector are simple and less in number? which are easy for them to understand. 66 .Research and Analysis of Indian Mutual Fund Industry concentrating on the „A‟ class cities since the cost involved in acquisition of big investors is small. in the Indian Mutual Funds Industry. But they should realize that stability in the fund would come with the presence of small retail investors. Investor‟s confidence can be developed by providing efficient investment management processes.

understand his own capacity for risk and choose his funds accordingly. 67 . because that‟s what all of us are really investing for. Conclusions Success in investing requires taking a view of the future. and enjoy life in the meantime.Research and Analysis of Indian Mutual Fund Industry 7. An investor must measure his risk appetite. The Indian Mutual Fund Industry is all set to achieve greater heights. and not reacting to the immediate past. Invest in mutual funds and have a longer investment horizon stay focused on the long-term goals. Mutual funds are the fastest growing segment of the financial services sector in India offering a better opportunity for investors with lesser risk.

mutualfundsindia. bonds & Mutual funds.com www.iciciprulife.franklintempletonindia.in www.com www.sbimf. K..com www. E..co. Tata McGraw-Hill Publishing Company Limited Goodman.hsbc. Dearborn Trade Publishing Sadhak. MUTUAL FUNDS IN INDIA Marketing Strategies and Investment Practices.kotakmutual. Jordan.org www. Verma. Raghunathan.indiainfoline. V.com www.com www.irdaindia.com www.com www.com 68 . Jayanth..dspmlmutualfund. Everyone’s money book on Stocks. M. Performance Appraisal of Mutual Funds.S.birlasunlife.. Samir.com www. Bodla.in www. Response Books Turan.gov.com www.hdfcfund...com www.moneycontrol..Research and Analysis of Indian Mutual Fund Industry 8. References Books: Barua.utimf.sebi. R.S.valueresearchindia.com www. H. B. 2nd Edition.com www. Excel Books Websites www.amfiindia. Portfolio Management.

051811 0.10381788 0.05561027 0.141662 0.22585703 0.04188671 0.257401 0.02822145 0.21353 0.257574 0.2938364 0.03108 0.262869 0.07591132 0.Growth DSP ML Tiger Fund .277383 0.0724952 0.02300288 0.09865918 0.Growth SBI Magnum Midcap Fund .Growth Tata Infrastructure Fund .Growth DSP ML Opportunities Fund .030678 0.30284744 0.Growth Tata Select Equity Fund .04617914 0.239543 0.28237112 0.07406891 0.175817 Fama 0.14570394 Sharpe 0.Growth Birla Balance Fund .15923451 0.04298742 0.23548266 0.222563 0.17063994 0.037553 0.03544436 0.005712 Treynor 0.245507 0.08058488 0.034307 0.193509 0.124508 0.06494808 0.248012 0.110174 Jensen 0.05377084 0.23617873 0.Growth Franklin India Opportunity Fund .05947971 0.Growth HDFC Top 200 .244854 0.048735 0.2799288 0.20553493 0.265761 0.Growth Birla SunLife 95 .075518 0.05491197 0.219469 0.018199 0.19594943 0.272431 0.01933589 Risk and Return of Balanced Schemes Risk Adjusted Return Scheme SBI Magnum Balanced Fund .132664 0.02323311 0.284335 0.18893597 0.17361075 0.25925096 0.176959 0.05081 0.07718853 0.16463059 Fama 0.33004262 0.Growth SBI Magnum Global Fund 94 .23223662 0.21138906 0.02252802 Jensen 0.Growth Reliance Equity Opportunities Fund .053706 0.03498021 0.24926284 0.06426636 0.04738269 -0.11323444 0.03833458 0. Annexure Risk and Return of Equity Diversified Schemes Risk Adjusted Return Scheme SBI Magnum Multiplier Plus 93 .128606 0.23609032 0.Growth HDFC Equity Fund .Growth Prudential ICICI Balanced .19573032 0.2457561 0.036526 0.211559 0.00081215 0.23044607 0.Growth Birla SunLife Equity Fund .04857 0.035023 0.Growth Kotak 30 .18223328 0.20178 0.21095003 0.244694 0.30371419 0.17925317 Treynor 0.252611 0.039009 0.28087934 0.06856723 0.255863 0.295225 0.Growth Unit Scheme 2002 .22777317 0.06115494 0.05589401 0.258617 0.07684812 0.024381 69 .Growth HSBC India Opportunitites Fund .17203702 0.2513898 0.05758759 0.014358 0.Growth HDFC Prudence Fund .Growth UTI Balanced Fund .126211 0.27415193 0.172323 Sharpe 0.135332 0.35299553 0.25774996 0.Growth Prudential ICICI Discovery Fund .121753 0.23699027 0.Growth Reliance Growth .03429766 0.30569 0.14169243 0.23142892 0.084172 0.158286 0.15924677 0.Research and Analysis of Indian Mutual Fund Industry 9.2092541 0.25036881 0.03778869 0.210581 0.005928 0.27119926 0.24627814 0.22232021 0.Growth Kotak Balance .27239658 0.0587427 0.Growth Average 0.2575882 0.08774662 0.Growth Franklin India Flexi Cap Fund .02018812 0.130319 0.05074636 0.Growth Franklin India Balanced Fund .Growth Prudential ICICI Dynamic Plan .1449029 0.057555 0.26418532 0.040493 0.21726959 0.024568 0.Growth Prudential ICICI Emerging STAR Fund .069097 0.0456853 0.196223 0.16894819 0.Growth Kotak Opportunities Fund .282967 0.24856025 0.Growth DSP ML Balanced Fund .27794073 0.131231 0.24524679 0.22253464 0.014432 0.064823 0.25493017 0.257118 0.Growth Tata Balanced Fund .Growth Average Return 0.241672 0.228421 0.24820812 0.288035 0.196341 0.22037596 0.16284 0.07829828 0.16935991 0.Growth UTI Thematic Mid Cap Fund .14097431 0.Growth FT India Balanced Fund .00755489 -0.259134 0.024317 0.12108461 0.Appr Tata Equity Opportunity Fund .05657906 0.121688 0.Growth Prudential ICICI Power .Growth HDFC Balanced Fund .05906579 0.179644 0.00949467 -0.031133 0.

02507024 -2.00298401 6.Option B Tata Income Plus Fund .6 5 -0.02617639 0.22639946 0.06 0.4 11 -0.10733471 Treynor 0.067 0.0214005 0.02488002 0.8 9 -0.023 Jensen 0.02642264 0.01081337 Sharpe 0.02549261 -1.24820714 0.02488567 0.00921168 -0.02071508 Fama -0.26306671 0.2 10 -0.02924517 0.60985213 -0.Growth Average 0.00219907 5.041 0.01667268 -0.07006893 -0.00891386 -0.00075878 2.01663923 -0.02191616 0.Growth Prudential ICICI Taxplan .6 12 70 .03767413 0.21182935 Treynor Fama 0.0014505 5.02114495 0.13314423 -0.64923867 Jensen Avg Rank Rank 0.05438133 -0.(Option B) Prudential ICICI STP UTI G-Sec Fund .14798653 -0.26829725 0.S T D UTI Childrens Career Bond Plan DSP ML Short Term Fund Templeton GSF .09251341 0.6 1 0.00520728 3.0043931 9.00666473 -0.313777 0.02655829 0.Plan B .Research and Analysis of Indian Mutual Fund Industry Risk and Return of ELSS Schemes Risk Adjusted Return Scheme SBI Magnum Tax Gain Scheme 93 HDFC Long Term Advantage Fund HDFC Taxsaver .00145893 5.02099088 0.8 3 -0.23951002 Sharpe 0.8 8 -0.02278501 0.00659291 -0.0328094 0.26701215 0.00742097 -0.004921 9.2 4 -0.15445403 -0.41206458 -6.00043041 3.26623062 0.STP DSP ML G Sec Fund .25551084 0.23788375 0.00252479 -0.58676748 -2.31422337 0.27181757 0.00731609 -0.07277184 0.8 7 -0.00361277 8.8 6 -0.07591206 0.35817638 0.00246291 -0.12988265 -1.320439 0.02093512 0.01664035 -0.0039793 9.07234505 0.HIP .06423926 Risk and Return of Short Term Debt Schemes Risk Adjusted Return Scheme Tata Dynamic Bond Fund .(Option A) Tata Short Term Bond Fund Tata Income Plus Fund .RIP .4 2 0.00810743 -0.1727556 -0.210865 -1.00369283 7.10452129 0.Option A Tata Income Fund Tata Dynamic Bond Fund .Treasury Plan Average 0.