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INTRODUCTION

INTRODUCTION TO MUTUAL FUNDS
Mutual Funds are investment institutions set up to manage money pooled in from the public. The advantages of investing in Mutual Funds are the professional expertise they employ coupled with the variations offered on the basis of asset classification and the diversification of the chosen portfolio aimed at optimizing the risk for the required return.

The benefits that can be accrued from Mutual Funds are

The schemes could be added to the portfolio with online updates for monitoring the performance of your investments in Mutual Funds.

The comprehensive search, which gets you the fund matching your criteria. The comparison of various schemes of different Mutual Funds based on the critical and most sought after investment criteria.

The analysis of different schemes and the outlook for the same. List of new launches in the market provided continuously.

Basically, Mutual funds are trusts that are formed to mobilize the savings from the people and pool them together to invest within the securities markets. The main advantage of mutual funds is that it is professionally managed. And the general idea is for
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investors to contribute small amounts into units in the various schemes, which in turn is deployed in the various markets. This way, any investor who is not in a position to directly invest in the markets can take advantage of this route.

UTI is the oldest of Indian mutual funds, having entered the arena with the launch of the Unit Scheme - 64 in 1964, hence the alphanumeric name. It was only in 1998 that other public sector banks were allowed to enter into the segment which was followed by a whole range of Asset Management companies including almost all the leading international portfolio managers including Merrill Lynch, Templeton, and Prudential among others.

There are several different ways one can diversify a portfolio, such as the different categories of the Morningstar style box, which contain several different asset classes. But another common way to diversify is between the various sectors of the economy. This is usually accomplished with mutual funds that concentrate in one of the major sectors, such as natural resources or utilities. This article will examine the nature and composition of sector funds and the advantages and disadvantages that they present to investors.

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NEED OF THE STUDY:
The main purpose of doing this project was to know about performance of mutual funds. This helps to investors to make investments in good AMC’s. When one wants to invest in mutual funds the study is mandatory because every investor wants to maximize the returns and minimize the risk for that this study is helpful for the investors through analysis of performance of mutual funds and risk analysis in mutual funds. The study helps to have knowledge of growth funds and working of mutual funds and the study enables the readers to assess t he NET ASSET VALUE (NAV) by seeing the charts.

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OBJECTIVES OF THE STUDY:
Statement of the problem:

The study totally attempts to know the performance of growth funds with reference to RELIANCE MUTUAL FUND &UTI MUTUAL FUND.

Objectives of the Project: Primary objectives  To measure the performance of Growth Funds using Sharpe’s Model, Treynor’s Model.  To study the volatility in growth funds.  To know which company fund is performing well. Secondary objective  To give better suggestions to the investor to invest in good Asset Management Company (AMC) between these two companies.

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company profile. Industry profile. Secondary data. analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. and some information through internet. Secondary data: In this method I collected the performance reports of the funds. fund fact sheets. journals. 5 . The methodology used in the study for the completion of the project and the fulfillment of the project objectives.RESEARCH & METHODOLOGY Research design or research methodology is the procedure of collecting. is as follows: Collection of Data: 1.

Rf Treynor’s Model = β 6 . ∑Y Beta Value β : N∑X2-(∑X) 2 Step3: calculation of Sharpe index: Rm .Rf Sharpe Model = α Step4: calculation of treynor’s index: Rm .METHODOLOGY: The following methodology is used for analyzing the data: Step1: calculation of returns using the following formula: HIGH NAV-LOW NAV RETURNS = -----------------------------------------------LOW NAV Step2: calculation of risk or standard deviation: ∑(R-r)2 √ -------------N-1 x100 Step3: calculation of Beta : N∑XY-∑X.

SCOPE OF THE STUDY: The project report covers the study of net asset values of growth funds of RELIANCE&UTI MUTUAL FUND COMPANIES. The analysis part includes net asset value charts (NAV) which gives the clear pictures of present value of the company. The theory part also includes following information related to mutual fund:     History of mutual funds Concept of mutual funds Net asset value types and benefits of mutual funds 7 . The study also includes returns & risk of mutual funds and the performance of mutual funds.

 Different people may interpret the same analysis in different ways.LIMITATIONS OF THE STUDY:  The study is restricted to growth funds of RELIANCE&UTI MUTUALFUND companies by taking 3 years data on monthly basis. 8 .

The capital appreciation and other incomes earned from these investments are passed on to the investors (also known as unit holders) in proportion of the number of units they own. who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his own. 9 .REVIEW OF LITERATURE: INTRODUCTION TO MUTUAL FUND Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. Since the stated investment objective of a mutual fund scheme generally forms the basis for an investor's decision to contribute money to the pool. a mutual fund can not deviate from its stated objectives at any point of time. Every Mutual Fund is managed by a fund manager.

B.000 or 10.When an investor subscribes for the units of a mutual fund. Professional Management: Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own. E. 100. 50 (i. 10 . NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. i. Mutual Fund investor is also known as a mutual fund shareholder or a unit holder.e. Any change in the value of the investments made into capital market instruments (such as shares. Portfolio Diversification: Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small). For example: A. Number of units held multiplied by the NAV of the scheme) ADVANTAGES OF MUTUAL FUND: 1.e. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. C.000 The total number of units issued to the investors is equal to 10. If the market value of the assets of a fund is Rs. D. 100.000/10. 2.00 Now if an investor 'X' owns 5 units of this scheme Then his total contribution to the fund is Rs.000. Then the NAV of this scheme = (A)/(B).

All funds are registered with SEBI and complete transparency is forced. Liquidity: An investor may not be able to sell some of the shares held by him very easily and quickly. Flexibility: Investors also benefit from the convenience and flexibility offered by Mutual Funds. 4. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa.3. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. Choice of Schemes: Mutual funds provide investors with various schemes with different investment objectives. 8. All material facts are disclosed to investors as required by the regulator. Safety: Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. 5. mutual funds pay lesser transaction costs. These schemes further have different plans/options 7. Low Transaction Costs: Due to the economies of scale (benefits of larger volumes). These benefits are passed on to the investors. 9. Less Risk: Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. 6. 11 . whereas units of a mutual fund are far more liquid. Transparency: Funds provide investors with updated information pertaining to the markets and the schemes.

Costs Control Not in the Hands of an Investor: Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units). For this. Difficulty in Selecting a Suitable Fund Scheme: Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives. when an investor wants to sell his units. No Customized Portfolio’s: The portfolio of securities in which a fund invests is a decision taken by the fund manager. TYPES OF MUTUAL FUNDS General Classification of Mutual Funds Open-end Funds / Closed-end Funds Open-end Funds: Funds that can sell and purchase units at any point in time are classified as Openend Funds. 2. The NAV of an open-end fund is calculated every day. 12 . 3. which some investors find as a constraint in achieving their financial objectives. An open-end fund is not required to keep selling new units to the investors at all times but is required to always repurchase. Investors have no right to interfere in the decision making process of a fund manager.DISADVANTAGES OF MUTUAL FUND: 1. The fund size (corpus) of an open-end fund is variable (keeps changing) because of continuous selling (to investors) and repurchases (from the investors) by the fund. irrespective of the performance of the fund.

to protect the interests of the investors. However. it refers to the load charged to an investor at the time of his entry into a scheme. portfolio churning. SEBI provides investors with two avenues to liquidate their positions: 1. Many funds recover these expenses from the investors in the form of load. fund manager’s salary etc. Closed-end Funds may also offer "buy-back of units" to the unit holders. distribution. advertising.Closed-end Funds: Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period are known as Closed-end Funds. These funds are known as Load Funds. The trading is generally done at a discount to the NAV of the scheme. Entry load is deducted from the investor’s contribution amount to the fund. The NAV of a closed-end fund is computed on a weekly basis (updated every Thursday). buying and redemption of units by the investors directly from the Funds is not allowed. A load fund may impose following types of loads on the investors:  Entry Load – Also known as Front-end load. the corpus of the Fund and its outstanding units do get changed. After the closure of the offer. 13 . 2. Load Funds/no-load funds Load Funds: Mutual Funds incur various expenses on marketing. Closed-end Funds are listed on the stock exchanges where investors can buy/sell units from/to each other. In this case. The corpus of a Closed-end Fund remains unchanged at all times.

all funds. which are taxable.   Deferred Load – Deferred load is charged to the scheme over a period of time. Non-Tax-exempt Funds: Funds that invest in taxable securities are known as Non-Tax-exempt Funds. Long term capital gains and dividend income in the hands of investors are tax-free. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). Tax-exempt Funds/ Non-Tax-exempt Funds Tax-exempt Funds: Funds that invest in securities free from tax are known as Tax-exempt Funds. This type of load is known as Contingent Deferred Sales Charge. these charges are imposed on an investor when he redeems his units (exits from the scheme). except open-end equity oriented funds are liable to pay tax on distribution income. No-Load Fund: All those funds that do not charge any of the above mentioned loads are known as Noload Funds. the percentage of exit load reduces as the investor stays longer with the fund. Exit load is deducted from the redemption proceeds to an outgoing investor. All open-end equity oriented funds are exempt from distribution tax (tax for distributing income to investors). Profits arising out of sale of units by an investor within 12 months of purchase are categorized as short-term capital gains. Exit Load – Also known as Back-end load. Contingent Deferred Sales Charge (CDSS) – In some schemes. In India. STT is deducted from the redemption proceeds to an investor 14 .

BROAD MUTUAL FUND TYPES 15 .

Because of these speculative investments Aggressive Growth Funds become more volatile and thus. Specialty Funds: Specialty Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. a. Equity Funds: Equity funds are considered to be the more risky funds as compared to other fund types. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. but they also provide higher returns than other funds. There are different types of equity funds each falling into different risk bracket. There are following types of specialty funds: 16 . there are following types of equity funds: (1)Aggressive Growth Funds: In Aggressive Growth Funds. for 3 years or more. Growth Funds invest in those companies that are expected to post above average earnings in the future. are prone to higher risk than other equity funds. fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature.1. are comparatively riskier than diversified funds. b. In the order of decreasing risk level. Criteria for some specialty funds could be to invest/not to invest in particular regions/companies. Specialty funds are concentrated and thus. Without entirely adopting speculative strategies. Growth Funds: Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future.

Market capitalization of Mid-Cap companies is less than that of big. Auto. Diversified Equity Funds: Except for a small portion of investment in liquid money market.1. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Market Capitalization of a company can be calculated by multiplying the market price of the company's share by the total number of its outstanding shares in the market. 2. investment gets risky. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or SmallCap Funds. One prominent type of diversified equity fund in India is 17 . Foreign securities funds achieve international diversification and hence they are less risky than sector funds. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 4. However. like all other funds diversified equity funds too are exposed to equity market risk. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently. foreign securities funds are exposed to foreign exchange rate risk and country risk. diversified equity funds invest mainly in equities without any concentration on a particular sector(s). Sector Funds: Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors. 500 crores. Banking. The exposure of these funds is limited to a particular sector (say Information Technology. 3. blue chip companies (less than Rs. However. These funds are well diversified and reduce sector-specific or company-specific risk. 2500 crores but more than Rs.

Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. As per the mandate.Equity Linked Savings Schemes (ELSS). 2. are more risky. Narrow indices are less diversified and therefore. they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. In order to ensure regular income to investors.) are known as Debt / Income Funds. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. debt (or income) funds distribute large fraction of their surplus to investors. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past. Equity index funds that follow broad indices (like S&P CNX Nifty. a minimum of 90% of investments by ELSS should be in equities at all times. financial institutions. governments and other entities belonging to various sectors (like infrastructure companies etc. c. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Although debt securities are generally less risky than equities. Less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Sensex) are d. banks. To minimize the 18 . Equity Index Funds: Equity Index Funds have the objective to match the performance of a specific stock market index. Debt/Income Funds: Funds that invest in medium to long-term debt instruments issued by private companies.

b. the security of investments depends upon 19 . Assured Return Funds: Although it is not necessary that a fund will meet its objectives or provide assured returns to investors. Because of their narrow orientation. these funds are conceivable and may be offered to investors very soon. Focused Debt Funds: Unlike diversified debt funds. Some examples of focused debt funds are sector. c. Although not yet available in India. is shared by all investors which further reduces risk for an individual investor. but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Diversified Debt Funds: Debt funds that invest in all securities issued by entities belonging to all sectors of the market are known as diversified debt funds.risk of default. focused debt funds are narrow focus funds that are confined to investments in selective debt securities. there can be following types of debt funds: a. issued by companies of a specific sector or industry or origin. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction. specialized and offshore debt funds. Any loss incurred. funds that invest only in Tax Free Infrastructure or Municipal Bonds. debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Based on different investment objectives. on account of default by a debt issuer. focused debt funds are more risky as compared to diversified debt funds. However. Debt funds that target high returns are more risky. These funds are generally debt funds and provide investors with a low-risk investment opportunity.

Also known as Government Securities in India. Monthly Income Plans of UTI) that assured specified returns to investors in the future. government had to intervene and took over UTI's payment obligations on itself. 1. these investments have little credit risk (risk of default) and provide safety of principal to the investors. However.Open-end 2. Unlike closed-end funds. SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. UTI was not able to fulfill its promises and faced large shortfalls in returns. To safeguard the interests of investors. fixed term plans are not listed on the exchanges. UTI had offered assured return schemes (i.the net worth of the guarantor (whose name is specified in advance on the offer document). d. gilt funds too are exposed to interest rate risk. f. like all debt funds. In the past. Eventually.GiltFunds g.Closed-end 3. Fixed term plan series usually invest in debt / income schemes and target short-term investors. Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. 20 . Gratify investors by generating some expected returns in a short period. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction. The objective of fixed term plan schemes is to e. no AMC in India offers assured return schemes to investors. Issued by the Government of India. Currently. though possible.e.

4. There are following types of hybrid funds in India: a. Hybrid Funds: As the name suggests. Money Market/Liquid Funds: Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. Balanced Funds – The portfolio of balanced funds include assets like debt securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. b. moderate capital appreciation and at the same time minimizing the risk of capital erosion. These securities are highly liquid and provide safety of investment. These funds invest in companies having potential for capital appreciation and those known for issuing high 21 . debts and money market securities. The objectives of balanced funds are to reward investors with a regular income. However. Balanced funds are appropriate for conservative investors having a long term investment horizon. convertible securities. even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments). Commercial papers (issued by companies) and Certificates of Deposit (issued by banks). and equity and preference shares held in a relatively equal proportion. Growth-and-Income Funds – Funds that combine features of growth funds and income funds are known as Growth-and-Income Funds. hybrid funds are those funds whose portfolio includes a blend of equities. 5. thus making money market / liquid funds the safest investment option when compared with other mutual fund types.

gold futures or shares of gold mines) are common examples of commodity funds. crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. 7. these funds are quite popular abroad. Commodity Funds: Those funds that focus on investing in different commodities (like metals. “Precious Metals Fund” and Gold Funds (that invest in gold. Exchange Traded Funds (ETF): Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Recently introduced in India. flexibility of holding a single share (tradable at index linked prices) at the same time. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. 8.dividends. Real Estate Funds: Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies. 22 . are known as Specialized Real Estate Funds. The biggest advantage offered by these funds is that they offer diversification. 6. The level of risks involved in these funds is lower than growth funds and higher than income funds. The objective of these funds may be to generate regular income for investors or capital appreciation. food grains.

Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes. are known as Fund of Funds. but do invest in other mutual fund schemes offered by different AMCs. Fund of Funds: Mutual funds that do not invest in financial or physical assets. which further helps in diversification of risks. just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non financial assets. The graphical representation hereunder provides a clearer picture of the relationship between mutual funds and levels of risk associated with these funds: 23 . However.9. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment. Risk Hierarchy of Different Mutual Funds: Thus. different mutual fund schemes are exposed to different levels of risk and investors should know the level of risks associated with these schemes before investing. the expenses of Fund of Funds are quite high on account of compounding expenses of investments into different mutual fund schemes.

MUTUAL FUND STRUCTURE
The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the public under one or more schemes for in vesting in securities in accordance with these regulations. These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four separate entitles, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets its registered with SEBI.

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The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908. The sponsor is required to contribute at least 40% of the minimum net worth (Rs.10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favour of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guide.

Sponsor Company (E.g. Prudential, ICICI) Managed by a Board of Trustees Mutual Fund (E.g. Prudential, ICICI, Mutual Fund) AMC (e.g. prudential ICICI Asset Management Company) Custodian Registrar Distributors

Establishes the MF as a trust Registers the MF with SEBI

Hold unit-holders funds in MF enter into an agreement with SEBI and ensure compliance Float MF funds Manages the fund as per SEBI guidelines and AMC agreement Provide custodial services Provides registrar and transfer services Provides the network for distribution of the scheme to the investors

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CHOOSING A FUND
The first step to investing in Mutual Fund is to define the objective of investing. You should clearly lay down the purpose for which you desire to invest. There are several schemes tailor made to meet certain personal financial goals (children's education, marriage, retirement etc.) which can be availed of. You should define the tenure of investment and the risk appetite you have. Thereafter, you can select a fund type that best meets your need i.e. income schemes, liquid schemes, tax saving schemes, equity schemes etc. Given the plethora of fund options available to you, you can then choose the particular fund that you are comfortable with. You can choose the fund on various criteria but primarily these can be the following:  The track record of performance of schemes over the last few years managed by the fund  Quality of management and administration  Parentage of the Mutual Fund  Quality and adequacy of disclosures  Service levels  The price at which you can enter/exit (i.e. entry load / exit load) the scheme and its impact on overall return  The market price of the units of the scheme (where available) to see the discount/premium that the market .assigns to the stated NA V of the scheme  Independent rating of the schemes, if available

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You could be investing in a mutual fund either at the initial stage when the mutual fund approaches the market through an offer document route or at a subsequent stage. If you choose to invest at the initial stage, the offer document would detail the schemes being offered and the manner of investing. The manner is usually similar to that of investing any public issue of any security (equity/debt). If you are planning to purchase the units subsequently. Then the following choices exist:

A close ended scheme. If the desired, units are of a close-ended scheme, then the investor would be able to purchase them at the stock exchange where the MF has listed them. This purchase would resemble the purchase of an equity share wherein the investor would pay the quoted price of the unit as well as a brokerage for the purchase transaction. In the case of a close ended scheme, the sale also is affected through the stock exchange mechanism and resembles the sale of equity share. The pricing for the transaction, as was mentioned earlier, is driven by the price the units quote. This is driven by the NA V (Net Asset Value) of the scheme. The price, however, may be either at a discount or premium to the NA V.

Purchasing a unit in a open-ended scheme is different as there is no exchange where these units are traded. Their price ret1ects the NA V of the scheme. The mutual fund in an open-ended scheme sells these units to the investor at the NA V (plus a sale / entry load).

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Don't rush in picking funds. 2. 3. think first: one first has to decide what he wants the money for and it is this investment goal that should be the guiding light for all investments done. Irrational expectations will only bring pain. 1. expectations and risk profile is of prime importance failing which. The Ground rules of Mutual Fund Investing: Moses gave to his followers 10 commandments that were to be followed till eternity. One can lose substantially if one picks the wrong kind of mutual fund. It is the mutual fund that buys back the units and at a price based on the NA V. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments.Selling units in an open-ended scheme is similar to the way they are purchased.Try to understand where the money is going: It is important to identify the nature of investment and to know if one is compatible with the investment. It is thus important to know the risks associated with the fund and 28 . The exit load is similar in concept to the entry load. one will make more mistakes in putting money in right places than otherwise.Assess yourself: Self-assessment of one's needs. These come in handy for there is every possibility of losing what one has if due care is not taken. The actual price is the NA V less the exit load. The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds.

4. Thus.Don't put all the eggs in one basket: This old age adage is of utmost importance. 29 . One should abstain from speculating which in' other words would mean getting out of one fund and investing in another with the intention of making quick money. but will also reduce the risks. 5. One would do well to remember that nobody can perfectly time the market so staying invested is the best option unless there are compelling reasons to exit.Invest. Identifying the proposed investment philosophy of the fund will give an insight into the kind of risks that it shall be taking in future. it is always advisable to diversify the risks associated. It is thus of key importance that there is thought given to the process of investment and to the time horizon of the intended investment. Excessive exposure to any specific sector should be avoided. Don't speculate: A common investor is limited in the degree of risk that he is willing to take. as it will only add to the risk of the entire portfolio.align it with the quantum of risk one is willing to take. Both have their share of critics but both philosophies work for investors of different kinds. No matter what the risk profile of a person is. This might reduce the maximum return possible. Diversification even in money in the hands of several fund managers. Mutual funds invest with a certain ideology such as the "Value Principle" or "Growth Philosophy". One should take a look at the portfolio of the funds for the purpose. even investors of equity should be judicious and invest some portion of the investment in debt. So putting one's money in different asset classes is generally the best option as it averages the risks in each category.

Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme. However with a plethora of schemes to choose from the retail investor faces problems in selecting funds. since it is extremely difficult to know when to enter or exit the market. it is. there must be some performance indicator that will reveal the quality of stock selection of various AMCs. but the funds record is an important indicator too.6. The basic philosophy of Rupee cost averaging would suggest that if one invests regularly through the ups and downs of the market. he would stand a better chance of generating more returns than the market for the entire duration. Be regular: Investing should be a habit and not an exercise undertaken at one's wishes. It should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Factors such as investment strategy and management style are qualitative. is one of the most preferred investment avenues in India. Performance Measures of Mutual Funds Mutual Fund industry today. good Mutual fund companies over are known by their AMCs and this fame is directly linked to their superior stock selection skills. Though past performance alone cannot be indicative of future performance. As we said earlier. frankly. For mutual funds to grow. The SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. Therefore. the only quantitative way to judge how good a fund is at present. if one has to really benefit from them. Worldwide. In other words. It is important to beat the market by being systematic. Risk 30 . AMCs must be held accountable for their selection of stocks. there is a need to correctly assess the past performance of different mutual funds. with about 34 players and more than five hundred schemes.

with little or no dividend payouts.associated with a fund. systematic risk cannot. fluctuations due to specific securities present in the portfolio of the fund. called market risk or systematic risk and second. higher will be its beta. called unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. 31 . Beta is calculated by relating the returns on a mutual fund with the returns in the market. On the other hand is measured in terms of Beta. present in the market. which affect all the securities. acquisitions. The higher the fluctuations in the returns of a fund during a given period. While unsystematic risk can be diversified through investments in a number of instruments. These fluctuations in the returns generated by a fund are resultant of two guiding forces. can be defined as variability or fluctuations in the returns generated by it. which represents t1uctuations in the NA V of the fund vis-à-vis market. higher will be the risk associated with it. First. The more responsive the NA V of a mutual fund is to the changes in the market. portfolio companies would mainly consist of companies with above average growth in earnings that reinvest their earnings into expansion. and/or research and development. INTRODUCTION ABOUT GROWTH FUNDS: MEANING OF GROWTH FUNDS: A diversified portfolio of stocks that has capital appreciation as its primary goal. in a general. general market fluctuations. Systematic risk.

GROWTH FUNDS: Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with above-average earnings momentum or price appreciation. They focus on those companies. which are experiencing significant earnings or revenue growth. Investing in growth funds requires a tolerance for risk and a holding period with a time horizon of five to 10 years. In India. Growth funds tend to look for the fastest-growing companies in the market. Growth funds are more volatile than funds in the value and blend categories. The rapid growth of Indian industry attracted investors’ money to sectors of high growth and as a result growth funds came into being.INVESTOPEDIA EXPLAINS GROWTH FUNDS: Most growth funds offer higher potential capital appreciation but usually at aboveaverage risk. The companies in a growth fund portfolio are in an expansion phase and they are not expected to pay dividends. 32 . growth funds became popular after the tremendous growth of the Indian companies during the post economic reforms period. rather than companies that pay out dividends.

that is usually expressed as a per-share amount. or NAV. this is known as a premium or discount. or POP. Only aggressive investors. These may be shares in very small or bankrupt companies. Growth funds offer tremendous opportunities for growth. which are registering significant earnings or revenue growth. respectively. should buy these funds. they may be derivatives. but some funds update their NAV multiple times during the trading day. growth funds are more volatile than other types of funds. after the close of trading on some specified financial exchange. each class will typically have its own NAV. In general. Open-end funds sell shares at the POP and redeem shares at the NAV. For most funds. is the current market value of a fund's holdings. If a fund is divided into multiple classes of shares. Closed-end funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV.OBJECTIVES OF GROWTH FUNDS: The objective of growth funds is to achieve capital appreciation by in stocks of those companies. or they may be private investments in unregistered financial instruments 33 . rising more than other funds in bull markets and falling more in bear markets. is the NAV plus a sales charge. The public offering price. and so process orders only after the NAV are determined. when the financial market is bullish. or those with enough time to make up for short-term market losses. reflecting differences in fees and expenses paid by the different classes. NET ASSET VALUE: The net asset value. minus the fund's liabilities. Some mutual funds own securities which are not regularly traded on any formal exchange. the NAV is determined daily.

34 . How much of a fund's assets may be invested in such securities is stated in the fund's prospectus. is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding. it is the responsibility of the fund manager to form an estimate of their value when computing the NAV. The price per share. In the absence of a public market for these securities. or NAV (net asset value). This is usually calculated at the end of every trading day.(such as stock in a non-public company).

and opinions. bonds. depository participant. Commodities Broking. and financial planning and management services for individuals and institutional clients. among others. India. It also provides a monthly magazine. Merchant Banking & Corporate Finance. investment options. fixed deposit. KARVY. IPOs. The company offers portfolio analysis. Depository Participants. which provides up-dated market information on market trends. equities. operations and research of various industrial segments. KARVY covers the entire spectrum of Financial services such as Stock broking. EARLY DAYS The birth of Karvy was on a modest scale in 1981.COMPANY PROFILE KARVY STOCK BROKING LTD OVERVIEW: Karvy Stock Broking Limited provides stock broking and research advisory services in India. is a premier integrated financial services provider. Insurance Broking. It began with the vision and enterprise of a small group of practicing Chartered Accountants who founded the flagship 35 . The company was founded in 1990 and is based in Hyderabad. and provides investor services to over 300 corporate. placement of equity. services over 16 million individual investors in various capacities. comprising the who is who of Corporate India. and ranked among the top five in the country in all its business segments.mutual funds. Karvy has a professional management team and ranks among the best in technology. Distribution of Financial products . Karvy Stock Broking Limited operates as a subsidiary of Karvy Consultants Limited. Personal Finance Advisory Services. Finapolis.

path breaking innovations in service. they have utilized their experience and superlative expertise to go from strength to strength…to better their services. offering a wide spectrum of services. diversify and in the process. and carved inroads into the field of registry and share accounting by 1985. to provide new ones. Company started with consulting and financial accounting automation. Mile Stones: 36 . Since then. evolved Karvy as one of India’s premier integrated financial service enterprise. And we have made this journey by taking the route of quality service.company …Karvy Consultants Limited. towards building a reputation as an integrated financial services provider. to innovate. versatility in service and finally…totality in service. Thus over the last 20 years Karvy has traveled the success route.

Karvy were one of the early entrants registered as Depository Participant with NSDL (National Securities Depository Limited). one of the cornerstones of the Karvy edifice. Having emerged as a leader in the registry business. Here. the first Depository in the country and then with CDSL (Central Depository Services Limited). Helping the customer create waves in his portfolio and empowering the investor completely is the ultimate goal. flows freely towards attaining diverse goals of the customer through varied services. growth knows no limits and success recognizes no boundaries. the world’s largest registrar. 37 . pioneering business policies. and The Hyderabad Stock Exchange (HSE).PRINCIPAL ACTIVITY OF KARVY ARE(1) KARVY CONSULTANTS LIMITED As the flagship company of the Karvy Group. (2) KARVY STOCK BROKING LIMITED Karvy Stock Broking Limited. Creating a plethora of opportunities for the customer by opening up investment vistas backed by research-based advisory services. company have now transferred this business into a joint venture with Computer share Limited of Australia. Karvy believe that they were best positioned to venture into this activity as a Depository Participant. With the advent of depositories in the Indian capital market and the relationships that Company have created in the registry business. The Bombay Stock Exchange (BSE). the first of the businesses that Karvy ventured into. Karvy Consultants Limited has always remained at the helm of organizational affairs. Karvy is a Member of National Stock Exchange (NSE). work ethic and channels of progress.

KARVY operate in the core market segments that have emerging requirements for specialized services. Their wide vertical market coverage includes Banking. the leading Australian company. Leisure and Entertainment. Karvy are registered with SEBI as a Category I merchant banker. Computershare Limited. (5) KARVY GLOBAL SERVICES LIMITED The specialist Business Process Outsourcing unit of the Karvy Group. Retail and Merchandising. which have earned us the reputation of a merchant banker.(3) KARVY INVESTORS SERVICES LIMITED Merchant Banking. 38 . The company that services more than 75 million shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5 continents has entered into a 50-50 joint venture with KARVY. This reputation was built by capitalizing on opportunities in corporate consolidations. The legacy of expertise and experience in financial services of the Karvy Group serves us well as company enter the global arena with the confidence of being able to deliver and deliver well. Raising resources for corporate or Government Undertaking successfully over the past two decades have given us the confidence to renew company focus in this sector. LIMITED Karvy have traversed wide spaces to tie up with the world’s largest transfer agent.Recognized as a leading merchant banker in the country. Financial and Insurance Services (BFIS). (4) KARVY COMPUTERSHARE PVT. mergers and acquisitions and corporate restructuring.

(6) KARVY COMMODITIES BROKING LIMITED At Karvy Commodities. With the opening up of the insurance sector and with a large number of private players in the business. KARVY Alliances Karvy Computershare Private Limited is a 50:50 joint venture of Karvy Consultants Limited and Computershare Limited.Energy and Utility and Healthcare. They have made commodities trading. Company enables trade in all goods and products of agricultural and mineral origin that include lucrative commodities like gold and silver and popular items like oil. pulses and cotton through a well-systematized trading platform. they provide both life and non-life insurance products to retail individuals.and only global -.share registry. they are focused on taking commodities trading to new dimensions of reliability and profitability. (7) KARVY INSURANCE BROKING PRIVATE LIMITED At Karvy Insurance Broking Pvt. Ltd. they are in a position to provide tailor made policies for different segments of customers. they will be better positioned to leverage their relationships with the product providers and place the requirements of their customers appropriately with the product providers. Australia.. and a leading financial market services provider to the global securities industry. 39 . into a sophisticated and scientific investment option. Computershare Limited is world's largest -. high net-worth clients and corporate. an essentially age-old practice. In their journey to emerge as a personal finance advisor.

by combining its human and technological resources. In the process. ACHIVEMENTS: Largest independent distributor for financial products  Amongst the top 5 stock brokers  Amongst the top 3 Depository participants  Largest network of branches and business associates  Amongst top 10 investment Bankers. preferred service provider to our customer. Karvy will strive to exceed Customer's expectations. Karvy shall aim for complete customer satisfaction.  Ranking 1st in retail procurement in equity IPOs. enterprising.  Ranking 8th in Merchant Banking services.Quality Policy: To achieve and retain leadership. and they aim to achieve this leadership position by building an innovative. MISSION OF KARVY:Their mission is to be a leading. to provide superior quality financial services. and technology driven organization which will set the highest standards of service and business ethics 40 .

Heavyweights like State Bank of India and ICICI bank account for 25% of fund`s AUM.000 Sunil Singhania 41 . The fund`s top ten stocks account for 60% of the fund`s AUM. Reliance Banking Fund was launched in May 28. 2003.98 as on Apr 30.DATA ANALYSIS & INTERPRETATION RELIANCE MUTUAL FUND RELIANCE BANKING SECTOR GROWTH FUND OBJECTIVE: The primary investment objective of the Scheme is to seek to generate continuous returns by actively investing in equity and equity related or fixed income securities of companies in the banking sector. the fund has a portfolio comprising of stocks from banking and financial service sectors. is an open-ended banking sector scheme with an aim to generate continuous returns by actively investing in equity and equity related or fixed-income securities of banks. FUND FACTS: Structure Inception Date Corpus (in cores) Minimum Investment Fund Manager : : : : : Open-ended Banking Sector Scheme May 26. 2003 Rs 1126. As the name suggests. 2010 Rs 5.

TOP 10 HOLDINGS Stock Sector State Bank of India Banks ICICI BANK LTD. Banks Oriental Bank of Commerce Ltd Banks Corporation Bank Banks Bajaj Auto Finance Ltd NBFC Andhra Bank Banks HDFC Bank Ltd Banks ING Vysya Bank Ltd Banks 42 . Banks Bank of Baroda Banks Canara Bank Ltd.

SECTOR ALLOCATION % Banks 81.04 SECTOR ALLOCATION 2% 5% 11% Banks Current Assets Miscellaneous NBFC 82% 43 .24 Miscellaneous 2.48 Current Assets 5.24 NBFC 11.

39 15.41 33.31 45.05 60.95 13.20 43.64 70.68 38.16 10.49 49.34 9.24 49.51 7.79 66.37 9.71 49.28 63.72 55.90 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 39.54 RETURNS = HIGH NAV-LOW NAV -----------------------------------------------LOW NAV x100 44 .55 50.93 58.90 45.47 57.45 17.26 19.83 49.30 11.61 62.62 65.05 41.73 7.85 46.59 9.62 57.Calculations of Returns for the Year Apr-08-Mar-09 Month HIGH NAV LOW NAV RELIANCE RETURNS (Y) 16.13 59.

45 Mar-09 Aug-08 Jun-08 Nov-08 Sep-08 Jan-09 Feb-09 Jul-08 .15.00 16.00 12.26 Maximum Returns = 19.00 10.15 = 17. The highest NAV in this month is 19.Total Returns No of Trading months Average Returns Risk (or) Stdev (σ) Variance Minimum Returns = 147.00 0.00 May-08 Apr-08 Reliance banking sector Growth Oct-08 Dec-08 INTERPRETATION: The above table and graph shows the calculations of Returns and Risk of Reliance banking sector Growth fund.00 14.00 6.00 18.59 and lowest NAV is 7.33 and the Risk is 4.26.00 2.19 = 7.95 = 12 = 12.59 Graphical Representation: Reliance banking sector Growth 20.00 4. The average Return is 12.33 = 4.00 8.

13 43.16 221.34 36.00 24.73 -22.52 X2 N∑XY-∑X.91 16.26 47.34 15.95 142.91 Reliance.41 141.36 274.27 9.55) 19.05 2.28 13. ∑Y Beta Value β : N∑X2-(∑X) 2 46 .00) 9.48 9.01 6.21 283.BETA VALUE CALCULATIONS FOR THE YEAR 2008-09: MONTH S&P CNX NIFTY(X) Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 7.04 0.90 -161.04 5.30 -9.39 115.30 4.19 5.64 7.59 -324.51 5.59 4.40 49.29 11.01) 17.MF(Y) XY 16.81 1.06 0.05) 10.58 7.01 (1.76 (16.34 81.35 25.83 11.37 77.45 21.40 (9.49 (2.

00) (20.MF(Y) INTERPRETATION: During this period the Beta value was around -0.0.00 10.00 30.44 11.05 3.00) (30. Here in this case.0. According to the definition of Beta. High-beta stocks are supposed to be riskier but provide a potential for higher returns. and individual stocks are ranked according to how much they deviate from the market.0.41 -0.00 Apr-08 May-08 Dec-08 (10.0.26 -2.00) Mar-09 Aug-08 Oct-08 Jun-08 Nov-08 Sep-08 Jan-09 Feb-09 Jul-08 S&P CNX NIFTY(X) Reliance.55 147.201.85 12. A stock that swings more than the market over time has a beta above 1.95 150.805.00 20.20 Beta value Graphical Representation: 40.86 10.42 704.∑X ∑Y ∑XY (∑X)2 N N∑XY ∑X∑Y ∑X2 N∑X2 APR O8-MAR 09 26. low-beta stocks pose less risk but also lower returns. the market has a beta of 1. the stock's beta is less than 1.496.92 933.122. If a stock moves less than the market.927.20. which means these are at low risk and also at lesser return 47 .00 1. the fund’s beta was lesser than 1.

Rf Treynor’s Model = β = -7.0175 Company Fund St.22 Rm (Expected rate of return) Rf (Risk free rate of return) = 1.value Sharpe Ratio Trenyor's Ratio Reliance Banking sector growth fund 4.35 -7.35 Rm .14 -0.22 48 .Rf Sharpe Model = α = 0.20 0.MUTUAL FUND MODELS CALCULATIONS: Rm .479 = 0.Dev β.

a low and negative Treynor's Index is an indication of unfavorable performance. 49 .00 represents “good” compensation for risk.00 earns a “very good” rating. Generally speaking. It is similar to the Sharpe ratio.35(<1) which shows the Low performance. with the difference being that the Treynor’s ratio uses beta as the measurement of volatility.” A low and negative Sharpe ratio shows unfavorable performance. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk.00 or better is “outstanding. while a ratio of 2. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. The Treynor’s ratio is a risk-adjusted measure of return based on systematic risk. Here in the above case.INTERPRETATION: The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. and 3. In the above case funds shown low and negative Treynor’s ratio. the Sharpe Ratio shows Low Shape Ratio That is 0. This shows the unfavorable performance of the Banking sector growth funds. a ratio of 1.

14 24.63 51.55 LOW NAV 50.77 47.05 40.92 13.66 42.03 50.Calculations of Returns for the Year Apr-09-Mar-10 MONTH Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 HIGH NAV 57.57 41.68 58.05 52.20 16.31 37.81 54.40 23.03 38.63 35.26 13.72 45.17 16.27 51.07 RETURNS 13.88 20.48 44.27 16.24 47.75 32.98 30.37 21.31 34.42 35.40 42.87 RETURNS = HIGH NAV-LOW NAV -----------------------------------------------LOW NAV x100 50 .36 26.48 36.82 35.

The average Return is 20.27.19 and the Risk is 6.19 = 6.33 = 12 = 20. BETA VALUE CALCULATIONS FOR THE YEAR 2009-10: 51 Mar-10 Aug-09 Jun-09 Nov-09 Sep-09 Jan-10 Jul-09 Feb-10 . The highest NAV in this month is 36.27 Maximum Returns = 36.88 Graphical Representation: Reliance banking sector Growth 40 35 30 25 20 15 10 5 0 Reliance banking sector Growth May-09 Apr-09 Oct-09 Dec-09 INTERPRETATION: The above table and graph shows the calculations of Returns and Risk of Reliance banking sector Growth fund.81 = 13.88 and lowest NAV is 13.91.Total Returns No of Trading months Average Returns Risk (or) Stdev (σ) Variance Minimum Returns = 242.91 = 47.

∑Y Beta Value β : N∑X2-(∑X) 2 April-09-mar-10 52 .85 -389.27 (10.92 123.42 -383.30 89.18 127.06 332.29 209.14 787.06) 36.87 234.17 (3.18 N∑XY-∑X.23) 21.15 33.55) 23.54 -165.05 13.81 (5.48 (28.20 7.36 7.035.40 (16.47 X2 79.37 (18.87 13.88 (3.33 274.59 -58.39 60.87 -1.62 -68.44 24.75) 13.77 16.42 11.04) 16.76 100.97 26.38) 20.90 13.65) 16.26 0.58 0.88 -76.30 63.MF(Y) XY 8.MONTH S&P CNX NIFTY(X) Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Reliance.85 11.14 9.

71 242.28 2. According to the definition of Beta. High-beta stocks are supposed to be riskier but provide a potential for higher returns.146.62 1. the fund’s beta was lesser than 1. and individual stocks are ranked according to how much they deviate from the market. 53 . which means these are at low risk and also at lesser returns. the stock's beta is less than 1.0.MF(Y) INTERPRETATION: During this period the Beta value was around -0.80 -0.53 12.0.845. Here in this case.571.288.53 22.∑X ∑Y ∑XY (∑X)2 N N∑XY ∑X∑Y ∑X2 N∑X2 -50.00 -17.0.0.27 Beta value Graphical Representation: 50 40 30 20 10 0 -10 -20 -30 -40 S&P CNX NIFTY(X) Reliance.27.470.36 -12.574. the market has a beta of 1. If a stock moves less than the market.33 -1. A stock that swings more than the market over time has a beta above 1.643.33 -5.73 19.354. low-beta stocks pose less risk but also lower returns.

79 INTERPRETATION: 54 .Rf Treynor’s Model = β = -8.value Sharpe Ratio Trenyor's Ratio Reliance Banking sector growth fund 6.4233 = 0.Dev β.91 -0.34 Rm .27 0.MUTUAL FUNDS MODEL CALCULATIONS: Rm .34 -8.0175 Company Fund St.Rf Sharpex Model = α = 0.79 Rm (Expected rate of return) Rf (Risk free rate of return) = 2.

while a ratio of 2. and 3. the Sharpe Ratio shows Low Shape Ratio That is 0.34(<1) which shows the Low performance. with the difference being that the Treynor’s ratio uses beta as the measurement of volatility.” A low and negative Sharpe ratio shows unfavorable performance. It is similar to the Sharpe ratio. a low and negative Treynor's Index is an indication of unfavorable performance.00 earns a “very good” rating.00 or better is “outstanding. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. Generally speaking.The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. Calculations of Returns for the Year Apr-10-Mar-2011 55 . a ratio of 1. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk. Here in the above case. In the above case funds shown low and negative Treynor’s ratio.00 represents “good” compensation for risk. The Treynor’s ratio is a risk-adjusted measure of return based on systematic risk. This shows the unfavorable performance of the Banking sector growth funds.

65 75.09 62.71 56 .16 61.64 9.88 78.99 79.40 RETURNS 21.86 71.43 RETURNS = HIGH NAV-LOW NAV -----------------------------------------------LOW NAV x100 Total Returns = 150.48 45.55 77.29 16.65 77.56 70.56 61.05 35.28 60.98 70.58 62.76 70.24 7.30 11.56 58.29 54.50 LOW NAV 36.87 72.12 11.64 15.92 6.01 72.20 79.MONTH Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 HIGH NAV 44.02 5.80 74.12 5.93 63.95 5.

02 BETA VALUE CALCULATIONS FOR THE YEAR 2010-11: 57 Mar-11 Apr-10 Aug-10 Oct-10 Jun-10 Sep-10 Jan-11 Feb-11 Jul-10 .71 = 75.12 Graphical Representation: Reliance banking sector Growth 40 35 30 25 20 15 10 5 0 May-10 Reliance banking sector Growth Nov-10 Dec-10 INTERPRETATION: The above table and graph shows the calculations of Returns and Risk of Reliance banking sector Growth fund.71 the highest NAV in this month is 35. The average Return is 12.55 and the Risk is 8.55 = 8.82 = 5.02 Maximum Returns = 35.12 and lowest NAV is 5.No of Trading months Average Returns Risk (or) Stdev (σ) Variance Minimum Returns = 12 = 12.

77 11.76 0.23 68.49 5. ∑Y Beta Value β : N∑X2-(∑X) 2 ∑X APRIL-10-MAR-11 43.38 934.02 6.99 -61.58 38.22 X2 207.64 (6.00 -4.56 76.70 141.43 -102.24 3.85 25.92 46.49 76.64 8.30 132.75) 6.MONTH S&P CNX NIFTY(X) Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Reliance.48) 11.91 42.77 55.22) 9.40 7.MF(Y) XY 303.95 0.95 5.60 35.23) 5.91 4.23 -84.12 (18.86 332.69 14.30 6.41 21.29 8.12 (7.05 26.29 15.84 11.74 0.76 16.92 (0.08 N∑XY-∑X.07 58 .78 35.72 707.

491.60. the stock's beta is less than 1. the market has a beta of 1.39 1. Here in this case.0.65 10. If a stock moves less than the market.80 19.MF(Y) INTERPRETATION: During this period the Beta value was around 0.0.0.71 1.0. and individual stocks are ranked according to how much they deviate from the market.∑Y ∑XY (∑X)2 N N∑XY ∑X∑Y ∑X2 N∑X2 150.399. According to the definition of Beta.796.00 16. the fund’s beta was lesser than 1.19 12.077.305.589. MUTUAL FUNDS MODEL CALCULATIONS: 59 .64 6. low-beta stocks pose less risk but also lower returns. High-beta stocks are supposed to be riskier but provide a potential for higher returns.72 1.45 0. A stock that swings more than the market over time has a beta above 1.60 Beta value Graphical Representation: 40 30 20 10 0 -10 -20 -30 S&P CNX NIFTY(X) Reliance.25 17.222.855. which means these are at low risk and also at lesser returns.

17 Rm .0175 Company Fund Std.6 0.48 INTERPRETATION: 60 .Rf Sharpe Model = α = 0.507 = 0.Dev β.7 0.48 Rm (Expected rate of return) Rf (Risk free rate of return) = 1.Rf Treynor’s Model = β = 2.17 2.value Sharpe Ratio Trenyor's Ratio Reliance Banking sector growth fund 8.Rm .

while a ratio of 2. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. Here in the above case. It is similar to the Sharpe ratio. a low and negative Treynor's Index is an indication of unfavorable performance. Generally speaking. and 3. the Sharpe Ratio shows Low Shape Ratio That is 0. The Treynor’s ratio is a risk-adjusted measure of return based on systematic risk.00 earns a “very good” rating.00 or better is “outstanding. In the above case funds shown high and positive Treynor’s ratio. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk.00 represents “good” compensation for risk. UTI MUTUAL FUND 61 . This shows superior risk adjusted performance of the Banking sector growth Funds.17(<1) which shows the Low performance. a ratio of 1.” A low and negative Sharpe ratio shows unfavorable performance. with the difference being that the Treynor’s ratio uses beta as the measurement of volatility.The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio.

auto sector fund. banking sector fund and PSU fund. The scheme would comprise of six funds.UTI THEMATIC BANKING SECTOR GROWTH FUND OBJECTIVE: Investment objective is "capital appreciation" through investments in the stocks of the companies/institutions engaged in the banking and financial services activities UTI Mutual Fund has announced the launch of UTI Thematic Fund to capitalize on diverse investment opportunities across various sectors. basic industries fund. TOP 10 HOLDINGS: 62 . FUND FACTS Structure Inception Date Corpus : : : Open-ended Banking Sector Scheme 9th March.000 Anoop Bhaskar . 2004 146. Minimum Investment : Fund Manager : UTI Financial sector fund was launched in the year 2004 on 9th march. This includes large cap fund.000. The scheme is open to resident individuals. mid-cap fund. The fund would be an open-ended growth-oriented equity scheme. The face value of units is Rs 10 and the minimum investment would be Rs 1. Arun Khurana . 2010 Rs 5.28 as on Apr 30. It is an open ended fund with an aim to an open-ended equity fund with the objective to provide capital appreciation through investments in the stocks of the companies/institutions engaged in the banking and financial services activities. institutions as well as NRIs and FIIs.

Banks HDFC Bank Ltd Banks State Bank of India Banks Bank of Baroda Banks Axis Bank Ltd Banks IndusInd Bank Ltd Banks Oriental Bank of Commerce Ltd Banks Central Bank of India Banks Punjab National Bank Banks Infrastructure Development Finance Co.Stock Sector ICICI BANK LTD. Ltd FI SECTOR ALLOCATION % 63 .

96 0.Banks Current Assets Custodial. Exchanges and rating agencies 86. Exchanges and rating agencies 86% FI Calculations of Returns for the Year Apr-08-Mar-09 64 .34 FI 3. Depository. Depository.35 9.35 SECTOR ALLOCATION 0% 4% 10% Current Assets Banks Custodial.

19 24.76 31.36 RETURNS = HIGH NAV-LOW NAV -----------------------------------------------LOW NAV x100 Total Returns = 167.62 30.87 8.52 20.01 22.47 22.01 32.37 13.93 11.06 24.81 33.49 31.07 5.90 16.36 22.34 24.54 11.31 23.06 25.71 18.41 26.47 34.29 LOW NAV 18.32 29.23 26.MONTH Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 HIGH NAV 21.6 30.73 22.71 24.54 9.69 35.89 65 .18 RETURNS 15.12 37.83 28.64 7.

The average Return is 13.99 = 6.36 Graphical Representation: Uti banking sector Growth 30 25 20 15 Utibanking sector Growth 10 5 0 Apr-08 May-08 Dec-08 Mar-09 Aug-08 Jun-08 Oct-08 Nov-08 Sep-08 Jan-09 Jul-08 INTERPRETATION: The above table and graph shows the calculations of Returns and Risk of Uti banking sector Growth fund.36 and lowest NAV is 5.27 = 39.99 and the Risk is 6. BETA VALUE CALCULATIONS FOR THE YEAR 2008-09: 66 Feb-09 .27 The highest NAV in this month is 26.54 Maximum Returns = 26.No of Trading months Average Returns Risk (or) Stdev (σ) Variance Minimum Returns = 12 = 13.54.33 = 5.

52 25.93 11.55) 2.87 8.36 (XY) 112.04 5.01) 15.27 (9.40 0.06 1.86 -370.54 9.04 0.17 -11.05 5.00 141.81 283.05) 6.91 16.71 18.58 (16.30 274.90 16.00) 11.64 7.07 5.34 29.38 27.19 N∑XY-∑X.21 43.59 4.93 67 . ∑Y Beta Value β : N∑X2-(∑X) 2 ∑X ∑Y ∑XY 26.04 317.MONTH S&P CNX NIFTY(X) UTI MF (Y) Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 7.88 199.73 22.83 (2.51 (X2) 49.55 167.41 4.23 26.13 81.89 162.70 -17.54 11.10 58.98 -237.35 24.91 (1.73 50.37 13.17 5.

If a stock moves less than the market.44 11. A stock that swings more than the market over time has a beta above 1.(∑X)2 N N∑XY ∑X∑Y ∑X2 N∑X2 704.MF(Y) INTERPRETATION: During this period the Beta value was around -0. the stock's beta is less than 1.41 -0.19 4.457.00 1.0. the fund’s beta was lesser than 1.496. the market has a beta of 1. High-beta stocks are supposed to be riskier but provide a potential for higher returns. low-beta stocks pose less risk but also lower returns.201.24.955.26 -2.38 933.85 12. Here in this case. and individual stocks are ranked according to how much they deviate from the market.0.0.0. 68 .24 BETA VALUE Graphical Representation: 30 20 10 0 -10 -20 S&P CNX NIFTY(X) UTI. which means these are at low risk and also at lesser returns.19 10. According to the definition of Beta.502.

27 -0.value Sharpe Ratio Trenyor's Ratio UTI Banking sector growth fund 6.MUTUAL FUNDS MODEL CALCULATIONS: Rm .96 INTERPRETATION: 69 .96 Rm (Expected rate of return) Rf (Risk free rate of return) = 1.Dev β.Rf Sharpex Model = α = 0.24 0.26 -6.26 Rm .Rf Treynor’s Model = β = -6.0175 Company Fund St.678 = 0.

00 represents “good” compensation for risk. a ratio of 1.00 or better is “outstanding. the Sharpe Ratio shows Low Shape Ratio That is 0.26(<1) which shows the Low performance. This shows the unfavorable performance of the Banking sector growth funds. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. a low and negative Treynor's Index is an indication of unfavorable performance. with the difference being that the Treynor’s ratio uses beta as the measurement of volatility. The Treynor’s ratio is a risk-adjusted measure of return based on systematic risk. while a ratio of 2. and 3. Calculations of Returns for the Year Apr-09-Mar-10 70 . Generally speaking. Here in the above case.” A low and negative Sharpe ratio shows unfavorable performance.00 earns a “very good” rating. In the above case funds shown low and negative Treynor’s ratio. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk. It is similar to the Sharpe ratio.The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio.

45 27.53 15.74 23.47 15.41 16.19 15.04 25.53 19.84 16.65 23.06 19.83 18.58 23.76 20.08 26.82 23.15 21.MONTH Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 HIGH NAV 27.33 22.98 20.97 14.48 17.24 25.41 23.89 20.89 17.91 17.16 = 12 71 .39 LOW NAV 23.74 RETURNS 16.66 39.23 15.51 19.28 22.56 RETURNS = HLGH NAV-LOW NAV -----------------------------------------------LOW NAV x100 Total Returns No of Trading months = 260.67 15.03 14.19 13.

03. The average Return is 21.06 = 14.68 = 7.27 The highest NAV in this month is 39.68 and the Risk is 6.22 = 52.04 Graphical Representation: Uti banking sector Growth 40 35 30 25 20 15 10 5 0 May-09 Uti banking sector Growth Dec-09 Apr-09 Jun-09 Oct-09 INTERPRETATION: The above table and graph shows the calculations of Returns and Risk of Uti banking sector Growth fund. 72 Mar-10 Aug-09 Nov-09 Sep-09 Jan-10 Feb-10 Jul-09 .04 and lowest NAV is 14.03 Maximum Returns = 39.Average Returns Risk (or) Stdev (σ) Variance Minimum Returns = 21.

10 12.05 13.34 -423.56 (XY) 146.62 -86.87 11.095.75) (18.04) (28.39 60.65) 9.44 16.504.38) 7.19 -147.16 -1.08 26.67 15.93 157.81 -1.73 787.30 89.90 (5.87 (10.30 63.41 23.33 22.23) 7.55) (3.03 14.66 39.76 20.64 207.06) (3.33 274.20 (X2) 79.BETA VALUE CALCULATIONS FOR THE YEAR 2008-09: MONTH S&P CNX NIFTY(X) UTI MF (Y) Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 8.76 100.58 0.90 -375.98 250.15 33.06 332.77 (16.18 N∑XY-∑X.04 25.97 0.36 -54.12 73 : N∑X2-(∑X) 2 .24 25. ∑Y Beta Value β ∑X ∑Y ∑XY -60.41 16.15 260.97 14.01 -94.

845.146. low-beta stocks pose less risk but also lower returns. the market has a beta of 1.399. the fund’s beta was lesser than 1.79 1.49 12.MF(Y) INTERPRETATION: During this period the Beta value was around -013. and individual stocks are ranked according to how much they deviate from the market.53 22. A stock that swings more than the market over time has a beta above 1. Here in this case.43 -15. If a stock moves less than the market.33 -2. High-beta stocks are supposed to be riskier but provide a potential for higher returns.049.0.(∑X)2 N N∑XY ∑X∑Y ∑X2 N∑X2 3.64 18.0.0.649.00 -18. the stock's beta is less than 1. which means these are at low risk and also at lesser returns. MUTUAL FUNDS MODEL CALCULATIONS: 74 . According to the definition of Beta.84 -0.618.13 BEETA VALUE Graphical Representation: 50 40 30 20 10 0 -10 -20 -30 -40 S&P CNX NIFTY(X) UTI.0.527.

017 Company Fund St.value Sharpe Ratio Trenyor's Ratio UTI Banking sector growth fund 7.Rm .60 = 0.Rf Treynor’s Model = β = -19.Dev β.13 0.35 Rm .35 -19.95 INTERPRETATION: 75 .95 Rm (Expected rate of return) Rf (Risk free rate of return) = 2.22 -0.Rf Sharpex Model = α = 0.

and 3. The Treynor’s ratio is a risk-adjusted measure of return based on systematic risk.The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. Generally speaking.35(<1) which shows the Low performance.00 or better is “outstanding.00 represents “good” compensation for risk. with the difference being that the Treynor’s ratio uses beta as the measurement of volatility. while a ratio of 2.00 earns a “very good” rating. a low and negative Treynor's Index is an indication of unfavorable performance. It is similar to the Sharpe ratio. a ratio of 1. In the above case funds shown low and negative Treynor’s ratio.” A low and negative Sharpe ratio shows unfavorable performance. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. the Sharpe Ratio shows Low Shape Ratio That is 0. Here in the above case. Calculations of Returns for the Year Apr-10-Mar-2011 76 . This shows the unfavorable performance of the Banking sector growth funds.

96 30.53 34.MONTH Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 HIGH NAV 20.71 RETURNS = HIGHNAV-LOW NAV -----------------------------------------------LOW x100 Total Returns No of Trading months = 154.23 28.6 34.99 33.95 28.22 34.54 24.13 26.8 RETURNS 19.49 27.12 8.26 9.34 7.17 31.41 25.92 9.44 14.73 LOW NAV 16.25 31.62 5.44 30.05 5.29 = 12 77 .55 12.16 13.39 32.17 18.72 27.69 26.05 35.78 20.61 31.29 33.22 33.85 30.

BETA VALUE CALCULATIONS FOR THE YEAR 2010-11: 78 Mar-11 Aug-10 Dec-10 Apr-10 Jun-10 Sep-10 Oct-10 Nov-10 Jan-11 Feb-11 Jul-10 . The average Return is 12.35 = 54.08 = 5.92 Graphical Representation: Uti banking sector Growth 35 30 25 20 15 10 5 0 May-10 Uti banking sector Growth INTERPRETATION: The above table and graph shows the calculations of Returns and Risk of Uti banking sector Growth fund.85 = 7.92 and lowest NAV is 5.35The highest NAV in this month is 30.Average Returns Risk (or) Stdev (σ) Variance Minimum Returns = 12.62.62 Maximum Returns = 30.85 and the Risk is 7.

12 8.27 79 .07 154.90 89.56 76.77 11.74 0.89 -5.96 30.01 118.17 18.22) 0.23) 8.71 (XY) 287.10 -56.08 N∑XY-∑X.05 5.92 9.75) 8.41 26.75 28.92 46.84 3. ∑Y Beta Value β : N∑X2-(∑X) 2 ∑X ∑Y ∑XY 43.58 38.48) 6.72 707.55 12.77 55.04 (X2) 207.91 42.36 162.60 (18.26 9.76 0.95 6.44 14.62 5.227.49 19.34 7.31 5.69 332.45 -172.30 68.36 37.29 1.29 (0.76 (7.73 822.MONTH S&P CNX NIFTY(X) UTI MF (Y) Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 14.16 13.40 (6.53 -90.

If a stock moves less than the market. the stock's beta is less than 1. MUTUAL FUNDS MODEL CALCULATIONS: 80 .19 12.855.27 6.48 17.80 19. the market has a beta of 1.0.081.0. High-beta stocks are supposed to be riskier but provide a potential for higher returns.077. which means these are at low risk and also at lesser returns. low-beta stocks pose less risk but also lower returns.MF(Y) INTERPRETATION: During this period the Beta value was around 0.65 8.(∑X)2 N N∑XY ∑X∑Y ∑X2 N∑X2 1.0.47 BEETA VALUE Graphical Representation: 40 30 20 10 0 -10 -20 -30 S&P CNX NIFTY(X) UTI. According to the definition of Beta. the fund’s beta was lesser than 1.589.0. A stock that swings more than the market over time has a beta above 1.47.222. Here in this case.727. and individual stocks are ranked according to how much they deviate from the market.45 0.645.79 1.00 14.

25 INTERPRETATION: 81 .Rf Treynor’s Model = β = 3.Rf Sharpe Model = α = 0.value Sharpe Ratio Trenyor's Ratio UTI Banking sector growth fund 7.20 3.20 Rm .35 0.5492 = 0.Dev β.Rm .25 Rm (Expected rate of return) Rf (Risk free rate of return) = 1.47 0.0175 Company Fund Std.

Generally speaking.00 earns a “very good” rating. It is similar to the Sharpe ratio. The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk.” A low and negative Sharpe ratio shows unfavorable performance.The Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the performance of a portfolio. a ratio of 1. while a ratio of 2.00 or better is “outstanding. and 3. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. Here in the above case .00 represents “good” compensation for risk. with the difference being that the Treynor’s ratio uses beta as the measurement of volatility.20(<1) which shows the Low performance. The Treynor’s ratio is a risk-adjusted measure of return based on systematic risk. In the above case funds shown high and positive Treynor’s ratio. This shows the superior risk adjusted performance of the Banking sector growth funds. the Sharpe Ratio shows Low Shape Ratio That is 0. 82 . a low and negative Treynor's Index is an indication of unfavorable performance.

24 Sharpe Ratio 0.20 Sharpe Ratio 0.T.T.34 -8.47 0.PERFORMANCE OF THE FUNDS FOR THE YEAR 2008-2011 (RELIANCE) Std.27 U .26 Treynor’s Ratio -6.value -0.48 PERFORMANCE OF THE FUNDS FOR THE YEAR 2008-2011 (U.60 0.I Banking sector growth fund 7.17 2.96 2009-2010 -0.79 2010-2011 0.27 0.value -0.I Banking sector growth fund 7.15 Reliance Banking sector growth fund 6.T.35 -19.35 U .I) Std.25 83 .35 Treynor’s Ratio -7.91 Reliance Banking sector growth fund 8.I β.22 2009-2010 -0.20 3.71 Reliance β.95 2010-2011 0.13 0.Dev 2008-2009 Banking sector growth fund 4.T.Dev 2008-2009 Banking sector growth fund 6.22 U .

3) Reliance growth fund in banking sector in the year 2010-2011.The fund performance index for Sharpe is 0.79.91. 6) U.95.The fund performance index for Sharpe is 0.I growth fund in banking sector in the year 2008-2009. 1) Reliance growth fund in banking sector in the year 2008-2009.15.19 and risk is 6. 84 .20 and Treynor’s is 3. 5) U.22.48.The fund performance index for Sharpe is 0.96.T.T. the average return is 21. the average return is 13.99 and risk is 6. the average return is 12.71.T.26 and Treynor’s is -6.84 and Treynor’s is 8.22.25.T. the average return is 12.FINDINGS: The Present project work has been undertaken to study the performance of banking sector mutual funds in growth option.The fund performance index for Sharpe is 0.I company growth fund is performing well than the Reliance company growth fund.33 and risk is 4. the average return is 12.68 and risk is 7. the following facts have been identified.85 and risk is 7. the average return is 20. During the study and analysis.The fund performance index for Sharpe is 0.17 and Treynor’s is 2.35.35 and Treynor’s is -19. 7) U.55 and risk is 8.35 and Treynor’s is 7.I growth fund in banking sector in the year 2009-2010.27.The fund performance index for Sharpe is 0.I growth fund in banking sector in the year 2010-2011. 2) Reliance growth fund in banking sector in the year 2009-2010. 4) U.

we can suggest investors to invest in the following funds. the other according to Treynor’s performance index. 1.T.35 0.26 0. 1) Rank wise Sharpe performance index: YEAR Mutual fund 2008-2009 2009-2010 2010-2011 Reliance U.17 0.T. U.I Reliance U.T.I Reliance U.I Sharpe’s performance index 0.34 0.T.35 0. Reliance 85 .20 Rank 1 2 2 1 2 1 On the basis of Sharpe’s performance index.I 2.SUGGESTIONS: After the study and analysis on performance of two AMC’s the funds have been categorized into one according to rank wise Sharpe performance index.

I Reliance U. we can suggest investors to invest in the following funds.I 2.I Treynor’s performance index -7.22 -6.95 2. U.96 -8.79 -19.T. RELIANCE 3) The Risk or standard deviation in Reliance Company is more volatile than the U.T.T. 1.I Reliance U.25 Rank 2 1 1 2 2 1 On the basis of Treynor’s performance index.T.T.I Company 86 .I Company so that we can suggest investors to invest in U.2) Rank wise Treynor’s performance index: YEAR Mutual fund 2008-2009 2009-2010 2010-2011 Reliance U.T.48 3.

We have a good number of investment options which minimize the risk of the investment. Therefore investment in mutual funds is a wise way to invest. Mutual funds promise the investor good returns not high but moderate. If we are careless we will loose all our wealth. If an investor wants to invest in low risk instruments for medium returns. he can invest in mutual funds. They will not be exposed to high risks as well.CONCLUSIONS: Investment these days is very dangerous game. Overall the project shows satisfactory results. Therefore it is very important to analyze the financial instruments available in the market very scrupulously in terms of their returns and risks. One of them is mutual funds. 87 . The present project work is an attempt to study the performance of mutual funds where one can decide on what basis they can invest in mutual funds.

amfiindia.com www.BIBILOGRAPHY:- Books Security Analysis & Portfolio Management .com www.com 88 .nseindia.mutualfundsindia.com www.Fishers & Jordon News Papers Business Line Times of India India Today Magazines Week Business Daily Websites www.utimutualfund.

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