COMPARATIVE ANALYSIS OF VARIOUS

DEBT SCHEMES IN MUTUAL FUNDS

Submitted in partial fulfillment of the requirements

For the award of

Post Graduate Diploma in Management (PGDM)

To

Institute of Information Technology and Management

Guide: Dr. R.K. Sharma. Submitted By:

Samriti Puri.
(Guide Name)
Roll No.:12508

1
 Batch (2008 – 2010.)

CERTIFICATE

I, Ms.Samriti Puri, Roll No. 12508 certify that the Summer Training Report (PGDM

- 304) entitled “Comparative Analysis of various Debt Schemes in Mutual Funds”

is done by me and it is an authentic work carried out by me at Prudent CAS Ltd.

The matter embodied in this report has not been submitted earlier for the award of any

degree or diploma to the best of my knowledge and belief.

Signature of the

Student:

Date:

Certified that the Summer Training Report/ (PGDM - 304) entitled

“Comparative Analysis of various Debt Schemes in Mutual Funds” done by Ms.

Samriti Puri, Roll No. 12508, is completed under my guidance.

Signature of the Guide:

Date:

Name of the Guide:

Countersigned

Designation:

Programme Director / HOD Address:

Institute of Information

Technology & Management,

New Delhi-110058

2
3
 ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude to all those who have

contributed significantly by sharing their knowledge and experience in the completion of

this project work.

My first word of gratitude is due to Mr. Manpreet Singh, Deputy Manager Prudent

(CAS) Corporate Advisory Services, Branch – Caunnaught place my corporate guide, for

his kind help and support and for his valuable guidance throughout the project. I am

thankful to him for providing me with necessary insights and helping me out at every

single step.

My heartfelt thanks to my respected Faculty Without their continuous help the project

would not have been materialized in the present form. Their valuable suggestions helped

me at every step.

Finally, I would also like to thank all my dear friends for their kind cooperation, advice

and encouragement during the long and arduous task of preparing this report and carrying

out the project.

At last but not the least, who are always at the top of my heart, my dear family members

whose blessings, inspiration and encouragement have resulted in the successful

completion of this project.

4
 Samriti Puri.

PGDM - Finance & HR.

EXECUTIVE SUMMARY:-

The Project is related to the field of Mutual Fund in which comparative analysis of the

various debt schemes in mutual fund. In the project, all the points are explained like -

what is mutual fund, types of mutual fund and which fund is better.

Three companies are selected for analysis is HDFC Mutual Fund, Reliance Mutual Fund

and Canara Robeco Mutual Fund. In this project the comparative analysis is

done on the basis of Net Assets Value which is used for computing

Sharpe Ratio, Treynor’s Ratio, and Benchmark. Compare their areas of Asset

Allocation; Top ten holding, Risk and Returns in the investment.

Mutual Fund industry has grown in many folds over the period of last two decades. There

has been an upsurge in the Mutual Fund industry in 90’s. During this period a large

number of private sector companies have started their mutual funds. The growth in the

number of distributors of mutual funds. Many private companies were established which

took up the job of selling mutual funds not only to the common man but also to the

corporate. Mutual Fund provides better return as compared to the traditional investment

opportunities like Fixed Deposit and Saving Accounts etc.

5
Mutual Fund present an ideal solution to the investment needs of the corporate, which are

looking for returns from their surplus funds. The Mutual Fund gives them a chance to

gain more profits over a short period. The Mutual fund is the most suitable investment for

corporate as it offers an opportunity to invest in a diversified, professionally managed

portfolio at a low cost.

Prudent CAS (Corporate Advisory Services) ltd. gives advices to its clients regarding

Financial Planning. The strong and efficient research team which supports the

investments advisors. The research team provides the desk to the necessary information

regarding the different mutual fund schemes and other investments options like Insurance

etc.

The company sells its financial products through both direct and direct

force. Prudent Channel since its inception has a strong hold in the

market through its Direct Force. It also has strong hold on the

corporate channel also now wants to have a greater reach to its clients

which it has already developed through its 150 certified brokers just

the beginning of the force that will grow in leaps and bounds. The

company also has a strong and efficient research team that is currently

working from Gujarat which publishes the data that helps the clients in

assessing their funds performance.

Thus through the comparative analysis of the these three schemes it

has been studied which of the scheme is best in terms performance, in

comparison to the schemes of other mutual funds in the debt mutual

funds category.

6
 CONTENTS

S No. Topic Page No.

1. Certificate 2
2 Acknowledgement 4
3. Executive Summary 5-6
4. List of Tables 8-9
5. List of Figures 10-11
6 List of Abbreviations 11
7. List of Symbols 12
8. Chapter-1 13-18
9. Chapter-2 19-39
10. Chapter-3 40-66
11. Chapter-4 67-69
12. Conclusion 70-71
13. Bibliography 72

7
 List of Tables:-

Table No Title Page No.

3.1 Investment Pattern of 43

HDFC Mutual Fund

3.2 Returns of HDFC Mutual 44

Fund
3.3 Net Asset Value of HDFC 44

Mutual Fund
3.4 Asset Allocation of HDFC 45

Mutual Fund
3.5 Top 10 holdings of HDFC 45

Mutual Fund
3.6 Sector Allocation of HDFC 46

Mutual Fund
3.7 Performance of HDFC 47

Mutual Fund
4.1 Returns of Reliance Mutual 52

Fund
4.2 Net Asset Value of 53

Reliance Mutual Fund

4.3 Asset Allocation of 53

Reliance Mutual Fund

4.4 Top 10 holdings of Reliance 54

Mutual Fund
4.5 Sector Allocation of 55

Reliance Mutual Fund

4.6 Performance of Reliance 56

Mutual fund
5.1 Returns of Canara Robeco 60

Mutual Fund
5.2 Net Asset Value of Canara 60

8
 Robeco Mutual Fund
5.3 Asset Allocation of Canara 61

Robeco Mutual Fund

5.4 Top 10 holdings of Canara 62

Robeco Mutual Fund

5.5 Sector Allocation of Canara 63

Robeco Mutual Fund

5.6 Performance of Canara 63

Robeco Mutual Fund

5.7 Comparative Table 65

List of Figures:-

Figure No. Title Page No

1.1 Organization Structure of 17

the Company
2.1 Introduction of Mutual 20

Fund
2.2 Organization of Mutual 21

Fund
2.3 Different Types of Mutual 25

Fund
3.1 NAV Chart of HDFC 44

Mutual Fund
3.2 Asset Allocation of HDFC 45

Mutual Fund
3.3 Sector Allocation of HDFC 47

9
 Mutual Fund
4.1 NAV Chart of Reliance 53

Mutual Fund
4.2 Asset Allocation of 54

Reliance Mutual Fund

4.3 Sector Allocation of 55

Reliance Mutual Fund

5.1 NAV Chart of Canara 60

Robeco Mutual Fund

5.2 Asset Allocation of Canara 61

Robeco Mutual Fund

5.3 Sector Allocation of Canara 63

Robeco Mutual Fund

List of Abbreviations:-

S No Abbreviated Name Full name

1 CAS Corporate Advisory
Services

2 NAV Net Asset Value

3 ELSS Equity linked saving
scheme

4 AMC Asset Management

Company

5 LIC Life Insurance Corporation

6 GIC General Insurance
Corporation

7 SEBI Securities Exchange Board

of India

10
 List of Symbols

S No Symbol Nomenclature & Meaning

1 Rs Rupees

2 Cr Crore

3 Lc Lakhs

4 @ At the rate

5 % Percentage

6 Σ Sigma

7 σ Standard deviation

8 √ Under Root

9 2 Square

10 β Beta

11 * Multiple

12 – Subtract

13 + Addition

14 / Division

11
 Chapter:-1

1. INTRODUCTION:-

Prudent CAS (Corporate Advisory Services) Ltd, known as Prudent Fund Manager

established in 2000 is a registered investment company offering fee-based money

management, financial planning, and investment advisory services. It focus on each

client, build investment strategies tailored to specific client needs, and regularly review

those strategies to increase the likelihood of success. It would like to know the client’s

goals and aspirations. So that it can determine an investing strategy that helps you

achieve your full potential.

Prudent believes in understanding the customer needs and offering the product that can

match his requirement (marketing) as against just selling what product is already

available. Owing to the inherent professional expertise we first study and understand the

investment requirements and circumstances. Our experts assess the investors' need and

their risk profile. Once the entire comparative analysis is done then the best possible

12
option is advised to the investors. The best possible option provides the proper asset

allocation to various asset classes and also the estimated risk involved.

This helps us to provide our clients an optional basket of funds rather than selling the

typical available funds. This approach lets us set our focus on the quality work rather than

the just the quantity.

2. PRUDENT INFRASTRUCTURE AND CLIENTS:-

Presently, Prudent operate from four key and 21 other locations of Gujarat.

Each of our branches is fully furnished with an excellent infrastructure and latest systems

to service the clients independently. We have been successful in making a remarkable

presence in all these locations.

Team Prudent consists of more than 80 professionals having expertise in the fields like

clients servicing, research, sales, technology etc.

3. PRUDENT LAURELS:-

Prudent have been accredited many times by various Assets management company

(AMCs) for outstanding performance in fund mobilization. Some of the prestigious

awards we won are:

1. Won consequently for four years in a row the most prestigious Prudential ICICI

Chairman Gold Award in FY 2002, 2003, 2004 and 2005

2. Rated 9th best independent Financial Advisor in all India by Franklin Templeton for

the year 2002.

3. SBI Mutual Fund in FY 2002 selected us as a chairman club member.

13
 4. Selected consequently for 2 years in a row by Standard Chartered AMC for their Hall

of Fame in FY 2002 and 2003.

4. HEAD OFFICE;-

701, SEARS TOWER, GULABI TEKARA, OFF. C.G ROAD

AHAMEDABAD- 380006

TELEFAX: +91-79-26464627. 26402436

EMAIL: info@prudentcorporate.com

Website: www.prudentcorporate.com

www.prudentchannel.com

It caters the market through Direct & Indirect channel. We were recruited at indirect

channel headed by Mr. Manpreet Singh at Caunnaught place branch of Delhi region:

Address: 322, third floor, Indra Prakash Building, Barakhamba Road, Cannaught Place,

New Delhi.

Contact No: - 011-30421191.

Email Address: - delhicp@prudentcorporate.com

Prudent CAS Ltd. is the National distributors and deals in the various Company like

Reliance Asset Management Company, ICICI Prudential Asset Management

Company, Kotak Life Insurance, Religare Mutual Fund etc.

4.1 GEOGRAPHICAL AREAS OF OPERATION OF THE COMPANY:

14
Prudent, presently, have over 30 offices in 6 states (Gujarat, Rajasthan, Delhi,

Maharashtra, Haryana, Madhya Pradesh) with over Rs 2000 crores plus of asset.

5. NATURE OF THE ORGANIZATION:-

Prudent is a service based distribution company which is in the business of distribution

of and marketing research of financial products like (mutual funds, insurance). It mainly

operates in functional areas of finance, marketing & sales for financial products.

6. COMPANY’S VISION & MISSION:-

Vision: - Providing Professional services in area of Personal and Corporate Investment.

Mission: - To help Investor in their Wealth Creation.

7. PRODUCT RANGE OF THE COMPANY:

Prudent CAS Ltd plans the financial needs in customised way. It analyses market trend

and investment buckets in turn to have maximum returns. Prudent CAS Ltd serves with

array of financial planning.

Spectrum of Products in which Prudent has an expertise:

1) Mutual Funds.

2) Investment Consultancy.

3) Equity and Derivatives broking.

4) RBI Relief funds and Infrastructure Bonds.

5) Life Insurance.

15
8. SIZE (IN TERMS OF MANPOWER & TURNOVER) OF

ORGANIZATION:

Prudent, presently has manpower of 400 employees.

It has a sales turnover of Rs 600-700 crore out of which profit turnover is around 50

crore.

9. ORGANIZATION STRUCTURE OF THE COMPANY:

16
 Figure No:- 1.1 Organization Structure of the Company

10. MARKET SHARE AND POSITION OF THE COMPANY IN THE

INDUSTRY:

The total market shares of industry are 5 lakh Crore and the prudent is capturing

3 thousand Crore. It captures 60% of the market.

11. PRESENT LEADERSHIP:-

The team at Prudent CAS Ltd at Delhi, C.P. branch consists of:-

• Mr. Manpreet Singh (Deputy Manager).

• Email Id: - manpreet@prudentCorporation.com

• Mr. Sanjay Kumar (Deputy Manager).

• Email Id: - sanjaykumar@prudentCorporation.com

• Mrs. Divya Singh (Customer Relationship Operation Head).

• Email Id:- Delhicp@prudentCorporation.com

• Mr. Subhash Chand (Relationship Manager).

• Email Id:- Shubhashchander@prudentCorporation.com

• Mrs. Surbhi Agarwal (Relationship Manager).

• Email Id:- Surbhi@prudentCorporation.com

17
 Chapter: - 2

FUNCTIONAL ANALYSIS OF COMPANY

Prudent CAS Ltd plans your financial needs in tailor made. It analyses market trend and

investment buckets in turn to have maximum returns. Prudent CAS Ltd serves you with

array of financial planning.

Spectrum of Products where we have an expertise:

1) Mutual Funds.

2) Investment Consultancy.

3) Equity and Derivatives broking.

4) RBI Relief funds and Infrastructure Bonds.

5) Life Insurance.

Thus, we were chosen Mutual Fund and Cross Functional analysis in Marketing of

Insurance Products.

FUNCTIONAL ANALYSIS OF COMPANY:

1. INTRODUCTION OF MUTUAL FUNDS:

18
A Mutual Fund is a trust that pools together the savings of a number of investors who

share a common financial goal. The money collected is then invested in capital market

instruments such as shares, debentures and other securities based on their objective. The

income earned through these investments and the capital appreciation realized is shared

by its unit holders in proportion to the number of units owned by the investors.

Figure No: 2.1 Introduction of Mutual Fund

2. ORGANISATION OF A MUTUAL FUND:-

There are many entities involved and the diagram below illustrates the organizational set

up of a mutual fund:

19
 Figure No: - 2.2 Organisation of Mutual Fund

3. HISTORY OF MUTUAL FUNDS INDUSTRY:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank. The history of

mutual funds in India can be broadly divided into four distinct phases.

Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up

by the Reserve Bank of India and functioned under the Regulatory and administrative

control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the

Industrial Development Bank of India (IDBI) took over the regulatory and administrative

control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the

end of 1988 UTI had Rs.6,700 crores of assets under management.

20
Second Phase - 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June

1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund

(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda

Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set

set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry

had assets under management of Rs.47,004 crores.

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was

the year in which the first Mutual Fund Regulations came into being, under which all

mutual funds, except UTI were to be registered and governed. The erstwhile Kothari

Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund

registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India and also the industry has witnessed several mergers and

acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets

21
of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under

management was way ahead of other mutual funds.

Fourth Phase - since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust

of India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of

assets under management and with the setting up of a UTI Mutual Fund, conforming to

the SEBI Mutual Fund Regulations, and with recent mergers taking place among different

private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of September, 2004, there were 29 funds, which

manage assets of Rs.153108 crores under 421 schemes.

4. CLASSIFICATION OF MUTUAL FUNDS:-

Open-end and Closed –end Funds:-

An open-end fund is one that sells and repurchases units at all times. When the fund

sells units, the investor buys them from the fund. When the investor redeems the

22
 units, the fund repurchases the units from the investor. An investor can buy units or

redeem units from the fund itself at a price based on the net asset value (NAV) per

unit. NAV per unit is obtained by dividing the amount of the market value of the

fund’s assets by the number of units outstanding. The number of units outstanding

goes up or down every time the fund sells new units or repurchases existing units. The

‘unit capital” of an open-end mutual fund is not fixed but variable.

Unlike an open-end fund, the ‘unit capital” of a closed-end fund is fixed, as it makes a

one time sale of a fixed number of units. After the offer closes, closed-end funds do not

allow investors to buy or redeem units directly from the funds. However, to provide the

much –needed liquidity to investors, closed-end funds list on a stock exchange. Trading

through a stock exchange enables investors to buy or sell units of a closed-end mutual

fund from each other, through a stockbroker, in the same fashion as buying or selling

shares of a company. The fund’s units may be traded at a discount or premium to NAV

based on investors’ perceptions about the fund’s future performance and other market

factors affecting the demand for or supply of the fund’s units. The number of outstanding

units of a closed-end fund does not vary on account of trading in the fund’s units at the

stock exchange.

DIFFERENT TYPES OF MUTUAL FUNDS:-

23
 Figure No: - 2.3 Different Types of Mutual Fund.

1. Equity funds

Equity funds are considered to be the more risky funds as compared to other fund

types, but they also provide higher returns than other funds. It is advisable that an

investor looking to invest in an equity fund should invest for long term i.e. for 3 years

or more. There are different types of equity funds each falling into different risk

bracket. In the order of decreasing risk level, there are following types of equity

funds:

a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire

for maximum capital appreciation and invest in less researched shares of

24
 speculative nature. Because of these speculative investments Aggressive Growth

Funds become more volatile and thus, are prone to higher risk than other equity

funds.

b. 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. Without entirely adopting speculative strategies, Growth Funds

invest in those companies that are expected to post above average earnings in the

future.

c. Speciality Funds - Speciality Funds have stated criteria for investments and their

portfolio comprises of only those companies that meet their criteria. Criteria for

some speciality funds could be to invest/not to invest in particular

regions/companies. Speciality funds are concentrated and thus, are comparatively

riskier than diversified funds.. There are following types of speciality funds:

i. Sector Funds: Equity funds that invest in a particular sector/industry of

the market are known as Sector Funds. The exposure of these funds is

limited to a particular sector (say Information Technology, Auto, Banking,

Pharmaceuticals or Fast Moving Consumer Goods) which is why they are

more risky than equity funds that invest in multiple sectors.

ii. Foreign Securities Funds: Foreign Securities Equity Funds have the

option to invest in one or more foreign companies. Foreign securities

funds achieve international diversification and hence they are less risky

than sector funds. However, foreign securities funds are exposed to foreign

exchange rate risk and country risk.

25
 iii. Mid-Cap or Small-Cap Funds: Funds that invest in companies having

lower market capitalization than large capitalization companies are called

Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap

companies is less than that of big, blue chip companies (less than Rs. 2500

crores but more than Rs. 500 crores) and Small-Cap companies have

market capitalization of less than Rs. 500 crores. 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. 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, investment gets risky.

iv. Option Income Funds*: While not yet available in India, Option Income

Funds write options on a large fraction of their portfolio. Proper use of

options can help to reduce volatility, which is otherwise considered as a

risky instrument. These funds invest in big, high dividend yielding

companies, and then sell options against their stock positions, which

generate stable income for investors.

d. Diversified Equity Funds - Except for a small portion of investment in liquid

money market, diversified equity funds invest mainly in equities without any

concentration on a particular sector(s). These funds are well diversified and

reduce sector-specific or company-specific risk. However, like all other funds

diversified equity funds too are exposed to equity market risk. One prominent

type of diversified equity fund in India is Equity Linked Savings Schemes

(ELSS). As per the mandate, a minimum of 90% of investments by ELSS should

26
 be in equities at all times. ELSS investors are eligible to claim deduction from

taxable income (up to Rs 1 lakh) at the time of filing the income tax return. 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.

e. Equity Index Funds - Equity Index Funds have the objective to match the

performance of a specific stock market index. The portfolio of these funds

comprises of the same companies that form the index and is constituted in the

same proportion as the index. Equity index funds that follow broad indices (like

S&P CNX Nifty, Sensex) are less risky than equity index funds that follow

narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow

indices are less diversified and therefore, are more risky.

f. Value Funds - Value Funds invest in those companies that have sound

fundamentals and whose share prices are currently under-valued. The portfolio of

these funds comprises of shares that are trading at a low Price to Earning Ratio

(Market Price per Share / Earning per Share) and a low Market to Book Value

(Fundamental Value) Ratio. Value Funds may select companies from diversified

sectors and are exposed to lower risk level as compared to growth funds or

speciality funds. Value stocks are generally from cyclical industries (such as

cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it

is advisable to invest in Value funds with a long-term time horizon as risk in the

long term, to a large extent, is reduced.

g. Equity Income or Dividend Yield Funds - The objective of Equity Income or

Dividend Yield Equity Funds is to generate high recurring income and steady

27
 capital appreciation for investors by investing in those companies which issue

high dividends (such as Power or Utility companies whose share prices fluctuate

comparatively lesser than other companies' share prices). Equity Income or

Dividend Yield Equity Funds are generally exposed to the lowest risk level as

compared to other equity funds.

2. Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private

companies, banks, financial institutions, governments and other entities belonging to

various sectors (like infrastructure companies etc.) are known as Debt / Income

Funds. Debt funds are low risk profile funds that seek to generate fixed current

income (and not capital appreciation) to investors. In order to ensure regular income

to investors, debt (or income) funds distribute large fraction of their surplus to

investors. Although debt securities are generally less risky than equities, they are

subject to credit risk (risk of default) by the issuer at the time of interest or principal

payment. To minimize the risk of default, debt funds usually invest in securities from

issuers who are rated by credit rating agencies and are considered to be of

"Investment Grade". Debt funds that target high returns are more risky. Based on

different investment objectives, there can be following types of debt funds:

a. 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. The

best feature of diversified debt funds is that investments are properly diversified

into all sectors which results in risk reduction. Any loss incurred, on account of

28
 default by a debt issuer, is shared by all investors which further reduces risk for an

individual investor.

b. Focused Debt Funds - Unlike diversified debt funds, focused debt funds are

narrow focus funds that are confined to investments in selective debt securities,

issued by companies of a specific sector or industry or origin. Some examples of

focused debt funds are sector, specialized and offshore debt funds, funds that

invest only in Tax Free Infrastructure or Municipal Bonds. Because of their

narrow orientation, focused debt funds are more risky as compared to diversified

debt funds. Although not yet available in India, these funds are conceivable and

may be offered to investors very soon.

c. High Yield Debt funds - As we now understand that risk of default is present in

all debt funds, and therefore, debt funds generally try to minimize the risk of

default by investing in securities issued by only those borrowers who are

considered to be of "investment grade". But, High Yield Debt Funds adopt a

different strategy and prefer securities issued by those issuers who are considered

to be of "below investment grade". The motive behind adopting this sort of risky

strategy is to earn higher interest returns from these issuers. These funds are more

volatile and bear higher default risk, although they may earn at times higher

returns for investors.

d. Assured Return Funds - Although it is not necessary that a fund will meet its

objectives or provide assured returns to investors, 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. Any shortfall in returns is suffered by the sponsors or

the Asset Management Companies (AMCs). These funds are generally debt funds

29
 and provide investors with a low-risk investment opportunity. However, the

security of investments depends upon the net worth of the guarantor (whose name

is specified in advance on the offer document). To safeguard the interests of

investors, SEBI permits only those funds to offer assured return schemes whose

sponsors have adequate net-worth to guarantee returns in the future. In the past,

UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that

assured specified returns to investors in the future. UTI was not able to fulfill its

promises and faced large shortfalls in returns. Eventually, government had to

intervene and took over UTI's payment obligations on itself. Currently, no AMC

in India offers assured return schemes to investors, though possible.

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. Unlike closed-end funds, fixed term

plans are not listed on the exchanges. Fixed term plan series usually invest in debt /

income schemes and target short-term investors. The objective of fixed term plan

schemes is to gratify investors by generating some expected returns in a short period.

3. Gilt Funds

Also known as Government Securities in India, Gilt Funds invest in government

papers (named dated securities) having medium to long term maturity period. Issued

by the Government of India, these investments have little credit risk (risk of default)

and provide safety of principal to the investors. However, like all debt funds, gilt

funds too are exposed to interest rate risk. 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.

30
 4. Money Market / Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest

bearing debt instruments. These securities are highly liquid and provide safety of

investment, thus making money market / liquid funds the safest investment option

when compared with other mutual fund types. However, 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).

5. Hybrid Funds

As the name suggests, hybrid funds are those funds whose portfolio includes a blend of

equities, debts and money market securities. Hybrid funds have an equal proportion of

debt and equity in their portfolio. There are following types of hybrid funds in India:

a. Balanced Funds - The portfolio of balanced funds include assets like debt

securities, convertible securities, and equity and preference shares held in a

relatively equal proportion. The objectives of balanced funds are to reward

investors with a regular income, moderate capital appreciation and at the same

time minimizing the risk of capital erosion. Balanced funds are appropriate for

conservative investors having a long term investment horizon.

b. Growth-and-Income Funds - Funds that combine features of growth funds and

income funds are known as Growth-and-Income Funds. These funds invest in

companies having potential for capital appreciation and those known for issuing

high dividends. The level of risks involved in these funds is lower than growth

funds and higher than income funds.

31
c. Asset Allocation Funds - Mutual funds may invest in financial assets like equity,

debt, money market or non-financial (physical) assets like real estate,

commodities etc.. Asset allocation funds adopt a variable asset allocation strategy

that allows fund managers to switch over from one asset class to another at any

time depending upon their outlook for specific markets. In other words, fund

managers may switch over to equity if they expect equity market to provide good

returns and switch over to debt if they expect debt market to provide better

returns. It should be noted that switching over from one asset class to another is a

decision taken by the fund manager on the basis of his own judgment and

understanding of specific markets, and therefore, the success of these funds

depends upon the skill of a fund manager in anticipating market trends.

6. Commodity Funds

Those funds that focus on investing in different commodities (like metals, food

grains, crude oil etc.) or commodity companies or commodity futures contracts

are termed as Commodity Funds. 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. "Precious

Metals Fund" and Gold Funds (that invest in gold, gold futures or shares of gold

mines) are common examples of commodity funds.

7. 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, are known as

32
 Specialized Real Estate Funds. The objective of these funds may be to generate

regular income for investors or capital appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end

and an open-end mutual fund. Exchange Traded Funds follow stock market

indices and are traded on stock exchanges like a single stock at index linked

prices. The biggest advantage offered by these funds is that they offer

diversification, flexibility of holding a single share (tradable at index linked

prices) at the same time. Recently introduced in India, these funds are quite

popular abroad.

9. Fund of Funds

Mutual funds that do not invest in financial or physical assets, but do invest in other

mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund

of Funds maintain a portfolio comprising of units of other mutual fund schemes, just

like conventional mutual funds maintain a portfolio comprising of equity/debt/money

market instruments or non financial assets. Fund of Funds provide investors with an

added advantage of diversifying into different mutual fund schemes with even a small

amount of investment, which further helps in diversification of risks. However, the

expenses of Fund of Funds are quite high on account of compounding expenses of

investments into different mutual fund schemes.

5. Parties eligible as investors in India

• Resident Indians.

33
 • Non-resident Indians (NRI).

• Persons of Indian Origin (POI).

• Indian Public Sector Undertakings.

• Indian Private Sector Undertakings.

• Parents/Guardians on behalf of minors.

• Wakf Boards.

• Hindu Undivided Family.

• Sole Proprietorship Firms.

• Partnership Firms.

• Cooperative Societies.

• Charitable or Religious Trusts.

• Trustee, AMC or Sponsor of their associates.

• Endowment or Registered Societies.

• Army/Air Force/Navy/Para-Military funds and other eligible institutions.

• Scientific and/or industrial research organizations.

And other associations, institutions, bodies, etc., authorized to invest in mutual fund.

6. ADVANTAGES OF MUTUAL FUNDS:-

34
1) 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).

2) 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.

3) Less Risk: - Investors acquire a diversified portfolio of securities even with a

small investment in a Mutual Fund. The risk in a diversified portfolio is lesser

than investing in merely 2 or 3 securities.

4) Low Transaction Costs: - Due to the economies of scale (benefits of larger

volumes), mutual funds pay lesser transaction costs. These benefits are passed on

to the investors.

5) Liquidity: - An investor may not be able to sell some of the shares held by him

very easily and quickly, whereas units of a mutual fund are far more liquid.

6) Choice of Schemes: - Mutual funds provide investors with various schemes with

different investment objectives. Investors have the option of investing in a scheme

having a correlation between its investment objectives and their own financial

goals. These schemes further have different plans/options.

7) Transparency: - Funds provide investors with updated information pertaining to

the markets and the schemes. All material facts are disclosed to investors as

required by the regulator.

8) Flexibility: - Investors also benefit from the convenience and flexibility offered

by Mutual Funds. Investors can switch their holdings from a debt scheme to an

equity scheme and vice-versa. Option of systematic (at regular intervals)

35
 investment and withdrawal is also offered to the investors in most open-end

schemes.

9) Safety: - Mutual Fund industry is part of a well-regulated investment environment

where the interests of the investors are protected by the regulator. All funds are

registered with SEBI and complete transparency is forced.

7. DISADVANTAGES OF MUTUAL FUNDS:-

1) 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), irrespective of the

performance of the fund.

2) No Customized Portfolios: - The portfolio of securities in which a fund

invests is a decision taken by the fund manager. Investors have no right to

interfere in the decision making process of a fund manager, which some investors

find as a constraint in achieving their financial objectives.

3) Difficulty in Selecting a Suitable Fund Scheme: - Many investors find it

difficult to select one option from the plethora of funds/schemes/plans available.

For this, they may have to take advice from financial planners in order to invest in

the right fund to achieve their objectives.

8. Cross-Functional Analysis in Marketing of Insurance Products:-

36
 8.1 Insurance:- Insurance is financial arrangement for redistributing the costs of

expected losses through a legal contract whereby an insurer aggress to compensate an

insured for losses. Insurance is that social device for making accumulations to meet

uncertain losses which are carried out through the transfer of the risks of many

individuals to one person or to a group of persons.

A contract between two parties where by one party call insurer undertakes in

exchange for a fixed sum called premium, to pay the other party called insured a fixed

amount of money on the happening of a certain event.

8.11TYPES OF INSURANCE:-

• Life Insurance

It insures the life of the person buying the Life Insurance Certificate. Once a Life

Insurance is sold by a company then the company remains legally entitled to make

payment to the beneficiary after the death of the policy holder.

• Medical Insurance

This is also known as mediclaim. Here, the policy holder is entitled to receive the

amount spent for his health purposes from the insurance company.

• General Insurance

This insurance type involves insuring the risks associated with the general life such

as automobiles, business related, natural incidents, commercial and residential

properties, etc.

37
8.12 ADVANTAGES OF INSURANCE:-

• Allows businesses, particularly small businesses, to take risks that will help them

compete in their market.

• Frees up your funds for investment-if you self-insure you'd have to keep your

funds liquid.

• Reduces your tax liability since premium is tax deductible.

• Offers you better protection in the event of a lawsuit since insurance contracts are

standardized and use court-tested language.

• Includes risk engineering and claims services in most cases, which can help you

reduce the frequency and severity of losses.

8.13 DISADVANTAGES OF INSURANCE:-

• Administration costs, including your time or an employee's time to maintain the

insurance.

• Employees might take less care to prevent losses because "we have insurance

anyway" (known as a moral hazard).

• The "deep pocket" theory-insurance could trigger claims that might not otherwise

be pursued if no insurance were available.

• Exclusions-insurance contracts normally have exclusions restricting coverage.

38
 Chapter:-3

Job Specific Analysis:-

COMPARATIVE ANALYSIS OF VARIOUS DEBT SCHEMES

IN MUTUAL FUNDS

1 DEBT FUND

An investment pool, such as a mutual fund or exchange-traded fund, in which core

holdings are fixed income investments. A debt fund may invest in short-term or long-term

bonds, securitized products, money market instruments or floating rate debt. The fee

ratios on debt funds are lower, on average, than equity funds because the overall

management costs are lower.

1.1 DEBT FUND IS SAFE INVESTMENT AVENUE

 They are less risky than equities. No doubt equities come with handsome returns

but on the other hand, the risk and volatility of equities are the negative sides of

investing in equities.

 Debt funds deliver you steady returns though the returns may not be as attractive

as equities. However, you get a sense of assurance for returns.

39
The debt fund schemes are broadly divided into 3 categories, viz., debt/income schemes,

liquid/money market schemes, gilt schemes.

1.2 Top Debt Funds:-

1) HDFC- Monthly Income Plan-Long Term Plan.

2) Reliance Monthly Income Plan.

3) Canara Robeco CIGO.

4) ICICI Prudential Short Term Institutional Plan.

I have chosen HDFC, Reliance, and Canara Robeco funds for the analysis. Compare their

NAV, Return, Benchmark, and Performance, etc.

2 HDFC Mutual Fund.

2.1 Overview of HDFC Asset Management Company (AMC)

HDFC Mutual Fund is governed by HDFC Asset Management Company Limited

(AMC). The HDFC mutual fund was approved by SEBI in June 2000. Equity Funds,

Balanced Funds, and Debt Funds are the mutual fund schemes offered by HDFC Mutual

Fund.

2.2 Overview of HDFC Mutual Fund

HDFC Mutual Fund has witnessed significant growth in the past few years. It is regulated

by HDFC Asset Management Company Limited (AMC) which works as an Asset

Management Company (AMC) for HDFC Mutual Fund. HDFC Asset Management

Company Limited (AMC) is a Joint Venture concern between the large-scale housing

finance company HDFC and British investment firm Standard Life Investments Limited.

40
The HDFC Asset Management Company Limited conducts the activities carried out by

the HDFC Mutual Fund and manages the assets of various mutual fund schemes.

2.3 Why HDFC Mutual Fund:-

HDFC Mutual Fund is one of the largest mutual funds and well-established fund house in

the country with consistent and above average fund performance across categories since

its incorporation on December 10, 1999. While our past experience does make us a

expert, but when it comes to investments, we have never believed that the experience is

enough.

2.4 Vision:-

To be a dominant player in the Indian mutual fund recognized for its high levels of ethical

and professional conduct and a commitment towards enhancing investor interests.

2.5 Schemes of HDFC Mutual Fund-

1) HDFC Mutual fund-Monthly Income Plan-Long Term Plan.

2) HDFC Income Fund.

3) HDFC Gilt Fund-Short Term Plan.

Thus from the above various funds offered by the HDFC Mutual Fund, HDFC-Monthly

Income Plan-Long Term Plan have been chosen for the analysis.

41
3 HDFC Monthly Income Plan-Long Term Plan

1) Investment Objective: -The primary objective of Scheme is to generate regular

returns through investment primarily in Debt and Money Market Instruments. The

secondary objective of the Scheme is to generate long-term capital appreciation

by investing a portion of the Scheme’s assets in equity and equity related

instruments.

2) Benchmark: - Crisil MIP Blended Index.

3) Type of scheme: - Open Ended.

4) Nature: - Debt.

5) Inception Date: - Dec 26, 2003.

6) Loads:-

6.1 Entry Load: - Entry Load is 0%.

6.2 Exit Load: - If redeemed bet. 0 Year to 1 Year; and Amount Bet. 0 to

49999999 then Exit load is 1%.

7) Investment Pattern:-

The asset allocation under the Scheme will be as follows :

Normal AllocationDeviation
Risk
Sr.No. Type of Instruments (% of Normal
Profile
(% of Net Assets) Allocation)
Debt instruments
(including securitised
Low to
1 debt) & Money Market75 100
Medium
instruments (including
cash/call money)
Equities & Equity related Medium to
2 25 100
instruments High

TABLE 3.1 Investment Pattern of HDFC Mutual Fund

42
 8) Minimum Investment: - Rs. 380053.

9) Fund Manager: - Shobhit Mehrotra.

10) Returns:-

Scheme Performance (%) as on Jul 14, 2009

Since
1 Month 3 Months 6 Months 1 Year 3 Years 5 Years
Inception
-1.78 6.88 11.45 19.44 13.75 14.56 6.92
Table No: - 3.2 Returns of HDFC Mutual Fund

11) Nav (Net Asset Value):-

Latest NAV 18.80 as on Jul 14, 2009

Benchmark Index - Crisil MIP Blended Index 1,817.96 as on Jul 13, 2009
52 - Week High 19.06 as on Jul 3, 2009
52 - Week Low 14.44 as on Oct 27, 2008
Table No: - 3.3 Net Asset Value of HDFC Mutual Fund

Figure No: - 3.1 NAV Chart of HDFC Mutual Fund

43
 12) Asset Allocation (%):-Asset Allocation shows that the collected corpus from the

fund is invested in which area in Equity, debt, or remains with the company in cash

form.

Equity Debt Cash & Equivalent

24.25 57.05 18.70
Table No: - 3.4 Asset Allocation of HDFC Mutual Fund

Figure No: - 3.2 Asset Allocation of HDFC Mutual Fund

13) Top 10 Holdings:- The companies having top holdings in the HDFC Monthly

income plan are:

Table No:-3.5 Top 10 holdings Percentage

Stock Sector of Net
Assets
Cash Current Assets 8.26
Power Finance Corporation Ltd Finance 6.34
Tata Sons Ltd. Finance 5.85
NABARD Finance 5.22
Electricals & Electrical
Rural Electrification Corporation
Equipments
4.84
Housing Development Finance Corporation
Ltd
Finance 4.42
Tata Steel Ltd. Steel 4.21
Computers - Software &
IBM India Private limited
Education
3.96
Indian Railway Finance Corporation Ltd Finance 3.90
Oil & Gas, Petroleum &
Bharat Petroleum Corporation Ltd
Refinery
3.72

44
 14) Sector Allocation: - Sector allocation shows that the fund’s corpus invested in

which different sector and at what percentage.

Auto & Auto ancilliaries 0.39

Banks 9.18
Cement 0.81
Chemicals 0.51
Computers - Software & Education 5.79
Consumer Durables 0.68
Current Assets 11.09
Electricals & Electrical Equipments 6.71
Engineering & Industrial Machinery 1.74
Entertainment 1.03
Finance 35.05
Food & Dairy Products 2.23
Miscellaneous 0.26
Oil & Gas, Petroleum & Refinery 5.18
Personal Care 2.46
Pharmaceuticals 2.57
Power Generation, Transmission & Equip 3.48
Rubber & Tyres 1.35
Securities 3.21
Steel 4.49
Tea 0.25
Textiles 1.52
Trading 0.03

Table No:-3.6 Sector Allocation of HDFC Mutual Fund

45
 Figure No:-3.3 Sector Allocation of HDFC Mutual Fund

Comparison on the basis of Portfolio Return, Return Market, Return

Free and judge performance on different ratios.

HDFC - Monthly Income Plan - Long Term Plan Performance

(X
(Rm- (Rp- -Xbar
YEAR Rp Rm Rf Rf) Rf) X2 XY ) D2

X Y D
23.5 20.9 14.9 17.5 223.2
LAST 1Year 8 4 6 4 8 0 262.64 4.04 16.32
11.9 12.8 47.05
LAST 3 Year 5 6 6 6.86 5.95 9 40.817 -4.04 16.32
23.5 270.2
TOTAL 21.8 3 5 303.457 0.00 32.64

Table No: - 3.7 Performance of HDFC Mutual Fund

46
Where,

Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return.

CALCULATION OF ARTHMETIC MEAN:-

=Σ X/N
= 21.8/ 2
= 10.9

CALCULATION OF STANDARD DEVIATION (σ):-

= √ Σ (X-Xbar)2 / N
= √32.64/2
= √16.32
= 4.0398.

CALCULATION OF BETA CO-EFFICIENT;-

= N (Σ XY) – Σ XΣ Y
N (Σ X2) – (Σ X) 2
= 2(303.457) – (21.8)(23.53)
2(270.25) – (21.8) 2

=606.914-512.954
540.5-475.24
=93.96
65.26
=1.439

47
CALCULATION OF SHARPE’S RATIO:-
= Rp-Rf/ σ
=23.53
4.0398
=5.824

CALCULATION OF TREYNOR’S RATIO:-

= Rp-Rf/β
=23.5/1.439
= 16.33/100 or 0.1633.

4 Reliance Mutual Fund

4. 1 Overview of Reliance Mutual Fund:-

The Reliance Mutual Fund is one of the most popular and leading mutual fund in the

mutual fund sector of India. The Reliance Mutual Fund is owned by Anil Dhirubhai

Ambani Group and with respect to net worth it ranks among the top three of all the

private financial service providers in India.

The Reliance mutual fund products are available in hundred and fifteen cities across

India. It is one of the fastest growing mutual fund in India and the main reason of its

popularity is that it has a wide portfolio of products that meets the requirements of each

and every type of investors. The Reliance Mutual Fund is headed by Mr. Vikrant Gugnani

- the CEO of the company.

48
4. 2 Details of Reliance Mutual Fund:

• The schemes of Reliance Mutual Fund are being managed by Reliance Capital
Asset Management Ltd, which is a subsidiary of Reliance Capital Limited.

• Reliance Capital Ltd holds 93.37% of the paid-up capital of the Reliance Capital
Asset Management Ltd.

• The value of the cumulative assets that are being managed (also called Assets
Under Management (AUM)) amounted to Rs. 80,779 crores, as on Dec 31st 2007.

• The investor base of Reliance Mutual Fund is over 43.67 lakh.

4. 3 Different types of mutual fund offered by the Reliance Mutual

Fund:

Equity / Growth based products- The main objective of investing in such scheme is to

provide capital appreciation over the medium to long- term range. Generally, in such

schemes a major portion of the accumulated sum is invested in equities.

Debt / Income based products- The main objective of investing in such scheme is to

provide regular and steady income to the investors of such funds. Generally, in such

schemes a major portion of the accumulated sum is invested in fixed income securities.

Sector Specific products - The main objective of investing in such funds is to gain

leverage out of the fast growing sectors. Generally, in such schemes all the sum

accumulated is invested in securities of a particular type of sector.

49
4. 4 Overview of Reliance Capital Asset Management Ltd.

Reliance Capital Asset Management Limited (RCAM), a company registered under the

Companies Act, 1956 was appointed to act as the Investment Manager of Reliance

Mutual Fund.

Reliance Capital Asset Management Limited (RCAM) was approved as the Asset

Management Company for the Mutual Fund by SEBI in June 30, 1995.

4. 5 Vision:-

To be a globally respected wealth creator with an emphasis on customer care and a

culture of good corporate governance.

4.6 Mission:-

To create and nurture a world-class, high performance environment aimed at delighting

our customers.

4. 7 Schemes of Reliance Mutual Fund:-

1) Reliance Income Fund.

2) Reliance Monthly Income Plan.

3) Reliance Gilt Securities Fund.

Thus from the above various funds offered by the Reliance Mutual Fund, Reliance-

Monthly Income Plan have been chosen for the analysis.

50
5 Reliance- Monthly Income Plan:-

1) Investment Objective: - The primary objective of the scheme is to generate

regular income in order to make regular dividend payments to unit holders with

the secondary objective of growth in capital.

2) Benchmark:- Crisil MIP Blended Index

3) Type of scheme: - Open-Ended.

4) Nature: - Debt.

5) Inception Date: - Jan 13, 2004.

6) Loads:-

6.1 Entry Load: - Entry Load is 0%.

6.2 Exit Load: - If redeemed bet. 0 Months to 12 Months; and Amount Bet. 0 to 9999999

then Exit load is 1%. If redeemed bet. 0 Months to 1 Months; and Amount greater than

10000000 then Exit load is 1%.

7) Minimum Investment: - Rs. 760053.

8) Fund Manager: - Amit Tripathy.

9) Returns:-

Scheme Performance (%) as on Jul 14, 2009

Since
1 Month 3 Months 6 Months 1 Year 3 Years 5 Years
Inception
1.06 12.52 19.64 21.15 11.72 12.94 12.04

Table No:-4.1 Returns of Reliance Mutual Fund

51
 10) Nav (Net Asset Value):-

Latest NAV 17.79 as on Jul 14, 2009

Benchmark Index - Crisil MIP Blended Index 1,817.96 as on Jul 13, 2009
52 - Week High 18.09 as on Jul 3, 2009
14.18 as on Jul 16, 2008
52 - Week Low

Table No:-4.2 Net Asset Value of Reliance Mutual Fund

Figure No:- 4.1 NAV Chart of Reliance Mutual Fund

11) Asset allocation: - Asset Allocation shows that the collected corpus from the fund

is invested in which area in Equity, debt, or remains with the company in cash

form.

Equity Debt Cash & Equivalent

12.18 47.82 40.00

Table No: - 4.3 Asset Allocation of Reliance Mutual Fund

52
 Figure No:- 4.2 Asset Allocation of Reliance Mutual Fund

12) Top 10 Holdings:- The companies having top holdings in the Reliance Monthly

income plan are:

Percentage
Sector of Net
Stock
Assets
Cash Current Assets 17.78
Industrial Development Bank of India Ltd Banks 14.67
Power Finance Corporation Ltd Finance 12.74
Jammu and Kashmir Bank Ltd Banks 9.15
Unitech Ltd Housing & Construction 6.33
Allahabad Bank Banks 6.14
GOI Securities 5.24
Tata Motors Ltd Auto & Auto ancilliaries 4.97
Indian Railway Finance Corporation Ltd Finance 4.97
ICICI BANK LTD. Banks 3.25

53
 Table No: - 4.4 Top 10 holdings of Reliance Mutual Fund

13) Sector Allocation: - Sector allocation shows that the fund’s corpus invested in

which different sector and at what percentage.

Auto & Auto ancilliaries 4.31

Banks 29.11
Cement 4.10
Current Assets 18.26
Finance 15.32
Oil & Gas, Petroleum & Refinery 1.74
Power Generation, Transmission & Equip 2.26
Securities 23.77
Textiles 1.13

Table No: - 4.5 Sector Allocation of Reliance Mutual Fund

54
 Figure No:-4.3 Sector Allocation of Reliance Mutual Fund

Reliance Monthly Income Plan Performance

(X
(Rm- (Rp- -Xbar
YEAR Rp Rm Rf Rf) Rf) X2 XY ) D2

X Y D
20.5 20.9 14.9 14.5
LAST 1Year 4 4 6 4 4 223.20 217.22 4.04 16.32
12.2 12.8 47.059
LAST 3 Year 3 6 6 6.86 6.23 6 42.7378 -4.04 16.32
20.7
TOTAL 21.8 7 270.25 259.95 0.00 32.64

Table No:- 4.6 Performance of Reliance Mutual Fund

Where,
Rp - Portfolio Return-
Rm - Market Return-
Rf - Risk free rate of return.

55
CALCULATION OF ARTHMETIC MEAN:-
=Σ X/N
= 21.8/ 2
= 10.9

CALCULATION OF STANDARD DEVIATION (σ):-

= √ Σ (X-Xbar)2 / N
= √2171.2232/2
= √1085.6116
= 32.948

CALCULATION OF BETA CO-EFFICIENT;-

= N (Σ XY) – Σ XΣ Y
N (Σ X2) – (Σ X) 2
= 2(259.95) – (21.8) (20.77)
2(270.25) – (21.8) 2

= 519.9-452.786
540.5-475.24
= 67.114
65.26
= 1.03

CALCULATION OF SHARPE’S RATIO:-

= Rp-Rf/ σ
= 20.77
32.948
= 0.6303

56
CALCULATION OF TREYNOR’S RATIO:-
= Rp-Rf/β
=20.77/1.03
= 20.165/100 or 0.20165.

6 Canara Robeco CIGO:-

6.1 Overview of Canara Robeco Mutual Fund:-

Canara Robeco Mutual Fund is a Joint Venture between Canara Bank and Robeco Group.

The Asset Management Company is known as Canara Robeco Asset Management

Company Limited. Canara Robeco Mutual Fund operates 15 open-ended and 3 close-

ended schemes.

Canbank Investment Management Services Ltd. (the AMC) was set up in the year 1993

as a wholly owned subsidiary of Canara Bank. The Asset Management Company

regulates and manages the assets of Canbank Mutual Fund under an investment

management agreement dated 16th June 1993.

Canara Robeco Mutual Fund is a joint Venture between Canara Bank and Robeco group.

This joint Venture came into existence on 19th March, 2007. This Joint Venture states

that the Robeco India Holding B.V has acquired 40 percent share in the Asset

Management Company. After this agreement, the Joint Venture concern came to be

known as Canara Robeco Mutual Fund and the Asset Management Company (AMC) was

renamed as Canara Robeco Asset Management Company Limited.

6.2 Objectives of Canara Robeco Mutual Fund-

57
The Canara Robeco Mutual Fund has launched thirty schemes ever since it came into

existence and furthermore has taken up four schemes from GIC Mutual Fund. Among

these thirty schemes launched by the company, around sixteen schemes have been

dissolved or terminated till date. The AMC now regulates eighteen schemes among which

fifteen are open-ended schemes and three are close-ended schemes.

The assets under management were estimated to be around Rs. 2211.57 Crores on 30th

September, 2007.

6.3 Schemes offered by Canara Robeco Mutual Fund-

• Canara Robeco Income.

• Canara Robeco CIGO.

Thus from the above various funds offered by the Canara Robeco Mutual Fund, Canara

Robeco-CIGO have been chosen for the analysis.

7.Canara Robeco-CIGO.

1) Investment Objective:- To generate income by investing in a wide range of debt

securities and Money Market Instruments of various maturities and risk profile and a

small portion of investment in equities and equity related instruments.

2) Benchmark: - Crisil MIP Blended Index.

3) Type of scheme: - Open Ended.

4) Nature: - Debt.

58
5) Inception Date:- Apr 4, 1988.

6) Loads:-

6.1 Entry Load: - Entry Load is 0%.

6.2 Exit Load: - If redeemed bet. 0 Month to 6 Month; and Amount Bet. 0 to

500000 then Exit load is 0.5%. and Amount greater than 500001 then Exit load is

0%.

7) Minimum Investment: - Rs. 380053.

8) Fund Manager: - Mr. N S Sriram.

9) Returns:-

Scheme Performance (%) as on Jul 14, 2009

Since
1 Month 3 Months 6 Months 1 Year 3 Years 5 Years
Inception
-1.78 6.88 11.45 19.44 13.75 14.56 6.92

Table No:- 5.1 Returns of Canara Robeco Mutual Fund

10) Nav (Net Asset Value):-

59
 25.31 as on Jul 14,
Latest NAV
2009
Benchmark Index -
1,817.96 as on Jul
Crisil MIP Blended
13, 2009
Index
25.86 as on Jun 11,
52 - Week High
2009
20.03 as on Oct 27,
52 - Week Low
2008

Table No:- 5.2 Net Asset Value of Canara Robeco Mutual Fund

Figure No:-5.1 NAV Chart of Canara Robeco Mutual Fund.

11) Asset allocation: - Asset Allocation shows that the collected corpus from the fund is

invested in which area in Equity, debt, or remains with the company in cash form.

Equity Debt Cash & Equivalent

20.35 0.00 79.65

Table No:- 5.3

Asset Allocation

60
 of Canara Robeco Mutual Fund

Figure No:- 5.2 of Asset Allocation of Canara Robeco Mutual Fund

12) Top 10 Holdings:- The companies having top holdings in the Canara Robeco-CIGO

are:

61
 Percentage
Stock Sector of Net
Assets
CBLO Current Assets 81.68
Oil & Gas, Petroleum &
Reliance Industries Ltd 3.21
Refinery
Hongkong & Shanghai Banking
Banks 3.13
Corporation
Bharti Airtel Ltd Telecom 2.31
Idea Cellular Limited Telecom 1.76
Aditya Birla Nuvo Limited. Textiles 1.45
State Bank of India Banks 1.43
Electricals & Electrical
Bharat Heavy Electricals Ltd 1.43
Equipments
HDFC Bank Ltd Banks 1.35
Pantaloon Retail (India) Ltd. Textiles 1.30

Table No:-5.4 Top 10 holding of Canara Robeco Mutual Fund

13) Sector Allocation:- Sector allocation shows that the fund’s corpus invested in which

different sector and at what percentage.

Banks 7.40
Current Assets 67.95
Electricals & Electrical Equipments 1.25
Entertainment 0.72
Fertilizers, Pesticides & Agrochemicals 0.17
Finance 0.45
Mutual Funds 8.81
Oil & Gas, Petroleum & Refinery 4.05
Pharmaceuticals 2.71
Power Generation, Transmission & Equip 1.32
Telecom 3.14
Textiles 2.03

Table No: - 5.5 Sector Allocation of Canara Robeco Mutual Fund

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 Figure No:- 5.3 Sector Allocation of Canara Robeco Mutual Fund

Canara Robeco-CIGO Performance

(X
(Rm- (Rp- -Xbar
X2
YEAR Rp Rm Rf Rf) Rf) XY ) D2

X Y D
21.3 20.9 14.9 15.3
LAST 1MONTH 4 4 6 4 4 223.20 229.17 4.04 16.32
LAST 3 10.0 12.8 47.059
MONTHS 8 6 6 6.86 4.08 6 27.988 -4.04 16.32
19.4
TOTAL 21.8 2 270.25 2327.15 0.00 32.64

Table No:- 5.6 Performance of Canara Robeco Mutual Fund

Where,
Rp - Portfolio Return
Rm - Market Return
Rf - Risk free rate of return.

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CALCULATION OF ARTHMETIC MEAN:-
=Σ X/N
= 21.8/ 2
= 10.9

CALCULATION OF STANDARD DEVIATION (σ):-

= √ Σ (X-Xbar)2 / N
= √32.64/2
= √16.32
= 4.0398

CALCULATION OF BETA CO-EFFICIENT;-

= N (Σ XY) – Σ XΣ Y
N (Σ X2) – (Σ X) 2
= 2(2327.15) – (21.8)(19.42)
2(270.25) – (21.8) 2

= 4654.3-423.356
540.5 - 4.7524
=4230.94
535.74
=7.897
CALCULATION OF SHARPE’S RATIO:-
= Rp-Rf/ σ
=19.42
4.0398

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 =4.807

CALCULATION OF TREYNOR’S RATIO:-

= Rp-Rf/β
=19.42/7.897.
= 2.459/100 or 0.024

Comparative Table of HDFC Monthly Income Plan, Reliance Monthly

Income Plan and Canara Robeco – CIGO.

Particular HDFC Reliance Canara Robeco

Inception Date Dec 26, 2003. Jan 13, 2004. Apr 4, 1988.
Benchmark Index Crisil MIP Crisil MIP Crisil MIP
Blended Index Blended Index Blended Index
Fund Manager Mr. Shobhit Mr.Amit Tripathy Mr. N S Sriram
Mehrotra

18.80 17.79 25.31

Latest NAV
Arthmetic Mean 10.9 10.9 10.9
Standard Deviation 4.0398 32.948 4.0398
Beta 1.439 1.03 7.897
Sharpe’s Ratio 5.824 0.6303 4.807
Treynor’s Ratio 0.1633 0.20165 0.024

Table No: - 5.7 Comparative Table

8 Sharpe’s Ratio:-
Sharpe’s performance index gives a single value to be used for the performance ranking
of various funds or portfolios. Sharpe ratio measures the risk premium of the portfolio
relative to the total amount of risk in the portfolio. This risk premium is the difference
between the portfolio’s average rate of return and the risk less rate of return. The

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Standard Deviation of the portfolio indicates the risk. The index assigns the highest
values to assets that have best risk-adjusted average rate of return.

9 Treynor’s Ratio:-
This performance is measured in relation to the market performance. The ideal fund’s
return rises at a faster rate than the general market performance when the market is
moving upwards and its rate of return declines slowly than the market return, in the
decline. The ideal fund may place its fund in the treasury bills or short sell the stock
during the decline and earn positive return.

Chapter:- 4

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1 Learning Summary:-

1) Experience about the Working: - At Prudent Corporate Advisory Service

(CAS) ltd. it was an excellent experience. As a part of summer training, I have

been guided with a pool of knowledge in investments and insurance. We visited at

various Asset Management Company (AMC) and insurance company like

Reliance Capital Asset Management Company and ICICI Prudential Asset

Management Company and Tata Asset Management Company and for insurance

in Kotak life Insurance which gave us knowledge about mutual fund and

insurance products.

2) Working Environment existing in the company: - The Environment in

the company was very Co-operative. Every employee provides us knowledge

about our project.

3) Practical knowledge gained during the internship in various functional areas such

as –

The practical knowledge gained during summer training in terms of various concepts.

Gained knowledge about the various Financial Products like Mutual fund and

Insurance products.

Gained Knowledge in terms of Finance:-

• Concepts of Mutual Fund.

• Working of Mutual Fund.

• Category of Mutual Fund.

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 • Parties eligible as Investors.

• Advantages and Disadvantages of Mutual Fund.

• Insurance.

• Different Types of Insurance.

• Advantages and Disadvantages of Insurance.

Gained Knowledge in terms of Marketing: - Prudent have two major Marketing

strategies Direct and Indirect selling’s. In direct selling companies employee go for

marketing/selling of the products while in indirect selling contractors / Distributors go

for marketing/ selling.

As Prudent CAS Ltd believes in understanding the customer needs and offering the

product that can match to his requirement. Thus, for marketing of various financial

products such as mutual funds, insurance the services provided are to be tailor made, as

every individual has different interests.

Gained knowledge in terms of Inventory: - As for the company its application forms of

various financial products are its inventory. These inventories are handling by operation

head of the company.

4) Best Practices and USP of the Company:-

• The Unique selling proposition of the company is that Prudent CAS Ltd being a

national distributor, it offers the wide variety of schemes of mutual funds.

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• Prompt and best suited advice through qualified and experienced professionals

like Chartered Accountant and MBA.

• Research Based Product Selection.

• Online Valuation report for all Mutual Fund investments.

• Unbiased advice across the product basket.

• Prudent provides daily, monthly reports to their clients.

• Daily Reports:-Return report for all Mutual Fund.

• Monthly Reports: - Portfolio analysis of debt funds and Prudent mutual fund

highlights.

5) Constraints and Limitations:-

• The time period of 2 months was the major limitation.

• Class room principles are very difficult to apply in business world.

• Human Resource department does not exist in the branch. so cannot gain much

knowledge about HR department.

CONCLUSION

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As we can see from the project that inspite of entrance of large number of private players

and large number of available schemes in mutual fund the Mutual Fund is still a new

concept for the Indian Financial Market. Putting the Asset under management of the

Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of

SBI alone, constitute less than 11% of the total deposits held by the Indian banking

industry.

Thus According to the Sharpe’s Ratio HDFC-Monthly Income Plan is the best fund

because it has highest ratio as compare to other two companies. It score ratio 5.824

which is much higher than 0.6303 and 4.807. So it is better fund than other two

companies.

According to the Treynor’s Ratio Reliance-Monthly Income Plan is the best fund

because it has highest ratio. It score ratio 0.20165 which is higher than other two

companies.

Firstly the fund has the highest Sharpe Ratio in comparison to the other funds and as

Sharpe ratio indicates the risk-adjusted performance and it also tells that whether the

returns are because of the better investing avenues or because of the excess risk. It ratio

5.824 is highest than others.

If NAV compare to benchmark performance then HDFC perform better as compare to

other one. In last year, portfolio return is 23.58 and market return is 20.94. It is a better

fund according to benchmark performance.

It was found that there is a variation followed by the industry and the concept we have

learned in the classroom. In classroom we have learned only about theoretical aspects of

70
subjects which are more difficult and practical than classroom studies. So it is advisable

to have more practical oriented knowledge of concepts rather than theoretical.

Bibliography:-

1. www.amfiindia.com

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2. www.mutualfundsindia.com

3. www.valueresearchonline.com

4. www.moneycontrol.com

5. www.rbi.org

6. www.investopedia.com

7. www.prudentcorporate.com

8. www.hdfcmutualfund.com

9. www.reliancemutualfund.com

10. www.canararobecomutualfund.com

11. www.bseindia.com

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