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A project report on
MUTUAL FUNDS
At

Submitted by
Ms. SWETHA. Y.P
HT No !"#$%&'(!%%"
Project submitted in p)rti)* +u*+i**ment +or
T,e
A-)rd + T,e De/ree + 
MASTE0 F 1US2NESS ADM2N2ST0AT2N T

SMAN2A UN23E0S2TY4 Hyder)b)d 5#%%%%(


 !%%&5!%$$

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DE6LA0AT2N

I hereby declare that this Project Report titled MUTUAL

FUNDS submitted by me to the Department o !usiness

Mana"ement# $%U%# &yderabad# is a bonaide 'or( underta(en by

me and it is not submitted to any other Uni)ersity or Institution

or the a'ard o any de"ree diploma * certiicate or published any

time beore%

 Name and Address o the Student Si"nature o the Student


S+,T&A%-%P S+,T&A%-%P

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6E0T2F26AT2N

This is to certiy that the Project Report title


,MUTUAL FUNDS submitted in partial ulilment
or the a'ard o M!A Pro"ramme o Department o
!usiness Mana"ement# $%U% &yderabad# 'as
carried out by S+,T&A -%P under my "uidance%
This has not been submitted to any other Uni)ersity
or Institution or the a'ard o any
de"ree*diploma*certiicate%

 Name and address o the .uide Si"nature o the .uide


S&RA/ANT&I%N S&RA/ANT&I%N

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6NTENTS

6,)pter No. N)me o+ t,e concept P)/e No.

Introduction
 Need o the study

$bjecti)es o the study


I
Scope o the study

Methodolo"y o the study

Limitations o the study

II Re)ie' o Literature
III Industry Proile

I/ 0ompany Proile

/ Data analysis and interpretation

/I Findin"s# Su""estions and 0onclusion

/II !iblio"raphy

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6HAPTE0 2 5 2NT0DU6T2N

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2NT0DU6T2N

A Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho

share a common inancial "oal% The money thus collected is then in)ested in capital
mar(et instruments such as shares# debentures and other securities% The income earned
throu"h these in)estments and the capital appreciations reali1ed are shared by its unit
holders in proportion to the number o units o'ned by them% Thus a Mutual Fund is the
most suitable in)estment or the common man as it oers an opportunity to in)est in a
di)ersiied# 2proessionally mana"ed bas(et o securities at a relati)ely lo' cost%

The project idea is to project mutual unds as the better a)enue or in)estment% Mutual
und is producti)e pac(a"e or a lay2in)estor 'ith limited inances% Mutual und is a
)ery old practice in U%S%# and it has made a recent entry into India% 0ommon man in
India still inds 3!an(4 as a sae door or in)estment% This sho's that mutual unds
ha)e not "ained a stron" oot2hold in his lie%

The project creates an a'areness that the mutual und is 'orthy in)estment practice%
The )arious schemes o mutual unds pro)ide the in)estor 'ith a 'ide ran"e o
in)estment options accordin" to his ris(2bearin" capacities and interest% !esides# they
also "i)e a handy return to the in)estor% The project analyses )arious schemes o mutual
und by ta(in" dierent mutual und schemes rom dierent AM04S% The uture
challen"es or mutual unds in India are also considered%

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NEED F THE STUDY

The study basically made to educate the in)estors about Mutual Funds% Analy1e the
)arious schemes to hi"hli"ht the ris( and return o di)ersity o in)estment that mutual
unds oer% Thus# throu"h the study one 'ould understand ho' a common man could
ruitully con)ert a pittance into "reat penny by 'isely in)estin" into the ri"ht scheme
accordin" to his ris(2 ta(in" abilities%

A small in)estor is the one 'ho is able to correctly plan 6 decide in 'hich proitable 6
sae instrument to in)est% To loc( up one4s hard earned money in a sa)in"s ban(4s

account is not enou"h to counter the monster o inlation% Usin" simple concepts o
di)ersiication# po'er o compound interest# stable returns 6 limited e7posure to e8uity
in)estment# one can ma7imi1e his returns on in)estments 6 multiply one4s sa)in"s%

In)estment is a serious proposition one has to loo( into )arious actors beore decidin"
on the instruments in 'hich to in)est% To sa)e is not enou"h% $ne must in)est 'isely 6
"et ma7imum returns% $ne must plan in)estment in such a 'ay that his in)estment

objecti)es are satisied% A sound in)estment is one 'hich "i)es the in)estor reasonable
returns 'ith a proper proitable mana"ement

This report "i)es the details about )arious in)estment objecti)es desired by an in)estor#
details about the concept 6 'or(in" o mutual und%

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17E6T23ES F THE STUDY

• To understand the concept o Mutual Funds%

• To study the dierent Sectoral Mutual Funds in India%

• To analyse the perormance o dierent sectoral mutual unds% 

• To identiy the best Sectoral Mutual Funds to in)est in India%

• To su""est the best mutual unds or in)estors%

S6PE F THE STUDY

   No' a days# there is a lot o scope or the mutual unds% The Financial mana"ers
ha)e to decide 'hether to in)est in the Shares# bonds# debentures# real estate# "old and
other 0ommodities to "et the ma7imum beneits or unds% The inancial mana"ers

should also reduce the ris( rom the In)estments% The scope o the study is conirmed
to the sectoral unds a)ailable in Indian mutual unds%

0ESEA06H METHDL8Y

  In the present project 'or( the data as been collected rom a)ailable source that is
secondary data li(e 'ebsites# Ne'spapers and ma"a1ines% The sample si1e ta(en is o :
dierent sectoral unds

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S)mp*in/ Desi/n

Samplin" method use is non probabilistic jud"mental samplin"% The Mutual Fund
Scheme or the study ha)e been selected based on ollo'in" ; criteria

$ Type o+ t,e sc,eme pen5ended Sector)*


Funds9/ro-t,:
! Minimum Assets Under M/mt. 0s. #%% 6rore
; 2nception D)te Prior to $st Apri*4 !%%'

.ro'th option or the entire selected scheme has been considered%

0ese)rc, Desi/n

$. 1enc,m)r< 2nde= For this study the <= shares mar(et inde7 S6P 0N>
 NIFT- has been used as the mar(et inde7%

!.  Period o+ study Period o study  has been ta(en as < years startin" rom
5st April# 9==? to 5=th @uly 9=5=%

;. 0is< Free 0)te + 0eturn Ris( ree rate o return reers to that
minimum return on an in)estment that has no ris( o loosin" the in)estment
o)er 'hich it is earned% For this purpose o this study ris( ree rate o return
is represented by 5 days Treasury bill%

L2M2TAT2NS

5% The analysis is based on historical data and thus indicates the past perormance
'hich may not al'ays be indicati)e o the uture perormance%

9% Dierent schemes consider dierent mar(et indices as their benchmar(s# but or
the purpose o uniormity in the study all schemes ha)e to be compared a"ainst
same benchmar( inde7%

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;% Sharpe ratio Cin its simplest orms that the relationship bet'een ris( and return
is linear and remain linear throu"hout its entire ran"e% /arious research 'or(s
conducted in this re"ard sho' that the relationship is not as simple as 0apital
Mar(et theory 'ould su""est% This is an inherent 'ea(ness o capital Asset
Pricin" Model%

B% The time period considered by the study is only three yearsE a lar"er period
could ha)e ensured co)era"e o a ull mar(et cycle# thus "i)in" a more real
 picture o the perormance o the schemes%

<

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6HAPTE0 22 5 0E32EW F L2TE0ATU0E

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Mutu)* Funds An o>er>ie-

A Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho share a
common inancial "oal% The money thus collected is in)ested by the und mana"er in
dierent types o securities dependin" upon the objecti)e o the scheme% These could
ran"e rom shares to debentures to money mar(et instruments% The income earned
throu"h these in)estments and the capital appreciations reali1ed by the scheme are
shared by its unit holders in proportion to the number o units o'ned by them Cpro
rata% Thus a Mutual Fund is the most suitable in)estment or the common man as it
oers an opportunity to in)est in a di)ersiied# proessionally mana"ed portolio at a
relati)ely lo' cost% Anybody 'ith an in)estible surplus o as little as a e' thousand
rupees can in)est in Mutual Funds% ,ach Mutual Fund scheme has a deined in)estment
objecti)e and strate"y%

A mutual und is the ideal in)estment )ehicle or today4s comple7 and modern inancial
scenario% Mar(ets or e8uity shares# bonds and other i7ed income instruments# real
estate# deri)ati)es and other assets ha)e become mature and inormation dri)en% Price
chan"es in these assets are dri)en by "lobal e)ents occurrin" in ara'ay places% A

typical indi)idual is unli(ely to ha)e the (no'led"e# s(ills# inclination and time to (eep
trac( o e)ents# understand their implications and act speedily% An indi)idual also inds
it diicult to (eep trac( o o'nership o his assets# in)estments# bro(era"e dues and
 ban( transactions etc%

A mutual und is the ans'er to all these situations% It appoints proessionally 8ualiied
and e7perienced sta that mana"es each o these unctions on a ull time basis% The
lar"e pool o money collected in the und allo's it to hire such sta at a )ery lo' cost
to each in)estor%

 In eect# the mutual und )ehicle e7ploits economies o scale in all three areas 2
research# in)estments and transaction processin"% +hile the concept o indi)iduals

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comin" to"ether to in)est money collecti)ely is not ne'# the mutual und in its present
orm is a 9= th century phenomenon%

In act# mutual unds "ained popularity only ater the Second +orld +ar% .lobally#
there are thousands o irms oerin" tens o thousands o mutual unds 'ith dierent
in)estment objecti)es% Today# mutual unds collecti)ely mana"e almost as much as or
more money as compared to ban(s%

A drat oer document is to be prepared at the time o launchin" the und% Typically# it
 pre speciies the in)estment objecti)es o the und# the ris( associated# the costs
in)ol)ed in the process and the broad rules or entry into and e7it rom the und and

other areas o operation% In India# as in most countries# these sponsors need appro)al
rom a re"ulator# S,!I CSecurities e7chan"e !oard o India in our case% S,!I loo(s at
trac( records o the sponsor and its inancial stren"th in "rantin" appro)al to the und
or commencin" operations%

A sponsor then hires an asset mana"ement company to in)est the unds accordin" to the
in)estment objecti)e% It also hires another entity to be the custodian o the assets o the

und and perhaps a third one to handle re"istry 'or( or the unit holders Csubscribers
o the und%

In the Indian conte7t# the sponsors promote the Asset Mana"ement 0ompany also# in
'hich it holds a majority sta(e% In many cases a sponsor can hold a 5== sta(e in the
Asset Mana"ement 0ompany CAM0% ,%"% !irla .lobal Finance is the sponsor o the
!irla Sun Lie Asset Mana"ement 0ompany Ltd%# 'hich has loated dierent mutual
unds schemes and also acts as an asset mana"er or the unds collected under the
schemes

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History o+ Mutu)* Fund in 2ndi)


The mutual und industry in India started in 5?; 'ith the ormation o Unit Trust o
India# at the initiati)e o the .o)ernment o India and Reser)e !an( the% The history o
mutual unds in India can be broadly di)ided into our distinct phases

First P,)se ? $&'"5@(


Unit Trust o India CUTI 'as established on 5?; by an Act o Parliament% It 'as set
up by the Reser)e !an( o India and unctioned under the Re"ulatory and
administrati)e control o the Reser)e !an( o India% In 5:G UTI 'as de2lin(ed rom
the R!I and the Industrial De)elopment !an( o India CID!I too( o)er the re"ulatory
and administrati)e control in place o R!I% The irst scheme launched by UTI 'as Unit
Scheme 5?B% At the end o 5GG UTI had Rs%?#:== crores o assets under mana"ement

Second P,)se ? $&@(5$&&; 9Entry o+ Pub*ic Sector Funds:


5G: mar(ed the entry o non2 UTI# public sector mutual unds set up by public sector
 ban(s and Lie Insurance 0orporation o India CLI0 and .eneral Insurance
0orporation o India C.I0% S!I Mutual Fund 'as the irst non2 UTI Mutual Fund
established in @une 5G: ollo'ed by 0anban( Mutual Fund CDec G:# Punjab National
!an( Mutual Fund CAu" G# Indian !an( Mutual Fund CNo) G# !an( o India C@un
=# !an( o !aroda Mutual Fund C$ct 9% LI0 established its mutual und in @une
5G 'hile .I0 had set up its mutual und in December 5=%

At the end o 5;# the mutual und industry had assets under mana"ement o
Rs%B:#==B crores%

T,ird P,)se ? $&&;5!%%; 9Entry o+ Pri>)te Sector Funds:


+ith the entry o pri)ate sector unds in 5;# a ne' era started in the Indian mutual
und industry# "i)in" the Indian in)estors a 'ider choice o und amilies% Also# 5;
'as the year in 'hich the irst Mutual Fund Re"ulations came into bein"# under 'hich
all mutual unds# e7cept UTI 'ere to be re"istered and "o)erned% The erst'hile Hothari

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Pioneer Cno' mer"ed 'ith Fran(lin Templeton 'as the irst pri)ate sector mutual und
re"istered in @uly 5;%

The 5; S,!I CMutual Fund Re"ulations 'ere substituted by a more comprehensi)e
and re)ised Mutual Fund Re"ulations in 5?% The industry no' unctions under the
S,!I CMutual Fund Re"ulations 5?%

The number o mutual und houses 'ent on increasin"# 'ith many orei"n mutual unds
settin" up unds in India and also the industry has 'itnessed se)eral mer"ers and
ac8uisitions% As at the end o @anuary 9==;# there 'ere ;; mutual unds 'ith total
assets o Rs% 5#95#G=< crores% The Unit Trust o India 'ith Rs%BB#<B5 crores o assets

under mana"ement 'as 'ay ahead o other mutual unds%

Fourt, P,)se ? since Febru)ry !%%;

In February 9==;# ollo'in" the repeal o the Unit Trust o India Act 5?; UTI 'as
 biurcated into t'o separate entities% $ne is the Speciied Underta(in" o the Unit Trust
o India 'ith assets under mana"ement o Rs%9#G;< crores as at the end o @anuary
9==;# representin" broadly# the assets o US ?B scheme# assured return and certain
other schemes% The Speciied Underta(in" o Unit Trust o India# unctionin" under an
administrator and under the rules ramed by .o)ernment o India and does not come
under the pur)ie' o the Mutual Fund Re"ulations%

The second is the UTI Mutual Fund Ltd# sponsored by S!I# PN!# !$! and LI0% It is
re"istered 'ith S,!I and unctions under the Mutual Fund Re"ulations% +ith the

 biurcation o the erst'hile UTI  'hich had in March 9=== more than Rs%:?#=== crores
o assets under mana"ement and 'ith the settin" up o a UTI Mutual Fund# conormin"
to the S,!I Mutual Fund Re"ulations# and 'ith recent mer"ers ta(in" place amon"
dierent pri)ate sector unds# the mutual und industry has entered its current phase o
consolidation and "ro'th% As at the end o March# 9==?# there 'ere 9 unds%

5=

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Future Scen)rio

The asset base 'ill continue to "ro' at an annual rate o about ;= to ;<  o)er the ne7t

e' years as in)estor4s shit their assets rom ban(s and other traditional a)enues% Some
o the older public and pri)ate sector players 'ill either close shop or be ta(en o)er%

$ut o ten public sector players i)e 'ill sell out# close do'n or mer"e 'ith stron"er
 players in three to our years% In the pri)ate sector this trend has already
Started 'ith t'o mer"ers and one ta(eo)er% &ere too some o them 'ill do'n their
shutters in the near uture to come%

!ut this does not mean there is no room or other players% The mar(et 'ill 'itness a
lurry o ne' players enterin" the arena% There 'ill be a lar"e number o oers rom
)arious asset mana"ement companies in the time to come% Some bi" names li(e
Fidelity# Principal# $ld Mutual etc% are loo(in" at Indian mar(et seriously% $ne
important reason or it is that most major players already ha)e presence here and hence
these bi" names 'ould hardly li(e to "et let behind%

The mutual und industry is a'aitin" the introduction o deri)ati)es in India as this
'ould enable it to hed"e its ris( and this in turn 'ould be relected in its Net Asset
/alue CNA/%

S,!I is 'or(in" out the norms or enablin" the e7istin" mutual und schemes to trade
in deri)ati)es% Importantly# many mar(et players ha)e called on the Re"ulator to
initiate the process immediately# so that the mutual unds can implement the chan"es

that are re8uired to trade in Deri)ati)es%

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0ecent trends in mutu)* +und industry

The most important trend in the mutual und industry is the a""ressi)e

e7pansion o the orei"n o'ned mutual und companies and the decline o
the companies loated by nationali1ed ban(s and smaller pri)ate sector
 players%

Many nationali1ed ban(s "ot into the mutual und business in the early nineties and "ot
o to a "ood start due to the stoc( mar(et boom pre)ailin" then% These ban(s did not
really understand the mutual und business and they just )ie'ed it as another (ind o

 ban(in" acti)ity%
Fe' hired speciali1ed sta and "enerally chose to transer sta rom the parent
or"ani1ations% The perormance o most o the schemes loated by these unds 'as not
"ood% Some schemes had oered "uaranteed returns and their parent or"ani1ations had
to bail out these AM0s by payin" lar"e amounts o money as the dierence bet'een
the "uaranteed and actual returns%

The ser)ice le)els 'ere also )ery bad% Most o these AM0s ha)e not been able to retain
sta# loat ne' schemes etc% and it is doubtul 'hether# barrin" a e' e7ceptions# they
ha)e serious plans o continuin" the acti)ity in a major 'ay% The e7perience o some o
the AM0s loated by pri)ate sector Indian companies 'as also )ery similar% They
8uic(ly reali1ed that the AM0 business is a business# 'hich ma(es money in the lon"
term and re8uires deep2poc(eted support in the intermediate years% Some ha)e sold out
to orei"n o'ned companies# some ha)e mer"ed 'ith others and there is "eneral
restructurin" "oin" on%

The orei"n o'ned companies ha)e deep poc(ets and ha)e come in here 'ith the
e7pectation o a lon" haul% They can be credited 'ith introducin" many ne' practices
such as ne' product inno)ation# sharp impro)ement in ser)ice standards and
disclosure# usa"e o technolo"y# bro(er education and support etc% In act# they ha)e

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orced the industry to up"rade itsel and ser)ice le)els o or"ani1ations li(e UTI ha)e
impro)ed dramatically in the last e' years in response to the competition pro)ided by
these%

Types o+ Mutu)* Funds


Mutual und schemes may be classiied on the basis o its structure and its in)estment
objecti)e%

1y Structure
pen5ended Funds

An open2end und is one that is a)ailable or subscription all throu"h the year% These do
not ha)e a i7ed maturity% In)estors can con)eniently buy and sell units at Net Asset
/alue CNA/ related prices% The (ey eature o open2end schemes is li8uidity%

6*osed5ended Funds
A closed2end und has a stipulated maturity period 'hich "enerally ran"in" rom ; to
5< years% The und is open or subscription only durin" a speciied period% In)estors can

in)est in the scheme at the time o the initial public issue and thereater they can buy or
sell the units o the scheme on the stoc( e7chan"es 'here they are listed% In order to
 pro)ide an e7it route to the in)estors# some close2ended unds "i)e an option o sellin"
 bac( the units to the Mutual Fund throu"h periodic repurchase at NA/ related prices%
S,!I Re"ulations stipulate that at least one o the t'o e7it routes is pro)ided to the
in)estor%

2nter>)* Funds
Inter)al unds combine the eatures o open2ended and close2ended schemes% They are

open or sale or redemption durin" pre2determined inter)als at NA/ related prices %

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1y 2n>estment bjecti>e5

8ro-t, Funds

The aim o "ro'th unds is to pro)ide capital appreciation o)er the medium to lon"2
term% Such schemes normally in)est a majority o their corpus in e8uities% It has been
 pro)en that returns rom stoc(s# ha)e outperormed most other (ind o in)estments held
o)er the lon" term% .ro'th schemes are ideal or in)estors ha)in" a lon"2term outloo(
see(in" "ro'th o)er a period o time%

2ncome Funds

The aim o income unds is to pro)ide re"ular and steady income to in)estors% Such
schemes "enerally in)est in i7ed income securities such as bonds# corporate debentures
and .o)ernment securities% Income Funds are ideal or capital stability and re"ular
income%

1)*)nced Funds
The aim o balanced unds is to pro)ide both "ro'th and re"ular income% Such schemes

 periodically distribute a part o their earnin" and in)est both in e8uities and i7ed
income securities in the proportion indicated in their oer documents% In a risin" stoc(
mar(et# the NA/ o these schemes may not normally (eep pace# or all e8ually 'hen
the mar(et alls% These are ideal or in)estors loo(in" or a combination o income and
moderate "ro'th%

Money M)r<et Funds

The aim o money mar(et unds is to pro)ide easy li8uidity# preser)ation o capital and
moderate income% These schemes "enerally in)est in saer short2term instruments such
as treasury bills# certiicates o deposit# commercial paper and inter2ban( call money%
Returns on these schemes may luctuate dependin" upon the interest rates pre)ailin" in
the mar(et% These are ideal or 0orporate and indi)idual in)estors as a means to par(
their surplus unds or short periods%

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Lo)d Funds

A Load Fund is one that char"es a commission or entry or e7it% That is# each time you
 buy or sell units in the und# a commission 'ill be payable% Typically entry and e7it
loads ran"e rom 5 to 9% It could be 'orth payin" the load# i the und has a "ood
 perormance history%

No5Lo)d Funds
A No2Load Fund is one that does not char"e a commission or entry or e7it% That is# no

commission is payable on purchase or sale o units in the und% The ad)anta"e o a no


load und is that the entire corpus is put to 'or(%  

t,er Sc,emes5

T)= S)>in/ Sc,emes


These schemes oer ta7 rebates to the in)estors under speciic pro)isions o the Indian
Income Ta7 la's as the .o)ernment oers ta7 incenti)es or in)estment in speciied
a)enues% In)estments made in ,8uity Lin(ed Sa)in"s Schemes C,LSS and Pension
Schemes are allo'ed as deduction u*s GG o the Income Ta7 Act# 5?5% The Act also
 pro)ides opportunities to in)estors to sa)e capital "ains u*s <B,A and <B,! by
in)estin" in Mutual Funds# pro)ided the capital asset has been sold prior to April 5#
9=== and the amount is in)ested beore September ;=# 9===%

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Speci)* Sc,emes

• 2ndustry Speci+ic Sc,emes

Industry Speciic Schemes in)est only in the industries speciied in the oer document%
The in)estment o these unds is limited to speciic industries li(e InoTech# FM0.#
and Pharmaceuticals etc%

• 2nde= Sc,emes
Inde7 Funds attempt to replicate the perormance o a particular inde7 such as the !S,
Sense7 or the NS, <=

• Sector)* Sc,emes
Sectoral Funds are those# 'hich in)est e7clusi)ely in a speciied industry or a "roup o
industries or )arious se"ments such as JAJ .roup shares or initial public oerin"s%

• 6ommodities Funds
0ommodities unds speciali1e in in)estin" in dierent commodities directly or throu"h
commodities uture contracts% Speciali1ed unds may in)est in a sin"le commodity or a
commodity "roup such as edible oil or rains# 'hile di)ersiied commodity unds 'ill
spread their assets o)er many commodities

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 RISK HIERARCHY OF MUTUAL FUNDS 

Money
Market Equity
Funds
Funds Debt
Gilt Funds "ybrid
Funds Funds
 !!ressive
Growth
Flexible sset Funds
allocation
Funds
Growth Funds

"i!h #ield
  $isk  Debt Funds
  %evel Diversified
Equity Funds

Index Funds

 Value Funds
Focused
Debt Funds Growth
Income and
funds
Equity Income
Funds
Balanced
Diversified Funds
Debt Funds
Money Gilt Funds
Market Funds

&y'e of Fund

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TA!L, 9

Sn)ps,ot o+ Mutu)* Fund Sc,emes


Mutu)*
Fund bjecti>e 0is<   2n>estment
Port+o*io W,o s,ou*d
in>est 2n>estment
,orion
Type
Those 'ho
Treasury !ills#  par( their
Li8uidity K
0ertiicate o unds in
Moderate
Money Deposits# current
Income K  Ne"li"ible 9 days 2 ; 'ee(s
M)r<et 0ommercial accounts or
Reser)ation o
Papers# 0all short2term
0apital
Money  ban(
deposits

S,ort5
term 0all Money#
0ommercial
Funds Papers# Those 'ith
Li8uidity K
9F*o)tin/ Little Treasury !ills# surplus ; 'ee(s 2
Moderate
5 s,ort5 Interest Rate 0Ds# Short2 short2term ; months
Income
term: term unds
.o)ernment
securities%
1ond Predominantly
Funds Debentures#
0redit Ris( Salaried 6
Re"ular .o)ernment More than  2 59
6 Interest conser)ati)e
9F*o)tin/ Income Rate Ris(  securities# in)estors months
5 Lon/5 0orporate
term: !onds
Salaried 6
8i*t Security 6 Interest Rate .o)ernment
conser)ati)e 59 months 6 more
Funds Income Ris(  securities
in)estors
A""ressi)e
Lon"2term in)estors
EBuity
0apital &i"h Ris( Stoc(s 'ith lon" ; years plus
Funds
Appreciation term out
loo(%
To "enerate
returns that are Portolio
 NA/ )aries
2nde= commensurate indices li(e A""ressi)e
'ith inde7 ; years plus
Funds 'ith returns o !S,# NIFT- in)estors%
 perormance
respecti)e etc
indices

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!alanced ratio
0apital o e8uity and
.ro'th 6
1)*)nced Mar(et Ris( debt unds to Moderate 6
Re"ular 9 years plus
Funds and Interest ensure hi"her A""ressi)e
Income
Rate Ris(  returns at
lo'er ris( 

1ene+its o+ Mutu)* Fund in>estment

$. Pro+ession)* M)n)/ement
Mutual Funds pro)ide the ser)ices o e7perienced and s(illed proessionals#
 bac(ed by a dedicated in)estment research team that analyses the perormance and
 prospects o companies and selects suitable in)estments to achie)e the objecti)es o
the scheme%

!. Di>ersi+ic)tion
  Mutual Funds in)est in a number o companies across a broad cross2section o
industries and sectors% This di)ersiication reduces the ris( because seldom do all
stoc(s decline at the same time and in the same proportion% -ou achie)e this
di)ersiication throu"h a Mutual Fund 'ith ar less money than you can do on your
o'n%

;. 6on>enient Administr)tion
In)estin" in a Mutual Fund reduces paper'or( and helps you a)oid many
 problems such as bad deli)eries# delayed payments and ollo' up 'ith bro(ers and
companies% Mutual Funds sa)e your time and ma(e in)estin" easy and con)enient%

". 0eturn Potenti)*

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  $)er a medium to lon"2term# Mutual Funds ha)e the potential to pro)ide a


hi"her return as they in)est in a di)ersiied bas(et o selected securities%

#. Lo- 6osts
Mutual Funds are a relati)ely less e7pensi)e 'ay to in)est compared to directly
in)estin" in the capital mar(ets because the beneits o scale in bro(era"e# custodial
and other ees translate into lo'er costs or in)estors%

'. LiBuidity
In open2end schemes# the in)estor "ets the money bac( promptly at net asset

)alue related prices rom the Mutual Fund% In closed2end schemes# the units can be
sold on a stoc( e7chan"e at the pre)ailin" mar(et price or the in)estor can a)ail o
the acility o direct repurchase at NA/ related prices by the Mutual Fund%

(. Tr)nsp)rency
In)estors "et re"ular inormation on the )alue o your in)estment in addition to
disclosure on the speciic in)estments made by the scheme# the proportion in)ested

in each class o assets and the und mana"erJs in)estment strate"y and outloo(%

@. F*e=ibi*ity
Throu"h eatures such as re"ular in)estment plans# re"ular 'ithdra'al plans
and di)idend rein)estment plans# one can systematically in)est or 'ithdra' unds
accordin" to your needs and con)enience%

&. A++ord)bi*ity
In)estors indi)idually may lac( suicient unds to in)est in hi"h2"rade stoc(s% A
mutual und because o its lar"e corpus allo's e)en a small in)estor to ta(e the
 beneit o its in)estment strate"y

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$%.We** 0e/u*)ted
All Mutual Funds are re"istered 'ith S,!I and they unction 'ithin the
 pro)isions o strict re"ulations desi"ned to protect the interests o in)estors% The
operations o Mutual Funds are re"ularly monitored by S,!I%

Limit)tion o+ Mutu)* Fund 2n>estment

$. No 6ontro* >er 6ost

An In)estor in mutual und has no control o)er the o)erall costs o in)estin"% &e
 pays an in)estment mana"ement ee C'hich is a percenta"e o his in)estments as

lon" as he remains in)ested in und# 'hether the und )alue is risin" or declinin"%
&e also has to pay und distribution costs# 'hich he 'ould not incur in direct
in)estin"%
 
&o'e)er this only means that there is a cost to obtain the beneits o mutual und
ser)ices% This cost is oten less than the cost o direct in)estin"%

!. No T)i*or5M)de Port+o*ios

In)estin" throu"h mutual unds means dele"ation o the decision o portolio


composition to the und mana"ers% The )ery hi"h net 'orth indi)iduals or lar"e
corporate in)estors may ind this to be a constraint in achie)in" their objecti)es%

&o'e)er# most mutual unds help in)estors o)ercome this constraint by oerin"
lar"e no% o schemes 'ithin the same und%

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;. M)n)/in/ A Port+o*io + Funds

A)ailability o lar"e no% o unds can actually mean too much choice or the
in)estors% &e may a"ain need ad)ice on ho' to select a und to achie)e his

objecti)es%
AMFI has ta(en initiati)e in this re"ard by startin" a trainin" and certiication
 pro"ram or prospecti)e Mutual Fund Ad)isors% S,!I has made this certiication
compulsory or e)ery mutual und ad)isor interested in sellin" mutual und%

".  T)=es

  Durin" a typical year# most acti)ely mana"ed mutual unds sell any'here rom 9=

to := percent o the securities in their portolios% I your und ma(es a proit on its
sales# you 'ill pay ta7es on the income you recei)e# e)en i you rein)est the money
you made%

#. 6ost o+ 6,urn

The portolio o und does not remain constant% The e7tent to 'hich the portolio
chan"es is a unction o the style o the indi)idual und mana"er i%e% 'hether he is a

 buy and hold type o mana"er or one 'ho a""ressi)ely churns the und% It is also
dependent on the )olatility o the und si1e i%e% 'hether the und constantly recei)es
resh subscriptions and redemptions% Such portolio chan"es ha)e associated costs
o bro(era"e# custody ees etc% 'hich lo'ers the portolio return commensurately%

6onceptu)* b)c</round o+ t,e study5

+ith a plethora o schemes to choose rom# the retail in)estor aces problems in
selectin" unds% Factors such as in)estment strate"y and mana"ement style are
8ualitati)e# but the unds record is an important indicator too% Thou"h past perormance
alone can not be indicati)e o uture perormance# it is# ran(ly# the only 8uantitati)e
'ay to jud"e ho' "ood a und is at present%

 Thereore# there is a need to correctly assess the past perormance o dierent mutual
unds% +orld'ide# "ood mutual und companies o)er are (no'n by their AM0s and

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this ame is directly lin(ed to their superior stoc( selection s(ills% For mutual unds to
"ro'# AM0s must be held accountable or their selection o stoc(s% In other 'ords#
there must be some perormance indicator that 'ill re)eal the 8uality o stoc( selection
o )arious AM0s%

Return aloneund
o a mutual should not be itconsidered
scheme# as the
should also basisthe
include o measurement
ris( ta(en byothe
theund
perormance
mana"er
 because dierent unds 'ill ha)e dierent le)els o ris( attached to them% For
e)aluatin" the perormance o selected Sectoral Mutual Fund schemes ris(2return
relation models ha)e been used li(e

C The Treynor Measure

C The Sharpe Measure

C @enson Model

C Fama Model

T,e Treynor Me)sure

De)eloped by @ac( Treynor# this perormance measure e)aluates unds on the basis o
TreynorJs Inde7% This Inde7 is a ratio o return "enerated by the und o)er and abo)e
ris( ree rate o return C"enerally ta(en to be the return on securities bac(ed by the
"o)ernment# as there is no credit ris( associated# durin" a "i)en period and systematic
ris( associated 'ith it Cbeta% Symbolically# it can be represented as

TreynorJs Inde7 9Ti:  90i 5 0+:1i.

+here# 0i represents return on +und4 0+ is ris< +ree r)te o+ return )nd 1i  is bet) o+
t,e +und.

All ris(2a)erse in)estors 'ould li(e to ma7imi1e this )alue% +hile a hi"h and positi)e
TreynorJs Inde7 sho's a superior ris(2adjusted perormance o a und# a lo' and
ne"ati)e TreynorJs Inde7 is an indication o una)orable perormance%

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Method% This measure in)ol)es e)aluation o the returns that the und has "enerated )s%
the returns actually e7pected out o the und "i)en the le)el o its systematic ris(% The
surplus bet'een the t'o returns is called Alpha# 'hich measures the perormance o a
und compared 'ith the actual returns o)er the period% Re8uired return o a und at a
"i)en le)el o ris( C0i can be calculated as2

0i  0+  1i 90m 5 0+:

+here# 0m is )>er)/e m)r<et return durin/ t,e /i>en period % Ater calculatin" it#
)*p,) c)n be obt)ined by subtr)ctin/ reBuired return +rom t,e )ctu)* return o+
t,e +und% &i"her alpha represents superior perormance o the und and )ice )ersa%

Limitation o this model is that it considers only systematic ris( not the entire ris(
associated 'ith the und and an ordinary in)estor can not miti"ate unsystematic ris(# as
his (no'led"e o mar(et is primiti)e%

F)m) Mode*
The ,u"ene Fama model is an e7tension o @enson model% This model compares the
 perormance# measured in terms o returns# o a und 'ith the re8uired return

commensurate 'ith the total ris( associated 'ith it% The dierence bet'een these t'o is
ta(en as a measure o the perormance o the und and is called net selecti)ity%

The net se*ecti>ity represents the stoc( selection s(ill o the und mana"er# as it is the
e7cess return o)er and abo)e the return re8uired to compensate or the total ris( ta(en
 by the und mana"er% &i"her )alue o 'hich indicates that und mana"er has earned
returns 'ell abo)e the return commensurate 'ith the le)el o ris( ta(en by him%

Re8uired return can be calculated as2

0i  0+  SiSmG90m 5 0+:

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+here# Sm is st)nd)rd de>i)tion o+ m)r<et returns% The net selecti)ity is then


calculated by subtractin" this re8uired return rom the actual return o the und%

Amon" the abo)e perormance measures# t'o models namely# Treynor me)sure )nd
7enson mode* use system)tic ris< b)sed on t,e premise t,)t t,e unsystem)tic ris<
is di>ersi+i)b*e.

T,ese mode*s )re suit)b*e +or *)r/e in>estors li(e institutional in)estors 'ith hi"h
ris( ta(in" capacities as they do not ace paucity o unds and can in)est in a number o
options to dilute some ris(s%

For them# a portolio can be spread across a number o stoc(s and sectors% &o'e)er#
S,)rpe me)sure  )nd  F)m) mode*  t,)t consider t,e entire ris< )ssoci)ted -it,
+und )re suit)b*e +or sm)** in>estors4 as the ordinary in)estor lac(s the necessary s(ill
and resources to di)ersiied%

Moreo)er# the selection o the und on the basis o superior stoc( selection ability o the
und mana"er 'ill also help in sae"uardin" the money in)ested to a "reat e7tent% The

in)estment in unds that ha)e "enerated bi" returns at hi"her le)els o ris(s lea)es the
money all the more prone to ris(s o all (inds that may e7ceed the indi)idual in)estorsJ
ris( appetite%

1ETA
!eta measures a stoc(Js )olatility# the de"ree to 'hich its price luctuates in relation to
the o)erall mar(et% In other 'ords# it "i)es a sense o the stoc(Js mar(et ris( compared

to the "reater mar(et% !eta is used also to compare a stoc(Js mar(et ris( to that o other
stoc(s% In)estment analysts use the .ree( letter JJ to represent beta.

This measure is calculated usin" re/ression  analysis% A beta o 5 indicates that the


securityJs price tends to mo)e 'ith the mar(et% A beta "reater than 5 indicates that the

9?

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securityJs price tends to be more )olatile than the mar(et# and a beta less than 5 means it
tends to be less )olatile than the mar(et .
 I σ   i I σ   m
r im

   
  9
σ  
m

  r im  is correlation coeicient bet'een mar(et returns and und returns%
σ   
i   is standard de)iation o und returns%9Si:
m  is standard de)iation o mar(et returns%9Sm:
σ   

9
σ  
m  is mar(et )ariance%

6oe++icient o+ Determin)tion C R  9 D 555 ) me)sure o+ re*i)bi*ity o+ 1et)

!eta depends on the inde7 used to calculate it% It can happen that the inde7 bears no
correlation 'ith the mo)ements in the und% Due to this reason# it is essential to ta(e a
loo( at statistical )alue called 0oeicient o Determination alon" 'ith !eta% It sho's
ho' reliable the beta number is% It )aries bet'een 1ero and one%

/alue o 5 indicates perect correlation 'ith the ind7% Thus# an I C R  9 D   O=%?B it
implies that ?B o the )ariation in the portolio returns is due to )ariations in the
mar(et returns% Mathematically it is the s8uare o correlation coeicientCR%


n Q x C−  x m D × C y −  ym eD a
e a n

RO 22222222222222222222222222222222222222222222222
∑C x  x D ∑
9   9
− mean   C y y
  × D   − mean

+here > and - are returns on the portolio and returns on the mar(et respecti)ely%
!eta and C R  9 D  should thus be used to"ether 'hen e7aminin" a und4s ris( proile%

NET ASSET 3ALUE 9NA3:

 NA/ per unit o a scheme on a day is the net mar(et )alue o the securities held by the
total no% o the units o the scheme on the particular day% It is actually the )alue o o
net asset per unit% Since the mar(et )alue o securities chan"es e)eryday# NA/ o a
und also )aries on a day to day basis% NA/4s or open ended schemes are re8uired to
 be disclosed a daily basisCbusiness day%

9:

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  Net Assets o the scheme


 NA/ O  

  No% o units outstandin"

+here#
 NumeratorO Mar(et )alue o in)estmentKrecei)ablesKother Accrued Income K$ther
Assets2 Accrued ,7penses2$ther Payables2$ther Liabilities%

St)nd)rd De>i)tion5 ) me)sure o+ Tot)* 0is< 

Standard De)iation is the most common statistical measure o jud"in" a und4s


)olatility and ris(% It measures a und4s total ris( i%e% sum o systematic ris( and
unsystematic ris(% Mathematically it "i)es a 38uality ratin"4 o an a)"% The SD o an
a)"% is the amt% !y 'hich the no% that "o in to an a)"% de)iate rom that a)"% It tells us
ho' closely an a)"% represents the underlyin" a)"% !ut one thin" to be (ept in mind is
that a hi"h Standard De)iation may be a measure o )olatility# but it does not
necessarily mean that such a und is 'orse than one 'ith a lo' Standard De)iation% I
the irst und is a much hi"her perormer than the second one# the de)iation 'ill not
matter much%

5
SDO ∑C x 
  9
i

  x mean D
n

∑C x   −  x
i mean
D 9  "i)es the s8uare o the sum o dierences o each )alue in the sample
rom the mean o the sample o 3n4 element%

Note 5 For this project ollo'in" tools ha)e been used2

• St)nd)rd De>i)tion
• 1et)
• S,)rp 0)tio
• 05SBu)re

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6HAPTE0 222 5 2NDUST0Y P0F2LE

9

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F2NAN62AL MA0JETS

Finance is the pre2re8uisite or modern business and inancial institutions play a )ital

role in the economic system% It is throu"h inancial mar(ets and institutions that the

inancial system o an economy 'or(s% Financial mar(ets reer to the institutional

arran"ements or dealin" in inancial assets and credit instruments o dierent types

such as currency# che8ues# ban( deposits# bills# bonds# e8uities# etc%

Financial mar(et is a broad term describin" any mar(etplace 'here buyers and sellers

 participate in the trade o assets such as e8uities# bonds# currencies and deri)ati)es%

They are typically deined by ha)in" transparent pricin"# basic re"ulations on tradin"#

costs and ees and mar(et orces determinin" the prices o securities that trade%

.enerally# there is no speciic place or location to indicate a inancial mar(et% +here)er

a inancial transaction ta(es place# it is deemed to ha)e ta(en place in the inancial

mar(et% &ence inancial mar(ets are per)asi)e in nature since inancial transactions are

themsel)es )ery per)asi)e throu"hout the economic system% For instance# issue o

e8uity shares# "rantin" o loan by term lendin" institutions# deposit o money into a

 ban(# purchase o debentures# sale o shares and so on%

In a nutshell# inancial mar(ets are the credit mar(ets caterin" to the )arious needs o

the indi)iduals# irms and institutions by acilitatin" buyin" and sellin" o inancial

assets# claims and ser)ices%

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6LASS2F26AT2N F F2NAN62AL MA0JETS

Fin)nci)* m)r<ets

r/)nied m)r<ets Unor/)nied m)r<ets

Money Lenders4
6)pit)* M)r<ets Money M)r<ets
2ndi/enuos 1)n<ers

2ndustri)* Securities
6)** Money M)r<et
M)r<et

6ommerci)* 1i**
Prim)ry M)r<et
M)r<et

Second)ry m)r<et Tre)sury 1i** M)r<et

8o>ernment
Securities M)r<et

Lon/5term *o)n
m)r<et

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6)pit)* M)r<et

The capital mar(et is a mar(et or inancial assets 'hich ha)e a lon" or indeinite

maturity% .enerally# it deals 'ith lon" term securities 'hich ha)e a period o abo)e one

year% In the 'idest sense# it consists o a series o channels throu"h 'hich the sa)in"s

o the community are made a)ailable or industrial and commercial enterprises and

 public authorities% As a 'hole# capital mar(et acilitates raisin" o capital%

The major unctions perormed by a capital mar(et are

5% Mobili1ation o inancial resources on a nation2'ide scale%

9% Securin" the orei"n capital and (no'2ho' to ill up deicit in the re8uired

resources or economic "ro'th at a aster rate%

;% ,ecti)e allocation o the mobili1ed inancial resources# by directin" the same

to projects yieldin" hi"hest yield or to the projects needed to promote balanced

economic de)elopment%
 

0apital mar(et consists o primary mar(et and secondary mar(et%

 Primary market  Primary mar(et is a mar(et or ne' issues or ne' inancial claims%

&ence it is also called as Ne' Issue Mar(et% It basically deals 'ith those securities

'hich are issued to the public or the irst time% The mar(et# thereore# ma(es a)ailable

a ne' bloc( o securities or public subscription% In other 'ords# it deals 'ith raisin" o

resh capital by companies either or cash or or consideration other than cash% The best

e7ample could be Initial Public $erin" CIP$ 'here a irm oers shares to the public

or the irst time%

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 Secondary market Secondary mar(et is a mar(et 'here e7istin" securities are traded%

In other 'ords# securities 'hich ha)e already passed throu"h ne' issue mar(et are

traded in this mar(et% .enerally# such securities are 8uoted in the stoc( e7chan"e and it

 pro)ides a continuous and re"ular mar(et or buyin" and sellin" o securities% This

mar(et consists o all stoc( e7chan"es reco"ni1ed by the "o)ernment o India%

Money M)r<et

Money mar(ets  are the mar(ets or short2term4 hi"hly li8uid debt securities% Money

mar(et securities are "enerally )ery sae in)estments 'hich return relati)ely lo'

interest rate that is most appropriate or temporary cash stora"e or short term time

needs% It consists o a number o sub2mar(ets 'hich collecti)ely constitute the money

mar(et namely call money mar(et# commercial bills mar(et# acceptance mar(et# and

Treasury bill mar(et%

Deri>)ti>es M)r<et

The deri)ati)es mar(et is the inancial mar(et or deri)ati)es# inancial instruments li(e

utures contracts or options# 'hich are deri)ed rom other orms o assets% A deri)ati)e

is a security 'hose price is dependent upon or deri)ed rom one or more underlyin"

assets% The deri)ati)e itsel is merely a contract bet'een t'o or more parties% Its )alue

is determined by luctuations in the underlyin" asset% The most common underlyin"

assets include stoc(s# bonds# commodities# currencies# interest rates and mar(et

inde7es% The important inancial deri)ati)es are the ollo'in"

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• For!ard" For'ards are the oldest o all the deri)ati)es% A or'ard contract

reers to an a"reement bet'een t'o parties to e7chan"e an a"reed 8uantity o an

asset or cash at a certain date in uture at a predetermined price speciied in that

a"reement% The promised asset may be currency# commodity# instrument etc%

• F#t#re" Future contract is )ery similar to a or'ard contract in all respects

e7ceptin" the act that it is completely a standardi1ed one% It is nothin" but a

standardi1ed or'ard contract 'hich is le"ally enorceable and al'ays traded on

an or"ani1ed e7chan"e%

• O$tion" A inancial deri)ati)e that represents a contract sold by one party

Coption 'riter to another party Coption holder% The contract oers the buyer

the ri"ht# but not the obli"ation# to buy Ccall or sell Cput a security or other

inancial asset at an a"reed2upon price Cthe stri(e price durin" a certain period

o time or on a speciic date Ce7ercise date% 0all options "i)e the option to buy

at certain price# so the buyer 'ould 'ant the stoc( to "o up% Put options "i)e the

option to sell at a certain price# so the buyer 'ould 'ant the stoc( to "o do'n%

•  S!a$" It is yet another e7citin" tradin" instrument% Inact# it is the combination

o or'ards by t'o counterparties% It is arran"ed to reap the beneits arisin"

rom the luctuations in the mar(et  either currency mar(et or interest rate

mar(et or any other mar(et or that matter%

;B

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Forei/n E=c,)n/e M)r<et

It is a mar(et in 'hich participants are able to buy# sell# e7chan"e and speculate on

currencies% Forei"n e7chan"e mar(ets are made up o ban(s# commercial companies#


central ban(s# in)estment mana"ement irms# hed"e unds# and retail ore7 bro(ers and

in)estors% The ore7 mar(et is considered to be the lar"est inancial mar(et in the

'orld% It is a 'orld'ide decentrali1ed o)er2the2counter  inancial mar(et or the tradin"

o currencies% !ecause the currency mar(ets are lar"e and li8uid# they are belie)ed to be

the most eicient inancial mar(ets% It is important to reali1e that the orei"n e7chan"e

mar(et is not a sin"le e7chan"e# but is constructed o a "lobal net'or( o computers

that connects participants rom all parts o the 'orld%

6ommodities M)r<et

It is a physical or )irtual mar(etplace or buyin"# sellin" and tradin" ra' or primary

 products% For in)estorsJ purposes there are currently about <= major commodity
mar(ets 'orld'ide that acilitate in)estment trade in nearly 5== primary

commodities% 0ommodities are split into t'o types hard and sot commodities% &ard

commodities are typically natural resources that must be mined or e7tracted C"old#

rubber# oil# etc%# 'hereas sot commodities are a"ricultural products or li)estoc( Ccorn#

'heat# coee# su"ar# soybeans# por(# etc%

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2ND2AN F2NAN62AL MA0JETS

India Financial mar(et is one o the oldest in the 'orld and is considered to be the

astest "ro'in" and best amon" all the mar(ets o the emer"in" economies%

The history o Indian capital mar(ets dates bac( 9== years to'ard the end o the

5Gth century 'hen India 'as under the rule o the ,ast India 0ompany% The

de)elopment o the capital mar(et in India concentrated around Mumbai 'here

no less than 9== to 9<= securities bro(ers 'ere acti)e durin" the second hal o
the 5th century%

The inancial mar(et in India today is more de)eloped than many other sectors because

it 'as or"ani1ed lon" beore 'ith the securities e7chan"es o Mumbai#

Ahmadabad and Hol(ata 'ere established as early as the 5th century%

!y the early 5?=s the total number o securities e7chan"es in India rose to ei"ht#

includin" Mumbai# Ahmadabad and Hol(ata apart rom Madras# Hanpur# Delhi#

!an"alore and Pune% Today there are 95 re"ional securities e7chan"es in India

in addition to the centrali1ed NS, CNational Stoc( ,7chan"e and $T0,I C$)er

the 0ounter ,7chan"e o India%

&o'e)er the stoc( mar(ets in India remained sta"nant due to strin"ent controls on the

mar(et economy that allo'ed only a handul o monopolies to dominate their

respecti)e sectors% The corporate sector 'asnJt allo'ed into many industry se"ments#

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'hich 'ere dominated by the state controlled public sector resultin" in sta"nation o

the economy ri"ht up to the early 5=s%

Thereater 'hen the Indian economy be"an liberali1in" and the controls be"an to be
dismantled or eased outE the securities mar(ets 'itnessed a lurry o IP$4s that 'ere

launched% This resulted in many ne' companies across dierent industry se"ments to

come up 'ith ne'er products and ser)ices% A remar(able eature o the "ro'th o the

Indian economy in recent years has been the role played by its securities mar(ets in

assistin" and uellin" that "ro'th 'ith money rose 'ithin the economy% This 'as in

mar(ed contrast to the initial phase o "ro'th in many o the ast "ro'in" economies o

,ast Asia that 'itnessed hu"e doses o FDI CForei"n Direct In)estment spurrin"

"ro'th in their initial days o mar(et decontrol% Durin" this phase in India much o the

or"ani1ed sector has been aected by hi"h "ro'th as the inancial mar(ets played an

all2inclusi)e role in sustainin" inancial resource mobili1ation% Many PSUs CPublic

Sector Underta(in"s that decided to oload part o their e8uity 'ere also helped by the
'ell2or"ani1ed securities mar(et in India% The launch o the NS, CNational Stoc(

,7chan"e and the $T0,I C$)er the 0ounter ,7chan"e o India durin" the mid 5=s

 by the "o)ernment o India 'as meant to usher in an easier and more transparent orm

o tradin" in securities% The NS, 'as concei)ed as the mar(et or tradin" in the

securities o companies rom the lar"e2scale sector and the $T0,I or those rom the

small2scale sector% +hile the NS, has not just done 'ell to "ro' and e)ol)e into the

)irtual bac(bone o capital mar(ets in India the $T0,I stru""led and is yet to sho' any

si"n o "ro'th and de)elopment% The inte"ration o IT into the capital mar(et

inrastructure has been particularly smooth in India due to the country4s 'orld class IT

;:

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industry% This has pushed up the operational eiciency o the Indian stoc( mar(et to

"lobal standards and as a result the country has been able to capitali1e on its hi"h

"ro'th and attract orei"n capital li(e ne)er beore% The re"ulatin" authority or capital

mar(ets in India is the S,!I CSecurities and ,7chan"e !oard o India% S,!I came into

 prominence in the 5=s ater the capital mar(ets e7perienced some turbulence% It had

to ta(e drastic measures to plu" many loopholes that 'ere e7ploited by certain mar(et

orces to ad)ance their )ested interests% Ater this initial phase o stru""le S,!I has

"ro'n in stren"th as the re"ulator o India4s capital mar(ets and as one o the country4s

most important institutions%

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T,e b)sic objecti>es o+ t,e 1o)rd -ere identi+ied )s 

• to protect the interests o in)estors in securitiesE


• to promote the de)elopment o Securities Mar(etE
• to re"ulate the securities mar(et and
• For matters connected there'ith or incidental thereto%

Since its inception S,!I has been 'or(in" tar"etin" the securities and is attendin" to

the ulillment o its objecti)es 'ith commendable 1eal and de7terity% The

impro)ements in the securities mar(ets li(e capitali1ation re8uirements# mar"inin"#


establishment o clearin" corporations etc% reduced the ris( o credit and also reduced

the mar(et%

S,!I has introduced the comprehensi)e re"ulatory measures# prescribed re"istration

norms# the eli"ibility criteria# the code o obli"ations and the code o conduct or

dierent intermediaries li(e# ban(ers to issue# merchant ban(ers# bro(ers and sub2

 bro(ers# re"istrars# portolio mana"ers# credit ratin" a"encies# under'riters and others%

It has ramed bye2la's# ris( identiication and ris( mana"ement systems or 0learin"

houses o stoc( e7chan"es# sur)eillance system etc% 'hich has made dealin" in

securities both sae and transparent to the end in)estor%

Another si"niicant e)ent is the appro)al o tradin" in stoc( indices Cli(e S6P 0N>

 Nity 6 Sense7 in 9===% A mar(et Inde7 is a con)enient and eecti)e product because

o the ollo'in" reasons

B=

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• It acts as a barometer or mar(et beha)iorE

• It is used to benchmar( portolio perormanceE

• It is used in deri)ati)e instruments li(e inde7 utures and inde7 optionsE

• It can be used or passi)e und mana"ement as in case o Inde7 Funds%

T'o broad approaches o S,!I is to inte"rate the securities mar(et at the national le)el#

and also to di)ersiy the tradin" products# so that there is an increase in number o

traders includin" ban(s# inancial institutions# insurance companies# mutual unds#

 primary dealers etc% to transact throu"h the ,7chan"es% In this conte7t the introduction

o deri)ati)es tradin" throu"h Indian Stoc( ,7chan"es permitted by S,!I in 9=== AD

is a real landmar(%

S,!I has enjoyed success as a re"ulator by pushin" systemic reorms a""ressi)ely and

successi)ely Ce%"% the 8uic( mo)ement to'ards ma(in" the mar(ets electronic and

 paperless rollin" settlement on TK9 bases% S,!I has been acti)e in settin" up the

re"ulations as re8uired under la'%

B5

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 59% Madhya Pradesh


 5;% Madras
 5B% Ma"adh
 5<% Man"alore
 5?% Meerut
 5:% Pune
 5G% Saurashtra Hutch
 5% Uttar Pradesh
 9=% /adodara 

B;

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1M1AY ST6J EK6HAN8E

A )ery common name or all traders in the stoc( mar(et# !S,# stands or !ombay

Stoc( ,7chan"e% It is the oldest mar(et not only in the country# but also in Asia% In

the early days# !S, 'as (no'n as The Nati)e Share 6 Stoc( !ro(ers Association%

It 'as established in the year 5G:< and became the irst stoc( e7chan"e in the country

to be reco"ni1ed by the "o)ernment% In 5<?# !S, obtained a permanent reco"nition

rom the .o)ernment o India under the Securities 0ontracts CRe"ulation Act# 5<?%

In the past and e)en no'# it plays a pi)otal role in the de)elopment o the countryJs

capital mar(et% This is reco"ni1ed 'orld'ide and its inde7# S,NS,># is also trac(ed

'orld'ide% ,arlier it 'as an Association o Persons CA$P# but no' it is a

demutualised and corporatised entity incorporated under the pro)isions o the

0ompanies Act# 5<?# pursuant to the !S, C0orporatisation and Demutuali1ation


Scheme# 9==< notiied by the Securities and ,7chan"e !oard o India CS,!I%

1SE 3ision

The )ision o the !ombay Stoc( ,7chan"e is to ,mer"e as the premier Indian stoc(

e7chan"e by establishin" "lobal benchmar(s%

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1SE F)cts

!S, as a brand is synonymous 'ith capital mar(ets in India% The !S, S,NS,> is

the benchmar( e8uity inde7 that relects the robustness o the economy and inance% It

'as the  


First in India to introduce ,8uity Deri)ati)es

• First in India to launch a Free Float Inde7

• First in India to launch US )ersion o !S, Sense7

• First in India to launch ,7chan"e ,nabled Internet Tradin" Platorm

• First in India to obtain IS$ certiication or Sur)eillance# 0learin" 6

Settlement

• J!S, $n2Line Tradin" System4 C!$LT has been a'arded the "lobally

  reco"ni1ed the Inormation Security Mana"ement System standard

 !S::299==9%

• First to ha)e an e7clusi)e acility or inancial trainin"

• Mo)ed rom $pen $utcry to ,lectronic Tradin" 'ithin just <= days

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 %SE !it& it" 'on( &i"tory o) ca$ita' market de*e'o$ment i" )#''y (eared to contin#e

it" contri+#tion" to )#rt&er t&e (ro!t& o) t&e "ec#ritie" market" o) t&e co#ntry, t&#"

&e'$in( India increa"e" it" "$&ere o) in)'#ence in internationa' )inancia' market"-

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NAT2NAL ST6J EK6HAN8E F 2ND2A


L2M2TED

The National Stoc( ,7chan"e o India Limited has "enesis in the report o the &i"h

Po'ered Study .roup on ,stablishment o Ne' Stoc( ,7chan"es# 'hich

recommended promotion o a National Stoc( ,7chan"e by inancial institutions CFI4s

to pro)ide access to in)estors rom all across the country on an e8ual ootin"% !ased

on the recommendations# NS, 'as promoted by leadin" Financial Institutions at the

 behest o the .o)ernment o India and 'as incorporated in No)ember 59 as a ta72

 payin" company unli(e other stoc( ,7chan"e in the country%

$n its reco"nition as a stoc( e7chan"e under the Securities 0ontracts CRe"ulation

Act# 5<? in April 5;# NS, commenced operations in the +holesale Debt Mar(et

C+DM se"ment in @une 5B% The 0apital Mar(et C,8uities se"ment commenced

operations in No)ember 5B and operations in Deri)ati)es se"ment commenced in

@une 9===%

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NSE 80UP

N)tion)* Securities 6*e)rin/ 6orpor)tion Ltd. 9NS66L:

It is a 'holly o'ned subsidiary# 'hich 'as incorporated in Au"ust 5< and

commenced clearin" operations in April 5?% It 'as ormed to build conidence in

clearin" and settlement o securities# to promote and maintain the short and consistent

settlement cycles# to pro)ide a counter2party ris( "uarantee and to operate a ti"ht ris(

containment system%

NSE.2T Ltd.

It is also a 'holly o'ned subsidiary o NS, and is its IT arm% This arm o the NS, is

uni8uely positioned to pro)ide products# ser)ices and solutions or the securities

industry% NS,%IT primarily ocuses on in the area o tradin"# bro(er ront2end and

 bac(2oice# clearin" and settlement# 'eb2based# insurance# etc% Alon" 'ith this# it

also pro)ides consultancy and implementation ser)ices in Data +arehousin"#

!usiness 0ontinuity Plans# Site Maintenance and !ac(ups# Stratus Mainrame

Facility Mana"ement# Real Time Mar(et Analysis 6 Financial Ne's%

2ndi) 2nde= Ser>ices  Products Ltd. 922SL:

It is a joint )enture bet'een NS, and 0RISIL Ltd% to pro)ide a )ariety o indices and

inde7 related ser)ices and products or the Indian 0apital mar(ets% It 'as set up in
May 5G% IISL has a consultin" and licensin" a"reement 'ith the Standard and

PoorJs CS6P# 'orldJs leadin" pro)ider o in)estible e8uity indices# or co2brandin"

e8uity indices%

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Re"ulation Act# 5<?% The e7chan"e 'as set up to aid enterprisin" promotes in

raisin" inance or ne' projects in a cost eecti)e manner and to pro)ide in)estors

'ith a transparent and eicient mode o tradin" Modeled alon" the lines o the

 NASDA mar(et o USA# $T0,I introduced many no)el concepts to the Indian

capital mar(ets such as screen2based nation'ide tradin"# sponsorship o companies#

mar(et ma(in" and scrip less tradin"% As a measure o success o these eorts# the

,7chan"e today has 55< listin"s and has assisted in pro)idin" capital or enterprises

that ha)e "one on to build successul brands or themsel)es li(e /IP Ad)anta# Sonora

Tiles 6 !rilliant mineral 'ater# etc%

Need +or T6E2

Studies by NASS0$M# sot'are technolo"y par(s o India# the )enture capitals unds

and the "o)ernment4s IT tas(s Force# as 'ell as risin" interest in IT# Pharmaceutical#

!iotechnolo"y and Media shares ha)e repeatedly emphasi1ed the need or a national

stoc( mar(et or inno)ation and hi"h "ro'th companies% Inno)ati)e companies are

critical to de)elopin" economics li(e India# 'hich is under"oin" a major

technolo"ical re)olution% +ith their abilities to "enerate employment opportunities

and contribute to the economy# it is essential that these companies not only e7pand

e7istin" operations but also set up ne' units% The (ey issue or these companies is

raisin" timely# cost eecti)e and lon" term capital to sustain their operations and

enhance "ro'th% Such companies# particularly those that ha)e been in operation or a

short time# are unable to raise unds throu"h the traditional inancin" methods#

 because they ha)e not yet been e)aluated by the inancial 'orld%

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6HAPTE0 23 5 6MPANY P0F2LE

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2ND2A 2NFL2NE L2M2TED

India Inoline is a one2stop inancial ser)ices shop# most respected or 8uality o its

inormation# personali1ed ser)ice and cuttin"2ed"e technolo"y%

3ision

$ur )ision is to be the most respected company in the inancial ser)ices space%

2ndi) 2n+o*ine 8roup

The India Inoline "roup# comprisin" the holdin" company# India Inoline Limited

and its 'holly2o'ned subsidiaries# include the entire inancial ser)ices space 'ith

oerin"s ran"in" rom ,8uity research# ,8uities and deri)ati)es tradin"#

0ommodities tradin"# Portolio Mana"ement Ser)ices# Mutual Funds# Lie Insurance#

Fi7ed deposits# .oI bonds and other small sa)in"s instruments to loan products and

In)estment ban(in"%

India Inoline also o'ns and mana"es the 'ebsites '''%indiainoline%com and

'''%<paisa%com%   The company has a net'or( o o)er 95== business locations

Cbranches and sub2bro(ers spread across more than B<= cities and to'ns% The "roup

caters to appro7imately a million customers%

Founded in 5< by Mr% Nirmal @ain C0hairman and Mana"in" Director as an

independent business research and inormation pro)ider# the company "radually

e)ol)ed into a one2stop inancial ser)ices solutions pro)ider%

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India Inoline recei)ed re"istration or a housin" inance company rom the National

&ousin" !an( and recei)ed the 3Fastest "ro'in" ,8uity !ro(in" &ouse 2 Lar"e

irms4 in India by Dun 6 !radstreet in 9==% It also recei)ed the Insurance bro(in"

license rom IRDAE recei)ed the )enture capital licenseE recei)ed in principle

appro)al to sponsor a mutual undE recei)ed 3!est bro(er2 India4 a'ard rom Finance

AsiaE 3Most Impro)ed !ro(era"e2 India4 a'ard rom Asia money%

6MPANY ST0U6TU0E

India Inoline Limited is listed on both the leadin" stoc( e7chan"es in India# )i1% the

Stoc( ,7chan"e# Mumbai C!S, and the National Stoc( ,7chan"e CNS, and is also

a member o both the e7chan"es% It is en"a"ed in the businesses o ,8uities bro(in"#

+ealth Ad)isory Ser)ices and Portolio Mana"ement Ser)ices% It oers bro(in"

ser)ices in the 0ash and Deri)ati)es se"ments o the NS, as 'ell as the 0ash

se"ment o the !S,% It is re"istered 'ith NSDL as 'ell as 0DSL as a depository

 participant# pro)idin" a one2stop solution or clients tradin" in the e8uities mar(et% It

has recently launched its In)estment ban(in" and Institutional !ro(in" business%

A S,!I authori1ed Portolio Mana"erE it oers Portolio Mana"ement Ser)ices to

clients% These ser)ices are oered to clients as dierent schemes# 'hich are based on

dierin" in)estment strate"ies made to relect the )aried ris(2return preerences o

clients%

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2ndi) 2n+o*ine Medi) )nd 0ese)rc, Ser>ices Limited

The ser)ices represent a stron" support that dri)es the bro(in"# commodities# mutual

und and portolio mana"ement ser)ices businesses% It underta(es e8uities research

'hich is ac(no'led"ed by none other than Forbes as J!est o the +ebJ and Ja must

read or in)estors in AsiaJ% India InolineJs research is a)ailable not just o)er the

internet but also on international 'ire ser)ices li(e !loomber" C0ode IILL#

Thomson First 0all and Internet Securities 'here India Inoline is amon"st the most

read Indian bro(ers%

2ndi) 2n+o*ine 6ommodities Limited.

India Inoline 0ommodities P)t Limited is en"a"ed in the business o commodities

 bro(in"% Their e7perience in securities bro(in" empo'ered them 'ith the re8uisite

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s(ills and technolo"ies to allo' them to oer commodities bro(in" as a contra2

cyclical alternati)e to e8uities bro(in"% It enjoys memberships 'ith the M0> and

 N0D,># t'o leadin" Indian commodities e7chan"es# and recently ac8uired

membership o D.0>% It has a multi2channel deli)ery model# ma(in" it amon" the

select e' to oer online as 'ell as oline tradin" acilities%

2ndi) 2n+o*ine M)r<etin/  Ser>ices

India Inoline Mar(etin" and Ser)ices Limited is the holdin" company o India

Inoline Insurance Ser)ices Limited and India Inoline Insurance !ro(ers Limited%

• India Inoline Insurance Ser)ices Limited is a re"istered 0orporate A"ent 'ith

the Insurance Re"ulatory and De)elopment Authority CIRDA% It is the lar"est

0orporate A"ent or I0I0I Prudential Lie Insurance 0o Limited# 'hich is

IndiaJs lar"est pri)ate Lie Insurance 0ompany% India Inoline 'as the irst

corporate a"ent to "et licensed by IRDA in early 9==5%


India Inoline Insurance !ro(ers Limited India Inoline Insurance !ro(ers
Limited is a ne'ly ormed subsidiary 'hich 'ill carry out the business o

Insurance bro(in"%

2ndi) 2n+o*ine 2n>estment Ser>ices Limited

0onsolidated shareholdin"s o all the subsidiary companies en"a"ed in loans and

inancin" acti)ities under one subsidiary% Recently# $rient .lobal# a Sin"apore2based

in)estment institution in)ested USD :?%: million or a 99%< sta(e in India Inoline

In)estment Ser)ices% This 'ill help ocused e7pansion and capital raisin" in the said

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22FL MANA8EMENT

• THE MANA8EMENT TEAM

Mr. Nirm)* 7)in4 6,)irm)n  M)n)/in/ Director

 Nirmal @ain# M!A CIIM# Ahmadabad and a 0hartered and 0ost Accountant# ounded

India4s leadin" inancial ser)ices company India Inoline Ltd% in 5<#

 pro)idin" "lobally acclaimed inancial ser)ices in e8uities and

commodities bro(in"# lie insurance and mutual unds distribution# amon" others%

Mr. 0 3en<)t)r)m)n4 E=ecuti>e Director

R /en(ataraman# co2promoter and ,7ecuti)e Director o India

Inoline Ltd%# is a !% Tech C,lectronics and ,lectrical 0ommunications

,n"ineerin"# IIT Hhara"pur and an M!A CIIM !an"alore% &e joined

the India Inoline board in @uly 5%

• THE 1A0D F D20E6T0S

Apart rom Nirmal @ain and R /en(ataraman# the !oard o Directors o India Inoline

Ltd% comprises :

Mr. Ni*es, 3i<)msey4 2ndependent Director

Mr% /i(amsey# !oard member since February 9==< 2 a practicin" 0hartered

Accountant and partner CHhimji Hun)erji 6 0o%# 0hartered

Accountants# a member irm o &L! International# headed the audit

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department till 5= and thereater also handles inancial ser)ices# consultancy#

in)esti"ations# mer"ers and ac8uisitions# )aluations etc

Mr S)t P)* J,)tt)r4 Non E=ecuti>e Director

Mr Sat Pal Hhattar# 2 !oard member since April 9==5 2 Presidential 0ouncil o

Minority Ri"hts member# 0hairman o the !oard o Trustee o

Sin"apore !usiness Federation# is also a lie trustee o SINDA# a non

 proit body# helpin" the under2pri)ile"ed Indians in Sin"apore% &e joined the India

Inoline board in April 9==5%

Mr Jr)nti Sin,)4 2ndependent Director

Mr% Hranti Sinha V !oard member since @anuary 9==< V completed

his masters rom the A"ra Uni)ersity and started his career as a 0lass I

oicer 'ith Lie Insurance 0orporation o India%

Mr Arun J. Pur>)r4 2ndependent Director

Mr% A%H% Pur)ar  !oard member since March 9==G  completed his

Masters de"ree in commerce rom Allahabad Uni)ersity in 5?? and a

diploma in !usiness Administration in 5?:%

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2nsur)nce

An entry into this se"ment helped complete the clientJs product bas(etE concurrently#

it "raduated the 0ompany into a one stop retail inancial solutions pro)ider% To ensure
ma7imum reach to customers across India# it has employed a multi pron"ed approach

and reaches out to customers )ia our Net'or(# Direct and Ailiate channels% India

Inoline 'as the irst corporate in India to "et the a"ency license in early 9==5%

2n>est n*ine

India Inoline has made in)estin" in Mutual unds and primary mar(et so eortless%

$nly re"istration is needed% No paper'or( no 8ueues and No re"istration

char"es% India Inoline oers a host o mutual und choices under one roo#

 bac(ed by in2depth research and ad)ice rom research house and tools coni"ured

as in)estor riendly%

We)*t, M)n)/ement

The (ey to achie)in" a successul In)estment Portolio is to ha)e a careully planned

inancial strate"y based on a thorou"h understandin" o the clientJs in)estment

needs and ris( appetite% The IIFL Pri)ate +ealth Mana"ement Team o inancial

e7perts 'ill recommend an appropriate inancial strate"y to eecti)ely meet

customer4s in)estment re8uirements%

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Asset M)n)/ement

India Inoline is a leadin" pan2India mutual und distribution house associated 'ith

leadin" asset mana"ement companies% It operates primarily in the retail se"ment

le)era"in" its e7istin" distribution net'or( to reach prospecti)e clients% It has

recei)ed the in2principle appro)al to set up a mutual und%

Port+o*io M)n)/ement

IIFL Portolio Mana"ement Ser)ice is a product 'herein an e8uity in)estment

 portolio is created to suit the in)estment objecti)es o a client% India Inoline

in)ests the client4s resources into stoc(s rom dierent sectors# dependin" on

client4s ris(2return proile% This ser)ice is particularly ad)isable or in)estors 'ho

cannot aord to "i)e time or donJt ha)e that e7pertise or day2to2day

mana"ement o their e8uity portolio%

Ne-s*etters

As a subscriber to the Daily Mar(et Strate"y# client4s "et research reports o India

Inoline research team on a priority basis% The Indiainoline +ee(ly Ne'sletter is

the lashbac( or the 'ee( "one by% A 'ee(ly outloo( coupled 'ith the best o
the 'eb stories rom Indiainoline and lin(s to important in)estment ideas#

Leader Spea( and eatures is deli)ered in the client4s inbo7 e)ery Friday e)enin"%

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Sc,eme Sn)ps,ot
62 Santosh Hamath 6)te/ory  ,8uity

Fund M)n)/er Anil Prabhudas  Sub56)te/ory Sectoral2FM0.

Address Le)el B# +oc(hardt To'ers# !andra 2 Hurla Type $pen


0omple7# !andra C,ast# Mumbai 2 B===<5
Min. 2n>estment90s: <===
P,one 5 99 <?;9 <G9=
Tot)* Assets90s.Mn: BG<%B9
F)= 5 99 99G5 =9;
0e/istr)rs Fran(lin Templeton Asset Mana"ement
-ebsite http**'''%templetonindia%com CIndia P)t% Ltd%

L)unc, D)te 5<2MAR2

Sc,eme bjecti>e
See(s to pro)ide lon" term capital appreciation by in)estin" primarily in shares o companies operatin" in the
FM0. industry%

 sset llocation
,8uity Shares ?%5;
0all And $ther Assets 9%GB
0orporate Debt * !onds 5%=;
As on ;=2N$/25=

&o' ( holdin!s s on ).+/,V+*.


 Nestle India Limited 5B%:

I T 0 Limited 55%9:

Asian Paints Limited %9<

Pidilite Industries Limited ?%BG

Marico Limited ?%=G

B% 2n+r)structure Sector

T)t) 2n+r)structure Fund

Sc,eme Sn)ps,ot

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62 /ed Pra(ash 0hatur)edi 6)te/ory  ,8uity

Fund M)n)/er M /enu"opal  Sub56)te/ory Sectoral2Inrastructure

Address Fort &ouse# 995 Dr% D% N% Road# Mumbai 2 Type $pen


B== ==5
Min. 2n>estment90s: <===
P,one 5 99 <?<=<9== * 9<5 * 9<9
Tot)* Assets90s.Mn: 5G:9%;
F)= 5 99 <?;5 <5B
0e/istr)rs 0omputer A"e Mana"ement Ser)ices
-ebsite http**'''%tatamutualund%com P)t%Ltd%

L)unc, D)te 9<2N$/2=B

Sc,eme bjecti>e
The in)estment objecti)e o the Scheme is to pro)ide income distribution and * or medium to lon" term capital
"ains by in)estin" predominantly in e8uity*e8uity related instrument o the companies in the inrastructure sectors%

 sset llocation
,8uity Shares <%99
0ash And $ther Assets B%:G
As on ;=2N$/25=

&o' ( holdin!s s on ).+/,V+*.


I 0 I 0 I !an( Limited B%:

0rompton .rea)es Limited B%:

0ash And $ther Assets B%:G

$il 6 Natural .as 0orporation Limited B%:=

& D F 0 !an( Limited B%<G

<% Po-er Sector5

0e*i)nce Di>ersi+ied Po-er Sector Fund

Sc,eme Sn)ps,ot

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62 H Raja"opal 6)te/ory  ,8uity

Fund M)n)/er Sunil Sin"hania Sub56)te/ory Sectoral2Po'er 

Address $ne Indiabulls 0entre# To'er5# @upiter Mills Type $pen


0ompound# GB5# Senapati !apat Mar"# ,lphinstone
Road# Mumbai 2 B== =5; Min. 2n>estment90s: <===

P,one 5 99 ;= B?== Tot)* Assets90s.Mn: <=955%9

F)= 5 99 ;=B5 BG 0e/istr)rs Har)y 0omputershare Pri)ate Limited

-ebsite http**'''%reliancemutual%com* L)unc, D)te 92MAR2=B

Sc,eme bjecti>e
The primary in)estment objecti)e o the scheme is to see( to "enerate continous returns by acti)ely in)estin" in
e8uity and e8uity related or i7ed income securities o Po'er and other associated companies

 sset llocation
,8uity Shares B%?<
Deri)ati)es#0ash And $ther Recei)ables <%;<
As on ;=2N$/25=

&o' ( holdin!s s on ).+/,V+*.


$ther ,8uities G%;;

0ummins India Limited ?%;9

Torrent Po'er Limited <%

I 0 I 0 I !an( Limited <%BG

0ash And $ther Assets And Deri)ati)es <%;<

?% Tec,no*o/y Sector5

Fr)n<*in 2n+otec, Fund

Sc,eme Sn)ps,ot

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6HAPTE0 32
F2ND2N8S4 SU88EST2NS  6N6LUS2N

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ANNEKU0E 5 2
TE0M2NL8Y
Mutu)* Fund An in)estment tool that pools in in)estments made by people and that
corpus is proessionally mana"ed by urther in)estin" as per the type o und that4s
 bein" operated% The intention is to loat money in the mar(et by o'nin" assets
components o many companies at the same meetin" the assurances made to
in)estors% There is no obli"ation 'hatsoe)er or assured returns%
NA35A cumulati)e mar(et )alue o total assets component o its liabilities% It4s
actually the measure o 'hat each shareholder 'ould a8uire i the assets o the
company are li8uidated%
No5Lo)d +unds 2 there is no commission component present to enter and e7it

o the und o'nership% It4s a ull in)ol)ement o the corpus%


ELSS 2 ,8uity lin(ed sa)in"s scheme is a scheme 'ith a ta7 rebate allo'ed as
 per the Sec GG in the Indian income ta7 act# 5?5%It pro)ides the in)estors 'ith the
opportunity to sa)e "ains on capital throu"h in)estments made in MFs%
2nde= Funds 2 An interestin" scheme that tries to replicate the beha)ior o the
 particular stoc( inde7# that is o interest% The portolio o the und 'ould majorly
consist o e8uities listed in that inde7%

Sector Funds 2 An MF scheme that has its portolio chart o companies that
 belon" to a certain sector# say $il% This is a hi"h2ris( und# as the perormance o that
sector 'ould directly relect in the unds NA/% So# here 'e are 'ith the di)erse
mar(et o Mutual Funds% ,ach one claimin" their USP% +hile MFs certainly are N$T
the saest# but they are relati)ely more sae than the direct in)ol)ement in the e8uity
mar(et# "i)en that act that majority o the in)estors are either ill2inormed or not
inormed about the 'ay the mar(ets mo)e%

So 'hat e7actly ma(es MFs the ri"ht (ind o und mana"ement tool# espy in a
country li(e IndiaX A country li(e India or or that matter any de)elopin" country has
some basic problems 'hich pre)ent the inormation to be a)ailable reely and that too
in an accessible ashion# so 'ith a situation li(e that# a proessionally mana"ed

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unds% I one "ets married# one mi"ht need to compromise one4s ris( tolerance and
desired returns 'ith that o the spouse% This could tri""er o the need to e7it%
A m)jor c,)n/e in )ny b)sic )ttribute o+ t,e +und
'hen the und chan"es any basic attribute as mentioned by it in its oer documents#
the in)estors ha)e a choice o "ettin" out o it% ,)en S,!I has pro)ided or an e7it
route bein" made a)ailable to the in)estors% 0han"es li(e a chan"e in Asset
Mana"ement 0ompany or in in)estment style o und or chan"e o structure say rom
closed2end to open2end etc% are "ood enou"h reasons or an in)estor to consider
s'itchin" or e7itin" rom it as they are certainly li(ely to aect the und in a major
'ay%
Fund doesnt comp*y -it, its objecti>e

$ne o the important parameters in the selection o the und is ali"nment o the ris(
 proiles o the in)estor and und% The objecti)e o the und says a lot about ho' the
und plans to in)est% I the objecti)e is not bein" complied 'ith# it is one o the e7it
 points 'orth considerin"% For e7ample# the three unds discussed abo)e# Alliance
,8uity# !irla Ad)anta"e and IN. .ro'th all claim to be di)ersiied e8uity unds yet
they had hu"e e7posures to select I0, sector scripts that not only added )olatility
than is e7pected out o di)ersiied unds but also in a 'ay# 'ent a"ainst their stated

objecti)e%
T,e FundOs E=pense 0)tio 0ises
a small rise in an e7pense ratio is not a bi" deal# ho'e)er a si"niicant rise can result
in substantial reduction o yields and so it 'ould be better to e7it the und% In the case
o bond unds or money mar(et unds# it is hi"hly unli(ely that the und can increase
its returns enou"h to justiy an increase in the undJs e7penses%
T,e Fund M)n)/er ,)s c,)n/ed
a simple chan"e o und mana"ers# in itsel# is not enou"h reason to sell a und on a
short2term basis% I it is a passi)ely mana"ed und Cinde7 und# then one has little to
no reason to 'orry% &o'e)er# i it is an acti)ely mana"ed und# then has to (eep the
eyes open on the ne' mana"er% $bser)in" the styles# stoc( pic(in" and ris(s
underta(en by the ne' mana"er is important or it discloses a lot about ho' the und

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mi"ht are in the uture% I satisied# one 'ill ha)e no reason to complain later but the
 process needs time and so an in)estor has to obser)e the und mana"er or some time
 beore one ta(es a decision%
Enou/, ,)s been e)rned
&o'e)er# nothin" is as important as to rein the horses in time% The primary principle
 behind saety o in)estment is to ta(e ris(s that can be tolerated% The principle also is
speciic on the e7pectations that the in)estor must ha)e rom any in)estment% @ust as
it is important to set realistic tar"ets that one hopes to achie)e rom the in)estment# it
is also important to e7it 'hen tar"et as e7pected has been achie)ed irrespecti)e o the
act that it mi"ht be "eneratin" better returns in a short2term%
  The abo)e list is certainly not e7hausti)e and indi)iduals 'ill ha)e other

 better reasons to 8uit as 'ell% It4s just that most don4t (no' 'hen to apply thou"ht
and so these 'ould come in handy%

T2PS F0 MUTUAL FUND 2N3EST0S 9SU88EST2NS:

These are the e' e7act as re"ards in)estment in MF4s ta(en rom the boo( 'ith
ZMar(etin" or the =4s[ "i)en by the +all Street%
5% 0hec( your letter o oer o unds prospectus to "uard yoursel)es a"ainst any
hidden ees%
9% ,nsue that the unds trac( record is the same as that o the current mana"ement
;% A)oid MF4s that char"e e7it ees at he bac( end door Cee s char"ed by MF rom
the unit holders at he time to redemption o the units%
B% !uy the unds 'ith no sale char"ed loads%Ca load is a char"e by the und 'hen
in)estor buys it is called the entry load or 'hen he sells is called the e7it load%
<% I the char"e it4s hea)y by the M F to discoura"e the in)estors rom ta(in" short
 positions in the unds units because too many in)estors sell their units at a time
then the und has to sell its holdin"s to meet the obli"ations that yield into )ital o

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the ines o)erall return% Most short unds li(e "uilt unds Cthese are the unds the
in)est only in "o)ernment securities and treasury bills thus the in)estors ha)e an
opportunities to buy ris( ree securities% These unds yield a better return than a
money mar(et und% It is "ood or the in)estors 'ho desire saety o principal
amount% Money mar(et unds Cthese unds in )ie's in money mar(et instruments
such as treasury bills# "o)t% bonds# certiicates o ban( deposits# commercial
deposits% They char"e no loads# ho'e)er loads are limited by S,!I to :%
?% 0hec( und4s perormance in bear as 'ell a the bull mar(et%
:% .uard und ris( by chec(in" its portolio or di)ersiication )olatility%

JEY STEPS F0 F2NAN62AL PLANN2N8


2NSU0E YU0SELF 1EF0E YU 2N3EST

Insurance is the pre2re8uisite o all in)estments the main purpose o insurance is to


 protect your current lie style ater retirement% It acts as a shield a"ainst all type o
inancial ris(s% In)estor has to reali1e that insurance is more or sae "uardin" a"ainst
ris( aced in lie rather than bein" an in)estment or proit%

6HSE S2MPLE 2N3ESTMENT

$ur daily lie is ull o complications the day2to2day "rind lea)es us 'ith little ener"y
to (eep trac( o our inancial in)estments% That is copy an in)estor should choose

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simple 6 uncomplicated instruments% Thereore he has to in)est the hassle ree


instruments%

UT2L2E THE PWE0 F 6MPUND2N8

0ompoundin" means payment o interest on accumulated interest% Thus money


earned by you 'or(s hard 6 earns more money or you% This implies that not only the
 principal earns income or you but interest "enerated by you also earns income% $ne
important actor is the time period% Lon"er the time hi"her the beneit

2N3EST 2N 2NT0UMENTS THAT JEEP YU AHEAD F 2NFLAT2N

That silently creeps up rom behind 6 starts eatin" your hard earned sa)in"s e)en
 beore you reali1e the situation% An in)estor should loo( at the real return Cthe rate o
return minus the rate o inlation 'hile considerin" an in)estment% &e should in)est
in instruments# 'hich pro)ide proitable2post2inlation returns%

0EDU6E TAK N YU0 2N3ESTMENT

There are t'o realities in the lie% $ne is death 6 the other is ta7% It is ad)isable that
in)estments should be so planned that least possible ta7 'ould be re8uired to be paid%
Smart mo)e or the in)estor is to sa)e e)ery rupee rom ta7 man%

8 F0 STA1LE  0EAL2ST26 0ETU0NS

Stability o returns is more important that increased proit% Usually these are
associated 'ith hi"h )olatile in)estment options li(e e8uities 6 e)en 'ith
"o)ernment securities or "ilts as they also run hi"h mar(et ris(% The asset allocation
is su""ested accordin" to the ris( proile o an in)estor% So in)est in the best option 6
"et the ma7imum returns%

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121L280APHY

 www.njindiainvest.com
 www.moneycontrol.com
 www.amfiindia.com

www.karvy.com
 www.valueresearchonline.com
 MUTUAL FUND P!DU"T AND #$%&"$#'''' TA(MAN
 AMF& "!U#$ )!!*

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