A Project Report

On

COMPARATIVE ANALYSIS
OF THREE
ASSET MANAGEMENT COMPANIES

for
KARVY STOCK BROKING
LIMITED

Submitted By,
Vinayak S. Bhoite
(PGPBA)
2005-2007

Submitted to,

Vishwakarma School of Business Management &

Research, PUNE
 ACKNOWLEDGEMENT

I wish to express my deep sense of gratitude and profound thanks to Mr. Anand Jaju for
giving me the opportunity to work with him in his reputed firm. He made me aware about
trends, condition and opportunities in the mutual fund, which helped me immensely in
my project.

I would like to express my heartily gratitude to Mr. Hemant Thorat for allowing me to
work with him. It s a great honors to work under his guidance. His guidance was very
valuable for me.

I wish to thank Prof. Sovani Madam my faculty guide for all the encouragement and
aspiring support in completing my project.

I am thankful to all the staff members of KARVY Stock Broking Limited to support me
in the project. Specially Rohit Sodani, Gaurav Bhansali, Ketan Jaju, Purvi Shaha, Kiran
Jagtap, Abhijeet & Sandeep.

Vinayak S. Bhoite.
 INDEX

Chapter Title Page

No. No.

1 Executive summery 1

2 Introduction 4

3 Company Profile 7

4 Objective of the study 15

5 Scope 16

6 Research Methodology 19

7 Project Work Undertaken 22

8 Analysis and interpretation of data 61

9 Suggestions and Conclusion 93

10 Bibliography 100
 CHAPTER-I:

EXECUTIVE SUMMARY

-1-
 EXECUTIVE SUMMARY

Comparative Study of Different Mutual Fund

Preparation of project report is an inseparable part of management studies. It gives a

thorough insight and proper understanding to the students of the intricacies of the
business situation.
I have completed my project under Mr. Hemant Thorat Distribution head without
whose guidance and help I could not complete my project successfully in time.
The project study was carried out for a period of two months form 15th June to 14th
August 2006 at KARVY Stock Broking Ltd. Pune under the supervision of Mr. Hemant
Thorat. This project study can be divided into two major part.
The first part dealt with what mutual fund is & thorough information of it. And the
second part dealt with information of all mutual fund industry such as corpus of all
existing companies, new fund offers and repurchase & redemption information. As well
as it contents the comparative study of three asset management companies. Comparisons
are made on the basis of products and service parameters among the leading asset
management companies like Unit Trust of India, SBI asset Management Company,
TATA Asset Management Company.
Objective of this project is to get the thorough knowledge about Mutual funds and how
mutual funds beneficial for retail investor. It also gives strategic guideline for choosing
right mutual according with requirement of investment. It also speared light on the part of
Risk Management in the mutual fund investment regime of the individual investor. The
project work will try to look into the various benefit of investing that an individual can
obtain by Mutual Funds.
As per the analysis, suggesting for investment opportunities in the mutual fund are
provided. Apart from these, various option were also recommended.

-2-
The project also facilitates the investment advisors in making decision that reduce the
inherent risk present in stock market. This project also provides practical knowledge
regarding mutual funds. This may become a base for taking decision in investing money
in various mutual funds and to earn a fair rate of return on invested money.
The final chapter covers the Suggestion, Conclusion, Recommendations & Limitations
that could be taken into consideration by investor.

-3-
 CHAPTER-II:

INTRODUCTION

-4-
 INTRODUCTION

Mutual funds have been in existence in India for last 42 years now. The area of mutual
fund is highly volatile and sensitive area. Investors are still biased about investments in
mutual funds.
Mutual fund companies primarily invest in share market, debt market, money market or
combination of all these. Mutual funds provide an option to investors to invest according
to his requirement. A person who wants to invest in capital market but is unaware about
the capital market for those mutual funds is the best option for investment.The investors
in proportion to their investments share profits or losses. The mutual funds normally
come out with a number of schemes with different investment objectives, which are
launched from time to time. A mutual fund is required to be registered with Securities
and Exchange Board of India (SEBI), which regulates securities markets before it can
collect funds from the public.
Investing in mutual fund is like sitting on passenger s seat of someone else s car . A
mutual fund company involves a group of fund managers and investment advisors who
look after the funds of investors. The performance of mutual fund companies can be
analyzed on the basis of past performance, NAV, Portfolio and Risk profile of the fund.
From 1993 to 2003, 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.
The corpus of the Indian mutual fund industry reached Rs 3,29,382 crore in March
2006, it still had a long way to go as it is still behind the bank deposit figure of
Rs16,22,579 crore. The American mutual fund industry s corpus stood at three times that
of bank deposits and therefore the Indian mutual fund industry had a long way to go.
Banks assets are expected to grow at an annual composite rate of growth of 13.4% during
the rest of the decade. In short term, mutual fund assets could fluctuate but over the
period we could see big jump in industry assets.
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next
few years as investor s shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.

-5-
The total assets of all scheduled commercial banks by end-March 2010 is estimated at
Rs40, 90,000 crore.
Going by current annual growth rate, mutual fund assets would be doubled by year 2010
but considering the growing appetite of retail investors for investments & booming Indian
Economy, we could see bigger jump in mutual fund assets.
Out of ten public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.But this does not mean there is no room for other players. The market will
witness a flurry of new players entering the arena. There will be a large number of offers
from various asset management companies in the time to come. Some big names like
Fidelity, Principal, Old Mutual etc. are looking at Indian market seriously. One important
reason for it is that most major players already have presence here and hence these big
names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this would
enable it to hedge its risk and this in turn would be reflected in it s Net Asset Value
(NAV).SEBI is working out the norms for enabling the existing mutual fund schemes to
trade in derivatives. Importantly, many market players have called on the Regulator to
initiate the process immediately, so that the mutual funds can implement the changes that
are required to trade in Derivatives.

-6-
 CHAPTER- II

COMPANY PROFILE

-7-
 COMPANY PROFILE

KARVY Stock Broking Limited is India s premier integrated financial services company
with a wide network of 525 offices & 7300 professionals operating from 352 towns/cities
and also established presence in UAE, UK & USA.
KARVY, ranked among the top five in the country in all its business segments, services
over 16 million individual investors in various capacities, and provides investor services
to over 300 corporates, comprising the Corporate India.
KARVY covers the entire spectrum of financial services such as Stock Broking, Demat
Services, Insurance, Wholesale/Retail Debt, Primary Market, Mutual Funds, Fixed
Deposits, Loan Products Distribution, Investment Banking, Registrars & Share Transfer
Agents, and Medical Transcription & BPO.

Board of Director
Chairman
Mr. C. Parthasarathy

Director
Mr. M. Yugandhar
Mr. M. S. Ramakrishna

-8-
KARVY - IN EARLY DAYS

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise
of a small group of practicing Chartered Accountants who founded the flagship company
Karvy Consultants Limited. We started with consulting and financial accounting
automation, and carved inroads into the field of registry and share accounting by 1985.
Since then, we have utilized our experience and superlative expertise to go from strength
to strength to better our services, to provide new ones, to innovate, diversify and in the
process, evolved Karvy as one of India s premier integrated financial service enterprise.
Thus over the last 20 years Karvy has traveled the success route, towards building a
reputation as an integrated financial services provider, offering a wide spectrum of
services. And we have made this journey by taking the route of quality service, path
breaking innovations in service, versatility in service and finally totality in service.
Our highly qualified manpower, cutting-edge technology, comprehensive infrastructure
and total customer-focus has secured for us the position of an emerging financial services
giant enjoying the confidence and support of an enviable clientele across diverse fields in
the financial world..Our values and vision of attaining total competence in our servicing
has served as the building block for creating a great financial enterprise, which stands
solid on our fortresses of financial strength - our various companies. With
the experience of years of holistic financial servicing behind us and years of complete
expertise in the industry to look forward to, we have now emerged as a premier integrated
financial services provider. And today, we can look with pride at the fruits of our mastery
and experience comprehensive financial services that are competently segregated to
service and manage a diverse range of customer requirements.

-9-
MILESTONE

KARVY STOCK BROKING LIMITED

Trading in NSE, BSE and F&O segment.

Sound research that gives excellent tips and recommendations on market
opportunities for short term, medium term and long term basis investment.
Personalized services to impart convenience and reach to our clients.
Competitive brokerage rates.
Member-National Stock Exchange (NSE), The Bombay Stock Exchange (BSE),
and The Hyderabad Stock Exchange (HSE).

- 10 -
Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely
towards attaining diverse goals of the customer through varied services. Creating a
plethora of opportunities for the customer by opening up investment vistas backed by
research-based advisory services. Here, growth knows no limits and success recognizes
no boundaries. Helping the customer create waves in his portfolio and empowering the
investor completely is the ultimate goal.

STOCK BROKING SERVICES

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high
success rate as a wealth management and wealth accumulation option. The difference
between unpredictability and a safety anchor in the market is provided by in-depth
knowledge of market functioning and changing trends, planning with foresight and
choosing one & rescue s options with care. This is what we provide in our Stock Broking
services.
We offer services that are beyond just a medium for buying and selling stocks and shares.
Instead we provide services, which are multi dimensional and multi-focused in their
scope. There are several advantages in utilizing our Stock Broking services, which are the
reasons why it is one of the best in the country.
We offer trading on a vast platform; National Stock Exchange, Bombay Stock Exchange
and Hyderabad Stock Exchange. More importantly, we make trading safe to the
maximum possible extent, by accounting for several risk factors and planning
accordingly. We are assisted in this task by our in-depth research, constant feedback and
sound advisory facilities. Our highly skilled research team, comprising of technical
analysts as well as fundamental specialists, secure result-oriented information on market
trends, market analysis and market predictions. This crucial information is given as a
constant feedback to our customers, through daily reports delivered thrice daily ; The Pre-
session Report, where market scenario for the day is predicted, The Mid-session Report,
timed to arrive during lunch break , where the market forecast for the rest of the day is
given and The Post-session Report, the final report for the day, where the market and the
report itself is reviewed.

- 11 -
To add to this repository of information, we publish a monthly magazine & ldquo;
Karvy; The Finapolis & rdquo;, which analyzes the latest stock market trends and takes a
close look at the various investment options, and products available in the market, while a
weekly report, called & ldquo; Karvy Bazaar Baatein & rdquo;, keeps you more informed
on the immediate trends in the stock market. In addition, our specific industry reports
give comprehensive information on various industries. Besides this, we also offer special
portfolio analysis packages that provide daily technical advice on scrip s for successful
portfolio management and provide customized advisory services to help you make the
right financial moves that are specifically suited to your portfolio.
Our Stock Broking services are widely networked across India, with the number of our
trading terminals providing retail stock broking facilities. Our services have increasingly
offered customer oriented convenience, which we provide to a spectrum of investors,
high-net worth or otherwise, with equal dedication and competence.
But true to our spirit, this success is not our final destination, but just a platform to launch
further enhanced quality services to provide you the latest in convenient, customer-
friendly stock management.
Over the years we have ensured that the trust of our customers is our biggest returns.
Factors such as our success in the Electronic custody business has helped build on our
tradition of trust even more. Consequentially our retail client base expanded very fast.
To empower the investor further we have made serious efforts to ensure that our research
calls are disseminated systematically to all our stock broking clients through various
delivery channels like email, chat, SMS, phone calls etc.
Our foray into commodities broking has been path breaking and we are in the process of
converting existing traders in commodities into the more organized mainstream of trading
in commodity futures, both as a trading and risk hedging mechanism.
In the future, our focus will be on the emerging businesses and to meet this objective, we
have enhanced our manpower and revitalized our knowledge base with enhances focus on
Futures and Options as well as the commodities business.

- 12 -
Services provided at Karvy Stock broking Limited:

STOCK BROKING
MUTUAL FUNDS
DEPOSITORY PARTICIPANT SERVICES
FINANCIAL PRODUCTS DISTRBUTION
CORPORATE DIPOSITORY SERVICES
INSURANCE
I.T ENABLED SERVICES
PERSONAL ADVISORY SERVICES
REGISTRAR AND TRANSFER AGENT

Achievements:-
Among the top 5 stock brokers in India (4% of NSE volumes)
India's No. 1 Registrar & Securities Transfer Agents
Among the to top 3 Depository Participants
Largest Network of Branches & Business Associates
ISO 9002 certified operations by DNV
Among top 10 Investment bankers
Largest Distributor of Financial Products
Adjudged as one of the top 50 IT uses in India by MIS Asia
Full Fledged IT driven operations

- 13 -
 CHAPTER-III:

OBJECTIVES OF THE STUDY

- 14 -
 OBJECTIVES OF THE STUDY
Objective of the project is to look into the use of Mutual fund regime for the individual

investor. This project work will try to look at the comparative analysis various Asset

Management Companies and their product that an individual must look before making an

investment in mutual fund.

To study the Indian Mutual Fund industry (Structure, Scenario of industry,

working, types, advantages of mutual funds)

To study the comparative analysis various Asset Management Companies and

their product.

To study all type of mutual fund schemes (Equity, Balanced, Guilt, Debt,

Diversified, Offshore, Spectral & Commodity Fund.)

To analyze these schemes on the basis of Portfolio, Size, market share, Returns of

these funds.

- 15 -
 SCOPE

The project Comparative Analysis of Three Asset Management Companies makes

comparison between various funds of these companies.

The scope of this project work is limited to the mutual funds, especially the mutual fund

of UTI, SBI and TATA. Basically this project studies risk-return profile of all the

schemes that are offering by these three companies. Mutual Fund in general means any

instrument, which can be used to secure one s investment / money. In mutual funds the

money collected from retail investors is then invested in capital market instruments such

as shares, debentures and other securities.

The study to some extent can be used to make the decision regarding the purchase and

sale of mutual funds at the right time to make fair rate of return

The Mutual Funds companies I have selected for this comparison are

UTI Asset Management Company.

SBI Asset Management Company.

TATA Asset Management Company.

Companies are compared on basis of their Returns per year, Credit Rating, Portfolio,

Performance, Entry loads, Exit loads, Minimum investment, Lock-in period, etc.

- 16 -
First half of project consists of Introduction to Co., Product profiles, Concepts of mutual

funds, types of mutual funds, advantages, disadvantages etc, NAV and Portfolio

management basics.

In later half of project, data analysis, findings and recommendations are recorded.

The final part of my project is Findings and Interpretation.

LIMITATIONS OF THE STUDY: -

The data used for analysis is as on 31 July 2006.

The comparison has been limited to three companies.

- 17 -
 CHAPTER-IV:

RESEARCH METHODOLOGY

- 18 -
 RESEARCH METHODOLOGY
The data taken into consideration is basically the information collected from various

Internet sites and various books pertaining to the subject. To begin with, a detailed

explanation is given regarding the investment & portfolio management. This helps in

getting a better understanding of the main element of the project.

The various figures are collected for the time period taken into consideration. They were

then represented in a graphic from to get a better understanding of figures. A comparison

of these figures and graphs was done to find out whether there was very big or negligible

difference between the two time periods and then see the trend in the mutual fund market.

The comparison helps to conclude keeping in mind the various limitations. The data

sources for collecting the required data, which is relevant to study the subject of project.

PRIMARY SOURCES

Information provided by project guide of KARVY Stock Broking Ltd.

through personal discussion.

Information gathered by meeting an individual investors and corporate

through personal interviews.

Information gathered by attending various seminars organized by various

mutual fund companies.

SECONDARY SOURCES

Online information available on websites of KARVY, NSE, BSE, AMFI,

MUTUAL FUNDS, and much more.

- 19 -
 Information & data published in the newspaper and magazines.

Information collected from the various book pertaining to the subject matter.

Information collected from the magazine of KARVY named Finapolis.

The sources that are mentioned above as a secondary sources are insufficient to provide

the data that required to complete the research so there is a need to collect information

from the primary sources.

- 20 -
 CHAPTER-V:

PROJECT WORK UNDERTAKEN

- 21 -
 PROJECT WORK UNDERTAKEN

Mutual Fund - Basics

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

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

instruments such as shares, debentures and other securities. The income earned through

these investments and the capital appreciation realized are shared by its unit holders in

proportion to the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. The flow

chart below describes broadly the working of a mutual fund:

Mutual fund is a mechanism for pooling the resources by issuing units to the investors

and investing funds in securities in accordance with objectives as disclosed in offer

document.

- 22 -
Investments in securities are spread across a wide cross-section of industries and sectors

and thus the risk is reduced. Diversification reduces the risk because all stocks may not

move in the same direction in the same proportion at the same time. Mutual fund issues

units to the investors in accordance with quantum of money invested by them. Investors

of mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The mutual

funds normally come out with a number of schemes with different investment objectives,

which are launched from time to time. A mutual fund is required to be registered with

Securities and Exchange Board of India (SEBI), which regulates securities markets

before it can collect funds from the public.

Mutual Funds: Universal appeal

Savings form an important part of the economy of any nation. With savings invested in

various options available to the people, the money acts as the driver for growth of the

country. Indian financial scene too presents multiple avenues to the investors. Though

- 23 -
certainly not the best or deepest of markets in the world, it has ignited the growth rate in

mutual fund industry to provide reasonable options for an ordinary man to invest his

savings.

Investment goals vary from person to person. While somebody wants security, others

might give more weightage to returns alone. Somebody else might want to plan for his

child s education while somebody might be saving for the proverbial rainy day or even

life after retirement. With objectives defying any range, it is obvious that the products

required will vary as well.

Though still at a nascent stage, Indian MF industry offers a plethora of schemes and

serves broadly all type of investors. The range of products includes equity funds, debt,

liquid, gilt and balanced funds. There are also funds meant exclusively for young and old,

small and large investors. Moreover, the setup of a legal structure, which has enough

teeth to safeguard investors interest, ensures that the investors are not cheated out of

their hard-earned money. All in all, benefits provided by them cut across the boundaries

of investor category and thus create for them, a universal appeal.

Investors of all categories could choose to invest on their own in multiple options but opt

for mutual funds for the sole reason that all benefits come in a package.

Let us see how.

An investor normally prioritizes his investment needs before undertaking an investment.

So different goals will be allocated different proportions of the total disposable amount.

Investments for specific goals normally find their way into the debt market as risk

reduction is of prime importance. This is the area for the risk-averse investors and here,

mutual funds are generally the best option. The reasons are not difficult to see.

- 24 -
One can avail of the benefits of better returns with added benefits of anytime liquidity by

investing in open-ended debt funds at lower risk. Many people have burnt their fingers by

investing in fixed deposits of companies who were assuring high returns but have gone

bust in course of time leading to distraught investors as well as pending cases in the

Company Law Board.

This risk of default by any company that one has chosen to invest in, can be minimized

by investing in mutual funds as the fund managers analyze the companies financials

more minutely than an individual can do as they have the expertise to do so. They can

manage the maturity of their portfolio by investing in instruments of varied maturity

profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of fixed

deposits, debt funds provide enough liquidity. Moreover, mutual funds are better placed

to absorb the fluctuations in the prices of the securities as a result of interest rate variation

and one can benefits from any such price movement.

Apart from liquidity, these funds have also provided very good post-tax returns on year to

year basis. Even historically, we find that some of the debt funds have generated superior

returns at relatively low level of risks. On an average debt funds have posted returns over

10 percent over one-year horizon. The best performing funds have given returns of

around 14 percent in the last one-year period. In nutshell we can say that these funds have

delivered more than what one expects of debt avenues such as post office schemes or

bank fixed deposits. Though they are charged with a dividend distribution tax on

dividend payout at 10 percent (plus a surcharge of 10 percent), the net income received is

still tax free in the hands of investor and is generally much more than all other avenues,

on a post tax basis.

- 25 -
Moving up in the risk spectrum, we have people who would like to take some risk and

invest in equity funds/capital market. However, since their appetite for risk is also

limited, they would rather have some exposure to debt as well. For these investors,

balanced funds provide an easy route of investment. Armed with the expertise of

investment techniques, they can invest in equity as well as good quality debt thereby

reducing risks and providing the investor with better returns than he could otherwise

manage. Since they can reshuffle their portfolio as per market conditions, they are likely

to generate moderate returns even in pessimistic market conditions.

Next come the risk takers. Risk takers by their very nature, would not be averse to

investing in high-risk avenues. Capital markets find their fancy more often than not,

because they have historically generated better returns than any other avenue, provided,

the money was judiciously invested. Though the risk associated is generally on the higher

side of the spectrum, the return-potential compensates for the risk attached.

Capital markets interest people, albeit not all for there are several problems associated.

First issue is that of expertise. While investing directly into capital market one has to be

analytical enough to judge the valuation of the stock and understand the complex

undertones of the stock. One needs to judge the right valuation for exiting the stock too. It

is very difficult for a small investor to keep track of the movements of the market.

Entrusting the job to experts, who watch the trends of the market and analyze the

valuations of the stocks will solve this problem for an investor. Mutual funds specialize

in identification of stocks through dedicated experts in the field and this enables them to

pick stocks at the right moment. Sector funds provide an edge and generate good returns

if the particular sector is doing well.

- 26 -
Next problem is that of funds/money. A single person can t invest in multiple high-priced

stocks for the sole reason that his pockets are not likely to be deep enough. This limits

him from diversifying his portfolio as well as benefiting from multiple investments. Here

again, investing through MF route enables an investor to invest in many good stocks and

reap benefits even through a small investment. This not only diversifies the portfolio and

helps in generating returns from a number of sectors but reduces the risk as well. Though

identification of the right fund might not be an easy task, availability of good investment

consultants and counselors will help investors take informed decision.

How is a mutual fund set up?

A mutual fund is set up in the form of a trust, which has

Sponsor,

Trustees,

Asset management company (AMC) and

Custodian.

- 27 -
 Mechanism

o The trust is established by a sponsor or more than one sponsor who is like

promoter of a company.

o The trustees of the mutual fund hold its property for the benefit of the unit

holders.

o Asset Management Company (AMC) approved by SEBI manages the

funds by making investments in various types of securities.

o Custodian, who is registered with SEBI, holds the securities of various

schemes of the fund in its custody.

o The trustees are vested with the general power of superintendence and

direction over AMC. They monitor the performance and compliance of

SEBI Regulations by the mutual fund.

- 28 -
 o SEBI Regulations require that at least two thirds of the directors of trustee

company or board of trustees must be independent i.e. they should not be

associated with the sponsors. Also, 50% of the directors of AMC must be

independent.

o All mutual funds are required to be registered with SEBI before they

launch any scheme.

Mutual Funds - A Globally Proven Investment

All investments whether in shares, debentures or deposits involve risk. Share value may

go down depending upon the performance of the company, the industry, state of capital

markets and the economy. Generally however, longer the term, lesser the risk. Companies

may default in payment of interest and principal on their debentures/bonds/deposits.

While risk cannot be eliminated, skillful management can minimize risk. Mutual Funds

help to reduce risk through diversification and professional management. The experience

and expertise of Mutual Fund managers in selecting fundamentally sound securities and

timing their purchases and sales help them to build a diversified portfolio that minimizes

risk and maximizes returns.

Worldwide, the Mutual Fund, or Unit Trust as it is called in some parts of the world, has

almost overtaken bank deposits and total assets of insurance funds. As of date, in the US

alone there are over 5,000 Mutual Funds with total assets of over US $ 3 trillion (Rs.l00

lakh crores). In India there are 34 Mutual Funds and over 300 schemes with total assets

of approximately Rs. 100,000 crores. The Securities and Exchange Board of India (SEBI)

regulate all mutual funds in India

- 29 -
Everyone who follows the financial news has heard of mutual funds and knows the stock

market has generally risen (with various ups-and-downs) for over 200 years. In fact, by

most measures, the stock market has made more money for more people, and done it

more reliably, than any other investment over the past 100 years! If you want to

accumulate substantial wealth, you must include stocks in your investments!

But, most people who "invest" don't study the market. They don't understand it, and they

don't have time to manage their portfolio wisely. That's where mutual funds come in. I

respect that other people have other opinions, and certainly not all mutual funds are well

managed - you MUST choose wisely and use appropriate caution! But, for most folks, a

good, solid, boring mutual fund is the golden path to riches.

Here are my Top 10 reasons to us mutual funds:

1. Selection. You can select from thousands of funds (you'll find one to suit your

needs) and you can get information on them easily. Magazines like "Money" are

easy to find. Most credit unions have information, and your local library is a

goldmine - and there's the Internet.

2. You Can Start Small. Most mutual funds will let you start with less than

$1000, and if you set it up for automatic deposits, some will let you start with

only $50. I've spent more than that in a restaurant! There is NO reason not to

consider this!

- 30 -
3. Simplicity. You deposit 10% of your income every month. Just pay yourself

first, then pay the mortgage, then pay everyone else.

4. Professional management. I don't always have time to research, select, and

monitor individual stocks. So, I pay a professional a small fee to do it for me. A

good fund manager will make you rich!

5. Compound interest. Depending on what index you pick, the U.S. stock market

has gone up an average of over 12% per year for the past 10 years, and it's been

almost that high for the past 20 years. The market fluctuates, but the beauty of this

is, you don't care! Over 10, 20, or 30 years, the system works every time!

6. Dollar-cost-averaging. The details are complicated, but by investing every

single month, whether the market is up or down, you get a tremendous boost from

the mathematics. Your "average cost" will always be less than the "average price"

you paid! And that is money in your pocket!

7. Diversification. A broad-based growth fund typically invests in dozens of

companies in different industries, sometimes even in different countries around

the world. If one stock goes down, hopefully dozens of others will go up. There is

excellent protection and sound risk management built-in to these funds.

- 31 -
8. Specialization. If you prefer, and if you do the research, there are funds that

invest in only a very small number of companies. If you can accept the additional

risk, you can invest in one particular industry, or one country, or in companies of

a certain size or that are environmentally responsible. This specialization offers

the potential for even greater profits, but it can also bring greater potential risk.

Study before you invest!

9. Fund "Families". Management companies that sponsor several different funds,

with different objectives, offer most mutual funds. They make it easy to move

your money between funds, so as your goals change, you can adjust your

investments with a quick phone call, or on the Internet.

10. Momentum. Once you get started, your enthusiasm builds. Once you have

money "in the market", you'll track it, manage it, and in all probability, your

desire to save will increase. If you've had difficulty saving in the past? START!

Those monthly statements will be positive reminders to do even more. Yes, you

should invest in tax-sheltered retirement plans first, and yes, there are other

investment possibilities. And yes, there is some risk, because the market can go

down. But to retire wealthy, pick a great, long-term growth fund, invest regularly,

and let the system work for you! The key, as always is: GET STARTED!

- 32 -
 STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY

LARGEST CATEGORY

DOMINATED BY : THE UNIT TRUST OF INDIA

Total corpus of Rs700bn

More than 20 million investors.

The biggest scheme : Unit Scheme 1964 (US 64) with a corpus of about

Rs200bn.

Governed by a special act of Parliament.

SECOND LARGEST CATEGORY

Floated by nationalized banks.

Canbank asset management floated by Canara bank and SBI funds

management floated by the State Bank of India are the largest of these.

GIC AMC floated by General Insurance Corporation and Jeevan Bima

Sahayog AMC floated by the LIC are some of the other prominent ones.

The aggregate corpus: Rs 150bn.

THIRD LARGEST CATEGORY

Floated by the private sector and by foreign asset management companies.

Largest are Prudential ICICI AMC and Birla Sun Life AMC.

The aggregate corpus: In excess of Rs 250 bn.

- 33 -
 Some of the AMCs operating currently
Name of the AMC Nature of ownership
Alliance Capital Asset Management (I) Private Limited Private foreign
Birla Sun Life Asset Management Company Limited Private Indian
Bank of Baroda Asset Management Company Limited Banks
Bank of India Asset Management Company Limited Banks
Canbank Investment Management Services Limited Banks
Cholamandalam Cazenove Asset Management Company Limited Private foreign
Dundee Asset Management Company Limited Private foreign
DSP Merrill Lynch Asset Management Company Limited Private foreign
Escorts Asset Management Limited Private Indian
First India Asset Management Limited Private Indian
GIC Asset Management Company Limited Institutions
IDBI Investment Management Company Limited Institutions
Indfund Management Limited Banks
ING Investment Asset Management Company Private Limited Private foreign
J M Capital Management Limited Private Indian
Jardine Fleming (I) Asset Management Limited Private foreign
Kotak Mahindra Asset Management Company Limited Private Indian
Kothari Pioneer Asset Management Company Limited Private Indian
Jeevan Bima Sahayog Asset Management Company Limited Institutions
Morgan Stanley Asset Management Company Private Limited Private foreign
Punjab National Bank Asset Management Company Limited Banks
Reliance Capital Asset Management Company Limited Private Indian
State Bank of India Funds Management Limited Banks
Shriram Asset Management Company Limited Private Indian
Sun F and C Asset Management (I) Private Limited Private foreign
Sundaram Newton Asset Management Company Limited Private foreign
Tata Asset Management Company Limited Private Indian
Credit Capital Asset Management Company Limited Private Indian
Templeton Asset Management (India) Private Limited Private foreign
Unit Trust of India Institutions
Zurich Asset Management Company (I) Limited Private foreign

- 34 -
The graph given below gives the brief picture of history of mutual fund
industry in India:-

(Total Asset under Management)

Banks v/s Mutual Funds

BANKS MUTUAL FUNDS

Returns Low Better

Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Minimum balance between
Interest calculation Everyday
10th& 30th Of every month
Maximum Rs.1 lakh
Guarantee None
on deposits

- 35 -
 ADVANTAGES OF MUTUAL FUNDS

1. Professional Management

Mutual funds bring about professional management of funds. Good mutual fund

managers with excellent research team can lead do better job of monitoring the

companies they have chosen to invest than you can. In a mutual fund, you are handing

your money to an investment professionals who have experience in making investment

decisions. Qualified investment professionals seek to maximize returns and minimize

risk monitor investor's money.

It is then the Fund Manager's job to

(a) Find the best securities for the fund, given the fund's stated investment objectives;

and

(b) Keep track of investments and changes in market conditions and adjust the mix of
the portfolio, as and when required.

2. Diversification

Mutual funds invest in broad range of securities- a number of companies across a broad

cross-section of industries and sectors. This limits the investment risk by reducing the

effect of possible decline of value of any one security. Because seldom do all stocks

decline at the same time and in the same proportion. One of the main reason people

choose mutual fund investments is that the risk is spread over number of stocks. You

achieve this diversification through a Mutual Fund with far less money than you can do

on your own.

- 36 -
 3. Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. Most open-ended funds mail your redemption

proceeds, which are linked to the fund's prevailing NAV (net asset value), within three to

five working days of your putting in your request.

In closed-end schemes, the units can be sold on a stock exchange at the prevailing

market price or the investor can avail of the facility of direct repurchase at NAV related

prices by the Mutual Fund.

4. Transparency

Regulations made by SEBI and AMFI are transparent enough. We can see and keep track

of investments that have been made on our behalf and specific investments made by the

mutual fund scheme to see where your money is going. There may be changes from time

to time in a mutual fund. The mutual funds are required to inform any material changes to

their unit holders. Apart from it, many mutual funds send quarterly newsletters to their

investors. The performance of a scheme is reflected in its net asset value (NAV), which is

disclosed on daily basis in case of open-ended schemes and on weekly basis in case of

close-ended schemes. The NAVs of mutual funds are required to be published in

newspapers. The NAVs are also available on the web sites of mutual funds. All mutual

funds are also required to put their NAVs on the web site of Association of Mutual Funds

in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all

mutual funds at one place

- 37 -
SEBI Regulations relate to the formation, administration and management of mutual

funds and also prescribe disclosure and accounting requirements. Such a high level of

regulation seeks to protect the interest of investors.

5. Variety

There are various schemes available in the market in which we can invest. There are

technology funds, FMCG funds, blue chip stocks bonds or mix of stocks and bonds. We

can choose fund on basis of safety, stability, or returns.

6. Convenience

Investing in mutual funds has large amount of convenience. We but only one instrument

actually but enjoy the

Benefits of diversified portfolios

Wide range of services like SIP, SWP, Dividend Reinvestment plan.

Funds managers look after the portfolios make payments and collects interests

from all companies in diversified portfolios.

Reduces paperwork and helps you

Avoid many problems such as bad deliveries, delayed payments and follow up

with brokers and companies.

Save your time and make investing easy and convenient.

7. Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher return

as they invest in a diversified basket of selected securities.

- 38 -
 8. Affordability

Individuals may lack sufficient amount of funds to invest in high valued stocks, but a

mutual fund because of its large corpus allows even a small investor to take the benefit of

its investment strategy.

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the

investment objective of the scheme. An investor can buy in to a portfolio of equities,

which would otherwise be extremely expensive. Each unit holder thus gets an exposure to

such portfolios with an investment as modest as Rs.500/-. Thus it would be affordable for

an investor to build a portfolio of investments through a mutual fund rather than investing

directly in the stock market.

Mutual Funds are a relatively less expensive way to invest compared to directly investing

in the capital markets because the benefits of scale in brokerage, custodial and other fees

translate into lower costs for investors.

9. Choice of Schemes

Mutual funds offer a whole variety of schemes. This variety is beneficial in two ways:

(a) It offers different types of schemes to investors with different needs and risk

appetites;

(b) It offers an opportunity to an investor to invest sums across a variety of schemes,

both debt and equity.

For example, an investor can invest his money in a debt scheme and a equity scheme

depending on his risk appetite to create a balanced portfolio easily or simply just buy a

Balanced Scheme.

- 39 -
 Limitations

1. Entry and exit load

Mutual funds are victims of their own success. When a large body like mutual

fund invests in shares. The concentrated buying or selling often results in adverse price

movements i.e. at the time of buying the funds end up paying higher price and while

selling it realizes lower prices.

This problem is severe in emerging markets like India; where excluding few stocks, in

Sensex, are not liquid, let alone the stocks in NSE 50 or CRISIL 500. So, there is simply

no way that a fund can the Sensex or any other index, if it blindly invests in the same

stocks those are in proportion. For obvious reasons, this problem is even more severe for

funds investing in small capitalization stocks. However given the large size of debt

market, excluding UTI, most of the funds do not face this problem.

2. Wait time before investments

It takes time for a mutual fund to invest money. Unfortunately, most of the mutual funds

receive money when markets are in boom phase and investors are willing to try out

investment avenues like mutual funds.

All funds cannot be invested in one day. There is always some money waiting to be

invested. There may arise time lag before investment opportunities are identified.

3. Fund management costs

The costs of the fund management are deducted from the fund. This includes marketing

and initial costs deducted at the time of entry itself, called loads.

- 40 -
Then there is annual asset management fee and expenses together concern with Expenses

ratio.

4. Cost of churn
The portfolio of fund doesn t remain constant. The extent to which portfolio changes are

a function of the style of the individual fund manager. i.e. if he is buy and hold type

manager or one who aggressively churns the funds. It is also dependant on volatility of

fund size i.e. whether fund constantly receives fresh subscriptions and redemptions. Such

portfolio changes have associated costs of brokerage, custody fees, registration fees etc.

that lowers the portfolio return commensurately.

5. Change of index composition

World over, the indices keep changing to reflect changing market conditions. There is an

inherent survivorship bias in this process, with the bad stocks weeded out and replaced by

emerging blue chips. This is a severe problem in India with Sensex having been changed

twice in last 5 years, with each change being quiet substantial.

Another reason for change in index composition is mergers and acquisitions. The

weightage of shares of a particular company in the index changes if it acquires a large

company, which is not a part of index.

- 41 -
 Different Types Of Mutual Fund Schemes
Schemes according to Maturity Period
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme

depending on its maturity period.

1. Open-ended Fund/ Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on

a continuous basis. These schemes do not have a fixed maturity period. Investors can

conveniently buy and sell units at Net Asset Value (NAV) related prices, which are

declared on a daily basis. The key feature of open-end schemes is liquidity. Such funds

can be issued and redeemed during the lifetime of the scheme.

2. Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is

open for subscription only during a specified period at the time of launch of the scheme.

Investors can invest in the scheme at the time of the initial public issue and thereafter

they can buy or sell the units of the scheme on the stock exchanges where the units are

listed. In order to provide an exit route to the investors, some close-ended funds give an

option of selling back the units to the mutual fund through periodic repurchase at NAV

related prices. SEBI Regulations stipulate that at least one of the two exit routes is

provided to the investor i.e. either repurchase facility or through listing on stock

exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

- 42 -
 Schemes according to Investment Objective
A scheme can also be classified as growth scheme, income scheme, or balanced scheme

considering its investment objective. Such schemes may be open-ended or close-ended

schemes as described earlier. Such schemes may be classified mainly as follows:

1. Growth / Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to

long- term. Such schemes normally invest a major part of their corpus in equities. Such

funds have comparatively high risks. These schemes provide different options to the

investors like dividend option, capital appreciation, etc. and the investors may choose an

option depending on their preferences. The investors must indicate the option in the

application form. The mutual funds also allow the investors to change the options at a

later date. Growth schemes are good for investors having a long-term outlook seeking

appreciation over a period of time.

2. Income / Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures,

Government securities and money market instruments. Such funds are less risky

compared to equity schemes. These funds are not affected because of fluctuations in

equity markets. However, opportunities of capital appreciation are also limited in such

funds. The NAVs of such funds are affected because of change in interest rates in the

country. If the interest rates fall, NAVs of such funds are likely to increase in the short

- 43 -
run and vice versa. However, long-term investors may not bother about these

fluctuations.

3. Balanced Fund

The aim of balanced funds is to provide both growth and regular income as such schemes

invest both in equities and fixed income securities in the proportion indicated in their

offer documents. These are appropriate for investors looking for moderate growth. They

generally invest 40-60% in equity and debt instruments. These funds are also affected

because of fluctuations in share prices in the stock markets. However, NAVs of such

funds are likely to be less volatile compared to pure equity funds.

4. Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity, preservation

of capital and moderate income. These schemes invest exclusively in safer short-term

instruments such as treasury bills, certificates of deposit, commercial paper and inter-

bank call money, government securities, etc. Returns on these schemes fluctuate much

less compared to other funds. These funds are appropriate for corporate and individual

investors as a means to park their surplus funds for short periods.

5. Gilt Fund

These funds invest exclusively in government securities. Government securities have no

default risk. NAVs of these schemes also fluctuate due to change in interest rates and

other economic factors as the case is with income or debt oriented schemes.

- 44 -
 6. Leveraged Funds
Investment Objective is to increase the value of the portfolio and benefit the shareholders

by gains exceeding the cost of borrowed funds Investment avenue: Speculative and risky

investments, like short sales to take advantage of declining market. Not common in India

7. Hedge Funds
Investment Objective is To hedge risks in order to increase the value of the portfolio

Investment Avenue: Employ speculative trading principles - buy rising shares and sell

shares whose prices are likely to fall. Not common in India

8. Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index,

S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same

weightage comprising of an index. NAVs of such schemes would rise or fall in

accordance with the rise or fall in the index, though not exactly by the same percentage

due to some factors known as "tracking error" in technical terms. Necessary disclosures

in this regard are made in the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds, which are

traded on the stock exchanges.

9. Diversified Debt/Equity Funds

A debt that invests in all available types of debt security, issued by entities across all

industrial sector is properly diversified debt fund. A diversified debt fund is less risky

than a narrow-focus fund that investment in debt security of a particular sector or equity.

- 45 -
A fund that seeks to invest in equities, except for a very small portion in liquid money

market securities, but it not focused on any one or few sectors or share, may be termed as

diversified equity fund. While expose to all equity price risk, diversified equity funds

seek to reduce the sector or stock specific risks through diversification.

10. Equity Linked Saving Scheme (ELSS)

This type of fund is totally invest in Equities, and this type of fund has lock-in period

before the end of which funds can not be withdrawn. Investment in these schemes

entitled the investor to claim an income tax rebate.

There are more funds such as

11. Small-Cap Equity Fund

12. Offshore Fund

13. Hybrid Funds

14. Commodity Funds

15. Real Estate Fund

16. Fund of Funds

17. Exchange Traded Funds

18. Focused Debt/Equity Fund

19. Fixed Term Plan Fund

20. Assured Return Fund

- 46 -
 Equity
Funds

Balanced Funds

Diversified Debt Funds

Risk

Level

Guilt Funds

Money Market Funds

Types of Funds

- 47 -
INVESTOR TYPES AND OPTIONS AVAILABLE

An investor desiring high liquidity in short term can opt for money market funds.

The fund invests mostly in commercial papers, Govt. securities, call money or

corporate deposits

An Investor having an investment objective of regular income for a minimum

term with low risk can go for income funds. The investment is mostly in non-

convertible debentures, corporate bonds, commercial papers etc.

An investor who is capable of taking high risks for long time for the purpose of

capital appreciation can go for growth / equity funds. These invest mainly in

equities or equity related instruments.

An investor desiring current income and capital appreciation which involves

investments in equities as well as fixed income securities can go for balanced

funds.

Investor who is keen to save tax for long term by investing in mostly equities can

opt for Tax saver funds.

An investor having objective of minimum risk and maximum liquidity for long

period can opt for GILT Funds.

An investor who can take high risk for long time with investment in equities of

specific industry can opt for Sector Funds.

- 48 -
 RIGHTS OF INVESTORS OF MUTUAL FUND

A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds)

Regulations, is entitled to:

1. Receive unit certificates or statements of accounts confirming the title within 6

weeks from the date of closure of the subscription or within 6 weeks from the date

of request for a unit certificate is received by the Mutual Fund.

2. Receive information about the investment policies, investment objectives,

financial position and general affairs of the scheme.

3. Receive dividend within 42 days of their declaration and receive the redemption

or repurchase proceeds within 10 days from the date of redemption or repurchase.

4. Vote in accordance with the Regulations to:-

a. Approve or disapprove any change in the fundamental investment policies of

the scheme, which are likely to modify the scheme or affect the interest of the

unit holder. The dissenting unit holder has a right to redeem the investment.

b. Change the Asset Management Company.

c. Wind up the schemes.

5. Inspect the documents of the Mutual Funds specified in the scheme's offer

document.

- 49 -
 RISK INVOLVED IN MUTUAL FUND

After understanding the basics of mutual funds an investor can build a portfolio. But

before building a portfolio it is necessary to understand various other elements that effect

the potential value of the investment over the years. The basic thing to be kept in mind is

that, when you invest in mutual funds there is no guarantee that you will end-up more

money when you withdraw your investment then what you started out with. That is the

potential of loss is always there. The loss in the value of your investment is what

considered as risk in investment.

Risk also refers to volatility i.e., the up and down activity in the market and individual

issues that constantly occur over the period of time. The volatility can be caused by

number of factors like interest rate charges, inflation or general economic conditions. It is

the variability, uncertainty and potential loss of investment that causes the investor to

worry. People fear that the shock that they hold may fail substantially. But it because of

this volatility that a person can expect long term returns that the saving account. The

basic principal here is that the greater the risk you take, the grater potential reward you

earn.

Different types of mutual funds have different level of volatility or potential price change

and those with grater change of price change are also the funds that can produce the

grater returns over time. So risk basically has two side: it causes the value of investment

to fluctuate, but it is the precisely the reason you can expect to earn higher returns.

- 50 -
 Risk Return Grid

Risk
Benefits offered by
Tolerance/Return Focus Suitable Products
MFs
Expected
Bank/ Company FD, Debt Liquidity, Better Post-
Low Debt
based Funds Tax returns
Balanced Funds, Some
Partially Liquidity, Better Post-
Diversified Equity Funds
Debt, Tax returns, Better
Medium and some debt Funds, Mix
Partially Management,
of shares and Fixed
Equity Diversification
Deposits
Diversification,
Capital Market, Equity
Expertise in stock
High Equity Funds (Diversified as well
picking, Liquidity, Tax
as Sector)
free dividends

TYPES OF RISKS

1. Market Risk

Sometimes the prices or the yield of the securities rise or fall due to broad outside

influences. When this happens, the stock prices of both, an outstanding, highly

profitable company and the fledgling corporation may be affected. This change in

price is due to Market Risk also called as Systematic Risk .

2. Inflation Risk

Inflation risk is also called as a loss of purchasing power. Whenever rises forward

faster than the earning on your investment, you run the risk of that you will be

able to buy less, not more. Inflation risk occurs when prices rise more faster than

the returns. The impact of change in inflation rate is similar to that of change in

interest rate. This means that inflation risk is grater for longer-term bonds.

- 51 -
 Hence, during the period of volatile inflation rates borrowers will be disinclined

to issue long term fixed interest bond and the investor s too will be reluctant to

buy such share.

3. Interest Rate Risk

Changing interest rates affects both equities and investments. The increase in

interest rates may depress the market prices, while decrease in interest rates will

push the market price up. Usually the greater the maturity the greater the degree

of price volatility.

4. Credit Risk

Credit risk refers to that kind of risk that arises from the fact that borrower may

or may not pay the interest and /or principal on time. It is normally judge from

the rating given by rating agency like CRISIL, CARE, ICRA. It basically judges

how stable the company is? How certain are you that it will be able to pay the

interest you are promised or you re principal when matured.

5. Liquidity risk

Another often overlooked, but equally dangerous threat to all investors is liquidity

risk. This refers to the possibility that you may need your money before your

investment s maturity date. Much so-called risk free investment such as

certificates of deposit and annuities with surrender charges must be held for a

specified period of time in order for you to receive the stand return. If you need

your money for an emergency, you ll probably be subjected to penalties, and the

interest you actually earn is calculated using a much lower rate.

- 52 -
6. Exchange Risk

A number of companies generate revenues in foreign currencies and may have

investments or expenses denominated in foreign currencies. Changes in exchange

rate may therefore may have positive or negative impact on companies and which

in turn will have effect on the investment of the fund.

7. Investment Risk

The sectoral fund scheme, investment will be predominantly in equities of select

companies in particular sector. Accordingly the NAV of the scheme is linked to

the equity performance of such companies and may be more volatile than more

diversified portfolio of equities.

8. Changes in the Government Policy

Changes in Government policy especially in regard to the tax benefits may impact

the business prospects of the companies lending to impact on investments made

by the fund.

- 53 -
 Investors Perspective

Mutual Funds Vs. Other Products

Investment Risk Tolerance Investment

Objective Horizon
Equity Capital High Long
Appreciation
FI Bonds Income Low Medium Long

Corporate Income High / Moderate / Medium Long

Debentures Low

Co. Fixed Income High / Moderate / Medium

Deposits Medium Low

Bank Deposits Income Generally Low Flexible All

Flexible Terms

PPF Income Low Long

Life Insurance Risk Cover Low Long

Gold Inflation Low Long

Hedge
Real Estate Inflation Low Long
Hedge

- 54 -
 What is NAV? How it is calculated?

The most important part of the calculation is the valuation of the assets owned by the

fund. Once it is calculated, the NAV is simply the net value of assets divided by number

of units outstanding.

Asset value is equal to:

Sum of market value of shares/debenture + Liquid assets/cash held, if any +

Dividends/interest accrued current liabilities Expenses accrued but not paid.

NAV = Asset value of the fund

No. of units outstanding

For example, consider that a fund collects Rs. 10 Crores by issuing units of Rs. 10 each.

Therefore when the mutual fund begins operations, it would have 1 crore units of Rs. 10

each. Lets assume that Portfolio is as follows:

Equity Shares: Rs. 4,50,00,000

Govt. Bonds: Rs. 3,00,00,000
Corporate Bonds: Rs. 1,50,00,000
Money Market Instruments Rs. 1,00,00,000
Total Rs. 10,00,00,000

After 30 Days, Fund was scheduled to open for fresh sales as well as repurchases. The

investors, who come into the fund, will by new units at the price that represents the value

of underlying portfolio. Similarly, investors who redeem their units will do so at a price

that reflects current value of the portfolio in which they originally invested.

- 55 -
 Therefore, the investment portfolio will have to be valued again, to ascertain what

its current value is. In the interim, the mutual fund would have incurred expenses, earned

incomes, which also will have to be reflected in the price per unit. We call them accrued

income and expenses. Mutual funds have internal accounting policies that enable the

computation of the accruals.

Equity Shares: Rs. 6,50,00,000

Govt. Bonds: Rs. 2,80,00,000
Corporate Bonds: Rs. 1,20,00,000
Money Market Instruments Rs. 1,00,00,000
Total Rs. 11,50,00,000

The value of investments is changed with the changes in market prices. The process of

valuing assets by using market prices is called as Marking to prices . Lets assume that

level of current assets and current liabilities were 4,00,000 and 3,00,000 respectively.

The net Assets of the fund can be computed as follows:

Total assets 11,50,00,000

Plus Current assets 4,00,000
Plus Accrued Income 1,00,000
11,55,00,000
Less Current Liabilities 3,00,000
Less Accrued Expenses 1,35,000
Net Asset Value of Fund 11,50,65,000
Divided by No. of Units (1,00,00,000)

Therefore NAV Per Unit 11.5065

- 56 -
 Factors Affecting NAV of Fund

Sale and purchase of securities

Sale and Repurchase of units

Valuation of assets

Accrual of Income and Expenses

Market value of investment portfolio

No. of units outstanding

- 57 -
 Portfolio Management

A portfolio is collection of Assets. In portfolio management, these assets are of

financial nature. The portfolio manager invests money in diverse assets with the aim of

maximizing returns and minimizing risks.

According to SEBI Portfolio is Total holdings of securities belonging to one

person

Portfolio manager is a person who is pursuant to a contract with the client

undertakes the management of portfolio of securities of funds of a client.

Functions Of Portfolio Manager

1. To frame the investment strategy and select an investment mix.

2. To provide a balanced portfolio, which hedge against inflation and also optimize

returns.

3. To make timely decisions regarding sales and purchases of securities.

4. To maximize after tax return by investing part of portfolios in tax saving schemes.

Portfolio management can be institutional in nature. The mutual Funds are a kind

of portfolio schemes.

- 58 -
 Steps In Portfolio Management
Portfolio management is an ongoing process and following steps are taken

1. Specification and quantification of investor s objectives, constraints and

preferences in the form of portfolio management.

2. Determination and quantification of capital market expectations from the

economy, market sector, industries and individual securities.

3. Allocation of assets into selected securities.

4. Performance measurement and evaluation of portfolio to ensure that investors

objectives are attained.

5. Monitoring the performance of securities and responding to changes in

investors objectives, constraints and market expectations.

6. Rebalancing the portfolio whenever necessary.

- 59 -
 CHAPTER-VI:

ANALYSIS AND
INTERPRETATION OF THE DATA

- 60 -
 Analysis & Interpretation of the data

Actual Comparison

Comparison of Asset Under Management (AUM) with Sensex.

The new millennium brought with itself what had rarely been seen in the market.

Burgeoning growth. Riding on the ICE boom, the market touched great heights. Also

touching new heights were the returns generated by equity funds. But as the saying goes,

what goes up has to come down and the higher one goes the steeper is the fall.

This is exactly what the equity funds have experienced over the last one year as they have

been robbed of their valuables by the volatile markets. The fall out of the volatile market

conditions is reflected in significant erosion of the total assets under management of the

equity funds.

As can be seen, in the last one-year, equity funds have lost almost 18 percent of the

wealth they had started the year with. Yet, surprisingly, they have managed to stay above

the market that lost almost 26 percent in the same duration. So despite the fact that people

have lost money in this year at a rate greater than the rate of depreciation of market

capitalization of the index, the funds have received some fresh inflows. The industry on

- 61 -
the whole saw a cumulative inflow of Rs. 5962 crores through new issues and Rs. 81210

crores through existing schemes in the year but also saw redemption of Rs. 68514 crores

in the same period.

The same trends can be observed if we dissect the industry across different categories of

fund houses. Assets under management of different categories of fund houses have

moved diversely. The industry finished with lower assets under management as it lost

almost 2 percent in the year while the industry giant UTI lost about 4.5 percent followed

by Indian Joint Ventures at 4.1 percent. However, the category to have lost maximum in

the year was that of Bank sponsored mutual funds that lost almost 56 percent. The poor

performance in this category was not just due to the ICE bust as many would like to

believe but also due to redemption of many schemes in the sector. However, the industry

saw shifting patterns in the investor s preferences. The private sector mutual funds and

foreign joint ventures struck big time this year and have emerged as the biggest gainers

despite the market crash. Both the categories gained in excess of 30 percent and defied

- 62 -
the general trend in the industry. This stresses the point that returns as well as quality of

services matter to the investor. This had hitherto been not too significant till now but has

become apparent now.

This is indeed reflective of maturing investors, though only just. Investors have been

known to follow the herd mentality and sell off when the principal amount is under

pressure. Although people have redeemed money from their investments in equity, by

and large, more money has also flown in to the industry. With the markets looking to

revive, the industry can still hope for better days, as investors seem to be gradually

understanding that despite the correlation between the market and mutual funds, they are

better placed with their risks reduced in mutual funds.

- 63 -
MUTUAL FUND DATA FOR THE QUARTER JANUARY- MARCH 2006

SALES DURING THE QUARTER JANUARY - MARCH 2006 TYPE AND CATEGORY WISE

Rs. In crore
Open-end Close-end Total

Scheme no. Amount Scheme no. Amount Scheme no. Amount

1. Income 2 69 76 20541 78 20610

2. Growth 14 16740 2 2761 16 19501

3. Balanced - - - - - -

4. Money 3 578 - - 3 578

market

5. Guilt - - - - - -

6. ELSS. 3 539 1 138 4 677

Total 22 17926 79 23440 101 41336

101 new Schemes were launched in the quarter and a sum of Rs.41,366 crores was

mobilsed - Rs. 20,610 crores under income schemes, Rs.19,501 crores under equity

schemes, Rs.578 crores under liquid schemes and Rs.677 crores under the Equity Linked

Schemes.

Total Funds mobilized for quarter stood at Rs. 3,29,382 crores as against Rs.2,20,907

crores for the corresponding quarter last year, representing an increase of 49 %.

Redemptions at Rs.3,06,130 crores were 37 % higher than the redemptions of Rs.

2,23,037 crores in the corresponding quarter last year.

On a net basis, there was an inflow of Rs. 23,252 crores during the quarter.

- 64 -
The Assets Under Management as on March 31, 2006 stood at Rs.2, 31,862 crores as

against Rs.1, 49,554 crores as at the end of the previous year, registering an increase of

55%over the year.

NAME OF NEW SCHEMES WERE LOUANCH IN BETWEEN JAN- MAR2006

OPENEND INCOME:

Deutsche Money Plus Fund and Escorts Floating Rate Fund.

OPENEND GROWTH:

Baroda Global Fund, Birla Infrastructure Fund, Chola Contra Fund, HSBC Advantage

India Fund, ING Vysya A.T.M. Fund, Kotak Lifestyle, Principal Infrastructure &

Services Industries Fund, Prudential ICICI Fusion Fund, Quantum Long Term Equity

Fund, Reliance Equity Fund, SBI Blue Chip Fund, Standard Chartered Imperial Equity

Fund, UTI Contra Fund and UTI Leadership Equity Fund.

OPENEND LIQUID:

Standard Chartered Liquidity Manager, Standard Chartered Liquidity Manager Plus and

TATA Liquidity Management Fund.

OPENEND ELSS:

ABN AMRO Tax Advantage Plan (ELSS), Deutsche Tax Saving Fund and Fidelity Tax

Advantage Fund.

CLOSEEND INCOME:

ABN AMRO Fixed Term Plan - Series 1,ABNAMRO Fixed Term Plan - Series 2

- 65 -
Quarterly Plan A, ABN AMRO Fixed Term Plan Series 2 Thirteen Month Plan, Birla

Fixed Term Plan Quarterly Series I, Birla Fixed Term Plan Quarterly Series 2, Birla

Fixed Term Plan Series E, Birla Fixed Term Plan Series F, Birla Fixed Term Plan Series G,

Birla Fixed Term Plan - Series H, Chola FMP Series -2 (Quarterly Plan - II), Chola FMP

Series 2 (Quarterly Plan B I), Chola FMP Series - 3 (Quarterly Plan - I ), Deutsche

Fixed Term Fund Series 5, Deutsche Fixed Term Fund - Series 6, Deutsche Fixed Term

Fund Series 7, Deutsche Fixed Term Fund Series 8, Deutsche Fixed Term Fund Series 9,

DSP Merrill Lynch Fixed Term Plan - Series 1B, DSP Merrill Lynch Fixed

Term Plan - Series 1C, DSP Merrill Lynch Fixed Term Plan Series 2, DSP Merrill Lynch

Fixed Term Plan - Series 3A, Franklin Templeton Fixed Tenure Fund Series IV- 60

Months Plan, Franklin Templeton Fixed Tenure Fund Series V- 13 Months Plan,

Grind lays Fixed Maturity Plus 19 Plan, Grind lays Fixed Maturity 20th. Plan, Grind lays

Fixed Maturity 21st. Plan, Grind lays Fixed Maturity 22nd. Plan, Grind lays Fixed Maturity

Plus Plan I, Grind lays Fixed Maturity Plus Plan II, HDFC Fixed Maturity Plans March

2006 (1), HSBC Fixed Term Series II, HSBC Fixed Term Series III, HSBC Fixed Term

Series IV, HSBC Fixed Term Series V, HSBC Fixed Term Series VI, HSBC Fixed Term

Series VII, HSBC Fixed Term Series VIII, HSBC Fixed Term Series XIII, ING Vysya Fixed

Maturity Fund Series VI, ING Vysya Fixed Maturity Fund Series VIII, ING Vysya Fixed

Maturity Fund Series IX, JMFixed Maturity Quarterly Plan - QSG7 Series, Kotak FMP

Series XIII, Kotak FMP Series XIV, Kotak FMP Series XV, Kotak FMPSeries XVI,

Kotak FMPSeries XVII, Kotak FMP Series XVIII, Kotak FMP Series XIX, Kotak FMP

Series XX, Kotak FMP Series XXI, Kotak FMP Series XXII, Kotak FMP Series XXIII,

Kotak FMP Series XXV, LIC MF FMP Series IV, LIC MF FMP Series V, LIC MF FMP

- 66 -
Series VI, Principal Pnb Fixed Maturity Plan - 91 Days Series I, Prudential ICICI Fixed

Maturity Plan Series 27 Monthly Plan, Prudential ICICI Fixed Maturity Plan - Series 28,

Prudential ICICI Fixed Maturity Plan - Series 28 - 4 Months Plan, Prudential ICICI Fixed

Maturity Plan - Series 28 - 16 Months Plan, Prudential ICICI Fixed Maturity Plan - Series31

4Months Plan, Reliance Fixed Maturity Fund - Series II Monthly Plan IX, Reliance Fixed

Maturity Fund - Series II Quarterly Plan III, Reliance Fixed Maturity Fund Series II

Monthly Plan XI, Standard Chartered Fixed Maturity 1st. Plan, Standard Chartered

Fixed Maturity 2nd. Plan, Standard Chartered Fixed Maturity - 3rd. Plan, Standard

Chartered Fixed Maturity 4th. Plan, Standard Chartered Tri-Star Series I, Sundaram Fixed

Term Plan Series I, Sundaram Fixed Term Plan Series III, Tata Fixed Horizon Fund,

TATA Fixed Horizon Fund Series 5 and UTI Fixed Term Income Fund Series I Plan 18.

CLOSE END GROWTH:

Franklin India Smaller Companies Fund and HDFC Long Term Equity.

CLOSE END ELSS:

TATA Tax Advantage Fund 1.

- 67 -
All Schemes Including New Schemes Of Mutual Funds With Their Aum

Rs. In crore
Schemes Open-end Close-end Total

Name Scheme no. Amt. Scheme no. Amt. Scheme no. Amt.

1. Income 139 14724 112 23751 251 38295

2. Growth 190 29742 4 3349 194 33091

3. Balanced 34 1101 2 - 36 1101

4. Money 45 253986 - - 45 253986

market

5. Guilt 29 651 - - 29 651

6. ELSS. 26 2119 11 139 37 2258

Total 463 302323 129 27059 592 329382

- 68 -
Redemption of Mutual Funds During The Quarter Of Jan-Mar 2006

Rs. In crore
Schemes Open-end Close-end Total Net Inflow/

Names Outflow

1. Income 25,647 3,919 29,566 8,729

2. Growth 17,404 - 17,404 15,687

3. Balanced 1,000 - 1,000 101

4. Money 256,786 - 256,786 (2800)

market

5. Guilt 1,241 - 1,241 (590)

6. ELSS. 33 100 133 2,125

Total 302,111 4,011 306,130 23,252

DATA ON FUND OF FUNDS JANUARY - MARCH 2006

No. of schemes Sales Redemptions AUM as on

31/03/2006

Fund of funds 13 218 355 1012

Notes:1. Fund of Funds is a scheme wherein the assets are invested in

the existing schemes of mutual funds.

- 69 -
 ASSET UNDER MANAGEMENT AS ON MARCH 31, 2006

Rs. In crore
Sr.No. Name of Asset Management Company Asset under Management

A Bank Sponsored

(a) Joint venture Predominantly Indian

1. 1 SBI Funds Management Pvt. Ltd. 13,186

Total A (a) 13,186

(b) OTHERS

1. BOB Asset Management Co. Ltd. 191

2. Canbank Investment Management Services Ltd 2,223

3. UTI Asset Management Co. Pvt. Ltd. 29,519

Total A (b) 31933

Total A (a+b) 45119

B Institution

1. Jeevan Bima Sahayog Asset Management Co. 5,229

Total B 5,229

C Private Sector

(a) INDIAN

1. Benchmark Asset Management Co. Pvt. Ltd. 982

- 70 -
2. Cholamandalam Asset Management Co. Ltd. 2,007

3. Credit capital Asset Management Co. Ltd. 232

4. Escorts Asset Management Ltd. 164

5. J.M. Financial Asset Management Pvt. Ltd. 2,596

6. Kotak Mahindra Asset Management Co. Ltd. 9,941

7. Quantum Asset Management Co. Pvt. Ltd. 11

8. Reliance Capital Asset Management Ltd. 24,670

9. Sahara Asset Management Co. Pvt. Ltd. 282

10. Tata Asset Management Ltd. 9,717 9,717

Total C (a) 50,602

(b) JOINT VENTURE PREDOMINANTLY

INDIAN

1. Birla Sun Life Asset Management Co. Ltd. 15,019

2. DSP Merrill Lynch Fund Managers Ltd. 10,795

3. HDFC Asset Management Co. Ltd. 21,550

4. Prudential ICICI Asset Management Co. Ltd. 23,502

5. Sundaram Asset Management Co. Ltd. 3,278

Total C (b) 74,114

(c) JOINT VENTURES - PREDOMINANTLY

FOREIGN

1. ABN AMRO Asset Management (India) Ltd. 2,769

- 71 -
2. Deutsche Asset Management (India) Pvt. Ltd. 2,535

3. Fidelity Fund Management Pvt. Ltd. 3,663

4. Franklin Templeton Asset Management (India) 17,827

Pvt Ltd.

5. HSBC Asset Management (India) Pvt. Ltd. 9,221

6. ING Investment Management (India) Pvt. Ltd. 1,961

7. Morgan Stanley Investment Management Pvt. 2,892

Ltd.

8. Principal Pnb Asset Management Co.Pvt. Ltd. 6,489

9. Standard Chartered Asset Management Co. Pvt. 9,411

Ltd.

Total C (c) 56,768

Total C (a+b+c) 181,514

Total (A+B+C) 231,862

- 72 -
 ANALYSIS OF THREE ASSET MANAGEMENT COMPANIES

I have taken three mutual fund companies for the comparison purpose. These are as

follows

1. UTI Mutual Fund

2. SBI Mutual Fund

3. TATA Mutual Fund

In this part of report I have taken various product of these three companies and made

analysis on the basis of their returns, investment pattern, their expenditure, dividend

history, Total Corpus, benchmark index, and comparison in the funds return &

benchmark growth.

UTI Asset Mgmt Company Pvt. Ltd.

Sponsors

1. State Bank of India.

2. Punjab National Bank.

3. Bank of Baroda.

4. Life Insurance Corporation of India.

Trustee

1. UTI Trustee co. (P) Ltd.

Investment Manager

1. UTI Asset Management co. (P) Ltd.

Custodians

- 73 -
 1. Stock Holding Corporation of India Limited.

Chairman

1. Mr. U. K. Sinha

Chief Investment Officer

1. Mr. A K Sridhar

Compliance Officer

1. Mr. Rajesh Verma

Address

UTI Towers, Gn Block, Bandra Kurla Complex,

Bandra East, Mumbai 400051

Telephone No. 022-5678 6666

E-mail- uticoirc@uti.co.in

- 74 -
 SBI Asset Mgmt Company Pvt. Ltd.

Sponsors

1. State Bank of India.

Trustee

1. SBI Mutual Fund Trustee Company Private Limited

Name of Trustee

1. Dr. Arvind Virmani

2. Dr. Malati Anagol

3. Mr. S K Hariharan

4. Prof. S K Barua

5. Mr. Raj Nair

Name of Fund Manager

1. Mr. Chetan Savla

2. Mr. Ganti N. Murthy

3. Mr. Gopal Agrawal

4. Mr. Jayesh Shroff

5. Mr. K. Ramkumar

6. Mr. Nimesh Chandan

7. Mr. Pankaj Gupta

8. Mr. Sanjay Sinha

9. Mr. Sanjay Vaid

- 75 -
Custodians

1. Stock Holding Corporation of India Limited.

2. City Bank.

3. HDFC Bank Ltd.

Chairman

1. Mr. P.G.R. Prasad

Chief Investment Officer

1. Mr. N. Sethuram Iyer

Compliance Officer

1. Mr. Ashutosh Vaidya

Address

191, Maker Tower E, Cuffe Parade,

Mumbai,Maharashtra,

India,

PIN-400021

Phone- 22180221-25/27

- 76 -
 TATA Asset Mgmt Company Pvt. Ltd.

Sponsors

TATA Sons Ltd., TATA Investment Corporation Ltd.

Trustee

TATA Trustee Company Pvt. Limited.

Investment Manager

TATA Asset Management co. (P) Ltd.

Custodians

Stock Holding Corporation of India Limited.

Chairman

Mr. S. M. Datta

Address

TATA Asset Management Ltd., Mulla House, Ground Floor,

51, M.G. Road, Near Flora Fountain,

Mumbai 400001

Telephone No. 022-56315191/92/93

E-mail- kiran@tataamc.com

- 77 -
 Investment Objectives
Scheme Name UTI Mutual Fund SBI Mutual Fund TATA Mutual Fund

1. Equity Fund The investment To provide investors The investment

objective of the long term capital objective of the
scheme is to generate appreciation along scheme is to provide
capital appreciation by with the liquidity of income distribution
primarily investing in an open-ended and / or medium to
equity/equity related scheme. The scheme long term capital
instruments. As a will invest in the gains while at all
defensive strategy diversified portfolio times emphasizing
arising out of market of equities of high the importance of
condition, the scheme growth companies capital appreciation.
may also invest in primarily in equities
debt/money market & the balance in debt
instruments. and money market
instruments.
2. Mid-Cap The investment To provide investors The investment
Fund objective of the with opportunities for objective of the
scheme is Capital long term growth in scheme is to provide
Appreciation by capital along with the income distribution
investing primarily in liquidity of an open- and / or medium to
Mid Cap stocks. The ended scheme by long term capital
fund would invest, at investing gains by investing
least 65% of its Net predominantly in a predominantly in
Assets in equity and well diversified basket equity / equity
equity related of equity stocks of related instrument of
instruments issued by companies whose Mid-Cap companies.
companies of CNX market capitalization These companies are
Midcap 200 index or is between Rs. 200 either included in
S&P CNX 500 but not crore to Rs. 2000 the CNX Mid-Cap
a part of BSE Sensex croreand debt and 200 index or one
(30) or Nifty (50), at money market that fall within
the time of instruments. market capital
investment. requirement of CNX
In this fund company mid-cap 200 index.
will not invest more Investment by the
than 20% in money scheme in
market. securitised debts,
will not normally
exceed 20% of the
net assets.

- 78 -
3. Equity Link An open-ended equity The prime objective The investment
Saving Scheme fund investing a of the scheme is to objective of the
(ELSS). minimum of 80% in deliver the benefit of scheme is to provide
equity and equity investment in a medium to long-
related instruments. It portfolio of equity term capital gains
aims at enabling share, while offering along with income
members to avail tax tax rebate on such tax relief to its unit
rebate under section investment made in holders, while at all
80c of the IT Act and the scheme U/S 80c of the times
provide them with IT Act, 1961. It also emphasizing the
benefit of growth. seeks to distribute importance of
income periodically capital appreciation.
Investment in this depending on
scheme would be distributable surplus. Investment in this
subject to a statutory scheme would be
lock-in of 3 years Investment in this subject to a statutory
from the date of scheme would be lock-in of 3 years
investment to avail subject to a statutory from the date of
Section 80c benefits. lock-in of 3 years investment to avail
from the date of Section 80c benefits.
investment to avail
Section 80c benefits.

- 79 -
 Comparison

Entry and Exit Load Comparison

Scheme UTI Mutual Fund SBI Mutual Fund TATA Mutual Fund
Name Entry Exit Load Entry Exit Load Entry Exit Load
Load Load Load
1. (Select) Below 25 NIL Below 5 Below 5 Below 1 NIL
Equity lac Crores Crores (6 Crores
Fund 2.25%, 2.25% months)- 2.25%
1%, (12
Above 25 NIL Above 5 months)- Above 1 NIL
lacs but Crores 0.50%, Crores
less than 2 NIL NIL
crores- Above 5
0.5%, Crores
NIL
Above 2 NIL
crores -
NIL
2. Mid-Cap Below 25 NIL Below 5 Below 5 Below 2 NIL
Fund lacs Crores Crores (6 Crores
2.25%, 2.25% months)- 2.25%
1%, (12
Above 25 NIL Above 5 months)- Above 2 NIL
lacs but Crores 0.50%, Crores
less than 2 NIL NIL
crores- Above 5
0.5%, Crores
NIL
Above 2 NIL
crores -
NIL
3. Equity Below 2 NIL Below 5 NIL Below 2 NIL
Link crores Crores Crores
Saving 2.25%, 2.25% 2.25%
Scheme
(ELSS). Above 2 NIL Above 5 NIL Above 2 NIL
crores- Crores Crores
NIL NIL NIL

- 80 -
Conclusion: UTI has lot of variety in charging of entry load. As far as Equity fund is

concern UTI is more relax able for small investor because as it is 2.25% for below 25

lakhs and above that it will charge 0.50% up to 2 crore others are quite higher than this.

Again for Mid Cap fund UTI is cheaper in comparison of other two mutual funds. But for

ELSS all three mutual funds have similar criteria for entry load. In all UTI is very rigid in

entry load is concern. It has same criteria for all the schemes.

- 81 -
 ANALYSIS OF RETURN

Compounded Annualized Return of equity schemes of various companies

YEAR UTI Mutual SBI TATA BSE BSE 100

Fund Mutual Mutual Sensex
Fund Fund
1st Year 0.78% 46.17% 54.51% 50.01% 69.57%
3rd Year NA 46.74% 69.28% 30.36% 57.80%
Since 37.80% 11.97% 34.57% NA 14.44%
Inception
Inception date Sep 10,2003 Jan 1, 1991 Mar 23,
1998

Compounded Annualized Return of Mid-Cap schemes of various companies

YEAR UTI Mutual SBI TATA CNX Mid BSE 100

Fund Mutual Mutual Cap 200
Fund Fund Index
1st Year 13.01% 32.05% 16.82% 28,91% 69.57%
3rd Year NA NA NA 57.80%
Since Inception 34.97% 52.64% 18.91% 28.82% 14.44%
Inception date Sep 10, 2003 Mar 17, June 15,
2005 2005

Compounded Annualized Return of Equity Linked Saving schemes of

various companies

YEAR UTI Mutual SBI TATA BSE BSE 100

Fund Mutual Mutual Sensex
Fund Fund
1st Year 20.92% 106.99% 63.85% 50.01% 69.57%
3rd Year 40.13% 121.77% 48.33% 30.36% 57.80%
Since Inception 19.74% 19.63% 26.55% NA 14.44%
Inception date Sep 10,2003 Mar Jan 16, 2005
31,1993

- 82 -
 ASSET ALLOCATION OF ABOVE SCHEME

UTI Dynamic Equity Fund

Top 10 Holdings as on Jul 31, 2006

Value
Company Nature %
(Cr.)
IVRCL Infrastructure & Projects Ltd. EQ 9.62 7.7
Jyoti Structures Ltd EQ 9.27 7.42
Gammon India Ltd EQ 7.48 5.99
Ispat Industries Ltd EQ 7.29 5.84
Amtek Auto Ltd EQ 7 5.6
AllSec Technology Limited. EQ 6.17 4.94
Patel Engineering Ltd. EQ 5.96 4.78
Lupin Ltd. EQ 5.95 4.77
Force Moters Ltd. EQ 5.59 4.47
HCL Technologies Ltd. EQ 5.13 4.11

Top Industry Allocation as on Jun 30, 2006

Industry Allocation Housing & Construction

Pharmaceuticals
3.79%
Auto & Auto ancilliaries
4.78%
14.68% Steel
5.12%
Power Generation,
6.74% Transmission & Equip
Computers - Software &
10.92% Education
Diversified
9.04%
Entertainment

10.07% Engineering & Industrial

9.65% Machinery
9.79% Chemicals

- 83 -
 SBI MAGNUM EQUITY FUND

Top 10 Holdings as on Jul 31, 2006

Value
Company Nature %
(Cr.)
Bharat Heavy Electricals Ltd EQ 15.37 7.43
Kotak Mahindra Bank Ltd. EQ 14.81 7.16
Infosys Technologies Ltd EQ 14.75 7.13
Gujarat Ambuja Cements Ltd EQ 14.13 6.83
Bharati Tele - Ventures EQ 10.92 5.28
Mahindra & Mahindra Ltd EQ 10.34 5
ITC Ltd EQ 10.05 4.86
Bajaj Auto Ltd EQ 9.89 4.78
United Phosphorus Limited
EQ 8.89 4.3
(New)

Top Industry Allocation as on Jun 30, 2006

Top Industry Allocation

Auto & Auto ancilliaries

Computers - Software &

Education
4.30% Cement

4.86% 13.33% Banks

5.85% Electricals & Electrical

Equipments
Pharmaceuticals
6.72% 8.14%
Telecom

Diversified
7.37% 8.09%
Tobacco & Pan Masala
7.43% 7.53%
Chemicals

- 84 -
 TATA PURE EQUITY FUND

Top 10 Holdings as on Jun 30, 2006

Value
Company Nature (Cr.) %
ITC Ltd EQ 12.03 5.01
Mahindra & Mahindra Ltd EQ 11.31 4.71
Reliance Industries Ltd EQ 10.32 4.3
Larsen & Toubro Limited EQ 10.14 4.22
Gujarat Ambuja Cements Ltd EQ 9.13 3.81
Infosys Technologies Ltd EQ 8.74 3.64
Siemens Ltd EQ 8.57 3.57
Hindustan Lever Ltd EQ 8.02 3.34
Grasim Industries Ltd EQ 7.78 3.24
Associated Cement Companies Ltd EQ 7.76 3.23

Top Industry Allocation as on Jun 30, 2006

3.01%
Diversified
3.73% Auto & Auto ancilliaries

3.87% 19.23% Computers - Software &

Education
4.62% Cement

Electricals & Electrical

5.01% Equipments
Tobacco & Pan Masala

7.69% 10.00% Electronics

Pharmaceuticals
7.77% 8.79%
Steel

Hotels & Resorts

- 85 -
 UTI Mid-Cap Fund

Top 10 Holdings as on Jul 31, 2006

Value
Company Nature %
(Cr.)
IVRCL Infrastructure & Projects Ltd. EQ 5.58 8.47
Thermax Limited EQ 5.26 7.99
Bharat Earth Movers Ltd EQ 3.34 5.07
Rallis India Ltd EQ 3.15 4.78
Gammon India Ltd EQ 3.07 4.65
AllSec Technology Limited. EQ 2.85 4.33
Ispat Industries Ltd EQ 2.77 4.21
Karur Vysya Bank Ltd EQ 2.65 4.02
Kalyani Steels Ltd EQ 2.59 3.93
Thomas Cook (India) Ltd EQ 2.52 3.82

Top Industry Allocation as on Jun 30, 2006

Engineering & Industrial

3.04%
3.82% Machinery
4.33% Housing & Construction
22.91%
4.63% Diversified

Steel
4.98%
Miscellaneous

Chemicals
7.62%
Banks

8.14% 16.68% Computers - Software &

Education
Transport & Travel
8.56%
Sugar

- 86 -
 SBI Magnum Mid-Cap Fund

Top 10 Holdings as on Jul 31, 2006

Value
Company Nature %
(Cr.)
Maharashtra Seamless Ltd EQ 13.73 5.1
Amtek Auto Ltd EQ 12.25 4.55
Opto Circuit Ltd. EQ 12.11 4.5
InfoTech Enterprises Limited EQ 11.39 4.23
Nagarjuna Construction
EQ 10.71 3.98
Company Ltd
Hotel Leela Venture Ltd EQ 9.93 3.69
India Cements Ltd EQ 9.37 3.48
Thermax Limited EQ 9.12 3.39
Crompton Greaves Ltd EQ 8.34 3.1
SKF Bearings India Ltd EQ 7.54 2.8

Top Industry Allocation as on Jun 30, 2006

Steel
3.69% 7.69% Auto & Auto ancilliaries
5.21% Computers - Software & Education

Housing & Construction

5.30% 7.35%
Textiles

Pharmaceuticals
5.49% Cement
6.71%
Engineering & Industrial Machinery

5.64% Electricals & Electrical Equipments

5.85% 6.02% Hotels & Resorts

- 87 -
 TATA MIDCAP FUND

Top 10 Holdings as on Jun 30, 2006

Company Nature Value (Cr.) %

Dishman Pharmaceuticals & Chemicals EQ 9.4 4.37
Lakshmi Machine Works Ltd EQ 9.4 4.37
Indian Hotels Co Ltd EQ 9.15 4.25
Greaves Ltd EQ 7.94 3.69
Tamil Nadu Newsprint & Papers Ltd EQ 6.42 2.98
CCL Product ltd EQ 6.32 2.94
KEC International Ltd. EQ 6.17 2.87
Voltas Ltd EQ 6.14 2.85
EIH Ltd EQ 6.07 2.82
Gokal Das Export Limited. EQ 5.64 2.62

Top Industry Allocation as on Jun 30, 2006

Computers - Software & Education

4.73%
9.30% Diversified
4.73% Pharmaceuticals

4.82% Hotels & Resorts

8.59%
Auto & Auto ancilliaries

5.64% Engineering & Industrial Machinery

Textiles

5.93% 8.27% Metals

Consumer Durables
6.54% 8.26% Housing & Construction

- 88 -
 UTI Tax Saving Fund

Top 10 Holdings as on Jul 31, 2006

Value
Company Nature %
(Cr.)
Infosys Technologies Ltd EQ 16.11 8.08
State Bank of India EQ 11.34 5.69
Bharat Heavy Electricals Ltd EQ 10.43 5.23
Bharati Tele - Ventures EQ 9.6 4.81
Satyam Computer Services Ltd EQ 9.28 4.65
Grasim Industries Ltd EQ 8.32 4.17
ITC Ltd EQ 7.87 3.95
India Cements Ltd EQ 7.36 3.69
Reliance Industries Ltd EQ 6.85 3.44
Reliance Energy Ltd EQ 6.79 3.4

Top Industry Allocation as on Jun 30, 2006

Computers - Software & Education

3.95% Diversified

4.32% 12.73% Banks

4.81% Pharmaceuticals

Power Generation, Transmission & Equip

5.00%
Electricals & Electrical Equipments
12.23%
5.23% Housing & Construction

5.42% Telecom

8.93% Steel
6.09%
Tobacco & Pan Masala

- 89 -
 SBI MAGNUM TAX GAIN SCHEME 93

Top 10 Holdings as on Jul 31, 2006

Value
Company Nature %
(Cr.)
Infosys Technologies Ltd EQ 36.72 4.92
India Cements Ltd EQ 34.7 4.65
Crompton Greaves Ltd EQ 30.52 4.09
Satyam Computer Services Ltd EQ 30.22 4.05
Havells India Ltd EQ 23.81 3.19
Reliance Communication Ventures Ltd. EQ 23.51 3.15
United Phosphorus Limited (New) EQ 23.13 3.1
Associated Cement Companies Ltd EQ 22.76 3.05
Shree Cement Ltd EQ 21.86 2.93
Hindustan Lever Ltd EQ 21.64 2.9

Top Industry Allocation as on Jun 30, 2006

3.25%
Computers - Software &
3.27% Education
Cement
4.30% 14.94%
Diversified

4.41% Electricals & Electrical

Equipments
Engineering & Industrial
4.86% Machinery
Entertainment
5.39% 14.68% Telecom

Housing & Construction

7.28%
8.16% Oil & Gas, Petroleum & Refinery

Pharmaceuticals

- 90 -
 TATA TAX SAVING FUND

Top 10 Holdings as on Jun 30, 2006

Value
Company Nature %
(Cr.)
Reliance Industries Ltd EQ 4.41 4.33
Larsen & Toubro Limited EQ 4.31 4.24
Grasim Industries Ltd EQ 4.01 3.94
ITC Ltd EQ 3.85 3.79
Wipro Ltd EQ 3.78 3.72
Mahindra & Mahindra Ltd EQ 3.57 3.51
Siemens Ltd EQ 3.5 3.44
Bharat Electronics Ltd EQ 3.36 3.3
Crompton Greaves Ltd EQ 3.36 3.3
Maruti Udyog Ltd EQ 3.3 3.25

Top Industry Allocation as on Jun 30, 2006

3.30%
Diversified
3.79% Computers - Software & Education

4.79% 19.43% Steel

5.29% Engineering & Industrial Machinery

Auto & Auto ancilliaries

6.75% Electronics

6.76% 12.09% Pharmaceuticals

Housing & Construction

7.11% 8.54% Tobacco & Pan Masala

Electricals & Electrical Equipments

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 CHAPTER-VII:

SUGGESTIONS & CONCLUSIONS

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 FINDINGS

1. There is tremendous growth in Mutual Fund Industry as a result of growing

awareness in the middle class investors about Mutual funds.

2. People tend to invest in Equity linked Savings schemes as they can avail Tax

Rebate as well as capital appreciation.

3. One of the most important drawbacks of ELS Schemes is that there is no

assurance of even any base level of returns. This is because these funds invest in

the equity markets, which, as we all know, can fluctuate wildly.

4. Past performance of mutual fund is not an indicator of future performance though

we can judge efficiency of fund management, which is major factor in

profitability of fund.

5. If we consider the Size of assets held by each fund, we find that magnum

Taxgain fund is Market leader in this category of ELSS Funds.

6. Market trend shows that, in equity sector there is a lot of portfolio turnover, which

is because of Its Dynamic and Liquid nature. High Volumes of Debt Purchases

show the tendency of Indian people to choose security of funds more than Returns

by taking Risks.

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7. Though Magnum Taxgain Fund has not fetched the Best returns since inception,

for last three years It is constantly performing better than other funds. Magnum

Taxgain is Indian Market s Top Performer since last 1 year in its category i.e.

ELSS.

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 SUGGESTIONS

Now day s mutual funds are emerging as one of the widely accepted option of

investment. The reason behind this is low performance of traditional investment options

and role played by government in this sector, which is totally oriented towards the

investor. Government has formed SEBI (Security Exchange Board of India) for the same

reason, which regulates Mutual Funds companies and guides to the Investor.

But before investing in mutual fund investor should take reasonable care, which will help

him to acquire good returns with proper safety of his funds. He should consider following

guidelines before investing in mutual fund

Understand your investment requirement and objectives.

Check out offer documents.

Check out the past performance of the fund.

Never invest all the savings in any single fund, diversify your investment for risk

minimization

Invest for the long period to earn good results.

Consider your liquidity profile and risk bearing capacity and function within these

boundaries only.

Track your portfolio regularly.

Regularly make your financial planning.

Before taking decision you should study properly Key Information Memorandum

and offer documents.

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Remember, not a single fund assures guaranteed returns at a particular rate.

Do not consider that fund will behave according to its past performance.

Frequently keep watch over changing rules and regulations laid down by

government and SEBI.

Experience hold by the company for dealing in mutual fund also matters more.

Do not go for earning high returns always; consider the safety of the fund also.

Select the proper schemes, which match your investment requirements.

Check out whether there is any lock-in period for the fund.

You can check your fund s nav form web site of that particular fund or from

amfiindia s website on daily base

Remember, "Mutual Fund investments are subject to market risk .

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 RECOMMENDATIONS

Investment in Money Market /Guilt funds would be desirable for those who don t
want to take risk and want earn income on regular basis. This fund would be best
option for retired person, because it will give higher return than provident fund.

The person who already has investment in Equities he can look towards debt fund
as Investment Avenue because it has comparatively less risk than Equity or
Balanced funds. Investment in debt would give wider portfolio to the investor.

The person who wants to take the benefits of both the market i.e. Equity & Debt,
he can go for diversified fund.

ELS Schemes would enable to give tax rebate up to 100000 to the customer.
Hence the person who needs tax benefits he can go for it, but one should keep in
mind that the all ELSS have lock-in period for investment. i.e. once the person
invest in this type of funds he can not withdraw his money up to 3 years.

The person who needs regular income from funds they should go income type of
fund, and The person who needs capital appreciation he has to go for growth plan.

Service man can go for Systematic Investment Plan (SIP). It enables them to
invest small amount in every month.

If the person seems that the fund in which he has invested his money is not doing
well he can switch over his money from one fund to another fund by the way of
Systematic Transfer plan (STP). He can switch over partial amount also to
another fund, but the fund must be from that company.

If the person wants to withdraw partial amount from the fund he can do this by
way of Systematic Withdraw Plan (SWP).

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 LIMITATIONS

Mutual fund industry is a very huge industry, which has more than 31 Mutual

Funds with more than 500 Schemes. For the analysis, only 3 Mutual Funds were

selected. Fund Was Focused on four Schemes only. ELSS Schemes Regulations

and Benefits are subject to change with government policies. It was very Difficult

to cover all aspects in study of mutual fund such as benchmark indices,

Performance measures. etc.

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 BIBLIOGRAPHY

1. Merchant Banking and Financial Services- Prof. P. G. Apte

2. www.amfiindia.com

3. www.mutualfundsindia.com

4. Source for all comparisons: www.personalfn.com

5. Websites of various Mutual Funds.

6. Mutual Funds: AMFI Course material by INVEST INDIA

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