Paper – Financial Management MBA 6204

Term Paper on
Risk and Return Analysis of Personal
Investment Portfolio

Submitted to:
JRF Ms. Amanpreet
Kaur

Submitted by:
Raktim Chaudhuri (21)
MBA 2019-2021 Sec A

University Business School

Panjab University, Chandigarh

Submitted on:
15th April 2020
Table 1: Group Details:
 (To be filled by students) (To be filled by a faculty)

Name of the Student Roll No. Marks Assigned Average Marks

A RAKTIM CHAUDHURI 21

B ISHJIV SINGH 08

C JAI 09

Table 2: Required Content of the study and rubrics (FOR STUDENT’S REFERENCE
ONLY)

Assuming that you are 25 years old and being a salaried person (either working in private sector
or government sector), you are required to do the detailed financial planning for next 5 years
of your life and answer the following questions:

No. Contents M.M. Marks assigned

A B C
1 Brief overview about your personal and
investment Profile
It may include, but not limited to, introduction
about yourself at the assumed age- name, location,
occupation, per month or annual salary, number of 2
dependents in your family, assets and investments
you already own, expected monthly expenses
depending on your lifestyle, your p.m. or annual
savings.
2 Identifying expected life events and financial
needs
It may include, but not limited to:
a. Detailed list of all the possible future events
2
coming up in next 5 years, the fulfilment of
which may require finances.
b. Expected amount of finance/ funds required to
perform those events
 Hint: Expected events may include, but not
limited to, buying a car, buying a home, buying a
land, your marriage, buying any insurance policy,
etc.
3 Determining the category of investor or
Identifying your Risk profile
In this section, considering your assumed age and
your income, you are required to identify the type
of investor or category of investor in which you
fall in. Herein, mention:
a. Type of Investor you are.
1
b. The Source/ way from which you identified
about your investment nature.
Hint: You can identify the different categories of
investors from online sources and even many
online platforms are available which provide free
services to help you identify about your investment
nature.
4 Selecting single investment asset/instrument
In this section, depending on your personal and
investment profile, your future financial needs and
considering your risk profile, you are required to:
a. Select and list out the single investment asset
or instrument for each financial need.
b. Determine the risk and return for previous 5
3
years for any one asset/ instrument required for
fulfilling one major financial need, and
c. Determine the expected risk and return for next
5 years (or up to the time period when those
funds are required) for any one asset/
instrument required for fulfilling one major
financial need.
5 Selecting a Mutual Fund scheme/ Portfolio 2
 Considering same particular financial need, same
monthly savings and assuming same risk profile,
choose any one mutual fund scheme/ or develop
your own portfolio to fulfil that selected financial
need. Herein, you are required to give:
a. Name of the MF scheme or a portfolio you
have selected/ or already have.
b. Features of selected MF scheme or a portfolio.
c. List of the industries included in selected MF
scheme or a portfolio.
d. List of the companies in which such MF
scheme or a portfolio has invested the funds.
6 Risk and Return analysis of MF scheme/
Portfolio
In this section, you are required to do:
a. Risk and return analysis of previous five years
for the selected MF scheme or a portfolio.
2
b. Determine the expected risk and return of the
selected mutual fund scheme or a portfolio for
next five years (or up to the time period when
the funds will be required for fulfilling selected
financial need)
7 Comparative analysis and conclusion
a. Perform the comparative analysis of expected
risk and return of selected single asset/
instrument with the expected risk and return of
selected MF scheme or a portfolio.
2
b. Select your investment preference and validate
it with specific reasons. Also, offer a
conclusion on amount of monthly investment
to be made in such avenue and then give a
concluding remark on the same.
Adherence to submission guidelines 1
 TOTAL 15
AVERAGE MARKS 15
 Contents
Personal Profile .......................................................................................................................... 7
Investment Profile .................................................................................................................. 7
Expected and Significant Life Events and Financial Expenses: ................................................ 8
Investor profile: .......................................................................................................................... 9
Medium Risk Investor ............................................................................................................ 9
Types Of Risk Profile:.......................................................................................................... 11
Selecting single investment asset/instrument........................................................................... 11
Risk and return for previous 5 years for all single instruments ........................................... 12
Travelling purposes .......................................................................................................... 12
Risk and Return for previous 5 years on FD (Fixed Deposit): ......................................... 12
Risk and Return for upcoming (forecasted) 5 years on FD (Fixed Deposit):................... 13
The Risk and Return for Equity (Hindustan Uni Lever Ltd.) against two indexes (Nifty
FMCG Index and NIFTY 50 Index) .................................................................................... 14
CAR AND HOUSE .......................................................................................................... 14
Investing in a Mutual Fund scheme ......................................................................................... 16
Name of the MF scheme selected: ....................................................................................... 16
NAV: INR 34.16 (as on 13 April 2020) ........................................................................... 16
Fund Size: ₹ 4433 Cr ........................................................................................................ 16
Features of the Mutual Fund: ............................................................................................... 16
Industries included in the MF: ............................................................................................. 17
Companies in which the MF has invested:........................................................................... 18
Return of the mutual fund during various durations: ............................................................... 19
Forecasting Returns By Comparing The Quarterly Data For Returns ............................. 19
.............................................................................................................................................. 20
.............................................................................................................................................. 20
Risk Analysis: The Risk Measures Are Mentioned Below .................................................. 21
Risk and Returns analysis basis previous 5Y data: .......................................................... 21
Risk Analysis: ...................................................................................................................... 21
ALPHA ............................................................................................................................. 21
BETA ................................................................................................................................ 21
STANDARD DEVIATION ............................................................................................. 21
SHARPE RATIO .............................................................................................................. 22
FORECASTING RISK-RETURN FOR FUTURE 5 YEARS ......................................... 23
Risk Exposure in future years ........................................................................................... 23
 Returns Analysis: ................................................................................................................. 24
Risk and Returns analysis basis forecasted (future) 5Y data: .......................................... 25
Comparative Analysis and Conclusion: ................................................................................... 27
1. Fixed Deposit ............................................................................................................ 27
2. Equity Investment ..................................................................................................... 27
3. Mutual Fund .............................................................................................................. 27
 Raktim Chaudhuri
MBA 2019-21

Personal Profile

NAME: Raktim Chaudhuri

AGE: 25

LOCATION: Kolkata

QUALIFICATION: MBA (Finance)

OCCUPATION: Financial Analyst

EMPLOYER: ICICI Securities

EXPERIENCE: 18 months (1.5 years)

SALARY: Rs. 80,000 per month

NO. OF DEPENDENTS: 2

MARITAL STATUS: Single

CHILDREN: None

Investment Profile
ASSETS AND INVESTMENTS:
i. Savings Account (Balance Rs 1,30,000 @ 4% p.a.)
ii. Income from renting flat: (16000 p.m. *12) = (Rs. 1,92,000)
iii. Rented Flat (worth Rs. 30 lakhs)
iv. Fixed Deposit (Value Rs 3,00,000 @ 6.75%)
v. Securities investment (Value Rs 5,00,000) (treated as disposable savings)
vi. Scooter (Remaining Useful Life 3 years)
vii. Ancestral House (worth approximately Rs. 50 lakhs)
viii. Ancestral Property and Lands (worth Rs. 25 lakhs approx.)

Current Assets
Cash 1,30,000
Shares 5,00,000
Income from flat given on 1,92,000
rent

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MBA 2019-21

Fixed Assets
Ancestral House (residence) 50,00,000
Ancestral Property 25,00,000
Flat (on rent) 3,00,000
Scooter 8,000
Car nil
Gold nil
Health insurance policy 7,000 PA
(History of chronic
pancreatitis)
Fixed deposit 3,00,000

FINANCIAL LIABILITIES: Brother’s Education Loan for MBA (Rs. 10,00,000)

MONTHLY EXPENSES: Rs 45,000 (Inclusive of Income Tax)

SAVINGS PER MONTH: Rs 53,120 p.m. (80,000 + 16,000 {rent received} + 1,687
{interest earned from FD} + 433{interest earned from savings account})

Expected and Significant Life Events and Financial Expenses:

EVENTS AMOUNT REQUIRED

Trip to Italy, France and Spain (Low-Priority) Rs. 2,50,000

Travel package as a gift to parents (Medium-Priority) Rs. 3,50,000

Car (Medium-Priority) Rs. 12,00,000

House/ Flat (High-priority) Rs. 50,00,000

Health and Life Insurance Policies (High-Priority) Rs. 7,50,000

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 Raktim Chaudhuri
MBA 2019-21

Investor profile:

Medium Risk Investor

The above quiz hosted by HSBC bank laid more stress on various aspects of risk
related with my investments. The quiz dwelled into my present savings, number of
dependants, my aspirations and targets in life, my job status as well as my responses
to financially unsuitable conditions etc.

It determined my risk profile to be Moderately Risky or Medium Risk Investor.

1
source: HSBC investor risk profile simulator.
LINK: https://www.hsbc.fr/1/2/hsbc-epargne-salariale/en/employee/simulator/investor-
profile

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 Raktim Chaudhuri
MBA 2019-21

“Your investment strategy is growth at a reasonable price (GARP), which combines tenets of
both growth and value investing. You look for growth-oriented companies with relatively low
price to earnings multiples.”
The above quiz hosted by usfunds.com analysed my patterns of investing, the
variables I consider, types of companies I like to invest in and what are my
expectations from my investments. I like to be very stock specific and asset specific
when it comes to choosing my investment strategies, as I am more interested is
Growth-Oriented companies as mentioned in the results above.

The quiz concluded that I am a Some Growth investor and Some Value Investor.
I seek impressive returns and understand there could be high risk. I believe is value
creation and growth opportunities.

2
Sources: http://www.usfunds.com/interactive/what-type-of-investor-are-you-
quiz/#.Xo3lhsgzbb2

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 Raktim Chaudhuri
MBA 2019-21

Types Of Risk Profile:

1. Low risk
2. Moderate low risk
3. Moderate risk
4. Moderate high risk
5. High risk
6. Very high risk

Selecting single investment asset/instrument

A} In the beginning I decided to stick to a single asset to satisfy the required future events
that I have planned for myself and my family. But, due to this unprecedented scenario caused
by the present global pandemic (COVID-19/ Coronavirus), I decided to use and invest in
different type of assets depending on the priority and timeline of the Planned Events.

The downfall of Private Sector Banks in recent scenario has been a grave concern as of now. I
have been deciding against Fixed Deposit for a long time but unequivocally it is probably the
safest form of investment when deposited in a well renowned PSU bank.

So, the F.D will be created in one of the Domestic Systemically Important Banks (D-SIBs)
declared by the R.B.I i.e. THE STATE BANK OF INDIA.

Firstly, I have selected Fixed Deposit as the asset to fulfill my wishes of Travelling.

I have selected Equity investment as the asset for my CAR purchase as well as my for my
HOUSE, as right now the equity markets are down due to coronavirus scare resulting in several
blue-chip stocks being available at discount prices. So, when the markets resurge which can be
reasonably expected with a horizon of 5 years the investment could bring in a handsome return.

Finally, Gold has been selected as the final asset for the Health & Life Insurance Policies as
many economists today fear a global recession and in such turbulent times Gold has been
known to perform well. Also with the horizon of 5 years it is bound to give a positive return.

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MBA 2019-21

I need health insurance policy because I am an accident survivor whish has led me to become
a chronic pancreatitis patient. A proper health insurance policy with good cover is a necessity
for an individual like me who has been a chronic patient due to unfortunate circumstances.

EVENTS ASSET AMOUNT HORIZON

1 TRAVELLING Fixed Deposit ₹ 6,00,000.00 5 years

2 CAR & HOUSE Equity ₹ 35,00,000.00 5 years

3 INSURANCE POLICIES Gold ₹ 7,00,000.00 25 years

Risk and return for previous 5 years for all single instruments

Travelling purposes

Target savings: 6 Lakhs

For an FD return rate @6.00%
Calculating for 60 months i.e. 5Y at 6 percent per annum for a one time deposit of INR
4,50,000 the maturity amount is ₹ 6,06,085 on 15 Apr 2025 which well exceeds our
target figure.

Risk and Return for previous 5 years on FD (Fixed Deposit):

The return % for a term deposit for the given period of 5Y has fluctuated from 8.5%
to 6.1% in the last 10 years. Even considering the lowest value of 6.1%, it quite
comfortably helps to exceed the targeted investment return option so as to fulfill one
major financial need.

Even the risk (volatility) as measured from the Standard deviation calculated from the
returns for the last 10 years is less than 1 i.e. (0.82309) which shows a very less

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MBA 2019-21

volatility and highly stable returns. This is to be expected as apart from RBI norms and
govt. action, there are not many external factors that affect the rates of term deposit
plans. Therefore, contemporary risk is low.

Risk and Return for upcoming (forecasted) 5 years on FD (Fixed Deposit):

Going by the current trend, the returns % figure for term deposit for the next 5 years
stand at 5.85 %, 5.65%, 5.45%, 5.25% and 5.05% till 2025 which suits our requirements
very well.

Again, the risk denoted by standard deviation for future forecasts stands at 0.47 and is
illustrative of a very low volatility and highly stable returns. So, the risk is low and can
be managed easily.

The requisite data and graph for the same is available on the adjoining page.

10
8 y = -0.0007x + 35.23 Return for Govt. Bond
6
y = -0.0006x + 30.235 Return for SBI FD
4
2
Linear (Return for Govt.
0 Bond)
Linear (Return for SBI FD)

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MBA 2019-21

CHANGE IN INTEREST RATE

YEAR ENDING INTEREST RATE (%)

2016 6.8
2017 6.6
2018 6
2019 6.6
2020 6.25

FORECASTING FOR FUTURE

2021 * 5.85
2022 5.65
2023 5.45
2024 5.25
2025 5.05

*) Forecasting of interest rate for year 2021 has been done using the Forecast formula in excel, based upon the
historical interest rates of previous five years.

The Risk and Return for Equity (Hindustan Uni Lever Ltd.) against two
indexes (Nifty FMCG Index and NIFTY 50 Index)

CAR AND HOUSE

Target savings: 35,00,000

Achievable through investment in equities on a monthly basis.
Equity chosen: Hindustan Unilever Limited
Calculating for 60 months i.e. 5Y at the mentioned percent on a particular for an annual
investment of INR 4,50,000 the maturity amount is ₹ (7,61,000 * 5) = ₹38,05,000 on 12
Apr 2025 which well exceeds our target set for ₹ 35,00,000.

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MBA 2019-21

Risk and Return for previous as well as future 5 years (HUL euity shares):

The return % for the chosen equity for the given period of 5Y has fluctuated from
54.5% to 7.27% in the last 5 years. Even considering the lowest value of 7.27%, it quite
comfortably helps to exceed the targeted investment return option so as to fulfill one
major financial need.

Even the risk (volatility) as measured from the Standard deviation calculated from the
returns for the last 5 years is low.

Trend Analysis
120.00%
100.00% y = 0.1029x - 0.0703

80.00%
60.00%
Return %

40.00%
20.00% y = -0.0039x + 0.0811
0.00%
-20.00% y = -0.0323x + 0.1116
-40.00%
2015- 2016- 2017- 2018- 2019-
16 17 18 19 20
Nifty FMCG -7.37% 20.45% 14.24% 12.91% -5.55%
hul -7.27% 10.58% 54.63% 23.54% 37.68%
Nifty 50 -12.63% 19.97% 12.78% 12.18% -24.86%

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MBA 2019-21

Investing in a Mutual Fund scheme

Name of the MF scheme selected:

According to my risk profile which is moderately risky and expected to give high returns I
chose Axis Midcap Fund which is the no.1 ranked midcap mutual fund according to ET
Money Website.

NAV: INR 34.16 (as on 13 April 2020)

Fund Size: ₹ 4433 Cr

The fund has CRISIL rating of 5 stars which reinforces CRISIL’s belief based on research
that this particular mutual fund is in a great position to deliver expected or higher than expected
returns on time and pay off all obligations as well. The MF professes moderately high risk and
investors need to be ready for the possibility of moderate losses.

The objective of the mutual fund as stated:

To generate income and long-term capital appreciation by investing in a diversified portfolio

predominantly consisting of equity and equity related securities.

Features of the Mutual Fund:

i) Returns Performance – High

(Indicates the ability of the fund to generate superior return)
ii) Downside Protection – High
(Indicates the ability of the fund to prevent losses)
iii) Fund's Consistency in generating returns-High

iv) Fund's Ability to protect losses during market downtime-High

v) Fund's Capability to generate risk-adjusted returns- High

vi) Fund's Immunity to Excessive Fluctuations in Returns –High

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MBA 2019-21

vii) AUM (Fund Size): ₹ 4,433 Crs

viii) Last Doubled In: 5 yrs 10 m

ix) Benchmark: S&P BSE Mid Cap TRI

x) Age: 7 yrs & 3 months (Since Jan 01, 2013)

xi) Min. Investment: SIP ₹1000 & Lumpsum ₹5000

Industries included in the MF:

i. Healthcare-15.93%
ii. Financial-13.03%
iii. Services-12.82%
iv. Chemicals-11.18%
v. Cons Durable-7.07%
vi. FMCG-6.18%
vii. Energy4.38%
viii. Technology-4.03%
ix. Automobile-2.55%
x. Construction-2.3%
xi. Communication-1.09%
xii. Metals-1.07%
xiii. Others-0.85%
xiv. Engineering-0.84%

Top 5 amongst these are Financial Services, FMCG, IT, Auto and Chemicals.

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MBA 2019-21

Companies in which the MF has invested:

Company Sector % Assets

Avenue Supermarts Services 5.74
Ipca Laboratories Healthcare 4.66
Bata India FMCG 3.65
Astral Poly Technik Chemicals 3.51
Voltas Cons Durable 3.45
Indraprastha Gas Energy 3.25
PI Industries Chemicals 3.12
City Union Bank Financial 2.91
Trent Services 2.74
Tata Consumer Products FMCG 2.53
Mphasis Technology 2.49
Cadila Healthcare Healthcare 2.17
Sanofi India Healthcare 2.1
Whirlpool Cons Durable 2.07
Aditya Birla Fashion and Retail Services 1.97
Cholamandalam Invest. & Fin. Financial 1.87
Abbott India Healthcare 1.83
HDFC Bank Financial 1.83
Bajaj Finance Financial 1.58
MindTree Technology 1.54
ICICI Bank Financial 1.53
Gujarat Gas Chemicals 1.41
Supreme Industries Chemicals 1.29
Torrent Pharmaceuticals Healthcare 1.29

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MBA 2019-21

Return of the mutual fund during various durations:

Forecasting Returns By Comparing The Quarterly Data For Returns

Benchmark
S&P BSE
Return Return Mid Cap
Principal (Total) (Interest) % TRI
%
Value Return Risk %
01-04- ₹
2015 2,40,000.00 - - - ₹ 11,093.02 - -
01-04- ₹ ₹ -₹
2016 2,40,000.00 2,16,376.87 23,623.13 -9.84% ₹ 10,817.39 -2.48% 7.36%
01-04- ₹ ₹ ₹
2017 2,40,000.00 2,87,306.71 47,306.71 19.71% ₹ 14,378.72 32.92% 13.21%
01-04- ₹ ₹ ₹
2018 2,40,000.00 2,97,317.25 57,317.25 23.88% ₹ 16,600.67 15.45% 8.43%
01-04- ₹ ₹ ₹
2019 2,40,000.00 2,48,937.27 8,937.27 3.72% ₹ 15,426.45 -7.07% 10.80%
01-04- ₹ -₹ -
2020 - 2,30,323.12 9,676.88 -4.03% ₹ 10,976.15 28.85% 24.82%

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Raktim Chaudhuri
MBA 2019-21

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 Raktim Chaudhuri
MBA 2019-21

Risk Analysis: The Risk Measures Are Mentioned Below

Risk and Returns analysis basis previous 5Y data:

Risk Analysis:

ALPHA: - The given fund is benchmarked by the S&P BSE 200 TRI. The given alpha value
of 3.35 for 5Y illustrates that the chosen fund has beaten the chosen index value by 3.35% in
the last half decade. It is also higher than the category average for both 3Y and 5Y duration.
It shows how this particular fund generated
BETA: Beta gives an idea about the volatility of the fund as compared to other similar funds.
values above show that the fund has been more volatile than the index but less volatile than
other funds in the category to which it belongs. Beta greater than one indicates more volatility
than the market and less than one shows less risk than the market trend.
STANDARD DEVIATION: - SD is high which shows it is quite difficult to predict its
performance. It shows that although this fund does offer good returns in the long term (apart

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MBA 2019-21

from the current COVID situation), it is also quite unstable and difficult to keep a rein on. It
is less volatile than other funds in the same category but more volatile than the index is.
SHARPE RATIO: - It indicates the amount of risk taken to generate a certain amount of
profit. Its high value dictates that a good return has been achieved for the amount of risk that
was there.
For this MF, the ratio is comfortably ahead of other such funds in its category as well as the
chosen index of S&P BSE 200 TRI.
The Scheme may invest in government securities, corporate bonds and money market
instruments. While the liquidity risk for money market instruments and short maturity
corporate bonds may be low, it may be high in case of medium to long maturity corporate
bonds. The Scheme may also be exposed to price risk in case of government securities and
corporate bonds arising out of the interest rate risk. The investments in corporate bonds could
also lead to a credit risk. Risk associated WITH Money markets are:

i. Credit risk
ii. Sovereign risk
iii. Interest rate risk
iv. Reinvestment risk
v. Liquidity Risk

(Source: https://www.moneycontrol.com/mutual-funds/nav/axis-long-term-equity-fund-
regular-plan/returns/MAA011)

Year ending Absolute Return (5%)

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MBA 2019-21

2015 6.05
2016 3.70
2017 40.67
2018 -12.74
2019 2.24
2020 -20.37

FORECASTING RISK-RETURN FOR FUTURE 5 YEARS

Year ending Return (%)

2015 6.05
2016 3.7
2017 40.67
2018 -12.74
2019 2.24
2020 -20.37

FORECASTING FOR FUTURE

2021 * -23.271
2022 -56.399
2023 -32.5063
2024 -87.0363
2025 -57.4745

*) Future rates are predicted with the help of forecast formula using Excel.
Risk Exposure in future years
• Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future
performance of the scheme.
• As the price / value / interest rates of the securities in which the scheme invests
fluctuates, the value of your investment in the scheme may go up or down. The value
of investments may be affected, inter-alia, by changes in the market, interest rates,
changes in credit rating, trading volumes, settlement periods and transfer procedures;
the NAV is also exposed to Price/Interest-Rate Risk and Credit Risk and may be
affected inter-alia, by government policy, volatility and liquidity in the money
markets and pressure on the exchange rate of the rupee.
• Investment in Mutual Fund Units involves investment risks such as trading volumes,
settlement risk, liquidity risk, default risk including the possible loss of principal.
• The Sponsor is not responsible or liable for any loss resulting from the operation of
the scheme beyond the initial contribution of Rs.2,50,000 made by it towards setting
up the Fund.

The above-mentioned scheme is not guaranteed or assured return scheme.

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MBA 2019-21

Returns Analysis:

As the name suggests, this MF is great to have for investors who have confidence in the Mid-
cap sector. It fluctuates a lot in the short term as it mostly deals with the mid-caps. The short
term returns even if positive are quite lesser than the long term returns as evident from the
table above. Currently, the fund seems in the red due to the ongoing economic slowdown
owing to COVID-19 situation. The time is not suitable as we need to consider the previous
data where an unnatural occurrence like a pandemic was not taken into the equation.
Then again, this fund is for the long term and for those who have some kind of a reasonable
or above reasonable risk appetite.
The MF for the most part during the last five years has not kept in sync or performed as well
as the benchmark index i.e. S&P BSE 200 TRI. But, during the recent economic slowdown
(COVID-19 instigated recession), the fund has plotted a path which outperforms its
benchmark index as shown in the graph above. So, in the long run this is a good mutual fund
to invest in.

3
(Source: https://www.moneycontrol.com/mutual-funds/nav/axis-mid-cap-fund-regular-
plan/MAA099)

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MBA 2019-21

Risk and Returns analysis basis forecasted (future) 5Y data:

% RETURNS Forecast
60

40

20

0
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
%
Axis Title

-20 2015 2016 2017 2018 2019 2020 2021 RETU

RNS
-40 CMA
(4)

-60 FORE
CAST
-80

-100

-120

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MBA 2019-21

The returns for the mutual fund vary largely between high negative values and occasional
positive peaks. This can be attributed to the recent upheavals of the financial markets
worldwide which has in turn created large fluctuations domestically as well. Also, our selected
MF is one in the category belonging to moderately High-risk investments and also has within
its portfolio many IT companies and financial institutions as well chemical manufacturing
firms all of whom have taken a hit due to the COVID19 pandemic.

Our returns appear good for the purpose of returning incremental gains in the Q1 of both 2024
and 2025. Q2 and Q3 are disappointing and in these two quarters, the risk prone nature of our
mutual fund comes out strongly.

The risk although high as per the excel calculations for present data, seems to go down for the
further 5 years as forecasts predict lower risks than present as presently for example, in Q3 of
2019, risk stands at a value of -49.54 but for Q4 of 2019 is 2.53 & Q4 of 2021, it stands at 4.14
respectively showing a favorable inclination.

The requisite data and graph for the same is available above as a screen shot.

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MBA 2019-21

Comparative Analysis and Conclusion:

These are the 3 instruments at hand:

1. Fixed Deposit (Domestic Deposit) Based on SBI rates for the last 5 years (2015-20).
2. Equity Investment: Hindustan Unilever Ltd. company stocks on the basis of previous
5 years. (NSE: HINDUNILVR, ISIN: INE030A01027)
3. Mutual Fund: Axis Midcap Fund {regular plan} (2015-2019)

Performance of instruments in previous 5 years

Particulars Fixed Deposit SIP in mutual fund Investment in

equity (HUL Ltd.)

Returns:

Monthly 40,000 p.m. 40,000 p.m. 4,80,000 p.a.

Instalment/
Annual
Investment
No. of months / 60 months 60 months 5 years
No. of years
Amount Invested Rs. 24,00,000 Rs. 24,00,000 Rs. 24,00,000

Maturity Amount RS. 2998790 Rs. 25,86,000 Rs. 32,60,941.46

Interest Earned Rs 5,98,790 Rs 1,86,000 Rs 8,60,941.46

Absolute Return 24.9% 7.75% 35.8%

(%)

Risk:

Standard 0% 3.11% 17.19

Deviation
Expense Ratio Rs 1.5 per Rs 100 1.45% as Brokerage charges
for default in management fees nominal for long
payment term investment

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 Raktim Chaudhuri
MBA 2019-21

My investment preference would be to choose Equity investment in HUL limited as an

instrument for fulfilling my future financial goals. I am a bit biased when it comes to choosing
this script as I am an ardent investor in equities. I have always been interested in stock specific
investment. I was torn between reliance Industries limited and HUL, but I chose to go with
HUL as the market share of HUL will increase exponentially with a resolution of this pandemic
period.

Upon examining all the three funds, it is evident that the equity investment plan outperforms
both the MF plan as well as the fixed deposit plan in the long run both on the basis of past and
future (returns as well as risk data-based estimations).

The MF offers good returns only in the first quarter while the Term Deposit data forecast shows
that the volatility is less for FD and at the only downside of one single percentage loss of gains,
the fixed deposit provides very stable gains which comfortably help us to fulfil the financial
need assigned. But, on the other hand the return scale from the equity investment is far greater
than that of the Fixed monthly deposits. The absolute return on the FD is coming around 25%
in the next 5 years which is suitable enough to fulfil our projected events, whereas the return
from equity investment is fairly greater than that of FD with a rate of 35.80%. Being a moderate
risky investor, I will stick to my investment in HUL limited for a time span of 5 Years.

Both Mutual funds even when advertised do warn us of the unstable nature and n number of
dependencies that come along with it. It is largely dependent on the mood and movement of
the financial markets which in turn is itself affected by various global events ranging from
international incidents to disasters to diverse other kinds of crisis situations.

The same story goes for HUL limited which is a big player in the Industry. Equities are very
news driven in the short run, but in the long run they are very good investment depending that
the stock is a blue-chip company worth investing, So a limited level of risk is involved in equity
investment, even when the stock or the company is well renowned and enjoying a good share
in the market. In contrast, Fixed deposits which are usually considered the forte of low risk
tolerance investors have come out on top because owing to the COVID situation, term deposits
option has given out stable, consistent and largely risk-free returns owing to it being backed by
RBI regulations and govt. confidence in the banking system.

Nonetheless, I will resolve to my beliefs and stick with the Equity Investment (HUL) that I
have chosen for a 5-year Horizon.

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