INTRODUCTION

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 1.1 INTRODUCTION ON MUTUAL FUNDS

Last two decades have witnessed a phenomenal growth in trade and industry the world

over. The days are passed when capital used to remain within the boundaries of nations.

In this era of globalization and liberalization, technology, capital and other resources are

not only crossing the borders of nation but also increasing the volume of international

trade. The rapidity with which the concept of corporate finance, bank finance and

investment finance have changed in recent years have given birth to new financial

products known as Mutual funds.

As the name suggests, this is financial instrument that pools the savings of number of

investors who share a common financial goal. The money thus collected is invested by

the funds manager in different types of securities depending on the objective of the

scheme.

Mutual funds have become increasingly importance in the world of finance. Mutual funds

legally known as “open-ended companies” are subject to regulations set forth by the

Investment Company Act 1940, when deciding how to invest. Mutual funds are attractive

because they require less of investors, as they offer diversification, experts talk and bond

selection, low cost and preferential tax treatment. Additionally Mutual funds do not have

a predetermined number of stocks to sell; rather stocks are added to the fund as required

by the demand.

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 invested by the fund manager in

different types of securities depending upon the objective of the scheme. This could range

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from shares to debentures to money market instruments. The income earned through these

investments and the capital appreciations realized by the scheme are shared by its unit

holders in proportion to the number of units owned by them.

Thus mutual fund is the most suitable investment for the common man as it offers the

opportunity to invest in a diversified professionally managed portfolio at a relatively low

cost. Any body with an investible surplus of as little as a few thousand rupees can invest

in mutual funds.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial

scenario. Markets for equity shares, bonds and other fixed income instruments, real estate

derivatives and other assets have become mature and information driven. A typical

individual is unlikely to have the knowledge, skills, inclination and time to keep track of

events, understand their implications and act speedily. Thus a mutual fund is the sum total

of many parts, each of which is designated to perform a specific function. SEBI, the

market regulator has outlined clearly the role and responsibilities of each entity. How well

they function determines, in part, the quality of your experience with the mutual fund.

As investment vehicles go, mutual funds are unique being the only ones to operate on the

principle of pooling resources. The element of novelty extends to their working also in

the kind of investment exposures they offer, the terms they use, the norms for pricing they

follow, and lots more. These character traits will unravel through the course of this book.

Life makes many demands of us. There’s so much to indulge in and deal with. At work or

at home. With family, friends or self. Woven into these threats is the inescapable truth

that money is a means to many an end. A house in the sub-urbs, good education for the

kids, a set of four wheels to zip around and early retirement. The ends might differ but the

means – at least one of them – to reach them remain the same: money. Earned wisely,

saved regularly, and invested smartly.

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People say that they don’t have the discipline, they don’t understand investing, especially

the stock market. They don’t have time and don’t really care. Well they should, even if

just a little. After all it’s their money and their life and it helps to have their saving

working for you. They don’t need to get neck – deep in to their personal finances, but the

least they can do, and should do, is get a fix on the big picture. Explore and understand

what they want from their investments, and leave the rest to the money managers: mutual

funds. These investment vehicles don’t demand them to have a deep understanding of

financial matters; they don’t even demand oodles of your time.

1.2 OBJECTIVES OF THE STUDY

1) To study whether mutual fund investment is investor’s best choice or not.

2) To study various investment schemes in the secondary market and assist the
individuals in their investment decisions.

3) To ascertain the various fluctuation in different sectoral schemes of mutual funds.

4) To compare mutual fund investment with equity investment and present the
current scenario of mutual fund industry.

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 1.3 scope of the study

1) The study covers the concept and details of mutual funds and introduction on
equity, derivatives and index.

2) The study also includes returns of equity, mutual funds and relative index of
different sectors.

3) Equities year high and low is also included in the study.

4) The project report covers the study of Net Asset Value (NAV) of mutual funds
in different sectors.

5) The analysis part includes the Net Asset Value (NAV) charts which gives the
clear picture of the present value of the mutual fund company.

6) The study includes the information regarding the selection of portfolio for
different funds in theory part.

7) The theory part also includes following information related to mutual fund :

 History of mutual funds

 Problem Concept of mutual funds

 Why mutual funds

 Net Asset Value (NAV)

 Types and benefits of mutual funds

 Trends in mutual funds

 Future scenario

 of mutual fund industry in India.

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 1.4 METHODOLOGY OF THE STUDY

All information related to the topic needs to be carefully scrutinized to avoid the

risk of biased analysis. Having once identified which information is relevant and need to

be collected, we will have to define how this will be done.

The method employed in the investigation depends on the purpose and scope of

the study. Let us try to understand methodology.

1) RESEARCH DESIGN: Research design is some statement or specification of

procedures for collecting and analyzing the information required for the solution of some

specific problem.

Here the exploratory research is used as investigation is mainly concerned with

determining the trends and positive and negative returns in different sectors of mutual

funds and equities. Exploratory research is generally carried out by three sources of

information

A) Study of secondary sources

B) Discussion with individuals

C) Analyzing some specific areas

2) DATA COLLECTION METHODS: The key for creating useful system are

selectivity in collection of data and linking that selectivity to the analysis and decision

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issue of the action to be taken. The accuracy of collected data is of great significance for

drawing correct and valid conclusions from the investigation.

The following are the main steps in data collection process

a) Type of information required in the investigation

b) Establishing the facts that are available at present and additional facts required.

c) Identification of sources from where the information can be available.

d) Selection of appropriate information i.e. collection method.

3) SOURCES OF INFORMATION: Data available in marketing research are either

primary or secondary.

Primary data: primary data are generated in an investigation according to the needs of

problem in head. Primary data is collected using case study methods. There are some set

of Qualitative techniques used for collection of some socio economic information about

some phenomenon.

Secondary data: Secondary data can be defined as data collected by some one else for

purpose other than solving the problem being investigated. Secondary data is collected

from external sources which include information from published material of SEBI and

some of the information is collected online. The data sources also include various books,

journals, magazines, news papers, etc. The organization profile is collected from Branch

Manager.

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 1.5 LIMITATIONS OF THE STUDY

1) Equity return is not taken from NSE stock exchange.

2) The data of mutual fund companies and equity companies is taken only for 3&

6 months and 1 year due to non availability of data.

3) Only few sectors have been studied.

4) Data for mutual funds available on website is day to day basis data. Data is

updated daily. Hence the data is available as on 31 march 2009.

5) Only growth funds are taken.

6) Due to non availability of data NSE scrip Tata consultancy information has

not taken.

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 2.1 REVIEW
LITERATURE

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HISTORY OF MUTUAL FUND INDUSTRY

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

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

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

FIRST PHASE – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act

of Parliament. It was set up by the Reserve Bank of India and functioned under the

Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-

linked from the RBI and the Industrial Development Bank of India (IDBI) took over the

regulatory and administrative control in place of RBI. The first scheme launched by UTI

was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under

management.

SECOND PHASE – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of

non- UTI, public sector mutual funds set up by public sector banks and Life Insurance

Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI

Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by

Canara Bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),

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

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

fund in December 1990. At the end of 1993, the mutual fund industry had assets under

management of Rs.47,004 crores.

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THIRD PHASE – 1993-2003 (Entry of Private Sector Funds) With the entry of private

sector funds in 1993, a new era started in the Indian mutual fund industry, giving the

Indian investors a wider choice of fund families. Also, 1993 was the year in which the

first Mutual Fund Regulations came into being, under which all mutual funds, except UTI

were to be registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first private sector mutual fund registered in July 1993. The

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

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

(Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing,

with many foreign mutual funds setting up funds in India and also the industry has

witnessed several mergers and acquisitions. As at the end of January 2003, there were 33

mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with

Rs.44,541 crores of assets under management was way ahead of other mutual funds.

FOURTH PHASE – since February 2003 In February 2003, following the repeal of the

Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the

Specified Undertaking of the Unit Trust of India with assets under management of

Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64

scheme, assured return and certain other schemes. The Specified Undertaking of Unit

Trust of India, functioning under an administrator and under the rules framed by

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Government of India and does not come under the purview of the Mutual Fund

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

LIC.

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

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

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

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

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

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

manage assets of Rs.153108 crores under 421 schemes. The graph indicates the growth of

assets over the years.

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 GROWTH IN ASSETS UNDER MANAGEMENT

ZZZ

Note:

Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the

Unit Trust of India effective from February 2003. The Assets under management of the

Specified Undertaking of the Unit Trust of India has therefore been excluded from the

total assets of the industry as a whole from February 2003 onwards.

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FUTURE SCENARIO

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.

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, and 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 its 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.

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 PROBLEMS & PROSPECTS OF MUTUAL FUNDS

1) Wrong positioning : The mutual funds in India have been quite wrongly promoted as

an alternative to equity industry. Thus creating very high expectations in the minds of

the investors. In a falling market, these expectations have been belied. Only the pure

equity schemes can be compared with the stock market index. However pure equity

schemes are few in India, further, investment is not purely linked to a particular index.

Therefore returns form mutual funds cannot really be compared with stock market

index.

2) Limited product range: Indian mutual funds have remained centered around a limited

product range basically income, income-cum-growth and tax saving schemes. Efforts

to develop and expand the market through innovative new products have been

negligible. These have happened due to the tendency to avoid risk, inability to

understand future market developments, and change in investor preference. Therefore

the extent of mutual funds market has remained limited.

3)Confused market situation: probably the introduction and implementation of new

regulatory norms has contributed in some measure to market sluggishness, as the

emerging market was, initially, not able to respond to the regulatory objectives.

4) Absence of Innovative Marketing Network: The absence of product diversification

and a confused market situation has been made worse by the absence of an innovative

marketing network for mutual funds. The agent oriented network has largely been

failure because most of the agents have not been specifically trained to sell mutual

funds products,

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liability management in mutual funds, leading many 5) Lack of adequate research

infrastructure: the passive approach of some mutual funds in managing investor’s

funds is compounded by the lack of adequate research infrastructure. Consequently,

returns commensurate with the market movement could not be realized by many

schemes, which has tended to show up Indian mutual funds in a bad light.

6) Inefficient management: Management is considered to be a key factor for the

operational efficiency of any business venture. This factor becomes even more crucial

for service ventures such as mutual funds. What mutual funds require are managers

who have a clear understanding of prevailing and emerging market potential, investor

preference and macro economic fundamentals.

7) Lack of investor’s education: The market success of any new product particularly a

financial product depends largely on its acceptance by consumers, in this case

investors. Mutual funds must undertake a well design and comprehensive program of

investor education especially aimed at investors in rural and semi-urban areas.

However this has been mostly neglected in India.

8) Lack of media support: investors understanding about mutual funds product and it

feature must be increased as it was found to be very low so far. This problem requires

quick and structured attention. This can be solved with effective use of media. A

positive media support is also required and mutual funds need to be media friendly. A

very closer coordination between AMFI, mutual funds and the media to promote

investor education in India.

9) Ignorance of liquidity management: over emphasis on asset management has often

ignored the crucial importance of Indian funds into a liquidity trap at the time of

redemption. A more scientific approach needs to be adopted by the funds.

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10) Risk management ignored: Derivatives have been widely used by the mutual funds

as a measure of risk management as a complex and competitive market place. Further

the practice of stock lending, used widely in the western market has induced

efficiency in funds management a regulatory environment for mutual funds need to

encouraged this practices in India.

3.1COMPANY PROFILE

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Wide
Bajaj Capital is one of India’s leading Financial Services companies offering Free Advice

on Investments, Insurance, Tax Saving, Retirement Planning, Financial Planning,

Children’s Future Planning and other services. They also have a wide range of

products and services for Corporates, High Net worth Individuals, and NRIs… all

under one roof.

At Bajaj Capital, they believe in dreaming big. Dreams inspire us to excel. They ignite

hope and kindle in us the passion to stretch our limits. We also believe that nothing can or

should stop us from realising our dreams… and financial constraints should be the last

thing to stop anyone.

Four decades of excellence

For over four decades, they have been helping people realise their aspirations by helping

them make their wealth grow, and plan their financial lives.

Today, they are a one of the largest financial planning and investment advisory

companies in India, with a strong presence all over the country. They take pride in

serving our customers – both individual and institutional – and are known for our strong

professionalism and work ethics.

range of services

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They offer a comprehensive range of services including financial planning and

investment advice, and the entire gamut of financial instruments and investment

products of almost all major companies, both public and private. In addition, they also

provide investment assistance by helping you complete all the formalities, and help you

keep regular track of your investments.

These services and products are delivered through our network of 109 Bajaj Capital

Investment Centers located all over the country.

They are also a SEBI-approved Category I Merchant Banker. They raise resources for

over 1,000 top institutions and corporate houses every year, and offer specialised

services to Non-Resident Indian (NRIs) and High Net worth Clients.

The History of Bajaj Capital

Bajaj Capital has contributed to the growth of the Indian Capital Market at every step.

In 1965, they were the first to innovate the Companies Fixed Deposit. Today, we are

playing an active role in the growth of the Indian Mutual Fund industry.

They are also working closely with private insurance companies to deepen India's

insurance market.

Here is a brief gist of our journey through the years.

1964

Bajaj Capital sets up its first Investment Centre™ in New Delhi to guide individual

investors on where, when and how to invest.

India's first Mutual Fund, Unit Trust of India (UTI) is incorporated in the same year.

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1965

Bajaj Capital is incorporated as a Company. In the same year, the company introduces an

innovative financial instrument – the Company Fixed Deposit. EIL Ltd. (Oberoi Hotels,

then known as Associated Hotels of India Ltd.) becomes the first company to raise

resources through Company Fixed Deposits.

1966

Bajaj Capital expands its product range to include all UTI schemes and Government

saving schemes in addition to Company Fixed Deposits.

1969

Bajaj Capital manages its first Equity issue (through an associate company) of Grauer &

Wells India Ltd.; right from drafting the prospectus to marketing the issue.

1975

Bajaj Capital starts offering 'need-based' investment advice to investors, which would

later be known as 'Financial Planning' in the investment world.

1981

SAIL becomes the first government company to accept deposits, followed by IOC,

BHEL, BPCL, HPCL and others; thus opening the floodgates for growth of retail

investment market in India .Bajaj Capital plays an active role in all the schemes as

'Principal Brokers'

1988

Public Sector Undertakings (PSUs) begin making public issues of bonds MTNL, NHPC,

IRFC offer a series of Bond Issues. Bajaj Capital is among the top ranks of resource

mobilisers. 1989

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SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays a

significant role in fund mobilisation for all these players.

1990

SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser

with collections of over US $20 million.

1991

The first private sector Mutual Fund – Kothari Pioneer – is launched, followed by Birla

and Alliance in the following years. Bajaj Capital plays an active role and is ranked

among the top mobilisers for all these schemes.

1995

IDBI and ICICI begin issuing their series of Bonds for retail investors. Bajaj Capital is the

co-manager in all these offerings and consistently ranks among the top five mobilisers on

an all-India basis.

1999

Private sector players lead the revival of Mutual Funds in India through Open-ended Debt

schemes. Bajaj Capital consolidates its position as India's largest retail distributor of

Mutual Funds.

2000

Bajaj Capital begins marketing Life and General Insurance products of LIC and GIC

(through associate firms) in anticipation of opening up of the Insurance Sector. Bajaj

Capital achieves the milestone of becoming the top 'Pension Scheme' seller in India and

launches marketing of GIC's Health Insurance schemes.

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2002

Bajaj Capital implements its vision of being a 'One-stop Financial Supermarket.' The

Company offers all kinds of financial products, including the entire range of investment

and insurance products through its Investment Centers. Bajaj Capital offers 'full-service

merchant banking' including structuring, management and marketing of Capital issues.

Bajaj Capital reinvents 'Financial Planning' in its international sense and upgrades its

entire team of Investment Experts into Financial Planners.

2006

The Company focuses on creating investor awareness for Financial Planning and need-

based investing. To achieve this goal, the companyintroduced the International College of

Financial Planning. The graduates of this institute become Certified Financial Planners

(CFPs), a coveted professional qualification.

2007

Bajaj Capital obtains the All India Insurance Broking Licence. Simultaneously, a series of

wealth creation seminars are launched all over the country, making Bajaj Capital a

household name.

2008

Bajaj Capital launches 360° Financial Planning, a software-based programme aimed at

encouraging scientific and holistic investing.

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List of Network Branches:

Bajaj Capital has more than 120 branches in India which has been penerated all over

the country to provide the best of its services in each and every zone.

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 4.1 STUDY ON MUTUAL
FUNDS AND OTHER
INVESTMENT SCHEMES

INTRODUCTION ON MUTUAL FUND

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The concept of “Mutual fund” is a new feature in the cap of Indian capital market but not

to international market. The concept of mutual fund spread to USA in the beginning of

20th century and three mutual fund companies were started in 1924. Mutual funds have

been successfully working in the USA and some western countries. These funds have

been useful in filling the gap between the demand and supply of capital in the market. A

mutual fund motivates small and big investors to entrust their savings to it so that these

are professionally employed in sharing good return. A large number of investors have

small savings with them. They can at the most buy shares of one or two companies. When

small savings are pooled and entrusted to mutual fund then these can be used to buy blue

chips where regular returns and capital appreciation are ensured.

Fund is an American concept. The terms like investment company, money fund

investment trust and mutual funds are used interchangeably and used to describe the

same thing in American literature. In British literature mutual funds has not been

explained but is considered as a synonym of investment trust of USA.

DEFINITION & MEANING

A mutual fund is an investment vehicle for investors, who pool their savings for investing

in diversified portfolio of securities with the aim of attractive yields and appreciation in

their value.

As per mutual fund book published by investment company institute of US,“Mutual fund

is a financial service organization that receives money from shareholders, invest it, earns

return on it, attempt to make it grow and agree to pay the shareholder cash on demand

for the current value of investment”

SEBI (mutual fund) regulations, 1996 defines mutual funds as

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“A fund established in the form of a trust to raise monies through the sale of units to the

public or a section of public under one or more schemes for investing in securities

including money market instruments”

A mutual fund is a special type of institution a trust or an investment company which acts

as an investment – intermediary and channelises the savings of large number of people to

the corporate securities in such a way that investors get a steady return, capital

appreciation and low risk

A mutual fund is a trust that pools the savings of a number of investors who wish to start

investing but do not have a large amount of capital to work with or who want to take

hands of approach and let the professional take all decisions. Mutual funds are basically

large funds operated by investment companies and pull money from many

different people and then invest according to a certain goal for the fund. This allows for

greater diversification than would be possible for a single person with less-than-generous

assets and also removes the burden of researching market conditions and constantly

adjusting investments accordingly from the individual.

CONCEPT OF MUTUAL FUND

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 realised 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:

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 Mutual Fund Operation Flow Chart

27
 ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the

organisational set up of a mutual fund:

WHY MUTUAL FUNDS

Let's suppose you're just getting started as an investor and have $5,000 to invest

and you have three important goals you want to achieve. First, you don't want to lose your

money in a risky venture so you want security, like that found in a certificate of deposit or

other fixed income investment. But you also want to make the most money you can, so

you want the prospect for growth potential, too. Finally, since you don't have the time or

knowledge to actively manage your money, you want professional money management --

occasionally diversifying your investments into promising new opportunities. That

sounds like a very good plan, but where can you invest your money and have a chance to

meet all three criteria? Certificates of deposit and other fixed income investments offer

security, but often with low rates of interest and a fixed potential for growth.

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Individual stocks may carry greater potential for growth, but $5,000 isn't a lot to invest

and if you put it all in one stock, you risk everything if it performs poorly. And, brokers

and investment advisors can offer you advice and money management, but at a price --

you pay for their services, which reduces further the amount you have available to invest.

More than 80 million people, or one out of every two households in America, invest in

mutual funds. Currently, over $6 trillion is invested in mutual funds. While funds have

been around since the 1920's, their popularity over the past 25 years has soared. The

reasons:

 Mutual funds make it easy and less costly for investors to

satisfy their need for capital growth, income and/or income

preservation
 Mutual funds bring diversification and professional money

management to the individual investor

A mutual fund is a company that pools the money of many investors -- its shareholders --

to invest in a variety of different securities. Investments may be in stocks, bonds, money

market securities or some combination of these. Those securities are professionally

managed on behalf of the shareholders, and each investor holds a pro rata share of the

portfolio -- entitled to any profits when the securities are sold, but subject to any losses in

value as well.

For the individual investor, mutual funds provide the benefit of having someone else

manage your investments, take care of record keeping for your account, and diversify

your dollars over many different securities that may not be available or affordable to you

otherwise. Today, minimum investment requirements on many funds are low enough that

even the smallest investor can get started in mutual funds.

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A mutual fund, by its very nature, is diversified -- its assets are invested in many different

securities. Beyond that, there are many different types of mutual funds with different

objectives and levels of growth potential, furthering your chances to diversify.

NET ASSET VALUE

The net asset value of the fund is the cumulative market value of the assets fund net of its

liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the

assets in the fund, this is the amount that the shareholders would collectively own. This

gives rise to the concept of net asset value per unit, which is the value, represented by the

ownership of one unit in the fund. It is calculated simply by dividing the net asset value of

the fund by the number of units. However, most people refer loosely to the NAV per unit

as NAV, ignoring the "per unit". We also abide by the same convention.

The price measured per unit is called the Net asset value NAV of the unit. Just as a share

or a bond is brought at a price, a mutual fund is bought and sold at its NAV. If for

example u were to invest Rs.10000 in a scheme when its NAV is Rs.10 you will be

allotted 1000 units (10000/10) roughly –the fund charges a nominal processing fee. The

NAV of any scheme tells how much each unit of it is worth at any point in time, and is

therefore the simplest measure of how it is performing. A scheme’s NAV is its Net assets

(market value of the securities is owns minus whatever it owes) divided by the number of

units it has issued.

A scheme’s NAV is a dynamic figure. The market value of the scheme’s portfolio

changes from day to day as prices of shares and bonds move up or down. The number of

units outstanding also changes, as new investors come into the scheme and old ones

leave. If the NAV of your schemes rises from Rs.10 to Rs.11 over a period of time, your

scheme is said to have generated a return of 10 percent. Similarly if its Net NAV falls

30
form Rs.10 to Rs. 9, it is said to have lost 10 percent. Fund houses have to calculate and

disclose, the NAVs of their schemes daily. Fund NAVs can be easily looked up. While

the general dailies give a random listing of schemes, the financial papers are more

exhaustive in their coverage. When invested in a scheme, its NAV is the figure to track,

as it quantifies your returns, and your purchase price will be based on it. Random listing

of schemes, the financial papers random listing

TYPES OF MUTUAL FUNDS

This section provides descriptions of the characteristics -- such as investment objective

and potential for volatility of your investment -- of various categories of funds. These

descriptions are organized by the type of securities purchased by each fund: equities,

fixed-income, money market instruments, or some combination of these.

This table organizes these fund types by how aggressive or conservative they are and by

investment objective. Because mutual funds have specific investment objectives such as

growth of capital, safety of principal, current income or tax-exempt income, you can

select one fund or any number of different funds to help you meet your specific goals.

In general mutual funds fall into these general categories:

 Equity Funds invest in shares of common stocks.

 Fixed-Income Funds invest in government or corporate securities which offer

fixed rates of return.

 Balanced Funds invest in a combination of both stocks and bonds.

 Money Market Funds for high stability of principal, liquidity and income.

 Bond Funds, both tax-exempt and taxable funds to generate income.

 Specialty/Sector Funds to diversify holdings within an industry.

31
Equity Funds

Aggressive Growth Funds

What they invest in: These funds seek maximum growth of capital with

secondary emphasis on dividend or interest income. They

invest in common stocks with a high potential for rapid

growth and capital appreciation.

Because they invest in stocks which can experience wide

swings up or down, these funds have a relatively low

stability of principal. They often invest in the stocks of

small emerging growth companies and generally provide

low current income because these companies usually

reinvest their profits in their businesses and pay small

dividends, if any. Aggressive growth funds generally

incur higher risks than growth funds in an effort to secure

more pronounced growth. These funds may invest in a

broad range of industries or concentrate on one or more

industry sectors. Some use borrowing, short-selling,

options and other speculative strategies to leverage their

results.

32
Suitable for: Investors who can assume the risk of potential loss in
value of their investment in the hope of achieving
substantial and rapid gains. They are not suitable for
investors who must conserve their principal or who must
maximize current income.

Growth Funds

International/Global Funds
What they invest in: Generally invest in stocks for growth rather than current income.

Growth funds are more likely to invest in well-established

companies where the company itself and the industry in which it

operates are thought to have good long-term growth potential.

Growth funds provide low current income, but the investor's

principal is more stable than it would be in an aggressive growth

fund. While the growth potential may be less over the short term,

many growth funds have superior long-term performance records.

They are less likely than aggressive growth funds to invest in

smaller companies which may provide short-term substantial

gains at the risk of substantial declines.

Suitable for: Although growth funds are more conservative than aggressive

growth funds, they are still relatively volatile. They are suitable

for growth-oriented investors but not investors who are unable to

assume risk or who are dependent on maximizing current income

from their investments.

Growth and Income Funds

33
What they invest in: Growth and income funds seek long-term growth of

capital as well as current income. The investment

strategies used to reach these goals vary among funds

Some invest in a dual portfolio consisting of growth

stocks and income stocks, or a combination of growth

stocks, stocks paying high dividends, preferred stocks,

convertible securities or fixed-income securities such

as corporate bonds and money market instruments.

Others may invest in growth stocks and earn current

income by selling covered call options on their

portfolio stocks.
Suitable for: Growth and income funds have low to moderate

stability of principal and moderate potential for current

income and growth. They are suitable for investors

who can assume some risk to achieve growth of capital

but who also want to maintain a moderate level of

current income.
Fixed-Income Funds

What they invest in: The goal of fixed income funds is to provide high current income

consistent with the preservation of capital. Growth of capital is of

secondary importance

Income funds that invest primarily in common stocks are

classified as equity income funds (see next listing). Those that

invest primarily in bonds and preferred stocks are classified as

fixed-income funds. These funds invest in corporate bonds or

government-backed mortgage securities that have a fixed rate of

34
 return.

Since bond prices fluctuate with changing interest rates, there is

some risk involved despite the fund's conservative nature. When

interest rates rise, the market price of fixed-income securities

declines and so will the value of the income funds' investments.

Conversely, in periods of declining interest rates, the value of

fixed-income funds will rise and investors will enjoy capital

appreciation as well as income

Fixed-income funds offer a higher level of current income than

money market funds, but a lower stability of principal. They are

generally more stable in price than funds that invest in stocks.

Within the fixed-income category, funds vary greatly in their

stability of principal and in their dividend yields. High-yield

funds, which seek to maximize yield by investing in lower-rated

bonds of longer maturities, entail less stability of principal than

fixed-income funds that invest in higher-rated but lower-yielding

securities.

Some fixed-income funds seek to minimize risk by investing

exclusively in securities whose timely payment of interest and

principal is backed by the full faith and credit of the U.S.

Government. These include securities issued by the U.S.

Treasury, the Government National Mortgage Association

("Ginnie Mae" securities), the Federal National Mortgage

Association ("Fannie Maes") and Federal Home Loan Mortgage

Corporation ("Freddie Macs"). All are backed by pools of

mortgages.

35
Suitable for: Fixed-income funds are suitable for investors who want to
maximize current income and who can assume a degree of capital
risk in order to do so. Again, carefully read the prospectus to learn
if a fund's investment policy with respect to yield and risk
coincides with your own objectives.

Balanced/Equity Income funds

What they invest in: Equity income funds seek high current yield by investing
primarily in equity securities of companies which pay high
dividends. Unlike interest payments on bonds, dividends on
equity securities can change as companies raise or lower their
dividends. Since yield-oriented stocks are more volatile than
comparably rated fixed-income securities, equity income funds
offer less stability of principal than fixed-income funds. Balanced
funds are more evenly invested in equities and income securities.
Suitable for: Balanced and equity income funds are suitable for conservative

investors who want high current yield with some growth.

Money Market Funds

What they invest in: For the cautious investor, these funds provide a very high stability

of principal while seeking a moderate to high current income.

They invest in highly-liquid, virtually risk-free, short-term debt

securities of agencies of the U.S. Government, banks and

corporations and U.S. Treasury Bills. They have no potential for

capital appreciation.

Tax-exempt money market funds invest in securities that provide

safety of principal, liquidity and income exempt from federal

36
 income taxes by investing in short-term, high-rated municipal

obligations.

Because of their short-term investments, money market mutual

funds are able to keep a constant share price; only the yield

fluctuates. Therefore, they are an attractive alternative to bank

accounts. With yields that are generally competitive with -- and

usually somewhat higher than -- yields on bank certificates of

deposit (CDs), they offer several advantages:

• Money can be withdrawn any time without penalty.

Money market funds also offer check writing privileges.

• Although not insured by the FDIC or FSLIC, money

market funds invest only in highly-liquid, short-term, top-

rated money market instruments.

• Money market funds are suitable for conservative

investors who want high stability of principal and

moderate current income with immediate liquidity.

Suitable for: Money market funds are suitable for conservative investors who

want high stability of principal and moderate current income with

immediate liquidity.

Municipal Bond Funds

What they invest in: "Muni" bond funds provide higher tax-exempt income than tax-

37
 exempt money market funds by investing in longer-maturity (and

often lower-rated) securities, which generally offer higher yields

than the short-term, high-rated securities in which tax-exempt

money market funds invest

Municipal bond funds vary greatly in the quality and maturity of

the municipal bonds they invest in. The longer the maturity, the

higher the yield. Also, the lower the credit rating of the issuer, the

greater the risk and the higher the yield

While municipal bond funds generally provide lower yields than

income funds with debt obligations of similar maturities and

ratings, for an investor in a high marginal tax bracket the after-tax

yields of municipal bond funds will be higher. The price and yield

of municipal bond funds will fluctuate moderately with interest

rates. As interest rates decline, the value of principal increases

while yield decreases; as rates increase, bond prices decline but

yields increase.
Suitable for: Suitable for investors in medium to higher tax brackets who want
current income free from federal income tax.

Double & Triple Tax-Exempt Bond Funds

What they invest in: These bond funds provide the investor with an even greater tax

advantage by investing in municipal bonds of a single state.

Triple tax-exempt funds are exempt from income tax in a specific

city. Thus they generate income exempt from not only federal

income tax but also from state and/or city income tax for residents

of those jurisdictions. Like all bond funds, the value of the shares

38
 will fluctuate with interest rates, as will the current yield. Also,

the stability of principal and yield levels vary with the quality and

maturity length of the bonds in which the funds invest. Lack of

geographic diversification increases credit risk of these funds

compared with national funds.

Suitable for: These funds are suitable for investors in medium to high tax

brackets in high tax states who want income with maximum

exemption from taxes.

Specialty/Sector Funds

What they invest in: These funds invest in securities of a specific industry or sector of

the economy such as health care, high technology, leisure, utilities

or precious metals

Because such funds invest primarily in one sector, they do not

offer the element of downside risk protection found in mutual

funds that invest in a broad range of industries. However, the

funds do enable investors to diversify holdings among many

companies within an industry, a more conservative approach than

investing directly in one particular company

Sector funds offer the opportunity for sharp capital gains in cases

where the fund's industry is "in favor" but also entail the risk of

capital losses when the industry is out of favor

39
 While sector funds restrict holdings to a particular industry, other

specialty funds such as index funds give investors a broadly-

diversified portfolio and attempt to mirror the performance of

various market averages. Index funds generally buy shares in all

the companies composing the S&P 500 Stock Index or other

broad stock market indices

Asset allocation funds move funds among a variety of markets

and instruments in response to the fund manager's view of relative

market prospects. They are broadly diversified and sometimes

have higher management fees since there may be a variety of

securities in the portfolio. These funds are suitable for investors

who can tolerate a moderate to high degree of risk, are seeking

capital appreciation and to whom dividend income is secondary in

importance. And whatever the instruments, social responsibility

funds apply moral and ethical as well as economic principles in

the selection of securities.

des on the largest and most cost-effective scale. In short, managing investmen

Suitable for: Specialty funds are suitable for investors seeking to invest in a

particular industry who can monitor industry performance

regularly and alter investment strategies accordingly. Investors

must be willing to assume the risk of potential loss in value of

their investment in the hope of achieving substantial gains. They

are not suitable for investors who must conserve their principal or

maximize current income.

40
BENEFITS OF MUTUAL FUNDS

1) Professional Investment Management: By pooling the funds of thousands of

investors, mutual funds provide full-time, high-level professional management that

few individual investors can afford to obtain independently. Such management is vital

to achieving results in today's complex markets. Your fund managers' interests are

tied to yours, because their compensation is based not on sales commissions, but on

how well the fund performs. These managers have instantaneous access to crucial

market information and are able to execute trats is a full-time job for professionals.

2) Diversification: Mutual funds invest in a broad range of securities. This limits

investment risk by reducing the effect of a possible decline in the value of any one

security. Mutual fund shareowners can benefit from diversification techniques usually

available only to investors wealthy enough to buy significant positions in a wide

variety of securities.

3) Low Cost: If you tried to create your own diversified portfolio of 50 stocks, you'd

need at least $100,000 and you'd pay thousands of dollars in commissions to assemble

your portfolio. A mutual fund lets you participate in a diversified portfolio for as little

as $1,000, and sometimes less. And if you buy a no-load fund, you pay or no sale

charges to own them.

4) Convenience and Flexibility: You own just one security rather than many, yet enjoy

the benefits of a diversified portfolio and a wide range of services. Fund managers

decide what securities to trade, clip the bond coupons, collect the interest payments

and see that your dividends on portfolio securities are received and your rights

exercised. It's easy to purchase and redeem mutual fund shares, either directly online

or with a phone call.

41
5) Quick, Personalized Service: Most funds now offer extensive websites with a host

of shareholder services for immediate access to information about your fund account.

Or a phone call puts you in touch with a trained investment specialist at a mutual fund

company who can provide information you can use to make your own investment

choices, assist you with buying and selling your fund shares, and answer questions

about your account status.

6) Ease of Investing: You may open or add to your account and conduct transactions or

business with the fund by mail, telephone or bank wire. You can even arrange for

automatic monthly investments by authorizing electronic fund transfers from your

checking account in any amount and on a date you choose. Also, many of the

companies featured at this site allow account transactions online.

7) Total Liquidity, Easy Withdrawal: You can easily redeem your shares anytime you

dividend payments in cash. Or you can have them reinvested in the fund free of

charge, in which case the dividends are automatically compounded. This can make a

significant contribution to your long-term investment results. With some funds you

can elect to have your dividends from income need cash by letter, telephone, bank

wire or check, depending on the fund. Your proceeds are usually available within a

day or two.

8) Life Cycle Planning: With no-load mutual funds, you can link your investment plans

to future individual and family needs -- and make changes as your life cycles change.

You can invest in growth funds for future college tuition needs, then move to income

funds for retirement, and adjust your investments as your needs change throughout

your life. With no-load funds, there are no commissions to pay when you change your

investments.

42
9) Market Cycle Planning: For investors who understand how to actively manage their

portfolio, mutual fund investments can be moved as market conditions change. You

can place your funds in equities when the market is on the upswing and move into

money market funds on the downswing or take any number of steps to ensure that

your investments are meeting your needs in changing market climates. A word of

caution: since it is impossible to predict what the market will do at any point in time,

staying on course with a long-term, diversified investment view is recommended for

most investors.

10) Investor Information: Shareholders receive regular reports from the funds, including

details of transactions on a year-to-date basis. The current net asset value of your

shares (the price at which you may purchase or redeem them) appears in the mutual

fund price listings of daily newspapers. You can also obtain pricing and performance

results for the all mutual funds at this site, or it can be obtained by phone from the

fund.

11) Periodic Withdrawals: If you want steady monthly income, many funds allow you

to arrange for monthly fixed checks to be sent to you, first by distributing some or all

of the income and then, if necessary, by dipping into your principal.

12) Dividend Options: You can receive all paid in cash and your capital gains

distributions reinvested.

13) Automatic Direct Deposit: You can usually arrange to have regular, third-party

payments -- such as Social Security or pension checks -- deposited directly into your

fund account. This puts your money to work immediately, without waiting to clear

43
 your checking account, and it saves you from worrying about checks being lost in the

mail.

14) Recordkeeping Service: With your own portfolio of stocks and bonds, you would

have to do your own recordkeeping of purchases, sales, dividends, interest, short-term

and long-term gains and losses.

15) Safekeeping: When you own shares in a mutual fund, you own securities in many

companies without having to worry about keeping stock certificates in safe deposit

boxes or sending them by registered mail. You don't even have to worry about

handling the mutual fund stock certificates; the fund maintains your account on its

books and sends you periodic statements keeping track of all your transactions.

16) Retirement and College Plans: Mutual funds are well suited to Individual

Retirement Accounts and most funds offer IRA-approved prototype and master plans

for individual retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k)

retirement plans. Funds also make it easy to invest -- for college, children or other

long-term goals. Many offer special investment products or programs tailored

specifically for investments for children and college.

17) Online Services: The internet provides a fast, convenient way for investors to access

financial information. A host of services are available to the online investor including

direct access to no-load companies.

18) Sweep Accounts: With many funds, if you choose not to reinvest your stock or bond

fund dividends, you can arrange to have them swept into your money market fund

automatically. You get all the advantages of both accounts with no extra effort.

44
19) Asset Management Accounts: These master accounts, available from many of the

larger fund groups, enable you to manage all your financial service needs under a

single umbrella from unlimited check writing and automatic bill paying to discount

brokerage and credit card accounts.

20) Margin: Some mutual fund shares are marginable. You may buy them on margin or

use them as collateral to borrow money from your bank or broker. Call your fund

company for details.

MARKET TRENDS

Alone UTI with just one scheme in 1964, now competes with as many as 400 odd

products and 34 players in the market. In spite of the stiff competition and losing market

share, UTI still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the

industry. New players have come in, while others have decided to close shop by either

selling off or merging with others. Product innovation is now passé with the game

shifting to performance delivery in fund management as well as service. Those directly

associated with the fund management industry like distributors, registrars and transfer

agents, and even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI

has always been a dominant player on the bourses as well as the debt markets, the new

generation of private funds which have gained substantial mass are now seen flexing their

muscles. Fund managers, by their selection criteria for stocks have forced corporate

governance on the industry. By rewarding honest and transparent management with

45
higher valuations, a system of risk-reward has been created where the corporate sector is

more transparent then before.

Funds have shifted their focus to the recession free sectors like pharmaceuticals,

FMCG and technology sector. Funds performances are improving. Funds collection,

which averaged at less than Rs100bn per annum over five-year period spanning 1993-98

doubled to Rs210bn in 1998-99. In the current year mobilization till now have exceeded

Rs300bn. Total collection for the current financial year ending March 2000 is expected to

reach Rs450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the

private sector mutual funds rather than public sector mutual funds. Indeed private MFs

saw a net inflow of Rs. 7819.34 crore during the first nine months of the year as against a

net inflow of Rs.604.40 crore in the case of public sector funds.

Mutual funds are now also competing with commercial banks in the race for retail

investor’s savings and corporate float money. The power shift towards mutual funds has

become obvious. The coming few years will show that the traditional saving avenues are

losing out in the current scenario. Many investors are realizing that investments in savings

accounts are as good as locking up their deposits in a closet. The fund mobilization trend

by mutual funds in the current

year indicates that money is going to mutual funds in a big way. The collection in the first

half of the financial year 1999-2000 matches the whole of 1998-99.

India is at the first stage of a revolution that has already peaked in the U.S. The

U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual

fund assets are not even 10% of the bank deposits, but this trend is beginning to change.

46
Recent figures indicate that in the first quarter of the current fiscal year mutual fund

assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank,

The Financial Express September, 99) This is forcing a large number of banks to adopt

the concept of narrow banking wherein the deposits are kept in Gilts and some other

assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be

ignored and they will not close down completely. Their role as intermediaries cannot be

ignored. It is just that Mutual Funds are going to change the way banks do business in the

future.

COMPARISON OF BANKS, MUTUAL FUNDS, EQUITY & DERIVATIVES

BANKS MUTUAL EQUITY DERIVATIVES

FUNDS
Returns Low Better Better Better
Administrati High Low Low Low

ve exp.
Risk Low Moderate High High
Investment Less More More Less

options
Network High penetration Low but High penetration High penetration

improving
Liquidity At a cost Better Better Better
Quality of Not transparent Transparent Transparent -

assets
Interest Minimum balance Everyday NA NA

calculation between 10th. & 30th.

Of every month

Guarantee Maximum Rs.1 lakh None NA NA

on deposits

47
RECENT TRENDS IN MUTUAL FUND INDUSTRY

The most important trend in the mutual fund industry is the aggressive expansion

of the foreign owned mutual fund companies and the decline of the companies floated by

nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties

and got off to a good start due to the stock market boom prevailing then. These banks did

not really understand the mutual fund business and they just viewed it as another kind of

banking activity. Few hired specialized staff and generally chose to transfer staff from the

parent organizations. The performance of most of the schemes floated by these funds was

not good. Some schemes had offered guaranteed returns and their parent organizations

had to bail out these AMCs by paying large amounts of money as the difference between

the guaranteed and actual returns. The service levels were also very bad. Most of these

AMCs have not been able to retain staff, float new schemes etc. and it is doubtful

whether, barring a few exceptions, they have serious plans of continuing the activity in a

major way.

The experience of some of the AMCs floated by private sector Indian companies

was also very similar. They quickly realized that the AMC business is a business, which

makes money in the long term and requires deep-pocketed support in the intermediate

years. Some have sold out to foreign owned companies, some have merged with others

and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the

expectation of a long haul. They can be credited with introducing many new practices

48
such as new product innovation, sharp improvement in service standards and disclosure,

usage of technology, broker education and support etc. In fact, they have forced the

industry to upgrade itself and service levels of organizations like UTI have improved

dramatically

SELECTING FUNDS FOR YOUR PORTFOLIO

The chart below can be used to identify the types of funds best suited to your particular

investment objectives. Refer to it as you begin to formulate your portfolio.

If Your Basic You Want The These Funds Invest Potential Potential Potential

Objective Is Following Primarily In Capital Current Risk

Fund Type Appreciation Income

Common stocks

Aggressive with potential for

Maximum
Growth very rapid growth. High to
Capital Very High Very Low
May employ certain Very High
Growth
International aggressive

strategies
Growth

Common stocks
High Capital Specialty/ High to Very
with long-term Very Low High
Growth Sector High
growth potential

International
Current Growth & Common stocks Moderate Moderate Moderate

Income & Income with potential for to High

Capital high dividends and

49
Growth capital appreciation
Fixed Income Both high-dividend-
High Current High to Low to
paying stocks and Very Low
Income Very High Moderate
Equity Income bonds
Current
General
Income & Money market Moderate
Money Market None Very Low
Protection of instruments to High
Funds
Principal
Tax-Free
Short-term
Income & Tax-Exempt Moderate
municipal notes and None Low
Protection of Money Market to High
bonds
Principal
Current
U.S.Treasury and
Income & U.S.
agency issues Moderate
Maximum Government None Low
guaranteed by the to High
Safety of Money Market
U.S. Government
Principal

ON INDEX INTRODUCTION
Stock market talk is everywhere, from T.V and radio, to the newspapers and the
web. But what does it mean? When people say that “the market turned a great
performance today”. “What is the market anyway?”

As it turns out, when most people talk about “the market” they are actually
referring to an index. With the growing importance of the stock market in our society the
names of indexes such as S & P 500, NIFTY, and SENSEX have become part of our
every vocabulary.

Index can be defined as “a statistical measure of changes in the portfolio of stocks

representing the portion of the overall market.” It would be difficult to track every single

50
security trading in the country. To get around this we take a smaller sample of the market
that is representative of the whole. Thus, just a pollster’s use a political survey to gauge
the sentiment of population, the investors use indexes to track the performance of the
stock market. Ideally change in price of an index would represent and exactly
proportionate change in the stocks included in the index.

Indexes are great tools for telling us what direction the market is taking, what
trends are prevailing. “An index is a number use to represent the changes in a set of
values between a base time period and another time period” A stock index is number that
helps you measure the levels of the market. Most stock indexes attempt to be proxies for
the market they exist in. returns on the index are thus supposed to represent the returns on
the market i.e the returns that u could get if u had the entire market in your portfolio.

5.1 ANALYSIS &

INTERPRETATION

51
Statement showing analysis of MF Co
LIC MF

avg
Date NAV (Rs.) returns return diffe d*d
29/01/2010 25.78 -0.0348 0.0348 0.001211
28/01/2010 25.77 -0.03879 -0.0348 -0.00399 1.59E-05
27/01/2010 25.77 0 -0.0348 0.0348 0.001211
AVG RETURNS=-
25/01/2010 25.76 -0.0388 -0.0348 -0.004 1.6E-05
22/01/2010 25.71 -0.1941 -0.0348 -0.1593 0.025376 0.0348
21/01/2010 25.7 -0.0389 -0.0348 -0.0041 1.68E-05
20/01/2010 25.68 -0.07782 -0.0348 -0.04302 0.001851 RISK=√∑D*D/(N-1)
19/01/2010 25.68 0 -0.0348 0.0348 0.001211
18/01/2010 25.68 0 -0.0348 0.0348 0.001211 =√0.046204/18
15/01/2010 25.66 -0.07788 -0.0348 -0.04308 0.001856
=0.0506
14/01/2010 25.66 0 -0.0348 0.0348 0.001211
13/01/2010 25.66 0 -0.0348 0.0348 0.001211
12/1/2010 25.66 0 -0.0348 0.0348 0.001211
11/1/2010 25.66 0 -0.0348 0.0348 0.001211
8/1/2010 25.64 -0.07794 -0.0348 -0.04314 0.001861
7/1/2010 25.63 -0.039 -0.0348 -0.0042 1.77E-05
6/1/2010 25.62 -0.03902 -0.0348 -0.00422 1.78E-05
5/1/2010 25.63
0.03903 0.07383
2 -0.0348 2 0.005451
INTERPRETATIO
4/1/2010 25.62 -0.03902 -0.0348 -0.00422 1.78E-05
1/1/2010 25.61 -0.03903 -0.0348 -0.00423 1.79E-05 N
0.046204

52
 The above table shows risk&return of LIC MF company .the avg return is –

0.0348 .&risk is 0.0506 .the company has the highestprice of 25.78 &lowest price of

25.61.

RILANCE MF

RELIANCE
MF

53
 NAV
AVG
Date (Rs.) RETURNS RETU DIFF D*D
29/01/2010 14.52 0.284897 -0.2849 0.081166
28/01/2010 14.44 -0.55096 0.284897 -0.83586 0.698664
27/01/2010 14.35 -0.62327 0.284897 -0.90817 0.824765
25/01/2010 14.77 2.926829 0.284897 2.641932 6.979806
22/01/2010 14.93 1.083277 0.284897 0.79838 0.63741
21/01/2010 15.06 0.87073 0.284897 0.585833 0.3432
20/01/2010 15.35 1.925631 0.284897 1.640734 2.692007
19/01/2010 15.4 0.325733 0.284897 0.040836 0.001668
18/01/2010 15.51 0.714286 0.284897 0.429389 0.184375
15/01/2010 15.44 -0.45132 0.284897 -0.73622 0.542018
14/01/2010 15.46 0.129534 0.284897 -0.15536 0.024138
13/01/2010 15.41 -0.32342 0.284897 -0.60831 0.370044
12/1/2010 15.33 -0.51914 0.284897 -0.80404 0.646481
11/1/2010 15.44 0.717547 0.284897 0.43265 0.187186
8/1/2010 15.39 -0.32383 0.284897 -0.60873 0.370554
7/1/2010 15.5 0.71475 0.284897 0.429853 0.184773
6/1/2010 15.51 0.064516 0.284897 -0.22038 0.048568
5/1/2010 15.43 -0.5158 0.284897 -0.80069 0.64111
4/1/2010 15.27 -1.03694 0.284897 -1.32184 1.747256
17.20519

=0.9776

AVG RETURNS=0.284897

RISK=√∑D*D/(N-1)

=√17.20519/18

INTERPRETATION

54
 The above table shows risk&return of RELIANCE company .the avg return

is0.284897 .and risk is 0.9776 .the company has the highestprice of 15.51 &lowest

price of 14.35. .

55
TATA MUTUAL FUND

TATA
MF
AVG
Date NAV (Rs.) RETURNS RET DIF D*D
31/01/2010 42.03
0.24432
5 -0.24433 0.059695
29/01/2010 42.03
0.24432
0 5 -0.24433 0.059695
28/01/2010 41.79
0.24432
-0.57102 5 -0.81535 0.664789
27/01/2010 41.84
0.24432
0.119646 5 -0.12468 0.015545
25/01/2010 43.27
0.24432 3.17345
3.417782 5 7 10.07083
22/01/2010 43.64
0.24432 0.61077
0.855096 5 1 0.373041
21/01/2010 43.99
0.24432 0.55769
0.802016 5 1 0.31102
20/01/2010 44.88
0.24432 1.77886
2.023187 5 2 3.16435
19/01/2010 45.12
0.24432 0.29043
0.534759 5 4 0.084352
18/01/2010 45.46
0.24432 0.50922
0.753546 5 1 0.259306
15/01/2010 45.33
0.24432
-0.28597 5 -0.53029 0.281208
14/01/2010 45.3
0.24432
-0.06618 5 -0.31051 0.096414
13/01/2010 45.05
0.24432
-0.55188 5 -0.7962 0.633937
12/1/2010 44.79
0.24432
-0.57714 5 -0.82146 0.674799
11/1/2010 45.11
0.24432
0.714445 5 0.47012 0.221013
8/1/2010 44.78
0.24432
-0.73155 5 -0.97587 0.952322
7/1/2010 44.85
0.24432
0.15632 5 -0.08801 0.007745
6/1/2010 44.73
0.24432
-0.26756 5 -0.51188 0.262025
5/1/2010 44.45
0.24432
-0.62598 5 -0.8703 0.757427
4/1/2010 43.98
0.24432
-1.05737 5 -1.30169 1.694404
1 20.64392

56
AVG RETURNS=0.244325

RISK=√∑D*D/(N-1)

=√20.64392/18

=1.0709

INTERPRETATION

The above table shows risk&return of TATA MF company .the avg return is

0.244325 .&risk is 1.0709 .the company has the highestprice of 45.56 &lowest

price of 41.79 .

57
58
SUNDARAM MF

SUNDARAM
MF
NAV
AVG
Date (Rs.) RETURNS RET DIF D*D
29/01/2010 12.86
0.31038
2 -0.31038 0.096337
28/01/2010 12.79
0.31038
-0.54432 2 -0.85471 0.730521
27/01/2010 12.84
0.31038 0.08054
0.39093 2 8 0.006488
25/01/2010 13.27
0.31038 3.03852
3.34891 2 8 9.23265
22/01/2010 13.45
0.31038 1.04606
1.356443 2 1 1.094244
21/01/2010 13.59
0.31038
1.040892 2 0.73051 0.533645
20/01/2010 13.9
0.31038 1.97070
2.281089 2 7 3.883686
19/01/2010 13.93
0.31038
0.215827 2 -0.09455 0.008941
18/01/2010 14.03
0.31038 0.40749
0.717875 2 3 0.166051
15/01/2010 14.01
0.31038
-0.14255 2 -0.45293 0.205149
14/01/2010 13.9
0.31038
-0.78515 2 -1.09554 1.200198
13/01/2010 13.83
0.31038
-0.5036 2 -0.81398 0.662562
12/1/2010 13.8
0.31038
-0.21692 2 -0.5273 0.278047
11/1/2010 13.95
0.31038 0.77657
1.086957 2 5 0.603068
8/1/2010 13.84
0.31038
-0.78853 2 -1.09891 1.207609
7/1/2010 13.9
0.31038 0.12314
0.433526 2 4 0.015164
6/1/2010 13.98
0.31038 0.26515
0.57554 2 8 0.070309
5/1/2010 13.84
0.31038
-1.00143 2 -1.31181 1.720852
4/1/2010 13.58
0.31038
-1.87861 2 -2.18899 4.791698
26.50722

AVG RETURNS=0.310382

59
 RETURNS=√∑D*D/(N-1)

=√26.50722/18

=1.2135

INTERPRETATION

The above table shows risk&return of SUNDARAM MF company .the avg

return is 0.31038 .&risk is 1.2134 .the company has the highestprice of 13.98

&lowest price of 12.79

60
HDFC MUTUAL FUND

HDFC
AVG
Date NAV (Rs.) RETURNS RET DIFF D*D
-
29/01/2010 11.62 0.0239
2 0.02392 0.000572
-
28/01/2010 11.61 0.0239
-0.08606 2 -0.06214 0.003861
-
27/01/2010 11.63 0.0239 0.19618
0.172265 2 5 0.038489
-
25/01/2010 11.62 0.0239
-0.08598 2 -0.06206 0.003852
-
22/01/2010 11.62 0.0239
0 2 0.02392 0.000572
21/01/2010 11.61 -0.08606 - -0.06214 0.003861
0.0239

61
 2
-
20/01/2010 11.61 0.0239
0 2 0.02392 0.000572
-
19/01/2010 11.61 0.0239
0 2 0.02392 0.000572
-
18/01/2010 11.6 0.0239
-0.08613 2 -0.06221 0.00387
-
15/01/2010 11.6 0.0239
0 2 0.02392 0.000572
-
14/01/2010 11.6 0.0239
0 2 0.02392 0.000572
-
13/01/2010 11.59 0.0239
-0.08621 2 -0.06229 0.00388
-
12/1/2010 11.6 0.0239 0.11020
0.086281 2 1 0.012144
-
11/1/2010 11.59 0.0239
-0.08621 2 -0.06229 0.00388
-
8/1/2010 11.59 0.0239
0 2 0.02392 0.000572
-
7/1/2010 11.59 0.0239
0 2 0.02392 0.000572
-
6/1/2010 11.58 0.0239
-0.08628 2 -0.06236 0.003889
-
5/1/2010 11.59 0.0239 0.11027
0.086356 2 6 0.012161
-
4/1/2010 11.57 0.0239
-0.17256 2 -0.14864 0.022095
0.116559

.&risk is 0.0804 .the company has the highestprice of 11.63 &lowest price of 11

AVG RETURN=0.02392

RISK=√∑D*D/(N-1)

62
 =√0.116559/18

=0.0804

INTERPRETATION

The above table shows risk&return of HDFC company .the avg return is

0.02392 .58 .

FUND HOUSE RETURN(Rp) Risk(std) Risk fre rate(Rr) 8%

Lic mf -0.0348 0.0506 0.08
Reliance 0.284897 0.9776 0.08

63
Tata mf 0.244325 1.0709 0.08
Sundaram mf 0.31038 1.2134 0.08
HDFC 0.02392 0.0804 0.08

GRAPH OF RETURN

GRAPH OF RISK

64
GRAPH OF COMBINATION RISK&RETURN

CALCULATION SHARPE ‘S PERFOMANCE INDREX

S.P.I=Rp-Rf/std deviation

Spi of Lic mf=-0.0348-0.08/0.0506

65
 =-2.2687

Spi of reliance=0.284897-0.08/0.9776

=0.2095

Spi of tata mf=0.244325-0.08/1.0709

=0.1534

Spi of sundaram mf=0.31038-0.08/1.2134

=0.1898

Spi of hdfc mf=0.02392-0.08/0.0804

=-0.6975

Fund house Performance index

Lic mf -2.2687
Reliance 0.2095
Tata mf 0.1534
Sundaram mf 0.1898
HDFC -0.6975

66
 6.1 FINDINGS

FINDINGS

The present project work has been undertaken to study and analyse the mutual funds with

Equities reference to their risk and returns. While doing this project we observe the

following facts.

67
  The company JET AIRWAYS is having the highest price of 557 and lowest price

of 479.3

It is showing less fluctuations.The risk is 3.4876 and return is 0.36103 The

CO-efficient of

variance 0.9660

 The company MARUTHI is having the highest price of 1565 and lowest price of

1369.8

It is showing less fluctuations.The risk is 1.8412 and return is 0.51941 The co

efficient of

Variance is3.5441.

 The company TCS is having the highest price of 802.2and lowest price of 699.8

It is showing less fluctuations.The risk is 2.65178 and return is -0.41133 The

co efficient of

variance is 4.9881.

 The company HDFC is having the highest price of 2708 and lowest price of

2305.35 It is showing less fluctuations.The risk is 1.412254 and return is

0.94640 The

Co efficient of variance 1.4911

 The company INFOSYS TCH is having the highest price of 2689.75 and lowest

price of

It is showing less fluctuations.The risk is 2.524821 and return is 0.039797 The

Co efficient of

68
 variance is 63.442.

69
 7.1 SUGGESTIONS

SUGGESTIONS

The present project work has been undertaken to study the best available mutual funds

in the industry and evaluating their performances. While doing so we come across the

70
 analysis and few facts have been identified. After such analysis,interpretation and

findings we will be able to suggest investors as follows.

 The fund house JET AIRWAYS is showing best co efficient of variance of

all the funds. The cov of JET AIRWAYS is 0.9660. There fore it should be

bought at its lowest MP price i.e,479.3..

 The fund house HDFCis showing best cov of all the funds. The cov of HDFC is

1.4911 . There fore it should be bought at its lowest MP price i.e,2305.35

 The fund house MARUTHI is showing best cov of all the funds. The cov of is T

MARUTHI 3.5441. There fore it should be bought at its lowest MP pricei.e, 1369.8.

 The fund house TCS is showing best performance index of all the funds. The

Cov of TCS is 4.9881. There fore it should be bought at its lowest MP pricei.e,699.8.

 The fund house INFOSYS TCH is showing best COV of all the funds. The cov

of INFOSYS TCH is 63.442 .There fore it should be bought at its lowest naMP pricei.e,

2452.4.

71
 8.1BIBILIOGRAPHY

I. TEXT BOOK
1. Security Analysis Portfolio Management

Donald Fisher

Ronald A Jordan

2.Mutual Fund In India

H.Sadhak

II. WEB SITES

www.mutualfundsindia.com

72
www.amfiindia.com

www.utimf.com

www.bseindia.com

III. MAGAINES
Business India

Business World

IV. NEWS PAPERS

Economic Times

Business Standard.

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