Project Report

(Submitted for the degree of B.COM, Honours in Accounting and Finance)

Title of the Project

Mutual Funds

Submitted By
Name of the Candidate - Ravi Mundhra

Registration No. – 017-1111-0170-17

CU Roll No. – 171017-21-1210

Name of the College – The Bhawanipur Education Society College

College UID – 0101170342

Supervised By:
Name of the Supervisor- Trupti Upadhyay

Name of the College – The Bhawanipur Education Society College

Month and Year of Submission:

Month-

Year-2020

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 Supervisor's Certificate

This is to certify that Mr. Ravi Mundhra student of B.Com. Honours in Accounting & Finance, The
Bhawanipur Education Society College under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project Report with the title Mutual
Funds, which he is submitting, is his genuine and original work to the best of my knowledge.

Place: Kolkata

Date:

Signature:

Name: Trupti Upadhyay

Designation: Lecturer

Name of the College: The Bhawanipur Education Society College

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 Student's Declaration

I hereby declare that the Project Work with the title MUTUAL FUNDS, submitted by me for the partial
fulfilment of the degree of B.Com. Honours in Accounting & Finance under the University of Calcutta is
my original work and has not been submitted earlier to any other University /Institution for the fulfilment
of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been incorporated in this report
from any earlier work done by others or by me. However, extracts of any literature which has been used for
this report has been duly acknowledged providing details of such literature in the references.

Signature:

Name: Ravi Mundhra

Address:74/1, jaliya para lane, Howrah

Registration No. 017-1111-0170-17

Place: Kolkata

Date:

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 ACKNOWLEDGEMENT

I express my thanks towards my professors and faculty members of THE BHAWANIPUR EDUCATION
SOCIETY COLLEGE, Department of Commerce (Moring). A Debt gratitude towards my guide, Prof.
Trupti Upadhyay, for patiently hearing me out and for giving valuable inputs on my research project.

I would like to make special thanks to my parents, without whose blessings, this project would not be
possible.

Finally, I would like to thank my fellow college mates who have helped me through this period of
project work.

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 TABLE OF CONTENTS

CHAPTER TOPIC PAGE

Chapter I: Introduction 1.1 Background of Mutual Fund 6-8
1.2 Literature Review 9-10
1.3 Objectives of study 11
1.4 Research Methodology 11
1.5 Limitations of study 11
1.6 Chapter Planning 12
Chapter II: Conceptual Framework 2.1 Definition of Mutual Funds 13
2.2 Organization of Mutual Funds 14
2.3 Advantages & Disadvantages of Mutual 15
Fund
2.4 Types of Mutual Fund 16-19
2.5 National Scenario 20-23
2.6 International Scenario 24
Chapter III: Presentation of Data, Analysis and 3.1 Company Profile 25-39
Findings
3.2 Data Analysis 40-48
3.3 Findings 49
Chapter IV: Conclusion & Recommendations 4.1 Conclusion 50
4.2 Recommendations 50
References 51

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 Chapter- I: Introduction

1.1 Background of the Mutual Fund

Mutual funds really captured the public's attention in the 1980s and '90s when mutual fund
investment hit record highs and investors saw incredible returns. However, the idea of pooling assets
for investment purposes has been around for a long time. Here we look at the evolution of this
investment vehicle, from its beginnings in the Netherlands in the 18th century to its present status as
a growing, international industry with fund holdings accounting for trillions of dollars in the United
States alone.

In the Beginning

Historians are uncertain of the origins of investment funds; some cite the closed-end investment
companies launched in the Netherlands in 1822 by King William I as the first mutual funds, while
others point to a Dutch merchant named Adriaan van Ketwich whose investment trust created in 1774
may have given the king the idea. Ketwich probably theorized that diversification would increase the
appeal of investments to smaller investors with minimal capital. The name of Ketwich's fund, Eendragt
Maakt Magt, translates to "unity creates strength". The next wave of near-mutual funds included an
investment trust launched in Switzerland in 1849, followed by similar vehicles created in Scotland in
the 1880s.

The idea of pooling resources and spreading risk using closed-end investments soon took root in Great
Britain and France, making its way to the United States in the 1890s. The Boston Personal Property
Trust, formed in 1893, was the first closed-end fund in the U.S. The creation of the Alexander Fund in
Philadelphia in 1907 was an important step in the evolution toward what we know as the modern
mutual fund. The Alexander Fund featured semi-annual issues and allowed investors to make
withdrawals on demand.

The Arrival of the Modern Fund

The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded the arrival of
the modern mutual fund in 1924. The fund went public in 1928, eventually spawning the mutual fund
firm known today as MFS Investment Management. State Street Investors' Trust was the custodian of
the Massachusetts Investors' Trust. Later, State Street Investors started its own fund in 1924 with
Richard Paine, Richard Saltonstall and Paul Cabot at the helm. Saltonstall was also affiliated with
Scudder, Stevens and Clark, an outfit that would launch the first no-load fund in 1928. A momentous
year in the history of the mutual fund, 1928 also saw the launch of the Wellington Fund, which was
the first mutual fund to include stocks and bonds, as opposed to direct merchant bank style of
investments in business and trade.

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Regulation and Expansion

By 1929, there were 19 open-ended mutual funds competing with nearly 700 closed-end funds. With
the stock market crash of 1929, the dynamic began to change as highly-leveraged closed-end funds
were wiped out and small open-end funds managed to survive.

Government regulators also began to take notice of the fledgling mutual fund industry. The creation
of the Securities and Exchange Commission (SEC), the passage of the Securities Act of 1933 and the
enactment of the Securities Exchange Act of 1934 put in place safeguards to protect investors: mutual
funds were required to register with the SEC and to provide disclosure in the form of a prospectus.
The Investment Company Act of 1940 put in place additional regulations that required more
disclosures and sought to minimize conflicts of interest.

Hundreds of new funds were launched throughout the 1960s until the bear market of 1969 cooled the
public appetite for mutual funds. Money flowed out of mutual funds as quickly as investors could
redeem their shares, but the industry's growth later resumed.

Recent Developments

In 1971, William Fouse and John McQuown of Wells Fargo Bank established the first index fund, a
concept that John Bogle would use as a foundation on which to build The Vanguard Group, a mutual
fund powerhouse renowned for low-cost index funds. The 1970s also saw the rise of the no-load fund.
This new way of doing business had an enormous impact on the way mutual funds were sold and
would make a major contribution to the industry's success.

With the 1980s and '90s came bull market mania and previously obscure fund managers became
superstars; Max Heine, Michael Price and Peter Lynch, the mutual fund industry's top gunslingers,
became household names and money poured into the retail investment industry at a stunning pace.
More recently, the burst of the tech bubble and a spate of scandals involving big names in the industry
took much of the shine off of the industry's reputation. Shady dealings at major fund companies
demonstrated that mutual funds aren't always benign investments managed by folks who have their
shareholders' best interests in mind.

The second is the UTI Mutual Fund, 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.

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THE GRAPH INDICATES THE GROWTH OF ASSETS OVER THE YEARS:

GROWTH IN ASSETS UNDER MANAGEMENT

Source: Slide Share; https://www.slideshare.net/praftek/associaion-of-mutual-fund-of-india

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. Mutual Funds in India are governed by the SEBI (Mutual Fund) Regulations
1996 as amended from time to time.

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1.2 LITERATURE REVIEW
1.Pandian P. in the book “Security Analysis and Portfolio Management” financial investment is the
allocation of money to assets that are expected to yield some gain over a period of time. It is an
exchange of financial claims such as stock and bonds for money. They are expected to yield returns
and experience capital growth over the years.

According to the book Mutual Funds by ICFAI University had described the various key financial
terms which are mentioned below:

Net asset value (nav) is the market value of the assets of the scheme minus its liabilities. The nav per
unit on any day is computed as follows

NAV= receivables+accrued income- liabilities- accrued liabilities

No. of shares or units outstanding

2. According to website about.com author lee McGowan had suggested ten reasons for buying
mutual funds which are given as follows: -

The beauty of a mutual fund is that you can buy a mutual fund and obtain instant access to a
hundred of individual stocks or bonds. Otherwise, in order to diversify your portfolio, you might have
to buy individual securities, which exposes you to more potential volatility.

Many investors don’t have the resources or the time to buy individual stocks. Investing in individual
securities, such as stocks, not only takes resources, but a considerable amount of time. By contrast,
mutual fund managers and analysts wake up each morning dedicating their professional lives to
researching and analysing current and potential holdings for their mutual fund.

A mutual fund comes in many types and styles. There are stock funds, bond funds, sector funds,
target-date mutual funds, money market mutual funds and balanced funds. Mutual funds allow you
to invest in the market whether you believe in active portfolio management (actively managed
funds) or you prefer to buy a segment of the market with no interference from a manager (passive
funds and index mutual funds). The availability of different types of mutual funds allows you to build
a diversified portfolio at low cost and without much difficulty.

Many mutual fund companies allow investors to get started in a mutual fund with as little as $1,000.
Schwab’s mutual fund family has a minimum of $100 for many of their mutual funds.

3. Ethical flavours in mutual fund-by S. Suma

(http://www.karvy.com/articles/ethical30062001.htm)

The concept of a socially responsible fund was hitherto unknown to Indian investors, it is a popular
investment vehicle in the US mutual fund market. Ethical funds, as they are popularly called, cater to
the need of a population segment with personal ethical codes, which are not in line with normal
investment practices. These funds consider environmental, social and animal cruelty issues before
investing in a company. Thus, ethical funds will follow a process of elimination while taking
investment decisions and will not invest in companies that are engaged in running abattoirs, meat

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processing and packaging, production of liquor, tobacco, leather goods pesticides, pisciculture and
sericulture.

The first socially responsible fund, to be launched by JM Asset Management Company, is christened
JM Heritage Fund. The fund will to cater to the needs of investors with strong personal ethic codes.
The scheme, structured as a balanced fund, will invest in equity and debt, would focus on ahimsa.
The 'Ahimsa' fund would provide investors with two options - income and balanced. The second plan
is a growth-cum-income plan that invests in both equity and debt. A small percentage of the fund
management fees is kept away for donation to charities involved in animal welfare. Typically, JM
Heritage fund would invest in areas like petrochemicals, auto, metals, banking and finance,
engineering and technology. It might also consider FMCG and pharma companies, provided such
outfits are above board with respect to cruelty issues.

For an investor just looking for performance, there's no reason to buy a socially responsible fund.

4. According to The Hindu 12th April 2010 “Indians shy away from investing in mutual funds”

Indians are reluctant to invest in mutual funds on fears of high risk and lack of information on how
this investment product works, despite being available in the market for over two decades now with
assets under management equalling Rs. 7,81,711.52 crore, less than 10 per cent Indian households
have invested in mutual funds, according to the report by research and analytics firm Boston
Analytics. The report suggests that investors are holding back from putting their money in mutual
funds due to perceived high risk and lack of information on how they work. The report is based on a
survey of approximately 10,000 respondents in 15 Indian cities as of March 2010.

Among respondents with high savings, close to 40 per cent of those who live in metros and Tier I
cities said such investments were very risky, whereas 33 per cent of those in tier II cities said they did
not know how and where to invest in such assets. On the other hand, among nine out of ten who
invested said they did so because they felt mutual funds were more professionally managed than
other asset classes.

5. According to S S Prashanth, http://www.karvy.com/articles/archmf.htm

Mutual Funds are still and would continue to be the unique financial tools, in the country. One has
to appreciate the fact that every aspect of life has its periods of highs and lows. This has been the
case with the stock markets. Why not apply the same logic to Mutual Funds? Mutual Funds have not
failed in any country where they work within a regulatory framework. Their future is bright.

If the markets crash, it must be the time to indulge in Mutual Fund bashing. If the markets are on a
swan song, it's time to shower heaps of praises on the virtues of Mutual Funds. Unfortunately, of
late, this ominous tendency has become the order of the day. And, so, once again we have been
having investors and casual observers commenting on the bleak and the unsteady future of Mutual
Funds. Is this domino effect justified? Are Mutual Funds really in for a sun-set?

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1.3 OBJECTIVES OF STUDY

● To learn about how to invest savings profoundly in mutual funds in this current market
situation.

● To learn about how to manage money through various means of investments available in the
market

1.4 RESEARCH METHODOLOGY

• The data required for the study has been collected from secondary source.

• The relevant information was taken from annual reports, journals and internet.

• It took me around 30 days for doing the research and 5 days to assembling them in order.
• Tools used in data analysis are:

❖ Net Asset Value (NAV)

❖ BETA
❖ ALPHA

❖ Standard Deviation

❖ SHARPE RATIO

❖ TREYNOR RATIO

❖ JENSEN MEASURE

1.5 LIMITATIONS OF STUDY

• In this project report, I have tried to cover every aspect of mutual fund industry but due to
limited time period & resources some areas have been cut short but without impairing the
intended knowledge it is supposed to provide.

• Due to the busy schedule of the high official of the companies, the collection of primary data
was not possible. As such, this project is restricted to the use of secondary data

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1.6 CHAPTER PLANNING
This project consists of 4 chapters:

1. Introduction
2. Conceptual Framework
3. Presentation of data, analysis and findings
4. Conclusion and Recommendations

Introduction consists of background of project, literature review, objectives of study,

methodology, limitations of study.

In Conceptual Framework national and international scenario is shown.

Whereas, Presentation of data, analysis and findings shows how the data is presented.

Chapter 4 consists of Conclusion and Recommendations

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 Chapter- II: Conceptual Framework
2.1 Definition of Mutual Funds

The Definition

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual
fund as a company that brings together a group of people and invests their money in stocks, bonds,
and other securities. Each investor owns shares, which represent a portion of the holdings of the fund.

Concept.

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
appreciations realized are shared by its unit holders in proportion to the number of units owned by
them. Thus, a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a relatively low
cost. The flow chart below describes broadly the working of a mutual fund:

You can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of
the income it receives over the year to fund owners in the form of a distribution.

2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also
pass on these gains to investors in a distribution.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase
in price. You can then sell your mutual fund shares for a profit.

Funds will also usually give you a choice either to receive a check for distributions or to reinvest the
earnings and get more shares.

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2.2 Organisation of Mutual Fund
There are many entities involved and the diagram below illustrates the organizational set up of a
mutual fund:

Source: nrimutualfunds.com; http://www.nrimutualfunds.com/concep13.gif

Mutual Fund Shareholders: The Mutual Fund Shareholders, like the other shareholders have the right
to vote. The voting rights include, the right to elect directors during the directorial elections, voting right to
approve the alterations investment advisory contract pertaining to the fund and provide approval for
changing investment objectives or policies.

Board of directors: The Board of directors supervises the functional activities, which include approval
of the contract Asset Management Company and other various service providers.

Investment management company or Asset Management Company: This body handles the
mutual fund portfolio as per the objectives and policies mentioned in the prospectus of the mutual funds.

Custodians: The custodians protect the portfolio securities. Mostly qualified bank custodians are used for
mutual funds.

Transfer Agents: The transfer agent for the purpose of maintaining records and similar functions. The
maintenance of the shareholder's accounts, calculation of dividends to the be disbursed, sending
information to the shareholders about the account statements, notices, and income tax information. Some
of the transfer agent sends information to the shareholders about the shareholder transactions and account
balances. They also maintain customer service departments in order the cater to the queries of the
shareholders.

SEBI: The primary aim of the Securities Exchange Board of India is to protect the interest of the mutual fund
investors. The SEBI has formulated several policies for better functioning and controls the mutual funds. In the
year 1993, SEBI issued guidelines pertaining to the mutual funds. All mutual funds, private sector and public
sector are regulated by the guidelines of the SEBI. The Asset Management Company managing the funds has to
be approved by the SEBI.

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2.3. Advantages and Disadvantages of Mutual Funds

Since their creation, mutual funds have been a popular investment vehicle for investors. Their
simplicity along with other attributes provides great benefit to investors with limited knowledge, time
or money. To help you decide whether mutual funds are best for you and your situation, we are going
to look at some reasons why you might want to consider investing in mutual funds.

ADVANTAGES DISADVANTAGES
1.PORTFOLIO DIVERSIFICATION 1. COSTS CONTROL NOT IN THE
2.PROFESSIONAL MANAGEMENT HANDS OF AN INVESTOR
3. LESS RISK 2. NO CUSTOMIZED PORTFOLIOS
4. LOW TRANSACTION COSTS 3. DIFFICULTY IN SELECTING A
5. LIQUIDITY SUITABLE FUND SCHEME
6. CHOICE OF SCHEMES 4. EVALUATING FUNDS
7. TRANSPARENCY

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2.4 Different Types of Funds

Source: tradewell.in; https://www.tradewell.in/Images/mfconceptschemes.gif

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and
return expectations etc. thus mutual funds has Variety of flavour, Being a

Collection of many stocks, investors can go for picking a mutual fund might be easy. There are over hundreds of
mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below.

OVERVIEW OF EXISTING SCHEMES EXISTED IN MUTUAL FUND CATEGORY: BY

STRUCTURE

1. OPEN - ENDED SCHEMES:

An open-end fund is one that is available for subscription all through the year. These do not have a fixed
maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature
of open-end schemes is liquidity.

2. CLOSE - ENDED SCHEMES:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open
for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public
issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed.
In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units
to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least
one of the two exit routes are provided to the investor.

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 3. INTERVAL SCHEMES:
Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The
units may be traded on the stock exchange or may be open for sale or redemption during pre-determined
intervals at NAV related prices.

Figure: Risk return matrix of financial assets

Source: Indiamart;https://3.imimg.com/data3/QN/GD/MY-9532109/1-500x500.jpg

The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly, he can expect
higher returns and vice versa if he pertains to lower risk instruments, which would be satisfied by lower returns.
For example, if an investor opts for Bank FD, which provide moderate return with minimal risk. But as he moves
ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher
as compared to the bank deposits but the risk involved also increases in the same proportion. Thus, investors
choose mutual funds as their primary means of investing, as Mutual funds provide professional management,
diversification, convenience and liquidity. That doesn’t mean mutual fund investments risk free. This is because
the money that is pooled in are not invested only in debts funds which are less risky but are also invested in the
stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk
since it is mostly traded in the derivatives market which is considered very volatile.

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OVERVIEW OF EXISTING SCHEMES EXISTED IN MUTUAL FUND CATEGORY: BY
NATURE
EQUITY FUND:

These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary
different for different schemes and the fund manager’s outlook on different stocks. The Equity Funds are sub-
classified depending upon their investment objective as follows:

● Diversified Equity Funds

● Mid-Cap Funds
● Sector Specific Funds
● Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon; thus, Equity funds rank high on the risk return matrix.

DEBT FUNDS:

The objective of these Funds is to invest in debt papers. Government authorities, private Companies, banks and
financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds
ensure low risk and provide stable income to the investors. Debt funds are further classified as:

GILT FUNDS: Invest their corpus in securities issued by Government, popularly known as Government of
India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes
are safer as they invest in papers backed by Government.

INCOME FUNDS: Invest a major portion into various debt instruments such as bonds, corporate debentures and
Government securities.

MIPS: Invests maximum of their total corpus in debt instruments while they take minimum exposure in
equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return
matrix when compared with other debt schemes.

SHORT TERM PLANS (STPS): Meant for investment horizon for three to six months. These funds primarily invest
in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus
is also invested in corporate debentures.

LIQUID FUNDS: Also known as Money Market Schemes, these funds provide easy liquidity and preservation of
capital. These schemes invest in short-term instruments like Treasury Bills inter-bank call money market, CPs
and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to
be the safest amongst all categories of mutual funds.

BALANCED FUNDS:

As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income
securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide
investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in
returns.

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FURTHER THE MUTUAL FUNDS CAN BE BROADLY CLASSIFIED ON THE BASIS OF INVESTMENT PARAMETER VIZ,

Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund.
The investor can align his own investment needs with the funds objective and invest accordingly.

BY INVESTMENT OBJECTIVE:

GROWTH SCHEMES: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide
capital appreciation over medium to long term. These schemes normally invest a major part of their fund in
equities and are willing to bear short-term decline in value for possible future appreciation.

INCOME SCHEMES: Income Schemes are also known as debt schemes. The aim of these schemes is to provide
regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds
and corporate debentures. Capital appreciation in such schemes may be limited.

BALANCED SCHEMES: Balanced Schemes aim to provide both growth and income by periodically distributing a
part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities,
in the proportion indicated in their offer documents (normally 50:50).

MONEY MARKET SCHEMES: Money Market Schemes aim to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.

OTHER SCHEMES
TAX SAVING SCHEMES:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88
of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

INDEX SCHEMES:

Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.
The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each
stock to the total holding will be identical to the stocks index weight age. And hence, the returns from such
schemes would be more or less equivalent to those of the Index.

SECTOR SPECIFIC SCHEMES:

These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the
offer documents. E.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc.
The returns in these funds are dependent on the performance of the respective sectors/industries. While these
funds may give higher returns, they are riskier compared to diversified funds. Investors need to keep a watch on
the performance of those sectors/industries and must exit at an appropriate time.

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2.5 NATIONAL SCENARIO
History of the Indian 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 of India. 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 Canbank Mutual Fund (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun
90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had
set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry,
giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first
Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was
the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up
funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of
January 2003, there were 33 mutual funds with total assets 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.

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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. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by Government of India
and does not come under the purview of the Mutual Fund Regulations.

Tax Benefit in Investing in Mutual Funds

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Steps to Buy or Sell Mutual Funds.

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 INVESTMENT STRATEGIES OF MUTUAL FUNDS:

⮚ Systematic Investment Plan (SIP):

Under SIP a fixed sum of your money is taken away from your Bank Accounts and invested in a Mutual
fund. Payment is made through post-dated cheques or direct debit facilities. The investor gets fewer
units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee
Cost Averaging (RCA).

⮚ Systematic Transfer Plan (STP):

The way STP works is, all your money is actually invested in a Mutual funds itself (probably Debt) and
units are sold every month and its invested in another Mutual fund (probably Equity) or vice versa.
Under this an investor invest in debt-oriented fund and give instructions to transfer a fixed sum, at a
fixed interval, to an equity scheme of the same mutual fund.

⮚ Systematic Withdrawal Plan (SWP):

If someone wishes to withdraw his/her money from a mutual fund then he/she can withdraw a fixed
amount each month. You should redeem your units in mutual funds every month and get it deposited
in your Bank accounts, it’s called SWP (systematic Withdrawal Plan), which is recommended to
liquidate your mutual funds corpus after you see a good bull market to protect your investment.

● SIP or Systematic Investment Plan enables you to invest in Mutual Funds through small
and periodic instalments –just like a bank’s monthly recurring deposit.
● It’s a convenient way to invest regularly over the long term in a disciplined manner.
● Some funds allow the monthly Investment to be as low as Rs 100/-
● SIP’s help you to accumulate wealth over the Long Term by harnessing the Power of
compounding.

Page 23
2.6 INTERNATIONAL SCENARIO

Global Scenario of Mutual Funds has been examined considering the growth and trends of
resource mobilization as well as increase in number of mutual funds at global level. Trends of
Net Resource Mobilization by Mutual Funds at Global Level The total crops of mutual funds
at the end of 2011 were 27,884,941 Million U.S. dollars. This has been increased to 40,364,115
Million U.S. dollars at the end of 2016. Since last six years mutual fund industry has
accomplished 7.20 percent Compound Growth Rate at global level. This shows a tremendous
growth of Mutual Fund industry throughout the world.

WORLDWIDE NUMBER OF OPEN-END MUTUAL FUNDS

Open End Mutual Funds are more popular funds than Closed End and Interval Funds all over
the world. Open-end funds or schemes offer subscription and repurchase on a continuous
basis. These do not have restricted maturity period. Investor can buy and sell units at NAV
(Net Asset Value) related prices according to his convenience. Key feature of Open-End
scheme is Liquidity. The total number of mutual funds schemes all over the world at the end
of 2011 was 88,525 which increased to 1, 10,271 at the end of 2016. During these six years all
countries commenced the fund schemes which reached CGR of 4.65 percent rate at global
level.

North and South America has more than half share in total Global Net Assets of the mutual
fund industry. Whereas India has accounted increasing percentage shares in worldwide total
net assets with growth rate (CGR) of 18.45 percent. This indicates that India has remarkable
potential growth in Mutual Fund industry at all over the world. Worldwide number of
schemes of mutual funds are showing increasing trend. North and South America showed
overall constant trend except in 2016, Europe had slightly decreasing trend. Asia & Pacific
group of countries has shown increasing trend in commence of number of mutual fund
schemes.

Page 24
CHAPETER III: Presentation of Data, Analysis and
Findings
3.1 COMPANY PROFILE

AXIS MUTUAL FUND

Axis Bank was the first of the new private banks to have begun operations in 1994, after the
Government of India allowed new private banks to be established. The Bank was promoted joy only
by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU
insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd.,
The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank today is
capitalized to the extent of Rs. 405.17 crores with the public holding (other than promoters and GDRs)
at 53.09%.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. The Bank
has a very wide network of more than 1000 branches and Extension Counters (as on 31st March 2010).
The Bank has a network of over 4055 ATMs (as on 31st March 2010) providing 24 hrs a day banking
convenience to its customers. This is one of the largest ATM networks in the country. The Bank has
strengths in both retail and corporate banking and is committed to adopting the best industry
practices internationally in order to achieve excellence.

AXIS EQUITY-GROWTH FUND

Fund objective:
An open-ended balanced fund investing between 40% to 75% in equity related securities and the
balanced in debt (fixed income securities) with a view of generate regular income together with capital
appreciation.

Page 25
Fund Manager: “Mr. Chandresh Nigam”

Fund Profile Returns

Latest NAV 75.68 (07/04/2010) Period Returns

(%)
52- Week High 75.68 (07/04/2010) 1-Month 4.36
52- Week Low 47.31(08/04/2009) 3-Month 2.17
Fund Category Hybrid: Equity 1-year 61.81
Oriented
Fund Type Open-Ended 3-year 13.33
Launch Date March 1995 5-year 16.01
Risk Grade Average
Return Grade Average
Net Assets (Cr) 1957.19
(31/03/2010)
Table: Fund profile of Axis Equity Table: Returns of Axis Equity
Growth Fund Growth Fund

Sector Allocation Asset Allocation

Top 5 Sectors % Net Asset
As on 28/02/2010
Energy 13.70
Engineering 7.90
Financial 7.62
Technology 6.03
Diversified 5.54
As on 28/02/2010 % Net Asset

Equity 73.24

Debt 24.79

Others 01.97

Table: Sector allocation of Axis Table: Asset allocation of Axis

Equity Growth Fund Equity Growth Fund

Page 26
 Portfolio Top Holdings

Company Sector Mkt.Value*(Rs. In Cores) % of Asset

Equity Shares
RELIANCE Oil & Gas 34.26 3.35
INFOSYS TECH Technology 33.46 3.27
BHEL Engineering 30.54 2.98
TCS Technology 28.13 2.75
LARSEN Engineering 27.66 2.70
NTPC Utilities 25.28 2.47
SBI Banks 23.69 2.32
AXIS BANK Banks 23.26 2.27
HDFC BANK Banks 23.06 2.25
SILMENS Telecom 22.92 2.24
BHARAT ELECTRONICS Engineering 18.40 1.80
ONGC Energy 16.98 1.66
GRASIM INDUSTRIES Diversified 16.17 1.58
TATA TEA FMCG 15.92 1.56
ITC LTD FMCG 15.73 1.54
Debt Holdings
Company Instrument Mkt.Value* (Rs. In Cores) % of Asset
EMAAR MGF LAND & PVT Realty 76.46 7.47
GOI Sovereign 58.34 5.70
UCO BANK Finance 20.00 1.95
Table: Portfolio Holdings of Axis Equity Growth Fund

History AXIS Equity-Growth Fund

2009 2008 2007 2006 2005 2004

NAV 41.42 48.02 32.56 26.15 20.80 20.11
Total Return -13.74 47.48 22.78 40.22 22.34 100.70
+/- S&P CNX Nifty 3.15 -8.90 1.87 26.45 9.72 28.16
Net Assets Rs. Cr. 1805.8 2108.90 1555.80 1508.70 1295.30 1443.20
Table: History of Axis Equity Growth Fund

Page 27
HDFC MUTUAL FUND

HDFC (Housing Development Finance Corporation Limited) is one of the dominant players in the Indian
mutual fund space. HDFC was incorporated in 1977 as the first specialised Mortgage Company in India.
HDFC Mutual Funds are handled by HDFC Asset Management Company Limited. HDFC Asset
Management Company was incorporated under the Companies Act, 1956, on December 10, 1999, and
was approved to act as an Asset Management Company for the Mutual Fund by SEBI on July 3, 2000.
The company also provides portfolio management / advisory services.

⮚ HDFC Asset Management Company Limited (AMC):

HDFC Asset Management Company (AMC) is the first AMC in India to have been assigned the ‘CRISIL
Fund House Level – 1’ rating. This is its highest Fund Governance and Process Quality Rating which
reflects the highest governance levels and fund management practices at HDFC AMC It are the only
fund house to have been assigned this rating for two years in succession. Over the past, we have won
a number of awards and accolades for HDFC performance.

We believe, that, by giving the investor long-term benefits, we have to constantly review the markets
for new trends, to identify new growth sectors and share this knowledge with our investors in the
form of product offerings. We have come up with various products across asset and risk categories to
enable investors to invest in line with their investment objectives and risk-taking capacity. Besides, we
also offer Portfolio Management Service.

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on
December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual
Fund by SEBI vide its letter dated June 30, 2000.

⮚ Vision:
“To be a dominant player in the Indian mutual fund space, recognized for its high levels of ethical and
professional conduct and a commitment towards enhancing investor interests.”

HDFC EQUITY-GROWTH FUND

Fund objective:
An open-ended balanced scheme with the objective of long-term growth of capital and current
income, through a portfolio of equity and fixed income securities. The HDFC Equity-Growth fund seeks
to achieve long- term capital appreciation and current income from a balanced portfolio with a target
allocation of 70% equity, 30% debt and money market securities.

Page 28
Fund Manager: “Mr. Prashant Jain”

Fund Profile Returns

Latest NAV 277.09(31/03/2010) Period Returns (%)
52- Week High 277.10(29/03/2010) 1-Month 4.9
52- Week Low 152.67(01/04/2009) 3-Month 7.5
Fund Category Hybrid: Equity 6-Month 9.4
Oriented
Fund Type Open-Ended 1-year 54.2
Launch Date December 1994 2-year 81.5
Risk Grade Average 3-year 50.7
Return Grade Above Average 5-year 244.2
Net Assets (Cr) 6734.63
(28/02/2010)

Table: Fund profile of HDFC Table: Returns of HDFC

Equity Growth Fund Equity Growth Fund

Sector Allocation Asset Allocation

Top 5 Sectors % Net Asset
As on 28/02/2010
Banking/Finance 22.15
Oil & Gas 15.32
Pharmaceuticals 09.92
Technology 07.34

Engineering 07.05
As on 28/02/2010 % Net Asset

Equity 65.48

Debt 9.81

Others 24.71

Table: Sector Allocation of HDFC Table: Asset Allocation of HDFC

Equity Growth Fund Equity Growth Fund

Page 29
 Portfolio Top Holdings

Company Sector Mkt.Value*(Rs. In Cores) % of Asset

Equity Shares
SBI Banks 506.44 7.52
ONGC Oil & Gas 449.07 6.67
TITAN INDUSTRY Miscellaneous 255.45 3.79
BANK OF BARODA Banks 252.49 3.75
ICICI BANK Banks 216.28 3.21
INFOSYS Technology 195.37 2.90
NTPC Utilities 194.36 2.89
LARSEN Engineering 194.01 2.88
GAIL Oil & Gas 188.20 2.79
ZEE ENTERTAIN Media 186.12 2.76
Table: Portfolio Holdings of HDFC Equity Growth Fund

History HDFC Equity- Growth Fund

2009 2008 2007 2006 2005 2004

NAV 188.42 223.32 145.39 107.01 65.77 51.57
Total Return -15.63 53.61 35.86 62.70 27.53 126.30
+/- S&P CNX 3.15 -8.90 1.87 26.45 9.72 28.16
Nifty
Net Assets Rs. Cr. 4716.6 5491.4 3937.7 2185.2 1148.6 978.0

Table: History of HDFC Equity Growth Fund

Page 30
BIRLA SUN LIFE MUTUAL FUND

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life
Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc.
of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market
and Sun Life's global experience.

Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading flagships of
Mutual Funds business managing assets of a large investor base. Our solutions offer a range of
investment options, including diversified and sector specific equity schemes, fund of fund schemes,
hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds.

⮚ Vision:

“To be a leader and role model in a broad based and integrated financial services business.”

⮚ Mission:

To consistently pursue investor's wealth optimization by:

● Achieving superior and consistent investment results.

● Creating a conducive environment to hone and retain talent.
● Providing customer delight.
● Institutionalizing system-approach in all aspects of functioning.

Birla Sun Life Asset Management Company has one of the largest team of research analysts in the
industry, dedicated to tracking down the best companies to invest in. BSLAMC strives to provide
transparent, ethical and research-based investments and wealth management services

Birla Sun Life Asset Management Company follows a long-term, fundamental research-based
approach to investment. The approach is to identify companies, which are excellent growth prospects
and strong fundamental. The fundamental includes the quality of the company management,
sustainability of its business model and its competitive position, amongst another factor. The fund has
more than 224 schemes with AUM of Rs. 49983.17 Cr.

Page 31
 BIRLA SUN LIFE 95-GROWTH FUND

Fund objective:
An open-ended balanced scheme with the objective of long-term growth of capital and current
income, through a portfolio of equity and fixed income securities. The Birla Sun Life 95- Growth seeks
to achieve long- term capital appreciation and current income from a balanced portfolio with a target
allocation of 60% equity, 40% debt and money market securities.

Fund Manager: “Mr. Nishit Dholakia”

Fund Profile Returns

Latest NAV 47.56(31/03/2010) Period Returns (%)

52- Week High 49.63(29/03/2010) 1-Month 4.5
52- Week Low 38.09(01/04/2009) 3-Month 4.7
Fund Category Hybrid: Equity 6-Month 7.6
Oriented
Fund Type Open-Ended 1-year 36.6
Launch Date February 1995 2-year 28.5
Risk Grade Average 3-year 12.8
Return Grade Above Average 5-year 21.1
Net Assets (Cr) 253.85
(28/02/2010)
Table: Fund Profile of BSL 95- Table: Returns of BSL 95-
Growth Fund Growth Fund

Page 32
Sector Allocation
Top 5 Sectors % Net Asset
As on 28/02/2010
Financial 13.70 Table: Sector Allocation of BSL
Services 7.90 95- Growth Fund
Diversified 7.62
FMCG 6.03
Metals 5.54

Asset Allocation

As on 28/02/2010 % Net Asset

Table: Asset Allocation Of BSL

Equity 66.09
95-Growth Fund
Debt 4.74

Others 29.16

Page 33
 Portfolio Top Holdings
Company Sector Mkt.Value*(Rs. In Cores) % of Asset
Equity Shares
RALLI INDIA Pesticide 87.46 3.48
TRENT Retailing 78.64 3.23
ICICI BANK Banks 72.52 3.10
INFOSYS TECH IT- Software 63.64 2.86
AXIS BANK Petroleum Products 61.64 2.51
RELIANCE Banks 53.59 2.43
HDFC BANK Banks 50.04 2.11
ALLHABAD BANK Banks 48.68 1.97
NESTLE LTD Consumer Non- 38.49 1.92
Durables
HIND. ZINC Non-Ferrous 38.40 1.52
Metals
CROMPTION GR. Industrial Capital 37.41 1.51
Goods
LUPIN LTD Pharmaceuticals 36.64 1.47
TO POWER AEC Power 35.92 1.44
HCL TECH IT- Software 35.96 1.42
ITC LTD Consumer Non- 35.20 1.39
Durables
WIPRO LTD IT- Software 34.43 1.36
Debt
Company Instrument Mkt.Value* (Rs. In Cores) % of Asset
INDUSTRIAL Bond 7.30 2.88
DEVELOPMENT BANK
OF INDIA LTD
7.02 GOI Securities 4.37 1.87
Table: Portfolio Holdings of BSL 95- Growth Fund

History Birla Sun Life 95- Growth Fund

2009 2008 2007 2006 2005 NA

NAV 38.09 46.40 25.27 19.38 13.99 NA
Total Return -17.90 83.60 29.03 39.97 NA NA
+/- S&P CNX 3.15 -8.90 1.87 26.45 9.72 28.16
Nifty
Net Assets Rs. Cr. 142.7 170.9 92.0 104.6 115.8 NA
Table: History of BSL 95-Growth Fund

Page 34
ANALYTICAL TOOLS:
Return alone should not be considered as the basis of measurement of the performance of a mutual
fund scheme, it should also include the risk taken by the fund manager because different funds will
have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined
as variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns
of a fund during a given period, higher will be the risk associated with it. These fluctuations in the
returns generated by a fund are resultant of two guiding forces. First, general market fluctuations,
which affect all the securities, present in the market, called market risk or systematic risk and second,
fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk. The
Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns
of the fund. In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a portfolio
by comparing alternative portfolios within a particular risk class. But before that we need to
understand all the components that are used to explain the ratios like Beta, Alpha, Treynor, Sharpe,
and Jensen etc. the components are as follows:

❖ Net Asset Value (NAV):

A mutual fund is a professionally-managed firm of collective investments that pools money from many
investors and invests it in stocks, bonds, short-term money market instruments, and/or other
securities. In other words, we can say that A Mutual Fund is a trust registered with the Securities and
Exchange Board of India (SEBI), which pools up the money from individual / corporate investors and
invests the same on behalf of the investors /unit holders, in equity shares, Government securities,
Bonds, Call money markets etc., and distributes the profits.

The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly calculated
daily based on the total value of the fund divided by the number of shares currently issued and
outstanding. The value of all the securities in the portfolio in calculated daily. From this, all expenses
are deducted and the resultant value divided by the number of units in the fund is the fund’s NAV.

NAV= Total value of the fund

No. of shares currently issued and outstanding
❖ Factors affecting NAV:

⮚ Variation in investment portfolio:

Variation in the investment portfolio causes changes in the NAV of the fund, which in turn may affect
the overall value of the fund. Since, same investment portfolios with different NAV gives same returns
in percentage terms, therefore, the securities that we have in the portfolio play pivotal importance.
Changing the portfolio or replacing any security with the existing security may change the overall NAV
of the fund, which in turn may change the value of the entire fund.

Page 35
 ⮚ Sale and repurchase of units:
Sale and repurchase of any unit that we have in our portfolio changes the overall NAV of the fund. For
example, we have a portfolio in which the security A is priced at Rs 100. We sell this security and after
one week when the price of the security becomes Rs 80 we buy it, keeping all other investments intact,
then the NAV of the portfolio will come down, which in turn will result in better valuation for the fund.
Therefore, sale and repurchase also affects the NAV of the fund.

⮚ Valuations of assets:
The value that the underlying asset has, whose portfolio the fund has managed or is managing, if the
value of that asset changes, it can change the overall NAV of the fund.

⮚ Cost associated with the Fund:

The cost associated with the fund also affects the NAV of the fund. All the charges accumulated during
the selling of a security are known as Sales charges. Funds with low expense ratios are always
preferred as they decrease the overall cost of the security.

❖ BETA:
It is a ratio that measures the market risk of securities or a fund. If the beta ratio exceeds one, the
fund is more sensitive than funds in general to the fluctuations of the stock market. The beta may also
be negative, which means that the value of the fund will, on average, move to the opposite direction
than the general market development. Beta measures the sensitivity of rates of return on a fund to
general market movements. It also measures the volatility of the fund, as compared to that of the
overall market. The Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more
volatile than the market, while a beta lower than 1.00 is considered to be less volatile. Beta measures
the systematic risk and show how price of security respond to the market foresees. It is calculated by
relating the return on security with return for market.

β = n ∑ XY – (∑x ∑ y) / n ∑ x – (∑x) ²

Where, X =index return, Y = fund return

❖ ALPHA:
It measures the stock unsystematic return and it is average return independent of market return. It
is calculated by comparing the funds actual performance with the risk adjusted expected return.

α= Y-β*X

Where, X =index return, Y = fund return

Page 36
 ❖ Standard Deviation:
Standard deviation is a representation of the risk associated with a given security stocks, bonds,
property, etc. or the risk of a portfolio of securities. Risk is an important factor in determining how to
efficiently manage a portfolio of investments because it determines the variation in returns on the
asset and/or portfolio and lives investors a mathematical basis for investment decisions. The overall
concept of risk is that as it increases, the expected return on the asset will increase as a result of the
risk premium earned higher return on an investment when said investment carries a higher level of
risk. S.D is used to measure the variability of return i.e. the variation between the actual and expected
return.

σ = √ y²/n

It is used to measure the variation in the individual return from the average expected return over a
certain period. Standard deviation is used in the concept of risk of a portfolio of investment. Higher
the Standard Deviation means a greater fluctuation in expected return.

❖ SHARPE RATIO:

A Sharpe ratio developed by Nobel laureate William. F. Sharpe (1966) to measure risk adjusted
performance. Sharpe’s performance index gives a single value to be used for the performance ranking
of various funds of portfolios. Sharpe’s index measures the risk premium of the portfolio relative to
the total amount of risk in the portfolio. This risk premium is the difference between the portfolio’s
average rate of return and the riskless rate of return. The standard deviation of the portfolio indicates
the risk. The index assigns the highest values to assets that have risk-adjusted average rate of return.
S = rP – rf /p

Where,

S = Sharpe's Index

p = The standard deviation of the portfolio.

RP = Return of the portfolio.

R f = Risk free rate of return. (*Risk free rate of return is taken as 7.73% p.a.)

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low
and negative Sharpe Ratio is an indication of un-favourable performance. If the Sharpe figure is
positive, the risk taken has paid off, and if the figure is negative, the returns are lower than the risk-
free rate.

Page 37
 ❖ TREYNOR RATIO:
“Jack Treynor” (1965) was the first researcher developing a composite measure of portfolio
performance. To understand the Treynor index, an investor should know the concept of characteristic
line. The fund’s performance is measured in relation to the market performance. The ideal fund’s
return rises at a faster rate than the general market performance when the market is moving upwards
and its rate of return declines slowly than the market return, in the decline. It measures portfolio risk
with beta, and calculates portfolio’s market risk premium relative to its beta. This ratio rewards
volatility because it shows risk adjusted returns per unit of market risk for that particular scheme.
When the markets are more volatile, schemes with high Treynor ratio are highly affected and vice
versa. A scheme with high Treynor ratio such as Equity scheme will enjoy a premium when the markets
are bullish and will be affected negatively when the markets are bearish. On the other hand, scheme
with low Treynor ratio such as Debt Fund will not be affected greatly, irrespective of the bullish or
bearish run in the markets.

Tn =rP – rf /p

Where

Tn = Treynor's index

RP = Return of the portfolio.

R f = Risk free rate of return.

p = beta coefficient of portfolio.

All risk-averse investors would like to maximize this value. While a high and positive Treynor
Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor Index is
an indication of unfavourable performance. The trouble with both Sharpe and Treynor ratios for
evaluating "risk-adjusted" returns is that they equate risk with short-term volatility. Therefore,
these measures may not be applicable in evaluating the relative merits of long-term
investments.

Page 38
 ❖ JENSEN MEASURE:
The absolute risk adjusted return measure was developed by “Michael Jensen” and commonly known
as Jensen’s measure. It is mentioned as a measure of absolute performance because a definite
standard is set and against that the performance is measured. The standard is based on the manager’s
predictive ability. Successfully prediction of security price would enable the manager to earn higher
returns than the ordinary investor expects to earn in a given level of risk. Sharpe and Treynor index
models provide measures for ranking the relative performance of various portfolios on a risk-adjusted
basis according to Jensen equilibrium average return on a portfolio would be a benchmark. Equilibrium
average return of the portfolio by the market with respect to systematic risk to portfolio should earn
with the systematic return.

Rp =α + (rm - rf)p

Where,

Rp= average return of the portfolio.

rf = risk free return

rm= average market return

β= A measure of systematic

α= Y-βX

If the alpha is positive, the portfolio has performed better and if alpha is negative it has not shown
performance up to the benchmark, i.e. the market Index.

Page 39
3. 2 DATA ANALYSIS

AXIS Equity- Growth Fund

X(nifty) (X) ² Y(return) (Y) ² XY y y²

3.15 9.92 -13.7 188.78 -43.28 -37.55 1410

-8.90 79.21 47.48 2254.35 -372.57 23.67 560.26

1.87 3.49 22.78 518.92 42.59 -1.03 1.06

26.45 699.60 40.22 1617.64 1163.81 16.41 269.28

9.72 94.47 22.34 499.07 217.14 -1.47 2.16

∑X=32.3 ∑(X) ∑Y ∑(Y) ∑XY 0 ∑y²=2242.

1 ²=886.69 =119.08 ²=5078.76 =1007.69 76

Table: Performance Evaluation of Axis Equity Growth Fund

X = ∑ X / N=>32.31/5= >6.46

Y= ∑ Y / N=>119.08/5=>23.81

y=Y-Y

X = Index return

Y = Fund return

N= No. of years

1. BETA:

β = n ∑ XY – (∑ x ∑ y) / n ∑ x – (∑ x) ²
β = 1190.98/3389.55
β = 0.35

2. Alpha:

α= Y-βX

α= 23.81- 0.35*6.46

α=21.55

Page 40
 3. Standard Deviation:

σ = √ y²/n

σ = √ 2242.76/5

σ = 21.17

4. Sharpe's index:

Sp = RP – Rf /p

rf =7.73%, p = 21.17, RP= 23.81

Sp= 23.81-7.73/21.17

Sp =0.75

5. TREYNOR:
Tn = rP – rf /p

β = 0.35, rf=7.73, rP = 23.81

Tn= 23.81-7.73/0.35

Tn = 45.94

6. JENSEN:
Rp=α + (rm - rf)

β = 0.35, rf=7.73, α = 21.55, rm = 6.46

Rp= 21.55 - 0.44

Rp = 21.10

Page 41
HDFC Equity Growth Fund

X(nifty) (X) ² Y(return) (Y) ² XY y y²

3.15 9.92 -15.63 244.29 -49.23 -48.44 2346.43

-8.90 79.21 53.61 2874.03 -477.12 20.8 432.64

1.87 3.49 35.86 1285.93 67.05 3.05 9.30

26.45 699.60 62.70 3931.29 1658.41 29.89 893.41

9.72 94.47 27.53 757.90 267.59 -5.28 27.87

∑X=32.3 ∑(X)²=886. ∑Y ∑(Y)²=9093. ∑ XY 0 ∑y²=3709.

1 69 =164.07 44 =1466.70 65

Table: Performance Evaluation of HDFC Equity Growth Fund

X =∑X / N=>32.31/5= >6.46

Y= ∑Y / N=>164.07/5=>32.81

y=Y-Y

X = Index return

Y = Fund return

N= No. of years

1. BETA:

β = n ∑ XY – (∑x ∑ y) / n ∑ x – (∑x) ²
β = 2032.4/3389.55=> 0.59

2. Alpha:

α= Y-βX
α= 32.81- 0.59*6.46=>29

Page 42
 3. Standard Deviation:

σ = √ y²/n

σ = √ 3709.65/5

σ = 27.23

4. Sharpe's index:

Sp = RP – Rf /p

rf =7.73, p = 27.23, RP=32.81

Sp= 32.81-7.73/27.23

Sp =0.92

5. TREYNOR:
Tn = rP – rf /p

β = 0.59, rf=7.73, rP =32.81

Tn= 32.81-7.73/0.59

Tn = 42.50

6. JENSEN:
Rp =α + (rm - rf)

β = 0.59, rf= 7.73,α= 29, rm = 6.46

Rp= 29 - 0.74

Rp = 28.26

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Birla Sun Life 95- Growth Fund

X(nifty) (X) ² Y(return) (Y) ² XY y y²

3.15 9.92 -17.90 320.41 -56.38 -51.57 2659.46

-8.90 79.21 83.60 6988.96 -744.04 49.93 2493

1.87 3.49 29.03 842.74 54.28 -4.64 21.52

26.45 699.60 39.97 1597.60 1057.20 6.3 39.69

∑X=22.5 ∑(X)²=792. ∑ Y =134.7 ∑(Y)²=9749. ∑ XY 0 ∑y²=5213.

7 22 71 =310.98 67

Table: Performance Evaluation of BSL 95-Growth Fund

X =∑X / N=>22.57/4= >5.64

Y= ∑Y / N=>134.7/4=>33.67

y=Y-Y

X = Index return

Y = Fund return

N= No. of years

1. BETA:

β = n ∑ XY – (∑ x ∑ y) / n ∑ x – (∑x) ²
β = -1796.25/2659.48
β = - 0.67

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 2. Alpha:
α= Y-βX

α= 33.67- (-0.67*5.64) =>33.67+3.77=>37.44

3. Standard Deviation:

σ = √ y²/n

σ = √ 5213.67/4

σ = 36.10

4. Sharpe's index:

Sp = RP – Rf /p

rf =7.73, p = 36.10, RP= 33.67

Sp = 33.67-7.73/36.10

Sp = 0.71

5. TREYNOR:
Tn = rP – rf /p

β = -0.67, rf=7.73, rP = 33.67

Tn= 33.67-7.73/-0.67

Tn = -38.71

6. JENSEN:

Rp = α + (rm - rf)

β = -0.67, rf=7.73, α =37.44, rm = 5.64

Rp = 37.44+1.40

Rp = 38.84

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Comparison Of AXIS, HDFC, Birla Sun Life Equity Growth Mutual Funds

Analysis of Mutual Fund on The Bases of Treynor's Index:

MUTUAL FUND TREYNOR'S INDEX

Axis Equity Growth Fund 45.94

HDFC Equity Growth Fund 42.50

Birla Sun Life 95- Growth Fund -38.71

Table 27: Treynor’s index of Axis, HDFC, BSL Mutual Funds

Chart: Treynor's Index Analysis

INTERPRETATION:

This shows the risk adjusted return. In this case Axis Equity Growth Fund have the
maximum i.e. 45.94 index value in comparison to the other two i.e. HDFC Equity Growth
Fund and Birla Sun Life 95- Growth fund. So, we can say that the Axis Equity Growth fund
is the best fund as it provides the maximum risk premium in comparison to the other two
funds.

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Analysis of Fund on the Bases of Sharpe's Index:

MUTUAL FUND SHARPE'S INDEX

Axis Equity Growth Fund 0.75

HDFC Equity Growth Fund 0.92

Birla Sun Life 95- Growth Fund 0.71

Table: Sharpe’s index of Axis, HDFC, BSL Mutual Funds

Chart: Sharpe's Index Analysis

INTERPRETATION:
Sharpe shows the risk adjusted return. Higher the Sharpe Index better the fund. In this case
HDFC Equity Growth Fund has the maximum value i.e.0.92 in comparison to other fund
i.e. Axis Equity Growth Fund and Birla Sun Life 95- Growth Fund. So, we can say that the
HDFC Equity Growth Fund is the best fund amongst the three funds.

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Analysis of Fund on the Bases of Jensen's Index:

MUTUAL FUND JENSEN'S INDEX

Axis Equity Growth Fund 21.1

HDFC Equity Growth Fund 28.26

Birla Sun Life 95- Growth Fund 38.84

Table 29: Jensen’s Index of Axis, HDFC, BSL Mutual Funds

Chart: Jensen's Index Analysis

INTERPRETATION:

This shows the risk adjusted return. In this case Birla Sun Life 95- Growth Fund have the
maximum i.e. 38.84 index value in comparison to the other two i.e. HDFC Equity Growth
Fund and Axis Equity Growth Fund. So, we can say that the Birla Sun Life 95- Growth
Fund is the best fund as it provides the maximum risk premium in comparison to the other
two funds.

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 3.3 FINDINGS

❖ Regarding Comparative Analysis of Mutual Funds:

⮚ PORTFOLIO:

● AXIS Equity Growth Mutual Fund has invested major part of portfolio in
13.70% sector.
● HDFC Equity Growth Mutual Fund has invest major part of portfolio in
Banking&Finance (22.15%) and Oil & Gas sector (15.32%).
● Birla Sun Life 95-Growth Fund has invested major part of portfolio in
Banking / Finance sector (13.70%).

⮚ RETURN:

Tools/Companies AXIS Mutual HDFC Mutual Birla Sun Life

Fund Fund Mutual Fund

Beta 0.35 0.59 -0.67

SD 21.17 27.23 36.10

Alpha 21.55 29 37.44

Sharpe’s Index 0.75 0.92 0.71

Treynor’s Index 45.94 42.50 -38.71

Jensen’s Index 21.10 28.26 38.84

Above table shows that the HDFC MF have grater Beta as compare another fund. AXIS
and HDFC MF has more Sharpe’s and Treynor’s performance index as compare Birla
Sun Life Mutual Fund. So, I can say that the AXIS MF and HDFC MF is better than
Birla Sun Life MF.

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 CHAPTER IV: CONCLUSION & RECOMMENDATIONS
4.1 CONCLUSION
A mutual fund brings together a group of people and invests their money in stocks, bonds, and other
securities. The advantages of mutual are professional management, diversification, economies of
scale, simplicity and liquidity. The disadvantages of mutual are high costs, over-diversification,
possible tax consequences, and the inability of management to guarantee a superior return. There are
many, many types of mutual funds. You can classify funds based on asset class, investing strategy,
region, etc.
Mutual funds have lots of costs. Costs can be broken down into ongoing fees (represented by the
expense ratio) and transaction fees (loads). The biggest problems with mutual funds are their costs
and fees. Mutual funds are easy to buy and sell. You can either buy them directly from the fund
company or through a third party. Mutual fund ads can be very deceiving.

4.2 RECOMMENDATIONS
Instead of going with the investment in the stock market directly they should go with the mutual fund
as in this case the level of risk is less. Investor should analysis the scheme before investing in fund, like
Sharpe, Treynor, Jensen.In the comparison of all three schemes the Axis MF scheme is the best scheme
as in the case Sharpe Index & Treynor Indexis good.In BSL MF scheme they have mainly invest in
banking sector (13.7%). So, they should go for proper portfolio diversification. Fund manager can
invest in Real estate, power sector because from the last 2-3 years these sectors are in boom and
giving very good return. Investor should read offer document before investing in to mutual fund.
Instead of investing into the close ended mutual fund, money should invest into open ended mutual
fund as in case there is no lock in period. The investor should evaluate not only the returns on the
scheme but also the NAV fluctuations. The most vital problem spotted is of ignorance. Investors should
be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors
should be made to realize that ignorance is no longer bliss and what they are losing by not investing.
Mutual Fund Company needs to give the training of the Individual Financial Advisors about the
Fund/Scheme and its objective, because they are the main source to influence the investors.

Page 50
 REFERENCES

❖ Magazine & Journals/ Newspaper:

● Indian journal of commerce

● Journal of finance
● The Management Accountant -
● Southern Economist
● SEBI Bulletin
● Charter financial analysis
● Journal of finance

❖ Websites:
● www.mutualfundsindia.com
● www.amfiindia.com
● www.valueresearchonline.com
● www.bseindia.com
● www.nseindia.com
● www.crisil.com
● www.moneycontrol.com
● www.crisilratings.com
● www.axismf.com
● www.hdfcmf.com
● www.bslmf.com

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