Summer Training Project

“PORTFOLIO MANAGEMENT Through MUTUAL FUUNDS”

COMPANY NAME

NITESH KUMAR TIWARI MBA Enrolment no: A7001909063 Specialization: FINANCE & MARKETING Industry Guides: Faculty Guide: Mr. Manish Guar Mrs. Parul Tripathi Branch Manager Sr. Lecturer HR Edelweiss Broking Ltd. ABS, Lucknow
(SUMMER INTERNSHIP REPORT IN PARTIAL FULFILLMENT OF THE AWARD OF FULL TIME MASTERS IN BUSINESS ADMINISTRATION (2009-11)

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AMITY BUSINESS SCHOOL AMITY UNIVERSITY UTTAR PRADESH -LUCKNOW

DECLARATION
I hereby certify that the work which is being presented in the project entitled, “PORTFOLIO MANAGEMENT THROUGH MUTUAL FUND.” in partial fulfillment of the requirements for the award degree of Master of Business Administration at AMITY BUSINESS SCHOOL, AMITY UNIVERSITY, UTTAR PRADESH, LUCKNOW, is an authentic record of my own work carried out under the supervision of Mrs. PARUL TRIPATHI, Sr. Lecturer, ABS, Lucknow. The matter presented in this Project Report by me has not been submitted by anyone for the award of any other degree of this or any other University.

This is to certify that the above statement made by the candidate is correct and true to the best of my knowledge.

NITESH KUMAR TIWARI MBA (Finance & Marketing) Semester- 3rd En:-A7001909063

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STUDENT’S CERTIFICATE
Certified that this report is prepared based on the summer internship project undertaken by me in Edelweiss Broking Ltd.from 10th may 2010 toth june 2010, under the able guidance of Dr. Azara Isharat, Asst. Professor, ABS in partial fulfillment of the requirement for award of degree of Master of Business Administration (MBA-G) from Amity University, Uttar Pradesh.

Student. Nitesh Kr. Tiwari Signature

Faculty Guide Mrs. Parul Tripathi Signature

ABS Director Prof. R. P. Singh Signature

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‘Edelweiss Mutual Fund PVT..Retail channel). is as beneficial to the organization as it had been to me. Rochak Sahay and all my friends and colleagues who helped whenever I faced any difficult situation. Last but not the least. I sincerely thank to all of them.’ has given me the opportunity to gain invaluable experience under the guidance of Mr. Ali Ashad (Team leader. I hope this report. Parul Tripathi Sr. Director ABS and my faculty Guide Mrs. Again.P. Lecturer. Lucknow Region) & Mr. summer internship is a critical component of the entire process.-A7001909063 4 . LTD. Manish Guar (Sales Manager. reflecting my learning in the past eight weeks. Their continuous support and valuable in hand experience provided me with the conceptual understanding and practical approach needed to work efficiently for this project. ABS for her great advices and Guidance and also to the entire staff of Edelweiss Broking ltd. 3rd Semester Amity Business School En. The entire Edelweiss Mutual Fund’s staff is praiseworthy. Singh.ACKNOWLEDGEMENT In pursuit of an MBA degree. Nitesh Kumar Tiwari MBA.Mr. Anurag Tripathi and Mr. I would also like to thank Prof. R.

Certificate 5 .

Among every stage of knowledge being inculcated in students. Hence the role of finance manager & the subject finance accounting gained maximum importance. 6 . Liberalization. practical training in the corporate world plays a significant role in exhibiting and pruning their capabilities and skill sets. The goal of the Summer Training is to give a corporate exposure (Real life situation) to the students as well as to give them an opportunity to apply theory into the practice. large-scale industries & service sector. The real business problems are drastically different from class-room case solving. So. small. Finance is very essentially needed for all types of organizations viz. medium. Summer Project aims to providing little insight into working of an organization to a management trainee. The purpose behind writing a report is to put in to works the practical training that is imparted into me that gives a better and a clear understanding of the experience I got.PREFACE Finance & its functions are the part of economic activity. “finance is regarded as the life blood of a business organization.” Master of Business Administrator as a professional course develop a new horizon of knowledge & skill set & make as available for those seeking challenging carriers in the of liberalizing & globalizing scenario of the corporate world. globalization & privatization created new challengers to entrepreneur & corporate world in carrying they’re day to day activities.

.. Table of contents CHAPTER-1…………………………………………………….24-30 2. Theme Research………………………………………. Disadvantage ………………………………………………..31-34 3...... Port Folio Management……………………………………. Sponsor………………………………………………………. Industry Profile……………………………………………. Benefits of the Mutual Fund………………………………. Background………………………………………………..22-23 1.....22-23 CHAPTER-4………………………………………………………24-52 1.....12-13 2.56-58 3.53-55 2...52 CHAPTER-5………………………………………………………. While preparing this project report I got the knowledge about various aspects regarding financial decisions made in organization like “Edelweiss Mutual Fund Pvt. Business principal…………………………………………17-18 4........... About Investment…………………………………………..10 3.53-60 1..09 2..“PORTFOLIO MANAGEMENT THROUGH MUTUAL FUND” being a very important aspect of Edelweiss Mutual Fund Pvt.. Types of Investors…………………………………………..” the business world..35-38 4..58-60 7 ...14-16 3..... Project objective………………………………………….12-21 1. Type of Mutual Fund………………………………………. Trustee…………………………………………………….. Executive summary………………………………………….21 CHAPTER-3……………………………………………………..19-20 5. Companies……………………………………………………..…. Introduction ………………... Ltd.. I have tried to explore many areas of the subject in my project report..9-11 1. History………………………………………………………44-45 6...39-43 5.. Ltd.....46-51 7.. Research Methodology………………………………………11 CHAPTER-2……………………………………………………........ Measurement of MF……………………………………….

87-92 5. ICICI Dynamic plan…………………………………………93-96 CHAPTER-7………………………………………………………. Conclusion…………………………………………………. Recommendations…………………………………………..77-86 4.64-76 3.CHAPTER-6……………………………………………………….971.. HDFC Equity Fund…………………………………………. Core & Satellite Fund………………………………………..61-96 1. ICICI Growth Fund………………………………………….61-63 2. Scheme Portfolio…………………………………………….97-98 2..99-101 ANNEXUR Fact Sheet (Page-105) Curriculum Vitae ( Page -106-107) List of Figures FIGURE-1 FIGURE-2 FIGURE-3 FIGURE-4 List of Graphs GRAPH-1 GRAPH-2 GRAPH-3 GRAPH-4 GRAPH-5 List of Tables TABLE-1 TABLE-2 TABLE-3 TABLE-4 TABLE-5 TABLE-6 TABLE-7 TABLE-8 TABLE-9 TABLE-10 8 .

realizing capital gains or losses and passing any proceeds to the individual investors. bonds. A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks. The investor can choose the investment funds he wants to invest his money. Today. The possibility of variation in the actual return is known as investment risk. The fund manager. Thus every investment involves a return and risk. The expectation brings with it a probability that the quantum of return may vary from a minimum to a maximum. also known as portfolio manager. the worldwide value of all mutual funds totals more than $26 trillion in assets. and/or other securities. short-term money market instruments. trades the fund's underlying securities.TABLE-11 TABLE-12 TABLE-13 TABLE-14 TABLE-15 TABLE-16 TABLE-17 TABLE-18 TABLE-19 TABLE-20 CHAPTER-1 INTRODUCTION EXECUTIVE SUMMARY Investment may be defined as an activity that commits funds in any financial/physical form in the present with an expectation of receiving additional return in the future. 9 . providing the investor an opportunity to have a direct stake in the performance of the financial markets. He can also benefit from attractive tax advantages.

The funds must be allocated such that their performance is stable and improves so that the investor gets high returns. Based on the findings suitable suggestions are given.The principal paid are invested in fund/funds of the investor’s choice (depending on the allocation rate) & units are allocated depending on the price of units for the fund/funds. Due to the increasing competition it becomes necessary that the companies fund is the best performing fund with highest return. debt fund. PROJECT OBJECTIVE: The premiums that are collected are invested in different funds like equity fund. 10 . To analyze the present performance of different mutual funds To analyze that how deferent companies diversified their portfolio for maximum profit of their INVESTMENT. midcap fund. balanced fund and cash fund. OBJECTIVES OF THE STUDY: • • • • To study the different investment guidelines prescribed by deferent mutual fund company. Among the different mutual funds this study is to find out the best fund which will yield high returns to the investor and minimize there risk.

Research Methodology
Since I have to get project for the analysis of the portfolio in mutual fund, that is why I have not go through primary data. I have also Interacted to more than 100 customers through phone calling during the lead generation, which also Secondary objectives: I have selected the secondary data in my study to To understand the portfolio management process in mutual fund To know the effects of political, economical, social and technological factors on Mutual Fund Industry in India. Evaluating fund performance

Collection of data For the complete study I required data of Mutual Fund and getting from the secondary data base. Sources of the data collection will be, (1) Internet

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(2) Various magazines/bulletins (3) News papers (4) Related books Limitations  It is based on Secondary Data.  Time Constraint  Lack of resources

CHAPTER-2
Overview
Edelweiss, a rare flower found in Switzerland. You will discover in our identity: A graphic flower that represents ideas. Around it, the protective arms of the letter ‘e’: We believe ideas create wealth, but values protect it. It is the practice of this core thought that has led to Edelweiss becoming one of the leading financial services company in India. Its current businesses include investment banking, securities broking, and investment management. We provide a wide range of services to corporations, institutional investors and high net-worth individuals. The core inspiring thought of ‘ideas creating wealth and values protecting it’ is

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translated into an approach that is led by entrepreneurship and creativity and protected by intellectual rigour, research and analysis. Edelweiss Asset Management Limited, a subsidiary of Edelweiss Capital Limited (ECL) is the asset management company acting as an investment manager to Edelweiss Mutual Fund (EMF). Edelweiss Capital Limited is one of the leading and fastest growing financial services company in India. Founded in 1996, Edelweiss Capital including its subsidiaries offers a wide array of multi-line solutions including Investment Banking, Institutional Equities, Asset Management, Wealth Management, Private Client Business, Insurance Brokerage, Wholesale Financing and Treasury Operations. Edelweiss Asset Management Limited constitutes a team of experienced professionals from the Financial Services industry. The management team is highly qualified and carries a rich experience of working in the mutual fund industry and finance related areas. Edelweiss Asset Management Limited will follow a research based and process oriented investment approach. Edelweiss Asset Management Limited will observe the highest ethical standards while deploying investors’ monies and servicing investors and dealing with business partners.

Service Approach
Client Focus
Edelweiss is driven by the emphasis we place on building long-term relationships with our clients. We work closely with our clients to equip them with the ability to address large, fast-growing market opportunities. Our emphasis on long-term relationships also means that we have a significant ongoing involvement with almost all of the clients that we work with.

Execution Orientation
We focus obsessively on delivering high quality execution through our experienced team of professionals. Each team is led by senior personnel and is highly research and ideas driven. We place strong emphasis on confidentiality and integrity in a sensitive business environment.

Culture
Edelweiss fosters a culture that is entrepreneurial and results-driven and that

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analyzing and evaluating investment decisions. 14 . Research Driven All our businesses are built on a research and analytics foundation. We respect our competitors. where he worked on project-based lending to large corporates. Mr. CEO and Founder of Edelweiss.Rashesh Shah has previously worked for ICICI (now ICICI Bank. He subsequently managed the Spartek Fund that focused on making equity investments in small and emerging companies. Our team is encouraged to display higher levels of initiative. We strive to be fair in all our dealings.. We expect our people to maintain high ethical standards. Venkat Ramaswamy has previously worked with the Spartek Emerging Opportunities Fund and ICICI. both in their professional and personal lives. Professional Integrity We place a strong emphasis on confidentiality. Mr.emphasizes teamwork and intellectual rigour. Mr. Our understanding of underlying market trends and strong analytical expertise has resulted in a demonstrated ability to identify emerging trends and themes early. We seek to provide the highest quality research and investment opinions to our clients. drive. Board of Directors Mr. and hunger for learning and taking on additional responsibility. India’s largest private sector financial conglomerate) where he handled a World Bank aided program for export-oriented projects. Venkat Ramaswamy Executive Director and Head of Investment Banking and Co-Founder of Edelweiss. Rashesh Shah Chairman. honesty and integrity in our business dealings.

Desai is the Managing Partner.N. He shifted to ICICI in 1974 as Chief Economist and then moved to project finance.. He is an Advocate and a Solicitor. Mr Chinniah oversees the Asian private equity business for GIC SI. Kunna Chinniah is Executive Vice President with GIC Special Investments ("GIC SI"). J. Mr. P.N. Venkatachalam has over 40 years of experience in the banking sector in India and abroad. Mr. one of India's leading law firms. Nandra Mr. where he is a member of the audit and remuneration committees. Mr Chinniah began his career in 1982 as a Senior Field Engineer with Schlumberger Wireline Services in the Middle East. Jhaveri. Kunna Chinniah Mr. on his return from U. He holds a Masters in Law. P. Nandra brings a wealth of global experience in helping financial services companies define and implement performance improvement and achieve growth. He is also Senior Advisor to DTZ Holdings plc. Mr.K. Venkatachalam joined the State Bank of India as a probationary officer on April 1967 and retired on March 2004 as a managing director Mr. a global real estate management and consultancy company headquartered in London.. GIC SI is the private equity arm of the Government of Singapore Investment Corporation ("GIC"). Venkatachalam Mr. Berjis Desai Mr. Berjis Desai. after a brief stint with NCAER as Senior Economist. Nandra is currently serving as an Independent Board member at Edelweiss Capital Ltd. 15 . He also serves as the Chairman of the IMC Economic Research and Training Foundation Mr. Sagar & Associates. Navtej S. is an Independent Director on the Board of Directors of the Company. Narendra Jhaveri Mr.Mr. Mr. joined the Economics Dept.. of the Reserve Bank of India in 1965. Mr.

reputation and capital 16 . partners and employees Ethical in all our actions Focus on growth Our assets are our stakeholders.ECL Finance Our Principles: • • • • • Thinking and transparent organization Fair to our investors.Institutional Equities Venkat Ramaswamy Executive Director Himanshu Kaji CFO & Group COO Rujan Panjwani President & Co-head Asset Management Rajeev Mehrotra Executive Vice President & Head . Edelweiss Tokio Life Insurance Company Limited Naresh Kothari President & Co-head Institutional Equities.Special Opportunities Investments Ravi Bubna Executive Vice President & Co-Head .Senior Management Team Rashesh Shah Chairman & CEO Deepak Mittal CEO.Asset Management Vikas Khemani Executive Vice President & Co-head . Private Client Services Peeyoosh Chadda Co-head .

But when we say ‘values protect’ what do we mean? Here’s a handy guide to the values and principles we will live by and live up to. We want our clients and our employees to be ‘richer’ for their relationship with us. our employees and all stake holders. Our policies – in spirit and in letter – will ensure transparency and equal opportunity for all. We will be Fair to our clients. Our clients’ and our own success depends on our ability to use greater ideation and more imagination in our approach. We will be a Thinking Organization. We will constantly bring ‘thought’ to everything we do. We will go beyond the normal goals of attracting. We will take care of our People seriously. values protect’ is how we define what Edelweiss believes in. recruiting.• Creativity and innovation in everything we do FIGURE-1 Business Principles ‘Ideas create. retaining and rewarding fine talent: We will ensure that 17 .

Our ability to constantly keep one eye on risk will guide us through this fine balance. maintain confidentiality and by our adherence to our value system. We will respect Risk. We will maintain the highest standard of integrity and honesty. We will focus on the Long Term. we will reflect on the longterm implications of our actions. and use our financial capital wisely. employees and shareholders. We will also treat our clients as partners and show them the same respect and consideration that we would toward our internal team members.every individual in Edelweiss has an opportunity to achieve their fullest potential. Our Reputation and image is more important than any financial reward. internally and externally. Even when making short-term decisions we will be aware of the long-term implications. When we are unclear we will seek clarifications. 18 . Reputation is hard to build and even harder to rebuild. Though individuals are very often brilliant. We will Endeavour to grow. Reputation will be impacted by our ability to think for our clients. We will operate as a Partnership. we believe teamwork and collaboration will always ensure a better and more balanced organization. We will Obey and Comply with the rules of the land. Our Financial Capital is a critical resource for growth. protect. Our business is going to be a constant challenge of balancing risk and reward. We will focus on Growth for our clients. Though the world will change a lot in the coming years and our assumptions for the future may not hold up.

Creating a hypothesis of the evolution of trends over a longer period of time.“Ideas Create Value Protect” Theme Research Theme-based fundamental research What is theme-based research? Inductive research or ’connecting the dots’ across economy-wide trends. The breadth of the pay-back is also not restricted to a few companies. potential payouts are also over a longer duration. Why are themes important? Themes play out over long periods of time. Edelweiss' research has helped in developing an in-depth understanding of these new. high growth 19 . but potentially a number of multi-baggers are created in different sectors. thereby providing a different perspective. We have been one of the earliest to cover the private capital markets in India and profile high growth sectors and companies.

Our four-person analytics team comprises of graduates in quantitative disciplines who generate innovative. even by emerging market standards for about five years now. it aims at building plays from changes in policy as well as economic trends. Leveraging considerable base of relationships with corporate India. In this context. particularly in the Indian context. the Indian economy's strong growth brings it under the spot light. by analyzing industry dynamics and emerging trends as well as showcasing some of the exciting private companies in each sector. based on their likely sectorial impact. global investor interest in India is on the rise. Stock Ideas Idea origination from first principles. Use of quantitative screens and qualitative mechanisms to identify undervalued high performing companies doing business in emerging sectors with high growth potential and operating in areas where India has a clear edge over the rest of the world. Our macro-economic research also provides a basis for implications of a top-down approach on various sectors.areas. 20 . and providing an outlook on future trends. And. With macro-fundamentals in place and openness to foreign capital flows. Our goal is to find companies in the early stages of significant growth. this is where our macro-strategy effort comes in. our macro economic research has a two fold purpose: • • keeping pace with dynamic economic trends—both Indian and international. India has witnessed enviable growth. Economy and Strategy As emerging markets are increasingly seen as a distinct asset class for global investors. quantitatively originated ideas backed by deep fundamental understanding. Quantitative and Alternative Research We are one of the leading quantitative research houses in India. Bottom-up research to spot potential multibaggers.

g. event-driven arbitrage opportunities Interest / Volatility arbitrage – e. growth.g.g. turnaround investing styles System-based trading models for clients derived from rigorous back-testing.g. sectors and indices Risk arbitrage – e. including capital raising services in public markets. quantitative analytics spanning across large cap and mid cap companies. Edelweiss Capital Limited (Edelweiss) offers a full range of services and transactions expertise. leveraged positions and synthetic positions Market-neutral – e. momentum and income. simultaneous long/short positions in stocks. 21 . mezzanine and convertible debt. private placements of equity. mergers and acquisitions and restructuring advisory services.We generate a host of alternative investment strategies that cover the entire spectrum of opportunities: • • • • Opportunistic market-timing – e. cash-future and dispersion trades We also create customized products and screens specific to clients’ investment styles: • • Screens for deep-value. bottom up. Edelweiss core strength lies in differential research including top down. Edelweiss has been empanelled with more than 50 foreign institutional investors and all leading domestic institutional investors and is recognized for cutting edge derivatives expertise with on of the largest market share in the institutional derivative market.

1 lac of ECL. 1882 vide Trust Deed dated 30th January 2008. executed between Edelweiss Capital Limited (ECL) and Edelweiss Trusteeship Company Limited with restricted liability to seed corpus of Rs. CHAPTER-3 Investor’s Portfolio What is an Investment? An investment is the use of capital to create more money through the acquisition of a security that promise the safety of the principal and generate a reasonable return.• Edelweiss Mutual Fund (EMF) is set up as a Trust under the Indian Trusts Act. Various Investment Options 22 .

Secondary market investment in equity 3. ULIP balanced fund.Savings form an important part of the economy of any nation. 1. the money acts as the driver for growth of the country. it has reasonable options for an ordinary man to invest his savings. Variable Return Options • • Mutual Funds Share and Stock market 1. Derivative. Futures and Options • • • Gold Real estate Foreign exchange assets 3. ULIP capital secure fund. 4. ULIP growth fund ULIP equity fund Pension capital secure fund 23 . Primary invested in equity (IPO) 2. 3. Indian financial scene too presents a plethora of avenue to the investors. There are basically two kinds of investments. Though certainly not the best or deepest of markets in the world. 2. Fixed Return Options • • • • • • • • Post office monthly income scheme Public provident fund Bank fixed deposits Government securities or gilts RBI taxable bonds Insurance Company fixed deposits Infrastructure bonds 2. With the saving invested in various options available to the people. 5. One that gives returns at fixed rate and other where the rate of return is depending upon the certain factors of the economy. UNIT LINKED INSURANCE PLANS 1.

Only 5% of total potential of this 24 . The mutual fund industry is burgeoning. Pension balanced fund 7. it is completely untapped market. Pension growth fund CHAPTER-4 INTRODUCTION TO MUTUAL FUNDS Mutual fund is a buzz in the market these days.6.

An individual also finds it difficult to keep track of ownership of his assets. This is increasing liquidity in the market and hence increasing the money in the hands of people and thus investment. real estate. professionally managed portfolio at a relatively low cost. investments. These could range from shares to debentures to money market instruments. More and more fund is pouring in our country. we can see its effect in all areas. As the future prospects for Indian companies are bright. skills. bonds and other fixed income instruments. inclination and time to keep track of events. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. derivatives and other assets have become mature and information driven. The Indian stock market and companies have become lucrative for foreign investors. Price changes in these assets are driven by global events occurring in faraway places. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. As Indian economy is growing at the rate of 8% per annum. understand their implications and act speedily. Hence this industry has a lot of opportunities in it.industry has been grabbed. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. the investment in Indian companies. That’s why it is so much interactive. brokerage dues and bank transactions etc. Markets for equity shares. Each Mutual Fund scheme has a defined investment objective and strategy. 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 (pro rata). they have lots of opportunities to expand their business worldwide. A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. 25 . A typical individual is unlikely to have the knowledge.

It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. E. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. Globally. In fact. While the concept of individuals coming together to invest money collectively is not new. mutual funds collectively manage almost as much as or more money as compared to banks. In many cases a sponsor can hold a 100% stake in the Asset Management Company (AMC).g. as in most countries. the costs involved in the process and the broad rules for entry into and exit from the fund and other areas of operation. SEBI (Securities exchange Board of India) in our case. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management Company Ltd. the mutual fund in its present form is a 20th century phenomenon.. In the Indian context. which has floated different mutual funds schemes and also acts as an asset manager for the funds collected under the schemes. A draft offer document is to be prepared at the time of launching the fund.research. these sponsors need approval from a regulator. mutual funds gained popularity only after the Second World War. the mutual fund vehicle exploits economies of scale in all three areas . Typically.A mutual fund is the answer to all these situations. SEBI looks at track records of the sponsor and its financial strength in granting approval to the fund for commencing operations. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. in which it holds a majority stake. In India. A sponsor then hires an asset management company to invest the funds according to the investment objective. there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. it pre specifies the investment objectives of the fund. In effect. Future Scenario 26 . the sponsors promote the Asset Management Company also. investments and transaction processing. the risk associated. Today.

SEBI is working out the norms for enabling the existing mutual fund schemes to trade in derivatives. 27 .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 big names like Fidelity. Market Trends A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. The market will witness a flurry of new players entering the arena. UTI still remains a formidable force to reckon with. Importantly. are looking at Indian market seriously. Principal. Out of ten public sector players five will sell out. Here too some of them will down their shutters in the near future to come. and Old Mutual etc. There will be a large number of offers from various asset management companies in the time to come. Some of the older public and private sector players will either close shop or be taken over. The mutual fund industry is awaiting the introduction of derivatives in India as this would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset Value (NAV). close down or merge with stronger players in three to four years. But this does not mean there is no room for other players. 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. many market players have called on the Regulator to initiate the process immediately. In the private sector this trend has already started with two mergers and one takeover. so that the mutual funds can implement the changes that are required to trade in Derivatives. In spite of the stiff competition and losing market share.

While UTI has always been a dominant player on the bourses as well as the debt markets. Product innovation is now passé with the game shifting to performance delivery in fund management as well as service. In the current year mobilization till now have exceeded Rs300bn. by their selection criteria for stocks have forced corporate governance on the industry. 28 . the new generations of private funds which have gained substantial mass are now seen flexing their muscles. Funds performances are improving. The industry is also having a profound impact on financial markets. a system of risk-reward has been created where the corporate sector is more transparent then before. registrars and transfer agents. Those directly associated with the fund management industry like distributors. and even the regulators have become more mature and responsible. The coming few years will show that the traditional saving avenues are losing out in the current scenario. while others have decided to close shop by either selling off or merging with others. By rewarding honest and transparent management with higher valuations. which averaged at less than Rs100bn per annum over five-year period spanning 199398 doubled to Rs210bn in 1998-99. Funds collection. New players have come in. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The power shift towards mutual funds has become obvious. Funds have shifted their focus to the recession free sectors like pharmaceuticals. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way.Last six years have been the most turbulent as well as exiting ones for the industry. What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector Mutual funds are now also competing with commercial banks in the race for retail investor’s savings and corporate float money. Total collection for the current financial year ending March 2000 is expected to reach Rs450bn. Fund managers. FMCG and technology sector.

(Source: Think-tank.S. mutual fund assets are not even 10% of the bank deposits. The flow chart below describes broadly the working of a mutual fund: 29 . but this trend is beginning to change. the Financial Express September. It offers an opportunity to invest in a diversified. The basic fact lies that banks cannot be ignored and they will not close down completely. professionally managed basket of securities at a relatively low cost. WHAT IS A MUTUAL FUND? A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.India is at the first stage of a revolution that has already peaked in the U. 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 U.S. 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%. boasts of an Asset base that is much higher than its bank deposits. It is just that Mutual Funds are going to change the way banks do business in the future. Their role as intermediaries cannot be ignored. In India.

GRAPH-1 “Mutual Funds are popular among all income levels. With a mutual fund. which are classified to form portfolios that meet predetermined objectives and criteria. we get a diversified basket of stocks managed by professionals” These Trusts are run by experienced Investment Managers who use their knowledge and expertise to select individual securities. They offer the investors the following main services: 30 . These portfolios are then sold to the public.

asset management company (AMC) and custodian. holds the securities of various schemes of the fund in its custody. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. The trust is established by a sponsor or more than one sponsor who is like promoter of a company.  Marketability: A new financial asset is created that may be more easily marketable than the underlying securities in the portfolio. GRAPH-2 31 . The trustees of the mutual fund hold its property for the benefit of the unit holders. trustees. Custodian. Portfolio Diversification: Diversification of the portfolio is the means to invest the assets in the deferent securities which leads to mitigate the risk in the Investment. The trustees are vested with the general power of superintendence and direction over AMC. who is registered with SEBI. which has sponsor. Organization of a Mutual Fund A mutual fund is set up in the form of a trust. They monitor the performance and compliance of SEBI Regulations by the mutual fund.

Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. 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. some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. They are open for sale or redemption during pre-determined intervals at NAV related prices 32 . By Structure: Open-ended Funds: An open-end fund is one that is available for subscription all through the year. Closed ended Funds: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. In order to provide an exit route to the investors. These do not have a fixed maturity. The fund is open for subscription only during a specified period. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.TYPES OF MUTUAL FUND SCHEMES Mutual fund schemes may be classified on the basis of its structure and its investment objective. Interval Funds: . The key feature of open-end schemes is liquidity. Interval funds combine the features of open-ended and close-ended schemes.

In a rising stock market. commercial paper and inter-bank call 33 . These schemes generally invest in safer short-term instruments such as treasury bills. Income Funds: The aim of income funds is to provide regular and steady income to investors. Such schemes normally invest a majority of their corpus in equities. Balanced Fund: The aim of balanced funds is to provide both growth and regular income. These are ideal for investors looking for a combination of income and moderate growth. the NAV of these schemes may not normally keep pace. It has been proved that returns from stocks.By Investment Objective Growth Funds: The aim of growth funds is to provide capital appreciation over the medium to long term. certificates of deposit. or fall equally when the market falls. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. have outperformed most other kind of investments held over the long term. Money Market Funds: The aim of money market funds is to provide easy liquidity. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time. corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. Such schemes generally invest in fixed income securities such as bonds. preservation of capital and moderate income.

money. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. • Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50 • Spectral Schemes 34 . Other Schemes Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. and Pharmaceuticals etc. 1961. The investment of these funds is limited to specific industries like InfoTech. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. FMCG. Special Schemes • Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market.

This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings BENEFITS OF MUTUAL FUNDS Diversification Professional management benefits Tax 35 .Sectoral Funds are those which invest exclusively in a specified sector.

An investor can buy into a portfolio of equities. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. i. depending upon the investment objective of the scheme. Affordability A mutual fund invests in a portfolio of assets.e.Affordability FIGURE-3 Transparency Professional Management Mutual Funds provide the services of experienced and skilled professionals. which would otherwise be extremely expensive. shares etc. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 36 . Diversification Mutual Funds invest in a number of companies across a broad cross – section of industries and sectors. bonds.

Low Costs Investing in the capital markets because the benefits of scale in brokerage. the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the mutual fund. 2003. Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme. income distributions for the year ending March 31. Flexibility 37 . However. will be taxed at a concessional rate of 10%. In closed – ended schemes. the proportion invested in each class of assets and the fund manager’s investment strategy and outlook. the investor gets the money back promptly at MAV related prices from the mutual fund. as a measure of concession to Unit holders of open – ended and equity – oriented funds. mutual funds are a relatively less expensive way to invest compared to directly custodial and other fees translate into lower costs for investors. Liquidity In open – ended schemes. mutual funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.Tax Benefits Any income distributed after March 31. 2002 will be subject to tax in the assessment of all unit-holders. Return Potential Over a medium to long – term.

indexation benefits increase your purchase cost by a certain portion. For instance. Dividends distributed by them are tax-free in the hands of the investor. depending upon the yearly cost-inflation index (which is calculated to account for rising inflation). If you hold units beyond one year. your investment in a mutual fund can fall in value. This reduces your tax liability. What’s more. mutual funds offer significant tax advantages. you can systematically invest or withdraw funds according to your needs and convenience. Simply put. tax-saving schemes and pension schemes give you the added advantage of benefits under Section 88. this must be your mantra: mutual funds do not offer assured returns and carry risk.Through features such as regular investment plans. You can avail of a 20 per cent tax exemption on an investment of up to Rs 10. In addition. a subsidiary of the Reserve Bank of India). They also give you the advantages of capital gains taxation. Tax breaks Last but not the least. thereby reducing the gap between your actual purchase cost and selling price. unlike bank deposits.000 in the scheme in a year. regular withdrawal plans and dividend reinvestment plans. where up to Rs 1 lakh per bank is insured by the Deposit and Credit Insurance Corporation. you get the benefits of indexation. No assured returns and no protection of capital If you are planning to go with a mutual fund. mutual funds are not insured or guaranteed by any government body (unlike a bank deposit. 38 . Well Regulated All mutual funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.

In our earlier example. which had invested 10 per cent of its corpus in Reliance. if risk minimization is your objective. This is because most closed-end funds that assured returns in the early-nineties failed to stick to their assurances made at the time of launch. resulting in losses to investors. RISK ASSOCIATED WITH MUTUAL FUNDS Credit inflation Political RISKS Liquidity Market 39 . say. But your investment in the mutual fund. However. Reliance appreciated 50 per cent. the lack of investment focus also means you gain less than if you had invested directly in a single security. A direct investment in the stock would appreciate by 50 per cent. Restrictive gains Diversification helps. will see only a 5 per cent appreciation.There are strict norms for any fund that assures returns and it is now compulsory for funds to establish that they have resources to back such assurances.

Figure-4 Risk-Return Trade Off The most important relationship to understand is the risk-return trade off. A well – diversified portfolio might help mitigate this risk. the investor to decide how much risk you are willing to take. Credit Risk The debt servicing ability of a company through its cash flows determines the Credit Risk faced by you. Inflation Risk 40 . Hence it is up to you. Market Risk Sometimes prices and yields of all securities rise and fall. In order to do this you must first be aware of the different types of risks involved with your investment decision. A ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor credit quality. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. This is known as Market Risk. Broad outside influences affecting the market lead to this. may it be big corporations or smaller mid-sized companies. This is true. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate the risk. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss.

Political Risk Changes in government policy and political decision can change the investment environment. bonds. Changes in interest rates affect the prices of bonds as well as equities. A well–diversified portfolio with some investment in equities might help mitigate this risk. for example. It simply means that you must spread your investment across different securities (stocks. staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. at the time of investment. during one period of time equities might under perform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity Markets. It can be partly mitigated by diversification. They can create a favorable environment for investment or vice versa. money market instruments. the prices of bonds will fall and vice versa. DISADVANTAGES OF MUTUAL FUNDS There are certainly some benefits to mutual fund investing. but you should also be aware of the drawbacks associated with mutual funds.). Interest Rate Risk In a free market economy interest rates are difficult and not impossible to predict. Liquidity Risk Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. If interest rates rise. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could. fixed deposits etc. Equity might be negatively affected as well in a rising interest rate environment. real estate. A well-diversified portfolio might help mitigate this risk. This kind of a diversification may add to the stability of your returns.Inflation is the loss of purchasing power over a time. 41 .

mutual funds tend to do neither exceptionally well nor exceptionally poorly. credit unions. In addition. losses can occur. like the S&P 500. unlike stock investments. For example. and it is possible (although extremely unlikely) that you could even lose your entire investment. Some of these expenses are charged on an ongoing basis. 3. not mutual funds. 4. 2. if a single security held by a mutual fund doubles in value. around 75% of all mutual funds fail to beat the major market indexes. although regulated by the government. Fees and Expenses: Most mutual funds charge management and operating fees that pay for the fund's management expenses (usually around 1. it can also be a disadvantage due to dilution. the mutual fund itself would not double in value because that security is only one small part of the fund's holdings. 12b-1 fees. Poor Performance: Returns on a mutual fund are by no means guaranteed. The Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks. on average. No Insurance: Mutual funds.0% to 1. are not insured against losses. some mutual funds charge high sales commissions. In fact.1. And some funds buy and trade shares so often that the transaction costs add up significantly. Dilution: Although diversification reduces the amount of risk involved in investing in mutual funds. and savings and loans. By holding a large number of different investments. 42 .5% per year). That means that despite the risk-reducing diversification benefits provided by mutual funds. and redemption fees. for which a commission is paid only when you buy and sell .

after they've calculated the current value of their holdings. given that there are strict rules about how much of a single company a fund may own. Loss of Control: The managers of mutual funds make all of the decisions about which securities to buy and sell and when to do so. Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves as protection against a large number of simultaneous withdrawals. You also should remember that you are trusting someone else with your money when you invest in a mutual fund. This can make it difficult for you when trying to manage your portfolio. the fund might be forced to lower its standards when selecting companies to invest in. Trading Limitations: Although mutual funds are highly liquid in general. 8. This is especially true of funds that focus on small companies. 6. Although this provides investors with liquidity. then it needs to find at least 100 such companies to invest in. it means that some of the fund's money is 43 . For example. Size: Some mutual funds are too big to find enough good investments. the tax consequences of a decision by the manager to buy or sell an asset at a certain time might not be optimal for you. 5. as a result. 7. most mutual funds (called open-ended funds) cannot be bought or sold in the middle of the trading day. You can only buy and sell them at the end of the day. If a mutual fund has $5 billion to invest and is only able to invest an average of $50 million in each.and a growing number of critics now question whether or not professional money managers have better stock-picking capabilities than the average investor.

Net Asset Value (NAV) Open-end mutual funds price their shares in terms of a Net Asset Value (NAV) (note that you can calculate NAV for a closed-end fund too. Mutual funds are available for virtually every investment strategy (e. The resulting NAV per share is the price at which shares in the fund are bought and sold (plus or minus any sales fees). So even the process of selecting a fund can be tedious. Mutual funds only calculate their NAVs once per trading day. and style. 44 . and then dividing by the number of outstanding shares in the fund.g. but it will not necessarily be the price at which you buy or sell closed-end shares). which tends to lower the investor's potential return.000 mutual funds in operation. biotech. Different Types: The advantages and disadvantages listed above apply to mutual funds in general. and these funds vary greatly according to investment objective. growth). NAV is calculated by adding up the market value of all the fund's underlying securities. and every country or region of the world. value.g. every sector (e. size. subtracting all of the fund's liabilities. However. HISTORY OF MUTUAL FUND IN INDIA HISTORY – The Landmarks 1963: UTI is India’s first mutual fund. at the close of the trading session. internet). there are over 10. 1964: UTI launches US-64.invested in cash instead of assets. strategy.

floating rate funds and Foreign debt funds debut. India’s first true ‘mutual fund’ scheme. mutual fund distributors banned from giving commissions to investors. 2001: US-64 scam leads to UTI overhaul. 1998: UTI Master Index Fund is the country’s first index fund. 45 . 1993: Private sector and foreign players allowed. 1994: Morgan Stanley is the first foreign player. come into force. launched. 2003: AMFI certification made compulsory for new agents. 1987: PSU banks and insurers allowed floating mutual funds. 00. 1996: Sebi’s mutual fund rules and regulations. Kothari Pioneer first private fund house to start operations. comes under SEBI purview. 2000: The industry’s assets under management crosses Rs 1.000 crore. 1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first acquisition in the mutual fund industry. SEBI set up to regulate industry. 2002: UTI bifurcated. 1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in shares and mutual funds. 1986: UTI Master share. State Bank of India (SBI) first off the blocks. fund of funds launched.1971: UTI’s ULIP (Unit-Linked Insurance Plan) is second scheme to be Launched. which forms the basis of most current laws.

at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases. INDUSTRY PROFILE: GRAPH-5 46 .The mutual fund industry in India started in 1963 with the formation of Unit Trust of India.

open and close – end funds operate under the same regulatory structure. i. in India. India has a legal framework within which mutual funds must be constituted. In India.GRAPH-6 (Industry Growth) Growth of asset under management from March-1965 to March-2009 STRUCTURE OF THE MUTUAL FUND IN INDIA FIGURE-7 Like other countries.e. all mutual funds are constituted along one unique structure – as 47 .

The sponsor will form a Trust and appoint a Board of Trustees. acting alone or in combination with another body corporate establishes a mutual fund. The Trust is created through a document called the Trust Deed that is executed by the 48 . laid down under SEBI (Mutual Fund) Regulations. The fund invites investors to contribute their money in the common pool by subscribing to units issued by various schemes established by the Trust as evidence of their beneficial interest in the fund. Board of Trustees manages most of the funds in India. The sponsor of a fund is akin to the promoter of companies he gets the fund registered with SEBI. 1996. must contribute at least 40% of the net worth of the AMC and issues a sound financial track over five years prior to registration. Mutual Funds as Trusts Mutual Fund in India is constituted in the form of a Public Trust under the Indian Trust Act 1882. may manage the Trust.unit trust. All these appointments are made in accordance with the SEBI Regulations. or a trust company – a corporate body. A mutual fund in India is allowed to issue open – end and close – end schemes under a common legal structure. The Trust or Fund has no legal capacity itself rather it is the Trustee(s) who have legal capacity and therefore the trustees take all acts in relation to the Trust itself. which is required to be followed by mutual funds in India. for a person to qualify as a sponsor. The structure. The Fund Sponsor ‘Sponsor’ is defined under SEBI Regulations as any person who. As per the existing SEBI Regulations. Trustees in mutual fund A Board of Trustees – a body of individuals.

49 . Transfer Agents Transfer Agents are responsible for issuing and redeeming units of the mutual fund and provide other related services such as preparation of transfer documents updating investor’s records. Right of Trustees a) Appoint the AMC with the prior approval of SEBI b) Approve each of the schemes floated by the AMC c) Have the right to request any necessary information from the AMC concerning the operations of various schemes managed by the AMC Obligations of the AMC and its Directors They must ensure that: a) Investment of funds is in accordance with SEBI Regulations and the Trust Deed b) Take responsibility for the act of its employees and others whose services it has procured c) Do not undertake any other activity conflicting with managing the fund Asset Management Company The role of an Asset Management Company (AMC) is to act as the investment manager of the trust under the Board supervision. A fund may choose to opt this activity in-house or by an outside transfer agent.Fund Sponsor in favors of the trustees. They ensure that AMC’s operations are along professional lines. They are the primary guardian of the unit holder’s funds and assets.

Association of Mutual Funds in India (AMFI) was incorporated on 22nd August. Bankers A fund’s activities involved dealing with the money on a continuous basis primarily with respect to buying and selling units. ASSOCIATION OF MUTUAL FUNDS IN INDIA With the increase in mutual fund players in India. Custodian and Depository The custodian is appointed by the Board of Trustees for safekeeping of securities in terms of physical delivery and eventual safe keeping or participating in the clearing system through approved depository companies. 1995.Distributors AMCs usually appoint distributors or brokers. A fund’s banker therefore plays a crucial role with respect to its financial dealings. Till date all the AMCs are that have launched mutual fund 50 . Some funds require that all transactions to be routed through such brokers. receiving the proceeds from sale of investment and discharging its obligations towards operative expenses. paying for investment made. AMFI is a apex body of all Asset Management Companies (AMC) which has been registered with SEBI. a need for mutual fund association in India was generated to function as a non profit organization. who sell units on behalf of the fund.

It implements a program of training and certification for all intermediaries and other engaged in the mutual fund industry. It functions under the supervision and guidelines of its Board of Directors.  Association of Mutual Fund in India does represent the Government of India. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holder. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.  It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management.  It develops a team of well qualified and trained Agent distributors.  AMFI undertakes all India awareness programmed for investor’s in order to promote proper understanding of the concept and working of mutual funds.schemes are its members. 51 . It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. The objectives are as follows:  This mutual fund association of India maintains high professional and ethical standards in all areas of operation of the industry.  AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. The objectives of Association of Mutual Funds in India The Association of Mutual Funds of India works with 30 registered AMCs of the country. the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry.

Tata Mutual Fund 12. Sahara Mutual Fund 10. At last but not the least association of mutual fund of India also disseminate information’s on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies. ABN AMRO Mutual Fund 3. State Bank of India Mutual Fund 11. ING Vysya Mutual Fund 8. Unit Trust of India Mutual Fund 52 . Kotak Mahindra Mutual Fund 13. Edelweiss Mutual Fund 2. Prudential ICICI Mutual Fund 9. Birla Sun Life Mutual Fund 4. HDFC Mutual Fund 6. Bank of Baroda Mutual Fund (BOB Mutual Fund) 5. HSBC Mutual Fund 7. Companies in India 1.

Canbank Mutual Fund 22. DSP Merill lynch Mutual Fund 28. Principal Mutual Fund 30. Morgan Stanley Mutual Fund India 18. 33. Bank of India Mutual Fund 53 . Benchmark Mutual Fund 21. IL&FS Mutual Fund 27. Alliance Capital Mutual Fund 20. Deutsche Mutual fund 32. Standard Chartered Mutual Fund 16. Reliance Mutual Fund 15. LIC Mutual Fund 25. GIC Mutual Fund 24.14. Taurus Mutual Fund 31. Fidelity Mutual Fund 26. Escorts Mutual Fund 19. Chola Mutual Fund 23. IDBI Investment Company Ltd. Franklin Templeton India Mutual Fund 17. Sundaram Mutual Fund 29.

The advantage of asset allocation lies in achieves superior returns when markets are down while minimizing the exposure of the portfolio to volatility. asset allocation is based on certain dimensions that. Asset allocation is different from simple diversification. debt or money market. Different asset class will react differently to market conditions like inflation. rising or falling interest rates or a market segment coming into or falling out of favor. In other words asset allocation is way to control risk in your portfolio.they tend to move in the same direction in response to a given market force. you may end up with over-exposure to a particular segment. You really have not done much to control risk in your portfolio if all these funds come from only one particular segment of the market say large cap stocks or mid cap stocks. In case of an adverse reaction for that segment. In fact. If you build your portfolio with various top performing growth funds without really bothering to analyze their portfolio allocation. Another point you need to remember is that growth funds are highly correlated. when combined tend to control the volatility while achieving targeted returns.CHAPTER-5 Portfolio Management People have different investment objective and risk appetite so to get the highest returns asset allocation through active portfolio management is the key element. 54 . all the funds will react similarly means they will go down.is more important than the particular security itself. It is based on the theory that the type or class of security you own equity. Asset allocation is a method that determines how you divide your portfolio among different investment instruments and provides you with the proper blend of various asset classes. Suppose you diversify your equity portfolio by investing in five or ten equity funds.

3. 55 . fixed returns on principal investment. Two broad portfolio choices are available An active portfolio management: it strive to earn superior risk adjusted returns by resorting to market timing. safety. Choice of asset mix: The most important decision in portfolio management is the asset mix decision. which may be broken down into the following steps: 1. capital appreciation. The appropriate mix of Stock and Bonds will depend upon the risk tolerance and investment horizon of the investor. 2.Portfolio Management Process Portfolio management is a complex activity. This is concerned with the proportions of “Stock” or “ Units” of mutual fund or “Bond” in the portfolio. Specification of investment objectives and constraints: The typical objectives sought by an investor are current income. or sector rotation or security selection or some combination of these. A passive portfolio management involves holding a broadly diversified portfolio and maintaining a pre-determined level of risk exposure. Formulation of portfolio strategy: Once the certain asset mix has been chosen an appropriate portfolio strategy has to be decided out.

He wants to lower down his risk profile and demand for fixed income on his investment. Cautious Investor: It’s kind of investor who is less bothers about high returns. 3. Types of Investor 1.Designing a model Portfolio There are certain objectives that should keep in mind while designing a portfolio these are: • • • • • • Higher absolute rate of return and high real rate of return Maximization current income High post tax returns Positive real return Preservation of capital Growth in capital For my study I am making three dummy portfolios for three different kinds of investors. His main objective of investment is fixed returns with less risk. Aggressive Investor: 56 . Balanced Investor: It’s a kind of investor who is bothers about returns as well as risk. 2. He wants moderate returns with moderate risk.

8. 70.000 Rs.a. 8% p.a.a.a.00.00.a. Logic behind selection of particular Instrument: 57 . 6. he is satisfied with fixed return rather they are less than equity investment’s returns. 1.000 Rs.000 Rs.00.00. Table-1 Returns 8. 6. Table-2 Returns 54.000 Rs.It’s a kind of investor who is ready to take risk.4% p.30.3% p.00.5% p.5% p.a.00.a.a.000 Rs. 8.000 Rs. So I took thus instrument which provides good return as well as secure also.000 Rs.000 Rs.000 Rs. 8. 1. 70.a. All of these instruments will give him return around 8% annually. 78. 5. 1. Portfolio for Cautious Investor Investment Instrument Kisan Vikas Patra PPF Bank Fixed Deposits NSC Post office monthly MIP TOTAL Amount 1.5% p.a.000 Rs. So he only wants to invest in equity schemes. Logic behind selection of particular Instrument: As investor does not want to take risk.5 Lakh . I have made an assumption that each investor want to invest Rs. 8. 1.4% p.000 Rs.000 Rs. 80.16% p. 5.2% p.50. He believes in high risk and high returns. 1. Portfolio for Balance Investor Investment Instrument HDFC Prudence Fund Reliance Vision Fund Bank Fixed Deposits PPF Kisan Vikas Patra TOTAL Amount 1.5% p.00.

000 Rs.3% p. 80. Fixed return instruments like PPF. 90. he is looking for high returns on his investment.00.As investor does not want to take high risk.a. Bank FD and kisan viaks patra will give him return around 8% annually and I suggest Balance kind of funds to him where he will have exposure of both equity as well as debts. I select more funds which are focusing on mid cap companies like HDFC.000 Rs. To increase the ratio of equity in portfolio I suggested Reliance vision fund which is mainly based on large and mid cap companies.10.000 Rs.000 Rs. Portfolio for Aggressive Investor Investment Instrument HDFC Core & Satellite Fund Prudential ICICI Emerging Star Fund Franklin Flexi Cap Fund Fidelity Equity Fund DSP Top 100 TOTAL Amount 1. 82. 90.25% p. he is satisfied with fixed return plus some equity exposure. 93.a. 86. HDFC prudence fund is best performing fund under balance scheme. I took thus instrument which provides good return.28% p. But he wants some safety in equity exposure also.a.30. 5.56% p.4% p.000 Rs. Logic behind selection of particular Instrument: As investor ready to take high risk. 1.a.a. Measurement of Returns on Portfolios The realized rate of return will be calculated by 58 . Table-3 Returns 83. All of these instruments will give him return around 80% annually. Franklin’s funds. So I took thus instrument which provides good return as well as safety also. 79. To take the benefit of increasing Sensex I took DSP top 100. Currently Mid cap companies will perform better than large cap companies so.000 Rs.

8% p.00. Time Weighted Rate of Return (TWROR) It is calculated by using Dietz Algorithm Ri= [(Pi-0.a. Current Value 2.5% p.a. Table-4 Time Weighted Rate of Return (TWROR) Ri= [(Pi-0.a.5% p.08.a.1.000 Rs.000 Rs.a. 6.5(0))/ (500000+0.5Ci)/ (Po+0. 1.a. 8.000 Rs.950 1.2% p.62.00. 1.000 5.16% p.000 Rs.a.600 75.00.00.4% p.06.5Ci)-1}*100 = {(539578-0.5Ci)-1}*100 Po= Portfolio value at the beginning of the period Pi= Portfolio value at the end of the period Ci= Net contributions during time interval Ri= Rate of Return for the time interval a) Rate of return for cautious investor Current Value 1.50. 1.000 Rs.000 Rs.3% p.a. 80.5Ci)/ (Po+0.578 Investment Instrument Kisan Vikas Patra PPF Bank Fixed Deposits NSC Post office monthly MIP TOTAL Amount Returns 1.460 1. 78. 5.00. 70.500 86.000 Rs.39. 6.00.500 = 7.30. 8. 59 . Returns 54.91% p.78.528 1.a. 1.5(0))-1}*100 b) Rate of return for balance investor Investment Instrument HDFC Prudence Fund Reliance Vision Fund Bank Fixed Deposits Amount 1. 8.000 Rs.5% p.06.000 Rs.300 1.

82. 5.25% p. 5.000 Rs.00.000 Rs.5(0))/ (500000+0. 75.a.5% p.91%p.5(0))/ (500000+0.a. Table-5 8. 1.28% p.000 Rs.92%p.56% p.000 Rs.3% p.00.a.04. c) Rate of return for aggressive investor Investment Instrument HDFC Core & Satellite Fund Prudential ICICI Emerging Star Fund Franklin Flexi Cap Fund Fidelity Equity Fund DSP Top 100 TOTAL Amount 1. 93.950 1. 80.a.875 1. Current Value 2.5Ci)/ (Po+0.5Ci)-1}*100 = {(924565-0. Table-6 Returns 83.000 Rs.30.352 9.920 1.000 Rs.628 1.000 Rs.a.a. 90. 8.00.790 2.73.a.610 Time Weighted Rate of Return (TWROR) Ri= [(Pi-0.10.4% p.a.69.400 6.45. 79.24.5(0))-1}*100 = 33.PPF Kisan Vikas Patra TOTAL 70.a.5Ci)/ (Po+0. 86.000 Rs.565 Time Weighted Rate of Return (TWROR) Ri= [(Pi-0. 60 .000 Rs.38. 1.61.5(0))-1}*100 = 84.08.5Ci)-1}*100 = {(669610-0. 90.4% p.

The selection of companies depend upon many issue which have great impact in current scenario as well as in near future. Before going into detail one should understand Sensex movement. The below table shown the Sensex change on monthly basis. Means what is % change in Sensex during one month. Fund manager has to do lot of research before investing into particular script.CHAPTER-6 INTERPRETATION OF THE EXISTING MUTUAL FUNDS Scheme Portfolio Like investors portfolio different scheme under mutual fund have different portfolio. By scheme portfolio we mean portfolio or companies in which fund manager invested the fund. Mutual fund returns are based on Sensex. 61 . Their Net Asset Value is directly related to Share market.

27 -0.32 175 2-Nov-08 7.339.892.24 62 2-Mar-09 10.58 8.788.Sensex Journey Percentage Changes at the End of the Day Date Opening Closing Change 30-Sep-08 8.892.26 1.27 -0.90 9.325.99 8.397.010.19 10.47 0.66 8.78 29 31-Mar-09 11.89 27 2-Feb-09 9.19 -0.961.672.072.962.14 -32 31-Jan-09 9.890.717.49 9.626.92 8.48 -38 3-Oct-08 8.71 10.672.93 58 2-Jan-09 9.370.96 11.597.81 -174 2-Dec-08 9.44 2.96 -46 TABLE-7 Change in % -0.308.87 -47 28-Feb-09 10.66 Closing 8.953.61 0.61 -49 30-Dec-08 9.54 0.23 9.48 Prices Nil In Closing Change in % Nil 62 .919.43 0.65 35 31-Oct-08 7.422.49 -0.07 7.62 -0.33 0.634.390.28 8.279.697.75 119 30-Nov-08 8.4 1 Percentage Changes at the End of the Month Change Date 30-Sep-08 Opening 8.634.843.662.32 9.

339.308.31-Oct-08 30-Nov-08 30-Dec-08 31-Jan-09 28-Feb-09 31-Mar-09 7.717.788.89 10.892.54 8. For my study purpose I have taken HDFC Equity Fund and HDFC Core & Satellite Fund.32 8.24 11.370.92 5.919.892.962.96 896 609 522 451 909 742 8.325.397. How he has allocated funds among various industries as well as various companies.59 11.55 4.96 7.92 9.23 10.32 9.71 11.35 6.93 9.76 Table-8 Graph-8(Sensex Journey) Sensex has boomed with lots of ups and down from last year 2009. What is their portfolio means in which companies the fund manager invested the fund.07 8.279. It seems very fluctuating.81 9. After studying both the fund’s portfolio I compare them with Reliance 63 .

09 33. Crompton Greaves Ltd.Growth fund. Oct 2008 31. Prudential ICICI Growth Fund. Mahindra & Mahindra Ltd. United Phosphorus Ltd.295 6 -5.69 4. State Bank of India Infosys Technologies Ltd. HDFC Equity Fund Portfolio Top 10 Holdings For October S. DSP Tiger Fund and Kotak Opportunity Fund.11 9. Comparison is based on per month returns and Sensex returns during the same period.54 66.055 -4. Maruti Udyog Ltd.67 4.7 88. Company Industry Oil & Natural Gas Corporation 1 2 3 4 5 6 7 8 9 10 Ltd.634. Bharat Heavy Electricals Ltd.05 5.25 6. No.11 Table-10 Compare returns with Sensex Movement Date 30-Sep-08 Closing 8.48 Change % change 64 .91 100 Goods Auto Ancillaries Auto Ancillaries Pesticides Industrial Capital Goods Auto Top 10 Holdings Others Equity Holdings TOTAL Table-9 NAV Changed During the Month (GROWTH) Date NAV Change % Change 1.21 4. Amtek Auto Ltd. Oct 2008 93.97 7.02 7.68 Capital 7. Satyam Computer Services Ltd. Oil Banks Software Software Industrial % of NAV 9.

36 62.49 100 NAV Changed During the Month (GROWTH) Date NAV 1.06 TABLE-13 Compare returns with Sensex Movement Date 30-NovClosing 8.45 Industrial Capital Goods Auto Ancillaries Top 10 Holdings Others Equity Holdings TOTAL TABLE-12 4.32 -742 -8. Maruti Udyog Ltd.14 8. Dec 2008 102. Infosys Technologies Ltd. Bharat Heavy Electricals Ltd.44 4. Company Industry Oil & Natural Gas Corporation 1 2 3 4 5 6 7 8 9 10 Ltd.182 % Change 4.51 37.59 TABLE-11 HDFC Equity Fund Portfolio Top 10 Holdings For December S.76 Auto 4.31-Oct-08 7. No.892. Mahindra & Mahindra Ltd. Dec 2009 107.87 Auto Ancillaries 4.19 Capital Goods 4. Amtek Auto Ltd.91 8.788. Satyam Computer Services Ltd. Oil Software Auto Software Banks Industrial % of NAV 9.67 7.8 Change % change 65 . State Bank of India Crompton Greaves Ltd.009 Change 4.827 3o.72 5. Tata Motors Ltd.

HDFC Equity Fund (Comparison of Oct.73 12.15 2.9 3 609 6.) How Fund's Portfolio effected Returns October % Industry Software Industrial Capital Goods Auto Banks Oil Auto Ancillaries Pesticides Power Transportation Petroleum Products Allocation 19.73 7.27 3.07 2.19 3.97 13.92 TABLE-14 In the month of December Sensex has grown by 6.98 3.14 7.28 9.14 17.48 13.69 4.92% but fund’s return were only 4.77 9.11 8.41 Of Industry Software Auto Industrial Capital Goods Oil Banks Auto Ancillaries Pesticides Consumer Non Durables Transportation Metals December % Allocation 20.397.73 9.06% which indicating towards lower performance of fund. & Dec.68 4.08 30-Dec08 1 9.25 Of 66 .74 2.

01 1.51 2.09 TABLE-15 Oct-Dec Month Portfolio Industry Software Auto Industry Capital Goods Oil Banks Auto Ancillaries Pesticides Consumer Non Durables Transportation Metals Gas Pharmaceuticals Hardware Textile Chemicals Change 0.57 0.41 0.06 TABLE-16 Tata Motors Share Benefit Date 31.92 1.88 Gas Pharmaceuticals Hardware Textile Chemicals Telecom-service Construction IT Consulting Services 2. Oct 2008 31.82 0.5 2.55 Change % Change 167.63 1.11 1.45 0. dec2008 Price 472 639.55 -1.03 -1.49 -0.Hardware Textile Metals Pharmaceuticals Chemicals 2.61 0.18 -0.76 1.75 0.21 & 0.55 35.27 0.71 3.01 0.79 0.49% TABLE-17 67 .66 -0.04 0.17 4.

05 6.58 6. Oil & Natural Gas Corporation Ltd. Amtek Auto Ltd.Fund manager added auto industry by taking Tata motors to 8.97 5.55 Rs means 35.92 7.26 % which proved right because its share price rose only by 8.61 38. So.79% TABLE-18 Fund manager reduced Amtek exposure in the portfolio by 1.7 297 Change % Change 24 8.2%. Oct 2008 31. During that time Tata Motors has grown from 472 to 639.79% where Sensex was increasing at 19.78 7.so Amtek performed lower than market so its good to sell this script from portfolio.49% increase which fletched fund performance in to positive. fund manager decision of taking Tata Motors has proved right. No.04 5.48 61.24 7. State Bank of India Satyam Computer Services Ltd. dec2008 Price 273. Tata Motors Ltd. ITC Ltd.55 6. Industry Software Banks Software Industrial Capital Goods Oil Auto Auto Ancillaries Consumer Non Durables Auto Ancillaries Top 10 Holdings Others Equity Holdings TOTAL NAV 8. Bharat Heavy Electricals Ltd. 1 2 3 4 5 6 7 8 9 Company Infosys Technologies Ltd. HDFC Equity Fund Portfolio Top 10 Holdings For February % S.39 100 of TABLE-22 68 . Maruti Udyog Ltd. Amtek Share Benefit Date 31.67 % which had no exposure in the month of October in the portfolio.

83 3.781 % Change Beta 0. Feb 2009 113.063 28.NAV Changed During the Month (GROWTH) Date NAV 1.344 Compare returns with Sensex Movement Date 31-Jan-06 28-Feb-06 Closing Change 9236 8800 436 % change -4.844 Change 3.72 TABLE- Industry Wise Allocation January Industry % February Of Industry % Of 69 . Feb 2009 116.83 0.

65 3.03 70 .29 2.12 Jan-Feb Month Portfolio Industry Change Software -0.78 1.16 15.1 TABLE-24 Software Industry Capital Goods Auto Consumer Non Durables Auto Ancillaries Banks Oil Pesticides Transportation Metals Pharmaceuticals Hardware Textile Chemicals IT Consulting & Services Allocation 21.06 17.89 6.07 Pharmaceuticals 0.68 Oil -1.59 10.Software Auto Industry Capital Goods Banks Oil Auto Ancillaries Consumer Non Durables Pesticides Transportation Gas Metals Pharmaceuticals Hardware Textile Chemicals IT Consulting & Services Allocation 22.7 2.84 2.97 Industry Capital Goods 1.6 7.45 1.57 Consumer Non Durables 6.16 8.25 Banks -0.92 6.7 0.67 0.04 0.9 7.35 8.94 3.09 0.23 Transportation -0.03 18.97 Auto -5.32 1.38 2.62 Metals -0.31 Pesticides -0.42 1.1 1.22 Auto Ancillaries 2.32 12.93 2.58 3.

HDFC Equity Fund Portfolio Top 10 Holdings For March 09 SR.3 5 892.41 TABLE-26 Add ITC to 5. Jan 2006 28.9 -1. Due to this fund’s performance has not felt.35 to 892.65 % Change 11. Feb 2006 Price 154. Crompton Greaves Share Benefit % Date 31. No.05 -0.53% decrease. Feb 2006 Price 906.8 172. During that time Crompton has felt from 906.44%.02 TABLE-25 Change 17. Jan 2006 28.45 Rs means 1. Company Industry % of 71 . this decision gave return at 3.03 0.97 which had no exposure in the month of January in the portfolio.54% growth.8 to 172.45 Rs means 11.09 0. During that time ITC has grown from 154.4 5 -13.Hardware Textile Chemicals IT Consulting & Services ITC Share Benefit Date 31.53 TABLE-27 Change Change Reduce share of Crompton Greaves which had less exposure in the month of February than January in the portfolio.41% increase which is higher than Sensex 4.45 -0.

844 31. Siemens Ltd.14 % change 8. Crompton Greaves Ltd. Bharat Heavy Electricals Ltd. Satyam Computer Services Ltd.88 72 .24 100 NAV Changed During the (GROWTH) Date NAV 1.72 7. Software Banks Consumer Non Durables Software Auto Industrial Capital Goods Auto Ancillaries Industrial Capital Goods Industrial Capital Goods Auto Ancillaries Top 10 Holdings Others Equity Holdings TOTAL TABLE-28 Month NAV 8.78 4. Mar 2009 116. Tata Motors Ltd.821 TABLE-29 Compare returns with Sensex Movement Date Closing 28-Feb-06 8800 31-Mar-06 9568.06 17.14 Change 768.88 8.76 37.151 Change 10.87 5.86 5.88 7.06 4.1 2 3 4 5 6 7 8 9 10 Infosys Technologies Ltd.35 12.73 TABLE-30 Industry Wise Allocation February % Industry Software Industry Capital Goods Auto Consumer Non Durables Auto Ancillaries Allocation 21.59 10.16 8.5 5.09 17.37 7.57 62. State Bank of India ITC Ltd.88 0. Amtek Auto Ltd.71 5.307 % Change Beta 0.9 Of Industry Software Industry Capital Goods Consumer Non Durables Auto Banks March % Of Allocation 18.81 6. Maruti Udyog Ltd.46 11. Mar 2009 127.32 12.

35 Transportation -0.83 Telecom.03 Consumer Non Durables 2.87 0.4 Change % Change 73 .58 3.67 3.29 2.36 Chemicals 0.72 Media & Entertainment 3.Banks Oil Pesticides Transportation Metals Pharmaceuticals Hardware Textile Chemicals IT Consulting & Services 7.04 Auto Ancillaries -1.45 1.04 Pharmaceuticals -0.87 2.86 1.Services 2.09 0.46 Hardware 0.29 Pesticides -0.67 0.04 TABLE-32 Crompton Greaves Share Benefit Date 28.29 2.05 1.78 1.65 Metals 0.2 IT Consulting & Services -0.12 Auto Ancillaries Oil Media & Entertainment Pesticides Telecom.3 Auto -1.65 2.09 0.23 Oil -2.97 Industry Capital Goods 0.13 1.52 Textile -0. Feb 2006 Price 892.86 3.32 1.81 2.7 2.22 Banks -0.Services Metals Transportation Hardware Textile Pharmaceuticals Chemicals IT Consulting & Services TABLE-31 7.08 Feb-March Month Portfolio Industry Change Software -2.92 6.

24 TABLE-34 Satyam computer has grown at the rate of 10.24% which is 20% higher than Sensex growth in that time period Prudential ICICI Growth Fund January 09 S.3 Rs means 17.4% return on fund.6 5 848.45 to 1049.5 1049. March 2006 Price 769.85 10.47 3.16 3. No 1 2 3 4 5 6 7 8 9 10 Companies Hindalco Industry Ltd. Bharat Heavy Electricals Limited Associated Cement Companies Ltd Oil & Natural Gas Company Ltd Grasim Industries Limited Reliance Industries Limited Satyam Computer Services Ltd.14 3.03 3 Industry Wise Allocation 74 . these decision results in 8.85 17. 31. Jaiprakash Associates Ltd Mahindra & Mahindra Limited ITC Limited TABLE-35 Industry Non Ferrous Metals Industrial Capital Goods Cement Oil Cement Petroleum Products Software Construction Auto Consumer Non Durables % of NAV 5. So.36 3.43 4.57 TABLE-33 Add share of Crompton Greaves which had less exposure in the month of February in the portfolio.73 3.57% increase. Satyam Computer Share Benefit Date 28.87 3. March 2006 3 156. Feb 2006 31.5 Change % Change 78. During March Crompton has grown from 892.08 3.

34% returns.85 713. So we can say that HDFC has performed better in January. Jan 2009 68.9 Change -183. 75 .GRAPH-9 NAV Changed During the Month (GROWTH) Date NAV 1.5 TABLE-36 In January. Reliance Industry Share Benefit Date 31.72 % Change Beta 0.98 0. Jan 2009 70.4 TABLE-37 In the month of January Reliance Industry’s share price has come down to 713.7 31.4% lesser than December price.42 Change 1.9 Rs which is 20.5% returns where HDFC Equity Fund has given 5. ICICI Growth Fund has given only 2.95 % Change -20. ICICI has exposure of reliance industry in to portfolio which harms the fund’s overall returns. Jan 2009 Price 897. Dec 2008 31.98 2.

Dec 2008 31.45 3.35 % Change 7. Mahindra & Mahindra Limited Oil & Natural Gas Company Ltd Cement Auto Software Auto Oil Industry Wise Allocation 76 .73 3.44 ITC Limited Durables Grasim Industries Limited Cement Associated Cement Companies Ltd Bajaj Auto Limited Satyam Computer Services Ltd.9 408. Jan 2009 Price 379.14 Petroleum Products 3.99 Consumer Non 3.68 3.84 Construction 4.46% in January month.71 3.46 TABLE ICICI has exposure of Jai Prakash Associates which has rose by 7. Prudential ICICI Growth Fund February S.82 3. HDFC Mutual fund did not have Jai Prakash’s exposure in their portfolio. No 1 2 3 4 5 6 7 8 9 10 Companies Bharat Heavy Electricals Limited Jaiprakash Associates Ltd Reliance Industries Limited Industry Industrial (TABLE-) % of NAV Capital Goods 4.44 3.25 Change 28.Jai Prakash Associate Share’s Benefit Date 31.

GRAPH

NAV

Changed

During

the

Month

(GROWTH) Date NAV 1, Feb 2009 70.42 28, Feb 2009 71.79

Change 1.37

% Change Beta 0.96 0.96 1.94

In February market has boomed by 4.54% where HDFC Equity fund has given 3.33% returns. So it has performed similar to market trend but ICICI Growth fund has given only 1.94% in same period. So, we can say that this fund has performed lower than market Prudential ICICI Growth Fund

77

March S. No 1 2 3 4 5 6 7 8 9 10 Companies Bharat Heavy Electricals Limited Reliance Industries Limited Larsen & Toubro Limited ITC Limited Siemens India Limited Bajaj Auto Limited Associated Cement Companies Industry Industrial Capital Goods Petroleum Products Industrial Capital Goods Consumer Non Durables Industrial Capital Goods Auto % of NAV 4.84% 4.64% 4.03% 3.91% 3.82% 3.52% 3.49% 3.32% 3.28% 3.17%

Ltd Cement Mahindra & Mahindra Limited Auto Cipla Limited Pharmaceuticals Grasim Industries Limited Cement TABLE

Industry Wise Allocation

GRAPH

78

NAV Changed During the Month (GROWTH) Date NAV Change % Change Beta 0.78 1, March 2009 71.79 0.78 31, March 2009 80.94 9.15 12.74 TABLE ICICI Growth fund has grown up by 12.74% in March where HDFC Equity Fund has grown only by 8.8% CIPLA Share’s Benefit Date 31, Dec 2008 31, Jan 2009 Price 552.15 662.25 Change 110.1 % Change 19.94 TABLE

ICICI has CIPLA script in their portfolio which has grown to 662.25 Rs. It has rose by 19.94% in March month. HDFC did not have CIPLA’s exposure. This script has the main reason behind ICICI better performance over HDFC. Reliance Growth Fund January S. No. Companies % of NAV Bharat Earth Movers 1 2 3 4 5 6 7 8 9 10 Ltd. Kirloskar Brothers Crompton Greaves Ltd. Hindustan Lever Ltd. State Bank of India Strides Arcolabs Ltd. United Phosphorous Jindal Saw Ltd. Jaiprakash Associates Reliance Industries Ltd. 4.96 3.84 2.99 2.64 2.58 2.35 2.26 2.2 2.11 2.08 TABLE % Of Allocation 10.44 10.41 9.34 8.92

Industry Wise Allocation S. No. 1 2 3 4 Industry Industry Capital Goods Consumer Non Durable Industrial Products Software

79

4.66 2.1 2.25 6.08 2.11 80 .19 8.05 1.55 3.04 TABLE Industry Wise Allocation S. Kirloskar Brothers Bombay Dying Ltd.16 3.5 6 7 8 9 10 11 12 13 14 15 Banks Pharmaceuticals Ferrous Metals Fertilizers Chemicals Construction Auto Ancillaries Pesticides Petroleum Products Auto Telecom Services 7.98 5. 1 2 3 4 5 6 7 8 9 10 Industry Industry Capital Goods Industrial Products Consumer Non Durable Software Pharmaceuticals Banks Ferrous Metals Petroleum Products Chemicals Construction % Of Allocation 10. No.09 2.16 2.19 6.95 4.76 10.6 4.57 2.09 3.26 2.1 5.91 4. Reliance Industries Ltd.8 2. Companies % of NAV Bharat Earth Movers 1 2 3 4 5 6 7 8 9 10 Ltd.37 8.58 2.78 7.31 2. JSW Steels Ltd.33 2. Jaiprakash Associates Strides Arcolabs Ltd.18 2.17 7. Jindal Saw Ltd. Bank of Baroda Crompton Greaves Ltd.86 TABLE Reliance Growth Fund March S. No.

Feb 2009 196.34 2. 81 . HDFC Mutual Fund had not this script into their portfolio. Kirloskar Brother Share’s Benefit Date Price Change % Change 28.15 31.41% increase in March month.91 Beta 0.7 95.18% exposure to this script.71 Bombay Dyeing shares have grown by 58. This means 48.78 2.7 Rs.87 0. In the same month HDFC Equity fund has given only 8.55 31. Feb 2009 31. Mar 2009 207.76 Change 22.35 596 Change 220.41 Kirloskar Brother Share price has risen from 196.11 12 13 14 15 Fertilizers Telecom Services Auto Auto Ancillaries Pesticides 2. Mar 2009 291.4%. Mar 2009 229.55 to 291.91% returns to investors in the month of March where market has boomed by only 8.87 Reliance growth fund has given 10.45 % Change 58.84 % returns.76% Reliance has 4.15 48.19 2.56 2.71% where the overall Sensex has grown only by 8. Bombay Dyeing Share’s Benefit Date 28.14 TABLE NAV Changed During the Month (GROWTH) Date NAV 1.61 % Change 10. Mar 2009 Price 375.

1 302.61% increase. 2004 82 .75 % Change 47.85 Rs which was 47. Feb 2009 31. Fund Manager : Dhawal Mehta Inception Date : September 17. Reliance has 2.04% exposure to this script. Core & Satellite Fund Nature of scheme : Open ended growth scheme Objective: To generate capital appreciation through equity investment in companies whose shares are quoting at prices below their true value.61 In the month of March JSW Steel has moved to 302. Mar 2009 Price 205.85 Change 97.JSW Steel Share’s Benefit Date 28.

6) 1.74 4. oct 2008 NAV Change % Change Beta 1.634.96 4. Infosys Technologies Ltd. 1 2 3 4 5 6 7 8 9 10 Company State Bank of India Bharat Heavy Electricals Ltd.No . Satyam Computer Services Ltd. Industry Banks Industrial Capital Goods Software Auto Software Consumer Capital Goods Industrial Capital Goods Non.73 7.17 6.83 7.34 5.95 7.72 100 TABLE NAV Changed During the Month (GROWTH) Date 1.892.481) (-8. Hindustan Construction Company Ltd. Hindalco Industries Ltd.07 61. ITC Ltd.22 4.27 4.03 17. Crompton Greaves Ltd.18 15.32 Change % change (-742) (-8.59) TABLE 83 .48 7. Tata Motors Ltd.Ferrous Metals Pesticides Construction Top 10 Holdings Others Equity Holdings TOTAL %To NAV 8. oct 2008 31.Core & Satellite Fund Portfolio Top 10 Holdings For October S.699 (-1.28 28.03 TABLE Compare returns with Sensex Movement Date 30-Sep-08 31-Oct-08 Closing 8. United Phosphorus Ltd.

Bharat Heavy Electricals Ltd. Hindalco Industries Ltd. Tata Motors Ltd. State Bank of India Infosys Technologies Ltd.65 6.18 5. Industry Software Industrial Capital Goods Auto Banks Software Industrial Capital Goods Construction Consumer Non Durable Non.87 0.2 TABLE Beta 0. 1 2 3 4 5 6 7 8 9 10 Company Satyam Computer Services Ltd. Crompton Greaves Ltd.04 28.Core & Satellite Fund Portfolio Top 10 Holdings For December S.15 4.397.5 5.35 5. No.87 Compare returns with Sensex Movement Date 30-Nov08 30-Dec08 Closing 8. Hindustan zinc Ltd.9 3 609 6. Dec 2008 17.21 5.33 6.92 TABLE Change % change Industry Wise Allocation 84 .72 100 To NAV Changed During the Month (GROWTH) Date NAV 1.822 Change 1.14 3.78 6. Hindustan Construction Company Ltd.8 1 9.542 30. ITC Ltd.Ferrous Metals Top 10 Holdings Others Equity Holdings Total % NAV 6.788.75 55.Ferrous Metals Non. Dec 2008 18.28 % Change 7.

18 5.43 Consumer Durables 1.03 10.29 Power 0.96 2.42 14.59 -0.15 4.12 8.33 5.76 9.42 Of December % Industry Industry Capital Goods Software Auto Ancillaries Banks Non-Ferrous Metals Auto Construction Consumer Non Durable Pesticides Industrial Products Chemicals Consumer Durables Of Allocation 21.73 -1.53 TABLE Oct-Dec month portfolio Industry Industry Capital Goods Software Auto Ancillaries Banks Non-Ferrous Metals Auto Construction Consumer Non Durable Change -0.11 85 .27 4.61 11.58 -0.89 6.October % Industry Industry Goods Software Banks Auto Ancillaries Non-Ferrous Metals Auto Pesticides Consumer Durable Construction Industrial Products Chemicals Non 5.07 2.36 -2.61 12.48 7.17 5.15 15.67 1.86 -0.75 7.12 1.71 Allocation Capital 22.94 2.84 -0.5 1.

27 0.12 2. Parry (India) Limited State Bank of India Bajaj Hindustan Limited Reliance Industries Limited Larsen & Toubro Limited Sterlite Industries (India) Limited Grasim Industries Limited % of NAV 7.18 4.Pesticides Industrial Products Chemicals Consumer Durables -0.89 3.I.35 3. Share Benefit Date Price Change % Change 31.98 2.85 31.2 TABLE Fund bought Hindustan Construction Ltd.18 3. shares. Oct 2008 853.41 0.98 TABLE 86 . No.49 3.38 3. Dec2008 127.12 0. ICICI Dynamic Plan January Portfolio S.14 TABLE Hindustan Construction Ltd.02 3.D. 1 2 3 4 5 6 7 8 9 10 Companies Deccan Chronicle Holdings Ltd Subex Systems Limited Hindalco Industries Limited E.

86% in January month.98% exposure of Sterlite which has grown 26. Jan 2009 44.28 TABLE Change % change 288.75 26. 87 .Industry Wise Allocation GRAPH NAV Changed During the Month (GROWTH) Date NAV 1. Jan 2009 Price 1074.7 5 1363.91 4.86 TABLE Fund has 2.4 5 Change 1. Jan 2009 31.91 0.68 31.83 % Change Beta 0. Jan 2009 42.51 Sterlite share's price Date 1.

14 3.01 TABLE Industry Wise Allocation 88 .21 3. Parry (India) Limited Larsen & Toubro Limited Grasim Industries Limited Hindalco Industries Limited Reliance Industries Limited Century Textiles & Industries Ltd Amtek Ltd.34 3.ICICI Dynamic Plan February Portfolio S. 1 2 3 4 5 6 7 8 9 10 Companies Deccan Chronicle Holdings Ltd Jain Irrigation Systems Limited Subex Systems Limited E. % of NAV 8.44 3.16 3.D.65 3. No.65 4.5 4.I.01 3.

Feb 2009 2.9 28. Feb 2009 46. Feb 2009 44.TABLE NAV Changed During the Month (GROWTH) Date NAV 1.22 Change 1.51 28.98 0.98 3.9 Nil % Change Nil TABLE Dynamic plan has 3. Feb 2009 2.64 Century textile share's price Date Price Change 1. ICICI Dynamic Plan March Portfolio 89 .14% exposure of this script which has grown by 0 % means its share price remained same during the month of February.71 % Change Beta 0.

No.17 4.98 3.7 3.97 2. Parry (India) Limited Tata Consultancy Services Limited Grasim Industries Limited Larsen & Toubro Limited TABLE % of NAV 7.31 5.93 Industry Wise Allocation 90 .89 3.46 3.18 2.D.S. 1 2 3 4 5 6 7 8 9 10 Companies Deccan Chronicle Holdings Ltd Reliance Industries Limited Triveni Engineering & Industries Ltd Jain Irrigation Systems Limited Subex Systems Limited Century Textiles & Industries Ltd E.36 3.I.

2009 46.9 31-Mar-09 5 Change % change 49 TABLE 64. CHAPTER-7 91 .95 Triveni share's price Date Price 1.95 2009 31.98% which has grown by 64.47 Fund has increased Triveni shares in portfolio to 4.GRAPHNAV Changed During the Month (GROWTH) Date NAV Change % Change Beta 1.35 7.95 125.42 TABLE 0.47% during March. Mar 2009 76.22 March 53.13 15. March 0.

by year 2010. • SEBI allowing the MFs to launch commodity mutual funds. some 24 million shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. FIIs continued to be positive on emerging markets in general and the Indian markets in particular. This good record of UTI became marketing tool for new entrants. Key Points: • • • • Almost 100% growth in the last 6 years. People rarely understood. We have some 70 mutual funds which are much less than US having more than 800. 'B' and 'C' class cities are growing rapidly. Soon they will find scope in the growing cities. But yes. In the last 5 years we have seen annual growth rate of 9%.4% during the rest of the decades.(excepting 2008) Our saving rate is over 30%. and of course investing was out of question. Today most of the mutual funds are concentrating on the 'A' class cities. highest in the world. people were miles away from the preparedness of risks factor after the liberalization. The annual composite rate of growth is expected 13. FIIs buying have considerable portion in mutual funds buying. 92 . The government is also helping in boosting mutual fund industry. The expectations of investors touched the sky in profitability factor. According to the current growth rate. Government is emphasizing a lot on infrastructure development and social spending and yet targeting a lower fiscal deficit. There is a big scope for expansion.Conclusion The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. However. Only channel zing these savings in mutual funds sector is required. mutual fund assets will be double.

What I see that most of the fund managers who are 93 . During last financial year investment habit of India has increased by and it is expected to grow by 30 % this year. 25 % Recommendations Studying the mutual fund industry I came to know that there are more then 700 types of funds available in the market.• • This year budget has increased the limit of investment in overseas market by mutual funds to 33-35%.

i thought of preparing my own portfolio by investing 25 percent in money market and the rest of the 75 percent in mid cap equity To provide investors with opportunities for long term growth in capital along with the liquidity of an open ended scheme by investing predominantly in a well diversified basket of equity stocks of companies and in debt and money market instruments.61 4.06 3. Nagarjuna Construction Company Ltd Thermax Limited Pantaloon Retail (India) Ltd.61 1.17 2.19 2.33 4. Crompton Greaves Ltd Welspun Gujarat Stahl Rohren Ltd Hotel Leela Venture Ltd Adlabs Films Limited Mangalam Cement Ltd Amtek Auto Ltd KEI Industries Elecon Engineering Company Ltd India Cements Ltd IVRCL Infrastructure & Projects Ltd. % of Net Assets 4.79 1.89 2.18 3.65 2. Equity Eastern Silk Industries Limited 3 i Infotech Limited.23 2.65 2.08 3.02 2.51 2..68 2. The portfolio is mentioned below:EQUITY Company Name Maharashtra Seamless Ltd Infotech Enterprises Limited Kesoram Industries Ltd Gitanjali Gems Ltd. Raymond Ltd Opto Circuit Ltd. KEC International Ltd.09 1.52 94 .67 1.investing in equity market are putting their funds into large cap funds which is of course more secure but it is giving less return to the investors.14 2.81 2.02 3.

66 0. Jagran Prakashan Ltd Rajshree Sugars & Chemicals Ltd Indo Asian Fuse Gear Ltd Sri Adhikari Brothers Television Network Ltd Global Vectra Helicorp Ltd Sagar Cements Ltd Bharati Shipyard PVR Ltd.46 1.78 0.09% 5.75 0.26 0.58 0.Software & Education Housing & Construction Textiles 7.65 0. Dwarikesh Sugar Industries Tanla Solutions Ltd Mahindra Ugine Steel Company Ltd Redington India Ltd.35% 1.18% 6.48 1.15 0.32 0.36 1.85% Allocation 8.3 0.97 0.37 0.93 0.17 0. Deepak Fertilizers & Petrochemicals Corp Ltd Usha Martin Ltd RPG Transmission Ltd Gujarat State Petronet Ltd. Suryalakshmi Cotton Mills Ltd Top Industry Allocation Industry Steel Computers .93 0. K E C Infrastructure Ltd.SKF Bearings India Ltd Crest Animation Studios Ltd Ansal Properties & Industries Ltd Gujarat Mineral Development Corporation Limited Lupin Ltd.28 0.30 0.16 0.15 95 .86 0.3 0.

44% 5.94 My Learning from PROJECT I have learnt many things which I might not be able to learn under class room training like looking at the stock market terminal and analyzing the stocks and thereby 96 .11% 4.57% 5.06 Debt 3.94% 5.63% 4.30% Money Market 25. Transmission & Equip Asset Allocation Equity 74.Diversified Electricals & Electrical Equipments Engineering & Industrial Machinery Entertainment Cement Power Generation.

some of banking product and transactions and some financial services offered by EDELWEISS Broking Ltd. But now I have good knowledge about Mutual Funds. I want to share some of experience or learning with you. • I also learnt about the risk factor calculation of the mutual funds. How the companies. how the various broking firms calculate the risk factors of various mutual funds. • I learnt about marketing elements also. Before this project I dint have much knowledge about Mutual funds.deducing about their performance and thus designing the portfolio on the basis of their performances. DMAT account. • I learnt about mutual funds as well as other products like insurance. banks and brokerage houses market their products in front of customer in presence of competitor’s products. • First and the most important I learnt about Mutual Fund Industry. IPO. 97 .

ANNEXURE 98 .

FACT SHEET OF THE EDELWEISS MUTUAL FUND 99 .

com  nseindia.  Business world 100 .com  mutualfundsindia.com  altavista.com  amfiindia.com Bibliography  Book on “Portfolio Management” by Press  Magazine “AAG” by HDFC Bank. April issue.com  icicidirect.com  investmart.Webography  hdfcfund.com  google.

M. Hindi. English. PowerPoint etc.C. P.B.M.C. (2010) Business Plan on ‘Cloud Computing’.5 YR–PASSOUT 2009-011 2007 2004 2002 MAJOR SUBJECTS Finance/Marketing P.0 60.Purvanchal . EDUCATION QUALIFICATION MBA (Finance/Marketing ) B. Hindi Science. Excel. PROJECTS • • I have completed Marketing Research on “Tata-NANO-Consumer Perception”.(Math) Intermediate High School UNIVERSITY/BOARD AMITY UNIVERSITY V.8 69.CARICULOUMN VITAE Nitesh Kumar Tiwari Village & Post-Imbrahimpur Bhadohi-221310 Mob:-+91 9336826902 E-mail Id:-nityaprabhat@gmail.University U.com CAREER OBJECTIVE To build a career with a leading organization with an environment comprising of committed and dedicated people. Sanskrit.Sc.BOARD U.S. SPECIALIZATION • • Marketing Finance COMPUTER SKILLS MS Word. So-Science. helping organizational and individual growth and develop my professional competence to the fullest.P.P. English. Math. BOARD %TAGE or CGPA 2nd Semester 57.(2010) 101 .

• Listening to music. • Attended MILITARY TRAINING CAMP at MANESAR. After Graduation (2007-09) in (Sankalp & 3-D Sikha Sansthan in Varanasi) Mr. EXTRA CURRICULAR ACTIVITIES • Led cleanliness and health awareness drives in my village • Volunteered in FRESHERS 2009-11 at AMITY UNIVERSITY. Ltd. GURGAON with an aim to further sharpen my team management and self-survival skills. French(Basic) WORK EXPERIENCE Taught Mathematics : • • REFEREE • During my Gradation (2004-07) in (∆+ Coaching center in Mirzapur). • Participated in Blood Donation Camp. 1987 Linguistic Abilities: Hindi. Anil Sharma Professor (Strategy & Finance) 102 . • Bathroom singing • Sketching Other Relevant Information: • • Date of Birth: 16th of December. English. Patience on most occasions. Good at communication skills. (For Australian Market)(2010) ACHIEVEMENTS • School prefect for class 11th & 12th.• International Marketing Plan for GITS food Product Pvt. Friendly Go getter Hobbies & Interests: • Traveling to new places. • Volunteered in I-VIEW SAMANVAY 2010 at AMITY UNIVERSITY. PERSONAL VITAE Strengths: • • • • • Quick Learner and adept at adapting to different conditions.

com 103 .Amity Business School Mob: +91-9415610158 E Mail: an_ils@rediffmail.

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