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A Project On Complete Analysis of Mutual Funds Of Bajaj Capital

(Submitted in Partial Fulfillment of the Requirements of Bachelor of Business Administration Program under Utkal University)

By Nani gopal sur 56317UT09079

Faculty Guide:
Biswajita das Faculty, ASBM Institute of BBA

Corporate Guide:
Branch Manager, Bajaj Capital, BBSR 1


This is to certify that Nani gopal sur, 56317UT09079, has successfully completed the project on Complete Analysis of Mutual Funds in Bajaj Capital Limited, Bhubaneswar from 18th May to 17th June 2010, for the partial fulfillment of BBA program of ASBM Institute of BBA prescribed by Utkal University.

Date: Place: (ASBM Institute of BBA)

I feel immense pleasure in presenting this report titled A Complete Analysis of Mutual Funds. This report has been prepared with the help of many people who have contributed their valuable ideas & suggestions in spite of their busy schedule. I express my whole heated gratitude to my esteemed guide Prof .Biswajita das for his precious guidance & necessary advice in preparing this report. I also express special vote of thanks & profound sense of gratitude to Mr. Sambit Mohanty, Brach Manager (Bajaj Capital) for his help & guidance during my study. I also extend my deepest gratitude to all officers working at Bajaj Capital who have cooperated with me in several ways which made possible to complete the study in time. Last but not the least; i would like thanks to my family & friends for their endless support & encouragement in completing my dissertation work.

Name: - Nani gopal sur Roll. No.:-56317UT09079


I Nani gopal sur, hereby declare that piece of project entitled A complete analysis of Mutual Funds at Bajaj Capital has been prepared by me as a topic of my dissertation work. It is also declared that this project report neither fully nor partially has been submitted to any other institute/university for the award of any degree of diploma. At last it need not be mentioned that i alone bear the responsibility of any shortcomings.

Name:-Nani gopal sur Roll.No:56317UT09079

Research is a systematic, self- critical enquiry. The enquiry is aimed at understanding a thing or phenomenon or solving a problem. So the following are some of the findings by some of the researchers:Indri, Kiang, Hun and Lee (1999) Mutual Fund Performance: Does Size Matter? In a different vein Indri, Kiang, Hun and Lee in Mutual Fund Performance: Does Size Matter? explore the question, Does size of the fund have any adverse impact on the performance of the fund? The authors explain that added economic value via 7 economies of scale can result from having the optimal amount of assets under management. However, high growth may create some cost disadvantages such as high impact costs, difficulty in exploiting information asymmetries and more administrative complexities. Research data for 683 funds (0993-1995), the authors show that three years returns increase as fund size increases and conclude that the optimal fund size for growth, value and blend funds is approximately $1.4 billion, $0.5 billion, and $1.9 billion respectively. Kon and Jen (1979) The Investment Performance of Mutual Funds: An Empirical Investigation of Timing, Selectivity and Market Efficiency Kon and Jen (1979), in The Investment Performance of Mutual Funds: An Empirical Investigation of Timing, Selectivity and Market Efficiency, employ several models of market equilibrium to evaluate stock selectivity performance when managers are also engaged in market timing. Using a sample of 49 mutual funds with different investment objectives, the null hypothesis of risk-level stationary and of constant selectivity performance are rejected for many individual funds. They report that some funds generate superior selectivity performance but that fund managers are unable to select securities well enough to recoup research expenses, management fees, and commissions. These findings are supported by Kon (1983) in The Market-Timing Performance of Mutual Funds Managers, who reports that a sample of funds produces better selectivity than timing performance. Similar results are reported by Chang and Llewellyn (1984) in Market-Timing and Mutual Fund Investment Performance. These authors jointly test for either superior market-timing or security-18 selection skills for a sample of 67 mutual funds during the 1970s. Using both monthly and quarterly returns series, they find that managers security selection abilities are significant in magnitude in only five instances out of 67, and three of these five have negative values.

Meaning of the study

Financial planning is a comprehensive framework of contingency planning, expense planning, tax planning, planning for risk and uncertainties and creation of wealth for meeting short and long-term objectives. By preparing this report, I want to show the performance of various mutual funds in India and which funds are performing better as compared to others. 5

If I had six hours to chop down tree; Id spend the first four hours sharpening the axe. -Abraham Lincoln As rightly stated by Abraham Lincoln, it is more important to plan your action rather than a haphazard action. This aptly applies to financial planning as well. It is important to take time and make a proper plan rather than making some random plan rather than making some random investments. Financial Planning is the continuous integrated process of goal setting, saving, insuring, investing and managing ones taxes in such a way that one achieves all his personal and financial goals in life and also review the progress and make necessary changes periodically. It is thus an exercise which one should start early in life and dedicate sufficient time and effort. However, it is never too late to start financial planning. What is most important is quantification of your goals in life and a disciplined approach towards fulfillment of these financial goals.

Objective of the study:

In this dissertation work, the research has made an attempt to study the existing performance of equity mutual funds in the market. The main objectives of the present study are as follows:The overall objectives of this project are as under: To know market status of equity funds in Indian market as well as in

international market.
To give an idea of the types of schemes available in the market.

To know performance of equity funds in the market from its origination. To know the cause of choosing equity funds by people for their future planning.
To know how equity funds work after the investment for the future.

To know the best equity fund available in the market for investment.

A Research is purely and simply the framework or plan for a study that guides the collection and analysis of data. A research is a blueprint that is followed in completing a study. It is a scientific inquiry. It is a process leading to discovery of facts, how they are related, etc. A scientific inquiry leads to growth of knowledge. Research is a systematic inquiry and has three essential characteristics i.e. objectivity, accuracy & continuity. Methodology has an important bearing on the collection of reliable information as well as on the outcome of the study. The categorization of the proposed investigation into certain type 6

of research, a corresponding method or methods for it and appropriate technique for collecting and analyzing data together known as Methodology of Research. Research design is a complete outline of the conduct of the proposed research study. It is a comprehensive statement on the problem and scope of the study, the purpose of undertaking it, the population and location to be covered for collecting information, the hypothesis formulated for the study and finally the methodology to be employed in it. The following methodology adopted in this project:


There were certain difficulties that were experienced by the researcher while conducting the study. The limitations were:The researcher alone conducted the entire study. So it was difficult on the part of the researcher to collect adequate data from each department and analyze it within such a short span of time. Being an outsider to the organization, it is not easy on the part of the researcher to collect information that were confidential to the organization and employees as confidentiality is one of the core values practiced at Bajaj Capital.. It was very difficult to collect more samples for opinion survey. However despite these limitations, the overwhelming co-operation and response of the employees in providing the much-needed information enabled the researcher to make the best out of the available data.


Bajaj Capitals Limited was incorporated in 1964 at New Delhi. It started as an investment consultancy company rendering advice for profitable investments in Company Deposits and Shares. Since then the organizations has grown by leaps and bounds, at present they have a network of 65 self-owned offices and thousands of Broker Associates spread across the country enable them to be one of the India's largest retail fund mobiliser for debit instruments. And in 34years , they have also became Indias best known corporate fund raiser in the shape of fixed deposits/debentures/bonds/units/mutual funds/gift-hedged securities, equity shares/interoperate corporate deposits etc. They are also providing Car finance, Insurance-both life and general, specialized NRI services, Financial Planning etc. services for our clients. They added a new dimension to the industrial finance in India in each in early 60's by innovating new financial instrument: Company Deposits. About 5,000 prospective investors daily visit our various offices throughout the country to seek our expert investment guidance. Bajaj Capital started its operations from New Delhi. After its success in New Delhi, it extended its activities to other metropolitan cities of India i.e. Bombay, Calcutta and Madras in order to cater to the needs of lakhs of investors and thousands of corporate clients. After its success in these metropolitan cities, Bajaj Capital opened offices in other important cities of India like Bangalore, Ahmedabad, Hyderabad, Luckhnow, Chandigarh ,Ghaziabad, Noida, Faridabad, etc.. In addition to its offices at these places Bajaj Capital has about 8,000 representatives Broker Associates in all the nooks and corners of India. In order to help its non-resident Indian investor clients, to make investments in corporate and other securities in India, Bajaj Capital has its associates in UK, i.e. Bajaj Capital (UK) Limited. Bajaj Capital has NRI clients in USA, UK, West Germany, Italy, Netherland, Denmark, Australia, Canada, France, New Zealand, Mauritius, Thailand, Singapore, UAE, Kuwait, Dubai, Egypt, Saudi Arabia, etc. and is providing them a complete range of services. Now after34 years of its working, Bajaj Capital is geographically present in all the nook s and corners of India and also has presence in important countries of world through its Broker Associates and Clients.

Wide range of services:Bajaj Capital offers a comprehensive range of services including financial planning and investment advice, and the entire gamut of financial instruments and investment products of almost all major companies, both public and private. In addition, they also provide investment assistance by helping one complete all the formalities, and help one keep regular track of your investments. Bajaj capital has more than 190 capital Investment Centers located all over the country.

Bajaj Capital is also a SEBI-approved Category I Merchant Banker. They raise resources for over 1,000 top institutions and corporate houses every year, and offer specialized services to Non-Resident Indian (NRIs) and High Net worth Clients. Bajaj Capitals Mission Statement:The focus of our organization is to be the most useful, reliable and efficient provider of Financial Services. It is our continuous endeavor to be a trustworthy advisor to our clients, helping them achieve their financial goals. Bajaj Capitals Aims: To serve our clients with utmost dedication and integrity so that we exceed their expectations and build enduring relationships. To offer unparalleled quality of service through complete knowledge of products, constant innovation in services and use of the latest technology.
To always give honest and unbiased financial advice and earn our clients' everlasting

trust. To serve the community by educating individuals on the merits of Financial Planning and in turn help shape a financially strong society. To create value for all stake holders by ensuring profitable growth. To build an amicable environment that accords respect to every individual and permits their personal growth. To utilise the power of teamwork to function as a family and build a seamless organisation. Milestones:The History of Bajaj Capital:Bajaj Capital has contributed to the growth of the Indian Capital Market at every step. In 1965, they were the first to innovate the Companies Fixed Deposit. Today, they are playing an active role in the growth of the Indian Mutual Fund industry. They are also working closely with private insurance companies to deepen India's insurance market. Here is a brief gist of their journey through the years:-

1964:- Bajaj Capital sets up its first 'Investment Centre' in New Delhi to guide individual investors on where, when & how to invest. India's first Mutual Fund, Unit Trust (UTI) of India is incorporated in the same year. 1965:- Bajaj Capital is incorporated as a company and in the same year innovate a new financial instrument Companies Fixed Deposits. EIL Ltd. (Oberoi Hotels, then known as Associated Hotels of India Ltd.) becomes the first company to raise Fixed Deposits. 1966:- Bajaj Capital expands its product range & includes all UTI schemes and Government saving schemes in addition to Company Fixed Deposits. 1969:- Bajaj Capital manages its first Equity issue (through an associate company) of Grauer & Wells India Ltd.; right from drafting the prospectus to marketing the issue. 1975:- Bajaj Capital starts offering need based investment advice to investors which would later be christened as Financial Planning in the investment world. 1981 :- SAIL becomes the first government company to accept deposits, followed by IOC, BHEL, BPCL, HPCL and others; thus opening the floodgates for growth of retail investment market in India. Bajaj Capital plays an active role in all the schemes as 'Principal Brokers' 1986:- Public Sector Undertakings (PSUs) start making Public issues of Bonds-MTNL, NHPC, IRFC offer a series of Bond Issues. Bajaj Capital tops ranking in most of them. 1987:- SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays a significant role in fund mobilization for all these players. 1991:- SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser with collections over US $ 20 million. 1993 :- The first private sector Mutual Fund Kothari Pioneer is launched, followed by Birla and Alliance in the following years. Bajaj Capital plays an active role and is ranked among the top mobilisers for all these schemes. 1995:- IDBI & ICICI start issuing their series of Bonds for retail investors. Bajaj Capital is Co-manager in all these offerings & rank constantly among top 5 mobilisers, on all India bases. 1997:- Private sector players lead the revival of Mutual Funds in India through Open-ended Debt schemes. Bajaj Capital consolidates its position as India's largest retail distributor of Mutual Funds. 1999:- Bajaj Capital starts marketing Life & General Insurance Products of LIC & GIC (through associate firm) in anticipation of opening up of the Insurance Sector. Bajaj Capital achieves milestone of becoming top Pension Scheme seller in India & launches marketing of Health insurance schemes of GIC 10

2000:- Bajaj Capital implements its vision of being a 'One-stop Financial Supermarket.' The Company offers all kinds of financial products, including the entire range of investment and insurance products through its Investment Centers. Bajaj Capital offers 'full-service merchant banking' including structuring, management and marketing of Capital issues. Bajaj Capital reinvents 'Financial Planning' in its international sense and upgrades its entire team of Investment Experts into Financial Planners. 2002:- The Company focuses on creating investor awareness for Financial Planning and need-based investing. To achieve this goal, the company introduced the International College of Financial Planning. The graduates of this institute become Certified Financial Planners (CFPs), a coveted professional qualification. 2004:- Bajaj Capital obtains the All India Insurance Broking License. Simultaneously, a series of wealth creation seminars are launched all over the country, making Bajaj Capital a household name. 2005:- Bajaj Capital launches 360 Financial Planning, a software-based programmer aimed at encouraging scientific and holistic investing. 2007:- Bajaj Capital launches Stock Broking and Depository (Demat) Services. 2008:- Bajaj Capital launches Just Trade, an online Platform for investing in Equities, Mutual Funds, and IPOs

Bajaj Capital's Specialty Service Groups:

PREMIER CLIENT GROUP offers Wealth Management Services for High Net worth Individuals. They offer tailor made investments Advisory and Financial Planning Services exclusively to meet the needs of high net worth individuals. Some of the additional services offered are: Value added service assignments. Dedicated relationship managers Periodic portfolio reviews. Regular updates of portfolio valuation Need-Based advice. FINANCIAL PLANNING GROUP offers comprehensive financial planning services for long term investors. They take a comprehensive approach to planning their future by including in each financial plan, solutions in all the following areas: Investment Planning Insurance Planning Cash Flow Budgeting 11

Goal Planning Tax planning Retirement planning


Bajaj Capitals Value Added Services: Regular Information Update - they keep their clients updated on the latest opportunities in the World of Investments. Need based Advice They give their clients customized advice only after understanding their needs and priorities. Research Based Advice Their professional research helps their clients with advice that is thorough and based on dynamics, Government policies and a close monitoring of global developments. Free investment health check They help their clients achieve their financial goals by assessing their risks tolerance level and recommend them a suitable asset allocation model. Door-to-door service They have a vast network of branches all over India, helping you to get services at your doorsteps. Regular Information They keep their clients updated on the latest opportunities in the world Of investments through their in-house publications. Accessibility They have branches spread out across India, covering almost every nook and Corner of the country. Tailor made Solutions Clients get easy transactions through our investment Centers even with a mere phone call. Specialization in all Client Segments - They offer Financial Planning for housewives, celebrities, professionals, ambassadors, army officers and others. 24-Hour Availability They are available to their clients 24 hours a day, on their websites, Bajaj Capital's in-house publications for Investors: Bajaj Capital Investors India - A monthly magazine, that helps their clients take the right decision in matters relating to investments, based on the principles of financial planning. Money Multiplying News - A fortnightly magazine that helps clients choose their best options available for them for investment. Investors Select Lists - A monthly list of the latest investment options covering all financial products like Company FDs, Equity Mutual Funds, Debt Mutual Funds, Insurance Schemes and others. Investment Outlook - A monthly research report that gives an overview of the debt and equity markets. Also gives a technical trend analysis of the market. Tax Planning Guide - An annual guide that educates the client how to avail certain exemptions, deductions, rebates, and relieves, in order to minimize their tax liability. Guide to Financial Independence - A practical financial guide on how to be financially independent. Voluntary Retirement Scheme Guide- A special guide that helps clients plan their finances according to their needs after they take voluntary retirement. 13





1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

Chairman Managing Director Vice President (operations & new projects) Director and Chief Executive Branch Channel Head(Executive V.P) Director & Head (Sub-Broker Division) Director & Head (Systems Developments) Financial Controller Manager (Institutional Investment) Company Secretary Manager (Money Market) Manager (Accounts & taxation) Manager (EDP) Manager (Administration) Manager (HRD) Regional Co-ordination Manager Regional Co-ordination Manager Regional Co-ordination Manager Regional Co-ordination Manager Regional Manager (South) Regional Manager (West) Regional Manager (East) Manager (Sub-Brokers Division)

Mr. K.K.Bajaj Mr. Rajiv Bajaj Mr. Sanjiv Bajaj Mr. Anil Kr. Chopra Mr. Venesh Menon Mr. Anurag Jain Mr. Ravi Kapoor Mr. B.B. Suri Mr. Vijay Pal Singh Mr. Raman Bawa Mr. Rampreet Singh Mr. P. K. Birla Mr. Rakesh Sharma Col. J. S. Oberoi Ms. Sunaina Motto Mr. Raj K. Dhall Mr. Rajiv Sharma Mr. R. S. Barthwal Mr. K. S. Rana Mr. George Thomas Mr. Harish Sabharwal Mr. Biman Chakravarty Mr. Manish Chopra


In this part of the project the procedure that is followed by me are as follows: Research design Sampling Data collection

So that when someone will read he/she can easily understand about the procedure.

Research design:
The type of research used by me to gather information or data for this project can be descriptive and analytical research.

Sample area:
The sample is collected from the staffs of Bajaj Capital ltd., Mastercanteen only.

Data collection: Primary Data:

Primary data was collected from the following sources: Questionnaire: Primary data can be collected through a questionnaire. It is one of the most common methods of collecting primary data. The questionnaire had been prepared for both the appraisers and appraises to access the performance appraisal system to cater to the needs of the researcher. The questionnaire is structured and consists of objectives questions. The opinion survey was undertaken on the spot visit.

Secondary Data:
Secondary Data on the organization was collected from various records, files and official documents & website of the organization. secondary sources like

The data collected was classified for presentation. It involved preparation of tables, graphs and diagrams to compare and study the relationship among variables. The presentation of data facilitates the analysis of data by applying statistical tools that further helps in interpretation of data.


Mutual Fund
Nowadays, Mutual funds have become a hot favorite of millions of the people all over the world. The driving force of mutual funds is the safety of principal guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or the dividend. People prefer mutual fund to the bank deposits, life insurance and even bonds because with a little money, they can get into the investment game. Thus mutual funds act as a gateway to enter into big companies hitherto in accessible to an ordinary investor with his small investment. The first mutual fund to be introduced in India was way back in 1963 when the Government of India launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund market till 1987 when a host of other government controlled Indian financial companies came up with their own funds.

What is a Mutual Fund? A Mutual Fund is a trust that pools together the savings of a number of investors who share a common financial goal. The fund manager invests this pool of money in securities -ranging from shares and debentures to money market instruments or in a mixture of equity and debt, depending upon the objectives of the scheme. Actually mutual fund collects the savings from small investors, invest them in Government and other corporate securities and earn income through interest and dividends, beside capital gains. It works on the principle of small drops of water make a big ocean. For instance if one has Rs. 1000 to invest, it may not fetch very much on its own. But when it is pooled with Rs. 1000 each from lot of other people, then, one could create a big fund large enough to invest in a wide varieties of schemes and debentures in order to enjoy a large scale operations. Hence a mutual fund is nothing but a collective form of investment. Each fund is divided into no. of units of equal value. Each investor is allocated in units in proportion to the size of their investments. Thus every investor whether big or small, will have stake in the fund and can enjoy the wide portfolio of the investment hold by the fund. It has emerged as a popular vehicle of creation of wealth due to high return, lower cost and diversified risk.

DEFINITION:The Securities and Exchange Board of India (Mutual Funds) Regulations, 1993 defines mutual fund as a fund established in the form of a trust by a sponsor, to raise monies by the trustees through the sale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations.

FUNCTIONS:The special objective or advantage of mutual fund is that it provides investors of small and moderate means the opportunity that is enjoyed by large, rich investors namely, to 16

realize high and secure rate of return on their savings. This is sought to be ensured by diminishing the risk of investing in stocks by spreading or diversifying investments over a large number of different kinds of stocks. The Unit trust helps (small) investors to obtain high return-low risk combination from their indirect holding of equities and other assets. ADVANTAGES:-

SL. No.

Advantage Portfolio Diversifica tion Profession al Manageme nt

Particulars Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small). Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own. Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid. Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator. Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch 17




Less Risk


Low Transactio n Costs Liquidity



Choice of Schemes


Transparen cy Flexibility


their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.





The schemes floated by MFs can be classified into different types based on location, duration of operation, major objectives, major financial instrument used for investment and so on.



1. Equity Funds Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket. In the order of decreasing risk level, there are following types of equity funds: a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds. b. Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future. c. Specialty Funds - Specialty Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some specialty funds could be to invest/not to invest in particular regions/companies. Specialty funds are concentrated and thus, are comparatively riskier than diversified funds. There are following types of specialty funds: i. Sector Funds: Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is less than 20



that of big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated by multiplying the market price of the company's share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky. iv. Option Income Funds: While not yet available in India, Option Income Funds write options on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. These funds invest in big, high dividend yielding companies, and then sell options against their stock positions, which generate stable income for investors.

d. Diversified Equity Funds - Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past. e. Equity Index Funds - Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectorial indices (like BSEBANKEX or CNX Bank Index etc.). Narrow indices are less diversified and therefore, are more risky. f. Value Funds - Value Funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earnings Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or specialty funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a 21

long-term time horizon as risk in the long term, to a large extent, is reduced. g. Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds. h. Open-Ended Funds:It is just the opposite of the closed ended funds. Under this scheme the size of the fund and the period of the fund are not pre-determined. The investors are free to buy and sell any number of units at any point of time. These fund are not publicly traded but re-purchase and resell facility is there with them. Since the units are not listed in the stock exchanges so their prices are linked to the NAV of the units. The NAV is determined by the fund and it varies from time to time. In a nutshell, the open-ended funds have a perpetual existence and their corpus is ever changing depending upon the entry and exit of the members. i. Income Funds:As the very name suggests, this fund aims at generating and distributing regular income to the members on a periodical basis. It concentrates more on the distribution of the regular income and it also sees that the average return is higher than that of the income from the bank deposits. This is best suited to the old and retired persons who may not have any regular income. It concerns itself with the short run gains only. j. Growth Funds:Unlike the income funds, growth funds concentrate mainly on the long run gains i.e. capital appreciation. They do not offer regular income and they aim at capital appreciation in the long run. Hence they have been described as Nest Eggs investment. This is best suited to the salaried and the businessman who have high risk bearing capacity and ability to defer liquidity. 2. Debt/Income Funds Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds that target high returns are more risky. Based on different investment objectives, there can 22

be following types of debt funds: a. Diversified Debt Funds - Debt funds that invest in all securities issued by entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor. b. Focused Debt Funds - Unlike diversified debt funds, focused debt funds are narrow focus funds that are confined to investments in selective debt securities, issued by companies of a specific sector or industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds. Because of their narrow orientation, focused debt funds are more risky as compared to diversified debt funds. Although not yet available in India, these funds are conceivable and may be offered to investors very soon. c. High Yield Debt funds - As we now understand that risk of default is present in all debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of "below investment grade". The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors. d. Assured Return Funds - Although it is not necessary that a fund will meet its objectives or provide assured returns to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in advance on the offer document). To safeguard the interests of investors, SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in returns. Eventually, government had to intervene and took over UTI's payment obligations on itself. Currently, no AMC in India offers assured return schemes to investors, though


possible. e. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closedend funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period. 3. Gilt Funds Also known as Government Securities in India, Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. Issued by the Government of India, these investments have little credit risk (risk of default) and also provide safety of principal to the investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction. 4. Money Market / Liquid Funds Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types. However, even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks). 5. Hybrid Funds As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. There are following types of hybrid funds in India: a. Balanced Funds - The portfolio of balanced funds include assets like debt securities, convertible securities, and equity and preference shares held in a relatively equal proportion. The objectives of balanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimizing the risk of capital erosion. Balanced funds are appropriate for conservative investors having a long term investment horizon. b. Growth and Income Funds - Funds that combine features of growth funds and income funds are known as Growth-and-Income Funds. These funds invest in companies having potential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than 24

growth funds and higher than income funds. c. Asset Allocation Funds - Mutual funds may invest in financial assets like equity, debt, money market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund managers to switch over from one asset class to another at any time depending upon their outlook for specific markets. In other words, fund managers may switch over to equity if they expect equity market to provide good returns and switch over to debt if they expect debt market to provide better returns. It should be noted that switching over from one asset class to another is a decision taken by the fund manager on the basis of his own judgment and understanding of specific markets, and therefore, the success of these funds depends upon the skill of a fund manager in anticipating market trends. 6. Commodity Funds those funds that focus on investing in different commodities (like food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds.

7. Real Estate Funds Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these funds is to generate regular income for investors or capital appreciation. 8. Exchange Traded Funds (ETF) Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad. 9. Fund of Funds Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual 25

fund schemes, like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non-financial assets. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks. However, the expenses of Fund of Funds are quite high on account of compounding expenses of investments into different mutual fund schemes.

Mutual fund schemes can be broadly classified into many as follows:

(1) Close-Ended Funds:Under this scheme the corpus of the fund and its duration are prefixed. In other words, the corpus of the fund and the number of units are determined in advance. Once the subscription reaches the pre-determined level, the entry of the investors is closed. After the expiry of the fixed period, the entire corpus is divested and the proceeds are distributed to the various unit holders in proportion to their holding. Thus the fund ceases to be a fund, after the final distribution. The main objective of this fund is capital appreciation. These units are publicly traded through the stock exchanges and generally there is no re-purchase facility. Generally the prices of this scheme unit are quoted at a discount of up to 40% below their NAV. (2) Open-Ended Funds:It is just the opposite of the closed ended funds. Under this scheme the size of the fund and the period of the fund are not pre-determined. The investors are free to buy and sell any number of units at any point of time. These fund are not publicly traded but re-purchase and resell facility is there with them. Since the units are not listed in the stock exchanges so their prices are linked to the NAV of the units. The NAV is determined by the fund and it varies from time to time. In a nutshell, the open-ended funds have a perpetual existence and their corpus is ever changing depending upon the entry and exit of the members. (3) Income Funds:As the very name suggests, this fund aims at generating and distributing regular income to the members on a periodical basis. It concentrates more on the distribution of the regular income and it also sees that the average return is higher than that of the income from the bank deposits. This is best suited to the old and retired persons who may not have any regular income. It concerns itself with the short run gains only.

(4) Growth Funds:Unlike the income funds, growth funds concentrate mainly on the long run gains i.e. capital appreciation. They do not offer regular income and they aim at capital appreciation in the long run. Hence they have been described as Nest Eggs 26

investment. This is best suited to the salaried and the businessman who have high risk bearing capacity and ability to defer liquidity. (5) Specialized Funds:Besides the above, a large number of specialized funds are in existence in abroad. They offer special schemes so as to meet the specific needs of specific categories of people like pensioners, widow etc. there are also funds for investment in securities in the specified areas. For instance, Japan Fund, South Korea Fund. In fact these funds open the door for foreign investors to invest on the domestic securities of these countries. Again these funds may be restricted to any particular sector like fertilizer, automobiles etc. these funds carry high risk since all the fund is invested in one industry.


Most mutual funds invest in stocks, and these are called equity funds. While mutual funds most often invest in the stock market, fund managers don't just buy any old stock they find attractive. Some funds specialize in investing in large-cap stocks; others in small-cap stocks and still others invest in what's left -- mid-cap stocks. "Cap" has nothing to do with hat size or what your spouse left off the tube of toothpaste (again). On Wall Street, cap is shorthand for capitalization, and is one way of measuring the size of a company -- how well it's capitalized. Large-cap stocks have market caps of billions of dollars, and are the best-known companies in the U.S. Smallcap stocks are worth several hundred million dollars, and are newer, up-and-coming firms. Mid-caps are somewhere in between. Mutual funds are often categorized by the market capitalization of the stocks that they hold in their portfolios. But how big is a large cap stock? Formulas differ, but here is one guideline: Small-cap stocks < Rs 25000 million Mid-cap stocks Rs 25000 million to Rs 250 billion Large-cap stocks > Rs250 billion
Equity fund managers usually employ one of three particular styles of stock picking when they make investment decisions for their portfolios. Some fund managers use a value approach to stocks, searching for stocks that are undervalued when compared to other, similar companies. Often, the market has beaten down the share prices of these stocks as investors have become pessimistic about the potential of these companies.

Another approach to picking is to look primarily at growth, trying to find stocks that are growing faster than their competitors, or the market as a whole. These funds buy shares in companies that are growing rapidly -- often well known, established corporations. Some managers buy both kinds of stocks, building a portfolio of both growth and value stocks. This is known as the blend approach. 27

Growth and Value Funds:

Every manager is different, but there are three broad archetypes when it comes to investment strategy: growth, value and blend. The issue here is whether the manager a. is willing to chase popular (expensive) stocks, hoping to cash in on their momentum; or b. is seeking to "discover" cheap stocks, betting that the market will discover them, too.

Growth Funds As their name implies, these funds tend to look for the fastest-growing companies on the market. Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with aboveaverage earnings momentum or price appreciation. For example, Dell and Microsoft are generally considered "expensive" stocks, because their prices have been bid high relative to their profits. But because they enjoy vibrant markets and have rapid earnings growth. But if the growth slows, watch out -- the more momentum a stock has, the harder it is likely to fall when the news turns bad. That's why growth funds are the most volatile of the three investment styles. It's also why expenses and turnover (which leads to tax liability) are also higher. For these reasons, only aggressive investors, or those with enough time to make up for shortterm market losses, should buy these spooky funds. Value Funds
These funds like to invest in companies that the market has overlooked. Managers like Marty Whitman of Third Avenue Value search for stocks that have become "undervalued" -or priced low relative to their earnings potential.

Sometimes a stock has run into a short-term problem that will eventually be fixed and forgotten. Or maybe the company is too small or obscure to attract much notice. In any event, the manager makes a judgment that there's more potential there than the market has recognized. His bet is that the price will rise as others come around to the same conclusion. Whitman, for instance, bought real-estate insurance company First American Financial early in 1997 before the Street discovered it. The stock rose 96% in 1998 and still traded at just 9.5 times the past 12-month earnings -- a steal when you consider the market average at the time was more like 22 times earnings. The big risk with value funds is that the "undiscovered gems" they try to spot sometimes remain undiscovered. That can depress results for extended periods of time. Volatility, however, is quite low, and if you choose a good fund, the risk of doggy returns should be minimal. Also, because these fund managers tend to buy stocks and hold them until they turn around, expenses and turnover are low. Add it up, and value funds are most suitable for more conservative, tax-averse investors. Blend Funds
These can go across the board. They might, for instance, invest in both high-growth Internet stocks and cheaply priced automotive companies. As such, they are difficult to classify in terms of risk. The Vanguard 500 Index fund invests in every company in the S&P 500 and could therefore qualify as a blend. But because it's also a large-cap fund, it tends to be steady.


The Legg Mason Special Investment fund is more aggressive, with heavy weightings in technology and financials. In order to determine if a particular blend fund is right for your needs, you'll probably have to look at the fund's holdings and make a call.

The Soft Distinction between Growth and Value Funds The primary mainstream funds include growth funds and value funds. In practice, there is a soft distinction between these two stock fund classes. While their short-term returns have varied from one period to another, their long-term returns have been fairly similar, a. On a year-by-year basis over an extended period, a slow cyclical pattern emerges in which first one type of fund leads the market, then the other. When the line is rising, growth funds are leading. When the line is falling, value funds are leading. Some further difficulty in distinguishing between these two basic types of funds is manifested in their portfolio holdings. The portfolio parallelism begins with Philip Morris, the largest holding in each fund group, but it hardly ends there. The overlap between the two columns confirms that the real-world similarities between the typical growth fund and the typical value fund are far greater than the differences. This process of mongrelization seems to have developed over the past decade. It means that the accepted broad definitions of equity fund categories are considerably less useful than each individual fund's specific investment characteristics. Large-Cap and Small-Cap Funds: Stock funds are often grouped by the size of the companies they invest in -- big, small or tiny. By size it is meant a company's value on the stock market: the number of shares it has outstanding multiplied by the share price. This is known as market capitalization, or cap size. Big companies tend to be less risky than small fries. But smaller companies can often offer more growth potential. The best idea is probably to have a mix of funds that give you exposure to large-cap, midsize and small companies. Large-Cap Funds
Large-capitalization funds generally invest in companies with market values of greater than $8 billion. Some, like the Vanguard 500 Index fund, merely mimic the index and invest in all 500 companies. Others, like Fidelity's huge Magellan fund, try to beat the index by picking a mix of large caps that will outperform the broader market. Large-cap funds are less volatile than funds that invest in smaller companies. Usually, that means one can expect smaller returns, but lately, large caps have outperformed all others. The last few years of the 1990s dished up an odd combination of economic stability in the U.S., but turmoil in Asia, Latin America and Russia. That made the stock market extremely volatile and convinced many investors to run for the relative stability of large, established companies like General Electric and Microsoft.

That may not always be the case, but for most investors, a large-cap fund is their core long-term holding, anyway. A good one is a reliable -- but far from stodgy -- place to park your retirement savings.


Mid-Cap Funds
As the name implies, these funds fall in the middle. They aim to invest in companies with market values in the $1 billion to $8 billion range -- not large caps, but not quite small caps, either. The stocks in the lower end of their range are likely to exhibit the growth characteristics of smaller companies and therefore add some volatility to these funds. They make the most sense as a way to diversify our holdings.

Small-Cap Funds
A small-cap fund, like Turner Small Cap Equity, will focus on companies with a market value below $1 billion. The volatility of the fund often depends on the aggressiveness of the manager. Aggressive small-cap managers will buy hot growth and technology companies, taking high risks in hopes of high rewards. More conservative "value" managers will look for companies that have been beaten down temporarily by the stock market. Value funds aren't as risky as the hot growth funds, but they can still be volatile.

Because of their volatility, small-cap funds require that we have enough time to make up for short-term losses. And as we saw during 1997 and 1998, there are times when the market turns away from small-cap companies altogether for extended periods. (Large caps have taken the spotlight lately due to extreme volatility in the markets; small caps, meanwhile, have floundered.) But that's no reason to abandon these funds. History would indicate that small companies will eventually regain favor as markets settle down. And when they do, they will likely grow more quickly than their larger cousins -- which can provide a good kicker for aggressive investors who need to build as much wealth as possible while they're young. Net Asset Value (NAV) The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention. Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below:-


Asset value is equal to

Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued - Amount due on unpaid assets- Expenses accrued but not paid

How does a mutual fund's NAV increase?

There are a couple of ways that a mutual fund can make money in its portfolio. (They're the same ways that your own portfolio of stocks, bonds, and cash can make money).

A mutual fund can receive dividends from the stocks that it owns. Dividends are shares of corporate profits paid to the stockholders of public companies. The fund might have money in the bank that earns interest, or it might receive interest payments from bonds that it owns. These are all sources of income for the fund. Mutual funds are required to hand out (or "distribute") this income to shareholders. Usually they do this twice a year; in a move that's called an income distribution. At the end of the year, a fund makes another kind of distribution, this time from the profits they might make by selling stocks or bonds that have gone up in price. These profits are known as capital gains, and the act of passing them out is called a capital gains distribution. Unfortunately, funds don't always make money. If the fund managers made some investments that didn't work out, selling some investments for less than the original purchase price, the fund manager may have some capital losses. Everyone hates to have losses, and funds are no different. The good news is that these losses are subtracted from the fund's capital gains before the money is distributed to shareholders. If losses exceed gains, a fund manager can even pile up these losses and use them to offset future gains in the portfolio. That means that the fund won't pass out capital gains to shareholders until the fund had at least earned more in profits than it had lost.


Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. these schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as tracking error in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds, which are traded on the stock exchanges. TOP 10 OPEN ENDED INDEX FUNDS Rank 1 2 3 4 5 6 7 8 9 10 Scheme Name HDFC Index Fund Sensex Plus Plan ICICI Prudential Index Fund Date Jun 18, 2010 Jun 18, 2010 NAVE (Rs.) 161.71 39.47 25.51 42.56 21.21 33.48 37.74 40.04 22.62 26.67 Last 12 Since Months Inception -1.29 -4.86 -6.5 -7.19 -7.34 -7.38 -7.38 -7.51 -7.52 -7.65 26.26 20.65 16.4 23.92 15.18 19.37 20.58 19.16 18.98 11.06

LIC MF Index Fund-Sensex Jun 18, 2010 Advantage Plan-Growth Birla Sun Life Index Fund-Growth ING Nifty Plus Fund-Growth Jun 18, 2010 Jun 18, 2010

Franklin India Index Fund-NSE Nifty Jun 18, 2010 Plan-Growth HDCC Index Fund-Nifty Plan Franklin India Index Sensex Plan-Growth Jun 18, 2010

Fund-BSE Jun 18, 2010 Jun 18, 2010 Jun 18, 2010

Canara Robeco Nifty Index Growth UTI Nifty Fund-Growth


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

TOP 10 OPEN ENDED SECTORAL EQUITY FUNDS Rank 1 2 3 4 5 6 7 8 9 10 Scheme Name Reliance Banking Fund-Growth Date Jun 18, 2010 NAVE (Rs.) 58.58 26.11 14.83 14.06 13.75 10.86 25.36 59.12 60.45 34.79 Last 12 Since Months Inception 17.22 15.02 7.39 5.79 5.01 4.12 3.06 1.54 1.4 1.16 33.82 19.94 7.75 11.2 10.43 3.67 20.26 -12.86 42.16 13.14

UTI Thematic Banking Sector Fund- Jun 18, 2010 Growth UTI Thematic Transportation and Jun 18, 2010 Logistics Fund-Growth Sahara Infrastructure Fund-Variable Jun 18, 2010 Pricing-Growth Sahara Infrastructure Pricing-Growth Fund-Fixed Jun 18, 2010 Jun 18, 2010 Jun 18, 2010 Jun 18, 2010

Taurus Infrastructure Fund-Growth Reliance Pharma Fund-Growth Reliance Pharma Fund-Grwoth

Reliance Diversified Power Sector Jun 18, 2010 Fund-Institutional-Growth UTI MNC Fund-Growth Jun 18, 2010


Diversified Equity Funds A mutual fund scheme that achieves the benefits of diversification by investing in the stocks of companies across a large number of sectors. As a result, it minimizes the risk of exposure to a single company or sector. Diversified equity fund is a fund, that seeks to invest only on equities, except for a very small portion in liquid money market securities, but is not focused on any one or few sectors or shares, may be termed a diversified equity fund. While exposed to all equity price risk diversified equity fund seek to reduce the sector or stock specific risk through diversification. They have mainly market risk expose. Such general proposal proposes but diversified funds are clearly at the lower risk lever than the growth funds.

TOP 10 OPEN-ENDED DIVERSIFIED EQUITY FUNDS Rank 1 Scheme Name Date NAVE (Rs.) 12.66 Last 12 Since Months Inception 26.04 25.94

Sundaram BNP Paribas Financial Jun 18, 2010 Services Opportunities Fund-RetailsGrowth Sundaram BNP Paribas Media & Jun 18, 2010 Enteret Opportunities Fund-RetailsGrowth JM Mid Cap Fund-Growth Jun 18, 2010




3 4 5 6 7 8 9 10

19.51 50.55 18.56 10.6 63.42 11.18 138.98 10.49

11.93 10.13 8.41 6.64 6.18 6.12 5.82 5.64

14.38 29.27 17.11 5.59 31.14 7.06 23.22 4.57

Birla Sun Life Dividend Yield Plus Jun 18, 2010 Growth UTI Opportunities Fund-Growth Jun 18, 2010

ICICI Prudential Focused Equity Jun 18, 2010 Fund-Institutional I-Growth Sahara Growth Fund-Growth Jun 18, 2010

Benchmark Equity And Derivative Jun 18, 2010 Opportunities Fund-Growth. HDFC Top 200-Growth Jun 18, 2010

ICICI Prudential Focused Equity Jun 18, 2010 Fund-Retail-Growth


ELSSEquity Linked Saving Scheme provides tax benefit to the investors. They operate like any other growth fund (and thats why are as risky). However, as investor in these schemes gets an income-tax rebate of 20 percent (for a maximum of Rs.10,000) under section 88. Essentially an incentive for the investor (who is otherwise investing in fixed income instruments like the Public Provident Fund primarily for saving tax on his or her annual salary or business income) a chance to participate in capital appreciation that can be delivered by investing in equity shares. Thats also why these schemes also come with a three-year lock-in period. Also while other tax planning schemes guarantee returns, an ELSS offers no such assurance.

TOP 10 OPEN-ENDED ELSS (TAX) FUNDS Rank 1 2 3 4 5 6 7 8 9 10 Scheme Name Sahara Taxgain-Growth Date Jun 18, 2010 NAVE (Rs.) 24.87 32.77 13.8 25.59 141.11 10.25 11.12 13.74 138.88 32.84 Last 12 Since Months Inception 3.86 0.92 0.06 -0.81 -1.34 -2.08 -2.2 -3.76 -3.87 -6.88 27.72 16.38 9.14 13.3 24.55 0.99 4.39 10.08 29.44 15.38

Sundaram BNP Paribas Taxsaver Jun 18, 2010 (Open Ended Fund) -Growth Reliance Tax Saver Fund-Growth Taurus Taxshield-Growth HDFC Taxsaver-Growth Jun 18, 2010 Jun 18, 2010 Jun 18, 2010

HSBC Tax Saver Equity Fund- Jun 18, 2010 Growth Religare Tax Plan-Growth Fidelity Tax Advantage Fund-Growth Franklin India Taxshield-Growth Franklin India Index Tax Fund Jun 18, 2010 Jun 18, 2009 Jun 18, 2010 Jun 18, 2010


Yearly return of equity mutual funds sector wise (Table-1)


INTERPRETATION: The above table shows return of sector-wise mutual funds in 2008 and 2009. In auto sector, both of the funds give better return in 2009 than 2008. This effect is done due to the upside of the automobile market in 2008. But the automobile sectorised mutual funds have given better result in comparison to its return in the equity market. In case of the banking sectors, 2008 was the more profitable than 2009, both in the equity sector and in the mutual fund industry. The banking sector faced a heavy loss in 2008. Thats why it affected the banking funds. Except the Allahabad Bank, no bank gave better return than the previous year. In case of the FMCG sector equity funds, one fund has given better result in 2009 and the other two funds had comparatively less return than 2008. And the index funds are depended on the index-SENSEX & NIFTY, and the stock market is volatile in its nature, some earned better return and others earned poor return.


Return of equity funds monthly, quarterly, half-yearly, yearly and in 3 years Funds, which gave good return as on 18th June 2009 (Table-2) Scheme Name Performance in different time periods (IN %) 1 Mths % 3 Mths% 6 Mths % 1 Yr % DBS Chola Mideap Fund- 10.74 75.78 50.27 -12.99 Growth JM Basic Fund-Growth 9.42 102.98 60.21 -37.34 JM Mid Cap Fund-Growth 10.70 70.54 76.56 11.93 JM Small & Mid-Cap 13.53 81.23 26.87 -58.12 Fund-Regular Growth Principal Junior Cap Fund- 8.90 91.77 68.49 -0.21 Growth Sahara Midcap Fund- 12.38 80.73 54.21 -7.75 Growth SBI Magnum Midcap 13.88 88.41 58.50 -24.90 Fund-Growth SBI Magnum Sector 14.94 89.94 55.77 -21.58 Umbrella-Emerging Business-Growth Sundaram BNP Paribas 9.26 81.24 50.01 -9.83 capex opportunities fundGrowth Taurus Infrastructure 16.15 108.5 77.74 4.12 Fund-Growth INTERPRETATION The Table-2 is showing the best equity funds return as per 1 month, 3 months, 6 months, 1 year and 3 years. From the above funds, TAURUS INFRASTRUCTURE FUND-GROWTH has the best return in 1 month, 3 months, and 6 months. In 1 year, JM MIDCAP FUND-GROWTH and in 3 years, SUNDARAM BNP PARIBAS CAPEX OPPORTUNITIES FUND-GROWTH is the best performer. But form overall point of view, all madcap funds have given the good return and all good performers are the growth funds. So, it is clear that mid-cap funds and growth funds are the good performers in the mutual fund field. Also the mid cap co.s are performing well in the recession time; they are also the good performers in mutual fund.

3 Yrs % 10.26 6.14 6.81 N/A 11.10 12.29 4.65 4.05




EQUITY FUNDS GIVING BAD RETURN Table-3 SCHEMES HDFC Arbitrage Fund-IPGrowth HDFC Arbitrage RetailGrowth ICICI Prudential Equity & Derivatives Fund-IO-IPGrowth ICICI Prudential Equity & Derivatives Fund-IORetail Growth IDFC Arbitrage Fund-Plan A (Regular)-Growth 1 month 0.19 0.18 1.07 3 months 1.17 1.11 1.23 6 months 3.08 2.95 3.10 1 year 7.36 7.10 6.58 3 years N/A N/A N/A











The above table shows the equity funds, which gave bad return. Two of the above table is arbitrage funds and the other twos are derivatives fund. As derivatives are related to the anticipation, and the security market is in the recession period, these funds are giving more and less return.


EQUITY FUNDS SECTOR WISE RETURN IN % PHARMA SECTOR Table-4 SCHEMES Franklin Pharma FundGrowth Reliance Pharma FundGrowth SBI Magnum Sector Umbrella-Pharma-Growth UTI Growth Sector FundPharma and Health care Growth 1 month 11.12 13.81 15.41 7.24 3 months 42.97 44.99 57.21 27.85 6 months 38.25 32.24 37.54 19.89 1 year -0.77 3.06 -22.95 -12.93 3 years 8.98 14.47 -4.85 5.85

INTERPRETATION In pharma sector, in 1 month and 3 months SBI MAGNUM UMBRELLA has the best return, in 6 months; FRANKLIN PHARMA FUND has the best return. But in long term periods, RELIANCE PHARMA FUND is the best. Pharma sector is the only sector, which is giving always a reasonable return to its customers, even in the recession period. Both in the share market and equity funds, it is not a looser. This sector is a trusted sector for investment. Ranbaxy, Dr. Reddys are giving reasonable return always in spite of slowdown. This also affects the pharma sector equity funds.


INFOTECT SECTOR Table-5 SCHEMES Birla Sun Life New millennium-Growth DSP Black Rock Technology-com FundReg-Growth Franklin Infotect FundGrowth ICICI Prudential Technology Fund-Growth Kotak Tech Fund Tata Life Sciences and Technology Fund-Appr.

1 month 5.47 10.19

3 months 56.75 53.89

6 months 32.50 32.36

1 year -26.23 -26.03

3 years 2.05 12.26

19.96 13.81 5.54 14.07

45.48 52.07 43.03 61.03

38.58 37.17 33.59 57.79

-21.53 -32.36 -25.09 -2.47

-2.13 -0.67 -6.25 9.32

INTERPRETATION Here, in 1 month, 3 months, 6 months and in 1 year performance, the TATA LIFE SCIENCES AND TECHNOLOGY FUNDS-APPR has the best return in 3 years; DSP BLACKROCK TECHNOLOGY COM FUND has the best return. As here given returns are the returns of the top performers of these sectors, it shows that this sector is not giving better return in comparison with other sectors.


BANKING AND FINANCIAL SERVICES SECTOR Table-6 SCHEMES JM Financial Services Sector Fund-Growth Reliance Banking FundGrowth Reliance Banking FundIP-Growth Reliance Banking FundGrowth Sahara Banking and Financial Services FundGrowth Sundaram BNP Paribas Financial Services Opportunities Fund-RetGrowth 1 month -0.10 -1.87 -1.87 0.51 0.42 3 months 44.15 79.19 79.19 65.97 86.82 6 months 1.23 42.54 42.54 29.63 72.72 1 year -32.52 17.22 N/A N/A N/A 3 years N/A 32.49 N/A N/A N/A






INTERPRETATION In one month, return of all is below 1. In 3 months and 6 months SAHARA BANKING AND FINANCIAL SERVICES FUND has the highest return. In 1 year, SUNDARAM BNP PARIBAS FINANCIAL SERVICES FUND is the best and in 3 years, there exists only RELIANCE BANKING FUND and it also gave good return 32.49%. So, overall SAHARA BANKING AND FINANCIAL SERVICES FUDN is the better scheme in banking and financial service sector. This sector is going in loss now. No bank except Allahabad Bank gave better result in 2008. Though SBI and some other banks have given reasonable return 2009, banking sector funds are still giving negative return. Here it can be seen that in 3 month return, they have given good result, but in one month, their return is poor, because currently fall of banking stocks. So current return are below 1.


INFRASTRUCTURE SECTOR Table-7 SCHEMES 1 month AIG Infrastructure and 5.97 Economic Reform FundIP-Growth Birla Sun Life 3.31 Infrastructure Fund-Plan A-Growth Canada Robeson 1.463 Infrastructure FundGrowth ICICI Prudential Banking 0.62 and Financial Services Fund Retail-Growth ICICI Prudential FMCG- 7.86 Growth ICICI Prudential 0.39 Infrastructure Fund-FII Growth ICICI Prudential 0.34 Infrastructure FundGrowth Sahara Infrastructure 6.95 Fund-Variable pricingGrowth Taurus Infrastructure 16.15 Fund-Growth Tata Infrastructure Fund- 2.82 Growth

3 months 63.95

6 months 44.65

1 year -9.41

3 years N/A













22.64 46.45

14.76 34.85

-21.80 -6.38

4.94 N/A









108.05 59.97

77.74 41.26

4.12 -12.19

N/A 17.83

INTERPRETATION As per the above table, TAURUS INFRASTRUCTURE FUND is the leader, which is giving the best return, but in long term periods (1 year and 3 years); SAHARA INFRASTRUCTURE FUND is the best player. The infrastructure sector has the growth period now and it is the sector, which is giving the best return in the equity funds. Infrastructure funds are also the leaders in the overall equity funds. AMCs are now introducing more and more NFOs in this sector.


TAX SAVING SCHEMES Table-8 SCHEMES Bharti AXA Tax Advantage Fund-EcoGrowth Bharti AXA Tax Advantage Fund-RegGrowth Birla Sun Life Tax PlanGrowth Birla Sun Life Tax Relief 96-Growth Canara Robeco Equity Taxsaver-Grwoth DBS Chola Taxsaver Fund-Growth ICICI Prudential TaxplanGrowth ING Tax Saving FundGrowth JM Tax Gain FundGrowth Sahara Taxgain-Growth

1 month 2.07

3 months 66.16

6 months N/A

1 year N/A

3 years N/A






4.53 2.15 1.82 5.15 7.48 7.81 7.94 6.81

53.01 67.43 68.61 70.93 61.05 60.49 55.17 58.82

37.30 48.35 N/A 49.42 46.06 45.31 33.08 42.78

-12.71 -10.13 N/A -9.70 -12.52 -25.03 -35.34 3.86

N/A N/A N/A 5.81 7.01 1.34 N/A 16.76

INTERPRETATION This table shows the tax saving schemes return. In 1 month, ING TAX SAVING FUND is the best return giver. In 3 months and 6 months, DBS CHOLA TAXSAVER is the best player. But in long term period both in 1 year and 3 years, the SAHARA TAXGAIN GRWOTH FUND is the fund which gave the highest return. Though most of them are the new comers in the market, but SAHARA TAXGAIN is the best player in the tax saver schemes.


1. What do you do? Service (60)



other (10)


2. What is your income ?(p.a) <100000 (15) 100000-150000 >300000(20)



150000-300000 >300000







A conscious effort was made by me to know people from different income level. It can be seen in the pie chart that only 15 % of the people surveyed were from the lower tax bracket. This has been done to ensure that the people on whom the survey is done have some money to spare or have enough disposable income to invest in mutual funds .In this survey I came to know that most of them are able to invest in mutual fund , but proper guidance and awareness about mutual fund is required.


3. Have you heard of mutual funds and its benefits? Yes (75) No (25)

25% YES NO 75%

A majority of the people surveyed had already invested in mutual funds. Around 75 % of the people surveyed heard about mutual funds. But many of them did not even remember in which scheme they had invested. They had to take a while to think which company they have invested. This is mainly because of their ignorance about mutual fund investment. Though they have invested they did not know about the pros and cons of investing in mutual fund. They were just like immature investors. 4. Are you satisfied with the returns you are getting from mutual funds Yes (60) No (5) So-so (10) cannot say (25)

60 60 50 40 30 20 10 0 5 10 25

From the above I came to know those who are invest in proper funds knowing properly about them get satisfied returns but those who are not invest properly not get such benefits . So before investment proper guidance and proper knowledge about the fund required to get the actual benefit.



How do you describe your investment decisions #Good (60) #very good (20) #not so bad (10) so-so (10)

60 60 50 40 30 20 10 0 1 20 10 10

From my survey I came to know that most people are good investor according to the market situation they invest their fund in diversified ways. Most of them invest in all the four categories which is proper investment according to the market. 6. In this current marketing situations where do you like to invest #Mutual funds (40) #share trading (20) #insurance (10) #fixed deposits (30)

40 40 30 20 10 0 30 20 10

Though 30 % (which is a big percentage) of the people want to invest in fixed deposits not mutual funds, but this is seen in a different angle we can see that 40% of the people surveyed would like to invest in mutual funds. Majority of the people would like to invest 0-15 % of the money they have for investment in mutual funds. But 20 % people are willing to invest 15-45% of their investment amount in mutual funds. This is a very big market and if this can be tapped then this can be really profitable for the organization.


If in mutual funds then a. which type of fund #Debt fund (5)

#equity fund (30)

#mixed fund (65)


35% 60%

b. what is the return you generally expecting #just more than FD (20) #10-15% (15) #15-25% (40) #25-50 %( 25) #more than 50%
50 40 30 20 10 0 40 20 25 15 0 JUST 10-15 % 1 5-25 % 25-50 % MO RE MO R E T HAN T HAN F D 50%

c. what you think the future of mutual funds in India


#Good (50)

#very good (30) #better than ever (20)






d. May I know which will describe you better while investing Conservative (20) aggressive (25) neutral (45) I just invest with the words of executive (10) 10%








Equity funds are the funds having both high risk and high return. Pure equity funds are volatile in nature. Growth equity funds are giving good return. Mid cap equity funds are also giving good return Sectorial equity funds have also high risk; high return and they can be volatile as the share market.

Though equity funds have risk, they are still giving better return and also the preference of the mutual fund holder.

In 2007 and 2008, diversified equity fund were the best preferences, but now it is the equity funds has the better market.



From this above survey I came to know that many people are not aware about mutual funds and their benefits. Those who invest in mutual funds also not know properly about its different schemes. Here I would like to state some points which I feel that if Bajaj Capital seriously works it will definitely help in improving its market share. Make awareness camps to make people know about the various financial plans. Instead of just selling financial products, an effort should be taken to make the people understand what the benefits of such an investment are. I just captured small portion of the market through my survey. A detailed study about the market should be carried out to tap the market in a better way. Arrange for camps by taking appointments from the people who actually wanted to undergo a training program on self-financial planning.

Make frequent visits to people in the intermediate level of income and ask about their
investment plans and keep a track about it.


The Mutual fund industry is on uprising moment. It has a good prospect in our country. Due to the pure volatility in the stock market, people are now looking for the mutual fund market for their big investments. As share market has high risk high return, and people are looking for high return but with safety, they choose mutual funds and mainly the equity funds those are giving better return in the market. As People have better knowledge about the share markets, they are choosing equity funds for their investment, but I have done my research in an analytical view, thats why Im presented the analysis for what people should choose the equity funds for their investments. The NFOs are entering the market, mainly based on the infrastructure sectorised funds. The equity funds are the only market, in which more and more types of funds can be created as per the situations. Now global funds, which contain the investment in foreign co.s are a new concept of equity funds Though equity funds are not always affected by the stock market, but it can be affected by its volatility. So, the investors should have better knowledge about the portfolio of the funds before investing in it . It is no doubt that equity funds have a bright future in Indian Investment Market and it is now is in the way of the excellence.



1. 2. 3.




QUESTIONAIRE Dear Sir I am Nani gopal Sur, Be, student of ASBM Institute of BBA pursuing my graduation. For the completion of the course I am required to prepare a project on Complete Analysis of Mutual Funds for academic purpose. For the completion of the project I need your cooperation and valuable five minutes to fill in the questionnaire. 1. What do you do? a. Service b. business c. other___________________ 2. What is your income? (p.a) a. 100000 b. 100000-150000 c. 150000-300000 d. >300000 3. Do you have any fixed deposits and where? a. Yes b. no c. & __________________(Name please) 4. What is the return you are getting there? (In %) ________________________________________________________________ ________________________________________________________________ 5. Have you heard of mutual funds and its benefits? a. Yes b. no c. & where______________(Name please) 6. Are you satisfied with the returns you are getting from mutual funds a. Yes b. no c. so-so d. cannot say 7. Do you have any share(s) and how do u got them? a. Yes b. no c. if yes from IPO or open market. 8. How do you describe your investment decisions a. Good b. very good c. not so bad d. bad 9. In this current marketing situations where do you like to invest a. Mutual funds b. share trading c. insurance d. fixed deposits e. others 10. If in mutual funds then a. which type of fund Debt fund equity fund mixed fund b. what is the return you generally expecting just more than FD 10-15% 15-25% 25-50% more than 50% c. what you think the future of mutual funds in India Good very good better than ever bad very bad d. May I know which will describe you better while investing Conservative aggressive neutral I just invest with the words of executive. 11. Have you heard of Bajaj Capital and the services provided by Bajaj Capital? a. Yes b. no 53

12. Are you friendly to the capital market a. Yes b. no c. just heard of it d. other__________________ 13. May I have your Address: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ ph. no. ______________________ email: _______________________________