MONEY LAL

Rs. 1,00,000/- Rs. 1,00,000/-

After few years…

Rs. 2 lacs Rs. 2.5 lacs

Rs. 1,25,000/- Rs. 50,000/-
 Introduction
• What are Mutual Funds?
• Organisation of Mutual Funds
Brief History of Mutual Funds in India
 Basic Terms
• Asset Under Management (AUM)-The market value of assets
an investment company manages on behalf of investors

• Net Asset Value (NAV) - The market value of the assets of the
scheme minus its liabilities. The per unit NAV is the net asset
value of the scheme divided by the number of units
outstanding on the Valuation date

• Asset Management Company (AMC) - A company that invests

its clients' pooled fund into securities that match its declared
financial objectives.

• Unit Holder; Fund Manager & Dividend

Mutual Fund Cycle
 What is Net Asset Value (NAV)
• Assets
 Securities (S)
 Cash (C)
 Accruals (A)

• Liabilities (L)
• Net Asset Value = S+C+A–L
No. of units outstanding
Calculation of NAVs – Example
• Value of Securities = Rs. 1000
• Cash in Hand = Rs 1500
• Liabilities = Rs 500
• No Of Outstanding Units = 100
• NAV = (1000 + 1500 – 500) / 100
• Therefore NAV = 20 (Present Day)
 Entry Load and Exit Load
• Charge collected by MF for buying or
selling of units
• Entry load charged while buying a Unit
• Exit load charged while selling a Unit
• Some MF schemes are No Load Schemes
Calculation of Applicable NAV and No. of units purchased

Dheeraj Lal purchased Mutual Fund units worth

Rs. 10,000 at an NAV of Rs. 10 per unit on
February 1, 2004. The Entry Load on the Mutual
Fund was 2%. On September 15, 2004, he sold all
the units at an NAV of Rs 20. The exit load was
0.5%.

• Amount of Investment = Rs. 10,000

• Market NAV = Rs. 10
• Entry Load = 2% = Rs. 0.20
• Applicable NAV (Purchase Price) = 10 + .20 = Rs.
10.20
• Actual Units purchased = 10000 / 10.20 = 980.392
units
 Calculation of NAV at the time of Sale

• NAV at the time of Sale = Rs 20

• Exit Load = 0.5% or Rs.0.10
• Applicable NAV = 20 - 0.10 = Rs. 19.90 per unit

Returns/Growth on Mutual Funds

• Applicable NAV at the time of Redemption =

Rs. 19.90
• Applicable NAV at the time of Purchase = Rs. 10.20
• Growth/ Returns on Investment =
{(19.90 – 10.20/10.20) * 100} = 95.30 %
Returns Options and their effects on
NAVs

• Growth
• Dividend
Payout
Re-Investment
 Classification of Mutual Fund on structure

1) Close-ended Fund/scheme:
• Maturity period of 3-15 yrs
• NAV published weekly
• Subscription open for a specified period

2) Open-ended Fund/scheme:
• No lock-in or maturity period
• NAV published everyday
• Subscription available all through the year
MUTUAL INTERESTS
(Current fee structure of mutual funds)

Open-ended equity schemes

Entry load 2- 2.5
Annual recurring
1.75-2.5
expenses
Exit load 0.5 -1
Close-ended schemes
Initial issue
6
expenses*
Annual recurring
1.75-2.5
expenses
Unamortised
Exit load
expenses
*No entry load, amount is amortised over
a period.
(Figures in % of amount invested)
Investment based classification of
Mutual Funds

1)Equity Fund

2)Bond/Debt Fund

3)Balanced Fund
• Sector Funds
Power Fund:
Banking Fund:

• Theme Funds
Dividend Yield fund:
Index Fund
Infrastructure fund:
 RELIANCE POWER SECTOR FUND

NAV returns
Duration Percentage
1 week 5.19
1 month 17.41
6 month 56.30
9 month 52.78
1 year 97.09

Top 10 holdings
Company Percentage
 Crompton Greaves 11.15
Siemens Ltd. 10.31
 Jaiprakash Associates 7.81
 Torrent Power 6.85
 Jindal St & Pwr 6.29
 Reliance Energy Ltd. 6.20
 ABB Ltd 6.18
 Suzlon Energy Ltd. 5.92
 Cummins India Lt 5.78
 Reliance Natural Res 4.58
• Sector Funds:
Power Fund
Banking Fund

• Theme Funds:
Dividend Yield fund:
Index Fund
Infrastructure fund:
 RELIANCE BANKING FUND

NAV returns
Duration Percentage
1 week 3.83
1 month 14.39
6 month 44.16
9 month 42.0
1 year 57.08

Top 10 holdings
Company Percentage
+  SBI 16.79
+  Punjab. National Bank 9.54
+  Bank of Baroda 9.23
+  ICICI Bank 8.79
+  Federal Bank 5.76
+  Dena Bank 4.67
+  Oriental Bank of Commerce 4.16
+  IDBI Ltd 3.84
+  Bank of Maharashtra 3.73
+  South Indian Bank 3.54
• Sector Funds
Power Fund
Banking Fund

• Theme Funds:
Dividend Yield fund
Index Fund
Infrastructure Fund
 UTI DIVIDEND YIELD FUND
NAV returns
Duration Percentage
1 week 2.61
1 month 12.99
6 month 37.61
9 month 34.30
1 year 40.44

Top 10 holdings
Company Percentage
 NTPC 5.91
 ONGC 4.72
 Guj. Mineral Dev 4.59
 ICI India 3.98
 Tata Chemicals 3.73
 SBI 3.56
 NIIT Technologies 3.46
 Great Eastern Sh 3.43
 Indian Oil Corp 3.21
 Tata Power Co. 3.08
• Sector Funds
Power Fund
Banking Fund

• Theme Funds:
Dividend Yield fund
Index Fund
Infrastructure Fund
• Diversified Fund

• Tax Saving Fund (Equity-linked Savings

Scheme)
 Tax exemption under Section 80C

• Fund of Funds (FoF)

 Debt/Income Funds

• Liquid Fund:
 Invests mainly in Treasury bills, Inter-bank call money markets,
commercial paper & commercial debenture.
 Used for short-term cash management of corporate houses.
 Investment horizon of 1 day to 3 months

• Gilt Fund:
 Short Term
 Long Term
 RELIANCE GILT FUND

Objective:
“The primary investment objective of the Scheme is to
generate optimal credit risk-free returns by investing in a
portfolio of securities issued and guaranteed by the Central
Government and State Government.”

NAV returns
Duration Percentage
1 week 0.24
1 month 0.80
6 month 4.13
9 month 4.38
1 year 7.48
• Floating Rate Fund
 Investment substantially in Floating Rate Debt
Securities and Instruments.

• Monthly Income Plans

 Max. corpus in debt and minimal in equity
 Risk profile higher than other Debt fund
 Top 5 Players
Company Name AUM (in Rs. Cr.)

Reliance mutual fund 70440

ICICI Prudential mutual fund 50369

UTI mutual fund 45000

HDFC mutual fund 41333

Franklin Templeton mutual fund 30481

 Top 5 mutual funds across all categories

Company Scheme Annual

Returns
Reliance Mutual Fund Reliance Power Sector Fund 97.09

JM Financial Mutual JM Basic Fund 86.29

Fund

Standard Chartered Standard Chartered Premier Equity Fund 75.28

Mutual Fund

Principal Mutual Fund Principal Personal Tax-saver 75.28

DSP Merill Lynch DSP ML Technology.com 65.72

Mutual
Fund
 Returns for Mutual Funds

• Dividend on stocks, Interest on Bonds

• Capital Gain
• Increase in Holdings Value

• Section 10 of I.T. act deals with Tax on Income of

Mutual Funds
 Profits to the Investors/Unit Holders

Tax Implication on Gains/Profits

• Dividends Received
Dividend Income is tax free in hands of
Investor

Dividend Distribution Tax

 Dividend Distribution Tax

Other Non- Equity

Liquid Funds
Equity Funds Funds
DDT
New
Old New Old Old New
Rates
Rates* Rates† Rates* Rate Rate
†

12.50
Individuals/HUFs 25% 12.5% 12.5% NIL 0%
%

Others 20% 25% 20% 20% 0% 0%

• Profit - Gains on Sale/Redemption
a) Short Term – Less than 365 days
Clubbed to business Income

b) Long Term – After 365 days

- Exempted Income

Thus
Short Term – Dividend Payout
Long Term – Growth/Bonus Option
 Current trends

• Real Estate Mutual funds

• Mutual Funds and Derivatives

• Arbitrage Funds

• Oversees Investments by Mutual Funds

 Real Estate Funds
• Invest in real estates directly, or may fund real
estate developers or lend to them directly or buy
shares of housing finance companies or may
even buy their securitized assets.
• The funds are close-ended and their units will be
compulsorily listed on the stock exchanges. The
real estate mutual funds have to declare their
net asset value on a daily basis.
 The Urban Infrastructure
Opportunities Fund (UIOF)
- Anil Jain In 2006
- Invest in housing, retail malls and
multiplexes, IT parks and commercial
property across the country.
- Target return of 30% after Tax
- The minimum investment limit is Rs 1
crore for individuals, Rs 2.5 crore for
corporates and Rs 10 crore for banks and
financial institutions
 Mutual Funds and Derivatives
• February 1, 2000 – Mutual funds allowed to
participate in Derivative Trading
• Each mutual fund shall have a maximum
derivatives net position of 50% of portfolio
• Subject to gross exposure limits for
individual securities
• Basic purpose to allow hedging and
arbitrage opportunities and reduce risks
 Arbitrage Funds
• To generate income through arbitrage
opportunities between cash and derivative
market and arbitrage opportunities within the
derivative segment
• Performs Well in Volatile, Bearish Markets

• SBI Arbitrage Opportunities Fund

• Reliance Arbitrage Opportunities Fund
 Hedge Funds v/s Mutual Funds

• Mutual Funds Seek Relative Returns

A mutual fund's goal is to beat the index

• Hedge Funds Actively Seek Absolute Returns

A Hedge fund engages in more aggressive
strategies and positions
 Systematic Investment Plans & Mutual
Funds
Systematic Investment Plan (SIP) is a simple,
time-honored strategy designed to help
investors accumulate wealth in a disciplined
manner over the long-term.

• Power of Compounding
• Cost Averaging
• Convenience
• Timing the Markets
 Why invest in Mutual Funds??
• Diversification
• Economy of scale
• Divisibility
• Liquidity
• Flexibility
• Convenience
• Regulated Operations
• Professional
Management
• Higher Returns
• Tax Benefits
• Transparency
 The Flip Side….
• Fluctuating Returns
• Diversification?
• Cash, Cash and More
Cash!!!
• Costs (shareholders,
annual fund-operating)
• Misleading Advertisements
• Evaluating Funds
• No Tailor-made Portfolios
• Managing a Portfolio of
Funds
 US-64

• Launched in 1964; size of Rs.12778crore as on June

30, 2001
• July 2, 2001- DOOM!!!! 
Market 18,000…

Dheeraj Lal Himmat Lal

Rs. 2.25 lacs Rs. 1.5 lacs

 Disclaimer
• All securities and investments are subject to market risks
and there is no assurance and no guarantee that the
schemes objectives will be achieved.

• Past performance is not indicative of future performance

• All examples that we have mentioned are for the sole
purpose of our presentation and we do not suggest or
advise to invest in a particular scheme or fund

• All characters depicted are fictitious and bears no

resemblance to any person living or dead.
 THANK YOU

• DHAVAL DOSHI 102

• ROHAN JOSHI 114
• JAINEE PAREKH 130
• PANKEEL SOLANKI 155
• MIHIR VORA 161