INTRODUCTION

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INTRODUCTION :

A mutual fund is a trust that pools the saving of a number of investors who

share a common financial goal. The money collected invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

range from shares to depending upon the objective to the scheme. These could range

from shares to debentures to money market instruments.

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

financial scenario. Markets for equity shares, bonds and other fixed income

instruments, real estate, derivatives and other assets other assets have become mature

and information driven.

A mutual fund is the answer to all these situations. It appoints professionally

qualified and experienced staff that manages each these functions on a full time basis.

The large pool of money collected in the fund allows it to hire such staff at a very low

cost to each investor.

TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its

investment objective.

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BY STRUCTURE

1. Open –end funds :

An open-end fund is one that is available for subscription all

through the year. These do not have a fixed maturity. Investors can

conveniently buy and sell unit at Net Asset Value related prices

2. Closed-end funds :

A closed –end fund has a stipulated maturity period which

generally ranging from 3 to 15 years. The fund is open for subscription only

during a specified period. Investors can invest in the scheme at the time of the

initial public issue and thereafter they are listed. SEBI regulations stipulate that

at lest one of the two exit routes is provided to the investor.

3. Interval funds :

Interval funds combine the features of open-ended and close-

ended schemes. They are open for sale or redemption during pre-determined

intervals at NAV related prices.

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BY INVESTMENT OBJECTIVE:

Growth funds :

The aim of growth funds is to provide capital appreciation over the

medium to long term. Such schemes normally invest a majority of their corpus in

equities.

Income funds :

The aim of income funds is to provide regular and steady income to

investors. Such schemes generally invest in fixed income securities such as bonds,

corporate debentures and government securities.

Balanced funds :

The aim of balanced funds is to provide both growth and regular

income. Such schemes periodically distribute a part of their earning and invest both in

equities and fixed income securities in the proportion indicated in their offer

documents.

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Money market funds :

The aim of money market funds is to provide easy liquidity,

preservation of capital and moderate income. These schemes generally invest in safer

short-term instruments such as treasury bills, certificates of deposit, and commercial

paper and inter bank call money.

Load fund:

A load fund is one that charges a commission for entry to exit. That

is, each time you buy or sell units in the fund, commission will be payable. Typically

entry and exit load range from 1% to 2% . it could be worth paying the load, if the

fund has a good performance history.

No- load fund :

A no –load fund is one that does not charge a commission for entry or

exit. That is, no commission is payable on purchase or sale of units in the fund. The

advantage of a no load fund is that the entire corpus is put to work.

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CONSTITUTION OF THE MUTUAL FUND

1. SPONSOR

2. TRUSTEE

3. CUSTODIAN

4. TRANSFER AGENT

5. AMC (ASSET MANAGEMENT COMPANY)

SPONSOR

The sponsor is the promoter of the mutual fund. The sponsor establishes the mutual

fund and registers the same with the SEBI.

1. Sponsor appoints the trustees, custodians and the AMC with prior approval of

SEBI, and the AMC with prior approval of SEBI and it accordance with SEBI

regulations.

2. Sponsor must be carrying on business in financial services for a minimum

period of five Years

3. Net worth of sponsor is positive in all preceding five years.

4. Net worth in immediately preceding year is more than capital contribution to

AMC.

5. Sponsor must have been profit making in at least three of the immediately

preceding five years including the fifth year

6. Sponsor must contribute at least 40% of the net worth of the AMC.

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TRUSTEE:

The mutual fund, which is a trust, is managed either by a trust

company or a board of trustees. It is the responsibility of the trustees to protect the

interest of investors, whose fund is managed by the AMC .

The AMC and other functionaries are functionally accountable to the trustee.

The appointment of all trustees has to be done with prior approval of SEBI

There must be at least four members in the board of trustee and at least 2/3rd of

the regulations.

Trustees appoint the AMC, in consultation with the sponsor and according to

SEBI regulations.

Trustees can seek information from the AMC have to be approved and by

trustee

*Trustees can seek information floated by the AMC on the operation and compliance

of the mutual fund , with provision of the trust deed, investment management

agreement And SEBI regulations.

CUSTODIAN:

They are responsible for the securities held in the mutual fund’s portfolio. they

discharge in important back office function by ensuring that securities that bought

are delivered and transferred the books of the mutual funds, and the funds are paid out

when a mutual fund buys securities. They keep the investment account of the mutual

fund, and also collect the dividends and interest payments due on mutual fund

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investments. Custodian also track corporate actions like bonus issues, rights offers,

offer for sale, buy back and open offers for acquisition.

TRANSFER AGENT

They are responsible for the investor servicing functions, as they maintain the record

of investors in mutual funds. They process investor applications, record details

provided by the investors on application forms, send out to investors, details regarding

their Investment in the mutual fund, send out periodical information on the

performance of the Mutual fund, process dividend payout to investors, incorporate

changes in information as Communicated by investors and keep the investor record up

to date, recording new Investors and removing investors who have withdrawn their

funds.

AMC

The trustees on the advice of the sponsors usually appoint the AMC . the AMC is

usually a private limited company, in which the sponsor and their associates or joint

venture partners are shareholders. The AMC has to be a SEBI registered entity and

should have a minimum net worth of Rs.10 crore. The trustees sign an investment

management agreement with the AMC which spells out the functions of the AMC.

ADVANTAGES OF THE MUTUAL FUNDS

Professional management:

Mutual funds provide the service of experienced

and skilled professionals, backed by a dedicated investment research team that

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analyze the performance and prospects of companies and selects suitable

investments to achieve the objectives of the scheme.

Diversification:

Mutual funds invest in a number of companies across a broad cross

section of industries and sectors. This diversification reduces the risk because

seldom do all stocks decline at the same time and in the same proportion. You

achieve this diversification through a mutual fund with far less money than you

can do your own.

Convenient administration:

Investing in mutual fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokers and

companies, mutual funds save your time and make investing easy and convenient.

Return potential:

Over a medium to long –term, mutual funds have the potential to

provide a higher return as they invest in a diversified basket of selected securities.

This can be said substantially as various schemes of franklin templeton has

outperformed market in the matter of returns they have provided returns to

the55.74% fund..

Low costs:

Mutual funds are a relatively less expensive way to invest compared to

directly investing in the capital markets because the benefits of scale in brokerage,

custodian and other fees translate into lower costs for investors.

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Liquidity:

In open end schemes, the investors gets the money back promptly

at net asset value related prices from the mutual fund. In closed-end schemes, the

units can be sold on a stock exchange at the prevailing market price or the investor

can avail of the facility of direct repurchase at NAV related prices by the mutual

fund.

Transparency:

You get regular information on the value of your investment in addition

to disclosure on the specific investments made by your schemes, the proportion

invested in each class of assets and the fund manager’s investment strategy and

outlook.

. Flexibility:

Features such as regular investment plans, regular withdrawal plans

and dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience.

Affordability:

Investors individually may lack sufficient funds to invest in high

grade stocks. A mutual fund because of its large corpus allows even a small

investor to take the benefit of its investment strategy as all investors weather big

or small will be treated equally,

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Choice of schemes:

Mutual funds offer a family of schemes to suit your varying needs

over a lifetime. An investor can choose from among a number of scheme which

ever suit his or her need.

Regulated:

All mutual funds are registered with SEBI and they function

within the provisions of strict regulations designed to protect the interests of

investors. The operations of mutual funds are regularly monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS

No guarantees:

No investments are risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no matter how

balanced the portfolio. Investors encounter fewer risks when they invest in mutual

funds than they buy and sell stocks on their own. However, anyone who invests

through a mutual fund runs the risk of losing money

. Fees and commissions

All funds charge administrative fees to cover their day-to-day

expenses. Some funds also charge sales commissions or loads to compensate

brokers, financial consultants, or financial planners. Even if you don’t use a broker

or other financial adviser, you will pay a sales commission if you buy shares in a

load fund.

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Taxes:

During a typical year, most actively managed mutual funds sell

anywhere from 20 to 70 percent of the securities in their portfolios. If your fund

makes a profit on its sales, you will pay taxes on the income you receive, even if

you reinvest the money you made.

Management risk:

When you invest in a mutual fund, you depend on the fund’s manager

does not perform as well as you had hoped, you might not make as much money

on your investment.

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 dividend 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 due on unpaid assets

Expenses accrued but not paid.

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NEED FOR THE STUDY

Investment

“Investment is the employment of the funds on assets with the aim of earning income

or capital appreciation.” Investment has two attributes namely time and risk. Present

consumption is a sacrificed to get a return in the future. The sacrifice that has to be

borne is certain but the return in the future may uncertain. This attribute of investment

indicates the risk factor.

Speculation

“Speculation means taking up the business risk in the hope of getting short- term gain.

Speculation essentially involves buying and selling activities with the expectation of

getting profit from the price fluctuations”.

Portfolio Management

“The art and science of making decisions about: investment mix and policy, matching

investments to objectives, asset allocation for individuals and institutions, and

balancing risk vs. performance”.

“Portfolio management is all about strengths, weaknesses, opportunities, and threats in

the choice of debt vs. equity, domestic vs. international, growth vs. safety, and

numerous other trades-offs encountered in the attempt to maximize return at a given

appetite for risk”.

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Objectives

The main objective is to study and analyze:

Separate study on portfolio management

To study the role of securities in Indian financial markets

To study in detail the role of securities

To take decision of the holders regarding Risk , Return and a host of

other considerations

Franklin's Equity and Balanced Funds on various parameters such as

expense ration, standard deviation, beta and Sharpe ratio, vis-à-vis

another finds

Consumer awareness about mutual funds

The various parameters used by customers while taking the investment

decision and the most preferred parameter

Experience of existing customers

The market potential and

Customer awareness about Franklin Templeton

. Limitations

The study is purely for academic purpose

Direct contact with the companies was not made, but the published

information was collected.

The portfolios are of 2 securities.

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Limited number of funds being taken into consideration for study

Unavailabity of data. Difficulty hasbeenfaced in getting the historical

data.

Getting accurate response from customers.

DATA COLLECTION

Data is collected from the following sources:

Primary data collection

Mail Interviews

Personal Interview

Secondary Data Collection:

Internal Source :

Funds and Sheets

Company’s Literature

External Source :

Magazines

Journal

Internet

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METHODOLOGY

For the project performance analysis of equity mutual funds: Performance metrics of mutual fund has been understood

Study of schemes through fact sheet

Equity schemes are segregated into diversified, balanced and tax saving

Schemes, which are further classified into large cap and mid cap funds

For the purpose of comparison 5years performance period is selected

Return for 1,3&5years are calculates and cut off date taken of NAV is

31/05/2006 risk free rate of return is represented by 91 days T Bills rate of

5.32% for the project market survey:

Questionnaire is prepared and mail interviews conducted.

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Review of Literature

About Beta – Definition, Theory:

Definitions of BETA;

1. A quantitative measure of the volatility of a given stock, mutual fund, or portfolio,

relative to the overall market, usually the S&P 500. Specifically, the performance the

stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or

down. A beta above 1 is more volatile than the overall market, while a beta below 1 is

less volatile.

2. A measure of securities or portfolio's volatility, or systematic risk, in comparison to

the market as a whole. Also known as "Beta coefficient."

Notes:

Beta is calculated using regression analysis, and you can think of beta as the tendency

of a security's returns to respond to swings in the market. A beta of 1 indicates that the

security's price will move with the market. A beta less than 1 means the security will

be less volatile than the market. A beta greater than 1 indicates that the security's price

will be more volatile than the market. For example, if a stock's beta is 1.2 it's

theoretically 20% more volatile than the market.

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Many utilities stocks have a beta of less than 1. Conversely most high-tech NASDAQ-

based stocks have a beta greater than 1, offering the possibility of a higher rate of

return but also posing more risk.

BETA:

Beta describes the relationship between the stocks return and the market index returns.

This can be positive and negative. It is the percentage change in the price of the stock

regressed (or related) to the percentage change in the market index. If beta is 1, a one

percentage change in market index will lead to one percentage change in price of the

stock. If beta is 0, stock price is unrelated to the market index and if the market goes

up by a +1%, the stock price will fall by 1% beta measures the systematic market

related risk, which cannot be eliminated by diversification. If the portfolio is efficient,

beta measures the systematic risk effectively. On the other hand alpha and epsilon

measures the unsystematic risk, which can be reduced by efficient diversification.

More details of beta are discussed else where in the book.

Beta measures no diversifiable risk. Beta show how the price of a security responds to

market forces. In effect, of more responsive the price of a security is to changes in the

market, the higher will be its beta. Beta is calculated by relating the returns on a

security with the returns for the market. Market returns is measured by the averages

returns of a large sample of stocks, such as the S&P 500 stock index. The beta for the

overall market is equal to 1.00 and other betas are viewed in relation to this value.

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Betas can be positive or negative. However, nearly all betas are positive and most

betas lie somewhere between 0.4 and 1.9. Listed in Table 3-3 are the betas for some

stocks, as reported by value line in late 1993

Many large brokerage firms (such as Merrill Lynch) as well as subscription services

(such as value line) publish betas for a large number of stocks.

Investors will find beta helpful in assessing systematic risk and understanding the

impact of market movement can have on the return expected from a share turn over

the next year, a stock having a beta of 1.80 would be expected to provide a 10 percent

to experiences an increase in returns of approximately 18 percent (1.80*10%) over the

same period. This particular stock is much more volatile than the market as a whole.

Decreases in market return are translated into decrease security returns and this where

the risk lies. In the preceding example, if the market is expected to experiences a

negative return 10 percent, then the stock with a beta of 1.8 should experience a 18

percent decrease [1.8 times – 10]. Stocks having betas of less than 1 will, of course be

less responsive to changing returns in the market, and therefore are considered less

risky.

A quantitative measure of the volatility of a given stock, mutual fund, or portfolio,

relative to the overall market, usually the S&P 500. Specifically, the performance the

stock, fund or portfolio has experienced in the last 5 years as the S&P moved 1% up or

down. A beta above 1 is more volatile than the overall market, while a beta below 1 is

less volatile.

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FINDINGS

EQUITY DIVERSIFIED SCHEMES (LARGE & MID CAP FUNDS)

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ANALYSYS

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INDUSTRY PROFILE

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INDUSTRY PROFILE

The mutual fund industry is a lot like the film star of the finance business. Though it is

perhaps the smallest segment of the industry, it is also the most glamorous - in that it

is a young industry where there are changes in the rules of the game everyday, and

there are constant shifts and upheavals. The mutual fund is structured around a fairly

simple concept, the mitigation of risk through the spreading of investments across

multiple entities, which is achieved by the pooling of a number of small investments

into a large bucket. Yet it has been the subject of perhaps the most elaborate and

prolonged regulatory effort in the history of the country

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

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

UnitTrustofIndia, at the initiative of the Government of India and Reserve Bank the.

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

First Phase -1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set

up by the Reserve Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from

the RBI and the

Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit

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

management.

Second Phase -1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance

Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund

established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of

India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund

in June 1989 while GIC had set up its mutual fund in December 1990 at the end of

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

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993

was the year in which the first Mutual Fund Regulations came into being, under which

all mutual funds, except UTI were to be registered and governed. The Kothari Pioneer

(unmerged with Franklin Templeton) was the first private, mutual fund registered in

July 1993.

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

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

SEBI (Mutual Fund) Regulations 1996.

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The 1993 .SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual

fund houses went on increasing, with many foreign mutual funds setting up funds in

India and also the industry has witnessed several mergers and acquisitions. As at the

end of January 2003, there were 33 mutual funds with total assets of Rs. 1,

21,805crores. The Unit Trust of India with Rs.44, 541 crores of assets under

management was way ahead of other mutual funds

Fourth Phase - since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit

Trust of India with assets under management of Rs.29, 835 crores as at the end of

January 2003, representing broadly, the assets of US 64 scheme, assured return and

certain other schemes. The Specified Undertaking of Unit Trust of India, function in

under an administrator and under the rules framed by Government of India and does

not come under the purview of the Mutual Fund Regulations.

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

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

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

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

Conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of December 2007, there

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.

COMPANAY PROFILE

COMPANY PROFILE

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Introduction to India bulls

India bulls is India’s leading Financial and Real Estate Company with a wide

presence throughout India. They ensure convenience and reliability in all their

products and services. India bulls has over 640 branches all over India. The customers

of India bulls are more than 4,50,000 which covers from a wide range of financial

services and products from securities, derivatives trading, depositary services, research

& advisory services, consumer secured & unsecured credit, loan against shares and

mortgage & housing finance. The company employs around 4000 Relationship

managers who help the clients to satisfy their customized financial goals. India bulls

entered the Real Estate business in the year 2005 with its group of companies. Large

scale projects worth several hundred million dollars are evaluated by them.

India bulls Financial Services Ltd is listed on the National Stock Exchange

(NSE), Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The

market capitalization of India bulls is around USD 2500 million (29thDecember,

2006). Consolidated net worth of the group is around USD 700 million. India bulls

and its group companies have attracted USD 500 million of equity capital in Foreign

Direct Investment (FDI) since March 2000. Some of the large shareholders of India

bulls are the largest financial institutions of the world such as Fidelity Funds,

Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.

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India bulls Group is one of the top business houses in the country with

business interests in Real Estate, Infrastructure, Financial Services, Retail, Multiplex

and Power sectors. India bulls Group companies are listed in Indian and overseas

financial markets. The Net worth of the Group exceeds USD 3 billion. India bulls has

been conferred the status of a “Business Super brand” by The Brand Council, Super

brands India.

India bulls Financial Services is an integrated financial services powerhouse

providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance,

Asset Management and Advisory services. India bulls Financial Services Ltd is

amongst 68 companies constituting MSCI - Morgan Stanley India Index. India bulls

Financial is also part of CLSA’s model portfolio of 30 Best Companies in Asia. India

bulls Financial Services signed a joint venture agreement with Sogecap, the insurance

arm of Societé Generale (SocGen) for its upcoming life insurance venture. India bulls

Financial Services in partnership with MMTC Limited, the largest commodity trading

company in India, has set up India’s 4th Multi-Commodities Exchange.

India bulls Real Estate Limited is India’s third largest property company with

development projects spread across residential projects, commercial offices, hotels,

malls, and Special Economic Zones (SEZs) infrastructure development. India bulls

Real Estate partnered with Farallon Capital Management LLC of USA to bring the

first FDI into real estate. India bulls Real Estate is transforming 14 million sqft in 16

cities into premium quality, high-end commercial, residential and retail spaces.

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India bulls Real Estate has diversified significantly in the following business verticals

within the real estate space: Real Estate Development, Project Advisory &

Facilities Management: Residential, Commercial (Office and Malls) and SEZ

Development.

India bulls Securities Limited is India’s leading capital markets company with

All-India Presence and an extensive client base. India bulls Securities possesses state

of the art trading platform, best broking practices and is the pioneer in trading product

innovations. Power India bulls, in-house trading platform, is one of the fastest and

most efficient trading platforms in the country.. Indiabulls Securities Limited is the

first brokerage house to be assigned the highest rating BQ – 1 by CRISIL.

Growth of Indiabulls

Year 2000-01:

One of India’s first trading platforms was set up by Indiabulls Financial Services Ltd.

with the development of an in-house team.

Year 2001-03:

The service offered by Indiabulls was increased to include Equity, F&O, Wholesale

Debt, Mutual fund, IPO Financing/Distribution and Equity Research.

Year 2003-04:

In this particular year Indiabulls ventured into Distribution and Commodities Trading

business.

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Year 2004-05:

This was one of the most important years in the history of Indiabulls. In this

year:

India bulls came out with its initial public offer (IPO) in September 2004.

India bulls started its Consumer Finance business.

India bulls entered the Indian Real Estate market and became the first company

to bring FDI in Indian Real Estate.

India bulls won bids for landmark properties in Mumbai.

Year 2005-06:

In this year the company acquired over 115 acres of land in Sonepat for

residential home site development. The world renowned investment banks like Merrill

Lynch and Goldman Sachs increased their shareholding in Indiabulls. It also became a

market leader in securities brokerage industry, with around 31% share in Online

Trading. The world’s largest hedge fund, Farallon Capital and its affiliates committed

Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and

Indiabulls Housing Finance Ltd. In the same year, the Steel Tycoon Mr. L N Mittal

promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit

Services Ltd.

Year 2006-07:

In this year, Indiabulls Financial Services Ltd. was included in the prestigious

Morgan Stanley Capital International Index (MSCI). Indiabulls Financial Services Ltd.

was benefited with the Farallon Capital agreeing to invest Rs. 6,440 million in it. The

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company also received an “in principle approval” from Government of India for

development of multi product SEZ in the state of Maharashtra. Indiabulls Financial

Services Ltd acquired 100% of the equity share capital of Noble Realtors Pvt. Ltd.

Noble Realtors is a Company engaged in the business of construction and

development of real estate projects. Indiabulls Real Estate Business was demerged to

become a separate entity called Indiabulls Real Estate Ltd. The Board of Indiabulls

Financial

The Board of Directors

Sameer Gehlaut Chairman and CEO

Gagan Banga Executive Director

Rajiv Rattan CEO

Shamsher Singh Director

Aishwarya Katoch Director

Karan Singh Director

Prem Prakash Mirdha Director

Saurabh K Mittal Director

Amit Jain Company Secretary

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Senior Vice President

Regional Manager

Branch ManagerSenior Sales Manager

Support System Sales Function

RM/SRM

ARM

Local Compliance

Officer

Back OfficeExecutive

Dealer

Organization Structure- Board of Directors:

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Indiabulls Securities

Trading Products

Cash Account Intraday Account

Margin Trading

Trading Products of Indiabulls Securities

Indiabulls Securities provide three products for trading. They are

Cash Account

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Intraday Account

Margin Trading (Mantra)

Cash Account: It provides the client to buy 4 times of cash balance in his trading

account.

Intraday Product: It provides the client to buy 8 times of his cash balance in the

trading account.

Mantra Account: Also called as margin trading, is a special account to buy on

leverage for a longer duration.

The subsidiaries of India bulls Financial Services Ltd. include:

India bulls Capital Services Ltd.

India bulls Commodities Pvt. Ltd.

India bulls Credit Services Ltd.

India bulls Finance Co. Pvt. Ltd

India bulls Housing Finance Ltd.

India bulls Insurance Advisors Pvt. Ltd.

India bulls Resources Ltd.

India bulls Securities Ltd

India bulls Financial Services Ltd:

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India bulls Financial Services Ltd. was incorporated in the year 2005.The

Auditors of India bulls Financial Services Ltd. are Deloitte, Haskins & Sells. The main

activity of this company is in relation to securities and stock brokerage. It was also

responsible for setting up one of India’s first trading platforms. 

India bulls Financial Services is one of India’s leading and fastest growing

private sector financial services companies. India bulls Financial Services is an

integrated financial services powerhouse providing Consumer Finance, Housing

Finance, Commercial Loans, Life Insurance, Asset Management and Advisory

services. The company is focused on providing multiple financial services through an

extensive network of consumer touch-points covering Tier 1, Tier 2 & Tier 3 cities.

India bulls serves more than 500,000 customers across different financial products

through its branch network, call centers & the internet. It also ranks among the top

private sector financial services and banking groups in terms of net worth.

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DATA ANALYSIS

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RESEARCH METHODOLOGY

FUNDAMENTAL ANALYSIS

Economic Analysis

A wise man once said, “No man is an island”. No person can work and live in

isolation. External forces are constantly influencing and individual’s actions and

affecting him. Similarly, no industry or Company can exist in isolation. It may have

splendid managers and a tremendous product. However, Its sales and its costs are

affected by factors, some of which are beyond its control the world economy, Price

inflation, taxes and a host of others. It is important, therefore to have an appreciation

of the economic Factors that affect an industry and a company.

The political equation

A stable political environment is necessary for steady, balanced growth. If a

country is ruled by a stable government which takes decisions for the long-term

development of the country, industry and companies will prosper. On the other hand,

instability causes insecurity, especially if there is the possibility of a government being

ousted and replaced by another those hods diametrically different political and

economic beliefs. India has Benn going through a fairly rough period. There has been

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political instability since the late eighties-minority governments, political squabbles of

a petty nature, disturbing stands taken by governments to procure votes that resulted in

riots and the fall of a government, etnic and religious disturbances and a host of others

including the securities scam in which several well known figures were implicated.

All these, especially the Hindu Muslim disturbances and elections for locksaba and

rajyasaba. In short, the political stability of a country is of paramount importance. No

industry or company can grow and prosper in the midst of political turmoil.

Foreign exchange reserves

A country needs foreign exchange reserves to meet its commitments, pay for

its imports and service foreign debts. Without foreign exchange, a country would not

be able to import materials or goods and technology for its developments and there is

also a loss of international confidence in such a country. In 1991, India was forced to

devalue the rupee as our foreign exchange reserves were very low, barely enough for

few weeks imports. The crisis was averted at that time by an IMF loan, the pledging

of gold, and the devaluation of the rupee.

Foreign exchange risk

This is a real risk and one must be cognizant of the effect of a revaluation or

devaluation of the currency either in the home country or in the country the company

deals in. Devaluation in the home country would make the company’s products more

attractive in other countries. It would also make imports more expensive and if a

company is dependent on imports. A method by which foreign exchange risks can be

hedged is by entering into forward contracts, i.e. advance purchase or sale of foreign

exchange thereby crystallizing the exposure.

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Restrictive practices

Restrictive practices or cartels imposed by countries can affect companies and

industries. The United States of America has restrictions regarding the imports of

variety of articles such as textiles, automobiles and computer technology (software

and networking). Licenses are given and amounts that may be imported from

companies and countries are clearly detailed. Similarly, India has a number of

restrictions on what may be imported, and at what rate of duty. To an extent this

determines the prices at which goods can be sold. If the domestic industry is to be

supported, the duties levied may be increased resulting in imports becoming

unattractive. During the last decade Indian customs duties have been reduced

drastically. Imports are consequently much cheaper and this has affected several

industries.

Foreign debt and the balance of trade

Foreign debt, especially if it is very large, can be a tremendous burden on an

economy. India has to pay around $ 12 billion a year in principal repayments and

interest payments. This is not a small sum. This has been the price the country has

had to pay due to our imports being far in excess of exports and an adverse balance of

payments. A permanent solution will result only when the inflow of foreign currency

exceeds the outflow and it is on account of this that tourism, information technology,

exports and exchange earring/saving industries are encouraged.

Inflation

Inflation has an enormous effect in the economy. Within the country it erodes

purchasing power. As a consequence, demand falls. If the rate of inflation in the

country from which a company imports is high then the rate of inflation in the country

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from which a company imports is high then the cost competitiveness of the product

finally manufactured. Conversely, if the rate of inflation in the country to which one

exports is high, the products become more attractive resulting in increased sales. Low

inflation within a country indicates stability and domestic companies and industries

prosper at such times.

The threat of nationalization

The threat of nationalization is a real threat in many countries-the fear that a

company may become nationalized. With very few exceptions, nationalized

companies are historically less efficient than their private sector counterparts. If one is

dependent on a company for certain supplies, nationalization could result in supplies

becoming erratic. In addition, the fear of nationalization chokes private investment

and there could be a flight of capital to other countries.

Interest rates

A low interest rate stimulates investment and industry. Conversely, high

interest rates result in higher cost of production and lower consumption. When the

cost of money is high, a company’s competitiveness decreases.

Taxation

The level of taxation in a country has a direct effect on the economy. If tax rates

are low, people have more disposable income. In addition, they have an incentive to

work harder and earn more. And an incentive to invest. This is good for the

economy. It is interesting to note that in every economy there is a level between 35%

to 55% where tax collection will be the highest. While the tax rates may go up,

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collection will decline. This is why there it has been argued that the rates in India

must be lowered.

Government policy

Government policy has a direct impact on the economy. A government that is

perceived to be pro-industry will attract investment. The liberalization policies of the

Vajpay and Manmohan Singh Government excited the developed world and foreign

companies grew keen to invest in India and increase their existing stakes in their

Indian ventures.

Domestic savings and its utilization

If utilized productively, domestic savings can accelerate economic growth. India has

one of the largest rate of savings (32%). In USA, it is only 2% whereas in Japan it is

as high as 23%. Japan’s growth was on account of its domestic savings invested

profitably and efficiently. Although India’s savings are high, these savings have not

been invested either wisely or well. Consequently, there has been little growth. It is

to be remembered that all investments are born out of savings. Borrowed funds

invested have to be returned. Investments from savings leads to greater consumption

in the future. This has been recognized by the Government and it was in order to

divert savings to industry the 1992 Finance Act stipulated that productive assets of

individuals (shares, debentures, etc.) would not be liable for wealth tax.

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The infrastructure

The development of an economy is dependent on its infrastructure. Industry needs

electricity to manufacture and roads to transport goods. Bad infrastructure leads to

inefficiencies, poor productivity, wastage and delays. This is possibly the reason why

the 2000 budget laid so much emphasis, and offered so many benefits, to

infrastructural industries, such as power and transportation.

Budgetary deficit

A budgetary deficit occurs when governmental expenditure exceeds its income.

Expenditure stimulates the economy by creating jobs and stimulating demand.

However, this can also lead to deficit financing and inflation. Both these if not

checked can result in spiraling prices. To control and cut deficits governments

normally cut governmental expenditure. This would also result in fall in money

supply and a consequent fall in demand which will check inflation. All developing

economies suffer from budget deficits as governments spend to improve the

infrastructure – build roads, power stations and the like. India is no exception. Budget

deficits have been high. The government has, to reduce inflation, consciously cut

expenditure down and it has reduced from a high of around 15% two years ago to 7%

today.

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Monsoons

The Indian economy is essentially an agrarian one and it is therefore extremely

dependent on the monsoon. Economic activity often comes to a stand still in late

March and early April as people wait to see whether the monsoon is likely to be good

or not.

Employment

High employment is required to achieve a good growth in national income. As the

population growth is faster than the economic growth unemployment is increasing.

This is not good for the economy.

INDUSTRY ANALYSIS

An industry is a group of firms that have similar technology structure of production

and produce similar products. For the convenience of the investors, the board

classification of the industry is given in financial dailies and magazines.

This analysis based on industry life cycle, the industry life cycle theory is generally

attributed to Julius Grodensky. The life cycle of the industry is separated into four well

defined stages such as

Pioneering stage

Rapid growth stage

Maturity and stabilization stage

Decline stage

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Pioneering stage

The prospective demand for the product is promising to produce in this stage and the

technology of the product is low. The demand for the product attracts many producers

to produce the particular product. There would be severe competition and only fittest

companies survive this stage. The producers try to develop brand name, differentiate

the product and create product image. This would lead to non-price competition too.

The severe competition often leads to the change of position of the firm in terms of

market shares and profit. In this situation, it is very difficult to select companies for

investment because the survival rate is unknown.

Rapid growth stage

This stage starts with the appearance of surviving firms from the pioneering stage. The

companies that have withstood the competition grow strongly in market share and

financial performance. The technology of the production would have improved

resulting in low cost of production and good quality products. The companies have

stable growth rate in this stage and they declare dividend to the share holders. It is

advisable to invest in the shares of these growth stage companies.

Maturity and stabilization stage

In this stabilization stage, the growth rate tends to moderate and the rate of growth

would be more or less equal to the industrial growth rate or the gross domestic product

growth rate. Symptoms of obsolescence may appear in the technology. To keep going,

technological innovations in the products process and products should be introduced.

The investors have to closely monitor the events that take place in the maturity stage

of the industry.

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Decline stage

In this stage, demand for the particular product and the earnings of the companies in

the industry decline. Now –a-day very few consumers demand black and white T.V.

innovation of new products and changes in construct preferences lead to this stage.

The specific feature of the decline at a higher rate during the recession. It is better to

avoid investing in the shares of the low growth industry even in the boom period.

Investment in the shares of these types of companies leads to erosion of capital.

Factors to be considered

Apart from industry life cycle analysis, the investor has to analyze some

other factors too. They are as listed below

● Growth of the industry

● Cost structure and profitability

● Nature of the product

● Nature of the competition

● Government policy

● Labour

● Research and development

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COMPANY ANALYSIS

NAV Performance

Indiabulls Securities Flexi Cap Fund

First Month

Second Month

Third Mont

Six Month One Year

FIFCF (G) 1.33% 6.81% 30.36% 34.72% 48.47%FIFCF (D) 1.34% 6.83% 30.37% 34.74% 48.49%S&P C&X 2.98 % 8.94% 32.41% 32.21% 38.17%

SIP – If you had invested Rs. 1,000/- every month in FIFCF

1 Year Rs. 12,000 Since Inception would have grown to Rs.

23,000

FIFCF (Return) 14,139 34,659

FIFCF (Percentage) 34% 47%

S&P C&X Return 14,500 32,774

S&P C&X Percentage 36% 40%

Fund size = Rs. 3,642 Crores.

Fund Manager K.N. Siva Subramanyam

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