AN ANALYTICAL STUDY ON INVESTMENT

PERFORMANCE OF EQUITY LINKED SAVINGS SCHEME

Dissertation submitted in partial fulfillment of the requirements for the

Award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Of

BANGALORE UNIVERSITY

By

Lovin Easo Varkey

Reg. No. 11JJCMA049

Under the guidance of

Prof. Aloysius Edward J

Department of Management Studies

KRISTU JAYANTI COLLEGE OF MANAGEMENT AND TECHNOLOGY

K.Narayanapura

Kothanur post

Bangalore - 560077

CERTIFICATE

It is certified that the Project entitled ‘A study on investment performance of Equity Linked

Savings Schemes’ is an original study carried out by Lovin Easo Varkey; 11JJCMA049 is

being submitted in partial fulfillment for the Award of the Degree of Master of Business

Administration of Bangalore University. The report has not been submitted earlier to any

University / Institution for the fulfillment of the requirement of a course of study.

Prof. Aloysius Edward Dr. Justin Nelson Michael Rev. Fr. Sebastian T.A. Research Guide Head Principal

Dept. of Management Studies Bangalore Date:

DECLARATION I, Lovin Easo Varkey, hereby declare that the Project entitled ‘A study on investment

performance of Equity Linked Savings Schemes’ is an original study carried out by me. The

Report does not form a part of any other work submitted to any University / Institution for the

award of any degree, diploma, associateship or other similar title.

Lovin Easo Varkey

Bangalore 11JJCMA049 Date:

ACKNOWLEDGEMENTS

At the successful completion of my project I would like to extend my gratitude to all those, without

whose valuable guidance and support it would have not been possible. I would first thank God Almighty

for giving me the wisdom and strength to undertake and complete this project. With all sincerity and

respect, I would like to express my gratitude to Fr. Sebastian T. A., Principal, Kristu Jayanti College, for

giving me an opportunity to have a platform to this project.

I also owe my gratitude to my internal guide Prof. Aloysius Edward, Department of Management, Kristu

Jayanti College of Management & Technology, for his support and assistance for the completion of this

project.

I thank all the faculty of Department of Management Studies whose contribution has helped in

completion of study. I like to extent m thanks to the Librarian of Kristu Jayanti College who helped in

locating various books and journal which was necessary for the completion of this study.

I affirm my renewed thanks to everyone who one way or the other helped me to complete this project .I

deeply acknowledge every service with grateful attitude.

LOVIN EASO VARKEY

11JJCMA049

TABLE OF CONTENTS

CHAPTER

NO.

PARTICULARS

PAGE NO

List of Tables i

List of Figures iv

Abstract v

1 Introduction 1

2 Review of Literature & Research Design 18

3 Profiles 25

4 Results, Analysis & Discussion 61

5 Findings, Conclusion And

Recommendation

109

Annexure

i

LIST OF TABLES

Table No.

Description

PAGE NO.

1.1 Tax Saving Schemes 13

1.2 Comparison Of ELSS with other Tax

Saving Instruments

13

1.3 List Of Top 10 Performing ELSS Funds

Based On Performance

14

1.4 List Of Top 10 Performing ELSS Funds

Based On Return(5 years)

15

3.1 List Of Mutual Funds In India 28

3.2 Investment Pattern 39

4.1 SBI Magnum Tax Gain Quarterly Return 62

4.2 SBI Magnum Tax Gain Return V/S The

Index Return

63

4.3 Birla Sun Life Tax Relief 96 Quarterly

Return

65

4.4 Birla Sun Life Tax Relief 96 V/S Index

Return

66

4.5 HDFC Tax Saver Quarterly Return 68

4.6 HDFC Taxsaver Return V/S The Index

Return

69

4.7 ICICI Prudential Tax Plan Quarterly

Return

71

4.8 ICICI Prudential Tax Plan V/S Index

Return

72

4.9 HDFC Long Term Advantage Quarterly

Return

74

4.10 HDFC Long Term Advantage V/S Index

Return

75

ii

4.11 Birla Sunlife Tax Plan Quarterly Return 77

4.12 Birla Sunlife Tax Plan V/S Index Return 78

4.13 Principal Personal Tax Saver Quarterly

Return

80

4.14 Principal Personal Tax Saver V/S Index

Return

81

4.15 Franklin India Tax Shield Quarterly

Return

83

4.16 Franklin India Tax Shield V/S Index

Return

84

4.17 DSP Blackrock Tax Saver Quarterly

Return

86

4.18 DSP Blackrock Tax Saver V/S The Index

Return

87

4.19 Tata Tax Savings Fund Quarterly Return 89

4.20 Tata Tax Savings Fund V/S The Index

Return

90

4.21 HSBC Tax Saver Quarterly Return 92

4.22 HSBC Tax Saver Equity Quarterly Return 93

4.23 BNP Paribas Tax Advantage Plan Gain

Quarterly Return

95

4.24 BNP Paribas Tax Advantage Plan V/S The

Index Return

96

4.25 Religare Tax Plan Gain Quarterly Return 98

4.26 Religare Tax Plan V/S The Index Return 99

4.27 Kotak Tax Saver Quarterly Return 101

4.28 Kotak Tax Saver V/S The Index Return 102

4.29 ING Tax Saving Fund Quarterly Return 104

4.30 ING Tax Saving Fund V/S The Index

Return

105

iii

4.31 Comparative Performance Analysis based

on Sharps Ratio

107

4.32 Top 5 Schemes Return and its Correlation

to Index Return

108

iv

LIST OF FIGURES

Figure

No.

Description

Page No.

1.1 Classification of Investments 3

3.1 Growth In Assets Under Management 28

4.1 Comparison of Quarterly Return 63

4.2 Comparison of Scheme Return And Index

Return

64

4.3 Comparison of Quarterly Return 65

4.4 Comparison of Scheme Return And Index

Return

67

4.5 Comparison of Quarterly Return 68

4.6 Comparison of Scheme Return And Index

Return

70

4.7 Comparison of Quarterly Return 71

4.8 Comparison of Scheme Return And Index

Return

73

4.9 Comparison of Quarterly Return 74

4.10 Comparison of Scheme Return And Index

Return

76

4.11 Comparison of Quarterly Return 77

4.12 Comparison of Scheme Return And Index

Return

79

4.13 Comparison of Quarterly Return 80

4.14 Comparison of Scheme Return And Index

Return

82

4.15 Comparison of Quarterly Return 83

4.16 Comparison of Scheme Return And Index 85

v

Return

4.17 Comparison of Quarterly Return 86

4.18 Comparison of Scheme Return And Index

Return

88

4.19 Comparison of Quarterly Return 89

4.20 Comparison of Scheme Return And Index

Return

91

4.21 Comparison of Quarterly Return 92

4.22 Comparison of Scheme Return And Index

Return

94

4.23 Comparison of Quarterly Return 95

4.24 Comparison of Scheme Return And Index

Return

97

4.25 Comparison of Quarterly Return 98

4.26 Comparison of Scheme Return And Index

Return

100

4.27 Comparison of Quarterly Return 101

4.28 Comparison of Scheme Return And Index

Return

103

4.29 Comparison of Quarterly Return 104

4.30 Comparison of Scheme Return And Index

Return

106

v

ABSTRACT

The objectives of this study are to compare equity-linked saving schemes with other traditional

forms of tax saving schemes. To analyze the equity-linked saving scheme picked at random on the

basis of risk and return. To understand the level of awareness regarding the mutual funds among the

Indian salaried class and the various factors that influence investors to invest in equity linked saving

schemes. The methodology conducted for this study is by using Sharpe ratio, standard deviation, beta,

multivariate statistical tool was used to cluster the funds into groups based on various parameters and

analyzed. The secondary data were collected by visiting various websites of the asset management

companies, articles available on the web, investment magazines and facts sheets of the asset

management companies.

All funds had a step declined in the year 2008 and 2010 because of financial crisis and melt

down stock market. The sharps index is at maximum for HSBC Tax Saver Equity with .023 Some

Equity Linked Savings Schemes have shown better returns than their respective benchmark index. The

beta of Birla Sun Life Tax Relief 96, Principal Personal Tax Saver Kotak Tax Saver, ING Tax Saving

Fund suggest that they are highly sensitive be relative to the market as a whole. The beta of SBI

Magnum Tax Gain, HDFC Tax Saver, ICICI Prudential Tax Plan, HDFC Long Term Advantage, Birla

Sunlife Tax Plan, Franklin India Tax Shield, DSP BlackRock Tax Saver, TATA Tax Savings Fund,

HSBC Tax Saver Equity, BNP Paribas Tax Advantage Plan, Religare Tax Plan Gain suggest that they

are less sensitive be relative to the market as a whole. The fund chosen by the investor should match

the risk appetite of the investor. It is suggested that the equity linked saving scheme should be

seriously considered by investors because of the dual advantage of tax saving and high return.

Investing in HSBC Tax Saver Equity is the best option in all 15 schemes

Keywords

NAV- Net Annual Value

Scheme Return

AMC- Asset Management Company

Risk

Return

1

CHAPTER 1

INTRODUCTION

2

1.1 INTRODUCTION

Investment is the employment of fund with the aim of achieving additional income

or growth in value. The essential quality of an investment is that it involves ‗waiting‘ for

reward. It involves the commitment of resources which have been saved or put away from

current consumption in the hope that since benefit will accrue in future.

Investment is the allocation of monetary resources to assets that are expected to

yield some gain or positive return over a given period of time. These assets range from

safe investment to risky investments. Investment in this form is called as ‗financial

Investments‘.

Why should one invest?

One needs to invest to:

Earn return on your idle resources.

Generate a specified sum of money for a specific goal in life.

Make a provision for an uncertain future.

One of the important reasons why one needs to invest wisely is to meet the cost of

inflation. Inflation is the rate at which the cost of living increases. The cost of living is

simply what it costs to buy the goods and services you need to live. Inflation causes

money to lose value because it will not buy the same amount of gods or services in the

future as it does now or did in the past. The aim of investments should be to provide a

return above the inflation rate to ensure that the investment does not decrease in value.

3

1.2 FACTORS INFLUENCING INVESTMENT

Increasing rate of taxation.

High interest rate.

High rate of inflation.

1.3 TYPES OF INVESTMENTS

Short term investment

Long term investment

FIGURE 1.1

Classification of investments

SHORT TERM LONG TERM

Savings Bank Account Post Office Savings

Money Market or Liquid Funds Public Provident Fund

Fixed Deposits with Banks Company Fixed Deposits

Securities [Shares, Bonds]

India by 2032 will become the third largest economy in the world, as reported by

Goldman Sachs in their wealth report. India‘s domestic savings as a percentage of its GDP is

28%, one of the forms of investment avenues like gold, fixed deposits, insurance, mutual

4

funds and capital markets. Investments in equities have shown better results and have

potential grow in the long run which can be an ideal approach to adjust inflation and provide

an opportunity for capital appreciation, provided the investors are high on risk. The majority

of Indian investors considerably have a low risk appetite, on an average. The only option left

for the investors in the mutual fund industry which has dual advantage of investing in equity

and getting goods return with optimum risk.

The Indian mutual fund market is in the process of evolving and the statistics on various

parameters like number of customers, types of products, types of channels, and geographical

locations along with the projection till 2005.

Equity linked Savings schemes are equity funds floated by mutual funds. They offer a 20 per

cent tax rebate on investments upto Rs 10,000 in a given financial year. There is a three year

lock-in on investments and there is no assurance on returns. The ELSS funds have to invest

more than 80 per cent of their money in equity and related instruments. Returns form ELSS

funds tend to fluctuate widely, in line with the performance of the stock markets. Young

people should definitely invest in the ELSS funds as they have the ability to take on higher

risk. Ideally one should invest in them when the markets are down. These funds are now open

all the year round. Therefore, investors can time their investment. The other way of investing

in these funds could be a systematic investment, which essentially means investing a small

sum regularly (monthly or quarterly).

It is one of the popular and good investments available under section 80c. Most

people not utilizing the power of mutual funds as the tax savings instrument. If you are

comparing with all the other tax saving instruments, ELSS is the one offers you high return.

There is risk associated with this investment. One think you have to keep in mind, if you are

taking the risk, return will be higher. In our life, every where there is some kind of risk exists.

An equity-linked saving scheme (ELSS) is a great investment option that offers the

twin benefits of tax saving and capital gains. Earlier, investors had to spread their investments

across different instruments such as PPF, ELSS, NSC and infrastructure bonds. But now, it‘s

possible to invest the entire limit of Rs 100,000 available under Sec 80C in ELSS. According

5

to the new Income Tax Act, Sec 80C investments in ELSS are allowed as deduction from the

total income, up to maximum Rs100, 000 in a financial year.

ELSS schemes have a three-year lock-in period, which works to the investors‘ benefit

as the fund manager can have a portfolio of stocks that can out-perform over a period of time.

1.4 Before investing in ELSS

Investment in an ELSS helps get a tax benefit to a maximum limit of Rs 1 lakh under

Section 80C of the Income Tax Act. Various other options like contribution to provident

fund, contribution to public provident fund, insurance premium paid, etc also get tax benefit

under Section 80C of the I-T Act. Investments made in ELSS are locked-in for a period of

three years and each scheme has a different portfolio.

LOWER COST

Mutual fund investments have a cost attached to them because every scheme incurs

some cost while managing your money. This cost is charged annually and eats into the

returns on your investments. An equity-oriented scheme attracts a fund management fee, also

called as expense ratio. This cost is adjusted in the net asset value (NAV) of the scheme and

not charged separately. Therefore, the investor does not realize that he is pays this amount to

the asset management company. The expense ratio is a percentage of the scheme's assets

under management. For example, if scheme returns 10 per cent and its expense ratio is 1 per

cent, it means, the scheme earned 11 per cent of which 1 per cent went towards the various

expenses.

According to the data from mutual rating agency, Value Research, 14 schemes had an

expense ratio of 2.5 per cent and 19 others had a lower expense ratio. Of the top 10 ELSS

schemes seven had a ratio lower than 2.5 per cent, while the remaining three had a ratio of

2.5 per cent, in the last one year ending January 27. This kind of lower cost is good for a

long-term investor who stays invested in the scheme for several years.

6

OLDER SCHEMES

Many ELSS have been launched till now, but, since fund houses usually do not launch

multiple schemes with similar features, the total number of ELSS is limited. And, the

presence of a large number of schemes with a long performance record helps investors

research enough for selecting the right scheme.

Thus, it is not surprising that most of the top performing schemes, even in the past one

year, are those that have been in the market for several years. In the last one year, six ELSS

have returned more than 100 per cent. Last ELSS scheme was launch in October 2005 and

the first scheme came to the market in March 1993. Investors need to look at each ELSS

portfolio.

Moreover, when time-tested schemes perform well, investors are more confident about

putting their money.

LOW PERFORMANCE DIFFERENTIAL

If your scheme selection goes wrong, there are chances of witnessing a big

difference in the return you receive as schemes differ in their performance from one another.

This situation can be illustrated better when it involves the selection of a equity diversified

scheme. In this case, a wrong choice can lead to a large difference in overall performance and

hence the returns received by the investor.

However, this does not hold true for ELSS. As the variance is comparatively less in

their case. In the last one year, the best performing scheme returned 127 per cent and the

worst performer returned 63 per cent, as on January 27. In comparison, the difference

between the worst and best performing equity diversified fund was a whopping 138 per cent

When compared over a period of two or three years, returns given by the best and the

worst performing ELSS were 24 per cent and 22 per cent per annum, respectively.

7

This is less than half, when the best and the worst performing equity diversified

schemes are compared. The difference stood at 57 per cent and 46 per cent per annum,

respectively. The absolute difference will be far higher, as the figures are compounded over

different time periods. This helps investors select a good ELSS scheme before investing.

1.5 How to choose this scheme

Short term performances of the fund can be ignored as its negligible and concentrate

on the brand and track record for over a period. Consistency in performance of fund is the

key. Many times certain funds become hit over a period but the quality deteriorates over a

period of time. Don‘t go just by the brand also as there have been times when investors have

been doomed by just going by brand name and have lost their capital.

1.6 Why should one invest ELSS?

Lock-in for three years helps in staying invested over a long period.

Investments in equity over a long-term delivers better returns.

Tax savings and high returns.

Through SIPs, one can invest small amount of Rs 500 in ELSS every

month.

There are different types of mutual funds available in the market. Based on the style of

investing the 3 well known types of mutual funds are:

1. Equity Mutual Funds: These mutual funds invest a major portion of their corpus in

equity shares and equity related instruments. The aim of this type of mutual fund is to

generate long term capital appreciation for the investor. This type of mutual fund is

suited to those investors who are looking for high returns and have a high appetite for

risk.

2. Debt Mutual Funds: These mutual funds invest a major portion of their corpus in

debt instruments like Government Bonds and Securities, Corporate Bonds, Fixed

Deposits, Money Market Instruments etc. The aim of this type of mutual fund is to

generate regular income for the investor. This type of mutual fund is suited for those

8

investors who are looking to generate regular income for themselves without taking

much risk.

3. Balanced Mutual Funds: These mutual funds invest a major portion of their corpus

in a mix of equities and debt instruments. The distribution may be in the ratio of

Equity 70 and Debt 30 or 50:50 or any other ratio as specified by the mutual fund.

The equity component aims at generating long term appreciation and the debt

component aims at providing stability and generating regular income.

Equity Linked Saving Scheme (ELSS) is also a type of mutual fund and falls under the

Equity Mutual Fund category. An ELSS mutual fund invests major portion of its corpus into

equity and equity related instruments. But there are some distinct features which makes ELSS

plans different from other equity mutual funds.

1.7 Difference between ELSS Plans and Other Mutual Funds

There are 2 major features that make ELSS plans different from other mutual funds:

1. Income Tax Benefit: Investments made in ELSS plans are eligible for deduction from

the taxable income under Section 80C of the Income Tax Act. There is no limit for

investments in ELSS plans, but investments of upto Rs 1,00,000 qualify for income

tax benefits. Investments made in normal mutual funds (other than ELSS plans) do

not qualify for income tax deduction.

2. 3 Year Lock-in Period: Investments made in ELSS plans have a lock-in period of 3

years. In case of normal mutual funds this lock-in period is not there. In an ELSS plan

every instalment has a lock-in period of 3 years.

Example: Let us assume that a person starts investing on a monthly basis from Jan

2009. The lock-in period of the 1st instalment (Jan 2009) will end in Jan 2012. The

lock-in period of the 2nd

instalment (Feb 2009) will end in Feb 2012 and so on.

9

1.8 Features of an ELSS Plan

1. ELSS is an equity linked tax saving investment instrument.

2. Money collected under ELSS plan is mainly invested in equity and equity related

instruments.

3. This financial product is more suited to those investors who are willing to take high

risk and looking for high returns.

4. There is no upper limit on investments that can be made in ELSS. However

investments upto INR 1,00,000 made in ELSS in a financial year qualify for

deduction from taxable income under Section 80C of the Income Tax Act.

5. ELSS comes with a 3 year lock-in period.

6. Long term capital gains earned on investments from ELSS are tax free.

7. Also dividends earned from ELSS plan are tax free in the hands of the investor.

8. The other tax saving instrument that comes closest to comparison with ELSS is Unit

Linked Insurance Plan (ULIP).

1.9 Benefits of ELSS

Tax Benefits

- Deduction under section 80C

- No tax on Capital gains

- Dividends are tax free in the hands of investor

Lock in period (3 years)

- Lowest among all tax saving instruments under

section 80C

- Long enough to minimize market volatility

Better Return

- Compared to all tax saving instruments under sec 80C

10

1.10 Options in an ELSS Plan

ELSS plans come with 2 options of growth and dividend.

1. Growth Option: If the investor selects growth option, he will not get any income

during the tenure of the investment. He will get a lump sum amount at the time of

redemption or on maturity. In other words the investor will not get any returns till the

time he is holding the instrument and the profit/loss is realized when the securities are

sold/transferred.

2. Dividend Options: Under the dividend option the investor has 2 options. Dividends

give income tax benefits to the investor. For example let us assume that the investor

invests Rs 1 Lakh in an ELSS plan (NAV Rs 10) in the month of April and the ELSS

scheme declares a dividend of 25% in the following month in May. The investor will

get back Rs 25,000 on his investment of Rs 1 Lakh. So effectively the investor has

invested only Rs 75,000 but he gets the income tax benefit on the entire Rs 1 Lakh. So

if the investor is falling in the 30% tax bracket, the tax saving of Rs 30,000 on Rs

75,000 (net investment amount as Rs 25000 is received back as dividend) effectively

works out to 40% instead of 30%. Also the lock-in period of the Rs 25,000 received

as dividend gets reduced from 3 years to 1 month only.

Please Note: The above calculation is done assuming the investor falls in the 30% tax

b racket and the investor has invested Rs 1, 00,000 and the ELSS scheme declares a

dividend of 25% in the subsequent month.

3. Dividend Re-investment Option: If the investor opts for dividend re-investment

option, then any dividends declared are re-invested on behalf of the investor. The

investor can claim additional tax benefits on the re-invested dividend amount. For

example let us assume that the investor has invested Rs 1 Lakh in the ELSS plan.

In the next year the scheme declares a dividend and the investor is entitled to a

dividend of Rs 20,000. This dividend is re-invested on behalf of the investor and he

gets additional units of the scheme. The investor can claim income tax deduction for

this Rs 20,000 from his taxable income as this investment of Rs 20,000 is treated as

fresh investment.

11

1.11 Charges in a Mutual Fund

There are 3 types of charges in an ELSS Plan:

1. Entry Load: This is the charge levied by the mutual fund at the time of investment. For

example if the entry load is 2.25% and the investor has invested Rs 100, the Rs 2.25 will

go towards entry load charges and the remaining Rs 97.75 is invested by the mutual fund

on behalf of the investor. If the NAV on that day is Rs 10, then the investor will get

97.75/10 = 9.775 units in his account.

Recently from 1st August 2009, Securities Exchange Board of India (SEBI) has abolished

the entry load for mutual funds. So now all ELSS plans are free of entry load charges.

This effectively means that if the investor invests Rs 100, the full Rs 100 will be invested

without deduction of any entry load charge.

2. Fund Management Charges: This is the recurring charge levied by the mutual fund. This

charge is for the day to day expenses of the mutual fund. The maximum permissible by

SEBI is 2.5% and the industry average is around 2.25%. This charge is collected by the

mutual fund by cancelling equivalent units from the investors account.

3. Exit Load: This charge is levied by mutual funds when the investor sells the units. In

ELSS plans there is no exit load.

1.12 Advantages of ELSS over NSC and PPF

1. Main advantage of ELSS is its short lock-in period. Maturity period of NSC is 6 years and

PPF is 15 years.

2. Since it is an equity linked scheme earning potential is very high.

3. Investor can opt for dividend option and get some gains during the lock-in period

4. Investor can opt for Systematic Investment Plan

5. Some ELSS schemes also offer personal accident death cover insurance

6. Provides 30 to 40% returns compared to 8% in NSC and PPF

12

1.13 Disadvantages of ELSS

1. Risk factor is high compared to NSC and PPF

2. Premature withdrawal is not allowed but it is allowed in other instruments in some specific

conditions.

1.14 ELSS vs other tax-saving instruments

There is no upper limit on investment is ELSS. However, investments of only upto Rs

100,000 are allowed to be claimed as deductions under section 80C.

The performance of the top five funds in India over a period of three years. Past

performance may or may not be sustained in the future.

Investors may note that though as of now the Finance Act, 2005 does not tax any

withdrawals from ELSS; it may be possible that as and when the proposed EET

system becomes fully operational, any redemption from ELSS may be subjected to

tax. In order to work out the roadmap for smoothly moving towards the EET system,

the Bill has proposed to set-up a committee of experts. Such committee will examine

the mix of savings instruments that would qualify under the new system and propose

suitable tax incidence. Investors should note the above before making any investment

under ELSS.

1.15 Investment strategy for ELSS funds

Risk appetite should at all times determine the total investments in tax-saving funds.

Don't go overboard in the segment simply because of the opportunity to rake

in impressive returns, thereby ignoring the risk involved.

Use the SIP route for investing in tax-saving funds. Not only does it do away with the

need for timing markets, but it also reduces the strain on your wallet at the end of the

financial year when most investors conduct their tax-planning exercise.

13

1.16 TAX SAVING SCHEME (ELSS)

TABLE 1.1

Tax Saving Schemes

Source: Secondary data

Comparison of ELSS with other tax saving instruments

TABLE 1.2

Comparison of ELSS with other tax saving instruments

Source: Secondary data

1.17 ELSS over ULIP (Unit linked insurance plan)

Though one must not discount importance of insurance, ELSS still has edge over

ULIP. ELSS has much lesser administration cost just 2% either in the form of entry load or

exit load. The entire amount of investment goes in to mutual fund unlike ULIP where a

certain amount is deducted for mortality charges, administration charges etc. The lock in

Parameter PPF NSC ELSS

Returns 8% 8% Market linked*

Interest Receipt On Maturity On Maturity Depends on Performance

Tenure 15 Years 6 Years Minimum 3 years

Tax Benefits Sec 80C ,sec10 Sec 80C Sec 80C

Minimum Investment Rs 500 p.a. Rs 100 Lump sum: Rs 5000/-

Maximum Investment Rs 70,000 Rs 1,00,000 No Upper Limit

Monthly Plans N.A N.A. SIP : Rs. 500/-

Particulars PPF NSC ELSS Bank

Deposits ULIP

Tenure (Years) 15 6 3 5 5

Min. investment (Rs) 500 100 500 10,000 10,000#

Max. Investment (Rs)

for sec 80C benefits 70,000 1,00,000 1,00,000 1,00,000 1,00,000

Return (CAGR) 8.00 8.00 32.25^ 8.25* NA

14

period of ELSS is three years and can be withdrawn later. Dividends received from ELSS are

tax free.

Growth option is the best choice for ELSS as there is substantial capital appreciation.

Avoid dividend reinvestment option as the small amounts will get locked in for three years

again. You can choose the SIP way again for ELSS.

TABLE 1.3

List of top 10 performing ELSS funds based on performance

Open Ended - Equity: Tax Planning - (Since Launch Return)

Funds NAV (Date) Returns(%) Return as on

Union KBC Tax Saver Scheme (G) 12.93 (15-Jan) 13.7

1/15/2013

HSBC Tax Saver Equity Fund 15.75 (15-Jan) 12.8

1/15/2013

SBI Tax Advantage Sr-2 11.45 (15-Jan) 11.8

1/15/2013

IDFC Tax Saver Fund 15.61 (15-Jan) 11.7

1/15/2013

IDFC Tax Advantage 21.18 (15-Jan) 11.5

1/15/2013

Axis Long Term Equity Fund 14.39 (15-Jan) 11.1

1/15/2013

DSP-BRTax Saver Fund 17.84 (15-Jan) 10.4

1/15/2013

DWS Tax Saving Fund 13.30 (15-Jan) 10.4

1/15/2013

Quantum Tax Saving Fund 24.34 (15-Jan) 10.1

1/15/2013

Principal Tax Savings 78.82 (15-Jan)

9.8 1/15/2013

Sundaram BNP Paribas Taxsaver 23.13 (15-Jan)

18.14 1/15/2013

15

From a tax management perspective, ELSS investment stands out as a preferred investment.

Investors, who want to lock-in their funds and not succumb to the temptation of re-working

and shuffling their holdings, will find ELSS a good avenue for investment as there is three

year lock-in period.

1.18 TOP 10 TAX SAVING MUTUAL FUNDS (ELSS)

The following 3 tables list the top 10 ELSS schemes in descending order of their 5 years, 3

years and 1 year returns. This may help you in selecting the best ELSS scheme for your

needs.

TABLE 1.4

List of top 10 performing ELSS funds based on Return (5 years)

Rank Fund Name

Return (%)

1 Year 2 Years 3 Year 5 Year

1 Can Robeco Eqty TaxSaver

7.6 4.3 6.2 11.2

2 Reliance ELSF - Series 1 3.8 3.4 6.5 9.2

3 Religare Tax Plan 9.1 3.7 6.1 8.3

4 UTI Long Term Advantage S2 9.1 2.0 4.2 8.1

5 Franklin India Tax Shield (G)

6.6 3.7 6.9 8.1

6 Reliance Tax Saver 0.6 2.2 5.6 7.9

7 HDFC Tax Saver 1.8 -1.5 3.3 7.7

8 L&T Tax Advantage 5.2 -0.1 5.3 7.7

9 ICICI Pru Tax Plan 8.4 1.6 4.8 7.6

10 HSBC Tax Saver Equity Fund 12.8 4.2 4.4 7.2

16

1.19 ADVANTAGES OF AN OPEN-ENDED ELSS

Mutual funds have been allowed to offer Equity Linked Saving Schemes (ELSS)

structured as open-end funds. ELSS offer 20 per cent tax rebate for investments up to Rs

10,000 with a three year lock-in period, under section 88 of the Income Tax Act. For

instance, if tax liability of an investor is Rs 3000, and he invests Rs 5000 in an ELSS, 20 per

cent of Rs 5000 or Rs 1000 would be reduced from his tax liability, thus bringing it down to

Rs 2000. Earlier, these schemes were allowed to be structured only as 10-year closed-end

funds with a lock-in period of three years commencing from the beginning of the new

financial year. Under the revised regulation, all investments under ELSS will continue to

attract a lock-in period of three years from the date of allotment or holding of units as the

case may be and not just from the beginning of the new financial year.

1. Wider Choice: With the new regulation, fund companies have been saved from the

process of floating a new fund in the last quarter of every financial year. The effort

and expense involved in launching such schemes and the small corpus garnered have

deterred funds even with a good track record from launching new schemes. Now there

is the flexibility than even if one tax-saving scheme is launched and garners a modest

sum, funds can leverage their performance and attract fresh subscription. This would

lead to addition of an open-end tax saver to the product portfolio of every AMC

giving investors a wider choice.

2. Periodic Investments: The open-end structure will make the fund less vulnerable to

market moods. Since all ELSS schemes were floated in the last quarter of the fiscal

and most of the money was collected in March, the fund's performance depended on

the market performance at that time. As these funds will now be sold throughout the

year, tax-savers can choose to invest at any point of time and take advantage of

market conditions. Importantly, the open-end structure for ELSS provides for natural

product enhancements, with features of regular investment plan (rupee cost

averaging) which will be of special appeal to marginal taxpayers while planning their

investments. Right in the beginning of the year, the investor can estimate his tax

liability and chalk out a strategy.

3. Buy a Hot Fund: The earlier framework did not allow an investor to buy an ELSS

based on its track record. The investor could take clue from the performance of the

17

tax-plans of a particular AMC, but could invest only in a tax-plan launched for that

year. And if a better performing AMC chose not to launch one in that year, investor

would have to settle for the second best. With open-end ELSS schemes, an investor

can buy into a fund that has a track record and can know the portfolio he is buying

beforehand.

4. Roll-Over: The instant liquidity after three years can be advantageous for investors

facing a cash crunch. An investor can get his units redeemed after three years and

redeploy the principal in the same fund and avail of tax rebate once again. Earlier, one

would have to put in investments in a new closed-end fund launched every year.

Effectively, it is now possible to lock-in Rs 30,000 over a period of three years and

enjoy the tax rebate on Rs 10,000 every year!! That of course assumes that the NAV

after three years is above the par value. Even after allowing for the capital gains tax

after adjusting for the inflation-index, it could work out to be beneficial. In fact, in

certain circumstances, the investor could take advantage of the fund's

underperformance i.e if the NAV falls below par value. Investors confronted with

substantial capital gains, can simply get the units redeemed and actualize a capital loss

and offset it against a capital gain. And if the investor is still optimistic about the

fund, he can redeploy the proceeds in the same fund may be at the same NAV.

5. Performance Pressure: The fact that there could be numerous open tax-savings

schemes competing for the investor's pie will optimize investment performance by

fund managers. So far, they could sit back in comfort - at least for three years. Now,

they will be under constant pressure to retain existing investors as well as to attract

fresh inflows.

6. ELSS for the Year: Many AMCs have indicated their intention to convert one of

their existing ELSS schemes into an open-end fund instead of launching a new one.

Currently, Birla and Alliance are offering open-end ELSS while Kothari and UTI

have launched closed-end ELSS. Both Birla and Alliance funds have been superior

performers till date. Both the tax plans are on a equal footing considering the

impressive performance of existing funds from both AMCs. In the past one year, Birla

Advantage has witnessed a spectacular appreciation of 95.69 per cent while Birla Tax

plan '98 has posted a total return of 62 per cent with the NAV at 16.22 as on February

25, 1

18

CHAPTER 2

REVIEW OF LITERATURE & RESEARCH DESIGN

19

2.1 INTRODUCTION

The title of the study is “A study on investment performance of equity linked saving

scheme ―

2.2 REVIEW OF LITERATURE

Shefali Jains conducted an empirical study on ‗Investment Performance of Equity Linked

Savings Schemes‘.Tax saving is the motive of any Indian investor today with increasing

average income and cash inflows. Investors have a choice of investing in a lot of traditional

tax saving instruments. They are all supported by Government of India and offer low rate of

return with long lock-in periods. The study evaluates the performance of equity-linked saving

schemes selected at random vis-à-vis the traditional schemes to give an insight into how these

funds perform with respect to risk and returns. This is done to help investors to choose an

ideal option to save tax and enjoy the benefits of investing in equity market which offers

good returns.

Nalini Prava Tripathy has done an empirical study on ‗Market Timing Abilities and Mutual

Fund Performance - An Empirical Investigation into Equity Linked Saving Schemes‘. The

Indian financial system in general and the mutual fund industry in particular continue to take

turns from around early 1990s. Growth of various mutual fund products has proved to be one

of the catalytic instruments in generating momentous investment growth in the capital

market. Therefore the present study evaluates the market timing abilities of Indian fund

managers of thirty-one tax planning schemes in India over the period December,1995 to

January, 2004 by using Jensen &Mazuy Model and Henriksson and Merton model. The study

indicates that the fund managers have not been successful in reaping returns in excess of the

market, rather they are timing the market in the wrong direction

Dr. S. Vadivelu has done ‗A Study on Performance of Mutual Fund Schemes‘ an overview

about mutual funds and various schemes related mutual funds are discussed in this paper. The

investors have been guided with investment portfolio. The common principles of funds

management (i.e.) Safety, liquidity and profitability are also discussed. A comparative study

has been made between the mutual fund investment and other investment avenues. The study

is made like an emperial research using latest tools and techniques. The conclusion and

suggestions are worth to emulate for the future development of mutual fund segments and eye

opener to bring the surplus resources into the organized sector

20

2.3 STATEMENT OF THE PROBLEM

India by 2032 will become the third largest economy in the world, as reported by

Goldman Sachs in their wealth report. India‘s domestic saving as a percentage of its GDP is

28%, one of the highest in the world. A significant proportion of this saving is in the form of

investment avenues like gold, fixed deposits, insurance, mutual funds and capital markets.

Investments in equities have shown better results and have the potential to grow in the long

run which can be an ideal approach to adjust inflation and provide an opportunity for capital

appreciation, provide the investors are high on risk. The study is undertaken to know the

performance of ELSS.

2.4 SCOPE OF THE STUDY

For the Purpose of this study the following different ELSS Mutual Fund Schemes

for five years are considered:

a) SBI Magnum Tax Gain

b) Birla Sun Life Tax Relief 96

c) HDFC Tax Saver

d) ICICI Prudential Tax Plan

e) HDFC Long Term Advantage

f) Birla SunLife Tax Plan

g) Principal Personal Tax Saver

h) Franklin India Tax Shield

i) DSP BlackRock Tax Saver

j) TATA Tax Savings Fund

k) HSBC Tax Saver Equity

l) BNP Paribas Tax Advantage Plan

m) Religare Tax Plan

n) Kotak Tax Saver

o) ING Tax Saving Fund

All those Mutual Funds were schemes of mutual funds(ELSS open-ended scheme)

The returns are undertaken for 5 years

21

2.5 OBJECTIVES OF THE STUDY

To compare equity-linked saving schemes with other traditional forms of tax saving

schemes.

To understand the quarterly return for 5 year of the schemes.

To analyze the equity-linked saving scheme picked at random on the basis of risk and

return.

2.6 HYPOTHESIS

H0: There is no relationship between the scheme return and index return

H1: there is relationship between the scheme return and index return

2.7 OPERATIONAL DEFINITION OF CONCEPTS

2.7.1 Net Asset Value or NAV

NAV is the total asset value (net of expenses) per unit of the fund and is calculated by the

Asset Management Company (AMC) at the end of every business day. Net asset value on a

particular date reflects the realizable value that the investor will get for each unit that he his

holding if the scheme is liquidated on that date.

Net asset Value of an investment company is the company‘s total assets minus its total

liabilities. For Example, if an investment company has securities and other assets worth $100

million and has liabilities of $10 million, the investment company‘s NAV will be $90 million

one day, $100 million the next, and $80 million.

22

For Calculating NAV in Years

NAV Closing Value – NAV Opening Value

= *100

NAV Opening Value

2.7.2 MARKET RETURN

The return on the market as a whole is known as market return. Market return is derived for

analysis is from BSE SENSEX index.

2.8 METHODOLOGY

Risk is measured using the parameters like Sharpe ratio, standard deviation, beta,

multivariate statistical tool was used to cluster the funds into groups based on various

parameters and analyzed.

The secondary data were collected by visiting various websites of the asset management

companies, articles available on the web, investment magazines and facts sheets of the asset

management companies.

2.8.1METHOD OF ANALYSIS

Standard Deviation

Beta

Sharpe measure

2.8.2 SOURCES OF DATA COLLECTION

Secondary Data: The various secondary data which will be used in this work includes

Internet

News Papers

Journals

Books related to investments etc

23

2.9 LIMITATIONS OF THE STUDY

The comparison of the fund was mainly dependent on the information collected from

secondary data i.e., fact sheets of various funds and from websites like value research

online. There could be possibility of error in the secondary data.

The results are generalized to all the Equity-linked saving scheme though the

comparison was done for few schemes.

2.10 CHAPTER SCHEME

CHAPTER 1 INTRODUCTION

In this chapter consists of introduction, factors influencing investment, types of investments,

classification of investments, before investing in ELSS, difference between ELSS plans and

other mutual funds, features of an ELSS plan, benefits of ELSS, options in an ELSS plan,

charges in a mutual fund, advantages of ELSS over NSC and PPF, disadvantage of ELSS,

ELSS v/s tax saving instruments ,investment strategy for ELSS funds, tax saving scheme v/s

ELSS, ELSS over ULIP, list of ten performing ELSS funds based on performance since

launch, top ten tax saving mutual funds(ELSS), advantages off an open-ended ELSS.

CHAPTER 2 REVIEW OF LITERATURE & RESEARCH DESIGN

This contains Title of the study, Statement of the Problem, Review of Literature, Objective of

the Study, scope of the study, Methodology, Method of analysis, Sources of data collection,

operational definition of concepts Limitation of the Study.

CHAPTER 3 PROFILES

In this chapter it contains industry profile, its history, list of mutual funds available in India,

investment opportunities. This chapter contains the selected companies‘ profiles.

24

CHAPTER 4 RESULTS, ANALYSIS & DISCUSSION

In this chapter, it contains the quarterly return average, the yearly average of fund and the

index, standard deviation and sharps ratio

CHAPTER 5 FINDINGS, CONCLUSION AND RECOMMENDATION

In this chapter contains all the findings that is been done on the research analysis chapter. The

conclusion, suggestions, bibliography and annexure is been include in this chapter

25

CHAPTER 3

PROFILES

26

3.1 PROFILES

History of the Indian Mutual Fund Industry

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

India, at the initiative of the Government of India and Reserve Bank 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 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 erstwhile Kothari Pioneer (now

27

merged with Franklin Templeton) was the first private sector mutual fund registered in July

1993.

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

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

under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual

funds setting up funds in India and also the industry has witnessed several mergers and

acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of

Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under

management was way ahead of other mutual funds.

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, functioning under an administrator and

under the rules framed by Government of India and does not come under the purview of the

Mutual Fund Regulations.

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 September, 2004, there were 29 funds, which manage assets of Rs.153108 crores

under 421 schemes.

28

The graph indicates the growth of assets over the year

GROWTH IN ASSETS UNDER MANAGEMENT

FIGURE 3.1

Growth In Assets Under Management

Table 3.1

LIST OF MUTUAL FUNDS IN INDIA

Mutual Fund Sponsors Year of

Entry

Bank sponsored

BOB Asset Management Co. Ltd Bank of Baroda 1992

Can Bank Investment Management

Services Ltd.,

Canara Bank 1987

S.B.I. Funds Management Ltd., State Bank of India 1987

UTI Asset Management Co., Pvt.

Ltd.,

SBI, PNB, BOB, LIC 1963

29

Institutions

G.I.C. Asset Management Co. Ltd., General Insurance

Corporation & other 4

PSU GIC

1990

Jeevan Bhima Sahyoga Asset

Management Co. Ltd.,

LIC 1989

Private Sectors

Benchmark Asset Management Co.

Pvt. Ltd.,

NICHE Financial

Services

2001

Chola Mandalam Asset

Management Co. Ltd.,

Chola Mandalam

Investments

1997

Escorts Asset Management Ltd., Escorts Finance 1996

J. M. Capital Management Pvt.

Ltd.,

J.M. Shares and Stock

Brokers

1994

Kotak Mahindra Asset Management

Co. Ltd.,

Kotak Mahindra Bank 1998

Reliance Capital Asset

Management Co. Ltd.,

Reliance Capital 1995

Sahara Asset Management Co. Pvt.

Ltd.,

Sahara India Finance 1996

Sundaram Asset Management Co.

Ltd.,

Sunadaram Finance 1996

Tata Asset Management Pvt. Ltd., Tata Sons 1995

Joint Ventures Predominantly Indian

Birla Sun Life Asset Management

Pvt. Ltd.,

Birla Global Finance 1994

30

Source: Secondary Data

D.S.P. Merrill Lynch Fund

Manager Ltd.,

D.S.P. Merrill Lynch 1996

HDFC Asset Management Co. Ltd., HDFC & Std Life

Investment

2000

Joint Ventures Predominantly Foreign

Alliance Capital Asset Management

Pvt. Ltd.,

Alliance Capital

Management

1994

Deutsche Asset Management Pvt.

Ltd.,

Deutsche Asset

Management

2002

Franklin Templeton Asset

Management Pvt. Ltd.,

Franklin Templeton

Investments

1996

HSBC Asset Manageent Pvt. Ltd., HSBC Security 2002

ING Inveatment Management Pvt.

Ltd.,

ING Group 1999

Morgan Stanley Investment

Management Pvt. Ltd.,

Morgan Stanley 1993

Prudential ICICI Asset

Management Pvt. Ltd.,

Prudential ICICI 1993

Principal Asset Management Co.

Pvt. Ltd.,

Principal Financial

Service

1994

Standard Charted Asset

Management Ltd.,

Standard Charted Bank 2000

31

Recent Trends in Mutual Fund Industry

The most important trend in the mutual fund industry is the aggressive expansion of

the Foreign owned mutual fund companies and the decline of the companies floated by

Nationalized Banks and smaller Private Sector players.

Many Nationalized banks got into the mutual fund business in the early nineties and

got off to a good start due to the stock market boom prevailing then. These banks did not

really understand the mutual fund business and they just viewed it as another kind of banking

activity. Few hired specialized staff and generally chose to transfer staff from the parent

organization. The performance of the schemes floated by these funds was not good

Some schemes offered guaranteed returns and their parent organization had to bail out

these AMCs by paying large amounts of money as the difference between the guaranteed and

actual returns. The service levels were also very bad. Most of these AMCs have not been able

to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions

they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was

also very similar. They quickly realized that the AMC business, which makes money in the

long term and requires deep-pocketed support in the intermediate years. Some have sold out

to Foreign owned companies, some have merged with others and there is general

restructuring going on.

The Foreign owned companies have deep pockets and come in here with the

expectation of a long haul. They can be credited with introducing many new practices such as

new product innovation, sharp improvement in service standards and disclosure, usage of

technology, broker education and support etc. In fact they have forced the industry to

Upgrade it and service levels of organizations like UTI have improved dramatically in

the last few years in response to the competition provided by these companies.

32

Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35% over the

next few years as investors shift their assets from banks and other traditional avenues. Some

of the older and private sector players will either close shop or be taken over.

In the coming years the market will witness a flurry of new players entering the arena.

There will be a large number of offers from various AMCs in the time to come. Some big

names like Fidelity, Principal, and Old Mutual etc. are looking at Indian market seriously.

One important reason for it is that most major players already have presence here and hence

these big names would hardly like to get left behind. The mutual fund industry is awaiting the

introduction of Derivatives in India as this would enable it to hedge its risk and this in turn

would be reflected in its NAV.

SEBI is working out the norms for enabling the existing mutual fund schemes to trade

in derivatives. Importantly, many market players have called on the regulator to initiate the

process immediately, so that the mutual funds can implement the changes that are required to

trade derivatives.

3.1.1 INVESTMENT OPPORTUNITIES

Savings bank account with commercial banks:

A safe, liquid and convenient investment option, it gives an interest rate of an average 4.5% per

annum, ideal parking funds for emergencies or unexpected expenses, the account holder may

keep an average balance equal to three months of his living expenses.

Objective: To provide high liquidity and safety to the account holders.

Risk: The savings rate is usually very low as compared to the other financial instruments and it

cannot offset inflation.

Bank fixed deposits

Being a safe investment option bank fixed deposits give interest rates around 5.25% to 8%. A

bank fixed deposit is recommended for those looking for preservation of capital along with

33

current income in the short term. However, over long term the returns may not keep pace with

inflation.

Objective: To provide regular and fixed income to the account holders who wish to have

regular and steady savings and earnings.

Risk: Although not rated, fixed deposits facilitate 100% assurance of principal with interest

rates regulated by RBI. But there is inflation risk involved.

Bonds and debentures

They are long-term debt instruments with interest rate ranging between 9-18% per annum.

Many types of debts and bonds have been structured to the investors with different time

horizons. Though the risk is high they offer better returns when compared to bank fixed

deposits.

Objective: It is the safest investment and loans can be borrowed against bonds or debentures.

Risk: The inflation and interest fluctuation affects investment decision. They have no

commercial ratings.

Company deposits

Fixed investment schemes offered by various Public limited companies or the private sector

may be cumulative or non-cumulative. They can be offered to the public as well as the existing

shareholders and employees. Non-Banking Financial Companies cannot offer more than 14%

of interest on the fixed deposits.

Objective: It confers faster capital appreciation and hence it is suitable for regular income

holders and an investor can borrow against the deposits depending on the credit rating.

Risk: It is an unsecured investment and there is no asset backing and provides limited

protection against inflation risk.

34

Gold:

In India gold is more of a sense of security and a fixed asset rather than for any use or for the

purpose of making profit or income. Since a long time it has been used extensively for

speculation. Gold may be invested either in the form of gold shares which are banned in India,

gold coins, gold bars, gold jewellary etc.

Objective: gold offsets inflation rates to some extent and offers good appreciation over a long

period of time.

Risk: there are no regular earnings and the rates fluctuate. Even the rates of capital

appreciation are not fixed or certain.

Real estate

Land and house property are the main real estate investments. These investments are taken by

and large number of people for hedging the inflation rates.

Objective: In India it is found that almost all banks and financial institutions consider land as

good collateral. Hence it is considered a safe investment.

Risk: investment in real estate involves a lot of pressures in terms of tax payment for capital

appreciation, stamp duties etc.

Shares

It is the most risky investment with highest returns in the long run. Sensex indicates the price

movements of shares on weighted average basis. Dividends up to Rs.1000 are not taxed.

Objective: to provide high capital appreciation and very high rates of dividend.

Risk: being highly volatile the price movements depends on the market and the company‘s

performance. The earning may even become negative.

35

3.2 COMPANY PROFILES

3.2.1 SBI CAPITLA MARKET LIMITED

SBI CAPITAL MARKETS LIMITED (SBICAPS) is India's leading investment bank

and project advisor, assisting domestic companies fund-mobilisation efforts for last many

years.

Foreseeing the changing needs of clients in a rapidly opening economy, over the years,

we have evolved an array of advisory services in almost all sectors of the economy. We are

known for professionalism and business ethics and provide a full range of Investment,

Advisory and Financial Services under one umbrella. A pioneer in privatization in India, we

have established ourselves as a leader in providing financial and advisory services in the core

sector and infrastructure industries.

We began operations in August 1986 as a wholly owned subsidiary of the State Bank of

India, which is the largest commercial bank in India. In January 1997, fresh equity shares

were issued to Asian Development Bank (ADB) and ADB now holds 13.84% stake in the

equity of SBICAPS. The distinguished parentage (with a 86.16% stake) together with the

long standing association of an internationally renowned financial institution like the Asian

Development Bank further enhances our image as a truly 'World Class Investment Bank'.

SBI MAGNUM TAX GAIN (ELSS)

Magnum Tax gain has consistently yielded superior returns over the past couple

of years. The fund has capitalized on the bullish trend in the markets in 2003 and 2004; its

shift to mid-cap stocks has also paid rich rewards. The scheme has generated 13.8%

annualized return

since it turned open-ended in November 1999 against 9.2% annualized return by its

benchmark, BSE 100 over the same period. Head of Equity at SBI Mutual Fund and Fund

36

Manager for the scheme Sandip Sabharwal attributes this performance to the superior stock

selection with a long-term view on investments.

Experts believe that the scheme will become even more attractive now with the

Finance Minister's budget proposal to remove the cap on investment in tax saving

instruments, allowing an investment of Rs 1 lakh in equity linked saving schemes, ELSS.

Sabharwal says, ―We believe this will be a big driver for flows into the equity markets.

Earlier the cap was at Rs 10000, so it really did not make sense for a lot of people to invest

this small amount and then monitor the performance. However with Rs 1 lakh limit, we are

likely to see huge inflows into this category of schemes from April 1st onwards.‖

Commenting on the advantages of investing in ELSS, Sabharwal says, ―If you see

ELSS schemes across fund houses they are one of the best performing schemes mainly due to

stable long-term funds where the fund manager can also take a long-term view. The other

advantages of no long term capital gains tax and tax free dividends also is a big positive as all

the returns that an investor makes out of this scheme are free of tax which is not so for most

asset classes today.‖

Meanwhile, the government is mulling over the proposal to tax the maturity value

of the tax saving instruments. When asked about the impact of the same on the scheme,

Sabharwal said, ―The Finance Minister has proposed the EET scheme but it is yet to be

implemented. Even if it gets implemented it will be uniform across tax saving asset classes

and as such will not have a significant impact on the inflows.‖

PORTFOLIO ANALYSIS

Magnum Tax gain Scheme has portfolio largely invested in mid-cap stocks. Barring

Gujarat Ambuja Cement, it has weeded out even the few large-cap stocks that it held last

year. The scheme invests with a bottom up approach with certain sectoral caps. Its current

turnover ratio is close to 110%, says the fund manager. The scheme's strategy to stick with

quite a few of its midcap stocks in the top ten holdings — Thermax, Praj, Crompton, KPIT,

Sintex, and United Phosphorus — for several months now, has paid off.

Besides this, Magnum Tax gain is heavily skewed to Electrical Equipment stocks

which together account for almost 32% of the net assets. Sabharwal says, ―Actually the

37

companies into which we have invested in belong to different product classes and each is

different in its product profile. We are positive on this sector due to the strong capital

investment cycle

3.2.2 HDFC ASSET MANAGEMENT COMPANY LIMITED

HDFC Asset Management Company Ltd. is a privately owned investment manager.

The firm primarily manages equity, fixed income, and balanced mutual funds for its clients. It

invests in public equity and fixed income markets. The firm employs fundamental analysis to

make its investments. It operates as a subsidiary of Housing Development Finance Corp. Ltd.

HDFC Asset Management Company Ltd was founded in 1999 and is based in Mumbai,

Maharashtra.

HDFC Mutual Fund Declares Dividend on Quarterly Interval Fund

HDFC Mutual Fund has approved Feb. 8, 2010 as the record date for declaration of

dividend under dividend option in retail and wholesale plan of HDFC Quarterly Interval Fund

- Plan C. The quantum of dividend will be 100% of distributable surplus as on the record

date.

HDFC Announces Launch of New Fund Named as HDFC FMP 19M November 2009

HDFC Asset Management Company Ltd. announced the launch of a new fund named

as HDFC FMP 19M November 2009, fixed maturity plan under HDFC Fixed Maturity Plans-

Series XI, a close-ended income scheme. The face value of the new issue will be INR 10 per

unit. The new issue will be open for subscription on Nov. 6, 2009 and close subscription on

16 Nov. 2009. The investment objective of the plans under the scheme is to generate regular

income through investments in debt/money market instruments and government securities

maturing on or before the maturity date of the respective plan(s). Maturity date of the scheme

would be 19 months from the date of allotment of units of the scheme. The fund would invest

60% to 100% of assets in debt and money market instruments including securitized debt.

Investments in securitized debt would be upto 75% of the net assets of the plan. The scheme

may invest upto 40% of the scheme‘s net assets in government securities. The entry and exit

38

load charge will not be applicable for the scheme. The units of the scheme will be listed on

the National Stock Exchange.

HDFC Asset Management Reportedly Mulls Listing

An Industry official said, HDFC Asset Management Company Ltd (HDFC Mutual

Fund) plans to conduct an initial public offering by early 2010. A leading mutual fund

distributor said, ―The fund house is planning to list itself in January.‖ Business Standard

added that HDFC Mutual Fund officials, when approached, did not comment. Milind Barve,

Managing Director, HDFC MF, could not be reached for comments. Lately Housing

Development Finance Corp (HDFC) Chairman Deepak Parekh had said that it plans to list

both insurance, and mutual fund companies and plans to list the mutual fund business first.

HDFC TAX SAVER (ELSS)

Investment objective

The investment objective of the Scheme is to achieve long term growth of capital.

BASIC SCHEME INFORMATION

Nature of scheme: open ended equity linked scheme with a lock-in period of 3 years.

Inception date: December 18, 1995

Option / plan: Dividend option, growth option. The dividend option offers dividend payout

and Reinvestment facility.

Entry load (purchase/additional purchase/switch-in): NIL (with effect from August 1,

2009

Minimum application amount: for new and existing investors: Rs 500 and in multiple

thereafter.

Lock-in-period: 3 years from the data allotment of the respective units.

Redemption proceeds: Normally dispatched within 3 Business day (subject to completion of

Lock- in-period)

39

INVESTMENT PATTERN

TABLE 3.2

Investment pattern

Sl No Asset type (% Of Portfolio)

Risk Profile Medium

to High

1 Equities & Equity

related intruments

Minimum 80%

2 Debt

Securities,Money

Market

instruments(including

cash/call Money)

Minimum 80%

Low to Medium

Source: secondary data

Investment in securitized debt, if undertaken, would not exceed 20% of the net

assets of the scheme. The scheme may also invest up to 25% of net assets of net assets of the

scheme in derivatives such as futures and options and such other derivative instruments as

may be introduced from time to time for the purpose of hedging and portfolio balancing an do

there uses as may be permitted under the regulations and guidelines.

The scheme may also invest a part of its corpus, not exceeding 40% of its net assets,

in overseas markets in Global Depository Receipts(GDR‘s), ADR‘s, overseas equity, bonds

and mutual funds and such other instruments as may be allowed under the Regulations from

time to time .

Subject to the Regulations and the application guidelines, the scheme may, engage

in stock Lending activities. Also refer to section on stock lending by the fund.

The ELSS (equity linked saving scheme) guidelines, as applicable, would be

adhered to in the management of this fund.

40

If the investment in equities and related instruments falls below 80% of the

portfolio of the scheme at any point in time, it would be endeavored to review and rebalance

the composition.

Not with standing anything stated above, subject to the regulations, the asset

allocation patter indicated above may change from time to time, keeping in view market

conditions, market opportunities, Applicable regulations and political and economic factors.

It may be clearly understood that the percentage stated above are only indicative and are not

absolute and that they can vary substantially depending upon the perception of the AMC, the

intention being at all times to seek to protect the NAV of the scheme. Such changes will be

for short term and defensive considerations.

Provided further and subjective to the above, any changes in the asset allocation

affecting the investment profile of the scheme and amounting to change in the fundamental

attributes of the scheme shall be effected in accordance with sub-regulation(15A) of

regulation 18 of SEBI regulations.

Investment strategy

Debt securities (in the form of non-convertible debentures, bonds, secured premium

notes, zero interest bonds, deep discount bonds, floating rate bond / notes, securitised debt,

pass through certificates, asset backed securities, mortgage backed securities and any other

domestic fixed income securities including structured obligations etc.) include, but are not

limited to :

Debt obligations of the Government of India, State and local Governments, Government

Agencies and statutory bodies (which may or may not carry a state / central government

guarantee),

Securities that have been guaranteed by Government of India and State Governments,

Securities issued by Corporate Entities (Public / Private sector undertakings),

Securities issued by Public / Private sector banks and development financial institutions.

41

Money Market Instruments include:

Commercial papers

Commercial bills

Treasury bills

Government securities having an unexpired maturity upto one year

Collateralized Borrowing & Lending Obligations (CBLO)

Certificate of deposit

Usance bills

Permitted securities under a repo / reverse repo agreement

Any other like instruments as may be permitted by RBI / SEBI from time to time.

Investment policies

Consistent with the investment objectives of the scheme, the AMC aims to identify

securities which offer superior levels of yield at low levels of risk. The investment team of

the AMC will carry out an internal credit analysis of all securities included in the investment

universe. The Scheme may also use various derivative and hedging products from time to

time, as would be available and permitted by SEBI, in an attempt to protect the value of the

portfolio and enhance Unit holders‘ interest. The Investment Manager may therefore enter

into forward contracts, future contracts or buy or sell options in an effort to maintain risks at

acceptable levels. The Scheme may also invest in suitable investment avenues in overseas

financial markets for the purpose of diversification, commensurate with the Scheme

objectives and subject to necessary stipulations by SEBI / RBI. Towards this, the Mutual

Fund may also appoint overseas investment advisors and other service providers, as and when

permissible under the regulations.

42

HDFC Long Term Advantage Fund(ELSS)

Investment objective

The primary objective of the Scheme is to generate long term capital appreciation from

a portfolio that is invested predominantly in equity and equity related instruments.

Nature of Scheme Open Ended Equity Linked Savings Scheme with a lock-in

period of 3 years

Inception Date January 02, 2001

Option/Plan Dividend Option,Growth Option. The Dividend Option

offers Dividend Payout and Reinvestment Facility.

Entry Load

(purchase / additional purchase

/ switch-in)

(click here for SIP Details)

NIL

(With effect from August 1, 2009)

Please click here to go through the addendum.

Exit Load

(as a % of the Applicable

NAV)

(click here for SIP Details)

No Exit Load shall be levied on bonus units and units

allotted on dividend reinvestment.

Minimum Application

Amount

(click here for SIP Details)

For new & existing investors :Rs.500 and in multiples

thereafter.

Lock-In-Period 3 years from the date of allotment of the respective Units

Net Asset Value Periodicity Every Business Day.

Redemption Proceeds Normally dispatched within 3 Business days(subject to

completion of Lock-in period, Only Individuals and HUF)

Investment Pattern

The net assets of the scheme wil be invested primarily in equity an dequity related

instruments. The scheme may invest a part of its net assets in debt and money market

instruments, in order to manage its liquidity requirements from to time, and under certain

circumstance, to protect the interest of the unit holders.

43

The asset allocation under the Scheme will be as follows :

Sr.No. Type of Instruments Normal

Allocation

(% of Net Assets)

Risk Profile

1 Equities & Equity related instruments 80 Medium to

High

2 Debt Securities, Money Market

instruments(including cash/call money)

20 Low to

Medium

Investment Strategy

The funds collected under the Scheme shall be invested in equities, cumulative

convertible preference shares and fully convertible debentures and bonds of companies.

Investment may be made in partly convertible debentures and bonds including those issued

on a rights basis subject to the condition that, as far as possible, the non convertible portion of

the debenture so acquired or subscribed shall be disinvested within a period of 12 months.

It shall be ensured that funds of the Scheme shall remain invested to the extent of at

least 80% in securities specified above. In exceptional circumstances, this requirement may

be dispensed with by the AMC, in order that the interests of the Unit holders are protected.

Pending investment of funds of the Scheme in the required manner, the AMC may

invest the funds of the Scheme in short term money market instruments or other liquid

instruments or both. After 3 years from the date of allotment of the Units, the Mutual Fund

may hold up to 20% of net assets of the Scheme in short-term money market instruments.

The investment approach will be based on a set of well established but flexible

principles that emphasis the concept of sustainable economic earnings and cash return on

Investment as the means of valuation of company.

44

3.2.4 PRUDENTIAL ICICI ASSET MANAGEMENT PRIVATE LIMITED

Company Overview

ICICI Prudential Asset Management Company Limited is a privately owned

investment manager. The firm provides its services to individuals and institutions. It manages

separate client-focused equity, fixed income, and balanced mutual funds. The firm invests in

the public equity and fixed income markets of India. It operates as a subsidiary of ICICI Bank

Ltd. ICICI Prudential Asset Management Company Limited was founded in 1998 and is

based in Mumbai, India.

ICICI Prudential Asset Management Company (AMC) is a child of two of the

strongest names in the world finance market - Prudential PLC of UK and ICICI Bank India.

Incepted in 1998, ICICI AMC Ltd is already a pre-eminent name in investment sector of

India. With just 2 funds under management in 1998, ICICI Prudential mutual fund count has

grown to 35 in the past decade.

Get the services of full-time, professionally trained and well-experienced investment

professionals for managing your funds at ICICI Prudential Asset Management Co. What‘s

more you can also get personal consultations at the customer service segment with

information to all your queries. Complete transparency is rendered in every investment by

ICICI Prudential Advisor. Prompt liquidity at the net asset values (NAV) in open-ended

schemes makes ICICI Prudential Mutual Funds a popular choice among investors.

ICICI Prudential Asset Management Company enjoys the strong parentage of

prudential plc, one of UK's largest players in the insurance & fund management sectors and

ICICI Bank, a well-known and trusted name in financial services in India. ICICI Prudential

Asset Management Company, in a span of just over eight years, has forged a position of pre-

eminence in the Indian Mutual Fund industry as one of the largest asset management

companies in the country with average assets under management of Rs. 82,168.12 Crore (as

of Nov 30, 2009). The Company manages a comprehensive range of schemes to meet the

varying investment needs of its investors spread across 230 cities in the country.

45

ICICI PRUDENTIAL TAX PLAN (ELSS)

ICICI Prudential Tax Plan (the Scheme) is a diversified equity fund that aims to

generate capital appreciation by investing in equity instruments. As an Equity Linked Savings

Scheme (ELSS), investments of upto Rs.1,00,000 are eligible for tax deduction u/s 80C of the

Income Tax Act, 1961. The scheme offers significant advantages in terms of (i) potential for

higher returns, and (ii) shorter lock-in period of 3 years as compared to other traditional tax

saving instruments. The 3-year lock-in, allows fund managers freedom to select stocks with a

long-term perspective without day to-day liquidity pressure which provides potential for

higher returns. The scheme offers potential to earn tax-free dividend. Maturity proceeds do

not attract Long Term Capital Gains Traditional tax saving instruments may have implicit /

explicit guarantee of Government of India or respective issuer for repayment of principal and

interest. Partial or pre mature withdrawals are also allowed in some instruments. Investments

in ELSS are subject to market risks and the NAV of units of ELSS may go up or down,

depending on the factors and forces affecting the capital markets. Partial or pre mature

withdrawals are not permitted in ELSS. Investors shall read and understand risk factors

before making an investment decision.

Portfolio Strategy

• ICICI Prudential Tax Plan is a blend of large and mid/small cap fund, seeking to provide

steady returns.

• The large cap stocks constitute about 57% of the net assets as on Oct 30, 2009.

• The 3-year lock in and mandate for patient long term investment enabled the fund to

maintain ~ 90% to 95% equity exposure on an average during the 2008 and 2009.

• This mandate has allowed fund manager to take advantage of investing at lower market

levels during early 2009 and subsequently has benefitted from the recent market recovery.

• For defensive purposes, the fund as on Oct 30, 2009, continues to remain over-weight on

Pharmaceuticals

46

• The fund has also turned overweight on Software by investing at current valuations due to

expected growth revival across the globe, lending higher growth visibility for the sector and a

favourable risk reward scenario

• The fund has been accumulating good quality stocks at lower levels and booking profits

intermittently at every possible opportunity

Scheme Features

Type Open-ended Equity Linked Savings Scheme Investment Pattern Equity and

Equity related instruments upto 90% & Debt, Money Market and Cash upto 10% Options

Growth & Dividend Default Option Dividend Reinvestment Application Amount Rs. 500

(plus in multiples of Re. 1) Minimum Additional Investment Rs. 500 & in multiples thereof

Redemption Cheques Issued Generally within 3 Business Days for specified RBI locations

and an additional of 3 Business Days for Non RBI locations after lock-in period of 3 yrs. Cut

off time: Purchase/Switch in : 3pm Redemption/Switch out : 3pm Systematic Investment Plan

(SIP) Monthly: Minimum of Rs. 500 or multiples thereof & 5 postdated cheques for a

minimum of Rs. 500for a block of 5 months in advance. Quarterly: MinimumRs.5000+

4postdatedcheques of Rs. 5,000each. Systematic Withdrawal Plan (SWP) Not Available

Systematic Transfer Plan (STP) Available.

3.2.5 BIRLA SUN LIFE ASSET MANAGEMENT PRIVATE LIMITED

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment

managers of Birla Mutual Fund, is a joint venture between companies of the Aditya V. Birla

Group and the Sun Life Financial Services of Canada Inc.

The Aditya Birla Group is a multinational group of companies comprising of some

of the best known companies in India. The group companies have attained a leading position

in a range of key core sector areas and rank among the country‘s largest, most profitable and

fastest growing companies with an excellent track record of returns to investors. At the

Aditya Birla Group, growth with excellence is a way of life. With a turnover of over Rs 280

billion, and fixed assets worth Rs 265 billion, the group is India's second largest business

house. The Group's family of 81,000 employees is spread across 40 companies situated in 17

countries around the globe. With the beginning of economic reforms in India, the Aditya

47

Birla Group entered the financial services sector in the early nineties. The aim is to become

the first choice of Indian customers for world class financial services.

Sun Life Financial Services of Canada Inc. is the holding company of Sun Life

Assurance Company of Canada. The group ranks as one of the largest global insurance and

wealth management organizations with assets under management of more than $300 billion

and credit ratings that places it at the top of the financial sector in North America. With major

operations for over a century and with businesses in 21 key markets throughout the world,

Sun Life Financial is a global force in financial services. Sun Life has major presence in the

growing mutual fund markets through MFS Investment Management in the U.S. and through

the Spectrum United Mutual Fund in Canada. MFS is listed in four stock exchanges and has

US$147 billion total assets under management with a four year compounded growth of 30%

across international, institutional, retail annuities and retail mutual funds.

The joint venture brings together the Aditya Birla Groups' experience in the Indian

market and Sun Life's global experience. Birla Mutual fund has been constituted as a trust in

December, 1994. It has a spectrum of 17 investment schemes including 2 off shore funds,

designed to cater to every need of the investor. Birla Mutual Fund today has emerged as one

of India's leading Mutual Funds with over Rs. 9200 crores1 of assets under management and

an investor base in excess of 5.75lac folios.

Birla Mutual Fund follows a long-term, fundamental research based approach to

investment. The approach is to identify companies, which have excellent credit-worthiness

and strong Fundamentals. The fundamentals include the quality of the company‘s

management, sustainability of its business model and its competitive position, amongst other

factors.

48

Birla Sun Life Tax Plan (ELSS)

FUND OVERVIEW

Category

ELSS

Fund Family

Birla Sun Life Mutual

Fund

Scheme Plan

Growth

Scheme Class

Open End

Tax Benefit

Yes

Net Asset

1.66 B

1 Year Return

99.87%

Fund Inception Date 16-02-1999

Birla Sun Life Tax Plan (BSLTP) aims at achieving long term growth of capital

along with Income Tax benefits for investors. It follows a bottom-up approach to investing,

where the emphasis is on identifying companies in quality businesses with a strong

competitive position and run by quality management. Essentially the focus is on long term

fundamentally driven values. The fund offers superior growth opportunities. Since

investments are planned for a 3 year period it helps the Fund Manager to take a long term

view while selecting stocks and not remain constrained by short term liquidity pressures.

49

TAX BENEFITS U/S 80C:

Investments in this fund would enable you to avail benefits under Section 80C of the

Income Tax Act, 1961. Investments upto Rs. 1 lakh by eligible investors in the scheme may

qualify for deductions. Investors are requested to consult their tax advisor in this regard.

BIRLA SUN LIFE TAX RELIEF 96

Investment Objective

An open-ended equity linked savings scheme (ELSS) with the objective of long term growth

of capital through a portfolio with a target allocation of 80%equity, 20% debt and money

market securities.

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Mar 06, 2008

Asset Size (Rs cr) 703.13 (Mar-30-2013)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

3.2.6 PRINCIPAL ASSET MANAGEMENT COMPANY PRIVATE LIMITED

Principal Mutual Fund (formerly known as IDBI-PRINCIPAL Mutual Fund) has been

constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 (2 of

1882). The Mutual Fund is registered with SEBI under Registration No. MF/019/94/0, dated

December 13, 1994. The underlying objective of Principal Mutual Fund is to mobilize

savings from the public, provide investment expertise to achieve optimal returns on their

investments.

50

The Fund was initially set up by Industrial Development Bank of India (IDBI) in 1994 by

execution of a Trust Deed dated November 25, 1994, under which IDBI was the sole Settlor,

Subsequently, on March 31, 2000, Principal Financial Services Inc. USA became the deemed

sponsor (along with the IDBI) by acquiring 50% stake in IDBI-PRINCIPAL Asset

Management Company Limited. In June 2003, Principal Financial Services Inc. USA became

the sole sponsor by acquiring 100% stake in IDBI-PRINCIPAL Asset Management Company

Limited, through its wholly owned subsidiary Principal Financial Group (Mauritius) Limited

(Principal Mauritius). Principal Mauritius has become the sole settlor of the Fund. Name of

the Asset Management Company was changed to Principal Asset Management Company

Private limited, to reflect the change in ownership.

Our Investment Philosophy

Having thoroughly understood the needs of our investors, we at Principal Mutual Fund

provide investors with a disciplined investment approach that takes acceptable risks, whilst

attempting to minimize volatility in the portfolio.

Equity Funds create wealth for our investors by investing in well-managed companies

that are attractively valued, to generate sustainable cash flows in the future. We add value by

maintaining a strong focus on credit research and every company is added to the portfolio

after it undergoes a thorough credit analysis.

We proactively manage our Debt and Liquid Funds by continuously monitoring the

macroeconomic environment and undertaking fundamental research of the fiscal and the

monetary position.

Both our corporate and individual clients get to choose from a variety of structured,

diversified investment options that meet their investment needs at all stages in their life.

PRINCIPAL PERSONAL TAX SAVER (ELSS)

Objective: Principal Personal Tax Saver Fund will invest in equity and equity linked

instruments, debt securities and money market to achieve long term capital gain. Investment

in the Scheme is subject to a lock-in period of 3 years from the date of allotment.

51

Structure: open-ended equity linked saving scheme.

Inception Date: April 12, 1996

Plans and options under the plan: Not Applicable

Face Value(Rs/unit): Rs 10

Minimum Investment: Rs 500 and any amount thereafter under each option.

Entry Load: 2.25%

Exit Load: Nil

3.2.7 FRANKLIN TEMPLETON ASSET MANAGEMENT (INDIA) PRIVATE

LIMITED

Franklin Templeton Asset Management (India) Private Limited is a privately owned

investment manager. The firm primarily caters to individuals, and investment companies. It

manages equity, fixed income, and balanced mutual funds for its clients. The firm invests in

the public equity and fixed income markets. It employs a combination of fundamental and

quantitative analysis along with bottom-up stock picking approach to make its investments.

The firm conducts in-house research to make its investments. It was founded in 1996 and is

based in Mumbai, India. Franklin Templeton Asset Management (India) Private Limited

operates as a subsidiary of Franklin Templeton Holding Ltd.

FRANKLIN INDIA TAX SHIELD

Investment Objective

An open end Equity Linked Savings scheme with an objective to provide medium to long-

term growth of capital along with income tax rebate.

Scheme details

Fund Type Open-Ended

Investment Plan Growth

52

Launch date Apr 10, 1999

Asset Size (Rs cr) 905.20 (Dec-31-2012)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

Load Comments 3 yr lock-in

3.2.8 DSP BLACKROCK INVESTMENT MANAGERS PVT LTD

DSP BlackRock Investment Managers Pvt. Ltd. is the investment manager to DSP

BlackRock Mutual Fund.

The philosophy of DSP BlackRock Investment Managers Pvt. Ltd. has been grounded in the

belief that experienced investment professionals, using a disciplined process and

sophisticated analytical tools, can consistently add value to client portfolios.

DSP BlackRock Investment Managers Pvt. Ltd. takes a three dimensional approach to the

management of the organization, incorporating functional, product and regional elements in

support of clients' goals. The functional dimension looks at the company's operations by

specific task, such as account management or operations. The product dimension brings

together the cross-disciplinary expertise critical to managing client assets in each class.

Finally, the regional aspect of the company's model recognizes the unique, geography-

specific needs of clients as well as the importance of local regulatory issues.

With our three-dimensional approach to managing the organization, we seek to:

Ensure consistency on a global basis;

Allow for the tailoring of products and services according to client or local needs;

Promote teamwork among our employees worldwide; and

Facilitate operational integrity and efficiency

53

DSP BLACKROCK TAX SAVER FUND

Investment Objective

An Open ended equity linked savings scheme whose primary investment objective is to seek

to generate medium to long-term capital appreciation from a diversified portfolio that is

substantially constituted of equity and equity related securities of corporates and to enable

investors avail of a deduction from total income as permitted under the Income Tax Act,1961

from time to time.

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Nov 27, 2006

Benchmark CNX 500

Asset Size (Rs cr) 763.17 (Dec-31-2012)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

3.2.9 HSBC GLOBAL ASSET MANAGEMENT

World-class investment solutions backed by the strength of the HSBC Group

HSBC Global Asset Management has an outstanding track record and a longstanding

presence globally. With approximately USD409 billion (as on 30 June 2012) of assets under

54

management worldwide and a presence in about 30 countries, it is one of the premier fund

management organizations in the world.

HSBC Global Asset Management in India provides a comprehensive range of investment

management solutions to a diverse client base and is committed to delivering consistent

investment performance, world-class service and a broad range of solutions for all types of

investors. Our range of offerings in India comes under two broad categories Mutual

Fund and Portfolio Management Services.

HSBC TAX SAVER EQUITY

Investment Objective

Aims to provide long term capital appreciation by investing in a diversified portfolio of

equity & equity related instruments of companies across various sectors and industries, with

no capitalization bias The Fund may also invest in fixed income securities

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Nov 20, 2006

Benchmark S&P BSE 200

Asset Size (Rs cr) 196.21 (Mar-30-2013)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

55

3.2.10 BNP PARIBAS ASSET MANAGEMENT INDIA

About BNP Paribas Investment Partners

BNP Paribas Investment Partners is the dedicated autonomous asset management business of

the BNP Paribas Group. BNP Paribas Investment Partners It offers the full range of

investment management services to both institutional and retail clients around the world.

Central to the way we it works is the concept of partnership – both in terms of how we it

behaves as a family of companies and our its relationships with our its clients.

Nearly 800 investment professionals‘ work across our BNP Paribas Investment Partners'

network of some 60 investment centers, each specializing in a particular asset class or type of

product. With total assets under management of EUR 513 billion, BNP Paribas Investment

Partners is the 6th-largest asset manager in Europe and the 15th-largest in the world. Fortis

Mutual Fund have been acquired by BNP Paribas Asset Management, Accordingly, all

existing schemes of Fortis Mutual Fund has been renamed with BNP Paribas with effect from

October 19, 2010.

BNP PARIBAS TAX ADVANTAGE PLAN

Investment Objective

The investment objective of the Scheme is to generate long-term capital growth from a

diversified and actively managed portfolio of equity and equity related securities along with

income tax rebate, as may be prevalent from time to time.

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Dec 20, 2005

56

Asset Size (Rs cr) 118.64 (Mar-30-2013)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

3.2.11 RELIGARE INVESCO ASSET MANAGEMENT COMPANY PRIVATE

LIMITED

Religare Invesco Asset Management Company Private Limited, the domestic asset

management arm of Religare, is the country‘s 13th largest mutual fund house by AUM. With

nearly 2,50,000 folios, we have a presence in 58 business locations across 55 cities within the

country.

A commitment to building a strong, process driven organization that follows a team approach

rather than revolving around star fund managers is central to our success. We cater to both

individual investors and institutional clients through mutual funds and sub-advised portfolios.

We have successfully forayed into managing offshore funds as well.

Our core investment philosophy leverages the inefficiency of equity markets, by relying on

sound research and disciplined portfolio management. Our equity investment philosophy is a

matrix of company, industry, technical and economic analysis. Our fixed income investments

focus on optimizing the risk-adjusted returns by investing in high credit-quality assets,

managing interest rate risk and minimizing liquidity risks. Lotus India Mutual Fund renames

as Religare Mutual Fund w.e.f. February 5, 2009.

57

RELIGARE TAX PLAN

Investment Objective

To generate long term capital growth from a diversified portfolio of predominantly equity

and equity related securities.

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Nov 20, 2006

Asset Size (Rs cr) 134.20 (Mar-30-2013)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

3.2.12 KOTAK MAHINDRA ASSET MANAGEMENT COMPANY LIMITED

Kotak Mahindra Asset Management Company Limited is privately owned investment

manager. The firm manages equity and fixed income, and balanced mutual funds for its

clients. It also manages exchange traded funds for its clients. The firm was founded in 1998

and is based in Mumbai, India. Kotak Mahindra Asset Management Company Limited

operates as a subsidiary of Kotak Mahindra Bank Limited.

KOTAK TAX SAVER

Investment Objective

To generate long-term capital appreciation from a diversified portfolio of equity and equity

related securities and enable investors to avail the income tax rebate, as permitted from time

to time.

58

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Oct 28, 2005

Asset Size (Rs cr) 400.81 (Mar-30-2013)

Minimum Investment Rs.500

Load Details

Entry Load Nil

Exit Load 0.00%

3.2.13 ING INVESTMENT MANAGEMENT (INDIA) PVT. LTD.

About ING Group

ING Group is a global financial institution of Dutch origin with 94,500 employees. ING

offers banking, insurance and asset management services to more than 67 million clients in

over 40 countries. The clients are individuals, families, small businesses, large corporations,

institutions and governments. ING comprises a broad spectrum of prominent businesses that

increasingly serve their clients under the ING brand.

ING Investment Management

At ING Investment Management, we provide a comprehensive range of investment solutions

and services to our clients and partners. We manage assets for institutional clients, fund

distributors and the ING labels.

59

ING Investment Management has nearly €322 billion assets under management. Worldwide

2800 professionals watch over our clients‘ money. We operate along regional lines with

centers of expertise in Europe, Americas and Asia-Pacific. ING Investment Management is

the principal asset manager of ING Group. Against the background of ING Group realizing

its global ambitions, ING Investment Management has also expanded across borders.

Nowadays we are active in well over 25 countries.

ING in India:

In India, ING is present in all three fields of banking, insurance and asset management in the

form of ING Vysya Bank, ING Life Insurance and ING Investment Management

respectively. The presence in all three fields signifies the importance that the group attaches

to the Indian markets and the group's operations here, as well as its bullish future outlook on

the country.

ING Investment Management – India

ING Investment Management (I) Pvt. Ltd has been associated with innovation and responsive

adaptability with sharp minds at work. ING Investment Management has sealed a position of

strength and is considered as one of the top contenders to challenge the market leaders. ING

Investment Management has enjoyed many firsts and has always maintained a pioneering

outlook.

ING Investment Management India operates under two divisions

Mutual Fund

Under the Mutual Fund division, ING offers a range of equity, debt and alternative asset class

funds in Single Manager & Multi Manager category. Each fund follows a stringent

investment process backed by in house research. Multi Manager business offers open

architecture, zero brand bias and active management. The belief to construct a Multi Manager

fund is not by simply combining the third party mutual funds with the best performance

records. Instead, use core research and proprietary investment tools to blend funds which

offer the potential for superior, consistent performance in the future.

60

Portfolio Management Service (PMS)

ING Private is the umbrella brand of ING Investment Management (India) Pvt. Ltd. in India

for all PMS product offerings. This exclusive offering especially created for high net worth

individuals and institutional investors, offers investment solutions that are built on ING‘s

global and local quantitative strategy expertise, using years of in-depth research that together

enable innovation in product design.

ING TAX SAVING FUND

Investment Objective

To generate medium to long term growth of capital along with income tax rebate.

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Mar 12, 2004

Asset Size (Rs cr) 25.99 (Mar-30-2013)

Load Details

Entry Load Nil

Exit Load 0.00%

61

CHAPTER 4

RESULTS, ANALYSIS & DISCUSSION

62

4.1 INTRODUCTION

This chapter deals with analysis and interpretation of fund and market return in relationship with ELSS.

4.2 SBI MAGNUM TAX GAIN

Table 4.1

SBI Magnum Tax Gain Quarterly Return

Year Q1 Q2 Q3 Q4 Average 2012 16.86 0.39 9.37 4.65 7.8175

2011 -7.97 -1.35 -8.37 -8.05 -6.435

2010 0.05 2.89 9.55 0.18 3.1675

2009 -0.26 47.69 18.58 6.72 18.1825

2008 -25.62 -17.06 -4.58 -23.33 -17.6475 Source: Secondary data

Inference

From the table4.1, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -17.6475 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 18.1825. In the year 2010 all

quarter had positive return with average return of 3.1675. In 2011 return fell back to negative

in all quarter with an average return of -6.435. In 2012 return back to positive return for all

quarter with an average return of 7.817

63

Figure 4.1 Comparison of Quarterly Return

Table: 4.2

SBI Magnum Tax Gain Return V/S the Index return

Source: Secondary data

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Rp Rm

2008 -54.86 -52.45

2009 86.41 81.03

2010 12.98 17.43

2011 -23.50 -24.64

2012 34.29 25.70

Total 55.32 47.07

Arp 11.06 SDRp 26.57

Arm 9.414 SDRm 27.15

Beta 0.90 Sharpe 0.03

64

Inference

The fund has performed fairly; the return of the fund is greater for the period 2009, and 2012.

The fund has fairly performed in 2010. In 2008 and 2011 fund return and market index return

at negative zone due to financial crisis. In 2009 it has increased by 86.41 at positive zone.

The average return of the fund is also satisfactory compared to the benchmark index mean.

The Beta of this scheme was 0.90 which shows that it is less volatile and it has lesser risks

than compared to the benchmark index. Its standard deviation was at 26.57 not much

comparable to that of the benchmark at 27.15 has lower risks.

Figure 4.2

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

65

4.3 BIRLA SUN LIFE TAX RELIEF 96

Table: 4.3

Birla Sun Life Tax Relief 96 Quarterly Return

Source: Secondary data

Inference

For the four quarters of year 2008, there is a negative return due to the financial crisis. The

average return is -21.16 which a loss is for the investor. For the year 2009, there was a

recovery from the financial crisis which made the return to jump back to positive figures for

the Q2, Q3 and Q4 with an average return of 21.52. In the year 2010 Q1, Q2, Q3 quarter had

positive return with average return of 3.33. In 2011 return fell back to negative in all quarter

with an average return of -8.3175. In 2012 return back to positive return for Q1, Q3, Q4with

an average return of 8.265.

Figure 4.3

Comparison of Quarterly Return

-40

-20

0

20

40

60

80

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 15.73 -0.27 10.29 7.31 8.265

2011 -9.53 -1.32 -11.71 -10.71 -8.3175

2010 0.21 4.44 11.07 -2.4 3.33

2009 -3.13 59.66 22.68 6.87 21.52

2008 -32.11 -21.62 -3.95 -26.96 -21.16

66

Table: 4.4

Birla Sun Life Tax Relief 96 V/S Index Return

Source: Secondary data

Year Rp Rm

2008 -62.67 -52.45

2009 102.77 81.03

2010 13.46 17.43

2011 -29.62 -24.64

2012 36.60 25.70

Total 60.54 47.07

Arp 12.108 SDRp 31.50

Arm 9.414 SDRm 27.15

Beta 1.05 Sharpe 0.02

67

Inference

From the Table 4.4, the fund has performed fairly; the return of the fund is greater for the

period 2009, and 2012. The fund has fairly performed in 2010. In 2008 and 2011 fund return

and market index return at negative zone due to financial crisis. In 2009 it has increased by

102.77 at positive zone. The average return of the fund is also satisfactory compared to the

benchmark index mean. The Beta of this scheme was 1.05 which shows that it is more

volatile and it has larger risks than compared to the benchmark index. Its standard deviation

was at 31.50, which is much deviation from the normal return to that of the benchmark at

27.15 has lower risks. The standard deviation of fund return and Index return is satisfactory

Figure 4.4

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

120

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

68

4.4 HDFC TAXSAVER

Table 4.5

HDFC Tax Saver Quarterly Return

Source: Secondary data

Inference

From the Table 4.5, the four quarters of year 2008, there is a negative return due to the

financial crisis, but had a positive return for the Q3. The average return is -15.72 which is a

loss for the investor. For the year 2009, there was a recovery from the financial crisis which

made the return to jump back to positive figures for the Q2, Q3 and Q4 with an average

return of 20.41. In the year 2010 quarter had positive return for Q1, Q2, and Q3 with average

return of 6.1775. In 2011 return fell back to negative in all quarter with an average return of

-6.1025. In 2012 return back to positive return for all quarter with an average return of 4.

Figure 4.5

Comparison of Quarterly Return

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 15.71 -2.9 6.59 5.71 4

2011 -6.49 1.09 -11.47 -7.54 -6.1025

2010 4.39 6.12 14.82 -0.62 6.1775

2009 -1.93 51.17 24.92 7.48 20.41

2008 -25.58 -16.82 4.93 -25.41 -15.72

69

Table: 4.6

HDFC TAXSAVER Return V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -51.55 -52.45

2009 99.07 81.03

2010 26.42 17.43

2011 -22.62 -24.64

2012 26.59 25.70

Total 77.91 47.07

Arp 15.582 SDRp 26.54

Arm 9.414 SDRm 27.15

Beta 0.88 Sharpe 0.18

70

Inference

From the Table 4.6, the fund has performed fairly; the return of the fund is greater for the

period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 99.07 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.88 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 26.54 not much comparable

to that of the benchmark at 27.15 has lower risks.

Figure 4.6

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

120

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

71

4.5 ICICI PRUDENTIAL TAX PLAN

Table: 4.7

ICICI Prudential Tax Plan Quarterly Return

Source: Secondary data

Inference

From the Table 4.7, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -18.0175 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 22.1325. In the year 2010,

all quarter had positive return with average return of 5.6225. In 2011 return fell back to

negative inQ1, Q3, Q4 quarter with an average return of -6.52. In 2012 return back to positive

return for all the quarter with an average return of 8.5025.

Figure 4.7

Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 18.28 0.13 8.18 7.42 8.5025

2011 -6.69 0.56 -10.47 -9.48 -6.52

2010 4.64 3.77 12.29 1.79 5.6225

2009 -0.91 51.11 25.62 12.71 22.1325

2008 -28.95 -9.83 -7.51 -25.75 -18.0175

72

Table 4.7

ICICI Prudential Tax Plan V/S Index Return

Source: Secondary data

Year Rp Rm

2008 -56.03 -52.45

2009 112.00 81.03

2010 24.11 17.43

2011 -23.96 -24.64

2012 37.63 25.70

Total 93.75 47.07

Arp 18.75 SDRp 28.39

Arm 9.414 SDRm 27.15

Beta 0.94 Sharpe 0.18

73

Inference

From the Table 4.7, the fund has performed fairly; the return of the fund is greater for the

period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 112.00 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.18 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 28.39 not much comparable

to that of the benchmark at 27.15 has lower risks.

Figure 4.4

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

74

4.6 HDFC LONG TERM ADVANTAGE

Table: 4.9

HDFC Long Term Advantage Quarterly Return

Source: Secondary data

Inference

From the Table 4.9, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -16.4025 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 18.985. In the year 2010 all

quarter had positive return with average return of 6.575. In 2011 return fell back to negative

with only Q2 in positive with an average return of -6.38. In 2012 return back to positive

return for Q1, Q3, Q4with an average return of 6.7625

Figure 4.9

Comparison of Quarterly Return

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 17.43 -1.72 7.56 3.78 6.7625

2011 -6.64 0.29 -10.79 -8.38 -6.38

2010 2.65 6.18 15.56 1.91 6.575

2009 -3.58 52.45 49.93 7.14 18.985

2008 -25.49 -11.51 -3.24 -25.37 -16.4025

75

Table 4.10

HDFC Long Term Advantage V/S Index Return

Source: Secondary data

Year Rp Rm

2008 -52.39 -52.45

2009 88.89 81.03

2010 28.37 17.43

2011 -23.48 -24.64

2012 28.83 25.70

Total 70.22 47.07

Arp 14.044 SDRp 25.98

Arm 9.414 SDRm 27.15

Beta 0.90 Sharpe 0.16

76

Inference

From the Table 4.10, the fund has performed fairly; the return of the fund is greater for the

period 2009, and 2012. The fund has fairly performed in 2010. In 2008 and 2011 fund return

and market index return at negative zone due to financial crisis. In 2009 it has increased by

88.89 at positive zone. The average return of the fund is also satisfactory compared to the

benchmark index mean. The Beta of this scheme was 0.16 which shows that it is less volatile

and it has lesser risks than compared to the benchmark index. Its standard deviation was at

25.98, which is less volatile from the normal return to that of the benchmark at 27.15 has

lower risks.

Figure 4.10

Comparison of Fund Return and Index Return

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

77

4.7BIRLA SUNLIFE TAX PLAN

Table: 4.11

Birla Sunlife Tax Plan Quarterly Return

Source: Secondary data

Inference

From the Table 4.11, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -18.7875 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 16.67. In the year 2010, Q2,

Q3, Q4 quarter had positive return with average return of 5.6225. In 2011 return fell back to

negative in all quarter with an average return of -6.22. In 2012 return back to positive return

for Q1, Q3, Q4 quarter with an average return of 8.22

Figure 4.11 Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 15.76 -0.33 10.23 7.22 8.22

2011 -4.15 -1.74 -8.45 -10.54 -6.22

2010 -0.24 0.51 12.2 0.8 3.3175

2009 -0.29 42.76 18.6 5.61 16.67

2008 -30.66 -15.17 -5.1 -24.22 -18.7875

78

Table 4.12

Birla Sunlife Tax Plan V/S Index Return

Source: Secondary data

Year Rp Rm

2008 -57.69 -52.45

2009 78.31 81.03

2010 13.40 17.43

2011 -22.86 -24.64

2012 36.38 25.70

Total 47.54 47.07

Arp 9.508 SDRp 26.21

Arm 9.414 SDRm 27.15

Beta 0.88 Sharpe 0.01

79

Inference

From the Table 4.12, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 78.31 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.88 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 26.21, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure4.11

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

80

4.8 PRINCIPAL PERSONAL TAX SAVER

Table: 4.13

Principal Personal Tax Saver Quarterly Return

Source: Secondary data

Inference

From the Table 4.13, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -20.86 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 18.4325. In the year 2010,

all quarter had positive return except for the Q4, with average return of 3.975. In 2011 return

fell back to negative in all quarter with an average return of -8.025. In 2012 return back to

positive return for all the quarter with an average return of 7.8975

Figure 4.13 Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 16.02 0.85 9.1 5.62 7.8975

2011 -8.05 -2.19 -12.59 -9.27 -8.025

2010 0.21 4.02 1.92 -1.25 3.975

2009 -2.38 48.42 21.84 5.85 18.4325

2008 -31.15 -14.6 -8.45 -29.24 -20.86

81

Table 4.14

Principal Personal Tax Saver V/S Index Return

Source: Secondary data

Year Rp Rm

2008 -61.91 -52.45

2009 86.87 81.03

2010 16.23 17.43

2011 -28.67 -24.64

2012 34.83 25.70

Total 47.35 47.07

Arp 9.47 SDRp 28.28

Arm 9.414 SDRm 27.15

Beta 0.95 Sharpe -0.06

82

Inference

From the Table 4.14, the fund has performed poorly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 86.87 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.95 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 28.28 which is more volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.14

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

83

4.9 FRANKLIN INDIA TAX SHIELD Table: 4.15

Franklin India Tax Shield Quarterly Return

Source: Secondary data

Inference

From the Table 4.15, the four quarters of year 2008, there is a negative return due to the

financial crisis except shown a positive of 0.23 in Q3 . The average return is -15.045 which a

loss is for the investor. For the year 2009, there was a recovery from the financial crisis

which made the return to jump back to positive figures for the Q2, Q3 and Q4 with an

average return of16.95. In the year 2010, all quarter had positive return with average return of

5.5375. In 2011 return fell back to negative inQ1, Q3, Q4 quarter with an average return of

-4.0025. In 2012 return back to positive return for Q1, Q3, Q4 quarter with an average return

of 6.7975

Figure 4.15

Comparison of Quarterly Return

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 14.47 -1.18 7.66 6.24 6.7975

2011 -3.19 0.19 -5.56 -6.77 -4.0025

2010 4.95 1.74 14.24 1.23 5.5375

2009 -1.91 49.52 14.91 8.28 16.95

2008 -25.63 -14.09 0.23 -20.69 -15.045

84

Table 4.16

Franklin India Tax Shield V/S Index Return

Source: Secondary data

Year Rp Rm

2008 -49.22 -52.45

2009 78.81 81.03

2010 23.47 17.43

2011 -15.19 -24.64

2012 29.38 25.70

Total 67.25 47.07

Arp 13.45 SDRp 23.82

Arm 9.414 SDRm 27.15

Beta 0.80 Sharpe 0.18

85

Inference

From the Table 4.16, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 78.81 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.80 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 23.82, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.16

Comparison of Fund Return and Index Return

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

86

4.10 DSP BLACKROCK TAX SAVER

Table 4.17

DSP BLACKROCK Tax Saver Quarterly Return

Year Q1 Q2 Q3 Q4 Average 2012 16.79 0.79 9.68 8.29 8.8875

2011 -8.3 -0.78 -11.3 -9.14 -7.38

2010 4.49 5.86 12.54 -0.98 5.4775

2009 -3.28 47.9 21.28 6.2 18.025

2008 -32.75 -10.49 -8.19 -21.63 -18.265 Source: Secondary data

Inference

From the Table 4.17, for the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -18.265 which is a loss for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 18.025. In the year 2010,

Q1, Q2, Q3 quarter had positive return with average return of 5.4775. In 2011 return fell back

to negative in all quarter with an average return of -7.38. In 2012 return back to positive

return for all quarter with an average return of 8.88875

Figure 4.17 Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

ren

Year

Q1

Q2

Q3

Q4

87

Table 4.18

DSP BLACKROCK Tax Saver V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -56.68 -52.45

2009 84.22 81.03

2010 23.26 17.43

2011 -26.68 -24.64

2012 39.81 25.70

Total 63.93 47.07

Arp 12.786 SDRp 26.00

Arm 9.414 SDRm 27.15

Beta 0.87 Sharpe 0.10

88

Inference

From the Table 4.18, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 84.22 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.87 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 26.00, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.18

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

89

4.11 TATA TAX SAVINGS FUND

Table 4.19

TATA Tax Savings Fund Quarterly Return

Source: Secondary data

Inference

From the Table 4.19, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -17.6975 which is a loss for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 17.205.In the year 2010 all

quarter had positive return with average return of 4.285. In 2011 return fell back to negative

in the first quarter and last with an average return of -4.8925. In 2012 return back to positive

return for Q1, Q3, Q4 quarter with an average return of 6.325

Figure 4.19

Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 12.07 -0.42 829 5.39 6.325

2011 -5.77 0.15 7.58 -6.37 -4.8925

2010 1.15 2.96 11.1 1.98 4.295

2009 -2 46.3 16.97 7.53 17.205

2008 -27.56 -16.03 -2.86 -23.34 -17.6975

90

Table 4.20

TATA Tax Savings Fund V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -55.17 -52.45

2009 80.37 81.03

2010 17.97 17.43

2011 -18.34 -24.64

2012 27.32 25.70

Total 52.14 47.07

Arp 10.428 SDRp 25.14

Arm 9.414 SDRm 27.15

Beta 0.84 Sharpe 0.06

91

Inference

From the Table 4.20, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 80.37 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.84 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 25.14, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.18

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

92

4.12 HSBC TAX SAVER EQUITY

Table 4.21

HSBC TAX SAVER Equity Quarterly Return

Year Q1 Q2 Q3 Q4 Average 2012 15.58 1.87 9.394 7.33 8.68

2011 -8.39 -1.36 -10.6 -6.22 -6.6425

2010 2.08 2.4 12.45 0.3 4.3025

2009 -1.77 42.63 19.53 7.53 16.98

2008 -32.11 -10.53 -3.34 -17.72 -15.925 Source: Secondary data

Inference

From the Table 4.21, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -15.925 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 16.98. In the year 2010 all

quarter had positive return with average return of 4.3025. In 2011 return fell back to negative

in all quarter with an average return of -6.6425. In 2012 return back to positive return for all

quarter with an average return of 8.68.

Figure 4.21 Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

93

Table4.22

HSBC Tax Saver Equity V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -51.69 -52.45

2009 80.08 81.03

2010 17.90 17.43

2011 -24.24 -24.64

2012 38.93 25.70

Total 60.98 47.07

Arp 12.196 SDRp 24.04

Arm 9.414 SDRm 27.15

Beta 0.80 Sharpe 0.23

94

Inference

From the Table 4.22, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 80.08 at positive zone. The

average return of the fund is also satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.80 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 24.04, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.22

Comparison of Fund Return and Index Return

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

95

4.13 BNP PARIBAS TAX ADVANTAGE PLAN

Table 4.23

BNP PARIBAS Tax Advantage Plan Gain Quarterly Return

Source: Secondary data

Inference

From the Table 4.23, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -22.6775 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 15.2625. In the year 2010,

Q1, Q2, Q3 quarters had positive return with average return of 3.665. In 2011 return fell back

to negative in Q1, Q3, Q4 quarters with an average return of -3.8875. In 2012 return back to

positive return for all quarter with an average return of 7.7725

Figure 4.23

Comparison of Quarterly Return

-50

-40

-30

-20

-10

0

10

20

30

40

50

2012 2011 2010 2009 2008Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 15.23 0.96 7.37 7.53 7.7725

2011 -6.61 3.38 -4.85 -7.47 -3.8875

2010 1.09 4.6 11.49 -2.52 3.665

2009 -1.7 39.2 19.35 4.2 15.2625

2008 -38.05 -19.41 -9.45 -23.8 -22.6775

96

Table 4.24

BNP PARIBAS Tax Advantage Plan V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -65.56 -52.45

2009 70.18 81.03

2010 14.92 17.43

2011 -15.00 -24.64

2012 34.31 25.70

Total 38.85 47.07

Arp 7.77 SDRp 24.78

Arm 9.414 SDRm 27.15

Beta 0.82 Sharpe -0.03

97

Inference

From the Table 2.24, the fund has performed poorly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 70.18 at positive zone. The

average return of the fund is not satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.82 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 24.78, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.24

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

98

4.14 RELIGARE TAX PLAN

Table 4.25

RELIGARE Tax Plan Gain Quarterly Return

Source: Secondary data

Inference

From the Table 4.25, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -15.26 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 17.725. In the year 2010,

Q1, Q2, Q3 quarters had positive return with average return of 5.25. In 2011 return fell back

to negative in Q1, Q3, Q4 quarters with an average return of -4.98. In 2012 return back to

positive return for Q1, Q3, Q4 quarters with an average return of 6.98

Figure 4.25

Comparison of Quarterly Return

-30

-20

-10

0

10

20

30

40

50

2012 2011 2010 2009 2008

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 14.46 -.75 8.17 6.04 6.98

2011 -6.13 3.55 -8.02 -9.32 -4.98

2010 3.35 6.04 12.88 -1.27 5.25

2009 -4.34 43.7 23.14 8.4 17.725

2008 -25.49 -19.35 -1.42 -14.78 -15.26

99

Table 4.26

RELIGARE Tax Plan V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -49.51 -52.45

2009 83.49 81.03

2010 22.13 17.43

2011 -18.92 -24.64

2012 30.31 25.70

Total 67.5 47.07

Arp 13.5 SDRp 24.77

Arm 9.414 SDRm 27.15

Beta 0.82 Sharpe 0.21

100

Inference

From Table 4.26, the fund has performed fairly well; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 83.49 at positive zone. The

average return of the fund is not satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.82 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 24.77, which is less volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.26

Comparison of Fund Return and Index Return

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

101

4.15 KOTAK TAX SAVER

Table 4.27

KOTAK Tax Saver Quarterly Return

Source: Secondary data

Inference

From Table 4.27, the four quarters of year 2008, there is a negative return due to the financial

crisis. The average return is -19.7275 which a loss is for the investor. For the year 2009, there

was a recovery from the financial crisis which made the return to jump back to positive

figures for the Q2, Q3 and Q4 with an average return of 16.57. In the year 2010, Q1, Q2, Q3

quarters had positive return with average return of 4.8. In 2011 return fell back to negative in

all quarters with an average return of -7.1675. In 2012 return back to positive return for all

quarters with an average return of 8.2025.

Figure4.27 Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 17.06 .81 9.13 5.81 8.2025

2011 -7.92 -0.24 -11.75 -8.76 -7.1675

2010 2.6 3.62 14.2 -1.22 4.8

2009 -4.27 47.41 18.38 4.76 16.57

2008 -30.34 -17.86 -7.26 -23.45 -19.7275

102

Table 4.28

KOTAK Tax Saver V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -59.38 -52.45

2009 74.99 81.03

2010 19.93 17.43

2011 -26.03 -24.64

2012 36.25 25.70

Total 45.76 47.07

Arp 9.152 SDRp 28.87

Arm 9.414 SDRm 27.15

Beta 0.97 Sharpe -0.03

103

Inference

From the Table 4.28, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 74.99 at positive zone. The

average return of the fund is not satisfactory compared to the benchmark index mean. The

Beta of this scheme was 0.97 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 28.87, which is more volatile

from the normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.28

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

104

4.16 ING TAX SAVING FUND

Table 4.29

ING Tax Saving Fund Quarterly Return

Source: Secondary data

Inference

From the Table 4.29, the four quarters of year 2008, there is a negative return due to the

financial crisis. The average return is -22.42 which a loss is for the investor. For the year

2009, there was a recovery from the financial crisis which made the return to jump back to

positive figures for the Q2, Q3 and Q4 with an average return of 19.96. In the year 2010, all

quarters had positive return with average return of 6.0125. In 2011 return fell back to

negative in all quarters with an average return of -5.7775. In 2012 return back to positive

return for Q1, Q3, Q4 quarters with an average return of 4.7725

Figure4.29 Comparison of Quarterly Return

-40

-30

-20

-10

0

10

20

30

40

50

60

2012 2011 2010 2009 2008

Retu

rn

Year

Q1

Q2

Q3

Q4

Year Q1 Q2 Q3 Q4 Average 2012 9.06 -.98 5.75 5.26 4.7725

2011 -5.48 -1.45 -9.22 -6.96 -5.7775

2010 2.55 7.6 12.25 1.65 6.0125

2009 -2.3 52.39 23.9 5.85 19.96

2008 -33.39 -12.79 -12.04 -31.46 -22.42

105

Table4.30

ING Tax Saving Fund V/S the Index return

Source: Secondary data

Year Rp Rm

2008 -64.98 -52.45

2009 95.26 81.03

2010 25.90 17.43

2011 -21.32 -24.64

2012 20.21 25.70

Total 55.07 47.07

Arp 11.014 SDRp 30.05

Arm 9.414 SDRm 27.15

Beta 1.00 Sharpe -0.01

106

Inference

From the Table 4.30, the fund has performed fairly; the return of the fund is in positive for

the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index return at

negative zone due to financial crisis. In 2009 it has increased by 95.26 at positive zone. The

average return of the fund is not satisfactory compared to the benchmark index mean. The

Beta of this scheme was 100 which show that it is volatile and it has risks than compared to

the benchmark index. Its standard deviation was at 30.05, which is more volatile from the

normal return to that of the benchmark at 27.15 has lower risks.

Figure 4.30

Comparison of Fund Return and Index Return

-80

-60

-40

-20

0

20

40

60

80

100

120

2008 2009 2010 2011 2012

Return

Year

Rp

Rm

107

Table 4.31

Comparative Performance Analysis based on Sharps Ratio

Schemes Ranking HSBC Tax Saver Equity 1

Religare Tax Plan 2

Franklin India Tax Shield 3

ICICI Prudential Tax Plan 4

HDFC Tax Saver 5

HDFC Long Term Advantage 6

DSP BlackRock Tax Saver 7

TATA Tax Savings Fund 8

Principal Personal Tax Saver 9

SBI Magnum Tax Gain 10

Birla Sun Life Tax Relief 96 11

Birla SunLife Tax Plan 12

ING Tax Saving Fund 13

BNP Paribas Tax Advantage Plan 14

Kotak Tax Saver 15

108

Hypothesis

Ho: there is no relationship between the scheme return and index return

H1: there is significant relation between scheme return and index return

Taking the correlation of the first 5 ranked ELSS schemes with its index return

Table 4.32

Top 5 Schemes Return and its Correlation to Index Return

Schemes Correlation Inference

HSBC Tax Saver Equity

0.993597 Highly Positive Correlation

Religare Tax Plan

0.999681 Highly Positive Correlation

Franklin India Tax Shield

0.997763 Highly Positive Correlation

ICICI Prudential Tax Plan

0.998663 Highly Positive Correlation

HDFC Tax Saver

0.997295 Highly Positive Correlation

From the Table 4.32, we can see that all the top 5 schemes is highly positive correlation to the index return

Therefore reject null hypothesis, that is, there is significant relation between scheme return and index return

109

CHAPTER 5

FINDINGS, CONCLUSION AND RECOMMENDATION

110

5.1 FINDINGS

All funds had a step declined in the year 2008 and 2010 because of financial crisis and

melt down stock market.

The analysis of Mutual funds schemes based on NAV returns for a period of 5 years

ranked.

Some Equity Linked Savings Schemes have shown better returns than their respective

benchmark index.

The beta of Birla Sun Life Tax Relief 96, Principal Personal Tax Saver Kotak Tax

Saver, ING Tax Saving Fund suggest that they are highly sensitive be relative to the

market as a whole.

The beta of SBI Magnum Tax Gain, HDFC Tax Saver, ICICI Prudential Tax Plan,

HDFC Long Term Advantage, Birla Sunlife Tax Plan, Franklin India Tax Shield,

DSP BlackRock Tax Saver, TATA Tax Savings Fund, HSBC Tax Saver Equity, BNP

Paribas Tax Advantage Plan, Religare Tax Plan Gain suggest that they are less

sensitive be relative to the market as a whole.

The performance measures of all Equity Linked Savings Schemes are not that

satisfactory on an average, but some are having fairly good return.

SBI MAGNUM TAX GAIN the four quarters of year 2008, there is a negative return

due to the financial crisis. The average return is -17.6475 which a loss is for the

investor. For the year 2009, there was a recovery from the financial crisis which made

the return to jump back to positive figures for the Q2, Q3 and Q4 with an average

return of 18.1825. In the year 2010 all quarter had positive return with average return

of 3.1675. In 2011 return fell back to negative in all quarter with an average return of

-6.435. In 2012 return back to positive return for all quarter with an average return of

7.817.

111

SBI MAGNUM TAX GAIN, the fund has performed fairly; the return of the fund is

greater for the period 2009, and 2012. The fund has fairly performed in 2010. In 2008

and 2011 fund return and market index return at negative zone due to financial crisis.

In 2009 it has increased by 86.41 at positive zone.

SBI MAGNUM TAX GAIN, the average return of the fund is also satisfactory

compared to the benchmark index mean. The Beta of this scheme was 0.90 which

shows that it is less volatile and it has lesser risks than compared to the benchmark

index. Its standard deviation was at 26.57 not much comparable to that of the

benchmark at 27.15 has lower risks. The sharps ratio is 0.03.

For the four quarters of year 2008, BIRLA SUN LIFE TAX RELIEF 96, there is a

negative return due to the financial crisis. The average return is -21.16 which a loss is

for the investor. For the year 2009, there was a recovery from the financial crisis

which made the return to jump back to positive figures for the Q2, Q3 and Q4 with an

average return of 21.52. In the year 2010 Q1, Q2, Q3 quarter had positive return with

average return of 3.33. In 2011 return fell back to negative in all quarter with an

average return of -8.3175. In 2012 return back to positive return for Q1, Q3, Q4with

an average return of 8.265.

BIRLA SUN LIFE TAX RELIEF 96, the fund has performed fairly; the return of the

fund is greater for the period 2009, and 2012. The fund has fairly performed in 2010.

In 2008 and 2011 fund return and market index return at negative zone due to

financial crisis. In 2009 it has increased by 102.77 at positive zone.

BIRLA SUN LIFE TAX RELIEF 96,The average return of the fund is also

satisfactory compared to the benchmark index mean. The Beta of this scheme was

1.05 which shows that it is more volatile and it has larger risks than compared to the

benchmark index. Its standard deviation was at 31.50, which is much deviation from

the normal return to that of the benchmark at 27.15 has lower risks. The standard

deviation of fund return and Index return is satisfactory. The sharp ratio is 0.02

112

HDFC TAXSAVER, the four quarters of year 2008, there is a negative return due to

the financial crisis, but had a positive return for the Q3. The average return is -175.72

which is a loss for the investor. For the year 2009, there was a recovery from the

financial crisis which made the return to jump back to positive figures for the Q2, Q3

and Q4 with an average return of 20.41. In the year 2010 quarter had positive return

for Q1, Q2, and Q3 with average return of 6.1775. In 2011 return fell back to negative

in all quarter with an average return of -6.1025. In 2012 return back to positive return

for all quarter with an average return of 4.

HDFC TAXSAVER, the fund has performed fairly; the return of the fund is greater

for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market index

return at negative zone due to financial crisis. In 2009 it has increased by 99.07 at

positive zone. The average return of the fund is also satisfactory compared to the

benchmark index mean. The Beta of this scheme was 0.88 which shows that it is less

volatile and it has lesser risks than compared to the benchmark index. Its standard

deviation was at 26.54 not much comparable to that of the benchmark at 27.15 has

lower risks. The sharps ratio is 0.18.

ICICI PRUDENTIAL TAX PLAN, the four quarters of year 2008, there is a negative

return due to the financial crisis. The average return is -18.0175 which a loss is for the

investor. For the year 2009, there was a recovery from the financial crisis which made

the return to jump back to positive figures for the Q2, Q3 and Q4 with an average

return of 22.1325. In the year 2010, all quarter had positive return with average return

of 5.6225. In 2011 return fell back to negative inQ1, Q3, Q4 quarter with an average

return of -6.52. In 2012 return back to positive return for all the quarter with an

average return of 8.5025.

ICICI PRUDENTIAL TAX PLAN, the fund has performed fairly; the return of the

fund is greater for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and

market index return at negative zone due to financial crisis. In 2009 it has increased

by 112.00 at positive zone. The average return of the fund is also satisfactory

compared to the benchmark index mean. The Beta of this scheme was 0.18 which

shows that it is less volatile and it has lesser risks than compared to the benchmark

113

index. Its standard deviation was at 28.39 not much comparable to that of the

benchmark at 27.15 has lower risks. The sharps ratio for the scheme is 0.18.

HDFC LONG TERM ADVANTAGE, the four quarters of year 2008, there is a

negative return due to the financial crisis. The average return is -16.4025 which a loss

is for the investor. For the year 2009, there was a recovery from the financial crisis

which made the return to jump back to positive figures for the Q2, Q3 and Q4 with an

average return of 18.985. In the year 2010 all quarter had positive return with average

return of 6.575. In 2011 return fell back to negative with only Q2 in positive with an

average return of -6.38. In 2012 return back to positive return for Q1, Q3, Q4with an

average return of 6.7625.

HDFC LONG TERM ADVANTAGE, the fund has performed fairly; the return of the

fund is greater for the period 2009, and 2012. The fund has fairly performed in 2010.

In 2008 and 2011 fund return and market index return at negative zone due to

financial crisis. In 2009 it has increased by 88.89 at positive zone. The average return

of the fund is also satisfactory compared to the benchmark index mean. The Beta of

this scheme was 0.16 which shows that it is less volatile and it has lesser risks than

compared to the benchmark index. Its standard deviation was at 25.98, which is less

volatile from the normal return to that of the benchmark at 27.15 has lower risks. The

sharps ratio for the scheme is 0.16.

BIRLA SUNLIFE TAX PLAN, the four quarters of year 2008, there is a negative

return due to the financial crisis. The average return is -18.7875 which a loss is for the

investor. For the year 2009, there was a recovery from the financial crisis which made

the return to jump back to positive figures for the Q2, Q3 and Q4 with an average

return of 16.67. In the year 2010, Q2, Q3, Q4 quarter had positive return with average

return of 5.6225. In 2011 return fell back to negative in all quarter with an average

return of -6.22. In 2012 return back to positive return for Q1, Q3, Q4 quarter with an

average return of 8.22.

BIRLA SUNLIFE TAX PLAN, the fund has performed fairly; the return of the fund

is in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and

114

market index return at negative zone due to financial crisis. In 2009 it has increased

by 78.31 at positive zone. The average return of the fund is also satisfactory compared

to the benchmark index mean. The Beta of this scheme was 0.88 which shows that it

is less volatile and it has lesser risks than compared to the benchmark index. Its

standard deviation was at 26.21, which is less volatile from the normal return to that

of the benchmark at 27.15 has lower risks. The sharps ratio for the scheme is 0.01.

PRINCIPAL PERSONAL TAX SAVER, the four quarters of year 2008, there is a

negative return due to the financial crisis. The average return is 20.86 which a loss is

for the investor. For the year 2009, there was a recovery from the financial crisis

which made the return to jump back to positive figures for the Q2, Q3 and Q4 with an

average return of 18.4325. In the year 2010, all quarter had positive return except for

the Q4, with average return of 3.975. In 2011 return fell back to negative in all quarter

with an average return of -8.025. In 2012 return back to positive return for all the

quarter with an average return of 7.8975.

PRINCIPAL PERSONAL TAX SAVER, the fund has performed poorly; the return of

the fund is in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund

return and market index return at negative zone due to financial crisis. In 2009 it has

increased by 86.87 at positive zone. The average return of the fund is also satisfactory

compared to the benchmark index mean. The Beta of this scheme was 0.95 which

shows that it is less volatile and it has lesser risks than compared to the benchmark

index. Its standard deviation was at 28.28, which is more volatile from the normal

return to that of the benchmark at 27.15 has lower risks. The sharps ratio for the

scheme is -0.06.

FRANKLIN INDIA TAX SHIELD, the four quarters of year 2008, there is a negative

return due to the financial crisis except shown a positive of 0.23 in Q3 . The average

return is -15.045 which a loss is for the investor. For the year 2009, there was a

recovery from the financial crisis which made the return to jump back to positive

figures for the Q2, Q3 and Q4 with an average return of16.95. In the year 2010, all

quarter had positive return with average return of 5.5375. In 2011 return fell back to

115

negative inQ1, Q3, Q4 quarter with an average return of -4.0025. In 2012 return back

to positive return for Q1, Q3, Q4 quarter with an average return of 6.7975.

FRANKLIN INDIA TAX SHIELD, the fund has performed fairly; the return of the

fund is in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return

and market index return at negative zone due to financial crisis. In 2009 it has

increased by 78.81 at positive zone. The average return of the fund is also satisfactory

compared to the benchmark index mean. The Beta of this scheme was 0.80 which

shows that it is less volatile and it has lesser risks than compared to the benchmark

index. Its standard deviation was at 23.82, which is less volatile from the normal

return to that of the benchmark at 27.15 has lower risks. The sharps ratio for the

scheme is 0.18.

DSP BLACKROCK TAX SAVER, for the four quarters of year 2008, there is a

negative return due to the financial crisis. The average return is -18.265 which is a

loss for the investor. For the year 2009, there was a recovery from the financial crisis

which made the return to jump back to positive figures for the Q2, Q3 and Q4 with an

average return of 18.025. In the year 2010, Q1, Q2, Q3 quarter had positive return

with average return of 5.4775. In 2011 return fell back to negative in all quarter with

an average return of -7.38. In 2012 return back to positive return for all quarter with

an average return of 8.88875.

DSP BLACKROCK TAX SAVER, the fund has performed fairly; the return of the

fund is in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return

and market index return at negative zone due to financial crisis. In 2009 it has

increased by 84.22 at positive zone. The average return of the fund is also satisfactory

compared to the benchmark index mean. The Beta of this scheme was 0.87 which

shows that it is less volatile and it has lesser risks than compared to the benchmark

index. Its standard deviation was at 26.00, which is less volatile from the normal

return to that of the benchmark at 27.15 has lower risks. The sharps ratio for the

scheme is 0.10.

116

TATA TAX SAVINGS FUND, the four quarters of year 2008, there is a negative

return due to the financial crisis. The average return is -17.6975 which is a loss for the

investor. For the year 2009, there was a recovery from the financial crisis which made

the return to jump back to positive figures for the Q2, Q3 and Q4 with an average

return of 17.205.In the year 2010 all quarter had positive return with average return of

4.285. In 2011 return fell back to negative in the first quarter and last with an average

return of -4.8925. In 2012 return back to positive return for Q1, Q3, Q4 quarter with

an average return of 6.325.

TATA TAX SAVINGS FUND, the fund has performed fairly; the return of the fund

is in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and

market index return at negative zone due to financial crisis. In 2009 it has increased

by 80.37 at positive zone. The average return of the fund is also satisfactory compared

to the benchmark index mean. The Beta of this scheme was 0.84 which shows that it

is less volatile and it has lesser risks than compared to the benchmark index. Its

standard deviation was at 25.14, which is less volatile from the normal return to that

of the benchmark at 27.15 has lower risks. The sharps ratio for the scheme is 0.06.

HSBC TAX SAVER EQUITY, the four quarters of year 2008, there is a negative

return due to the financial crisis. The average return is -15.925 which a loss is for the

investor. For the year 2009, there was a recovery from the financial crisis which made

the return to jump back to positive figures for the Q2, Q3 and Q4 with an average

return of 16.98. In the year 2010 all quarter had positive return with average return of

4.3025. In 2011 return fell back to negative in all quarter with an average return of -

6.6425. In 2012 return back to positive return for all quarter with an average return of

8.68.

HSBC TAX SAVER EQUITY, the fund has performed fairly; the return of the fund is

in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and

market index return at negative zone due to financial crisis. In 2009 it has increased

by 80.08 at positive zone. The average return of the fund is also satisfactory compared

to the benchmark index mean. The Beta of this scheme was 0.80 which shows that it

is less volatile and it has lesser risks than compared to the benchmark index. Its

117

standard deviation was at 24.04, which is less volatile from the normal return to that

of the benchmark at 27.15 has lower risks. The sharps ratio for the scheme is 0.23.

BNP PARIBAS TAX ADVANTAGE PLAN, the four quarters of year 2008, there is

a negative return due to the financial crisis. The average return is -22.6775 which a

loss is for the investor. For the year 2009, there was a recovery from the financial

crisis which made the return to jump back to positive figures for the Q2, Q3 and Q4

with an average return of 15.2625. In the year 2010, Q1, Q2, Q3 quarters had positive

return with average return of 3.665. In 2011 return fell back to negative in Q1, Q3, Q4

quarters with an average return of -3.8875. In 2012 return back to positive return for

all quarter with an average return of 7.7725.

BNP PARIBAS TAX ADVANTAGE PLAN, the fund has performed poorly; the

return of the fund is in positive for the period 2009, 2010 and 2012. In 2008 and 2011

fund return and market index return at negative zone due to financial crisis. In 2009 it

has increased by 70.18 at positive zone. The average return of the fund is not

satisfactory compared to the benchmark index mean. The Beta of this scheme was

0.82 which shows that it is less volatile and it has lesser risks than compared to the

benchmark index. Its standard deviation was at 24.78, which is less volatile from the

normal return to that of the benchmark at 27.15 has lower risks. The sharps ratio for

the scheme is -0.03.

RELIGARE TAX PLAN, the four quarters of year 2008, there is a negative return due

to the financial crisis. The average return is -15.26 which a loss is for the investor. For

the year 2009, there was a recovery from the financial crisis which made the return to

jump back to positive figures for the Q2, Q3 and Q4 with an average return of 17.725.

In the year 2010, Q1, Q2, Q3 quarters had positive return with average return of 5.25.

In 2011 return fell back to negative in Q1, Q3, Q4 quarters with an average return of -

4.98. In 2012 return back to positive return for Q1, Q3, Q4 quarters with an average

return of 6.98.

RELIGARE TAX PLAN, the fund has performed fairly well; the return of the fund is

in positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and

market index return at negative zone due to financial crisis. In 2009 it has increased

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by 83.49 at positive zone. The average return of the fund is not satisfactory compared

to the benchmark index mean. The Beta of this scheme was 0.82 which shows that it

is less volatile and it has lesser risks than compared to the benchmark index. Its

standard deviation was at 24.77, which is less volatile from the normal return to that

of the benchmark at 27.15 has lower risks. The sharps ratio for the scheme is 0.21.

KOTAK TAX SAVER, the four quarters of year 2008, there is a negative return due

to the financial crisis. The average return is -19.7275 which a loss is for the investor.

For the year 2009, there was a recovery from the financial crisis which made the

return to jump back to positive figures for the Q2, Q3 and Q4 with an average return

of 16.57. In the year 2010, Q1, Q2, Q3 quarters had positive return with average

return of 4.8. In 2011 return fell back to negative in all quarters with an average return

of -7.1675. In 2012 return back to positive return for all quarters with an average

return of 8.2025.

KOTAK TAX SAVER, the fund has performed fairly; the return of the fund is in

positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market

index return at negative zone due to financial crisis. In 2009 it has increased by 74.99

at positive zone. The average return of the fund is not satisfactory compared to the

benchmark index mean. The Beta of this scheme was 0.97 which shows that it is less

volatile and it has lesser risks than compared to the benchmark index. Its standard

deviation was at 28.87, which is more volatile from the normal return to that of the

benchmark at 27.15 has lower risks. The sharps ratio for the scheme is -0.03.

ING TAX SAVING FUND, the four quarters of year 2008, there is a negative return

due to the financial crisis. The average return is -22.42 which a loss is for the investor.

For the year 2009, there was a recovery from the financial crisis which made the

return to jump back to positive figures for the Q2, Q3 and Q4 with an average return

of 19.96. In the year 2010, all quarters had positive return with average return of

6.0125. In 2011 return fell back to negative in all quarters with an average return of -

5.7775. In 2012 return back to positive return for Q1, Q3, Q4 quarters with an average

return of 4.7725.

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ING TAX SAVING FUND, the fund has performed fairly; the return of the fund is in

positive for the period 2009, 2010 and 2012. In 2008 and 2011 fund return and market

index return at negative zone due to financial crisis. In 2009 it has increased by 95.26

at positive zone. The average return of the fund is not satisfactory compared to the

benchmark index mean. The Beta of this scheme was 100 which show that it is

volatile and it has risks than compared to the benchmark index. Its standard deviation

was at 30.05, which is more volatile from the normal return to that of the benchmark

at 27.15 has lower risks. The sharps ratio for the scheme is -0.01.

HSBC Tax Saver Equity scheme is the having the highest Sharp.

The schemes return is highly correlated to the index return, that is the market

fluctuation has an high impact on the schemes.

5.2 CONCLUSION

Saving money is not enough. Each of us also need to invest the savings intelligently in

order to have enough money available for funding the higher education of one’s children,

for buying a house, or for one’s own golden years.

The study will guide the new investor who wants to invest in mutual fund schemes by

providing knowledge about how to measure the risk and return of particular scrip or mutual

fund schemes of different companies. The biggest advantage of the Mutual Funds is the

diversified investment and transparency in the operation of the Asset management Company.

The study is about understanding and comparing the various tax saving instruments in the

market with focus on the equity linked saving schemes. The performance of various funds is

evaluated using various parameters of risk and return and comparing their performance with

120

its benchmark S&P BSE SENSEX. It is just not the past performance or returns, but

qualitative criteria like reputation and performance of fund house, credentials and expertise of

the fund manager and the other funds managed.

Finally, the fund chosen by the investor should match the risk appetite of the investor. It is

suggested that the equity linked saving scheme should be seriously considered by investors

because of the dual advantage of tax saving and high return.

5.3 SUGGESTIONS

For the scheme, SBI MAGNUM TAX GAIN, beta is less volatile. Hence it is

suggested that the companies should not reallocate their funds according to the

market performance.

For the scheme, BIRLA SUNLIFE TAX PLAN RELIEF 96, the beta of the scheme

shows that it’s more sensitive to the index. Hence it is suggested that the companies

can reallocate their funds according to the market performance.

For the scheme, HDFC TAXSAVER, the beta of the scheme shows that it’s less

sensitive to the index. Hence it is suggested that the companies should not reallocate

their funds according to the market performance.

The beta of ICICI PRUDENTIAL TAX PLAN is high and it is more volatile. Hence

it is suggested that the companies can reallocate their funds according to the market

performance.

The beta of HDFC LONG TERM ADVANTAGE is low and it is less volatile.

Hence it is suggested that the companies should not reallocate their funds according

to the market performance.

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The beta of BIRLA SUNLIFE TAX PLAN is low and it is less volatile. Hence it is

suggested that the companies should not reallocate their funds according to the

market performance.

The beta of PRINCIPAL PERSONAL TAX SAVER is high and it is more volatile.

Hence it is suggested that the companies can reallocate their funds according to the

market performance.

The beta of FRANKLIN INDIA TAX SHIELD is high and it is more volatile.

Hence it is suggested that the companies can reallocate their funds according to the

market performance.

The beta of DSP BLACKROCK TAX SAVER is low and it is less volatile. Hence it

is suggested that the companies should not reallocate their funds according to the

market performance.

The beta of TATA TAX SAVINGS FUND is low and it is less volatile. Hence it is

suggested that the companies should not reallocate their funds according to the

market performance.

The beta of HSBC TAX SAVER EQUITY is low and it is less volatile. Hence it is

suggested that the companies should not reallocate their funds according to the

market performance.

The beta of BNP PARIBAS TAX ADVANTAGE PLAN is low and it is less

volatile. Hence it is suggested that the companies should not reallocate their funds

according to the market performance.

The beta of RELIGARE TAX PLAN is low and it is less volatile. Hence it is

suggested that the companies should not reallocate their funds according to the

market performance

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The beta of KOTAK TAX SAVER is high and it is more volatile. Hence it is

suggested that the companies can reallocate their funds according to the market

performance

The beta of ING TAX SAVING FUND is high and it is more volatile. Hence it is

suggested that the companies can reallocate their funds according to the market

performance

The top 5 schemes are: HSBC TaxSaver Equity, Religare Tax Plan, Franklin India

Tax Shield, ICICI Prudential Tax Plan and HDFC TaxSaver. Investing in HSBC

Tax Saver Equity is the best option in all 15 schemes according to Sharps Index

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BIBLIOGRAPHY

BOOKS

Chandra Prasanna, Investment Analysis and Portfolio Management, 2nd

edition, Tata McGraw-Hill publishing company Ltd., New Delhi, 2005.

Fischer Donald E & Ronald Jordan J, Security Analysis and Portfolio

Management, 6th

edition, Pearson Prentice Hall, New Delhi, 2009.

Avadhani V.A, Investments and Securities Markets in India,2nd edition

Himalaya Publishing House, 2003.

JOURNALS

Indian journal of finance, Vol III, Jan 2011

WEBSITES

www.valueresearchonline.com

www.mutualfundindia.com

www.amfiindia.com

www.moneycontrol.com

www.bseindia.com

www.yahoofinance.com

www.sebi.gov.in

www.morningstar.in

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ANNEXURE

STANDARD DEVIATION

Standard Deviation (Risk) of the Fund:

Where: p : Risk of the Fund.

Rp : Return of the fund.

Standard Deviation (Risk) of the benchmark index:

Where

Rm Index Return (Market Return)

m Risk of the Index

1/2

n Rm2 - ( Rm)

2

m=

+= n

2

n Rp2 - ( Rp)

2

n2

p = 1/2

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BETA

Beta of the Fund:

SHARPE’S MEASURE

Sharp index = Portfolio average return – risk free rate of return / standard deviation of the

Portfolio return

CORRELATION

x: return of fund

y: return of index

Where:

p : Beta of the fund.

Rp: Return of the fund.

ARp: Average return of the Mutual

Fund Scheme.

ARm: Average return of the

benchmark index.

p =

n (Rp - ARp) (Rm – ARm

n

i = 1

Rm – ARm2