training report on analysis of mutual fund schemes w.r.t karvy

8/6/2019 Training Report on Analysis of Mutual Fund Schemes w.r.t Karvy

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RATIONALE FOR THE STUDY

Practical knowledge is an important suffix to theoretical knowledge. One cannot merely

depend upon the theoretical knowledge. Classroom lectures make the fundamental concepts

of management clear. They also facilitate the learning of practical things. However to

develop healthy managerial and administrative skills potential managers, it is necessary that

they combine their classroom learning with real life project research plays a significant role

in the curriculum of Business Management Courses.

Any science without its practical application or knowledge is considered to be unsystematic.

Since management is a developing science, the students of Management Degree courses are

required to undergo a project in the final year of the course.

Thus for the fulfillment of the above requirement a project was undertaken by me on the topic

ANALYSIS OF MUTUAL FUND SCHEMES. The project was a good

experience and helped me in widening my knowledge and sharpening my managerial skills.

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TITLE OF THE PROJECT

ANALYSIS OF MUTUAL FUND

SCHEMES

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OBJECTIVES OF THE STUDY

The present study focuses on the performance appraisal of mutual funds schemes. The

objectives of the research are:

To understand the concept of mutual funds and get an insight of working of the

mutual funds.

To evaluate the funds sensitivity to the market movements by calculating beta.

To evaluate funds risk adjusted return

To evaluate the performance of mutual funds schemes by applying the Sharpe index.

To find out various aspect of mutual fund for future prediction.

To establish framework for decision regarding various schemes available in market.

ASSUMPTIONS UNDER THE STUDY/HYPOTHESIS

Rate of risk less return, that is bank rate for 1 year has been taken as 7.5 %

Secondary data sources are assumed to be done.

Data provided by karvy is free from error.

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SCOPE OF THE STUDY1 . Investors

Investors are the people who put their money or invest in the Mutual Fund. Every investor,

given his/her financial position and personal disposition, has a certain inclination to take risk.

The more risk one is capable of taking, the more return one can expect to get, and vice versa.

However, most people have neither the time nor the knowledge to directly invest in the

market. Mutual Fund is a solution for investors who lack either the time or the inclination or

the necessary skills to actively manage their investments in individual securities. In the

scheme of a Mutual Fund, the investor may have invested in a bank or any other safe option,

thus depriving them of the possibility of getting a better return.

2 . Asset Management Company (AMC):

Asset Management Companies are those companies who manage the investment portfolios of

the schemes such as SCMF, FI, BMF, SMF, LICMF, etc.

Its income comes from the management fee that it charges for its services. The management

fee is calculated as a percentage of the net asset that is managed. In some countries, the

management fee is based on performance.

An AMC has to employ people in order to bear all the establishment costs related to its

activities such as premises, furniture, etc. These costs are paid from the management fee

earned by it.

Expenses such as trustee fees, marketing costs, etc are borne by the Mutual Fund scheme.Sometimes, due to competition, the AMC is forced to bear these costs. As long as the income

is more than the expenditure, the AMC is viable. All AMCs have certain Asset Under

Management (AUM), below which it is not viable. In Indian context, it is difficult for an

AMC to achieve Break-Even if its AUM is below Rs. 2,000 crores.

Within an AMC, the fund manager ensures that the schemes funds are invested in such a

way that the objectives of the scheme in the interest of its investors are achieved. The CEO,

in turn, sees that the fund manager performs his duty in a correct way.

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4 . Distributors :

Distributors are the people who attract or bring in the investors into the schemes of a mutual

fund. They earn a commission for this. The commission is an expense for the AMC and it

may choose to bear the cost wholly or partially.

Depending upon the financial and physical resources at their disposal, the distributors can be

classified into 3 tiers:

Tier-1 Distributor:

These distributors have their own or franchise network reaching out to investors all across the

country.

Tier-2 Distributor:

These distributors are mostly regional players.

Tier-3 Distributor:

These are the small distributors marginal players and have limited reach.

Distributors bring in investors for the AMC, for which they earn commission from them. But

they also safeguard the financial health of the investors who dont pay them in return.

In recognition of this anomaly in the distribution structure, a body of financial planner is

expected to emerge in the Indian financial market. They will safeguard the investors interestsin return for a fee from the investors.

5. Registrars :

Registrars and Transfer Agents (R&T) keeps track of the Mutual Fund scheme on account of

the investors investments and disinvestments from the scheme. The R&T of the Mutual Fund

maintains the database of investors. As a result, interest based transactions of the existing

investors in the schemes of an AMC are affected through its database server.

Request to invest more money into the scheme, or to redeem money against existing

investment in a scheme, are procured by R&T.

6 . Custodial Depository :

The Custodial Depository maintains custody of the securities in which the scheme invests.

This ensures an ongoing independent record of the investment of the scheme. It also follows

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various corporate actions such as bonus and dividends declared by the invested companies.

Its importance is growing as securities are increasingly being dematerialized .

LIMITATIONS OF THE STUDY

o The study is based on only secondary data, the researcher therefore cannot comment on

the investors preferences of the schemes.

o The data is based on daily basis it is very difficult to arrange it.

o It is very difficult to compare the data with Nifty because dates are not properly

matched with NAV dates and daily closing price of nifty.

o The calculations are made manually, and all care has been taken to ensure the accuracy,

yet inadvertent lapses cannot be ruled out.

o In calculations of returns on portfolio, dividend has not been taken due to its non

availability.

o Study is very complicated because of complicated formulas.

o Study is complete in very short period.

o This study has lack of investors participation in study.

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COMPANY PROFILE

Overview about company

Karvy Group Companies

Management Team

Our Alliances

Achievements

Quality Policy

OVERVIEW ABOUT COMPANY

KARVY, is a premier integrated financial services provider, and ranked among the top five in

the country in all its business segments, services over 16 million individual investors in

various capacities, and provides investor services to over 300 corporate, comprising the who

is who of Corporate India. KARVY covers the entire spectrum of financial services such as

Stock broking, Depository Participants, Distribution of financial products mutual funds,

bonds, fixed deposit, equalities, Insurance Broking, Commodities Broking, Personal Finance

Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs,

among others. Karvy has a professional management team and ranks among the best in

technology, operations and research of various industrial segments.

Banking & Corporate Finance, Insurance Broking, Commodities Broking, Personal Finance

Advisory Services, placement of equity, IPOs, among others. Karvy has a professional

management team and ranks among the best in technology, operations, and more importantly,

in research of various industrial segments.

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History of Karvy

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a

small group of practicing Chartered Accountants who founded the flagship company

Karvy Consultants Limited. We started with consulting and financial accounting automation,

and carved inroads into the field of registry and share accounting by 1985. Since then, we

have utilized our experience and superlative expertise to go from strength to strength to

better our services, to provide new ones, to innovate, diversity and in the process, evolvedKarvy as one of Indias premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route, towards building a

reputation as an integrated financial services provider, offering a wide spectrum of services.

And we have made this journey by taking the route of quality service, path breaking

innovations in service, versatility in service and finallytotality in service.

Our highly qualified manpower, cutting-edge technology, comprehensive infrastructure and

total customer-focus has secured for us the position of an emerging financial services giant

enjoying the confidence and support of an enviable clientele across diverse fields in the

financial world.

Our values and vision of attaining total competence in our servicing has served as the

building block for creating a great financial enterprise, which stands solid on our fortresses of

financial strength-our various companies.

With the experience of years of holistic financial servicing behind us and years of complete

expertise in the industry to look forward to, we have now emerged as a premier integrated

financial services provider.

And today, we can look with pride at the fruits of our mastery and experience

comprehensive financial services that are competently segregated to service and manage a

diverse range of customer requirements.

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MANAGEMENT TEAM

BOARD MEMBERS

C Parthasarathy, Chairman & Managing Director

Mr. C Parthasarathy, a leader in the financial services industry in

India is responsible for building KARVY as one of India's truly

integrated Financial Services Provider; he is a fellow member of the

Institute of Company Secretaries of India, a Fellow Member of the

Institute of Chartered Accountants of India and a graduate in law.As

Chairman and Managing Director, he oversees the group's operations and renders vision and

business direction.

M Yugandhar, Managing Director

Mr. M Yugandhar, Managing Director, founder member of KARVY

Consultants Limited, has varied experience in the field of financial

services spanning over 20 years. He is a Fellow Member of the

Institute of Chartered Accountants of India and was involved in the

statutory and branch audit of banks for 26 years.

.

M S Ramakrishna, Executive Director

Mr. M S Ramakrishna, Director, founder member of KARVYConsultants Limited is the orchestrator of technology initiatives

such as the call center in the service of the customer.

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OTHER MEMBERS

K Sridhar

V Mahesh

V Ganesh

S Gopichand

J Ramaswamy

M S Manohar

S Ganapathy Subramanian

Karvy Group Cos

Karvy Depository Participant Services (NSDL & CDSL)

Karvy the Finapolis

Karvy Consultants Ltd.

Karvy Stock Broking Ltd. (NSE & BSE)

Karvy Investor Services Ltd.

Karvy Computer Share Pvt. Ltd.

Karvy Global Services Ltd.

Karvy Commodities Broking Pvt. Ltd.

Karvy Insurance Broking Pvt. Ltd.

Karvy E-TDS Returns & PAN Application Process

Karvy Reality Services

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Karvy Consultants Ltd.

As the flagship company of the Karvy Group, Karvy Consultants Limited has always

remained at the helm of organizational affairs, pioneering business policies, work ethic and

channels of progress.

Having emerged as a leader in the registry business, the first of the businesses that we

ventured into, we have now transferred this business into a joint venture with Computershare

Limited of Australia, the worlds largest registrar. With the advent of depositories in the

Indian capital market and the relationships that we have created in the registry business, we

believe that we were best positioned to venture into this activity as a Depository Participant.

We were one of the early entrants registered as Depository Participant with NSDL (National

Securities Depository Limited), the first Depository in the country and then with CDSL

(Central Depository Services Limited). Today, we service over 6 lakhs customer accounts in

this business spread across over 250 cities/towns in India and are ranked amongst the largest

Depository Participants in the country. With a growing secondary market presence, we have

transferred this business to Karvy Stock Broking Limited (KSBL), our associate and a

member of NSE, BSE and HSE.

Karvy Stock Broking Ltd

Member - Natio nal Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and The

Hyderabad Stock Exchange (HSE).

Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely

towards attaining diverse goals of the customer through varied services. Creating a plethora

of opportunities for the customer by opening up investment vistas backed by research-based

advisory services. Here, growth knows no limits and success recognizes no boundaries.

Helping the customer create waves in his portfolio and empowering the investor completely

is the ultimate goal.

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success

rate as a wealth management and wealth accumulation option. The difference between

unpredictability and a safety anchor in the market is provided by in-depth knowledge of

market functioning and changing trends, planning with foresight and choosing ones

options with care. This is what we provide in our Stock Broking services..

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Karvy the Finapolis

The paradigm shift from pure selling to knowledge based selling drives the business today.

With our wide portfolio offerings, we occupy all segments in the retail financial services

industry. A 1600 team of highly qualified and dedicated professionals drawn from the best of

academic and professional backgrounds are committed to maintaining high levels of client

service delivery. This has propelled us to a position among the top distributors for equity and

debt issues with an estimated market share of 15% in terms of applications mobilized, besides

being established as the leading procurer in all public issues.

To further tap the immense growth potential in the capital markets we enhanced the scope of

our retail brand, Karvy the Finapolis , thereby providing planning and advisory services to

the mass affluent. Here we understand the customer needs and lifestyle in the context of

present earnings and provide adequate advisory services that will necessarily help in creating

wealth. Judicious planning that is customized to meet the future needs of the customer deliver

a service that is exemplary. The market-savvy and the ignorant investors, both find this

service very satisfactory. The edge that we have over competition is our portfolio of offerings

and our professional expertise. The investment planning for each customer is done with an

unbiased attitude so that the service is truly customized.

Our monthly magazine, Finapolis, provides up-dated market information on market trends,

investment options, opinions etc. Thus empowering the investor to base every financial move

on rational thought and prudent analysis and embark on the path to wealth creation.

Karvy Investor Service Limited

Recognized as a leading merchant banker in the country, we are registered with SEBI as a

Category I merchant banker. This reputation was built by capitalizing on opportunities in

corporate consolidations, mergers and acquisitions and corporate restructuring, which have

earned us the reputation of a merchant banker. Raising resources for corporate or

Government Undertaking successfully over the past two decades have given us the

confidence to renew our focus in this sector.

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Karvy Computershare Pvt. Ltd.

We have traversed wide spaces to tie up with the worlds largest transfer agent, the leading

Australian company, Computershare Limited. The company that services more than 75

million shareholders across 7000 corporate clients and makes its presence felt in over 12

countries across 5 continents has entered into a 50-50 joint venture with us.

With our management team completely transferred to this new entity, we will aim to enrich

the financial services industry than before. The future holds new arenas of client servicing

and contemporary and relevant technologies as we are geared to deliver better value and

foster bigger investments in the business. The worldwide network of Computershare will

hold us in good stead as we expect to adopt international standards in addition to leveraging

the best of technologies from around the world.

Excellence has to be the order of the day when two companies with such similar ideologies of

growth, vision and competence, get together.

Karvy Global Services Ltd.

The specialist Business Process Outsourcing unit of the Karvy Group. The legacy of expertise

and experience in financial services of the Karvy Group serves us well as we enter the global

arena with the confidence of being able to deliver and deliver well.

Here we offer several delivery models on the understanding that business needs are unique

and therefore only a customized service could possibly fit the bill. Our service matrix has

permutations and combinations that create several options to choose from. Be it in re-

engineering and managing processes or delivering new efficiencies, our service meets up to

the most stringent of international standards. Our outsourcing models are designed for the

global customer and are backed by sound corporate and operations philosophies, and domain

expertise. Providing productivity improvements, operational cost control, cost savings,

improved accountability and a whole gamut of other advantages. .

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Karvy Comtrade Ltd.

At Karvy Commodities, we are focused on taking commodities trading to new dimensions of

reliability and profitability. We have made commodities trading, an essentially age-old

practice, into a sophisticated and scientific investment option.

Here we enable trade in all goods and products of agricultural and mineral origin that include

lucrative commodities like gold and silver and popular items like oil, pulses and cotton

through a well-systematized trading platform. Our technological and infrastructural strengths

and especially our street-smart skills make us an ideal broker. Our service matrix is holistic

with a gamut of advantages, the first and foremost being our legacy of human resources,

technology and infrastructure that comes from being part of the Karvy Group.

Karvy Insurance Broking Pvt. Ltd.

At Karvy Insurance Broking Limited., we provide both life and non-life insurance products to

retail individuals, high net-worth clients and corporates. With the opening up of the insurance

sector and with a large number of private players in the business, we are in a position to

provide tailor made policies for different segments of customers. In our journey to emerge as

a personal finance advisor, we will be better positioned to leverage our relationships with the

product providers and place the requirements of our customers appropriately with the product

providers. With Indian markets seeing a sea change, both in terms of investment pattern and

attitude of investors, insurance is no more seen as only a tax saving product but also as an

investment product. By setting up a separate entity, we would be positioned to provide the

best of the products available in this business to our customers.

Karvy Reality & Service (India) Ltd.

KARVY Realty & Services (India) Limited (KRSIL) is engaged in the business of real estate

and property services offering value added property services and offers individuals and

establishments a myriad of options across investments, financing and advisory services in the

realtysector.

KARVY Realty & Services (India) Limited Take a

Realty Byte !!!

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Promoted by the KARVY Group of companies, Indias largest integrated financial services

company. KARVY Realty & Services India Limited carries forward its legacy of trust and

excellence in investor and customer services delivered with a passion for services and the

highest level of quality that align with global standards.

KARVY Realty & Services (India) Limited welcomes you to take a reality check on realty

options that you can be rest assured of and of course profit from.

OUR ALLIANCE

Karvy Computer share Private Limited is a 50:50 joint venture of Karvy Consultants Limited

and Computershare Limited, Australia. Computereshare Limited is world's largest -- and only

global -- share registry, and a leading financial market services provider to the global

securities industry.

The joint venture with Computershare, reckoned as the largest registrar in the world,

servicing over 60 million shareholder accounts for over 7,000 corporations across eleven

countries spread across five continents. Computershare manages more than 70 million

shareholder accounts for over 13,000 corporations around the world.

Karvy Computershare Private Limited, today, is India's largest Registrar and Share Transfer

Agent servicing over 300 corporates and mutual funds and 16 million investors.

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ACHIEVEMENTS

Among the top 5 stock brokers in India (4% of NSE volumes)

India's No. 1 Registrar & Securities Transfer Agents

Among the top 3 Depository Participants

Largest Network of Branches & Business Associates

ISO 9002 certified operations by DNV

Among top 10 Investment bankers

Largest Distributor of Financial Products

Adjudged as one of the top 50 IT uses in India by MIS Asia

Full Fledged IT driven operations

Every 50th Indian is Serviced by Karvy

Every 20th Trade in Stock Maarket is done through Karvy.

QUALITY POLICY

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial

services. In the process, Karvy will strive to exceed Customer's expectations.

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THEORETICAL PERSPECTIVE

Mutual funds industry is a growing at a very fast rate India. Various studies and research has

been on this industry by experts. Here are the list of few books that have been referred to forthe purpose of the study.

Mr. M. Jaidev in his book has Investment policy and performance of Mutual

Fund has studied the Indian Public Sector Mutual Funds. In this book he has

covered risk , rate of return. Investment policy and pricing of mutual funds. In this

book he has done an empirical study covering all aspects of mutual fund

investment along with the regulatory framework.

Nalini Prava Tripathy in her book Mutual Funds in India. Emerging Issues

provides a detailed evaluation of investment management which is not only

helpful for influencing marketing operations but also for securities selection,

investment research and timing and resource allocation.

Dr H. Sadak in his book Mutual Funds in India has highlighted the importance

of financials institutions in India. The basically focuses on the growth and

development of mutual funds in India. The entire gamut of the theoretical aspectsof the fund management has been critically examined in the context of the

performance of mutual funds and it provides an insight into fund management and

the areas of weakness.

Mr. Sharad Panwar and Dr. R. Madhumathi in their journal Characteristics and

Performance of selected mutual funds in India., have studied a sample of Public

and Private sectormutual funds of varied net assets to investigate the differences

in characteristics of assets held, portfolio diversification, and variable effects of

diversification on investment performance. The extent of diversification in the

portfolio of securities of public-sector sponsored and private-sector sponsored

mutual funds have been highlighted.

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Mutual funds are financial intermediaries which pool the savings of numerous individuals

and invest the money thus raised in a diversified portfolio of securities, including equity,

bonds, debentures and other instruments, thus spreading and reducing risk. The object is

to maximize the return to the investor who participates in equity indirectly through

mutual funds.

Actually, it is a pool of money collected from investors and is invested according to stated

investment objectives. Mutual Fund investors are like shareholders and they own the

fund. They are not lenders or deposit holders in a mutual fund. Everybody else

associated with a mutual fund is a service provider, who earns a fee. The money in the

mutual fund belongs to the investors and nobody else.

Mutual funds invest in marketable securities according to the investment objective. The

value of the investments can go up or down, changing the value of the investors holdings.

NAV of a mutual fund fluctuates with market price movements. The market value of the

investors fund is also called as net assets. Investors hold a proportionate share of the fund in

the mutual fund. New investors come in and old investors can exit, at prices related to net

asset value per unit.

A mutual fund is the ideal investment vehicle for todays complex and modern financial

scenario. Markets for equity shares, bonds and other fixed income instruments, real estate,

derivatives and other assets have become mature and information driven. Prices changes in

these assets are driven by global events occurring in faraway places. A typical individual is

unlikely to have the knowledge, skills, inclination and time to keep track of events,

understand their implications and act speedily. An individual also finds it difficult to keep

track of ownership of his assets, investments, brokerage dues and bank transactions etc.

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

experienced staff that manages each of these functions on a full time basis. The large pool of

money collected in the fund allows it to hire such staff at a very low cost to each investor. In

effect, the mutual fund vehicle exploits economies of scale in all three areas- researches,

investments and transaction processing. While the concept of individuals coming together to

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invest money collectively is not new, the mutual fund in its present form is a 20th century

phenomenon. In fact, mutual funds gained popularity only after the Second World War.

Globally, there are thousands of firms offering tens of thousands of mutual funds with

different investment objectives. Today, mutual funds collectively manage almost as much as

or more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund.

Typically, it pre specifies the investments objectives of the fund, the risk associated, the costs

involved in the process and the broad rules for entry into and exit from the fund and other

areas of operation. In India, as in most countries, these sponsors need approval from a

regulator, SEBI in our case. SEBIlooks at track records of the sponsor and its financial

strength in granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the

investment objective. It also hires another entity to be the custodian of the assets of the funds

and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in which

it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset

Management Company (AMC).

ORGANISATION OF MUTUAL FUND

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset

Management Company (AMC) and custodian. The trust is established by a sponsor or more

than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its

property for the benefit of the unit holders. Asset Management Company (AMC) approved by

SEBI manages the funds by making investments in various types of securities. Custodian,

who is registered with SEBI, holds the securities of various schemes of the fund in its

custody. The trustees are vested with the general power of superintendence and direction over

AMC. They monitor the performance and compliance of SEBI regulations by the mutual

fund.SEBI Regulations require that at least two thirds of the directors of trustee company or

board of trustees must be independent i.e. they should not be associated with the sponsors.

Also, 50% of the directors of AMC must be independent. All mutual funds are required to be

registered with SEBI before they launch any scheme. :

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Organizational set up of a mutual fund

MUTUAL FUND TERMINOLOGY

1. Net Asset Value (NAV)

Net Asset Value (NAV) denotes the performance of a particular scheme of a mutual fund.

Mutual funds invest the money collected from the investors in securities markets. In simple

words, Net Asset Value is the market value of the securities held by the scheme. Since marketvalue of securities changes every day, NAV of a scheme also varies on day-to-day basis. The

NAV per unit is the market value of securities of a scheme divided by the total number of

units of the scheme on any particular date.

2. Loads or No Load Fund

A load fund is one that charges a percentage of NAV of entry or exit. That is, each time

one buys or sells units in the fund, a charge will be payable. That is, each time one buys or

sells units in the fund, a charge will be payable. This charge is used by the mutual fund for

marketing and distribution expenses. Suppose the NAV per unit is Rs. 10. If the entry as well

as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and

those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit.

The investors should take the loads into consideration while making investment as these their

yields/ returns. However, the investors should also consider the performance track record and

service standard of the mutual fund, which are more important. Efficient funds may give

higher returns in spite of loads.

A no- load fund is one that does not charge for entry or exit. It means the investors can

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enter the fund/scheme at NAV and no additional charges are payable on purchase on

purchase or sale of units.

3. Sale or Repurchase/ Redemption Price

The price or NAV a unit holder is charged while investing in an open-ended scheme is

called sales price. It may include sales load, if applicable.

Repurchase or redemption price is the price or NAV at which an open-ended scheme

purchases or redeems its units from the unit holders. It may include exit load, if applicable.

TYPES OF MUTUAL FUNDS SCHEMES

According to Maturity Period

Open Ended

Close Ended

According to Investment Objective

Equity funds

Debt funds

Balanced funds

Money Market funds

Other types of schemes

Tax Saving schemes

Special schemes

Index schemes

1. SCHEMES ACCORDING TO MATURITY PERIOD:

A mutual fund scheme can be classified into open -ended scheme or close-ended scheme

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depending on its maturity period.

Open-ended Fund / Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on a

continuous basis. These schemes do not have a fixed maturity period. Investors canconveniently buy and sell units at Net Asset Value (NAV) related prices that are declared on

a daily basis. The key feature of open-ended schemes is liquidity. The AMC is always ready

to accept money from investors and is always willing to return the amount to the investors.

Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is

open for subscription only during a specified period at the time of launch of the scheme.

Investors can invest in the scheme at the time of the NFO (New Fund Offer) and thereafterthey can buy or sell the units of the units of the scheme on the stock exchange where the units

are listed. In order to provide an exit route to the investors, some close-ended funds give an

option of selling back the units to the mutual funds through periodic repurchase at NAV

related prices. SEBI Regulations stipulate that at least one of the exit routes is provided to the

investor i.e. either repurchases facility or through listing on stock exchanges. These mutual

funds schemes disclose NAV generally on weekly basis.

2. SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

A scheme can also be classified as growth scheme, income scheme, or balanced scheme

considering its investment objective. Such schemes may be open ended or close-ended

schemes as described earlier. Such schemes may be classified mainly as follows:

Growth /Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to long-term.Such schemes normally invest a major part of their corpus in equities. Such funds havecomparatively high risks. These schemes provide different options to the investors like

dividend option, capital appreciation, etc. and the investors may choose an option depending

on their preferences. The investors must indicate the options at a later date. Growth schemes

are good for investors having a long-term outlook seeking appreciation over a period of time.

Various kinds of equity funds

1. Simple diversified equity funds

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2. Sector specific funds

Simple diversified equity funds

This fund invests in equity across all sectors, companies. These funds invest a pre-dominant

portion of the funds mobilized in equity, and equity related products. In most cases about 80-

90% of their investments are in equity shares. These funds have the freedom to invest both in

primary and secondary markets for equity. A simple diversified equity fund can be made by

selectind companies based on their market capitalization or some other predetermined

criteria.

Sector specific funds

The investment objective of a sectoral fund is to invest in securities of a specific sector. The

choice of the sector could vary depending on the investor preference and the return risk

attributes of the sector. For example: banking stocks have shown quite decent growth in the

last four years. Investors who wanted to participate in this sector could do so, by investing in

sectoral funds. Sectoral funds are not as well diversified as simple equity funds, as they tend

to focus on fewer sectors in the equity markets. They can exhibit very volatile returns.

Few examples:

a) Banking sector fundb) Power sector fund

c) IT sector fund

d) FMCG sector fund

e) Petroleum sector fund

Income / Debt Oriented Schemes The aim of income funds is to provide regular and steady income to investors. Suchschemes generally invest in fixed income securities such as bonds, corporate debentures,

Government securities and money market instruments. Such funds are less risky compared to

equity schemes. These funds are not affected because of fluctuations in equity markets.

However, opportunities of capital appreciation are also limited in such funds. The NAVs of

such funds are affected because of change in interest rates in the country. If the interest rates

fall, NAVs of such are likely to increase in the short run and vice versa. However, long-term

investors may not brother about these fluctuations.

Various kinds of debt funds

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1. Diversified debt funds

2. Gilt funds

3. Focused debt funds

4. High yield debt funds

5. Liquid and money market mutual funds

6. Floating rate debt funds

7. Fixed term plan series

Balanced schemes

A balanced fund invests in debt and security in comparable proportion. The proportion need

not be exactly same but comparable. In India, balanced funds are normally invested 60% in

debt and remaining in equity.

A balanced fund tends to provides investors an exposure to both equity and debt markets in a

one product. This provides asset call diversification, as equity and debt markets are not

subject to the same kinds of external risk factors. A balanced fund gives an investor exposure

in equity at a relatively lower volatility.

3. OTHER SCHEMES:

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian

Income Tax laws as the Government offers tax incentives for investment in specified

avenues. Investments made in Equity linknewed Savings Schemes (ELSS) and Pension

Schemes are allowed as deduction under Section 88 of the Indian Income Tax Act, 1961

Index Funds

Index funds replicate the portfolio of a particular index such as the BSE Sensitive index;S&P NSE 50 index (NIFTY), etc. These schemes invest in the securities in the same weight

age comprising of an index. NAVs of such schemes would rise or fall in accordance with the

rise or fall in the index, though not exactly by the same percentage due to some factors

known as tracking error" in technical terms. Necessary disclosures in this regard are made in

the offer document of the mutual fund scheme.

1.6 ALLOCATION OF ASSETS

Investment Pattern of Mutual Funds

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The most important feature in a mutual fund scheme is the allocation of its assets. The

investment pattern of a scheme is to a large extent determined by the broad guidelines issued

by SEBI. But these are of a generalized nature and applicable to all mutual fund schemes.

What primarily distinguishes one scheme from another is the manner in which a fund

manager actually deploys the amount raised from investors.

INSTRUMENTS OF INVESTMENT

At the outset, therefore, it is essential to consider the various instruments in which mutual

funds deploy their funds.

EquityConvertible debentures

Fixed income Securities

4. Short term Securities

These are:

a) Certificates of deposit;

b) Treasury bills;

c) Bill discounting;

d) Commercial paper; and

e) Call money

These are meant for shot term investments. Their yield is relatively low but there is greater

liquidity. Mutual Funds invest a portion of their money market investments in order to meet

their need for money at short notice, whether to meet dividend liabilities or for redemption of

units upon the maturity of a scheme.

MEASURING AND EVALUATING MUTUAL FUND PERFORMANCE

Different performance measures:

Change in NAV =

NAV at the end of the period NAV at the beginning of the period

Advantage: Very simple method.

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Disadvantage: However does not give the correct picture, in case the fund has distributed

dividend.

Total Return = [Dividend distributions + change in NAV] *100

Beginning NAVAdvantage: Corrects the shortcomings of the first method by taking into account the divided

distributed.

Suitable for all types of funds. Performance must be interpreted in the light of

market conditions and investment objectives.

Disadvantage: However, it ignores the fact that distributed dividend also get reinvested.

ROI = [{Units held [ Div ]} / End NAV- begin NAV ]

Ex div NAV

___________________________________________ *100

Beginning NAV

Advantage: Most suitable method.

Overcomes the limitation of second method by considering the reinvestment of

dividend.

Expense Ratio

-Total expense/average net assets of the fund.

-Is an indicator of the funds efficiency and cost effectiveness?

Income Ratio

Net Investment Income

Net Assets

Portfolio Turnover Ratio

-It measures the amount of buying and selling done by a fund. It gives an idea of how

fast the fund manager is churning his portfolio.

-High turnover ratio also indicates high transaction costs.

-Transaction Costs include all expenses related to trading such as brokerage

commission paid; stamp duty on transfer registrar fees and custodians fees. It has

significant bearing a fund performance.

Fund Size

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Small Funds

-Easy to manage.

-Achieve objective in focused manner with limited holding.

Large Funds

-Economies of scale.

-Lower Expense Ratio.

Cash Holdings

-Enables meeting redemption needs.

-A cushion against decline in market prices of shares/bonds.

-May reduce the return on the portfolio.

Evaluating Fund Performance

Basis of choosing an appropriate performance Benchmark:

-The asset class if invests in.

-An equity fund should be judged against another equity fund &equity benchmark

(indices).

Equity FundsIndex Fund An Index fund invests in the stock comprising of the index in the same

ratio.

For example,

Market Index Fund - BSE Sensex

Nifty Index Fund - NIFTY

Active Equity Funds The fund manager actively manages this fund. To evaluate

performance in such case we have to select an appropriate benchmark.

Large diversified equity fund BSE 100

Sector fund -- Sectoral Indices

Even when two funds with similar characteristics are otherwise comparable, their returns

must be calculated on a comparable basis. Hence,

1. Compare returns of two funds over the same periods only.

2. Similarly, only average annualized compound returns are comparable.

3. Only after tax returns of two different schemes should be compared.

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NET ASSET VALUE (NAV) OF MUTUAL FUND UNITS

The net asset value (NAV) of the units of a mutual fund scheme is of vital importance

to determine its performance and health.

Formula for Determination of NAV

The calculation of NAV is based on the total market value of a mutual fund schemes assets,

to which are added the following:

a) Receivables.

b) Accrued income.

c) Other assets.

From the total of the above is deducted the aggregate of:a) Accrued expenses.

b) Payables.

c) Other net liabilities.

The number of units outstanding divides the net figure obtained, and this

constitutes the NAV.

Total market value of mutual fund schemes assets _ _ _

+ Receivables. _ _ _

+ Accrued income. _ _ _

+ Other assets. _ _ _

---------------

---------------

- Accrued expenses. _ _ _

- Payables. _ _ _

- Other net liabilities. _ _ _

-----------------

Net figure -----------------

/

No. Of units outstanding

-----------------------------

NAV

------------------------------.

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ADDITIONAL FACILITIES PROVIDED BY MUTUAL FUNDS TO THE

INVESTORS

1) Systematic Investment Plan (SIP)

2) Systematic Withdrawal Plan (SWP)

3) Systematic Transfer Plan (STP)

4) Dividend Transfer Plan (DTP)

5) Auto debit facility and Electronic Clearing Service (ECS)

6) Switching

Systematic Investment Plan (SIP)An existing unit holder can benefit under this facility by investing specified amounts

regularly. By investing a fixed amount of rupees at regular intervals, one would end up

buying more units of the fund when the price is low and fewer units when the price is high.

As a result, over a period, the average cost per unit to the unit holder will always be less than

the average subscription price per unit, irrespective of whether it is a rising, falling or

fluctuating market. Thus, the unit holder automatically gains and averages out the

fluctuations of market, without having to monitor prices on a day-to-day basis. This concept

is called Rupee Cost Averaging.

The following points should be noted regarding SIP:

i. In case of a SIP, the minimum amount for investing is much lower around Rs. 500 to

Rs. 1000.

ii. The minimum number of payments that should be invested in order to get this facility

might be 12 cheques of Rs. 500 each or 6 cheques of Rs. 1000 each.

iii. It is mandatory that cheques should be of same value.

iv. The frequency of investment offered for SIP varies from fund to fund. In general all

mutual funds offer monthly and quarterly investment facility.

v. The first cheque can be of any date in the month but the subsequent cheques should

bear any of the dates offered by the mutual fund for this facility.

vi.

Systematic Withdrawal Plan (SWP)

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Under a Systematic Withdrawal Plan, an investor can receive regular/quarterly

payments from the scheme into his account. The unit holder can opt to withdraw a fixed

amount subject to a prescribed minimum amount per month or per quarter. The amount

withdrawn by redemption shall be converted into units at the applicable NAV and such units

shall be subtracted from the unit balance of the unit holder.

Systematic Transfer Plan (STP)

A systematic transfer plan gives investor facility to transfer amount from one scheme

to another scheme at periodic intervals. In STP, investors can choose between a fixed

systematic transfer plan and capital appreciation STP. Each mutual fund specifies the

schemes in which the amount can be transferred.

Dividend Transfer Plan (DTP)

Under DTP, investors can choose to transfer their dividends of one scheme on to the

other scheme as and when dividends are paid out. If such a plan is chosen than the amount of

dividend distribution will be automatically invested on the ex-dividend date into the scheme

selected by the investor and the units will be allotted accordingly.

Auto debit facility and Electronic Clearing Service (ECS)

A SIP can be affected in two ways. The investor can pay post-dated cheques dated at

requisite intervals or the investor can choose for an auto debit facility/ECS. In auto debit/ECS

facility, the amount mentioned in his application form would be automatically debited on the

date of investment and amount would be invested in the scheme.

The investor opting for auto debit/ECS facility will be required to sign up a mandate form

based on which the mutual fund will arrange for his account to be debited as per thefrequency, amount & date chosen by the investor.

SWITCHING

Unit holders have an option to switch all or part of their investment in one scheme

plan to another scheme plan established by the fund that is available for investment at that

time. The switch will be affected by way of redemption of units and a re-investment of the

redemption proceeds in another scheme.

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RESEARCH DESIGN

A Research Design is the framework or plan for a study, which is used as a guide in

collecting and analyzing the data collected. It is the blue print that is followed in completing

the study. The basic objective of research cannot be attained without a proper research

design. It specifies the methods and procedures for acquiring the information needed to

conduct the research effectively. It is the overall operational pattern of the project thatstipulates what information needs to be collected, from which sources and by what methods.

This chapter has been divided into 8 sections that consist of Present Study, Objective of the

Study, Assumptions under the study, Research Methodology, Scope of the study, Statistical

tools, Usefulness of study and its limitations.

Each section gives the complete description of the things included in it. In the sections,

the topic related to particular section is very clearly written to enhance the understanding of

the concepts.

This chapter also includes the sub sections which are we can also say as the sub parts.

This has been done in order to enhance the comfortability while understanding and reading

the methodology of research.

PRESENT STUDY

A mutual fund is an investment company or trust that pools the resources of thousands

of its shareholders or unit holders and invest on behalf of these diversified securities and a

cross section of companies to attain the objective of the investors, which in turn achieve

income or growth or both long with low risk (depending upon the securities). The present

study is done to evaluate the performance of mutual fund schemes of different AMCs and to

rank them as per the findings.

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COLLECTION OF DATA

The data has been collected from the secondary sources including the annual reports of the

various mutual funds and their offer documents, fact sheets of various mutual funds. NAVs

and return on securities have been taken for 12 months starting from Apr. 2007 to March

2008 and CNX Nifty and CNX 500 have been noted from www.amfindia.com,

www.indianfonline.com and www.nseindia.com respectively.

SOME OF THE AMCS OPERATING CURRENTLY ARE:-

JUNE 2009

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33

AMCs at a glance (Scheme Wise)

(in crore)

AMC Company AUM

Equity

Value Debt Value

Others

Value

Open

Ended

Schemes

Close

Ended

schem

Reliance Mutual Fund 61095.07 20907.90 30355.28 9831.89 120 120

ICICI Prudential

Mutual Fund 55292.87 10928.71 40091.86 4272.30 139 139

UTI Mutual Fund 48889.78 15541.90 26646.44 6701.44 106 106HDFC Mutual Fund 48157.76 14599.30 31125.23 2433.23 90 90

Birla Sun Life Mutual

Fund 39144.72 7440.68 28029.92 3674.12 142 142

Franklin Templeton

Mutual Fund 24248.68 11370.35 11102.63 1775.70 116 116

SBI Mutual Fund 22851.80 12401.81 9913.83 536.16 106 49 155

DSP Merill Lynch

Mutual Fund 16533.54 6921.94 7246.99 2364.61 82 87 169

Kotak Mahindra

Mutual Fund 16281.24 2943.72 11804.24 1533.29 61 61

Tata Mutual Fund 13588.58 3734.38 8117.48 1736.71 172 172Principal PNB Mutual

Fund 12569.61 2101.16 9290.67 1177.79 93 46 139

LIC Mutual Fund 11949.24 664.15 9846.13 1438.97 47 47

Sundaram BNP

Paribas Mutual Fund 11288.20 5668.15 3757.59 1862.46 102 102

HSBC Mutual Fund 11280.58 2777.37 7783.56 719.65 83 83

IDFC Mutual Fund 10924.95 2629.75 7657.38 637.82 95 95

JM Financial Mutual

Fund 10008.69 3274.67 6266.68 467.33 83 83

ABN Amro Mutual

Fund 7212.42 584.75 6343.41 284.26 51 51ING Mutual Fund 6960.25 275.99 5904.65 779.60 131 131

Fidelity Mutual Fund 6441.47 5233.20 876.73 331.53 40 40

Deutsche MutualFund 6233.32 307.11 5206.02 720.18 65 65

Lotus India Mutual

Fund 6127.02 705.30 5113.12 308.61 73 73

Canara Robeco

Mutual Fund 3785.63 502.66 3215.62 67.35 57 57

AIG Mutual Fund 3526.30 930.90 2289.39 306.01 60 60

Benchmark Mutual

Funds 2641.87 1791.18 781.46 69.23 10 2 12

Mirae Asset MutualFund 2372.89 107.15 2258.54 7.20 35 35

J P Morgan Mutual

Fund 2351.14 930.49 1207.83 212.81 18 18

DBS Chola Mutual

Fund 2147.73 213.34 1794.08 140.31 45 45

Taurus Mutual Fund 260.70 222.00 37.37 1.32 14 14

Escorts Mutual Fund 172.23 68.20 57.92 46.11 26 6 32

Sahara Mutual Fund 169.50 41.37 116.16 11.97 32 10 42

Quantum Mutual

Fund 57.70 34.13 21.18 2.38 7 7

BOB Mutual Fund 53.86 44.07 6.02 3.77 20 20

GIC Mutual Fund

Unit Trust of India

Morgan Stanley

Mutual Fund

2797.023

4 2682.3038 114.7196 2 1 3

Shriram Mutual Fund

Bharti AXA Mutual


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SAMPLING

Due to a large number of Mutual Fund schemes in existence, it was not feasible to present the

investment pattern of each of them separately. Therefore, the analysis of investment pattern is

restricted to 20 schemes. These schemes were selected on judgment and convenience basis.

SAMPLING DESIGN

Sampling Unit scheme of mutual fund

Sampling Size- 20 mutual fund schemes

The scope of the study is kept limited to the period beginning from 1 st Apr. 2007 to

ending in 31st March 2008. It is important to point out that NVAs have been taken on daily

basis. The funds covered under the study are:

Sr. No. Scheme Name

1 ICICI Prudential Balance Fund - Dividend Option

2 ICICI Prudential Growth Fund - Dividend

3 ICICI Prudential Dynamic Plan

4 ICICI Prudential Liquid Plan

5 LIC MF Equity Fund - Dividend6 LIC MF Index Funds - Nifty - Dividend

7 LIC MF Balance Fund - Dividend

8 LIC MF Growth Fund

9 HDFC Equity Fund - Dividend Plan

10 HDFC Income Fund - Dividend

11 HDFC Balance Fund - Growth Plan

12 HDFC Growth Fund - Dividend Plan

13 TATA Balance Fund - Dividend Option

14 TATA Income Fund - Dividend Qtly

15 TATA Growth Fund - Dividend

16 TATA Equity Management Fund

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17 Sundaram BNP Paribus Balance Fund - Dividend Option

18 Sundaram BNP Paribus Plus - Dividend

19 Sundaram BNP Paribus Growth Fund - Dividend

20 Sundaram BNP Paribus Select Mid Cap Dividend

Data Analysis and Interpretations

STATISTICAL TOOLS FOR ANALYZING DATA

To come to the finding of the research project an extensive use of statistical

techniques has been made. Following tools have been used for analysis of data.

Average

It has used to calculate average market returns and average return of mutual funds over the

period of study.

Return of portfolio

Rp = NAV (t) NAV (t-1) + DIVIDEND

NAV (t-1)

Where,

Rp = Daily return on a scheme

NAV(t) = Net Asset Value on a scheme

NAV (t-1) = Net Asset Value for preceding day.

Average Daily Return (Avg R)

The average daily returns have been arrived at by dividing the summation of the daily

returns for individual schemes by the total number of days for which returns are calculated.

Mathematically

Avg Rp = (Rp1 + Rp2 + Rp3 + ..Rpn)/N

Where Rp1, Rp2, Rp3.Rpn are returns 1st, 2nd, 3rd and so on upto nth day

returns based on NAVs (MPs) and N is the total number of days under a particular scheme.

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Market returns :

Rm = M.I (t) - M.I. (t-1)

M.I. (t-1)

Where,

Rm = Market daily return

M.I. (t)= Market index for the day

M.I. (t-1) = Market index for preceding day

Avg Rm = (Rm1+Rm2+Rm3+Rmn)/N

Where,

Where Rm1, Rm2, Rm3..Rpn are return for 1 st, 2nd, 3rd and so on upto nth

day returns.

Variance and standard deviation

Variance and standard deviation of prices of mutual funds from average price have

been calculated for the purpose of studying fluctuations in prices.

Risk of portfolioDenoted by Sp

Sp = (Rp-Avg Rp)2

N-1

Where,

Sp = Total risk of the scheme

Rp = Return on portfolio (scheme)

Avg Rp = Average weekly returns of portfolio (scheme)

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N = Number of observations

Market risk

Denoted by Sm

Sm = (Rm - Avg Rm)2

N-1

Where,

Rm = Weekly return of market

Avg Rm = Average weekly return of market

N = Number of observations

Covariance

Beta is a measure of risk, which is arrived at by dividing covariance between returns

of mutual fund scheme and market return, COV (Rp, Rm), by variance of market return Var

(Rm).

Beta analysis

Beta measures non diversifiable risk. Beta shows how prices of securities respond to

the market forces. Beta is calculated by relating the returns on the security with return for the

market, is beta is higher than I the stock is said to be riskier than market. If beta is less than I,

the indication is that stock is less risky in comparison to market. If beta is one then risk same

as that of the market. Negative beta is rare.

Beta measures the systematic risk, which is undiversifiable in nature. It shows how

the price of portfolio responds to market forces beta. Beta for overall market is assumed to be

1. Beta can be calculated as:

Beta = COV (Rp, Rm)

VARm

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Where,

COV (Rp.Rm)= Covariance of the portfolio and market returns

VARm = Variance of the market

Risk Adjusted Performance Measure

The performance of a portfolio is measured by combining the risk and return levels

with a single value. The differential return earned by a portfolio may be due to the difference

in the risk exposure from that of the stock market index. Following are the major methods of

assessing a risk-adjusted performance.

Sharpes Ratio:

Sharpe index measure risk premium of portfolio relative to the total amount of risk in

the portfolio. Sharpe index summarizes the risk and return of a portfolio in a single measure

that categorizes the performance of funds on risk adjusted basis. The larger the Sharpes

index the portfolio is over performing the market and vice versa.

William F Sharpe developed a method of measuring return per unit of risk. Sharpes ratio is

simply the ratio of reward, define as the realized portfolio return Rp in excess of the risk-freerates, to the variability of the return as measured by the standard deviation of returns.

RVARp = Avg Rp Avg Rf

Sp

Where,

RVARp = Reward to variability of the fund portfolios total

risk/Sharpes ratio

Avg. Rp = Average daily return of fund

Avg. Rf = Average risk free return

Sp = Standard deviation of fund

Here the benchmark is additional return of market over risk free return related with market

portfolios total risk.

RVARm = Avg.R Avg Rf

Sm Where,

RVARm = Reward to variability of the market

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Avg. Rp = Average daily market return

Avg. Rf = Average risk free return

Sm = Standard deviation of market

In case RVARp is greater than RVARm (Benchmark_, a funds performance is better than

market.

ANALYSIS OF DATA

This chapter has been devoted to appraise the performance of listed growth schemes of

mutual funds in the framework of their daily returns and the risk associated therewith. With a

view to associate the returns and risk of individual schemes their relationship has been

examined with S & P CNX Nifty as proxies to the market with a view to reach a complete

result regarding the extent to which return on various mutual fund schemes have reached to

the changes in the market portfolio return. Beta value has been calculated with reference to

CNX Nifty. In an attempt to bring forth under performing and outperforming schemes they

have been evaluated with reference to the benchmark i.e. market return. To reach the concise

and meaningful results by optimally using benchmark, we have relied on Sharpe model of

performance appraisal.

RETURN ANALYSIS

At the outset, an effort has been made to analyze the returns and the number of schemes

yielding positive/negative returns. For this purpose overall 20 schemes has been selected for

appraisal. A glance at the average daily returns of the year 2007-08 shown by table 4.2

reveal that there is hardly any scheme which has been constantly at a particular rank in the

ordering of the schemes. For instance ICICI Prudential Liquid Plan scheme of ICICI

Prudential stands at first rank which means that it is giving the maximum returns and on the

other side the lowest scheme in this is TATA Income Fund Div Qtly which means that it is

giving very less returns as compared to the others.

Table 4.2: NAVs based average daily returns and ranking of selected Mutual Funds

Schemes (Apr. 1, 2008 to March 31, 2009)

Sr.

No. Scheme Name Avg. Rp. Rank

1 ICICI Prudential Balance Fund - Dividend Option -0.00026648 122 ICICI Prudential Growth Fund - Dividend -0.00003307 9

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3 ICICI Prudential Dynamic Plan 0.0009368 4

4 ICICI Prudential Liquid Plan 0.000505 1

5 LIC MF Equity Fund - Dividend -0.00058 14

6 LIC MF Index Funds - Nifty - Dividend -0.00091 16

7 LIC MF Balance Fund - Dividend -0.00128 188 LIC MF Growth Fund 0.000104 2

9 HDFC Equity Fund - Dividend Plan 0.00002531 6

10 HDFC Income Fund - Dividend 0.00001349 7

11 HDFC Balance Fund - Growth Plan 0.00004644 5

12 HDFC Growth Fund - Dividend Plan -0.00055878 13

13 TATA Balance Fund - Dividend Option -0.00006526 10

14 TATA Income Fund - Dividend Qtly -0.00377652 20

15 TATA Growth Fund - Dividend -0.0015706 19

16 TATA Equity Management Fund -0.00006553 11

17Sunderam BNP Paribus Balance Fund - DividendOption 0.00009535 3

18 Sunderam BNP Paribus Plus - Dividend 0.00000806 8

19 Sunderam BNP Paribus Growth Fund - Dividend -0.00068222 15

20 Sunderam BNP Paribus Select Mid Cap Dividend -0.00118189 17

Table 4.2

TOP THREE SCHEMES ON THE BASIS OF THEIR AVERAGE DAILY RETURN

Sr.

No.

Schemes Sponsor Average

Return

Rank

1 ICICI Prudential

Liquid Plan

ICICI Prudential 0.000505 1

2 LIC MF Growth Fund LIC 0.000104 2

3 Sundaram BNP Paribus

Balanced Fund

-Dividend Option

Sundaram BNP Paribus

0.00009535 3

Table 4.2

LOWEST THREE SCHEMES ON THE BASIS OF THEIR AVERAGE DAILY

RETURN

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Sr.

No.

Schemes Sponsor Average

Return

Rank

1 TATA Income Fund-

Dividend Qtly

TATA -0.00377652 20

2 TATA Growth Fund -

Dividend

TATA -0.00157060 19

3 LIC Mutual Fund

Balance- Dividend

LIC -0.00128000 18

4.3 RISK ANALYSIS

Having carried out the return analysis of some selected schemes it is considered imperative to

examine the magnitude of variability in the daily returns of different mutual fund schemes

around the mean. The variation, which is also known as risk, has been measured in terms of

standard deviation (SD), which is an absolute measure of variability.

A sectoral position as to risk (SDp) prevailing in all 20 schemes taken in the sample for

analysis and ranking thereof, based on SDp have been presented in Table 4.3. According to

this table the scheme that is most risky is HDFC Income while the scheme that is least risky

is the Sundaram BNP Paribus Income plus Dividend option.

Table 4.3: Ranking of selected Mutual Funds Schemes according to Standard Deviation

of NAVs based daily returns (Apr 1, 2008 to Mar.31, 2009).

Sr.

No. Scheme Name SDp Rank

1 ICICI Prudential Balance Fund - Dividend Option 0.0145644 8

2 ICICI Prudential Growth Fund - Dividend 0.01526872 93 ICICI Prudential Dynamic Plan 0.191230 14


5 LIC MF Equity Fund - Dividend 0.0229385 15

6 LIC MF Index Funds - Nifty - Dividend 0.0246479 16

7 LIC MF Balance Fund - Dividend 0.1680580 19

8 LIC MF Growth Fund 0.0187313 13




12 HDFC Growth Fund - Dividend Plan 0.011835666 613 TATA Balance Fund - Dividend Option 0.0142209 7

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14 TATA Income Fund - Dividend Qtly 0.0865846 18

15 TATA Growth Fund - Dividend 0.0395498 17

16 TATA Equity Management Fund 0.040381 3

17

Sunderam BNP Paribus Balance Fund - Dividend

Option 0.0054506 518 Sunderam BNP Paribus Plus - Dividend 0.0025847 1

19 Sunderam BNP Paribus Growth Fund - Dividend 0.0032910 2

20 Sunderam BNP Paribus Select Mid Cap Dividend 0.0043735 4

Table 4.3

TOP THREE SCHEMES ON THE BASIS OF THEIR TOTAL RISK

Sr. No. Schemes Sponsor SDp Rank

1 Sundaram BNP

Paribus Income

plus Dividend

Sundaram BNP Paribus 0.0025847 1

2 Sundaram BNP

Paribus Growth

Fund Dividend

Sundaram BNP Paribus 0.0032910 2

3 TATA Equity

Management Fund

TATA 0.0040381 3

Table 4.3

LOWEST THREE SCHEMES ON THE BASIS OF THEIR TOTAL RISK

Sr. No. Schemes Sponsor SDp Rank

1 HDFC Income Fund HDFC Bank 0.17133388 20

2 LIC MF BalanceFund - Dividend

ICICI BankPrudential

0.1680580 19

3 TATA Income Fund

Div Qtly

TATA 0.0865846 18

4.4 BETA ANALYSIS

In this subsection an attempt has been made to bring out the extent to which returns of

various mutual funds schemes have reacted to the changes in the market portfolio return. As

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has been discussed earlier market portfolio returns are represented by daily returns calculated

with reference to CNX Nifty has been presented in Table 4.4.

Table 4.4: Beta Values and ranking of selected Mutual Funds Schemes (Apr. 1, 2008 to

March 31, 2009)

Sr.

No. Scheme Name BETA Rank

1 ICICI Prudential Balance Fund - Dividend Option 0.9959016 5

2 ICICI Prudential Growth Fund - Dividend 0.9969016 2

3 ICICI Prudential Dynamic Plan 0.9957447 7


5 LIC MF Equity Fund - Dividend 0.4895782 18

6 LIC MF Index Funds - Nifty - Dividend 0.2159701 19

7 LIC MF Balance Fund - Dividend 0.4965751 17

8 LIC MF Growth Fund 0.5445563 16




12 HDFC Growth Fund - Dividend Plan -0.9959183 20

13 TATA Balance Fund - Dividend Option 0.9928188 8

14 TATA Income Fund - Dividend Qtly 0.9962685 3

15 TATA Growth Fund - Dividend 0.9371198 14

16 TATA Equity Management Fund 0.9390835 12

17 Sunderam BNP Paribus Balance Fund - DividenOption 0.9959183 618 Sunderam BNP Paribus income Plus - Dividend 0.9863118 10

19 Sunderam BNP Paribus Growth Fund - Dividend 0.9959349 4

20 Sunderam BNP Paribus Select Mid Cap Dividend 0.9386306 13

Table 4.4

TOP THREE SCHEMES ON THE BASIS OF THEIR BETA

Sr. No. Schemes Sponsor Beta Rank

1 ICICI Prudential Liquid Plan ICICI Prudential 1.0682317 1

2 ICICI Prudential Growth

Fund - Dividend

ICICI Prudential 09969016 2

3 TATA Income Fund -

Dividend Qtly

TATA 0.9962685 3

Table 4.4

LOWEST THREE SCHEMES ON THE BASIS OF THEIR BETA

Sr. No. Schemes Sponsor Beta Rank

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1 HDFC Growth Fund -

Dividend Plan

HDFC Bank -0.9959183 20

2 LIC MF Index Funds -

Nifty - Dividend

LIC 0.2159701 19

3 LIC MF Equity Fund -

Dividend

LIC 0.4895782 18

4.5 RISK ADJUSTED PERFORMANCE MEASURES

Yet another way to measure the performance of mutual fund is to evaluate them with

reference to the benchmark, which is the case in stock market return. In the process of

holding such a comparison, we can identify the under performing and over performing

schemes. Here an attempt has been made to do much the same thing. The Benchmark taken

here includes the daily returns based on CNX Nifty. With a view to reach concise and

meaningful results, the well-known Sharpes models for performance appraisal has been

applied. According to the Table 4.5 No. 1 scheme on the basis of Sharpes Index is Sunderam

BNP paribus Balance Fund and the Lowest Scheme is LIC MF Balance Fund Dividend

Table 4.5: Sharpes index and its difference from benchmark based on CNX Nifty and

NAV returns for selected MF schemes. (Apr 1, 2008 to Mar 31, 2009).

Sr.

No. Scheme Name RVARp. RAVRm

1 ICICI Prudential Balance Fund - Dividend Option 0.006014 0.000128

2 ICICI Prudential Growth Fund - Dividend -0.002025 -0.000453

3 ICICI Prudential Dynamic Fund -0.013064 -0.003655

4 ICICI Prudential Liquid Plan 0.002809 0.000692

5 LIC MF Equity Fund - Dividend -0.023641 -0.000795

6 LIC MF Index Funds - Nifty - Dividend -0.034520 -0.001248

7 LIC MF Balance Fund - Dividend -0.065117 -0.001755

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8 LIC MF Growth Fund 0.005199 0.000142

9 HDFC Equity Fund - Dividend Plan 0.001351 0.000034

10 HDFC Income Fund - Dividend 0.000073 0.000018

11 HDFC Balance Fund - Growth Plan 0.002504 0.000766

12 HDFC Growth Fund - Dividend Plan -0.044142 -0.000080

13 TATA Balance Fund - Dividend Option -0.004290 -0.00008914 TATA Income Fund - Dividend Qtly -0.040781 -0.005180

15 TATA Growth Fund - Dividend -0.037130 -0.002154

16 TATA Equity Management Fund -0.015173 -0.000089

17

Sunderam BNP Paribus Balance Fund - Dividend

Option 0.016356 0.000130

18 Sunderam BNP Paribus Plus - Dividend 0.002915 0.000011

19 Sunderam BNP Paribus Growth Fund - Dividend -0.193824 -0.000935

20

Sunderam BNP Paribus Select Mid Cap

Dividend -0.252673 -0.001621

Table 4.5

TOP THREE SCHEMES ON THE BASIS OF SHARPES INDEX

Sr. No. Schemes Sponsor SI-BMS

1 Sunderam BNP Paribus

Balance Fund - Dividend

Option

Sunderam BNP

Paribus

0.01635641

2 ICICI Prudential Balance

Fund - Dividend Option

ICICI Bank

Prudential

0.00601403

3 LIC MF - Growth Fund LIC 0.00519912

Table 4.5

LOWEST THREE SCHEMES ON THE BASIS OF SHARPES INDEX

Sr. No. Schemes Sponsor SI-BMS


Select Mid Cap Dividend

Sunderam BNP Paribus -0.25267340


Growth Fund - Dividend

Sunderam BNP Paribus -0.19382427

3 LIC MF Balance Fund -

Dividend

LIC -0.00519912

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SUMMARY OF FINDINGSNow, in the end we shall recapitulate some of the more important points emerging from the

performance appraisal of the mutual funds carried out in this work. A summary of the

introduction to mutual funds in this study forms the subject matter of first section of this

chapter. The second and third sections will present the view regarding mutual funds industry

and research methodology. The last section encompasses a brief commentary on the Analysis

of data so as to put forward some policy measures which may be beneficial to investors, fund

managers, regulatory authorities and other interested individuals and institutions

SECTION 1

Mutual Funds are the financial intermediaries which pool the savings of numerous

individuals and invest the money thus raised in a diversified portfolio of securities, including

equity, bonds, debentures and other instruments, thus spreading and reducing risk. There are

different types of Mutual Fund Schemes like Open-ended, Close ended, Gilt, Index Fund etc.

Benefits of Mutual Funds are transparency, affordability, flexibility, etc.

SECTION 2

The Indian Mutual Fund Industry is dominated by UTI, which has a total corpus of Rs

700 bn collected from more than 20 million investors. The Unit scheme 64, which is a

balanced fund, is the biggest scheme with a corpus of about 200 bn. Regarding the growth of

mutual fund industry in India, the study reveals that this industry has registered a sharp rise interms of resource mobilization. Major Mutual Fund Companies in India are ABN Amro

Mutual Fund, HDFC Mutual Fund, HSBC Mutual Fund, ICICI Prudential Mutual Fund and

Reliance Mutual Fund etc

SECTION 3

ICICI Prudential Asset Management Company enjoys the strong parentage of ICICI

Bank, a well-known and trusted name in financial services in India and Prudential plc, one of

UK's largest players in the insurance & fund management sectors. ICICI Prudential Asset

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

eminence in the Indian Mutual Fund industry as second largest asset management companies

in the country with assets under management of Rs. 48,689 crores (as of July 31, 2008).

The Company manages a comprehensive range of schemes to meet the varying investment

needs of its investors spread across 68 cities in the country.

SECTION 4

This section summarizes the results of the performance appraisal of selected schemes

in terms of daily returns and the risk associated therewith. The risk and return analysis has

been carried out aim wise and according to periodicity. The model devised by Sharpe has

been applied to evaluate the risk-adjusted performance of sample schemes. By the analysis

of data on the basis of daily returns, it can be said that ICICI Prudential Liquid Plan is the

best for investment because returns on ICICI Prudential Liquid Plan scheme is much higher

than the others. On the basis of risk analyses, Sunderam BNP Paribus Plus-Dividend scheme

is the best because the risk is very less in this scheme as compared to the others and on the

basis of Beta and Sharpes Index, it will be right to say that ICICI Prudential Liquid Plan and

Sunderam BNP Paribus Balanced Fund Dividend Option are the most suitable schemes for

investment.

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CONCLUSION

This project reach at the conclusion that some schemes are highly risky and some are less

risky some schemes have good return and some do not have good return following things are

include in the conclusion of the project

o According to average daily return ICICI prudential liquid plan is the best scheme

among 20 schemes of mutual fund and Tata income fund dividend qtly is worst

scheme among these schemes.

o On the time of upward in stock market high beta funds should be purchase but in

time of downward in stock market inventors should consider those stock which have

less beta.

o According to standard deviation sundram BNP paribus-income plus-dividend is best

and HDFC income fund is worst fund among all schemes this shows that return of

sundram is less volatile but return of HDFC is highly volatile.

o On the basis of beta ICICI Prudential Liquid Plan is best and HDFC Growth Fund -

Dividend Plan has last ranking. This shows that ICICI fund give more return in front

of market.

o On the basis of sharp ratio Sunderam BNP Paribus Balance Fund - Dividend Option

and Sunderam BNP Paribus Select Mid Cap Dividend is worst. This tell over all

performance of scheme.

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RECOMMENDATIONS

Do not panic; remain disciplined and stay committed to your investment

plans. the markets does these kinds of things once in a while; but it will

pass. In the long run, a disciplined investor will see his objectives being

met.

In our view, the long term investment opportunity presented by the Indian

stock markets remains unchanged. The fundamentals of the economy and

the companies continue to be generally robust. we could expect a 15%

sustainable growth in earnings over the next few years.

At this time there is big chance of stock market appreciation so investors

should purchase those funds which have high beta.

Investors should consider past performance of funds on the basis of sharp

ratio, standard deviation, beta of funds. This will be helpful in maximize

the return of investors

If investor is risk averter then he should go to those funds which do not

have high standard deviation.

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BIBLIOGRAPHY

Books

Bodla, BS, Turan MS, Performance Appraisal of Mutual Funds

Gupta, S P, Statistical Methods

Chandra, Prasanna, The Investment Game - How to Win

Seema Vaid, Mutual Fund Operations in India

Newspapers

Economic Times

Financial Express

Business Standard

The Economic Survey of India

SEBI Annual Report

Business Line

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training report on analysis of mutual fund schemes w.r.t karvy

Documents