Report on Mutual Fund of Karvy

8/12/2019 Report on Mutual Fund of Karvy

1/85

A

Project Study Report

On

KARVY STOCK BROKING LTD

MUTUAL UND S!RVIC!S"#

Su$%&tted &n P'rt&'( u()&((%ent )or t*e

A+'rd o) De,ree o)

M'-ter O) Bu-&ne-- Ad%&n&-tr't&on

Su$%&tted By. Su$%&tted To.

ANS/U GUPTA DR" SONAL 0AIN

MBA 1t*

Se%" /"O"D"

D!!PS/IK/A COLL!G! OR T!C/NICAL !DUCATION2 0AIPUR

344563477

1


2/85

D!CLARATION

I ANSHU GUPTA declares that the project report titled MUTUAL FUND OF KAR ! STO"K#ROKING LTD$% is &ased o' () project st*d)$ This project report is () ori+i'al ,or- a'd this

has 'ot &ee' *sed .or a') other p*rpose a'),here$

ANS/U GUPTA

MBA 1 t* -e%e-ter

2


3/85

P!R AC!

The i(porta'ce o. &*si'ess (a'a+e(e't is &ei'+ i'creasi'+ reali/ed i' the i'd*strial a'd 'o'0

i'd*strial areas &oth i' I'dia$ This reali/atio' has co(e a&o*t &eca*se o. i'creasi'+

co(ple1it) o. the Ma'a+ers a'd Ad(i'istratio'$ He'ce2 (ost o. the &*si'ess schools toda)

ha3e (id0(od*les as ,ell as .i'al projects i'corporatio' as a part o. their s)lla&*s$

Practical trai'i'+ is o'e o. the (ajor co(po'e't .or a') pro.essio'al co*rse li-e M$#$A the real

place ,here a pro.essio'al perso' .aces a pro&le( i' a .ield$ It ,as a +ood e1pos*re .or (e to*'der+o trai'i'+ i' a hi+hl) estee(ed a'd corporate co(pa') li-e KAR ! S4"URITI4S

,here I +ot to e'ha'ce () -'o,led+e a'd e1perie'ce ,ith respect to "ONSUM4R

#4HA IOUR IN MUTUAL FUND AND S4"URITI4S 5 I ha3e lear'ed 3ario*s practical aspects

o. tradi'+ i' stoc- (ar-et$ This project is a part o. the c*rric*l*( o. post +rad*ate pro+ra((ed

i' (a'a+e(e't2 D44PSIKHA "OLL4G4 OF T4"HNI"AL 4DU"ATION2 6AIPUR%$

I ,as a&le to +et .a(iliari/ed ,ith the corporate e'3iro'(e't2 tea( s*pport a'd (a'a+e(e't

operatio's i' ,or-i'+ o*t the operatio's o. e..icie'c) s*ccess.*ll) .or the achie3e(e't o. the

e'd o&jecti3e o. or+a'i/atio' as ,hole$

Th*s I ,o*ld sa) that this trai'i'+ ,as &e'e.icial ed*cati3e a'd +ood e1pos*re to (e2 ,hich

,ill certai'l) help i' () 'ear .*t*re $

3


4/85

ACKNO8L!DG!M!NT

I e1press () si'cere tha'-s to () project +*ide Mr$ Aashish Shar(a 7Tea( Leader i' KAR !

STO"K #ROAKING LIMIT4D2 6AIPUR8 .or +*idi'+ (e ri+ht .or( the i'ceptio' till the

s*ccess.*l co(pletio' o. the project$ I si'cerel) ac-'o,led+e hi( .or e1te'di'+ there 3al*a&le

+*ida'ce2 s*pport .or literat*re2 critical re3ie,s o. project a'd the report a'd a&o3e all (oral

s*pport he had pro3ided to (e ,ith all sta+es o. this project$

I ,o*ld also li-e to tha'- the s*pporti'+$DR$SONAL 6AIN 7H$O$D o. D"T48 .or this help a'd

cooperatio' thro*+h o*t o*r project$

9S&,n'ture:

ANS/U GUPTA

4


5/85


6/85

C!RTI ICAT!

I .eel +reat pleas*re i' certi.)i'+ that the research project e'titled e(&odies arecord o. the

res*lt o. i'3esti+atio' carried o*t &) ANSHU GUPTA% *'der () +*ida'ce$

I a( satis.ied ,ith the a'al)sis o. the data 2i'terpretatio' o. res*lts a'd co'cl*sio' dra,'$

I reco((e'd the s*&(issio' o. research project$

Place=

Date=

Ms$

6


7/85

CONT!NT

;$ I'trod*ctio' to the I'd*str) >

?$ I'trod*ctio' to the Or+a'i/atio' ;@

C$ Facts a'd Fi'di'+s >@

$ A'al)sis a'd I'terpretatio' >

B$ SEOT ;

>$ "o'cl*sio' ?

$ Reco((e'datio' a'd S*++estio's @

$ #i&lio+raph) C

7


8/85

Introduct&on to t*e &ndu-try

8


9/85

Kar3) "o's*lta'ts Li(ited ,as esta&lished i' ; ? at H)dera&ad$ It ,as esta&lished &) a

+ro*p o. H)dera&ad0&ased practici'+ "hartered Acco*'ta'ts$ At i'itial sta+e it ,as 3er) s(all

i' si/e$ It ,as started ,ith a capital o. Rs$ ;2


10/85

&*t .ast de3elopi'+ cities li-e "ha'di+arh2 G*r+ao'2 6aip*r etc$ M) research is &ased o' the

reside'ts o. 6AIPUR a'd its 'ear&) areas$

8/!R! KARVY STAND IN T/! MARK!Ter>&e+

Introduct&on

Succe-- &- ' journey2 not ' de-t&n't&on"# I. ,e loo- .or e1a(ples to pro3e this :*ote the'

,e ca' .i'd (a') &*t there is 'o'e li-e that o. -ar3)$ #ac- i' the )ear ; ;2 .i3e people11


12/85

created histor) &) esta&lishi'+ -ar3) a'd co(pa') ,hich is toda) -'o,' as -ar3)2 the lar+est

.i'a'cial ser3ice pro3ider o. I'dia$

Succe-- -utr'- o) KARVY

The s*ccess stor) o. -ar3) is dri3e' &) s*ccess s*tras adopted &) it 'a(el) tru-t2 &nte,r&ty2

ded&c't&on2 co%%&t%ent2 enterpr&-e2 *'rd +or? 'nd te'% p('y2 (e'rn&n, 'nd &nno>'t&on2

e%p't*y 'nd *u%&(&ty" These are the 3al*es that &i'd s*ccess ,ith -ar3)$

V&-&on o) KARVY

To achie3e 5 s*stai' (ar-et leadership2 Kar3) shall ai( .or co(plete c*sto(er satis.actio'2 &)

co(&i'i'+ its h*(a' a'd tech'olo+ical reso*rces2 to pro3ide ,orld class :*alit) ser3ices$ I'

the process Kar3) shall stri3e to (eet a'd e1ceed c*sto(er s satis.actio' a'd set i'd*str)

sta'dards$

M&--&on -t'te%ent

To &e a leadi'+2 pre.erred ser3ice pro3ider to o*r c*sto(er2 a'd to achie3e this leadership

positio' &) &*ildi'+ a' i''o3ati3e2 e'terprisi'+2 a'd tech'olo+) dri3e' or+a'i/atio' ,hich ,ill

set the hi+hest sta'dards o. ser3ice a'd &*si'ess ethics$

BOARD O DIR!CTORS

KARVY CONSULTANTS LIMIT!D$PARTHASARATH! "

$!UGANDHAR M

$RAMAKRISHNA M S

$PRASAD POTIURI

$RO#4RT GI#SON12


13/85

$SAN6A! KUMAR DHIR

$R SH!AMSUND4R

K'r>y &n>e-tor -er>&ce- (&%&ted

Parthasarath) "

!*+a'dhar M

Ra(a-rish'a M S

K'r>y Secur&t&e- L&%&ted

Parthasarath) "

!*+a'dhar M

Ra(a-rish'a M S

Aja) K*(ar K

Eillia( Sa(*el

K'r>y Stoc? Bro?&n, L&%&ted

Parthasarath) "

Aja) K*(ar K

K*t*(&a Rao

Eillia( Sa(*el

C P'rt*'-'r't*y 2 C*'&r%'n @ M'n',&n, D&rector

13


14/85

Mr$ " Parthasarath)2 a leader i' the .i'a'cial ser3ices i'd*str) i'

I'dia is respo'si&le .or &*ildi'+ KAR ! as o'e o. I'dia s tr*l) i'te+rated Fi'a'cial Ser3ices

Pro3ider he is a .ello, (e(&er o. the I'stit*te o. "o(pa') Secretaries o. I'dia2 a Fello,

Me(&er o. the I'stit*te o. "hartered Acco*'ta'ts o. I'dia a'd a +rad*ate i' la,$ As "hair(a'

a'd Ma'a+i'+ Director2 he o3ersees the +ro*p s operatio's a'd re'ders 3isio' a'd &*si'ess

directio'$ His passio' a'd 3isio' .or achie3i'+ leadership i' the &*si'ess (ade KAR ! a

leadi'+ .i'a'cial i'ter(ediar) ra'-i'+ the( as '*(&er o'e i' the re+istrar2 Share Tra's.er a'd

IPO Distri&*tio' &*si'esses$

Mr" M Yu,'nd*'r2 M'n',&n, D&rector

Mr$ M !*+a'dhar2 Ma'a+i'+ Director2 .o*'der (e(&er o. KAR !

"o's*lta'ts Li(ited2 has 3aried e1perie'ce i' the .ield o. .i'a'cial ser3ices spa''i'+ o3er ?y Stoc? Bro?&n, L&%&ted

KAR ! Stoc- #ro-i'+ Li(ited2 o'e o. the cor'ersto'es o. the KAR ! edi.ice2 .lo,s .reel)

to,ards attai'i'+ di3erse +oals o. the c*sto(er thro*+h 3aried ser3ices$ It creates a plethora

o. opport*'ities .or the c*sto(er &) ope'i'+ *p i'3est(e't 3istas &ac-ed &) research0&ased

ad3isor) ser3ices$ Here2 +ro,th -'o,s 'o li(its a'd s*ccess reco+'i/es 'o &o*'daries$

Helpi'+ the c*sto(er create ,a3es i' his port.olio a'd e(po,eri'+ the i'3estor co(pletel) is

the *lti(ate +oal$ KAR ! Stoc- #ro-i'+ Li(ited is a (e(&er o.=

Natio'al Stoc- 41cha'+e 7NS48

#o(&a) Stoc- 41cha'+e 7#S48

H)dera&ad Stoc- 41cha'+e 7HS48

Me(&er 0 Natio'al Stoc- 41cha'+e 7NS48 a'd The #o(&a) Stoc- 41cha'+e 7#S48$

Kar3) Stoc- #ro-i'+ Li(ited2 o'e o. the cor'ersto'es o. the

Kar3) edi.ice2 .lo,s .reel) to,ards attai'i'+ di3erse +oals o. the c*sto(er thro*+h 3ariedser3ices$ "reati'+ a plethora o. opport*'ities .or the c*sto(er &) ope'i'+ *p i'3est(e't 3istas

&ac-ed &) research0&ased ad3isor) ser3ices$ Here2 +ro,th -'o,s 'o li(its a'd s*ccess

reco+'i/es 'o &o*'daries$ Helpi'+ the c*sto(er create ,a3es i' his port.olio a'd e(po,eri'+

the i'3estor co(pletel) is the *lti(ate +oal$

Stoc? Bro?&n, Ser>&ce-

24


25/85

It is a' *'disp*ted .act that the stoc- (ar-et is *'predicta&le a'd )et

e'jo)s a hi+h s*ccess rate as a ,ealth (a'a+e(e't a'd ,ealth acc*(*latio' optio'$ The

di..ere'ce &et,ee' *'predicta&ilit) a'd a sa.et) a'chor i' the (ar-et is pro3ided &) i'0depth

-'o,led+e o. (ar-et .*'ctio'i'+ a'd cha'+i'+ tre'ds2 pla''i'+ ,ith .oresi+ht a'd choosi'+

o'e5rs:*o s optio's ,ith care$ This is ,hat ,e pro3ide i' o*r Stoc- #ro-i'+ ser3ices$

Ee o..er ser3ices that are &e)o'd j*st a (edi*( .or &*)i'+ a'd selli'+ stoc-s a'd

shares$ I'stead ,e pro3ide ser3ices ,hich are (*lti di(e'sio'al a'd (*lti0.oc*sed i' their

scope$ There are se3eral ad3a'ta+es i' *tili/i'+ o*r Stoc- #ro-i'+ ser3ices2 ,hich are the

reaso's ,h) it is o'e o. the &est i' the co*'tr)$

Ee o..er tradi'+ o' a 3ast plat.or( Natio'al Stoc- 41cha'+e a'd #o(&a)

Stoc- 41cha'+e$ More i(porta'tl)2 ,e (a-e tradi'+ sa.e to the (a1i(*( possi&le e1te't2 &)acco*'ti'+ .or se3eral ris- .actors a'd pla''i'+ accordi'+l)$ Ee are assisted i' this tas- &) o*r

i'0depth research2 co'sta't .eed&ac- a'd so*'d ad3isor) .acilities$ O*r hi+hl) s-illed research

tea(2 co(prisi'+ o. tech'ical a'al)sts as ,ell as .*'da(e'tal specialists2 sec*re res*lt0

orie'ted i'.or(atio' o' (ar-et tre'ds2 (ar-et a'al)sis a'd (ar-et predictio's$ This cr*cial

i'.or(atio' is +i3e' as a co'sta't .eed&ac- to o*r c*sto(ers2 thro*+h dail) reports deli3ered

thrice dail) The Pre0sessio' Report2 ,here (ar-et sce'ario .or the da) is predicted2 The Mid0

sessio' Report2 ti(ed to arri3e d*ri'+ l*'ch &rea-2 ,here the (ar-et .orecast .or the rest o.

the da) is +i3e' a'd The Post0sessio' Report2 the .i'al report .or the da)2 ,here the (ar-et

a'd the report itsel. is re3ie,ed$ To add to this repositor) o. i'.or(atio'2 ,e p*&lish a (o'thl)

(a+a/i'e 5ld:*o Kar3) The Fi'apolis5rd:*o 2 ,hich a'al)/es the latest stoc- (ar-et tre'ds

a'd ta-es a close loo- at the 3ario*s i'3est(e't optio's2 a'd prod*cts a3aila&le i' the (ar-et2

,hile a ,ee-l) report2 called 5ld:*o Kar3) #a/aar #aatei'5rd:*o 2 -eeps )o* (ore i'.or(ed

o' the i((ediate tre'ds i' the stoc- (ar-et$ I' additio'2 o*r speci.ic i'd*str) reports +i3e

co(prehe'si3e i'.or(atio' o' 3ario*s i'd*stries$ #esides this2 ,e also o..er special port.olio

a'al)sis pac-a+es that pro3ide dail) tech'ical ad3ice o' scrips .or s*ccess.*l port.olio

(a'a+e(e't a'd pro3ide c*sto(i/ed ad3isor) ser3ices to help )o* (a-e the ri+ht .i'a'cial

(o3es that are speci.icall) s*ited to )o*r port.olio$

O*r Stoc- #ro-i'+ ser3ices are ,idel) 'et,or-ed across I'dia2 ,ith the '*(&er o. o*r

tradi'+ ter(i'als pro3idi'+ retail stoc- &ro-i'+ .acilities$ O*r ser3ices ha3e i'creasi'+l) o..ered25


26/85

c*sto(er orie'ted co'3e'ie'ce2 ,hich ,e pro3ide to a spectr*( o. i'3estors2 hi+h0'et,orth or

other,ise2 ,ith e:*al dedicatio' a'd co(pete'ce$ #*t tr*e to o*r spirit2 this s*ccess is 'ot o*r

.i'al desti'atio'2 &*t j*st a plat.or( to la*'ch .*rther e'ha'ced :*alit) ser3ices to pro3ide )o*

the latest i' co'3e'ie't2 c*sto(er0.rie'dl) stoc- (a'a+e(e't$ O3er the )ears ,e ha3e

e's*red that the tr*st o. o*r c*sto(ers is o*r &i++est ret*r's$

26


27/85

Or,'n&='t&on -tructure o) ?'r>y

27


28/85

Tal-i'+ a&o*t the or+a'i/atio' str*ct*re o. -ar3)2 ,e ha3e the &oard o. directors as the

s*pre(e +o3er'i'+ &od) 2 the chair(a' &ei'+ Mr$ " parthasarth)2 MR$ M$ !UGANDHAR as

the (a'a+i'+ director2 MR$ M$S$ RAMAKRISHNA a'd MR$ PRASAD $ POTLURI as

directors$ The &oard o. diretors head the -ar3) +ro*p2 -ar3) co(p*tershares li(ited2 -ar3)

i'3estors ser3ices ltd$2 -ar3) co(trade2 -ar3) stoc- &ro-i'+ ltd$2 a'd -ar3) +lo&al ser3ices ltd$

Kar3) +ro*p &ei'+ the .la+ship co(pa') loo-s a.ter the .*'ctio'al depart(e'ts s*ch as

corporate a..airs2 +ro*p h*(a' reso*rces2 .i'a'ce 5 acco*'ti'+2 trai'i'+ 5 de3elop(e't2

tech'olo+) ser3ices a'd corporate :*alit)$

Kar3) co(p*tershare pri3ate li(ited .acilitates (*t*al .*'d ser3ices2 share re+istr) a'd iss*e

re+istr) ,hereas (ercha't &a'-i'+ is loo-ed a.ter &) -ar3) i'3estor ser3ices ltd$ Kar3) stoc-

&ro-i'+ ltd heads its a'other &ra'ch too ie$ Kar3) i's*ra'ce &ro-i'+ ltd$ The ser3ices o..ered

&) KS#L are= stoc- &ro-i'+2 depositor)2 research2 distri&*tio'2 perso'al clie't +ro*p a'd

i'stit*tio'al des-$ A'd .i'all) the #PO ser3ices are (a'a+ed &) -ar3) +lo&al ser3ices

ltd$S*((ari/i'+ it i' a dia+ra(2 it ca' &e prese'ted as=

28


29/85

29


30/85


31/85

/&er'rc*&c'( Structure &n d&',r'%

The a&o3e dia+ra( sho,s the hierarch) o. Kar3) stoc- &ro-i'+ ltd$ It ca' &e easil) depicted

.ro( the dia+ra( that the re+io'al head 7prese'tl) Mr$ Alo- "hat*r3edi8 is the s*pre(e i' the

easter' re+io'2 *'der ,ho( the 3ario*s /o'al heads operate a'd *'der these /o'al heads2

the &ra'ch heads operate$ #et,ee' each le3el o the hierarch)2 there e1ists a coordi'ator2 ,ho

acts as the .acilitator &et,ee' the di..ere't heads$

31


32/85

Structure 'ccord&n, to t*e Product- o))ered $y K'r>y

32

REGIONALHEADS

PRODUCT

HEADS

M*t*

al.*'ds

I's*r

a'ce&ro-i'+

"o(

(odities

Stock

broking

Depos

itory partici pant

Merc

ha't5i'3$&a'-i'+

PMS

Realt)Debt

division


33/85

" Re-e'rc* Met*odo(o,y

33


34/85

The (ai' o&jecti3e o. a research is to .i'd o*t the tr*th ,hich is hidde' a'd

,hich has 'ot &ee' disco3ered$ Accordi'+ to ad3a'ce lear'er9s dictio'ar) o. c*rre't 4'+lish

the de.i'itio' o. research is=0 A care.*l i'3esti+atio' or e':*ir) especiall) thro*+h search .or

'e, .acts i' a') &ra'ch o. -'o,led+e%

M'r?et&n, re-e'rc*.6

Mar-eti'+ (a'a+ers o.te' co((issio' .or(al (ar-eti'+ st*dies o. speci.ic pro&le(s a'd

opport*'ities$ The) (a) re:*est a (ar-et s*r3e)2 a prod*ct pre.ere'ce test2 or a' ad3ertisi'+

e3al*atio'$ Mar-eti'+ research is the .*'ctio' ,hich li'-s the co's*(ers2 c*sto(ers a'd p*&lic to

the (ar-eter tho*+h i'.or(atio'0 *sed to ide'ti.ied a'd de.i'e (ar-eti'+ opport*'ities a'd

pro&le(s2 +e'erate ad e3al*ate (ar-eti'+ actio's =0 (o'itor (ar-eti'+ per.or(a'ce a'd i(pro3e*'dersta'di'+ o. (ar-eti'+ as a process$ 4..ecti3e (ar-eti'+ research i'cl*des .i3e steps2 ,hich

sho*ld &e -ept i' (i'd to co'd*ct a (ar-eti'+ research i' a per.ect (a''er$

a$ De.i'e the pro&le( a'd research o&jecti3e$

&$ De3elop the research pla'$

c$ "ollect the i'.or(atio'$

d$ Prese't the .i'di'+s$

"7 T&t(e o) t*e Study

34


35/85

MATUAL UND S!RVIC!S O KARVY STOCK BROKING LTD"#

"3 Dur't&on o) t*e Project

7 D'y-

" O$ject&>e- o) t*e -tudy.

;$ To st*d) a'd a'al)se the process o. (at*al .*'d a'd I'3est(ators opi'io' to,ards (at*al

.*'d Processi'+$

?$ To -'o, a'd e1plai' proced*re .or i'3est i' (at*al .*'d a'd process o. (at*alali/atio' o.

sec*rities to eli(i'ate the pro&le( related ,ith ph)sical holdi'+s o. sec*rities$

@$ To e1plai' the ad3a'ta+es o. (at*al .*'d o. sec*rities2 co'3i'ce a'd (a-e the( to

sec*rities$

C$ To -'o, the pro&le( .aced &) the i'3estor a'd reaso' .or ph)sical holdi'+s o. sec*rities

,itho*t o. sec*rities$

$ To +i3e a,are'ess a(o'+ the i'3estors a&o*t (at*al .*'d a'd to (a-e the( to i'3est i'

(at*al .*'d

"1 Type- o) re-e'rc*

35


36/85

The c*sto(er research ,as carried o*t i' t,o phases=

a$ A' e1plorator) research ,as carried o*t to -'o, ,hat c*sto(er loo-s .or i' .i'a'cial co(pa')

a'd ,hether c*sto(ers are satis.ied or 'ot ,ith there prod*cts

&$ The other ,as a dia+'ostic st*d) to ide'ti.) the .actors respo'si&le .or satis.actio's or

dissatis.actio' o. c*sto(er

" S'%p(e S&=e 'nd %et*od o) -e(ect&n, -'%p(e

S'%p(e -&=e

The sa(ple si/e o. () project is li(ited to > o'l) $

S'%p(e de-&,n

Data has &ee' prese'ted ,ith the help o. dia+ra((atic a'd pie chart etc$

S'%p(&n, procedure

The sa(ple is selected i' a ra'do( ,a)2 irrespecti3e o. the( &ei'+ i'3estor or 'ot or

a3aili'+ the ser3ices or 'ot$ It ,as collected thro*+h (ails a'd perso'al 3isits to the -'o,'

perso's2 &) .or(al a'd i'.or(al tal-s a'd thro*+h .illi'+ *p the :*estio''aire prepared$ The

data has &ee' a'al)/ed &) *si'+ the (eas*res o. ce'tral te'de'cies li-e (ea'2 (edia'2

(ode$ The +ro*p has &ee' selected a'd the a'al)sis has &ee' do'e o' the &asis statistical

tools a3aila&le$

" Scope o) t*e -tudy.

36


37/85

The prese't st*d) see-s to a'al)se c*rre't operatio's o. -ar3) stoc- &ro-i'+ co(pa')

re+ardi'+ the (at*al ser3ices$ Moreo3er -ar3) a'd its operatio' (ar-et is a 3ast area ,ith

cha'+i'+ da) to da) re+*latio'$ So st*d)i'+ a&o*t -ar3) ser3ices its i(plicatio's2 to the le'+th

a'd &reath a'd .i'di'+ the pors a'd co's acc*ratel) .ro( the poi't o. 3ie, o. i'3estors

protectio' is a di..ic*lt tas- i' 3ie, o. the ti(e a'd e'er+) le.t &e.ore the ca'didate$

The research ,as carried o' i' the 4aster' Re+io' o. I'dia$ It is restricted to Kol-ata ,here it

has +ot ;; &ra'ch o..ices a'd @ .ra'chisees$ I ha3e 3isited people ra'do(l) 'ear&) () localit)2

di..ere't shoppi'+ (alls2 s(all retailers etc$

Kar3) Stco- #ro-i'+ Ltd$ is Depositor) particpa't &oth ,ith 0Natio'al Sec*rities Depositories

Li(ited 7NSDL8 a'd "e'tral Depositor) Ser3ices Li(ited 7"DSL8$

Pro$(e% St'te%ent.6

To -'o, the rate o. ha/ard o. i'3esti'+ i' (*t*al .*'d% C$? O&jecti3es o. St*d)=0 I' 3ie,

o. the pro&le( citied a&o3e2 the st*d) ai(s at a'al)/i'+ the .ollo,i'+ (ajor iss*es=

;

? To e3al*ate a'd trac- the per.or(a'ce o. M*t*al .*'d$

@ To +e'erate a,are'ess o. (*t*al .*'d i' Raip*r cit)$

To co(pare the 3olatilit) o. (*t*al .*'d ,ith other .i'a'cial prod*cts a3aila&le i' the (ar-et$

C To see the i'terest o. people i' i'3esti'+ i' M*t*al F*'d

To (eas*re the ris- associated ,ith the i'3est(e't i' M*t*al F*'d$

!M!RG!NC! O MUTUAL UNDS.6

37


38/85

M*t*al .*'ds 'o, represe't perhaps the (ost appropriate i'3est(e'topport*'it) .or (ost s(all i'3estors$ As .i'a'cial (ar-ets &eco(e (ore sophisticated 5

co(ple12 i'3estors 'eed a .i'a'cial i'ter(ediar) ,ho pro3ides the re:*ired -'o,led+e 5

pro.essio'al e1pertise o' s*ccess.*l i'3esti'+$ It is 'o ,o'der the' that i' the &irthplace o.

(*t*al .*'ds0the U$S$A0the .*'d i'd*str) has alread) o3erta-e' the &a'-i'+ i'd*str)2 ,ith

(ore (o'e) *'der (*t*al .*'d (a'a+e(e't tha' deposited ,ith &a'-s$

Concept o) %utu'( )und .6

The co'cept o. (*t*al .*'ds ,as i'trod*ced i' I'dia ,ith the .or(atio' o. U'it Tr*st o.

I'dia i' ; B@$ The +o3er'(e't o. I'dia set *p U'it Tr*st o. I'dia i' ; B@ &) a' act o'

parlia(e't$ UTI .*'ctio'ed *'der the re+*lator) a'd ad(i'istrati3e co'trol o. the Reser3e #a'-

o. I'dia till ; > $The .irst sche(e la*'ched &) UTI ,as the 'o, i'.a(o*s U'it Sche(e BC i'

; BC$ UTI co'ti'*ed to &e the sole (*t*al .*'d *'til ; >2 ,he' so(e p*&lic sector &a'-s a'd

Li.e I's*ra'ce "orporatio' o. I'dia a'd Ge'eral I's*ra'ce "orporatio' o. I'dia set *p (*t*al

.*'ds$ It ,as o'l) i' ; @ that pri3ate pla)ers ,ere allo,ed to ope' shops i' the co*'tr)$

Toda)2 @? (*t*al .*'ds collecti3el) (a'a+e Rs B>;@ > $; cr *'der h*'dreds o. sche(es$

I' ; 2 the R#I per(itted pri3ate sector i'stit*tio's to set *p Mo'e) Mar-et

M*t*al F*'ds 7MMMFs8$ Pri3ate i'stit*tio's ca' i'3est i' treas*r) &ills2 call a'd 'otice (o'e)2co((ercial paper2 co((ercial &ills accepted co0accepted &) &a'-s2 ha3i'+ *'e1pired (at*rit)*p to o'e )ear$ The i'd*str) has steadil) +ro,' o3er the decade$ The (*t*al .*'d collects

(o'e) directl) or thro*+h &ro-ers .ro( i'3estors$ The (o'e) is i'3ested i' 3ario*s

i'str*(e'ts depe'di'+ o' the o&jecti3e o. the sche(e$ A M*t*al F*'d is a tr*st that pools the

sa3i'+s o. a '*(&er o. i'3estors$ Eho share a co((o' .i'a'cial +oal The (o'e) th*s

collected is the' i'3ested i' capital (ar-et i'str*(e'ts s*ch as share2 de&e't*res a'd other

sec*rities

The i'co(e ear'ed thro*+h these i'3est(e'ts a'd the capital appreciatio's reali/ed

are shared &) its *'it holders i' proportio' to the '*(&er o. *'its o,'ed &) the($ Th*s a

M*t*al F*'d is the (ost s*ita&le i'3est(e't .or the co((o' (a' as it o..ers a' opport*'it) to

i'3est i' a di3ersi.ied2 pro.essio'all) (a'a+ed &as-et o. sec*rities at a relati3el) lo, cost

8or?&n, o) Mutu'( und-

38


39/85

!>o(ut&on o) Mutu'( und- &n Ind&'

39


40/85

The (*t*al .*'d i'd*str) i' I'dia started i' ; B@ ,ith the .or(atio' o. U'itTr*st o. I'dia2 at the i'itiati3e o. the Go3er'(e't o. I'dia a'd Reser3e #a'- o. I'dia$

The histor) o. (*t*al .*'ds i' I'dia ca' &e &roadl) di3ided i'to .o*r disti'ct phases

&r-t P*'-e E 75 16F Un&t

Tr*st o. I'dia 7UTI8 ,as esta&lished o' ; B@ &) a' Act o. Parlia(e't$ It ,as set *p &)

the Reser3e #a'- o. I'dia a'd .*'ctio'ed *'der the Re+*lator) a'd ad(i'istrati3e co'trol

o.the Reser3e #a'- o. I'dia$ I' ; > UTI ,as de0li'-ed .ro( the R#I a'd the I'd*strial

De3elop(e't #a'- o. I'dia 7ID#I8 too- o3er the re+*lator) a'd ad(i'istrati3e co'trol i' place

o. R#I$ The .irst sche(e la*'ched &) UTI ,as U'it Sche(e ; BC$ At the e'd o. ; UTI had

Rs$B2 > (ar-ed the e'tr) o. 'o'0 UTI2 p*&lic sector (*t*al .*'ds set *p &) p*&lic

sector &a'-s a'd Li.e I's*ra'ce "orporatio' o. I'dia 7LI"8 a'd Ge'eral I's*ra'ce "orporatio'

o. I'dia 7GI"8$ S#I M*t*al F*'d ,as the .irst 'o'0 UTI M*t*al F*'d esta&lished i' 6*'e ; >

.ollo,ed &) "a' &a'- M*t*al F*'d 7Dec >82 P*'ja& Natio'al #a'- M*t*al F*'d 7A*+ 82

I'dia' #a'- M*t*al F*'d 7No3 82 #a'- o. I'dia 76*' 2


41/85

The ; @ S4#I 7M*t*al F*'d8 Re+*latio's ,ere s*&stit*ted &) a (ore co(prehe'si3e

a'd re3ised M*t*al F*'d Re+*latio's i' ; B$ The i'd*str) 'o, .*'ctio's *'der the S4#I

7M*t*al F*'d8 Re+*latio's ; B The '*(&er o. (*t*al .*'d ho*ses ,e't o' i'creasi'+2 ,ith

(a') .orei+' (*t*al .*'ds setti'+ *p .*'ds i' I'dia a'd also the i'd*str) has ,it'essed

se3eral (er+ers a'd ac:*isitio's$ As at the e'd o. 6a'*ar) ?


42/85

Ad>'nt',e- o) Mutu'( und-.6

Port)o(&o d&>er-&)&c't&on.6

M*t*al .*'ds 'or(all) i'3est i' a ,ell0di3ersi.ied port.olio o. sec*rities$ 4achi'3estor i' a .*'d is part o. o,'er o. all o. the .*'d9s assets$ This e'a&les hi( to hold a

di3ersi.ied i'3est(e't port.olio e3e' ,ith a s(all a(o*'t o. i'3est(e't2 ,hich ,o*ld other,ise

re:*ire &i+ capital$ The &est (*t*al .*'ds desi+' their port.olios so i'di3id*al i'3est(e'ts ,ill

react di..ere'tl) to the sa(e eco'o(ic co'ditio's$ For e1a(ple2 eco'o(ic co'ditio's li-e a rise

i' i'terest rates (a) ca*se certai' sec*rities i' a di3ersi.ied port.olio to decrease i' 3al*e$

Other sec*rities i' the port.olio ,ill respo'd to the sa(e eco'o(ic co'ditio's &) i'creasi'+ i'

3al*e$ Ehe' a port.olio is &ala'ced i' this ,a)2 the 3al*e o. the o3erall port.olio sho*ld

+rad*all) i'crease o3er ti(e2 e3e' i. so(e sec*rities lose 3al*e$

42


43/85


44/85

M*t*al .*'d (a'a+e(e't co(pa'ies o..er (a') i'3estor ser3ices that adirect (ar-et i'3estor ca''ot +et$ Eithi' the sa(e .*'d .a(il)2 i'3estors ca' easil)

tra's.er s,itch their holdi'+ .ro( o'e sche(e to a'other$ The) ca' also i'3est or ,ithdra,

their (o'e) at re+*lar i'3estors i' (ost ope' e'd sche(es$ M*t*al .*'d i'3est(e't process

has &ee' (ade .*rther (ore co'3e'ie't ,ith the .acilit) o..ered &) .*'ds .or i'3estors to &*) or

sell their *'its thro*+h the i'ter'et or e(ail *si'+ or *si'+ other co((*'icatio' (ea's$

S')ety.6

M*t*al F*'d I'd*str) is ,ell0re+*lated all .*'ds are re+istered ,ith S4#I ,hich lies do,' to

protect the i'3estors$ Th*s2 i'3estors also &e'e.it .ro( the sa.et) o. a re+*lated i'3est(e't

e'3iro'(e't$

T'J $ene)&t-.6

M*t*al .*'ds o..er a host o. ta1 &e'e.its$ Di3ide'd i'co(e recei3ed .ro( i'3esti'+ i' e:*it) 5

de&t sche(e o. a (*t*al .*'d is a ta1 .ree i' the ha'ds o. the i'3estor$

C*o&ce o) -c*e%e .6

M*t*al .*'ds o..er a 3ast 3ariet) o. ,ell0desi+'ed sche(es 5 optio's that )o* ca' choose

.ro( depe'di'+ o' )o*r ris- appetite$

Tr'n-p'rency.6

All that )o* i'3est i' a sche(e is (ade -'o,' to )o* 5 )o* are periodicall) i'.or(ed a&o*t all

the *pdates 5 cha'+es ta-i'+ place$

Mutu'( und C('--&)&c't&on

44


45/85

Open6end >-" C(o-ed6end und-.6

A' ope'0e'd .*'d is o'e that sells 5 rep*rchases *'its at all ti(es$ Ehe' the .*'d sells *'its2

the i'3estor &*)s the( .ro( the .*'d$ Ehe' the i'3estor redee(s the *'its2 the .*'drep*rchases the *'its .ro( the i'3estor$ A' i'3estor ca' &*) or redee( *'its .ro( the .*'d

itsel. at a price &ased o' the 'et asset 3al*e 7NA 8 per *'it$ NA per *'it is o&tai'ed &)

di3idi'+ the a(o*'t o. the (ar-et 3al*e o. the .*'d9s assets &) the '*(&er o. *'its

o*tsta'di'+$ These sche(es do 'ot ha3e a .i1ed (at*rit) period$

A closed0e'd .*'d is .i1ed2 as it (a-es a o'e0ti(e sale o. a .i1ed '*(&er o. *'its$ A.ter the

o..er closes2 closed0e'd .*'ds do 'ot allo, i'3estors to &*) or redee( *'its directl) .ro( the

.*'ds$ Ho,e3er to pro3ide the (*ch 'eeded li:*idit) to i'3estors2 closed0e'd .*'ds list o' a

stoc- e1cha'+e$ Tradi'+ thro*+h a stoc- e1cha'+e e'a&les i'3estors to &*) or sell *'its o. a

closed0e'd (*t*al .*'d .ro( each other9s thro*+h a stoc-&ro-er2 i' the sa(e .ashio' as

&*)i'+ or selli'+ shares o. a co(pa')$

Lo'd @ No6(o'd und-.6

45


46/85


47/85

7 By Structure

Open 6 !nded Sc*e%e-

C(o-e 6 !nded Sc*e%e-Inter>'( Sc*e%e-

7 By In>e-t%ent O$ject&>e

Gro+t* Sc*e%e-

Inco%e Sc*e%e-

B'('nced Sc*e%e-

Money M'r?et Sc*e%e-

7

3 Ot*er Sc*e%e-

T'J S'>&n, Sc*e%e-

Spec&'( Sc*e%e-

IndeJ Sc*e%e-

Sector Spec&)&c Sc*e%e-

By Structure

;

? Ope' e'ded .*'ds=0

I'3estors ca' &*) a'd sell *'its o. ope'0e'ded .*'ds at NA 0related price e3er) da)

; "lose0e'ded .*'ds=0

These .*'ds ha3e a stip*lated (at*rit) period2 ,hich (a) 3ar) .ro( three to ; )ears

; I'ter3al F*'ds=0

These .*'ds co(&i'e the .eat*res o. &oth ope' a'd close0e'ded .*'ds

By In>e-t%ent o$ject&>e

47


48/85

7

? #ala'ced .*'ds= The o&jecti3e o. &ala'ced .*'ds is to pro3ide +ro,th alo'+ ,ith re+*lar

i'co(e$

@ Mo'e) (ar-et .*'ds= These .*'ds stri3e to pro3ide eas) li:*idit)2 preser3atio' o. capital a'd

(odest i'co(e

Gro,th .*'ds= Gro,th sche(es are ideal .or i'3estors ,ith ris- appetite$

I'co(e .*'ds= The) +e'erall) i'3est their corp*s i' .i1ed i'co(e sec*rities li-e &o'ds2

corporate de&e't*res2 a'd +o3er'(e't sec*rities$

MUTUAL UND CONSTITU!NTS

I. )o* re still +etti'+ a ha'dle o' the 3ario*s co'stit*e'ts o. a (*t*al .*'d2 rest ass*red )o* re

'ot alo'e$ A' *'dersta'di'+ o. a .*'d s co'stit*e'ts a'd their respecti3e roles help )o* i'

de3elopi'+ realistic e1pectatio's .ro( )o*r .*'d2 choosi'+ &et,ee' .*'ds a'd e3al*ati'+

optio's i' case o. pro&le(s ,ith )o*r i'3est(e't$ A (*t*al .*'d pools a'd i'3ests the sa3i'+s

o. a '*(&er o. i'3estors shari'+ a co((o' .i'a'cial +oal i' its sche(es$ These sche(es

i'3est i' 3ario*s de&t a'd e:*it) i'str*(e'ts2 depe'di'+ o' their o&jecti3es a'd the pre3aili'+

re+*lator) e'3iro'(e't$

I'dia' (*t*al .*'ds are +o3er'ed &) t,o di..ere't str*ct*res$ The U'it Tr*st o. I'dia

.ollo,s o'e de.i'ed &) the UTI Act2 ; B@2 a'd its s*&se:*e't a(e'd(e'ts$ All other (*t*al

.*'ds .ollo, the Sec*rities a'd 41cha'+e #oard o. I'dia s 7M*t*al F*'ds8 Re+*latio's2 ; B2

,hich are (ore ri+oro*s .ro( the 3ie,poi't o. disclos*re a'd acco*'ta&ilit)$ Despite the

di..ere'ces2 all (*t*al .*'ds co(prise .o*r co'stit*e'ts 00 spo'sors2 tr*stees2 asset

(a'a+e(e't co(pa'ies 7AM"s8 a'd c*stodia's$

48


49/85


50/85

Tru-tH$o'rd o) tru-tee-.6

Tr*stees hold a .id*ciar) respo'si&ilit) to,ards *'it holders &) protecti'+ their i'terests$

So(eti(es2 as ,ith "a'ara #a'-2 the tr*stee a'd the spo'sor are the sa(e$ For others2 li-e

S#I F*'ds Ma'a+e(e't2 State #a'- o. I'dia is the spo'sor a'd S#I "apital Mar-ets the

tr*stee$Tr*stees .loat a'd (ar-et sche(es2 a'd sec*re 'ecessar) appro3als$ The) chec- i. the

AM" s i'3est(e'ts are ,ithi' de.i'ed li(its2 ,hether the .*'d s assets are protected2 a'd also

e's*re that *'it holders +et their d*e ret*r's$

Tr*stees also re3ie, a') d*e dili+e'ce do'e &) the AM"$ For (ajor decisio's

co'cer'i'+ the .*'d2 the) ha3e to ta-e *'it holders co'se't$ The) s*&(it reports e3er) si1

(o'ths to S4#I i'3estors +et a' a''*al report$ Tr*stees are paid a''*all) o*t o. the .*'d s

assets 00


51/85

Mutu'( und Co%p'n&e- &n Ind&'.6

51


52/85

52


53/85

7" ABN AMRO %utu'( )und.6 A#N AMRO M*t*al F*'d ,as set*p o' April ; 2 ?


54/85

ING )s)a M*t*al F*'d ,as set*p o' Fe&r*ar) ;;2 ; ,ith the sa(e 'a(ed Tr*stee"o(pa')

7.

Prudent&'( ICICI Mutu'( und.6The (*t*al .*'d o. I"I"I is a joi't 3e't*re ,ith Pr*de'tial Plc$ o. A(erica2 o'e o. the

lar+est li.e i's*ra'ce co(pa'ies i' the US o. A$ Pr*de'tial I"I"I M*t*al F*'d ,as set*p o'

;@th o. Octo&er2 ; @$

7F" S'*'r' Mutu'( und.6

Sahara M*t*al F*'d ,as set *p o' 6*l) ; 2 ; B ,ith Sahara I'dia Fi'a'cial

"orporatio' Ltd$5" St'te B'n? o) Ind&' Mutu'( und.6

State #a'- o. I'dia M*t*al F*'d is the .irst #a'- spo'sored M*t*al F*'d to la*'ch

o..shore .*'d2 the I'dia Ma+'*( F*'d ,ith a corp*s o. Rs$ ?? cr$

774" T't' Mutu'( und.6

Tata M*t*al F*'d 7TMF8 is a Tr*st *'der the I'dia' Tr*st Act2 ; ?$ The spo'sorers .or

Tata M*t*al F*'d are Tata So's Ltd$2 a'd Tata I'3est(e't "orporatio' Ltd$

777" Kot'? M'*&ndr' Mutu'( und.6

Kota- Mahi'dra Asset Ma'a+e(e't "o(pa') 7KMAM"8 is a s*&sidiar) o. KM#L$

773" Un&t Tru-t o) Ind&' Mutu'( und.6

UTI Asset Ma'a+e(e't "o(pa') Pri3ate Li(ited2 esta&lished i' 6a' ;C2 ?


55/85

771" St'nd'rd C*'rtered Mutu'( und.6

Sta'dard "hartered M*t*al F*'d ,as set *p o' March ;@2 ?


56/85

"a' &a'- M*t*al F*'d ,as set*p o' Dece(&er ; 2 ; > ,ith "a'ara #a'- acti'+ as

the spo'sor

37" C*o('- Mutu'( und.6

"hola M*t*al F*'d *'der the spo'sorship o. "hola(a'dala( I'3est(e't 5 Fi'a'ce

"o(pa') Ltd$ ,as set*p o' 6a'*ar) @2 ; >$

733" LIC Mutu'( und.6

Li.e I's*ra'ce "orporatio' o. I'dia set *p LI" M*t*al F*'d o' ; th 6*'e ; $ It

co'tri&*ted Rs$ ? "rores to,ards the corp*s o. the F*'d$ LI" M*t*al F*'d ,as co'stit*ted as

a Tr*st i' accorda'ce ,ith the pro3isio's o. the I'dia' Tr*st Act2 ; ?$

TOP UNDS

Sc*e%e N'%e N'ture 7 M M 7 Y Y

I"I"I Pr*de'tial Foc*sed 4:*it) ; $B

HDF" MIP 0 LTP 0 Gro,th MIP ;$?@ ;$@ $?? ;?$?C4scorts Li:*id Pla' 0 Gr Li:*id $;> >$ ?

HDF" Lo'+ Ter( Ad3a'ta+ 4LSS @$; 0 $ > ;B$?> ;$@B ;@$@; ? $ B 0

Reli+are Gilt F*'d 0 Lo' Gilt ?$


57/85

CAT!GORI!S O MUTUAL UND SC/!M!S

The characteristics o. +ro,th orie'ted (*t*al .*'d cate+ories a'd the top .*'ds *'der each

cate+or) &ased o' last )ears9 per.or(a'ce are re3ie,ed &elo,=

;$ ! u&ty D&>er-&)&ed. 4:*it) di3ersi.ied .*'ds i'3est pri(aril) i' stoc-s across sectors

a'd i'd*stries$ He'ce2 it (i'i(i/es the ris- o. e1pos*re to a si'+le co(pa') or sector$

These .*'ds ca' &e lar+e cap2 (id cap or s(all cap orie'ted depe'di'+ o' the .*'d

(a'a+er9s st)le a'd i'3est(e't o&jecti3e$

57
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58/85


59/85

8*y Me'-ure und Per)or%'nce e-tor Per-pect&>e .6The i'3estor ,o*ld 'at*rall) &e i'terested i' trac-i'+ the 3al*e o. his i'3est(e'ts2 ,hether he

i'3ests directl) i' the (ar-et or i'directl) thro*+h (*t*al .*'ds$ He ,o*ld ha3e to (a-e

i'telli+e't decisio' o' ,hether he +ets a' accepta&le ret*r' o' his i'3est(e'ts i' the .*'d

selected &) hi(2 or i. he 'eeds to s,itch to a'other .*'d$ He there.ore 'eeds to *'dersta'd the&asis o. appropriate per.or(a'ce (eas*re(e't .or the .*'d2 a'd ac:*ire the &asic -'o,led+e

o. the di..ere't (eas*re o. e3al*ati'+ the per.or(a'ce o. a .*'d$ O'l) the' ,o*ld he &e i' a

positio' to j*d+e correctl) ,hether his .*'d is per.or(i'+ ,ell or 'ot2 5 (a-e the ri+ht

decisio's$

T*e Ad>&-or - per-pect&>e.6

I. )o* are a' i'ter(ediar) reco((e'di'+ a (*t*al .*'d to a pote'tial i'3estor2 he ,o*lde1pect )o* to +i3e hi( proper ad3ice o' ,hich .*'ds ha3e a +ood per.or(a'ce trac- record$ I.

)o* ,a't to &e a' e..ecti3e i'3est(e't ad3isor2 the' )o* too ha3e to -'o, ho, to (eas*re 5

e3al*ate o. the di..ere't .*'ds that are a3aila&le to the i'3estor$ The 'eed to co(pare di..ere't

.*'ds per.or(a'ce re:*ires the ad3isor to ha3e the -'o,led+e o. the correct 5 appropriate

(eas*res o. e3al*ati'+ the .*'d per.or(a'ce$

59
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60/85

D&))erent Per)or%'nce Me'-ure-

77": C*'n,e &n NAV6T*e Mo-t Co%%on Me'-ure Purpo-e.6

I. the i'3estor ,a'ts to co(p*te the Ret*r' o' I'3est(e't &et,ee' t,o dates2 he ca' si(pl)

*se the Per U'it Asset al*e at the &e+i''i'+ a'd the e'd periods2 a'd calc*late the cha'+e i'

the 3al*e o. the NA &et,ee' the t,o dates i' a&sol*te 5 perce'ta+e ter(s$

For(*la=0

For NA "ha'+e i' a&sol*te ter(s=

7NA at the e'd o. the period80 7NA at the &e+i''i'+ o. the period8

For NA "ha'+e i' perce'ta+e ter(s=

I. the period is less (ore tha' o'e )ear= .or a''*ali/ed NA cha'+e=

Q 7A&sol*te cha'+e i' NA NA at the &e+i''i'+ 8 (o'th co3ered ;? ;


61/85


62/85

or%u('.6

It is de.i'ed as the ratio o. total e1pe'ses to a3era+e 'et assets o. the .*'d$

!J'%p(e.6 I' a') o..er doc*(e't2 )o* ,ill .i'd the past 5 esti(ated e1pe'ses .i+*res 5 ratios

as disclosed &) the .*'d$ !o* ,ill .i'd that .ro( a') a''*al report o. a .*'d2 )o* ,ill &e a&le to

co(p*te the e1pe'se ratios 5 co(pare ,ith .i+*res i' the O..er Doc*(e't$

L&%&t't&on.6

Tho*+h a' i(porta't )ardstic-2 .l*ct*atio's i' the ratio across periods re:*ire that a' a3era+e

o3er three to .i3e )ears to &e *sed to j*d+e a .*'d9s per.or(a'ce$ Also2 the e1pe'se ratio (*st

&e e3al*ated i' the li+ht o. the .*'d si/e2 a3era+e acco*'t si/e 5 port.olio co(positio' e:*it)

or .i1ed i'co(e$

or !J'%p(e2 .*'d ,ith s(all corp*s si/e ,ill ha3e a hi+her e1pe'se ratio a..ecti'+ i'3estor ret*r's tha' a lar+e corp*s .*'d$ I. a .*'d9s i'co(e le3els or ret*r's are s(all2 sa) a de&t .*'d

+i3i'+ a +ross ret*r' o. J2 e1pe'se ratio &eco(e i(porta't2 a'd di..ere'ce o. e3e' er R'te

or%u('.6

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Port.olio t*r'o3er rate (eas*res the a(o*'t o. &*)i'+ 5 selli'+ o. sec*rities do'e &) a .*'d$ It

is de.i'ed as the lesser o. assets p*rchased or sold di3ided &) the .*'d9s 'et assets$

Purpo-e.6 The ratio (eas*res ho, (a') ti(es the .*'d (a'a+er t*r's o3er his port.olio &)

&*)i'+ 5 selli'+ o. sec*rities i' the (ar-et$ A ;


64/85

Tra'sactio' costs there.ore ha3e a si+'i.ica't &eari'+ o' .*'d per.or(a'ce a'd its Total

Ret*r'$ F*'d ,ith s(all si/e2 or s(all ret*r's2 ha3e to &e j*d+ed (ore o' their e1pe'se ratios

5 tra'sactio' costs2 +i3e' their i(pact o' Total Ret*r'$

L&%&t't&on.6Ehile other costs are detailed i' the .*'d prospect*s or a''*al reports2 dealer

spreads are di..ic*lt to :*a'ti.) or doc*(e't$ A3aila&ilit) o. these data li(its the *se o. this

(eas*re i' practice$

: und S&=e.6

S(all .*'ds are easier to (a'e*3er 5 ca' achie3e their o&jecti3es i' a .oc*sed (a''er ,ith

li(ited holdi'+s$ Lar+e .*'ds &e'e.its .ro( eco'o(ies o. scale ,ith lo,er e1pe'se ratios a'd

s*perior .*'d (a'a+e(e't s-ills$ The) also +ai' thro*+h +reater ris- &eari'+ 5 (a'a+e(e't

capacit)$

F: C'-* /o(d&n,.6

M*t*al F*'d allocates their assets a(o'+ e:*it) shares2 de&t sec*rities 5 cash &a'- deposits$

The perce'ta+e o. a .*'d9s port.olio held i' cash e:*i3ale'ts ca' &e a' i(porta't ele(e't i' its

s*ccess.*l per.or(a'ce$

Lar+e cash holdi'+ allo, s the .*'d to stre'+the' its positio' i' pre.erred sec*rities ,itho*tli:*idati'+ its other port.olios$ "ash also allo,s the .*'d a c*shio' a+ai'st decli'e i' the

(ar-et price o. shares or &o'ds$ The .*'d (*st also +*ard a+ai'st lar+e2 co'siste't 'et

rede(ptio's2 &eca*se these 'ot o'l) i'dicate the dissatis.actio' o' the part o. i'3estors2 &*t

also .orce the .*'d to (ai'tai' lar+e cash reser3e lo,eri'+ the ret*r' o' the port.olio$ It

&eco(es di..ic*lt .or the .*'d to attai' its o&jecti3es i' s*ch a sit*atio'

I%port'nce o) Benc*%'r?&n, &n !>'(u't&n, und per)or%'nce. A .*'d9s per.or(a'ce ca' o'l) &e j*d+ed i' relatio' to certai' +*ideposts% o' ,hat is possi&le

to achie3e2 or (oderate his e1pectatio's ,ith the realistic co(para&le i'3est(e't alter'ati3es

a3aila&le to hi( i' the .i'a'cial (ar-ets$ These +*ideposts or i'dicators o. per.or(a'ce ca' &e

tho*+ht o. as &e'ch(ar-s a+ai'st ,hich a .*'d9s per.or(a'ce o*+ht to &e j*d+ed$

64


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Benc*%'r?&n, re('t&>e to t*e %'r?et.

A: ! u&ty und- IndeJ und-6 ' $'-e &ndeJ.

X

I. a' i'3estor ,ere to choose a' 4:*it) I'de1 F*'d2 he ca' e1pect to +et the sa(e

ret*r' o' his i'3est(e't as the ret*r' o' the e:*it) i'de1 *sed &) the .*'d as its &e'ch(ar-2

called the #ase I'de1$ This is a passi3e% i'3est(e't st)le$ The .*'d ,o*ld i'3est i' the i'de1

stoc-s2 5 e1pect its NA cha'+e to (irror the cha'+es i' the i'de1 itsel.$ The .*'d 5 the

i'3estor do 'ot e1pect to &eat the &e'ch(ar-2 &*t (erel) ret*r' sa(e ret*r' as the i'de1$

Tr'c?&n, error.

I' order to o&tai' the sa(e ret*r's as the i'de1 .*'d2 a' i'de1 .*'d i'3ests i' all o. the stoc-s

i'cl*ded i' the i'de1 calc*latio'2 i' the sa(e proportio' as the stoc-s9 ,ei+ht a+e i' the i'de1$

A' i'de1 .*'d9s act*al ret*r' (a)2 ho,e3er2 &e the &etter or ,orse &) ,hat is called the

66


67/85

trac-i'+ error% $The trac-i'+ error arises .ro( the practical di..ic*lties .aced &) the .*'d

(a'a+er i' tr)i'+ to al,a)s &*) or sell stoc-s to re(ai' i' li'e ,ith the ,ei+hta+e that the

stoc-s e'jo) i' the i'de1$

Act&>e# ! u&ty und-.

A' I'de1 F*'d is passi3el) (a'a+ed2 to trac- a +i3e' I'de1$ Most o. the other e:*it)

.*'ds sche(es are acti3el) (a'a+ed &) the .*'d (a'a+ers$ To e3al*ate the per.or(a'ce o.

a' 4:*it) F*'d2 there.ore2 ,e 'eed to select a' appropriate &e'ch(ar- 5 co(pare its ret*r's

to the ret*r's o' &e'ch(ar-s *s*all) this (ea's *si'+ the appropriate (ar-et i'de1$ the

appropriate i'de1 to &e *sed to e3al*ate the &road &ase0e:*it) sho*ld &e decided o' the &asis

o. the si/e 5 the co(positio' o. the .*'d9s port.olio$ I. the .*'d i' :*estio' has a lar+e port.olio2

a &roader (ar-et i'de1 li-e #S4 ;


68/85

i'3estors i' I'dia$ I' a') case2 a') &e'ch(ar- .or a de&t .*'d (*st ha3e the sa(e port.olio

co(positio' 5 the sa(e (at*rit) pro.ile as the .*'d itsel.2 to &e co(para&le$

C: Money M'r?etHL& u&d und-

Li:*id .*'ds ha3e port.olios o. short ter( i'str*(e'ts$ He'ce per.or(a'ce o. li:*id

.*'ds is *s*all) &e'ch(ar-ed a+ai'st the +o3er'(e't sec*rities o. appropriate (at*rities$ I'

I'dia &esides N$S$42 6PMor+a' has also de3eloped a Treas*r)0#ill I'de1$ I0#4W2 &ei'+

co(posite i'de1 is 'ot s*ita&le .or li:*id .*'ds$ A &etter &e'ch(ar- .or MM .*'ds i' I'dia is

either the Li:*id F*'d I'de1 o. "RISIL or NS49s G0Sec 5 T0#ills i'dices$

D: Appropr&'te Benc*%'r?-6

S4#I Disclos*re Re:*ire(e't S4#I re:*ires (*t*al .*'ds to speci.) appropriate

&e'ch(ar-s .or each sche(e i' the O..er Doc*(e't 5 Ke) I'.or(atio' Me(ora'd*($ F*rther2

per.or(a'ce o. the sche(e i' ter(s o. co(po*'ded a''*ali/ed ret*r's o3er o'e2 three 5 .i3e

)ear9s periods2 alo'+ ,ith a co(pariso' ,ith the &e'ch(ar-2 'eeds to &e pro3ided i' these

doc*(e'ts 5 appropriatel) disclosed i' ad3ertise(e'ts$

Benc*%'r?&n, re('t&>e to t*e ot*er -&%&('r %utu'( )und.6

Additio' to Mar-et0&ased co(pariso'2 it is i(porta't to (eas*re a .*'d or sche(e9s

per.or(a'ce relati3e to other .*'ds sche(es (a'a+ed &) other asset (a'a+e(e't

co(pa'ies$ I' I'dia2 at prese't (ea'i'+.*l per.or(a'ce &e'ch(ar- is 'ot a3aila&le$ I' case o.

De&t .*'ds2 there.ore2 it is (ore (ea'i'+.*l to co(pare the per.or(a'ce o. di..ere't sche(es

,ith that o. other .*'d (a'a+er9s sche(es$ S*ch co(pariso' si(ilar (*t*al .*'ds are called

peer +ro*p co(pariso's%$

Cr&ter&' )or Peer Group Co%p'r&-on-

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It is e1tre(el) i(porta't to e's*re that co(pariso's are (ea'i'+.*l2 that ,e co(pare apple

,ith apples o'l)$ O'l) .*'ds ,ith si(ilar characteristics ca' &e co(pared$ The .ollo,i'+ are

so(e o. the criteria .or co(pariso' o. .*'d per.or(a'ce=

; The i'3est(e't o&jecti3es a'd ris- pro.iles o. t,o .*'ds &ei'+ co(pared (*st &e the sa(e$

or !J'%p(e. 6

It ,o*ld 'ot &e appropriate to co(pare a' e:*it) .*'d ,ith a de&t .*'d2 &eca*se a'

e:*it) .*'d tar+ets +ro,th 5 hi+h capital +ai's2 ,hereas a de&t .*'d is (ea't .or the ris-0

a3erse i'3estor a'd th*s .oc*ses o' re+*lar i'co(e$

He'ce2 their total ret*r's ,ill &e di..ere't a'd 'ot co(para&le$ A' e:*it) i'co(e% .*'d ca''ot

&e co(pared ,ith a de&t i'co(e% .*'d2 'or ca' &e de&t .*'d i'3esti'+ i' +o3er'(e't

sec*rities &e co(pared ,ith a .*'d i'3esti'+ i' corporate de&t i'str*(e'ts 43e' ,ithi' thee:*it) .*'d cate+or)2 a .*'d ,ith a 3al*e i'3esti'+% approach ca''ot &e co(pared ,ith a

+ro,th .*'d% or sa) a &ala'ced .*'d%$

;

u'(&t't&>e !>'(u't&on o) &n'nc&'( Product-

Return- S')ety Con>en&ence Vo('t&(&ty L& u&d&ty

! u&ty /&,* Moder'te Lo+ /&,* /&,* orLo+

I Bond- Moder'te /&,* /&,* Moder'te Moder'te

Corpor'te De$enture Moder'te Lo+ Moder'te Moder'te Lo+

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Co%p'ny &Jed

Depo-&t-

Moder'te

Moder'te

Lo+ Lo+ Lo+

B'n? Depo-&t- Lo+ /&,* /&,* Lo+ /&,*

PP /&,* Moder'te /&,* Lo+ Moder'te

L&)e In-ur'nce Lo+ Moder'te /&,* Lo+ Lo+

Go(d Moder'te Lo+ /&,* Moder'te Moder'te

Re'( !-t'te /&,* Lo+ Moder'te /&,* Lo+

Mutu'( und- /&,* /&,* /&,* Moder'te /&,*

Tr'c?&n, Mutu'( )und per)or%'nce

Ha3i'+ ide'ti.ied appropriate (eas*res 5 &e'ch(ar- .or the (*t*al .*'ds

a3aila&le i' the (ar-et2 the challe'+e is to trac- .*'d per.or(a'ce o' a re+*lar &asis$ This is

i'deed the -e) to,ards (a1i(i/i'+ ,ealth thro*+h (*t*al .*'d i'3esti'+$ Proper trac-i'+

allo,s the i'3estor to (a-e the i'3estors to (a-e i'.or(ed a'd ti(el) decisio's re+ardi'+ his

.*'d port.olio0 ,hether to ac:*ire attracti3e .*'ds dispose o.. poor per.or(ers or s,itch&et,ee' pla's .*'ds$ To &e a&le to trac- .*'d per.or(a'ce2 the .irst step is to .i'd the rele3a't

i'.or(atio' o' NA 2 e1pe'se2 cash .lo,2 appropriate ratio a'd so o'$

T*e )o((o+&n, 're t*e co%%on -ource o) &n)or%'t&on &n Ind&'.

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1 Mutu'( und- Annu'( @ Per&od&c Report- .

These i'cl*de data o' the .*'ds .i'a'cial per.or(a'ce2 so i'dicators s*ch as

i'co(e e1pe'se ratios 5 Total Ret*r' ca' &e co(p*ted o' the &asis o. this data$ The a''*al

report i'cl*des a listi'+ o. the .*'d9s port.olio holdi'+s at (ar-et 3al*e2 state(e't o. re3e'*e 5

e1pe'ses2 *'reli/ed appreciatio' depreciatio' at )ear0 e'd2 a'd cha'+es i' 'et assets$ O' the

&asis o. the a''*al report2 the i'3estors ca' de3elop a perspecti3e o' the :*alit) o. the .*'ds

assets2 port.olio co'ce'tratio' ris- pro.ile2 &esides the co(p*ti'+ ret*r's$

7 &n'nc&'( Pre--.

3 Dail) 'e,spapers s*ch as the 4co'o(ic Ti(es pro3ide dail) NA .i+*res .or ope' e'd

sche(es 5 share price o. closed e'd listed sche(es$

#esides2 ,ee-l) s*pple(e't o. the eco'o(ic 'e,spapers +i3e (ore a'al)tical i'.or(atio' o'

.*'d per.or(a'ce$

1 und Tr'c?&n, A,enc&e-.

I' I'dia2 a+e'cies s*ch as "rede'ce 5 al*e Research are a so*rce o. i'.or(atio' .or (*t*al

.*'d per.or(a'ce data 5 e3al*atio'$ This data is a3aila&le o'l) o' re:*est 5 pa)(e't$

;

2 Ne+-(etter-.

Ma') stoc-&ro-ers2 (*t*al .*'d distri&*tors 5 &a'-s 5 'o'0&a'-i'+ .ir(s cateri'+ to retail

i'3estors p*&lish their o,' 'e,sletters2 so(eti(es .ree or else .or their s*&scri&ers2 +i3i'+

.*'d per.or(a'ce data 5 reco((e'datio's$

Pro-pectu-.

S4#I Re+*latio's .or (*t*al .*'ds re:*ire the .*'d spo'sors to disclose per.or(a'ce data

relati'+ to sche(es &ei'+ (a'a+ed &) the co'cer'ed AM"2 s*ch as the &e+i''i'+ a'd e'd o.

)ear NA 9s di3ide'ds2 e1pe'ses to 'et assets ratio2 Per U'it Statistics9 o' i'co(e 5 e1pe'ses2

etc$This is a 3al*a&le so*rce o. per.or(a'ce data o' a' AM"9s e1isti'+ sche(es2 altho*+h it is

past o. the o..er doc*(e't .or a 'o, sche(e$

;71


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2 An'(yt&c'( Art&c(e-. 3 I' the U$S$2 there are (a'*als that pro3ide a detailed a'al)sis o. the .*'ds i' the (ar-et at a

+la'ce2 their Total Ret*r'2 costs i'3ol3ed i' i'3esti'+ s*ch as loads 5 (a'a+e(e't .ees2 ris-

statistics 5 characteristics o. the .*'d9s port.olio$ "*rre'tl) i' I'dia2 o'l) occasio'al a'al)tical

articles i' 'e,spaper are a3aila&le$

" L&%&t't&on- o) -tudy6

43er) ,or- has its o,' li(itatio's$ Li(itatio's are e1te't to ,hich the process sho*ld 'ot

e1ceed $The li(itatio's .or the project is=

;

? D*ratio' o. project ,as 'ot e'o*+h to (a-e o*r co'cl*sio' o' s*ch a 3ast s*&ject$ A ti(e

co'strai't has also &eco(e a (ajor li(itatio'$@

C I'3estor i+'ora'ce ,as d*ri'+ disc*ssio's ,ith respo'de'ts$

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'ct @ &nd&n,-.6

; People ,a't to pla) sa.el)$

?

@ Ma') o. the people ,ere 'ot a,are a&o*t M*t*al .*'ds$

C A.ter telli'+ the( a&o*t (ethod o. (eas*ri'+ 5 e3al*ati'+ the .*'d per.or(a'ce the)

&eco(e read) to i'3est$

O'l) >J o. people i'3est their ;


74/85

> O'l) @ J o. people thi'- that (*t*al .*'d +i3e +ood ret*r's$

A.ter +etti'+ -'o,led+e o. &e'e.it o. (*t*al .*'ds the) i'3ested their (o'e) i' sa(e$

DATA ANALYSIS

@

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INT!RPR!TATION

ANALYSIS AND INR!RPR!TATION

7" Do you &n>e-t re,u('r(y

Documents

Report on Mutual Fund of Karvy