CONTENTS

EXECUTIVE SUMMARY..................................................................................................5

INTRODUCTION....................................................................................................................6

THEORETICAL BACKGROUND..................................................................................8

LITERATURE REVIEW..................................................................................................24

RESEARCH METHODOLOGY....................................................................................44

STATEMENT OF THE PROBLEM..............................................................................44

NEED FOR STUDY............................................................................................................44

OBJECTIVES OF THE STUDY....................................................................................45

OPERATIONAL DEFINITION OF CONCEPTS....................................................45

DATA SOURCE....................................................................................................................51

METHOD OF DATA COLLECTION..........................................................................51

LIMITATIONS.......................................................................................................................51

DATA ANALYSIS.................................................................................................................52

STUDY OF INVESTOR'S ATTITUDE TOWARDS MUTUAL FUNDS.......................................................................................................................................52

RECOMMENDATIONS.....................................................................................................91

CONCLUSION.......................................................................................................................93

BIBLIOGRAPHY..................................................................................................................94

4

EXECUTIVE SUMMARY

There are a lot of investment avenues available today in the

financial market for an investor with an investable surplus. He can

invest in Bank Deposits, Corporate Debentures, and Bonds where

there is low risk but low return. He may invest in Stock of

companies where the risk is high and the returns are also

proportionately high. The recent trends in the Stock Market have

shown that an average retail investor always lost with periodic

bearish tends. People began opting for portfolio managers with

expertise in stock markets who would invest on their behalf. Thus

we had wealth management services provided by many

institutions. However they proved too costly for a small investor.

These investors have found a good shelter with the mutual funds

Mutual fund industry has seen a lot of changes in past few years

with multinational companies coming into the country, bringing in

their professional expertise in managing funds worldwide. In the

past few months there has been a consolidation phase going on in

the mutual fund industry in India. Now investors have a wide range

of Schemes to choose from depending on their individual profiles.

5

INTRODUCTION

A mutual fund is a professionally managed investment company

that combines the money of many individuals and invests this

“pooled” money in a wide variety of different securities.

It is by pooling the money of many individuals that mutual funds

are able to provide the diversification and money management

(along with many other advantages) that were once reserved only

for the wealthy.

Professional money managers take this pool of money and invest it

in a wide variety of stocks, bonds, or other securities depending on

the investment objective, or goal, of the particular fund. It is the

investment objective of the fund that guides the manager in

selecting the various securities for the fund.

It is the investment objective of the mutual fund that also guides

the investor on which funds to invest in. Since different investors

have different objectives, there are a number of different kinds of

mutual funds, i.e., some mutual funds may provide monthly

income while others seek long-term capital appreciation.

The benefits that can be accrued from Mutual Funds are

The schemes could be added to the portfolio with online

updates for monitoring the performance of your investments

in Mutual Funds.

The comprehensive search, which gets you the fund matching your criteria.

The comparison of various schemes of different Mutual

Funds based on the critical and most sought after investment

criteria.

6

The analysis of different schemes and the outlook for the same.

List of new launches in the market provided continuously.

Basically, Mutual funds are trusts that are formed to mobilize the

savings from the people and pool them together to invest within

the securities markets. The main advantage of mutual funds is that

it is professionally managed. And the general idea is for investors

to contribute small amounts into units in the various schemes,

which in turn is deployed in the various markets. This way, any

investor who is not in a position to directly invest in the markets

can take advantage of this route.

UTI is the oldest of Indian mutual funds, having entered the arena

with the launch of the Unit Scheme - 64 in 1964, hence the

alphanumeric name. It was only in 1998 that other public sector

banks were allowed to enter into the segment which was followed

by a whole range of Asset Management companies including

almost all the leading international portfolio managers including

Merrill Lynch, Templeton, and Prudential among others.

7

THEORETICAL BACKGROUND

An Introduction to Mutual Funds

Over the past decade, American investors increasingly have turned

to mutual funds to save for retirement and other financial goals.

Mutual funds can offer the advantages of diversification and

professional management. But, as with other investment choices,

investing in mutual funds involves risk. And fees and taxes will

diminish a fund's returns. It pays to understand both the upsides

and the downsides of mutual fund investing and how to choose

products that match your goals and tolerance for risk.

A mutual fund is a company that pools money from many investors

and invests the money in stocks, bonds, short-term money-market

instruments, other securities or assets, or some combination of

these investments. The combined holdings the mutual fund owns

are known as its portfolio. Each share represents an investor's

proportionate ownership of the fund's holdings and the income

those holdings generate.

Other Types of Investment Companies

Legally known as an "open-end company," a mutual fund is one of

three basic types of investment companies. While this brochure

discusses only mutual funds, you should be aware that other

pooled investment vehicles exist and may offer features that you

desire. The two other basic types of investment companies are:

8

Closed-end funds: which, unlike mutual funds, sell a fixed

number of shares at one time (in an initial public offering) that later trade on a secondary market.

Unit Investment Trusts (UITs): which make a one-time

public offering of only a specific, fixed number of redeemable

securities called "units" and which will terminate and dissolve on a

date specified at the creation of the UIT.

Exchange-traded funds (ETFs): Is a type of Investment

Company that aims to achieve the same return as a particular

market index. They can be either open-end companies or UITs.

But ETFs are not considered to be, and are not permitted to call

themselves, mutual funds.

Some of the traditional, distinguishing characteristics of mutual

funds include the following:

1. Investors purchase mutual fund shares from the fund itself

(or through a broker for the fund) instead of from other

investors on a secondary market, such as the New York

Stock Exchange or NASDAQ Stock Market.

2. The price that investors pay for mutual fund shares is the

fund's per share net asset value (NAV) plus any shareholder

fees that the fund imposes at the time of purchase (such as

sales loads)

3. . Mutual fund shares are "redeemable," meaning investors

can sell their

shares back to the fund (or to a broker acting for the fund)

9

4. Mutual funds generally create and sell new shares to

accommodate new investors. In other words, they sell their

shares on a continuous basis, although some funds stop

selling when, for example, they become too large. The

investment portfolios of mutual funds typically are managed

by separate entities known as "investment advisers" that are

registered with the SEC.

A Word about Hedge Funds and "Funds of Hedge Funds"

"Hedge fund" is a general, non-legal term used to describe private,

unregistered investment pools that traditionally have been limited

to sophisticated, wealthy investors. Hedge funds are not mutual

funds and, as such, are not subject to the numerous regulations that

apply to mutual funds for the protection of investors — including

regulations requiring a certain degree of liquidity, regulations

requiring that mutual fund shares be redeemable at any time,

regulations protecting against conflicts of interest, regulations to

assure fairness in the pricing of fund shares, disclosure regulations,

regulations limiting the use of leverage, and more.

"Funds of hedge funds," a relatively new type of investment

product, are investment companies that invest in hedge funds.

Some, but not all, register with the SEC and file semi-annual

reports. They often have lower minimum investment thresholds

than traditional, unregistered hedge funds and can sell their shares

to a larger number of investors. Like hedge funds, funds of hedge

funds are not mutual funds. Unlike open-end mutual funds, funds

of hedge funds offer very limited rights of redemption. And, unlike

ETFs, their shares are not typically listed on an exchange.

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Advantages and Disadvantages

Every investment has advantages and disadvantages. But it's

important to remember that features that matter to one investor

may not be important to you. Whether any particular feature is an

advantage for you will depend on your unique circumstances. For

some investors, mutual funds provide an attractive investment

choice because they generally offer thefollowing features:

Professional Management: Professional money managers

research, select, and monitor the performance of the securities the

fund purchases.

Diversification: Diversification is an investing strategy that can be

neatly summed up as "Don't put all your eggs in one basket."

Spreading your investments across a wide range of companies and

industry sectors can help lower your risk if a company or sector

fails. Some investors find it easier to achieve diversification

through ownership of mutual funds rather than through ownership

of individual stocks or bonds.

Affordability: Some mutual funds accommodate investors who

don't have a lot of money to invest by setting relatively low dollar

amounts for initial purchases, subsequent monthly purchases, or

both.

Liquidity: Mutual fund investors can readily redeem their shares

at the current NAV—plus any fees and charges assessed on

redemption — at any time. But mutual funds also have features

that some investors might view as disadvantages:

Costs Despite Negative Returns: Investors must pay sales

charges, annual fees, and other expenses (which we'll discuss

below) regardless of how the fund

11

performs. And, depending on the timing of their investment,

investors may also have to pay taxes on any capital gains

distribution they receive — even if the fund went on to perform

poorly after they bought shares.

Lack of Control: Investors typically cannot ascertain the exact

make-up of a fund's portfolio at any given time, nor can they

directly influence which securities the fund manager buys and sells

or the timing of those trades.

Price Uncertainty: With an individual stock, you can obtain real-

time (or close to real-time) pricing information with relative ease

by checking financial websites or by calling your broker. You can

also monitor how a stock's price changes from hour to hour — or

even second to second. By contrast, with a mutual fund, the price

at which you purchase or redeem shares will typically depend on

the fund's NAV, which the fund might not calculate until many

hours after you've placed your order. In general, mutual funds must

calculate their NAV at least once every business day, typically after

the major U.S. exchanges close.

Different Types of Funds

When it comes to investing in mutual funds, investors have

literally thousands of choices. Before you invest in any given fund,

decide whether the investment strategy and risks of the fund are a

good fit for you. The first step to successful investing is figuring

out your financial goals and risk tolerance — either on your own or

with the help of a financial professional. Once you know what

you're saving for, when you'll need the money, and how much risk

you can tolerate, you can more easily narrow your choices.

Most mutual funds fall into one of three main categories — money

market funds, bond funds (also called "fixed income" funds), and

stock funds (also called

12

"equity" funds). Each type has different features and different risks

and rewards. Generally, the higher the potential return, the higher

the risk of loss.

Money Market Funds: Money market funds have relatively low

risks, compared to other mutual funds (and most other

investments). By law, they can invest in only certain high-quality,

short-term investments issued by the U.S. government, U.S.

corporations, and state and local governments. Money market

funds try to keep their net asset value (NAV) — which represents

the value of one share in a fund — at a stable $1.00 per share. But

the NAV may fall below $1.00 if the fund's investments perform

poorly. Investor losses have been rare, but they are possible.

Money market funds pay dividends that generally reflect short-

term interest rates, and historically the returns for money market

funds have been lower than for either bond or stock funds. That's

why "inflation risks" — the risk that inflation will outpace and

erode investment returns over time — can be a potential concern

for

investors in money marketfunds.

Bond Funds: Bond funds generally have higher risks than money

market funds, largely because they typically pursue strategies

aimed at producing higher yields. Unlike money market funds, the

SEC's rules do not restrict bond funds to high-quality or short-term

investments. Because there are many different types of bonds,

bond funds can vary dramatically in their risks and rewards. Some

of the risks associated with bond funds include:

Credit Risk: the possibility those companies or other issuers

whose bonds are owned by the fund may fail to pay their debts

(including the debt owed to holders of their bonds). Credit risk is

less of a factor for bond funds that invest in insured bonds or U.S.

Treasury bonds. By contrast, those that invest in the bonds of

13

companies with poor credit ratings generally will be subject to higher risk.

Interest Rate Risk: the risk that the market value of the bonds will

go down when interest rates go up. Because of this, you can lose

money in any bond fund, including those that invest only in

insured bonds or Treasury bonds. Funds that invest in longer-term

bonds tend to have higher interest rate risk.

Prepayment Risk: the chance that a bond will be paid off early.

For example, if interest rates fall, a bond issuer may decide to pay

off (or "retire") its debt and issue new bonds that pay a lower rate.

When this happens, the fund may not be able to reinvest the

proceeds in an investment with as high a return or yield.

Stock Funds: Although a stock fund's value can rise and fall

quickly (and dramatically) over the short term, historically stocks

have performed better over the long term than other types of

investments — including corporate bonds, government bonds, and

treasury securities. Overall "market risk" poses the greatest

potential danger for investors in stocks funds. Stock prices can

fluctuate for a broad range of reasons — such as the overall

strength of the economy or demand for particular products or

services.

Not all stock funds are the same. For example:

· Growth funds focus on stocks that may not pay a regular

dividend but have the potential for large capital gains.

· Income funds invest in stocks that pay regular dividends.

· Index funds aim to achieve the same return as a particular

market index, such as the S&P 500 Composite Stock Price Index,

by investing in all — or perhaps a representative sample — of the

companies included in an index.

14

· Sector funds may specialize in a particular industry segment,

such as technology or consumer products stocks.

How to Buy and Sell Shares

You can purchase shares in some mutual funds by contacting the

fund directly. Other mutual fund shares are sold mainly through

brokers, banks, financial planners, or insurance agents. All mutual

funds will redeem (buy back) your shares on any business day and

must send you the payment within seven days.

The easiest way to determine the value of your shares is to call the

fund's toll-free number or visit its website. The financial pages of

major newspapers sometimes print the NAVs for various mutual

funds. When you buy shares, you pay the current NAV per share

plus any fee the fund assesses at the time of purchase, such as a

purchase sales load or other type of purchase fee. When you sell

your shares, the fund will pay you the NAV minus any fee the fund

assesses at the time of redemption, such as a deferred (or back-end)

sales load or redemption fee. A fund's NAV goes up or down daily

as its holdings change in value.

Exchanging Shares

A "family of funds" is a group of mutual funds that share

administrative and distribution systems. Each fund in a family may

have different investment objectives and follow different

strategies. Some funds offer exchange privileges within a family of

funds, allowing shareholders to transfer their holdings from one

fund to another as their investment goals or tolerance for risk

change. While some funds impose fees for exchanges, most funds

typically do not. To learn more about a fund's exchange policies,

call the fund's toll-free number, visit its website, or read the

"shareholder information" section of the prospectus. Bear in mind

that exchanges have tax consequences.

15

Even if the fund doesn't charge you for the transfer, you'll be liable

for any capital gain on the sale of your old shares — or, depending

on the circumstances, eligible to take a capital loss. We'll discuss

taxes in further detail below.

How Funds Can Earn Money for You

You can earn money from your investment in three ways:

Dividend Payments: A fund may earn income in the form of

dividends and interest on the securities in its portfolio. The fund

then pays its shareholders nearly all of the income (minus

disclosed expenses) it has earned in the form of dividends.

Capital Gains Distributions: The price of the securities a fund

owns may increase. When a fund sells a security that has increased

in price, the fund has a capital gain. At the end of the year, most

funds distribute these capital gains (minus any capital losses) to

investors. Increased NAV — if the market value of a fund's

portfolio increases after deduction of expenses and liabilities, then

the value (NAV) of the fund and its shares increases. The higher

NAV reflects the higher value of your investment.

With respect to dividend payments and capital gains distributions,

funds usually will give you a choice: the fund can send you a

check or other form of payment, or you can have your dividends or

distributions reinvested in the fund to buy more shares (often

without paying an additional sales load).

16

How an SIP works: An SIP allows you to take part in the stock

market without trying to second-guess its movements. It is also

known as dollar cost averaging.

An SIP means you commit yourself to investing a fixed amount every

month. Let's say it is 1,000. When the Market price of shares fall, the

investor benefits by purchasing more units; and is protected by

purchasing less when the price rises. Thus the average cost of units is

always closer to the lower end.) {NAV: Net Asset Value, or the price of

one unit of a fund. Can be computed as follows: NAV = [market value of

all the investments in the fund + current assets + deposits - liabilities]

divided by the number of units outstanding.}

Date NAV Approx number of units you will get at 1000

Jan 1 10 100

Feb 1

10.5 95.23

Mar 1 11 90.90

Apr 1 9.5 105.26

May 1 9 111.11

Jun 1

11.5 86.95

Within six months, you would have 5,89.45 units by investing just 1,000

every month.

17

Over the long run, you may make money or lose.Let's say you invested in

a Mutual Fund unit during the dotcom and tech boom.

Say you began with 1,000 and kept investing 1,000 every month. This

would be the result:

Investment period

• Mar 2000 � Mar 2005

Monthly investment

1,000

Total amount invested

61,000

Value of investment of Mar 7, 2005

1,09,315

Return on investment

23.87%

Had you bought the units on March 13, 2000 at 10.88 per unit (that was

the NAV then), you would have lost because the NAV was just 7.04 on

March 7, 2005. But because you spaced out your investment, you won.

18

Conversely if the market had trended higher from the day you decided to

start investing, you would lose out on an opportunity. This would happen

as your subsequent purchases will get you less number of units for the

same amount.

Systematic Investment Plan can help you to be disciplined (if you need

discipline) but not solve your market timing issues. The Investment

advisor or the Mutual Fund has a vested interest in pitching this idea to

you as once you invest all your future investment would also accrue to

them effortlessly.

How SIP scores

It makes you disciplined in your savings. Every month you are forced to

keep aside a fixed amount. This could either be debited directly from

your account or you could give the mutual fund post-dated cheques.

As you see above, it helps you make money over the long term. Since

you get more units when the NAV drops and fewer when it rises, the cost

averages out over time. So you tide over all the ups and downs of the

market without any drastic losses.

Also, a number of mutual funds do not charge an entry load if you opt for

an SIP. This fee is a percentage of the amount you are investing. And if

you do not exit (sell your units) within a year of buying the units, you do

not have to pay an exit load (same as an entry load, except this is charged

when you sell your units).

If, however, you do sell your units within a year, you would be charged

an exit load. So it pays to stay invested for the long-run.

The best way to enter a mutual fund is via an SIP. But to get the benefit of

an SIP, think of at least a three-year time frame when you won't touch

your money. Of course you would lose money if your units lost value

over time.

19

What most SIP Mutual funds don't tell you is that they recover their fees

as monthly charges by selling your units, so while you are buying more

units when the market is down, more of your units are also being sold to

fund the monthly charges of the Mutual fund. Also the Bid and Offer of

the Mutual Fund is around 7% and this is the front load or expense you

pay for buying the units each month. Also sometimes the Mutual fund

will have annual fee charges.

In spite of the above drawbacks the retail investors' benefit in the long

term horizon of 5–8 years is enormous. Only make sure that you can

switch your funds from stock market to money market at short notice

when the markets are really in a correction phase to safeguard the profits

which you have made when the market was in a booming phase. This is

easier said than done.

SIP will work best if markets trend lower after your investment. SIP

performance would be average if markets trade in a range. SIP will

perform worst if markets trend higher.

Another Benefit of investing in mutual funds via SIP is benefit from

Power of Compounding.

BENEFITS

Become A Disciplined Investor: Being disciplined - It’s the key to

investing success. With the HDFC MF Systematic Investment Plan you

commit an amount of your choice (minimum of Rs. 500 and in multiples

of Rs. 100 thereof*) to be invested every month in one of our schemes.

Think of each SIP payment as laying a brick. One by one, you’ll see them

transform into a building. You’ll see your investments accrue month after

month. It’s as simple as giving at least 6 postdated monthly cheques to us

for a fixed amount in a scheme of your choice. It’s the

20

perfect solution for irregular investors. *Minimum amounts may differ

for each Scheme. Please refer to SIP Enrolment Form for details.

Reach Your Financial Goal: Imagine you want to buy a car a year from

now, but you don’t know where the down-payment will come from.

HDFC MF SIP is a perfect tool for people who have a specific, future

financial requirement. By investing an amount of your choice every

month, you can plan for and meet financial goals, like funds for a child’s

education, a marriage in the family or a comfortable postretirement life.

The table below illustrates how a little every month can go a long way.

Monthly Savings - What your savings may generate

Rate of return

Savings per month Total amount invested6.0% 8.0% 10.0%

(for 15 years) (Rs. in Lacs)(rupees in lacs, 15 years later)*

5000 9.0 14.6 17.4 20.9

4000 7.2 11.7 13.9 16.7

3000 5.4 8.8 10.4 12.5

2000 3.6 5.8 7.0 8.3

1000 1.8 2.9 3.5 4.2

*Monthly installments, compounded monthly, for a 15-year period.

Take Advantage of Rupee Cost Averaging: Most investors want to buy

stocks when the prices are low and sell them when prices are high. But

timing the market is time-consuming and risky. A more successful

investment strategy is to adopt the

21

method called Rupee Cost Averaging. To illustrate this we’ll compare

investing the identical amounts through a SIP and in one lump sum.

Imagine Suresh invests Rs. 1000 every month in an equity mutual fund

scheme starting in January. His friend, Rajesh, invests Rs. 12000 in one

lump sum in the same scheme. The following table illustrates how their

respective investments would have performed from Jan to Dec:

Suresh’s Investment Rajesh’s Investment

Month NAV Amount Units Amount Units

Jan-20119.345 1000 107.0091 12000 1284.1091

Feb-20119.399 1000 106.3943

Mar-20118.123 1000 123.1072

Apr-20118.750 1000 114.2857

May-20118.012 1000 124.8128

Jun-20118.925 1000 112.0448

Jul-20119.102 1000 109.8660

Aug-20118.310 1000 120.3369

Sep-20117.568 1000 132.1353

Oct-20116.462 1000 154.7509

Nov-20116.931 1000 144.2793

Dec-20117.600 1000 131.5789

*NAV as on the 10th every month. These are assumed NAVs in a

volatile market as seen in the table, by investing through SIP, you end

up buying more units when the price is low and fewer units when the

price is high. However, over a period of

22

time these market fluctuations are generally averaged. And the

average cost of your investment is often reduced.

At the end of the 12 months, Suresh has more units than Rajesh, even

though they invested the same amount. That’s because the average cost of

Suresh’s units is much lower than that of Rajesh. Rajesh made only one

investment and that too when the per-unit price was high. Suresh’s

average unit price = 12000/1480.6012 =

Rs. 8.105 Rajesh’s average unit price = Rs. 9.345

Grow Your Investment with Compounded Benefits

It is far better to invest a small amount of money regularly, rather than

save up to make one large investment. This is because while you are

saving the lump sum,

your savings may not earn muchinterest.

With HDFC MF SIP, each amount you invest grows through

compounding benefits as well. That is, the interest earned on your

investment also earns interest.

Thefollowing example illustratesthis.

Imagine Neha is 20 years old when she starts working. Every month she

saves and invests Rs. 5,000 till she is 25 years old. The total investment

made by her over 5 years is Rs. 3 lakhs.Arjun also starts working when he

is 20 years old. But he doesn’t invest monthly. He gets a large bonus of

Rs. 3 lakhs at 25 and decides to invest the entire amount. Both of them

decide not to withdraw these investments till they turn 50. At 50, Neha’s

Investments have grown to Rs. 46,68,273* whereas Arjun’s investments

have grown to Rs. 36,17,084*. Neha’s small contributions to a

SIP and her decision to start investing earlier than Arjun have made her

wealthier by over Rs. 10 lakhs.

*Figures based on 10% p.a. interest compounded monthly.

23

LITERATURE REVIEW

The Indian mutual fund industry has witnessed significant growth in the

past few years driven by several favourable economic and demographic

factors such as rising income levels, and the increasing reach of Asset

Management Companies and distributors. However, after several years of

relentless growth, the industry witnessed a fall of 8% in the assets under

management in the financial year 2008-2009 that has impacted revenues

and profitability. Whereas in 2009-10 the industry is on the road of

recovery.

History of Mutual Funds

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

Unit Trust of India, at the initiative of the Government of India and

Reserve Bank of India. The history of mutual funds in India can be

broadly divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of

Parliament. It was set up by the Reserve Bank of India and functioned

under the Regulatory and administrative control of the Reserve Bank of

India. In 1978 UTI was de-linked from the RBI and the Industrial

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

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

was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 Crores of

assets under management.

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

24

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

public sector banks and Life Insurance Corporation of India (LIC) and

General Insurance Corporation of India (GIC). SBI Mutual Fund was the

first non- UTI Mutual Fund established in June 1987 followed by

Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund

(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),

Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in

June 1989 while GIC had set up its mutual fund in December 1990.At the

end of 1993, the mutual fund industry had assets under management of

Rs.47, 004 Crores.

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

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

Indian mutual fund industry, giving the Indian investors a wider choice of

fund families. Also, 1993 was the year in which the first Mutual Fund

Regulations came into being, under which all mutual funds, except UTI

were to be registered and governed. The erstwhile Kothari Pioneer (now

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

registered in July 1993.

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

comprehensive and revised Mutual Fund Regulations in 1996. The

industry now functions under the SEBI (Mutual Fund) Regulations

1996.The number of mutual fund houses went on increasing, with many

foreign mutual funds setting up funds in India and also the industry has

witnessed several mergers and acquisitions. As at the end of January

2003, there were 33 mutual funds with total assets of Rs. 1, 21,805

Crores. The Unit Trust of India with Rs.44, 541 Crores of assets under

management was way ahead of other mutual funds .

25

Fourth Phase – since February 2003

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

UTI was bifurcated into two separate entities. One is the Specified

Undertaking of the Unit Trust of India with assets under management of

Rs.29, 835 crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other schemes. The

Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and

does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB

and LIC. It is registered with SEBI and functions under the Mutual Fund

Regulations. With the bifurcation of the erstwhile UTI which had in

March 2000 more than Rs.76,000 Crores of assets under management and

with the setting up of a UTI Mutual Fund, conforming to the SEBI

Mutual Fund.

26

The graph indicates the growth of assets over the years:

Assets of the mutual fund industry touched an all-time high of Rs639,000

crore (approximately $136 billion) in May, aided by the spike in the stock

market by over 50 per cent in the last one month and fresh inflows in

liquid funds, data released by the Association of Mutual Funds in India

(AMFI) shows yesterday.

The country's burgeoning mutual fund industry is expected to see its

assets growing by 29% annually in the next five years. The total assets

under management in the Indian mutual funds industry are estimated to

grow at a compounded annual growth rate (CAGR) of 29 per cent in the

next five years," the report by global consultancy Celent said. However,

the profitability of the industry is expected to remain at its present level

mainly due to increasing cost incurred to develop distribution channels

and falling margins due to greater competition among fund houses, it

said.

27

Regulatory Framework

Securities and Exchange Board of India (SEBI) ;The Government of

India constituted Securities and Exchange Board of India, by an Act of

Parliament in 1992, the apex regulator of all entities that either raise funds

in the capital markets or invest in capital market securities such as shares

and debentures listed on stock exchanges. Mutual funds have emerged as

an important institutional investor in capital market securities. Hence they

come under the purview of SEBI. SEBI requires all mutual funds to be

registered with them. It issues guidelines for all mutual fund operations

including where they can invest, what investment limits and restrictions

must be complied with, how they should account for income and

expenses, how they should make disclosures of information to the

investors and generally act in the interest of investor protection. To

protect the interest of the investors, SEBI formulates policies and

regulates the mutual funds. MF either promoted by public or by private

sector entities including one promoted by foreign entities are governed by

these Regulations. SEBI approved Asset Management Company (AMC)

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

Custodian, registered with SEBI, holds the securities of various schemes

of the fund in its custody. According to SEBI Regulations, two thirds of

the directors of Trustee Company or board of trustees must be

independent.

Association of Mutual Funds in India (AMFI):With the increase

in mutual fund players in India, a need for mutual fund association in

India was generated to function as a non-profit organization. Association

of Mutual Funds in India (AMFI) was incorporated on 22nd August,

1995.

AMFI is an apex body of all Asset Management Companies (AMC)

which has been registered with SEBI. Till date all the AMCs are that have

launched mutual

28

fund schemes are its member. It functions under the supervision and

guidelines of its Board of Directors. Association of Mutual Funds India

has brought down the Indian Mutual Fund Industry to a professional and

healthy market with ethical line enhancing and maintaining standards. It

follows the principle of both protecting and promoting the interests of

mutual funds as well as their unit holders.

Objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered

AMCs of the country. It has certain defined objectives which juxtaposes

the guidelines of its Board of Directors. The objectives are as follows:

This mutual fund association of India maintains high professional

and ethical standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices

and code of conduct which is followed by members and related

people engaged in the activities of mutual fund and asset

management. The agencies who are by any means connected or

involved in the field of capital markets and financial services also

involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs

guidelines in the mutual fund industry.

Association of Mutual Fund of India does represent the

Government of India, the Reserve Bank of India and other related

bodies on matters relating to the Mutual Fund Industry.

29

It develops a team of well qualified and trained Agent distributors.

It implements a program of training and certification for all

intermediaries and other engaged in the mutual fund industry.

AMFI undertakes all India awareness program for investors in

order to promote proper understanding of the concept and working

of mutual funds.

At last but not the least association of mutual fund of India also

disseminate information on Mutual Fund Industry and undertakes

studies and research either directly or in association with other

bodies.

Concept of Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors

who share a common financial goal. The money thus collected is then

invested in capital market instruments such as shares, debentures and

other securities. The income earned through these investments and the

capital appreciations realized are shared by its unit holders in proportion

to the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed basket of securities at a

relatively low cost.

The flow chart

below describes the

working of a mutual

30

Mutual fund operation flow chart

Mutual funds are considered as one of the best available investments as

compare to others. They are very cost efficient and also easy to invest in,

thus by pooling money together in a mutual fund, investors can purchase

stocks or bonds with much lower trading costs than if they tried to do it

on their own. But the biggest advantage to mutual funds is diversification,

by minimizing risk & maximizing returns.

Organization of a Mutual Fund: There are many entities involved and

the diagram below illustrates the organizational set up of a mutual fund.

I. Types of Mutual Fund schemes in INDIA: Wide variety of Mutual

Fund Schemes exists to cater to the needs such as financial position,

risk tolerance and return expectations.

31

Overview of schemes existed in mutual fund category: BY STRUCTURE

Open - Ended Schemes: An open-end fund is one that is available for

subscription all through the year. These do not have a fixed maturity.

Investors can conveniently buy and sell units at Net Asset Value ("NAV")

related prices. The key feature of open-end schemes is liquidity.

Close - Ended Schemes: A closed-end fund has a stipulated maturity

period which generally ranging from 3 to 15 years. The fund is open for

subscription only during a specified period. Investors can invest in the

scheme at the time of the initial public issue and thereafter they can buy

or sell the units of the scheme on the stock exchanges where they 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 Fund through

periodic repurchase at NAV related prices. SEBI Regulations stipulate

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

Interval Schemes: Interval Schemes are that scheme, which combines

the features of open-ended and close-ended schemes. The units may be

traded on the stock exchange or may be open for sale or redemption

during pre-determined intervals at NAV related prices.

32

Overview of existing schemes existed in mutual fund category: BY NATURE

Equity fund: These funds invest a maximum part of their corpus into

equities holdings. The structure of the fund may vary different for

different schemes and the fund manager’s outlook on different stocks.

The Equity Funds are sub-classified depending upon their investment

objective, as follows:

-Diversified Equity Funds

-Mid-Cap Funds

-Sector Specific Funds

-Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds

rank high on the risk-return matrix.

Debt funds: The objective of these Funds is to invest in debt papers.

Government authorities, private companies, banks and financial

institutions are some of the major issuers of debt papers. By investing in

debt instruments, these funds ensure low risk and provide stable income

to the investors.

Gilt Funds: Invest their corpus in securities issued by Government,

popularly known as Government of India debt papers. These Funds carry

zero Default risk but are associated with Interest Rate risk. These schemes

are safer as they invest in papers backed by Government.

Income Funds: Invest a major portion into various debt instruments such

as bonds, corporate debentures and Government securities.

33

Monthly income plans (MIPs) : Invests maximum of their total corpus in

debt instruments while they take minimum exposure in equities. It gets

benefit of both equity and debt market. These scheme ranks slightly high

on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs) : Meant for investment horizon for three to six

months. These funds primarily invest in short term papers like Certificate

of Deposits (CDs) and Commercial Papers (CPs). Some portion of the

corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds

provides easy liquidity and preservation of capital. These schemes invest

in short-term instruments like Treasury Bills, inter-bank call money

market, CPs and CDs. These funds are meant for short-term cash

management of corporate houses and are meant for an investment horizon

of 1day to 3 months. These schemes rank low on risk-return matrix and

are considered to be the safest amongst all categories of mutual funds.

Balanced funds: They invest in both equities and fixed income

securities, which are in line with pre-defined investment objective of the

scheme. These schemes aim to provide investors with the best of both the

worlds. Equity part provides growth and the debt part provides stability in

returns.

Further the mutual funds can be broadly classified on the basis of

investment parameter. It means each category of funds is backed by an

investment philosophy, which is pre-defined in the objectives of the fund.

The investor can align his own investment needs with the funds objective

and can invest accordingly

By investment objective:

34

Growth Schemes: Growth Schemes are also known as equity schemes.

The aim of these schemes is to provide capital appreciation over medium

to long term. These schemes normally invest a major part of their fund in

equities and are willing to bear short-term decline in value for possible

future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The

aim of these schemes is to provide regular and steady income to investors.

These schemes generally invest in fixed income securities such as bonds

and corporate debentures. Capital appreciation in such schemes may be

limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and

income by periodically distributing a part of the income and capital gains

they earn. These schemes invest in both shares and fixed income

securities, in the proportion indicated in their offer documents.

Money Market Schemes: Money Market Schemes aim to provide easy

liquidity, preservation of capital and moderate income. These schemes

generally invest in safer, short-term instruments, such as treasury bills,

certificates of deposit, commercial paper and inter-bank call money.

Other schemes

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the

investors under tax laws prescribed from time to time. Under Sec.80C of

the Income Tax Act, contributions made to any Equity Linked Savings

Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a

particular index such as the BSE Sensex or the Nifty 50. The portfolio of

these schemes will

35

consist of only those stocks that constitute the index. The percentage of each stock

to the total holding will be identical to the stocks index weightage. And hence, the

returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes: These are the funds/schemes which invest in

the securities of only those sectors or industries as specified in the offer

documents. Ex- Pharmaceuticals, Software, Fast Moving Consumer

Goods (FMCG), Petroleum stocks, etc. The returns in these funds are

dependent on the performance of the respective sectors/industries. While

these funds may give higher returns, they are more risky compared to

diversified funds. Investors need to keep a watch on the performance of

those sectors/industries and must exit at an appropriate time.

Advantages of Mutual Funds

Diversification: It can help an investor diversify their portfolio with a

minimum investment. Spreading investments across a range of securities

can help to reduce risk. A stock mutual fund, for example, invests in

many stocks .This minimizes the risk attributed to a concentrated

position. If a few securities in the mutual fund lose value or become

worthless, the loss may be offset by other securities that appreciate in

value. Further diversification can be achieved by investing in multiple

funds which invest in different sectors.

Professional Management: Mutual funds are managed and supervised

by investment professional. These managers decide what securities the

fund will buy and sell. This eliminates the investor of the difficult task of

trying to time the market.

Well regulated: Mutual funds are subject to many government

regulations that protect investors from fraud.

36

Liquidity: It’s easy to get money out of a mutual fund.

Convenience: we can buy mutual fund shares by mail, phone, or over the Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of

our investment. Expenses for Index Funds are less than that, because

index funds are not actively managed. Instead, they automatically buy

stock in companies that are listed on a specific index.

Transparency: The mutual fund offer document provides all the

information about the fund and the scheme. This document is also called

as the prospectus or the fund offer document, and is very detailed and

contains most of the relevant information that an investor would need.

Choice of schemes: there are different schemes which an investor can

choose from according to his investment goals and risk appetite.

Tax benefits :An investor can get a tax benefit in schemes like ELSS

(equity linked saving scheme)

Terms used in Mutual Fund

Asset Management Company (AMC): An AMC is the legal entity

formed by the sponsor to run a mutual fund. The AMC is usually a private

limited company in which the sponsors and their associates or joint

venture partners are the shareholders. The trustees sign an investment

agreement with the AMC, which spells out the functions of the AMC. It is

the AMC that employs fund managers and analysts, and other personnel.

It is the AMC that handles all operational matters of a mutual fund – from

launching schemes to managing them to interacting with investors.

37

Fund Offer document: The mutual fund is required to file with SEBI a

detailed information memorandum, in a prescribed format that provides

all the information about the fund and the scheme. This document is also

called as the prospectus or the fund offer document, and is very detailed

and contains most of the relevant information that an investor would need

Trust: The Mutual Fund is constituted as a Trust in accordance with the

provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is

registered under the Indian Registration Act, 1908. The Trust appoints the

Trustees who are responsible to the investors of the fund.

Trustees: Trustees are like internal regulators in a mutual fund, and their

job is to protect the interests of the unit holders. Trustees are appointed by

the sponsors, and can be either individuals or corporate bodies. In order to

ensure they are impartial and fair, SEBI rules mandate that at least two-

thirds of the trustees be independent, i.e., not have any association with

the sponsor.

Trustees appoint the AMC, which subsequently, seeks their approval for

the work it does, and reports periodically to them on how the business

being run.

Custodian: A custodian handles the investment back office of a mutual

fund. Its responsibilities include receipt and delivery of securities,

collection of income, and distribution of dividends and segregation of

assets between the schemes. It also track corporate actions like bonus

issues, right offers, offer for sale, buy back and open offers for

acquisition. The sponsor of a mutual fund cannot act as a custodian to the

fund. This condition, formulated in the interest of investors, ensures that

the assets of a mutual fund are not in the hands of its sponsor. For

example, Deutsche Bank is a custodian, but it cannot service Deutsche

Mutual Fund, its mutual fund arm.

38

NAV: Net Asset Value is the market value of the assets of the scheme

minus its liabilities. The per unit NAV is the net asset value of the scheme

divided by the number of units outstanding on the Valuation Date. The

NAV is usually calculated on a daily basis. In terms of corporate

valuations, the book values of assets less liability. The NAV is usually

below the market price because the current value of the fund’s assets is

higher than the historical financial statements used in the NAV

calculation.

Market Value of the Assets in the Scheme + Receivables + Accrued Income

- Liabilities - Accrued Expenses

NAV = -----------------------------------------------------------------------------------------

No. of units outstanding

Where,

Receivables: Whatever the Profit is earned out of sold stocks by the

Mutual fund is called Receivables.

Accrued Income: Income received from the investment made by the Mutual Fund.

Liabilities: Whatever they have to pay to other companies are called liabilities.

Accrued Expenses: Day to day expenses such as postal expenses,

Printing, Advertisement Expenses etc.

39

Calculation of NAV

Scheme ABN

Scheme Size Rs. 5, 00, 00,000 (Five Crores)

Face Value of Units Rs.10/-

Scheme Size 5, 00, 00,000

---------------------------=-------------------= 50, 00,000

Face value of units 10

The fund will offer 50, 00,000 units to Public.

Investments: Equity shares of Various Companies.

Market Value of Shares is Rs.10, 00, 00,000 (Ten Crores)

Rs. 10, 00, 00,000

NAV = -------------------------- = Rs.20/-

50, 00,000 units

Thus each unit of Rs. 10/- is Worth Rs.20/-

It states that the value of the money has appreciated since it is more than

the face value.

40

Sale price: Is the price we pay when we invest in a scheme. Also called

Offer Price. It may include a sales load.

Repurchase price: Is the price at which units under open-ended schemes

are repurchased by the Mutual Fund. Such prices are NAV related

Redemption Price: Is the price at which close-ended schemes redeem

their units on maturity. Such prices are NAV related.

Sales load: Is a charge collected by a scheme when it sells the units. Also called,

‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load: Is a charge collected by a scheme when

it buys back the units from the unit holders

CAGR (compounded annual growth rate):The year-over-year growth rate

of an investment over a specified period of time. The compound annual

growth rate is calculated by taking the nth root of the total percentage

growth rate, where n is the number of years in the period being

considered.

II. Fund Management

Actively managed funds: Mutual Fund managers are professionals.

They are considered professionals because of their knowledge and

experience. Managers are hired to actively manage mutual fund

portfolios. Instead of seeking to track

41

market performance, active fund management tries to beat it. To do this,

fund managers "actively" buy and sell individual securities. For an

actively managed fund, the corresponding index can be used as a

performance benchmark.

Is an active fund a better investment because it is trying to outperform the

market? Not necessarily. While there is the potential for higher returns

with active funds, they are more unpredictable and more risky. From 1990

through 1999, on average, 76% of large cap actively managed stock funds

actually underperformed the S&P 500.

Actively managed fund styles: Some active fund managers follow an

investing "style" to try and maximize fund performance while meeting the

investment objectives of the fund. Fund styles usually fall within the

following three categories.

Fund Styles:

Value: The manager invests in stocks believed to be currently

undervalued by the market.

Growth: The manager selects stocks they believe have a strong

potential for beating the market.

Blend: The manager looks for a combination of both growth and

value stocks.

To determine the style of a mutual fund, consult the prospectus as well as

other sources that review mutual funds. Don't be surprised if the

information conflicts. Although a prospectus may state a specific fund

style, the style may change. Value stocks held in the portfolio over a

period of time may become growth stocks and

42

vice versa. Other research may give a more current and accurate account

of the style of the fund.

Passively Managed Funds: Passively managed mutual funds are an

easily understood, relatively safe approach to investing in broad segments

of the market. They are used by less experienced investors as well as

sophisticated institutional investors with large portfolios. Indexing has

been called investing on autopilot. The metaphor is an appropriate one as

managed funds can be viewed as having a pilot at the controls. When it

comes to flying an airplane, both approaches are widely used.

A high percentage of investment professionals, find index investing

compelling for the following reasons:

• Simplicity. Broad-based market index fundsmake asset

allocation and diversification easy.

Management quality. The passive nature of indexing eliminates any

concerns about human error or management tenure.

Low portfolio turnover. Less buying and selling of securities means

lower costs and fewer tax consequences.

Low operational expenses. Indexing is considerably less expensive

than active fund management.

Asset bloat. Portfolio size is not a concern with index funds.

43

RESEARCH METHODOLOGY

A research design is the specification of method and procedure for

acquiring the information needed to the structure or to solve the problem.

It is the overall operation pattern or framework of the project that

stipulates what information is to be collected, from which sources and

what procedure.

Research design may be classified by many criteria, the most useful one

concern the major or purpose of investigation on the basis one many

identify the broad classes of design as exploratory, descriptive, causal.

In the project exploratory studies are being applied .although descriptive

information is often helpful for predictive purpose, but it is possible one

would like to know the cause of what we are predicting. One would also

like to know how these causal factors relate the effect that one is

predicting.

STATEMENT OF THE PROBLEM

To study about the performance of various Mutual funds and compare it

with the respective Benchmark indices in the market and rank them in a

systematic order over a period of time (5 year’s) and to find the risk and

return of each scheme and also creating awareness about Equity Schemes

among the investors.

NEED FOR STUDY

The Performance evaluation of equity schemes with their respective

Benchmark indexes and to find out the Beta of the fund, Standard

deviation of the fund and performance measures of Sharpe and Treynors.

It helps the investors whether to

44

invest in Equity Schemes in Mutual Fund house. The performance of

Equity schemes in Mutual Fund industry however helps the prospective

investors to choose the best investment avenue that suit his objective.

There has always been high volatility in India, which leads to very high-

risk levels. So there is an absolute need to develop. This concept makes all

the investors aware of its advantages and makes them use these

instruments according to their needs.

To study the concept of Mutual funds such as how mutual funds have

come into existence, the different types of mutual funds schemes such as

open ended schemes closed ended schemes, to compare the performance

of different mutual funds to understand the concept of NAV and mutual

funds, to identify the different players in mutual fund industry, to compare

equity funds with their respective Bench Mark index.

OBJECTIVES OF THE STUDY To compare the performance of different mutual funds.

To identify different players in mutual fund industry.

To study and compare the return of Equity mutual funds with their respective Benchmark indexes.

To study the best performing Funds using Sharpe, Treynor & Jensen measures.

OPERATIONAL DEFINITION OF CONCEPTS

Net Asset Value or NAV: NAV is the total asset value (net of expenses)

per unit of the fund and is calculated by the Asset Management Company

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

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

he his holding if the

45

scheme is liquidated on that date.Net asset Value of an investment

company is the company’s total assets minus its total liabilities. For

Example, if an investment company has securities and other assets worth

$100 million and has liabilities of $10 million, the investment company’s

NAV will be $90 million one day, $100 million the next, and $80 million.

NAV Periodic performance in percentage

NAV Closing Value – NAV Opening Value

= *100

NAV Opening Value

Entry Load: It is the load charged by the fund manager when one invests

into the fund. It increases the price of the units to more than the NAV and

is expressed as a percentage of NAV. SEBI has removed the entry load on

mutual funds from 18 th

June, 2009.

ExitLoad: It is the load charged by the fund when one redeems the units

from the fund. It reduces the price of the units to less than the NAV and is

expressed as a percentage of NAV.

Performance: Performance of an investment indicates the returns from an

investment. The returns can come by way of income distributions as well

as appreciation in the value of the investment.

46

RISK MEASUREMENT CONCEPTS

STANDARD DEVIATION: A measure of the dispersion of a set of data

from its mean. The more spread apart the data is higher the deviation. In

finance, a standard deviation is applied to the annual rate of return of an

investment to measure the investment Volatility (Risk). A volatile stock

would have a high standard deviation. In mutual funds, the standard

deviation tells us how much the return on the fund is deviating from the

expected normal returns. Standard deviation can also be calculated as the

square root of the variance.

Standard Deviation (Risk) of the Fund:

σp =n∑ Rp2 - (∑ Rp)2

1/2

n2

Where:

σp : Risk of the Fund.

Rp: Return of the fund.

Standard Deviation (Risk) of the benchmark index:

1/2

n∑

Rm2 - (∑ Rm)2

σm =

n2

47

Where

Rm Index Return (Market Return)

σm Risk of the Index

BETA: It is the measure of the relative sensitivity of a stock or mutual

fund to the market. The market is assigned a beta of 1. The higher the beta,

the more sensitive the stock or fund is considered to be relative to the

market as a whole. In other words, funds with beta more than 1 will react

more to any fluctuations (whether upward or downward) in market than

funds with beta less than 1.

Beta of the Fund:

∑ [(Rp - ARp) (Rm – ARm ]

βp = ∑ [Rm – ARm]2

Where:

βp : Beta of the fund.

Rp: Return of the fund.

ARp: Average return of the Mutual Fund Scheme.

ARm: Average return of the benchmark index.

48

Sharpe’s Measure: Sharpe measure adjusts portfolio

performance for total risk rather than market risk. It tells us whether

a portfolio's returns are due to smart investment decisions or a result

of excess risk. The higher the Sharpe ratio for a portfolio, the better

the portfolio has performed.

Sharpe’s Measure of Performance:

Sp = AR p - r*

σp

Where, Sp = Sharpe Index

r* = riskless rate of interest (T-Bill 91 days)

p = Standard deviations of the returns of portfolio p

ARp= average return on portfolio p

Treynor’s Measure : It is a relative measure of performance for

investment managers and measures the return premium per unit of

systematic risk as measured by the beta or relative volatility of the

portfolio. While a high and positive index shows a superior risk-

adjusted performance of a fund, a low and negative index is an

indication of unfavorable performance.

Treynor’s Measure of Performance:

Tp = AR p - r*

βp49

Where, Tp = Treynor’s Index

r* = Riskless rate of interest (T-Bill 91 days)

βp = Beta coefficient of portfolio p

ARp= Average return on portfolio p

50

DATA SOURCE

Both primary and secondary data are collected for the study, both

play vital role at the time of analysis. to give a suitable

recommendation to the existing problems, primary data played a

major role, also secondary data is necessary to give proper support to

the primary data.

Primary data: has been collected from the east and central, Delhi

region with the help of questionnaire

Secondary data: has been collected from the internet, print media& investor.

METHOD OF DATA COLLECTION

Several alternative media are available for obtaining information

from respondent through communication .respondent may be

interviewed in person or interviewed by telephone, or they may be

mailed a questionnaire to which they are asked to respond.

Primary data has been collected by personal interview of investor. in

few cases the concerned person refused to give an appointment and

has to collect information through phone .

LIMITATIONS

1. Small sample size

2. Possibility of biased responses

3. Possibility of errors in questionnaire.

51

DATA ANALYSIS

Study of Investors’ attitude towards Mutual Funds

1. What kind of investments you prefer most? Pl tick (√). All applicable

a. Saving account b. Fixed deposits c. Insuranced. Mutual Fund

e. Post Office-NSC, etc

f. Shares/Debentures

g. Gold/ Silver h. Real Estate

i.PPF j. PF

a. Saving account 65

b. Fixed deposits 51

c. Insurance 60

d. Mutual Fund 35

e. Post Office-NSC, etc 34

f. Shares/Debentures 39

g. Gold/ Silver 79

h. Real Estate 40

I. PPF 80

j. PF 78

52

INTERPRETATION : Gold and silver are most prefered investmnet avenue. The

mutul funds are prefered by 6% respondents only

2. While investing your money, which factor you prefer most? Any one

Liquidity Low Risk High Return Company reputation

53

INTERPRETATION:Investors prefer to have all components such as

liquidity,low risk, high return and company reputation in a balancing manner in

their investment.

3. Have you ever invested your money in mutual fund?

Yes No

If yes,

a) Where do you find yourself as a mutual fund investor?

Totally ignorant [ ]

Partial knowledge of mutual funds [ ]

Aware only of any specific scheme in which you invested [ ]

Fully aware [ ]

54

INTERPRETATION: Only 20% mutual fund investors are fully aware of the

mutual fund working process and plans.

b) In which kind of mutual you would like to invest?

Public [ ] Private [ ]

INTERPRETATION: 55% respondents prefer investing in private mutual funds

55

c) How do you come to know about Mutual Fund?

a. Advertisement b. Peer Group c.Banks d.Financial Advisors

INTERPRETATION: Investors are getting exposures to mutual funds

through their peer group, financial advisors, banks and advertisements.

d) Which mutual fund scheme have you used?

Open-ended Close-ended

Liquid fund Mid- Cap

Growth fund Regular Income fund

Long-Cap Sector fund

56

INTERPRETATION: Most of the respondents invest in long cap and regular

income funds.

If no,

a) If not invested in Mutual Fund then why?

Not aware of MF Higher risk Not any specific reason

INTERPRETATION : Most of them not invetsing due to high risk in mutual funds.

57

4. Which feature of the mutual funds allure you most?

Diversification [ ]

Better return and safety [ ]

Reduction in risk and transaction cost [ ]

Regular Income [ ]

Tax benefit [ ]

INTERPRETATION: Most of them investing in mutual funds

because of diversification and tax benefits.

5. In which Mutual Fund you have invested? Please tick (√). All applicable.

a. SBIMF

b. UTI

c. HDFC

d. HDFC

e. ICICI prudential funds

f. JM mutual fund

g. other

58

INTERPRETATION:Top mutual funds attractinginvetsors are

HDFC,HDFC,ICICI and SBI.

6. When you invest in Mutual Funds which mode of investment will you

prefer?

a. One Time Investment b.Systematic Investment Plan(SIP)

INTERPRETATION: Most of the investors said they prefer SIP than

one time investment.

7. Where from you purchase mutual funds?

Directly from the AMCs [ ]

Brokers only [ ]

Brokers/ sub-brokers [ ]

Other sources [ ]

INTERPRETATION: There is mixed response in terms of selecting the

source of investing.

FINDINGS

Gold and silver are most prefered investmnet avenue. The mutul funds are prefered by 6% respondents only.

Investors prefer to have all components such as liquidity,low risk, high return and company reputation in a balancing manner in their investment.

60

Only 20% mutual fund investors are fully aware of the mutual fund working process and plans.

55% respondents prefer investing in private mutual funds.

Investors are getting exposures to mutual funds through their peer group, financial advisors,, banks and advertisements.

Most of the respondents invest in long cap and regular incoem funds.

Most of them not invetsing due to high risk in mutual funds.

Most of them investing in mutual funds because of diversification and tax benefits.

Top mutual funds attracting invetsors are HDFC,HDFC,ICICI and SBI.

Most of the investors said they prefer SIP than one time investment.

There is mixed response in terms of selecting the source of investing.

Performance study of Mutual Funds

The performance of Mutual Funds has been measured for a period of

five years starting from January 2010 to December 2014. The funds’

performance is analyzed and a comparison is made between the

performances of various funds with their respective benchmark index

with the help of above discussed methods (methodology section) on

yearly basis. The funds chosen belong to the top 10 AMCs in India as

on 31st December 2011. The funds are selected based on their corpus

and objective of the portfolio investment (Growth Schemes). More

than 80% of the total corpus of each fund is invested in the equity. The

following 10 Equity funds are included in the study:

1. Birla Sunlife Frontline Equity

2. DSP Blackrock opportunities growth

61

ICICI Prudential growth fund

3. HDFC Equity fund

4. J M Mutual fund equity growth

5. Kotak 30 growth fund

6. Reliance mutual growth fund

7. Sundaram BNP Paribas growth

8. TATA pure equity growth

10. HSBC equity fund

Brief Description of Funds

An introduction to various mutual funds used for comparison is as follows-

Ø BIRLA SUNLIFE MUTUAL FUNDS

Scheme: Birla Sun life Frontline Equity

Objective: The scheme aims to generate long-term capital growth,

income generation and distribution of dividend. It would target the

same sectoral weights as BSE 200, subject to flexibility of selecting

stocks within a particular sector.

62

Description of the Birla sun life frontline Equity

Mutual fund family Birla Sun life Mutual Fund

Fund class Equity Diversified

Launch Date August 2002

Fund Manager Mahesh Patil

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal --

Minimum Balance --

Pricing Method Forward

Type Open End

Bench Mark BSE 200

Source secondary data

Ø DSP Blackrock Mutual Fund

Scheme: Opportunities Growth

Objective: The scheme seeks to achieve long-term capital

appreciation by responding to the dynamically changing Indian

economy by moving across sectors such as the lifestyle, pharma,

cyclical and technology.

63

Description about the fund:

Mutual fund family DSP Merillynch Mutual Fund

Fund class Equity Diversified

Launch Date August 2000

Fund Manager Anup Maheshwari

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal Rs.1000

Minimum Balance Rs.500

Pricing Method Forward

Type Open End

Bench Mark S & P CNX Nifty

Source secondary data

Ø ICICI Mutual Fund

Scheme: Prudential Growth

Objective: The scheme seeks to generate long-term capital

appreciation by investing predominantly in equities that is 95% in

equities while the rest would be invested in debt and money market

instruments.

64

Description of the ICICI Prudential Growth

Mutual fund family ICICI Mutual Fund

Fund class Equity Diversified

Launch Date June 1998

Fund Manager Kaushik Roychaudhary

Minimum Investment Rs.5000

Subsequent Investment Rs.500

Minimum Withdrawal Rs.500

Minimum Balance Rs.5000

Pricing Method Forward

Type Open End

Bench Mark S & P CNX Nifty

Source secondary data

Ø HDFC Mutual Fund

Scheme: Equity

Objective: The scheme seeks to provide long-term capital

appreciation by predominantly investing in high growth companies.

Description of the HDFC Equity Growth fund

65

Mutual fund family . HDFC Mutual Fund

Fund class Equity Diversified

Launch Date December 1994

Fund Manager Prashanth Jain

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal Rs.500

Minimum Balance Rs.1000

Pricing Method Forward

Type Open End

Bench Mark S & P CNX 500

Source secondary data

Ø J M Mutual Fund

Scheme: Equity Growth

Objective: The scheme seeks long-term capital growth and

appreciation through investment primarily in equities.

66

Description of the JM Equity Growth

Mutual fund family J M Mutual Fund

Fund class Equity Diversified

Launch Date December 1994

Fund Manager Amandeep Chopra

Minimum Investment Rs.5000

Subsequent Investment --

Minimum Withdrawal Rs.0

Minimum Balance --

Pricing Method Forward

Type Open End

Bench Mark Sensex

Source: Secondary data

Ø Kotak Mutual Funds

Scheme: Kotak 30 Growth

Objective: The scheme seeks capital appreciation, through

investments in equities. The fund would invest in not more than 30

stocks. A part of the corpus will be invested in debt also.

67

Description of the Kotak 30 Growth

Mutual fund family Kotak Mutual Funds

Fund class Equity Diversified

Launch Date December 1998

Fund Manager Krishna Sanghvi

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal Rs.1000

Minimum Balance Rs.5000

Pricing Method Forward

Type Open End

Bench Mark S&P CNX Nifty

Source: Secondary data

Ø Reliance Mutual Funds

Scheme: Reliance Growth

Objective: The scheme aims at long-term growth of capital through

research based investment approach. The funds will be invested in

Equity and equity related instruments, and there will be an exposure to

debt and money market instruments also.

68

Description of the Reliance Growth

Mutual fund family Reliance Mutual Funds

Fund class Equity Diversified

Launch Date October 1995

Fund Manager V Ramanan

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal Rs.0

Minimum Balance Rs.5000

Pricing Method Forward

Type Open End

Bench Mark BSE 100

Source: Secondary data

Ø Sundaram Mutual Funds

Scheme: BNP Paribas Growth

Objective: The scheme aims to provide to investors a reasonably

diversified portfolio of stocks essentially meant to give higher returns

in the medium to long term. However on a selective basis, short-term

opportunities that may yield above average returns will not be

ignored.

69

Description of the Sundaram BNP Paribas Growth

Mutual fund family Sundaram Mutual Funds

Fund class Equity Diversified

Launch Date March 1997

Fund Manager Rajesh Singh

Minimum Investment Rs.2000

Subsequent Investment Rs.1000

Minimum Withdrawal Rs.500

Minimum Balance Rs.500

Pricing Method Forward

Type Open End

Bench Mark BSE 200

Source: Secondary data

Ø TATA Mutual Funds

Scheme: Pure Equity Growth

Objective: Earlier known as Tata Twin Option (Equity), the scheme

aims at medium to long term capital growth, with 100 per cent

investments in the equity of large-cap, liquid blue-chip companies.

70

Description of the Tata Pure Equity Growth

Mutual fund family TATA Mutual Funds

Fund class Equity Diversified

Launch Date March 1998

Fund Manager M Venugopal

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal Rs.1000

Minimum Balance Rs.5000

Pricing Method Forward

Type Open End

Bench Mark Sensex

Ø HSBC Mutual Fund

Scheme: Equity

Objective: The scheme seeks to generate long-term capital growth

from a diversified portfolio of equity and equity related securities of

companies across a range of market capitalization’s, with a preference

for medium and large companies.

71

Description of the HSBC Equity

Mutual fund family HSBC Mutual Fund

Fund class Equity Diversified

Launch Date December 2002

Fund Manager Mihr Vora

Minimum Investment Rs.10000

Subsequent Investment Rs.1

Minimum Withdrawal Rs.1000

Minimum Balance Rs.1000

Pricing Method Forward

Type BSE 200

Bench Mark Sensex

Source: Secondary data

72

Comparative study of performance of Mutual Funds in India

Table 1: Returns on selected schemes of selected companies

Return on selectedAverage annual return

schemes

HDFC 2014 2013 2012 2011 2010Average

HDFC Capital Builder -24.9275

65.4346

-51.6222 7.1478

Fund26.9715

79.2738

HDFC Core & Satellite -24.8243

70.1695

-34.7273 1.6437

Fund30.0512

91.4511

HDFC Equity Fund-

25.528771.762

4-

41.6247 7.885831.0903

68.3961

HDFC Long Term -19.8029

57.5674

-31.8064 2.6296

Equity Fund25.9228

70.1055

HDFC Top 200 Fund-

22.265366.231

4-

77.543215.607727.834

260.1671

Average-

19.611466.233

1-

47.464828.3740

73.8787

ICICI PRUDENTIAL

ICICI Prudential -24.3587

84.7972

-32.7698 7.2531

Discovery Fund - IP27.0940

78.5660

ICICI Prudential -19.1976

58.4972

-33.2607 5.8180

Dynamic Plan22.7100

59.1553

ICICI

Prudential - 15.6824

56.2144 - 45.2974 -2.0372

73

Service Industries Fund 28.1453 99.2349

ICICI

Prudential

Top -

16.098555.505

0-

35.5478 3.9593100 Fund 22.7232 64.6314

ICICI

Prudential

Top -

19.623560.882

2-

39.1552 1.4778200 Fund 32.0309 80.2407

Average-

18.992163.179

2-

37.206226.5407 76.3656

RELIANCE

- -

Reliance Growth 15.792667.722

5 55.7800 5.940732.0251 77.5665

Reliance NRI Equity -18.7842

67.4213

-43.6671 5.0243

Fund 28.0870 76.6637

Reliance Regular -97.8366 -9.5488

-64.7633 7.7480

Savings Fund - Equity 35.6433 78.6676

Reliance Short Term7.5988 4.8791 8.4483 11.4118 9.2583 8.3192

Equity Fund

Reliance Vision

-14.1459

59.7041

-44.2235 2.3078

33.6102 72.9243

Average Return

-30.2877

38.7495

-43.5384

24.3534 58.8821

UTI

UTI Equity Fund-

18.426161.350

2-

37.9361 7.305621.1871 59.9970

UTI Master Value Fund-

23.935377.309

5-

46.1876 6.174428.9865 87.5735

UTI Mid Cap Fund - 17.278274.208

8 - 40.4158 2.0985

74

27.3370 94.0731

UTI Opportunities -17.6617

67.8321

- 53.1256 11.7158

Fund 12.9068 67.1332

UTI Equity Fund-

12.0803- - 43.207

1-

17.628315.079

8 79.1552 11.3152

Average-

17.876353.124

2- 44.174

521.6091 77.5864

BIRLA SUN LIFE

Birla Sun Life -16.6936

58.4007

- 43.6103 3.2742

Advantage Fund 28.1772 74.1563

Birla Sun Life -25.0720

63.2951

- 44.2372 10.943

Dividend Yield Plus 19.3394 58.5499

Birla Sun Life Equity -12.3338

62.8623

- 51.2547 2.0284

Fund 33.1358 83.1726

Birla Sun Life Mid Cap -9.2809

77.8366

- 56.6515 5.3482

Fund - Plan A 29.6531 87.3748

Birla Sun Life Top 100 -16.1636

55.2481

- 37.3890 3.5341

Fund 23.2216 67.9085

Average-

15.908863.528

5- 46.628

526.7054 74.2324

Source: calculated data

INFERENCE: Table 4.1 depicts the performance of selected equity

diversified schemes return for a period of 2010 to 2014. It also depicts

the average Portfolio return and scheme return performance in

comparison to the benchmark. The

75

analysis of table 1.1 clearly reveals that compounded annualized percentage

return since inception ranges between -94.0731 percent and 97.8366

percent. The fifth column shows the schemes-wise return for five years in

which HDFC Top 200 Fund-Growth scheme of HDFC Company. Reliance

regular saving equity– Growth gives highest return of 97.8366 in the year

2013 and also from the inception. It is followed by ICICI Prudential

Discovery Fund - IP- Growth, Birla Sun Life Mid Cap Fund – Plan A -

Growth, UTI Master Value Fund - Growth, UTI Mid Cap Fund - Growth

with, HDFC Equity Fund - Growth, with 84.7972, 77.8366, 77.3095,

74.2088, and 71.7624 return respectively. UTI Mid Cap Fund - Growth has

given the minimum compounded annualized percentage return of -

94.0731percent. In year 2012, all schemes outperformed compare to other

years except UTI Equity Fund - Growth. In year 2011 and 2014, the

performance of all the all schemes was found to be poor with the exception

of Reliance Short Term Equity Fund - Growth. In all five years duration

HDFC Top 200 Fund-Growth is performed well compare to others schemes.

Table 2: Risk (Sigma) on selected schemes of selected companies

Risk onselecte

d 2014 2013 2012 2011 2010 Average

schemes

HDFC

HDFC Capital 3.0012

1.5283

1.5283 2.1542 1.2222 1.8868Builder

Fund

HDFC Core & 0.9602 0.8166 1.8565 1.8565 1.3531 1.3685

Satellite Fund

HDFC Equity Fund1.1503 0.8757 1.8674 2.3291 1.3584 1.5161

HDFC Long Term 1.0724 1.4609 1.5172 2.0269 1.2240 1.4602

Equity Fund

76

HDFC Top 200 Fund 1.2000 0.8929 1.8654 2.3773 1.4088 1.5488

Average Risk 2.2491 0.8270 1.7270 2.2494 1.3133

ICICI

PRUDENTIAL

ICICI Prudential1.0359 0.8416 1.5087 2.3272 1.1898 1.3806

Discovery Fund - IP

ICICI Prudential1.0879 0.6576 1.3384 2.3078 1.2435 1.32704

Dynamic Plan

ICICI Prudential

Service Industries 1.2741 1.0065 1.8304 2.4493 1.3249 1.5770

Fund

ICICI Prudential Top1.2620 0.8777 1.8048 2.5899 1.5034 1.6075

100 Fund

ICICI Prudential Top1.3020 0.9608 1.7493 2.5659 1.4152 1.5986

200 Fund

Average Risk 1.1924 0.8688 1.6463 2.4480 1.3354

RELIANCE

Reliance Growth 1.1890 0.9444 1.7038 2.2265 1.3725 1.4872

Reliance NRI Equity1.1205 0.9208 1.9790 2.6937 1.5235 1.6475

Fund

Reliance Regular

Savings Fund - 1.2009 6.2563 4.6582 2.3532 1.6087 3.2154

Equity

Reliance Short Term0.0481 0.0324 0.1055 0.0959 0.0417 0.0647

Equity Fund

Reliance Vision 2.0735 0.9829 1.8555 2.2753 1.4246 1.7223

77

Average Risk 1.1264 1.8274 2.0604 1.9289 1.1942

UTI

UTI Equity Fund 1.1169 0.8547 1.4677 1.9942 1.3011 1.3469

UTI Master Value 1.0810 0.9640 1.6621 2.2075 1.26231.4353

Fund

UTI Mid Cap Fund 1.1245 0.9608 1.7246 2.1374 1.4472 1.4789

UTI Opportunities 1.0694 0.9229 1.8355 2.1595 1.52961.5033

Fund

UTI Equity Fund 1.1427 0.9558 4.7910 2.4171 1.5332 2.1679

Average Risk 1.1069 0.9316 2.2962 2.1832 1.4147

BIRLA SUN LIFE

Birla Sun Life1.3472 1.0185 2.2601 3.0017 1.4935 1.8242

Advantage Fund

Birla Sun Life0.8574 0.8147 1.4387 2.1227 1.2247 1.2916

Dividend Yield Plus

Birla Sun Life Equity1.1785 0.9257 2.0298 2.6712 1.4923 1.6595

Fund

Birla Sun Life Mid1.0357 0.9223 2.1476 2.4629 1.3382 1.5813

Cap Fund - Plan A

Birla Sun Life Top1.1442 0.9444 1.8394 2.4024 1.4573 1.5575

100 Fund

Average Risk 1.1126 0.9251 1.9431 2.5322 1.4012

INFERENCE: Table 4.3. Reveals the Risk in terms of Standard Deviation

of Return of selected schemes of selected companies and it is found that on

an average HDFC and Reliance Schemes are riskier than the ICICI

Prudential, UTI,

78

and Birla Sun Life Schemes during 2010 to 2014. The variation in return is

observed to be higher during 2012 as compare to others years, in case of all

selected schemes. However, in case of HDFC Capital Builder Fund-Growth

(3.0012) in 2014, Reliance Regular Saving Fund- Equity-Growth (6.2563) in

2010 and (4.6582) in 2011, UTI Equity Fund-Growth (4.7910) in 2012 and Birla

Sun Life Advantage Fund –Growth (3.0017) in 2011 were riskier than the market.

Reliance Short Term Equity Fund-Growth is least riskier than other companies

schemes from 2008 to 2012. Reliance Regular Savings Fund - Equity - Growth

risk is high for all five years compare to the others schemes. This mean that if any

investor want to earn good return on scheme at low risk than, that person can

invest in this reliance scheme.

Table 3: Beta values of selected schemes of selected companies

Scheme Name Average Annual Beta

HDFC 2014 2013 2012 2011 2010Average

HDFC Capital 0.7244 0.6742 0.8867 0.6549 0.6664 0.7213

Builder Fund

HDFC Core & 0.7523

Satellite 0.6504 0.8166 0.7685 0.7056 0.8208

Fund

HDFC Equity 0.8283 0.7832 0.7967 0.7773 0.8245 0.802

Fund

HDFC Long 0.7746 0.6516 0.4576 0.6580 0.7245 0.6532

Term Equity

Fund

HDFC Top 2000.8836

0.8439 0.6358 0.8169 0.8790 0.8118

Fund

79

Average Value 0.7723 0.6138 0.7091 0.7225 0.7830

ICICI

Prudential

ICICI Prudential 0.6814 0.6992 0.5417 0.7160 0.5957 0.6468

Discovery Fund -

IP

ICICI Prudential 0.7755 0.6103 0.5775 0.7749 0.7449 0.6966

Dynamic Plan

ICICI Prudential 0.8412

Service 0.9000 0.9386 0.8068 0.8117 0.7491

Industries Fund

ICICI Prudential 0.9132 0.8510 0.8130 0.8961 0.9397 0.8826

Top 100 Fund

ICICI Prudential 0.9442 0.9264 0.7842 0.8722 0.8606 0.8775

Top 200 Fund

Average Value 0.8429 0.8051 0.7047 0.8142 0.7780

Reliance

Reliance Growth 0.8157 0.8323 0.7126 0.7152 0.7698 0.7691

Reliance NRI 0.7896 0.8203 0.8613 0.8987 0.8982 0.8536

Equity Fund

Reliance Regular 0.8226 0.2729 0.7187 0.7609 0.8474 0.6845

Savings Fund -

Equity

Reliance Short0.043 0.02762

0.08484 0.03488 0.03256 0.0445

Term

Equity Fund

80

Reliance Vision 0.8132 0.9154 0.8189 0.7571 0.8536 0.8316

Average value 0.6568 0.5737 0.6392 0.6334 0.6803

UTI

UTI Equity Fund 0.7644 0.7918 0.6284 0.6633 0.7895 0.7274

UTI Master 0.6934 0.7655 0.6022 0.6389 0.6419 0.6683

Value Fund

UTI Mid Cap 0.6606 0.7534 0.6224 0.5967 0.7285 0.6723

Fund

UTI 0.7158 0.8463 0.7909 0.7044 0.9367 0.7988

Opportunities

Fund

UTI Equity Fund 0.7810 0.9008 0.7263 0.8082 0.5784 0.7589

Average Value 0.7230 0.8116 0.6741 0.6823 0.7350

Birla Sun Life

Birla Sun Life 0.8350 0.8945 0.9386 0.8973 0.8933 0.8917

Advantage Fund

Birla Sun Life 0.5692 0.4458 0.5268 0.5642 0.6073 0.5426

Dividend Yield

Plus

Birla Sun Life 0.8345 0.6220 0.8697 0.8346 0.8673 0.8056

Equity Fund

Birla Sun Life 0.6374 0.5126 0.8183 0.6842 0.7127 0.6730

Mid Cap Fund -

Plan A

Birla Sun Life 0.8291 0.6466 0.7953 0.7562 0.8944 0.7843

Top 100 Fund

81

Average Value 0.7411 0.6243 0.7897 0.7473 0.7950

INFERENCE: Table 4.5 clearly shows that on an average, all schemes had been

defensive as the average beta value is less than one. However the selected ICICI

Prudential, UTI and Birla Sun Life schemes had been more defensive than the

HDFC and Reliance schemes. ICICI Prudential Top 200 Fund – Growth (0.9264)

in 2011 and (0.9442) in 2012, ICICI Prudential Top 100 Fund – Growth (0.9132)

in 2012, Reliance Vision – Growth (0.9154) in 2011, UTI Opportunities Fund -

Growth(0.9367) in 2008, UTI Equity Fund – Growth(0.9008) in 2011 and Birla

Sun Life Advantage Fund – Growth(0.9386) in 2010 having beta value nearby

one. In average beta value as per scheme-wise Birla Sun Life Advantage Fund -

Growth is having a higher beta value than compare to the all other schemes, while

UTI Opportunities Fund - Growth scheme average beta value is lower than

average because it assimilates the changes with sensex value.

Table 4: Sharpe’s values for selected schemes of selected companies

SchemeAverage Annual Sharpe Value

Name

HDFC 2014 2013 2012 2011 2010Average

HDFC -25.9926 39.4122 - 35.7473 9.8834

Capital 11.5287 40.2063

Builder

Fund

HDFC Core - 24.1412 34.9955

-19.8033 -0.4340

& 39.2428 41.8675

Satellite

Fund

82

HDFC - 23.3151 35.6436 - 24.8026 3.5170

Equity Fund 33.6592 32.5168

HDFC Long -10.0565 34.5156

-19.5048 -1.0835

Term 31.2863 38.2081

Equity Fund

HDFC Top - 19.2109 32.7171 - 49.4100 8.6776

200 Fund 29.5528 28.3969

Average-29.054 20.54326 35.4568

-29.8536

Value 36.2391

ICICI

Prudential

ICICI - - 20.8751 5.2143

Prudential 33.5185 22.8694 52.7596 36.9140

Discovery

Fund – IP

ICICI - - 20.3687 4.9816

Prudential 27.8877 21.4198 39.8205 28.8131

Dynamic

Plan

ICICI 28.2019 -1.0032

Prudential -10.5028 27.8703

-

Service 28.0785 43.5125

Industries

Fund

ICICI - 12.5184 27.8735 - 18.3687 1.3843

Prudential 24.0502 27.7889

83

Top 100

Fund

ICICI - 15.1048 31.8309 - 22.0622 1.3573

Prudential 28.0785 34.1325

Top 200

Fund

Average -16.48304 36.03096

- 21.97532

Value 28.3227 34.2322

Reliance

Reliance - 11.3097 36.6951 - 34.8621 2.2761

Growth 33.3517 38.1344

Reliance NRI - 14.8493 31.4412 - 23.4553 1.3373

Equity Fund 31.8744 31.1847

Reliance - 14.8211 -3.1661 - 35.3278 -5.12

Regular 36.0337 36.5491

Savings Fund

- Equity

Reliance 19.4535Short Term - -7.1732 30.8027 42.4573 31.8052

0.6244

Equity Fund

Reliance - 9.1917 29.3737 - 25.4745 1.77502

Vision 19.8887 35.2761

Average -8.59972 25.02932

- 30.18498

value 24.3546 19.7374

UTI

UTI Equity - 15.5788 38.2580 - 23.0613 3.46664

84

Fund25.7993

33.7656

UTI Master - 19.5270

43.3841

- 30.3056 3.26996

Value33.8716

42.9953

Fund

UTI Mid Cap -

12.6640

40.0144 -

22.4454 -0.6832

Fund31.0946

47.4455

UTI -13.5996

34.1219 -

29.5460 4.7158

Opportunities

19.2032

34.4852

Fund

UTI Equit - 7.2916 - - 23.0076 -

y 27.9206Fund

22.1023

35.7846 11.1017

Average -13.7322

25.57156

- 25.67318Val

ue26.4142

38.8952

Birla Sun

Life

Birla Sun - - -1.8904

Life35.4712 9.0297 25.7514

32.6507 23.8885

AdvantageFund

Birla Sun - - 6.4064

Life31.4551 24.5020 40.3815

31.0397 29.6437

Dividend

Yield Plus

Birla Sun -

11.6120 28.4076-

29.0302 0.1151

Life Equity34.5900

33.8842

Fund

85

Birl Sun - - 0.0592

a

Life Mid35.9957 4.5209 33.8218

38.4562 36.4056

Cap Fund -Plan A

Birla Sun - 11.7035 27.2087 - 20.2134 0.1685Life Top 100

26.9614

31.3214

Fund

Average - 12.27362 31.1142

- 27.83628

Value32.8947

33.4704

INFERENCE: Table 4.7 reflects Sharpe’s Index value for the selected schemes

of selected company’s scheme during 2010 to 2014. In year 2010, 2012 and 2013,

the performance of all schemes is poor in the market on the basis of Sharpe’s

Index.

Only Reliance Regular Saving Fund - Equity – Growth (-3.1661) in 2012 and

Reliance Short Term Fund – Growth (-7.1732) in 2012 Schemes were having a

good performance. Reliance Short Term Equity Fund - Growth sharp value is

higher, these mean scheme risk premium is high compare to other schemes. And

portfolio value of HDFC Company is higher in year 2013. In year 2011 and 2014,

on basis of Sharpe’s Index and return, the performance of various schemes of all

five companies is not found good because overall market condition was not

favorable. HDFC Top 200 Fund – Growth (49.4100) in 2010, ICICI Prudential

Discovery Fund – IP- Growth (52.7596) in 2012 and UTI Master

Value Fund – Growth (43.3841) in 2012 performed well compare to others

selected schemes. Reliance Short Term Fund – Growth (-0.6244) in 2014 is near

on par performance as compared to the market.

86

Table 5: Treynor values for selected schemes of selected companies

Scheme Name Average Annual Treynor Value

HDFC 2014 2013 2012 2011 2010Average

HDFC Capital -29.391

767.9314 -

65.5632 -3.4271

Builder Fund47.7611

132.2609

HDFC Core & -28.296

484.5318 -

32.6437 -

Satellite Fund57.9317

140.0134 10.4946

HDFC Equity -26.070

783.5489

-97.4316

40.8622 1.2610

Fund46.7450

HDFC Long -

22.5476

114.4280

117.7012

32.9543 1.7831

Term Equity43.3128

Fund

HDFC Top 200 -

20.3260

95.9869

-82.6399

79.1970

14.5470

Fund40.1347

Average Value-

25.3264

89.2854

-66.9289

50.2440

47.1771

ICIC

I

Prudential

ICICI -27.527

8146.9374 -

41.6955 9.0453

Prudential50.9614

119.9725

Discovery Fund

- IP

ICICI -23.080

092.2834

-85.8104

34.0010 4.8867

Prudential39.1201

Dynamic Plan

87

ICICI - 11.2627 63.2274 -49.882

0 -9.3362Prudential

39.7497

131.3037

ServiceIndustries Fund

ICICI - 12.9108 61.8746-80.3199

29.3866 -1.8767

Prudential

Top

33.2357

100 Fund

ICICI - 15.6658 71.0027 -36.281

0 -2.6474Prudential

Top

35.7741

100.4128

200 Fund

Average Value-

18.0894 87.0651

-103.564 38.2492

39.7682

Reliance

Reliance -

12.8340 87.7440 - 62.1527

-0.9208

Growth

48.6105

118.7244

Reliance NRI -

16.6690 72.2437

-93.4693 39.7860 -2.0011

Equity Fund45.2352

Reliance -

339.808

-20.5224 - 67.0655 44.144

Regular

52.6016

113.0302

Savings Fund -

Equity

Reliance Short

-0.6985

-8.4034 38.2887

116.7648 40.7345

37.3372

TermEquit

y

Fund

88

Reliance - 9.8699 24.7893 - 42.5177 -

Vision 50.7142

106.0141

15.9103

Average value-39.572

74.1556 40.5086

-62.8946 50.4512

UTI

UTI Equity -

16.8139 89.3578 - 38.0054 0.9915

Fund

37.6981

101.5212

UTI Master -

24.5896

119.7503 - 59.5951 0.5139

Value Fund52.8080

148.5572

UTI

Mid Cap -

16.1486

110.8672 - 44.5924 -

Fund

52.9306

169.9508

10.2546

UTI -

14.8305 79.1862 - 48.2485

1.57142

Opportunities28.6901

105.7180

Fund

UTI Equity - 7.7362 -

27.9206-

60.9833-

Fund

32.3400

107.0232

19.7129

Average Value-

16.0237

74.24818

-126.554 50.2849

40.8934

Birla Sun Life

Birla

Sun Life - 9.6916 60.6017 - 39.9386 -8.9802

Advantage49.6834

105.4497

Fund

Birla

Sun Life -

44.7799

110.2812

- 59.7840

10.1380

Dividend

Yield

47.3757

116.7793

Plus

Birla

Sun Life -

11.6120 66.3031 - 49.9541 -5.8844

Equity Fund48.8479

108.4433

89

Birla Sun Life - 8.1344 88.7661 - 68.3603 -6.3337Mid Cap Fund -

58.4911

138.4386

Plan A

Birla Sun Life -17.0944 62.9336

-99.5120 32.9364 -4.7512

Top 100 Fund37.2087

Average Value-

18.2624 77.7771

-113.725 50.1946

48.3214

INFERENCE:Table 4.9 reveals the risk adjusted measure of Treynor

for market during year 2010 to 2014. In the year 2010, 2012 and 2013,

the performance of all the schemes is found to be poor. But Reliance

Regular Saving Fund - Equity – Growth (-20.5224) in 2010 and

Reliance Short Term Fund – Growth (-8.4034) in 2011and UTI Equity

Fund – Growth (-27.9206) in 2012 Schemes were perform better on

systematic risk adjusted return. During 2011 and 2012, none of the

schemes had underperformed. The performance of HDFC Long Term

Equity Fund

– Growth (114.4280) in 2012, ICICI Prudential Discovery Fund – IP-

Growth (146.9374) in 2012.Reliance Regular Saving Fund - Equity –

Growth (339.8087) in 2011, UTI Master Value Fund – Growth

(119.7503), UTI Mid Cap Fund – Growth (110.8672) in 2012 is more

compare to others selected schemes. In year 2010, 2012 and 2013,

90% of selected schemes give even a return equal to risk free return.

Year 2011 and 2014 was really bad as 100% of selected schemes did

not give even a return equal to risk free return because Its Treynor

Index is more than benchmark as its beta value is negative. Here we

can see that Reliance Short Term Equity Fund - Growth Treynor value

is high compare to other companies schemes.

90

RECOMMENDATIONS

The SIP should be promoted in retail investors

More branches in small areas can enhance the customer base

There should be minimum guaranteed returns.

Even for the cash-rich, SIPs reduces the chance of investing at the

wrong time and losing their sleep over a wrong investment decision.

However, the true benefit of an SIP is derived by investing at lower

levels. Other benefits include:

1. Discipline: The cardinal rule of building your corpus is to stay

focused, invest regularly and maintain discipline in your investing

pattern. A few hundreds set aside every month will not affect your

monthly disposable income. You will also find it easier to part with a

few hundreds every month, rather than set aside a large sum for

investing in one shot.

2. Power of compounding: Investment gurus always recommend that

one must start investing early in life. One of the main reasons for doing

that is the benefit of compounding. Let's explain this with an example.

Person A started investing Rs 10,000 per year at the age of 30. Person

B started investing the same amount every year at the age of 35. When

they attained the age of 60 respectively, A had built a corpus of Rs

12.23 lakh while person B's corpus was only Rs 7.89 lakh. For this

example, a rate of return of 8% compounded has been assumed. So the

difference of Rs 50,000 in amount invested made a difference of more

than Rs 4 lakh to their end-corpus. That difference is due to the effect

of compounding. The longer the (compounding) period, the higher the

returns.

91

Now, instead of investing Rs 10,000 each year, suppose A invested Rs

50,000 after every five years, starting at the age of 35. The total amount

invested, thus remains the same -- Rs 3 lakh. However, when he is 60,

his corpus will be Rs 10.43 lakh. Again, he loses the advantage of

compounding in the early years.

3. Rupee cost averaging: This is especially true for investments in

equities. When you invest the same amount in a fund at regular intervals

over time, you buy more units when the price is lower. Thus, you would

reduce your average cost per share (or per unit) over time. This strategy

is called 'rupee cost averaging'. With a sensible and long-term

investment approach, rupee cost averaging can smoothen out the

market's ups and downs and reduce the risks of investing in volatile

markets.

People who invest through SIPs capture the lows as well as the highs of

the market. In an SIP, your average cost of investing comes down since

you will go through all phases of the market, bull or bear.

4. Convenience: This is a very convenient way of investing. You have

to just submit cheques along with the filled up enrolment form. The

mutual fund will deposit the cheques on the requested date and credit

the units to one's account and will send the confirmation for the same.

5. Other advantages

· There are no entry or exit loads on SIP investments.

· Capital gains, wherever applicable, are taxed on a first-in, first-out basis.

92

CONCLUSION

Overall, all selected mutual fund companies have positive return during

2010 to 2014. HDFC and Reliance mutual fund have performed well as

compared to the Sensex return. ICICI prudential and UTI Mutual fund

has lower level of risk compare to HDFC and Reliance mutual fund.

Beta is less than one to all selected mutual fund companies which

means the funds are less volatile than the Index.

Funds with beta close to one, means the fund’s performance closely

match the benchmark index. Sharpe’s Index of HDFC Mutual fund is

higher than the other, so it shows good performance compared to other

funds. Treynor’s Index result revealed that the

HDFC and Reliance mutual fund offers better return in comparison to

ICICI Prudential, UTI, and Birla Sun Life Mutual funds for the same

level of risk exposure.

93

BIBLIOGRAPHY

Reilly/Brown, Investment Analysis and Portfolio Management. www.valueresearchonline.com www.moneycontrol.com www.nseindia.com www.bseindia.com www.HDFCmutual.com.

94