CHAPTER- I

1:1 General Introduction

The term investment can be explained as if a person have surplus fund available then he can either save that money or opt for an investment .i.e. when a person has more money than required for current consumption then that individual is likely to be an investor whether he or she invests in a bank deposits for earning interest or in stocks and shares, or purchase properly ,or gold or antique or a price of art, essentially the individual is investing his surplus in procuring an asset, such that the present sacrifice will procure some future benefits. 1.1.1 Features of Investments: Any decision or planning on investment or its management should the following factors. Safety Liquidity Appreciation Legality Transferability Risk factor

1.1.2 Some of the Major Investment Options: 1. Equity shares 2. Fixed income securities 3. Money market instruments 4. Mutual fund 5. Real estate 6. Non marketable financial asset 7. Precious object 8. Financial derivatives

In the minds of every common man investing in stock market is a very risky affair. According to basis financial theory, which states that an investor can reduce his total risk by holding a portfolio of assets instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.

According to basis financial theory, which states that an investor can reduce his total risk by holding a portfolio of assets instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.

Present study focuses on impacts affected to Indian MFs because of Recent Financial crisis. Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision making process. Since the competition in the market is very high, it is the responsibility of the fund manager to analyze investor behavior and understand their needs and expectations to gear up the performance to meet investor requirements and also to fight competition.

A very important risk involved in mutual fund investments is the market risk. When the market is in doldrums, most of the equity funds will also experience a downturn. However, the company specific risks are largely eliminated due to professional fund management.This study reveals facts about Indian Mutual Fund Industry in Brief. Mutual Fund is an instrument of investing money. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. 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 appreciation
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realized is 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.

A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. 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. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification.

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

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.

1.2 MUTUAL FUNDS

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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme 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 portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. You can buy mutual fund shares directly from the mutual fund company or from a stockbroker. Either way buying and redeeming is relatively easy. The following picture shows the operational flow of mutual funds

Figure 1.1

MUTUAL FUND

OPERATIONAL FLOW CHART

1.2.1 Features of Mutual Fund Investments

1. Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 2.Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. 3. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. 4. Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. 5. Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

6. Liquidity In open-end schemes, the investor gets the money back promptly at net asset Value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. 7. Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. 8. Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. 9.Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. 10. Choice of Schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

1.2.2 Drawbacks of Mutual Funds:

Mutual funds have their drawbacks and may not be for everyone
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1) No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

2) Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

3) Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made. 4) Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers

1.2.3 Types of Mutual Fund Schemes: Mutual fund schemes may be classified on the
basis of its structure and its investment objective. By structure: Open ended. Close ended. Interval schemes. By investment objectives: Growth schemes. Income schemes. Balanced schemes. Money market schemes.

Other schemes: Tax saving schemes. Special schemes Index schemes. Sector specific schemes.

By Structure
1) Open-end Funds An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. 2) Closed-end Funds A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they 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
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through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. 3) Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective
1) Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.

2) Income Funds The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. 3) Balanced Funds The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV
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of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. 4) Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. OTHER SCHEMES 1) Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. 2) Special Schemes a) Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc. b) Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.

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c) Sectoral Schemes Sectoral Funds are those which invest exclusively in a specified sector. This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

Mutual Fund Structure Figure 1.2.1

Sponsor Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or

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shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund. 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.

Trustee Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alias ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner.

Asset Management Company (AMC) The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 crore at all times. Registrar and Transfer Agent The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form, redemption requests and dispatches

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account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor record.

1.2.2 RIGHTS OF A MUTUAL FUND UNIT HOLDER: A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is entitled to: 1. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme. 2. Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund. 3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase. 4. Vote in accordance with the Regulations to:-

Approve or disapprove any change in the fundamental investment policies of the scheme, which are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit holder has a right to redeem the investment. a. Change the Asset Management Company. b. Wind up the schemes.

1.2.3 TAX BENEFITS OF MUTUAL FUNDS: Section 94(6) of the Income Tax Act 1961:- Section 94(6) of the Income Tax Act 1961 now provides that any person who buys or acquires any securities or unit within a period of three months prior to the record date and such person sells or transfers such securities
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or unit within a period of three months after such date and the dividend or income on such securities or unit received or receivable by such person is exempt, then, the loss, if any, arising to him on account of such purchase and sale of securities or unit, to the extent such loss does not exceed the amount of dividend or income received or receivable on such securities or unit, shall be ignored for the purposes of computing his income chargeable to tax. Section 10(33) of the Income Tax Act 1961 The dividend received by the investors from the scheme will be exempt from income tax for all categories of investors under Section 10(33) of the Income Tax Act, 1961. The scheme will pay a distribution tax currently @10% plus surcharge if the portfolio holds less than 50 percent debt securities on an average during the last one year period. Section 88 of the Income Tax Act 1961 Specified units of mutual fund schemes qualify for rebate under Section 88 of the Income Tax Act, 1961, subscription to the Units of the Scheme by Individuals and Hindu Undivided Families, not exceeding Rupees ten thousand would be eligible to a deduction, from income-tax, of an amount equal to 20% of the amount so subscribed. In the case of subscription by an individual, whose income is derived from the exercise of his profession as an author, playwright, artist, musician, actor or sportsman (including an athlete), the deduction admissible would be at the rate of 25%. Tax Deduction at Source: There will not be any Tax Deduction at Source on payment to resident unit-holders towards redemption or dividends. Wealth tax benefits: Mutual Fund units are exempt from Wealth Tax. Tax Deduction at Source (TDS): Redemptions/Exchanges/Switches by non-residents, OCBs & FIIs will be subjected to tax deduction at source at the rates in force and certificates for tax deducted will be issued.

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To Charitable Trusts: Investment in the units of the scheme is an eligible mode of investment under Section 11(5) of the Income Tax Act read with Income Tax Rule 17 C. To the Fund: Open Ended Mutual Funds are exempt from income tax under Section 10 [23D] of the Act. CHAPTER - 2: RESEARCH DESIGN

2.1-Title of the Study:

A study on Impact of Financial Crisis on Indian Mutual Funds.

2.2- Statement of the Problem

Present study focuses on impacts affected to Indian MFs because of Recent Financial crisis. Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision making process. Since the competition in the market is very high, it is the responsibility of the fund manager to analyze investor behavior and understand their needs and expectations to gear up the performance to meet investor requirements and also to fight competition. Because of Global Economic Recession almost all Sectors in the Country are get affected. Indian Financial market faced a slowdown. People temporarily stopped investing, they lost the trustworthiness of Indian market. As compared to other world markets Indian markets were less affected. Impact were affected by Indian Mutual funds also. A very important risk involved in mutual fund investments is the market risk. When the market is in doldrums, most of the equity funds will also experience a downturn. However, the company specific risks are largely eliminated due to professional fund management .This study reveals facts about Indian Mutual Fund Industry in Brief.

2.3 Objectives of the study

To Study the Impact of Financial Crisis in Indian Mutual Funds

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 To study performance of Indian MFs during Recession period. To study the general Trend of Mutual Funds after recession Period. To identify the preferred savings avenue among the investors in this juncture To assess Mutual Fund selection behavior among the investors with special consideration with global financial crisis.

2.4 Methodology
Methodology here refers to the method as to how the researcher has done his efforts towards the activity of reviewing the literature. For this study Secondary data are readily available, because they were collected for some other purpose and which can also be used to solve the present problem. They are the cheapest and the easiest means of access to information.

2.4.1 Sources for Data Collection

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

Internet Periodicals News Papers Journals Books related to mutual funds etc.

2:4.2 Sampling

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For the purpose of study and evaluation Various Mutual Fund schemes from various sectors were selected randomly in order to analyze the effect of impact of recession in Indian Mutual Funds. 10 Equity based Mutual Fund schemes were selected randomly.

2.4.3 Method of Analysis

Standard Deviation, Beta Jenson Measure, Treyner Measure & Sharpe Measure

2.5 OPERATIONAL DEFINITION OF CONCEPTS

2.5.1 Net Asset Value or NAV NAV is the total asset value (net of expenses) per unit of the fund and is calculated by the Asset Management Company (AMC) at the end of every business day. Net asset value on a particular date reflects the realizable value that the investor will get for each unit that he his holding if the scheme is liquidated on that date. Net asset Value of an investment company is the companys 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 companys NAV will be $90 million one day, $100 million the next, and $80 million. For Calculating NAV in Years NAV Closing Value NAV Opening Value = NAV Opening Value *100

Entry Load It is the load charged by the fund 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.

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Exit Load 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.

2.5.2 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:

p =

n Rp2

n2

( Rp)2

1/2

Where: p : Risk of the Fund. Rp : Return of the fund. Standard Deviation (Risk) of the benchmark index:

1/2 n Rm2

( Rm)2

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m = n2

Where Rm Index Return (Market Return)

m Risk of the Index 2.5.3 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:

p =

n
[(Rp - ARp) (Rm ARm ]

Where: p : Beta of the fund. Rp: Return of the fund. ARp: Average return of the Mutual Fund Scheme. ARm: Average return of the benchmark index.

n
i=1

[Rm ARm]2

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2.6 Scope of the study:

For the Purpose of this study I considered 10 different Mutual Fund Schemes All those Mutual Funds were Equity Mutual Funds

Only Indian Mutual Funds have Considered

NAV for a period of Five years was considered

2:7 Limitations of the Study

Since the study had to be conducted in a short span of time, the accuracy may be affected. The results obtained during the period cannot be taken as a conclusive decision for Conclusions were depends upon facts from secondary data. Only 10 Equity funds were compared and analyzed. Only funds, which are more than five years old, have been considered. Only open-ended funds have been considered. The NAV values and the Benchmark Index values obtained may not have been entirely accurate. making a choice for investment

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2.8 Chapter Scheme

CHAPTER- 1: INTRODUCTION Introduction of the research topic Subject background of the topic CHAPTER- 2: RESEARCH DESIGN Brief Introduction Statement of the Problem Review of Literature Objective of the Study Methodology Sampling Tools for data collection Need for the Study Limitation of the Study CHAPTER- 3: INDUSTRY PROFILE CHAPTER- 4: ANALYSIS AND INTERPRETATION OF DATA
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CHAPTER- 5: SUMMARY AND CONCLUSION Findings Conclusion from the study Suggestions Bibliography Annexure

CHAPTER 3:- PROFILES 3.1 History of the Indian Mutual Fund Industry
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of nonUTI, 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
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(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. 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
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the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. Financial Services Industry: Financial services organizations are striving to achieve increasingly ambitious profit and growth targets against a background of heightened risk, regulation and market pressures. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States.

Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises.

Customer needs and expectations are evolving in the face of increasing personal wealth, more private funding of pensions and healthcare and the desire for ever more accessible and personalised financial products and services. In turn, intense competition has squeezed industry margins and forced organisations to cut costs while still seeking to enhance the quality of client choice and service. The battle for talent is also heating up as company seek to enhance innovation, customer loyalty and investment returns.

The corollary of this market evolution is increasing risk as products become more complex, organisations more diffuse and the business environment ever more uncertain. Regulation is also tightening in the wake of public and government pressure for improved governance, transparency and accountability. In this environment, the winners will be companies that can turn the challenges into opportunities to build stronger and more enduring customer relationships; sharpen process efficiency; unlock talent and creativity; use improved risk
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management processes to deliver more sustainable returns; and use new regulatory demands as a catalyst for strengthening the business and enhancing market confidence. Organisations will also need to identify and concentrate on core competencies where they can exert maximum competitive advantage, be this particular product, service, process or geographical territory. For some this will require a strategic re-orientation towards becoming a specialist niche provider. Even larger groups will need to differentiate their offering and by implication the associated brand. In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient market hypothesis. Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity. Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. In finance, financial markets facilitate:

The raising of capital (in the capital markets) The transfer of risk (in the derivatives markets) International trade (in the currency markets)

and are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends.

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Definition of Financial Market: The term financial markets can be a cause of much confusion. Financial markets could mean: 1. Organizations that facilitate the trade in financial securities. i.e. Stock Exchanges facilitate the trade in stocks, bonds and warrants. 2. The coming together of buyers and sellers to trade financial securities. i.e. stocks and shares are traded between buyers and sellers in a number of ways including: the use of stock exchanges; directly between buyers and sellers etc. In academia, students of finance will use both meanings but students of economics will only use the second meaning.Financial markets can be domestic or they can be international market. Types of Financial Markets: The financial markets can be divided into different subtypes: Capital Market, which is the market for securities, where companies and governments can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission, oversee the capital markets in their designated countries to ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded. Capital Market which consists of: 1. Stock Markets, which provide financing through the issue of shares or common stock, and enable the subsequent trading thereof.

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2. Bond Markets, which provide financing through the issue of bonds, and enable the subsequent trading thereof.

Commodity Markets, which facilitate the trading of commodities. Money Markets, which provide short term debt financing and investment. Derivatives Markets, which provide instruments for the management of financial risk. Futures Markets, which provide standardized forward contracts for trading products at some future date; see also forward market. Insurance Markets, which facilitate the redistribution of various risks. Foreign Exchange Markets, which facilitate the trading of foreign exchange.

The capital markets consist of primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets. Secondary markets allow investors to sell securities that they hold or buy existing securities. Raising Capital: To understand financial markets, let us look at what they are used for, i.e. what is their purpose? Without financial markets, borrowers would have difficulty in finding lenders themselves. Intermediaries such as banks help in this process. Banks take deposits from those who have money to save. They can then lend money from this pool of deposited money to those who seek to borrow. Banks popularly lend money in the form of loans and mortgages.

More complex transactions than a simple bank deposit require markets where lenders and their agents can meet borrowers and their agents, and where existing borrowing or lending commitments can be sold on to other parties. A good example of a financial market is a stock exchange. A company can raise money by selling shares to investors and its existing shares can be bought or sold.

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The following table illustrates where financial markets fit in the relationship between lenders and borrowers:

Figure 3.1

Relationship between lenders and borrowers

Lenders Financial Intermediaries Banks Individuals Companies InsuranceCompanies PensionFunds Mutual Funds Financial Markets Borrowers Interbank StockExchange MoneyMarket BondMarket Foreign Exchange Individuals Companies CentralGovernment Municipalities Public Corporations

Analysis of Financial Markets: Much effort has gone into the study of financial markets and how prices vary with time. Charles Dow, one of the founders of Dow Jones & Company and The Wall Street Journal, enunciated a set of ideas on the subject which are now called Dow Theory. This is the basis of the so-called technical analysis method of attempting to predict future changes. One of the tenets of "technical analysis" is that market trends give an indication of the future, at least in the short term. The claims of the technical analysts are disputed by many academics, who claim that the evidence points rather to the random walk hypothesis, which states that the next change is not
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correlated to the last change.The scale of changes in price over some unit of time is called the volatility. It was discovered by Benoit Mandelbrot that changes in prices do not follow a Gaussian distribution, but are rather modeled better by Levy stable distributions. The scale of change, or volatility, depends on the length of the time unit to a power a bit more than 1/2. Large changes up or down are more likely than what one would calculate using a Gaussian distribution with an estimated standard deviation.

The graph indicates the growth of assets over the years.

Figure 3.2

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3.1.2 Global Economic Recession

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A recession is a general slowdown in economic activity in a country over a sustained period of time, or a business cycle contraction. A recession is when GDP growth slows, businesses stop expanding, employment falls, unemployment rises, and housing prices decline. During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes and business profits all fall during recessions.Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation. The technical definition of an economic recession is when GDP growth is negative for two quarters or more. A recession is usually preceded by several quarters of slowing but positive growth. It usually feels like a recession before it has officially started. Therefore, a recession is also defined by a period when economic growth slows, businesses stop expanding, employment falls, unemployment rises, and housing prices decline. Economic recessions are caused by a decline in GDP growth, which is itself caused by a slowdown in manufacturing orders, falling housing prices and sales, and a drop-off in business investment. The result of this slowdown is falling employment, and rising unemployment, which causes a slowdown in retail sales. This creates a downward spiral in manufacturing and increased layoffs. A stock market decline, known as a bear market, can either be a result of a recession but is often a cause itself.Each recession has its own specific causes, but all of them are usually preceded by a period of irrational exuberance. This is also known as a business cycle. Many experts state that it is only an economic recession when GDP growth is negative for two consecutive quarters or more. However, for all practical purposes a recession starts when there are several quarters of slowing but still positive growth. Often a quarter of negative growth will occur, following by positive growth for several quarters, and then another quarter of negative growth.

One of the causes of the current recession was that the Fed was also slow to raise interest rates when the economy started to boom again in 2004. Low interest rates in 2004 and 2005 helped
31

created the housing bubble. Irrational exuberance set in again as many investors took advantage of low rates to buy homes just to resell. Others bought homes they couldn't afford thanks to interest-only loans. The crisis began one year ago in the US sub prime home-loan market and has spread into a global credit squeeze, dragging down world economic growth. Sub-prime lending are loans made to borrowers who are perceived to have high credit risk. While the US remains the focal point, financial institutions in other countries have also been affected, reflecting unreliable global financial conditions. The crisis happened due to weakness in risk management systems and prudential supervision. The IMF warned that the global economy was being hit by a serious slowdown and its report indicated that total losses related to US risky loans could reach $1.4 trillions. It predicted dire consequences for banks and financial systems if financial regulators and banks did not act quickly. About the only good thing about a recession is that it will cure inflation. The balancing act the Federal Reserve must pursue is to slow economic growth enough to prevent inflation without triggering a recession. Currently, it must do this without the help of fiscal policy, which is generally trying to stimulate the economy as much as possible through lowering taxes, spending on social programs and ignoring current account deficits. Observation of economic recession: The calculation of a country's gross domestic product or GDP is usually for two or more quarters of a year, successively. Many economists judge recessions to better understand the causes and find effective solutions to them. A period of recession is a significant decline in economic activity. The decline could be observed over a period of a few months. The abstract decline that affects real people is sensed via a fall in the GDP, actual income on record, employment data, production and sales etc. A recession is measured from the time of initial decline, which is mostly just after the economy reaches a peak of activity till the time the resultant trough shows up on the graph. Most recessions are brief.

Figure 3.3

32

33

Table 3.1

34

Wider implications: A recession documents simultaneous decline in employment, profit and investment, and an upscale inflation. During the economic collapse, the periods of deflation and alternative inflation are part of a process studied by economists as stagflation. A severe economic recession is a devastating breakdown of an economy. Those economies that are market-oriented are usually characterized by economic driving cycles and there it is debated whether or not, in such economies, government intervention smoothes, exaggerates or creates it. A period of recession witnesses a stock market drop at the onset. Sometimes, nearly half of the stock market declines are recorded after the onset of the period. The period of economic recession can also be sensed via the unemployment rate and subsequent claims, a housing recession and the use of the indicator index.

Asia and the financial crisis

Countries in Asia are increasingly worried about what is happening in the West. A number of nations urged the US to provide meaningful assurances and bailout packages for the US economy, as that would have a knock-on effect of reassuring foreign investors and helping ease concerns in other parts of the world. Many believed Asia was sufficiently decoupled from the Western financial systems. Asia has not had a subprime mortgage crisis like many nations in the West have, for example. Many Asian nations have witnessed rapid growth and wealth creation in recent years. This lead to enormous investment in Western countries. In addition, there was increased foreign investment in Asia, mostly from the West. However, this crisis has shown that in an increasingly inter-connected world means there are always knock-on effects and as a result, Asia has had more exposure to problems stemming from the West. Many Asian countries have seen their stock markets suffer and currency values going on a downward trend. Asian products and services are also global, and a slowdown in wealthy countries means increased chances of a slowdown in Asia and the risk of job losses and associated problems such as social unrest.

35

India and China are the among the worlds fastest growing nations and after Japan, are the largest economies in Asia. From 2007 to 2008 Indias economy grew by a whopping 9%. Much of it is fueled by its domestic market. However, even that has not been enough to shield it from the effect of the global financial crisis, and it is expected that in data will show that by March 2009 that Indias growth will have slowed quickly to 7.1%. Although this is a very impressive growth figure even in good times, the speed at which it has droppedthe sharp slowdownis what is concerning. China, similarly has also experienced a sharp slowdown and its growth is expected to slow down to 8% (still a good growth figure in normal conditions). However, China also has a growing crisis of unrest over job losses. Both have poured billions into recovery packages. Japan, which has suffered its own crisis in the 1990s also faces trouble now. While their banks seem more secure compared to their Western counterparts, it is very dependent on exports. Japan is so exposed that in January alone, Japans industrial production fell by 10%, the biggest monthly drop since their records began. Towards the end of October 2008, a major meeting between the EU and a number of Asian nations resulted in a joint statement pledging a coordinated response to the global financial crisis. However, as Inter Press Service (IPS) reported, this coordinated response is dependent on the entry of Asias emerging economies into global policy-setting institutions. This is very significant because Asian and other developing countries have often been treated as second-class citizens when it comes to international trade, finance and investment talks. This time, however, Asian countries are potentially trying to flex their muscle, maybe because they see an opportunity in this crisis, which at the moment mostly affects the rich West. Asian leaders had called for effective and comprehensive reform of the international monetary and financial systems. For example, as IPS also noted in the same report, one of the Chinese state-controlled media outlets demanded that We want the U.S. to give up its veto power at the International Monetary Fund and European countries to give up some more of their voting rights in order to make room for emerging and developing countries. They also added, And we want

36

America to lower its protectionist barriers allowing an easier access to its markets for Chinese and other developing countries goods. Whether this will happen is hard to know. Similar calls by other developing countries and civil society around the world, for years, have come to no avail. This time however, the financial crisis could mean the US is less influential than before. A side-story of the emerging Chinese superpower versus the declining US superpower will be interesting to watch.It would of course be too early to see China somehow using this opportunity to decimate the US, economically, as it has its own internal issues. While the Western mainstream media has often hyped up a threat posed by a growing China, the World Banks chief economist (Lin Yifu, a well respected Chinese academic) notes Relatively speaking, China is a country with scarce capital funds and it is hardly the time for us to export these funds and pour them into a country profuse with capital like the U.S. Asian nations are mulling over the creation of an alternative Asia foreign exchange fund, but market shocks are making some Asian countries nervous and it is not clear if all will be able to commit. What seems to be emerging is that Asian nations may have an opportunity to demand more fairness in the international arena, which would be good for other developing regions, too. The subprime mortgage crisis reached a critical stage during the first week of September 2008, characterized by severely contracted liquidity in the global credit markets and insolvency threats to investment banks and other institutions. Reserve balances from banks in the Federal Reserve System began increasing over required levels of about $10 billion at the beginning of September 2008, just after the Democratic and Republican national conventions, and just before the stock market crash and presidential debates. Beginning October 6, Section 128 of the Emergency Economic Stabilization Act of 2008 allowed the Federal Reserve System to pay interest on the excess balances, producing further pressure on international credit markets. Excess on reserve balances topped $870 billion by the end of the second week of January 2009. In comparison, the increase in reserve balances reached only $65 billion after September 11, 2001 before falling back to normal levels within a month.

37

The root cause of the global financial crisis is deeply embedded in policy deficiencies in the international financial system and in the unsustainable fundamentals of the world economy. The prospect of a systemic world financial breakdown and, consequently, a long lasting economic slowdown seems real. Now the complete financial deregulation of U.S. and Europe stands discredited. The British Government has already bought shares in British banks and the US Government has decided to buy. This will enable the Government to have a place on the boards and to effectively control the financial institutions.

India and Recession

The contagion of the crisis has spread to India through various mechanisms by impacting financial and real sectors of the economy, as well as affecting the business confidence. Indias financial markets - equity markets, money markets, forex markets and credit markets came under pressure from a number of directions. As a consequence of the global liquidity squeeze, Indian banks and corporate found their overseas financing drying up, forcing corporates to shift their credit demand to the domestic banking sector. The corporates withdrew their investments from domestic money market mutual funds putting redemption pressure on the mutual funds and on non-banking financial companies where the mutual funds companies had invested a significant portion of their funds. The substitution of domestic financing for overseas financing affected money markets and credit markets. The forex market also came under pressure because of reversal of capital flows as part of the global de-leveraging process. Simultaneously, corporates were converting the funds raised locally into foreign currency to meet their external obligations. These factors put downward pressure on the rupee. Now with regard to the impact on the real sector, the transmission of the crisis has been straight through the slump in demand for exports. The United States, European Union and the Middle East, which account for three quarters of Indias trade in goods and services, are in a downturn. Service export growth is also likely to be affected adversely, as financial services firms traditionally large users of outsourcing services are restructured. Remittances from migrant workers also will be downward, as the Middle East
38

adjusts to lower crude prices and advanced economies go into a recession. The crisis also spread through transmission of business sentiments - the-2- confidence levels. The ongoing turbulence in the global markets prompted bankers to be risk averse and cautious about lending. The Government and the RBI have responded to the unusual circumstances by way of announcing fiscal and monetary stimulus packages. There is evidence of domestic economic activity slowing down. Real GDP growth has moderated in the first half of 2008/09. The services sector too, which has been our prime growth engine for the last five years, is on the decline, mainly in construction, transport and communication, trade, and hotels. For the first time in seven years, exports have declined in absolute terms during October-December 2008. Recent data indicate that the demand for bank credit is slackening despite comfortable liquidity in the system. Higher input costs and dampened demand have dented corporate margins. The index of industrial production has shown negative growth and investment demand has decelerated. All these factors suggest that growth moderation may be steeper and more extended than earlier projected. In addressing the crisis, India has several advantages also. Most notably, the headline inflation, as measured by the wholesale price index, has fallen sharply, and recent trends suggest a faster-than-expected reduction in inflation. The slowing domestic demand has contributed to the disinflation. The decline in inflation will reduce input costs for corporates. Furthermore, the decline in global crude prices and naphtha prices will reduce the size of subsidies to oil and fertilizer companies, thus helping to earmark more funds for infrastructure spending. It is also expected that imports will shrink more than exports keeping the current account deficit modest. There are also several structural factors to our advantage. First, notwithstanding the severity of the adverse shocks, Indias financial markets have shown admirable resilience. The banking system remains sound, healthy, well capitalized and prudently regulated. Second, our comfortable reserve position provides confidence to overseas investors. Third, since a large majority of Indians do not participate in equity and asset markets, the negative impact of the wealth loss effect that is plaguing the advanced economies will be quite moderate. Consequently, consumption demand will prop up in course of time. Fourth, because of
39

Indias mandated priority sector lending, institutional credit for agriculture will be unaffected. The farm loan waiver package implemented by the Government will further insulate the agriculture sector from the crisis. Finally, over the years, India has built an extensive network of social safety-net programmes, including the flagship rural employment guarantee programme, which will protect the poor from the extreme impact of the global crisis. Over the last five years, India clocked an unprecedented nine per cent growth rate, driven largely by domestic consumption, investment and foreign trade. At the heart of Indias growth were a growing entrepreneurial spirit, rise in productivity and increase in savings. These fundamental strengths continue to be in place. Nevertheless, the global crisis will dent Indias growth trajectory as investments and exports will decline. However, once the global economy begins to recover, Indias turn around will be swifter, backed by strong fundamentals. Meanwhile, the challenge for the Government and the RBI is to manage the crisis, taking care of the poor and the vulnerable sections of the population.

Figure 3.4

BSE sensex Changes During Recession Period

40

3.2 COMPANY PROFILES

COMPANIES DESCRIPTION:
BIRLA SUNLIFE MUTUAL FUNDS

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market and Sun Life's global experience. Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading Mutual Funds managing assets of a large investor base. The fund offers a range of investment options, which include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds. BSLAMC follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the companys management, sustainability of its business model and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. Birla Sun Life AMC strives to provide transparent, ethical and research-based investments and wealth management services. Scheme: Birla Sun life Frontline Equity

Objective: Birla Sun Life Frontline Equity Fund is an open-ended diversified equity fund, which

invests in handpicked frontline stocks (i.e. stocks which have the potential of providing superior growth opportunities) such that it is representative of all leading sectors of its chosen benchmark. The scheme targets the same sectoral weights (+/- 5%) within its portfolio as the benchmark, the BSE 200. However, the choice of stocks is not limited to the benchmark, thus providing a wider universe of investible stocks.

41

Investing across sectors ensures diversification and at the same time investing in frontline stocks provides for a possibility of higher returns. Birla Sun Life Frontline Equity Fund is ideal for investors looking at investing in quality stocks across the leading sectors of the economy. 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.. TABLE 3.1 Description of the Birla sun life frontline Equity

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: secondary data

Birla Sun life Mutual Fund Equity Diversified August 2002 Mahesh Patil Rs.5000 Rs.1000 --Forward Open End BSE 200

42

 DSP Merrill Lynch Mutual Fund DSP Merrill Lynch Limited (DSPML) - DSPML is a leading financial service provider in India. It is a culmination of a long standing relationship between DSP Financial Consultants Limited (DSP), and Merrill Lynch and Co. (ML), the leading international capital raising, financial management and advisory company.In India, DSPML is the leading underwriter and broker for debt and equity securities and a leading advisor to corporations and institutions. For private customers, our platform of products and services provides access to a robust range of investing and wealth building tools with the personal guidance of financial consultants. DSPML is also among the first firms to set up a full-fledged research team in India. The Company is among the major players in the debt and equity markets and is also a primary dealer of Government Securities. DSP Merrill Lynch Limited is a full service investment banking and brokerage firm with a leading position in helping clients to raise capital, mergers and acquisitions, securities research, sales and trading and investment advisory activities. DSP Merrill Lynch Capital Limited is a leading NBFC registered with the Reserve Bank of India. It offers solutions to clients in terms of securities based loans, IPO financing, secured financing backed by receivables, real estate and other collaterals and also structured products designed to meet the investment needs of clients. It also makes principal investments in partnership with clients. DSP Merrill Lynch Securities Trading Company Limited is an NBFC registered with the Reserve Bank of India and carries on the activity of a primary dealer as permitted by the Reserve Bank of India. It is one of the leading players in the sovereign, corporate bond and derivatives markets.

43

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. TABLE 3.2 Description about the fund:
Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: secondary data DSP Merillynch Mutual Fund Equity Diversified August 2000 Anup Maheshwari Rs.5000 Rs.1000 Rs.1000 Rs.500 Forward Open End S & P CNX Nifty

ICICI Mutual Fund

44

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank - one of India's foremost financial services companies-and Prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%.Started their operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide team comprises of 2099 branches (inclusive of 1,116 micro-offices), over 276,000 advisors; and 18 bancassurance partners.

ICICI Prudential is the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As we grow our distribution, product range and customer base, we continue to tirelessly uphold our commitment to deliver world-class financial solutions to customers all over India.

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.

TABLE 3.3

45

Description of the ICIC Prudential Growth

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: secondary data

ICICI Mutual Fund Equity Diversified June 1998 Kaushik Roychaudhary Rs.5000 Rs.500 Rs.500 Rs.5000 Forward Open End S & P CNX Nifty

HDFC Mutual Fund HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
46

The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC Capital Builder Fund (HCBF), HDFC TaxSaver (HTS), HDFC Prudence Fund (HPF), HDFC High Interest Fund (HHIF), HDFC Cash Management Fund (HCMF), HDFC MF Monthly Income Plan (HMIP), HDFC Core & Satellite Fund (HCSF), HDFC Multiple Yield Fund (HMYF), HDFC Premier Multi-Cap Fund (HPMCF), HDFC Multiple Yield Fund . Plan 2005 (HMYF-Plan 2005), HDFC Quarterly Interval Fund (HQIF) and HDFC Arbitrage Fund (HAF). The AMC is also managing 11 closed ended Schemes of the HDFC Mutual Fund viz. HDFC Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Infrastructure Fund, HDFC Fixed Maturity Plans, HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans Series III, HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V, HDFC Fixed Maturity Plans - Series VI, HFDC Fixed Maturity Plans - Series VII and HFDC Fixed Maturity Plans - Series VIII.

The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is valid from January 1, 2007 to December 31, 2009.

Scheme : Equity Growth

Objective: The scheme seeks to provide long-term capital appreciation by predominantly investing in high growth companies. TABLE 3.4 47

Description of the HDFC Equity Growth fund

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: secondary data HDFC Mutual Fund Equity Diversified December 1994 Prashanth Jain Rs.5000 Rs.1000 Rs.500 Rs.1000 Forward Open End S & P CNX 500

48

 J M Mutual Fund JM Financial Asset Management Private Limited (AMC), Sponsored by J.M. Financial & Investment Consultancy Services Pvt. Ltd. and JM Financial Ltd., JM Financial Asset Management Pvt. Ltd. (formerly known as J.M. Capital Management Pvt. Ltd.) is registered under the Companies Act, 1956 and was incorporated on June 9, 1994.

JM Financial Trustee Company Pvt. Ltd. has entered into an Investment Management Agreement (IMA) on September 1, 1994 appointing JM Financial Asset Management Pvt. Ltd. as the AMC for the Fund. The AMC has to submit quarterly reports and/or such other reports at such intervals as may be prescribed by the Trustee or SEBI on the functioning of the Fund to the Trustee.

The AMC can be removed by the Trustee or by 75% of the Unit holders of the particular Fund, subject to the approval of SEBI. The AMC will manage the Scheme(s) of the Fund, in accordance with the provisions of Investment Management Agreement, the Trust Deed, the Regulations and the investment objectives of the Schemes.

Scheme: Equity Growth

Objective: The scheme seeks long-term capital growth and appreciation through investment primarily in equities.

49

TABLE 3.5

Description of the JM Equity Growth

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: Secondary data J M Mutual Fund Equity Diversified December 1994 Amandeep Chopra Rs.5000 -Rs.0 -Forward Open End Sensex

50

 Kotak Mutual Funds

Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates.

The group has a net worth of around Rs.3,200 crore and employs around 10,800 employees across its various businesses servicing around 2.6 million customer accounts through a distribution network of branches, franchisees, representative offices and satellite offices across 300 cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore.

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. 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.

51

TABLE 3.6

Description of the Kotak 30 Growth

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: Secondary data Kotak Mutual Funds Equity Diversified December 1998 Krishna Sanghvi Rs.5000 Rs.1000 Rs.1000 Rs.5000 Forward Open End S&P CNX Nifty

52

 Reliance Mutual Funds

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Average Assets Under Management (AAUM) of Rs. 88,388 Crs (AAUM for 30th Apr 09 ) and an investor base of over 71.53 Lacs. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a wellrounded portfolio of products to meet varying investor requirements and has presence in 118 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders." Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.

Scheme: Reliance Equity 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.

53

TABLE 3.7 Description of the Reliance Growth

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: Secondary data

Reliance Mutual Funds

Equity Diversified October 1995 V Ramanan Rs.5000 Rs.1000 Rs.0 Rs.5000 Forward Open End BSE 100

Sundaram Mutual Funds

54

The Company was incorporated in 1954, with the object of financing the purchase of commercial vehicles and passenger cars. The company was started with a paid-up capital of Rs.2.00 Lakhs and later went public in 1972. The Company's shares were listed in the Madras Stock Exchange in 1972 and in the National Stock Exchange in January 1998.

Subsequently, the equity shares of the Company have been delisted from Madras Stock Exchange Limited (MSE) with effect from January 27, 2004, in accordance with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary delisting. 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.

TABLE 3.8

55

Description of the Sundaram BNP Paribas Growth

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: Secondary data Sundaram Mutual Funds Equity Diversified March 1997 Rajesh Singh Rs.2000 Rs.1000 Rs.500 Rs.500 Forward Open End BSE 200

TATA Mutual Funds

Backed by one of the most trusted and valued brands in India, Tata Mutual Fund has earned the trust of lakhs of investors with its consistent performance and world-class service.Tata Mutual Fund manages around Rs. 19,438.00 crores (average AUM for the month) as on April 30, 2009
56

worth of assets across its varied offerings. Tata Mutual Fund offers an investment option for everyone, whether you are a businessman or salaried professional, a retired person or housewife, an aggressive investor or a conservative capital builder.The Tata Asset Management philosophy is centred on seeking consistent, long-term results. Tata Asset Management aims at overall excellence, within the framework of transparent and rigorous risk controls.

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.

TABLE 3.9

Description of the Tata Pure Equtiy Growth

57

Mutual fund family Fund class Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: Secondary data

TATA Mutual Fuds Equity Diversified March 1998 M Venugopal Rs.5000 Rs.1000 Rs.1000 Rs.5000 Forward Open End Sensex

HSBC Mutual Fund

HSBC Mutual Fund, a premier asset management company, offers optimum investment performance, institutionalised investment management process, efficient service and a flexible product range to create wealth in the long term for individual and institutional investors. HSBC Global Asset Management has an outstanding track record and a longstanding presence globally. With approximately USD299 billion (as on 31 October 2008) of assets under
58

management worldwide and a presence in about 20 countries, it is one of the premier fund management organisations in the world. HSBC Global Asset Management in India provides a comprehensive range of investment management solutions to a diverse client base and is committed to delivering consistent investment performance, world-class service and a broad range of solutions for all types of investors. Our range of offerings in India comes under two broad categories Mutual Fund and Portfolio Management Services.
Scheme: Equity growth 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 capitalizations, with a preference for medium and large companies.

TABLE 3.10 Description of the HSBC Equity

Mutual fund family Fund class

HSBC Mutual Fund Equity Diversified 59

Launch Date Fund Manager Minimum Investment Subsequent Investment Minimum Withdrawal Minimum Balance Pricing Method Type Bench Mark Source: Secondary data

December 2002 Mihr Vora Rs.10000 Rs.1 Rs.1000 Rs.1000 Forward BSE 200 Sensex

CHAPTER 4 - ANALYSIS ANS INTREPRETATION OF DATA

BIRLA SUNLIFE FRONTILINE EQUITY This part of the chapter provides the comparison of Birla Frontline Equity with Market Indicators (BSE200). TABLE 4.1: Comparison of Birla Frontline equity fund with market indicators (BSE200.) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta.
60

NAV Year 2004 2005 2006 2007 2008 Opening Closing 20.01 24.46 33.98 50.86 82.13 Total 23.94 33.94 50.13 81.34 61.42 Rp 19.64 38.75 47.52 59.92 -25.21 140.63 Rp^2 385.73 1502.11 2258.90 3591.51 635.85 8374.12

BSE200 Opening 769.67 890.48 1188.78 1655.28 2664.67 Closing 886.55 1186.23 1655.74 2656.52 1950.17 Rm 15.18 33.21 39.28 60.48 -26.81 121.35 Rm^2 230.60 1103.06 1542.96 3658.75 718.98 7254.37

Arp Arm

28.12 24.27

SDRp SDRm

28.72 29.35

Beta

1.15

Source: Secondary data

Where, Rp Rm ARp Arm SDRp SDRm

Fund Return (Portfolio Return) Index Return (Market Return) Average fund return Average Index return Standard deviation of Fund Return Standard deviation of Index return

Figure. 4.1

Comparison of Birla Frontline equity fund with market indicators (BSE200.)

61

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% 2004 2005 2006 2007 2008

Portfolio Return Market Return The fund has performed fairly, the return of the fund is greater for the period 2004,2005,2006 and 2007 when compared to the respective market index which is the BSE 200

From the Beginning of 2008 the Fund started declining because of the impact of Recession. The average return of the fund is also satisfactory. The Beta of this scheme was 1.15, which shows that it is very volatile and it has greater risks than compared to the benchmark index. Its standard deviation was at 28.72 very much comparable to that of the benchmark at 29.35 has higher risks. The standard deviation of fund return and Index return is satisfactory. From January 2009 , the Fund shows a recovery Trend Benchmark Index Greatly affected this Mutual Fund

4.2 DSP Merrill Lynch Opportunities Growth

This part of the chapter provides the comparison of DSP Black Rock Growth with Market Indicators (S & P CNX Nifty)
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TABLE 4.2: Comparison of DSP growth equity fund with market indicators (S & P CNX Nifty) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta.

NAV Year 2004 2005 2006 2007 2008 Opening Closing 20.43 26.48 39.07 56.81 90.54 Total 26.06 39.06 56.23 89.89 63.07 Rp 27.5575 47.5076 43.9212 58.2292 -30.34 146.875 Rp^2 759.41 7 2256.9 7 1929.0 7 3390.6 4 920.52 7 9256.6 2

S & P CNX NIFTY Opening Closing 1880 2080 2837 3966 6136 2081 2837 3966 6139 4735 Rm 10.6914 9 36.3942 3 39.7955 6 54.7907 2 -22.8325 118.84 Rm^2 114.3079 1324.54 1583.686 3002.023 521.3214 6545.88

Arp Arm Source:

29.375 23.7679 secondary data

SDRp SDRm

31.43 27.28

Beta

1.23

63

Figure 4.2
Comparison of DSP growth equity fund with market indicators (S & P CNX Nifty)

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% 2004 2005 2006 2007 2008

Portfolio Return Market Return

The fund has performed better for the year 2004, 2005, 2006 and 2007 is greater than the return of the index fund except in the year 2008, where the fund return is falling lower than the index return which is the S&P CNX Nifty.

During 2008 Fund affected badly because of Recession The average return of the fund is also satisfactory. The beta of the fund suggests that it is very volatile and it has greater risks than compared to the benchmark index. The standard deviation of the fund is very much comparable to that of Index return. Throughout the year 2008 the Fund showed a Negative Returns

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4.3 ICICI Prudential Growth Fund This part of the chapter provides the comparison of ICICI Prudential Growth with Market Indicators (S & P CNX Nifty) TABLE 4.3: Comparison of ICICI Prudential growth fund with market indicators (S & P CNX Nifty) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta.

NAV Year 2004 2005 2006 2007 2008 Opening Closing 39.15 44.08 65.58 94.48 134.72 Total 43.73 65.39 93.36 134.81 103.44 Rp 11.698 6 48.343 9 42.360 5 42.686 3 -23.219 121.87 1 Rp^2 136.85 7 2337.1 3 1794.4 1 1822.1 2 539.1 6629.6 2

S & P CNX NIFTY Opening 1880 2080 2837 3966 6136 Closing 2081 2837 3966 6139 4735 Rm 10.6914 9 36.3942 3 39.7955 6 54.7907 2 -22.8325 118.84 Rm^2 114.3079 1324.54 1583.686 3002.023 521.3214 6545.88

Arp Arm Source:

24.3741 23.7679 secondary data

SDRp SDRm

27.05 27.28

Beta

1.25

65

Figure 4.3
Comparison of ICICI Prudential growth fund with market indicators (S & P CNX Nifty)

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% Portfolio Return Market Return 2004 2005 2006 2007 2008

From the above graph and table we can state that the fund returns are higher for the year 2005 & 2006 than the Index returns. And in the year 2007 the index return is greater than the fund return and in 2008 both the fund return and index return falling at the same stage.

The beta of the fund suggests that it is very volatile and it has greater risks than compared to the benchmark index. The average return of the fund is also satisfactory The standard deviation of fund return is comparable to the that of Bench mark return..

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4.4 HDFC EQUITY FUND This part of the chapter provides the comparison of HDFC Equity with Market Indicators (S & P CNX 500) TABLE 4.4: Comparison of HDFC equity fund with market indicators (S & P CNX500) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta.

NAV Year 2004 2005 2006 2007 2008 Opening Closing 52.29 66.69 107.19 147.29 224.59 Total 66.39 107.01 145.39 223.32 166.41 Rp 26.965 60.458 8 35.637 7 51.619 3 -25.905 148.77 6 Rp^2 727.11 1 3655.2 7 1270.0 4 2664.5 5 671.06 8 8988.0 4

S & P CNX 500 Opening Closing 1542.45 1818.55 2465 3299.9 5370.35 1804.9 2459.2 3295.0 5 5354.7 3825.8 5 Rm Rm^2

17.0151 4 289.5149 35.2286 2 1241.055 33.6734 3 1133.9

62.2685 5 3877.373 -28.7598 917.9552 119.426 7459.8

Arp Arm Source:

29.7552 23.8852 secondary data

SDRp SDRm

30.2 30.35

Beta

1.24

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Figure 4.4
Comparison of HDFC equity fund with market indicators (S & P CNX500)

80.00% 60.00% 40.00% 20.00% 0.00% 2004 -20.00% -40.00% 2005 2006 2007 2008

Portfolio R eturn M arket R eturn

The fund has outperformed the benchmark returns in the Year 2006 and 2007 In the Year 2006, 2007 and 2008 it has underperformed the benchmark returns From the above return variations we can consider this fund as an inconsistent performer. During 2008 Fund showed deep negative returns. The standard deviation of Fund return and benchmark return is satisfactory.

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4.5 J M Mutual Fund Equity Growth This part of the chapter provides the comparison of JM Equity Growth with Market Indicators (Sensex) TABLE 4.5: Comparison of JM equity fund with market indicators (Sensex) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta. NAV Year 2004 2005 2006 2007 2008 Openin g 15.21 18.03 27.33 39.9 58.49 Total Closin g 17.9 27.24 39.25 57.6 41.85 Rp 17.6857 51.0815 43.6151 44.3609 -28.449 128.294 Rp^2 312.78 5 2609.3 2 1902.2 7 1967.8 9 809.36 3 7601.6 4 SENSEX Opening 5872.48 6626.49 9422.49 13827.7 7 20325.2 7 Closing 6602.69 9397.93 13786.9 1 20286.9 9 15832.5 5 Rm 12.4344 4 41.8236 5 46.3191 8 46.7119 4 Rm^2 154.6153 1749.218 2145.466 2182.006

-22.1041 917.9552 125.185 7149.26

Arp Arm Source:

25.6588 25.037 secondary data

SDRp SDRm

29.35 28.33

Beta

0.94

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Figure 4.5 Comparison of JM equity fund with market indicators (Sensex)

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% Portfolio R eturn Market R eturn 2004 2005 2006 2007 2008

The benchmark index for this scheme is the SENSEX. The return of the fund is very low as compared to the respective benchmark index. The average return of the fund is 21.27 as compared to the benchmark index of 25.037 The beta of 0.94, indicates that it is less volatile as compared to the benchmark index The standard deviation of fund return is very much comparable to that of benchmark return

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4.6 KOTAK 30 GROWTH FUND This part of the chapter provides the comparison of Kotak 30 Growth with Market Indicators (S & P CNX Nifty) TABLE: 4.6: Comparison of Kotak 30 Growth fund with market indicators (S&P CNX Nifty) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta. S & P CNX NIFTY Rp 34.5439 46.2058 43.481 65.1531 -25.403 163.981 Rp^2 1193.2 8 2134.9 8 1890.6 4244.9 2 645.30 2 10109. 1 Opening Closing 1880 2080 2837 3966 6136 2081 2837 3966 6139 4735 Rm 10.6914 9 36.3942 3 39.7955 6 54.7907 2 -22.8325 118.83 Rm^2 114.3079 1324.54 1583.686 3002.023 521.3214 6545.88

NAV Year 2004 2005 2006 2007 2008 Opening Closing 23.68 32.55 47.63 68.93 114.2 Total 31.86 47.59 68.34 113.84 85.19

Arp Arm Source:

32.7962 23.766 secondary data

SDRp SDRm

30.76 27.28

Beta

1.37

71

Figure 4.6 Comparison of Kotak 30 Growth fund with market indicators

(S&P CNX Nifty)

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% 2004 2005 2006 2007 2008

Portfolio Return Market Return

The benchmark index for this scheme is the S & P CNX NIFTY. The return of the fund is very low as compared to the respective benchmark index. The average return of the fund is 21.27 as compared to the benchmark index of 25.037. The Beta of this scheme was 1.94, which shows that is a aggressive portfolio compared to the benchmark index. The standard deviation of Fund return is very much comparable to that of Benchmark return.

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4.7 RELIANCE MUTUAL GROWTH FUND This part of the chapter provides the comparison of Reliance Growth with Market Indicators (BSE 100) TABLE 4.7: Comparison of Reliance Growth fund with market indicators (BSE 100) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta. NAV Year 2004 2005 2006 2007 2008 Openin g 79.45 112.86 190.78 270.05 476.85 Total Closin g 112.12 189.18 266.74 471.73 334.26 Rp 41.120 2 67.623 6 39.815 5 74.682 5 -29.902 193.33 9 Rp^2 1690.8 7 4572.9 5 1585.2 7 5577.4 7 894.15 9 14320. 7 BSE 100 Opening 3089.58 3593.58 4964.64 6999.7 11186.4 5 Closing 3580.34 4953.28 6982.56 11154.2 8 8320.87 Rm 15.8843 6 37.8369 2 40.6458 5 59.3536 9 Rm^2 252.3129 1431.633 1652.085 3522.86

-25.6165 656.2065 128.104 7515.1

Arp Arm

38.6679 25.6209

SDRp SDRm

37.01 29.09

Beta

1.5

Source secondary data

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Figure 4.7 Comparison of Reliance Growth fund with market indicators (BSE 100)
80.00% 60.00% 40.00% 20.00% 0.00% 2004 -20.00% -40.00% 2005 2006 2007 2008

Portfolio R eturn Market R eturn

From the above table and graph we can state that the fund return and index return is fair for the period 2006, 2007 and both the fund and index return are falling a lower rate in the year 2008.

The Bench Mark index for this scheme is BSE100

The beta of the fund suggests that it is very volatile and it has greater risks than compared to the benchmark index

The standard deviation of fund return is very much comparable to that of bench mark return.

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4.8 SUNDARAM BNP PARIBAS GROWTH This part of the chapter provides the comparison of Sundaram BNP Paribas Growth with Market Indicators (BSE 200) TABLE 4.8: Comparison of Sundaram BNP Paribas Growth fund with market indicators (BSE 200) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta. NAV Year 2004 2005 2006 2007 2008 Opening Closing 26.85 34.29 48.17 69.39 118.84 Total 33.87 48.13 68.63 117.88 80.13 Rp 26.1453 40.3616 42.4746 69.8804 -32.573 146.289 Rp^2 683.57 4 1629.0 6 1804.0 9 4883.2 7 1061.0 1 10061 BSE 200 Opening 769.67 890.48 1188.78 1655.28 2664.67 Closing 886.55 1186.23 1655.74 2656.52 1950.17 Rm Rm^2

15.1857 3 230.6064 33.2124 2 1103.065 39.2806 1 1542.966 60.4876 5 3658.756 -26.8138 718.9813

Arp Arm Source:

38.6679 25.6209 secondary data

SDRp SDRm

37.01 29.09

Beta

1.2

75

Figure 4.8
Comparison of Sundaram BNP Paribas Growth fund with market indicator (BSE 200)

80.00% 60.00% 40.00% 20.00% 0.00% 2004 -20.00% -40.00% 2005 2006 2007 2008

Portfolio R eturn M arket R eturn

The return of the fund is higher than the benchmark index for the year 2004 to 2007. The benchmark index for the comparison of this fund is the BSE 200 The beta of the fund indicates that it is volatile as against the benchmark index. The NAV returns of the fund are better than the bench mark index. The standard deviation of fund return is very much comparable to that of benchmark return.

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4.9 TATA PURE EQUITY GROWTH This part of the chapter provides the comparison of TATA Pure Equity Growth with Market Indicators (Sensex)

TABLE: 4.9: Comparison of Tata Pure equity growth fund with market indicators (Sensex.) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta. NAV Year 2004 2005 2006 2007 2008 Opening Closing 23.56 30.19 43.3 62.55 100.03 Total 29.94 43.22 61.65 99.45 73.09 Rp 27.079 8 43.16 42.378 8 58.992 8 -26.932 144.67 9 Rp^2 733.31 5 1862.7 8 1795.9 6 3480.1 5 725.32 8 8597.5 4 SENSEX Opening 5872.48 6626.49 9422.49 13827.7 7 20325.2 7 Closing 6602.69 9397.93 13786.9 1 20286.9 9 15832.5 5 Rm Rm^2

12.4344 4 154.6153 41.8236 5 1749.218 46.3191 8 2145.466 46.7119 4 2182.006 -22.1041 488.5917 125.185 6719.9

Arp Arm Source:

28.9359 25.037 secondary data

SDRp SDRm

29.7 26.77

Beta

1.15

77

Figure 4.9
Comparison of Tata Pure equity growth fund with market indicators (Sensex.)

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% 2004 2005 2006 2007 2008

Portfolio Return Market Return

The fund has outperformed the benchmark returns in the Year 2004 and mid 2006 For the rest of the year it has underperformed the benchmark returns From the above return variations we can consider this fund as an inconsistent performer Overall the Fund has not given good returns The standard deviation of fund return and benchmark return is satisfactory.

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4.10 HSBC EQUITY FUND This part of the chapter provides the comparison of HSBC Equity with Market Indicators (Sensex) TABLE: 4.10: Comparison of HSBC equity fund with market indicators (Sensex) with the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund & index return and Beta.

NAV Year 2004 2005 2006 2007 2008 Opening Closing 27.13 37.44 52.39 73.02 115.04 Total 36.97 52.49 72.04 114.92 88.56 Rp 36.269 8 40.197 6 37.507 2 57.381 5 -23.018 148.33 8 Rp^2 1315.5 1615.8 5 1406.7 9 3292.6 4 529.83 2 8160.6 1

SENSEX Opening 5872.48 6626.49 9422.49 13827.7 7 20325.2 7 Closing 6602.69 9397.93 13786.9 1 20286.9 9 15832.5 5 Rm Rm^2

12.4344 4 154.6153 41.8236 5 1749.218 46.3191 8 2145.466 46.7119 4 2182.006 -22.1041 488.5917 125.185 6719.9

Arp Arm Source:

29.6676 25.037 secondary data

SDRp SDRm

27.46 26.77

Beta

1.18

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Figure 4.10 Comparison of HSBC equity fund with market indicators (Sensex)

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% 2004 2005 2006 2007 2008

Portfolio Return Market Return

The fund has outperformed the benchmark returns in the Year 2004 and mid 2007 For the rest of the year it has underperformed the benchmark returns From the above return variations we can consider this fund as an inconsistent performer Overall the Fund has not given good returns and is very volatile in nature. The standard deviation of fund return and benchmark return is satisfactory.

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Table 4.11 Top Five Funds based on NAV Returns

Sl.No. 1 2 3 4 5

Funds Reliance Growth Sundaram BNP Paribas Growth Tata Pure Equity Kotak 30 Growth HDFC Equity

Rank 1 2 3 4 5

Table 4.12 The Top five fund based on Standard Deviation

Sl.No. 1

Funds Reliance Growth

Rank 1 81

2 3 4 5

Sundaram BNP Paribas Growth Kotak 30 Growth Tata Pure Equity HDFC Equity

2 3 4 5

CHAPTER 5 FINDINGS RECCOMENDATIONS AND CONCLUSION 5.1 FINDINGS

All funds had a steep decline in the year 2008. Recession Badly affected Indian Mutual Funds. Almost all sectors got affected by the Impact of Recession. During January 2008 Decline percentage was more.
The analysis of 10 Equity Diversified Mutual funds based on NAV returns for a period of

5 years ranked, RELIANCE Equity fund as 1st with 74.68% followed by SUNDARAM BNP PARIBAS Growth as 2nd with 69%, Tata Pure Equity Growth fund as 3 rd and Kotak 30 Growth fund. All Equity schemes has shown better returns than their respective benchmark index. Sundaram BNP Paribas Growth fund managed efficiently showing better performance in different holding periods, compared to market portfolios The beta of the funds suggest that they are no highly volatile when it is compared to their respective benchmark indexes,

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 Of the 10 Equity schemes selected RELIANCE EQUITY Growth, J M EQUITY GROWTH and SUNDARAM BNP PARIBAS GROWTH were the funds, which had the highest return. They had the highest increase in its NAV during the year of 2007. Track Record, Brand Image and the Portfolio mix were the most preferred criteria for investing in debt funds by the respondents in the order of preference.
The performance measures of all Equity schemes are satisfactory on an average.

5.2 CONCLUSION According to Amartya Sen, the Nobel laureate in Economics, the present recession in the global economy is more a matter of psychology than economics and no amount of financial stimulus would be enough to turn it around. We have to get rid of the mindset, the mindset of recession. The economic meltdown gripped the world due to financial mismanagement and lack of regulations by the developed countries. The stimulus packages alone would not perk up the economy and these should be supplemented by coordinated efforts by the developed and emerging economies so that a more participatory and all-inclusive development policy and agenda should be adopted and a more equitable international financial architecture should be visualized and implemented without loss of time.For the casual investor who does not have the time or inclination to actively manage his or her own portfolio, mutual funds reduce the time and effort needed. That stays true even in a recession. The trick is finding mutual funds that do well in tough economic times. There are certain industries that weather recession better than others and the best mutual funds will be sector funds which are based on a specific industry. Industries that do well during economic downturn include utilities (everyone still needs to keep the lights on), oil and gas (still need to drive to work), and staple consumer goods (babies still need diapers and kids still need clothes).

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Mutual funds in recession-proof sectors can still be volatile and under-perform if the fund manager buys and sells constantly or the fund charges a high management fee. Review the fee structures for the funds you are considering and choose one with a high historical return and low fee.Mutual funds can still be the foundation of your investment portfolio if you choose carefully and understand the basics. There are bargains to be had in the current economic climate. All stocks, and therefore all mutual funds, are being punished because of the rampant fear and lack of confidence in the markets. Those mutual funds that contain good quality, recession-proof stocks will weather the storm and provide solid returns.
Saving money is not enough. Each of us also need to invest ones savings intelligently in order to have enough money available for funding the higher education of ones children, for buying a house, or for ones own golden years.The study will guide the new investor who wants to invest in equity-diversified schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for equity diversified schemes.

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5.3 RECOMMENDATIONS

The Mutual Fund companies can utilize this opportunity of soft interest regime followed by the banks and attract the fixed deposit and the savings Bank Account Investors.
Asset Management Companies Can give a clear cut information regarding their Position

in the current Scenario. Investors should consider entrusting some of their money to funds that have done well in tough markets or amid a weak economy.
The Mutual Fund Asset Management companies can Educate and give Awareness about

the concept of Mutual Funds to the investors. As majority of the investors do not know what a Mutual Fund is. And it should highlight the benefits of mutual fund over other investment and also their safety and security advantages to attract more number of customers.
In the Present Scenario, The Mutual Fund Asset Management companies can come up

with more advertisements and promotional measures and it should also target the FIIs and individual investors who invest in the capital markets. The fund can state always the objective of each fund floated by the Asset Management Company to the investors so that the right investors can choose the right fund. To induce investments into mutual funds the Government can to provide tax breaks that would attract investment into mutual funds. The risk management systems and the benchmarking of indices can be improved by AMFI (Association of Mutual Funds in India) to give the investors more guidelines and tools to take a good investment decision during Recession Period.

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BIBLIOGRAPHY
Books
Chandra Prasanna Investment analysis and portfolio management , The McGraw hill

companies ,2005
V.K.Bhalla, Security Analysis and Portfolio management -2005 Edition Bodie, Kane, Markus Investments , TATA McGraw hill companies, 2004 Avadhani V.A, Investments and Securities Markets in India, Himalaya Publishing House,

2003
Jain Rajiv, Investing in India, Indian Investment Publication, 2004

Journals The ICFAI Journal of applied finance, Vol 13 NO.9 , September 2007 ICFAI Reader, Feb 2009
The ICFAI Journal- Treasury Management, Jan 2009& Feb 2009 Indian Journal of Finance, Vol 3, No.3, Mar 2009

Indian Journal of Finance, Vol 3, No.4, April 2009 Websites www.sbimf.com/latestnav.asp http://amfiindia.com/showhtml.asp?page=mfindustry www.mutualfundsindia.com/mfbasic www.moneycontrol.com www.wikipedia.com http://bseindia.com/histdata/hindices.asp www.camsonline.com

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