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CHAPTER-I

INTRODUCTION

INTRODUCTION
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.

NEED OF THE STUDY


Mutual funds are dynamic financial intuitions which play crucial role in an economy by
mobilizing savings and investing them in the capital market. The activities of mutual
funds have both short and long term impact on the savings in the capital market and the
national economy. Mutual funds, trust, assist the process of financial deepening &
intermediation. To banking at the same time they also compete with banks and other
financial intuitions. India is one of the few countries to day maintain a study growth rate is
domestic savings.

The need of study arises for learning the variables available that distinguish the mutual fund of
two companies.

To know the risk & return associated with mutual fund.

To chose best company for mutual investment between UTI& BIRLA SUNLIFE MNC fund.

To

project

mutual

fund

as

the

productive

avenue

for

investing

activities.

SCOPE OF THE STUDY

To make people aware about concept of mutual fund.

To provide information regarding advantages and demerits of mutual fund.

To advice where to invest or not to invest.

To provide information regarding types of mutual fund which is beneficial for whom.

OBJECTIVES

To analysis which provides better returns from UTI& BIRLA SUNLIFE MNC fund.

To analyze the concept and parameters of mutual fund.

To know how many people are satisfied by their investment in UTI& BIRLA SUNLIFE
MNC fund.

To know people behavior regarding risk factor involved in mutual fund.

RESEARCH METHODOLOGY & TOOLS


This study is basically depends on Secondary Data. The secondary data collected
from the different sites, broachers, news papers, company offer documents, different
books and through suggestions from the project guide and from the faculty members of
our college.

TOOLS USED IN THIS PROJECT


The following parameters were considered for analysis:
Beta

Correlation coefficient

Treynors Ratio

Sharpes Ratio

LIMITATIONS OF THE STUDY:


1. The study is conducted in short period, due to which the study may not be
detailed in all aspects.
2. The study is limited only to the analysis of different schemes and its suitability
to different investors according to their risk-taking ability.
3. The study is based on secondary data available from monthly fact sheets, web
sites; offer documents, magazines and newspapers etc., as primary data was not
accessible.
4. The study is limited by the detailed study of various schemes.
5. The NAVS are not uniform.
6. The data collected for this study is not proper because some mutual
funds are not disclosing the correct information.
7. The study is not exempt from limitations of Sharpe Treynor and Jenson measure.
8. Unique risk is completely ignored in all the measure.

CHAPTER-II
REVIEW OF LITERATURE

CONCEPT OF MUTUAL FUNDS


A Mutual Fund is a financial intermediary which acts as an instrument of investment. It
collects the funds from different investors to a common pool of investible funds and
then invest these funds in a wide variety of investment opportunities in diversified
portfolios of securities such as Money Markets instrument, corporate and government
bonds and equity shares of joint stock companies.

The investment may be diversified to spread risk and to ensure good return to the
investors. The Mutual Funds employ professional, experts and investment consultants to
conduct investment analysis and then to select the portfolio of securities where the
funds are to be invested.

Each investor owns units, which represent a portion of the holdings of the fund.
You can make money from a MF in three ways:-

1. Income is earned from dividends on stocks and interest on bonds. A Fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution.
2. If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in the form of dividends.
3. If fund holdings increase in price but are not sold by the fund manager, the funds
shares increase in price. You can then sell your Mutual Fund units for a profit.
Funds will also usually give you a choice either to receive a cheque for dividends or
to re-invest the same and get more units.

FIGURE SHOWING THE WORKING OF MUTUAL FUND

STRUCTURE AND CONSTITUENTS OF FUND


MUTUAL
FUND

Sponsor

Trustee

AMC

Custodian

SPONSOR:
Establishes the MUTUAL FUND

Need to have sound financial track record.


Appoints TRUSTEES.
Appoints Asset Management Company.
Must contribute 40% of the net worth of the AMC.

Sometimes this power is given by the sponsor to the trustees through the trust deed.

At least 50% of directors on the board of Asset Management Company

should be independent of the sponsor.


All securities transactions of the Asset Management Company with its associates

should be disclosed.

TRUSTEE:
Manages the Mutual Fund and look after the operation of the appointed AMC.
The investments are held by the Trustees, in a fiduciary responsibility.
Trustees approve each Mutual Fund Scheme floated by AMC.
Furnish report to SEBI on half yearly basis on AMC and Fund Functioning.

ASSET MANAGEMENT COMPANY:


AMC acts as investment manager of the trust under the board supervision and

direction of the trustees.


AMC floats the different Mutual Fund schemes.
Submits report to the Trustees on quarterly basis, mentioning activity and

compliance factor.
AMC is responsible to the trustees.
AMC fees have a ceiling, decided by SEBI.
Should have a net worth of at least Rs.10 crores at all the times.

CUSTODIAN:
Appointed by board of trustees for safekeeping of securities.
Its an entity independent of sponsors.

SEBI regulates the securities market in India. According to SEBI every Mutual Fund
require that at least two thirds of the directors of trustee company or board of
trustees must be independent i.e. they should not be associated with the sponsors.
Also, 50% of the directors of AMC must be independent. All Mutual Fund are
required to be registered with SEBI before they launch any Scheme.

ORGANISATION OF MUTUAL FUND:

CHARACTERISTICS OF MUTUAL FUNDS:


A Mutual Fund actually belongs to the investors who have pooled their

funds. The ownership of the Mutual Fund is in the hands of the investors.
Mutual funds are trusts or registered associations managed by investment

professionals and other service providers, who earn a fee for their services from the
fund.
The pools of the funds are invested in a portfolio of marketable investments

(Shares and Securities). The value of the portfolio is updated everyday.


Mutual funds collect money from small investors and in return, they will

issue a certificate in units.


The investors share in the fund is denoted by UNITS". The value of the units

changes with the change in the portfolios value every day.


The profits of investments will be distributed to the unit holders. The unit holders

can sell their units in the open market at Net Asset Value (NAV).

NET ASSET VALUE (NAV):


Mutual Funds invest the money collected from the investors in securities markets.
In simple words, Net Asset Value is the market value of the securities scheme also
varies on day to day basis. The NAV per unit is the market value of securities of a
scheme divided by the total number of units of the scheme on any particular date.

The performance of a particular scheme of a Mutual Fund is denoted by Net Asset


Value.
For example; if the market value of securities of a MF Scheme is Rs. 200
lakhs and the Mutual Fund has issued 10 lakhs units of Rs. 10 each to the
investors, then the NAV per unit of the fund is Rs. 20. NAV is required to
be disclosed by the MF on a regular basis daily or weekly depending on
the type of scheme.

NAV = Market value of the funds investments + Receivables + Accrued Income Liabilities
Accrued Expenses

Number of Outstanding units

OBJECTIVES OF MUTUAL FUNDS:


The objectives sought to be achieved by Mutual funds are as follows: To provide an opportunity for lower income groups to acquire without much

difficulty property in the form of shares.


To cater mainly to the need of individual investors whose means are small?
To manage investors portfolios in a manner that provides regular income,

growth, safety, liquidity and diversification.

SCHEMES OF MUTUAL FUNDS:


Mutual fund schemes are usually open-ended (Perpetually open for investors
and redemption) or close-ended (with a fixed term). A Mutual Fund scheme issues
units that are normally priced at Rs.10/- during the initial offer. The number of
units you own against the total number of units issued by a Mutual Fund scheme
determines your share in the profits or losses in the scheme.

TYPES OF MUTUAL FUND SCHEMES:


The Mutual Funds can be classified under the following types:
ACCORDING TO STRUCTURE:

STRUCTURE

OPEN-ENDED
SCHEME

CLOSED-ENDED
SCHEME

INTERVAL SCHEME

OPEN - ENDED SCHEME


An open-ended scheme is a scheme in which an investor can buy and sell units on a
daily basis. The scheme has a perpetual existence and flexible, ever changing corpus.
Open- Ended schemes do not have a fixed maturity period. The investors are free to
buy and sell any number of units, at any point of time, at prices that are linked to the
NAV of the units.
In these schemes the investor can invest and disinvest any amount, any time after a
short initial lock in period. This scheme gives investors with instant liquidity and
fund announces sale and repurchase price from time to time. The units can be bought

from and sold to any Mutual Fund.


Advantages of Open-ended funds over Close-ended funds:

o Any Time Entry Option


o This provides ready liquidity to the investors and avoids reliance on transfer
deeds, signature verifications and bad deliveries.
o Allows to enter the fund at any time and even to invest at regular intervals.
o Any time Exit Option.

CLOSE ENDED SCHEME


A Close-ended scheme has a stipulated maturity period. E.g. 5-7 years. A Close-ended
scheme is one in which the subscription period for the Mutual Fund remains open only
for a specific period, called the redemption period. At the end of this period, the
entire corpus is disinvested and the proceeds distributed to unit holders. After final
distribution the scheme ceases to exist. Such schemes can be rolled over by approval of
unit holders.

Reasons for fluctuations in NAV

Investors doubts about the abilities of the funds management.


Lack of sales effort (Brokers earn less commission on closed end schemes than
on open ended schemes).
Riskiness of the fund.

Lack of marketability of the funds units.

INTERVAL SCHEMES

Interval schemes are those that combine both the features of both open-ended and
close- ended schemes. The units may be traded on the stock exchange or may be
open for sale redemption during predetermined intervals at NAV related prices.

ACCORDING TO INVESTMENT OBJECTIVE

EQUITY SCHEME

DEBT OR BOND SCHEME

BALANCED SCHEME
INVESTMENT
OBJECTIVE
MONEY MARKETSCHEME

GROWTH & INCOME FUND

OTHER SCHEMES

ADVANTAGES OF MUTUAL FUNDS


The key advantages of both open and close-end Mutual Funds is that they put
professional managers with experience and access to sophisticated financial research to
work for you this, and other wide range of key benefits are as follows :1) Professional Management

Experienced portfolio managers carefully select a funds holdings according to the


funds seated investment objective. The portfolio management team continuously
monitors and evaluates the funds holdings to help make sure it keeps pace with
changing market conditions. The team decides when to buy and sell securities. There
is a fee associated with this professional management.

2) Diversification

A Single diversified Mutual Fund may invest in dozens even hundreds of


different holdings. This approach may reduce the impact on your return if any one
investment held by the fund declines. Diversification spreads your assets among
different types of holdings and may be one of the best ways to protect yourself amid
the complexity and uncertainty of the financial markets.
3) Compounding

In a Mutual Fund, you may choose to reinvest your earnings automatically to buy
more shares. When you reinvest, not only do you have the potential to earn money
on your initial investment, you may also have the opportunity to earn money on the
dividends and capital gains you accumulate. Compounding may increase the impact of
what you contribute and can help your money grow faster. And the longer you invest,
the greater the potential growth.
4) Systematic Investing

You can invest in most mutual funds automatically through regular payments directly
from your bank account; you can start building a long-term investment program.
With systematic investing you invest a fixed amount of money at regular intervals
regardless of market conditions, helping out market fluctuations.

5) Hassle-free operations

With most Mutual Funds, buying and selling shares, changing distribution options,
and obtaining information can be accomplished conveniently by telephone, by mail, or
online. Although a funds shareholder is relieved of the day-to-day tasks involved in
researching, buying and selling securities, an investor will still need to evaluate a
Mutual Fund based on investment goals and risk tolerance before making a purchase
decision. Investors should always read the prospectus carefully before investing in any
Mutual Fund.

6) Buying Power

When you invest in a mutual fund, you join the other investors in a pool of
investment money. The result is that you have a partial stake in each company the
fund holds for a relatively small amount of principal invested, while potentially
offsetting some of the risk associated with holding individual securities.
7) Choice

There is an incredible array of mutual funds more than 10,000 available to meet
your specific Investment objective. Funds have different investment objectives and
degrees of investment risk often indicated through asset classes and sub-classes,
such as money market funds, fixed income funds, balanced funds, growth and income
funds, growth funds and aggressive growth funds.
8) Liquidity

Mutual fund shares are liquid and orders to buy or sell are placed during market
hours. However, orders are not executed until the close of business when the NAV
(Net Asset Value) of the fund can be determined. Fees or commissions may or may
not be applicable. Fees and commissions are determined by the specific fund and the
Institution that executes the order.
9) Transparency

You get regular information on the value of your investments in addition to disclosure
on the specific investments made by your scheme, the proportion invested in each
class of assets and the fund managers investment strategy and outlook.

DISADVANTAGE OF MUTUAL FUNDS:


1) Over Diversification

Diversification is usually a good thing because it reduces risk, but Mutual Funds
sometimes make small investments in so many securities that they become over
diversified. In other words, the Mutual Funds holdings in each security may be so
small that it is difficult to realize substantial return from any of those holdings, which

in turn means that the overall return for each investor is small.
2) Unused Cash

Your cash may occasionally serve as liquidity insurance rather than work for you as
an investment. The constant availability of shares is certainly convenient for investors
in a mutual fund, but it can also operate as a disadvantage. A Mutual Fund manager
must always prepare for the possibility than an investor will cash in his or her
shares. As a result Mutual Funds must maintain a ready cash supply at all times.
3) Fluctuating Returns

Mutual funds are like many other investments without a guaranteed return. There is
always the possibility that the value of your mutual fund will depreciate. Unlike
fixed- income products, such as Bonds and Treasury Bills, mutual funds experience
price fluctuations along with stocks that make up the fund.
4) Costs Despite Negative Returns

Investors must pay sales charges, annual fees, service charges and other expenses
regardless of how the fund performs. In addition, depending on the timing of their
investment, investors may also have to pay taxes on any capital gains distribution
they receive even if the fund went on to perform poorly after they bought shares.
5) Misleading Advertisements

The misleading advertisements of different funds can guide investors down the
wrong path. Some funds may be incorrectly labeled as growth funds, while others are
classified as small-cap or income.

6) Evaluating Funds

Not offer investors the opportunity to compare the P/E ratio, sales growth, earnings
share, etc. A Mutual Funds Net Asset Value gives the investors the total value of the
Another limitation of mutual fund is the difficulty they pose for investors interested in
researching and evaluating the different funds. Unlike stocks, mutual funds do funds
portfolio less liabilities.

7) Poor Transparency

Technology used for servicing of investors and for portfolio management and
investment decision making is poor and general efficiency and timeliness are lacking
as a result of antiquated methods of operation. Telex, telephone and communication
systems are poor and antiquated.

RISK ASSOCIATED WITH MUTUAL FUND INVESTMENT


The Principal that the greater risk you take, the greater the potential reward.
Typically, risk is defined as short term price variability. But on a long term basis,
risk is the possibility that your accumulated real capital will be insufficient to meet
your financial goals. And if you want to reach your financial goals, you must start with
an honest.
At the cornerstone or investing is the basic appraisal of your own personal comfort
zone with regard to risk. Individual tolerance for risk varies, creating a distinct
investment personality for each investor. Some investors can accept short-term
volatility with ease, others with near panic. So whether you consider you investment
temperament to be conservative, moderate or aggressive, you need to focus on how
comfortable or uncomfortable you will be as the value of your investment moves up or
down

TYPES OF RISK
All investments involve some form of risk. Even an insured band account is subject
to the possibility that inflation will rise faster than your earnings, leaving you with less
real purchasing power than when you started (Rs.1000 gets you less than it got your
father when he was your age). Consider these common types of risks and evaluate
them against potential rewards when you select an investment.

Market

Inflation

Credit

Interest Rate
TYPE OF
RISKS

Exchange Rate

Investment

Government Policies

1) Market Risk: At times the prices or yields of the all the securities in a particular

market rise or fall due to broad outside influences. When this happens, the stock
prices of both an outstanding, highly profitable company and a fledging
corporation may be affected. This change in price is due to Market Risk.
2) Inflation Risk: Some times referred to as loss of purchasing power. Whenever

inflation sprints forward faster than the earnings on your investment, you run the
risk that youll actually be able to buy less, not more. Inflation risk also occurs
when prices rise faster than your return.
3) Credit Risk:

In short, how stable is the company or entity to which you lend

your money when you invest. How certain are you that it will be able to pay the
interest you are promised, or repay your principal when the investment matures.
4) Interest Risk: Changing interest rates affect both equities and bonds in many ways.

Investors are minded that predicting which way rates Effect of loss rev
professionals and inability to adapt:
An industries key asset is often the personnel who run the business i.e.
intellectual properties or the key employees of the respective companies. Given
the ever-changing complexion of few industries and the high obsolescence levels,
availability of qualified, trained and motivated personnel is very critical for the
success of industries in few sectors. It is, therefore, necessary to attract key
personnel and also to retain them to meet the changing environment and
challenges the sector offers. Failure or inability to attract/retain such qualified
key personnel may impact the prospects of the companies in the particular sector
in which fund invests.
5) Exchange risk:

A number of companies generate revenues in foreign currencies

and may have investments or expenses also denominated in foreign currencies.


Changes in exchange rates may, therefore, have a positive negative impact on
companies which in turn would have an effect on the investment of the fund.
6). Changes in government policy:

Changes in government policy especially in

regard to the tax benefits may impact business prospects of the companies leading
to an impact on the investments made by the fund.

RISK RETURN GRID


RISK
TOLERANCE/
RETURN

FOCUS

SUITABLE

BENEFITS

PRODUCTS

OFFERED BY

Bank/company FD, Debt

MFS
Liquidity, Better

based Funds

Post-Tax return

EXPECTED
Low

Medium

Debt

Balanced Funds, some

Liquidity,

Better

Partially Debt,

Diversified

Post-Tax

returns,

Partially Equity

Funds are some debt

Better Management,

Funds, Mix of share and

Diversification

Equity

Fixed Deposits

High

Equity

Capital Market, Equity

Diversification,

Funds (Diversified as

Expertise in stock

well as Sector)

picking, Liquidity,
Tax free dividends

COST INVOLVED IN MUTUAL FUNDS


An investor must know that there are certain costs can be classified into 2 broad
categories:
Operating expenses - Which are paid out of the funds earnings
Sales charges

- That are directly deducted from your investment. It is not

compulsory that every mutual fund levy sales charges but they certainly have operating
expenses. No doubt they influence returns on investment in a fund.
Operating expense

These referred to cost incurred to operate a mutual fund. Advisory fees paid to
investment mangers, Audit fees to chartered accountant, custodial fees, register and
transfer agent fees, trustee fee, agent commission. Operating expenses also known
as expenses ratio which is annual expenses expressed as a percentage of the
funds average daily net assets mutual funds.

Operating expenses
Expenses Ratio =

----------------------------Average Net Assets

For instant, if funds Rs. 100 Crores and expenses 20 lakhs. Then expenses ratio is 2%
expenses ratio is available in the offer document and from historical per unit statistics
included in the financial results of the fund which are published by annually. UN
audited for the half year ending Sep30 and audited for the physically year end in March
30.Depending upon schemes and net asset, operating expenses are determined by
limits mandated by SEBI Mutual fund regulation Act. Any excess over specified
limits as to be born by Asset Management Company, the trustees or sponsors.
Sales charges:

These are known commonly sales loads; these are charged directly to investor. Sales
loads are used by mutual fund for the payment of agents commission, distribution and
marketing expensed. These charges have not effect on the performance of the scheme.
Sales loads are usually express in percentage and or of two types front-end and back
end.
Front-end load:

It is a one time fixed fee paid by an investor when buying a

mutual fund scheme. It determines public offer price which intern decides how much
of your initial investment actually get invested the standard practice of arriving a
public offer price is as follows:
Net Asset Value
Public offer price = -------------------------(1- front end load)

Let us assume, an investor invests Rs.10, 000 in a scheme that charges a 2%front end
load at a NAV per unit RS. 10 using the formula public offer price =10/ (1-0.02) is Rs.
10.20. So only 980 units are allotted to the investor

Amount invested
Number of units allotted =

-------------------------Public offer price

10,000/10..20= 980 units at a NAV of Rs. 10


This means units worth 9800 are allotted to him on an initial investment of Rs. 10,000.
Front end loads tent to decrease as initial investment amount increase.
Back end load:

May be a fixed fee redemption (or) a contingent deferred sales charges-a redemption
load continues so long as the redeeming or selling of the units of the units of a fund
does not take place in the event of back end load is applied. The redemption price is
arriving at using following formula.

Net Asset Value


Redemption price = -----------------------------(1+ back end load)

Let us assume an investor redeems units valued at Rs. 10,000 in a scheme that charges
a 2% back end load at a NAV per unit of Rs. 10. Using the formula redemption price
10/ (1+0.02) = Rs. 9.8
So, what the investor gets in hand is 9800(908*1000)
Contingent Deferred Sales Charges (CDSC):

Contingent deferred sales charges are a structured back end load. It is paid when the
units are redeemed during the initial years of ownership. It is for a pre determined period
only and reduced over the time youre invested for a fund. The longer the investor
remains in fund the lower the CDSC.
The SEBI (mutual fund Regulation 1996) stipulate that a CDSC may be
charge only for first 4 years after purchase of units and also stipulate the maximum
CDSC that can we charge every year. The SEBI Mutual funds Regulation 1996 do not
allow either the front end load or back end load to any combination is higher that 7%.

Transaction cost:
Some funds may also impose a switch over fee which is a charge on transfer of
investment from one scheme to another with in a same mutual fund family and also to
switch from on plan (short term) to another (long term) within same scheme.

SYSTEMATIC INVESTING PLANS (SIPs)


It is an investment vehicle, where you need to deposit a fixed amount at regular
intervals (monthly, quarterly, etc.) in a MF scheme; just like you do in a recurring
deposit account with a bank or the post office.
Regular Investing is not easy. Owing to lack of time, most people invest sporadically.
The result? The returns are rarely optimal. However, there is a foolproof way of
investing a fixed amount of money at regular intervals: Chola Mutual Funds
Systematic Investment Plan (SIP). SIP uses the concept of rupee cost averaging,
ensuring investors buy more when prices are low; and fewer units when prices are high.

Benefits of Systematic Investment Plans


Discipline Saving:
Inculcating discipline in your investment has been easier. Your investment is done on a
regular basis by the mutual fund without any intervention required by you. The best
part is that you will not feel the pain of having to save since the money will move
from your bank account automatically.
Rupee Cost Averaging:
The SIP helps you take advantage of the fluctuation in the stocks market by rupee
cost averaging. The investor buys more units when the prices are low and
fewer units cost. Assume you are investing Rs.1000/- each for next four months.

Month

Amount Invested

Purchase Price

No of Units Purchased

1000

10

100

1000

09

111.11

1000

10

100

1000

11

90.9

Table 2 (b)
Total Investment = Rs. 4000; No of units purchased is 402.21. The average cost per
units work out to be Rs9.95.
As illustrated, over time you have a lower average cost per unit. By investing
a fixed amount of money at regular intervals, you as an investor stand to gain
reasonable returns and create significantly wealth-over time.

Lower Cost of Investing:

Getting into SIP program does not required large investment amounts at regular
intervals. Even as small as Rs. 1000 can be invested at regular intervals.
Builds Investment Kitty:

You have to give Post-Dated cheque (PDCs) to the mutual fund for deposit
on specific dates, for the amount you want to invest. These cheques are presented to
your bank account on these dates and the funds are withdrawn from your account
for investment in the mutual fund scheme at the prevailing NAV. Other than
making the initial investment and issuing the cheques at the beginning, no further
efforts are required from you.

Overcoming market volatility:

SIPs help you avoid missing market falls because of lack of time to track the market.
You dont have the responsibility of actively monitoring market movement to be able to
enter during falls.
Market timing doesnt work:

Trying to time the markets, i.e. entering when the markets fall and exiting when the
markets rise, usually does not work. It is best to take the systematic investment
approach to stay above market
Redemption of Units:

The units can be redeemed (i.e. sold back to the mutual fund) or switched-out subject
to completion of lock in period, on every business day at the redemption price. The
redemption/switch out request can be made by way of a written request, on a pre printed
form or by using the relevant tear off section of the transaction slip enclosed with
the account statement, which should be submitted at/may be sent by mail to any of the
ISCs.
Redemption price:

Redemption price will be calculated on the basis of the loads of different


plans/options. The redemption price per unit will be calculated using the following
formula:

Redemption Price = Application NAV * (1 exit Load, if any)

Example for calculation of redemption Price

If the application NAV is Rs.10.00; Exit/redemption load is 2%, then the


redemption price will be calculated as follows:
= Rs.10.00 *(1-0.02)
= Rs.10.00 * (0.98)
= Rs.9.80

PARAMETERS DESCRIPTION

The following parameters were considered for analysis:

Beta

Alpha

Correlation coefficient

Treynors Ratio

Sharpes Ratio

Jensens Ratio

Beta
Beta is a measure of volatility, or systematic risk, of a security or portfolio in
comparison to the market as a whole. Beta measures a stock's volatility, the degree to
which a stock price fluctuates in relation to the overall market. Investment analysts use
the Greek letter beta, . It is calculated using regression analysis. A beta of 1
indicates that the security's price will move with the market. A beta greater than 1
indicates that the security's price will be more volatile than the market, and a beta
less than 1 means that it will be less volatile than the market.

While standard deviation determines the volatility of a fund according to the disparity
of its returns over a period of time, beta, another useful statistical measure, determines
the volatility, or risk, of a fund in comparison to that of its index.
Investors expecting the market to be bullish may choose funds exhibiting high betas,
which increase investors' chances of beating the market. If an investor expects the
market to be bearish in the near future, the funds that have betas less than 1 are a good
choice because they would be expected to decline less in value than the index. For
example, if a fund had a beta of 0.5 and the S&P 500 declined 6%, the fund would be
expected to decline only 3%. Be aware of the fact that beta by itself is limited and

can be skewed due to factors of other than the market risk affecting the fund's
volatility.
Here is a basic guide to various betas:
Negative beta - A beta less than 0 is possible but highly unlikely. People used to
think that gold and gold stocks should have negative betas because they tended to do
better when the stock market declined, but this hasn't been true overall.
Beta = 0 - Basically this is cash (assuming no inflation).
Beta between 0 and 1 - Low-volatility investments, such as utilities, are usually in this range

Beta = 1 - This is the same as an index, such as the S&P 500 or some other index fund.
Beta greater than 1 - This denotes anything more volatile than the broad-based index,
like a sector fund.
Beta greater than 100 - This is impossible because the stock would be expected go to
zero on any decline in the stock market. The beta never gets higher than two to three.

The beta value for an index itself is taken as one. Equity funds can have beta values,
which can be above one, less than one or equal to one. By multiplying the beta value of
a fund with the expected percentage movement of an index, the expected movement
in the fund can be determined. Thus if a fund has a beta of 1.2 and the market is
expected to move up by ten per cent, the fund should move by 12 per cent Similarly if
the market loses ten per cent, the fund should lose 12 per cent.
This shows that a fund with a beta of more than one will rise more than the market and
also fall more than market. Clearly, if you'd like to beat the market on the upside, it
is best to invest in a high-beta fund. But you must keep in mind that such a fund
will also fall more than the market on the way down. So, over an entire cycle, returns
may not be much higher than the market.
Similarly, a low-beta fund will rise less than the market on the way up and lose less
on the way down. When safety of investment is important, a fund with a beta of less
than one is a better option. Such a fund may not gain much more than the market on
the upside; it will protect returns better when market falls.

Alpha
A measure of risk, used for mutual funds with regards to their relation and the
market. A positive alpha is the extra return awarded to the investor for taking a risk,
instead of accepting the market return.
The formula for alpha is:
Alpha = [ (sum of y) - ((b)(sum of x)) ] / n
n =number of observations (36 mos.)
b = beta of the fund
x = rate of return for the market
y = rate of return for the fund
Alpha measures how much if any of this extra risk helped the fund outperform its

corresponding benchmark. Using beta, alpha's computation compares the fund's


performance
For example, if a fund has an alpha of 1, it means that the fund outperformed the

benchmark by 1%. Negative alphas are bad in that they indicate that the fund under
performed for the amount of extra, fund-specific risk that the fund's investors
undertook.

STANDARD DEVIATION:
Standard deviation is probably used more than any other measure to describe the risk
of a security (or portfolio of securities). If you read an academic study on
investment performance, chances are that standard deviation will be used to gauge
risk. It's not just a financial tool, though. Standard deviation is one of the most
commonly used statistical tools in the sciences and social sciences. It provides a precise
measure of the amount of variation in any group of numbers--the returns of a mutual
fund.
Measure of the dispersion of a set of data from its mean. The more spread apart the
data is, the higher the deviation. Standard deviation is applied to the annual rate of
return of an investment to measure the investment's 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 is a statistical measure of the range of a fund's
performance. When a fund has a high standard deviation, its range of performance
has been very wide, indicating that there is a greater potential for volatility.
Technically speaking, standard deviation provides a quantification of the variance of
the returns of the security, not its risk. After all, a fund with a high standard deviation
of returns is not necessarily "riskier" than one with a low-standard deviation of returns.

Correlation:
Correlation is a useful tool for determining if relationships exist between securities. A
correlation coefficient is the result of a mathematical comparison of how closely related
two variables are.
The relationship between two variables is said to be highly correlated if a movement in

one variable results or takes place at the same time as a similar movement in another
variable. A useful feature of correlation analysis is the potential to predict the movement
in one security when another security moves.

Sometimes, there are securities that lead

other securities. In other words a change in price in one results in a later change in price
of the other.

A high negative correlation means that when a securities price

changes, the other security or indicator or otherwise financial vehicle, will often move
in the opposite direction.
Correlation analysis is a measure of the degree to which a change in the independent
variable will result in a change in the dependent variable. A low correlation
coefficient (e.g., 0.1) suggests that the relationship between the two variables is weak
or non-existent. A high correlation coefficient (e.g., 0.80) indicates that the dependent
variable will most likely change when the Independent variable changes. Correlation
can also be used for a study between an indicator and a stock or index to help
determine the predictive abilities of changes in the indicator. Correlation is not static.
In other words, the correlation between two things in the markets does change over
time and so a careful understanding that what has happened in the past may not
predict what will happen in the future should be part of any basis in trading
financial instruments in the market.

PORTFOLIO MEASUREMENT METHODS:


We are interested in discovering if the management of a mutual fund is performing
well; that is, has management done better through its selective buying and selling of
securities than would have been achieved through merely buying the market
picking a large number of securities randomly and holding them throughout the period?
The most popular ways of measuring managements performance are
1. Sharpes Performance Measure
2. Treynors Performance Measure
3. Jensens Performance Measure

SHARPES RATIO
Sharpes is the summary measure of portfolio performance which properly adjusts
performance for risk. It measures the risk premiums of the portfolio relative to the total
amount of risk in the portfolio.
The Sharpes index is given by:
Sharpes Index =

(Average return on portfolio Risk less rate of interest)

(Deviation of returns on portfolio)

Graphically the index measures the slope of the line emanating from the risk less rate
outward to the portfolio in question. Thus, the Sharpe Index summarizes the risk and
return of a portfolio in a single measure that categorizes the performance of the
fund on a risk- adjusted basis. The larger the value of Sharpe Index the better the
portfolio has performed.

TREYNORS RATIO
Treynors ratio measures the risk premium of the portfolio, where risk premium
equals the difference between the return of the portfolio and the risk less rate. The
risk premium is related to the amount of systematic risk assumed in the portfolio.
Graphically; the index measures the slope of the line emanating outward from risk
less rate to the portfolio under consideration.
Treynors ratio is given as
(Average return of portfolio Risk less rate of interest)

Treynor Index = ------------------------------------------------------Beta coefficient of portfolio

Jensens Performance Measure (Michael)


It refers the actual return earned in portfolio and return expected out of portfolio
given its level of risk.
CAPM is used to calculate the expected return. The difference between the expected
return and act retain can be said the return earned out of the mandatory of systematic
risk.
This excess return refers the managers predictive ability and managerial skills.
CAPM
rp = rf + (rm rf)

Differential return is calculated as follows:


p = rp - rp

p =positive > Superior returns


p=Negative > Unskilled management (worse portfolio)
p = 0 > Neutral performance
Higher alpha represents superior performance of a fund and vice versa.

CHAPTER-III
INDUSTRY PROFILE
& COMPANY PROFILE

INDUSTRY PROFILE

GROWTH AND HISTORY OF MUTUAL FUNDS

The First investment trust (now called Mutual Fund) began in the Netherlands in the
early 1800s. The first in the U.S. was the New York Stock Trust, which started in 1889.
Since Boston was the economic center of the nation until the turn of the century, the
majority of funds started thereFidelity, Pioneer and Putnum Fund, to name a few. A
Fund that was comprised of both stocks and bonds (the Wellington Fund) started in
1928 and is still part of Vanguard. As the 20's crashed to a close, there were 10 Mutual
Funds in the nation.
Foundation for the Mutual Fund in India was laid by the parliament in 1963. With the
enactment

of

Unit

Trust

of

India

(UTI)

Act

the

then

Finance

Minister

Mr.T.T.Krishnamacharya who initiated the act made it clear to the parliament act UTI would
provide an opportunity for the middle and lower income groups to acquire property in
the form of share. Thus UTI came out with the mission of catering to the needs of
individuals investors whose means are small, with its maiden fund, an open ended fund in
1964.

The Indian Mutual Fund Industry can be studied in four phases:FIRST PHASE BETWEEN 1964 1987

The genesis of the Mutual Fund industry in India can be traced back to 1964 with the
setting up of the Unit Trust of India (UTI) by the Government of India. Since then
UTI has grown to be a dominant player in the industry. UTI is governed by a special
legislation, the Unit Trust of India Act, 1963. It was setup by the Reserve Bank of
India and functioned under the regulatory and administrative control of RBI. In 1978,
UTI was de-linked from the RBI and the administrative control in place of RBI. The
first scheme launched by UTI was unit Scheme 1964. At the end of 1988, UTI had Rs.
6700 crores of assets under the management.

SECOND PHASE 1987-1993(Entry of Public Sector Funds)

Till 1986, UTI was the only mutual player in India. The industry was opened up for
wider participation in 1987 when public sector banks and insurance companies were
permitted to setup Mutual Funds.
Since then, many public sector banks have setup Mutual Funds. SBI Mutual Fund was
the first non-UTI Mutual Funds established in June 1987 followed by can bank
Mutual Funds, Punjab National Bank Mutual Fund, India bank Mutual Funds, Bank of
India, Bank of Boroda Mutual Funds. Also the two Insurance companies LIC (June
1987) and GIC (December 1990) have established Mutual Funds. At the end of 1993,
the Mutual Fund industry had assets under management of Rs. 47004 crores. This
phase changed the mind set of the investors.

THIRD PHASE 1993-2003

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 Funds 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 sector Mutual
Fund registered in July 1993.
Securities Exchange Board of India (SEBI) formulated the Mutual Fund (Regulation)
1993, which for the first time established a comprehensive regulatory framework for
the Mutual Fund Industry. Since then several Mutual Funds have been setup by the
private and joint sectors.

FOURTH PHASE - Since February 2003

In February 2003, following the repeal of the Unit Trust of India act 1963, UTI was
bifurcated into separate entities. One is the specified undertaking of the UTI with asset
under management of Rs. 29835 crores as at the end of January 2003, representing
broadly, the assets of US 64 schemes, assured return and certain other schemes.

The second is UTI Mutual Fund ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered in SEBI and functions under the Mutual Fund regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76000
crores of assets under management and with the setting up of the UTI Mutual Fund. At
the end of October 31, 2006 there were 39 funds which manage assets of Rs. 176726
crores under 426 schemes.

Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure.
The East India Company was the dominant institution in those days and business in its
loan securities used to be transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half a
dozen brokers recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage
business attracted many men into the field and by 1860 the number of brokers increased
into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in
1865, a disastrous slump began (for example, Bank of Bombay Share which had
touched Rs 2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in
1874, found a place in a street (now appropriately called as Dalal Street) where they
would conveniently assemble and transact business. In 1887, they formally established
in Bombay,

the "Native Share and Stock Brokers' Association" (which is

alternatively known as " The Stock Exchange "). In 1895, the Stock Exchange
acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock

Exchange at Bombay was consolidated.


Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry.
After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new
mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in
1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry
was to Calcutta. Also tea and coal industries were the other major industrial groups
in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in
jute shares, which was followed by a boom in tea shares in the 1880's and 1890's;
and a coal boom between 1904 and 1908. On June 1908, some leading brokers
formed "The Calcutta Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in
India with the Swadeshi Movement; and with the inauguration of the Tata Iron and
Steel Company Limited in 1907, an important stage in industrial advancement under
Indian enterprise was reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange"
with 100 members. However, when boom faded, the number of members stood reduced
from 100 to 3, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in South India where there
was a rapid increase in the number of textile mills and many plantation companies
were floated. In 1937, a stock exchange was once again organized in Madras - Madras
Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras
Stock Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged
with the Punjab Stock Exchange Limited, which was incorporated in 1936.
Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed
by a slump. But, in 1943, the situation changed radically, when India was fully
mobilized as a supply base.
On account of the restrictive controls on cotton, bullion, seeds and other commodities,
those dealing in them found in the stock market as the only outlet for their activities.
They were anxious to join the trade and their number was swelled by numerous others.
Many new associations were constituted for the purpose and Stock Exchanges in all
parts of the country were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited
and the Delhi Stocks and Shares Exchange Limited - were floated and later in June
1947, amalgamated into the Delhi Stock Exchnage Association Limited.
Post-independence Scenario

Most of the exchanges suffered almost a total eclipse during depression. Lahore
Exchange was closed during partition of the country and later migrated to Delhi and
merged with Delhi Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.
Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well
established exchanges, were recognized under the Act. Some of the members of the
other Associations were required to be admitted by the recognized stock exchanges on
a concessional basis, but acting on the principle of unitary control, all these pseudo

stock exchanges were refused recognition by the Government of India and they there
upon ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India
(mentioned above). The number virtually remained unchanged, for nearly two decades.
During eighties, however, many stock exchanges were established: Cochin Stock
Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur,
1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange
Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock
Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at
Patna, 1986), Jaipur Stock Exchange Limited (1989),Bhubaneswar Stock Exchange
Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot,
1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established
exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one
recognized stock exchanges in India excluding the Over The Counter Exchange of
India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).
The Table given below portrays the overall growth pattern of Indian stock markets
since independence. It is quite evident from the Table that Indian stock markets
have not only grown just in number of exchanges, but also in number of listed
companies and in capital of listed companies. The remarkable growth after 1985 can
be clearly seen from the Table, and this was due to the favouring government policies
towards security market industry.
Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend
paying, growth-oriented companies with a paid-up capital of atleast Rs.50 million and
a market capitalization of atleast Rs.100 million and having more than 20,000
shareholders are, normally, put in the specified group and the balance in non-specified
group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot
delivery transactions "for delivery and payment within the time or on the date stipulated
when entering into the contract which shall not be more than 14 days following the
date of the contract" : and (b) forward transactions "delivery and payment can be
extended by further period of 14 days each so that the overall period does not exceed
90 days from the date of the contract". The latter is permitted only in the case of
specified shares. The brokers who carry over the outstandings pay carry over charges
(cantango or backwardation) which are usually determined by the rates of interest
prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell
securities for his clients on a commission basis and also can act as a trader or dealer as
a principal, buy and sell securities on his own account and risk, in contrast with the
practice prevailing on New York and London Stock Exchanges, where a member can
act as a jobber or a broker only.
The nature of trading on Indian Stock Exchanges are that of age old conventional
style of face-to-face trading with bids and offers being made by open outcry.
However, there is a great amount of effort to modernize the Indian stock exchanges in
the very recent times.
Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to
many functional inefficiencies, such

as, absence of liquidity, lack of transparency,

unduly long settlement periods and benami transactions, which affected the small
investors to a great extent. To provide improved services to investors, the country's
first ringless, scripless, electronic stock exchange - OTCEI - was created in 1992 by
country's premier financial institutions - Unit Trust of India, Industrial Credit and
Investment Corporation of India, Industrial Development Bank of India, SBI Capital
Markets, Industrial Finance Corporation of India, General Insurance Corporation and
its subsidiaries and CanBank Financial Services.
Trading at OTCEI is done over the centres spread across the country. Securities traded
on the OTCEI are classified into:

Listed Securities - The shares and debentures of the companies listed on the
OTC can be bought or sold at any OTC counter all over the country and
they should not be listed anywhere else

Permitted Securities - Certain shares and debentures listed on other


exchanges and units of mutual funds are allowed to be traded

Initiated debentures - Any equity holding atleast one lakh debentures of a


particular scrip can offer them for trading on the OTC.
OTC has a unique feature of trading compared to other traditional exchanges.
That is, certificates of listed securities and initiated debentures are not
traded at OTC. The original certificate will be safely with the custodian.
But, a counter receipt is generated out at the counter which substitutes the
share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange.
The difference is that the delivery and payment procedure will be completed within 14
days.
Compared to the traditional Exchanges, OTC Exchange network has the
following advantages:

OTCEI has widely dispersed trading mechanism across the country which
provides greater liquidity and lesser risk of intermediary charges.

Greater transparency and accuracy of prices is obtained due to the screen-based


scripless trading.

Since the exact price of the transaction is shown on the computer screen, the
investor gets to know the exact price at which s/he is trading.

Faster settlement and transfer process compared to other exchanges.

In the case of an OTC issue (new issue), the allotment procedure is

completed in a month and trading commences after a month of the issue


closure, whereas it takes a longer period for the same with respect to other
exchanges.
Thus, with the superior trading mechanism coupled with information transparency
investors are gradually becoming aware of the manifold advantages of the OTCEI.
National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian
stock market trading system on par with the international standards. On the basis of
the recommendations of high powered Pherwani Committee, the National Stock
Exchange was incorporated in 1992 by Industrial Development Bank of India,
Industrial Credit and Investment Corporation of India, Industrial Finance Corporation
of India, all Insurance Corporations, selected commercial banks and others.
Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Capital market.

Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial
instruments such as government securities, treasury bills, public sector unit bonds,
commercial paper, certificate of deposit, etc.
There are two kinds of players in NSE:
(a) trading members and
(b) participants.

Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players
like banks who take direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism
which adopts the principle of an order-driven market. Trading members can stay at
their offices and execute the trading, since they are linked through a communication
network. The prices at which the buyer and seller are willing to transact will appear
on the screen. When the prices match the transaction will be completed and a
confirmation slip will be printed at the office of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-

market operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractices prevailing in the

traditional trading mechanism can be done away with greater operational efficiency
and informational transparency in the stock market operations, with the support of
total computerized network.
Unless stock markets provide professionalized service, small investors and foreign
investors will not be interested in capital market operations. And capital market being
one of the major source of long-term finance for industrial projects, India cannot
afford to damage the capital market path. In this regard NSE gains vital importance in
the Indian capital market system.

Preamble

Often, in the economic literature we find the terms development and growth are
used interchangeably. However, there is a difference. Economic growth refers to
the sustained increase in per capita or total income, while the term economic
development implies sustained structural change, including all the complex effects of
economic growth. In other words, growth is associated with free enterprise, where as
development requires some sort of control and regulation of the forces affecting
development. Thus, economic development is a process and growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like
India to take the country in the path of economic development to attain economic
growth.
Why Economic Planning for India?

One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the
levels of income, saving and investment. However, increasing the rate of capital
formation in India is beset with a number of difficulties. People are poverty ridden.
Their capacity to save is extremely low due to low levels of income and high propensity
to consume. Therefor, the rate of investment is low which leads to capital deficiency
and low productivity. Low productivity means low income and the vicious circle
continues. Thus, to break this vicious economic circle, planning is inevitable for
India.
The market mechanism works imperfectly in developing nations due to the ignorance
and unfamiliarity with it. Therefore, to improve and strengthen market mechanism
planning is very vital. In India, a large portion of the economy is non-monitised; the
product, factors of production, money and capital markets is not organized properly.
Thus the prevailing price mechanism fails to bring about adjustments between
aggregate demand and supply of goods and services. Thus, to improve the economy,
market imperfections has to be removed; available resources has to be mobilized and
utilized efficiently; and structural rigidities has to be overcome. These can be attained
only through planning.
In India, capital is scarce; and unemployment and

disguised

unemployment

is

prevalent. Thus, where capital was being scarce and labour being abundant, providing
useful employment opportunities to an increasing labour force is a difficult exercise.
Only a centralized planning model can solve this macro problem of India.
Further, in a country like India where agricultural dependence is very high, one cannot
ignore this segment in the process of economic development. Therefore, an economic
development model has to consider a balanced approach to link both agriculture and
industry and lead for a paralleled growth. Not to mention, both agriculture and

industry cannot develop without adequate infrastructural facilities which only the
state can provide and this is possible only through a well carved out planning strategy.
The governments role in providing infrastructure is unavoidable due to the fact that
the role of private sector in infrastructural development of India is very minimal
since these infrastructure projects are considered as unprofitable by the private sector.

Further, India is a clear case of income disparity. Thus, it is the duty of the state to
reduce the prevailing income inequalities. This is possible only through planning.

Planning History of India

The development of planning in India began prior to the first Five Year Plan of
independent India, long before independence even. The idea of central directions of
resources to overcome persistent poverty gradually, because one of the main policies
advocated by nationalists early in the century. The Congress Party worked out a
program for economic advancement during the 1920s, and 1930s and by the 1938
they formed a National Planning Committee under the chairmanship of future Prime
Minister Nehru. The Committee had little time to do anything but prepare programs
and reports before the Second World War which put an end to it. But it was already
more than an academic exercise remote from administration. Provisional government
had been elected in 1938, and the Congress Party leaders

held positions of

responsibility. After the war, the Interim government of the pre-independence years
appointed an Advisory Planning Board. The Board produced a number of somewhat
disconnected Plans itself. But, more important in the long run, it recommended the
appointment of a Planning Commission.
The Planning Commission did not start work properly until 1950. During the first three
years of independent India, the state and economy scarcely had a stable structure at
all, while millions of refugees crossed the newly established borders of India and
Pakistan, and while ex-princely states (over 500 of them) were being merged into India
or Pakistan. The Planning Commission as it now exists, was not set up until the new
India had adopted its Constitution in January 1950.

Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :

To make an assessment of the material, capital and human resources of the


country,

including technical personnel, and investigate the possibilities of

augmenting such of these resources as are found to be deficient in relation to the


nations requirement.

To formulate a plan for the most effective and balanced use of the countrys
resources.

Having determined the priorities, to define the stages in which the plan should
be carried out, and propose the allocation of resources for the completion of each
stage.

To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political
situation, should be established for the successful execution of the Plan.

To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

To appraise from time to time the progress achieved in the execution of each stage
of the Plan and recommend the adjustments of policy and measures that such
appraisals may show to be necessary.

To make such interim or auxiliary recommendations as appear to it to be


appropriate either for facilitating the discharge of the duties assigned to it or on a
consideration of the prevailing economic conditions, current policies, measures and
development programs; or on an examination of such specific problems as may be
referred to it for advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

Increasing National Income

Reducing inequalities in the distribution of income and wealth

Elimination of poverty

Providing additional employment; and

Alleviating bottlenecks in the areas of : agricultural production,


manufacturing capacity for producers goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year
Plans. Approximately, economic growth has been targeted at a rate of five per cent per
annum. High priority to economic growth in Indian Plans looks very much justified in
view of long period of stagnation during the British rule

COMPANY PROFILE UTI


The origin of the Indian mutual fund industry can be traced back to 1964 when the Indian
Government, with a view to augment small savings within the country and to channelise
these savings to the capital markets, set up the Unit Trust of India (UTI). The UTI was
setup under a specific statute, the Unit Trust of India Act, 1963. The Unit Trust of India
launched its first open-ended equity scheme called Unit 64 in the year 1964, which turned
out to be one of the most popular mutual fund schemes in the country. In 1987, the
government permitted other public sector banks and insurance companies to promote
mutual fund schemes. Pursuant to this relaxation, six public sector banks and two insurance
companies viz. Life Insurance Corporation of India and General Insurance Corporation of
India launched mutual fund schemes in the country.
Securities Exchange Board of India, better known as SEBI, formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive regulatory
framework for the mutual fund industry. This proved to be a boon for the mutual fund
industry and since then several mutual funds have been set up by the private sector as well
as the joint sector. Kothari Pioneer Mutual fund became the first from the private sector to
establish a mutual fund in association with a foreign fund. Since then several private sector
companies have established their own funds in the country, making mutual fund industry
one of the most followed sector by critics and investors alike. The share of private sector
mutual funds too has gone up rapidly.
In the period between 1963 and 1988, when the UTI was the sole player in the industry, the
assets under management grew to about Rs.67 billion. In the second phase between 19881994, when public sector banks and insurance companies were allowed to launch mutual

fund schemes, the total assets in the mutual fund industry grew to about Rs. 610 billion
with the total number of schemes increasing to 167 by the end of 1994. The third phase of
the mutual fund industry, which commenced in 1994, witnessed exponential growth of the
industry, with the advent of private players therein. As on May 31, 2004, the total assets
under management stood at Rs. 1540 billion and the total number of schemes stood at 399.
During the last three and a half decades, UTI has been a dominant player in the mutual
fund industry. The total assets under the management of the UTI as on September 30, 2002
were to the tune of Rs. 442 billion, which amount to almost 41% of the total assets under
management in the domestic mutual fund industry. UTI has witnessed some erosion of
assets pursuant to the last years crisis arising on account of its Unit 64 scheme, the scheme
with largest amount of assets under management. This was the first scheme launched by
the UTI with a significant equity exposure and the returns of which was not linked to the
market. This resulted in a payment crisis when the stock markets crashed during the last
two years, which resulted in some degree of loss of investors confidence in UTI leading to
erosion of its assets under management. This period also gave opportunity to the private
players to demonstrate better returns thereby capturing a significant market share.Whatever
may have happened to mutual funds in the past and whatever one is seeing now, mutual
funds are here to stay as long as they can deliver the aspirations of their investors. One
must not forget that India is a large nation with a population of more than 1 billion people
and the potential continues to be huge. However, to be fair mutual fund managers should
also strive to improve their performance and not blame the vagaries of the market all the
times.
The Company has grown from an institutional brokerage house to a full-fledged financial
intermediary having nationwide presence in major cities with branches and franchisees to
service a wide range of clients. We are committed to gradually enhancing our network in
the near future.
The Company has also invested in the joint-venture company with Standard Chartered
Bank viz. Standard Chartered UTI Securities (P) Ltd. that is engaged in primary dealership
and Government securities. The Company has started Commodity Trading through its
subsidiary, UTISEC COMMODITIES LIMITED, which provides facility of commodity
trading on NCDEX and MCX.

Mission and Vision:


To emerge as one of the leading providers of stock brokerage, investment banking and
related services, at par with the best in the world".

PRODUCTS AND SERVICES:


You have the right to pursue financial independence ... your way. Usectrade is committed
to help you do just that. We deliver State-of-the-art Tools, excellent Customer Care,
Affordable Pricing and Innovative Technology so you can follow your own path. Need
based solutions, that is, what our Product Bouquet is all about
Equity:
At Usectrade, you can place online trades for virtually any stock listed on NSE & BSE.
Usectrade offers plenty of powerful ways to place stock orders ... along with the trading
tools and services that help you move quickly and conveniently. Ways to trade stock
Delivery based Trading:
Place delivery based orders for all stocks listed on NSE & BSE Intra-day Trading:
Execute Margin Orders upto 3 to 4 times your available funds. The same is available for
select group of stocks listed on NSE & BSE.
ANST: Sell shares before you receive the same in your demat account. You can avail of
this facility 1st and 2nd day after the buy order date.
Derivative:
With a Derivative-approved Usec trade account, you can pursue a wide range of Futures &
Options trading strategies with speed and ease. We deliver the support, information and
structure that quickly lets you spot potential opportunities and act on them fast
Mutual Fund:
At Usectrade, we offer access to more than 1000 mutual fund schemes from leading fund
families. These funds provide broad diversification and cover a range of investment
objectives, philosophies, asset classes and risk exposures. Trades may be placed via the
Internet, Interactive Voice Response (IVR) phone system or with a broker.
IPO:
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investments in a relatively short period of time. We have made investing in IPOs hassle
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Commodities:
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Insurance:
Usectrade in association with Birla Sunlife brings you a secure insurance option
without the hassles and worries of a conservative insurance plan. With least paperwork,
you get the dual benefit of a risk cover and savings. What's more, we shall send you regular
reminders about your premium payments due.
Bonds
Fixed income securities can help reduce your risk within an investment portfolio
while providing a steady stream of income over time. Currently you can choose to invest
online in GOI Bonds. If you are looking to diversify your portfolio, possibly improve your
tax efficiency and/or reducing your risk exposure, you may want to consider making fixed
income securities part of your personal investment strategy
Research:
Charting Tools - Get a combined view of stocks, rapid price changes and volume increases
with this pre-trade analytic tool. Enables you to do technical market analysis of stocks on
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Sector Watch - You can access sector-wise information to track sectors and individual
scrips within the sector, which makes analysis easy for you.
Corporate Infohub - We provide you with exhaustive company information, detailed
financials and ratios. And we also allow you to evaluate financials across peer companies.
Our extensive database covers more than 4000 companies.
Newsroom - View live market news from the most reliable sources on equity, debt, politics
and general events. You even have access to live news analysis, market commentary and
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Customer Service & Other Value Added Services


Online Query Resolution - With our "Quick Mail" tool you can resolve all your problems
online.

Online Ledger - View your Digital Contract Note, summary of your transactions using
Online "Bills & Accounts"
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Dedicated Customer Care Centre & State-of- the-art Phone-2-Trade Desk
Interactive Demo - A step-by-step guide to enable you to navigate through the process of
Investing Online on our website Usectrade.com
Subscription to Mailers - Subscribe to our Inhouse Research Reports covering our entire
Product Bouquet
Investment Banking and Advisory Services
Investment Banking is one of the prime focus areas of the company and we provide value
added, customized solutions to our clients. Leveraging on the knowledge, expertise and
experience of our professionals, we offer services that range from managing public issues,
debt and equity placements, corporate advisory services and financial consultancy to
facilitating mergers and acquisitions.
The Investment Banking Team's business philosophy emphasizes:

Long-term relationship with clients.

A strong research-based advice.

Innovative solutions and speedy execution.

Ethical and transparent conduct of business.

It has always been the endeavor of UTI Securities to bring all the market constituents
together in a mutually beneficial relationship.
Equity capital Markets
The Issue Management group focuses on public issues, open offers and buy back
issues. Our proximity to large institutions gives us an added advantage in placing large
equity issues. This division is supported by a nationwide network comprising of 12
branches, 15 franchisees and sub-brokers across the country for retail distribution. Within a
short span, UTISEL has already been recognized as one of the leading merchant bankers in

India.
UTI Securities has consistently provided professional guidance and expert services.
Over the years, it has developed strong relationships with institutional investors and other
market intermediaries, enabling it to structure and successfully place a wide array of
Capital Market products that meet the requirements of the issuer, investor and the market.
The Equity Capital Markets group offers the following services:

Initial Public Offerings

Rights Issues

Buy-Back

Underwriting

Open Offers

Delisting of Securities

Private Equity

The Equity Capital Markets group seamlessly draws on the expertise provided by the
Equity Research and Equity Sales teams on all the public offerings.
We have been associated with a number of issues in different capacities as Lead
Managers, Co Managers, Syndicate/Sub-syndicate Members, etc. in the past. We
successfully lead managed recently the public issue of Four Soft Ltd., a software products
company, with an issue size aggregating Rs. 200 million. We were also involved as a
syndicate member in the issue of Indraprastha Gas Ltd. where we procured over 12,000
applications.
Clients:
We are currently lead managing the issues of SMS Pharmaceuticals, a bulk drugs
manufacturer; Glenmark Laboratories Ltd. which is in formulations segment; Vivimed
Labs Ltd., manufacturer of pharmaceutical ingredients catering to the personal care
industry and Crew BOS Products Ltd., a fashion accessories manufacturer. The size of the
said issues ranges from Rs. 150 million to Rs. 500 million. We are also Lead Managing
Rights Issue of Varun Shipping Company Ltd of Rs.130 -150 Crores. We also pursue
Buyback/Delisting offers amongst others.
We are aiming at making further inroads by securing mandates of premier companies in the
Pharmaceutical, Textiles, Information Technology, Hospitality, Banking and Housing

Finance industries amongst others.

Private Equity
The Private Equity Group arranges equity placement through the off-market route using its
privileged relationships with various Venture Capital and Strategic & Portfolio Equity
investor who operate from within the country as well as from abroad. The Private Equity
group assists companies seeking capital infusions in the form of seed capital, venture
capital, angel investment, strategic investment, and mezzanine financing from the private
equity marketplace.
The private equity group identifies start up, later stage projects for investing in wellmanaged companies, which are placed to grow rapidly and to take advantage of the
favourable economic conditions existing within the space with a clearly defined business
model. Private Equity Group has followed the philosophy of being a multi-sector player, as
it believes that in the Indian context it ensures an optimum balance of risk and return to its
investors. Private Equity Group has demonstrated its industry expertise in different sectors
by backing diverse sectors like Pharma, Power, Entertainment, Information Technology
etc.
The Private Equity division has been successful in arranging pre IPO funding from venture
capitalists/Private Equity investors. Recently we have done the placement for Four Soft
Ltd. and Glenmark Laboratories Ltd. aggregating Rs. 140 million.

BIRLA SUNLIFE MUTUAL FUND


Birla Sunlife Mutual Fund is a joint venture between Sun Life Assurance Company, the
Canada-based financial service organization and the Indian industrial house of Aditya
Birla, this AMC was launched in the mid-90s. Both the partners are well known in all
areas that they operate in. While Aditya Birla is a household name in India and has
renowned brands in businesses spread across industries as wide ranging as Aluminium
(Hindalco), Textiles (Grasim), Fertilizers (Indo-Gulf), Finance (Birla Global Finance Ltd.)
and Rayon (India Rayon), Sun Life is a leading financial service organization in North
America. Sun Life provides services related to risk management, money management and
wealth management across globe. Having established itself at Toronto in 1871, it has now
spread its wings across Asia Pacific, U.S.A. and U.K. It also has a significant presence
through MFS Investment Management in U.S. and Spectrum United Mutual Funds in
Canada.
The major strengths of the group are its expertise drawn from managing assets over the
globe, a big agent network and an ability to cater to the need of people. Drawing on the
expertise of a worldwide staff of over 10,000 people and a network of more than 65,000
agents and distributors, Sun Life is committed to providing not just products and services,
but solutions for clients financial and risk management needs. Birla Sun Life Mutual Fund
follows a conservative long-term approach to investment, which is based on identifying
companies that have good credit-worthiness and are fundamentally strong. It places a lot of
emphasis on quality of management and risk control. This is done through extensive
analysis that includes factory visits and field research. It has one of the largest team of
research analysts in the industry. The company is one of India's leading private mutual
funds with a large customer base.
Birla Mutual Fund has been constituted as a trust under the provisions of the Indian Trusts
Act, 1882 and registered with SEBI. The objective of Mutual Fund is to offer to the public
and other eligible investors units in one or more schemes in the Mutual Fund for making
group or collective investments primary in Indian Securities in accordance with and as
permitted under the directions and guidelines issued from time to time by SEBI. The
Sponsors of Birla Mutual Fund are Birla Global Finance Ltd. and Sun Life (India) AMC
Investments Inc., which is wholly owned subsidiary of Sun Life Financial Services
Company of Canada. Birla Sun Life Trustee Company Private Ltd. (BSLTC) is a company

incorporated with limited liability under the Companies Act, 1956. Birla Sun Life Asset
Management Company Ltd. (BSLAMC) is the investment manager of Birla Mutual
Fund.

Vision
To be the most trusted name in investment and wealth management, to be the preferred
employer in the industry and to be a catalyst for growth and excellence of the asset
management business in India.

Mission
To consistently pursue investor's wealth optimization by

Achieving superior and consistent investment results

Creating a conductive environment to hone and retain talent

Providing customer delight

Institutionalizing system-approach in all aspects of functioning

Upholding highest standards of ethical values at all times

Schemes Offered by Birla Sunlife Mutual Fund


Equity Schemes
Investments in equities are made with a long-term objective in mind. Empirical studies
have indicated that despite the short-term volatility that is characteristic of equities, over
the longer term, equities have generated superior returns. This makes equities the best
instruments for long-term growth of capital. Investing in a diversified equity portfolio can
help minimize risk as the portfolio gets exposure across various sectors, while enabling
investors to capitalize on the fundamental upsides presented by these sectors. The various
Equity schemes are

Birla Advantage Fund

Birla Dividend Yield Plus

Birla Midcap Fund

Birla India Opportunities Fund

Birla MNC Fund

Birla Equity Fund

Birla Index Fund

Debt Schemes

Birla Income Plus

Birla Gilt Plus

Birla Bond Plus

Birla Cash Plus

Birla MIP

Birla MIP-II

Birla Floating Rate Fund

Birla Bond Index Fund

Other Schemes

Birla Asset Allocation Fund

Birla Balance

Offshore Schemes

India Advantage Fund

Excel India Fund

Investment Plans Offered

GROW (Gain Regularly On Withdrawals)

Formerly known as Regular Withdrawal Plan (RWP) - is the best alternative for investors
who need regular income. GROW is available in two options:

Fixed Withdrawal: Where investors specify amounts they wish to withdraw from
their investment on a monthly/quarterly basis.

Appreciation Withdrawal: Where they can withdraw 90% of their appreciated


amount on a monthly/quarterly basis.

REAP (Regular Extra Advantage Plan)


The REAP formerly known as Systematic Investment Plan (SIP) - lets investors invest
small amounts of money on a monthly basis and gives them the option of increasing these
amounts as their investment capacity increases.
STEER (Systematic Transfer to Earn Equity Returns)
While investing in a debt, fund normally assures of fairly consistent returns, equities have
the potential to create wealth. But the unpredictability in equity funds can be quite a

deterrent when Investors make a choice. To combine the best of both worlds Birla presents
STEER formerly known as Systematic Transfer Plan (STP).
UNIQUE FEATURES OF BIRLA
Birla Bond Exchange
Birla Bond Exchange is a unique facility introduced by Birla Sun Life AMC Ltd. to
help retail investors replace their existing portfolio of debt securities with a diversified debt
fund in order to optimize returns and improve liquidity.
Readicheques
A product add-on available for Resident Indian investors in the growth plans of the debt
schemes, i.e. Birla Income Plus, Birla Cash Plus, Birla Bond Plus, Birla MIP and Birla Gilt
Plus. Readicheques are pre-issued undated repurchase cheques drawn in favour of the first
applicant. Under normal circumstances, when investor wishes to redeem, he needs to fill up
a repurchase request and submit it to the Investor Service Centre. Normally the repurchase
warrant is delivered to the investor on the third working day from the date of submitting
the redemption request. With Readicheques, all the investor needs to do is to request for
preissued warrants in advance and deposit them as and when needed. Thus, the hassles of
filling in a redemption request, submitting at an Investor Service Centre and then waiting
for the redemption warrant to reach him are done away with this product add-on.
Birla Gift Certificates
Birla Gift Certificates brought to investors is a novel idea for presenting a gift for special
occasions, festivals or simply to say you care. Investors can present these Gift Certificates
to their loved ones or their valued business associates on special occasions. Birla Gift
Certificates can be used for acquiring units of five funds - Birla Income Plus (BIP), Birla
Monthly Income Plan (MIP), Birla Midcap, Birla Dividend Yield Plus (BDYP) and Birla
Advantage Fund (BAF). These Gift Certificates can be bought from any of BSLAMC
branches.

CHAPTER-IV
DATA ANALYSIS & INTERPRETATION

Data Analysis & Interpretation

For the purpose of data analysis and interpretation the following mutual
funds have been chosen;

a)

UTI MNC fund

b)

UTI Growth fund

c)

Birla Sun life MNC fund

d)

Birla Sun life Growth fund

Each product has been analyzed using the following tools and the results tabulated,
presented graphically and the evaluation of the same has been given under the
caption 'Interpretation' below the graph.

The fund NAVs are compared with the bench mark of nifty for the analysis.

For analysis Net Asset Value ( NAV) of the schemes have been taken for 18 months from
August-13 to March-15

Month

Market
Level
( NIFTY)

Birla
MNC Fund

UTI MNC
Fund

UTI
Growth
Fund

Birla Growth
fund

Aug-13

3033.45

21.08

159.95

57.62

7.94

Sep-13

3046.75

21.22

162.21

57.94

7.98

Oct-13

3121.45

21.69

163.7

59.18

8.1

Nov-13

3112.8

21.86

163.84

59.22

8.12

Dec-13

2920.4

20.7

154.38

56.44

7.7

Jan-14

2873

20.18

154.48

55.55

7.57

Feb-14

2773.1

19.75

152.69

53.99

7.42

Mar-14

2744.95

19.64

152.59

53.55

7.39

Apr-14

2835.3

20

155.28

54.64

7.53

May-14

2736.7

19.56

152.9

53.31

7.33

June-14

2828.45

19.87

154.27

54.56

7.46

July-14

2846.2

19.98

156.12

54.73

7.49

Aug-14

2796.6

19.63

155.72

53.92

7.38

Sep-14

2706.15

19.18

153.08

52.47

7.25

Oct-14

2713.8

19.11

151.88

52.5

7.24

Nov-14

2678.55

18.71

150.67

51.76

7.14

Dec-14

2771.35

19.24

151.51

53.03

7.24

Jan-15

2849.5

19.62

152.33

54.04

7.35

Feb-15

2823.95

19.47

151.76

53.86

7.34

Mar15

2874.8

19.71

152.91

54.54

7.42

Average

2854.36

20.01

155.11

54.84

7.52

Calculations of Risk of Birla MNC fund for the period of 18 months from August-12 to March-

15

Month

Market Level
( NIFTY)

Market
Return

Birla MNC fund

Return

21.08

Aug-13

3033.45

Sep-13

3046.75

0.44

21.22

0.66

Oct-13

3121.45

2.45

21.69

2.21

Nov-13

3112.8

-0.28

21.86

0.78

Dec-13

2920.4

-6.18

20.7

-5.31

Jan-14

2873

-1.62

20.18

-2.51

Feb-14

2773.1

-3.48

19.75

-2.13

Mar-14

2744.95

-1.02

19.64

-0.56

Apr-14

2835.3

3.29

20

1.83

May-14

2736.7

-3.48

19.56

-2.20

June-14

2828.45

3.35

19.87

1.58

July-14

2846.2

0.63

19.98

0.55

Aug-14

2796.6

-1.74

19.63

-1.75

Sep-14

2706.15

-3.23

19.18

-2.29

Oct-14

2713.8

0.28

19.11

-0.36

Nov-14

2678.55

-1.30

18.71

-2.09

Dec-14

2771.35

3.46

19.24

2.83

Jan-15

2849.5

2.82

19.62

1.98

Feb-15

2823.95

-0.90

19.47

-0.76

Mar-15

2874.8

1.80

19.71

1.23

Average
Return

-0.36

-0.42

SD (Risk)

2.75

2.15

Beta

0.75

Graphical Presentation of Birla MNC fund For the period of 18


months from August-10 to March-15

8
6
4
2
0
-2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-4

Series2
Series1

-6
-8
-10
-12
-14

Series 1 : Market returns


Series 2 : UTI (NAV) returns

Interpretation:
Birla MNC fund has been analyzed and it is found that there is a negative
growth. Howe ver on the basis of the average returns of Birla MNC fund there is a
negative growth 0.42 as against the index average of negative 0.36 the beta being
less than 1 the stock is not highly volatile.

Calculation of Risk of UTI MNC fund for the period of 18 months from August-13 to

March-15

Month

Aug-13

Market Level
( NIFTY)

Market
Return

3033.45

UTI MNC fund

Return

159.95

Sep-13

3046.75

0.44

162.21

1.41

Oct-13

3121.45

2.45

163.7

0.92

Nov-13

3112.8

-0.28

163.84

0.09

Dec-13

2920.4

-6.18

154.38

-5.77

Jan-14

2873

-1.62

154.48

0.06

Feb-14

2773.1

-3.48

152.69

-1.16

Mar-14

2744.95

-1.02

152.59

-0.07

Apr-14

2835.3

3.29

155.28

1.76

May-14

2736.7

-3.48

152.9

-1.53

June-14

2828.45

3.35

154.27

0.90

July-14

2846.2

0.63

156.12

1.20

Aug-14

2796.6

-1.74

155.72

-0.26

Sep-14

2706.15

-3.23

153.08

-1.70

Oct-14

2713.8

0.28

151.88

-0.78

2678.55

-1.30

150.67

-0.80

Dec-14

2771.35

3.46

151.51

0.56

Jan-15

2849.5

2.82

152.33

0.54

Feb-15

2823.95

-0.90

151.76

-0.37

2874.8

1.80

152.91

0.76

Nov-14

Mar-15
Average
Return
SD (Risk)
Beta

-0.36

-0.28

2.75

1.69
0.51

Graphical Presentation of UTI MNC fund For the period of 18


months from August-13 to March-15
6
4
2
0
-2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

-4
-6

Series2
Series1

-8
-10
-12
-14

Series 1 : Market return


Series 2 : UTI MNC Fund (NAV) Returns
Interpretation:
UTI MNC fund have been analysed and it is found that there is a negative growth.
However on the basis of the average returns of Birla Sun life there is a negative
growth 0.28as against the index average of negative 0.36 the beta being less than
1 the stock is not highly volatile.

Calculations of Risk of UTI Growth fund for the period of 18 months from August-10
to March-15

Month
Aug-13

Market Level
( NIFTY)

Market
Return (x)

UTI Growth fund

3033.45

Return(y)

57.62

Sep-13

3046.75

0.44

57.94

0.56

Oct-13

3121.45

2.45

59.18

2.14

Nov-13

3112.8

-0.28

59.22

0.07

Dec-13

2920.4

-6.18

56.44

-4.69

Jan-14

2873

-1.62

55.55

-1.58

Feb-14

2773.1

-3.48

53.99

-2.81

Mar-14

2744.95

-1.02

53.55

-0.81

Apr-14

2835.3

3.29

54.64

2.04

May-14

2736.7

-3.48

53.31

-2.43

June-14

2828.45

3.35

54.56

2.34

July-14

2846.2

0.63

54.73

0.31

Aug-14

2796.6

-1.74

53.92

-1.48

Sep-14

2706.15

-3.23

52.47

-2.69

Oct-14

2713.8

0.28

52.5

0.06

2678.55

-1.30

7.14

-1.38

Dec-14

2771.35

3.46

7.24

1.40

Jan-15

2849.5

2.82

7.35

1.52

Feb-15

2823.95

-0.90

7.34

-0.14

Mar-15

2874.8

1.80

7.42

1.09

Nov-14

Average
Return
SD (Risk)

-0.36

-0.42

2.75

1.86
0.65

Beta

Graphical presentation of UTI Growth fund For the period of 18 months


from August-13 to March-15

4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
-2

Series1
Series2

-4
-6
-8

Series 1 : Market returns


Series 2 : UTI Growth fund (NAV) Returns

Interpretation:
UTI Growth fund has been analyzed and it is found that there is a negative growth.
However on the basis of the average returns of UTI Growth fund there is a negative
growth 0.42 as against the index average of negative 0.36 the beta being less than 1
the stock is not highly volatile.

Comparative Study of the performance of the Selected Schemes


Sharp index and Treynor index are calculated For 18 months from
August-13 to March-15

Name of the
Fund

Return
(Rm)

Risk

Beta ()

Rf

(std dev)

Sharp' s

Treynor

(Rm- Rf)/

(Rm-Rf)/

Birla MNC fund


-0.42

2.15

0.75

-0.28

1.69

0.51

-0.35

2.07

0.75

-0.42

1.86

0.65

0.06

-0.22

-0.64

-0.20

-0.67

-0.20

-0.55

-0.26

-0.73

UTI MNC fund

UTI Growth fund

0.06

0.06

Birla Growth
fund

0.06

The graphical representation of Sharp Index:

0
-0.05

Birla MNC fund

UTI MNC fund UTI Growth fund

Birla Growth
fund

-0.1
-0.15
-0.2

-0.22

-0.2

-0.2

-0.25

-0.26

-0.3

Interpretation:

From the above table and graph we can know that UTI MNC fund and UTI growth
are giving good returns and they are in first position,

And the second position is Birla MNC fund

The graphical representation of TREYNER Index:

0
-0.1

Birla MNC fund

UTI MNC fund

UTI Growth fund Birla Growth fund

-0.2
-0.3
-0.4
-0.5
-0.6

-0.55

-0.64

-0.7

-0.67
-0.73

-0.8

Interpretation:

From the above table and graph we can know UTI Growth f u n d is performing
well and it is in first position

And the second position is Birla MNC Fund

The general trend in the reduction of the market price for various mutual funds
schemes studied is not encouraging the stock market index has also been
falling continuously because of general economic slowd own howe ver the funds
are ranked considering sharp and trenyors in the order of performance

CHAPTER-V
DATA ANALYSIS & INTERPRETATION

FINDINGS
SHARPES: As per Sharpe performance measure, a high Sharpe ratio is preferable as
it indicates a superior risk adjusted performance of a fund. From the above table UTI
MNC fund and UTI Growth a better risk-adjusted performance out of considered
schemes

TREYNORs: As per TREYNORS ratio the Treynors reward to volatility - having


high positive index is favorable. Therefore, as per this ratio also UTI Growth is
preferable.

SUGGESTIONS TO INVESTORS:
Investing Checklist

Financial goals & Time frame


(Are you investing for retirement? A childs education? Or for current income? )
Risk Taking Capacity
Identify funds that fall into your Buy List
Obtain and read the offer
Documents match your objectives

In terms of equity share and bond weightings, downside risk

protection, tax benefits offered, dividend payout policy, sector focus

Performance of various funds with similar objectives for at least 3-5 years

Think hard about investing in sector funds For relatively aggressive investors

Close touch with developments in sector, review portfolio regularly Look for `load'
costs

Management fees, annual expenses of the fund and sales loads

Look for size and credentials

Asset size less than Rs. 25 Crores

Diversify, but not too much

Invest regularly, choose the S-I-P

MF- an integral part of your savings and wealth building plans.

Portfolio Decision
The right asset allocation
i. Age = % in debt instruments
ii. Reality= different financial position, different allocation
iii. Younger= Riskier

Selecting the right fund/s


i. Based on schemes investment philosophy
ii. Long-term, appetite for risk, beat inflation equity funds best

TRAPS TO AVOID
IPO Blur
Begin with existing schemes (proven track record) and then new schemes
iii. Avoid Market Timing

MF Comparison
Absolute returns
% Difference of NAV
iv. Diversified Equity with Sector Funds NO

Benchmark returns
v. SEBI directs
vi. Fund's returns compared to its benchmark

Time period Equal to time for which you plan to invest


vii. Equity- compare for 5 years, Debt- for 6 months

Market conditions

RECOMMENDATIONS AND SUGGESTIONS TO AMCS:


1) Brand building:

Brand building is an exercise, which every business enterprise will have. Brand
is the soul of an institution; it survives on it, lives with it and cherishes it. Example:
BIRLA SUNLIFE MUTUAL FUND has a brand, every bank, insurance companies;
mutual fund companies have got their own brands.
2) Strength full Strategies:

Every AMC should try to turn into a more modern, a more vibrant, a more
transparent and regulatory compliance institution. It is with this in mind, every
institution should try to come up with verity of different type of products to fill
different investment objectives
3) Marketing tools for total quality achievement:
a) Large Network.
b) Effective Man power
c) Distribution across the Market
d) Customer relations(Building better relationships)
e) Value added service
f) Better transparency level
g) Building brand name as a disciplined player

4) Innovation:

MF industry can be classified morely into three categories like equity, debt and
balanced. And there is also complexive in nature. Fund managers are not able to
reach niche market. The products are should be innovative that can meet niche
market. Here MF should follow the FMCG industry innovative strategy.

The Ground rules of Mutual Fund Investing


Assess yourself
1) Try to understand where the money is going
2) Don't rush in picking funds, think first
3) Invest. Dont speculate
4) Dont put all the eggs in one basket
5) Be regular
6) Do your homework
7) Find the right funds
8) Keep track of your investments
9) Know when to sell your mutual funds

CONCLUSIONS

From the study analysis conducted it is clear that in UTI MNC Fund is performing
very well.

Investing in the UTI Growth fund will leads to profits.

By seeing the overall performance UTI Growth is performing very well.

The prospective investors are needed to be made aware of the investment in mutual
funds.

The Industry should keep consistency and transparency in its management and
investors objectives.

There is 100% growth of mutual fund as foreign AMCS are in queue to enter the
Indian markets.

Mutual funds can also penetrate in to rural areas.

BIBILIOGRAPHY

TEXT BOOKS
I.Donald E Fischer Ronald J Jordan

H.Sadhak

Mutual Fund in India

II. WEB SITES

www.uti securities.com www.birlasunlife.com www.bseindia.com


www.nseinda.com www.bluechipinda.co.in
III. MAGAZINES

Business India Business World UTI fund watch


IV. NEWS PAPERS

Economic Times Business Standard.