Академический Документы
Профессиональный Документы
Культура Документы
com
A project report on
MUTUAL FUNDS
At
Submitted by
Ms. SWETHA. Y.P
HT No !"#$%&'(!%%"
Project submitted in p)rti)* +u*+i**ment +or
T,e
A-)rd + T,e De/ree +
MASTE0 F 1US2NESS ADM2N2ST0AT2N T
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 1/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
DE6LA0AT2N
time beore%
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 2/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
6E0T2F26AT2N
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 3/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
6NTENTS
Introduction
Need o the study
II Re)ie' o Literature
III Industry Proile
I/ 0ompany Proile
/II !iblio"raphy
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 4/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
6HAPTE0 2 5 2NT0DU6T2N
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 5/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 6/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
2NT0DU6T2N
A Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho
share a common inancial "oal% The money thus collected is then in)ested in capital
mar(et instruments such as shares# debentures and other securities% The income earned
throu"h these in)estments and the capital appreciations reali1ed are shared by its unit
holders in proportion to the number o units o'ned by them% Thus a Mutual Fund is the
most suitable in)estment or the common man as it oers an opportunity to in)est in a
di)ersiied# 2proessionally mana"ed bas(et o securities at a relati)ely lo' cost%
The project idea is to project mutual unds as the better a)enue or in)estment% Mutual
und is producti)e pac(a"e or a lay2in)estor 'ith limited inances% Mutual und is a
)ery old practice in U%S%# and it has made a recent entry into India% 0ommon man in
India still inds 3!an(4 as a sae door or in)estment% This sho's that mutual unds
ha)e not "ained a stron" oot2hold in his lie%
The project creates an a'areness that the mutual und is 'orthy in)estment practice%
The )arious schemes o mutual unds pro)ide the in)estor 'ith a 'ide ran"e o
in)estment options accordin" to his ris(2bearin" capacities and interest% !esides# they
also "i)e a handy return to the in)estor% The project analyses )arious schemes o mutual
und by ta(in" dierent mutual und schemes rom dierent AM04S% The uture
challen"es or mutual unds in India are also considered%
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 7/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
The study basically made to educate the in)estors about Mutual Funds% Analy1e the
)arious schemes to hi"hli"ht the ris( and return o di)ersity o in)estment that mutual
unds oer% Thus# throu"h the study one 'ould understand ho' a common man could
ruitully con)ert a pittance into "reat penny by 'isely in)estin" into the ri"ht scheme
accordin" to his ris(2 ta(in" abilities%
A small in)estor is the one 'ho is able to correctly plan 6 decide in 'hich proitable 6
sae instrument to in)est% To loc( up one4s hard earned money in a sa)in"s ban(4s
account is not enou"h to counter the monster o inlation% Usin" simple concepts o
di)ersiication# po'er o compound interest# stable returns 6 limited e7posure to e8uity
in)estment# one can ma7imi1e his returns on in)estments 6 multiply one4s sa)in"s%
In)estment is a serious proposition one has to loo( into )arious actors beore decidin"
on the instruments in 'hich to in)est% To sa)e is not enou"h% $ne must in)est 'isely 6
"et ma7imum returns% $ne must plan in)estment in such a 'ay that his in)estment
objecti)es are satisied% A sound in)estment is one 'hich "i)es the in)estor reasonable
returns 'ith a proper proitable mana"ement
This report "i)es the details about )arious in)estment objecti)es desired by an in)estor#
details about the concept 6 'or(in" o mutual und%
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 8/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
No' a days# there is a lot o scope or the mutual unds% The Financial mana"ers
ha)e to decide 'hether to in)est in the Shares# bonds# debentures# real estate# "old and
other 0ommodities to "et the ma7imum beneits or unds% The inancial mana"ers
should also reduce the ris( rom the In)estments% The scope o the study is conirmed
to the sectoral unds a)ailable in Indian mutual unds%
0ESEA06H METHDL8Y
In the present project 'or( the data as been collected rom a)ailable source that is
secondary data li(e 'ebsites# Ne'spapers and ma"a1ines% The sample si1e ta(en is o :
dierent sectoral unds
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 9/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
S)mp*in/ Desi/n
Samplin" method use is non probabilistic jud"mental samplin"% The Mutual Fund
Scheme or the study ha)e been selected based on ollo'in" ; criteria
.ro'th option or the entire selected scheme has been considered%
0ese)rc, Desi/n
$. 1enc,m)r< 2nde= For this study the <= shares mar(et inde7 S6P 0N>
NIFT- has been used as the mar(et inde7%
!. Period o+ study Period o study has been ta(en as < years startin" rom
5st April# 9==? to 5=th @uly 9=5=%
;. 0is< Free 0)te + 0eturn Ris( ree rate o return reers to that
minimum return on an in)estment that has no ris( o loosin" the in)estment
o)er 'hich it is earned% For this purpose o this study ris( ree rate o return
is represented by 5 days Treasury bill%
L2M2TAT2NS
5% The analysis is based on historical data and thus indicates the past perormance
'hich may not al'ays be indicati)e o the uture perormance%
9% Dierent schemes consider dierent mar(et indices as their benchmar(s# but or
the purpose o uniormity in the study all schemes ha)e to be compared a"ainst
same benchmar( inde7%
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 10/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
;% Sharpe ratio Cin its simplest orms that the relationship bet'een ris( and return
is linear and remain linear throu"hout its entire ran"e% /arious research 'or(s
conducted in this re"ard sho' that the relationship is not as simple as 0apital
Mar(et theory 'ould su""est% This is an inherent 'ea(ness o capital Asset
Pricin" Model%
B% The time period considered by the study is only three yearsE a lar"er period
could ha)e ensured co)era"e o a ull mar(et cycle# thus "i)in" a more real
picture o the perormance o the schemes%
<
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 11/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 12/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
A Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho share a
common inancial "oal% The money thus collected is in)ested by the und mana"er in
dierent types o securities dependin" upon the objecti)e o the scheme% These could
ran"e rom shares to debentures to money mar(et instruments% The income earned
throu"h these in)estments and the capital appreciations reali1ed by the scheme are
shared by its unit holders in proportion to the number o units o'ned by them Cpro
rata% Thus a Mutual Fund is the most suitable in)estment or the common man as it
oers an opportunity to in)est in a di)ersiied# proessionally mana"ed portolio at a
relati)ely lo' cost% Anybody 'ith an in)estible surplus o as little as a e' thousand
rupees can in)est in Mutual Funds% ,ach Mutual Fund scheme has a deined in)estment
objecti)e and strate"y%
A mutual und is the ideal in)estment )ehicle or today4s comple7 and modern inancial
scenario% Mar(ets or e8uity shares# bonds and other i7ed income instruments# real
estate# deri)ati)es and other assets ha)e become mature and inormation dri)en% Price
chan"es in these assets are dri)en by "lobal e)ents occurrin" in ara'ay places% A
typical indi)idual is unli(ely to ha)e the (no'led"e# s(ills# inclination and time to (eep
trac( o e)ents# understand their implications and act speedily% An indi)idual also inds
it diicult to (eep trac( o o'nership o his assets# in)estments# bro(era"e dues and
ban( transactions etc%
A mutual und is the ans'er to all these situations% It appoints proessionally 8ualiied
and e7perienced sta that mana"es each o these unctions on a ull time basis% The
lar"e pool o money collected in the und allo's it to hire such sta at a )ery lo' cost
to each in)estor%
In eect# the mutual und )ehicle e7ploits economies o scale in all three areas 2
research# in)estments and transaction processin"% +hile the concept o indi)iduals
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 13/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
comin" to"ether to in)est money collecti)ely is not ne'# the mutual und in its present
orm is a 9= th century phenomenon%
In act# mutual unds "ained popularity only ater the Second +orld +ar% .lobally#
there are thousands o irms oerin" tens o thousands o mutual unds 'ith dierent
in)estment objecti)es% Today# mutual unds collecti)ely mana"e almost as much as or
more money as compared to ban(s%
A drat oer document is to be prepared at the time o launchin" the und% Typically# it
pre speciies the in)estment objecti)es o the und# the ris( associated# the costs
in)ol)ed in the process and the broad rules or entry into and e7it rom the und and
other areas o operation% In India# as in most countries# these sponsors need appro)al
rom a re"ulator# S,!I CSecurities e7chan"e !oard o India in our case% S,!I loo(s at
trac( records o the sponsor and its inancial stren"th in "rantin" appro)al to the und
or commencin" operations%
A sponsor then hires an asset mana"ement company to in)est the unds accordin" to the
in)estment objecti)e% It also hires another entity to be the custodian o the assets o the
und and perhaps a third one to handle re"istry 'or( or the unit holders Csubscribers
o the und%
In the Indian conte7t# the sponsors promote the Asset Mana"ement 0ompany also# in
'hich it holds a majority sta(e% In many cases a sponsor can hold a 5== sta(e in the
Asset Mana"ement 0ompany CAM0% ,%"% !irla .lobal Finance is the sponsor o the
!irla Sun Lie Asset Mana"ement 0ompany Ltd%# 'hich has loated dierent mutual
unds schemes and also acts as an asset mana"er or the unds collected under the
schemes
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 14/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
At the end o 5;# the mutual und industry had assets under mana"ement o
Rs%B:#==B crores%
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 15/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Pioneer Cno' mer"ed 'ith Fran(lin Templeton 'as the irst pri)ate sector mutual und
re"istered in @uly 5;%
The 5; S,!I CMutual Fund Re"ulations 'ere substituted by a more comprehensi)e
and re)ised Mutual Fund Re"ulations in 5?% The industry no' unctions under the
S,!I CMutual Fund Re"ulations 5?%
The number o mutual und houses 'ent on increasin"# 'ith many orei"n mutual unds
settin" up unds in India and also the industry has 'itnessed se)eral mer"ers and
ac8uisitions% As at the end o @anuary 9==;# there 'ere ;; mutual unds 'ith total
assets o Rs% 5#95#G=< crores% The Unit Trust o India 'ith Rs%BB#<B5 crores o assets
In February 9==;# ollo'in" the repeal o the Unit Trust o India Act 5?; UTI 'as
biurcated into t'o separate entities% $ne is the Speciied Underta(in" o the Unit Trust
o India 'ith assets under mana"ement o Rs%9#G;< crores as at the end o @anuary
9==;# representin" broadly# the assets o US ?B scheme# assured return and certain
other schemes% The Speciied Underta(in" o Unit Trust o India# unctionin" under an
administrator and under the rules ramed by .o)ernment o India and does not come
under the pur)ie' o the Mutual Fund Re"ulations%
The second is the UTI Mutual Fund Ltd# sponsored by S!I# PN!# !$! and LI0% It is
re"istered 'ith S,!I and unctions under the Mutual Fund Re"ulations% +ith the
biurcation o the erst'hile UTI 'hich had in March 9=== more than Rs%:?#=== crores
o assets under mana"ement and 'ith the settin" up o a UTI Mutual Fund# conormin"
to the S,!I Mutual Fund Re"ulations# and 'ith recent mer"ers ta(in" place amon"
dierent pri)ate sector unds# the mutual und industry has entered its current phase o
consolidation and "ro'th% As at the end o March# 9==?# there 'ere 9 unds%
5=
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 16/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Future Scen)rio
The asset base 'ill continue to "ro' at an annual rate o about ;= to ;< o)er the ne7t
e' years as in)estor4s shit their assets rom ban(s and other traditional a)enues% Some
o the older public and pri)ate sector players 'ill either close shop or be ta(en o)er%
$ut o ten public sector players i)e 'ill sell out# close do'n or mer"e 'ith stron"er
players in three to our years% In the pri)ate sector this trend has already
Started 'ith t'o mer"ers and one ta(eo)er% &ere too some o them 'ill do'n their
shutters in the near uture to come%
!ut this does not mean there is no room or other players% The mar(et 'ill 'itness a
lurry o ne' players enterin" the arena% There 'ill be a lar"e number o oers rom
)arious asset mana"ement companies in the time to come% Some bi" names li(e
Fidelity# Principal# $ld Mutual etc% are loo(in" at Indian mar(et seriously% $ne
important reason or it is that most major players already ha)e presence here and hence
these bi" names 'ould hardly li(e to "et let behind%
The mutual und industry is a'aitin" the introduction o deri)ati)es in India as this
'ould enable it to hed"e its ris( and this in turn 'ould be relected in its Net Asset
/alue CNA/%
S,!I is 'or(in" out the norms or enablin" the e7istin" mutual und schemes to trade
in deri)ati)es% Importantly# many mar(et players ha)e called on the Re"ulator to
initiate the process immediately# so that the mutual unds can implement the chan"es
55
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 17/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
The most important trend in the mutual und industry is the a""ressi)e
e7pansion o the orei"n o'ned mutual und companies and the decline o
the companies loated by nationali1ed ban(s and smaller pri)ate sector
players%
Many nationali1ed ban(s "ot into the mutual und business in the early nineties and "ot
o to a "ood start due to the stoc( mar(et boom pre)ailin" then% These ban(s did not
really understand the mutual und business and they just )ie'ed it as another (ind o
ban(in" acti)ity%
Fe' hired speciali1ed sta and "enerally chose to transer sta rom the parent
or"ani1ations% The perormance o most o the schemes loated by these unds 'as not
"ood% Some schemes had oered "uaranteed returns and their parent or"ani1ations had
to bail out these AM0s by payin" lar"e amounts o money as the dierence bet'een
the "uaranteed and actual returns%
The ser)ice le)els 'ere also )ery bad% Most o these AM0s ha)e not been able to retain
sta# loat ne' schemes etc% and it is doubtul 'hether# barrin" a e' e7ceptions# they
ha)e serious plans o continuin" the acti)ity in a major 'ay% The e7perience o some o
the AM0s loated by pri)ate sector Indian companies 'as also )ery similar% They
8uic(ly reali1ed that the AM0 business is a business# 'hich ma(es money in the lon"
term and re8uires deep2poc(eted support in the intermediate years% Some ha)e sold out
to orei"n o'ned companies# some ha)e mer"ed 'ith others and there is "eneral
restructurin" "oin" on%
The orei"n o'ned companies ha)e deep poc(ets and ha)e come in here 'ith the
e7pectation o a lon" haul% They can be credited 'ith introducin" many ne' practices
such as ne' product inno)ation# sharp impro)ement in ser)ice standards and
disclosure# usa"e o technolo"y# bro(er education and support etc% In act# they ha)e
59
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 18/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
orced the industry to up"rade itsel and ser)ice le)els o or"ani1ations li(e UTI ha)e
impro)ed dramatically in the last e' years in response to the competition pro)ided by
these%
1y Structure
pen5ended Funds
An open2end und is one that is a)ailable or subscription all throu"h the year% These do
not ha)e a i7ed maturity% In)estors can con)eniently buy and sell units at Net Asset
/alue CNA/ related prices% The (ey eature o open2end schemes is li8uidity%
6*osed5ended Funds
A closed2end und has a stipulated maturity period 'hich "enerally ran"in" rom ; to
5< years% The und is open or subscription only durin" a speciied period% In)estors can
in)est in the scheme at the time o the initial public issue and thereater they can buy or
sell the units o the scheme on the stoc( e7chan"es 'here they are listed% In order to
pro)ide an e7it route to the in)estors# some close2ended unds "i)e an option o sellin"
bac( the units to the Mutual Fund throu"h periodic repurchase at NA/ related prices%
S,!I Re"ulations stipulate that at least one o the t'o e7it routes is pro)ided to the
in)estor%
2nter>)* Funds
Inter)al unds combine the eatures o open2ended and close2ended schemes% They are
open or sale or redemption durin" pre2determined inter)als at NA/ related prices %
5;
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 19/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
1y 2n>estment bjecti>e5
8ro-t, Funds
The aim o "ro'th unds is to pro)ide capital appreciation o)er the medium to lon"2
term% Such schemes normally in)est a majority o their corpus in e8uities% It has been
pro)en that returns rom stoc(s# ha)e outperormed most other (ind o in)estments held
o)er the lon" term% .ro'th schemes are ideal or in)estors ha)in" a lon"2term outloo(
see(in" "ro'th o)er a period o time%
2ncome Funds
The aim o income unds is to pro)ide re"ular and steady income to in)estors% Such
schemes "enerally in)est in i7ed income securities such as bonds# corporate debentures
and .o)ernment securities% Income Funds are ideal or capital stability and re"ular
income%
1)*)nced Funds
The aim o balanced unds is to pro)ide both "ro'th and re"ular income% Such schemes
periodically distribute a part o their earnin" and in)est both in e8uities and i7ed
income securities in the proportion indicated in their oer documents% In a risin" stoc(
mar(et# the NA/ o these schemes may not normally (eep pace# or all e8ually 'hen
the mar(et alls% These are ideal or in)estors loo(in" or a combination o income and
moderate "ro'th%
The aim o money mar(et unds is to pro)ide easy li8uidity# preser)ation o capital and
moderate income% These schemes "enerally in)est in saer short2term instruments such
as treasury bills# certiicates o deposit# commercial paper and inter2ban( call money%
Returns on these schemes may luctuate dependin" upon the interest rates pre)ailin" in
the mar(et% These are ideal or 0orporate and indi)idual in)estors as a means to par(
their surplus unds or short periods%
5B
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 20/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Lo)d Funds
A Load Fund is one that char"es a commission or entry or e7it% That is# each time you
buy or sell units in the und# a commission 'ill be payable% Typically entry and e7it
loads ran"e rom 5 to 9% It could be 'orth payin" the load# i the und has a "ood
perormance history%
No5Lo)d Funds
A No2Load Fund is one that does not char"e a commission or entry or e7it% That is# no
t,er Sc,emes5
5<
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 21/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Speci)* Sc,emes
Industry Speciic Schemes in)est only in the industries speciied in the oer document%
The in)estment o these unds is limited to speciic industries li(e InoTech# FM0.#
and Pharmaceuticals etc%
• 2nde= Sc,emes
Inde7 Funds attempt to replicate the perormance o a particular inde7 such as the !S,
Sense7 or the NS, <=
• Sector)* Sc,emes
Sectoral Funds are those# 'hich in)est e7clusi)ely in a speciied industry or a "roup o
industries or )arious se"ments such as JAJ .roup shares or initial public oerin"s%
• 6ommodities Funds
0ommodities unds speciali1e in in)estin" in dierent commodities directly or throu"h
commodities uture contracts% Speciali1ed unds may in)est in a sin"le commodity or a
commodity "roup such as edible oil or rains# 'hile di)ersiied commodity unds 'ill
spread their assets o)er many commodities
5?
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 22/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Money
Market Equity
Funds
Funds Debt
Gilt Funds "ybrid
Funds Funds
!!ressive
Growth
Flexible sset Funds
allocation
Funds
Growth Funds
"i!h #ield
$isk Debt Funds
%evel Diversified
Equity Funds
Index Funds
Value Funds
Focused
Debt Funds Growth
Income and
funds
Equity Income
Funds
Balanced
Diversified Funds
Debt Funds
Money Gilt Funds
Market Funds
&y'e of Fund
5:
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 23/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
TA!L, 9
S,ort5
term 0all Money#
0ommercial
Funds Papers# Those 'ith
Li8uidity K
9F*o)tin/ Little Treasury !ills# surplus ; 'ee(s 2
Moderate
5 s,ort5 Interest Rate 0Ds# Short2 short2term ; months
Income
term: term unds
.o)ernment
securities%
1ond Predominantly
Funds Debentures#
0redit Ris( Salaried 6
Re"ular .o)ernment More than 2 59
6 Interest conser)ati)e
9F*o)tin/ Income Rate Ris( securities# in)estors months
5 Lon/5 0orporate
term: !onds
Salaried 6
8i*t Security 6 Interest Rate .o)ernment
conser)ati)e 59 months 6 more
Funds Income Ris( securities
in)estors
A""ressi)e
Lon"2term in)estors
EBuity
0apital &i"h Ris( Stoc(s 'ith lon" ; years plus
Funds
Appreciation term out
loo(%
To "enerate
returns that are Portolio
NA/ )aries
2nde= commensurate indices li(e A""ressi)e
'ith inde7 ; years plus
Funds 'ith returns o !S,# NIFT- in)estors%
perormance
respecti)e etc
indices
5G
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 24/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
!alanced ratio
0apital o e8uity and
.ro'th 6
1)*)nced Mar(et Ris( debt unds to Moderate 6
Re"ular 9 years plus
Funds and Interest ensure hi"her A""ressi)e
Income
Rate Ris( returns at
lo'er ris(
$. Pro+ession)* M)n)/ement
Mutual Funds pro)ide the ser)ices o e7perienced and s(illed proessionals#
bac(ed by a dedicated in)estment research team that analyses the perormance and
prospects o companies and selects suitable in)estments to achie)e the objecti)es o
the scheme%
!. Di>ersi+ic)tion
Mutual Funds in)est in a number o companies across a broad cross2section o
industries and sectors% This di)ersiication reduces the ris( because seldom do all
stoc(s decline at the same time and in the same proportion% -ou achie)e this
di)ersiication throu"h a Mutual Fund 'ith ar less money than you can do on your
o'n%
;. 6on>enient Administr)tion
In)estin" in a Mutual Fund reduces paper'or( and helps you a)oid many
problems such as bad deli)eries# delayed payments and ollo' up 'ith bro(ers and
companies% Mutual Funds sa)e your time and ma(e in)estin" easy and con)enient%
5
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 25/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
#. Lo- 6osts
Mutual Funds are a relati)ely less e7pensi)e 'ay to in)est compared to directly
in)estin" in the capital mar(ets because the beneits o scale in bro(era"e# custodial
and other ees translate into lo'er costs or in)estors%
'. LiBuidity
In open2end schemes# the in)estor "ets the money bac( promptly at net asset
)alue related prices rom the Mutual Fund% In closed2end schemes# the units can be
sold on a stoc( e7chan"e at the pre)ailin" mar(et price or the in)estor can a)ail o
the acility o direct repurchase at NA/ related prices by the Mutual Fund%
(. Tr)nsp)rency
In)estors "et re"ular inormation on the )alue o your in)estment in addition to
disclosure on the speciic in)estments made by the scheme# the proportion in)ested
in each class o assets and the und mana"erJs in)estment strate"y and outloo(%
@. F*e=ibi*ity
Throu"h eatures such as re"ular in)estment plans# re"ular 'ithdra'al plans
and di)idend rein)estment plans# one can systematically in)est or 'ithdra' unds
accordin" to your needs and con)enience%
&. A++ord)bi*ity
In)estors indi)idually may lac( suicient unds to in)est in hi"h2"rade stoc(s% A
mutual und because o its lar"e corpus allo's e)en a small in)estor to ta(e the
beneit o its in)estment strate"y
9=
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 26/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
$%.We** 0e/u*)ted
All Mutual Funds are re"istered 'ith S,!I and they unction 'ithin the
pro)isions o strict re"ulations desi"ned to protect the interests o in)estors% The
operations o Mutual Funds are re"ularly monitored by S,!I%
An In)estor in mutual und has no control o)er the o)erall costs o in)estin"% &e
pays an in)estment mana"ement ee C'hich is a percenta"e o his in)estments as
lon" as he remains in)ested in und# 'hether the und )alue is risin" or declinin"%
&e also has to pay und distribution costs# 'hich he 'ould not incur in direct
in)estin"%
&o'e)er this only means that there is a cost to obtain the beneits o mutual und
ser)ices% This cost is oten less than the cost o direct in)estin"%
!. No T)i*or5M)de Port+o*ios
&o'e)er# most mutual unds help in)estors o)ercome this constraint by oerin"
lar"e no% o schemes 'ithin the same und%
95
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 27/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
A)ailability o lar"e no% o unds can actually mean too much choice or the
in)estors% &e may a"ain need ad)ice on ho' to select a und to achie)e his
objecti)es%
AMFI has ta(en initiati)e in this re"ard by startin" a trainin" and certiication
pro"ram or prospecti)e Mutual Fund Ad)isors% S,!I has made this certiication
compulsory or e)ery mutual und ad)isor interested in sellin" mutual und%
". T)=es
Durin" a typical year# most acti)ely mana"ed mutual unds sell any'here rom 9=
to := percent o the securities in their portolios% I your und ma(es a proit on its
sales# you 'ill pay ta7es on the income you recei)e# e)en i you rein)est the money
you made%
#. 6ost o+ 6,urn
The portolio o und does not remain constant% The e7tent to 'hich the portolio
chan"es is a unction o the style o the indi)idual und mana"er i%e% 'hether he is a
buy and hold type o mana"er or one 'ho a""ressi)ely churns the und% It is also
dependent on the )olatility o the und si1e i%e% 'hether the und constantly recei)es
resh subscriptions and redemptions% Such portolio chan"es ha)e associated costs
o bro(era"e# custody ees etc% 'hich lo'ers the portolio return commensurately%
+ith a plethora o schemes to choose rom# the retail in)estor aces problems in
selectin" unds% Factors such as in)estment strate"y and mana"ement style are
8ualitati)e# but the unds record is an important indicator too% Thou"h past perormance
alone can not be indicati)e o uture perormance# it is# ran(ly# the only 8uantitati)e
'ay to jud"e ho' "ood a und is at present%
Thereore# there is a need to correctly assess the past perormance o dierent mutual
unds% +orld'ide# "ood mutual und companies o)er are (no'n by their AM0s and
99
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 28/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
this ame is directly lin(ed to their superior stoc( selection s(ills% For mutual unds to
"ro'# AM0s must be held accountable or their selection o stoc(s% In other 'ords#
there must be some perormance indicator that 'ill re)eal the 8uality o stoc( selection
o )arious AM0s%
Return aloneund
o a mutual should not be itconsidered
scheme# as the
should also basisthe
include o measurement
ris( ta(en byothe
theund
perormance
mana"er
because dierent unds 'ill ha)e dierent le)els o ris( attached to them% For
e)aluatin" the perormance o selected Sectoral Mutual Fund schemes ris(2return
relation models ha)e been used li(e
C @enson Model
C Fama Model
De)eloped by @ac( Treynor# this perormance measure e)aluates unds on the basis o
TreynorJs Inde7% This Inde7 is a ratio o return "enerated by the und o)er and abo)e
ris( ree rate o return C"enerally ta(en to be the return on securities bac(ed by the
"o)ernment# as there is no credit ris( associated# durin" a "i)en period and systematic
ris( associated 'ith it Cbeta% Symbolically# it can be represented as
+here# 0i represents return on +und4 0+ is ris< +ree r)te o+ return )nd 1i is bet) o+
t,e +und.
All ris(2a)erse in)estors 'ould li(e to ma7imi1e this )alue% +hile a hi"h and positi)e
TreynorJs Inde7 sho's a superior ris(2adjusted perormance o a und# a lo' and
ne"ati)e TreynorJs Inde7 is an indication o una)orable perormance%
9;
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 29/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 30/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Method% This measure in)ol)es e)aluation o the returns that the und has "enerated )s%
the returns actually e7pected out o the und "i)en the le)el o its systematic ris(% The
surplus bet'een the t'o returns is called Alpha# 'hich measures the perormance o a
und compared 'ith the actual returns o)er the period% Re8uired return o a und at a
"i)en le)el o ris( C0i can be calculated as2
0i 0+ 1i 90m 5 0+:
+here# 0m is )>er)/e m)r<et return durin/ t,e /i>en period % Ater calculatin" it#
)*p,) c)n be obt)ined by subtr)ctin/ reBuired return +rom t,e )ctu)* return o+
t,e +und% &i"her alpha represents superior perormance o the und and )ice )ersa%
Limitation o this model is that it considers only systematic ris( not the entire ris(
associated 'ith the und and an ordinary in)estor can not miti"ate unsystematic ris(# as
his (no'led"e o mar(et is primiti)e%
F)m) Mode*
The ,u"ene Fama model is an e7tension o @enson model% This model compares the
perormance# measured in terms o returns# o a und 'ith the re8uired return
commensurate 'ith the total ris( associated 'ith it% The dierence bet'een these t'o is
ta(en as a measure o the perormance o the und and is called net selecti)ity%
The net se*ecti>ity represents the stoc( selection s(ill o the und mana"er# as it is the
e7cess return o)er and abo)e the return re8uired to compensate or the total ris( ta(en
by the und mana"er% &i"her )alue o 'hich indicates that und mana"er has earned
returns 'ell abo)e the return commensurate 'ith the le)el o ris( ta(en by him%
0i 0+ SiSmG90m 5 0+:
9<
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 31/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Amon" the abo)e perormance measures# t'o models namely# Treynor me)sure )nd
7enson mode* use system)tic ris< b)sed on t,e premise t,)t t,e unsystem)tic ris<
is di>ersi+i)b*e.
T,ese mode*s )re suit)b*e +or *)r/e in>estors li(e institutional in)estors 'ith hi"h
ris( ta(in" capacities as they do not ace paucity o unds and can in)est in a number o
options to dilute some ris(s%
For them# a portolio can be spread across a number o stoc(s and sectors% &o'e)er#
S,)rpe me)sure )nd F)m) mode* t,)t consider t,e entire ris< )ssoci)ted -it,
+und )re suit)b*e +or sm)** in>estors4 as the ordinary in)estor lac(s the necessary s(ill
and resources to di)ersiied%
Moreo)er# the selection o the und on the basis o superior stoc( selection ability o the
und mana"er 'ill also help in sae"uardin" the money in)ested to a "reat e7tent% The
in)estment in unds that ha)e "enerated bi" returns at hi"her le)els o ris(s lea)es the
money all the more prone to ris(s o all (inds that may e7ceed the indi)idual in)estorsJ
ris( appetite%
1ETA
!eta measures a stoc(Js )olatility# the de"ree to 'hich its price luctuates in relation to
the o)erall mar(et% In other 'ords# it "i)es a sense o the stoc(Js mar(et ris( compared
to the "reater mar(et% !eta is used also to compare a stoc(Js mar(et ris( to that o other
stoc(s% In)estment analysts use the .ree( letter JJ to represent beta.
9?
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 32/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
securityJs price tends to be more )olatile than the mar(et# and a beta less than 5 means it
tends to be less )olatile than the mar(et .
I σ i I σ m
r im
9
σ
m
r im is correlation coeicient bet'een mar(et returns and und returns%
σ
i is standard de)iation o und returns%9Si:
m is standard de)iation o mar(et returns%9Sm:
σ
9
σ
m is mar(et )ariance%
!eta depends on the inde7 used to calculate it% It can happen that the inde7 bears no
correlation 'ith the mo)ements in the und% Due to this reason# it is essential to ta(e a
loo( at statistical )alue called 0oeicient o Determination alon" 'ith !eta% It sho's
ho' reliable the beta number is% It )aries bet'een 1ero and one%
/alue o 5 indicates perect correlation 'ith the ind7% Thus# an I C R 9 D O=%?B it
implies that ?B o the )ariation in the portolio returns is due to )ariations in the
mar(et returns% Mathematically it is the s8uare o correlation coeicientCR%
∑
n Q x C− x m D × C y − ym eD a
e a n
RO 22222222222222222222222222222222222222222222222
∑C x x D ∑
9 9
− mean C y y
× D − mean
+here > and - are returns on the portolio and returns on the mar(et respecti)ely%
!eta and C R 9 D should thus be used to"ether 'hen e7aminin" a und4s ris( proile%
NA/ per unit o a scheme on a day is the net mar(et )alue o the securities held by the
total no% o the units o the scheme on the particular day% It is actually the )alue o o
net asset per unit% Since the mar(et )alue o securities chan"es e)eryday# NA/ o a
und also )aries on a day to day basis% NA/4s or open ended schemes are re8uired to
be disclosed a daily basisCbusiness day%
9:
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 33/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
+here#
NumeratorO Mar(et )alue o in)estmentKrecei)ablesKother Accrued Income K$ther
Assets2 Accrued ,7penses2$ther Payables2$ther Liabilities%
5
SDO ∑C x
9
i
−
x mean D
n
∑C x − x
i mean
D 9 "i)es the s8uare o the sum o dierences o each )alue in the sample
rom the mean o the sample o 3n4 element%
• St)nd)rd De>i)tion
• 1et)
• S,)rp 0)tio
• 05SBu)re
9G
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 34/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
9
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 35/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
F2NAN62AL MA0JETS
Finance is the pre2re8uisite or modern business and inancial institutions play a )ital
role in the economic system% It is throu"h inancial mar(ets and institutions that the
arran"ements or dealin" in inancial assets and credit instruments o dierent types
Financial mar(et is a broad term describin" any mar(etplace 'here buyers and sellers
participate in the trade o assets such as e8uities# bonds# currencies and deri)ati)es%
They are typically deined by ha)in" transparent pricin"# basic re"ulations on tradin"#
costs and ees and mar(et orces determinin" the prices o securities that trade%
a inancial transaction ta(es place# it is deemed to ha)e ta(en place in the inancial
mar(et% &ence inancial mar(ets are per)asi)e in nature since inancial transactions are
themsel)es )ery per)asi)e throu"hout the economic system% For instance# issue o
e8uity shares# "rantin" o loan by term lendin" institutions# deposit o money into a
In a nutshell# inancial mar(ets are the credit mar(ets caterin" to the )arious needs o
the indi)iduals# irms and institutions by acilitatin" buyin" and sellin" o inancial
;=
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 36/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Fin)nci)* m)r<ets
Money Lenders4
6)pit)* M)r<ets Money M)r<ets
2ndi/enuos 1)n<ers
2ndustri)* Securities
6)** Money M)r<et
M)r<et
6ommerci)* 1i**
Prim)ry M)r<et
M)r<et
8o>ernment
Securities M)r<et
Lon/5term *o)n
m)r<et
;5
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 37/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
6)pit)* M)r<et
The capital mar(et is a mar(et or inancial assets 'hich ha)e a lon" or indeinite
maturity% .enerally# it deals 'ith lon" term securities 'hich ha)e a period o abo)e one
year% In the 'idest sense# it consists o a series o channels throu"h 'hich the sa)in"s
o the community are made a)ailable or industrial and commercial enterprises and
9% Securin" the orei"n capital and (no'2ho' to ill up deicit in the re8uired
economic de)elopment%
Primary market Primary mar(et is a mar(et or ne' issues or ne' inancial claims%
&ence it is also called as Ne' Issue Mar(et% It basically deals 'ith those securities
'hich are issued to the public or the irst time% The mar(et# thereore# ma(es a)ailable
a ne' bloc( o securities or public subscription% In other 'ords# it deals 'ith raisin" o
resh capital by companies either or cash or or consideration other than cash% The best
e7ample could be Initial Public $erin" CIP$ 'here a irm oers shares to the public
;9
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 38/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Secondary market Secondary mar(et is a mar(et 'here e7istin" securities are traded%
In other 'ords# securities 'hich ha)e already passed throu"h ne' issue mar(et are
traded in this mar(et% .enerally# such securities are 8uoted in the stoc( e7chan"e and it
pro)ides a continuous and re"ular mar(et or buyin" and sellin" o securities% This
Money M)r<et
Money mar(ets are the mar(ets or short2term4 hi"hly li8uid debt securities% Money
mar(et securities are "enerally )ery sae in)estments 'hich return relati)ely lo'
interest rate that is most appropriate or temporary cash stora"e or short term time
mar(et namely call money mar(et# commercial bills mar(et# acceptance mar(et# and
Deri>)ti>es M)r<et
utures contracts or options# 'hich are deri)ed rom other orms o assets% A deri)ati)e
is a security 'hose price is dependent upon or deri)ed rom one or more underlyin"
assets% The deri)ati)e itsel is merely a contract bet'een t'o or more parties% Its )alue
assets include stoc(s# bonds# commodities# currencies# interest rates and mar(et
;;
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 39/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
• For!ard" For'ards are the oldest o all the deri)ati)es% A or'ard contract
asset or cash at a certain date in uture at a predetermined price speciied in that
an or"ani1ed e7chan"e%
Coption 'riter to another party Coption holder% The contract oers the buyer
the ri"ht# but not the obli"ation# to buy Ccall or sell Cput a security or other
inancial asset at an a"reed2upon price Cthe stri(e price durin" a certain period
o time or on a speciic date Ce7ercise date% 0all options "i)e the option to buy
at certain price# so the buyer 'ould 'ant the stoc( to "o up% Put options "i)e the
option to sell at a certain price# so the buyer 'ould 'ant the stoc( to "o do'n%
rom the luctuations in the mar(et either currency mar(et or interest rate
;B
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 40/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
It is a mar(et in 'hich participants are able to buy# sell# e7chan"e and speculate on
in)estors% The ore7 mar(et is considered to be the lar"est inancial mar(et in the
o currencies% !ecause the currency mar(ets are lar"e and li8uid# they are belie)ed to be
the most eicient inancial mar(ets% It is important to reali1e that the orei"n e7chan"e
6ommodities M)r<et
It is a physical or )irtual mar(etplace or buyin"# sellin" and tradin" ra' or primary
products% For in)estorsJ purposes there are currently about <= major commodity
mar(ets 'orld'ide that acilitate in)estment trade in nearly 5== primary
commodities% 0ommodities are split into t'o types hard and sot commodities% &ard
commodities are typically natural resources that must be mined or e7tracted C"old#
rubber# oil# etc%# 'hereas sot commodities are a"ricultural products or li)estoc( Ccorn#
;<
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 41/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
India Financial mar(et is one o the oldest in the 'orld and is considered to be the
astest "ro'in" and best amon" all the mar(ets o the emer"in" economies%
The history o Indian capital mar(ets dates bac( 9== years to'ard the end o the
5Gth century 'hen India 'as under the rule o the ,ast India 0ompany% The
no less than 9== to 9<= securities bro(ers 'ere acti)e durin" the second hal o
the 5th century%
The inancial mar(et in India today is more de)eloped than many other sectors because
!y the early 5?=s the total number o securities e7chan"es in India rose to ei"ht#
includin" Mumbai# Ahmadabad and Hol(ata apart rom Madras# Hanpur# Delhi#
!an"alore and Pune% Today there are 95 re"ional securities e7chan"es in India
in addition to the centrali1ed NS, CNational Stoc( ,7chan"e and $T0,I C$)er
&o'e)er the stoc( mar(ets in India remained sta"nant due to strin"ent controls on the
respecti)e sectors% The corporate sector 'asnJt allo'ed into many industry se"ments#
;?
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 42/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
'hich 'ere dominated by the state controlled public sector resultin" in sta"nation o
Thereater 'hen the Indian economy be"an liberali1in" and the controls be"an to be
dismantled or eased outE the securities mar(ets 'itnessed a lurry o IP$4s that 'ere
launched% This resulted in many ne' companies across dierent industry se"ments to
come up 'ith ne'er products and ser)ices% A remar(able eature o the "ro'th o the
Indian economy in recent years has been the role played by its securities mar(ets in
assistin" and uellin" that "ro'th 'ith money rose 'ithin the economy% This 'as in
mar(ed contrast to the initial phase o "ro'th in many o the ast "ro'in" economies o
,ast Asia that 'itnessed hu"e doses o FDI CForei"n Direct In)estment spurrin"
"ro'th in their initial days o mar(et decontrol% Durin" this phase in India much o the
or"ani1ed sector has been aected by hi"h "ro'th as the inancial mar(ets played an
Sector Underta(in"s that decided to oload part o their e8uity 'ere also helped by the
'ell2or"ani1ed securities mar(et in India% The launch o the NS, CNational Stoc(
,7chan"e and the $T0,I C$)er the 0ounter ,7chan"e o India durin" the mid 5=s
by the "o)ernment o India 'as meant to usher in an easier and more transparent orm
o tradin" in securities% The NS, 'as concei)ed as the mar(et or tradin" in the
securities o companies rom the lar"e2scale sector and the $T0,I or those rom the
small2scale sector% +hile the NS, has not just done 'ell to "ro' and e)ol)e into the
)irtual bac(bone o capital mar(ets in India the $T0,I stru""led and is yet to sho' any
si"n o "ro'th and de)elopment% The inte"ration o IT into the capital mar(et
inrastructure has been particularly smooth in India due to the country4s 'orld class IT
;:
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 43/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
industry% This has pushed up the operational eiciency o the Indian stoc( mar(et to
"lobal standards and as a result the country has been able to capitali1e on its hi"h
"ro'th and attract orei"n capital li(e ne)er beore% The re"ulatin" authority or capital
mar(ets in India is the S,!I CSecurities and ,7chan"e !oard o India% S,!I came into
prominence in the 5=s ater the capital mar(ets e7perienced some turbulence% It had
to ta(e drastic measures to plu" many loopholes that 'ere e7ploited by certain mar(et
orces to ad)ance their )ested interests% Ater this initial phase o stru""le S,!I has
"ro'n in stren"th as the re"ulator o India4s capital mar(ets and as one o the country4s
;G
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 44/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 45/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Since its inception S,!I has been 'or(in" tar"etin" the securities and is attendin" to
the ulillment o its objecti)es 'ith commendable 1eal and de7terity% The
the mar(et%
norms# the eli"ibility criteria# the code o obli"ations and the code o conduct or
dierent intermediaries li(e# ban(ers to issue# merchant ban(ers# bro(ers and sub2
bro(ers# re"istrars# portolio mana"ers# credit ratin" a"encies# under'riters and others%
It has ramed bye2la's# ris( identiication and ris( mana"ement systems or 0learin"
houses o stoc( e7chan"es# sur)eillance system etc% 'hich has made dealin" in
Another si"niicant e)ent is the appro)al o tradin" in stoc( indices Cli(e S6P 0N>
Nity 6 Sense7 in 9===% A mar(et Inde7 is a con)enient and eecti)e product because
B=
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 46/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
T'o broad approaches o S,!I is to inte"rate the securities mar(et at the national le)el#
and also to di)ersiy the tradin" products# so that there is an increase in number o
primary dealers etc% to transact throu"h the ,7chan"es% In this conte7t the introduction
is a real landmar(%
S,!I has enjoyed success as a re"ulator by pushin" systemic reorms a""ressi)ely and
successi)ely Ce%"% the 8uic( mo)ement to'ards ma(in" the mar(ets electronic and
paperless rollin" settlement on TK9 bases% S,!I has been acti)e in settin" up the
B5
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 47/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 48/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
B;
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 49/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
A )ery common name or all traders in the stoc( mar(et# !S,# stands or !ombay
Stoc( ,7chan"e% It is the oldest mar(et not only in the country# but also in Asia% In
the early days# !S, 'as (no'n as The Nati)e Share 6 Stoc( !ro(ers Association%
It 'as established in the year 5G:< and became the irst stoc( e7chan"e in the country
rom the .o)ernment o India under the Securities 0ontracts CRe"ulation Act# 5<?%
In the past and e)en no'# it plays a pi)otal role in the de)elopment o the countryJs
capital mar(et% This is reco"ni1ed 'orld'ide and its inde7# S,NS,># is also trac(ed
1SE 3ision
The )ision o the !ombay Stoc( ,7chan"e is to ,mer"e as the premier Indian stoc(
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 50/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 51/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
1SE F)cts
!S, as a brand is synonymous 'ith capital mar(ets in India% The !S, S,NS,> is
the benchmar( e8uity inde7 that relects the robustness o the economy and inance% It
'as the
•
First in India to introduce ,8uity Deri)ati)es
Settlement
• J!S, $n2Line Tradin" System4 C!$LT has been a'arded the "lobally
!S::299==9%
• Mo)ed rom $pen $utcry to ,lectronic Tradin" 'ithin just <= days
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 52/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
%SE !it& it" 'on( &i"tory o) ca$ita' market de*e'o$ment i" )#''y (eared to contin#e
it" contri+#tion" to )#rt&er t&e (ro!t& o) t&e "ec#ritie" market" o) t&e co#ntry, t&#"
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 53/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
The National Stoc( ,7chan"e o India Limited has "enesis in the report o the &i"h
to pro)ide access to in)estors rom all across the country on an e8ual ootin"% !ased
behest o the .o)ernment o India and 'as incorporated in No)ember 59 as a ta72
Act# 5<? in April 5;# NS, commenced operations in the +holesale Debt Mar(et
C+DM se"ment in @une 5B% The 0apital Mar(et C,8uities se"ment commenced
@une 9===%
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 54/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
NSE 80UP
clearin" and settlement o securities# to promote and maintain the short and consistent
settlement cycles# to pro)ide a counter2party ris( "uarantee and to operate a ti"ht ris(
containment system%
NSE.2T Ltd.
It is also a 'holly o'ned subsidiary o NS, and is its IT arm% This arm o the NS, is
uni8uely positioned to pro)ide products# ser)ices and solutions or the securities
industry% NS,%IT primarily ocuses on in the area o tradin"# bro(er ront2end and
bac(2oice# clearin" and settlement# 'eb2based# insurance# etc% Alon" 'ith this# it
It is a joint )enture bet'een NS, and 0RISIL Ltd% to pro)ide a )ariety o indices and
inde7 related ser)ices and products or the Indian 0apital mar(ets% It 'as set up in
May 5G% IISL has a consultin" and licensin" a"reement 'ith the Standard and
PoorJs CS6P# 'orldJs leadin" pro)ider o in)estible e8uity indices# or co2brandin"
e8uity indices%
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 55/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 56/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Re"ulation Act# 5<?% The e7chan"e 'as set up to aid enterprisin" promotes in
raisin" inance or ne' projects in a cost eecti)e manner and to pro)ide in)estors
'ith a transparent and eicient mode o tradin" Modeled alon" the lines o the
NASDA mar(et o USA# $T0,I introduced many no)el concepts to the Indian
mar(et ma(in" and scrip less tradin"% As a measure o success o these eorts# the
,7chan"e today has 55< listin"s and has assisted in pro)idin" capital or enterprises
that ha)e "one on to build successul brands or themsel)es li(e /IP Ad)anta# Sonora
Studies by NASS0$M# sot'are technolo"y par(s o India# the )enture capitals unds
and the "o)ernment4s IT tas(s Force# as 'ell as risin" interest in IT# Pharmaceutical#
!iotechnolo"y and Media shares ha)e repeatedly emphasi1ed the need or a national
stoc( mar(et or inno)ation and hi"h "ro'th companies% Inno)ati)e companies are
and contribute to the economy# it is essential that these companies not only e7pand
e7istin" operations but also set up ne' units% The (ey issue or these companies is
raisin" timely# cost eecti)e and lon" term capital to sustain their operations and
enhance "ro'th% Such companies# particularly those that ha)e been in operation or a
short time# are unable to raise unds throu"h the traditional inancin" methods#
because they ha)e not yet been e)aluated by the inancial 'orld%
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 57/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 58/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
India Inoline is a one2stop inancial ser)ices shop# most respected or 8uality o its
3ision
$ur )ision is to be the most respected company in the inancial ser)ices space%
The India Inoline "roup# comprisin" the holdin" company# India Inoline Limited
and its 'holly2o'ned subsidiaries# include the entire inancial ser)ices space 'ith
Fi7ed deposits# .oI bonds and other small sa)in"s instruments to loan products and
In)estment ban(in"%
India Inoline also o'ns and mana"es the 'ebsites '''%indiainoline%com and
Cbranches and sub2bro(ers spread across more than B<= cities and to'ns% The "roup
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 59/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
India Inoline recei)ed re"istration or a housin" inance company rom the National
&ousin" !an( and recei)ed the 3Fastest "ro'in" ,8uity !ro(in" &ouse 2 Lar"e
irms4 in India by Dun 6 !radstreet in 9==% It also recei)ed the Insurance bro(in"
license rom IRDAE recei)ed the )enture capital licenseE recei)ed in principle
appro)al to sponsor a mutual undE recei)ed 3!est bro(er2 India4 a'ard rom Finance
6MPANY ST0U6TU0E
India Inoline Limited is listed on both the leadin" stoc( e7chan"es in India# )i1% the
Stoc( ,7chan"e# Mumbai C!S, and the National Stoc( ,7chan"e CNS, and is also
ser)ices in the 0ash and Deri)ati)es se"ments o the NS, as 'ell as the 0ash
participant# pro)idin" a one2stop solution or clients tradin" in the e8uities mar(et% It
has recently launched its In)estment ban(in" and Institutional !ro(in" business%
clients% These ser)ices are oered to clients as dierent schemes# 'hich are based on
clients%
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 60/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
The ser)ices represent a stron" support that dri)es the bro(in"# commodities# mutual
'hich is ac(no'led"ed by none other than Forbes as J!est o the +ebJ and Ja must
read or in)estors in AsiaJ% India InolineJs research is a)ailable not just o)er the
internet but also on international 'ire ser)ices li(e !loomber" C0ode IILL#
Thomson First 0all and Internet Securities 'here India Inoline is amon"st the most
bro(in"% Their e7perience in securities bro(in" empo'ered them 'ith the re8uisite
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 61/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
cyclical alternati)e to e8uities bro(in"% It enjoys memberships 'ith the M0> and
India Inoline Mar(etin" and Ser)ices Limited is the holdin" company o India
Inoline Insurance Ser)ices Limited and India Inoline Insurance !ro(ers Limited%
IndiaJs lar"est pri)ate Lie Insurance 0ompany% India Inoline 'as the irst
•
India Inoline Insurance !ro(ers Limited India Inoline Insurance !ro(ers
Limited is a ne'ly ormed subsidiary 'hich 'ill carry out the business o
Insurance bro(in"%
in)estment institution in)ested USD :?%: million or a 99%< sta(e in India Inoline
In)estment Ser)ices% This 'ill help ocused e7pansion and capital raisin" in the said
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 62/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 63/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
22FL MANA8EMENT
Nirmal @ain# M!A CIIM# Ahmadabad and a 0hartered and 0ost Accountant# ounded
commodities bro(in"# lie insurance and mutual unds distribution# amon" others%
Apart rom Nirmal @ain and R /en(ataraman# the !oard o Directors o India Inoline
Ltd% comprises :
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 64/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
department till 5= and thereater also handles inancial ser)ices# consultancy#
Mr Sat Pal Hhattar# 2 !oard member since April 9==5 2 Presidential 0ouncil o
proit body# helpin" the under2pri)ile"ed Indians in Sin"apore% &e joined the India
his masters rom the A"ra Uni)ersity and started his career as a 0lass I
Mr% A%H% Pur)ar !oard member since March 9==G completed his
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 65/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 66/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
2nsur)nce
An entry into this se"ment helped complete the clientJs product bas(etE concurrently#
it "raduated the 0ompany into a one stop retail inancial solutions pro)ider% To ensure
ma7imum reach to customers across India# it has employed a multi pron"ed approach
and reaches out to customers )ia our Net'or(# Direct and Ailiate channels% India
Inoline 'as the irst corporate in India to "et the a"ency license in early 9==5%
2n>est n*ine
India Inoline has made in)estin" in Mutual unds and primary mar(et so eortless%
char"es% India Inoline oers a host o mutual und choices under one roo#
bac(ed by in2depth research and ad)ice rom research house and tools coni"ured
as in)estor riendly%
We)*t, M)n)/ement
needs and ris( appetite% The IIFL Pri)ate +ealth Mana"ement Team o inancial
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 67/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Asset M)n)/ement
India Inoline is a leadin" pan2India mutual und distribution house associated 'ith
Port+o*io M)n)/ement
in)ests the client4s resources into stoc(s rom dierent sectors# dependin" on
client4s ris(2return proile% This ser)ice is particularly ad)isable or in)estors 'ho
cannot aord to "i)e time or donJt ha)e that e7pertise or day2to2day
Ne-s*etters
As a subscriber to the Daily Mar(et Strate"y# client4s "et research reports o India
the lashbac( or the 'ee( "one by% A 'ee(ly outloo( coupled 'ith the best o
the 'eb stories rom Indiainoline and lin(s to important in)estment ideas#
Leader Spea( and eatures is deli)ered in the client4s inbo7 e)ery Friday e)enin"%
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 68/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 69/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 70/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 71/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 72/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Sc,eme Sn)ps,ot
62 Santosh Hamath 6)te/ory ,8uity
L)unc, D)te 5<2MAR2
Sc,eme bjecti>e
See(s to pro)ide lon" term capital appreciation by in)estin" primarily in shares o companies operatin" in the
FM0. industry%
sset llocation
,8uity Shares ?%5;
0all And $ther Assets 9%GB
0orporate Debt * !onds 5%=;
As on ;=2N$/25=
I T 0 Limited 55%9:
B% 2n+r)structure Sector
Sc,eme Sn)ps,ot
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 73/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
L)unc, D)te 9<2N$/2=B
Sc,eme bjecti>e
The in)estment objecti)e o the Scheme is to pro)ide income distribution and * or medium to lon" term capital
"ains by in)estin" predominantly in e8uity*e8uity related instrument o the companies in the inrastructure sectors%
sset llocation
,8uity Shares <%99
0ash And $ther Assets B%:G
As on ;=2N$/25=
Sc,eme Sn)ps,ot
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 74/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
Sc,eme bjecti>e
The primary in)estment objecti)e o the scheme is to see( to "enerate continous returns by acti)ely in)estin" in
e8uity and e8uity related or i7ed income securities o Po'er and other associated companies
sset llocation
,8uity Shares B%?<
Deri)ati)es#0ash And $ther Recei)ables <%;<
As on ;=2N$/25=
?% Tec,no*o/y Sector5
Sc,eme Sn)ps,ot
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 75/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 76/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 77/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
6HAPTE0 32
F2ND2N8S4 SU88EST2NS 6N6LUS2N
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 78/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 79/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 80/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
ANNEKU0E 5 2
TE0M2NL8Y
Mutu)* Fund An in)estment tool that pools in in)estments made by people and that
corpus is proessionally mana"ed by urther in)estin" as per the type o und that4s
bein" operated% The intention is to loat money in the mar(et by o'nin" assets
components o many companies at the same meetin" the assurances made to
in)estors% There is no obli"ation 'hatsoe)er or assured returns%
NA35A cumulati)e mar(et )alue o total assets component o its liabilities% It4s
actually the measure o 'hat each shareholder 'ould a8uire i the assets o the
company are li8uidated%
No5Lo)d +unds 2 there is no commission component present to enter and e7it
Sector Funds 2 An MF scheme that has its portolio chart o companies that
belon" to a certain sector# say $il% This is a hi"h2ris( und# as the perormance o that
sector 'ould directly relect in the unds NA/% So# here 'e are 'ith the di)erse
mar(et o Mutual Funds% ,ach one claimin" their USP% +hile MFs certainly are N$T
the saest# but they are relati)ely more sae than the direct in)ol)ement in the e8uity
mar(et# "i)en that act that majority o the in)estors are either ill2inormed or not
inormed about the 'ay the mar(ets mo)e%
So 'hat e7actly ma(es MFs the ri"ht (ind o und mana"ement tool# espy in a
country li(e IndiaX A country li(e India or or that matter any de)elopin" country has
some basic problems 'hich pre)ent the inormation to be a)ailable reely and that too
in an accessible ashion# so 'ith a situation li(e that# a proessionally mana"ed
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 81/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 82/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 83/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
unds% I one "ets married# one mi"ht need to compromise one4s ris( tolerance and
desired returns 'ith that o the spouse% This could tri""er o the need to e7it%
A m)jor c,)n/e in )ny b)sic )ttribute o+ t,e +und
'hen the und chan"es any basic attribute as mentioned by it in its oer documents#
the in)estors ha)e a choice o "ettin" out o it% ,)en S,!I has pro)ided or an e7it
route bein" made a)ailable to the in)estors% 0han"es li(e a chan"e in Asset
Mana"ement 0ompany or in in)estment style o und or chan"e o structure say rom
closed2end to open2end etc% are "ood enou"h reasons or an in)estor to consider
s'itchin" or e7itin" rom it as they are certainly li(ely to aect the und in a major
'ay%
Fund doesnt comp*y -it, its objecti>e
$ne o the important parameters in the selection o the und is ali"nment o the ris(
proiles o the in)estor and und% The objecti)e o the und says a lot about ho' the
und plans to in)est% I the objecti)e is not bein" complied 'ith# it is one o the e7it
points 'orth considerin"% For e7ample# the three unds discussed abo)e# Alliance
,8uity# !irla Ad)anta"e and IN. .ro'th all claim to be di)ersiied e8uity unds yet
they had hu"e e7posures to select I0, sector scripts that not only added )olatility
than is e7pected out o di)ersiied unds but also in a 'ay# 'ent a"ainst their stated
objecti)e%
T,e FundOs E=pense 0)tio 0ises
a small rise in an e7pense ratio is not a bi" deal# ho'e)er a si"niicant rise can result
in substantial reduction o yields and so it 'ould be better to e7it the und% In the case
o bond unds or money mar(et unds# it is hi"hly unli(ely that the und can increase
its returns enou"h to justiy an increase in the undJs e7penses%
T,e Fund M)n)/er ,)s c,)n/ed
a simple chan"e o und mana"ers# in itsel# is not enou"h reason to sell a und on a
short2term basis% I it is a passi)ely mana"ed und Cinde7 und# then one has little to
no reason to 'orry% &o'e)er# i it is an acti)ely mana"ed und# then has to (eep the
eyes open on the ne' mana"er% $bser)in" the styles# stoc( pic(in" and ris(s
underta(en by the ne' mana"er is important or it discloses a lot about ho' the und
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 84/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
mi"ht are in the uture% I satisied# one 'ill ha)e no reason to complain later but the
process needs time and so an in)estor has to obser)e the und mana"er or some time
beore one ta(es a decision%
Enou/, ,)s been e)rned
&o'e)er# nothin" is as important as to rein the horses in time% The primary principle
behind saety o in)estment is to ta(e ris(s that can be tolerated% The principle also is
speciic on the e7pectations that the in)estor must ha)e rom any in)estment% @ust as
it is important to set realistic tar"ets that one hopes to achie)e rom the in)estment# it
is also important to e7it 'hen tar"et as e7pected has been achie)ed irrespecti)e o the
act that it mi"ht be "eneratin" better returns in a short2term%
The abo)e list is certainly not e7hausti)e and indi)iduals 'ill ha)e other
better reasons to 8uit as 'ell% It4s just that most don4t (no' 'hen to apply thou"ht
and so these 'ould come in handy%
These are the e' e7act as re"ards in)estment in MF4s ta(en rom the boo( 'ith
ZMar(etin" or the =4s[ "i)en by the +all Street%
5% 0hec( your letter o oer o unds prospectus to "uard yoursel)es a"ainst any
hidden ees%
9% ,nsue that the unds trac( record is the same as that o the current mana"ement
;% A)oid MF4s that char"e e7it ees at he bac( end door Cee s char"ed by MF rom
the unit holders at he time to redemption o the units%
B% !uy the unds 'ith no sale char"ed loads%Ca load is a char"e by the und 'hen
in)estor buys it is called the entry load or 'hen he sells is called the e7it load%
<% I the char"e it4s hea)y by the M F to discoura"e the in)estors rom ta(in" short
positions in the unds units because too many in)estors sell their units at a time
then the und has to sell its holdin"s to meet the obli"ations that yield into )ital o
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 85/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
the ines o)erall return% Most short unds li(e "uilt unds Cthese are the unds the
in)est only in "o)ernment securities and treasury bills thus the in)estors ha)e an
opportunities to buy ris( ree securities% These unds yield a better return than a
money mar(et und% It is "ood or the in)estors 'ho desire saety o principal
amount% Money mar(et unds Cthese unds in )ie's in money mar(et instruments
such as treasury bills# "o)t% bonds# certiicates o ban( deposits# commercial
deposits% They char"e no loads# ho'e)er loads are limited by S,!I to :%
?% 0hec( und4s perormance in bear as 'ell a the bull mar(et%
:% .uard und ris( by chec(in" its portolio or di)ersiication )olatility%
$ur daily lie is ull o complications the day2to2day "rind lea)es us 'ith little ener"y
to (eep trac( o our inancial in)estments% That is copy an in)estor should choose
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 86/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
That silently creeps up rom behind 6 starts eatin" your hard earned sa)in"s e)en
beore you reali1e the situation% An in)estor should loo( at the real return Cthe rate o
return minus the rate o inlation 'hile considerin" an in)estment% &e should in)est
in instruments# 'hich pro)ide proitable2post2inlation returns%
There are t'o realities in the lie% $ne is death 6 the other is ta7% It is ad)isable that
in)estments should be so planned that least possible ta7 'ould be re8uired to be paid%
Smart mo)e or the in)estor is to sa)e e)ery rupee rom ta7 man%
Stability o returns is more important that increased proit% Usually these are
associated 'ith hi"h )olatile in)estment options li(e e8uities 6 e)en 'ith
"o)ernment securities or "ilts as they also run hi"h mar(et ris(% The asset allocation
is su""ested accordin" to the ris( proile o an in)estor% So in)est in the best option 6
"et the ma7imum returns%
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 87/88
5/25/2018 BlackbookProjecton MutualFunds-slidepdf.com
121L280APHY
www.njindiainvest.com
www.moneycontrol.com
www.amfiindia.com
www.karvy.com
www.valueresearchonline.com
MUTUAL FUND P!DU"T AND #$%&"$#'''' TA(MAN
AMF& "!U#$ )!!*
Project Report
http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds 88/88