“TITLE OF PROJECT”

Project report submitted in partial fulfillment of the requirement for the award of

Degree of

MASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted by

______________________________
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“ROLL NO..”
______________________________

Under the guidance of

“GUIDE NAME”

Sikkim Manipal University

Directorate of Distance Education

April 2016
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I “STUDENT NAME” bearing “Reg. No. …” hereby declare that this project
report entitled “TITLE OF POJECT” has been prepared by me towards the
partial fulfillment of the requirement for the award of the Master of Business
Administration (MBA) Degree under the guidance of “GUIDE NAME” .

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Place: (Name (in capitals) and signature of candidate)

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 ACKNOWLEDGEMENT

I would like to express my heartfelt thanks to “GUIDE NAME” for guiding me to

do this project. I would also like to thank Ms. Menaka from Narayana Health for
giving me valuable inputs and the staff for their co-operation during the interview.

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 TABLE OF CONTENTS
CHAPTER CONTENTS PAGE NO.
NO.

INTRODUCTION 1 – 17

1.1 Concept Of Mutual Funds 01

1.2 Mutual Funds In India 04

1 1.3 Asset Management Company (AMC) 06

1.4 Types Of Mutual Fund Schemes 08

1.5 Association Of Mutual Funds In India 10

11

RESEARCH DESIGN 12 – 21

2.1 Statement of the Problem 12

2.2 Objective of the Study 12

2.3 Scope of the Study 13

2 2.4 Limitations 13

2.5. Need For The Study 16

2.5 Research Methodology

 2.6 Operational Definitions Of The Concept 16

3 PROFILE OF THE COMPANY 22 – 24

3.1Organisation of The Karvy 22

3.2 Mutual Fund Services In Karvy 24

ANALYSIS AND INTERPRETATION 25 – 64

4.1 Different Funds Return 25

26
4.2 LIST OF IDENTIFIED MUTUAL FUND SCHEMES

4 DETAILS 56

56
4.3 Review Of Analysis Of Data
56
4.3.1 Data Analysis Plan
4.3.2 Portfolio Performance Measures

58

4.4 Sharpe Index 59

4.5 Treners Index
60
4.6 Jensen’s Index 61
5
4.7 Ranking The Portfolio Of The Various Companies

4.7.1 The ranks of the funds based on the Treynor

 Ratio 61

4.7.2 The ranks of the funds based on the Jensen’s 62

Index

4.8 Average Ranking Of The Companies

63

64

SUMMARY OF FINDINGS, SUGGESTIONS AND

65 – 67
CONCLUSION
6
 INTRODUCTION

Mutual Funds are for everyone. Around the world, millions of investors invest in Mutual
Funds because of their safety, ease of investing and the many advantages they offer.

A mutual fund is type of investment vehicle where investors pool their money in order to allow
each investor participate in a portfolio of securities. The individual investor doesn't actually own
each security but instead, he owns shares of the mutual fund. The main benefit of a mutual fund
is that it provides a way for the investor to achieve diversification in his investments without
having to invest a lot of money. The first mutual fund was the Massachusetts Investors Trust
introduced in 1924. At the end of its first year, the fund had 200 investors with $63,600 in assets.
At the end of 1995, the fund grew to 73,500 investors with assets totaling $1.8 billion! Now there
are over 7000 different mutual funds available to choose from.

Different investment avenues are available to investors. Mutual funds also offer good investment
opportunities to the investors. Like all investments, they also carry certain risks. The investors
should compare the risks and expected yields after adjustment of tax on various instruments
while taking investment decisions. The investors may seek advice from experts and consultants
including agents and distributors of mutual funds schemes while making investment decisions.
With an objective to make the investors aware of functioning of mutual funds, an attempt has
been made to provide information in question-answer format that may help the investors in
taking investment decisions.

Over the past decade, American investors increasingly have turned to mutual funds to save for
retirement and other financial goals. Mutual funds can offer the advantages of diversification and
professional management. But, as with other investment choices, investing in mutual funds
involves risk. And fees and taxes will diminish a fund's returns. It pays to understand both the
upsides and the downsides of mutual fund investing and how to choose products that match your
goals and tolerance for risk.
1.1 CONCEPT OF MUTUAL FUNDS

The concept of mutual funds in India dates back to the year 1963. The era between 1963
and 1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets
under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the
end of the 80s decade, few other mutual fund companies in India took their position in mutual
fund market.

A Mutual Fund is a trust that pools the savings of a number of investors who share common
financial goal; investments may be in shares, debt securities, money market securities or a
combination of these. Those securities are professionally managed on behalf of the unit-holders,
and each investor holds a pro-rata share of the portfolio i.e. entitled to any profits when the
securities are sold, but subject to any losses in value as well. The income earned through these
investments and the capital appreciation realized is shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally managed basket

of securities at a relatively low cost.

How does a Mutual fund work? Share Market A mutual fund is the ideal investment vehicle for
today’s complex and modern financial scenario. Markets for equity shares, bonds and other fixed
income instruments, real estate, derivatives and other assets have become mature and information
driven. Price changes in these assets are driven by global events occurring in faraway places. A typical
individual is unlikely to have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it difficult to keep track of
ownership of his assets, investments, brokerage dues and bank transactions etc. A mutual fund is the
answer to all these situations. It appoints professionally qualified and experienced staff that manages
each of these functions on a full time basis. The large pool of money collected in the fund allows it to
hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle exploits economies
of scale in all three areas - research, investments and transaction processing. While the concept of
individuals coming together to invest money collectively is not new, the mutual fund in its present form

is a 20th century phenomenon. In fact, mutual funds gained popularity only after the Second World War.
Globally, there are thousands of firms offering tens of thousands of mutual funds with different
investment objectives. Today, mutual funds collectively manage almost as much as or more money as
compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically, it pre
specifies the investment objectives of the fund, the risk associated, the costs involved in the
process and the broad rules for entry into and exit from the fund and other areas of operation. In
India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities
exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial
strength in granting approval to the fund for commencing operations. A sponsor then hires an
asset management company to invest the funds according to the investment objective. It also
hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle
registry work for the unit holders (subscribers) of the fund. In the Indian context, the sponsors
promote the Asset Management Company (AMC) also, in which it holds a majority stake. In
many cases a sponsor can hold a 100% stake in the AMC. E.g. BIRLA Global Finance is the
sponsor of the BIRLA Sun Life Asset Management Company Ltd., which has floated different
mutual funds schemes and also acts as an asset manager for the funds collected under the
schemes.

1.2 MUTUAL FUNDS IN INDIA

In India, the Mutual Fund Industry has been monopolized by the Unit Trust of India ever since
1963. Now, the commercial banks like the Sate Bank of India, Canara Bank, Indian Bank, Bank
of India and the Punjab National Bank have entered in to the field. To add to the list are the LIC
of India and the private sector banks and other financial institutions. These institutions have
successfully launched a variety of schemes to meet the diverse needs of millions of small
investors. The Unit Trust of India has introduced huge portfolio of schemes like Unit 64, Master
gain, and Master share etc. It is the country’s largest mutual fund company with over 25 million
investors and a corpus exceeding Rs.55,000 crores, accounting for nearly 10% of the country’s
stock market capitalization.

The total corpus of the 13 other mutual funds in the country is less than Rs.15,000 crore. The
SBI fund has a corpus of Rs.2925 crore deployed in its 16 schemes servicing over 2.5 million
shareholders.

On the whole, as on 30/9/95 there were nearly 25 mutual funds offering 80 different schemes and
serving nearly 60 million investors.

There are also mutual funds with investments sourced abroad called ‘offshore funds’. They have
been established for attracting NRI investments to the capital market in India. The India Fund
Unit scheme 1986 traded in the London Stock Exchange and the India Fund Unit Scheme 1988
traded in the New York Stock Exchange were floated by the Unit Trust of India and the India
Magnum Fund was floated by the State Bank of India. As preset, there are 16 different offshare
Indian funds which have brought about $2.7billion to the Indian market. Besides the above, the
LIC and the GIC have also entered into the market. Again many private organizations have
entered into the field. Most of the schemes have declared a dividend ranging between 13.5% and
17%. In most of the cases it is around 14% only.

The recent trend in the mutual fund industry is to go for tie up arrangements with foreign
collaborators. We find Tatas tying up with Kleinworth Benson; GIC with George Soros; Credit
th
Capital with Lazard Brothers; Kothari with Pioneer; ICICI with JP Morgan; 20 Century with
Morgan and so on. Of course, these tie-ups would bring in new perspective, systems and
technology and this very foreign tag may add credit to the institution

The private sector which entered the arena in 1993 is concentrating on the primary market. It is
so because; investments in new share fetch appreciation between 30 and 1500 per cent in a very
short period. Promoters too give preferential treatment to mutual funds because it reduces their
marketing cost. Again, they go for fund-participation in a venture even before it goes public.
They see potential for immense appreciation in unlisted securities which intent to go to public
with a short period of one year.

In India, Mutual funds have been preferred as an avenue for investment by the household savers
only from 1990s. the sales of units of UTI which were Rs.890 crores in 1985-86 rose to Rs.4100
crores in 1990-91 and Rs.9500 crores in 1993-94. the public sector mutual funds wee able to
collect Rs 3800 crores I 1990-91. However, they could collect only R. 400 crores in 1993-94.
The private sector mutual funds mobilized Rs.17—crores in 1993-94. On the whole, the mutual
fund industry was able to mobilize approximately Rs. 1200 crores in 1993-94, which amounts to
8% of the gross domestic house holding savings in the country. It is a good going indeed.
However, the rate of growth is comparatively slow a not very satisfactory.

The structure consists of

1. Sponsor
2. Trust
3. Trustee
 4. Registrar and Transfer Agent

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

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the
Mutual Fund. The Registrar processes the application form, redemption requests and
dispatches account statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records.

1.3 ASSET MANAGEMENT COMPANY (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC
is required t o be approved by the Securities and Exchange Board of India (SEBI) to act as an
asset management company of the Mutual Fund. At least 50% of the directors of the AMC are
independent directors who are not associated with the Sponsor in any manner. The AMC must
have a net worth of at least 10 crore at all times.

Asset Management Companies in India

The management of a client's investments by a financial services company, usually an investment

bank. The company will invest on behalf of its clients and give them access to a wide range of
traditional and alternative product offerings that would not be to the average investor.

Name of the AMC Nature of ownership

Alliance Capital Asset Management (I) Private Limited Private foreign
BIRLA Sun Life Asset Management Company Limited Private Indian
Bank of Baroda Asset Management Company Limited Banks
Bank of India Asset Management Company Limited Banks
Canbank Investment Management Services Limited Banks
Cholamandalam Cazenove Asset ManagementCompany Ltd Private foreign
Dundee Asset Management Company Limited Private foreign
DSP Merrill Lynch Asset Management Company Limited Private foreign
Escorts Asset Management Limited Private Indian
First India Asset Management Limited Private Indian
GIC Asset Management Company Limited Institutions
IDBI Investment Management Company Limited Institutions
Indfund Management Limited Banks
ING Investment Asset Management Company PVT LTD Private foreign
J M Capital Management Limited Private Indian
Jardine Fleming (I) Asset Management Limited Private foreign
Kotak Mahindra Asset Management Company Limited Private Indian
Kothari Pioneer Asset Management Company Limited Private Indian
Jeevan Bima Sahayog Asset Management Company Limited Institutions
Morgan Stanley Asset Management Company PVT LTD Private foreign
Punjab National Bank Asset Management Company Limited Banks
Reliance Capital Asset Management Company Limited Private Indian
State Bank of India Funds Management Limited Banks
Shriram Asset Management Company Limited Private Indian
Sun F and C Asset Management (I) Private Limited Private foreign
 Sundaram Newton Asset Management Company Limited Private foreign
Tata Asset Management Company Limited Private Indian
Credit Capital Asset Management Company Limited Private Indian
Templeton Asset Management (India) Private Limited Private foreign
Unit Trust of India Institutions
Zurich Asset Management Company (I) Limited Private foreign

1.4. Types of mutual fund schemes

Mutual fund schemes may be classified on the basis of its

Structure

 Open - Ended Schemes

 Close - Ended Schemes
 Interval Schemes
Investment Objective

 Growth Schemes
 Income Schemes
 Balanced Schemes
 Money Market Schemes

Other Schemes

 Tax Saving Schemes

 Special Schemes
  Index Schemes
 Sector Specific Schemes
ByStructure

Open-end Funds: An open-end fund is one that is available for subscription all through the year.
These funds do not have a fixed maturity and investors can conveniently buy and sell its units at
Net Asset Value ("NAV") related prices. The key feature of open-end schemes is its liquidity.

Closed-end Funds: A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified period and investors
can invest in the scheme only at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they are listed. In order to provide an
exit route to the investors, some close-ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that
at least one of the two exit routes is provided to the investor.

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

By Investment Objective

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

Income Funds: The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds, corporate debentures
and Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds: The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in equities and fixed
income securities in the proportion indicated in their offer documents. In a rising stock market,
the NAV of these schemes may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and moderate growth.

Money Market Funds: The aim of money market funds is to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer short-term
instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call
money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in
the market. These are ideal for Corporate and individual investors as a means to park their
surplus funds for short periods.

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