Вы находитесь на странице: 1из 55

A

PROJECT REPORT
ON

“NAV - THE BEST FOR CRITICAL EVALUATION FOR


GROWTH OF MUTUAL FUNDS, A STUDY ON KOTAK
MUTUAL FUND”

IN PARTIAL FULLFILLMENT OF THE


MASTER OF BUSINESS ADMINISTRATION

Submitted by

NIRUPAMA GOUDA
Roll No.- 13209V094020

UNDER THE GUIDANCE OF

Mr. N.C.KAR
Department of BUSINESS ADMINISTRATION
Utkal University
Bhubaneswar

DEPARTMENT OF BUSINESS ADMINISTRATION


UTKAL UNIVERSITY
BHUBANESWAR

DECLARATION

I do hereby declare that the project entitled “NAV - THE BEST FOR
CRITICAL EVALUATION FOR GROWTH OF MUTUAL FUNDS, A STUDY ON
KOTAK MUTUAL FUND" submitted for the partial fulfillment of the requirement of
the degree of master of business administration, is an original piece of work done by me
under the guidance of Mr. N.C.KAR, Faculty, DEPARTMENT OF BUSINESS
ADMINISTRATION, Utkal University, Bhubaneswar and has not been submitted for
award of any other degree else where in part or full.

(NIRUPAMA GOUDA)
CONTENTS

CHAPTER-1 : INTRODUCTION

• Objectives of the study


• Scope of the study
• Research Methodology
• Limitation

CHAPTER-2 : MUTUAL FUNDS

• History of Mutual Fund

• Why of Mutual Fund

• Organization Structure of Mutual Fund

• Advantages of Mutual Fund

• Types of Mutual Fund

• NAV concept of Mutual Fund

• CHAPTER-3 : INVESTMENT STRATEGY IN MUTUAL FUNDS

• CHAPTER-4 : ABOUT KOTAK MFs AND A BRIEF ABOUT OTHER MFs

• CHAPTER-5 : COMPARATIVE STUDY OF KOTAK MFs WITH OTHER MFs

• CHAPTER-6 : CONCLUSION

• SUGGESTION

• BIBLIOGRAPHY

• QUESTIONNAIRE
INTRODUCTION

Of late, mutual funds have become a hot favorite of millions of people all over the world. The driving
force of mutual funds is the safety of the principal guaranteed, plus the added advantage of capital
appreciation together with the income earned in the form of interest or dividend. People prefer Mutual
Funds to bank deposits, life insurance and even bonds because with a little money, they can get into the
investment game. One can own a string of blue chips like ITC, TISCO, and Reliance etc. through mutual
funds Thus, mutual funds act as a gateway to enter into big companies hitherto inaccessible to an
ordinary investor with his small investment. The equity market have been roaring and scaling new peaks
of late. The last quarter was path-breaking in some ways, with the BSE Sensex going well past the 16000
level. Corporate and institutions who form only 2.24% of the total number of investors accounts in the
mutual funds industry, contribute a sizeable amount of Rs.118,742.44 crore which is 51.01% of the total
net assets in the mutual funds industry. A combination of factors has made India the preferred investment
destination by foreign institutional investors (FIIs) Fears of a slowdown in the world economy, higher
unemployment in European economies. Coupled with lower growth rates in those countries, has resulted
in Asia becoming the main destination to park FII money

Public sector and private sector mutual fund companies are coming to the market rapidly. However, the
private sector mutual funds manage 78.25%of the net assets whereas the public sector mutual funds own
only 21.75% of the assets. Mid-cap mania fired up the market and many equity funds made a fortune by
increasing exposure in these companies. Higher the composition of mid-caps in a fund’s portfolio larger
is its absolute returns. Fund managers today have divergent views on whether it makes sense to have
higher exposure in mid cap stocks in normal equity funds. This is due to concerns of higher price earning
multiples
.

Then there are those who bet on the potential of small companies to grow big.
“They are high quality enterprises started by the new generation of entrepreneurs. And
with good exhibition of corporate ethics, these are expected to add to shareholders
value.”
It has been seen that the current equity rally not only for the mid-cap
counter, but for the market as a whole has been largely led by Flls. In other words the
rally has been led more by outside money. Historically the equity markets have been
driven globally by domestic money at least in the longer term and in that sense, the
current situation is of some concern, says an MD of a mutual fund. If one were to look at
the past three years, growth in the Indian equity markets has been largely driven by FII
money. But fund managers aren’t worrying till there is earnings visibility. Though price
to earning ratio may be quoting at higher valuations, they believe the big story exists as
long as companies keep growing their earnings at faster rates to match their P/E.

Risk is an area which often gets little attention by MF investors. Because of this price
fluctuation which leads to more risk such as sensex crash, creats a horror in the investors
mind. Standard deviation or volatility is one way of measuring risk in a found portfolio.
Standard deviation which is calculated on NAV of the mutual fund schemes gives a better
idea to the investors for investment. Even NAV gives an idea for decision making to
invest in a particular mutual fund schemes for a novice. NAV calculation on a daily basis
helps the investors in a large extent.
Overall, the Indian equity story still looks good and is likely to stay on a firm
footing, through global inflation remains a concern Rising oil and commodity prices and
wage inflation had been consistently chopping off growth rates from the world economy
in the world hence, Indian equity investors have only to celebrate.
1.1 OBJECTIVE OF THE STUDY
I. To know all about MFs.
II. To give investor awareness about the mutual fund investment.
III. To know performance of various MFs.
IV. To provide investment strategy for investors.
V. To know different schemes of Kotak mutual fund company.
VI. To know the importance of NAV in MF investment.
VII. To know the growth of Kotak mutual fund schemes with other mutual fund
schemes.
1.2 SCOPE OF THE STUDY
The study aim at analyze the performance of the MFs according to its changing of NAV
which will help the investors for better decision making for future investment.
RESEARCH METHODLOGY
1. Field Research
2. Desk Research
Field Survey:-
This research is done from the primary information available. It provides that first
hand information. It is accurate and depicts the correct picture. The approach is
focused on the information collected from the field. The information is complete in
object and cannot be influenced unlike information available in articles and
magazines. Which can be based and sponsored chances of failure or
misrepresentation in field survey are negligible.
The required information for the primary source are collected from a sample
survey collected in different sectors at Bhubaneswar. The survey is confined a total of
one hundred persons. All the possible attempts have been made to make the sample
truly represent the mass. This was possible by covering a wide spectrum of people of
different income groups, occupation and having investment in different Mutual fund.
Desk Research:
In desk research facts and figure are taken the secondary sources available. It
consists of collection of published information and a brief analysis of the same. The
major advantage of desk research is that is relatively cheap, requires comparatively
less time and does not require elaborate structure on manpower. The secondary
source of information can be following such as companies annual report, monthly
updates of various mutual fund company, other newspaper and websites.
1.3 LIMITATION
The study is mainly depends upon reliability of the data and the information collected
form the secondary sources. Thus the study incorporates limitations data inherent in
the available published information. The study could not be made comprehensive due
to time factor and limited information at hand.
CHAPTER-2

HISTORY OF MUTUAL FUND

The origin of the modern mutual fund industry may be traced to Robert
Fleming’s first investment trust set up in the 1870s, when he promised to manage the
finance of the moneyed classes of Scotland. Fleming’s trust called foreign colonial
Investment trust was formed as a limited company, to invest in a selection of 18 overseas
government stocks at an average yield of 8 prevent. The moneyed people latched on to
the trust idea in a period of falling interest rates.

1964-87(The solitary Fund phase)

The UTI has the distinction of laying the foundation of mutual fund
industry in India. The trust was established under the UTI Act. 1963 a special act of the
parliament and become operational in July 1964. It started with the basic objective of
mobilizing savings through the sole of units and investing them in corporate securities,
for maximizing yield and capital appreciation.

The institution maintained its monopoly till 1987, with its different
schemes like monthly income, capital gain scheme, equity linked investment plan etc., its
most popular scheme has been the unit scheme-1964, which is the first open-ended
scheme. Over the years, UTI has emerged as a large investment institution, with a well
spread out network, it has successfully managed its domestic and off-shore mutual funds.
During this place, UTI was the only fund family included five income oriented open-
ended schemes, which were sold largely through its agent network built up over the year.

1987-92(the coming in of the public sector funds)

The second place, witnessed the entry of fund companies sponsored by the
state owned banks and financial institutions. In 1987, SBI Mutual fund and Canbank
mutual fund were set up as trusts Act, 1882, by the respective sponsors, the state Bank of
India and the Canara Bank. Buy 1990 the two public sector insurance against LIC and
GIC and state owned banks, namely Indian Bank of India and Punjab national Bank had
started operations of wholly owned MF subsidiaries. At this stage mutual funds were
governed by August 1988 guidelines issued by the RBI Subsequently, the Government of
India issued another set guidelines in the year 1990 which emphasized the arms length
relationship between the sponsor and AMC.

1992 To Date (The phase open field policy)

The year 1993 marked a turning point in the history of the mutual funds in
India. As a part of the economy liberalization and reforms process the Government
launched a measure for financial sector including setting of SEBI as a regulatory body.
Also SEBI issued the mutual fund regulations in January 1993 and also the MF industry
opened up to private entity and foreign partners. Kothari group of companies form a joint
venture with pioneer, a US fund company, setup the first private MF, the kothari pioneer
MF in 1993. This was soon followed from Morgan Stanley. Subsequently several mutual
fund trusts setup by domestic and foreign either in joint ventures or as independent
entries. Kotak Mutual Fund, Prudential ICICI, Tata Fund, Sun life, Templeton, HDFC
mutual fund, SBI mutual fund are few names in the recent MF industry in India.
WHY MUTUAL FUNDS

MUTUAL FUNDS are financial intermediaries in the investment business


they collect funds from public and invest on behalf of the investors as “pass through
entities” with losses and gains accruing to the investors only. Mutual fund sell shares to
the investors, invest the proceeds in a wide choice of securities in the financial market.
Owners of shares receive pro-rata shares of the earnings from these assets, minus
management and other fees assessed by the fund.

MUTUAL funds are defined by the different authors in different works


meaning one and same thing i.e. it is a non-banking or non depository financial
intermediary which acts as a important vehicle for bringing wealth holders and deficit
units together indirectly. Mutual funds are poling funds together and then investing that
fund in different securities thus reduces risk by diversification.

MUTUAL FUND FLOW CHART


Here many investors join together to entrust their funds to professional
money managers. These funds are invested in securities. The capital gains, dividend and
interest income from these securities are then passed back to investors either through
dividends or an increase in value of the investment of the fund.

ORGANISATION STRUCTURE OF THE FUND

There are many entities involved in managing your money. This elaborate
structure serves three main purposes. They are

• It ensures safeguarding of your money by providing checks and controls.


● It gives you the benefit of specialization because each of these entities are
experts at their assigned functions.
• If offers a one-stop shop because all aspects relating to managing and
monitoring your investment are taken care of.

ROLE OF VARIOUS ENTITIES

The various entities in the organization of mutual funds are the Trustees
Sponsors, Asset Management Company, Custodian, Transfer Agent and SEBI.
The functions of each of these entities are as below:

TRUSTEES
The trust is administered by a group of trustees who are eminent people
experienced in various walls of life, who safeguard investors interests and ensure
compliance with the regulations. Their functions include
• Responsibility for safeguarding investors funds
• Monitoring the programme of AMC, custodian and transfer agent and
ensure that all these agencies act in unit holders’ interest.
SPONSORS
Sponsors are the promoters of the mutual fund. They are thoroughly
scrutinized by SEBI for sound reputation and integrity in business dealings. For being a
sponsored only the well experienced and well capitalized are in a business. They hold a
major pf share capital of the AMS. The sponsors appoint the Trustees and promote the
AMC.

ASSET MANAGEMENT COMPANY (AMC)

• The AMC is a separate unit which is entrusted with the following


responsibilities.
• Launching schemes, mobilizing funds from investors and investing the
money in line with scheme’s objectives.
• Reporting various aspects of operations of trustees and confirms with the
SEBI regulations.
• Receives an annual fee (maximum 1.25% of value of assets) for he
services from the mutual fund schemes.

CUSTODIAN
Usually the banks, which are solid institutions and well regulated, provide an
independent means of control as custodians. Their responsibilities include
 Safekeeping the assets held by the mutual funds.
Receives and delivers securities in exchange for payment
Following up on corporate benefits, dividends, bonuses etc)

TRANSFER AGENT
The functions of the transfer agent are
• Issuing certificate or account statements to investors for their investment.
• Arranges payment to investors when they redeem (in open ended funds)
and transfer when they buy/sell nits in a stock exchange (in closed-end
funds)
• Takes care of change in address, replacement of lost certificates or account
statements etc.
SEBI
The Securities and Exchange Board of India (SEBI) is statutory body set up by
the government of India. It is an agency responsible to protect investor interest and
promote orderly growth of mutual fund industry. SEBI also formulates regulations
monitors’ performance and conduct of mutual funds and enforces compliance to
regulations through a system of reviewing reports and regulator operations.

2.4 ADVANTAGES OF MUTUAL FUNDS

People with time and skill of analyze companies can do well by picking up
individual stocks but for most investors mutual funds are probably a better way to go
funds offer important advantages over direct ownership. The following are the
advantages of mutual funds over self- involvement.

RETURN POTENTIAL
Investment in securities markets require close monitoring of trends of
economy and industry, Political developments. Interest rate movements global events,
individual company performance Mutual funds offers you full time professional
management with experienced fund managers using the help of research databases on
line terminals and other means of information access (management meetings, plant
visits, broker research).By doing so mutual funds make informed decisions which
increase the chances of making higher returns than investing without their information.

DIVERSIFICATION
Holding more securities in the portfolio spreads out risk and minimizes
value erosion on account of steep decline in one or two securities. Putting all your money
in just one investment exposes you to a grater risk of if something adverse happens to that
single investment. This loss can happen to even well chosen investments on account of
unanticipated events. Therefore investing in a portfolio of securities spreads and reduces
overall risk because steep decline in a few securities are offset by the relative better
performance of other investments.
• LOW OPERATING COSTS
Because they are large professionally managed portfolios, mutual funds
incur proportionately lower trading commissions than do individuals. Due to the huge
amount of transactions, economies of scale come into play.

• CONVINIENCE
Mutual funds offer an easy way to invest and are one shop for all
investment needs Investing by you in the market involves many operational hassles such
as excessive paperwork, bad deliveries and constant follow-up with the brokers and
companies with a mutual fund, you have none of which is well organized to make the job
of investing easy for you.

• LIQUIDITY
Liquidity refers to the speed and ease with which an asset- stock, bond, and
mutual fund may be purchased or sold. The second requirement is that the transaction
takes place with no significant negative price impact. Liquidity is assured with open-
ended funds which are open all around the year to receive your investment and make
payments to you. In case of closed- ended funds buying and selling scan be done through
the stock exchange where the scheme is listed.

• CHOICE
Although mutual funds appear to be just one type of financial product, they are
versatile and can meet savings needs of all investors, whatever be their stage in life or
level of affluence or financial need. There is a variety of schemes to choose from with
wide range of:
Investment objectives and types of securities invested in time horizons of
investments.
 Risk level and return potential.
 Types of tax benefits.
• WELL REGULATED

The AMC has its own Board of Directors and Compliance Officer to ensure
the proper management of investor funds, Additional layers of supervision in the form
of Statutory Auditors. Trustees and SEBI maintain a close watch on functioning of the
mutual fund. The multiplicity of agencies ensures that the investor funds are properly
protected against fraud and misuse.

TYPES OF FUND

Mutual Funds have become so popular that you can find a stock portfolio
that fits just about every investment style approach and focus. You might see the
advertisements or articles about them in newspapers, magazines etc. or your friends could
be talking about them. So they are a common sight to see everywhere today.

Before anything else, you should seek out funds with the kinds of
objectives you are looking for. Today mutual fund companies are coming out with so
many innovations to match the demands and needs of the people.
Mutual funds can be classified based upon the following:
1. Functional Classification of, Mutual Funds.
2. Portfolio Classifications of Mutual funds.
3. Geographical Classification of Mutual Funds.
FUNCTIONAL CLASSIFICATION OF MUTUAL FUNDS

OPEN- ENDED FUNDS


Open –ended funds are those which do not have a fixed maturity and
those follow the principles like that of a going concern. The main features of
open ended funds are:
 No fixed maturity
 Variable corpus
 Not listed
 Investors can buy and sell units from the fund on any working day of the year
 Entry and exit is done at NAV related prices.
CLOSED- ENDED FUUNDS

The close-end universe is much smaller than that of open-ended. Also, in contrast
to open-end funds, the closed-end relatives do not stand ready to issue new shares or
redeem shares. For this reason, the assets of a closed portfolio generally remain more
stable but they are riskier than open-end funds since their price fluctuate widely and
don’t necessarily correspond to NAV.
The main features of Closed- end funds are:-
They are of fixed maturity .i.e. a predetermined duration of a fund (5 yrs.-8
yrs. etc).
Fix their corpus at the initial offer period.
Offer liquidity through listing in or more stock Exchanges.
Entry and exit is at market prices (possibly at premium/ discount to NAV)
There are several advertises of Open-end funds over closed –end funds.
They are:
Instant liquidity
Fair price quoted through daily NAV declaration.
Easy to invest and redeem/ buy and sell units directly from the funds and day.
Systematic investment and withdrawal facility.
No concepts of odd-lots (buy any number and sell any number).
Account statement avoids risk of certificate loss.
PROTFOLIO CLASSIFICATION OF MUTUAL FUNDS

GROWTH FUNDS
These funds invest mostly in equity shares and assume the risks associated with
equity investments. Primary objective of such funds are to provide growth through capital
appreciation. Income through dividend is only an incidental aim. Such funds invest
majority of funds in shares, usually above 80% under normal circumstances. The weight-
age given during investment is in the following pattern- Equity, Debt, Money Market.
Value of investment can fluctuate as it the movement of share prices .The growth funds
can further be classified into 3 categories .They are
1. Aggressive Growth funds
2. Small Company
3. Growth funds

 AGGRESSIVE GROWTH FUNDS:-


Aggressive growth portfolios are known as maximum capital gains capital
appreciation or Performance go-go funds. Some are highly volatile and may use a variety
of speculative strategies such as leveraging their portfolios or selling short stocks they
feel might be due to plunge. Many concentrate on a fairly narrow list of holidays,
including smaller, unfamiliar companies. The more reckless of these portfolios can take
the shareholders on rollercoaster ride, plunging far more than the overall market in a
major sell- off and then outstripping the averages during the rallies. They appeal
primarily to risk tolerant investors, e.g Twentieth century growth, Twentieth Century
ultra and Twentieth century Visa.
SMALL COMPANY
They share similarities with growth funds and sometimes get lumped
together. Small companies can grow at a faster rate than large firms do because their
expansion takes place on a smaller base of assets and revenues. Most funds in this group
have a growth orientation. These stocks generally have a high P/E Ratio.

 GROWTH FUNDS
Funds in this category are generally less volatile than those in the previous
two groups. As the name implies, growth portfolios hold stocks of firms who’s
earning are expected to rise at an above average rate. The companies tend to be
larger, well established firms.

INCOME FUNDS

These funds invest primarily in bonds i.e. debt instruments like debentures. Their
bias is towards providing safety of investments and regular income. Primary objective of
such funds is to provide steady returns and income by way of regular dividend. Hence
managers focus primarily on dividend yields. They seek yields significantly higher than
that of an overall market yardstick such as the S &P -500 .When a stock price falls, it s
yield increases- assuming the company pays a dividend. Investment pattern is different.
Here weight age is given in the following order- Debt, money market and equity. Usually
over 80% is invested in debt instruments corporate debentures, public sector bonds and
government securities.

HYBRID FUNDS
They divide their investment between equity shares and bonds in order to meet
the objectives of safety. Capital appreciation and regularity of income. There investment
pattern is different from the above two categories. Here more weight age is given to
Equity funds. Then Debt securities and Money Market instruments investment is Equity
is anywhere between 30%-70% and the rest in Debt instruments. Here there is moderate
return and less risk than growth funds but relatively higher risk and more potential for
capital appreciation compared to income funds.
Three categories fall under this type:
Balanced Funds
Convertible Funds
Asset- allocation Funds

BALANCED FUNDS
These strive to achieve three goals: Income, Moderate Capital Appreciation and
Preservation of Capital. The portfolio ranges between 40% -60% in bonds. They typically
emphasize on securities issued by high- quality companies. Balanced funds are
especially appropriate for individuals who can afford only one fund, since they are
diversified into both the bond and stock market. They also make sense for investors who
are starting out and want something with a reasonably conservative orientation.
CONVERTIBLE FUNDS

Convertible securities are bond or preferred stock that can be exchanged for
predetermined number of companies common shares, at holder’s option. Convertibles
have split personality. At times they act as stocks and at times act like bonds. They
provide the downside protection of fixed income securities and upside potential of equity.
It has greater emphasis on income and preservation of capital than the typical stock
investment.

ASSET ALLOCATION FUNDS


These funds diversify beyond equities into other asset-categories, typically cash
equivalents and bonds. Some, with broader orientation, include foreign equities, gold
stocks real estate shares and natural resource companies.

TAX-EXEMPT FUNDS

They invest their funds in such investments which receive benefit and or enjoy
exclusive tax free treatment e.g municipal bonds. The main objective of such funds is to
get the tax rebate plus capital growth or steady retunes .Under section 80ccc of the
income Tax Act, any investment in an equity linked saving scheme (ELSS) up to Rs
100000 per financial year is liable to tax exemption. Thus Rs.30000 will be reduced
from the tax payable if you put in Rs.100000. The minimum lock in period with these
funds is three years apart from the tax break on entry, these funds offer change of capital
appreciation through growth in NAV as well as the potential.

INDEX FUNDS
These funds invest only in those shares which are included in the market indices
and in exactly the same proportion, so that the value of such index funds various with
market indices e.g. hold the same or similar stocks as would be fund in s particular
market index like the standard & poor 500.

HEDGE FUNDS
Mutual funds which their funds by speculative trading i.e. by buying
shares whose price is expected to raise and selling shares whose prices are likely to fall,
are called hedge funds.

Hedging is done to reduce a portfolio’s, volatility .Options and futures can


be used to lessen market risk. Interest-rate risk and currency risk. Hedging should be
viewed as insurance. Too much can prove costly and might reduce returns.

MONEY MARKET MUTUAL FUNDS


They specialize in investing in short-term money market instruments like
certificates of Deposits. The primary objective is to provide instant liquidity. Complete
principal safety and a degree of dividend and current income. Here the investment is
made in only very safe money market instruments as the government T- bills, Bank
Certificates of Deposits, call Money, Commercial Paper and short term government
securities .They provide even greater principal safety than bond funds, with yields usually
higher than bank deposits. This is achieved because many money market mutual funds
work on very low expenses compared to banks. The investment pattern is such that more
weight age is given to money market instruments and then Debt securities. This is ideally
suited for risk averse investors looking for principal safety as well as those looking for
a short- term investment avenue prior to meeting a forthcoming expenditure or making
a longer- term investment. The recommended investment time frame is 15 days up to 1
year.

Generally money market mutual funds are not volatile, since they predominantly
invest in short- term paper. Investors too, tend to take a short term view of the funds-15
days to one year. The choice of funds is often dictated by more than just return .Investors
choose the fund based on services and conveniences offered rather than just returns.
Funds offer 24 hours turn around, cheque writing facility against the fund account and
even ATM access the fund account. Another factor that afflicts funds performances
seems to be size .Large schemes like UTI’s money market funds and SBI’s Magnum
Liquid fund have rates of return higher than 105, a stupendous performance by any
standards.

SPECIAL FUNDS

These funds, which track the fortunes of securities in a particular industry ,like
software and pharmaceuticals, since these industrials and others like media continue to
outperform the board market indices. But as investors continue to lap up these schemes,
it is time to sound a note of caution.
Sect oral funds are generally a better way to ride the bull market, but they also
should be first dumped when the trend reverses. The new sectors which are the say of the
market are info Tech fund communication fund, Entertainment fund, MNC fund, Internet
fun etc.
They are three key rules to remember before investing in sector funds.
I. Despite the overwhelming factor of the relative strength of the industry in
the market place, investors still cannot ignore portfolios composition and
AMCs investment style.
II. Returns on such funds will heavily depend and the stage of the
industry’s lifecycle. So, evaluating a fund by its past record can be
misleading instead. Investors should look for long term sustainability of
that industry while fudging a fund’s upside potential. For a sunrise
industry like lit, the 475 percent growth by Kothari pioneer, InfoTech fund
over last one year is not surprising.

III. Sector funds are inherently riskier then funds with broader objectives like
growth or value. But for a investor who understands a particular industry well, sector
funds are an ideal proxy to trade back and forth in securities of that industry. For
instance, investors can freely switch over from one sect oral fund to another without entry
or like load under the umbrella of SBI’s Magnum sector Funds.

GEOGRAPHICAL CLASSIFICATION OF MUTUAL FUNDS

 Domestic funds: Domestic funds are the saving schemes. Which are
opened for mobilizing saving of the investors in household sector in
the country? They can invest only in the securities in the financial
markets within the country.

 Offshore Funds: Such mutual funds can invest in securities of foreign


companies and such investments require RBI permission UTI and SBI
have lunched such funds outside as the Indian fund etc.

By entry or exit charges mutual funds may also be classified Load funds have a one
time charges at the time of entry or exit into the fun. An entry charges is called Front-
end load and an exit charge is called Back-end load. The load is limited to 6% of
investment value. The load is meant to cover marketing expenses involved i.e.
particularly agent commission.
A no load fund does not charge an entry or exit fee but the AMC is
entitled to collect 1% additional asset management fees. Therefore while the investors
save some upfront cost, they incur higher ongoing cost. A contingent Deferred Sales
charges (CDSE) is a time dependent back- end load which is chargeable only if the
investor redeems within a pre-specified period.
1. Net Asset Value

Definition of NAV

Net Asset Value or NAV is the sum total of the market value of all the shares held in
the portfolio including cash less the liabilities, divided by the total number of units
outstanding. Thus, NAV of a mutual fund unit is nothing but the ‘book value’. Mutual
funds and Unit Investment Trusts (UITs) generally must calculate their NAV at least
once every business day, typically after the major U.S. exchanges close. A closed-ended
fund, whose shares generally are not "redeemable" that is, not required to be repurchased
by the fund, is not subject to this requirement.

An investment company calculates the NAV of a single share (or the "per share NAV")
by dividing its NAV by the number of shares that are outstanding. For example, if a
mutual fund has an NAV of Rs100 million, and investors own 10,000,000 of the fund’s
shares, the fund’s per share NAV will be Rs10. Because per share NAV is based on
NAV, which changes daily, and on the number of shares held by investors, which also
changes daily, per share NAV also will change daily. Most mutual funds publish their
NAVs per share in the daily newspapers.

The share price of mutual funds and traditional UTI is based on their NAV. That is, the
price that investors pay to purchase mutual fund and most UIT shares is the approximate
per share NAV, plus any fees that the fund imposes at purchase (such as sales loads or
purchase fees). The price that investors receive on redemptions is the approximate per
share NAV at redemption, minus any fees that the fund deducts at that time (such as
deferred sales loads or redemption fees).

For the statutory and regulatory provisions relating to NAV, refer to the Investment
Company Act of 1940 and the rules adopted under that Act, in particular Section 2(a)
(41), and Rules 2a-4 and 22c-1.
NAV Calculation

The net asset value of the fund is the cumulative market value of the assets fund net of its
liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the
assets in the fund, this is the amount that the shareholders would collectively own. This
gives rise to the concept of net asset value per unit, which is the value, represented by the
ownership of one unit in the fund. It is calculated simply by dividing the net asset value
of the fund by the number of units. However, most people refer loosely to the NAV per
unit as NAV, ignoring the "per unit". We also abide by the same convention.

• NAV= Market Value of Asset-Liabilities


Units Outstanding

• NAV +/- load, if any, sit the value at which a fund buys and sells unit.

IIIustration

Market Value of Equities Rs. 200 crores Asst


Market Value of Debentures Rs.100 crores Asset
Dividend accrued Rs. 2 crores Income
Interest Accrued Rs.4 crores Income
Ongoing Fee payable Rs. 1 crores Liabilities
Shares purchased Rs.9 crores Liabilities
No. of units held in the fund 20 crores Units

NAV per unit= Market value of Asset- Liabilities


Units Outstanding

NAV = (200+100+2+4)-(1-9)
20

=306-10
20

=14.5
This computation is on an assumed unit capital of 20 cores units. On going fee at
2.5% maximum allowed by SEBI includes intermediary brokerage R & I and custodian
charges audit fees trustee expenses etc. in actual computation this would be pro-rated on
the weekly average of the fund.

In a no load fund the investor can buy and redeem units at NAV+ load will be the
sale and redemption price of units. Risk faced a bond fund investor that the coupon
payments get invested at a successively low rate.

3. Risk return characteristics

NAV vs Price of an equity share

In case of companies, the price of its share is ‘as quoted on the stock exchange’, which
apart from the fundamentals, is also dependent on the perception of the company’s future
performance and the demand-supply scenario. And hence the market price is generally
different from its book value.

There is no concept as market value for the MF unit. Therefore, when we buy MF units at
NAV, we are buying at book value. And since we are buying at book value, we are
paying the right price of the assets whether it be Rs 10 or Rs.100. There is no such thing
as a higher or lower price.

Misconception about NAV

This situation arises from the perception that a fund at Rs 10 is cheaper than say Rs 15 or
Rs 100. However, this perception is totally wrong and investors would be much better off
once they appreciate this fact. Two funds with same portfolio are same, no matter what
their NAV is. NAV is immaterial.

Why people carry this perception is because they assume that NAV of a MF is similar to
the market price of an equity share. This, however, is not true.

The NAV of a mutual fund has not been correctly understood by a large section of the
investing community.

This is quite evident from the fact that Mutual Funds had been recently collecting
huge corpus in their New Fund Offers or NFOs, whereas the collections in the existing
schemes were negligible. In fact, investors sold their existing investments and invested
in NFOs. This switch makes no sense, unless the new fund has something different and
better to offer.

NAV & its impact on the returns

We feel that a MF with lower NAV will give better returns. This again is due to the
wrong perception about NAV. An example will make it clear that returns are independent
of the NAV.

Say you have Rs 10,000 to invest. You have two options, wherein the funds are same as
far as the portfolio is concerned. But say one Fund X has an NAV of Rs 10 and another
Fund Y has NAV of Rs 50. You will get 1000 units of Fund X or 200 units of Fund Y.
After one year, both funds would have grown equally as their portfolio is same, say by
25%. Then NAV after one year would be Rs 12.50 for Fund X and Rs 62.50 for Fund Y.
The value of your investment would be 1000*12.50 = Rs 12,500 for Fund X and
200*62.5 = Rs 12,500 for Fund Y. Thus your returns would be same irrespective of the
NAV. It is quality of fund, which would make a difference to your returns. In fact for
equity shares also broadly this logic would apply. An IT company share at say Rs 1000
may give a better return than say a jute company share at Rs 50, since IT sector would
show a much higher growth rate than jute industry (of course Rs 1000 may
‘fundamentally’ be over or under priced, which will not be the case with MF NAV).

THIRD CHAPTER

UNDERSTANDING AND MANAGING RISKS

Most people aren’t worried about earning too much on their investments, rather,
they are concerned about the possible of losing their hard-earned money Mutual funds
and other securities do offer us potentially higher returns than guaranteed savings
accounts. But in exchange for this they also come with certain risks.

When investing in mutual funds, the main risk you face is the uncertainty of future rates
of return, which can result in the erosion of your investment. Here’s breakdown of mutual
fund risks, which can be experienced in any combination.

• Market Risk- the risk that movement in the financial markets will adversely
affects your investment you can always be assured of one thing when
investing- the markets will fluctuate based on many factors, such as the state
of the economy, current events, corporate earnings, interest rate movements,
and sometimes even a statement from a high-ranking federal official.

• Interest Rate Risk- the risk that the value of a fixed –income investment
will drop as interest rates rise Bond prices are inversely related to interest
rates, that is, if one goes up, the other goes down .If you’re heavily invested in
bonds, the value of your portfolio may be greatly influenced by interest rate
fluctuations.

• Inflation Risk- the risk that the return on your investments will not keep pace
with rising consumer prices. Historically, fixed –rate securities have
sometimes not returned enough to protect investors against inflation. While
over the long term, equity securities have tended to keep up with or exceed it.
• Business Risk- the risk that a company issuing a security may not be
financially healthy due to any number of factors, like poor management, low
product demand or exorbitant operating expenses. Such situations can result
in a plunge in the security’s value, as well as a dividend reduction or
elimination.

• Credit Risk- the risk that a bond issuer will not be able to repay its debt at
maturity Bond ratings by agencies like Moody’s and standard & Poor’s
identify the quality and risk level of bonds Highly- rated bonds tend to carry
the lowest risk, while bonds with low ratings, like high-yielding junk bonds
are typically the riskiest.

• Currency Risk- the risk that fluctuations in the exchange rate between the
U.S dollar and a foreign currency may decrease the value of a security that is
either invested in or whose value is derived upon that currency. Global and
international investments are most subject to this type of risk.

• Political Risk- the risk that political and/or governmental actions or events
may unfavorably influence the value of a security.

• Liquidity Risk- the risk that a mutual fund’s underlying securities cannot be
sold at a fair price within a reasonable period of time. Shares in large blue-
chip stocks are considered liquid because there are a large number of
outstanding shares that are actively traded. As a result, their stock prices are
not dramatically affected by day-to-day buying and selling. Conversely,
small-company stocks with less outstanding shares are generally not
considered liquid, since a few big buy or sell orders can greatly influence the
share price.
What You Can Do to Help Manage Risk
Here are some time-tested ways to help you manage risk in your portfolio:

Educate yourself- be familiar with the types of risk are exposed to within your
portfolio. If you are not willing to accept much risk, you should probably think twice
before investing in funds that are exposed to more types of risk than others. For example,
international and global stock funds are subject to the majority of risks mentioned in the
previous section, while domestic stock funds are less likely to experience political and
currency risks.

• Spread out Risk- Diversification is key in helping to temper some types of


portfolio risk. The process of diversifying, known as asset allocation, can help to
minimize some risk by spreading your money among several different asset
classes. Therefore, when one asset class is adversely affected by market or other
conditions, another class may be less affected or not affected at all.
Diversification does not assure a profit or protect against market loss.

• Keep Your Goals in Mind- the shorter your investment time horizon, the
more your portfolio could be adversely affected by market volatility. If you don’t
have a lot of time to invest for a goal, consider your tolerance and financial ability
to ride out market ups and downs. You may decide to invest in a more
conservative fixed-income or money market fund instead of a stock fund.
• Don’t Forget about Future Costs, while long-term investors are better suited to
tolerate market fluctuations, inflation risk should still be a consideration. If you
are investing for a long-term goal like retirement, you probably have a larger
percentage of stock funds in portfolio. Over the long term, stocks have historically
kept pace with or exceeded inflation.
• Consider Your Income Needs - perhaps you are already retired and living on a
fixed income. You most likely want your investment portfolio to include income-
producing investments, such as high-quality bonds and cash investment. You may
also be comfortable having some equity securities in your portfolio to keep the
potential for growth.
• Tap a Valuable Resource - Consult your investment professional for guidance
in understanding and managing risks. He or she can provide you with detailed
fund and performance information to help you match your investments to your
goals.
 Back to Top
Neither New York Life Investment Management LLC nor its
representatives provide legal, tax, or accounting advice-please contacts your
own advisors.
HOW TO INVEST IN A MUTUAL FUND

Investors are always faced with several tricky questions while deciding on
investments, whether it is in equities or mutual funds. Our topic of discussion here is,
how a investor should invest in a mutual fund, by which he can get more return. If
investors invest his money in an IPO (in a new scheme) the entry load is nil. But as
scheme is new it is difficult to know whether the scheme will perform well or not. So it is
a risk.
Another thing is the investor should see the portfolio of scheme in which
the money is invested. He should also invest his money when the market is low. While
investing in debt or equity scheme, he should judge whether the equity market id
performing good or debt market is performing.

Generally a investor who is of a high income group and of high risk appetite
should invest in equity funds. Because equity scheme are high risk and the return on
equity is also higher. An investor who is a conservative one should invest his money in
debt, balance or money market fund. To get more return and minimize risk a investor
should invest his money at least for 3 to 4 years. If an investor invests his money for 3 to
4 years he will get higher return form other deposits.

A retail investor should seek advice from a financial planner – although one needs
to make sure that the financial planner’s advice is independent. An alternative method is
to check out the websites of a number of online fund brokers such as
mutualfundsindia.com, where one can compare funds, including their fees and
performances. One can also check the ratings given to these funds by financial research
groups such as value researchononline.com and others help when an investor seeks
guidelines from someone who shows a similar age and income profile.

The most effective technique for a retail investor would be to invest


regularly through SIP. This will commit the small investors to invest a regular amount
every month rather than bunch investments towards the end of the year.
SIP as that route of investing, where an investor puts a specific some of
money regularly, ensures that there’s cost averaging of the units bought through times
both good and bad and hence gives a better chance to the investor to make gains.

Several mutual funds are sending out mailers to their existing investors,
informing them of the potential of either some existing or new schemes that they are
launching. How’s ever there lots more pressure in terms of selling new schemes than the
existing ones.

The main reasons being given for investing in new schemes is that first the units
for the investor will be offered at par and in some cases the entry load is waived. How
ever many schemes change an entry load even during IPO and that needs to be taken into
consideration.

On a cumulative basis, close Rs 60000 would be invested over a period of


five years. In this case, it has been found that the worst perform gave an annual return of
22%. On an average the 53 equity funds gave a return of 36% with the band of returns
ranging from 22% to 60%. The investment philosophies of the equity funds are different
and hence, returns would not be the sole criteria for evaluating fund performance.
Reliance growth, Franklin India Prima, Magnum Contra, HDFC equity, Alliance equity,
are among the ones with more than 40% annual return.

Investor of equity funds should remember that adopting the discipline of


saving and investing on a regular basis, they could benefit in two respects. First they can
avoid the temptation of timing the investment. Market timing is an activity that is best left
to professionals.

Second, the way to weather market cycles successfully as with disciplined


and periodic investing. This simply means investing an equal amount of money at regular
intervals. Regular subscriptions to a mutual fund are an excellent way to save and invest.
The major benefit is SIP is that in many cases in SIP entry load is nil.
SYSTEMATIC INVESTMENT PLANS IN MUTUAL FUNDS

It’s the story of Ganesh, the farmer, who used to live in a small village and
used to earn very little. Once upon a time a very renowned wise man visited his village.
Ganesh thought to visit him and seek some advice from him about his meager income.
The wise man advised him to cultivate Chinese Bamboo. He had never heard about it
before, but he went on to cultivate it.

He planted a little seed, watered it and fertilized it for a whole year. But, nothing seemed
to happen. The next year he again watered it and fertilized it, but to his dismay nothing
happened again. The third year the same thing happened and he got very discouraged. He
thought that he has been mislead by that wise man. But, he still watered it for the fifth
year. This time to his amazement, the bamboo tree sprouted and grew NINETY FEETS
in 6 weeks. This way the poor Ganesh became a rich man and all his woes came to an
end.

A systematic Investment Plan, or SIP, is a simple yet a powerful tool used by investors
worldwide as a method for savings and wealth accumulation. It works on the principle of
Chinese Bamboo. That is, you will reap unbelievable returns only in the longer run.
Investing through SIP facility will empower you to plan and save for your future by
inculcating in you a disciplined habit of investing that should bring you closer to
achieving your financial objective.

SIP Defined
Systematic Investment Plan or SIP is a disciplined way of investing one’s money in
order to take advantage of the volatility in the market, and thus drawing maximum
benefit out of our investments over a longer period of time. In it an investor invests a pre-
specified amount in a scheme at pre-specified intervals at the then prevailing NAV. By
investing through this route the investor actually ends up with more number of units and
hence can get more returns whenever he disposes them off. This happens due to the
reduction in average cost of each unit of the scheme that is purchased.
Now let’s look at how it works.

COMPARISON OF SIP WITH ONE TIME INVESTMENT PLAN.

A big-time investment at the starting level is like investing in the dark,


because the future performance is obviously difficult to predict. So it is very risky, in one
time investment. The return may higher or may lower which can not be said. On the other
hand, in SIP due to regular investor knows what he is getting into and the kind of risk that
is being taken at each stage. Another hazard of one time investment is that after some
time two schemes might start to lock the same as they have a similar portfolio and hence
at such a stage there could be little reason for one to go in for the new scheme. A regular
investment has limited risk and it also gives a choice for investor to take corrective action
but constant and quick change, are not recommended unless there are special reason. In
the final analysis, investors need to give themselves, a better chance to earn return and
here it is important that one uses the systematic route for investment.

How Does SIP Works for the Investors ?


Benefits to the investors:

1 Makes market timing irrelevant


2 helps you build for the future
3 compounds returns
4 Lowers the average cost
5 Light on the wallet
6 Saving for different Investment goals
7 Opportunity Cost saved by the Investor
Most investors want to buy stocks when the prices are lower and sell them when
prices are high. But timing the market is time-consuming and risky and involves lot of
element of judgment. A more successful investment strategy is to adopt the method called
Rupee Cost Averaging. To illustrate this lets compare investing the identical amounts
through a SIP and one lump sum.
CHAPTER-3

COMPANY PROFILE

Kotak Mahindra is one of India's leading financial institutions, offering complete


financial solutions that encompass every sphere of life. From commercial banking, to
stock broking, to mutual funds, to life insurance, to investment banking, the group caters
to the financial needs of individuals and corporates.
The group has a net worth of around Rs.3,200 crore and employs around 10,800
employees across its various businesses servicing around 2.6 million customer accounts
through a distribution network of branches, franchisees, representative offices and
satellite offices across 300 cities and towns in India and offices in New York, London,
Dubai, Mauritius and Singapore.

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned


subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF).
KMAMC started operations in December 1998 and has over 4 Lac investors in various
schemes. KMMF offers schemes catering to investors with varying risk - return profiles
and was the first fund house in the country to launch a dedicated gilt scheme investing
only in government securities. It is committed to offering innovative investment solution
and world class services and conveniences to facilitate wealth creation for its investors.
As on May, 2007 the number of investors of Kotak Mutual Fund is 4.97 lakhs. As on 31st
May, 2007 Asset Under Management (AUM) of the Kotak Mutual Fund is Rs.17147.44
crores. Kotak mutual fund company has won award across its debt from esteem
institutions such as ICRA and Lipper. It has got ICRA award for its Kotak Flexi Debt and
Kotak Bond short term. At the Lipper awards India 2007,

Kotak Mahindra AMC added two more Lipper fund Awards to its list. Kotak Mahindra
Mutual Fund was adjudged the Best Fund Group (over past three years) in the bond
category and the Kotak Bond Regular Plan (growth) adjudged the Best Fund (over last 5
years) in the Bond Indian Rupees General category. The awards are indeed encouraging
and are also a humbling reminder that investor oriented performance and adherence to the
mandate serves in the long run and facilitates delivery of risk adjusted performance on a
consistent basis. Since its inception kotak mutual fund has been dealing with many funds
according to the market situation need and investors perception.

 According to its recent scheme Kotak Life Time has been launched from 24
March, 2006 which is an Open- Ended Equity Growth Scheme.

 According to its recent performance schemes Kotak life Style, Kotak 30, Kotak
Oppertunities, Kotak MNC, Kotak Mid-Cap are the best.

 Recently Kotak Mutual Fund has launched Kotak Gold ETF Fund. Its NFO period
is 20th June, 2007 to 4th July,2007.

Different schemes have been made for their special features according to the demand of
the market situation and conception of the investors. Some brief ideas have been given
for different schemes.

KOTAK TAX SAVER:


(Open-Ended Equity Linked Saving Scheme.)
It was started for continuous offer from 25th November 2005. A diversified equity
scheme that invests in equity and equity related securities and enable investors to avail
the income tax rebate as permitted from time to time. The investment strategy is to have
80-100% in equity portion and 0-20% in non equity portion. Its ideal investment horizon
is 3 years and above, corpus is Rs.201.46 crores. Sector allocation is more upon industrial
capital goods.

• KOTAK GLOBAL INDIA :


(Open –Ended equity growth scheme.)
It was started for continuous offer from 3rd February 2004.
A diversified equity scheme which aims at capturing the growth potential of
globally competitive Indian Companies. The scheme follows a bottom up approach to
stock selection with focus on Indian companies. With a clear global expansion /
export strategy for incremental growth. The investment strategy is to have a portfolio
diversified across sectors. Its ideal investment horizon is 1 to 3 years and corpus is
Rs.109.90 cores. Sector allocation is more upon industrial capital goods.

• KOTAK TECH :
(Open- ended equity growth scheme.)
It was started for continuous offer from 2nd May- 2000. A sector scheme, investing
only in IT sector companies. The scheme follows a bottom-up approach to stock
selection. The investment strategy is to invest with medium to long term view on
companies. Its ideal investment horizon is 1-3 years and corpus is Rs.44.71 cores.
Sector allocation is more upon software which is nearly 94%.

• KOTAK EQUITY FOF:


(Open-ended equity fund of funds scheme)
It was started for continuous offer from 10th August 2004.
A multi manager FOF scheme that invests 90- 100% in diversified equity schemes
and rest in liquid schemes. The scheme invests across multiple fund houses which
invests 65-75% of their portfolio in diversified large cap schemes and 15% -25% in
diversified aggressive equity schemes. Its ideal investment horizon is 1-3 years and
corpus is Rs. 71.95 crores. Sector allocation is more upon Kotak 30.

• KOTAK FLEXI FOF-


(Close- ended fund of funds scheme)
A close ended multi manager FOF scheme, with a maturity period of 3 years. The
scheme allocates assets across equity (diversified large cap. and aggressive scheme)
and liquid schemes. Ideal investment horizon is more than 1 year and corpus is Rs.
82.77 crores.

• KOTAK BALANCE:
(Open-ended balanced scheme)
It was started for continuous from 29th November 1999. A scheme investing in
equity, debt and money market instruments. The investment strategy is to have 51%
-70% in equity portion and 30%- 50% in non equity portion. Its ideal investment
horizon is more than one year and corpus is Rs. 94.83 crores.
• KOTAK INCOME PLUS :
(Open ended income scheme)
It was started for continuous offer from 3rd December 2003.
A scheme, investing in equity, debt and money market instruments. The
investment strategy is to have 80%-100% in debt and money market instruments and
0%- 20% in equity and equity related instruments.
Its ideal investment horizon is more than one year and corpus is Rs. 71.49 crores.
• KOTAK GILT SAVINGS :
(Open-ended dedicated gilt scheme)
It was started for continuous offer from 5th January 1999.
India’s first dedicated gilt scheme with an objective to generate risk free returns
through predominant investments in the Govt. of India securities with short term
outstanding maturity and with low interest rate/price risk. The investment strategy
involves the average portfolio maturity being capped at 4 years and a reasonable cash
component in bearish markets. Its ideal investment horizon is 6 months and above. Its
corpus is Rs.13.33 crorers.

• KOTAK LIQUID:
(Open – ended debt scheme)
It was started for continuous offer from 6th October-2oo6. A liquid scheme, which
predominantly invests in money mark securities and endeavors to provide reasonable
returns and high level of liquid. The scheme has four plans: regular plan, sweep plan,
institutional plan and institutional premium plan. The investment strategy reduces the
interest rate/ price risk to minimal levels and normally the average portfolio maturity
is not more than 6 months. Its ideal investment horizon is 7 days to 15 days and its
corpus is Rs. 2667.77 crores.

• KOTAK CASH PLUS:-


(Open ended income oriented scheme)
It was started for continuous offer from 3 October 2005. An open-ended arbitrage scheme
that aims to generate income from investment in debt and money market securities and by
availing arbitrage opportunities between price of spot and derivatives markets. Its ideal
investment horizon is 1 to 3 months and corpus is Rs. 41.94 corers.

• KOTAK BOND :
(Open-ended debt scheme)
It was started for continuous after from 29 November 1999. The portfolio of the scheme
consists of debt and money market securities having two plans Deposit plan & Regular
plan. The investment strategy is to invest across were maturity horizons and different
kinds of issuers in the debt market, the G. sec component is normally maintained
between 30% to 50% and it generally does not invest in corporate bonds with less than
AA rating .Its investment horizon is 1 to 2 years and corpus is Rs 46.59 crores.
• KOTAK MNC :
(Open-ended equity growth scheme)
It was started for continuous offer from 2 may -2000.
A scheme diversified across sectors, that invest in multinational companies having
business India. The scheme following a bottom-up approach to stock selection and the
investment strategy is to make aggressive allocation across select sectors. Its ideal
investment horizon is 1 to 3 years and corpus is Rs40.61 crores.

• KOTAK CONTRA :
(Open ended equity growth scheme)
It was started for continuous offer from 27 July 2005. A diversified which are
currently under- valued due to temporary /non- recurring reasons, thus following the
conation style of investment. The investment strategy is to have 65% -100% in equity
and equity related securities, 0%- 35% in debt and money securities. Its ideal investment
horizon is 1 to 3 years and corps is Rs137.11 corers.
• KOTAK MID-CAP :
(Open –Ended Equity Growth Scheme)
It was started for continuous offer from 25.febuary 2005. A scheme that invests
predominantly in madcap companies which are expected to be tomorrow’s large cap
companies. The scheme follows a bottom up approach to stock selection. The investment
strategy is to have 65% -100% investment in mid-cap companies, up to 35% in large cap/
small cap companies, 0% -35% in debt and money market securities with a portfolio
diversified sectors. Its ideal investment horizon is 1 to 3 years and corpus is Rs. 230.63
corers.
• KOTAK DYNAMIC FOF:
(Close- ended fund of funds scheme)
A close- ended multi- manager FOF scheme with a maturity period of three years. The
scheme allocates assets across the diversified large cap schemes and liquid schemes in a
specific proportion, based on the recommendation received by the designated advisor.
Its ideal investment horizon is more than one year and corpus is Rs. 24.76 cores.
SCHEME OF JBI MUTUAL FUND

• MAGNUM EQUITY FUND :


(Open ended growth scheme)
Investment objective:-
To provide investors long term capital appreciation along with the liquidity of an open-
ended scheme, the scheme will invest in a diversified portfolio of equities of high
growth companies primarily in equities and the balance in debt and money market
instruments. Its sector allocation is more upon equity and equity related instruments
which is not less than 70%. Its benchmark index is BSE 100.
• MAGNUM TAXGAIN SCHEME :
(Open-ended equity linked savings scheme (FLLS)
Investment objective:-
The prime objective of scheme is to deliver the benefit of investment in a portfolio of
equity share, while offering tax rebate on such investments made in the scheme under
section 80C of the income- tax Act, 1961 .It also seeks to distribute income periodically
depending on distributable surplus. Investment in this scheme would be subject to a
statutory lock- in of 3 years from the date of investment to avail section 80C benefits. Its
benchmark index is BSE 100.
• MAGNUM BALANCED FUND :
(Open-Ended Balance Scheme)
Investment objective:-
To provide investors long term capital appreciation along with the liquidity of an
open-ended scheme by investing in a mix of debt and equity. The scheme will invest
in a diversified portfolio of equities of higher growth companies and balance the risk
through investing the best in a relatively save portfolio of debt. Its sector allocation is
more upon equity and equity related instruments which is at least 50%. Its benchmark
index is CRISIL balanced index.

SCHEMES OF HDFC MUTUAL FUND

• HDFC GROWTH FUND :


Investment Objective :-
To generate a long term capture appreciation from a portfolio that is invested
predominantly in equity and equity-related instruments. Its sector allocation is more
upon equity and equity related instruments.
Its benchmark index is SENSEX.

• HDFC BALANCED FUND ( HBF):

Investment objective:-
To generate capital appreciation along with current income from a combined portfolio
of equity & equity related and money market instruments. Its sectors allocation is
more upon equity and equity related instruments. Its benchmark is CRISIL Balanced
fund index.
• HDFC TAXSAVER (HTS) :
Investment objective:- To achieve long term capital growth
Note: units purchased can not be assigned / transferred/ pledged/ redeemed / switched
out until completion of 3 years from the date of allotment of the respective units.
Its sector allocation is more upon equity and equity related instruments which is
more than 80% its benchmark index is S & P CNX 500.
• HDFC MF MONTHLY INCOME PLAN ( HMIP):
Investment objective:-
The primary objective of the scheme is to generate regular returns through
investment primarily in debt and money market instruments. The secondary objective
of the scheme is to general long- term capital appreciation by investing a portion of
the scheme’s assets in equity and equity related instruments. However, there can be
no assurance that the investment objective of the scheme will be achieved. Its sect
oral allocation is more upon debt and money market instruments which is normally
75%. Its benchmark index is CRISIL MIP blended index.
SCHEMES OF ICICI PRODENTIAL MUTUAL FUND
• GROWTH PLAN:
(Open –ended equity fund)

To seek and generate long term capital appreciation from a portfolio that is
invested predominantly in equity and equity related securities. Its sector allocation
is more upon equity and equity related instruments which is up to 95%. Its benchmark
index is S & P CNX Nifty
• BALANCED FUND:
(Open –ended balanced fund)
To seek and generate long- term capital appreciation and current income from a
portfolio that is invested in equity and equity related securities as well as in fixed
income securities. Its sect oral allocation is more upon which is equity & equity
related instruments (65%-80%). Its benchmark is CRISIL balanced fund index.
• INCOME PLAN:
(Open-Ended Debt Fund)
To generate income through investments in a basket of debt and money market
instruments of various maturities with a view to
maximise income while maintaining the optimizer balanced of yield, safety and
liquidity.
Its sect oral allocation is 95% upon debt and money market instruments.
• TAX PLAN:
(Open-ended equity linked saving scheme)
To seek to generate long- term capital appreciation from a portfolio that is invested
predominantly in equity and equity related securities. Its sector allocation is 90%
upon equity and equity related instruments. Its benchmark index is S & P CNX Nifty.
CHAPTER-4
COMPARATIVE STUDY OF KOTAK MF SCHEMES WITH OTHER MF
SCHEMES
NAV growth fund

DATE KOTAK HDFC ICICI SBI UTI

01.08.06 53.32 9.55 80.97 10.11 45.71


30.08.06 58.30 9.58 80.89 10.44 49.62
09.09.06 58.4 9.60 80.97 10.44 49.57
29.09.06 61.13 9.63 82.48 11.18 51.24
03.10.06 60.91 9.65 84.12 10.96 51.20
28.10.06 63.74 9.69 84.03 11.32 53.83
04.11.06 64.15 9.73 84.12 11.46 55.23
27.11.06 67.39 9.76 89.17 11.77 57.09
01.12.06 68.06 9.78 93.99 11.84 57.75
25.12.06 66.26 9.78 94.18 11.58 56.71
02.01.07 68.93 9.80 95.55 11.85 58.41
9.83
26.01.07 70.82 9.88 91.07 12.02 59.15
10.02.07 72.05 9.91 86.69 11.88 59.94
28.02.07 64.31 9.91 86.63 10.72 54.78
03.03.07 63.85 9.94 86.69 10.68 54.31
27.03.07 64.88 9.96 87.96 10.88 54.40
01.04.07 64.99 10.00 89.18 10.44 52.75
29.04.07 68.92 10.02 91.93 11.59 52.51
05.05.07 69.57 10.03 95.48 11.67 52.42
20.05.07 10.08 95.91 11.90 53.26 20.5
09.06.07 10.13 96.02 11.79 53.21 9.6
30.06.07 10.19 98.47 12.17 53.45 30.6
06.07.07 10.21 101.49 12.41 53.57 6.7
30.07.07 80.46 102.82 12.53 54.09
Tax saver (Scheme devedend)

DATE KOTAK HDFC ICICI SBI UTI

01.08.06 10.26 54.66 24.05 92.48 15.18


28.08.06 11.33 59.81 24.96 22.56 16.62
02.09.06 11.31 60.25 27.67 22.87 16.59
25.09.06 11.69 61.63 28.18 22.88 16.93
3.10.06 11.90 63.03 29.05 23.27 17.45
27.10.06 12.57 67.21 29.97 23.27 18.14
04.11.06 13.01 67.31 28.76 23.43 18.53
26.11.06 13.55 69.91 27.45 23.52 19.05
02.12.06 13.84 70.02 26.99 23.98 19.32
29.12.06 14.23 70.09 27.18 23.86 19.07
01.01.07 14.23 71.00 27.64 23.95 19.27
29.01.07 14.70 70.66 27.82 23.96 17.43
08.02.07 15.24 72.24 24.68 24.02 17.80
20.02.07 14.64 69.61 22.33 24.13 17.06
03.03.07 10.86 63.72 20.18 24.13 15.52
23.03.07 11.02 56.65 20.79 24.67 15.62
05.04.07 10.91 54.91 20.96 24.94 15.27
27.04.07 11.76 60.05 21.01 25.02 16.47
09.05.07 11.77 60.06 22.85 24.82 16.45
21.05.07 12.46 62.64 22.23 25.15 17.26
07.06.07 12.64 63.41 22.45 25.62 17.18
23.06.07 12.96 65.13 22.00 25.93 17.51
07.07.07 13.40 67.02 22.61 26.78 18.22
19.07.07 13.83 67.90 22.89 26.85 18.95
Balanced fund (Growth)

DATE KOTAK HDFC ICICI SBI UTI

02.08.06 21.29 27.06 28.87 30.48 47.27


28.08.06 22.51 28.59 30.49 30.87 50.27
03.09.06 22.32 29.25 28.95 31.05 50.98
27.09.06 22.87 29.93 31.34 31.53 52.63
01.10.06 21.99 29.94 32.05 31.88 53.14
29.10.06 22.72 31.54 32.83 33.32 54.92
04.11.06 22.85 31.72 33.24 33.80 55.28
25.11.06 23.15 32.18 33.99 35.30 55.37
06.12.06 23.47 32.58 34.12 36.77 56.20
28.12.06 23.61 32.01 34.46 35.31 55.68
07.01.07 23.80 32.20 34.98 35.49 55.80
29.01.06 24.16 32.18 35.23 36.26 56.77
03.02.06 24.43 32.13 35.92 36.59 56.97
25.02.06 23.35 30.21 36.67 34.94 54.15
04.03.06 22.59 28.00 37.86 32.82 50.75
20.03.06 22.30 28.57 39.09 33.49 51.72
06.04.06 22.57 28.99 36.18 33.52 52.00
21.04.06 23.63 30.83 34.98 35.47 54.66
09.05.06 23.68 30.76 35.25 35.49 55.00
23.05.06 24.36 31.70 36.03 36.97 56.71
01.06.07 24.94 32.00 36.16 37.73 57.55
24.06.07 25.12 31.98 36.21 37.67 57.82
08.07.07 25.74 33.10 36.98 38.73 60.09
22.07.07 26.62 34.07 37.91 39.88 62.16
Income fund plus growth

DATE KOTAK HDFC ICICI SBI UTI

01.08.06 12.45 13.53 20.89 9.89 9.81


28.08.06 12.62 13.85 20.837 10.01 9.86
03.09.06 12.62 13.98 21.03 10.01 9.87
26.09.06 12.71 14.10 21.19 10.05 9.91
05.10.06 12.74 14.25 21.24 10.00 9.94
29.10.06 12.84 14.43 21.30 10.10 9.95
07.11.06 12.88 14.50 21.49 10.10 9.98
28.11.06 12.96 14.51 21.65 10.12 10.00
03.12.06 13.04 14.62 21.62 10.11 10.01
25.12.06 12.98 14.57 21.61 10.12 10.03
02.01.07 13.10 14.65 21.52 10.12 10.04
28.01.07 13.18 14.88 21.46 10.15 10.08
07.02.07 13.25 14.96 21.45 10.17 10.09
26.02.07 13.08 14.79 21.44 10.18 10.01
03.03.07 12.94 14.70 21.42 10.17 10.10
24.03.07 13.00 14.76 21.44 10.17 10.15
05.04.07 12.90 14.71 21.46 10.18 10.18
28.04.07 13.11 14.93 21.49 10.18 10.22
06.05.07 13.15 14.98 21.54 10.18 10.25
21.05.07 13.25 15.15 21.58 10.25 10.30
15.06.07 13.29 15.27 21.59 10.31 10.37
28.06.07 13.37 15.39 21.62 10.34 10.41
01.07.07 13.39 15.48 21.64 10.52 10.43
26.07.07 13.70 15.74 21.64 10.61 10.50
Name of Tax saver(dividend Equity growth fund Income fund plus Balance fund(growth)
the MF scheme) growth
company
Mean(X) Standard Mean(X) Standard Mean(X) Standard Mean(X) Standard
Deviation(ơ) Deviation(ơ) Deviation(ơ) Deviation(ơ)
Kotak 12.67 1.5461 66.89 6.1080 13.02 0.2783 23.50 1.2366
HDFC 64.53 5.1496 9.87 0.1898 14.69 0.9891 30.89 1.7232
ICICI 24.77 3.0293 90.03 6.4049 21.41 0.6934 34.57 2.6495
SBI 24.25 1.1788 11.35 0.6638 10.16 0.6442 34.80 2.6148
UTI 17.37 1.2458 53.92 3.3253 10.10 0.6506 54.74 3.3466

Comparative statements of mean & standard deviation


Comparative Statement of
Co-relation Co-efficient

Tax Saver Equity growth Income fund Balance fund


dividend fund plus growth (growth)
scheme
Comparison Kotak Katak Kotak Kotak
With Kotak
HDFC 0.8520 0.01810 0.07747 0.93472
ICICI 0.28716 0.92505 0.9790 0.63815
SBI 0.27452 0.99736 0.92090 0.96799
UTI 0.70609 0.54928 0.66827 0.69746
* Tax saver dividend scheme

From the co-relation co-efficient table we find out that in case of tax saver dividend
scheme Kotak mutual fund has the proportionate growth with HDFC mutual fund and
UTI mutual fund having co-relation co-efficient of 0.8520 and 0.70609 respectively
.Investors should prefer these two funds because of proper growth in the present time.
And from the table what we find out that ICICI & SBI mutual fund are not preferable.

* Equity growth fund

From the co-relation co-efficient table we find out that in nase of equity growth
fund Kotak mutual fund has not proportionate growth with other mutual fund
schemes.Here investors should prefer to invest upon ICICI & SBI mutual funds. Kotak
mutual fund in this scheme is not preferable because it has very less growth in the
present time.

* Income fund plus growth

From the co-efficient co- relation analysis table we find out that in case of income fund
plus growth scheme Kotak mutual fund has the proportionate growth with ICICI and SBI
mutual fund schemes. Investors should prefer these three funds .And from the table what
we find out that UTI mutual fund is not so preferable.
*Balance fund (growth)

From the co-efficient co-relation analysis table we find out that incase of balance fund
growth) scheme Kotak mutual fund has the proportionate growth with SBI and UTI
mutual funds.Investors should prefer these three funds becomes of proper growth in the
present time. And from the table what we find out that ICICI mutual fund is not so
preferable.
CHAPTER-5

CONCLUSION
SUGGESTION

• Investors should be aware about the calculation of Net Asset Value (NAV) and
accordingly they should enter or exit from the market. Because NAV plays the
vital role in case of mutual fund investment.

• Distribution houses of mutual funds or Mutual fund Companies should inform to


the investors according to the changing NAV of the different mutual funds
schemes from time to time or investors should go through business news paper or
web sides to know the NAV of the schemes.

• Equity investors should go for long term investment i.e. more than one year
because NAV does not change so much or the investors do not get good return
within one year.

• Many people who are investing upon mutual funds are not aware of Kodak
Mutual fund .So more advertisement through news papers, Television, Radio and
distribution of more leaflets through book fair, exhibition or in market is required.
It is very much essential for kotal Mutual fund company what I have observed
from the investors from the market survey.

• Many people now only the name of the mutual fund companies but they do not
have knowledge about the benefits and different type of schemes which will be
suitable for them., So kotak mutual fund company should go for giving the
awareness of different mutual fund scheme for the investors or other people also.
5. Invest only after you have researched on the stock, in the same
manner as you would have researched if you were buying a consumer
durable. However, lack of knowledge and understanding is a short-
coming faced by many small investors. In such a scenario, never aim to
invest directly into the equity market. Invest through equity market. Invest
through equity related products such as mutual funds (MFs). It makes
more sense to hand over your hard earned investment surplus in the hands
of professionals. Consider this: if you are unwell, don’t you go to the
doctor or do you treat yourself? Similar for your investments.

6. Whether you are investing directly or indirectly, diversification is


the key for better returns. Never have all your eggs in the same basket, See
what happened when the tech stocks, you would have made heavy losses.
You never know which sector might, perform better than other sectors in
the long term. So always diversify across industries so that at any given
point in time at least some sector would be outperform.
• If kotak mutual Fund company will reduce the least investment amount, in case of
SIP if it will be Rs.500 or less than Rs.500 invested of Rs.1000 then small
investors would go for investment. This is what I have studied from the
investor’s perceptions from the market survey.
• Investors should go through website such as www. Valuereachonline.com to
know the ranking of the different funds of mutual fund companies having yearly
basis or half early basis and then go for investment.
8. Last not the least a retail investor should seek advice from a financial planner.
Although one needs to make sure that the financial planner’s advice is
independent. An alternative method is to check out the websites of number of
online fund brokers such as mutualfundsIndia.com, where one can compare funds,
including their fees and performances. One can also check the rating given to
these funds by financial research groups such valueresearchonline.com and
others.

BIBLIOGRAPHY

Books
V.K. Bhalla, Security & portfolio Management,
S. Chand and company limited, New Delhi , 10th edition, 2004.
H.R Machiraju, Indian Financial system, Vikash Publishing House Pvt. Ltd.

Journals/ periodicals/ News paper


 Fact sheet of Kotak mutual fund, March 31,2007.
 Fact sheets of HDFC Mutual Fund, SBI Mutual fund, UTI Mutual Fund &
ICICI Mutual Fund.
 Portfolio organizer, ICICI University press, May 2007, page -30.
Portfolio organizer, ICICI University press December 2006, page -37
Business standard, 14 May 2007
Business standard, 20 June 2007
The Economic Times

Websites:
www.amfiindia.com

www.valueresearchonline.com

www.investopedia.com

www.indiainfoline.com

 www.answers.com

 www.kotakmutual.com

 www.hdfcfund.com

 www.sbimf.com

 www.icicipruamc.com

 www.google.com

 www.bseindia.com

 www.equitymaster.com

 www.sebi.com

 www.moneycontrol.com

www.utimf.com