mutual funds
TRANSCRIPT
CHAPTER-I
INTRODUCTION
1
1.1 INTRODUCTION
A Mutual Fund is a financial intermediary which acts as an
instrument of investment. It collects the funds from different
investors to a common pool of investible funds and then invest
these funds in a wide variety of investment opportunities in
diversified portfolios of securities such as Money Markets
instrument, corporate and government bonds and equity shares of
joint stock companies.
Mutual Funds are professionally managed pool of Money
From a group of investors. A Mutual fund manager invests Your
funds in securities including stocks and bonds, Money Market
Instruments or some combination and decides the best time to buy
and sell. By pooling your resources with other investors in
Mutual Funds, you can diversify even a small investment over a
wide Spectrum.
With the emergence of the capital market at the center stage
of the Indian financial system from its marginal role a decade
earlier, the Indian capital market also witnessed during the same
period a significant institutional development in the form of
diversified structure of Mutual Funds. A Mutual fund is a special
type of investment institution which acts as an investment
conduit.
It pools the savings, particularly of the relatively small
investors, and invests them in a well-diversified portfolio of
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sound investment. As an investment intermediary, it offers a
variety of services/advantages to the relatively small investors
who on their own cannot successfully construct and manage
investment portfolio mainly due to the small size of their funds,
lack of expertise and experience, and so on. These services
include the diversification of portfolio, expertise of the
professional management, liquidity of investment, tax shelter,
reduced risk and reduced cost.
Mutual fund is the most suitable investment mode
for the common man as it offers an opportunity to invest in a
diversified, professionally managed portfolio at a relatively low
cost. Any body with an investible surplus of as little as a few
thousand rupees can invest in mutual funds. Each Mutual fund
scheme has a defined investment objective and strategy.
The most important trend in the Mutual Fund industry is the
aggressive expansion of the foreign owned Mutual Fund companies
and the decline of the companies floated by nationalized banks
and smaller private sector players.
Funds issue and redeem shares on demand at the fund's net
asset value (NAV). Mutual fund management fees typically range
between 0.5% and 2% of assets per year, exchange fees and other
administrative charges also apply.
According to SEBI - Mutual Fund is defined as - “A fund
established in the form of a trust to raise money’s through the3
sale of units to the public or a section of the public under one
or more schemes for investing in securities, including money
market instruments.”Mutual Fund is a mechanism for pooling the
resources by issuing units to the investors and investing funds
in securities in accordance with objectives as disclosed in the
offer document.
1.2 OBJECTIVES OF THE STUDY
The Main objective of this project is to study and analyze
Open-Ended Balanced growth schemes of five Mutual Funds and
to compare and Rank each of them.
To give a broad idea on basics, structure, constituents,
characteristics, advantages, disadvantages, types, and risk
associated with Mutual Funds.
To give investor an idea on Mutual Funds and its working in
the market with illustrations.
To help and guide investors to take wise investment
decisions.
The Tax benefits of investing in Mutual Funds under various
schemes.
1.3 NEED OF THE STUDY
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The basic purpose of the study is to give broad idea on
Mutual Funds and analyze various schemes to highlight the
diversified investment that Mutual Fund offers to its investors.
Through this study one can understand how to invest in Mutual
Funds and turn the raw investment into ripen fruits by taking
wise decisions, taking the risk factors into account.
1.4 SIGNIFICANCE OF THE STUDY
(1) The Study presents basic concept and trends in the Mutual
fund Industry.
(2) The Study enables a fresh investor to understand easily the
various benefits offered by Mutual Funds and their working
in the Market.
(3) The Study provides a clear idea on growth of Mutual Funds
from past to the present scenario and its scope in the
future.
(4) The Study gives a brief idea on the Open- Ended Balanced
Growth Schemes of five major organizations.
(5) At the end of the study, one can conclude what type of
investments would be ideal with reference to the risk taking
abilities of the investors and which type of investments
would suit their financial needs and goals.
1.5 SCOPE OF THE STUDY
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1) The Study covers the basic meaning, concept, structure and
the organization of the Mutual Funds.
2) The Study is restricted to explain only the returns provided
by the Mutual Funds from various schemes.
3) Under this study investments relating to Open-Ended Balanced
Growth Fund of Mutual Funds are taken into account.
4) The theoretical part of the study include the following
concepts:-
Characteristics of Mutual Funds.
Advantages/ Disadvantages of Mutual Funds.
Net Asset Value (NAV).
Investment Process.
Risk return grid of Mutual Funds.
SEBI guidelines.
5) The tools used for graphical representation of data include
Pie charts, Bar diagrams, and other accessories.
1.6 METHODOLOGY OF THE STUDY
All information related to the topic needs to be carefully
scrutinized to avoid the risk of biased analysis. Having once
identified which information is relevant and need to be
collected, we will have to define how this will be done.
The Method employed in the investigation depends on the purpose
and scope of the study.
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Research Design :
Research design is some statement or specification of
procedures for collecting and
analyzing the information required for the solution of some
specific problem. Here, the exploratory research is used as
investigation and is mainly concerned with determining the trends
and returns in Mutual Funds and Bank returns.
Data Collection Methods :
The key for creating useful system is selectivity in
collection of data and linking that selectivity to the analysis
and decision issue of the action to be taken. The accuracy of
collected data is of great significance for drawing correct and
valid conclusions from the research.
Sources of Information :
Primary Data
Data available in marketing research are either primary or
secondary. Primary Data is not included in this study, only
secondary data is taken in to account since, it is a comparative
analysis.
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Secondary Data:
Secondary data can be defined as - “data collected by some one
else for purpose other than solving the problem being investigated”. Secondary
data is collected from external sources which include information
from published material of SEBI and some of the information is
collected online. The data sources also include various books,
magazines, newspapers, websites etc. The organization profile is
collected from the Hyderabad Stock Exchange.
1.7 LIMITATIONS
The data that is considered for the Comparative analysis of
various Mutual Funds returns of Open-Ended Balanced Growth
Fund are only for a short period of one year ( 1st April
2013 to 31st march 2013) and performance during this period
may not be same in future.
As the project period is limited, the long-term data of
Mutual Funds are not taken into consideration in analysis
section.
The data taken into account for analysis is very general.
confidential data is ignored as it is highly sensitive. As a
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result the information presented in the research report is
limited.
CHAPTER-29
ABOUT MUTUAL FUNDS
2.1 MUTUAL FUNDS
DEFINITION
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A Mutual Fund is a financial intermediary which acts as an
instrument of investment. It collects the funds from different
investors to a common pool of investible funds and then invest
these funds in a wide variety of investment opportunities in
diversified portfolios of securities such as Money Markets
instrument, corporate and government bonds and equity shares of
joint stock companies.
The investment may be diversified to spread risk and to
ensure good return to the investors. The Mutual Funds employ
professional, experts and investment consultants to conduct
investment analysis and then to select the portfolio of
securities where the funds are to be invested.
Each investor owns units, which represent a portion of the
holdings of the fund. You can make money from a MF in three
ways:-
1. Income is earned from dividends on stocks and interest on
bonds. A Fund pays out nearly all income it receives over the
year to fund owners in the form of a distribution.
2. If the fund sells securities that have increased in price, the
fund has a capital gain. Most funds also pass on these gains
to investors in the form of dividends.
3. If fund holdings increase in price but are not sold by the
fund manager, the fund’s shares increase in price. You can
then sell your Mutual Fund units for a profit. Funds will also11
usually give you a choice either to receive a cheque for
dividends or to re-invest the same and get more units.
2.2 BROAD MUTUAL FUND TYPES:
Figure no 2.1
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1. Equity Funds:
Equity funds are considered to be the more risky funds as
compared to other fund types, but they also provide higher
returns than other funds. It is advisable that an investor
looking to invest in an equity fund should invest for long term
i.e. for 3 years or more. There are different types of equity
funds each falling into different risk bracket. In the order of
decreasing risk level, there are following types of equity funds:
(1)Aggressive Growth Funds: In Aggressive Growth Funds,
fund managers aspire for maximum capital appreciation and invest
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in less researched shares of speculative nature. Because of these
speculative investments Aggressive Growth Funds become more
volatile and thus, are prone to higher risk than other equity
funds.
Growth Funds: Growth Funds also invest for capital
appreciation (with time horizon of 3 to 5 years) but they
are different from Aggressive Growth Funds in the sense that
they invest in companies that are expected to outperform the
market in the future. Without entirely adopting speculative
strategies, Growth Funds invest in those companies that are
expected to post above average earnings in the future.
Speciality Funds: Speciality Funds have stated criteria
for investments and their portfolio comprises of only those
companies that meet their criteria. Criteria for some
speciality funds could be to invest/not to invest in
particular regions/companies. Speciality funds are
concentrated and thus, are comparatively riskier than
diversified funds. There are following types of speciality
funds:
Sector Funds: Equity funds that invest in a particular
sector/industry of the market are known as Sector Funds.
The exposure of these funds is limited to a particular
sector (say Information Technology, Auto, Banking,
Pharmaceuticals or Fast Moving Consumer Goods) which is
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why they are more risky than equity funds that invest in
multiple sectors.
Foreign Securities Funds: Foreign Securities Equity
Funds have the option to invest in one or more foreign
companies. Foreign securities funds achieve international
diversification and hence they are less risky than sector
funds. However, foreign securities funds are exposed to
foreign exchange rate risk and country risk.
Mid-Cap or Small-Cap Funds: Funds that invest in
companies having lower market capitalization than large
capitalization companies are called Mid-Cap or Small-Cap
Funds. Market capitalization of Mid-Cap companies is less
than that of big, blue chip companies (less than Rs. 2500
crores but more than Rs. 500 crores) and Small-Cap
companies have market capitalization of less than Rs. 500
crores. Market Capitalization of a company can be
calculated by multiplying the market price of the
company's share by the total number of its outstanding
shares in the market. The shares of Mid-Cap or Small-Cap
Companies are not as liquid as of Large-Cap Companies
which gives rise to volatility in share prices of these
companies and consequently, investment gets risky.
Diversified Equity Funds: Except for a small portion of
investment in liquid money market, diversified equity
funds invest mainly in equities without any concentration
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on a particular sector(s). These funds are well
diversified and reduce sector-specific or company-
specific risk. However, like all other funds diversified
equity funds too are exposed to equity market risk. One
prominent type of diversified equity fund in India is
Equity Linked Savings Schemes (ELSS). As per the mandate,
a minimum of 90% of investments by ELSS should be in
equities at all times. ELSS investors are eligible to
claim deduction from taxable income (up to Rs 1 lakh) at
the time of filing the income tax return. ELSS usually
has a lock-in period and in case of any redemption by the
investor before the expiry of the lock-in period makes
him liable to pay income tax on such income(s) for which
he may have received any tax exemption(s) in the past.
Equity Index Funds: Equity Index Funds have the objective to
match the performance of a specific stock market index. The
portfolio of these funds comprises of the same companies
that form the index and is constituted in the same
proportion as the index. Equity index funds that follow
broad indices (like S&P CNX Nifty, Sensex) are
Less risky than equity index funds that follow narrow
sectoral indices (like BSEBANKEX or CNX Bank Index etc).
Narrow indices are less diversified and therefore, are more
risky.
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Debt/Income Funds: Funds that invest in medium to long-term
debt instruments issued by private companies, banks,
financial institutions, governments and other entities
belonging to various sectors (like infrastructure companies
etc.) are known as Debt / Income Funds. Debt funds are low
risk profile funds that seek to generate fixed current
income (and not capital appreciation) to investors. In order
to ensure regular income to investors, debt (or income)
funds distribute large fraction of their surplus to
investors. Although debt securities are generally less risky
than equities, they are subject to credit risk (risk of
default) by the issuer at the time of interest or principal
payment. To minimize the risk of default, debt funds usually
invest in securities from issuers who are rated by credit
rating agencies and are considered to be of "Investment
Grade". Debt funds that target high returns are more risky.
Based on different investment objectives, there can be
following types of debt funds:
Diversified Debt Funds: Debt funds that invest in all
securities issued by entities belonging to all sectors of the
market are known as diversified debt funds. The best feature
of diversified debt funds is that investments are properly
diversified into all sectors which results in risk reduction.
Any loss incurred, on account of default by a debt issuer, is
shared by all investors which further reduces risk for an
individual investor.
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Focused Debt Funds: Unlike diversified debt funds, focused
debt funds are narrow focus funds that are confined to
investments in selective debt securities, issued by companies
of a specific sector or industry or origin. Some examples of
focused debt funds are sector, specialized and offshore debt
funds, funds that invest only in Tax Free Infrastructure or
Municipal Bonds. Because of their narrow orientation, focused
debt funds are more risky as compared to diversified debt
funds. Although not yet available in India, these funds are
conceivable and may be offered to investors very soon.
Assured Return Funds: Although it is not necessary that a
fund will meet its objectives or provide assured returns to
investors, but there can be funds that come with a lock-in
period and offer assurance of annual returns to investors
during the lock-in period. Any shortfall in returns is
suffered by the sponsors or the Asset Management Companies
(AMCs). These funds are generally debt funds and provide
investors with a low-risk investment opportunity. However,
the security of investments depends upon the net worth of the
guarantor (whose name is specified in advance on the offer
document). To safeguard the interests of investors, SEBI
permits only those funds to offer assured return schemes
whose sponsors have adequate net-worth to guarantee returns
in the future. In the past, UTI had offered assured return
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schemes (i.e. Monthly Income Plans of UTI) that assured
specified returns to investors in the future. UTI was not
able to fulfill its promises and faced large shortfalls in
returns. Eventually, government had to intervene and took
over UTI's payment obligations on itself. Currently, no AMC
in India offers assured return schemes to investors, though
possible.
Fixed Term Plan Series: Fixed Term Plan Series usually are
closed-end schemes having short term maturity period (of less
than one year) that offer a series of plans and issue units
to investors at regular intervals. Unlike closed-end funds,
fixed term plans are not listed on the exchanges. Fixed term
plan series usually invest in debt / income schemes and
target short-term investors. The objective of fixed term plan
schemes is to
Gratify investors by generating some expected returns in a
short period.
1. Open-end
2. Closed-end
3. GiltFunds
Also known as Government Securities in India, Gilt Funds
invest in government papers (named dated securities) having
medium to long term maturity period. Issued by the Government
of India, these investments have little credit risk (risk of
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default) and provide safety of principal to the investors.
However, like all debt funds, gilt funds too are exposed to
interest rate risk. Interest rates and prices of debt
securities are inversely related and any change in the
interest rates results in a change in the NAV of debt/gilt
funds in an opposite direction.
2. Money Market/Liquid Funds:
Money market / liquid funds invest in short-term (maturing
within one year) interest bearing debt instruments. These
securities are highly liquid and provide safety of investment,
thus making money market / liquid funds the safest investment
option when compared with other mutual fund types. However, even
money market / liquid funds are exposed to the interest rate
risk. The typical investment options for liquid funds include
Treasury Bills (issued by governments), Commercial papers (issued
by companies) and Certificates of Deposit (issued by banks).
3. Hybrid Funds: As the name suggests, hybrid funds are thosefunds whose portfolio includes a blend of equities, debts and
money market securities. Hybrid funds have an equal proportion of
debt and equity in their portfolio. There are following types of
hybrid funds in India:
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Balanced Funds – The portfolio of balanced funds include
assets like debt securities, convertible securities, and
equity and preference shares held in a relatively equal
proportion. The objectives of balanced funds are to reward
investors with a regular income, moderate capital
appreciation and at the same time minimizing the risk of
capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment
horizon.
Growth-and-Income Funds – Funds that combine features of
growth funds and income funds are known as Growth-and-Income
Funds. These funds invest in companies having potential for
capital appreciation and those known for issuing high
dividends. The level of risks involved in these funds is
lower than growth funds and higher than income funds.
4. Debt/Income Funds:
Those funds that focus on investing in different commodities
(like metals, food grains, crude oil etc.) or commodity companies
or commodity futures contracts are termed as Commodity Funds. A
commodity fund that invests in a single commodity or a group of
commodities is a specialized commodity fund and a commodity fund
that invests in all available commodities is a diversified
commodity fund and bears less risk than a specialized commodity
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fund. “Precious Metals Fund” and Gold Funds (that invest in gold,
gold futures or shares of gold mines) are common examples of
commodity funds.
5. Real Gift Funds:
Funds that invest directly in real estate or lend to real
estate developers or invest in shares/securitized assets of
housing finance companies, are known as Specialized Real Estate
Funds. The objective of these funds may be to generate regular
income for investors or capital appreciation.
Exchange Traded Funds (ETF):
Exchange Traded Funds provide investors with combined
benefits of a closed-end and an open-end mutual fund. Exchange
Traded Funds follow stock market indices and are traded on stock
exchanges like a single stock at index linked prices. The biggest
advantage offered by these funds is that they offer
diversification, flexibility of holding a single share (tradable
at index linked prices) at the same time. Recently introduced in
India, these funds are quite popular abroad.
6. Fund of Funds:
Mutual funds that do not invest in financial or physical
assets, but do invest in other mutual fund schemes offered by22
different AMCs, are known as Fund of Funds. Fund of Funds
maintain a portfolio comprising of units of other mutual fund
schemes, just like conventional mutual funds maintain a portfolio
comprising of equity/debt/money market instruments or non
financial assets. Fund of Funds provide investors with an added
advantage of diversifying into different mutual fund schemes with
even a small amount of investment, which further helps in
diversification of risks. However, the expenses of Fund of Funds
are quite high on account of compounding expenses of investments
into different mutual fund schemes.
2.3 Risk Hierarchy of Different Mutual Funds: Thus,
different mutual fund schemes are exposed to different levels of
risk and investors should know the level of risks associated with
these schemes before investing. The graphical representation
hereunder provides a clearer picture of the relationship between
mutual funds and levels of risk associated with these funds:
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Fig.2
.2
2.4 FIGURE SHOWING THE WORKING OF MUTUAL FUND
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Fig 2.3
STRUCTURE AND CONSTITUENTS OF FUND
Fig 2.4
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MUTUAL FUND
Sponsor
Trustee
AMC Custodian
SPONSOR
Establishes the MUTUAL FUND
o → Need to have sound financial track record.
o → Appoints TRUSTEES.
o → Appoints Asset Management Company.
o → Must contribute 40% of the net worth of the AMC.
Sometimes this power is given by the sponsor to the
trustees through the trust deed.
At least 50% of directors on the board of Asset Management
Company should be independent of the sponsor.
Asset Management Company shall not deal with any broker or
firm associated with sponsor beyond 5% of daily gross
business of the Mutual Fund.
All securities transactions of the Asset Management Company
with its associates should be disclosed.
TRUSTEE
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Manages the Mutual Fund and look after the operation of the
appointed AMC.
The investments are held by the Trustees, in a fiduciary
responsibility.
Trustees approve each Mutual Fund Scheme floated by AMC.
Furnish report to SEBI on half yearly basis on AMC and Fund
Functioning.
ASSET MANAGEMENT COMPANY
AMC acts as investment manager of the trust under the board
supervision and direction of the trustees.
AMC floats the different Mutual Fund schemes.
Submits report to the Trustees on quarterly basis,
mentioning activity and compliance factor.
AMC is responsible to the trustees.
AMC fees have a ceiling, decided by SEBI.
Should have a net worth of at least Rs.10 crores at all the
times.
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CHAPTER-3
COMPANY PROFILE
Kotak Mahindra Bank29
Type Public
Traded as BSE: 500247NSE: KOTAKBANK
Industry Financial serviceFounded 1985 (as Kotak Mahindra Finance Ltd)Headquarters Mumbai, IndiaKey people Uday Kotak (Vice Chairman) & (MD)
ProductsDeposit accounts, Loans, Investment services,Business banking solutions, Treasury and Fixedincome products etc.
Website www.kotak.com
Kotak Mahindra Bank (BSE: 500247, NSE: KOTAKBANK) is an
Indian financial service firm established in 1985. It was
previously known as Kotak Mahindra Finance Limited, a non-banking
financial company. In February 2003, Kotak Mahindra Finance Ltd,
the group's flagship company was given the license to carry on
banking business by the Reserve Bank of India (RBI). Kotak
Mahindra Finance Ltd. is the first company in the Indian banking
30
history to convert to a bank. Today it has more than 20,000
employees and Rs. 10,000 crore in revenue.[2]
Mr. Uday Kotak is Executive Vice Chairman & Managing Director of
Kotak Mahindra Bank Ltd. In July 2011 Mr. C. Jayaram and Mr.
Dipak Gupta, whole time directors of the Bank, were appointed the
Joint Managing Directors of Kotak Mahindra Bank. Dr. Shankar
Acharya is the chairman of board of Directors in the company. The
Bank has its registered office at Nariman Bhavan, Nariman Point,
Mumbai.
History
It bought stressed assets from a number of banks, at full loan
value of Rs 1,000 crore in 2005.[3] In January 2011, the bank
reported a 32% rise in net profit to Rs188 crore for the quarter
ended December 2010 against Rs. 142 crore the corresponding
quarter last year.[4] Kotak Mahindra bank also reached the top 100
most trusted brands of India in The Brand Trust Report published
by Trust Research Advisory in 2011.
The group specializes in offering top class financial services
catering to every segment of the industry. The various group
companies include.
Kotak Mahindra Capital Limited
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Kotak Mahindra Securities Limited
Kotak Mahindra Inc
Kotak Mahindra (International) Limited
Global Investments Opportunities Fund Limited
Kotak Mahindra(UK) Limited Kotak Securities Limited
Kotak Mahindra Old Mutual Life Insurance Company Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Mahindra Investments Limited
Kotak Forex Brokerage Limited
Kotak Mahindra Private-Equity Trustee Limited
Group Structure
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Kotak Mahindra Bank
Kotak Mahindra Capital Company
Kotak Securities
Kotak Mahindra Investments
Kotak Mahindra Prime
Kotak Mahindra Asset Management Company
Kotak Mahindra Trust Company
Kotak Mahindra Securities
Kotak Mahindra ( International)
Kotak Mahindra Inc.
Kotak Mahindra (UK)
Global Investment Opportunities Fund
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CHAPTER-4
INDUSTRY PROFILE
34
3.1 GROWTH AND HISTORY OF MUTUAL FUNDS
The First investment trust (now called Mutual Fund) began in
the Netherlands in the early 1800s. The first in the U.S. was the
New York Stock Trust, which started in 1889. Since Boston was the
economic center of the nation until the turn of the century, the
majority of funds started there—Fidelity, Pioneer and Putnum
Fund, to name a few. A Fund that was comprised of both stocks and
bonds (the Wellington Fund) started in 1928 and is still part of
Vanguard. As the 20's crashed to a close, there were 10 Mutual
Funds in the nation.
Foundation for the Mutual Fund in India was laid by the
parliament in 1963. With the enactment of Unit Trust of India
(UTI) Act the then Finance Minister Mr. T.T. Krishnamacharya who
initiated the act made it clear to the parliament act “UTI would
provide an opportunity for the middle and lower income groups to
acquire property in the form of share.” Thus UTI came out with
the mission of catering to the needs of individuals investors
whose means are small, with its maiden fund, an open ended fund
in 1964.
The Indian Mutual Fund Industry can be studied in four phases:-
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FIRST PHASE BETWEEN 1964 – 1987The genesis of the Mutual Fund industry in India can be
traced back to 1964 with the setting up of the Unit Trust of
India (UTI) by the Government of India. Since then UTI has grown
to be a dominant player in the industry. UTI is governed by a
special legislation, the Unit Trust of India Act, 1963. It was
setup by the Reserve Bank of India and functioned under the
regulatory and administrative control of RBI. In 1978, UTI was
de-linked from the RBI and the administrative control in place of
RBI. The first scheme launched by UTI was unit Scheme 1964. At
the end of 1988, UTI had Rs. 6700 crores of assets under the
management.
SECOND PHASE 1987-1993 (Entry of Public Sector Funds)Till 1986, UTI was the only mutual player in India. The
industry was opened up for wider participation in 1987 when
public sector banks and insurance companies were permitted to
setup Mutual Funds
THIRD PHASE 1993-2003
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With the entry of private sector funds in 1993, a new era
started in the Indian Mutual Fund Industry, giving the Indian
investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Funds regulations came into being,
under which all Mutual Funds, except UTI were to be registered
and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first sector Mutual Fund registered
in July 1993.
Securities Exchange Board of India (SEBI) formulated the
Mutual Fund (Regulation) 1993, which for the first time
established a comprehensive regulatory framework for the Mutual
Fund Industry. Since then several Mutual Funds have been setup by
the private and joint sectors.
FOURTH PHASE - Since February 2003In February 2003, following the repeal of the Unit Trust of
India act 1963, UTI was bifurcated into separate entities. One is
the specified undertaking of the UTI with asset under management
of Rs. 29835 crores as at the end of January 2003, representing
broadly, the assets of US 64 schemes, assured return and certain
other schemes.
The second is UTI Mutual Fund ltd, sponsored by SBI, PNB,
BOB and LIC. It is registered in SEBI and functions under the
Mutual Fund regulations. With the bifurcation of the erstwhile
37
UTI which had in March 2000 more than Rs. 76000 crores of assets
under management and with the setting up of the UTI Mutual Fund.
At the end of October 31, 2006 there were 39 funds which manage
assets of Rs. 176726 crores under 426 schemes.
PRESENT SCENARIO The decade of 80’s witnessed the emergence of stock
markets as major source of finance for trade and industry. The
process of liberalization and deregulation had led to a pace of
growth almost unparallel in the history of any nation.
Average annual capital mobilization from the marked,
which used to be about Rs.70 crores in the 60’s and Rs.90 crores
in the 70’s increased manifold during the 8-‘s with the amount
raised in 1989-90 being of the order of Rs.647.3 crores. The
number of listed companies rose from 2265 in 1980 to over 8600 at
the end of 2006; the daily turnover accordingly shot up from
Rs.25 crores in 1979-80 to about Rs.585 crores in 2005-2006.
Distribution of Worldwide Mutual Fund Assets by Region,
2006
(Percentage of Total Assets)
38
Figure 3.1
At present, there are 20 stock exchanges recognized under
the Securities Contracts (Regulation) Act, 1956. These recognized
stock exchanges mobilize and direct the flow of savings of the
general public into productive channels of investment.) .
According the latest statistics the market capitalization
(assets) of Mutual Funds in India is amounting to Rs. 3, 00,000
Crores.
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CHAPTER-5DATA ANALYSIS
& INTERPRETATION
40
4.1 CHART SHOWING ASSET ALLOCATION OF TATA
BALANCED FUND
Fig 4.1
The TATA Balanced Fund Portfolio consists of 75.21% Equity
holdings, 17.63% Debt, 7.16% Money Market. It is evident from
the data that though the investors have risk taking ability,
they balanced their investments by investing in Debt also.
FUND : TATA OPEN-ENDED BALANCED GROWTH
OBJECTIVE : The Scheme aims to balance income
requirements with growth of capital
41
through balanced mix of investment in equity and
debt
PORTFOLIO OF THE FUND
Sector JAN 2013
Mar 2013
A Finance 13.14 16.86
B Pharmaceuticals 11.95 11.23
C Oil & Gas, Petroleum & Refinery
11.04 10.26
D Banks 10.29 9.40
E Auto & Auto ancilliaries
7.59 7.43
F Computers - Software & Education
4.93 5.15
G Securities 2.25 4.97H Sugar 4.22 4.87I Tobacco & Pan
Masala4.46 4.81
J Breweries & Distilleries
6.04 4.74
K Debt 17.39 14.88L Money market 6.70 5.40
Table 4.1
42
Fig 4.2
Fig 4.3
43
The BIRLA Balanced Fund Portfolio consists of 79.72%Equity
holdings, 14.88% Debt, 5.40% Money Market. It is evident from
the data that though the Investors have risk taking ability,
they balanced their investments by investing in Debt also.
FUND : Pru ICICI OPEN-ENDED BALANCED GROWTH FUND
OBJECTIVE : Aims to invest in equity and debt oriented
securities so as to ` give
investor balanced returns.
PORTFOLIO OF THE FUND Table
4.2
Sector Jan 2013
Mar 2013
A Banks 11.47 15.17
B Securities 9.75 13.52
C Oil & Gas, Petroleum & Refinery
10.90 10.83
44
D Engineering & Industrial Machinery
6.74 8.58
E Telecom 6.48 6.00
F Miscellaneous 0.00 5.31
G Finance 9.41 4.84
H Electricals & Electrical Equipments
3.64 4.36
I Cement 6.35 4.09
J Steel 4.97 3.49
k Debt 24.98 22.08L Money market 5.31 1.73
Fig 4.4
45
Fig 4.5
The Pru ICICI Balanced Fund Portfolio consists of 76.19%
Equity holdings, 22.08% Debt, 1.73% Money market. It is
evident from the data that though the Investors have risk
taking ability, they balanced their investments by investing
in Debt also.
FUND : DSP MERRILL LYNCH OPEN-ENDED BALANCED
GROWTH FUND
46
OBJECTIVE : Seeks to generate long term capital
appreciation and current income from a portfolio
constituted of equity and equity related
securities as well as fixed income securities.
PORTFOLIO OF THE FUNDTable 4.3
Sector Jan 2013
Mar 2013
A Banks 19.10 2.48
B Finance 12.03 12.88
C Oil & Gas, Petroleum & Refinery
12.47 12.14
D Engineering & Industrial Machinery
5.65 4.41
E Fertilizers, Pesticides & Agrochemicals
6.05 4.38
F Power Generation, Transmission & Equip
3.01 3.60
G Housing & Construction
2.88 3.59
H Computers - Software &
5.87 3.40
47
EducationI Pharmaceuticals 3.20 2.44
J Entertainment 2.59 2.44
k Debt 20.92 37.84
L Money market 6.23 10.40
Fig 4.6
48
Fig 4.7
The DSP Merrill Lynch Balanced Fund Portfolio consists of
51.76%Equity holdings, 37.84%Debt, 10.40% Money Market. It is
evident from the data that though the Investors have risk
taking ability, they balanced their investments by investing
in Debt also.
FUND : JM FINANCIAL OPEN-ENDED BALANCED GROWTH
49
OBJECTIVE : Aims to provide investors with liquidity and
current income
along with capital appreciation.
PORTFOLIO OF THE FUND Tab
le 4.5
Sector Jan 2013
Mar 2013
A Banks 12.72 19.95
B Housing &Construction
19.12 16.70
C Finance 9.49 11.45
D Steel 11.44 11.41
E Computers – Software & Education
4.64 7.62
F Cement 2.92 6.65
G Miscellaneous 4.58 4.15
H Tobacco & Panmasala
0.00 3.66
50
I Edible Oil & Vanaspati
3.99 3.50
J Rubber & Tyres 0.95
K Debt 24.91L Money market 5.24
Fig 4.8
Balanced Fund Portfolio consists of 51.76%Equity holdings,
37.84%Debt, 10.40% Money Market. It is evident from the data
that though the Investors have risk taking ability, they
balanced their investments by investing in Debt also.
51
CHART SHOW ING ASSET ALLOCATION O F JM FINANCIAL BALANCED FUND
86.03%
12.12% 1.85%
Equity DebtM oney M arket
Fig 4.9
The JM Balanced Fund Portfolio consists of 86.03% Equity
holdings, 12.12% Debt, % 1.85% Money Market. It is evident
from the data that though the Investors have risk taking
ability, they balanced their investments by investing in
Debt also.
52
TATA OPEN-ENDED BALANCED GROWTH FUND
DATE 1st Apr12
29th Jun 12
31st Aug 12
26th Oct 12
27th Dec 12
28th Feb 13
31stMar 13
NAV 50.92 48.29 54.42 58.13 61.95 71.61 67.31
Table 4.5
Fund performance and NAV values over a period of 1 year.
Fig 4.10
53
BIRLA OPEN-ENDED BALANCED GROWTH FUND
DATE 1st Apr12
29th Jun 12
31st Aug 12
26th Oct 12
27th Dec 12
28th Feb13
31stMar13
NAV 28.37 27.18 29.63 31.66 33.18 33.54 32.15
Table 4.6
Fund performance and NAV values over a period of 1 year.
54
Fig 4.11
Pru ICICI OPEN-ENDED BALANCED GROWTH FUND
DATE 1st Apr12
29th Jun 12
31st Aug 12
26th Oct 12
27th Dec 12
28th Feb13
31stMar13
NAV 35.84 33.46 36.39 36.32 39.90 43.53 41.27
55
Table 4.7
Fund performance and NAV values over a period of 1 year.
Fig 4.12
DSP MERRILL LYNCH OPEN-ENDED BALANCED GROWTH FUND
56
DATE 1st Apr12
29th Jun 12
31st Aug 12
26th Oct 12
27th Dec 12
28th Feb13
31stMar13
NAV 39.33 36.97 42.50 44.56 47.46 51.92 50.14 Table
4.8
Fund performance and NAV values over a period of 1 year.
Fig 4.13
57
JM FINANCIAL OPEN-ENDED BALANCED GROWTH FUND
DATE 1st Apr12
29th Jun 12
31st Aug 12
26th Oct 12
27th Dec 12
28th Feb13
31stMar13
NAV 23.87 21.92 24.73 27.30 29.91 31.61 28.45Table 4.10
Fund performance and NAV values over a period of 1 year.
Fig 4.14
58
4.2 PERFORMANCE EVALUATION
We are interested in discovering if the management of a
mutual fund is performing well; that is, has management done
better through its selective buying and selling of securities
than would have been achieved through merely “buying the market”
picking a large number of securities randomly and holding them
throughout the period?
One of the most popular ways of measuring management’s
performance is by comparing the yields for the managed portfolio
with the market or with a random portfolio.
The following formula can be used to evaluate Mutual fund
performance:-
59
NAVt + Dt
1
Where:
NAV t = per-share net asset value at the end of year t
D t = Capital appreciation during year.
NAV t-1 = per-share net asset value at the end of
the previous year.
60
4.3 PERFORMANCE EVALUATION OF SELECTED FUNDS
NAV t-1 = 1st April, 2013
NAV t = 31st March, 2013
1) TATA Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t
NAV t-1)
50.9259 67.3129 16.387
Applying the formula we get-
= 67.3129+16.387- 1 50.9295
= 0.6434 x 100
= 64.34%
2) BIRLA Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t
NAV t-1)
28.37 32.15 3.78
61
Applying the formula we get-
= 32.15+3.78 - 1 28.37
= 0.2664 x 100
= 26.64%
3) Pru ICICI Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t
NAV t-1)
35.84 41.27 5.43
Applying the formula we get-
= 41.27+5.43 - 1 35.84
= 0.3030 x 100
= 30.30%
4) DSP MERRILL LYNCH Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t
NAV t-1)
62
39.339 50.146 10.807
Applying the formula we get-
= 50.146+10.807 - 1 39.339
= 0.5494 x 100
= 54.94%
5) JM FINANCIAL Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t
NAV t-1)
23.87 28.4438 4.5738
Applying the formula we get-
= 28.4438+4.5738- 1 23.87
= 0.3832 x 100
63
= 38.32%
FUND PERFORMANCE RANKING
Name of the Fund NAV Rank
64
Tata open-ended Balanced Growth Fund 64.34% 1
DSP Merrill Lynch open-ended Balanced
Growth Fund 54.94%
2
JM Financial open-ended Balanced
Growth Fund
38.32%
3
Pru ICICI open-ended Balanced Growth
Fund 30.30% 4
Birla open-ended Balanced Growth Fund 26.64% 5
Table 4.11
65
Fig 4.15
66
4.4 SWOT ANALYSIS
Strengths
1. Simplified speed and quality of services offered by Mutual
Fund Companies.
2. As on investment tool for the investors to boost.
3. Wide range of investment schemes offered by mutual fund
companies to
meet various requirements of investors.
4. Diversification of funds which minimizes the risk.
Weakness
1. NAV range doesn’t seem to fit in with corporate
compensation. There is positioning and pricing problem.
2. Delays in infrastructure development may dampen the growth
rate of NAV’s of different schemes, which in turn affects the
investor to invest.
3. Deregulation of interest rates may affect the profitability
of companies.
4. Stiff competition from existing mutual fund companies and
new Entrants.
67
Opportunities1. Perceptive changes in life style.
2. Addition of level of new class of entrepreneurs to the broad
base of middle class of the market.
3. The range of schemes and services offered by mutual fund
companies is large enough for all investors to have a slice of
cake.
4. The falling interest rates would make to raise capital at less
cost. Hence more opportunities for companies.
5. Globalization is buying fresh opportunities in terms of
foreign tie-ups.
Threats:1. Risk of scams.
2. Severe increase in the competition among mutual fund
companies results in decreasing the spread.
68
CHAPTER-6
FINDINGS, SUGESSIONS
&
CONCLUSIONS
FINDINGS
Mutual funds are subjected to risk please read the document
before investing.
69
The Biggest advantage with Mutual Funds is that the investor
don’t need huge amount to be invested in all his favorite
stocks and bonds. Most Mutual Funds have a minimum
investment of Rs.5000.
As most of the investors in the market have less risk taking
capabilities, the Balanced fund investments are suitable
one.
The Balanced fund investments are a combination of Equity,
Debt & Money markets. As such, the investments are
diversified and the risk is balanced.
The Balanced Fund Investments provide, steady and assured
returns to the investors. This is one of the important
reasons, for choosing the Balanced investments.
Five Balanced fund schemes are chosen for the study – Tata,
Birla, Pru ICICI, DSP Merrill Lynch & JM Financial. The
Funds Chosen for the study are some of the top performers in
the Market.
It is evident from the analysis that ‘The TATA OPEN ENDED
BALANCED GROWTH FUND’ out performed all the other four. It
recorded a Net Asset Value of 64.34%.
70
SUGGESTIONS
The information in this project report will provide the investors
the basic knowledge about Mutual Funds and enable them to choose
the best investments suiting their risk/return profile. Basing
on the information in this project, recommendations made to
investors are as follows:-
Mutual funds provide regular and steady income to investors.
Systematic investment plan in Mutual Funds is the best tool
for sound investment to small investors who prefer
investments in installments.
Liquidity, transparency, well regulated and flexibility, are
some of the features of Mutual funds which is very
advantageous to investors.
71
The entry load and exit load in Mutual Funds is very low
which does not affect the ultimate yields.
Safety of funds & positive rate of return over inflation are
the basic two needs of traditional investor. Mutual Fund is
well equipped to cater to these basic desires of investors.
CONCLUSIONS
As most of the investors in the market have less risk taking
capabilities, the Balanced fund investments are suitable
one.
The Balanced fund investments are a combination of Equity,
Debt & Money markets. As such, the investments are
diversified and the risk is balanced.
72
The Balanced Fund Investments provide, steady and assured
returns to the investors. This is one of the important
reasons, for choosing the Balanced investments.
Five Balanced fund schemes are chosen for the study – Tata,
Birla, Pru ICICI, DSP Merrill Lynch & JM Financial. The
Funds Chosen for the study are some of the top performers in
the Market.
73
BIBLIOGRAPHY
74
BIBLIOGRAPHY
BOOKS
Security analysis and -- DONALD E.
FISHER &
portfolio management RONALD J. JORDAN
Financial Services -- M.Y.KHAN
NEWS PAPERS
The Economic Times
The New Indian Express
WEBSITES
www.mutualfundsindia.com
75
