mutual funds risk and performance. research for b.r.m

8/8/2019 Mutual Funds risk and performance. Research for B.R.M

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Mutual

FundsRisk

&Performance


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Mutual Funds Risk & Performance Page

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SUBMITTED

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CONTOLLER OF EXAMINATION

M.D. UNIVERSITY ROHTAK

By: -NITIN GOEL

MBA 2nd SEM

98189222729729627852

Royal Institute of Management & Technology


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TABLE OF CONTENTS Acknowledgement Introduction History of the Company Products profile Managerial usefulness of study Definition of the concepts used in the study Objectives Scope of work Research Methodology

Research DesignSampleCollection of data

Data Analysis Findings RecommendationsLimitations Bibliography/References Annexure


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ACKNOWLEDGMENT

I would like to take this opportunity to acknowledge the support and cooperation of all those who enabled the

successful completion of this project.

We would like to extend our sincere gratitude towards Mr. Vishal Jindal under whose guidance we

undertook this project, for extending the advice and direction that is required to carry on a study of this

nature, and for helping us with the intricate details of the project every step of the way.

Finally we would like to thank all the employees who helped us and took out time to answer our questions

and helped complete this project. It was a wonderful learning experience for me.

Nitin Go


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INTRODUCTION

Role of financial systems to enthuse economic development

As investor are getting more educated, aware and prudent they look for innovative investment instruments sothat they are able to reduce investment risk, minimize transaction costs and maximize return along with

certain level of conveniences as a result there has been an advent of numerous innovative financial

instruments such as bonds company deposits, insurance and mutual funds all of which could be marked with

individuals investment needs Mutual funds score over all other investment options in terms of safety ,

liquidity returns and are a transparent convenient as it can get goal of mutual funds is to provide an efficient

way to make money. In India there are 36 mutual funds with different investment strategies and goals to

choose from. Different mutual funds have different risks, which differ because of the funds goals, funds

managers and investment styles.


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INDUSTRY PROFILE

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial

goal. The money thus collected is then invested in capital market instruments such as shares,

debentures and other securities. The income earned through these investments and the capital

appreciation realized is shared by its unit holders in proportion to the number of units owned by them.

Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow

chart below describes broadly the working of a mutual fund:

ORGANISATIONOFA MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational set up of a

mutual fund


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History of the Indian MutualFundIndustry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can

be broadly divided into four distinct phases

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the

Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve

Bank of India. At the end of 1988 UTI had Rs.6,700 crores of assets under management

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual

Fund was the first non- UTI Mutual Fund established in June 1987

Third Phase 1993-2003 (Entry of Private Sector Funds)

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 Fund Regulations came into being, under which all mutual funds, except UTI were to be

registered and governed.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two

separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under

management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US

64 scheme, assured return and certain other schemes.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with

SEBI and functions under the Mutual Fund Regulations.


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PARTIESINVOLVEDINMUTUAL FUND

Mutual Fund Manager: Establishes one or more mutual funds, markets them and oversees theirgeneral administration.

Portfolio Adviser: The professional money manager appointed by the Mutual Fund Manager to directthe fund's investments. The Mutual Fund Manager also often acts as the Portfolio Adviser.

Principal Distributor: Coordinates the sale of the fund to investors, either directly or through anetwork of registered dealers.

Custodian: The bank or trust company appointed by the Mutual Fund Manager to hold all of thesecurities owned by the fund.

Transfer Agent and Registrar: The group responsible for maintaining a list of all investors in thefund.

Auditor: The independent accountants retained by the Mutual Fund Manager to audit each year, andreport on the financial statements of the fund.

Trustee: The entity that has title to the securities owned by the fund on behalf of the unit holders.

Mutual funds are generally categorized according to their investment objectives. Some mutual funds

focus on stocks, others on bonds, money market instruments or other securities. Some mutual funds

invest primarily in Canada, others invest internationally, and some specialize in countries or specific

industries. Some mutual funds will invest in only low-risk investments, while others may hold much

riskier securities. If you decide to become a mutual fund investor, choosing funds whose investment

objectives and risk profile are right for you will be one of your most important decisions.


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VARIOUSMUTUAL FUNDS COMPANIES IN INDIA

ABN AMROMutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as

the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on

November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun LifeMutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life

Financial is a golbal organisation evolved in 1871 and is being represented in Canada, the US, the

Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a

conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores.

Bank of BarodaMutual Fund (BOBMutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the

sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB

Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFCMutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development

Finance Corporation Limited and Standard Life Investments Limited.

HSBCMutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India)

Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of

HSBC Mutual Fund.

Prudential IC

IC

IM

utual FundThe mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life

insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October,

1993 with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential

ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated

on 22nd of June, 1993.


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RELIGARESECURITIES LTD.

Religare, a Ranbaxy promoter group company, is one of Indias largest and fastest growing integrated

financial services institutions. The company offers a large and diverse bouquet of services ranging from

equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal

finance services, Investment banking and institutional broking services. The services are broadly

clubbed across three key business verticals- Retail, Wealth management and the Institutional spectrum.

Religare Enterprises Limited is the holding company for all its businesses, structured and being

operated through various subsidiaries.

Religares retail network spreads across the length and breadth of the country with its presence through

more than 900 locations across more than 300 cities and towns. Having spread itself fairly well acrossthe country and with the promise of not resting on its laurels, it has also aggressively started eyeing

global geographies.


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RELIGARE BRANDIDENTITY

Name

Religare is a Latin word that translates as 'to bind together'. This name has been chosen to reflect the

integrated nature of the financial services the company offers. The name is intended to unite and bring

together the phenomenon of money and wealth to co-exist and serve the interest of individuals and

institutions, alike.

Symbol

The Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is used to

define the rare quality of good fortune that is the aim of every financial plan. It has traditionally been

considered good fortune to find a single four leaf clover considering that statistically one may need to

search through over 10,000 three-leaf clovers to even find one four leaf clover.

Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

The first leaf of the clover represents Hope. The aspirations to succeed. The dream of becoming. Of new

possibilities. It is the beginning of every step and the foundations on which a person reaches for the stars.

The second leaf of the clover represents Trust. The ability to place ones own faith in another. To have a

relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to al

not in the binding but in the bond that is built.

The third leaf of the clover represents Care. The secret ingredient that is the cement in every relationship.

The truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs

true warmth of service and the ability to adapt to evolving environments with consideration to all.

The fourth and final leaf of the clover represents Good Fortune. Signifying that rare ability to meld

opportunity and planning with circumstance to generate those often looked for remunerative moments of

success.

Hope. Trust. Care. Good fortune. All elements perfectly combine in the emblematic and rare, four-leaf

clover to visually symbolise the values that bind together and form the core of the Religare vision.


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Accent usage

The diacritical tilde mark ( ) over the letter A in the Religare typeface indicates a palatal emphasissound of the letter A.

New Initiatives

Religare is on a fast and ambitious growth trajectory with some interesting plans in the pipeline AEGON Religare Life Insurance - Life Insurance Company, a Joint Venture with Aegon Religare AEGON AMC - Asset Management Company, a Joint Venture with Aegon Religare Finance - Personal Loans / Credit Cards / Loan against Property / Mortgage & Reverse Mortgage

Trading in Equities with Religare truly empowers you for your investment needs. A highly process drive

diligent approach backed by powerful Research & Analytics and one of the best in class dealing roomensures that you have a superlative experience. Further, Religare also has one of the largest retail network

with its presence in more than 900 locations across more than 320 towns & cities. This means, you cawalk into any of these branches and connect to our highly skilled and dedicated relationship managers t

get the best services. You could also choose to enjoy the freedom to execute your own trade through ouonline mechanism.


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RETAIL SPECTRUM

Equity tradingCommodies tradingOnline investment portalPersonal financial servicesPersonal credit


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EQUITY TRADING

Trading in Equities with Religare truly empowers you for your investment needs. A highly process

driven, diligent approach backed by powerful Research & Analytics and one of the best in class

dealing rooms ensures that you have a superlative experience.

Further, Religare also has one of the largest retail networks, with its presence in more than 900

locations across more than 320 towns & cities. This means, you can walk into any of these branches

and connect to our highly skilled and dedicated relationship managers to get the best services. You

could also choose to enjoy the freedom to execute your own trades through our online mechanism.


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COMMODITIES

Religare Commodities Limited (RCL) was initiated to spearhead Exchange based Commodity Trading.

As a member of NCDEX, MCX and NMCE, RCL is a trade facilitator providing the platform to trade

in commodities. Grounded in the Religare philosophy, highly skilled and dedicated professionals strive

to offer the clients "best-fit" investment solutions in the country.

The Operating Fabric-Commodities Business

In terms of the business structure, RCL caters to retail clients; it has a structured arbitrage desk which

focuses on spot futures arbitrage, RCL is also present in close to 40 Mandi locations across the country

and also caters to the Corporate / Institutional business through one of the best in class Corporate

Desks.

Our business philosophy is to treat each client situation as unique, requiring customized solutions. Our

list of corporate clients reads like a Whos Who of the Indian Industry and we have been successful in

providing them with practical customized solutions for their requirements. We are propelled by our

group vision and desire to strive tirelessly and aim to be the best within this category.

The Religare Edge

Pan India footprint Ethical business practices Nationwide presence including Mandi Locations for in-depth and firsthand information Offline/Online delivery models Powerful research and analytics supported by a pool of highly skilled Research Analysts Single window for all investments needs through you unique


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ONLINEINVESTMENTPORTAL

Investing online will never be the same again with our 360 degree portal www.religareonline.com Now

you can not just invest online in Equities, IPOs, Mutual Funds, Commodities and much more but, alsoget TRADE REWARDS each time you invest.

Besides this, we also offer you a host of other revolutionary features such as Zero Percent Brokerage;Interest on cash margin, exposure upto 20 times your cash margin etc... on our select product schemes

available through our highly sophisticated and customized platform R-ACE (Religare Advanced ClientEngine).

So get empowered, enrich your experience of investing online and open yourself to a whole new world

of possibilities.

For more information log on to www.religareonline


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PERSONAL FINANCIAL SERVICES

Religare has recently entered into personal financial advisory services. It caters to the financial needs of

individuals by advising them on various financial plans. Religares Personal financial advisors, also

called financial planners or financial consultants, use their knowledge of investments, tax laws, and

insurance to recommend financial options to individuals in accordance with the individuals short-term

and long-term goals. Some of the issues that planners address are general investments, retirement and

tax planning.

Why Financial Planning?

Financial planning is the process of meeting your life goals through proper management of your

finances. Life goals can include buying a home, saving for your childs education or planning forretirement. Financial planning services are offered to individuals to put together a financial plan for

managing financial resources.

Advantage - Financial Planning

Provides direction and meaning to your financial decisions Helps understanding how each financial decision you make affects other areas of your finances Helps assessing the level of risk you are willing to take with your investments You can also adapt more easily to life changes and feel more secure that your goals are on track.

Product offerings

Mutual Funds Insurance - Life & Non - Life Bonds Deposits IPOs Small Savings Instruments


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PHILOSOPHY

At Religare we believe Our clients are people, not accounts hence successful investment

management relationship begins with a clear understanding of each clients specific needs, concerns and

long term objectives. Our investment philosophy applies a disciplined approach to building a

customized strategy designed to meet your individual financial goals and tolerance for risk.

PROCESS

Credit finance

Religare as part of its NBFC business being operated through Religare Finvest Ltd. offers Personal

Credit to cater to the growing wave of consumerism in India.

Through our Loan against Shares (LAS) and Personal Lending Services (PLS) offerings, we have

entered into consumer lending business activities. Our PLS service offering is marketed as Personal

Credit services and developed by leveraging our branch network to generate opportunities from

existing equity customers. Our PLS business consists of unsecured consumer loans to our retail

customers. Our LAS business consists of loans secured by shares held by our retail customers and helps

them leverage their equity market positions to take increased exposure.


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WEALTHSPECTRUM

Wealth advisoryPortfolio management servicesArts intiative Priority equityclient services


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WEALTHADVISORWealthGrow It, Protect It, Spend It, Share It.. Copyright- Book by the same name by Stuart Lucas

"At Religare, we are always at It, partnering with you relentlessly.

We would want you to sleep in peace , but never would we want your wealth to sleep or go into a

slumberEthical, dynamic and diligent processes is what we are truly about

WealthManagement @ Religare

To provide investment advisory and execution services To work hand in hand with clients to identify and analyze their long-term goals, risk tolerance and

existing asset base

To Utilise our full-suite platform with an open architecture along with a fully focussed client centricapproach to offer customized solutions for clients

Supported by dedicated team of highly skilled and qualified wealth managers and research professionals.

Our Value Proposition

Strong lineage and pedigree Young, professional, innovative and fully client centric human capital Full suite platter of services from the Religare umbrella National and International Foot print An open architecture and client centric philosophy Not just lip service

Product Recommendations

Equities (Including International) Debts Commodities Structured Products Emerging Investment Classes.

Critical Steps in our Client Centric Operating Process

Risk Profiling Research & Asset Allocation Product Recommendations Review & Rebalancing

To know more about us mails us at [email protected]


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INTERNATIONAL ADVISORY FUND

MANAGEMENTSERVICES (AFMS)

A new horizon for international investments

We provide our wealth clients an opportunity to invest in international financial instruments (currently limited

to the US). Equities, Mutual Funds and Debts are some the key instruments available and the clients have the

option to choose from various asset allocation modules.

Why Invest Overseas?

Avenues for enhancing returns, minimizing risk and portfolio diversification Global outreach of opportunities Pre approved route for resident individuals to invest (Healthy Govt. Patronage and favorable regulatory

developments)

Religare's Edge

Exclusive Tie-ups with full suite broking firms in the US and top of the line institutional research service

providers

To know more about us mails us at [email protected]

Portfolio management services

Religare offers PMS to address varying investment preferences. As a focused service, PMS pays

attention to details, and portfolios are customised to suit the unique requirements of investors.

Religare PMS currently extends five portfolio management schemes, viz Panther, Tortoise,

Elephant,Caterpillar and Leo. Each scheme is designed keeping in mind the varying tastes, objectivesand risk tolerance of our investors


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Investment Philosophy

We believe that our investors are better served by a disciplined investment approach, which combines

an understanding of the goals and objectives of the investor with a fine tuned strategy backed by

research.

Stock specific selection procedure based on fundamental research for making sound investment decisions.

Focus on minimizing investment risk by following rigorous valuation disciplines. Capital preservation. Selling discipline and use of Derivatives to control volatility. Overall to enhance absolute return for investors.

Our Schemes

Panther

The Panther portfolio aims to achieve higher returns by taking aggressive positions across secto

and market capitalizations. It is suitable for the High Risk High Return investor with a strategy tinvest across sectors and take advantage of various market conditions.

Tortoise

The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time by way o

careful and judicious investment in fundamentally sound companies having good prospects. Th

scheme is suitable for the Medium Risk Medium Return investor with a strategy to invest companies which have consistency in earnings, growth and financial performance.

ElephantThe Elephant portfolio aims to generate steady returns over a longer period by investing Securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the Low Ri

Low Return investor with a strategy to invest in blue chip companies, as these companies havsteady performance and reduce liquidity risk in the market.

Caterpillar

The Caterpillar portfolio aims to achieve capital appreciation over a long period of time by investin

in a diversified portfolio. This scheme is suitable for investors with a high risk appetite. Th

investment strategy would be to invest in scrips which are poised to get a re-rating either because change in business, potential fancy for a particular sector in the coming years/months, businediversification leading to a better operating performance, stocks in their early stages of an upturn

for those which are in sectors currently ignored by the market.

Leo

Leo is aimed at retail customers and structured to provide medium to long-term capital appreciation

by investing in stocks across the market capitalization range. This scheme is a mix of moderate and


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aggressive investment strategies. Its aim is to have a balanced portfolio comprising selected

investments from both Tortoise and Panther. Exposure to Derivatives is taken within permissibleregulatory limits.

The Religare Edge

We serve you with a diligent, transparent & process driven approach and ensure that your money gets thecare it deserves.

No experts, only expertise. Religare PMS comes to you from Religare, a Ranbaxy promoter gro

company with a solid reputation for an ethical and scientific approach to financial management. While woffer you the services of a Dedicated Relationship Manager who is at your service 24x7, we do not depen

on individual expertise alone. For you, this means lower risk, higher dependability and unhinderecontinuity. Moreover, you are not limited by a particular individuals investment style.

No hidden profits. We ensure that a part of the broking at Religare Portfolio Management Services

through external broking houses. This means that your portfolio is not churned needlessly. Using mo

broking firms gives us access to a larger number of reports and analysis, enabling us to make better, moinformed decisions. Furthermore, your portfolio is customised to suit your investment objectives.

Daily disclosures. Religare Portfolio Management Services gives you daily updates on your investmen

You can pinpoint where your money is being invested, 24x7, instead of waiting till the end of the monto keep track.

No charge till you profit*.So sure are we of our approach to Portfolio Management that we do not charg

you for our services, until your investments start showing profit. With customised investment optioReligare Portfolio Management Services invites you to invest across five broad portfolios to suit you

investment needs.

Note: Except fixed administrative charges.


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INSTITUTIONAL SPECTRUM

Institutional Broking Services

The mission of this division is to institutionalize and implement a process driven approach to cater to

the needs of leading corporate houses and institutions.

The division would like to be seen as a one stop investment gateway and knowledge repository for its

clients servicing their unique and sophisticated needs. The division is structured as a separate SBU and

is housed out of Mumbai, manned by a small yet fleet footed and extremely skilled group of top notch

professionals drawn from the best in the industry.

The key highlights of our service platter are:

Highly skilled, dedicated dealing, research and sales teams Dealing capabilities on the NSE, BSE and in the cash and derivatives segment In-depth, detailed and insightful coverage of more than 60 stocks across diverse sectors. The sectors

covered are FMCG, Hotels, Media, Pharma, Auto, Cement, Steel pipes, Logistics, Telecom,

Construction and much more.

Our Current clientele includes some major domestic mutual funds, insurance companies, banks and

FIIs

Investment Banking

We provide innovative, integrated and best-fit solutions to our corporate customers. It is our continuous

endeavor to provide value enhancement through diverse financial solutions on an on-going basis,

through offerings like corporate debt, private equity, IPO, ECB, FCCB, GDR/ADR etc.

Religare's Investment Banking Division offers the following services:

Corporate Finance

We focus on finding partners for our clients, who not only help in adding value , but also improve the

future valuation of the organization. We specialize in structured financing and in providing advisory

services related to financial planning, modeling and advising on financial requirements.


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Placement of Debt Syndication of Domestic Loan / Foreign Currency Loan Securitisation Debt Swap & Loan Restructuring Short Term Corporate Debt Working Capital (Cash Credit & Short term Loan) Capital Market Instruments Overseas Acquisition Placement of Equity (Private Equity) Both for listed and unlisted companiesMerchant Banking

IPO/FPO/RIGHTS Mergers & Acquisitions Corporate Advisory Services ADR/GDR/FCCB Buy Back Of SharesCorporate Finance

We focus on finding right and relevant partners for our clients, who not only help in adding value but

also improve the future valuation of the organization. We specialize in structured financing and

providing advisory services related to financial planning, modeling and advising on financial

requirements.

Corporate finance products offered by us:

Placement ofDebt

Syndication of Domestic Loan / Foreign Currency Loan Securitisation Debt Swap & Loan Restructuring Short Term Corporate Debt Working Capital (Cash Credit & Short term Loan) Capital Market Instruments Overseas Acquisition


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Placement ofEquity (Private Equity)

Both for listed and unlisted companiesInsurance Advisory

Religare Insurance Broking, a Religare Enterprises Limited venture, is one of India's leading insurance

broking firms, with one of the largest retail networks in the country. The company holds a composite

broking license operating in the Life, Non-Life and Reinsurance domains.

The company not only services and provides customized solutions to individual retail households /

clients but also to some leading corporate houses and institutions across the country.

True to the spirit of its existence, the company proactively represents and champions the interests of its

clients tirelessly to principal insurance companies.

Within a short span it has inked MoUs with all the leading insurance companies in the country and is

backed by passionate professionals, a robust IT infrastructure and strong risk analysis teams adept at

identifying and analyzing risks to offer tailor-made solutions.

The team across the country is driven by the core philosophy of creating and delivering value to its

customers.


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MANAGERIAL USEFULNESSOFSTUDY

This study will give us an insight risk & performance of various mutual funds and no ways to

investing in mutual funds. It will provide complete details on Systematic Investment Plan (SIP) which

is rapidly become popular among the people of all sectors. This study will make the concept of SIP

clear and explain its pros and cons. SIP is coming up as a good investment of option because of certain

benefits that are available only with SIPs. Moreover, the study focuses on various aspects associated

with SIPs that will make us understand it much better. Besides, an analysis has been done based on the

real data available through some resources which makes the study more reliable.


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CONCEPTSUSED IN THESTUDY

Mutual Funds can be a conundrum for people who are not closely associated with the industry. Even

many who have been part of the industry for several years continue to have some misconceptions.

INTRODUCTION

What is a mutual fund?

PooledVehicle

A mutual fund (MF) is a vehicle to pool money from investors, with a promise that the

money would be invested in a particular manner, by professional managers who are

expected to honour the promise.

Mutual funds in India are governed by the regulations of Securities and Exchange Board of

India (SEBI).

Professional Management

The idea behind a MF is that investors lack the time or the inclination or the skills to

manage their own investments. Professional managers, acting on behalf of the MF,

manage the investments for the benefit of investors, in return for a management fee.

Schemes

Investors have their individual preferences on how they would like their money invested

and how much risk they are willing to take.

Professional managers can choose to manage each individual investors money as per the

investors preferences. Such personal treatment, often referred to as Portfolio Management

Scheme (PMS) in India, entails significant demands on the time of the managers

It is possible to balance the time and cost required to manage investments by grouping

investors together based on their preferences. In this manner, the focus of the investment


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activity can be shifted from a single investor (in the case of PMS) to a group of investors

having similar expectations (in the case of a MF).

For ease of management and reporting, such a group of investors is identified with a

mutual fund scheme. In commercial terminology, the investors have invested in a

scheme and the professional managers manage the scheme. A MF can, and typically

does, have several schemes to cater to different investor preferences.

Money in Trust

The MF manages investments of the scheme for the benefit of its investors. Every scheme

has an:

Investment portfolio (Portfolio Statement)

Account of income and expenditure (Revenue Account)

Account of assets and liabilities (Balance Sheet).

In order to ensure fairness to investors, the expenditure that can be charged to the scheme,

whether as management fees or as other expenses, is regulated by SEBI.

The gains of any scheme (after accounting for income, permitted expenses, profits and

losses from the investment activity) would belong to

Its investors, similarly losses, if any, would need to be borne by its investors, up to the

amount invested. Thus, the MF manages the moneys in trust for the benefit of investors.

Legal framework

Across the world, the MF sector is viewed as a critical mechanism to channel funds of

investors into the capital market. Since these investors are often not so well qualified to

invest, the mutual fund business is highly regulated. Regulations vary from country to

country.

Performance Measures Of MutualFunds

Mutual Fund industry today, with about 34 players and more than five hundred schemes, is

one of the most preferred investment avenues in India. However, with a plethora of


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schemes to choose from, the retail investor faces problems in selecting funds. Factors such

as investment strategy and management style are qualitative, but the funds record is an

important indicator too. Though past performance alone can not be indicative of future

performance, it is, frankly, the only quantitative way to judge how good a fund is at

present. Therefore, there is a need to correctly assess the past performance of different

mutual funds.

Worldwide, good mutual fund companies over are known by their AMCs and this fame is

directly linked to their superior stock selection skills. For mutual funds to grow, AMCs

must be held accountable for their selection of stocks. In other words, there must be some

performance indicator that will reveal the quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the performance of a

mutual fund scheme, it should also include the risk taken by the fund manager because

different funds will have different levels of risk attached to them. Risk associated with a

fund, in a general, can be defined as variability or fluctuations in the returns generated by

it. The higher the fluctuations in the returns of a fund during a given period, higher will be

the risk associated with it. These fluctuations in the returns generated by a fund are

resultant of two guiding forces. First, general market fluctuations, which affect all the

securities present in the market, called market risk or systematic risk and second,

fluctuations due to specific securities present in the portfolio of the fund, called

unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in

terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is

measured in terms of Beta, which represents fluctuations in the NAV of the fund vis--vis

market. The more responsive the NAV of a mutual fund is to the changes in the market;

higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the

returns in the market. While unsystematic risk can be diversified through investments in a

number of instruments, systematic risk cannot. By using the risk return relationship, we try

to assess the competitive strength of the mutual funds vis--vis one another in a better way.

In order to determine the risk-adjusted returns of investment portfolios, several eminent

authors have worked since 1960s to develop composite performance indices to evaluate a

portfolio by comparing alternative portfolios within a particular risk class. The most

important and widely used measures of performance are:


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The Trey nor Measure The Sharpe Measure Jenson Model Fama Model

The Trey nor Measure

Developed by Jack Trey nor, this performance measure evaluates funds on the basis of

Trey nor Index. This Index is a ratio of return generated by the fund over and above risk

free rate of return (generally taken to be the return on securities backed by the government,

as there is no credit risk associated), during a given period and systematic risk associated

with it (beta). Symbolically, it can be represented as:

Trey nor Index (Ti) = (Ri - Rf)/Bi.

Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive Trey

nor Index shows a superior risk-adjusted performance of a fund, a low and negative Trey

nor Index is an indication of unfavorable performance.

The Sharpe Measure

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a

ratio of returns generated by the fund over and above risk free rate of return and the total

risk associated with it. According to Sharpe, it is the total risk of the fund that the investors

are concerned about. So, the model evaluates funds on the basis of reward per unit of total

risk. Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a

fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe andTrey nor


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Sharpe and Trey nor measures are similar in a way, since they both divide the risk

premium by a numerical risk measure. The total risk is appropriate when we are evaluating

the risk return relationship for well-diversified portfolios. On the other hand, the

systematic risk is the relevant measure of risk when we are evaluating less than fully

diversified portfolios or individual stocks. For a well-diversified portfolio the total risk is

equal to systematic risk. Rankings based on total risk (Sharpe measure) and systematic risk

(Trey nor measure) should be identical for a well-diversified portfolio, as the total risk is

reduced to systematic risk. Therefore, a poorly diversified fund that ranks higher on Trey

nor measure, compared with another fund that is highly diversified, will rank lower on

Sharpe Measure.

Jenson Model

Jenson's model proposes another risk adjusted performance measure. This measure was

developed by Michael Jenson and is sometimes referred to as the Differential Return

Method. This measure involves evaluation of the returns that the fund has generated vs. the

returns actually expected out of the fund given the level of its systematic risk. The surplus

between the two returns is called Alpha, which measures the performance of a fund

compared with the actual returns over the period. Required return of a fund at a given level

of risk (Bi) can be calculated as:

Ri = Rf + Bi (Rm - Rf)

Where, Rm is average market return during the given period. After calculating it, alpha can

be obtained by subtracting required return from the actual return of the fund.

Higher alpha represents superior performance of the fund and vice versa. Limitation of this

model is that it considers only systematic risk not the entire risk associated with the fund

and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of market is

primitive.

Fama Model

The Eugene Fama model is an extension of Jenson model. This model compares the

performance, measured in terms of returns, of a fund with the required return


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commensurate with the total risk associated with it. The difference between these two is

taken as a measure of the performance of the fund and is called net selectivity.

The net selectivity represents the stock selection skill of the fund manager, as it is the

excess return over and above the return required to compensate for the total risk taken by

the fund manager. Higher value of which indicates that fund manager has earned returns

well above the return commensurate with the level of risk taken by him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where, Sm is standard deviation of market returns. The net selectivity is then calculated by

subtracting this required return from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and

Jenson model use systematic risk based on the premise that the unsystematic risk is

diversifiable. These models are suitable for large investors like institutional investors with

high risk taking capacities as they do not face paucity of funds and can invest in a number

of options to dilute some risks. For them, a portfolio can be spread across a number of

stocks and sectors. However, Sharpe measure and Fama model that considers the entire

Risk associated with fund is suitable for small investors, as the ordinary investor lacks the

necessary skill and resources to diversify. Moreover, the selection of the fund on the basis

of superior stock selection ability of the fund manager will also help in safeguarding the

money invested to a great extent. The investment in funds that have generated big returns

at higher levels of risks leaves the money all the more prone to risks of all kinds that may

exceed the individual investors' risk appetite.

CONSIDERATIONWHILE SELECTING AMUTUAL FUND

For most investors, choosing a qualified financial adviser is an important first step in any

investment program. With the help of financial adviser, we can establish our investment

goals, assess our risk tolerance, and develop a personal investment strategy.

Once we have identified some funds that seem to meet our investment needs, we must

consider the following parameters.


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Investment Objectives: Are the fund's investment objectives consistent with our own? Can

the fund provide the level of regular income you need? Does it provide the type of

diversification we're looking for? If we have other investments, how will this fund affect

the overall balance of our portfolio?

Risk: Are we comfortable with the level of risk associated with the fund? If we have other

investments, would this fund tend to increase or decrease our overall risk exposure? Unlike

GICs or savings accounts, mutual funds are not covered by deposit insurance. Values of

most mutual funds will fluctuate and we can lose money depending on changes in the

marketplace.

Time Horizons: Does the investment fit with our expected investment time horizon? For

example, if we're investing for a relatively short time, will sales charges and redemption

fees offset any possible gains? Might the value of the fund be down just when we need to

redeem we investment?

Expected Return: Does the fund have the potential to provide the returns you need to meet

our goals? Remember, predicting the return of any mutual fund requires that we predict the

future - something that can never be done with certainty. Past performance will tell us

about the fund's historical volatility and its performance relative to competing funds, but it

is not a reliable indicator of future performance. The return we can expect from a mutual

fund is closely related to its risk. The lower the risk of the fund, the lower the return we

should expect.

Costs: Fees and commissions associated with mutual funds will affect our overall return

and can vary widely from one fund to the next. Higher fees and commissions do not

necessarily mean better performance. We should check and compare fees and commissions

before investing.

Flexibility: Will we be entitled to switch our investment to other funds in the same fund

family'? Can we afford the minimum initial investment? Does the fund offer other features

such as regular monthly purchase plans or redemption plans that are attractive to us?

Tax Considerations: Is the mutual fund a qualifying investment for our Registered

Retirement Income Fund (RRIF) or other registered plan? If we are investing in the fund


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outside a registered plan, do we understand the tax implications of the distributions of

income or capital gains that the fund may make to us?

RISKFACTORSINGENERAL

We take risks when we invest in any mutual fund. We may lose some or all of the money

we invest (our principal) because the securities held by a fund go up and down in value.

What we earn on our investment (dividends and interest) also may go up or down. The

various types of risk are:

Volatility: The unpredictability of changes in stock prices.

Interest-rate risk: The fluctuation in bond prices due to interest rate changes.

Credit risk: The likelihood that payments of bond interest and principal will not be made as

promised.

Inflation risk: The risk that the lowered purchasing power of the dollar will erode our

return.

Each kind of mutual fund has different risks and rewards. Generally, the higher the

potential return, the higher the risk of loss. The following discussion of risk for the various

types of funds is intended to aid us in choosing a fund that meets our requirements as an

investor.


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OBJECTIVES

The objectives of the project are as under

To study about the Mutual Funds in detail To evaluate investment performance of selected mutual funds in terms of risk and return To analyze the returns given by different kind of funds selected for study

The project of my SIP is about Comparative Analysis of various types of Mutual Funds and risk

analysis of various Mutual funds based on some selective parameters.

Invented in the 1920s, mutual funds are pools of money managed by an investment company or

advisor. Different mutual funds have different goals. For example, funds may seek growth, growth and

income, specific market cap sizes, sectors, etc


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RESARCHMETHODOLOGY

Meaning

Research means a search for knowledge. Research is an art of scientific investigation. It is a careful

investigation or inquiry especially through search for new facts in any branch of knowledge.

Some people consider research as a movement, a movement from the known to unknown. It is actually

a voyage of discovery.

Research is an academic activity and as such the term should be used in a technical sense. Research

comprises defining and redefining problem, formulating hypothesis or suggested solutions, collecting,

organizing and evaluating data, making deductions and reaching conclusions and at last carefully

testing the conclusions to determine whether they fit the formulated hypothesis.

Research Methodology is a way to systematically solve the research problem. It is a science of studying

how research is done scientifically.

For Example, an architect, who designs a building, has to consciously evaluate the basis of his

decisions i.e; he has to evaluate why and what basis he selects particular size, number and location of

doors, windows and ventilators, uses particular material and not others and the like.

Similarly, in research the scientist has to expose the research decisions to evaluations before they are

implemented. He has to specify very clearly and precisely what decisions he selects and why he selects

them so that they can be evaluated by others also.

Type of Research

The type of research that I took is descriptive as well as analytical. Descriptive research includes

surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research isdescription of the state of affairs as it exists at presents. The main characteristic of this method is that

the researcher has no control over the variables; he can only report what has happened or what is

happening.


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Research Design

A research design is the arrangement of condition for collection and analysis of data in a manner that

aims to combine relevance to the research purpose with economy in procedure.

Research design is divided into the following parts:

The sampling design- methods of selecting items to be observed The observational design relates to the condition under which the observations are to be made Statistical design it is concerned with the observation and analysis of the data. The operational design the techniques by which the procedures like sampling observation

designs etc. can be carried out.

Sample

The sample taken for this research are funds of a few AMCs Franklin India Prima Plus Fund, UTI

Master Value Fund , HSBC Blue Chip fund etc. I personally visited the offices of the AMCs Franklin

Templeton to collect the data. The research revolves around the performances of these fund houses.

Collection of data

Data can be collected in two ways primary and secondary. The data that is used in this research is

secondary data. Secondary data is the data which is already available i.e. the data which have already

been collected and analysed by someone else. This data may either be published or unpublished data

such as reports and publications of various associations connected with business and industry, banks,

stock exchange etc. unpublished biographies and published biographies available with research

workers, scholars etc.

The Secondary sources were:

Performance and NAV sheets Fact sheets of AMCs etc.

Risk Analysis

Risk analysis has been done in two parts.

Quantitative Analysis Qualitative Analysis


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Quantitative analysis; it is a form of analysis, which uses numbers and ratios derived from a company's

financials to assess its prospects. Under quantitative analysis various types of funds have been evaluated

based on some selective parameters

The entry of private mutual funds (since 1993) has injected a sense of competition and the industry has been

witnessing a structural transformation from a public sector monopoly to monopolistic industry. A proper

evaluation will help small investors to decide about level of investments in various mutual funds schemes,

so as to maximize the returns. Present study is confined to evaluate the performance of mutual funds on the

basis of average returns of last three years compared with the risk free securities returns and BSE index. In

this project funds have been divided on the basis of their investments in different type of securities e.g.

Large cap funds Mutual funds which have invested most of their corpus in large cap equities Medium cap funds Mutual funds which have invested most of their corpus in medium cap equities Aggressive funds Mutual funds which have invested most of their corpus in small cap equities. Balanced funds Mutual funds which have invested their corpus in all kinds of securities Thematic funds Mutual funds which invest only in some particular kind of stocks based on a particular

theme.

Four funds have been taken under each type and therefore the samples size consists of 20 mutual funds

on one year basis.

The collection of information is based on the primary and secondary data. The primary data has beencollected through discussion with the mutual funds institutes officials, to get the first hand

information

Secondary information has been collected through various books, studies and annual reports ofvarious institutes like Kotak, UTI, and HDFC. In addition many internet sites like

mutualfundsofindia.com , myiris.com etc will be referre

Alpha, beta, and R-squared are components of Modern Portfolio Theory (MPT), which is a standard

financial and academic method for assessing the risk of a fund, relative to a benchmark. A mutual

fund's alpha and beta are calculated in relation to a market index. Each fund is linked to an

appropriate index based on its investment category.

The parameters that have been taken for the evaluation of funds are as under.


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(a) Risk- The difference between the required rate of return on mutual fund investment and risk free is the

risk premium. The sources that determine risk premium includes market risk, financial risk, credit risk,

liquidity risk etc.

(b) Beta - Beta coefficient compares the variability of funds returns to the market as a whole. It is a relative

measure unlike absolute measure. Beta, a component of Modern Portfolio Theory statistics, is a measure of a

fund's sensitivity to market movements. It measures the relationship between a fund's excess return over T-

bills and the excess return of the benchmark index. Equity funds are compared with the S&P 500 index;

bond funds are compared with the Lehman Brothers Aggregate Bond index.

By definition, the beta of the benchmark (in this case, an index) is 1.00. Accordingly, a fund with a 1.10 beta

has performed 10% better than its benchmark index--after deducting the T-bill rate--than the index in up

markets and 10% worse in down markets, assuming all other factors remain constant. Conversely, a beta of

0.85 indicates that the fund has performed 15% worse than the index in up markets and 15% better in down

markets. A low beta does not imply that the fund has a low level of volatility, though; rather, a low beta

means only that the funds market-related risk is low. A specialty fund that invests primarily in gold, for

example, will often have a low beta, relative to the S&P 500 index, as its performance is tied more closely to

the price of gold and gold-mining stocks than to the overall stock market. Thus, though the specialty fund

might fluctuate wildly because of rapid changes in gold prices, its beta relative to the S&P may remain low.

(c) Jensen Alpha It represents the difference between a mutual funds actual performance that would be

expected on the level of risk taken by the manager. If a fund produces the expected return at the level of risk

assumed, the fund would have an alpha equal to zero. Alpha measures the difference between a fund's actual

returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure

indicates the fund has performed better than its beta would predict. In contrast, a negative alpha indicates a

fund has underperformed, given the expectations established by the fund's beta. Some investors see alpha as

a measurement of the value added or subtracted by a fund's manager. There are limitations to alpha's ability

to accurately depict a manager's added or subtracted value. In some cases, a negative alpha can result from

the expenses that are present in the fund figures but are not present in the figures of the comparison index.

Alpha is dependent on the accuracy of beta: If the investor accepts beta as a conclusive definition of risk, a

positive alpha would be a conclusive indicator of good fund performance.

(d) Standard Deviation - Standard deviation is a statistical measure of the range of a fund's performance, and

is reported as an annual number. When a fund has a high standard deviation, its range of performance has

been very wide, indicating that there is a greater potential for volatility.


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(e) Sharpe Ratio -A measure of a fund's excess return relative to the total variability of the fund's holdings.

The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance

(f) Trey nor Ratio - A measure of the excess return per unit of risk, where excess return is defined as the

difference between the portfolio's return and the risk-free rate of return over the same evaluation period and

where the unit of risk is the portfolio's beta.

Qualitative Analysis- It is an analysis that gathers information, which is varied, in-depth and rich. The

information sought is about how something is experienced and not specifically about facts and figures.

Information from qualitative research is often more difficult to interpret, partly because it cannot be

measured'. The emphasis is on the quality and depth of information. In the Qualitative analysis first hand

information has been through personal interviews. Through this person buying behavior can be judged, in

case of mutual funds and what they think about the returns from particular mutual funds. For this, sample

size of 50 has been taken.

Methodology Used

The analysis and interpretation is based upon following methodology. Of the 20 funds selected, the

following parameters have been calculated:

Return

The return will be calculated as under:

Portfolio Return (Rit) = NAV t NAV t-1

NAV t-1

Where Rit is the difference between markets indexes of two consecutive days divided by market index

for the preceding day

Market Return (Rmt) = M.Ind t M.Ind t-1

M.Ind t-1

Where Rmt is the difference between markets indexes of two consecutive days divided by market index

for the preceding day.


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Sharpe ratio Sharpe performance index gives a single value to be used for the performance ranking of

various funds. Sharpe index measures the risk premium of the portfolio relative to the total amount of

risk in the portfolio. The risk premium is the difference between the portfolio average rate of return and

the risk less rate of return.

Sharpe Index = Portfolio average return ( Rp ) Risk free rate of interest ( Rf)

Standard deviation of the portfolio return (Wp )

Trey nor Performance index It is expressed as ratio of returns to systematic risk (beta). Precisely, it is

reward to volatility ratio and is defined as:

Trey nor Index = Portfolio average return (Rp) Risk free rate of interest (Rf)

Beta coefficient of portfolio (Fp)

It measures portfolio risk in term of beta that is the weighted average of individual security betas. The

ratio is relevant to investors, for whom the fund represents only a fraction of their total assets. The

higher the ratio better is the performance.

Jensens Measure It is regression of excess fund return with excess market return. It is expressed as:

RptRf= EFRm Rf ) + e i

Where:

Alpha = intercept

Beta = Systematic risk

Rm = Market return

Rf = Return on risk free asset

Rpt = Fund return for time period t

After finding all these parameters for the sample size selected, I will plot all the funds on the Risk-

Return graph.

Benchmark Index For this study, broad 500 shares based BSE 500 has been used as a proxy for market

index. This is because BSE 500 is comparatively far broad based than BSE Sensex which is constituted

of 30 shares only.


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Mutual funds selected for the study

Large-cap Funds DSP-MERILL LYNCH TIGER FUND-GROWTH

KOTAK OPPORTUNITIES BIRLA SUNLIFE EQUITY FUND-GROWTH TATA PURE EQUITY FUND-GROWTHMid Cap Funds

SUNDARAM SELECT MIDCAP GROWTH BIRLA MIDCAP FUND DIVIDEND CHOLA MIDCAP FUND GROWTH SHARA MIDCAP FUND GROWTHAggressive Funds

PRUDENTIAL ICICI EMERGING STAR FUND GROWTH FRANKLIN INDIA PRIMA FUND-GROWTH HDFC CAPITAL BUILDERS SBI MAGNUM GLOBAL 94-GROWTHBalanced Funds

KOTAK BALANCE SBI MAGNUM BALANCED FUND GROWTH PRUDENTIAL ICICI BALANCED FUND GROWTH JM BALANCED FUND

Thematic Funds

BIRLA SUNLIFE BUY INDIA FUND-GROWTH UTI THEMATIC BASIC INDUSTRIES FUND-GROWTH KOTAK MNC FUND BIRLA MNC FUND-GROWTH


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DATAANLAYISOFPERFROMANCE

OFVARIOUSMUTUAL FUNDS

ON THEBASISOFRISKV/SRETURN

Large Cap Funds

If we look at the graph of Risk Vs Return in case of large cap funds, then DSP Merrill Lync tiger fund

has given maximum returns with minimum Beta. On the other hand Tata pure Equity fund has given

the minimum returns with high risk involved in the portfolio. Whereas opportunities and Birla Sunlife

equity funds have given returns as per the risk in their portfolios

Mid Cap Funds

Sundram select Mid Cap fund has given maximum returns with low risk (Beta=0.6). Chola Mid Cap

and Sahara Mid Cap Funds have almost same Beta values but Sahara Mid Cap funds have given better

returns than Chola Mid Cap Fund. Birla Mid Cap fund has given returns proportional to the Beta of its

portfolio.

Aggressive Funds

If we look at the graph of Aggressive funds then we find some surprising results, HDFC Capital

Builders have given proportionate returns as compared to the Risk evolved in its portfolio ( Beta = 0.58

). On the other hand SBI Magnum Global 94 and Prudential ICICI emerging star fund have almost

same risk in their portfolio but Prudential ICICI emerging star fund has given better returns than SBI

Magnum Global 94. Franklin India Prima fund has given better returns than HDFC Capital Builders.

Balanced Funds

Prudential ICICI Balanced Fund has high risk but has given lowest return if compared to other funds in

its category. Kotak Balance has given less return than SBI Magnum Balanced Fund with high risk. JM


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Balanced Fund has given better returns than Prudential ICICI Balanced Fund even with less risk in its

portfolio as compared to that in portfolio of ICICI Balanced Fund.

Thematic Funds

Kotak MNC Fund has given lowest returns among the Funds selected in its category with Beta of 0.66.

Also Birla MNC fund has given fewer returns as compared to Prudential ICICI FMCG Funds in spite

of having more risky portfolio. Returns given by UTI Thematic Basic Industries fund is good as it has

more risk in its portfolio as compared to other funds in this category.

QUALITATIVE ANALYSIS

Consumer behavior is the study of how people buy, what they buy, when they buy and why they buy. It

is a subcategory of marketing that blends elements from psychology, sociology, socio psychology,

anthropology and economics. It attempts to understand the buyer decision making process, both

individually and in groups. It studies characteristics of individual consumers such as demographics,

psychographics, and behavioral variables in an attempt to understand people's wants. It also tries to

assess influences on the consumer from groups such as family, friends, reference groups, and society in

general.

DetailedModel of Factors Influencing behavior


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Cultural Factors

Cultural factors exert the broadest and deepest influence on consumer behavior.

In general, the marketers distinguish three different cultural factors:

Culture Subculture Social class (this is a social factor, too)

Culture

Culture (or civilization) is the highest entity of personal identification with the society.

These entities were in the past the nations and could be in the future the civilizations

(Western, Muslim, Hindi, Chinese).

Human behavior is largely learned. The growing child acquires a set of values,

Perceptions, preferences and behaviors through a process of socialization involving

The family and other education institutions

Subculture

Each culture consists of smaller subcultures that provide more specific identification and

socialization for its members.

We can distinguish several subcultures in the different countries.

Not only in the India, but also in European countries we can distinguish:

National groups (immigrants, Europeans and non-Europeans) Religious groups (Catholics, Protestants, Orthodoxs, Muslims, Jews) Geographical areas (Regions, regional identity in Germany and in other

European countries)


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SocialClass

Social classes are relatively homogeneous and enduring divisions in a society, which are

hierarchically ordered and whose members share similar values interests and behavior.

Social classes show distinct product and brand preferences in such areas as clothing, home

furnishing, leisure activities, automobiles, and food and beverages.

SocialFactors

The consumers behavior is also influenced by (other) social factors as

Reference groups Family Social rules and statuses

Reference Groups

A persons reference groups consist of all social groups that have a direct (face to face) or

indirect influence on the persons attitudes or behavior

We distinguish different reference groups:

Membership groups are the groups, to which the person belongs,

Family, friends, neighbors, coworkers (primary groups) Religious, political, professional groups (secondary groups)

Non-membership groups are the groups to which a person not belongs, but which influence

the attitudes and behavior of the person.

Aspirational groups are groups to which a person would like to belong. Dissociative groups are groups whose values or behavior are rejected.

Family

Family members constitute the most influential primary reference group shaping the

buyers behavior.


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We distinguish between two types of families in the consumers life:

the family of orientation (family of origin) consists of ones parents.From parents a person acquires an orientation towards religion, ethics, politic and

economic behavior and also food patterns.

the family of procreation (own family) consists of ones spouse and children.This family is the most important consumer-buying organization in society.

Roles and Statuses

A person participates in many groups throughout life:

Family, clubs, organizations.The persons position in each group can be defined in terms of role and status.

A role consists of the activities that a person is expected to perform according to the

persons around him or her.

Each role carries a status reflecting the esteem accorded to it by society. Roles and statuses

are at the same time dynamic and static phenomena:

They change with the economic and social progress (land owner, entrepreneur) People with higher status like to remain their position

People choose products that communicate their role and status in society. But status

symbols vary for social classes and also geographically.

PersonalFactors

A buyers decisions are also strongly influenced by personal characteristics, so the

Age and Life-cycle Stage, Occupation or Profession, Economic Situation, Lifestyle.


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Age and Life-cycle Stage

People buy different goods and services over their lifetime. They eat baby food in the early

years, most foods in the growing and maturing years, and special diets in the later years.

Occupation

A persons consumption pattern is also influenced by his or her occupation. A white-collar

worker will buy other clothing and food as a blue-collar worker.

Economic circumstances

People economic circumstances consist of their

Spendable income Savings and assets Borrowing power Attitude toward spending and saving.

Lifestyle

People coming from the same subculture, social class, occupation but may lead different

lifestyles.

A persons lifestyle is the persons pattern of living in the world as expressed in the

persons activities, interests, and opinions. Lifestyle portrays the whole person

interacting with his or her environment. Personality and Self-concept lead to the

Psychological factors. Personality means the persons distinguishing psychological

characteristics. Self concept (or self image) means our image of ourselves.


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FINDINGS

In my study i have concentrated on two major issues one deals with the performance of various mutual

funds and the other one is risk in various method s of investing in mutual funds. Findings of my study

are follows:

IN RESPECT TO PERFORMANCE:

Large Cap Funds

If we look at the graph of Risk Vs Return in case of large cap funds, then DSP Merrill Lync tiger fund

has given maximum returns with minimum Beta. On the other hand Tata pure Equity fund has given

the minimum returns with high risk involved in the portfolio. Whereas opportunities and Birla Sun lifeequity funds have given returns as per the risk in their portfolios

MidCap Funds

Sundram select Mid Cap fund has given maximum returns with low risk (Beta=0.6). Chola Mid Cap

and Sahara Mid Cap Funds have almost same Beta values but Sahara Mid Cap funds have given better

returns than Chola Mid Cap Fund. Birla Mid Cap fund has given returns proportional to the Beta of its

portfolio.

Aggressive Funds

If we look at the graph of Aggressive funds then we find some surprising results, HDFC Capital

Builders have given proportionate returns as compared to the Risk evolved in its portfolio ( Beta = 0.58

). On the other hand SBI Magnum Global 94 and Prudential ICICI emerging star fund have almost

same risk in their portfolio but Prudential ICICI emerging star fund has given better returns than SBI

Magnum Global 94. Franklin India Prima fund has given better returns than HDFC Capital Builders.

BalancedFunds

Prudential ICICI Balanced Fund has high risk but has given lowest return if compared to other funds in

its category. Kotak Balance has given less return than SBI Magnum Balanced Fund with high risk. JM


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Balanced Fund has given better returns than Prudential ICICI Balanced Fund even with less risk in its

portfolio as compared to that in portfolio of ICICI Balanced Fund.

ThematicFunds

Kotak MNC Fund has given lowest returns among the Funds selected in its category with Beta of 0.66.

Also Birla MNC fund has given fewer returns as compared to Prudential ICICI FMCG Funds in spite

of having more risky portfolio. Returns given by UTI Thematic Basic Industries fund is good as it has

more risk in its portfolio as compared to other funds in this category.

WITH RESPECT TOMETHOD OF INVESTING :

In some of the above examples we see that an investor who has invested lump sum gains much better

that the one who invests through SIP. This is due to the fact that the former invested at the time when

the unit price of the fund was low. Though the market fluctuated and the price of the unit fell poorly,

mostly we saw a rise in the prices. When spread the investment over a period of 3 years ultimately the

price at the time of selling was much higher which gave the lump sum investor an upper hand. Still we

cannot completely go against the SIP on this basis. Because SIP is the best option for small investors

and those who dont want to take any chances or risks. Moreover, it inculcates the saving tendencies

among the people who otherwise never think of investing for the future. Besides this it usually gives

them an advantage of the rising market trends and economic booms which they would otherwise miss if

they had not thought of investing in the mutual funds. This is not that a SIP investor is always a loser to

a lump sum investor. Nobody can fully predict the market trends. Sometimes it rises steadily, at other

times it falls and they rise, sometimes it rises and then falls. Think of a scenario when the at the time of

initiation of a SIP the market price of the unit is low, then it rises for a few months and then falls for a

very long time and suddenly rises. In that case the SIP investor can gain a lot more than the lump sum

investor. I am neither in favour of nor totally against lump sum or SIP. Instead, I would like to

emphasize on the fact that gain or loss to a large extend depends on the market trend and so many other

factors. Right timing is the key to getting success in the money market. It is true also for a SIP investor.


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RECOMMENDATIONS

Following are some recommendations to reduce the losses through investments in mutual funds.

Mutual funds are not guaranteed or insured by any government agency even if you buythrough a bank and the fund carries the bank's name. You can lose money investing in mutual

funds.

Past performance is not a reliable indicator of future performance. So don't be dazzled by lastyear's high returns. But past performance can help you assess a fund's volatility over time.

As per the National Stock Exchange, the Mid-Cap Universe is defined as stocks having average six months

market capitalisation between Rs 75 crore and Rs 750 crore such as Amtek Auto, Federal Bank, Allahabad

Bank, BEML etc.

Market capitalisation means the number of shares issued multiplied by their market value. Generally these

are midsized businesses.

And hence display high rates of growth in a growing economy. But being mid-sized in nature, they are very

susceptible to changes in the economy and could suffer more in a bad period than a large company. Hence,

mid cap stocks are good to have in a portfolio, but in a limited proportion, as compared to large cap stocks.

In times of panic or crises, we have seen mid caps falling much more than large caps.

Stock prices never grow in a straight line, unlike deposits. Their values keep swinging based on perceptions

(of buyers and sellers) of the companys business prospects.

This nature of swinging is called volatility. Moreover, the swinging does not occur in a set pattern. So the

swinging nature combined with an irregular pattern renders stock prices unpredictable in the short run.

Greater the volatility, lesser the predictability

High volatility also implies that you could have purchased the stock at an abnormal high or an abnormal

low.

Buying low is beneficial whereas buying high is not! The chart above shows the NAVs of two funds, one

more volatile than the other.


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The blue line fund is more volatile than the black line. You will observe that the blue line dips lower and

rises further, too. But if you are the sort with a weak stomach, you will lose sleep over the steep falls. Hence

my advise that conservative investors have more of less volatile funds. But the aggressive investor can opt

for higher volatility, as long as it returns him more eventually, like in the chart below. Mid caps are more

volatile than large caps.


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LIMITATIONSOF THESTUDY

The study is limited to some particular Mutual funds and cant be generalized to other funds. The study

is limited to a particular year of returns and cant be generalized for future returns Funds which have

been selected under a particular category is based on the following assumptions.

Funds which have given maximum returns in last one year. No two funds from a same company have been selected under one category. A fund selected is at least one year old. Only open ended schemes have been taken for analysis. Minor change in the portfolio of a fund is not taken into consideration. There is very less time to complete the study.


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REFERENCES

Google.com NAVIndia.com Investopedia.com www.bseindia.com www.kotak.com www.kotakmutual.com www.mutualfundsindia.com www.myiris.com www.nseindia.com NSE course for AMFI Nav.com


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QUESTIONNAIRE

FOR Investors

Name :

Contact No. :

1. Profession/Service Details?

a) Service Class ( )b) Business ( )c) Students ( )d) Others ( )

2. Age Groupa) Up to 20 ( )b) 21 to 40 ( )c) 41 to 60 ( )d) Above 60 ( )

3. Sex

a) Male ( )b) Female ( )

4. Income Group (Monthly Income in Rs.)

a) Up to 5,000 ( )b) 5,001 to 20,000 ( )c) 20,001 to 50,000 ( )d) Above 50,000 ( )e) None ( )

mutual funds risk and performance. research for b.r.m

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