A Study On A PERFORMANCE & AWARENESS OF MUTUAL FUND IN NIRMAL BANG SECURITIES PVT LTD Project submitted in partial fulfillment

for the award of degree of MASTER OF BUSINESS ADMINSTRATION BY RAVI KUMAR ROLL NO.

Under the supervision of

Head of the Department

MAHESWARA COLLEGE OF ENGINEERING R.R.DISTRICT HYDERABAD-500043

DECLARATION
I hereby declare that this Project Report titled A PERFORMANCE & AWARENESS OF MUTUAL FUND with special reference to Magnum Equity Fund, UTI Equity FundGrowth, HDFC Growth Fund submitted by me to the Department of Management Studies in Institute of Aeronautical Engineering, is a bona fied work undertaken by me and it is not submitted to any other university or Institute for the award of any degree/diploma/certificate or published any time before.

Name and address of the student

Signature of the student

Date:

ACKNOWLEDGEMENT
I would like to express my gratitude for all the people, who extended unending support at all the stages of the project. This report is product of not only my sincere effort but also the guidance and morale support given by the management of the NIRMAL BANG SECURITES Company. I express my sincere gratitude to my guide Mrs. G.SAI REKHA for sparing the valuable information and suggestions all through, for the successful completion of the project. I also thanks to my guide and also management and staff of my college for providing the guidance and support. Last but not least I thanks all my friends and parents who have directly or indirectly contributed for the successful completion of the project.

Place: Date:

Name: Roll. No.:

TABLE OF CONTENTS Contents

Chapter-I Introduction Definition, History Advantages & Disadvantages Performance of MF in India Types of Mutual Funds, Role of SEBI in Mutual Funds Chapter-II Research problem Objectives of the study Need of the study Limitations & Assumptions of the study Chapter-III Research design Research methodology & Data collection Chapter-IV Literature review Chapter-V Introduction to company/organization Chapter-VI Data analysis and interpretation Chapter-VII Findings/suggestions/summary/conclusions BIBLIOGRAPHY 87 - 92 93 71 - 86 47 - 70 39 - 46

Pg.nos
1 35 1 3 7 14 18-35 36 37 36 36 37 37 38 38 38 38

CHAPTER 1

Introduction to Mutual Funds:

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money collected & invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and its unit holders in proportion to the number of units owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus, a Mutual Fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody 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 A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all three areas - research, investments and transaction processing. While the concept of individuals coming together to invest money collectively is not new, the mutual fund in its present form is a 20th century phenomenon. In fact, mutual funds gained popularity only after the Second World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual funds collectively manage almost as much as or more money as compared to banks.

Definitions A mutual fund is a trust that pools the savings of a number of investors with common financial goals. The collected money is invested in various instruments like debentures, shares, etc. The income generated from these instruments and the capital appreciation is shared by the investors in proportion to the number of units owned by them. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals).[1] The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective. In the U.S., a fund registered with the Securities and Exchange Commission (SEC) under both SEC and Internal Revenue Service (IRS) rules must distribute nearly all of its net income and net realized gains from the sale of securities (if any) to its investors at least annually. Most funds are overseen by a board of directors or trustees (if the U.S. fund is organized as a trust as they commonly are) which is charged with ensuring the fund is managed appropriately by its investment adviser and other service organizations and vendors, all in the best interests of the fund's investors

Short History The government of India set up Unit Trust of India in 1963 by an act on parliament. UTI functioned under the regulatory and administrative control of the Reserve Bank of India till 1978. The Industrial Development Bank of India took over the regulatory and administrative control that year. The first scheme launched by UTI was Unit Scheme 1964 or the infamous Unit 64. The second phase of the mutual fund industry began with the public sector banks and Life Insurance Corporation of India and General Insurance Corporation of India setting up their own mutual funds in 1987. Finally, in 1993 Kothari Pioneer (now merged with Franklin Templeton) became the first private sector mutual fund to start operations in the country. A host of private sector as well as foreign funds set up shop after that. In 1996, a comprehensive and revised Mutual Fund regulation was put in place. The industry now functions under Sebi (Mutual Fund) regulations, 1996. The industry faced its toughest challenge when the US 64 fiasco shattered the confidence of investors. However, in 2003, the government bifurcated the erstwhile UTI. One entity manages the assets of US 64 and some assured return schemes. The other is a regular mutual fund working under the Sebi regulations. Thanks to the boom in the stock market, UTI managed to clean up its act and continue to enjoy the confidence of several investors. The whole industry also came out of the controversy without any major setbacks.

Mutual Funds Operations flow chart;

Organizational Structure of Mutual Funds;

The above diagram gives an idea on the structure of an Indian mutual fund.

SPONSOR:
Any corporate body, which initiates the launching of a mutual fund, is referred to as the sponsor. Sponsor is basically a promoter of the fund. The agency, which is expected to have a sound track record and experience in the relevant field of financial services for a minimum period of 5 years, ensures complying with the various formalities required in establishing a mutual fund. According to SEBI norms, the sponsor should have professional competence, financial soundness and a general reputation for fairness and integrity in business transactions. There must be a minimum contribution by the sponsor to the tune of 40 per cent of the net worth of the Asset Management Company. Trustees benefit of unit holders. Trustees holds mutual fund property for the

TRUSTEES:
Persons who hold the property of the mutual fund in trust for the benefit of the unit holders are called trustees. Trustees look after the mutual fund, which is contributed as a trust under the provisions of the Indian Trust Act. For this purpose, a company is appointed as a trustee to manage the mutual fund with prior approval from SEBI. Two third of the trustees must be independent professionals who own the fund and supervises the activities of the AMC to ensure fair dealings.

ASSET MANAGEMENT COMPANY:

The investment manager of a mutual fund is technically known as the Asset Management Company (AMC) and is appointed by the sponsor or the trustees. The Asset Management Company manages the affairs of the mutual fund. It is responsible for operating all the schemes of the fund, and can act as the AMC of only one mutual fund. Only activities which are in the nature of management and advisory services to

10

offshore funds, pension funds, provident funds, and venture capital funds, management of insurance funds, financial consultancy and exchange of research on commercial basis can be undertaken by the AMC. With the permission of SEBI, it can also operate as an underwriter. It takes decisions on when and where to invest the money. It doesnt own the money. AMC is only a fee-for-service provider

CUSTODIAN:
An agency that keeps custody of the securities that are brought by the mutual fund managers under the various schemes is called the Custodians. Custodian ensures safe custody of the investments (related documents of securities invested). According to SEBI norms, the custodian who is so appointed should in no way be associated with the AMC and cannot act as sponsor or trustee to any mutual fund. A custodian should be a registered entity with SEBI. If the promoter holds 50% voting rights in the custodian company it cant be appointed as custodian for the fund.

TRANSFER AGENTS:
Transfer Agent Company interfaces with the customers, issue a funds units, help investors while redeeming units. Provides balance statements and fund performance fact sheets to the investors. CAMS is a leading Transfer Agent in India.

11

Advantages of Mutual Funds;

Portfolio Diversification
Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction Cost Safety of regulation environment Choice of schemes Transparency

Mutual funds are preferred for their cost-effectiveness and easy investment process. By investing all the money in a mutual fund, investors can buy stocks or bonds at lower trading charges. This is indeed one of the main benefits, which is not available otherwise. You don't need to see which stock or bond would be better to buy. Another advantage is diversification. Diversification stands for diffusing money across various different categories of investments. There is every possibility that when one investment is down, the other can be up. In simple terms, this is helpful in reducing risks. Transparency, flexibility, professional investment management, variety and liquidity are some of the other benefits of the mutual funds, which are not found in case of other investments to such an extent.

12

Disadvantages of Mutual Funds:

No Control over Cost in the hands of an investor No tailor-made portfolio Managing a portfolio funds Difficulty in selecting a Suitable Fund scheme Mutual Funds Have Hidden Fee Mutual Funds Lack Liquidity Mutual Funds Have High Sales Charges Poor Trade Execution High Capital Gains Distributions

13

Risks of investing in a mutual fund:

The biggest risk of investing in a mutual fund is one of underperformance. When an investor decides to invest in a particular asset class, he typically expects to get the return that the benchmark of the asset provides. For example, if someone is investing in large-cap equity stocks, he would expect to make at least as much return (with similar risk) as a benchmark index, say Sensex or Nifty. Mutual funds try to maximize the returns on the funds invested through them -- but all of the funds cannot succeed an outperforming each other or the benchmark. Hence, some of them under-perform the benchmark. Similarly, the cost of investing in a mutual fund (discussed below), eats in the returns. In high return years (like the last few years, where returns have been in the high 30% in equity, 2% costs may not make a material impact: however, at more moderate or negative returns, costs can be a big inch). The other risk with mutual funds is 'style drift.' If you invest in a large cap fund and it begins to invest in mid cap stocks, or if you invest in a long term debt fund but it starts to invest a greater proportion in cash instruments, you might not the type of risk-return reward that you have been expecting. Change of the fund manager can also introduce an element of risk into your portfolio. There is a wide debate as to whether investing is a science or an art: most authorities concede that it is a blend of the two. If so, the artist may contribute to the success of the returns. Hence, if you invest based on the ability of a fund manager who decides to move on, it presents you with a risk. Change of a fund manager can also cause style drift.

14

Costs of investing in a mutual fund:

Typically there are three types of charges in a mutual fund: entry load, asset management charges and exit loads. As the names suggest, these charges are applicable when you invest, while you are with the fund and when you exit the fund, respectively. You also get hit by the 'buy-sell spread.'

Entry load:
An entry load is the charge that the fund charges you for marketing and distributing the fund to you. This money is typically paid to your mutual fund broker. This can range from as low as 0.25% (or lower) in case of debt funds to as high as 2.25% in case of old equity funds. Typically, new equity funds require a lot more marketing and distribution effort and in order to compensate your broker for selling you a fund based only on promises, the entry load is higher (up to 5%). Now you may say that when you invested in the last new fund offering (NFO), you did not see an entry load. The Rs 1000 that you invested showed as 100 units of Rs 10 each -- how then was the entry load charged (or the broker compensated)? Well, the fund company creates a Contingent Deferred Sales Charge (CDSC) which is the total expenditure that the company has incurred in launching the NFO. It amortizes this amount daily over the course of 3 to 5 years (the lock-in period) which reduces the NAV slightly every day (but with such a miniscule amount that it is hardly noticeable!) Asset management charges: While the fund house manages your money, it needs to incur costs in research, brokerage, salaries of hiring the best talent for you, office rentals and overheads, etc. In order to recoup such costs, the fund house charges you a certain percentage of your assets as asset management expenses.

15

In equity funds, this typically ranges between 1.5% to 2% of the assets per year while in debt funds, it is typically lower than 0.5%. If you are investing for the long run, you will realize that a low cost fund (in its category) is the best choice for you. Incidentally, the lowest cost equity funds are 'index funds' which manage your assets passively by investing based on an index. While academic research and mutual fund industry veterans (for example, John Bogle) show that these funds perform better and at lower cost over the long run, these funds seem not to have caught the fancy of investors in India.

Exit loads:
Exit loads are loads that the mutual fund charges you when you leave the fund. Exit loads are charged by some funds on a reducing basis on time: hence the load decreases as time passes. This promotes a long term investment from the investor. Also, the fund may charge you an exit load to recover some of the charges of from you.

Buy-sell spread:
When you buy a fund, you will typically be invited to buy at a premium to the prevailing Net Asset Value (NAV) of the fund. Similarly, while selling some funds might require you to sell at prices below the NAV. Hence, you get hit on both the sides. This spread is limited by SEBI to 6%, but typically the range is much lower, indicating a mature market. When you buy a mutual fund, be careful: while these are great avenues of investment, you need to know the costs and the risks. Now that we have mastered them, we will look at the taxation aspects of the funds.

16

GROWTH IN ASSETS UNDER MANAGEMENT:The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

The Securities and Exchange Board of India (SEBI):

(Mutual Funds) REGULATIONS,1996 defines a mutual fund as a " fund establishment in the form of a trust to raise money through the 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 Funds have been a significant source of investment in both government and corporate securities. It has been for the decades the monopoly of the state with UTI being the key player with invested funds exceeding Rs. 300 bn. (US $ 10 bn.). The state owned insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds exist, including private and foreign companies. Banks - mainly state owned too have established Mutual Funds (MFs). Foreign participation in mutual funds and asset management companies permitted on a case-by-case basis.

Some of the AMCs operating currently are:

17

Name of the AMC

Nature ownership

of

Alliance Capital Asset Management (I) Private Limited Birla Sun Life Asset Management Company Limited Bank of Baroda Asset Management Company Limited Bank of India Asset Management Company Limited Can bank Investment Management Services Limited Cholamandalam Cazenove Asset Management Company Limited Dundee Asset Management Company Limited DSP Merrill Lynch Asset Management Company Limited Escorts Asset Management Limited First India Asset Management Limited GIC Asset Management Company Limited IDBI Investment Management Company Limited Indfund Management Limited ING Investment Asset Management Company Private Limited J M Capital Management Limited Jardine Fleming (I) Asset Management Limited Kotak Mahindra Asset Management Company Limited Kothari Pioneer Asset Management Company Limited Jeevan Bima Sahayog Asset Management Company Limited

Private foreign Private Indian Banks Banks Banks Private foreign

Private foreign Private foreign

Private Indian Private Indian Institutions Institutions Banks Private foreign

Private Indian Private foreign Private Indian Private Indian Institutions

Performance of Mutual Funds in India:

18

Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the preparedness of risks factor after the liberalization. The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There was rather no choice apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in the market, the investors disinvested by selling at a loss in the secondary market. The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value. The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and don'ts of mutual funds. 19

Recent trends in mutual fund industry:

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. Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way.The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

Tracking mutual funds performance:

20

Objective parameters: The NAV of the scheme will reflect the performance of the scheme. The fund will also give you returns for various periods such as one month, three months, six months, one year, three years, since inception, etc. This will give you an idea about the performance of the fund. Funds also provide comparison with relevant benchmarks. This should tell you whether the fund manager has performed better than the benchmark. However, financial experts believe that these returns do not give the complete picture. They believe that the return should be risk-adjusted. Various publications and Internet sites provide such returns. The computation is complicated and they use various formulas for this purpose. Subjective parameters: The performance alone does not make a fund house a winner. Equally important is the service standards and transparency in actions. It is also essential that the fund offer speedy solutions to grievances of investors. The reputation of the fund house among its investors and public at large indicates how well the fund scores on this front. Information sources: Every financial daily offers daily NAV of all mutual fund schemes. Magazines also come out with annual survey of mutual funds. There are even magazines dedicated entirely towards mutual fund industry. Internet is also a great place for information. There are dedicated sites as well as financial sites, which offer information on mutual funds. Association of Mutual Funds of India (AMFI) home page is also a great place for information.

Resolving grievances:

21

Mutual funds are regulated by SEBI (mutual fund) regulation 1996. Therefore, an investor always has the recourse to approach the watchdog. Various investor forums also take up the case of individual investors. You can also turn to judiciary as a last resort.

Glossary:
NAV: NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units. Sale price: The price you pay when you invest in a scheme. It is also called offer price. Repurchase price: The price at which a close-ended scheme repurchases its units. It is also called bid price. Redemption price: The price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. This price is NAV related. Entry load: The extra amount you pay when you invest in a scheme. It is also called front-end load or sales load. Exit load: Amount collected when you are selling or redeeming units.

Various Mutual Fund schemes and their implications & Types:

22

Mutual fund schemes are classified on the basis of its structure and investment objective.

By Structure
Open-ended funds: Investors can buy and sell units of open-ended funds at NAVrelated price every day. Open-end funds do not have a fixed maturity and it is available for subscription every day of the year. Open-end funds also offer liquidity to investments, as one can sell units whenever there is a need for money. Close-ended funds: These funds have a stipulated maturity period, which may vary from three to 15 years. They are open for subscription only during a specified period. Investors have the option of investing in the scheme during initial public offer period or buy or sell units of the scheme on the stock exchanges. Some close-ended funds repurchase the units at NAV-related prices periodically to provide an exit route to the investors. Interval Funds: These funds combine the features of both open and close-ended funds. They are open for sale and repurchase at a predetermined period.

By Investment objective
23

Growth funds: They normally invest most of their corpus in equities, as their objective is to provide capital appreciation over the medium-to-long term. Growth schemes are ideal for investors with risk appetite. Income funds: As the name suggests, the aim of these funds is to provide regular and steady income to investors. They generally invest their corpus in fixed income securities like bonds, corporate debentures, and government securities. Income funds are ideal for those looking for capital stability and regular income. Balanced funds: The objective of balanced funds is to provide growth along with regular income. They invest their corpus in both equities and fixed income securities as indicated in the offer documents. Balanced funds are ideal for those looking for income and moderate growth. Money market funds: These funds strive to provide easy liquidity, preservation of capital and modest income. MMFs generally invest the corpus in safer short-term instruments like treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes hinges on the interest rates prevailing in the market. MMFs are ideal for corporate and individual investors looking to park funds for short periods.

Other schemes

24

Tax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax rebates to investors under section 88 of the Income Tax Act. They generally have a lock-in period of three years. They are ideal for investors looking to exploit tax rebates as well as growth in investments. Special schemes: These schemes invest only in the industries specified in the offer document. Examples are Infotech funds, FMCG funds, pharma funds, etc. These schemes are meant for aggressive and well-informed investors. Index funds: Index Funds invest their corpus on the specified index such as BSE Sensex, NSE index, etc. as mentioned in the offer document. They try to mimic the composition of the index in their portfolio. Not only is the share, even their weightage replicated. Index funds are a passive investment strategy and the fund manager has a limited role to play here. The NAVs of these funds move along with the index they are trying to mimic save for a few points here and there. This difference is called tracking error. Sector specific schemes: These funds invest only specified sectors like an industry or a group of industries or various segments like A Group shares or initial public offerings.

Types of mutual funds:

25

Most funds have a particular strategy they focus on when investing. For instance, some invest only in Blue Chip companies that are more established and are relatively low risk. On the other hand, some focus on high-risk start up companies that have the potential for double and triple digit growth. Finding a mutual fund that fits your investment criteria and style is important. On the basis of their structure and objective, mutual funds can be classified into following major types: Closed-end funds A closed-end mutual fund has a set number of shares issued to the public through an initial public offering. Open-end funds Open end funds are operated by a mutual fund house which raises money from shareholders and invests in a group of assets Large cap funds Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in stocks of large blue chip companies Mid-cap funds Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there is no standard definition classifying companies Equity funds Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled amounts of money in the stocks of public companies. Equity funds Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds Growth funds Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks.

No load funds

26

Mutual funds can be classified into two types - Load mutual funds and No-Load mutual funds. Exchange traded funds Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an exchange, similar to a stock. Hence, unlike conventional mutual funds Value funds Value funds are those mutual funds that tend to focus on safety rather than growth, and often choose investments providing dividends as well as capital appreciation. Money market funds A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid. International mutual funds International mutual funds are those funds that invest in non-domestic securities markets throughout the world. Regional mutual funds Regional mutual fund is a mutual fund that confines itself to investments in securities from a specified geographical area, usually, the fund's local region. Sector funds Sector mutual funds are those mutual funds that restrict their investments to a particular segment or sector of the economy.

Why invest through a Mutual Fund:

27

Affordability: Mutual funds allow you to start with small investments. For example, if you want to buy a portfolio of blue chips of modest size, you should at least have a few lakhs of rupees. A mutual fund gives you the same portfolio for meagre investment of Rs 1,000-5,000. A mutual fund can do that because it collects money from many people and it has a large corpus. Professional management: The major advantage of investing in a mutual fund is that you get a professional money manager for a small fee. You can leave the investment decisions to him and only have to monitor the performance of the fund at regular intervals. Diversification: Considered the essential tool in risk management, mutual funds makes it possible for even small investors to diversify their portfolio. A mutual fund can effectively diversify its portfolio because of the large corpus. However, a small investor cannot have a well-diversified portfolio because it calls for large investment. For example, a modest portfolio of 10 blue-chip stocks calls for a few a few thousands. Convenience: Mutual funds offer tailor-made solutions like systematic investment plans and systematic withdrawal plans to investors, which is very convenient to investors. Investors also do not have to worry about the investment decisions or they do not have to deal with their brokerage or depository, etc. for buying or selling of securities. Mutual funds also offer specialized schemes like retirement plan, childrens plan, industry specific schemes, etc. to suit personal preference of investors. These schemes also help small investors with asset allocation of their corpus. It also saves a lot of paper work. Cost effectiveness: A small investor will find that a mutual fund route is a cost effective method. AMC fee is normally 2.5% and they also save a lot of transaction costs as they get concession from brokerages. Also, they get the service of a financial professional for a very small fee. If they were to seek a financial advisor's help directly, they may end up pay more. Also, the size of the corpus should be large to get the service of investment experts, who offer portfolio management. 28

Liquidity: You can liquidate your investments anytime you want. Most mutual funds dispatch checks for redemption proceeds within two or three working days. You also do not have to pay any penal interest in most cases. However, some schemes charge an exit load. Tax breaks: You do not have to pay any taxes on dividends issued by mutual funds. You also have the advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the added advantage of benefits under Section 88. Investments up to Rs 10,000 in them qualify for tax rebate. Transparency: Mutual funds offer daily NAVs of schemes, which help you to monitor your investments on a regular basis. They also send quarterly newsletters, which give details of the portfolio, performance of schemes against various benchmarks, etc. They are also well regulated and Sebi monitors their actions closely.

Selection parameters:

29

Your objective: The first point to note before investing in a fund is to find out whether your objective matches with the scheme. It is necessary, as any conflict would directly affect your prospective returns. For example, a scheme that invests heavily in mid-cap stocks is not suited for a conservative equity investor. He should be better off in a scheme, which invests mainly in blue chips. Similarly, you should pick schemes that meet your specific needs. Examples: pension plans, childrens plans, sector-specific schemes, etc. Your risk capacity and capability: this dictates the choice of schemes. Those with no risk tolerance should go for debt schemes, as they are relatively safer. Aggressive investors can go for equity investments. Investors that are even more aggressive can try schemes that invest in specific industry or sectors. Fund Managers and scheme track record: Since you are giving your hard earned money to someone to manage it, it is imperative that he manages it well. It is also essential that the fund house you choose has excellent track record. It also should be professional and maintain high transparency in operations. Look at the performance of the scheme against relevant market benchmarks and its competitors. Look at the performance of a longer period, as it will give you how the scheme fared in different market conditions. Cost factor: Though the AMC fee is regulated, you should look at the expense ratio of the fund before investing. This is because the money is deducted from your investments. A higher entry load or exit load also will eat into your returns. A higher expense ratio can be justified only by superlative returns. It is very crucial in a debt fund, as it will devour a few percentages from your modest returns.

List of Mutual Fund Companies in India:

30

Some of the popular firms that deal in mutual funds in India are:

Reliance Mutual Funds HDFC ABN Amro AIG Bank of Baroda Canara Bank Birla Sun Life DSP Merrill Lynch DBS Chola Mandalam AMC Escorts Mutual Deutsche Bank ING HSBC ICICI Prudential LIC JP Morgan Kotak Mahindra Lotus India JM Financial Morgan Stanley State Bank of India (SBI) Sahara Mutual Funds Sundaram BNP Paribas Taurus Mutual Funds Tata UTI

31

Best Mutual Funds in India:

Before knowing about the arguably best mutual funds in India, it is important to know the factors that actually decide their fate in the market. In order to get an actual ideal of the best performing mutual funds in the market, one needs to track its current Net Asset Value or NAV. NAV stands for the latest market value of the holdings of a fund that brings down the fund's liabilities, which are generally indicated in terms of per share amount. On a daily basis, most of the funds' NAV is decided. This is determined after the trade closes on certain financial exchanges. The net asset value of the mutual funds is ascertained at the end of the trading day. An increase in NAV signifies rise in the holdings of the shareholder. The Fund Firm will then do the transaction on the shares along with the sales fees. While open-ended net asset value of the mutual funds is issued daily, the close-ended NAV of the mutual fund is released on a weekly basis. You can calculate net asset value of the mutual fund easily. Track the latest market value of the net assets of the fund and then subtract that by the number of outstanding shares.

Top mutual funds in India :

Here are some of the top mutual funds in India that are listed below :

Fund Reliance Mutual Fund The DSP ML Tiger Fund SBI Magnum Contra Fund HDFC Equity Fund Prudential ICICI Dynamic Fund SBI Mutual

32

SCOPE FOR DEVELOPMENT OF MUTUAL FUND BUSINESS IN INDIA: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. India has a burgeoning population of middle class now estimated around 300 million. A typical Indian middle class family can have liquid savings ranging from Rs.2 to Rs.10 Lacs today. Investments in Banks are liquid and safe, but with the falling rate of interest offered by Banks on Deposits, it is no longer attractive. At best a part can be saved in bank deposits, but what are the other sources of investment for the common man? Mutual Fund is the ready answer. Viewed in this sense globally India is one of the best markets for Mutual Fund Business, so also for Insurance business. This is the reason that foreign companies compete with one another in setting up insurance and mutual fund business units in India. The sheer magnitude of the population of educated white collar employees provides unlimited scope for development of Mutual Fund Business in India. The alternative to mutual fund is direct investment by the investor in equities and bonds or corporate deposits. All investments whether in shares, debentures or deposits involve risk. While risk cannot be eliminated, skillful management can minimize risk. Mutual Funds help to reduce risk through diversification and professional management. The experience and expertise of Mutual Fund managers in selecting fundamentally sound securities and timing their purchases and sales help them to build a diversified portfolio that minimizes risk and maximizes returns.

ROLE OF SEBI IN MUTUAL FUNDS:

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either promoted by public or by private sector entities including one promoted by foreign entities are governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the 33

securities of various schemes of the fund in its custody. The general power of superintendence and direction over AMC is vested with the trustees.

According to SEBI Regulations, two thirds of the directors of trustee company or board of trustees must be independent . They should not be associated with the sponsors. 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme.

Increase of load more than the level mentioned in the offer document is applicable only to prospective investments by the MFs. For original investments, the offer documents has to be amended to make investors aware of loads at the time of investments.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):

With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.

34

The objectives of Association of Mutual Funds in India:

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows:

This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.

The sponsors of Association of Mutual Funds in India: Bank Sponsors

SBI Fund

Management Ltd. Management Co. Ltd.

BOB Asset Canbank

Investment Management Services Ltd. Management Company Pvt. Ltd.

UTI Asset

Institutions
GIC

Asset Management Co. Ltd. Bima Sahayog Asset Management Co. Ltd.

Jeevan

35

Private Sector Indian:

BenchMark

Asset Management Co. Pvt. Ltd. Asset Management Co. Ltd.

Cholamandalam Credit

Capital Asset Management Co. Ltd. Asset Management Ltd.

Escorts JM

Financial Mutual Fund

Predominantly India Joint Ventures:

Birla DSP

Sun Life Asset Management Co. Ltd. Merrill Lynch Fund Managers Limited Asset Management Company Ltd.

HDFC

Predominantly Foreign Joint Ventures:

ABN

AMRO Asset Management (I) Ltd. Asset Management (India) Pvt. Ltd.

Alliance Capital Deutsche Asset Fidelity Fund Franklin HSBC ING

Management (India) Pvt. Ltd.

Management Private Limited

Templeton Asset Mgmt. (India) Pvt. Ltd.

Asset Management (India) Private Ltd.

Investment Management (India) Pvt. Ltd. Stanley Investment Management Pvt. Ltd.

Morgan

36

MUTUAL FUND INDUSTRY SNAPSHOT MARCH 2010: Mutual fund AMU down in March:
In spite of the risk in sensex in the month of March the average assets Under Management of the Mutual Fund industry fell by 4.37%. The main reason behind the fall was pulling out of money by Banks and Corporate to meet their liquidity requirements for advance tax payments and other requirements at the end of the fiscal year. The MF Industry AAUM for the Month of March 10 stood at Rs.747525 crs, compared to Rs.781711Crs, in Feb 2010. Huge outflows in Income funds were also a main reason for fall in industry AAUM. The fall in the month of March AAUM is a general trend observed during the end every fiscal where banks and corporate have increased liquidity requirements. AUM Movement-Month on Month Analysis: The increase in AAUM witnesses in the previous month could not be sustained in the month of March and the industry assets fell by 4.37%, as corporate and Banks withdrew2 money mainly from Income Schemes. Out of the 5 largest Fund houses in terms of AUM, only 2 witnessed an increase while the rest saw a fall in their AUM The three largest fund houses Reliance MF, HDFC MF and Birla MF had a fall of 4.61%, 6.70% and 6% respectively in their AAUM in March. Highest increase in AUM was witnessed by Edelweiss MF, DSP Blackrock MF and Quantum MF to the extent of 30%, *% and 5.5% respectively. The highest decrease was seen by JP Morgan MF, AIG Global Investment Group MF to the extent of 24% and 22% respectively.

37

MF and FII Activities: MFs were net sellers in both equity market and bebt market to the extent of Rs,4082Crs. And Rs.9349Crs. respectively for the month ended March 10. FIIs were net buyers in the equity as well debt markets to the extent of Rs. !804crs. & Rs. 9432crs respectively.

38

Top

10

Mutual

Funds

March

2010

Net Flows in Mutual Funds:

In the month of March the MF industry witnessed huge net outflows to the extent Rs. 162165 crs, with income funds witnessing the highest outflows. Net Flows were positive in the month of Feb 2010. The outflow was owing to pulling out of money by Banks and corporate for liquidity requirements. The highest net outflows were witnessed in Income schemes to the extent of Rs. 164487crs. Second in line were equity schemes witnessing redemptions to the extent of Rs.2016crs. Liquid and Money Market schemes has a net inflow of Rs. 3971crs

39

40

Chapter-II

Research problem & Objectives of the study

41

RESEARCH PROBLEM:
To know what is a Mutual Fund. What are the various schemes available in mutual fund? How a lay investor can measure the performance of the fund before investing in any mutual
fund.

OBJECTIVE OF THE STUDY:

Main objective of the project is to find out the strategies of different E-Broking firms and evaluate them. Project is about to penetrate the competitors of NIRMAL BANG SECURITES LTD. Conclusion of this project can give an idea of strategies of different companies which may
Understand the concept of financial performance. Understand the ways through which we can calculate the financial performance To analyse existing financial performance of Angel broking ltd and difficulties involved in it. To evaluate the performance of 3 different equity schemes based on BETA and rate of return. To compare the NAV trend of the funds to that of the NSE Nifty.

42

NEED OF THE STUDY

To know the effective utilization of the financial performance in the company. To know how management makes use of various financial techniques,, for administering the financial affairs of the firm in the most effective and efficient way. Therefore it means that entire guaranty of managerial efforts devoted to the management of finance.

LIMITATION:
The study is limited to 3 equity schemes of mutual funds. Only one month NAV is taken into consideration to evaluate the performance of equity schemes. There may be scope for committing statistical errors. The schemes that are more than 1 years old have been considered for evaluation. Only open-ended funds are considered for evaluation. Among growth and dividend schemes, only growth schemes have been taken so as to avoid repetition (as portfolio remains identical for both the options).

ASSUMPTIONS: NSE Nifty is taken as benchmark. Risk free rate is assumed to be 7%.

43

Chapter-III

Research design Research methodology & Data collection

44

RESEARCH DESIGN:
Three mutual funds are chosen, their risk, return and performance is calculated and analysis is made.

RESEARCH METHODOLOGY:
The collection method includes both the primary and secondary collection methods. Primary data methods: This method includes the data collection from the personal discussion with the authorities clerks and members of the exchange. Secondary data: This method includes the lectures of the superintend of the

department of market operations and so on.., also the data collected from the news, magazines and newspapers. Data collection: The present study is based on Secondary data. The various source of secondary data include Share prices of different BSE Sensex companies. Information provided by ANGEL BROKING LTD. Magazines Websites nseindia.com investopedia.com angelbroking.com mutualfundsindia.com hdfcfund.com moneycontrol.com

45

Chapter-IV

Literature review

46

4 Common Mistakes Made by Mutual Fund Investors

1) Believing Distorted Performance Comparisons Wall Street enjoys having the performance of its investment funds compared to inaccurate yardsticks. Not only does it help to distort true performance but it gives funds an artificial look of superiority. Take recent analysis by Bloomberg, which concluded that only 2 of the 10 largest mutual funds in the U.S. are beating their primary benchmarks this year. (through early June 2010). It shows how even large media enterprises can be misled by true fund performance. One of the funds Bloomberg analyzed is the Fidelity Contra fund whose performance was compared to the S&P 500, a large cap U.S. stock yardstick. Only problem is, FCNTX, a so-called domestic equity fund, had around 16% of its assets invested in international stocks at the end of April. The only way to fairly compare FCNTX's true performance would be to use a blended benchmark of indexes that accurately replicate the fund's asset mix over the same time period. Because Wall Street uses misleading yardsticks of performance, such as peer group comparisons, incongruent indexes and other minutia, the public is misled. Here's the bottom line: The fund industry and analysts should be forced by the Securities and Exchange Commission to use blended benchmarks for an accurate measure of the performance for their funds. And furthermore, the Inspector Closeouts running the SEC should've long ago had rules in place to enforce this.

47

2) Buying into Mutual Fund Ratings Many people have the misinformed view that selecting mutual funds with the best performance, the most stars or the highest rating is the surest way to get ahead. But the facts say otherwise. A gander at the marketing practices of the mutual fund industry are a good lesson in caveat emptor. Magazine covers and advertisements touting hot performing mutual funds with top rankings are everywhere. Unfortunately, these ads prey on unsuspecting buyers by giving them the false impression that top performing funds will consistently repeat their former success. 'Star ratings have little predictive value,' states John Boggle, in Common Sense on Mutual Funds (John Wiley & Sons 2010). Put another way, fund ratings are an effective sales and marketing tool but not an effective research tool. Similarly, a research piece by Advisor Perspectives analyzed fund ratings and arrived at a similar conclusion. 'We concur that (mutual fund) ratings are not an effective forwardlooking measure, but that is not how they are used in the industry,' states the report's author Robert Huebscher. The report also suggested that mutual fund ratings should be renamed 'Historical Performance Measures' or something similar. This would help investors to avoid confusing fund ratings as forward looking benchmarks of performance. Instead of analyzing historical performance, fund investors should be paying attention to costs, tax-efficiency and making sure the funds they choose compliment their investment goals.

48

3) Implicit Faith in Fund Managers Despite experiencing the worst stock market drop since the Great Depression in 2008 and a 'lost decade' of subpar performance, surely mutual fund managers have helped their investors to get ahead, right? After evaluating 2008's bear market performance, Dalbar reported in its Quantitative Analysis of Investor Behavior that in 2008 stock fund investors lost 41.6% compared to the 37.7% loss for the S&P 500 Index. Why are these findings significant and what do they prove? Since the S&P 500 (NYSEArca:) is a fully invested index, with no cash or bonds, it theoretically should've underperformed compared to actively managed funds designed to beat it. But it didn't. This contradicts one of the famous sales pitches given for buying actively managed funds that attempt to beat benchmarks like the S&P 500, which is that portfolio managers can protect their shareholders during a bear market by going into cash, whereas an index fund or index ETF cannot. Instead of proving that, it proves something quite different. The fact that stock fund investors performed worse than a fully invested benchmark like the S&P 500, shows 1) portfolio managers are ineffective market timers, 2) portfolio managers have done a good job of not protecting shareholder's capital and 3) protection during bear markets from portfolio managers is largely a myth. If you're a mutual fund investor that believes your fund manager can protect you from the next big crisis or whatever, it's probably time to re-think your blind faith.

49

4) Ignoring Taxes People invest in mutual funds as if taxes don't matter. And the results have been disastrous. A 2010 Lipper study found that buy-and-hold investors with stock mutual funds in a taxable account surrendered between 1.13% to 2.13% of their annual returns over the past 10 years. If that doesn't sound like a lot, just remember it does not include the additional burden of annual fund expenses, sales charges, and internal brokerage trading costs. Added up all together, the annualized performance drag could be anywhere from 3 to 6 percent. Lipper states, 'Fund families and their boards should place more importance on serving the taxable investor by stressing after-tax performance and by providing improved compensation packages rewarding tax efficient behavior at the fund level.'

50

5 Ways to Measure Mutual Fund Risk

By Richard Lath

There are five main indicators of investment risk that apply to the analysis of stocks, bonds and mutual fund portfolios. They are alpha, beta, r-squared, standard deviation and the Sharpe ratio. These statistical measures are historical predictors of investment risk/volatility and are all major components of modern portfolio theory (MPT). The MPT is a standard financial and academic methodology used for assessing the performance of equity, fixed-income and mutual fund investments by comparing them to market benchmarks. All of these risk measurements are intended to help investors determine the risk-reward parameters of their investments. In this article, we'll give a brief explanation of each of these commonly used indicators.

1. Alpha Alpha is a measure of an investment's performance on a risk-adjusted basis. It takes the volatility (price risk) of a security or fund portfolio and compares its risk-adjusted performance to a benchmark index. The excess return of the investment relative to the return of the benchmark index is its "alpha".

Simply stated, alpha is often considered to represent the value that a portfolio manager adds or subtracts from a fund portfolio's return. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. For investors, the more positive an alpha is, the better it is.

51

2. Beta Beta, also known as the "beta coefficient," is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is calculated using regression analysis, and you can think of it as the tendency of an investment's return to respond to swings in the market. By definition, the market has a beta of 1.0. Individual security and portfolio values are measured according to how they deviate from the market.

A beta of 1.0 indicates that the investment's price will move in lock-step with the market. A beta of less than 1.0 indicates that the investment will be less volatile than the market, and, correspondingly, a beta of more than 1.0 indicates that the investment's price will be more volatile than the market. For example, if a fund portfolio's beta is 1.2, it's theoretically 20% more volatile than the market.

Conservative investors looking to preserve capital should focus on securities and fund portfolios with low betas, whereas those investors willing to take on more risk in search of higher returns should look for high beta investments.

3. R-Squared R-Squared is a statistical measure that represents the percentage of a fund portfolio's or security's movements that can be explained by movements in a benchmark index. For fixed-income securities and their corresponding mutual funds, the benchmark is the U.S. Treasury Bill and, likewise with equities and equity funds, the benchmark is the S&P 500 Index.

R-squared values range from 0 to 100. According to Morningstar, a mutual fund with an R-squared value between 85 and 100 has a performance record that is closely correlated to the index. A fund rated 70 or less would not perform like the index.

52

Mutual fund investors should avoid actively managed funds with high R-squared ratios, which are generally criticized by analysts as being "closet" index funds. In these cases, why pay the higher fees for so-called professional management when you can get the same or better results from an index fund?

4. Standard Deviation Standard deviation measures the dispersion of data from its mean. In plain English, the more that data is spread apart, the higher the difference is from the norm. In finance, standard deviation is applied to the annual rate of return of an investment to measure its volatility (risk). A volatile stock would have a high standard deviation. With mutual funds, the standard deviation tells us how much the return on a fund is deviating from the expected returns based on its historical performance.

5. Sharpe Ratio Developed by Nobel laureate economist William Sharpe, this ratio measures riskadjusted performance. It is calculated by subtracting the risk-free rate of return (U.S. Treasury Bond) from the rate of return for an investment and dividing the result by the investment's standard deviation of its return.

The Sharpe ratio tells investors whether an investment's returns are due to smart investment decisions or the result of excess risk. This measurement is very useful because although one portfolio or security can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater an investment's Sharpe ratio, the better its risk-adjusted performance.

53

Conclusion Many investors tend to focus exclusively on investment return, with little concern for investment risk. The five risk measures we have just discussed can provide some balance to the risk-return equation. The good news for investors is that these indicators are calculated for them and are available on several financial websites, as well as being incorporated into many investment research reports. As useful as these measurements are, keep in mind that when considering a stock, bond, or mutual fund investment, volatility risk is just one of the factors you should be considering that can affect the quality of an investment.

54

Chapter-V

55

COMPANY PROFILE

56

ABOUT NIRMAL BANG

INTRODUCTION:Nirmal Bang Group is one of the largest retail broking house in India, providing the investors state of art services in capital markets in the country. The Group has memberships of Bombay Exchange Limited, National Stock of India Limited, Multi Commodity Exchange of India Limited, National Commodity and Derivatives Exchange Limited and is also a depository participant of NSDL and CDS (I) L, the depositories of the country. They started in 1986 under Late Shri Nirmal Bang as sub brokers but have grown steadily and progressively since then. Their clients had contributed tremendously to their growth they recognize and applaud that, they value their relationship with the customers and for their convenience had all investing avenues under one roof.

NIRMAL BANG consultant

As the flagship company of the NIRMAL BANG Group, NIRMAL BANG Private Limited has always remained at the helm of organizational affairs, pioneering business policies, work ethic and channels of progress. NIRMAL BANG believe that they were best positioned to venture into that activity as a Depository Participant. They were one of the early entrants registered as Depository Participant with NSDL (National Securities Depository Limited), the first Depository in the country and then with CDSL (Central Depository Services Limited). Today, It service over 1Lac customer accounts in this business spread across over 350 cities/towns in India and are ranked amongst the largest Depository Participants in the country. With a growing secondary market presence.

57

It has transferred this business to NIRMAL BANG SECURITIES PRIVATE LIMITED (NBSPL), their associate and a member of NSE, BSE, MCX & NCDEX.

NIRMAL BANG --- Early Days

The birth of NIRMAL BANG was on a modest scale in 1986. It began with the vision and enterprise of a small group of practicing Chartered Accountants who founded the flagship company. NIRMAL BANG Securities Private Limited. It started with consulting and financial accounting automation, and carved inroads. Since then, They have utilized their experience and superlative expertise to go from strength to strengthto better their services, to provide new ones, to innovate, diversify and in the process, evolved NIRMAL BANG as one of Indias premier integrated financial service enterprise. Thus over the last 20 years NIRMAL BANG has traveled the success route, towards building a reputation as an integrated financial services provider, offering a wide spectrum of services. And they have made this journey by taking the route of quality service, path breaking innovations in service, versatility in service and finally totality in service. Their highly qualified manpower, cutting-edge technology, comprehensive infrastructure and total customer-focus has secured for them the position of an emerging financial services giant enjoying the confidence and support of an enviable clientele across diverse fields in the financial world. Their values and vision of attaining total competence in their servicing has served as the building block for creating a great financial enterprise, which stands solid on their fortresses of financial strength - their various companies.

58

With the experience of years of holistic financial servicing behind them and years of complete expertise in the industry to look forward to, They have now emerged as a premier integrated financial services provider. And today, they can look with pride at the fruits of their mastery and experience comprehensive financial services that are competently segregated to service and manage a diverse range of customer requirements.

Business Focus:The focus of the business is the Customer Customer service, Customer education, Customer support, Customer relations and last but not the least Customer acquisition. Trade execution transparency, timely settlements, risk monitoring and superior service shall have topmost priority, in the best interests of all concerned.

VISION STATEMENT TO CREATE VALUABLE RELATIONSHIP AND PROVIDE THE BEST FINANCIAL SERVICES MOST PROFESSIONALLY

MISSION STATEMENT
TO WORK TOGETHER WITH INTEGRITY & MAKE OUR CUSTOMER FEEL VALUED

59

CORE VALUE
RESPECT OUR COLLEAGUE AND THE BUSINESS ITSELF

60

Board of Directors Of NIRMAL BANG GROUP

NAME
Mr. Dilip M. Bang Director

POSITION

Mr. Kishor M. Bang

Director

Mr.Rakesh Bhandari Mr. Deepak Agarval Mr.Suvinay Sharma Mr.Naresh Samdani Mr. Deepak Patel Mr. Sunil Jain Mr.Anup Agarval Mr.Brijmohan Bohra Miss. Monika Bafna Mr.Brijmohan Bohra

Chartered Accountant Chartered Accountant Chartered Accountant Chartered Accountant Chartered Accountant Chartered Accountant Chartered Accountant Chartered Accountant Chartered Accountant Company Secretarial

61

Principal Activities Of NIRMAL BANG GROUP

NIRMAL BANG Securities Private Limited

Member : National Stock Exchange of India Limited Member : Bombay Stock Exchange Limited Participant : National Securities Depository Limited Participant : Central Depository Service (India) Limited

NIRMAL BANG Commodities Private Limited

Member - Multi Commodity Exchange of India Limited Member - National Commodities and Derivatives Exchange Ltd.

BANG Equity Broking Private Limited

Member - Bombay Stock Exchange Ltd

Nadi Finance & Investment Private Limited

RBI registered Non Banking Finance Company

Publications of NIRMAL BANG

62

 NIRMAL BANG- Beyond Market

NIRMAL BANG Profile REGISTERED OFFICE

"NIRMAL BANG HOUSE" 38, Khatau Building, 2nd Floor, Alkesh Dinesh Modi Marg, Fort, Mumbai - 400 001, Maharashtra, India. Tel : +91-2264-1234 Fax : +91-3027-2006

SURAT Branch

Shop no. G4, ITC Building, Majura Gate, Surat. Ph. 9376126075 Email: surat@nirmalbang.com

63

64

Organization Chart:Nirmal Bang

Branch

Franchise

Web Dealer

Sales Executive Customer Care Receptionist

Sales Coordinator

Account Head

65

Chapter-VI
Data analysis And Interpretation

66

MAGNUM EQUITY FUND

SCHEME AND PLAN NAME

Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth Magnum Equity Fund- Growth

DATE
30-01-2010 27-02-2010 31-03-2010 28-04-2010 28-05-2010 30-06-2010 31-07-2010 31-08-2010 29-09-2010 30-10-2010 30-11-2010 31-12-2010

NAV(X) X-Xbar
19.98 18.94 20.49 23.32 30.9 31.25 34.03 34.61 36.04 35.17 37.35 38.81 360.89 -10.09 -11.13 -9.58 -6.75 0.83 1.18 3.96 4.54 5.97 5.1 7.28 8.74

X-Xbar2
101.81 123.87 91.77 45.56 0.69 1.39 15.68 20.61 35.64 26.01 52.99 76.39 592.41

Calculation of Mean

= 360.89 12 = 30.07

67

Calculation of Standard Deviation:-

means 'standard deviation'. means 'the sum of'. means 'the mean' = 7.02

Sharpe index ratio:-

Sp =Rp Rf p
= 30.07 - 0.07 7.02 Sp = 4.27

68

Calculation of beta:R Record Date 30-01-2010 27-02-2010 31-03-2010 28-04-2010 28-05-2010 30-06-2010 31-07-2010 31-08-2010 29-09-2010 30-10-2010 30-11-2010 31-12-2010 NAV (X) 19.98 18.94 20.49 23.32 30.9 31.25 34.03 34.61 36.04 35.17 37.35 38.81 360.8 9
P1-P0 x100 P0

r=(R R) R=6.06 0 -11.26 2.12 7.75 26.44 -4.93 2.83 -4.45 -1.93 -8.47 0.13 -2.15 6.08

r2

Index

M
P1-P0x100 P0

m=Mrm M m= 5.48 0 -9.34 3.83 5.82 26.83 -9.03 2.57 -4.93 1.91 -11.37 1.33 -2.14 5.48 0 105.16 8.12 45.10 709.38 44.51 7.27 21.93 -3.68 96.30 0,17 4.60 1038.86

r2 m

0 -5.20 8.18 13.81 32.50 1.13 8.89 1.61 4.13 -2.41 6.19 3.91 72.74

0 126.78 4.49 60.06 699.07 24.30 8.01 19.80 3.72 71.74 0.01 4.62

2874.80 2763.65 3020.95 3362.35 4448.95 4291.10 4636.45 4662.10 5006.85 4711.70 5032.70 5201.05 50012.65

0 -3.86 9.31 11.30 32.31 -3.55 8.05 0.55 7.39 -5.89 6.81 3.34 65.76

0 -1184.12 17.19 349.55 18756.05 -219.43 20.58 -97.61 7.10 -815.68 0.01 -9.88 16823.76

Beta = [Nrm] [r * m] Nr2m - m

N=12 rm = 1038.86 r = 6.08 m = 5.48 r2m = 16823.76 Substituting the above values in the formula, we get Beta = [12*1038.86] [6.08*5.48] [12*16823.76] [5.48] = 12466.32 33.32 201885.12 5.48 = 12433 201879.64 Beta = 0.06

69

TREYNOR PORTFOLIO PERFORMANCE MEASURE:Tp = Rp Rf

Rp = return on portfolio Rf = risk free rate = beta

Rp = 30.07 Rf= 7% or 0.07 = 0.06

substituting the above values in the formula

Tp = Rp Rf
= 30.07 0.07 0.06 Tp = 500

JENSEN PORTFOLIO PERFORMANCE MEASURE:Rp= rf + (m-rf)

Rf = risk free rate = beta m = market rate of return on portfolio

Rf = 0.07
70

 = 0.06
m = 26.6 Substituting the above values in the formula, we get

Rp

= 0.07 + 0.06(26.6 - 0.07)

= 0.07 + 0.06(26.53)

= 0.07 +1.59

Rp = 1.66

500 500 450 400 350 300 250 200 150 100 50 0

4.27 Sharpe Treynor

1.66 Jenson

71

HDFC EQUITY FUND

SCHEME AND PLAN NAME DATE

HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth HDFC Equity Fund- Growth 30-01-2010 27-02-2010 31-02-2010 29-04-2010 28-05-2010 30-06-2010 31-07-2010 31-08-2010 30-09-2010 30-10-2010 30-11-2010 31-12-2010

NAV
103.75 98.16 108.85 127.09 169.89 172.87 187.63 193.00 211.82 209.02 224.13 231.01 2037.22

X-Xbar X-Xbar2
-66.01 -71.6 -60.91 -42.67 0.13 3.11 17.87 23.24 42.06 39.26 54.37 61.25 4357.32 5126.56 3710.03 1820.73 0.01 9.67 319.33 540.09 1769.04 1541.34 2956.09 3751.56

25901.77

Calculation of Mean

= 2037.22 72

12 = 169.76

Calculation of Standard Deviation:-

means 'standard deviation'. means 'the sum of'. means 'the mean' = 46.46

Sharpe index ratio:-

Sp =Rp Rf p
= 169.76 - 0.07 46.46 = 3.65

73

culation of beta:r=(R - R) P1-P0 x100 R=7.31 R Record Date 30-01-2010 27-02-2010 NAV(X ) 103.75 0 98.16 -5.38
P0

r2

Index

M
P1-P0x100 P0

0 -12.69

0 161.0 3 12.81 89.11 694.8 5 30.91 1.51 19.80 5.95 74.47 0.00 18.06 1108. 5

2874.80 2763.65

0 -3.86

m=MM m= 5.48 0 -9.34

rm

r2 m

0 118.52

31-02-2010 29-04-2010 28-05-2010 30-06-2010 31-07-2010 31-08-2010 30-09-2010 30-10-2010 30-11-2010 31-12-2010

108.85 127.09 169.89 172.87 187.63 193.00 211.82 209.02

10.89 16.75 33.67 1.75 8.54 2.86 9.75 -1.32

3.58 9.44 26.36 -5.56 1.23 -4.45 2.44 -8.63 -0.08 -4.25 7.39

3020.95 3362.35 4448.95 4291.10 4636.45 4662.10 5006.85 4711.70 5032.70 5201.05 50012.6 5

9.31 11.30 32.31 -3.55 8.05 0.55 7.39 -5.89 6.81 3.34 65.76

3.83 5.82 26.83 -9.03 2.57 -4.93 1.91 -11.37 1.33 -2.14 5.48

13.71 54.94 707.24 50.20 3.16 21.94 4.66 98.12 -0.10 9.09 1081.4 8

0 1504.0 2 49.06 518.62

18642. 83 279.13 3.88 -97.61 11.36 846.72

224.13 7.23 231.01 3.06 2037.22 87.8

0
-38.65

16459. 62

Beta = [Nrm] [r * m] Nr2m - m

N=12 rm = 1081.48 r = 7.39 m = 5.48 r2m = 16459.62

74

Substituting the above values in the formula, we get Beta = [12*1081.48] [7.39 * 5.48] [12*16459.62] [5.48] = 12977.76 40.49 197515.44 5.48 = 12937.27 197509.96 Beta = 0.06

75

TREYNOR PORTFOLIO PERFORMANCE MEASURE:Tp = Rp Rf

Rp = return on portfolio Rf = risk free rate = beta

Rp = 169.76 Rf= 7% or 0.07 = 0.06

substituting the above values in the formula

Tp = Rp Rf
= 169.76 0.07 0.06 Tp = 2828.16

JENSEN PORTFOLIO PERFORMANCE MEASURE:Rp= rf + (m-rf)

Rf = risk free rate = beta m = market rate of return on portfolio

Rf = 0.07 = 0.06
76

m = 45.2 Substituting the above values in the formula, we get

Rp

= 0.07 + 0.06(45.2 - 0.07)

= 0.07 + 0.06(45.13)

= 0.07 +2.70 Rp = 2.77

2828.16 3000 2500 2000 1500 1000 500 0 1 2 3 3.65 2.77

77

UTI EQUITY FUND

SCHEME AND PLAN NAME DATE

UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth UTI Equity Fund- Growth 30-01-2010 27-02-2010 31-03-2010 29-04-2010 29-05-2010 30-06-2010 31-07-2010 31-08-2010 30-09-2010 29-10-2010 30-11-2010 31-12-2010

NAV X-Xbar X-Xbar2

26.66 24.82 26.47 29.30 35.79 35.92 40.22 41.45 45.05 43.94 47.06 48.68 445.36 -10.45 -12.29 -10.64 -7.81 -1.32 -1.19 3.11 4.34 7.94 6.83 9.95 11.57 109.20 151.04 113.21 60.99 1.74 1.41 9.67 18.83 63.04 46.65 99 133.86 808.64

Calculation of Mean

= 445.36 12 = 37.11

78

Calculation of Standard Deviation:-

means 'standard deviation'. means 'the sum of'. means 'the mean' = 67.38

Sharpe index ratio:-

Sp =Rp Rf p
= 37.11 - 0.07 67.38 = 0.55

79

Calculation of beta:NA V( X) 26. 66 24. 82 26. 47 29. 30 35. 79 35. 92 40. 22 41. 45 45. 05 43. 94 47. 06 48. 68 445 .36 R
P1-P0 x100 P0

r=(R - R) R=5.39 0 -12.29 1.25 5.3 16.76 -5.03 6.58 -2.33 3.29 -7.85 1.71 -1.95 5.44

r2

Index

M
P1P0x100 P0

m=M-M m= 5.48 0 -9.34 3.83 5.82 26.83 -9.03 2.57 -4.93 1.91 -11.37 1.33 -2.14 5.48

rm

r2 m

Record Date 30-01-2010 27-02-2010 31-03-2010 29-04-2010 29-05-2010 30-06-2010 31-07-2010 31-08-2010 30-09-2010 29-10-2010 30-11-2010 31-12-2010

0 -6.90 6.64 10.69 22.15 0.36 11.97 3.06 8.68 -2.46 7.10 3.44 64.73

2874.80

0 -3.86 9.31 11.30 32.31 -3.55 8.05 0.55 7.39 -5.89 6.81 3.34

0 114.79 4.78 30.84 449.67 45.42 16.91 11.48 6.28 89.25 2.27 4.17 775.86

0 1410.71 5.97 163.48 7536.28 -228.46 111.25 -26.77 20.66 -700.62 3.88 -8.13 5466.83

151.04 2763.65 1.56 28.09 3020.95 3362.35

280.89 4448.95 25.3 43.29 5.43 10.82 61.62 2.92 3.80 4291.10 4636.45 4662.10 5006.85 4711.70 5032.70 5201.05

614.76 50012.65 65.76

Beta = [Nrm] [r * m] Nr2m - m

N=12 rm = 775.86 r = 5.44 m = 5.48 r2m = 5466.83

Substituting the above values in the formula, we get 80

Beta = [12*775.86] [5.44 * 5.48] [12*5466.83] [5.48] = 9310.32 29.81 65601.96 5.48 = 9280.51 65596.48 Beta = 0.14

TREYNOR PORTFOLIO PERFORMANCE MEASURE:Tp = Rp Rf

Rp = return on portfolio Rf = risk free rate = beta

Rp = 37.11 Rf= 7% or 0.07 = 0.14

substituting the above values in the formula

Tp = Rp Rf
= 37.11 0.07 0.14 Tp = 264.57

JENSEN PORTFOLIO PERFORMANCE MEASURE:-

81

Rp= rf + (m-rf)
Rf = risk free rate = beta m = market rate of return on portfolio

Rf = 0.07 = 0.14 m = 28.2 Substituting the above values in the formula, we get Rp = 0.07 + 0.14(28.2 - 0.07)

= 0.07 + 0.14(28.13)

= 0.07 +3.94 Rp = 4.01

300 250 200 150 100 50 0 Sharpe 0.55

264.57

4.01 Treynor Series1 Jensen

Chapter-VII
82

Findings/suggestions/summary

SHARPE INDEX RATIO:

83

Name of the scheme

1. Magnum Equity Fund 2. HDFC Equity Fund 3. UTI Equity Fund

Performance
4.27 3.65 0.55

Ranks I II III

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

4.27 3.65

0.55

Magnum Equity Fund

HDFC Equity Fund

UTI Equity Fund

According to the Sharpe index ratio among the above three mutual funds Magnum Equity Fund got first rank because its performance will be as 4.27, And HDFC Equity Fund placed in second rank with performance of 3.65 Finally the UTI Equity Fund stands in last place with the performance 0.55 and got last rank

TREYNOR PORTFOLIO PERFORMANCE MEASURE:84

Name of the scheme

1. Magnum Equity Fund 2. HDFC Equity Fund 3. UTI Equity Fund

Performance
500 2828.16 264.17

Ranks II I III

2828.16 3000 2500 2000 1500 1000 500 0 Magnum Equity Fund HDFC Equity Fund UTI Equity Fund 500 264.17

According to Treynor Portfolio performance Measure among the above three mutual funds HDFC Equity Fund placed on first rank because its performance will be as 2828.16.

And Magnum Equity Fund got second rank with performance of 500, Finally the UTI Equity Fund stands in last place with low performance that is 264.17 and got last rank

JENSEN PORTFOLIO PERFORMANCE MEASURE:-

85

Name of the scheme

1. Magnum Equity Fund 2. HDFC Equity Fund 3. UTI Equity Fund

Performance
1.66 2.77 4.01

Ranks III II I

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Magnum Equity Fund HDFC Equity Fund 1.66 2.77

4.01

UTI Equity Fund

In JENSEN PORTFOLIO PERFORMANCE MEASURE among the above three mutual funds UTI Equity Fund placed on first with the performance of 4.01, And HDFC Equity Fund got second rank with performance of 2.77, Finally the Magnum Equity Fund stands in last place with low performance that is 1.66 and got last rank.

Magnum Equity Fund:

86

If we see the trends of magnum equity fund, it has a constant growth rate. In the start of the year i.e, 31-01-2010 the NAV is around 19.98 where as at the end of the year i.e, 31-12-2010 it has reached upto 38.81. It has increased in all the months except in the months February and October.

UTI Equity Fund:

It we see the trends of UTI Equity Fund, it has some ups and downs in the trends. In the start of the year i.e, 31-01-2010 the NAV is around 26.66 where as at the end of the year i.e, 31-12-2010 it has reached upto 48.68. It has increased in all the months except in the months February and October.

HDFC Equity Fund:

If we see the trends of HDFC Equity Fund, it has a constant growth rate. In the start of the year i.e, 30-01-2010 the NAV is around 100 where as at the end of the year i.e, 31-12-2010 it has reached upto 230.01. It has increased in all the months except in the date of 27-02-2010.

Magnum Performance Measure

87

Here we have done performance meassure bu using Sharpe, Jensen and Treynor methods. When we see the performance of Magnum Through Sharpe Index Model it has reached upto 4.27. When we see the performance of Magnum through Treynor Method it has reached upto 500. When we see the performance of Magnum through Jensen Model the performance has reached upto 1.66.

HDFC Performance measure

Here we have done performance meassure bu using Sharpe, Jensen and Treynor methods. When we see the performance of HDFC Through Sharpe Index Model it has reached upto 3.65. When we see the performance of HDFC through Treynor Method it has reached upto 2828.16. When we see the performance of HDFC through Jensen Model the performance has reached upto 2.77. UTI Performance Measure Here we have done performance meassure bu using Sharpe, Jensen and Treynor methods. When we see the performance of UTI Through Sharpe Index Model it has reached upto 0.55. When we see the performance of UTI through Treynor Method it has reached upto 264.57. When we see the performance of UTI through Jensen Model the performance has reached upto 4.01.

88

Affordability: Mutual funds allow you to start with small investments Professional management: : The major advantage of investing in a mutual fund is that you get a professional money manager for a small fee. Diversification: Considered the essential tool in risk management A mutual fund can effectively diversify its portfolio because of the large corpus. Convenience: Mutual funds offer tailor-made solutions like systematic investment plans and systematic withdrawal plans to investors, Investors also do not have to worry about the investment decisions Cost effectiveness: A small investor will find that a mutual fund route is a cost effective method. AMC fee is normally 2.5% and they also save a lot of transaction costs as they get concession from brokerages. Liquidity: You can liquidate your investments anytime you want. Most mutual funds dispatch checks for redemption proceeds within two or three working days. Tax breaks: You do not have to pay any taxes on dividends issued by mutual funds. You also have the advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the added advantage of benefits under Section 88. Transparency: Mutual funds offer daily NAVs of schemes, If you are looking at open end funds you can always purchase them from the company at the NAV minus some loads or expenses.

89

BIBLIOGRAPHY

90

BIBLIOGRAPHY
http://www.mutualfundsindia.com/mfbasic.asp http://www.seninvest.com/article5.htm http://www.moneycontrol.com/mutual-funds/performance-tracker/eqd/ab http://www.investopedia.com/articles/mutualfund/08/dump-mutual-fund.asp http://finance.indiamart.com/india_business_information/mutual_funds_industry.html http://www.iloveindia.com/finance/indian-mutual-funds/index.html http://www.moneylife.in/article/81/6921.html http://www.fundsavvy.com/mutual_funds_articles/mutual-funds-investing.htm http://www.indobase.com/markets/mtfi-india/sbi-magnum-equity-fund.php http://www.indobase.com/markets/mtfi-india/hdfc-equity-fund.php http://www.indobase.com/markets/mtfi-india/uti-equity-fund.php

91