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ON
Management Thesis-I
SUBMITTED IN FULFILLMENT
OF
SUBMITTED TO:
Ms. Chandrima Das
(Project Guide)
SUBMITTED BY:
Mr. Shailesh Patil
Enroll: 8NBNG041
ACKNOWLEDGEMENT
Before getting in the thick of the things, I would like to add a few heartfelt
words for the people who were part of this project in numerous ways. People
who gave unending support right from the stage the ideas were conceived.
Shailesh Patil
8NBNG041
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DECLARATION
I, Mr. Shailesh Patil, the student of MBA course 2008-10 of INC, Nagpur,
hereby submit my “Final Report- Management Thesis”. Most of the work
carried out in this project is original and was done under the guidance of
Project Guide, Ms. Chandrima Das. A good amount of textual content in
this project is derived from other works published earlier. However, this
material that has been picked up has been used to enhance the clarity of the
hypothesis and has been used for an academic purpose only.
I further assert that this project or any part of it has never been submitted by
me or anyone else to any university in the world. Also no part of this project
may be used or reproduced by others either academically or commercially
without the written consent of the authors and their guide.
Shailesh Patil
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CERTIFICATE
Signature
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INDEX
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ABSTRACT
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Introduction
Exchange Traded Funds (ETFs) are open ended mutual funds that are passively managed
and most of them seek to mirror the return of an index, a commodity or a basket of assets.
ETFs are listed and traded on stock exchanges like stocks. They enable investors to gain
broad exposure to indices or defined underlying asset (commodity) with relative case, on
a real-time basis, and at a lower cost than many other forms of investing.
Gold ETFs provided investors a means of participating in the gold bullion market without
the necessity of taking physical delivery of gold, and to buy and sell that participation
through the trading of a security on stock exchange. Gold ETF would be a passive
investment; so, when gold prices move up, the ETF appreciates and when gold prices
move down, the ETF loses value.
Gold ETF tracks the performance of Gold Bullion. Gold ETFs provide returns that,
before expenses, closely correspond to the returns provided by physical Gold. Each unit
is approximately equal to the price of 1 gram of Gold. But, there are Gold ETFs which
also provide a unit which is approximately equal to the price of ½ gram of Gold
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Comparison of Gold ETF with Physical Gold
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Chapter
Gold ETF Funds in India
The trading unit for BeES has been fixed at one gram with a tick size of one paisa. This
instrument offers only trading and holding it in DMAT account and not the physical
delivery of gold. "Gold BeES, like any other mutual fund instrument, would attract
common men to save in small quantity with a minimum possible monthly balance of Rs
1000 (roughly equivalent to the price of one gram gold BoES) which, if continued, may
accumulate over a period of time to give handsome amount on the occasions like
daughter's wedding or higher education of their child," A P Kurian, chairman, AMFI said.
He further added that the New Year was adding a new benchmark in the history of
mutual funds with the addition of BeES to the securities portfolio. Looking at the success
of gold exchange traded funds in the countries like the US, South Africa and Australia
which has created an asset of about $12 billion, this production in India is all set to attract
good amount of retail participation from the common man, Kurian said.
Gold BeES is designed to provide returns that, before expenses, closely correspond to the
returns provided by physical Gold. Each unit is approximately equal to the price of 1
gram of Gold.
There will be no exit load charge by the Fund The total expense ratio will be maximum of
1% per annum. Since Gold BeES is classified under Mutual Fund, investor investing in
this need not pay Wealth Tax. The scheme will have Non equity Mutual Fund taxation,
applicable as per current Tax laws, which investor has to pay after redemption.
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2. UTI GOLD Exchange Traded Fund
UTI Gold Exchange Traded Fund is an open ended exchange traded fund. The investment
objective of the scheme is to endeavor to provide returns that, before expenses, closely
track the performance and yield of Gold. However the performance of the scheme may
differ from that of the underlying asset due to tracking error.
A gold ETF was eagerly awaited by US investors. Now, there are two to choose from.
One is IAU from Barclay's Global Investors. The other is GLD from State Street.
State Street's started trading first and has managed to capture a larger slice of the market.
In February, the GLD ETF held $6 billion worth of assets. However, both should be
equivalent bets for those looking to invest in gold. In its first three days of trading, GLD
traded roughly 30 million shares and nearly all of that has been a new buyer if you
believe the press.
I, for one, am not interested in holding too much of this particular asset class. Why?
Because gold has no real use in the world. Sure, it is admired and hoarded by people
across the globe, but it doesn't generate value on its own. Warren Buffet said it best, "I
would rather own assets that produce value. Dow went from 66 to 12000 and paid
dividends. If you owned Gold you paid 20 and went to 400 a hundred years later."
However some investors are attracted since gold is likely to increase in value when other
areas of the market are suffering. As such, it is used as hedge against other investments.
Regardless, I prefer to invest in the long-term returns that company stocks and bonds
offer. This isn’t to say that I don’t own any gold. In fact, the commodities ETF that have
is 10% gold.
Note that gains from the gold ETF will be taxed at the collectibles rate of 28% vs. the
long-term capital gains rate of 15%. If you're going to invest in this ETF, you might want
to consider using a tax deferred account. And since gold doesn't produce income, partial
shares of your holdings will be sold to pay for management fees.
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3. Kotak Gold Exchange Traded Fund
Investment Objective: the investment objective of the scheme is to generate returns that
are in line with the return on investment in physical gold, subject to tracking errors.
Type of fund: Kotak Gold ETF is open ended fund. The ongoing of the scheme
commenced from August 8, 2007. The fund creates/redeem the scheme units in large size
known as creation unit. The value of unit is 1000 gram of physical gold or multiple
thereof called as the portfolio deposit and a cash component which will be exchanged for
corresponding number of units. The portfolio deposit and cash component may change
from time to time and will be announced by fund on its website.
Indemnity is a legal exemption from the penalties or liabilities incurred by any course of
action. Some of the risk factors listed in the prospectus are · the loss, damage, theft or
restrictions on access to the Trust's gold · the lack of adequate sources of recovery if the
Trust's gold is lost, damaged, stolen or destroyed, including a lack of insurance · the
failure of gold bullion allocated to the Trust to meet the London Good Delivery Standards
· the failure of sub-custodians to exercise due care in the safekeeping of the Trust's gold ·
the limited ability of the Trustee and the Custodian to take legal action against sub-
custodians; · the insolvency of the Custodian · the Trust's obligation to reimburse the
Purchaser and the Market Agent for certain liabilities in the event the Sponsor fails to
indemnify them · the lack of experience of the Sponsor and its management in operating
an investment vehicle such as the Trust · competing claims over ownership of intellectual
property rights related to the Trust.
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4. Reliance Gold Exchange Traded Fund.
Reliance Gold Exchange Traded Fund (RGETF) is an open ended Gold Exchange Traded
Fund which will track the performance of Gold Bullion. The units issued under the
scheme will represent the value of gold held in the scheme. It is designed to provide
returns that, before expenses, closely correspond to the returns provided by domestic
price of Gold. Gold ETF is a security listed on the stock exchange available for trading
with an intention to offer investors a means of participating in the gold bullion market
without the necessity of taking physical delivery of gold.
Product Features
Type: An open-ended Gold Exchange Traded Fund that tracks the domestic prices of
gold through investments in physical Gold.
Investment Objective: The investment objective is to seek to provide returns that closely
correspond to returns provided by price of gold through investment in physical Gold (and
Gold related securities as permitted by Regulators from time to time). However, the
performance of the scheme may differ from that of the domestic prices of Gold due to
expenses and or other related factors.
Modes of payment for subscriptions & redemptions during NFO & continuous offer
with the AMC
During NFO all the subscriptions will happen by cash (by issuing a cheque / DD)
however during continuous offer the transactions with the AMC by Authorized
Participants & Large Investors can happen by issuing a cheque / DD or by transferring
requisite gold (as per LBMA Good Delivery Norms referred in the Offer Document) to
the fund’s Designated DP account (in the form of Portfolio Deposit) while the balance
Cash Component, if any has to be paid to the AMC. Please refer to the offer Document
for further details.
Allotment Price
Allotment price will be equal to the face value of Rs100/- plus premium equivalent to the
difference between the face value and price of one gram of gold on the date of allotment.
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For example :
If on the date of allotment the price of 10 gm of gold is 9000, then the allotment price
becomes as follows;
Rs 100 + premium equivalent to the difference between the face value and price of one
gram of gold on the date of allotment.
i.e Rs 100 + Rs (900-100) = Rs 900 approx
(The above example is for illustration purpose and does not include the expenses of the
scheme)
Purity of Gold
All gold bullion held in the scheme’s allocated account with the custodian shall be of
fineness (or purity) of 995 parts per 1000 (99.5%) or higher.
Listing: The Fund would endeavor to get the units of the Scheme listed on the National
Stock Exchange and / or any other stock exchange(s) as may be decided by the AMC
within 30 days from the closure of the New Fund Offer period.
Liquidity : After the close of the NFO, as RGETF would be listed on the Exchange,
subsequent buying or selling by Unit holders can be made from the secondary market.
The minimum number of Units that can be bought or sold on the exchange is 1 (one) unit.
All investors including Authorised Participants and large investors may sell their units in
the stock exchange(s) on which these units are listed on all the trading days of the stock
exchange. The trading will be as per the normal settlement cycle.
Alternatively, Authorised Participants and Large investors can directly buy / sell Units in
blocks from the Fund in ‘Creation Unit’ size, as defined in this Offer Document on all
working days. Mutual fund will repurchase units from Authorised Participants and Large
investors on any business day provided the units offered for repurchase is not less than
100 units.
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5. Quantum Gold Exchange Traded Fund
The Quantum Gold Fund (QGF) seeks to offer investors an innovative, cost-efficient and
secure way to invest in gold. The QGF is an Open Ended Fund, which is listed on the
National Stock Exchange (NSE) in the form of an Exchange Traded Fund (ETF) tracking
domestic prices of gold. The scheme enables investors to participate in the gold bullion
market without taking physical delivery of gold, and to buy and sell units just like a stock
on any of the recognized exchanges where it is listed..
Investment Objective
The investment objective of the Quantum Gold Fund is to provide returns that, before
expenses, closely correspond to the returns provided by the domestic price of gold.
Scheme Details
Each unit of the QGF will be approximately equal to price of half (½) gram of Gold. In
the New Fund Offer (NFO) period, the Fund will accept cheque or demand draft. The
minimum amount of investment is Rs.5,000/- and in multiples of Rs.1,000/- thereafter.
After the NFO, the QGF units are listed on the NSE and investors can buy or sell units
just like any equity share. Investors can buy or sell QGF units through member-brokers
on the NSE. The minimum quantity for buying and selling would be at least 1 unit.
Ongoing Sales/Redemption
On an ongoing basis (after the NFO), direct purchases from the Fund would be restricted
to only Authorized Participants and Eligible Investors. Authorised Participants and
Eligible Investors can buy/redeem in creation unit size and multiples thereof directly
from the Fund on all business days. Retail investors can buy and sell only on the
exchange
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it though your broker on the stock exchanges. And unlike your jeweler and bank, you do
not suffer premiums or making charges in the transactions. About the Quantum Gold
Fund. The Quantum Gold Fund is an Open Ended Exchange Traded Fund (ETF)
launched by Quantum Mutual Fund and listed on the NSE. It will track domestic prices of
Gold through investments in physical Gold. How to purchase and sell Quantum Gold
Fund units.
The load structure is however, subject to change from time to time and such changes shall
be implemented prospectively.
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RESEARCH METHODOLOGY
Secondary Data
I. SKEWNESS
Skewness describe asymmetry from the normal distribution in a set of statistical data.
Skewness can come in the form of "negative skewness" or "positive skewness",
depending on whether data points are skewed to the left (negative skew) or to the right
(positive skew) of the data average.
Negative skew: The left tail is longer; the mass of the distribution is concentrated on the
right of the figure. It has relatively few low values. The distribution is said to be left-
skewed.
Positive skew: The right tail is longer; the mass of the distribution is concentrated on the
left of the figure. It has relatively few high values. The distribution is said to be right-
skewed.
Skewness is extremely important to finance and investing. Most sets of data, including
stock prices and asset returns, have either positive or negative skew rather than following
the balanced normal distribution (which has a skewness of zero). By knowing which way
data is skewed, one can better estimate whether a given (or future) data point will be
more or less than the mean .Most advanced economic analysis models study data for
skewness and incorporate this into their calculations. Skewness risk is the risk that a
model assumes a normal distribution of data when in fact data is skewed to the left or
right of the mean
For univariate data Y1, Y2, ..., YN, the formula for skewness is:
Where is the mean, is the standard deviation, and N is the number of data points. The
skewness for a normal distribution is zero, and any symmetric data should have a
skewness near zero.. By skewed left, we mean that the left tail is long relative to the right
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tail. Similarly,skewed right means that the right tail is long relative to the left tail. Some
measurements have a lower bound and are skewed right.
TABLE- 1.1
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TABLE – 1.2
Return on Gold Exchange traded fund
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II. KURTOSIS
Kurtosis is statistical measure used to describe the distribution of observed data around
the mean.Kurtosis is a measure of whether the data are peaked or flat relative to a normal
distribution. That is, data sets with high kurtosis tend to have a distinct peak near the
mean, decline rather rapidly, and have heavy tails. Data sets with low kurtosis tend to
have a flat top near the mean rather than a sharp peak.
Used generally in the statistical field, kurtosis describes trends in charts. A high kurtosis
portrays a chart with fat tails and a low, even distribution, whereas a low kurtosis portrays
a chart with skinny tails and a distribution concentrated toward the mean
For univariate data Y1, Y2, ..., YN, the formula for kurtosis is:
This definition is used so that the standard normal distribution has a kurtosis of zero. In
addition, with the second definition positive kurtosis indicates a "peaked" distribution and
negative kurtosis indicates a "flat" distribution.
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III. COEFFICIENT OF VARIATION - CV
A statistical measure of the dispersion of data points in a data series around the mean. It
is calculated as follows:
The coefficient of variation represents the ratio of the standard deviation to the mean, and
it is a useful statistic for comparing the degree of variation from one data series to
another, even if the means are drastically different from each other. In the investing
world, the coefficient of variation allows you to determine how much volatility (risk) you
are assuming in comparison to the amount of return you can expect from your
investment. In simple language, the lower the ratio of standard deviation to mean return,
the better your risk-return tradeoff.
The Analysis Of Variance, popularly known as the ANOVA test, can be used in cases
where there are more than two groups. When we have only two samples we can use the t-
test to compare the means of the samples but it might become unreliable in case of more
than two samples. If we only compare two means, then the t-test (independent samples)
will give the same results as the ANOVA. It is used to compare the means of more than
two samples. This can be understood better with the help of an example.
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Benchmark KOTAK Reliance Quantum
gold ETF UTI GOLD ETF GOLD ETF GOLD ETF gold ETF
Quarte Quarter Quarter Quarter Quarter
r
07- 09 NAV 07- 09 NAV 07- 09 NAV 07- 09 NAV 07- 09 NAV
10 1459.9 10 1495.3
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s12 44294.02 10774.22108
s22 46939.75 11417.77703
s32 40151.62 8681.431351
s42 17170.76 2784.447568
s52 13342.98 1803.105405
Table Value of f for (4,126 ) degree of freedom & 5 % significance level is 2.45 approx
Table Value of f for (4,126 ) degree of freedom & 1 % significance level is 3.32 approx
Which specifies that return from all the Gold exchange traded fund are same they
bear no difference.
V. CORRELATION Matrix:
Sx Sy
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benchmark gold Mcx bsc100 nifty
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benchmark 1 0.99964 -0.03745 -0.46234 -0.43995
gold 0.999647 1 -0.04762 -0.46899 -0.4467
mcx -0.03745 -0.04762 1 0.472066 0.561259
bse-100 -0.46234 -0.46899 0.472066 1 0.97291
nifty -0.43995 -0.4467 0.561259 0.97291 1
PRIMARY DATA:
Sample Size – 100
Sampling method: convenience sampling
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Collected by Questionnaire
people aware
35%
unaware
65%
As per preference
preference to the
physical gold
79%
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Secondary Data analysis:
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