CHAPTER – I

INTRODUCTION

1
INTRODUCTION TO MUTUAL FUND
SECTORAL FUNDS
Sectoral funds, which were a hit with mutual fund investors during the last Bull Run,
are back in vogue and are being marketed as sector exchange traded funds or sector
ETFs this year.

Several asset management companies are in the process of launching ETFs with
sectors such as power & infrastructure, automobile, services, FMCG, metals and
pharma as the underlying theme\

Those marketing these funds are hoping to raise a fair amount of funds through these
schemes. Regular sectoral mutual funds have generated decent returns on their
portfolios with banking funds, as a category, having generated 58% returns in one
year. Pharma, FMCG and technology categories of sectoral mutual funds have yielded
50%, 46% and 36%, respectively, over a one-year period. On a wider scale, flexi-cap
equity funds have returned 31% over the past one year.

“Sectoral ETFs deliver benefits in line with the performance of the un-derlying sector.
It gives investors a cost-effective means to participate in sectors he or she is bullish
on,” said Lakshmi Iyer, head, fixed income & products, Kotak Mutual Fund, which
has plans to launch metals and some market cap-based ETFs in the coming months.

According to Ms Iyer, sectoral ETFs provide investors an easy way to transact on the
exchange and avail themselves of the benefits of knowing the near real-time prices of
their fund investments.

Benchmark Mutual Fund has sought Sebi approvals to launch six ETFs with IT,
FMCG, services, energy, pharma and realty as the base themes. The ETFs will be
marked against CNX IT, CNX FMCG, CNX Services Sector , CNX Energy, CNX
Pharma and CNX Realty indices. The minimum investment for these schemes is Rs
10,000 and in mul-tiples of Re 1 thereafter. Apart from Benchmark, UTI, Edelweiss
MF, Reliance Mutual and Religare Mutual have plans to launch sector ETFs in the
near term.

2
According to senior officials at Benchmark, sectoral ETFs allow cost-effective
portfolio diversification at one shot thereby reducing scrip-specific risk. It allows
foreign portfolio investors and institutional investors to have wide sectoral exposure.

Being listed on the exchanges — and in dematerialised format, ETFs can be traded
without much of a hassle. Unlike sector-based mutual funds, there are no exit charges
or loads on ETFs.

“ETFs are going to get larger in times to come. We’re also open to the idea of sector
ETFs and we’re working on plans along the same lines,” said Jaideep Bhattacharya,
CMO, UTI Asset Management.

According to Mr Bhattacharya, the coming months will see fund houses launching
ETFs with specific regions or markets as the underlying theme.

While the industry is more or less gung-ho about launching sector ETFs, voices of
dissent are being heard from wealth managers and in-vestment advisors.

“ETFs follow a passive investment strategy. There are several diversified equity funds
that can generate better returns than ETFs. Only ac-tive fund management can add
value to investor portfolios,” said a Mumbai-based wealth manager on condition of
anonymity. According to investment experts, exposure to a few sectors could in-
crease risk on overall fund portfolios. Investors in sector-based funds and ETFs could
suffer losses when outlook turns bleak or negative.

Mutual fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with objectives as disclosed in offer
document.

Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced. Diversification reduces the risk because all stocks may not
move in the same direction in the same proportion at the same time. Mutual fund issues

3
units to the investors in accordance with quantum of money invested by them. Investors
of mutual funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their investments. The
mutual funds normally come out with a number of schemes with different investment
objectives which are launched from time to time. A mutual fund is required to be
registered with Securities and Exchange Board of India (SEBI) which regulates securities
markets before it can collect funds from the public.

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset
Management Company (AMC) and custodian. The trust is established by a sponsor or
more than one sponsor who is like promoter of a company. The trustees of the mutual
fund hold its property for the benefit of the unit holders. Asset Management Company
(AMC) approved by SEBI manages the funds by making investments in various types of
securities. Custodian, who is registered with SEBI, holds the securities of various
schemes of the fund in its custody. The trustees are vested with the general power of
superintendence and direction over AMC. They monitor the performance and compliance
of SEBI Regulations by the mutual fund.

4
Mutual fund in India
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early
1990s, Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The
objectives of SEBI are to protect the interest of investors in securities and to promote the
development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual
funds to protect the interest of the investors. SEBI notified regulations for the mutual
funds in 1993. Thereafter, mutual funds sponsored by private sector entities were
allowed to enter the capital market. The regulations were fully revised in 1996 and have
been amended thereafter from time to time. SEBI has also issued guidelines to the
mutual funds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector entities including
those promoted by foreign entities are governed by the same set of Regulations. There is
no distinction in regulatory requirements for these mutual funds and all are subject to
monitoring and inspections by SEBI. The risks associated with the schemes launched by
the mutual funds sponsored by these entities are of similar type

You can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds.
2) If the fund sells securities that have increased in price, the fund has a
capital gain.
3) If fund holdings increase in price but are not sold by the fund manager, the
fund's shares increase in price. You can then sell your mutual fund shares
for a profit.
Advantages of Mutual Funds:
• Professional Management - The primary advantage of funds is the professional
management of your money. Investors purchase funds because they do not have
the time or the expertise to manage their own portfolios. A mutual fund is a
relatively inexpensive way for a small investor to get a full-time manager to make
and monitor investments.

5
• Diversification - By owning shares in a mutual fund instead of owning
individual stocks or bonds, your risk is spread out. The idea behind
diversification is to invest in a large number of assets so that a loss in any
particular investment is minimized by gains in others.
• Economies of Scale - Because a mutual fund buys and sells large amounts of
securities at a time, its transaction costs are lower than what an individual would
pay for securities transactions.
• Liquidity - Just like an individual stock, a mutual fund allows you to request that
your shares be converted into cash at any time.
• Simplicity – Minimum investment is small.

Disadvantages:
• Dilution - It's possible to have too much diversification. Because funds have small
holdings in so many different companies, high returns from a few investments often don't
make much difference on the overall return.
• Taxes - When making decisions about your money, fund managers don't consider
your personal tax situation.

NEED OF THE STUDY

 Mutual funds are dynamic financial intuitions which play crucial role in an
economy by mobilizing savings and investing them in the capital market.
 The activities of Mutual funds have both short and long term impact on the
savings in the capital market and the national economy.
 Mutual funds, trust, assist the process of financial deepening & intermediation.
 To banking at the same time they also compete with banks and other financial
intuitions.
 India is one of the few countries to day maintain a study growth rate is
domestic savings.

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SCOPE OF THE STUDY:
The study is limited to the analysis made on two major types of schemes offered by four
banks. Each scheme is calculated in term of their risk and return using different
performance measurement theories. The reasons for such performance in immediately
analyzed in the commentary. Column charts are used to reflect the portfolio risk and
return.

OBJECTIVES
MAIN OBJECTIVE:
 A study on comparative analysis of mutual funds in Sharekhan Ltd (NSE:
INDIAINFO, BSE: 532636), are effecting on the financial performance of the
company.

ANCILLARY OBJECTIVES:
 To know the different mutual fund schemes in Sharekhan Ltd mutual Fund.
 To know the concept of Mutual funds.
 To know how the Sharekhan Ltd are participating in the stock market.
 To know how the Sharekhan Ltd are effecting on the overall performance of
the Sharekhan Ltd Company.

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RESEARCH METHODOLOGY
Meaning of research: The method and technique that are used for conducting the
research. Research methodology is a systemic way of solving research problem this
methodology includes all the stages of research such as research process, research
design, sampling design, data collection, data analysis, data interpretation and data
presentation.

Research Process: - This is the process of conducting entire research in such away to
solve the research problem. It includes identification of problem conducting the
research and interpretation of the data and reporting.
To test the Different Mutual fund Schemes and its effect on the Business with
reference to the IIFL Mutual Funds.

Research design: - It indicates a design of research problem and research process

1. Information collected from the Questionnaire to the Sharekhan Ltd
Mutual Fund Hyderabad branch.

2. I collect all the Financial Statements from the Sharekhan Ltd Mutual
fund websites.

Data collection:-The objective of the present study can be accomplished by

conducting a systematic research to know the effect of Sharekhan Ltd Mutual Fund
Schemes on the Business.

1. Primary data The information presented in the report is primary data, i.e. the
data Collected from the “Sharekhan Ltd” through the Questionnaire.
2. Secondary data
Secondary data is taken from
 Website

 Sharekhan Ltd Journals

 Security Analysis (sem-4)

 Brocuhers

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Tools for data analysis:- To analyse the information (or) data collected form Branch
Manager and various financial Statements the following tools are used:

1. Percentages
2. Averages
3. Range
4. Graphs
5. Bar Chart

LIMITATIONS

 Mostly the data is related to the secondary data.

 To collect the primary data from the company is difficult task and it is a
confidential matter to the company.
 The product is restricted to only mutual funds.
 The data is only limited to financial performance of the mutual funds.
 The collected primary data is only from the one branch head of Hyderabad.
 The comparison for the financial performance of the company is taken.

9
 CHAPTER -II
INDUSTRY PROFILE
&
COMPANY PROFILE

10
History of the Indian Mutual Fund Industry:

The mutual fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank .The
objective then is to attract the small investors and introduce them to market
investments. Since then, the history of mutual funds in India can be broadly divided
into four distinct phases.

First Phase – 1964-87:

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

was set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched by
UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets
under management. The mutual Funds Industry in India not only started with UTI, but
still count UTI as its largest Player with the largest corpus of investible funds among
all Mutual Funds currently opening in India.

For the period of 1987-88

Table No: 1 Source: Secondary Data
Amount Mobilized Assets Under Management
(Rs.Crores) ( Rs.Crores)
2,175 6,700
UTI
Total 2,175 6,700

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

11
 1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund
in June 1989 while GIC had set up its mutual fund in December 1990. At the end of
1993, the mutual fund industry had assets under management of Rs.47,004 crores.
From 1987to 1992-93, the fund industry expanded nearly seven times in terms of
Assets under Management, as seen in the following figures:

For the period of 1992-93

Table No: 2 Secondary Data

Amount Mobilized Assets Under Management

(Rs.Crores) ( Rs.Crores)
UTI 11,057 38,247
Public Sector 1,964 8,757
Total 13,021 47,004

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

With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.
Also, 1993 was the year in which the first Mutual Fund Regulations came into
being, under which all mutual funds, except UTI were to be registered and
governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton)
was the first private sector mutual fund registered in July 1993.The 1993 SEBI
(Mutual Fund) Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds

12
with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores
of assets under management was way ahead of other mutual funds.

Fourth Phase – since February 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs.29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual
Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers
taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth. As at the end of October 31,
2003, there were 31 funds, which manage assets of Rs.126726 crores under 386
schemes. The graph indicates the growth of assets over the years

Fig: 1.GROWTH IN ASSETS UNDER MANAGEMENT

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Unit holding pattern of mutual funds industry as on March 31, 2003

SEBI has done an analysis of the unit holding pattern of mutual funds industry as on
March 31, 2003. The details are given below: -

A] Mutual Funds Industry Unit holding Pattern

From the data collected from the mutual funds, the following has been observed:-

i) As on March 31, 2003 there are a total number of 1.6 crore investors accounts
(it is likely that there may be more than one folio of an investor which might
have been counted more than once and actual number of investors would be
less) holding units of Rs. 79,601 crore. Out of this total number of investors
accounts, 1.56 crore are individual investors accounts, accounting for 97.42%
of the total number of investors accounts and contribute Rs.32,691 crore
which is 41.07% of the total net assets.

ii) Corporate and institutions who form only 2.04% of the total number of
investors accounts in the mutual funds industry, contribute a sizeable amount

14
 of Rs.45,470 crore which is 57.12% of the total net assets in the mutual funds
industry.

iii) The NRIs/OCBs and FIIs constitute a very small percentage of investors
accounts (0.54%) and contribute Rs.1440.18crore (1.81%) of net assets.

The details of unit holding pattern are given in the following table:

Table No: 3 Secondary Data

UNIT HOLDING PATTERN OF MUTUAL FUNDS INDUSTRY

No. Of % To Total NAV(Rs.Crore) %To Total

Category
Investors A/C Investors A/C NAV

Individuals 15,557,506 97.42 32,691.12 41.07

NRIs/OCBs 84,311 0.53 878.51 1.10

FIIs 2,058 0.01 561.67 0.71

Corporate/
Institutions/Othe
rs 324,979 2.04 45,469.53 57.12

TOTAL 15,968,854 100.00 79,600.83 100.00

B] Unit holding Pattern – Private/Public Sector Mutual Funds:

From the analysis of data on unit holding pattern of Private Sector Mutual Funds and
Public Sector Mutual Funds, the following observations are made:-

1. Out of a total of 1.6 crore investors accounts in the mutual funds industry, (it is
likely that there may be more than one folio of an investor which might have been

15
 counted more than once and therefore actual number of investors may be less)
42.93 lakh investors accounts i.e. 27% of the total investors accounts are in private
sector mutual funds whereas the 1.17 crore investors accounts ie.73% are with the
public sector mutual funds which includes UTI Mutual Fund. However, the
private sector mutual funds manage 71.2% of the net assets whereas the public
sector mutual funds own only 28.8% of the assets.

2. UTI Mutual Fund has 97. 12 lakh investors’ accounts which is 60.82% of the total
investor’s accounts in the mutual funds industry.

Details of unit holding pattern of private sector and public sector mutual funds are:

Table No: 4 Secondary Data

UNIT HOLDING PATTERN OF PRIVATE SECTOR MFS

No. Of Investors % To Total NAV(Rs.Cr %To Total

Category A/C Investors A/C ore) NAV

Individuals 4001841 93.23 17956.48 31.68

NRIs/OCBs 38416 0.89 723.02 1.28

FIIs 1317 0.03 528.51 0.93

Corporate/
Institutions/
Others 250972 5.85 37465.91 66.11

TOTAL 4292546 100.00 56673.92 100.00

Table No: 5 Secondary Data

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 UNIT HOLDING PATTERN OF PUBLIC SECTOR MFS (INCLUDING UTI MF )

NO. Of % To Total NAV(Rs.Cr %To Total

Category Investors A/C Investors A/C ore) NAV

Individuals 11,555,665 98.97 14734.64 64.27

NRIs/OCBs 45895 0.39 155.49 0.68

FIIs 741 0.01 33.16 0.14

Corporate/
Institutions/
Others 74007 0.63 8003.62 34.91

TOTAL 11676308 100.00 22926.91 100.00

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.

17
 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.

The foreign owned companies have deep pockets and have come in here with
the expectation of a long haul. 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.

COMPANY PROFILE

18
SHAREKHAN

Share khan, India’s leading stock broker is the retail arm of SSKI, an
organization with over eighty years of experience in the stock market with more
than 280 share shops in 120 cities and big towns, and premier online trading
destination www.sharekhan.com. Share khan offers the trade execution facilities
for cash as well as derivatives, on BSE and NSE, depository services,
commodities trading on the MCX(Multi Commodity Exchange of India Ltd) and
NCDEX (National Commodity and Derivative Exchange) and most importantly,
investment advice tempered by eighty years of broking experience.

Share khan provides the facility to trade in commodities through Share khan
Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. Share khan is the
member of two major commodity exchanges MCX and NCDEX.

SSKI
Apart from Share khan, the SSKI group also comprises of institutional broking and
corporate finance. The institutional broking division caters to domestic and foreign
institutional investors, while the corporate finance division focuses on niche areas
such as infrastructure, telecom and media. SSKI owns 56% in Share khan and the
balance ownership is HSBC, First Caryl and Intel Pacific. SSKI has been voted as the
top domestic brokerage house in the research category, twice by Euro money survey
and four times by Asia money survey.

SHAREKHAN STOCK BROKING COMPANY

Share khan is one of the leading retail brokerage of City Venture which is running
successfully since 1922 in the country. Earlier it was the retail broking arm of the
Mumbai based SSKI (SRIPAL SRAVANTHI KANTHILAL ISWARLAL)Group,
which has over eight decades of experience in the stock broking business. Share khan
offers its customers a wide range of equity related services including trade execution
on BSE, NSE, Derivatives, depository services, online trading, investment advice etc.

Earlier with a legacy of more than 80 years in the stock markets, the SSKI group
ventured into institutional broking and corporate finance 18 years ago. SSKI is one of

19
the leading players in institutional broking and corporate finance activities. SSKI
holds a sizeable portion of the market in each of these segments. SSKI’s institutional
broking arm accounts for 7% of the market for Foreign Institutional portfolio
investment and 5% of all Domestic Institutional portfolio investment in the country.

It has 60 institutional clients spread over India, Far East, UK and US. Foreign
Institutional Investors generate about 65% of the organization’s revenue, with a daily
turnover of over US$ 2million.The objective has been to let customers make informed
decisions and to simplify the process of investing in stocks.

“Mission” of the Share khan is

“To educate and empower the individual investor to make better investment
decisions through

 QUALITY ADVICE
 INNOVATIVE PRODUCTS and
 SUPERIOR SERVICE.”

WORK STRUCUTRE OF SHAREKHAN:

Share khan has always believed in investing in technology to build its
business. The company has used some of the best-known names in the IT industry,
like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix,
Vignette, VeriSign Financial Technologies India Ltd, Spider Software Pvt. Ltd. to
build its trading engine and content. The City Venture holds a majority stake in the
company. HSBC, Intel & Carlyle are the other investors.

On April 17, 2002 Sharekhan launched Speed Trade and Trade Tiger, are net-
based
Executable application that emulates the broker terminals along with host of other
information relevant to the Day Traders. This was for the first time that a net-based
trading station of this caliber was offered to the traders. In the last six months Speed
Trade has become a de facto standard for the Day Trading community over the net.
Share khan’s ground network includes over 700+ Share shops in 130+ cities in India.

20
 The firm’s online trading and investment site www.sharekhan.com - was
launched on Feb 8, 2000. The site gives access to superior content and transaction
facility to retail customers across the country.

PRODUCT AND SERVICES OFFERD BY SHAREKHAN:

 Equity Trading Platform (Online/Offline).
 Commodities Trading Platform (Online/Offline).
 Portfolio Management Service.
 Mutual Fund Advisory and Distribution.
 Insurance Distribution.
 Forex

REASON TO CHOOSE SAHREKHAN LIMITED

Experience
SSKI has more than eight decades of trust and credibility in the Indian stock
market. In the Asia Money broker's poll held recently, SSKI won the 'India's best
broking house for 2004' award. Ever since it launched Share khan as its retail broking

21
division in February 2000, it has been providing institutional-level research and
broking services to individual investors.

Technology
With their online trading account one can buy and sell shares in an instant from
any PC with an internet connection. Customers get access to the powerful online
trading tools that will help them to take complete control over their investment in
shares.

Knowledge
In a business where the right information at the right time can translate into
direct profits, investors get access to a wide range of information on the content-rich
portal, www.sharekhan.com. Investors will also get a useful set of knowledge-based
tools that will empower them to take informed decisions.

Convenience
One can call Share khan’s Dial-N-Trade number to get investment advice and
execute his/her transactions. They have a dedicated call-center to provide this service
via a Toll Free Number 1800 22-7500 & 39707500 from anywhere in India.

Customer Service
Its customer service team assist their customer for any help that they need
relating to transactions, billing, demat and other queries. Their customer service can
be contacted via a toll free number, email or live chat on www.sharekhan.com.

22
Investment Advice
Sharekhan has dedicated research teams of more than 30 people for
fundamental and technical research. Their analysts constantly track the pulse of the
market and provide timely investment advice to customer in the form of daily
research emails, online chat, printed reports etc.

Benefits
 Free Depository A/c
 Instant Cash Transfer
 Multiple Bank Option.
 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual
purchases.
 Personalized Price and Account Alerts delivered instantly to your
Mobile Phone & Email address.
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Buy or sell even single share
 Anytime Ordering.

Share khan offers the following products :-

CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investors who is risk-averse and
hence prefers to invest in stocks or who does not trade too frequently.

23
Features
 Online trading account for investing in Equity and Derivatives
via www.sharekhan.com
 Live Terminal and Single terminal for NSE Cash, NSE F&O &
BSE.
 Integration of On-line trading, Saving Bank and Demat
Account.
 Instant cash transfer facility against purchase & sale of shares.
 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).

SPEEDTRADE
SPEEDTRADE is an internet-based software application that enables you to
buy and sell in an instant. It is ideal for active traders and jobbers who transact
frequently during day’s session to capitalize on intra-day price movement.
Features
 Single screen trading terminal for NSE Cash, NSE F&O &
BSE.
 Technical Studies & Multiple Charting.
 Market summary (Cost traded scrip, highest clue etc.)
 Alerts and reminders.
 Back-up facility to place trades on Direct Phone lines.

DIAL-N-TRADE
Along with enabling access for trade online, the CLASSIC and
SPEEDTRADE ACCOUNT also gives Dial-n-trade services. With this service, one
can dial Share khan’s dedicated phone lines 1800-22-7500, 3970-7500. Beside this,
Relationship Managers are always available on Office Phone and Mobile to resolve
customer queries.

SHARE MOBILE
Sharekhan had introduced Share Mobile, mobile based software where one
can watch Stock Prices, Intra Day Charts, Research & Advice and Trading Calls live

24
on the Mobile. (As per SEBI regulations, buying-selling shares through a mobile
phone are not yet permitted.)

PREPAID ACCOUNT
Customers pay Advance Brokerage on trading Account and enjoy
uninterrupted trading in their Account. Beside this, great discount are also available
(up to 50%) on brokerage.
 Prepaid Classic Account: - Rs.750
 Prepaid Speed trade Account: - Rs.1000

IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite hassle-
free, paperless and time saving. Simply allocate fund to IPO Account, Apply for the
IPO and Sit Back & Relax.

Mutual Fund Online

Investors can apply to Mutual Funds of Reliance, Franklin Templeton
Investments, ICICI Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch,
PRINCIPAL and TATA with Sharekhan.

Zero Balance ICICI Saving Account

Sharekhan had tied-up with ICICI bank for Zero Balance Account for Share
khan’s Clients. Now their customers can have a Zero Balance Saving Account with
ICICI Bank after your demat account creation with Sharekhan.

AWARDS:
 Rated among the top 20 wired companies along with Reliance, HLL, Infosys
etc by Business Today edition.
 PIONEERS of online trading in India.
 Amongst the top 3 online trading websites from India.
 Most preferred financial destination amongst online banking customers.

25
  Winner of ‘Best Financial Website Award
 Awarded to Share khan at the Ahwaz ‘Consumer Awards 2005’ in the "Stock
Broking" category. Research conducted by AC Nielsen-ORG MARG for
Ahwaz.

SWOT ANALYSIS

Strengths

 Strong credibility among investors because of its heritage.

 Excellent reputation among the business society.
 Capability of providing superior customer service.
 Quality research team.
 Easier access to the customer due to largest ground network of 280 branded
share shops in 120 cities.
 Abundant information about economy and companies.
 Ability to attract and retain superior and quality personnel.
 Highly sophisticated infrastructure.
 Efficient research and analysis team, which by interpreting the economy and
company’s performance accurately is enhancing the profitability of the
clientele.

Weaknesses

 Limited customer appeal as the company product line does not include mutual
funds which is increasingly becoming a preferred customer investment option.
 Inadequate product awareness among the retail investors.
 Limited customer appeal as the company does not have access to the BSE
online space.
 Brand awareness is low in the financial market.
 Promotional activities conducted by the company are not at par with the other
firms.

26
Opportunities
 Hyderabad covers only 3% of investors which gives huge potential for the

market penetration.
 Bullish phase of the market attracts investing public.
 Access to the BSE online space for the retail investors creates opportunity to
increase clientele base.
 An awareness campaign about online trading creates new market.

Threats

 Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in

the market.
 Threat of entry is high in this industry as the manpower required is less and
capital requirement is medium.

Observations:

 Fluctuations are more in secondary market than any other market.

 There are more speculators than investors.
 Information plays a vital role in the secondary market.
 Previously rolling settlement is T+5 days, now it changed to T+2 days and
further it will be changing to T+1 day.
 It was also observed that many broking houses offering internet trading
allow clients to use their conventional system as well just ensure that they do
not loose them and this instead of offering e-broking services they becomes
service providers.
 The number of players is increasing at a steady rate and today there are
over a dozen of brokerage houses who have opted to offer net trading to their
customers and prominent among them are SHARE KHAN, India bulls,
kotakstreet, ICICI direct and geojit.

27
 The Bombay stock exchange sensex zoomed past the 7700 barrier for the
first time in history to achieve new all time high of 7800 intra day trade and
ended at a historic close of 7732 points.

28
 CHAPTER-III
LITERATURE REVIEW

29
Sector Mutual Funds
Sectoral funds are those mutual funds which invest in a particular sector or industry of
the market, e.g. infrastructure, banking, pharma, information technology etc. Sector
funds are riskier than equity diversified funds since they invest in shares belonging to a
particular sector which gives them fewer diversification opportunities.

A sector fund is a mutual fund or exchange-traded fund that concentrates its

investments in a single sector of the market. A sector is a slice of the market that is
focused on the same line of business. For example, Bank of America is in the
financial services sector, while Wal-Mart is in the consumer services sector.

Three Common Characteristics of Sector Funds

There are three characteristics that are common among sector funds:

1. Focused on stocks within a certain business or industry

2. Concentrated number of holdings
3. More volatile than the overall stock market

How Many Sectors Are There for Sector Funds?

It depends who you ask. There are several organizations which have formally divided
the market into various sectors and subsets of sectors. In other words, Wal-Mart is in
the consumer services sector, but it can be further categorized as a discount store.
Bank of America and Allstate are both in the financial services sector, but upon
further categorizing, Bank of America is in the banking sector while Allstate is in the
insurance sector. You can invest in most of these sectors through a mutual fund or
exchange-traded fund.

Morningstar and Sector Funds

As for sector fund investing, Morningstar takes a stab at labeling the various
categories of sector funds in eight categories:

1. Technology
2. Financials

30
 3. Communications
4. Utilities
5. Natural Resources
6. Healthcare
7. Real Estate
8. Precious Metals

Trendy Sector Funds

Although Morningstar’s eight sectors are helpful in categorizing sector funds, the
trend has been to identify an increasing number of sectors and create products (mutual
funds, exchange-traded funds, etc.) based on those sectors. Your head might spin
when you’re trying to pick a fund in the healthcare sector. In that case, you might run
across a fund focused on identifying companies that develop products and services
that detect and treat cancer. You can also buy a fund that focuses on investing in
companies that manage nursing homes and hospitals.

Should I Invest in a Sector Fund?

Should you invest in a sector fund? It depends. Do you want to try picking the hottest
sector of the next decade? In 1999, the technology sector was all the rage until it
stumbled in March 2000. The NYSE Arca Tech 100 Index (an index comprised of
stocks of technology-related companies) is down 20% from December 1999 to
December 2008.

Despite the volatility of individual sectors, such as the technology sector, investors
may find sector funds useful depending on their needs.

Sector Funds for Diversification

If you’re planning a steak dinner and only have a salad on the side, you might want to
add another dish -- I like sweet potato casserole. Just the same, if you have a 401(k)
that has limited investment options and you find yourself with a lack of representation
in one sector or another, you can turn to sector funds in your IRA or brokerage
account to fill the void.

31
If you invest in individual stocks and you’re uncomfortable investing in stocks within
a particular sector, then you may benefit from sector funds. You can diversify your
portfolio by adding the neglected sector via a sector fund.

Sector Funds for Speculation

Speculative investing entails placing bets on stocks or funds that you think will soar in
value. It’s a risky proposition, as speculators generally try to make huge profits in a
very short period. Although I am not a fan of speculative investing, if you want to
speculate with a small portion of your portfolio based on a hunch you have about a
particular stock, you might be better off buying the sector fund that holds the stock.
That way, if you’re wrong about the stock, at least you are diversified among your
other holdings.

How Do I Invest in a Sector Fund?

Many fund companies offer sector funds. Fidelity has 43 sector mutual funds and
Vanguard has more than 30 sector funds -- including mutual funds and ETFs. Clearly,
there is no shortage of sector funds. If you decide to make a sector bet, do your
homework and make sure you are well diversified.

DEFINITION:
Mutual fund is the pool up savings of small investors to raise funds called mutual funds.
Mutual funds are invested in diversified portfolio to spread risk. While it opens an
investment channel to small investors, it reduces risks, improves liquidity and results in
stable returns and better capital appreciation in the long run.

CONCEPT
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most

32
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a mutual fund:

MUTUAL FUND
Mutual fund is a trust that pools money from a group of investors (sharing common
financial goals) and invest the money thus collected into asset classes that match the
stated investment objectives of the scheme. Since the stated investment objective of a
mutual fund scheme generally forms the basis for an investor's decision to contribute
money to the pool, a mutual fund can not deviate from its stated objectives at any
point of time.

Every Mutual Fund is managed by a fund manager, who using his investment
management skills and necessary research works ensures much better return than
what an investor can manage on his own. The capital appreciation and other incomes

33
earned from these investments are passed on to the investors (also known as unit
holders) in proportion of the number of units they own.

When an investor subscribes for the units of a mutual fund, he becomes part owner of
the assets of the fund in the same proportion as his contribution amount put up with
the corpus (the total amount of the fund). Mutual Fund investor is also known as a
mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments
(such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the
scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net
of its liabilities. NAV of a scheme is calculated by dividing the market value of
scheme's assets by the total number of units issued to the investors.
For example:
A. If the market value of the assets of a fund is Rs. 100,000
B. The total number of units issued to the investors is equal to 10,000.
C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00
D. Now if an investor 'X' owns 5 units of this scheme

34
E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held
multiplied by the NAV of the scheme)

ADVANTAGES OF MUTUAL FUND

1. Portfolio Diversification Mutual Funds invest in a well-diversified portfolio of
securities which enables investor to hold a diversified investment portfolio (whether
the amount of investment is big or small).
2. Professional Management Fund manager undergoes through various research
works and has better investment management skills which ensure higher returns to the
investor than what he can manage on his own.
3. Less Risk Investors acquire a diversified portfolio of securities even with a
small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than
investing in merely 2 or 3 securities.
4. Low Transaction Costs Due to the economies of scale (benefits of larger
volumes), mutual funds pay lesser transaction costs. These benefits are passed on to
the investors.
5. Liquidity An investor may not be able to sell some of the shares held by him very
easily and quickly, whereas units of a mutual fund are far more liquid.
6. Choice of Schemes Mutual funds provide investors with various schemes with
different investment objectives. Investors have the option of investing in a scheme
having a correlation between its investment objectives and their own financial goals.
These schemes further have different plans/options
DISADVANTAGES OF MUTUAL FUND
1.Costs Control Not in the Hands of an Investor Investor has to pay investment
management fees and fund distribution costs as a percentage of the value of his
investments (as long as he holds the units), irrespective of the performance of the
fund.

2. No Customized Portfolios The portfolio of securities in which a fund invests is a

decision taken by the fund manager. Investors have no right to interfere in the
decision making process of a fund manager, which some investors find as a constraint
in achieving their financial objectives.

35
3. Difficulty in Selecting a Suitable Fund Scheme Many investors find it difficult to
select one option from the plethora of funds/schemes/plans available. For this, they
may have to take advice from financial planners in order to invest in the right fund to
achieve their objectives.

TYPES OF MUTUAL FUNDS

General Classification of Mutual Funds
Open-end Funds / Closed-end Funds
Open-end Funds

Funds that can sell and purchase units at any point in time are classified as Open-end
Funds. The fund size (corpus) of an open-end fund is variable (keeps changing)
because of continuous selling (to investors) and repurchases (from the investors) by
the fund. An open-end fund is not required to keep selling new units to the investors at
all times but is required to always repurchase, when an investor wants to sell his units.
The NAV of an open-end fund is calculated every day.
Closed-end Funds

Funds that can sell a fixed number of units only during the New Fund Offer (NFO)
period are known as Closed-end Funds. The corpus of a Closed-end Fund remains
unchanged at all times. After the closure of the offer, buying and redemption of units
by the investors directly from the Funds is not allowed. However, to protect the
interests of the investors, SEBI provides investors with two avenues to liquidate their
positions:
1. Closed-end Funds are listed on the stock exchanges where investors can
buy/sell units from/to each other. The trading is generally done at a discount to the
NAV of the scheme. The NAV of a closed-end fund is computed on a weekly basis
(updated every Thursday).
2. Closed-end Funds may also offer "buy-back of units" to the unit holders. In
this case, the corpus of the Fund and its outstanding units do get changed.

Load Funds/no-load funds

Load Funds

36
Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio
churning, fund manager’s salary etc. Many funds recover these expenses from the
investors in the form of load. These funds are known as Load Funds. A load fund may
impose following types of loads on the investors:
 Entry Load – Also known as Front-end load, it refers to the load charged to
an investor at the time of his entry into a scheme. Entry load is deducted from the
investor’s contribution amount to the fund.
 Exit Load – Also known as Back-end load, these charges are imposed on an
investor when he redeems his units (exits from the scheme). Exit load is deducted
from the redemption proceeds to an outgoing investor.
 Deferred Load – Deferred load is charged to the scheme over a period of
time.
 Contingent Deferred Sales Charge (CDSS) – In some schemes, the
percentage of exit load reduces as the investor stays longer with the fund. This type of
load is known as Contingent Deferred Sales Charge.

No-load Funds

All those funds that do not charge any of the above mentioned loads are known as No-
load Funds.

Tax-exempt Funds/ Non-Tax-exempt Funds

Tax-exempt Funds

Funds that invest in securities free from tax are known as Tax-exempt Funds. All
open-end equity oriented funds are exempt from distribution tax (tax for distributing
income to investors). Long term capital gains and dividend income in the hands of
investors are tax-free.

Non-Tax-exempt Funds

Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India,
all funds, except open-end equity oriented funds are liable to pay tax on distribution
income. Profits arising out of sale of units by an investor within 12 months of

37
purchase are categorized as short-term capital gains, which are taxable. Sale of units
of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is
deducted from the redemption proceeds to an investor

BROAD MUTUAL FUND TYPES

1. Equity Funds

Equity funds are considered to be the more risky funds as compared to other fund
types, but they also provide higher returns than other funds. It is advisable that an
investor looking to invest in an equity fund should invest for long term i.e. for 3 years
or more. There are different types of equity funds each falling into different risk

38
bracket. In the order of decreasing risk level, there are following types of equity
funds:
a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers
aspire for maximum capital appreciation and invest in less researched shares of
speculative nature. Because of these speculative investments Aggressive Growth
Funds become more volatile and thus, are prone to higher risk than other equity funds.
b. Growth Funds - Growth Funds also invest for capital appreciation (with time
horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the
sense that they invest in companies that are expected to outperform the market in the
future. Without entirely adopting speculative strategies, Growth Funds invest in those
companies that are expected to post above average earnings in the future.
c. Specialty Funds - Specialty Funds have stated criteria for investments and
their portfolio comprises of only those companies that meet their criteria. Criteria for
some specialty funds could be to invest/not to invest in particular regions/companies.
Speciality funds are concentrated and thus, are comparatively riskier than diversified
funds. There are following types of specialty funds:

1. Sector Funds: Equity funds that invest in a particular sector/industry of the market
are known as Sector Funds. The exposure of these funds is limited to a particular
sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving
Consumer Goods) which is why they are more risky than equity funds that invest in
multiple sectors.

2. Foreign Securities Funds: Foreign Securities Equity Funds have the option to
invest in one or more foreign companies. Foreign securities funds achieve
international diversification and hence they are less risky than sector funds. However,
foreign securities funds are exposed to foreign exchange rate risk and country risk.

3. Mid-Cap or Small-Cap Funds:

Funds that invest in companies having lower market capitalization than large
capitalization companies are called Mid-Cap or Small-Cap Funds. Market
capitalization of Mid-Cap companies is less than that of big, blue chip companies
(less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies
have market capitalization of less than Rs. 500 crores. Market Capitalization of a

39
company can be calculated by multiplying the market price of the company's share by
the total number of its outstanding shares in the market. The shares of Mid-Cap or
Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise
to volatility in share prices of these companies and consequently, investment gets
risky.

4. Diversified Equity Funds - Except for a small portion of investment in liquid

money market, diversified equity funds invest mainly in equities without any
concentration on a particular sector(s). These funds are well diversified and reduce
sector-specific or company-specific risk. However, like all other funds diversified
equity funds too are exposed to equity market risk. One prominent type of diversified
equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a
minimum of 90% of investments by ELSS should be in equities at all times. ELSS
investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the
time of filing the income tax return. ELSS usually has a lock-in period and in case of
any redemption by the investor before the expiry of the lock-in period makes him
liable to pay income tax on such income(s) for which he may have received any tax
exemption(s) in the past.

Equity Index Funds - Equity Index Funds have the objective to match the
performance of a specific stock market index. The portfolio of these funds comprises
of the same companies that form the index and is constituted in the same proportion
as the index. Equity index funds that follow broad indices (like S&P CNX Nifty,
Sensex) are less risky than equity index funds that follow narrow sectoral indices (like
BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and
therefore, are more risky.

2.Debt/IncomeFunds
Funds that invest in medium to long-term debt instruments issued by private
companies, banks, financial institutions, governments and other entities belonging to
various sectors (like infrastructure companies etc.) are known as Debt / Income
Funds. Debt funds are low risk profile funds that seek to generate fixed current
income (and not capital appreciation) to investors. In order to ensure regular income
to investors, debt (or income) funds distribute large fraction of their surplus to
investors. Although debt securities are generally less risky than equities, they are
40
subject to credit risk (risk of default) by the issuer at the time of interest or principal
payment. To minimize the risk of default, debt funds usually invest in securities from
issuers who are rated by credit rating agencies and are considered to be of
"Investment Grade". Debt funds that target high returns are more risky. Based on
different investment objectives, there can be following types of debt funds:

a. Diversified Debt Funds - Debt funds that invest in all securities issued by
entities belonging to all sectors of the market are known as diversified debt funds. The
best feature of diversified debt funds is that investments are properly diversified into
all sectors which results in risk reduction. Any loss incurred, on account of default by
a debt issuer, is shared by all investors which further reduces risk for an individual
investor.
b. Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are
narrow focus funds that are confined to investments in selective debt securities, issued
by companies of a specific sector or industry or origin. Some examples of focused
debt funds are sector, specialized and offshore debt funds, funds that invest only in
Tax Free Infrastructure or Municipal Bonds. Because of their narrow orientation,
focused debt funds are more risky as compared to diversified debt funds. Although not
yet available in India, these funds are conceivable and may be offered to investors
very soon.
c. Assured Return Funds - Although it is not necessary that a fund will meet its
objectives or provide assured returns to investors, but there can be funds that come
with a lock-in period and offer assurance of annual returns to investors during the
lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset
Management Companies (AMCs). These funds are generally debt funds and provide
investors with a low-risk investment opportunity. However, the security of
investments depends upon the net worth of the guarantor (whose name is specified in
advance on the offer document). To safeguard the interests of investors, SEBI permits
only those funds to offer assured return schemes whose sponsors have adequate net-
worth to guarantee returns in the future. In the past, UTI had offered assured return
schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to
investors in the future. UTI was not able to fulfill its promises and faced large
shortfalls in returns. Eventually, government had to intervene and took over UTI's

41
payment obligations on itself. Currently, no AMC in India offers assured return
schemes to investors, though possible.
d. Fixed Term Plan Series –

Fixed Term Plan Series usually are closed-end schemes having short term maturity
period (of less than one year) that offer a series of plans and issue units to investors at
regular intervals. Unlike closed-end funds, fixed term plans are not listed on the
exchanges. Fixed term plan series usually invest in debt / income schemes and target
short-term investors. The objective of fixed term plan schemes is to gratify investors
by generating some expected returns in a short period.

3.GiltFunds
Also known as Government Securities in India, Gilt Funds invest in government
papers (named dated securities) having medium to long term maturity period. Issued
by the Government of India, these investments have little credit risk (risk of default)
and provide safety of principal to the investors. However, like all debt funds, gilt
funds too are exposed to interest rate risk. Interest rates and prices of debt securities
are inversely related and any change in the interest rates results in a change in the
NAV of debt/gilt funds in an opposite direction.

4. Money Market/Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest
bearing debt instruments. These securities are highly liquid and provide safety of
investment, thus making money market / liquid funds the safest investment option
when compared with other mutual fund types. However, even money market / liquid
funds are exposed to the interest rate risk. The typical investment options for liquid
funds include Treasury Bills (issued by governments), Commercial papers (issued by
companies) and Certificates of Deposit (issued by banks).
5. Hybrid Funds
As the name suggests, hybrid funds are those funds whose portfolio includes a blend
of equities, debts and money market securities. Hybrid funds have an equal proportion
of debt and equity in their portfolio. There are following types of hybrid funds in
India:
a. Balanced Funds

42
The portfolio of balanced funds includes assets like debt securities, convertible
securities, and equity and preference shares held in a relatively equal proportion. The
objectives of balanced funds are to reward investors with a regular income, moderate
capital appreciation and at the same time minimizing the risk of capital erosion.
Balanced funds are appropriate for conservative investors having a long term
investment horizon.

b. Growth-and-Income Funds

Funds that combine features of growth funds and income funds are known as Growth-
and-Income Funds. These funds invest in companies having potential for capital
appreciation and those known for issuing high dividends. The level of risks involved
in these funds is lower than growth funds and higher than income funds.

6. Commodity Funds

Those funds that focus on investing in different commodities (like metals, food grains,
crude oil etc.) or commodity companies or commodity futures contracts are termed as
Commodity Funds. A commodity fund that invests in a single commodity or a group
of commodities is a specialized commodity fund and a commodity fund that invests in
all available commodities is a diversified commodity fund and bears less risk than a
specialized commodity fund. “Precious Metals Fund” and Gold Funds (that invest in
gold, gold futures or shares of gold mines) are common examples of commodity
funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in
shares/securitized assets of housing finance companies, are known as Specialized
Real Estate Funds. The objective of these funds may be to generate regular income for
investors or capital appreciation.

8. ExchangeTradedFunds (ETF)

43
Exchange Traded Funds provide investors with combined benefits of a closed-end and
an open-end mutual fund. Exchange Traded Funds follow stock market indices and
are traded on stock exchanges like a single stock at index linked prices. The biggest
advantage offered by these funds is that they offer diversification, flexibility of
holding a single share (tradable at index linked prices) at the same time. Recently
introduced in India, these funds are quite popular abroad.
9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other
mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund
of Funds maintain a portfolio comprising of units of other mutual fund schemes, just
like conventional mutual funds maintain a portfolio comprising of equity/debt/money
market instruments or non financial assets. Fund of Funds provide investors with an
added advantage of diversifying into different mutual fund schemes with even a small
amount of investment, which further helps in diversification of risks. However, the
expenses of Fund of Funds are quite high on account of compounding expenses of
investments into different mutual fund schemes.

Risk Hierarchy of Different Mutual Funds

Thus, different mutual fund schemes are exposed to different levels of risk and
investors should know the level of risks associated with these schemes before
investing. The graphical representation hereunder provides a clearer picture of the
relationship between mutual funds and levels of risk associated with these funds:

44
MUTUAL FUND STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund
established in the form of a trust by a sponsor to raise monies by the Trustees through
the sale of units to the public under one or more schemes for in vesting in securities in
accordance with these regulations.

These regulations have since been replaced by the SEBI (Mutual Funds) Regulations,
1996. The structure indicated by the new regulations is indicated as under.

A mutual fund comprises four separate entitles, namely sponsor, mutual fund trust,
AMC and custodian. The sponsor establishes the mutual fund and gets its registered
with SEBI.

45
The mutual fund needs to be constituted in the form of a trust and the instrument of
the trust should be in the form of a deed registered under the provisions of the Indian
Registration Act, 1908.

The sponsor is required to contribute at lease 40% of the minimum net worth (Rs.10
crore) of the asset management company. The board of trustees manages the MF and
the sponsor executes the trust deeds in favour of the trustees. It is the job of the MF
trustees to see that schemes floated and managed by the AMC appointed by the
trustees are in accordance with the trust deed and SEBI guidelines.

Sponsor Company Establishes the MF as a trust

(E.g. Prudential,IIFL) Registers the MF with SEBI

Managed by a Board of
Trustees

Mutual Fund Hold unit-holders funds in MF

(E.g. Prudential, IIFL, Mutual enter into an agreement with
Fund) SEBI and ensure compliance

AMC Float MF funds

(e.g. prudential IIFL Asset Manages the fund as per SEBI
Management Company) guidelines and AMC agreement

Custodian Provide custodial services

Registrar Provides registrar and transfer

services

Distributors Provides the network for

distribution of the scheme to the
investors

46
Performance Measures of Mutual Funds
The most important and widely used measures of performance are:
 The Treynor Measure
 The Sharpe Measure
 Jenson Model
 Fama Model

The Trevnor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's index (Ti) = (Ri - Rf)/Bi
Where, Ri represents return on fund, Rf is risk free rate of return and Hi is beta of the
fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.
The Sharpe Measure
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which
is a ratio of returns generated by the fund over and above risk free rate of return and
the total risk associated with it. According to Sharpe, it is the total risk of the fund that
the investors are concerned about. So, the model evaluates funds on the basis of
reward per unit of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri – Rf)/Si
Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of
a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

47
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating less
than fully diversified portfolios or individual stocks. For a well-diversified portfolio
the total risk is equal to systematic risk. Rankings based on total risk (Sharpe
measure) and systematic risk (Treynor measure) should be identical for a well-
diversified portfolio,as the total risk is reduced to systematic risk. Therefore, a poorly
diversified fund that ranks higher on Treynor measure, compared with another fund
that is highly diversified, will rank lower on Sharpe Measure.
Jenson Model
Jenson’s model proposes another risk adjusted performance measure.
This measure was developed by Michael Jenson and is sometimes referred to as the
Differential Return Method. This measure involves evaluation of the returns that the
fund has generated vs. the returns actually expected out of the fund given the level of
its systematic risk. The surplus between the two returns is called Alpha, which
measures the performance of a fund compared with the actual returns over the period.
Required return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf+ Bi (Rm – Rf)
Where, Rm is average market return during the given period. After calculating it
alpha can be obtained by subtracting required return from the actual return of the
fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation
of this model is that it considers only systematic risk not the entire risk associated
with the fund and an ordinary investor can not mitigate unsystematic risk, as his
knowledge of market is primitive.

48
Fama Model

The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return
commensurate with the total risk associated with it. The difference between these two
is taken as a measure of the performance of the fund and is called net selectivity.
The net selectivity represents the stock selection skill of the fund manager, as it is the
excess return over and above the return required to compensate for the total risk taken
by the fund manager. Higher value of which indicates that fund manager has earned
returns well above the return commensurate with the level of risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm – Rf)
Where, Sm is standard deviation of market returns. The net selectivity is then
calculated by subtracting this required return from the actual return of the fund.
Among the above performance measures, two models namely, Treynor measure and
Jenson model use systematic risk based on the premise that the unsystematic risk is
diversifiable. These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds and can invest in
a number of options to dilute some risks. For them, a portfolio can be spread across a
number of stocks and sectors. However, Sharpe measure and Fama model that
consider the entire risk associated with fund are suitable for small investors, as the
ordinary investor lacks the necessary skill and resources to diversified. Moreover, the
selection of the fund on the basis of superior stock selection ability of the fund
manager will also help in safeguarding the money invested to a great extent. The
investment in funds that have generated big returns at higher levels of risks leaves the
money all the more prone to risks of all kinds that may exceed the individual
investors’ risk appetite.

49
LIST OF AMC’S

Kotak mutual funds

ABN AMRO Mutual fund
Birla Mutual fund
Deutsche Mutual fund
DSP Merrill Lynch Mutual fund
Franklin Templeton Mutual fund
HDFC Mutual fund
HSBC Mutual fund
ING Vysya Mutual fund
JM Financial Mutual fund
Networth Mutual fund
LIC Mutual fund
Morgan Stanley Mutual fund
Principal Mutual fund
Prudential KOTAK Mutual fund
Reliance Mutual fund
SBI Mutual fund
Sundaram Mutual fund
TATA Mutual fund
Unit Trust of India Mutual fund
UTI Mutual fund

50
 TYPES OF MUTUAL FUND SEHEMES

BY STRUCTURE
 Open-Ended Schemes
 Close-Ended Schemes
 Interval Schemes
BY INVESTMENT OBJECTIVE
 Growth Schemes
 Income Schemes
 Balanced Schemes
 Money Market Schemes
OTHER SCHEMES
 Tax saving Schemes
 Special Schemes
 Index Schemes
 Sector Specific Schemes

Mutual fund schemes may be classified on the basis of its structure and its investment
objective.
By Structure:
Open-ended funds
An open ended fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value (“NAV”) related prices. The key feature of open-end schemes is liquidity.

51
Closed-ended funds

A closed end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specific period. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they are listed.

Interval funds

These combine the features of open-ended and closed-ended schemes. They are open for
sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective:

Growth funds

The aim of growth funds is to provide capital appreciation over the medium to long-term.
Such schemes normally invest the majority of their corpus in equities. It has been proven
that returns from stocks, have outperformed most other kind of investments held over the
long term. Growth schemes are ideal for investors having a long-term outlook seeking
growth over a period of time.

Income funds

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures
and government securities. Income funds are ideal for capital stability and regular
income.

Balanced funds

The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and investment both in equities and fixed
income securities in the proportion indicated in their offer documents. In a rising stock

52
market, the NAV of these schemes may not normally keep pace, or fall equally when the
market falls. These are ideal for investors looking for a combination of income and
moderate growth.

Money market funds

For over 30 years, money market funds have treated investors well. Money market funds
have been around for 30 years and are a very popular place for investors to park their
money.

Money market funds are a type of mutual fund that invests in short-term (less than a
year) debt securities of agencies of the U.S. Government, banks and corporations and
U.S. Treasury Bills. They are fixed at $1 per share and only the yield fluctuates.

Load Funds

A load fund is one that charges a commission for entry of exit. That is, each time you buy
or sell units in the fund, a commission will be payable. Typically entry exit loads range
from 1% to 2%. It could be corpus is put to work.

No-Load Funds

A No-Load fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a No-
Load fund is that the entire corpus is put to work.

Other Schemes:

Tax saving Schemes:

These schemes offer tax rebates to the investor under specific provisions of the Indian
income tax laws as the Government offers tax incentives for investment in Equity Linked
Saving Scheme (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the
Income Tax Act. The Act also provide opportunities to investors to save capital gains u/s
54EA and 54EB by investing in Mutual funds, provided the capital asset has been sold to
April 1,2000 and the amount is invested before September 30,2000.

53
Special Schemes:

Industry Specific Schemes

Industry Specific Schemes invest in the industries specified in the offer document. The
investment of these funds is limited to specific like Info Tech, FMCG, and
Pharmaceuticals etc.

Index Schemes:

Index Funds attempt to replicate the performance of a particular index such as the BSE
sensex or the NSE.

SECTORAL SCHEMES:

Sectoral funds are those, which invest exclusively in a specified industry or a group of
industries or various segments such as ‘A’ Group shares or initial public offerings.

54
FREQUENTLY USED TERMS
Net Asset Value (NAV)
Net Asset Value 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
outstanding on the Valuation Date.
Is the price at which a close-ended scheme repurchases its units and it may include a
back-end load. This is also called Bid Price.

Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended
schemes redeem their units on maturity. Such prices are NAV related.

Sales Load
Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load.
Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units from the unit holders.

55
 CHAPTER – IV
DATA ANALYSIS & INTERPRETATION

56
For analysis Net Asset Value (NAV) of the Four AMC’S
for the period of 1st December 2017 to 22nd January 2018

Axis IDBI HSBC

HDFC
Market banking GOLD Brazil
GOLD
Date Level Debt fund- FUND- Fund-
Fund –
( NIFTY) Growth GROWTH Growth
Growth

22/01/2018 7376.65 1361.26 8.23 3.61 8.87

21/01/2018 7357.00 1360.93 8.25 3.60 8.93

20/01/2018 7381.8 1360.61 8.21 3.74 8.98

19/01/2018 7420.35 1360.51 8.13 3.77 8.92

18/01/2018 7561.65 1360.21 8.15 3.83 8.89

15/01/2018 7467.4 1359.44 8.05 3.89 8.74

14/01/2018 7557.9 1359.32 8.08 3.85 8.79

13/01/2018 7587.2 1359.09 8.00 3.86 8.67

12/01/2018 7527.45 1358.79 8.09 3.91 8.77

11/01/2018 7611.65 1358.57 8.14 3.97 8.80

08/01/2018 7673.35 1357.84 8.08 4.04 8.81

07/01/2018 7788.05 1357.50 8.10 4.06 8.82

06/01/2018 7828.4 1357.23 8.00 4.07 8.85

05/01/2018 7924.55 1356.91 7.94 4.17 8.68

04/01/2018 7938.45 1356.59 7.90 4.33 8.61

01/01/2018 7897.8 1355.73 7.80 4.28 8.57

31/12/2017 7938.6 1355.38 7.82 4.16 8.55

30/12/2017 7929.2 1354.98 7.87 4.16 8.60

29/12/2017 7863.2 1354.62 7.86 4.38 8.57

28/12/2017 7888.75 1354.33 7.87 4.51 8.61

23/12/2017 7830.45 1352.93 7.87 4.38 8.51

22/12/2017 7829.4 1352.73 7.92 4.48 8.57

57
21/12/2017 7745.65 1352.44 7.88 4.52 8.64

18/12/2017 7828.9 1351.66 7.79 4.53 8.58

17/12/2017 7783.05 1351.28 7.88 4.68 8.49

16/12/2017 7725.25 1350.93 7.90 4.82 8.53

15/12/2017 7659.15 1350.64 7.94 4.58 8.55

14/12/2017 7558.2 1350.47 7.93 4.71 8.54

11/12/2017 7699.6 1349.96 7.90 4.70 8.55

10/12/2017 7643.3 1350.08 7.94 4.79 8.56

09/12/2017 7695.5 1349.88 7.98 4.53 8.60

08/12/2017 7738.5 1349.80 7.94 4.54 8.64

07/12/2017 7816.55 1349.73 7.99 3.61 8.60

04/12/2017 7817.6 1349.10 7.88 3.60 8.66

03/12/2017 7902.3 1348.88 7.79 3.74 8.58

02/12/2017 7976.7 1348.49 7.88 3.77 8.50

01/12/2017 7958.15 1348.17 7.89 3.83 8.57

Average 7722.38 1354.51 7.96 4.16 8.66

Calculations of Risk of Axis banking Debt fund-Growth

For the period of 1st December 2016 to 22nd January 2017

Axis banking returns

Debt fund-
Market Level
Growth
Date ( NIFTY) returns
22/01/2018 7376.65 1361.26

21/01/2018 7357.00 -19.65 1360.93 -0.33

58
20/01/2018 7381.8 24.8 1360.61 -0.32

19/01/2018 7420.35 38.55 1360.51 -0.1

18/01/2018 7561.65 141.3 1360.21 -0.3

15/01/2018 7467.4 -94.25 1359.44 -0.77

14/01/2018 7557.9 90.5 1359.32 -0.12

13/01/2018 7587.2 29.3 1359.09 -0.23

12/01/2018 7527.45 -59.75 1358.79 -0.3

11/01/2018 7611.65 84.2 1358.57 -0.22

08/01/2018 7673.35 61.7 1357.84 -0.73

07/01/2018 7788.05 114.7 1357.5 -0.34

06/01/2018 7828.4 40.35 1357.23 -0.27

05/01/2018 7924.55 96.15 1356.91 -0.32

04/01/2018 7938.45 13.9 1356.59 -0.32

01/01/2018 7897.8 -40.65 1355.73 -0.86

31/12/2017 7938.6 40.8 1355.38 -0.35

30/12/2017 7929.2 -9.4 1354.98 -0.4

29/12/2017 7863.2 -66 1354.62 -0.36

28/12/2017 7888.75 25.55 1354.33 -0.29

23/12/2017 7830.45 -58.3 1352.93 -1.4

22/12/2017 7829.4 -1.05 1352.73 -0.2

21/12/2017 7745.65 -83.75 1352.44 -0.29

18/12/2017 7828.9 83.25 1351.66 -0.78

17/12/2017 7783.05 -45.85 1351.28 -0.38

16/12/2017 7725.25 -57.8 1350.93 -0.35

15/12/2017 7659.15 -66.1 1350.64 -0.29

14/12/2017 7558.2 -100.95 1350.47 -0.17

11/12/2017 7699.6 141.4 1349.96 -0.51

10/12/2017 7643.3 -56.3 1350.08 0.12

09/12/2017 7695.5 52.2 1349.88 -0.2

59
08/12/2017 7738.5 43 1349.8 -0.08

07/12/2017 7816.55 78.05 1349.73 -0.07

04/12/2017 7817.6 1.05 1349.1 -0.63

03/12/2017 7902.3 84.7 1348.88 -0.22

02/12/2017 7976.7 74.4 1348.49 -0.39

01/12/2017 7958.15 -18.55 1348.17 -0.32

Average 15.74 0.36

Stranded Deviation (SD) 1.48 0.11

Beta 0.62

Graphical Presentation of Axis banking Debt fund-Growth For the

month of January 2018

60
Interpretation:

Axis banking Debt fund-Growth has been analyzed and it is found that there is a
positive growth. However on the basis of the avg returns of Axis banking Debt fund-
Growth there is a growth 0.36 as against the index avg of 14.74 the beta being less
than 1 the stock is not highly volatile.

Calculations of Risk of IDBI GOLD FUND-GROWTH

For the period of 1st December 2017 to 22nd January 2018

61
 returns IDBI GOLD returns
Market Level
Date FUND-
( NIFTY)
GROWTH
22/01/2018 7376.65 8.23

21/01/2018 7357.00 -19.65 8.25 0.02

20/01/2018 7381.8 24.8 8.21 -0.04

19/01/2018 7420.35 38.55 8.13 -0.08

18/01/2018 7561.65 141.3 8.15 0.02

15/01/2018 7467.4 -94.25 8.05 -0.1

14/01/2018 7557.9 90.5 8.08 0.03

13/01/2018 7587.2 29.3 8 -0.08

12/01/2018 7527.45 -59.75 8.09 0.09

11/01/2018 7611.65 84.2 8.14 0.05

08/01/2018 7673.35 61.7 8.08 -0.06

07/01/2018 7788.05 114.7 8.1 0.02

06/01/2018 7828.4 40.35 8 -0.1

05/01/2018 7924.55 96.15 7.94 -0.06

04/01/2018 7938.45 13.9 7.9 -0.04

01/01/2018 7897.8 -40.65 7.8 -0.1

31/12/2017 7938.6 40.8 7.82 0.02

30/12/2017 7929.2 -9.4 7.87 0.05

29/12/2017 7863.2 -66 7.86 -0.01

28/12/2017 7888.75 25.55 7.87 0.01

23/12/2017 7830.45 -58.3 7.87 0

22/12/2017 7829.4 -1.05 7.92 0.05

21/12/2017 7745.65 -83.75 7.88 -0.04

18/12/2017 7828.9 83.25 7.79 -0.09

17/12/2017 7783.05 -45.85 7.88 0.09

16/12/2017 7725.25 -57.8 7.9 0.02

15/12/2017 7659.15 -66.1 7.94 0.04

62
14/12/2017 7558.2 -100.95 7.93 -0.01

11/12/2017 7699.6 141.4 7.9 -0.03

10/12/2017 7643.3 -56.3 7.94 0.04

09/12/2017 7695.5 52.2 7.98 0.04

08/12/2017 7738.5 43 7.94 -0.04

07/12/2017 7816.55 78.05 7.99 0.05

04/12/2017 7817.6 1.05 7.88 -0.11

03/12/2017 7902.3 84.7 7.79 -0.09

02/12/2017 7976.7 74.4 7.88 0.09

01/12/2017 7958.15 -18.55 7.89 0.01

Average 16.15 -0.009

Stranded Deviation (SD) 1.48 -0.004

Beta 0.12

Graphical Presentation of IDBI GOLD FUND-GROWTH For the month

of January 18

63
Interpretation:

IDBI GOLD FUND-GROWTH have been analyzed and it is found that there is a
negative growth. However on the basis of the avg returns of IDBI GOLD FUND-
GROWTH there is a negative growth 0.004as against the index avg of negative 0.19
the beta being less than 1 the stock is not highly volatile.

Calculations of Risk of HSBC Brazil Fund-Growth

For the period of 1st December 2017 to 22nd January 2018

64
 Market Level Return HSBC Brazil Return
Date
( NIFTY) Fund-Growth

22/01/2018 7376.65 3.61

21/01/2018 7357.00 -19.65 3.6 -0.01

20/01/2018 7381.8 24.8 3.74 0.14

19/01/2018 7420.35 38.55 3.77 0.03

18/01/2018 7561.65 141.3 3.83 0.06

15/01/2018 7467.4 -94.25 3.89 0.06

14/01/2018 7557.9 90.5 3.85 -0.04

13/01/2018 7587.2 29.3 3.86 0.01

12/01/2018 7527.45 -59.75 3.91 0.05

11/01/2018 7611.65 84.2 3.97 0.06

08/01/2018 7673.35 61.7 4.04 0.07

07/01/2018 7788.05 114.7 4.06 0.02

06/01/2018 7828.4 40.35 4.07 0.01

05/01/2018 7924.55 96.15 4.17 0.1

04/01/2018 7938.45 13.9 4.33 0.16

01/01/2018 7897.8 -40.65 4.28 -0.05

31/12/2017 7938.6 40.8 4.16 -0.12

30/12/2017 7929.2 -9.4 4.16 0

29/12/2017 7863.2 -66 4.38 0.22

28/12/2017 7888.75 25.55 4.51 0.13

23/12/2017 7830.45 -58.3 4.38 -0.13

22/12/2017 7829.4 -1.05 4.48 0.1

21/12/2017 7745.65 -83.75 4.52 0.04

18/12/2017 7828.9 83.25 4.53 0.01

17/12/2017 7783.05 -45.85 4.68 0.15

16/12/2017 7725.25 -57.8 4.82 0.14

15/12/2017 7659.15 -66.1 4.58 -0.24

65
14/12/2017 7558.2 -100.95 4.71 0.13

11/12/2017 7699.6 141.4 4.7 -0.01

10/12/2017 7643.3 -56.3 4.79 0.09

09/12/2017 7695.5 52.2 4.53 -0.26

08/12/2017 7738.5 43 4.54 0.01

07/12/2017 7816.55 78.05 3.61 -0.93

04/12/2017 7817.6 1.05 3.6 -0.01

03/12/2017 7902.3 84.7 3.74 0.14

02/12/2017 7976.7 74.4 3.77 0.03

01/12/2017 7958.15 -18.55 3.83 0.06

Average 16.15 0.006

Stranded Deviation (SD) 1.48 0.02

Beta 0.12

Graphical Presentation of HSBC Brazil Fund-Growth

For the month of January 18

66
Interpretation:

HSBC Brazil Fund-Growth have been analyzed and it is found that there is a
positive growth. However on the basis of the avg returns of HSBC Brazil Fund-
Growth there is a negative growth 0.02 as against the index avg of negative 0.02 the
beta being less than 0.12 the stock is not highly volatile.

Calculations of HDFC GOLD Fund –Growth

For the period of 1st December 2017 to 22nd January 2018

67
 Return Return
Market Level HDFC
Date
( NIFTY) GOLD Fund
–Growth

22/01/2018 7376.65 8.87

21/01/2018 7357.00 -19.65 8.93 0.06

20/01/2018 7381.8 24.8 8.98 0.05

19/01/2018 7420.35 38.55 8.92 -0.06

18/01/2018 7561.65 141.3 8.89 -0.03

15/01/2018 7467.4 -94.25 8.74 -0.15

14/01/2018 7557.9 90.5 8.79 0.05

13/01/2018 7587.2 29.3 8.67 -0.12

12/01/2018 7527.45 -59.75 8.77 0.1

11/01/2018 7611.65 84.2 8.80 0.03

08/01/2018 7673.35 61.7 8.81 0.01

07/01/2018 7788.05 114.7 8.82 0.01

06/01/2018 7828.4 40.35 8.85 0.03

05/01/2018 7924.55 96.15 8.68 -0.17

04/01/2018 7938.45 13.9 8.61 -0.07

01/01/2018 7897.8 -40.65 8.57 -0.04

31/12/2017 7938.6 40.8 8.55 -0.02

30/12/2017 7929.2 -9.4 8.60 0.05

29/12/2017 7863.2 -66 8.57 -0.03

28/12/2017 7888.75 25.55 8.61 0.04

23/12/2017 7830.45 -58.3 8.51 -0.1

22/12/2017 7829.4 -1.05 8.57 0.06

21/12/2017 7745.65 -83.75 8.64 0.07

18/12/2017 7828.9 83.25 8.58 -0.06

17/12/2017 7783.05 -45.85 8.49 -0.09

68
16/12/2017 7725.25 -57.8 8.53 0.04

15/12/2017 7659.15 -66.1 8.55 0.02

14/12/2017 7558.2 -100.95 8.54 -0.01

11/12/2017 7699.6 141.4 8.55 0.01

10/12/2017 7643.3 -56.3 8.56 0.01

09/12/2017 7695.5 52.2 8.60 0.04

08/12/2017 7738.5 43 8.64 0.04

07/12/2017 7816.55 78.05 8.60 -0.04

04/12/2017 7817.6 1.05 8.66 0.06

03/12/2017 7902.3 84.7 8.58 -0.08

02/12/2017 7976.7 74.4 8.50 -0.08

01/12/2017 7958.15 -18.55 8.57 0.07

Average 16.15 0.008

Stranded Deviation (SD) 1.48 0.002

Beta 0.08

Graphical presentation of HDFC GOLD Fund –Growth)For the month of

January 18

69
Interpretation:

HDFC GOLD Fund –Growthhas been analyzed and it is found that there is a negative
growth. However on the basis of the avg returns of HDFC GOLD Fund –Growththere
is a negative growth 0.008 as against the index avg of negative 0.02 the beta being
less than 0.08 the stock is not highly volatile.

Comparative Study of the performance of the Selected AMC’s

Sharp index and Treynor index are calculated
For the month of January 18
Name of the Fund Rf Sharp's Treynor

70
 Return Risk(std Beta (Rm- (Rm-
(Rm) dev) (β) Rf)/σ Rf)/β

Axis banking Debt fund- 0.36 0.1 0.62 0.06

Growth
3.00 0.48
IDBI GOLD FUND-
0.009 -0.004 0.12 0.06
GROWTH
-0.42 -0.85
HSBC Brazil Fund-
0.006 0.02 0.12 0.06
Growth
-2.7 -0.45
HDFC GOLD Fund –
0.008 0.002 0.08 0.06
Growth
-2.6 -0.86

71
The graphical representation of Sharp Index:

Interpretation:

 From the above table and graph we can know that Axis banking Debt fund-
Growth and are giving good returns and they are in first position,

 And the second position is HDFC GOLD Fund –Growth

72
The graphical representation of TREYNER Index:

Interpretation:

 From the above table and graph we can know Axis banking Debt fund-
Growth is performing well and it is in first position

 And the second position is HDFC GOLD Fund –Growth

 The general trend in the reduction of the market price for various mutual
funds studied is not encouraging the stock market index has also been
falling continuously because of general economic slowdown however the
funds are ranked considering sharp and trenyors in the order of
performances

73
CHAPTER-V
 FINDINGS

 SUGGESSIONS

 CONCLUSION

 BIBLIOGRAPHY

74
FINDINGS

SHARPE’S: As per Sharpe performance measure, a high Sharpe ratio is preferable

as it indicates a superior risk adjusted performance of a fund. From the above HDFC
GOLD Fund –Growth and Axis banking Debt fund-Growth show a better risk-
adjusted performance out of top4 AMC’S.

TREYNOR’s: As per TREYNOR’S ratio the Treynor’s reward to volatility - having

high positive index is favorable. Therefore, as per this ratio also Axis banking Debt
fund-Growth is preferable.

75
CONCLUSION

 From the study analysis conducted it is clear that in EQUITY FUNDS-

Axis banking Debt fund-Growth is performing very well.

 Investing in HDFC-Growth will leads to profits.

 By seeing the overall performance Axis banking Debt fund-Growth

is performing very well.

 The prospective investors are needed to be made aware of the

investment in mutual funds.

 The Industry should keep consistency and transparency in its

management and investors objectives.

 There is 100% growth of mutual fund as foreign AMCS are in

queue to enter the Indian markets.

 Mutual funds can also perctrate in to rural areas.

76
SUGGESTIONS TO INVESTORS:

Investing Checklist

 Financial goals & Time frame

(Are you investing for retirement? A child’s education? Or for current income? )

Risk Taking Capacity

Identify funds that fall into your Buy List

Obtain and read the offer

Documents match your objectives

 In terms of equity share and bond weightings, downside risk

 protection, tax benefits offered, dividend payout policy, sector focus

 Performance of various funds with similar objectives for at least 3-5 years

 Think hard about investing in sector funds For relatively aggressive investors

 Close touch with developments in sector, review portfolio regularly – Look for
`load' costs

 Management fees, annual expenses of the fund and sales loads

 Look for size and credentials

 Asset size less than Rs. 25 Crores

 Diversify, but not too much

 Invest regularly, choose the S-I-P

 MF- an integral part of your savings and wealth building plans.

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Portfolio Decision

The right asset allocation

i. Age = % in debt instruments

ii. Reality= different financial position, different allocation

iii. Younger= Riskier

2. Selecting the right fund/s

i. Based on scheme’s investment philosophy

ii. Long-term, appetite for risk, beat inflation– equity funds best

3. TRAPS TO AVOID

4. IPO Blur

5. Begin with existing schemes (proven track record) and then new

6. schemes

i. Avoid Market Timing

7. MF Comparison

8. Absolute returns

9. –% Difference of NAV

i. Diversified Equity with Sector Funds– NO

10. Benchmark returns

i. SEBI directs

ii. Fund's returns compared to its benchmark

11. Time period –Equal to time for which you plan to invest

i. Equity- compare for 5 years, Debt- for 6 months

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 12. Market conditions

i. Proved its mettle in bear market

Recommendations and Suggestions to AMCS:

1) Brand building:

Brand building is an exercise, which every business enterprise will have.

Brand is the soul of an institution; it survives on it, lives with it and cherishes it.
Example: LIC Nomura Balanced -Growth has a brand, every bank, insurance
companies; mutual fund companies have got their own brands.

2) Strength full Strategies:

Every AMC should try to turn into a more modern, a more vibrant, a more
transparent and regulatory compliance institution. It is with this in mind, every
institution should try to come up with verity of different type of products to fill
different investment objectives

3) Marketing tools for total quality achievement:

a) Large Network.

b) Effective Man power

c) Distribution across the Market

d) Customer relations(Building better relationships)

e) Value added service

f) Better transparency level

g) Building brand name as a disciplined player.

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 4) Innovation:

MF industry can be classified morely into three categories like equity, debt
and balanced. And there is also complexive in nature. Fund managers are not able to
reach niche market. The products are should be innovative that can meet niche
market. Here MF should follow the FMCG industry innovative strategy.

The Ground rules of Mutual Fund Investing

Assess yourself

1) Try to understand where the money is going

2) Don't rush in picking funds, think first

3) Invest. Don’t speculate

4) Don’t put all the eggs in one basket

5) Be regular

6) Do your homework

7) Find the right funds

8) Keep track of your investments

9) Know when to sell your mutual funds

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BIBLIOGRAPHY
Books References:

1. Security Analysis and Portfolio Management

(Fischer & Jordan)

2. Investment Decisions

(V.K. Bhalla)

3. Security Analysis & Portfolio Management

(Robbins)

WEBSITES
www.mutualfundsindia.com
www.reliancemutual.com
www.sbimf.com
www.hdfc.com
www.moneycontrol.com
www.amfiindia.com
www.nse-india.com

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