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A

DISSERTATION REPORT ON
“A STUDY THE PERFORMANCE OF MUTUAL FUND SCHEMES IN
THE FRAMEWORK OF RISK AND RETURN”. (ELSS)
TO Share khan LIMITED

Dissertation submitted in partial fulfillment of the requirements of Bangalore


University for the Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Of
BANGALORE UNIVERSITY

SUBMITTED BY:
Under the Guidance of
Mr.VAGGANA VAR

R.K INSTITUTE OF MANAGEMENTAND COMPUTER SCIENCE


Bellandur Gate, Sarjapur Main Road
Banglore-560034
STUDENT DECLARATION

I hereby declare that this dissertation titled “A STUDY THE


PERFORMANCE OF MUTUAL FUND SCHEMES IN THE FRAMEWORK OF RISK
AND RETURN”. (ELSS) submitted by me to the department of management, Bangalore
University in partial fulfillment of requirements of MBA program is a bonafide work
carried by me under the guidance of Mr. VAGGANAVAR. This has not been submitted
earlier to any other university or institution for the award of any degree / diploma /
certificate or published any time before.

BASAVARAJ.Y
ACKNOWLEDGEMENT

Working in a well-reputed organization is a challenging task. I have


completed this study on time. This study could not have been successful without
the help of following persons.
I sincerely express my thanks to Mr. VAGGANAVAR Lecturer,
Department Of Management Studies, for giving me timely advice and suggestions
as internal guide of MBA Department, RKIMCS, Bangalore.
I wish to thank all faculty members of Department of Management
Studies, RKIMCS, Bangalore and my dear friends for their co-operation and
support.
Last but not least I would like to thank my family members for moral
support and encouragement they have given.

Place: Bangalore BASAVARAJ.Y


Date: (Reg. No. 07JPCM6027)
LIST OF CONTENTS
CHAPTER PAGE
NO CONTENTS NO
EXECUTIVE SUMMARY 1
1 INTRODUCTION
• Part A: About the Industry 2-5
• Part B: About the Subject 6-17
2 RESEARCH DESIGN 18-27
• Statement of the Problem
• Objective of the Study
• Sample design
• Need for study
• Scope of study
• Research design
• Operational definition of the concepts
• Tools and techniques for data collection
• Limitations of the Study
• Overview of Chapter scheme
3 COMPANY PROFILE 28-43
• Introduction
• Objectives, vision, culture and values
• Strategy
• Product profile
• Competitors
DATA4ANALDDATA ANALYSIS AND INTERPRETATION 44-69
5 SUMMARY OF FINDINGS, CONCLUSIONS, 70-76
SUGGESTIONS AND RECOMMENDATIONS

BIBLIOGRAPHY 77
LIST OF TABLES
TABLE PAGE
NO CONTENTS NO
1 Table showing the monthly return of Birla Sunlife tax relife96 45
2 Table showing the calculation rsk,beta, trenyor,share and 46
jenson
3 Table showing the monthly return of Franklin India Taxshield 50
4 Table showing the calculation rsk,beta, trenyor,share and 51
jenson
5 Table showing the monthly returns of hdfc tax saver 55
6 Table showing the calculation rsk,beta, trenyor,share and 56
jenson
7 Table showing the SBI magnum Taxgain 60

8 Table showing the calculation rsk,beta, trenyor,share and 61


jenson

9 Table showing the Sundaram tax saver98 65

10 Table showing the calculation rsk,beta, trenyor,share and 66


jenson
LIST OF GRAPHS

TABLE CONTENTS PAGE


NO NO
1 Graph showing the Birla Sunlife tax relief96 nav movement 49
2 Graph showing the Franklin India Taxshield 54
3 Graph showing the hdfc tax saver 59
4 Graph showing the sbi magnum tax gain 64
5 Graph showing the Sundaram tax saver 98 69

EXECUTIVE SUMMARY
Financial market’s main function is to facilitate transfer of funds from surplus
sectors to deficit sectors. A financial market consists of investor or buyers, sellers, dealers
and does not refer to physical location. Indian financial system consists of two markets,
viz. money and capital market. The core of money market is the inter-bank call money
market. It has two components - organised and unorganised.

Capital market provides the framework in which savings and investments take
place. On one hand it enables companies to raise resources from the investing community
and on the other, it facilitate households to invest their savings in industrial or
commercial activities. The capital market consists of primary and secondary segments. In
primary market it deals with the issue of new instruments by the corporate sector such as
equity shares, preference shares, and debentures. The secondary market or stock
exchanges where existing Securities are traded. Capital market plays a major role in
Indian financial system.

So, Equities & mutual fund is the part of capital market. Mutual fund industry in
India began with setting up of Unit Trust of India (UTI) in 1964 by the government of
India. Now a day mutual fund is playing very important role in the industry. Investors
will get the benefit of return, capital appreciation, tax benefits and safety to there
investment and companies will get the capital for there growth. Recently they have also
started Systematic Investment Plan(SIP) with the help of this even small investors
(minimum of Rs. 100)can start investing, by this even students can also invest in this
fund. So, we came to know how this mutual fund works. .

The saving of an individual are spread through different means of investment one
of them is mutual fund which is a growing investment now a days because of diversified
risk and lack of time to look after their money.
CHAPTER-1
INTRODUCTION
1.1 ABOUT THE INDUSTRY

Indian capital market is one of the oldest and largest capital markets of the world.
It history can be traced back to 19th century. The first instance of organized trading
corporate securities in India is related to the trading in securities of East India Company.
The concept of limited liability introduced with enactment of companies act, 1850 helped
in commencing an era of joint-stock companies, which in turn paved the way for the
development of capital market. In due course, broker used to assemble at some common
places to conduct trade. By 1874, Dalal Street in Mumbai became a prominent place of
meeting of the broker. Bombay Stock Exchange (BSE) the first organized stock
exchange in the country was started functioning in 1875. However, it was in 1887 the
BSE formally established as a society named Native Share and Stock Brokers
Association.

The effects of industrial revolution began to be felt in India by the dawn of 20 th


century. This period was also marked by the Swadeshi Movement which created much
industrial enthusiasm in the country. During the period of first and Second World War,
industrial sector as well as capital market exhibited much dynamism. After independence
the Indian government gave priority to the infrastructure development, considering the
urgency of proceeding with large scale industrial development. Accordingly many
financial institutions like IFC, ICICI, LIC, UTI, and IDBI were established to accelerate
the pace of industrialization in India. The promulgation of the companies’ act, 1956
based on recommendations of the company Law committee was another important event.
The passing of FERA 1973 limited the share holding of foreign firms to 40%, if they
were recognized to be as Indian company. For diluting their share holding, many MNC’s
offered shares to the public at attractive rates. Encouraged by good response to these
issues, much domestic company also came out with public issues. Individual investors
were enthusiastic to invest in the capital market as the found equity investment to be
hedge against inflation and source of higher earning compared to other investments.

CAPITAL MARKET OPERATIONS


It consist manly of primary market operation and secondary market operations.
Primary market or new issue market deals with the issue of new securities to investors on
facilitates the corporate sectors in raising funds. The primary market is made up of two
components: where the firms go public for the first time through initial public offering
and where the firms which are already traded raise additional capital through seasoned
equity offerings.

In the Secondary market the securities which are floated and subscribed in the
primary market are traded. The primary function of stock exchange or secondary market
is to provide liquidity of capital and continuous market for outstanding securities. The
stock exchange brings about a correct evaluation of securities and set prices of securities
close to their investment worth.

OVERVIEW OF INDIAN STOCK MARKET

The only stock exchanges operating in the 19th century were those of Mumbai set
up in 1875 and Ahmadabad set up in 1894. These were organized as voluntary non-profit
making associations of brokers to regulate and protect their interest. Before the control on
securities trading became a central subject under the Constitution in 1950, it was a state
subject and the Bombay Security Contracts (Control) Act of 1925 used to regulate trading
in securities. Under this act, the Bombay Stock Exchange was recognized in 1927 and
Ahmadabad in 1937. During the war boom, a number of stock exchanges were organized
even in Mumbai, Ahmadabad and other centers, but they were not recognized. Soon after
it became a central subject. Central legislation was proposed and a committee headed by
A.D. Gorwala went into the Bill for securities regulation. On the basis of the committee’s
recommendations and public discussion, the Securities Contracts (Regulation) Act
SC(R) Act became law in 1956.
Stock exchange

“Stock Exchange means any body or individuals whether incorporated or not,


constituted for the purpose of assisting, regulating or controlling the business of buying,
selling, or dealing in securities”. It is an association of member brokers for the purpose of
self – regulation and protecting the interests of its members. It can operate only if it is
recognized by the government under the Securities Contracts (Regulation) Act, 1956. The
recognition is granted under section 3 of the act by the central government, ministry of
finance.

Present recognized stock exchanges

At present, there are 21 stock exchanges recognized under the securities contracts
(regulation) Act, 1956. They are located at Bombay, Calcutta, Madras, Delhi,
Ahmedabad, Hyderabad, Indore, Bhuwandeshwar, Mangalore, Patna, Bangalore, Rajkot,
Guwahati, Jaipur, Kanpur, Ludhiana, Baroda, Cochin and Pune. The recently recognized
stock exchanges are at Coimbatore and Meerut. Visakhanatnam stock exchange was
recognized in 1996 for electronic trading. A stock exchange has also been sought for this
body as the jurisdiction of the Securities Contracts (Regulation) Act, 1956 has not so far
been extended to the areas covered by the state. A decade ago, there were hardly 8 stock
exchanges in the country. There is no trading, how ever, in Meerut and Vishakhapatnam
stock exchanges.

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India
Ltd (NSE) are the two primary exchanges in India. In addition, there are 22 Regional
Stock Exchanges in India. However, the BSE and NSE have established themselves as
the two leading exchanges and account for about 80% of the equity volume traded in
India.

The NSE and BSE are equal in size in terms of daily traded volume. The average
daily turnover at the exchanges has increased from 851 crore in 1997-98 to 1,284 crore in
1998-99 and further to Rs 2,273 crore in 1999-2000 (April –August 1999).

NSE has around 1500 shares listed with a total market capitalization of around 9,21,500
crores.The BSE has over 6000 stocks listed and has a market capitalization of around
9,68,000 cores.

The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the
S&P NSE 50 Index (NIFTY) which consists of fifty stocks. The BSE Sensex is the older
and more widely followed index. Both the exchanges have switched over from the open
outcry trading system to a fully automated computerized mode of trading known as (BSE
Online Trading) BOLT and (National Exchange Automated Trading) NEAT system. It
facilitates more efficient processing, automatic order matching, faster execution of trades
and transparency.

The key regulator governing stock exchanges, brokers, depositories, depository


participants, mutual funds, FII and other participants in Indian secondary and primary
market is the Securities & Exchange Board of India (SEBI) Ltd.

1.2 ABOUT THE SUBJECT

HISTORY OF THE MUTAL FUND


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 appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.

Definition of Mutual Fund-


The SEBI (MF) Regulations, 1993 defines mutual fund 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 investing in securities in accordance with these
regulations.”

Mutual Fund Industry-


Mutual fund industry in India began with setting up of Unit Trust of India
(UTI) in 1964 by the government of India. During last 39 years UTI has grown to be a
dominant player in the industry. The UTI is governed by a special legislation, the Unit
Trust of India Act 1963. In 1987 public sector banks and insurance companies were
permitted to set up mutual funds and accordingly in 1987 six public sectors banks have
set up mutual funds. Also the two insurance companies LIC and GIC established the
mutual funds.
Securities Exchange Board of India (SEBI) formulated the mutual fund regulation
in 1993, which for the first time established a comprehensive regulatory framework for
the mutual fund industry. Since then several mutual funds have been set up the private
and joint sectors.

History of Mutual Fund-


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 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.

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


1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Can bank 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.

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 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.
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 corers 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 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.

Concept of Mutual Fund-

Steps of concepts of Mutual Fund-


1. Many investors with the common objective pool their money in Mutual Fund.
2. Investors on a proportionate basis, get mutual fund units for the sum contributed
to the pool.
3. The money collected by the investors is invested into the shares, debentures
and other securities by the Fund Manager.
4. The Fund manager realizes gains or losses, and collects dividends or interest
Income.
5. Any capital gains or losses from such investment are passed on to the
6. Investors in proportion of the number of units held by them.

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.

Working of Mutual Fund

To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from
time to time. MF either promoted by public or by private sector entities including one
promoted by foreign entities is governed by these Regulations.
SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or board
of trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of
mutual funds that the mutual funds function within the strict regulatory framework. Its
objective is to increase public awareness of the mutual fund industry.

AMFI also is engaged in upgrading professional standards and in promoting best industry
practices in diverse areas such as valuation, disclosure, transparency etc.

Organization of a Mutual fund


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

Types of Mutual Fund schemes-

A. Schemes according to Maturity Period:


A mutual fund scheme can be classified into open-ended scheme or close-ended
scheme depending on its maturity period.
1. Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and
repurchase on a continuous basis. These schemes do not have a fixed maturity period.
Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices
which are declared on a daily basis. The key feature of open-end schemes is liquidity.

2. Close-ended Fund/ Scheme


A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The
fund is open for subscription only during a specified period at the time of launch of the
scheme. 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 the
units are listed. In order to provide an exit route to the investors, some close-ended funds
give an option of selling back the units to the mutual funds NAV related prices. SEBI
Regulations stipulate that at least one of the two exit routes is provided to the investor i.e.
either repurchase facility or through listing on stock exchanges. These mutual funds
schemes disclose NAV generally on weekly basis.

B. Schemes according to Investment Objective:


A scheme can also be classified as growth scheme, income scheme, or balanced
scheme considering its investment objective. Such schemes may be open-ended or close-
ended schemes as described earlier. Such schemes may be classified mainly as follows.

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

 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.
 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.
 Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower
market capitalization than large capitalization companies are called Mid-Cap or
Small-Cap Funds. Market capitalization of Mid-Cap companies is less than that of
big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores)
and Small-Cap companies have market capitalization of less than Rs. 500 crores.
Market Capitalization of a company can be calculated by multiplying the market
price of the company's share by the total number of its outstanding shares in the
market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of
Large-Cap Companies which gives rise to volatility in share prices of these
companies and consequently, investment gets risky.
 Equity Linked Saving Scheme- 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.
 Dividend Yield Funds -The objective of Equity Income or Dividend Yield
Equity Funds is to generate high recurring income and steady capital appreciation
for investors by investing in those companies, which issue high dividends. Equity
Income or Dividend Yield Equity Funds are generally exposed to the lowest risk
level as compared to other equity funds.
 Gold Fund- The objective of this fund is accumulating the money at the gold rate
according to the units held by the investors. This is one of the new fund
introduced. Here all the investors will invest for the pool account of mutual fund
and that amount is invested in the gold. And according to the fluctuation of the
rates of gold in the market, fund manager invest when rates are in good rates like
this profit earned from this gold fund is distributed according to the units held by
the investors

2. Debt funds-

Funds that invest in medium to long-term debt instruments issued by private


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

 Diversified Debt Funds - Debt funds that invest in all securities issued by entities
belonging to all sectors of the market are known as diversified debt funds. The best
feature of diversified debt funds is that investments are properly diversified into all
sectors which results in risk reduction. Any loss incurred, on account of default by a
debt issuer, is shared by all investors which further reduces risk for an individual
investor.
 High Yield Debt funds - As we now understand that risk of default is present in all
debt funds, and therefore, debt funds generally try to minimize the risk of default by
investing in securities issued by only those borrowers who are considered to be of
"investment grade". But, High Yield Debt Funds adopt a different strategy and prefer
securities issued by those issuers who are considered to be of "below investment
grade". The motive behind adopting this sort of risky strategy is to earn higher
interest returns from these issuers. These funds are more volatile and bear higher
default risk, although they may earn at times higher returns for investors.
 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. 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 payment obligations on itself. Currently, no AMC in India offers assured
return schemes to investors, though possible.
 Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes
having short-term maturity period (of less than one year) that offer a series of plans
and issue units to investors at regular intervals. Unlike closed-end funds, fixed term
plans are not listed on the exchanges. Fixed term plan series usually invest in debt /
income schemes and target short-term investors. The objective of fixed term plan
schemes is to gratify investors by generating some expected returns in a short period.

3. Balanced Fund-
A balanced fund is one that has a portfolio comprising debt instruments,
convertible securities, and Preference equity shares. Their assets are generally held in
more or less equal proportions between debt/money market securities and equities. By
investing in a mix of this nature, balanced funds seek to attain the objectives of
income, moderate capital appreciation and preservation of capital, and are ideal for
investors with a conservative and long-term orientation.

ADVANTAGES AND DISADVENTAGE OF MUTUAL FUND

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. Flexibility: Investors also benefit from the convenience and flexibility offered
by Mutual Funds. Investors can switch their holdings from a debt scheme to an
equity scheme and vice-versa. Option of systematic (at regular intervals)
investment and withdrawal is also offered to the investors in most open-end
schemes.
6. Safety: Mutual Fund industry is part of a well-regulated investment environment
where the interests of the investors are protected by the regulator. All funds are
registered with SEBI and complete transparency is forced.

DISADVANTAGES OF MUTUAL FUND

1. Cost 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.
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.
Mutual Fund Who Objective Investment Risk Term of
Type Should Portfolio investment
Invest
Growth Fund Aggressive High growth Equity shares High 3-5 years
investors Risk
Sector Fund Aggressive High growth Equity shares Very 1-3years
investors high
Mid-cap and Aggressive Long term Equity shares High 1-3 years
Small-cap investors growth risk
Fund
Equity Linked Moderate Long-term Equity shares High 1-3years
Saving and growth with
Scheme aggressive tax saving
investors
Dividend Fund Moderate Return Preference Low 1-3 years
Investors shares
Gold Fund Moderate Long term Equity shares Low 3-5 years
and growth
aggressive
investors
Diversified Moderate High growth Equity shares High 1-3years
debt and and
aggressive Preference
investors share
High yield Moderate High Return Equity shares Low 1-3years
debt Investors
Assured return Moderate Return Equity shares Low 1-3years
Investors
Fixed term Moderate Moderate Equity shares Low 3-5 years
plan Investors Investors
CHAPTER-2
RESEARCH METHODOLOGY

2.1 STATEMENT OF THE PROBLEM


In India, very little work has been done to investigate fund managers forecasting
abilities. Active fund managers are expected to reward higher return. If the fund manager
feels that market on the whole overvalued, then he would get out of the market. Hence
the present study has the objective of finding out. The performance of mutual fund
schemes in the framework of risk and return. (ELSS)

2.2 OBJECTIVE OF THE STUDY:

 To identify the risk & return involved in Mutual funds.


 To study the concept of mutual funds
 To compare the performance of different mutual funds.
 To understand the concept of Net Asset Value (NAV) and mutual fund

SAMPLE DESIGN

The population consists of 5 old funds of risk and return of last three year the entire
population has been taken in to consideration for the study.
Need for the Study

Business concerns, corporate investors worldwide are using these new financial
instruments; “Mutual Funds” effectively to reduce substantial loss, countries have proved
that these instruments can effectively reduce risk.

There has always been high volatility in India, which leads to very high-risk levels. So
there is an absolute need to develop. This concept makes all the investors aware of its
advantages and makes them use these instruments according to their needs.

To study the concept of Mutual funds such as how mutual funds have come into
existence, the different types of mutual funds schemes such as open ended schemes
closed ended schemes, to compare the performance of different mutual funds to
understand the concept of NAV and mutual funds, to identify the different players in
mutual fund industry, to compare equity funds with sensex and nifty

2.3 SCOPE OF THE STUDY:

♦ This study covers Equity Linked Savings Schemes (ELSS) of six AMC’s, of
which Share khan is a distributor.
♦ The study covers the period of past three years i.e. from Jan 2006 to Dec
2008.
♦ The study covers only open ended type.
♦ The study applies only three approaches to evaluate performance, namely
Treynor’s Index, Sharpe’s Index and Jensen’s Index.

2.4 RESEARCH DESIGN


The methodology is the plan, structure and strategy of the investigation process
that sets out to obtain answer to the study. The methodology followed for the collecting
information are using two sources of data namely

 Primary Data

 Secondary Data

Primary Data

The data collected first hand by the researcher concerned with the research
problem refers to the Primary data.

Personal discussion was made with Unit manager and interaction with other
personnel in the organization for this purpose. There is no formal design of questionnaire
used in this study.
Secondary Data

The information available at various sources made for some other purpose but
facilitating the study undertaken is called as Secondary Data.

The various sources that were used for the collection of secondary data are

 Various Text books were used to understand the concepts of portfolio


management.

 Websites – Various sites like www.5paise.com, www.sharekhan.com


www,amfi.com www.bseindia.com and other websites.

 Newspapers such as Economic Times, Financial Express.

 Magazines such as Business World, Business Today, Investors Guide, Capital


Market.

2.5 OPERATIONAL DEFINITIONS OF CONCEPTS

NET ASSET VALUE (NAV)


Net Asset Value (NAV) denotes the performance of particular scheme of a mutual fund.
Mutual Funds invest the money collected from the investors in securities markets. In
simple words, Net Asset Value is the market value of the securities held by the scheme.
Since market value of securities changes every day, NAV of a scheme also varies on day-
to-day basis. The NAV per unit is market value of securities of scheme divided by the
total number of units of the scheme on any particular date.

Formula of the calculation of Net Asset Value (NAV)

Market Value of Investments


Net Asset Value =
No. of units Outstanding
THE CONCEPT OF RETURN
Return can be defined as the amount or rate or produce, proceeds, gain profit which
accrues to an economic agent from an undertaking or enterprise or real/ financial
investment. It is a reward for and a motivating force behind investment, the objective of
which is usually to maximize return.

Return is said to have two components


The basic one, which is the periodic cash or income receipts, either interest or dividend.
The other which is the appreciation or depreciation in the price of value of the asset, or
called the capital gain or capital loss.

The total return can thus be defined as


R= Income + (-) Price Appreciation (Depreciation)

Required Rate of Return of Expected Return

The concept of required rate of return plays an important role in the valuation of assets
and in both financial and real investment decisions.

The required rate of return for a security is defined as the minimum expected rate of
return needed to induce or persuade an investor to purchase the security, given its risk.
The required rate of return has two components:

Risk-Free rate of Return, which is the basic temporal exchange rate in the economy. It
can be defined as that reward or price which is expected by an investor to induce him to
forgo his present consumption in favor of future consumption plus a premium for
expected inflation.

The second component is the Risk Premium. The rational risk hover investor, purchasing
an asset, expects to be compensated for the risk. The premium for risk must reflect all
the uncertainty involved in investing in the security. Thus
Required Rate of Return = Risk Free Rate of Return + Risk Premium

It should be noted that there are many financial assets, and therefore, many required rates
of return. They are also different within a particular asset class or category. The RRR
may change over a period also. The RRR and market interest rate are positively related.

RISK – RETURN TRADE OFF

The objective of maximizing return can be pursued only at the cost of incurring higher
risk. The financial markets offer a wide range of assets from very safe to very risk, with
corresponding low to high returns. The investor has to consider both its return potential
and risk involved while selecting the asset for investment. The empirical evidence shows
that generally there is a high correlation between risk and return over a long period. The
securities are generally priced such that high risk is rewarded with high return, and low
risk is accompanied by a corresponding low return. This relationship is known as risk –
return trade off.

MEASUREMENT OF HISTORICAL RETURN

The total return on an investment for a given period is

Total Returns = cash payment received during the year+ Price change over the period

Price at the beginning of the period


RISK
Risk refers to the possibility that the actual outcome of an investment will differ from the
expected outcome. In other words, risk refers to the variability or dispersion. If an
asset’s return has no variability, it is risk less. The risk of a portfolio can be measured in
various ways. The two most commonly used measures of risk are
♦ Variance
♦ Beta

VARIANCE AND STANDARD DEVIATION

The most commonly used measure of risk in finance is variance or the standard deviation.
The variance and the standard deviation of a historical return series are defined as
follows:
σ² = ∑ (x-x')²

N-1
Where
σ ² : Variance of Return
σ : Standard Deviation of Return
X : Return for the stock in period
x' : Arithmetic Return
N : Number of periods

BETA
The sensitivity of a security to market movements is called beta (β). A measure of risk
commonly advocated is beta. It represents the most widely accepted measure of the
extent to which the return on a security fluctuates with the return on the market portfolio.
It describes the relationship between the securities return and the index returns. To
calculate the beta of a portfolio, regress the rate of return of the portfolio on the rate of
return of a market index. The slope of this regression line is the portfolio beta. By
definition, the beta for the market portfolio is 1. Beta of a portfolio can be calculated as
follows
Beta (βA) = COV ( RA,RM)

σ ²M
Where

RA : Return of the portfolio A

RM : Return of the market M

R’A : Average rate of return of portfolio A

R'M : Average rate of return of market M


N : Number of periods

COV (RA, RM) = ∑ (RA-R'A)(RM-R'M)

(N-1)
σ ²M = ∑ (RM-R'M)²

(N-1)

RISK ADJUSTED PERFORNMANCE MESURES

1. A MEAN – VARIANCE MODEL


The simplest measures of risk – adjusted performance have their roots in the mean –
variance framework developed by Harry Markowitz in the early 1950’s, In the mean-
variance world, the standard deviation of an investment measures its risk and the return
earned is the reward. If you compare two investments with the same standard deviation
in returns, the investment with the higher average return would be considered the better
one.
2. SHARPE’S INDEX (SI)
It is the measure of risk premium related to the total risk. It gives a single value
to be used for the performance ranking of various funds or portfolios. This risk premium
is the difference between the portfolio’s average rate of return and the risk free rate of
return. The standard deviation of the portfolio indicates the risk. It assigns the highest
values to assets that have best risk-adjusted rate of return.
The Sharpe ratio is a versatile measure that has endured the test of time. Its focus is on
the standard deviation as the measure of risk does bias it against portfolios that are
diversified widely across the market. A sector specific mutual fund (such as Pharma or
Banking fund) will tend to do poorly on a Sharpe ratio basis because its standard
deviation will be higher because of the presence of sector-specific. Since investors in
these funds can diversify the risk by only way of holding multiple funds, it does seem
unfair to penalize these funds for them.

Sharpe’s Index SI given by the formulae


SI = R’A-RF

σ A
Where,
R’A : Average rate of return of Portfolio A
RF : Average rate of return on a risk-free investment
σ A : Standard deviation of return of portfolio A.

3. TREYNOR’S INDEX (TI)


It measures the fund’s performance in relation to the market performance.
To understand it better one must know about the Characteristic line. The relationship
between the given market return and the fund return is given by the characteristic line.
The ideal fund’s return rises at a faster rate than the general market performance when
the market is moving upwards and its rate of return declines slowly than the market
return, in the decline.
Treynor’s Index (TI) given by the formulae
TI = R'A-RF

βA
Where
R’A : Average rate of return of Portfolio A
RF : Average rate of return on a risk-free investment
βA : Beta of portfolio A
JENSEN’S INDEX
The absolute risk adjusted return measure was developed by Michael Jensen and
commonly known as Jensen’s measure. It is mentioned as measure of absolute
performance because a definite standard is set and against that the performance is
measured. The standard is based on the manager’s predictive ability. Successful
prediction of the security price would enable the manager to earn higher returns than the
ordinary investor expects to earn in a given level of risk. The basic model of Jensen is

Jensen index = R'A-[RF+ βA(R'M-RF)]


Where
R'A : Average rate of return of Portfolio A
RF : Average rate of return on a risk-free investment
βA : Beta of portfolio A
R'M : Average rate of return of market M
There have been a number of studies of Mutual Fund performance using the above three
indices. Most studies have found that the fund managers are unable systematically to
beat the market and hence they do not out perform an unmanaged (yet diversified)
portfolio such as the index.

2.6 TOOLS AND TECHNIQUES

Performance measure
♦ Trenor’s Index
♦ Sharpe’s Index
♦ Jensen’s Index
Statistical techniques
♦ Mean
♦ Standard Deviation

2.7 LIMITATIONS OF THE STUDY


 Not all the information required was freely available.
 Interaction with the company professional was limited, due to their busy schedule.

 The study is limited to the evaluation of performance of the selected funds.


 NAV s considered for the calculations of returns is obtained from AMFI website
and the same is taken as true value without verification.
2.8 AN OVERVIEW OF THE REPORT
Chapter 1.
Provide a brief insight in to the topic, the theoretical background of the study and
also deals with industrial background of the study.
Chapter 2.
Includes the statement of the problem, review of literature. Objectives of the study,
significance of the study, operational definition of the concepts, research design of data, ,
tools of gathering data, an overview of the report, scope and limitations of the study.
Chapter 3.
Provides information relevant to the origin of the organization. It also gives the
present status of the organization and briefs the growth and development plans of the
organization, its future prospects, the structure and the functional departments in the
organization and also provides a profile of the respondents.
Chapter 4.
Provides the classification and tabulation of collected data, its analysis and
interpretation.

Chapter 5.
Provides a summary of the findings and includes the conclusion and
recommendations of the researcher.
CHAPTER-3
COMPANY PROFILE

3.1COMPANY PROFILE
Share khan is a retail broking arm of S.S Kantilla Ishwarlal Investors Services Pvt Ltd, an
organization with more than 8 decades of trust and credibility in the stock market. Share
khan Ltd (Formally SSKI Investors Services Pvt Ltd) was promoted by Mr.Shripal.S
Morakhia and Mr.Shreyas.S Morakhia. It is currently India’s largest broking house. It is a
member of the stock exchange, Mumbai. It is a depository participant of the NSDL and
CDSL. Its business includes stock broking, depository services, portfolio management
and derivatives.

The company’s core specialty lies in its retail distribution with a large network of
branches i.e. 510 share shops (retail shops) in 170 cities in India and sub-
brokers/authorized persons. Its strengths lies in its investment research capabilities. Its
research division has several analysts continuously monitoring global, national and
regional political, economic and social situations so as to assess their impact on the
economy in general, the sectors and companies they research which helps them if
offering quality research and advice to clients.

NATURE OF THE BUSINESS CARRIED:

Share khan is a stock broking company. The company offers a complete range of pre
trade, trade and post trade service on the BSE (Bombay stock exchange) and the NSE
(National stock exchange).

Whether the client come in to the companies conventionally located offices and trade in
a dedicated environment or issue instructions over the phone, our highly trained team and
sophisticated equipment ensure smooth transactions and prompt service.

• Investment Advisory service


• Facilitation services to Retail Investors, Corporate.
• Depository services
• Investment options includes:
1. Online trading(Includes equity, derivatives)
2. Commodities trading
3. Mutual funds
4. Portfolio management services

Share khan Branches are conceptualized to be place where investors can come in contact
with investment opportunities in an atmosphere of convenience and comfort. Our services
are available through our network of 510 Share shops spanning 170 major towns and
cities in the country.

Professional seeks to educate clients & end their confusion by custom an Investment Plan

according to the needs of clients and are also today a part of companies induction

program advising employees on how to plan their investments

COMPANY PROFILE WITH REFERENCE TO McKinney’s 7’S MODEL

The McKinney’s 7’s framework model was developed by the consultants of the
McKinney Company, a very well known management consultancy firm in U.S.A,
towards the end of 1970s to diagnose the cause of organizational problems and to
formulate programs for improvements.

The McKinney’s 7s framework is one of the early and widely accepted


framework and it identifies the key factors shown in the Fig. 2.1. McKinney’s 7s
framework provides useful visualization of the key components that managers must
consider in making sure a strategy.

Mckinsey’s consultants call ‘Strategy’ and ‘Structure’ as the hardware of the


organization and other 5s that is System, Style, Staff, Skills and Shared values are the
software of the organization.

STRATEGY

Strategy refers to a set of decisions and actions aimed at gaining a sustainable


competitive advantage.

Organizations must have a consistent set of narrow intentions to move them


towards producer intention and also organization’s most critical responsibility is to
establish the parameter that shape the values, motives and actions of others throughout
the organization. These parameters are called as hierarchy of strategic intent.
The hierarchy of strategic intent includes five types of elements. They are :

1) A Broad Vision of what the organization should be.

2) The organization’s Mission.

3) Specific goals that are operationalised as

4) Various strategic objectives to be reached by acting according to specific.

5) Plans.

VISION

Vision refers to the category of intentions that are broad all inclusive and forward
thinking. A vision describes aspirations for the future without specifying the means that
will be used to achieve those desired ends.

Share khan practices customer centric approach to be the leading broking firm. Our
company Vision is

 To be the top most company for providing investment advisory & financial
planning services in India.

 To be a leading investment intermediary for transaction through both online and


offline medium.

MISSION

A vision becomes more tangible in the form of a ‘Mission Statement’. Such


statement can verbalize the beliefs and the directions of the organization. Most mission
statements are more specific than anyone’s visionary thinking but they are still hardly
concrete directions for action. Therefore a mission statement tries to make vision more
specific.
To Educate & Empower the individual investor to make better investment
decisions through quality advice & superior service.

 Educate & Empower

1) Research backed advice which is easy to understand, retail specific and


discipline.

2) Total equity solutions for the entire investment process.

3) Relationship management

 Superior service

1. Integrity
2. Transparency
3. Professionalism
4. Information – product ,news, operations
5. Hassle free trading

6. Enjoyable experience

MILESTONES OF SSKI

• 1922: The SSKI started its operation in stock broking


• 1922: The SSKI became the first member in the BSE as institutional broker

• 1984: Ventured into corporate finance

• 2002: The site was launched on February 8th in on-line trading

• 2002: The next generation technology product “Speed trade” was launched on
April 17th

• 2002: The advanced technology in the online business “ Speed trade plus” was
launched on October 28th for derivative trading

• 2008: The SSKI crossed US $ 8 billion of private equity dea

ACHIEVEMENTS OF SHARE KHAN:

• Rated among the top 20 wired companies along with Reliance, HLL, Infosys, etc
by ‘Business Today’, January 2006 edition

• Awarded ‘Top Domestic Brokerage House’ four times by Euro money and Asia
money.

• Pioneers of online trading in India amongst the top 3 online trading websites from
India. Most preferred financial destination amongst online broking customers

• Winners of “ Best Financial Website” award

• India’s most preferred brokers within 5 years. “ Awaaz Consumers Award 2005”

FUTURE PLANS:

• 2,00,000 plus retail customers being serviced through centralized call centers/web
solutions
• Branches/semi branches servicing affluent/ aggressive traders through high skill
financial advisor

• 250 independent investment managers/franchisee servicing 50,000 highly valued


clients

• New initiatives- Portfolio Management Services and Commodities trading

OWNERSHIP PATTERN:

The shareholder of SSKI investor Pvt. Ltd are Mr. Shripal Morkhia, Mr. Shreyas
Morkhia, foreign private equity funds and key employees of the company. The key
promoter of the company is Mr. Shirpal Morkhia who as on march 31, 2005 along with
his family owns 55.47% of the paid up capital of the company and the remaining balance
i.e.54.53% is HSBC, CARLYE, and INTEL PACIFIC.

INFRASTRUCTURE FACILITIES:

Sharekhan outlets are designed to be places where retail investors can come in
touch with Investment opportunities in an atmosphere of convenience and comfort. The
look and feel of the offices across India projects a consistent branch image for the
company. The features that enable a unique facility for retailing financial service include
among others.

3.2 PRODUCT PROFILE


The share khan provides trade execution facility for equity, commodity backed
with investment and derivatives.
EQUITY TRADING

Equity share is a product which represents ownership capital. Those shares of the
company which are listed in NSE and BSE can be purchased and sold through brokers.

COMMODITY TRADING

It comprises of raw material and products that can be traded on special


commodity exchange across the country. Sharekhan is founder member of two major
commodity exchanges, the MCX and NCDEX and offers trading facility for the
following commodities and both these exchanges:

 Bullion: Gold and Silver

 Oil and Oil seed: Castor, Soya, Rapeseed/Mustard Oil, Crude Palm
Oil, RBD Palmolein.

 Soft Commodities: Cotton.

 Spices and Plantation: Pepper and Rubber.

DERIVATIVE TRADING

Derivative is product which derives their values from the underlying asset or
securities in a contractual manner. The underlying asset can be Equity, commodity or
any other asset.

SERVICE

Share khan is a complete service orient organization serves a vast range of


customers all over India. The trading services are design to offer an easy, hassle free
trading experience and the customer will be entitle to a host of value added services
,intended to assist investment process depending on investor investing style. The main
service provided by Sharekhan is Depository service, online trading, Classic, speed trade
and speed trade plus.

 Depository service

A depository can be define as an institution where the investors can keep their
financial asset such as Equities Etc., in the dematerialized form and transaction could be
effected on it.

 Online trading

With a Share khan Online trading account, an investor can buy and sell shares
through the web site www.sharekhan.com in an instant. Sharekhan offers three types of
online trading account that suits investors trading habits and preferences.

An online products offered by Sharekhan are as follows

Online products

1. Classic Account
2. Speed trade
3. Speed tradeplus

1. Classic Account:

This account allows the client to the trade through out website and is suitable for the
retail investors. Our online trading website also comes with the Daily Trade service that
enables you to buy and sell shares by calling their dedicated toll free number. This
account for retail investor who is risk averse and hence prefer to invest in stock
selectively or who does not trade frequently.

The account opening charge for classic account is 750/- in which client will get the
DEMAT account free for one year, after one year client should pay an annual
maintenance of rupees 300/- for demat account..

2 .Speed trade
Speed trade is a next-generation online trading product that brings the power of your
broker’s terminal to your PC. It is ideal for active traders who transact frequently during
day’s trading session capitalize on intra-day price movements. Speed trade is an internet-
based application available on a CD, which provides every-thing a trader needs on one
screen, thereby, reducing the required to execute a trade.

Speed trade has all the above-mentioned features with the power to trade in cash and
derivatives from a single screen. For this account opening charge is 1000/-

The brokerage charged for both a/c is 0.1% each sides for intra day [i.e., buys & sell the
same day and 0.5% for delivery [i.e., investment].the minimum brokerage in trading
account is 33% margin and 100% delivery.

3. Speed Trade Plus

A speed trade plus has all the above mention future with an additional
functionality of trading in derivatives from the same single-screen inter-face.

Basis of Trading

The NEAT F&O system supports an order driven market, where in orders match
automatically. Order matching is essentially on the basis of security, its price, time and
quantity. All quantity fields are in units and price in rupees. The lot size in the Futures
market is for 200 Nifties the exchanging notifies the regular Lot size an ticks sizes for
each of the contracts traded in the segment from time to time. When any order enters the
trading system, it is an active order. It tries to find a match on the other side of the book if
it finds a match, a trade is generated. If it does not find a match, the order becomes
passive and goes and sits in the respective outstanding order book in the system.

Order type and conditions

The system allows the trading member to enter orders with various conditions
attached to them as per their requirements. This condition is broadly divided into the
following categories.
Time conditions

• Day order: A day order which is valid for the day on which it is entered. If the
order is not executed during the day, the system cancels the order automatically at
the end of the day.

• Good till canceled: It is the order remains in the system until the user cancels
it. The maximum number of days an order can remaining the system is notified by
the exchange from time to time after which the order is automatically cancelled by
the system.

• Good till days: An order allows the user to specify the number of days till
which the order should stay in the system is not executed. The maximum days
allowed by the system are the same as in good till cancelled order.

• Immediate or cancel: An immediate or cancel order allows user to buy or sell a


contract as soon as order is released into the system, failing which the order is
cancelled from the system. Partial match is possible for the order, and the
unmatched portion of the order is cancelled immediately.

Price Condition

• Stop-Loss: This facility allows the user to release an order in to the system, after
the market price of the security reaches or crosses a threshold price.

Other Condition

• Market price: Market orders are orders for which no price is specified at the
time the orders are entered. For such orders, the system determines the price.
• At opening price: It is the price arrived at by the system after the pre-open phase
is over.

• Trigger price: Price at which an order gets triggered from stop-loss book.

• Limit Price: Price of the order after triggering from stop- loss book.

The Brokerage Charges are calculated as under:-


For Intra-day Trades:

Description Brokerage Minimum brokerage per share


Intra day Buying 0.10% 5 Paisa*
Intra day Selling 0.10% 5 Paisa*

• This means that if the share price you trade in is Rs 50/- or less, a minimum
brokerage of 5 paisa per share will be charged.

For Delivery Based Trades:-

Description Brokerage Minimum brokerage per share

Delivery Buying 0.50% 10 Paisa**


Delivery Selling 0.50% 10 Paisa**

** Minimum brokerage of 10 paisa per share is applicable when the share price is Rs 20/-
or less and minimum brokerage of Rs 16/- per scrip on selling side will be applicable
when the traded volume is Rs 3200/- or less

For F&O trades:-


Description Brokerage Minimum brokerage per share
First Leg 0.10%*** NA
Second Leg ( If it is intraday) 0.02%*** NA
Second leg (For any other day 0.10%*** NA
selling)

*** All the brokerages are charged in derivatives on the value of contract.

The Transaction Charges are:-

• Statutory costs as it stands on 21st Nov 2005

Details Cash (BSE / NSE) NSE F&O Remarks


Exch. Turnover Charges Futures: 0.0021% On Actual Rate
0.0035%
Options:0.0510% On Premium
Stamp Duty Trading : 0.002% On Actual Rate
0.002%
Delivery: 0.01% On Premium
Service Tax 12.24% on Brokerage 12.24% on Brokerage
(II) Nature of transaction: Rate of STT (Charged on Traded Value)
(II.A)Equity segment

Description Buyer to pay Seller to pay


Delivery based transaction 0.125% 0.125%
Intra day transactions NA 0.025%

(II.B)DERIVATIVE SEGMENT
Seller to pay 0.017% (Applicable for both intraday and next day selling)
Speed Trade Plus

A speed trade plus has all the above mention future with an additional
functionality of trading in derivatives from the same single-screen inter-face.

Basis of Trading
The NEAT F&O system supports an order driven market, where in orders match
automatically. Order matching is essentially on the basis of security, its price, time and
quantity. All quantity fields are in units and price in rupees. The lot size in the Futures
market is for 200 Niftiest the exchanging notifies the regular Lot size a ticks sizes for
each of the contracts traded in the segment from time to time.

When any order enters the trading system, it is an active order. It tries to find a
match on the other side of the book if it finds a match, a trade is generated. If it does not
find a match, the order becomes passive and goes and sits in the respective outstanding
order book in the system.

SERVICES OFFERED BY SHAREKHAN

Following services are offered:

1. Trading Facilities:

Sharekhan as a member of NSE& BSE provides both offline and online trading
facilities nationwide for trading the securities in secondary market to its clients.
The company’s wide network of outlets spread across the country facilities to
executive the orders in secondary market.

2. Derivatives: (Futures and Options)

The company also facilitates the trading system for trading in secondary market under
future and options segment of NSE and BSE. The equity dealers in the company will
be eager to give insights into the new sets introduction in the Indian Capital Market
futures and options.

3. Depository services:

Sharekhan is a Depository participant of National Securities Depository Limited


and Central Depository and Securities Limited.

Sharekhan will open De-mat accounts, which will investors to convert physical
certificates of shares into electronic balances in an account maintained.
4. Margin Financing:

In the present rolling settlement scenario, Sharekhan understand investor need for
additional capital availability for daily purchaser shares. It offers unique facility avail
finance, for purchasing shares at very competitive interest rates.

5. IPO’s and Mutual Funds:

Sharekhan offers the change of investing in the potentially lucrative IPO market.
Sharekhan is a distribution house for all mutual funds. This is the news scheme
introduced by the company and it also offers schemes catering to investors with varying
risk return profiles.

6. Stock lending and Borrowing:

One can place an order of shares with Sharekhan. It is approved intermediary of the
security or lending scheme. These would be sent out the borrowers, these earnings fees
for all investors’ idle shares. Thus Sharekhan fulfill the investor need for borrowing and
lending of shares.

7. Equity Research:

Share khan has a highly rated research using involved in macro economic studies,
industry and company specific equity research. The research team’s inputs will be
available as daily trading calls, quarterly investment picks and long term investment
picks, based on the fundamentals of particular company and the industry as a whole.

8. Trading:

Investors can also trade their securities through this facility by logging into
company’s website. The virtual world that Sharekhan offers online trading services
through.

9. Portfolio Management Services:

Sharekhan securities are a registered portfolio manager with SEBI to manage


portfolios on behalf of clients with a discretionary and non discretionary right. This
service is a provision for those who may not have the time to manage their stock
investments or require the service of company’s highly specialized profession team.
10. Other Services

• Free access to investment advice from Share khan’s research team


“Sharekhan “Value line” (A monthly publication with review of recommendations
stocks to watch out)
• Daily research reports and market review (high noon and eagle eye)
• Daily trading calls based technical analyses
• Cool trading products (Daring derivatives and market strategy)
• Personalized advice
• Live management information
• Internet- Based online trading

Online BSE & NSE executions through BOLT & NEAT terminals)

3.3 ORGANISATION STRUCTURE


Successful strategy implementation depends in large part on a firm’s
“Organizational Structure”. Organizational structure refers to the way the work is
organized. The various activities that reflect the work of the enterprise are divided in
ways that are intended to get the work done efficiently and effectively. Organization
structure of SSKI and Sharekhan Branch Office structure is shown in Fig. 4.1 and Fig.
4.2 Respectively.

The operations Share khan can be broadly classified in to Online and offline
media. The Online channel is followed through to modes that is

Direct

2. Alternative

The Offline channel is followed through Sub brokers and Franchises.

The various departments in Share Khan as a company are

a. FINANCE
It is the department which handles all the necessary financial operations which are
needed for any organization. The accounts department is responsible for handling all the
financial requirements of the company.

b. DEMAT ACCOUNT DEPARTMENT

As the trading activity is of a nature where the Demat A/C is mandatory


requirement of any of the investor a separate department handles all the operations that
are used in handling the operations of this Demat A/C.

c. RISK & COMPLIANCE

This department handles all the details regarding the safeguard of the individual
investor’s money. The software keeps track of the account s of all the investors and any
slip will immediately known and it is rectified to meet the guidelines of the SEBI.

d. REGULATION

The regulation department handles the legality requirement of all the operations
involved in this business. The transaction costs, brokerage, turnover tax, stamp duty and
service tax norms are to be met by every organization and this department handles all
these operations.

e. MARKETING

The Offline operations are handled by the marketing department and the
acquisition of the customers is mainly based on the contacts and periodical reviews of
these employees are done to keep tab of the growth.
CHAPTER-4

ANALYSIS AND INTERPRETATION OF DATA


The analysis and interpretation of data conducted in Sharekhan limited at
electronic branch, Bangalore, covers an overview of the Mutual fund segment, other
related data with percentage and narrative data, supported by charts and tables form the
information collected during the project study.

In this study five funds have been considered. Their relative benchmark indices are

♦ BIRLA SUNLIFE TAX RELIEF 96 – BSE 200

♦ FRANKLIN INDIA TAXSHIELD – S&P CNX 500

♦ HDFC TAX SAVER - S&P CNX 500

♦ SBI MAGNUM TAXGAIN 93 – BSE 100

♦ SUNDARAM TAX SAVER 98 - BSE 200


Table 1.1: Monthly returns of Birla Sunlife Tax Relief 96 and BSE 200 Index

BIRLA SUNLIFE TAX RELIEF 96

Fund Market
Period NAV* Index* (BSE 200)
Return Return

Jan-06 115.69 769.67


Feb-06 116.14 0.3890 731.89 -4.9086
Mar-06 123.42 6.2683 725.49 -0.8744
Apr-06 112.15 -9.1314 731.81 0.8711
May-06 116.72 4.0749 753.00 2.8956
Jun-06 97.52 -16.4496 618.34 -17.8831
Jul-06 96.52 -1.0254 626.77 1.3633
Aug-06 104.30 8.0605 676.66 7.9599
Sep-06 103.99 -0.2972 684.55 1.1660
Oct-06 111.90 7.6065 733.42 7.1390
Nov-06 111.58 -0.2860 746.92 1.8407
Dec-06 119.72 7.2952 818.03 9.5204
Jan-07 133.16 11.2262 890.48 8.8566
Feb-07 126.46 -5.0315 871.61 -2.1191
Mar-07 125.11 -1.0675 899.17 3.1620
Apr-07 120.48 -3.7007 868.74 -3.3842
May-07 119.20 -1.0624 824.95 -5.0406
Jun-07 128.78 8.0369 890.28 7.9193
Jul-07 132.35 2.7722 921.58 3.5157
Aug-07 145.92 10.2531 977.60 6.0787
Sep-07 153.55 5.2289 1014.05 3.7285
Oct-07 162.91 6.0957 1101.33 8.6071
Nov-07 147.47 -9.4776 1009.59 -8.3299
Dec-07 167.43 13.5350 1116.68 10.6073
Jan-08 176.19 5.2320 1188.78 6.4566
Feb-08 188.78 7.1457 1255.05 5.5746
Mar-08 191.78 1.5892 1294.92 3.1768
Apr-08 219.71 14.5636 1419.57 9.6261
May-08 176.75 -19.5530 1507.07 6.1638
Jun-08 157.89 -10.6704 1297.70 -13.8925
Jul-08 143.08 -9.3799 1272.80 -1.9188
Aug-08 145.50 1.6914 1274.60 0.1414
Sep-08 158.24 8.7560 1399.37 9.7890
Oct-08 174.22 10.0986 1498.95 7.1161
Nov-08 185.97 6.7443 1564.30 4.3597
Dec-08 193.22 3.8985 1649.74 5.4619
Jan-09 171.23 -11.3808 1655.28 0.3358

* As on 1st of every month


Table 1.2: Calculation of Risk, Beta, Trenor, Sharpe and Jensen Measure for Birla
Sunlife Tax Relief 96

Fund Return Return from (RA-R'A)


RA-R'A RM-R'M (RM-R'M)² (RA-R'A)²
(RA) Market (RM) (RM-R'M)

0.3890 -1.0568 -4.9086 -7.2720 7.6850 52.8816 1.1168


6.2683 4.8225 -0.8744 -3.2378 -15.6145 10.4835 23.2567
-9.1314 -10.5772 0.8711 -1.4922 15.7837 2.2268 111.8770
4.0749 2.6291 2.8956 0.5322 1.3992 0.2832 6.9123
-16.4496 -17.8954 -17.8831 -20.2465 362.3194 409.9213 320.2452
-1.0254 -2.4712 1.3633 -1.0001 2.4713 1.0001 6.1068
8.0605 6.6147 7.9599 5.5965 37.0192 31.3206 43.7547
-0.2972 -1.7430 1.1660 -1.1974 2.0870 1.4337 3.0380
7.6065 6.1607 7.1390 4.7756 29.4213 22.8065 37.9546
-0.2860 -1.7317 1.8407 -0.5227 0.9052 0.2732 2.9989
7.2952 5.8494 9.5204 7.1571 41.8648 51.2234 34.2160
11.2262 9.7804 8.8566 6.4933 63.5069 42.1625 95.6566
-5.0315 -6.4773 -2.1191 -4.4825 29.0343 20.0924 41.9556
-1.0675 -2.5133 3.1620 0.7986 -2.0071 0.6377 6.3167
-3.7007 -5.1465 -3.3842 -5.7476 29.5802 33.0350 26.4866
-1.0624 -2.5082 -5.0406 -7.4040 18.5707 54.8194 6.2910
8.0369 6.5911 7.9193 5.5559 36.6196 30.8679 43.4431
2.7722 1.3264 3.5157 1.1524 1.5285 1.3280 1.7593
10.2531 8.8073 6.0787 3.7153 32.7220 13.8035 77.5693
5.2289 3.7831 3.7285 1.3651 5.1645 1.8636 14.3120
6.0957 4.6500 8.6071 6.2437 29.0329 38.9837 21.6221
-9.4776 -10.9234 -8.3299 -10.6933 116.8073 114.3468 119.3206
13.5350 12.0892 10.6073 8.2439 99.6620 67.9619 146.1484
5.2320 3.7863 6.4566 4.0933 15.4982 16.7548 14.3358
7.1457 5.6999 5.5746 3.2112 18.3038 10.3121 32.4891
1.5892 0.1434 3.1768 0.8134 0.1166 0.6616 0.0206
14.5636 13.1178 9.6261 7.2627 95.2706 52.7468 172.0764
-19.5530 -20.9988 6.1638 3.8005 -79.8052 14.4435 440.9505
-10.6704 -12.1162 -13.8925 -16.2559 196.9599 264.2542 146.8026
-9.3799 -10.8257 -1.9188 -4.2822 46.3574 18.3369 117.1962
1.6914 0.2456 0.1414 -2.2220 -0.5457 4.9371 0.0603
8.7560 7.3102 9.7890 7.4256 54.2827 55.1392 53.4396
10.0986 8.6528 7.1161 4.7527 41.1241 22.5880 74.8711
6.7443 5.2986 4.3597 1.9963 10.5778 3.9854 28.0749
3.8985 2.4527 5.4619 3.0985 7.5997 9.6006 6.0158
-11.3808 -12.8266 0.3358 -2.0276 26.0068 4.1110 164.5212

52.0478 85.0816 1377.3100 1481.6275 2443.2127

N=36
∑ RA=52.0478 R'A=1.4458
∑ RM=85.0816 R'M=2.363
∑ (RA-R'A)(RM-R'M)= 1377.3100

∑ (RM-R'M)²= 1481.6275

∑ (RA-R'A)²= 2443.2127

RF= 8.5%
Rate of Return = (Terminal value – Initial value)+ Dividend

Initial Value

Rate of Return for Jan 06(Fund) = 116.14 – 115.69


* 100 = 0.3890
115.69

Rate of Return for Jan 06(Market) = 731.89 -769.67


* 100 = -4.9086
769.67

Beta (βA) = COV ( RA,RM)

σ ²M

βA = 0.9296

σ A= ∑ (RA-R'A)²
√ (N-1)
σ A = 8.3550

Treynor’s Measure = R'A-RF

βA

Treynor’s Measure = 1.4638

Sharpe Measure = R’A-RF

σ A

Sharpe Measure = 0.1629

Jensen Measure = R'A-[RF+ βA(R'M-RF)]

Jensen Measure =-0.7572


INFERENCE
♦ The overall risk of the mutual fund as measured by the Standard Deviation (σ A)
of the total returns of the fund returns for the period from 1 Jan 2006 to 31 st Dec
2008 is 8.3550.

♦ The Average Returns of the Mutual Fund as depicted by Arithmetic Mean (R' A)
for the period from 1 Jan 2006 to 31st Dec 2008 is 1.4458.

♦ The Average Returns of the Market Index – BSE 200 as depicted by Arithmetic
Mean (R'M) for the period from 1 Jan 2006 to 31st Dec 2008 is 2.3634.

♦ The Systematic Risk of the Mutual Fund as given by the β coefficient for the
period from 1 Jan 2006 to 31st Dec 2008 is 0.9296.

♦ Treynor’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
1.4638 which indicates that for every one unit change in the beta there will be
1.4638 unit change in the returns

♦ Sharpe’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
0.1629 which indicates that for every one unit change in the standard deviation
there will be 0.1629 unit change in the returns.

♦ Jensen’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
-0.7572

Graph 1.3: Birla Sunlife Tax Relief 96 NAV movement from 2006 to 2008
BIRLA SUN LIFE TAX RELIF 96 NAV MOVEMENT
FROM 2006-2008

250
200
150
NAV

NAV*
100
50
0
ar

ar
ar

p
n

n
c

c
De

De

De
Ju

Ju
Ju
Se

Se
Se
M

M
6-

8-
7-
7-

8-
6-

6-

6-

7-

8-

8-
7-

DATE

INTERPRETATIONS

1. The NAV of Birla Sun life Tax Relief 96 has increased steadily over the 3 year
period.
2. Over the period it has a steady increase in the NAV and has reached its peak in
March 2008 of Rs. 219.71.
3. After its high in March 2008 it has started decreasing and had closed at Rs.171.23
at the end of December 2008.

Table 2.1: Monthly returns of Franklin India Taxshield and S&P CNX 500 Index

FRANKLIN INDIA TAXSHIELD


Index * (S&P
Period NAV* Fund Return Market Return
CNX 500)
Jan-06 50.33 1531.35
Feb-06 49.24 -2.1657 1459.80 -4.6723
Mar-06 19.75 -59.8903 1442.80 -1.1645
Apr-06 51.58 161.1646 1457.50 1.0189
May-06 53.33 3.3928 1507.55 3.4340
Jun-06 46.06 -13.6321 1226.55 -18.6395
Jul-06 47.43 2.9744 1248.00 1.7488
Aug-06 50.4 6.2619 1351.45 8.2893
Sep-06 52.09 3.3532 1377.20 1.9054
Oct-06 54.98 5.5481 1478.75 7.3737
Nov-06 54.71 -0.4911 1502.05 1.5757
Dec-06 61.56 12.5206 1653.20 10.0629
Jan-07 66.38 7.8298 1804.90 9.1761
Feb-07 65.48 -1.3558 1768.25 -2.0306
Mar-07 69.68 6.4142 1827.40 3.3451
Apr-07 67.89 -2.5689 1772.85 -2.9851
May-07 65.49 -3.5351 1688.65 -4.7494
Jun-07 70.59 7.7874 1834.85 8.6578
Jul-07 73.45 4.0516 1906.20 3.8886
Aug-07 80.09 9.0402 2027.40 6.3582
Sep-07 86.71 8.2657 2126.35 4.8806
Oct-07 89.57 3.2984 2274.00 6.9438
Nov-07 81.53 -8.9762 2067.80 -9.0677
Dec-07 92.82 13.8477 2306.15 11.5267
Jan-08 98.86 6.5072 2459.20 6.6366
Feb-08 106.32 7.5460 2585.95 5.1541
Mar-08 110.51 3.9409 2658.95 2.8229
Apr-08 120.07 8.6508 2910.35 9.4549
May-08 123.2 2.6068 3064.70 5.3035
Jun-08 108.41 -12.0049 2635.25 -14.0128
Jul-08 103.68 -4.3631 2562.50 -2.7606
Aug-08 103.16 -0.5015 2562.55 0.0020
Sep-08 111.29 7.8810 2807.95 9.5764
Oct-08 118.28 6.2809 2988.25 6.4211
Nov-08 122.94 3.9398 3114.55 4.2266
Dec-08 125.79 2.3182 3280.45 5.3266
Jan-09 125.72 -0.0556 3295.05 0.4451
* As on 1st of every month

Table 2.2: Calculation of Risk, Beta, Trenor, Sharpe and Jensen Measure for
Franklin India Taxshield
Return
Fund Return from (RA-R'A)
RA-R'A RM-R'M (RM-R'M)² (RA-R'A)²
(RA) Market (RM-R'M)
(RM)

-2.1657 -7.6069 -4.6723 -7.0466 53.6024 49.6543 57.8643


-59.8903 -65.3315 -1.1645 -3.5388 231.1937 12.5230 4268.2029
161.1646 155.7234 1.0189 -1.3554 -211.0650 1.8371 24249.7789
3.3928 -2.0484 3.4340 1.0597 -2.1707 1.1230 4.1958
-13.6321 -19.0733 -18.6395 -21.0138 400.8006 441.5777 363.7890
2.9744 -2.4668 1.7488 -0.6254 1.5428 0.3912 6.0850
6.2619 0.8207 8.2893 5.9150 4.8545 34.9875 0.6736
3.3532 -2.0880 1.9054 -0.4689 0.9790 0.2198 4.3596
5.5481 0.1069 7.3737 4.9994 0.5346 24.9942 0.0114
-0.4911 -5.9322 1.5757 -0.7986 4.7374 0.6377 35.1915
12.5206 7.0794 10.0629 7.6887 54.4313 59.1158 50.1181
7.8298 2.3886 9.1761 6.8019 16.2471 46.2659 5.7054
-1.3558 -6.7970 -2.0306 -4.4048 29.9395 19.4024 46.1990
6.4142 0.9730 3.3451 0.9709 0.9447 0.9426 0.9468
-2.5689 -8.0100 -2.9851 -5.3594 42.9286 28.7226 64.1607
-3.5351 -8.9763 -4.7494 -7.1237 63.9439 50.7464 80.5736
7.7874 2.3463 8.6578 6.2836 14.7431 39.4832 5.5051
4.0516 -1.3896 3.8886 1.5144 -2.1043 2.2933 1.9310
9.0402 3.5990 6.3582 3.9840 14.3383 15.8720 12.9529
8.2657 2.8245 4.8806 2.5064 7.0794 6.2820 7.9781
3.2984 -2.1428 6.9438 4.5696 -9.7917 20.8811 4.5916
-8.9762 -14.4174 -9.0677 -11.4420 164.9630 130.9184 207.8606
13.8477 8.4065 11.5267 9.1525 76.9407 83.7684 70.6694
6.5072 1.0661 6.6366 4.2624 4.5440 18.1678 1.1365
7.5460 2.1049 5.1541 2.7799 5.8513 7.7277 4.4305
3.9409 -1.5002 2.8229 0.4487 -0.6732 0.2013 2.2507
8.6508 3.2096 9.4549 7.0806 22.7263 50.1352 10.3018
2.6068 -2.8343 5.3035 2.9292 -8.3025 8.5805 8.0335
-12.0049 -17.4460 -14.0128 -16.3870 285.8884 268.5346 304.3637
-4.3631 -9.8042 -2.7606 -5.1349 50.3435 26.3670 96.1227
-0.5015 -5.9427 0.0020 -2.3723 14.0978 5.6277 35.3156
7.8810 2.4398 9.5764 7.2022 17.5719 51.8711 5.9527
6.2809 0.8397 6.4211 4.0468 3.3983 16.3767 0.7052
3.9398 -1.5013 4.2266 1.8523 -2.7810 3.4311 2.2540
2.3182 -3.1229 5.3266 2.9524 -9.2201 8.7165 9.7528
-0.0556 -5.4968 0.4451 -1.9292 10.6043 3.7217 30.2148

195.8815 85.4725 1353.6618 1542.0990 30060.1787

N=36
∑ RA=195.8815 R'A=5.4412
∑ RM=85.4725 R'M=2.3742
∑ (RA-R'A)(RM-R'M)= 1353.6618

∑ (RM-R'M)²= 1542.0990

∑ (RA-R'A)²= 30060.1787
RF= 8.5%
Rate of Return = (Terminal value – Initial value)+ Dividend

Initial Value

Rate of Return for Jan 06(Fund) = 49.24 – 50.33


* 100 = -2.1657
50.33

Rate of Return for Jan 06(Market) = 1459.8 -1531.35


* 100 =-4.6723
1531.35
Beta (βA) = COV ( RA,RM)

σ ²M
βA = 0.8778

σ A= ∑ (RA-R'A)²
√ (N-1)

σ A = 29.3064

Treynor’s Measure = R'A-RF

βA

Treynor’s Measure = 6.1018

Sharpe Measure = R’A-RF

σ A

Sharpe Measure = 0.1828

Jensen Measure = R'A-[RF+ βA(R'M-RF)]

Jensen Measure =3.3466

INFERENCE

♦ The overall risk of the mutual fund as measured by the Standard Deviation (σ A)
of the total returns of the fund returns for the period from 1 Jan 2006 to 31 st Dec
2008 is 29.3064.
♦ The Average Returns of the Mutual Fund as depicted by Arithmetic Mean (R' A)
for the period from 1 Jan 2006 to 31st Dec 2008 is 5.4412.

♦ The Average Returns of the Market Index – S&P CNX 500 as depicted by
Arithmetic Mean (R'M) for the period from 1 Jan 2006 to 31st Dec 2008 is 2.3742.

♦ The Systematic Risk of the Mutual Fund as given by the β coefficient for the
period from 1 Jan 2006 to 31st Dec 2008 is 0.8778.

♦ Treynor’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
6.1018.

♦ Sharpe’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
0.1828.

♦ Jensen’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
3.3466.

Graph 2.3: Franklin India Taxshield NAV movement from 2006 to 2008
FRAKLIN INDIA TAX SHIELD NAV MOVEMENT
FROM 2006-08

140
120
100
80
NAV

60 NAV*
40
20
0
1/6/2009

3/6/2009

4/6/2009

5/6/2009

7/6/2009

8/6/2009

9/6/2009

10/6/2009

11/6/2009

12/6/2009
2/6/2009

6/6/2009

DATE

INTERPRETATIONS

1. The NAV of Franklin India Tax shield has increased steadily over the 3 year
period.

2. During Feb 04 its NAV declined sharply and reached it’s lowest ever of Rs.19.75.

3. After decline the NAV has steadily increased over the period and has reached its
peak of Rs.123.2 during April 2008.

Table3.1 : Monthly returns of HDFC Tax Saver and S&P CNX 500 Index

HDFC TAX SAVER


Index * (S&P
Period NAV* Fund Return Market Return
CNX 500)

Jan-06 41.82 1531.35


Feb-06 40.08 -4.1818 1459.80 -4.6723
Mar-06 39.77 -0.7586 1442.80 -1.1645
Apr-06 40.12 0.8851 1457.50 1.0189
May-06 43.00 7.1680 1507.55 3.4340
Jun-06 37.72 -12.2794 1226.55 -18.6395
Jul-06 37.76 0.0981 1248.00 1.7488
Aug-06 41.22 9.1721 1351.45 8.2893
Sep-06 45.37 10.0779 1377.20 1.9054
Oct-06 49.33 8.7232 1478.75 7.3737
Nov-06 49.41 0.1520 1502.05 1.5757
Dec-06 55.89 13.1300 1653.20 10.0629
Jan-07 62.48 11.7797 1804.90 9.1761
Feb-07 63.42 1.5062 1768.25 -2.0306
Mar-07 67.12 5.8390 1827.40 3.3451
Apr-07 67.56 0.6481 1772.85 -2.9851
May-07 68.64 1.6046 1688.65 -4.7494
Jun-07 75.88 10.5507 1834.85 8.6578
Jul-07 78.12 2.9427 1906.20 3.8886
Aug-07 87.97 12.6109 2027.40 6.3582
Sep-07 94.90 7.8792 2126.35 4.8806
Oct-07 99.31 4.6535 2274.00 6.9438
Nov-07 92.78 -6.5832 2067.80 -9.0677
Dec-07 104.24 12.3622 2306.15 11.5267
Jan-08 109.24 4.7878 2459.20 6.6366
Feb-08 116.56 6.7076 2585.95 5.1541
Mar-08 116.14 -0.3595 2658.95 2.8229
Apr-08 131.22 12.9840 2910.35 9.4549
May-08 141.68 7.9712 3064.70 5.3035
Jun-08 121.07 -14.5459 2635.25 -14.0128
Jul-08 115.19 -4.8574 2562.50 -2.7606
Aug-08 114.65 -0.4696 2562.55 0.0020
Sep-08 125.08 9.0962 2807.95 9.5764
Oct-08 131.68 5.2726 2988.25 6.4211
Nov-08 139.90 6.2418 3114.55 4.2266
Dec-08 146.25 4.5441 3280.45 5.3266
Jan-09 146.51 0.1750 3295.05 0.4451
• As on 1st of every month
Table 3.2: Calculation of Risk, Beta, Trenor, Sharpe and Jensen Measure for
HDFC Tax Saver
Return
Fund
from (RA-R'A)
Return RA-R'A RM-R'M (RM-R'M)² (RA-R'A)²
Market (RM-R'M)
(RA)
(RM)
-4.1818 -7.9465 -4.6723 -7.0466 55.9955 49.6543 63.1465
-0.7586 -4.5232 -1.1645 -3.5388 16.0068 12.5230 20.4597
0.8851 -2.8796 1.0189 -1.3554 3.9030 1.8371 8.2921
7.1680 3.4033 3.4340 1.0597 3.6066 1.1230 11.5824
-12.2794 -16.0440 -18.6395 -21.0138 337.1451 441.5777 257.4106
0.0981 -3.6666 1.7488 -0.6254 2.2932 0.3912 13.4438
9.1721 5.4074 8.2893 5.9150 31.9848 34.9875 29.2398
10.0779 6.3132 1.9054 -0.4689 -2.9601 0.2198 39.8566
8.7232 4.9586 7.3737 4.9994 24.7900 24.9942 24.5875
0.1520 -3.6126 1.5757 -0.7986 2.8850 0.6377 13.0511
13.1300 9.3653 10.0629 7.6887 72.0069 59.1158 87.7092
11.7797 8.0150 9.1761 6.8019 54.5172 46.2659 64.2400
1.5062 -2.2585 -2.0306 -4.4048 9.9483 19.4024 5.1009
5.8390 2.0744 3.3451 0.9709 2.0140 0.9426 4.3030
0.6481 -3.1166 -2.9851 -5.3594 16.7029 28.7226 9.7131
1.6046 -2.1601 -4.7494 -7.1237 15.3876 50.7464 4.6659
10.5507 6.7860 8.6578 6.2836 42.6405 39.4832 46.0502
2.9427 -0.8219 3.8886 1.5144 -1.2447 2.2933 0.6756
12.6109 8.8462 6.3582 3.9840 35.2430 15.8720 78.2557
7.8792 4.1145 4.8806 2.5064 10.3126 6.2820 16.9292
4.6535 0.8888 6.9438 4.5696 4.0614 20.8811 0.7900
-6.5832 -10.3479 -9.0677 -11.4420 118.4002 130.9184 107.0789
12.3622 8.5975 11.5267 9.1525 78.6887 83.7684 73.9170
4.7878 1.0231 6.6366 4.2624 4.3610 18.1678 1.0468
6.7076 2.9429 5.1541 2.7799 8.1809 7.7277 8.6606
-0.3595 -4.1241 2.8229 0.4487 -1.8505 0.2013 17.0085
12.9840 9.2193 9.4549 7.0806 65.2786 50.1352 84.9960
7.9712 4.2065 5.3035 2.9292 12.3219 8.5805 17.6946
-14.5459 -18.3105 -14.0128 -16.3870 300.0550 268.5346 335.2751
-4.8574 -8.6220 -2.7606 -5.1349 44.2731 26.3670 74.3393
-0.4696 -4.2343 0.0020 -2.3723 10.0450 5.6277 17.9294
9.0962 5.3316 9.5764 7.2022 38.3987 51.8711 28.4255
5.2726 1.5079 6.4211 4.0468 6.1023 16.3767 2.2738
6.2418 2.4772 4.2266 1.8523 4.5885 3.4311 6.1364
4.5441 0.7795 5.3266 2.9524 2.3012 8.7165 0.6076
0.1750 -3.5896 0.4451 -1.9292 6.9250 3.7217 12.8854

135.5280 85.4725 1435.3090 1542.0990 1587.7779

N=36
∑ RA=135.5280 R'A=3.7647
∑ RM=85.4725 R'M=2.3742
∑ (RA-R'A)(RM-R'M)= 1435.3090
∑ (RM-R'M)²= 1542.0990

∑ (RA-R'A)²= 1587.7779
RF= 8.5%
Rate of Return = (Terminal value – Initial value)+ Dividend

Initial Value

Rate of Return for Jan 06(Fund) = 40.08 – 41.82


* 100 = -4.1818
41.82

Rate of Return for Jan 06(Market) = 1459.80 -1531.35


* 100 = -4.6723
1531.35
Beta (βA) = COV ( RA,RM)

σ ²M
βA = 0.9308

σ A= ∑ (RA-R'A)²
√ (N-1)

σ A = 6.7354

Treynor’s Measure = R'A-RF

βA

Treynor’s Measure = 3.9534

Sharpe Measure = R’A-RF

σ A

Sharpe Measure = 0.5463

Jensen Measure = R'A-[RF+ βA(R'M-RF)] Jensen Measure = 1.5490


INFERENCE

♦ The overall risk of the mutual fund as measured by the Standard Deviation (σ A)
of the total returns of the fund returns for the period from 1 Jan 2006 to 31 st Dec
2008 is 6.7354.
♦ The Average Returns of the Mutual Fund as depicted by Arithmetic Mean (R' A)
for the period from 1 Jan 2006 to 31st Dec 2008 is 3.7647.

♦ The Average Returns of the Market Index – CNX 500 as depicted by Arithmetic
Mean (R'M) for the period from 1 Jan 2006 to 31st Dec 2008 is 2.3742.

♦ The Systematic Risk of the Mutual Fund as given by the β coefficient for the
period from 1 Jan 2006 to 31st Dec 2008 is 0.9308.

♦ Treynor’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
3.9534

♦ Sharpe’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
0.5463.

♦ Jensen’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
1.5490.
Graph 3.3: HDFC Tax Saver NAV movement from 2006 to 2008

HDFC TAX SAVER NAV MOVEMENT FROM 2006-08

160
140
120
100
NAV

80 NAV*
60
40
20
0
ar

ar

ar
p

p
n

n
c

c
c

De

De
Ju

De

Ju

Ju
Se

Se

Se
M

M
M
6-

7-

8-
6-

7-

8-
6-

6-

7-

7-

8-

8-
DATE

INTERPRETATIONS

1. The NAV of the fund has almost remained constant at around Rs. 40 for about
one year i.e. 2006.

2. Then the increasing rally started, since then expect for small falls for short periods
it has increased continuously.

3. On 31 Dec 2008, its NAV was Rs. 146.51.


Table 4.1: Monthly returns of SBI Magnum Tax gain and BSE 100 Index

SBI MAGNUM TAXGAIN 93


Index* (BSE
Period NAV* Fund Return Market Return
100)

Jan-06 27.01 3089.58


Feb-06 23.88 -11.5883 2949.32 -4.5398
Mar-06 24.26 1.5913 2923.55 -0.8738
Apr-06 22.31 -8.0379 2958.54 1.1968
May-06 24.07 7.8888 3018.76 2.0355
Jun-06 20.02 -16.8259 2543.70 -15.7369
Jul-06 20.84 4.0959 2569.34 1.0080
Aug-06 23.38 12.1881 2764.75 7.6055
Sep-06 26.39 12.8743 2794.35 1.0706
Oct-06 27.26 3.2967 3000.40 7.3738
Nov-06 28.98 6.3096 3030.30 0.9965
Dec-06 28.85 -0.4486 3349.96 10.5488
Jan-07 33.39 15.7366 3593.58 7.2723
Feb-07 33.58 0.5690 3526.88 -1.8561
Mar-07 36.86 9.7677 3617.90 2.5808
Apr-07 38.57 4.6392 3491.08 -3.5053
May-07 41.09 6.5336 3326.60 -4.7114
Jun-07 45.47 10.6595 3608.60 8.4771
Jul-07 37.07 -18.4737 3789.70 5.0186
Aug-07 41.33 11.4918 4068.27 7.3507
Sep-07 46.03 11.3719 4191.65 3.0327
Oct-07 47.30 2.7591 4580.23 9.2703
Nov-07 44.47 -5.9831 4204.41 -8.2053
Dec-07 49.21 10.6589 4660.68 10.8522
Jan-08 51.37 4.3894 4964.64 6.5218
Feb-08 54.17 5.4507 5243.03 5.6075
Mar-08 55.93 3.2490 5421.48 3.4036
Apr-08 46.07 -17.6292 5933.04 9.4358
May-08 48.89 6.1211 6279.67 5.8424
Jun-08 42.53 -13.0088 5418.87 -13.7077
Jul-08 40.61 -4.5145 5389.27 -0.5462
Aug-08 41.44 2.0438 5419.69 0.5645
Sep-08 44.72 7.9151 5935.38 9.5151
Oct-08 47.26 5.6798 6342.87 6.8654
Nov-08 50.13 6.0728 6619.04 4.3540
Dec-08 54.70 9.1163 6948.27 4.9740
Jan-09 55.65 1.7367 6999.70 0.7402
* As on 1st of every month
Table 4.2: Calculation of Risk, Beta, Trenor, Sharpe and Jensen Measure of SBI
Magnum Tax gain
Return
Fund
from (RA-R'A)
Return RA-R'A RM-R'M (RM-R'M)² (RA-R'A)²
Market (RM-R'M)
(RA)
(RM)

-11.5883 -14.0243 -4.5398 -7.0351 98.6625 49.4927 196.6815


1.5913 -0.8447 -0.8738 -3.3691 2.8460 11.3508 0.7136
-8.0379 -10.4739 1.1968 -1.2985 13.6004 1.6861 109.7034
7.8888 5.4528 2.0355 -0.4599 -2.5076 0.2115 29.7333
-16.8259 -19.2619 -15.7369 -18.2323 351.1886 332.4151 371.0224
4.0959 1.6599 1.0080 -1.4873 -2.4688 2.2122 2.7552
12.1881 9.7521 7.6055 5.1101 49.8344 26.1134 95.1031
12.8743 10.4382 1.0706 -1.4247 -14.8714 2.0298 108.9568
3.2967 0.8607 7.3738 4.8785 4.1988 23.7996 0.7408
6.3096 3.8736 0.9965 -1.4988 -5.8057 2.2464 15.0047
-0.4486 -2.8846 10.5488 8.0535 -23.2310 64.8582 8.3209
15.7366 13.3006 7.2723 4.7770 63.5367 22.8197 176.9047
0.5690 -1.8670 -1.8561 -4.3514 8.1240 18.9348 3.4856
9.7677 7.3317 2.5808 0.0854 0.6263 0.0073 53.7539
4.6392 2.2032 -3.5053 -6.0007 -13.2204 36.0081 4.8539
6.5336 4.0976 -4.7114 -7.2068 -29.5301 51.9375 16.7900
10.6595 8.2235 8.4771 5.9818 49.1914 35.7819 67.6261
-18.4737 -20.9097 5.0186 2.5232 -52.7602 6.3667 437.2170
11.4918 9.0558 7.3507 4.8554 43.9692 23.5748 82.0067
11.3719 8.9359 3.0327 0.5374 4.8022 0.2888 79.8497
2.7591 0.3231 9.2703 6.7750 2.1887 45.9007 0.1044
-5.9831 -8.4191 -8.2053 -10.7006 90.0894 114.5027 70.8813
10.6589 8.2229 10.8522 8.3568 68.7171 69.8369 67.6153
4.3894 1.9533 6.5218 4.0265 7.8650 16.2124 3.8155
5.4507 3.0146 5.6075 3.1121 9.3819 9.6853 9.0880
3.2490 0.8130 3.4036 0.9082 0.7384 0.8249 0.6610
-17.6292 -20.0652 9.4358 6.9405 -139.2619 48.1701 402.6121
6.1211 3.6851 5.8424 3.3470 12.3342 11.2027 13.5800
-13.0088 -15.4448 -13.7077 -16.2031 250.2531 262.5390 238.5422
-4.5145 -6.9505 -0.5462 -3.0416 21.1403 9.2511 48.3091
2.0438 -0.3922 0.5645 -1.9309 0.7573 3.7283 0.1538
7.9151 5.4790 9.5151 7.0198 38.4617 49.2775 30.0199
5.6798 3.2438 6.8654 4.3701 14.1756 19.0979 10.5220
6.0728 3.6368 4.3540 1.8587 6.7596 3.4547 13.2261
9.1163 6.6803 4.9740 2.4787 16.5581 6.1437 44.6262
1.7367 -0.6993 0.7402 -1.7551 1.2273 3.0805 0.4890

87.6966 89.8318 947.5711 1385.0438 2815.4693

N=36
∑ RA=87.6966 R'A=2.4360
∑ RM=89.8318 R'M=2.4953
∑ (RA-R'A)(RM-R'M)= 947.5711

∑ (RM-R'M)²= 1385.0438

∑ (RA-R'A)²= 2815.4693

RF= 8.5%
Rate of Return = (Terminal value – Initial value)+ Dividend

Initial Value

Rate of Return for Jan 06(Fund) = 23.88–27.01


* 100 = -11.5883
27.01

Rate of Return for Jan 06(Market) = 2949.32-3089.58


* 100 = -4.5398
3089.58
Beta (βA) = COV ( RA,RM)

σ ²M
βA = 0.6841

σ A= ∑ (RA-R'A)²
√ (N-1)

σ A = 8.9689

Treynor’s Measure = R'A-RF

βA

Treynor’s Measure = 3.4364

Sharpe Measure = R’A-RF

σ A

Sharpe Measure = 0.2621

Jensen Measure = R'A-[RF+ βA(R'M-RF)]

Jensen Measure = 0.7020


INFERENCE

♦ The overall risk of the mutual fund as measured by the Standard Deviation (σ A)
of the total returns of the fund returns for the period from 1 Jan 2006 to 31 st Dec
2008 is 8.9689

♦ The Average Returns of the Mutual Fund as depicted by Arithmetic Mean (R' A)
for the period from 1 Jan 2006 to 31st Dec 2008 is 2.4360.

♦ The Average Returns of the Market Index – BSE 100 as depicted by Arithmetic
Mean (R'M) for the period from 1 Jan 2006 to 31st Dec 2008 is 2.4953

♦ The Systematic Risk of the Mutual Fund as given by the β coefficient for the
period from 1 Jan 2006 to 31st Dec 2008 is 0.6841

♦ Treynor’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
3.4364.

♦ Sharpe’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
0.2621.

♦ Jensen’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
0.7020.
Graph 4.3: SBI Magnum Taxgain 93 NAV movement from 2006 to 2008

SBI MAGNUM TAXGAIN 93 NAV MOVEMENT FROM


2006-08

60
50
40
NAV

30 NAV*
20
10
0
ar

ar

ar
n

p
n
c

c
De

De

De
Ju

Ju

Ju
Se

Se

Se
M

M
6-

7-

8-
6-

7-

8-
6-

6-

7-

7-

8-

8-
DATE

INTERPRETATIONS

1. The NAV of the fund has almost remained constant at around Rs. 25 for about
one year i.e. 2006.

2. Then the increasing rally started, since then expect for small falls for short periods
it has increased continuously.

3. During Feb 2008, the NAV reached high of Rs.55.93 during the period.

4. On 31 Dec 2008, its NAV was Rs. 55.65

Table 5.1: Monthly returns of Sundaram Tax Saver 98 and BSE 200 Index
SUNDARAM TAX SAVER 98
Index* (BSE
Period NAV* Fund Return 200) Market Return

Jan-06 34.56 769.67


Feb-06 32.57 -5.7340 731.89 -4.9086
Mar-06 32.91 1.0293 725.49 -0.8744
Apr-06 32.41 -1.5117 731.81 0.8711
May-06 33.13 2.2041 753.00 2.8956
Jun-06 27.52 -16.9238 618.34 -17.8831
Jul-06 27.58 0.2264 626.77 1.3633
Aug-06 29.99 8.7132 676.66 7.9599
Sep-06 30.65 2.2024 684.55 1.1660
Oct-06 32.78 6.9611 733.42 7.1390
Nov-06 33.08 0.9094 746.92 1.8407
Dec-06 36.20 9.4324 818.03 9.5204
Jan-07 39.26 8.4559 890.48 8.8566
Feb-07 38.47 -2.0177 871.61 -2.1191
Mar-07 39.46 2.5724 899.17 3.1620
Apr-07 37.56 -4.7965 868.74 -3.3842
May-07 36.16 -3.7233 824.95 -5.0406
Jun-07 39.23 8.4810 890.28 7.9193
Jul-07 40.01 1.9897 921.58 3.5157
Aug-07 41.77 4.4007 977.60 6.0787
Sep-07 43.51 4.1668 1014.05 3.7285
Oct-07 46.14 6.0303 1101.33 8.6071
Nov-07 43.71 -5.2660 1009.59 -8.3299
Dec-07 49.30 12.7926 1116.68 10.6073
Jan-08 52.25 5.9794 1188.78 6.4566
Feb-08 55.44 6.1203 1255.05 5.5746
Mar-08 57.49 3.6974 1294.92 3.1768
Apr-08 65.32 13.6083 1419.57 9.6261
May-08 67.58 3.4658 1507.07 6.1638
Jun-08 56.83 -15.9160 1297.70 -13.8925
Jul-08 57.60 1.3668 1272.80 -1.9188
Aug-08 56.34 -2.1924 1274.60 0.1414
Sep-08 61.22 8.6546 1399.37 9.7890
Oct-08 62.99 2.9027 1498.95 7.1161
Nov-08 65.68 4.2684 1564.30 4.3597
Dec-08 68.80 4.7464 1649.74 5.4619
Jan-09 69.38 0.8390 1655.28 0.3358
* As on 1st of every month

Table5.2: Calculation of Risk, Beta, Trenor, Sharpe and Jensen Measure of


Sundaram Tax Saver 98
Return
Fund
from (RA-R'A) (RM-
Return RA-R'A RM-R'M (RM-R'M)² (RA-R'A)²
Market R'M)
(RA)
(RM)

-5.7340 -7.9044 -4.9086 -7.2720 57.4806 52.8816 62.4796


1.0293 -1.1411 -0.8744 -3.2378 3.6946 10.4835 1.3021
-1.5117 -3.6822 0.8711 -1.4922 5.4947 2.2268 13.5583
2.2041 0.0337 2.8956 0.5322 0.0179 0.2832 0.0011
-16.9238 -19.0942 -17.8831 -20.2465 386.5907 409.9213 364.5880
0.2264 -1.9440 1.3633 -1.0001 1.9441 1.0001 3.7793
8.7132 6.5428 7.9599 5.5965 36.6165 31.3206 42.8079
2.2024 0.0320 1.1660 -1.1974 -0.0383 1.4337 0.0010
6.9611 4.7907 7.1390 4.7756 22.8785 22.8065 22.9506
0.9094 -1.2610 1.8407 -0.5227 0.6591 0.2732 1.5901
9.4324 7.2620 9.5204 7.1571 51.9745 51.2234 52.7366
8.4559 6.2854 8.8566 6.4933 40.8130 42.1625 39.5067
-2.0177 -4.1881 -2.1191 -4.4825 18.7730 20.0924 17.5401
2.5724 0.4020 3.1620 0.7986 0.3210 0.6377 0.1616
-4.7965 -6.9670 -3.3842 -5.7476 40.0433 33.0350 48.5384
-3.7233 -5.8938 -5.0406 -7.4040 43.6375 54.8194 34.7364
8.4810 6.3105 7.9193 5.5559 35.0607 30.8679 39.8230
1.9897 -0.1807 3.5157 1.1524 -0.2082 1.3280 0.0327
4.4007 2.2302 6.0787 3.7153 8.2860 13.8035 4.9739
4.1668 1.9964 3.7285 1.3651 2.7253 1.8636 3.9855
6.0303 3.8599 8.6071 6.2437 24.0999 38.9837 14.8986
-5.2660 -7.4364 -8.3299 -10.6933 79.5198 114.3468 55.3002
12.7926 10.6222 10.6073 8.2439 87.5683 67.9619 112.8311
5.9794 3.8090 6.4566 4.0933 15.5911 16.7548 14.5082
6.1203 3.9499 5.5746 3.2112 12.6841 10.3121 15.6017
3.6974 1.5269 3.1768 0.8134 1.2420 0.6616 2.3315
13.6083 11.4379 9.6261 7.2627 83.0701 52.7468 130.8259
3.4658 1.2953 6.1638 3.8005 4.9229 14.4435 1.6779
-15.9160 -18.0865 -13.8925 -16.2559 294.0116 264.2542 327.1199
1.3668 -0.8036 -1.9188 -4.2822 3.4413 18.3369 0.6458
-2.1924 -4.3628 0.1414 -2.2220 9.6941 4.9371 19.0344
8.6546 6.4842 9.7890 7.4256 48.1486 55.1392 42.0443
2.9027 0.7322 7.1161 4.7527 3.4801 22.5880 0.5362
4.2684 2.0980 4.3597 1.9963 4.1883 3.9854 4.4016
4.7464 2.5759 5.4619 3.0985 7.9815 9.6006 6.6355
0.8390 -1.3315 0.3358 -2.0276 2.6996 4.1110 1.7728

78.1352 85.0816 1439.1078 1481.6275 1505.2586


N=36
∑ RA=78.1352 R'A=2.1704
∑ RM=85.0816 R'M=2.3634
∑ (RA-R'A)(RM-R'M)= 1439.1078
∑ (RM-R'M)²= 1481.6275

∑ (RA-R'A)²= 1505.2586
RF= 8.5%
Rate of Return = (Terminal value – Initial value)+ Dividend

Initial Value

Rate of Return for Jan 06(Fund) = 32.57–34.56


* 100 =-5.7340
34.56

Rate of Return for Jan 06(Market) = 731.89 - 769.67


* 100 =-4.9086
769.67
Beta (βA) = COV ( RA,RM)

σ ²M
βA = 0.9713

σ A= ∑ (RA-R'A)²
√ (N-1)

σ A = 6.5580

Treynor’s Measure = R'A-RF

βA

Treynor’s Measure = 2.1470

Sharpe Measure = R’A-RF

σ A

Sharpe Measure = 0.3180

Jensen Measure = R'A-[RF+ βA(R'M-RF)]

Jensen Measure =-0.1276


INFERENCE

♦ The overall risk of the mutual fund as measured by the Standard Deviation (σ A)
of the total returns of the fund returns for the period from 1 Jan 2006 to 31 st Dec
2008 is 6.5580.
♦ The Average Returns of the Mutual Fund as depicted by Arithmetic Mean (R' A)
for the period from 1 Jan 2006 to 31st Dec 2008 is 2.1704.

♦ The Average Returns of the Market Index – BSE 200 as depicted by Arithmetic
Mean (R'M) for the period from 1 Jan 2006 to 31st Dec 2008 is 2.3634

♦ The Systematic Risk of the Mutual Fund as given by the β coefficient for the
period from 1 Jan 2006 to 31st Dec 2008 is 0.9713

♦ Treynor’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
2.1470.

♦ Sharpe’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
0.3180

♦ Jensen’s Measure for the fund for the period from 1 Jan 2006 to 31st Dec 2008 is
-0.1276

Graph 5.3: Sundaram Tax Saver NAV movement from 2006 to 2008
SUNDARAM TAX SAVER NAV MOVEMENT FROM
2006-08

80
70
60
50
NAV

40 NAV*
30
20
10
0 ar

ar
ar

p
n

n
c

c
De
Ju

Ju

De

Ju

De
Se

Se
Se
M

M
M
6-

7-

8-
8-
6-

7-
6-

6-

8-
7-

7-

8-
DATE

INTERPRETATIONS

1. The NAV of the fund has steadily increased over the period

2. On 31st Dec 2008 it closed at its high of Rs. 69.38 during the period.
FINDINGS AND SUGGESTION

SUMMARY OF FINDING’S
BIRLA SUNLIFE TAX RELIEF 96;

Average Returns (R'A) 1.4458


Market Average Return ( R'M) 2.3634
Standard Deviation (σ A) 8.3550
Beta (β) 0.9296

1. The average return of the fund (R’A) is lower than that of the average market
return (R'M) which indicates that the fund is not performing well as compared to
the market.

2. The Standard Deviation of 8.3550 indicates the amount of risk involved in


investing in the fund.

3. The fund’s beta of 0.9296 is relatively lower than that of the market index (1, by
definition), which gives the idea that the proportionate change in the fund
resulting from the change in the market index is relatively low.

FRANKLIN INDIA TAXSHIELD;

Average Returns (R'A) 5.4412


Market Average Return ( R'M) 2.3742
Standard Deviation (σ A) 29.3064
Beta (β) 0.8778

4. The average return of the fund (R’A) is higher than that of the average market
return (R'M) which indicates that the fund is performing well as compared to the
market.

5. The Standard Deviation of 29.3064 indicates the amount of risk involved in


investing in the fund. The risk involved in investing in this fund is too high.
6. The fund’s beta of 0.8778 is relatively lower than that of the market index (1, by
definition), which gives the idea that the proportionate change in the fund
resulting from the change in the market index is relatively low.

HDFC TAX SAVER

Average Returns (R'A) 3.7647


Market Average Return ( R'M) 2.3742
Standard Deviation (σ A) 6.7354
Beta (β) 0.9308

7. The average return of the fund (R’A) is higher than that of the average market
return (R'M) which indicates that the fund is performing well as compared to the
market.

8. The Standard Deviation of 6.7354 indicates the amount of risk involved in


investing in the fund.

9. The fund’s beta of 0.9308 is relatively lower than that of the market index (1, by
definition), which gives the idea that the proportionate change in the fund
resulting from the change in the market index is relatively low.

SBI MAGNUM TAXGAIN 93

Average Returns (R'A) 2.4360


Market Average Return ( R'M) 2.4953
Standard Deviation (σ A) 8.9689
Beta (β) 0.6841

10. The average return of the fund (R’A) is almost equal to the average market return
(R'M).
11. The Standard Deviation of 8.9689 indicates the amount of risk involved in
investing in the fund.

12. The fund’s beta of 0.6841 is lower than that of the market index (1, by
definition), which gives the idea that the proportionate change in the fund
resulting from the change in the market index is low and the fund is less volatile
compared to the market.

SUNDARAM TAX SAVER 98

Average Returns (R'A) 2.1704


Market Average Return ( R'M) 2.3634
Standard Deviation (σ A) 6.5580.
Beta (β) 0.9713

13. The average return of the fund (R’A) is less than that of the average market return
(R'M).

14. The Standard Deviation of 6.5580 indicates the amount of risk involved in
investing in the fund.

15. The fund’s beta of 0.9713 is almost equal to that of the market index (1, by
definition), which gives the idea that the proportionate change in the fund
resulting from the change in the market index is almost equal and the fund moves
almost in tandem with the market.

TREYNOR'S INDEX

RANKINGS REFRENCE
BIRLA SUNLIFE TAX RELIEF 96 1.4638 V Page no.47
FRANKLIN INDIA TAXSHIELD 6.1018 I Page no.52
HDFC TAX SAVER 3.9534 II Page no.57
SBI MAGNUM TAXGAIN 93 3.4364 III Page no.62
SUNDARAM TAX SAVER 98 2.1470 IV Page no.67

16. Franklin India Taxshield ranks top among the funds because of the high risk

premium i.e. 5.3562 and low market related risk i.e. 0.8778.

17. Though SBI Magnum Tax gain 93 has low market related risk it has been ranked
third because of low risk premium

SHARPE'S INDEX

RANKNGS REFRENCE
BIRLA SUNLIFE TAX RELIEF 96 0.1629 V Page no.47
FRANKLIN INDIA TAXSHIELD 0.1828 IV Page no.52
HDFC TAX SAVER 0.5463 I Page no.57
SBI MAGNUM TAXGAIN 93 0.2621 III Page no.62
SUNDARAM TAX SAVER 98 0.3180 II Page no.67

18. HDFC Tax Saver fund ranks top among the funds because of the higher return
and less risky.

19. Though Franklin India Taxshield has a high return compared to other funds it is
ranked fifth because of high amount of risk involved in investing in the fund.

JENSEN'S INDEX

RANKINGS REFRENCE
BIRLA SUNLIFE TAX RELIEF 96 -0.7572 V Page no.48
FRANKLIN INDIA TAXSHIELD 3.3466 I Page no.53
HDFC TAX SAVER 1.5490 II Page no.57
SBI MAGNUM TAXGAIN 93 0.7020 III Page no.63
SUNDARAM TAX SAVER 98 -0.1276 IV Page no.68

20. Among the risk adjusted performance of the portfolios Franklin India Tax shield
is the best.

SUGGESTION’S

♦ The investors who are ready to take risk can invest in Franklin India Taxshield
has the risk associated with it is too high and the return is also high. The
predictive ability represented by Jensen’s Index is also quite good and gives an
idea that the fund manager has a good ability of predicting the market and then
investing. So you can have faith in the fund manager.

♦ The investors who are not much interested in taking risk can invest in HDFC Tax
Saver as the risk associated with this fund is less and the returns are also good but
not as high as that of Franklin India Taxshield. As the fund is able to earn high
returns with low risk, we can say that the fund as been managed very well.

♦ The investors can also invest in SBI Magnum Taxgain 93 has it has been ranked
third among all the measures but the returns will be moderate compared to
Franklin and HDFC.

♦ As the Tata Tax Savings Fund is highly volatile, investors are not recommended
invest in this fund.

CONCLUSION
The asset base rose by Rs 58,013 crore in April. March had seen a marginal decline in the
assets under management of the industry.

The mutual fund industry as we have seen has been through testing phase in its evolution.
It has seen a sudden mushrooming of several asset management companies soon after the
opening up of the industry for private players, the debacle of UTI, and its low recovery
and the optimism of the new generation fund mangers who believe that they can indeed
beat the market and diversify away the risk very efficiently. Investors today have to bear
outrageous plans of various AMC’s that they have magic portfolio, which can give tailor
made returns than risks.
In this study an attempt was made to look into the logic behind the claims that these
AMC’s boldly make theoretically with a broad prospective. Broadly various concepts
like the risk-return relationship and various performance evaluation methods were floated
with an intention to facilitate even an ordinary investor with elementary knowledge of
statistics to understand them.
Based on the inferences from the analytical study of the performance of the fund some
suggestions were made to the investor.
The future of the mutual fund industry in India is very bright and is going to be very
preferred investment options for an investor in the coming future. It looks to take over
the other avenues of investment available to the investor due to its high returns and
professional management, which is lowering the risk.
BIBILOGRAPHY
1. Referred by following books

Sl No Book Author Publisher


1 Investment Analysis Prasanna Chandra 5th reprint, 2003
and Portfolio Tata McGraw-Hill
Management

2 Investment V.K.Bhalla 7th Edition,


Management S.Chand & Co
(Security Analysis
and Portfolio
Management),
3 Security Analysis Punithavathy 2nd Reprint, 2003,
and Portfolio Pandian Vikas Publishing
Management House
4 Investment Frank K Reilly, 7th Edition,
Analysis and Keith C Brown Thomson South
Portfolio Western
Management

2. Website

www.equitymaster.com

www.nseindia.com

www.bseindia.com

www.icicidirect.com

www.Sharekhan.co

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