A comparative study on direct equity investing and mutual fund investing

91
Summer Internship Project Report On A COMPARATIVE STUDY ON DIRECT EQUITY INVESTING AND MUTUAL FUND INVESTING At Geojit Bnp Paribas, Kottayam Submitted in partial fulfilment of the degree of BBA + GDBA Programme of Amity University (U.P) Submitted to: Submitted by: Ms. Anitha Suresh Mr. Akash Jeevan Faculty guide A31106413023 BBA class of 2014 Amity Global Business School, Cochin BBA+GDBA Batch 2013-2016

description

It is an internship report.

Transcript of A comparative study on direct equity investing and mutual fund investing

Page 1: A comparative study on direct equity investing and mutual fund investing

Summer Internship Project Report

On

A COMPARATIVE STUDY ON DIRECT EQUITY INVESTING

AND MUTUAL FUND INVESTING

At

Geojit Bnp Paribas, Kottayam

Submitted in partial fulfilment of the degree of BBA + GDBA

Programme of Amity University (U.P)

Submitted to: Submitted by:

Ms. Anitha Suresh Mr. Akash Jeevan

Faculty guide A31106413023

BBA class of 2014

Amity Global Business School, Cochin

BBA+GDBA Batch 2013-2016

Page 2: A comparative study on direct equity investing and mutual fund investing

DECLARATION

Title of Project Report:

‘A Comparative Study on Direct Equity Investing and Mutual Fund Investing’

I declare

(a)That the work presented for assessment in this Summer Internship Report is my own,

that it has not previously been presented for another assessment and that my debts (for

words, data, arguments and ideas) have been appropriately acknowledged

(b)That the work conforms to the guidelines for presentation and style set out in the

relevant documentation.

Date: Mr. Akash Jeevan

A31106413023

BBA class of 2014

Page 3: A comparative study on direct equity investing and mutual fund investing

CERTIFICATE FROM FACULTY GUIDE

I Ms. Anitha Suresh hereby certify that Mr. Akash Jeevan student of Bachelor of

Business Administration at Amity Global Business School, Kochi, Amity University

Uttar Pradesh has completed the Project Report on ― ‘A comparative study on direct

equity investing and mutual fund investing.’

Ms. Anitha Suresh

Faculty in charge

AGBS, Kochi

Page 4: A comparative study on direct equity investing and mutual fund investing

CERTIFICATE FROM INDUSTRY

Page 5: A comparative study on direct equity investing and mutual fund investing

ACKNOWLEDGEMENT

An undertaking of work life - this is never an outcome of a single person; rather it bears

the imprints of a number of people who directly or indirectly helped me in completing

the present study. I would be failing in my duties if I don't say a word of thanks to all

those who made my training period educative and pleasurable one. I am thankful to

GEOJIT BNP PARIBAS, KOTTAYAM for giving me an opportunity to do summer

training in the company.

First of all, I am extremely grateful to Mr. Sunil K (Branch Manager, Kottayam) for his

guidance, encouragement and tutelage during the course of the internship despite his

extremely busy schedule. My very special thanks to him for giving me the opportunity to

do this project and for his support throughout as a mentor.

I must also thank my faculty guide Ms. Anitha Suresh (Faculty, Amity Global Business

School) for her continuous support, mellow criticism and able directional guidance during

the project.

I sincerely thank Mr. Ashish K Pillai (Faculty, Amity Global Business School) for his

valuable suggestions and guidance for the completion of my summer internship and

preparation of the report.

I would also like to thank all the respondents for giving their precious time and relevant

information and experience, I required, without which the Project would have been

incomplete.

Finally I would like to thank all lecturers, friends and my family for their kind support

and to all who have directly or indirectly helped me in preparing this project report. And

at last I am thankful to all divine light and my parents, who kept my motivation and zest

for knowledge always high through the tides of time.

Page 6: A comparative study on direct equity investing and mutual fund investing

ABSTRACT

A comparative study is a process of conducting studies of two or more subject with

respect of their features. It’s a comparison of their respective pros and cons. This way of

a study helps in finding out a best thing from the compared things. Here I made a

comparative study on direct investing in equity shares and investing in mutual funds.

The objective of my study is to find out a best security to invest in Indian Financial Market

according to an investor. This study makes to understand the followings factors:

Performance of equity shares and mutual funds for the past 10 years

Makes me to understand the factors regarding the stock split and bonus shares

Understand the stock market crash on 2008

Gives me a lot of information about Indian Financial Market

I have done project on “A Comparative Study on Direct Equity Investing and Mutual

Fund Investing” of 8 weeks during my summer internship training at Geojit Bnp Paribas,

Kottayam under the guidance of Mr. Sunil K (Branch manager).

I have tried to put my best effort that this report can help anyone about the Indian Capital

Market, the equity shares and mutual funds.

This report has several features:

The language and concept used to explain is very simple to understand any reader

Makes enough tables and graphs for easier understanding

Added several websites as reference, which is helpful for a reader to get additional

information

Added some interesting facts about the study, which will definitely makes the

reader more enthusiastic

Page 7: A comparative study on direct equity investing and mutual fund investing

TABLE OF CONTENTS

Chapter 1: Introduction to company………………………………………………..…1

1.1: Introduction to Financial Market……………………………………………6

1.1.1: Indian Financial Market…………………………………………..…6

1.2: The Equity Capital………………………………………………………….8

1.2.1: Face Value of a Share…………………………………………….….9

1.2.2: Issue of Shares……………………………………………………….9

1.2.3: Advantages of Equity Shares……………………………………...…9

1.2.4: Disadvantages of Equity Shares……………………………………10

1.3: The Mutual Fund……………………………………………………….…11

1.3.1: NAV (Net Asset Value)…………………………………………….12

1.3.2: Various Types of Mutual Funds……………………………………12

1.3.3: Advantages of Mutual Fund……………………………………..…14

1.3.4: Disadvantages of Mutual Fund……………………………………..16

1.4: Indian Stock Market Preview – 2004 April to 2014 March………………..16

1.4.1: Biggest falls in the Indian stock market history………………….…17

Chapter 2: Literature Review…………………………………………………...........20

Chapter 3: Research Methodology…………………………………………………...22

Chapter 4: Analysis and Interpretations……………………………………………..24

Chapter 5: Conclusion and Recommendations………………………………………70

References……………………………………………………………………………...72

Annexure……………………………………………………………………………....73

Page 8: A comparative study on direct equity investing and mutual fund investing

LIST OF TABLES

4.1: Price and return of NSE CNX NIFTY……………………….……………………..24

4.2: Price and return of Hindustan Unilever Limited……………………………………27

4.3: Price and return of Larsen & Toubro Limited………………………………………29

4.4: Price and return of Bharat Petroleum Corporation Limited…………….…………..31

4.5: Price and return of Infosys Limited……………………………………...…………33

4.6: Price and return of Dr. Reddy's Laboratories Limited……………………..……….35

4.7: Price and return of State Bank of India……………………………………………..37

4.8: Price and return of Tata Steel Limited………………………………………….…..39

4.9: Price and return of Maruti Suzuki India Limited…………………………………...41

4.10: Price and return of Bharat Heavy Electricals Limited……………………………..43

4.11: Price and return of Bharti Airtel Limited………………………………………….45

4.12: Price and return of Birla sun life equity fund-regular plan-growth…………….….48

4.13: Price and return of Reliance growth fund-regular plan-growth…………………...50

4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth…………52

4.15: Price and return of Tata pure equity fund-regular plan-growth………………….54

4.16: Price and return of SBI magnum equity fund-regular plan-growth……………...56

4.17: Price and return of Canara Robeco equity diversified fund-regular plan-growth….58

4.18: Price and return of HDFC top 200 fund-regular plan-growth…………………..…60

4.19: Price and return of Franklin India prima fund-regular plan-growth…………….…62

4.20: Price and return of UTI equity fund-regular plan-growth…………………………64

4.21: Price and return of Sundaram growth fund-regular plan-growth …………….……66

Page 9: A comparative study on direct equity investing and mutual fund investing

LIST OF GRAPHS

4.1: Price and return of NSE CNX NIFTY……………………………………………...24

4.2: Price and return of Hindustan Unilever Limited…………………………………....27

4.3: Price and return of Larsen & Toubro Limited………………………………………29

4.4: Price and return of Bharat Petroleum Corporation Limited……………………...…31

4.5: Price and return of Infosys Limited………………………………………………...33

4.6: Price and return of Dr. Reddy's Laboratories Limited…………………………...…35

4.7: Price and return of State Bank of India…………………………………………..…37

4.8: Price and return of Tata Steel Limited…………………………………………...…39

4.9: Price and return of Maruti Suzuki India Limited…………………………………...41

4.10: Price and return of Bharat Heavy Electricals Limited…………………………..…43

4.11: Price and return of Bharti Airtel Limited……………………………………….…45

4.12: Price and return of Birla sun life equity fund-regular plan-growth………………48

4.13: Price and return of Reliance growth fund-regular plan-growth………………….50

4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth…………52

4.15: Price and return of Tata pure equity fund-regular plan-growth…………….……54

4.16: Price and return of SBI magnum equity fund-regular plan-growth………...……56

4.17: Price and return of Canara Robeco equity diversified fund-regular plan-growth….58

4.18: Price and return of HDFC top 200 fund-regular plan-growth……………………..60

4.19: Price and return of Franklin India prima fund-regular plan-growth…………….…62

4.20: Price and return of UTI equity fund-regular plan-growth…………………………64

4.21: Price and return of Sundaram growth fund-regular plan-growth ……………….…66

Page 10: A comparative study on direct equity investing and mutual fund investing

LIST OF FIGURES

1.1: Mutual Fund Operation……………………………………………………………12

1.2: Indian stock market crash – 2008………………………………………………….19

Annexure figure 1: A bull in stock market……………………………………………....73

Annexure figure 2: A bear in stock market ……………………………………………..74

Page 11: A comparative study on direct equity investing and mutual fund investing

CHAPTER 1: INTRODUCTION

Page 12: A comparative study on direct equity investing and mutual fund investing

1 | P a g e

Introduction to Company

Geojit BNP Paribas, today, is a leading retail financial services company in India with a

growing presence in the Middle East. The company rides on its rich experience in the

capital market to offer its clients a wide portfolio of savings and investment solutions.

The gamut of value-added products and services offered ranges from equities and

derivatives to Mutual Funds, Life & General Insurance and third party Fixed Deposits.

The needs of over 710,000 clients are met via multichannel services - a countrywide

network of over 486 offices, phone service, dedicated Customer Care Centre and the

Internet.

Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange

(NSE) and the Bombay Stock Exchange (BSE). In 2007, global banking major BNP

Paribas joined the company’s other major shareholders - Mr. C.J.George, KSIDC (Kerala

State Industrial Development Corporation) and Mr.Rakesh Jhunjhunwala – when it

bought a stake to become the single largest shareholder.

The company also has a strategic presence in the Middle East Region in the form of joint

ventures and partnerships. Barjeel Geojit Securities, its joint venture with the Al Saud

group, is headquartered in Dubai, in the United Arab Emirates, and has branches in Abu

Dhabi, Ras Al Khaimah, Al Ain, and Sharjah. Aloula Geojit Brokerage Co., the joint

venture with the Al Johar group in Saudi Arabia is headquartered in Riyadh, with

branches in Dammam and Jeddah. BBK Geojit Securities KSC, located in Kuwait, is a

joint venture with Bank of Bahrain, Kuwait and JZA. Geojit Qurum Business Group

Financial Services LLC is the joint venture with QBG and National Securities Co. and

based in Oman.

A strong brand identity and extensive industry knowledge coupled with BNP Paribas’

international expertise gives Geojit BNP Paribas a competitive advantage.

Expanding range of Online Products and Services

Geojit BNP Paribas has proven expertise in providing online services. In the year 2000,

the company was the first stockbroker in the country to offer Internet Trading, integrating

the first Bank Payment Gateway in the country for Internet Trading, among many other

industry firsts. This experience, along with the BNP Paribas Personal Investors’ expertise

Page 13: A comparative study on direct equity investing and mutual fund investing

2 | P a g e

as the leading online broker in Europe, is helping the company to rapidly expand its

business in the Internet Trading segment. Currently, clients can trade online in equities,

derivatives, currency futures, mutual funds and IPOs, and select from multiple bank

payment gateways for online transfer of funds. Strategic B2B agreements with South

Indian Bank, City Union Bank and Federal Bank enable the respective bank’s clients to

open integrated 3-in-1 accounts to seamlessly trade via a sophisticated Online Trading

platform. Further, deployment of BNP Paribas’ state-of-the-art globally accepted systems

and processes is already scaling up the sales of Mutual Funds and Insurance.

Note:

Certified financial advisors help clients to arrive at the right financial solution to meet

their individual needs. The wide range of products and services on offer includes:

Equities, Derivatives, Currency Futures, Custody Accounts, Mutual Funds, Life

Insurance & General Insurance, IPOs, Portfolio Management Services, Property Services,

Margin Funding and Loans against Shares.

A growing footprint

With a presence in almost all the major states of India, the network of over 491 offices

across 300 cities and towns presently covers Andhra Pradesh, Bihar, Chattisgarh, Goa,

Gujarat, Haryana, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra,

New Delhi, Orissa, Punjab, Rajasthan, Tamil Nadu & Pondicherry, Uttar Pradesh,

Uttaranchal and West Bengal.

Milestones

Product innovation backed by a high level of domain specific knowledge and state-of-

the-art technology has helped Geojit BNP Paribas set many milestones including

numerous industry firsts.

1986

C. J. George became member of Cochin Stock Exchange

1987

Page 14: A comparative study on direct equity investing and mutual fund investing

3 | P a g e

M/s C. J. George and Co. was set up at Ravipuram, Cochin

1988

Company was renamed at M/s Geojit & Co.

1994

Becomes a Public Limited Company named Geojit Securities Ltd.

1995

o Kerala State Industrial Development Corporation Ltd. (KSIDC) acquires

24 percent equity stake.

o Membership in National Stock Exchange (NSE).

o Public Issue.

1996

Launch of Portfolio Management Services with SEBI registration.

1997

Depository Participant (DP) under National Securities Depository Limited.

1999

Membership in Bombay Stock Exchange (BSE).

2000

o BSE Listing.

o 1st broking firm in India to offer online trading facility.

o Commences Derivative Trading with NSE.

o Integrates the 1st Bank Payment Gateway in the country for Internet

Trading.

2001

o Becomes India's first DP to launch depository transactions through

Internet.

o Establishes Joint Venture in the UAE to serve NRI customers.

Page 15: A comparative study on direct equity investing and mutual fund investing

4 | P a g e

2002

1st in India to launch an integrated internet trading system for Cash & Derivatives

segments.

2003

o Geojit Commodities Limited, wholly owned subsidiary, launched Online

Futures Trading in agri-commodities, precious metals and in energy

futures on multiple commodity exchanges.

o National launch of online futures trading in Rubber, Pepper, Gold, Wheat

and Rice.

o Company renamed as Geojit Financial Services Ltd.

2004

National launch of online futures trading in Cardamom.

2005

o NSE Listing.

o Geojit Credits, a subsidiary, registers with RBI as a Non-Banking

Financial Company (NBFC).

o National launch of online futures trading in Coffee.

2006

Charter member of the Financial Planning Standards Board of India.

2007

o BNP Paribas takes a stake in the company’s equity, making it the single

largest shareholder.

o Establishes Joint Venture in Saudi Arabia to serve the Saudi national and

the NRI.

2008

o BNP Paribas Securities India (P) Ltd. – a Joint Venture with BNP Paribas

S.A. for Institutional Brokerage.

o 1st brokerage to offer full Direct Market Access execution in India for

institutional clients.

2009

Page 16: A comparative study on direct equity investing and mutual fund investing

5 | P a g e

o Launch of Property Services division.

o Launch of online trading in Currency Derivatives.

o Consequent to BNP Paribas becoming the largest stakeholder in Geojit

BNP Paribas, company is renamed as Geojit BNP Paribas Financial

Services Ltd.

2010

o Launch of FLIP (Financial Investment Platform), a new advanced online

investment platform.

o Launch of state of the art Mobile Trading platform to empower clients to

trade from anywhere, even while on the move through the innovative

application FLIP- ME.

o Barjeel Geojit Securities, its joint venture with the Al Saud group is

headquartered in Dubai, in the United Arab Emirates, and owns branches

in Abu Dhabi, Ras Al Khaimah, Al Ain, and Sharjah.

o Aloula Geojit Capital Co., the joint venture with the Al Johar group in

Saudi Arabia is headquartered in Riyadh with branches in Dammam and

Jeddah.

o BBK Geojit Securities KSC, located in Kuwait, is a joint venture with

BBK and JZA.

o QBG Geojit Financial Services LLC is the joint venture with Qurum

Business Group (QBG) and National Securities Co. and based in Oman.

2011

o Geojit BNP Paribas and JZ Associates LLC, Kuwait signed a JV deal with

Bank of Bahrain and Kuwait to from BBK Geojit Securities KSC. The

agreement was signed by Abdulkarim Bucheery, CEO of BBK, C. J.

George and Jassem Hassan Zainal of JZ Associates LLC

o Geojit BNP Paribas joined hands with Qurum Business Group and

National Securities Company in Oman to form QBG Geojit Securities

LLC, Oman. The deal was inked by Sheikh Abdulaziz bin Ahmed Al

Hosni, Vice President and Chairman of Qurum Business Group and C. J.

George

2012

Qualified Foreign Investors (QFI) Investment services launched.

Page 17: A comparative study on direct equity investing and mutual fund investing

6 | P a g e

1.1 Introduction to Financial Market

A financial market is a market in which people and entities can trade financial securities,

commodities, and other fungible items of value at low transaction costs and at prices that

reflect supply and demand. Securities include stocks and bonds, and commodities include

precious metals or agricultural goods.

There are both general markets (where many commodities are traded) and specialized

markets (where only one commodity is traded). Markets work by placing many interested

buyers and sellers, including households, firms, and government agencies, in one "place",

thus making it easier for them to find each other. An economy which relies primarily on

interactions between buyers and sellers to allocate resources is known as a market

economy in contrast either to a command economy or to a non-market economy such as

a gift economy.

In finance, financial markets facilitate:

The raising of capital (in the capital markets)

The transfer of risk (in the derivatives markets)

Price discovery

Global transactions with integration of financial markets

The transfer of liquidity (in the money markets)

International trade (in the currency markets)

– and are used to match those who want capital to those who have it.

Typically a borrower issues a receipt to the lender promising to pay back the capital.

These receipts are securities which may be freely bought or sold. In return for lending

money to the borrower, the lender will expect some compensation in the form of interest

or dividends. This return on investment is a necessary part of markets to ensure that funds

are supplied to them.

1.1.1 Indian Financial Market

India Financial market is one of the oldest in the world and is considered to be the fastest

growing and best among all the markets of the emerging economies. The history of Indian

Page 18: A comparative study on direct equity investing and mutual fund investing

7 | P a g e

capital markets dates back 200 years toward the end of the 18th century when India was

under the rule of the East India Company. The development of the capital market in India

concentrated around Mumbai where no less than 200 to 250 securities brokers were active

during the second half of the 19th century. The financial market in India today is more

developed than many other sectors because it was organized long before with the

securities exchanges of Mumbai, Ahmedabad and Kolkata were established as early as

the 19th century.

By the early 1960s the total number of securities exchanges in India rose to eight,

including Mumbai, Ahmedabad and Kolkata apart from Madras, Kanpur, Delhi,

Bangalore and Pune.

Today there are 21 regional securities exchanges in India in addition to the centralized

NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India).

However the stock markets in India remained stagnant due to stringent controls on the

market economy that allowed only a handful of monopolies to dominate their respective

sectors.

The corporate sector wasn't allowed into many industry segments, which were dominated

by the state controlled public sector resulting in stagnation of the economy right up to the

early 1990s.

Thereafter when the Indian economy began liberalizing and the controls began to be

dismantled or eased out, the securities markets witnessed a flurry of IPOs that were

launched. This resulted in many new companies across different industry segments to

come up with newer products and services.

A remarkable feature of the growth of the Indian economy in recent years has been the

role played by its securities markets in assisting and fuelling that growth with money rose

within the economy. This was in marked contrast to the initial phase of growth in many

of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign

Direct Investment) spurring growth in their initial days of market decontrol. During this

phase in India much of the organized sector has been affected by high growth as the

financial markets played an all-inclusive role in sustaining financial resource

Page 19: A comparative study on direct equity investing and mutual fund investing

8 | P a g e

mobilization. Many PSUs (Public Sector Undertakings) that decided to offload part of

their equity were also helped by the well-organized securities market in India.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter

Exchange of India) during the mid-1990s by the government of India was meant to usher

in an easier and more transparent form of trading in securities. The NSE was conceived

as the market for trading in the securities of companies from the large-scale sector and

the OTCEI for those from the small-scale sector. While the NSE has not just done well

to grow and evolve into the virtual backbone of capital markets in India the OTCEI

struggled and is yet to show any sign of growth and development. The integration of IT

into the capital market infrastructure has been particularly smooth in India due to the

country’s world class IT industry. This has pushed up the operational efficiency of the

Indian stock market to global standards and as a result the country has been able to

capitalize on its high growth and attract foreign capital like never before.

The regulating authority for capital markets in India is the SEBI (Securities and Exchange

Board of India). SEBI came into prominence in the 1990s after the capital markets

experienced some turbulence. It had to take drastic measures to plug many loopholes that

were exploited by certain market forces to advance their vested interests. After this initial

phase of struggle SEBI has grown in strength as the regulator of Indian capital markets

and as one of the country’s most important institutions.

1.2 The Equity Capital

Investors owning equity shares of a company are owners of the company. They are issued

equity shares of the company, as evidence of such ownership.

Equity investors are not entitled to any fixed return or repayment of capital. However,

they are entitled to the benefits that arise out of the performance of the company. If the

business fails, they may lose the entire investment. Of all the financiers, they take the

most risk.

Total equity capital of a company is divided into equal units of small denominations, each

called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is

divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share.

Page 20: A comparative study on direct equity investing and mutual fund investing

9 | P a g e

Thus, the company then is 12 said to have 20, 00,000 equity shares of Rs 10 each. The

holders of such shares are members of the company and have voting rights.

1.2.1 Face Value of a Share

The nominal or stated amount (in Rs.) assigned to a security by the issuer. For shares, it

is the original cost of the stock shown on the certificate; for bonds, it is the amount paid

to the holder at maturity. Also known as par value or simply par. For an equity share, the

face value is usually a very small amount (Rs. 5, Rs. 10) and does not have much bearing

on the price of the share, which may quote higher in the market, at Rs. 100 or Rs. 1000

or any other price. For a debt security, face value is the amount repaid to the investor

when the bond matures (usually, Government securities and corporate bonds have a face

value of Rs. 100). The price at which the security trades depends on the fluctuations in

the interest rates in the economy.

When a security is sold above its face value, it is said to be issued at a Premium and if it

is sold at less than its face value, then it is said to be issued at a Discount.

1.2.2 Issue of Shares

Most companies are usually started privately by their promoter(s). However, the

promoters’ capital and the borrowings from banks and financial institutions may not be

sufficient for setting up or running the business over a long term. So companies invite the

public to contribute towards the equity and issue shares to individual investors. The way

to invite share capital from the public is through a ‘Public Issue’. Simply stated, a public

issue is an offer to the public to subscribe to the share capital of a company. Once this is

done, the company allots shares to the applicants as per the prescribed rules and

regulations laid down by SEBI.

1.2.3 Advantages of Equity Shares

More Income: Equity shareholders are the residual claimant of the profits after

meeting all the fixed commitments. The company may add to the profits by

trading on equity. Thus equity capital may get dividend at high in boom period.

Page 21: A comparative study on direct equity investing and mutual fund investing

10 | P a g e

Right to participate in the Control and Management: Equity shareholders have

voting rights and elect competent persons as directors to control and manage the

affairs of the company.

Capital profits: The market value of equity shares fluctuates directly with the

profits of the company and their real value based on the net worth of the assets of

the company. An appreciation in the net worth of the company's assets will

increase the market value of equity shares. It brings capital appreciation in their

investments.

An Attraction of Persons having Limited Income: Equity shares are mostly of

lower denomination and persons of limited recourses can purchase these shares.

Tax Advantages: Equity shares also offer tax advantages to the investor. The

larger yield on equity shares results from an increase in principal or capital gains,

which are taxed at lower rate than other incomes in most of the countries

Other Advantages: It appeals most to the speculators. Their prices in security

market are more fluctuating.

1.2.4 Disadvantages of Equity Shares

Uncertain and Irregular Income: The dividend on equity shares is subject to

availability of profits and intention of the Board of Directors and hence the income

is quite irregular and uncertain. They may get no dividend even three are sufficient

profits.

Capital loss During Depression Period: During recession or depression periods,

the profits of the company come down and consequently the rate of dividend also

comes down. Due to low rate of dividend and certain other factors the market

value of equity shares goes down resulting in a capital loss to the investors.

Loss on Liquidation: In case, the company goes into liquidation, equity

shareholders are the worst suffers. They are paid in the last only if any surplus is

available after every other claim including the claim of preference shareholders is

settled. It is evident from the advantages and disadvantages of equity share capital

discussed above that the issue of equity share capital is a must for a company, yet

it should not solely depend on it. In order to make its capital structure flexible, it

should raise funds from other sources also.

Page 22: A comparative study on direct equity investing and mutual fund investing

11 | P a g e

Dividend at the board’s mercy: The rate of dividend is recommended by the board.

The shareholders in the AGM cannot declare a higher rate than what is

recommended by the board.

Illiquid: Since equity shares are not refundable they are treated as illiquid.

Speculation: higher dividends during prosperous periods and low dividend during

depression period shall lead to ample speculation.

1.3 Mutual Fund

A mutual fund is a professionally managed type of collective investment scheme that

pools money from many investors and invests it in stocks, bonds, short-term money

market instruments and other securities. Mutual funds have a fund manager who invests

the money on behalf of the investors by buying / selling stocks, bonds etc. Currently, the

worldwide value of all mutual funds totals more than $US 26 trillion.

There are various investment avenues available to an investor such as real estate, bank

deposits, post office deposits, shares, debentures, bonds etc. A mutual fund is one more

type of Investment Avenue available to investors. There are many reasons why investors

prefer mutual funds. Buying shares directly from the market is one way of investing. But

this requires spending time to find out the performance of the company whose share is

being purchased, understanding the future business prospects of the company, finding out

the track record of the promoters and the dividend, bonus issue history of the company

etc. An informed investor needs to do research before investing. However, many investors

find it cumbersome and time consuming to pore over so much of information, get access

to so much of details before investing in the shares. Investors therefore prefer the mutual

fund route. They invest in a mutual fund scheme which in turn takes the responsibility of

investing in stocks and shares after due analysis and research. The investor need not

bother with researching hundreds of stocks. It leaves it to the mutual fund and its

professional fund management team. Another reason why investors prefer mutual funds

is because mutual funds offer diversification. An investor’s money is invested by the

mutual fund in a variety of shares, bonds and other securities thus diversifying the

investor’s portfolio across different companies and sectors. This diversification helps in

reducing the overall risk of the portfolio. It is also less expensive to invest in a mutual

fund since the minimum investment amount in mutual fund units is fairly low (Rs. 500 or

Page 23: A comparative study on direct equity investing and mutual fund investing

12 | P a g e

so). With Rs. 500 an investor may be able to buy only a few stocks and not get the desired

diversification.

Figure 1.1: Mutual Fund Operation

1.3.1 NAV (Net Asset Value)

NAV means Net Asset Value. The investments made by a Mutual Fund are marked to

market on daily basis. In other words, we can say that current market value of such

investments is calculated on daily basis. NAV is arrived at after deducting all liabilities

(except unit capital) of the fund from the realisable value of all assets and dividing by

number of units outstanding. Therefore, NAV on a particular day reflects the realisable

value that the investor will get for each unit if the scheme is liquidated on that date. This

NAV keeps on changing with the changes in the market rates of equity and bond markets.

Therefore, the investments in Mutual Funds is not risk free, but a good managed Fund

can give you regular and higher returns than when you can get from fixed deposits of a

bank etc.

1.3.2 Various Types of Mutual Funds

A common man is so much confused about the various kinds of Mutual Funds that he is

afraid of investing in these funds as he cannot differentiate between various types of

Page 24: A comparative study on direct equity investing and mutual fund investing

13 | P a g e

Mutual Funds with fancy names. Mutual Funds can be classified into various

categories under the following heads:-

(A) According to type of investments: - While launching a new scheme, every Mutual

Fund is supposed to declare in the prospectus the kind of instruments in which it will

make investments of the funds collected under that scheme. Thus, the various kinds of

Mutual Fund schemes as categorized according to the type of investments are as follows:-

Equity funds/schemes

Debt funds / schemes (also called Income Funds)

Diversified funds / schemes (also called Balanced Funds)

Gilt funds/ schemes

Money market funds/ schemes

Sector specific funds

Index funds

B) According to the time of closure of the scheme : While launching new schemes,

Mutual Funds also declare whether this will be an open ended scheme (i.e. there is no

specific date when the scheme will be closed) or there is a closing date when finally the

scheme will be wind up. Thus, according to the time of closure schemes are classified as

follows:-

Open ended schemes

Close ended schemes

Open ended funds are allowed to issue and redeem units any time during the life of the

scheme, but close ended funds cannot issue new units except in case of bonus or rights

issue. Therefore, unit capital of open ended funds can fluctuate on daily basis (as new

investors may purchase fresh units), but that is not the case for close ended schemes. In

other words we can say that new investors can join the scheme by directly applying to the

mutual fund at applicable net asset value related prices in case of open ended schemes but

not in case of close ended schemes. In case of close ended schemes, new investors can

buy the units only from secondary markets.

Page 25: A comparative study on direct equity investing and mutual fund investing

14 | P a g e

C) According to tax incentive schemes: Mutual Funds are also allowed to float some tax

saving schemes. Therefore, sometimes the schemes are classified according to this also:-

Tax saving funds

Non tax saving funds / Other funds

(D) According to the time of pay-out: Sometimes Mutual Fund schemes are classified

according to the periodicity of the pay outs (i.e. dividend etc.). The categories are as

follows:-

Dividend Paying Schemes

Reinvestment Schemes

1.3.3 Advantages of Mutual Fund

Professional Management: Mutual funds offer investors the opportunity to earn

an income or build their wealth through professional management of their

investible funds. There are several aspects to such professional management viz.

investing in line with the investment objective, investing based on adequate

research, and ensuring that prudent investment processes are followed.

Affordable Portfolio Diversification: Units of a scheme give investors exposure

to a range of securities held in the investment portfolio of the scheme. Thus, even

a small investment of Rs 5,000 in a mutual fund scheme can give investors a

diversified investment portfolio.

Economies of Scale: The pooling of large sums of money from so many investors

makes it possible for the mutual fund to engage professional managers to manage

the investment. Individual investors with small amounts to invest cannot, by

themselves, afford to engage such professional management.

Liquidity: At times, investors in financial markets are stuck with a security for

which they can’t find a buyer – worse, at times they can’t find the company they

invested in! Such investments, whose value the investor cannot easily realise in

the market, are technically called illiquid investments and may result in losses for

the investor. Investors in a mutual fund scheme can recover the value of the

moneys invested, from the mutual fund itself. Depending on the structure of the

mutual fund scheme, this would be possible, either at any time, or during specific

Page 26: A comparative study on direct equity investing and mutual fund investing

15 | P a g e

intervals, or only on closure of the scheme. Schemes where the money can be

recovered from the mutual fund only on closure of the scheme, are listed in a stock

exchange. In such schemes, the investor can sell the units in the stock exchange

to recover the prevailing value of the investment.

Tax Deferral: Mutual funds are not liable to pay tax on the income they earn. If

the same income were to be earned by the investor directly, then tax may have to

be paid in the same financial year. Mutual funds offer options, whereby the

investor can let the moneys grow in the scheme for several years. By selecting

such options, it is possible for the investor to defer the tax liability. This helps

investors to legally build their wealth faster than would have been the case, if they

were to pay tax on the income each year.

Tax benefits: Specific schemes of mutual funds (Equity Linked Savings Schemes)

give investors the benefit of deduction of the amount invested, from their income

that is liable to tax. This reduces their taxable income, and therefore the tax

liability. Further, the dividend that the investor receives from the scheme, is tax-

free in his hands.

Convenient Options: The options offered under a scheme allow investors to

structure their investments in line with their liquidity preference and tax position.

Investment Comfort: Once an investment is made with a mutual fund, they make

it convenient for the investor to make further purchases with very little

documentation. This simplifies subsequent investment activity.

Regulatory Comfort: The regulator, Securities & Exchange Board of India (SEBI)

has mandated strict checks and balances in the structure of mutual funds and their

activities. Mutual fund investors benefit from such protection.

Systematic approach to investments: Mutual funds also offer facilities that help

investor invest amounts regularly through a Systematic Investment Plan (SIP); or

withdraw amounts regularly through a Systematic Withdrawal Plan (SWP); or

move moneys between different kinds of schemes through a Systematic Transfer

Plan (STP). Such systematic approaches promote an investment discipline, which

is useful in long term wealth creation and protection.

Page 27: A comparative study on direct equity investing and mutual fund investing

16 | P a g e

1.3.4 Disadvantages of Mutual Fund

Lack of portfolio customization: Some securities houses offer Portfolio

Management Schemes (PMS) to large investors. In a PMS, the investor has better

control over what securities are bought and sold on his behalf. On the other hand,

a unit-holder is just one of several thousand investors in a scheme. Once a unit-

holder has bought into the scheme, investment management is left to the fund

manager (within the broad parameters of the investment objective). Thus, the unit-

holder cannot influence what securities or investments the scheme would buy.

Large sections of investors lack the time or the knowledge to be able to make

portfolio choices. Therefore, lack of portfolio customization is not a serious

limitation in most cases.

Choice overload: Over 800 mutual fund schemes offered by 38 mutual funds –

and multiple options within those schemes – make it difficult for investors to

choose between them. Greater dissemination of industry information through

various media and availability of professional advisors in the market should help

investors handle this overload.

No control over costs: All the investor's moneys are pooled together in a scheme.

Costs incurred for managing the scheme are shared by all the Unit holders in

proportion to their holding of Units in the scheme. Therefore, an individual

investor has no control over the costs in a scheme.

SEBI has however imposed certain limits on the expenses that can be charged to

any scheme. These limits, which vary with the size of assets and the nature of the

scheme.

1.4 Indian Stock Market Preview – 2004 April to 2014 March

As the study period is from April 2004 to March 2014, here is the relevance to give a

preview of Indian stock market. As this is the period were market shows booms (bull),

depression (bear), and stable moments. So this is the period of making a good study.

As in April 2004 period Sensex is trading at 5807.13 and Nifty is at 1800s. In 2005 period

Sensex is between 6000s and late 9000s.at the same time Nifty is between 1900s and

Page 28: A comparative study on direct equity investing and mutual fund investing

17 | P a g e

2700s. In 2006 – 2007 period is a booming period for both Sensex and Nifty, Sensex get

into 10000s and made a record close of 19843.96 points in December 2007, and Nifty

also made a record close of 6159.21 at December 2007. But the period 2008 – 2009 is a

depressive (bearish) for Indian stock market. The Sensex shows a record low of 7,697.39

in the 2008 financial year and Nifty also came down to 2526.2.

But in the mid of 2009, the new government lead by Dr Manmohan Singh came into

power, which made the bearish market to rise into bullish trend. The Sensex rise gradually

and made a record in October 2011 at 20267.72 points, and Nifty also made a record at

6335.25 in November 2010. From 2011 to 2013 period market is going in a zigzag way,

the Sensex is trading between 16000s and 20000s and Nifty is also in 4500s and 5800s.

In 2013 – 2014 financial year both Sensex and Nifty comes into 22000s and 6500s

respectively.

1.4.1 Biggest falls in the Indian stock market history

May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391,

following heavy selling by FIIs, retail investors and a weakness in global markets. The

Nifty crashed by 496.50 points (8.70%) points to close at 5,208.80 points.

April 2, 2007: The Sensex opened with a huge negative gap of 260 points at 12,812

following the Reserve Bank of India decision to hike the cash reserve ratio and repo

rate. Unabated selling, mainly in auto and banking stocks, saw the index drift to lower

levels as the day progressed. The index tumbled to a low of 12,426 before finally settling

with a hefty loss of 617 points (4.7%) at 12,455.

August 1, 2007: The Sensex opened with a negative gap of 207 points at 15,344 amid

weak trends in the global market and slipped deeper into the red. Unabated selling across-

the-board saw the index tumble to a low of 14,911. The Sensex finally ended with a hefty

loss of 615 points at 14,936. The NSE Nifty ended at 4,346, down 183 points. This is the

third biggest loss in absolute terms for the index.

August 16, 2007: The Sensex, after languishing over 500 points lower for most of the

trading session, slipped again towards the close to a low of 14,345. The index finally

ended with a hefty loss of 643 points at 14,358.

Page 29: A comparative study on direct equity investing and mutual fund investing

18 | P a g e

October 18, 2007: Profit-taking in noon trades saw the index pare gains and slip into

negative zone. The intensity of selling increased towards the closing bell, and the index

tumbled all the way to a low of 17,771 - down 1,428 points from the days high. The

Sensex finally ended with a hefty loss of 717 points (3.8%) at 17,998. The Nifty lost 208

points to close at 5,351.

October 24, 2008: The Sensex plunged by 1070.63 points (10.96 per cent) to close at

8,701.07. The National Stock Exchange's Nifty ended at 2,557.25, down 13.11 per cent

or 386 points. The BSE Midcap closed 8.38 per cent lower and BSE Small cap Index

ended 7.66 per cent down.

November 21, 2007: Mirroring weakness in other Asian markets, the Sensex saw

relentless selling. The index tumbled to a low of 18,515 - down 766 points from the

previous close. The Sensex finally ended with a loss of 678 points at 18,603. The Nifty

lost 220 points to close at 5,561.

December 17, 2007: A heavy bout of selling in the late noon deals saw the index plunge

to a low of 19,177 - down 856 points from the day's open. The Sensex finally ended with

a huge loss of 769 points (3.8%) at 19,261. The NSE Nifty ended at 5,777, down 271

points.

January 18, 2008: Unabated selling in the last one hour of trade saw the index tumble to

a low of 18,930 - down 786 points from the day’s high. The Sensex finally ended with a

hefty loss of 687 points (3.5%) at 19,014. The index thus shed 8.7% (1,813 points) during

the week. The NSE Nifty plunged 3.5% (208 points) to 5,705.

January 21, 2008: The Sensex saw it’s highest ever loss of 1,408 points at the end of the

session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the

day's low of 16,963.96, on high volatility as investors panicked following weak global

cues amid fears of the US recession.

Page 30: A comparative study on direct equity investing and mutual fund investing

19 | P a g e

Figure 1.2: Indian stock market crash – 2008

January 22, 2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low

of 15,332, down 2,273 points. However, it recovered losses and closed at a loss of 875

points at 16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended

for one hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low

of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent.

February 11, 2008: The Sensex finally ended with a loss of 834 points (4.8%) at 16,631.

The NSE Nifty slipped over 5% (263 points) to 4,857.

March 3, 2008: The Bombay Stock Exchange benchmark Sensex witnessed its second-

largest fall ever losing 900.84 points to close at 16,677.88 on frantic selling by funds,

triggered by deepening concern over United States recession and some Budget-related

concerns.

March 17, 2008: The Bombay Stock Exchange benchmark Sensex crashed by 951 points

to close at 14,809 on weak cues from the overseas markets. Unabated selling saw the

index slip below the 15,000-mark.

10 October 2008: The markets crashed by 801 points to close at a low of 10,528. The

crisis in the global markets, a fall in the rupee and poor IIP numbers led to the fall.

Page 31: A comparative study on direct equity investing and mutual fund investing

CHAPTER 2: LITERATURE REVIEW

Page 32: A comparative study on direct equity investing and mutual fund investing

20 | P a g e

P. Sandeep ( September 2011) The stock market has become an essential market which

plays a vital role in economic prosperity and foster capital formation and help in

sustaining economic growth. Stock markets are more than a place to trade securities; they

operate as a facilitator between savers and users of capital by means of pooling of funds,

sharing risk, and transferring wealth. Stock markets are essential for economic growth as

they insure the flow of resources to the most productive investment opportunities.

Gupta (1972) in his book has studied the working of stock exchanges in India and has

given a number of suggestions to improve its working. The study highlights the' need to

regulate the volume of speculation so as to serve the needs of liquidity and price

continuity. It suggests the enlistment of corporate securities in more than one stock

exchange at the same time to improve liquidity. The study also wishes the cost of issues

to be low, in order to protect small investors.

Jamadar Lal (1992) presents a profile of Indian investors and evaluates their investment

decisions. He made an effort to study their familiarity with, and comprehension of

financial information, and the extent to which this is put to use. The information that the

companies provide generally fails to meet the needs of a variety of individual investors

and there is a general impression that the company's Annual Report and other statements

are not well received by them.

Nabhi Kumar Jain (1992) specified certain tips for buying shares for holding and also

for selling shares. He advised the investors to buy shares of a growing company of a

growing industry. Buy shares by diversifying in a number of growth companies operating

in a different but equally fast growing sector of the economy. He suggested selling the

shares the moment company has or almost reached the peak of its growth. Also, sell the

shares the moment you realise you have made a mistake in the initial selection of the

shares. The only option to decide when to buy and sell high priced shares is to identify

the individual merit or demerit of each of the shares in the portfolio and arrive at a

decision.

Sathya Swaroop Debashish (2009) measured the performance of the equity based

mutual funds in India. 23 schemes were studied over a period of April 1996 to March

Page 33: A comparative study on direct equity investing and mutual fund investing

21 | P a g e

2009 (13 years). The analysis was done on the basis of mean return, beta risk, coefficient

of determination, sharp ratio, Treynor ratio and Jensen alpha. The first analysis has been

done on the basis of returns, followed by a comparison between market returns and the

return on schemes. It was concluded that UTI mutual fund schemes and Franklin

Templeton schemes have performed excellently in public and private sectors respectively.

Further, on the basis of the parameters like Sharpe ratio, Deutsche, Franklin Templeton,

Prudential ICICI (in private sector) and SBI and UTI (in public sector) mutual funds

schemes have out- performed the market portfolio with positive values. However, the

overall analysis finds Franklin Templeton and UTI being the best performers, and Birla

Sun Life, HDFC and LIC mutual funds showing poor below - average performance when

measured against the risk - return relationship models and measures.

Rohatgi (1973) states that the basic function of the stock market is to provide ready

marketability or liquidity to holdings of securities. The ideal stock market is one that can

provide instantaneous and unlimited liquidity. But it is reasonable to assume that a

prudent long-term investor in equities would provide for his immediate cash needs. This

is in agreement with the three motives of liquidity preference. If so, one would expect not

`instant' liquidity, but moderate liquidity. It will be unreasonable for any investor to

suppose that his equity holdings are as good as cash.

Jack Clark Francis (1986) revealed the importance of the rate of return in investments

and reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain

world, investors cannot predict exactly what rate of return an investment will yield.

However he suggested that the investors can formulate a probability distribution of the

possible rates of return.

Page 34: A comparative study on direct equity investing and mutual fund investing

CHAPTER 3: RESEARCH METHODOLOGY

Page 35: A comparative study on direct equity investing and mutual fund investing

22 | P a g e

Aim:

This study aims at creating awareness in the minds of investor in terms of risk, return,

liquidity & marketability of their investments. Also focuses on which would be the better

investment for an individual investor.

Objectives:

To compare Equity and Mutual Fund Schemes in respect of their risk & return.

Analysing the performance of equity shares and mutual fund schemes with their

benchmark NSE CNX Nifty.

Finding the performance by taking the quarterly average of 10 years.

Provide information about pros and cons of investing in Equity and Mutual Funds

Scope of the study:

The study is primarily deals with equity and mutual fund investments. The study covers

10 randomly selected stocks out of 50 NSE CNX NIFTY companies and 10 randomly

selected mutual fund schemes out of mutual fund industry in India for comparison. The

analysis is strictly based on share prices and Net asset values of the mutual funds which

will help an investor to identify better investment avenues from the market. The study

goes through a period in which the market has shown booms, depression, and consistent

performance.

Research Methodology:

Sampling technique: - Since the population is heterogeneous stratified random

sampling were taken

Sample size: - Ten companies and ten mutual fund scheme were selected.

Sample description: - In this study 10 companies have been selected from NSE

CNX Nifty and 10 mutual funds selected on the basis of their Net Asset Value and

after that comparison made between them, using their benchmark.

Data collection methods:

The entire date were collected from the secondary source. Internet is main source of

secondary sources of date collection used. Magazines, Newspapers and Journals were

also used for collecting data.

Page 36: A comparative study on direct equity investing and mutual fund investing

23 | P a g e

Analysis and Interpretations:

The analysis and interpretation has been made with the help of graphs and percentage of

returns of securities. Microsoft Excel 2013 is the software used for this purpose.

Limitations of the study:

The sample size is limited by 10 each on equity shares and mutual funds

The benchmark for equity shares and mutual funds is NSE CNX NIFTY, other

benchmarks for securities may have shown good or bad performance.

The data was collected from the time horizon of 10 financial years starting from

April 2004 to March 2014.

The comparison here made strictly on price of equity shares and NAV of mutual

funds, the study hasn’t gone deep into other factors.

The data has been collected from secondary sources only, relevance of

information may not fully trustworthy.

Page 37: A comparative study on direct equity investing and mutual fund investing

CHAPTER 4: ANALYSIS AND INTERPRETATION

Page 38: A comparative study on direct equity investing and mutual fund investing

24 | P a g e

Benchmark: NSE CNX NIFTY

Average share price and percentage returns of CNX NIFTY is as follows:

Table 4.1: Price and returns of NSE CNX NIFTY

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 1841.81 0% 0%

2005-06 2765.28 50% 50%

2006-07 3626.14 97% 31%

2007-08 5053.19 174% 39%

2008-09 3485.46 89% -31%

2009-10 4956.30 169% 42%

2010-11 5827.68 216% 18%

2011-12 5127.63 178% -12%

2012-13 5642.46 206% 10%

2013-14 6146.43 234% 9%

Graph 4.1: Price and returns of NSE CNX NIFTY

-50%

0%

50%

100%

150%

200%

250%

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

7000.00

NSE CNX NIFTY

POINT(Avg) %RETURN % RETURN(YoY)

Page 39: A comparative study on direct equity investing and mutual fund investing

25 | P a g e

The NSE CNX NIFTY has performed so well for long and medium term. For short term

except 2008-09 and 2011-12 the Nifty performed well. One of the main thing is that the

Nifty hasn’t shown a negative return for the continuous long term and short term period.

In 2007 and 2008, a period in which stock market crash happens, then also the Nifty did

not shows it badly. The high percentage of return the Nifty has given is 234% in 2013-14

for the continuous 10 year period.

The main reason for the good performance of Nifty is that the stock embed in it. Overall

the has given good support to,

Long-term investors – Better

Medium-term investors – Good

Short-term investors – Fair

Page 40: A comparative study on direct equity investing and mutual fund investing

26 | P a g e

Equity Shares

Following are the equity shares selected for the study from NSE CNX NIFTY:

1. Hindustan Unilever limited

2. Larsen & Toubro Ltd.

3. Bharat Petroleum Corporation Limited

4. Infosys Ltd.

5. Dr. Reddy's Laboratories Ltd.

6. State Bank of India

7. Tata Steel Ltd.

8. Maruti Suzuki India Ltd.

9. Bharat Heavy Electricals Limited

10. Bharti Airtel Ltd.

Page 41: A comparative study on direct equity investing and mutual fund investing

27 | P a g e

1. Hindustan Unilever limited

Average share price and percentage returns of the company is as follows:

Table 4.2: Price and returns of HUL

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 132.01 0% 0%

2005-06 ₹ 203.60 54% 54%

2006-07 ₹ 226.95 72% 11%

2007-08 ₹ 212.93 61% -6%

2008-09 ₹ 236.80 79% 11%

2009-10 ₹ 258.61 96% 9%

2010-11 ₹ 294.15 123% 14%

2011-12 ₹ 375.43 184% 28%

2012-13 ₹ 498.04 277% 33%

2013-14 ₹ 597.20 352% 20%

Graph 4.2: Price and return of HUL

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

₹ -

₹ 100.00

₹ 200.00

₹ 300.00

₹ 400.00

₹ 500.00

₹ 600.00

₹ 700.00

HINDUSTAN UNILEVER LIMITED

PRICE(Avg) % RETURN % RETURN(YoY)

Page 42: A comparative study on direct equity investing and mutual fund investing

28 | P a g e

Hindustan unilever limited is one of the top FMCG in India. As we can see that the share

price is growing yearly, which has not showed any negative return for the continuous 10

years. For a short term investor the return is also good except in the year of 2007-08 as

because of stock market crash it shows a bit down. But overall return of Hindustan

Unilever is at a peak as it shows 352% of return in the end of 10 year.

For example if an investor but 10 shares at ₹ 132.01 in 2004-05 period and after 10 years

at 2013-14 his investment grows up to ₹ 5972.

Page 43: A comparative study on direct equity investing and mutual fund investing

29 | P a g e

2. Larsen and Toubro Limited

Average share price and percentage returns of the company is as follows:

Table 4.3: Price and return of L&T Ltd.

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 883.76 0% 0%

2005-06 ₹ 1,732.26 96% 96%

2006-07 ₹ 1,645.11 86% -5%

2007-08 ₹ 3,052.33 245% 86%

2008-09 ₹ 1,519.06 72% -50%

2009-10 ₹ 1,641.36 86% 8%

2010-11 ₹ 1,873.31 112% 14%

2011-12 ₹ 1,371.25 55% -27%

2012-13 ₹ 1,491.99 69% 9%

2013-14 ₹ 1,134.70 28% -24%

Graph 4.3: Price and return of L&T Ltd.

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

₹ -

₹ 500.00

₹ 1,000.00

₹ 1,500.00

₹ 2,000.00

₹ 2,500.00

₹ 3,000.00

₹ 3,500.00

LARSEN AND TOUBRO

PRICE(Avg) % RETURN % RETURN(YoY)

Page 44: A comparative study on direct equity investing and mutual fund investing

30 | P a g e

Larsen and Toubro Limited is one of the best infrastructure sector company in India. But

its share price shows a little bit disappointing for the long term as well as short term

investor. Its share price on year over year is on a sig-sag manner, means up and down.

But on unexpectedly on year 2007-08 shows a return of 245%, its share price is at

₹ 3,052.33 which is of high for the period of 10 years. A noticing point is that when stock

market crash many of the company’s share price where at the lowest level but Larsen &

Toubro is one which shows the highest return at that time.

If an investor has got L&T in his portfolio he cannot face a big down on his portfolio.

According to a short term investor L&T did not give any high return except on 2007-08

period.

Page 45: A comparative study on direct equity investing and mutual fund investing

31 | P a g e

3. Bharat Petroleum Corporation Limited

Average share price and percentage returns of the company is as follows:

Table 4.4: Price and return of BPCL

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 379.86 0% 0%

2005-06 ₹ 408.16 7% 7%

2006-07 ₹ 335.40 -12% -18%

2007-08 ₹ 407.51 7% 22%

2008-09 ₹ 334.05 -12% -18%

2009-10 ₹ 539.44 42% 61%

2010-11 ₹ 670.64 77% 24%

2011-12 ₹ 619.03 63% -8%

2012-13 ₹ 456.68 20% -26%

2013-14 ₹ 376.54 -1% -18%

Graph 4.4: Price and return of BPCL

-40%

-20%

0%

20%

40%

60%

80%

100%

₹ -

₹ 100.00

₹ 200.00

₹ 300.00

₹ 400.00

₹ 500.00

₹ 600.00

₹ 700.00

₹ 800.00

BPCL

PRICE(Avg) % RETURN % RETURN(YoY)

Page 46: A comparative study on direct equity investing and mutual fund investing

32 | P a g e

Bharat Petroleum Corporation Limited is one of the Petroleum Corporation of India in

which majority of the shares are held by government. BPCL has not performed so well.

But in the year of 2009 to 2012 the shares of BPCL performed well compared to whole

10 year. For a long term concern the BPCL did not give any good return, but for a short

term investor for the year 2009-10 and 2010-11 is of a good time of earnings.

Overall we can see that the BPCL is good for short term investors

Page 47: A comparative study on direct equity investing and mutual fund investing

33 | P a g e

4. Infosys Limited

Average share price and percentage returns of the company is as follows:

Table 4.5: Price and return of Infosys Ltd.

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 2,892.13 0% 0%

2005-06 ₹ 2,712.95 -6% -6%

2006-07 ₹ 2,297.26 -21% -15%

2007-08 ₹ 1,757.90 -39% -23%

2008-09 ₹ 1,393.55 -52% -21%

2009-10 ₹ 2,332.03 -19% 67%

2010-11 ₹ 3,131.39 8% 34%

2011-12 ₹ 2,769.36 -4% -12%

2012-13 ₹ 2,563.05 -11% -7%

2013-14 ₹ 3,070.08 6% 20%

Graph 4.5: Price and return of Infosys Ltd.

-60%

-40%

-20%

0%

20%

40%

60%

80%

₹ -

₹ 500.00

₹ 1,000.00

₹ 1,500.00

₹ 2,000.00

₹ 2,500.00

₹ 3,000.00

₹ 3,500.00

INFOSYS LIMITED

PRICE(Avg) % RETURN % RETURN(YoY)

Page 48: A comparative study on direct equity investing and mutual fund investing

34 | P a g e

As we all know Infosys Limited is one of the best IT Company in India. As Infosys at a

glance* has given negative return for long as well as short term horizon. In 2007 and

2008 period both short and long term return is at the deepest level, but in the year 2009

and 2010 period showed good short term return.

As the company overall given short term investors a good return.

*In the year 2004 and 2006 Infosys Limited had issued bonus shares in the ratio 3:1 and

1:1 respectively, which is an indirect return for an investor, as investor got additional

shares without paying money.

Page 49: A comparative study on direct equity investing and mutual fund investing

35 | P a g e

5. Dr. Reddy's Laboratories Limited

Average share price and percentage returns of the company is as follows:

Table 4.6: Price and return of Dr. Reddy’s Lab Ltd.

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 769.11 0% 0%

2005-06 ₹ 996.40 30% 30%

2006-07 ₹ 884.70 15% -11%

2007-08 ₹ 657.71 -14% -26%

2008-09 ₹ 534.76 -30% -19%

2009-10 ₹ 1,048.54 36% 96%

2010-11 ₹ 1,548.71 101% 48%

2011-12 ₹ 1,589.44 107% 3%

2012-13 ₹ 1,722.51 124% 8%

2013-14 ₹ 2,424.63 215% 41%

Graph 4.6: Price and return of Dr. Reddy’s Lab Ltd.

-50%

0%

50%

100%

150%

200%

250%

₹ -

₹ 500.00

₹ 1,000.00

₹ 1,500.00

₹ 2,000.00

₹ 2,500.00

₹ 3,000.00

DR. REDDY'S LABORATORIES LIMITED

PRICE(Avg) % RETURN % RETURN(YoY)

Page 50: A comparative study on direct equity investing and mutual fund investing

36 | P a g e

Dr. Reddy’s Lab also given a good return in short and long term except the drop down

period of 2007 and 2008. From 2004 to 2008 the stock is moving in a constant manner,

but after that the share price goes like rocket speed. It shows 215% return in the year

2013-14. For a short term investor who started investing in 2008-09 period and his

investment period is of medium (1, 3, or 5) he should have earn a record return. Because

from 2008 to 2014 the stock price is 5 times greater than 2008 price.

For example an investor has bought 100 shares at ₹ 534.76 on 2008, his total investment

is ₹ 53576. On 2014 his investment has grown to ₹ 242463.

Page 51: A comparative study on direct equity investing and mutual fund investing

37 | P a g e

6. State Bank of India

Average share price and percentage returns of the company is as follows:

Table 4.7: Price and return of State Bank of India

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 551.38 0% 0%

2005-06 ₹ 874.19 59% 59%

2006-07 ₹ 999.11 81% 14%

2007-08 ₹ 1,860.76 237% 86%

2008-09 ₹ 1,232.71 124% -34%

2009-10 ₹ 2,071.86 276% 68%

2010-11 ₹ 2,779.91 404% 34%

2011-12 ₹ 2,007.78 264% -28%

2012-13 ₹ 2,304.46 318% 15%

2013-14 ₹ 1,813.23 229% -21%

Graph 4.7: Price and return of State Bank of India

-100%-50%0%50%100%150%200%250%300%350%400%450%

₹ -

₹ 500.00

₹ 1,000.00

₹ 1,500.00

₹ 2,000.00

₹ 2,500.00

₹ 3,000.00

STATE BANK OF INDIA

PRICE(Avg) % RETURN % RETURN(YOY)

Page 52: A comparative study on direct equity investing and mutual fund investing

38 | P a g e

State Bank of India is largest bank in India. The amazing thing about SBI is that its stock

price never showed a negative return* for the continuous 10 year period. Investing in SBI

for long term has given investors higher returns as compared to same sector. For the short

and medium investors SBI has given a good return except in 2008 and 2011 period. In

2010-11 period showed the highest return of 404%, in 2007 and 2008 period were

disappoint period for almost all investors, but after that SBI had solved the problems with

high returns. One of the noticing thing is that from 2009-10 to 2012-13 the stock is trading

at 2000s*, but on 2013-14 it drops a little bit.

Overall we can say that SBI was most flavoured to long term investors.

* The State Bank of India had made rights issue in 2008 in the ratio of 1:5 at a premium

of Rs 1580 per share. That is reason of the stock price increase.

Page 53: A comparative study on direct equity investing and mutual fund investing

39 | P a g e

7. Tata Steel Limited

Average share price and percentage returns of the company is as follows:

Table 4.8: Price and return of Tata Steel Ltd.

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 344.06 0% 0%

2005-06 ₹ 419.93 22% 22%

2006-07 ₹ 500.30 45% 19%

2007-08 ₹ 769.41 124% 54%

2008-09 ₹ 394.78 15% -49%

2009-10 ₹ 537.46 56% 36%

2010-11 ₹ 610.04 77% 14%

2011-12 ₹ 458.18 33% -25%

2012-13 ₹ 395.93 15% -14%

2013-14 ₹ 340.86 -1% -14%

Graph 4.8: Price and return of Tata Steel Ltd.

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

₹ -

₹ 100.00

₹ 200.00

₹ 300.00

₹ 400.00

₹ 500.00

₹ 600.00

₹ 700.00

₹ 800.00

₹ 900.00

TATA STEEL LIMITED

PRICE(Avg) % RETURN % RETURN(YOY)

Page 54: A comparative study on direct equity investing and mutual fund investing

40 | P a g e

Tata Steel Limited (TISCO) is one of the most steel manufactures in India. But looking

into its share price the company has not given a huge return except in 2007-08 period.

Tata steel is also one of the company which have given a high return on the stock market

crashed period. The price is at ₹ 769.41 during 2007-08 period and the continuous return

given was 124%. For the short term investor 2007-08 is of a good period for high return.

One of the main thing is that in 2004-15 the price ₹ 344.06 and after 10 years in 2013-14

the price come back to ₹ 340.86.

Overall the stock has not performed so well with respect to short and long term time

horizon

Page 55: A comparative study on direct equity investing and mutual fund investing

41 | P a g e

8. Maruti Suzuki India Limited

Average share price and percentage returns of the company is as follows:

Table 4.9: Price and return of Maruti Suzuki India Ltd.

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 410.16 0% 0%

2005-06 ₹ 633.64 54% 54%

2006-07 ₹ 881.85 115% 39%

2007-08 ₹ 891.10 117% 1%

2008-09 ₹ 651.70 59% -27%

2009-10 ₹ 1,437.10 250% 121%

2010-11 ₹ 1,387.10 238% -3%

2011-12 ₹ 1,127.93 175% -19%

2012-13 ₹ 1,322.90 223% 17%

2013-14 ₹ 1,657.99 304% 25%

Graph 4.9: Price and return of Maruti Suzuki India Ltd.

-50%

0%

50%

100%

150%

200%

250%

300%

350%

₹ -

₹ 200.00

₹ 400.00

₹ 600.00

₹ 800.00

₹ 1,000.00

₹ 1,200.00

₹ 1,400.00

₹ 1,600.00

₹ 1,800.00

MARUTI SUZUKI INDIA LIMITED

PRICE(Avg) % RETURN % RETURN(YOY)

Page 56: A comparative study on direct equity investing and mutual fund investing

42 | P a g e

Maruti Suzuki India Limited is one of the largest automobile manufactures in India. As

its innovative technology and reputation has made investors to make trust over it. The

company’s share has given better return as compared to companies in the same sector. It

is also one of the company in which, has not given a negative return for continuous 10

year period. In the year 2009-10 and 2013-14 the company was given highest return of

250% and 304% respectively. For a short term investor in the period of 2008-09 and 2009-

10 the company has given 121% return, which is of a good return according to a short

term investor. After that the share has not performed so well for a short investor.

Overall the company had given good support to long term investors than short and

medium term investors.

Page 57: A comparative study on direct equity investing and mutual fund investing

43 | P a g e

9. Bharat Heavy Electricals Limited

Average share price and percentage returns of the company is as follows:

Table 4.10: Price and return of BHEL

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 652.40 0% 0%

2005-06 ₹ 1,430.28 119% 119%

2006-07 ₹ 2,227.24 241% 56%

2007-08 ₹ 2,056.48 215% -8%

2008-09 ₹ 1,460.96 124% -29%

2009-10 ₹ 2,331.71 257% 60%

2010-11 ₹ 2,331.14 257% 0%

2011-12 ₹ 1,046.55 60% -55%

2012-13 ₹ 221.16 -66% -79%

2013-14 ₹ 171.15 -74% -23%

Graph 4.10: Price and return of BHEL

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

₹ -

₹ 500.00

₹ 1,000.00

₹ 1,500.00

₹ 2,000.00

₹ 2,500.00

BHARAT HEAVY ELECTRICAL LIMITED

PRICE(Avg) % RETURN % RETURN(YoY)

Page 58: A comparative study on direct equity investing and mutual fund investing

44 | P a g e

Bharat Heavy Electrical Limited is one of the government holding company. BHEL at a

glance* shows a low or negative returns mainly in terms of short term investment horizon.

But for a medium period the stock has performed well, especially from 2005-06 to 2010-

11, which is of a prosperous* period for a medium term investors, as the stock has given

returns on 200s. The stock really disappointed* short term investor in the period 2010-11

as the return given is 0%.

Conclude that the stock is more flourish able to medium term investors.

*The company was given bonus in the ratio of 1:1 in 2007and there is a stock split

happens in 2011, the ₹ 10 face value split to ₹ 2. Both is of an indirect return to an

investor.

Page 59: A comparative study on direct equity investing and mutual fund investing

45 | P a g e

10. Bharti Airtel Limited

Average share price and percentage returns of the company is as follows:

Table 4.11: Price and return of Bharti Airtel Ltd.

FY PRICE(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 176.65 0% 0%

2005-06 ₹ 337.55 91% 91%

2006-07 ₹ 558.28 216% 65%

2007-08 ₹ 899.63 409% 61%

2008-09 ₹ 711.84 303% -21%

2009-10 ₹ 465.80 164% -35%

2010-11 ₹ 336.33 90% -28%

2011-12 ₹ 363.58 106% 8%

2012-13 ₹ 294.84 67% -19%

2013-14 ₹ 314.60 78% 7%

Graph 4.11: Price and return of Bharti Airtel Ltd.

-100%-50%0%50%100%150%200%250%300%350%400%450%

₹ -

₹ 100.00

₹ 200.00

₹ 300.00

₹ 400.00

₹ 500.00

₹ 600.00

₹ 700.00

₹ 800.00

₹ 900.00

₹ 1,000.00

BHARTI AIRTEL LIMITED

PRICE(Avg) % RETURN % RETURN(YOY)

Page 60: A comparative study on direct equity investing and mutual fund investing

46 | P a g e

Bharti Airtel Limited is the largest telecom company in India. The return of Airtel also

did not shown a negative for the continuous 10 year period. It has also given a highest

return on 2007-08 and 2008-09, of 409% and 304% respectively. The graph shows a peak

on 2007-08 period. For a short term investor the return was not so good except the initial

stages. Mainly the company has more with long and medium term investor.

Overall the company maintained its long and medium term investors in good condition.

Page 61: A comparative study on direct equity investing and mutual fund investing

47 | P a g e

Mutual Funds

For the study her I had chosen equity mutual funds which are of from diversified equity

funds, large cap funds, multi-cap funds, and small and medium cap funds. All funds are

of high risk. The selected mutual funds are:

1. Birla sun life equity fund-regular plan-growth

2. Reliance growth fund-regular plan-growth

3. ICICI prudential top 200 fund-regular plan-growth

4. Tata pure equity fund-regular plan-growth

5. SBI magnum equity fund-regular plan-growth

6. Canara Robeco equity diversified fund-regular plan-growth

7. HDFC top 200 fund-regular plan-growth

8. Franklin India prima fund-regular plan-growth

9. UTI equity fund-regular plan-growth

10. Sundaram growth fund-regular plan-growth

Page 62: A comparative study on direct equity investing and mutual fund investing

48 | P a g e

1. Birla Sun Life Equity Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.12: Price and return of Birla sun life equity fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 69.15 0% 0%

2005-06 ₹ 122.99 78% 78%

2006-07 ₹ 161.01 133% 31%

2007-08 ₹ 242.12 250% 50%

2008-09 ₹ 151.37 119% -37%

2009-10 ₹ 232.90 237% 54%

2010-11 ₹ 274.35 297% 18%

2011-12 ₹ 229.55 232% -16%

2012-13 ₹ 255.37 269% 11%

2013-14 ₹ 280.64 306% 10%

Graph 4.12: Price and return of Birla sun life equity fund-regular plan-growth

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

₹ -

₹ 50.00

₹ 100.00

₹ 150.00

₹ 200.00

₹ 250.00

₹ 300.00

BIRLA SUN LIFE EQUITY FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 63: A comparative study on direct equity investing and mutual fund investing

49 | P a g e

Birla Sun Life equity fund is a diversified equity fund, started in 1998. The fund has

performed well in its time horizon, as it gives 306% of return in the tear of 2013-14, which

is among highest in the diversified equity fund. The funds gives a good support to its long

term investors. For the short term investors also the fund is so favourable as it give 78%

of return in 2005-06 period. The fund is little bit down for short term investors in the

period 2008-09 and 2011-12.

Overall the fund has mainly focused long and medium term investors than short term

investors.

Page 64: A comparative study on direct equity investing and mutual fund investing

50 | P a g e

2. Reliance Growth Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.13: Price and return of Reliance growth fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 97.48 0% 0%

2005-06 ₹ 181.96 87% 87%

2006-07 ₹ 240.15 146% 32%

2007-08 ₹ 365.19 275% 52%

2008-09 ₹ 251.59 158% -31%

2009-10 ₹ 396.39 307% 58%

2010-11 ₹ 482.08 395% 22%

2011-12 ₹ 411.52 322% -15%

2012-13 ₹ 456.54 368% 11%

2013-14 ₹ 462.68 375% 1%

Graph 4.13: Price and return of Reliance growth fund-regular plan-growth

-100%-50%0%50%100%150%200%250%300%350%400%450%

₹ -

₹ 100.00

₹ 200.00

₹ 300.00

₹ 400.00

₹ 500.00

₹ 600.00

RELIANCE GROWTH FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 65: A comparative study on direct equity investing and mutual fund investing

51 | P a g e

Reliance growth fund was incepted in 1995, is a large cap focussed fund. The fund has

given well support to long and short term investors as the fund has given 395% and 375%

of return in the 2010-11 and 2013-14 periods respectively. Which is of highest among the

funds compared here. As in the period 2008-09 the fund shown a downward for short and

medium investors. For the last 5 years the fund has given return in 300s, which is of a

good period for a long term investor to take profits.

After all the fund is most with the long term as well as short term investors.

Page 66: A comparative study on direct equity investing and mutual fund investing

52 | P a g e

3. ICICI Prudential Top 200 Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 32.12 0% 0%

2005-06 ₹ 53.50 67% 67%

2006-07 ₹ 73.42 129% 37%

2007-08 ₹ 99.68 210% 36%

2008-09 ₹ 63.29 97% -37%

2009-10 ₹ 94.51 194% 49%

2010-11 ₹ 126.64 294% 34%

2011-12 ₹ 101.47 216% -20%

2012-13 ₹ 113.34 253% 12%

2013-14 ₹ 124.61 288% 10%

Graph 4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

₹ -

₹ 20.00

₹ 40.00

₹ 60.00

₹ 80.00

₹ 100.00

₹ 120.00

₹ 140.00

ICICI PRUDENTIAL TOP 200 FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 67: A comparative study on direct equity investing and mutual fund investing

53 | P a g e

ICICI prudential top 200 is a large and multi cap focussed fund started in 1994. The fund

has well performed for long term investors as it gives 294% of return in 2010-11 period.

One of the main thing is that the fund had not achieved a return in 300s, as the fund’s

NAV is moving in a systematic way. The fund has got given a well return to short term

investors. But as the NAV is lower investors has got an opportunity to buy more number

of units.

Overall the fund is best suited for long term investors.

Page 68: A comparative study on direct equity investing and mutual fund investing

54 | P a g e

4. Tata Pure Equity Fund – Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.15: Price and return of Tata pure equity fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 26.49 0% 0%

2005-06 ₹ 42.90 62% 62%

2006-07 ₹ 56.12 112% 31%

2007-08 ₹ 80.32 203% 43%

2008-09 ₹ 56.33 113% -30%

2009-10 ₹ 83.58 215% 48%

2010-11 ₹ 101.84 284% 22%

2011-12 ₹ 91.45 245% -10%

2012-13 ₹ 102.86 288% 12%

2013-14 ₹ 112.77 326% 10%

Graph 4.15: Price and return of Tata pure equity fund-regular plan-growth

-50%

0%

50%

100%

150%

200%

250%

300%

350%

₹ -

₹ 20.00

₹ 40.00

₹ 60.00

₹ 80.00

₹ 100.00

₹ 120.00

TATA PURE EQUITY FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 69: A comparative study on direct equity investing and mutual fund investing

55 | P a g e

Tata pure equity is a large cap based fund incepted in 1998. The fund has given 326% of

return in the year 2013-14, which is of highest in its 10 year period. The fund is more

favourable to long and medium term investors, then also it gives a little bit support to

short term investors. In the year 2008-09 the fund shows a lagging for long as well as

short term investors, after all the fund has performed good.

Overall the fund is most suitable for long term investors.

Page 70: A comparative study on direct equity investing and mutual fund investing

56 | P a g e

5. SBI Magnum Equity Fund – Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.16: Price and return of SBI magnum equity fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 11.24 0% 0%

2005-06 ₹ 18.01 60% 60%

2006-07 ₹ 24.83 121% 38%

2007-08 ₹ 36.75 227% 48%

2008-09 ₹ 23.85 112% -35%

2009-10 ₹ 36.59 225% 53%

2010-11 ₹ 44.48 296% 22%

2011-12 ₹ 40.67 262% -9%

2012-13 ₹ 45.63 306% 12%

2013-14 ₹ 49.31 339% 8%

Graph 4.16: Price and return of SBI magnum equity fund-regular plan-growth

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

₹ -

₹ 10.00

₹ 20.00

₹ 30.00

₹ 40.00

₹ 50.00

₹ 60.00

SBI MAGNUM EQUITY FUND(G)

NAV(Avg) % RETURN RETURN(YoY)

Page 71: A comparative study on direct equity investing and mutual fund investing

57 | P a g e

SBI magnum equity fund is a large cap – oriented fund, started in the year of 1991. Which

is one of the oldest fund of SBI. The fund is a consistent performer mainly supported long

term investors. The fund has given 306% and 339% of return in the period 2012-13 and

2013-14 respectively. The fund is also a fair supporter for short term investor in the initial

and middle phase of the 10 year period. As the NAV is lower investors can buy more

units with lesser money

Concluding the fund is mostly favoured to long term investors.

Page 72: A comparative study on direct equity investing and mutual fund investing

58 | P a g e

6. Canara Robeco Equity Diversified Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.17: Price and return of Canara Robeco equity diversified fund-regular plan

growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 15.15 0% 0%

2005-06 ₹ 23.50 55% 55%

2006-07 ₹ 27.65 83% 18%

2007-08 ₹ 40.18 165% 45%

2008-09 ₹ 27.41 81% -32%

2009-10 ₹ 44.74 195% 63%

2010-11 ₹ 55.81 268% 25%

2011-12 ₹ 52.76 248% -5%

2012-13 ₹ 59.71 294% 13%

2013-14 ₹ 64.11 323% 7%

Graph 4.17: Price and return of Canara Robeco equity diversified fund-regular plan

growth

-50%

0%

50%

100%

150%

200%

250%

300%

350%

₹ -

₹ 10.00

₹ 20.00

₹ 30.00

₹ 40.00

₹ 50.00

₹ 60.00

₹ 70.00

CANARA REBECO EQUITY DIVERSIFIED

FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 73: A comparative study on direct equity investing and mutual fund investing

59 | P a g e

Canara rebeco equity diversified fund is an equity diversified fund, started in 2003. It has

given 323% of return for long term investors in the period 2013-14 and 63% of return for

the short term investors in the period 2009-10. The fund has shown a downward in 2008-

09 period. But in 2011-12 period, every fund had shown a good downward trend, canara

rebeco equity diversified fund is the fund which has shown a little bit downward of 5%

of return for the short term investors. As the NAV is lower, the fund is affordable to small

investors.

Overall the fund is more favourable to its long term investors.

Page 74: A comparative study on direct equity investing and mutual fund investing

60 | P a g e

7. HDFC Top 200 Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.18: Price and return of HDFC top 200 fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 45.55 0% 0%

2005-06 ₹ 75.87 67% 67%

2006-07 ₹ 100.28 120% 32%

2007-08 ₹ 140.54 209% 40%

2008-09 ₹ 105.63 132% -25%

2009-10 ₹ 169.93 273% 61%

2010-11 ₹ 215.06 372% 27%

2011-12 ₹ 192.99 324% -10%

2012-13 ₹ 212.59 367% 10%

2013-14 ₹ 225.44 395% 6%

Graph 4.18: Price and return of HDFC top 200 fund-regular plan-growth

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

₹ -

₹ 50.00

₹ 100.00

₹ 150.00

₹ 200.00

₹ 250.00

HDFC TOP 200 FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 75: A comparative study on direct equity investing and mutual fund investing

61 | P a g e

HDFC top 200 fund is a large cap focussed fund incepted in 1996. As the graph and table

shows that the fund has given a good return to its long and medium term investors. The

fund had given 395% of return in the period 2013-14. For the past four years the fund is

a good performer. The fund is also not too bad for short term investors as it has given

67% and 61% of return in the period 2005-05 and 2009-10 respectively.

Overall the fund mostly supported long and medium term investors.

Page 76: A comparative study on direct equity investing and mutual fund investing

62 | P a g e

8. Franklin India Prima Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.19: Price and return of Franklin India prima fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 94.65 0% 0%

2005-06 ₹ 163.11 72% 72%

2006-07 ₹ 186.76 97% 14%

2007-08 ₹ 249.34 163% 34%

2008-09 ₹ 139.81 48% -44%

2009-10 ₹ 224.36 137% 60%

2010-11 ₹ 281.63 198% 26%

2011-12 ₹ 255.90 170% -9%

2012-13 ₹ 298.80 216% 17%

2013-14 ₹ 341.11 260% 14%

Graph 4.19: Price and return of Franklin India prima fund-regular plan-growth

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

₹ -

₹ 50.00

₹ 100.00

₹ 150.00

₹ 200.00

₹ 250.00

₹ 300.00

₹ 350.00

₹ 400.00

FRANKLIN INDIA PRIMA FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 77: A comparative study on direct equity investing and mutual fund investing

63 | P a g e

Franklin India prima fund is multi-cap oriented fund started in the year of 1993. As the

table shows that the fund is not so good to its medium and short term investors. But fund

is better for its long term investors as it had given 260% of return in the year of 2013-14

period. The fund has favoured to short term investors in the period 2005-06 and 2009-10

with return of 72% and 60% respectively.

Overall the fund is a good performer to its long term investors.

Page 78: A comparative study on direct equity investing and mutual fund investing

64 | P a g e

9. UTI Equity Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.20: Price and return of UTI equity fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 18.29 0% 0%

2005-06 ₹ 25.77 41% 41%

2006-07 ₹ 30.15 65% 17%

2007-08 ₹ 40.26 120% 34%

2008-09 ₹ 29.84 63% -26%

2009-10 ₹ 44.50 143% 49%

2010-11 ₹ 55.41 203% 25%

2011-12 ₹ 51.96 184% -6%

2012-13 ₹ 59.05 223% 14%

2013-14 ₹ 65.23 257% 10%

Graph 4.20: Price and return of UTI equity fund-regular plan-growth

-50%

0%

50%

100%

150%

200%

250%

300%

₹ -

₹ 10.00

₹ 20.00

₹ 30.00

₹ 40.00

₹ 50.00

₹ 60.00

₹ 70.00

UTI EQUITY FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 79: A comparative study on direct equity investing and mutual fund investing

65 | P a g e

UTI equity fund is a large & mid cap oriented fund started in the year of 1992. The fund

is a consistent performer as it gives only 257% return for its long term investors, which

is quiet lower compared to same class funds. As we can see that the is not satisfied its

short and long term investors. One of the main thing is that the fund’s NAV is lower and

is affordable to small investors.

Concluding that the fund is a long term investor oriented fund.

Page 80: A comparative study on direct equity investing and mutual fund investing

66 | P a g e

10. Sundaram Growth Fund - Regular Plan – Growth

Average share price and percentage returns of the fund is as follows:

Table 4.21: Price and return of Sundaram growth fund-regular plan-growth

FY NAV(Avg) % RETURN % RETURN(YoY)

2004-05 ₹ 29.78 0% 0%

2005-06 ₹ 47.19 58% 58%

2006-07 ₹ 61.71 107% 31%

2007-08 ₹ 89.44 200% 45%

2008-09 ₹ 58.19 95% -35%

2009-10 ₹ 80.72 171% 39%

2010-11 ₹ 95.92 222% 19%

2011-12 ₹ 83.18 179% -13%

2012-13 ₹ 89.40 200% 7%

2013-14 ₹ 93.04 212% 4%

Graph 4.21: Price and return of Sundaram growth fund-regular plan-growth

-50%

0%

50%

100%

150%

200%

250%

₹ -

₹ 20.00

₹ 40.00

₹ 60.00

₹ 80.00

₹ 100.00

₹ 120.00

SUNDARAM GROWTH FUND(G)

NAV(Avg) % RETURN % RETURN(YoY)

Page 81: A comparative study on direct equity investing and mutual fund investing

67 | P a g e

Sundaram growth fund is a large-cap oriented fund incepted in 1997. As we can see that

the fund is a poor performer mainly for short and medium term investors. But for its long

term investor the fund is not so good, as its gives only 222% return in the compared

period. For a small investors the fund is financial affordable as the NAV is lower.

Overall the fund is mostly good for long term investors.

Page 82: A comparative study on direct equity investing and mutual fund investing

68 | P a g e

Comparative analysis and interpretation

As we had seen 10 equity shares and 10 mutual funds, and their performance for 10

financial year period. Most of the equity shares had given unexpected returns to its long,

medium, and short term investors. Mutual funds also not so bad in giving returns, but they

are performing in a systematic way.

One of the main advantage of investing directly into equity stocks is that, huge

fluctuations will affect 100% positively or negatively to investors. Wherein such a huge

fluctuations will balanced in mutual funds, as mutual funds has a bunch of equity stocks

in its portfolio. Thus investing in mutual funds are less risky than direct equity investing.

Here 2 of the companies – State bank of India and Bharti airtel limited has given returns

to long term investors in 400s percent. The mutual funds has not given such huge returns.

As the graphs and tables shows that the price of direct investing in equity stocks is too

high than the NAV of mutual funds, which is not affordable for investors with small

amount of money. For example in an investor has ₹ 1000 in his hand. With that money

he is not able to buy a stock of L&T, SBI, etc. But he is able to buy at least 3 or 5 units

of any mutual funds.

One of the main advantage of mutual fund is that diversification, if an investor has got

lessor money, as he buys mutual fund units, his/her money is investing in diversified

manner. In a mutual fund industry the portfolio is managed by the fund manager and his

team. But in a direct investing method his/her portfolio has to manage by the investors

himself. All is about the investor’s preference, some investors find satisfaction in

managing his funds in portfolio. An investor can’t order the fund manager to buy stocks

of his preference in a mutual fund investing.

The main 3 things every investor has to bear in mind before going to invest directly are:

1. The time of entry,

2. Choosing a company, and

3. Time of exit.

But it is not so important when an investor invest in a mutual funds, because the fund’s

fund manager will take care of these things. Only one thing the investor has to bear in

mind which is choosing a scheme from the bunch of schemes of the AMCs. If an investor

Page 83: A comparative study on direct equity investing and mutual fund investing

69 | P a g e

is investing through a distributor, he will help the investor to choose a better funds which

suit with the investors financial goals.

As I explained above about the huge fluctuation in equity shares, few of the main

examples of stock which had fluctuate more for the past 10 years are:

Suzlon Energy – low: ₹ 5.72 (mid 2013) & high: ₹ 460(early 2008)

Adani Enterprises – low: ₹ 5(mid 2001) & high: ₹ 785.25(late 2011)

Reliance Communications – low: ₹ 46.50(mid 2012) & high: ₹ 844(early 2008)

Wockhardt Pharma – low: ₹ 67.50(early 2009) & high: ₹ 2166.05(early 2013)

This above high and low rates will shows that if an investor has bought any of the above

stocks he will get returns of 40 or 50 times more than invested money. That is one of the

main advantage of direct investing – unexpected return/profit. Here time of entry,

choosing a company, and time of exit is very important.

In mutual funds such a huge fluctuating never occur as huge return in one company is

balanced by low return on another company because the portfolio is diversified. Here in

the comparison I had chosen those equity stocks from NSE CNX NIFTY, but the

benchmark has not given such a huge return in the past 10 financial year period, that’s

because of balancing of high and low returns.

Page 84: A comparative study on direct equity investing and mutual fund investing

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS

Page 85: A comparative study on direct equity investing and mutual fund investing

70 | P a g e

Conclusion

As the comparative study makes to find out so many answers to questions before direct

investing and mutual fund investing. The concluded points are:

For a start-up investor mutual fund investment method is more favourable and

affordable, as risk is low compared to direct investing.

For an investor with lessor money, he/she should go for mutual fund investing as

NAV is lower than the price of a stock.

If an investor wants to make profits out of speculation then he should choose direct

investing in equity shares.

Investing in direct equities makes an investor to study more about the company,

the financial market, and the economy.

People need a systematic way of investing should go for mutual fund investing.

Investing with a fixed income strategy, should choose mutual fund as an

investment choice.

Short term as well as medium term investors should choose direct equity investing

as an investment choice.

Mutual fund investing is termed as a long term horizon of getting a good return,

as the fund is going in a systematic way.

If an investor has got time in making a market study and managing his/her

portfolio, should invest in equity shares directly, otherwise go for mutual fund

investing.

If an investor like in buying and selling stocks, managing the stocks in his

portfolio should choose direct investing in equity stocks.

Page 86: A comparative study on direct equity investing and mutual fund investing

71 | P a g e

Recommendations

As the recommendations given here is my personal view as an investor in stock market.

My recommendations are:

Direct investing in equity shares is the best way to learn about stock market and

economy of a nation.

If you really enjoy in managing the portfolio, should choose direct investing.

If you don’t know anything about stock market, just getting an income is your

concern, you should choose a mutual fund scheme.

Make a good study before choosing an investment option.

Be aware that investing in any securities whether direct investing or mutual fund

investing, involves a certain risk. Analysis the risk with the financial backups and

then choose an investment option.

Page 87: A comparative study on direct equity investing and mutual fund investing

72 | P a g e

REFERENCES

Websites:

www.nseindia.com

www.bseindia.com

www.moneycontrol.com

www.indiainfoline.com/Markets/News

www.globalresearch.co.in

www.valueresearchonline.com

www.amfi.com

www.sebi.gov.in

www.nseindia.moneycontrol.com

en.wikipedia.org/wiki/financial market

www.rbi.co

www.businesstimes.com

www.economicstimes.com

http://stocktraderschat.com

http://getsplithistory.com

http://economictimes.indiatimes.com/definition/ bonus-share

www.rediff.com/business

www.thereformedbroker.com/2012/04/08/10-things-you-need-to-know-about-

indias-stock-market

www.forbes.com

Magazines:

NISM: Workbook for – NISM Series 5-A: Mutual Fund Distributors Certification

Examination.

Geodata – Monthly investment magazine by Geojit Bnp Parbas Financial services

Limited: Volume 6, Issues 9, 10, 11, 12 and Volume 7, Issue 1.(refer capital

market & mutual fund chapters)

Mathrubhumi Yearbook Plus 2014. (refer page no: 42-58, 472-479, 546-561, 625-

686)

Page 88: A comparative study on direct equity investing and mutual fund investing

73 | P a g e

ANNEXURE

Annexure 1: Trends in Stock Market

You might have heard some animal’s names in Stock Market activities. I would like to

share real meaning for this Words or Names through this article. They are

1. Bull

2. Bear

3. Lamp

4. Deer

5. Dead Cat Bounce

6. Hound Dog

7. Lame Duck

Bull: In jallikattu bull is raising its horns for showing its maximum strength. As like,

when the prices are continuous to be ascending in stock market that market is called as

bullish market. The term (BULLISH) is used to indicate that, the stock market is

dominated by bull. The investors always like bullish market because then only they are

going to earn more profit.

Annexure figure 1: A bull in stock market

Page 89: A comparative study on direct equity investing and mutual fund investing

74 | P a g e

Bear: Bear in stock market is otherwise called as “Anucnu”. When the prices are

continuous to be descending in stock market that market is called as “BEARISH

MARKET”. If a person will be caught by bear, it may cause more damages to his body.

As like, when a stock market is catch by bear. The investors will take more time to recover

from that damage. So the investors are not investing their money during this period.

Instead of that they are selling their shares (which they have bought in low prices). Again

it will lead to reduce the share prices.

Annexure figure 2: A bear in stock market

Lamp: The investors are not having basic knowledge about stock market. They are not

interesting to learn about stock market. But they would like to invest their money in stock

market. This type of investors are mostly depends on others like stock brokers etc.,

sometimes they are losing their money (which they have invested) and cheated by others.

Deer: Dear is not familiar among investors. Investors are applying for the new issue of

shares in the capital market. After bought shares form the firms. They are not selling their

shares as soon as possible. They are waiting for raises in share. If share prices meet their

expected level. They are going to sell the shares. They are more patience in market

activities (Buying & Selling). These types of investors are called as DEER.

Dead Cat Bounce: The DEAD CAT BOUNCE is a term which is derived from a real

time incident i.e. if a dead cat is fall down from a great height it may bounce some extend.

As like, when the share market is meet big fall it indicates that, it will bounce some extend.

It is a famous term during 1985. But now it is not famous among investors.

Page 90: A comparative study on direct equity investing and mutual fund investing

75 | P a g e

Hound Dog: The Hound Dog indicates that “The buyers who have an ability to take

purchase and sales decisions according to market fluctuations”.

Lame Duck: The Lame Duck is mostly used in Europe. The term was invented in 18th

century. This used in London Stock Exchange to indicate default debt of investors and

brokers. The continuous increases in default debt will lead to bankrupt. The investor who

is making more trades without profit. They are called as Lame Duck.

Annexure 2: Facts about Indian Stock Market

10 Things You Need to Know about India’s Stock Market:

1. Equity Averse: Indians are hugely equity averse. Only 1.2% of the Indian household

financial savings is directly invested in shares (2010-2011). This amounts to a laughable

figure of 2.5 Billion dollars for the entire Indian household population.

2. Low Participation: In a country of 1.2 billion, there are only 20 Million demat

accounts (e.g.: a dematerialised account for individual Indian citizens to trade in listed

stocks or debentures in electronic form) and 248 portfolio managers.

3. Foreigners vs Locals: Foreign Institutional Investors (FIIs) hold a larger stake in

listed Indian companies (10.45%) than the combined stake of Indian Mutual Funds

(2.68%) and Indian Financial Institutions/Insurance Companies (5.32%)

4. Inflows vs Outflows: In January -March of 2012, Foreign Institutional Investors (FIIs)

invested $8.89 Billion in the Indian stock markets. In the same period, domestic

institutions such as mutual funds, insurance companies etc sold around $4 Billion worth.

5. Total Market Cap to GDP: The current (2011) Market Cap to GDP ratio is around

86. In the last 19 years, the ratio ranged from a low of 25.1 (!) in 1992-93 to a high of

101 in 2007-2008.

6. Exchanges: The two main stock exchanges for Equity Trading in India are the Bombay

Stock Exchange (BSE) and the National Stock Exchange (NSE). BSE is the oldest stock

exchange in Asia and claims to have the largest number of listed companies in the world.

Page 91: A comparative study on direct equity investing and mutual fund investing

76 | P a g e

However, of the 8900 scripts (stocks) listed, only about a third (around 3000) are traded

every day.

7. Volume: The daily turnover in the Equity Cash segment of National Stock Exchange

(NSE) is around $3 billion and that of Bombay Stock Exchange (BSE) is half a billion

dollars. Three fourths (75%) of the turnover can be attributed to the top 100 scripts.

8. Derivatives: The National Stock Exchange (NSE) has a monopoly in the Equity

Derivatives market. It ranks very high in global rankings for the number of contracts

traded – 2nd in Stock Index Options, 3rd in Stock Index Futures and 3rd in Single Stock

Futures. The daily turnover in the derivatives segment is around $30 Billion.

9. Brokers vs Algos: Around 70% of the trading volume is done by the top 100

brokers. Algorithmic and co-location trading accounted for about 25% of derivatives

volume and around 30% of equities volume on the NSE and BSE.

10. Foreign Investors Now Welcome: Earlier foreign citizens were prohibited from

trading directly in the Indian stock markets but since Jan 2012, these restrictions are

withdrawn and now they are permitted to invest freely.

==============================================================