Performance evaluation of mutual funds @ uti secureties

A study on “Performance Evaluation of Mutual Funds with Reference to risk and return”

CONTENTS

- Executive Summary

- Introduction

- Literature review

- Purpose of the study

- Objectives

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EXECUTIVE SUMMARY

UTI securities ltd. (UTISEL) has been working as an independent professional

entity for providing financial intermediary and advisory services to corporate

institutional and retail clientele. This project emphasis on, “The Performance of

Mutual Funds with reference to Risk and Returns”, conducted at UTI Securities

Ltd. In this project I have analyzed the Mutual Funds Schemes, particularly the

Equity Diversified open ended (growth) schemes and evaluated the returns and the

risk associated with those schemes.

OBJECTIVES OF THE STUDY

To know the performance of Mutual Fund of different companies.

To evaluate the returns and the risk associated with mutual funds.

To evaluate the investment performance of mutual funds with risk

adjustment, by using the theoretical parameters as suggested by

William. Sharpe, Treynor and Jensen.

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LIMITATIONS:

Not single work is an exception to the limitations every work has got its

limitations. The data collection here in this project is strictly confined to the

secondary sources. No primary data was associated with the project. Collecting

historical NAV is very difficult. Selection of the schemes for the study is also a very

difficult task because of the wide variety of schemes. The results of the study are

subjected to inconsistencies arising out of the assumptions made to make the

portfolios comparable viz., sample selection procedure, portfolio proportion

assumption etc.

RESEARCH METHODOLOGY:

Data source:

Secondary data - Reports from UTI securities and other reports

from related websites.

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Introduction

An investment means employment of funds on assets (i.e. securities or mutual

funds or any of the investment avenues) with the aim of earning income as well as

capital appreciation. There are mainly two attributes while investing to any of the

funds i.e. time and risk. There are mainly four objectives, which the investments

activities will carry on. Those are:

Return from the investment

Risk involved

Liquidity

Hedge against inflation

Safety

Convenience

There are many alternatives investment avenues which are open to the

investors to suit their needs and nature .The selection of investment alternatives

depends up on the required level of return and the risk tolerance level. These

alternatives range from financial securities to traditional non-securities investment.

Following are the various investment alternatives.

Negotiable and fixed income securities

Equity shares

Preference share

Debentures

Bonds

Indira vikas patra &Kisan Vikas patra

Government securities

Money market securities (i.e. treasury bill, commercial paper, certificate of Deposit etc)

Non-negotiable securities

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Bank deposit

Post office deposit

NBFC deposit

Tax saving schemes

Public provident fund scheme

National saving scheme

Life insurance

Mutual funds

Real estate

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LITERATURE REVIEW

Introduction to Mutual Funds

What is a Mutual Fund?

Like most developed and developing countries the mutual fund cult has been

catching on in India. There are various reasons for this. Mutual funds make it easy

and less costly for investors to satisfy their need for capital growth, income and/or

income preservation.

And in addition to this a mutual fund brings the benefits of diversification and

money management to the individual investor, providing an opportunity for financial

success that was once available only to a select few.

Understanding Mutual funds is easy as it's such a simple concept: a mutual

fund is a company that pools the money of many investors -- its shareholders -- to

invest in a variety of different securities. Investments may be in stocks, bonds, money

market securities or some combination of these. Those securities are professionally

managed on behalf of the shareholders, and each investor holds a pro rata share of the

portfolio -- entitled to any profits when the securities are sold, but subject to any

losses in value as well.

For the individual investor, mutual funds provide the benefit of having someone else

manage your investments and diversify your money over many different securities

that may not be available or affordable to you otherwise. Today, minimum investment

requirements on many funds are low enough that even the smallest investor can get

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started in mutual funds.

A mutual fund, by its very nature, is diversified that is, its assets are invested in many

different securities. Beyond that, there are many different types of mutual funds with

different objectives and levels of growth potential, furthering your chances to

diversify.

Evolution:

In most of the countries, mutual funds have emerged as strong rivals to

banking industry in mobilizing savings funds. The reason that may attributed to

same is that in the banking sector there are many restrictions for investment in

the capital market, there as the mutual funds have been a free access to these

markets which in other words have given then an upper hand in the matter of

operations. Consequently, the returns from mutual funds investment are higher

compared to the returns out of savings in banks in an ideal market condition.

Thus, he mutual funds i8ndusty has witnessed a tremendous growth in countries

like Mexico and South Africa.

Mutual Funds can be broadly classified under 3 heads namely

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a) Investment Trust

b) Holding companies

c) Finance Companies

Out of the above the investment trust got a boost because of good public

response and today we have in India Unit Trust of India that was constituted on

similar lines with the unit trust in the U.S.A.

The unit trusts are open-ended schemes where the investor can buy and sell

‘Unit’ at his only will and wish. The other advantage of unit Trust is that even a

small investor can hold shares of many companies and enjoy the returns arising

lot of the investment.

The unit trust of India was constituted under the unit Trust of India act,

1963 and became operational in the year 1964 with the basic objectives of

mobilizing savings through the sale of units and investing them in corporate

securities with the idea of maximizing yield from them and capital appreciation

with inbuilt liquidity. The unit trust of India still commands a good position

among mutual fund in India and approximately 90% of the investments in

mutual fund are in the schemes floated by unit trust of India.

The unit trust of India has many highlights in its performance so far. The

monopoly of unit trust of India was brought to an end with the entry of public

sector mutual funds in the year 1987. Canara bank, State Bank of India, Punjab

National Bank and Indian bank floated the premier mutual funds that came into

being during 1987.

DEFINITIONS:

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The reason for increased response towards mutual funds world over is on

account of investment analyst, who takes investment decisions based on research.

The concept of the lower risk carried on by the investor as the funds are diverted

with professional body of investment analyst, who take investment decisions based

on research. The concept of mutual fund has been defined in various ways.

According to SEBI (Mutual Fund) regulatins1993, “Mutual fund means a

fund established in the form of trust by sponsor to raise moneys by the trustees

through the sale of units to the public under one or more schemes for investing

in securities in accordance with these regulations”.

However in the Indian context it is safe to define “Mutual Fund as trusts

accepting savings from the investors and invest the same as per the objectives

incorporated in the trust deed to manage diversified portfolio which in turn

assure reasonable returns to the investors.”

Why invest in Mutual Funds.

Investing in mutual has various benefits which makes it an ideal investment

avenue. Following are some of the primary benefits.

Professional investment management

One of the primary benefits of mutual funds is that an investor has access to

professional management. A good investment manager is certainly worth the fees you

will pay. Good mutual fund managers with an excellent research team can do a better

job of monitoring the companies they have chosen to invest in than you can, unless

you have time to spend on researching the companies you select for your portfolio.

That is because Mutual funds hire full-time, high-level investment professionals.

Funds can afford to do so as they manage large pools of money. The managers have

real-time access to crucial market information and are able to execute trades on the

largest and most cost-effective scale. When you buy a mutual fund, the primary asset

you are buying is the manager, who will be controlling which assets are chosen to

meet the funds' stated investment objectives.

Diversification

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A crucial element in investing is asset allocation. It plays a very big part in the

success of any portfolio. However, small investors do not have enough money to

properly allocate their assets. By pooling your funds with others, you can quickly

benefit from greater diversification. Mutual funds invest in a broad range of securities.

This limits investment risk by reducing the effect of a possible decline in the value of

any one security. Mutual fund unit-holders can benefit from diversification techniques

usually available only to investors wealthy enough to buy significant positions in a

wide variety of securities.

Low Cost

A mutual fund let's you participate in a diversified portfolio for as little as

Rs.5,000, and sometimes less. And with a no-load fund, you pay little or no sales

charges to own them.

Convenience and Flexibility

Investing in mutual funds has it’s own convenience. While you own just one

security rather than many, you still enjoy the benefits of a diversified portfolio and a

wide range of services. Fund managers decide what securities to trade, collect the

interest payments and see that your dividends on portfolio securities are received and

your rights exercised. It also uses the services of a high quality custodian and

registrar. Another big advantage is that you can move your funds easily from one fund

to another within a mutual fund family. This allows you to easily rebalance your

portfolio to respond to significant fund management or economic changes.

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Liquidity

In open-ended schemes, you can get your money back promptly at net asset

value related prices from the mutual fund itself.

Transparency

Regulations for mutual funds have made the industry very transparent. You

can track the investments that have been made on you behalf and the specific

investments made by the mutual fund scheme to see where your money is going. In

addition to this, you get regular information on the value of your investment.

Variety

There is no shortage of variety when investing in mutual funds. You can find a

mutual fund that matches just about any investing strategy you select. There are funds

that focus on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds.

The greatest challenge can be sorting through the variety and picking the best for you.

Mutual fund route offers several important advantages.

The popular saying, “don’t keep all the egg in one basket” is quite

appropriate in the case of instruments, if an investor wishes to maximize

his returns, he should invest in a variety of securities available across the

market. However, a small investor with his limited savings can not

acquire a number of securities of different companies and industries.

Thus, the investor gets a proportion of the average market. This specific

character of mutual fund investment avenues further, the modern portfolio

they states that, diversification reduces the risk and improves the scope

for higher returns.

Professionals who have knowledge and experience in security analysis

and portfolio management manage the corpus amount mobilized by the

mutual funds under various schemes. Research is continuous process in

mutual funds, where they identify the under valued and high yielding

securities and make will-timed purchases and sales. An investor of a

mutual fund schemes may gain out its professional management. The

investor can save his cost and time in identifying the securities; he can

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share the benefits of reach and management costs of the funds with other

investor.

Mutual funds are floating different schemes with variety investment

objectives. This creates an opportunity among investors to choose the

schemes based on their objective, motivations, and requirements.

In addition to the above advantages, the Indian mutual funds are

specifically offering the following benefits to the investors.

In the case of investment in equity shares or debentures, the

allotment would be based on lost or proportional. Whereas, almost all the

mutual funds promise assure allotment to all investors to the extent of

amount subscribed by them. This reduces the investor’s time.

Mutual funds offer certain tax incentives to the investors and

additional tax benefits for investing in tax planning schemes.

The presence of the Mutual fund institutions in the economy offers certain

advantages to the economy-

Mutual funds are the financial intermediaries, which mobilize the savings

from surplus units and transfer them to the capital and money market by

investing in a variety of financial instruments.

Mutual funs with support of their professional managers, carefully

analyses the prospects of new companies and new industries if the

prospects are good, subscribe large amounts to he equity and debt capital

of newly established companies.

Mutual funds as institutional investors, with their professional expertise in

the stock trading. The increased participation of professional rational

investment reduces the undesirable speculation in the capital market.

Classification of Mutual Fund Schemes

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Any mutual fund has an objective of earning income for the investor’s

and/ or getting increased value of their investments. To achieve these objectives

mutual funds adopt different strategies and accordingly offer different schemes

of investments. On this basis the simplest way to categorize schemes would be

to group these into

Operational classification highlights the two main types of schemes, i.e., open-

ended and close-ended which are offered by the mutual funds.

Portfolio classification projects the combination of investment instruments and

investment avenues available to mutual funds to manage their funds. Any portfolio

scheme can be either open ended or close ended

A. Operational Classification or on Structural basis:

Open Ended Schemes:

As the name implies the size of the scheme (Fund) is open – i.e., not

specified or pre-determined. Entry to the fund is always open to the investor

who can subscribe at any time. Such fund stands ready to buy or sell its

securities at any time. It implies that the capitalization of the fund is constantly

changing as investors sell or buy their shares. Further, the shares or units are

normally not traded on the stock exchange but are repurchased by the fund at

announced rates. Open-ended schemes have comparatively better liquidity

despite the fact that these are not listed. The reason is that investor can any time

approach mutual fund for sale of such units. No intermediaries are required.

Moreover, the realizable amount is certain since repurchase is at a price based

on declared net asset value (NAV). No minute-to-minute fluctuations in rates

haunt the investors. The portfolio mix of such schemes has to be investments,

which are actively traded in the market. Otherwise, it will not be possible to

calculate NAV. This is the reason that generally open-ended schemes are Equity

Based.

Moreover, desiring frequently traded securities, open-ended schemes

hardly have in their portfolio shares of comparatively new and smaller

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companies since these are not generally traded. In such funds, option to reinvest

its dividend is also available. Since there is always a possibility of withdrawals,

the management of such funds becomes more tedious as managers have to work

from crisis to crisis. Crisis may be on two fronts, one is, that unexpected

withdrawals require funds to maintain a high level of cash available every time

implying thereby idle cash. Fund managers have to face questions like ‘ what to

sell’. He could very well have to sell his most liquid assets. Second, by virtue of

this situation such funds may fail to grab favorable opportunities. Further, to

match quick cash payments, funds cannot have matching realization from their

portfolio due to intricacies of the stock market. Thus, success of the open-ended

schemes to a great extent depends on the efficiency of the capital market. The

holders of the shares in the fund can resell them to issuing Mutual Fund

Company at any time They receive in turn the net asset value (NAV) of the

shares at the time of resale. Such mutual funds companies place their funds in

the secondary securities market. They do not participate in new issue markets

to pension funds or life insurance investment companies. Can sell an unlimited

number of shares and thus keep going larger. The open end mutual funds by or

sell their own share.

These companies ell new shares at NAV plus a loading or management

fee and redeem scheme at NAV. UTI’S Unit scheme, 1964 and CANCIGO

and CANGICT are few examples of such funds. The minimum corpus for and

open-ended fund is fifty crores a per SEBI guidelines.

(b) Close Ended Schemes:

Such schemes have a definite period after which their shares/units can be

redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e.,

their corpus normally does not change throughout its life period. Close ended

fund units trade among the investors in the secondary market since these are to

be quoted on the stock exchanges. Their price is determined on the basis of

demand and supply in the market. Their liquidity depends on the efficiency and

understanding of the engage broker. Their price is free to deviate from NAV,

i.e., there is every possibility that the market price may be above or below its

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NAV. If one takes into account the issue expenses, conceptually close ended

fund units cannot be traded at a premium or over NAV because the price of a

package of investments, i.e., cannot exceed the sum of the prices of the

investments constituting the package. Whatever premium exists that may exist

only on account of speculative activities. In India as per SEBI (MF) Regulations

every mutual fund is free to launch any or both types of schemes. Close– ended

mutual funds are different form the open-ended mutual fund. Close-ended and

investment company has definite target amount for the funds and can not sell

more shares after its initial offering. Its growth in terms of numbers is limited.

Its shares are issued like together company’s new issue listed and quoted at

stock ex change. That minimum corpus for Close-ended fund is Rs20 crores.

Close-ended funds changed funds the secondary market acquisition of corporate

securities.

There is no necessary relationship between the price of close-ended

mutual fund share and its NAV. Its shares may les per the current NAV per

share, per more,(at a premium) as per less(at discount). Investor’s doubts about

the abilities of the funds management lack of sales effort (brokers earn less

commission of close ended schemes then open ended schemes) risk ness of the

fund.

B. Portfolio classification of mutual funds.

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These are specific mutual funds, which are structured for feeding a

particular invests able purpose. The objective of funds provide fixed return for

those who design safety

Equity (Stock) Funds:

Equity Funds are those that invest primarily in stock. The actual portfolio

holing, trading style, portfolio turnover, etc, are widely depending on the fund’s

investment objectives and manager’s style.

Aggressive Growth:

These funds are also called capital Appreciation fund. Having an investment

objective of maximum capital gains, with minimal or no concern for dividends or

income. These funds tend to be some of the most volatile, with share price rise that

can be thrilling and drop that can be frightening. Not only do the portfolios holding

them be volatile, but many aggressive growth funds magnify the volatility by using

borrowed money (leverage) to increase the size of the position held. Some funds in

this category growth funds fall into the aggressive growth area.

Aggressive growth funds purchase shares of stock in smaller companies, which

have a chance to grow at a faster pace than more “mature” companies. Of course,

there is also greater risk involved with investing in less established companies.

Aggressive growth funds are usually recommended for the investors who seek long-

term capital appreciation and will not need access to money for at least ten years.

Balanced:

Funds invest in a mix of common stock and corporate bonds. The weighting of

going piece of the mix depends on the fund manager’s perceptions of where the

markets and economy are going. Some preferred stock and convertible securities are

commonly allowed, as are cash equivalents such and Treasury Bills, CDs, and

commercial paper.

Global:

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It is Similar to international, but with the option of investing anywhere

globally including the U.S.

Growth:

The goal for these funds is long-term growth of capital. Growth funds own

shares of medium to large companies, and could include such familiar “blue chip”

names as IBM and GENERAL ELECTRIC. Normally, these established companies

will grow at a moderate pace, and will pay regular dividends to owner of its shares. If

mutual fund is the owner the fund will collect these dividend and pass them to mutual

funds shareholders once are more per year. While capital appreciation is major

objective of these type of fund income derived from dividends is secondary objectives

investments are typically in long – growth stocks, with a lower portfolio turnover then

the aggressive growths funds. Dividends yield tend to be low.

Growth and income:

Despite the name, fund in this category are typically more interested in growth

than income with typical dividend rates on the portfolios in the 1% range. The usual

portfolio is Blue Chip stock, with some income enhancing securities like convertible

preferred stocks are bonds thrown in to the mix.

Index:

Unlike traditional stock funds, which are managed actively by a portfolio

manager based on analysis of economic and market movements, index funds are

passively managed. A passively managed fund buys and holds securities selected to

represent its unmanaged target index, such as standard and poor 500 index.

Sector:

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Concentrates investments on a narrow market sector like Health care, internal

stocks, bio technology, and so on. Sector funds tend to be volatile as industry groups

fall into and out of favor; portfolios are diversified only within industry group.

Real estate funds:

Real estate funds are of close-ended type. The funds are named so because

primary investment is real estate ventures.

Bond funds:

Bond funds are objective of safety. Bond funds are liquid prices of funds

fluctuates with changing interest rates.

C. Geographical Classification of Mutual Funds

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National boundaries provide territorial restrictions on the sale and

purchase of mutual funds units or share, as is the case in commodity trade or

service in view of the, Mutual funds which operate with in the nation

boundaries are different form those which are meant for subscription of

foreigners or the countries national living out side its share. The classification is

of broadly tow types.

1) Domestic Mutual Funds

2) Offshore Mutual Funds

Domestic Mutual Funds

Domestic Mutual Funds are the saving schemes, which are open for

mobilizing saving of the nationals with in the country. All the Mutual fund

schemes in vogue in the country vis-à-vis, UTI, GIC Mutual Fund, LIC Mutual

Fund, SBI Mutual fund, CAN Bank Mutual Fund, PNBMF and BOIMF are the

domestic schemes.

Offshore Mutual Funds

The basic objective of opening offshore Mutual fund scheme is to attract

foreign capital for investment purposes in the country of the issuing company.

Offshore Mutual Funds thus facilitate cross border fund flow, which is a direct

route for getting foreign currency without political strings or domination on the

issue country.

From investment point of view too, offshore Mutual funds open up

domestic capital market to the international investor and global portfolio

investments.

The major point of difference between offshore Mutual funds and

Domestic Mutual funds is the currency and country risk for the global investors

as the source of funds from am broad because of high risk in a higher return in

the invested funds can be expected. Like domestic mutual funds, the offshore

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Mutual funds can also be functionally classified into Close-ended or Open-

ended funds.

The Major Offshore Mutual Funds opened so far have been close-ended

schemes providing redemption of the units for individual investors only at the

end of the period specified in the scheme. UTIs India funds 1986, India growth

fund, SBIs India Magnum, Can Bank’s Indo-Swiss Himalayan fund, 1990 and

Common wealth equity fund are all close-ended offshore funds.

Characteristics of Mutual Fund Schemes

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The following are mutual fund scheme characteristics of the Indian

mutual fund schemes.

Assurance of minimum returns:

Mutual funds in general do not assure any minimum returns to their

investors. Returns are paid to the investors, commensurate with the returns

earned by the fund on the portfolio, as portfolio consists of various securities,

whose returns are subject to market risks. Contrary to this, the Indian mutual

fund schemes launched during 1987 to 1990 assured specific returns while

marketing their schemes.

I n 1991, SEBI together with the union ministry of finance ordered the

mutual funds not assume minimum returns. Recently, SEBI has formulated of

policy that, mutual funds with a track record ;of 5 years will be allowed to offer

fixed returns. SEBI shall prescribe the returns to be assured from time to time.

However, no fund will be allowed to offer fixed return for more than 1 year.

Multiple Option

Most of the mutual fund schemes are offering different option to the

investor under one scheme. For example growth oriented scheme may offer

option of either regular income plan, dividend shall be distributed to the

investor, and under second dividend will be re-invested and the total amount at

the time of redemption.

Immediate monthly income.

Deferred monthly income.

Accumulated income and benefits under section 80 1 of the

income act.

Growth with capital gain.

Lock in period

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Mutual fund schemes offer documents that contain a clause of lock in

period ranging from one year to 3 years. Till the completion of the minimum

period, the investors are neither allowed to trade the units on the stock exchange

nor avail repurchased facility.

Liquidity

a) Open-ended mutual funds offer the facility of repurchase, and the close-

ended schemes are also offering repurchase after a minimum period of two to

three year.

b) Mutual funds units can be pledged or mortgaged in favor of commercial

banks or financial institutions, and can obtain a loan according to the rules and

regulations of the bank or financial institution.

c) Mutual fund can be transferred in favors of any individuals.

PURPOSE OF THE STUDY

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The purpose of the study is to know the returns and the risk associated with

the Mutual Fund’s Equity Diversified schemes and to find out which best scheme to

recommend.

SCOPE OF THE STUDY

The present study includes 4 years average returns of the mutual funds, which

have the total corpus (mass, quantity, amount,) value, of more than 10000

crores.

For my study I have scanned all the mutual funds companies and have taken

only those schemes which are having the corpus value of more than 400 crores

and age of the fund is more than 3 years.

This study covers only equity diversified schemes which are subject to more

fluctuating risks and returns.

Since the number and nature of stocks, the proportion of stocks in the portfolio

and the relative ness of portfolio to the index considered, differs, the portfolios

are averaged at 0.5 for these factors for variance determination.

To evaluate the performance of the Mutual Fund schemes, Sharpe’s index,

Treynor’s index and Jensen’s Alpha measures are applied.

OBJECTIVES OF THE STUDY

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To know the performance of Mutual Fund of different companies.

To evaluate the returns and the risk associated with mutual funds.

To evaluate the investment performance of mutual funds with risk

adjustment, by using the theoretical parameters as suggested by William.

Sharpe, Treynor and Jensen.

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CONTENTS

- Organization Profile

- Date Collection Methods

- Measuring Tools

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ORGANIZATION PROFILE

UTI SECURITIES LTD., (UTISEL) was incorporated on June 28, 1994 by

Unit Trust of India as its 100% subsidiary and on the repealing of the UTI Act, the

capital was now held by the Administrator of the Specified Undertaking of Unit Trust

of India (ASUUTI), on April 17, 2006 the entire share capital of the company was

transferred from SUUTI to Securities Trading Corporation Of India Ltd. [STCI] and

its nominees. UTISEL has been working as an independent professional entity for

providing financial intermediary and advisory services to corporate institutional and

retail clientele. The Company has built up a reputation for transparent and fair

execution of transactions, which have been well received and appreciated by its

clientele. The staff at UTI Securities strives to maintain the quality of services offered

to its clients at the highest degree.

The Company has grown from an institutional brokerage house to a full-

fledged financial intermediary having nationwide presence in major cities with

branches and franchisees to service a wide range of clients. We are committed to

gradually enhancing our network in the near future.

The Company has also invested in the joint-venture company with Standard

Chartered Bank viz. Standard Chartered UTI Securities (P) Ltd. that is engaged in

primary dealership and Government securities. The Company has started Commodity

Trading through its subsidiary, UTISEC COMMODITIES LIMITED, which provides

facility of commodity trading on NCDEX and MCX.

Mission and Vision:

To emerge as one of the leading providers of stock brokerage, investment banking and

related services, at par with the best in the world".

Management profile:

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Mr. Dipankar Basu: Chairman

Mr. Dipankar Basu was appointed as Chairman and Director on the Board of UTI

Securities Limited at the Meeting of the Board of Directors held on April 17, 2006.

Mr. Basu is the non-executive Chairman of Securities Trading Corporation of

India Limited and Rain Calcining Limited. Mr. Basu brings with him long experience

and specialized knowledge of financial markets in India. He has been the Chairman of

State Bank of India until August 1995. While acting as the Chairman, Mr. Dipankar

Basu served as a Member on the Boards of number of SBI subsidiaries including

those engaged in investment banking and fund management. He has been a Board

member of number of companies engaged in both financial and non-financial

businesses.

Even after retirement in 1995, Mr. Basu has been actively engaged in wide spectrum

of functions including being a member of the Disinvestment Commission set up to

advise the Government of India on public sector disinvestments. He has also been a

member of the Narsimhan Committee on Banking Sector Reforms.

Mr. Gopalakrishnan Narayanan: Director

Mr. Gopalakrishnan Narayanan, currently the Managing Director of Securities

Trading Corporation of India Limited has been appointed as an Additional Director on

the Board of our Company with effect from April 17, 2006.

Being qualified as BSc and CAIIB, Mr. Narayanan brings with him more than 36

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years of experience and knowledge. He joined Bank of India in 1970. Large part of

Mr. Narayanan’s career was in International Treasury and Foreign Exchange related

areas. He has had two stints of Overseas Assignments at Tokyo and Jersey Branches

of Bank of India.

Mr. Narayanan has attended number of trainings conducted by in-house training

college, Bankers Training College of Reserve Bank of India in Treasury and Forex

related areas. He has been a regular guest faculty on Treasury & Forex related

subjects in in-house training colleges & Bankers Training College of Reserve Bank of

India.

Dr. D C Anjaria: Director

An MBA in finance from the IIM (A), he has had 20 years of experience with

Citibank N.A. in India and overseas. He worked as Chief of Staff with Citicorp

Investment Bank in Paris, France. In 1988, Dr. Anjaria joined the Unit Trust of India

to establish and head UTI Institute of Capital Markets, a unique specialised training

and research institution. Currently he runs an independent consulting operation-

International Financial Solutions Pvt. Ltd. to advise clients in areas including

corporate strategy, financial risk management and use of derivative products.

Shri A Rama Mohan Rao: Managing Director

Chartered Accountant by profession, Shri Rao is the Managing Director of the

Company since July 2002. He has worked with UTI for a period of 22 years in

various functional areas of marketing, accounting, operations, Investments and Fund

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Management in different capacities.

He worked as Branch Manager at UTI Branches, as Functional Head in International

Finance and Investment Department and also as one of the Chief Investment Officers

for UTI schemes. He has represented as one of the Indian Delegates at the Asia

Oceania Regional Meeting for Investment Managers held at Singapore in 2002. At

UTISEL he is responsible for the overall management and performance of the

Company.

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Execute Margin Orders upto 3 to 4 times your available funds. The same is available

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of this facility 1st and 2nd day after the buy order date.

Derivative:

BABASAB PATIL-29-


With a Derivative-approved Usec trade account, you can pursue a wide range of

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BABASAB PATIL-30-


paperwork, you get the dual benefit of a risk cover and savings. What's more, we shall

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Research:

Charting Tools - Get a combined view of stocks, rapid price changes and volume

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Sector Watch - You can access sector-wise information to track sectors and individual

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Corporate Infohub - We provide you with exhaustive company information, detailed

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companies. Our extensive database covers more than 4000 companies.

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politics and general events. You even have access to live news analysis, market

commentary and happening stocks.

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Customer Service & Other Value Added Services

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entire Product Bouquet

Investment Banking and Advisory Services

Investment Banking is one of the prime focus areas of the company and we provide

value added, customized solutions to our clients. Leveraging on the knowledge,

expertise and experience of our professionals, we offer services that range from

managing public issues, debt and equity placements, corporate advisory services and

financial consultancy to facilitating mergers and acquisitions.

BABASAB PATIL-32-


The Investment Banking Team's business philosophy emphasizes:-

Long-term relationship with clients.

A strong research-based advice.

Innovative solutions and speedy execution.

Ethical and transparent conduct of business.

It has always been the endeavor of UTI Securities to bring all the market

constituents together in a mutually beneficial relationship.

Equity capital Markets

The Issue Management group focuses on public issues, open offers and buy

back issues. Our proximity to large institutions gives us an added advantage in placing

large equity issues. This division is supported by a nationwide network comprising of

12 branches, 15 franchisees and sub-brokers across the country for retail distribution.

Within a short span, UTISEL has already been recognized as one of the leading

merchant bankers in India.

UTI Securities has consistently provided professional guidance and expert

services. Over the years, it has developed strong relationships with institutional

investors and other market intermediaries, enabling it to structure and successfully

place a wide array of Capital Market products that meet the requirements of the

issuer, investor and the market.

The Equity Capital Markets group offers the following services:

Initial Public Offerings

Rights Issues

Buy-Back

Underwriting

Open Offers

Delisting of Securities

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Private Equity

The Equity Capital Markets group seamlessly draws on the expertise provided by the

Equity Research and Equity Sales teams on all the public offerings.

We have been associated with a number of issues in different capacities as

Lead Managers, Co Managers, Syndicate/Sub-syndicate Members, etc. in the past.

We successfully lead managed recently the public issue of Four Soft Ltd., a software

products company, with an issue size aggregating Rs. 200 million. We were also

involved as a syndicate member in the issue of Indraprastha Gas Ltd. where we

procured over 12,000 applications.

Our Clients:

We are currently lead managing the issues of SMS Pharmaceuticals, a bulk drugs

manufacturer; Glenmark Laboratories Ltd. which is in formulations segment;

Vivimed Labs Ltd., manufacturer of pharmaceutical ingredients catering to the

personal care industry and Crew BOS Products Ltd., a fashion accessories

manufacturer. The size of the said issues ranges from Rs. 150 million to Rs. 500

million. We are also Lead Managing Rights Issue of Varun Shipping Company Ltd of

Rs.130 -150 Crores. We also pursue Buyback/Delisting offers amongst others.

We are aiming at making further inroads by securing mandates of premier companies

in the Pharmaceutical, Textiles, Information Technology, Hospitality, Banking and

Housing Finance industries amongst others.

Private Equity

The Private Equity Group arranges equity placement through the off-market

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route using its privileged relationships with various Venture Capital and Strategic &

Portfolio Equity investor who operate from within the country as well as from abroad.

The Private Equity group assists companies seeking capital infusions in the form of

seed capital, venture capital, angel investment, strategic investment, and mezzanine

financing from the private equity marketplace.

The private equity group identifies start –up, later stage projects for investing

in well-managed companies, which are placed to grow rapidly and to take advantage

of the favourable economic conditions existing within the space with a clearly defined

business model. Private Equity Group has followed the philosophy of being a multi-

sector player, as it believes that in the Indian context it ensures an optimum balance of

risk and return to its investors. Private Equity Group has demonstrated its industry

expertise in different sectors by backing diverse sectors like Pharma, Power,

Entertainment, Information Technology etc.

The Private Equity division has been successful in arranging pre IPO funding

from venture capitalists/Private Equity investors. Recently we have done the

placement for Four Soft Ltd. and Glenmark Laboratories Ltd. aggregating Rs. 140

million.

Data Collection:

Data source:

Secondary data - Reports from UTI securities and other reports

from related websites.

Measuring tools and Techniques:

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Techniques of analysis:

1. Return:

Return on a typical investment consists of two components. The basic is the

periodic cash receipts (or income) on the investment, either in the form of interest or

dividends. The second component is the change in the price of the assets-commonly

called the capital gain or loss. This element of return is the difference between the

purchase price and the price at which the assets can be or is sold; therefore, it can be

a gain or a loss.

The return has been calculated as under:

NAVt – NAVt-1

Portfolio return: Rit =---------------------------------

NAV t-1

Where Rit is the difference between Net Asset Values for two consecutive days

dividend by the NAV of the preceding day.

M.indt – M.indt-1

Market return: Rmt =--------------------------------

M.indt-1

Where Rmt is the difference between market indices of two consecutive days

dividend by the market index for the preceding day

2. Risk :

Risk is neither good nor bad. Risk in holding securities is generally associated

with the possibility that realized returns will be less than expected returns. The

difference between the required rate of returns on mutual fund investment and the

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risk free return is the risk premium. Risk can be measured in terms of Beta &

standard deviations.

Standard deviation:

It is used to measure the variation in individual returns from the average

expected returns over a certain period. Standard deviation is used in the concept of

risk of a portfolio of investments. Higher standard deviation means a greater

fluctuation in expected return.

SD = n ∑X2 – (∑X)2

Beta :

Beta measures the systematic risk and shows how prices of securities respond

to the market forces. It is calculated by relating the return on a security with return

for the market. By convention, market will have beta 1.0.Mutual fund is said to be

volatile, more volatile or less volatile. If beta is grater than 1 the stock is said to be

riskier than market. If beta is less than 1, the indication is that stock is less risky in

comparison to market. If beta is zero then the risk is the same as that of the market.

Negative beta is rare.

ß = Covar / (SD)2

Where, Covariance (covar) is the average of the products of deviations for

each data point pair. And, covar is calculated as:

Covar = 1/n (xi –µ x)(yi - µy)

Where, x = scheme returns.

y = market returns.

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n (n-1)


µ = mean.

= nxy - (x)( y)

nx2-(x) 2

Where, n = number of years

X = rolling returns of the BSE index

Y = rolling returns of the schemes

3. Sharpe index

Sharpe index measures risk premium of a portfolio, relative to the total

amount of risk in the portfolio. Sharpe index summarizes the risk and return of a

portfolio in a single measure that categorizes the performance of funds on the risk-

adjusted basis. The larger the Sharpe’s index the portfolio over performs the market

and vise versa.

Formula to calculate Sharpe’s measure is:

RP - Rf

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St =


SD

Where,

st = Sharpe’s index

Rp= portfolio return

Rf= Risk free rate of return (5%)

SD= Standard Deviation of the port folio

4. Treynor’s Index

Treynor’s model is on the concept of the characteristics straight line. The

characteristics line has drawn a relationship between the market return and a specific

portfolio without taking into consideration any direct adjustment for risk. It is also

known as reward to volatility ratio and is defined as:

The formula for Treynor’s Index is:

Portfolio avg return (Rp) – risk-free rate of interest (Rf)

Treynor index (Tn) =

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Beta coefficient of portfolio (Bp)

Rp -Rf

Tn =

Bp

It measures portfolio risk in terms of beta, which is weighted average of

individual security beta. The ratio is investors, for who the fund represents only a

fraction of their total assets. The higher the ratio better is the performance.

5. Alpha

The size of the alpha exhibits the stock’s unsystematic return and its average

return independent of market return. If the fund produces the expected return at the

level of risk assumed, the fund would have an alpha equal to zero. A positive alpha

indicates that the manager produced return greater than expected for the risk taken.

Alpha is calculated by comparing the fund’s actual performance with the risk-

adjusted expected return.

Where Rp = portfolio return

Rf = Risk free rate of return (5%)

Rm = average market return

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=(Rp - Rf) - Beta (Rm- Rf)

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CONTENTS

- Methodology

- Results & Discussion with Charts & Graphs

- Conclusion

- Bibliography

Methodology

The following table shows the list of AMC in India & the corpus value

of individual AMC in the month of October and November 2006.

S.NoMutual Fund AUM

31/01/2007AUM31/12/2006

Increase/Decrease

Change %

1. LIC Mutual Fund 16480.90 12458.88 4022.02 32.28

2. UTI Mutual Fund 41622.51 37789.97 3832.54 10.14

3. Benchmark Mutual Fund 8951.09 5659.42 3291.67 58.16

4. Reliance Mutual Fund 34636.90 3152.28 3064.62 9.71

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5. Kotak Mahindra Mutual Fund 13542.09 10938.29 2603.8 23.80

6. Pru ICICI Mutual Fund 35232.16 32664.03 2568.13 7.86

7. DSP Merrill Lynch Mutual Fund 14277.26 11781.10 2559.16 21.84

8. HDFC Mutual Fund 29555.13 27552.96 2002.17 7.27

9. PRINCIPAL Mutual Fund 11887.17 10050.54 1836.63 18.27

10. Deutsche Mutual Fund 6138.66 5155.57 982.72 19.06

11. Birla Mutual Fund 17474.97 16821.57 653.2 3.88

12. HSBC Mutual Fund 10312.24 9691.28 620.95 6.41

13. JM Mutual Fund 4664.6 4097.05 567.55 13.85

14. SBI Mutual Fund 15961.26 15496.18 465.09 3.00

15. ABN AMRO Mutual Fund 5738.67 5335.14 403.53 7.56

16. Fidelity Mutual Fund 5786.05 5399.96 386.09 7.15

17. Standard Chartered Mutual Fund 12894.13 12541.59 352.54 2.81

18. ING Vysya Mutual Fund 3834.43 35781.17 256.26 7.16

19. DBS Chola Mutual Fund 2145.33 1938.74 206.59 10.66

20. Morgan Stanley Mutual Fund 3026.44 2864.58 161.87 5.65

21. Tata Mutual Fund 12521.86 12472.36 47.51 0.38

22. Sahara Mutual Fund 203.33 160.94 42.39 26.34

23. Sundaram Mutual Fund 6854.99 6818.87 36.12 0.53

24. Escorts Mutual Fund 127.70 123.18 4.52 3.67

25. Quantum Mutual Fund 55.15 51.51 3.65 7.09

26. BOB Mutual Fund 150.21 165.49 -15.28 -9.23

27. Taurus Mutual Fund 258.29 275.92 -17.63 -6.39

28. Franklin Templeton Investments 23832.70 23920.26 -87.57 -.037

29. Canbank Mutual Fund 2304.91 2737.86 -332.85 -12.62

The AMC which have the AUM of more than 10,000Crs

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1st STEP:

The selection of AMCs for analysis is on the basis of AUM value of individual

AMC. From all the AMCs, the fund, which have the AUM of more than 10,000crs

only those AMCs are taken for the study.

The following table shows the list of AMCs, which have the

AUM of more than 10,000Crs in the month of December 2006 and

January 2007, & the % change in the values in a month also are

shown.

S. NoAMC AUM

31/01/2007AUM31/12/2006

Absolute change

%Change

1. UTI Mutual Fund 41622.51 37789.97 3832.54 10.14

2. Pru ICICI Mutual Fund 35232.16 32664.03 2568.13 7.86

3. Reliance Mutual Fund 34636.90 3152.28 3064.62 9.71

4. HDFC Mutual Fund 29555.13 27552.96 2002.17 7.27

5. Franklin Templeton Investments 23832.70 23920.26 -87.57 -.037

6. Birla Mutual Fund 17474.97 16821.57 653.2 3.88

7. LIC Mutual Fund 16480.90 12458.88 4022.02 32.28

8. SBI Mutual Fund 15961.26 15496.18 465.09 3.00

9. DSP Merrill Lynch Mutual Fund 14277.26 11781.10 2559.16 21.84

10. Kotak Mahindra Mutual Fund 13542.09 10938.29 2603.8 23.80

11. Standard Chartered Mutual Fund 12894.13 12541.59 352.54 2.81

12. Tata Mutual Fund 12521.86 12472.36 47.51 0.38

13. PRINCIPAL Mutual Fund 11887.17 10050.54 1836.63 18.27

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14. HSBC Mutual Fund 10312.24 9691.28 620.95 6.41

2nd STEP

Equity diversified Schemes:

There are varieties of schemes offered by the AMCs. Equity diversified is one of

the schemes offered by the AMC. The selection criteria of schemes are totally based

on the fund size and age of the fund. The scheme, which has the corpus value of more

BABASAB PATIL-45-


than 400crs and the age of the fund, is more then 3yrs only those funds are qualified

for the analysis.

Equity Diversified Fund diversifies their portfolio evenly across stocks and

industry sectors. The returns from them tend to be moderately high over a long-term

horizon but since the prices of equity shares fluctuate on the stock markets, the net

asset value is subject to these fluctuations. These funds suit investors who have

moderate risk appetite. In a diversified fund, the risk of down-side is mitigated by the

breadth of variety of stocks in the portfolio. Since the portfolio is diversified, the

under-performance in some stocks or sectors in which the fund has invested is

balanced by the superior performance of other stocks or sectors

The following are the equity-diversified schemes in the selected funds

at the current date.1/02/2007

Tables for fund size and fund age

UTI Mutual Fund

S. No Scheme Name Fund Size Date of Inception

Fund Age

Fund Class

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1. UTI Master Plus 91(G) 863.52 31/12/1991 15.16 ED

2. UTI Index Select Equity (G) 216.36 12/05/97 9.58 ED

3. UTI Mastergrowth 93 (G) 346.95 18/01/93 14.08 ED

4. UTI Large Cap (G) 25.53 07/04/04 2.83 ED

5. UTI Mastershare (G) 1,828. 19/09/1986 20.33 ED

6. UTI Equity Fund (G) 1,451.73 18/05/92 14.75 ED

7. UTI Growth & Value Fund (G) 151.96 28/10/99 7.33 ED

8. UTI Leadership Equity Fund (G) 1,027.84 30/01/06 1.08 ED

9. UTI Dividend Yield Fund (G) 516.88 03/05/05 1.91 ED

10. UTI India Advantage Equity (G) 55.84 05/02/00 7 ED

11. UTI Dynamic Fund (G) 128.27 12/09/03 3.41 ED

12. UTI Master Value Fund (G) 647.68 01/06/98 9.08 ED

13. UTI Mid Cap (G) 80.70 07/04/04 2.83 ED

14. UTI Opportunities Fund (G) 497.79 20/07/05 1.58 ED

15. UTI Contra Fund (G) 640.04 22/03/06 0.91 ED

16. UTI Wealth Builder Fund (G) 905.02 07/09/06 0.41 ED

Prudential ICICI Mutual Fund

S. No Scheme Name Fund

Size

Date of

inception

Age of

the fund

Fund

class

1. Pru ICICI Infrastructure (G) 1,562.32

16/08/05

1.5 ED

2. Pru ICICI Dynamic Plan (G) 1,533.33 18/10/2002 4.33 ED

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3. Pru ICICI Services Indus. (G) 424.02

18/11/05

1.25 ED

4. Pru ICICI Growth (G) 406.88 19/06/98 8.66 ED

5. Pru ICICI Emerging S.T.A.R.(G) 933.66

05/10/04

2.75 ED

6. Pru ICICI Discovery Fund (G) 908.60

23/07/04

2.58 ED

7. Pru ICICI Fusion Fund (G) 634.15 27/02/06(1)

ED

8. Pru ICICI Power (G) 1,025.4905/10/01(5.33)

ED

Reliance Mutual Fund


Size

Date of

inception

Age of

the

fund

Fund

class

1. Reliance RSF – Equity (G) 160.50 10/05/05 1.75 ED

2. Reliance NRI Equity Fund (G)

121.23 01/11/04 2.25 ED

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3. Reliance Equity Opp. Fund (G)

2,214.79 07/03/05 1.58 ED

4. Reliance Vision Fund (G) 2,415.31 07/09/95 11.58 ED

5. Reliance Growth Fund (G) 3,243.92 08/09/95 10.5 ED

6. Reliance Equity Fund (G) 4,455.25 07/03/06 0.58 ED

HDFC Mutual Fund


Size

Date of

inception

Age of the

fund

Fund

class

1. HDFC Growth Fund (G) 379.40 11/09/00 6.41 ED

2. HDFC Core & Satellite Fund (G)

646.03 10/09/04 1.41 ED

3. HDFC Top 200 Fund G) 1,621.10 19/08/96 10.5 ED

4. HDFC Equity Fund (G) 3,907.14 08/12/94 12.5 ED

5. HDFC Premier Multi-Cap (G) 673.81 21/03/05 1.91 ED

6. HDFC Capital Builder Fund (G) 657.84 16/12/93 13.16 ED

7. HDFC Long Term Equity Fund (G)

1,478.01 27/01/06 1.08 ED

Franklin Templeton Mutual Funds


Size (crs.)

Date of

inception

Age of

the fund

Fund

class

1. Franklin India Opportunity. (G) 687.15 19/02/2000 7 ED

2. Franklin India Growth Fund 25.06 07/02/2000 7 ED

3. Franklin India Prima Plus (G)

878.70 28/09/94 12.41 ED

4. Franklin India Blue chip (G) 2575.97 30/11/1993 13.25 ED

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5. Franklin (I) Flexi Cap (G) 3,364.79 09/02/05 2 ED

6. Franklin (I) Smaller Co's (G) 1,211.47 14/12/05 1.16 ED

7. Templeton (I) Equity Income(G) 1,749.86 20/04/06 0.83 ED

Birla Mutual Fund


Size

Date of

inception

Age of

the fund

Fund

class

1. Birla Long Term Adv. Fund (G)

396.18 08/09/2006 0.42 ED

2. Birla Infrastructure Fund (G)

474.08 24/02/2006 1 ED

3. Birla India GenNext Fund (G)

159.40 12/07/2005 1.58 ED

4. Birla India Opportunities (G)

83.17 25/08/2003 3.5 ED

5. Birla Advantage Fund (G)

475.06 24/02/95 12 ED

6. Birla Midcap Fund (G) 228.43 01/10/02 4.33 ED

7. Birla Top 100 Fund (G)

440.00 28/09/05 1.42 ED

8. Birla Equity Fund (G)

506.37 08/27/98 7.77 ED

9. Birla Frontline Equity (G) 124.74 30/08/2002 4.5 ED

v. Birla Dividend Yield Plus (G) 415.8902/07/03 3.32

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LIC Mutual Fund


Size

Date of

inception

Age of the

fund

Fund

class

1. 1. LIC MF Growth Fund

99.28 10/08/94 12.5 ED

2. 2. LIC MF Equity Fund (G)

82.93 11/01/93 14.08 ED

SBI Mutual Fund


Size

Date of

inception

Age of

the fund

Fund

class

1. Magnum Global Fund (G) 954.15 22/09/1994 12.42 ED

2. Magnum Midcap Fund (G)

427.81 17/03/05 1.91 ED

3. Magnum Contra Fund (G) 1,448.78 31/07/99 7.57 ED

4. SBI Magnum Equity Fund (D) 265.98 1/01/1991 16.03 ED

5. Magnum Comma Fund (G 457.58 25/07/05 1.58 ED

6. Magnum Multiplier Plus (G) 745.07 01/03/93 13.91 ED

7. Magnum Multicap Fund (G) 1,079.18 16/09/05 1.41 ED

8. Magnum Emerging Businesses (G)

267.94 17/09/04 2.41 ED

9. Magnum NRI Fund - FA Plan (G) 13.64 13/01/04 3.08 ED

10. SBI Arbitrage Oppor. Fund (G) 214.38 15/09/06 0.41

11. SBI Blue Chip Fund (G) 1,936.34 20/01/06 1.08

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DSP Merrill Lynch Mutual Fund


Size

Date of

inception

Age of the

fund

Fund

class

1. DSP-ML Small & MidCap- Inst (G)

54.59 29/09/06 0.41 ED

2. DSP-ML Small & Mid Cap Fund (G)

1,389.79 29/09/06 0.41 ED

3. DSP-ML Opportunities (G)

1,356.20 18/04/00 6.83 ED

4. DSP-ML Equity Fund

695.41 07/04/97 9.83 ED

5. DSP-ML Top 100 Equity (G) 299.47 21/02/03 4 ED

6. DSP-ML India T.I.G.E.R. (G) 1,481.34 25/05/04 2.75 ED

Kotak Mutual Fund


Size

Date of

inception

Age of the

fund

Fund

class

1. Kotak Lifestyle Fund (G)

384.15 22/02/06 1 ED

2. Kotak 30 (G) 432.01 22/12/98 8.16 ED

3. Kotak Opportunities Fund (G)

224.26 25/08/04 2.5 ED

4. Kotak Global India Scheme (G)

111.85 16/01/04 3.08 ED

5. Kotak Contra (G)

143.59 01/07/05 1.58 ED

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Standard Chartered Mutual Fund


Size

Date of

inception

Age of the

fund

Fund

class

1. StanChart Imperial Equity (G)

251.16 21/02/06 1 ED

2. StanChart Classic Equity (G) 372.11 14/07/05 3.16 ED

3. StanChart Premier Equity (G)

161.21 26/09/05 2.83 ED

S. No Scheme Name Fund Size Date of

inception

Age of the

fund

Fund

class

1. Tata Infrastructure Fund (G)

1,187.91 22/12/04 2.16 ED

2. Tata Select Equity Fund (G) 106.38 24/05/96 10.75 ED

3. Tata Pure Equity Fund (G) 292.23 07/05/98 8.75 ED

4. Tata Equity Opp. Fund (G) 440.12 30/03/93 13.96 ED

5. Tata Service Industries (G) 181.46 10/05/05 1.75 ED

6. Tata Equity P/E Fund (G) 84.53 15/06/04 2.66 ED

7. Tata Growth Fund (G) 33.29 15/06/94 12.66 ED

8. Tata Mid Cap Fund (G) 154.51 15/06/05 1.66 ED

9. Tata Dividend Yield Fund (G) 146.18 27/10/04 2.33 ED

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10. Tata Contra Fund (G) 201.42 25/10/05 1.33 ED

Tata Mutual Fund


Size

Date of

inception

Age of

the fund

Fund

class

1. Principal Large Cap Fund (G)

251.90 19/10/05 1.33 ED

2. Principal Resurgent IEF (G)

260.89 30/06/00 6.66 ED

3. Principal Growth Fund (G)

260.03 25/10/00 6.33 ED

4. Principal Junior Cap Fund (G)

71.00 08/06/05 1.66 ED

5. Principal Focussed Adv. (G)

60.31 22/02/05 2 ED

6. Principal Global Oppor (G)

436.71 19/03/04 2.91 ED

7. Principal Infra & Serv Ind (G)

266.92 07/02/06 1 ED

8. Principal Dividend Yield (G)

139.01 22/09/04 2.41 ED

Principal Mutual Fund

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HSBC Mutual Fund


Size

Date of

inception

Age of the

fund

Fund

class

1. HSBC India Opportunities (G) 607.88 13/02/04 3 ED

2. HSBC Equity Fund (G) 936.53 03/12/02 4.16 ED

3. HSBC Midcap Equity Fund (G) 311.51 03/05/05 1.75 ED

4. HSBC Advantage India Fund (G 1,216.90 27/01/06 1.08 ED

4 Step:

Absolute returns:

The selected funds returns from date of launch to date of inception

Scheme Name DOI

NAV

()

1yr 2yr 3yr 4yr

1. UTI Master Plus 91(G) 62.79 13.8 98.8 120.5 309.2

2. UTI Mastershare (G) 33.08 7.8 66.8 110.4 --

3. UTI Equity Fund (G) 30.86 -2.2 64.9 121.3 313.5

4. UTI Master Value Fund (G) 27.23 -5.4 44.2 90.5 389.1

5. Pru ICICI Dynamic Plan (G)

63.59 23.4 143.4 258.5 --

6. Pru ICICI Growth (G) 89.80 14.5 105.9 160.5 354.2

7. Pru ICICI Power (G) 78.11 15.6 116.6 191.0 559.2

8. Reliance Vision Fund (G) 171.46 13.7 100.3 185.8 795.4

9. Reliance Growth Fund (G) 259.81 17.1 124.8 267.3 982.5

10. HDFC Top 200 Fund G) 105.32 12.3 104.4 178.8 553.7

11. HDFC Equity Fund (G) 144.18 15.3 119.8 197.9 554.2

12. HDFC Capital Builder Fund (G)

59.74 2.5 69.4 184.2 444.6

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13. Franklin India Opportunity. (G)

24.20 16.9 124.5 193.0 376.4


133.87 21.5 116.1 170.3 469.2

15. Franklin India Blue chip (G) 124.12 13.2 99.3 144.9 449.7

16. Birla Advantage Fund (G) 120.87 10.3 91.0 155.9 368.9

17. Birla Dividend Yield Plus (G)

40.07 -2.6 45.0 98.7 --

18. Magnum Global Fund (G) 41.40 17.3 148.9 380.9 770.8

19. Magnum Contra Fund (G) 35.71 15.1 133.6 334.2 790.3

20. Magnum Multiplier Plus (G)

50.92 11.2 139.8 260.9 544.9

21. DSP-ML Opportunities (G) 52.64 11.9 102.8 178.5 562.9

22. DSP-ML Equity Fund 37.47 16.0 112.3 205.2 541.5

23. Kotak 30 (G) 65.64 12.1 106.9 176.2 471.0

24. Tata Equity Opp. Fund (G) 55.55 5.8 101.0 180.1

25. HSBC India Opportunities (G)

27.13 21.6 109.7 198.8 --

26. HSBC Equity Fund (G) 68.72 16.7 91.1 164.3 --

By observing the absolute returns of the schemes we find that Reliance

Growth Fund (G) is the one which is giving the good returns from the date of launch.

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5th STEP:

METHODOLOGY

Returns

Scheme Names DOI

NAV

(28/02/07)

Annualized returns (%) 4 yrs

Avg

Rtn

1 yr 2yr 3yr 4yr

1. UTI Master Plus 91(G) 62.79 13.8 41.0 30.2 32.629.4

2. UTI Mastershare (G) 33.08 7.8 29.2 28.1 --21.7

3. UTI Equity Fund (G) 30.86 -2.2 28.4 30.3 32.822.33

4. UTI Master Value Fund (G) 27.23 -5.4 20.1 24.0 37.419.03

5. Pru ICICI Dynamic Plan (G) 62.25 52.5 57.2 41.8 52.551

6. Pru ICICI Growth (G) 89.80 14.5 43.5 37.6 35.332.73

7. Pru ICICI Power (G) 78.11 15.6 47.2 42.8 45.837.85

8. Reliance Vision Fund (G) 171.46 13.7 41.5 41.9 55.038.03

9. Reliance Growth Fund (G) 259.81 17.1 49.9 54.3 61.045.58

10. HDFC Top 200 Fund G) 105.32 12.3 43.0 40.7 45.635.4

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11. HDFC Equity Fund (G) 144.18 15.3 48.3 43.9 45.638.28

12. HDFC Capital Builder Fund (G) 59.74 2.5 30.2 41.6 40.328.65

13. Franklin India Opportunity. (G) 24.20 16.9 49.8 43.1 36.636.6

14. Franklin India Prima Plus (G) 133.87 21.5 47.0 39.3 41.637.35

15. Franklin India Blue chip (G) 124.12 13.2 41.2 34.8 40.632.45

16. Birla Advantage Fund (G) 120.87 10.3 38.2 36.8 36.230.38

17. Birla Dividend Yield Plus (G) 40.07 -2.6 20.4 25.7 --14.5

18. Birla Equity Fund(G) 175.05 16.4 49.1 50.0 46.140.4

19. Magnum Global Fund (G) 41.40 17.3 57.8 68.8 54.249.53

20. Magnum Contra Fund (G) 35.71 15.1 52.8 63.1 54.846.45

21. Magnum Multiplier Plus (G) 50.92 11.2 54.9 53.4 45.241.18

22. DSP-ML Opportunities (G) 52.64 11.9 42.4 40.7 46.035.25

23. DSP-ML Equity Fund 37.47 16.0 45.7 45.1 45.037.95

24. Kotak 30 (G) 65.64 12.1 43.8 40.3 41.734.48

25. Tata Equity Opp. Fund (G) 55.55 5.8 41.8 41.0 --29.53

26. HSBC India Opportunities (G) 27.13 21.6 44.8 44.0 --36.8

27. HSBC Equity Fund (G) 68.72 16.7 38.2 38.3 --31.07

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Market Return

Market Return 1 yr 2yr 3yr 4yrAvg

rtrn

Sensex 22.60 43.50 35.00 30.80 32.98

Risk

Standard Deviation:

Scheme Names DOI

NAV

Annualized Returns (%) 4 yr

Avg

(SD)

1 yr 2 yr 3 yr 4 yr

1. UTI Master Plus 91(G)

62.79 13.8 41.0 30.2 32.629.4

11.38

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2. UTI Mastershare (G)

33.08 7.8 29.2 28.1 --21.7

12.05

3. UTI Equity Fund (G)

30.86 -2.2 28.4 30.3 32.822.33

16.45

4. UTI Master Value Fund (G)

27.23 -5.4 20.1 24.0 37.419.03

17.89


62.25 52.5 57.2 41.8 52.551

6.52

6. Pru ICICI Growth (G) 89.80 14.5 43.5 37.6 35.332.73

12.63

7. Pru ICICI Power (G)

78.11 15.6 47.2 42.8 45.837.85

14.95

8. Reliance Vision Fund (G)

171.46 13.7 41.5 41.9 55.038.03

17.39

9. Reliance Growth Fund (G)

259.81 17.1 49.9 54.3 61.045.58

19.52

10. HDFC Top 200 Fund G) 105.32 12.3 43.0 40.7 45.635.4

15.53

11. HDFC Equity Fund (G) 144.18 15.3 48.3 43.9 45.638.28

15.42


59.74 2.5 30.2 41.6 40.328.65

18.16


24.20 16.9 49.8 43.1 36.636.6

14.20


133.87 21.5 47.0 39.3 41.637.35

11.05

15. Franklin India Blue chip (G)

124.12 13.2 41.2 34.8 40.632.45

13.15


120.87 10.3 38.2 36.8 36.230.38

13.41


40.07 -2.6 20.4 25.7 --14.5

15.04

18. Birla Equity Fund(G) 175.05 16.4 49.1 50.0 46.140.4

16.09

19. Magnum Global Fund (G)

41.40 17.3 57.8 68.8 54.249.53

22.36

20. Magnum Contra Fund (G)

35.71 15.1 52.8 63.1 54.846.45

21.37

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50.92 11.2 54.9 53.4 45.241.18

20.43


52.64 11.9 42.4 40.7 46.035.25

15.72

23. DSP-ML Equity Fund 37.47 16.0 45.7 45.1 45.037.95

14.64

24. Kotak 30 (G) 65.64 12.1 43.8 40.3 41.734.48

14.99

25. Tata Equity Opp. Fund (G)

55.55 5.8 41.8 41.0 --29.53

20.56


27.13 21.6 44.8 44.0 --36.8

13.17

27. HSBC Equity Fund (G) 68.72 16.7 38.2 38.3 --31.07

12.44

SD = n ∑X2 – (∑X)2

It is used to measure the variation in individual returns from the average

expected returns over a certain period. Standard deviation is used in the

concept of risk of a portfolio of investments. Higher standard deviation means

a greater fluctuation in expected return.

BABASAB PATIL-61-

n (n-1)


BETA:

S.No Scheme Names 4 Years avg

ReturnsBeta

1. UTI Master Plus 91(G) 29.4 0.45974

2. UTI Mastershare (G) 21.7 0.5195

3. UTI Equity Fund (G) 22.33 0.51445

4. UTI Master Value Fund (G) 19.03 0.38752


51 0.04588

6. Pru ICICI Growth (G)

32.73 0.50621

7. Pru ICICI Power (G) 37.85 0.53133


38.03 0.42884


45.58 0.53642

10. HDFC Top 200 Fund G)

35.4 0.50859

11. HDFC Equity Fund (G)

38.28 0.55997


28.65 0.47609


36.6 0.58826


37.35 0.43023

15. Franklin India Blue chip (G) 32.45

0.46015

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30.38 0.48017


14.5 0.57688

18. Birla Equity Fund(G)

40.4 0.57362


49.53 0.74307


46.45 0.67269


41.18 0.77797


35.25 0.50358


37.95 0.50899

24. Kotak 30 (G)

34.48 0.53857

25. Tata Equity Opp. Fund (G)

29.53 0.87693


36.8 0.56432

27. HSBC Equity Fund (G)

31.07 0.52537

ß = Covar / σm2

Where, Covariance (covar) is the average of the products of deviations for

each data point pair. And, covar is calculated as:

Covar = 1/n (xi –µ x)(yi - µy)

σm2 = Market Variance

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Beta describes the relationship between the stock’s return and the index returns. it

describes the risk in the portfolio with comparing market risk as 1 .

If beta =1

One percent changes in market index return causes exactly one percent change in

the stock returns. it indicates that the stock moves in tandem with the market .

If Beta <1

Then the stock is less volatile compared to the market.

If Beta >1

Then the stock is more volatile compared to the market. The stock value

With more then 1 beta value is considered to be risky.

If Beta –ve: native Beta indicates that the stock returns moves in the opposite direction to the market return.

Returns and risk for the top 10 companies having the highest

portfolio returns (Rp).

Scheme Names DOI nav 5 yrs

Avg

Rtrn

SD Beta

1. Pru ICICI Dynamic Plan (G) 62.25

516.52 0.05

2. Magnum Global Fund (G) 41.4049.53 22.36 0.74

3. Magnum Contra Fund (G) 35.71 46.45 21.37 0.674. Reliance Growth Fund (G) 259.81 45.58 19.52 0.54


50.92 41.18 20.43 0.78

6. Birla Equity Fund(G) 175.05 40.4 16.09 0.57

7. HDFC Equity Fund (G) 144.18 38.28 15.42 0.56

8. Reliance Vision Fund (G) 171.46 38.03 17.39 0.43

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9. DSP-ML Equity Fund 37.47 37.95 14.64 0.51

10. Pru ICICI Power (G) 78.11 37.85 14.95 0.53

Sharpe’s Index:

Sharpe’s index measures the risk premium of

the portfolio relative to the total amt of risk in the

portfolio. This risk premium is the difference

between the portfolio’s average rate of return and

the risk less rate of return. The index assigns the

highest values to assets that have best risk-adjusted

average rate of returns.

Scheme Names DOI NAV

28/02/07

4 Yr

Avg Rf Sd(σ)

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Rtrn

RpSt

1. Pru ICICI Dynamic Plan (G) 62.25

515 6.52

7.06

2. Magnum Global Fund (G) 41.4049.53

5 22.361.99

3. Magnum Contra Fund (G) 35.71 46.45 5 21.37 1.94


259.81 45.58 5 19.52 2.08


50.92 41.18 5 20.43 1.77

6. Birla Equity Fund(G) 175.05 40.4 5 16.09 2.20

7. HDFC Equity Fund (G) 144.18 38.28 5 15.42 2.16

8. Reliance Vision Fund (G) 171.46 38.03 5 17.39 1.90

9. DSP-ML Equity Fund 37.47 37.95 5 14.64 2.25

10. Pru ICICI Power (G) 78.11 37.85 5 14.95 2.20

St =

Where,

Rp = Average portfolio returns

Rf = Risk free rate of rate (5%)

Sd(σ) = Standard Deviation (Risk) of returns

Treynor’s Index:Treynor’s index sums up the risk and return of the

portfolio in a single number, while categorizing the

performance of the portfolio.

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Rp - Rf

Sd(σ)


Scheme NamesDOI NAV

28/02/07

4 Yr

Avg Rtrn

RpRf

Beta

βTr

1. Pru ICICI Dynamic Plan (G) 62.25 51 5 0.05 1002.62

2. Magnum Global Fund (G) 41.4049.53

5 0.74 59.93

3. Magnum Contra Fund (G) 35.71 46.45 5 0.67 61.62


259.8145.58 5 0.54 75.65


50.9241.18 5 0.78 46.51

6. Birla Equity Fund(G) 175.05 40.4 5 0.57 61.71

7. HDFC Equity Fund (G) 144.18 38.28 5 0.56 59.43

8. Reliance Vision Fund (G) 171.46 38.03 5 0.43 77.02

9. DSP-ML Equity Fund 37.47 37.95 5 0.51 64.74

10. Pru ICICI Power (G) 78.11 37.85 5 0.53 61.83

Tr = Treynor’s Performance index

Rp = Average portfolio returns

Rf = Risk free rate of rate (5%)

βp = A Measure of systematic risk ( Co-efficient to be estimated)

Jensen’s Alpha index:

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Rp – Rf

βpTr =


Scheme NamesDOI

NAV

28/02/07

Rp Rf Beta

β

RmAlfa

α α/β


62.25 51 5 0.05 32.98 44.72 974.636


41.40

49.535 0.74 32.98 23.74 31.947


35.7146.45 5 0.67 32.98 22.63 33.638


259.8145.58 5 0.54 32.98 25.57 47.670


50.9241.18 5 0.78 32.98 14.41 18.526


175.0540.4 5 0.57 32.98 19.35 33.733


144.1838.28 5 0.56 32.98 17.61 31.452


171.4638.03 5 0.43 32.98 21.03 49.042


37.4737.95 5 0.51 32.98 18.71 36.756


78.1137.85 5 0.53 32.98 17.98 33.846

= ( Rp- Rf)-beta(Rm- Rf)

Where,

Rp = Average Portfolio Return

Rf = Risk Free rate of interest (5%)

β = A measure of systematic risk

Rm = Average Market Return

Performance evaluation for Top 10 equity diversified schemes on

the basis of three Performance Indexes i.e., (Sharpe’s, Treynor’s

and Jensen’s Performance Index).

BABASAB PATIL-68-


Scheme NamesNAV

28/02/07Rp Beta SD Sharpe’s Treynor’s Jensen’s


62.25 51 0.05 6.52 7.06 1002.62 974.636


41.4049.53 0.74 22.36 1.99 59.93 31.947


35.71 46.45 0.67 21.37 1.94 61.62 33.638


259.81 45.58 0.54 19.52 2.08 75.65 47.670


50.92 41.18 0.78 20.43 1.77 46.51 18.526


175.05 40.4 0.57 16.09 2.20 61.71 33.733


144.18 38.28 0.56 15.42 2.16 59.43 31.452


171.46 38.03 0.43 17.39 1.90 77.02 49.042


37.47 37.95 0.51 14.64 2.25 64.74 36.756


78.11 37.85 0.53 14.95 2.20 61.83 33.846

RANKING OF SCHEMES

Ranking on the basis of Sharpe’s Performance index:

Scheme NamesDOI NAV

28/02/07Rp SD

Sharpe’sIndex

Rank

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1. Pru ICICI Dynamic Plan (G) 62.25 51 6.52

7.0551

2. DSP-ML Equity Fund 37.47 37.9514.64 2.251

2

3. Birla Equity Fund(G) 175.05 40.4 16.09 2.2003

4. Pru ICICI Power (G) 78.11 37.85

14.95 2.1974

5. HDFC Equity Fund (G) 144.18 38.2815.42 2.158

5


259.81 45.5819.52 2.079

6


41.4049.53

22.36 1.9927


35.71 46.4521.37 1.940

8


171.46 38.0317.39 1.899

9


50.92 41.1820.43

1.77 10

Chart showing the performance according to Sharpe’s Index

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Chart showing the performance according to Sharpe's Index

0

1

2

3

4

5

6

7

8

Equity Diversified Schemes

Sh

arp

e's

Me

asu

re

Pru ICICI DynamicPlan (G)

DSP-ML Equity Fund

Birla Equity Fund(G)

Pru ICICI Power (G)

HDFC Equity Fund (G)

Reliance Growth Fund(G)

Magnum Global Fund(G)

Magnum Contra Fund(G)

Reliance Vision Fund(G)

Magnum Multiplier Plus(G)


According to Sharpe’s performance index Pru ICICI Dynamic Plan is the best Equity

Diversified Scheme because this scheme is having the best risk-adjusted rate of

return.

Ranking on the basis of Treynor’s index:

Scheme Names DOI NAV28/02/07

RP Beta Treynor’sIndex

Rank

1. Pru ICICI Dynamic Plan (G) 62.25 51

0.051002.62 1

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171.46 38.03 0.4377.02 2


259.81 45.580.54

75.65 3


37.47 37.950.51 64.74

4


78.1137.85

0.53 61.835


175.05 40.40.57 61.71

6


35.71 46.450.67

61.62 7


41.4049.53

0.7459.93 8


144.18 38.280.56

59.43 9


50.92 41.180.78

46.51 10

Chart showing the performance according to Treynor’s Index

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Chart showing the performance according to Treynor's Index

0

200

400

600

800

1000

1200

Equity Diversified Schems

Tre

yn

or'

s m

ea

su

re

1. Pru ICICI DynamicPlan (G)

2. Reliance Vision Fund(G)

3. Reliance Growth Fund(G)




7. Magnum Contra Fund(G)

8. Magnum Global Fund(G)

9. HDFC Equity Fund(G)

10. Magnum MultiplierPlus (G)


According to Treynor’s performance index Pru ICICI Dynamic Plan ranked

as first best Equity Diversified Scheme because this scheme is having the best risk-

adjusted rate of return followed by Reliance Vision Fund (G).

Scheme NamesDOINAV

28/02/07Rp

Jensen’s Measure

Rank

1. Pru ICICI Dynamic Plan (G)62.25 51

974.641

2. Reliance Vision Fund (G) 171.46 38.0349.04

2

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3. Reliance Growth Fund (G) 259.81 45.5847.67

3

4. DSP-ML Equity Fund 37.47 37.9536.76

4

5. Pru ICICI Power (G)78.11 37.85

33.855

6. Birla Equity Fund(G) 175.05 40.433.73

6

7. Magnum Contra Fund (G)35.71 46.45

33.647

8. Magnum Global Fund (G)41.40

49.5331.95

8

9. HDFC Equity Fund (G) 144.18 38.2831.45

9

10. Magnum Multiplier Plus (G) 50.92 41.1818.53

10

Ranking on the basis of Jensen’s Alfa Measure:

Chart showing the performance according to Jensen's performance measure

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Chart showing the performance according to Jensen's Performance Measure

0

200

400

600

800

1000

1200

Equity Diversified Schemes

Jen

sen

's M

easu

re1. Pru ICICI DynamicPlan (G)

2. Reliance Vision Fund(G)

3. Reliance GrowthFund (G)




7. Magnum Contra Fund(G)

8. Magnum Global Fund(G)

9. HDFC Equity Fund(G)

10. Magnum MultiplierPlus (G)


According to Jensen’s performance Measure, Pru ICICI Dynamic Plan ranked as

first best Equity Diversified Scheme followed by Reliance Vision Fund (G).

Classification of Risk into Systematic (un-diversifiable) and Unsystematic (diversifiable)

Scheme

Names

5 yrs

Avg

SD Beta

(ß)

Systematic

Risk

Unsystematic

Risk

(% )

Systemat

(%)

Un-

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Rtrn (ß2*σm2) (SD -

Systematic

risk)

ic

Risk

Systematic

Risk


51

6.520.045

880.002105 6.3605499 2.45 97.55


49.53 22.360.743

070.552153 -19.465133 100.00 0.00


46.4521.37 0.67269 0.4525118 -12.907396 100.00 0.00


45.5819.52

0.53642

0.2877464 -2.2765522 100.00 0.00


41.1820.43

0.77797

0.6052373 -25.416225 100.00 0.00


40.416.09

0.57362

0.3290399 -8.8344997 100.00 0.00


38.2815.42

0.55997

0.3135664 -8.3323946 100.00 0.00


38.0317.39

0.42884

0.1839037 3.4594439 80.11 19.89


37.9514.64

0.50899

0.2590708 -4.9843996 100.00 0.00


37.85

14.950.531

330.2823116 -6.434867 100.00 0.00

When we consider the systematic and un-systematic risk Pru ICICI Dynamic (G)

has got 2.45% of systematic risk and 97.55% of unsystematic risk and Reliance

Vision Fund (G) 80.11% systematic risk and 19.89% of unsystematic risk. And other

all schemes have got 0% of Unsystematic risk.

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Finding and Suggestions:

According to the Absolute returns of the scanned Equity Diversified

Schemes of the top listed AMCs, Reliance Growth Fund (G) is the one

which is giving good returns from the date of launch.

According to Sharpe’s performance Index we find that Pru ICICI

Dynamic Plan (G) is ranked as 1st and DSP-ML Equity Fund as 2nd rank

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and Birla Equity Fund (G) as 3rd Rank. The Sharpe’s index considers

total risk of the Scheme.

According to Treynor’s Performance Index, Pru ICICI Dynamic Plan (G)

is ranked as 1st followed by Reliance Vision Growth (G) (2nd Rank) and

Reliance Growth Fund (G) (3rd Rank).

The Treynor’s index considers the return premium for systematic

risk undertaken.

According to Jensen’s Performance Index, Pru ICICI Dynamic Plan (G)

is ranked as 1st followed by Reliance Vision Fund (G) (2nd Rank) and

Reliance Growth Fund (G) (3rd Rank).

The Jensen’s index compares the actual or relized return of the

portfolio with calculated return and hence depicts the predictive ability

of the managerial personnel.

According to all the three indexes Pru ICICI Dynamic Plan (G). is the

best equity diversified scheme because this particular scheme is having

the best risk adjusted rate of return.

When we consider the systematic and un-systematic risk, Pru ICICI

Dynamic (G) has got 2.45% systematic risk and 97.55% of unsystematic

risk and Reliance vision (G) 80.11% systematic risk and 19.89% of

unsystematic risk. And other all schemes have 0% of Unsystematic risk

which means that they are diversified to the fullest extent and the risk is

only due to market factors.

Conclusion

The construction of the mutual fund scheme’s portfolio is done by taking

various factors so even after evaluating the mutual funds and ranking them we cannot

say which is the best scheme in all.

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Bibliography

UTI records

Text Books referred: Punithvathy. Pandian Fisher and Jorden

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Web Sites: www.moneycontrol.com

www.amfiindia.com

www.icicidirect.com

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http://www.icicidirect.com/

http://www.amfiindia.com/

http://www.moneycontrol.com/

Performance evaluation of mutual funds @ uti secureties

Economy & Finance

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