A COMPARISON BETWEEN TOP 10 MIP SCHEMES OF MUTUAL FUND.(With Specific Reference to Birla Sun Life Asset management Company)

Submitted By

Namrata Sharma B4-26

Under The Esteemed Guidance ofProf. Sashi kumar Kompalli.

SIVA SIVANI INSTITUTE OF MANAGEMENT KOMPALLY, SECUNDERABAD

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TABLE OF CONTENTS: Chapter -11. Acknowledgement 2. Preface 3. Students Declaration 4. Executive Summary 5. Objective 6. Scope of the study 7. Limitation of the study 8. Proposed Methodology Chapter -2 1.Background of a. Birla Sun Life 2.Mutual Fund b. Introduction c. Characteristics of MF d. About MF Industry e. Regulatory Structure of MF in India f. Concept & Role of MF g. Types of MF Schemes h. Major Mutual Funds in India i. 5 Easy steps to Invest in Mutual Fund j. 5 Pointers to Measure the Performance MF k. Tax rules for Mutual Fund Investors l. Advantages & Disadvantages of MF Chapter -3 1.Who can invest in MF in India 2.Comparison of Investment Products 3. Common Mistakes of MF Investors 4. Data Interpretation of Investors 5. Swot Analysis 6. Risk Factor Chapter -4 1.MIP Schemes offered by BIRLA SUN LIFE AMC 2.comparison of top 10 open ended MIP MFs on 5 parameters 3.Beta calculation of S C Premier & S C Classic Funds 4.Snap-shot comparison sheet Chapter-5 1.Suggestion on the basis analysis 2. conclusion Bibliography

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ACKNOWLEDGMENT

It gives me immense pleasure to present this project report on A COMPARISON BETWEEN TOP 10 MIP SCHEMES OF MUTUL FUND (With Specific Reference To BIRLA SUNLIFE MUTUAL FUND), Hyderabad. In partial fulfillment of Post Graduate Diploma in Management-BIFAAS. No work can be carried out without the help and guidance of various persons. I am happy to take this opportunity to express my gratitude to those who have been helpful to me in completing this project report. At the outset I would like to thank Mr. ARUN KUMAR MOHANATY, for his valuable advice and guidance during my project. I am also thankful to all staff members of BIRLA SUNLIFE MUTUAL FUND unit for their help in completing my summer internship program. I would be failing in my duty if I do not express my deep sense of gratitude to Prof. Sasi Kumar without his guidance it wouldnt have been possible for me to complete this project work.

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PREFACE

Mutual Funds are going to be amongst the most exciting players in the years to come. Fund managers of well oiled operations and their clients are in for a terrific experience. The question in everybodys mind however is, When? When will investors interest in Mutual Funds will really pick up? When will the infatuation of the small investors with primary markets end? And when will the mutual fund gain the type of clout in the stock market that their counterparts in the United States of America enjoy.

The Indian investor, believes in playing the market on his own, and will continue to do so till the time his perception changes- which they undoubtedly will. Financial institutions and mutual funds, leaving the small investor with no other option except the mutual fund to put his savings in., will ultimately dominate the markets but for this to happen, industry will have to be patient and prove that it can prove investors with better returns than the markets. Plus they will have to make their operations much more transparent and investor friendly. Well if we look at the trend and the figure of last one year number it seems the shift has started to happen towards mutual fund shifting the trend.

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STUDENTS DECLARATION

I here by declare that Industrial internship program Report submitted as a requirement of fulfillment of my PGDM (BIFAAS) course is my original work and not submitted for the award of any other degree, diploma, fellowship or other similar title or prizes.

Namrata Sharma

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EXECUTIVE SUMMARY

The topic of this project is Comparison between top 10 MIP Schemes of Mutual Fund . The mutual fund industry in India has seen dramatic improvements in quantity as well as quality of product and service offerings in recent years and hence here focus is performance parametrers. Project analysis of TOP 10 MIP mutual fund schemes. Different measures like beta ,Sharpe, standard deviation, expense ratio, P/E ratio etc. have been taken into consideration to analyze the performance. An effort has been made to work on the concepts that have been taught during my IIP along with other useful parameters so that better study can be done. on comparing schemes of different mutual fund companies on different

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OBJECTIVES OF THE STUDYThe primary objective of this study is to make a comparative study on top 10 MIP schemes across the mutual fund companies. In addition to the above the study also examines the trading of MIP schemes in India with a special reference to Birla Sun Life Mutual Fund.

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SCOPE OF THE STUDY

This study calculates different measures to compare MIP schemes of different fund houses. For this study comparison of investment option, performance, risk volatility, portfolio analysis, and NAV comparison have been taken into consideration. It helps us to see how the funds stand in comparison with each other and helps investors in selecting schemes for investment.

LIMITATIONS OF THE STUDYTime constraints: Due to shortage or less availability of time it may be possible that all the related and concerned aspects may not be covered in the project.

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PROPOSED METHODOLOGY Majority of the data required for the study has been collected from the secondary data viz., journals, magazines, news papers etc., Comparing Investment of the products to constantly compare one form of investment with anotherInvestment of schemes certainly looks for the best returns for different option. Comparing portfolio of the TOP 10 funds on the basis of P/E ratio, Market capital & asset value.

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BACKGROUND OF THE COMPANY Company ProfileBirla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market and Sun Life's global experience. Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading flagships of Mutual Funds business managing assets of a large investor base. Our solutions offer a range of investment options, including diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. BSLAMC strives to provide transparent, ethical and research-based investments and wealth management services. Heritage

The Aditya Birla GroupThe Aditya Birla Group is one of India's largest business houses. Global in vision, rooted in Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. The Group operates in 26 countries India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, UAE, Singapore, Myanmar, Bangladesh, Vietnam, Malaysia, Bahrain and Korea. A US $29 billion corporation in the League of Fortune 500, the Aditya Birla Group is anchored by an extraordinary work force of 130,000 employees, belonging to 40 different nationalities. Over 60 per cent of its revenues flow from its operations across the world. The Aditya Birla Group is a dominant player in all its areas of operations viz; Aluminium, Copper, Cement, Viscose Staple Fibre, Carbon Black, Viscose Filament Yarn, Fertilisers, Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance, Mutual Funds, Software and Telecom. The Group has strategic joint ventures with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group and NGK Insulators (Japan), and has ventured into the BPO sector with the acquisition of TransWorks, a leading ITES/BPO company.

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Sun Life FinancialSun Life Financial Inc is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial Inc and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda.

PhilosophyBirla Sun Life Asset Management Company follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the companys management, sustainability of its business model and its competitive position, amongst other factors.

VisionTo be a leader and role model in a broad based and integrated financial services business.

MissionTo consistently pursue investor's wealth optimization by: Achieving superior and consistent investment results. Creating a conducive environment to hone and retain talent. Providing customer delight. Institutionalizing system-approach in all aspects of functioning. Upholding highest standards of ethical values at all times.

ValuesIntegrity Commitment Passion Seamlessness Speed

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INTRODUCTION

What is Mutual Fund ?A mutual fund is a form of collective investment that pools money from many investors and invests their money in stocks, bonds, short-term money market instruments, other securities etc. In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. A mutual fund is created when investor put their money together. It is therefore a pool of the investors funds. The term mutual means that investors contribute to the pool and also benefit from the pool. There are no other claimants to funds. The pool of funds help mutually by investors is the mutual fund. A mutual fund business is to invest the funds thus collected according to the wishes of the investors who created the pool the invested appoints professional investment mangers, to mange their funds.

IMPORTANT CHARACTERISTICS OF THE MUTUAL FUND 1.2. 3. 4. A mutual fund actually belongs to the investors who have pooled their funds. The ownership of the mutual fund is in the hand of the investor 77 A mutual fund is managed by investment professional and other service providers who earn a fee for their services from the fund The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is update every day. The investors share in the fund is denominated by UNIT. The value of the unit changes with changes in the portfolio value every day the value of the unit of investment is called as the Net Assets Value or NAV. The investment portfolio of the fund is created according to the stated investment objectives of the fund.

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ABOUT MUTUAL FUND INDUSTRY

Mutual Funds are financial intermediaries which pool the savings of numerous individuals and invest the money, thus related in a diversified portfolio of securities, including equity, bonds debentures and other money market instruments, thus spreading and reducing risk. The objective of mutual fund is to maximize the return to the investor who participates in equity indirectly through mutual funds. Even though the mutual fund industry grown in asset value from Rs.7000 Crores to 2,00,000/- Crores today, this is just the tip of the iceberg. According to most Fund Managers, the real boom is yet to come. The sum of Rs.2,00,000/- Crores represents just 3% - 4% of the total market capitalization of 25,00,000 Crore. This compares poorly with the US, where the mutual funds have nearly $ 6.8 billion of market capitalization of roughly Rs.70000 Crore, barely 3% - 4% of total market capitalization. This is not expected, because mutual fund history in India, which dates back to 1964, when the first openended mutual fund scheme Unit-64 was launched by Unit Trust of India, is still dominated by it. The focus initially was income earning securities, with only 20 % of the Corpus going into equity. The early 80s saw other schemes like the growing income, fixed income, and monthly income being introduced by the UTI. But it was only in 1986 that the first pure Growth equity scheme Master share was launched. 1989-90 was another landmark year in the history of mutual funds. For the fist time, the monopoly of UTI over the industry was broken. The government allowed public sector banks and insurance companies to enter this sector to bring in some competition. But it was only in 1993, when the private sector was given the green signal to float mutual funds, that excitement and competition came. Not only did the Government allowed Indian companies to float mutual funds, it even allowed foreign funds to set in shop in India and float funds. Thus, in one stroke, this sector was truly privatized. Today there are about 12-14 private players in the market including foreign funds such as Morgan Stanley, besides the nine public sector players and UTI. Together, these funds have mobilized around Rs.6500 Crore from the market. The collections could have been better, had not the public sector funds been busy complying with the SEBI guidelines pertaining to the formation of asset management companies etc. But the best is yet to come. A number of companies have plans to float mutual funds at various stages of implementation. Some of the major names which are likely to come to the market are Tata Sons in collaboration with Kleinwort Benson, ITC Classic with Thread needle UR, Oppenheimer of US, plus a host of others. And according to conservative guesstimates, mutual funds are set to collect over Rs.10000 Crore from the market this year. The reason for such confidence is that with SEBI firm about the small investor taking the mutual fund route to investments in the stock market, and the regulatory changes making it much more difficult to get allotments in primary markets, small investors will not be left with many opportunities.

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REGULATORY STRUCTURE OF MUTUAL FUND IN INDIA

The structure of mutual fund in India is governed by SEBI (MUTUAL FUND) regulations 1996. These regulations make it mandatory for mutual funds to have a three-tier structure of SPONSOR-TRUSTEE-ASSET MANAGEMENT COMPANY (AMC).

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CONCEPT AND ROLE OF MUTUAL FUND

A Mutual Fund is common pool of money into which Investor place their contributions that are to be invested in accordance with a stated objective. The ownership of the Fund is thus joint or mutual; the fund belongings to all investors. A single investors ownership of the fund is in the same proportion as the amount of the contribution made by him or her bears to the total amount of the fund.

A Mutual fund uses the money collected from investors to buy those assets, which are specifically permitted by its stated investment objective. Thus, an Equity Fund would buy mainly Equity assets-ordinary shares, preference shares, warrants etc. A bond fund would mainly buy debt instruments such as debentures, bonds or government securities. It is these assets, which are owned by the investors in the same proportions as there contribution bears to the total contribution of all investors put together. When an investor subscribes to a mutual fund, he or she buys a part of these assets or the pool of funds that are outstanding at that time. Its no different from buying shares of a joint stock company, in which case the purchase makes the investor a part owner of the company and its assets. In fact, in the USA, a Mutual fund is constituted as an investment company and an investor buys into the fund, meaning he buys the shares of the fund. In India, a mutual fund is constituted as a Trust and the investor subscribes to the units issued by the fund, which is where the term unit Trust comes from.

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TYPES OF MUTUAL FUNDS SCHEMES

Schemes floated by the various mutual funds are essentially of two types, namely open-ended and close-ended. The basic characteristics of these two types of mutual fund schemes are given below:

OPEN ENDED SCHEMES:Open-ended schemes are available for subscription all the year round excluding the period of book-closing. They may or may not have a specified redemption period. The sale and repurchase prices are fixed by the mutual fund concerned from time to time. Repurchases are generally allowed al specified rated. Each open-ended scheme must have a minimum corpus of Rs.50 crore. In case the fund manager is not able to raise this amount at the time of issue, 60 % of the targeted amount whichever is higher or, the entire subscription must be returned to the investor.

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CLOSE-ENDED SCHEMES:These are open for subscription only during a specified period. Generally the redemption dates are also specified when the investor can redeem their units. The duration of this scheme varies: normally it is 5-7 years. Repurchase during the intervening period may or may not be allowed. Some of the schemes though have a repurchase facility after a certain period. Many of these schemes are listed in stock exchanges, except for some of the close-ended income schemes .

Equity Oriented Schemes:These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term. Equity schemes are hence not suitable for investors seeking regular income or needing to use their investments in the short-term. They are ideal for investors who have a long-term investment horizon. The NAV prices of equity fund fluctuates with market value of the underlying stock which are influenced by external factors such as social, political as well as economic.

Debt Based Schemes: These schemes, also commonly called Income Schemes, invest in debt securities such ascorporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.

INCOME SCHEMES : These schemes provide returns in the form of dividends. The returns may be cumulative or non-cumulative on a monthly, quarterly, or yearly basis. Mutual Funds carry market risks and are prohibited by SEBI from declaring any guaranteed rate of returns. The money under such schemes are predominantly invested in fixed income securities like debentures, bonds, Government securities etc.

Liquid Income Schemes: Similar to the Income scheme but with a shorter maturity than Income schemes. An example of this scheme is the BIRLA SUN LIFE CASH PLUS. Money Market Schemes: These schemes invest in short term instruments such as commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes are the least volatile of all the types of schemes because of their investments in money market instrument with short-term maturities. These schemes have become popular with institutional investors and high net worth individuals having short-term surplus funds. Gilt Funds: This scheme primarily invests in Government Debt. Hence the investor usually does not have toworry about credit risk since Government Debt is generally credit risk free.

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HYBRID SCHEMES :These schemes are commonly known as balanced schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation. Birla Sun Life 95' Fund is an example of hybrid scheme. Interval Schemes: These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices. From the investments point of view the existing schemes can be further divided into 3 major categories :

1. GROWTH SCHEMES :

These are usually close-ended schemes. The aim of such schemes is to provide capital appreciation to their investors and accordingly a substantial part of the Corpus is invested in equities an convertible debentures. Such schemes are usually listed in the major stock exchanges and the capital

2. VALUE-ADDED SCHEMES : they are in addition to the growth/income schemes. Some of themutual funds schemes have provision for value addition. This is usually in the nature of personal insurance cover for accidents, etc. GIC Mutual Fund was the first to introduce this concept, appreciation is reflected in their market value i.e. NAV. They may or may not declare dividends even though the declaration of annual dividends represents the health of a scheme.

3. EQUITY-LINKED SCHEMES (ELSS) : These are popularly known as tax-planning schemes . Theyare essentially close-ended growth schemes in nature. They are floated by almost all the public sector mutual funds in the last quarter of each financial year, some of the essential characteristics are : a. Investment up to a ceiling of Rs.1,00,000/ come under Section 80C of the Income Tax Act. b. Repurchase is allowed after a specified period- usually 3 years. c. During the lock-in period of 3 years their units cannot be traded, pledged or transferred.

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5 EASY STEPS TO INVEST IN MUTUAL FUNDS

1) Search: Where to look for if we want to invest in MF a) Contacting an Investment advisor in a bank or a brokerage house or an Independent Financial Advisor is the first step to gathering information. b) Mutual funds units can also be bought over the Internet. c) Mutual funds are much like any other product, in that there are manufacturers who provide the product and there are dealers who sell them.

2) Evaluation: Evaluation: choosing the right mutual fund for youAs an investor one may a) for the short term or long term want to invest b) want regular income or growth c) want to target lower risk or higher returns d) be convinced of a particular sector and want to invest in it

3) Purchase: a) Systematic Investment Plan (SIP): Allows you to save a part of your income regularly. Also used toreduce risk when investing in schemes targeting aggressive growth.

b) Systematic Withdrawal Plan (SWP): Allows you to withdraw a part of your investment regularly. Usedwhen you want to withdraw your investment for a specific regular payment, like insurance premium payments of monthly/quarterly frequency.

c) Automatic debit: Saves the hassle of writing a cheque when making an investment. Your account is debitedautomatically for the amount invested.

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d) Dividend Plan :A) Dividend Payout: Under this plan investor can redeem his/her dividend at specific times. B) Dividend Reinvestment: Under this plan investors dividend is reinvested back to its principal amount which therefore increase the number of units investor is holding. C) Growth: Under this plan income generated from investment will put back to its invested amount which therefore increases the value of each unit customer is holding.

4) Post Purchase Monitoring:Once you have invested in an ongoing fund, expect a period of two to three days before you receive an account statement on the address mentioned by you in your application form. a) The Account Statement Your account statement indicates your current holding in the scheme that you have invested. b) The transaction slip: The transaction slip at the end of the account statement can be used for additional purchases, redemptions or to intimate the mutual fund on any change in bank mandates/address. c) NAV: The NAVs of all the open-ended schemes are published at the fund's website, financial newspapers and AMFI (Association of Mutual Funds) web-site www.amfiindia.com.

5) EXIT: Every AMC advice that every investor should monitor the his/her units NAV periodically but AMC also recommend their unit holders to not get swayed by short term considerations in deciding their exit.

Redemption: In case of open ended funds investor can redeem his/her invested amount. Most funds take 1-3days to credit your account with your redemption proceeds.

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5 POINTERS TO MEASURE MUTUAL FUND PERFORMANCE

MEASURES

DESCRIPTION

IDEAL RANGE

STANDARD DEVIATION

Standard Deviation allows to evaluate the volatility of the fund. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return.

Should be near to its mean return.

BETA Beta is a fairly commonly used measure of risk. It basically indicates the level of volatility associated with the fund as compared to the benchmark. R-SQUARE R- square measures the correlation of a funds movement to that of an index. Rsquared describes the level of association between the fund's volatility and market risk. Alpha is the difference between the returns one would expect from a fund, given its beta, and the return it actually produces. It also measures the unsystematic risk .

Beta > 1 = high risky Beta = 1 = Avg Beta