Thesis- Portfolio Management

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Introduction to Portfolio Management

Investing in securities such as shares, debentures, and bonds

is profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk

and calls for scientific knowledge as well artistic skill. In such investments both rationale

and emotional responses are involved. Investing in financial securities is now considered

to be one of the best avenues for investing one savings while it is acknowledged to be one

of the best avenues for investing one saving while it is acknowledged to be one of the

most risky avenues of investment.

“It is rare to find investors investing their entire savings

in a single security. Instead, they tend to invest in a group of securities. Such a

group of securities is called portfolio”. Creation of a portfolio helps to reduce risk,

without sacrificing returns. Portfolio management deals with the analysis of individual

securities as well as with the theory and practice of optimally combining securities into

portfolios. An investor who understands the fundamental principles and analytical aspects

of portfolio management has a better chance of success.


Portfolio Management

An investor considering investment in securities is faced with the problem of choosing

from among a large number of securities and how to allocate his funds over this group of

securities. Again he is faced with problem of deciding which securities to hold and how

much to invest in each. The risk and return characteristics of portfolios. The investor tries

to choose the optimal portfolio taking into consideration the risk return characteristics of

all possible portfolios.

As the risk return characteristics of individual securities as well as portfolios also change.

This calls for periodic review and revision of investment portfolios of investors.

An investor invests his funds in a portfolio expecting to get good returns consistent with

the risk that he has to bear. The return realized from the portfolio has to be measured and

the performance of the portfolio has to be evaluated.

It is evident that rational investment activity involves creation of an investment portfolio.

Portfolio management comprises all the processes involved in the creation and

maintenance of an investment portfolio. It deals specifically with the security analysis,

portfolio analysis, portfolio selection, portfolio revision & portfolio evaluation. Portfolio

management makes use of analytical techniques of analysis and conceptual theories

regarding rational allocation of funds. Portfolio management is a complex process which

tries to make investment activity more rewarding and less risky.


Selection of Portfolio

The selection of portfolio depends upon the objectives of the investor. The selection of

portfolio under different objectives are dealt subsequently

Objectives and asset mix

If the main objective is getting adequate amount of current income, sixty percent of the

investment is made in debt instruments and remaining in equity. Proportion varies

according to individual preference.

Growth of income and asset mix

Here the investor requires a certain percentage of growth as the income from the capital

he has invested. The proportion of equity varies from 60 to 100 % and that of debt from 0

to 40 %. The debt may be included to minimize risk and to get tax exemption.

Capital appreciation and Asset Mix

It means that value of the investment made increases over the year. Investment in real

estate can give faster capital appreciation but the problem is of liquidity. In the capital

market, the value of the shares is much higher than the original issue price.

Safety of principle and asset mix

Usually, the risk adverse investors are very particular about the stability of principal.

Generally old people are more sensitive towards safety.


Risk and return analysis

The traditional approach of portfolio building has some basic assumptions. An investor

wants higher returns at the lower risk. But the rule of the game is that more risk, more

return. So while making a portfolio the investor must judge the risk taking capability and

the returns desired.

Diversification

Once the asset mix is determined and risk – return relationship is analyzed the next step is

to diversify the portfolio. The main advantage of diversification is that the unsystematic

risk is minimized.


Evolution of Portfolio Management

Portfolio management is essentially a systematic method of maintaining one‘s investment

efficiently. Many factors have contributed to the existence and development of the

concept.

In the early years of the century analyst used financial statements to find the value of the

securities. The first to be analyzed using this was Railroad Securities of the USA. A

booklet entitled ―The Anatomy of the Railroad‖ was published by Thomas F. Woodlock

in 1900. As the time progressed this method became very important in the investment

field, although most of the writers adopted different ways to publish there data.

They generally advocated the use of different ratios for this purpose. John Moody in his

book ―The Art of wall Street Investing‖, strongly supported the use of financial ratios to

know the worth of the investment. The proposed type of analysis later on became the

―common-size‖ analysis.

The other major method adopted was the study of stock price movement with the help of

price charts. This method later on was known as Technical Analysis. It evolved during

1900-1902 when Charles H. Dow, the founder of the Dow Jones and Co. presented his

view in the series of editorials in the Wall Street Journal in USA. The advocates of

technical analysis believed that stock prices movement is ordered and systematic and the

definite pattern could be identified. There investment strategy was build around the

identification of the trend and pattern in the stock price movement.


Another prominent author who supported the technical analysis was Ralph N. Elliot who

published a book in the year 1938 titled ―The Wave Principle‖. After analyzing 75 years

data of share price, he concluded that the market movement was quite orderly and

followed a pattern of waves. His theory is known as Elliot Wave Theory.

According to J.C. Francis the development of investment management can be traced

chronologically through three different phases.

First phase is known as Speculative Phase. Investment was not a wide spread activity, but

a cake of few rich people. The process is speculative in nature. Investment management

was an art and needed skills. Price manipulation was resorted to by the investors. During

this time period pools and corners were used for manipulation. The result of this was the

stock exchange crash in the year 1929. Finally the daring speculative ventures of

investors were declared illegal in the US by the Securities Act of 1934.

Second phase began in the year 1930. The phase was of professionalism. After coming up

of the Securities Act, the investment industry began the process of upgrading its ethics,

establishing standard practices and generating a good public image. As a result the

investments market became safer place to invest and the people in different income group

started investing. Investors began to analyze the security before investing.

During this period the research work of Benjamin Graham and David L. Dood was

widely publicized and publicly acclaimed. They published a book ―Security Analysis‖ in

1934, which was highly sought after. There research work was considered first work in

the field of security analysis and acted as the base for further study. They are considered

as pioneers of security analysis as a discipline.

Third phase was known as the scientific phase. The foundation of modern portfolio

theory was laid by Markowitz. His pioneering work on portfolio management was

described in his article in the Journal of Finance in the year 1952 and subsequent books

published later on.


He tried to quantify the risk. He showed how the risk can be minimized through proper

diversification of investment which required the creation of the portfolio. He provided

technical tools for the analysis and selection of optimal portfolio. For his work he won

the Noble Prize for Economics in the year 1990.

The work of Markowitz was extended by the William Sharpe, John Linter and Jan

Mossin through the development of the Capital Asset Pricing Model (CAPM).

If we talk of the present the last two phases of Professionalism and Scientific Analysis

are currently advancing simultaneously with investment in various financial instruments

becoming safer, with proper knowledge to each and every investor.


Role of Portfolio Management

There was a time when portfolio management was an exotic term. A practice which is

beyond the reach of the small investor, but the time has changed now. Portfolio

management is now a common term and is widely practiced in INDIA. The theories and

concepts relating to portfolio management now find there way in the front pages of the

financial newspapers and magazines.

In early 90‘s India embarked on a program of economic liberalization and globalization,

with high participation of private players. This reform process has made the Indian

industry efficient, with rapid computerization, increased market transparency, better

infrastructure and customer services, closer integration and higher volume. The markets

are dominated by large institutional investors with their diversified portfolios. A large

number of mutual funds have come up in the market since 1987. With this development

investment in securities has gained considerable momentum

Along with the spread of the securities investment way among Indian investors have

changed due to the development of the quantitative techniques. Professional portfolio

management, backed by research is now being adopted by mutual funds, investment

consultants, individual investors and big brokers. The Securities Exchange Board of India

(SEBI) is a regulatory body in INDIA. It ensures that the stock market is free from fraud,

and of course the main objective is to ensure that the investor‘s money is safe.


With the advent of computers the whole process of portfolio management has become

quite easy. The computer can absorb large volumes of data, perform the computations

accurately and quickly give out the results in any desired form. Moreover simulation,

artificial intelligence etc provides means of testing alternative solutions.

The trend towards liberalization and globalization of the economy has promoted free flow

of capital across international borders. Portfolio not only now include domestic securities

but foreign too. So financial investments can‘t be reaped without proper management.

Another significant development in the field of investment management is the

introduction to Derivatives with the availability of Options and Futures. This has

broadened the scope of investment management.

Investment is no longer a simple process. It requires a scientific knowledge, a systematic

approach and also professional expertise. Portfolio management is the only way through

which an investor can get good returns, while minimizing risk at the same time.

So portfolio management objectives can be stated as: -

Risk minimization.

Safeguarding capital.

Capital Appreciation.

Choosing optimal mix of securities.

Keeping track on performance.


WHAT IS MUTUAL FUND??

A mutual fund is a form of collective investment that pools money from many investors

and invests the money in stocks, bonds, short-term money market instruments, and/or

other securities.

Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

range from shares to debentures to money market instruments. The income earned

through these investments and the capital appreciation realized by the scheme is shared

by its unit holders in proportion to the number of units owned by them. Thus a Mutual

Fund is the most suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed portfolio at a relatively low cost. The

small savings of all the investors are put together to increase the buying power and hire a

professional manager to invest and monitor the money. Anybody with an investible

surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual

Fund scheme has a defined investment objective and strategy.

The flow chart below describes broadly the working of a mutual fund.

http://en.wikipedia.org/wiki/Collective_investment_scheme

http://en.wikipedia.org/wiki/Stock

http://en.wikipedia.org/wiki/Bond

http://en.wikipedia.org/wiki/Money_market

http://en.wikipedia.org/wiki/Security_(finance)


A mutual fund is a managed group of owned securities of several corporations. These

corporations receive dividends on the shares that they hold and realize capital gains or

losses on their securities traded. Investors purchase shares in the mutual fund as if it was

an individual security. After paying operating costs, the earnings (dividends, capital gains

or loses) of the mutual fund are distributed to the investors, in proportion to the amount

of money invested.

A mutual fund may be either an open-end or a closed-end fund. An open-end mutual fund

does not have a set number of shares; it may be considered as a fluid capital stock. The

number of shares changes as investors buys or sell their shares. Investors are able to buy

and sell their shares of the company at any time for a market price. However the open-

end market price is influenced greatly by the fund managers. On the other hand, closed-

end mutual fund has a fixed number of shares and the value of the shares fluctuates with

the market. But with close-end funds, the fund manager has less influence because the

price of the underlining owned securities has greater influence

Mutual fund is a mechanism for pooling the resources by issuing units to the investors

and investing funds in securities in accordance with objectives as disclosed in offer

document. Investments in securities are spread across a wide cross-section of industries

and sectors and thus the risk is reduced. Diversification reduces the risk because all

stocks may not move in the same direction in the same proportion at the same time.


Mutual fund issues units to the investors in accordance with quantum of money invested

by them. Investors of mutual funds are known as unit holders. The profits or losses are

shared by the investors in proportion to their investments. The mutual funds normally

come out with a number of schemes with different investment objectives, which are

launched from time to time.

The concept of mutual fund originated in Belgium by the ―Society Generale de

Belgique” in the year 1822. Unit Trust of India was the first mutual fund set up in India

in the year 1963. In early 1990s, Government allowed public sector banks and institutions

to set up mutual funds. SEBI formulates policies and regulates the mutual funds to

protect the interest of the investors. All mutual funds whether promoted by public sector

or private sector entities including those promoted by foreign entities are governed by the

same set of Regulations.

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset

Management Company (AMC) and custodian. The trust is established by a sponsor or

more than one sponsor who is like promoter of a company. The trustees of the mutual

fund hold its property for the benefit of the unit holders. Asset Management Company

(AMC) approved by SEBI manages the funds by making investments in various types of

securities. Custodian, who is registered with SEBI, holds the securities of various

schemes of the fund in its custody. The trustees are vested with the general power of

superintendence and direction over AMC. They monitor the performance and compliance

of SEBI Regulations by the mutual fund.

The performance of a particular scheme of a mutual fund is denoted by Net Asset Value

(NAV). In simple words, Net Asset Value is the market value of the securities held by the

scheme. Since market value of securities changes every day, NAV of a scheme also

varies on day-to-day basis. The NAV per unit is the market value of securities of a

scheme divided by the total number of units of the scheme on any particular date. For

example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and

the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV


per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a

regular basis - daily or weekly - depending on the type of scheme.


TYPES OF MUTUAL FUNDS SCHEMES

Mutual fund schemes may be classified on the basis of its structure and its investment

objective-:

A) By Structure

1) Open-ended Fund

An open-end fund is one that is available for subscription all through the year. These do

not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset

Value ("NAV") related prices. The key feature of open-end schemes is liquidity. The

term Mutual fund is the common name for an open-end investment company. Being

open-ended means that at the end of every day, the investment management company

sponsoring the fund issues new shares to investors and buys back shares from investors

wishing to leave the fund.

http://en.wikipedia.org/wiki/Open-End_Fund

http://en.wikipedia.org/wiki/Share_(finance)


2) Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can

invest in the scheme at the time of the initial public issue and thereafter they can buy or

sell the units of the scheme on the stock exchanges where they are listed. In order to

provide an exit route to the investors, some close-ended funds give an option of selling

back the units to the Mutual Fund through periodic repurchase at NAV related prices.

SEBI Regulations stipulate that at least one of the two exit routes is provided to the

investor. A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years.

The fund is open for subscription only during a specified period at the time of launch of

the scheme. Investors can invest in the scheme at the time of the initial public issue and

thereafter they can buy or sell the units of the scheme on the stock exchanges.

3) Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are

open for sale or redemption during pre-determined intervals at NAV related prices.

B) By Investment Objective

1) Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term.

Such schemes normally invest a majority of their corpus in equities. It has been proved


that returns from stocks, have outperformed most other kind of investments held over the

long term. Growth schemes are ideal for investors for a period of time.

2) Income Funds

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures

and Government securities. Income Funds are ideal for capital stability and regular

income.

3) Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income

securities in the proportion indicated in their offer documents. In a rising stock market,

the NAV of these schemes may not normally keep pace, or fall equally when the market

falls. These are ideal for investors looking for a combination of income and moderate

growth.

4) Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital

and moderate income. These schemes generally invest in safer short-term instruments

such as treasury bills, certificates of deposit, commercial paper and inter-bank call

money. Returns on these schemes may fluctuate depending upon the interest rates

prevailing in the market. Money market funds have relatively low risks, compared to

other mutual funds (and most other investments). By law, they can invest in only

certain high-quality, short-term investments issued by the U.S. government, U.S.

corporations, and state and local governments. Money market funds try to keep their


net asset value (NAV) — which represents the value of one share in a fund — at a

stable $1.00 per share. But the NAV may fall below $1.00 if the fund's investments

perform poorly. Investor losses have been rare, but they are possible. Money market

funds pay dividends that generally reflect short-term interest rates, and historically the

returns for money market funds have been lower than for either bond or stock funds.

That's why "inflation risks" — the risk that inflation will outpace and erode

investment returns over time — can be a potential concern for investors in money

market funds.


HISTORY OF INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank the. The history of

mutual funds in India can be broadly divided into four distinct phases


First Phase – 1964-87

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

by the Reserve Bank of India and functioned under the Regulatory and administrative

control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the

Industrial Development Bank of India (IDBI) took over the regulatory and administrative

control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the

end of 1988 UTI had Rs.6, 700 crores of assets under management.

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June

1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund

(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda

Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set

up its mutual fund in December 1990

At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004

crores

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

(now merged with Franklin Templeton) was the first private sector mutual fund registered

in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India and also the industry has witnessed several mergers and


acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets

of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under

management was way ahead of other mutual fund

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust

of India with assets under management of Rs.29, 835 crores as at the end of January

2003, representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of

assets under management and with the setting up of a UTI Mutual Fund, conforming to

the SEBI Mutual Fund Regulations, and with recent mergers taking place among

different private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of September, 2004, there were 29 funds, which

manage assets of Rs.153108 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT


ORGANISATION OF MUTUAL FUND

There are many entities involved and the diagram below illustrates the

organizational set up of a mutual fund:


Trends in Transactions on Stock Exchanges by Mutual Funds (since

January 2000)

Equity (Rs in

Crores)

Debt (Rs in

Crores)

Time

Gross Purchase

Gross Sales

Net Purchase/

Sales

Gross Purchase

Gross Sales

Net Purchase/

Sales

Jan 2000-March 2000. 11070.54 11492.19 -421.65 2764.72 1864.29 900.43 April 2000 -March 2001. 17375.78 20142.76 -2766.98 13512.17 8488.68 5023.49 April 2001-March 2002. 12098.11 15893.99 -3795.88 33583.64 22624.42 10959.22 April 2002-March 2003 14520.89 16587.59 -2066.70 46663.83 34059.41 12604.42 April 2003-March 2004 36663.58 35355.67 1307.91 63169.93 40469.18 22700.75 April 2004-March 2005 45045.25 44597.23 448.02 62186.46 45199.17 16987.29 April 2005-March 2006 100435.90 86133.70 14302.20 109804.91 73003.67 36801.24 April 2006. 12752.47 9631.91 3120.56 11227.96 6800.08 4427.88 May 2006. 18345.43 10452.07 7893.36 15386.47 7774.06 7612.41 June 2006. 7843.52 9820.47 -1976.95 14235.54 8906.90 5328.64 July 2006. 7552.18 7633.89 -81.71 15982.62 8266.41 7716.21 August 2006. 8851.58 8425.14 426.44 16169.28 11853.22 4316.06 September 2006. 10345.23 9005.54 1339.69 12878.65 9591.24 3287.41 October 2006. 9944.46 9947.97 -3.51 10314.44 7929.50 2384.94 November 2006. 12675.21 12700.04 -24.83 13296.65 6961.92 6334.73 December 2006. 13181.43 11554.38 1627.05 7584.70 6256.15 1328.55 January 2007. 11643.60 12985.83 -1342.23 10830.62 8427.46 2403.16 February 2007. 12697.09 12971.14 -274.05 10351.99 7682.98 2669.01 March 2007 (upto 10th) 3844.74 4568.60 -723.86 4784.63 2660.08 2124.55

Total (April '06 - March '07) 129676.94 119696.98 9979.96 143043.55 93110.00 49933.55


Trends in Transactions on Stock Exchanges by Mutual Funds

Equity (Rs in crores) Debt (Rs in crores)

Transaction Date

Gross Purchase

s

Gross Sales

Net Purchases / Sales

Gross Purchase

s

Gross Sales

Net Purchases/ Sales

01.03.07 767.80 796.92 -29.12 845.18 411.54 433.64

02.03.07 442.25 567.57 -125.32 238.24 272.74 -34.50

05.03.07 707.38 541.24 166.14 981.15 591.73 389.42

06.03.07 528.54 460.10 68.44 1148.53 243.93 904.60

07.03.07 338.20 717.76 -379.56 690.76 282.95 407.81

08.03.07 578.23 617.99 -39.76 533.50 524.92 8.58

09.03.07 482.34 867.02 -384.68 347.27 327.74 19.53

10.03.07 0.00 0.00 0.00 0.00 4.53 -4.53

Total 3844.74

4568.60 -723.86 4784.63

2660.08 2124.55


Union Budget 2007-08 & the Mutual Fund Industry

The 2007-08 budget presented by the Finance Minister was also a low impact budget,

compared with the last year, whose fundamental message was for overall growth of the

economy and a positive emphasis to be put on agricultural and rural development, as well

as education, which will certainly give a long term boost to the growth of the economy.

The reduction in fiscal deficit is also a positive step and the government will also increase

spending on education by 34%.

Markets have seen a major correction over the last few trading sessions. On 28th

the

markets was hit hard from both sides, internally as well as externally. The budget had a

few shockers when the dividend distribution tax was hiked, and on the other side the

global market saw major meltdown with the Asian market were beaten the most, Chinese

markets alone lost around 9% over the day. The Indian markets could not sustain the

beating it got from both ends and saw the maximum decline witnessed in the last eight

months. The market was around 200 points down after the markets opened for the day.


But the announcement of the FM to hike dividend distribution tax saw another fall of

more than 300 points which the markets was not able to recover till the end of the day.

Among the major sectors Cement is clearly the most hit, and to some extent IT services

also got hit, because of bringing both the sector under MAT.

The announcement of MAT of 11.3 % on IT companies was misinterpreted by the market

on the budget day, by responding in negative, but saw some recovery, in the next trading

day when markets realized that MAT can be used as a deferred tax asset by IT companies

post FY 2010 to offset taxes, Secondly SEZs are still MAT free. Hence the impact is not

severe as was thought on the budget day. Secondly, as per Finance Minister FBT on

ESOP is still under notification.

The Indian Mutual Fund industry also suffered on announcement of the hike in dividend

distribution tax. The DDT for the money market and liquid mutual funds has been

proposed to be brought at par at 25%. Currently the rate is 12.5% for retail investor and

23% for institutional investors. The FM said that this was being done to restrict the

arbitrage opportunities used by these schemes.

Another proposal put up by the Finance Minister was for Mutual Funds to play a bigger

role in infrastructure development by launching and operating dedicated infrastructure

funds which would directly invest into core sector projects. The Indian Mutual Fund

industry already have schemes which are sector specific and invest into infrastructure

sector through equities. Now after this particular proposal Mutual Funds can directly

invest into infrastructure projects.

FM also allowed delivery based short selling for institutional participants. Mostly in all

developed countries short selling is allowed. In India, till recently only the retail investors


were allowed to enjoy this. Along with FII, Mutual Fund houses are also allowed for

delivery based short selling.

FM has proposed to bring the asset management services offered by individuals under the

service tax bracket. The individuals who provide investment fund management advisory

services will now have to pay service tax. The managers will have to register themselves

with the Central Excise department and have to pay service tax, if their service fee is

more than Rs.8 lakh per annum.

Along with the above the FM also proposed for the retail investor to invest abroad

through Mutual Funds. Currently the industry has quite a few mutual fund schemes which

invest dedicatedly abroad. A few more schemes invest partially abroad.

On a whole, the budget other than the DDT hike for the liquid and the money market

mutual funds and the infrastructure funds didn‘t have much in store for the Mutual Fund

industry.

To summarize, the Budget will sustain high economic growth through larger investments,

increased savings and building of manpower capabilities.


USAGE OF MUTUAL FUND

Mutual funds can invest in many different kinds of securities. The most common are

cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for

instance, can invest primarily in the shares of a particular industry, such as technology or

utilities. These are known as sector funds. Bond funds can vary according to risk (high

yield or junk bonds, investment-grade corporate bonds), type of issuers (government

agencies, corporations, or municipalities), or maturity of the bonds (short or long term).

Both stock and bond funds can invest in primarily US securities (domestic funds), both

US and foreign securities (global funds), or primarily foreign securities (international

funds).

By law, mutual funds cannot invest in commodities and their derivatives or in real estate.

However, there do exist real estate investment trusts, or REITs, which invest solely in

real estate or mortgages, and mutual funds are allowed to hold shares in REITs. A mutual

fund may restrict itself in other ways. These restrictions, permissions, and policies are

found in the prospectus, which every open-end mutual fund must make available to a

potential investor before accepting his or her money.

Most mutual funds' investment portfolios are continually adjusted under the supervision

of a professional manager, who forecasts the future performance of investments

appropriate for the fund and chooses the ones which he or she believes will most closely

match the fund's stated investment objective. A mutual fund is administered through a

parent management company, which may hire or fire fund managers.

http://en.wikipedia.org/wiki/Cash

http://en.wikipedia.org/wiki/Bond

http://en.wikipedia.org/wiki/Technology

http://en.wikipedia.org/wiki/Real_estate

http://en.wikipedia.org/wiki/Real_estate_investment_trust

http://en.wikipedia.org/wiki/Real_estate

http://en.wikipedia.org/wiki/Mortgage


Mutual funds are subject to a special set of regulatory, accounting, and tax rules. Unlike

most other types of business entities, they are not taxed on their income as long as they

distribute substantially all of it to their shareholders. Also, the type of income they earn is

often unchanged as it passes through to the shareholders. Mutual fund distributions of

tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions

can either be ordinary income or capital gains, depending on how the fund earned it.

ADVANTAGES AND DISADVANTAGES OF MUTUAL FUND

ADVANTAGES

Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a

dedicated investment research team that analyses the performance and prospects of

companies and selects suitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section of industries

and sectors. This diversification reduces the risk because seldom do all stocks decline at

the same time and in the same proportion. You achieve this diversification through a

Mutual Fund with far less money than you can do on your own.

Convenient Administration

http://en.wikipedia.org/wiki/Tax

http://en.wikipedia.org/wiki/Capital_gains


Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such

as bad deliveries, delayed payments and follow up with brokers and companies. Mutual

Funds save your time and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher return

as they invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly investing

in the capital markets because the benefits of scale in brokerage, custodial and other fees

translate into lower costs for investors.

Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a

stock exchange at the prevailing market price or the investor can avail of the facility of

direct repurchase at NAV related prices by the Mutual Fund.

Transparency

You get regular information on the value of your investment in addition to disclosure on

the specific investments made by your scheme, the proportion invested in each class of

assets and the fund manager's investment strategy and outlook.


Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your

needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual

fund because of its large corpus allows even a small investor to take the benefit of its

investment strategy.

Choice of Schemes

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of

strict regulations designed to protect the interests of investors. The operations of Mutual

Funds are regularly monitored by SEBI.


DISADVANTAGES

Costs Despite Negative Returns

Investors must pay sales charges, annual fees, and other expenses (which we'll

discuss below) regardless of how the fund performs. And, depending on the timing of

their investment, investors may also have to pay taxes on any capital gains

distribution they receive — even if the fund went on to perform poorly after they

bought shares.

Lack of Control

Investors typically cannot ascertain the exact make-up of a fund's portfolio at any

given time, nor can they directly influence which securities the fund manager buys

and sells or the timing of those trades.

Price Uncertainty

With an individual stock, you can obtain real-time (or close to real-time) pricing

information with relative ease by checking financial websites or by calling your

broker. You can also monitor how a stock's price changes from hour to hour — or

even second to second. By contrast, with a mutual fund, the price at which you

purchase or redeem shares will typically depend on the fund's NAV, which the fund

might not calculate until many hours after you've placed your order. In general,

mutual funds must calculate their NAV at least once every business day, typically

after the major U.S. exchanges close.


HOW TO INVEST IN MUTUAL FUND??

Step One - Identify your Investment needs

Your financial goals will vary, based on your age, lifestyle, financial independence,

family commitments, and level of income and expenses among many other factors.

Therefore, the first step is to assess your needs. You can begin by defining your

investment objectives and needs which could be regular income, buying a home or

finance a wedding or educate your children or a combination of all these needs, the

quantum of risk you are willing to take and your cash flow requirements.

Step Two - Choose the right Mutual Fund


The important thing is to choose the right mutual fund scheme which suits your

requirements. The offer document of the scheme tells you its objectives and provides

supplementary details like the track record of other schemes managed by the same Fund

Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track

record of the performance of the fund over the last few years in relation to the appropriate

yardstick and similar funds in the same category. Other factors could be the portfolio

allocation, the dividend yield and the degree of transparency as reflected in the frequency

and quality of their communications. For selecting the right scheme as per your specific

requirements,

Step Three - Select the ideal mix of Schemes

Investing in just one Mutual Fund scheme may not meet all your investment needs. You

may consider investing in a combination of schemes to achieve your specific goals.

Step Four - Invest regularly

The best approach is to invest a fixed amount at specific intervals, say every month. By

investing a fixed sum each month, you buy fewer units when the price is higher and more

units when the price is low, thus bringing down your average cost per unit. This is called

rupee cost averaging and is a disciplined investment strategy followed by investors all

over the world. You can also avail the systematic investment plan facility offered by

many open end funds.

Step Five- Start early

It is desirable to start investing early and stick to a regular investment plan. If you start

now, you will make more than if you wait and invest later. The power of compounding


lets you earn income on income and your money multiplies at a compounded rate of

return.

Step Six - The final step

All you need to do now is to for online application forms of various mutual fund schemes

and start investing. You may reap the rewards in the years to come. Mutual Funds are

suitable for every kind of investor - whether starting a career or retiring,

conservative or risk taking, growth oriented or income seeking

RIGHTS OF A MUTUAL FUND UNIT HOLDER

A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds)

Regulations is entitled to:

1) Receive unit certificates or statements of accounts confirming the title within 6

weeks from the date of closure of the subscription or within 6 weeks from the date

of request for a unit certificate is received by the Mutual Fund.

2) Receive information about the investment policies, investment objectives,

financial position and general affairs of the scheme.


3) Receive dividend within 42 days of their declaration and receive the redemption

or repurchase proceeds within 10 days from the date of redemption or repurchase.

4) Vote in accordance with the Regulations to:-

Approve or disapprove any change in the fundamental investment policies of the

scheme, which are likely to modify the scheme or affect the interest of the unit

holder. The dissenting unit holder has a right to redeem the investment.

Change the Asset Management Company.

Wind up the schemes.

5). Inspect the documents of the Mutual Funds specified in the scheme's offer

document.

CRITICISM OF MUTUAL FUNDS

The primary criticism of actively managed mutual funds comes from the historical fact

that, over long periods of time, most have not returned as much as an index fund would.

There are also other criticisms levied against mutual funds as a consequence of the first

criticism. One critique covers the concept of the sales load, an upfront or deferred fee as

high as 8.5 percent of the amount invested in a fund. Firstly, some critics do not believe

that this should be charged on a percentage basis instead of a flat fee basis. A so-called

flat fee, annual fee or wrap fee does very little for an investor other than insure that they

will pay an advisor a commission for as many years as their relationship exists. It helps

http://en.wikipedia.org/wiki/Index_fund

http://en.wikipedia.org/w/index.php?title=Sales_load&action=edit


an advisor create predictable (and since most investments trend upwards) increasing

income flow. Secondly this payment for advice and other services seems dubious to these

critics because with so many mutual funds underperforming, but yet visibly attracting

money, the advice given seemingly would be bad advice.

Mutual funds are also seen by some to have a systemic conflict of interest with regards to

their size. Fund companies typically make money by charging a management fee of

anywhere between 0.5-2.5 percent of the funds total assets. Although theoretically this

could motivate them to cause the fund to perform well, since a well performing fund

would cause the amount invested in the fund to rise and thus increasing the fee earned, it

also could motivate the fund to focus on attracting more and more new investors, as the

new investors adding money to the fund would also cause the assets of the fund to

increase. Many investors believe however that the larger the pool of money one works

with, the harder it is to invest. Thus the harder it becomes for the mutual fund to perform

well. Thus a fund company can be focused on attracting new customers, hurting its

existing investors' performance. A great deal of the funds costs are flat and fixed costs,

such as the salary for the manager. Thus it can be more profitable to the fund to try and

allow it to grow as large as possible, instead of limiting its assets.

Other practices of mutual funds have been criticized from time to time, such as funds

allowing market timing. More recent criticisms have focused on the fund managers

accepting extravagant gifts in exchange for trading stocks through certain investment

banks, who presumably overcharge the fund compared to what another, non-gifting

investment bank would charge

http://en.wikipedia.org/wiki/Market_timing


TABLE OF MUTUAL FUND SCHEMES

Mutual

Fund

Type

Objective Risk Investment

Portfolio

Who should

invest

Investment

horizon

Money

Market

Liquidity +

Moderate

Income +

Reservation

of Capital

Negligible

Treasury Bills,

Certificate of

Deposits,

Commercial

Papers, Call Money

Those who park

their funds in

current accounts

or short-term

bank deposits

2 days - 3

weeks


Short-

term

Funds

(Floating

- short-

term)

Liquidity +

Moderate

Income

Little

Interest

Rate

Call Money,

Commercial

Papers, Treasury

Bills, CDs, Short-

term Government

securities.

Those with

surplus

short-term funds

3 weeks -

3 months

Bond

Funds

(Floating

- Long-

term)

Regular

Income

Credit Risk

& Interest

Rate Risk

Predominantly

Debentures,

Government

securities,

Corporate Bonds

Salaried &

conservative

investors

More than

9 - 12

months

Gilt

Funds

Security &

Income

Interest

Rate Risk

Government

securities

Salaried &

conservative

investors

12 months

& more

Equity

Funds

Long-term

Capital

Appreciation

High Risk Stocks

Aggressive

investors with

long term out

look.

3 years plus

Index

Funds

To generate

returns that

are

commensurate

with returns

of respective

indices

NAV varies

with index

performance

Portfolio indices

like BSE, NIFTY

etc

Aggressive

investors. 3 years plus

Balanced

Funds

Growth &

Regular

Capital

Market Risk

Balanced ratio of

equity and debt

Moderate &

Aggressive 2 years plus


Income and Interest

Risk

funds to ensure

higher returns at

lower risk

FREQUENTLY USED TERMS

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. Per

unit NAV is the net asset value of the scheme divided by the number of units outstanding

on the Valuation Date. It is calculated as

Total market value of the assets or securities – liabilities in the portfolio of the fund


Number of fund‘s units (shares) outstanding

Sale Price

It is the price you pay when you invest in a scheme. It is also called as Offer Price. It may

include a sales load.

Repurchase Price

It is the price at which a close-ended scheme repurchases its units and it may include a

back-end load. This is also called Bid Price.

Redemption Price

It is the price at which open-ended schemes repurchase their units and close-ended

schemes redeem their units on maturity. Such prices are NAV related.

Sales Load

It is a charge collected by a scheme when it sells the units. Also called as ‗Front-end‘

load. Schemes that do not charge a load are called ‗No Load‘ schemes. Generally it is

2.25% for subscription below Rs. 2 Crores, 1.25% for Rs. 2 Crore to Rs. 5 Crore and nil

above Rs. 5 Crore. However the load structure varies from company to company.

Repurchase or „Back-end‟ Load

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

is 2.25% and is charged if the investment is redeemed before six months from the date of

investment in a mutual fund.


RESEARCH METHODOLOGY

RESEARCH:-


Research is a voyage of discovery, a movement from unknown to known. In common

parlance, it refers to a scientific and systematic search for pertinent information on a

specific topic. It is the pursuit of truth with the help of study, observation, comparison

and experiment.

RESEARCH METHOD:-

Research methods may be understood as all those method / techniques that are used by

the researcher during the course of studying his research problem.

RESEARCH METHODOLOGY:-

Research methodology is a way to solve the problem scientifically and systematically.

In this we study the various steps that are generally adopted by researcher in studying his

research problem along with the logic behind them.

When we talk about research methodology, we not only talk of the research methods but

also the comparison of the logic behind the method we use in the context of our research

study and explain why we are using a particular method and why not others.

Research Objectives

To compare performance of different mutual funds in last 1 year.

To compare the return of a mutual fund using different investment ways.

To develop a new investment way in mutual funds.


To compare the different portfolios being maintained by selected mutual funds.

To understand the concept and importance of Mutual Fund & Portfolio

Management in today‘s scenario.

RESEARCH DESIGN: -

A research design is the arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in

procedure. The research design used in my study is basically exploratory in nature.

METHOD OF DATA COLLECTION: -

The study made in use secondary sources.

SECONDARY DATA COLLECTION: Secondary data have been collected from

various Books and websites..

SAMPLING DESIGN: -

A sample design is a definite plan for obtaining a sample from a given population .It

refers to the technique or the procedure the researcher would adopt in selecting items for


the sample i.e. the size of the sample. Judgment sampling has been adopted to select the

Mutual Funds.

SAMPL E SIZE: -

Nine

ANALYSIS OF DATA: -

The data after collection has to be processed and analyzed with the outline laid for the

purpose at the time of developing the research plan. This is essential for a scientific study

and for insuring that we have all relevant data for making contemplated comparison and

analysis.

Technically speaking processing implies editing, coding, classification and tabulation of

collected data so that they are amenable to analysis.

The term analysis refer to the computation of certain measures along with searching for

patterns of relationship that exist among data groups .To analyze the data percentages,

graphs, pie charts etc are used. After that interpretations are drawn and finally, a list of

suggestions and recommendations is put forward.

I hope the study will be interesting for a layman, a good experience for the

teacher and a key for the industrial pioneers in understanding and facing challenges.


Introduction to the Topic


The topic of study is “Comparative Analysis of Different Mutual Funds and

Investing Ways”. In it 9 mutual funds have been selected and there performance is

compared in last 1 year starting from 1st February 2006 to 31

st January 2007. For this

there Net Asset Values is used and portfolio maintained is studied. Further returns of

different investing ways will be compared in the same mutual fund like One Time

Investment, Systematic Investment Plan. Further study would be done to find out that can

we develop a new way of investing in them and if yes than what the pre requisite for its

implementation. The whole study will be carried out in a manner like firstly different

mutual funds will be selected. Than there NAV‘s will be noted from 1st February 2006 to

31st January 2007. Using some calculations performance will be compared. Using the

Fact Sheet of the selected mutual fund minute details of each will be studied.

The Mutual Funds under study are as follows: -

SBI MAGNUM CONTRA

RELIANCE GROWTH FUND

FRANKLIN INDIA PRIMA FUND

HDFC EQUITY FUND

DSPML OPPORTUNITIES FUND

KOTAK BOND REGULAR FUND

JM INCOME FUND

LIC MF BOND

UTI BOND


SBI MUTUAL FUND


Incorporated 29 JUNE 1987

Ownership Public

Ownership Pattern Foreign - 37%,

Domestic-63%

Sponsor State Bank of India, Society

General Asset Management

Fund

The fund takes contrarian call on the markets. It has given compounded annual returns of

67% in past 5 years against the category average of 46%. It is the top wealth creator for

the year 2006-07. The fund has mainly shifted its focus to large cap space. It also

contains a large cash component of Rs 120 Crore, which amounts to about 10% of its

portfolio. This prudence, along with its successful bet on banking stocks has helped the

fund out perform the category.

Magnum Contra-G Fund Rating


Current Stats & Profile

Latest NAV 34.63 (12/03/07)

52-Week High 39.91 (06/02/07)

52-Week Low 25.02 (14/06/06)

Fund Category Equity: Diversified

Type Open End

Launch Date July 1999

Risk Grade Below Average

Return Grade High

Net Assets (Cr) 1,448.78 (28/02/07)

Benchmark BSE 100

Trailing Returns

As on 12 Mar 2007 Fund Category

Year to Date -7.65 -8.15

1-Month -9.08 -8.49

3-Month -0.83 -1.40

1-Year 13.17 6.47

3-Year 57.66 33.18

5-Year 53.60 37.90

Return Since Launch 32.58 --

Returns upto 1 year are absolute and over 1 year are

annualized.

Relative Performance (Fund Vs Category Average)

Portfolio

Security Instrument % Net Assets

Praj Industries Equity 4.97

Reliance Industries Equity 4.89

Hindustan Zinc Equity 3.78

http://www.valueresearchonline.com/stocks/snapshot.asp?code=2982




Mahindra & Mahindra Equity 3.73

Jai Prakash Associates Equity 3.49

Aditya Birla Nuvo Equity 7.47

India Cements Equity 5.19

F A G Bearings India Equity 4.95


Motor Industries Co. Equity 4.42


Kansai Nerolac Paints Equity 3.1

Torrent Pharmaceuticals Equity 3.1

India Infoline Equity 2.97

C C L Products (I) Equity 2.88

Cummins India Equity 2.85

T V S Motor Co. Equity 2.84

Ashok Leyland Equity 2.61

Merck Ltd. Equity 2.53

Esab India Equity 2.48

Federal Bank Equity 2.09

Sundaram Fasteners Equity 1.86

Ruchi Soya Inds. Equity 1.81

Sesa Goa Equity 1.8

Raymond Equity 1.72

Indraprastha Gas Equity 1.36

Infotech Enterprises Equity 1.31

Ansal Prop & Infra Equity 1.27

T I L Equity 1.26

Ciba Speciality Chemicals Equity 1.24





























Top Sectors in Portfolio

Composition of Various Sectors

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Auto

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Serv

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Meta

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Meta

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Energ

y

Sector

% C

op

osit

ion

Composition of Various

Sectors

Basic/Engineering 15.67

Diversified 13.61

Health Care 12.62

Construction 12.37

Automobile 11.13

FMCG 5.6

Services 5.53

Chemicals 4.34

Financial Services 3.77

Technology 2.21

Metals & Metal

Products 1.8

Textiles 1.72

Energy 10.83


RELIANCE MUTUAL FUND

Incorporated 30 June 1995

Ownership Private


Domestic-100%

Sponsor Reliance Capital Ltd

About Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as a trust under the Indian Trusts Act,

1882 with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital

Trustee Co. Limited (RCTCL), as the Trustee.

RMF has been registered with the Securities & Exchange Board of India (SEBI) vide

registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital

Mutual Fund has been changed to Reliance Mutual Fund effective from March 2004.

Reliance Mutual Fund was formed to launch various schemes under which units are

issued to the Public with a view to contribute to the capital market and to provide

investors the opportunities to make investments in diversified securities.


The main objectives of the Trust are:

To carry on the activity of a Mutual Fund as may be permitted at law and

formulate and devise various collective Schemes of savings and investments for

people in India and abroad and also ensure liquidity of investments for the Unit

holders;

To deploy Funds thus raised so as to help the Unit holders earn reasonable returns

on their savings and

To take such steps as may be necessary from time to time to realize the effects

without any limitation.


It is a mid cap fund with around 75% in mid cap and a maximum of 25% in large caps.

Large cap exposure gives fund tremendous liquidity but not in bearish time. It uses

opportunistic style of investment i.e. looking at companies that are scalable in sectors

with growth and management passion to grow. It invests nearly in 60 stocks with a

bottom up approach. In top holdings, 5.3% of the assets are invested in Reliance

Industries. The fund also invests across sectors such as steel, infrastructure, textile &

cement, which move with economic and GDP growth. It is also one of the wealth creators

in the year 2006-07. Last year return of this fund is 34.22%.

FUND DATA

Structure Open-ended Equity Growth Scheme

Inception Date October 8, 1995

Corpus Rs 3214.06 crore (January 31, 2007)

Minimum Investment Rs 5,000

Fund Manager Mr. Sunil Singhania


Entry Load <2cr - 2.25%; >_2cr<5cr - 1.25 %;> _5cr - Nil

Exit Load Nil

Benchmark BSE 100 Index

SPECIAL FEATURE Reliance Any Time Money Card

INVESTMENT OBJECTIVE To achieve long-term growth of capital by investing in

Equity and equity related securities through a research-

Based investment approach.

PORTFOLIO OF RELIANCE GROWTH FUND

Holdings Weightage (%)

Equities 87.87

JSW Steels Ltd 4.51

Reliance Industries Ltd 3.93

Bharat Earth Movers Ltd 3.74

Jindal Saw Ltd 3.44

Divis Laboratories Ltd 2.84

Jaiprakash Associates 2.63

Northgate Technologies Ltd 2.55

Gujarat State Fertilizers & Chemicals Ltd 2.22

Cambridge Solutions Ltd 2.15

Adani Enterprises Ltd 2.03

Bombay Dyeing & Mfg Company Ltd 2.03

Bank Of Baroda 1.94

Escort India Ltd 1.94

Jain Irrigation Systems Ltd 1.93

Strides Arcolabs Ltd 1.89

Lupin Ltd 1.87

HCL Technologies Ltd 1.82

State Bank Of India 1.77

Greaves Cotton Ltd 1.61

Dena Bank 1.55


AIA Engineering Ltd 1.52

United Phosphorous Ltd 1.47

Jindal Steel & Power Ltd 1.45

Crompton Greaves Ltd 1.45

Maharashtra Seamless Ltd 1.40

Radico Khaitan Ltd 1.40

Gujarat Mineral Development Corporation 1.39

Bharati Shipyard Ltd 1.38

Orient Paper & Industries Ltd 1.34

Shivvani Oil And Gas Exploration 1.29

Allcargo Global Logistics Ltd 1.26

NIIT Technologies Ltd 1.24

Mahanagar Telephone Nigam Ltd 1.19

Bharat Petroleum Corp Ltd 1.17

Gammon India Ltd 1.16

Tamilnadu Newsprint Ltd 1.11

GHCL Ltd 1.06

Hexaware Technologies Ltd 1.03

Tata Motors 1.02

Educomp Solutions Ltd 1.02

Equity < 1% Of Corpus 14.11

Derivatives, Cash & Other Receivables 12.13

Grand Total 100.00

SECTOR ALLOCATION

Industry % Allocation

Ferrous Metals 10.81

Industrial Capital Goods 9.72

Software 8.08

Pharmaceuticals 6.89


Banks 5.27

Petroleum Products 5.11

Chemicals 4.53

Construction 4.14

Auto 3.94

Industrial Products 3.54

Fertilizers 3.39

Consumer Non Durables 2.93

Auto Ancillaries 2.72

Information Technology 2.55

Trading 2.03

Pesticides 1.47

Minerals/Mining 1.39

Cement 1.34

Oil 1.29

Transportation 1.26

Telecom - Services 1.19

Paper 1.11

Textiles – Cotton 0.97

Net Asset Value

Date Net Asset Value

Wednesday, February 01, 2006 201.18

Wednesday, March 01, 2006 210.22

Monday, April 03, 2006 229.75

Monday, May 01, 2006 251.68

Thursday, June 01, 2006 215.11

Monday, July 03, 2006 199.51

Tuesday, August 01, 2006 193.2

Friday, September 01, 2006 218.12


Tuesday, October 03, 2006 234.47

Wednesday, November 01, 2006 250.23

Friday, December 01, 2006 261.78

Tuesday, January 02, 2007 270.05

FRANKLIN INDIA PRIMA FUND

Fund

FRANKLIN India Prima Fund is a 12 year old diversified equity fund with a specific

focus on mid/small cap stocks from India‘s emerging businesses. The investment

approach is style-agnostic i.e. neither pure growth nor value addition. This style is chosen

keeping in mind that different styles tend to out perform in different market conditions. If

Rs. 1,000 is invested every month for last five years than there present value would have

been Rs 2.12 lakh. Its NAV shoot up from Rs 19.95 in 2001 to Rs. 174.84 in 2006. The

fund holds around 40 stocks in its portfolio, with the top 10 holdings accounting for

43.04% of its net assets. The fund holds about Rs 172 Crore as cash. The corpus of the

fund is Rs 2,418 Crore. The main feature of the fund is that it hasn‘t seen heavy

redemption pressures throughout its 12 years. It is also one of the wealth creator funds.

Last year return of this fund is 20.56%.

Fund Style


Fund Facts

Asset Allocation Portfolio Concentration

Equity 94% Top 3 sectors 41.90%

Debt 0% Top 5 holdings 26.67%

Other 6% Top 10 holdings 43.04%

Franklin India Prima-G Fund Rating

Current Stats & Profile

Latest NAV 184.17 (12/03/07)

52-Week High 220.51 (16/01/07)

52-Week Low 139.55 (14/06/06)

Fund Category Equity: Diversified

Type Open End

Launch Date November 1993

Risk Grade Average

Return Grade Above Average

Net Assets (Cr) 1,583.62 (28/02/07)

Benchmark S&P CNX 500

Trailing Returns

As on 12 Mar 2007 Fund Category

Year to Date -14.08 -8.15

1-Month -11.76 -8.49

3-Month -6.78 -1.40

1-Year -2.52 6.47

3-Year 35.98 33.18

5-Year 48.12 37.90

Return Since Launch 24.51 --

Returns upto 1 year are absolute and over 1 year are

annualised.

Relative Performance (Fund Vs Category Average)


Portfolio

Stock Instrument % Net Assets

Aditya Birla Nuvo Equity 7.47

India Cements Equity 5.19

F A G Bearings India Equity 4.95



Ipca Laboratories Equity 4.31

Kansai Nerolac Paints Equity 3.1

Torrent Pharmaceuticals Equity 3.1

India Infoline Equity 2.97

C C L Products (I) Equity 2.88

Cummins India Equity 2.85

T V S Motor Co. Equity 2.84

Ashok Leyland Equity 2.61

Merck Ltd. Equity 2.53

Esab India Equity 2.48

Federal Bank Equity 2.09

Sundaram Fasteners Equity 1.86

Ruchi Soya Inds. Equity 1.81

Sesa Goa Equity 1.8

Raymond Equity 1.72

Indraprastha Gas Equity 1.36

Infotech Enterprises Equity 1.31

Ansal Prop & Infra Equity 1.27

T I L Equity 1.26

Ciba Speciality

Chemicals Equity 1.24




























Top Holdings in Portfolio

% Composition

02468

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Health C

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Constructio

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Autom

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FM

CG

Servic

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Chem

icals

Fin

ancia

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ervic

es

Technolo

gy

Metals

&

M

etal

Products

Textiles

Sector

% C

om

po

sitio

n

Net Asset Value




Monday, April 03, 2006 201.75

Monday, May 01, 2006 209.27


Monday, July 03, 2006 162.61


Sector

%

Composition

Basic/Engineering 15.67

Diversified 13.61

Health Care 12.62

Construction 12.37

Automobile 11.13

FMCG 5.6

Services 5.53

Chemicals 4.34

Financial Services 3.77

Technology 2.21

Metals & Metal

Products 1.8

Textiles 1.72







HDFC MUTUAL FUND


Ownership Private


Domestic-100%

Sponsor Housing Development Finance Corporation Ltd.

Fund Speak

The main feature of this fund is that it has beaten its category for eight consecutive years.

The fund is not having large portfolio with number of stocks between 30– 40. Top 5

stocks account for 35-40%. The funds investment policy is to buy quality and sustainable

businesses at a reasonable price. So even if a sector don‘t perform well now, but has

potential to perform in future, the fund will hold on to it. The fund is also known for

quick sector move. The fund doesn‘t offer good returns in 1-2 years, but in long term. It

is also the wealth creator fund. Last year return of this fund is 31% nearly.


Portfolio

Name of Instrument Industry + Quantity Market/ % to

Fair

Value NAV

(Rs. In

Lakhs)

EQUITY & EQUITY

RELATED

Lanco Infratech Ltd Engineering 48,119 125.59 0.33

Subtotal 125.59 0.33

(a) Listed / awaiting listing on Stock Exchanges

Divis Laboratories Ltd. Pharmaceuticals 87,707 2,635.60 6.88

Infosys Technologies Ltd. Software 117,602 2,563.37 6.69

Bharat Heavy Electricals Ltd.

Industrial Capital

Goods 80,000 2,004.60 5.23

Bharti Airtel Ltd.

Telecom -

Services 310,000 1,955.17 5.10

Crompton Greaves Ltd.

Industrial Capital

Goods 700,000 1,854.30 4.84

State Bank of India Banks 140,000 1,843.87 4.81

Reliance Industries Ltd. Petroleum 140,000 1,742.23 4.55


Products

Apollo Tyres Ltd. Auto Ancillaries 472,796 1,726.18 4.51

Sun Pharmaceutical Industries

Ltd. Pharmaceuticals 164,531 1,670.24 4.36

ITC Ltd.

Consumer Non

Durables 900,000 1,665.90 4.35

Kansai Nerolac Paints Ltd.

Consumer Non

Durables 186,000 1,589.93 4.15

Thermax Ltd.

Industrial Capital

Goods 416,969 1,588.23 4.15

Oil & Natural Gas

Corporation Ltd. Oil 172,500 1,487.55 3.88

Sundaram Clayton Ltd. Auto Ancillaries 112,000 1,367.02 3.57

Grasim Industries Ltd. Cement 47,500 1,321.90 3.45

Hindustan Lever Ltd.

Consumer Non

Durables 500,000 1,176.00 3.07

Satyam Computer Services

Ltd. Software 240,000 1,102.80 2.88

Hindustan Petroleum

Corporation Ltd.

Petroleum

Products 325,000 915.85 2.39

Tata Motors Ltd. Auto 110,000 890.07 2.32

Aditya Birla Nuvo Ltd. Textile Products 75,928 881.83 2.30

Birla Corporation Ltd. Cement 224,964 825.84 2.16

ISMT Ltd. Metals

1,174,66

8 811.70 2.12

Hanung Toys & Textiles Ltd Textile Products 519,066 670.37 1.75

Solar Explosives Ltd. Chemicals 424,937 590.45 1.54

Eimco Elecon (India) Ltd. Engineering 145,072 507.10 1.32

Voltamp Transformers Ltd Power 75,890 452.61 1.18

Phoenix Lamps Ltd. Auto Ancillaries 308,766 389.82 1.02


Global Vectra Helicorp Ltd Transportation 159,810 256.26 0.67

Chennai Petroleum

Corporation Ltd.

Petroleum

Products 98,859 218.23 0.57

Great Eastern Shipping

Company Ltd. Transportation 96,000 209.81 0.55

EID Parry (India) Ltd.

Consumer Non

Durables 144,640 201.92 0.53

Great Offshore Ltd. Transportation 24,000 145.41 0.38

Subtotal 37,262.16 97.27

Total 37,387.75 97.60

MONEY MARKET INSTRUMENTS

Reverse Repos 873.55 2.28

Subtotal 873.55 2.28

Total 873.55 2.28

OTHERS

Net Current Assets 42.14 0.12

Net Assets 38,303.44 100.00

Top Holding

Sectoral Assets(%)

Industrial Capital Goods 14.22

Consumer Non Durables 12.10

Pharmaceuticals 11.24

Software 9.57

Auto Ancillaries 9.10

Petroleum Products 7.51

Cement 5.61

Telecom - Services 5.10

Banks 4.81


Assets(%)

0.002.004.006.008.00

10.0012.0014.0016.00

Industria

l C

apital

Goods

Pharm

aceutic

als

Auto A

ncilla

rie

s

Cem

ent

Banks

Oil

Metals

Transportatio

n

Pow

er

Sector

% A

ssets

Net Asset Value




Monday, April 03, 2006 130.819

Monday, May 01, 2006 134.053

Thursday, June 01, 2006 112.237

Monday, July 03, 2006 114.59







Textile Products 4.05

Oil 3.88

Auto 2.32

Metals 2.12

Engineering 1.65

Transportation 1.60

Chemicals 1.54

Power 1.18

Money Market

Instruments/Net

Receivables 2.40


DSP Merrill Lynch Opportunities Fund

Fund

The fund maintains a complicated portfolio. The fund has constantly figured in the top

25% of its category. The funds mandate is to move around promising sectors. The

portfolio is highly diversified. Technology stock is the favourite, but fund also has

automobiles, FMCG, metals and engineering. If a sector isn‘t performing the fund

believes in buy and hold strategy. There is no mid and small cap stock in the portfolio as

the exposure doesn‘t typically exceeds 30%. Its fund managers are Mr. Anup

Maheshwari and Mr. Soumendra Lahiri. It is also a wealth creator fund. Last year return

of this fund is 36.4%.

Type of Scheme: Open ended growth scheme

Options available: Growth

Dividend

Payout

Reinvest

Minimum Application

amount:

First Purchase - Rs. 5,000/-

Subsequent Purchase - Rs. 1,000/-

Entry Load: For Regular investments


2.25% : For investments < Rs 5.0 crs

Nil : For investments >= Rs 5.0 crs

For SIP investments

1%

Exit Load: NIL

Contingent Deferred

Sales Charge (CDSC):

For SIP investments

1.25% : If investment is redeemed before the

completion of 2 years

Nil : If investment is redeemed on or after the

completion of 2 years

Under normal circumstances, it is anticipated that the asset allocation shall be as follows:

Indicative Asset Allocation

Instrument Indicative Allocation (% of

Corpus) Risk Profile

Equity and equity-related

securities 80% - 100% Medium to High

Fixed income securities

(debt* and money market

securities)

0% - 20% Low to Medium

*Debt securities/instruments are deemed to include securitised debts.

HIGHLIGHTS

Cut Off Time - Subscription 3:00 PM


Cut Off Time -Redemption 3:00 PM

Cut Off Time - Switching 3:00 PM

Redemption cheques issued^ Normally within 3 Business Days of the

receipt of redemption request

Systematic Investment Plan (SIP) Monthly and Quarterly Options available

Minimum Investment for SIP Rs. 2000/- (Effective November 15,2006)

Systematic Withdrawal Plan (SWP) Weekly, Monthly and Quarterly Options

available

Minimum Withdrawal for SWP Rs. 1,000/-

Systematic Transfer Plan (STP) Weekly, Monthly and Quarterly Options

available

Minimum Transfer for STP Rs. 1000/-

INVESTMENT OBJECTIVE

An Open Ended growth Scheme, seeking to generate long term capital appreciation and

whose secondary objective is income generation and the distribution of dividend from a

Portfolio constituted of equity and equity related securities concentrating on the

Investment Focus of the Scheme.

ASSET ALLOCATION

Equity & Equity related securities: 80% - 100%

Fixed Income securities (Debt* & Money market securities): 0% - 20%.

Debt securities/ instruments are deemed to include securitised debts


Portfolio

Sr.No. Name of the Instrument Industry Market Value % to Net Assets

(Rs. In lakhs)

EQUITY & EQUITY RELATED

(a) Listed / awaiting listing on the stock exchanges

1 Reliance Industries Petroleum Products 6,338.44 4.26%

2 L&T Industrial Capital Goods 5,621.09 3.78%

3 Infosys Technologies Software 5,553.37 3.73%

4 Tata Consultancy Services Software 4,632.03 3.11%

5 Reliance Communication 4,279.49 2.88%

6 Grasim Industries Cement 4,105.98 2.76%

7 Bharti Televentures Telecom - Services 4,095.93 2.75%

8 ONGC Oil 4,072.42 2.74%

9 Zee Entertainment Media & Entertainment 4,061.53 2.73%

10 Satyam Computer Services Software 3,972.92 2.67%

11 Aditya Birla Nuvo Textile Products 3,736.21 2.51%

12 Tata Motors Auto 3,556.37 2.39%

13 Jaiprakash Industries Construction 3,502.68 2.35%

14 Crompton Greaves Industrial Capital 3,420.59 2.30%

Goods

15 Deccan Chronicle Holdings Media & 3,277.04 2.20%

Entertainment

16 BHEL Industrial Capital Goods 3,228.42 2.17%

17 State Bank of India Banks 3,189.03 2.14%

18 ITC Consumer Non Durables 3,066.23 2.06%

19 Sterlite Industries Non - Ferrous Metals 2,763.33 1.86%


20 Century Textiles Cement 2,756.03 1.85%

21 Gujarat Ambuja Cements Cement 2,689.09 1.81%

22 Mahindra & Mahindra Auto 2,657.02 1.79%

23 ICICI Bank Banks 2,503.18 1.68%

24 Dr. Reddy‘s Laboratories Pharmaceuticals 2,198.83 1.48%

25 TV 18 Media & Entertainment 2,167.36 1.46%

26 Hindustan Lever Consumer Non Durables 2,035.25 1.37%

27 MphasiS BFL Software 1,995.66 1.34%

28 Ansal Properties Construction 1,961.41 1.32%

29 Siemens Industrial Capital Goods 1,880.10 1.26%

30 Bharat Electronics Industrial Capital Goods1,784.84 1.20%

31 Amtek Auto Auto Ancillaries 1,754.56 1.18%

32 Wire and Wireless Media & Entertainment 1,722.55 1.16%

33 Voltas Consumer Durables 1,627.39 1.09%

34 Lanco Infratech Engineering 1,623.97 1.09%

35 HCL Technologies Software 1,559.48 1.05%

36 Hindustan Construction Construction 1,463.70 0.98%

37 Karur Vysya Bank Banks 1,374.13 0.92%

38 United Phosphorus Pesticides 1,307.21 0.88%

39 BPCL Petroleum Products 1,268.59 0.85%

40 ACC Cement 1,245.82 0.84%

41 Tech Mahindra Software 1,199.95 0.81%

42 Birla Corporation Cement 1,194.11 0.80%

43 Jindal Saw Pipes Industrial Capital Goods 1,162.32 0.78%

44 Cipla Pharmaceuticals 1,094.23 0.74%

45 IOC Petroleum Products 1,087.51 0.73%

46 SAIL Ferrous Metals 1,075.56 0.72%

47 Hindalco Non - Ferrous Metals 1,051.35 0.71%

48 IPCL Petroleum Products 1,047.60 0.70%

49 Bombay Dyeing Chemicals 1,009.92 0.68%


50 Graphite India Industrial Products 949.62 0.64%

51 Colgate Consumer Non Durables 936.43 0.63%

52 Hexaware Technologies Software 918.13 0.62%

53 GE Shipping Transportation 869.41 0.58%

54 Mcleod Russell Consumer Non Durables 776.29 0.52%

55 NRB Bearings Industrial Products 764.44 0.51%

56 Sun TV Media & Entertainment 755.82 0.51%

57 Pantaloon Retail Retailing 752.44 0.51%

58 B L Kashyap & Sons Construction 741.82 0.50%

59 HPCL Petroleum Products 717.67 0.48%

60 Hindalco Rights Non - Ferrous Metals 690.61 0.46%

61 DCM Shriram Consolidated Fertilisers 652.77 0.44%

62 Financial Technologies Software 634.71 0.43%

63 Mastek Software 601.11 0.40%

64 Nestle Consumer Non Durables 579.26 0.39%

65 Bannari Amman Sugar Consumer 567.27 0.38%

Non Durables

66 Karur Vysya Bank - Rights Banks 540.97 0.36%

67 Sesa Goa Ferrous Metals 315.16 0.21%

68 I-Flex Solutions Software 291.70 0.20%

69 Centurion Bank of Punjab Banks 284.10 0.19%

70 Bajaj Auto Auto 277.22 0.19%

71 Maruti Udyog Auto 274.24 0.18%

72 Voltamp Transformers Industrial Capital 114.52 0.08%

Goods

73 Network18 Media & Entertainment 78.90 0.05%

Total 140,056.43 94.11%

DERIVATIVES

74 ICICI Feb 2007 Banks 1,293.32 0.87%

75 BHEL Feb 2007 Industrial Capital Goods 622.16 0.42%


76 Bharti Feb 2007 Telecom - Services 315.72 0.21%

77 Century Textiles Feb 2007 Cement 230.92 -0.16%

Total 2,000.28 1.34%

MONEY MARKET INSTRUMENTS

Cash & Equivalent

CBLO / Reverse Repo Investments 6,417.46 4.31%

Net Receivables / (Payables) 347.60 0.23%

Total 6,765.06 4.55%

Grand Total 148,821.77 100.00%

Major Holdings

Sector % Assets

MEDIA &

ENTERTAINMENT 8.11

CEMENT 7.9

PETROLEUM

PRODUCTS 7.03

BANKS 6.17

TELECOM - SERVICES 5.84

CONSUMER NON

DURABLES 5.35

CONSTRUCTION 5.15

AUTO 4.55

NON - FERROUS

METALS 3.03

OIL 2.74

TEXTILE PRODUCTS 2.51

PHARMACEUTICALS 2.21

AUTO ANCILLARIES 1.18

INDUSTRIAL 1.15


% Assets

02468

10121416

ME

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&

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TR

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UM

TE

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CO

M -

CO

NS

TR

UC

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N

NO

N -

FE

RR

OU

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XT

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AU

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FE

RR

OU

S

CH

EM

ICA

LS

RE

TA

ILIN

G

CA

SH

&

IND

US

TR

IAL

Sector%

Assets

Transportation has a share of 0.58% and Retailing has a share of 0.51% in the portfolio.

Net Asset Value




Monday, April 03, 2006 49.51

Monday, May 01, 2006 51.84


Monday, July 03, 2006 43.44







PRODUCTS

CONSUMER DURABLES 1.09

ENGINEERING 1.09

FERROUS METALS 0.93

PESTICIDES 0.88

CHEMICALS 0.68

FERTILISERS 0.44

CASH & EQUIVALENT 4.55

SOFTWARE 14.35

INDUSTRIAL CAPITAL

GOODS 11.98


KOTAK MAHINDRA MUTUAL FUND


Ownership Private


Domestic-100%

Sponsor Kotak Mahindra Finance Ltd

Corpus Rs. 52.38 Crore

Ideal Investment Horizon 1-2 year

Fund Manager Mr. Ritesh Jain

Kotak Mahindra is one of India's leading financial institutions, offering complete

financial solutions that encompass every sphere of life. From commercial banking, to

stock broking, to mutual funds, to life insurance, to investment banking, the group caters

to the financial needs of individuals and corporates.

The group has a net worth of around Rs.2,900 crore and employs around 8,800

employees across its various businesses servicing around 2 million customer accounts

through a distribution network of branches, franchisees, representative offices and


satellite offices across 282 cities and towns in India and offices in New York, London,

Dubai and Mauritius.

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned

subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF).

KMAMC started operations in December 1998 and has over 4 Lac investors in various

schemes. KMMF offers schemes catering to investors with varying risk - return profiles

and was the first fund house in the country to launch a dedicated gilt scheme investing

only in government securities.

Fund

This fund has generated a decent income for its investors with reasonably low level of

volatility. 60-70% of its portfolio consists of high yield assets such as bonds, commercial

paper, corporate deposits and securitised debts. The balance is employed in riskier

government securities. Risk management is most important for this fund. Emphasis on

high yield portfolio has kept the fund‘s volatility low. It is the fourth best performing

income fund in past six months based on returns. The portfolio of the scheme consists of

debt and money market instruments. The investment strategy is to invest across wide

maturity horizons and different kind of issuers in debt market, the G-Sec component is

normally maintained between 30-50% and it generally doesn‘t invest in corporate bonds

with less than AA rating. It is to be noted that NAV of this fund never fell down, even

when the Sensex was down. The fund is income generator. Last year return of this fund is

7%.


Net Asset Value




Monday, April 03, 2006 18.3392

Monday, May 01, 2006 18.4542

Thursday, June 01, 2006 18.5166

Monday, July 03, 2006 18.6115








Portfolio


JM INCOME FUND


Inception 1st April, 1995

Fund Manager Mr. Dwijendra Srivastava

Bench Mark Index CRISIL COMPOSITE BOND FUND INDEX

Corpus Rs 26.58 Crore.

Investment Objective

To generate stable long term returns with low risk strategy and capital appreciation/

accretion through investment in debt instruments and related securities besides

preservation of capital.

JM Financial Mutual Fund is one of India's first private sector mutual funds-an integral

part of the first wave that commenced operations in 1993-94. Today, they are among the

top most mutual funds in the country, ranked by assets managed, and enjoy a superior

performance record.

The Group's origins can be traced back to the 1950s when the Kampani family began to

get involved in India's then nascent capital markets. J.M. Financial and Investment

Consultancy Services was founded on September 15, 1973. Under the leadership of

Chairman Nimesh N. Kampani, the JM Group has played a stellar and multi-faceted role

in the development of India's capital markets. Apart from helping companies raise

finance, JM has also been instrumental in educating a burgeoning and prospering middle


class about the advantages of investing in blue chip companies. In 1999, they commenced

a joint venture with Morgan Stanley Dean Witter, that today spans investment banking,

broking, fixed income and retail distribution.

JM Financial Asset Management Private Limited, the Asset Management Company of

JM Financial Mutual Fund, is not a part of this joint venture. Sponsored by J.M. Financial

and Investment Consultancy Services Pvt. Ltd., and co-sponsored by JM Financial Ltd.,

JM Financial Asset Management Private Limited started operations in December 1994

with a simultaneous launch of three funds-JM Liquid Fund (now JM Income Fund), JM

Equity Fund and JM balanced Fund. Today, JM Financial Mutual Fund offers a bouquet

of funds that caters to the diverse needs of both its institutional and individual investors.

Their mission is to manage risk effectively while generating top quartile returns across all

product categories. They believe that to cultivate investor loyalty, they must provide a

safe haven for their investments.

They are focused on helping their investors realize their investment goals through prudent

advice, judicious fund management, impeccable research, and strong systems of

managing risk scientifically.

Fund

The fund has given a one year return of 2.6% and five year return of 7.7%. The

philosophy behind investment is that invest in papers that offers value to the investor i.e.

they consider the relative value and the spread offered by the paper in a maturity bucket

instead of just the absolute yield. The fund is in medium risk-return segment. The net

assets are mainly invested in AAA rated instruments. The top 5 holdings account for

55.6% of total assets. The major risks associated are Interest Rate Risk, Liquidity Risk,

and Reinvestment Risk. Nearly 25% of total assets are held as cash. The portfolio

basically includes corporate bonds, money market instruments, g-sec investments. The

fund is income generator. Last year return of this fund is 3%.

http://www.jmfinancial.in/


Portfolio


Net Assets Value




Monday, April 03, 2006 27.7041

Monday, May 01, 2006 27.8435

Thursday, June 01, 2006 27.9194

Monday, July 03, 2006 27.8875








UTI BOND FUND

UTI Mutual Fund is managed by UTI Asset Management Company Private Limited who

has been appointed by the UTI Trustee Company Private Limited for managing the

schemes of UTI Mutual Fund and the schemes transferred / migrated from UTI Mutual

Fund.

The UTI Asset Management Company has its registered office at : UTI Tower, Gn

Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide

professionally managed back office support for all business services of UTI Mutual Fund

(excluding fund management) in accordance with the provisions of the Investment

Management Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the

objectives of the schemes. State-of-the-art systems and communications are in place to

ensure a seamless flow across the various activities undertaken by UTI AMC.

UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)

Regulations, 1993 on February 3 2004, for undertaking portfolio management services

and also acts as the manager and marketer to offshore funds through its 100 % subsidiary,

UTI International Limited, registered in Guernsey, Channel Islands.

UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset

Management Company presently manages a corpus of over Rs. 34500 Crore.

UTI Mutual Fund has a track record of managing a variety of schemes catering to the


needs of every class of citizenry. It has a nationwide network consisting 70 UTI Financial

Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. With a

view to reach to common investors at district level, 4 satellite offices have also been

opened in select towns and districts. It has a well-qualified, professional fund

management team, who has been highly empowered to manage funds with greater

efficiency and accountability in the sole interest of unit holders. The fund managers are

also ably supported with a strong in-house equity research department. To ensure better

management of funds, a risk management department is also in operation.

It has reset and upgraded transparency standards for the mutual funds industry. All the

branches, UFCs and registrar offices are connected on a robust IT network to ensure cost-

effective quick and efficient service. All these have evolved UTI Mutual Fund to position

as a dynamic, responsive, restructured, efficient, and transparent and SEBI compliant

entity.

Fund

It is a income scheme with relatively low volatility and stable returns. Time horizon of

investment is medium. Investing way being conservative, so a portfolio of Corporate

Bonds and g-sec is made. The fund has seen a slow but sure growth in NAV. The fund

avoids extreme swings in either maturity or duration. It has a corpus of Rs. 388.98 Crore.

The top 10 holdings has major share of corporate bonds than g-sec. nearly 61.7% holding

is of AAA rated bonds. Emphasis is on adding value through multiple, diversified

strategies combined with volatility analytics, and adjustment to traditional variables such

as sector, coupon & quality of companies. The average maturity of its portfolio is 3 years.

Its fund manager is Mr. Amandeep Chopra. Last year return of this fund is 4.7%.

Portfolio

NAME OF THE INSTRUMENT QUANTITY MARKET-VALUE

% TO NAV

Debt Instruments -


(a) Listed/awaiting listing on Stock Exchanges

NCDR 7.86% UTI BANK LTD. MATURING 25/07/2012 300 3001.23 9.58

NCD 6% TATA TEA LTD. MATURING 08/06/2007 20 2278.06 7.27

NCD 8.65% CITIFINANCIAL CONSUMER FINANCE INDIA LTD. MATURING 05/08/2008 150 1484.03 4.74

NCDR 7.45% HDFC LTD. MATURING 10/08/2009 100 1004.8 3.21

NCD 8.7% HINDALCO INDUSTRIES LTD. MATURING 23/04/2007 200 1001.46 3.2

NCD 8.78% POWER FINANCE CORPORATION LTD. MATURING 11/12/2016 100 976.21 3.12

NCD 14.75% RELIANCE INDUSTRIES LTD. MATURING 13/02/2008 1000000 686.39 2.19

NCD 8.71% INDIAN RAILWAYS FIN CORPN LTD. MATURING 15/03/2007 50 500.72 1.6

NCD 9.25% LIC HOUSING FINANCE LTD. MATURING 18/02/2009 3 299.8 0.96

NCD 6.98% INDIAN RAILWAYS FIN CORPN LTD. MATURING 31/03/2007 30 299.78 0.96

TOTAL:(a) Listed/awaiting listing on Stock Exchanges 11532.48

(b) Unlisted

NCDR 6.58% INDUSTRIAL DEVELOPMENT BANK OF INDIA LIMITED. MATURING 23/08/2010 250 2500 7.98

PTC 8.8479% ICICI BANK LTD MATURING 22/10/2009 25 2366.27 7.55

NCD 6.58% TATA SONS LTD. MATURING 14/05/2008 15 1452.54 4.64

PTC 0% TATA MOTORS LTD. MATURING 14/01/2008 15 1090.64 3.48

NCD 13.05% HONGKONG & SHANGHAI BANKING CORP.LT MATURING 10/08/2009 10 1079.8 3.45

NCD 8.75% CITICORP FINANCE INDIA LTD. MATURING 12/09/2009 100 986.82 3.15

PTC 11.22% STANDARD CHARTERED BANK MATURING 15/05/2014 1000000 736.73 2.35


PTC 0% ICICI BANK LTD MATURING 07/02/2009 20 536.45 1.71

NCD 11.75% CITIBANK N.A. MATURING 31/01/2010 5 530.98 1.69





PTC 11.85% LIC HOUSING FINANCE LTD. MATURING 01/04/2007 25 0.64 *

PTC 11.85% HDFC LTD. MATURING 01/06/2007 20 0.63 *

PTC 10.25% LIC HOUSING FINANCE LTD. MATURING 01/05/2007 7 0.25 *

TOTAL:(b) Unlisted 13096.69

TOTAL:Debt Instruments - 24629.17

Others -

GSEC 7.59% RESERVE BANK OF INDIA MATURING 23/03/2015 150000000 1450.35 4.63

C D KOTAK MAHINDRA BANK LTD. MATURING 21/12/2007 100000000 928.03 2.96

GSEC 7.44% RESERVE BANK OF INDIA MATURING 23/03/2012 85000000 826.64 2.64

TOTAL: 3205.02

NET CURRENT ASSETS 0 2729.61 8.71

C P EXIM BANK MATURING 12/07/2007 80000000 769.08 2.45

TOTAL: 3498.69

TOTAL:Others - 6703.71


TOTAL:UTI-Bond Fund 31332.88

Net Asset Value




Monday, April 03, 2006 20.6422

Monday, May 01, 2006 20.7818

Thursday, June 01, 2006 20.8577

Monday, July 03, 2006 20.8763








LIC Mutual Fund Bond

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989 and

contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was

constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882.

The Settlor is not responsible for the management of the Trust. The Settlor is also not

responsible or liable for any loss or shortfall resulting in any of the schemes of LIC

Mutual Fund.

The Trustees of the LIC Mutual Fund have exclusive ownership of Trust Fund and are

vested with general power of superintendence, discretion and management of the affairs

of the Trust. LIC Mutal Fund Asset Management Company Ltd. was formed on 20th

April 1994 in compliance with the Securities and Exchange Board of India (Mutual

Funds) Regulations, 1993. The Company commenced business on 29th April 1994. The

Trustees of LIC Mutual Fund have appointed LIC Mutual Fund Asset Management

Company Ltd. as the Investment Managers for LIC Mutual Fund. The Trustees are

responsible for appointing a Custodian. The Trustees should also ensure that the activities

of the Trust and the Asset Management Company are in accordance with the Trust Deed

and the SEBI Mutual Fund Regulations as amended from time to time. The Trustees have

also to report periodically to SEBI on the functioning of the Fund.


The investors under the schemes can obtain a copy of the Trust Deed, the text of the

concerned Scheme as also a copy of the Annual Report, on a written request made to the

LIC Mutual Fund Asset Management Company Ltd.

Fund

Life Insurance Corporation Mutual Fund Bond is one of the consistent performers in the

income category fund. This is due to high exposure to corporate bonds. In August 2006 it

was having 87.4% of its net assets as corporate bonds. It is the only income fund that

doesn‘t give exposure to government security. The average maturity of its portfolio is 1.3

years. Ten year yield of the fund is nearly 7.6-7.7%. In its portfolio 24.3% holding is of

AA- & AA+ bonds. The annual average return is 7.75% in comparison to the category

average of 7.34%. Last year return of this fund is 4.43%.

Net Assets Value




Monday, April 03, 2006 19.1114

Monday, May 01, 2006 19.2687

Thursday, June 01, 2006 19.3326

Monday, July 03, 2006 19.3877








Portfolio

Debt Instruments - Bonds/Debentures

Listed / Awaiting Listing on Stock Exchanges

I C I C I BANK Banks AAA 1800 1,839.23 17.1

T I S C O Ferrous

Metals AAA 1650000 1,794.02 16.67

A C C Cement AA+ 50 515.7 4.79

SUNDARAM FINANCE Finance AA+ 50 500 4.65

FINOLEX INDUSTRIES Chemicals AA- 5 493.58 4.59

GOVT. SECURITIES Govt

Securities Sovereign 500000 491.55 4.57

RABO INDIA FINANCE Finance P1+ 37 370 3.44

Privately placed / Unlisted

JSW STEEL Ferrous

Metals AA- 2200000 1,209.30 11.24

DSP ML CAPITAL Finance AAA(FSO) 100 1,000.00 9.29

KOTAK MAHINDRA

PRIME Finance AA+ 100 1,000.00 9.29

Securitised Debt

INDIAN RETAIL ABS

TRUST Finance AAA(SO) 3 294.86 2.74

ASSET SECURITIES Finance AAA(SO) 14 128.95 1.2

http://www.licmutual.com/home.asp?cocode=540


TRUST

Total: 9,637.19 89.57

Money Market & Net Receivables/Payables

Cash 'n' Call, Current

Assets & Receivables 1,121.64 10.43

Total: 1,121.64 10.43

Scheme Total: 10,758.83 100

Graphical Representation of the Portfolio

Net Assets

17.1

16.67

4.794.654.594.573.44

11.24

9.29

9.29

2.74

1.210.43

I C I C I BANK

T I S C O

A C C

SUNDARAM FINANCE

FINOLEX INDUSTRIES

GOVT. SECURITIES

RABO INDIA FINANCE

JSW STEEL

DSP ML CAPITAL

KOTAK MAHINDRA PRIME

INDIAN RETAIL ABS TRUST

ASSET SECURITIES TRUST

Cash 'n' Call, Current Assets & Receivables


Different Investing ways in Mutual Fund

There are basically two ways to invest in a Mutual Fund. These are: -

One Time Investment

Systematic Investment Plan (SIP)

Let us discuss each.

One time investment

In this way of investment investor pays the entire investment amount in one time only.

The minimum amount that must be invested in such a way is Rs. 5,000/- only. An entry

load of 2.25% (nearly every fund charges) has to be paid by the investor. Depending

upon the Net Asset Value (NAV) of the fund units are allotted to the investor. Let us

understand it with the help of an example.

Let an investor wants to invest Rs 12,000/- in one time only in Reliance Equity Fund. At

the date of investment let the NAV of the fund be Rs 12/- per unit. Than the number of

units that the investor will get is as follows: -

Total Investment Rs 12,000/-

NAV Rs 12/-


Entry Load 2.25%

Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)]

i.e. 12 + (2.25*12)/100 = Rs 12.27/-

Units actually purchased by investor = Rs 12,000 / Rs 12.27 = 978 Units.

This way of investment is recommended for those investors who are sensitive because

"emotions" may make the investor susceptible to "mistakes in timings of his purchases

and sales". However with this way of investment the investor might loose future

opportunities as available in SIP due to fluctuations in Sensex.

Systematic Investment Plan (SIP)

SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is very similar to

regular saving schemes like a recurring deposit.

An SIP allows you to buy units on a given date each month, so that you can implement an

investment / saving plan for yourself. Once you have decided on the amount you want to

invest every month and the mutual fund scheme in which you want to invest, you can

either give post-dated cheques or ECS instruction, and the investment will be made

regularly. SIPs generally start at minimum amounts of Rs 500 per month and the upper

limit for using an ECS is Rs 25000 per instruction. Therefore, if you wish to invest Rs

100,000 per month, you may need to do it on 4 different dates.

In this way of investment investor pays the entire investment amount over a time period

generally 1 year. The minimum amount that must be invested in such a way is Rs. 6,000/-

only i.e. Rs 500/- a month at least continuously for one year. An investor can invest any

amount in multiple of 5. Entry load of 2.25% (nearly every fund charges) has to be paid

by the investor every month. Depending upon the Net Asset Value (NAV) of the fund

units are allotted to the investor. Let us understand it with the help of an example.


Let an investor wants to invest Rs 12,000/- in SIP in Reliance Equity Fund on 1st January,

2004. At the date of investment let the NAV of the fund be Rs 12/- per unit. Than the

number of units that the investor will get is as follows: -

Total Investment Rs 12,000/-

Investment on 1st January (Monday) 2004 Rs 1,000/-

(Total Investment / Number of months)

NAV Rs 12/-

Entry Load 2.25%


i.e. 12 + (2.25*12)/100 = Rs 12.27/-

Units actually purchased by investor = Rs 1,000 / Rs 12.27 = 81.50 Units.

Now let NAV on 1st February (Wednesday) be Rs 12.50

Entry Load 2.25%


i.e. 12.50 + (2.25*12.50)/100 = Rs 12.78/-

Units actually purchased by investor = Rs 1,000 / Rs 12.78 = 78.24 Units.

So in the month of February the total units holded by the investor are 81.50 + 78.24 =

159.74 units.

In the same way investor will invest Rs 1000/- every month continuously for next 10

months. Depending upon the NAV every month investor will get units after deducting the

entry load.

The main advantage in SIP is that if Sensex is down on the day of investment than

previous day investor will get more units as NAV will also fall generally. The investor

can invest using SIP every month, quarterly, half yearly.

It is to be noted that Investor can do additional purchase any time both in One time

investment as well as SIP.


Value Averaging as an Investment way

An investment strategy designed to reduce volatility in which securities, typically mutual

funds, are purchased at regular intervals in amounts which increase when the market

drops and decrease when the market rises

Instead of simply adding X-amount into your portfolio every month (week, semester,

year...) you decide in the beginning, how much your portfolio shall be worth any given

time. (I.e. you start with a sum X to start with, and you decide to increase your portfolio

by a certain sum per month.)

The value of your portfolio will of course fluctuate according the movements of the

markets, and thus will you have to put in more money every month, when the markets

drop (to keep up with your projected growth) or less when the markets rise. There might

even be times when you will have to withdraw moneys when markets make a big jump

up.

This all seems logic in an academic sense, as it really forces you to buy low, and sell

high. This investment way is not practiced till time.

But there are certain drawbacks:

http://www.investorwords.com/2627/investment_strategy.html

http://www.investorwords.com/5256/volatility.html

http://www.investorwords.com/4446/securities.html

http://www.investorwords.com/3173/mutual_funds.html




The administration of such a portfolio amounts to a fair-sized Excel sheet, and

needs careful attention at regular intervals.

One will have to make a calculation of how much a portfolio will have to grow

every month. Something that is filled with rough guesswork at best of times. Of

course can you say: I will need X amount when I'm 45 in order to retire early, and

then work out how much you have to save every month. But even this number can

be nothing short of arbitrary, as there are factors like: Inflation, live expectation,

change of lifestyle, health, development of social security...

Many people in their accumulation phase would be hard put to suddenly even out

ones portfolio after a 20% market decline. As John Mayard said: Markets can

remain irrational longer than you can remain solvent.

Comparison of returns from a fund in same time period using different investment

ways

Assumptions

1 There is no withdrawals from the selected funds from 1st February, 2006 to 2

nd January,

2007 by the investor.

2 Units are issued to the investor as soon as he made the investment.

Fund: -


Investment Way Lump sum.

Total Investment = Rs 12,000/-

NAV as on Feb 1, 2006 = Rs 201.18

Entry load @ 2.25% (NAV of the day) = Rs 4.53


Effective NAV = 201.18 + 4.53 = Rs 205.70

Units Got = 12,000 / 205.70 = 58.33

NAV as on Jan 2, 2007 = Rs 270.05

Units Value = 58.33 * 270.05 = 15752

1 year return = [(15752-12000)*100]/ 12000 = 31.27%.

Average Price =

Total of NAV‘s in which investment is made / number of times investment made =

201.18 / 1 = Rs 201.18/-

Average Cost = Total Investment / Units Purchased = 12000 / 58.33 = Rs 205.70/-

Investment Way SIP

Date NAV Investment [email protected]% Units

February 01, 2006 201.18 Rs 1000 Rs 22.5 4.86

March 01, 2006 210.22 Rs 1000 Rs 22.5 4.65

April 03, 2006 229.75 Rs 1000 Rs 22.5 4.25

May 01, 2006 251.68 Rs 1000 Rs 22.5 3.88

June 01, 2006 215.11 Rs 1000 Rs 22.5 4.54

July 03, 2006 199.51 Rs 1000 Rs 22.5 4.90

August 01, 2006 193.2 Rs 1000 Rs 22.5 5.06

September 01, 2006 218.12 Rs 1000 Rs 22.5 4.5

October 03, 2006 234.47 Rs 1000 Rs 22.5 4.17

November 01, 2006 250.23 Rs 1000 Rs 22.5 3.90

December 01, 2006 261.78 Rs 1000 Rs 22.5 3.73

January 02, 2007 270.05 Rs 1000 Rs 22.5 3.62

Total 2735.3 Rs 12,000 52.06

Calculations

Investment per month = Rs 1,000/-

Load @ 2.25% on Rs 1,000/- = Rs 22.5/-


Effective value at which unit will be purchased = Rs 977.5/-

NAV on 1st Feb, 2006 = Rs 201.18/-

Units Purchased = 4.86

In the same way units purchased for the next 11 months has been calculated.

On 2nd

Jan, 2007

Total Units Purchased = 52.06

NAV = Rs 270.05/-

Investment Value = 52.06 * 270.05 = Rs 14,059/-

Return = [(14059 – 12000)* 100]/12000 = 17.15%.

Average Price = 2735.3 / 12 = Rs 227.94/-

Average Cost = 120000 / 52.06 = Rs 230.5/-

Investment Way Value Averaging

Here our objective is that in 1st month the value of our investment should be Rs 1,000/-

and in 2nd

month it should be Rs 2,000/-. Similarly in the beginning of 12th

month it

should be Rs 12,000/-.

Calculations

Investment per month = Rs 1,000/-

Load @ 2.25% on Feb 01, 2006 on NAV Rs 201.18 = Rs 4.53/-


Units Purchased = 4.86.

Now

On March 01, 2006


NAV = Rs 210.22/-

Units Holded = 4.86

Current Value = NAV* Total Units Holded = 210.22 * 4.86 = Rs 1021/-

Since we are in second month of investment so as per the rules we want our investment to

be of value Rs 2,000/-.

Thus Investment Required = Rs 2,000- Rs 1,021 = Rs 979/-

Now

Load @ 2.25% on March 01, 2006 on NAV Rs 210.22 = Rs 4.73/-


Units Purchased = 979 / 214.95 = 4.55

So Total Units Holded in 2nd

Month = 4.86 + 4.55 = 9.41.

In the same way we will calculate the investment require to be made in next ten months.

It is being assumed that Entry Load will be charged every month like in case of SIP.

Returns

Value of the investment as on January 02, 2007 = 44.38 * 270.05 = Rs 11,985/-

Total Investment Made = Rs 9914/-

One year return = [(11985-9914)* 100]/9914 = 20.88%.

Average Price = 2735.3 / 12 = Rs 227.94/-

Average Cost = 9914 / 44.38 = Rs 223.38/-

Date NAV

(Rs)

Current

Value

(Rs)

Load

(2.25%)

+

NAV

(Rs)

Investment

Made

(Rs)

Units

Got

February 01, 2006 201.18 -------- 205.71 1000 4.86


March 01, 2006 210.22 1021 214.95 979 4.55

April 03, 2006 229.75 2162 234.9 838 3.57

May 01, 2006 251.68 3267 257.34 733 2.85

June 01, 2006 215.11 3405 219.95 1595 7.25

July 03, 2006 199.51 4605 204 1395 6.84

August 01, 2006 193.2 5780 197.55 1220 6.17

September 01, 2006 218.12 7872 223 128 0.57

October 03, 2006 234.47 8596 240 404 1.68

November 01, 2006 250.23 9594 255.86 406 1.58

December 01, 2006 261.78 10450 267.67 550 2.05

January 02, 2007 270.05 11334 276.12 666 2.41

Total 2735.3 9914 44.38

Kotak Mahindra

Investment Way Lump sum.

Total Investment = Rs 12,000/-

NAV as on Feb 1, 2006 = Rs 18.2249

Entry load @ 2.25% (NAV of the day) = Rs .4096

Effective NAV = Rs 18.6345

Units Got = 12,000 / 18.6345 = 643.96

NAV as on Jan 2, 2007 = Rs 19.501

Units Value = 12558

1 year return = [(12558-12000)*100]/ 12000 = 4.65%.

Average Price =

Total of NAV‘s in which investment is made / number of times investment made =

18.2249 / 1 = Rs 18.2249/-

Average Cost = Total Investment / Units Purchased = 12000 / 643.96 = Rs 18.6345/-

Investment Way SIP


Date NAV Investment [email protected]% Units

February 01, 2006 18.2249 Rs 1000 Rs 22.5 53.63

March 01, 2006 18.2803 Rs 1000 Rs 22.5 53.47

April 03, 2006 18.3392 Rs 1000 Rs 22.5 53.30

May 01, 2006 18.4542 Rs 1000 Rs 22.5 52.97

June 01, 2006 18.5166 Rs 1000 Rs 22.5 52.79

July 03, 2006 18.6115 Rs 1000 Rs 22.5 52.52

August 01, 2006 18.704 Rs 1000 Rs 22.5 52.26

September 01, 2006 18.9008 Rs 1000 Rs 22.5 51.71

October 03, 2006 19.0739 Rs 1000 Rs 22.5 51.24

November 01, 2006 19.1858 Rs 1000 Rs 22.5 50.94

December 01, 2006 19.3916 Rs 1000 Rs 22.5 50.40

January 02, 2007 19.501 Rs 1000 Rs 22.5 50.12

Total 225.1838 625.35

Using the same way and method as used in calculation of return of Reliance using SIP we

will find that

One year return = 1.625%

Average Price = Rs 18.7653

Average Cost = Rs 19.1892

Investment Way Value Averaging

Date NAV

(Rs)

Current

Value

(Rs)

Load

(2.25%)

+

NAV

(Rs)

Investment

Made

(Rs)

Units

Got

February 01, 2006 18.2249 --------- 18.6345 1000 53.63

March 01, 2006 18.2803 980 18.6916 1020 54.57

April 03, 2006 18.3392 1984 18.7518 1016 54.18

May 01, 2006 18.4542 2996 18.8694 1004 53.20


June 01, 2006 18.5166 3990 18.9332 1010 53.34

July 03, 2006 18.6115 5004 19.0302 996 52.33

August 01, 2006 18.704 6007 19.1248 993 51.92

September 01, 2006 18.9008 7052 19.326 948 49.05

October 03, 2006 19.0739 8052 19.503 948 48.60

November 01, 2006 19.1858 9032 19.6175 968 49.34

December 01, 2006 19.3916 10086 19.828 914 46.10

January 02, 2007 19.501 11041 19.9398 959 48.09

Total 225.1838 11776 614.29

Using the same way and method as used in calculation of return of Reliance using Value

Averaging we will find that

One year return = 1.73%

Average Price = Rs 18.7653

Average Cost = Rs 19.17


FINDINGS

Like a traveler, who after completing his long and arduous journey reaches his

destination and looks back upon the area covered by him for recalling the important

landmarks and experiences he came across; similarly, it would be desirable to review

the various aspects of the present study. So prior to winding up this study, an attempt is

made to summarize its major findings and suggestions on the basis of forgoing chapters.


Findings: -

1. All the Equity related funds invested in high growth, current high importance sectors

Like Energy, Infrastructure, IT, Telecom, Oil, Auto etc.

2. To maintain liquidity all the mutual funds have cash holdings of nearly 10% out of

there total assets. Maintaining cash also enables them to invest in any lucrative

instrument as it comes.

3. NAV of all the equity related funds fell down in June, July, and August 2006 due to

Fall in the Sensex. However those funds which invested in safer instruments like Bonds,

Government Securities there NAV were not much affected.

4. The main reasons for Sensex fall were found to be:

The interest rate hike in the US by the Federal Reserve Bank.

BSE Metal Index lost 22 per cent. This putted lot of impact as infrastructure

development is in Boom in INDIA.

Some people viewed that Sensex growth was valuated higher.

Markets in US and Japan were attracting liquidity and inflation scare was also

there, so a lot of emerging markets pulled back.

Industry feared more tax brackets.

Many reports were issued which criticized the growth shown by Sensex. It was

speculated by experts that Sensex may touch 9000 mark.

FII‘s were net sellers in emerging markets to book profits.

The rise in the level of margin trading was very high.

International Crude Oil Prices were rising.

5. The one year equity related funds is higher than other funds. It proves the principal of

high risk, high return.


6. DSP Merrill Lynch Mutual Fund gave one year return of 36.4%. Total number of

instruments in its portfolio is 77. However HDFC Mutual Fund gave one year return of

nearly 34%, with number of instruments in its portfolio close to 60. So it‘s important

what instrument we include in portfolio rather than the number of securities. More

number of securities only complexes the portfolio management.

7. As the NAV increases, the number of units which an investor gets decreases and vice-

versa.

8. Average Price which a investor has to pay to invest in a mutual fund was found to be

less in one time investment than opting for SIP or Value Averaging (if available).

9. Average Price which an investor has to pay to invest in a mutual fund was found to be

equal in SIP and Value Averaging.

10. Average Cost associated with a mutual fund was found to be least in one time

investment than Value Averaging, whose average cost was further less than that

associated with SIP.

11. Average Price, Average Cost in one time investment was found to be less in

comparison to other investing ways. This is one of the reasons why its one year returns

are more.

12. To practically implement value averaging the minimum amount condition like in SIP

has to be eliminated. As we have seen in the calculations at one time investor was

investing Rs. 1596/- and at other Rs 158/- only.

13. One year return in One time investment was found to be more than in Value

Averaging investment way, which was further high than one year return using SIP.


14. Growth fund option gives investors good returns as well as capital appreciation.


Suggestions

1. Best time to invest in stock market is when it is down because with same investment

money he will get more value.

2. Mutual Fund is the best way to enter into market particularly for those investors who

want good returns with minimum risk as fund of mutual funds is handled by an expert.


3. To get good returns investor must invest considering the time horizon of at least two to

three years. This will help him in getting good returns.

4. Portfolio management is a difficult task. So fund managers must choose optimal

number of securities which meets the objectives of fund.

5. Mutual Fund Companies must devise fund considering the end investor in mind.

6. Individual investors must also choose a basket of securities instead of making

investment in only one or two instruments, so that even if one instruments return is

negative other instruments return can compensate that.

7. Since there are large number of mutual funds in which an investor can invest, so he

must choose the fund in which investment is to be made by clearly understanding the

little aspects associated with it.

8. Those investors who are risk averse must invest in open ended funds because he can

look at the past performance of the fund under consideration.

9. Diversification of portfolio is must as it will reduce the unsystematic risk and give the

return an edge.


Limitations

The researcher was inexperienced.


The scope of the study was very wide as there are hundreds of mutual funds of

different types but only few have been studied.

The portfolio published by the various Asset Management Companies might not

be the real one. As, if it would be so than any individual can invest in the manner

similar to portfolio of funds.

The objective of including a particular sector in the portfolio by the fund manager

couldn‘t be known.

The portfolio being maintained by different funds changes with market

conditions. The portfolio being actually maintained under different market

conditions in last one year couldn‘t be ascertained.

To develop a new way of investment lot of calculations needs to be done, but here

only few has been done.

The actual hurdles in making value averaging as an investment way in portfolio

couldn‘t be found.


Conclusion


Thus on the whole it can be concluded that there is

no conclusive evidence which suggest that performance of mutual fund scheme portfolio

is superior to others. But it is for sure performance of the most of the funds in better.

Each investment alternative has its own strengths and weaknesses. Equity related funds

give more returns, but the risk associated is also very high. It would be clearer from the

fact that when Sensex was down in the middle of 2006, the NAV of all the equity related

funds fell down. On the other hand investing in safer instruments like Bank Deposits,

Government Bonds….gives investor the assured return with nearly no risk. But the

returns are very less in comparison to other instruments. So if an investor wants to get

good returns with minimum risk he must invest in basket of securities. Selecting a fund is

not an easy task. So he must do his homework very clearly. While choosing the fund it is

also very necessary that he chose funds investing in different sectors. Mutual Funds are

probably the best investment tool for those persons who don‘t know the basics of Stock

Market but wish to invest in it. As mutual fund investments are taken, care by expert fund

managers so chances of making a loss in the investment are very less.

Right now practical application of investing in mutual fund by using Value Averaging

appears to be difficult. But if it is applied than by investing a small amount an investor

will be able to get good returns in comparison to SIP. A lot of research has to be done

onto it. In last we can conclude that those investors who wish to get good returns with

minimum risk they must invest in mutual funds. But while investing they must consider

there investment objectives, expected returns, risk taking capability. Depending upon

these they must choose the instrument in which they should invest. Further they should

insure that they make investment in basket of instruments as this will give those

advantages of various sectors, at the same time minimize the risk.


BIBLIOGRAPHY


Websites

www.reliancemutual.com

www.sbimf.com

www.franklintempletonindia.com

www.hdfcfund.com

www.dspmlmutualfund.com

www.kotakmutual.com

www.jmmutual.com

www.licmutual.com

www.utimf.com

www.valueresearchindia.com

www.amfiindia.com

www.mutualfundindia.com

Books

Verma, Dr J.C., ―Mutual Funds & Investment Portfolio‖, Bharat Publications, 2nd

Edition.

Pandian, Punithavathy, ―Security Analysis and Portfolio Management‖, Vikas

Publications, 2nd

Reprint.

Kothari, C.R., ―Research Methodology‖, New Age International Publishers, 2005.

Thesis- Portfolio Management

Documents

Transcript of Thesis- Portfolio Management