TRAINING PROJECT REPORTON

“MUTUAL FUND IS THE BETTER INVESTMENT PLAN”

A Training Project Report

SUBMITTED TO THE

PARTIAL FULFILLMENT OF TWO YEAR FULL TIME COURSE

MASTERS IN BUSINESS ADMINISTRATION

Academic Session 2012-13

PROJECT GUIDE: SUBMITTED BY:

Dr.Vanadna panwar Dharmveer Khangar

Rajasthan Technical University, Kota

Kota (Rajasthan)

CERTIFICATE

This is to certify that Mr. Dharmveer Khangar student of MBA III semester at

Maharishi Arvind International Institute of Technology, has completed Training Project

entitled “MUTUAL FUND IS THE BETTER INVESTMENT PLAN” This project has

been completed after studying for one year in MBA course and for partially fulfilling the

requirements for award of MBA. The Major Research Project has been conducted under

the guidance of Dr. Vandana Panwar Faculty of MBA Dept. of UCE and is as per norms.

Dr. Vandana Panwar

FACULTY - MBA Dept

Academic Guide , UCE Kota

Date:

CERTIFICATE

This is to certify that Mr. Dharmveer Khangar student of MBA III semester at UCE, has

submitted Training Project Report entitled “MUTUAL FUND IS THE BETTER

INVESTMENT PLAN” This project has been completed after studying for one year in

MBA course and for partially fulfilling the requirements for award of MBA. The Training

Project Report has been evaluated and viva-voce conducted by the undersigned panel of

examiners. The project has been found satisfactory/unsatisfactory and is recommended/not

recommended for acceptance.

Prof. Prof.

Internal Examiner External Examiner

Kota

Date:

DECLARATION

I Dharmveer Khangar Student of MBA III year hereby declares that for the purpose of

Training Project Report I have conducted study on “MUTUAL FUND IS THE BETTER

INVESTMENT PLAN” for the partial fulfillment of MBA degree. It is my original

work.

Place:

Signature

Date:

ACKNOWLEDGEMENT

On completion of my project on the topic “MUTUAL FUND IS THE BETTER

INVESTMENT PLAN” I would like to say that it was an absolute privilege for me to

work under such a prestigious and professional organization.

I sincerely thank Mr. Kirtidhwaj Singh Rana H.R. Manager (Training) of UTI Asset

Management Company Ltd. for providing me an opportunity to work on this project. I am

very obliged to receive his invaluable guidance, which he spared for me from his busy

schedule.

I appreciate the spontaneity and willingness of all the employees, management and staff of

UTI mutual fund who helped me by giving their valuable feedback so that I could

complete my survey on effectiveness of training programmed as observed in this

organization.

I take this opportunity in my career to express my sincere gratitude and in deftness to all

those who made this project a success. I would like to mention that this sentiment will

linger on throughout my life.

Undergoing training here gave me a good insight into the functioning of an organization. I

would also like to thank my teachers for giving me a platform to learn so much.

DHARMVEER KHANGAR

PREFACE

It is well evident that work experience is an indispensable part of every professional

course. In the same manner practical training in any organization is a must for each and

every individual the management course. This training gives more knowledge about

present corporate world. It also helps the individual to improve his skills to a great extent

and assess his personality in corporate life. Classroom study is no doubt quite important

for gaining theoretical knowledge, but practical is equally for who wants to provide

herself the real working environment in any field of study this true of management studies

well.

We generally get theoretical knowledge of management. But this knowledge doesn’t

prove to be adequate. In future management student have to work in an organization. By

merely knowing theoretical what management is, we are not capable of applying it.

Being a management student, I also had to undergo 45 Days of summer training. I under

took training at UTI MUTUAL FUND.

I have much pleasure in submitting the Project Report on “MUTUAL FUND IS THE

BETTER INVESTMENT PLAN”

DHARMVEER KHANGAR

EXECUTIVE SUMMARY

In few years mutual fund has emerged as a tool for ensuring one’s financial well being.

Mutual funds have not only contributed to the India growth story but have also helped

families tap into the success of Indian industry. The main objective of the study is to need

of financial advisors for mutual fund investors and identify the consumer behavior with

UTI Mutual Fund. This mutual fund association of India maintains a high professional and

ethical standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of

conduct which is followed by members and related people engaged in the activities

of mutual fund and asset management. The agencies who are by any means

connected or involved in the field of capital markets and financial services also

involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual

fund industry.

Association of Mutual Fund of India do represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual

Fund Industry.

It develops a team of well qualified and trained Agent distributors. It implements a

program of training and certification for all intermediaries and other engaged in the

mutual fund industry.

AMFI undertakes all India awareness program for investors in order to promote

proper understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate information

on Mutual Fund Industry and undertakes studies and research either directly or in

association with other bodies

I studied about the products and strategies of other AMCs to know why people prefer to

invest in those AMCs. This project covers the topic “THE MUTUAL FUND IS

BETTER INVESTMENT PLAN”. The data collected has been well organized and

presented. I hope the research findings and conclusion will be use.

CONTENT

Certificates

Declaration

Preface

Acknowledgement

Executive Summary

Chapter No. Chapter name Page No.

1 Company Profile3-12

2 Conceptual Framework13-47

3 Research Methodology48-50

4 Analysis and Interpretation51-83

5 Facts and Findings84-85

6 Conclusion86

7Recommendation and Suggestions 87-88

Questionnaire

Bibliography

Annexure

List of figures

     

S. No. Details Page No.

     

1 Concept of mutual fund   1

2 Hierarchical structure in diagram 10

3 Structure according to the product offered by UTI 11

4 Categories of mutual funds 16

5 Risk v/s Return 19

 

INTRODUCTION

The SEBI regulations, 1993 defines a mutual fund as “a fund in the form of a trust by a

sponsor, to raise money by the trustee trough the sale of units to the public, under one or

more schemes, for investing in securities in accordance with these regulations”

A mutual fund is a professionally-managed firm of collective investments that pools

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

instruments, and/or other securities. In a mutual fund, the fund manager, who is also

known as the portfolio manager, trades the fund's underlying securities, realizing capital

gains or losses, and collects the dividend or interest income. The investment proceeds are

then passed along to the individual investors. The value of a share of the mutual fund,

known as the net asset value per share (NAV), is calculated daily based on the total value

of the fund divided by the number of shares currently issued and outstanding.

“Success is a journey, not a destination.” If we look for examples to prove this quote

than we can find many but there is none like that of UTI. Back in the year 1981, five

people created history by establishing UTI and company which is today known as UTI,

the largest financial service provider of India.

Success sutras of UTI

The success story of UTI is driven by 8 success sutras adopted by it namely trust,

integrity, dedication, commitment, enterprise, hard work and team play, learning

and innovation, empathy and humility. These are the values that bind success with UTI.

Vision of UTI

To be the most preferred Mutual fund. UTI shall aim for complete customer satisfaction,

by combining its human and technological resources, to provide world class quality

services. In the process UTI shall strive to meet and exceed customer's satisfaction and set

industry standards.

Mission

1 The most trusted brand, admired by all stakeholders.

2. The largest and most efficient money manager with global presence.

3. The best in class customer service provider.

4. Most innovative and best wealth creator.

5. A socially responsible organization known for best corporate governance.

Chapter-1COMPANY PROFILE

COMPANY PROFILE

UTI Mutual Fund was established as UTI and company by five chartered accountants

during the year 1979-80, and then its work was confined to audit and taxation only. Later

on it diversified into financial and accounting services during the year 1981-82 with a

capital of rs.150000. it achieved its first milestone after its first investment in technology.

UTI became a known name during the year 1985-86 when it forayed into capital market as

registrar.

Evolution of UTI

It is well said that success is a journey not a destination and we can see it being proved by

UTI mutual fund. Under this section we will see that how this “UTI and company” of

1980 became “UTI mutual fund” of 2008. UTI blossomed with the setting up of its first

branch at Mumbai during the year 1987-88. The turning point came in the year 1989 when

it decided to enter into one of the not only emerging rather potential field too i.e. stock

broking. It added the feather of stock broking into its cap. At the same time it became the

member of Hyderabad Stock Exchange through associate firm UTI securities ltd and then

UTI never looked back……..it went on adding services one after another, it entered into

retail stock broking in the year 1990. UTI investor service centers were set up in the year

1992. UTI which already enjoyed a wide network through its investor service centers,

entered into financial product distribution services in the year 1993. One year more and

UTI was now dealing into mutual fund services too in the year 1994 but it didn’t stopped

there, it stepped into corporate finance and investment banking in the year 1995.

UTI’s strategy has always been being the first entrant in the market. UTI again hit the

limelight by becoming the first registrar in the country to be awarded ISO 9002 in the year

1997. Then it stepped into the other most happening sector i.e. IT enabled services by

establishing its own BPO units and at a gap of just 1 year it took the path of e-Business

through its website www.utimf.com . Then it entered into insurance services in the year

2001 with the launch of its retail arm “UTI- the fin a polis: your personal finance advisor”.

Then in the year 2002 it launched its PCG (Private Client Group) which looks after its

High Net worth Individuals .and maintain their portfolio and provides them with other

financial services. In the year 2003, it commenced secondary debt and WDM trading.

It was a decade which saw many Indian companies going global…..so why the largest

financial service provider of India should lag behind? Hence, UTI launched “UTI global

services limited” after entering into a joint venture with Computershare, Australia in the

year 2004.the year 2004 also saw UTI entering into commodities marketing through UTI

com trade.

Year 2005 saw UTI establishing a separate branch for its insurance services under the

head “UTI insurance broking ltd” and in the same year, after being impressed with the

rapid growth of UTI stock broking limited, PCG group of Hong Kong acquired 25% stake

at KSBL. In the year 2006, UTI entered into one of the hottest sector of present time i.e.

real estate through UTI realty& services (India) ltd. hence, we can see now UTI being

established as the largest financial service provider of the country.

Now group consists of 8 highly renowned entities which are as follow:

1. The first securities registry to receive ISO 9002 certification in India. Registered with

SEBI as Category I Registrar, is Number 1 Registrar in the Country. The award of being

‘Most Admired’ Registrar is one among many of the acknowledgements we received for

our customer friendly and competent services.

2. UTI stock broking ltd. Consists of five units namely stock broking servics, depository

participant, advisory services, distribution of financial products, advisory services and

private client goups.

3. It is registered with SEBI as a category 1 merchant banker. Its clientele includesinclude

leading corporate, State Governments, foreign institutional investors, public and private

sector companies and banks, in Indian and global markets.

4. UTI insurance broking ltd is also a part of UTI stock broking ltd. At UTI Insurance

Broking Limited both life and non-life insurance products are provided to retail

individuals, high net-worth clients and corporates.

5. The company provides investment, advisory and brokerage services in Indian

Commodities Markets. And most importantly, it offer a wide reach through our branch

network of over 225 branches located across 180 cities.

6. UTI Global is a leading business and knowledge process outsourcing Services

Company offering creative business solutions to clients globally. It operates in banking

and financial services, inurance, healthcare and pharmaceuticals, media , telecom and

technology. It has its sales and business development office in New York, USA and the

offshore global delivery center in Hyderabad, India

7. UTI Realty (India) Limited is engaged in the business of real estate and property services offering:

Buying/ selling/ renting of properties

Identifying valuable investments opportunities in the real estate sector

Facilitating financial support for real estate and investments in properties

Real estate portfolio advisory service.

8. It is a joint venture between Computershare, Australia and UTI Consultants Limited,

India in the registry management services industry.

Organization structure of UTI

Talking about the organization structure of UTI we have the board of directors as the

supreme governing body , the chairman being Mr. C parthasarthy, mr. m yugandhar as the

managing director, mr m s ramakrishna andmr. Prasad v. potluri as directors.

The board of diretors head the UTI group, Uti computershares limited, UTI investors

services ltd., UTI comtrade, UTI stock broking ltd., and UTI global services ltd.

UTI group being the flagship company looks after the functional departments such as

corporate affairs, group human resources, finance & accounting, training & development,

technology services and corporate quality.

UTI computershare private limited facilitates mutual fund services, share registry and

issue registry whereas merchant banking is looked after by UTI investor services ltd. UTI

stock broking ltd heads its another branch too i.e. UTI insurance broking ltd. The services

offered by KSBL are: stock broking, depository, research, distribution, personal client

group and institutional desk and finally the BPO services are managed by UTI global

services ltd.

Spectrum of services offered by UTI

UTI being the top registrar and transfer agent, functions as registrar in most of the issues

in the country. Talking about the mutual fund services offered by UTI, we can get the

products of 33 AMCs over here. it deals in both closed ended funds as well as open ended

too. Now one must be thinking why to get the mutual funds from UTI instead of getting it

directly from AMCs???we have great reasons for it: the first one being ; if we avail the

services of UTI then we can get the information about all the AMCs and their products at

a single place along with expert recommendations whereas at an AMC we can get

information about the products of that specific AMC only. And the second being wide

network of UTI….nowadays we can find UTI offices at remote areas too.

Along with these, UTI is very well handling the role of depository participant. Being

registered with both the depositories i.e.; NSDL (national securities depository ltd) and

CDSL (central depository services UTI can have access to both. Its wide network also

facilitates it in distribution of retail financial products.

UTI believes in being updated always. So it is always ready to use latest technologies so

that its clients always in touch with the latest happenings along with UTI. It offers e-

business through internet through its website: www.utimf.com. Other than it, it also

provides its various services through SMS’s.

UTI’s services are not limited to its investors only rather its offerings are for its corporate

clients and distributors too. it is very well aware of the fact that in this era of neck to neck

competition, we can’t ignore any of the aspects of our business….so there’s a offering for

everybody…everyone’s welcome at UTI.

UTI position

Excellence is next to nothing and here at UTI everybody tries their best to offer excellent

services to its clientele through its offerings maintaining the UTI culture which includes:

1. Controlled and low cost service culture: UTI is there to serve its client at the minimum

possible cost. it controls cost by its various cost- cutting techniques and minimization of

avoidable costs.

2. Large volume processing capability: Being the largest financial service provider in the

country, it has the unique distinction of operating its activities on a large scale which

benefits all the parties cordially.

3. Adherence to strict time schedule: UTI knows that time is money and tries it best to finish the task within the stipulated time schedule.4. Expertise in coordinating multi-location responses: UTI has got a wide network and

hence one can find its branches at most of the places in India. Thus it enjoys its presence

everywhere and coordinates among itself in solving the queries and in responding to any

situation.

5.Expertise in managing independent entities such as banks, post-office etc.: the work

culture of UTI and the ethics followed inside UTI makes its workforce compatible with

everybody, so the UTI people establishes good coordination with independent entities too.

6. Pooling of group resources: UTI group consists of eight subsidiaries, so it can easily

pool up its resources for accomplishment of its goals, whenever needed. The groups can

help each other whenever there are peaks and lows, and even in the case when they have

huge targets just as we saw few years back, Tata group pooling its resources to acquire

Corus.

Steps of achievement

The core competency of UTI lies in the following points due to which it enjoys a

competitive edge over its competitors. The following culture adopted by UTI makes it all

time favorite among its clientele:

1. Professionally managed by qualified and trained manpower.2. Uniquely structured in-house software and hardware department3. Query handling within 48 hrs.4. Strong secretarial, accounting and audit systems.5. Unique work culture of working 7 days a week in 3 shifts.6. Unmatched network spreading all over India.

Achievements sounds synonymous to UTI

The landmarks achieved by UTI very well define its success story. In the previous pages,

we learnt how a company started by five chartered accountants, named as UTI and

company turned into today’s UTI group, the largest financial intermediary of India. But

success didn’t came to UTI at a flow, the hard work and dedication of its workforce made

it what it is today…gradually it achieved the following landmarks and now it has became

what we call the UTI group, now it is:

1. Largest independent distributor for financial products.2. An among the top 5 stock broker.3. An among the top 3 depository participants.4. Largest network of branches & business associates.5. ISO 9002 certified operations by DNV.6. An among top 10 investment bankers.7. Adjudged as one of the top 50 IT users in India by MIS south Asia.8. full- fledged IT driven operation.9. India’s no.1 registrar & securities transfer agent.

Clientele of UTI

UTI’s culture has helped UTI in achieving such a distinct position in the market where it can boast of its huge client base. Be it a retail investor investing Rs. 500 in a SIP in Reliance mutual fund or be it the largest corporate house of the country: Reliance industries- everybody is heading towards UTI for their wealth maximization, let’s have a look at the clientele of UTI.According to the data published in year 2007, UTI stock broking ltd. Operates through more than 12000 terminals, more than 290000 accounts are maintained and commands over 3.14% market share of NSE. The distribution service has access to more than Rs. 40 billion Assets under Management. UTI being a depository participant with both NSDL and CDSL manages more than 700000 accounts from more than 380 locations. Talking about the registry services, it manages over 750 public/ right issues at the same time, it is managing over 16 million portfolios as registrar.

If we took a look at some of the top corporate houses availing the services of UTI then

we have: Reliance, IOC, IDBI,LIC, Hindustan Unilever, Principal Mutual Fund, Duetsche

Mutual Fund, Yogokawa, Marico Industries, Patni Computers, Morgan Stanley,

Glenmark, CRISIL, 3M, Kotak Mahindra Bank, Bharti Televenture, Infosys Technologies,

Wipro, Info tech, IPCL,TATA consultancy services, UTI mutual fund etc. Thus in total

UTI serves over 16 million investors.

UTI at eastern zone

UTI stock Broking Ltd was started 11 yrs ago i.e.; during the year 1996 at Jatin Das road which was later on established as the regional head office. Presently Mr. Alok Chaturvedi is heading the eastern zone. Talking about the zonal offices, UTI has zonal offices at Kolkata, south Bengal, north Bengal, North east, Jharkhand, Bihar, Orissa and Chhattisgarh. Each zonal office has got its own zonal heads. UTI is a member of three stock exchanges of India: National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Hyderabad Stock Exchange (HSE).

Hierarchical Structure in diagram

The above diagram shows the hierarchy of UTI stock broking ltd. It can be easily

depicted from the diagram that the regional head (presently Mr. Alok Chaturvedi) is the

supreme in the eastern region, under whom the various zonal heads operate and under

these zonal heads, the branch heads operate. Between each level o the hierarchy, there

exists a coordinator, who acts as the facilitator between the different heads.

Structure according to the Products offered by UTI

REGIONAL HEADS

UTI Mutual Fund Services

Mutual funds have servings for everybody. Whichever type of investor you are, you will

surely get a mutual fund meeting your requirements. But investing in mutual funds is no

child’s play therefore UTI mutual fund advisory services is there to guide in each and

every step of investment in mutual funds so that the dream of wealth creation doesn’t turns

into nightmares. Its offerings includes: products of all the 33 major AMCs, research report

about all the existing funds as well as NFOs, customized mutual fund portfolios designed

for individual as well as institutional customers, it not only design the portfolios rather it

offers continuous portfolio revision too depending on changing market outlook and

evolving trends, it further gives access to its online consolidated portfolio statement. Thus

UTI with its various offerings makes the investor feel safe in this dynamic environment of

the Indian financial market.

UTI Computershare mutual fund services offers investors services, distributor services and

client services. It can be said that UTI is dedicated towards providing quality service to all

these three facets of the investment process.

UTI being an intermediary is well registered with the Association of Mutual Funds of

India (AMFI). UTI has got the registration no [ARN 0018] for mutual funds, which is

PRODUCT HEADS

HEA

Mutual funds

Insurance broking

commodities

Stock broking

Depository participant

Merchant & inv.banking

PMS

Realty

Debt division

mentioned on every form. After the procurement of forms from various AMCs, the forms

are passed on to its various zonal and branch offices (as per their requirements) and then

further processing is done either directly or through sub-brokers.

UTI operates through its sub- brokers, associates and its excellent pool of own direct

employees. The employees are offered salary by UTI whereas the sub- brokers and

associates get certain commission. UTI has 70 branches and 3 franchisees in the eastern

region. All the work of mutual funds is regulated from Rashbehari avenue branch, an

extension of the JDR branch.

The main source of earning for UTI is the brokerage offered by the various AMCs known

as pay-in. The amount offered may vary from AMC to AMC. Also, the franchisees have

to pay a certain amount every month. Now UTI also pay a certain amount to the sub

brokers and associates known as pay-out. The payout is decided according to the

procurement done by them.

Recruitment

UTI has an enviable pool of dynamic employees. Its people power has a great contribution

in making it the No. 1 financial intermediary. All the employees of UTI dealing in mutual

funds have to go through AMFI test. The recruitment process is at par with the industry

standards, it is mostly done through campus recruitment from reputed B- schools. Other

than that, it also recruits through direct interviews and GDs as per their requirement.

UTI never compromises with quality that’s the reason it is excelling by providing quality

services to all the investors, clients, AMCs etc. associated with it.

Chapter-2CONCEPTUAL FRAMEWORK

CONCEPTUAL FRAMEWORK

It’s all about mutual fund:

WHAT IS MUTUAL FUND

BY STRUCTURE

BY NATURE

EQUITY FUND

DEBT FUNDS

BY INVESTMENT OBJECTIVE

OTHER SCHEMES

PROS & CONS OF INVESTING IN MUTUAL FUNDS

ADVANTAGES OF INVESTING MUTUAL FUNDS

DISADVANTAGES OF INVESTING MUTUAL FUNDS

MUTUAL FUNDS INDUSTRY IN INDIA

MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

CATEGORIES OF MUTUAL FUNDS

INVESTMENT STRATEGIES

WORKING OF A MUTUAL FUND

GUIDELINES OF THE SEBI FOR MUTUAL FUND

COMPANIES DISTRIBUTION CHANNELS

DOES FUND PERFORMANCE AND RANKING PERSIST?

PORTFOLIO ANALYSIS TOOLS

Mutual funds

A mutual fund is a professionally-managed firm of collective investments that pools

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

instruments, and/or other securities in other words we can say that A Mutual Fund is a

trust registered with the Securities and Exchange Board of India (SEBI), which pools up

the money from individual / corporate investors and invests the same on behalf of the

investors /unit holders, in equity shares, Government securities, Bonds, Call money

markets etc., and distributes the profits.

The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly

calculated daily based on the total value of the fund divided by the number of shares

currently issued and outstanding. The value of all the securities in the portfolio in

calculated daily. From this, all expenses are deducted and the resultant value divided by

the number of units in the fund is the fund’s NAV.

NAV = Total value of the fund………………. No. of shares currently issued and outstanding

Advantages of a MF

– Mutual Funds provide the benefit of cheap access to expensive stocks

– Mutual funds diversify the risk of the investor by investing in a basket of assets

– A team of professional fund managers manages them with in-depth research inputs from investment analysts.

– Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information, which individual investors cannot access.

History of the 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 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 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 Canra 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.47,004crores.

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

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. As at the end of January 2003, there were 33 mutual

funds with total assets of Rs. 1,21,805 crores.

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 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. consolidation

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

of Rs.153108 crores under 421 schemes.

Categories of mutual funds

Mutual funds can be classified as follow:

Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.

Close-ended funds: These funds raise money from investors only once. Therefore,

after the offer period, fresh investments cannot be made into the fund. If the fund is

listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley

Growth Fund). Recently, most of the New Fund Offers of close-ended funds

provided liquidity window on a periodic basis such as monthly or weekly.

Redemption of units can be made during specified intervals. Therefore, such funds

have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses.

However, short term fluctuations in the market, generally smoothens out in the long

term, thereby offering higher returns at relatively lower volatility. At the same time,

such funds can yield great capital appreciation as, historically, equities have

outperformed all asset classes in the long term. Hence, investment in equity funds

should be considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages.ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks.iii) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields.iv) The metric funds- Invest 100% of the assets in sectors which are related through some theme.e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks.vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a

result, on the risk-return ladder, they fall between equity and debt funds. Balanced

funds are the ideal mutual funds vehicle for investors who prefer spreading their

risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market.ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate.iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-

pricing between cash market and derivatives market. Funds are allocated to equities,

derivatives and money markets. Higher proportion (around 75%) is put in money markets,

in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities.vi) Income funds LT- typically, such funds invest a major portion of the portfolio in long-term debt papers.vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.Investment strategies

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed

date of a month. Payment is made through post dated ch eque or direct debit facilities.

The investor gets fewer units when the NAV is high and more units when the NAV is low.

This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give

instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same

mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then

he can withdraw a fixed amount each month.

Risk v/s. return

Working of Mutual fund

The entire mutual fund industry operates in a very organized way. The investors known as

unit holder’s handover their savings to the AMCs under various schemes. The objective of

the investment should match with the objective of the fund to best suit the investors’

needs. The AMCs further invest the funds into various securities according to the

investment objective. The return generated from the investments is passed on to the

investors or reinvested as mentioned in the offer document.

To protect the interest of the investors, SEBI formulates policies and regulates the mutual

funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from

time to time. SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities. Custodian, registered with SEBI, holds

the securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or board

of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of

mutual funds that the mutual funds function within the strict regulatory framework. Its

objective is to increase public awareness of the mutual fund industry. AMFI also is

engaged in upgrading professional standards and in promoting best industry practices in

diverse areas such as valuation, disclosure, transparency etc.

Documents required

1. PAN mandatory

Proof of identity: 1 photo PAN card

2. In case of non - photo PAN card in addition to copy of PAN card any one of the

following: driving license/passport copy/ voter id/ bank photo pass book.

Proof of address (any of the following) : Latest telephone bill, latest electricity bill,

Passport, latest bank passbook/bank account statement, latest Demat account statement,

voter id, driving license, ration card, rent agreement.

Offer document: an offer document is issued when the AMCs make New Fund

Offer(NFO). Its advisable to every investor to ask for the offer document and read it

before investing. An offer document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format)

Summary Information

Glossary of Defined Terms

Risk Disclosures

Legal and Regulatory Compliance

Expenses

Condensed Financial Information of Schemes

Constitution of the Mutual Fund

Investment Objectives and Policies

Management of the Fund

Offer Related Information.

Key Information Memorandum: A key information memorandum, popularly known as

KIM, is attached along with the mutual fund form. And thus every investor get to read it.

Its contents are:

1. Name of the fund.

2. Investment objective

3. Asset allocation pattern of the scheme.

4. Risk profile of the scheme

5. Plans & options

6. Minimum application amount/ no. of units

7. Benchmark index

8. Dividend policy

9. Name of the fund manager(s)

10. Expenses of the scheme: load structure, recurring expenses

11. Performance of the scheme (scheme return v/s. benchmark return)

12. Year- wise return for the last 5 financial year.

Distribution channels

Mutual funds posses a very strong distribution channel so that the ultimate customers

doesn’t face any difficulty in the final procurement. The various parties involved in

distribution of mutual funds are:

1. Direct marketing by the AMCs: The forms could be obtained from the AMCs directly.

The investors can approach to the AMCs for the forms. some of the top AMCs of India

are; Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram,

ICICI, Mirae Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs

include: Standard Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill

Lynch, etc.

2. Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-

broker to popularize their funds. AMCs can enjoy the advantage of large network of these

brokers and sub brokers.eg: KARVY being the top financial intermediary of India has the

greatest network. So the AMCs dealing through KARVY has access to most of the

investors.

3. Individual agents, Banks, NBFC: investors can procure the funds through individual

agents, independent brokers, banks and several non- banking financial corporation’s too,

whichever he finds convenient for him.

Costs associated expenses

AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries,

advertising expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges

Rs1.50 for every Rs100 in assets under management. A fund's expense ratio is typically to

the size of the funds under management and not to the returns earned. Normally, the costs

of running a fund grow slower than the growth in the fund size - so, the more assets in the

fund, the lower should be its expense ratio.

Loads:

Entry Load/Front-End Load (0-2.25%) - It’s the commission charged at the time of

buying the fund to cover the cost of selling, processing etc.

Exit Load/Back- End Load (0.25-2.25%) - It’s the commission or charged paid when an

investor exits from a mutual fund, it is imposed to discourage withdrawals. It may reduce

to zero with increase in holding period.

Measuring and evaluating mutual funds performance

Every investor investing in the mutual funds is driven by the motto of either wealth

creation or wealth increment or both. Therefore it’s very necessary to continuously

evaluate the funds’ performance with the help of factsheets and newsletters, websites,

newspapers and professional advisors like UTI mutual fund services. If the investors

ignore the evaluation of funds’ performance then he can lose hold of it any time. In this

ever-changing industry, he can face any of the following problems:

1. Variation in the funds’ performance due to change in its management/ objective.

2. The funds’ performance can slip in comparison to similar funds.

3. There may be an increase in the various costs associated with the fund.

4. Beta, a technical measure of the risk associated may also surge.

5. The funds’ ratings may go down in the various lists published by independent rating

agencies.

6. It can merge into another fund or could be acquired by another fund house.

Performance measures

Equity funds: the performance of equity funds can be measured on the basis of: NAV

Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and

Distributions, Computing Total Return (Per Share Income and Expenses, Per Share

Capital Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover

Rate, Fund Size, Transaction Costs, Cash Flow, Leverage.

Debt fund: likewise the performance of debt funds can be measured on the basis of: Peer

Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs,

besides NAV Growth, Total Return and Expense Ratio.

Liquid funds: the performance of the highly volatile liquid funds can be measured on the

basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.

Concept of benchmarking for performance evaluation

Every fund sets its benchmark according to its investment objective. The fund

performance is measured in comparison with the benchmark. If the fund generates a

greater return than the benchmark then it is said that the fund has outperformed

benchmark , if it is equal to benchmark then the correlation between them is exactly 1 and

if in case the return is lower than the benchmark then the fund is said to be

underperformed.

Some of the benchmarks are

1. Equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU,

BSE 500 index, BSE banker, and other sect oral indices.

2. Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Box Total

Return Index, JPM T- Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds.

3. Liquid funds: Short Term Government Instruments’ Interest Rates as Benchmarks, JPM

T- Bill Index

To measure the fund’s performance, the comparisons are usually done with:

i) With a market index.

a. Funds from the same peer group.

b. Other similar products in which investors invest their funds.

Financial planning for investors (ref. to mutual funds):

Investors are required to go for financial planning before making investments in any

mutual fund. The objective of financial planning is to ensure that the right amount of

money is available at the right time to the investor to be able to meet his financial goals. It

is more than mere tax planning.

Steps in financial planning are:

Asset allocation.

Selection of fund.

Studying the features of a scheme.

In case of mutual funds, financial planning is concerned only with broad asset allocation,

leaving the actual allocation of securities and their management to fund managers. A fund

manager has to closely follow the objectives stated in the offer document, because

financial plans of users are chosen using these objectives.

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the

market flooded with a variety of investment options which includes mutual funds,

equities, fixed income bonds, corporate debentures, company fixed deposits, bank

deposits, PPF, life insurance, gold, real estate etc. All these investment options could be

judged on the basis of various parameters such as- return, safety convenience, volatility

and liquidity. Measuring these investment options on the basis of the mentioned

parameters, we get this in a tabular form

Return  Safety  Volatility  Liquidit

y 

Convenie

nce 

Equity  High  Low  High  High  Moderate 

Bonds  Moderate  High  Moderate  Moderate  High 

Co.

Debenture

s 

Moderate  Moderate  Moderate  Low  Low 

Co. FDs  Moderate  Low  Low  Low  Moderate 

Bank

Deposits 

Low  High  Low  High  High 

PPF  Moderate  High  Low  Moderate  High 

Life

Insurance 

Low  High  Low  Low  Moderate 

Gold  Moderate  High  Moderate  Moderate  Gold 

Real

Estate 

High  Moderate  High  Low  Low 

Mutual

Funds 

High  High  Moderate  High  High 

We can very well see that mutual funds outperform every other investment option. On

three parameters it scores high whereas it’s moderate at one. comparing it with the other

options, we find that equities gives us high returns with high liquidity but its volatility too

is high with low safety which doesn’t makes it favorite among persons who have low risk-

appetite. Even the convenience involved with investing in equities is just moderate.

Now looking at bank deposits, it scores better than equities at all fronts but lags badly in

the parameter of utmost important i.e.; it scores low on return , so it’s not an happening

option for person who can afford to take risks for higher return. The other option offering

high return is real estate but that even comes with high volatility and moderate safety

level, even the liquidity and convenience involved are too low. Gold have always been a

favorite among Indians but when we look at it as an investment option then it definitely

doesn’t gives a very bright picture. Although it ensures high safety but the returns

generated and liquidity are moderate. Similarly the other investment options are not at par

with mutual funds and serve the needs of only a specific customer group. Straightforward,

we can say that mutual fund emerges as a clear winner among all the options available.

The reasons for this being:

I) Mutual funds combine the advantage of each of the investment products: mutual

fund is one such option which can invest in all other investment options. Its principle of

diversification allows the investors to taste all the fruits in one plate. Just by investing in

it, the investor can enjoy the best investment option as per the investment objective.

II) Dispense the shortcomings of the other options: every other investment option has

more or less some shortcomings. Such as if some are good at return then they are not safe,

if some are safe then either they have low liquidity or low safety or both….likewise, there

exists no single option which can fit to the need of everybody. But mutual funds have

definitely sorted out this problem. Now everybody can choose their fund according to

their investment objectives.

III) Returns get adjusted for the market movements: As the mutual funds are managed

by experts so they are ready to switch to the profitable option along with the market

movement. Suppose they predict that market is going to fall then they can sell some of

their shares and book profit and can reinvest the amount again in money market

instruments.

IV) Flexibility of invested amount: Other then the above mentioned reasons, there exists

one more reason which has established mutual funds as one of the largest financial

intermediary and that is the flexibility that mutual funds offer regarding the investment

amount. One can start investing in mutual funds with amount as low as Rs. 500 through

SIPs and even Rs. 100 in some cases.

How do investors choose between funds?

When the market is flooded with mutual funds, it’s a very tough job for the investors to

choose the best fund for them. Whenever an investor thinks of investing in mutual funds,

he must look at the investment objective of the fund. Then the investors sort out the funds

whose investment objective matches with that of the investor’s. Now the tough task for

investors start, they may carry on the further process themselves or can go for advisors

like UTI. Of course the investors can save their money by going the direct route i.e.

through the AMCs directly but it will only save 1-2.25% (entry load) but could cost the

investors in terms of returns if the investor is not an expert. So it is always advisable to go

for MF advisors. The mf advisors’ thoughts go beyond just investment objectives and rate

of return. Some of the basic tools which an investor may ignore but an mf advisor will

always look for are as follow:

1. Rupees cost averaging: The investors going for Systematic Investment Plans (SIP) and

Systematic Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost Averaging).

Rupee cost averaging allows an investor to bring down the average cost of buying a

scheme by making a fixed investment periodically, like Rs 5,000 a month and nowadays

even as low as Rs. 500 or Rs. 100. In this case, the investor is always at a profit, even if

the market falls. In case if the NAV of fund falls, the investors can get more number of

units and vice-versa. This results in the average cost per unit for the investor being lower

than the average price per unit over time.

The investor needs to decide on the investment amount and the frequency. More frequent

the investment interval, greater the chances of benefiting from lower prices. Investors can

also benefit by increasing the SIP amount during market downturns, which will result in

reducing the average cost and enhancing returns. Whereas STP allows investors who have

lump sums to park the funds in a low-risk fund like liquid funds and make periodic

transfers to another fund to take advantage of rupee cost averaging. 

2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up

and investing in the asset class that is down. Trigger and switching are tools that can be

used to rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a

specified event occurs. The trigger could be the value of the investment, the net asset

value of the scheme, level of capital appreciation, level of the market indices or even a

date. The funds redeemed can be switched to other specified schemes within the same

fund house. Some fund houses allow such switches without charging an entry load. 

To use the trigger and switch facility, the investor needs to specify the event, the amount

or the number of units to be redeemed and the scheme into which the switch has to be

made. This ensures that the investor books some profits and maintains the asset allocation

in the portfolio. 

3. Diversification: Diversification involves investing the amount into different options. In

case of mutual funds, the investor may enjoy it afterwards also through dividend transfer

option. Under this, the dividend is reinvested not into the same scheme but into another

scheme of the investor's choice.

For example, the dividends from debt funds may be transferred to equity schemes. This

gives the investor a small exposure to a new asset class without risk to the principal

amount. Such transfers may be done with or without entry loads, depending on the MF's

policy. 

4. Tax efficiency: tax factor acts as the “x-factor” for mutual funds. Tax efficiency affects

the final decision of any investor before investing. The investors gain through either

dividends or capital appreciation but if they haven’t considered the tax factor then they

may end loosing.

Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and

education cess) on dividends paid out. Investors who need a regular stream of income

have to choose between the dividend option and a systematic withdrawal plan that allows

them to redeem units periodically. SWP implies capital gains for the investor.

If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax

bracket. Investors in higher tax brackets will end up paying a higher rate as short-term

Capital gains and should choose the dividend option. 

The capital gain is long-term (where the investment has been held for more than one year),

the growth option is more tax efficient for all investors. This is because investors can

redeem units using the SWP where they will have to pay 10 per cent as long-term capital

gains tax against the 12.50 per cent DDT paid by the MF on dividends.

All the tools discussed over here are used by all the advisors and have helped investors in

reducing risk, simplicity and affordability. Even then an investor needs to examine costs,

tax implications and minimum applicable investment amounts before committing to a

service.

Most popular stocks among fund managers (as on 30th April 2008)

Company Name no. of funds Reliance industries limited 244Larsen & toubro limited 206

ICICI bank limited 202State bank of India 188Bharti airtel limited 184Bharat heavy electrical limited 200Reliance communication ventures ltd 169Infosys technologies ltd 159Oil& Natural gas corporation ltd. 153ITC ltd. 143

We can easily point out that reliance industries limited emerges as a true winner over here

attracting the attention of almost244 managers well followed by Larsen & turbo ltd. ICICI

bank ltd and Bharat heavy electrical ltd. The other companies succeeding in getting a

place at top 10 are SBI, Bharti Airtel limited, reliance communications, Infosys

technologies limited, ONGC and at last ITC ltd.

What are the most lucrative sectors for mutual fund managers?

This is a question of utmost interest for all the investors even for those who don’t invest in

mutual funds because the investments done by the MFs act as trendsetters. The

investments made by the fund managers are used for prediction. Huge investments assure

liquidity and reflects appositive picture whereas tight investment policy reflects crunch

and investors may look forward for a gloomy picture.

Their investments show that which sector is hot? And will set the market trends. The

expert management of the funds will always look for profitable and high paying sectors.

So we can have looked at most lucrative sectors to know about the recent trends:

(Source: moneycontrol.com; 20.05.08)

Sector name No. of MFs betting on it

automotive 255banking & financial services

196

cement & construction

237

consumer durables 51conglomerates 218chemicals 259consumer non durables

146

engineering & capital goods

317

food & beverages 175information technology

284

media & entertainment

218

Manufacturing 259metals& mining 275Miscellaneous 250oil & gas 290Pharmaceuticals 250

Services 200Telecom 264Tobacco 150Utility 225

From the above data collected we can say that engineering & capital goods sector has

emerged as the hottest as most of the funds are betting on it. We can say that this sector is

on boom and presents a bright picture. Other than it other sectors on height are oil & gas,

telecom, metals & mining and information technology. Sectors performing average are

automotive, cement & construction, chemicals, media & entertainment, manufacturing,

miscellaneous, pharmaceuticals and utility. The sectors which are not so favorites are

banking & financial services, conglomerates, consumer non- durables, food & beverages,

services and tobacco. And the sector which failed to attract the fund managers is consumer

durables with just 51 funds betting on it.

Thus this analysis not only gives a picture of the mindset of fund managers rather it also

reflects the liquidity existing in each of the sectors. It is not only useful for investors of

mutual funds rather the investors of equity and debt too could take a hint from it. Asset

allocation by fund managers are based on several researches carried on so, it is always

advisable for other investors to take a look on it. It can be further presented in the form of

a graph as follow:

Systematic investment plan (in details)

We have already mentioned about SIPs in brief in the previous pages but now going into

details, we will see how the power of compounding could benefit us. In such case, every

small amounts invested regularly can grow substantially. SIP gives a clear picture of how

an early and regular investment can help the investor in wealth creation. Due to its

unlimited advantages SIP could be redefined as “a methodology of fund investing

regularly to benefit regularly from the stock market volatility. In the later sections we will

see how returns generated from some of the SIPs have outperformed their benchmark but

before moving on to that lets have a look at some of the top performing SIPs and their

return for 1 year:

Scheme Amount NAV NAV DateTotal Amount

Reliance diversified power sector retail 1000 62.74 30/5/2008 14524.07Reliance regular savings equity 1000 22.208 30/5/2008 13584.944principal global opportunities 1000 18.86 30/5/2008 14247.728

fund

DWS investment opportunities

fund 1000 35.31 30/5/2008 13791.157BOB growth fund 1000 42.14 30/5/2008 13769.152

In the above chart, we can see how if we start investing Rs.1000 per month then what

return we’ll get for the total investment of Rs. 12000. There is reliance diversified power

sector retail giving the maximum returns of Rs. 2524.07 per year which comes to 21%

roughly. Next we can see if anybody would have undertaken the SIP in Principal would

have got returns of app. 18%. We can see reliance regular savings equity, DWS

investment opportunities and BOB growth fund giving returns of 13.20%, 14.92%, and

14.74% respectively which is greater than any other monthly investment options. Thus we

can easily make out how SIP is beneficial for us. Its hassle free, it forces the investors to

save and get them into the habit of saving. Also paying a small amount of Rs. 1000 is easy

and convenient for them, thus putting no pressure on their pockets.

Now we will analyze some of the equity fund SIP s of Birla sun-life with BSE 200 and

bank fixed deposits In a tabular format as well as graphical.

Scheme Name

NO. OF INSTALMENTS

Original inv

Returns at BSE 200

FUND RETURNS

Birla SL tax relief '96 144 144000 553190 1684008Birla SL equity fund 114 114000 388701 669219Birla frontline equity fund 66 66000 156269 181127

In the above case, we have taken three funds of Birla sun-life namely Birla sun-life tax

relief ’96, Birla sun-life equity fund and Birla sun-life frontline equity fund. All these

three funds follow the same benchmark i.e. BSE 200. Here, we have shown how one

would have benefitted if he would have put his money into these schemes since their

inception. And the amount even is a meager Rs. 1000 per month.

Starting from Birla frontline equity fund, we could spot that if someone would have

invested Rs. 1000 per month resulting into total investment of Rs. 66000 then it would

have amounted to rs.156269 if invested in BSE 200 whereas the fund would have given a

total return of Rs 181127. Now moving next to Birla sun-life equity fund, a total

investment of 114000 for a total of 114 months at BSE 200 would have given a total

return of Rs. 388701 whereas the fund gave a total return of Rs. 669219, nearly double the

return generated at BSE 200. And now the cream of all the investments, Birla sun-life tax

relief ’96. A total investment of Rs. 144000 for a period of 12 years at BSE 200 would

have given total returns of just Rs. 553190 but the Birla sun-life tax relief ’96 gave an

unbelievable total return of Rs 1684008.

Thus the above case very well explains the power of compounding and early investment.

We have seen how a meager amount of Rs. 144000 turned into Rs. 1684008. It may

appear unbelievable for many but SIPs have turned this into reality and the power of

compounding is speaking loud, attracting more and more investors to create wealth

through SIPs.

Does fund performance and ranking persist?

This project has been a great learning experience for me. But the analyses that are carried

onward these pages are really close to my heart. After taking a look at the data presented

below, an expert might underestimate my efforts. One might think it as a boring task and

can go for recording historic NAVs since last 1 month instead of recording it daily.

But frankly speaking, while tracking the NAVs, I really developed some sentiments with

these funds. Really the ups and downs in the NAVs affected me as if I m tracking my own

portfolio. The portfolio consists of different types of funds. We can see some funds are 5-

star rated but their performances are below the unrated funds. We can also find some

funds which performed very well initially but gradually declined either in short- run or

long run. Some funds have high NAVS but the returns offered are low. We can also see

some funds following same benchmark and reflecting diverse NAV and returns. Even it

can be seen that the expense ratios for various funds varies which may affect the ultimate

return.

Now before going into details, let’s have a look at those funds: in this downgrading equity

market, we can easily make out that the 1 year return of the fund that was on 17 th of april

could not be sustained till 1 month. One can sort out that the present return of funds has

decreased a lot and subsequently its NAV too has come down. All the funds are showing

negative returns for the last 1 month. Even the two hybrid funds are showing negative

monthly returns. That means all those who bought these funds a month back must be

experiencing a negative return. Although the annual return of the funds have gone down in

comparison to what it was offering a month back. Still the total return is positive. On an

average the equity funds are offering a return of 30% annually, in spite of a week equity

market.

Now checking the validity of funds’ ratings, we can see that some of the funds are 5 star

or 4 star rated but their returns lag behind the unrated funds. Although, since the ratings

include both risk and return so it will not be a total justice to judge the funds purely on a

return basis but still we can go for it just to judge them on the basis of returns generated.

Looking at the funds, we have three 5 star rated funds, one 4star rated and six unrated

funds. In other way, we have seven equity diversified funds, one equity specialty, one

hybrid: dynamic asset allocation and one hybrid: debt oriented fund. It is not possible to

compare each and every fund in details. So I have compared 2 funds out of this list on the

basis of their returns and expenses.

Here DBS Chola opportunities and ICICI Pru infrastructure follows the same benchmark

S&P CNX NIFTY. In this case, DBS Chola opportunities is a 4 star rated fund whereas

ICICI Pru infrastructure is an unrated fund. The star rating definitely gives DBS a

competitive advantage but now let’s have a look at other factors, we can see that ICICI

Pru has really performed worse in the last month. Its 1 month return is -5.8% whereas

DBS gave a return of -3.07%. Even if we consider 6 months return or yearly returns,

definitely DBS is a winner. We can easily spot the difference by change in their rankings

even. Considering 1 yr return, we can spot DBS at no.5 whereas ICICI at no.6 but when

we look at the monthly ratings, to our ultimate shock, DBS is at 52 and ICICI far behind at

172 but if we look at the yearly returns, then there is not much difference between them,

DBS offering returns of 35.17% whereas ICICI offering 34.27. But looking at the

expenses, the expenses charged by ICICI is lower to that of DBS, which may act as the

ultimate factor in choosing the fund in a long run.

Thus at last we can conclude that ratings are totally irrelevant for investors. Here is

why they are totally irrelevant to investor:

1. Mutual fund ratings are based on the returns generated, that is, appreciation of net

asset value, based on the historical performance. So they rely more on the past,

rather than the current scenario.

2. As returns play a key role in deciding the ratings, any change in returns will lead to

re-rating of the mutual fund. If you choose your mutual fund only on the basis of

rating, it will be a nuisance to keep realigning your investment in line with the

revision of the ratings.

3. The ratings don’t value the investment processes followed by the mutual fund. As a

result, a fund following a certain process may lose out to a fund that has given

superior returns only because it has a star fund manager. But there is a higher risk

associated with a star fund manager that the ratings don’t reflect. If the star fund

manager quits, it can throw the working of a mutual fund out of gear and thus affect

its performance.

4. The ratings don’t show the level of ethics followed by the fund. A fund or fund

manager that is involved in a scam or financial irregularities won’t get poor ratings

on the basis of ethics. As the star ratings look at just returns, any wrongdoing

carried out by the fund or fund manager will be completely ignored.

5. Ratings also don’t consider two very important factors: transparency and keeping

investors informed. There are no negative ratings awarded to the fund for being

investor-unfriendly.

6. Ratings don’t match the investor’s risk-appetite with their portfolio. As a matter of

fact, investments should be done only after considering the risk appetite of the

investor. For example, equities may not be the best investment vehicle for a very

conservative investor. However ratings fail to take that into account.

Ratings should be the starting point for making an investment decision. They are not the

be all and end all of mutual fund investments. There are other important factors like

portfolio management, age of funds and more, which should be taken into account before

making an investment.

Portfolio analysis tools

With the increasing number of mutual fund schemes, it becomes very difficult for an

investor to choose the type of funds for investment. By using some of the portfolio

analysis tools, he can become more equipped to make a well informed choice. There are

many financial tools to analyze mutual funds. Each has their unique strengths and

limitations as well. Therefore, one needs to use a combination of these tools to make a

thorough analysis of the funds.

The present market has become very volatile and buoyant, so it is getting difficult for the

investors to take right investing decision. so the easiest available option for investors is to

choose the best performing funds in terms of “returns” which have yielded maximum

returns.

But if we look deeply to it, we can find that the returns are important but it is also

important to look at the ‘quality’ of the returns. ‘Quality’ determines how much risk a

fund is taking to generate those returns. One can make a judgment on the quality of a fund

from various ratios such as standard deviation, Sharpe ratio, beta, tenor measure, R-

squared, alpha, portfolio turnover ratio, total expense ratio etc.

Now I have compared two funds of SBI on the basis of standard deviation, beta, R-

squared, Sharpe ratio, portfolio turnover ratio and total expense ratio. So before going into

details, let’s have a look at these ratios:

Standard deviation: in simple terms standard deviation is one of the commonly used

statistical parameter to measure risk, which determines the volatility of a fund. Deviation

is defined as any variation from a mean value (upward & downward). Since the markets

are volatile, the returns fluctuate every day. High standard deviation of a fund implies high

volatility and a low standard deviation implies low volatility.

Beta analysis: beta is used to measure the risk. It basically indicates the level of volatility

associated with the fund as compared to the market. In case of funds, as compared to the

market. In case of funds, beta would indicate the volatility against the benchmark index. It

is used as a short term decision making tool. A beta that is greater than 1 means that the

fund is more volatile than the benchmark index, while a beta of less than 1 means that the

fund is more volatile than the benchmark index. A fund with a beta very close to 1 means

the fund’s performance closely matches the index or benchmark.

The success of beta is heavily dependent on the correlation between correlation between a

fund and its benchmark. Thus, if the fund’s portfolio doesn’t have a relevant benchmark

index then a beta would be grossly inappropriate. For example if we are considering a

banking fund, we should look at the beta against a bank index.

R-Squared (R2): R squared is the square of ‘R’ (i.e.; coefficient of correlation). It

describes the level of association between the fun’s market volatility and market risk. The

value of R- squared ranges from0 to1. A high R- squared (more than 0.80) indicates that

beta can be used as a reliable measure to analyze the performance of a fund. Beta should

be ignored when the r-squared is low as it indicates that the fund performance is affected

by factors other than the markets.For example:

Case 1 Case 2

R2 0.65 0.88

B 1.2 0.9

In the above tableR2 is less than 0.80 in case 1, implies that it would be wrong to mention

that the fund is aggressive on account of high beta. In case 2, the r- squared is more than

0.85 and beta value is 0.9. it means that this fund is less aggressive than the market.

Sharpe ratio: sharp ratio is a risk to reward ratio, which helps in comparing the returns

given by a fund with the risk that the fund has taken. A fund with a higher sharpe ratio

means that these returns have been generated taking lesser risk. In other words, the fund is

less volatile and yet generating good returns. Thus, given similar returns, the fund with a

higher sharp ratio offers a better avenue for investing. The ratio is calculated as:

Sharpe ratio = (Average return- risk free rate)/ standard deviation

Portfolio turnover ratio: Portfolio turnover is a measure of a fund's trading activity and

is calculated by dividing the lesser of purchases or sales (excluding securities with

maturities of less than one year) by the average monthly net assets of the fund. Turnover is

simply a measure of the percentage of portfolio value that has been transacted, not an

indication of the percentage of a fund's holdings that have been changed. Portfolio

turnover is the purchase and sale of securities in a fund's portfolio. A ratio of 100%, then,

means the fund has bought and sold all its positions within the last year. Turnover is

important when investing in any mutual fund, since the amount of turnover affects the fees

and costs within the mutual fund.

Total expenses ratio: A measure of the total costs associated with managing and

operating an investment fund such as a mutual fund. These costs consist primarily of

management fees and additional expenses such as trading fees, legal fees, auditor fees and

other operational expenses. The total cost of the fund is divided by the fund's total assets

to arrive at a percentage amount, which represents the TER:

Total expense ratio = (Total fund Costs/ Total fund Assets)

Performance report and portfolio analysis of magnum equity fund and magnum

multiplier plus against their benchmark BSE100:

YTD 1M 3M 6M 1Y 3Y 5YMagnum equity fund

-23.73%

9.02% -7.71% -15.18%

26.61% 45.07% 48.96%

Magnum multiplier plus

-26.16%

5.57% -11.26%

-18.00%

21.44% 45.28% 59.31%

BenchmarkBSE100

-17.53%

11.74% -2.56% 11.47% 30.71% 40.46% 44.24%

Now in the above table, we have two funds from SBI i.e. magnum equity fund and

magnum multiplier plus following the same benchmark i.e. BSE 100. In this case, we have

compared their returns during various time periods. We have their returns YTD, during

last 1 month, 3month, 6 months, 1 year, 3 year and 5 year. If we look at a long term

perspective, then magnum multiplier plus totally outperformed both magnum equity fund

as well as BSE 100. In case of 5 year returns, neither the benchmark nor the magnum

equity fund stands anywhere near multiplier plus. It is greater than equity fund by 10.35%

and from benchmark by 15.07%. But in case of 3 year returns, surely multiplier plus gave

the maximum return but it fell sharply in comparison to its 5 yr return. A 45.28% return

scored over equity fund just by a margin of 0.21% and benchmark by a mere 4.28%. Now

moving down to 1 yr return, we can clearly see that BSE 100 emerges as a true winner.

The benchmark gave a return of 30.71% but both the funds failed to match it even.

But the ultimate surprise comes when we look at the data’s of last 6 months. Here not only

the fund managers failed to beat or match the market. Rather they also performed as

laggards, giving negative returns. When the BSE 100 gave returns of 11.47%, these funds

were trailing by 29.47% and 26.65% which is a huge figure. In the last 3 months too, both

the funds were behind bse100 but all the three gave negative returns and the difference

between them and benchmark was narrowed down. Again, during last 1 month return of

all three got positive but the funds always remained behind the benchmark. The BSE 100

outscored multiplier plus and equity fund by 6.17% and 2.72% respectively. Similarly, the

YTD return of all 3 is negative even then the benchmark is at a better position than the

funds.

From the following analysis we can infer that in spite of all the steps taken; it is not

always possible for the fund managers to always beat the market. Also, the past

performance just tells the background and history of the fund, by looking at it we cannot

interpret that the fund will perform in the same way in the future too.

The data’s can be presented in the form of a graph as follow:

Quantitative data

Ratios Magnum equity fund Magnum multiplier plus

Standard deviation 26.00% 26.90%

Beta 0.96% 0.95%

r-squared 0.84%

Sharpe ratio 1.46% 1.42%

Portfolio turnover 31% 25%

Total expense ratio 2.5% 2.5%

Analysis

We can see that the standard deviation of both the funds are more or less same even

then the S.D of multiplier plus is greater than that of equity fund by 0.90%.

Generally higher the SD higher is the risk and vice-versa. Therefore, magnum

multiplier plus is riskier than magnum equity fund.

The beta of magnum equity fund is higher than that of magnum multiplier plus.

Therefore, equity fund is more volatile than multiplier plus. But beta of both the

funds is smaller than 1 that means both the funds are less volatile than the market

index. As r- squared values are more than 0.80 in both the cases, we can rely on the

usage of beta for the analysis of these funds.

A look at the Sharpe ratio indicates that magnum equity has outperformed

multiplier plus. A higher Sharpe ratio of equity fund depicts that these return have

been generated taking lesser risk than the multiplier plus. It Is less volatile than the

other.

R-squared of both the funds are greater than 0.80. it indicates that beta can be used

as a reliable measure to analyze the performance of these funds. Magnum equity

fund’s R- squared is higher. So its beta is more reliable.

Portfolio turnover ratio of magnum equity fund is higher than multiplier plus. It

mean the manager is frequently churning the portfolio of equity fund than of

multiplier plus. It may lead to an increase in expenses but could be ignored if could

generate higher return by changing the composition of portfolio.

Total expense ratio of both the funds are same i.e.; 2.5%

In the form of a chart

Chapter-3

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Research design

Title of project

Objective of study

Type of research

Sample size and method of selecting sample

Method of data analysis

Scope of study

Limitations of study

Objective of research

The main objective of this project is concerned with getting the opinion of

people regarding mutual funds and what they feel about availing the

services of financial advisors.

I have tried to explore the general opinion about mutual funds. It also

covers why/ why not investors are availing the services of financial

advisors.

Along with it a brief introduction to India’s largest financial intermediary,

UTI has been given and it is shown that how they operate in mutual fund

dept.

Scope of the study

The research was carried on in the Eastern Region of India. It is restricted to

Kolkata where it has got 11 branch offices and 3 franchisees. I have visited

people randomly nearby my locality, different shopping malls, small retailers etc.

Data sources

Research is totally based on primary data. Secondary data can be used only for

the reference. Research has been done by primary data collection, and primary

data has been collected by interacting with various people. The secondary data

has been collected through various journals and websites and some special

publications of UTI.

Sampling

Sampling procedure: The sample is selected in a random way,

irrespective of them being investor or not or availing the services or not. It

was collected through mails and personal visits to the known persons, by

formal and informal talks and through filling up the questionnaire

prepared. The data has been analyzed by using the measures of central

tendencies like mean, median, mode. The group has been selected and the

analysis has been done on the basis statistical tools available.

Sample size:

The sample size of my project is limited to 200 only. Out of which only

135 people attempted all the questions. Other 65 not investing in MFs

attempted only 2 questions.

Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs

etc.

Limitation:

1. Time limitation.

2. Research has been done only at Kolkata.

3. Some of the persons were not so responsive.

4. Possibility of error in data collection.

5. Possibility of error in analysis of data due to small sample size

Chapter-4

ANALYSIS AND AND

INTERPRETATIONINTERPRETATION

ANALYSIS AND INTEPRETATION

1. Statement of the problem

“Analysis the performance of mutual fund with reference to mutual fund industry”

2. Objectives

To evaluate investment performance of mutual funds in terms of risk and return.

To examine the funds sensitivity to the market fluctuations in terms of beta.

To find out the financial performance of mutual fund schemes.

To appraise investment performance of mutual funds with risk adjustment, the

theoretical parameters as suggested by Sharpe, Tenor and Jensen.

To analyze the performance of various schemes of mutual funds.

3. Methodology

Methodology is a way to systematically solve the research problem. It may be understood

as a science of studying how research is done scientifically.

Type of the study:

Descriptive study:

The type of the study or research used in this project is a descriptive research design. It

mainly involves surveys and facts findings enquiries of different kinds. The main

objective of descriptive research is to describe the state of affairs as it exists at present.

Type of data:

Secondary data:

“The data (published or unpublished) which have already been collected and processed

by some agency or person and taken over from there and used by any other agency for

their statistical work are termed as person and taken over from there and used by any

other agency for their statistical work are termed as secondary data”.

Analysis and discussion

UTI Domestic Opportunities Fund:

Nature of the scheme: An open ended equity scheme

Scheme objective : To provide long term capital appreciation from a portfolio that is

Primarily invested in companies, which derive significant

Proportion of their revenues from domestic Indian market economy.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1

Date of launch : 12-09-2002

Fund size : 112.29 Cr.

NAV per unit as on 31th January 2013

Growth Option : Rs. 36.28

Dividend Option : Rs. 16.69

Bonus Option : Rs. 36.28

Benchmark : BSE-100

Load structure

Entry load : 2.25% for investment of less than Rs, 1 cr. No entry load on

Investment of more than 1cr.

Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days,

0.5% if Redeemed after 180 but before 365 days and no exit load on

the investment of more than 1 cr.

Portfolio construction as on 31th January 2013:

Assets under Management: Rs. 112.29 crores.Table 1.1

Sectors and companies % of portfolio

Banks 15.27

Refineries/marketing 9.76

Telecom – services 6.68

Power equipments 5.08

Diversified- construction 4.74

Steel 4.40

Passenger / utility vehicles 3.70

Cigarettes 3.49

Transmission towers 3.09

Oil exploration/production 2.64

Construction projects 2.50

Consumer electronics 2.34

Housing finance 2.15

Plastic products 2.11

NBFC 2.01

Cement 1.98

Computer-hardware i.92

Pharmaceuticals 1.82

Gas transmission/marketing 1.80

Fabrics and garments 1.79

Fertilizers-nitrogenous 1.64

Power 1.59

Fund performance as on 31th January 2013:Table 1.2

Period Actual return Benchmark return

Last one year 16.10 17.95

Last two year 31.02 32.12

Last three year 41.19 38.92

Last four year 43.28 42.58

Last five year 46.31 42.04

Quantitative data:

Table 1.3

Sharpe ratio 0.918

Trey nor ratio 23.69

Jensen ration -4.99

Interpretation:

By comparing these three ratios the fund giving fair return that is 0.918 by taking into

consideration of total risk of 23.19 because it measures the reward to the total risk. By

evaluating neither trey nor ratio this fund performing well it gives 23.69 returns by taking

into consideration of total market risk this fund gave the good return but it can’t perform

up to the benchmark return for last two years so it gave negative result in the Jensen ratio.

UTI Select Stock Fund:

Nature of the scheme: An open ended growth scheme

Scheme objective : To provide long term capital appreciation from a portfolio that is

primarily invested in equity and equity related securities.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1

Date of launch : 06-05-1999

Fund size : 36.55 Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 36.80

Dividend Option : Rs. 19.44

Benchmark : BSE-100

Load structure

Entry load : 2.25% for investment of less than Rs,1 cr. No entry load on

investment of more than 1 cr.

Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days,

0.5% if Redeemed after 180 but before 365 days and no exit load on

the investment of more than 1 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs.36.55crores: Table 1.4

Sectors and companies % portfolio

Banks 11.36

Refineries/marketing 8.49

Computers-software 8.27

Telecom-services 6.88

Steel 6.04

Financial institutions 5.24

Diversified-constructions 4.06

Power equipments 3.69

Housing finance 3.50

Construction projects 3.47

Cement 2.88

Oil exploration/production 2.81

Industrial minerals 2.80

Cigarettes 2.67

Residential/commercial/sez projects 2.44

Construction civil 2.27

Plastic products 1.99

Fabrics and garments 1.90

NBFC 1.90

Passenger/utility vehicles 1.86

Pharmaceuticals 1.86

Printing and publishing 1.84

Ship building 1.84

Stock broking and allied 1.81

Oil exploration 1.33

CBLO/Repo/FD/Cash/Other assets 4.56

Fund performance as on 31th January 2013:

Table 1.5

Period Actual return Benchmark return

Last one year 17.72 17.95

Last two year 31.85 32.12

Last three year 41.17 38.92

Last four year 38.83 42.58

Last five year 16.07 22.49

Quantitative data:

Table 1.6

Sharp ratio 0.9466

Treynor ratio 23.88

Jensen ratio -1.94

Interpretation:

By comparing these ratios the sharp ratio shows that the fund performing better and giving

fair return that is 0.9466. By evaluating trey nor ratio this fund able to give good returns

that is 23.88 by considering market risk of 1.01. This fund consistently performing well

because it gave less negative value -1.94, it shows that fund generating good returns.

UTI Dividend Yield Fund:

Nature of the scheme: An open ended equity scheme.

Scheme objective : To provide long term capital appreciation and / or dividend

Distribution by investing predominantly in equity and equity

Related instruments, which offer high dividend yield.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1

Date of launch : 24-10-2001

Fund size : 28.89 Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 15.12

Dividend Option : Rs. 13.74

Bonus option : Rs. 15.12

Benchmark : BSE-100

Load structure

Entry load : 2.25% for investment of less than Rs. 1 cr. No entry load on

investment of more than 1 cr.

Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days,

0.5% if Redeemed after 180 but before 365 days and no exit load on

the investment of more than 1 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs.28.89crores:Table 1.7

Sectors and companies % Portfolio

Banks 15.26

Refineries/marketing 8.71

Fertilizers-nitrogenous 7.14

Electrodes 5.79

Computer software 5.40

Fertilizers-phosphate 4.70

LPG/CNG/PNG/LNG SUPPLIERS 4.53

Motor cycles/scooters 4.49

Shipping 4.48

Diversified consumer goods 4.30

Oil exploration/ production 4.27

Industrial minerals 3.68

Axles 3.08

Ship building 2.85

Spinning cotton/blended 2.04

Steel 1.90

Steel products 1.87

Cement 1.62

Stock broking and allied 1.11

Petrochemicals 0.70

NBFC 0.09

CBLO/Repo/FD/Cash/Other assets 5.11

Performance of fund as on 31th 2013:

Table 1.8

Period Actual return Benchmark return

Last one year 15.77 17.95

Last two year 28.14 32.12

Last three year 35.08 38.92

Last four year 40.02 42.58

Last five year 19.97 43.03

Quantitative data:

Table 1.9

Sharp ratio 0.874

Treynor ratio 33.48

Jensen ration -6.19

Interpretation:

By comparing these ratios the sharp ratios shows that the fund performing well and gives

return like 0.874 by taking total risk 26.07 by evaluating neither trey nor ratio this fund

able to give good return 33.48 by considering market risk of 0.83. This fund gave Jensen

of -6.19 more –ve value because first and last year it perform poor.

UTI L.I.O.N: (Large cap, Intermediate cap, Opportunities, New Offering)

Fund:

Nature of the scheme: An open ended diversified equity scheme.

Scheme objective : To provide medium to long term capital appreciation by investing

in stocks across the entire capital market capitalization range.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1

Date of launch : 28-12-2001

Fund size : Rs.53.96Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 16.07

Dividend Option : Rs. 16.07

Bonus option : Rs. 16.07

Benchmark : BSE-100

Load structure

Entry load : 2.25% for investment of less than Rs,1 cr. No entry load on

investment of more than 1 cr.

Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days,

0.5% if Redeemed after 180 but before 365 days and no exit load on

the investment of more than 1 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 53.96crores:Table 1.10

Sectors and companies % portfolio

Banks 13.20

Refineries/marketing 8.44

Computer –software 7.84

Telecom-services 6.16

Steel 5.91

Financial institutions 5.11

Diversified-construction 4.07

Power equipment 4.03

Housing finance 3.06

Pharmaceuticals 3.72

Construction projects 3.36

Cement 2.85

Residential/commercial/sez projects 2.78

Cigarettes 2.78

Oil exploration/production 2.76

Fabrics and garments 2.52

Gas transmission/marketing 2.36

Industrial minerals 2.25

Passenger/utility vehicles 2.00

Ship building 1.96

Plastic products 1.79

NBFC 1.48

Stock broking/allied 1.35

Oil exploration 1.35

Fertilizers-phosphate 1.14

Transmission towers 0.75

CBLO/Repo/FD/Cash/Other assets 4.08

Performance of fund as on 31th 2013:

Table 1.11

Period Actual return Benchmark return

Last one year 15.20 17.95

Last two year 26.74 32.12

Last three year 35.82 38.92

Last four years 40.12 42.58

Last five years 25.44 37.09

Quantitative Data:

Table 1.12

Sharp ratio 0.982

Treynor ratio 24.64

Jensen ratio -3.92

Interpretation:

This fund gave the return of 0.982 with total risk of 24.08, shows that this fund is

performing well. By comparing neither trey nor ratio it shows that the fund gave the more

return of -3.92 which shows that the fund can’t outperform even for one time.

UTI Nifty plus Fund:

Nature of the scheme: An open ended index linked equity scheme.

Scheme objective : The objectives of the fund is to invest in companies whose

Securities are included in the S & P CNX Nifty Index.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1

Date of launch : 23-02-2002

Fund size : Rs.10.90Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 25.78

Dividend Option : Rs. 17.16

Bonus option : Rs. 25.78

Benchmark : S & p CNX Nifty Index.

Load structure

Entry load : 2.25% for investment of less than Rs,1 cr. No entry load on

Investment of more than 1 cr.

Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days,

0.5% if Redeemed after 180 but before 365 days and no exit load on

Investment of more than 1 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 10.90 cr.:Table 1.13

Sectors and companies % Portfolio

Banks 11.36

Telecom-services 11.20

Refineries/marketing 10.70

Computers-software 9.07

Oli exploration/production 8.47

Power 7.60

Power equipments 6.39

Steel 4.57

Diversified-construction 3.43

Cigarettes 2.86

Housing finance 2.60

Pharmaceuticals 2.09

Cement 1.89

Residential/commercial/sez project 1.69

Aluminum 1.53

Diversified-consumer goods 1.46

Copper & copper products 1.38

Passenger/utility vehicles 1.30

Motor cycles/scooters 1.18

Gas transmission/marketing 1.10

Commercial vehicles 0.53

T V broadcasting and software production 0.39

CBLO/Repo/FD/Cash/Other assets 7.21

Performance of fund as on 31th 2013:

Table 1.14

Period Actual return Benchmark return

Last one year 11.26 13.44

Last two year 22.70 25.83

Last three year 33.44 35.66

Last four year 35.85 37.57

Quantitative Data:

Table 1.15

Sharp ratio 0.939

Treynor ratio 23.16

Jensen ratio -0.356

Interpretation:

This fund gave the sharper ratio that is 0.939 showed that, fund performing well during

five years history with total risk of 26.07. by evaluating tenor ratio, the fund gave return of

23.16 with little more market risk of 0.91 and fund performing well during five years of

history because it gives very less difference between actual and benchmark return -0.356.

UTI Tax Savings Fund:

Nature of the scheme: An open ended equity linked savings scheme.

Scheme objective : The objectives of the fund is to generate medium to long term

growth of capital along with income tax rebate.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1

Date of launch : 28-03-2002

Fund size : Rs.58.76 Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 29.37

Dividend Option : Rs. 14.49

Bonus option : Rs. 29.4

Benchmark : CNX Midcap

Load structure

Entry load : 2.25% for investment of less than Rs,1 cr. No entry load on

Investment of more than 1cr.

Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days,

0.5% if Redeemed after 180 but before 365 days and no exit load on

the investment of more than 1 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 58.77crores: Table 1.16

Sectors and companies % Portfolio

Construction projects 8.70

Pharmaceuticals 7.40

Banks 6.28

LPG/CNG/LNG SUPPLIER 5.69

Refineries/marketing 4.77

Power equipments 4.64

Trading 4.54

Personal care 3.45

Paints 3.45

Fertilizers-phosphate 3.41

Residential/commercial/sez projects 3.36

Financial institution 3.03

Ship building 3.02

Industrial minerals 2.95

Plastic products 2.89

Fabrics and garments 2.63

Hotels 2.55

Stock broking and allied 2.38

Steel 2.17

Fertilizers and nitrogenous 2.06

Steel products 1.94

Retailing 1.93

Industrial equipment 1.90

Printing and publishing 1.89

Sugar 1.52

Electrodes 1.50

Computer software 1.50

Oil exploration 1.49

Air conditioner 1.33

NBFC 0.09

Aluminum 0.03

CBLO/Repo/FD/Cash/Other assets 3.60

Performance of fund as on 31th 2013:

Table 1.17

Period Actual return Benchmark return

Last one year 0.62 18.30

Last two year 5.31 38.42

Last three year 33.37 36.63

Last four year 46.28 49.39

Last five year 32.32 38.36

Quantitative data:

Table 1.18

Sharp ratio 0.741

Trey nor ratio 20.64

Jensen ratio -9.518

Interpretation:

Sharp ratio shows the reward to total risk associated with fund. That is this fund gave the

return of 0.714 with risk of 26.01. The neither trey nor ratio shows that the fund

performance by considering market risk it gave less return 20.64 because they have to

create awareness of the fund to the people. Because of new category or fund the Jensen

ratio also very less that is -9.518 shows that fund performance not able to beat the

benchmark return.

UTI Growth Fund:

Nature of the scheme: An open ended growth scheme.

Scheme objective : The objectives of the fund is to generate long term capital

Appreciation from a portfolio that is invested predominantly in

Equity and equity related instruments.

Investment pattern: for new investor Rs.5000 and in multiples of Rs.100 thereafter.

for existing investor Rs.1000 and in multiples of Rs.100 thereafter.

Date of launch : 11-09-2000

Fund size : Rs.894.707Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 68.432

Dividend Option : Rs. 33.714

Benchmark : Sensex

Load structure

Entry load : 2.25% for investment of less than Rs,5 cr. No entry load on

investment of more than 5 cr.

Exit load/CDSC : 1% on the investment below 5 cr. And redeemed within 365 days,

and no exit load on the investment of more than 5 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 894.707crores: Table 1.19

Sectors or industry % Portfolio

Petroleum products 6.14

Banks (state bank of India) 5.88

Consumer non durable goods 5.53

Pharmaceuticals 5.02

Finance 4.68

Banks (ICICI bank) 4.35

Telecom services 4.32

Industrial capital goods 4.30

Industrial capital goods 3.80

Industrial capital goods 3.58

Total of ten equity holdings 47.60

Total equity and equity related holdings 93.15

ICICI Bank ltd. 3.33

Jindal Saw ltd. 1.66

Tatal debt/money market instrument 4.99

Other current assets (Repo and CBLO) 1.86

Grand total 100

Net assets 894.707cr

Performance of fund as on 31th 2013:

Table 1.20

Period Actual return Benchmark return

Last one year 16.55 13.49

Last two year 39.89 25.25

Last three year 42.32 39.11

Last four year 51.42 40.24

Last five year 29.72 19.61

Quantitative data:

Table 1.21

Sharp ratio 4.00

Treynor ratio 30.89

Jensen ratio 8.39

Interpretation:

This fund gave the sharper ratio, 4.006 shows that the fund performing better during five

year history with the total risk of 7.75. by evaluating Trey nor ratio the fund gave the

return of 30.89 by considering the beta value of 1.003 it shows that even though in volatile

condition the fund perform well, the Jensen gave the positive return of 8.30 it shows that

actual return is more than benchmark return during 5 year history because it is difference

between actual and benchmark return.

UTI Equity Fund:

Nature of the scheme: An open ended growth scheme.

Scheme objective : The objectives of the fund is to generate long term capital

Appreciation

Investment pattern : For new investor Rs.5000 and in multiples of Rs.100 thereafter.

For existing investor Rs.1000 and in multiples of Rs.100 thereafter.

Date of launch : 01-01-1999

Fund size : Rs.4, 716 Cr.

NAV per unit as on 31th January 2013

Growth Option : Rs. 188.420

Dividend Option : Rs. 49.444

Benchmark : S & P CNX 500

Load structure:

Entry load : 2.25% for investment of less than Rs,5 cr. No entry load on

investment of more than 5 cr.

Exit load/CDSC : Nil

Portfolio construction as on 31th January 2012:

Asset under management Rs. 4,716crores:Table 1.22

Sectors and industry % Portfolio

banks 9.73

Media and entertainment 4.63

Industrial capital goods 4.42

Industrial capital goods 4.14

Banks 3.92

Pharmaceuticals 3.50

Consumer non durables 3.30

Pesticides 3.29

Pharmaceuticals 3.20

Industrial capital goods 3.09

Total equity holdings 43.27

Total equity and equity related holdings 98.01

Jindal saw ltd. 1.68

Total debt/money market instrument 1.68

Other Current Aseets 0.31

Grand total 100

Net assets 4716 cr

Performance of fund as on 31th 2013:

Table 1.23

Period Actual return Benchmark return

last one year 9.34 14.94

last two year 24.46 28.17

Last three year 43.43 34.98

Last four year 53.02 42.13

Last five year 40.42 21.99

Quantitative data:

Table 1.24

Sharp ratio 3.74

Trey nor ratio 32.98

Jensen ratio 8.44

Interpretation:

This fund gave the sharp ratio of 3.74 that is reward of 3.47 with risk of 7-77% and giving

good return to the investor. Neither trey nor ratio gave the value of 32.98 means it gave

the good return with overcoming market risk of 0.883 and succeed in the performance.

The Jensen ratio measure that fund beat the benchmark return and gave the return of 8.44.

UTI Top 200 Funds:

Nature of the scheme: An open ended growth scheme.

Scheme objective : The objectives of the fund is to generate long term capital

Appreciation from a portfolio of equity and equity-linked

Instruments primarily drawn from the companies in BSE

200 index

Investment pattern: For new investor Rs.5000 and in multiples of Rs.100 thereafter.

For existing investor Rs.1000 and in multiples of Rs.100 thereafter.

Date of launch : 11-10-1996

Fund size : Rs.2,363.26 Crores.

NAV per unit as on 31th January 2013

Growth Option : Rs. 147.718

Dividend Option : Rs. 48.858

Benchmark : BSE Sensex

Load structure

Entry load : 2.25% for investment of less than Rs,5 cr. No entry load on

investment of more than 5 cr.

Exit load/CDSC : 1% on the investment below 5 cr. And redeemed within 365 days,

and no exit load on the investment of more than 5 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 2,363.26crores:Table 1.25

Sectors and industry % Portfolio

Banks (ICICI Bank) 8.75

Petroleum products 6.29

Software 4.66

Consumer non durables 3.65

Industrial capital goods 3.52

Banks(SBI) 3.15

Pharmaceuticals 2.70

Telecom services 2.65

Total of top ten equity holdings 41.10

total equity and equity related holdings 96.48

Debt/money market instrument

Rabo india finance private ltd. 0.63

ICICI bank Ltd. 0.42

total debt/money market instrument 1.05

Other Current Assets(including reverse

repos’/CBLO

2.47

Grand total 100.00

Net Assets 2,363.26

Net assets (in lacs) 236,326.17

Performance of fund as on 31th 2013:

Table 1.26

Period Actual return Benchmark return

Last one year 15.75 17.75

Last two year 31.47 31.86

Last three year 43.09 36.93

Last four year 53.79 42.23

Last five year 32.24 21.65

Quantitative data:

Table 1.27

Sharp ratio 4.17

Treynor ratio 34.43

Jensen ratio 8.22

Interpretation:

This fund perform well and gave the sharp value of 4.11 by considering total risk 7.25 and

trey nor ratio shows that the fund succeed in overcoming market risk and gave return of

43.43% and Jensen gave positive return 8.22 means that fund beat the benchmark return in

its five year history.

UTI Capital Builder Fund:

Nature of the scheme: An open ended growth scheme.

Scheme objective : The objectives of the fund is to generate long term capital

Appreciation in long term

Investment pattern: for new investor Rs.5000 and in multiples of Rs.100 thereafter.

For existing investor Rs.1000 and in multiples of Rs.100 thereafter.

Date of launch : 01-02-1994

Fund size : Rs.750.63 Cr.

NAV per unit as on 31th January 2013

Growth Option : Rs. 88.367

Dividend Option : Rs. 31.510

Benchmark : S & P CNX 500

Load structure

Entry load : 2.25% for investment of less than Rs,5 cr. No entry load on

investment of more than 5 cr.

Exit load/CDSC : Nil

Portfolio construction as on 31th January 2013:

Asset under management Rs.2,363.26crores:Table 1.28

Sectors and industry % portfolio

Banks 6.11

Industrial products 6.06

Banks 5.54

Industrial capital goods 4.47

Auto ancillaries 4.46

Industrial capital goods 4.12

Pharmaceuticals 4.02

Ferrous metals 3.94

Industrial products 3.93

Chemicals 3.43

Total top ten equity holdings 46.18

Total equity and equity related holdings 95.74

Debt/money market instruments

Jindal saw Ltd. 1.98

Total debt/money market instruments 1.98

Other current Assets(Including reverse repo/CBLO 2.28

Grand total 100.00

Net assets 750.63

Performance of fund as on 31th 2013:

Table 1.29

Period Actual return Benchmark return

Last one year 14.89 14.94

Last two year 37.09 28.17

Last three year 36.50 34.98

Last four year 52.56 42.13

Last five year 30.27 21.99

Quantitative data:

Table 1.30

Sharp ratio 4.29

Trey nor ratio 33.17

Jensen ratio -9.20

Interpretation:

This fund able to compensate the risk and possible of giving return of 4.29, trey nor gave

the return of 33.17% with considering market risk of 0.8708 and able to beat the market

risk. Jensen gave the value of 9.20 shows that the fund beat the benchmark return and

gave the good return to the investor.

UTI Index Fund: (Sensex plan):

Nature of the scheme: An open ended index linked scheme.

Scheme objective : The objectives of the fund are to generate returns that are common

with the performance of the sensex, subject to tracking record.

Investment pattern: for new investor Rs.5000 and in multiples of Rs.100 thereafter.

For existing investor Rs.1000 and in multiples of Rs.100 thereafter.

Date of launch : 17-07-2002

Fund size : Rs.78.02 Crores

NAV per unit as on 31th January 2013

Growth Option : Rs. 154.2977

Benchmark : Sensex

Load structure

Entry load : Nil

Exit load/CDSC : 1% on the investment below 5 cr. And redeemed within 365 days,

and no exit load on the investment of more than 5 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 78.02crores: Table 1.31

Sectors and industry % Portfolio

Petroleum products 14.85

Banks(ICICI) 10.39

Industrial capital goods 7.95

Software 6.02

Finance 5.58

Telecom services 4.73

Banks(SBI) 4.29

Consumer Non durables 4.24

Bank(HDFC) 3.68

Telecom services (Reliance

communication)

3.58

Total top ten equity holdings 65.29

Total equity and equity related

holdings

98.59

Other Current Assets(Repo/CBLO) 1.41

Grand total 100

Net Assets 78.02 crs.

Performance of fund as on 31th 2013:

Table 1.32

Period Actual return Benchmark return

Last one year 8.47 14.37

Last two year 18.68 27.75

Last three year 35.37 42.64

Last four year 36.34 44.43

Last five year 32.68 39.50

Quantitative data:

Table 1.33

Sharp ratio 2.62

Trey nor ratio 22.45

Jensen ratio -10.69

Interpretation:

This fund is able to compensate the risk and possible to give the return of 2.6. trey nor

gave the normal return of 22.45 with beta of 0.949 by considering Jensen ratio we come to

know that the fund has not performed well during five year of history which gave the –ve

value of -10.69.

UTI Index Plan (Nifty Plan):

Nature of the scheme: An open ended index linked scheme.

Scheme objective : The objectives of the fund are to generate returns that are

commensurate with the performance of the nifty subject to tracking record.

Investment pattern: for new investor Rs.5000 and in multiples of Rs.100 thereafter.

For existing investor Rs.1000 and in multiples of Rs.100 thereafter.

Date of launch : 17-07-2002

Fund size : Rs.49.42 cr.

NAV per unit as on 31th January 2013

Growth Option : Rs. 46.6758

Benchmark : S & P CNX Nifty

Load structure

Entry load : Nil

Exit load/CDSC : 1% on the investment below 5 cr. And redeemed within 365 days

and no exit load on the investment of more than 5 cr.

Portfolio construction as on 31th January 2013:

Asset under management Rs. 49.42crores: Table 1.34

Sectors and industry % Portfolio

Petroleum products 11.83

Oil 6.94

Telecom services (Bharti airtel) 5.35

Power 5.31

Banks(ICICI Bank) 4.14

Telecom services(reliance communication) 4.05

Banks(SBI) 3.87

Industrial capital goods(Larsen and Turbo) 3.50

Industrial capital goods(BHEL) 3.31

Ferrous metals 2.91

Total of top ten equity holdings 51.21

Total of equity and equity related holdings 96.66

Other Current Assets(Including Repo/CBLO) 3.34

Grand total 100

Net Assets 49.42 cr.

Performance of fund as on 31th 2013:

Table 1.35

Period Actual return Benchmark return

Last one year 7.06 13.90

Last two year 17.91 27.47

Last three year 31.86 37.67

Last four year 34.85 40.13

Last five year 31.26 35.85

Quantitative data:

Table 1.36

Sharp ratio 2.45

Trey nor ratio 23.06

Jensen ratio -2.49

Interpretation:

This fund gave the return of 2.45% with risk of 7.98, the fund not able to provide better

return to the investor, by comparing the neither trey nor ratio this fund gave the normal

return of 23.06 with beta of 0.894. Jensen ratio provides that the fund performing well and

not so good and it gave the negative value of -2.49.

Chapter-5

FACT & FINDINGS

FACT AND FINDINGS

Summary of findings:

Following are the findings of the UTI funds:

Sharp ratio indicates that fund performance by considering overall total risk. Some

funds are not able to perform well because of total risk involved in the funds.

ING investing funds in the some selected sectors. So it is not possible to diversify

the risk associated with funds, so they having more standard deviation.

Because of volatility in the market conditions. The funds are not able to cross the

benchmark return so fund houses should concentrate on the market conditions.

By considering Jensen ratio it shows that no fund has not crossed more time

benchmark return so that’s why Jensen ratio can’t give the +ve return for many

funds.

By considering neither trey nor ratio it shows that the fund performs well during 5

years of history and able to overcome the market risk.

From portfolio construction shows that, the fund diversifies its risk for some extent

so the fund able to give +ve return based on Jensen ratio.

In UTI all funds are having very less standard deviation and it helps the fund to

generate good returns on the fund.

Out of six funds last two funds that is sensex and index got –ve value based on

Jensen ratio because they gave more preference for bank deposits.

Out of six equity schemes many funds are crossed the benchmark return because of

the well management of funds and well diversifying of risk.

Chapter-6

CONCLUSION

CONCLUSION

“Mutual fund is booming sector now a days and it has lot of scope to generate income and

providing return to the investor, the mutual fund is one of the way to development of

country and helps to mobilizing dead money in the economy which helps to develop the

economic conditions of the country and people.

Mutual fund helps the people for studying the market conditions, it providing lot of

opportunities to the people for research work and helps the people to know the new things

going on around the world. It gave the more knowledge to the person, because it

diversifies the risk by investing in different securities.”

Chapter-7

SUGESSTION

SUGGESTION

Following are the suggestions for the both funds. The fund house has to reduce the total risk involved in the fund in order to increase

the return with good portfolio construction.

The fund house should select the innovative way of portfolio construction and

should see the attracting areas of investing funds.

The fund houses should concentrate on the market conditions according to that they

have to set the benchmark and invest in different sectors.

The fund houses should invest in good and attracting sectors to reduce standard

deviation.

The fund house should try to reduce little more betas in order to generate more

returns to investors.

In ING Jensen never gave the +ve value so fund house try to cross the benchmark

return and achieve the objectives of the fund.

UTI fund house gave the good return it showed by sharp ratio even though they have

to reduce the total risk by diversifying their portfolio and achieving objectives.

The UTI investing in diversifies areas but not in upcoming areas like real estate and

infrastructure better to invest in those areas to increase return.

UTI still it has to reduce the standard deviation to generate more return by reducing

total risk factors associating with mutual funds, and analyses all the factors.

UTI has to concentrate on those funds which are performing less than their

benchmark return and take actions and analysis the market conditions and take

correct steps.

QUESTIONNARIE

QUESTIONNAIRE

Have you invested /are you interested to invest in mutual funds?

Yes [ ] No [ ] (please attempt the next question) What is the most important reason for not investing in mutual funds?

Lack of knowledge about mutual funds [ ] Enjoys investing in other option [ ] Its benefits are not enough to drive you for investment [ ] No trust over the fund managers [ ]

Where do you find yourself as a mutual fund investor?

Totally ignorant [ ] Partial knowledge of mutual funds [ ] Aware only of any specific scheme in which you invested [ ] Fully aware [ ]

Where from you purchase mutual funds?

Directly from the AMCs [ ] Brokers only [ ] Brokers/ sub-brokers [ ] Other sources [ ]

Which feature of the mutual funds allure you most?

Diversification [ ] Professional management [ ] Reduction in risk and transaction cost [ ] Helps in achieving long term goals [ ]

According to you which is the most suitable stage to invest in mutual funds?

Young unmarried stage [ ] Young Married with children stage [ ] Married with older children stage [ ] Pre-retirement stage [ ]

Are you availing the services of personal financial advisors?

YES [ ] NO [ ]

Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment recommendation [ ] Planning to achieve specific financial goals [ ] Managing assets in retirement [ ] Access to specialist in areas such as tax planning [ ]

What is the major reason for using financial advisors?

Want help with asset allocation [ ] Don’t have time to make my own investment decision [ ] To explain various investment options [ ] Want to make sure I am investing enough to meet my financial goals [ ]

What is the major reason for not using financial advisor?

Have access to all resources needed to invest on own [ ] Believe advisors are too expensive [ ] Unsure how to find a trustworthy advisor [ ] Want to be in control of own investment [ ]

BIBLIOGRAPHY

BIBLOGRAPHY

BOOK REFERENCES:

V.A.AVADHANI (2006): Security analysis and portfolio management, Himalaya

publishing house. 6th edition.

L.M.BHOLE (2005): Financial institutions and market, Tata McGraw – hill.

FISHER AND JORDEN (2000): Security analysis and portfolio management, prentice

hall.

WEBSITES: www.valueresearchonline.com

www.amfindia.com

www.google.com

www.ingim.co.in

www.hdfcfund.com

www.investorsideas.com

Company fact sheet & Journals

PUBLISHED MAGAZINES AND ARTICLES:

Thomas davenport (2010): “Mutual fund investment”, investors India.

Sanjay j Biyani ss (2010): “An empirical analysis of performance evaluation of mutual

fund schemes in India”, capital market (ICFAI journals):

P. Prasad Rao (2011): “distribution channels in the mutual fund industry”, Money market

(ICFAI journals).

Siddhartha Srivastava (2011): “real estate fund, present conditions and future of the fund”

Capital market (Investment management).