Comparative study of Investment in Equity & Mutual Fund Schemes
A RESEARCH REPORT
ON
“Comparative Study of Investment in Equity & Mutual Fund Schemes”
Submitted in partial fulfillment of the requirements of
the M.B.A Degree Course of Bangalore University
Submitted By
MALLIKARJUNA HIREMATH (REGD.NO:04XQCM 6051)
Under the Guidance and Supervision Of
DR. N.S. MALAVALLI
M.P.BIRLA INSTITUTE OF MANAGEMENT Associate Bharatiya Vidya Bhavan
# 43, Race Course Road, Bangalore-560001 2005-2006
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Comparative study of Investment in Equity & Mutual Fund Schemes
Declaration I hereby declare that this report titled “Comparative Study of Investment in
Equity & Mutual Fund Schemes” is a record of independent work carried out by me,
towards the partial fulfillment of requirements for MBA course of Bangalore University at
M.P.Birla Institute of Management. This has not been submitted in part or full
towards any other degree.
PLACE: BANGALORE DATE: MALLIKARJUNA HIREMATH
M.P. BIRLA INSTITUTE OF MANAGEMENT
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Comparative study of Investment in Equity & Mutual Fund Schemes
Principal’s Certificate This to certify that this report titled “Comparative Study of Investment in
Equity & Mutual Fund Schemes” has been prepared by
MALLIKARJUNA HIREMATH bearing the registration no.04 XQCM 6051
under the guidance and supervision of DR. N.S.MALAVALLI ,MPBIM, Bangalore.
Place: Bangalore Principal Date: (Dr.N.S.Malavalli)
M.P. BIRLA INSTITUTE OF MANAGEMENT
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Comparative study of Investment in Equity & Mutual Fund Schemes
GUIDE’S CERTIFICATE This is to certify that the Research Report entitled “Comparative Study of
Investment in Equity & Mutual Fund Schemes”, done by
MALLIKARJUNA HIREMATH bearing Registration No.04 XQCM 6051 is a
bonafide work done carried under my guidance during the academic year 2005-06 in a partial
fulfillment of the requirement for the award of MBA degree by Bangalore University. To the
best of my knowledge this report has not formed the basis for the award of any other degree.
Place: Bangalore Date : DR.N.S. MALAVALLI
M.P. BIRLA INSTITUTE OF MANAGEMENT
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Comparative study of Investment in Equity & Mutual Fund Schemes
ACKNOWLEDGEMENT
I am thankful to DR. N.S.MALAVALLI, M.P.Birla institute of Management,
Bangalore, who has guided me to do this project by giving valuable suggestions and advice.
Finally, I express my sincere gratitude to all my friends and well wishers who helped me to do
this project.
MALLIKARJUNA HIREMATH
M.P. BIRLA INSTITUTE OF MANAGEMENT
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INDEX
Chapter No
Particulars Page no
Research Extract 01
1 Introduction
a. Background of the Study
b. Statement of the Problem
c. Objectives of the Study
d. Scope of the Study
e. Limitations of the Study
02-17
18
19
20
21
2 Research Methodology
a. Methodology
b. Sampling technique
c. Sample size
d. Sample description
22
23
24
25
3 26-76 Analysis and Interpretation
4 Summary and Conclusion
a. Findings
b. Recommendations
c. Conclusion
77-78
79-80
81
Annexure
Bibliography
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LIST OF TABLES:
Table No Particulars Page No
1.1 Average risk of selected mutual funds 45
1.2 Average return of selected mutual funds 47
1.3 Risk and return of ACC Ltd 54
1.4 Risk and return of Bajaj Auto Ltd 58
1.5 Risk and return of BHEL 62
1.6 Risk and return of ICICI Bank 66
1.7 Risk and return of Satyam Computers Ltd 70
1.8 Average risk of selected companies 71
1.9 Average return of selected companies 73
1.10 Comparison of Equity Capital and mutual funds in
respect of their risk
75
1.11 Comparison of Equity Capital and mutual funds in
respect of their return
76
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LIST OF GRAPHS:
Table No Particulars Page No
1.1 Average risk of selected mutual funds 45
1.2 Average return of selected mutual funds 47
1.3 Risk and return of ACC Ltd 54
1.4 Risk and return of Bajaj Auto Ltd 58
1.5 Risk and return of BHEL 62
1.6 Risk and return of ICICI Bank 66
1.7 Risk and return of Satyam Computers Ltd 70
1.8 Average risk of selected companies 71
1.9 Average return of selected companies 73
1.10 Comparison of Equity Capital and mutual funds in
respect of their risk
75
1.11 Comparison of Equity Capital and mutual funds in
respect of their return
76
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RESEARCH EXTRACT
In the current economic scenario interest rates are falling and fluctuation in
the share market has put investors in confusion. One finds it difficult to take
decision on investment. This is primarily, because of investments are risky in
nature and investors have to consider various factors before investing in
investment avenues.
These factors include risk, return, volatility of shares and liquidity. The
main objective of comparing investment in equity shares with mutual fund
schemes is to analyze the performance of mutual funds with their benchmark
and comparing them with equities by using risk, return, beta and alpha as a
parameter.
Historical data were taken for calculating risk, return, alpha and beta.
Analysis has done on percentage method for comparing equity shares with
mutual fund schemes. Compare to equities mutual funds are less risky with
stable returns and mutual funds gives the investor a diversified portfolio.
Those who have well knowledge in equity market they can go for equity
investments rather that investing in mutual funds because no control on the
expenses made by the fund manager.
The study will guide the new investor who wants to invest in equity and
mutual fund schemes by providing knowledge about how to measure the risk
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and return of particular scrip or mutual fund scheme. The study recommends
new investors to go for mutual funds rather than equities, because of high risk
and market instability.
a. Background of the study:
Introduction to Equity Capital and Mutual Fund
Issue of shares is the most important method of raising capital. Finance raised
by the issue of shares serves as a financial floor to the company’s capital
structure. Shares indicate the ownership or equity interest in the assets of the
company. Shares are of different nominal or face values and of different kinds
to attract different kinds of investors. The maximum amount of capital to be
raised by the issue of shares is mentioned in the memorandum of association.
During 1990-91 and 1991-92, equity accounts for 35 to 39 percent of
the total capital raised respectively. This proportion was reversed in 1992-93,
the first year of free pricing, when the share of equity increased to 62 percent.
He share of equity finance increased to a high of 73.18 percent in 1994-95.
However, in 1995-96 there is a rise in the importance of debt largely due to
the high interest rates in the economy and negative returns from the
secondary market.
The mutual fund industry in India started in 1964 with the formation of
Unit Trust of India, at the initiative of the Government of India. The 1993 SEBI
Regulations were substituted by a more comprehensive and revised Mutual
Fund Regulations in 1996.
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The end of millennium marks 36 years of existence of mutual funds in
this country. The ride through these 36 years is not been smooth. Investor
opinion is still divided. While some are for mutual funds others are against it.
UTI commenced its operations from July 1964. The impetus for establishing a
formal institution came from the desire to increase the propensity of the
middle and lower groups to save and to invest. UTI came in to existence
during a period marked by great political and economic turmoil that depressed
the financial market; entrepreneurs were rather hesitant to enter the capital
markets.
Concept of Equity Capital and Mutual Fund
The term Equity literally means the stock or ownership of a company. They
are also known as ordinary shares. The rate of dividend on equity shares
varies according to the amount of profit available and the intention of board of
directors. In the event of winding up of the company, equity shares can be
refunded only after all other claims, including those of preference shares for
the refund of their capital, have been met.
Equity capital or financing is money raised by a business in exchange
for a share of ownership in the company. Ownership is represented by owning
shares of stock outright or having the right to convert other financial
instruments into stock of that private company. Two key sources of equity
capital for new and emerging businesses are angel investors and venture
capital firms.
Equity capital is represented by funds that are raised by a business, in
exchange for a share of ownership in the company. Equity financing allows a
business to obtain funds without incurring debt, or without having to repay a
specific amount of money at a particular time.
The Equity Capital Markets Group (ECM) oversees the Firm's activities
in the primary equity and equity-linked markets, as well as monetization and M.P. BIRLA INSTITUTE OF MANAGEMENT
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equity derivatives. It provides support in the origination of primary market
transactions and manages their structuring, syndication, marketing and
distribution.
The world over, it’s been shown that over long tenures, equities–with
their risk premia–have provided approximately 7 percentage points higher
returns than risk-free options. People have to accumulate significant amounts
of wealth during their working years. Right now, a 17-year bond gives you
only 5.5 per cent. So, it is imperative that these people have some exposure
to equity.
A mutual fund is a trust that pools the money of many investors -- its
shareholders -- to invest in a variety of different securities. Investments may
be in stocks, bonds, money market securities or some combination of these.
Those securities are professionally managed on behalf of the shareholders,
and each investor holds a pro rata share of the portfolio -- entitled to any
profits when the securities are sold, but subject to any losses in value as well.
A mutual fund is a group of investors operating through a fund
manager to purchase a diverse portfolio of stocks or bonds. There are myriad
kinds of mutual funds, each with its own goals and methodologies. Whether or
not a mutual fund is a good investment is a matter of much public debate, with
many claiming they are excellent for the average person, and others saying
they are simply a poor way to invest.
For the individual investor, mutual funds provide the benefit of having
someone else manage your investments, take care of recordkeeping for your
account, and diversify your rupees over many different securities that may not
be available or affordable to you otherwise. Today, minimum investment
requirements on many funds are low enough that even the smallest investor
can get started in mutual funds.
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A mutual fund, by its very nature, is diversified -- its assets are invested
in many different securities. Beyond that, there are many different types of
mutual funds with different objectives and levels of growth potential, furthering
your chances to diversify.
Many critics of mutual funds point out that scarcely over 20% of mutual
funds outperform the Standard and Poor's 500 Index. This means that nearly
80% of the time, an investor would have been more profitable by simply
buying equal shares in all 500 of the companies currently on the S&P 500.
Schemes of Mutual funds
Schemes according to Maturity Period:
A mutual fund scheme can be classified into open-ended scheme or close-
ended scheme depending on its maturity period.
Open-ended Scheme:
An open-ended fund or scheme is one that is available for subscription and
repurchase on a continuous basis. These schemes do not have a fixed
maturity period. Investors can conveniently buy and sell units at Net Asset
Value (NAV) related prices which are declared on a daily basis. The key
feature of open-end schemes is liquidity.
Close-ended Scheme:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years.
The fund is open for subscription only during a specified period at the time of
launch of the scheme. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the scheme
on the stock exchanges where the units are listed. In order to provide an exit
route to the investors, some close-ended funds give an option of selling back
the units to the mutual fund through periodic repurchase at NAV related M.P. BIRLA INSTITUTE OF MANAGEMENT
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prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor i.e. either repurchase facility or through listing on
stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.
Schemes according to Investment Objective:
A scheme can also be classified as growth scheme, income scheme, or
balanced scheme considering its investment objective. Such schemes may be
open-ended or close-ended schemes as described earlier. Such schemes
may be classified mainly as follows:
Growth / Equity Oriented Scheme:
The aim of growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes provide
different options to the investors like dividend option, capital appreciation, etc.
and the investors may choose an option depending on their preferences.
Income / Debt Oriented Scheme:
The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds,
corporate debentures, Government securities and money market instruments.
Such funds are less risky compared to equity schemes. These funds are not
affected because of fluctuations in equity markets.
Balanced Scheme:
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The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for
investors looking for moderate growth. They generally invest 40-60% in equity
and debt instruments. These funds are also affected because of fluctuations
in share prices in the stock markets. However, NAVs of such funds are likely
to be less volatile compared to pure equity funds.
Money Market or Liquid Fund:
These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest
exclusively in safer short-term instruments such as treasury bills, certificates
of deposit, commercial paper and inter-bank call money, government
securities, etc. Returns on these schemes fluctuate much less compared to
other funds. These funds are appropriate for corporate and individual
investors as a means to park their surplus funds for short periods.
Gilt Fund:
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to
change in interest rates and other economic factors as is the case with
income or debt oriented schemes.
Index Funds:
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc, these schemes invest in the
securities in the same weightage comprising of an index. NAV’s of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
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"tracking error" in technical terms. Necessary disclosures in this regard are
made in the offer document of the mutual fund scheme.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those
sectors or industries as specified in the offer documents. e.g.
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries.
Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of
the Income Tax Act, 1961 as the Government offers tax incentives for
investment in specified avenues. e.g. Equity Linked Savings Schemes
(ELSS). Pension schemes launched by the mutual funds also offer tax
benefits. These schemes are growth oriented and invest pre-dominantly in
equities. Their growth opportunities and risks associated are like any equity-
oriented scheme.
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Advantages of Equity Capital and Mutual Fund:
Advantages of Equity Capital:
1. High dividend and high value:-
In times of prosperity, the equity shareholders get a very high rate of dividend,
sufficiently higher than that on preference shares. At the same time, their
share value will also go up in the market.
2. Voting rights:-
It is only the equity shareholders who enjoy voting rights on all the policy
matters of the company.
3. Pre-emptive right to new shares:-
Equity shareholders have the pre-emptive right to purchase new shares.
Under the provisions of the companies act, the existing shareholders of the
company have a right to allotment of newly issued shared.
4. Many privileges and rights:-
Equity shareholders enjoy many privileges and rights. For example, they can
vote at meetings, elect directors, control the directors to run the company
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efficiently and profitably, look into the books and records of the company and
transfer or sell their shareholdings.
Advantages of Mutual Fund:
1. Professional Investment Management:-
By pooling the funds of thousands of investors, mutual funds provide full-time,
high-level professional management that few individual investors can afford to
obtain independently. Such management is vital to achieving results in today's
complex markets. Your fund managers' interests are tied to yours, because
their compensation is based not on sales commissions, but on how well the
fund performs.
2. Diversification:-
Mutual funds invest in a broad range of securities. This limits investment risk
by reducing the effect of a possible decline in the value of any one security.
Mutual fund shareowners can benefit from diversification techniques usually
available only to investors wealthy enough to buy significant positions in a
wide variety of securities.
3. Low Cost:-
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If you tried to create your own diversified portfolio of 50 stocks, you'd need at
least Rs.1,00,000 and you'd pay thousands of rupees in commissions to
assemble your portfolio. A mutual fund lets you participate in a diversified
portfolio for as little as Rs.10,000, and sometimes less. And if you buy a no-
load fund, you pay or no sale charges to own them.
4. Convenience and Flexibility:-
You own just one security rather than many, yet enjoy the benefits of a
diversified portfolio and a wide range of services. Fund managers decide what
securities to trade, clip the bond coupons, collect the interest payments and
see that your dividends on portfolio securities are received and your rights
exercised.
5. Quick, Personalized Service:-
Most funds now offer extensive websites with a host of shareholder services
for immediate access to information about your fund account. Or a phone call
puts you in touch with a trained investment specialist at a mutual fund
company who can provide information you can use to make your own
investment choices, assist you with buying and selling your fund shares.
6. Ease of Investing:-
You may open or add to your account and conduct transactions or business
with the fund by mail, telephone or bank wire. You can even arrange for
automatic monthly investments by authorizing electronic fund transfers from
your checking account in any amount and on a date you choose.
7. Total Liquidity, Easy Withdrawal:-
You can easily redeem your shares anytime you need cash by letter,
telephone, bank wire or check, depending on the fund. Your proceeds are
usually available within a day or two.
8. Life Cycle Planning:-
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With no-load mutual funds, you can link your investment plans to future
individual and family needs -- and make changes as your life cycles change.
You can invest in growth funds for future college tuition needs, then move to
income funds for retirement, and adjust your investments as your needs
change throughout your life.
9. Market Cycle Planning:-
For investors who understand how to actively manage their portfolio, mutual
fund investments can be moved as market conditions change. You can place
your funds in equities when the market is on the upswing and move into
money market funds on the downswing or take any number of steps to ensure
that your investments are meeting your needs in changing market climates.
10. Investor Information:-
Shareholders receive regular reports from the funds, including details of
transactions on a year-to-date basis. The current net asset value of your
shares (the price at which you may purchase or redeem them) appears in the
mutual fund price listings of daily newspapers. You can also obtain pricing
and performance results for the all mutual funds at this site, or it can be
obtained by phone from the fund.
11. Periodic Withdrawals:-
If you want steady monthly income, many funds allow you to arrange for
monthly fixed checks to be sent to you, first by distributing some or all of the
income and then, if necessary, by dipping into your principal.
12. Dividend Options:-
You can receive all dividend payments in cash. Or you can have them
reinvested in the fund free of charge, in which case the dividends are
automatically compounded. This can make a significant contribution to your
long-term investment results. M.P. BIRLA INSTITUTE OF MANAGEMENT
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13. Automatic Direct Deposit:-
You can usually arrange to have regular, third-party payments -- such as
Social Security or pension checks -- deposited directly into your fund account.
This puts your money to work immediately, without waiting to clear your
checking account, and it saves you from worrying about checks being lost in
the mail.
14. Recordkeeping Service:-
With your own portfolio of stocks and bonds, you would have to do your own
recordkeeping of purchases, sales, dividends, interest, short-term and long-
term gains and losses. Mutual funds provide confirmation of your transactions
and necessary tax forms to help you keep track of your investments and tax
reporting.
15. Safekeeping:-
When you own shares in a mutual fund, you own securities in many
companies without having to worry about keeping stock certificates in safe
deposit boxes or sending them by registered mail. You don't even have to
worry about handling the mutual fund stock certificates; the fund maintains
your account on its books and sends you periodic statements keeping track of
all your transactions.
16. Retirement and College Plans:-
Mutual funds are well suited to Individual Retirement Accounts and most
funds offer IRA-approved prototype and master plans for individual retirement
accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k) retirement plans.
17. Online Services:-
The internet provides a fast, convenient way for investors to access financial
information. A host of services are available to the online investor including
direct access to no-load companies. Visit Company Links to access these
Companies.
18. Sweep Accounts:- M.P. BIRLA INSTITUTE OF MANAGEMENT
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With many funds, if you choose not to reinvest your stock or bond fund
dividends, you can arrange to have them swept into your money market fund
automatically. You get all the advantages of both accounts with no extra
effort.
19. Asset Management Accounts:-
These master accounts, available from many of the larger fund groups,
enable you to manage all your financial service needs under a single umbrella
from unlimited check writing and automatic bill paying to discount brokerage
and credit card accounts.
Disadvantages of Equity Capital and Mutual Fund
Disadvantages of Equity Capital: 1. No refund of capital:-
Since equity shares cannot be refunded, excessive issue of such shares may
leads to overcapitalization, particularly when the earning capacity of the
company declining.
2. Benefits only in prosperity:-
During the periods of prosperity, the company has to distribute heavy
dividends on these shares.
3. Manipulation of control:-
Since the equity shares have proportionate voting power, the company’s
management may be vitiated by manipulation of votes, clique-formation,
abuse of proxy rights etc.
4. High risk:-
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Equity share holders cannot claim dividend as a matter of right, because the
decision to fit the rate of dividend on equity shares is vested in the Board of
Directors. Therefore investors as a class may find equity shares unsafe,
unattractive and unremunerative.
5. Unhealthy Speculation:-
During the period of boom, the market value of shares will go up, which leads
to unhealthy speculation in the stock market.
Disadvantages of Mutual Fund:
There are certainly some benefits to mutual fund investing, but you should
also be aware of the drawbacks associated with mutual funds.
1. No Insurance:-
Mutual funds, although regulated by the government, are not insured against
losses. The Federal Deposit Insurance Corporation (FDIC) only insures
against certain losses at banks, credit unions, and savings and loans, not
mutual funds. That means that despite the risk-reducing diversification
benefits provided by mutual funds, losses can occur, and it is possible
(although extremely unlikely) that you could even lose your entire investment.
2. Dilution:-
Although diversification reduces the amount of risk involved in investing in
mutual funds, it can also be a disadvantage due to dilution. For example, if a
single security held by a mutual fund doubles in value, the mutual fund itself
would not double in value because that security is only one small part of the
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fund's holdings. By holding a large number of different investments, mutual
funds tend to do neither exceptionally well nor exceptionally poorly.
3. Fees and Expenses:-
Most mutual funds charge management and operating fees that pay for the
fund's management expenses (usually around 1.0% to 1.5% per year). In
addition, some mutual funds charge high sales commissions, 12b-1 fees, and
redemption fees. And some funds buy and trade shares so often that the
transaction costs add up significantly. Some of these expenses are charged
on an ongoing basis, unlike stock investments, for which a commission is paid
only when you buy and sell (see Investor Guide University: Fees and
Expenses).
4. Poor Performance:-
Returns on a mutual fund are by no means guaranteed. In fact, on average,
around 75% of all mutual funds fail to beat the major market indexes, like the
S&P 500, and a growing number of critics now question whether or not
professional money managers have better stock-picking capabilities than the
average investor.
5. Loss of Control:-
The managers of mutual funds make all of the decisions about which
securities to buy and sell and when to do so. This can make it difficult for you
when trying to manage your portfolio. For example, the tax consequences of a
decision by the manager to buy or sell an asset at a certain time might not be
optimal for you. You also should remember that you are trusting someone
else with your money when you invest in a mutual fund.
6. Trading Limitations:-
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Although mutual funds are highly liquid in general, most mutual funds (called
open-ended funds) cannot be bought or sold in the middle of the trading day.
You can only buy and sell them at the end of the day, after they've calculated
the current value of their holdings.
7. Size:-
Some mutual funds are too big to find enough good investments. This is
especially true of funds that focus on small companies, given that there are
strict rules about how much of a single company a fund may own. If a mutual
fund has $5 billion to invest and is only able to invest an average of $50
million in each, then it needs to find at least 100 such companies to invest in;
as a result, the fund might be forced to lower its standards when selecting
companies to invest in.
8. Inefficiency of Cash Reserves:-
Mutual funds usually maintain large cash reserves as protection against a
large number of simultaneous withdrawals. Although this provides investors
with liquidity, it means that some of the fund's money is invested in cash
instead of assets, which tends to lower the investor's potential return.
9. Different Types:-
The advantages and disadvantages listed above apply to mutual funds in
general. However, there are over 10,000 mutual funds in operation, and these
funds vary greatly according to investment objective, size, strategy, and style.
Mutual funds are available for virtually every investment strategy (e.g. value,
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growth), every sector (e.g. biotech, internet), and every country or region of
the world. So even the process of selecting a fund can be tedious.
.
b. Statement of the Problem:
In the current economic scenario interest rates are falling and fluctuation in
the share market has put investors in confusion. One finds it difficult to take
decision on investment. This is primarily, because investments are risky in
nature and investors have to consider various factors before investing in
investment avenues. Therefore the study aims to compare equity and mutual
fund schemes in form their risk, return & liquidity and also creating awareness
about Equity and Mutual Fund Schemes among the investors.
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C. Objectives of the Study: Saving money is not enough. Each of us also need to invest one’s savings
intelligently in order to have enough money available for funding the higher
education of one’s children, for buying a house, or for one’s own golden
years. But the rapidly growing number of investment avenues often lead to
confusion. Objectives of the study are to provide information to individual
investors regarding their risk, and choosing the best investment options to
match their goals and attitude to risk.
1. To compare Equity and Mutual Fund Schemes in respect of their risk &
return.
2. Analyzing the performance of equity shares and mutual fund schemes
with their benchmark.
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3. Finding the Volatility of shares by using beta.
4. Provide information about pros and cons of investing in Equity and
Mutual Funds
d. Scope of the Study
The project primarily deals with equity, derivatives, mutual funds, portfolio
management.
The study is limited to compare equity capital and mutual fund
schemes in respect of their risk, return and liquidity. The study covers 5
randomly selected stocks out of 30 BSE Sensex companies and 5 randomly
selected mutual fund schemes out of mutual fund industry in India for
comparison. The analysis is strictly based on share price and unit price
information. Other company performance indicators are not considered. It
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focuses on every month ending closing prices of during the period from 1st
Apr, 2003 to 31st Mar, 2006.
e. Limitations of the Study
The time period for the project was limited to only one and half month and
information provided is limited to the extent of internet and journals.
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Research Methodology The whole study can be termed as comparative study. It is also a desk
research hence; there is no field work and collection of primary date for this
research.
The study centers on comparing equity and mutual fund schemes in
respect of their risk, return and liquidity. However, with the objective and
scope of the study in mind, it was decided to base the study on return series
of selected stocks and mutual fund schemes.
BSE being the premier exchange of India was chosen for selecting
stocks. It is widely accepted that BSE Sensex is the one of the most reliable
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index of the stock exchange that reflects present day market condition. Since
it is not possible to compare all the 30 scrips in the index with all Mutual Fund
Schemes due to time and resource constraints, sampling techniques were
considered. Randomly selected samples will facilitate inference of the
population, in our case BSE Sensex and mutual fund industry in India. Hence
by stratified random sampling 5 scrip’s out of 30 sensex and 5 mutual fund
schemes out of whole mutual fund industry were selected.
The initial examination of the composition of index revealed that it is
composed of primarily two types of industries: manufacturing and services in
the ratio of 3 : 2. there for to give correct picture appropriate weight was
assigned to manufacturing industries and hence three scrip’s from
manufacturing and two from service industries were randomly selected and in
case of mutual funds it consists basically large cap, mid cap, small cap,
sectoreal funds and contra funds there fore one fund from each area were
selected.
Monthly share price and unit prices of the selected scrip’s and units
were collected from historical data. In order to avoid bias, at least three years
monthly data was decided to be necessary. The reference period is from 1st
Apr, 2003 to 31st Mar, 2006.
a. Sampling technique:
The quality of research output and the validity of its findings depend upon
appropriateness of the sampling design selected for the study. It was needed
to apply inferential statistical analysis, hence probability sampling was chosen
to be essential.
Criteria for Selecting Sampling Techniques
It is intended to generalize the finding based on the sample
examination to the population, therefore, probability sampling adopted
in order to have a representative sample.
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Since the population is heterogeneous stratified random sampling was
taken.
Probability sampling produces high degree of precision compared to
non probability sampling.
Sample Design
1. Relative population – 30 BSE sensitivity index companies and mutual
fund industry in India.
2. Sampling frame – list of population, elements from which sample is drawn
(see the annexure).
3. Method of sampling – stratified random sampling. Stratification or division
of population into homogeneous group was done on the basis of industry.
4. Variables – monthly calculated risk and returns were used for comparing
equity and mutual fund schemes.
b. Sample size:
Five companies and five mutual fund schemes were selected.
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C. Sample Description:
EQUITIES BENCHMARK
ACC LIMITED BSE SENSEX
BAJAJ AUTO LIMITED BSE SENSEX
BHEL BSE SENSEX
ICICI BANK LIMITED BSE SENSEX
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SATYAM COMPUTER SERVICES LIMITED BSE SENSEX
MUTUAL FUNDS BENCHMARK
RELIANCE MUTUAL FUND BSE SENSEX
FRANKLIN INDIA PRIMA FUND BSE 100
SUNDARAM SMILE FUND BSE 500
PRUDENTIAL ICICI MUTUAL FUND BSE 100
SBI MUTUAL FUND BSE 100
Calculation of Return and Risk of Selected Mutual Fund Schemes and their Bench Marks
Risk and Return of Bench Marks
1. BSE SENSEX:
Calculation of Return and Standard Deviation Date SENSEX Return in % R -R1 (R - R1)2
30-03-03 3048.72 30-04-03 2959.79 -2.92 -6.83 46.6530-05-03 3180.75 7.47 3.56 12.6730-06-03 3607.13 13.41 9.50 90.2531-07-03 3792.61 5.14 1.23 1.5129-08-03 4244.73 11.92 8.01 64.16
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Comparative study of Investment in Equity & Mutual Fund Schemes
30-09-03 4453.24 4.91 1.00 1.0031-10-03 4906.87 10.19 6.28 39.4428-11-03 5044.82 2.81 -1.10 1.2131-12-03 5838.96 15.74 11.83 139.9530-01-04 5695.67 -2.45 -6.36 40.4527-02-04 5667.51 -0.49 -4.40 19.3631-03-04 5590.6 -1.36 -5.27 27.7730-04-04 5655.09 1.15 -2.76 7.6231-05-04 4759.62 -15.83 -19.74 389.6730-06-04 4795.46 0.75 -3.16 9.9930-07-04 5170.32 7.82 3.91 15.2931-08-04 5192.08 0.42 -3.49 12.1830-09-04 5583.61 7.54 3.63 13.1829-10-04 5672.27 1.59 -2.32 5.3830-11-04 6234.29 9.91 6.00 36.0031-12-04 6602.69 5.91 2.00 4.0031-01-05 6555.94 -0.71 -4.62 21.3428-02-05 6713.86 2.41 -1.50 2.2531-03-05 6492.82 -3.29 -7.20 51.8429-04-05 6154.44 -5.21 -9.12 83.1731-05-05 6715.11 9.11 5.20 27.0430-06-05 7193.85 7.13 3.22 10.3729-07-05 7635.42 6.14 2.23 4.9731-08-05 7805.43 2.23 -1.68 2.8230-09-05 8634.48 10.62 6.71 45.0231-10-05 7892.32 -8.6 -12.51 156.5030-11-05 8788.81 11.36 7.45 55.5030-12-05 9397.93 6.93 3.02 9.1231-01-06 9919.89 5.55 1.64 2.6928-02-06 10370.2 4.54 0.63 0.4031-03-06 11280 8.77 4.86 23.62Total 140.6 1474.39
Bench Mark Return and Risk (BSE Sensex)
Return = (P1 /P0 *100)-100
Where, P1 = Current month price,
P0 = Previous month price
R1 = ΣR/n, where n=number of months.
R1 = 140.60/36
=3.9
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SD = √ Σ(R- R1)2 /n
= √1474.39/36
SD = 6.4
2. BSE 100:
Calculation of Return and Standard Deviation
BSE 100 Return in % R -R1 (R - R1)2 Date 30-03-03 1716.28 30-04-03 1671.63 -2.60 -6.32 39.96 30-05-03 1641.44 -1.81 -5.53 30.54 30-06-03 1819.36 10.84 7.12 50.68 31-07-03 1893.45 4.07 0.35 0.12 29-08-03 2229.25 17.73 14.01 196.42 30-09-03 2314.62 3.83 0.11 0.01 31-10-03 2485.43 7.38 3.66 13.39 28-11-03 2594.94 4.41 0.69 0.47 31-12-03 3074.87 18.49 14.77 218.30
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30-01-04 2946.14 -4.19 -7.91 62.51 27-02-04 2923.99 -0.75 -4.47 20.00 31-03-04 2966.31 1.45 -2.27 5.16 30-04-04 3025.14 1.98 -1.74 3.02 31-05-04 2525.35 -16.52 -20.24 409.71 30-06-04 2561.16 1.42 -2.30 5.30 30-07-04 2755.22 7.58 3.86 14.88 31-08-04 2789.07 1.23 -2.49 6.21 30-09-04 2997.97 7.49 3.77 14.21 29-10-04 3027.96 1.00 -2.72 7.40 30-11-04 3231.25 6.71 2.99 8.96 31-12-04 3456.54 6.97 3.25 10.58 31-01-05 3521.71 1.89 -1.83 3.37 28-02-05 3611.9 2.56 -1.16 1.34 31-03-05 3481.88 -3.60 -7.32 53.58 29-04-05 3313.45 -4.84 -8.56 73.23 31-05-05 3601.73 8.70 4.98 24.80 30-06-05 3800.24 5.51 1.79 3.21 29-07-05 4072.15 7.16 3.44 11.80 31-08-05 4184.83 2.77 -0.95 0.91 30-09-05 4566.63 9.12 5.40 29.20 31-10-05 4159.59 -8.91 -12.63 159.60 30-11-05 4849.87 16.59 12.87 165.76 30-12-05 4953.28 2.13 -1.59 2.52 31-01-06 5254.97 6.09 2.37 5.62 28-02-06 5422.67 3.19 -0.53 0.28 31-03-06 5904.17 8.88 5.16 26.62 Total 133.96 1679.66
Bench Mark Return and Risk (BSE 100)
Return = (P1 /P0 *100)-100
Where, P1 = Current month price,
P0 = Previous month price
R1 = ΣR/n,
Where n=number of months.
R1 = 133.96/36
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= 3.72
SD = √ Σ(R- R1)2 /n
= √1679.66/36
SD = 6.83
3. BSE 500:
Calculation of Return and Standard Deviation
BSE 500 Return in % R – R1 (R - R1)2Date 30-03-03 1164.68 30-04-03 1182.01 1.49 -2.60 6.77 30-05-03 1235.78 4.55 0.46 0.21 30-06-03 1373.56 11.15 7.06 49.83 31-07-03 1439.3 4.79 0.70 0.48 29-08-03 1687.35 17.23 13.14 172.77
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30-09-03 1748.43 3.62 -0.47 0.22 31-10-03 1877.14 7.36 3.27 10.70 28-11-03 1991.74 6.11 2.02 4.06 31-12-03 2366.36 18.81 14.72 216.64 30-01-04 2246.83 -5.05 -9.14 83.56 27-02-04 2228.41 -0.82 -4.91 24.11 31-03-04 2243.6 0.68 -3.41 11.62 30-04-04 2321.25 3.46 -0.63 0.40 31-05-04 1891.75 -18.50 -22.59 510.44 30-06-04 1923.78 1.69 -2.40 5.74 30-07-04 2081.26 8.19 4.10 16.78 31-08-04 2125.65 2.13 -1.96 3.83 30-09-04 2276.87 7.11 3.02 9.14 29-10-04 2319.3 1.86 -2.23 4.96 30-11-04 2518.67 8.60 4.51 20.31 31-12-04 2634.51 4.60 0.51 0.26 31-01-05 2726.49 3.49 -0.60 0.36 28-02-05 2825.65 3.64 -0.45 0.21 31-03-05 2434.66 -13.84 -17.93 321.38 29-04-05 2610.5 7.22 3.13 9.81 31-05-05 2829.2 8.38 4.29 18.38 30-06-05 2928.31 3.50 -0.59 0.34 29-07-05 3124.78 6.71 2.62 6.86 31-08-05 3273 4.74 0.65 0.43 30-09-05 3521.83 7.60 3.51 12.34 31-10-05 3198.69 -9.18 -13.27 175.97 30-11-05 3568.37 11.56 7.47 55.76 30-12-05 3795.96 6.38 2.29 5.23 31-01-06 4004.96 5.51 1.42 2.00 28-02-06 4130.07 3.12 -0.97 0.93 31-03-06 4516.73 9.36 5.27 27.79 Total 147.26 1790.64
Bench Mark Return and Risk(BSE 500)
Return = (P1 /P0 *100)-100
Where, P1 = Current month price,
P0 = Previous month price
X1 = ΣR/n,
Where n=number of months.
R1 = 147.26/36
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= 4.09
SD = √ Σ(R- R1)2 /n
= √1790.64/36
SD = 7.05
1. Reliance Vision Fund:-
Reliance Vision Fund is large cap open ended growth fund. Its objective is to
achieve long term growth of capital through a research based investment
approach. Monthly risk and return from 30th Apr 2003 to 31st Mar 2006 is
calculated below.
Return=P1 /P0 *100
Where, P1 = Current month price,
P0 = Previous month price
R1 = ΣR/n, = 190.14/36, = 5.28 M.P. BIRLA INSTITUTE OF MANAGEMENT
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Where n=number of months.
SD = √ Σ(R- R1)2 /n, = √1704.71/36
SD = 6.88
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1424.07/1474.39
B = 0.96
Calculation of Alpha
Alpha = (Ra1 - Rm1)*B
= (5.16-3.9)*0.96
=1.2 Calculation of Risk And Return
Net Asset Value Return in % (R) R - R1 (R- R1)2Date 30-Mar-2003 27.66 ------ ----- ---- 30-Apr-2003 27.86 4.85 -0.43 0.18 30-May-2003 31.45 13.7 8.42 70.89 27-Jun-2003 34.70 10.03 4.75 22.56 31-Jul-2003 37.58 8.29 3.01 9.06 29-Aug-2003 43.31 16.39 11.11 123.43 30-Sep-2003 48.11 9.99 4.71 22.18 31-Oct-2003 53.04 10.24 4.96 24.6 28-Nov-2003 57.89 9.14 3.86 14.89 31-Dec-2003 68.51 18.34 13.06 170.56 30-Jan-2004 63.69 -7.03 -12.31 151.53 27-Feb-2004 65.39 2.66 -2.62 6.86 31-Mar-2004 63.11 -3.48 -8.76 76.73
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30-Apr-2004 65.34 3.53 -1.8 3.24 31-May-2004 54.44 -16.68 -21.96 482.24 30-Jun-2004 56.26 3.34 -1.94 3.76 30-Jul-2004 60.9 8.24 2.96 8.76 31-Aug-2004 63.94 4.99 -1.04 1.08 30-Sep-2004 68.7 7.44 2.16 4.66 29-Oct-2004 69.11 1.45 -3.83 14.66 30-Nov-2004 74.76 7.25 1.97 3.88 31-Dec-2004 82.08 9.79 4.51 20.34 31-Jan-2005 83.14 1.6 -3.68 13.54 28-Feb-2005 90.19 8.14 2.86 8.17 31-Mar-2005 86.7 -3.86 -9.14 83.53 29-Apr-2005 86.10 -0.69 5.97 35.64 31-May-2005 91.64 6.43 1.15 1.32 30-Jun-2005 91.49 -0.16 -5.44 29.59 31-Jul-2005 99.74 9.01 3.73 13.91 31-Aug-2005 104.82 5.09 -0.19 0.03 30-Sep-2005 114.32 9.06 3.78 14.28 31-Oct-2005 105.35 -7.84 13.12 172.13 30-Nov-2005 118.05 12.05 6.77 45.83 30-Dec-2005 125.97 6.7 1.42 2.01 31-Jan-2006 134.38 6.67 1.39 1.93 28-Feb-2006 139.26 3.63 -1.92 3.68 31-Mar-2006 155.75 11.84 6.56 43.03 Total 190.14 1704.71 Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-Ra1) (Rm-Rm1)] (Rm-Rm1)2
30-04-03 0.72 -2.92 -4.44 -6.83 30.33 46.6530-05-03 12.89 7.47 7.73 3.56 27.52 12.6730-06-03 10.33 13.41 5.17 9.5 49.12 90.2531-07-03 8.3 5.14 3.14 1.23 3.86 1.5129-08-03 15.25 11.92 10.09 8.01 80.82 64.1630-09-03 11.08 4.91 5.92 1 5.92 1.0031-10-03 10.25 10.19 5.09 6.28 31.97 39.4428-11-03 9.14 2.81 3.98 -1.1 -4.38 1.2131-12-03 18.35 15.74 13.19 11.83 156.04 139.9530-01-04 -7.04 -2.45 -12.2 -6.36 77.59 40.4527-02-04 2.67 -0.49 -2.49 -4.4 10.96 19.3631-03-04 -3.49 -1.36 -8.65 -5.27 45.59 27.77
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30-04-04 3.53 1.15 -1.63 -2.76 4.50 7.6231-05-04 -16.68 -15.83 -21.84 -19.74 431.12 389.6730-06-04 3.34 0.75 -1.82 -3.16 5.75 9.9930-07-04 8.25 7.82 3.09 3.91 12.08 15.2931-08-04 4.99 0.42 -0.17 -3.49 0.59 12.1830-09-04 7.44 7.54 2.28 3.63 8.28 13.1829-10-04 0.6 1.59 -4.56 -2.32 10.58 5.3830-11-04 8.18 9.91 3.02 6 18.12 36.0031-12-04 9.79 5.91 4.63 2 9.26 4.0031-01-05 1.29 -0.71 -3.87 -4.62 17.88 21.3428-02-05 8.48 2.41 3.32 -1.5 -4.98 2.2531-03-05 -3.87 -3.29 -9.03 -7.2 65.02 51.8429-04-05 -0.69 -5.21 -5.85 -9.12 53.35 83.1731-05-05 6.43 9.11 1.27 5.2 6.60 27.0430-06-05 -0.16 7.13 -5.32 3.22 -17.13 10.3729-07-05 9.02 6.14 3.86 2.23 8.61 4.9731-08-05 5.09 2.23 -0.07 -1.68 0.12 2.8230-09-05 9.06 10.62 3.9 6.71 26.17 45.0231-10-05 -7.85 -8.6 -13.01 -12.51 162.76 156.5030-11-05 12.06 11.36 6.9 7.45 51.41 55.5030-12-05 6.71 6.93 1.55 3.02 4.68 9.1231-01-06 6.68 5.55 1.52 1.64 2.49 2.6928-02-06 3.63 4.54 -1.53 0.63 -0.96 0.4031-03-06 11.84 8.77 6.68 4.86 32.46 23.62Total 185.61 140.61 1424.07 1474.39
2. Franklin India Prima Fund:-
Franklin India Prima Fund is mid cap open ended growth fund. Its
objective is to achieve long term growth of capital through a research based
investment approach. Monthly risk and return from 30th Apr 2003 to 31st Mar
2006 is calculated below.
Return = (P1 /P0 *100) - 100
Where, P1 = Current month price,
P0 = Previous month price
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R1 = ΣR/n,
Where n=number of months.
R1 = 201.9/36
= 5.6
SD = √ Σ(R- R1)2 /n
= √1669.164/36
SD = 6.8
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 375.48/1679.2
B = 0.22
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (5.64-3.72)*0.22 =0.42
Calculation of Risk and Return
Net Asset Value Return in % (R) R- R1 (R- R1)2 Date 30-Mar-2003 29.33 ----- ----- ----- 30-Apr-2003 30.55 4.15 -1.45 2.1 30-May-2003 37.23 21.86 16.26 264.38 30-Jun-2003 41.14 10.5 4.9 24.01 31-Jul-2003 45.70 11.08 5.48 30.03 29-Aug-2003 49.05 7.33 1.73 2.99 30-Sep-2003 52.04 6.09 0.49 0.24 31-Oct-2003 56.93 9.39 3.79 14.36 28-Nov-2003 64.97 14.12 8.52 72.59 31-Dec-2003 80.59 24.04 18.44 340.03
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30-Jan-2004 73.49 -8.81 -14.41 207.64 27-Feb-2004 72.14 -1.83 -7.43 55.2 31-Mar-2004 72.43 0.04 -5.56 30.91 30-Apr-2004 71.86 -0.78 -6.38 40.7 31-May-2004 78.32 8.98 3.38 11.42 30-Jun-2004 79.04 0.09 -5.51 30.36 30-Jul-2004 75.49 -4.49 -10.09 101.8 31-Aug-2004 81.64 8.14 2.54 6.45 30-Sep-2004 84.73 3.78 -1.82 3.31 29-Oct-2004 88.06 3.93 -1.67 2.78 30-Nov-2004 97.23 10.41 4.81 23.13 31-Dec-2004 109.93 13.06 7.46 55.65 31-Jan-2005 108.91 -0.92 -6.52 42.51 28-Feb-2005 117.09 7.51 1.91 3.64 31-Mar-2005 113.63 -2.95 -8.55 73.1 29-Apr-2005 118.08 3.91 -1.69 2.85 31-May-2005 124.54 5.47 -0.13 0.01 30-Jun-2005 122.89 -1.32 -6.92 47.88 29-Jul-2005 126.52 2.95 -2.65 7.02 31-Aug-2005 127.9 1.09 -4.51 20.34 30-Sep-2005 130.06 1.68 -3.92 15.36 31-Oct-2005 149.4 14.87 9.27 85.93 30-Nov-2005 164.69 10.23 4.63 21.43 30-Dec-2005 174.03 5.67 0.07 0.004 31-Jan-2006 180.17 3.52 -2.08 4.32 28-Feb-2006 182.34 1.2 -4.4 19.36 31-Mar-2006 196.88 7.91 2.31 5.33 Total 201.9 1669.164 Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(RaRa1) (Rm-Rm1)] (Rm-Rm1)2
30-03-03 30-04-03 4.16 -2.6 -1 -6.32 6.32 39.9430-05-03 21.87 -1.81 16.71 -5.53 -92.41 30.5830-06-03 10.5 10.84 5.34 7.12 38.02 50.6931-07-03 11.08 4.07 5.92 0.35 2.07 0.1229-08-03 7.33 17.73 2.17 14.01 30.40 196.2830-09-03 6.1 3.83 0.94 0.11 0.10 0.0131-10-03 9.4 7.38 4.24 3.66 15.52 13.4028-11-03 14.12 4.41 8.96 0.69 6.18 0.4831-12-03 24.04 18.49 18.88 14.77 278.86 218.1530-01-04 -8.81 -4.19 -13.97 -7.91 110.50 62.57
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27-02-04 -1.84 -0.75 -7 -4.47 31.29 19.9831-03-04 0.4 1.45 -4.76 -2.27 10.81 5.1530-04-04 -0.79 1.98 -5.95 -1.74 10.35 3.0331-05-04 8.99 -16.52 3.83 -20.24 -77.52 409.6630-06-04 0.92 1.42 -4.24 -2.3 9.75 5.2930-07-04 -4.49 7.58 -9.65 3.86 -37.25 14.9031-08-04 8.15 1.23 2.99 -2.49 -7.45 6.2030-09-04 3.78 7.49 -1.38 3.77 -5.20 14.2129-10-04 3.93 1 -1.23 -2.72 3.35 7.4030-11-04 10.41 6.71 5.25 2.99 15.70 8.9431-12-04 13.06 6.97 7.9 3.25 25.68 10.5631-01-05 -0.93 1.89 -6.09 -1.83 11.14 3.3528-02-05 7.51 2.56 2.35 -1.16 -2.73 1.3531-03-05 -2.95 -3.6 -8.11 -7.32 59.37 53.5829-04-05 3.92 -4.84 -1.24 -8.56 10.61 73.2731-05-05 5.47 8.7 0.31 4.98 1.54 24.8030-06-05 -1.32 5.51 -6.48 1.79 -11.60 3.2029-07-05 2.95 7.16 -2.21 3.44 -7.60 11.8331-08-05 1.09 2.77 -4.07 -0.95 3.87 0.9030-09-05 1.69 9.12 -3.47 5.4 -18.74 29.1631-10-05 14.87 -8.91 9.71 -12.63 -122.64 159.5230-11-05 10.23 16.59 5.07 12.87 65.25 165.6430-12-05 5.67 2.13 0.51 -1.59 -0.81 2.5331-01-06 3.53 6.09 -1.63 2.37 -3.86 5.6228-02-06 1.2 3.19 -3.96 -0.53 2.10 0.2831-03-06 7.97 8.88 2.81 5.16 14.50 26.63
203.23 375.48 1679.20Total 133.96
3. Prudential ICICI FMCG Plan
Prudential ICICI FMCG Plan is sector open ended growth fund. Its objective is
to achieve long term growth of capital through a research based investment
approach. Monthly risk and return from 30th Apr 2003 to 31st Mar 2006 is
calculated below.
Return=(P1 /P0 *100) - 100
Where, P1 = Current month price,
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P0 = Previous month price
R1 = ΣR/n, where n=number of months.
R1 = 178.5/36
= 4.96
SD = √ Σ(R- R1)2 /n
= √1567.54/36
SD = 6.6
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1102.22/1679.2
B = 0.65
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (4.96-3.72)*0.65
=0.80 Calculation of Return and Risk
Net Asset Value Return in % R -R1 (R - R1)2 Date 30-03-03 7.43 30-04-03 7.48 0.67 -4.49 20.13 30-05-03 8.28 10.70 5.54 30.64 30-06-03 9.05 9.30 4.14 17.14 31-07-03 9.36 3.43 -1.73 3.01 29-08-03 10.23 9.29 4.13 17.10 30-09-03 10.11 -1.17 -6.33 40.11 31-10-03 10.31 1.98 -3.18 10.12 28-11-03 11.03 6.98 1.82 3.33 31-12-03 12.85 16.50 11.34 128.61 30-01-04 12.04 -6.30 -11.46 131.41 27-02-04 11.88 -1.33 -6.49 42.11
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31-03-04 11.13 -6.31 -11.47 131.63 30-04-04 12.06 8.36 3.20 10.21 31-05-04 10.92 -9.45 -14.61 213.53 30-06-04 11.11 1.74 -3.42 11.70 30-07-04 11.73 5.58 0.42 0.18 31-08-04 12.72 8.44 3.28 10.76 30-09-04 13.16 3.46 -1.70 2.89 29-10-04 12.87 -2.20 -7.36 54.22 30-11-04 15.18 17.95 12.79 163.55 31-12-04 16.72 10.14 4.98 24.85 31-01-05 17.34 3.71 -1.45 2.11 28-02-05 17.52 1.04 -4.12 16.99 31-03-05 18.06 3.08 -2.08 4.32 29-04-05 18.85 4.37 -0.79 0.62 31-05-05 20.85 10.61 5.45 29.70 30-06-05 21.48 3.02 -2.14 4.57 29-07-05 24.21 12.71 7.55 56.99 31-08-05 27.87 15.12 9.96 99.16 30-09-05 29.72 6.64 1.48 2.18 31-10-05 27.04 -9.02 -14.18 201.00 30-11-05 29.96 10.80 5.64 31.80 30-12-05 32.48 8.41 3.25 10.57 31-01-06 34.11 5.02 -0.14 0.02 28-02-06 35.43 3.87 -1.29 1.66 31-03-06 39.46 11.37 6.21 38.62 Total 178.50 1567.54
Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-a1) (Rm-Rm1)] (Rm-Rm1)2
30-03-03 30-04-03 0.67 -2.6 -4.49 -6.32 28.38 39.9430-05-03 10.7 -1.81 5.54 -5.53 -30.64 30.5830-06-03 9.3 10.84 4.14 7.12 29.48 50.6931-07-03 3.43 4.07 -1.73 0.35 -0.61 0.1229-08-03 9.29 17.73 4.13 14.01 57.86 196.2830-09-03 -1.17 3.83 -6.33 0.11 -0.70 0.0131-10-03 1.98 7.38 -3.18 3.66 -11.64 13.4028-11-03 6.98 4.41 1.82 0.69 1.26 0.4831-12-03 16.5 18.49 11.34 14.77 167.49 218.1530-01-04 -6.3 -4.19 -11.46 -7.91 90.65 62.57
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27-02-04 -1.33 -0.75 -6.49 -4.47 29.01 19.9831-03-04 -6.31 1.45 -11.47 -2.27 26.04 5.1530-04-04 8.36 1.98 3.2 -1.74 -5.57 3.0331-05-04 -9.45 -16.52 -14.61 -20.24 295.71 409.6630-06-04 1.74 1.42 -3.42 -2.3 7.87 5.2930-07-04 5.58 7.58 0.42 3.86 1.62 14.9031-08-04 8.44 1.23 3.28 -2.49 -8.17 6.2030-09-04 3.46 7.49 -1.7 3.77 -6.41 14.2129-10-04 -2.2 1 -7.36 -2.72 20.02 7.4030-11-04 17.95 6.71 12.79 2.99 38.24 8.9431-12-04 10.14 6.97 4.98 3.25 16.19 10.5631-01-05 3.71 1.89 -1.45 -1.83 2.65 3.3528-02-05 1.04 2.56 -4.12 -1.16 4.78 1.3531-03-05 3.08 -3.6 -2.08 -7.32 15.23 53.5829-04-05 4.37 -4.84 -0.79 -8.56 6.76 73.2731-05-05 10.61 8.7 5.45 4.98 27.14 24.8030-06-05 3.02 5.51 -2.14 1.79 -3.83 3.2029-07-05 12.71 7.16 7.55 3.44 25.97 11.8331-08-05 15.12 2.77 9.96 -0.95 -9.46 0.9030-09-05 6.64 9.12 1.48 5.4 7.99 29.1631-10-05 -9.02 -8.91 -14.18 -12.63 179.09 159.5230-11-05 10.8 16.59 5.64 12.87 72.59 165.6430-12-05 8.41 2.13 3.25 -1.59 -5.17 2.5331-01-06 5.02 6.09 -0.14 2.37 -0.33 5.6228-02-06 3.87 3.19 -1.29 -0.53 0.68 0.2831-03-06 11.37 8.88 6.21 5.16 32.04 26.63Total 178.5 133.96 1102.22 1679.20
4. Sundaram S.M.I.L.E. Fund
Sundaram S.M.I.L.E. Fund is Mid cap open ended growth fund. Its objective is
to achieve capital appreciation by investing in diversified stocks that are
generally termed as 'Small and Midcaps' and by investing in other equities.
Monthly risk and return from 28th Feb 2005 to 31st Mar 2006 is calculated
below.
Return = (P1 /P0 *100)-100
Where, P1 = Current month price,
P0 = Previous month price
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R1 = ΣR/n, where n=number of months.
R1 = -3.31/14
= -0.23
SD= √ Σ(R- R1)2 /n
= √873.52/14
SD= 7.89
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 415/637.71
B = 0.65
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (-0.23-4.09)*0.65
= -2.8 Calculation of Return and Risk
Date Net Asset Value Return in % R -R1 (R - R1)2 31-01-05 11.01 28-02-05 10.19 -7.45 -7.23 52.24 31-03-05 10.07 -1.18 -0.96 0.92 29-04-05 10.14 0.70 0.92 0.84 31-05-05 11 8.48 8.70 75.71 30-06-05 11.23 2.09 2.31 5.34 29-07-05 12.21 8.73 8.95 80.04 31-08-05 13.19 8.03 8.25 68.00 30-09-05 13.5 2.35 2.57 6.61 31-10-05 10.21 -24.37 -24.15 583.24 30-11-05 10.13 -0.78 -0.56 0.32 30-12-05 10.12 -0.10 0.12 0.01 31-01-06 10.13 0.10 0.32 0.10
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28-02-06 10.14 0.10 0.32 0.10 31-03-06 10.14 0.00 0.22 0.05 Total -3.31 873.52
Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-a1) (Rm-Rm1)] (Rm-m1)2
28-02-05 -7.45 3.64 -7.23 -0.45 3.25 0.2031-03-05 -1.18 -13.84 -0.96 -17.93 17.21 321.4829-04-05 0.7 7.22 0.92 3.13 2.88 9.8031-05-05 8.48 8.38 8.7 4.29 37.32 18.4030-06-05 2.09 3.5 2.31 -0.59 -1.36 0.3529-07-05 8.73 6.71 8.95 2.62 23.45 6.8631-08-05 8.03 4.74 8.25 0.65 5.36 0.4230-09-05 2.35 7.6 2.57 3.51 9.02 12.3231-10-05 -24.37 -9.18 -24.15 -13.27 320.47 176.0930-11-05 -0.78 11.56 -0.56 7.47 -4.18 55.8030-12-05 -0.1 6.38 0.12 2.29 0.27 5.2431-01-06 0.1 5.51 0.32 1.42 0.45 2.0228-02-06 0.1 3.12 0.32 -0.97 -0.31 0.9431-03-06 0 9.36 0.22 5.27 1.16 27.77
-3.31 147.26 415.00 637.71Total
5. SBI MSFU CONTRA
SBI MSFU CONTRA is open ended growth fund. Its objective is to achieve
capital appreciation by investing in diversified stocks. Monthly risk and return
from 31st May 2005 to 31st Mar 2006 is calculated below.
Return=P1 /P0 *100
Where, P1 = Current month price,
P0 = Previous month price M.P. BIRLA INSTITUTE OF MANAGEMENT
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R1 = ΣR/n, where n=number of months. X1 = 70.64/11 = 6.42 SD = √ Σ(R- R1)2 /n = √337/11 SD = 5.53
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= -67.35/677.99
B = -0.09
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (6.42-5.57)*-0.09
= 0.76 Calculation of Return and Risk
Date Net Asset Value Return in % R -R1 (R - R1)2 29-04-05 16.52 31-05-05 17.16 3.87 -2.55 6.48 30-06-05 17.66 2.91 -3.51 12.29 29-07-05 19.87 12.51 6.09 37.14 31-08-05 21.91 10.27 3.85 14.80 30-09-05 23.04 5.16 -1.26 1.59 31-10-05 21.53 -6.55 -12.97 168.32 30-11-05 24.1 11.94 5.52 30.44 30-12-05 24.92 3.40 -3.02 9.11 31-01-06 27.08 8.67 2.25 5.05 28-02-06 28.43 4.99 -1.43 2.06 31-03-06 32.26 13.47 7.05 49.73 Total 70.64 337.00
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Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-m1
[(Ra-a1) (Rm-Rm1)] (Rm-m1)2
31-05-05 3.87 -2.55 8.7 -8.12 -70.64 65.9330-06-05 2.91 -3.51 5.51 -9.08 -50.03 82.4529-07-05 12.51 6.09 7.16 0.52 3.72 0.2731-08-05 10.27 3.85 2.77 -1.72 -4.76 2.9630-09-05 5.16 -1.26 9.12 -6.83 -62.29 46.6531-10-05 -6.55 -12.97 -8.91 -18.54 165.19 343.7330-11-05 11.94 5.52 16.59 -0.05 -0.83 0.0030-12-05 3.4 -3.02 2.13 -8.59 -18.30 73.7931-01-06 8.67 2.25 6.09 -3.32 -20.22 11.0228-02-06 4.99 -1.43 3.19 -7 -22.33 49.0031-03-06 13.47 7.05 8.88 1.48 13.14 2.19Total 70.64 61.23 -67.35 677.99
Table1.1
Average risk of selected mutual fund schemes
Mutual Fund Schemes Risk Beta Alpha
Reliance Vision fund 6.9 0.96 1.2
Franklin India prima fund 6.8 0.22 0.42
Pru icici FMCG sector fund 6.6 0.65 0.8
Sundaram SMILE fund 7.89 0.65 -2.8
SBI Contra Fund 5.53 -0.09 0.76
Total 33.72
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Bench Mark 6.4
Average risk = 33.72/5
=6.74
Chart 1.1
Risk factor of Mutual Funds
-4
-2
0
2
4
6
8
10
Relian
ce V
ision
fund
Frank
lin In
dia pr
ima f
und
Pru ic
ici FM
CG secto
r fun
d
Sunda
ram S
MILE fu
nd
SBI Con
tra F
und
Bench
Mark
Mutual funds & Bench Mark
Ris
k, B
eta
& A
lpha
in %
RiskBetaAlpha
ANALYSIS:
Sundaram SMILE fund has the highest risk factor of 7.89% with 0.65%
beta and -2.8% of alpha.
SBI Contra Fund has the lowest risk factor of 5.53% with -0.09% of
beta and 0.76% of alpha.
Bench Mark has the risk factor of 6.4%
M.P. BIRLA INSTITUTE OF MANAGEMENT
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Comparative study of Investment in Equity & Mutual Fund Schemes
On an average Mutual Fund Schemes have the risk factor of 6.74%
INTERPETATION:
Risk is a major factor influence all type of investors. In the above selected
Mutual Fund Schemes average risk factor is 6.74% even though the risk
factor of bench mark is 6.4%, it is very close to average risk. It is showing
Mutual Funds are also risky.
Table1.2
Average return of selected mutual fund schemes
Mutual Fund Schemes Return
Reliance Vision fund 5.16
Franklin India prima fund 5.64
Pru icici FMCG sector fund 4.96
Sundaram SMILE fund -0.23
SBI Contra Fund 6.42
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Total 21.85
3.9 Bench Mark
Average Return = 21.95/5
=4.39
Chart1.2
Return of selected Mutual Funds
-101234567
Relian
ce Visi
on fu
nd
Franklin
India
prima f
und
Pru ici
ci FM
CG secto
r fund
Sunda
ram SMILE fu
nd
SBI Con
tra Fun
d
Bench
Mark
Mutual Funds & Bench Mark
Ret
urn
In %
Return
ANALYSIS:
SBI Contra Fund has got the highest return of 6.42%
Sundaram SMILE fund got the negative return of -0.23%
Bench Mark return is 3.9%
On an average Mutual Fund Schemes have got 4.39% per month.
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INTERPETATION: Return is a major factor influencing factor to all type of investors. In the above
selected Mutual Fund Schemes average return is 4.39%, compared to bench
mark return mutual fund returns are good and it will attract more and more
customers.
Calculation of Return and Risk of Selected companies
Calculation of Return and Risk of Bench Mark(BSE SENSEX)
Date SENSEX Return in % R -R1 (R – R1)2 30-03-03 3048.72 30-04-03 2959.79 -2.92 -6.83 46.6530-05-03 3180.75 7.47 3.56 12.6730-06-03 3607.13 13.41 9.50 90.2531-07-03 3792.61 5.14 1.23 1.5129-08-03 4244.73 11.92 8.01 64.16
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30-09-03 4453.24 4.91 1.00 1.0031-10-03 4906.87 10.19 6.28 39.4428-11-03 5044.82 2.81 -1.10 1.2131-12-03 5838.96 15.74 11.83 139.9530-01-04 5695.67 -2.45 -6.36 40.4527-02-04 5667.51 -0.49 -4.40 19.3631-03-04 5590.6 -1.36 -5.27 27.7730-04-04 5655.09 1.15 -2.76 7.6231-05-04 4759.62 -15.83 -19.74 389.6730-06-04 4795.46 0.75 -3.16 9.9930-07-04 5170.32 7.82 3.91 15.2931-08-04 5192.08 0.42 -3.49 12.1830-09-04 5583.61 7.54 3.63 13.1829-10-04 5672.27 1.59 -2.32 5.3830-11-04 6234.29 9.91 6.00 36.0031-12-04 6602.69 5.91 2.00 4.0031-01-05 6555.94 -0.71 -4.62 21.3428-02-05 6713.86 2.41 -1.50 2.2531-03-05 6492.82 -3.29 -7.20 51.8429-04-05 6154.44 -5.21 -9.12 83.1731-05-05 6715.11 9.11 5.20 27.0430-06-05 7193.85 7.13 3.22 10.3729-07-05 7635.42 6.14 2.23 4.9731-08-05 7805.43 2.23 -1.68 2.8230-09-05 8634.48 10.62 6.71 45.0231-10-05 7892.32 -8.6 -12.51 156.5030-11-05 8788.81 11.36 7.45 55.5030-12-05 9397.93 6.93 3.02 9.1231-01-06 9919.89 5.55 1.64 2.6928-02-06 10370.2 4.54 0.63 0.4031-03-06 11280 8.77 4.86 23.62Total 140.6 1474.39
Return = (P1 /P0 *100)-100
Where, P1 = Current month price,
P0 = Previous month price
R1 = ΣR/n, where n=number of months. M.P. BIRLA INSTITUTE OF MANAGEMENT
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R1 = 140.60/36 =3.9 SD = √ Σ(R- R1)2 /n = √1474.39/36 SD = 6.4
1. ACC Limited:-
Calculation of Return and Risk
Date Scrip Value Return in % R -R1 (R – R1)2 30-03-03 137 30-04-03 128.1 -6.50 -10.22 104.3730-05-03 136.9 6.87 3.15 9.9230-06-03 169.1 23.52 19.80 392.0731-07-03 174.8 3.37 -0.35 0.12
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29-08-03 219 25.29 21.57 465.0930-09-03 186.5 -14.84 -18.56 344.4831-10-03 207.1 11.05 7.33 53.6628-11-03 222.2 7.29 3.57 12.7531-12-03 252.4 13.59 9.87 97.4430-01-04 271 7.37 3.65 13.3227-02-04 261 -3.69 -7.41 54.9131-03-04 255.25 -2.20 -5.92 35.0830-04-04 276 8.13 4.41 19.4431-05-04 247 -10.51 -14.23 202.4130-06-04 232.9 -5.71 -9.43 88.9030-07-04 236 1.33 -2.39 5.7131-08-04 263 11.44 7.72 59.6130-09-04 267.3 1.63 -2.09 4.3529-10-04 263.5 -1.42 -5.14 26.4430-11-04 287.65 9.17 5.45 29.6531-12-04 320.1 11.28 7.56 57.1731-01-05 352 9.97 6.25 39.0128-02-05 362.6 3.01 -0.71 0.5031-03-05 369.8 1.99 -1.73 3.0129-04-05 376 1.68 -2.04 4.1831-05-05 381.15 1.37 -2.35 5.5230-06-05 384.5 0.88 -2.84 8.0729-07-05 450 17.04 13.32 177.2931-08-05 472.45 4.99 1.27 1.6130-09-05 467.6 -1.03 -4.75 22.5331-10-05 438 -6.33 -10.05 101.0130-11-05 516.5 17.92 14.20 201.7130-12-05 537.5 4.07 0.35 0.1231-01-06 566 5.30 1.58 2.5028-02-06 597.9 5.64 1.92 3.6731-03-06 764 27.78 24.06 578.91Total 190.72 3226.54
Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-m1
[(Ra-Ra1) (Rm-Rm1)] (Rm-Rm1)2
30-04-03 -6.5 -2.92 -10.22 -6.83 69.80 46.65
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30-05-03 6.87 7.47 3.15 3.56 11.21 12.6730-06-03 23.52 13.41 19.8 9.5 188.10 90.2531-07-03 3.37 5.14 -0.35 1.23 -0.43 1.5129-08-03 25.29 11.92 21.57 8.01 172.78 64.1630-09-03 -14.84 4.91 -18.56 1 -18.56 1.0031-10-03 11.05 10.19 7.33 6.28 46.03 39.4428-11-03 7.29 2.81 3.57 -1.1 -3.93 1.2131-12-03 13.59 15.74 9.87 11.83 116.76 139.9530-01-04 7.37 -2.45 3.65 -6.36 -23.21 40.4527-02-04 -3.69 -0.49 -7.41 -4.4 32.60 19.3631-03-04 -2.2 -1.36 -5.92 -5.27 31.20 27.7730-04-04 8.13 1.15 4.41 -2.76 -12.17 7.6231-05-04 -10.51 -15.83 -14.23 -19.74 280.90 389.6730-06-04 -5.71 0.75 -9.43 -3.16 29.80 9.9930-07-04 1.33 7.82 -2.39 3.91 -9.34 15.2931-08-04 11.44 0.42 7.72 -3.49 -26.94 12.1830-09-04 1.63 7.54 -2.09 3.63 -7.59 13.1829-10-04 -1.42 1.59 -5.14 -2.32 11.92 5.3830-11-04 9.17 9.91 5.45 6 32.70 36.0031-12-04 11.28 5.91 7.56 2 15.12 4.0031-01-05 9.97 -0.71 6.25 -4.62 -28.88 21.3428-02-05 3.01 2.41 -0.71 -1.5 1.07 2.2531-03-05 1.99 -3.29 -1.73 -7.2 12.46 51.8429-04-05 1.68 -5.21 -2.04 -9.12 18.60 83.1731-05-05 1.37 9.11 -2.35 5.2 -12.22 27.0430-06-05 0.88 7.13 -2.84 3.22 -9.14 10.3729-07-05 17.04 6.14 13.32 2.23 29.70 4.9731-08-05 4.99 2.23 1.27 -1.68 -2.13 2.8230-09-05 -1.03 10.62 -4.75 6.71 -31.87 45.0231-10-05 -6.33 -8.6 -10.05 -12.51 125.73 156.5030-11-05 17.92 11.36 14.2 7.45 105.79 55.5030-12-05 4.07 6.93 0.35 3.02 1.06 9.1231-01-06 5.3 5.55 1.58 1.64 2.59 2.6928-02-06 5.64 4.54 1.92 0.63 1.21 0.4031-03-06 27.78 8.77 24.06 4.86 116.93 23.62Total 190.72 140.6 1267.64 1474.39
Return=P1 /P0 *100
Where, P1 = Current month price,
P0 = Previous month price
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R1 = ΣR/n, where n=number of months. R1 = 190.72/36 =5.29 SD = √ Σ(R- R1)2 /n = √3136.92/36 SD = 9.33
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1267.64/1474.39
B = 0.86
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (5.29-3.9)*0.86
=1.19
Table No 1.3
Risk and return of ACC Ltd.
Factor Percentage
Risk 9.33
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Return 5.29
Beta 0.86
Alpha 1.19
Chart No 1.3
Risk & Return of ACC Ltd.
0
1
2
3
4
5
6
7
8
9
10
Risk Return Beta Alpha
Factors
Per
cent
age
Percentage
ANALYSIS:
ACC Ltd. has a risk factor of 9.33%
Its rate of return on a monthly average is 5.29%
Alpha and Beta are 1.19 and 0.86 respectively
INTERPETATION:
Beta of the ACC ltd. is 0.86 which is less than one; it shows the less volatility
of scrip with respect to market. Risk of the share is 9.33% and the rate of
return is only 5.29%.
2. BAJAJ AUTO LIMITED:- Calculation of Return and Risk
Date Scrip Value Return in % R - R1 (R - R1)2 481.1 30-03-03 482.2 0.23 -3.49 12.1930-04-03
485 0.58 -3.14 9.8630-05-03 576 18.76 15.04 226.2930-06-03 575 31-07-03 -0.17 -3.89 15.16
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705 22.61 18.89 356.7829-08-03 746.5 5.89 2.17 4.6930-09-03 863.8 15.71 11.99 143.8431-10-03
918 6.27 2.55 6.5328-11-03 1160 26.36 22.64 512.6431-12-03 1119 -3.53 -7.25 52.6330-01-04 920 -17.78 -21.50 462.4127-02-04 876 -4.78 -8.50 72.2931-03-04 943 7.65 3.93 15.4330-04-04 879 -6.79 -10.51 110.3931-05-04 895 1.82 -1.90 3.6130-06-04
831.9 -7.05 -10.77 116.0030-07-04 909 9.27 5.55 30.7831-08-04 990 8.91 5.19 26.9530-09-04 954 -3.64 -7.36 54.1229-10-04
1020 6.92 3.20 10.2330-11-04 1127 10.49 6.77 45.8431-12-04 1050 -6.83 -10.55 111.3531-01-05 990 -5.71 -9.43 89.0128-02-05
1021 3.13 -0.59 0.3531-03-05 1080 5.78 2.06 4.2429-04-05 1243 15.09 11.37 129.3431-05-05 1310 5.39 1.67 2.7930-06-05 1325 1.15 -2.57 6.6329-07-05 1405 6.04 2.32 5.3731-08-05 1640 16.73 13.01 169.1630-09-05 1665 1.52 -2.20 4.8231-10-05
2075.5 24.65 20.93 438.2630-11-05 2064.9 -0.51 -4.23 17.9030-12-05 2229.9 31-01-06 7.99 4.27 18.24
28-02-06 2600 16.60 12.88 165.8231-03-06 2749 5.73 2.01 4.04Total 194.47 3455.96
Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-Ra1) (Rm-Rm1)] (Rm-Rm1)2
30-03-03 30-04-03 0.23 -2.92 -3.49 -6.83 23.84 46.6530-05-03 0.58 7.47 -3.14 3.56 -11.18 12.6730-06-03 18.76 13.41 15.04 9.5 142.88 90.25
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31-07-03 -0.17 5.14 -3.89 1.23 -4.78 1.5129-08-03 22.61 11.92 18.89 8.01 151.31 64.1630-09-03 5.89 4.91 2.17 1 2.17 1.0031-10-03 15.71 10.19 11.99 6.28 75.30 39.4428-11-03 6.27 2.81 2.55 -1.1 -2.81 1.2131-12-03 26.36 15.74 22.64 11.83 267.83 139.9530-01-04 -3.53 -2.45 -7.25 -6.36 46.11 40.4527-02-04 -17.78 -0.49 -21.5 -4.4 94.60 19.3631-03-04 -4.78 -1.36 -8.5 -5.27 44.80 27.7730-04-04 7.65 1.15 3.93 -2.76 -10.85 7.6231-05-04 -6.79 -15.83 -10.51 -19.74 207.47 389.6730-06-04 1.82 0.75 -1.9 -3.16 6.00 9.9930-07-04 -7.05 7.82 -10.77 3.91 -42.11 15.2931-08-04 9.27 0.42 5.55 -3.49 -19.37 12.1830-09-04 8.91 7.54 5.19 3.63 18.84 13.1829-10-04 -3.64 1.59 -7.36 -2.32 17.08 5.3830-11-04 6.92 9.91 3.2 6 19.20 36.0031-12-04 10.49 5.91 6.77 2 13.54 4.0031-01-05 -6.83 -0.71 -10.55 -4.62 48.74 21.3428-02-05 -5.71 2.41 -9.43 -1.5 14.15 2.2531-03-05 3.13 -3.29 -0.59 -7.2 4.25 51.8429-04-05 5.78 -5.21 2.06 -9.12 -18.79 83.1731-05-05 15.09 9.11 11.37 5.2 59.12 27.0430-06-05 5.39 7.13 1.67 3.22 5.38 10.3729-07-05 1.15 6.14 -2.57 2.23 -5.73 4.9731-08-05 6.04 2.23 2.32 -1.68 -3.90 2.8230-09-05 16.73 10.62 13.01 6.71 87.30 45.0231-10-05 1.52 -8.6 -2.2 -12.51 27.52 156.5030-11-05 24.65 11.36 20.93 7.45 155.93 55.5030-12-05 -0.51 6.93 -4.23 3.02 -12.77 9.1231-01-06 7.99 5.55 4.27 1.64 7.00 2.6928-02-06 16.6 4.54 12.88 0.63 8.11 0.4031-03-06 5.73 8.77 2.01 4.86 9.77 23.62Total 194.47 140.6 1425.94 1474.39
Return = (P1 /P0 *100) -100
Where, P1 = Current month price,
P0 = Previous month price M.P. BIRLA INSTITUTE OF MANAGEMENT
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Comparative study of Investment in Equity & Mutual Fund Schemes
R1 = ΣR/n, where n=number of months. R1 = 194.47/36 =5.40 SD = √ Σ(R- R1)2 /n = √3353.99/36 SD = 9.63
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1425.94/1474.39
B = 0.96
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (5.4-3.9)*0.96
=1.44
Table No 1.4
Risk and return of Bajaj Auto Ltd
Factor Percentage
Risk 9.63
Return 5.4
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Beta 0.96
Alpha 1.44
Chart 1.4
Risk & Return of Bajaj Ltd
0
2
4
6
8
10
12
Risk Return Beta Alpha
Factor
Per
cent
age
Percentage
ANALYSIS:
Bajaj Ltd. has a risk factor of 9.63%
Its rate of return on a monthly average is 5.4%
Alpha and Beta are 1.44 and 0.96 respectively
INTERPETATION:
Beta of the Bajaj ltd. is 0.96 which is very close to one; it shows the equal
volatility of scrip with respect to market. Risk of the share is 9.63% and the
rate of return is only 5.4%.
3. BHEL:-
Calculation of Return and Risk
Date Scrip Value Return in
% X -X1 (X - X1)2 219.9 30-03-03
30-04-03 228.2 3.77 0.05 0.00
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256 12.18 8.46 71.6130-05-03 266 3.91 0.19 0.0330-06-03
275.05 3.40 -0.32 0.1031-07-03 339.7 23.50 19.78 391.4429-08-03
365 7.45 3.73 13.9030-09-03 428 17.26 13.54 183.3431-10-03 430 0.47 -3.25 10.5828-11-03 495 15.12 11.40 129.8831-12-03
579.45 17.06 13.34 177.9730-01-04 617.95 6.64 2.92 8.5527-02-04
566 -8.41 -12.13 147.0631-03-04 642 13.43 9.71 94.2430-04-04 452 -29.60 -33.32 1109.8931-05-04
496.45 9.83 6.11 37.3830-06-04 549.1 10.61 6.89 47.4130-07-04
555.25 1.12 -2.60 6.7631-08-04 580 4.46 0.74 0.5430-09-04 630 8.62 4.90 24.0229-10-04 600 -4.76 -8.48 71.9430-11-04
728.9 21.48 17.76 315.5431-12-04 729 0.01 -3.71 13.7431-01-05 865 18.66 14.94 223.0728-02-05 799 -7.63 -11.35 128.8231-03-05 815 2.00 -1.72 2.9529-04-05 880 7.98 4.26 18.1131-05-05
842.3 -4.28 -8.00 64.0730-06-05 986 17.06 13.34 177.9729-07-05
1099 11.46 7.74 59.9131-08-05 1109 0.91 -2.81 7.9030-09-05 1099 -0.90 -4.62 21.3631-10-05
1434.5 30.53 26.81 718.6630-11-05 1379 -3.87 -7.59 57.5930-12-05 1730 31-01-06 25.45 21.73 472.33
28-02-06 1911 10.46 6.74 45.4631-03-06 2162 13.13 9.41 88.63Total 258.52 4942.75
Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-Ra1) (Rm-Rm1)]
(Rm-Rm1)2
30-03-03 30-04-03 3.77 -2.92 0.05 -6.83 -0.34 46.6530-05-03 12.18 7.47 8.46 3.56 30.12 12.6730-06-03 3.91 13.41 0.19 9.5 1.81 90.2531-07-03 3.4 5.14 -0.32 1.23 -0.39 1.51
M.P. BIRLA INSTITUTE OF MANAGEMENT
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Comparative study of Investment in Equity & Mutual Fund Schemes
29-08-03 23.5 11.92 19.78 8.01 158.44 64.1630-09-03 7.45 4.91 3.73 1 3.73 1.0031-10-03 17.26 10.19 13.54 6.28 85.03 39.4428-11-03 0.47 2.81 -3.25 -1.1 3.58 1.2131-12-03 15.12 15.74 11.4 11.83 134.86 139.9530-01-04 17.06 -2.45 13.34 -6.36 -84.84 40.4527-02-04 6.64 -0.49 2.92 -4.4 -12.85 19.3631-03-04 -8.41 -1.36 -12.13 -5.27 63.93 27.7730-04-04 13.43 1.15 9.71 -2.76 -26.80 7.6231-05-04 -29.6 -15.83 -33.32 -19.74 657.74 389.6730-06-04 9.83 0.75 6.11 -3.16 -19.31 9.9930-07-04 10.61 7.82 6.89 3.91 26.94 15.2931-08-04 1.12 0.42 -2.6 -3.49 9.07 12.1830-09-04 4.46 7.54 0.74 3.63 2.69 13.1829-10-04 8.62 1.59 4.9 -2.32 -11.37 5.3830-11-04 -4.76 9.91 -8.48 6 -50.88 36.0031-12-04 21.48 5.91 17.76 2 35.52 4.0031-01-05 0.01 -0.71 -3.71 -4.62 17.14 21.3428-02-05 18.66 2.41 14.94 -1.5 -22.41 2.2531-03-05 -7.63 -3.29 -11.35 -7.2 81.72 51.8429-04-05 2 -5.21 -1.72 -9.12 15.69 83.1731-05-05 7.98 9.11 4.26 5.2 22.15 27.0430-06-05 -4.28 7.13 -8 3.22 -25.76 10.3729-07-05 17.06 6.14 13.34 2.23 29.75 4.9731-08-05 11.46 2.23 7.74 -1.68 -13.00 2.8230-09-05 0.91 10.62 -2.81 6.71 -18.86 45.0231-10-05 -0.9 -8.6 -4.62 -12.51 57.80 156.5030-11-05 30.53 11.36 26.81 7.45 199.73 55.5030-12-05 -3.87 6.93 -7.59 3.02 -22.92 9.1231-01-06 25.45 5.55 21.73 1.64 35.64 2.6928-02-06 10.46 4.54 6.74 0.63 4.25 0.4031-03-06 13.13 8.77 9.41 4.86 45.73 23.62Total 258.52 140.6 1413.30 1474.39
Return = (P1 /P0 *100) -100
Where, P1 = Current month price,
P0 = Previous month price
R1 = ΣR/n, where n=number of months. R1 = 258.52/36
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=7.18 SD = √ Σ(X- X1)2 /n = √4511.48/36 SD = 11.19
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1413.3/1474.39
B = 0.958
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (7.18-3.9)*0.958
=3.14
Table 1.5
Calculation of Return and Risk of BHEL
Factor Percentage
Risk 11.19
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Return 7.18
Beta 0.958
Alpha -3.14
Chart 1.5
Risk & Return of BHEL
-4
-2
0
2
4
6
8
10
12
Risk Return Beta Alpha
Factor
Per
cent
age
Percentage
ANALYSIS:
BHEL has a risk factor of 11.19%
Its rate of return on a monthly average is 7.18%
Alpha and Beta are -3.14 and 0.958 respectively
INTERPETATION:
Beta of the BHEL. is 0.958 which is very close to one; it shows the equal
volatility of scrip with respect to market. Risk of the share is 11.19% and the
rate of return is only 7.18%.
4. ICICI BANK LTD:-
Calculation of Return and Risk
Date Scrip Value Return in
% X -X1 (X - X1)2 30-03-03 133.96 30-04-03 121.4 -9.38 -13.10 171.50
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30-05-03 137.67 13.40 9.68 93.7430-06-03 150.2 9.10 5.38 28.9631-07-03 158.6 5.59 1.87 3.5129-08-03 184.55 16.36 12.64 159.8230-09-03 194.95 5.64 1.92 3.6731-10-03 248.1 27.26 23.54 554.2928-11-03 249.9 0.73 -2.99 8.9731-12-03 295.7 18.33 14.61 213.3730-01-04 287.25 -2.86 -6.58 43.2727-02-04 271.8 -5.38 -9.10 82.7831-03-04 295.9 8.87 5.15 26.4930-04-04 315.2 6.52 2.80 7.8531-05-04 258.2 -18.08 -21.80 475.4030-06-04 266.8 3.33 -0.39 0.1530-07-04 269.45 0.99 -2.73 7.4431-08-04 278.56 3.38 -0.34 0.1130-09-04 286.05 2.69 -1.03 1.0629-10-04 299 4.53 0.81 0.6530-11-04 340.2 13.78 10.06 101.1931-12-04 370.75 8.98 5.26 27.6731-01-05 360.6 -2.74 -6.46 41.7028-02-05 380.75 5.59 1.87 3.4931-03-05 393 3.22 -0.50 0.2529-04-05 375.1 -4.55 -8.27 68.4731-05-05 392.05 4.52 0.80 0.6430-06-05 421.55 7.52 3.80 14.4729-07-05 536 27.15 23.43 548.9631-08-05 481.7 -10.13 -13.85 191.8430-09-05 600.35 24.63 20.91 437.2931-10-05 497.15 -17.19 -20.91 437.2330-11-05 537.15 8.05 4.33 18.7130-12-05 584.7 8.85 5.13 26.3431-01-06 609.15 4.18 0.46 0.2128-02-06 615.1 0.98 -2.74 7.5331-03-06 589.25 -4.20 -7.92 62.77Total 169.65 3871.80
Calculation of Beta
Date Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-Ra1) (Rm-Rm1)] (Rm-Rm1)2
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30-04-03 -9.38 -2.92 -13.1 -6.83 89.47 46.6530-05-03 13.4 7.47 9.68 3.56 34.46 12.6730-06-03 9.1 13.41 5.38 9.5 51.11 90.2531-07-03 5.59 5.14 1.87 1.23 2.30 1.5129-08-03 16.36 11.92 12.64 8.01 101.25 64.1630-09-03 5.64 4.91 1.92 1 1.92 1.0031-10-03 27.26 10.19 23.54 6.28 147.83 39.4428-11-03 0.73 2.81 -2.99 -1.1 3.29 1.2131-12-03 18.33 15.74 14.61 11.83 172.84 139.9530-01-04 -2.86 -2.45 -6.58 -6.36 41.85 40.4527-02-04 -5.38 -0.49 -9.1 -4.4 40.04 19.3631-03-04 8.87 -1.36 5.15 -5.27 -27.14 27.7730-04-04 6.52 1.15 2.8 -2.76 -7.73 7.6231-05-04 -18.08 -15.83 -21.8 -19.74 430.33 389.6730-06-04 3.33 0.75 -0.39 -3.16 1.23 9.9930-07-04 0.99 7.82 -2.73 3.91 -10.67 15.2931-08-04 3.38 0.42 -0.34 -3.49 1.19 12.1830-09-04 2.69 7.54 -1.03 3.63 -3.74 13.1829-10-04 4.53 1.59 0.81 -2.32 -1.88 5.3830-11-04 13.78 9.91 10.06 6 60.36 36.0031-12-04 8.98 5.91 5.26 2 10.52 4.0031-01-05 -2.74 -0.71 -6.46 -4.62 29.85 21.3428-02-05 5.59 2.41 1.87 -1.5 -2.81 2.2531-03-05 3.22 -3.29 -0.5 -7.2 3.60 51.8429-04-05 -4.55 -5.21 -8.27 -9.12 75.42 83.1731-05-05 4.52 9.11 0.8 5.2 4.16 27.0430-06-05 7.52 7.13 3.8 3.22 12.24 10.3729-07-05 27.15 6.14 23.43 2.23 52.25 4.9731-08-05 -10.13 2.23 -13.85 -1.68 23.27 2.8230-09-05 24.63 10.62 20.91 6.71 140.31 45.0231-10-05 -17.19 -8.6 -20.91 -12.51 261.58 156.5030-11-05 8.05 11.36 4.33 7.45 32.26 55.5030-12-05 8.85 6.93 5.13 3.02 15.49 9.1231-01-06 4.18 5.55 0.46 1.64 0.75 2.6928-02-06 0.98 4.54 -2.74 0.63 -1.73 0.4031-03-06 -4.2 8.77 -7.92 4.86 -38.49 23.62Total 169.65 140.6 1746.98 1474.39
Return = (P1 /P0 *100) -100
Where, P1 = Current month price,
P0 = Previous month price M.P. BIRLA INSTITUTE OF MANAGEMENT
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R1 = ΣR/n, where n=number of months. R1 = 169.65/36 =4.71 SD = √ Σ(R- R1)2 /n = √3871.8/36 SD = 10.37
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1746.98/1474.39
B = 1.18
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (4.71-3.9)*1.18
=0.96
Table No 1.6
Calculation of Return and Risk of ICICI Bank Ltd
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Factor Percentage
Risk 10.37
Return 4.71
Beta 1.18
Alpha 0.96
Chart No 1.6
Risk & Return of ICICI Bank Ltd.
0
2
4
6
8
10
12
Risk Return Beta Alpha
Factor
Per
cent
age
Percentage
ANALYSIS:
ICICI Bank Ltd. has a risk factor of 10.37%
Its rate of return on a monthly average is 4.71%
Alpha and Beta are 1.18 and 0.96 respectively
INTERPETATION:
Beta of the ICICI Bank Ltd. is 1.18 which is higher to one; it shows the high
volatility of scrip with respect to market. Risk of the share is 10.37% and the
rate of return is only 4.71%.
5. SATYAM:-
Calculation of Return and Risk Date Scrip Value Return in X -X1 (X - X1)2
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% 30-03-03 186.5 30-04-03 162 -13.14 -16.86 284.1530-05-03 161.9 -0.06 -3.78 14.3030-06-03 190.8 17.85 14.13 199.6731-07-03 175.05 -8.25 -11.97 143.3929-08-03 208.65 19.19 15.47 239.4630-09-03 241 15.50 11.78 138.8731-10-03 298.55 23.88 20.16 406.4128-11-03 315 5.51 1.79 3.2031-12-03 361.8 14.86 11.14 124.0430-01-04 380 5.03 1.31 1.7227-02-04 314.95 -17.12 -20.84 434.2431-03-04 320 1.60 -2.12 4.4830-04-04 334 4.38 0.66 0.4331-05-04 300 -10.18 -13.90 193.2030-06-04 309 3.00 -0.72 0.5230-07-04 327 5.83 2.11 4.4331-08-04 342.5 4.74 1.02 1.0430-09-04 373.4 9.02 5.30 28.1129-10-04 371 -0.64 -4.36 19.0330-11-04 417.6 12.56 8.84 78.1631-12-04 408 -2.30 -6.02 36.2331-01-05 401 -1.72 -5.44 29.5528-02-05 401.55 0.14 -3.58 12.8431-03-05 390 -2.88 -6.60 43.5129-04-05 402 3.08 -0.64 0.4131-05-05 457 13.68 9.96 99.2330-06-05 498 8.97 5.25 27.5829-07-05 535.9 7.61 3.89 15.1431-08-05 508 -5.21 -8.93 79.6830-09-05 520 2.36 -1.36 1.8431-10-05 579.8 11.50 7.78 60.5330-11-05 653.9 12.78 9.06 82.0930-12-05 710 8.58 4.86 23.6131-01-06 741 4.37 0.65 0.4228-02-06 771 4.05 0.33 0.1131-03-06 823.9 6.86 3.14 9.87Total 165.44 2841.49
Calculation of Beta
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Return of company
Return of market Ra-Ra1 Rm-Rm1
[(Ra-Ra1) (Rm-Rm1)] (Rm-Rm1)2 Date
30-03-03 30-04-03 -13.14 -2.92 -16.86 -6.83 115.15 46.6530-05-03 -0.06 7.47 -3.78 3.56 -13.46 12.6730-06-03 17.85 13.41 14.13 9.5 134.24 90.2531-07-03 -8.25 5.14 -11.97 1.23 -14.72 1.5129-08-03 19.19 11.92 15.47 8.01 123.91 64.1630-09-03 15.5 4.91 11.78 1 11.78 1.0031-10-03 23.88 10.19 20.16 6.28 126.60 39.4428-11-03 5.51 2.81 1.79 -1.1 -1.97 1.2131-12-03 14.86 15.74 11.14 11.83 131.79 139.9530-01-04 5.03 -2.45 1.31 -6.36 -8.33 40.4527-02-04 -17.12 -0.49 -20.84 -4.4 91.70 19.3631-03-04 1.6 -1.36 -2.12 -5.27 11.17 27.7730-04-04 4.38 1.15 0.66 -2.76 -1.82 7.6231-05-04 -10.18 -15.83 -13.9 -19.74 274.39 389.6730-06-04 3 0.75 -0.72 -3.16 2.28 9.9930-07-04 5.83 7.82 2.11 3.91 8.25 15.2931-08-04 4.74 0.42 1.02 -3.49 -3.56 12.1830-09-04 9.02 7.54 5.3 3.63 19.24 13.1829-10-04 -0.64 1.59 -4.36 -2.32 10.12 5.3830-11-04 12.56 9.91 8.84 6 53.04 36.0031-12-04 -2.3 5.91 -6.02 2 -12.04 4.0031-01-05 -1.72 -0.71 -5.44 -4.62 25.13 21.3428-02-05 0.14 2.41 -3.58 -1.5 5.37 2.2531-03-05 -2.88 -3.29 -6.6 -7.2 47.52 51.8429-04-05 3.08 -5.21 -0.64 -9.12 5.84 83.1731-05-05 13.68 9.11 9.96 5.2 51.79 27.0430-06-05 8.97 7.13 5.25 3.22 16.91 10.3729-07-05 7.61 6.14 3.89 2.23 8.67 4.9731-08-05 -5.21 2.23 -8.93 -1.68 15.00 2.8230-09-05 2.36 10.62 -1.36 6.71 -9.13 45.0231-10-05 11.5 -8.6 7.78 -12.51 -97.33 156.5030-11-05 12.78 11.36 9.06 7.45 67.50 55.5030-12-05 8.58 6.93 4.86 3.02 14.68 9.1231-01-06 4.37 5.55 0.65 1.64 1.07 2.6928-02-06 4.05 4.54 0.33 0.63 0.21 0.4031-03-06 6.86 8.77 3.14 4.86 15.26 23.62Total 165.44 140.6 1226.24 1474.39
Return = (P1 /P0 *100) - 100
Where, P1 = Current month price, M.P. BIRLA INSTITUTE OF MANAGEMENT
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P0 = Previous month price
R1 = ΣR/n, where n=number of months. R1 = 165.44/36 =4.59 SD = √ Σ(R- R1)2 /n = √2813.89/36 SD = 8.84
Calculation of Beta
B = [Σ(Ra –Ra1)(Rm-Rm1)]/ Σ(Rm-Rm1)2
Where Ra = Return on Company, Ra1= Average return on company
Rm= Return on market, Rm1= Average return on market
= 1226.24/1474.39
B = 0.83
Calculation of Alpha
Alpha = (Ra1-Rm1)*B
= (4.59-3.9)*0.958
=0.66
Table No 1.7
Calculation of Return and Risk of Satyam Computers Ltd
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Factor Percentage
Risk 8.84
Return 4.59
Beta 0.83
Alpha 0.66
Chart No 1.7
Risk & Return of Satyam Computers
0
1
2
3
4
5
6
7
8
9
10
Risk Return Beta Alpha
Factor
Per
cent
age
Percentage
ANALYSIS:
Satyam Computers has a risk factor of 8.84%
Its rate of return on a monthly average is 4.71%
Alpha and Beta are 0.66 and 0.83 respectively
INTERPETATION:
Beta of the Satyam Computers is 0.83 which is lower than one; it shows the
low volatility of scrip with respect to market. Risk of the share is 8.84% and
the rate of return is only 4.59%.
Table No 1.8
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Average risk of selected Company shares
Company Risk
ACC Limited 9.33
Bajaj Auto Limited 9.63
BHEL 11.19
ICICI Bank 10.37
Satyam 8.84
Total 49.36
Bench Mark 6.4
Average risk = 49.36/5
=9.87
Chart No 1.8
Risk Profile
0
2
4
6
8
10
12
ACCLimited
Bajaj AutoLimited
BHEL ICICI Bank Satyam Bench M ark
Companies & Bench Mark
Ris
k in
%
Risk
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ANALYSIS:
BHEL has the highest risk factor of 11.19% with 0.958% beta and -3.14% of alpha.
Satyam Computers has the lowest risk factor of 8.84% with 0.83% of beta and 0.66% of alpha.
Bench Mark has the risk factor of 6.4%
On an average Equity shares have the risk factor of 9.87%
INTERPETATION:
Risk is a major factor influence all type of investors. In the above selected
Equity Shares average risk factor is 9.87% and the risk factor of bench mark
is 6.4%, it is showing equities are more risky.
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Table No 1.9
Average return of selected Company shares
Company Return
ACC Limited 5.29
Bajaj Auto Limited 5.40
BHEL 7.18
ICICI Bank Ltd. 4.71
Satyam 4.59
Total 27.17
Bench Mark 3.9
Average return = 27.17/5
= 5.43
Chart No 1.9
Return Profile
012345678
ACCLimited
BajajAuto
Limited
BHEL ICICI BankLtd.
Satyam BenchMark
Companies & Bench Mark
Ret
urn
in %
Return
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ANALYSIS:
BHEL shares have got the highest return of 7.18%
Satyam Computers shares have got the lower return of 4.59%
Bench Mark return is 3.9%
On an average equity shares have got 5.43% per month.
INTERPETATION:
Return is a major factor influencing factor to all type of investors. In the above
selected equity shares average return is 5.43%, compared to bench mark
return of 3.9% selected equity shares returns are good and it will attract more
and more customers.
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Comparison of Selected Equity Capital and Mutual Fund Schemes in respect their Risk
Table No 1.10
Investment Avenues Risk
Mutual funds 6.74
Equity capital 9.87
Chart No 1.10
0
5
10
15
Ris
k
Investment Avenues
Risk Profile
Mutual funds Equity capital
ANALYSIS:
Mutual funds have the risk on an average of 6.74%
Equity shares have the risk on an average of 9.87%
INTERPETATION:
Equity capital and Mutual fund schemes are subjected to market risk. Based
on the above analysis mutual funds have an average risk of 6.74% which is
compared to equity shares risk of 9.87% is lower. Those who would like to
take risk can go for equity investments.
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Comparison of Selected Equity Capital and Mutual Fund Schemes in respect their Return
Table No 1.11
Investment Avenues Return
Mutual funds 4.39
Equity capital 5.43
Chart No 1.11
0123456
Ret
urn
Investment Avenues
Return Profile
Mutual fundsEquity capital
ANALYSIS:
Mutual funds have average return of 4.39%
Equity shares have the return on an average of 5.43%
INTERPETATION:
Equity capital and Mutual fund schemes are subjected to market risk. Based
on the above analysis mutual funds have an average return of 4.39% which is
compared to equity shares return of 5.43% is lower. Those who would like to
take risk can go for equity investments for getting higher return.
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FINDINGS AND RECOMMENDATIONS:
Saving money is not enough. Each of us also need to invest one’s savings
intelligently in order to have enough money available for funding the higher
education of one’s children, for buying a house, or for one’s own golden
years.
FINDINGS
Investments in both equity capital and mutual fund schemes are
subjected to market risk.
Now a day’s investments in equity and mutual fund schemes are
increases because of falling interest rates and awareness of equity
capital and mutual fund schemes in the minds of investors.
BHEL has a highest risk factor of 11.19% and Satyam Computers has
a lowest risk factor of 8.84%, where as benchmark risk is 6.4% which
shows investing in equity is more risky.
BHEL has a highest return on a monthly average of 8.18% and Satyam
Computers has a lowest return on a monthly average of 4.59%, where
as benchmark return is only 3.9% which shows higher the risk higher
the return.
Sundaram SMILE fund has higher risk factor of 7.89% with a negative
return of 0.23% where as Reliance Vision Fund has higher risk factor of
6.9% with a return of 5.16% per month.
On the basis of above analysis mutual funds have a risk factor on an
average 6.74%, and their returns are 4.39% per month
On the basis of above analysis Equity shares have a risk factor on an
average 9.87%, and their returns are 5.43% per month
On the basis of above statements it has proved higher the risk higher
the return and lower the risk lower the return.
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Investment in mutual fund schemes gives diversified portfolio to
investors.
Standard deviation is one of the best ways for finding risk of scrip’s
mutual fund units.
In case of both equities and mutual funds(open ended) liquidity is very
high, with in three working days mutual funds will converted into cash
and liquidity of equity is based on demand and supply conditions of the
market for a particular scrip.
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RECOMMENDATIONS
Now a day’s Indian capital market is attracting more and more foreign
institutional investors (FII’s) because of economic stability and
increasing growth rate, it leads to gradual increase in the stock market
indices.
This is the right time to invest in share and mutual funds because of
above reason.
Interest rates are falling gradually and equity markets are booming
because of this reason investors can move from bank deposits to
mutual funds and equities.
Five basic norms of smart investing:
Investors must have a portfolio approach to wealth.
One must analyze one's risk appetite.
One must possess a long-term outlook
Never forget to do homework and analysis.
It is essential to have control over one's emotions.
Investment in both equity capital and mutual fund schemes are subjected to
market risk. Following are the recommendations given to investors for
investing rationally in equity capital and mutual fund schemes
Aggressive Growth Funds
Investors who can assume the risk of potential loss in value of their
investment in the hope of achieving substantial and rapid gains. They are not
suitable for investors who must conserve their principal or who must maximize
current income.
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Growth Funds
Although growth funds are more conservative than aggressive growth funds,
they are still relatively volatile. They are suitable for growth-oriented investors
but not investors who are unable to assume risk or who are dependent on
maximizing current income from their investments.
Growth and Income Funds
Growth and income funds have low to moderate stability of principal and
moderate potential for current income and growth. They are suitable for
investors who can assume some risk to achieve growth of capital but who
also want to maintain a moderate level of current income.
Fixed-Income Funds
Fixed-income funds are suitable for investors who want to maximize current
income and who can assume a degree of capital risk in order to do so. Again,
carefully read the prospectus to learn if a fund's investment policy with respect
to yield and risk coincides with your own objectives.
Balanced/Equity Income funds
Balanced and equity income funds are suitable for conservative investors who
want high current yield with some growth.
Money Market Funds
Money market funds are suitable for conservative investors who want high
stability of principal and moderate current income with immediate liquidity.
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CONCLUSION
Saving money is not enough. Each of us also need to invest one’s savings
intelligently in order to have enough money available for funding the higher
education of one’s children, for buying a house, or for one’s own golden
years.
The study will guide the new investor who wants to invest in equity and mutual
fund schemes by providing knowledge about how to measure the risk and
return of particular scrip or mutual fund scheme. The study recommends new
investors to go for mutual funds rather than equities, because of high risk and
market instability.
From the calculation it is found that the average risk of equities based on
sample size is 9.87 & they are earning 5.43% returns per month where as
mutual funds average risk based on sample size is only 8.74 & they are
earning 4.39% per month.
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ANNEXURES
BSE Sensex Companies
Industry Companies (Population Elements)
Random Selected Co. (Sample)
Manufacturing
1. Bajaj Auto Ltd.,
2. Hero Honda Motors Ltd.,
3. Maruti Udyog Ltd.,
4. Tata Motors Ltd.,Ranbaxy Laboratories Ltd.,
5. Rambaxy Laboratories Ltd.,
6. Dr.Reddy’s Laboratories Ltd.,
7. Cipla Ltd.,
8. BHEL
9. TISCO
10. L & T Ltd.,
11. ACC Ltd.,
12. Gujarath Ambuja Cements Ltd.,
13. Tata Power Co. Ltd.,
14. Reliance Equity Ltd.,
15. Grasim Industries Ltd.,
16. Reliance Industries Ltd.,
17. Hondalco Industries Ltd.,
18. Hindustan Lever Ltd.,
19. ITC Ltd.,
1. Bajaj Auto Ltd.,
2. BHEL
3. ACC Ltd.,
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20. Hindustan Petroleum Corp. Ltd.,
21. ONGC Ltd.,
Service
1. Infosys Technologies Ltd.,
2. Wipro Ltd.,
3. Satyam Computer Services Ltd.,
4. HDFC
5. HDFC Bank Ltd.,
6. ICICI Bank Ltd.,
7. State Bank of India
8. Bharti Tele Ventures Ltd.,
9. Zee telefilms Ltd.,
ICICI Bank Ltd.,
Satyam Computer Services Ltd.,
Mutual Fund Industry in India
Mutual fund Companies (Population Elements)
Random Selected Schemes (Sample)
ABN AMRO Mutual Fund
Birla Sun Life Mutual Fund
BOB Mutual Fund
Canbank Mutual Fund
DBS Chola Mutual Fund
Deutsche Mutual Fund
Escorts Mutual Fund
Franklin Templeton Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
ING Vysya Mutual Fund
JM Financial Mutual Fund
Kotak Mahindra Mutual Fund
LIC Mutual Fund
Reliance Mutual Fund
Franklin Templeton Mutual Fund
Prudential ICICI Mutual Fund
SBI mutual fund
Sundaram Mutual Fund
PRINCIPAL Mutual Fund
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Prudential ICICI Mutual Fund Reliance Mutual Fund
Sahara Mutual Fund
SBI mutual fund
Standard Chartered Mutual Fund
Sundaram Mutual Fund
Tata Mutual Fund
Taurus Mutual Fund
GROWTH IN ASSETS UNDER MANAGEMENT
Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of
India effective from February 2003. The Assets under management of the Specified Undertaking of the
Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from
February 2003 onwards.
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BIBLIOGRAPHY
Key information memorandums.
• Franklin Templeton KIM
• Reliance mutual fund KIM
• SBI mutual fund KIM
Preeti Singh, Investment Management, Eleventh edition, Himalaya
Publishing House, Page No.150,388,389.
www.amfiindia.com / Historical NAVs of mutual fund schemes
www.bseindia.com / Historical share prices of companies.
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