A Comparitive Analysis of Infrastructure Funds

A REPORT
On
COMPARATIVE ANALYSIS OF INFRASTRUCTURE

FUNDS
By
-----------------
IBS Gurgaon
Mahindra Finance
Jay Plaza,2nd Floor, Old Dlf Colony, Gurgaon
A REPORT
On
COMPARATIVE ANALYSIS OF INFRASTRUCTURE

FUNDS
By
IBS Gurgaon
Mahindra Finance
Jay Plaza,2nd Floor, Old Dlf Colony, Gurgaon
Date of Submission: 18th April 2009
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Authorisation
I ----------- hereby state that this final evaluation report of Summer Internship
Program (SIP) has been submitted to ICFAI Business School as partial fulfillment
of the requirements of MBA Program of IBS Class of 2010.
The empirical information of this report is based on my experience in SIP. Any

part of this project has not been reported or copied from any report of the
university and others.
--------------------
IBS GURGAON
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ABSTRACT
“Infrastructure is the buzzword in the present Indian context as there is a huge gap between
demand and supply," said Sumit Mehra, business development manager for Lipper's India
operations, which is part of the Reuters group.
"That was the reason infrastructure funds were best performers in India in the past two years,"
he said, adding the investment of $500 billion expected in the country's infrastructure should
trigger more money into infrastructure funds.
A lot has been written about large cap funds, mid cap funds, small cap funds and various
sectoral funds, but not much is known about infrastructure funds and their performance.
Infrastructure funds are part of a mutual fund category called thematic funds. While sectoral
funds invest in particular sectors like, say, information technology, power, metals, oil and gas,
etc, thematic funds invests in themes like infrastructure, consumption-led categories like the
retail industry and outsourcing companies. But nowadays most of the experts consider thematic
funds to be as the sectoral funds.
The project deals with the comparative analysis of infrastructure funds depending upon their
past performances. Infrastructure, as a theme, covers several sectors like power utilities, power
equipment and construction companies. Unlike technology sector mutual funds (at best,
technology sector funds could buy stocks from telecom and media besides the software
stocks it traditionally invests in), infrastructure funds are not restricted to a few sectors.
For the comparison three infrastructure funds have been taken and they would be compared
accordingly.
1. Prudential ICICI Infrastructure Fund
2. Tata Infrastructure Fund
3. UTI Thematic Infrastructure Fund
The analysis would include measurement of Standard deviation, Beta Calculation, R square,
Sharpe Ratio for the individual funds. Standard Deviation, Alpha, Beta etc are statistical
measurements which help investors determine the risk-reward profile of a mutual fund
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About Mahindra Group
The US $6 billion Mahindra Group is among the top 10 industrial houses in India. Mahindra &
Mahindra is the only Indian company among the top tractor brands in the world. Mahindra’s
Farm Equipment Sector has recently won the Japan Quality Medal, the only tractor company
worldwide to be bestowed this honor. It also holds the distinction of being the only tractor
company worldwide to win the Deming Prize. Mahindra is the market leader in multi-utility
vehicles in India. It made a milestone entry into the passenger car segment with the Logan.
The Group has a leading presence in key sectors of the Indian economy, including the financial
services, trade and logistics, automotive components, information technology, and infrastructure
development.
With over 62 years of manufacturing experience, the Mahindra Group has built a strong base in
technology, engineering, marketing and distribution which are key to its evolution as a
customer-centric organization. The Group employs over 50,000 people and has several state-of-
the-art facilities in India and overseas.
The Mahindra Group has ambitious global aspirations and has a presence on five continents.
Mahindra products are today available on every continent except Antarctica. M&M has one
tractor manufacturing plant in China, three assembly plants in the United States and one at
Brisbane, Australia. It has made strategic acquisitions across the globe including Stokes
Forgings (UK), Jeco Holding AG (Germany) and Schoneweiss & Co GmbH (Germany). Its
global subsidiaries include Mahindra Europe Srl. based in Italy, Mahindra USA Inc. and
Mahindra South Africa.
M&M has entered into partnerships with international companies like Renault SA, France, and
International Truck and Engine Corporation, USA. Forbes has ranked the Mahindra Group in its
Top 200 list of the World’s Most Reputable Companies and in the Top 10 list of Most Reputable
Indian companies. Mahindra has recently been honoured with the Bombay Chamber Good
Corporate Citizen Award for 2006-07.
About Mahindra Finance

A subsidiary of Mahindra & Mahindra Limited, it is one of India’s leading non-banking finance
companies. Focused on the rural and semi-urban sector, it provides finance for utility vehicles,
tractors and cars and has the largest network of branches
covering these areas. Their goal is to be the preferred
provider of retail financing services in the ruraland semi-
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urban areas of India, while their strategy is to provide a range of financial products and services
to their customers through their nationwide distribution network.
Company Profile
Mahindra & Mahindra Financial Services Limited, a subsidiary of Mahindra & Mahindra
Limited, was established in the year 1991 with a vision to become the number one semi-urban
and rural Finance Company. In a short span of 18 years, it has become one of the India's leading
non-banking finance company providing finance for acquisition of utility vehicles, tractors and
cars. It has more than 450 branches covering the entire India and services over 6,00,000
customer contracts.
Mahindra Group has a leading presence in key sectors of the Indian economy, including trade
and financial services (Mahindra Intertrade, Mahindra & Mahindra Financial Services Ltd.),
automotive components, information technology & telecom (Tech Mahindra, Bristlecone), and
infrastructure development (Mahindra GESCO, Mahindra Holidays & Resorts India Ltd.,
Mahindra World City). With around 60 years of manufacturing experience, the Mahindra Group
has built a strong base in technology, engineering, marketing and distribution. The Group
employs around 30,000 people and has eight state-of-the-art manufacturing facilities in India
spread over 500,000 square meters.
Group Structure
Mahindra Finance is a company with a strong foundation and a shining legacy, growing every
day to create a legacy of their own. Our leading promoter Mahindra & Mahindra holds the
majority of their Equity Shares and is also a leading tractor and UV manufacturer with over 60
years’ experience in the Indian market. As a supplement to their business, in May 2004, they
started an insurance broking business through our wholly owned subsidiary, Mahindra Insurance
Brokers Limited.
Product Portfolio
Mahindra Finance has a wide range of products and services, with something to suit everyone’s
needs. Right from finance for two wheelers, tractors, farm equipment, cars and utility vehicles to
commercial vehicles and construction equipment, they also have a group of experts providing
investment advice, surveying available market products and choosing the most suitable to our
customers’ needs.
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Investment Advisory Services
Mahindra Finance is all-encompassing of clients’ needs. So while they believe in making assets
easily available, they also believe in catering to those who want to create wealth from these
assets. Their Investment Advisory Services act as an avenue to help create and multiply wealth.
Mutual Fund Distribution
Recently they have received the necessary permission from Reserve Bank of India (RBI) to start
the distribution of Mutual Fund products through their network. Hitherto they were only
participating in the liability requirements of their customers but with a mutual fund distribution
business, they can also participate in the customer’s asset allocation.
When it comes to investing, everyone has unique needs based on their own objectives and risk
profile. While many investment avenues such as fixed deposits, bonds etc. exist, it is usually
seen that equities typically outperform these investments, over a longer period of time. Hence
they are of the opinion that, systematic investment in equity allows one to create substantial
wealth.
However, investing in equity is not as simple as investing in bonds or bank deposits, because
only proper allocation of portfolio gives maximum returns with moderate risk, and this requires
expertise and time.
Their Investment Advisory Services helps one to invest his money in equity through different
Mutual Fund Schemes. They ensure the best for their clients by identifying products best suited
to individual needs.
Offers Available
Personalized Service: They believe in providing personalized service and individual attention
to each client to ensure that they understand their investment goals and help them achieve it.
Professional Advice: Offer expert advice on equity and debt portfolios with an objective to
provide consistent long-term return while taking calculated market risks. Their approach helps
their clients build a proper mix of products, and not concentrate on just one individual product.
Hence, serving their long-term objectives in the best way.
Long-term Relationship: They believe that long-term vision is the only means to steady wealth
creation. However to achieve this, one also needs to take advantage of short-term market
opportunities while not losing sight of long-term objectives. Hence they partner all their clients
in realizing their long-term vision.
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Access to Research Reports: They provide their clients with access to the expert opinion of
economists and analysts from CRISIL, one of the leading financial research and rating
companies of India. This is because they believe that unbiased research is the key to providing
sound advice in making informed investment decisions.
Transparency and Confidentiality: Their clients receive regular portfolio statements, via
email. They can also view the detailed performance of their investment portfolio on the web, the
access to which is restricted to the client only. Moreover, their monitoring system enables them
to detect any unauthorized access to the portfolio.
Flexibility: To facilitate smooth dealing and consistent attention, all their clients are serviced by
their individual Relationship Executives. Relationship Executives provide them with completely
hassle-free, customized services taking care of all the administrative aspects of their
investments. This includes submission of application forms to fund houses and a monthly report
on the overall performance of their investment portfolio.
Hassle-free investment: They ensure that the process of investing remains hassle-free. They
also want to offer complete customized service to their clients. It is for these reasons that their
Relationship Executives take care of all the administrative aspects of investments like helping
them to submit the application forms to fund houses and other such formalities like monthly
reports on the overall state of investments of the clients and performance of portfolios.
Their clients also enjoy
Information updates on a daily basis through email

Ease of viewing their portfolio on the internet
Investment advice at their convenience
Weekly, fortnightly and monthly reports sent to them via email, on request
The freedom to contact us, anywhere in India
Access to the multiple products offered by Mahindra Finance through their Relationship
Executive.
Mutual Funds
A mutual fund is a pool of money that is professionally managed for the benefit of all
shareholders. As an investor in a mutual fund, one owns a portion of the fund, sharing in any
increase or decrease in the value of the fund. A mutual fund may focus on stocks, bonds, cash, or
a combination of these asset classes.
The income earned through these investments and its unit holders in proportion to the number of
units owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus, a
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Mutual Fund is the most suitable investment for the
common person as it offers an opportunity to invest
in a diversified, professionally managed portfolio at a
relatively low cost. Anybody with an investible
surplus of as little as a few thousand rupees can
invest in Mutual Funds. Each Mutual Fund scheme
has a defined investment objective and strategy. In
effect, the mutual fund vehicle exploits economies of
scale in all three areas - research, investments and
transaction processing.
Like most developed and developing countries the mutual fund cult has been catching on in
India. The important reasons for this interesting occurrence are:
• Mutual funds make it easy and less costly for investors to satisfy their need for capital
growth, income and/or income preservation.
• Mutual fund brings the benefits of diversification and money management to the
individual investor, providing an opportunity for financial success that was once
available only to a select few.
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 odds to diversify.
THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds)

REGULATIONS,1996 defines a mutual fund as a " a fund establishment in the form of a trust
to raise money through the sale of units to the public or a section of the public under one or
more schemes for investing in securities, including money market instruments."
History of mutual funds

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank the. The history of mutual funds in
India can be broadly divided into four distinct phases.
First Phase – Establishment and Growth of Unit Trust of India -

1964-87:
• Unit Trust of India (UTI) established on 1963 by an Act of Parliament.

• Set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the RBI.
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• In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India
(IDBI) took over the regulatory and administrative control in place of RBI.
• The first scheme launched by UTI was Unit Scheme 1964.
• At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase - Entry of Public Sector Funds – 1987-1993:
• 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC).
• SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian
Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct
92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund
in December 1990.
• At the end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores.
Third Phase – Entry of Private Sector Funds - 1993-2003:
• Entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families.
• Also, 1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed.
• The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993.
• The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996.
• At the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805
crores. The Unit Trust of India with Rs.44,541 crores of assets under management was
way ahead of other mutual funds.
Fourth Phase – Growth and SEBI Regulation - 1996-2004:
• The mutual fund industry witnessed robust growth and stricter regulation from the SEBI
after the year 1996.
• The mobilisation of funds and the number of players operating in the industry reached
new heights as investors started showing more interest in mutual funds.
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• Investors’' interests were safeguarded by SEBI and the Government offered tax benefits
to the investors in order to encourage them.
• SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform
standards for all mutual funds in India.
• The Union Budget in 1999 exempted all dividend incomes in the hands of investors
from income tax.
• Various Investor Awareness Programmes were launched during this phase, both by SEBI
and AMFI, with an objective to educate investors and make them informed about the
mutual fund industry
• In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament.
• The primary objective behind this was to bring all mutal fund players on the same level.
UTI was re-organised into two parts: 1. The Specified Undertaking, 2. The UTI Mutual
Fund
• Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past
schemes (like US-64, Assured Return Schemes) are being gradually wound up. However,
UTI Mutual Fund is still the largest player in the industry.
• At the end of September, 2004, there were 29 funds, which manage assets of Rs.153108
crores under 421 schemes.
Phase V - Growth and Consolidation - 2004 Onwards

The industry also witnessed several mergers and acquisitions recently, examples of which are
acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and
PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutal fund
players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29
funds as at the end of March 2006. This is a continuing phase of growth of the industry
through consolidation and entry of new international and private sector players.
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Structure of the Indian mutual
fund industry
The Indian mutual fund industry is dominated by the Unit Trust of India, which has a total
corpus of Rs700bn collected from more than 20 million investors. The UTI has many
funds/schemes in all categories i.e. equity, balanced, income etc with some being open-ended
and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is
a balanced fund, is the biggest scheme with a corpus of about Rs200bn. Most of its investors
believe that the UTI is government owned and controlled, which, while legally incorrect, is true
for all practical purposes.
The second largest category of mutual funds is the ones floated by nationalized banks. Can bank
Asset Management floated by Canara Bank and SBI Funds Management floated by the State
Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation and
Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones.
Working of mutual funds

A mutual fund is set up by a sponsor. However, the sponsor cannot run the fund directly. He has
to set up two arms: a trust and Asset Management Company. The trust is expected to assure fair
business practice, while the AMC manages the money. All mutual funds except UTI functions
under Sebi (Mutual Fund) regulations 1996.
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The mutual fund collects money directly or through brokers from investors. The money is
invested in various instruments depending on the objective of the scheme. The income generated
by selling securities or capital appreciation of these securities is passed on to the investors in
proportion to their investment in the scheme. The investments are divided into units and the
value of the units will be reflected in Net Asset Value or NAV of the unit. NAV is the market
value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of
the scheme divided by the number of units outstanding on the valuation date. Mutual fund
companies provide daily net asset value of their schemes to their investors. NAV is important, as
it will determine the price at which you buy or redeem the units of a scheme. Depending on the
load structure of the scheme, you have to pay entry or exit load.
Classification of mutual funds in

India
Various Mutual Fund schemes and their implications
Mutual fund schemes are classified on the basis of its structure and investment objective.
By Structure
Open ended funds: Investors can buy and sell units of open-ended funds at NAV-related price
every day. Open-end funds do not have a fixed maturity and it is available for subscription every
day of the year. Open-end funds also offer liquidity to investments, as one can sell units
whenever there is a need for money.
Close-ended funds: These funds have a stipulated maturity period, which may vary from three
to 15 years. They are open for subscription only during a specified period. Investors have the
option of investing in the scheme during initial public offer period or buy or sell units of the
scheme on the stock exchanges. Some close-ended funds repurchase the units at NAV-related
prices periodically to provide an exit route to the investors.
Interval Funds: These funds combine the features of both open and close-ended funds. They
are open for sale and repurchase at a predetermined period.
By Investment objective
Growth funds: They normally invest most of their corpus in equities, as their objective is to
provide capital appreciation over the medium-to-long term. Growth schemes are ideal for
investors with risk appetite.
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Income funds: As the name suggests, the aim of these funds is to provide regular and steady
income to investors. They generally invest their corpus in fixed income securities like bonds,
corporate debentures, and government securities. Income funds are ideal for those looking for
capital stability and regular income.
Balanced funds: The objective of balanced funds is to provide growth along with regular
income. They invest their corpus in both equities and fixed income securities as indicated in the
offer documents. Balanced funds are ideal for those looking for income and moderate growth.
Money market funds: These funds strive to provide easy liquidity, preservation of capital and
modest income. MMFs generally invest the corpus in safer short-term instruments like treasury
bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these
schemes hinges on the interest rates prevailing in the market. MMFs are ideal for corporate and
individual investors looking to park funds for short periods.
Other schemes
Tax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax rebates to
investors under section 88 of the Income Tax Act. They generally have a lock-in period of three
years. They are ideal for investors looking to exploit tax rebates as well as growth in
investments.
Special schemes: These schemes invest only in the industries specified in the offer document.
Examples are Infotech funds, FMCG funds, pharma funds, etc. These schemes are meant for
aggressive and well-informed investors.
Index funds: Index Funds invest their corpus on the specified index such as BSE Sensex, NSE
index, etc. as mentioned in the offer document. They try to mimic the composition of the index
in their portfolio. Not only the shares, even their weightage is replicated. Index funds are a
passive investment strategy and the fund manager has a limited role to play here. The NAVs of
these funds move along with the index they are trying to mimic save for a few points here and
there. This difference is called tracking error.
Sector specific schemes: These funds invest only specified sectors like an industry or a group
of industries or various segments like ‘A’ Group shares or initial public offerings.
Selecting a Mutual Fund

Selection parameters
Your objective:
The first point to note before investing in a fund is to find out whether your objective matches
with the scheme. It is necessary, as any conflict would directly affect your prospective returns.
For example, a scheme that invests heavily in mid-cap stocks is not suited for a conservative
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equity investor. He should be better off in a scheme, which invests mainly in blue chips.
Similarly, you should pick schemes that meet your specific needs. Examples: pension plans,
children’s plans, sector-specific schemes, etc.
Your risk capacity and capability:

This dictates the choice of schemes. Those with no risk tolerance should go for debt schemes, as
they are relatively safer. Aggressive investors can go for equity investments. Investors that are
even more aggressive can try schemes that invest in specific industry or sectors.
Fund Manager’s and scheme track record:

Since you are giving your hard earned money to someone to manage it, it is imperative that he
manages it well. It is also essential that the fund house you choose has excellent track record. It
also should be professional and maintain high transparency in operations. Look at the
performance of the scheme against relevant market benchmarks and its competitors. Look at the
performance of a longer period, as it will give you how the scheme fared in different market
conditions.
Cost factor:
Though the AMC fee is regulated, you should look at the expense ratio of the fund before
investing. This is because the money is deducted from your investments. A higher entry load or
exit load also will eat into your returns. A higher expense ratio can be justified only by
superlative returns. It is very crucial in a debt fund, as it will devour a few percentages from
your modest returns.
Purchasing mutual funds

Purchasing during IPO:
Like companies, even mutual funds offer initial public offering. It is when they launch the
scheme for the first time. You can buy units at par on this occasion. However, it is not always
advantageous to buy a mutual fund during IPO. You can always wait and see the performance
before investing in it.
Purchasing existing mutual fund units:
You can buy units of an open-end scheme anytime at NAV-related price. Most mutual funds
charge an entry load of up to 2%. That means you have to pay an additional 2% of the NAV to
get into the scheme. You can buy the plan directly from the mutual fund or brokerage. You can
even buy them via the Internet.
Selling mutual funds

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You can sell or redeem units very easily. As per Sebi guidelines, a mutual fund unit holder has
the right to receive redemption or repurchase proceeds within 10 days of the redemption or
repurchase. Most funds do not charge an exit load these days.
• When should you sell a mutual fund unit is a crucial question.

• Ideally, you should sell it when you have met your target profit.
• The other reason is that you need the money or your profile has changed due to some
changes in your life.
• Other than this, you should sell the units if you find that the fund has been taken over by
another fund, which you do not approve of.
• Any major changes in the objective of the fund or a sharp rise in expenses could also be
valid reasons to redeem units.
• Following a favorite fund manager is also a usual practice. However, it need not be
always rewarding.
Income from mutual funds: the

options
Mutual funds distribute their income as dividend. An investor has the option of receiving the
dividend or opting for the dividend reinvestment. If an investor needs the income, he can opt for
dividend payout option. However, if you do not need the money, he can opt for dividend
reinvestment. Another choice before him is the growth or cumulative option. Here the income
generated from sale of securities or capital appreciation is automatically reinvested.
Speedy investment, redemption and income receipts
Thanks to the Electronic Clearing Services (ECS), mutual fund investor now has the option of
automatic credit of dividends and redemptions into bank account. This will save a lot of
paperwork, for both you and the fund. You can also instruct your bank to automatically
withdraw a certain sum towards systematic investment plan. Alternatively, you can also directly
receive systematic withdrawal proceeds in your bank account.
Tracking mutual funds

performance
Objective parameters
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The NAV of the scheme will reflect the performance of the scheme. The fund will also give you
returns for various periods such as one month, three months, six months, one year, three years,
since inception, etc. This will give you an idea about the performance of the fund.
Funds also provide comparison with relevant benchmarks. This should tell you whether the fund
manager has performed better than the benchmark. However, financial experts believe that these
returns do not give the complete picture. They believe that the return should be risk-adjusted.
Various publications and Internet sites provide such returns. The computation is complicated and
they use various formulas for this purpose.
Subjective parameters
The performance alone does not make a fund house a winner. Equally important is the service
standards and transparency in actions. It is also essential that the fund offer speedy solutions to
grievances of investors. The reputation of the fund house among its investors and public at large
indicates how well the fund scores on this front.
Information sources
Every financial daily offers daily NAV of all mutual fund schemes. Magazines also come out
with annual survey of mutual funds. There are even magazines dedicated entirely towards
mutual fund industry. Internet is also a great place for information. There are dedicated sites as
well as financial sites, which offer information on mutual funds. Association of Mutual Funds of
India (AMFI) home page is also a great place for information.
Resolving grievances
Mutual funds are regulated by Sebi (mutual fund) regulation 1996. Therefore, an investor
always has the recourse to approach the watchdog. Various investor forums also take up the case
of individual investors. You can also turn to judiciary as a last resort.
Benefits of investing in Mutual

Funds
One can invest in stocks, in bonds, Treasury bills, or real estate, but in the end the resources will
limit him to one or maybe two securities which increase the risk to about the level of going to
the local casino or buying a lottery ticket. The reason Mutual Funds are so popular is because
they decrease the risk and increase the probability of enjoying high returns. Following are the
top five big benefits of investing in Mutual Funds.
1. The Advantage of Professional Investment

Management.
Mutual funds provide full-time, high quality professional management services by pooling the
resources of many hundreds of investors. The high level of professional management is a vital
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key to profoundly satisfying results mutual funds enjoy in today’s complicated and volatile
markets. The fund manager’s goals and interests are tied to your success because their paycheck
is based on how well the fund performs rather than on sales commissions. The fund manager has
instant access to real market information and is able to make trades on very large and therefore
cost effective securities packages.
2. Diversification.
A major advantage of mutual funds is that they invest in a wide range of options from stocks to
bonds to money market securities. This diversification limits risk because a decline in the value
of any specific security is offset by the stability or increasing value of other securities in the
package. Shareholders benefit from a level of diversification made possible by the amount of
pooled investment dollars that most individual investors would not be able to achieve.
3. Low Cost, High Quality Investing

An average investor could not create a well balanced portfolio holding a meager 50 stocks. It
would be too expensive. The investments alone would be about $150,000 and then there would
be fees and commissions and accountants compensations on top of that. A mutual fund lets you
buy into a diversified portfolio for as little as $50. in some circumstances. Typically you can get
started in a well managed fund for under $1000.
4. Convenience and Flexibility

Mutual Fund managers study the market, analyze the securities, make all the decisions on what
to buy and sell, clip the coupons, collect all the interest payments and make sure dividends on
the fund's securities are received, recorded and disbursed. They protect the interest of the
shareholder (you) and are available to answer questions or to buy and redeem fund shares either
online or on the telephone. While you own just one security you have all the benefits of a widely
diversified portfolio.
Other services may include automatic reinvestment of dividends and exchange privileges.
5. Mutual Fund Investments are Liquid and Easy to

Withdraw
Mutual Funds can be traded in (redeemed) at anytime so cash is available in an emergency. You
can request (redeem) funds by electronic transfer, letter, phone, or simply by writing a check
against the shares depending on the type of fund you are invested in. The money will be in your
hand in about three business days.
Drawbacks of mutual funds

Mutual funds have their drawbacks and may not be for everyone:
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No Guarantees
No investment is risk free. If the entire stock market declines in value, the value of mutual fund
shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing money.
Fees and commissions

All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge
sales commissions or "loads" to compensate brokers, financial consultants, or financial planners.
Even if one doesn't use a broker or other financial adviser, one will have to pay a sales
commission if he buys shares in a Load Fund.
Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent
of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on
the income you receive, even if you reinvest the money you made.
Management risk
When one invests in a mutual fund, then they depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as they had
hoped, one might not make as much money on their investment as they have expected. Of
course, if he invests in Index Funds, he’ll forego management risk, because these funds do not
employ managers
Mutual Fund Risk

Risk
Every type of investment, including mutual funds, involves risk. Risk refers to the possibility
that one will lose money (both principal and any earnings) or fail to make money on an
investment. A fund's investment objective and its holdings are influential factors in determining
how risky a fund is.
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Generally speaking, risk and potential return are related. This is the risk/return trade-off. Higher
risks are usually taken with the expectation of higher returns at the cost of increased volatility.
While a fund with higher risk has the potential for higher return, it also has the greater potential
for losses or negative returns. The school of thought when investing in mutual funds suggests
that the longer your investment time horizon is the less affected you should be by short-term
volatility. Therefore, the shorter your investment time horizon, the more concerned you should
be with short-term volatility and higher risk.
Defining Mutual fund risk

Different mutual fund categories as previously defined have inherently different risk
characteristics and should not be compared side by side. A bond fund with below-average risk,
for example, should not be compared to a stock fund with below average risk. Even though both
funds have low risk for their respective categories, stock funds overall have a higher risk/return
potential than bond funds.
Of all the asset classes, cash investments (i.e. money markets) offer the greatest price stability
but have yielded the lowest long-term returns. Bonds typically experience more short-term price
swings, and in turn have generated higher long-term returns. However, stocks historically have
been subject to the greatest short-term price fluctuations—and have provided the highest long-
term returns.
Investors looking for a fund which incorporates all asset classes may consider a balanced or
hybrid mutual fund. These funds can be very conservative or very aggressive. Asset allocation
portfolios are mutual funds that invest in other mutual funds with different asset classes. At the
discretion of the manager(s), securities are bought, sold, and shifted between funds with
different asset classes according to market conditions.
Mutual funds face risks based on the investments they hold. For example, a bond fund faces
interest rate risk and income risk. Bond values are inversely related to interest rates. If interest
rates go up, bond values will go down and vice versa. Bond income is also affected by the
change in interest rates. Bond yields are directly related to interest rates falling as interest rates
fall and rising as interest rise. Income risk is greater for a short-term bond fund than for a long-
term bond fund.
Similarly, a sector stock fund (which invests in a single industry, such as telecommunications) is
at risk that its price will decline due to developments in its industry. A stock fund that invests
across many industries is more sheltered from this risk defined as industry risk.
The Role of Risk in Mutual Fund Strategies
• Identifying individual risk tolerance is one of the basic factors in determining an

optimum investment strategy for a mutual fund portfolio. Regardless of the return
objectives and time horizon within a portfolio, risk tolerance affects both asset
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allocation and especially the selection of fund categories (i.e., large value, small
growth, international, short-term bond, intermediate-term bond, etc.).
• As the level of risk increases, both volatility and total return potential proportionately
increase; conversely, as the level of risk decreases, both volatility and total return
potential proportionately decrease. This standard risk/reward rule is often illustrated
with risk and reward both escalating over a broad spectrum beginning with cash
reserves, changing to bonds and then ending with stocks:
Risks involved while investing in Mutual Funds.
• Call Risk. The possibility that falling interest rates will cause a bond issuer to redeem—
or call—its high-yielding bond before the bond's maturity date.
• Country Risk. The possibility that political events (a war, national elections), financial
problems (rising inflation, government default), or natural disasters (an earthquake, a
poor harvest) will weaken a country's economy and cause investments in that country to
decline.
• Credit Risk. The possibility that a bond issuer will fail to repay interest and principal in
a timely manner. Also called default risk.
• Currency Risk. The possibility that returns could be reduced for Americans investing in
foreign securities because of a rise in the value of the U.S. dollar against foreign
currencies. Also called exchange-rate risk.
• Income Risk. The possibility that a fixed-income fund's dividends will decline as a
result of falling overall interest rates.
• Industry Risk. The possibility that a group of stocks in a single industry will decline in
price due to developments in that industry.
• Inflation Risk. The possibility that increases in the cost of living will reduce or
eliminate a fund's real inflation-adjusted returns.
• Interest Rate Risk. The possibility that a bond fund will decline in value because of an
increase in interest rates.
• Manager Risk. The possibility that an actively managed mutual fund's investment
adviser will fail to execute the fund's investment strategy effectively resulting in the
failure of stated objectives.
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• Market Risk. The possibility that stock fund or bond fund prices overall will decline
over short or even extended periods. Stock and bond markets tend to move in cycles,
with periods when prices rise and other periods when prices fall.
• Principal Risk. The possibility that an investment will go down in value, or "lose
money," from the original or invested amount.
Five Stats That Showcase Risk
There are five main indicators of investment risk that apply to the analysis of stocks, bonds and
mutual fund portfolios. They are Alpha, Beta, R-square, Standard Deviation and Sharpe
Ratio. These statistical measures are historical predictors of investment risk/volatility and are all
major components of Modern Portfolio Theory (MPT).
The MPT is a standard financial and academic methodology used for assessing the performance
of equity, fixed-income and mutual fund investments by comparing them to market benchmarks.
Alpha
Alpha is a measure of an investment's performance on a risk-adjusted basis. It takes the
volatility (price risk) of a security or fund portfolio and compares its risk-adjusted
performance to a benchmark index. The excess return of the investment relative to the
return of the benchmark index is its "alpha".
Simply stated, alpha is often considered to represent the value that a portfolio manager adds or
subtracts from a fund portfolio's return. A positive alpha of 1.0 means the fund has outperformed
its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an
underperformance of 1%. For investors, the more positive an alpha is, the better it is.
Beta
Beta, also known as the "beta coefficient," is a measure of the volatility, or systematic risk, of a
security or a portfolio in comparison to the market as a whole. Beta is calculated
using regression analysis, and you can think of it as the tendency of an investment's return to
respond to swings in the market. By definition, the market has a beta of 1.0. Individual security
and portfolio values are measured according to how they deviate from the market.
A beta of 1.0 indicates that the investment's price will move in lock-step with the market. A beta
of less than 1.0 indicates that the investment will be less volatile than the market , and ,
correspondingly, a beta of more than 1.0 indicates that the investment's price will be more
volatile than the market. For example, if a fund portfolio's beta is 1.2, it's theoretically 20%
more volatile than the market.
Conservative investors looking to preserve capital should focus on securities and fund portfolios
with low betas, whereas those investors willing to take on more risk in search of higher returns
should look for high beta investments.
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R-Squared
R-Squared is a statistical measure that represents the percentage of a fund portfolio's or

security's movements that can be explained by movements in a benchmark index.
R-squared values range from 0 to 100. According to Morningstar, a mutual fund with an R
squared value between 85 and 100 has a performance record that is closely correlated to the
index. A fund rated 70 or less would not perform like the index.
Mutual fund investors should avoid actively managed funds with high R-squared ratios, which
are generally criticized by analysts as being "closet” index funds. In these cases, why pay the
higher fees for so-called professional management when you can get the same or better results
from an index fund.
Standard Deviation
Standard deviation measures the dispersion of data from its mean. In layman terms, the more
that data is spread apart, the higher the difference is from the norm. In finance, standard
deviation is applied to the annual rate of return of an investment to measure its volatility (risk).
A volatile stock would have a high standard deviation.
With mutual funds, the standard deviation tells us how much the return on a fund is deviating
from the expected returns based on its historical performance.
Sharpe Ratio
Developed by Nobel laureate economist William Sharpe, this ratio measures risk - adjusted
performance. It is calculated by subtracting the risk-free rate of return from the rate of
return for an investment and dividing the result by the investment's standard deviation of its
return.
The Sharpe ratio tells investors whether an investment's returns are due to smart
investment decisions or the result of excess risk. This measurement is very useful because
although one portfolio or security can reap higher returns than its peers, it is only a good
investment if those higher returns do not come with too much additional risk. The greater an
investment's Sharpe ratio, the better its risk-adjusted performance.
The Risk- Return Trade Off

The risk-return tradeoff is the balance an investor must decide on between the desire for the
lowest possible risk for the highest possible returns. It’s a fact that low levels of uncertainty (low
risk) are associated with low potential returns and high levels of uncertainty (high risk) are
associated with high potential returns.
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The following chart shows an example of the risk/return tradeoff for investing. A higher
standard deviation means a higher risk:
Risk Return Grid
We can figure out from the above diagram that, Liquid funds are the least risky and hence the
expected returns are also the least. Whereas the equity sector funds are the most risky and hence
the returns offered are also the maximum.
Relation between Diversification

and Risk
Proper levels of diversification can be used to minimize risk while still allowing appreciating
securities to dominate a portfolio. Diversification can eliminate non-market risk from a
portfolio, that is, risk associated with owning a particular company. Diversification is not the
same as the number of investments held in a portfolio. Diversification is minimizing the
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correlation between each investment held in a portfolio. This is usually accomplished in a stock
portfolio by holding stocks of differing industries.
What is proper diversification, as opposed to over or under

diversification?
The graph below shows the maximum reduction in portfolio risk for each security added to a
portfolio. As can be seen, the level of risk is reduced from 50% to 20.3% with as little as ten
properly diversified securities. Adding another 1000 securities to the portfolio would reduce the
risk to 20.1%. The first ten securities in a portfolio diversify away over 97% of the non-market
risk. Diversification, or elimination of the non-market risk, can lower the risk of a common
stock portfolio to 20%, which is the level of market risk that every portfolio holds. Market risk,
the risk associated with the stock market in general, can never be eliminated or reduced.
Under-Diversification Produces Large Amounts of

Unnecessary Non-Market Risk
Holding five or fewer securities allows for a high level of non-market risk in a portfolio and is
generally not recommended. An example of an exception to this rule is company founders and
officers that hold vast amounts of a single security. They can afford the high levels of non-
market risk because of their wealth.
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Most industry specific mutual funds are quite under-diversified in spite of the high numbers of
securities owned by each mutual fund. Each security in an industry specific mutual fund is quite
susceptible to common industry factors which create a high level of non-market risk, even if the
fund has close to 1000 companies represented.
Therefore it makes little sense for the investor to pay the high management fees of an
industry specific fund , because in order to be properly diversified the investor must pick
nine other industry funds from other industries.
True Diversification
To achieve true diversification that you need to buy funds that are different from each other
whether by company size, industry, sector, country, etc. This means you are buying funds that
are uncorrelated – funds that move in different directions during different times. A person's
overall portfolio should also diversify among different asset classes, meaning allocating a
certain percentage to bonds, commodities, real estate, alternative assets and so on.
Owning a mutual fund that invests in 100 companies doesn't necessarily mean that you are at
optimum diversification. Many mutual funds are sector specific, so owning a telecom or health
care mutual fund means you are diversified within that industry, but because of the high
correlation between movements in stocks prices within an industry, you are not diversified to the
extent you could be by investing across various industries and sectors. Balanced funds offer
better risk protection than a sector-specific mutual fund because they own 100 or more stocks
across the entire market.
Many mutual fund holders also suffer from being over-diversified. Some funds, especially the
larger ones, have so many assets (i.e. cash to invest) that they have to hold literally hundreds of
stocks. In some cases this makes it nearly impossible for the fund to outperform indexes.
Over diversification
Many mutual funds hold close to a thousand securities in their portfolio, which reduces non-
market risk a small fraction more than a portfolio of 10 securities. But the question must be
raised as to whether the costs of holding a thousand securities are worth the small reduction in
risk. The personnel, equipment, and administrative costs associated with analyzing, following
and holding large numbers of securities are passed on to the mutual fund investor. And for what?
Basically, for attaining the same returns as the market in general minus the extra expenses
mentioned.
Drawbacks of Over Diversification:
• Unforeseen taxes and turnover costs.
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• Mediocre performance due to broad-based exposure.
• Lack of adequate supervision over each asset class.
How can over diversification hurt returns?
Unfortunately, many investors overdo diversification because there is a tendency to believe that
if more is good, even more is better. Taken to an extreme, diversification can diminish returns
simply because, if you have too many investments, the positive contribution of one won't be big
enough to make a difference. For example, if a fund or security only makes up 1 percent or 2
percent of your portfolio, even a significant gain in that investment won't have a material
difference in the overall portfolio.
High costs
Overall performance can be further eroded by unforeseen trading costs or taxes associated with
a portfolio that has too many holdings. If you are paying for trades or sales charges, managing
an excessive number of stocks or funds can be expensive or prevent you from missing
breakpoints.
Management problems
Having too many securities or funds creates a real management problem. It is essential that
either the investor or his or her adviser knows every security or fund in the portfolio. If neither
understand it, then it shouldn't be in there."
How much is enough?

• Generally 10 to 15 funds
• Or funds in four to five asset classes (essentially top fund in each asset class).
Small cap, Mid cap and Large cap domestic stocks, and some international exposure
Mutual Fund Expenses

Expenses
Because mutual funds are professionally managed investments, there are management fees and
operating expenses associated with investing in a fund. These fees and expenses charged by the
fund are passed onto shareholders and deducted from the fund's return.
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These expenses are typically expressed as the expense ratio - the percent of fund assets spent
(annually) on day-to-day operations. Expense ratios can vary widely among funds. Expense
ratios for mutual funds commonly range from 0.2% to 2.0%, depending on the fund.
Defining Mutual Fund costs

All mutual funds have costs, but some funds are more expensive to own than others. Be
conscious of the effect of seemingly minor cost differences which can significantly affect the
growth of your investment assets, especially over longer periods of time.
Mutual fund costs fall into two main categories: One-time fees and ongoing annual expenses.
Not all funds charge one-time fees, but all funds charge ongoing annual fees of some sort.
One-Time Fees
Loads
Loads come in three forms:
• Front-End Load
o Charged when you purchase fund shares-usually class A shares, effectively
reducing your purchase amount.
o May be charged on reinvested distributions.
o Can be as high as 8.5%.
• Back-End Load
o Charged when you sell fund shares.
o Usually assessed based on the length of time you have held your shares, and
declines over time.
o Maximum allowed is 8.5%, but this is rarely seen. According to Lipper Inc.,
back-end loads can be as high as 6% if you sell shares within one year.
• Level Load
o Deducted annually from fund assets as marketing and distribution costs.
o Used to pay commissions to brokers and the fund's financial adviser, and is
generally reported as part of a fund's operating expenses.
o Can be as high as 0.75% per year, according to Lipper Inc.
Funds that have no sales charges are known as "no-load," while funds that charge loads of 1% to
3% are called "low-load." Keep in mind, funds that have lower loads or no-loads tend to have
higher operating expenses. Again, read each fund's prospectus and compare "net" returns.
Ongoing Annual Expenses

• Management Fees
• Distribution and Service Fees
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• Other Expenses
• Underlying Fund Expenses
Other fees
In addition to sales loads, fund companies and brokerages may charge other fees when you buy
or sell fund shares.
A transaction fee is charged by some brokerage firms for purchasing or selling shares.
Transaction fees are sometimes referred to as commissions but are extra costs not normally paid
if you were to purchase your fund directly with the fund family.
Some fund companies and brokerages may charge a redemption fee if the fund is held for less
than a certain period of time, generally between 90 and 180 days. These charges are intended to
discourage short-term trading that can raise a fund's administrative costs.
Not all funds assess these "extra" fees. In fact, funds and brokerages may not charge a sales
load, transaction fees or redemption fees.
Mutual Funds and Taxes

Different types of Mutual Funds attract different types of taxes. Here is the information about
taxes applicable on Mutual Funds in India.
Equity Liquid funds/Money Debt fund/liquid plus

Taxation
Funds Market Funds Funds
Short Term
As per Income Tax
Capital Gain *16.995% As per Income Tax Slab
Slab
Tax
Long Term Less of 10% without Less of 10% without

Capital Gain Nil indexation or 20% with indexation or 20% with
Tax indexation indexation
Dividend
Nil **28.325% **14.163%
Distribution Tax
• 80C benefits through ELSS: Under the current tax laws, you can get an annual income
tax benefit of up to Rs. 1Lakh if you invest in Equity Linked Savings Schemes, ELSS.
However, the minimum term for these schemes is 3 years and you cannot withdraw your
money before that time
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*There would be an additional surcharge of 10% of Short Term Capital Gain Tax if the
individuals’ income is more than 10 lacs per annum. Further, the education cess of 3% shall be
levied on all investors.
*Short Term Capital Gain Tax indicated above is inclusive of surcharge and education cess
**Dividend Distribution Taxes indicated above are inclusive of additional surcharge and cess.
INCOME TAX IMPLICATIONS ON MUTUAL FUND GAINS
We all invest in mutual funds and get the returns either in the form of dividends or get capital
appreciation benefits under growth option. But do we know how is this income taxed in India?
What are the tax implications on the income arising out of mutual fund investments? Will try
and answer this today.We will look at how income arising from mutual funds are taxed for an
individual investor. The income from mutual funds can arise out of dividend received from the
fund or from the capital gains (short term or long term).
Let us understand how is the income arising out of dividend and capital gains taxed as per
Income Tax Act in India.
1. DIVIDEND
a. On units of equity oriented funds (funds having more than 65% investments in Indian
equity instruments): Income in the form of dividend is tax free in the hands of the investor.
Moreover such a fund house is exempt from paying Dividend Distribution Tax also.
b. On units of funds other than equity oriented fund: Income in the form of dividends is tax
free. However, the fund house needs to pay Dividend Distribution Tax (DDT) at the time of
distributing the dividend. The rate of dividend distribution tax depends on who is the recipient
of the dividend and is calculated as under- Individual and HUF - 14.025%- Others like corporate
- 22.44%
2. CAPITAL GAINS
Capital gain is classified into 2 categories i.e. Short term and long term capital gains. Short
term capital gains arises out of sale of units held for less than 12 months and long term capital
gains arises out of sale of units held for more than 12 months.
a Short Term capital Gains
-On units of equity oriented funds (funds having more than 65% investments in Indian equity
instruments): The income arising out of short term capital gains in mutual funds is to be taxed
at the rate of 10% plus applicable surcharges.
-On units of funds other than equity oriented funds: Short term capital gains is added back to
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your income and then your total income is taxed as per the IT slab i.e. 10% or 20% or 30% for
the ones falling in the highest bracket.
b. Long Term capital Gains
-On units of equity oriented funds (funds having more than 65% investments in Indian equity
instruments): Tax free
--On units of funds other than equity oriented funds : There are 2 methods for this.
• The investor can calculate capital gains taking the benefit of indexation and pay tax at
the rate of 20% plus surcharge. or
• The investor can calculate the capital gains without the benefit of indexation and pay tax
at 10%.
Infrastructure Funds
Mutual funds constantly come out with different schemes. A lot has been written about large cap
funds, mid cap funds, small cap funds and various sectoral funds, but not much is known about
infrastructure funds and their performance.
Infrastructure funds are part of a mutual fund category called thematic funds. While sectoral
funds invest in particular sectors like, say, information technology, power, metals, oil and gas,
etc, thematic funds invests in themes like infrastructure, consumption-led categories like the
retail industry and outsourcing companies. But nowadays most of the experts consider thematic
funds to be as the sectoral funds.
Infrastructure funds have caught the fancy of a lot of mutual funds; many new funds have been
launched in this category in the last couple of years. But there are only five that have sizeable
money under management; and these five were launched before 2006:
These funds include:
1. DSP ML TIGER Fund
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5. Sundaram BNP Paribas Capex Opportunities Fund
These are are open-ended funds; this means one can invest in them whenever they like. There
are some more infrastructure funds currently available in the market but most of them are close-
ended (in open-ended funds, investors are free to sell their units anytime; in close-ended funds,
investors cannot sell their units for a minimum period of time this minimum period is decided
by the fund).
Infrastructure, as a theme, covers several sectors like power utilities, power equipment and
construction companies. Unlike technology sector mutual funds (at best, technology sector funds
could buy stocks from telecom and media besides the software stocks it traditionally invests in),
infrastructure funds are not restricted to a few sectors.
In 2006, infrastructure funds shot to prominence by topping the performance rankings. Among
the five best performing diversified equity funds, three were infrastructure funds. So it comes as
a bit of a surprise to know that infrastructure was not even recognized as a separate theme a few
years ago.
It was the government's planned infrastructure expenditure of $320 billion during the eleventh
5-year plan (2007-2012) that did the trick. Even if half of it materializes, infrastructure funds
will be able to generate great returns.
UTI Infrastructure was the first to grab the opportunity in April 2004. Talk about the early bird
getting the worm, it was the best performing equity fund in 2006 with a 61.5 per cent return.
Tata Infrastructure and ICICI Prudential Infrastructure delivered 61.5 per cent and 60.3 per cent
respectively.
This was no mean feat considering that in 2005, no infrastructure fund featured in the top 10
return generators. Currently, there are 12 funds dedicated to this sector. The latest entry into the
fold is DBS Cholamandalam with a three-year, close-ended fund.
Analysis of Infrastructure Funds

The project deals with the analysis of three of the infrastructure funds viz.
Till date only individual analysis has been taken into consideration the comparison between the
funds will be carried on further.
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Objective: To generate capital appreciation and income distribution to unit holders by investing
predominantly in equity/equity related securities of the company belonging to the infrastructure
industries and balance in debt securities and money market instruments including call money.
Structure: Open-ended equity Fund
Inception Date: August 16, 2005
Plans and Options under the Plan: Growth Option & Dividend Option.
Face Value (Rs/Unit): Rs. 10
Minimum Investment: Rs. 5000
Entry Load: For investments of less than Rs. 5 Crores, Entry load is 2.25% of applicable NAV.
For investments of Rs. 5 crores and above, Entry Load is Nil.
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Portfolio Analysis:
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Current Stats & Profile Trailing Returns
Latest NAV As on 15 Apr 2009

Fund
19.61 (15/04/09) Category
52-Week High Year to Date

13.62
29.49 (02/05/08) 11.00
52-Week Low 1-Month

23.64
14.11 (27/10/08) 25.55
Fund Category 3-Month

20.97
Equity: Diversified 17.84
Type 1-Year
-28.14
Open End -32.30
Launch Date 3-Year

9.27
August 2005 -4.38
Risk Grade 5-Year

--
14.70
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Portfolio Summary
Top Holdings
As on 31 Mar
As from the current

Name of Holding
statistics we see that
the latest NAV of the % Net Assets
fund has been much
more inclined
towards the 52-
week Low i.e. it has Reliance Industries
increased only 5
points from the 9.64
lowest NAV which
was 14.11 so the
fund has greater
prospects and in the Bharti Airtel
near future may
show an increase in 8.49
NAV resulting into
the investor a profit
of 10 Rs on each
unit. Moreover the
return grade of the
fund is high whereas
the risk grade is
HDFC Bank
average.
6.51
Comparing it with
the similar category
fund we find that it
has always given
better returns as
compared to them.
As where the fund
has given a return of State Bank of
13.62% the similar India
category funds have
given only 11% of 4.36
return
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ICICI Bank
3.09
Top 5 Sectors % Net Asset
As on 31/03/2009
Financial 17.19
Energy 12.25
Metals 8.78
Communication 8.49
Diversified 4.92
Returns and Risk Aggregates

Indicates an increase or decrease or no change in holding since last
Rating & Risk Modern
portfolioPortfolio Volatility Measures
Stat
Fund Rating R-Squared 0.94 Mean 11.98
Fund Risk Average Alpha 11.32 Standard 35.79
Grade Deviation
Fund Return High Beta 1.11 Sharpe Ratio 0.19
Grade
Standard Deviation:
The standard deviation essentially reports a fund's volatility, which indicates the tendency of the
returns to rise or fall drastically in a short period of time. The standard deviation of a fund
measures this risk by measuring the degree to which the fund fluctuates in relation to its mean
return, the average return of a fund over a period of time.
According to the table we see that the standard deviation of the fund is much higher. This fund is
therefore more risky because it fluctuates widely between negative and positive returns within a
short period.
The fund with the lower standard deviation would be more optimal because it is maximizing the
return received for the amount of risk acquired
Beta:
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While standard deviation determines the volatility of a fund according to the disparity of its
returns over a period of time, beta, another useful statistical measure, determines the volatility,
or risk, of a fund in comparison to that of its index or benchmark.
A fund with a beta very close to 1 means the fund's performance closely matches the index or
benchmark. A beta greater than 1 indicates greater volatility than the overall market, and a beta
less than 1 indicates less volatility than the benchmark.
Here we see that the beta of fund is 1.11 in relation to the S&P CNX Nifty, i.e. the fund is
moving 11% more than the index. . Therefore, if the S&P CNX Nifty increased 15%, the fund
would be expected to increase 16.65%.
R-Square:
The R-squared of a fund advises investors if the beta of a mutual fund is measured against an
appropriate benchmark. Measuring the correlation of a fund's movements to that of an index, R-
squared describes the level of association between the fund's volatility and market risk, or more
specifically, the degree to which a fund's volatility is a result of the day-to-day fluctuations
experienced by the overall market.
R-squared values range between 0 and 100, where 0 represents the least correlation and 100
represents full correlation. If a fund's beta has an R-squared value that is close to 100, the beta of
the fund should be trusted. On the other hand, an R-squared value that is close to 0 indicates that
the beta is not particularly useful because the fund is being compared against an inappropriate
benchmark.
From the table we see that the R- Square of the fund is 0.94 i.e. 94 which is much closer to 100
hence the beta of the fund should be trusted as it has been measured against an appropriate
benchmark.
Alpha
Using beta, alpha's computation compares the fund's performance to that of the benchmark's
risk-adjusted returns and establishes if the fund's returns outperformed the market's, given the
same amount of risk.
For example, if a fund has an alpha of 1, it means that the fund outperformed the benchmark by
1%. Negative alphas are bad in that they indicate that the fund underperformed for the amount
of extra, fund-specific risk that the fund's investors undertook.
The alpha of the fund is 11.32 which state that the fund outperformed the benchmark by 11.32%.
Sharpe ratio
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The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a
result of excess risk. This measurement is very useful because although one portfolio or fund
can reap higher returns than its peers, it is only a good investment if those higher returns do not
come with too much additional risk.
The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. A
negative Sharpe ratio indicates that a risk-less asset would perform better than the security being
analyzed. A ratio of 1 or better is considered good, 2 and better is very good, and 3 and better is
considered excellent.
Since the Sharpe ratio here of the fund is only 0.19 hence we see that the returns are due to
excess risk undertaken and not due to astute investment decision.
Best and Worst Performance

Best (Period) Worst (Period)
Month 26.07 (14/09/2007 - 16/10/2007) -38.80 (24/09/2008 - 24/10/2008)
Quarter 54.25 (21/08/2007 - 20/11/2007) -42.13 (28/07/2008 - 27/10/2008)
Year 103.61 (12/12/2006 - 12/12/2007) -55.81 (03/12/2007 - 02/12/2008)
The year 2007 proved to be quite significant from the investment point of view as it gave the
highest return, as on Dec 2007 the scheme posted 46.53% of returns outperforming the category
average of 29.08%. It outperformed the sensex posted 28.07% returns during the same period.
Whereas the fund gave its worst return during 2008 due to the turbulent changes in the market
conditions.
Trailing Returns
As of Fund Return Category Return S&P CNX Nifty Sensex
15 Apr 2009
Year-to-Date 13.62 11.00 17.74 16.97
1-Week 4.92 5.79 4.22 5.05
1-Month 23.64 25.55 28.13 28.87
3-Month 20.97 17.84 27.31 24.74
1-Year -28.14 -32.30 -28.60 -30.14
2-Year 3.60 -10.04 -5.69 -8.18
3-Year 9.27 -4.38 1.36 0.14
5-Year -- 14.70 13.35 14.07
Return less than 1-year are absolute and over 1 year are annualized
From the above table of trailing returns we see that the fund has given better returns as
compared to its benchmark as well as the category returns
Page | 35
Annual Returns
2008 2007 2006 2005 2004
Fund Return -51.64 92.92 58.53 -- --
Rank In Category 66/193 6/162 4/145 -- --
Category Average -55.08 59.27 34.73 46.58 26.38
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68
Sensex -52.45 47.15 46.70 42.33 13.08
In the annualized return table we can see that though the return for the fund is negative but much
better than its benchmark as well as the category. Whereas in the year 2006 and 2007 it was
amongst the best performers.
Page | 36
Portfolio Concentration
As on 31/03/09 As on 31/03/09
% Net Assets
% Net Assets
Top 3 Sectors
Equity 38.21
89.32
Top 5 Holdings
32.10
Debt
0.00
Top 10 Holdings
42.54
Others
10.68
Page | 37
The fund has completely allocated its assets on equity with only 10.68% issued to others which
can act as a hindrance while revising the portfolio of the fund. A larger amount of cash in hand
would help the fund manager buy fruitful and performing stocks.
Page | 38
Investment Details
Basics Systematic Investment Plan
Min Investment (Rs) SIP
5000
Yes
Subsequent Investment (Rs) Initial Investment (Rs)
500
1000
Min Withdrawal (Rs) Additional Investment (Rs)
500
1000
Min Balance (Rs) No of Cheques
5000
5
Pricing Method Note
Forward
Purchase Cut-off Time (hrs)

The scheme also offers a quarterly SIP with
15 minimum investment of Rs 5000 and 4 post-
dated cheques of Rs 5000 each.
Redemption Cut-off Time (hrs) Page | 39
15
The different investment plans and its details is provided in the above table.
Objective: Tata Infrastructure Fund seeks to provide income distribution and / or medium to
long term capital gains by investing predominantly in equity / equity related instrument of
companies in infrastructure sector.
Structure: Open-ended Equity Fund
Inception Date: November 25, 2005
Plans and Options under the Plan: Growth, Dividend
Minimum Investment: Rs.5000
Entry Load: For investment amount greater than or equal to Rs.2 crores: Nil. For investment
amount less than Rs.2 crores: 2.25%.
Exit Load: For each investment amount of less than Rs. 2crores: 1% if redeemed on or before
expiry of 6 months from the date of allotment.
Trailing Returns
As on 15 Apr 2009 Fund Category
Year to Date 9.68 11.00
1-Month 25.86 25.55
3-Month 19.94 17.84
1-Year -35.48 -32.30
3-Year 0.08 -4.38
5-Year -- 14.70
Return Since 18.21 --
Launch
Returns upto 1 year are absolute and over
1 year are annualised.
Page | 40
Portfolio Summary
Top Holdings
As on 31 Mar
Portfolio Analysis:
The above tableHere
givestheustop
the5information
sectors of the funds has been
about the top 5listed
holdings
depending
of the company
upon their asset allocation.
Name ofCurrent
HoldingStats & Profile st
as on 31 MarchThe09 AUMs 26.36% of the asset has been
Latest NAV 20.5842
% Net Assets (15/04/09) allocated to the energy sector only.
52-Week High 34.3221
(02/05/08)
52-Week Low 15.6997
(09/03/09)
BHEL
Rating & Risk
Fund Category Equity: Modern Portfolio Volatility Measures
6.05 Diversified Stat
Fund Rating
Type Open End R-Squared 0.92 Mean 2.62
Launch Date December 2004
Grade Deviation
Risk Grade Average
Fund Return Average Beta 1.06 Sharpe Ratio -0.07
Return
Grade Grade Average
HDFC Bank
Net Assets (Cr) 1,357.69
(31/03/09)
5.66
Benchmark Sensex
Here we see that the fund has both average
return and risk simultaneously. The standard
Here we see that the fund’s latest NAV has th
increased only 5 points from the 52 week low deviation is high hence Thewereturn till 15
can say that April 09 lags behind
the fund
and hence has a great prospect because if in the is risky. the category return a bit. Otherwise it
near future it reaches its high it would instantly has given much better return than the
fetch an increase of about 13.7379 with every Beta of the fund is category1.06 i.e. it would give 6%
unit. higher returns as compared to its benchmark.
Reliance Industries
The R- Top 5 Sectors % Net Asset
5.62 Square of As on 31/03/2009
the fund is Energy 26.36
Financial 15.12
Engineering 9.72
Communication 5.44
Metals 4.34
approaching near 100 i.e. has a higher degree of co

ONGC relation with the benchmark and hence beta can be
trusted.
4.31
Alpha of the fund is 1.76 i.e. the returns of the fund is
1.76% higher than its benchmark.
As already discussed a negative Sharpe ratio indicates

that a risk-less asset would perform better than the
security being analyzed. Hence the funds negative
Page | 41
Bharti Airtel
4.24
Sharpe ratio shows that the fund performance has been mainly due to excess risk undertaken and
not due to wise investment decisions.

Month 27.34 (14/09/2007 - 16/10/2007) -36.33 (24/09/2008 - 24/10/2008)
Quarter 57.56 (21/08/2007 - 20/11/2007) -43.50 (02/09/2008 - 02/12/2008)
Year 109.10 (02/05/2005 - 02/05/2006) -61.05 (03/12/2007 - 02/12/2008)
Similarly here also we see that the fund has given its best performance in the year 2007 with
27.34% of return in a single month and its worst performance in the year 2008.
Annual Returns
2008 2007 2006 2005 2004
Fund Return -57.58 84.31 60.32 -- --
Rank In Category 125/193 15/162 3/145 -- --
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68
Sensex -52.45 47.15 46.70 42.33 13.08
The annualized returns of the fund as compared to the category as well as its benchmark have
been slightly less in the year 2008. But in 2006 and 2007 it had outperformed both of them.
Page | 42
Here we see that the major portion of the total asset has been allocated to equity whereas about
Asset Allocation Portfolio Concentration
As on 31/03/09 As on 31/03/09
% Net Assets
% Net Assets
Top 3 Sectors
Equity 51.20
81.15
Top 5 Holdings
25.88
Debt
0.11
Top 10 Holdings
40.42
Others
18.74
Page | 43
Page | 44
Investment Details
5000
Yes
1000
--
1000
500
Min Balance No of Cheques
--
12
Pricing Method Note
Forward

The scheme also offers quarterly SIP with
minimum of 6 cheques of Rs 1000 each. For
SIP, an entry load of 1% will be charged and
15 an exit load of 1.25% if redeemed within 2
yrs. for investment upto Rs 10 lakhs and for
investment greater than Rs 10 lakhs the
prevailing load structure for investment
other than SIP will be applicable.
Page | 45
Redemption Cut-off Time (hrs)
15
Different investment modes of the fund have been described above.
Objective: To provide Capital appreciation through investing in the stocks of the companies
engaged in the sectors like Metals, Building materials, oil and gas, power, chemicals,
engineering etc.
Structure: Open Ended Equity Fund
Inception Date: March 09, 2004
Plans and Options under the Plan: Income Option, Growth Option
Minimum Investment: Rs. 5,000/-
Entry Load: Nil for investments made after 10.10.2004 and amount >=Rs 2 crore., Entry load
2.25% for investments made after 10.10.2004 and amount < Rs 25 lakhs
Exit Load: Nil.
Portfolio Analysis:
The latest NAV of the fund has increased 3.93 in less than 5 weeks hence if the same trend
continues the investor who might had invested in this fund would virtually make profit. As its
highest in 52 weeks was 37.27 which is about 14.08 Rs higher than the current NAV. Hence the
investor can make a profit of this much amount for every unit he has purchased.
The trailing returns of the fund lags behind its category returns.
Page | 46
Current Stats & Profile Trailing Returns
Latest NAV As on 16 Apr 2009

Fund
23.18 (16/04/09) Category
52-Week High Year to Date

8.07
37.27 (02/05/08) 8.32
52-Week Low 1-Month

16.02
19.25 (09/03/09) 20.43
Fund Category 3-Month

11.98
Equity: Diversified 13.39
Type 1-Year
-34.37
Open End -34.33
Launch Date 3-Year

-1.15
April 2004 -5.18
Risk Grade 5-Year

--
Average 14.07
Page | 47
Portfolio Summary
Top Holdings
As on 31 Mar
Name of Holding
% Net Assets
Reliance Industries
6.43
BHEL
6.37
Bharti Airtel
5.54
Larsen & Toubro

Top 5 Sectors % Net Asset
As on 31/03/2009
4.24
Energy 20.46
Engineering 11.93
Communication 8.36
Diversified 8.11
Metals 6.77
Page | 48
ONGC
Indicates an increase or decrease or no change in holding since last portfolio Indicates a new holding since last
portfolio
3.29
Rating & Risk Modern Portfolio Volatility Measures
Stat
Fund Rating R-Squared 0.90 Mean 2.45
Grade Deviation
Fund Return Average Beta 1.02 Sharpe Ratio -0.08
Grade
The standard deviation of the fund is higher hence the fund is much risky and as according to
the rating both the risk as well as the return has been average.
Beta is 1.02 i.e. it would give 2% higher returns as compared to the benchmark. Similarly the R-
Square is much more near 100 i.e. 90 and hence beta can be trusted.
Alpha of the fund is 1.41 which can be interpreted as the fund would give 1.41% higher returns
as compared to the benchmark.
Whereas the Sharpe ratio is negative i.e. -0.08 which states that the fund performance is mainly
due to excess risk.

Month 28.03 (14/09/2007 - 16/10/2007) -31.81 (24/09/2008 - 24/10/2008)
Quarter 51.38 (21/08/2007 - 20/11/2007) -37.33 (02/09/2008 - 02/12/2008)
Year 111.95 (02/05/2005 - 02/05/2006) -59.04 (04/12/2007 - 03/12/2008)
Similar to the above two funds the same trend is followed here i.e. the fund has shown an
outstanding performance in 2007 during which the market was bullish whereas the worst
performance is in 2008.
Trailing Returns
As of Fund Return Category Return S&P CNX Nifty Sensex
16 Apr 2009
Year-to-Date 8.07 8.32 13.87 13.48
1-Week 1.22 2.67 0.82 1.33
1-Month 16.02 20.43 21.33 22.41
3-Month 11.98 13.39 19.13 17.42
1-Year -34.37 -34.33 -31.06 -32.61
2-Year -8.21 -11.85 -8.37 Page | 49
-10.59
3-Year -1.15 -5.18 0.24 -0.87
5-Year -- 14.07 12.51 13.30
Return less than 1-year are absolute and over 1 year are annualised
The fund return lags behind both its benchmark as well as the category return as in a year from
16th April 2009 the fund has given a return of 8.07% only, the similar category funds have given
a return of 8.32% where as S&P CNX Nifty has given a return of 13.87% and simultaneously
13.48% return from Sensex.
Annual Returns
2008 2007 2006 2005 2004
Fund Return -56.32 72.01 61.48 57.00 --
Rank In Category 112/193 31/162 1/145 18/100 --
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68
Sensex -52.45 47.15 46.70 42.33 13.08
The annualized return of the fund has been given in the table. It shows that the fund had an
outstanding performance in the year 2006 and 2007 but in 2008 it underperformed its category
returns as well as its benchmark.
Page | 50
Asset Allocation Portfolio Concentration
As on 31/03/09 As on 31/03/09
% Net Assets
% Net Assets
Top 3 Sectors
Equity 40.75
62.34
Top 5 Holdings
25.86
Debt
20.63
Top 10 Holdings
38.18
Others
17.03
Page | 51
Here the fund has only 62.34% of the total asset allocated to equity where as the rest is divided
between the debt and others accordingly. Hence it can be said it is much safer as compared to
the other two funds.
Investment Details
Page | 52
5000
Yes
1000
5000
--
500
Min Balance No of Cheques
--
6
Pricing Method Note
Forward
15
Page | 53
The investment plans of the fund have been depicted in the above table.
Comparative Analysis
After the individual analysis, let’s begin with the comparative analysis of the three funds. The
comparison is based on the five stats used for risk determination being Alpha, Beta , R- Square,
Standard Deviation and Sharpe Ratio. It would also include the risk and return analysis and the
difference in the rating of these three funds.
Portfolio Analysis:
Prudential ICICI Tata Infrastructure UTI Thematic
Infrastructure fund Fund Infrastructure Fund
Latest NAV 19.61(15/04/09) 20.5842 (15/04/09) 23.880(15/04/09)
52-Week High 29.49 (02/05/08) 34.3221 (02/05/08) 37.27 (02/05/08)
52-Week Low 14.11 (27/10/08) 15.6997 (09/03/09) 19.25 (09/03/09)
Fund Category Equity: Diversified Equity: Diversified Equity: Diversified
Type Open End Open End Open End
Launch Date August 2005 December 2004 April 2004
Risk Grade Average Average Average
Return Grade High Average Average
Net Assets (Cr) 2,481.02 (31/03/09) 1,357.69 (31/03/09) 1,121.13 (31/03/09)
Benchmark S&P CNX Nifty Sensex BSE 100
NAV (Net Asset Value) :
Page | 54
The net asset value of the fund is the cumulative market value of the assets fund net of its
liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the
fund, this is the amount that the shareholders would collectively own. This gives rise to the
concept of net asset value per unit, which is the value, represented by the ownership of one unit
in the fund. It is calculated simply by dividing the net asset value of the fund by the number of
units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".
We also abide by the same convention.
52-Week High/Low NAV
52-Week High/Low means the highest and lowest price at which a stock has traded in the past
12 months, or 52 weeks. For stocks, the 52-week high/ low is the highest/ lowest composite
traded price for the issue over the last fifty-two weeks, including the current trading day,
adjusted for any stock splits or stock dividends.
Many investors see the 52-week high or low as an important indicator. For example, a value
investor may view a stock trading at a 52-week low as an initial indication of a possible value
play (a stock sitting at a price below its intrinsic value). An astute value investor will have to
conduct a lot more analysis to come to this conclusion, but the fact that the stock is trading at its
52-week low can be a potential starting point.
Explanation:
• All the funds are open ended equity diversified.
Page | 55
• From the graph we see that all the three funds are performing at an average range of their
NAVs and hence already stated it can be viewed as a potential starting point. As if in the
future the NAV reaches their maximums point it can fetch better returns. For example
Pru ICICI Infrastructure fund can give a profit of 10 Rs approx on each unit similarly 14
Rs approx for both the other funds.
• Prudential ICICI Infrastructure has the highest net asset among the three with UTI
lagging behind. Hence the fund manager of ICICI Prudential can smartly invest in
various stocks and sectors giving a higher return as compared to the others.
Trailing Returns
Prudential Tata UTI Thematic Category
As on 15 Apr 2009 ICICI Infra Infrastructure Infrastructure Return
fund Fund Fund
Year to Date 13.62 9.68 8.07 11.00

1-Month 23.64 25.86 16.02 25.55
3-Month 20.97 19.94 11.98 17.84
1-Year -28.14 -35.48 -34.37 -32.30
3-Year 9.27 0.08 -1.15 -4.38
5-Year -- -- -- 14.70
Return Since 20.17 18.21 20.35 --
Launch
Returns up to 1 year are absolute and over 1 year are annualized
Page | 56
Explanation:
• From the above details we can interpret that ICICI Pru has outperformed its category
returns as well as its counterparts. It has given the best returns in every period of time as
compared to others.
• Next to it lies Tata Infrastructure fund which also has given better returns as compared to
its category.
• Whereas UTI Thematic Infrastructure fund has always given lesser returns when
compared with the category as well as other funds.
• The category returns is very less as compared to the funds, where in 3 years span the
funds are giving positive returns the category returns are highly negative. Hence it can be
said that the funds are the best performers of their category.
Sector allocation of funds

Top Sectors % Net Asset
Prudential ICICI Tata Infrastructure UTI Thematic

Infra fund Fund Infrastructure
Fund
Financial 17.19 15.12 1.37
Energy 12.25 26.36 20.46
Metals 8.78 4.34 6.77
Communication 8.49 5.44 8.36
Diversified 4.92 4.09 8.11
Engineering 1.60 9.72 11.93
Page | 57
Sector allocation is a useful tool for constructing sound or superior reward/risk balanced
portfolios. Past performance shows that overweighting or underweighting a small number of
sectors can make large differences in performance.
Here the graph and the data show the sectoral allocation of the funds. The observations are as
follows
• ICICI Pru has its major net asset allocated to the financial sector whereas its energy
sector for the remaining two.
• UTI has given the least share to financial sector and has major portion of the net asset in
energy and engineering sector followed by communication, diversified and metals sector.
• In case of Tata, after energy comes the financial sector followed by engineering,
communication, metals and diversified sector.
As the sector allocation of a fund decides the performance of the fund. Hence it can be stated
that the performance of ICICI Pru as compared to any other funds is far much better due to its
judicious sector allocation. It can be stated with the help of an example. Where ICICI Pru has its
major allocation in financial sector UTI has least and vice versa is in the case of engineering
sector. This can be attributed for the underperformance of the UTI Infrastructure fund.
Returns and Risk Aggregate
Page | 58
Prudential ICICI Tata UTI
Infrastructure Infrastructure Thematic
fund Fund Infrastructure
Fund
Fund Rating
Fund Risk Grade Average Average Average
Fund Return Grade High Average Average
Modern Portfolio stat

R-Squared 0.94 0.92 0.90
Alpha 11.32 1.76 1.41
Beta 1.11 1.06 1.02
Volatility Measures
Mean 11.98 2.62 2.45
Standard Deviation 35.79 34.62 33.57
Sharpe Ratio 0.19 -0.07 -0.08
Explanation:
• As already discussed the R-squared of a fund advises investors if the beta of a mutual
fund is measured against an appropriate benchmark. From the table we can see that the
all the funds have R square which is much closer to 100 hence the beta of the fund
should be trusted as it has been measured against an appropriate benchmark
• ICICI Pru Infrastructure fund has the highest alpha i.e. 11.32 % which states that the
fund outperformed the benchmark by 11.32% which is far much better than the
remaining two giving 1.76% and 1.41% of return respectively as compared to their
benchmark.
Page | 59
• Beta, determines the volatility, or risk, of a fund in comparison to that of its index or
benchmark. Again we see that ICICI Pru Infrastructure fund has the highest beta stating
that the fund is moving 11% more than the index as compared to Tata Infrastructure and
UTI Infrastructure Fund which are moving 6% and 2% respectively as compared to their
index.
Explanation:
• The mean here depicts the mean return of the funds and as seen ICICI Pru has the
highest average returns as compared to the other two funds.
• Standard deviation simply quantifies how much a series of numbers, such as fund
returns, varies around its mean, or average. Investors like using standard deviation
Page | 60
because it provides a precise measure of how varied a fund's returns have been over a
particular time frame—both on the upside and the downside.
• From the above data we can see that all the funds lie within the same range of standard
deviation and as it is high therefore is more risky because it fluctuates widely between
negative and positive returns within a short period.
• As already stated Sharpe ratio tells us whether a portfolio's returns are due to smart
investment decisions or a result of excess risk. A ratio of 1 or better is considered good, 2
and better is very good, and 3 and better is considered excellent. Here we see that the
Sharpe ratio of every fund is less than 1, hence it can be said that the returns are due to
excess risk undertaken and not due to astute investment decision.
• The Sharpe ratio of ICICI Pru is still far better as compared to the rest two which has
negative ratio. Hence the performance of ICICI Pru is far much better as compared to
other funds.
Prudential ICICI Tata UTI

Infrastructure Infrastructure Thematic
fund Fund Infrastructure Fund
Best (Period) Best (Period) Best (Period)
Month 26.07 (14/09/2007 - 27.34 (14/09/2007 - 28.03 (14/09/2007 -
16/10/2007) 16/10/2007) 16/10/2007)
Quarter 54.25 (21/08/2007 - 57.56 (21/08/2007 - 51.38 (21/08/2007 -
20/11/2007) 20/11/2007) 20/11/2007)
Year 103.61 (12/12/2006 109.10 (02/05/2005 111.95 (02/05/2005
- 12/12/2007) - 02/05/2006) - 02/05/2006)
Worst (Period) Worst (Period) Worst (Period)
Month -38.80 (24/09/2008 - -36.33 (24/09/2008 - -31.81 (24/09/2008 -
24/10/2008) 24/10/2008) 24/10/2008)
Quarter -42.13 (28/07/2008 - -43.50 (02/09/2008 - -37.33 (02/09/2008 -
27/10/2008) 02/12/2008) 02/12/2008)
Year -55.81 (03/12/2007 - -61.05 (03/12/2007 - -59.04 (04/12/2007 -
02/12/2008) 02/12/2008) 03/12/2008)
Explanation:
• The best month for every fund was 14th Sept 07 to 16th Oct 07 as it gave the highest
return. By comparing the returns we can state that UTI was the best performer whereas
ICICI Pru lagged behind.
Page | 61
• The best quarter was 21st Aug 07 to 20th Nov 07 in which Tata Infrastructure was the best
performer with 57.56% of returns.
• The best year varied for ICICI Pru which was 12th Dec 06 to 12th Dec 07 having a return
of 103.61%, whereas for the remaining two it was 2nd May 05 to 2nd May 06 offering a
return of 109.10 and 111.95 for Tata and UTI Fund respectively.
• UTI Infrastructure fund was the best performer for every time period followed by Tata
and ICICI Pru.
Explanation:
• In a monthly basis ICICI Pru was the underperformer offering a return of -38.8%. The
duration was same for every fund i.e. 24th Sept 08 to 24th Oct 08.
• Whereas on a Quarterly basis it was Tata Infrastructure fund giving a return of -43.5%
followed by ICICI Pru and UTI subsequently.
• The duration was 28th July 08 to 27th Oct 2008 for ICICI Pru whereas it was 2nd Sept 08
to 2nd Dec 08.
• On a yearly basis also Tata Infrastructure gave the lowest returns as compared to other
funds. The duration was 3rd Dec 07 to 2nd Dec 08 for ICICI Pru and Tata whereas it was
4th Dec 07 to 3rd Dec 08 for UTI.
Page | 62
Annual Returns
Prudential Tata UTI Category S&P Sensex

ICICI Infrastructure Thematic Average CNX
Infrastructure Fund Infrastructure Nifty
fund Fund
2008 -51.64 -57.58 -56.32 -55.08 -51.79 -52.45
2007 92.92 84.31 72.01 59.27 54.77 47.15
2006 58.53 60.32 61.48 34.73 39.83 46.70
2005 -- -- 57.00 46.58 36.34 42.33
2004 -- -- -- 26.38 10.68 13.08
Page | 63
Page | 64

A Comparitive Analysis of Infrastructure Funds

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A REPORT

COMPARATIVE ANALYSIS OF INFRASTRUCTURE

COMPARATIVE ANALYSIS OF INFRASTRUCTURE

Date of Submission: 18th April 2009

The empirical information of this report is based on my experience in SIP. Any

1. Prudential ICICI Infrastructure Fund

2. Tata Infrastructure Fund

3. UTI Thematic Infrastructure Fund

About Mahindra Finance

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THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds)

History of mutual funds

First Phase – Establishment and Growth of Unit Trust of India -

• Unit Trust of India (UTI) established on 1963 by an Act of Parliament.

Second Phase - Entry of Public Sector Funds – 1987-1993:

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

Fourth Phase – Growth and SEBI Regulation - 1996-2004:

Phase V - Growth and Consolidation - 2004 Onwards

Working of mutual funds

Classification of mutual funds in

Selecting a Mutual Fund

Your risk capacity and capability:

Fund Manager’s and scheme track record:

Purchasing mutual funds

Purchasing existing mutual fund units:

Selling mutual funds

• When should you sell a mutual fund unit is a crucial question.

Income from mutual funds: the

Tracking mutual funds

Benefits of investing in Mutual

1. The Advantage of Professional Investment

3. Low Cost, High Quality Investing

4. Convenience and Flexibility

5. Mutual Fund Investments are Liquid and Easy to

Drawbacks of mutual funds

Fees and commissions

Mutual Fund Risk

Defining Mutual fund risk

The Role of Risk in Mutual Fund Strategies

• Identifying individual risk tolerance is one of the basic factors in determining an

Risks involved while investing in Mutual Funds.

Five Stats That Showcase Risk

R-Squared is a statistical measure that represents the percentage of a fund portfolio's or

The Risk- Return Trade Off

Risk Return Grid

Relation between Diversification

What is proper diversification, as opposed to over or under

Under-Diversification Produces Large Amounts of

Drawbacks of Over Diversification:

• Unforeseen taxes and turnover costs.

• Lack of adequate supervision over each asset class.

How can over diversification hurt returns?

How much is enough?

Mutual Fund Expenses

Defining Mutual Fund costs

Loads come in three forms:

Ongoing Annual Expenses

Mutual Funds and Taxes

Equity Liquid funds/Money Debt fund/liquid plus

Long Term Less of 10% without Less of 10% without

INCOME TAX IMPLICATIONS ON MUTUAL FUND GAINS