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INTRODUCTION
1.1 RESEARCH BACKROUND
All over the world, mutual fund is one of the most popular instruments for
investment. Its popularity with consumer has dramatically increased over the last couple of
years worldwide; the mutual fund has a long and successful history. The popularity of
mutual fund has increased manifold. In developed financial market like United States,
mutual has almost overtaken bank deposits and total assets of insurance funds.
The mutual fund industry in India is regulated by Association of Mutual Funds in
India (AMFI). The mutual fund industry in India is of 493,287 crores approx. SBI
Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track
record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has
grown immensely since its inception and today it is India's largest bank, patronized by over
80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture
between the State Bank of India and Society General Asset Management, one of the
worlds leading fund management companies that manages over US$ 500 Billion
worldwide.
In twenty years of operation, the fund has launched 38 schemes and successfully
redeemed fifteen of them. In the process it has rewarded its investors handsomely with
consistently high returns.
A total of over 4.6 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund. Schemes of the Mutual fund have consistently
outperformed benchmark indices and have emerged as the preferred investment for
millions of investors and HNIs. Today, the fund manages over Rs. 28500 crores of assets
and has a diverse profile of investors actively parking their investments across 36 active
schemes.
The fund serves this vast family of investors by reaching out to them through network
of over 130 points of acceptance, 28 investor service centers, 46 investor service desks and
56 district organizers.
The project entitled Comparative analysis of top 4 Mutual Fund in Unicon
Investment solution gives me an opportunity to enhance my knowledge of mutual funds
industry and gives me an insight of business processes of different types of client.
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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 the
management.
Second Phase: 1897-93(entry of public sector funds)
1987 marked the entry of non UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non UTI Mutual Fund
established in June1987 followed by Can Bank Mutual Fund (Dec 87), Punjab National
Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun
90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual
fund industry had assets under management of Rs.47, 004 crores.
Third Phase: 1993-2003(entry of private sector funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families. Also,
1993 was the year in which the first Mutual Fund came into being, under which all mutual
funds, except UTI, were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered in
July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996.
The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The
number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets
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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: since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of
India with assets under management of Rs.29,835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With
the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores
of assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of consolidation and
growth
Mutual funds are the fastest growing segment of the financial services sector in India.
There is little awareness about mutual fund in India; people have accepted it as a one of
the major investment avenue. Once people know about the benefits offered by it, mutual
funds will become one of the sought after investment avenues.
In future, Out of ten public sector players five will sell out, close down or merge
with stronger players in three to four years. In the private sector this trend has already
started with two mergers and one takeover. But this does not mean there is no room for
other players. The market will witness a flurry of new players entering the arena. There
will be a large number of offers from various asset management companies in the time to
come. Some big names like Fidelity, JP Morgan, etc. have entered the Indian market.
One important reason for it is that most major players already have presence here and
hence these big names would hardly like to get left behind.
The mutual fund industry is witnessing the introduction of derivatives in the
country. This enables it to hedge its risk and this in turn would be reflected in its Net
Asset Value (NAV).
I personally visualize a minimum annual growth of between 30 and 35 per cent,
since we are on a growth phase (a real take off, if I may venture to say) as penetration into
semi-urban and rural areas is steadily increasing since more and more households are
opting for mutual funds.
I feel that this industry has a very interesting past, an encouraging present
and a very bright future.
Unicon customers have the advantage of trading in all the market segments together
in the same window, as we understand the need of transactions to be executed with high
speed and reduced time. At the same time, they have the advantage of having all Advisory
Services for Life Insurance, General Insurance, Mutual Funds and IPOs also.
Unicon is a customer focused financial services organization providing a range of
investment solutions to our customers. We work with clients to meet their overall investment
objectives and achieve their financial goals. Our clients have the opportunity to get
personalized services depending on their investment profiles. Our personalized approach
enables clients to achieve their Total Investment Objectives.
Our key product offerings are as follows:
Equity
Commodity
Depository
Distribution
NRI Services
Back Office
Fixed Income
Investment Banking
Currency Derivatives
Portfolio Management
Management Team
Mutual fund is an investment company that pools money from share holders and
invests in a variety of securities, such as stocks, bonds and money market instruments. Most
open-end Mutual funds stand ready to buy back (redeem) its shares at their current net asset
value, which depends on the total market value of the fund's investment portfolio at the
time of redemption. Most open-end Mutual funds continuously offer new shares to investors.
Also known as an open-end investment company, to differentiate it from a closed-end
investment company. Mutual funds invest pooled cash of many investors to meet the fund's
stated investment objective. Mutual funds stand ready to sell and redeem their shares at any
time at the funds current net asset value: total fund assets divided by shares outstanding.
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In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing
units to the investors and investing funds in securities in accordance with objectives as
disclosed in offer document.
Investments in securities are spread across a wide cross-section of Industries and
sectors and thus the risk are reduced. Diversification reduces the risk because all stocks may
not move in the same direction in the same proportion at the same time. Mutual fund issues
units to the investors in accordance with quantum of money invested by them. Investors of
Mutual funds are known as unit holders.
The profits or losses are shared by the investors in proportion to their investments. The
Mutual funds normally come out with a number of schemes with different investment
objectives which are launched from time to time.
In India, A Mutual fund is required to be registered with Securities and
Exchange Boa rd of India (SEBI) which regulates securities markets before it can collect funds
from the public.
In Short , a Mutual fund is a common pool of money in to which investors
with common investment objective place their contributions that are to be invested in
accordance with the stated investment objective of the scheme. The investment manager
would invest the money collected from the investor in to assets that are defined/ permitted
by the stated objective of the scheme. For example, an equity fund would invest equity
and equity re la ted instruments and a debt fund would invest in bonds, debentures, gilts etc.
Mutual fund is a suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively low cost.
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Professional Management - The primary advantage of funds (at least theoretically) is the
professional management of your money. Investors purchase funds because they do not
have the time or the expertise to manage their own portfolio. A Mutual fund is a relatively
inexpensive way for a small investor to get a
full-time
investments.
Diversification - By owning shares in a Mutual fund instead of owning individual
stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a
large number of assets so that a loss in any particular investment is minimize d by gains
in others. In other words, the more stocks and bonds you own, the less any one of
them can hurt you (Think about Enron). Large Mutual funds typically own hundreds of
different stocks in many different industries. It wouldn't be possible for an investor to build
this kind of a portfolio with a small amount of money.
Economies of Scale - Because a Mutual fund buys and sells large amounts of securities at
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a time, its transaction costs are lower than you as an individual would pay.
Liquidity - Just like an individual stock, a Mutual fund allows you to request
That your shares be converted into cash at any time.
Simplicity - Buying a Mutual fund is easy! Pretty well any bank ha s its own line of Mutual
funds, and the minimum investment is small. Most companies also have automatic purchase
plans whereby as little as $100 can be invested on a monthly basis.
segments.
Open-ended Fund
An open-ended Mutual fund is one that is available for subscription and repurchase on
a continuous basis. These Funds do not have a fixed maturity period.
Investors
can
conveniently buy and sell units at Net Asset Value (NAV) related prices which are
declared on a daily basis. The key features of open-end schemes are liquidity.
Close-ended Fund
A close-ended Mutual fund has a stipulated maturity period e.g. 5-7 years. The fund is
open for subscription only during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the initial public issue and thereafter they ca n
buy or sell the units of the scheme on the stock exchanges where the units are listed. In order
to provide an exit route to the investors, some close -ended funds give an option of
selling back the units to the Mutual fund through periodic repurchase at NAV related
prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to t he
investor i.e. Either repurchase facility or through listing on stock exchanges. These Mutual
funds schemes disclose NAV generally on weekly basis.
of time.
Balanced Fund
The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated in
their offer documents. These are appropriate for investors looking for moderate growth.
They generally invest 40-60% in equity and debt instruments. These funds are also affected
because of fluctuations in share prices in the stock markets. However, NAVs of such funds
are likely to be less volatile compared to pure equity funds.
Gilt Fund
These funds invest exclusively in government securities. Government securities have
no default risk. Navs of these schemes also fluctuate due to change in interest rates and
other economic factors as is the case with income or debt oriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive
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index, S&P NSE 50 index (Nifty), etc these schemes invest in the securities in the same
weight age comprising of an index. Navs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same percentage
due to some factors known as "tracking error" in technical terms. Necessary disclosure s in
this regard is made
in the offer document of the Mutual fund scheme. There are also
exchange traded index funds launched by the Mutual funds which are traded on the stock
exchanges.
Mutual funds
diversification, liquidity as well as tax benefits. Besides, through MFs investors can gain
access to investment opportunities that would otherwise be unavailable to them due to limited
knowledge and resources.
CATOGIRIES OF MUTUAL FUND
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WITH SEBI?
An applicant proposing to sponsor a Mutual fund in India must submit an application
in Form A along with a fee of Rs.25, 000. The application is examined and once the
sponsor satisfies certain conditions such as being in the financial services business and
possessing positive net worth for the last five years, having net profit in three out of the
last five years and possessing the general reputation of fairness and integrity in all
business transactions, it is required to complete the remaining formalities for setting up
a
Mutual
fund.
and
investment
management agreement, setting up a trustee company/board of trustees comprising twothirds independent trustees, incorporating the asset management company (AMC),
contributing to at least 40% of the net worth of the AMC and appointing a custodian.
Upon satisfying these conditions, the registration certificate is issued subject to the payment
of registration fees of Rs.25.00 lacs for details; see the SEBI
(Mutual funds) Regulations, 1996.
3. Receive dividend within 42 days of their declaration and receive the redemption
or repurchase proceeds within 10 days from the date of redemption or repurchase
4. The trustees shall be bound to make such disclosures to the unit holders as
are essential in order to keep them informed about any information which may
have an adverse bearing on their investments
5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of
the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.
7. An investor can send complaints to SEBI, who will take up the matter with
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the concerned Mutual Funds and follow up with them till they are resolved.
debentures/bonds/deposits. Besides this, the government may come up with new regulation
which may affect a particular industry or class of industries. All these factors influence the
performance of Mutual Funds.
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and investment experience. Remember, while ascertaining the risk tolerance, it is crucial to
consider one's desire to assume risk as the capacity to assume the risk.
It helps to understand different categories of overall risk tolerance, i.e. conservative,
mode rate or aggressive. While a conservative investor will accept lower re turns to minimize
price volatility, a mode rate investor would be all right with greater price volatility than
conservative risk tolerances to pursue higher returns.
An aggressive investor wouldn't mind large swings in the NAVs to seek the highest returns.
Though identifying the desire for risk is a tough job, it can be made easy by defining one's
comfort zone.
2. Don't have too many scheme s in your portfolio
While it is t rue that diversification helps in earning better returns with a lower level of
fluctuations, it becomes counterproductive when one has too many funds in the portfolio.
For example, if you have 15 funds in your portfolio, it does not necessarily
mean that your
portfolio is adequately
diversified.
diversification, one has to consider factors like size of the portfolio, type of funds and
allocation to different asset classes. The refore, it is possible that a portfolio having 5 schemes
may be adequately diversified where as another one with 10 schemes may have very little
diversification.
Remember, to have a well-balanced equity portfolio, it is important to have the right
level of exposure to different segments of the equity market like large cap, mid-cap and small
cap. In addition, for a decent portfolio size, it is all right to have some exposure in the sector
and specialty funds.
3. Longer time horizon provides protection from volatility
As an e quit y fund investor, you need to understand that volatility is an integral part of
the stock market. However, if you remain focused on the Long-term objectives and follow a
disciplined approach to investing, you can not only handle volatility properly but also turn it to
your advantage.
21
has
doesn't make sense to hold a fund when it no longer meets your needs. If you have
made a proper selection, you would gene rally be required to make changes only if the fund
changes its objective or investment style, or if your needs change.
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The choice between funds that have a diversified and a concentrated portfolio largely
depends upon your risk profile. As discussed earlier, a wellDiversified portfolio helps in spreading the investments across different sectors and
segments of the market. The idea is that if one or more stocks do badly, the portfolio
won't be affected as much.
At the same time, if one stock does very well, the portfolio wont reap all the benefits. A
diversified fund, therefore, is an ideal choice for someone who is looking for steady returns
over the longer term.
A concentrated portfolio works exactly in the opposite manner. While a
fund with a concentrated portfolio has a better chance of providing higher returns, it
also increases your chance s of underperforming or losing a large portion of your portfolio
in a market downturn. Thus, a concentrated portfolio is ideally suited for those
investors who have the capacity to shoulder higher risk in order to improve the
chances of getting better returns.
7. Review your portfolio periodically
It is always a good idea to review your portfolio periodically. For example, you may
begin reviewing your portfolio on a half-yearly basis. Besides, you may be requiring to
review your portfolio in greater detail when your investments goals or financial circumstances
change.
Mutual Fund
Scheme Name
Scheme Type
Open Ended
Scheme Category
Growth
Launch Date
29-Se p-1994
Page | 43
Mutual Fund
Scheme Name
Objective of Scheme
Scheme Type
: Open Ended
24
Scheme Category
: Growth
Launch Date
: 06-Jun-2005
: 2000
Mutual Fund
Scheme Name
Objective of Scheme
medium to long
oriented companies.
Scheme Type
Open Ended
Scheme Category
Growth
Minimum Amount
Rs.5000/- Subscription
Scheme Name
Objective of Scheme
Scheme Type
Open Ended
Scheme Category
Growth
Launch Date
25-Se p-1995
5000
Minimum
Subscription Amount
The need of the study aimed to know the awareness in the public about the various
products and services provided by unicon investment solution.
A study was also conducted to measure the performance of various funds on the
basis of various performance measuring ratios such as, Alpha, standard deviation,
Beta and P/E Ratio.
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The study was basically undertaken to understand the financial needs of the
customer and to provide or suggest them products and services according to their
financial needs.
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The project can be used as a reference by the company for giving investment
suggestion to their customer.
It can be used as for the students who are doing research in related area.
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1.8 CHAPTERISATION
My project is divided into 5 chapters & they are given as under.
Chapter 5 deals with the use of findings, conclusion, suggestions and limitations.
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CHAPTER
II
LITERATURE SURVEY
2.1 REVIEW OF LITRATURE
ABSTRACT (1)
Antonella Basso and Stefania Funari of Dipartimento di Matematica Applicata B. de
Finetti, Universit di Trieste, Piazzale Europa, 1, 34127 Trieste, Italy and Dipartimento di
Matematica Applicata, Universit Ca' Foscari di Venezia, Dorsoduro 3825/E, 30123 Venezia,
Italy respectively discussed in this paper about A data envelopment analysis approach to
measure the mutual fund performance. In this paper they present a model which can be
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used to evaluate the performance of mutual funds. This model applies an operational research
methodology, called data envelopment analysis (DEA), which allows measuring the relative
efficiency of decision making units. This approach allows defining mutual fund performance
indexes that can take into account several inputs and thus consider different risk measures
and, above all, the investment costs (subscription costs and redemption fees). Moreover, the
DEA approach can naturally envisage other output indicators, in addition to the mean return
considered by the traditional indexes. Therefore, a generalized version of the DEA mutual
fund performance indexes is defined, too, which includes among the outputs a stochastic
dominance indicator that reflects both the investors' preference structure and the time
occurrence of the returns. In addition, the procedure allows to identify, for each mutual fund,
a composite portfolio which can be considered as a particular benchmark. The performance
indexes proposed are tested on empirical data.
ABSTRACT (2)
Peter Tufano and Mathew Sevick of Harvard Business School, Boston and Monitor
Company, Inc., Cambridge respectively discussed in this paper about Board structure
and fee-setting in the U.S. mutual fund industry. This study uses a new database to
describe the composition and compensation of boards of directors of U.S. open-end mutual
funds. They use these data to examine the relation between board structure and the fees
charged by a fund to its shareholders. They find that shareholder fees are lower when fund
boards are smaller, have a greater fraction of independent directors, and are composed of
directors who sit on a large fraction of the fund sponsor's other boards. They find some
evidence that funds whose independent directors are paid relatively higher directors' fees
approve higher shareholder fees.
ABSTRACT (3)
Financial Management of Private and Public Equity Mutual Funds in India: An
Analysis of Profitability (By H.J Sondhi and PK Jain from The ICFAI Journal of
applied finance, July 2005)
This article examines the rates of returns generated by equity mutual funds,vis--vis,364
days T-bills and the Bombay Stock Exchange-100(BSE-100) National Index during the
period 1993-2002.Rate of return on 364 days T-bill is the surrogate measure for risk free
return and the BSE-100 National index has been chosen as proxy for market portfolio in our
33
analysis. Equity mutual funds predominantly invest in company equities and hence are
risky investments while choosing to invest in equity mutual funds, the investors expect not
only risk premium but also better returns than the market portfolio.
The paper has been divided in to four sections.Section1 outlines the scope and methodology
of the study that includes, inter alia, the basis of computation of rate of return earned by the
equity mutual funds,364 days T-bills and BSE-100 National Index,Section2 computes and
analyzes rates of return.Section3 is concerned with comparison of rates of return of private
sector company sponsored equity mutual funds and PSU sponsored equity mutual funds
Concluding observations have been recapitulated in Section 4.
ABSTRACT (4)
Mutual Fund Investments are subject to Market Risks (Portfolio Organizer, October
2005)
This article deals with the risk of Mutual Fund Investments, Types of risks, and the common
mistakes done by investor while choosing the funds for the purpose of investing, Investors
responsibility in Investing. To identify suitable fund can be done in two step manner as
follows:
Selecting a fund with investment objectives and preferences, return objectives, time horizon
and risk tolerances that meet the requirements of investor.
Selecting a fund that has a detailed asset allocation strategy by fund type category to reflect
the investment objectives of the fund.
ABSTRACT (5)
Empirical Investigation on the Investment Managers Stock Selection Abilities: The
Indian Experience (By Ramesh Chander from The ICFAI Journal of applied finance,
August 2005)
The study examined the stock selection abilities of investment managers in India across the
fund characteristics as well as the persistence of such performance. It also investigated
performance variability for a sample of 80 investment schemes for the period starting from
January 1998-December 2002.On the whole, the results reported documents significant
34
statistical evidences for passive stock selection abilities of Indian investment managers. It
points to the consistency of performance across the measurement criteria. Investment
Performance depends on the stock selection and pertains to the successful micro forecasting
for company specific events. It refers to the managers ability to identify under or overvalued
securities.
ABSTRACT (6)
Mutual Fund Industry in India: On a growth Trail (Cover Story, Chartered Financial
Analyst, July 2005)
The mutual fund industry in India has been on a roll as the assets under management continue
to see strong spurt in growth. The assets under management swelled to Rs. 1, 67,978 cr. By
May 31, 2005 from Rs.1, 01,565 cr. In January 2000.This apart, the industry has also seen a
spurt in the number of schemes on offer which amount to 460 at present, catering to varied
needs of investors. A booming economy, soaring stock market and a conducive regulatory
environment, amongst a slew of other factors have added to the growth of the industry. Given
the huge opportunity in sub-urban and rural markets, which lie hitherto untapped and growing
income levels in the country, the industrys future look bright.
ABSTRACT (7)
Managing Mutual Fund Investments in the Era of chang (By Kulbhushan Chandel and
OP Verma from the ICFAI Journal of applied finance, October 2005)
The study is confined to evaluate the performance of mutual funds on the basis of weekly
returns compared with risk free security returns and BSE Index. The present study includes
the five different sector specific schemes. Among these 25 schemes, only sector specific
schemes floated by different institutions have been studied .To evaluate the performance of
funds only three performance measures have been applied i.e. Sharpe Index, Treynor Index
35
and Jensens measure. It is observed that the performance of sample schemes during the study
period is best. However; there are some instances where poor performance has been reflected.
It may lead to regain investors confidence.
36
CHAPTER
III
RESEARCH METHODOLOGY
Methodology basically means the selection of the various methods and techniques
in the research-conducted. The various steps includes: 1. Selection of a representative sample from the general population, which depicts the
characteristics of the complete population.
2. Application of various tools and techniques to obtain relevant information related to a
case.
37
The Total Risk of a given fund is sum of these two and is measured in terms of
standard deviation of returns of the fund. Systematic risk, on the other hand, is measured
in terms of Beta, which represents fluctuations in the NAV of the fund vis--vis market.
The more responsive the NAV of a mutual fund is to the changes in the market; higher will
be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the
market. While unsystematic risk can be diversified through investments in a number of
instruments, systematic risk cannot. By using the risk return relationship, we try to assess the
competitive strength of the mutual funds vis--vis one another in a better way.
3.3 TERMINOLOGY
ALPHA - The alpha ratio illustrates the effect of the portfolio managers choice on
the fund's return. The greater the alpha, the better a return has the investment
yielded compared with other investment objects with the same market risk. Alpha is an
annualized return measure of how much better or worse a funds performance is relative
to an index of funds in the same category, after allowing for differences in risk.
BETA A ratio that measures the market risk of securities or a fund. If the beta ratio
39
exceeds one, the fund is more sensitive than funds in general to the fluctuations of the
stock market. The beta may also be negative, which means that the value of the fund
will, on average, move to the opposite direction than the general market development.
Beta measures the sensitivity of rates of return on a fund to general market
movements.
Beta measures the volatility of the fund, as compared to that of the overall market.
The Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile
than the market, while a beta lower than 1.00 is considered to be less volatile.
Beta measures the volatility of the funds value relative to the volatility of the funds
benchmark value. The Beta coefficient indicates the percentage change of the funds value
when the benchmark value changes by one percentage point.
investor.
Extreme variability in market.
Unawareness among investors is next in the line. The investor does not want to
invest in Mutual Funds because of the myth that investment in these funds lead to
insensitive returns. They think that market is highly volatile and will not be able to
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The investor also does not want to invest because of the greater risk
attached with equity. Rather, he wants to invest in a fixed instrument from
where he may be able to get secured returns instead of having unasserted
returns.
Comparison of funds is done on the basis of various factors but due to time constrain
and non-availability of data, I have done comparison on the basis of three factors
namely return, risk and portfolio of the fund.
Also it is not possible to compare all the funds in market under each category,
thats why I have selected top 4 funds of the investment company and compared
them.
Since I have not undertaken the AMFI exam, which is a mandatory condition to
work in the operations department, I was not able to understand some of the
common terms of the mutual funds industry but later I learnt them.
41
CHAPTER
IV
fluctuations, which affect all the securities, present in the market, called market risk or
systematic risk and second, fluctuations due to specific securities present in the portfolio
of the fund, called unsystematic risk. The Total Risk of a given fund is sum of these two
and is measured in terms of standard deviation of returns of the fund.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. But before that
we need to understand all the components that are used to explain the ratios like Beta,
Treynor, Sharpe, and Jensen etc. the components are as follows:
NAV
Net Asset Value, or NAV, is the sum total of the market value of all the shares
held in the portfolio including cash, less the liabilities divided by the total number of units
outstanding. Thus, NAV of a mutual fund unit is nothing but the 'book value'.
Factors affecting NAV
which in turn may affect the overall value of the fund. Since, same investment portfolios
with different NAV gives same returns in percentage terms, therefore, the securities that we
have in the portfolio play pivotal importance. Changing the portfolio or replacing any
security with the existing security may change the overall NAV of the fund, which in turn
may change the value of the entire fund.
NAV of the fund. For example, we have a portfolio in which the security A is priced at
Rs 100. We sell this security and after one week when the price of the security becomes
Rs 80 we buy it, keeping all other investments intact, then the NAV of the portfolio will
come down, which in turn will result in better valuation for the fund. Therefore, sale and
repurchase also affects the NAV of the fund.
Valuations of assets
43
The value that the underlying asset has, whose portfolio the fund has managed or is
managing, if the value of that asset changes, it can change the overall NAV of the fund.
accumulated during the selling of a security are known as Sales charges. Funds with low
expense ratios are always preferred as they decrease the overall cost of the security.
BETA
It is a ratio that measures the market risk of securities or a fund. If the beta ratio
exceeds one, the fund is more sensitive than funds in general to the fluctuations of the
stock market. The beta may also be negative, which means that the value of the fund will,
on average, move to the opposite direction than the general market development.
Beta measures the sensitivity of rates of return on a fund to general market
movements. It also measures the volatility of the fund, as compared to that of the overall
market. The Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more
volatile than the market, while a beta lower than 1.00 is considered to be less volatile.
Beta measures the volatility of the funds value relative to the volatility of the funds
benchmark value. The Beta coefficient indicates the percentage change of the funds value
when the benchmark value changes by one percentage point.
44
(x-xx )
Standard deviation =----------------------N
P/E RATIO
4.2 TABLES
4.2.1 FRANKLIN TEMPLETON
S.No
1
2
3
4
5
Total
Year
2007
2008
2009
2010
2011
X
54.00
-52.07
75.32
17.98
-6.53
88.7
Y
54.90
-47.71
73.10
19.48
-2.59
97.18
(x-xx ) (y-yx)
Co-variance
=---------------------------
(x-xx )
36.26
-69.81
57.58
.24
-24.27
(y-yx )
35.464
-67.146
53.664
.044
-22.026
(x-xx )( y-yx )
(x-xx )
1285.92464 1314.7876
4687.46226 4873.4361
3089.97312 3315.4564
0000.01056 0000.0576
534.57102
589.0329
9597.9416 10092.7706
9597.9416
= ------------------ = 1919.58832
5
45
(x-xx )
10092.7706
Co-variance
Beta
9597.9416
10092.7706
Year
2007
2008
2009
2010
2011
X
49.46
-53.27
74.74
17.99
-6.65
82.27
(x-xx ) (y-yx)
Co-variance
Y
52.37
-66.65
119.56
18.10
-2.19
121.19
(x-xx )
33.006
-69.724
58.286
1.536
-23.104
(y-yx )
28.132
-90.888
95.322
-6.138
-26.428
(x-xx )( y-yx )
(x-xx )
928.52479
1089.3960
6337.07491 4861.43617
5555.93809 3397.25779
-9.42796
2.35929
610.59251
533.79489
13422.70234 9884.24409
13422.70234
5
46
(x-xx )
9884.24409
Co-variance
Beta
2684.540468
2684.540468
Year
2007
2008
2009
2010
2011
X
52.21
-52.37
73.83
17.52
-6.66
84.53
(x-xx ) (y-yx)
Co-variance
Y
65.02
-60.23
91.65
16.67
-6.73
106.38
(x-xx )
35.304
-69.276
65.924
0.614
-83.566
0.006
(y-yx )
43.744
-81.506
70.374
-4.006
-28.006
0.000
(x-xx )( y-yx )
1544.338176
5646.409656
4005.969576
-2.459684
659.989376
11854.2471
11854.2471
5
47
(x-xx )
1246.372416
4799.164176
3240.341776
.376996
555.356356
9841.611714
(x-xx )
9841.611714
Co-variance
Beta
2370.84942
1968.3223
Year
2007
2008
2009
2010
2011
X
67.23
-52.83
83.46
19.21
-6.34
110.73
(x-xx ) (y-yx)
Co-variance
(x-xx )
45.084
-74.314
61.314
-2.936
-28.486
Y
76.85
-54.11
97.40
17.18
-6.86
130.46
(y-yx )
50.758
-80.202
71.308
-8.912
-32.952
14638.7089
5
48
(x-xx )( y-yx )
(x-xx )
2288.3736 2032.5670
6013.2215 5621.4005
4372.1787 3759.4065
26.1656
8.6200
938.7689
811.4521
14638.7089 12233.4461
(x-xx )
12233.4461
Co-variance
Beta
2927.7417
2446.6892
Beta Value
0.95097
1.35798
1.20450
1.21482
49
Alpha Value
2.5657
1.8936
0.9127
0.8109
50
P/E ratio
14.34
11.64
15.18
18.62
51
NAV Value
224.43
57.06
42.91
466.42
52
53
CHAPTER
V
CONCLUSION
5.1 SUMMARY OF FINDINGS
Following are the findings taken into the consideration after the completing this
research study:
Franklin templeton India prima plus is gives higher return and low risk in the market.
SBI magnum global fund is high volatile and it gives adjustable return to the
investors.
54
Tata growth fund is volatile because beta value is higher than 1 and it gives low return
to the investors.
Reliance beta value is higher than 1 so it is risky investment and reliance growth gives
There should be given more time & concentration on the Tier-3 distributors.
Regular activities like canopy should be done so as to get more interaction with
55
the clients.
All the persons who have cleared the AMFI exam should be empanelled with Mutual
Fund so as to be largest distributor base.
Should have to provide more advertisements, canopies in the shopping mall, main
markets because no. of people visiting these places are mostly of service classes
and they have to save tax, hence there is more opportunity of getting more no. of
applications.
5.3 CONCLUSION
The future of primary market is growing at a very high pace. Taking this thing into
consideration, there are lots of opportunities for the Unicon investment solution to tap the
golden opportunities from the Indian market.
Unicon investment solution has emerged a very strong player in the field of
distribution of financial product within a short period of one year time in India and is
giving stiff competition to all the players in the market including the banks. It is
expanding its area of business, if the progress of Unicon goes in the same way, than I can
say that there is bright future for Unicon in coming years. They have much
56
The investors think mostly mutual fund investment is in very risky but in this case the
ANNEXURE I
57
ANNEXURE II
BIBLIOGRAPHY
58
Websites referred:
www.mutualfundsindia.com
www.amfiindia.com
www.valueresearchonline.com
www.bseindia.com
www.nseindia.com
www.moneycontrol.com
www.crisilratings.com
Books referred:
Outlook Money
Money Life
59