INTRODUCTION

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INTRODUCTION
MUTUAL FUNDS
Mutual fund industry is rapidly becoming popular in our country .The
reason being for this is that it diversify the investment made by the investors and
giving good return .So this industry is having a lot of potential and that is why this
industry is also becoming very competitive. Presently more than five hundred
schemes are running in our country so it becomes difficult for the investor to select
the right option of investment. Therefore financial advisor companies are doing the
job for the investor and recommending them the funds which are best suited to their
risk profile. And for the purpose they analyze the schemes in terms of their risk
factors. The project Comparative analysis of mutual fund schemes in India is
basically a two way analysis at one side it will analyze the various schemes and on the
other hand it will analyze the investor behavior.
Mutual Fund Investment Is Darling to the investor
Indian economy has achieved what it has been hoping for quite some time. The
Feel Good Factor. Perhaps at no time during the post-liberalization period, Indian
economy has shown such kind of optimism. It is poised to enhance its real economic
growth rate by more than two full percentage points in the current year, holding a
huge reserve of foreign exchange.
The growth of Mutual Fund in any economy is an indicator of the
development of financial sector and the extent to which investor have faith in the
regulatory environment. In the last decade the mutual fund industry has been one of
the fastest growing industries in the financial services sector, with the assets under
management growing at a CAGR of 13% from 1993 to 2005.
A Mutual fund is a trust that pools the saving of the number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from share to debentures these investments and the capital appreciation realized
by the scheme are shared by its unit holders in proportion to the number of units
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owned by them (prorate). Thus a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally
managed portfolio at a relatively low cost. Anybody with an investment in mutual
funds. Each mutual funds scheme has a defined investment objective and strategy.

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

Investors
Passed
back to

pool their
money with

Returns

Fund
Manager

Generates

Invest in
Securities

A mutual fund is the ideal investment vehicle for todays complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in fare way places. A typical individual is unlikely to have the knowledge,
skills inclination and time to keep track of events, understand their implications and
act speedily. An individual also finds it difficult to keep track of ownership of his
assets, investments, brokerage dues and bank transactions etc.
A mutual fund is the answer to all these situations. It appoints professionally qualified
and experience staff that manages each of these functions on a full times basis. The
large pool of money collected in the fund allows it to hire such at a very low cost to
each investor. In effect, the mutual fund vehicle exploits economics of scale in all
three areas-research, investments and transaction processing. While the concept of
individual coming together the invest money collectively is now new, the mutual fund
its present from is 20th century phenomenon. In fact, mutual funds gained popularity
only after the second world war. Globally there are thousand of funds offering ten of
thousands of mutual funds with different investment objectives. Today, mutual funds
collectively mange almost as much as or more money as compared to banks.

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A draft offer document is to be prepared at the time of lunching the fund. Typically, it
pre species the investment objectives of the fund, the risk associated, the costs
involved in the process and the broad rules fro entry in to and exit from the fund and
other areas of operation. In India, as in countries, these sponsors need approval from a
regulator, SEBI (Security and Exchange Board of India) in our case SEBI looks at
track records of the sponsor and its financial strength in grating approval to the fund
for commencing operations.
A sponsor then hires an asset management company to invest the funds according to
the investment objective. It also hires another entity to bt the custodian of the assets of
the fund and perhaps a third one to handle registry work for the unit holders
(subscribers) of the fund.
In the Indian context, the sponsors promote the asset Management Company also, in
which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the
asset management Company (AMC). E.g. Birla Global Finance is the sponsor of the
Birla Sun Life Asset Management Ltd. Which has floated mutual funds schemes and
also acts as a manger for the funds collected under the schemes?

EVOLUTION
The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
India and the Reserve Bank of India. The history of mutual fund industry in India can
be better understood divided into following phases:

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87

Unit Trust of India enjoyed complete monopoly when it was established in the year
1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it
continued to operate under the regulatory control of the RBI until the two were delinked in 1978 and the entire control was tranferred in the hands of Industrial
Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the largest number of investors in any
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single

investment

scheme

over

the

years.

UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's
Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share
(Inida's first equity diversified scheme) in 1987 and Monthly Income Schemes
(offering assured returns) during 1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs 6700 crores.

Phase

II.

Entry

of

Public

Sector

Funds

1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering
the market in the year 1987. In November 1987, SBI Mutual Fund from the State
Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was
later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual
Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By
1993, the assets under management of the industry increased seven times to Rs.
47,004 crores. However, UTI remained to be the leader with about 80% market share.

Phase III.

Emergence

of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to
enter the mutual fund industry in 1993, provided a wide range of choice to investors
and more competition in the industry. Private funds introduced innovative products,
investment techniques and investor-servicing technology. By 1994-95, about 11
private sector funds had launched their schemes.

Phase

IV.

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.

Investors' interests were safeguarded by SEBI and the Government offered tax
benefits to the investors in order to encourage them. SEBI (Mutual Funds)
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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 mutual 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.

Phase

V.

Growth

and

Consolidation

2004

Onwards

The industry has 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 mutual 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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s.

Working of Mutual Fund:-

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BRIEF HISTORY OF MUTUAL FUNDS (MFS)

The end of millennium marks 36 years pf existence of mutual funds in this country.
The ride through these 36 years is not been smooth. Investor opinion is still divided.
While some are for mutual funds other against it.
UTI commenced its operations from July 1964. the impetus for establishing a formal
UTI. On came from the desire to increase the propensity of the middle and lower
groups to save and to invest. UTI came into existence during a period marked by great
political and economic uncertainty in India. With war on the boards and economic
turmoil that depressed the financial market, entrepreneurs were hesitant to enter
capital market. The already existing companies found it difficult to raise fresh capital,
as investors did not responds adequately to new issues. Earnest efforts were required
to canalize saving of the community into productive uses in order to speed up the
process of industrial growth. The finance minister, T.T Krishanmachari set up the idea
of a unit trust that would be open the any person or UTI on o purchase the units
offered by the truest. However this UTI on as we see it, is intended to cater to the
needs of individual investors, and even among them as far as possible, to those whose
means are small. His ideas took the form of the Unit Trust of India, an intermediary
that would help fulfil the twin objectives of mobilizing retail saving and investing
those savings in the capital market and passing on the benefits so accrued to the small
investors.
UTI commenced its operations from July 1964 with a view to encouraging saving
and investment and participation in the income, profits and gain occurring to the
corporation from the acquisition, holding, management and disposal of securities.
Different, provisions of the UTI act laid down the structure of management, scope of
business, powers and functions of the trust as well as accounting, disclosures and
regulatory requirements for the trust.
One thing is certain the fund industry is here to stay. The industry was one entity
show till 1986 when the UTI monopoly was broken when SBI and Can bank mutual
fund entered the area. This was followed by the entry of others like LIC, IC, etc.
sponsored by public sectors banks. Starting with an asset base of Rs. 0.25 ban in 1964
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the industry has grown at a compounded average growth rate of 26.34% to its current
size Rs. 1130 ban.
The period 1986-1993 can be termed as the period of public sector mutual funds
(PMFs). From one player in 1985 the number increased to 8 in 199. The party did not
last long. When the private sector made its debut in 1993-94, the stock market was
booming. The opening up of the assets management business to private sector in 1993
saw international along with the host of domestic players join the party. But for the
equity funds, the period of 1994-96 was one of the worst in the history of Indian
mutual funds.
1999-2000 years of the funds: Mutual funds have been around for a long period of
time precise for 36 yrs. But the year 1999 saw immense future potential and
developments in this sector. This year signalled the year of resurgence of mutual
funds and the regaining of investor confidence in these MFs this time around all the
participants are developments in this sector. This year signaled the year of resurgence
of mutual funds and the regaining of investor confidence in these MFs. this time
around all the participants are involved in the revival of the funds the AMCs the unit
holders, the other related parties. However the sole factor that give lift to the revival
of the funds was the union budget. The budget brought about a large number of
changes in one stroke. An insight of the union budget on mutual funds taxation
benefits is provided later.
It provided centre stage to the mutual funds, made them more attractive and provides
acceptability among the investors. The union budget exempted mutual fund dividend
given out by equity-oriented schemes from, both at the hands of the investor as well
as the mutual fund. No longer were the mutual funds interested in selling the concept
of mutual funds they wanted to talk business which would mean to increase asset
base, and to get asset base and investor base they had to be fully armed with a whole
lot of schemes for every investor. So new schemes for new IPOs were inevitable. The
quest to attract investors extended beyond just new schemes. The funds started to
regulate themselves and were all out on wining the trust and confidence of the
investors under the ages of the Association of Mutual funds of India (AMFI)

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One can say that the industry is moving from infancy to adolescence, the industry is
maturing and the investor and funds are frankly and openly discussing difficulties
opportunities and compulsions.

FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to 35 % over the
next few years as investors shift their assets from banks and other traditional
avenues. Some of the older public and private sector players will either close shop or
be taken over.
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. Here too some of them will down their shutters in the
near future to come.
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, Principal, Old Mutual etc. are looking at Indian market seriously. 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.
In the U.S. most mutual funds concentrate only on financial funds like equity and
debt. Some like real estate funds and commodity funds also take an exposure to
physical assets. The latter type of funds are preferred by corporate who want to hedge
their exposure to the commodities they deal with.
For instance, a cable manufacturer who needs 100 tons of Copper in the month of
January could buy an equivalent amount of copper by investing in a copper fund. For
Example, Permanent Portfolio Fund, a conservative U.S. based fund invests a fixed
percentage of its corpus in Gold, Silver, Swiss francs, specific stocks on various
bourses around the world, short term and long-term U.S. treasuries etc.
In U.S.A. apart from bullion funds there are copper funds, precious metal funds and
real estate funds (investing in real estate and other related assets as well.).In India, the
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Canada based Dundee mutual fund is planning to launch a gold and a real estate fund
before the year-end.
In developed countries like the U.S.A there are funds to satisfy everybodys
requirement, but in India only the tip of the iceberg has been explored. In the near
future India too will concentrate on financial as well as physical funds.
The mutual fund industry is awaiting the introduction of DERIVATIVES in the
country as this would enable it to hedge its risk and this in turn would be reflected in
its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to trade
in Derivatives. Importantly, many market players have called on the Regulator to
initiate the process immediately, so that the mutual funds can implement the changes
that are required to trade in Derivatives.
\

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BROAD MUTUAL FUND TYPES

Equity FundsEquity funds are considered to be the more risky funds as compared
to other fund types, but they also provide higher returns than other funds. It is
advisable that an investor looking to invest in an equity fund should invest for long
term i.e. for 3 years or more. There are different types of equity funds each falling into
different risk bracket. In the order of decreasing risk level, there are following types
of equity funds:

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a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers

aspire for maximum capital appreciation and invest in less researched shares of
speculative nature. Because of these speculative investments Aggressive
Growth Funds become more volatile and thus, are prone to higher risk than
other equity funds.
b. Growth Funds - Growth Funds also invest for capital appreciation (with time
horizon of 3 to 5 years) but they are different from Aggressive Growth Funds
in the sense that they invest in companies that are expected to outperform the
market in the future. Without entirely adopting speculative strategies, Growth
Funds invest in those companies that are expected to post above average
earnings in the future.
c. Speciality Funds - Speciality Funds have stated criteria for investments and
their portfolio comprises of only those companies that meet their criteria.
Criteria for some speciality funds could be to invest/not to invest in particular
regions/companies.

Speciality

funds

are

concentrated

and thus, are

comparatively riskier than diversified funds.. There are following types of

speciality funds:
i.

Sector Funds: Equity funds that invest in a particular sector/industry of

the market are known as Sector Funds. The exposure of these funds is
limited to a particular sector (say Information Technology, Auto,
Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is
why they are more risky than equity funds that invest in multiple
sectors.

ii.

Foreign Securities Funds: Foreign Securities Equity Funds have the

option to invest in one or more foreign companies. Foreign securities
funds achieve international diversification and hence they are less risky
than sector funds. However, foreign securities funds are exposed to
foreign exchange rate risk and country risk.

iii.

Mid-Cap or Small-Cap Funds: Funds that invest in companies having

lower market capitalization than large capitalization companies are
called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap
companies is less than that of big, blue chip companies (less than Rs.
2500 crores but more than Rs. 500 crores) and Small-Cap companies
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have market capitalization of less than Rs. 500 crores. Market

Capitalization of a company can be calculated by multiplying the
market price of the company's share by the total number of its
outstanding shares in the market. The shares of Mid-Cap or Small-Cap
Companies are not as liquid as of Large-Cap Companies which gives
rise to volatility in share prices of these companies and consequently,
investment gets risky.
iv.

Option Income Funds*: While not yet available in India, Option

Income Funds write options on a large fraction of their portfolio. Proper
use of options can help to reduce volatility, which is otherwise
considered as a risky instrument. These funds invest in big, high
dividend yielding companies, and then sell options against their stock
positions, which generate stable income for investors.

d. Diversified Equity Funds - Except for a small portion of investment in liquid

money market, diversified equity funds invest mainly in equities without any
concentration on a particular sector(s). These funds are well diversified and
reduce sector-specific or company-specific risk. However, like all other funds
diversified equity funds too are exposed to equity market risk. One prominent
type of diversified equity fund in India is Equity Linked Savings Schemes
(ELSS). As per the mandate, a minimum of 90% of investments by ELSS
should be in equities at all times. ELSS investors are eligible to claim
deduction from taxable income (up to Rs 1 lakh) at the time of filing the
income tax return. ELSS usually has a lock-in period and in case of any
redemption by the investor before the expiry of the lock-in period makes him
liable to pay income tax on such income(s) for which he may have received
any tax exemption(s) in the past.
e. Equity Index Funds - Equity Index Funds have the objective to match the
performance of a specific stock market index. The portfolio of these funds
comprises of the same companies that form the index and is constituted in the
same proportion as the index. Equity index funds that follow broad indices
(like S&P CNX Nifty, Sensex) are less risky than equity index funds that
follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc).
Narrow indices are less diversified and therefore, are more risky.
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f. Value Funds - Value Funds invest in those companies that have sound
fundamentals and whose share prices are currently under-valued. The portfolio
of these funds comprises of shares that are trading at a low Price to Earning
Ratio (Market Price per Share / Earning per Share) and a low Market to Book
Value (Fundamental Value) Ratio. Value Funds may select companies from
diversified sectors and are exposed to lower risk level as compared to growth
funds or speciality funds. Value stocks are generally from cyclical industries
(such as cement, steel, sugar etc.) which make them volatile in the short-term.
Therefore, it is advisable to invest in Value funds with a long-term time horizon
as risk in the long term, to a large extent, is reduced.
g. Equity Income or Dividend Yield Funds - The objective of Equity Income or
Dividend Yield Equity Funds is to generate high recurring income and steady
capital appreciation for investors by investing in those companies which issue
high dividends (such as Power or Utility companies whose share prices
fluctuate comparatively lesser than other companies' share prices). Equity
Income or Dividend Yield Equity Funds are generally exposed to the lowest
risk level as compared to other equity funds.

2.

Debt

Income

Funds

Funds that invest in medium to long-term debt instruments issued by private

companies, banks, financial institutions, governments and other entities belonging to
various sectors (like infrastructure companies etc.) are known as Debt / Income
Funds. Debt funds are low risk profile funds that seek to generate fixed current
income (and not capital appreciation) to investors. In order to ensure regular income
to investors, debt (or income) funds distribute large fraction of their surplus to
investors. Although debt securities are generally less risky than equities, they are
subject to credit risk (risk of default) by the issuer at the time of interest or principal
payment. To minimize the risk of default, debt funds usually invest in securities from
issuers who are rated by credit rating agencies and are considered to be of
"Investment Grade". Debt funds that target high returns are more risky. Based on
different investment objectives, there can be following types of debt funds:

a. Diversified Debt Funds - Debt funds that invest in all securities issued by
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entities belonging to all sectors of the market are known as diversified debt
funds. The best feature of diversified debt funds is that investments are
properly diversified into all sectors which results in risk reduction. Any loss
incurred, on account of default by a debt issuer, is shared by all investors which
further reduces risk for an individual investor.
b. Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are
narrow focus funds that are confined to investments in selective debt securities,
issued by companies of a specific sector or industry or origin. Some examples
of focused debt funds are sector, specialized and offshore debt funds, funds that
invest only in Tax Free Infrastructure or Municipal Bonds. Because of their
narrow orientation, focused debt funds are more risky as compared to
diversified debt funds. Although not yet available in India, these funds are
conceivable and may be offered to investors very soon.
c. High Yield Debt funds - As we now understand that risk of default is present
in all debt funds, and therefore, debt funds generally try to minimize the risk of
default by investing in securities issued by only those borrowers who are
considered to be of "investment grade". But, High Yield Debt Funds adopt a
different strategy and prefer securities issued by those issuers who are
considered to be of "below investment grade". The motive behind adopting this
sort of risky strategy is to earn higher interest returns from these issuers. These
funds are more volatile and bear higher default risk, although they may earn at
times higher returns for investors.
d. Assured Return Funds - Although it is not necessary that a fund will meet its
objectives or provide assured returns to investors, but there can be funds that
come with a lock-in period and offer assurance of annual returns to investors
during the lock-in period. Any shortfall in returns is suffered by the sponsors or
the Asset Management Companies (AMCs). These funds are generally debt
funds and provide investors with a low-risk investment opportunity. However,
the security of investments depends upon the net worth of the guarantor (whose
name is specified in advance on the offer document). To safeguard the interests
of investors, SEBI permits only those funds to offer assured return schemes
whose sponsors have adequate net-worth to guarantee returns in the future. In
the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of
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UTI) that assured specified returns to investors in the future. UTI was not able
to fulfill its promises and faced large shortfalls in returns. Eventually,
government had to intervene and took over UTI's payment obligations on itself.
Currently, no AMC in India offers assured return schemes to investors, though
possible.
e. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end
schemes having short term maturity period (of less than one year) that offer a
series of plans and issue units to investors at regular intervals. Unlike closedend funds, fixed term plans are not listed on the exchanges. Fixed term plan
series usually invest in debt / income schemes and target short-term investors.
The objective of fixed term plan schemes is to gratify investors by generating
some expected returns in a short period.

3. Gilt Funds
Also known as Government Securities in India, Gilt Funds invest in government
papers (named dated securities) having medium to long term maturity period. Issued
by the Government of India, these investments have little credit risk (risk of default)
and provide safety of principal to the investors. However, like all debt funds, gilt
funds too are exposed to interest rate risk. Interest rates and prices of debt securities
are inversely related and any change in the interest rates results in a change in the
NAV of debt/gilt funds in an opposite direction.

4. Money Market / Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest
bearing debt instruments. These securities are highly liquid and provide safety of
investment, thus making money market / liquid funds the safest investment option
when compared with other mutual fund types. However, even money market / liquid
funds are exposed to the interest rate risk. The typical investment options for liquid
funds include Treasury Bills (issued by governments), Commercial papers (issued by
companies) and Certificates of Deposit (issued by banks).

5. Hybrid Funds
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As the name suggests, hybrid funds are those funds whose portfolio includes a blend
of equities, debts and money market securities. Hybrid funds have an equal proportion
of debt and equity in their portfolio. There are following types of hybrid funds in
India:
a. Balanced Funds - The portfolio of balanced funds include assets like debt
securities, convertible securities, and equity and preference shares held in a
relatively equal proportion. The objectives of balanced funds are to reward
investors with a regular income, moderate capital appreciation and at the same
time minimizing the risk of capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment horizon.
b. Growth-and-Income Funds - Funds that combine features of growth funds
and income funds are known as Growth-and-Income Funds. These funds invest
in companies having potential for capital appreciation and those known for
issuing high dividends. The level of risks involved in these funds is lower than
growth funds and higher than income funds.
c. Asset Allocation Funds - Mutual funds may invest in financial assets like
equity, debt, money market or non-financial (physical) assets like real estate,
commodities etc.. Asset allocation funds adopt a variable asset allocation
strategy that allows fund managers to switch over from one asset class to
another at any time depending upon their outlook for specific markets. In other
words, fund managers may switch over to equity if they expect equity market
to provide good returns and switch over to debt if they expect debt market to
provide better returns. It should be noted that switching over from one asset
class to another is a decision taken by the fund manager on the basis of his own
judgment and understanding of specific markets, and therefore, the success of
these funds depends upon the skill of a fund manager in anticipating market
trends.

6. Commodity Funds
Those funds that focus on investing in different commodities (like metals, food grains,
crude oil etc.) or commodity companies or commodity futures contracts are termed as
Commodity Funds. A commodity fund that invests in a single commodity or a group
of commodities is a specialized commodity fund and a commodity fund that invests in
all available commodities is a diversified commodity fund and bears less risk than a
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specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in
gold, gold futures or shares of gold mines) are common examples of commodity
funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in
shares/securitized assets of housing finance companies, are known as Specialized
Real Estate Funds. The objective of these funds may be to generate regular income for
investors or capital appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and
an open-end mutual fund. Exchange Traded Funds follow stock market indices and
are traded on stock exchanges like a single stock at index linked prices. The biggest
advantage offered by these funds is that they offer diversification, flexibility of
holding a single share (tradable at index linked prices) at the same time. Recently
introduced in India, these funds are quite popular abroad.

9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other
mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund
of Funds maintain a portfolio comprising of units of other mutual fund schemes, just
like conventional mutual funds maintain a portfolio comprising of equity/debt/money
market instruments or non financial assets. Fund of Funds provide investors with an
added advantage of diversifying into different mutual fund schemes with even a small
amount of investment, which further helps in diversification of risks. However, the
expenses of Fund of Funds are quite high on account compounding expenses of
investments into different mutual fund scheme.

TYPES OF MUTUAL FUNDS

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Mutual fund schemes may be classified on the basis of its Structure and its Investment
objectives.

By Structure:
Open-ended funds
An open-end fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at net asset
value (NAV) related prices. The key feature of the open-end schemes is liquidity.

Closed-ended Funds
A closed-end-fund has a stipulated maturity period generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investor can
invest in the scheme at the time of the initial public issue and thereafter they can by or
sell the units of the stock exchanges where they are listed. In order to an option of
selling back the units to the Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations Stipulate that at least one of the two exit routes is provided
to the investor.

Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during predetermined intervals at NAV related prices.

By Investment Objective:
Growth Funds
The aim of growth is to provide capital appreciation over the medium to long-term.
Such schemes normally invest a majority of their corpus in equities. It has been
proven that returns from stocks, have outperformed most other kind of investments
held over the long term. Growth schemes are ideal for investors having a long term
out look seeking growth over a period of time.

Income Funds
Page 21

The aim of income fund is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities. Income Funds are ideal for
capital stability and regular income.

Balanced Income
The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in equities and
fixed securities in the proportion indicated in their offer documents. In a rising
market, the NAV of these schemes may not normally keep pace, or fall equally when
the market falls. These are ideal for investors looking for a combination of income
and moderate growth.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital
and moderate income. These schemes generally invest in safer short-term instruments
such as treasury bills, certificates of deposits, commercial paper and inter-bank call
money. Returns of this schemes may fluctuate depending upon the interest rates
prevailing in the market. These are ideal for corporate and individual investors as a
mean to park their surplus funds for short periods.

Load funds
A load Fund is one that charges a commission for entry or exit. That is each time you
buy or sell units in the fund, a commission will be payable. Typically entry or exit
loads range from 1% to 2% It could be worth paying the load if the fund has a good
performance history.

No-load Fund

Page 22

A No-Load Fund is one that does not charge a commission for entry or exit. That is,
no commission is payable on purchase or sale of units in the fund. The advantage of a
no load fund is that the entire corpus is put to work.

Other Schemes:
Tax Saving Schemes
These schemes offer tax rebate to the investors under specific provision of the Indian
income tax law as the Government offers tax incentives for investment in specified
avenues. Investment made in Equity Liquid Saving Schemes (ELSS) and Pension
schemes are allowed as deduction u/s 88 of the income Tax act, 1961. The Act also,
provides opportunities to investors to save capital gains u/s 54 EA and 54 EB by
investing in Mutual Funds, provided the capital asset has been sold prior to April 1,
2000 and the amount is invested before September 30, 2000.

Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in offer document.
The investment of these funds is limited to specific industries like Info Tech, FMCG,
Pharmaceuticals, HDFC BANK LTD. calls etc.

Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the
BSE sensex or the NSF 50

Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group
of industries or various segments such as A Group shares or initial public offerings

REGULATORY ASPECT
Page 23

Schemes of a Mutual Fund

The asset management company shall launch no schemes unless the trustees approve
such scheme and a copy of the offer document has been filled by board.
Every mutual fund shall along with the offer document of each scheme pay filing
fees.
The offer document shall contain disclosures which are adequate in order to enable
the investors to make informed investment decision including the disclosure on
maximum investments proposed to be made by the scheme in the listed securities of
the group companies of the sponsor. A close-ended scheme shall be fully redeemed at
the end of the maturity period. Unless a majority of the unit holders otherwise decide
for its rollover by passing a resolution.
The mutual fund and Asset Management Company shall be liable to refund the
application money to the applicants:
(i)

If the mutual fund fails to receive the minimum subscription amount

referred in to clause (a) of sub-regulation (1).

(ii)

If the money received from the applicants for units are in excess of
subscription amount referred to in clause (a) of sub-regulation (1).

The asset management company shall issue to the applicant whose application has
been accepted as soon as possible but not later than six week from the date of closure
of the initial subscription list and or from the date of receipt of the request from the
unit holders in any open ended scheme.

Rules regarding advertisement

Page 24

The offer document and advertisement materials shall not be misleading or contain
any statement or opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:

The price at which the units may be subscribed or sold and the price at which such
units may at any time be repurchased by the mutual fund shall be made available to
the investors.

General obligations:
Every asset management company for each scheme shall keep and maintain proper
books of accounts, records and documents, for each scheme so as to explain its
transaction and the disclose at any point of time the financial position of each scheme
and in particular give a true and fair view of the state of affairs of the fund intimate to
the board the place where such books of accounts, records and documents are
maintained.
The financial year of all the schemes end as of March 31 of each year. Every mutual
fund or the asset management company shall prepare in respect of each financial year
an annual report and annual statement of accounts of the schemes and the fund as
specified in Eleventh Schedule.
Every mutual fund shall have the annual statement of accounts audited by an auditor
who is not in any way associated with the auditor of the asset management company.

Procedure for Action in Case of Default :

On and from the date of the suspension of the certificate or the approval, as the case
may be, the mutual fund, trustees or asset management company, shall cease to carry
on any activity as a mutual fund, trustee or asset management company, during the
period of suspension, and shall be subject to the directions of the board with regard to
any records, documents, or securities that may be in its custody or control, relating to
its activities as mutual fund, trustees or asset management company.
No mutual fund under all its schemes should own more than ten percent of any
companys paid up capital carrying voting rights.

Page 25

Such transfers are done at the prevailing market rate for quoted instruments on spot
basis.
The securities so transferred shall be in conformity with the investment objective of
the scheme to which such transfer has been made.
A scheme may invest in another scheme under the same asset management company
or any other mutual fund without charging any fees, provided that aggregate inter
scheme investment made by all schemes under the same management company shall
not exceed 5% of the net asset value of the mutual fund.
The initial issue expense in respect of any scheme may not exceed six percent of the
funds raised under that scheme.
Every mutual fund shall, get the securities purchased or transferred in the name of
mutual fund on the account of the concerned scheme, wherever investments are
intended to be of long-term nature.
Pending deployment of funds of a scheme in securities in terms of investment
objectives of the scheme a mutual fund can invest the funds of the scheme in short
term deposits of scheduled commercial banks. No mutual fund scheme shall make any
investment in :
(i)

Any unlisted security of an associate or group company of the sponsor

or

(ii)

Any security issued by way of private placement by an associate or

group company of the sponsor or

The listed securities of proup companies of the sponsor which is an excess of 30% of
the net assets of all the schemes of a mutual fund.
No mutual fund scheme shall invest more than 10% of its NAV in the equity shares or
equity relates instruments of any company. Provided that, the limit of 10% shall not
be applicable for investments in index fund or sector or industry specific scheme.
A mutual fund scheme shall not invest more than 5% of its NAV in the equality
related investment s in case of open-ended scheme and 10% of its NAV in case of
close ended schemes.
Page 26

BENEFITS OF MUTUAL FUND INVESTMENT

Professional Management
Mutual funds provide the service of experienced and skilled professionals, backed by
a dedicated investment research team that analyze the performance and prospect of
companies and selects suitable investments to achieve the objectives of the scheme.

Diversification
Investing in Mutual Fund reduces paperwork and helps you avoid many problems
such as bad deliveries, delayed payments and follow up with brokers and companies.
Mutual Funds save your time and make investing easy and convenient.

Return Potential
Over a medium to a long-term, Mutual Funds have the potential to provide a higher
returns as they invest in a diversified basket of selected securities.

Low Costs
Mutual funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial
and other fees translate into lower costs for investors.

Liquidity
In open end schemes, the investor gets the money back promptly at net asset value
related prices from the mutual funds. In closed end schemes, the units can be sold on a
stock exchange at the prevailing market price or the investor can avail of the facility
of direct repurchase at NAV related prices by Mutual fund.

Page 27

Transparency
You get regular information on the value of your investment in addition to disclosure
on the specific investment made by you r scheme, the proportion invested in each
class of assets and the fund managers investment strateer5gy and outlook.

Flexibility
Through features such as regular investment plans, regular withdraw plans and
dividend reinvestment plans, you can systematically invest or withdraw funds
according to your needs and convenience.

Choice of schemes
Mutual funds offer a family of schemes of suit your varying needs over a lifetime.

Well regulated
All mutual funds are registered with SEBI and there function with the provisions of
strict regulations designed to protect the interest of investors. The operations of
mutual funds are regularly monitored by SEBI.

Page 28

DIFFERENCE BETWEEN PRIVATE & PUBLIC SECTOR

MUTUAL FUNDS
Public Sector Mutual Funds
Purpose set by legislation
Focus on functions usually
impacting significant groups in
society.
Have the most money and
more likely to award large
grants/contracts.
More likely to pay all project
cost and/or cover indirect costs.
Easier to find information
about and to stay current on
project needs/interests.
Application processes and
deadlines are public information
and very firm.
Use prescribed formats for
proposals many use "common"
application forms.
Possibilities of renewal
known up front.
Plentiful staff resources
most projects have specific
contact person.
More likely to have resources
for technical assistance.
Funds available to wider
array of organizations (for-profit
and non-profit).
Accountable to elected
officials if administrative staff
dont follow the rules.

Private Sector Mutual Funds

More likely to focus on emerging issues,
new needs, populations not yet recognized as
"special interests."
Often willing to pool resources with
other funders.
Wide range in size of available grants -some can make very large awards, others are
strictly for small local projects.
More willing source of start-up or
experimental funds.
Full length, complex proposals not
always necessary.
Can be much more flexible in responding
to unique needs and circumstances.
Able to avoid bureaucratic requirements
for administering grants.
Can often provide alternative forms of
assistance, i.e., software/hardware donations,
materials, expertise, etc.
Fewer applicants in most cases.
Can generally be much more informal
and willing to help with the proposal
process.

Page 29

RECENT TRENDS IN MUTUAL FUND INDUSTRY

IN INDIAN
RECENT trends in mutual fund flows suggest that the Indian investor is regaining his
appetite for equities. But is he willing to make them a part of his regular diet? The
evidence on this is not conclusive. For this, the robust inflows into equity funds since
2003 will have to be sustained through the ups and downs of the stock market.
Equity funds are certainly making a come back, judging by their sales numbers over
the past year and a half. Equity funds notched up average sales of about Rs 2,700
crore a month in 2004. This is a hefty 70 per cent increase over the number for 2003
and about five times the monthly sales registered during the bull market of 1999.
With new investments steadily building up the corpus and rising equity values lending
a helping hand, equity funds have doubled their asset base over the past year.

Yet to be tested
But an analysis of trends in Indian mutual fund flows over a five-year period shows
that it may be early days yet to expect such a jump. It is only in the 22 months since
August 2003 that equity fund flows accelerated sharply, and this has been a
particularly buoyant period for the stock market.
Judging from the experience until 2003, investors appear typically comfortable
entering an equity fund midway through a stock market rally, when the NAVs (net
asset values) are trending steadily upwards.

Few investors venture into equity funds in a moribund market, confident that they will
gain upon recovery.
Robust monthly inflows into equity funds usually follow a month or two of good
stock market returns. In this respect, the period since August 2003 has been quite
Page 30

conducive to equity fund sales. The stock market has either notched up positive
monthly returns or has stayed flat in 18 of the 22 months between May 2003 and
February 2005. With the market marching predictably upwards and the returns on
equity funds outpacing the market by a big margin, recent investors have tasted the
rewards of equity investing, without experiencing its risks.

Disconcerting trend
However, the one disconcerting feature of the recent inflows is that new funds
garnered a significant portion of the money flowing into equity funds. Over the past
year, about 16 per cent of all inflows into equity funds (or Rs 5,168 crore) poured into
initial public offerings from fund houses. Though old funds with an established record
have garnered much more (Rs 27,000 crore), investments routed through an IPO
suffer from a couple of disadvantages.
One, many investors who take the IPO route make one-off investments in equity
funds and are not regular investors. This may not be the ideal way to invest in equity
funds, as the returns from such an investment would depend heavily on the timing of
the IPO. Should the market enter a corrective phase, these investors may be
vulnerable to sharp erosion in the value of their entire investment.
Two, many investors who prefer a new fund over an established one do so under the
mistaken notion that entering a fund at an NAV of Rs 10 reduces the downside risk
associated with an equity investment.
These investors may be less prepared (than those who invest in established funds) for
a blip in the value of their investments, in the event of a market correction.
Instead of rolling out new funds, fund houses need to put greater effort into
persuading investors to place faith in established funds that have a good track record.
Regular monthly investments in mutual funds also need to encouraged, rather than
one-off investments prompted by a booming stock market.
They have made a beginning on this, by announcing entry load waivers on
investments routed through the systematic investment route.

Page 31

If the fund industry, through its distributors, does manage to convince a larger
proportion of investors to make systematic investments in equity funds, one can look
forward to fund flows that are not too influenced by the ebb and flow of the stock
market.

Risk Hierarchy of Different Mutual Funds

Thus, different mutual fund schemes are exposed to different levels of risk and
investors should know the level of risks associated with these schemes before
investing. The graphical representation hereunder provides a clearer picture of the
relationship between mutual funds and levels of risk associated with these funds:

Page 32

Page 33

LITERATURE
REVIEW

Page 34

LITERATURE REVIEW
Literature on mutual fund performance evaluation is enormous. A few
research studies that have influenced the preparation of this paper
substantially are discussed in this section.
1. Sharpe, William F. (1966) suggested a measure for the evaluation of
portfolio performance. Drawing on results obtained in the field of portfolio
analysis, economist Jack L. Treynor has suggested a new predictor of mutual
fund performance, one that differs from virtually all those used previously by
incorporating the volatility of a fund's return in a simple yet meaningful
manner.
2. Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio
performance (Jensens alpha) that estimates how much a managers
forecasting ability contributes to funds returns.
3. Mc. Donald (1974) examined the relationship between the stated fund
objectives and their risk-return attributes and concludes that on an average, the
fund managers appeared to keep their portfolios within the stated risk and
ensured superior returns, but they were offset by expense and load charges.
4. Ippolito (1989) however, finds no significant relationship between
performance, after expense and turnover and investment fees.
5. Barua,et.al (1991) concluded that the fund performed better than the
market but not so well as compared to the Capital Market Line.
6. Ippolito (1993) suggest that mutual fund returns, after expense (but before
load fund), are equivalent or superior to those available from a risk-adjusted
market index implying that mutual fund managers may have access to useful
private information.
Page 35

7. Goetzmann and Ibbotson (1994) provide support for market

inefficiency by finding evidence of repeated winners among fund managers
and positive performance persistence.
8. Malkiel (1995) considers both benchmark error and survivorship bias in
concluding that the results of prior studies suggesting market inefficiency are
contaminated by these factors.
9. Elton et.al (1996) conclusion that the fund returns used in other studies
may be overstated thus creating only the appearance of performance
persistence.
10. Hooks (1996) concludes that low expense load fund do significantly
outperform average expense no load fund.
11. ssssCarhart (1997) report a negative impact for portfolio turnover and
total fund expense on fund returns.
12. Wermers (2000) decomposes mutual fund returns into stock picking talent,
characteristics of stock holdings, trading costs and expenses.
13. As indicated by Statman (2000), the e SDAR of a fund portfolio is the
excess return of the portfolio over the return of the benchmark index, where
the portfolio is leveraged to have the benchmark indexs standard deviation.
S.Narayan Rao , et. al., evaluated performance of Indian mutual funds in a
bear market through relative performance index, risk-return analysis,
Treynors ratio, Sharpes ratio, Sharpes measure , Jensens measure, and
Famas measure. The study used 269 open-ended schemes (out of total
schemes of 433) for computing relative performance index. Then after
excluding funds whose returns are less than risk-free returns, 58 schemes are
finally used for further analysis. The results of performance measures suggest
that most of mutual fund schemes in the sample of 58 were able to satisfy
Page 36

investors expectations by giving excess returns over expected returns based

on both premium for systematic risk and total risk. Bijan Roy, et. al.,
conducted an empirical study on conditional performance of Indian mutual
funds. This paper uses a technique called conditional performance evaluation
on a sample of eighty-nine Indian mutual fund schemes .This paper measures
the performance of various mutual funds with both unconditional and
conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton
model. The effect of incorporating lagged information variables into the
evaluation of mutual fund managers performance is examined in the Indian
context. The results suggest that the use of conditioning lagged information
variables improves the performance of mutual fund schemes, causing alphas to
shift towards right and reducing the number of negative timing coefficients.
14. Dellva et.al (2001) concludes that improper benchmark specification is
also cited for causing errors in fund performance evaluation.
15. Mishra, et al., (2002) measured mutual fund performance using lower
partial moment. In this paper, measures of evaluating portfolio performance
based on lower partial moment are developed. Risk from the lower partial
moment is measured by taking into account only those states in which return is
below a pre-specified target rate like risk-free rate.
16. Kshama Fernandes (2003) evaluated index fund implementation in
India. In this paper, tracking error of index funds in India is measured .The
consistency and level of tracking errors obtained by some well-run index fund
suggests that it is possible to attain low levels of tracking error under Indian
conditions. At the same time, there do seem to be periods where certain index
funds appear to depart from the discipline of indexation. K. Pendaraki et al.
studied construction of mutual fund portfolios, developed a multi-criteria
methodology and applied it to the Greek market of equity mutual funds. The
methodology is based on the combination of discrete and continuous multicriteria decision aid methods for mutual fund selection and composition.
UTADIS multi-criteria decision aid method is employed in order to develop
Page 37

mutual funds performance models. Goal programming model is employed to

determine proportion of selected mutual funds in the final portfolios.
17. Zakri Y.Bello (2005) matched a sample of socially responsible stock
mutual funds matched to randomly selected conventional funds of similar net
assets to investigate differences in characteristics of assets held, degree of
portfolio diversification and variable effects of diversification on investment
performance. The study found that socially responsible funds do not differ
significantly from conventional funds in terms of any of these attributes.
Moreover, the effect of diversification on investment performance is not
different between the two groups. Both groups underperformed the Domini
400 Social Index and S & P 500 during the study period.
18. Bello (2005) matched a sample of socially responsible stock mutual fund
matched to randomly select conventional funds of similar net assets to
investigate differences in characteristics of assets held, degree of portfolio
diversification and variable effects of diversification on investment
performance. The studies have found that socially responsible funds do not
differ significantly from conventional funds in terms of any of these attributes.

Page 38

Page 39

HDFC ASSET MANAGEMENT COMPANY

LIMITED
HDFC Asset Management Company Limited (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset
Management Company for the Mutual Fund by SEBI on July 3, 2000. The sponsor
HDFC was incorporated in 1977 as first specialised housing finance institution in
India. HDFC provides financial assistance to individuals, corporates and
developers for the purchase and construction of residential housing. It also
provides property-related services, training and consultancy. In the mutual fund
venture, HDFC has tied up with Standard Life, one of the leading Insurance
companies in the United Kingdom, having vast experience in management of
funds. HDFC has developed a strong and dedicated team of agents that market its
fixed deposit products. These key partners would constitute the backbone of the
marketing and distribution network of Mutual Fund and will remain a central
theme of the organisational framework in times to come.
No. of schemes

77

No. of schemes including options

293

Equity Schemes

29

Debt Schemes

240

Short term debt Schemes

14

Equity & Debt

Money Market

Gilt Fund

Corpus under management

Page 40

Rs.46291.973 Crs. as on Feb 29, 2008

Key Personnel
Deepak S. Parekh (Chairman), P. M. Thampi (Director), Milind Barve (MD &
CEO), N. Keith Skeoch ( Director),Keki M. Mistry (Director), Mark Connolly
(Director), Vijay Merchant (Director), Rajeshwar Raj Bajaaj (Director), Rahul
Bhandari (CFO)

Fund Managers
Anand Laddha , Anil Bamboli , Chirag Setalvad, Mustafa Mehmood , Prashant
Jain, Rajeev Shastri, Shabbir Kapasi, Shobhit Mehrotra , Srinivas Rao Ravuri .

SBI FUNDS MANAGEMENT PRIVATE LTD.

SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund. SBI
Mutual Fund has been constituted as a trust, sponsored by State Bank India. Today
Page 41

the Fund has an investor base of over 2.8 million spread over 23 schemes. With a
large network of collecting branches and investor service centres, SBI Mutual
Fund constantly endeavours to get closer to its growing family of investors. SBI is
the largest public sector Bank in India with 8,836 branches all over India. SBI is
the leader in providing loans to trade & industry. It also provides related services,
which generate significant fee-based income. It has also identified project finance
and consumer banking as key areas.
No. of schemes

48

No. of schemes including options

141

Equity Schemes

34

Debt Schemes

79

Short term debt Schemes

10

Equity & Debt

Money Market

Gilt Fund

12

Corpus under management

Rs.29492.9685 Crs. as on Feb 29, 2008

Key Personnel
Achal K Gupta (MD&CEO), Didier Turpin (Deputy Chief Exe. Off) ,C.A. Santosh
(CM Cust Serv), Ms Aparna Nirgude (CRO), R.S. Srinivas Jain (CMO), Mr.
Parijat Agrawal (FM - Fixed Income) , Ms. Vinaya Datar (CS & Compliance
Officer), Navneet Munot(CIO)

Fund Managers
Arun Agrawal , Ganti Murthy, Mr. David Pezarkar , Mr. Jayesh Shroff , Pankaj
Gupta , Parijat Agrawal , Rajiv Radhakrishnan , Ritesh Sheth , Sanjay Sinha,.

RELIANCE CAPITAL ASSET

MANAGEMENT LTD.

Reliance Capital Asset Management Ltd., the investment Manager of Reliance

Capital Mutual Fund (RCMF), is a company incorporated under the Companies
Page 42

Act, 1956 with limited liability. Reliance Capital Limited holds 93.37% of the
paid-up capital of RCAM. Reliance Capital Limited is a member of Reliance
Group and has been promoted by Reliance Industries Limited (RIL), one of
India s largest private sector enterprise. Setting a fast pace of growth, RCL in a
short span of time has established its presence in the finance sector by rapidly
expanding its operations into Leasing, Bill discounting, Merchant Banking,
investment Banking and a member of OTCEI.
No. of schemes

72

No. of schemes including options

325

Equity Schemes

73

Debt Schemes

220

Short term debt Schemes

18

Equity & Debt

Money Market

Gilt Fund

10

Corpus under management

Rs.93531.6756 Crs. as on Feb 29, 2008

Key Personnel
Sundeep Sikka (CEO), K Rajagopal (CIO), Madhusudan Kela (Hd-Equity),
Manish Kumar (Hd HRD), Pratap Pandit (Mrkg Comm), Geeta Chandran
(VPO), Sanjay Wadhwa (CFO), Milind Nesarikar (IRO), Sures T. Viswanathan
(Compliance), Pankaj Gupta (Risk Manager).

Fund Managers
Amit Tripathy, Amitabh Mohanty , Arpit Malaviya, Arun Khairesan , Ashwani
Kumar , Hiren Chandaria , Krishan Daga , Omprakash Kuckien , Prashant
R.Pimple, Ramesh Rachuri , Sailesh Raj Bhan , Shiv Chanani , Sunil Singhania
.

Page 43

UTI ASSET MANAGEMENT COMPANY LTD.

Page 44

UTI Asset Management Company Private Limited, established in Jan 14, 2003,
manages the UTI Mutual Fund with the support of UTI Trustee Company Private
Limited. UTI Asset Management Company presently manages a corpus of over
Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB),
Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance
Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,
Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance
Funds.

No. of schemes

97

No. of schemes including options

305

Equity Schemes

61

Debt Schemes

213

Short term debt Schemes

10

Equity & Debt

Money Market

Gilt Fund

10

Corpus under management

Rs.48347.6 Crs. as on Mar 31, 2008

Key Personnel
U K Sinha(Chairman & MD), A K Sridhar (CIO), A Rama Mohan Rao
(Compliance Officer), K P Ghosh (IRO), S L Pandian(COO), Anoop
Bhaskar(Head Equity), Amandeep S Chopra ( Head Fixed Income), Jaideep
Bhattacharya (CMO)

Fund Managers
Puneet Pal, Anagha Hannurkar, V Suresh, Alok Sahoo , Amandeep Chopra, Anoop
Bhaskar , Arun Khurana , Deb Bhattacharya , Harsha Upadhyaya, Manis Joshi ,
Puneet Pal, Sanjay Dongre, Swati Kulkarni, Vinay Kulkarni .

Page 45

Name the Mutual Fund Houses that

Comes Under your Mind When u
Decide to Invest in Mutual funds

Page 46

Most of respondents prefer big name they want to invest only in schemes
of major players of the market. On the basis of customer response I select
the various fund houses and compare their schemes. The top five fund
houses that preferred by the customer is selected for the comparative
analysis of their schemes. The fund houses selected for the analysis are
Reliance, Tata, SBI, HDFC and Birla.

Page 47

RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem. It may
be understood as a science of studying how research is done scientifically. Research is
an academic activity and the term is used in a technical sense. Research is defined as
the systematic and objective process of gathering, recording and analysing data for aid
in making decisions.

According to CLIFFORD, research comprises defining & refining problems,

formulating hypothesis, collecting, organizing & evaluating data, making deductions
Page 48

and reaching conclusion; and at last carefully testing the conclusion to determine
whether fit the formulating hypothesis.

RESEARCH DESIGN
Research Design is the conceptual structure within which the research is conducted.
Research design as a blue print for the collection, measurement and analysis of data.
Research design is the plan, structure and strategy of investigation conceived so as to
obtain answer to research questions and to control variances.

TYPES OF RESEARCH
DESIGN

EXPLORATORY
RESEARCH
DESIGN

DESCRIPTIVE
&
DIAGNOSTIC
RESEARCH DESIGN

EXPERIMENTAL
RESEARCH
DESIGN

Exploratory Research Design: Exploratory research design is termed as formulating research studies. The main
purpose of study is that of formulating a problem. The major emphasis in such study
is on discovery of new ideas and insights. As such the research design appropriate for
such studies must be flexible enough to provide opportunity for considering different
aspects of problem.

Descriptive and Diagnostic Research Design: Descriptive research designs are those design which are concerned with describing
the characteristics of particular individual or of the group.
Whereas diagnostic research studies determine the frequency with which something
occurs or its association with some else. In descriptive and diagnostic study the
Page 49

researcher must be able to define clearly what he wants to measure and must find
adequate method for measuring it.

Experimental Research Design: These are those studies where the researcher tests the hypothesis of casual
relationship between variables. Such study requires procedure that will not only
reduce biasness and increase reliability but will permit drawing influence about
casuality. Usually experiments meets this requirement, hence these research designs
are prepared for experiment.

Research design in study: In the study research design is descriptive research. As descriptive research design
is the description of state of affairs, as it exists at present.

OBJECTIVE of the STUDY

I. To identify the differences in characteristics of public-sector sponsored
& private-sector sponsored mutual funds.
II. To find the extent of diversification in the portfolio of securities of
public-sector sponsored & private-sector sponsored mutual funds.
III. To compare the performance of public-sector sponsored & private-sector
sponsored mutual funds using traditional investment measures.

SAMPLING SIZE
Sample size for the research comprises of 4 Mutual Fund Companies

SAMPLING UNIT
Sample Unit for the research is consists of:2 Private Sectors Sponsored Mutual Funds
Reliance Mutual Funds
HDFC Bank Mutual Funds
2 Public Sectors Sponsored Mutual Funds
Page 50

 SBI Mutual Funds

UTI Mutual Funds

STUDY PERIOD
Study Period for Research consists of: 2006-2007
2007-2008

HYPOTHESIS
Hypothesis for the research report is:H0: Both public and private mutual funds are equally efficient
H1: Private mutual funds are performing more efficiently than public mutual funds

DATA COLLECTION
After the research problem has been identified and selected the next step is to gather
the requisite data. While deciding about the method of data collection to be used for
the researcher should keep in mind two types of data i.e. primary and secondary.

Contd..

TYPES OF DATA

PRIMARY
DATA

SECONDRY
DATA

Page 51

Primary Data: The primary data are those, which are collected afresh and for the first time, and thus
happened to be original in character. We can obtain primary data either through
observation or through direct communication with respondent in one form or another
or through personal interview.

METHODS OF PRIMARY DATA

OBSERVATION
METHOD

INTERVIEW
METHIOD

QUETIONAIRE
METHOD

SCHEDULE
METHOD

Secondary Data : The secondary data on the other hand, are those which have already been collected by
someone else and which have already been passed through the statistical processes.
When the researcher utilizes secondary data then he has to look into various sources
from where he can obtain them. For eg. Books, magazine, newspaper, Internet,
publications and reports.

METHODS USED IN STUDY: Page 52

Methods used for the collection of data through the secondary sources such as:

Books

Magazines

Newspapers

Internet

ANALYTICALTOOL USED

Sharpe
Sharpes performance index gives a single value to be used for the performance
ranking of various funds or portfolio. Sharpe index measures the risk premium of the
portfolio relative to the total amount of risk in the portfolio. This risk premium is the
difference between the portfolios average rate of return and the riskless rate of return.
The Sharpe's index is measured as
S = RP Rf /p
Where,
S = Sharpe's Index
rp = average monthly return of fund.
rf = risk free return *.
* risk free return (rf) is taken as 6% per annum

Treynor
Treynor measures the funds performance in relation to the market performance. The
ideal funds return rises at a faster rate than the general market performance when the
market is moving upwards and its rate of return declines slowly than the market
return, in the decline.
Treynor is measured as:Tn = rP rf /p
where
Tn = Treynor's index
Page 53

rp = average return on portfolio

rf = risk free return
p = beta coefficient of portfolio.

Jenson
The absolute risk adjusted return measure was developed by Michael Jenson and
commonly known as Jensons Measure.
Jenson index compares the actual or realised return of the portfolio with the calculated
or predicted return. Better performance of the fund depends on the predictive ability
of the managerial personnel of the fund.
Rp = rf + (rm - rf ) p
Where,
Rp= average return of the portfolio.
rf = risk free return
rm= average market return
= A measure of systematic risk

LIMITATIONS OF THE STUDY

The present study has the following limitations:
LACK OF PRIMARY DATA:
Conduction of study in lack of primary data makes unable to analyse the data properly
as per the huge financial market and forces to rely upon secondary data collected
through different sources which prevented the researcher to do research in a more

Page 54

explorative manner. Hence various areas and various people belong to different
profession remained uncovered.

TIME CONSTRAINTS
Time has also affected the research due to less availability of number of days
information was conducted in few days.
.
RESOURCE CONSTRAINT
Availability of data was a constraint due to only those mutual funds data is
considered, which is available, and also there are some MFs whose data was not
available so their duration was shortened.
PERIOD OF ANALYSIS
Generally longer period gives us more accurate estimates of beta. In this case period
of analysis is only 2 years.
COMPLEX CALCULATIONS
Though every - "precaution has taken due to large data and complex calculations there
may be chances of error.

Page 55

Data Analysis & Interpretation of

Mutual Funds Schemes
1. Performance Evaluation of Mutual Funds
LIQUID FUND
A. UTI Liquid Fund (G)
Page 56

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
8.7
7.7
Y=16.4

Y
0.5
-0.5
y=0

=Y/n

RM =X/n
Here,
n=2
Y

=16.4/2
=8.2
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1

)2

P= (7.7-8.2)2+ (8.7-8.2)2
= (-0.5)2 + (0.5)2
P =0.71

2. P = change in return in security/change in market index

= 8.7-7.7 / 31.59-11.99
P= 0.051
3. Sharpes Ratio = RP Rf /p
RP= 8.2% or 0.082
RF=6% 0r 0.06
P=0.71
Sharpes Ratio = 0.082-0.06 / 0.71
= 0.031
4. Treynor Ratio = RP Rf /p
Page 57

RP= 8.2% or 0.082

RF=6% 0r 0.06
P= 0.051
Treynor Ratio= 0.082-0.06 / 0.051
= 0.431
5. Jensens Ratio = rf + (rm - rf ) p
RF=6% 0r 0.06
P= 0.051
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.051(0.2179-0.06)
= 0.06805 or 6.805%

B. Reliance Money Manager Fund- Retail Fund (G)

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
9.1
6.8
Y=15.9

y
1.15
-1.15
y=0

=Y/n

RM =X/n
Here,
n=2

Page 58

=15.9/2
=7.95
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1

)2

P= (9.1-7.95)2+ (6.8-7.95)2
=(1.15)2 + (-1.1.5)2
P =1.63
2. P = change in return in security/change in market index
= 9.1-6.8 / 31.59-11.99
P= 0.117
3. Sharpes Ratio = RP Rf /p
RP= 7.95% or 0.0795
RF=6% 0r 0.06
P=1.63
Sharpes Ratio = 0.0795-0.06 /1.63
= 0.012
4. Treynor Ratio = RP Rf /p
RP= 7.95% or 0.0795
RF=6% 0r 0.06
P= 0.117
Treynor Ratio= 0.0795-0.06 / 0.117
= 0.166
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.117
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.117(0.2179-0.06)
= 0.06+0.0185
= 0.0785 or 7.85%
Page 59

C. HDFC Cash Management Fund- Saving Plan (G)

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
9.0
8.1
Y=17.1

y
0.45
-0.45
y=0

=Y/n

RM =X/n
Here,
n=2
Y

=17.1/2
=8.55
Page 60

RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1

)2

P= (9.0-8.55)2+ (8.1-8.55)2
=(0.45)2 + (-0.4.5)2
P =0.636
2. P = change in return in security/change in market index
= 9.0-8.1 / 31.59-11.99
P= 0.0459
3. Sharpes Ratio = RP Rf /p
RP= 8.55% or 0.0855
RF=6% 0r 0.06
P=0.636
Sharpes Ratio = 0.0855-0.06 /0.636
= 0.0401
4. Treynor Ratio = RP Rf /p
RP= 8.55% or 0.0855
RF=6% 0r 0.06
P= 0.0459
Treynor Ratio= 0.0855-0.06 / 0.0459
= 0.566
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.0459
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.0459(0.2179-0.06)
= 0.06+0.0072
= 0.06725 or 6.72%

Page 61

D. SBI Magnum Insta Cash Fund- Liquid Floater Plan (G)

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
8.7
5.9
Y=14.6

y
1.4
-1.4
y=0

=Y/n

RM =X/n
Here,
n=2
Y

=14.6/2
=7.3
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1

)2

P= (8.7-7.3)2+ (5.9-7.3)2
=(1.4)2 + (-1.4)2
P =1.97
2. P = change in return in security/change in market index
= 8.7-5.9 / 31.59-11.99
P= 0.143
3. Sharpes Ratio = RP Rf /p
RP=7.3% or 0.073
RF=6% 0r 0.06
P=1.97
Sharpes Ratio = 0.073-0.06 /1.97
= 0.0065
4. Treynor Ratio = RP Rf /p
RP= 7.3% or 0.073
RF=6% 0r 0.06
P= 0.143
Page 62

Treynor Ratio= 0.073-0.06 / 0.143

= 0.091
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.14
RM=21.79% or 0.2179
Jensens Ratio = 0.06+0.143(0.2179-0.06)
= 0.06+0.02557
= 0.0825 or 8.25%

Interpretation:From the above evaluation of liquid mutual fund it reveals that:i.

Sharpes Ratio of HDFC liquid fund is higher than other mutual fund schemes
i.e. UTI liquid fund, SBI liquid fund and Reliance liquid fund. So HDFC
liquid fund is performing best than other mutual fund schemes.

ii.

Treynors Ratio of HDFC liquid fund is greater than the other mutual fund
schemes i.e. SBI liquid fund, UTI liquid fund and Reliance liquid fund. So
HDFC liquid fund is performing best among the other three because it
provides the maximum risk premium in comparison to the other three funds.

iii.

Jensens Ratio of SBI liquid fund has the maximum value 8.25% in
comparison to other three fund schemes i.e. HDFC liquid fund, Reliance liquid
fund and UTI liquid fund. So we can say that the SBI liquid fund is the best
fund as it provides the maximum risk prem
Page 63

 EQUITY FUND
A. UTI Leadership Equity Fund (G)
Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
15.9
6.8
Y=22.7

y
4.55
-4.55
y=0

=Y/n

RM =X/n
Here,
n=2
Y

=22.7/2
=11.35
Page 64

RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1

)2

P= (15.9-11.35)2+ (6.8-11.35)2
=(4.55)2 + (-4.55)2
P =6.438
2. P = change in return in security/change in market index
= 15.9-6.8 / 31.59-11.99
P= 0.464
3. Sharpes Ratio = RP Rf /p
RP=11.35% or 0.1135
RF=6% 0r 0.06
P=6.438
Sharpes Ratio = 0.1135-0.06 /6.438
= 0.0083
4. Treynor Ratio = RP Rf /p
RP=11.35% or 0.1135
RF=6% 0r 0.06
P= 0.464
Treynor Ratio= 0.1135-0.06 / 0.464
= 0.1153
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.464
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.464(0.2179-0.06)
= 0.06+0.0732
= 0.1332 or 13.3%

Page 65

B. Reliance Equity Fund- Retail Plan (G)

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
24.81
7.71
Y=35.52

y
8.55
-8.55
y=0

=Y/n

RM =X/n
Here,
n=2
Y
RM

=35.52/2
=16.26
= 43.58 / 2
=21.79
Page 66

n
1. P=(Y- Y
i=1

)2

P= (24.81-16.26)2+ (7.71-16.26)2
=(8.55)2 + (-8.55)2
P =12.09
2. P = change in return in security/change in market index
= 24.81-7.71 / 31.59-11.99
P= 0.872
3. Sharpes Ratio = RP Rf /p
RP=16.26% or 0.1626
RF=6% 0r 0.06
P=12.09

Sharpes Ratio = 0.1626-0.06 /12.09

= 0.0084
4. Treynor Ratio = RP Rf /p
RP= 16.26% or 0.1626
RF=6% 0r 0.06
P= 0.872
Treynor Ratio= 0.1626-0.06 / 0.872
= 0.1176
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.872
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.872(0.2179-0.06)
= 0.06+0.1376
= 0.1976 or 19.76%

Page 67

C. HDFC Equity Fund (G)

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
21.2
9
Y=30.2

y
6.1
-6.1
y=0

=Y/n

RM =X/n
Here,
n=2
Y
RM

=30.2/2
=15.1
= 43.58 / 2
=21.79

Page 68

n
1. P=(Y- Y
i=1

)2

P= (21.2-15.1)2+ (9-15.1)2
=(6.1)2 + (-6.1)2
P =8.63
2. P = change in return in security/change in market index
= 21.2-9 / 31.59-11.99
P= 0.622
3. Sharpes Ratio = RP Rf /p
RP=15.1% or 0.151
RF=6% 0r 0.06
P=8.63
Sharpes Ratio = 0.151-0.06 /8.63
= 0.0105
4. Treynor Ratio = RP Rf /p
RP= 15.1% or 0.151
RF=6% 0r 0.06
P= 0.622
Treynor Ratio= 0.151-0.06 / 0.622
= 0.146
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.622
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.622(0.2179-0.06)
= 0.06+0.09821
= 0.1582 or 15.82%

Page 69

D. SBI Magnum Equity Fund (G)

Year
2009
2008

X(Nifty)
31.59
11.99
X=43.58

Y(Return)
21.4
12.2
Y=33.6

y
4.6
-4.6
y=0

=Y/n

RM =X/n
Here,
n=2
Y

=33.6/2
=16.8
RM = 43.58 / 2
=21.79
n
1. P=(Y- Y
i=1

)2

P= (21.4-16.8)2+ (12.2-16.8)2
Page 70

= (4.6)2 + (-4.6)2
P =6.51
2. P = change in return in security/change in market index
=21.4-12.2 / 31.59-11.99
P= 0.469
3. Sharpes Ratio = RP Rf /p
RP=16.8% or 0.168
RF=6% 0r 0.06
P=6.51
Sharpes Ratio = 0.168-0.06 /6.51
= 0.0165

4. Treynor Ratio = RP Rf /p
RP= 16.8% or 0.168
RF=6% 0r 0.06
P= 0.469
Treynor Ratio= 0.168-0.06 / 0.469
= 0.230
5. Jensens Ratio = rf + (rm rf ) p
RF=6% 0r 0.06
P= 0.469
RM=21.79% or 0.2179
Jensens Ratio= 0.06+0.469(0.2179-0.06)
= 0.06+0.0741
= 0.1341 or13.41%

Interpretation:From the above evaluation of liquid mutual fund it reveals that:i.

Sharpes Ratio shows the risk adjusted return. Higher the Sharpe Index better
the fund. In this case SBI equity fund have the maximum value i.e. 0.0165 in

Page 71

comparison to other three funds. So we can say that the SBI equity fund is the
best fund among the three funds.
ii.

Treynor Index of SBI equity fund has the maximum value i.e. 0.230 in
comparison to other three funds. So we can say that the SBI equity fund is the
best fund as it provides the maximum risk premium in comparison to the other
three funds.

iii.

Jensens Index shows the risk adjusted return. Higher the Jensen Index better
the fund. In this case Reliance equity fund have the maximum value i.e.
19.76% in comparison to other three funds. So we can say that Reliance equity
fund is the best fund as it provides the maximum risk premium in comparison
to the other three fund

2. Comparison & Analysis of Mutual Fund

Schemes
LIQUID FUND
a) Comparison & Analysis on the basis of Return & Sharpes Index
Mutual Fund
Schemes
UTI Liquid
Fund
SBI Liquid
Fund
HDFC Liquid
Fund
Reliance
Liquid Fund

Return
8.2

Sharpes
Index
0.031

7.3

0.0065

8.55

0.0401

7.95

0.012

Page 72

Interpretation:From the above evaluation of liquid mutual fund it reveals that:Sharpes Index of HDFC liquid fund have maximum value i.e. 0.0401in comparison
to the other schemes i.e. SBI liquid fund, UTI liquid fund and Reliance liquid fund
and returns is also higher than other three mutual fund schemes i.e. 8.55% which
considered the best performing fund. So we can say that HDFC liquid fund is the best
fund as it provides the maximum risk premium in comparison to the other three funds.

Page 73

b)

Comparison & Analysis on the basis of

Return & Treynor Index
Mutual Fund
Schemes
UTI Liquid
Fund
SBI Liquid
Fund
HDFC Liquid
Fund
Reliance
Liquid Fund

Return

Treynor Index

8.2

0.431

7.3

0.091

8.55

0.56

7.95

0.166

Page 74

Interpretation:From the above evaluation of liquid mutual fund it reveals that:Treynors Index of HDFC liquid fund have maximum value i.e. 0.56 in comparison
to the other schemes i.e. SBI liquid fund, UTI liquid fund and Reliance liquid fund
and returns is also higher than other three mutual fund schemes i.e. 8.55% which
considered the best performing fund. So we can say that HDFC liquid fund is the best
fund as it provides the maximum risk premium in comparison to the other three funds.

Page 75

c)

Comparison & Analysis on the basis of

Return & Jensens Index
Mutual Fund
Schemes
UTI Liquid
Fund
SBI Liquid
Fund
HDFC Liquid
Fund
Reliance
Liquid Fund

Return

Treynor Index

8.2

6.805%

7.3

8.25%

8.55

6.72%

7.95

7.85%

Page 76

Interpretation:From the above evaluation of liquid mutual fund it reveals that:Jensens Index of SBI liquid fund have maximum value i.e. 8.25% in comparison to
the other schemes i.e. HDFC liquid fund, UTI liquid fund and Reliance liquid fund
and returns is less than other three mutual fund schemes i.e. 7.3% which is the lowest
among all the mutual funds but risk adjusted returns is higher than other fund
schemes. So we can say that SBI liquid fund is the best fund as it provides the
maximum risk premium in comparison to the other three funds.

Page 77

 EQUITY FUND
a)

Comparison & Analysis on the basis of

Return & Sharpes Index

Mutual Fund
Schemes
UTI Equity
Fund
SBI Equity
Fund
HDFC Equity
Fund
Reliance
Equity Fund

Return
11.35

Sharpes
Index
0.0083

16.8

0.0165

15.1

0.0105

16.26

0.0084

Page 78

Interpretation:From the above evaluation of liquid mutual fund it reveals that:Sharpes Index of SBI equity fund have maximum value i.e. 0.0165 in comparison to
the other schemes i.e. HDFC equity fund, UTI equity fund and Reliance equity fund
and returns is also higher than other three mutual fund schemes i.e. 16.8% which
considered the best performing fund. So we can say that SBI equity fund is the best
fund as it provides the maximum risk premium in comparison to the other three
funds........

Page 79

b)Comparison & Analysis on the basis of

Return & Treynors Index
Mutual Fund
Schemes
UTI Equity
Fund
SBI Equity
Fund
HDFC Equity
Fund
Reliance
Equity Fund

Return
11.35

Treynors
Index
0.1153

16.8

0.230

15.1

0.146

16.26

0.1176

Page 80

Interpretation:From the above evaluation of liquid mutual fund it reveals that:Treynors Index of SBI equity fund have maximum value i.e. 0.230 in comparison to
the other schemes i.e. HDFC equity fund, UTI equity fund and Reliance equity fund
and returns is also higher than other three mutual fund schemes i.e. 16.8% which
considered the best performing fund. So we can say that SBI equity fund is the best
fund as it provides the maximum risk premium in comparison to the other three funds.

Page 81

c) Comparison & Analysis on the basis of

Return & Jensens Index
Mutual Fund
Schemes
UTI Equity
Fund
SBI Equity
Fund
HDFC Equity
Fund
Reliance
Equity Fund

Return
11.35

Jensens
Index
13.3%

16.8

13.41%

15.1

15.82%

16.26

19.76%

Page 82

Interpretation:From the above evaluation of liquid mutual fund it reveals that:Jensens Index of Reliance equity fund have maximum value i.e. 19.76% in
comparison to the other schemes i.e. HDFC equity fund, UTI equity fund and SBI
equity fund and returns is slightly less than other three mutual fund schemes i.e.
0.54% but considered the best performing fund regarding the risk adjusted returns. So
we can say that Reliance equity fund is the best fund as it provides the maximum risk
premium in comparison to the other three funds.

Page 83

FINDINGS OF THE STUDY

The major findings of the study are as follows:
Performance of Schemes on the basis of Sectors : - Private sector
mutual funds and public sector mutual fund are not equally efficient.
Return on Equity & Liquid Schemes : - Large variability in return on
Equity Schemes of Mutual Funds. And returns on equity Schemes are on a
increasing year by year.
Trend in Behaviour of Investor:- Investments behaviour of investors,
shows increasing interest in Liquid & Equity Schemes because of high rate of
returns.
Average Return In Comparison to Benchmark Index: - The
average returns of selected schemes are less than the average market return or
Benchmark return.
Liquid and Equity Schemes have less risk than the market risk.
All the Equity and Liquid Schemes have the positive relation with market
return.
Investment Portfolio: - The private sector funds over-perform the public
sector mutual funds because of good investment portfolio as well as the better
advisory services provided by them to investors it is evident from the
investment pattern tables.

Page 84

SUGGESTIONS
1) Mutual fund may develop their own modern market research. It may be
helpful for better and efficient portfolio management.
2) If investors have invested in a fund with a reasonably long track record and
have an entry reasonably well, they should hold the investment for atleast 3
years. They should not panic on every dip in the funds value.
3) To provide greater liquidity for the investors mutual funds, may development
of a wide network of self- sufficient branches is required.
4) There is an urgent need for exclusive and comprehensive legislation for the
mutual fund industry. The Government should pass a law without losing any
time.
5) Mutual fund institutions may be allowed to borrow from the market up to a
particular extent so that they may meet their requirements at the time of
redemption and provide extra funds for the managers to enable them to invest
in the stock market.
6) The fund manager may include portfolios of securities that show higher
returns when compared to the market.
7) For the people who want capital appreciation over a long tenure, they may go
for a growth fund which yields good return for a long period.
8) It is always better to analyse the NAV and the number of units so that the
unsystematic risk can be avoided.
If these suggestions are followed, the efficiency and popularity of the mutual fund
may increase and they may have speedy and healthy growth in this era of
miraculous changes

Page 85

CONCLUSIONS
The investor should evaluate not only the returns on the scheme but also the NAV
fluctuations. The 3 utmost important factors taken into consideration by investor
are safety, liquidity and profitability. The 3 utmost important factors taken into
consideration by investor are
safety
liquidity
profitability.
Fund manager should take into consideration the trends of the market . For e.g. Indian
Financial market do not have desired liquidity from the last couple of years so the
more funds can be invested in long term debt funds. Instead of going with the

investment in the stock market directly investor should go with the mutual fund
as in this case the level of risk is less.

Investor should analysis the scheme

before investing in fund, like SHARPHE,TREYNOR, JENSEN.

Investor should read offer document before investing in to mutual fund

Page 86

BIBLIOGRAPHY
WEBSITES

http://www.amfiindia.com/showhtml.aspx?page=mfindustry

http://literacy.kent.edu/Oasis/grants/publicVSprivate.html

http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/20/snapshot/imde
sc/UTI%20Money%20Market%20Fund%20(G)/ffdesc/UTI%20Asset
%20Mgmt%20Company%20Pvt.%20Ltd./imid/MUT028/imffid/UTi

http://www.moneycontrol.com/mutualfundindia/

http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/11/snapshot/imde
sc/Reliance%20Equity%20Fund%2020Retail%20Plan%20(G)/ffdesc/Reliance
%20Capital%20Asset%20Management%20Ltd.
%20/imid/MRC103/imffid/RC

http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/15/snapshot/imde
sc/HDFC%20Equity%20Fund%20(G)/ffdesc/HDFC%20Asset
%20Management%20Co.%20Ltd./imid/MZU001/imffid/HD

http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/18/snapshot/imde
sc/SBI%20Magnum%20Equity%20Fund%20(G)/ffdesc/SBI%20Funds
%20Management%20Private%20Limited/imid/MSB085/imffid/SB

http://www.moneycontrol.com/india/mutualfunds/mfinfo/19/21/snapshot/imde
sc/UTI%20Leadership%20Equity%20Fund%20(G)/ffdesc/UTI%20Asset
%20Mgmt%20Company%20Pvt.%20Ltd./imid/MUT096/imffid/UT I

http://indianmutualfund.blogspot.com/2008/05/gem-gaze-index-funds.html
Page 87

http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM025

http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM026

http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM041

http://www.mutualfundsindia.com/newsite/amc_snapshot.asp?
amc_name=AM021

www.hdfcmutualfund.com

www.reliancemutualfund.com

www.utimtualfund.com

www.sbimutualfund.com

www.mutualfundsindia/navreports.jsp

http://www.appuonline.com/mf/knowledge/industry.html

http://www.appuonline.com/mf/knowledge/concept.html

NEWS PAPER COVERED

The Economic Times
The Business Standard
Business Line

JOURNALS
ICFAI reader- Performance of Mutual Funds in India- Article by Navdeep
Aggarwal & Mohit Gupta

(Page 5-15)

ICFAI reader- A study on Performance Analysis of Mutual Funds- Article by

K. Soundarapandiyan & S.Sankar

(Page 26-41)
Page 88