Portfolio Management of Various Funds

PORTFOLIO MANAGEMENT
A Study On
Portfolio Management
At
IDBI FORTIS
Submitted in partial fulfillment for the award of
Masters of Business Administration Degree
-By-
A.V.SURESH
Roll No: A30601909040
Batch: 2009-2011
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AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD.
Internship at “IDBI fortis Life Insurance Limited”AGBS HDERABAD

DECLARATION
I hereby declare to the best of my knowledge and belief that the Summer Training Project Report
entitled as “PORTFOLIO MANAGEMENT” for IDBI Fortis Life Insurance being submitted as the
partial fulfillment of Master of Business Administration, has been written and submitted under the
guidance of Ms. Shanti, Industry guide and Mr. Pavan Kumar, my faculty guide.
I further declare that it is original work done as a part of the academic course and has not been
submitted elsewhere.
The conclusions and recommendations written in this project are based on the data collected by me
while preparing this report.
Date:
Place: HYDERABAD
A.V.SURESH
A30601909040
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CERTIFICATE
(Whom so ever it may concern)
This is to certify that the project report entitled “PORTFOLIO MANAGEMENT” carried at
IDBI FORTIS LIFE INSURANCE LIMITED Hyderabad is a bona fide work done by Mr. A.V.SURESH,
bearing ID No. A30601909040 a student of AMITY GLOBAL BUSINESS SCHOOL, Hyderabad and
submitted the same in the partial fulfillment for the award of the degree of “ MASTER OF BUSINESS
ADMINISTRATION” has done his Summer Internship Program under my guidance from 1st June
2010 to 31st July 2010.
I found him to be good in the task and activities assigned to him. I wish his success in all
future endeavors.
DATE:
PLACE: HYDERABAD
SIGNATURE OF FACULTY GUIDE
(Prof. B.Pavan Kumar)

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ACKNOWLEDGEMENT
I would like to express word of thanks to all those who have provided me with sincere advice and
information during the course of my training period. It was indeed a great pleasure for me to work
in a very co-operative, enthusiastic and learning atmosphere at IDBI.
I would like to take this opportunity to thank Dr. Prasad Rao (Director AGBS Hyderabad) and
D.Surekha Thakur (corporate relations), Amity Global Business School for giving me an
opportunity for doing a project in a corporate firm and all my faculty members, senior officials and
colleagues at IDBI FORTIS for their help and support during the project.
I would also like to express my sincere thanks to Mr. Pavan Kumar (Faculty Guide-AMITY GLOBAL
BUSINESS SCHOOL, Hyderabad) for his unstinting guidance and support throughout the project. He
has been a great source of motivation to me.
I would like to extend my regards to my industry guide Ms. Shanti, IDBI for helping me and
providing me with right direction during the course of my project. The interaction with her has
provided me with the knowledge which will definitely help me enrich my career and help me to
perform better in future.
With all the heartiest thanks; I hope my final project report will be a great success and a good
source of learning and information.
Date:
Place:HYDERABAD
4 Page
A.V.SURESH
A30601909040

INDEX
CHAPTER TABLE OF CONTENTS PAGE NO.
Objective & Methodology 5

Introduction of company 8
CHAPTER-1
Introduction to Portfolio Management 10
CHAPTER-2
Types of mutual funds
CHAPTER-3 49
Health insurance plans and details
CHAPTER-4 56
Analysis of performance of various funds
CHAPTER-5 59
Case studies
CHAPTER-6 129
Article
CHAPTER-7 133
Saving options for rising interest rates
CHAPTER-8 135
CHAPTER-9 Questionnaire 139
Top 10 fund houses 146
Recommendations/suggestions 147
Bibliography 148
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OBJECTIVES
1) To study the portfolio of various funds offered by IDBI Fortis Life insurance.
2) To study and analyze the performance of various funds in the market offered by different
companies and also to provide vital information to investors who are looking to build a good
and balanced portfolio.
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METHODOLOGY
RESEARCH DESIGN OF THE STUDY
This report is based on primary as well secondary data, however secondary data collection was
given more importance in the project since it is more of analysis. One of the most important uses of
research methodology is that it helps in identifying the problem, collecting, analyzing the required
data and providing an alternative solution to the problem .It also helps in collecting the vital
information that is required by the top management to assist them for the better decision making
both day to day decisions and critical ones.
The study consists of analysis of various funds offered by IDBI as well as various companies in the
market.
The methodology adopted includes
 Questionnaire
 Discussions with few investors
SOURCES OF DATA
 Primary data: Questionnaire
 Secondary data: Published materials of funds such as periodicals, journals, news papers,
and websites.
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Duration of Study
The Study was carried out for the period of two months from June1 2010 to July31 2010.

Field Study:
Directly approached respondents by the following strategies
 Personal Visits
 Clients References
 Database provided by the IDBI Fortis Life insurance.
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CHAPTER-1
INTRODUCTION OF COMPANY
About IDBI Fortis
IDBI Fortis Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier development and
commercial bank, Federal Bank, one of India’s leading private sector banks and Fortis Insurance
International, a multinational insurance giant based out of Europe. In this venture, IDBI owns 48%
equity while Federal Bank and Fortis own 26% equity each. At IDBI Fortis, we endeavor to deliver
products that provide value and convenience to the customer. Through a continuous process of
innovation in product and service delivery we intend to deliver world-class wealth management,
protection and retirement solutions to Indian customers. Having started in March 2008, in just five
months of inception we became one of the fastest growing new insurance companies to garner Rs
100 Cr in premiums. The company offers its services through a vast nationwide network across the
branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners.
In only its first year of operations, as on March 31st 2009, the company collected more than 328 Cr
in premiums – highest first year collection in the history of Indian life insurance industry, through
over 87000 policies and over Rs 2825 Cr in Sum Assured.
Do visit www.idbifortis.com to know more.
Vision and Values

Maintaining integrity through our values

Our Vision
To be the leading provider of wealth management, protection and retirement solutions that meets
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the needs of our customers and adds value to their lives.

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Our Mission
To continually strive to enhance customer experience through innovative product offerings,

dedicated relationship management and superior service delivery while striving to interact with our
customers in the most convenient and cost effective manner.
To be transparent in the way we deal with our customers and to act with integrity.
To invest in and build quality human capital in order to achieve our mission.

Our Values
Transparency: Crystal Clear communication to our partners and stakeholders

Value to Customers: A product and service offering in which customers perceive value
Rock Solid and Delivery on Promise: This translates into being financially strong, operationally
robust and having clarity in claims
Customer-friendly: Advice and support in working with customers and partners
Profit to Stakeholders: Balance the interests of customers, partners, employees, shareholders
and the community at large
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CHAPTER 2
Portfolio Management
 What Is Portfolio:
A portfolio is a collection of securities. Since it is rarely desirable to invest the entire funds of an
individual or an institution in a single security, it is essential that every security be viewed in a
portfolio context.
A set or combination of securities held by investor. A portfolio comprising of different types

of securities and assets.
As the investors acquire different sets of assets of financial nature, such as gold, silver, real
estate, buildings, insurance policies, post office certificates, NSC etc., they are making a provision
for future. The risk of each of such investments is to be understood before hand. Normally the
average householder keeps most of his income in cash or bank deposits and assumes that they are
safe and least risky. Little does he realize that they also carry a risk with them – the fear of loss or
actual loss or theft and loss of real value of these assets through the rise price or inflation in the
economy? Cash carries no interest or income and bank deposits carry a nominal rate of 4% on
savings deposits, no interest on current account and a maximum of 9% on term deposits of one
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year. The liquidity on fixed deposits is poor as one has to wait for the period to maturity or take
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loan on such amount but at a loss of income due to penal rate. Generally risk averters invest only in
banks, Post office and UTI and Mutual funds. Gold, silver real estate and chit funds are the other
avenues of investment for average Householder, of middle and lower income groups. If the investor
desired to have a real rate of return which is substantially higher than the inflation rate he has to
invest in relatively more risky areas of investment like shares and debenture of companies or bonds
of Government and semi-Government agencies or deposits with companies and firms. Investment

in Chit funds, Company deposits, and in private limited companies has a highest risk. But the basic
principle is that the higher the risk, the higher is the return and the investor should have a clear
perception of the elements of risk and return when he makes investments. Risk Return analysis is
thus essential for the investment and portfolio management.
 Why Portfolio:
You will recall that expected return from individual securities carries some degree of risk.
Risk was defined as the standard deviation around the expected return. In effect we equated a
security’s risk with the variability of its return. More dispersion or variability about a security’s
expected return meant the security was riskier than one with less dispersion.
The simple fact that securities carry differing degrees of expected risk leads most investors
to the notion of holding more than one security at a time, in an attempt to spread risks by not
putting all their eggs into one basket. Diversification of one’s holdings is intended to reduce risk in
an economy in which every asset’s returns are subject to some degree of uncertainty. Even the
value of cash suffers from the inroads of inflation. Most investors hope that if they hold several
assets, even if one goes bad, the others will provide some protection from an extreme loss.
 Portfolio Management:
The portfolio management is growing rapidly serving broad array of investors – both
individual and institutional – with investment portfolio ranging in asset size from few thousands to
crores of rupees. Despite growing importance, the subject of portfolio and investment
management is new in the country and is largely misunderstood. In most cases, portfolio
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management has been practiced as a investment management counseling in which the investor has
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been advised to seek assets that would grow in value and / or provide income.
Portfolio management is concerned with efficient management of investment in the

securities. An investment is defined as the current commitment of funds for a period of time in
order to derive a future flow of funds that will compensate the investing unit:

- For the time the funds are

committed.
- For the expected rate of inflation,
and
- For the uncertainty involved in the
future flow of funds.
The portfolio management deals with the process of selection of securities from the number
of opportunities available with different expected returns and carrying different levels of risk and
the selection of securities is made with a view to provide the investors the maximum yield for a
given level of risk or ensure minimize risk for a given level of return.
Investors invest his funds in a portfolio expecting to get a good return consistent with the
risk that he has to bear. The return realized from the portfolio has to be measured and the
performance of the portfolio has to be evaluated.
It is evident that rational investment activity involves creation of an investment portfolio.

Portfolio management comprises all the processes involved in the creation and maintenance of an
investment portfolio. It deals specially with security analysis, portfolio analysis, portfolio selection,
portfolio revision and portfolio evaluation. Portfolio management makes use of analytical
techniques of analysis and conceptual theories regarding rational allocation of funds. Portfolio
management is a complex process, which tries to make investment activity more rewarding and
less risky.
 Definition of Portfolio Management:

It is a process of encompassing many activities of investment in assets and securities. The
portfolio management includes the planning, supervision, timing, rationalism and conservatism in
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the selection of securities to meet investor’s objectives. It is the process of selecting a list of
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securities that will provide the investor with a maximum yield constant with the risk he wishes to
assume.
 Application to portfolio Management:

Portfolio Management involves time element and time horizon. The present value of future
return/cash flows by discounting is useful for share valuation and bond valuation. The investment
strategy in portfolio construction should have a time horizon, say 3 to 5 year; to produce the
desired results of say 20-30% return per annum.
Besides portfolio management should also take into account tax benefits and investment
incentives. As the returns are taken by investors net of tax payments, and there is always an
element of inflation, returns net of taxation and inflation are more relevant to tax paying investors.
These are called net real rates of returns, which should be more than other returns. They should
encompass risk free return plus a reasonable risk premium, depending upon the risk taken, on the
instruments/assets invested.
 Objective of Portfolio Management:-

The objective of portfolio management is to invest in securities is securities in such a way
that one maximizes one’s returns and minimizes risks in order to achieve one’s investment
objective.
A good portfolio should have multiple objectives and achieve a sound balance among them. Any
one objective should not be given undue importance at the cost of others. Presented below are
some important objectives of portfolio management.
1. Stable Current Return: -

Once investment safety is guaranteed, the portfolio should yield a steady current income.
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The current returns should at least match the opportunity cost of the funds of the investor. What
we are referring to here current income by way of interest of dividends, not capital gains.
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2. Marketability: -
A good portfolio consists of investment, which can be marketed without difficulty. If there
are too many unlisted or inactive shares in your portfolio, you will face problems in encasing them,

and switching from one investment to another. It is desirable to invest in companies listed on major
stock exchanges, which are actively traded.
3. Tax Planning: -
Since taxation is an important variable in total planning, a good portfolio should enable its
owner to enjoy a favorable tax shelter. The portfolio should be developed considering not only
income tax, but capital gains tax, and gift tax, as well. What a good portfolio aims at is tax planning,
not tax evasion or tax avoidance.
4. Appreciation in the value of capital:

A good portfolio should appreciate in value in order to protect the investor from any erosion
in purchasing power due to inflation. In other words, a balanced portfolio must consist of certain
investments, which tend to appreciate in real value after adjusting for inflation.
5. Liquidity:
The portfolio should ensure that there are enough funds available at short notice to take
care of the investor’s liquidity requirements. It is desirable to keep a line of credit from a bank for
use in case it becomes necessary to participate in right issues, or for any other personal needs.
6. Safety of the investment:

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The first important objective of a portfolio, no matter who owns it, is to ensure that the
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investment is absolutely safe. Other considerations like income, growth, etc., only come into the
picture after the safety of your investment is ensured.
Investment safety or minimization of risks is one of the important objectives of portfolio

management. There are many types of risks, which are associated with investment in equity stocks,
including super stocks. Bear in mind that there is no such thing as a zero risk investment. More over,
relatively low risk investment give correspondingly lower returns. You can try and minimize the

overall risk or bring it to an acceptable level by developing a balanced and efficient portfolio. A good
portfolio of growth stocks satisfies the entire objectives outline above.
 Scope of Portfolio Management:-

Portfolio management is a continuous process. It is a dynamic activity. The following are the
basic operations of a portfolio management.
a) Monitoring the performance of portfolio by incorporating the latest market conditions.

b) Identification of the investor’s objective, constraints and preferences.
c) Making an evaluation of portfolio income (comparison with targets and achievement).
d) Making revision in the portfolio.
e) Implementation of the strategies in tune with investment objectives.
 Approaches of Portfolio Management:-

Different investors follow different approaches when they deal with investments. Four basic
approaches are illustrated below, but there could be numerous variations.
i) The Holy-Cow Approach:

These investors typically buy but never sell. He treats his scrips like holy cows, which are
never to be sold for slaughter. If you can consistently find and then confine yourself to buying only
prized bulls, this holy cow approaches may pay well in the long run.
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ii) The Pig-Farmer Approach:

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The pig-farmer on the other hand, knows that pigs are meant for slaughter. Similarly, an
investor adopting this approach buys and sells shares as fast as pigs are growth and slaughtered.
Pigs become pork and equity hard cash.
iii) The Rice-Miller Approach:

The rice miller buys paddy feverishly in the market during the season, then mills, hoards and
sells the rice slowly over an extended period depending on price movements. His success lies in his
shills in buying and selling, and his financial capacity to hold stocks. Similarly, an investor following
this approach grabs the share at the right price, takes a position, holds on to it, and liquidates
slowly.
iv) The Woolen-Trader Approach:

The woolen-trader buys woolen ever a period of time but sells them quickly during the
season. Hid success also lies in his skill in buying and selling, and his ability to hold stocks. An
investor following this strategy over a period of time but sells quickly, and quits.
 SEBI Guidelines to Portfolio Management:-

SEBI has issued detailed guidelines for portfolio management services. The guidelines have
been made to protect the interest of investors. The salient features of these guidelines are given
here under;
1) The nature of portfolio management services shall be investment consultant.

2) The portfolio manager shall not guarantee any return ti his clients.
3) Client’s funds will be kept in separate bank account.
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4) The portfolio manager shall acts as trustee of client’s funds.

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5) The portfolio manager can invest in money or capital market.

6) Purchase and sale of securities will be at prevailing market price.
 Different Phases of Portfolio Management:

Portfolio management is a process encompassing many activities aimed at optimizing the
investment of one’s funds. Main five phases can be identified in this management process:

a. Security Analysis
b. Portfolio Analysis
c. Portfolio Selection
d. Portfolio Revision
e. Portfolio Evaluation
f. Portfolio Construction
(A) SECURITY ANALYSIS:-
The different types of securities are available to an investor for investment. In stock
exchange of the country the shares of 7000 companies are listed. Traditionally, the securities were
classified into ownership such as equity shares, preference share, and debt as a debenture bonds
etc. Recently companies to raise funds for their projects are issuing a number of new securities with
innovative feature. Convertible debenture, discount bonds, Zero coupon bonds, Flexi bond, floating
rate bond, etc. are some of these new securities. From these huge group of securities the investors
has to choose those securities, which he considers worthwhile to be included in his investment
portfolio. So for this detailed security analysis is most important.
The aim of the security analysis is to find out intrinsic value of a security. The basic value is
also called as the real value of a security is the true economic worth of a financial asset. The real
value of the security indicates whether the present market price is over priced or under priced in
order to make a right investment decision. The actual price of the security is considered to be a
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function of a set of anticipated capitalization rate. Price changes, as anticipation risk and return
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change, which in turn change as a result of latest information.
Security analysis refers to analyzing the securities from the point of view of the scrip prices,
return and risks. The analysis will help in understanding the behaviour of security prices in the
market for investment decision making. If it is an analysis of securities and referred to as a macro
analysis of the behaviour of the market. Security analysis entails in arriving at investment decisions

after collection and analysis of the requisite relevant information. To find out basic value of a
security “the potential price of that security and the future stream of cash flows are to be forecast
and then discounted back to the present value.” The basic value of the security is to be compared
with the current market price and a decision may be taken for buying or selling the security. If the
basic value is lower than the market price, then the security is in the over bought position, hence it
is to be sold. On the other hand, if the basic value is higher than the market price the security’s
worth is not fully recognized by the market and it is in under bought position, hence it is to be
purchased to gain profit in the future.
There are mainly three alternative approaches to security analysis, namely fundamental
analysis, technical analysis and efficient market theory.
The fundamental analysis allows for selection of securities of different sectors of the
economy that appear to offer profitable opportunities. The security analysis will help to establish
what type of investment should be undertaken among various alternatives i.e. real estate, bonds,
debentures, equity shares, fixed deposit, gold, jewellery etc. Neither all industries grow at same
rate nor do all companies. The growth rates of a company depend basically on its ability to satisfy
human desires through production of goods or performance is important to analyze nation
economy. It is very important to predict the course of national economy because economic activity
substantially affects corporate profits, investors’ attitudes, expectations and ultimately security
price.
According to this approach, the share price of a company is determined by these

fundamental factors. The fundamental works out the compares this intrinsic value of a security
based on its fundamental; them compares this intrinsic value, the share is said to be overpriced and
vice versa. The mispricing security provides an opportunity to the investor to those securities,
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which are under priced and sell those securities, which are overpriced. It is believed that the market
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will correct notable cases of mispricing in future. The prices of undervalued shares will increase and
those of overvalued will decline.
Fundamental analysis helps to identify fundamentally strong companies whose shares are
worthy to be included in the investor’s portfolio.

The second alternative of security analysis is technical analysis. The technical analysis is the
study of market action for the purpose of forecasting future price trends. The term market action
includes the three principal sources of information available to the technician – price, value, and
interest. Technical Analysis can be frequently used to supplement the fundamental analysis. It
discards the fundamental approach to intrinsic value. Changes in price movements represent shifts
in supply and demand position. Technical Analysis is useful in timing a buy or sells order. The
technical analysis does not claim 100% of success in predictions. It helps to improve the knowledge
of the probability of price behaviour and provides for investment. The current market price is
compared with the future predicted price to determine the extent of mispricing. Technical analysis
is an approach, which concentrates on price movements and ignores the fundamentals of the
shares.
A more recent approach to security analysis is the efficient market hypothesis/theory.

According to this school of thought, the financial market is efficient in pricing securities. The
efficient market hypothesis holds that market prices instantaneously and fully reflect all relevant
available information. It means that the market prices of securities will always equal its intrinsic
value. As a result, fundamental analysis, which tries to identify undervalued or overvalued
securities, is said to be a useless exercise.
Efficient market hypothesis is direct repudiation of both fundamental analysis and technical
analysis. An investor can’t consistently earn abnormal return by undertaking fundamental analysis
or technical analysis. According to efficient market hypothesis it is possible for an investor to earn
normal return by randomly choosing securities of a given risk level.
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(B) PORTFOLIO ANALYSIS:-

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The main aim of portfolio analysis is to give a caution direction to the risk and return of an
investor on portfolio. Individual securities have risk return characteristics of their own. Therefore,
portfolio analysis indicates the future risk and return in holding of different individual instruments.
The portfolio analysis has been highly successful in tracing the efficient portfolio. Portfolio analysis
considers the determination of future risk and return in holding various blends of individual
securities. An investor can sometime reduce portfolio risk by adding another security with greater

individual risk than any other security in the portfolio. Portfolio analysis is mainly depending on Risk
and Return of the portfolio. The expected return of a portfolio should depend on the expected
return of each of the security contained in the portfolio. The amount invested in each security is
most important. The portfolio’s expected holding period value relative is simply a weighted average
of the expected value relative of its component securities. Using current market value as weights,
the expected return of a portfolio is simply a weighted average of the expected return of the
securities comprising that portfolio. The weights are equal to the proportion of total funds invested
in each security.
Tradition security analyses recognize the key importance of risk and return to the investor.
However, direct recognition of risk and return in portfolio analysis seems very much a “seat-of-the-
pants” process in the traditional approaches, which rely heavily upon intuition and insight. The
result of these rather subjective approaches to portfolio analysis has, no doubt, been highly
successfully in many instances. The problem is that the methods employed do not readily lend
themselves to analysis by others.
Most traditional method recognizes return as some dividend receipt and price appreciations
aver a forward period. But the return for individual securities is not always over the same common
holding period nor are he rates of return necessarily time adjusted. An analyst may well estimate
future earnings and P/E to derive future price. He will surely estimate the dividend. But he may not
discount the value to determine the acceptability of the return in relation to the investor’s
requirements.
A portfolio is a group of securities held together as investment. Investments invest their

funds in a portfolio of securities rather than in a single security because they are risk averse. By
constructing a portfolio, investors attempt to spread risk by not putting all their eggs into one
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basket. Thus diversification of one’s holding is intended to reduce risk in investment.

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Most investor thus tends to invest in a group of securities rather than a single security. Such
a group of securities held together as an investment is what is known as a portfolio. The process of
creating such a portfolio is called diversification. It is an attempt to spread and minimize the risk in
investment. This is sought to be achieved by holding different types of securities across different
industry groups.

(C) PORTFOLIO SELECTION: -
Portfolio analysis provides the input for the next phase in portfolio management, which is
portfolio selection. The proper goal of portfolio construction is to generate a portfolio that provides
the highest returns at a given level of risk. A portfolio having this characteristic is known as an
efficient portfolio. The inputs from portfolio analysis can be used to identify the set of efficient
portfolios. From this set of efficient portfolios the optimum portfolio has to be selected for
investment. Harry Markowitz portfolio theory provides both the conceptual framework and
analytical tools for determining the optimal portfolio in a disciplined and objective way.
(D) PORTFOLIO REVISION: -
Once the portfolio is constructed, it undergoes changes due to changes in market prices and
reassessment of companies. Portfolio revision means alteration of the composition of debt/equity
instruments, shifting from the one industry to another industry, changing from one company to
another company. Any portfolio requires monitoring and revision. Portfolios activities will depend
on daily basis keeping in view the market opportunities. Portfolio revision uses some theoretical
tools like security analysis that already discuss before this, Markowitz model, Risk-Return
evaluation.
Portfolio revision involves changing the existing mix of securities. This may be effected
either by changing the securities currently included in the portfolio or by altering the proportion of
fund invested in the securities. New securities may be added to the portfolio or some of the existing
securities may be removed from the portfolio. Portfolio revision thus, leads to purchasing and sales
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of securities. The objective of portfolio revision is the same as the objective of portfolio selection,
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i.e maximizing the return for a given level of risk or minimizing the risk foa given level of return. The
ultimate aim of portfolio revision is maximization of returns and minimizing of risk.
Having constructed the optimal portfolio, the investor has to constantly monitor the
portfolio to ensure that it continues to be optimal. As the economy and financial markets are
dynamic, changes take place almost daily. As time passes, securities, which were once attractive,

may cease to be so. New securities with promises of high returns and low risk may emerge. The
investor now has to revise his portfolio in the light of the development in the market. This revision
leads to purchase of some new securities and sale of some of the existing securities from the
portfolio. The mixture of security and its proportion in the portfolio changes as a result of the
revision.
Portfolio revision may also be necessitated some investor related changes such as
availability of additional funds, changes in risk attitude need of cash for other alternative use etc.
Whatever be the reason for portfolio revision, it has to be done scientifically and objectively
so as to ensure the optimality of the revised portfolio. Portfolio revision is not a casual process to
be carried out without much care. In fact, in the entire process of portfolio management portfolio
revision is as important as portfolio analysis and selection. In portfolio management, the maximum
emphasis is placed on portfolio analysis and selection which leads to the construction of the
optimal portfolio. Very little discussion is seen on portfolio revision which is as important as
portfolio analysis and selection.
Portfolio revision involving purchase and sale of securities gives rise to certain problem
which acts as constraints in portfolio revision, from those constraints some may be as following:
1. Statutory Stipulations:
Investment companies and mutual funds manage the largest portfolios in every country.
These institutional investors are normally governed by certain statutory stipulations
regarding their investment activity. These stipulations often act as constraints in timely
portfolio revision.
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2. Transaction cost:
Buying and selling of securities involve transaction costs such as commission and brokerage.
Frequent buying and selling of securities for portfolio revision may push up transaction cost
thereby reducing the gains from portfolio revision. Hence, the transaction costs involved in
portfolio revision may act as a constraint to timely revision of portfolio.

3. Intrinsic difficulty:
Portfolio revision is a difficult and time-consuming exercise. The methodology to be
followed for portfolio revision is also not clearly established. Different approaches may be
adopted for the purpose. The difficulty of carrying out portfolio revision it self may act as a
restriction to portfolio revision.
4. Taxes:
Tax is payable on the capital gains arising from sale of securities. Usually, long term capital
gains are taxed at a lower than short-term capital gains. To qualify as long-term capital gain,
a security must be held by an investor for a period not less than 12 months before sale.
Frequent sales of securities in the course of periodic portfolio revision of adjustment will
result in short-term capital gains which would be taxed at a higher rate compared to long-
term capital gains. The higher tax on short-term capital gains may act as a constraint to
frequent portfolios.
(F) PORTFOLIO PERFORMANCE EVALUATION:-
Portfolio evaluating refers to the evaluation of the performance of the portfolio. It is

essentially the process of comparing the return earned on a portfolio with the return earned on one
or more other portfolio or on a benchmark portfolio. Portfolio evaluation essentially comprises of
two functions, performance measurement and performance evaluation. Performance
measurement is an accounting function which measures the return earned on a portfolio during the
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holding period or investment period. Performance evaluation , on the other hand, address such
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issues as whether the performance was superior or inferior, whether the performance was due to
skill or luck etc.
The ability of the investor depends upon the absorption of latest developments which
occurred in the market. The ability of expectations if any, we must able to cope up with the wind
immediately. Investment analysts continuously monitor and evaluate the result of the portfolio
performance. The expert portfolio constructer shall show superior performance over the market

and other factors. The performance also depends upon the timing of investments and superior
investment analysts capabilities for selection. The evolution of portfolio always followed by revision
and reconstruction. The investor will have to assess the extent to which the objectives are
achieved. For evaluation of portfolio, the investor shall keep in mind the secured average returns,
average or below average as compared to the market situation. Selection of proper securities is the
first requirement. The evaluation of a portfolio performance can be made based on the following
methods:
a) Sharpe’s Measure
b) Treynor’s Measure
c) Jensen’s Measure
(a) Sharpe’ Measure:
The objective of modern portfolio theory is maximization of return or minimization of risk.

In this context the research studies have tried to evolve a composite index to measure risk based
return. The credit for evaluating the systematic, unsystematic and residual risk goes to sharpe,
Treynor and Jensen. Sharpe measure total risk by calculating standard deviation. The method
adopted by Sharpe is to rank all portfolios on the basis of evaluation measure. Reward is in the
numerator as risk premium. Total risk is in the denominator as standard deviation of its return. We
will get a measure of portfolio’s total risk and variability of return in relation to the risk premium.
The measure of a portfolio can be done by the following formula:
Rt – Rf
SI =
25
σf
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Where,
SI = Sharpe’s Index
Rt = Average return on portfolio
Rf = Risk free return

σf = Standard deviation of the portfolio return.
For instance:
Which portfolio perform better performance from following two portfolio, by using Sharpe’s
model
Portfolio Average return Standard deviation Risk free rate
A 50% 10% 24%
B 60% 18% 24%
Performance can be finding out by the following formula:
For Portfolio A: Rt – Rf
SI =
σf
Rt = 50
Rf = 24
26
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σf = 0.10
0.50 – 0.24
SI = = 0.26 / 0.10
0.10

= 2.6 Portfolio A
For Portfolio B: Rt – Rf
SI =
σf
0.60 – 0.24
SI = = 0.36 / 0.18
0.18
= 2, Portfolio B
Conclusion: According to the calculated “portfolio A” has better performance than portfolio B
(b) Treynor’s Measure:
The Treynor’s measure related a portfolio’s excess return to non-diversifiable or systematic

risk. The Treynor’s measure employs beta. The Treynor based his formula on the concept of
characteristic line. It is the risk measure of standard deviation, namely the total risk of the portfolio
is replaced by beta. The equation can be presented as follow:
Rn - Rf
Tn =
βm
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Where, Tn = Treynor’s measure of performance
Rn = Return on the portfolio
Rf = Risk free rate of return
βm = Beta of the portfolio ( A measure of systematic risk)

For instance: Which securities perform better performance from following two portfolios, by using
Treynor’s method
Portfolio Return βm Risk free rate
X 44% 0.12% 22%
Z 52% 2.40% 22%
For portfolio X: Rn - Rf
Tn =
βm
Rn = 0.44 Rf = 0.22 βm = 0.12
0.44 – 0.22 0.22
Tn = = = 0.092
2.40 2.40
For portfolio Y: 0.52 - 0.22 0.30
Tn = = = 0.125
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Page
2.4 2.40
Conclusion: Portfolio Y is better than X because Tnx < Tny
(c) Jensen’s Measure:
Jensen attempts to construct a measure of absolute performance on a risk adjusted basis.

This measure is based on CAPM model. It measures the portfolio manager’s predictive ability to

achieve higher return than expected for the accepted riskiness. The ability to earn returns through
successful prediction of security prices on a standard measurement. The Jensen measure of the
performance of portfolio can be calculated by applying the following formula:
Rp = Rf + (RMI – Rf) x β
Where, Rp = Return on portfolio
RMI = Return on market index
Rf = Risk free rate of return
For instance: From the following data, the portfolio performance can be measure according to
Jensens model as follow:
Portfolio Estimated Return on portfolio Portfolio Beta
I 40% 1.5
II 34% 1.1
III 46% 1.8
Market Index: 36% 1.03
Risk free rate of return: 20%
Market Beta =1.00
For portfolio –I:
RMI = 40%, Rf = 20%, β=3
Rp = 20 + (40 – 20) x 1.5

29 Page
= 50%
For portfolio – II:
RMI = 34%, Rf = 20%, β = 1.1
Rp = 20 + (34 – 20) x 1.1 = 35.4%
For portfolio – III:

RMI = 46%, Rf = 20%, β = 1.8
Rp = 20 + (46 – 20) x 1.8
=66.8%
The measure of performance = Actual – estimated
I = 50% - 40% = 10%
II = 35.4% - 34% = 1.4%
III = 66.8% - 46% = 20.8%
Here, the portfolio III is better perform then other two
(G) PORTFOLIO CONSTRUCTION:-
Portfolio construction refers to the allocation of funds among a variety of financial assets
open for investment. Portfolio theory concerns itself with the principles governing such allocation.
The objective of the theory is to elaborate the principles in which the risk can be minimized subject
to desired level of return on the portfolio or maximize the return, subject to the constraint of a
tolerate level of risk.
Thus, the basic objective of portfolio management is to maximize yield and minimize risk.
The other ancillary objectives are as per the needs of investors, namely:6
 Safety of the investment

 Stable current Returns
30
 Appreciation in the value of capital

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 Marketability and Liquidity

 Minimizing of tax liability.
In pursuit of these objectives, the portfolio manager has to set out all the various alternative
investment along with their projected return and risk and choose investment with safety the
requirement of the individual investor and cater to his preferences. The manager has to keep a list
of such investment avenues along with return-risk profile, tax implications, yield and other return

such as convertible options, bonus, rights etc. A ready reckoned giving out the analysis of the risk
involved in each investment and the corresponding return should be kept.
The portfolio construction, as referred to earlier, be made on the basis of the investment
strategy, set out for each investor. Through choice of asset classis, instrument of investment and
the specific scripts, save of bond or equity of different risk and return characteristics, the choice of
tax characteristics, risk level and other feature of investment, are decided upon.
 Portfolio Investment Process:-

The ultimate aim of the portfolio manager is to reduce the risk and increase the return to
the investor in order to reach the investment objectives of an investor. The manager must be aware
of the investment process. The process of portfolio management involves many logical steps like
portfolio planning, portfolio implementation and monitoring. The portfolio investment process
applies to different situation. Portfolio is owned by different individuals and organizations with
different requirements. Investors should buy when prices are very low and sell when prices rise to
levels higher that their normal fluctuation.
The process used to manage a security portfolio is conceptually the same as that used in any
managerial decision. One should (1) Panning, (2) Implement the plan; and (3) Monitor the result.
This portfolio investment process is displayed schematically as follow:
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The Portfolio Investment Process
Planning:
Investor’s situation
Market Condition
Speculative policies
Strategic asset allocation
Implementation:
Rebalance Strategic Asset Allocation
Tactical Asset Allocation
Security Selection
Monitoring:
Evaluate Statement of Investment Policy
Evaluate Investment Performance
Applying the different steps for portfolio investment process can be complex and opinions
32
are divided for maximization of wealth to the investor. Many differences exist between present
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investment theory and empirical result and which have often contradictory result the following
some basic principles should be applied to all portfolio decisions.
1. The quantum of risk to be acceptable.

2. The profits will vary along with variability of risk.
3. Individual securities affect the aggregate portfolio.
4. Portfolio should provide a sound liquidity position.

5. Diversification of a portfolio may decrease the risk level.

6. Portfolio should be tailored to the needs of investors.
7. Follow the passive investment strategy or an activity speculative strategy.
Portfolio investment process is an important step to meet the needs and convenience of
investors. The portfolio investment process involves the following steps:
1. Planning of portfolio
2. Implementation of portfolio plan.
3. Monitoring the performance of portfolio.
1) PLANNING OF PORTFOLIO:
Planning is the most important element in a proper portfolio management. The success of
the portfolio management will depend upon the careful planning. While making the plan, due
consideration will be given to the investor’s financial capability and current capital market situation.
After taking into consideration a set of investment and speculative policies will be prepared in the
written form. It is called as statement of investment policy. The document must contain (1) The
portfolio objective (2) Applicable strategies (3) Investment and speculative constraints. The
planning document must clearly define the asset allocation. It means an optimal combination of
various assets in an efficient market. The portfolio manager must keep in mind about the difference
between basic pure investment portfolio and actual portfolio returns. The statement of investment
policy may contain these elements. The portfolio planning comprises the following situation for its
better performance:
33 Page
(A) Investor Conditions: -

The first question which must be answered is this – “What is the purpose of the security
portfolio?” While this question might seem obvious, it is too often overlooked, giving way instead
to the excitement of selecting the securities which are to be held. Understanding the purpose for
trading in financial securities will help to: (1) define the expected portfolio liquidation, (2) aid in
determining an acceptable level or risk, and (3) indicate whether future consumption (liability
needs) are to be paid in nominal or real money, etc. For example: a 60 year old woman with small
to moderate saving probably (1) has a short investment horizon, (2) can accept little investment
risk, and (3) needs protection against short term inflation. In contrast, a young couple investing
couple investing for retirement in 30 years has (1) a very long investment horizon, (2) an ability to
accept moderate to large investment risk because they can diversify over time, and (3) a need for
protection against long-term inflation. This suggests that the 60 year old woman should invest
solely in low-default risk money market securities. The young couple could invest in many other
asset classes for diversification and accept greater investment risks. In short, knowing the eventual
purpose of the portfolio investment makes it possible to begin sketching out appropriate
investment / speculative policies.
(B) Market Condition: -

The portfolio owner must known the latest developments in the market. He may be in a
position to assess the potential of future return on various capital market instruments. The
investors’ expectation may be two types, long term expectations and short term expectations. The
most important investment decision in portfolio construction is asset allocation. Asset allocation
means the investment in different financial instruments at a percentage in portfolio. Some
investment strategies are static. The portfolio requires changes according to investor’s needs and
34
knowledge. A continues changes in portfolio leads to higher operating cost. Generally the potential
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volatility of equity and debt market is 2 to 3 years. The another type of rebalancing strategy focuses
on the level of prices of a given financial asset.
(C) Speculative Policies:

The portfolio owner may accept the speculative strategies in order to reach his goals of
earning to maximum extant. If no speculative strategies are used the management of the portfolio
is relatively easy. Speculative strategies may be categorized as asset allocation timing decision or
security selection decision. Small investors can do by purchasing mutual funds which are indexed to
a stock. Organization with large capital can employ investment management firms to make their
speculative trading decisions.
(D) Strategic Asset Allocation:-

The most important investment decision which the owner of a portfolio must make is the
portfolio’s asset allocation. Asset allocation refers to the percentage invested in various security
classes. Security classes are simply the type of securities: (1) Money Market Investment, (2) Fixed
Income obligations; (3) Equity Shares, (4) Real Estate Investment, (5) International securities.
Strategic asset allocation represents the asset allocation which would be optimal for the
investor if all security prices trade at their long-term equilibrium values that is, if the markets are
efficiency priced.
2) IMPLEMENTATION:-
In the implementation stage, three decisions to be made, if the percentage holdings of

various assets classes are currently different from the desired holdings as in the SIP, the portfolio
should be rebalances to the desired SAA (Strategic Asset Allocation). If the statement of investment
policy requires a pure investment strategy, this is the only thing, which is done in the
35
implementation stage. However, many portfolio owners engage in speculative transaction in the
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belief that such transactions will generate excess risk-adjusted returns. Such speculative
transactions are usually classified as “timing” or “selection” decisions. Timing decisions over or
under weight various assets classes, industries, or economic sectors from the strategic asset
allocation. Such timing decision deal with securities within a given asset class, industry group, or
economic sector and attempt to determine which securities should be over or under-weighted.

(A) Tactical Asset Allocation:-

If one believes that the price levels of certain asset classes, industry, or economic sectors
are temporarily too high or too low, actual portfolio holdings should depart from the asset mix
called for in the strategic asset allocation. Such timing decision is preferred to as tactical asset
allocation. As noted, TAA decisions could be made across aggregate asset classes, industry
classifications (steel, food), or various broad economic sectors (basic manufacturing, interest-
sensitive, consumer durables).
Traditionally, most tactical assets allocation has involved timing across aggregate asset
classes. For example, if equity prices are believes to be too high, one would reduce the portfolio’s
equity allocation and increase allocation to, say, risk-free securities. If one is indeed successful at
tactical asset allocation, the abnormal returns, which would be earned, are certainly entering.
(B) Security Selection:-

The second type of active speculation involves the selection of securities within a given
assets class, industry, or economic sector. The strategic asset allocation policy would call for broad
diversification through an indexed holding of virtually all securities in the asset in the class. For
example, if the total market value of HPS Corporation share currently represents 1% of all issued
equity capital, than 1% of the investor’s portfolio allocated to equity would be held in HPS
corporation shares. The only reason to overweight or underweight particular securities in the
strategic asset allocation would be to off set risks the investors’ faces in other assets and liabilities
outside the marketable security portfolio. Security selection, however, actively overweight and
underweight holding of particular securities in the belief that they are temporarily mispriced.
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(3) PORTFOLIO MONITORING: -

Portfolio monitoring is a continuous and on going assessment of present portfolio and the
portfolio manger shall incorporate the latest development which occurred in capital market. The
portfolio manager should take into consideration of investor’s preferences, capital market
condition and expectations. Monitoring the portfolio is up-grading activity in asset composition to
take the advantage of economic, industry and market conditions. The market conditions are
depending upon the Government policy. Any change in Government policy would reflect the stock
market, which in turn affects the portfolio. The continues revision of a portfolio depends upon the
following factors:
i. Change in Government policy.

ii. Shifting from one industry to other
iii. Shifting from one company scrip to another company scrip.
iv. Shifting from one financial instrument to another.
v. The half yearly / yearly results of the corporate sector
Risk reduction is an important factor in portfolio. It will be achieved by a diversification of
the portfolio, changes in market prices may have necessitated in asset composition. The
composition has to be changed to maximize the returns to reach the goals of investor.
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RISK & RETURN IN PORTFOLIO
 Return:-

` The typical objective of investment is to make current income from the investment in the
form of dividends and interest income. Suitable securities are those whose prices are relatively
stable but still pay reasonable dividends or interest, such as blue chip companies. The investment
should earn reasonable and expected return on the investments. Before the selection of
investment the investor should keep in mind that certain investment like, Bank deposits, Public
deposits, Debenture, Bonds, etc. will carry fixed rate of return payable periodically. On investments
made in shares of companies, the periodical payments are not assured but it may ensure higher
returns from fixed income securities. But these instruments carry higher risk than fixed income
instruments.
 Risk:-
The Webster’s New Collegiate Dictionary definition of risk includes the following meanings:
“……. Possibility of loss or injury ….. the degree or probability of such loss”. This conforms to the
connotations put on the term by most investors. Professional often speaks of “downside risk” and
“upside potential”. The idea is straightforward enough: Risk has to do with bad outcomes, potential
with good ones.
In considering economic and political factors, investors commonly identify five kinds of
hazards to which their investments are exposed. The following tables show components of risk:
(A) SYSTEMATIC RISK:

38
1. Market Risk
Page
2. Interest Rate Risk

3. Purchasing power Risk
(B) UNSYSTEMATIC RISK:
1. Business Risk
2. Financial Risk

(A) SYSTEMATIC RISK:

Systematic risk refers to the portion of total variability in return caused by factors affecting
the prices of all securities. Economic, Political and Sociological charges are sources of systematic
risk. Their effect is to cause prices of nearly all individual common stocks or security to move
together in the same manner. For example; if the Economy is moving toward a recession &
corporate profits shift downward, stock prices may decline across a broad front. Nearly all stocks
listed on the BSE / NSE move in the same direction as the BSE / NSE index.
Systematic risk is also called non-diversified risk. If is unavoidable. In short, the variability in
a securities total return in directly associated with the overall movements in the general market or
Economy is called systematic risk. Systematic risk covers market risk, Interest rate risk & Purchasing
power risk
1. Market Risk:
Market risk is referred to as stock / security variability due to changes in investor’s reaction
towards tangible & intangible events is the chief cause affecting market risk. The first set that is the
tangible events, has a ‘real basis but the intangible events are based on psychological basis.
Here, Real Events, comprising of political, social or Economic reason. Intangible Events are
related to psychology of investors or say emotional intangibility of investors. The initial decline or
rise in market price will create an emotional instability of investors and cause a fear of loss or
39
create an undue confidence, relating possibility of profit. The reaction to loss will reduce selling &
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purchasing prices down & the reaction to gain will bring in the activity of active buying of securities.
2. Interest Rate Risk:

The price of all securities rise or fall depending on the change in interest rate, Interest rate
risk is the difference between the Expected interest rates & the current market interest rate. The

markets will have different interest rate fluctuations, according to market situation, supply and
demand position of cash or credit. The degree of interest rate risk is related to the length of time to
maturity of the security. If the maturity period is long, the market value of the security may
fluctuate widely. Further, the market activity & investor perceptions change with the change in the
interest rates & interest rates also depend upon the nature of instruments such as bonds,
debentures, loans and maturity period, credit worthiness of the security issues.
3. Purchasing Power Risk:

Purchasing power risk is also known as inflation risk. This risks arises out of change in the
prices of goods & services & technically it covers both inflation & deflation period. Purchasing
power risk is more relevant in case of fixed income securities; shares are regarded as hedge against
inflation. There is always a chance that the purchasing power of invested money will decline or the
real return will decline due to inflation.
The behaviour of purchasing power risk can in some way be compared to interest rate risk.
They have a systematic influence on the prices of both stocks & bonds. If the consumer price index
in a country shows a constant increase of 4% & suddenly jump to 5% in the next. Year, the required
rate of return will have to be adjusted with upward revision. Such a change in process will affect
government securities, corporate bonds & common stocks.
(B) UNSYSTEMATIC RISK:-

The risk arises out of the uncertainty surrounding a particular firm or industry due to factors
like labour Strike, Consumer preference & management policies are called Unsystematic risk. These
40
uncertainties directly affect the financing & operating environment of the firm. Unsystematic risk is
Page
also called “Diversifiable risk”. It is avoidable. Unsystematic risk can be minimized or Eliminated
through diversification of security holding. Unsystematic risk covers Business risk and Financial risk

1. Business Risk:
Business risk arises due to the uncertainty of return which depend upon the nature of
business. It relates to the variability of the business, sales, income, expenses & profits. It depends
upon the market conditions for the product mix, input supplies, strength of the competitor etc. The
business risk may be classified into two kind viz. internal risk and External risk.
Internal risk is related to the operating efficiency of the firm. This is manageable by the firm.
Interest Business risk loads to fall in revenue & profit of the companies.
External risk refers to the policies of government or strategic of competitors or unforeseen

situation in market. This risk may not be controlled & corrected by the firm.
2. Financial Risk:
Financial risk is associated with the way in which a company finances its activities. Generally,
financial risk is related to capital structure of a firm. The presence of borrowed money or debt in
capital structure creates fixed payments in the form of interest that must be sustained by the firm.
The presence of these interest commitments – fixed interest payments due to debt or fixed
dividend payments on preference share – causes the amount of retained earning availability for
equity share dividends to be more variable than if no interest payments were required. Financial
risk is avoidable risk to the extent that management has the freedom to decline to borrow or not to
41
borrow funds. A firm with no debt financing has no financial risk. One positive point for using debt
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instruments is that it provides a low cost source of funds to a company at the same time providing
financial leverage for the equity shareholders & as long as the earning of company are higher than
cost of borrowed funds, the earning per share of equity share are increased.
 Risk - Return Relationship:-

The entire scenario of security analysis is built on two concepts of security: Return and risk.
The risk and return constitute the framework for taking investment decision. Return from equity
comprises dividend and capital appreciation. To earn return on investment, that is, to earn dividend
and to get capital appreciation, investment has to be made for some period which in turn implies
passage of time. Dealing with the return to be achieved requires estimated of the return on
investment over the time period. Risk denotes deviation of actual return from the estimated return.
This deviation of actual return from expected return may be on either side – both above and below
the expected return. However, investors are more concerned with the downside risk.
The risk in holding security deviation of return deviation of dividend and capital appreciation
from the expected return may arise due to internal and external forces. That part of the risk which
is internal that in unique and related to the firm and industry is called ‘unsystematic risk’. That part
of the risk which is external and which affects all securities and is broad in its effect is called
‘systematic risk’.
The fact that investors do not hold a single security which they consider most profitable is
enough to say that they are not only interested in the maximization of return, but also minimization
of risks. The unsystematic risk is eliminated through holding more diversified securities. Systematic
risk is also known as non-diversifiable risk as this can not be eliminated through more securities and
is also called ‘market risk’. Therefore, diversification leads to risk reduction but only to the
minimum level of market risk.
The investors increase their required return as perceived uncertainty increases. The rate of
return differs substantially among alternative investments, and because the required return on
specific investments change over time, the factors that influence the required rate of return must
be considered.
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 Different Types of Investment in India and Risk – Return Associated With It:-
1) Life Insurance Policy:-
In India the life insurance corporation offers different types of policies tailor made to suit
the varied age group in society. The Whole Life Policies, Limited – Payment Life Policy, Convertible
Whole Life Assurance Policy, Endowment Assurance Policy, Jeevan Mitra, The Special Endowment
Plan with Profits, Jeevan Saathi, The New Money Back Plan, Marriage Endowment, Children’s

Differed Endowment Assurance Policy, Jeevan Dhara have gained immense popularity among all
classes of people. In LIC there is some scheme have eligible for exemption from tax under section
80C of the Income Tax Act, 1961. Risk associated with Insurance Corporation is as follow:
High
S Moderate
Low
Low Moderate High
RETURN
43
2) Bank Deposits:-
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Commercial Bank has been extending deposits facilities to the public and has been the
Indian investor’s greatest investment opportunity. The various schemes offered by commercial
Banks are in the categories of saving accounts. Fixed Deposits, recurring deposits, monthly re-
payment plan, cash certificates, children’s deposits schemes and retirement plans. The saving
account offers an interest rate of 4% per annum. One fixed deposits the banks give a rate of 6.5%
per annum.
High
S Moderate
Low
Low Moderate High
RETURN
44
3) Provident Funds:-
Page
Many employers offer recognized provident Fund schemes for the benefit of their
employees. In general employees are obliged to contribute a minimum of 8.33% of their salary
every month to the PPF, however, they may in certain cases contribute up to a maximum of 30% of
their salary, Whatever, may be the employee’s contribution, the employer’s contribution is
generally restricted to 8.33% only. Employees own contribution can be claimed as a deduction form
his total income under section 80C of income Tax Act. The interest on Provident Funds is now 10 %

per annum. The prime benefit of the provident fund is the facility of loan up to 755 of the sum
contributed.
High
S Moderate
Low
Low Moderate High
RETURN
The SBI and its subsidiaries operate the public provident funds schemes. It is a 15 year
45
scheme. A minimum sum of Rs. 100/- has to be deposited every year in this fund; the maximum
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amount which can be deposited in this fund, is Rs.20,000/- in one year. The rate of interest on the
PPF is 12% per annum. The PPF scheme offers both income Tax and Wealth Tax benefits. The
deposits made every year qualify for deduction under section 80C and the interest is completely tax
free, in addition, loans can also be taken after one year from the close of the year in which the
account was opened.

4) Equity Shares: -
The investment in equity share has a number of positive aspect associated with it. These are
Capital Appreciation as a hedge against inflation, bonus shares, Right shares, voting rights,
marketability, annual dividends and fringe benefits etc. Income tax and wealth tax benefits are also
available to investment in equity share, 50% of the contribution made by investors in shares of new
companies qualifies for deduction under section 80CC. No deduction is available in under section
80CCA with effect from 1993-94 except rebate of Section 88.
High
S Moderate
Low
Low Moderate High

46
RETURN
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5) Government Bonds:-
The government bond, there is two categories of these bonds, namely, tax-free and taxable.
The tax-free bonds are 9 to 10% bonds issued for Rs.1000; interest compounded half-yearly and
payable half-yearly. They have a maturity period of 7 to 10 years with the facility for buy-back
sometimes provided to small investors up to certain limits. The taxable bonds yield 13% or above,
compounded half-yearly and payable half-yearly. They have normally a face value of Rs.1000/- and
have buy-back facilities similar to taxable bonds. Income from these bonds is tax exempt up to
Rs.12, 000/- under section 80L.
High
S Moderate
Low
Low Moderate High

47
RETURN
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6) Fixed Deposits with Companies:-
Fixed Deposits are invited from the public by different private sector companies. Their major
selling point is the high rates of interest, which they offer. Some of these companies offer even up
to 16% return per annum on deposits; the risk element is high in fixed deposits since they are

absolutely unsecured. In addition, there are no tax benefits, An example, may be cited of a well
known company. Orkay Silk Mills, The Company delayed the payment of quarterly interest by two
months and the matured amount has not been returned to the depositors.
High
S Moderate
Low
Low Moderate High
RETURN
48Page

7) Debentures:-
A debenture is just a loan bond. Debenture holders are lenders but not owners of the
company. They don’t enjoy any voting rights. Usually Debentures are of the face value of Rs.100/-
each. They carry a fixed rate of interest. The ruling rate in the market for debentures is 10% to 14%.
There are no income tax or wealth tax benefits for an investment in Debenture.
High
S Moderate
Low
Low Moderate High

49
RETURN
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Chapter 3
Types of Mutual Funds
 What is investment?
“Investment may be defined as the purchase by an individual or institutional investor of a
financial or real asset that produces a return proportional to the risk assumed over some future
investment period.”
- F. Amling
“Investment defined as commitment of funds made in the expectation of some positive rate
of return. If the investment is properly undertaken, the return will commensurate with the risk the
investor assumes.”
- Fisher & Jordan
Investment refers to acquisition of some assets. It also means the conversion of money into
claims on money and use of funds for productive income earnings assets. In essence, it means the
use of funds for productive purpose, for securing some objectives like, income, appreciation of
capital or capital gains, or for further production of goods and services with the objective of
securing yield
50
 Financial and Economic Meaning of Investment:

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Financial investment involves of funds in various assets, such as stock, Bond, Real Estate,
Mortgages etc. Investment is the employment of funds with the aim of achieving additional income
or growth in value. It involves the commitment of resources which have been saved or put away
from current consumption in the hope some benefits will accrue in future. Investment involves long
term commitment of funds and waiting for a reward in the future.

From the point of view people who invest their finds, they are the supplier of ‘Capital’ and in
their view investment is a commitment of a person’s funds to derive future income in the form of
interest, dividend, rent, premiums, pension benefits or the appreciation of the value of their
principle capital. To the financial investor it is not important whether money is invested for a
productive use or for the purchase of secondhand instruments such as existing shares and stocks
listed on the stock exchange. Most investments are considered to be transfers of financial assets
from one person to another.
Economic investment means the net additions to the capital stock of the society which
consists of goods and services that are used in the production of other goods and services. Addition
to the capital stock means an increase in building, plants, equipment and inventories over the
amount of goods and services that existed.
The financial and economic meanings are related to each other because investment is a part
of the savings of individuals which flow into the capital market either directly or through
institutions, divided in ‘new’ and secondhand capital financing. Investors as ‘suppliers’ and
investors as ‘users’ of long-term funds find a meeting place in the market.
So from above we know the term investment. The savers become the investors in the
following term and invest in unique asset
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Open-ended schemes
These funds do not have a fixed maturity and one can invest in such funds on any working day,
52
during business hours. Investors can buy or sell units of open-ended schemes directly from the fund
house at NAV related prices.
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Close-ended schemes
Such funds have a fixed maturity period and are open for subscription only for a specified period.
After the expiry of this period, investors can buy or sell the units on the stock exchanges where
such funds are listed. Some funds also have the option of periodic repurchase, whereby investors
can sell back their units to the fund at NAV related prices.

Interval schemes
Interval schemes are a combination of both open and close-ended schemes. Investors can purchase
or redeem their shares from the fund house at pre-determined intervals at NAV related prices
Growth schemes
Such funds are aimed at capital appreciation over the medium to long term. Usually, such funds
invest a major portion of the portfolio in equities.
Balanced schemes
Such funds have a balanced portfolio and invest in equity and preference shares in addition to fixed
income securities. The aim of such funds is to provide both income and capital appreciation over a
long-term.
Income schemes
These schemes invest primarily in fixed income instruments issued by the government, banks,
financial institutions and private companies. The main objective of income schemes is preservation
of capital and to provide fixed income over the medium to long term.
Money market schemes

Money market schemes invest in short-term debt instruments, which earn interest and have high
liquidity. Though these are considered to be the safest investment option, such funds are subject to
fluctuations in the rates of interest.
Tax saving schemes

Such schemes are aimed at offering tax rebates to investors under specific provisions of the Income
Tax Act, 1961. For instance, investors of Equity Linked Savings Schemes (ELSS) and Pension Schemes
are applicable for deduction u/s 88 of the Income Tax Act, 1961.
53
Index schemes
Such funds strive to mirror the performance of specific market indices, such as the BSE SENSEX, CNX
Page
Nifty, etc which are called the base index. Investments in such funds are made in the same stocks as
the base index and in similar proportion.
Sector-specific schemes
Such funds invest in a specific industry or sector. The investments could be in a particular industry
(Banking, Pharmaceuticals, Infrastructure, etc) or a group of industries, or various segments (like ‘A’
Group shares).

Exchange-traded funds
Such funds are listed and traded on the stock exchange in a similar manner as stocks. Such funds
invest in a basket of stocks and aim at replicating an index (S&P CNX Nifty, BSE Sensex) or a
particular industry (banking, information technology) or commodity (gold, crude oil, petroleum).
Capital protection funds

These funds are designed to safeguard the capital invested therein, by investing in suitable
securities.
No of No of
Incorp
Fund House Fund Type Schemes Schemes Total Assets (Rs. in Cr)
Date
(Open) (Close)
Feb 24
Reliance Mutual Fund Indian Private 52 25 101320.00
1995
Dec 10 Joint Venture
HDFC Mutual Fund 38 31 86648.10
1999 Indian
ICICI Prudential Mutual Jun 22 Joint Venture
77 53 73822.40
Fund 1993 Indian
Nov 14
UTI Mutual Fund Others 49 28 64445.70
2002
Birla Sun Life Mutual Sep 5 Joint Venture
68 30 63139.30
Fund 1994 Indian
Franklin Templeton Oct 6
Foreign 50 22 35481.40
Mutual Fund 1995
Feb 7 Joint Venture
SBI Mutual Fund 42 11 33727.90
1992 Indian
54
Apr 20
LIC Mutual Fund Institutions 19 4 30049.40
Page
1994
Kotak Mahindra Mutual Aug 5
Indian Private 27 20 28636.90
Fund 1994
Dec 20
IDFC Mutual Fund Indian Private 51 16 21482.80
1999
DSP BlackRock Mutual May 13 Joint Venture
36 6 21415.80
Fund 1996 Indian
Mar 15
Tata Mutual Fund Indian Private 57 22 18464.10
1994

Sundaram BNP Paribas Feb 26 Joint Venture

34 24 12717.50
Mutual Fund 1996 Indian
May 20
Religare Mutual Fund Indian Private 24 13 10918.50
2005
Mar 21
Deutsche Mutual Fund Indian Private 23 17 9016.87
2002
Canara Robeco Mutual Mar 2 Joint Venture
21 5 8533.44
Fund 1993 Indian
Fidelity Mutual Fund Jul 2 2004 Foreign 14 6 8000.45
Nov 20 Joint Venture
PRINCIPAL Mutual Fund 26 3 6827.97
1991 Foreign
JM Financial Mutual Jun 9
Fund 1994
Dec 12 Joint Venture
HSBC Mutual Fund 21 3 5353.19
2001 Foreign
Nov 4
Fortis Mutual Fund Foreign 14 13 5162.39
2003
Sep 20 Joint Venture
JPMorgan Mutual Fund 8 0 4030.79
2006 Foreign
Apr 30
L&T Mutual Fund Indian Private 18 9 3693.42
1996
Baroda Pioneer Mutual Nov 5 Joint Venture
11 0 3075.20
Fund 1992 Foreign
Jul 27
Taurus Mutual Fund Indian Private 12 6 2438.65
1993
Morgan Stanley Mutual Oct 12 Joint Venture
4 0 2256.80
Fund 1993 Foreign
Benchmark Mutual Oct 16
Fund 2000
Apr 6 Joint Venture
ING Mutual Fund 38 4 1544.36
1998 Foreign
AIG Global Investment Oct 13
Foreign 8 0 1014.66
Group Mutual Fund 2006
Jun 4
Peerless Mutual Fund Indian Private 7 0 921.26
2009
55
Aug 31
Sahara Mutual Fund Indian Private 18 1 741.62
1995
Page
Bharti AXA Mutual Aug 13 Joint Venture

11 1 693.37
Fund 2007 Foreign
Aug 23
Edelweiss Mutual Fund Indian Private 12 0 282.76
2007
May 1 Joint Venture
Shinsei Mutual Fund 3 0 273.08
2007 Foreign
Mirae Asset Mutual Nov 20
Foreign 13 0 252.13
Fund 2006
Escorts Mutual Fund Dec 1 Indian Private 13 1 195.50

1995
Sep 19
Quantum Mutual Fund Indian Private 6 0 102.43
2005
56 Page
Chapter 4
Health Insurance Plans – Types and details

Companies offering health plans:-
National Insurance
Bajaj Alliance General Insurance
ICICI Lombard General Insurance
Star health and Allied Insurance
Oriental Insurance
HDFC ERGO General Insurance
Apollo Munich Health Insurance
IFFCO Tokio General Insurance
Reliance General Insurance
Royal Sundaram Alliance Insurance
Cholamandalam MS General Insurance
United India Insurance
The New India Insurance
Tata AIG General Insurance
Decoding Health Insurance:-
The possibility of one undergoing some kind of expensive health treatment during the lifetime is
much more than a sudden demise. Given the cost of treatment at private healthcare facilities, its
57
almost beyond reach for the middle and lower income class to meet such expenses. Despite that,
the penetration of health insurance in our country is extremely low. Only 2% of India’s population is
Page
covered under medical insurance.
This is partly because of a lack of understanding of various products and the need for these
products. There is a wide range of health products available in the market, each with its own
advantages and drawbacks. Understanding them is important to make the right choice.
Individual Health plan:-

The simplest form of health insurance is the individual mediclaim policies. It covers hospitalization
for an individual for up to the sum assured limit. The insurance premium is dependent on the sum
assured value. Unlike in the past, most plans now come with sub-limits for each of these heads.
Drawbacks:- There are restrictions in terms of pre-existing ailments, out-patient treatments and
other exclusions. There is a limit on maximum age at entry.
Family Floaters:-
These plans consist of shared individual health plan. The benefits are mostly the same, but the sum
insured can be used for the treatment of any or all members of the family and not a single person.
This reduces the need for you to pay from the pocket. It comes at a lower premium.
Drawbacks:- Most family floaters have an upper age limit of 55 years or 60 years. Moreover,
coverage of children under this policy will cease once they reach 25 years. Therefore, a family
floater is more suitable for a young family.
Critical Illness:-
This is not a category in itself, but an addition to the individual or family floater plan. In India, these
plans are sold separately, this is a major flaw in the sales of health insurance. An illness plan
provides financial assistance if the insured develops a serious ailment, such as cancer or has a
stroke.
Drawback:- This is not a comprehensive health insurance cover and only covers specific
situations. Moreover, a diagnosis of a critical ailment like cancer may not enough to trigger
payment of the policy if the cancer has not spread or is not life threatening. Other restrictions may
include a specific no. of days the policy holder must be ill or must survive after diagnosis.
Senior Citizen Health Plan:-

58Page
Most basic mediclaim plans cap the entry age at around 60 years while senior citizens health plans
are generally for the people in the age group of 60-80 years. Most can be renewed lifelong or up to
the age of 90, and have a fixed coverage of, say Rs 1 lakh or 2 Lakh.
Drawback:- One should watch out for the illness as many ailments are excluded from these plans.

Daily Hospitalization plans:-
Hospital Cash plan is a daily cash benefit insurance policy that assists the policy holder to meet all
his/her miscellaneous expenses during the period of their hospitalization generally not covered in
the regular health insurance. It acts as a supplement to the health insurance policy.
Drawback:- These plans are not sufficient in themselves as they only cover hospitalization
expenses and not medical costs.
Unit-Linked Health Plan:-
Although life insurers are selling these policies, they may not cover life risk. Out of the premium
paid, a portion goes towards medical coverage and the rest of the premium is in the stock market
just like a ULIP. They are defined benefits and the payout is not dependent on the cost actually
incurred.
Drawback:- Linked to the market, they are subject to market risks and also costs like fund
management charges.
Medical Cover from Life Insurers:-
Life insurance companies, too, have started offering health plans. These are long-term, having a
fixed premium for, say, three, five or even 10 years. These policies do not need to be renewed
every year. There are variations in this policy, including some cash back policies also.
Drawback:- Claim procedure is relatively difficult in health policies provided by life insurers. Claim
settlement ratio is higher at general insurance.
59
Page
Chapter 5
Analysis of performance of various funds
IDBI FORTIS

Equity Growth Fund
Large Cap , 71 .7 6% Mid Cap, 15 .7 1%
Small Cap, 9. 14 %
Equity 96.87%
Cash & CBLO , 2 .88%
Returns as on 31st Jan 2010
NAV 12.18
1 Month -4.16%
3 Months 13.46%
6 Months -6.13%
60Page
Since Inception 69.82%
Nifty Index Fund

Investment Objective:-
The objective of this fund is to replicate the returns generated by the Nifty Index. The composition
of the portfolio of securities invested in this scheme will be similar to the Nifty Index subject to IRDA
guidelines.
Cash 4%
Equity 96%
Returns as on 31st Jan 2010
NAV 9.45
1 Month -6.18%\
3 Months 2.98%
61
Since Inception 69.82%

Page
Midcap Fund
Investment Objective:-

The objective of the fund is to invest in mid cap stocks with attractive growth prospects. It aims to
diversify risk in investing in large cap as well as fixed income investments when required.
Equity 96.5%
Cash 3.5%
Fund manager’s perspective:-
Global and Budget uncertainties would keep the markets volatile. Sharp corrections would be used
as buying opportunity in markets.
62
NAV 9.64
Page
GuaranteedReturn Fund

Investment objective:- It is a close-ended scheme which guarantees minimum terminal NAV at the
maturity of the scheme. The corpus of the scheme is invested in money markets and fixed income
securities.
Asset allocation
Term deposits 81.09% NCD 7.54%
Cash 11.37%
Fund is comfortably positioned to deliver NAV of 14.69 on April 01,2013.
HDFC Equity Fund

63Page
Particulars Holding
BANK OF INDIA LTD-Term Deposits 39.19%
FEDERAL BANK LTD-Term Deposits 7.01%
IDBI BANK LTD-Term Deposits Launched in Dec 1994, HDFC equity is 0.79%
KOTAK MAHINDRA BANK LTD-Term Deposits 3.35%one of the oldest
STATE BANK OF PATIALA-Term Deposits schemes and the 21.51%
STATE BANK OF INDORE-Term Deposits third largest diversified quity 9.25%
POWER FINANCE CORPORATION LTD-NCD 7.54%fund in the country with
CASH & CBLO 11.37%
assets under management(AUM) of over Rs.6100 cr. The rise in its asset base and its popularity is
not just a fluke but an outcome of fund’s consistent performance over the years.
The fund has been criticized on more than one occasions for dissatisfying its investors during
some of the bullish market phases of the decade, but its dramatic recovery thereafter and
outstanding performance thereafter has silenced critics.
Performance:-
Having been a part of the mutual fund industry for more than a decade, HDFC equity definitely
boasts a long experience having faced both the bullish and the bearish phases in its 16 year long
journey. The fund has not only successfully beaten its benchmark indices and cushioned its fall
during the dotcom bubble of 2000-01, but also made a steadfast recovery in the immediately
following years of 2002-03. Its 126% returns in 2003 against its benchmark S&P CNX 500’s returns
of about 98% in that year were commendable indeed.
However, in 2006-07- one of the most bullish phases of the decade- HDFC Equity grossly failed to
meet the investor expectations. In 2006, the fund returned just about 36%, marginally
outperforming its benchmark returns of about 34%.
The fund’s poor performance in these years can be, however, attributed to very low exposure in
the hot sectors of the industry, such as real estate and construction. In fact, even in 2007, HDFC
Equity maintained a high exposure in sectors like healthcare, which, being most defensive was one
of the poorest performing sectors in that year. The strategy and investment decisions that failed in
2006-07, however, did wonders for the fund in the following years. In 2008, as the equity markets
across the globe collapsed like pack of cards, HDFC equity’s NAV, too fell by about 50%.
But this fall was far lower than the 57% decline in the returns of its benchmark index. The fund,
however, recovered these losses in 2009 as it returned a whopping 106%.
Even in the current calendar year, despite the market volatility, the fund has continued its winning
streak as it has returned about 7% gains since January against the CNX 500’s negative 0.3% returns
64
during this period.

Page
Portfolio:-

For a fund with size as large as Rs.6000cr, HDFC equity’s portfolio is well diversified to incorporate
an average of about 60 stocks across sectors.
While the fund has a multi-cap approach, it is clearly biased towards large-cap stocks with more
than 60% of its equity portfolio invested in the large caps.
For the sectoral allocation, the fund has a reasonable exposure in the healthcare and FMCG
sectors, to the tune of about 10% and 8% respectively. In fact, HDFC equity has been bullish on
healthcare since early 2007 when there were hardly any takers for this sector.
The turnaround witnessed in this space in the past one-and-a half year has in fact made healthcare
as one of the most favorite sectors of many fund managers in the industry. However, as far as the
highest sectoral exposure is concerned, financial and energy dominate HDFC equity’s portfolio as
they do for most other diversified equity schemes of the country today.
As far as its portfolio is concerned, the fund has a fine mix of stocks which have been invested into
way back in 2006-07 as well as some others that have been invested into recently.
Some of its profitable long term investments include Bank of Baroda, SBI, GSK consumer
healthcare, CMC, Divi’s labs, Dr. Reddy’s and Sun Pharma among others.
Overall view:-
Reckoned as a low risk and high return diversified equity scheme, HDFC Equity has indeed turned
out to be an investor’s delight so far. While its performance in 2006-07 had raised distrust for this
fund among many of its investors, those who continued to stay invested have been fairly rewarded
today.
The fund’s performance, investments strategies and portfolio diversification so far definitely
qualifies it for consideration as a viable investment option.
Top 5 Stock holdings:-
SBI – 7.5%
65Page
ONGC- 5.9%
Bank of Baroda- 4.0%
Titan industries-3.8%
ICICI Bank-3.4%

Sectoral allocation:-
Financial-23.3%
Chemicals- 0.4%
Textiles-0.6%
Engineering-2%
Diversified-2.5%
Communication-2.8%
Metals-2.8%
Cash and cash equivalent-3.7%
Consumer durables-3.8%
Construction-3.8%
Automobile-6%
Technology-6.5%
FMCG-7.7%
Services-8.1%
Healthcare-10%
Energy-16.1%
66Page
ICICI PRU ACE

Icici Pru Ace, launched in Jan 2010, offers seven investment options(funds). One can choose from
equity, debt or balanced portfolio. For instance, dynamic P/E, bluechip, multi-cap growth,
opportunity and return guarantee fund are equity based, whereas money market and income fund
are debt based. Those looking for a balanced portfolio can opt for multi-cap balanced fund. These
are fixed portfolio strategy offered by the scheme. Besides, the product also offers the trigger
portfolio strategy, whereas the fund will maintain a equity-debt ration of 75% : 25%.
Cost structure:-
Unlike other Ulips that charge hefty premium allocation charges (PAC) in the initial years, ICICI PRU
Ace does not charge any PAC. However, any additional premium paid towards investment purposes
only are charged at 1% as allocation charge. As far as other charges are concerned, they are also
very low.
Considering these charges, if the fund were to generate returns at 6% and 10% as mandate
by IRDA, the net yield in the hands of investors after factoring the above costs would be 4.6% and
8.5% respectively per annum. This is fairly higher than 3.8% and 7.6% annualized net returns
offered by its peer products.
Benefits:-
Despite of the fact that the policy does not have any premium allocation charge, investors are
allotted additional units at 2% of annual premium every year from the sixth policy year onwards.
Also the policy gives loyalty units at 2.5% of fund value, allotted every fifth year starting from tenth
policy year as an incentive. A few other benefits include:
- The plan offers cover continuance option, which ensures that the policy and its benefit
continue, in case one is unable to pay the premium.
- Increase or decrease of sum assured anytime within the policy tenure.
- Additional riders like critical illness and accidental death and disability benefit on payment
67
of additional fee.
Page
Performance:-
Ulips are known as investment cum insurance product. Since, the premium is invested in assets like
equity and debt, it is important for investors to choose funds as per their risk appetite and keep a
track of their performance.
Icici pru Ace is only six months old and the fund has fairly outperformed the major market indices.
For example, Nifty, Sensex and Bse 500 have been returned 1.52%, 1.09% and 2.72% respectively

during this period, whereas returns from Icici Pru Ace’s bluechip, dynamic P/E and opportunity fund
have been 2.11%, 5.2%, 4.16% respectively. Similarly, the income fund has given returns 3.635 as
compared to 2.87% by its benchmark. But the past record of Icici Pru is disappointing as some of its
funds have underperformed in the past three year, the exception being Maximizer, but its no more
available to new investors. The long term record of its equity oriented funds is encouraging. In
contrast, Multiplier-its other equity scheme- has grossly underperformed the broader market, while
Flexi-growth just about match the market returns.
Portfolio Review:-
This has the highest exposure in the financial services and oil and gas sectors, making it a high beta
fund. Beta measures a portfolio or a stock sensitivity to market movement. In fact, the portfolio of a
few of its funds like multi-cap growth and opportunity, comprise almost 40% of the above
mentioned sectors. The portfolios also have very high exposure in metal stocks, which are
underperforming.
It has low exposure in the health-care and FMCG , which are relatively low beta sectors. According
to the fund manager, health care stocks are currently very expensive and these companies face
related risk. The fund manager has an equally pessimistic view about consumer goods companies
and he believes that these companies are currently facing pressure.
While the fund manager has asserted to frequent churning of the portfolio, the same is restricted
to high volatile sectors such as commodity, construction, etc. Real estate and telecom, are absent
from ICICI Pru Ace’s portfolio.
Death/Maturity Benefits:-
Upon maturity, the policy holder receives the amount accumulated in the fund, whereas in case of
death, higher of the fund value or sum assured will be received. For instance, say a 35 year old
healthy male invests 50,000 p.a in dynamic P/E fund of ICICI Pru Ace for 15 years. Assuming sum
assured equivalent of five times the annual premium, that is Rs.2.5 lakh. Now by the end of 15
years, assuming rate of return of 6% and 10%, fund value shall be Rs 10,70,975 and 15,03,238
respectively, at maturity. However, in case of death, say in the sixth policy year, the nominee shall
receive higher of the sum assured Rs. 2.5 lakh or the accumulated fund value, Rs. 3,43,998. Also, in
68
case the recipient does not want to take the fund value in lump sum, there is an option of
Page
structured benefit on maturity, where in one gets payments on an yearly, half yearly, quarterly or
monthly basis, over a period of one to 5 years
My View:-
Icici Pru Ace is one of the most competent products in the industry at present in terms of its cost
structure. As there are a variety of funds available with various equity proportions, investors should
park their money as per their risk appetite and should keep a check on the returns of these options.
Those who have already taken this plan should track its performance on a regular basis and can
switch to funds performing better(four switches are allowed), while those planning to invest can
wait for a while and check the performance as it is difficult to comment on these funds at this stage.
Sector-wise allocation of funds:-
Banking and finance – 23%
Oil and gas – 17.8%
Metals – 9%
Technology – 8.9%
Infrastructure – 8.9%
Consumer goods – 6.5%
Auto – 6.3%
Capital goods – 5%
Healthcare – 3.2%
Telecom – 1.6%
Others – 1.2%
Real estate – 1.1%
Cement – 0.8%
69
Page
UTI LEADERSHIP EQUITY FUND

Uti Leadership equity fund was launched in January 2006 with an objective to invest in companies,
which are perceived as leaders in their respective sectors. This however, does not render UTI
leadership equity as an exceptional fund as its portfolio is akin to any other multi-cap diversified
equity scheme with a clear bias for large cap companies.
Performance:-
With most of the Sensex and the Nifty stocks forming part of its portfolio and the sectoral
weightage also similar to that of the sensex and nifty, the performance of the Uti leadership equity
can be more or less aligned to the performances of the indices. In 2007, for instance, even as the
category of diversified equity delivered an average of around 60% returns, Uti equity was content
with only 53% returns, akin to that of its benchmark index- the S&P CNX nifty which returned about
55% that year. The sensex returns were about 47% then. In the meltdown year of 2008, the fund’s
net asset value declined by about 54% against the 52% decline in the indices. The category of
diversified equity schemes fell by an average of about 57% that year.
For further disappointment of its investors, the fund did not show any improvement in its
performance even in the following years, despite the market making a sharp recovery. In 2009, for
instance, it returned about 69% for the year against the 76% returns of nifty. Then again, in the
current year, it has so far managed to generate just about 1% gains against the Nifty gains of 2%.
To summarize the fund’s performance till date, since its launch in 2006, it has returned just about
46% absolute gains to its investors against about 72-73% gains by the sensex and nifty respectively,
rendering this fund as a below average performer so far.
Portfolio:-
With its objective to invest in sector leaders, UTI leadership equity’s portfolio clearly comprises of
Blue chip Nifty stocks. Moreover, its sectoral buildup is also pretty similar to that of the sensex and
nifty. This can be construed as one of the reasons for the fund’s poor performance, especially in the
70
current calendar year where these two major indices of the country have been extremely volatile,
thanks to their restricted sectoral composition. It is devoid of any exposure in the healthcare
Page
sector-one of the most prosperous sectors for over an year now- while its has a high exposure in
sectors like metals which have been highly volatile since the beginning of this year.
A far as stock holdings are concerned, most of its blue chip holdings date back to the time of its
launch in 2006. The dedicated long term investment strategy in these stocks has definitely boosted
the fund’s notional gains. Some of these stocks where the fund can be said to have made massive
profits include SBI,BHEL,L&T,RIL AND Infosys. At the same time, some of its other long term
holdings have been severely impacted by the market volatility and are currently trading below their

investment costs. These include Jaiprakash associates, Sterlite Industries, SAIL, Tata steel, Alok
industries.
While the fund does churn its portfolio occasionally, a major chunk of its current portfolio is more
than two years old clearly hinting at fund’s philosophy for long term investments rather than a
trading tendency. Nearly four-fifth of the fund’s current equity portfolio is believed to be trading at
a price above the cost of investment. However, some prominent companies like pharma and
consumer goods are clearly missed in the portfolio.
My View:-
UTI leadership equity, given its current portfolio structure and investment strategy, can be said to
be a highly conservative equity scheme. This extremely conservative approach has, however, led
the fund to miss out on some of the brilliant opportunities in the market. The mutual fund industry
has many other conservative equity diversified schemes on offer, some from the UTI basket itself
that have historically generated much better returns than Leadership equity.
1 Equity 96.01%
2 Debt 2.41%
3 Cash / Call 1.59%
DSP BR Micro-Cap Fund

(G)
NAV Details 
71
NAV Date Jul 6 2010

Page
NAV [Rs.] 15.82

Buy/Resale Price [Rs.] 15.66

Sell/Repurchase Price
15.82
[Rs.]

NAV Returns
1 Week 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception

[%] [%] [%] [%] [%] [%] [%] [%]
Returns 2.37 8.71 17.21 27.95 91.73 15.48 0.00 16.15
Investment Details
Summary Info
Fund Name DSP BlackRock Mutual Fund Tax Benefits

Scheme Min. Investment [Rs.] 10000.00
DSP BR Micro-Cap Fund (G)
Name
DSP BlackRock Investment Increm. Investment
AMC 1000.00
Managers Pvt Ltd [Rs.]

Type OPEN

Category Equity - Diversified

Launch Date May 4 2007

Fund
Mr. Mehul Jani
Manager

Net Assets
292.43
(Rs.cr)
72
Holdings
Page
Company % Holding
Whirlpool India 5.73

Jubilant Organ. 4.98

Hind.Dorr-Oliver 4.79

Federal Bank 4.56


Zuari Inds. 3.71

McNally Bharat 3.66

Coromandel Inter 3.26

Ipca Labs. 3.25

TRF 3.25

Shasun
3.24
Chemicals

Patni Computer 3.16

Bata India 3.04

Gateway Distr. 2.94

Kajaria Ceramics 2.84

DQ Entertain. 2.77

K P R Mill Ltd 2.65

TTK Prestige 2.6

Jyothy Lab. 2.46

Kennametal India 2.37
73

Page
Sadbhav Engg. 2.36

Take Solutions 2.23

Godawari Power 2.11

NIIT Tech. 2.07


Rallis India 1.94

JMC Projects 1.93

Everonn Educat. 1.83

Dhanalaksh.Bank 1.82

Bayer Crop Sci. 1.81

Raymond 1.81

Radico Khaitan 1.77

Marg 1.77

UCO Bank 1.7

Sterlite Tech. 1.62

Other Equities 1.34

Vascon Engineers 1.14

CBLO 1.03

CMC 1.03

Bombay Dyeing 0.91

74
Eimco Elecon(I) 0.81

Page
Nilkamal Ltd 0.72

Nucleus Soft. 0.58

Net CA & Others 0.41


Sundaram BNP Paribas India Leadership - Inst

(G)
NAV Details 
NAV Date Sep 4 2009

NAV [Rs.] 33.24


Sell/Repurchase Price [Rs.] 33.24
NAV Returns
1 Week 1 Month 3 Months 6 Months 1 Year 3 Years 5 Years Since Inception

[%] [%] [%] [%] [%] [%] [%] [%]
75
Returns 13.25 13.25 13.25 0.00 0.00 0.00 0.00 35.24

Page
Summary Info
Fund Name Sundaram BNP Paribas Mutual Fund

Investment Details
Scheme Name Sundaram BNP Paribas India Leadership - Inst (G)
Tax


AMC Sundaram BNP Paribas Asset Management Comp Benefit

s
Type OPEN
Min.
Category Equity - Diversified Invest 1000000
ment 0.00
[Rs.]
Launch Date Apr 28 2009

Increm.
Fund Manager J Venkatesan Invest 100000.
ment 00
Net Assets [Rs.]
188.28
(Rs.cr)
Asset Allocation
Equity – 92%
Cash and bank deposits – 8%
76
Holdings
Page
Company % Holding
Cash & Bank
8
Balance

Sterlite Inds. 5.43

TCS 5.2


Reliance Inds. 5.16

Tata Motors 4.85

St Bk of India 4.02

Axis Bank 3.49

ONGC 3.47

United Spirits 3.36

ITC 3.28

Indian Hotels 3.26

Tata Steel 3.21

BHEL 2.92

Larsen & Toubro 2.91

NTPC 2.84

Bajaj Auto 2.82

Hero Honda Motor 2.76

Bank of Baroda 2.72

77
Ranbaxy Labs. 2.63

Page

Jet Airways 2.5

Reliance Infra. 2.49

ICICI Bank 2.46


Dr Reddys Labs 2.36

Tata Power Co. 2.26

Dish TV 2.14

JP Associates 1.87

DLF 1.85

Cairn India 1.65

Punj Lloyd 1.63

M&M 1.56

IVRCL Infra. 1.5

India Infoline 1.42

Bharti Airtel 1.39

Rel. Comm. 0.94
78
Birla Sun Life Buy India Fund

Page
(G)
NAV Details 
NAV Date Jul 6 2010

NAV [Rs.] 40.88



Sell/Repurchase Price
40.88
[Rs.]
NAV Returns
1 W 1 Mo 3 Mon 6 Mon 1 Ye 3 Ye 5 Ye

Since Ince
eek nth ths ths ar ars ars
ption [%]
[%] [%] [%] [%] [%] [%] [%]
Retu 56. 11.7 19.1
2.51 6.57 9.25 9.28 14.38
rns 99 7 3
Summary Info
Fund Birla Sun Life

Name Mutual Fund

Scheme Birla Sun Life Buy
Name India Fund (G)

Birla Sunlife Asset
AMC Management
Company Ltd

Type OPEN

Category Equity - Diversified

Launch
Dec 15 1999
Date

79
Fund
Ajay Garg
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Manager

Net Assets
52.97
(Rs.cr)

Asset Allocation
Equity- 99%
Cash and bank deposits –
1%
Holdings
Company % Holding
Glaxosmit Pharma 7.12 Investment details

Rallis India 5.75
Tax Benefits 54EA

Indraprastha Gas 5.18
Min. Investment [Rs.] 5000.00

HDFC 4.8
Increm. Investment
1000.00
[Rs.]
Trent 4.4

St Bk of India 4.3

Aventis Pharma 4.12

ICICI Bank 3.74

80
Tata Tea 3.73

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ING Vysya Bank 3.57

M&M 3.16

Maruti Suzuki 2.98

Sundaram Clayton 2.97


United Spirits 2.95

Axis Bank 2.87

EID Parry 2.64

Jet Airways 2.64

Radico Khaitan 2.53

TV 18 India 2.52

Wyeth 2.48

ITC 2.44

Fulford (India) 2.43

Kotak Mah. Bank 2.22

India Infoline 2.16

SpiceJet 2.06

U B Holdings 2.05

TajGVK Hotels 1.91

PVR 1.84

Indian Hotels 1.8
81

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Ackruti City 1.62

Cox & Kings 1.48

Cash & Bank
1.24
Balance

Asian Hotels 0.74


UTV Software 0.68

Vardhman Hotels 0.58

Chillwinds Hotel 0.58

Magnasound (I) 0

Net CA & Others -0.29

HDFC TAX SAVER FUND
Top Holdings
Equity Sector Value (cr) % to Assets

82
ICICI Bank Banking/Finance 120.69 4.90

SBI Banking/Finance 119.72 4.86
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Crompton Greave Engineering 98.51 4.00

Sun Pharma Pharmaceuticals 93.68 3.80
Rural Elect Cor Banking/Finance 90.57 3.67
Infosys Technology 89.04 3.61
Axis Bank Banking/Finance 88.81 3.60
TCS Technology 80.15 3.25

Patni Computer Technology 71.92 2.92

Bank of Baroda Banking/Finance 71.07 2.88
Asset allocation:-
Equity : 93%
Cash: 3%
Others : 4%
Sectoral weightages:-
Banking/finance – 24.67%
Engineering – 12.21%
Pharmaceuticals – 11.6%
Technology – 9.78%
Oil and gas – 7%
Media – 5.29%
Automotive – 5.13%
Others – 16%
Performance:-
Crisil ranking – 2
83
1 year return – 52%

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Performance view – Buy
Investment type – Equity
Absolute Returns (in %)

Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Annual

2010 3.8 4.8 - - -
2009 -3.4 50.2 23.6 -0.2 96.1
2008 -26.1 -15.9 8.3 -26.2 -51.9
2007 -9.8 21.9 11.5 16.4 37.7
2006 19.9 -14.2 13.7 11.2 33.9
2005 7.8 13.8 25.4 8.7 74.3
Reliance Growth fund
Absolute returns : 46.8% since inception
Fund Type Open-Ended

Investment Plan Dividend
Asset Size (Rs cr) 81.97 (Jun-30-2010)
Last Dividend Rs.2.50 (Mar-30-2010)
Launch Date Aug 08, 2007
Benchmark BSE 100
Fund Manager Sunil Singhania
Exit Load 1.00%
Load Comments Exit load - 1% if redeemed/switched out on or before
completion of 1 yrs from the date of allotment.
Top Holdings (Jun 30, 10)

Equity Sector Value Asset
84
(Rs cr) %
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Lupin Pharmaceuticals 4.05 4.94

Jindal Saw Metals & Mining 2.69 3.28
EID Parry Food & Beverage 2.06 2.51
ONGC Oil & Gas 2.03 2.48
Divis Labs Pharmaceuticals 2.02 2.46
Reliance Oil & Gas 1.95 2.37

Jindal Steel Metals & Mining 1.92 2.34

Sector Allocation (Jun 30, 10)

Sector % -- 1-Year --
High Low
Banking/Finance 12.34 15.24 11.68
Pharmaceuticals 9.04 9.04 5.77
Metals & Mining 7.09 9.25 7.09
Oil & Gas 5.86 6.91 4.48
Technology 5.68 6.45 5.52
Food & Beverage 5.04 6.42 5.04
Asset Allocation (%) (Jun 30, 10)

Equity 69.16
Others 22.71
8.13
Cash / Call
85
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Franklin India Bluechip Fund
Crisil CPR Rank 1

1-year Return 27.6%

Performance View Strong Buy
Investment Type General Equity
Crisil CPR Category Large Cap
1 Equity 91.36%
2 Cash / Call 8.68%
Top 5 stock holdings:-
Infosys Tech – 7.9%
RIL – 6.1%
HDFC Bank – 5.6%
Bharti Airtel – 5.4%
ICICI Bank – 4.4%
Sectoral Allocation:-
Financial – 18.8%
Energy – 17.6%
86
Cash – 8.7%
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Communication – 7.1%
Diversified – 5.2%
FMCG – 4.2%
Construction – 3.4%

Franklin India bluechip fund is one of the oldest diversified equity schemes in India and among the
largest as well. Launched in Nov 1993, Franklin fund today ranks amongst the top 10 diversified
equity schemes by size, with average Assets under management(AUM) of over 3000cr. Its size
clearly reflects its popularity among equity investors.
Performance:-
During its existence for over a decade, the fund has had periodic spurts of outstanding
performances during 1997-99 and then again from 2002-04 when it outperformed the market
indices by healthy margins.
However, barring these periodic bouts, the fund has been an average performer with returns
aligned to those of the broader market indices. In fact, it is one of the no-nonsense funds that
believes in the traditional philosophy of long term investment in highly liquid and large companies
and is thus suitable for investors with low risk appetite.
For instance, in 2006 and 2007, the two years of fantastic rally witnessed in the equity market,
when many other diversified equity schemes have had startling performances, this fund failed to
impress the investors with returns that were highly correlated to the movements in the BSE Sensex.
The fund’s abstinence from some of the high performance sectors such as real estate and
infrastructure then could be construed as one of the reasons for the fund’s abysmal performance.
However, the very same investment strategy proved to be a boon in the following year when the
market meltdown trashed the equity market by more than 50 percentage points.
Franklin India Bluechip, however , succeeded in curtailing the fall to about 48% in that year. In 2009
again, the fund delivered about 85% gains for that year, once again aligned approximately to those
of the sensex at about 81%.
A startling turnaround in the fund’s performance, however, has been in the current calendar year
as it returns about 5% gains since January against barely nil returns by the Sensex during the period.
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Portfolio:-
Adhering to the name, the fund is focused on bluechip companies with a little exposure to midcaps
and absolutely no exposure to high risk small caps. The fund’s portfolio is thus a bundle of
Prominent large-cap stocks such as RIL, Infosys, ACC, Hero Honda, Nestle, L&T among others.

The fund has been holding these stocks for more than three years now. Thus many of these
holdings, acquired at fairly low valuations before the market rally of 2007, continue to yield
handsome returns for the fund.
As far as the sectoral composition of the fund is concerned, being benchmarked to the sensex, its
sectoral weightages are similar to the former with large exposure in financials, energy and
technology sectors.
Fortunately, for the scheme, a limited exposure to metals- despite this sector commanding a high
weightage in the sensex – has saved its day from meeting the same as that of the sensex since
January this year. Metals have been one of the most beaten up sectors this year
On the other hand, had the fund devoted a little more importance to the health sector, its
performance could have been even better. Its only investment in pharma is Dr. Reddy’s Lab.
And while the mutual fund industry, per se, has taken a pessimistic approach to the telecom
space, it seems to be making value buy in this space and gradually increasing the exposure to two
of the most sought after stocks in this space – Airtel and Idea.
Given their extremely low valuations at the current levels, if these stocks happen to see a
turnaround in the near future, this fund could be a big gainer.
My View:-
Given its past performance and a well crafted portfolio, the fund is an ideal investment opportunity
for conservative investors that shun undesirable risk embedded in the equity market and are
content with just about average returns from their investments.
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Tata PURE EQUITY FUND

Total Net Assets as on 31/05/2010 (Rs. Lacs) : 57,183.38
Portfolio as on 31/05/2010
Finance 10.99

Rural Electrification Corp. Ltd. 3.84

LIC Housing Finance Ltd 3.55
HDFC Limited 2.93
India Infoline Ltd 0.67
Software 9.68
Infosys Technologies Ltd. 3.60
Wipro Ltd 2.34
Mphasis Ltd. 2.32
Oracle Financials Services Software 1.42
Auto 9.56
Bajaj Auto Limited 3.85
Tata Motors Limited 2.38
Mahindra & Mahindra Ltd. 2.37
Ashok Leyland 0.96
Banks 8.91
HDFC Bank Ltd 3.73
ICICI Bank Ltd 3.15
Axis Bank Limited 1.07
State Bank Of India 0.79
ING Vysya Bank 0.17
Petroleum Products 8.46
Reliance Industries Ltd. 5.21
H.P.C.L. 3.25
Pharmaceuticals 7.11
Cadilla Healthcare Limited 3.60
Lupin Ltd 3.51
Construction Project 6.98
Voltas Limited 2.83
Larsen & Toubro Ltd. 2.38
Nagarjuna Construction Co Ltd 1.77
Consumer Non Durable 5.98
ITC Ltd 2.48
Nestle India Ltd. 2.39
United Spirits Ltd. 1.11
Industrial Capital Goods 5.81
Crompton Greaves Ltd 2.58
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Bharat Heavy Electricals Ltd. 2.43

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Sterlite Technologies Ltd. 0.80

Transportation 5.51
The Great Eastern Shipping Co.Ltd 1.87
Jet Airways Limited 1.49
Mundra Port & Special Economic Zone 1.34
Container Corporation Of India Ltd. 0.81
Oil 4.14
Oil & Natu. Gas Co. 4.14
Media & Entertainment 3.66

Zee Entertainment Enterprises Ltd. 2.18

Sun TV Network Ltd. 1.48
Cement 3.12
Jai Prakash Associates Limited 1.68
Shree Cement Limited 1.44
Power 2.70
KEC International Ltd 1.97
Jyoti Structures Ltd. 0.73
Non - Ferrous Metals 2.55
Sterlite Industries (I) Ltd 1.37
Hindalco Industries Ltd 1.18
Industrial Products 1.16
Jain Irrigation Systems Ltd. 1.06
SKF Bearings India Limited 0.10
Gas 1.06
Gujarat Gas Company Ltd 1.06
Retailing 0.80
Pantaloon Retail (India) Ltd. 0.80
Auto Ancillaries 0.57
Wabco-TVS (India) Ltd 0.57
Cash, Others 1.25
Fund positioning: Focus on long term investment in fundamentally undervalued large cap
companies through a process of rigorous research.
SIP Returns
Investment Total Value of Compounded
Period Investment Investment as on Annualised
May 10, 2010 Return on
Investment (%)
Last 1 year 23.99
Last 3 years 19.43
Last 5 years 18.03
Since Disclosure of
1st NAV May 7, 1998 144000 842168 27.29
Past performance may or may not sustained in future. Dividend assumed to be reinvested.
Benchmark Returns through SIP route: BSE Sensex Last 1 year 14.44%, last 3 years 14.08%
90
and last 5 years 13.95%, Since Inception 17.88%. Investment of Rs 1,000 p.m. is assumed
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to be made on 10th of every month, if not then the next business day
Quantitative Indicators:
Scheme BSE Sensex
Average P/E : 23.10 Std. Dev (Annualised) : 32.87 33.44
Average P/BV : 5.70 Sharpe Ratio : 0.10 0.05
Annual Portfolio Turnover Ratio : 127.70 Portfolio Beta : 0.94 1.00
R Squared : 0.95 1.00
Portfolio turnover has been computed as the ratio of the lower value of average purchase and
average sales to the average net

assets in the past one year (since inception for schemes that have not completed a year)
^Risk-free rate based on the last 3 months T-Bill cut-off of 4.98%. Past Performance may or may not
be sustained in future.
Source: www.mutualfundsindia.com
Performance Record - Growth Option
Past Performance of the Scheme may or may not be sustained in future. Returns are given for
growth option. Dividends assumed
to be reinvested. While calculating returns dividend distribution tax is excluded. Returns < 1 yr
absolute. Returns > 1 yr CAGR.
10.77
22.78
28.08
0.11
15.86
5.22
20.32
12.54
28.28
3.87
0
5
10
15
20
25
30
Tata Pure Equity Fund BSE Sensex

Past Performance of the Scheme may or may not be sustained in future. Returns are given for
growth option. Dividends assumed
to be reinvested. While calculating returns dividend distribution tax is excluded.
Rs. 100000 invested at inception: Tata Pure Equity Fund Vs BSE Sensex
Snapshot
Fund Manager : M Venugopal (Equity)
Indicative investment horizon: 3 years and above
Inception Date : May 7, 1998
91
AUM (Rs. lacs) : 57,183.38

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NAV (as on 31/05/2010)

Dividend : Rs 35.91
Growth : Rs .90.50
52 week High (G) : Rs 93.24 (26-Apr-2010)
52 week Low (G) : Rs 65.45 (13-Jul-2009 )
Expense : 2.50%

Birla Sunlife Dividend Yield
Crisil CPR Rank 1

1-year Return 57.6%
Crisil CPR Category Diversified Equity
Top Holdings
Wyeth Pharmaceuticals 15.52 3.79
GlaxoSmith Con Food & Beverage 14.88 3.63
GlaxoSmithKline Pharmaceuticals 14.70 3.58
Cummins Engineering 13.11 3.20
Rural Elect Cor Banking/Finance 11.41 2.78
Andhra Bank Banking/Finance 11.25 2.74
Coromandel Int Chemicals 11.07 2.70
Bajaj Electric Cons Durable 10.74 2.62
Castrol Chemicals 10.62 2.59
Sector weightages:-
Banking/Finance – 17.87%
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Chemicals – 15.11%
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Pharma – 8.79%
Food and Beverage – 6.18%

Manufacturing – 3.43%
Metals and mining – 2.62%
Consumer durables – 2.62%
Misc – 2.5%
Utilities – 1.94%
Services – 1.53%
Consumer non-durables – 1.42%
Media – 1.2%
Conglomerates – 0.89%
Asset Allocation:-
Equity – 93.66%
Cash – 3.55%
Others – 2.77%
Returns:-
From Date NAV(Rs.) To Date NAV(Rs.)

14-07-2009 50.440 14-07-2010 81.660
93Page


2010 3.9 8.8 - - -
2009 -3.1 43.4 24.8 7.1 87.3
2008 -30.5 -12.6 5.8 -12.6 -45.1
2007 -5.4 21.6 8.8 26.6 55.9
2006 11.6 -18.4 15.5 2.1 9.7
2005 -4.8 3.6 17.5 6.7 28.4
Reliance Growth Fund – Retail plan(G)
Crisil CPR Rank 1

1-year Return 45.6%

Equity Sector Value Asset
(Rs cr) %
Jindal Saw Metals & Mining 245.65 3.28
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EID Parry Food & Beverage 188.17 2.51

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ONGC Oil & Gas 186.00 2.48

Divis Labs Pharmaceuticals 184.42 2.46
Jindal Steel Metals & Mining 175.25 2.34

High Low
Metals & Mining 7.09 9.25 7.09
Oil & Gas 5.86 6.91 4.48
Technology 5.68 6.45 5.52
Food & Beverage 5.04 6.42 5.04

Equity 69.16
Others 22.71
Cash / Call 8.13

2010 1.8 3.4 - - -
2009 -6.2 54.7 19.9 -0.2 93.5
2008 -30.0 -9.2 -3.6 -23.6 -54.6
2007 -3.9 22.1 12.5 33.2 74.7
2006 20.4 -14.9 17.4 13.8 39.8
2005 5.9 9.8 28.1 8.6 67.6
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Reliance Monthly Income Plan
Fund Type Open-Ended

Investment Plan Growth

Asset Size (Rs cr) 5,207.83 (Jun-30-2010)

Minimum Investment Rs.1000

Debt Rating Value Asset
(Rs cr) %
BANK OF INDIA P1+ 585.16 11.24
TATA TELESERVICES LIMITED CARE A+ (SO) 253.99 4.88
IDBI BANK LTD A1+ 244.12 4.69
7.80% GOI (MD 03/05/2020). Sovereign 244.08 4.69
8.20% GOI (MD 15/02/2022) Sovereign 199.10 3.82
TATA STEEL LTD. AA(IND) 196.07 3.76
POWER FINANCE CORPORATION LIMITED AAA 137.10 2.63
7.27% GOI 2013(MD 03/09/2013) Sovereign 136.95 2.63
IDBI BANK LTD P1+ 124.72 2.39
BHARAT PETROLEUM CORPORATION LTD. AAA 124.32 2.3

High Low
Oil & Gas 3.46 3.46 1.04
Telecom 1.42 1.42 0.68
Engineering 1.33 3.16 1.02
Automotive 0.82 2.24 0.82
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Equity 17.38
Others 1.06
Debt 80.8
Cash


2010 1.1 2.2 - - -
2009 -3.1 10.0 5.8 -0.2 20.8
2008 -6.3 -0.1 1.4 13.6 9.4
2007 -3.0 2.5 3.3 5.6 8.3
2006 4.2 -0.5 5.0 4.3 14.7
2005 1.6 2.9 6.9 2.3 14.9
HDFC Top 200 Fund
Crisil CPR Rank 2

1-year Return 33.6%
Performance View Buy
Top Holdings
97

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ONGC Oil & Gas 379.73 4.73

Larsen Engineering 329.22 4.10
ICICI Bank Banking/Finance 329.16 4.10
ITC Tobacco 287.69 3.59
GAIL Oil & Gas 233.63 2.91

LIC Housing Fin Banking/Finance 223.48 2.79
Sectoral
Weightages (Jun30,2010)
Pharma – 8.18%
Utilities – 3.88%
Tobacco – 3.59%
Cement – 2.56%
Telecom – 2.46%
Consumer non durables – 2.42%
Misc – 2.34%
Media – 1.86%
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Services – 1%
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Chemicals – 0.36%
Asset Allocation (Jun 30,

2010)
1 Equity 98.68%

2 Cash / Call 1.31%

2010 1.3 5.2 - - -
2009 -2.0 53.7 18.2 -0.2 91.0
2008 -22.7 -11.8 6.2 -22.8 -45.5
2007 -5.7 20.3 15.8 20.2 53.2
2006 20.5 -12.8 16.9 9.7 37.6
2005 - 7.7 21.6 13.4 52.9
Kotak 30 Fund
4
Crisil CPR Rank
1-year Return 28.8%
Performance View Average Buy
99Page
Top Holdings


HPCL Oil & Gas 32.87 3.15
Axis Bank Banking/Finance 31.68 3.03
Sectoral Weightages:-
Pharma – 7.18%
Cement – 4.42%
Tobacco – 3.65%
Media – 3.42%
Utilities – 3.39%
100
Food and beverage – 2.82%

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Chemicals – 1.67%
Asset Allocation (Jun 30,

2010)

1 Equity 95.37%
2 Money Market 3.52%
3 Debt 1.15%
4 Others / Unlisted 1.14%
5 Net Receivable / Payable -1.18%

2010 -0.2 3.7 - - -
2009 -3.8 36.7 17.5 3.9 63.5
2008 -25.1 -12.5 1.2 -23.1 -50.5
2007 -5.7 21.2 16.4 28.0 65.1
2006 24.8 -11.4 13.1 12.2 43.5
2005 -1.3 3.1 30.0 7.3 46.2
Given its name, one can conveniently presume that Kotak 30 is probably an index fund replicating
the 30 stocks of the Sensex. The fund, however, is similar to any other diversified equity scheme
with an objective to invest in about 30-40 large cap stocks and is benchmarked to the Nifty.
Launched in Dec 1998, the scheme has gained recognition as one of the most popular large cap
schemes of the mutual fund industry.
Performance:-
A performer in the category of diversified equity schemes, it has earned better returns than that of
its benchmark index Nifty, by good margins. This includes the Meltdown year of 2008 when it lost
about 50% of its NAV in the global market crash against nearly 52% decline in the nifty. However,
unlike many other popular schemes of its Genre in this category, the scheme failed to make a smart
101
recovery in 2009, fairly disappointing many of its investors. The gain of about 67% made by this
scheme last year against 76% gains of the nifty and about 85% average returns by the category of
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diversified equity schemes has come as a surprise given its past performance records. This
performance has, in fact, neatly pushed down the ratings of this otherwise successful large cap
scheme.
Since the time of its launch in 1999, it has handsomely rewarded its investors, especially during
the bullish periods of this cycle. After a remarkable performance in the year of its launch, 1999 –
when it returned about 152% against the 67% gains, Kotak 30 was beaten down by the tech bubble
burst in the following couple of years, but was quick to rebound and has been outperforming the

broader market indices by extremely good margins since then. Even in 2006 and 2007 – two of the
most bullish years of the decade which saw many diversified equity schemes reward its investors by
more than 80% gains – Kotak 30’s returns of about 44% and 66% respectively, cannot be
undermined given the fact that these come from a pure large cap fund which has bare minimum
exposure to the small and mid cap category of stocks. In the current calendar year too, the fund has
put up a fairly decent performance so far, delivering about 6% gains against the Nifty returns of
about 4% and the average returns by the category of Diversified Equity schemes of about 8%.
Portfolio:-
It is clearly a scheme for the conservative investor given its exposure to large caps and a relatively
low Beta. The fund currently commands a beta of 0.89 which implies that for every 1% gain/decline
in the market returns, the scheme will gain or lose about 0.89%. This makes it relatively lesser
volatile vis-à-vis he market. The fund’s low volatility can be construed to its relatively high exposure
in the defensive sectors such as health care and FMCG. After a relatively low exposure to the
health care space in 2009, the fund has been gradually increasing its exposure in this sector, which
clearly is one of the top performing sectors of the equity markets today. A low exposure to this
space until last year can be construed as one of the reasons for the fund’s relatively disappointing
performance last year.
Of late, the fund has completely moved out of the telecom space. Regulatory interferences and
acute competition has made telecom one of the most difficult sectors of the economy today. While
some of the fund managers perceive this as a value sector, given the kind of valuations the sector is
currently commanding, for others, this sector has become a failed story altogether. In case of this
fund, the fund manager is clearly supporting the second cause. As far as the stock selection is
concerned, the fund’s portfolio comprises of almost all popular large cap counters.
My View:-
102
A pure large cap fund, it has a good performance track record. However, a slowdown in its pace is
clearly evident and the fund needs to put in more efforts to match the returns of its other large cap
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peers inn this category. The fund is recommended for those seek relatively safe investment
portfolio with just about decent returns, which are more or less at par with the market.

HSBC Cash Fund
5
Crisil CPR Rank
1-year Return 2.7%
Performance View Strong Sell
Investment Type Money Market
Crisil CPR Category Liquid
Portfolio Holding:-
Cblos 16.97 17.61

Money market instruments - cps 9.11 9.46
Tata capital A1+ 4.56 4.73
Ongc videsh P1+ 4.55 4.73
Uco bank P1+ 4.55 4.72
Canara bank P1+ 4.39 4.56
State bank of mysore A1+ 4.39 4.56
Idbi bank A1+ 4.39 4.55
Bank of baroda P1+ 4.39 4.55
Asset Allocation:-
1 Money Market 73.68%

2 Cash / Call 26.30%
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2010 0.6 0.8 - - -

2009 1.1 0.5 0.5 0.5 2.6
2008 1.9 2.0 2.1 1.8 8.1
2007 1.9 1.8 1.7 1.9 7.7
2006 1.4 1.5 1.5 1.6 6.3
2005 1.2 1.3 1.3 1.3 5.1
Open-Ended
Fund Type
Investment Plan Growth
Asset Size (Rs cr) 96.32 (Jun-30-2010)
Minimum Investment Rs.100000
Fidelity Tax Advantage Fund
Crisil CPR Rank 1

1-year Return 44.7%
Crisil CPR Category ELSS
104
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Top Holdings
HDFC Bank Banking/Finance 55.13 4.66


HDFC Banking/Finance 34.96 2.95
Rallis India Chemicals 31.59 2.67
Sectoral allocation:-
Pharma – 9.6%
Media – 5.27%
Chemicals – 4.09%
Tobacco – 3.6%
Cons NonDurables – 2.19%
Misc – 1.96%
Cement – 1.82%
Cons Durable – 1.74%

105
Utilities – 1.55%
Telecom – 0.79%
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Asset allocation:-

1 Equity 97.42%
2 Cash / Call 1.70%

2010 3.2 7.6 - - -
2009 -0.4 41.1 20.1 6.7 83.4
2008 -25.8 -12.1 1.4 -22.2 -50.2
2007 -2.5 22.3 12.2 21.0 57.0
2006 7.7 -15.0 18.0 11.5 23.4
Religare Tax Plan
Crisil CPR Rank 2

1-year Return 43.1%
Crisil CPR Category ELSS
Top Holdings
106

HDFC Banking/Finance 5.13 5.05
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Power Finance Banking/Finance 2.69 2.65

Bosch Automotive 2.49 2.45

BHEL Engineering 2.20 2.17
Pharma – 4.28%
Cons NonDurable – 3.31%
Chemicals – 2.87%
Media – 2.73%
Services – 2.15%
Misc – 1.98%
Real Estate – 1.97%
Utilities – 1.46%
107
Telecom – 1.4%
Cement – 0.85%
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Tobacco – 0.77%
Asset Allocation:-

1 Equity 91.94%
2 Cash / Call 8.06%

2010 2.9 5.6 - - -
2009 -5.1 42.6 21.3 8.9 82.0
2008 -26.0 -18.9 -0.1 -17.5 -49.9
2007 -10.6 22.0 14.2 28.2 62.3
ICICI PRUDENTIAL DISCOVERY FUND
Crisil CPR Rank 1

1-year Return 65.9%
Crisil CPR Category Small & Mid Cap
108
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Top Holdings
Bharti Airtel Telecom 68.74 5.80
StanChart IDR 59.39 5.01
Cadila Health Pharmaceuticals 52.77 4.45

United Phos Chemicals 48.14 4.06

CESC Utilities 47.34 3.99
Rain Commoditie Cement 40.83 3.44
Sterlite Ind Metals & Mining 39.87 3.36
GE Shipping Services 39.44 3.33
Vardhman Text Manufacturing 37.53 3.17
FDC Pharmaceuticals 35.69 3.01
Pharma – 11.23%
Chemicals – 9.37%
Utilities – 7.27%
Telecom – 5.8%
Cement – 5.08%
Services – 3.33%

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Asset Allocation:-
1 Equity 89.85%
2 Cash / Call 6.45%

2010 5.6 5.0 - - -
2009 -5.7 62.0 34.5 10.0 128.9
2008 -32.5 -8.5 -4.3 -22.6 -55.8
2007 -11.0 21.9 3.2 26.3 38.8
2006 19.1 -15.2 19.8 3.7 28.1
2005 1.5 9.4 28.8 6.8 60.6
Fidelity India Special Solutions
Fidelity India Special Situations scheme was launched in April 2006 seeking long term investment in
undervalued companies. It has been named ‘Special Solutions’ as the fund aims to focus on out-of-
the ordinary situations which present interesting stock picking opportunities. Investors, however,
should not presume that this fund has an out-of-the ordinary portfolio or has generated out-of-the-
ordinary performance. Benchmarked to the BSE 200, this fund has emerged as an average
performer with returns more or less at par with the major market indices.
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Performance:-
While the fund did make a dashing start in 2006, delivering nearly 39% returns against the BSE
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200’s 30% returns during May-Dec 2006, it drastically failed to meet the returns of its benchmark
index as well as other broader market indices in the following year when investor’s expectations
from the equities and equity related mutual funds were at the highest. A return of 45% in the year
2007 can by no means be construed insignificant. However, when compared with over 60% gains by
the BSE 200 or nearly 55% returns by the Nifty, Fidelity Special Solutions returns were definitely
below par. Even the category average of the diversified equity schemes has stood about 60% that
year.

The following years of 2008 and 2009 saw the fund’s performance aligned to the broader market
indices, especially the Sensex. In 2008, for instance, the fund’s NAV fell by about 52%,equivalent to
the decline in the returns of the Sensex and Nifty, and in 2009, the sharp recovery of about 81% in
its NAV can be aligned to an equally sharp recovery in the sensex. As far as the fund’s benchmark
index is concerned, it fell by about 57% in 2008 and recovered to the tune of 89% by the end of
2009.
There has been a dramatic change in the pace of Fidelity India Special Solutions this year. Even as
the Sensex and Nifty have been struggling amidst the global uncertainties and have returned just
about 2.5-3.5% since January this year, Fidelity’s Special Solutions has zoomed past with more than
10% returns during the period.
The fund’s current year’s performance has thus given it an edge over the indices when the total
returns since the time of its launch are taken into consideration. Those who have invested in the
fund way back in April 2006 have nearly doubled their money – Rs 100 invested then has grown to
about Rs 178, implying a 78% absolute gain over these four years. The sensex and nifty have
provided about 70% absolute gains during the period.
Portfolio:-
Top 5 stock holdings -
1) RIL – 8.1%
2) NSE – 6.4%
3) HDFC Bank – 4.7%

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4) Infosys – 4.4%
5) ITC – 3.1%
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Sectoral Allocation –
Financial – 33.2%
Energy – 15.3%
FMCG – 8.1%
Metals – 5.2%
Healthcare – 4.7%
Construction – 4.4%
Automobiles – 3.9%
Services – 3.3%
Diversified – 1.8%
Chemicals – 1.2%
Consumer Durables – 1%
Cash and cash equivalent – 2.8%
Managing assets(AUM) of over 1000 cr, Fidelity India Special Situations is extremely well diversified,
incorporating more than 80 stocks in its portfolio, including foreign equity, albeit a small
percentage. As on May 2010, the fund’s total exposure to foreign equities stood at about 6.5%
while domestic equities comprised about 91% of the portfolio. Within its domestic equity portfolio,
the fund has a blend of almost well known large cap blue chip stocks as well as some of the popular
mid cap companies.
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While the fund has stuck to its objective of long term investments, its portfolio does not reflect
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out-of-the-ordinary situations for stock picking. It has extremely high exposure to the financial and
energy sectors, which are two of the most popular stocks for most MF schemes today. Within the
financials, it has a clear bias towards PSU banks, which currently constitute more than 12% of the
fund’s equity portfolio. IT is another space, which the fund has been extremely optimistic on, since
inception. While the fund marginally cut its exposure in this space in the beginning of 2009, it was
quick to raise the exposure to over 10% by mid 2009. Most IT stocks have been the beneficiaries of
the market recovery in 2009.

It was, however, surprising to see the fund reduce its exposure to healthcare from over 10% in
2007-08 to less than 5% by mid 2009, despite the fact that pharma stocks have gained handsomely
in 2008-09 and are currently one of the most preferred sectors for equity investors.
My View:-
Despite its name being Special Situations, investors would do well to treat this fund like any other
pure diversified equity schemes. An average performer so far, Fidelity India Special solutions has
definitely surprised investors by its performance this year. However, it remains to be seen if it can
continue this pace even in future.
SBI Unit Plus II Child Plan
Unit Plus II Child Plan, launched in Dec 2009, is an upgraded version of SBI Life’s Unit plus Child plan
with inclusion of two new investment options (funds) – Top 300 and Index fund. Among all child
plans in the market, it has the highest net yield. Unlike other ULIPS, Unit Plus II child plan offers a
couple of funds to choose as per their risk return appetite. For instance equity, equity optimizer,
index, growth fund are equity based, whereas money market and bond fund are debt based. Those
looking for balanced portfolio can opt for balanced fund. The plan covers children up to an age of
25 years only.
Cost Structure:-
The cost of this product is comparatively lower than the other in the same league. Premium
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allocation charges totals to only 26% over a period of five years. These changes go nil from the sixth
year onwards. Additional premium paid towards investment purposes only (top ups) are charged at
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2% allocation charge. Policy administration charge is also fixed at Rs 600 per annum. This policy has
an inbuilt waiver benefit rider attached to it at a nominal cost. Under this, in case of demise of both
the parents, the company pays the future premium and hands over the fund accumulated to the
child on maturity. Considering these charges, if the fund were to generate returns at 6% and 10% as
mandated by IRDA (Insurance Development Authority of India) , the net yield in the hands of the
investors after considering the above costs would be 4.2% and 7.93% (apprx), respectively per
annum. This is fairly higher than 3.49% and 7.2% annualized net return offered by its peer products.

Benefits:-
Unit Plus II child plan gives investors choice to opt for a sum assured, between 5X to 20X the
annualized premium. The policy also provides varying premium payment options ranging from
limited premium payment to regular payment. Also, the policy gives loyalty units on maturity.
The plan offers settlement option, under which policy holder can take away the fund value at
maturity in five installments. Increase or decrease of sum assured / premium anytime within the
policy tenure. Additional riders like accidental death and disability benefit and an inbuilt premium
waiver benefit rider on payment of additional charge.
Performance:-
SBI life has been a consistent performer since its launch. Unit plus II child plan is a market linked
product and as such its performance is depended on the movements of the stock. Though this plan
is a few months old, the funds available for investment have been with the company for a long
time. Most of the funds have outperformed their respective benchmarks over the period. Equity
fund and balanced fund, which are now five-and-a-half-year old, have not only outperformed the
major market indices but have beaten similar funds from competing companies. In the past 5 years,
the NAV of SBI life equity fund has grown at compounded annual rate of 26.8% much higher than
20% annualized returns given by ICICI Maximizer fund over the same period. Trends are similar for
its balanced fund, which has given returns of 14.7% over 12% of ICICI Balancer fund. Top 300 and
Index funds are new funds launched in january 2010. Though Top 300 performance has been
exceptionally good, most of its money is parked in fixed deposits. So, we have to wait for a while as
it is difficult to comment on these funds at this stage.
Portfolio:-
Finance – 17.4%
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IT – 10.2%
Capital goods – 7.9%
Metals – 6.26%
FMCG – 4.3%
Power – 3.9%
Telecom – 1.7%
Chemicals and Petro Chemicals – 1.6%
Healthcare – 1.5%
Infrastructure – 1.1%
Cement – 1.05%
Others – 2.32%
The plan has an equity oriented basket of funds, which suggests high risk with high returns. The
company has low mid cap equity exposure, except the equity fund which comprises of about 9%
funds parked in mid-cap stocks. The company has high exposure in capital goods and IT sectors. The
performance has been hit in the past few months due to its investments in metal and real estate
sectors, which are under-performing the broader market. It also has small exposure in the
healthcare and FMCG sector, which are low beta sectors and doing well currently. According to the
Fund manager, healthcare faces unique complexities such as regulatory and patent issues, which
clouds its future visibility. While the fund manager has asserted frequent churning of the portfolio,
the same is restricted to volatile sectors such as metal and real estate. Churning is mostly done in
mid-cap stocks rather than large caps.
Death/Maturity Benefits:-
Upon Maturity, the policy holder receives the amount accumulated in the fund. In the case of
demise of the policy holder (both parents), the nominee (child) receives the sum assured and also
gets a waiver in all the future premiums. The insurance company pays the premium till maturity,
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the fund accumulated is given to the child. For instance, say a 35 year old healthy male invests Rs
50,000 a year in this fund for his 10 year old child, then the maximum tenure he can call for is 15
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years with a sum assured to 5 lakh. Assuming the rate of return of 6% and 10%, the fund value will
grow up to nearly Rs 10,69,953 and Rs 14,62,095 respectively receivable at the maturity. In case he
dies in the fifth policy year, then the child will receive 5 lakh plus the company will pay the
remaining 10 premiums and the accumulated corpus will be then given to the child when he turns
25 years old.

My View:-
The plan is one of most competent products in terms of its cost structure. Their benefit on
eventuality is also quite attractive. Investors with high risk and return can invest in this product,
either the equity fund or the equity optimizer fund, as they have a history of good returns. Aviva
young scholar and HDFC youngstar super are few other similar products, which the interested
investors may study.
Sundaram S.M.I.L.E FUND
Crisil CPR Rank 3

1-year Return 47.8%
Performance View Average Buy
Top Holdings
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TVS Motor Automotive 41.04 5.85
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Ashok Leyland Automotive 31.74 4.52

Kotak Mahindra Banking/Finance 28.53 4.07
Polaris Technology 25.79 3.68
Cairn India Oil & Gas 23.13 3.30

Ranbaxy Labs Pharmaceuticals 18.41 2.62

Lanco Infratech Cement 17.40 2.48
Zee Entertain Media 15.81 2.25
Banking/Finance - 11.94%
Pharma – 11.66%
Cement – 6.85%
Services – 4.12%
Utilities – 3.63%
Media – 3.01%
Misc – 2.4%
Telecom – 1.8%
Manufacturing - 1.74%

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Chemicals – 0.79%
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Asset Allocation:-
1 Equity 94.16%
2 Cash / Call 5.81%


2010 -4.7 4.0 - - -
2009 -10.4 64.6 29.9 -0.2 113.8
2008 -33.9 -11.9 -0.7 -25.0 -58.5
2007 -10.0 23.0 20.7 35.7 79.6
2006 19.4 -15.5 13.1 9.0 28.9
2005 0.7 9.5 18.9 4.6 43.7
Tata Dividend Yield Fund
Crisil CPR Rank 2

1-year Return 50.8%
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Top Holdings
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CRISIL Miscellaneous 11.09 7.29

HUL Cons NonDurable 10.68 7.02
GlaxoSmith Con Food & Beverage 9.09 5.98
Navneet Miscellaneous 7.14 4.70
Castrol Chemicals 6.80 4.47
Hero Honda Automotive 6.14 4.04

Nestle Food & Beverage 5.71 3.76

GlaxoSmithKline Pharmaceuticals 5.49 3.61
Deepak Fert Chemicals 5.49 3.61
Technology - 15.8%
Chemicals - 14.7%
Misc – 11.99%
Cons Nondurable – 7.02%
Pharma – 3.67%
Media – 3.45%

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Tobacco – 1.5%
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Asset Allocation:-
1 Equity 98.98%
2 Cash / Call 1.02%


2010 5.9 7.6 - - -
2009 -2.4 42.6 20.9 -0.2 85.4
2008 -29.0 -12.4 -3.7 -20.2 -53.5
2007 -5.4 23.4 16.6 30.7 74.2
2006 11.7 -17.0 17.7 2.0 13.8
2005 0.3 5.9 16.8 5.1 36.1
Sundaram BNP Paribas Select Small Cap Fund
Crisil CPR Rank Not Ranked

1-year Return 56.0%
Performance View Avoid
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Top Holdings
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TVS Motor Automotive 26.72 7.05
WABCO-TVS Automotive 24.84 6.56
Rallis India Chemicals 16.44 4.34
Amara Raja Batt Automotive 16.16 4.27
Nava Bharat Ven Conglomerates 14.59 3.85

ESS DEE Manufacturing 14.09 3.72

Elgi Equipments Engineering 13.00 3.43
Polaris Technology 12.96 3.42
Sundaram-Clayto Automotive 11.83 3.12
J Kumar Infra Cement 11.46 3.03
Sector weightages:-
Maufacturing – 6.85%
Chemicals – 6.26%
Cement – 5.59%
Misc – 5.12%
Pharma – 5.04%
Cons Nondurable – 2.38%
Services – 1.84%

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Asset Allocation:-
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1 Equity 92.29%
2 Debt 4.85%
3 Cash / Call 2.82%


2010 0.1 5.3 - - -
2009 -12.5 64.0 35.3 -0.2 111.8
2008 -38.5 -13.4 -9.4 -25.4 -65.5
2007 -1.0 7.6 9.2 29.2 52.3
LIC Health Protection Plan
Launched in April 2009, LIC Health Protection plan is the kind of product in the market that clubs
health insurance and investment. It works like any other unit-linked insurance plan (Ulip), releasing
a part of premium towards health cover while the rest goes into investment. Very few insurance
companies provide such a plan. LIC initially had launched health plus and consecutively released an
upgraded version of it as health protection. This scheme offers a single fund called health
protection fund where money is parked. The fund is more or less a balanced fund, ensuring safety
of investors.
Cost Structure:-
Unlike regular health product in which the whole premium is an expense to policy holders, the plan
gives an opportunity to invest the premium and earn market-linked returns. Part of the premium
goes for veritable expenses. Premium allocation is high in this scheme as compare to NIL allocation
in typical Ulips. Policy administration charges, as a tradition to LIC, are lowest in the industry. Other
major expense in the product is morbidity expense that covers hospitalization expenses and
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surgical benefits. Considering these charges, the net yield of the product at 6% and 10% per annum
would be 3.1% and 6.8% respectively.
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Benefits:-
The product provides health cover for the entire family, including new born babies from the age of
three months. Both hospital cash benefit and major surgical benefit are covered under the plan. So
we can say individual health plan, family floater and critical illness all three are covered in one plan.

This scheme also allows the insured to claim for domiciliary treatment that is expenses incurred in
respect of any disease for which they need not be hospitalized. Another significant benefit of the
scheme is that after payment of three premiums, one can, if required, pay alternate premiums that
is skip fourth year and pay fifth year premium. The policy would not get lapsed under such
agreement. The product also offers increase/decrease in premium depending on the need of
coverage required.
Performance:-
It offers only one investment option called health protection fund. This is more of a balanced fund
with equity exposure limited to a maximum of 50%. The fund is just a year old. Overall, the fund has
not performed that well. It has been unable to beat the benchmark in the long term. But the past
six months performance of the fund is encouraging, indicating the fund is picking up gradually.
Since the fund has an AUM of only 45 crore, it is passively managed. The fund manager is of the
view that is primarily a health product and so return is not the major focus of policy holders rather
liquidity would be, as policy holders has the option to do partial withdrawals in case of domiciliary
treatment.
Portfolio Review:-
The fund has more exposure to debt than equity due to the basic conservative nature of LIC.
Portfolio comprises of only 19% of equity, while the rest is invested in bond and money market
instruments. In equity, per say, the fund has high exposure in sectors like oil and gas, banking and
health care. There is reasonable exposure in the FMCG sector also. Media and Real estate are
sectors which the fund manager is not in favor of. Telecom, which is an underperforming sector, is
absent from LIC health protection plus’s portfolio. The company has exposure in metals as well. The
fund is of the view that though the metal sector is not performing currently, three years down the
road, the sector will do well.
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Bond – 52%
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Money market – 29%
Equity – 19%

Death/Health Benefits:-
LIC health protection plus does not provide any death benefit. Accumulated fund value is handed
over in case of death of the insured. In case the spouse and the children are also covered then the
premium will be waived off and the cover will continue for them. The product offers benefits of
hospital cash back, surgical treatment and domiciliary treatment.
Under surgical benefit one receives the whole or part of sum insured on diagnosis. The limit of
surgical benefit is 100% of the sum insured annually and 300% over the policy tenure in respect of
each insured family member. The policy covers almost 48 illnesses under surgical illness benefit
category. Domiciliary health benefit is available only after 3 year premium has been paid.
My View:-
Compared to general health insurance product the net cost in LIC health protection plus is low. It
also provides market linked returns on a part of premium. One major attraction of this product is
domiciliary health benefit and there is no age limit for this benefit, unlike hospital cash benefit and
surgical benefit which lasts only till the age of 75 years. But, this product does only allow tax benefit
under section 80D, and not under section 80C. Also this product does not have a surrender option.
One can at the maximum partially withdraw 50% of the fund value in case of emergency.
Alternately, one can buy a combination of family floater and critical illness health plan. But not as
many illnesses are covered under pure critical illness plan. As far as performance of the fund is
considered it’s a mix view.
Canara Robecco Equity Scheme

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It is quite small in size, but that is no hindrance to the power packed performance delivered by this
fund, especially over the last couple of years. Launched in September 2003, with AUM of just over
3000 crore today, it shot to fame after its parent Canara Bank tied up with Robecco group of
Netherlands in 2007. The joint venture resulted in a major turnaround performances in many of the
schemes of this relatively small fund house across various categories.

Performance:-
Before 2007, it was barely recognized in the mutual fund industry. Managing less than even Rs100
crore of assets then, the scheme had failed to keep pace with the rise in the broader market
indices, let alone the average of the category of diversified equity schemes. No wonder, the scheme
was rated as one amongst those at the bottom of the MF performance pyramid. But no more.
Today, this scheme stands as one of the top performers having generated absolute gains of about
35.5% over the past one year and about 51% gains over the past three years. This implies that Rs
1000 invested in this scheme about three years back in July 2007 would be worth Rs 1510 today.
These returns are far superior to those of the Sensex and Nifty, which have returned about 17% and
18% respectively over the past three years. The category of diversified equity schemes has returned
absolute gains of about 28% and 23.5% respectively during these periods.
If you consider the year wise performance of the scheme, then with over 63% gains in the year
2007, the fund was successful in beating the 60% gains of its benchmark index – the BSE 200 as well
as those of the Sensex and Nifty which ranged between 47-55%. While the meltdown year of 2008
did impact its performance too as its NAV collapsed by about 51% in the year, it was better off than
the fall in BSE 200 as well as that of its peers which fell by an average of about 56%.
Again in 2009, the fund made a smart recovery with about 93% gains against the recovery with
about 89% made by the BSE 200 and about 85% by the category of Equity Diversified schemes that
year. And despite the markets being at their volatile best since the beginning of this year, this fund
has successfully maintained its pace, generating more than 12% returns since January this year
against the BSE 200’s 5% and the Sensex and the Nifty’s 4% gains respectively during this period.
Portfolio:-
Top Holdings
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BHEL Engineering 13.18 3.89
GAIL Oil & Gas 12.91 3.81
Bharti Airtel Telecom 11.85 3.50

PNB Banking/Finance 10.26 3.03

Oil India Oil & Gas 9.92 2.93
NTPC Utilities 9.26 2.74
Sectoral Allocation:-
Pharma – 8.88%
Automotive – 4.8%
Utilities – 4.78%
Media – 4.22%
Telecom – 3.5%
Chemicals – 2.27%
Services – 1.98%
Misc – 1.43%
Asset allocation:-
Equity – 87.45%
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Cash – 12.55%
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2
Crisil CPR Rank
1-year Return 46.5%
The fund’s Multi-cap portfolio is currently well diversified with around 40 stocks with exposure per
stock restricted to less than 5%. This considerably reduces the stock specific risk of the portfolio. As
far as the stock selection and turnover is concerned, the fund appears quite pro-active in churning
its portfolio and most of its current holdings are less than 6 months old. This may sound
opportunistic as the fund manager believes in active fund management and keeps track of the
market developments. The downside of this strategy is that its costly and the fund may, in future,
lose out on opportunities resulting from long term holding.
Being Opportunistic has, however, helped the fund so far as is evident from its portfolio and
performance analysis. It can be credited as one of the few schemes to have encashed upon the
boom in the pharma sector. Its exposure in the pharma sector shot up drastically from less than 3%
until September 2008 to more than 8% now. This played a big role in its stupendous performance
last year.
In the recent past, the fund has gradually increased it exposure in the oil refining segment from
about 6.8% in March 2010 to more than 8% by the end of June 2010. The fund has thus been a
beneficiary of the gains accrued to the companies in this sector after the partial decontrol of the
sectors last month.
Of late, however, it drastically reduced its exposure in IT sector from nearly 15% in January 2010
to about 9% by the end of June 2010. With Corporate results in the sector far better than expected
and companies seemingly poised for growth in future, it will be interesting to see the fund
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manager’s take on this sector in the coming months.

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My View:-
This fund has made an impressive mark in the MF industry over the past couple of years. While the
scheme does not boast of a large asset base, it’s a matter of time provided it continues to sustain its
recent performance. The scheme has provided its potential and would be interesting to observe its

performance over the next few months to gauge whether the turnaround in its performance is not
momentary.
Aegon Religare Invest Maximiser Plan
It is a plain vanilla product launched in August 2009. It’s a type I plan that offers the higher of the
sum assured and fund value on maturity. This product offers four investment options (funds). One
can choose from equity, debt or balanced portfolio.
Cost Structure:-
The product has nominal premium allocation charges. Additional premium paid towards investment
purposes only are charged 1% as allocation charge. With an initial outgo of Rs. 480 per annum, its
policy administration charges seem to be low. But, with the continuous inflation of 5% p.a ., this
increase to Rs. 1500 by the end of the policy term (that is fixed at 25 years in this policy).
Considering these charges, if the fund were to generate returns of 6% and 10%, the net yield in the
hands of investors would be around 4.4% and 8.4% respectively per annum. This is fairly higher
than the 3.8% and 7.7% annualized net return offered by its peer products.
Benefits:-
As an incentive to policy holders, the policy gives loyalty units at 1.5% of the fund value to its policy
holders, allotted every third year starting from the tenth policy year. Apart from that, it allows
policy holders to take the maturity proceeds in installments over a chosen period(not exceeding 5
years). The policy also offers riders of accidental death and disability benefit on payment of
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additional charges.
Performance:-
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Aegon Religare invest maximizer is only a year old but the funds have been running for two years
now. Except for the debt fund, none of the funds have performed well. The balanced fund, which
has 65% of equity, has grossly under performed the Crisil Balanced Fund Index, its benchmark. In
the past two years the NAV has grown at Compounded annual rate of 13.8%, which is fairly lower
than the 16-23% returns provided by similar funds of peers. On the contrary, the debt fund has
done better than most of the other debt investment options.

Portfolio Review:-
Finance – 21%
Oil and gas – 11%
IT – 10.3%
Capital goods – 11.5%
Metal – 3.39%
FMCG – 5.5%
Power/utilities – 5.5%
Telecom – 2.2%
Health care- 2.2%
Others – 8.5%
The fund follows a defensive fund management strategy. The company has high exposure to
cyclical sectors like financial services. It is optimistic about FMCG and financial sectors. In contrast,
it is pessimistic about metal, telecom, utilities and oil and gas sectors and has reduced the exposure
in the same. It also has low exposure in healthcare. Real estate and media, the sectors that are
underperforming, are absent from the portfolio.
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Death/Maturity benefits:-
Upon maturity, the policy holder receives the amount accumulated in the fund, whereas in case of
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death, higher of the fund value and sum assured. For instance, say, a 35 year-old healthy male
invests Rs. 50,000 per annum in enhanced equity fund for a period of 25 years. The total sum
assured receivable, in case of any eventuality, would not be more than Rs. 2.5 lakh. By the end of
25 years, assuming rate of return of 6% and 10%, the fund value shall be Rs 22,04,284 and Rs
40,20,404 respectively, receivable at the maturity along with the maturity bonus. However, in case
of death of the policy holder, say in the sixth policy year, the nominee shall receive higher of the
sum assured of Rs. 2.5 lakh and the accumulated fund value.

My view:-
This is a simple Type I product having fairly low cost structure but sum assured is limited to five
times the annual premium. Not only are the investment options limited to four, the portfolio
returns of the scheme also lag the returns of other similar funds. Another point to note is that even
though the yields are better for the Invest Maximizer plan, this is mainly due to a much longer fixed
policy tenure of 25 years. Further, the policy doesn’t have any premium holiday option either. An
alternative to the product would be to take a term policy and invest the rest in high performing
mutual funds. In case one needs tax exemption, one can opt for Equity linked savings scheme
(ELSS).
Chapter 6
Case studies
Case study-Morgan Stanley
Abstract:
This concept note explains the methodology involved in analyzing the risk weighted performance
of a mutual fund. It analyzes the risk weighted performance of Morgan Stanley Growth Fund, a
close ended equity mutual fund with its benchmark BSE 200, BSE Sensex and other close and open
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ended equity mutual funds including IDFC Enterprise Equity Fund, Taurus Star Share Fund, DSPML
Tiger and Magnum Multiplier Fund. The note evaluates the fund's performance based on three
different measures namely Sharpe's Ratio, Treynor's Ratio and Jensen's Alpha to rank the
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performance of these equity mutual funds. This concept note is designed for students of Finance
curriculum and can be discussed with the chapter on Portfolio Management and Security Analysis.
Preface:
In January 1994, Morgan Stanley Mutual Fund (MSMF) launched the Morgan Stanley Growth Fund
(MSGF). MSMF was sponsored by Morgan Stanley Asset Management India Private Limited (MSAM

India), the Indian subsidiary of Morgan Stanley Group Inc (Morgan Stanley). MSGF, a closed-ended
fund1, could be redeemed only after 15 years, in January 2009. The fund was intended for retail
investors with an investment objective of long-term capital appreciation. The company raised Rs 3
billion by issuing 300 million units at the rate of Rs 10 per unit. The liquidity for MSGF units was
provided through listing on the Mumbai, Kolkata, Delhi, Chennai, and Ahmedabad Stock
Exchanges.T he fund primarily invested in equity and equity related instruments. However, the
investments in equities were subjected to certain limitations as prescribed by SEBI 2 guidelines.
Even though the fund was guided by certain rules and guidelines of SEBI, it did not offer a
guaranteed return. Being an equity fund, it was subject to the risks inherent in stock market
investments such as interest rate risks, currency exchange rate risks, and the risks relating to
changes in governmental policy, taxation, and political, economic, or other adverse developments.
Even after careful investment, there were chances that the fund might lose its value due to
unforeseen incidents. The performance benchmark for MSGF is BSE 200, as it invested mainly in
those companies that comprised the BSE 200 index.
Analysis:
The fund seems to have performed quite well over the last 14 years. While for a 13.5-year and
10-year period, the fund outperformed the BSE 200, for the remaining periods the fund under-
performed, as compared to its benchmark. For the last three years, the gap between the returns
generated by the fund and BSE 200 has widened. On the whole, the NAV of the fund is moving in
tandem with BSE 200
Excerpts:-
Sharpe's Ratio
131
Sharpe's ratio evaluates the performance of a portfolio/fund based on the total risk of the
portfolio/fund. It takes standard deviation as a measure of risk. Sharpe's ratio can be calculated by
the following formula
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S = (Rp - Rf)/σp
Where Rp = Return on portfolio/fund

Rf = Risk free return
σp = Standard deviation of return on the portfolio/fund...

Case Study – Harvard Management Company
Abstract:
The case examines the investment management strategies adopted by the Harvard Management
Company (HMC). HMC managed Harvard University's endowment funds, the largest in the industry.
The case explains the hybrid fund management strategy followed at HMC and how the strategy led
to phenomenal growth of Harvard's endowment funds over the decades. The case describes the
investment performance of the endowment fund, asset allocation, portfolio mix and risk
management strategies under various fund managers of HMC since its inception. The case also
explains the recent problems faced by HMC due to the frequent changes in its leadership and the
sub-prime crisis that emerged in the US in late 2007 resulting in significant losses for Harvard's
endowment fund.
On February 17, 2009, 1,600 non-faculty employees of Harvard University (Harvard) received a
crimson folder containing details of the early retirement benefits offered to them. Earlier, on
February 11, 2009, Harvard had announced the eligibility4 criteria for those employees who would
be offered early retirement.
The objective of the move was to save on operating expenses. The University also announced other
cost-cutting measures that included budget cuts varying between 10% and 15% in all Harvard
departments. Besides, it announced a 3.5% increase in tuition fees for the academic year 2009-10.
The University attributed these cost-cutting measures to the losses incurred by Harvard
132
Management Company (HMC). HMC managed Harvard's endowment funds, the largest in the
industry. As of June 30, 2008, it managed assets worth US$ 36.9 billion. Harvard reported that the
value of the assets had fallen by 22% in the four months of fiscal 2008-09 that ended on October
Page
31, 2008. The losses reported in this case did not include HMC's investments in real assets and
private equity.
Harvard depended on its endowment to fund more than one-third of its operational budget every
year.

It withdrew US$ 1.6 billion from its endowment fund in the fiscal year 2008 that ended on June 30,
2008. This marked HMC's largest ever endowment payout to the university. Harvard estimated a
loss of 30% on the assets of HMC for the current fiscal year that would end on June 30, 2009. This
would be the worst loss reported by HMC since 1974 when it had posted a loss of 12.2%. HMC
announced that it would lay off 25% of its 200 employees as a part of its reorganization and
rebalancing strategy.
HMC was regarded as one of the most profitable managers of endowment funds (Refer to Table I
for returns generated by top four endowments in the US for the financial years 2005 to 2008)...
It consistently outperformed the average returns posted by the industry which invested in similar
asset classes in which HMC invested. For instance, HMC posted a positive return of 8.6% on its
funds for the year ended June 2008 as compared to a 13% negative return posted by the S&P 500
index5 during the same period. HMC was renowned for its asset allocation strategy. It followed a
hybrid model in managing its funds...
Analysis:-
HMC was incorporated in 1974 to manage the endowments, pension assets, working capital, and
non-cash gifts of Harvard. Its objective was to provide financial support to the operations of
Harvard. To conform with that objective, HMC's Board and the management laid down the
investment philosophy to allocate assets across various markets and asset classes in their effort to
generate the optimum rate of return in line with Harvard's risk tolerance level. HMC also worked on
the premise that in addition to earning income to support the activities of the University, it had to
generate capital appreciation on the assets it held over a long term...
Asset Allocation:-
Since its inception, HMC had managed the largest university endowment fund in the world. (Refer
to Exhibit IV for Top Ten University Endowments in the US by the End of June 2008). It followed a
well-diversified asset allocation strategy. For instance, for the fiscal ended June 2008, HMC had
investments in 12 non-cash asset classes...
133
Fund Management at HMC:-

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Walter Cabot (Cabot) was nominated as the first President and CEO for HMC in 1974. HMC's assets
grew from US$ 1.3 billion in 1974 to US$ 4.7 billion in 1990 under his leadership. Cabot resigned
from HMC after his 16-year tenure in 1990 when Meyer was nominated as his successor. Meyer led
HMC between 1990 and 2005 and grew HMC's asset value from US$ 4.7 billion to US$ 22.6 billion.
HMC nominated Mohammed El-Erian (El-Erian) as successor to Meyer.
HMC UNDER WALTER CABOT

HMC had US$ 1.3 billion endowment funds to manage when Cabot became the President and CEO.

Cabot's initial task was to build HMC's staff and also to find a few outside firms to manage a small
portion of the fund...
HMC UNDER JACK MEYER

While Cabot focused on investments with an objective of achieving returns above the rate of
inflation, Meyer focused more on the spending requirements and risk tolerance of Harvard. He also
hinted at increased external management help in managing the endowment funds unlike Cabot
who had outsourced only a small portion of the endowment funds to the external managers...
HMC UNDER MOHAMMED EL-ERIAN

On October 14, 2005, Harvard announced that El-Erian, who was managing the emerging markets
debt and portfolio team at Pacific Investment Management Company (PIMCO) , would become the
CEO of HMC in mid-February 2006...
The Crisis
Analysts felt that Mendillo had accepted a challenging task in steering Harvard's endowment when
the markets were facing turbulence. She was also required to understand the complex investment
strategies implemented by El-Erian before taking any further steps.
Chapter 7
Article
A Comparison of Risk and Return Between BSE Sensex and Bank Fixed Deposits
134
This concept note compares the risk-weighted returns generated by the BSE Sensex and bank fixed
Page
deposits during the period between March 1992 and March 2007. The objective of the note is to
determine whether investment in Indian equities has generated superior risk-weighted returns as
compared to fixed deposits over various time periods ranging between one year and fifteen years.
It calculates average annualized returns, standard deviation and range of returns at different
probabilities generated by BSE Sensex over fifteen year period. Finally, the coefficient of variation is
determined across various time horizons to examine how much risk an investor has taken for an
extra unit of return generated from the stock markets over bank fixed deposits. This concept note is

designed for students of Finance curriculum and can be discussed with the chapter on Security
Analysis and Portfolio Management. It can also be discussed in a training program for executives
employed in broking firms and mutual fund companies.
For the financial year 2007-08, the Indian economy recorded a gross domestic product (GDP)
growth of 9 percent. This was the third year in a row when the Indian economy grew at the rate of
9 percent and above. In the financial year 2005-06, the Indian economy grew at 9.4 percent
followed by 9.6 percent in 2006-07. The fast growing Indian economy has not only opened up new
opportunities for wealth creation; it has led more and more people to invest in stocks and equity
mutual funds.
According to a FICCI study, investments by households in shares and debentures as percentage of

total financial savings increased to 4.9 percent in 2006 compared to 2.4 percent in 2005.
At the same time, the share of the household sector in bank deposits came down from 64 percent
in 2003 to 60 percent in 2004 and further down to 57 per cent in 2005. Over the last few years,
more and more Indian households are preferring investments in stocks over fixed income
instruments like fixed deposits in banks, public provident fund, post office savings instruments etc.
mainly due to higher returns.
The return on fixed income investments has decreased in real terms over the last fifteen years due
to increasing inflation. Let us have a look at the returns generated by the Indian stock market (BSE)
over the last fifteen years between March 31, 1992 and March 31, 2007. The Sensex increased from
4285 points on March 31, 1992 to 13072.10 points as on March 31, 2007 (Refer Exhibit II for the
BSE Sensex Chart). The compounded annual growth rate (CAGR) recorded by the BSE Sensex during
this period is 7.72 percent (Refer Table I for the annual return and standard deviation recorded by
BSE Sensex between March 1992 and March 2007).
To calculate the return generated by Sensex and its standard deviation, we have taken the closing
figures of Sensex on March 31 each year. In case March 31 is a holiday, we have taken the
preceding day's figures.
135
From these figures, we have first calculated the year-on-year return on the index by using the
following formula:
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Return generated by Sensex = ((I1 - I0)/ I0) × 100
Here I0 = Closing figure of previous year
I1 = Closing figure of just concluded year or present year
For calculating the average return, we have added all the annual returns obtained between 1992

and 2007 and divided the figure by the number of years. In other words, for the period we are
looking at i.e. 15 years, the figure obtained is the average return on Sensex over 15-year period.
Similarly, we have calculated returns for ten years, seven years, five years, three years, two years
and one-year period
Returns from Stock Markets
Let us have a look at the returns generated by the Indian stock market (BSE) over the last fifteen
years between March 31, 1992 and March 31, 2007. The Sensex increased from 4285 points on
March 31, 1992 to 13072.10 points as on March 31, 2007.
The compounded annual growth rate (CAGR) recorded by the BSE Sensex during this period is 7.72
percent.
Chapter 8
Savings options for rising interest rates
Top 5 saving options
The interest rates are rising. It is good news for some - those who look at making deposits; bad
news for some - those who are looking at taking loans. Savings however have to be channeled
136
carefully so that the maximum can be gained from the deposits. Here are the top 5 savings
instruments in a rising interest rate regime.
Page
In today's scenario the top 5 savings instruments are:
1. Debt Mutual Funds
2. Mutual Fund Monthly Income Plan - Growth Option
3. Company Deposits
4. Post Office Recurring Deposit

5. Post Office Monthly Income Scheme
Debt Mutual Funds
These are managed funds that invest the funds from the investors predominantly in debt and debt
oriented schemes.
There are a number of advantages that these mutual funds give compared to a direct deposit. The
most apparent is the fact that this is a managed fund and the returns can be better as the manager
has access to more information and will leverage that compared to individual investors. There is no
TDS or tax on the interest. The returns will be processed as capital gains.
Returns from this fund are expected to be good. The top five debt mutual funds have given
compounded returns in the range of 10.50-14.50% in the last 3 years. This is much better than the
normal bank deposit or company deposit. The advantage is that debt mutual funds can create
capital gains when the interest rates go down.
Mutual Fund Monthly Income Plan - Growth Option

137
For people who have a higher risk quoitent during the short term, monthly income plan (MIP) of
Page
mutual funds is good. Here a small portion (generally not more than 20%) of the funds is invested in
equity. So the returns can be better than the normal debt mutual fund when the market is rising.
The typical returns in the last 3 years are 12% to 14% for the top 5 funds.

However caution needs to be taken when choosing the growth option. This is due to the fact that if
we start to receive the monthly payouts there may be months when the principal is used for the
payout. This will drain the fund particularly when the market goes down.
Being largely a debt oriented mutual fund, the tax treatment is the same as the debt mutual fund.
Company Deposits
Companies that offer deposit schemes to consumers tend to offer rates that are in-between bank
deposit rates and bank lending rates. This is a win-win situation for the company and the person
saving.
The bank has to make a profit when borrowing from the public and lending to companies. So they
have an interest rate difference (spread) of about 4.5%. In effect, the deposit holders are paid less
and the borrowers are charged more. When a company has direct access to the depositor, both
benefit. The depositor gets a better rate than what the bank can offer and the company is able to
borrow at a lesser rate when compared to a bank interest rate.
However, it is in the best interest of the borrower to do his research thoroughly and double check
how good the credit rating of the company is before investing. On an average estimates show that
138
one can easily get 11% - 12% on reputed companies' deposits for a 3 year term.
Page
The returns will be taxed as interest and will have TDS.
Post Office Recurring Deposit

This is a 5 year scheme where one invests on a monthly basis. However, there does exist an option
for the fund to be closed after 3 years, which comes with a penalty of 1%. The advantage with the
postal recurring deposit over the bank recurring deposit is that the minimum monthly investment is
only Rs.10/- with no upper limit. In case the payment is made once is 6 months or on a yearly basis,
there are discounts for that too.
The limitation is that the interest rate is fixed at 7.5% only and auto-debit to bank account is not
available.
There are no tax benefits from the scheme. However Post Offices have not been deducting TDS.
Post Office Monthly Income Scheme
For the retired people, the Post Office Monthly Income Scheme is a good savings instrument. The
interest is 8% divided on a monthly payout basis. The payout if not required can be channeled to a
recurring deposit. The effective returns increases by almost 10% by doing this.
The interest can be credited to a savings account of any bank too. The account can be closed after 1
year with a 5% penalty and after 3 years without any penalty. The limitation however is that the
maximum investment for any individual is only Rs.6 L.
The ranking of the above 5 savings schemes have been done based on their returns, the
convenience factor to close and change to another savings scheme (important when the interest
rate is rising) and the safety for investments. Of all the options the debt mutual funds appear to
139
score the highest due to their flexibility and returns. This is closely followed by the mutual fund
MIPs.
Page
There is one more category called Liquid funds or money-market schemes. These funds are meant
to provide easy liquidity and preservation of capital. These schemes invest in short-term
instruments like treasury bills, CBLO market (Collaterised money borrowing and lending obligation –
an overnight borrowing lending market for domestic financial institutions ), CP’s and CD’S. These
funds are meant for an investment horizon of 1 day to 3 months. The NAV’s of these funds are
directly linked to yield and hence likely to do better when interest rates are northbound.

Chapter 9
Questionnaire
1.Gender: Male Female
Gender
25
20
15
10
0
MALE FEMALE
140
Page

2.Age: 1)18-30 2)31-40 3)41-50 4)>51
Age
20
18
16
14
12
10
8
6
4
2
0
18-30 31-40 41-50 >51
Interpretation:- Most of the people who have answered the questionnaire are young and in the age
group 18-30.
3.Marital status Married Unmarried
marital status
18
16
14
12
141
10
8
Page
6
4
2
0
Married Unmarried
Interpretation:- Most of the people who have answered this questionnaire are married.

4.Occupation: 1)Business 2)Student 3) Employee 4) Any other
occupation
Business
Student
Employee
Any other
Interpretation:- Most of the employees who have answered the questionnaire are employees.
5. Monthly Income : 1)10,000 – 20,000 2) 20,000 – 40,000 3) 40,000-60,000 4) >60,000

142
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Monthly Income
12
10
0
10,000 – 20,000 20,000 – 40,000 40,000-60,000 >60,000
Interpretation:- Many people answering the questionnaire have incomes ranging from 10,000-
20,000.
6. What is your expected average annual return from mutual funds/insurance policies in the
current scenario?
1. 6% 2.8% 3.10% 4.12% or more
Expected annual return
12% or more
10%
8%
6%
143
0 2 4 6 8 10 12 14 16
Page
Interpretation:- About 50% of people answering the questionnaire are expecting an average annual
return of 8%

7. While recognizing that investments in the financial markets always carry an element of risk,
which of the following statements is most true about the way you wish to invest your portfolio
assets, within this service, to achieve your goals?
1) Safety of principal is my primary concern. The amount of capital appreciation and

Income from my investments are secondary objectives.
2) My investments should be relatively safe and emphasize current income.
3) My investments can be exposed to a moderate level of risk with the primary goal of
generating current income. Capital appreciation over time is a secondary objective.
4) My investments can be exposed to a risk and should emphasize growth over time, but
should also generate some current income.
5) My investments should grow substantially in value over the long term and can be
exposed to considerable market risk. I do not need to generate current income.
Investment Risk
a
b
c
d
e
144
Interpretation:- Most of the people who answered the questionnaire prefer safety to returns in
Page
the current scenario. This suggests the investor mindset to be conservative.
8. Consider the following two hypothetical investments, X and Y. Investment X

provides an average annual return of 5% with minimal risk of principal loss.
Investment Y provides an average annual return of 15%, but carries a potential

principal loss of 40% or more in any one year. If I could choose to invest
between Investment X and Investment Y to meet my goal, I would invest my
money as follows:
a. 100% in Investment X and 0% in Investment Y
b. 80% in Investment X and 20% in Investment Y
c. 50% in Investment X and 50% in Investment Y
d. 20% in Investment X and 80% in Investment Y
e. 0% in Investment X and 100% in Investment Y?
12
10
0
A B C D E
Interpretation:- More than 33% of people have said they want to divide their money between risky
and safety funds. They neither want to be too aggressive or too conservative.
9. If your portfolio results failed to meet your expectations over a two-year time
145
frame and your personal circumstances remained similar to those of today,

which would you do?
Page
a. Develop a more conservative strategy for these assets.

b. Maintain the portfolio strategy.
c. Develop a more aggressive strategy within the program.

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
A B C
Interpretation:- People who answered this questionnaire are divided upon the strategy to be
maintained in case the portfolio does not provide expected returns after 2 years.
10. Which of these investment vehicles are you most

comfortable with?
1. Savings accounts, CDs, and other short-term insured investments
2. Income-producing bonds and bond mutual funds
3. Stocks
4. Growth stocks and growth-stock mutual funds
5. Aggressive-growth stock mutual funds
Investment Vechicle
E
146
D
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0 1 2 3 4 5 6 7 8 9 10

Interpretation:- More number of people are interested in stocks than in any other investment
vehicle.
Top 10 fund houses
1) HDFC
2) Reliance
3) Birla Sun life
4) Deutsche
5) ICICI Prudential
6) UTI
7) IDFC
8) DSP Blackrock
9) Tata
10) Sundaram BNP
147
Page

Recommendations
Recommendations/Suggestions for investors
Invest (100- Age)% of your savings amount in Equity oriented schemes and rest in debt schemes.
Ideal portfolio:-
Dsp BR equity fund
Reliance growth fund
HDFC tax saver fund
Icici Pru Ace Fund

148
Page

Bibliography
Economic Times
NDTV Profit
Forbes India Magazine
DARE Magazine
Money control.com
149
Page

Portfolio Management of Various Funds

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PORTFOLIO MANAGEMENT

Submitted in partial fulfillment for the award of

Masters of Business Administration Degree

Roll No: A30601909040

AMITY GLOBAL BUSINESS SCHOOL, HYDERABAD.

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SIGNATURE OF FACULTY GUIDE

(Prof. B.Pavan Kumar)

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CHAPTER TABLE OF CONTENTS PAGE NO.

Objective & Methodology 5

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RESEARCH DESIGN OF THE STUDY

The methodology adopted includes

 Primary data: Questionnaire

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Directly approached respondents by the following strategies

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About IDBI Fortis

Vision and Values

the needs of our customers and adds value to their lives.

To continually strive to enhance customer experience through innovative product offerings,

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Transparency: Crystal Clear communication to our partners and stakeholders

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A set or combination of securities held by investor. A portfolio comprising of different types

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Portfolio management is concerned with efficient management of investment in the

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- For the time the funds are

It is evident that rational investment activity involves creation of an investment portfolio.

 Definition of Portfolio Management:

 Application to portfolio Management:

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 Objective of Portfolio Management:-

1. Stable Current Return: -

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4. Appreciation in the value of capital:

6. Safety of the investment:

Investment safety or minimization of risks is one of the important objectives of portfolio

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 Scope of Portfolio Management:-

a) Monitoring the performance of portfolio by incorporating the latest market conditions.

 Approaches of Portfolio Management:-

i) The Holy-Cow Approach:

ii) The Pig-Farmer Approach:

iii) The Rice-Miller Approach:

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iv) The Woolen-Trader Approach:

 SEBI Guidelines to Portfolio Management:-

1) The nature of portfolio management services shall be investment consultant.

4) The portfolio manager shall acts as trustee of client’s funds.

5) The portfolio manager can invest in money or capital market.

 Different Phases of Portfolio Management:

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(A) SECURITY ANALYSIS:-

change, which in turn change as a result of latest information.

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According to this approach, the share price of a company is determined by these

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