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FROM ARNI SCHOOL OF BUSINESS MANAGEMENT AUGUST 2010 Submitted to ASBM KATHGARH (INDORA) MBA 3rd sem Submitted By SATISH KUMAR ID.AEMB0012A/09
ARNI UNIVERSITY
KATHGARH (INDORA), KANGRA (H.P) PIN-176401 www.arni.in 1
DECLARATION
I, SATISH KUMAR, ID. No. AEMB0012A/09 M.B.A. Final year (III semester) of Arni School of Business Management hereby declare that the Summer Training Report entitled COMPARATIVES STUDY AMONG MUTUAL FUNDS OFFER VARIOUS COMPANIES IN INDIAN MARKET is an original work and the same has not been submitted to any other University/Organization for the award of any other degree. A seminar presentation of the Training Report was made on 10/sep/2010 and the suggestions as approved by the faculty were duly incorporated.
Presentation In
Countersigned Director/Dean/Coordinator
ACKNOWLEDGEMENT
Completing this project for submission for academic purposes has been one of the most enlightening and interesting experience in itself for it not only has helped gained an insight into an unknown territory to me, but also is going to be helpful to everyone who goes through this project.
The success of this project is an outcome of sincere efforts channeled in right direction. And for this proper channeling I would first and foremost like to thank Mr. AMIT PATIAL (sr.executive) and Mr. Sudhir bhardwaj(CRO) without whose able guidance this would never have been possible. Hes been the sincere advisor and inspiring force behind the outcome of this project.
My deepest thanks to Mr. Ravikant Swami dean of ASBM and lecturer Mr. Rajeev Sawal the Guide of the project for guiding and correcting various documents of mine with attention and care. He has taken pain to go through the project and make necessary correction as and when needed.
I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.
SATI SH KUMAR
CONTENTS
S.NO. CHAPTER 1. 2. 3. HISTORY OF MUTUAL FUND COMPANY PROFILE INTRODUCTION ABOUT MUTUAL FUND ADVANTAGES DISADVANTAGES TYPES 4. 5. 6. 7. 8. 9. 10. 11. 12. INDUSTRY PROFILE ECONOMIC ENVIRONMENT LEGAL & POLITICAL ENVIRONMENT
PAGE NO. 1 5 13 17 19 20 27 29 34
COMPARATIVE STUDY AMONG MUTUAL FUND OFFERS 42 BY VARIOUS COMPANIES IN INDIA. KOTAK OPPRTUNITY FUND RELIANCE EQUITY OPPRTUNITY FUND FRANKLIN INDIA FLEXI CAP HSBC INDIA OPPRTUNITY FUND RESEARCH METHODOLOGY 43 47 50 53 58 61 71 74 75
UTI sole player in the industry, created by an Act of Parliament ,1963 1963 1987 UTI launches first product Unit Scheme 1964 UTI creates products such as MIP's, children plans ,offshore funds etc MASTERSHARE Ist Diversified Equity Investment Scheme in India. INDIA Fund Ist indian offshore fund lauched in August 1996. In 1987 Public Sector Banks and FI's got permission to set up MF. 1987 - 1993 SBI mutual fund was the first non -UTI mutual fund In 1993, Mutual Fund Industry was open to private players. 1993 - 1996 SEBI's first set of regulations for the industry formulated in 1993 Significant innovations, mostly initiated by private players Implementation of new SEBI regulations led to rapid growth 1996 - 1999 Bank mutual funds were recast as per SEBI guidelines UTI came under voluntary SEBI supervision. Dividends made tax free in 1999. Rapid growth, significant increase in corpus of private players 1999 - 2000 Tax break offered created arbitrage opportunities Bond funds and liquid funds registered highest growth
COMPANY PROFILE
COMPANY PROFILE
NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and services in India. Established in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm. NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.
At NJ we believe in .. having single window, multiple solutions that are integrated for simplicity and sapience making innovations, accessions, value-additions, a constant process providing customers with solutions for tomorrow which will keep them above the curve, today
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NJ had over INR 5,050* Crores of mutual fund assets under advice with a wide presence in over 130 locations* in 22 states* in India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients. At NJ, we continue to innovate, enrich our intellect, and ask critical questions. We challenge our own processes and systems on constant basis to emerge more convinced. At NJ, we continue to expand the scope and depth of our offerings, making apt use of technological support.
Philosophy
At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs, attitude, actions and decisions of our employees. If NJ would resemble a body, our philosophy would be our spirit which drives our body.
ServicePhilosophy: Our primary measure of success is customer satisfaction . We are committed to provide our customers with continuous, long-term improvements and value-additions to meet the needs in an exceptional way. In our efforts to consistently deliver the best service possible to our customers, all employees of NJ will make every effort to: think of the customer first, take responsibility, and make prompt service to the customer a priority deliver upon the commitments & promises made on time anticipate, visualize, understand, meet, exceed our customer's needs bring energy, passion & excellence in everything we do be honest and ethical, in action & attitude, and keep the customers interest supreme
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strengthen customer relationships by providing service in a thoughtful & proactive manner and meet the expectations, effectively
Clients want need-based solutions, which fits them Long-term wealth creation is simple and straight Asset-Allocation is the ideal & the best way for long-term wealth creation Educating and disclosing all the important facets which the customer needs to be aware of, is important The solutions must be unbiased, feasible, practical, executable, measurable and flexible Constant monitoring and proper after-sales service is critical to complete the on-going process InvestingPhilosophy: We aim to provide Need-based solutions for long-term wealth creation We aim to provide all customers of NJ, directly or indirectly, with true, unbiased, need-based solutions and advice that best meets their stated & un-stated needs. In our efforts provide quality financial & investment advice, we believe that.
At NJ our aim is to earn the trust and respect of the employees, customers, partners, regulators, industry members and the community at large by following our service and investing philosophy with commitment and without exceptions.
Products
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NJ offers advisory and distribution services on the following products. 1. 2. 3. 4. 5. Mutual funds covering all AMCs & all schemes, Fixed deposits of companies, Government/RBI bonds, Infrastructure Bonds, Approved securities for charitable trusts, etc
Vision:
To be the leader in our field of business through, Total Customer Satisfaction Commitment to Excellence Determination to Succeed with strict adherence to compliance Successful Wealth Creation of our Customers
Mission: Ensure creation of the desired value for our customers, employees and associates, through constant improvement, innovation and commitment to service & quality. To provide solutions 13
which meet expectations and maintain high professional & ethical standards along with the adherence to the service commitments.
Management
The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management provides direction and guidance to the whole organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector. The 'Customer First' philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of Range of products and services offered Quality Customer Service
All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.
Mr. NeerajChoksi
Recognition
Some of the awards & recognitions 15 that we have received in past..
Performance
presented
by
Chairman,
Prudential
Plc.
at
London
Year2002: For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at London Year2003: For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at London Year2004: Among Most Valued Business Associates presented by HDFC Standard Life at Edinburgh, Scotland Year2004: For Outstanding Performance by Deputy CEO, Prudential Singapore at Malaysia Year2006: Award for mobilising the Highest Number of SIPs at National Level by Fidelity Mutual Fund Plc at Mumbai Year Award 2006: Vietnam
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Mutual fund operations is a circle in which the investors pool in their money to earn income and then the fund manager invests the money in securities, which may be debt or equity, which in turn generates income in the form of returns to the investors and then investors again invest their money. So the circle continues with more investors coming in and some of them leaving.
Definition:A mutual fund is an investment that pools money from many individuals and invests it according to the fund's stated objectives. Professional money managers make investment decisions on behalf of fund investors, buying and selling investments such as money market investments, bonds and stocks
A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal . The money thus collected is invested by the fund manager in different type of securities depending upon the objective of scheme. These could range from shares to debentures to money market instruments. The income earned through these and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned 18
by them (pro rata). Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified , professionally managed portfolio at a relatively low cost. Any body with an inventible surplus of as little as a few thousand rupees can invest in mutual funds. Each mutual fund scheme has a defined investment objective and strategy.
A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares , bonds and other fixed income instruments , real estate , derivatives and other assets have become mature and information driven . Price changes in these assets are driven by global events occurring in far away places. A typical individual is unlikely to have the knowledge , skills , inclination and time to keep track of events , understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets , investments , brokerage dues and bank transactions etc.
FUND MANAGERS
Portfolio diversification Professional Management Reduction in Risk Reduction in Transaction costs Liquidity Convenience and Flexibility Safety Well regulated TAX BENIFIT
Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
Diversification
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Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.
Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.
Transparency
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You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.
Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience
Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.
No Guarantees
No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through mutual fund runs the risk of losing the money.
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All funds charge administrative fees to cover their day to day expenses. Some funds also charge sales commissions or loads to compensate brokers, financial consultants, or financial planners. Even if you dont use a broker or other financial advisor, you will pay a sales commission if you buy shares in a Load Fund.
Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even you reinvest the money you made.
Management Risk
When you invest in mutual fund, you depend on fund manager to make the right decisions regarding the funds portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in index funds, you forego management risk because these funds do not employ managers.
Special Schemes Index Schemes Sector Specific Schemes Industry Specific Schemes Specific Area Schemes Bond Scheme
Mutual fund schemes may be classified on the basis of its structure and the investment objective.
1. According to Structure
Open Ended Funds
An open ended fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. The key feature of open ended schemes is liquidity.
Interval Funds
Interval funds combine the features of open ended and close ended schemes. They are open for sales or redemption during pre-determined intervals at their NAV.
2.
Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks are much better than the other investments had over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.
Income Funds
The aim of the income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Income funds are ideal for capital stability and regular income.
Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.
3. Other Schemes
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Special Schemes :
Index Schemes Index funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.
Bond Schemes
It seeks investment in bonds, debentures and debt related instrument to generate regular income flow.
High level of return, but has a high level of risk too Return compartively less risk than equity funds Provide stable but low level of return
3 year lock in period Minimum investment of 90% in equity markets at all times So ELSS investment automatically leads to investment in equity shares. Open or closed ended. Eligible under Section 80 C upto Rs.1 lakh allowed Dividends are tax free. Benefit of Long term Capital gain taxation.
ASSET MANAGEMENT COMPANY (AMC) :The AMC is appointed by the Trustee as Investment Manager of the mutual fund . The AMC is required to be approved by the SEBI to act as an asset management company of the mutual fund . At least 50% of the directors of AMC are independent Directors who are not associated with the sponsor in any manner .The AMC must have a net worth of at least 10 crores at all times. The trustees, on the advice of the sponsors usually appoint the AMC The AMC is usually a private limited co., in which the sponsors and their associates or JV partners ,are shareholders The AMC has to be a SEBI registered entity, with a minimum net worth of Rs. 10 Cr. The trustees sign an investment management agreement with the AMC, which spells out the functions of the AMC
Restrictions on AMC : AMC s cannot launch a scheme without the prior approval of the trustees AMC s have to provide full details of investments by employees and Board members in all cases where the investment exceeds Rs.1 Lakh AMC s cannot take up any activity that is in conflict with the activities of the mutual fund
Mutual funds Equity funds Balanced funds Index funds Gilt funds Bond funds
Objective
Risk
Who invest
Long-term capital
High risk
appreciation Growth & regular Capital market income risk & interest risk To generate returns that commensurate with returns of respective indices Securities & Income NAV varies with index performance Interest rate risk
Aggressive 3 years + investors , long term investment Balanced ratio Moderate & 2 years + of equity &debt aggressive funds to ensure investors higher return at low risk Portfolio indices Aggressive 3 years + like BSE, investors NIFTY etc. Government Securities
Money market
Salaried & 12 months + conservative Investors Regular Income Credit Risk & Debentures Salaried & 12 months + Interest rate risk ,Govt. securities conservative , corporate Investors Bonds Liquidity + Negligible Treasury Bills, Park funds in 2 Days to 3 Moderate Income Certificates of current A/c s or weeks + Reservation of Deposits , short term Bank Income commercial Deposits papers, Call money
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INDUSTRY PROFILE
II. Canbank Investment Management Services Ltd. III. PNB Asset Management Ltd. IV. UTI Asset Management Company (P) Ltd. Institutions I. GIC Asset Management Co. Ltd. II. Jeevan Bima Sahayog Asset Management Co. Ltd. Private Sector INDIAN I. Benchmark Asset Management Co. Ltd. II. Cholamandalam Asset Management Co. Ltd. III. Escorts Asset Management IV. J.M. Capital Management Ltd. V. Kotak Mahindra Asset Management Co. Ltd. VI. Sundaram Asset Management Co. VII. Reliance Capital Asset Management Ltd. FOREIGN I. Principal Asset Management Co. Ltd. Joint Ventures Predominantly Indian I. Birla Sun Life Asset Management Pvt. Co. Ltd. II. Credit Capital Asset Management Co. Ltd. III. DSP Merrill Lynch Fund Managers Ltd. IV. First India Asset Management Pvt. Ltd. V. HDFC Asset Management Co. Ltd. VI. Tata TD Waterhouse Asset Management Pvt. Ltd. Joint Ventures Predominantly Foreign I. Alliance Capital Asset Management (India) Pvt. Ltd. II. Deutsche Asset Management (India) Pvt. Ltd. III. HSBC Asset Management (India) Pvt. Ltd. IV. ING Investment Management (India) Pvt. Ltd. V. Prudential ICICI Management Co. Ltd.
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ECONOMIC ENVIRONMENT
FUND
While the Indian mutual fund industry has grown in size by about 320% from March, 1993 (Rs. 470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the AUM of the sector excluding UTI has grown over 8 times from Rs. 152 billion in March 1999 to Rs. 1295 billion as at March 2005.
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Though India is a minor player in the global mutual fund industry, its AUM as a proportion of the global AUM has steadily increased and has doubled over its levels in 1999. The growth rate of Indian mutual fund industry has been increasing for the last few years. It was approximately 0.12% in the year of 1999 and it is noticed 0.25% in 2004 in terms of AUM as percentage of global AUM.
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Now we can see from the above graph that India has robust GDP growth prospects.
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100% growth in the last 6 years. Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.
The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by the nationalized banks and smaller private sector players. Many nationalized banks got into the mutual fund business in the early nineties and got off to a start due to the stock market boom was prevailing. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as a difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. in fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.
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38
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The mutual fund industry is governed by the Securities and Exchange Board of India (Mutual Fund) Regulations, 1996, which lays the norms for the structure and the operation of a mutual fund in India. The diagram below illustrates the organizational set up of a mutual fund:
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SEBI
The regulation of mutual funds operating in India falls under the preview of authority of the Securities and Exchange Board of India (SEBI). Any person proposing to set up a mutual fund in India is required under the SEBI (Mutual Funds) Regulations, 1996 to be registered with the SEBI.
Mutual Fund: - A Mutual Fund is established in the form of a trust under the Indian
Trusts Act, 1882. The investor subscribes to the units issued by the Mutual Funds. The resources raised are pooled under various schemes established by the trust.
Trustees: - The Mutual Fund can either be managed by the Board of Trustees, which is a
body of individuals, or by a trust company, which is a corporate body. Most of the funds in India are managed by the Board of Trustees. The Trustees are appointed with the approval of the SEBI. Two thirds of the Trustees are independent persons and are not associated with the sponsors. The Trustees, however, do not manage the portfolio of Mutual Fund. It is managed by the AMC.
Unit Holders
They are the parties to whom the mutual fund is sold. They are ultimate beneficiary of the income earned by the mutual funds.
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Custodian
The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry out the custodial services for the schemes of the fund. Only institutions with substantial organizational strength, service capability in terms of computerization and other infrastructure facilities are approved to act as custodians. The custodian must be totally delinked from the AMC and must be registered with SEBI.
Easy to make more clints . . . greater variety of solutions to meet different needs of differents clients. higher acceptance by clients. less than 2% people have invested in mutual fund.
Less competition in the market . very few mutual fund advisors and huge demand of them.
. less than 60000 certified mutual fund advisors in comparisons with more than 20 lac. Advisors in insurance. Only 1MF advisors versus 32+insurance adcvisors.
More satisfections to the clients . . . complete financial planning for clients. professionally managed. strongy regulated by SEBI.
. .
Strong industry growth ahead MF industyry growing at 30% CAGR over the past 5 year. industry AUM trippled from 1.50 lac crores 2003 to 4.50lac crores in nov. 2008
. money in bank deposits still 10.50 times more than the entire mutual fund industry size.
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Net Asset Value (NAV) - Net Asset Value is the market value of the assets of the scheme
minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Sales Price - Is the price you pay when you invest in a scheme. Also called Offer Price. It may
include a sales load.
Repurchase Price - Is the price at which a close-ended scheme repurchases its units and it
may include a back-end load. This is also called Bid Price.
Redemption Price - Is the price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. Such prices are NAV related.
Sales Load - Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load scheme
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HYPOTHESIS
The hypotheses of the study involve comparison between: 1. 2. 3. 4. Kotak opportunity fund. Reliance equity opportunity fund. Franklin India Flexi fund. HSBC India opportunity fund.
OBJECTIVE:To generate capital appreciation from a diversified portfolio of equity and equity related seacurity Kotak opportunity fund is diversified equity scheme, with a flexibal investing style. It will invest in sectors,which our fund manager belives would outperform other in the short and medium term. Kotak opportunity fund, spacially lies in giving fund manager flexibility to act based on his view on the market, and in to allowing to him to invest in higher concentration in sectors he belives will outperform other.
YEAR
(Rm-
(Rp-Rf) 47
X2
XY
(X-Xbar)
Rp LAST 1 MONTHS 5.92 LAST 3 MONTHS 24.61 LAST 6 MONTHS 34.42 Since inceptions 78.17 TOTAL
Rm
Rf
D2 Y 1.67 20.36 30.17 1.98 78.49 670.29 -2.35 180.38 781.10 D -20.11 -9.847 25.89 404.71 96.97 670.29
45.99
4.5
41.49 74.83
73.67 125.87
1721.42 2472.19
3056.56 4015.70
22.78 18.70
590.04 1691.02
WHERE, Rp portfolio return- Reliance equity opportunity fund Rm- market return - Funds benchmark BSE-500 Rf risk free rate of return. CALCULATION OF ARTHMETIC MEAN: = X/N = 74.83/4 = 18.70 CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N =1691.02/4 =422.75 =20.56
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CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(4015.70)-(74.83)(125.87) 4(2472.19) (74.83 )2 = 16062.8-9418.85 9888.76-5599 = 6643.95 4289.76 = 1.54
Interpretation
Last I month: it reveals that reliance equity opportunity fund are 5.92 as compare to fund benchmark return are 2.84, and the risk free rate is common for next 9monts. (i.e.,4.25%)
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Last iii month: it reveals that reliance equity opportunity fund are 24.61 as compare to fund benchmark return are 13.11, and the risk free rate is common for next 6monts. (i.e.,4.25%)
Last vi month: it reveals that reliance equity opportunity fund are 34.42as compare to fund benchmark return are 30.14, and the risk free rate is common for next 3monts. (i.e.,4.25%)
Since inception: it reveals that reliance equity opportunity fund are 78.17,as compare to fund benchmark return are 45.99, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.
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YEAR Rp LAST 1 MONTHS 2.4 LAST 3 MONTHS 16.22 LAST 6 MONTHS 29.46 Since inceptions 54.99 TOTAL 50.23 4.5 Rm Rf
X2
XY
(X-Xbar) D2 D
45.73 81.62
50.49 85.82
2091.232 9 2904.021 2
2308.907 7 3101.329 6
45.73 40.81
2091.2329 2662.630
WHERE, Rp portfolio return- Reliance equity opportunity fund Rm- market return - Funds benchmark BSE-500 Rf risk free rate of return.
CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(3101.32)-(81.62) (85.82) 4(2404.02) (81.62 )2 = 12405-7002.91 11616-6661.82 = 5402.09 4954.18 = 1.09
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Interpretation
Last I month: it reveals that reliance equity opportunity fund are 2.4 as compare to fund benchmark return are 3.72, and the risk free rate is common for next 9monts. (i.e.,4.25%) Last iii month: it reveals that reliance equity opportunity fund are 16.22 as compare to fund benchmark return are 13.82, and the risk free rate is common for next 6monts. (i.e.,4.25%)
Last vi month: it reveals that reliance equity opportunity fund are 29.46as compare to fund benchmark return are 31.1, and the risk free rate is common for next 3monts. (i.e.,4.25%)
Since inception: it reveals that reliance equity opportunity fund are 54.99,as compare to fund benchmark return are 50.23, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.
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Year
Rp
Rm
Rf
(RmRf) X
XY
(XXbart) D
25.325 1195.337
WHERE, Rp portfolio return Franklin flexi cap fund Rm market return funds benchmark S&P CNX 500 Rf risk free rate of return
CALCULATION OF ARTHMETIC MEAN: = X/N = 81.6/4 = 20.4 CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N =1195/4 =298.75 =17.28
CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(3605)-(81.6)(101) 4(2904)-(2904) 2 = 14420-8241.6 11616-8433 = 6178.4 3183 55
= 1.94
Interpretation
Last I month: it reveals that FRANKLIN India flexi cap fund return are 3.47 as compare to fund benchmark return are 2.8, and the risk free rate is common for next 9 months. (i.e.,4.25% Last iii month: it reveals that FRANKLIN India flexi cap fund return are 14.99 as compare to fund benchmark return are13.11 and the risk free rate is common for next 6 months. (i.e.,4.25%)
Last vi month: it reveals that FRANKLIN India flexi cap fund return are 36.58 as Compare to fund benchmark return are 30.14 and the risk free rate is common for next 3 months. (i.e.,4.25%) Since inception: it reveals that reliance equity opportunity fund are 61.8, as compare to fund benchmark return are 47.75, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.
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Rp
Rm
Rf
(RpRf)
XY
XXba r
19.6 95
387.893025
LAST 3 MONTH 12.4 5 LAST 6 MONTH 27.6 7 SINCE INCEPTI 48.6 ON 2 TOTAL
83.7225
186.8689 134.0964
73.02
70.92
2369.27 57
2467.336
14.705
792.580825
CALCULATION OF ARTHMETIC MEAN: = X/N = 73.02/4 = 18.25 CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N =792.58/4 =198.14 =14.07
CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(2467.33)-(73.02)(70.92) 4(2369.27)-(73.02) 2 = 9869.32-5178.57 9477.08-5331.92 = 4690.75 4145.18 = 1.13
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Interpretation
Last I month: it reveals that HSBC India opportunity fund return are 0.57 as compare to fund benchmark return are 2.81, and the risk free rate is common for next 9 months. (i.e.,4.25% Last iii month: it reveals that HSBC India opportunity fund return are 12.45 as compare to fund benchmark return are13.45 and the risk free rate is common for next 6 months. (i.e.,4.25%)
Last vi month: it reveals that HSBC India opportunity fund return are 27.87 as Compare to fund benchmark return are 28.13 and the risk free rate is common for next 3 months. (i.e.,4.25%) Since inception: it reveals that HSBC India opportunity fund are 48.82, as compare to fund benchmark return are 45.82, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.
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OBSERVATION:
Observations are made from the data analysis. The following observation are drawn from the analysis of schemes:
Monthly returns
5.92
3.47
2.4
-0.57
Sharpe,s Ratio
6.12
5.84
7.29
5.04
Treynor,s Ratio
0.81
0.52
0.37
0.62
Co-efficient( )
1.54
1.94
1.09
1.13
Std. Deviation( )
20.56
17.28
25.80
14.07
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RESEARCH METHODOLOGY
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RESEARCH METHODOLOGY
OBJECTIVES: To study about the mutual funds industry. To study the approach of investors towards mutual funds. To study the behaviour of the investors whether they belong to bull or bear category.
SCOPE OF THE STUDY: Subject matter is related to the investors approach towards mutual funds. People of age between 20 to 60 Area limited to Chandigarh,Panchkula,pinjor,kalka Demographics include names, age, qualification, occupation, marital status and annual income.
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4. Specify the scaling procedures:- Scaling involves creating a continuum on which measured objects are located. Both nominal and interval scales have been used for this purpose. 5. Construct and pretest a questionnaire:A questionnaire is a formalized set of questions for obtaining information from respondents. Where as pretesting refers to the testing of the questionnaire on a small sample of respondents in order to identify and eliminate potential problems.
6. Specify the sampling process and sample size: Population All the investors of Chandigarh,panchkula,pinjor & kalka in June-July 2010 who are investing money in mutual funds. Sample Unit Any investor in Chandigarh,panchkula,pinjor&kalka Sample Size This study involves 100 respondents. Sample Design The study uses convenient sampling technique to make contacts with the respondents.
7. Plan for data analysis:Analysis of data is planned with the help of mean, chisquare technique and analysis of variance.
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It shows that only 7% of people of Chandigarh prefer safety of principal, which means they have Options Steadily At an average rate Fast Percentages 12% 35% 53%
a conservative approach towards their investment in mutual funds. Where as 58% of people want high returns from their investment that means they have an aggressive approach because if there is a high return then there will be a high risk also.
12%
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It shows that more than half of the investors .i.e. 53% want their investment to grow at a faster rate and only 12% investors want their investment to grow steadily.
3. Imagine that stock market drops immediately after you invest in it then what will you do?
28%
15%
It shows that, 15% of people of Chandigarh prefer withdrawing their money when stock market drops that means they belong to the category of risk avoiders who dont want to take the risk and may be treated as bears. 68
More than half of the investors .i.e. 57% prefer to just wait and watch when stock market drops immediately after their investment that means they belong to the category of risk averse who minimize the return at fixed risk. Only 28% of the investors prefer investing more money when stock market drops that means they are risk takers who takes risk with the expectation of high returns and they may be called bulls.
12% For the last 1-5 years For the last 5-10 years 32% 56% For over 10 years & above
TIME 1 2 3 Total
It shows most of the people who are having an annual income of rs.1,50,000-2,50,000 have been investing for the last 1-5 years.
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23%
48%
% of Income 1 2 3 Total
It shows that most of the people who are having an annual income of between 1,50,000 2,50,000 invest 5% - 10% of their income.
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Hypothesis: It shows that there is no significant difference between the annual income of
the investors and the percentage of their income which they invest in mutual funds.
Occasionally 33%
Daily 15%
Monthly 52%
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It shows that most of the people .i.e. 52% prefer monitoring their investment on monthly basis. 33% of the people monitor their investment occasionally.
7.
It shows that 60% of the people invest their money in share market where as only 40% of people dont invest their money in share market. Chi-Square Tests Value Pearson Chi-Square 8.361 df 2 Sig. (2-sided) .015
Hypothesis: There is no significant difference between the age of the people and the people
who invest their money in share market.
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DEMOGRAPHICS
Age Group
17% 20-30 30-40 25% 58% Above 40
58% of people belong to 20-30 age group and on the other hand only 17% of people belong to above 40 age group.
Qualification
17% Under graduate Graduate Post graduate 52%
31%
17% of the people are under graduate. 52% of the people are graduates, and 31% of the people are post graduates.
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Occupation
Retired 5%
Salaried 31%
Business 31%
31% of the people are having their own business. 31% of the people are salaried. 25% are professionals. 8% are housewives. 5% are retired.
Annual Income
7% 33% 24%
36%
24% of the people belong to below 1,50,000 income group. 36% of the people belong to1,50,000 2,50,000 income group. 33% of the people belong to 2,50,000 4,00,000 income group. Only 7% of the people belong to above 4,00,000 income group.
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FINDINGS
Highest number of investors comes from the salaried class. Highest number of investors comes from the age group of 20-30. Most of the investors belong to bull category that invest more money when the stock market drops. Most of the people have been investing their money for the last 1-5 years belong to 1,50,000 2,50,000 income group. Mostly investors prefer monitoring their investment on monthly basis. Most of the people invest their 5% - 10% of their annual income in mutual funds.
Most of the people between the age group of 20 30 invest their money in share market
SUGGESTIONS
AMC,s should decrease charges upon amfi test. Provide better awareness about mutual fund. Improve the commission of the financial advisors Choose the large scale strategy in mutual fund schemes Asset manager should be loyal & expertise. The people do not want to take risk. The AMC should launch more diversified funds so that the risk becomes minimum. This will lure more and more people to invest in mutual funds. The expectation of the people from the mutual funds is high. So, the portfolio of the fund should be prepared taking into consideration the expectations of the people. People age group of 50 and above should go for high percentage of debt mutual funds as they are risk avoiders.
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CONCLUSION
A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixes income instruments, real estate, derivatives and other assets have become mature and information driven. Today each and every person is fully aware of every kind of investment proposal. Everybody wants to invest money, which entitled of low risk, high returns and easy redemption. In my opinion before investing in mutual funds, one should be fully aware of each and everything.
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ANNEXURES
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By: AMFI
QUESTIONNAIRE
1) Which factor do you consider before investing in mutual fund? 1. Safety of principal 2. Low risk 3. High returns At which rate do you want your investment to grow? 1. Steadily 2. At an average rate 3. Fast Imagine that stock market drops immediately after you invest in it then what will you do? 1. Withdraw your money 2. Wait and watch 3. Invest more in it 4) How long have you been investing in mutual fund? 1. For the last 1-5 years 2. For the last 5-10 years 3. For over 10 years and above What percentage of your income do you invest? 1. Up to 5% 2. 5%-10% 3. More than 10% How often do you monitor your investment? 1. Daily 2. Monthly 3. Occasionally Do you invest your money in share market? Yes No Mobile no:.. Name:.. Address . ...... 81
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