MUTUAL FUND PORTFOLIO ANALYSIS

Prepared by: Indranil Bishayee 10SBCM0269

Date: 13.5.2011

A mutual fund is a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of funds.

You can make money from a mutual fund in three ways: 1) Income is earned from dividends on stocks and interest on bonds. 2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. 3) If fund holdings increase in price, you can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares. Advantages of Mutual Funds

Professional Management - The primary advantage of funds are the management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a relatively a much less expensive way for a small investor to get a full -time manager to make and monitor investments.

Diversification - Owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. ). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. The idea in diversifying is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds we own, the less any one of them can hurt us.

Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions

 Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.

Simplicity - Buying a mutual fund is relatively easy. Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have a utomatic purchase plans where as little as $100 can be invested on a monthly basis. Disadvantages of Mutual Funds

Professional Management - Many investors ask whether or not the professionals are any better than normal small investors at picking stocks

Costs - Creating, distributing, and running a mutual fund is an expensive proposition. Everything costs money. Those expenses ar e passed on to the investors. Since fees vary widely from fund to fund, failing to pay attention to the fees can have negative long -term consequences. Remember, every dollar spend on fees is a dollar that has no opportunity to grow over time.

Dilution - It's possible to have huge diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. Taxes - When a fund manager sells a s ecurity, a capital -gains tax is triggered. Investors who are concerned about the impact of taxes need to keep those concerns in mind when investing in mutual funds.

The different parameters to see before buying a mutual fund

Net asset value (NAV), which is a fund's assets minus liabilities, is the value of a mutual fund. NAV per share is the value of one share in the mutual fund, and it is the number that is quoted in the newspapers. We can think of NAV per share as the price of a mutual fun d. It fluctuates everyday as fund holdings and shares outstanding changes on a daily basis. When you buy shares, you pay the current NAV per share plus any sales front -end load. When you sell your shares, the fund will pay you NAV less any back -end load.

Identifying Goals and Risk Tolerance

Before acquiring shares in any fund, we need to think about why we are investing. What is the goal that we are looking at. Are long -term capital gains desired, or is a current income preferred? Will the money be used to pay for college expenses, or to supplement a retirement that is decades away? Identifying a goal is important because it will help you hone in on the right fund for the task. For really short-term goals, money market funds may be the right choice, For goals that are few years in the future, bond funds may be appropriate. For long -term goals, stocks funds may be the way to invest. Of course, we must also consider the issue of risk tolerance. Can we afford and accept dramatic swings in portfolio value? If so, you may prefer stock funds over bond funds. Are more conservative investment s warranted? In that case, bond funds may be the way to invest. The next question to consider include, Are we more concerned about trying to outperform your funds benchmark index or are you more concerned about the cost of your investments? If the answer is cost, index funds are likely the right choice for us.

Additional questions, to cons ider include how much money we have to invest, whether we should invest in a lump sum or a little bit over time and whether taxes are a concern for you. Remembering the key points to buy and invest in mutual fund, we choose a mutual fund which is balanced. The risk is not too high and not low. The risk premium is just about perfect. Moreover there is a certain amount of cover that is present and that is the reason we take a balanced fund. The portfolio ICICI prudential balanced growth fund

Returns (as on May 12, 11) Period 1 month 3 months 6 months 1 year 2 year 3 year 5 year Returns (%) -2.8 3.8 -4.2 11.1 24.9 6.2 7.3 Rank 15 5 11 5 12 19 21

As a balanced fund we see the short term gains are very less from the table above but the long term gains are relatively high. So this is very good from the point of view of the investor who is not a huge risk taker.
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Moneycontrol Rank within 36 Balanced Schemes Returns over 1 year are annualized

Absolute Returns (in %) Year 2011 2010 2009 2008 2007 2006 Qtr 1 -2.3 2.9 -2.3 -21.2 -4.4 13.6 Qtr 2 2.0 25.8 -12.2 12.5 -8.0 Qtr 3 9.8 13.3 -2.2 9.8 9.8 Qtr 4 1.1 4.8 -14.3 17.2 10.1 Annual 17.9 48.4 -43.9 34.8 28.4

When we see the balanced returns we see that the average is quite good. The right kind of risk premium is matched by the right rate of returns which is extremely good news for the investors. The next table would talk about the SIP investment returns. The CAGR (compounded annualized growth rate) is 7.97% which is good enough when compared to the competitors. The table below shows the invested amount and the various asset allocation including the different returns. The method of investments are shown below.

SIP Investment Returns ( CAGR*): 7.97% *Compounded Annualized Growth Rate ICICI Prudential Balanced Fund (G)

Investment Period No of Investments Total Amount Invested (Rs) Total Units Purchased Investment Value as on May 01, 2011 Latest NAV Investment Date May 03, 2010 Jun 01, 2010 Jul 01, 2010 Aug 02, 2010 Sep 01, 2010 Oct 01, 2010 Nov 01, 2010 Dec 01, 2010 Jan 03, 2011 Feb 01, 2011 Mar 01, 2011 Apr 01, 2011 May 02, 2011

May 01, 2010 to May 01, 2011 13 650,000.00 14,551.83 675,495.86 45.820 (as on May 12, 2011) Investment Amount (Rs) Purchase Price (Rs) 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 41.300 40.500 42.210 43.480 43.860 46.970 47.640 47.150 47.570 44.280 44.510 46.430 46.420 Units Purchased 1210.654 1234.568 1184.553 1149.954 1139.991 1064.509 1049.538 1060.445 1051.083 1129.178 1123.343 1076.89 1077.122

These are the different top holdings of the selected mutual fund: We can see banking/finance and oil and gas are the major scrips in the portfolio because of their stable nature.

Top Holdings (Mar 31, 11) Equity Sector Value (Rs cr) PNB TCS Balkrishna Ind ONGC Allahabad Bank Reliance Torrent Pharma Bharti Airtel Ipca Labs Axis Bank Banking/Finance Technology Automotive Oil & Gas Banking/Finance Oil & Gas Pharmaceuticals Telecom Pharmaceuticals Banking/Finance 12.41 9.80 9.58 9.38 8.88 8.63 8.11 8.01 7.98 7.90 Asset % 4.70 3.71 3.63 3.55 3.36 3.27 3.07 3.03 3.02 2.99

Now coming to the sector allocation which is one of the most important parameters to see the type of balance in a mutual fund we look at the following table below:

Sector Allocation (Mar 31, 11) Sector % -- 1-Year -High Banking/Finance Automotive Oil & Gas Technology Pharmaceuticals Engineering 17.62 11.19 8.55 7.62 6.10 4.53 18.04 11.67 9.65 10.47 6.43 7.32 Low 15.46 5.12 7.73 7.62 2.90 4.53

In the table below we see the asset allocation of the fund which is very important in seeing how the fund is managed and what are the different components of it and what is the weight age. Here equity consists of around 70 % which shows the risk appetite. So returns in a longer term is more in the double digit figures.

Asset Allocation (%) (Mar 31, 11) Equity Others Debt Mutual Funds Money Market Cash / Call 70.07 0.00 26.40 N.A 0.00 3.53

Concentration Holdings Top 5 Top 10 Sector Top 3 % 18.96 34.36 % 37.36

In the above table we see the concentration of equity based on the industry and individual sectors we see that its at the top. So its on stable scrips and the industries are also stable and growing. CONCLUSION Core funds should be at the heart of any portfolio. They should account for a chunk of your total mutual fund investments. Large cap stocks fit the bill. Most of the large cap can be invested in mid caps too. Here a balanced portfolio is very important in getting a balanced risk without taking many risks. So that is the way to go. Mutual funds can be deceiving so to pick the right fund we have to be very careful. Here analyzing the portfolio we see the more the investor takes risk the more risk premium he gets.But if he chooses a balanced fund he would be well of at the time of downturn of a market as the debts will cushion the portfolio s losses.