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COMPARITIVE ANALYSIS OF SECTORIAL MUTUAL FUND SCHEMES

Synopsis submitted to College of Management & Economic Studies for the partial fulfillment of the degree of

MBA (Infrastructure Management)


Guided ByDr. Ankur Mittal Assistant Professor ( Department Of Finance)

Submitted ByAtul Nangare Enrollment No- (R580210001) SAP ID- 500011874 1

Problem statement The Indian Mutual Fund industry has significantly high ownership from the institutional investors. Retail investor comprising of 97% in numbers, term held approximately 38% AUM as it end of march 2011 as comparison to other countries in the world. The present study explores whether sectoral m fund schemes have huge potencial in rewarding high return to the investors or not. Introduction:A mutual fund is nothing more than a collection of stocks and/or bonds. One 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 the fund. Money can be made from these funds in 3 ways:1. Income earned from stocks divident and interest on bonds. 2. Sell of securities that are being earned by these funds with increasing value. 3. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Advantages of Mutual Funds: 1. Professional management: An investor generally has less idea regarding investment and manageing investment in different assets. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments 2. Diversification: Mutual funds provide an opportunity to diversify ones investment in different assets thus shareing risk of investment. 3. Economy 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. 4. LiquidityLiquidity: Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time. Disadvantages of Mutual Funds: Costs - Creating, distributing, and running a mutual fund is an expensive proposition. Those expenses are 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. 2. Dilution - It's possible to have too much 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
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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. 3. Taxes - When a fund manager sells a security, 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. Types of funds: Each fund has a predetermined investment objective that tailors the fund's assets, regions of investments and investment strategies. At the fundamental level, there are three varieties of mutual funds: 1) Equity funds (stocks) 2) Fixed-income funds (bonds) 3) Money market funds Literature review The financial system in India comprises of financial institutions, financial markets, financial instruments and services. RBI forms the apex of the financial institutes followed by the banking and non banking financial institute. The Indian financial sector reforms aim at improving the productivity and efficiency of the economy. The opening of the Indian financial market to foreign and private Indian players has resulted in increased competition and better product offerings to consumers. The main function of all these financial institutions is facilitating the flow of saving from common man to industrial houses. Financial Markets are mainly classified as Money Market and Capital Market. The term, money market is used to denote the financial institutions which deal with the short term borrowing and lending of money. The term, capital market is used to mean the institutes which deals with the lending and borrowing of long-term money. Resource mobilization by mutual funds is an important activity in the capital markets. According to a study, mutual funds would be one of the major instruments of wealth creation and wealth saving in the years to come, giving positive results. As India is targeting a GDP growth rate of 9 % in the Eleventh Plan Period, the role of financial sector as well as the role of mutual funds industry in India as an important segment of financial market for resource mobilization in capital market is going to be very significant. The consistency in the performance of mutual funds has been a major factor that has attracted many investors. The mutual fund industry growth is estimated at about 50 per cent, much higher than that of bank fixed deposits which are growing at about 20 per cent.

Mutual fund as a Financial services: Mutual fund industry has been growing at a healthy pace of 16.68% from the last decade. With the enterance of new fund houses the total assets under the management of Mutual fund industry has been rose from 1000 crores in 1987 to 339232.4 crores in 2006 and still showing a substantial growth of Rs 7,00,538 crore at the end of March 2011. Mutual funds for Real investors Pure equity fund offering collected a whopping rose by 138000 in August 2011, a month when the benchmark indices fell by 12%. There was an exodus of investors in July 2011, with 330,000 equity folios being closed. Thus it bridges the gap between retail investors and capital markets.

Scope of research The scope of research lie within the trend of the market behaviour and the NAVs of the mutual fund offering of the past 5 yrears quaterly data which will help in forecasting the behaviour of the future trend for the next quarter.

Objective 1. To find out key performance measures for sectoral mutual fund schemes. 2. To study the behaviour of different mutual fund schemes related to different sectors (Banking, Real estate, Service). 3. To analyse the performance of selected sectorial mutual funds schemes on risk return yadstick. 4. To study the scope of growth for sectoral mutual fund schemes in india.

Research Methodology The research methodology that can be used is basically the secondary data analysis Based on this methodology, different schemes related to the 3 sectors of banking, Real estate and service will be selected based on the crisil rateing. The behaviour and the performance of these mutual fund schemes on the monthly basis for a period of 5 years will be considered considering the aspect of trend behaviour and market behavoiur. The net asset value of that scheme is to be collected based on the quaterly reports of each schemes and also the sensex trends which will provide with an information about the market trend on that date on quaterly basis. Based on these results the sensitivity analysis of the schemes will be done by calculating various ratios such as the 1. sharpe ratio, 2. treynor ratio, 3. fema decomposition ratio By applying the regression model to the parameters of NAV and the sensex values. This analysis will help to forecast the future behaviour and performance of those schemes.

Topics Summary 1. 2. 3. 4. 5. 6. 7. 8. Introduction Literature review Observations Research Methodology Calculations Conclusion Appendix Bibliography

Refrences: www.moneycontrol.com www.indiamutualfund.com www.appuonline.com www.navindia.com www.myiris.com http://www.investopedia.com Paper on MUTUAL FUND: A RESOURCE MOBILIZER IN FINANCIAL MARKET by P. Hanumantha Rao and jay Kr. Mishra