A PROJECT REPORT ON PERFORMANCE ANALYSIS OF SELECTED ELSS SCHEME

Submitted by: REEMA KUMARI BBA/4589/10 NIPUN GUPTA BBA/4583/10

MUTUAL FUND
which is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner.

TYPES OF MUTUAL FUNDS

A mutual fund has several schemes in which investor can invest. There are structure based schemes distinguished by their maturity periods. Then there are objective based schemes that offer different risk reward options. It has also some special schemes that invest in specific sectors.

MUTUAL FUNDS CAN CLASSIFY ON THE FOLLOWING BASES:-

EQUITY LINKED SAVING SCHEME

WHY SHOULD ONE INVEST ELSS? Lock-in for three years helps in staying invested over a long period Investments in equity over a long-term delivers better returns Tax savings and high returns Through SIPs, one can invest small amount of Rs 500 in ELSS every month.

TAX BENEFITS: Dividends from mutual funds are fully exempt from income tax under Section 10(33). Equity funds (schemes that invest 50 per cent of their funds in equity) are also exempt from dividend tax. ELSSs offer under section 88 tax rebate on investments up to Rs 10,000 in a financial year. The difference between the selling price and the cost price is taxable as capital gains in the year of sale, at 10 per cent or 20 per cent, depending on whether or not you claim indexation benefits.

PLUSES Possibility of high returns Lock-in period of only three years Easy transfer Low tax incidence (10 per cent) on redemption Efficient service, especially in the case of private mutual funds

MINUSES High risk Difficult to choose the right fund (But not if you use the services of the Matchmaker!

SIP SYSTEMATIC INVESTMENT PLAN ROUTE FOR ELSS

One of the best ways to invest in ELSS is to save and invest on a regular basis. A Systematic Investment Plan (SIP) in ELSS gives the best combination of investments available to investors. The minimum investment in an ELSS through the SIP route can be as small as Rs 500.

WHY SIP? You can purchase scheme units at a lesser cost as most of the Asset Management Companies (AMCs) charge less entry load (for some scheme even NIL) for SIP investments, as compared to normal purchases in the scheme. SIPs make the volatility in the market work in your favour. Since a fixed amount is invested more units are purchased when a scheme NAV is low and fewer units when the NAV is high. As a result, over a period of time these market fluctuations are generally averaged. Thus the average cost of your investment is often reduced.

OBJECTIVE OF THE STUDY

To study investor objective for making investment. To evaluate investment alternatives (in financial assets) for the Indian investor. To study the performance of selected ELSS scheme. To rank the ELSS scheme under study on the basis of performance evaluation.

RESEARCH METHODOLOGY

DATA COLLECTION---- Primary and secondary TYPE OF RESEARCH ---- Descriptive and analytical RESEARCH DESIGN Sample size----100 Sampling frame---- DELHI/NCR Sampling unit---- 7 companies TOOLS FOR EVALUATING PERFORMANCE The tools which are taken for evaluating the performance are risk adjusted measures and returns of the ELSS schemes. RISK ADJUSTED MEASURES ARE: BETA, SHARPE RATIO, ALPHA RETURNS & AUM: Returns of 1 year are in absolute returns produced by the fund in the last one year whereas the returns for the 2, 3, and 5 year are on the CAGR basis.

DATA ANALYSIS AND INTERPRETATION

Mutual Fund A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities. lets begin with the comparative analysis of the five funds I have chosen EQUITY LINKED TAX SAVING SCHEME of five companies namely BIRLA SUN LIFE TAX RELIEF 96 BIRLA TAX PLAN HDFC TAX SAVER HDFC LT ADVANTAGE FUND ICICI PRUDENTIAL TAX PLAN LIC MF TAX PLAN SBI MAGNUM TAXGAIN

What are Equity Linked Savings Schemes? An ELSS gives a tax benefit and comes with a lock in period of 3 years. Investment avenues of an ELSS are a mix of various asset classes such as equity, debt, gold and real estate. Advantages of ELSS The 3 year lock in period prevents withdrawals and thus allows your money to grow over a period of time. Long term investment in equities gives better returns than any other investment instrument. * It gives tax benefits (Up to 30% for people in the highest tax slab). As per our Indian IT laws every tax payer is eligible for savings under section 80C for amounts up to Rs. 1,00,000/-

The Performance analysis is based on Alpha, Beta and Sharpe's. It would also include the return analysis.

PERFORMANCE EVALUATION OF ELSS FUNDS ON THE BASIS OF RISK ADJUSTED MEASURES : Risk Name is ELSS scheme
BIRLA SUN LIFE TAX RELIEF 96
BIRLA TAX PLAN HDFC TAX SAVER BETA SHARPE RATIO JENSEN ALPHAS

1.15

0.35

1.18

0.96 0.88

0.23 0.20

-2.95 -3.54

HDFC LT ADVANTAGE FUND

ICICI PRUDENTIAL TAX PLAN LIC MF TAX PLAN SBI MAGNUM TAXGAIN

0.94
1.00

0.25
0.19

-2.26
-4.40

1.02 0.96

0.14 0.36

-6.66 1.20

INTERPRETATION:

According to beta the best ELSS fund is HDFC LT ADVANTAGE FUND SBI MAGNUM TAX GAIN is at 4th place and at last is BIRLA SUN LIFE TAX RELIEF 96 According to ALPHAS the best ELSS fund is SBI MAGNUM TAX GAIN and at last place is LIC MF TAX PLAN According to Sharpe Ratio the best ELSS fund is SBI MAGNUM TAX GAIN and at last place is LIC MF TAX PLAN

PERFORMANCE EVALUATION OF ELSS FUNDS ON THE BASIS OF RETURNS & AUM:Return Name is ELSS scheme
BIRLA SUN LIFE TAX RELIEF 96 BIRLA TAX PLAN 1 YEAR 2 YEAR 3 YEAR 5 YEAR

10.18 %

-4.13 %

14.30 %

21.58 %

3.07 %

-7.68 %

9.70 %

23.23 %

HDFC TAX SAVER

11.02 %

-1.71 %

10.51 %

23.66 %

HDFC LT ADVANTAGE FUND

18.42 %

0.08 %

12.15 %

30.36 %

ICICI PRUDENTIAL TAX 7.08 % PLAN LIC MF TAX PLAN 6.95 %

-0.24 %

8.09 %

27.01 %

-4.51 %

6.81 %

12.27 %

SBI MAGNUM TAXGAIN

9.63 %

-0.78 %

14.48 %

37.95 %

INTERPRETATION:

1 YEAR RETURNS the best ELSS fund is HDFC TAX SAVER, SBI MAGNUM TAX GAIN is at 4th place and at last is UTI EQUITY TAX SAVINGS 2 year returns basis the best ELSS fund is HDFC TAX SAVER, SBI MAGNUM TAX GAIN is at 3rd place at last is BIRLA TAX PLAN. 3 YEAR RETURNS the best ELSS fund is SBI MAGNUM TAX GAIN and at last place is LIC MF TAX PLAN 5 year returns the best ELSS Fund is SBI MAGNUM TAX GAIN and at last place is LIC MF TAX PLAN AUM the best ELSS fund is SBI MAGNUM TAX GAIN and at last place is LIC MF TAX PLAN.

FINDINGS AND CONCLUSION

ON THE BASIS OF BETA THE BEST ELSS FUND IS:HDFC LT ADVANTAGE FUND ON THE BASIS OF STANDARD DEVIATION THE BEST FUND IS :UTI EQUITY TAX SAVINGS PLAN ON THE BASIS OF SHARPE RATIO THE BEST ELSS FUND IS:SBI MAGNUM TAX GAIN ON THE BASIS OF R-SQUARED THE BEST ELSS FUND ARE:SBI MAGNUM TAX GAIN LIC MF TAX PLAN UTI EQUITY TAX SAVINGS PLAN

ON THE BASIS OF ALPHAS THE BEST ELSS FUND IS:SBI MAGNUM TAX GAIN
ON THE BASIS OF 1 YEAR RETURN THE BEST ELSS FUND IS:HDFC TAX SAVER ON THE BASIS OF 2 YEAR RETURN THE BEST ELSS FUND IS :HDFC TAX SAVER ON THE BASIS OF 3 YEAR RETURN BEST ELSS FUND IS :SBI MAGNUM TAX GAIN ON THE BASIS OF 5 YEAR RETURN BEST ELSS FUND IS:SBI MAGNUM TAX GAIN ON THE BASIS OF AUM THE BEST ELSS FUND IS :SBI MAGNUM TAX GAIN So the above are the different schemes which are coming out as best ELSS schemes in the different criteria. But SBI MAGNUM TAX GAIN SCHEME 1993 is the best ELSS scheme as it has topped in the six criterias which are chosen for the purpose of evaluation.

BIBLIOGRAPHY

www.amfiindia.com www.sebi.gov.in www.sbimf.com www.mutualfundsindia.com www.valueresearchonline.com www.utimf.com www.hdfcmf.com www.birlamf.com www.licmf.com www.icicimf.com