Mutual Funds in India

Name SUSHIL BARAL
College ST. XAVIERS COLLEGE

Project MUTUAL UN!S IN IN!IA
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INTRODUCTION TO MUTUAL FUNDS:-
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 then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. 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 basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a Mutual Fund.
A Mutual Fund is a body corporate registered with the ecurities and !"change #oard
of $ndia %!#$& that pools up the money from individual'corporate investors and invests
the same on behalf of the investors'unit holders, in !(uity shares, )overnment
securities, #onds, *all Money Markets etc, and distributes the profits. $n the other
words, a Mutual Fund allows investors to indirectly take a position in a basket of assets.
Mutual Fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with ob+ectives as disclosed in offer
document. $nvestments in securities are spread among a wide cross,section of industries
and sectors thus the risk is reduced. -iversification reduces the risk because all stocks
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may not move in the same direction in the same proportion at same time. $nvestors of
mutual funds are known as unit holders.
The investors in proportion to their investments share the profits or losses. The mutual
funds normally come out with a number of schemes with different investment
ob+ectives which are launched from time to time. A Mutual Fund is re(uired to be
registered with ecurities !"change #oard of $ndia %!#$& which regulates securities
markets before it can collect funds from the public.
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HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in $ndia started in 1234 with the formation of 5nit Trust of
$ndia, at the initiative of the )overnment of $ndia and 6eserve #ank of $ndia. The history
of mutual funds in $ndia can be broadly divided into four distinct phases
First Phase 196-!"
5nit Trust of $ndia %5T$& was established on 1234 by an Act of 7arliament. $t was set up
by the 6eserve #ank of $ndia and functioned under the 6egulatory and administrative
control of the 6eserve #ank of $ndia. $n 1289 5T$ was de,linked from the 6#$ and the
$ndustrial -evelopment #ank of $ndia %$-#$& took over the regulatory and administrative
control in place of 6#$. The first scheme launched by 5T$ was 5nit cheme 123:. At the
end of 1299 5T$ had 6s.3,8;; crores of assets under management.
Se#$%& Phase 19!"-199' (E%tr) $* P+,-i# Se#t$r F+%&s.
1298 marked the entry of non, 5T$, public sector mutual funds set up by public sector
banks and <ife $nsurance *orporation of $ndia %<$*& and )eneral $nsurance *orporation
of $ndia %)$*&. #$ Mutual Fund was the first non, 5T$ Mutual Fund established in =une
1298 followed by *anbank Mutual Fund %-ec 98&, 7un+ab >ational #ank Mutual Fund
%Aug 92&, $ndian #ank Mutual Fund %>ov 92&, #ank of $ndia %=un 2;&, #ank of #aroda
Mutual Fund %?ct 2.&. <$* established its mutual fund in =une 1292 while )$* had set up
its mutual fund in -ecember 122;.
At the end of 1224, the mutual fund industry had assets under management of 6s.:8,;;:
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crores.
Thir& Phase 199'-/00' (E%tr) $* Pri1ate Se#t$r F+%&s.
@ith the entry of private sector funds in 1224, a new era started in the $ndian mutual fund
industry, giving the $ndian investors a wider choice of fund families. Also, 1224 was the
year in which the first Mutual Fund 6egulations came into being, under which all mutual
funds, e"cept 5T$ were to be registered and governed. The erstwhile Aothari 7ioneer
%now merged with Franklin Templeton& was the first private sector mutual fund registered
in =uly 1224.
The 1224 !#$ %Mutual Fund& 6egulations were substituted by a more comprehensive
and revised Mutual Fund 6egulations in 1223. The industry now functions under the
!#$ %Mutual Fund& 6egulations 1223.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in $ndia and also the industry has witnessed several mergers and
ac(uisitions. As at the end of =anuary .;;4, there were 44 mutual funds with total assets
of 6s. 1,.1,9;B crores. The 5nit Trust of $ndia with 6s.::,B:1 crores of assets under
management was way ahead of other mutual funds.

F$+rth Phase si%#e Fe,r+ar) /00'
$n February .;;4, following the repeal of the 5nit Trust of $ndia Act 1234 5T$ was
bifurcated into two separate entities. ?ne is the pecified 5ndertaking of the 5nit Trust of
$ndia with assets under management of 6s..2,94B crores as at the end of =anuary .;;4,
representing broadly, the assets of 5 3: scheme, assured return and certain other
schemes. The pecified 5ndertaking of 5nit Trust of $ndia, functioning under an
administrator and under the rules framed by )overnment of $ndia and does not come
under the purview of the Mutual Fund 6egulations.
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OR2ANISATION OF A MUTUAL FUND:
There are many entities involved and the diagram below illustrates the organizational
set up of a Mutual Fund/
%For detailed definitions in the above chart refer to anne"ure 1&
Mutual Funds diversify their risk by holding a portfolio of instead of only one asset.
This is because by holding all your money in +ust one asset, the entire fortunes of your
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portfolio depend on this one asset. #y creating a portfolio of a variety of assets, this risk
is substantially reduced.
Mutual Fund investments are not totally risk free. $n fact, investing in Mutual Funds
contains the same risk as investing in the markets, the only difference being that due to
professional management of funds the controllable risks are substantially reduced. A
very important risk involved in Mutual Fund investments is the market risk. Cowever,
the company specific risks are largely eliminated due to professional fund management.
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IMPORTANT CHARACTERISTICS OF A MUTUAL FUND
A Mutual Fund actually belongs to the investors who have pooled their
Funds. The ownership of the mutual fund is in the hands of the $nvestors.
A Mutual Fund is managed by investment professional and other
ervice providers, who earns a fee for their services, from the funds.
The pool of Funds is invested in a portfolio of marketable investments.
The value of the portfolio is updated every day.
The investorEs share in the fund is denominated by FunitsG. The value
of the units changes with change in the portfolio value, every day. The
value of one unit of investment is called net asset value %>AH&.
The investment portfolio of the mutual fund is created according to The stated
$nvestment ob+ectives of the Fund.
O34ECTI5ES OF A MUTUAL FUND:
To 7rovide an opportunity for lower income groups to ac(uire without
Much difficulty, property in the form of shares.
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To *ater mainly of the need of individual investors, whose means are small0
To Manage investors portfolio that provides regular income, growth,
afety, li(uidity, ta" advantage, professional management and diversification.
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AD5ANTA2ES OF MUTUAL FUNDS:
Di1ersi*i#ati$%: An investor undertakes risk if he invests all his funds in a single
scrip. Mutual funds invest in a number of companies across various industries and
sectors. This diversification reduces the risk of the investment.
Pr$*essi$%a- Ma%a6e7e%t: An investor lacks the knowledge of the capital
market operations and does not have large resources to reap the benefits of
investment. Cence, he re(uires the help of an e"pert. Mutual funds are managed
by professional managers who have the re(uisite skills and e"periences to analyse
the performance and prospectus of companies.
Re6+-at$r) $1ersi6ht: Mutual funds are sub+ect to many government regulations
that protect investors from fraud.
Li8+i&it): $tIs easy to get your money out of a mutual fund. @rite a check, make
a call, and youIve got the cash.
C$%1e%ie%#e: Jou can usually buy mutual fund shares by mail, phone, or over
the $nternet. $t reduces paperwork, saves time and makes investment easy.
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L$9 #$st: Mutual fund e"penses are often no more than 1.B percent of your
investment. !"penses for $nde" Funds are less than that, because inde" funds are
not actively managed. $nstead, they automatically buy stock in companies that are
listed on a specific inde"
Tra%s:are%#)/ Mutual funds transparently declare their portfolio every month.
Thus, an investor knows where his'her money is being deployed and in case they
are not happy with the portfolio they can withdraw at a short notice.
F-e;i,i-it): Mutual funds offer a family of schemes, and investors have the option
of transferring their holdings from one scheme to other.
Ta; ,e%e*its/ Mutual fund investors now en+oy income ta" benefits. -ividends
received from mutual fundsE debt schemes are ta" e"empt to the overall limit of
6s 2;;; allowed under section ?< of the $ncome Ta" Act.
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DISAD5ANTA2ES OF MUTUAL FUNDS
Hi&&e% #$sts: The mutual fund industry tactfully buries costs under layers of
+argon. These costs come despite of negative returns. !"amples of such costs
include sales charges, annual fees, and other e"pensesK and depending on the
timing of their investment, investors may also have to pay ta"es on any capital
gains distribution they receive L even if the fund went on to perform poorly after
they bought shares.
La#< $* #$%tr$-: $nvestors typically cannot ascertain the e"act make,up of a
fundIs portfolio at any given time, nor can they directly influence which securities
the fund manager buys and sells or the timing of those trades.
Di-+ti$%: #ecause funds have small holdings in so many different companies,
high returns from a few investments often donIt make much difference on the
overall return. -ilution is also the result of a successful fund getting too big.
@hen money pours into funds that have had strong success, the manager often has
trouble finding a good investment for all the new money.
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Pri#e U%#ertai%t): @ith an individual stock, one can obtain real,time %or
close to real,time& pricing information with relative ease by checking financial
websites or through a broker, as can one observe stock price changes by the hour
or minute. #y contrast, with a mutual fund, the price at which one purchases or
redeems shares will typically depend on the fundIs >AH, which the fund might
not calculate until many hours after the order has been placed. $n general, mutual
funds must calculate their >AH at least once every business day, typically after
the ma+or 5.. e"changes close.
STRUCTURE OF A MUTUAL FUND
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IN5ESTORS PROFILE:
An investor normally prioritizes his investment needs before undertaking an
investment. o different goals will be allocated to different proportions of the total
disposable amount. $nvestments for specific goals normally find their way into the debt
market as risk reduction is of prime importance, this is the area for the risk,averse
investors and here, Mutual Funds are generally the best option. ?ne can avail of the
benefits of better returns with added benefits of anytime li(uidity by investing in open,
ended debt funds at lower risk, this risk of default by any company that one has chosen
to invest in, can be minimized by investing in Mutual Funds as the fund managers
analyze the companies financials more minutely than an individual can do as they have
the e"pertise to do so.
Moving up the risk spectrum, there are people who would like to take some risk and
invest in e(uity funds'capital market. Cowever, since their appetite for risk is also
limited, they would rather have some e"posure to debt as well. For these investors,
balanced funds provide an easy route of investment, armed with e"pertise of investment
techni(ues, they can invest in e(uity as well as good (uality debt thereby reducing risks
and providing the investor with better returns than he could otherwise manage. ince
they can reshuffle their portfolio as per market conditions, they are likely to generate
moderate returns even in pessimistic market conditions.
>e"t comes the risk takers, risk takers by their nature, would not be averse to investing
in high,risk avenues. *apital markets find their fancy more often than not,
because they have historically generated better returns than any other avenue,
provided, the money was +udiciously invested. Though the risk associated is
generally on the higher side of the spectrum, the return,potential compensates for
the risk attached.
MUTUAL E=PECTATIONS AND 3ENEFITS
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Everyone e"pects the >ew year to usher an era of +oy and prosperity and certainly looks
forward to a windfall in terms of good things to come. $nvestor is no e"ception to this.
#ut before one rushes to celebrate with new investments, it would be appropriate to take
a look at how J.A treated Mutual Funds %MFs& , the investment vehicle of the small
investor.
A happy,go,lucky,man turned investor would have nothing to write home about, had he
invested in the Jear .;;; and stayed invested throughout the year. 7ositive returns
seemed like a state of utopia in J.A. @hat a transformation in an $ndustry that had
witnessed almost triple digit returns in 1222 when #! ense" had generated returns of
about 3B percent.
@hat was common to MFs in J.A was the presence of technology, media M telecom
sector scripEs in portfolios of most funds, especially e(uity growth funds. #irla
Advantage Fund with and e"posure of 38N, Alliance to the tune of 81N are +ust to name
a few. @hile the bull phases did not raise any (uestions about the portfolio compositions,
the bear phases certainly did. >AHs of most of these funds plummeted raising (uestions
on the e"tent of portfolio diversification.
@hen the bull phase came to an end and when most of the funds stood stripped with the
downslide of most of the TMT stocks, most fund managers moved to (uality portfolio
levels and reduced their $T e"posure to reasonable levels. Most e(uity diversified funds,
today, maintain $T e"posure at .;N to 48N while simultaneously picking up both old and
new economy stocks. #ut fund managers still are willing to bet on TMT stocks despite
the tumultuous e"perience they have had in J.A. @hile accepting the possibility of a
downward revision of their growth rate, they foresee no indications of a significant
slowdown from at least $ndia based companies. They concur that the fundamentals of $T
sector are strong with future growth, however, being at a modest pace. They are now of
the view that a mi"ture of old and new economy scrips would form an ideal portfolio.
@hile the crash in $T share prices has resulted in a re,balancing of portfolios, action on
the old economy front would further narrow the gap between the so called Oclick and
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mortarE and O brick and mortarE companies,bring with it a greater diversification in MF
portfolios.
MF $ndustry in $ndia, like any other $ndustry, has had its nascent stage and is still trying
to grapple with several inconsistencies. The $ndustry is now approaching a stage where a
cross section of investing community has begun to comprehend that MFs provide and
ideal investment vehicle to meet their varied investment ob+ectives in the long run with
ade(uate emphasis on portfolio diversification. All in all, MFs have had their share of
lessons in J.A and are waiting for newer horizons in J.AP1 with abated breath.
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TYPES OF MUTUAL FUNDS:
1> OPEN-ENDED MUTUAL FUNDS:-
The holders of the shares in the Fund can resell them to the issuing Mutual Fund
*ompany at the time. They receive in turn the net assets value %>AH& of the shares at
the time of re,sale. uch Mutual Fund *ompanies place their funds in the secondary
securities market. They do not participate in new issue market as do pension funds or
life insurance companies. Thus they influence market price of corporate securities.
?pen,end investment companies can sell an unlimited number of hares and thus keep
going larger. The open,end Mutual Fund *ompany #uys or sells their shares. These
companies sell new shares >AH plus a <oading or management fees and redeem shares
at >AH. $n other words, the target amount and the period both are indefinite in such
funds
/> CLOSED-ENDED MUTUAL FUNDS:-
A closedQend Fund is open for sale to investors for a specific period, after which
further sales are closed. Any further transaction for buying the units or repurchasing
them, Cappen in the secondary markets, where closed end Funds are listed. Therefore
new investors buy from the e"isting investors, and e"isting investors can li(uidate their
units by selling them to other willing buyers. $n a closed end Funds, thus the pool of
Funds can technically be kept constant. The asset management company %AM*&
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however, can buy out the units from the investors, in the secondary markets, thus
reducing the amount of funds held by outside investors. The price at which units can be
sold or redeemed -epends on the market prices, which are fundamentally linked to the
>AH. $nvestors in closed end Funds receive either certificates or -epository receipts,
for their holdings in a closed end mutual Fund.
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OR2ANISATION AND MANA2EMENT OF MUTUAL FUNDS:-
$n $ndia Mutual Fund usually formed as trusts, three parties are generally involved viz.
ettler of the trust or the sponsoring organization.
The trust formed under the I%&ia% tr+st a#t? 19!/ or the trust company
registered under the I%&ia% #$7:a%ies a#t? 19@6
Fund mangers or The merchant,banking unit
*ustodians.
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MUTUAL FUNDS TRUST:-
Mutual fund trust is created by the sponsors under the I%&ia% tr+st a#t? 19!/
@hich is the main body in the creation of Mutual Fund Trust0
The main functions of Mutual Fund trust are as follows/
7lanning and formulating Mutual Funds schemes.
eeking !#$Es approval and authorization to these schemes.
Marketing the schemes for public subscription.
eeking 6#$ approval in case >6$Es subscription to Mutual Fund is $nvited
Attending to trusteeship function. This function as per guidelines can be
assigned to separately established trust companies too. Trustees are re(uired to
submit a consolidated report si" monthly to !#$ to ensure that the guidelines
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are fully being complied with trusted are also re(uired to submit an annual
report to the investors in the fund.
FUND MANA2ERS (OR. THE ASSES MANA2EMENT COMPANY
(AMC.
AM* has to discharge mainly three functions as under/
$. Taking investment decisions and making investments of the funds through
market dealer'brokers in the secondary market securities or directly in the
primary capital market or money market instruments
$$. 6ealize fund position by taking account of all receivables and realizations,
moving corporate actions involving declaration of dividends,etc to compensate
investors for their investments in unitsK and
$$$. Maintaining proper accounting and information for pricing the units and arriving
at net asset value %>AH&, the information about the listed schemes and the
transactions of units in the secondary market. AM* has to feed back the trustees
about its fund management operations and has to maintain a perfect information
system.
CUSTODIANS OF MUTUAL FUNDS:-
Mutual funds run by the subsidiaries of the nationalized banks had their respective
sponsor banks as custodians like canara bank, #$, 7>#, etc. Foreign banks with
higher degree of automation in handling the securities have assumed the role of
custodians for mutual funds. @ith the establishment of stock Colding *orporation
of $ndia the work of custodian for mutual funds is now being handled by it for
various mutual funds. #esides, industrial investment trust company acts as sub,
custodian for stock Colding *orporation of $ndia for domestic schemes of 5T$,
#?$ MF, <$* MF, etc
Fee str+#t+re:-
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*ustodian charges range between ;.1BN to ;..;N on the net value of the
customerEs holding for custodian services space is one important factor which has
fi"ed cost element.
RESPONSI3ILITY OF CUSTODIANS: -
6eceipt and delivery of securities
Colding of securities.
*ollecting income
Colding and processing cost
*orporate actions etc
FUNCTIONS OF CUSTOMERS
afe custody
Trade settlement
*orporate action
Transfer agents
RATE OF RETURN ON MUTUAL FUNDS:-
An investor in mutual fund earns return from two sources/
$ncome from dividend paid by the mutual fund.
*apital gains arising out of selling the units at a price higher than the
ac(uisition price
F$r7ati$% a%& re6+-ati$%s:
1. Mutual funds are to be established in the form of trusts under the I%&ia% tr+sts
a#t and are to be operated by separate asset management companies %AM* s&
.. AM*Es shall have a minimum Net 9$rth $* Rs> @ #r$resA
4. AM*Es and Trustees of Mutual Funds are to be two separate legal entities and
that an AM* or its affiliate cannot act as a manager in any other fundK
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:. Mutual funds dealing e"clusively with money market instruments are to be
regulated by the 6eserve #ank ?f $ndia
B. Mutual fund dealing primarily in the capital market and also partly money
market instruments are to be regulated by the Se#+rities E;#ha%6e 3$ar& O*
I%&ia (SE3I.
3. All schemes floated by Mutual funds are to be registered with !#$
S#he7es:-
1. Mutual funds are allowed to start and operate both closed,end and open,end
schemesK
.. !ach closed,end schemes must have a Mi%i7+7 #$r:+s (:$$-i%6 +:. $* Rs /0
#r$reA
4. !ach open,end scheme must have a Mi%i7+7 #$r:+s $* Rs @0 #r$re
:. $n the case of a *losed Q!nd scheme if the Mi%i7+7 a7$+%t $* Rs /0 #r$re
$r 60B of the target amount, which ever is higher is not raised then the entire
subscription has to be refunded to the investorsK
B. $n the case of an ?pen,!nded schemes, if the Minimum amount of Rs @0 #r$re
$r 60 :er#e%t of the targeted amount, which ever is higher, is no raised then
the entire subscription has to be refunded to the investors.
I%1est7e%t %$r7s:-
1. >o mutual fund, under all its schemes can own more than five percent of any
companyEs paid up capital carrying voting rightsK
.. >o mutual fund, under all its schemes taken together can invest more than 1;
percent of its funds in shares or debentures or other instruments of any single
companyK
4. >o mutual fund, under all its schemes taken together can invest more than 1B
percent of its fund in the shares and debentures of any specific industry, e"cept
those schemes which are specifically floated for investment in one or more
specified industries in respect to which a declaration has been made in the offer
letter.
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:. >o individual scheme of mutual funds can invest more than five percent of its
corpus in any one companyEs shareK
B. Mutual funds can invest only in transferable securities either in the money or in
the capital market. 7rivately placed debentures, securitized debt, and other
un(uoted debt, and other un(uoted debt instruments holding cannot e"ceed 1;
percent in the case of growth funds and :; percent in the case of income funds.
Distri,+ti$%:
Mutual funds are re(uired to distribute at least 2; percent of their profits annually in
any given year. #esides these, there are guidelines governing the operations of mutual
funds in dealing with shares and also seeking to ensure greater investor protection
through detailed disclosure and reporting by the mutual funds. !#$ has also been
granted with powers to over see the constitution as well as the operations of mutual
funds, including a common advertising code. #esides, !#$ can impose penalties on
Mutual funds after due investigation for their failure to comply with the guidelines.
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MUTUAL FUND SCHEME TYPES:
E8+it) Di1ersi*ie& S#he7es
These schemes mainly invest in e(uity. They seek to achieve long,term capital
appreciation by responding to the dynamically changing $ndian economy by moving
across sectors such as <ifestyle, 7harma, *yclical, Technology, etc.
Se#t$r S#he7es
These schemes focus on particular sector as $T, #anking, etc. They seek to generate
long,term capital appreciation by investing in e(uity and related securities of
companies in that particular sector.
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I%&e; S#he7es
These schemes aim to provide returns that closely correspond to the return of a
particular stock market inde" such as #! ense", >! >ifty, etc. uch schemes invest
in all the stocks comprising the inde" in appro"imately the same weightage as they are
given in that inde".
E;#ha%6e Tra&e& F+%&s (ETFs.
!TFs invest in stocks underlying a particular stock inde" like >! >ifty or #!
ense". They are similar to an inde" fund with one crucial difference. !TFs are listed
and traded on a stock e"change. $n contrast, an inde" fund is bought and sold by the
fund and its distributors.
E8+it) Ta; Sa1i%6 S#he7es
These work on similar lines as diversified e(uity funds and seek to achieve long,term
capital appreciation by investing in the entire universe of stocks. The only difference
between these funds and e(uity,diversified funds is that they demand a lock,in of 4
years to gain ta" benefits.
D)%a7i# F+%&s
These schemes alter their e"posure to different asset classes based on the market
scenario. uch funds typically try to book profits when the markets are overvalued and
remain fully invested in e(uities when the markets are undervalued. This is suitable for
investors who find it difficult to decide when to (uit from e(uity.
3a-a%#e& S#he7es
These schemes seek to achieve long,term capital appreciation with stability of
investment and current income from a balanced portfolio of high (uality e(uity and
fi"ed,income securities.
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Me&i+7-Ter7 De,t S#he7es
These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of five to seven years.
Sh$rt-Ter7 De,t S#he7es
These schemes have a portfolio of debt and money market instruments where the
average maturity of the underlying portfolio is in the range of one to two years.
M$%e) Mar<et De,t S#he7es
These schemes invest in debt securities of a short,term nature, which generally means
securities of less than one,year maturity. The typical short,term interest,bearing
instruments these funds invest in Treasury #ills, *ertificates of -eposit, *ommercial
7aper and $nter,#ank *all Money Market.
Me&i+7-Ter7 2i-t S#he7es
These schemes invest in government securities. The average maturity of the securities
in the scheme is over three years.
Sh$rt-Ter7 2i-t S#he7es
These schemes invest in government securities. The securities invested in are of short to
medium term maturities.
F-$ati%6 Rate F+%&s
They invest in debt securities with floating interest rates, which are generally linked to
some benchmark rate like M$#?6. Floating rate funds have a high relevance when
interest rates are on the rise helping investors to ride the interest rate rise.
M$%th-) I%#$7e P-a%s (MIPS.
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These are basically debt schemes, which make marginal investments in the range of 1;,
.BN in e(uity to boost the schemeEs returns. M$7 schemes are ideal for investors who
seek slightly higher return that pure long,term debt schemes at marginally higher risk.
DIFFERENT MODES OF RECEI5IN2 THE INCOME EARNED
FROM MUTUAL FUND IN5ESTMENTS
Mutual Funds offer three methods of receiving income/
2r$9th P-a%
$n this plan, dividend is neither declared nor paid out to the investor but is built into the
value of the >AH. $n other words, the >AH increases over time due to such incomes
and the investor realizes only the capital appreciation on redemption of his investment.
I%#$7e P-a%
$n this plan, dividends are paid,out to the investor. $n other words, the >AH only
reflects the capital appreciation or depreciation in market price of the underlying
portfolio.
Di1i&e%& Re-i%1est7e%t P-a%
$n this case, dividend is declared but not paid out to the investor, instead, it is
reinvested back into the scheme at the then prevailing >AH. $n other words, the
investor is given additional units and not cash as dividend.
MUTUAL FUND IN5ESTIN2 STRATE2IES:
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1> S)ste7ati# I%1est7e%t P-a%s (SIPs.
These are best suited for young people who have started their careers and need to build
their wealth. $7s entail an investor to invest a fi"ed sum of money at regular intervals
in the Mutual fund scheme the investor has chosen, an investor opting for $7 in "yz
Mutual Fund scheme will need to invest a certain sum on money every
month'(uarter'half,year in the scheme.
/> S)ste7ati# Cith&ra9a- P-a%s (SCPs.
These plans are best suited for people nearing retirement. $n these plans, an investor
invests in a mutual fund scheme and is allowed to withdraw a fi"ed sum of money at
regular intervals to take care of his e"penses
'> S)ste7ati# Tra%s*er P-a%s (STPs.
They allow the investor to transfer on a periodic basis a specified amount from one
scheme to another within the same fund family Q meaning two schemes belonging to
the same mutual fund. A transfer will be treated as redemption of units from the scheme
from which the transfer is made. uch redemption or investment will be at the
applicable >AH. This service allows the investor to manage his investments actively to
achieve his ob+ectives. Many funds do not even charge any transaction fees for his
service Q an added advantage for the active investor.
AD5ANTA2ES OF IN5ESTIN2 TRHOUR2H MUTUAL FUNDS /
There are several reasons that can be attributed to the growing popularity and suitability
of Mutual Funds as an investment vehicle especially for retail investors/
ASSET ALLOCATION
Mutual Funds offer the investors a valuable tool Q Asset Allocation. This is
e"plained by an e"ample.
An investor investing 6s.1 lakh in a mutual fund scheme, which has collected 6s.1;;
crores and invested the money in various investment options, will have 6s.1 lakh
spread over a number of investment options as demonstrated below/
..

$nvestment Type
Per#e%ta6e $*
A--$#ati$% (B $*
t$ta- :$rt*$-i$.
T$ta- :$rt*$-i$ $*
the M+t+a- F+%&
s#he7e (Rs> I%
#r$res.
I%1est$rs :$rt*$-i$
a--$#ati$% (Rs>.
EDUITY: @"B @" @"?000
State 3a%< $* I%&ia 1@B 1@ 1@?000
I%*$s)s Te#h%$-$6ies 1/B 1/ 1/?000
A33 10B 10 10?000
Re-ia%#e I%&+stries 9B 9 9?000
MICO "B " "?000
Tata P$9er B ?000
DE3T: 'B ' '?000
2$1t> Se#+rities /0B /0 /0?000
C$7:a%) De,e%t+res 10B 10 10?000
I%stit+ti$% 3$%&s 9B 9 9?000
M$%e) Mar<et B ?000
T$ta- 100B 100 1?00?000
Thus OAsset AllocationE is allocating your investments in to different investment
options depending on your risk profile and return e"pectations.
DI5ERSIFICATION
-iversification is spreading your investment amount over a larger number of
investments in order to reduce risk. For instance, if you have 6s.1;,;;; to invest in
$nformation Technology %$T& stocks, this amount will only buy you a handful of
stocks of perhaps one or two companies. A fall in the market price of any of these
company stocks will significantly erode your investment amount instead it makes
sense to invest in an $T sector mutual fund scheme so that your 6s.1;,;;; is spread
across a larger number of stocks thereby reducing your risk.
PROFESSIONALS AT CORE
.4

Few investors have the time or e"pertise to manage their personal investments every
day, to efficiently reinvest interest or dividend income, or to investigate the
thousands of securities available in the financial markets. Fund managers are
professionals and e"perienced in tracking the finance markets, having access to
e"tensive research and market information, which enables them to decide which
securities to buy and sell for the fund. For an individual investor like you, this
professionalism is built in when you invest in the Mutual Fund.
REDUCTION OF TRANSACTION COSTS
@hile investing directly in securities, all the costs of investing such as brokerage,
custodial services etc. #orne by you are at the highest rates due to small transaction
sizes. Cowever, when going through a fund, you have the benefit of economies of
scaleK the fund pays lesser costs because of larger volumes, a benefit passed on to its
investors like you.
EASY ACCESS TO YOUR MONEY
This is one of the most important benefits of a Mutual Fund. ?ften you hold shares
or bonds that you cannot directly, easily and (uickly sell. $n such situations, it could
take several days or even longer before you are able to li(uidate his Mutual Fund
investment by selling the units to the fund itself and receive his money within 4
working days.
TRANSPARENCY
The investor gets regular information on the value of his investment in addition to
disclosure on the specific investments made by the fund, the proportion invested in
each class of assets and the fund managerEs investment strategy and outlook.
SA5IN2 TA=ES
Ta" saving schemes of Mutual Funds offer investor a ta" rebate under section 99 of
the $ncome Ta" Act. 5nder this section, an investor can invest up to 6s.1;,;;; per
.:

Financial year in a ta" saving scheme. The rate of rebate under this section depends
on the investorEs total income.
IN5ESTIN2 IN STOCE MAREET INDE=
$nde" schemes of mutual funds give you the opportunity of investing in scrips that
make up a particular inde" in the same proportion of weightage that these scrips
have in the inde". Thus, the return on your investment mirrors the movement of the
inde".
IN5ESTIN2 IN 2O5ERNMENT SECURITIES
)ilt and Money Market chemes of Mutual Funds also give you the opportunity to
invest in )overnment ecurities and Money Markets %including the inter banking
call money market&
CELL-RE2ULATED INDUSTRY
All Mutual Funds are registered with !#$ and they function within the provisions
of strict regulations designed to protect the interests of investors. The operations of
Mutual Funds are regularly monitored by !#$.
CON5ENIENCE AND FLE=I3ILITY
Mutual Funds offer their investors a number of facilities such as inter,fund transfers,
online checking of holding status etc, which direct investments donEt offer.
RISES ASSOCIATED CITH MUTUAL FUNDS:-
$nvesting in Mutual Funds, as with any security, does not come without risk. ?ne of the
most basic economic principles is that risk and reward are directly correlated. $n other
words, the greater the potential risk the greater the potential return. The types of risk
commonly associated with Mutual Funds are/
.B

1. MAREET RISE
Market risk relates to the market value of a security in the future. Market prices
fluctuate and are susceptible to economic and financial trends, supply and demand, and
many other factors that cannot be precisely predicted or controlled.
/. POLITICAL RISE
*hanges in the ta" laws, trade regulations, administered prices, etc are some of the
many political factors that create market risk. Although collectively, as citizens, we
have indirect control through the power of our vote individually, as investors, we have
virtually no control.
'. INFLATION RISE
$nterest rate risk relates to future changes in interest rates. For instance, if an investor
invests in a long,term debt Mutual Fund scheme and interest rates increase, the >AH of
the scheme will fall because the scheme will be end up holding debt offering lower
interest rates.
. 3USINESS RISE
#usiness risk is the uncertainty concerning the future e"istence, stability, and
profitability of the issuer of the security. #usiness risk is inherent in all business
ventures. The future financial stability of a company cannot be predicted or guaranteed,
nor can the price of its securities. Adverse changes in business circumstances will
reduce the market price of the companyEs e(uity resulting in proportionate fall in the
>AH of the Mutual Fund scheme, which has invested in the e(uity of such a company.
@. ECONOMIC RISE
!conomic risk involves uncertainty in the economy, which, in turn, can have an adverse
effect on a companyEs business. For instance, if monsoons fail in a year, e(uity stocks
of agriculture,based companies will fall and >AHs of Mutual Funds, which have
invested in such stocks, will fall proportionately.
.3

PERFORMANCE MEASURES OF MUTUAL FUNDS:
Mutual Fund industry today, with about 4; players and more than si" hundred schemes,
is one of the most preferred investment avenues in $ndia. Cowever, with a plethora of
schemes to choose from, the retail investor faces problems in selecting funds. Factors
such as investment strategy and management style are (ualitative, but the funds record
is an important indicator too.
Though past performance alone cannot be indicative of future performance, it is,
frankly, the only (uantitative way to +udge how good a fund is at present. Therefore,
there is a need to correctly assess the past performance of different Mutual Funds.
@orldwide, good Mutual Fund companies over are known by their AM*Es and this
fame is directly linked to their superior stock selection skills.
For Mutual Funds to grow, AM*Es must be held accountable for their selection of
stocks. $n other words, there must be some performance indicator that will reveal the
(uality of stock selection of various AM*Es.
6eturn alone should not be considered as the basis of measurement of the performance
of a Mutual Fund scheme, it should also include the risk taken by the fund manager
because different funds will have different levels of risk attached to them. 6isk
associated with a fund, in a general, can be defined as Hariability or fluctuations in the
returns generated by it. The higher the fluctuations in the returns of a fund during a
given period, higher will be the risk associated with it. These fluctuations in the returns
generated by a fund are resultant of two guiding forces. First, general market
fluctuations, which affect all the securities, present in the market, called Market risk or
ystematic risk and second, fluctuations due to specific securities present in the
.8

portfolio of the fund, called 5nsystematic risk. The Total 6isk of a given fund is sum of
these two and is measured in terms of standard deviation of returns of the fund.
ystematic risk, on the other hand, is measured in terms of #eta, which represents
fluctuations in the >AH of the fund vis,S,vis market. The more responsive the >AH of
a Mutual Fund is to the changes in the marketK higher will be its beta. #eta is calculated
by relating the returns on a Mutual Fund with the returns in the market. @hile
5nsystematic risk can be diversified through investments in a number of instruments,
systematic risk cannot. #y using the risk return relationship, we try to assess the
competitive strength of the Mutual Funds one another in a better way. $n order to
determine the risk,ad+usted returns of investment portfolios, several eminent authors
have worked since 123;s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class.
The 7$st i7:$rta%t a%& 9i&e-) +se& 7eas+res $* :er*$r7a%#e are:
The TreynorEMeasure
The harpe Measure
=enson Model
Fama Model
1. The Tre)%$r Meas+re:-
-eveloped by =ack Treynor, this performance measure evaluates funds on the basis of
TreynorIs $nde".
This $nde" is a ratio of return generated by the fund over and above risk free rate of
return %generally taken to be the return on securities backed by the government, as there
is no credit risk associated&, during a given period and systematic risk associated with it
%beta&. ymbolically, it can be represented as/
TreynorIs $nde" %Ti& 1 %6i , 6f&'#i.
@here,
6i represents return on fund,
.9

6f is risk free rate of return, and
#i is beta of the fund.
All risk,averse investors would like to ma"imize this value. @hile a high and positive
TreynorIs $nde" shows a superior risk,ad+usted performance of a fund, a low and
negative TreynorIs $nde" is an indication of unfavorable performance.
/. The Shar:e Meas+re :-
$n this model, performance of a fund is evaluated on the basis of harpe 6atio, which is
a ratio of returns generated by the fund over and above risk free rate of return and the
total risk associated with it.
According to harpe, it is the total risk of the fund that the investors are concerned
about. o, the model evaluates funds on the basis of reward per unit of total risk.
ymbolically, it can be written as/
harpe $nde" %i& 1 %6i , 6f&'i
@here,
i is standard deviation of the fund,
6i represents return on fund, and
6f is risk free rate of return.
@hile a high and positive harpe 6atio shows a superior risk,ad+usted performance of a
fund, a low and negative harpe 6atio is an indication of unfavorable performance.
C$7:aris$% $* Shar:e a%& Tre)%$r
harpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well,diversified portfolios. ?n the other hand,
the systematic risk is the relevant measure of risk when we are evaluating less than
fully diversified portfolios or individual stocks. For a well,diversified portfolio the total
.2

risk is e(ual to systematic risk. 6ankings based on total risk %harpe measure& and
systematic risk %Treynor measure& should be identical for a well,diversified portfolio,
as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that
ranks higher on Treynor measure, compared with another fund that is highly
diversified, will rank lower on harpe Measure.
'. 4e%s$% M$&e-:-
=ensonIs model proposes another risk ad+usted performance measure. This measure was
developed by Michael =enson and is sometimes referred to as the differential 6eturn
Method. This measure involves evaluation of the returns that the fund has generated vs.
the returns actually e"pected out of the fund1 given the level of its systematic risk. The
surplus between the two returns is called Alpha, which measures the performance of a
fund compared with the actual returns over the period. 6e(uired return of a fund at a
given level of risk %#i& can be calculated as/
6i 1 6f P #i %6m , 6f&
@here,
6i represents return on fund, and
6m is average market return during the given period,
6f is risk free rate of return, and
#i is #eta deviation of the fund.
After calculating it, Alpha can be obtained by subtracting re(uired return from
the actual return of the fund.
Cigher alpha represents superior performance of the fund and vice versa. <imitation of
this model is that it considers only systematic risk not the entire risk associated with the
fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of
market is primitive.
. Fa7a M$&e-:-
4;

The !ugene Fama model is an e"tension of =enson model. This model compares the
performance, measured in terms of returns, of a fund with the re(uired return
commensurate with the total risk associated with it. The difference between these two is
taken as a measure of the performance of the fund and is called >et electivity.
The >et electivity represents the stock selection skill of the fund manager, as it is the
e"cess returns over and above the return re(uired to compensate for the total risk taken
by the fund manager. Cigher value of which indicates that fund manager has earned
returns well above the return commensurate with the level of risk taken by him.
6e(uired return can be calculated as/ 6i 1 6f P i'mT%6m , 6f&
@here,
m is standard deviation of market returns,
6m is average market return during the given period, and
6f is risk free rate of return.
The >et electivity is then calculated by subtracting this re(uired return from
the actual return of the fund.
Among the above performance measures, two models namely, Treynor measure and
=enson model use ystematic risk is based on the premise that the 5nsystematic risk is
diversifiable. These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds and can invest in a
number of options to dilute some risks. For them, a portfolio can be spread across a
number of stocks and sectors. Cowever, harpe measure and Fama model that consider
the entire risk associated with fund are suitable for small investors, as the ordinary
investor lacks the necessary skill and resources to diversify. Moreover, the selection of
the fund on the basis of superior stock selection ability of the fund manager will also
help in safeguarding the money invested to a great e"tent. The investment in funds that
41

have generated big returns at higher levels of risks leaves the money all the more prone
to risks of all kinds that may e"ceed the individual investorsI risk appetite.
COMPANY PROFILE
(EOTAE MAHINDRA.
Aotak Mahindra Mutual Fund %AMMF& is managed by Aotak Mahindra Asset
Management *ompany <td., a wholly owned subsidiary of Aotak Mahindra
#ank <td. Aotak Mahindra Mutual Fund launched its chemes in -ecember 1229 and
today manages assets over and above 6s. 84B4.9. cr. contributed by more than 1,22,919
investors in various schemes. AMMF has to its credit the launching of innovative
schemes and plans like Aotak )ilt and Free <ife $nsurance with Aotak #ond -eposit
7lan.
Aotak Mahindra is one of $ndiaIs leading financial institutions, offering complete
financial solutions that encompass every sphere of life. From commercial banking, to
stock broking, to mutual funds, to life insurance, to investment banking, the group caters
to the financial needs of individuals and corporates.
The group has a net worth of around 6s.1,8;; crore and employs over :,;;; employees
in its various businesses. @ith a presence in 8: cities in $ndia and offices in >ew Jork,
<ondon, -ubai and Mauritius, it services a customer base of over B,;;,;;;
Aotak Mahindra has international partnerships with )oldman achs %one of the worldIs
largest investment banks and brokerage firms&, Ford *redit %one of the worldIs largest
dedicated automobile financiers& and ?ld Mutual %a large insurance, banking and asset
management conglomerate&.
4.

Aotak Mahindra Asset Management *ompany <imited %AMAM*&, a wholly owned
subsidiary of AM#<, is the asset manager for Aotak Mahindra Mutual Fund %AMMF&.
AMAM* started operations in -ecember 1229 and has over 1,22,919 investors in various
schemes. AMMF offers schemes catering to investors with varying risk , return profiles
and was the first fund house in the country to launch a dedicated gilt scheme investing
only in government securities.
The Aotak Mahindra )roup was born in 129B as Aotak *apital Management Finance
<imited. This company was promoted by 5day Aotak, idney A. A. 7into and Aotak M
*ompany. $ndustrialists Carish Mahindra and Anand Mahindra took a stake in 1293, and
thatIs when the company changed its name to Aotak Mahindra Finance <imited.
ince then itIs been a steady and confident +ourney to growth and success.
Aotak Mahindra Finance <imited starts the activity of #ill -iscounting
Aotak Mahindra Finance <imited enters the <ease and Cire 7urchase market.
The Auto Finance division is started the $nvestment #anking -ivision is started.
!nters the Funds yndication sector
122B #rokerage and -istribution businesses incorporated into a separate company ,
Aotak ecurities. $nvestment #anking division incorporated into a separate company ,
Aotak Mahindra *apital *ompany.
1223 The Auto Finance #usiness is hived off into a separate company , Aotak Mahindra
7rimus <imited. Aotak Mahindra takes a significant stake in Ford *redit Aotak Mahindra
<imited, for financing Ford vehicles. The launch of Matri" $nformation ervices <imited
marks the )roupEs entry into information distribution.
1229 !nters the mutual fund market with the launch of Aotak Mahindra Asset
Management *ompany.
Aotak Mahindra ties up with ?ld Mutual plc. For the <ife $nsurance business.
Aotak ecurities launches kotakstreet.com , its on,line broking site. Formal
commencement of private e(uity activity through setting up of Aotak Mahindra Henture
*apital Fund.
.;;1 Matri" sold to Friday *orporation <aunches $nsurance ervices
44

.;;4 Aotak Mahindra Finance <td. converts to bank Aotak Mahindra is one of $ndiaIs
leading financial institutions, offering complete financial solutions cities in $ndia and
offices in >ew Jork, <ondon, -ubai and Mauritius, it services a customer base of over
B,;;,;;;.
has international partnerships with )oldman achs %one of the worldIs largest investment
banks and brokerage firms&, Ford *redit %one of the worldIs largest dedicated automobile
financiers& and ?ld Mutual %a large insurance, banking and asset management
conglomerate that encompass every sphere of life. From commercial banking, to stock
broking, to mutual funds, to life insurance, to investment banking, the group caters to the
financial needs of individuals and corporates.
The group has a net worth of around 6s.1,8;; crore and employs over :,;;; employees
in its various businesses. @ith a presence in 8: cities in $ndia and offices in >ew Jork,
<ondon, -ubai and Mauritius, it services a customer base of over B,;;,;;;.
Aotak Mahindra Asset Management *ompany <imited %AMAM*&, a wholly owned
subsidiary of AM#<, is the asset manager for Aotak Mahindra Mutual Fund %AMMF&.
AMAM* started operations in -ecember 1229 and has over 1,22,919 investors in various
schemes. AMMF offers schemes catering to investors with varying risk , return profiles
and was the first fund house in the country to launch a dedicated gilt scheme investing
only in government securities.
4:

Aotak $nvestment #ankingT %A$#&, $ndiaIs premier $nvestment #ank is a strategic +oint
venture between Aotak Mahindra #ank <imited %AM#<& and the )oldman achs )roup,
<<7.
AM#< has come into e"istence in March .;;4 through the conversion of Aotak
Mahindra #ank <td. into a *ommercial #ank. Aotak Mahindra is one of $ndiaIs leading
financial institutions, offering complete financial solutions that encompass every sphere
of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to
investment banking, the group caters to the v needs of individuals and corporates.
The group has a net worth of over 6s.1,BB; crore and employs over 4,;;; employees in
its various businesses. @ith a presence in 3; cities in $ndia and offices in >ew Jork,
<ondon, -ubai and Mauritius, it services a customer base of over B,;;,;;;.
Aotak $nvestment #anking %A$#& and Aotak $nstitutional !(uities represent the securities
business of the Aotak Mahindra )roup TT%A$&, both, +oint ventures with )oldman achs
involved in brokerage, distribution and research.
4B

@e are a full service $nvestment #ank bringing to our clients the global reach and
e"pertise of )oldman achs and the local knowledge and skills of Aotak Mahindra. As a
full service $nvestment #ank, Aotak $nvestment #anking core business areas include
!(uity $ssuances, Mergers M Ac(uisitions, Advisory ervices and Fi"ed $ncome
ecurities and 7rincipal #usiness.
?ur strength lies in understanding our clientsI businesses backed by a strong research
team and an e"tensive distribution network, which spans a wide variety of investors
across the country. @e are also the first $ndian $nvestment #ank to be registered with the
ecurities M Futures Authority in the 5A %through our wholly owned subsidiary& and the
>ational Association of ecurities and -ealers in the 5A.
@e are also the first $ndian $nvestment #ank to be appointed by the )overnment of $ndia
as a *o,lead Manager in their international divestment of )as Authority of $ndia <td
through a )-6 offering.
@e are today well positioned in an increasing globalised environment to provide full
service to its clients based either in $ndia or overseas.
RESEARCH METHODOLO2Y
The Methodology involves randomly selecting ?pen,!nded e(uity schemes of different
fund houses of the country. The data collected for this pro+ect is basically from one
sources, that is/,
1. econdary sources/ *ollection of data from $nternet and #ooks.
HYPOTHESIS
The Cypothesis of the study involves *omparison between/
1. Aotak ?pportunities fund.
.. 6eliance !(uity ?pportunities fund.
4. Franklin $ndia Fle"i fund.
:. C-F* *ore M satellite fund.
B. C#* $ndia ?pportunities fund.
43

NEED OF THE STUDY:
The pro+ectEs idea is to pro+ect Mutual Fund as a better avenue for investment on a
long,term or short,term basis. Mutual Fund is a productive package for a lay,investor
with limited finances, this pro+ect creates an awareness that the Mutual Fund is a
worthy investment practice. Mutual Fund is a globally proven instrument. Mutual
Funds are G5nit TrustG as it is called in some parts of the world has a long and
successful history, of late Mutual Funds have become a hot favorite of millions of
people all over the world.
The driving force of Mutual Funds is the Osafety of the principalE guaranteed, plus the
added advantage of capital appreciation together with the income earned in the form of
interest or dividend. The various schemes of Mutual Funds provide the investor with a
wide range of investment options according to his risk bearing capacities and interest
besidesK they also give handy return to the investor. Mutual Funds offers an investor to
invest even a small amount of money, each Mutual Fund has a defined investment
ob+ective and strategy. Mutual Funds schemes are managed by respective asset
managed companies sponsored by financial institutions, banks, private companies or
international firms. A Mutual Fund is the ideal investment vehicle for todayEs comple"
and modern financial scenario.
The study is basically made to analyze the various open,ended e(uity schemes of
different Asset Management *ompanies to highlight the diversity of investment that
Mutual Fund offer. Thus, through the study one would understand how a common man
could fruitfully convert a pittance into great penny by wisely investing into the right
scheme according to his risk taking abilities.
SCOPE:
The study here has been limited to analyse open,ended e(uity )rowth schemes of
different Asset Ma%a6e7e%t C$7:a%ies namely E$ta< Mahi%&ra M+t+a- F+%&?
Re-ia%#e M+t+a- F+%&? HDFC M+t+a- F+%&? Fra%<-i% Te7:-et$% M+t+a- F+%&?
HS3C M+t+a- F+%&seach scheme is analysed according to its performance against the
48

other, based on factors like Shar:eFs Rati$? Tre)%$rFs Rati$? (3eta. C$-e**i#ie%t?
Ret+r%s>
O34ECTI5ES:
1. To pro+ect Mutual Fund as the Oproductive avenueE for investing activities.
.. To show the wide range of investment options available in Mutual Funds by
e"plaining its various schemes.
4. To compare the schemes based on Shar:eFs rati$? Tre)%$rFs rati$? C$-
e**i#ie%t? Ret+r%s and show which scheme is best for the investor based on his
risk profile.
:. To help an investor make a right choice of investment, while considering the
inherent risk factors.
To understand the recent trends in Mutual Funds world.
The comparison between these schemes is made based on the following factors
A& harpeEs 6atio
#& TreynorEs 6atio
*& %#eta& co,efficient.
-& 6eturns
A. The Shar:eFs Meas+re /,
$n this model, performance of a fund is evaluated on the basis of harpe 6atio, which is
a ratio of returns generated by the fund over and above risk free rate of return and the
total risk associated with it.
According to harpe, it is the total risk of the fund that the investors are concerned
about. o, the model evaluates funds on the basis of reward per unit of total risk.
ymbolically, it can be written as/
49

harpe $nde" %i& 1 %6i , 6f&'i
@here,
i is tandard -eviation of the fund.
@hile a high and positive harpe 6atio shows a superior risk,ad+usted performance of a
fund, a low and negative harpe 6atio is an indication of unfavorable performance.
3. The Tre)%$r Meas+re /,
-eveloped by =ack Treynor, this performance measure evaluates funds on the basis of
TreynorIs $nde".
This $nde" is a ratio of return generated by the fund over and above risk free rate of
return %generally taken to be the return on securities backed by the government, as there
is no credit risk associated&, during a given period and systematic risk associated with it
%beta&. ymbolically, it can be represented as/
TreynorIs $nde" %Ti& 1 %6i , 6f&'#i.
@here,
6f is risk free rate of return,
and #i is beta of the fund.
All risk,averse investors would like to ma"imize this value. @hile a high and positive
TreynorIs $nde" shows a superior risk,ad+usted performance of a fund, a low and
negative TreynorIs $nde" is an indication of unfavorable performance.
C. (3eta. C$-e**i#ie%t:-
ystematic risk is measured in terms of #eta, which represents fluctuations in the >AH
of the fund vis,S,vis market. The more responsive the >AH of a Mutual Fund is to the
changes in the marketK higher will be its beta. #eta is calculated by relating the returns
on a Mutual Fund with the returns in the market. @hile unsystematic risk can be
42

diversified through investments in a number of instruments, systematic risk cannot. #y
using the risk return relationship, we try to assess the competitive strength of the
Mutual Funds vis,S,vis one another in a better way.
%#eta& is calculated as > % UJ& Q U J
> % U
.
& Q % U&
.

D. Ret+r%s:- 6eturns for the last one,year of different schemes are taken for the
comparison and analysis part.
DATA ANALYSISG INTERPRETATIONS:
>ote/ All the data used for analysis is taken up to the period .9,febuary,.;;3
EOTAE OPPORTUNITIES FUND
Aotak opportunities is a open,ended e(uity )rowth scheme.
Aotak opportunities is a diversified aggressive e(uity scheme
The fund has portfolio turnover ratio.
The fund manager is optimistic on the markets in the long term and e"pects good
returns from the same.
The fund manager is of the opinion that the market may not fall due to the abundent
li(uidity in the system.Cowever the fund managers sees high oil prices a big concern
in the global markets.
The fund has invested into e(uities to the tune of 2:.:BN of the total portfolio.
:;

RELIANCE EDUITY OPPORTUNITIES FUND:
6eliance !(uity ?pportunities Fund is an ?pen,!nded !(uity cheme.
6eliance !(uity ?pportunities Fund is an aggressive diversified e(uity scheme
6eliance !(uity ?pportunities is to seek to generate capital appreciation and provide
long term growth opportunities by investing in a portfolio constituted of e(uity
securities and e(uity related securities.
The fund has a high portfolio turnover ratio.
$t has $nstrument type such as !(uity M !(uity related $nstruments and -ebt M
Money Market $nstruments.
HDFC C$re a%& Sate--ite F+%&
C-F* *ore and atellite Fund is an ?pen,!nded !(uity cheme.
C-F* *ore and atellite Fund is an diversified e(uity scheme
The cheme may seek investment opportunity in the A-6 ' )-6 ' Foreign !(uity
and -ebt ecurities, in accordance with guidelines stipulated in this regard by !#$
and 6#$ from time to time.
The net assets of the cheme will be invested primarily in e(uity and e(uity related
instruments in a portfolio comprising of I*oreI group of companies and IatelliteI
group of companies.
The IatelliteI group will comprise of predominantly small,mid cap companies that
offer higher potential returns but at the same time carry higher risk
FRANELIN INDIA FLE=I CAP EDUITY FUND
Franklin india fle"i cap Fund is an ?pen,!nded !(uity cheme.
Franklin india fle"i cap Fund is an aggressive diversified e(uity scheme
$t is an investment avenue that has the potential to provide steady returns and capital
appreciation over a five,year period through a mi" of fi"ed income and e(uity
instruments.
:1

$t has a investment team has a rich e"perience of investing in both e(uity and fi"ed
income instrument that has translated in to a good investment performance from its
hybrid scheme
HS3C I%&ia $::$rt+%ities F+%&
C#* $ndia ?pportunities Fund is an ?pen,!nded !(uity cheme.
$t is a scheme seeking long term capital growth through investments across all
market capitalizations, including small, mid and large cap stocks.
The investment is to seek aggressive growth by focussing on mid cap companies in
addition to investments in large cap stocks.
The fund aims to be predominantly invested in e(uity and e(uity related securities
EOTAE OPPORTUNITIES FUND
F+%& Ma%a6er: (Mr> A%a%& Shah.
O34ECTI5E:-
To generate capital appreciation from a diversified portfolio of e(uity and e(uity
related securities Aotak ?pportunities is a diversified e(uity scheme, with a fle"ible
investing style. $t will invest in sectors, which our Fund Manager believes would
outperform others in the short to medium,term. Aotak ?pportunitiesE speciality lies in
giving the Fund Manager fle"ibility to act based on his views on the marketK and in
allowing him to invest higher concentrations in sectors he believes will outperform
others.
As markets evolve and grow, new opportunities for growth keep emerging. Aotak
?pportunities would endeavour to capture these opportunities to generate wealth for its
investors.
EOTAE OPPORTUNITIES FUND PERFORMANCE:-
YEAR R: R7 R*
(R7-
R*.
(R:-
R*. =/ =Y
(=
-=,ar. D/
U J -
:.

LAST 1
MONTH B.2. ..9: :..B ,1.:1 1.38 1.29 ,..4B ,.;.11 :;:.81
LAST '
MONTHS .:.31
14.1
1 :..B 9.93 .;.43 89.:2 19;.49 ,2.9:8 23.28
LAST 6
MONTHS 4:.:.
4;.1
: :..B .B.92 4;.18 38;..2 891.1; .B.92 38;..2
Si%#e
I%#e:ti$% 89.18
:B.2
2 :.B :1.:2 84.38 18.1.:. 4;B3.B3 ...89 B12.;:
TOTAL 8:.94
1.B.9
8 .:8..12 :;1B.8; 19.8; 1321.;.
@here,
6p , 7ortfolio 6eturn, E$ta< $::$rt+%ities
6m , Market 6eturn,F+%&Fs ,e%#h 7ar<- SG P CN= @00
6f , 6isk free rate of return.
CALCULATION OF ARTHMETIC MEAN :-
1 U ' >
1 8:.94' :
1 19.8;
CALCULATION OF STANDARD DE5IATION (H . :-
1 V %U,Ubar&
.
' >
1 V1321.;.':
1V:...8B
1.;.B3
CALCULATION OF 3ETA CO-EFFICIENT:-
1 > % UJ& Q U J
> % U
.
& Q % U&
.

1 :%B.;9.9B& Q %2;.4B&%1.3..1&
:%:118...& Q %2;.4B&
.

1 :%:;1B.8;&,%8:.94&,%1.B.98&
:%.:8..12&,%8:.94&
.
1 13;3..9,2:19.9B
2999.83,BB22
:4

1 33:4.2B
:.92.83
11.B:
CALCULATION OF SHARPEFS RATIO:-
1 6p,6f '
11.B.98 '.;.B3
1 3.1.
CALCULATION OF TREYNORFS RATIO :-
1 6p,6f '
1 1.B.98'1.B:
1 98.84'1;;
1;.9184
2RAPH SHOCIN2 EOTAE OPPORTUNITIES FUND PERFORMANCE:-
K OT AK OP P OR T U N IT IE S
5. 92
24. 61
34. 42
78. 17
2. 84
13. 11
30. 14
45. 99
4. 25 4. 25 4. 25 4. 5
LA S T 1 M ONTH LA S T 3 M ONTHS LA S T 6 M ONTHS S INCE INCE P TION 09
S E P TE MB E R2004
R
E
T
U
R
N
S
! OTA ! OP P ORT"NITIE S S # P CN$500 R%
I%ter:retati$%:-
::

Last I M$%th : $t reveals that Aotak ?pportunities 6eturns are B.2.
As compare to Funds #enchmark 6eturns are ..9:, and
The 6isk Free 6ate is common for ne"t 2 months. %i.e., :..BN&
Last III M$%ths : $t reveals that Aotak ?pportunities 6eturns are .:.31
As compare to Funds #enchmark 6eturns are 14.11, and
Last 5I M$%ths : $t reveals that Aotak ?pportunities 6eturns are 4:.:.
As compare to Funds #enchmark 6eturns are 4;.1:, and
Si%#e I%#e:ti$% : $t reveals that Aotak ?pportunities 6eturns are 89.18,
As compare to Funds #enchmark 6eturns are :B.22, and
There is a slight $ncrease in 6isk Free 6ate by ;..BN %i.e., :.BN&
compare to last 2 Months.
HDFC COREG SATELLITE FUND :

O,Ie#ti1e :-
The ob+ective of the scheme is to generate capital appreciation through e(uity
investment in companies whose shares are (uoting at prices below their true value.
HDFC COREG SATELLITE FUND PERFORMANCE:-
YEAR R: R7 R*
(R7-
R*.
(R:-
R*. =/ =Y
(=
-=,ar. D/
= Y D
LAST
1MONTH 1.1B 4.8. :..B ,;.B4 ,4.1 ;..9;2 1.3:4
,
.;.82.B :4..4.9;B34
LAST '
MONTHS 13.:3
14.9
. :..B 2.B8
1...
1 21.B9:2 113.9:28
,
1;.32.B 11:.4.2BB34
LAST
6MONTHS 4B.3 41.1 :..B .3.9B
41.4
B 8.;.2..B 9:1.8:8B .3.9B 8.;.2..B
Si%#e
I%#e:ti$% 32.3:
:2.3
3 :.B :B.13
3B.1
: .;42.:.B3 .2:1.8..: .:.928B 312.99BB;34
:B

TOTAL 91.;B
1;B.
3 .9B...142 42;1.23.3 .;..3.B 1998.:3B312
@here,
6p , 7ortfolio 6eturn,HDFC #$re G Sate--ite F+%&
6m - Market 6eturn,F+%&Fs ,e%#h7ar<-3SE-/00
CALCULATION OF ARTHMETIC MEAN:-
1 U ' >
1 91.;B':
1 .;..3
CALCULATION OF STANDARD DE5IATION (H. :-
1 V %U,Ubar&
.
' >
1 V1998.:':
1 V:81.8B
1.1.81
CALCULATION OF 3ETA CO-EFFICIENT:-
1 > % UJ& Q U J
> % U
.
& Q % U&
.

1 :%42;1.2& Q%91.;B&%1;B.3&
:%:;.3& Q %92.8B&
.

1 1B3;8.B,9BB9.9
11:;9.9,3B32.1
18;:9.8
:942
11.:B
16p,6f,J W
11;B.3'.1.81
:3

1:.93
1 6p,6f'
1 1;B.3'1.:B
1 8..9.'1;;
1;.8.9.
2RAPH SHOCIN2 HDFC COREG SATELLITE FUND PERFORMANCE:-
H D C C o r e ! S a te llit e u n d P e r fo r " a n # e
1 . 1 5
1 6 . 4 6
3 5 . 6
6 9 . 6 4
3 . 7 2
1 3 . 8 2
3 1 . 1
4 9 . 6 6
4 . 2 5 4 . 2 5 4 . 2 5 4 . 5
0
1 0
2 0
3 0
4 0
5 0
6 0
7 0
8 0
L A S T 1 M O N TH L A S T 3 M O N TH S L A S T 6 M O NTH S S IN C E IN C E P TIO N 1 7 S E P TE M B E R
2 0 0 4
R
E
T
U
R
N
S
R p R & R %
I%ter:retati$%:
:8

Last I M$%th : $t reveals that C-F* *ore M atellite Fund 6eturns are 1.1B
as compare to Funds #enchmark 6eturns are 4.8., and The 6isk
Free 6ate is common for ne"t 2 months. %i.e., :..BN&
Last III M$%ths : $t reveals that C-F* *ore M atellite Fund 6eturns are 13.:3
as compare to Funds #enchmark 6eturns are 14.9., and The
6isk Free 6ate is common for ne"t 3 months. %i.e., :..BN&
Last 5I M$%ths : $t reveals that C-F* *ore M atellite Fund 6eturns are 4B.3,
as compare to Funds #enchmark 6eturns are 41.1 and The 6isk
Free 6ate is common for ne"t 4 months. %i.e., :..BN&
Si%#e I%#e:ti$% : $t reveals that C-F* *ore M atellite Fund 6eturns are 32.3:,
as compare to Funds #enchmark 6eturns are :2.33, and There is
a slight increase in 6isk Free 6ate by ;..BN%:.BN& compare to
last 2 Months.
RELIANCE EDUITY OPPORTUNITIES FUND:
I%1est7e%t O,Ie#ti1e:
The primary investment ob+ective of the scheme is to seek to generate capital
appreciation M provide long,term growth opportunities by investing in a portfolio
constituted of e(uity securities M e(uity related securities and the secondary
ob+ective is to generate consistent returns by investing in debt and money market
securities.
RELIANCE EDUITY OPPORTUNITIES FUND PERFORMANCE:-
YEAR R: R7 R*
(R7-
R*.
(R:-
R*. =/ =Y
(=
-=,ar. D/
= Y D
:9

LAST 1
MONTH ..: 4.8. :..B ,;.B4 ,1.9B ;..9;2 ;.29;B ,.;.24B :49..8:..B
LAST '
MONTHS 13... 14.9. :..B 2.B8 11.28 21.B9:2 11:.BB.2 2.B8 21.B9:2
LAST 6
MONTHS .2.:3 41.1 :..B .3.9B .B..1 8.;.2..B 383.999B 3.::B :1.B49;.B
Si%#e
I%#e:ti$% B:.22 B;..4 :.B :B.84 B;.:2 .;21..4.2 .4;9.2;88 :B.84 .;21..4.2
TOTAL 91.3. 9B.9. .2;:.;.1. 41;1.4.23 :;.91 .33..34;;B
@here,
6p , 7ortfolio 6eturn,Re-ia%#e e8+it) $::$rt+%ities *+%&
6m , Market 6eturn,F+%&Fs 3e%#h7ar< 3SE-@00
1 U ' >
1 91.3.' :
1 .;.:;
1 V %U,Ubar&
.
' >
1 V.33..34':
1 V33B.3B
1.B.9;
CALCULATION OF 3ETA CO-EFFICIENTA-
1 > % UJ& Q U J
> % U
.
& Q % U&
.

1 :%41;1.4.& Q %91.3.&%9B.9.&
:%.2;:.;.& Q %91.3.&
.

1 1.:;B,8;;..21
11313,3331.9.
1B:;..;2
:2B:.19
:2

11.;2
1 6p,6f' W
19B.9.
.B..4
18..2
1 6p,6f'
1 9B.9.'1.:8
1 48.4.'1;;
1;.48
2RAPH SHOCIN2 RELIANCE EDUITY OPPORTUNITIES FUND
PERFORMANCE:-
R E $ IAN C E E %U IT Y OP P OR TU N IT IE S U N D
2. 4
16. 22
29. 46
54. 99
3. 72
13. 82
31. 1
50. 23
4. 25 4. 25 4. 25 4. 5
LA S T 1M O NTH LA S T 3 M O NTHS LA S T 6 M O NTHS S INCE INCE P TIO N 31 M A RCH
2005
R
E
T
U
R
N
S
RE LIA NCEB S E 100 R%
I%ter:retati$%:-
Last I M$%th : $t reveals that 6eliance !(uity ?pportunities Fund
6eturns are ..: as compare to Funds #enchmark 6eturns Are
4.8., and The 6isk Free 6ate is common for ne"t 2 months. %i.e.,
:..BN&
B;

Last III M$%ths : $t reveals that 6eliance !(uity ?pportunities
Fund 6eturns are 13... as compare to Funds #enchmark 6eturns
are 14.9., and The 6isk Free 6ate is common for ne"t 3 months.
%i.e., :..BN&
Last 5I M$%ths : $t reveals that 6eliance !(uity ?pportunities
Fund 6eturns are .2.:3 as compare to Funds #enchmark 6eturns
are 41.1 and The 6isk Free 6ate is common for ne"t 4 months.
%i.e., :..BN&
Si%#e I%#e:ti$% : $t reveals that 6eliance !(uity ?pportunities Fund 6eturns
are B:.22, as compare to Funds #enchmark returns are B;..4, and
There is a slight increase in 6isk Free 6ate by ;..BN%:.BN&
compare to last 2 months.
FRANELIN INDIA FLE=I CAP EDUITY FUND
F+%& Ma%a6ers: (Mr> E N Si1a S+,ra7a%ia% G R S+<+7ar RaIah.
I%1est7e%t $,Ie#ti1e:
tocks of companies are usually categorized as large,cap, midcap, and small,cap
depending on their market capitalization. Cistory has demonstrated that these categories
tend to perform differently through economic and market cycles. For e"ample, mid or
small cap stocks could move up sharply during a certain time period while large cap
stocks remain range bound and vice versa. ?n the other hand, large,cap stocks tend to be
less volatile than mid M small,cap stocks on account of factors such as size, market
leadership..etc. Moreover, such periods of out performance are typically followed by a
consolidation phase and a possible reversal of the situation. $n order to derive optimal
returns from the stock markets, investments need to be diversified and have fle"ibility to
shift allocations across market caps.
-esigned to help you achieve this with a single investment is Franklin $ndia Fle"i *ap
Fund %F$F*F&. An open,end diversified e(uity fund, F$F*F seeks to provide medium to
B1

long,term capital appreciation by investing in stocks across the entire market
capitalization range.

FRANELIN INDIA FLE=I CAP FUND PEFORMANCE:-
J!A6 6p 6m 6f
%6m,
6f&
%6p,
6f& U. UJ
%U
,Ubar& -.
U J -
<AT 1M?>TC 4.:8 4.8. :..B ,;.B4
,
;.89 ;..91 ;.:14:
,
.;.24B :49..8:..B
<AT 4 M?>TC 13.:2 14.9. :..B 2.B8 1... 21.B9 118.1439 1;.1 1;..;1
<AT 3 M?>TC 43.B9 41.1 :..B .3.2 4..4 8.;.2 939.;3;B 18..9 .29.B29:
$>*! $>*!7T$?>
March ., .;;B 31.9 B;..4 :.B :B.8 B8.4 .;21 .3.;.4.2 19.99 4B3.:B::
T?TA< 91.3 1;1 .2;: 43;B.2428 .B.4.B 112B.448;.B
@here,
R: , 7ortfolio 6eturn,Fra%<-i% *-e;i #a: *+%&
R7 , Market 6eturn,F+%&Fs 3e%#h7ar<s SGP CN=-@00
R* , 6isk free rate of return.
1 U ' >
1 91.3' :
1 .;.:
1 V %U,Ubar&
.
' >
1 V112B':
1 V.29.8B
1 18..9
B.

1 > % UJ& Q U J
> % U
.
& Q % U&
.

1 :%43;B& Q %91.3&%1;1&
:%.2;:& Q %.2;:&
.

1 1::.;,9.:1.3
11313,9:44
13189.:
4194
11.2:
1 6p,6f' W
11;1
18..9
1B.9:
1 6p,6f'
11;1'1.2:
1 B..;3'1;; or ;.B.
2RAPH SHOCIN2 FRANELIN INDIA FLE=I CAP FUND PERFORMANCE:-
B4

ra n & lin in d ia fle ' i # a ( fu n d
3 . 47
16. 4 9
3 6. 58
61 . 8
3 . 72
13. 8 2
3 1. 1
5 0. 23
4 . 25 4 . 2 5 4. 2 5 4. 5
0
10
20
30
40
50
60
70
L A S T 1 M O N TH LA S T 3 M O N THS L A S T 6 M O NTHS S IN CE INCE P TION M 'r( ) 2* 200 5
R
E
T
U
R
N
S
Rp R& R%
I%ter:retati$%:
Last I M$%th : $t reveals that Franklin $ndia fle"i *ap Fund 6eturns are 4.:8 as
compare to Funds #enchmark 6eturns are ..9, and The 6isk Free
6ate is common for ne"t 2 months. %i.e., :..BN&
Last III M$%ths : $t reveals that Franklin $ndia fle"i *ap Fund 6eturns are
1:.:2 as compare to Funds #enchmark 6eturns are 14.11, and
Last 5I M$%ths : $t reveals that #irla un,life !(uity ?pportunities Fund
6eturns are 43.B9 as compare to Funds #enchmark 6eturns are
4;.1: and The 6isk Free 6ate is common for ne"t 4 months. %i.e.,
:..BN&
Si%#e I%#e:ti$% : $t reveals that #irla un,life !(uity ?pportunities Fund
6eturns are 31.9, as compare to Funds #enchmark 6eturns are
:8.8B and There is a slight $ncrease in 6isk Free 6ate by
;..BN%:.BN& compare to last 2 months.
B:

HS3C INDIA OPPORTUNITIES FUND
F+%& Ma%a6er: (Mr>Sa%Ii1 D+66a-.
I%1est7e%t $,Ie#ti1e:
The fund is an open,ended e(uity scheme seeking long term capital growth through
investments across all market capitalizations, including small, mid and large cap
stocks. The fund will endeavour to invest in large cap companies as well as identify
mid stocks, which have the potential to become blue chip large cap stocks over
time. The investment style is to seek aggressive growth by focussing on mid cap
companies in addition to investments in large cap stocks. This fund aims to be
predominantly invested in e(uity and e(uity related securities. Cowever, it could
move a significant portion of its assets towards fi"ed income securities if the fund
becomes negative on negative on e(uity markets.
HS3C INDIA OPPORTUNITIES FUND PEFORMANCE:-
YEAR R: R7 R*
(R7-
R*.
(R:-
R*. =/ =Y
(=
-=,ar. D/
= Y D
LAST 1
MONTH ,;.B8 ..91 :..B ,1.:: ,:.9. ..;843 3.2:;9 ,12.32B 498.924;.B
LAST '
MONTHS 1..:B 14.:B :..B 2.. 9.. 9:.3: 8B.:: 2.1B 94.8..B
LAST 6
MONTHS .8.38 .9.14 :..B .4.99 .4.:. B8;..B:: BB2..323 14.38 193.9392
Si%#e
I%#e:ti$% :9.3. :B.99 :.B :1.49 ::.1. 181..4;:: 19.B.39B3 11.B9 14:.;23:
TOTAL 84.;. 8;.2. .432..8.: .:38.443 1:.8;B 82..B9;9.B
@here,
R: , 7ortfolio 6eturn,
R7 , Market 6eturn,
R* , 6isk free rate of return.
1 U ' >
BB

1 84.;.' :
1 19..B
1 V %U,Ubar&
.
' >
1 V82..B9':
1 V129.1:
11:.;8
1 > % UJ& Q U J
> % U
.
& Q % U&
.

1 :%.:38.44& Q %84.;.&%8;.2.&
:%.432..8& Q %84.;.&
.

1 2932.4.,B189.B8
2:88.;9,B441.2.
1:32;.8B
:1:B.19
11.14
1 6p,6f' W
18;.2.
1:.;8
1B.;:
CALCULATION OF TREYNORFS RATIO : -
1 6p,6f'
18;.2.'1.14
1 3..83'1;;
1;.3.
2RAPH SHOCIN2 HS3C INDIA OPPORTUNITIES FUND
PEFORMANCE:-
B3

H S ) C IN D IA OP P OR T U N IT IE S
0. 57
12. 45
27. 67
48. 62
2. 81
13. 45
28. 13
45. 88
4. 25 4. 25 4. 25 4. 5
10
0
10
20
30
40
50
60
1+ 1+ 1900 1+ 2+ 1900 1+ 3+ 1900 1+ 4+ 1900 1+ 5+ 1900 1+ 6+ 1900
R
E
T
U
R
N
S
HS B C B S E 500 R%
I%ter:retati$%
Last I M$%th : $t reveals that C#* $ndia ?pportunities Fund 6eturns are
,;.B8 as compare to Funds #enchmark 6eturns are ..91, and The
6isk Free 6ate is common for ne"t 2 months. %i.e., :..BN&.
Last III M$%ths : $t reveals that C#* $ndia ?pportunities Fund 6eturns are
1.>:Bas compare to Funds #enchmark 6eturns are 14.:B, and
The 6isk Free 6ate is common for ne"t 3 months. %i.e., :..BN&.
Last 5I M$%ths : $t reveals that that C#* $ndia ?pportunities Fund
6eturns
are .8.98 as compare to Funds #enchmark 6eturns are .9.14
and The 6isk Free 6ate is common for ne"t 4 months. %i.e.,
:..BN&
Si%#e I%#e:ti$% : $t reveals that C#* $ndia ?pportunities Fund 6eturns
are :9.9., as compare to Funds #enchmark returns are :B.9., and
There is a slight $ncrease in 6isk Free 6ate by ;..B N %:.BN&
compare to last 2 months
B8

O3SER5ATIONSA
?bservations are made from the data analysis.
The following observations are drawn from the analysis of schemes/
EOTAE
OPPORTUNITIES
FUND
FRANELIN
INDIA
FLE=I
CAP FUND
RELIANCE
EDUITY
OPPORTUNITIE
S
FUND
HDFC
CORE G
SATELLITE
FUND
HS3C
INDIA
OPPORT-
UNITIES
FUND
B9

M$%th-) ret+r%Fs @>9/ '>" /> 1>1@ -0>@"
Shar:eFs Rati$ 6>1/ @>! ">/9 >!6 @>0
Tre)%$rFs Rati$ 0>!1 0>@/ 0>'" 0>"/ 0>6/
C$-e**i#ie%t ( .
1>@ 1>9 1>09 1>@ 1>1'
St&>De1iati$% ( .
/0>@6 1">/! /@>!0 /1>"1 1>0"
LIMITATIONS OF THE STUDY
1. The study is limited only to the analysis of different schemes and its suitability
to different investors according to their risk,taking ability.
.. The study is based on secondary data available from monthly fact sheets,
websites and other books, as primary data was not accessible.
4. The study is limited by the detailed study of various schemes of Five Asset
Management *ompany.
SU22ESTIONS:-
The Asset Management *ompany must design the portfolio in such a way, to
increase the returns.
The Asset Management *ompany must design the portfolio in such a way, to lessen
the risk that is common in the market.
The Asset Management *ompany must dedicate itself, because it motivates the
investors and potential investors to invest in Mutual Funds.
The Asset Management *ompany must manage the Fund efficiently and with
dedication to earn the goodwill of the public.
B2

The Asset Management *ompany must make the most advantageous use of print
and electronic media in order to motivate the investors and potential investors to
invest in Mutual Funds.
CONCLUSIONS
After interpreting the above data the following conclusions have been made
E$ta< O::$rt+%ities F+%&:
$t is a diversified aggressive e(uity fund.
$t is a open,ended e(uity scheme
ince the ratio is high it implies the risk is high
As the returns are more in Aotak ?pportunities compare to other Four AM*Es
3;

$t is suitable for investors looking for medium risk and moderate returns with in a
time period of 1,4 years.
Fra%<-i% I%&ia F-e;i Ca: F+%&:
$t is a diversified e(uity fund.
$n Franklin the returns are more compare to other Three AM*Es %C-F*,
6!<$A>*!, C#*&
Re-ia%#e E8+it) O::$rt+%ities 2r$9th F+%&:
$n 6eliance !(uity ?pportunities the returns are medium compare to other AM*Es
HDFC C$re G Sate--ite F+%&:
$n C-F* the returns are low compare to other AM*Es
$t is a value based fund
$t is a low risky fund
HS3C I%&ia O::$rt+%ities F+%&:-
$n C#* the returns are lesser than other AM*Es
$t is a low risky fund
31

3I3LIO2RAPHY
<aymanEs )uide to Mutual Funds #y KOUTLOOEL
Mutual Funds 7rimer #y KECONOMIC TIMESL
999>a7*ii%&ia>#$7
999><$ta<7+t+a->#$7
999>re-ia%#e7+t+a->#$7
3.

ANNE=UREFS
ANNE=URE-I
S:$%s$r
ponsor is the person who acting alone or in combination with another body corporate
establishes a Mutual Fund. ponsor must contribute at least :;N of the net worth of the
34

$nvestment Managed and meet the eligibility criteria prescribed under the securities and
!"change #oard of $ndia %Mutual Fund& 6egulations, 1223. The ponsor is not
responsible or liable for any loss or short fall resulting from the operation of the
schemes beyond the initial contribution made by it towards setting up the Mutual Fund.
Tr+st
The Mutual Fund is constituted as a trust in accordance with the provisions of the
$ndian Trusts Act, 199. by the ponsor. The trust deed is registered under the $ndian
6egistration Act, 12;9.
Tr+stee
Trustee is usually a company %*orporate body& or a #oard of Trustees %body of
individuals&. The main responsibility of the trustee is to safeguard the interest of the
unit holders and inter alia ensure that the AM* functions in the interest of investors and
in accordance with the securities and !"change #oard of $ndia %Mutual Funds&
6egulations, 1223, the provisions of the Trust -eed and the ?ffer -ocuments of the
respective chemes. At least .'4
rd
directors of the Trustee are independent directors
who are not associated with the ponsor in any manner.
Asset Ma%a6e7e%t C$7:a%) (AMC.
The AM* if so authorized by the Trust -eed appoints the 6egistrar and Transfer Agent
to the Mutual Fund. The 6egistrar processes the application form, redemption re(uests
and dispatches account statements to the unit holders. The 6egistrar and Transfer agent
also handles communications with investors and updates investor records.
3:

U%it H$-&ers
5nit Colders are those investing in Mutual Fund.
C+st$&ia%
*ustodian is the agency, which will have the legal possession of all the securities
purchased by the Mutual Fund.
SE3I
The tock !"change #oard of $ndia %!#$& is regulatory authority of the Mutual Funds.
ANNE=URE II
E8+it) F+%& is the one in which much of the portfolio is invested in corporate
securities and De,t F+%& is the one in which much of the portfolio is invested in )ilt
and money market securities.
$n an O:e%-e%&e& Mutual Fund, there are no limits on the total size of the corpus.
$nvestors are permitted to enter and e"it the open,ended Mutual Fund at any point of
time at a price that is linked to the net asset value %>AH&.
$n case of C-$se&-e%&e& funds, the total size of the corpus is limited by the size of the
initial offer.
A Di1i&e%& plan entails a regular payment of dividend to the investors.
A 6e-i%1est7e%t plan is a plan where these dividends are reinvested in the scheme
itself.
A 2r$9th plan is one where no dividends are declared and investor only gains
through capital appreciation in the >AH of the fund.
3B

NA5 is the net asset value of the fund. imply put it reflects what the unit held by an
investor is worth at current market prices.
The broad guidelines issued for a Mutual Fund/
SE3I is the regulatory authority of Mutual Funds. !#$ has the following broad
guidelines pertaining to Mutual Funds/
Mutual Funds should be formed as a trust under $ndian Trust Act and should be
operated by Asset Management *ompanies.
Mutual Funds need to set up a #oard of Trustee *ompanies. They should also
have their #oard of -irectories.
The net worth of the Asset Management *ompany should be at least 6s.1;
crore.
Asset Management *ompanies and Trustees of a MF should be two separate and
distinct legal entities.
The Asset Management *ompanies or any of its companies cannot act A
managers for any other fund.
Asset Management *ompany has to get the approval of !#$ for its articles and
Memorandum of Association.
All Mutual Fund chemes should be registered with !#$.
Mutual Funds should distribute minimum of 2;N of their profits among the
investors.
33

Mutual Funds in India

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Name SUSHIL BARAL

College ST. XAVIERS COLLEGE

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