CHAPTER I

INTRODUCTION TO MUTUAL FUNDS

A Mutual fund is a pool of money that is managed on behalf of the investors, by a

Professional fund manager. The manager uses the money to buy stocks, bonds and other
securities according to specific investment objective that have been established for the fund. In
return of the investment, the investors are given units for that fund. The investments range from
shares to debentures to money market instruments. Each mutual fund with different type of
schemes is managed by respective Asset Management Company (AMC). An investor can invest
his money in one or more schemes depending upon his choice. The income earned by the
investor and the capital appreciation realized by the scheme is shared by the unit holders in
proportion to the number of units held by him. Thus mutual fund is a best investment option for a
common investor as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a relatively lower cost.

Mutual Funds in India are governed by the SEBI (Mutual Fund) Regulations 1996 as
amended from time to time.

DEFINITION OF MUTUAL FUNDS

The securities and exchange board of Mutual fund as fund established in the form of a
trust by a sponsor to raise monies by the trustees through the sale of units to the public under one
or more schemes for investing in securities in accordance with these regulations.

“Mutual fund is non depository, non-blocking financial intermediary that acts as an

improvement vehicle for bringing wealth holders and deficit units together directly”.

PIERCE AND JAIMES.L

Mutual fund is a corporation which accepts money from investors and uses the same to
buy stocks, long-term and short-term debt instruments used by issuers.

WESTON.J.FRED AND BRINGHAM

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 “Mutual fund is a common pool of money in which investor place their contribution that
are be invested in accordance with the stated objective. The fund belongs to all the investors
depending on the proportion of his contribution to the fund.”

MUTUAL FUND OPERATION

1. Pooled Vehicle

A mutual fund (MF) is a vehicle to pool money from investors, with a promise that the
money would be invested in a particular manner, by professional managers who are expected to
honor the promise.

2. Professional Management

The idea of mutual fund is that individual investors generally lack the time, the
inclination of the skills to manage their own investments. Thus, mutual funds hire professional
managers to manage the investments for the benefit of their investors in return for a management
fee.

3. Schemes

Investors have their individual preference on how they would lay their money invested
and how much risk they are willing to take.

Individual investors could choose to hire a professional manager to manage money as per
his investment and risk preferences. Such personal treatment often referred to as portfolio
management scheme. PMS is economically feasible only for the investment portfolio above a
particular value, rarely below Rs 1000000.

It is possible to balance the time and cost required to manage investment by grouping
investors together based on their preferences. In this manner, the focus of the investment activity
can be shifted from single investor to a group of investor having similar expectation.

For ease of management and reporting such a group of investor is identified with a
“mutual fund scheme” In commercial terminology, the investor invests in a scheme and

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professional manager manage the scheme. A Mutual fund can, and typically does, have several
schemes to cater to different investor preferences.

4. Money in Trust

The mutual fund manages the investment of scheme for the benefit of its investors. Every
scheme has an:

Investment portfolio Account of income and expenditure & Account of asset and
liability.

In order to ensure fairness to investor, SEBI regulate the expenditure that can be charged
to scheme, Heather as management fee of other expenses. The gain of any scheme belongs to its
investor. Similarly losses, if any, would need to be born by its investors, up to the amount
invested. Thus, the mutual fund manages the scheme’s money in trust for the benefit of investor

5. Legal Framework

Across the world, mutual fund sector is viewed as a critical mechanism to channel
investor fund in to the capital market. Since these in investor are often not so well qualified to
invest, the mutual fund business is highly regulated. Regulation varies from country to country.
But, broadly, they provided for Checks and balances in legal structure, Pre-qualification to start a
mutual fund, Permissible schemes and investment, Control over marketing process, level of
operational flexibility to professional investor and valuation of security.

CLASSIFICATION OF MUTUAL FUNDS

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview into the
existing types of schemes in the Industry.

By Structure

o Open - Ended Schemes

o Close - Ended Schemes

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 o Interval schemes

By Investment Objective

o Growth Schemes

o Income Schemes

o Balanced Schemes

o Money Market Schemes

Other Schemes

o Tax Saving Schemes

o Special Schemes

 Index Schemes

 Sector Specific Schemes

By Structure

Open Ended Schemes

Open- End Funds in India is such that the investors can sell as well as buy all throughout
the year. The investors sell and buy units of Open- End Funds in India at the related prices of Net
Asset Value (NAV) each day. An investor can buy Open- End Funds in India either from a
brokerage house or through the mutual fund company. Open- End Funds in India have no fixed
date of maturity. The main advantage of Open- End Funds in India is that it offers liquidity to the
investors for they can sell the units whenever they need the money

Major Open- End Funds in India are:

 UTI Gold Exchange Traded Fund

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  Standard Chartered Premier Equity Fund

 Sahara Mid- Cap Fund

 Lotus India Tax Plan

 Reliance Tax Saver (ELSS) Fund

 Canara Robeco Equity Tax Saver- 93

 DSP Merrill Lynch Tax Saver Fund

 Tata Life Sciences and Technology Fund

 JM Arbitrage Advantage Fund

 Kotak Gold ETF

Close Ended Schemes

Closed- End Funds in India have a fixed period of maturity which can vary between three
to fifteen years. Closed- End Funds in India can be subscribed to only during the period of time
that has been specified. Investors can make investments in Closed- End Funds in India either
during the period of public offer or buy the funds from the stock exchanges.

In Closed- End Funds in India, the number of shares that are sold in the public offer is
fixed and after this the selling and buying of the units are possible only in the stock exchanges.
Certain Closed- End Funds in India repurchase the units periodically at related prices of Net
Asset Value (NAV) in order to provide the investors an exit route

Major Closed- End Funds in India are:

 UTI Wealth Builder

 HDFC Long-Term Equity

 Standard Chartered Enterprise Equity

 Franklin India Smaller Companies

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  Birla Long-Term Advantage

 Tata Capital Builder

 ING Vysya C.U.B.

 Prudential ICICI Fusion

 Tata Equity Management

Interval Funds

Interval Funds in India combine the characteristics of both the close ended funds and
open ended funds. This means that Interval Funds in India can be repurchased and sold at the
time that has been predetermined. Interval Funds in India are usually repurchased every six or
twelve months or as has been unveiled in the annual report and prospectus of the fund. Interval
Funds in India are sold and repurchased at the prices that are related to the Net Asset Value
(NAV).

Advantages of Interval Funds in India

The advantage of Interval Funds in India is that it allows the investor more flexibility
than the close ended funds for he can sell it at the predetermined time. Further the advantage of
Interval Funds in India is that it ensures that the investor has liquidity of capital at regular
intervals of time.

HISTORY OF MUTUAL FUNDS

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank of India. The history of
mutual funds in India can be broadly divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

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Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6, 700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and acquisitions. As
at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21, 805 crores.
The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of
other mutual funds.

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Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India
with assets under management of Rs.29, 835 Crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under the rules
framed by Government of India and does not come under the purview of the Mutual Fund
Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of
the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth.

MUTUAL FUNDS

The Indian mutual fund industry has been one of the fastest growing and most competitive
segments of the financial sector. Its net inflow has been highest since 2007-08 and the assets
under management are at an all-time high. This growth may be contributed both to a positive
outlook as well as well-timed and paced initiatives by SEBI to re-energise the Mutual Fund
industry from time to time. The year 2014-15 saw the introduction of the concept of seed capital,
increase in cash transaction limits for investors and increase in minimum net worth for asset
management companies (AMCs) to launch and manage new schemes as some of the regulatory
reforms undertaken by SEBI.

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Resource Mobilization by Mutual Funds (rupee in crore)

Year Gross Redemption Net Inflow Assets at the

Mobilisation end of period
2013-14 97,68,100 97,14,318 53,782 8,25,240
2014-15 1,10,86,259 1,09,82,971 1,03,287 10,82,757

The Sponsors of Association of Mutual Funds In India

Bank Sponsored Institutions

 SBI Fund Management Ltd.

 Bank of Baroda Asset Management Co. Ltd.
 Canara Investment Management Services Ltd.
 UTI Asset Management Pvt.Ltd.
 GIC Asset Management Co. Ltd.
 Jeevan Bhima Sahayog Asset Management Co. Ltd.

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Private Sector - Indian

 Benchmark Asset Management Co. Pvt. Ltd

 Cholamandalam Asset Management Co. Ltd
 Credit Capital Asset Management Co. Ltd
 Escorts Asset Management Ltd.
 Jim Financial Mutual Funds
 Kotak Mahindra Asset Management Co. Ltd
 Reliance Capital Asset Management Ltd.
 Sahara Asset Management Co. Pvt. Ltd.
 Sundaram Asset Management Co .Ltd.
 Tata Asset Management Pvt.Ltd.

Predominantly India Joint Ventures

 Birla Sun Life Asset Management Co .Ltd

 DSP Merrill Lynch Fund Managers Limited
 HDFC Asset Management Co. Ltd

Predominantly Foreign Joint Ventures

 ABN Amro Asset Management (I) Ltd.

 Alliance Capital Asset Management (India)Pvt. Ltd
 Deutsche Asset Management (India) Pvt.Ltd
 Fidelity Fund Management Pvt. Ltd
 Franklin Templeton Asset Management (India) Pvt. Ltd
 HSBC Asset Management (India) pvt.ltd
 ING Investment Management (India) pvt.ltd
 Morgan Stanley Investment Management pvt.ltd
 Principal Asset Management Co.pvt. ltd
 Prudential ICICI Asset Management Co.ltd
 Standard Chartered Asset Management Co. pvt. ltd

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By Investment objective

Growth Schemes
Growth schemes invest in those stocks of those companies whose profits are expected to
grow at a higher than average rate. For example, telecom sector is a growth sector because many
people in India still do not own a phone – so as they buy more and more cell phones, the profits
of telecom companies will increase. Similarly, infrastructure; we do not have well connected
roads all over the country; neither do we have best of ports or airports. For our country to move
forward, this infrastructure has to be of world class. Hence companies in these sectors may
potentially grow at a relatively faster pace. Growth schemes will invest in stocks of such
companies.

Income Schemes

Income schemes in India usually invest their principal in companies that give high
payouts of dividends and also in securities of fixed income such as corporate debentures,
government securities, and bonds. The advantage of Income Funds in India is that it provides
regular income to the investor either on a monthly or quarterly basis. Further the advantage of
Income Funds in India is that it also provides stability of capital to the investor. Income Funds
share prices are not fixed for they have a tendency to grow with the fall in interest rates and fall
with the rise of the interest rates. The bonds that are there in Income Funds are usually of the
investment grade. The other bonds are of such credit quality that they assure the protection of the
capital.

Balanced Schemes

The Balanced fund aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents. Ideal for
investors who are looking for a combination of income and moderate growth.

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 Balanced mutual funds have a portfolio mix of bonds, preferred stocks and common
stocks. Balanced mutual funds aim to conserve investors’ initial investment, to pay an income
and to aid in the long-term growth of both the principle and the income.

Money-Market Funds

These are generally the safest and most secure of mutual fund investments. They invest in
the largest, most stable securities, including Treasury bills. The chances of your capital being
eroded are very minimal. Money-market funds are risk-free. If you invest a thousand rupees, you
will get that money back. It is simply a matter of when you get it back. When investing in a
money-market fund, you should pay attention to the interest rate that is being offered, along with
the rules regarding check-writing. Money-markets have allowed investors to reap high yields on
their deposits, and have made the entire investment process more accessible to people.

The interest rates on money-market funds are changing nearly day to day. In times of
inflation, these funds have had high yields.

Other Schemes

Tax Saving Schemes

Investors in India opt for the tax-saving mutual fund schemes for the simple reason that it
helps them to save money. The tax-saving mutual funds or the equity-linked savings schemes
(ELSS) receive certain tax exemptions under Section 88 of the Income Tax Act. That is one of
the reasons why the investors in India add the tax-saving mutual fund schemes to their portfolio.
The tax-saving mutual fund schemes are one of the important types of mutual funds in India that
investors can opt for.

SPECIAL SCHEMES

1. Index schemes

Equity Schemes come in many variants and thus can be segregated according to their risk
levels. At the lowest end of the equity funds risk – return matrix come the index funds while at
the highest end come the sectoral schemes or specialty schemes. These schemes are the riskiest

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amongst all type schemes as well. However, since equities as an asset class are risky, there is no
guaranteeing return for any type of fund. Index Funds invest in stocks comprising indices, such
as the Nifty 50, which is a broad based index comprising 50 stocks. There can be funds on other
indices which have a large number of stocks such as the CNX Midcap 100 or S&P CNX 500.
Here the investment is spread across a large number of stocks. In India today we find many index
funds based on the Nifty 50 index, which comprises large, liquid and blue chip 50 stocks.

2. Sector Specific Schemes

Sector- Specific Funds in India are those funds that make investments only in those
industries or sectors that have been specified in the prospectus of the funds. Sector- Specific
Funds in India usually make investments in sectors such as power, pharmaceuticals, petroleum,
and technology. The amount of returns that Sector- Specific Funds in India give depends totally
on the performance of the industries or sectors in which investments have been made. Sector-
Specific Funds in India give very high returns but at the same time they are also very risky in
comparison to the funds that are diversified. This is the reason that the investors that have
invested in Sector- Specific Funds in India need to carefully watch the operation of those
industries or sectors and then at the correct time make an exit.

NATURE OF INCOME DISTRIBUTION

Investors often get confused between the above mentioned (Dividend Payout, Dividend
Reinvestment and Growth Options) three options which he has to choose while investing in
mutual fund’s units. These options have to be selected by the investor at the time of purchasing
the units and many a times investors feel that the dividend reinvestment option is better than
growth as they get more number of units. Let’s understand the three options:

Growth Option

Growth option is for those investors who are looking for capital appreciation. Say an
investor aged 25 invests Rs 1 lakh in an equity scheme. He would not be requiring a regular
income from his investment as his salary can be used for meeting his monthly expenses. He
would instead want his money to grow and this can happen only if he remains invested for a long
period of time. Such an investor should go for Growth option. The NAV will fluctuate as the

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market moves. So if the scheme delivers a return of 12% after 1 year, his money would have
grown by Rs. 12,000. Assuming that he had invested at a NAV of Rs. 100, then after 1 year the
NAV would have grown to Rs 112. Notice here that neither is any money coming out of the
scheme, nor is the investor getting more units. His units will remain at 1,000 (1, 00, 000/ 100)
which he bought when he invested Rs. 1 lakh @ Rs. 100/ unit.

Dividend Payout Option

In case an investor chooses a Dividend Payout option, then after 1 year he would Receive
Rs. 12 as dividend. This results in a cash outflow from the scheme. The impact of this would be
that the NAV would fall by Rs. 12 (to Rs. 100 after a year. In the growth option the NAV
became Rs. 112). Here he will not get any more number of units (they remain at 1,000), but will
receive Rs 12,000 as dividend (Rs. 12 per unit * 1,000 units). Dividend Payout will not give him
the benefit of compounding

as Rs. 12,000 would be taken out of the scheme and will not continue to grow like money which
is still invested in the scheme.

Dividend Reinvestment Option

This option provides the investor an opportunity to re-invest the dividends Declared by
mutual fund back in to the fund itself at NAV that is prevalent at the time of re-investment. The
value of the units will be similar to that under the cumulative option.

THE STRUCTURE OF MUTUAL FUND

The following figure illustrates the structure of mutual fund industry.

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 Figure 1.1: Structure of Mutual Fund

Sponsors
The sponsor is the company which sets up the mutual fund. It means anybody corporate
acting alone or in combination with another body corporate established a mutual fund after
initiating and completing the formalities.

Trustees
The management of the mutual fund is subject to the control of the board of trustees of
the fund. They guide the operations of the fund and carry the crucial responsibility to see that
AMC always act in the best interest of the investors.

Asset Management Company

The mutual fund is operated by a separately established asset management company

(AMC).It manages the funds of the various schemes. It is entrusted with the specific task of
mobilizing funds under the scheme.

Custodian
A custodian is a person carrying on the activities of the safekeeping of the securities or
participating in any clearing system on behalf of the clients to effect deliveries of the securities.

Registrar And Transfer Agents

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 Registrars and Transfer Agents (RTAs) perform the important role of maintaining
investor records. All the New Fund Offer (NFO) forms, redemption forms (i.e. when an investor
wants to exit from a scheme, it requests for redemption) go to the RTA’s office where the
information is converted from physical to electronic form. How many units will the investor get,
at what price, what is the applicable NAV, what is the entry load, how much money will he get
in case of redemption, exit loads, folio number, etc. is all taken care of by the RTA.

ADVANTAGES AND DIS-ADVANTAGES OF MUTUAL FUNDS

The Advantages Of Investing In A Mutual Fund Are

 Diversification

The best mutual funds design their portfolios so individual investments will react
differently to the same economic conditions. For example, economic conditions like a rise in
interest rates may cause certain securities in a diversified portfolio to decrease in value. Other
securities in the portfolio will respond to the same economic conditions by increasing in value.
When a portfolio is balanced in this way, the value of the overall portfolio should gradually
increase over time, even if some securities lose value.

 Professional Management
Most mutual funds pay topflight professionals to manage their investments. These
managers decide what securities the fund will buy and sell.

 Regulatory oversight

Mutual funds are subject to many government regulations that protect investors from
fraud.

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  Liquidity

It's easy to get your money out of a mutual fund. Write a check, make a call, and you've
got the cash.

 Convenience

You can usually buy mutual fund shares by mail, phone, or over the Internet.

 Low cost

Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses
for Index Funds are less than that, because index funds are not actively managed. Instead, they
automatically buy stock in companies that are listed on a specific index

 Transparency

 Flexibility

 Choice of schemes

 Tax benefits

 Well regulated
The Disadvantages of Investing in A Mutual Fund are

 Professional Management

Did you notice how we qualified the advantage of professional management with the
word "theoretically"? Many investors debate over whether or not the so-called professionals are
any better than you or I at picking stocks. Management is by no means infallible, and, even if the
fund loses money, the manager still takes his/her cut. We'll talk about this in detail in a later
section.

 Costs

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 Mutual funds don't exist solely to make your life easier--all funds are in it for a profit.
The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so
complicated that in this tutorial we have devoted an entire section to the subject.

 Dilution

It's possible to have too much diversification (this is explained in our article entitled "Are
You Over-Diversified?"). Because funds have small holdings in so many different companies,
high returns from a few investments often don't make much difference on the overall return.
Dilution is also the result of a successful fund getting too big. When money pours into funds that
have had strong success, the manager often has trouble finding a good investment for all the new
money.

 Taxes

When making decisions about your money, fund managers don't consider your personal
tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered,
which affects how profitable the individual is from the sale. It might have been more
advantageous for the individual to defer the capital gains liability.

Key Concepts

Net asset value (NAV)

Net asset value (NAV) is a term used to describe the value of an entity's assetsless the
value of its liabilities. The term is most commonly used in relation to open-ended or mutual
funds due to the fact that shares of such funds are redeemed at their net asset value. However, the
term may also be used as a synonym for book value or the equity value of a business. Net asset
value may represent the value of the total equity, or it may be divided by the number of shares
outstanding and, thereby, represent the per share net asset value. There is no universal method of
valuing assets and liabilities for the purposes of calculating net asset value, and the criteria used
for the valuation will depend upon the circumstances, the purposes of the valuation and any
regulations that may apply.

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 NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent Holdings - Fund
Liabilities) / Total Fund Shares Outstanding

Entry Load

Investors have to bear expenses for availing of the services (professional management) of
the mutual fund. The first expense that an investor has to incur is by way of Entry Load. This is
charged to meet the selling and distribution expenses of the scheme. A major portion of the Entry
Load is used for paying commissions to the distributor. The distributor (also called a mutual fund
advisor) could be an Independent Financial Advisor, a bank or a large national distributor or a
regional distributor etc. They are the intermediaries who help an investor with choosing the right
scheme, financial planning and investing in scheme s from time to time to meet one’s
requirements. Investors must ensure that his Advisor has passed the AMFI – Mutual Fund
(Advisors) module certification.

Exit Loads

As there are Entry Loads, there exist Exit Loads as well. As Entry Loads increase the cost
of buying, similarly Exit Loads reduce the amount received by the investor. Not all schemes
have an Exit Load, and not all schemes have similar exit loads as well. Some schemes have
Contingent Deferred Sales Charge (CDSC). This is nothing but a modified form of Exit Load,
wherein the investor has to pay different Exit Loads depending upon his investment period. If the
investor exits early, he will have to bear more Exit Load and if he remains invested for a longer
period of time, his Exit Load will reduce. Thus the longer the investor remains invested, lesser is
the Exit Load. After some time the Exit Load reduces to nil; i.e. if the investor exits after a
specified time period, he will not have to bear any Exit Load.

Sale price

It is the pay when you invest in a scheme, also called as “offer price”.

Re purchase price

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 It is the price at which a close ended scheme re-purchases its units and it may include a
back end load. This is also called bid price.

Redemption price

It is the price at which an open ended scheme repurchases their units and close ended
schemes redeem their units on maturity. Such prices are NAV related.

Systematic investment plan

 A specific amount should be invested for a continuous period at regular intervals under
this plan.

 SIP is similar to a regular saving scheme like a recurring deposit. It is a method of

investing a fixed sum regularly in a mutual fund.

 SIP allows the investor to buy units on a given date every month. The investor decides
the amount and also the mutual fund scheme.

 While the investor's investment remains the same, more number of units can be bought in
a declining market and less number of units in a rising market.

 The investor automatically participates in the market swings once the option for SIP is
made.

Categories of Mutual Funds

Large Cap Funds

Large Cap Funds in India are a kind of mutual fund that looks for appreciation of capital
by investing mainly in the shares of companies that are big blue chip. The big blue chip
companies in which Large Cap Funds in India make their investments have above- average
potential for growth in earnings. The large cap companies in which Large Cap Funds in India
makes investments are usually companies that have a market capitalization that is more than Rs.
1000 crores. The main advantage of Large Cap Funds in India is that they are considered to be of
low return and low risk category. This ensures that the investments of the investors are relatively
safe.

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Mid - Cap funds
Mid-cap funds are a special type of mutual fund wherein, the corpus accumulated is
invested in small or medium sized companies. In the absence of any standardized definition or
definite classification of small or medium sized company, each mutual fund classifies small and
medium sized companies according to its own policies. In general, companies with a market
capitalization up to Rs 500 crores are regarded as small and companies with a market
capitalization over Rs 500 crores but below Rs 1,000 crores are defined as medium sized by the
mutual fund industry. Mid-cap funds bear high risk factors and thus offer high returns in case of
positive movements of the indexes.

Small - Cap Funds

A small-cap fund, like Turner Small Cap Equity, will focus on companies with a market
value below $1 billion. The volatility of the fund often depends on the aggressiveness of the
manager. Aggressive small-cap managers will buy hot growth and technology companies, taking
high risks in hopes of high rewards. More conservative "value" managers will look for
companies that have been beaten down temporarily by the stock market. Value funds aren't as
risky as the hot growth funds, but they can still be volatile. Because of their volatility, small-cap
funds require that you have enough time to make up for short-term losses. And as we saw during
1997 and 1998, there are times when the market turns away from small-cap companies altogether
for extended periods. (Large caps have taken the spotlight lately due to extreme volatility in the
markets; small caps, meanwhile, have floundered.), But that's no reason to abandon these funds.
History would indicate that small companies will eventually regain favor as markets settle down.
And when they do, they will likely grow more quickly than their larger cousins -- which can
provide a good kicker for aggressive investors who need to build as much wealth as possible
while they're young

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 CHAPTER II

INDUSTRY & COMPANY PROFILE

INDUSTRY PROFILE

A Mutual Fund is defined as “a financial service organization that it receives money from
shareholders, invests it, earns return on it, attempts to make it grow and agrees to pay the
shareholder cash on demand for the current value of his investment”

The primary objective of all mutual funds is to provide better returns to investors by
minimizing risk associated with capital market investment. Naturally the degree of risk
associated with expected returns and the associated benefits differs.

The concept of mutual funds in India dates back to the year 1963. The era between 1963
and 1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets
under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the
end of the 80s decade, few other mutual fund companies in India took their position in mutual

22
fund market. The new entries of mutual fund companies in India were SBI Mutual Fund, Can
bank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of
India Mutual Fund.

The succeeding decade showed a new horizon in Indian mutual fund industry. By the end
of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started
penetrating the fund families. In the same year the first Mutual Fund Regulations came into
existence with re-registering all mutual funds except UTI. The regulations were further given a
revised shape in 1996. Kothari Pioneer was the first private sector mutual fund company in India
which has now merged with Franklin Templeton. Just after ten years with private sector players
penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies
in India.

COMPANY PROFILE

Doha Brokerage & Financial Services Ltd, the flagship company of the DBFS group had
its origin in 1992 as one the first corporate brokerages in India and one of the leading financial
service companies in the country. Select group, as it was known then had a very humble

23
beginning with branches in select locations in Kerala, had the ambition and the vision to expand
the network and services beyond the boundaries of the God’s own country. With this vision in
mind, the company took over a firm with national presence in 2003. Under the astute leadership
and vision of the directors, Select group under its new brand name Investnet, had over 100
branches in Tamil Nadu, Karnataka and Maharashtra in short period of time. Subsequent to the
tie-up with Doha Bank of Qatar, the Select group of companies was rechristened as Doha
Brokerage and Financial Services Ltd (DBFS).

Today the group has diversified into the entire spectrum of brokerage and related
financial services and today it showcases a wide range of products and services. Departing from
the traditional brokerage, the group pursues a total wealth management and investment centered
approach. The group has a network of over 280 branches spread across India and offices in
Middle East. DBFS has trading licenses in BSE and NSE for cash and derivative segment. We
have memberships in premier commodity exchanges like MCX, NMCE and NCDEX. We also
have memberships in NSE and MCX SX for trading in currency futures. DBFS group has also
membership in DGCX Dubai, where we offer facilities for trading in international commodity
and currency segment. As a depository participant with CDSL, DBFS offers depository services
for its clientele. A SEBI registered Portfolio Manager, the PMS returns at DBFS betters the
returns of benchmark indices (Nifty and Sensex). DBFS has also launched NBFC products for
their clients.

Over the years online trading is getting popular and just with a single click at your
comfort either from your home, office or local cafe you can either buy or sell shares. Being an
investor you need to spend quality time to obtain benefits from online trading. It is very essential
to have good knowledge on the shares you trade in before you start buying and selling them
online. The important factor is you need to have speed internet connection. If internet connection
is slow then you might at times land up in losses as the share prices keep changing. So make sure
you have good internet connection.

SERVICES

Capital Markets

24
 Stock market is one of the best investments bet worldwide with very risky proportion of
risk-return at times. Our experienced trading & advisory consultants and advanced trading tools
will provide the personalized support to achieve your long-term goals and your investment
targets via the stock markets

We feel proud with our rapidly increasing client base in a little time horizon, and we
serve to our valuable clients in the following segments

 Capital Markets
 Commodity Futures
 Currency Derivatives
 Merchant Banking
 Loan Against Shares
 Depository
 Online Trading

CORE STRENGTHS

Research and Advisory Capabilities

The competent, professional research team of DBFS is always committed to building and
managing the financial assets of its customers. By providing security information and trading
calls on a real time basis through trading terminals, DBFS is always committed to remain a step
ahead of other brokerage firms.

Technology innovations

The brokerage industry, today, is driven by sophisticated technology. The IT and telecom
revolution has brought in a brave new world in knowledge sharing and customer service. DBFS
is always committed to bring the best of these conveniences to its customers. The group has
acquired the latest cutting-edge technology for front end trading and back office processing. This
enhances quality and speed of services. This also enables centralized monitoring and risk

25
management up to client level, online back office support at the branch level and real time
customer support through internet.

Qualified, trained and motivated manpower

DBFS employs a large number of qualified professionals who are motivated and
adequately trained to service the customers efficiently and competently

Distribution network

DBFS has a network of over 180 branches. Thus, the company is poised to reach out to
more customers, offer the most competitive brokerage and terms to its customers. As the
company has already invested in a technology platform which is scalable to any new location
without additional investment, the group is gearing up to increase the branch network
exponentially.

CORPORATE VISION

Vision

We want to remain as the leading, trusted total financial services provider, wherever we
operate, by maintaining superior technological and service standards, and by keeping trust and
transparency as our core values.

Mission

We are committed to create and enhance wealth for corporate and retail customers, by
delivering cutting-edge financial solutions which suit their specific needs.

FUTURE PLANS

26
The promise of a better future

DBFS is always keen in stretching its horizons to explore into newer areas of services
and solutions. Because, in a fast paced world, customer expectations and requirements are
growing, at an equal pace. To take on the challenging needs, DBFS is rolling out a host of new
products and services. The company is gearing up to widen its presence, both in India and
overseas, with the support of its strategic partner.

SERVICES

Internet Trading

DBFS has a state-or-the-art internet trading platform with cutting-edge technological

excellence. Trade easy, the internet trading platform of the group has almost all the features of a
Broker’s terminal.

Commodities & Forex Trading

As a trading member of DGCX, Dubai, Select Commodities DMCC offers trading in

commodities and forex for its customers.

The group has membership in all premier commodity exchanges in India, namely
NCDEX, NMCE and MCX. The company facilitates futures trading for various agricultural
commodities and other commodities including gold, silver, rubber, cardamom, pepper etc. which
are actively traded.

CUSTODIAL - DEPOSITORY SERVICES

Select Stock Brokers Ltd. is a Depository Participant with Central Depository Services
Ltd. (CDSL). CDSL is one of only two depositories in India for electronic holding of securities.
The Company extends depository services to its trading clients as well as non-trading clients.
The custodial services include electronic holding of securities, Demat, Remat, pledge, unpledge
etc. and market and off-market transfers, transmission, transposition etc.

27
Mutual Funds & Insurance Products

DBFS, being a total solutions provider for the varied investment needs of the retail
investors, distributes Mutual Fund products of almost all major AMCs. Application Forms of
NFOs are available with the branches.

Portfolio Management

DBFL Ltd. is a SEBI registered Portfolio Manager with an excellent track record of
performance. The group has a highly professional, experienced and result-oriented research team
which analyzes the markets and manages the customers’ funds accordingly in order to ensure
optimum results. DBFS Portfolio Managers have been able to consistently out-perform the
bench-mark indices.

Trading in Equities & Derivatives

DBFS has membership in both NSE and BSE. The group has been permitted to operate in
the cash as well as derivative segments of NSE and BSE. Online trading in Cash Market and
FAO are available at all the branches. Connectivity is provided at the Branches by way of V-Sat
or VPN / Broad Band. The group services both retail and institutional customers.

SERVICES RENDERED BY DBFS

28
 Equity & Derivative
Trading
Institutional Distribution
Lending Services Services

Insurance Broking
Depository Services

Private Equity
Commodities Broking

Internet Trading
International Equity &
Commodities
Investment Banking
Wealth Management

SERVICES

 Broking in Equities & Derivatives on NSE & BSE.

 Depository Services
 Commodities trading on MCX& NCDEX
 IPO services
 Mutual funds
 Insurance
 Portfolio Management services

BENEFITS AT DBFS     

29
 Expert Advice: Our expert investment advisors are based at various branches across India
to provide assistance in designing and monitoring portfolios.
 Timely Entry & Exit: Our advisors will regularly monitor your investments and will
guide you to book timely profits. They will also guide you in adopting switching
techniques from one stock to another during various market conditions.
 De-Risking Portfolio: A diversified portfolio of stocks is always better than concentration
in a single stock. Based on our research, we diversify the portfolio in growth oriented
sectors and stocks to minimize the risk and optimize the returns.

 Research Department: Strong research has always been our forte. Our investment
advisory department is backed by an experience research team. This team comprises of
12 sectorial special analysts and a Research Head. Their vast experience and expertise in
spotting great investments opportunities has always been beneficial for our clients.
 Understanding Risk: At DBFS, utmost emphasis is given to understanding the risk profile
of an investor.
 Regular Analysis & Monitoring :Investments undergo regular monitoring and analysis to
check any deviation from the structured goal ensuring creation of wealth over a period of
time.
 Professional Management: PMS is provided through professional management by experts
on equity with an aim to optimize returns.
 Transparency: Regular statements and updates from us, as well as online access so you
are just a click away from all the information that you require about your investments.
 Administrative Convenience :DBFS focuses on providing hassle free administrative/
operational support & customized services

30
 SELECTED MUTUAL FUNDS

SBI MUTUAL FUNDS

SBI Mutual Fund, India's largest bank sponsored mutual fund, is a joint venture between
the State Bank of India and Societe Generale Asset Management, one of the world's top-notch
fund management companies. Over the years, SBI Mutual Fund has carved a niche for itself
through prudent investment decisions and consistent wealth creation.

Since its inception, SBI Funds Management Private Ltd. has launched thirty-two schemes
and successfully redeemed fifteen of them. Throughout this journey, SBI Mutual Fund has
profusely rewarded the 20, 00,000 investors who have reposed their faith in it.

Today, the SBI fund boasts of an expertise of managing assets over Rs. 13,000 crores and
has a diverse profile of investors actively parking their investments across 28 active schemes. A
vast network of 82 collection branches, 26 investor service centers, 21 investor service desks and
21 district organizers helps the SBI Mutual Fund to reach out to their investors.

CONTRA FUND

Is it a trading between NSE and BSE price different.

Contra is a short form of constructions they are some stocks which are out of favour from
buyers for many reasons. May be the market the stock are in are cyclic or long gestation period
or better down sector.

Definition

Ms. Adams expects fidelity contra fund to out perform the market during good times and
pioneer cullen on do better during difficult times.

Contra fund manager will Danoff continues to believe that his focus on high quality
companies with sustainable competitive advantages positions the fund well for future returns
says Fidelity spokes mam Adam Bankes.

31
 CHAPTER III

RESEARCH DESIGN ANDMETHODOLOGY

STATEMENT OF THE PROBLEM

In the current economic scenario interest rates are falling and fluctuation in the share
market has put investors in confusion. One finds it difficult to take decision on investment. This
is primarily, because investments are risky in nature and investors have to consider various
factors before investing in investment avenues. Therefore the study aims to compare mutual fund
schemes in form their risk, return & liquidity and also creating awareness about Mutual Fund
Schemes among the investors.

NEED FOR THE STUDY

This study is useful to the investors to taking decisions relating to investments in mutual
funds. By comparing the Magnum contra fund with other equity funds like SBI, TATA, Kotak,
UTI, L&T contra fund in the area of risk and returns investor will make decisions easily.

OBJECTIVES OF THE STUDY

1. To calculate average returns and risk of each selected contra fund;

2. To compare the SBI Magnum contra fund performance with others selected contra funds;
and

3. To evaluate the selected contra funds performance against the bench mark ;

SCOPE AND LIMITATIONS

The present scope study includes calculation of returns and risks of selected contra fund a
study also analysis the sbi magnum contra fund performance and compare with other contra
funds.

32
The study covers performance of

SBI contra fund

TATA contra fund

Kotak contra fund

UTI contra fund

L&T contra fund

1) Only contra funds are taken into considerations.

2) The results are subject to statical technic limitation

SOURCES OF DATA

Secondary data

Data collected from secondary sources such as

1. Annual reports, fact sheets, reference books and newspapers.

2. Web sitesare referred in this reports

TOOLS OF ANALYSIS

The following are the tools used for analysis

SHAR PE RATIO = Risk premium/ Fund’s Standard Deviation

Ri  R F
SHARPE RATIO = S tan dard deviation

X
Mean
 X 
N

33
  
2
 XX
Standard Deviation = n 1

TREYNOR RATIO = Risk premium/ Fund’s Beta

Ri  R F
TREYNOR RATIO = 

nXY  XY
nX 2   X 
2
BETA =

RISK ADJUSTED PERFORMANCE MEASURES

Higher risk is associated with greater probability of higher return and lower risk with a

greater probability of smaller return

 Risk and returns have co-relation.

 Risk adjusted returns is measured by using sharpe ratio (or) Treynor ratio.

34
 CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

The following table shows the information about performance in terms of risk adjusted rate of
returns of magnum contra fund

Table 4.1 (a)

Computation Standard Deviation of SBI Contra Fund

 X - X  X - X
2
Year Returns

2010-2011 66.29 49.28 2428.52

2011-2012 -53.14 -70.15 4921.02
2012-2013 90.55 73.54 5408.13
2013-2014 9.59 -7.42 55.05
2014-2015 -28.24 45.25 2047.56
Total 85.05 14860.28
Source: www.nseindia.com

X
Mean
 X 
N

85.05
5
 17.01

 
2
 XX
Standard Deviation = n 1

14,860.28
= 4

S.D = 60.95

Ri  R F
SHARPE RATIO = S tan dard deviation

Ri = Mean

RF = Risk return = 7%

35
 17.01  7
SHARPE RATIO = 60.95

10.01
= 60.95 = 0.16

Table 4.1(b)

The following table shows the information about Performance of SBI contra funds

Standard
Company Mean Sharpe Ratio
Deviation
SBI
17.01 60.95 0.16
Contra Fund

Graph 4.1
SBI Contra Fund Returns

100 90.55
80 66.29
60
40
RETURNS

20 9.59
0
-20 2010- 2011- 2012- 2013- 2014-
-40 2011 2012 2013 2014 2015
-28.24
-60 -53.14
-80
YEAR

INFERENCE

36
As per Sharpe ratio calculation the SBI Contra Fund has a Sharpe ratio (reward risk ratio) of 0.16
Mean 17.01, S.d 60.95, which indicates moderate returns over a period of 5 years

The following table shows the information about comparison of different funds with bench SBI
contra fund

Table 4.1(c)

ComputationFund Returns of SBI Contra Fund

Year Market Return Fund Return

2010-2011 59.35 66.29

2011-2012 -55.41 -53.14

2012-2013 83.80 90.55
2013-2014 15.87 9.59
2014-2015 -26.06 -28.24
Total 77.55 85.05
Source: www.nseindia.com

nXY  XY
nX 2   X 
2
BETA =

 = 1.09

Ri  R F
TREYNOR RATIO = 

17.01  7
= 1.09

10.01
= 1.09

= 9.18

37
 Table 4.1(d)

The following table shows the information about market returns versus SBI contra fund return

Company Beta Treynor Ratio

SBI Contra Fund 1.09 9.18

Graph 4.2

Comparison of SBI Contra Fund with Bench Mark

100 90.55
83.8
80
66.29
59.35
60

40

20 15.87
9.59
-55.41 -26.06
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20

-40 -28.24

-60 -53.14

-80
Market Return Fund Return

INFERENCE

From the above diagram we came to know that the SBI Contra Fund is showing the beta () of
1.09Treynor ratio of 9.18 indicates that is a defensive stock.

The following table shows the information about Performance in terms of risk adjusted rate of
returns of Tata contra fund

38
 Table 4.2 (a)
Computation Standard Deviation of Tata Contra Fund

 X - X  X - X
2
Year Returns

2010-2011 54.60 34.53 1192.32

2011-2012 -56.52 -76.59 5866.03
2012-2013 102.27 82.2 6756.84
2013-2014 20.25 0.18 0.032
2014-2015 -20.51 -40.58 1646.74
Total 100.36 15461.96
Source: www.nseindia.com

X
Mean
 X 
N

100.36
5
 20.072

 
2
 XX
Standard Deviation = n 1

15461.96
= 4

S.D = 62.173

Ri  R F
SHARPE RATIO = S tan dard deviation

Ri = Mean

RF = Risk return = 7%

20.07  7
SHARPE RATIO = 62.17

39
 13.07
= 62.17 = 0.210

Table 4.2(b)

The following table shows the information about performance of Tata contra funds

Standard
Company Mean Share Ratio
Deviation
TATA Contra Fund 20.07 62.17 0.21

Graph 4.3
Tata Contra Fund Returns

120
102.27
100
80
60 54.6
40
RETURNS

20.25
20
0
-20 2010-... 2011-... 2012-... 2013-... 2014-...
-20.51
-40
-60
-56.52
-80 YEAR

INFERENCE

As per Sharpe ratio calculation the TATA contra fund has a sharpe ratio (reward risk ratio) of
0.210 Mean , 20.7 SD 62.173 which indicates moderate returns over a period of 5 years.

The following table shows the information about Tata contra fund comparison of Tata fund with
bench mark

Table 4.2(c)

Computation Fund Returns of Tata Contra Fund

40
 Year Market Return Fund Return
2010-2011 59.35 54.60
2011-2012 -55.41 -56.52
2012-2013 83.80 102.27
2013-2014 15.87 20.25
2014-2015 -26.06 -20.51
Total 77.55 101.09
Source: www.nseindia.com

nXY  XY
nX 2   X 
2
BETA =

 = 1.30

Ri  R F
TREYNOR RATIO = 

20.07  7
= 1.30

13
= 1.30

= 10.05

41
 Table 4.3(d)

The following table shows the information about market return versus Tata contra fund return

Company Beta Treynor Ratio

Tata Contra Fund 1.30 10.05

Graph 4.4

Comparison of Tata Contra Fund with Bench Mark

120
102.27
100
83.8
80
59.3554.6
60

40

20 15.8720.25
-55.41 -26.06
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-20.51
-40

-60 -56.52
-80
Market Return Fund Return

INFERENCE

From the above table we came to know that the TATA Contra Fund is showing the beta
() of 1.30 Treynor ratio of 10.05 indicates that is a defensive stock.

The following table shows the information about computation standard deviation of kotak contra
fund

42
 Table 4.3 (a)

Computation Standard Deviation of Kotak Contra Fund

 X - X  X - X
2
Year Returns

2010-2011 51.79 37.14 1379.38

2011-2012 -50.73 -65.38 4274.54
2012-2013 80.38 65.73 4320.43
2013-2014 15.62 0.97 0.940
2014-2015 -23.81 -38.46 1479.17
Total 73.25 11454.46
www.moneycontrol.com

X
Mean
 X 
N
73.25
5
 14.65

 
2
 XX
Standard Deviation = n 1

11454.46
= 4

S.D = 53.5127

Ri  R F
SHARPE RATIO = S tan dard deviation

Ri = Mean

RF = Risk return = 7%

14.65  7
SHARPE RATIO = 53.51

43
 7.65
= 53.51 = 0.143

Table 4.3(b)

The Following Table shows the Information about performance of kotak Contra Funds

Standard
Company Mean Share Ratio
Deviation
Kotak Contra Fund 14.65 53.51 0.143

Graph 4.5
kotak contra fund returns

100
80.38
80

60 51.79

40
RETURNS

20 15.62

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-23.81
-40

-60 -50.73
YEAR

INFERENCE

As per Sharpe ratio calculation the Kotak contra fund has a sharpe ratio (reward risk
ratio) of 0.143 which indicates moderate returns over a period of 5 years.

The following table shows the information about kotak contra fund comparison of kotak fund
with bench mark

Table 4.3(c)

44
 Computation Fund Returns of Kotak Contra Fund

Year Market Return Fund Return

2010-2011 59.35 51.79
2011-2012 -55.41 -50.73
2012-2013 83.80 80.38
2013-2014 15.87 15.62
2014-2015 -26.06 -23.81
Total 77.55 73.25
www.moneycontrol.com

nXY  XY
nX 2   X 
2
BETA =

 = 0.94

Ri  R F
TREYNOR RATIO = 

14.65  7
= 0.94

7.65
= 0.94

= 8.13

45
 Table 4.3(d)

The following table shows the information about market return versus kotak contra fund return

Company Beta Treynor Ratio

Kotak Contra Fund 0.94 8.13

Graph 4.6

Comparison of Kotak Contra Fund with Bench Mark

100
83.880.38
80
59.35
60 51.79

40

20 15.8715.62
-26.06
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-23.81
-40

-60 -50.73
-55.41
-80

Market Return Fund Return

INFERENCE

From the above table we came to know that the Kotak Contra Fund is showing the beta
() of 0.94 Treynor ratio of 8.13 indicates that is a defensive stock..

46
The following table shows the information aboutperformance in terms of risk adjusted rate of
returns of UTI contra fund

Table 4.4(a)
Computation Standard Deviation of UTI Contra Fund

 X - X  
2
Year Returns X-X

2010-2011 40.98 31.11 967.83

2011-2012 -42.81 -52.68 2775.18
2012-2013 74.33 64.46 4155.09
2013-2014 9.11 -0.76 0.577
2014-2015 -32.26 -42.13 1774.93
Total 49.35 9673.61
www.moneycontrol.com

X
Mean
 X 
N
49.35
5
 9.87

 
2
 XX
Standard Deviation = n 1

9673.61
= 4

S.D = 49.177

Ri  R F
SHARPE RATIO = S tan dard deviation

Ri = Mean

RF = Risk return = 7%

47
 9.87  7
SHARPE RATIO = 49.17

= 0.05

Table 4.4(b)

The following table shows the information about performance of UTI contra funds

Standard
Company Mean Share Ratio
Deviation
UTI Contra Fund 9.87 49.17 0.05

GRAPH 4.7

UTI Contra Fund

100 Returns
80 74.33

60
40.98
40
RETURNS

20 9.11
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20

-40 -32.26
-42.81
-60
YEAR

INFERENCE

As per Sharpe ratio calculation the UTI contra fund has a sharpe ratio (reward risk ratio)
of 0.05 which indicates moderate returns over a period of 5 years.

48
The following table shows the information about UTI contra fund comparison of UTI fund with
bench mark

TABLE 4.4(c)

Computation Fund Returns of UTI Contra Fund

Year Market Return Fund Return

2010-2011 59.35 40.98
2011-2012 -55.41 -42.81
2012-2013 83.80 74.33
2013-2014 15.87 9.11
2014-2015 -26.06 -32.26
Total 77.55 49.35
www.moneycontrol.com

nXY  XY
nX 2   X 
2
BETA =

 = 0.63

Ri  R F
TREYNOR RATIO = 

9.87  7
= 0.63

2.87
= 0.63

= 4.5

Table 4.4(d)

49
 The following table shows the information about market return versus uti contra fund return

Company Beta Treynor Ratio

UTI Contra Fund 0.63 4.5

Graph 4.8
Comparison of UTI Contra Fund with Bench Mark

100
83.8
80 74.33
59.35
60
40.98
40

20 15.87
9.11
-55.41 -26.06
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20

-40 -32.26
-42.81
-60

-80

Market Return Fund Return

INFERENCE

From the above table we came to know that the UTI Contra Fund is showing the beta ()
of 0.63 Treynor ratio of 4.5 indicates that is a defensive stock.

The following table shows the information about Performance in terms of risk adjusted rate of
returns of L&T contra fund

50
 Table 4.5(a)

Computation Standard Deviation of L&T Contra Fund

 X - X  X - X
2
Year Returns

2010-2011 36.33 31.23 975.31

2011-2012 -68.54 -73.64 5422.84
2012-2013 68.79 63.69 4056.41
2013-2014 15.63 10.53 110.88
2014-2015 -26.69 -31.79 1010.60
Total 25.52 11576.04
www.moneycontrol.com

X
Mean
 X 
N
25.52
5 = 5.104

 
2
 XX
Standard Deviation = n 1

11576.04
= 4

S.D = 53.79

Ri  R F
SHARPE RATIO = S tan dard deviation

Ri = Mean

RF = Risk return = 7%

5.104  7
SHARPE RATIO = 53.74

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 1.9
= 53.79 = - 0.03

Table 4.5(b)

The following table shows the information about performance of L &T Contra Funds

Standard
Company Mean Share Ratio
Deviation
L&T Contra Fund 5.104 53.79 - 0.03

GRAPH 4.9

L&T Contra Fund

80 68.79
60

40 36.33

20 15.63
RETURNS

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-26.69
-40

-60

-80 -68.54

YEAR

INFERENCE

As per Sharpe ratio calculation the L&T contra fund has a sharpe ratio (reward risk ratio)
of -0.03 which indicates moderate returns over a period of 5 years.

The following table shows the information aboutL&T contra fund comparison of L&T fund with
bench mark

Table 4.5(c)

Computation Fund Returns of L&T Contra Fund

52
 Year Market Return Fund Return
2010-2011 59.35 36.33
2011-2012 -55.41 -68.54
2012-2013 83.80 68.79
2013-2014 15.87 15.63
2014-2015 -26.06 -26.69
Total 77.55 25.52
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nXY  XY
nX 2   X 
2
BETA =

 = 0.32

Ri  R F
TREYNOR RATIO = 

5.10  7
= 0.32

1.9
= 0.32

= -5.93

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 Table 4.5(d)

The following table shows the information about market return versus L&T contra fund return

Company Beta Treynor Ratio

L&T Contra Fund 0.32 -5.93

Graph 4.10
Comparison of L&T Contra Fund with Bench Mark

100
83.8
80 68.79
59.35
60

40 36.33

20 15.87
15.63
-55.41 -26.06
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-26.69
-40

-60

-80 -68.54

Market Return Fund Return

INFERENCE

From the above table we came to know that the L&T Contra Fund is showing the beta ()
of 0.32 Treynor ratio of -5.93 indicates that is a defensive stock.

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 Table 4.6

The following table shows the information about magnum contra fund performance with other
contra fund ratio

Risk &
Magnum Tata Kotak UTI L&T
Returns
Contra Contra Contra Contra Contra
measurabl
fund Fund Fund Fund Fund
e
Mean 17.01 20.07 14.65 9.87 5.10
S.D 60.95 62.17 53.51 49.17 53.79
 1.09 1.30 0.94 0.63 0.32
Sharpe
0.16 0.21 0.14 0.05 -0.03
Ratio
Traynor
9.18 10.05 8.13 4.5 -5.93
ratio

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Graph 4.11
‘Magnum contra Fund performance with other Contra Funds’

55
 70 62.17
60.95
60 53.51 53.79
49.17
50
40
30
20.07
20 17.03
14.65
9.18 10.05 8.13 9.87
10 4.5 5.1
1.090.16 1.30.21 0.940.14 0.630.05 0.32
0
-0.03
Magnum Contra Tata Contra Fund Kotak Contra UTI Contra Fund L&T Contra Fund
-10 Fund Fund
-5.93
Mean S.D Beta Sharpe Ratio Traynor Ratio

INFERENCE

When the results of all the Contra Funds are compared, the TATA CONTRA FUND
exhibits high values in all aspects as mentioned below:

Mean 20.7

Standard deviation 62.17

Beta 1.3

Sharpe ratio 0.21

Treynor ratio 10.05

CHAPTER V

56
 SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS

Average Returns

The mean returns of Tata Contra Fund is high (20.07) when compared with other contra
funds like Magnum contra fund (17.07), Kotak contra fund (14.65), UTI contra fund (9.87) and L
& T contra fund (5.10).

Standard Deviation

The standard deviation of UTI contra fund (49.17) reveals that it has low risk when
compared with other contra funds like Kotak contra fund (53.15), L & T contra fund (53.79), SBI
contra fund (60.95) and Tata contra fund (62.17).

Beta

Beta calculation reveals that the Tata contra fund (1.30) is having high risk when
compared with other contra fund SBI contra fund (1.09), Kotak contra fund (0.94), UTI contra
fund (0.63) and L&T contra fund (0.32).

 Performance evaluation

Sharpe ratio

As per SHARPE ratio, the performance of Tata contra fund (0.21) is said to be good
when compared to other contra fund SBI contra fund (0.16), Kotak contra fund (0.14), UTI
contra fund (0.05) and L&T contra fund (0.03).

Treynor ratio

Treynor ratio of Tata contra fund (10.05) is high when compared to other contra funds
like SBI contra fund (9.18), Kotak contra fund (8.13), L&T contra fund (-5.93) and UTI contra
fund (4.5).

SUGGESTIONS

57
 1. Risk takers can go for TATA contra fund which is yielding high average returns.

2. Risk aversers can go for SBI contra fund because its performance is high and average
returns are also moderate.

3. The fund manager has to select good scrip's in the portfolio for good returns.

4. Mutual funds should concentrate on differentiating the portfolio of their MF than their
Mf

5. Try to reduce fund charges, administration charges and other charges which help to invest
more funds in security market and earn good returns

CONCLUSION

From the study it can be concluded that the risk is less in L & T contra fund and risk high
in TATA contra fund. Return is high in TATA contra fund and low in L&T contra fund. High
performance fund is Tata contra fund and low performance is L&T contra fund.

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 BIBLIOGRAPHY

BOOKS
 Prasanna Chandra, 2002, “FINANCIAL MANAGEMENT”, 5th Edition, Tata-
McGraw Hill, New Delhi.
 I. M. Pandey, 2002, “FINANCIAL MANGEMENT”, 8TH Edition, Vikas Publishing
House Private Limited, New Delhi.
 Dr. V. A. Avadhani, 2006, “SECURITIES ANALYSIS AND PORTFOLIO
MANAGEMENT”, 8TH Revised Edition, Himalaya Publishing House, Mumbai.
 Preeti Singh, 2006, “INVESTMENT MANAGEMENT” 14th Revised Edition,
Himalaya Publishing House, Mumbai.

WEBSITES

 www.nseindia.com

 www.utimf.com

 www.economictimes.com

 www.moneycontrol.com

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