REPORT
ON
“MUTUAL FUND INDUSTRY-
ANALYSIS & RECENT TRENDS”
By:
Priyanka Agrawal
PICT-SITM
Pune
Kotak Mahindra Asset Management Company
Limited
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REPORT
ON
“MUTUAL FUND INDUSTRY-
ANALYSIS & RECENT TRENDS”
By:
Priyanka Agrawal
PICT-SITM
A report submitted in partial fulfillment of
the requirement of MBA Program
Submitted to:
Mr.Balaramchandran
Faculty Member
PICT-SITM, Pune
&
Mr. Rohit Kaushal
Relationship Manager
Kotak Mahindra Asset Management Company Limited
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ACKNOWLEDGEMENT
The success behind the completion of any good job is the support and the
joint team effort of a number of people. There are many persons, whose help
& cooperation, made this project successful.
I would also like to thank my parents and my friends for all their time-to-
time assistance. Last but not the least I would like to thank God because
without his divine grace nothing would have been possible.
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TABLE OF CONTENTS
Page No.
Acknowledgements……………………………………………………... 3
List of Illustrations……………………………………………………... 6
Abstract………………………………………………………………… 7
1. Introduction
a. Purpose…………………………………………………… 8
b. Objective………………………………………………...... 8
c. Proposed Methodology………………………………....... 9
a. Phases of Growth………………………………………… 16
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4. Distribution Model
b. Distribution Channels………………………………….... 32
c. Challenges in Distribution……………………………….. 33
a. Offer Document………………………………………….. 36
c. Pricing Of Units………………………………………….. 40
d. Investment Plans…………………………………………. 42
e. Tax Provisions…………………………………………… 44
f. Restriction on Investment……………………………….. 46
c. Fund Analysis
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ii) Debt Based Fund………………………………… 76
v) Cash Funds………………………………………. 85
7. Conclusion……………………………………………………….. 88
8. Recommendations……………………………………………….. 89
9. Appendices……………………………………………………….. 91
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TABLE OF ILLUSTRATIONS
a. By Nature of Investment………………………………….. 52
b. By Performance……………………………………………. 53
11.Risk-Return Grid………………………………………………… 54
a. Beta……………………………………………………….. 57
b. R Squared…………………………………………………. 58
c. Treynor Ratio…………………………………………….. 59
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d. Sharpe Ratio……………………………………………… 60
e. Cash Funds……………………………………………….. 85
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ABSTRACT
If size is the measure of dominance, then the Indian mutual fund industry can
now boast on that. With the total Asset Under Management (AUM)
increasing from Rs.1,01,565 Crores in Jan 2000 to Rs.5,67,601.98 Crores
by April 2008, according to the Association of Mutual Funds in India
(AMFI), the industry’s growth has been nothing but exceptional. It has
indeed come a long way from being a single player, single scheme (US-64)
industry to having 34 players and more than 480 schemes.
What has driven the growth? Numbers of factors have contributed to the
surge in the industry’s growth. First and foremost, a buoyant domestic
economy coupled with a booming stock market has been one of the major
drivers of the growth in recent times particularly in the last five-year.
Another significant factor facilitating this growth has been a conducive
regulatory regime, thanks to increased effort by SEBI to improve market
surveillance and protect investor’s interests. Further, incentives, such as
making dividend tax free in the hands of investors have also provided strong
impetus to the growth.
It also throws some light on major mutual fund companies in India, the
different types of mutual funds on the basis of structure, investment, load and
schemes and also it covers the different phases of growth of mutual fund
industry. Then it covers the calculation of NAV, the various investment plans,
factor’s that help in calculating the mutual fund performance.
In the end mutual fund analysis have been done on the basis of Standard
Deviation, Beta, Alpha, R Squared, Treynor Ratio & Sharpe Ratio on various
schemes like Equity based Funds, Debt based Funds, Monthly Income Plans,
Cash Funds & ELSS Tax Saver Schemes.
INTRODUCTION
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Purpose of the project
This project provides better understanding to the reader by giving insights on
Indian Mutual Fund Industry through comparative analysis of different Asset
Management Companies and their schemes in India. To do a comparative
analysis of five major Mutual Funds of India namely
Kotak Mutual Fund
HDFC Mutual Fund
UTI Mutual Fund
Reliance Mutual Fund
Prudential ICICI Mutual Fund
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Proposed Methodology
In broader perspective the whole project can be divided into three sections.
Under SECTION I, on the basis of past and present the industry has been
analyzed and based on which future outlook has been projected. This section
covers following things:
i. Concept of Mutual Funds and its Advantages.
ii. Types of Mutual Funds.
iii. Size of Industry
iv. Growth trends
Section III focuses on the different tools used to measure & evaluate the
performance of different Mutual Funds. This section covers the following
things:
i. The performance of the Mutual Funds is evaluated on the basis of
Standard Deviation, Beta, Alpha, R Squared, Treynor Ratio & Sharpe
Ratio.
ii. Recent Trends in the Mutual Fund industry
iii. Impact on Mutual Funds of the Union Budget.
Limitations
The analysis is completely based on the past performance and not
confirms the future performance.
The research is based on secondary data collected from other sources
like magazines, newspapers and websites etc.
Reliability of the sources could also be limitation for the project.
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ABOUT MUTUAL FUNDS
CONCEPT
Individuals or institutions when have surplus
money, i.e. savings, would like to invest with the
common and logical motive of growing money by
getting returns on the investments. There are
various avenues to park money towards fulfillment
of your objective of return on investment.
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 fund market.
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The new entries of mutual fund companies in India were SBI Mutual Fund,
Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank
Mutual Fund, Bank of India Mutual Fund.
A Mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective.
The ownership of the fund is thus joint or “mutual”; the fund belongs to all
investors. A single investor’s ownership of the fund is in the same proportion
as the amount of the contribution made by him bears to the total amount of
the fund.
A mutual fund uses the money collected from investors to buy those assets,
which are specifically permitted by its stated investment objective. Thus, an
equity fund would buy mainly equity assets-ordinary shares, preference
shares, warrants, etc. a bond fund would mainly buy debt instruments, such
as debentures, bonds, or government securities. It is these assets, which are
owned by the investors in the proportion of their investments.
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Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced. Diversification reduces the risk
because all stocks may not move in the same direction in the same proportion
at the same time. The profits and losses are shared by the investors in
proportion to their investments. Mutual funds normally come out with a
number of schemes with different investments objectives which are launched
from time to time. A mutual fund is required to be registered with Securities
and Exchange Board of India which regulates securities markets before it can
collect funds from public.
However, whether the investor gets funds shares or units is only a matter of
legal distinction. In any case, a mutual fund shareholder or unit holder is a
part owner of the fund’s assets. The term unit-holder includes the mutual
fund account-holder or closed-end fund shareholder. A unit holder in Unit
Trust of India US-64 scheme is the same as a UTI Master shareholder or an
investor in an alliance
Each share or unit that an investor holds needs to be assigned a value. Since
the units held by investor evidence the ownership of the assets, the value of
the total assets of the fund when divided by the total number of units issued
by the mutual fund gives us the value of one unit. This is generally called the
Net Asset Value (NAV) of one unit or one share. The value of an investor’s
part ownership is the determined by the NAV of the number of units held.
The flow chart below describes broadly the working of a mutual fund:
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SOURCE: AMFI
Advantages of Mutual Funds
If mutual funds are emerging as the favorite investment vehicle, it is because
of the many advantages they have over other forma and avenues of investing,
particularly for the investor who has limited resources available in terms of
capital and ability to carry out detailed research and market monitoring. The
following are the major benefits offered by mutual funds to all investors:
i) Portfolio Diversification
Mutual Funds spread the investment across different securities (stocks,
bonds, money market instruments, real estate, fixed deposits etc.) by
investing in a number of companies across a broad cross-section of industries
and sectors (auto, textile, information technology etc.). This kind of a
diversification may add to the stability of your returns and reduces the risk
with far less money than you can do on your own. For example during one
period of time equities might underperform but bonds and money market
instruments might do well enough to offset the effect of a slump in the equity
markets.
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iii) Professional Management
Qualified investment professionals who seek to maximize returns and
minimize risk monitor investor's money. The investment professional has
experience in making investment decisions. It is the Fund Manager's job to
(a) find the best securities for the fund, given the fund's stated investment
objectives; and (b) keep track of investments and changes in market
conditions and adjust the mix of the portfolio, as and when required.
iv) Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units
can be sold on a stock exchange at the prevailing market price or the investor
can avail of the facility of direct repurchase at NAV related prices by the
Mutual Fund.
v) Affordability
Investors individually may lack sufficient funds to invest in high-grade
stocks. A mutual fund because of its large corpus allows even a small
investor to take the benefit of its investment strategy.
vi) Variety
Mutual funds offer a tremendous variety of schemes. This variety is
beneficial in two ways: first, it offers different types of schemes to investors
with different needs and risk appetites; secondly, it offers an opportunity to
an investor to invest sums across a variety of schemes, both debt and equity.
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viii) Transparency
Open-ended mutual funds disclose their Net Asset Value (NAV) daily and the
entire portfolio monthly. This level of transparency, where the investor
himself sees the underlying assets bought with his money, is unmatched by
any other financial instrument.
While the benefits of investing through mutual funds far outweigh the
disadvantages, an investor and his advisor will do well to be aware of few
shortcomings of using the mutual fund as an investment vehicle.
i) No Tailor-made-Portfolios
Investing through funds means, the investor delegates the decision of
investing through which securities to fund manager. The very high-net-worth
individuals or large corporates may find this as a constraint in achieving their
objectives. However this constraint can be overcome to some extent by
offering families of schemes to investor, within the same fund.
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MUTUAL FUND INDUSTRY
The Phases of Growth
The Indian mutual industry has come a long way since the inception of UTI
in 1963.According to AMFI, the evolution of the industry can be classified
broadly into four phases, which mark its transition from a period when UTI
ruled the roost to a period of competition and increased awareness among
investors.
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period, the total asset of the industry grew to about Rs. 610bn with the total
number of schemes increasing to about 167 by the end of 1994.
iv) Fourth Phase (since Feb 2003)– UTI’s restructuring and beyond
In Feb 2003 UTI ACT 1963 was replaced and UTI was bifurcated into two
separate entities: Specified undertaking of Unit Trust of India, which is still
under the Govt. of India and the UTI Mutual Fund Ltd. This was done in the
wake of the sever payment crisis that UTI suffered on account of its assured
return schemes of US-64 that finally resulted in an adverse impact on the
India capital markets. US-64 was the first scheme launched by UTI with a
significant equity exposure and the returns of which were not linked to the
market. However, the industry has overcome that shock and is hoped to have
learnt its lesson.
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as Reliance Capital Mutual Fund which was changed on March 11, 2004.
Reliance Mutual Fund was formed for launching of various schemes under
which units are issued to the Public with a view to contribute to the capital
market and to provide investors the opportunities to make investments in
diversified securities.
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xi) Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial
Corporation Ltd. as the sponsor. Sahara Asset Management Company Private
Limited incorporated on August 31, 1995 works as the AMC of Sahara
Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.
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through their website. They have Open end Diversified Equity schemes,
Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax
Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.
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xx) LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June
1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC
Mutual Fund was constituted as a Trust in accordance with the provisions of
the Indian Trust Act, 1882. . The Company started its business on 29th April
1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima
Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.
SEBI
The Securities Exchange Board of India (SEBI) is the regulatory authority
for all the mutual funds sponsored by the public/private sector banks,
financial institutions, private sector companies, non- banking finance
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companies and foreign institutional investors. SEBI has laid down the rules
and regulations regarding the obligations of the entities involves in a mutual
fund, its establishment and launch of different schemes, investments and
valuation, financial reporting, conduct and operations of mutual funds.
Intermediaries
They act as a link between the mutual fund companies and the investors. The
intermediaries include brokers, sub- brokers, and investment houses. The
other intermediary- registrar and transfer agents perform activities, which are
associated with maintaining records concerning units already issued or to be
issued by the company. The registrar also performs other activities such as
dividend payment, investor grievance, etc.
Investors
Investors subscribe to the units issued by the mutual funds in the hope of
getting a return commensurate with the risk involved. SEBI protects the
interest of the investors through the guidelines laid down under SEBI
(Disclosure and Investor Protection) Guidelines, 2000. The mutual fund
investor mainly includes individual, HUF, corporate and trusts.
Types of Mutual Funds
There are many types of mutual funds available to the investor. However,
these different types of funds can be grouped into certain classifications for
better understanding.
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SOURCE: http://amfiindia.com
SOURCE: http://amfiindia.com
By Structure
i) Open-ended Funds
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy and
sell units at Net Asset Value (NAV) related prices. Hence, the unit capital of
the schemes keeps changing each day. Such schemes thus offer very high
liquidity to investors and are becoming increasingly popular in India. Please
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note that an open-ended fund is NOT obliged to keep selling/issuing new
units at all times, and may stop issuing further subscription to new investors.
On the other hand, an open-ended fund rarely denies to its investor the
facility to redeem existing units.
By Investment Objective
i) Growth Funds
The aim of growth funds is to provide capital appreciation over the medium
to long- term. Such schemes normally invest a majority of their corpus in
equities. It has been proven that returns from stocks, have outperformed most
other kind of investments held over the long term. Growth schemes are ideal
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for investors having a long-term outlook seeking growth over a period of
time.
v) Gilt Fund
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to
change in interest rates and economic factors as is the case with income or
debt oriented schemes.
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securities in the same weight age comprising of an index. NAV’s of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
“Tracking Error” in technical terms. Necessary disclosure in this regard is
made in the offer document of the mutual fund scheme. There are also
exchange traded index funds launched by the mutual funds which are traded
on the stock exchanges.
i) Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2%. It could be worth
paying the load, if the fund has a good performance history.
Other Schemes
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Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc.
It is essential for the investors to read the Offer Documents & Risk
Factors before investing in the mutual funds scheme to take well
informed investment decisions. Considering that the investors get very
little time to read the advertisements through hoardings/posters, etc.
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while passing by, it is clarified that such advertisements may carry
only the following statement apart from copy of advertisement:
Performance Advertisements
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• Impact of Distribution Taxes: While advertising returns by
assuming reinvestment of dividends, if distribution taxes are
excluded while calculating the returns, this should also be
disclosed.
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Distribution Model
AMC
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Direct Sales Brokers Banks Tied Agency Internet
Institutional Brokers
IFAs
Customer Segments
Distribution Channels
In highly competitive environment, product innovation or development has
become a necessity for mutual fund players to stay ahead. Increasing
commoditization and growing needs of the customers are forcing players to
shift to solution based models from production based ones. In either model,
the role of distribution channel remains critical as it helps stave off
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competition by maintaining relationships, providing advisory services and
customizing need-based solution
Relationship plays a vital role while selling mutual fund products. An agent
is essential channel between investors and mutual fund products. However it
is difficult for AMCs to manage and monitor large agent force. So they take
shelter in third-party distribution AMCs like KARVY, BAJAJ Capital, and
Integrated Enterprises etc. These AMCs in turn, appoint their agents to sell
the MF to AMCs products. Agents advise the customer on the kind of
product that caters to the needs of the client. To unload their work, the
companies bear a huge market expense in the form of higher commission to
lure investors.
To control increasing operational costs, AMCs are opting for the service s of
large distributors to sell their products by leveraging their value chain, which
comprises of a brokers, sub brokers and agents. However mutual fund
players have to bear splurging marketing expenses to push their product
against others. In addition mutual fund AMCs are also using banks and Non
–Banking Financial AMCs (NBFC) as distribution channels to leverage their
reach and huge client base. UTI is distributing its offerings through selected
branches of Indian Bank, Corporation Bank, Bank of India an Allahabad
Bank, besides, they are also appointing sales personnel to meet investors,
educate them and sell their products.
The contribution of direct marketing to the total sales is miniscule, but the
cost burden is huge. The post office is also used as a channel of Distribution
by mutual funds AMCs, given the fact that the post office has the largest
network then many other institution or bank in the country. As far as retail
penetration is concerned, the post office plays a vital role because its offices
are distributed through the country. Mutual fund industry is also using the
internet to distribute their products because of the cost advantages and
increased communication. However, the fact is that internet has its limits in
providing customized advice to individuals; restrict its use on large scale.
Challenges in Distribution
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Lack of awareness
Risk aversion
It has been a big challenge for the Mutual Fund Industry. As most of the
investors are still not aware how it functions. They sometime feel that it is a
costly affair. Educating investors about the advantages of investing in mutual
funds compared to risk-free savings instrument is a big task for the industry.
According to the Securities Market Infrastructure- Leveraging Expert
(SMILE), the transaction cost of establishing contact centers, delay in fund
transfer and tardy inter-city payment system are the major impediments. So
enhancing the reach through the existing distribution model will require
more investments.
As of now, mutual fund investments are confined to the metros, tier 1 and 2
cities (about 50 cities). A major reason for this is high cost of developing
retail infrastructure. So, scaling up the operation by increasing investment in
other cities doesn’t seem feasible.
There is also a regulatory entanglement in fund realization. Allotment of
units Net Asset Value (NAVs) is done before realization of funds, except in
liquid and money market schemes. Such delay is quite pervasive in smaller
towns, where it can be 3-5 days or more. Such hassle could prevent investors
from investing in mutual funds. However, these problems are being resolved
with appointment of registrars to meet the time-lines of recording the
transactions. In addition, technological advancements of remittance
instruments such as Electronic clearing Services (ECS), Electronic Funds
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Transfer (FT) and Real- Time Gross settlement System (RTGS), is a making
the process fast and reducing delay in fund transfer across cities.
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So there is a need to focus on rural penetration for future growth. To achieve
its growth, educating the customer about the mutual funds as a saving vehicle
will be critical. More efforts are required from the regulators and the industry
to manage the wealth of individuals to further propel the growth of the
industry by popularizing the use of mutual funds. The govt. should properly
regulate and monitor the regulation so that a favorable climate can be
created. Regulations should be tightened to curb unethical practices. They
should also develop a comprehensive risk management system so that it can
induce more investment. The industry should focus on product innovation
and maintain transparency, flexibility, service and innovation to realize its
potential.
Offer Document
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Dividend Option: The investor can choose to receive a part of the
profits of the mutual fund at some intervals before their redemption.
This option is Dividend Option. Investors who choose dividend option
can again have 2 sub options:
Growth Option: The investors who do not want to receive any part of
profits of the mutual fund before its redemption. Rather they want to
retain the profits made in the pool and want their returns to grow by
being compounded. Whenever they need to get some money or profits
back, they would sell a part of their units. This is Growth Option.
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Lock-in Period Options:
Mutual funds usually do not have lock-in periods, during which investors
cannot exit the fund. Mutual funds may create products with lock-in periods.
Repurchase information can be found in the offer document. There are 2
normal situations when investors are restricted from exiting the fund:
An open-ended fund may announce an initial offer period, during
which time it will only sell units. There may be no repurchase during
that period. The fund will announce a date from which further sales
and repurchases will take place.
• Purchases:
• Redemption:
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In respect of valid applications received upto 3 p.m. by the
Mutual Fund, same day’s closing NAV shall be applicable.
Liquid funds
• Purchases:
• Redemption
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NAV computation is undertaken once at the end of each trading day based
on the closing market prices of the portfolio's securities.
For the purpose of NAV calculation, the day on which NAV is calculated
by a fund is known as the Valuation Date. NAV of all schemes must be
calculated and published at least every Wednesday for Closed-end
schemes and daily for Open-end schemes. The day’s NAV must be posted
on AMFI website by 8:00 p.m. that day. This applies to both Open-end &
Closed-end schemes.
Pricing Of Units
Although NAV per unit defines the fair value of the investor’s holding in the
fund, the fund may not repurchase the investor’s units at the same price as
NAV. There can be entry or exit loads. The Sale price is NAV + Entry Load
and the Repurchase price is NAV – Exit Load. SEBI requires that fund must
ensure that repurchase price is not lower than 93% of NAV (95% in the case
of a closed-end fund). On the other side, the fund may sell new units at a
price that is different from the NAV, but the sale price cannot be higher than
107% of NAV. Also, the difference between the repurchase price and the sale
price of the unit is not permitted to exceed 7% of the sale price.
Sale Price: Applicable NAV * (1 + Entry Load)
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Repurchase Price: Applicable NAV * (1 – Exit Load)
Total Expenses:
Total Expenses charged by the AMC to a scheme, excluding issue or
redemption expenses but including investment management &
advisory fees, are subject to the following limits:
On the first Rs.100 Crores of daily or average weekly net assets 2.5%
On the next Rs.300 Crores of daily or average weekly net assets 2.25%
On the next Rs.300 Crores of daily or average weekly net assets 2.0%
On the balance of daily or average weekly net assets 1.75%
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For Bond Funds:
On the first Rs.100 Crores of daily or average weekly net assets 2.25%
On the next Rs.300 Crores of daily or average weekly net assets 2.0%
On the next Rs.300 Crores of daily or average weekly net assets 1.75%
On the balance of daily or average weekly net assets 1.5%
Investment Plans
The term “investment plans” generally refers to the portfolio flexibility that
the funds to investors offering different ways to invest or reinvest. The
different investment plans are an important consideration in the investment
decision, because they determine the level of flexibility available to the
investor. Also, the investment plan offered by a fund allows the investors
freedom with respect to investing one time or at regular intervals, making
transfers to different schemes within the same fund family, or receiving
income at specified intervals or accumulating distributions. These are some
of the investment plans offered by mutual funds in India:
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• Automatic Reinvestment Plans (ARP):
Many funds offer 2 options under the same scheme- the Dividend
Option & the Growth Option. The ARP allows the investor to
reinvest the amount of dividends or other distributions made by the
fund in the same fund & receive additional units, instead of receiving
them in cash.
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• R-Squared
The R-squared of a fund advises investors if the beta of a mutual fund is
measured against an appropriate benchmark. Measuring the correlation of a
fund's movements to that of an index, R-squared describes the level of
association between the fund's volatility and market risk, or more specifically,
the degree to which a fund's volatility is a result of the day-to-day fluctuations
experienced by the overall market.
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What is risk?
Risk can be defined as the potential for harm. But when anyone analyzing
mutual funds uses this term, what is actually being talked about is volatility.
Volatility is nothing but the fluctuation of the Net Asset Value (price of a unit
of a fund). If there is high volatility, then there will be greater fluctuations in
NAV.
Generally, past volatility is taken as an indicator of future risk and for the
task of evaluating a mutual fund, this is an adequate approximation.
There are 2 ways in which you can determine how risky a fund is.
Standard Deviation
Sharpe Ratio
The Sharpe Ratio of a fund measures whether the returns that a fund
delivered were commensurate with the kind of volatility it exhibited.
This ratio looks at both, returns and risk, and delivers a single measure
that is proportional to the risk adjusted returns.
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Important Points:
Kotak 30 has 3 stars & Kotak Opportunities has 4 stars. That does not
mean that their NAV is approximately the same. In fact, the NAV of
Kotak 30 is 90.22 & NAV of Kotak Opportunities is 40.48
A fund with more stars does not indicate a higher return when
compared with the rest. All it means is that you will get a good return
without putting your money at too much risk.
HDFC Top 200 has an NAV of 140.47 while UTI Infrastructure has an
NAV of 36.60
This does not necessarily mean that HDFC Top 200 is offering a
higher risk since the return is higher.
In fact, according to the ratings, HDFC Top 200, a 5-star fund has a
low risk while UTI Infrastructure, a 5-star fund has an average risk.
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Recent Trends in the Mutual Fund Industry
• Most fund houses are already offering this STP facility to investors. In
the first week of May, JP Morgan AMC launched Optimiser
Systematic transfer plan, wherein investors can invest a lump sum in
JP Morgan India Liquid Fund or JP Morgan India Liquid Plus Fund
through STP. An amount predetermined by the investor would be
transferred periodically (daily, weekly, monthly or quarterly) from this
fund to any of the existing equity schemes managed by JP Morgan
Mutual Fund.
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STP is yet to be promoted in India to its full extent. Investors need to
be adequately informed about it.
• Many of the funds will cover a wide range of areas within the
entertainment arena such as retail, shopping malls, mobile content
providers, lifestyle beyond the conventional media like television,
film, print advertising and multiplex.
• Global media giants like Viacom, Walt Disney, BBC, J C Decaux and
Astro are already in the country or looking at it. The industry has
already witnessed deals such as Walt Disney-UTV, Blackstone-Eenadu
and Adlabs-ADAG (Anil Dhirubhai Ambani Group).
• A brand image is very important for mutual funds and investors base
their decisions on known and dependable brands. Brand-building
exercises are mostly taken up by foreign players and big industrial
houses which have deep pockets, while fund houses with lower corpus
can only attract investors by showing good performance.
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• Country's MF industry holds immense potential for the existing as well
as the new players entering or those envisaging an entry into the space,
but firms with a strong brand presence definitely has a competitive
advantage.
• The asset base of the industry has grown by 7.33% to Rs. 567601.98
Crores.
• Compared to the last month, April has been great for the mutual fund
industry as 28 AMCs out of 34 posted positive growth in their AAUM.
Reliance Mutual Fund has topped the chart with an AAUM of Rs
96,386.40 Crores. ICICI Prudential MF and UTI MF continue to be at
the second and third position respectively.
52 | P a g e
• Kotak Mahindra Asset Management Company has announced the
launch of an exchange traded fund which will focus on the stocks that
comprise the BSE SENSEX.
• The fund is open for subscription from May 07, 2008 till May 16,
2008. The units will be listed on BSE to provide liquidity through
secondary market. Each unit of the Kotak Sensex ETF will be
approximately equal to 1/100th of the value of BSE SENSEX. The
minimum investment amount during the New Fund Offer is Rs 10,000
and in multiples of Rs 1,000.
• Reliance Mutual Fund is the first mutual fund in India to cross this
mark. On April 30, the total Assets Under Management (AUM) of the
fund was Rs 100812 Crores, including Rs 34000 Crores in equity
schemes and Rs 66800 Crores in debt funds.
53 | P a g e
• The fact sheet will provide details of obligators, underlying asset
class, rating etc on a consolidated basis across the entire fixed
income portfolio which will play a key role in aiding investors gain
complete insight of their investment and evaluate the credit quality of
their portfolio.
54 | P a g e
Impact
• This is expected to increase the disposable income in the hands of the
individuals to some extent which could translate into increased retail
investments in mutual funds.
Impact
• Since long term capital gains tax has been left unchanged, this hike in
short term capital gains tax could encourage long-term investments
which augur well to the development of the concept of “long term” in
the Indian Mutual Fund industry, which is conspicuous by its absence
but which is coveted by the fund industry given the greater flexibility
that this provides in fund’s management.
• At the same time since the short term capital gains tax is still lower
than the income tax slabs of typical capital market investors, it is not
Incentives for equities should be continued and the status quo on long-
term capital gain tax and STT should be maintained.
55 | P a g e
• KYC is an acronym for “Know your Client”, a term commonly used
for Client Identification Process. SEBI has prescribed certain
requirements relating to KYC norms for Financial Institutions and
Financial Intermediaries including Mutual Funds to ‘know’ their
clients. This would be in the form of verification of identity and
address, financial status, occupation and such other personal
information. Applicant must be KYC compliant while investing with
any SEBI registered Mutual Fund.
• As a result, all applicants will now have to submit their PAN card copy
(which serves as Proof of Identity (PoI)) and Proof of Address (PoA)
only once to the designated Point of Service (PoS) centers spread
across the country. After confirming the credentials of the investor, the
PoS issues KYC acknowledgement letter that needs to be submitted
along with the mutual fund investments.
56 | P a g e
Service Taxes realigned for ULIP’s
Impact
• The competitiveness of mutual funds vis-à-vis ULIPs in the
investment basket of investors is expected to increase somewhat.
57 | P a g e
FUND ANALYSIS (On the basis of NAV)
Fund Category Rating 3 Year
Return
DSPML T.I.G.E.R. Reg Equity: Diversified 45.64
Tata Infrastructure Equity: Diversified 45.31
Magnum Contra Equity: Diversified 44.80
Kotak Opportunities Equity: Diversified 43.72
UTI Infrastructure Equity: Diversified 43.18
Magnum Multiplier Plus Equity: Diversified 43.05
Reliance Growth Equity: Diversified 42.00
Sundaram BNP Paribas Select Equity: Diversified 41.06
Midcap Reg
HDFC Top 200 Equity: Diversified 39.65
BoB Growth Equity: Diversified 38.55
Principal Child Benefit Hybrid: Equity-oriented 36.93
Magnum Balanced Hybrid: Equity-oriented 31.37
HDFC Prudence Hybrid: Equity-oriented 29.27
Birla Sun Life Income Debt: Medium-term 8.37
58 | P a g e
Kotak
Category Fund
Equity Fund Scheme Kotak 30 – Growth
Debt Fund Scheme Kotak Bond Short Term
ELSS Tax Saver Kotak Tax Saver Scheme – Growth
Monthly Income Plan Kotak Income Plus
Cash Fund Kotak Liquid Instrument
HDFC
Category Fund
Equity Fund Scheme HDFC Equity Fund- Growth
Debt Fund Scheme HDFC HI Short Term
ELSS Tax Saver HDFC Tax Saver Scheme- Growth
Monthly Income Plan HDFC MIP- Short Term
Cash Fund HDFC Liquid
UTI
Category Fund
Equity Fund Scheme UTI Equity Fund- Growth
Debt Fund Scheme UTI Short Term Income Regular
ELSS Tax Saver UTI ETSP- Growth
Monthly Income Plan UTI- MIS
Cash Fund UTI Liquid Cash Instrument
59 | P a g e
ICICI
Category Fund
Equity Fund Scheme ICICI Prudential Dynamic Plan- Growth
Debt Fund Scheme ICICI Prudential Short Term
ELSS Tax Saver ICICI Prudential Tax Plan
Monthly Income Plan ICICI Prudential MIP
Cash Fund ICICI Prudential Liquid
Reliance
Category Fund
Equity Fund Scheme Reliance Growth
Debt Fund Scheme Reliance Short Term
ELSS Tax Saver Reliance Tax Saver
Monthly Income Plan Reliance MIP
Cash Fund Reliance Liquid Cash
60 | P a g e
Equity Fund Scheme
1. Kotak 30- Growth
5. Reliance Growth
Findings
61 | P a g e
ICICI 3 1 5 1 4 1 15
Reliance 5 4 2 5 5 3 24
Analysis
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
62 | P a g e
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, HDFC Equity
Growth fund has the maximum R Square (.92) followed by UTI Equity
Growth fund (.89).
But the analysis can’t be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio ICICI Prudential Growth fund (1.43) stands out
clear with 1st rank, followed by Kotak 30 Growth fund (1.39).
In case of Treynor ratio, Kotak 30 Growth fund (3.09) value is higher so it
has been given the 1st rank among the others which is followed by Reliance
Equity fund (2.97).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
Thus, ICICI Prudential Dynamic Growth Plan is the best Equity fund for the
investor for investment purpose. It is the best fund as far as Alpha, Beta &
Sharpe ratio is concerned. Though R Square is not so convincing which
means that the fund is not so diversified. It stands at 3 rd position in Standard
63 | P a g e
Deviation after UTI Equity Growth fund & HDFC Equity Growth fund and
last when Treynor ratio is considered. But when we combine all the 6
parameters which are considered to measure the performance of a Mutual
Fund, ICICI Prudential Dynamic Growth Plan is the best Equity Fund when
compared with rest of the Equity funds.
Findings
64 | P a g e
Reliance 2 2 3 2 1 2 12
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, HDFC HI Short Term stands out
with rank 1 (.52) & following HDFC HI is Reliance Short Term fund (.54)
which suggest that these funds are stable in their returns & also are less risky.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also HDFC HI Short
Term has lowest beta (.42) among these funds which is followed by Reliance
Short Term fund (.46). But beta of 1 is preferable because of the returns it is
considered safe for the value of 1 in this analysis almost most of the funds
have beta of less than 1 which means that these funds are managed in
keeping the people risk at a manageable level, which help investors to earn
safe returns. As we have to do the analysis we have to take one stand so in
this case, according to me 1st rank should be given to that beta value which is
lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
65 | P a g e
So, higher R Square means a well diversified portfolio. So, Reliance Short
Term fund has the maximum R Square (.59) followed by Kotak Bond Short
Term (.55). HDFC HI Short term fund is on the 3rd place (.54).
But the analysis can’t be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio HDFC HI Short Term fund (7.10) stands out clear
with 1st rank, followed by Reliance Short Term fund (6.55).
In case of Treynor ratio, Kotak Bond Short Term fund (3.42) value is higher
so it has been given the 1st rank among the others which is followed by
HDFC HI Short Term fund (3.11).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, HDFC HI Short Term fund (2.95) is the best
followed by Reliance Short Term fund (2.72).
Thus, HDFC HI Short Term fund is the best Debt fund when compared with
the other funds of Kotak, ICICI, UTI & Reliance. It has the smallest
Standard Deviation & also the smallest Beta when compared with all the
funds. This shows the fund is less risky and will give good returns to its
66 | P a g e
investors. When taken R Square into consideration, this fund stands at the 3rd
position after Kotak Bond Short Term & Reliance Short Term. This shows
that the fund is less diversified. The fund is the best performer as far as
Sharpe ratio is concerned and is the 2nd best when Treynor ratio is
considered. The fund is a good performer as it has the highest Alpha. So, if a
person wants to invest in Debt for a short term then he can go in for HDFC
HI Short Term fund.
Findings
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, UTI ETSP- Growth fund stands
out with rank 1 (24.49) followed by HDFC Tax Saver Scheme- Growth fund
(25.22) which suggest that these funds are stable in their returns & also are
less risky.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also HDFC Tax Saver
Scheme Fund has lowest beta (.92) among these funds which is followed by
ICICI Prudential Tax Plan (.94). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns and in this case beta is approximately equal to 1. As we have to
do the analysis we have to take one stand so in this case, according to me 1st
rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
68 | P a g e
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, UTI ETSP-
Growth fund has the maximum R Square (.86) followed by HDFC Tax Saver
Scheme- Growth Fund (.84)
But the analysis can’t be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In case of Sharpe Ratio, an HDFC Tax Saver Scheme- Growth fund (1.05)
stand out clear with 1st rank, followed by UTI ETSP Growth fund (.91) &
just next is ICICI Prudential Tax Plan (.90).
In case of Treynor ratio, it is the just the opposite of Sharpe Ratio, UTI ETSP
Growth fund (1.94) value is higher so it has been given the 1st rank among
the others which is followed by HDFC Tax Saver Scheme fund (1.93).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, all the funds have a negative figure which means
that all the funds are not performing good. But, when compared among these
69 | P a g e
5 funds HDFC Tax Saver Scheme (-3.11) is the best followed by ICICI
Prudential Tax Plan (-4.04).
Thus, HDFC Tax Saver Scheme is the best Tax Saver Fund. It stands 2 nd in
case of Standard Deviation after UTI ETSP Growth Fund and is the best fund
when Beta is compared followed by ICICI Prudential Tax Plan. As far as R
Square is considered it stands at 2nd position after UTI ETSP Growth Fund. It
is again the best when we consider the Sharpe Ratio. Though all the funds
are showing a negative figure when alpha is compared but again it is the best
as far as these 5 funds are compared. So, if we keep all the 6 parameters in
mind the investor should be advised to invest in HDFC Tax Saver Scheme.
Monthly Income Plans (MIP)
1. Kotak Income Plus
3. UTI- MIS
5. Reliance MIP
Findings
70 | P a g e
Kotak 5 3 2 4 3 2 19
HDFC 2 4 5 2 1 5 19
UTI 1 1 3 5 5 3 18
ICICI 3 2 1 3 2 1 12
Reliance 4 5 4 1 4 4 22
Analysis
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
71 | P a g e
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, HDFC MIP-
short Term fund has the maximum R Square (.81) followed by ICICI
Prudential MIP fund (.71).
But the analysis can’t be done on these two parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio UTI MIP fund (.76) stands out clear with 1st rank,
followed by ICICI Prudential MIP fund (.47). HDFC MIP & Reliance MIP
have negative Sharpe ratio.
In case of Treynor ratio, ICICI Prudential MIP (4.71) value is higher so it has
been given the 1st rank among the others which is followed by Kotak Income
Plus fund (4.04).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
In case of Alpha ICICI MIP (3.13) is the best fund followed by Kotak
Income Plus (2.70) & UTI MIS (2.34) in the third place.
72 | P a g e
ICICI Prudential MIP is recommended to the investors. ICICI is the 3rd
highest in standard deviation after UTI MIS fund and HDFC MIP fund. It is
also 3rd as far as beta of the fund is considered after Reliance MIP & HDFC
MIP- Short Term. It is 2nd best in Sharpe ratio after UTI MIS and it is the best
in Treynor ratio followed by Kotak Income plus. ICICI Prudential MIP
should be considered by the investors. Also ICICI Prudential MIP is the best
fund when Alpha is considered. But, if the investor wants to take less risk
then he can go in for HDFC MIP- Short Term fund as this fund is 2md best
in both Standard Deviation & Beta. But, after considering all the 6
parameters ICICI Prudential MIP is the best fund.
Cash Funds
1. Kotak Liquid Instrument
2. HDFC Liquid
Findings
Standard Sharpe Treynor Beta R Alpha Total
Deviation Ratio Ratio Square
Kotak 1 1 1 2 3 4 12
73 | P a g e
HDFC 3.5 2 3 3 2 1 14.5
UTI 3.5 3 4 1 5 2.5 19
ICICI 2 4 2 4 1 2.5 15.5
Reliance 5 5 5 5 4 5 29
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, Kotak Liquid Instrument stands
out with rank 1 (.12) & ICICI Prudential Liquid (.14) which suggest that
these funds are stable in their returns. HDFC Liquid & UTI Liquid Cash
Instrument shares the 3rd position as they both have the same standard
deviation.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also UTI Liquid Cash
Instrument has lowest beta (.09) among these funds which is followed by
Kotak Liquid Instrument (.10). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns. But in this case, beta of all the funds is much below than 1. As
we have to do the analysis we have to take one stand so in this case,
according to me 1st rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
74 | P a g e
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, ICICI Liquid
Cash Instrument fund has the maximum R Square (.33) followed by HDFC
Liquid fund (.23).
But the analysis can’t be done on these two parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio Kotak Liquid Instrument fund (17.20) stands out
clear with 1st rank, followed by HDFC Liquid fund (16.91).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
75 | P a g e
Kotak Liquid Instrument fund is recommended to all the investors as it has
the least standard deviation i.e. the risk is least as compared to all other
mutual funds. Beta is also 2nd lowest just after UTI Liquid Cash Instrument
and is also very close as it has the beta of (.10) and UTI Liquid Cash
instrument has of (.09). When compared the Sharpe ratio & the Treynor ratio,
Kotak Liquid Instrument has the highest ratio. Though it is the 3rd best in R
Square i.e. it is less diversified as compared to ICICI Prudential Liquid &
HDFC Liquid. Keeping in mind all the 6 parameters, Kotak Liquid
instrument fund is the best Cash Fund when compared with rest of the cash
funds.
CONCLUSION
After analyzing the mutual funds under 5 categories like Equity based, Debt
based, ELSS Tax Saving, Monthly Income Plans & Cash funds under 6
parameters like Standard deviation, Beta, Alpha, R Squared, Treynor Ratio &
Sharpe Ratio, I have come to a conclusion that there are different funds
which are performing best under different categories. No fund is the best in
all the categories.
76 | P a g e
Category Fund
Equity Fund Scheme ICICI Prudential Dynamic Plan- Growth
Debt Fund Scheme HDFC HI- Short Term
ELSS Tax Saver HDFC Tax Saver Scheme
Monthly Income Plan ICICI Prudential MIP
Cash Fund Kotak Liquid Instrument
So, it can be seen that ICICI Prudential is the best in Equity Fund Scheme &
Monthly Income Plan but HDFC is the best in Debt Fund Scheme & ELSS
Tax Saver Scheme. Kotak is the best in Cash Fund & when the NAV of past
3 years is compared T.I.G.E.R. fund is the best fund with a NAV of 45.64 and
among these 5 funds Kotak Opportunities is the best fund with an NAV of
43.72 of the past 3 years.
RECOMMENDATIONS
Diversify
77 | P a g e
• Investor can also plan like one mutual fund of diversified equity
plan, second mutual fund of balanced type and third one you can
plan of debt type etc. In this manner the money will get diversified,
risk is reduced and the investor will get excellent profit.
• Never judge a fund on the basis of its NAV. Also have a look at the
Standard Deviation, Beta, Alpha, R Squared, Treynor & Sharpe
Ratios & also its performance in the bear and the bull phase, and
then invest in it. Only judging a fund by its NAV, is irrelevant while
selecting the fund as it is the percentage gain or loss that matters.
• Also look for past returns, dividend etc. the mutual fund has
declared. If the investor has chosen equity or stock market related
mutual fund, then he may go for SIP (Systematic Investment Plan)
method. A risk adverse investor should avoid investing in the
Sectoral funds.
• AMC’s use NFOs to create excitement and push their funds. These
schemes are launched because they are easy avenues to capture
management fees and increase the fund house's asset base. These
schemes are usually just clones of existing schemes, but with new
peppy names flaunted to attract investors.
78 | P a g e
• It is important for investors to understand that NFOs are merely
marketing devices. There are a number of existing funds that have
proved their mettle and investors should opt for them because they
have a track record.
APPENDICES
Kotak
79 | P a g e
Kotak 30- Growth
Objective
The investment objective of the scheme is to generate capital appreciation from a
portfolio of predominantly equity and equity related securities. The portfolio will
generally comprise of equity and equity related instruments of around 30companies
which may go up to 39 companies, and that these companies may or may not be the
same which constitute the BSE Sensitive Index or NSE Fifty (S&P CNX Nifty)
Index. Review and rebalancing will be conducted if the investment in companies
exceed above 39.
80 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Dec 22, 1998
Face Value
(Rs/Unit)
10
Fund Manager
Krishna Sanghvi,
Sanjib Guha .
SIP
STP
SWP
Expense ratio(%)
2.24
Portfolio 81 | P a g e
Turnover
Ratio(%)
131.26
Last Dividend
Declared
10 % as on Dec 31,
2001
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
49999999 then Entry
load is 2.25%. and
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
If redeemed bet. 0
Months to 6 Months;
Exit load is 1%.
Objective
82 | P a g e
The objective of the Plan is to provide reasonable returns and high level of liquidity
by investing in debt instruments and money market instruments so as to spread the
risk across different kinds of issuers in the debt markets.
83 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Apr 25, 2002
Face Value
(Rs/Unit)
10
Fund Manager
Deepak Agrawal
SIP
STP
SWP
Expense ratio(%)
0.60
Portfolio
Turnover 84 | P a g e
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
85 | P a g e
Kotak Tax Saver Scheme- Growth
Objective
The investment objective of the scheme is to generate long term capital
appreciation from a diversified portfolio of equity and equity related securities and
enable investors to avail the income tax rebate, as permitted from time to time.
86 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Oct 25, 2005
Face Value
(Rs/Unit)
10
Fund Manager
Krishna Sanghvi
SIP
STP
SWP
Expense ratio(%)
2.31
Portfolio
Turnover 87 | P a g e
Ratio(%)
84.31
Last Dividend
Declared
NA
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
49999999 then Entry
load is 2.25%. &
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
If redeemed after 0
Year; Exit load is
0%. Exit Load is 0%.
88 | P a g e
Kotak Income Plus
Objective
To enhance returns over a portfolio of debt instruments with a moderate exposure in
equity and equity related instruments.
89 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Nov 14, 2003
Face Value
(Rs/Unit)
10
Fund Manager
Ritesh Jain,
Krishna Sanghvi,
Sanjib Guha
SIP
STP
SWP
Expense ratio(%)
2.22
90 | P a g e
Portfolio
Turnover
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
If redeemed bet. 0
Year to 1 Year; and
Amount Bet. 0 to
2500000 then Exit
load is 1%.
91 | P a g e
Kotak Liquid Instrument
Objective
Aims to provide reasonable returns and high level of liquidity by investing in debt
instruments such as bonds, debentures, Government Securities, money market
instruments such as treasury bills, commercial paper, certificate of deposit,
including repos in permitted securities of different maturities so as to spread the risk
across different kinds of issuers in the debt markets.
92 | P a g e
Type of Scheme
Open Ended
Nature
Short Term
Debt
Option
Growth
Inception Date
Mar 12, 2003
Face Value
(Rs/Unit)
10
Fund Manager
Ritesh Jain,
Deepak Agrawal.
SIP
STP
SWP
Expense Ratio(%)
0.72
93 | P a g e
Portfolio
Turnover
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
10000000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
HDFC
HDFC Income Fund- Growth
Objective
94 | P a g e
Aims at providing capital appreciation through investments predominantly in equity
oriented securities
95 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Dec 24, 1994
Face Value
(Rs/Unit)
10
Fund Manager
Prashant Jain
SIP
STP
SWP
Expense ratio(%)
1.82
Portfolio
Turnover 96 | P a g e
Ratio(%)
56.62
Last Dividend
Declared
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
49999999 then Entry
load is 2.25%. &
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
Exit Load is 0%.
97 | P a g e
HDFC HI Short Term
Objective
Seeks to generate income with a view to maximize income while maintaining the
optimum balance of Yield , Safety and Liquidity.
98 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Feb 6, 2002
Face Value
(Rs/Unit)
10
Fund Manager
Shabbir Kapasi
SIP
STP
SWP
Expense ratio(%)
0.40
Portfolio
Turnover 99 | P a g e
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
1000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
100 | P a g e
HDFC Tax Saver Scheme
Objective
The fund plans to provide tax benefits along with capital appreciation
101 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Mar 31, 1996
Face Value
(Rs/Unit)
10
Fund Manager
Vinay R Kulkarni
SIP
STP
SWP
Expense ratio(%)
2.02
Portfolio
Turnover 102 | P a g e
Ratio(%)
50.91
Last Dividend
Declared
210 % as on Apr 4,
2000
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
49999999 then Entry
load is 2.25%. &
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
Exit Load is 0%.
103 | P a g e
HDFC Monthly Income Plan - Short Term
Objective
104 | P a g e
The primary objective of the Scheme is to generate regular returns through
investment primarily in Debt and Money Market Instruments. The Secondary
objective of the scheme is to generate long term capital appreciation by investing a
portion of the Scheme’s assets in equity and equity related instruments.
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Dec 8, 2003
Face Value
(Rs/Unit)
10
Fund Manager
Shobhit Mehrotra
Vinay R Kulkarni 105 | P a g e
SIP
SWP
Expense ratio(%)
2.13
Portfolio
Turnover
Ratio(%)
NA
HDFC Liquid
Objective
The primary objective of the Scheme is to enhance income consistent with a high
level of liquidity, through a judicious portfolio mix comprising of money market
and debt instruments.
106 | P a g e
Type of Scheme
Open Ended
Nature
Short Term
Debt
Option
Growth
Inception Date
Oct 17, 2000
Face Value
(Rs/Unit)
10
Fund Manager
Shobhit Mehrotra
SIP
STP
SWP
Expense ratio(%)
0.55
Portfolio 107 | P a g e
Turnover
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
10000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
108 | P a g e
UTI
UTI Equity Fund
Objective
The principal investment objective is to provide long term capital appreciation
through investment in the securities market in India.
109 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Apr 20, 1992
Face Value
(Rs/Unit)
10
Fund Manager
Anoop Bhaskar
SIP
STP
SWP
Expense Ratio(%)
110 | P a g e
1.54
Portfolio
Ratio(%)
51.31
111 | P a g e
Last Dividend
Declared
20 % as on Jun 10,
2005
Minimum
Investment (Rs)
2000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
19999999 then Entry
load is 2.25%. and
Amount greater than
20000000 then Entry
load is 0%.
Exit Load
If redeemed bet. 0
Days to 180 Days;
and Amount Bet. 0 to
19999999 then Exit
load is 1%. If
redeemed bet. 0 Days
to 180 Days; and
Amount greater than
20000000 then Exit
load is 0.5%.
112 | P a g e
UTI Short Term- Income Regular
Objective
113 | P a g e
The scheme aims to generate steady and reasonable income, with low risk and high
level of liquidity from a portfolio of money market securities and high quality debt.
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Aug 27, 2007
Face Value
(Rs/Unit)
10
Fund Manager
Amit Jain 114 | P a g e
SIP
STP
SWP
Expense ratio(%)
0.67
Portfolio
Turnover
Ratio(%)
NA
Objective
Aims at providing investors the opportunity to participate in the reasonable growth
in the value of investments in equities and equity - linked securities, over a period
of time, in addition to tax benefits
115 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Dec 15, 1999
Face Value
(Rs/Unit)
10
Fund Manager
Swati Kulkarni
SIP
STP
SWP
Expense ratio(%)
116 | P a g e
2.33
Portfolio
Ratio(%)
38.39
Last Dividend
Declared
20 % as on Nov 30,
2004
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
19999999 then Entry
load is 2.25%. and
Amount greater than
20000000 then Entry
load is 0%.
Exit Load
Exit Load is 0%.
117 | P a g e
UTI Monthly Income Scheme
Objective
The scheme aims at distributing income periodically.
118 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Oct 11, 2002
Face Value
(Rs/Unit)
10
Fund Manager
Amandeep Chopra
SIP
STP
SWP
Expense ratio(%)
119 | P a g e
1.40
Portfolio
Ratio(%)
32.31
Last Dividend
Declared
NA
Minimum
Investment (Rs)
1000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
If redeemed bet. 0
Days to 180 Days;
and Amount Bet. 0 to
999999 then Exit
load is 0.5%. and
Amount greater than
1000000 then Exit
load is 0%.
120 | P a g e
UTI Liquid Cash Instrument
Objective
The scheme aims to generate steady and reasonable income, with low risk and high
level of liquidity from a portfolio of money market securities and high quality debt.
121 | P a g e
Type of Scheme
Open Ended
Nature
Short Term Debt
Option
Growth
Inception Date
Jun 24, 2003
Face Value
(Rs/Unit)
1000
Fund Manager
Amandeep Chopra
SIP
STP
SWP
Expense ratio(%)
122 | P a g e
0.24
Portfolio
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
100000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
ICICI Prudential
123 | P a g e
ICICI Prudential Dynamic Plan- Growth
Objective
Seeks to generate capital appreciation by actively investing in equity and equity
related securities. For defensive considerations, the Scheme may invest in debt,
money market instruments and derivatives.
124 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Oct 18, 2002
Face Value
(Rs/Unit)
10
Fund Manager
S Naren, Amit
Mehta .
SIP
STP
SWP
125 | P a g e
Expense ratio(%)
1.90
Turnover
Ratio(%)
225
126 | P a g e
Last Dividend
Declared
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
49999999 then Entry
load is 2.25%. and
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
If redeemed bet. 0
Months to 6 Months;
and Amount Bet. 0 to
49999999 then Exit
load is 1%. If
redeemed bet. 6
Months to 12
Months; and Amount
Bet. 0 to 49999999
then Exit load is
0.5%. and Amount
greater than
50000000 then Exit
load is 0%.
127 | P a g e
ICICI Prudential Short Term
Objective
Aims to generate income through investments in a basket of debt and money
market instruments with a view to provide reasonable returns with low interest
risks.
128 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Feb 23, 2003
Face Value
(Rs/Unit)
10
Fund Manager
Chaitanya Pande,
Amit Mehta .
SIP
STP
SWP
129 | P a g e
Expense Ratio(%)
0.80
Turnover
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
25000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
Objective
130 | P a g e
The scheme seeks to generate long term capital appreciation from a portfolio that is
Invested predominantly in equity and equity related securities
131 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Aug 9, 1999
Face Value
(Rs/Unit)
10
Fund Manager
S Naren, Amit
Mehta
SIP
STP
SWP
132 | P a g e
Expense ratio(%)
2.11
Turnover
Ratio(%)
187
Last Dividend
Declared
NA
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
49999999 then Entry
load is 2.25%. and
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
Exit Load is 0%.
133 | P a g e
ICICI Prudential Monthly Income Plan
Objective
The primary investment objective of the scheme is to generate regular income and
secondary objective is to generate capital appreciation.
134 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Oct 14, 2000
Face Value
(Rs/Unit)
10
Fund Manager
Prashant Kothari,
Rahul Goswami,
Amit Mehta
SIP
STP
SWP
135 | P a g e
Expense ratio(%)
1.95
Portfolio
Turnover
Ratio(%)
42
Last Dividend
Declared
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
If redeemed bet. 0
Months to 6 Months;
and Amount Bet. 0 to
1000000 then Exit
load is 0.5%. and
Amount greater than
1000001 then Exit
load is 0%.
136 | P a g e
ICICI Prudential Liquid
Objective
Aims to generate steady and consistent returns from a basket of high quality liquid
debt instruments.
137 | P a g e
Type of Scheme
Open Ended
Nature
Short Term
Debt
Option
Growth
Inception Date
Feb 23, 2003
Face Value
(Rs/Unit)
10
Fund Manager
Chaitanya Pande,
Amit Mehta
SIP
STP
SWP
138 | P a g e
Expense ratio(%)
0.25
Portfolio
Turnover
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
10000000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
Reliance
139 | P a g e
Reliance Growth
Objective
Seeks to provide Long Term Capital Appreciation
140 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Oct 7, 1995
Face Value
(Rs/Unit)
10
Fund Manager
Sunil Singhania
SIP
STP
SWP
Expense ratio(%)
141 | P a g e
1.81
Portfolio
Ratio(%)
50
142 | P a g e
Last Dividend
Declared
NA
Minimum
Investment (Rs)
5000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
19999999 then Entry
load is 2.25%. and
Amount Bet.
20000000 to
49999999 then Entry
load is 1.25%. and
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
If redeemed bet. 0
Year to 1 Year; and
Amount Bet. 0 to
49999999 then Exit
load is 1%. and
Amount greater than
50000000 then Exit
load is 0%.
143 | P a g e
Reliance Short Term
Objective
It aims to generate stable returns for investors with a short-term investment horizon
by investing in fixed income securities of a short-term maturity.
144 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Dec 17, 2002
Face Value
(Rs/Unit)
10
Fund Manager
Prashant Pimple
SIP
STP
SWP
Expense ratio(%)
145 | P a g e
0.65
Portfolio
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
50000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
147 | P a g e
Type of Scheme
Open Ended
Nature
Equity
Option
Growth
Inception Date
Aug 23, 2005
Face Value
(Rs/Unit)
10
Fund Manager
Ashwani Kumar
SIP
STP
SWP
Expense ratio(%)
148 | P a g e
1.89
Portfolio
Ratio(%)
98
Last Dividend
Declared
NA
Minimum
Investment (Rs)
500
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Amount Bet. 0 to
19999999 then Entry
load is 2.25%. and
Amount Bet.
20000000 to
49999999 then Entry
load is 1.25%. and
Amount greater than
50000000 then Entry
load is 0%.
Exit Load
Exit Load is 0%.
149 | P a g e
Reliance Monthly Income Plan
Objective
The primary objective of the scheme is to generate regular income in order to make
regular dividend payments to unit holders with the secondary objective of growth in
capital
150 | P a g e
Type of Scheme
Open Ended
Nature
Debt
Option
Growth
Inception Date
Dec 29, 2003
Face Value
(Rs/Unit)
10
Fund Manager
Ashwani Kumar
Prashant Pimple
SIP
STP
SWP
151 | P a g e
Expense ratio(%)
1.99
Turnover
Ratio(%)
NA
152 | P a g e
Last Dividend
Declared
NA
Minimum
Investment (Rs)
10000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
0 Months to 3
Months; and Amount
Bet. 0 to 2500000
then Exit load is
0.75%. If redeemed
bet. 3 Months to 6
Months; and Amount
Bet. 0 to 2500000
then Exit load is
0.6%. If redeemed
bet. 6 Months to 9
Months; and Amount
Bet. 0 to 2500000
then Exit load is
0.5%. If redeemed
bet. 9 Months to 12
Months; and Amount
Bet. 0 to 2500000
then Exit load is
0.25%. If redeemed
bet. 0 Days to 7
Days; and Amount
greater than 2500001
153 | P a g e
Reliance Liquid Cash
Objective
To generate optimal returns consistent with moderate levels of risk and high
liquidity.
154 | P a g e
Type of Scheme
Open Ended
Nature
Short Term
Debt
Option
Growth
Inception Date
Dec 4, 2001
Face Value
(Rs/Unit)
10
Fund Manager
Amit Tripathy
SIP
STP
SWP
155 | P a g e
Expense ratio(%)
0.40
Turnover
Ratio(%)
NA
Last Dividend
Declared
NA
Minimum
Investment (Rs)
25000
Purchase
Redemptions
Daily
NAV Calculation
Daily
Entry Load
Entry Load is 0%.
Exit Load
Exit Load is 0%.
156 | P a g e
References:
• http://amfiindia.com
• http://mutualfundindia.com
• http://valueresearchonline.com
• http://investopedia.com
• AMFI Workbook
• TREYNOR J.: How to Rate Management of Investment Funds,
Harvard Business Review, 1965/1
157 | P a g e
158 | P a g e