Anda di halaman 1dari 82

CHAPTER-1

Page | 1

INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who share common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

Page | 2

EXECUTIVE SUMMARY

The project has been carried out at Share Khan Ltd with the title Comparative Analysis of Selected Mutual Fund. The main function of having analysis of Mutual fund is to pinpoint the strong points and weaknesses of mutual fund schemes For this I have taken the following parameters: Analyzing Mutual Fund using:Beta: - By comparing Mutual Fund on the basis of beta we come to know how volatile a particular Mutual Fund as related to stock market . Standard Deviation: - The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return. Sharpe Ratio: - Sharpe ratio is used to measure risk-adjusted performance. It tells us whether a portfolios return are due to smart investment decision or a result of excess risk. The schemes selected for project are: 1. Equity Diversified 2. Tax saver funds Thus concluded from the project that from the above schemes tax saver schemes has a better performance than the equity funds as the risk observed in tax saver funds are less than the equity funds risk and they are giving comparatively better returns than the equity funds.

Page | 3

OBJECTIVES OF STUDY

To measure the risk & return associated with the mutual funds. To compare the mutual fund schemes on the basis of various parameters.

Page | 4

RESEARCH METHODOLOGY

Research Methodology is a very organized and systematic medium through which a particular case or problem can be solved. It is analytical, descriptive and quantitative research where the comparison between the different mutual fund scheme is made on the basis of risk, volatility and return. For data collection purpose the secondary source was used like mutual fund factsheet, Books and websites.

Methodology Used: Descriptive Analytical Research

Under this type the researcher has to use the facts and information already available and analyze them to make evaluation of the market.

In analytical research the researcher has to use the facts already available, and analyze these to make the critical evaluation data of the material.

Data has been collected from the Fact sheet of the various mutual fund schemes and used those datas for the research. In fact sheet past returns were given of different funds.

Data also included value of risk measuring instruments like Standard Deviation, Beta etc.

Comparisons of mutual funds are done by using following measures: Beta Standard Deviation Sharpe Index
Page | 5

Beta
Beta is useful statistical measure, which determines the volatility, or risk, of a fund in comparison to that of its index or benchmark. A fund with a beta very close to 1 means the fund's performance closely matches the index or benchmark. A beta greater than 1 indicates greater volatility than the overall market, and a beta less than 1 indicates less volatility than the benchmark.

Standard Deviation
The standard deviation essentially reports a fund's volatility, which indicates the tendency of the returns to rise or fall drastically in a short period of time. A security that is volatile is also considered higher risk because its performance may change quickly in either direction at any moment. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return.

Sharpe Index
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where, Si is standard deviation of the fund. While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.
Page | 6

SCOPE OF THE STUDY

The funds are selected to which Share khan is advisor. The Schemes were categorized and selected on evaluating their performance and relative risk. The scope of the project is mainly concentrated on the different categories of the mutual funds such as equity schemes and equity linked savings schemes etc.

LIMITATIONS OF THE STUDY

The project is unable to analyze each and every scheme of mutual funds. All the datas were not available in the websites. Selection of the schemes for the study is also a very difficult task because of the wide variety of schemes. Time is the critical factor limiting the study.

Page | 7

Chapter 2:

Page | 8

Literature Review CONCEPTUAL STUDY


Since 1990 there has been a tremendous growth in the investment in international mutual funds. This growth is likely to continue as domestic stock market cools down and more U.S. investors seek higher returns as well as the diversification benefits of foreign assets. Investors are also attracted to international funds in the belief that such funds earn abnormally high returns because of the previous relative inefficiency in those markets. This study examines the annual riskadjusted returns using Sharpes Index for ten portfolios of international mutual funds for the period September 2000 through September 2006. The international funds were analyzed by combining the funds into individual portfolios based on sector, geographic and company size. The benchmarks for comparison were the U.S. mutual fund performance reported by Morningstar. The risk-adjusted returns were then determined and compared to each other and to the U.S. market. During this period, nine out of ten of the international mutual fund portfolios outperformed the U.S. market. The portfolio that contained all International Mutual Funds (IMF) significantly outperformed on a risk-adjusted basis the fund that was made up of all of the U.S. stock mutual funds, (All U.S. Stock Funds- USSF). Additionally, the Foreign Small Value (FSV) portfolio, Foreign Small Growth (FSG) portfolio, Emerging Markets (EM) portfolio, Latin America (LA) portfolio, and the Pacific Asia without Japan (PA-J) portfolio all had average annual returns (not adjusted for risk) that exceeded USMFs returns by more than 10 percent.

In the aftermath of the 1997 Asian crisis and the 1998 Russian debacle, investors began to question the benefits of international diversification and in particular investing in emerging markets. After a short period of lower investing rates, investors returned strongly to international mutual fund investments. The market responded. As of 2005, almost one-half of the total net asset value of mutual funds is in non-U.S. funds. Most economists believe that the recent trend for investors to increase the holding of international stocks and mutual funds will continue. There are of course advantages and also unique risks for investors to include non-U.S. mutual funds in their portfolios. Many of the best-known brands in the U.S. are actually owned by foreign firms. The majority of these firms are focused on maximizing shareholder value. There are a large number of firms, and of course their stocks domiciled outside of the U.S., that have
Page | 9

extraordinary growth and earning potential. New technologies, advancements in transportation, communication and political changes have created a global economy where currencies are merging and borders are more transparent. With the globalization of the world, competition will be more formidable, which will provide more equity opportunities. Companies outside the U.S. dominate major industries in the world. Worldwide economic expansion has sparked growth of many foreign companies making them increasingly attractive with large cash holdings and aggressive expansion plans. Investing in international markets provides greater investment diversification that may reduce the overall portfolio risk. Markets of the world are not perfectly correlated and do not move in lockstep. A downturn in one countrys economy may be offset by a rise in another.

Including non-U.S. stocks in domestic portfolios does result in an increase in the standard deviation of the portfolio. Though, the higher risk is usually associated with a higher portfolio return. There is evidence that foreign markets are more volatile and emerging markets are especially instable. However, volatility measures upward movement as well as downward. Foreign governments can change quickly and with the change in power there can be a disruption in the business environment. Currency risk is a concern. Changes in the exchange rate with respect to the dollar can impact valuations and returns. Evaluation of the performance of mutual fund managers is a topic of considerable interest to practitioners and academics alike. To date, most mutual fund performance evaluations have been fairly simplistic: how has a fund performed relative to "the market"? The Standard & Poor's 500 Stock Index is usually used as a proxy for the market, despite the fact that it accounts for only about 70% of the capitalization of the U.S. stock market and is dominated by corporations with gigantic market capitalizations. The decision is normally based on historical returns without any further analysis of relevant risks. When risk is considered, if at all, it is generally in the context of comparing the return of a fund to its peer group; for example, a small cap growth fund is compared with other small cap growth funds or relevant Exchange Traded Funds (such as I Shares Russell 2000 growth index, IWO or I Shares S&P Small Cap 600/BARRA Growth (IJT)) or some official benchmark index. This method also ignores extremely different risk/return profiles of funds. Sharpes Reward to Variability ration (R/V), a useful measure of performance is utilized in this empirical study of mutual funds. The numerator shows the difference between
Page | 10

the funds average annual return and the risk free interest rate; it is thus the reward provided for investor for bearing risk. The denominator measures the standard deviation of the annual rate of return; it shows the amount of risk actually borne. The ratio is thus the reward per unit of variability and the purpose of this study is to quantify this reward to variability ratio, which is also known as risk-adjusted performance, of international mutual funds relative to U.S. mutual funds for the period 2000 to 2005. This study examines the R/V ratios for ten portfolios made up of foreign mutual funds. The international portfolios were formed by combining funds into individual portfolios based on sector, geographics and company size. The benchmark for comparison was the U.S. mutual fund performance reported by Morningstar

Investors have a large array of mutual funds to select from to form their investment portfolio. Mutual fund offerings have grown in numbers and many funds are very specialized. There are over 10,000 mutual funds; the majority concentrates on specific industries, firm size, geography or growth expectations (risk). Investors may not fully take advantage of possible portfolio risk reduction and higher returns if they exclude international mutual funds from their portfolio. This study shows that performance can be evaluated with a simple, yet theoretically meaningful measure that considers both average return and risk. During the study period, foreign mutual funds appear to have more volatility and higher risk but have outperformed U.S. mutual funds in nominal and risk-adjusted terms. Predicting in advance which mutual funds would outperform is difficult and the cost of selecting the "wrong" mutual fund is very high. Investors have to keep in mind that sound investment decision-making combines the science of quantitative analysis with the art of qualitative judgment and reason.

Literature on mutual fund performance evaluation is enormous. A few research studies that have influenced the preparation of this paper substantially are discussed in this section. Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance .Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new predictor of mutual fund performance, one that differs from virtually all those used previously by incorporating the volatility of a fund's return in a simple yet meaning full manner .Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensens alpha) that estimates how much a managers forecasting ability contributes to funds returns. As indicated
Page | 11

by Stat man (2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the return of the benchmark index, where the portfolio is leveraged to have the benchmark indexs standard deviation.S.Narayan Rao, etc. al., evaluated performance of Indian mutual funds in a bear market through relative performance index, risk-return analysis, Treynors ratio, Sharpes ratio, Sharpes measure , Jensens measure, and Famas measure. The study used 269 openended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of performance measures suggest that most of mutual fund schemes in the sample of 58were able to satisfy investors expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk. Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian mutual funds. This paper uses a technique called conditional performance evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper measures the performance of various mutual funds with both unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton model. The effect of incorporating lagged information variables into the evaluation of mutual fund managers performance is examined in the Indian context. The results suggest that the use of conditioning lagged information variables improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients. Mishra, et al.,(2002) measured mutual fund performance using lower partial moment. In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial moment is measured by taking into account only those states in which return is below a pre-specified target rate like risk-free rate. According to Fernandez (2003) evaluated index fund implementation in India. In this paper, tracking error of index funds in India is measured .The consistency and level of tracking errors obtained by some well-run index fund suggests that it is possible to attain low levels of tracking error under Indian conditions. At the same time, there do seem to be periods where certain index funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multi-criteria methodology and applied it to the Greek market of equity mutual funds. The methodology is based on the combination of discrete and continuous multi-criteria decision aid methods for mutual fund selection and composition. UTADIS multi-criteria decision aid method is employed in order to develop mutual funds
Page | 12

performance models. Goal programming model is employed to determine proportion of selected mutual funds in the final portfolios. According to Antonella Basso and Stefanie Funari of Dipartimento di Matematica Applicata B.de Finetti, Universit di Trieste, Piazzale Europa, 1, 34127 Trieste, Italy and Dipartimento di Matematica Applicata, Universit Ca' Foscari di Venezia, Dorsoduro 3825/E, 30123 Venezia, Italy respectively discussed in this paper about A data envelopment analysis approach to measure the mutual fund performance. In this paper they present a model which can be used to evaluate the performance of mutual funds. This model applies an operational research methodology, called data envelopment analysis (DEA), which allows to measure the relative efficiency of decision making units. This approach allows defining mutual fund performance indexes that can take into account several inputs and thus consider different risk measures and, above all, the investment costs (subscription costs and redemption fees). According to Treynor and Mazuy (1966). Jensen (1968). Kon and Jen (1979). Henriksson and Merton (1981), Chang and Lewellen (1984), Henriksson (1984), and Jagannathan and Korajczyk (1986). to name but a few. These studies have generally concluded that mutual fund managed can not consistently time the market or select under-priced securities. This has led to the conclusion that long-term individual mutual fund performance can best be described as random. Very few studies have attempted to explain the flow of money into and out of mutual funds. The remaining pages of this chapter are devoted to a review of the studies related to this topic. According to Harry Markowitz (1952) a theory about how investors should select securities for their investment portfolio given beliefs about future performance. He claims that rational investors consider higher expected return as good and high variability of those returns as bad. From this simple construct, he says that the decision rule should be to diversify among all securities, securities which give the maximum expected returns. His rule recommends the portfolio with the highest return is not the one with the lowest variance of returns and that there is a rate at which an investor can increase return by increasing variance. This is the cornerstone of portfolio theory as we know it. His portfolio theory shows that an investor has a choice of combinations of return and variance depending on the percentage of wealth invested in various combinations of risky assets. From this, he shows that a plot of all possible combinations of wealth divided among possible combinations of securities will result in a circle. This circle
Page | 13

mill be plotted on an xy grid with return planed on one axis and risk, as measured by variance on the other axis. The notion that investors desire to maximize return for a given risk gives rise to some combinations of securities dominating others in terms of risk and return characteristic. These dominant portfolios are said to lie on the "efficient frontier" When an asset with no risk is added as an investment option, it shows that investors can mvtde their wealth between the risk free asset and a portfolio of the risky assets. According to William Sharpe (1964)' and John Lintner (1965) show that the theory implies that the rates of return from efficient combinations of risky assets move together perfectly (will be perfectly correlated). This could result from their common dependence on general economic activity. If this is so, diversification among risky assets enables investors to escape from all risks except the risk resulting from changes in economic activity. Therefore, only the responsiveness of an asset return to changes in economic activity is relevant in assessing its risk. Investor only needs to be concerned with systematic risk [beta], not the total risk proposed by Markowitz. Thus gave birth to the "Security Market Line" (SML). The difference between the Capital Market Line (CML) and SML is the measure of risk used for the horizontal axis. The CML uses the variance of returns, whereas the SML uses the systematic risk termed beta. Beta 1s defined as the covariance between a security (or portfolio of securities) and the market as a whole, divided by the variance of the market. The market as a whole is considered the point of tangency between the SML and the efficient frontier this is the foundation for the Capital Asset Pricing Model (CAPM). According to Swaminnthan and Bhaskaran (1994)' made on attempt to focus on the implications of individual investor behavior for the pricing of close-ended funds and small firms. Specifically, they developed a two security, noisy rational expectations model of closed-end funds and compare its predictions to that of a model of investor sentiment. The rational model shows that the estimation errors of rational but imperfectly informed small, individual investors can give rise to average discounts. However, discounts cannot track time variation in expected returns induced by mean reversion in small investor estimation errors. In contrast, in a model of investor sentiment, discounts can track time variation in expected returns induced by mean reversion is small investor sentiment. This implies that discounts can forecast stock returns either if they are a proxy of investor sentiment or if they are a proxy of some fundamental factor. Their empirical tests examine the time series implications of the two models.
Page | 14

The results indicate that discounts forecast small firm returns. They also show that the forecasting power of discounts is not related to that of any known fundamental forecasting variable. This evidence provides support for the investor sentiment explanation of the pricing of closed-end Funds and small firms, and suggests that there may be sentiment related variation in small firm expected returns.

Page | 15

EVOLUTION OF STOCK BROKERAGE

INTRODUCTION
Stock exchanges to some extent play an important role as indicators, reflecting the performance of the countrys economic state of health. Stock market is a place where securities are bought and sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are determined by the demand and supply of stocks at a given time. Stock brokers are the ones who buys and sells securities on behalf of individuals and institutions for some commission .The Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the operations of stock exchanges, banks and other financial institutions .The past performances in the capital markets especially the securities scam by Hasrshad Mehta has led to tightening of the operations by SEBI. In addition the international trading and investment exposure has made it imperative to better operational efficiency. With the view to improve, discipline and bring greater transparency in this sector, constant efforts are being made and to a certain extent improvements have been made.

HISTORY OF THE STOCK BROKING INDUSTRY


Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly200 years ago. The earliest records of security dealings in India are meager and obscure. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60.In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in
Page | 16

Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as "The Stock Exchange"). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in1899. Thus, the Stock Exchange at Bombay was consolidated. Thus in the same way, gradually with the passage of time number of exchanges were increased and at currently it reached to the figure of 24 stock exchanges

Development
An important early event in the development of the stock market in India was the formation of the Native Share and Stock Brokers Association at Bombay in 1875, the precursor of the present-day Bombay Stock Exchange. This was followed by the formation of associations /exchanges in Ahmedabad (1894), Calcutta (1908), and Madras (1937). IN addition, a large number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion during depressing times subsequently. In order to check such aberrations and promote a more orderly development of the stock market, the central government introduced a legislation called the Securities Contracts (Regulation) Act, 1956. Under this legislation, it is mandatory on the part of stock exchanges to seek government recognition. As of January 2002 there were23 stock exchanges recognized by the central Government. They are located at Ahemdabad, Bangalore, Baroda, Bhubaneswar, Calcutta, Chennai,(the Madras stock Exchanges ), Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Indore, Jaipur,Kanpur, Ludhiana, Mangalore, Mumbai(the National Stock Exchange or NSE),Mumbai (The Stock Exchange), popularly called the Bombay Stock Exchange, Mumbai (OTC Exchange of India), Mumbai (The Inter-connected Stock Exchange of India), Patna, Pune, and Rajkot. Of course, the principle bourses are the National Stock Exchange and The Bombay Stock Exchange, accounting for the bulk of the business done on the Indian stock market .While the recognized stock exchanges have been accorded a privileged position, they are subject to governmental supervision and control. The rules of a recognized stock exchanges relating to the managerial powers of the governing body, admission, suspension, expulsion, and re-admission of its members, appointment of authorized representatives and clerks, so on and so forth have to be approved by the government. These rules can be amended, varied or rescinded only with the prior approval of the government.

Page | 17

BSE (BOMBAY STOCK EXCHANGE) The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875as "The

Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.The Exchange, while providing an efficient and transparent market for trading insecurities, debt and derivatives upholds the interests of the investors and ensures redressal of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education program and making available to them necessary informative inputs. A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer. NSE (NATIONAL STOCK EXCHANGE) NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It started operations in June 1994, with trading on the Wholesale Debt Market Segment. Subsequently it launched the Capital Market Segment in November 1994 as a trading platform for equities and the Futures and Options Segment in June 2000 for various derivative instruments.NSE has been able to take the stock market to the doorsteps of the investors. The technology has been harnessed to deliver the services to the investors across the country at the cheapest possible cost. It provides a nation-wide, screen-based, automated trading system, with a high degree of transparency and equal access to investors irrespective of geographical location. The high level of information dissemination through on-line system has helped in integrating retail investors on a nation-wide basis. The standards set by the exchange in terms of market
Page | 18

practices, Products, technology and service standards have become industry benchmarks and are being replicated by other market participants. Within a very short span of time, NSE has been able to achieve all the objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian Capital Markets to its present form. The Indian Capital Markets are a far cry from what they used to be a decade ago in terms of market practices, infrastructure, technology, risk management, clearing and settlement and investor service.

Page | 19

MUTUAL FUND CONCEPT

Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instrument such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well diversified portfolio of equities, bonds and other securities. Each share holder participants in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investment 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 proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

Page | 20

Evolution of Mutual Funds

The first mutual funds were established in Europe. One researcher credits a Dutch merchant with creating the first mutual fund in 1774.] The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London stock exchange. Mutual funds were introduced into the United States in the 1890s. They became popular during the 1920s. These early funds were generally of the closed-end type with a fixed number of shares which often traded at prices above the value of the portfolio. The first open-end mutual fund with redeemable shares was established on March 21, 1924. This fund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However, closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929, open-end funds accounted for only 5% of the industry's $27 billion in total assets. After the stock market crash of 1929, Congress passed a series of acts regulating the securities markets in general and mutual funds in particular. The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the Securities and Exchange Commission and that they provide prospective investors with a prospectus that discloses essential facts about the investment. The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual funds, report regularly to their investors; this act also created the Securities and Exchange Commission, which is the principal regulator of mutual funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds, while the Investment Company Act of 1940 governs their structure. When confidence in the stock market returned in the 1950s, the mutual fund industry began to grow again. By 1970, there were approximately 360 funds with $48 billion in assets. The introduction of money market funds in the high interest rate environment of the late 1970s boosted industry growth dramatically. The first retail index fund, First Index Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the

Page | 21

Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100 billion in assets as of January 31, 2011. Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bull market for both stocks and bonds, new product introductions (including tax-exempt bond, sector, international and target date funds) and wider distribution of fund shares. Among the new distribution channels were retirement plans. Mutual funds are now the preferred investment option in certain types of fast-growing retirement plans, specifically in 401(k) and other defined contribution plans and in individual retirement accounts (IRAs), all of which surged in popularity in the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of 2008. In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of fund shareholders. Some fund management companies allowed favored investors to engage in late trading, which is illegal, or market timing, which is a practice prohibited by fund policy. The scandal was initially discovered by then-New York State Attorney General Eliot Spitzer and resulted in significantly increased regulation of the industry. At the end of 2010, there were over 15,000 mutual funds of all types in the United States with combined assets of $13.1 trillion, according to the Investment Company Institute (ICI), a national trade association of investment companies in the United States. The ICI reports that worldwide mutual fund assets were $24.7 trillion on the same date. Mutual funds play an important role in U.S. household finances. At the end of 2010, they accounted for 23% of household financial assets. Their role in retirement planning is particularly significant. Roughly half of assets in 401(k) plans and individual retirement accounts were invested in mutual funds.

Page | 22

MUTUAL FUNDS IN INDIA


The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market. Then a host of other government-controlled Indian financial companies came up with their own funds. These included State Bank of India, Canara Bank, and Punjab National Bank. This market was made open to private players in 1993, as a result of the historic constitutional amendments brought forward by the then Congress-led government under the existing regime of Liberalization, Privatization and Globalization (LPG). The first private sector fund to operate in India was Kothari Pioneer, which later merged with Franklin Templeton.

History of Mutual Funds in India


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. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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 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.
Page | 23

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 Canara 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) 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. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. 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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. Consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. STRUCTURE OF MUTUAL FUNDS Every Mutual fund will comprise a sponsor, trustee, AMC, custodian and registrar, and is regulated by SEBI .The structure of mutual fund is discussed in detail.
Page | 24

Sponsor
The company that sets up the MF is called the sponsor. It is typically a financial institution, bank, investment house or even an individual that contributes at least 40 per cent to the net worth of the asset management company (AMC) .The sponsor initiates the fund's activities by appointing the trustees, the AMC and custodians.

Trustee
The trustee monitors the operations of the various schemes and safeguards investor interests. The trustees can also review the AMCs operations and transactions, including contracts with various agencies such as custodians and registrars.

Asset management company


.The AMC seeks to multiply the invested money in the fund in line with the scheme's investment objective. It should have a net worth of at least Rs 10 crore. The AMC is a key player in the MF game and does everything to make the most of your investment. It launches new schemes, manages them, and employs the fund management team, including the fund manager. The sponsor appoints the AMC and the trustees review its operations.

Custodian .A Mutual funds needs to store and record transactions, for which it relies on banks or financial institutions that are designated custodians. The custodian maintains custody of the securities in which the scheme invests (as distinct from the registrar who tracks the investment by investors in the scheme).The custodian also follows up on various corporate actions, such as rights, bonus and dividends declared by investor companies.

Page | 25

R&t agents
Registrars and transfer agents (R&T agents) handle all paperwork involving investor servicing. Their services include processing initial public offerings, dispatch of certificates, account statements, annual reports and dividend warrants.

TYPES OF MUTUAL FUNDS

Page | 26

BY STRUCTURE
a) Open Ended Schemes:

As the name implies the size of the scheme (Fund) is open i.e., not specified or pre-determined. Entry to the fund is always open to the investor who can subscribe at any time. Such fund stands ready to buy or sell its securities at any time. It implies that the capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the fund at announced rates .Openended schemes have comparatively better liquidity despite the fact that these are not listed. The reason is that investor can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value (NAV). No minute-to-minute fluctuations in rates haunt the investors .The portfolio mix of such schemes has to be investments, which are actively traded in the market. Otherwise, it will not be possible to calculate NAV. This is the reason that generally open-ended schemes are Equity Based .Moreover, desiring frequently traded securities, open-ended schemes hardly have in their portfolio shares of comparatively new and smaller companies since these are not generally traded. In such funds, option to reinvest its dividend is also available. Since there is always a possibility of withdrawals, the management of such funds becomes more tedious as managers have to work from crisis to crisis. Crisis may be on two fronts, one is, that unexpected withdrawals require funds to maintain a high level of cash available every time implying thereby idle cash. Fund managers have to face questions like what to sell. He could very well have to sell his most liquid assets. Second, by virtue of this situation such funds may fail to grab favorable opportunities. Further, to match quick cash payments, funds cannot have matching realization from their portfolio due to intricacies of the stock market. Thus, success of the open-ended schemes to a great extent depends on the efficiency of the capital market. The holders of the shares in the fund can resell them to issuing Mutual Fund Company at any time they receive in turn the net asset value (NAV) of the shares at the time of resale. Such mutual funds companies place their funds in the secondary securities market. They do not participate in new issue markets to pension funds or life insurance
Page | 27

investment companies. Can sell an unlimited number of shares and thus keep going larger. The open end mutual funds by or sell their own share. These companies ell new shares at NAV plus a loading or management fee and redeem scheme at NAV. UTIS Unit scheme, 1964 and CANCIGO and CANGICT are few examples of such funds. The minimum corpus for and openended fund is fifty crores a per SEBI guidelines.

b)

Close Ended Schemes:

Such schemes have a definite period after which their shares/units can be redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e., their corpus normally does not change throughout its life period. Close ended fund units trade among the investors in the secondary market since these are to be quoted on the stock exchanges. Their price is determined on the basis of demand and supply in the market. Their liquidity depends on the efficiency and understanding of the engage broker. Their price is free to deviate from NAV, i.e., there is every possibility that the market price may be above or below its NAV. If one takes into account the issue expenses, conceptually close ended fund units cannot be traded at a premium or over NAV because the price of a package of investments, i.e., cannot exceed the sum of the prices of the investments constituting the package. Whatever premium exists that may exist only on account of speculative activities. In India as per SEBI (MF) Regulations every mutual fund is free to launch any or both types of schemes. Close ended mutual funds are different form the openended mutual fund. Close-ended and investment company has definite target amount for the funds and cannot sell more shares after its initial offering. Its growth in terms of numbers is limited. Its shares are issued like together companys new issue listed and quoted at stock exchange. That minimum corpus for Close-ended fund is Rs20 crores. Close-ended funds changed funds the secondary market acquisition of corporate securities. There is no necessary relationship between the price of close-ended mutual fund share and its NAV. Its shares may les per the current NAV per share, per more,(at a premium) as per less(at discount). Investors doubts about the abilities of the funds management lack of sales effort (brokers earn less commission of close ended schemes then open ended schemes) risk ness of the fund.

c)

Interval Funds:

Page | 28

Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

BY INVESTMENT OBJECTIVE:

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 for investors having a long-term outlook seeking growth over a period of time.

Income Funds:

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.
Balanced Funds:

The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market.

Page | 29

These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

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.

No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.

OTHER SCHEMES:
Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in Specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000. Industry Specific Schemes: 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. Index Schemes: Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. Sectoral Schemes:
Page | 30

Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

BENEFITS OF MUTUAL FUND INVESTMENT


Professional Management:

Mutual Funds provide the services of experienced and skilled professionals backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
Diversification:

Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
Convenient Administration:

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. 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.
Page | 31

Transparency: You get regular information on the value of your investment in addition to disclosure on the

specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.
Flexibility: Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
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.
Choice of Schemes:

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

LIMITATION OF MUTUAL FUND INVESTMENT


No Control over Cost:

An Investor in mutual fund has no control over the overall costs of investing. He pays an investment management fee (which is a percentage of his investments) as long as he remains invested in fund, whether the fund value is rising or declining. He also has to pay fund distribution costs, which he would not incur in direct investing. However this only means that there is a cost to obtain the benefits of mutual fund services. This cost is often less than the cost of direct investing.
No Tailor-Made Portfolios:

Investing through mutual funds means delegation of the decision of portfolio composition to the fund managers. The very high net worth individuals or large corporate investors may find this to be a constraint in achieving their objectives. However, most mutual funds help investors overcome this constraint by offering large no. of schemes within the same fund.
Page | 32

Managing A Portfolio Of Funds:

Availability of large no. of funds can actually mean too much choice for the investors. He may again need advice on how to select a fund to achieve his objectives. AMFI has taken initiative in this regard by starting a training and certification program for prospective Mutual Fund Advisors. SEBI has made this certification compulsory for every mutual fund advisor interested in selling mutual fund.
Taxes:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.
Cost of Churn:

The portfolio of fund does not remain constant. The extent to which the portfolio changes is a function of the style of the individual fund manager i.e. whether he is a buy and hold type of manager or one who aggressively churns the fund.

Page | 33

Chapter 3:

Page | 34

COMPANY PROFILE About the Company:


Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 1200+ share shops in 400 cities and Indias premier online trading portal www.sharekhan.com. With their research expertise, customer commitment and superior technology, they provide investors with end-to-end solutions in investments. They provide trade execution services through multiple channels - an Internet platform, telephone and retail outlets. Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family, continues to remain the largest shareholder. It is the retail broking arm of the Mumbai-based SSKI [SHRIPAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE, NSE, and Derivatives. Depository services, online trading, Investment advice, Commodities, etc. Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awaaz Consumer Vote. It is first brokerage Company to go online. The Company's online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000. This site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information.

Page | 35

Sharekhan has one of the best states of art web portal providing fundamental and statistical information across equity, mutual funds and IPOs. One can surf across 5,500 companies for indepth information, details about more than 1,500 mutual fund schemes and IPO data. One can also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more. Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan to take advantage of the growing consumer demand for financial services products in India through investments in research, pan-Indian branch network and an outstanding technology platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. We look forward to providing strategic counsel to Sharekhan's management as they continue their expansion for the benefit of all shareholders. SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with strong research-driven focus. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength. The team has completed over US$5 billion worth of deals in the last 5 years - making it among the most significant players raising equity in the Indian market. SSKI, a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. If we experience their language, presentation style, content or for that matter the online trading facility, we'll find a common thread; one that helps us make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Sharekhan's all about. "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan Limited. Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the stock markets. And these beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial

Page | 36

services power house, with strong presence in Retail equities Institutional equities Investment banking.

In Ahmedabad, It is having the branch at Dynamic house, opp. Child care hospital, Navrangpura road and over 40 franchisees in Ahmedabad. We have been given the centre at Navrangpura road, Ahmedabad.

Page | 37

MISSION:

To educate and empower the individual investor to make better investment decisions through quality advice and superior service.

VISION:
To be the best retail brokering Brand in the retail business of stock market.

REASON TO CHOOSE SHAREKHAN LIMITED


Experience SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia Money broker's poll held recently, SSKI won the for 2004' award. Ever since it launched Sharekhan as its retail broking division in February 2000, it has been providing institutional individual investors.

Technology With its online trading account one can buy and sell with an internet connection. One can get access to its powerful online trading tools that will help him take complete control over his investment in shares.

Accessibility Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION services for investors. These services are accessible through its centers across the country over the internet (through the website www.sharekhan.com) as well as over the Voice Tool.

Page | 38

Customer Service Sharekhan limiteds customer service team will assist one for any help that one may require relating to transactions, billing, demat and other queries. Its customer service can be contacted via a toll-free number, email or live chat on www.sharekhan.com. Investment Advice Sharekhan has dedicated research teams of more than 30 people for fundamental and technical researches. Its analysts constantly track the pulse of the market and provide timely investment advice to its clients in the form of daily research emails, online chat, printed reports and SMS on their mobile phone.

Page | 39

PRODUCT AND SERVICES


SHAREKHAN LTD. PROVIDE DIFFERENT PRODUCT AS FOLLOWS Share online & offline Derivatives Mutual fund online Commodities online IPO online Portfolio Management Services Insurance Fixed deposits
Advisory products

Currency trading

Page | 40

Share Online
Sharekhan provide online facilities. BENEFIT I. Freedom from paperwork:-Integrated trading, bank and de-mat account with digital contracts removers all paperwork. II. Instant credit and transfer:-instant transfer of funds from bank account of the choice to Sharekhan trading account. III. Trade anywhere:-enjoy the ease of trading from any part of the world in a completely secure environment. IV. V. Dial n Trade:-call toll free number (1-800-22-7050) to place orders through telebrokers. Timey advice:-make informed decisions with expert advice, investment calls and live market commentary. VI. Real-time portfolio tracking:-benefit from real-time information for investment and current portfolio value. VII. After-hour orders:-place order after market hours, which get executed as soon as the markets opens.

Sharekhan provide two different accounts: 1) Classic account 2) Trade Tiger

CLASSIC ACCOUNT:
The Classic Account enables customers to trade online on the NSE and the BSE, invest in IPO and Mutual Funds and access all the research and transaction reports through Sharekhans website. This account is suitable for the retail investors. In this account Shown the maximum script are 25 in the terminal and the technical chart are not shown in this account. The life time registration charge for this account is 750 rupees.

Page | 41

Features: Online trading account for investing in Equities and Derivatives Free trading through Phone (Dial-n-Trade) o Two dedicated numbers for placing your orders with your cell phone or landline. o Automatic funds transfer with phone banking (for Citibank and HDFC bank customers) o Simple and Secure Interactive Voice Response based system for authentication o Get the trusted, professional advice of our telebrokers. o After hours order placement facility between 8.00 am and 9.30 am Integration of: Online trading + Bank + Demat account Instant cash transfer facility against purchase & sale of shares IPO investments Instant order and trade confirmations by e-mail Single screen interface for cash and derivatives

TRADE TIGER:
Trade tiger is a next-generation online trading product that brings the power of brokers terminal to customer pc. It is session to capitalize on intra-day price movement. Trade tiger is an internet based application available on a CD, which provides everything a trader needs on one screen. Key Features: A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX, Mutual Funds, IPOs Multiple Market Watch available on Single Screen Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with various Studies Graph Studies include Average, Band- Bollinger, Know Sure Thing, MACD, RSI, etc
Page | 42

Apply studies such as Vertical, Horizontal, Trend, Retracement & Free lines User can save his own defined screen as well as graph template, that is, saving the layout for future use

User-defined alert settings on an input Stock Price trigger Tools available to gauge market such as Tick Query, Ticker, Market Summary, Action Watch, Option Premium Calculator, Span Calculator

Shortcut key for FAST access to order placements & reports

ADVANTAGES:
Live Streaming Quotes Access all Trading Calls Advanced Charting features Create your own technical rules for trading A Single Trading Screen for all segments

Share Offline:
As the internet has taken over the physical trade, the same is the situation in trading in shares. Even the internet has not spared trading in shares and still the conventional system of offline trading continues in todays world. Merits of Offline Trading: Low brokerage Less margin Flexibility in credit period Customized advice Demerits of Offline Trading: Problems in getting in touch with the broker Limited clientele
Page | 43

Problem of attention from the broker due to load Reliance on the brokers information Customer has to believe what the broker says Broker Might not give the best price Reconciliation of account and cash settlements Paperwork Geographical Restriction

Dial-n-trade
Sharekhan provides complete trading facility like they are giving Toll free numbers the phone trading facility as an alternative of net trading where a customer can call n number of times.

Toll Free numbers: 1800-22-7500 1800-22-7050 Local number : 079-30307600 (chargeable)

Exposure: For Intraday = 10 times For Delivery = 04 times

Sharekhan is also providing the Margin on DP balance.

Derivatives
Derivatives are financial contracts whose value/price is depends on the behavior of price of one or more basic underling assets. These contracts are legally binding agreement, made on the trading screen of stock exchange, buy or sell an asset in future. The assets can be share, index, interest rate, bond, rupee- dollar exchange rate, sugar, crude oil, soybean, cotton, coffee etc.

Commodities Online
Commodities are agreements to buy and sell virtually anything except, for some reason, onions. The primary commodities that are traded are oil, gold and agricultural products. Commodity
Page | 44

derivatives comprise of raw materials and products that can be traded on special commodity exchanges across the country. Commodities expands customer investing horizon from investing in a metal company to trading in the metal itself. Trading in commodity derivative provides unique market opportunities for a wider section of participants like: investor, hedgers, arbitragers, traders, manufactures planters, exporters and importers. While trading commodities through an exchange, there are no transportation charges, no insurance costs, no storage charges and complete security when customer trade though an exchange. Customer can trade in commodities at nominal costs and carry the investment in paper from as customer want. The fundamentals for commodities are quite simple: price is a function of demand and supply. Sharekhan provides commodity facility. Sharekhan trades on two major commodity exchanges in India. 1) MCX 2) NCDEX

Insurance
Insurance is a policy from a large Financial Institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages. Life insurance ensures that your family will receive financial support in your absence Put simply; life insurance provides your family with a sum of money should something happen to you. It protects your family from financial crises. In addition to serving as a protective cover, life insurance acts as a flexible money-saving scheme, which empowers you to accumulate wealth-to buy a new car, get your children married and even retire comfortably. Life insurance also triples up as an ideal tax-saving scheme. To know more, read the Key Benefits of Life Insurance.

Mutual Funds
Mutual Fund is an investment company that pools money from shareholders and invests in a variety of securities, such as stocks, bonds and money market instruments. Most openend mutual funds stand ready to buy back (redeem) its shares at their current net asset value,
Page | 45

which depends on the total market value of the fund's investment portfolio at the time of redemption. Most open-end mutual funds continuously offer new shares to investors. Initial Public offering(IPO) Initial Public Offering, the first sale of stock by a company to the public.

Companies offering an IPO are sometimes new, young companies, or sometimes companies which have been around for many years but are finally deciding to go public. IPOs are often risky investments, but often have the potential for significant gains. IPOs are often used as a way for a young company to gain necessary market capital. From an investor point of view, IPO gives a chance to buy shares of a company, directly from the company at the price of their choice (In book build IPO's). Many a times there is a big difference between the price at which companies decides for its shares and the price on which investor are willing to buy share and that gives a good listing gain for shares allocated to the investor in IPO. From a company prospective, IPO help them to identify their real value which is decided by millions of investor once their shares are listed in stock exchanges. IPO's also provide funds for their future growth or for paying their previous borrowings. Sharekhan provides to their customer the Online IPO facility. In this facility, the customer has to feel only the bid price and the quantity for which he/she wants to buy the stock.

Portfolio Management Services


Sharekhan unfolds for customer an enable of PMS to choose from that helps customer sit back, relax and see customer money grow without worrying about the ups and downs at the stock market. Talks to Sharekhan specialists and theyll help customer choose a PMS plan that suits customer risk taking appetite and expectation from the market. There are two types of PMS in Sharekhan Limited A) PRO PRIME B) PROTECH
Page | 46

PROPRIME (FUNDAMENTAL):ProPrime uses in-depth independent fundamental research through primary analysis in highquality companies. The ProPrime line is designed for varying risk-return profiles and investment. Ideal for investors looking at steady and superior returns with low to medium risk appetite. This portfolio consists of a blend of quality blue chip and growth stocks ensuring a balanced portfolio with relatively medium risk profile. The portfolio will mostly have large capitalization stocks based on sectors & themes that have medium to long term growth potential.

PROTECH (TECHNICAL):Protech uses the knowledge of technical analysis and the power of derivatives market to identify trading opportunities in the market. The Protech lines of products are designed around various risk/reward/volatility profiles for different kinds of investment needs.

Fixed Deposits
Fixed deposits are loan arrangements where a specific amount of funds is placed on deposit under the name of the account holder. The money placed on deposit earns a fixed rate of interest, according to the terms and conditions that govern the account. The actual amount of the fixed rate can be influenced by such factors at the type of currency involved in the deposit, the duration set in place for the deposit, and the location where the deposit is made. The most unusual characteristic of a fixed deposit is that the funds cannot be withdrawn for a specified period of time. In most cases, fixed deposits carry duration of five years. During that time, the money remains in the account and cannot be withdrawn for any reason. Individuals, corporate entities, and even non-profit organizations that wish to set aside funds and limit their access to the funds for a period of time often find that fixed deposits are a simple way to accomplish this goal. As an added benefit, the monies in the account will earn a fixed rate of interest regardless of any fluctuations in interest rates that apply to other types of accounts.

Currency Trading
Currency trading means to trade in currency of different countries and price varies because of supply and demand.

Page | 47

Currency trading is mostly done by large companies or by people who is import-export business. In price of currency there is always fluctuation. So it can be dangerous for people who have import-export business. So they make reverse position or it is also known as hedging.

So by this way people minimize their risk with the help of currency trading. Currency trading is not much useful to individual investors. Sharekhan is providing offline currency trading to interested customers. Online currency trading is not given because individual investors still not prefer currency trading.

Page | 48

Chapter 4:

Page | 49

Data Analysis & Interpretation DSP BLACK ROCK TIGER (G)

PERIOD
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Total

NAV 50.17 44.49 41.96 45.03 45.42 43.97 44.02 43.24 39.84 39.24 40.23 36.53 33.79 39.57

FUND RETURN(Y) -11.32150688 -5.686671162 7.316491897 0.866089274 -3.192426244 0.113713896 -1.771921854 -7.863089732 -1.506024096 2.52293578 -9.19711658 -7.500684369 17.10565256 -20.11455751

BSE Index 6191.51 5550.03 5370.5 5855.53 5795.29 5638.16 5686.26 5531.7 5062.17 4995.67 5334.14 4831.73 4598.21 5202.65

MARKET RETURN(X) -10.360639 -3.23475729 9.031375105 -1.028771093 -2.711339726 0.853115201 -2.718131074 -8.487987418 -1.313665878 6.775267382 -9.418762912 -4.833051516 13.14511516 -14.30223306

X*Y 117.2980457 18.395001 66.07798277 -0.89100761 8.655752097 0.097011053 4.816315851 66.74180671 1.978412468 17.09356449 86.62546054 36.25119396 224.8557729 647.9953119 107.3428 10.46365 81.56574 1.05837 7.351363 0.727806 7.388237 72.04593 1.725718 45.90425 88.71309 23.35839 172.7941 620.4394 128.1765 32.33823 53.53105 0.750111 10.19159 0.012931 3.139707 61.82818 2.268109 6.365205 84.58695 56.26027 292.6033 732.0522

Beta

1.034994478

Page | 50

DSP BLACK ROCK TIGER (G)

PERIOD
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL

NAV 50.17 44.49 41.96 45.03 45.42 43.97 44.02 43.24 39.84 39.24 40.23 36.53 33.79 39.57

FUND RETURN(Y)

Y-Y' 9.774306877 4.139471162 8.863691897 2.413289274 1.645226244 1.660913896 0.224721854 6.315889732 0.041175904 4.07013578 -7.64991658 5.953484369 18.65285256

-11.32150688 -5.686671162 7.316491897 0.866089274 -3.192426244 0.113713896 -1.771921854 -7.863089732 -1.506024096 2.52293578 -9.19711658 -7.500684369 17.10565256 -20.11455751

95.53707492 17.1352215 78.56503405 5.823965119 2.706769394 2.758634969 0.050499912 39.8904631 0.001695455 16.56600527 58.52122368 35.44397613 347.9289086

-0.00095750 700.9294721

Page | 51

DSP BLACK ROCK TIGER (G) N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-20.11 Y= X=-14.30 ( ) =700.93

=-1.5472

Rate of return (fund) = Rate of return (market) =

( ( ( ) (

)( )

=1.034

=7.642

Sharpe measures=

=-1.38

Page | 52

HDFC INDEX FUND (G)

PERIOD
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL

FUND S&P CNX MNC MARKET NAV RETURN(Y) INDEX RETURN(X) 53.16 6134.5 47.735 -10.20504138 5505.9 -10.24696389 46.1844 -3.248350267 5333.25 -3.135727129 50.47 9.279323754 5833.75 9.384521633 49.7331 -1.460075292 5749.5 -1.444182558 48.08 -3.323943209 5560.15 -3.293329855 48.9867 1.885815308 5647.4 1.56920227 47.59 -2.851182056 5487.75 -2.826964621 43.43 -8.741332213 5001 -8.869755364 52.53 20.95325812 4943.25 -1.154769046 46.15 -12.1454407 5326.6 7.755019471 41.8 -9.425785482 4832.05 -9.284534224 39.45 -5.622009569 4624.3 -4.299417432 44.89 13.7896071 5199.25 12.43323314 -11.1151559

X*Y 104.5707 10.18594 87.08201 2.108615 10.94684 2.959226 8.060191 77.53348 -24.1962 -94.1881 87.51403 24.17137 171.4494 105.0003 9.832785 88.06925 2.085663 10.84602 2.462396 7.991729 78.67256 1.333492 60.14033 86.20258 18.48499 154.5853 104.1429 10.55178 86.10585 2.13182 11.0486 3.556299 8.129239 76.41089 439.039 147.5117 88.84543 31.60699 190.1533

-13.41366761 468.1975 625.7073 1199.234

BETA

0.74645104

Page | 53

HDFC INDEX FUND (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 53.16 47.735 46.1844 50.47 49.7331 48.08 48.9867 47.59 43.43 52.53 46.15 41.8 39.45 44.89

FUND RETURN(Y)

Y-Y' 9.349961384 2.393270267 10.13440375 0.604995292 2.468863209 2.740895308 1.996102056 7.886252213 21.80833812 -11.2903607 8.570705482 4.766929569 14.6446871 0.000884103

-10.20504138 -3.248350267 9.279323754 -1.460075292 -3.323943209 1.885815308 -2.851182056 -8.741332213 20.95325812 -12.1454407 -9.425785482 -5.622009569 13.7896071 -11.1151559

87.42177789 5.727742571 102.7061395 0.366019304 6.095285544 7.512507088 3.984423416 62.19297396 475.6036114 127.4722447 73.45699246 22.72361752 214.4668602 1189.730196

Page | 54

HDFC INDEX FUND (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-11.11 Y= X=-13.41 ( ) =1189.73

=-0.855

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.746

=9.95
=-0.99

Sharpe measures=

Page | 55

ICICI FUND (G)

PERIOD
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL

FUND S&P CNX MNC MARKET NAV RETURN(Y) INDEX RETURN(X) 151.03 6134.5 137.29 -9.097530292 5505.9 -10.24696389 132.57 -3.437978003 5333.25 -3.135727129 140.93 6.306102436 5833.75 9.384521633 143.91 2.114524941 5749.5 -1.444182558 140.39 -2.445973178 5560.15 -3.293329855 141.72 0.947360923 5647.4 1.56920227 141.06 -0.465707028 5487.75 -2.826964621 127.98 -9.272649936 5001 -8.869755364 126.88 -0.859509298 4943.25 -1.154769046 134.22 5.784993695 5326.6 7.755019471 121.75 -9.290716734 4832.05 -9.284534224 114.85 -5.667351129 4624.3 -4.299417432 130.73 13.82673052 5199.25 12.43323314 -11.55770308

X*Y 93.22206 10.78056 59.17975 -3.05376 8.055396 1.486601 1.316537 82.24614 0.992535 44.86274 86.25998 24.36631 171.911 105.0003 9.832785 88.06925 2.085663 10.84602 2.462396 7.991729 78.67256 1.333492 60.14033 86.20258 18.48499 154.5853 82.76506 11.81969 39.76693 4.471216 5.982785 0.897493 0.216883 85.98204 0.738756 33.46615 86.31742 32.11887 191.1785

-13.41366761 581.6258 625.7073 575.7218

BETA

0.93108549

Page | 56

ICICI FUND (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 151.03 137.29 132.57 140.93 143.91 140.39 141.72 141.06 127.98 126.88 134.22 121.75 114.85 130.73

FUND RETURN(Y)

Y-Y'

-9.097530292 8.208530292 -3.437978003 2.548978003 6.306102436 7.195102436 2.114524941 3.003524941 -2.445973178 1.556973178 0.947360923 1.836360923 -0.465707028 0.423292972 -9.272649936 8.383649936 -0.859509298 0.029490702 5.784993695 6.673993695 -9.290716734 8.401716734 -5.667351129 4.778351129 13.82673052 14.71573052 -11.55770308 -0.00070308

67.37996955 6.497288859 51.76949907 9.021162074 2.424165476 3.37222144 0.17917694 70.28558625 0.000869701 44.54219184 70.58884407 22.83263952 216.5527247 565.4463395

Page | 57

ICICI FUND (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-11.55 Y= X=-13.41 ( ) =565.44

=-0.889

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.931

=6.86
=-1.44

Sharpe measures=

Page | 58

TATA PURE EQUITY FUND (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Total 106.45 95.57 90.09 97.04 97.81 95.91 97.22 96.08 89.97 89.57 93.9 87.25 83.85 89.96

FUND RETURN(Y) -10.22076092 -5.734016951 7.714507715 0.793487222 -1.942541662 1.365863831 -1.172598231 -6.35928393 -0.444592642 4.834207882 -7.08200213 -3.896848138 7.286821705 -14.85775625

BSE MARKET Sensex RETURN(X) 20509.09 18327.76 -10.63591802 17823.4 -2.75189112 19445.22 9.0993862 19135.96 -1.590416565 18503.28 -3.306236008 18845.87 1.85150957 18197.2 -3.441974289 16676.75 -8.355406326 16453.76 -1.337131036 17705.01 7.604644774 16123.46 -8.932782303 15454.92 -4.146380492 16863.3 9.112826207 -16.82976941

X*Y 108.7072 15.77939 70.19729 -1.26198 6.422501 2.52891 4.036053 53.1344 0.594479 36.76243 63.26198 16.15782 66.40354 113.1228 7.572905 82.79883 2.529425 10.9312 3.428088 11.84719 69.81281 1.787919 57.83062 79.7946 17.19247 83.0436 104.464 32.87895 59.51363 0.629622 3.773468 1.865584 1.374987 40.44049 0.197663 23.36957 50.15475 15.18543 53.09777

442.724 541.6924 386.9459

Beta

0.81455165

Page | 59

TATA PURE EQUITY FUND (G)

PERIOD
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL

FUND NAV RETURN(Y) Y-Y' 106.45 95.57 -10.22076092 -9.078760921 90.09 -5.734016951 -4.592016951 97.04 7.714507715 8.856507715 97.81 0.793487222 1.935487222 95.91 -1.942541662 -0.800541662 97.22 1.365863831 2.507863831 96.08 -1.172598231 -0.030598231 89.97 -6.35928393 -5.21728393 89.57 -0.444592642 0.697407358 93.9 4.834207882 5.976207882 87.25 -7.08200213 -5.94000213 83.85 -3.896848138 -2.754848138 89.96 7.286821705 8.428821705 -14.85775625

82.4238999 21.0866197 78.4377289 3.74611079 0.64086695 6.28938099 0.00093625 27.2200516 0.48637702 35.7150607 35.2836253 7.58918826 71.0450353

-0.01175625 369.964882

Page | 60

TATA PURE EQUITY FUND (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-14.85 Y= X=-16.82 ( ) =369.96

=-1.142

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.814

=5.55

Sharpe measures=

=-1.83

Page | 61

BIRLA SUNLIFE TAX RELIEF-96 (G)

PERIOD
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Total

FUND MARKET NAV RETURN(Y) Bse 200 RETURN(X) 12.36 2533.9 11.05 -10.5987055 2270.22 -10.40609337 10.42 -5.701357466 2185.86 -3.715939424 11.18 7.293666027 2378.69 8.821699468 11.2 0.178890877 2363.68 -0.631019595 10.92 -2.5 2301.65 -2.624297705 11.83 8.333333333 2314.65 0.5648122 10.89 -7.945900254 2256.48 -2.513122934 9.96 -8.539944904 2061.08 -8.65950507 9.74 -2.208835341 2028.27 -1.591883867 10.08 3.490759754 2155.58 6.276777747 9.28 -7.936507937 1953.03 -9.396542926 8.76 -5.603448276 1850.89 -5.229822379 9.6 9.589041096 2099.47 13.4302957 -22.14900859

X*Y 110.2911 21.1859 64.34253 -0.11288 6.560744 4.706768 19.96902 73.9517 3.516209 21.91072 74.57574 29.30504 128.7837 108.2868 13.80821 77.82238 0.398186 6.886938 0.319013 6.315787 74.98703 2.534094 39.39794 88.29502 27.35104 180.3728 112.3326 32.50548 53.19756 0.032002 6.25 69.44444 63.13733 72.93066 4.878954 12.1854 62.98816 31.39863 91.94971

-15.67464216 558.9863 626.7753 613.2309

BETA

0.875640025

Page | 62

BIRLA SUNLIFE TAX RELIEF-96 (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 12.36 11.05 10.42 11.18 11.2 10.92 11.83 10.89 9.96 9.74 10.08 9.28 8.76 9.6

FUND RETURN(Y) -10.5987055 -5.701357466 7.293666027 0.178890877 -2.5 8.333333333 -7.945900254 -8.539944904 -2.208835341 3.490759754 -7.936507937 -5.603448276 9.589041096 -22.14900859

Y-Y' -8.8957055 -3.99835747 8.996666027 1.881890877 -0.797 10.03633333 -6.24290025 -6.8369449 -0.50583534 5.193759754 -6.23350794 -3.90044828 11.2920411

79.13357637 15.98686243 80.9399996 3.541513271 0.635209 100.7279868 38.97380358 46.74381561 0.255869393 26.97514038 38.85662119 15.21349675 127.5101921

-0.01000859 575.4940865

Page | 63

BIRLA SUNLIFE TAX RELIEF-96 (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-22.14 Y= X=-15.67 ( ) =575.49

=-1.703

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.875

=6.92

Sharpe measures=

=-1.55

Page | 64

FRANKLIN INDIA TAX SHIELD (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 219.92 201.38 195.29 212.9 212.4 210.39 212.5 211.78 199.52 200.05 209.79 194.88 186.52 202.88

FUND RETURN(Y) -8.430338305 -3.024133479 9.0173588 -0.234852043 -0.946327684 1.002899377 -0.338823529 -5.789026348 0.26563753 4.868782804 -7.107107107 -4.289819376 8.771177354 -6.234572006

S&P CNX MARKET 500 RETURN(X) 4940.95 4424.6 -10.45041945 4247.15 -4.010532025 4626.45 8.930694701 4615.3 -0.241005523 4492.9 -2.652048621 4522.95 0.668833048 4424.05 -2.186625985 4038.35 -8.718255897 3978.35 -1.485755321 4215.9 5.971068408 3811.25 -9.598187813 3597.75 -5.601836668 4082.85 13.48342714

X*Y 88.10057 12.12838 80.53128 0.056601 2.509707 0.670772 0.74088 50.47021 -0.39467 29.07184 68.21535 24.03087 118.2655 109.2113 16.08437 79.75731 0.058084 7.033362 0.447338 4.781333 76.00799 2.207469 35.65366 92.12521 31.38057 181.8028 71.0706 9.145383 81.31276 0.055155 0.895536 1.005807 0.114801 33.51283 0.070563 23.70505 50.51097 18.40255 76.93355

-15.89064401 474.3973 636.5508 366.7356

BETA

0.756370498

Page | 65

FRANKLIN INDIA TAX SHIELD (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 219.92 201.38 195.29 212.9 212.4 210.39 212.5 211.78 199.52 200.05 209.79 194.88 186.52 202.88

FUND RETURN(Y) -8.430338305 -3.024133479 9.0173588 -0.234852043 -0.946327684 1.002899377 -0.338823529 -5.789026348 0.26563753 4.868782804 -7.107107107 -4.289819376 8.771177354 -6.234572006

Y-Y' -7.951338305 -2.545133479 9.4963588 0.244147957 -0.467327684 1.481899377 0.140176471 -5.310026348 0.74463753 5.347782804 -6.628107107 -3.810819376 9.250177354

63.22378084 6.477704426 90.18083045 0.059608225 0.218395164 2.196025765 0.019649443 28.19637982 0.554485051 28.59878092 43.93180382 14.52234432 85.56578107

-0.007572006 363.7455693

Page | 66

FRANKLIN INDIA TAX SHIELD (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-6.234 Y= X=-15.89 ( ) =363.74

=-0.479

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.756

=5.50
=-1.72

Sharpe measures=

Page | 67

HDFC TAX SAVER (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 249.06 227.67 218.27 232.9 235.27 231.44 235.45 233.48 213.14 208.44 215.8 202.01 192.72 212.54

FUND RETURN(Y) -8.588291978 -4.128782888 6.702707656 1.017604122 -1.627916861 1.732630487 -0.836695689 -8.711666952 -2.205123393 3.530992132 -6.390176089 -4.598782239 10.28435035 -13.81915134

MARKET S&PCNX500 RETURN(X) 4940.95 4424.6 -10.45041945 4247.15 -4.010532025 4626.25 8.925985661 4615.3 -0.236692786 4492.9 -2.652048621 4522.95 0.668833048 4424.05 -2.186625985 4038.35 -8.718255897 3978.35 -1.485755321 4215.9 5.971068408 3811.25 -9.598187813 3597.75 -5.601836668 4082.85 13.48342714

X*Y 89.75125 16.55862 59.82827 -0.24086 4.317315 1.158841 1.829541 75.95054 3.276274 21.0838 61.33411 25.76163 138.6683 109.2113 16.08437 79.67322 0.056023 7.033362 0.447338 4.781333 76.00799 2.207469 35.65366 92.12521 31.38057 181.8028 73.75876 17.04685 44.92629 1.035518 2.650113 3.002008 0.70006 75.89314 4.862569 12.46791 40.83435 21.1488 105.7679

-15.89104031 499.2776 636.4646 404.0942

BETA

0.781773574

Page | 68

HDFC TAX SAVER (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 249.06 227.67 218.27 232.9 235.27 231.44 235.45 233.48 213.14 208.44 215.8 202.01 192.72 212.54

FUND RETURN(Y)

Y-Y'

-8.588291978 7.525291978 -4.128782888 3.065782888 6.702707656 7.765707656 1.017604122 2.080604122 -1.627916861 0.564916861 1.732630487 2.795630487 -0.836695689 0.226304311 -8.711666952 7.648666952 -2.205123393 1.142123393 3.530992132 4.593992132 -6.390176089 5.327176089 -4.598782239 3.535782239 10.28435035 11.34735035 -13.81915134

56.63001935 9.399024713 60.30621539 4.328913512 0.31913106 7.815549822 0.051213641 58.50210615 1.304445845 21.10476371 28.37880508 12.50175604 128.76236

-0.00015133 389.4043043

Page | 69

HDFC TAX SAVER (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y==-13.819 Y= X=-15.89 ( ) =389.40

=-1.063

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.781

=5.69

Sharpe measures=

=-1.77

Page | 70

SBI MAGNUM TAX GAIN SCHEME (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 TOTAL 65.27 58.69 55.51 60.07 60.75 58.83 59.26 59.04 54.53 54.3 56.57 52.53 49.93 55.29

FUND RETURN(Y) -10.08120116 -5.41829954 8.214736084 1.132012652 -3.160493827 0.730919599 -0.371245359 -7.638888889 -0.421786173 4.180478821 -7.141594485 -4.949552637 10.73502904 -14.18988588

MARKET BSE 100 RETURN(X) 6191.51 5550.03 -10.360639 5370.5 -3.23475729 5855.53 9.031375105 5795.29 -1.028771093 5638.16 -2.711339726 5686.16 0.851341572 5531.7 -2.71642022 5062.17 -8.487987418 4995.87 -1.309715004 5334.14 6.77099284 4831.73 -9.418762912 4598.21 -4.833051516 5202.65 13.14511516

X*Y 104.4477 17.52688 74.19036 -1.16458 8.569172 0.622262 1.008458 64.83879 0.55242 28.30599 67.26499 23.92144 141.1132 107.3428 10.46365 81.56574 1.05837 7.351363 0.724782 7.378939 72.04593 1.715353 45.84634 88.71309 23.35839 172.7941 101.6306 29.35797 67.48189 1.281453 9.988721 0.534243 0.137823 58.35262 0.177904 17.4764 51.00237 24.49807 115.2408

-14.3026195 531.1971 620.3588 477.1609

BETA

0.852738424

Page | 71

SBI MAGNUM TAX GAIN SCHEME (G)

PERIOD NAV
Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 65.27 58.69 55.51 60.07 60.75 58.83 59.26 59.04 54.53 54.3 56.57 52.53 49.93 55.29

FUND RETURN(Y)

Y-Y' 8.990201164 -4.32729954 9.305736084 2.223012652 2.069493827 1.821919599 0.719754641 6.547888889 0.669213827 5.271478821 6.050594485 3.858552637 11.82602904 0.006885878

-10.08120116 -5.41829954 8.214736084 1.132012652 -3.160493827 0.730919599 -0.371245359 -7.638888889 -0.421786173 4.180478821 -7.141594485 -4.949552637 10.73502904

80.82371698 18.72552131 86.59672406 4.941785251 4.282804701 3.319391025 0.518046743 42.8748489 0.447847147 27.78848896 36.60969362 14.88842845 139.8549629

TOTAL

-14.18988588

461.67226

Page | 72

SBI MAGNUM TAX GAIN SCHEME (G)

N=number of observation YF= risk free return Y= average return of funds X= average return of market = beta = standard deviation

N=13,

=9%

Y=-14.189 Y= X=-14.30 ( ) =461.67

=-1.09

Rate of return (fund) = Rate of return (market) = =


( ( ( ) ( )( ) )

=0.852

=6.20
=-1.63

Sharpe measures=

Page | 73

Chapter 5:

Page | 74

FINDINGS
From the study we found that:

EQUITY SCHEMES DSP BLACK ROCK TRADE TIGER (G)

Beta=1.034 Standard deviation=7.642 Sharpe ratio= -1.38

From the above findings we can see that the beta is more than 1, i.e. the fund is more volatile from the market returns. The fund return will fluctuate more than the market return. And the standard deviation is a bit more as compared to other schemes which mean the fund involves more risk than others. The Sharpe ratio which measures the risk-adjusted performance, thus we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. In this fund we can see fund is fluctuating more, risk is more also returns are not up to the mark overall the fund is not performing well.

HDFC INDEX FUND (G)

Beta=0.746 Standard deviation=9.95 Sharpe ratio= -0.99

From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return. And the standard deviation is high as compared to other schemes which mean the fund involves a lot more risk than others.

Page | 75

The Sharpe ratio which measures the risk-adjusted performance, thus we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. But if we look to the fund it is performing well in the market as fluctuation is less, but carries high risk also getting good returns.

ICICI FUND (G)


Beta=0.931 Standard deviation=6.86 Sharpe ratio= -1.44

From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return but closer to 1 means can move with market. And the standard deviation is less as compared to other two above schemes which mean the

fund involves a less risk than others. The Sharpe ratio which measures the risk-adjusted performance, here we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. Thus we can say the fund is not performing much good or bad but moderate.

TATA PURE EQUITY (G)

Beta=0.814 Standard deviation=5.55 Sharpe ratio= -1.83

From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return but a bit closer to 1 means can move with market. And the standard deviation is less as compared to all other above schemes which mean the fund involves a very few risk than others.

Page | 76

The Sharpe ratio which measures the risk-adjusted performance, here we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. So we can say that the fund is less volatile, less risk is involved though may be due to some reason it is not performing well.

TAX SAVER SCHEMES BIRLA SUNLIFE TAX RELIEF-96 (G)

Beta=0.875 Standard deviation=6.92 Sharpe ratio= -1.55

From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return. And the standard deviation is high as compared to other schemes which mean the fund involves a lot more risk than others. The Sharpe ratio which measures the risk-adjusted performance, thus we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. But if we look to the fund it is performing well in the market as fluctuation is less, but carries high risk also getting better returns from all other schemes.

FRANKLIN INDIA TAX SHIELD (G)

Beta=0.756 Standard deviation=5.50 Sharpe ratio= -1.72

From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return.
Page | 77

And the standard deviation is less as compared to all other above schemes which mean the fund involves a very few risk than others. The Sharpe ratio which measures the risk-adjusted performance, here we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. So we can say that the fund is less volatile, less risk is involved but it is not performing well in the market.

HDFC TAX SAVER (G)

Beta=0.781 Standard deviation=5.69 Sharpe ratio= -1.77

From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return. And the standard deviation is less as compared to all other above schemes which mean the fund involves a very few risk than others. The Sharpe ratio which measures the risk-adjusted performance, here we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. So we can say that the fund is less volatile, less risk is involved but the performance of the fund is very bad.

SBI MAGNUM TAX GAIN SCHEME (G)


Beta=0.852 Standard deviation=6.20 Sharpe ratio= -1.63 From the above findings we can see that the beta is less than 1, i.e. the fund is less volatile from the market returns. The fund return will fluctuate less than the market return but closer to 1 means can move with market.

Page | 78

And the standard deviation is involves a high risk than others.

more as compared to above schemes which mean the fund

The Sharpe ratio which measures the risk-adjusted performance, here we can see this fund has given negative Sharpe ratio which means a risk- less asset would perform better from this. Thus we can say the fund is not performing much good or bad but moderate as the risk is high and fluctuation is less.

Page | 79

SUGGESTIONS
In the equity schemes which we have taken we can say that by the fluctuations in the market return, amount of risk involved in the fund and performance of all the schemes we can say that if an investor is aggressive in nature or expecting high return then the investor should have to take high risk as in equity if the risk is high then the returns would be more. So the investor should choose HDFC Index Fund (G) compare to other as higher risk is involved in this fund and investor can expect higher returns.

In the tax saver schemes also we can say that by the fluctuation in the market return, amount of risk involved in the fund and the performance of all the schemes we can say that Birla Sun Life Tax Relief (G) is better from all the funds which has been taken in the study. An investor who is conservative in nature means doesnt want to take too much risk but expecting of high returns and also that to some relaxation from tax should invest in Birla Sun Life Tax Relief (G) and investor with aggressive nature as always they want to take high risk for high returns should invest in HDFC Index Fund (G).

Page | 80

CONCLUSION

In order to study the concept of mutual fund we should note that a mutual fund is a trust that pools the money of several investors and manages investments on behalf. The fund collects this money from investors through various schemes. Each scheme is differentiated by its objectives of investments or in other words a broadly defined purpose of how the collected money is going to be involved.

By comparing the above mentioned schemes I came to know the risk and return relation between the specified schemes. Therefore investors before investing in any Mutual Fund schemes they should study the risk and return relation. And if the risk and returns is been matched with their planning, then only the investors should go for Mutual Fund schemes.

Page | 81

BIBLIOGRAPHY

1. Jordan, Ronald J and Fisher, D.E. Security analysis and portfolio management, Sixth Edition. Dorling Kindersley (India) pvt ltd.1995.

2. Kevin, S., Security Analysis and Portfolio Management, PHI Publication, New Delhi, 2009. 3. Chandra, P., Investment Analysis and Portfolio Management, Tata McGraw-Hill Publication, New Delhi, 2009. 4. www.nseindia.com 5. www.moneycontrol.com 6. www.amfindia.com

Page | 82