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A REPORT ON

MUTUAL FUND COMPARISION ANALYSIS


IN
NETWORTH STOCK BROKING LIMITED
Project work submitted in partial fulfillment of the requirements for the
Award of degree in
MASTER OF BUSINESS ADMINISTRATION

Submitted by

DECLARATION
I here by declare that, the project Mutual Fund Comparison Analysis is original and
one that has been carried out by me as a student of M.B.A, NETWORTH STOCK
BROKING LIMITED and submitted for the partial requirement for the award of degree of
MASTER OF BUSINESS ADMINSTRATION for the academic year . It has not submitted
else where for the award of any degree or diploma of any institute or university in partial or full.

Date:
Place:

ACKNOWLEDGEMENT

I take the opportunity to express my deep and sincere gratitude to the management of
NETWORTH STOCK BROKING LIMITED for their gesture of allowing me to undertake
this project and its various employees who lent me their hand towards the completion of this
study.
The co-operation I received from the wide cross-section of employee of NETWORTH
makes it difficult to style out individuals for acknowledgement.
However, I am particularly indebted to -----------, manager for allowing me to carry out
my project work in the organization and for apprising me of the situation with necessary
background and helping me to complete this project work.
I am also thankful to our college principal ---------------- and -----------------------providing their guidance to complete this project work.
Last, but not least, I thank my family members, my friends and classmates, who have
done as they could to help me finish the project on time.

CERTIFICATE FROM PRINCIPAL


CERTIFICATE
This is to certify that Ms. N bearing Roll No. 07265C1070 student of our college
studying MBA final has successfully completed her project work entitled MUTUAL FUND
COMPARISON ANALYSIS

in

NETWOTH STOCK BROKING LTD. and made a

presentation in the seminar organized on . This project is submitted in partial


fulfillment for the award of Masters Degree in Business Administration.

PRINCIPAL

Certificate from the project guide

.
Asst. Professor
Department Of Business Management
This is to certify that the project report entitled MUTUAL FUND COMARISON
ANALYSIS submitted by in partial fulfillment for the award of masters of Business
Administration.
This is record of bonafide work done by her under my guidance and supervision.
Place :
Date:

CONTENTS PAGE
CHAPTER- I

Introduction of Mutual Funds


History of Mutual Funds
Structure of Mutual Funds
Objectives of the study
Methodology of the study
Limitations of the study

CHAPTER- II

Profile of the organization

CHAPTER- III

About AMFI (Association of Mutual Funds in India).


Role and concepts
Types and objectives
Risk associated with mutual funds

CHAPTER-IV

Calculation of NAV
Selection of Mutual Fund company
Selection of Mutual Fund schemes
Comparison of Mutual fund schemes

CHAPTER-V

Conclusions & suggestions


Bibliography

CHAPTER-I

INTRODUCION TO MUTUAL FUNDS


HISTORY OF MUTUAL FUNDS
STRUCTURE OF MUTUAL FUNDS
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
BENEFIS & LIMITATIONS

INTRODUCTION TO MUTUAL FUNDS

MUTUAL FUND
A Mutual Fund is a form of collective investment that pools money from many
investors and invests their money in stocks, bonds, short-term money market instruments, and or
other securities. In a Mutual fund, the fund manager trades the funds underlying securities,
realizing capital gains or losses, and collects the dividend or interest income.
Definitions:
Mutual Fund is a non-depository, non-banking financial intermediary which acts as
important vehicle for bringing wealth holders and deficit units together
Indirectly.
Mutual funds are also suitable for those investors who do not have knowledge of
capital market and by investing through a mutual fund it can make use of knowledge of
specialized people which the mutual fund employees.
PIERCE, JAMES.L
The origin of the Indian mutual fund industry can be traced back to 1964 when the Indian
Government, with a view to augment small savings within the country and to channelise these
savings to the capital markets, set up the Unit Trust of India (UTI). The UTI was setup under a
specific statute, the Unit Trust of India Act, 1963. The Unit Trust of India launched its first openended equity scheme called Unit 64 in the year 1964, which turned out to be one of the most
popular mutual fund schemes in the country. In 1987, the government permitted other public
sector banks and insurance companies to promote mutual fund schemes. Pursuant to this
relaxation, six public sector banks and two insurance companies viz. Life Insurance Corporation
of India and General Insurance Corporation of India launched mutual fund schemes in the
country.
Securities Exchange Board of India (SEBI), formulated the Mutual Fund (Regulation)
1993, which for the first time established a comprehensive regulatory framework for the mutual
fund industry. This proved to be a boon for the mutual fund industry and since then several
mutual funds have been set up by the private sector as well as the joint sector. Kothari Pioneer
Mutual fund became the first from the private sector to establish a mutual fund in association
with a foreign fund. Since then several private sector companies have established their own funds
in the country, making mutual fund industry one of the most followed sector by critics and
investors alike. The share of private sector mutual funds too has gone up rapidly.

In the period between 1963 and 1988, when the UTI was the sole player in the industry, the
assets under management grew to about Rs.67 billion. In the second phase between 1988-1994,
when public sector banks and insurance companies were allowed to launch mutual fund schemes,
the total assets in the mutual fund industry grew to about Rs.610 billion with the total number of
schemes increasing to 167 by the end of 1994. The third phase of the mutual fund industry,
which commenced in 1994, witnessed exponential growth of the industry, with the advent of
private players therein. As on May 31, 2004, the total assets under management stood at Rs.1540
billion and the total number of schemes stood at 399.
During the last three and a half decades, UTI has been a dominant player in the mutual
fund industry. The total assets under the management of the UTI as on September 30, 2002 were
to the tune of Rs.442 billion, which amount to almost 41% of the total assets under management
in the domestic mutual fund industry. UTI has witnessed some erosion of assets pursuant to the
last years crisis arising on account of its Unit 64 scheme, the scheme with largest amount of
assets under management. This was the first scheme launched by the UTI with a significant
equity exposure and the returns of which was not linked to the market. This resulted in a payment
crisis when the stock markets crashed during the last two years, which resulted in some degree of
loss of investors confidence in UTI leading to erosion of its assets under management. This
period also gave opportunity to the private players to demonstrate better returns thereby
capturing a significant market share.
Whatever may have happened to mutual funds in the past and whatever one is
seeing now, mutual funds are here to stay as long as they can deliver the aspirations of their
investors. One must not forget that India is a large nation with a population of more than 1 billion
people and the potential continues to be huge. However, to be fair mutual fund managers should
also strive to improve their performance and not blame the vagaries of the market all the times.

HISTORY OF MUTUAL FUNDS


Global
The definition of a mutual fund is a form of collective investment that pools money from
many investors and invests their money in stocks, bonds, short-term money market instruments,
and/or other securities. In a mutual fund, the fund manager trades the funds underlying
securities, realizing capital gains or losses, and collects the dividend or interest income. The
investment proceeds are then passed along to the individual investors. The value of a share of the
mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total
value of the fund divided by the number of shares currently issued and outstanding.
Legally known as an open-end company under the Investment Company Act of 1940 (the
primary regulatory statute governing investment companies), a mutual fund is one of three basic
types of investment companies available in the United States. Outside of the United States (with
the exception of Canada, which follows the U.S. model), mutual fund is a generic term for
various types of collective investment vehicle. In the United Kingdom and western Europe
(including offshore jurisdictions), other forms of collective investment vehicle are prevalent,
including unit trusts, open-ended investment companies (OEICs) ,SICAVs and unitized insurance
funds.
In Australia the term mutual fund is generally not used; the name managed
fund is used instead. However, managed fund is somewhat generic as the definition of a
managed fund in Australia is any vehicle in which investors money is managed by a third party
(NB: usually an investment professional or organization). Most managed funds are open-ended
(i.e., there is no established maximum number of shares that can be issued); however, this need
not be the case. Additionally the Australian government introduced a compulsory
superannuation/pension scheme which, although strictly speaking a managed fund, is rarely
identified by this term and is instead called a superannuation fund because of its special tax
concessions and restrictions on when money invested in it can be accessed.

10

Indian
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 the. The history of mutual
funds in India can be broadly divided into four distinct phases.
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6, 700 crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being under which all mutual funds, except
UTI were to be registered and governed.
The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the
first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under
the SEBI (Mutual Fund) Regulations 1996.
11

The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and acquisitions. As
at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of
other mutual funds.
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India
with assets under management of Rs.29,835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under the rules
framed by Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation
of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421
Schemes.

12

FUND BASICS

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in different
types of securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and the
capital appreciation realized by the scheme is 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
portfolio a relatively low cost. The small savings of all the investors are put together to increase
the buying power and hire a professional manager to invest and monitor the money. Anybody
with an invisible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each
Mutual Fund scheme has a defined investment objective and strategy.

STRUCTURE OF A MUTUAL FUND

13

A mutual fund is set up in the form of a trust, which has Sponsor, Trustees, Asset
Management Company (AMC) and a Custodian. The trust is established by a sponsor or more
than one sponsor who is like a promoter of a company. The trustees of the mutual fund hold its
property for the benefit of the unit-holders. The AMC, approved by SEBI, manages the funds by
making investments in various types of securities. The custodian, who is registered with SEBI,
holds the securities of various schemes of the fund in its custody. The trustees are vested with the
general power of superintendence and direction over AMC. They monitor the performance and
compliance of SEBI Regulations by the mutual fund.
A typical mutual fund structure in India can be graphically represented as
Follows:

14

SPONSOR:
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.
The Sponsor is not responsible or liable for any loss or shortfall resulting from the
operation of the Schemes beyond the initial contribution made by it towards setting up of the
Mutual Fund. The Sponsor (or) any of its directors or the principal officer employed by the
mutual fund should not be guilty of fraud, not be convicted of an offence involving moral
turpitude (or) should have not been found guilty of any economic offence.

TRUST:
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian
Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act,
1908.

TRUSTEE:
Trustee is usually a company (corporate body) or a Board of Trustees (body of
individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders
and join together to ensure that the AMC functions in the interest of investors and in accordance
with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. The
provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd
directors of the Trustee are independent directors who are not associated with the Sponsor in any
manner. An AMC or any of its officers or employees is not eligible to act as a trustee of any
mutual fund. In case a company is appointed as a trustee then its directors can act as trustees of
any other trust provided that the object of such other trust is not in conflict with the object of the
mutual fund.

ASSET MANAGEMENT COMPANY:


The sponsor or the trustees are required to appoint an AMC to manage the assets of the
mutual fund. Under the Mutual Fund Regulations, the applicant must satisfy certain eligibility
criteria in order to qualify to register with SEBI as an AMC:

The sponsor must have at least 40% stake in the AMC

The directors of the AMC should be persons having adequate professional experience in
finance and financial services related field and not found guilty of moral turpitude or
convicted of any economic offence or violation of any securities laws
15

The AMC should have and must at all times maintain, a minimum net worth of Rs.10
Crores

The board of directors of such AMC has at least 50% directors, who are not Associates of
or associated in any manner with, the sponsor or any of its Subsidiaries or the trustees

The Chairman of the AMC is not a trustee of any mutual fund.

In addition to the above eligibility criteria and other on going compliance


requirements laid down in the Mutual Fund Regulations, the AMC is required to observe the
following restrictions in its normal course of business. Any director of the AMC cannot hold
office of a director in another AMC unless such person is an independent director and the
approval of the board of the AMC of which such person is a director, has been obtained; the
AMC shall not act as a trustee of any mutual fund; the AMC cannot undertake any other business
activities except activities in the nature of portfolio management services, management and
advisory services to offshore funds, pension funds, provident funds, venture capital funds,
management of insurance funds, financial consultancy and exchange of research on commercial
basis if any of such activities are not in conflict with the activities of the mutual fund.

CUSTODIAN:
The mutual fund is required, under the Mutual Fund Regulations, to appoint a
custodian to carry out the custodial services for the schemes of the fund. Only institutions with
substantial organizational strength, service capability in terms of computerization, and other
infrastructure facilities are approved to act as custodians. The custodian must be totally de-linked
from the AMC and must be registered with SEBI. Under the Securities and Exchange Board of
India (Custodian of Securities) Guidelines, 1996, any person proposing to carry on the business
as a custodian of securities must register with the SEBI and is required to fulfill specified
eligibility criteria. Additionally, a custodian in which the sponsor or its associates holds 50% or
more of the voting rights of the share capital of the custodian or where 50% or more of the
directors of the custodian represent the interest of the sponsor or its associates cannot act as
custodian for a mutual fund constituted by the same sponsor or any of its associate or subsidiary
company.

TRANSFER AGENTS:
Transfer agents are responsible for issuing and redeeming units of the mutual fund and
provide other related services such as preparation of transfer documents and updating investor
records. A fund may choose to carry out this activity in-house and charge the scheme for the
service at a competitive market rate. Where an outside Transfer Agent is used, the fund investor
will find the agent to be an important interface to deal with, since all of the investor services that
a fund provides (besides the investment management) are going to be dependent on the transfer
agent.
16

DISTRIBUTORS:
Mutual funds operate as collective investment vehicles, on the principle of accumulating
funds from a large number of investors and then investing on a big scale. For a fund to sell units
across a wide retail base of individual investors, an established network of distribution agents is
essential.
(AMCs usually appoint Distributors or brokers, who sell units on behalf of the fund.
Some funds even require that all transactions be routed through such brokers. A sponsor or an
associate (or in some cases, an employee) may act as a distributor for the AMC with which he or
she is associated, only if adequate disclosure of such involvement and the brokerage/commission
paid is made to unit-holders. A broker usually acts on behalf of several mutual funds
simultaneously and may have several sub-brokers under him for the purpose of distribution of
units.
In India, besides brokers, independent individuals are appointed as agents for the
purpose of selling the fund schemes to investors. These agents are not brokers in a formal sense
and do not belong to any stock exchange or, organized self regulatory body of brokers.
While individuals constitute the largest segment in the category of mutual fund
distributors, other distributors include banks, Non Banking Finance Companies, and corporate.
It is important to note here that all mutual fund distributors - from individual agents
to large banks - serve as much, if not more than, as investment advisors as fund salespersons. In
fact, most investors look to the agents as advisors and in other countries the agents are called
financial advisors. This is an important function and developed countries like the-U.S.A.
require that the financial advisors be suitably trained in the advisory function and role. They are
even required to pass a specifically designated examination, before being allowed to sell fund
products to investors. Whether required by regulation or not, knowledge of financial advisory
function is essential for fund agents.

17

OBJECTIVES OF THE STUDY

To analyze the Concepts and parameters of Mutual Funds

To give a brief idea about the benefits available for Mutual Funds
Investment

To give an idea of the types of schemes available

To discuss about the Market trends of the Mutual Fund Investment.

To study some of the prominent Mutual Fund Companies schemes & its
Comparison analysis

METHODOLOGY OF THE STUDY

The Primary data as expressed above was collected through Networth Stock Broking
Limited, in course of interviewing through attending classes.
The Secondary data was provided for the study through the company literature business
Magazines, Broachers, Fact Sheets & Different Company Websites played a major role in
collection of data.

18

BENEFITS OF MUTUAL FUNDS


Professional Management:
Qualified investment professionals who to maximize returns and minimize risk monitor
investors money. When you buy in to a mutual fund, you are handing your money to an
investment professional that has experience in making investment decisions. It is the fund
managers job (a) find the best securities for the fund, given the funds stated investment
objectives; and (b) keep track of investments and changes in market conditions and adjust the
mix of portfolio, as and when required.

Portfolio Diversification:
The nuclear weapon in your arsenal for your fight against risk. It simply means that you
must spread your investment across different securities (stocks, bonds, money market
instruments, real estate etc.) and different sectors (auto, textile, information technology etc.). this
kind of diversification may add to the stability of your returns. For example during one period of
time equities might under perform but bonds and money market instruments might do well
enough to offset the effect of a slump in the equity markets. Similarly the information technology
sector might be faring poorly but the auto and textile sectors might do well and may protect your
principal investment as well as help you meet your return objectives.

Diversification of Risk:
When an investor invests directly, all the risk of the potential loss is his own, whether he
places a deposit with a company or a bank, or buys a share or debenture on his own or in any
other form. While investing in a pool of funds shared with other investors, the potential losses are
also shared with other investors. This risk reduction is one of the most important benefits of a
collective investment vehicle like the mutual fund.

Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps to avoid many problems such as
bad deliveries, delayed payments and unnecessary follow up with brokers and companies.
Mutual Funds save 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.

19

Affordability and Low Costs:


A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the
investment objective of the scheme. An investor can buy in to portfolio of equities, which would
otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with
an investment as modest Rs.500. this amount today would get you less than quarter of an Infosys
share! Thus it would be affordable for an investor to build a portfolio of investment through a
mutual fund rather than investing directly in the stock market.
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-ended schemes, Investors can get their money back promptly at net asset value
related prices from the Mutual Fund itself. With close-ended schemes, they can sell their units on
a stock exchange at the prevailing market price or avail of the facility of direct repurchase at
NAV related prices which some close-ended and interval schemes offer periodically.

Transparency:
Investors get regular information on the value of their investment in addition to disclosure
on the specific investments made by the scheme, the proportion invested in each class of assets
and the fund managers investment strategy and outlook. This level of transparency were the
investor him self sees the underling assets bought with his money is unmatched by any other
financial instrument. Thus the investor is in the know of the quality of portfolio and can invest
further or redeem depending on the kind of portfolio that has been constructed by the investment
manager.

Flexibility:
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, Investors can systematically invest or withdraw funds according to their
needs and convenience.

Choice of Schemes:
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two
ways, first it offers different types of schemes to with different needs and risk appetites:
20

secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both
debt and equity. For example an investor can invest his money in a growth fund (equity scheme)
and income fund (debt scheme) depending on his risk appetite and thus create a balanced
portfolio easily or just buy a balanced scheme.

Tax Benefits:
In general, investors pay tax on a year-to year basis. So if they were to an income and
then re-invest the income, what they would re-invest is the amount that is available after paying
tax. Mutual fund schemes, on the other hand, do not pay a tax on their income. So the same
earning in a mutual fund scheme could facilitate a higher re-investment.

Well Regulated:
All Mutual Funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investors. The operations of Mutual Funds
are regularly monitored by SEBI.

LIMITATIONS TIONS OF MUTUAL FUNDS


No Control over costs:
An investor in a mutual fund has no control over the overall cost of investing .He pays
investment management fees as long as he remains with the fund, albeit in return for the
professional management and research. Fees are usually payable as a percentage of the value of
his investments, whether the fund value is rising or declining.

No Tailor-made Portfolios:
Investors who invest on their own can build their own portfolios of shares, bonds and
other securities. Investing through funds means he delegates this decision 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.

Managing a portfolio of funds:

21

Availability of a large number of funds can actually mean too much choice for the
investor. He may again need advice on how to select a fund to achieve his objective, quite similar
to the situation when has to select individual shares or bonds to invest in.

CHAPTER- II
PROFILE OF THE ORGANISATION

22

ABOUT THE NETWORTH


Ever since its inception in 1993, Networth Stock Broking Limited (NSBL) has sought to
provide premium financial services and information, so that the power of investment is vested
with the client. We equip those who invest with us to make intelligent investment decisions,
providing them with the flexibility to either tap into our extensive knowledge and expertise, or
make their own decisions.
NSBL made its debut into the financial world by servicing Institutional clients, and
proved its high scalability of operations by growing exponentially over a short period of time.
Now, powered by a top-notch research team and a network of experts, we provide an array of
retail broking services across the globe - spanning India, Middle East, Europe and America. We
are a Depository participant at Central Depository Services India (CDSL) and National Securities
Depository (NSDL).
Our strong support, technology-driven operations and business units of research,
distribution and advisory coalesce to provide you with a one-stop solution to cater to all your
broking and investment needs. Our customers have been participating in the booming
commodities markets with our membership at the Multi Commodity Exchange of India (MCX)
and National Commodity & Derivatives Exchange (NCDEX) through Networth Stock.Com Ltd.
NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the
Bombay Stock Exchange Ltd (BSE) on the Capital Market and Derivatives (Futures & Options)
segment. It is also a listed company at the BSE.
Networth Stock Broking Limited (NSBL) has sought to provide premium financial
services and information

23

NETWORTH TEAM OF EXPERTS


Owing to the vision and expertise of our team of experts, Networth has
established itself as one of the premier financial services organization in India. Networth
professionals form the backbone of the organization, pooling together their expertise from top
financial service and broking houses.
A strong team of professionals experienced and qualified pool of human resources drawn
from top financial service & broking houses form the back bone of our sizeable infrastructure.
Highly technology oriented, the companys scalability of operations and the highest level of
service standards has ensured rapid growth in the number of locations & the clients serviced in a
very short span of time
.
S.P JAIN
(Chairman & Managing Director)

The primary force behind the founding and the listing of


Networth Stock Broking Ltd., S.P. Jain has propelled the
company forward From its very origins. With over 14
years of Experience in the Capital market and Financial
Services, he is at the helm of NSBL, working Closely
with the research division and guiding the organization to
the forefront of financial services in India.

SUHAS BADE
(Director)

Mr. Suhas Bade heads NSBLs Investment. Banking


Division. As a Management Consultant, Mr. Bade has
lead organizations Through the various stages of their
lifecycle To achieve and surpass growth targets. His
Wide-ranging experience in the field includes Funds
mobilization, placement of equity and PR services for
SME.

SATISH PASARI
(Country Head)

From a career in consumer durables (with four years of


experience with in Videocon Distribution and Advisory
International) to a comprehensive knowledge and
experience in the equity markets, Mr. Satish Pasari has
acquired a gamut of experience across sectors. Over the
span of 11 years, Mr. Pasari has handled distribution of
financial services in retail, HNI and Institutional
24

segments. He has previously Worked with Karvy Stock


Broking Ltd.
RAJ BHANDARI
(Director and Head Dealing)

Mr. Raj Bhandari has over 8 years of Capital


Market experience at NSBL. His expertise Includes
dealing and servicing the institutional And retail
segments.

SATHYAN RAJAN
(Director & Head-sales)

With over a decade in the industry and experience in


various capacities, Mr. Sathyan Rajan brings to NSBL
insights from the length And breathe of the financial
sector. He has Previously worked with Karvy Stock
Broking Ltd., one of the largest retail networks in the
Country, and was responsible for establishing the
companys overseas network. His transition from
research to sales marked a Significant step in his career.

GIRISH V DEV
(Director & COO)

Over the span of 14 years, Mr. Girish Dev has acquired


an in-depth knowledge of theCapital and Commodities
Market. His experience covers a wide spectrum, ranging
from Arbitrage & Client dealing across several
exchanges and client categories to setting up operations,
including those of a Foreign Brokerage and one of the
first major e-broking ventures in the country. He has led
the entire operations of full-scale financial services
intermediaries including compliance, e-business,
distribution of non-equity products and book-building
IPO activities, and has majorily contributed in
developing a technology-sustained infrastructure that
supports a range of financial products & services.

J. GOPAL KRISHNAN
Mr. J. Gopals 15 years of Capital Market experience
(Vice President& Southern Region Head) is replete with the distinguished leadership roles he has
played in the organizations he was involved with. At
Anush Shares & Securities Pvt. Ltd., where he served for
12 years, he was the Head of Operations. He has also
headed the finance, trading & settlement operations at
Karvy Stock Broking Ltd., where he worked for 3 years.

25

CHAPTER- III

About AMFI (Association of Mutual Funds in India).


Role and concepts
Types and objectives
Risk associated with mutual funds

26

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI).


Association of Mutual Funds in India (AMFI) is an apex body of asset management
companies of the Mutual Fund registered in India. It was incorporated on the August 22nd 1995
as a non-profit making organization. It is dedicated to developing the Indian Mutual Fund
industry on professional, healthy & ethical lines & to enhance and maintain standards in all areas
with a view to protecting & promoting the interests of Mutual Funds & their unit holders.

OBJECTIVES:

To recommend & implement healthy business practices, ethical code of conduct, standard
principles & practices to be followed by the members of the company & others engaged
in the activities of Mutual Funds & Asset Management including agencies connected or
involved in the field of capital Markets & financial Services.

To promote high standards of commercial honor & encourage & promote among
members & others the observance of securities laws including regulations & directives
issued by Securities & Exchange Board of India (SEBI) & function in
the best of interest of the investing public.

To help in setting up professional standards for providing efficient services & establishing
standard practices for Mutual Fund & Asset Management activities.

To bring about better co-ordination in the field of Mutual Funds & Asset Management
Industry.

To promote & develop sound, progressive & dynamic principles, practices & conventions
in the activities of Mutual Fund & Asset Management.

To render assistance & provide common services & utilities to the persons engaged in the
field of Mutual Funds & Asset Management.

27

ROLE OF MUTUAL FUND


Mutual Funds & Financial Market:
In the process of development Indian mutual funds have emerged as strong financial
intermediaries & are playing a very important role in bringing stability to the financial system &
efficiency to resource allocation. Mutual Funds have opened new vistas to investors & imparted
a much-needed liquidity to the system. In the process they have challenged the hitherto role of
commercial banks in the financial market & national economy.

Mutual Fund & Capital Market:


The active involvement of Mutual Funds in promoting economic development can be
seen not only in terms of their participation in the savings market but also in their dominant
presence in the money & capital market. A developed financial market is critical to overall
economic development, & Mutual Funds play an active role in promoting a healthy capital
market. The asset holding pattern of mutual funds in the USA indicates the dominant role of
Mutual Funds in the capital market & money market. More over they have also rendered critical
support to securities mortgage loans & municipal bond market in the USA. In the USA, Mutual
Funds provide very active support to the secondary market in terms of purchase of securities.
Investors preferences pattern in India has undergone a tremendous change during recent
times, along with the changes in the share of financial assets in the total annual savings. Indian
investors have moved towards more liquid & growth oriented trade able instruments likes
shares/debentures & units of Mutual Funds. The shift is asset holding pattern of investors has
been significantly influenced by the equity & unit culture while the holders of company shares
& debentures are concentrated in the urban areas, small/medium investors in the semi-urban &
rural areas are tending towards Mutual Funds. Mutual Funds in India have certainly created
awareness among investors about equity oriented investments & its benefits.

28

CONCEPT OF MUTUAL FUND


A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market instruments
such as shares, debentures and other securities. The income earned through these investments
and the capital appreciation realised are shared by its unit holders in proportion to the number of
units owned by them. Thus a Mutual Fund is the most suitable investment for the common man
as it offers an opportunity to invest in a diversified, professionally managed basket of securities
at a relatively low cost. The flow chart below describes broadly the working of a mutual fund.

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 across a wide cross-section of industries and sectors
and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in
the same direction in the same proportion at the same time. 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.
The profits or losses are shared by the investors in proportion to their investments. 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
and Exchange Board of India (SEBI) which regulates securities markets before it can collect
funds from the public.
29

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset
Management Company (AMC) and custodian. The trust is established by a sponsor or more than
one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property
for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI
manages the funds by making investments in various types of securities. Custodian, who is
registered with SEBI, holds the securities of various schemes of the fund in its custody. The
trustees are vested with the general power of superintendence and direction over AMC. They
monitor the performance and compliance of SEBI Regulations by the mutual fund.
SEBI Regulations require that at least two thirds of the directors of trustee company or
board of trustees must be independent i.e. they should not be associate with the sponsors. Also,
50% of the directors of AMC must be independent. All mutual funds are required to be registered
with SEBI before they launch any scheme.

TYPES OF MUTUAL FUND SCHEMES


There are a wide variety of Mutual Fund schemes that cater to investors need, whatever
your age, financial position, risk tolerance and return expectations. Whether as the foundation of
your investment program or as a supplement, Mutual Fund schemes can help you meet your
financial goals.
By Structure Schemes can be classified into 3 types

OPEN-ENDED SCHEMES:
These do not have a fixed maturity. Investors deal directly with the Mutual Fund for their
investments and redemptions. The key feature is liquidity. They can conveniently buy and sell
their units at Net Asset Value (NAV) related prices.

CLOSE-ENDED SCHEMES:
Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called
close-ended schemes. Investors can invest directly in the scheme at the time of the initial issue
and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are
listed. The market price at the stock exchange could vary from the schemes NAV on account of
demand and supply situation, unit holders expectations and other market factors. One of the
characteristics of the close-ended schemes is that they are generally traded at a discount to NAV;
but closer to maturity, the discount narrows. Some close-ended schemes give them an additional
option of selling their units directly to the Mutual Fund through periodic repurchase at NAV
related prices. SEBI Regulations ensure that at least one of the two exit routes is provided to the
investor.

INTERVAL SCHEMES:
These combine the features of open-ended and close- ended schemes. They may be traded
on the stock exchange or may be open for sale or redemption during predetermined intervals at
NAV related prices.
30

BY INVESTMENT OBJECTIVE
Growth//Equity Schemes:
Aim to provide capital appreciation over the medium to long term. These schemes
normally invest a majority of their funds in equities and are willing to bear short- term decline in
value for possible future appreciation. These schemes are not for investors seeking regular
income or needing their money back in the short-term.
Income Schemes:
Aim to provide regular and steady income to investors. These schemes generally invest in
fixed income securities such as bonds and corporate debentures. Capital appreciation in such
schemes may be limited.
Balanced Schemes:
Aim to provide both growth and income by periodically distributing a part of the income
and capital gains they earn. They invest in both shares 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.
Money Market Schemes:
Aim 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 inter- bank call money. Returns on these schemes may fluctuate,
depending upon the interest rates prevailing in the market.
Tax Saving Schemes:
These schemes offer tax rebates to the investors under tax laws as prescribed from time to
time. This is made possible because the Government offers tax incentives for investment in
specified avenues. For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes.
Recent amendments to the Income Tax Act provide further opportunities to investors to save
capital gains by investing in Mutual Funds. The details of such tax savings are provided in the
relevant offer documents.
Special Schemes:
This category includes index schemes that attempt to replicate the performance of a
particular index, such as the BSE Sensex or the NSE 50, or industry specific schemes (which
invest in specific industries) or Sectoral schemes (which invest exclusively in segments such as
A Group shares or initial public offerings). Index fund schemes are ideal for investors who are
satisfied with a return approximately equal to that of an index. Sectoral fund schemes are ideal
for investors who have already decided to invest in a particular sector or segment. Keeping in
mind that any one scheme may not meet all the investors requirements for all time

31

RISKS OF INVESTING IN MUTUAL FUNDS


Risk:
Every type of investment, including mutual funds, involves risk. Risks refer to the
possibility that you will lose money (both principal and any earnings) or fail to make money on
an investment.
Following is a glossary of some risks to consider when investing in mutual funds.
Call Risk. The possibility that falling interest rates will cause a bond issuer to redeemor call
its high-yielding bond before the bonds maturity date.
Country Risk The possibility that political events (a war, national elections), financial problems
(rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will
weaken a countrys economy and cause investments in that country to decline.
Credit Risk. The possibility that a bond issuer will fail to repay interest and principal in a timely
manner. Also called default risk.
Currency Risk The possibility that returns could be reduced for Americans investing in foreign
securities because of a rise in the value of the U.S. dollar against foreign currencies. Also called
exchange-rate risk.
Income Risk. The possibility that a fixed-income funds dividends will decline as a result of
falling overall interest rates.
Industry Risk . The possibility that a group of stocks in a single industry will decline in price
due to developments in that industry.
Inflation Risk The possibility that increases in the cost of living will reduce or eliminate a
funds real inflation-adjusted returns.
Interest Rate Risk The possibility that a bond fund will decline in value because of an increase
in interest rates.

32

CHAPTER-IV

Calculation of NAV
Selection of Mutual Fund company
Selection of Mutual Fund schemes
Comparison of Mutual fund schemes

33

CALCULATION OF NAV
Analysis and evaluation of the schemes
The basic tool to evaluate the exact worth of fund is Net Asset Value (NAV). NAV reveals
the intrinsic worth of a fund on a continuous basis. It is the market value of the mutual funds
unit. Mutual funds are like babbles you sit ask and watch them grow. Mutual funds too require
careful monitoring does your fund declare its Net Asset Value and portfolio regularly?
1. Is it nimble-footed to spot opportunity to enter a stock and exit at the first Whit of trouble?
2. Are you subsidizing the redemption run on your fund?
3. Do you know the changes in the exit policy?
4. Have the sponsors informed you that the fund is up for sales?
If stock markets are risks, investing in mutual funds is no childs play. But no need to
panic help is just a click away.
At last, you can sleep soundly. Because you know how your money is being put to use
and watch it grows just like you baby.
The term NAV used by mutual funds, master shares and other investment trust to indicate
the net tangible assets value of each share on a particular date. It can also means the total market
price of all the shares held by a mutual funds less any liabilities divided by total number of
outstanding shares with every change in share price, the NAV of mutual funds shares changes.
It is computed by the formulae given below:
NAV=Assets - liabilities / No of units outstanding.
More specifically it will be
NAV = (Value of investment + Receivable + Accrued incomes +
Other Current Asset) - (Liability + Accrued expenses) / No of units outstanding

34

Simply stated, NAV represents the fair value of units in a mutual fund. Usually the fund
units at the time of application are sold at public offering price (POP). The difference between
NAV and POP is the sales charges recovered by the Asset Management company from the
scheme to cover cost of raising funds on a continuous basis. The POP is generally calculated as
follows:
POP = NAV / 1 - Sales charge
Example:
BR fund has Rs. 5000000 worth Assets and Rs. 15, 00,000 liabilities with a share capital
of 7 Lacks divided into 70 equity shares pf Rs. 10 each. What is the NAV?
NAV = Total Assets - Total Liabilities / No of equity shares.
Total Assets 5000000
Total Liabilities 1500000
No of Shares Outstanding:
= Scheme size / Face value of shares
= 7, 00,000/10
= 70,000
NAV = 50, 00,000-15, 00,000/70,000
NAV= Rs. 50 per share

35

FREQUENTLY USED TERMS


Net Asset (NAV):
Net Asset value is the market value of assets of the scheme minus its liabilities. The per
unit NAV is the net asset value of the scheme divide by the number of units Outstanding
valuation date.
Net assets of scheme
NAV= ----------------------------------------Number of units outstanding
The price you pay when you invest in a scheme. Also called offer price. It may Include a
sale load.
Repurchase Price:
Is the price at which a close-ended scheme repurchases its unit and it may include a backend load. This is also called Bid Price
Redemption Price:
Is the price at which a open-ended schemes repurchases their units and closed ended
schemes redeem their units on a maturity. Such prices are NAV related.
Sales Load /Entry Load:
Is a charge collected by a scheme when it sells the units? Also called Fronted load.
Schemes that do not charge a load are called NO Load schemes.
Repurchase chase / Back-End / Exit Load:
Is a charge collected by a scheme when it buys back the units from the unit holders?

36

SELECTION OF MUTUAL FUND COMPANY


UNIT TRUST OF INDIA (UTI)
ASSET MANAGEMENT COMPANY PRIVATE LIMITED
UTI Mutual Fund is managed by UTI Asset Management Company Private Limited
(Estb: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private Limited for
managing the schemes of UTI Mutual Fund and the schemes transferred/ migrated from UTI
Mutual Fund.
The UTI Asset Management Company has its registered office at : UTI Tower, Gn Block,
Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide professionally managed
back office support for all business services of UTI Mutual Fund (excluding fund management)
in accordance with the provisions of the Investment Management Agreement, the Trust Deed, the
SEBI (Mutual Funds) Regulations and the objectives of the schemes. State-of-the-art systems
and communications are in place to ensure a seamless flow across the various activities
undertaken by UTI AMC.
UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)
Regulations, 1993 on February 3 2004, for undertaking portfolio management services and also
acts as the manager and marketer to offshore funds through its 100 % subsidiary, UTI
International Limited, registered in Guernsey, Channel Islands.
UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset
Management Company presently manages a corpus of over Rs. 34500 Crore.
UTI Mutual Fund has a track record of managing a variety of schemes catering to the
needs of every class of citizenry. It has a nationwide network consisting 70 UTI Financial
Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. With a view to
reach to common investors at district level, 4 satellite offices have also been opened in select
towns and districts. It has a well-qualified, professional fund management team, who has been
highly empowered to manage funds with greater efficiency and accountability in the sole interest
of unit holders. The fund managers are also ably supported with a strong in-house equity research
department. To ensure better management of funds, a risk management department is also in
operation.
It has reset and upgraded transparency standards for the mutual funds industry. All the
branches, UFCs and registrar offices are connected on a robust IT network to ensure costeffective quick and efficient service. All these have evolved UTI Mutual Fund to position as a
dynamic, responsive, restructured, efficient, and transparent and SEBI compliant entity.

37

BIRLA SUN LIFE


ASSET MANAGEMENT COMPANY LTD. ( BSLAMC),
The investment managers of Birla Mutual Fund, is a joint venture between the Aditya
Birla Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings
together the Aditya Birla Groups experience in the Indian market and Sun Lifes global
experience.
Since its inception in 1994, Birla Mutual Fund has emerged as one of Indias leading
Mutual Funds with over Rs. 16,500 crores * of assets under management and an investor base in
excess of 8 lakhs. The fund offers a range of investment options, which include diversified and
sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide
range of debt and treasury products and offshore funds.
BSLAMC is the first asset management company in India to be awarded the coveted ISO
9001:2000 certification by DNV, Netherlands. BSLAMC also provides private Wealth
Management services.
BSLAMC follows a long-term, fundamental research based approach to investment. The
approach is to identify companies, which have excellent growth prospects and strong
fundamentals. The fundamentals include the quality of the companys management,
sustainability of its business model and its competitive position, amongst other factors. Birla Sun
Life Asset Management Company has one of the largest team of research analysts in the industry,
dedicated to tracking down the best companies to invest in.
Birla Sun Life AMC strives to provide transparent, ethical and research-based
investments and wealth management services.

38

SELECTION OF SCHEMES
UTI SCHEMES
1. UTI- Opportunities Fund :
This scheme seeks to generate capital appreciation and/or income distribution by
investing the funds of the scheme in equity shares and equity-related instruments.
2. UTI-Bond Fund:
Open-end 100% pure debt fund, which invests in rated corporate debt papers and
government securities with relatively low risk and easy liquidity.
3. UTI-Balanced Fund:
An open-ended balance fund investing between 40% to 60% in equality related securities
and the balance in debt (fixed income securities) with a view to generate regular income together
with capital appreciation.

BSL SCHEMES
1. Birla India Opportunities Fund :
Is an open-ended scheme that invests in foreign exchange earning companies? BIOF aims to
identify companies that seek to utilize Indias low cost and high quality resources to service the
needs of global customers. The scheme, thus, allows investors to participate in Indias emerging
global outsourcing theme and seeks innovative ways of investing in only certain types of
companies and sectors that have years of consistent growth ahead of them
2. Birla Sun Life Short Term Fund :
A scheme with an investment objective to generate optimal returns with high liquidity
through active management of the portfolio by investing in high quality Debt and Money Market
Instruments.
3. Birla Balance :
Birla Balance strikes a balance between the growth that equity offers and the safety that debt
provides, thus seeking to maximize returns on your investments at moderate levels of risk.
Equity investments are best for the long-term growth of capital. However, it is still volatile in the
short term. Debt investments on the other hand are generally more stable.
39

SCHEMES DETAILS
UTI-OPPORTUNITIES FUND:-

Type Of Scheme

: Open Ended Equity Fund

Date Of Inception

: 20/07/2005

Scheme Objective

: This scheme seeks to generate capital appreciation and or income


distribution by investing the funds of the scheme in equity shares
and equity-related instruments. The main focus of this scheme is to
capitalize on opportunities arising in the market by responding to
the dynamically changing Indian economy by moving its
investments amongst different sectors as prevailing trends change.

Asset Allocation

: 90- 100% in Equity & Equity Related Instruments &


0-10% in Debt Instruments and Money Market
Instruments

Face Value

: Rs.10

Min Investment Amt

: Minimum initial investment is Rs.5,000/-. Subsequent


minimum investment under a folio is Rs.1,000/- and in
multiples of Re.1/- thereafter with no upper limit.

Plan

Latest
INCOME RETAIL

Nav

Date

12.52

26/04/2007

GROWTH RETAIL 14.25

26/04/2007

Entry Load

: Entry Load 2.25% for < Rs. 25 lacks, 0.50% for =>
Rs. 25 lacks but < Rs. 2 crore, NIL for => Rs. 2 crore

Exit Load

: Exit Load Nil

40

UTI-BOND FUND:-

Type Of Scheme

: Open Ended Income Fund

Date Of Inception

: 04/05/1998

Scheme Objective

: Open-end pure debt scheme, which invests in rated


corporate Debt papers and government securities with
relatively low risk and easy liquidity.

Asset Allocation

: 100% in Debt

Face Value

: Rs.10/-

Min Investment Amt

: Regular Growth Plan Rs. 1,000/- -Fixed Amount


Withdrawal Rs. 30,000/- Variable Withdrawal
Rs. 30,000/- Income Plan Rs. 20,000/-.

Plan

Latest

Nav

Date

GROWTH RETAIL 21.7374

26/04/2007

INCOME RETAIL 10.8905

26/04/2007

Entry Load

: Entry Load Nil (For Investments Made On Or After


01/11/2003)

Exit Load

:FOR EXIT LOAD PLEASE REFER OFFER

DOCUMENT

41

UTI- BALANCED FUND:-

Type Of Scheme

: Open Ended Balanced Fund

Date Of Inception

: 02/01/1995

Scheme Objective

: Aims to invest in portfolio of equity/equity related


securities and fixed income securities (debt & money
market instrument) with a view to generating regular
income together with capital appreciation

Asset Allocation

: Equity & Equity related instruments: 40-75% and Debt &


(money market instruments including securitized debt):
25-60%

Face Value

: Rs. 10

Min Investment Amt

: Growth Option Rs. 1000/- , Income Option Rs. 5000/

Plan

Latest

Nav

Date

GROWTH RETAIL 55.3

26/04/2007

INCOME RETAIL

26/04/2007

19.67

EntryLoad

: ENTRY LOAD NIL FOR INVESTMENTS MADE


AFTER 10.10.2004 AND AMOUNT >=
Rs2 CRORE.,ENTRY LOAD 2.25% FOR
INVESTMENTS MADE AFTER 10.10.2004 AND
AMOUNT < Rs 25 LAKHS.

Exit Load

: Exit Load 2% (For Investment Before 01.11.2003),


Exit Load Nil (For Investments Made On Or
After 01/11/2003)

42

BIRLA INDIA OPPORTUNITIES FUND:-

Type Of Scheme

: An Open ended Growth Scheme

Date Of Inception

: 27-Dec-1999

Scheme Objective

: To achieve superior long-term growth of capital by


investing in shares of companies that do one or more of
the following: 1. Leverage Indias intellectual capital for
providing services, research and creative inputs. 2. Seek to use
current and impending changes in patent laws /import tariffs /
quotas to supply goods and services. 3.Leverage Indias lower
labour costs for providing services and manufactured goods. 4.
Leverage Indias large population of English speaking people for
providing services.

Asset Allocation

: 70 - 100% in equity and equity related instruments.


Upto 30% in cash, money market instruments and short
term debt instruments.

Min. sub. amt.

: Rs.5,000/- and in multiples of Re. 1/- thereafter

Min. addl. invest.

: Rs.1,000/- and in multiples of Re. 1/- thereafter

Entry Load

: For Purchase / switch in of units less than Rs.5 Crores in value


2.25% For Purchase / switch in of units equal to or greater than Rs.
5 Crores in value: NIL

Exit Load

: For any redemption/ Switch-in of units within six months from


the date of allotment: 1%

43

BIRLA DYNAMIC BOND FUND:-

Type Of Scheme

: Open ended income scheme

Date Of Inception

: November 27, 2004

Scheme Objective

: The objective of the scheme is to generate optimal


Returns with high liquidity through active management
of the portfolio by investing in High Quality Debt and
Money Market Instruments.

Asset Allocation

: 0 -100% in Government Securities, Corporate Bonds, Cash/liquid


instruments including money market instruments & short term debt
papers upto a maturity of
1 Year

Min.sub. amt.

: Rs.5,000/- and in multiples of Re. 1/- thereafter

Min. addl. invest.

: Rs.1,000/- and in multiples of Re. 1/- thereafter

Entry Load

: NIL

Exit Load

: NIL

44

BIRLA BALANCE:-

Type Of Scheme

: An Open ended Balanced Scheme

Date Of Inception

: 12-Oct-1999

Scheme Objective

: To balance income requirement with growth of capital


through balance mix of investment in equity and debt at
relatively moderate levels of risk through a diversified
research based investment approach.

Asset Allocation

: 50 - 75% in equity and equity related instrument.


25 - 50% in debt and money market instruments.

Min. sub. amt.

: Rs.5,000/- and in multiples of Re. 1/- thereafter

Min. addl. invest.

: Rs.1,000/- and in multiples of Re. 1/- thereafter

EntryLoad :

For Purchase / switch in of units less than Rs. 5 Crores


in value: 2.25% For Purchase / switch in of units equal
to or greater than Rs. 5 Crores in value: NIL

Exit Load

: NIL

45

COMPARISON OF MUTUAL FUND SCHEMES


METHODS OF EVALUATION OF MUTUAL FUND SCHEMES:
The following methods are used to identify the performance of the portfolio.
1. Sharpe model.
2. Treynors model
3. Jensens Index model.

1. SHARPE MODEL:
It depends on total risk rate of the portfolio.Return of the security compared with risk free
rate of return and the excess return of security is treated as premium or reweard to the
investor.The risk of the premium is calculated by comparing portfolio risk rate. If there is no
premium Sharpe index shows negative value(-).In such a case the portfolio is not treated as
efficient portfolio.
Sharpes ratio(Sp) = rp - rf / p
Where,
Sp = Sharpe measure
rp = Return of the portfolio
rf = risk free rate of return
p = Portfolio standard deviation.
The major advantage this method is that it uses the volatility of the portfolio return
instead of measuring the volatility against a benchmark (i.e., index). This method is also called
Reward to Variability method. Portfolio with higher Sharpes measure is preferred.

46

2. TREYNORS MODEL :
It is another method to measure the portfolio performance, where systematic risk is used
instead of total risk. It is also called Reward to volatility.
Treynor ratio (Tp) = rp - rf / p
Where,
Tp = Treynors portfolio performance model.
rp = Return of the portfolio
rf = Risk free rate of return
p = Portfolio beta.
Higher the value of the Treynors measure, the better is the portfolio performance.

3. JENSENS INDEX MODEL:


Jensens measure is an absolute measure of performance, adjusted for risk. It assesses the
portfolio managers predictive ability. The objective is to calculate the return that should be
expected for the fund at a given level of risk using CAPM model and comparing it with the
actual return realized over the period.
Jensen Ratio (Jp) = rp [ rp+ p (rm rf) ]
Where,
Jp = Jensens index performance model
rp = Return of the portfolio
rf = Risk free rate of return
p = Portfolio beta
rm = return on market.
Positive Jensens measure indicates that superior performance of the fund is due to
superior predictive ability of the fund manager.
Negative Jensens measure indicates that poor performance of the fund is due to poor
predictive ability of the fund manager.
The higher the ratio, the better the performance
47

UTI OPPORTUNITES FUND


months

Uti(nav)

may
june
july
august

15.71
12.82
12.45
12.25

1467.84
1247.92
1278.05
1273.99

september
october
november
december
januray
february
march
aprail

13.32
14.04
14.14
14.2
14.05
14.48
13.28
12.57
163.31

Total
Average
beta
RF
SD

BSe200

0.967
0.08
6.93

UTT (X)

X2

BSE (Y)

Y2

XY

-18.4
-2.89
-1.61

16.64818
1.138182
-0.14182

277.162
1.295458
0.020112

-14.98
2.41
-0.32

235.9296
4.1616
0.4761

255.7161
-2.32189
-0.09785

10.77
5.55
6.74
4.13
0.85
2.52
-8.6
-4.94

15.36
-2.04
0.69
10.39
-5.17
-6.37
-3.75
-0.47
-2.15
8.97
5.32

1411.2
1489.46
1589.88
1655.52
1669.59
1711.74
1564.49
1487.13

8.73
5.41
0.71
0.42
-1.06
3.06
-8.29
-5.35

-10.4818
-7.16182
-2.46182
-2.17182
-0.69182
-4.81182
6.538182
3.598182

109.8685
51.29164
6.060549
4.716794
0.478612
23.15359
42.74782
12.94691

107.9521
26.7289
40.5769
14.0625
0.2209
4.6225
80.4609
28.3024

108.9061
37.0266
15.68178
8.144318
0.325155
10.34541
58.64749
19.14233

17846.81

-19.27
1.75182

529.742

4.13

543.4944

511.5155

48.15836

0.375455

49.40858

7.03

1800
1600
1400
1200
1000

Uti(nav)

800

BSe200

600
400
200
0
1

10

11

12

13

48

BIRLA INDIA OPPORTUNITES FUND


Months
May
June
July
August

BSI (Nav)
48.35
41.05
39.62
40

BSE200
1467.84
1247.92
1278.05
1273.99

43.81
45.28
49.19
51.46
53.2
54.54
51.47
48.41

September
October
November
December
January
February
March
April
Total
Average
Beta
RF
SD

BSI(X)

BSE
(Y)

XY

-15.1
-3.48
0.96

15.35818
3.738182
-0.70182

235.8737
13.974
0.492549

-14.98
2.41
-0.32

235.9296
4.1616
0.4761

235.9017
-7.62589
-0.48425

10.77
5.55
6.74
4.13
0.85
2.52
-8.6
-4.94

15.36
-2.04
0.69
10.39
-5.17
-6.37
-3.75
-0.47
-2.15
8.97
5.32

1411.2
1489.46
1589.88
1655.52
1669.59
1711.74
1564.49
1487.13

9.53
3.36
8.64
4.61
3.38
2.52
-5.63
-5.95

-9.27182
-3.10182
-8.38182
-4.35182
-3.12182
-2.26182
5.888182
6.208182

85.96661
9.621276
70.25488
18.93832
9.745749
5.115821
34.67069
38.54152

107.9521
26.7289
40.5769
14.0625
0.2209
4.6225
80.4609
28.3024

96.33419
16.0364
53.39218
16.31932
1.467255
4.862909
52.81699
33.02753

566.38

17846.81

2.84
0.258182

523.1952

4.13

543.4944
49.40858

502.0483

0.096
0.08
6.89

7.03

1800
1600
1400
1200
1000

BSI (Nav)

800

BSE200

600
400
200
0
1

10

11

12

49

UTI BALANCE FUND


MONTH

BSI (NAV)

BSE 200

BSI
(X)

BSE (Y)

235.9296
4.1616
0.4761

189.0816
0.4692
-0.2484

107.9521
26.7289
40.5769
14.0625
0.2209
4.6225
80.6404
28.1961

79.2757
28.9003
27.9643
5.8125
0.4606
2.107
67.7092
9.5049

543.5676

411.0369

MAY
JUNE
JULY
AUGUST

53.92
47.1
47.05
47.06

1467.84
1247.92
1278.05
1273.99

-12.62
0.7
0.78

12.31
-0.23
-0.36

151.5361
0.0529
0.1296

-14.98
2.41
-0.32

SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL

50.49
53.14
55.25
55.92
56.28
56.64
52.18
51.07

1411.2
1489.46
1589.88
1655.52
1669.59
1711.74
1564.49
1487.13

6.99
5.4
5.16
2.62
0.04
0.53
-4.16
-1.99

-7.63
-5.59
-4.39
-1.55
-0.98
-0.98
7.54
1.79

58.2169
31.2481
19.2721
2.4025
0.9604
0.9604
56.8516
3.2041

10.77
5.55
6.74
4.13
0.85
2.52
-8.6
-4.94

15.36
-2.04
0.69
10.39
-5.17
-6.37
-3.75
-0.47
-2.15
8.98
5.31

TOTAL

626.1

17846.81

3.45

324.8347

4.13

AVERAGE
BETA
RF
SD

0.754
0.08
5.43

7.03

XY

1800
1600
1400
1200
1000

BSI (NAV)
BSE 200

800
600
400
200
0
1

10 11 12 13 14 15

50

BIRLA BALANCE FUND


MONTH

BSI (NAV)

BSE 200

BSI
(X)

BSE (Y)

235.9296
4.1616
0.4761

198.7584
0.7956
-0.3243

107.9521
26.7289
40.5769
14.0625
0.2209
4.6225
80.6404
28.1961

69.3013
26.3153
30.8945
8.625
-0.1316
0.473
40.1406
12.213

543.5676

387.0608

MAY
JUNE
JULY
AUGUST

26.14
22.84
23
23.18

1467.84
1247.92
1278.05
1273.99

-12.62
0.7
0.78

12.94
-0.39
-0.47

167.4436
0.1521
0.2209

-14.98
2.41
-0.32

SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL

24.8
26.14
27.49
28.21
28.22
28.37
27.19
26.65

1411.2
1489.46
1589.88
1655.52
1669.59
1711.74
1564.49
1487.13

6.99
5.4
5.16
2.62
0.04
0.53
-4.16
-1.99

-6.67
-5.09
-4.85
-2.3
0.28
-0.22
4.47
2.3

44.4889
25.9081
23.5225
5.29
0.0784
0.0484
19.9809
5.29

10.77
5.55
6.74
4.13
0.85
2.52
-8.6
-4.94

15.36
-2.04
0.69
10.39
-5.17
-6.37
-3.75
-0.47
-2.15
8.98
5.31

312.23

17846.81

3.45

292.4238

4.13

0.712
0.08
5.16

7.03

TOTAL
AVERAGE
BETA
RF
SD

XY

1800
1600
1400
1200
1000

BSI (NAV)
BSE 200

800
600
400
200
0
1

10 11 12 13 14

51

UTI BOND FUND


MONTHS

UTI (NAV)

364 T BILL

UTI (X)

364 (Y)

XY

MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER

15.71
12.82
12.45
12.25
13.32
14.04
14.14

5.74
5.74
5.74
5.74
5.74
5.74
5.74

0.29
0.1
0.38
0.81
0.8
0.56

0.08
0.27
-0.01
-0.44
-0.44
-0.19

0.0064
0.0729
0.0001
0.1936
0.1936
0.0361

0
0
0
0
0
0

3.9204
3.9204
3.9204
3.9204
3.9204
3.9204

0.1584
0.5346
-0.0198
-0.8712
-0.8712
-0.3762

DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL

14.2
14.05
14.48
13.28
12.57

6.99
6.99
6.99
6.99
6.99

0.7
-0.05
0.28
-0.28
0.46

-0.33
-0.42
0.09
0.65
-0.09

0.1089
0.1764
0.0081
0.4225
0.0081

21.78
0
0
0
0

1.98
1.98
1.98
1.98
1.98
1.98
19.8
1.98
1.98
1.98
1.98

392.04
3.9204
3.9204
3.9204
3.9204

6.534
-0.8316
0.1782
1.287
-0.1782

TOTAL

163.31

75.13

4.05

1.2267

21.78

431.244

5.544

AVERAGE
BETA
RF
SD

0.368181818

0.111518

1.98

39.204

0.016
0.05
0.33

6.26

18
16
14
12
10

UTI (NAV)

364 T BILL

6
4
2
0
1

10

11

12

13

14

52

BIRLA DYANMIC BOND FUND


BSI
(NAV)

MONTH
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
TOTAL
AVERAGE
BETA
RF
SD

364
T.BILL

BSI (X)

364 (Y)

XY

10.81
10.85
10.91
10.97
11.03
11.12
11.19
11.28
11.31
11.35
11.35
11.45

5.74
5.74
5.74
5.74
5.74
5.74
5.74
6.99
6.99
6.99
6.99
6.99

0.37
0.55
0.55
0.55
0.82
0.63
0.8
0.27
0.35
0
0.88

0.15
-0.03
-0.03
-0.02
-0.29
-0.1
-0.28
0.26
0.17
0.52
-0.35

0.0225
0.0009
0.0009
0.0004
0.0841
0.01
0.0784
0.0676
0.0289
0.2704
0.1225

0
0
0
0
0
0
21.78
0
0
0
0

1.98
1.98
1.98
1.98
1.98
1.98
-19.8
1.98
1.98
1.98
1.98

3.9204
3.9204
3.9204
3.9204
3.9204
3.9204
392.04
3.9204
3.9204
3.9204
3.9204

0.297
-0.0594
-0.0594
-0.0396
-0.5742
-0.198
5.544
0.5148
0.3366
1.0296
-0.693

133.62

75.13

5.77

0.6866

21.78

431.244

6.0984

0.06

1.98

0.52
0.014
0.05
0.24

39.19

6.26

14
12
10
8

BSI (NAV)
364 T.BILL

6
4
2
0
1

10

11

12

13

14

53

CALCULATIONS OF EQUITY FUNDS


UTI
CALCULATION
(-1.75-0.08)
6.93

METHODS
SHARPE

RESULT
-0.264

TREYNOR

(-1.75-0.08)
0.967

-1.833

JENSEN

-1.75 - [-1.75 +
0.967 (0.38-0.08)]

1.984

BIRLA
CALCULATION
(0.26-0.08
6.89
(0.26 -0.08)
0.096
0.26-[0.29+0.096
(0.38-0.08)]

RESULT
0.248
0.573
-0.144

INTERPRETATION:
Birla India Opportunities Fund is better compared to UTI
Opportunities Fund while considering averages of these funds.

<

<9

<i

SHARPE
TREYNOR

<<

UTI

BIRLA

JENSEN

<
<<
<
<<

54

CALCULATIONS OF BALANCE FUNDS


UTI
CALCULATION
(-0.34-0.08)
5.43
(-0.34-0.08)
0.754
-0.34-[0.34+0.754
(0.38-0.08)]

METHODS
SHARPE
TREYNOR
JENSEN

RESULT
-0.077
-0.557
0.668

BIRLA
CALCULATION
(0.31-0.08)
5.16
(0.31-0.08)
0.712
0.31-[0.31+0.712
(0.38-0.08)]

RESULT
0.044
0.323
0.214

INTERPRETATION:
Birla in balance fund is good compared to UTI Balance fund while
considering averages of these funds.

<
<'
<E
<c

SHARPE
TREYNOR

<<

UTI

BIRLA

JENSEN

<<
<<
<<

55

CALCULATIONS OF DEBT FUNDS


UTI
CALCULATION
(-0.37-0.05)
0.33
(-0.37-0.05)
0.016
-0.37-[0.37+0.016
(1.98-0.05)]

METHODS
SHARPE
TREYNOR
JENSEN

RESULT
0.969
20
0.375

BIRLA
CALCULATION
(0.52-0.05)
0.24
(0.52-0.05)
0.014
0.52-[0.52+0.014
(1.98.-0.05)]

RESULT
1.958
33.57
0.027

INTERPRETATION:
Birla Dynamic Bond Fund is good compared to UTI Bond Fund while
considering averages of these funds.

<
<
<
<

SHARPE

<

TREYNOR

<

JENSEN

<

n<

<&

56

RECOMMENDATONS AND SUGESSTIONS TO INVESTORS:

Make clearly defined goals (should be in practical and simple manner).


Prioritize the goals (classify the goals which are immediate and which are for a later
date)
Find out the cost to attain the goals
Prepare the cash statements (if you have an idea of what are cash out flows and cash
inflows)
Evaluate all the investment plans and identify some expenses that can be avoided
Analyze the investment opportunities
Allocate the investment opportunities.
Make systematic and periodical evolution of mutual funds and AMCS and change
accordingly.
Recent informal discussion of five Indian top five fund managers
sponsored by business standards has revealed the following facts for investors.

One, equity as an asset will out perform this year.


Debt funds may not be able to replicate their past performance, but may still post
decent years.
Floating rate funds are essentially for people who do not want to take a call on
interest rates even as they are looking for capital protection plus some marginal
returns.
Equities are not for people who lack patience. A 3-5 year time-should be the
investment horizon for plugging into equity funds. The longer the duration the
lesser are the chances of failure.
Investors should not try to outguess fund managers. Select funds, which are
diversified and show consistency in performance.
Investors should make investments based on their risk profile, and a 20 percent
overweight to equities this year may be justifiable.

57

Suggestions to mutual fund investors:


These are the few exact as regards investment in MFs taken from the book with
marketing for the 90s given by the wall street

Check your letter of offer funds prospectus to guard yourselves against any hidden fees.

Ensure that the funds track record is same as that of the current management.

Avoid MFs that charge exit fees at the back end (fees charged by MF from the unit
holders at the time to redemption the units).

Buy the funds with no sale charged loads. (A load is a charge by the fund when investor
buys it is called the entry load or when he sells it is called the exit load).

If the charge its heavy by the MF to discourage the investors from taking short positions
in the funds units because too many investors sell their units at a time then the fund has to
sell its holdings to meet the obligations that yield into vital of the fines overall return.
Most short funds like guilt funds (these are the funds that invest only in government
securities and treasury bills thus the investors have an opportunities to buy risk free
securities). These funds yield better return than any amount. Money market funds (these
funds in views in money market instruments such as treasury bills, government bonds,
certificates of bank deposits, commercial deposits). They charge no loads, however loads
are limited by SEBI to 70%.

Check funds performance in bear as well as bull market.

Guard fund risk by checking its portfolio for diversification volatility.

58

CONCLUSION
It can be concluded that the mutual fund are better investment option. Investing in
portfolio of mutual funds can minimize the risk. The market is growing day by day and websites
provide the investors with much information. Investing has easier with the introduction of
technology. Through the public is interested in better investment in mutual funds. This has to be
overcome.
It can also say that it is suitable to people from all backgrounds and all age groups.
This project is helpful for both investors and the importance of investing in mutual funds
as this gives awareness about the mutual fond companies.

59

60

BIBLIOGRAPHY

Websites:

www.amfiindia.com
www.moneypore.com
www.moneycontrol.com
www.myiris.com
www.indiainfoline.com
www.utimf.com
www.birlasunlife.com
www.investor guide.com

Books:

Security Analysis And Portfolio Management


_ Fisher & Jordan

61