CHAPTER-I

INTRODUCTION
 INTRODUCTION

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 other words, a mutual fund allows an investor
to indirectly take a position in a basket of assets. Unit Trust of India is the first Mutual Fund set
up under a separate act, UTI Act in 1963, and started its operations in 1964 with the issue of
units under the scheme US-64. Securities Exchange Board of India (SEBI) is the regulatory body
for all the mutual funds mentioned above. All the mutual funds must get registered with SEBI.
The only exception is the UTI, since it is a corporation formed under a separate Act of
Parliament.

SEBI is the regulatory authority of MFs. SEBI has the following broad guidelines
pertaining to mutual funds :

1. MFs should be formed as a Trust under Indian Trust Act and should be operated by Asset
Management Companies (AMCs).
2. MFs need to set up a Board of Trustees and Trustee Companies. They should also have
their Board of Directors.
3. The net worth of the AMCs should be at least Rs.5 crore.
4. AMCs and Trustees of a MF should be two separate and distinct legal entities.
5. The AMC or any of its companies cannot act as managers for any other fund.
6. AMCs have to get the approval of SEBI for its Articles and Memorandum of Association.
7. All MF schemes should be registered with SEBI.
8. MFs should distribute minimum of 90% of their profits among the investors.
9. There are other guidelines also that govern investment strategy, disclosure norms and
advertising code for mutual funds.

A mutual fund is just the connecting bridge or a financial intermediary that allows a group
of investors to pool their money together with a predetermined investment objective. The mutual
fund will have a fund manager who is responsible for investing the gathered money into specific
securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions
of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to
do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing
risk & maximizing returns

Like most developed and developing countries the mutual fund culture has been catching
on in India. There are various reasons for this. Mutual funds make it easy and less costly for
investors to satisfy their need for capital growth, income and/or income preservation. And in
addition to this a mutual fund brings the benefits of diversification and money management to
the individual investor, providing an opportunity for financial success that was once available
only to a select few.

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

Mutual Fund Operation Flow Chart

Fig.2

Mutual Funds Operation flowchat

Organization of a Mutual

BENEFITS OF MUTUAL FUNDS

Investing in mutual has various benefits which makes it an ideal investment avenue.
Following are some of the primary benefits.
Professional investment management
One of the primary benefits of mutual funds is that an investor has access to professional
management. A good investment manager is certainly worth the fees you will pay. Good mutual
fund managers with an excellent research team can do a better job of monitoring the companies
they have chosen to invest in than you can, unless you have time to spend on researching the
companies you select for your portfolio. That is because Mutual funds hire full-time, high-level
investment professionals. Funds can afford to do so as they manage large pools of money. The
managers have real-time access to crucial market information and are able to execute trades on
the largest and most cost-effective scale. When you buy a mutual fund, the primary asset you are
buying is the manager, who will be controlling which assets are chosen to meet the funds' stated
investment objectives.
Diversification
A crucial element in investing is asset allocation. It plays a very big part in the success of
any portfolio. However, small investors do not have enough money to properly allocate their
assets. By pooling your funds with others, you can quickly benefit from greater diversification.
Mutual funds invest in a broad range of securities. This limits investment risk by reducing the
effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit
from diversification techniques usually available only to investors wealthy enough to buy
significant positions in a wide variety of securities.
Low Cost
A mutual fund let's you participate in a diversified portfolio for as little as Rs.5,000, and
sometimes less. And with a no-load fund, you pay little or no sales charges to own them.
Convenience and Flexibility
Investing in mutual funds has its own convenience. While you own just one security
rather than many, you still enjoy the benefits of a diversified portfolio and a wide range of
services. Fund managers decide what securities to trade, collect the interest payments and see
that your dividends on portfolio securities are received and your rights exercised. It also uses the
services of a high quality custodian and registrar. Another big advantage is that you can move
your funds easily from one fund to another within a mutual fund family. This allows you to
easily rebalance your portfolio to respond to significant fund management or economic changes.
Liquidity
In open-ended schemes, you can get your money back promptly at net asset value related
prices from the mutual fund itself.
Transparency
Regulations for mutual funds have made the industry very transparent. You can track the
investments that have been made on you behalf and the specific investments made by the mutual
fund scheme to see where your money is going. In addition to this, you get regular information
on the value of your investment.
Variety
There is no shortage of variety when investing in mutual funds. You can find a mutual
fund that matches just about any investing strategy you select. There are funds that focus on
blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds. The greatest challenge
can be sorting through the variety and picking the best for you.
TYPES OF MUTUAL FUNDS
Getting a handle on what's under the hood helps you become a better investor and put
together a more successful portfolio. To do this one must know the different types of funds that
cater to investor needs, whatever the age, financial position, risk tolerance and return
expectations. The mutual fund schemes can be classified according to both their investment
objective (like income, growth, tax saving) as well as the number of units (if these are unlimited
then the fund is an open-ended one while if there are limited units then the fund is close-ended).
This section provides descriptions of the characteristics -- such as investment objective and
potential for volatility of your investment -- of various categories of funds. The type of securities
purchased by each fund organizes these descriptions: equities, fixed-income, money market
instruments, or some combination of these.
Open-Ended Schemes
Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units
at NAV-related prices from and to the mutual fund on any business day. These schemes have
unlimited capitalization, open-ended schemes do not have a fixed maturity, there is no cap on the
amount you can buy from the fund and the unit capital can keep growing. These funds are not
generally listed on any exchange.
Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem
units any time during the life of a scheme. Hence, unit capital of open-ended funds can fluctuate
on a daily basis. The advantages of open-ended funds over close-ended are as follows:
Any time exit option. The issuing company directly takes the responsibility of providing an entry
and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds,
signature verifications and bad deliveries. Any time entry option, an open-ended fund allows one
to enter the fund at any time and even to invest at regular intervals.
Close-Ended Schemes
Close-ended schemes have fixed maturity periods. Investors can buy into these funds
during the period when these funds are open in the initial issue. After that such schemes can not
issue new units except in case of bonus or rights issue. However, after the initial issue, you can
buy or sell units of the scheme on the stock exchanges where they are listed. The market price of
the units could vary from the NAV of the scheme due to demand and supply factors, investors
expectations and other market factors
Classification According To Investment Objectives
Mutual funds can be further classified based on their specific investment objective such
as growth of capital, safety of principal, current income or tax-exempt income.
In general mutual funds fall into three general categories:
1] Equity Funds are those that invest in shares or equity of companies.
2] Fixed-Income Funds invest in government or corporate securities that offer fixed rates of
return are
3] While funds that invest in a combination of both stocks and bonds are called Balanced Funds.
Growth Funds
Growth funds primarily look for growth of capital with secondary emphasis on dividend.
Such funds invest in shares with a potential for growth and capital appreciation. They invest in
well-established companies where the company itself and the industry in which it operates are
thought to have good long-term growth potential, and hence growth funds provide low current
income. Growth funds generally incur higher risks than income funds in an effort to secure more
pronounced growth.
Some growth funds concentrate on one or more industry sectors and also invest in a broad range
of industries. Growth funds are suitable for investors who can afford to assume the risk of
potential loss in value of their investment in the hope of achieving substantial and rapid gains.
They are not suitable for investors who must conserve their principal or who must maximize
current income.
Growth and Income Funds
Growth and income funds seek long-term growth of capital as well as current income.
The investment strategies used to reach these goals vary among funds. Some invest in a dual
portfolio consisting of growth stocks and income stocks, or a combination of growth stocks,
stocks paying high dividends, preferred stocks, convertible securities or fixed-income securities
such as corporate bonds and money market instruments. Others may invest in growth stocks and
earn current income by selling covered call options on their portfolio stocks. Growth and income
funds have low to moderate stability of principal and moderate potential for current income and
growth. They are suitable for investors who can assume some risk to achieve growth of capital
but who also want to maintain a moderate level of current income.
Fixed-Income Funds
Fixed income funds primarily look to provide current income consistent with the
preservation of capital. These funds invest in corporate bonds or government-backed mortgage
securities that have a fixed rate of return. Within the fixed-income category, funds vary greatly in
their stability of principal and in their dividend yields. High-yield funds, which seek to maximize
yield by investing in lower-rated bonds of longer maturities, entail less stability of principal than
fixed-income funds that invest in higher-rated but lower-yielding securities.
Some fixed-income funds seek to minimize risk by investing exclusively in securities
whose timely payment of interest and principal is backed by the full faith and credit of the Indian
Government. Fixed-income funds are suitable for investors who want to maximize current
income and who can assume a degree of capital risk in order to do so.
Balanced
The Balanced fund aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents. Ideal for
investors who are looking for a combination of income and moderate growth.

Money Market Funds/Liquid Funds

 For the cautious investor, these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liquid, virtually risk-free, short-
term debt securities of agencies of the Indian Government, banks and corporations and Treasury
Bills. Because of their short-term investments, money market mutual funds are able to keep a
virtually constant unit price; only the yield fluctuates.
Therefore, they are an attractive alternative to bank accounts. With yields that are
generally competitive with - and usually higher than -- yields on bank savings account, they offer
several advantages. Money can be withdrawn any time without penalty. Although not insured,
money market funds invest only in highly liquid, short-term, top-rated money market
instruments. Money market funds are suitable for investors who want high stability of principal
and current income with immediate liquidity.
Specialty/Sector Funds
These funds invest in securities of a specific industry or sector of the economy such as
health care, technology, leisure, utilities or precious metals. The funds enable investors to
diversify holdings among many companies within an industry, a more conservative approach
than investing directly in one particular company. Sector funds offer the opportunity for sharp
capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital
losses when the industry is out of favor. While sector funds restrict holdings to a particular
industry, other specialty funds such as index funds give investors a broadly diversified portfolio
and attempt to mirror the performance of various market averages.
Index funds generally buy shares in all the companies composing the BSE Sensex or NSE
Nifty or other broad stock market indices. They are not suitable for investors who must conserve
their principal or maximize current income.
RISK Vs. REWARD
Having understood the basics of mutual funds the next step is to build a successful
investment portfolio. Before you can begin to build a portfolio, one should understand some
other elements of mutual fund investing and how they can affect the potential value of your
investments over the years. The first thing that has to be kept in mind is that when you invest in
mutual funds, there is no guarantee that you will end up with more money when you withdraw
your investment than what you started out with. That is the potential of loss is always there. The
loss of value in your investment is what is considered risk in investing. Even so, the opportunity
for investment growth that is possible through investments in mutual funds far exceeds that
concern for most investors. Heres why At the cornerstone of investing is the basic principal that
the greater the risk you take, the greater the potential reward. Or stated in another way, you get
what you pay for and you get paid a higher return only when you're willing to accept more
volatility.
Risk then, refers to the volatility -- the up and down activity in the markets and individual
issues that occurs constantly over time. This volatility can be caused by a number of factors --
interest rate changes, inflation or general economic conditions. It is this variability, uncertainty
and potential for loss, that causes investors to worry. We all fear the possibility that a stock we
invest in will fall substantially. But it is this very volatility that is the exact reason that you can
expect to earn a higher long-term return from these investments than from a savings account.
Different types of mutual funds have different levels of volatility or potential price change, and
those with the greater chance of losing value are also the funds that can produce the greater
returns for you over time. So risk has two sides: it causes the value of your investments to
fluctuate, but it is precisely the reason you can expect to earn higher returns. You might find it
helpful to remember that all financial investments will fluctuate. There are very few perfectly
safe havens and those simply don't pay enough to beat inflation over the long run.

Fig . 3 Risk Vs Rewards

TYPES OF RISKS

All investments involve some form of risk. Consider these common types of risk and
evaluate them against potential rewards when you select an investment.
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due to
broad outside influences. When this happens, the stock prices of both an outstanding, highly
profitable company and a fledgling corporation may be affected. This change in price is due to
"market risk". Also known as systematic risk.
Inflation Risk
Sometimes referred to as "loss of purchasing power." Whenever inflation rises forward
faster than the earnings on your investment, you run the risk that you'll actually be able to buy
less, not more. Inflation risk also occurs when prices rise faster than your returns.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you
invest? How certain are you that it will be able to pay the interest you are promised, or repay
your principal when the investment matures?
Interest Rate Risk
Changing interest rates affect both equities and bonds in many ways. Investors are
reminded that "predicting" which way rates will go is rarely successful. A diversified portfolio
can help in offsetting these changes.
Exchange risk
A number of companies generate revenues in foreign currencies and may have
investments or expenses also denominated in foreign currencies. Changes in exchange rates may,
therefore, have a positive or negative impact on companies which in turn would have an effect on
the investment of the fund.
Investment Risks
The sectoral fund schemes, investments will be predominantly in equities of select
companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity
performance of such companies and may be more volatile than a more diversified portfolio of
equities.
Call Risks
Call risk is associated with bonds have and embedded call option in them. This option
gives the issuer the right to call back the bonds prior to maturity. Then investor how ever is
exposed to some risks here. The price of the callable bond many not rise much above the price at
which the issuer may call the bond.
Changes in the Government Policy
Changes in Government policy especially in regard to the tax benefits may impact the
business prospects of the companies leading to an impact on the investments made by the fund.
Effect of loss of key professionals and inability to adapt business to the rapid technological
change.
An industries' key asset is often the personnel who run the business i.e. intellectual
properties of the key employees of the respective companies. Given the ever-changing
complexion of few industries and the high obsolescence levels, availability of qualified, trained
and motivated personnel is very critical for the success of industries in few sectors. It is,
therefore, necessary to attract key personnel and also to retain them to meet the changing
environment and challenges the sector offers. Failure or inability to attract/retain such qualified
key personnel may impact the prospects of the companies in the particular sec
Investment cycle in Mutual Funds

Fig.4 Investment Cycle

Fig. 5 Mutual Fund Prodect Processor

Types of mutual funds

Fig. 6 Mutual fund Types

History of the Indian Mutual Fund Industry:

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(UTI MONOPOLY)

 An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
cores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign I am
dearmutual 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.

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
June 30, 2003, there were 31 funds, which manage assets of Rs.104762 crores under 376
schemes.

NEED OF THE STUDY

1. Mutual funds are dynamic financial intuitions which play crucial role in an economy by
mobilizing savings and investing them in the capital market.
2. The activities of mutual funds have both short and long term impact on the savings in the
capital market and the national economy.
3. Mutual funds, trust, assist the process of financial deepening & intermediation.
4. To banking at the same time they also compete with banks and other financial intuitions.
5. India is one of the few countries to day maintain a study growth rate is domestic savings.

OBJECTIVES OF THE STUDY

1. To show the wide range of investment options available in MFs by explaining various
schemes offered by different AMCs.
2. To help an investor to make a right choice of investment, while considering the inherent
risk factors.
3. To understand the recent trends in the MF world.
4. To understand the risk and return of the various schemes.
5. To find out the various problems faced by Indian mutual funds and possible solutions.
 SCOPE THE STUDY

1. The study is limited to the analysis made for a Growth scheme offered by four AMCs.
2. Each scheme is calculated their risk and return using different performance measurement
theories.
3. Because of the reason for such performance is immediately analyzed in the issue.
4. Graphs are used to reflect the portfolio risk and return.

RESEARCH METHODOLOGY & TOOLS

This study is basically depends on
1. Primary Data
2. Secondary Data

Primary data: The primary data collected from the different companies through enquiry.

Secondary data: The secondary data collected from the different sites, broachers, news papers,
company offer documents, different books and through suggestions from the project guide and
from the faculty members of our college.

TOOLS USED IN THIS PROJECT

The following parameters were considered for analysis:

Beta
Alpha
Correlation coefficient
Treynors Ratio
Sharpes Ratio

ADVANTAGES OF THE MUTUAL FUNDS

1. The investors risk is reduced to the minimum.

2. The funds managers maximize the income of the funds.
3. To achieve a similar degree of diversification, an individual investor as to spend
considerable and money.
 4. In a mutual fund, it is possible to reinvest the dividend and capital gains.
5. Selection of shares debentures etc and timing is made available to investors.

LIMITATIONS OF THE STUDY:

1. The study is conducted in short period, due to which the study may not be detailed in all
aspects.
2. The study is limited only to the analysis of different schemes and its suitability to
different investors according to their risk-taking ability. 3. The study is based on
secondary data available from monthly fact sheets, web sites; offer documents, magazines
and newspapers etc., as primary data was not accessible.
3. The study is limited by the detailed study of various schemes.
4. The NAVS are not uniform.
5. The data collected for this study is not proper because some mutual funds are not
disclosing the correct information.
6. The study is not exempt from limitations of Sharpe Treynor and Jenson measure.
7. Unique risk is completely ignored in all the measure.
 CHAPTER-II

LITERATURE REVIEW

GROWTH IN ASSETS UNDER MANAGEMENT

India is at the first stage of a revolution that has already peaked in the U.S. The U.S.
boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets
are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures
indicate that in the first quarter of the current fiscal year. The formation and operations of mutual
funds in India is solely guided by SEBI (Mutual Fund) Regulations, 1993, which came into force
on 20 January 1993. The regulations have since been replaced by the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996, through a notification on 9 December 1996.
A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC
and custodian. They are of course assisted by other independent administrative entities like
banks, registrars and transfer agents. We may discuss in brief the formation of different entities,
their functions and obligations. The sponsor for a mutual fund can by any person who, acting
alone or in combination with another body corporate establishes the mutual fund and gets it
registered with SEBI. The sponsor is required to contribute at least 40 per cent of the minimum
net worth (Rs 10 crore) of the asset management company. The sponsor must have a sound track
record and general reputation of fairness and integrity in all his business transactions. As per
SEBI Regulation, 1996, a mutual fund is to be formed by the sponsor and registered with SEBI.
A mutual fund shall be constituted in the form of a trust and the instrument of trust shall be in the
form of a deed, duly registered under the provisions of the Indian Registration Act, 1908,
executed by the sponsor in favor of trustees named in such an instrument.
The board of trustees manages the mutual fund and the sponsor executes the trust deeds
in favor of the trustees. The mutual fund raises money through sale of units under one or more
schemes for investing in securities in accordance with SEBI guidelines. It is the job of the
mutual fund trustees to see that the schemes floated and managed by the AMC appointed by the
trustees, are in accordance with the trust deeds and SEBI guidelines. It is also the responsibilities
of the trustees to control the capital property of mutual funds schemes. The trustees have the
right to obtain relevant information from the AMC, as well as a quarterly report on its activities.
They can also dismiss the AMC under specific condition as per SEBI regulations. At least half
the trustees should be independent persons. The AMC or its employees cannot act as a trustee.
No person who is appointed as a trustee of a mutual fund can be appointed as a trustee of any
other mutual fund unless he is an independent trustee and prior permission is obtained from the
mutual fund in which he is a trustee.
The trustees are required to submit half-yearly reports to SEBI on the activities of the
mutual fund. The trustees appoint a custodian and supervise their activities. The trustees can be
removed only with prior approval of SEBI. As per SEBI guidelines, an asset management
company is appointed by the trustees to float the schemes for the mutual fund and manage the
funds raised by selling units under a scheme. The AMC must act as per SEBI guidelines, trust
deeds and management agreement between trustee & the AMC.

The Importance of Accounting Knowledge

Mutual funds in India are required to follow the accounting policies laid down in SEBI
(Mutual Fund) Regulations, 1996 and the amendments in 1998. This section of the workbook
summarizes the important Regulations, and periodical budgets.
Net Asset Value (NAV)
A mutual fund is a common investment vehicle where the assets of the fund belong
directly to the investors. The fund does not account for investors' subscriptions as liabilities or
deposits but as Unit Capital. On the other hand, the investments made on behalf of the investors
are reflected on the assets side and are the main constituents of the balance sheet. There are,
however, liabilities of a strictly short-term nature that may be part of the balance sheet. The
fund's Net Assets are therefore defined as the assets minus the liabilities. As there are many
investors in a fund, it is common practice for mutual funds to compute the share of each investor
on the basis of the value of Net Assets Per Share/Unit, commonly known as the Net Asset Value
(NAV).
The following are the regulatory requirements and accounting definitions lay down by
SEBI.
NAV = Net Assets of the scheme / Number of Units Outstanding, i.e. Market value of
investments + Receivables + Other Accrued Income + Other Assets
Accrued Expenses-Other Payables-Other Liabilities
No. Of Units Outstanding as at the NAV date
A fund's NAV is affected=by four sets of factors:
-- Purchase and sale of investment securities
-- Valuation of all investment securities held
-- Other assets and liabilities, and
-- Units sold or redeemed
Pricing of Units:
Although NAV per share defines the value of the investor's holding in the fund, the fund
may not repurchase the investor's units at the same price as NAV. However, SEBI requires that
the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a
closed end fund). On the other side, a fund may sell new units at a price that is different from the
NAV, but the sale price cannot be higher than 107% of NAV. Also, the difference the repurchase
price and the sale price of the unit is not permitted to exceed 7% of the sale price.
Fees and Expenses:
An AMC may incur many expenses specifically for given schemes, and other common
expenses. In any case, all expenses should be clearly Unidentified and allocated to the individual
schemes. The AMC may charge the scheme with investment management and advisory fees that
are fully disclosed in the offer document subject to the following limits:

@ 1.25% of the first Rs. 100 crore of weekly average net assets outstanding in the
accounting year, and @ 1% of weekly average net assets in excess of Rs. 100 crore.
For no load schemes, the AMC may charge an additional management fee up to 1% of
weekly average net assets outstanding in the accounting year.
Investment management and advisory fees are subject to the overall ceiling for expenses.
A. Initial expenses of launching schemes (not to exceed 6% of initial resources raised under the
scheme); and
Recurring expenses including:
i. Marketing and selling expenses including agents' commission
ii. Brokerage and transaction costs
iii. Registrar services for transfer of units sold or redeemed
 v. Fees and expenses of trustees
v. Audit fees
vi. Custodian fees
vii. Costs related to investor communication
viii. Costs of fund transfers from location to location
ix. Costs of providing account statements and dividend / redemption
cheques and warrants
x. Insurance premium paid by the fund
xi. Winding up costs for terminating a fund or a scheme
xii. Other costs as approved by SEBI
The total expenses charged by the AMC to a scheme, excluding issue or redemption
expenses but including investment management and advisory fees are subject to the following
limits:
On the first Rs. 100 Crores of average weekly net assets-2.5%
On the next Rs. 300 Crores of average weekly net assets -2.0%
On the balance of average weekly net assets-1.75%
For bond funds, the above percentages are required to be lower by 0.25%

Initial Issue Expenses:

When a scheme is first launched, the AMC will incur significant expenses, whose benefit
will accrue over many years. All expenses cannot, therefore, be charged to a scheme in the first
year itself. SEBI permits "amortization" of initial expenses as follows:

For a closed-end scheme floated on a 'load' basis, the initial issue expenses shall be
amortized on a weekly basis over the period of scheme. For example, a 5-year (i.e. 260
week) closed-end scheme with initial issue expenses of Rs. 5 lakhs must charge Rs.1923
(5 lakhs / 260 weeks) every week to the fund. It cannot charge the entire amount of Rs. 5
lakhs at the time of issue.
For an open-end scheme floated on a 'load' basis, initial issue expenses may be amortized
over a period not exceeding five years. For example, if an open-end scheme has initial
issue expenses of Rs. 10 lakhs, it need not charge this entire amount to the fund in the
year of issue. Instead, it may charge Rs. 2 lakhs (10 lakhs / 5 years) per year to the fund,
thereby spreading the charge of initial issue expenses over a maximum of 5 years. Issue
expenses incurred during the life of an open-end scheme cannot be amortized.
Un amortized portion of initial issue expenses shall be included for NAV calculation,
considered as "other asset". The investment advisory fee cannot be claimed on this asset.
Hence, they have to be excluded while determining the chargeable investment
management / advisory fees. While calculating the maximum amount of chargeable
 expenses, the un amortized portion of the initial issue expenses will not be included as
part of the average weekly net assets figure.

Accounting Policies:

Investments are required to be marked to market using market prices. Any unrealized
appreciation cannot be distributed, and provision must be made for the same.
Dividend received by the fund on a share should be recognized, not on the date of
declaration, but on the date the share is quoted on ex-dividend basis. For example, if a
fund owns shares on which dividend is declared on April 5, and the shares are quoted on
ex-dividend basis on April 20, the dividend income will be included by the fund for
distribution/NAV computation only April 20.
In determining gain or loss on sale of investments, the average cost method must be
followed to determine the cost of purchase. This will be applied by security.
Purchase / sale of investments should be recognized on the trade date and not settlement
date
Bonus / rights shares should be recognized only when the original shares are traded on
the stock exchange on an ex-bonus /ex-rights basis
Income receivable on investments, which is accrued, but not received for 12 months
beyond due date, should be provided for, and no further accrual should be made for such
investment
An investment shall be regarded as non-performing if it has provided no returns through
dividend/interest for more than 2years at the end of the accounting year
Investments owned by mutual funds are marked to market. Therefore, the value of
investments appreciates or depreciates based on market fluctuations, which is reflected in
the balance sheet. However, this change in value constitutes unrealized gain/loss. When
any investments are actually sold, the proportion of the unrealized gain / loss that pertains
to such investments becomes realized gain/loss. Therefore, at any given time, the NAV
includes realized and unrealized gain/loss on investments. While SEBI prohibits the
distribution of unrealized appreciation on investments, realized gain in available for
distribution.
An open-end scheme sells and repurchases units on the basis of NAV. SEBI therefore
prescribes the use of an equalization account, to ensure that creation / redemption of units does
not change the percentage of income distributed. This involves the following steps:
 Computation of distributable reserves:
Income + Realized Gain on Investments- Expenses-Unrealized Losses (unrealized gains
are excluded)
If distributable reserves are positive, the following percentage is computed:
Distributable Reserve / Units Outstanding
The above percentage is multiplied with the number of new units sold, and the
equalization account is credited by this amount, if units are sold above par; if the units are
sold below par, the equalization account is debited by this amount. The same percentage
is multiplies with the number of units repurchased, and the equalization account is
debited by this amount if the units are repurchased above par; if the units are repurchased
below par, the equalization account is credited.
The net balance in the equalization account is transferred to the profit and loss account. It
is only an adjustment to the distributable surplus and does not affect the net income for
the period.

VALUATION
Mutual funds value their investments on a 'mark-to-market' basis with reference to the
date on which they are valued i.e., the valuation date.
Valuation of Traded Securities:

Where a security is traded on a stock exchange, it is valued at the last quoted closing
price on the stock exchange where it is "principally traded".
If a security is not traded on any stock exchange on a particular valuation day, the value
at which it was traded on the selected/other stock exchange on the
Earliest previous day may be used, provided such date is not more than 60 days prior to
the valuation date.
Valuation of traded securities, once the market price is obtained as above, is quite simple.
The fund will multiply its current holding in number of shares or bonds by the applicable
market price to get the "mark to market" value.

valuation of Non-traded Securities:

When a security is not traded on any stock exchange for 60 days prior to the valuation
date, it must be treated as non-traded' scrip.
 Non-traded securities shall be valued 'in good faith' by the AMC on the basis of
appropriate valuation methods, which shall be periodically reviewed by the trustees and
reported by the auditors as fair and reasonable. The following principles are to be applied
for the valuation of non-traded securities:
Equity instruments: are to be valued on the basis of capitalization of earnings solely or in
combination with its balance sheet Net Asset Value. For this purpose, capitalization rate
will be determined by reference to the price or earning rations of comparable traded
securities with an appropriate discount for lower liquidity to be used.

Debit instruments: are to be valued on a yield to maturity basis, the capitalization factor being
determined for comparable traded securities with an appropriate discount for lower liquidity.
Call money, bills purchased: under rediscounting and short term deposits with banks are to be
valued at cost + accrual: other money market instruments at yield at which they are currently
traded; non-traded instruments (not traded for 7 days) will be valued at cost plus interest accrued
till the beginning of the valuation day plus the difference between redemption value and cost,
spread uniformly over the remaining maturity of the instruments
Government Securities: are to be valued at yield to maturity based on prevailing market rate
Convertible debentures and bonds: non-convertible component is to be valued as a debt
instrument, and convertible as any equity instrument. If after Conversion, the resultant equity
instrument would be traded pari passu with an existing instrument, which is traded, the value of
the latter instrument can be adopted after an appropriate discount for the non-tradability of the
instrument.

RISK INVOLVED IN MUTUAL FUNDS INDUSTRY:

Mutual funds are not free from risk. It is so because basically the mutual funds also invest
their funds in stock markets on shares, which are volatile in nature and are not risk free, the
following risk are inherent in their dealing.
INHERENT RISK FACTORS:
1) Market Risks: In general there are certain risks associated with the every kind of investment
on shares. They are called market risks. These market risks can be reduced, but cannot be
completely eliminated even by a good investment.
2) Scheme Risks : There are certain risks inherent in the scheme itself. It all depends upon the
nature of the scheme. For instance, in a pure growth scheme, risks are greater.
 3) Investment Risks: Whether the mutual fund makes money in shares or loses depends upon
the investment expertise of the Asset Management Company. If the investment advice goes
wrong, the fund has to suffer a lot.
4) Business Risks : The corpus of a mutual fund might have been invested in a companys
shares. If the business of that company suffers any set back, it cannot declare any dividend. It
may even go to the extent of winding up its business.
5) Political Risks: Successive Governments bring with them fancy new economic ideologies and
policies. It is often said that many economic decisions are politically motivated.

Fig.7 Risk Returns

PARAMETERS DESCRIPTION

The following parameters were considered for analysis:

Beta
Alpha
Correlation coefficient
Treynors Ratio
Sharpes Ratio
Jensens Ratio

Beta: Beta is a measure of volatility, or systematic risk, of a security or portfolio in comparison

to the market as a whole. Beta measures a stock's volatility, the degree to which a stock price
fluctuates in relation to the overall market. Investment analysts use the Greek letter beta, . It is
calculated using regression analysis. A beta of 1 indicates that the security's price will move with
the market. A beta greater than 1 indicates that the security's price will be more volatile than the
market, and a beta less than 1 means that it will be less volatile than the market.

While standard deviation determines the volatility of a fund according to the disparity of its
returns over a period of time, beta, another useful statistical measure, determines the volatility, or
risk, of a fund in comparison to that of its index.

Investors expecting the market to be bullish may choose funds exhibiting high betas,
which increase investors' chances of beating the market. If an investor expects the market to be
bearish in the near future, the funds that have betas less than 1 are a good choice because they
would be expected to decline less in value than the index. For example, if a fund had a beta of
0.5 and the S&P 500 declined 6%, the fund would be expected to decline only 3%. Be aware of
the fact that beta by itself is limited and can be skewed due to factors of other than the market
risk affecting the fund's volatility.

Here is a basic guide to various betas:

Negative beta - A beta less than 0 is possible but highly unlikely. People used to think
that gold and gold stocks should have negative betas because they tended to do better
when the stock market declined, but this hasn't been true overall.
Beta = 0 - Basically this is cash (assuming no inflation).
Beta between 0 and 1 - Low-volatility investments, such as utilities, are usually in this
range
Beta = 1 - This is the same as an index, such as the S&P 500 or some other index fund.
Beta greater than 1 - This denotes anything more volatile than the broad-based index,
like a sector fund.
Beta greater than 100 - This is impossible because the stock would be expected go to
zero on any decline in the stock market. The beta never gets higher than two to three.

The beta value for an index itself is taken as one. Equity funds can have beta values,
which can be above one, less than one or equal to one. By multiplying the beta value of a fund
with the expected percentage movement of an index, the expected movement in the fund can be
determined. Thus if a fund has a beta of 1.2 and the market is expected to move up by ten per
cent, the fund should move by 12 per cent Similarly if the market loses ten per cent, the fund
should lose 12 per cent.

This shows that a fund with a beta of more than one will rise more than the market and
also fall more than market. Clearly, if you'd like to beat the market on the upside, it is best to
invest in a high-beta fund. But you must keep in mind that such a fund will also fall more than
the market on the way down. So, over an entire cycle, returns may not be much higher than the
market. Similarly, a low-beta fund will rise less than the market on the way up and lose less on
the way down. When safety of investment is important, a fund with a beta of less than one is a
better option. Such a fund may not gain much more than the market on the upside; it will protect
returns better when market falls.
Alpha : A measure of risk, used for mutual funds with regards to their relation and the market. A
positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting
the market return

The formula for alpha is:

Alpha = [ (sum of y) - ((b)(sum of x)) ] / n
n =number of observations (36 mos.)
b = beta of the fund
x = rate of return for the market
y = rate of return for the fund
Alpha measures how much if any of this extra risk helped the fund outperform its
corresponding benchmark. Using beta, alpha's computation compares the fund's performance to
that of the benchmark's risk-adjusted returns and establishes if the fund's returns outperformed
the market's, given the same amount of risk.
For example, if a fund has an alpha of 1, it means that the fund outperformed the
benchmark by 1%. Negative alphas are bad in that they indicate that the fund under performed
for the amount of extra, fund-specific risk that the fund's investors undertook.

Standard Deviation
Standard deviation is probably used more than any other measure to describe the risk of a
security (or portfolio of securities). If you read an academic study on investment performance,
chances are that standard deviation will be used to gauge risk. It's not just a financial tool,
though. Standard deviation is one of the most commonly used statistical tools in the sciences and
social sciences. It provides a precise measure of the amount of variation in any group of
numbers--the returns of a mutual fund.

Measure of the dispersion of a set of data from its mean. The more spread apart the data is, the
higher the deviation. Standard deviation is applied to the annual rate of return of an investment to
measure the investment's volatility (risk).
A volatile stock would have a high standard deviation. In mutual funds, the standard
deviation tells us how much the return on the fund is deviating from the expected normal returns.
Standard deviation is a statistical measure of the range of a fund's performance. When a fund has
a high standard deviation, its range of performance has been very wide, indicating that there is a
greater potential for volatility. Technically speaking, standard deviation provides a quantification
of the variance of the returns of the security, not its risk. After all, a fund with a high standard
deviation of returns is not necessarily "riskier" than one with a low-standard deviation of returns.
Correlation : Correlation is a useful tool for determining if relationships exist between
securities. A correlation coefficient is the result of a mathematical comparison of how closely
related between two variables is said to be highly correlated if a movement in one variable
results or takes place at the same time as a similar movement in another variable. A useful
feature of correlation analysis is the potential to predict the movement in one security when
another security moves. Sometimes, there are securities that lead other securities. In other
words a change in price in one results in a later change in price of the other. A high negative
correlation means that when a securities price changes, the other security or indicator or
otherwise financial vehicle, will often move in the opposite direction. Correlation analysis is a
measure of the degree to which a change in the independent variable will result in a change in the
dependent variable. A low correlation coefficient (e.g., 0.1) suggests that the relationship
between the two variables is weak or non-existent. A high correlation coefficient (e.g., 0.80)
indicates that the dependent variable will most likely change when the Independent
variable changes. Correlation can also be used for a study between an indicator and a stock or
index to help determine the predictive abilities of changes in the indicator. Correlation is not
static. In other words, the correlation between two things in the markets does change over time
and so a careful understanding that what has happened in the past may not predict what will
happen in the future should be part of any basis in trading financial instruments in the market.

PORTFOLIO MEASUREMENT METHODS:

We are interested in discovering if the management of a mutual fund is performing well;
that is, has management done better through its selective buying and selling of securities than
would have been achieved through merely buying the market picking a large number of
securities randomly and holding them throughout the period?
The most popular ways of measuring managements performance are
1. Sharpes Performance Measure
2. Treynors Performance Measure
3. Jensens Performance Measure

SHARPES RATIO
Sharpes is the summary measure of portfolio performance which properly adjusts
performance for risk. It measures the risk premiums of the portfolio relative to the total amount
of risk in the portfolio.
The Sharpes index is given by:
Sharpes Index = (Average return on portfolio Risk less rate of interest)
(Deviation of returns on portfolio)
Graphifically the index measures the slope of the line emanating from the risk less rate
outward to the portfolio in question. Thus, the Sharpe Index summarizes the risk and return of a
portfolio in a single measure that categorizes the performance of the fund on a risk-adjusted
basis. The larger the value of Sharpe Index the better the portfolio has performed.
TREYNORS RATIO
Treynors ratio measures the risk premium of the portfolio, where risk premium equals
the difference between the return of the portfolio and the risk less rate. The risk premium is
related to the amount of systematic risk assumed in the portfolio. Graphically; the index
measures the slope of the line emanating outward from risk less rate to the portfolio under
consideration.
Treynors ratio is given as
(Average return of portfolio Risk less rate of interest)
Treynor Index = ----------------------------------------------------------------
Beta coefficient of portfolio

Jensens Performance Measure (Michael)

It refers the actual return earned in portfolio and return expected out of portfolio given its
level of risk.
CAPM is used to calculate the expected return. The difference between the expected return
and act retain can be said the return earned out of the mandatory of systematic risk.
This excess return refers the managers predictive ability and managerial skills.

CAPM
rp = rf + (rm rf)
Differential return is calculated as follows:
p = rp - rp
p =positive > Superior returns
p = Negative > Unskilled management (worse portfolio)
p = 0 > Neutral performance

Higher alpha represents superior performance of a fund and vice versa.

 CHAPTER-III

INDUSTRY PROFILE
 &

COMPANY PROFILE

History of the Indian Mutual Fund Industry:

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 objective then is to
attract the small investors and introduce them to market investments. Since then, 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. The mutual Funds Industry in India not only started
with UTI, but still count UTI as its largest Player with the largest corpus of investible funds
among all Mutual Funds currently opening in India.

For the period of 1987-88

Table No: 1 Source: Secondary Data

Amount Mobilized Assets Under Management

(Rs.Crores) ( Rs.Crores)
UTI 2,175 6,700
Total 2,175 6,700

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 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. From
1987to 1992-93, the fund industry expanded nearly seven times in terms of Assets under
Management, as seen in the following figures:

For the period of 1992-93

Table No: 2 Secondary Data

Amount Mobilized Assets Under Management

(Rs.Crores) ( Rs.Crores)
 UTI 11,057 38,247
Public Sector 1,964 8,757
Total 13,021 47,004

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.The 1993
SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual
Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.

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

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
October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386
schemes. The graph indicates the growth of assets over the years

A. Mutual Funds Industry Unit holding Pattern

From the data collected from the mutual funds, the following has been observed:-

i) As on March 31, 2003 there are a total number of 1.6 crore investors accounts (it is
likely that there may be more than one folio of an investor which might have been
counted more than once and actual number of investors would be less) holding units of
Rs. 79,601 crore. Out of this total number of investors accounts, 1.56 crore are individual
investors accounts, accounting for 97.42% of the total number of investors accounts and
contribute Rs.32,691 crore which is 41.07% of the total net assets.

ii) Corporate and institutions who form only 2.04% of the total number of investors
accounts in the mutual funds industry, contribute a sizeable amount of Rs.45,470 crore
which is 57.12% of the total net assets in the mutual funds industry.

iii) The NRIs/OCBs and FIIs constitute a very small percentage of investors accounts
(0.54%) and contribute Rs.1440.18crore (1.81%) of net assets.

The details of unit holding pattern are given in the following table:

Table No: 3 Secondary Data

 UNIT HOLDING PATTERN OF MUTUAL FUNDS INDUSTRY
Category No. Of % To Total NAV(Rs.Crore) %To
Investors Investors A/C Total
A/C NAV
Individuals 15,557,506 97.42 32,691.12 41.07
NRIs/OCBs 84,311 0.53 878.51 1.10
FIIs 2,058 0.01 561.67 0.71
Corporate/
Institutions/Ot
hers 324,979 2.04 45,469.53 57.12
TOTAL 15,968,854 100.00 79,600.83 100.00
B. Unit holding Pattern Private/Public Sector Mutual Funds:

From the analysis of data on unit holding pattern of Private Sector Mutual Funds and
Public Sector Mutual Funds, the following observations are made:-

1. Out of a total of 1.6 crore investors accounts in the mutual funds industry, (it is likely that
there may be more than one folio of an investor which might have been counted more than
once and therefore actual number of investors may be less) 42.93 lakh investors accounts i.e.
27% of the total investors accounts are in private sector mutual funds whereas the 1.17 crore
investors accounts ie.73% are with the public sector mutual funds which includes UTI
Mutual Fund. However, the private sector mutual funds manage 71.2% of the net assets
whereas the public sector mutual funds own only 28.8% of the assets.

2. UTI Mutual Fund has 97. 12 lakh investors accounts which is 60.82% of the total investors
accounts in the mutual funds industry.

Details of unit holding pattern of private sector and public sector mutual funds are:

Table No: 4 Secondary Data

UNIT HOLDING PATTERN OF PRIVATE SECTOR MFS

 Category No. Of % To Total NAV(Rs. %To Total
Investors A/C Investors A/C Crore) NAV

Individuals 4001841 93.23 17956.48 31.68

NRIs/OCBs 38416 0.89 723.02 1.28

FIIs 1317 0.03 528.51 0.93

Corporate/
Institutions/
Others 250972 5.85 37465.91 66.11

TOTAL 4292546 100.00 56673.92 100.00

Table No: 5 Secondary Data

UNIT HOLDING PATTERN OF PUBLIC SECTOR MFS (INCLUDING

UTI MF )
Category NO. Of % To Total NAV(Rs. %To Total
Investors Investors A/C Crore) NAV
A/C
Individuals 11,555,665 98.97 14734.64 64.27
NRIs/OCBs 45895 0.39 155.49 0.68
FIIs 741 0.01 33.16 0.14
Corporate/
Institutions/
Others 74007 0.63 8003.62 34.91
TOTAL 11676308 100.00 22926.91 100.00
RECENT TRENDS IN MUTUAL FUND INDUSTRY:
 The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by nationalized
banks and smaller private sector players. Many nationalized banks got into the mutual fund
business in the early nineties and got off to a good start due to the stock market boom prevailing
then. These banks did not really understand the mutual fund business and they just viewed it as
another kind of banking activity. Few hired specialized staff and generally chose to transfer staff
from the parent organizations.

The performance of most of the schemes floated by these funds was not good. Some
schemes had offered guaranteed returns and their parent organizations had to bail out these
AMCs by paying large amounts of money as the difference between the guaranteed and actual
returns. The service levels were also very bad. Most of these AMCs have not been able to retain
staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was also
very similar. They quickly realized that the AMC business is a business, which makes money in
the long term and requires deep-pocketed support in the intermediate years. Some have sold out
to foreign owned companies, some have merged with others and there is general restructuring
going on. The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices such as
new product innovation, sharp improvement in service standards and disclosure, usage of
technology, broker education and support etc. In fact, they have forced the industry to upgrade
itself and service levels of organizations like UTI have improved dramatically in the last few
years in response to the competition provided by these.

National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian
stock market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment
Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations,
selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.
Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as government
securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc.

There are two kinds of players in NSE:

(a) trading members and

(b) participants.
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players like banks
who take direct settlement responsibility. Trading at NSE takes place through a fully automated
screen-based trading mechanism which adopts the principle of an order-driven market. Trading
members can stay at their offices and execute the trading, since they are linked through a
communication network. The prices at which the buyer and seller are willing to transact will
appear on the screen. When the prices match the transaction will be completed and a
confirmation slip will be printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractices prevailing in the

traditional trading mechanism can be done away with greater operational efficiency and
 informational transparency in the stock market operations, with the support of total
computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors will
not be interested in capital market operations. And capital market being one of the major source
of long-term finance for industrial projects, India cannot afford to damage the capital market
path. In this regard NSE gains vital importance in the Indian capital market system.

Preamble

Often, in the economic literature we find the terms development and growth are used
interchangeably. However, there is a difference. Economic growth refers to the sustained increase
in per capita or total income, while the term economic development implies sustained structural
change, including all the complex effects of economic growth. In other words, growth is
associated with free enterprise, where as development requires some sort of control and
regulation of the forces affecting development. Thus, economic development is a process and
growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like India to take
the country in the path of economic development to attain economic growth.

Why Economic Planning for India?

One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels of
income, saving and investment. However, increasing the rate of capital formation in India is
beset with a number of difficulties. People are poverty ridden. Their capacity to save is extremely
low due to low levels of income and high propensity to consume. Therefor, the rate of investment
is low which leads to capital deficiency and low productivity. Low productivity means low
income and the vicious circle continues. Thus, to break this vicious economic circle, planning is
inevitable for India.
 The market mechanism works imperfectly in developing nations due to the ignorance and
unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is very
vital. In India, a large portion of the economy is non-monitised; the product, factors of
production, money and capital markets is not organized properly. Thus the prevailing price
mechanism fails to bring about adjustments between aggregate demand and supply of goods and
services. Thus, to improve the economy, market imperfections has to be removed; available
resources has to be mobilized and utilized efficiently; and structural rigidities has to be
overcome. These can be attained only through planning.

In India, capital is scarce; and unemployment and disguised unemployment is prevalent.

Thus, where capital was being scarce and labour being abundant, providing useful employment
opportunities to an increasing labour force is a difficult exercise. Only a centralized planning
model can solve this macro problem of India. Further, in a country like India where agricultural
dependence is very high, one cannot ignore this segment in the process of economic
development. Therefore, an economic development model has to consider a balanced approach
to link both agriculture and industry and lead for a paralleled growth. Not to mention, both
agriculture and industry cannot develop without adequate infrastructural facilities which only the
state can provide and this is possible only through a well carved out planning strategy. The
governments role in providing infrastructure is unavoidable due to the fact that the role of
private sector in infrastructural development of India is very minimal since these infrastructure
projects are considered as unprofitable by the private sector. Further, India is a clear case of
income disparity. Thus, it is the duty of the state to reduce the prevailing income inequalities.
This is possible only through planning.

Planning History of India

The development of planning in India began prior to the first Five Year Plan of
independent India, long before independence even. The idea of central directions of resources to
overcome persistent poverty gradually, because one of the main policies advocated by
nationalists early in the century. The Congress Party worked out a program for economic
advancement during the 1920s, and 1930s and by the 1938 they formed a National Planning
Committee under the chairmanship of future Prime Minister Nehru. The Committee had little
time to do anything but prepare programs and reports before the Second World War which put an
end to it. But it was already more than an academic exercise remote from administration.
Provisional government had been elected in 1938, and the Congress Party leaders held positions
of responsibility. After the war, the Interim government of the pre-independence years appointed
an Advisory Planning Board. The Board produced a number of somewhat disconnected Plans
itself. But, more important in the long run, it recommended the appointment of a Planning
Commission.

The Planning Commission did not start work properly until 1950. During the first three
years of independent India, the state and economy scarcely had a stable structure at all, while
millions of refugees crossed the newly established borders of India and Pakistan, and while ex-
princely states (over 500 of them) were being merged into India or Pakistan. The Planning
Commission as it now exists, was not set up until the new India had adopted its Constitution in
January 1950.

Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :

To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nations requirement.

To formulate a plan for the most effective and balanced use of the countrys resources.

Having determined the priorities, to define the stages in which the plan should be carried
out, and propose the allocation of resources for the completion of each stage.

To indicate the factors which are tending to retard economic development, and determine
the conditions which, in view of the current social and political situation, should be
established for the successful execution of the Plan.
 To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

To appraise from time to time the progress achieved in the execution of each stage of the
Plan and recommend the adjustments of policy and measures that such appraisals may
show to be necessary.

To make such interim or auxiliary recommendations as appear to it to be appropriate

either for facilitating the discharge of the duties assigned to it or on a consideration of the
prevailing economic conditions, current policies, measures and development programs;
or on an examination of such specific problems as may be referred to it for advice by
Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

Increasing National Income

Reducing inequalities in the distribution of income and wealth

Elimination of poverty

Providing additional employment; and

Alleviating bottlenecks in the areas of: agricultural production, manufacturing capacity

for producers goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year Plans.
Approximately, economic growth has been targeted at a rate of five per cent per annum. High
priority to economic growth in Indian Plans looks very much justified in view of long period of
stagnation during the British rule
 COMPANY PROFILE

ABOUT US

IDBI Bank Ltd. is a Universal Bank with its operations

driven by a cutting edge core Banking IT platform. The Bank
offers personalized banking and financial solutions to its clients
in the retail and corporate banking arena through its large network of Branches and ATMs,
spread across length and breadth of India. We have also set up an overseas branch at Dubai and
have plans to open representative offices in various other parts of the Globe, for encashing
emerging global opportunities. Our experience of financial markets will help us to effectively
cope with challenges and capitalize on the emerging opportunities by participating effectively in
our countrys growth process.

IDBI Bank is the youngest, new generation, public sector universal bank that rides on a
cutting edge core banking Information Technology platform. This enables the Bank to offer
personalized banking and financial solutions to its clients. The Bank had an aggregate Balance
sheet size of Rs.3, 28,997 crore and total business of Rs.4,33,460 crore as on March 31, 2014.
IDBI Bank's operations during the financial year ended March 31, 2014 resulted in a net profit of
Rs. 1121 crore.

Our vision for the Bank is

TO BE THE MOST PREFERRED AND TRUSTED BANK ENHANCING VALUE FOR

ALL STAKEHOLDERS.
 Vision

To be the most preferred and trusted bank enhancing value for all stakeholders.

Mission

Delighting customers with our excellent service and comprehensive suite of best-in-class
financial solutions;

Touching more people's lives with our expanding retail footprint while maintaining our
excellence on corporate and infrastructure financing;

Continuing to act in an ethical, transparent and responsible manner, becoming the role model for
corporate governance;

Deploying world class technology, systems and processes to improve business efficiency and
exceed customers expectations;

Encouraging a positive, dynamic and performance-driven work culture to nurture employees

grow them and build a passionate and committed work force;
o Expanding our global presence;
o Relentlessly striving to become a greener bank.
Bank's Profile

IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years,
IDBI Bank has essayed a key nation-building role, first as the apex Development Financial
Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a
full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched
its canvas beyond mere project financing to cover an array of services that contributed towards
balanced geographical spread of industries, development of identified backward areas,
emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On
October 1, 2004, the erstwhile IDBI Bank converted into a Banking company (as Industrial
Development Bank of India Limited) to undertake the entire gamut of Banking activities while
continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its
parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the
subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3,
2006, the tech-savvy, new generation Bank with majority Government shareholding today
touches the lives of millions of Indians through an array of corporate, retail, SME and Agri
products and services.

Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business
strategy, a highly competent and dedicated workforce and a state-of-the-art information
technology platform, to structure and deliver personalised and innovative Banking services and
customised financial solutions to its clients across various delivery channels.
 As on March 31, 2014 IDBI Bank has a balance sheet of Rs.3, 28,997 crore and business
size (deposits plus advances) of Rs.4,33,460 crore. As an Universal Bank, IDBI Bank, besides its
core banking and project finance domain, has an established presence in associated financial
sector businesses like Capital Market, Investment Banking and Mutual Fund Business. Going
forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and
'the most valued financial conglomerate', besides generating wealth and value to all its
stakeholders.

Glorious History
Information on the Constitution of IDBI Bank

Industrial Development Bank of India

Industrial Development bank of India (IDBI) was constituted under Industrial Development bank
of India Act, 1964 as a Development Financial Institution and came into being as on July 01,
1964 vide GoI notification dated June 22, 1964. It was regarded as a Public Financial Institution
in terms of the provisions of Section 4A of the Companies Act, 1956. It continued to serve as a
DFI for 40 years till the year 2004 when it was transformed into a Bank.

Industrial Development Bank of India Limited

In response to the felt need and on commercial prudence, it was decided to transform IDBI into a
Bank. For the purpose, Industrial Development bank (transfer of undertaking and Repeal) Act,
2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act, 1964. In
terms of the provisions of the Repeal Act, a new company under the name of Industrial
Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the
Companies Act, 1956 on September 27, 2004. Thereafter, the undertaking of IDBI was
transferred to and vested in IDBI Ltd. with effect from the effective date of October 01, 2004. In
terms of the provisions of the Repeal Act, IDBI Ltd. has been functioning as a Bank in addition
to its earlier role of a Financial Institution.
 Merger of IDBI Bank Ltd. with IDBI Ltd.

Towards achieving the faster inorganic growth of the Bank, IDBI Bank Ltd., a wholly owned
subsidiary of IDBI Ltd. was amalgamated with IDBI Ltd. in terms of the provisions of Section
44A of the Banking Regulation Act, 1949 providing for voluntary amalgamation of two banking
companies. The merger became effective from April 02, 2005.

Merger of United Western bank with IDBI Ltd.

The United Western bank Ltd. (UWB), a Satara based private sector bank was placed under
moratorium by RBI. Upon IDBI Ltd. showing interest to take over the said bank towards its
further inorganic growth, RBI and Govt. of India amalgamated UWB with IDBI Ltd. in terms of
the provisions of Section 45 of the Banking Regulation Act, 1949. The merger came into effect
on October 03, 2006.

Change of name of IDBI Ltd. to IDBI Bank Ltd.

In order that the name of the Bank truly reflects the functions it is carrying on, the name of the
Bank was changed to IDBI Bank Limited and the new name became effective from May 07,
2008 upon issue of the Fresh Certificate of Incorporation by Registrar of Companies,
Maharashtra. The Bank has been accordingly functioning in its present name of IDBI Bank
Limited.

Statute

Transfer of Undertaking and Repeal Act, 2003

Memorandum of Association
Articles of Association
Management

IDBI Bank is a Board-managed organisation. The responsibility for the day-to-day management
of operations of the Bank is vested with the Chairman & Managing Director and Deputy
Managing Directors, who draw upon the support and expertise of a cross-disciplinary Top
Management Team. IDBI Bank Ltd.'s employee base includes professionals from the fields of
accountancy, management, engineering, law, computer technology, banking and economics.

Board of Directors (Position as on July 22, 2014)

Mr. M. O. Rego
Mr. M. S. Raghavan
(Deputy Managing Director)
(Chairman & Managing Director)

Mr. B. K. Batra
Ms. Snehlata Shrivastava
(Deputy Managing Director)
Mr. Pankaj Vats

Mr. Ninad
Karpe

Mr. S.Ravi

Mr. P. S. Shenoy
 New Generation Government Owned Bank

Categorization of IDBI Bank Ltd. as OTHER PUBLIC SECTOR BANK by RBI

Industrial Development Bank of India Ltd. (since renamed as IDBI Bank Ltd.) was incorporated
under Companies Act 1956, as a Limited Company, registered with the Registrar of Companies,
Maharashtra, Mumbai vide Certificate of incorporation dated 27th September, 2004. In terms of
the Articles of Association of the IDBI Bank Ltd., the Central Government being a shareholder
of the company shall, at all times, maintain not less than 51% of the Issued Capital of the
company. Considering the shareholding pattern, IDBI Ltd. has been categorized under a New
Sub-Group "Other Public Sector Banks".Reserve Bank of India has, vide its letter no DBOD.
BP. 1630/21.04.152/2004-05 dated April 15, 2005 confirmed that IDBI Ltd. (since renamed as
IDBI Bank Ltd.) may be considered as Government-owned bank.

IDBI Bank Ltd. to be Treated on PAR with Nationalised Banks / SBI

Ministry of Finance has vide its circular no. F.No. 7/96/2005-BOA dated December 31, 2007
advised Secretaries of all Ministries/Departments of Government of India that the bank may be
treated on par with Nationalised Banks/State Bank of Indiaby Govt. Departments / Public
Sector Undertakings / other entities for all purposes, including deposits / bonds / investments /
guarantees etc. and Government business.

'Other Public Banks' included in 'Public Sector Banks' in Income Tax Act 1961
Section 10(23D) of the Income Tax Act 1961, after amendment by Finance Act 2009,
incorporates 'Other Public sector Banks' in the expression 'Public Sector Banks' .

General Code of Conduct and Ethics

Preamble:
IDBI Bank Ltd. is committed to creating long term economic value for all its stakeholders,
including shareholders, depositors, customers, employees and the society as a whole. IDBI Bank
Ltd. is committed to maintaining high standards of ethical and professional conduct in all its
corporate activities.

This Code of Conduct and Ethics outlines the overall standards that shall guide the actions of
IDBI Bank Ltd. and its Directors, officers and employees.

National Interest: IDBI Bank Ltd. shall continue to be committed in all its actions to benefit the
economic development of the nation and shall not engage in any activity that would adversely
affect such objective.

Financial Reporting and Records: IDBI Bank Ltd. shall continue to prepare and maintain its
accounts fairly and accurately in accordance with the accounting and financial reporting
standards which represent the generally accepted guidelines, principles, standards, laws and
regulations of the country. Internal accounting and audit procedures shall fairly and accurately
reflect all of IDBI Bank Ltd. business transactions and disposition of assets.

Corporate Disclosure Practices: IDBI Bank Ltd. shall continue to abide by the corporate
disclosure practices as specified by the appropriate external regulatory authorities.

Competition:
IDBI Bank Ltd. shall market its products and services on its own merits.

Equal-Rights:
IDBI Bank Ltd shall continue to provide equal opportunities to all its employees and all qualified
applicants for employment without regard to their race, caste, religion, colour, ancestry, marital
status, sex, age, nationality, disability etc. Applicable laws, rules, and guidelines of Government
of India / any other Competent Authority in this regard shall also be observed for this purpose.
Employees of IDBI Bank Ltd. shall be treated with dignity and in accordance with the IDBI
Bank Ltd. policy to maintain a work environment free of sexual harassment, whether physical,
verbal or psychological. Employee policies and practices shall be administered on a non-
discriminatory basis in all matters relating to recruitment, training, compensation, benefits,
promotion, transfers and all others terms and conditions of employment.

Prohibited Business: IDBI Bank Ltd. shall not enter into any kind of business with any
company / organisation / entity, of which any of its director of is a proprietor, partner, director, a
manager, employee or guarantor or in which one or more directors of IDBI Bank Ltd. together
hold substantial interest.

Substantial interest, in relation to any company / organisation / entity, means any beneficial
interest held by one or more of the directors of IDBI Bank Ltd. or by any relative of such
director, whether singly or taken together, in the shares of the company / organisation / entity, the
aggregate amount paid up on which either exceeds five lakh of rupees or 5% of its paid-up share
capital, whichever is lesser.

Quality of Products and Services: IDBI Bank Ltd. shall continue to be committed to creating
new industry standards of excellence in customer service. IDBI Bank Ltd. shall provide
innovative and superior quality customer service consistent with the requirements of the
customers for their satisfaction.

Corporate Opportunity: A Director / Officer / Employee must not deprive IDBI Bank Ltd. of
an opportunity that belongs to IDBI Bank Ltd., for his/ her own/other's advantage, if he / she is in
a position of diverting the corporate opportunity for own benefit or to others to the detriment of
IDBI Bank Ltd. A Director / Officer / Employee must not compete with IDBI Bank Ltd. in
respect of any business transaction.

Health, Safety and Environment: IDBI Bank Ltd. shall strive to provide a safe and healthy
working environment at its work places and comply, in the conduct of its business affairs, with
all regulations regarding the preservation of the environment of the territories it operates in.

Corporate Social Responsibility: IDBI Bank Ltd. shall continue to be committed to be a good
corporate citizen not only in compliance with all relevant regulating laws and regulations but
also by actively assisting in the improvement of the quality of life of the people in the
communities in which it operates with the objective of making them self reliant.
Public Representation of the Company & the Group: IDBI Bank Ltd. honours the
information requirements of the public and its stakeholders. All its external communication will
be only by officials / directors authorised for the purpose.

The information for the public constituents and stakeholders, duly approved by the Compliance
Officer or other authorised official, as the case may be, shall be disseminated through any of the
following media:

Use of IDBI Bank Ltd. Name Logo/ Trademarks:

A Director / Officer / Employee shall not use the name of IDBI Bank Ltd., its logo or trademark
for personal benefit or for the benefit of persons / entities not forming part of the IDBI Group.

Shareholders:
IDBI Bank Ltd. is committed to enhance shareholder value and shall comply with all regulations
and laws that govern shareholders' rights. The Board of Directors' of IDBI Bank Ltd. shall duly
and fairly inform its shareholders about all relevant aspects of the organisation business and
disclose such information in accordance with the respective regulations and agreements. Every
employee shall also be responsible for implementation of and compliance with this code.

Ethical Standards:

A Director / Officer / Employee of IDBI Bank Ltd. shall conduct all the dealings on behalf of
IDBI Bank Ltd. with professionalism, honesty, integrity and high moral and ethical standards.
Every Director / Officer / Employee of IDBI Bank Ltd. shall be responsible for the
implementation of and compliance with the Code in his / her professional environment, be fair
and take action not to discriminate, honour confidentiality and strive to achieve more specific
professional responsibilities.

Insider Trading:
Insider Trading involves the improper use of non - public price sensitive information when
dealing in securities. Specified employees are prohibited from engaging in insider trading as
detailed in the Code of Conduct for Prevention of Insider Trading.

Conduct of Staff:
To uphold the image and dignity of the institution, it is desirable that every director / officer /
employee of IDBI Bank Ltd. should demonstrate a high degree of conduct and integrity, as
under:
a sense of fair play, impartiality and promptness in disposing of cases and show courtesy and
consideration in public dealings;
keeping in mind the objective of IDBI Bank Ltd., to contribute his / her mite through integrity,
dedication and competence;
restrain from participating or assisting in any activity, which is detrimental to the interest of IDBI
Bank Ltd. or is in competition to the interest of IDBI Bank Ltd.;
not use or influence by virtue of the position held in the bank for obtaining favours ofany kind
for himself / herself or any members of family or friends or equivalent person with any
constituent / borrower / client / customer;
be cost conscious and plug all wastes and leakages, to remain competitive;
not to be negligent or show lack of devotion to duty any time and
not to show any favouritism or commit any irregularity in inviting tenders an awarding contracts
or cultivate too much friendship with the Bank's contractors / suppliers.

Regulatory Compliance:

A Director / officer / employee shall, in his business conduct, comply with all applicable laws
and regulations.

Securities Transactions and Confidential Information:

A Director / officer / employee of IDBI Bank Ltd. and their family members shall not derive any
benefit or assist others to derive any benefit from the access to and possession of information
about IDBI Bank Ltd. which is not in the public domain and thus constitutes insider information.
The Director / officer / employee of IDBI Bank Ltd. shall maintain confidentiality of all price
sensitive information. Unpublished price sensitive information would be disclosed only to those
within the company who need the information to discharge their duty.

Conflict of Interest:

The Directors / officers / employees of IDBI Bank Ltd. shall always conduct themselves in an
honest and ethical manner and in the best interest of the Bank. Towards this, the directors,
officers and employees of IDBI Bank Ltd. shall endeavour to avoid situations that may lead to an
actual or potential conflict between person's private interest and the interest of the Bank,
including its affiliates and subsidiaries. While it may be difficult to list all the situations of
conflict of interest, the following are illustrative examples of some of the situations, which may
constitute a Conflict of interest:

a Director/ officer/ employee engages in any business, relationship or activity which might
detrimentally conflict with the business of IDBI Bank Ltd.

a Director / officer / employee receives improper personal benefits as a result of his official
position in IDBI Bank Ltd.

a Director / officer / employee is in a position to make, influence or benefit from the decisions
relating to the transaction.

If such and other instances of conflict of interest exist due to any historical reasons, adequate
disclosures by the interested employees should be made to the management.

Gifts and Donations:

The Director / officer / employee of IDBI Bank Ltd. shall not solicit or accept any gifts
/donations of more than modest value from a constituent of IDBI Bank Ltd. or from any
subordinate employee or from existing / potential clients or third parties having business dealings
with IDBI Bank Ltd.

Gender Friendly Workplace:

As a good corporate citizen, IDBI Bank Ltd. is committed to a gender friendly workplace. IDBI
Bank Ltd. demands, demonstrates and promotes professional behaviour and respectful treatment
of all employees.

Prohibition against participation in politics and standing for election:

No employee shall take an active part in politics or in any political demonstration, or stand for
election as member of a Municipal Council, district Board or any other Local Body or any
Legislative Body.

Protection of Bank's assets:

The assets of IDBI Bank Ltd. shall not be misused but employed for conducting the business for
which they are duly authorized.

Ethics and Compliance Committee:

The Ethics and Compliance Committee comprising few independent directors of the Board, an
Executive Director, Chief Vigilance Officer of IDBI Bank Ltd. and the Compliance Officer and
any other officer so nominated, will oversee the compliance of the Code of Conduct and Ethics

METHODOLOGY TOOLS
 Formulae used for Date Analysis:

1. Return = Ve - Vb

_____

Vb

Ve = Value at the end

Vb = Value at the beginning

2. Variance (2) = (x-)2

N

3. Standard Deviation () = 2
 CHAPTER-IV

DATA ANALYSES AND INTERPRETATION

For analysis Net Asset Value (NAV) of the Four AMCS

for the period of 1st December 2016 to 22nd January 2017

SBI
IDBI Indiabulls
Magnum HDFC
Market GOLD blue chip
Balanced GOLD
Date Level FUND- fund-
Fund- Fund
( NIFTY) GROWTH Growth
Growth Growth

22/01/2017 7376.65 92.37 8.23 13.58 8.87

21/01/2017 7357.00 91.38 8.25 13.31 8.93
20/01/2017 7381.8 91.24 8.21 13.39 8.98
19/01/2017 7420.35 92.12 8.13 13.67 8.92
18/01/2017 7561.65 91.30 8.15 13.50 8.89
15/01/2017 7467.4 92.89 8.05 13.78 8.74
14/01/2017 7557.9 94.20 8.08 13.95 8.79
13/01/2017 7587.2 94.63 8.00 14.05 8.67
12/01/2017 7527.45 94.93 8.09 14.01 8.77
11/01/2017 7611.65 95.46 8.14 14.12 8.80
08/01/2017 7673.35 95.87 8.08 14.17 8.81
07/01/2017 7788.05 95.25 8.10 14.09 8.82
06/01/2017 7828.4 96.38 8.00 14.44 8.85
05/01/2017 7924.55 96.29 7.94 14.48 8.68
04/01/2017 7938.45 96.34 7.90 14.43 8.61
01/01/2017 7897.8 97.43 7.80 14.71 8.57
31/12/2016 7938.6 96.99 7.82 14.67 8.55
30/12/2016 7929.2 96.61 7.87 14.60 8.60
29/12/2016 7863.2 96.76 7.86 14.66 8.57
28/12/2016 7888.75 96.67 7.87 14.63 8.61
23/12/2016 7830.45 96.27 7.87 14.53 8.51
22/12/2016 7829.4 96.13 7.92 14.53 8.57
21/12/2016 7745.65 95.44 7.88 14.41 8.64
18/12/2016 7828.9 95.55 7.79 14.48 8.58
17/12/2016 7783.05 95.37 7.88 14.38 8.49
16/12/2016 7725.25 95.68 7.90 14.52 8.53
15/12/2016 7659.15 94.91 7.94 14.29 8.55
14/12/2016 7558.2 94.55 7.93 14.22 8.54
11/12/2016 7699.6 94.08 7.90 14.11 8.55
10/12/2016 7643.3 93.99 7.94 14.04 8.56
09/12/2016 7695.5 94.32 7.98 14.16 8.60
08/12/2016 7738.5 93.94 7.94 14.00 8.64
07/12/2016 7816.55 94.82 7.99 14.22 8.60
04/12/2016 7817.6 95.28 7.88 14.34 8.66
03/12/2016 7902.3 95.46 7.79 14.34 8.58
02/12/2016 7976.7 95.74 7.88 14.45 8.50
01/12/2016 7958.15 96.06 7.89 14.56 8.57
Average 7722.38 94.93 7.96 14.21 8.66
Calculations of Risk of SBI Magnum Balanced Fund- Growth
For the period of 1st December 2016 to 22nd January 2017

SBI Magnum Returns

Market Level Balanced
Date ( NIFTY) returns Fund- Growth
22/01/2017 7376.65 92.37
21/01/2017 7357.00 -19.65 91.38 -0.99
20/01/2017 7381.8 24.8 91.24 -0.14
19/01/2017 7420.35 38.55 92.12 0.88
18/01/2017 7561.65 141.3 91.30 -0.82
15/01/2017 7467.4 -94.25 92.89 1.59
14/01/2017 7557.9 90.5 94.20 1.31
13/01/2017 7587.2 29.3 94.63 0.43
12/01/2017 7527.45 -59.75 94.93 0.3
11/01/2017 7611.65 84.2 95.46 0.53
08/01/2017 7673.35 61.7 95.87 0.41
07/01/2017 7788.05 114.7 95.25 -0.62
06/01/2017 7828.4 40.35 96.38 1.13
05/01/2017 7924.55 96.15 96.29 -0.09
04/01/2017 7938.45 13.9 96.34 0.05
01/01/2017 7897.8 -40.65 97.43 1.09
31/12/2016 7938.6 40.8 96.99 -0.44
30/12/2016 7929.2 -9.4 96.61 -0.38
29/12/2016 7863.2 -66 96.76 0.15
28/12/2016 7888.75 25.55 96.67 -0.09
23/12/2016 7830.45 -58.3 96.27 -0.4
22/12/2016 7829.4 -1.05 96.13 -0.14
21/12/2016 7745.65 -83.75 95.44 -0.69
18/12/2016 7828.9 83.25 95.55 0.11
17/12/2016 7783.05 -45.85 95.37 -0.18
16/12/2016 7725.25 -57.8 95.68 0.31
15/12/2016 7659.15 -66.1 94.91 -0.77
14/12/2016 7558.2 -100.95 94.55 -0.36
11/12/2016 7699.6 141.4 94.08 -0.47
10/12/2016 7643.3 -56.3 93.99 -0.09
09/12/2016 7695.5 52.2 94.32 0.33
08/12/2016 7738.5 43 93.94 -0.38
07/12/2016 7816.55 78.05 94.82 0.88
04/12/2016 7817.6 1.05 95.28 0.46
03/12/2016 7902.3 84.7 95.46 0.18
02/12/2016 7976.7 74.4 95.74 0.28
01/12/2016 7958.15 -18.55 96.06 0.32
Average 15.74 0.153

Stranded Deviation (SD) 1.48 0.08

Beta 0.57
Graphical Presentation of SBI Magnum Balanced Fund-Growth For the month of January
2017

returns
40
20 returns

0
-20

Interpretation:

SBI Magnum Balanced Fund-Growth has been analyzed and it is found that there is a positive
growth. However on the basis of the avg returns of SBI there is a growth 0.15 as against the
index avg of 14.74 the beta being less than 1 the stock is not highly volatile.

Calculations of Risk of IDBI GOLD FUND-GROWTH

For the period of 1st December 2016 to 22nd January 2017

returns IDBI GOLD returns

Market Level
Date FUND-
( NIFTY)
GROWTH
22/01/2017 7376.65 8.23
21/01/2017 7357.00 -19.65 8.25 0.02
20/01/2017 7381.8 24.8 8.21 -0.04
19/01/2017 7420.35 38.55 8.13 -0.08
18/01/2017 7561.65 141.3 8.15 0.02
15/01/2017 7467.4 -94.25 8.05 -0.1
14/01/2017 7557.9 90.5 8.08 0.03
13/01/2017 7587.2 29.3 8 -0.08
12/01/2017 7527.45 -59.75 8.09 0.09
11/01/2017 7611.65 84.2 8.14 0.05
08/01/2017 7673.35 61.7 8.08 -0.06
07/01/2017 7788.05 114.7 8.1 0.02
06/01/2017 7828.4 40.35 8 -0.1
05/01/2017 7924.55 96.15 7.94 -0.06
04/01/2017 7938.45 13.9 7.9 -0.04
01/01/2017 7897.8 -40.65 7.8 -0.1
31/12/2016 7938.6 40.8 7.82 0.02
30/12/2016 7929.2 -9.4 7.87 0.05
29/12/2016 7863.2 -66 7.86 -0.01
28/12/2016 7888.75 25.55 7.87 0.01
23/12/2016 7830.45 -58.3 7.87 0
22/12/2016 7829.4 -1.05 7.92 0.05
21/12/2016 7745.65 -83.75 7.88 -0.04
18/12/2016 7828.9 83.25 7.79 -0.09
17/12/2016 7783.05 -45.85 7.88 0.09
16/12/2016 7725.25 -57.8 7.9 0.02
15/12/2016 7659.15 -66.1 7.94 0.04
14/12/2016 7558.2 -100.95 7.93 -0.01
11/12/2016 7699.6 141.4 7.9 -0.03
10/12/2016 7643.3 -56.3 7.94 0.04
09/12/2016 7695.5 52.2 7.98 0.04
08/12/2016 7738.5 43 7.94 -0.04
07/12/2016 7816.55 78.05 7.99 0.05
04/12/2016 7817.6 1.05 7.88 -0.11
03/12/2016 7902.3 84.7 7.79 -0.09
02/12/2016 7976.7 74.4 7.88 0.09
01/12/2016 7958.15 -18.55 7.89 0.01
Average 16.15 -0.009

Stranded Deviation (SD) 1.48 -0.004

Beta 0.12
Graphical Presentation of IDBI GOLD FUND-GROWTH For the month of January 16

Return
40
30
20 Return

10
0
-10

Interpretation:

IDBI GOLD FUND-GROWTH have been analyzed and it is found that there is a negative
growth. However on the basis of the avg returns of IDBI GOLD FUND-GROWTH there is a
negative growth 0.004as against the index avg of negative 0.19 the beta being less than 1 the
stock is not highly volatile.

Calculations of Risk of Indiabulls blue chip fund-Growth

For the period of 1st December 2016 to 22nd January 2017

Indiabulls
Market Level
Date Return blue chip fund- Return
( NIFTY)
Growth
22/01/2017 7376.65 13.58
21/01/2017 7357.00 -19.65 13.31 -0.27
20/01/2017 7381.8 24.8 13.39 0.08
19/01/2017 7420.35 38.55 13.67 0.28
18/01/2017 7561.65 141.3 13.50 -0.17
15/01/2017 7467.4 -94.25 13.78 0.28
14/01/2017 7557.9 90.5 13.95 0.17
13/01/2017 7587.2 29.3 14.05 0.1
12/01/2017 7527.45 -59.75 14.01 -0.04
11/01/2017 7611.65 84.2 14.12 0.11
08/01/2017 7673.35 61.7 14.17 0.05
07/01/2017 7788.05 114.7 14.09 -0.08
06/01/2017 7828.4 40.35 14.44 0.35
05/01/2017 7924.55 96.15 14.48 0.04
04/01/2017 7938.45 13.9 14.43 -0.05
01/01/2017 7897.8 -40.65 14.71 0.28
31/12/2016 7938.6 40.8 14.67 -0.04
30/12/2016 7929.2 -9.4 14.60 -0.07
29/12/2016 7863.2 -66 14.66 0.06
28/12/2016 7888.75 25.55 14.63 -0.03
23/12/2016 7830.45 -58.3 14.53 -0.1
22/12/2016 7829.4 -1.05 14.53 0
21/12/2016 7745.65 -83.75 14.41 -0.12
18/12/2016 7828.9 83.25 14.48 0.07
17/12/2016 7783.05 -45.85 14.38 -0.1
16/12/2016 7725.25 -57.8 14.52 0.14
15/12/2016 7659.15 -66.1 14.29 -0.23
14/12/2016 7558.2 -100.95 14.22 -0.07
11/12/2016 7699.6 141.4 14.11 -0.11
10/12/2016 7643.3 -56.3 14.04 -0.07
09/12/2016 7695.5 52.2 14.16 0.12
08/12/2016 7738.5 43 14.00 -0.16
07/12/2016 7816.55 78.05 14.22 0.22
04/12/2016 7817.6 1.05 14.34 0.12
03/12/2016 7902.3 84.7 14.34 0
02/12/2016 7976.7 74.4 14.45 0.11
01/12/2016 7958.15 -18.55 14.56 0.11
Average 16.15 0.02

Stranded Deviation (SD) 1.48 0.01

Beta 0.12
Graphical Presentation of Indiabulls blue chip fund-Growth
For the month of January 16

Chart Title
40
30
20
10
0
-10

Interpretation:

Indiabulls blue chip fund-Growth have been analyzed and it is found that there is a positive
growth. However on the basis of the avg returns of Indiabulls blue chip fund-Growth there is
negative growth 0.02 as against the index avg of negative 0.02 the beta being less than 0.12 the
stock is not highly volatile.

Calculations of HDFC GOLD Fund Growth

For the period of 1st December 2016 to 22nd January 2017

Return Return
Market Level
Date HDFC GOLD
( NIFTY)
Fund Growth

22/01/2017 7376.65 8.87

21/01/2017 7357.00 -19.65 8.93 0.06
20/01/2017 7381.8 24.8 8.98 0.05
19/01/2017 7420.35 38.55 8.92 -0.06
18/01/2017 7561.65 141.3 8.89 -0.03
15/01/2017 7467.4 -94.25 8.74 -0.15
14/01/2017 7557.9 90.5 8.79 0.05
13/01/2017 7587.2 29.3 8.67 -0.12
12/01/2017 7527.45 -59.75 8.77 0.1
11/01/2017 7611.65 84.2 8.80 0.03
08/01/2017 7673.35 61.7 8.81 0.01
07/01/2017 7788.05 114.7 8.82 0.01
06/01/2017 7828.4 40.35 8.85 0.03
05/01/2017 7924.55 96.15 8.68 -0.17
04/01/2017 7938.45 13.9 8.61 -0.07
01/01/2017 7897.8 -40.65 8.57 -0.04
31/12/2016 7938.6 40.8 8.55 -0.02
30/12/2016 7929.2 -9.4 8.60 0.05
29/12/2016 7863.2 -66 8.57 -0.03
28/12/2016 7888.75 25.55 8.61 0.04
23/12/2016 7830.45 -58.3 8.51 -0.1
22/12/2016 7829.4 -1.05 8.57 0.06
21/12/2016 7745.65 -83.75 8.64 0.07
18/12/2016 7828.9 83.25 8.58 -0.06
17/12/2016 7783.05 -45.85 8.49 -0.09
16/12/2016 7725.25 -57.8 8.53 0.04
15/12/2016 7659.15 -66.1 8.55 0.02
14/12/2016 7558.2 -100.95 8.54 -0.01
11/12/2016 7699.6 141.4 8.55 0.01
10/12/2016 7643.3 -56.3 8.56 0.01
09/12/2016 7695.5 52.2 8.60 0.04
08/12/2016 7738.5 43 8.64 0.04
07/12/2016 7816.55 78.05 8.60 -0.04
04/12/2016 7817.6 1.05 8.66 0.06
03/12/2016 7902.3 84.7 8.58 -0.08
02/12/2016 7976.7 74.4 8.50 -0.08
01/12/2016 7958.15 -18.55 8.57 0.07
Average 16.15 0.008

Stranded Deviation (SD) 1.48 0.002

Beta 0.08
Graphical presentation of HDFC GOLD Fund Growth)For the month of January 16
 Return
40

20 Return

-20

Interpretation:
HDFC GOLD Fund Growthhas been analyzed and it is found that there is a negative growth.
However on the basis of the avg returns of HDFC GOLD Fund Growththere is a negative
growth 0.008 as against the index avg of negative 0.02 the beta being less than 0.08 the stock is
not highly volatile.

Comparative Study of the performance of the Selected AMCs

Sharp index and Treynor index are calculated
For the month of January 16

Return Risk(std Beta Sharp's Treynor

Name of the Fund Rf (Rm- (Rm-
(Rm) dev) ()
Rf)/ Rf)/

SBI Magnum Balanced 0.153 0.08 0.57 0.06

Fund- Growth 1.16 0.26

IDBI GOLD FUND-
0.009 -0.004 0.12 0.06
GROWTH -0.42 -0.85
Indiabulls blue chip fund-
0.02 0.01 0.12 0.06
Growth -4.00 -0.33

HDFC GOLD Fund

0.008 0.002 0.08 0.06
Growth
-2.6 -0.86
The graphical representation of Sharp Index:
Interpretation:
From the above table and graph we can know that SBI Magnum Balanced Fund-
Growth and are giving good returns and they are in first position,
And the second position is Indiabulls blue chip fund-Growth
The graphical representation of TREYNER Index:

Interpretation:

From the above table and graph we can know SBI Magnum Balanced Fund- Growth
is performing well and it is in first position

And the second position is Indiabulls blue chip fund-Growth

The general trend in the reduction of the market price for various mutual funds studied
is not encouraging the stock market index has also been falling continuously because
 of general economic slowdown however the funds are ranked considering sharp and
trenyors in the order of performances

CHAPTER-V

FINDINGS, SUGGESSIONS AND CONCLUSIONS

FINDINGS

SHARPES: As per Sharpe performance measure, a high Sharpe ratio is preferable as it

indicates a superior risk adjusted performance of a fund. From the above table Indiabulls blue
chip fund-Growth and SBI show a better risk-adjusted performance out of top4 AMCS.

TREYNORs: As per TREYNORS ratio the Treynors reward to volatility - having high
positive index is favorable. Therefore, as per this ratio also SBI -Growth is preferable.

CONCLUSIONS

From the study analysis conducted it is clear that in EQUITY FUNDS- SBI
MUTUAL FUND is performing very well.

Investing in Indiabulls blue chip fund-Growth will leads to profits.

By seeing the overall performance SBI MUTUAL FUND is performing very

well.

The prospective investors are needed to be made aware of the investment in

mutual funds.
 The Industry should keep consistency and transparency in its management and
investors objectives.

There is 100% growth of mutual fund as foreign AMCS are in queue to enter the
Indian markets.

Mutual funds can also perctrate in to rural areas.

SUGGESTIONS TO INVESTORS:

Investing Checklist

Financial goals & Time frame

(Are you investing for retirement? A childs education? Or for current income? )

Risk Taking Capacity

Identify funds that fall into your Buy List

Obtain and read the offer

Documents match your objectives

In terms of equity share and bond weightings, downside risk

protection, tax benefits offered, dividend payout policy, sector focus

Performance of various funds with similar objectives for at least 3-5 years
 Think hard about investing in sector funds For relatively aggressive investors

Close touch with developments in sector, review portfolio regularly Look for `load'
costs

Management fees, annual expenses of the fund and sales loads

Look for size and credentials

Asset size less than Rs. 25 Crores

Diversify, but not too much

Invest regularly, choose the S-I-P

MF- an integral part of your savings and wealth building plans.

Portfolio Decision

The right asset allocation

i. Age = % in debt instruments

ii. Reality= different financial position, different allocation

iii. Younger= Riskier

2. Selecting the right fund/s

i. Based on schemes investment philosophy

ii. Long-term, appetite for risk, beat inflation equity funds best

3. TRAPS TO AVOID

4. IPO Blur

5. Begin with existing schemes (proven track record) and then new
 6. schemes

i. Avoid Market Timing

7. MF Comparison

8. Absolute returns

9. % Difference of NAV

i. Diversified Equity with Sector Funds NO

10. Benchmark returns

i. SEBI directs

ii. Fund's returns compared to its benchmark

Time period Equal to time for which you plan to invest

iii. Equity- compare for 5 years, Debt- for 6 months

11. Market conditions

i. Proved its mettle in bear market

Recommendations and Suggestions to AMCS:

1) Brand building:

Brand building is an exercise, which every business enterprise will have. Brand is the
soul of an institution; it survives on it, lives with it and cherishes it. Example: LIC Nomura
Balanced -Growth has a brand, every bank, insurance companies; mutual fund companies have
got their own brands.

2) Strength full Strategies:

 Every AMC should try to turn into a more modern, a more vibrant, a more transparent
and regulatory compliance institution. It is with this in mind, every institution should try to come
up with verity of different type of products to fill different investment objectives

3) Marketing tools for total quality achievement:

a) Large Network.

b) Effective Man power

c) Distribution across the Market

d) Customer relations(Building better relationships)

e) Value added service

f) Better transparency level

g) Building brand name as a disciplined player.

4) Innovation:

MF industry can be classified morely into three categories like equity, debt and balanced.
And there is also complexive in nature. Fund managers are not able to reach niche market. The
products are should be innovative that can meet niche market. Here MF should follow the
FMCG industry innovative strategy.

The Ground rules of Mutual Fund Investing

Assess yourself

1) Try to understand where the money is going

2) Don't rush in picking funds, think first

3) Invest. Dont speculate

4) Dont put all the eggs in one basket

 5) Be regular

6) Do your homework

7) Find the right funds

8) Keep track of your investments

9) Know when to sell your mutual funds

BIBILIOGRAPHY

I. Referred BOOKS

Donald E Fischer
Security Analysis Portfolio Management
Ronald J Jordan

H. Sadhak Mutual Fund in India

G. Ramesh Babu FINANCIAL SERVICES IN INDIA -1st Edition (2005)

II. WEB SITES

www.amfiindia.com

www.hdfcamc.com
 www.bseindia.com

www.nseinda.com

www.bluechipinda.co.in

III. MAGAZINES

Business India

Business World

IV. NEWS PAPERS

Economic Times

Business Standard.