EXECUTIVE SUMMARY

INTRODUCTION:
The main aim of the investor is to minimize the risk involved in investment &
maximize the return. Today there are number of options available to investor like Post
Office investment, Bank Deposit, Stock Market, Insurance, Mutual Fund etc... Mutual
fund is a growing investment now a day because of low cost & lack of time to look
after their money. In this project let us see the different means of investment in mutual
fund & how to analyze the risk involved in each mutual fund.
This project is about a brief introduction to mutual funds, different types, the
intermediaries involved, parties involved, regulatory bodies etc… The contents in this
project are made simple so as to make a layman understand the terms used in the field
of mutual fund.
The core area of this project focuses on risk & return analysis of mutual fund which
tells an advisory about the risk level of each option in each fund. This project contains
some elementary statistics which are used in calculation which help in drawing
inferences.
This project has been done in VERSATILE SECURITIES (Franchisee of
RELIGARE SECURITIES), which is a financial Shoppe involved in rendering
different financial services like equity brokerage, commodity research & brokerage,
portfolio management services, mutual fund distribution.
Mutual funds are truly a safer way to invest. They essentially are a pooling of small
resources by individuals, handed over to a professional fund manager to invest in well
diversified portfolio of securities such as money market instruments, corporate &
govt. bonds, equity shares of joint stock companies based on the objectives of the
scheme.

TITLE OF THE PROJECT:

“A Study on Mutual Funds and Comparative Performance Analysis [Risk and Return] of SBI
Mutual Fund with ICICI Prudential Mutual Fund.”
MAIN OBJECTIVE:
To make Comparative Analysis of Performance of SBI Mutual Fund with ICICI Prudential
Mutual Fund.

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SUB-OBJECTIVES:
• To study the different kinds of schemes provided by each of Mutual funds.
• Comparative risk & return analysis of SBI Gilt Fund with ICICI Prudential Gilt Fund.
• Comparative risk & return analysis of SBI Equity Fund with ICICI Prudential Equity
Fund
• Comparative risk & return analysis of SBI Balance Fund Plan with ICICI Prudential
Balance Fund.
FINDINGS:
• Returns from ICICI Prudential Balanced Fund for the past one year period is
23.16% and return from SBI Magnum Balanced Fund is higher at 25.96% for
the same period. The NAV 40.88 of SBI Magnum Balanced Fund is 40.88 and
ICICI Prudential Balanced Fund is 35.2
• The present NAV of SBI Magnum Gilt and ICICI Prudential are Rs. Rs.17.26
and Rs.22.62 respectively. Returns for the past one-year period for SBI
Magnum Gilt Fund is 5.36%, which is lower than ICICI Prudential Gilt Fund
Returns 8.09%.
• NAV of SBI Magnum global Fund is Rs.48.48, and NAV of ICICI Prudential
Dynamic Fund is Rs.67.18. Returns from SBI Magnum global Fund are
17.93% and ICICI Prudential Dynamic Fund returns are 43.56% for the past
one year. Returns and NAV of both the funds are very much fluctuating.
RECOMMENDATIONS:
• It is favorable for the SBI Mutual fund to promote more of SBI Magnum
Balanced Fund over ICICI Prudential Balance Fund, because SBI Magnum
balanced fund is giving consistent returns since inception.
• The Performance of the SBI Magnum Gilt Fund is poor compared to ICICI
Prudential Gilt Fund. It’s better to invest more in High yield Government
Securities than investing in short term Deposits with lower rate of interest.
• As the Portfolio of the SBI Magnum Global is holding More of cash balance,
the cash balance should be reduced and invest same in Mid Cap and Small
Cap.

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 A BROAD VIEW OF
MUTUAL FUND INDUSTRY

The unique thing about the state of mind of investors in stocks or mutual funds
nowadays is that there is a huge diversity in their happiness level. The markets are at
or near all time high and so are equity mutual funds. Currently almost 95% of equity
mutual fund are either at an all time high or within two or three per cent of such high.
Except for a handful of perpetual dullards, there are no equity funds that haven’t
recovered the losses that the market suffered a year ago. Since June 14, 2006 when,
the major indices touched the lowest point in recent times, both the Sensex and the
Nifty have gained around 63 per cent. During this period, as many as 70 equity
mutual funds gained more than the markets did. Of course a large number, 95,
performed worse than the markets. Still the fact remain that even these have earned
substantial returns over this period.
All in all, there are hardly any investors who are today sitting on losses, no matter
when they have invested. Based on analysis done by Value Research, of the Rs.1,
10,000 crore of investor’s money that is being managed by diversified equity mutual
funds, around 94 per cent is in profits.
A great deal of money flowed into mutual funds in the first half of 2007. This was the
time of mega NFO’s like the Reliance Equity Advantage Fund, SBI Infrastructure,
HDFC Mid Cap Fund and many more.
This is a brief overview on the present scenario of mutual funds. Many people are
now aware of mutual funds as compared to earlier and mutual funds have become a
part of their portfolio.

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INTRODUCTION TO THE MUTUAL FUND INDUSTRY:

Unit Trust of India was the first mutual fund set up in India in the year 1963. In early
1990s, as a result of liberalization the Government allowed public sector banks and
institutions to set up mutual funds. SEBI formulates policies and regulates the mutual
funds to protect the interest of the investors. All mutual funds whether promoted by
public sector or private sector entities including those promoted by foreign entities are
governed by the same set of Regulations. Thus, SEBI (Securities Exchange Board of
India) regulates the security market.

DIAGRAM DEPICTING WORKING MECHANISM OF MUTUAL FUNDS.

Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. The small savings of all the investors are put together to increase the buying
power and hire a professional manager to invest and monitor the money. Anybody
with an invest able surplus of as little as a few thousand rupees can invest in Mutual
Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

Mutual funds are financial intermediaries, which collect the savings of investors and
invest them in a large and well-diversified portfolio of securities such as money
market instruments, corporate and government bonds equity shares of joint stock

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companies. Mutual funds are conceived as institutions for providing small investors
with avenues of investments in the capital market.

Since small investors generally do not have adequate time, knowledge, experience
and resources for directly accessing the capital market, they have to rely on an
intermediary, which undertakes informed investment decisions and provides
consequential benefits of professional expertise.

THE CONCEPT:

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and the capital appreciations realized by the schemes 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 person as it
offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost.

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HOW IS A MUTUAL FUND SET UP?

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset
Management Company (AMC) and custodian.

• The trust is established by a sponsor or more than one sponsor who is like promoter
of a company.
• The trustees of the mutual fund hold its property for the benefit of the unit holders.
Asset Management Company (AMC) approved by SEBI, manages the funds by
making investments in various types of securities.
• Custodian, who is registered with SEBI, holds the securities of various schemes of
the fund in its custody. The trustees are vested with the general power of
superintendence and direction over AMC. They monitor the performance and
compliance of SEBI Regulations by the mutual fund.

ORGANISATION OF MUTUAL FUND:

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund

established in the form of a trust by a sponsor to raise money by the Trustees through

the sale of units to the public under one or more schemes for investing in securities in

accordance with these regulations.

There are many entities involved in organization of mutual fund. Diagram given
below illustrates the organization set-up of a mutual fund.

Mutual funds have a unique structure not shared with other entities such as companies
or firms. It is important for employees and agents to be aware of the special nature of

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this structure, because it determines the rights and responsibilities of the fund’s
constituents viz. sponsors, trustees, custodians, transfer agents and of course, the
fund and the asset management company the legal structure also drives the inter-
relationships between these constituents.

1. The Fund Sponsor

The sponsor of a fund is akin to the promoter of a company as he gets the fund
registered with SEBI. As the promoter of the fund, he is required to appoint the
people who will look after the fund.
• The sponsor will form a Trust and appoint a Board of Trustees.
• The sponsor will also generally appoint an Asset Management Company as
fund managers.
• The sponsor, either directly or acting through the Trustees, will also appoint a
Custodian to hold the fund assets.
All these appointments are made in accordance with SEBI Regulations. For a person
to qualify as a sponsor, he must contribute at least 40% of the net worth of the AMC
and possess a sound financial track record over five years prior to registration.
2. Trustees
The mutual fund may be managed by a Board of Trustees a body of individuals, or a
Trust Company - a corporate body. Most of the funds in India are managed by Boards
of Trustees. While the Board of Trustees is governed by the provisions of the Indian
Trusts Act, where the Trustee is a corporate body, it would also be required to comply
with the provisions of the Companies Act, 1956. The Board or the trustee Company,
as an independent body, acts as protector of the unit- holders interests. The Trustees
do not directly manage the portfolio of securities. For this specialist function, they
appoint an Asset Management Company. They ensure that the fund is managed by the
AMC as per the defined objectives and in accordance with the Trust Deed and SEBI
Regulations.
The Trust is created through a document called the Trust Deed that is executed by the
Fund Sponsor in favor of the Trustees. The Trust Deed is required to be stamped as
registered under the provisions of the Indian Registration Act and registered with
SEBI.

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The Trustees being the primary guardians of the unit-holders funds and assets, a
Trustee has to be a person of high repute and integrity.
Trustees appoint AMC in consultation with the sponsors and according to SEBI
regulation. All mutual fund scheme floated by AMC have to be approved by trustees.
Trustees review and ensure that net worth of the company is according to stipulated
norms, every quarter
3. Custodian:
Often an independent organization, it takes custody of securities and other assets of
mutual fund. Its responsibilities include receipt and delivery of securities, collecting
income-distributing dividends, safekeeping of the units and segregating assets and
settlements between schemes. Their charges range between 0.15% - 0.2% of the net
asset value of the holding. Custodians can service more than one fund.
4. Transfer Agent (also Registrar):
The organization that mutual funds employ to prepare and maintain records relating to
unit holder accounts. Some mutual fund groups operate in-house transfer agencies.
5. Asset Management Company:
The role of an AMC is to act as the investment manager of the Trust. They are the one
who manage money of the investors. An AMC takes decisions, compensates investors
through dividends, maintains proper accounting and information for pricing of units,
calculates the NAV, and provides information on listed schemes. It also exercises due
diligence on investments, and submits quarterly reports to the trustees. A fund’s AMC
can neither act for any other fund nor undertake any business other than asset
management. Its net worth should not fall below Rs.10 crore. And, its fee should not
exceed 1.25% if collections are below Rs.100 crore and 1% if collections are above
Rs.100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.

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 AMC’S IN INDIAN CONTEXT:

In India we have four types of Asset Management Companies

• AMC’s owned by banks

• AMC’s owned by financial institutions
• AMC’s owned by Indian private sector companies
• AMC’s owned jointly by Indian and foreign investors.
SOME OF THE AMC’S OPERATING CURRENTLY ARE:
Name of the AMC Nature of ownership
Alliance Capital Asset Management (I) Private Limited Private foreign
Birla Sun Life Asset Management Company Limited Private Indian
Bank of Baroda Asset Management Company Limited Banks
Bank of India Asset Management Company Limited Banks
Can bank Investment Management Services Limited Banks
Cholamandalam Cazenove Asset Management Company Limited Private foreign
Dundee Asset Management Company Limited Private foreign
DSP Merrill Lynch Asset Management Company Limited Private foreign
Escorts Asset Management Limited Private Indian
First India Asset Management Limited Private Indian
GIC Asset Management Company Limited Institutions
IDBI Investment Management Company Limited Institutions
Indfund Management Limited Banks
ING Investment Asset Management Company Private Limited Private foreign
J M Capital Management Limited Private Indian
Jardine Fleming (I) Asset Management Limited Private foreign
Kotak Mahindra Asset Management Company Limited Private Indian
Kothari Pioneer Asset Management Company Limited Private Indian
Jeevan Bima Sahayog Asset Management Company Limited Institutions
Morgan Stanley Asset Management Company Private Limited Private foreign
Punjab National Bank Asset Management Company Limited Banks
Reliance Capital Asset Management Company Limited Private Indian
State Bank of India Funds Management Limited Banks
Shriram Asset Management Company Limited Private Indian
Sun F and C Asset Management (I) Private Limited Private foreign
Sundaram Newton Asset Management Company Limited Private foreign
Tata Asset Management Company Limited Private Indian
Credit Capital Asset Management Company Limited Private Indian
Templeton Asset Management (India) Private Limited Private foreign
Unit Trust of India Institutions

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Zurich Asset Management Company (I) Limited Private foreign

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ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):

With the increase in Mutual Fund players in India, a need for Mutual Fund
Association in India was generated to function as a non-profit organization.
Association of Mutual Funds in India (AMFI) was incorporated on 22nd August,
1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been
registered with Securities Exchange Board of India (SEBI). Till date all the AMCs are
that have launched mutual fund schemes are its members. It functions under the
supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund
Industry to a professional and healthy market with ethical lines enhancing and
maintaining standards. It follows the principle of both protecting and promoting the
interests of mutual funds as well as their unit holders.

THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS IN INDIA:

The Association of Mutual Funds of India works with 30 registered AMCs of the
country. It has certain defined objectives, which juxtaposes the guidelines of its Board
of Directors. The objectives are as follows:

 This Mutual Fund Association of India maintains high professional and ethical
standards in all areas of operation of the industry.

 It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of Mutual Fund and Asset Management.

 AMFI interacts with SEBI and works according to SEBI’s guidelines in the
Mutual Fund industry.

 Associations of Mutual Fund of India do represent the Government of India,

the Reserve Bank of India and other related bodies on matters relating to the
Mutual Fund Industry.

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  It develops a team of well-qualified and trained Agent distributors. It
implements a programme of training and certification for all intermediaries
and other engaged in the mutual fund industry.

 AMFI undertakes all India awareness programme for investors in order to

promote proper understanding of the concept and working of Mutual Funds.

At last but not the least Association of Mutual Fund of India also disseminate
information on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.

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CLASSIFICATION OF MUTUAL FUNDS:

MUTUAL FUNDS

Based on the Based on investment

Other schemes
structure objective

Open-ended Growth/Equity Tax Saving

funds schemes

Close-ended Income/Debt
funds
Special
Interval schemes
Schemes Sector funds
Balanced funds
Index funds

Money market
funds

Gilt funds

General
purpose funds

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SCHEMES ACCORDING TO STRUCTURE:

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

• Open-ended Fund/ Scheme:

An open-ended fund or scheme is one that is available for subscription and repurchase
on a continuous basis. These schemes do not have a fixed maturity period. Investors
can conveniently buy and sell units at Net Asset Value (NAV) related prices which
are declared on a daily basis. The key feature of open-end schemes is liquidity.

• Close-ended Fund/ Scheme:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The
fund is open for subscription only during a specified period at the time of launch of
the scheme. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme on the stock exchanges
where the units are listed. In order to provide an exit route to the investors, some
close-ended funds give an option of selling back the units to the mutual fund through
periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least
one of the two exit routes is provided to the investor i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose NAV
generally on weekly basis.

• Interval Schemes :

These schemes combine the features of open-ended and Close-ended schemes. They
may be traded on the stock exchange or may be open for sale or redemption during
pre-determined intervals at NAV based prices.

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SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

A scheme can also be classified as growth scheme, income scheme, or balanced

scheme considering its investment objective. Such schemes may be open-ended or
close-ended schemes as described earlier. Such schemes may be classified mainly as
follows:

• Growth / Equity Oriented Scheme:

The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide different options to the
investors like dividend option, capital appreciation, etc. and the investors may choose
an option depending on their preferences. The investors must indicate the option in
the application form. The mutual funds also allow the investors to change the options
at a later date. Growth schemes are good for investors having a long-term outlook
seeking appreciation over a period of time.

• Income / Debt Oriented Scheme:

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are
less risky compared to equity schemes. These funds are not affected because of
fluctuations in equity markets. However, opportunities of capital appreciation are also
limited in such funds. The NAVs of such funds are affected because of change in
interest rates in the country. If the interest rates fall, NAVs of such funds are likely to
increase in the short run and vice versa. However, long term investors may not bother
about these fluctuations.

• Balanced Fund:

The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. These are appropriate for investors looking for moderate
growth. They generally invest 40-60% in equity and debt instruments. These funds are

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also affected because of fluctuations in share prices in the stock markets. However,
NAVs of such funds are likely to be less volatile compared to pure equity funds.

• Money Market or Liquid Fund:

These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively in
safer short-term instruments such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money, government securities, etc. Returns on these
schemes fluctuate much less compared to other funds. These funds are appropriate for
corporate and individual investors as a means to park their surplus funds for short
periods.

• Gilt Fund:

These funds invest exclusively in government securities. Government securities have

no default risk. NAVs of these schemes also fluctuate due to change in interest rates
and other economic factors as is the case with income or debt oriented schemes.

• General Purpose Equity Schemes:

The investment objectives of general-purpose equity schemes do not restrict them to

invest in specific industries or sectors. They thus have a diversified portfolio of
companies across a large spectrum of industries. While they are exposed to equity
price risks, diversified general-purpose equity funds seek to reduce the sector or stock
specific risks through diversification. They mainly have market risk exposure. Sahara
Wealth Plus Fund is an Equity Fund which is a general-purpose equity scheme.

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OTHER SCHEMES:

• Index Funds:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive
index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the
same weight age comprising of an index. NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same
percentage due to some factors known as "tracking error" in technical terms.
Necessary disclosures in this regard are made in the offer document of the mutual
fund scheme.

There are also exchange traded index funds launched by the mutual funds which are
traded on the stock exchanges.

• Sector specific funds/schemes:

These are the funds/schemes which invest in the securities of only those sectors or
industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast
Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds
are dependent on the performance of the respective sectors/industries. While these
funds may give higher returns, they are more risky compared to diversified funds.
Investors need to keep a watch on the performance of those sectors/industries and
must exit at an appropriate time. They may also seek advice of an expert.

• Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the
Income Tax Act, 1961 as the Government offers tax incentives for investment in
specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes
launched by the mutual funds also offer tax benefits. These schemes are growth
oriented and invest pre-dominantly in equities. Their growth opportunities and risks
associated are like any equity-oriented scheme.

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 • Fund of Funds (FoF) scheme:

A scheme that invests primarily in other schemes of the same mutual fund or other
mutual funds is known as a FoF scheme. An FoF scheme enables the investors to
achieve greater diversification through one scheme. It spreads risks across a greater
universe.

• Load or no-load Fund:

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each
time one buys or sells units in the fund, a charge will be payable. This charge is used
by the mutual fund for marketing and distribution expenses. Suppose the NAV per
unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who
buy would be required to pay Rs.10.10 and those who offer their units for repurchase
to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads
into consideration while making investment as these affect their yields/returns.
However, the investors should also consider the performance track record and service
standards of the mutual fund which are more important. Efficient funds may give
higher returns in spite of loads.

A no-load fund is one that does not charge for entry or exit. It means the investors can
enter the fund/scheme at NAV and no additional charges are payable on purchase or
sale of units.

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RISK HIERARCHY OF DIFFERENT MUTUAL FUNDS:

Different mutual fund schemes are exposed to different levels of risk and investors
should know the level of risks associated with these schemes before investing. The
graphical representation hereunder provides a clearer picture of the relationship
between mutual funds and levels of risk associated with these funds:

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STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY:

The Indian mutual fund industry is dominated by the Unit Trust of India, which has a
total corpus of Rs700bn collected from more than 20 million investors. The UTI has
many funds/schemes in all categories i.e. equity, balanced, income etc with some
being open-ended and some being closed-ended. The Unit Scheme 1964 commonly
referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of
about Rs200bn. Most of its investors believe that the UTI is government owned and
controlled, which, while legally incorrect, is true for all practical purposes.

The second largest category of mutual funds is the ones floated by nationalized banks.
Can bank Asset Management floated by Canara Bank and SBI Funds Management
floated by the State Bank of India are the largest of these. GIC AMC floated by
General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC
are some of the other prominent ones.

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TOP TEN MUTUAL FUND TERMS:

1. Expense ratio:

The ratio of total expenses to net assets of the fund. Expenses include management
fees, the cost of shareholder mailings and other administrative expenses. The ratio is
listed in a fund's prospectus. Expense ratios may be a function of a fund's size rather
than of its success in controlling expenses. The cost of operating the fund is called
expense ratio. It is revealed as percentage of the fund’s average net assets. Eg:
Vanguard Capital.

2.12b-1 fee:

12b-1 fees’ pay funds’ marketing, promotion and distribution expenses.

3. Alpha (α):

It is measure of the difference between a fund’s expected return and its real return.
Alpha must be evaluated in context of beta (β) i.e. volatility and R-squared
(benchmark index).

A high alpha (more than 1) is a good thing and inversely a negative alpha means the
fund has under performed.

4. Beta (β):

It is the fund’s volatility measured against the S&P 500 index which has a set beta of
1. Therefore, if the fund has Beta greater than 1, it means the fund is moving up and
down more than the rest of the market.

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E.g.: a fund with beta 2 will move up 20% when the S&P rises 10%.

5. R-squared:

This measures funds movements against its particular benchmark index on a scale
ranging from 1 to 100. An S&P 500 index fund will have R-squared very close to 100
because the fund mirrors the index. A fund with a low R-squared number is moving
out of sync with its index.

A high R-squared means beta is useful. A low R-squared means ignore the beta

6. Redemption fee:

A redemption fee is charged when you withdraw money from a fund. It is different
from back-end load. A redemption fee goes back into the fund while a back-end load
profits the fund company.

A redemption fee is charged only if the money is withdrawn before a set period. Some
fund families charge it as ‘exchange fee’.

7. Volatility:

In investing, volatility refers to the ups and downs of the price of an investment. The
greater the ups and downs, the more volatile the investment is.

8. Net Asset Value:

Also known as NAV, this is the unit price (or rupee value) of one unit of a mutual
fund. NAV is calculated at the end of every business day. It is calculated by adding up
the value of all the securities and cash in the mutual fund's portfolio (its assets),
subtracting the fund's liabilities, and dividing that number by the number of units that
the fund has issued. It does not include a sales charge. The NAV increases (or
decreases) when the value of the mutual fund's holdings increase (or decrease).

NAV = Current Assets - Current Liabilities & provisions

No. of outstanding units

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9. Load:

Load is the factor that is applies to the NAV of a scheme to arrive at the price .if a
commission is paid to agents, to bring in new business; this represents a cost incurred
by the mutual fund, for the additional sales. The fund may therefore decide that
investors, who are already in the scheme, need not bear this cost. Therefore it may
decide to impose this cost on the new investors, by increasing the price at which they
can buy units. This is called “ENTRY LOAD” if a investor stays in a fund for a short
while, and decides to repurchase his units, the fund may incur some costs in
liquidating the portfolio and paying off this investor. The fund may want to impose
the cost of this operation on the exiting investor, in the form of a load. This is called
as “EXIT LOAD”

10. Asked or Offering Price:

It is the price at which a mutual fund's shares can be purchased. The asked or offering
price means the current net asset value (NAV) per share plus sales charge, if any. For
a no-load fund, the asked price is the same as the NAV.

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SYSTEMATIC INVESTMENT PLAN:

Many mutual funds offer investment programs whereby unit holders can invest. The
Unit holders of the scheme can benefit by investing specific Rupee amounts
periodically, for a continuous period. The SIP allows the investors to invest a fixed
amount of Rupees every month or quarter for purchasing additional units of the
scheme at NAV based prices. It helps investors to tide over the volatility by averaging
out the cost as shown in the example.

Month NAV Lump sum SIP

Invest(Rs.) No. of Invest(Rs.) No. of units

units
June 20 24000 1200 2000 120.00
July 22 - - 2000 90.91
August 23 - - 2000 86.96
September 21 - - 2000 95.23
October 20 - - 2000 100.00
November 19 - - 2000 105.26
December 18 - - 2000 111.11
January 16 - - 2000 125.00
February 18 - - 2000 111.11
March 19 - - 2000 105.26
April 21 - - 2000 95.23
May 22 - - 2000 90.91
Total 24000 1200 24000 1236.98

EFFECTIVENESS OF SIP BY AVERAGING OF COSTS:

Lump sum SIP______

Total investment Rs.24, 000 Rs.24000

Total number of units 1200 1236.98

Average price per unit Rs.20 Rs.19.40

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Value after 1 year Rs.26, 400 Rs.27213

Returns 10 % 13.39 %_____

Thus, SIP yields the best results only if the person continues to invest during
downturns. Often investors get so disturbed by bearish market that they stop
investing. This is a mistake because market dips are the best time to buy cheap and
average your purchase price

Importance of Offer Document:

An abridged offer document, which contains very useful information, is required to be

given to the prospective investor by the mutual fund. The application form for
subscription to a scheme is an integral part of the offer document. SEBI has
prescribed minimum disclosures in the offer document. An investor, before
investing in a scheme, should carefully read the offer document. Due care must be
given to portions relating to main features of the scheme, risk factors, initial issue
expenses and recurring expenses to be charged to the scheme, entry or exit loads,
sponsor's track record, educational qualification and work experience of key
personnel including fund managers, performance of other schemes launched by the
mutual fund in the past, pending litigations and penalties imposed, etc.

Statement of account:

Mutual funds are required to dispatch certificates or statements of accounts within six
weeks from the date of closure of the initial subscription of the scheme. In case of
close-ended schemes, the investors would get either a demat account statement or unit
certificates as these are traded in the stock exchanges. In case of open-ended schemes,
a statement of account is issued by the mutual fund within 30 days from the date of
closure of initial public offer of the scheme. The procedure of repurchase is
mentioned in the offer document.

Transfer of Units:

According to SEBI Regulations, transfer of units is required to be done within thirty

days from the date of lodgment of certificates with the mutual fund.

25
Dividends:

A mutual fund is required to dispatch to the unit holders the dividend warrants within
30 days of the declaration of the dividend and the redemption or repurchase proceeds
within 10 working days from the date of redemption or repurchase request made by
the unit holder.

In case of failures to dispatch the redemption/repurchase proceeds within the

stipulated time period, Asset Management Company is liable to pay interest as
specified by SEBI from time to time (15% at present).

Information on Mutual Funds:

Almost all the mutual funds have their own web sites. Investors can also access the
NAVs, half-yearly results and portfolios of all mutual funds at the web site of
Association of mutual funds in India (AMFI) www.amfiindia.com. AMFI has also
published useful literature for the investors.

Complaint redressing:

Investors would find the name of contact person in the offer document of the mutual
fund scheme that they may approach in case of any query, complaints or grievances.
Trustees of a mutual fund monitor the activities of the mutual fund. The names of the
directors of asset Management Company and trustees are also given in the offer
documents. Investors can also approach SEBI for redressal of their complaints. On
receipt of complaints, SEBI takes up the matter with the concerned mutual fund and
follows up with them till the matter is resolved.

MUTUAL FUND IPO:

26
Investors often tend to think of fund IPO’s in the same vein as they do of stock IPO’s.
However, there are some fundamental differences that they need to take into
consideration. The price of a stock is based on its supply and the demand for it. IPO’s
often get listed at a premium because when a stock opens, its demand is sometimes
much larger than its supply.

This is not true of mutual funds. In case of mutual funds, a separate unit is created at
the time of investment and it is destroyed at the time of redemption. Thus, the supply
of mutual fund units is unlimited and so any appreciation in the value of a fund's
NAV can never be due to an increase in the demand for a fund's units. Moreover, in
the case of funds, your gains depend on how well the fund manager invests

All things considered, it is generally a good idea to stay out of fund IPO’s. A new
fund is an untested entity without any track record. Your investment call will have to
be made purely by looking at the fund manager and the AMC. Another issue is that of
a possible opportunity loss. Your investments may be locked in for up to a month.
This money could instead be kept in a liquid fund for a month and then invested once
the fund opens for daily sale and repurchase post its IPO.

There are some exceptions to this. An obvious one is closed-end funds. Even though
these are no longer in vogue, there are special funds called fixed maturity plans,
which are similarly structured. If an investor wants to invest in one of these, then the
IPO may be the only option available to him because these funds are not open for
daily sale and repurchase.

Investors need to understand that fund IPO’s are purely a marketing device that
creates some excitement. AMCs always communicate strongly during an IPO. A
discerning investor should absorb this information carefully and invest later when the
fund opens for sale and repurchase on an ongoing basis.

HOW SAFE ARE MUTUAL FUNDS:

27
 • By investing in mutual funds, the risk is not totally removed but one will

have the benefits of diversification.

• NAV of growth funds mirrors the fluctuations of the share a price of it

constitutes. Sometimes there is permanent erosion in value too.

• Bond funds, in which the constituents are debt instruments, don’t waver so

much. Income funds seldom face permanent value erosion.

• Generally, mutual funds are not guaranteed by anybody. However, in the

Indian context, some of the mutual funds have floated “guaranteed” or “assured”

return schemes that guarantee a certain annual return or guarantee a buyback at a

specified price after some time.

Examples of these include funds floated by the UTI, cannabis mutual fund, BSI

mutual fund, etc. many of these funds have not earned returns that they promised and

the asset management companies of the respective mutual funds or their sponsors

have made good their promises.

TYPES OF RETURN ONE EXPECT FROM MUTUAL FUNDS:

28
 • Capital appreciation: An increase in the value of the units of the fund is

called as capital appreciation. As the value of the individual securities in the

fund increases, the fund’s unit price increases. An investor can book a profit

by selling the units at prices higher than the price at which he bought the units.

• Dividend distribution: The profit earned by the fund is distributed among

unit holders in the form of dividends. These dividends can be either re-

invested in the fund or can be withdrawn.

ADVANTAGES AND DISADVANTAGES:

29
ADVANTAGES:

1. Professional management:

Mutual funds are backed by experienced and skilled professionals, a

dedicated investment research team that analyses the performance and prospects of

companies and selects investments.

2. Diversification:

Mutual funds always have an investment mix. The diversity in this mix

spreads out the probability of profits and losses, reducing the risk of a substantial fall

in the money you have invested.

3. Return potential:

Over a medium to long term, mutual funds have the potential to provide a

higher net return as they invest in a diversified basket of selected securities.

4. Efficiency:

By pooling investors' monies together, mutual fund companies can take

advantage of economies of scale. With large sums of money to invest, they often trade
commission-free and have personal contacts at the brokerage firms.
5. Liquidity:

In open end schemes, the investor gets the money back promptly at net NAV
pegged prices. In closed end schemes, the units can be sold on a stock exchange at the
prevailing market price. The fund also repurchases from the investors at NAV pegged
prices.
6. Flexibility:

Through features such as regular investment plans, regular withdrawal plans

and dividend reinvestment plans, you can systematically invest or withdraw funds
according to your needs and convenience.
7. Transparency:

30
 You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion invested
in each class or assets and the fund manager’s investment strategy and outlook.

8. Affordability:

Mutual funds are excellent for the new investors because you can invest small
amounts of money and you can invest at regular intervals with no trading costs.
9. Investor’s safety:

All mutual funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors. The
operations of mutual funds are regularly monitored by SEBI.

DISADVANTAGES:

No Control over Costs:

Since investors do not directly monitor the fund’s operations they cannot
control the costs effectively. Regulators therefore usually limit the expenses of mutual
funds.
No tailor –made portfolio:

Mutual fund portfolios are created by AMC’s into which investors invest. They
cannot create tailor made portfolios.

31
SOME DO’S AND DON’TS FOR INVESTORS WHILE INVESTING IN
MUTUAL FUNDS:

DO’s:
• Read the offer document carefully before investing.
• Note that investments in Mutual Funds may be risky.
• Mention your bank account number in the application form.
• Invest in a scheme depending upon the investment objective and your appetite
for risk.
• Note that Net Asset Value of a scheme is subject to change depending upon
market conditions.
• Insist for a copy of the offer document/key information memorandum before
investing.
• Note that past performance of a scheme is not indicative of future
performance.
• Past performance of a scheme may or may not be sustained in future.
• Keep track of the Net Asset Value of a scheme, where you have invested, on a
regular basis.
• Ensure that you receive an account statement for the money that you have
invested.
• Update yourself on the performance of the scheme on a regular basis.

DON‘Ts:
• Do not invest in a scheme just because somebody is offering you a
commission
or other incentive, gifts etc.
• Do not get carried away by the name of the scheme/Mutual Fund.
• Do not fall prey to promises of unrealistic returns.
• Do not forget to take note of risks involved in the investment.
• Do not hesitate to approach concerned persons and then the appropriate
Authorities for any problem.
• Do not deal with any agent/broker dealer who is not registered with
Association
of Mutual Funds in India (AMFI).

32
FUTURE OF MUTUAL FUNDS IN INDIA:

There are around 669 Mutual funds in India at present and there are 24 different types
of Mutual funds & 175 new funds being launched in the last year, the mutual fund
industry is here to stay. At the end of 2005 July, Indian mutual fund industry reached
Rs. 1, 75, 918 crores. It is estimated that by 2010 March-end, the total assets of all
scheduled commercial banks should be Rs. 40, 90, 000 crores.

The annual composite rate of growth is expected 13.4% during the rest of the decade.
In the last 5 years we have seen annual growth rate of 9%. According to the current
growth rate, by year 2010, mutual fund assets will be double.

Going by the above facts and generally, mutual funds have often been considered a
good route to invest and earn returns with reasonable safety. Small and big investors
have both invested in instruments that have suited their needs. And so equity and debt
funds have attracted investments alike. The performance of the investments, equity in
particular, for the last one-year, has however been disappointing for the investors.

The fall in NAVs of equity funds, and it is really steep in some, even to the extent of
60-70 percent, has left investors disgusted. Such backlash was only to be expected
when funds, in a hurry to post good returns invested in volatile tech stocks. The move,
though good under conducive market conditions, is the point of rebuttal now. Owing
to volatility in market and profit warnings by some IT majors, tech stocks have been
on the downhill journey and the result is fall in NAVs of most equity funds.

This hurts the investor but then investments in equity are never safe. Mutual funds are
not just guilty of mismanaging their risks as the recent survey by Pricewaterhouse
Coopers indicates but also not educating their investors enough on the risks facing
them. It is for the mutual benefit of the investors as well as mutual funds that investor
is educated enough or else an agitated investor might route his investments to other
avenues that are considered safe.

Debt funds are safe investments and generate returns far in excess of what other so-
called safe avenues such as banks generate. Despite this, the inflow of funds in debt

33
funds and banks is by no means comparable.The factor contributing to this the lack of
understanding caused by improper guidance by the intermediaries.

Till now, Investor education has been one of the issues, less cared for, by the industry.
The industry focused upon the amounts and not why a person wanted to invest or
whether a particular product suited him or not. While educating the customer might
not have been on the cards earlier, the things are beginning to change now.

Steps taken:

• With SEBI passing on the guidelines, the funds will engage in investor
education. The guidelines state that funds will utilize the income earned on
unclaimed money lying with them for a period exceeding three years to
educate the investors.
• AMFI has started a certification program for intermediaries. This will be made
mandatory for the intermediaries and is aimed at educating the investors about
the risks attached to the schemes and to inculcate adequate skills into the
intermediaries to help the investors choose the right kind of fund.

Steps such as these are aimed at obliterating various flaws in the system by
standardizing the knowledge base of intermediaries, as they are the interface between
the investor and the funds.

Although the investors themselves are also guilty of picking funds that were not
suited for them, the blame can’t lie square on their shoulders alone. The industry has
also got to bear some of it. With such programs becoming mandatory, it can be
ensured to some extent that ignorance ceases to be an aspect associated with the
industry.

Till now, investors have been ignorant about the kind of fund to be picked or how to
select a fund. Teaching an investor how to select a fund is thus an important aspect.
Educated investors can, on their part, ask pertinent questions to find funds that qualify
to be in their portfolio as per their risk bearing capacity.

34
It would not be improper to say that investor education is still the key to managing the
funds handed over by investors. It would thus be of critical importance to educate
people for an informed investor is in the best position to pick up Schemes as per his
need. This would also infuse some confidence in the minds of the investors who under
the current scenario seem to be losing faith on account of the falls suffered in recent
times.

An educated and informed intermediary stands the best chance of understanding the
needs of the client and also of winning his confidence through proper guidance. As it
is, investor education will remain a key issue for mutual funds in the longer run and
educating the intermediaries will be the first step towards it.

35
 COMPANY PROFILE

This project work is been done in the esteemed organization called Versatile
Securities. It is the franchisee of the Religare Securities. So, I feel it will be
better if the introduction starts with the main company. Let us have the
introduction of the esteemed RELIGARE SECURITIES LIMITED.

ABOUT RELIGARE:

Religare is one of the leading integrated financial services institution of India. The
company offers a large and diverse bouquet of services ranging from equities,
commodities, insurance broking, to wealth advisory, portfolio management services,
personal finance services, Investment banking and institutional broking services. The
services are broadly clubbed across three key business verticals- Retail, Wealth
management and the Institutional spectrum. Religare Enterprises Limited is the
holding company for all its businesses, structured and being operated through
various subsidiaries.

Religare’s retail network spreads across the length and breadth of the country with its
presence through more than 1,217 locations across more than 392 cities and towns.
Having spread itself fairly well across the country and with the promise of not resting
on its laurels, it has also aggressively started eyeing global geographies.

36
GROUP STRUCTURE:

VISION:

To build Religare as a globally trusted brand in the financial services domain and
present it as the ‘Investment Gateway of India’.

MISSION:

Providing financial care driven by the core values of diligence and transparency.

BRAND ESSENCE:

Religare is driven by ethical and dynamic processes for wealth creation.

BRAND IDENTITY:

Name: Religare is a Latin word that translates as 'to bind together'. This name has
been chosen to reflect the integrated nature of the financial services the company
offers. The name is intended to unite and bring together the phenomenon of money
and wealth to co-exist and serve the interest of individuals and institutions, alike.

Symbol: The Religare name is paired with the symbol of a four-leaf clover. The four-
leaf clover is used to define the rare quality of good fortune that is the aim of every

37
financial plan. It has traditionally been considered good fortune to find a single four
leaf clover considering that statistically one may need to search through over 10,000
three-leaf clovers to even find one four leaf clover.

Each leaf of the four-leaf clover has a special meaning in the sphere of Religare.

The first leaf of the clover represents Hope. The aspirations to succeed. The dream of
becoming. Of new possibilities. It is the beginning of every step and the foundations
on which a person reaches for the stars.

The second leaf of the clover represents Trust. The ability to place ones own faith in
another. To have a relationship as partners in a team. To accomplish a given goal with
the balance that brings satisfaction to all not in the binding but in the bond that is
built.

The third leaf of the clover represents Care. The secret ingredient that is the cement in
every relationship. The truth of feeling that underlines sincerity and the triumph of
diligence in every aspect. From it springs true warmth of service and the ability to
adapt to evolving environments with consideration to all.

The fourth and final leaf of the clover represents Good Fortune. Signifying that rare
ability to meld opportunity and planning with circumstance to generate those often
looked for remunerative moments of success.

38
Hope, Trust, Care and Good fortune. All elements perfectly combine in the
emblematic and rare, four-leaf clover to visually symbolize the values that bind
together and form the core of the Religare vision

MANAGEMENT TEAM:

Mr. Sunil Godhwani - CEO & Managing Director, Religare Enterprises Limited

Mr. Sunil Godhwani is the CEO and Managing Director of our Company. He is a
graduate in chemical engineering and has a master’s degree in industrial engineering
and finance from Polytechnic Institute, New York. He has more than 20 years
experience in business.Mr. Godhwani joined the Board on July 13, 2006. He was
appointed as CEO and Managing Director of our Company on April 9, 2007. Mr.
Godhwani is also the managing director of Fortis Financial Services Limited. Prior to
becoming the Managing Director of our Company, he was Managing Director of
Religare Securities Limited since April 15, 2002

Mr. Shachindra Nath - Group Chief Operating Officer, Religare Enterprises

Limited

Mr. Shachindra Nath (Group Chief Operating Officer) aged 36 years, carries the
overall responsibility for managing the key operations of our group. He joined RSL
on May 8, 2000. RSL, at that relevant point of time, was a subsidiary of Fortis
Financial Services Limited, our Promoter Group company. He received a bachelor’s
degree in law from the Banaras University, Varanasi, and a post graduate diploma in
intellectual property rights from the Amity Law College, Delhi.

Prior to joining religare, he was at Abhipra Capital Limited as a Senior Consultant

and Divisional Incharge and held several key positions there from 1998 until 2000. In
the past, he has also worked with Obeetee Textiles Limited, R. D & Company and

39
Garware Wall Ropes Limited. He has over 14 years of experience in the financial
services industry.

Mr. Anil Saxena- Group Chief Finance Officer, Religare Enterprises Limited

Mr. Anil Saxena (Group Chief Finance Officer), aged 38 years, carries the overall
responsibility for management and supervision of our group and has played a key role
in driving its growth. He joined RSL on August 1, 2001. RSL, at that relevant point of
time, was a subsidiary of Fortis Financial Services Limited, our Promoter Group
Company. He received a bachelor’s degree in commerce from the University of Delhi.

He is a member of the Institute of Chartered Accountants of India as well as the

Institute of the Cost and Works Accountants of India. Prior to joining us, he was at
Kotak Securities Limited as their Vice-President. In the past, he has also worked with
Fortis Financial Services Limited and R. Singhania & Co. He has over 15 years of
experience in the financial services industry

Board of Directors - Religare Enterprises Limited

Mr. Malvinder Mohan Singh - Chairman (Non Executive)

Mr. Sunil Godhwani - CEO & Managing Director

Mr. Shivinder Mohan Singh - Non Executive Director

Mr. Harpal Singh - Non Executive Director

Mr.Deepak Ramchand Sabnani - Independent Director

Mr.Padam Bahl - Independent Director

Mr.J.W. Balani - Independent Director

Mr. Baldev Singh Johal - Independent Director

Mr. R. K. Shetty - Alternate to Mr. J. W. Balani

Capt.G.P.S.Bhalla - Alternate to Mr. Deepak Sabnani

40
CLIENT INTERFACE:

Retail Spectrum:

To cater to a large number of retail clients by offering all products under one roof
through the Branch Network and Online mode

Equity and Commodity Trading

Personal Finance Services

Mutual Funds

Insurance

Saving Products

Personal Credit

Personal Loans

Loans against Shares

Online Investment Portal

Institutional Spectrum:

To Forge & build strong relationships with Corporate and Institutions

Institutional Equity Broking

Investment Banking

Merchant Banking

Transaction Advisory

Corporate Finance

Wealth Spectrum:

41
To provide customized wealth advisory services to High Net worth Individuals

Wealth Advisory Services

Portfolio Management Services

International Advisory Fund Management Services

Priority Equity Client Services

Arts Initiative

New Initiatives

Religare is on a fast and ambitious growth trajectory with some interesting plans in
the pipeline of ;

AEGON Religare Life Insurance - Life Insurance Company, a Joint Venture with
Aegon one of the largest insurance and pension companies, globally

Religare AEGON AMC - Asset Management Company, a Joint Venture with

Aegon

Religare Finance - Personal Loans / Credit Cards / Loan against Property /

Mortgage & Reverse Mortgage

Online Trading - Agreement with IndusInd Bank to offer online trading services

Religare Macquarie Wealth Management Ltd - Wealth Management Company, a

Joint Venture with Macquarie

Wealth Management Services - with Wall Street Electronica, Inc., a U.S. broker -
dealer to give our Indian clients access to U.S markets

Religare Securities Ltd - Agreement with Vijay Co-operative Bank Ltd. and
Tamilnadu Mercantile Bank Ltd. to offer offline trading services.

42
 VERSATILE SECURITIES

Now it’s the time to move towards the introduction of the company where the project
work is undertaken. The name of the company is Versatile Securities, Hubli. The
company started on 20th August 2005. This was the year, when the awareness about
stock broking and other investments was booming in this region. The company is the
Partnership Firm. Presently the company is covering 10 % to 12% share of the Mutual
funds market in Hubli city. The number of partners is four and their names are:

1. Mr. Ravindra M Neeli

2. Mr. Ashwin Gudisagar
3. Mr. Vishal Karadi
4. Mr. Santosh Naragund

The company is operated and managed by one of the partner Mr. Ravindra Neeli who
is an MBA graduate in the filed of Finance. The company is now made the
considerable goodwill in the market with the sincere efforts of the Management team
and the support of the partners. The good quality service and the advises given to
investors also made contribution.

The major source of the income is from the equity market and Mutual Funds. They
are selling at a good numbers and making contribution to profits.

43
PRODUCT RANGE:

Equity:

For the first time Religare brings investing community the power to be associated
with the elite dealing rooms and freedom to execute trade on their own. That is, you
may trade from our branches or trade on your own over the net and with that you get
our expertise and assistance. It has been designed to provide world-class experience
and expertise to investors. R-ALLY as the name suggests is the perfect partner for
savvy investors. Clients opting for this service would be provided services managed
by a team of dedicated relationship managers and experienced trade dealers. They
would not only assist the client in information dissemination but would also take care
of all post trade requirements.

Commodities:

Commodities as a word originated from the French word ‘commdite’ meaning

‘benefit, profit’. Rightly so! The kind of continuously growing turnover which
commodities market has seen is incredible, benefiting both producers and buyers.
These amazing results have transformed commodities as a most sought after asset
class. And this has caught attention of the whole world.

Commodities market is particularly significant to our country as India is essentially a

commodity-based economy. Therefore, it should not be surprising to see that Indian
Commodities Market is also taking giant strides, growing at a scorching pace and is
well poised to occupy its rightful place in the world. This has provided the Indian
investors with new emerging investment opportunities in the area of commodities.

Commodity Derivatives trading in India is now done through the electronic trading
platform of two popular exchanges NCDEX (National Commodity & Derivative
Exchange Limited) and MCX (Multi Commodity Exchange). The various
commodities being traded on the exchanges include precious metals, crude oil, agro-
commodities amongst others.

44
Religare Commodities Limited is a member of both the exchanges (MCX & NCDEX)
that allows you to trade in all the commodities traded at both the exchanges. At
present, trading in commodities is restricted to futures contracts only.

Depository:

Religare is among the few major Depository Participants holding securities worth
more than Rs.6000 crore under its management. RSL provides depository services to
investors as a Depository Participant with NSDL and CDSL.

The Depository system in India links issuers, depository participants, depositories

National Securities Depository Limited (NSDL) and Central Depository Services
(India) Limited (CDSL) and clearing house / clearing corporation of stock exchanges.
These facilitate holding of securities in dematerialized form and securities
transactions are processed by means of account transfers.

Portfolio Management Services:

Portfolio Management Services manage our client’s wealth more efficiently; reduce
risk by diversifying across assets, sectors and funds, and maximizing returns. Expert
Portfolio Managers find best of avenues to achieve optimum returns at managed
levels of risk. This service could also be called as “transparent collective
investments”. You get an upper hand in many ways.

NRI:

NRI - Non Resident Indians Invest Back Home

India has emerged as one of the fastest growing financial markets in the world and is
a preferred destination for investment among the global investor fraternity. Religare
Securities – country’s premier financial services company will help you pick the best
of products.

Corporate Advisory:

Religare has set up a new TOP level sales force named Corporate Advisory Group-
(CAG) in order to create, maintain and serve excellent relationship by providing
various solutions to the corporate and Institutional sector globally.

45
CAG is a segmentric approach where for one segment the Religare will offer all the
products.

CAG will be the one point for relationship for all big and small corporate, banks,
financial institution.

Investment Banking:

Company provides innovative, integrated and best-fit solutions to our corporate

customers, it is our continuous endeavor to provide value enhancement through
diverse financial solution on an on-going basis, through products like corporate
debt, private equity, IPO, ECB, FCCB, GDR/ADR etc.

EMPLOYEE BASE:

Number of employees working in the organization is 4 including the working partner

and Manager of the organization Mr. Ravindra Neeli. There are other 3 employees
and they are performing the task of handling Mutual Funds and terminal operation.

46
 COMPANY PROFILES OF SBI MUTUAL FUNDS AND ICICI
PRUDENTIAL MUTUAL FUNDS

The mutual funs companies which I have chosen for my project analysis are;

1] SBI Mutual Funds

2] ICICI Prudential Mutual Funds

A brief profile of the companies is as follows.

47
SBI MUTUAL FUNDS:

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.

The fund traces its lineage to SBI - India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India's
largest bank, patronized by over 80% of the top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and Society
General Asset Management, one of the world’s leading fund management
companies that manages over US$ 330 Billion worldwide.

In eighteen years of operation, the fund has launched thirty-two schemes and
successfully redeemed fifteen of them. In the process it has rewarded its
investors handsomely with consistently high returns.

A total of over 3.5 million investors have reposed their faith in the wealth
generation expertise of the Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices

and have emerged as the preferred investment for millions of investors and
HNI’s.

Today, the fund manages over Rs. 20000 crores of assets and has a diverse
profile of investors actively parking their investments across 40 active schemes.

The fund serves this vast family of investors by reaching out to them through
network of over 100 points of acceptance, 26 investor service centers, 33
investor service desks and 52 district organizers.

48
SBI Mutual is the first bank-sponsored fund to launch an offshore fund –
Resurgent India Opportunities Fund. Growth through innovation and stable
investment policies is the SBI MF.

IMPORTANCE OF SBI MUTUAL FUND

1) SBI Mutual Fund helps in introducing a high degree of professional

management and marketing concept in to banking
2) SBI Mutual Fund creates Healthy competition on general efficiency levels in
the industry
3) SBI Mutual Fund is always trying to innovate the new products avenues, new
schemes, services etc.

MORE ABOUT SBI MUTUAL FUND:

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth
creation.The fund traces its lineage to SBI - India’s largest banking enterprise.
The institution has grown immensely since its inception and today it is India's
largest bank, patronized by over 80% of the top corporate houses of the
country. SBI Mutual Fund is a joint venture between the State Bank of India
and Society General Asset Management, one of the world’s leading fund
management companies that manages over US$ 330 Billion worldwide.

BUSINESS OBJECTIVES:

The Primary Objective of SBI Mutual Fund is to enhance the Investments in the
country through the Provision of Different Mutual Fund Schemes in a systematic and
Professional Manner, and to promote the Investments in the Mutual Fund

ORGANIZATIONAL GOAL:

SBI Mutual Fund Main goals are to:

a) Develop a Close Relationship with Customer
b) Transform Ideas in to Viable and Creative Solutions

49
 c) Provide Consistently high Returns to Shareholders,
d) To grow through diversification by leveraging off the existing client base.

BUSINESS FOCUS:

SBI Mutual Fund mission is to be world class Mutual Fund its Main aim is to build
Customer Franchises across distinct business So as to be the Preferred Provider of
services in the Segments that Fund Operates in and to achieve healthy growth in
profitability, and consistency.The SBI Mutual Fund is committed to maintain the
highest level of ethical standards, professional integrity and regulatory compliance

SUBSIDIARIES AND ASSOCIATES:

SBI Bank

SBI Mutual Fund

SBI Life insurance Company

SBI Securities

SBI NRI Services

Other Companies co- promoted by SBI

SBI Mutual Fund is professionally managed organization with a board of directors

consisting of eminent persons who represent various fields including finance,
taxation, construction and urban policy and development. The board primarily focuses
on strategy
Formulation, policy and control, designed to deliver increasing value to the share
holders.

50
S B I MUTUAL FUND SCHEMES:

1] EQUITY SCHEMES:

The investments of these schemes will predominantly be in the stock markets

and endeavor will be to provide investors the opportunity to benefit from the
higher returns which stock markets can provide. However they are also
exposed to the volatility and attendant risks of stock markets and hence should
be chosen only by such investors who have high risk taking capacities and are
willing to think long term. Equity Funds include diversified Equity Funds,
Sectoral Funds and Index Funds. Diversified Equity Funds invest in various
stocks across different sectors while sectoral funds which are specialized
Equity Funds restrict their investments only to shares of a particular sector and
hence, are riskier than Diversified Equity Funds. Index Funds invest passively
only in the stocks of a particular index and the performance of such funds
move with the movements of the index.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum MidCap Fund

Magnum Multicap Fund

Magnum Multiplier Plus 1993

Magnum Sector Funds Umbrella

SBI Arbitrage Opportunities Fund

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 SBI Blue chip Fund

2] DEBT SCHEMES:

Debt Funds invest only in debt instruments such as Corporate Bonds,

Government Securities and Money Market instruments either completely
avoiding any investments in the stock markets as in Income Funds or Gilt
Funds or having a small exposure to equities as in Monthly Income Plans or
Children's Plan. Hence they are safer than equity funds. At the same time the
expected returns from debt funds would be lower. Such investments are
advisable for the risk-averse investor and as a part of the investment portfolio
for other investors.

Magnum Children’s Benefit Plan

Magnum Gilt Fund

• Magnum Gilt Fund (Long Term)

• Magnum Gilt Fund (Short Term)

Magnum Income Fund

• Magnum Income Plus Fund

• Magnum Income Plus Fund (Saving Plan)
• Magnum Income Plus Fund (Investment Plan)
Magnum Insta Cash Fund
Magnum InstaCash Fund -Liquid Floater Plan
Magnum Institutional Income Fund
Magnum Monthly Income Plan
Magnum Monthly Income Plan Floater
Magnum NRI Investment Fund

SBI Debt Fund Series

• SDFS 15 Months Fund

• SDFS 90 Days Fund
• SDFS 13 Months Fund

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 • SDFS 18 Months Fund
• SDFS 24 Months Fund
• SDFS 60 Days Fund

SBI PREMIER LIQUID FUND:

3] BALANCED SCHEMES:

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they
are less risky than equity funds, but at the same time provide commensurately lower
returns. They provide a good investment opportunity to investors who do not wish to
be completely exposed to equity markets, but is looking for higher returns than those
provided by debt funds.
Magnum Balanced Fund
Magnum NRI Investment Fund - Flexi Asset Plan

SBI EQUITY SCHEMES DETAILS:

MAGNUM GLOBAL FUND:
Investment Objective:
To provide the investors maximum growth opportunity through well researched
investments in Indian equities, PCDs and FCDs from selected industries with
high growth potential and Bonds.

Asset Allocation:
Instrument %of portfolio Risk
Profile
Equity, Partly Convertible Debentures, Fully 80-100% HIGH
Convertible Debentures and Bonds
Money Market instruments 0-20% LOW

SCHEME HIGHLIGHTS:
1. An open-ended equity scheme investing in stocks from selected industries
with high growth potential.

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2. Minimum Investment Rs. 2000 and in multiples of Rs. 1000 with Dividend
and Growth options available. ^ Money Market Instruments will include
Commercial Paper, Commercial Bills, Certificate of Deposit, Treasury Bills,
Bills Rediscounting, Repos, Government securities having an unexpired
maturity of less than 1 year, call or notice money, usance bills and any other
such short-term instruments as may be allowed under the regulations prevailing
from time to time.

Launch Date: September 30, 1994

Entry Load
Investments below Rs. 5 crores - 2.25% Investments of Rs.5 crores and above –
NIL
Exit Load
Investments below Rs 5 crores <= 6 months - 1.00% and NIL thereafter.
Investments of Rs 5 crores and above - NIL

SBI GILT FUND DETAILS:

SBI MAGNUM GILT FUND:
Investment Objective:
To provide the investors with returns generated through investments in
government securities issued by the Central Government and / or a State
Government

Asset Allocation:
Instrument %of portfolio Risk
Profile
Government of India Dated Securities 100% Sovereign
State Governments Dated Securities 100% Low
Government of India Treasury Bills 100% Sovereign

Scheme Highlights:
1. Open ended Gilt Scheme.

54
2. The scheme will invest in government securities only with the exception of
investments made in the call money markets. Investment in Government
Securities signifies no risk of default (zero credit risk) either in payment of
principal or even interest on the investments made by the scheme. Long-Term
Plan - for investors with a long-term investment horizon. This Plan will have
two options (a) Quarterly Dividend option and (b) Growth option The Long
Term Plan Dividend Plan and the Growth Plan will each have three options for
investment 1. Regular Dividend / Growth Option : This option will be the
existing option in this Plan wherein investments in this option would be subject
to a Contingent Deferred Sales Charge (CDSC) of 0.25% for exit within 90 days
from the date of investment. 2. PF (Regular) Option: This option under both the
Dividend and Growth Plans would be a no-load option.
3. PF (Fixed Period) Option: This option under both the Dividend and Growth
Plan provides prospective investors with an option to lock-in their investments
for a period of 1 year, 2 years or 3 years from the date of their investment
Facility to reinvest dividend is available under both the Plans. Both the Plans
will have separate investment portfolios and separate NAVs. Under the Long-
Term Plan, the funds will normally be managed to an average portfolio-maturity
longer than three years.

Launch Date: January 1, 2003

Entry Load: Nil

Exit Load: Regular Plan (Long Term) - CDSC of 0.25% for exit within 90 days
from date of investment

SBI BALANCED FUND:

Investment Objective:
To provide investors long term capital appreciation along with the liquidity of
an open-ended scheme by investing in a mix of debt and equity. The scheme
will invest in a diversified portfolio of equities of high growth companies and
balance the risk through investing the rest in a relatively safe portfolio of debt.

55
Asset Allocation:
Instrument %of portfolio Risk
Profile
Equities At least 50% MED-
HIGH
Debt Instruments like debentures, bonds,khokhas. UP TO 40%
Securitized Debt 10% MED-
HIGH
Money Market Instruments Balance Low
Scheme Highlights:
1. An open-ended scheme investing in a mix of debt and equity instruments.
Investors get the benefit of high expected-returns of equity investments with the
safety of debt investments in one scheme.
2. On an ongoing basis, magnums will be allotted at an entry load of 2.25% to
the NAV.
3. Scheme opens for Resident Indians, Trusts, Indian Corporates, on a fully
repatriable basis for NRIs and, Overseas Corporate Bodies.
4. Facility to reinvest dividend proceeds into the scheme at NAV available.
5. Switchover facility to any other open-ended schemes of SBI Mutual Fund at
NAV related prices.
6. The scheme will declare NAV, Sale and repurchase price on a daily basis.
7. Nomination facility available for individuals applying on their behalf either
singly or jointly up to three.
Launch Date: May 1, 1996
Entry Load: Investments below Rs. 5 crores - 2.25% Investments of Rs.5
crores and above - NIL
Exit Load: Investments below Rs.5 crores < = 6 months - 1.00%, > 6 months
but < 12 months - 0.50% Investments of Rs.5 crores and above - NIL

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ICICI PRUDENTIAL MUTUAL FUND:

ICICI Prudential Asset Management Company enjoys the strong parentage of

prudential plc, one of UK's largest players in the insurance & fund management
sectors and ICICI Bank, a well-known and trusted name in financial services in India.
ICICI Prudential Asset Management Company, in a span of just over eight years, has
forged a position of pre-eminence in the Indian Mutual Fund industry as one of the
largest asset management companies in the country with assets under management of
Rs. 37,906.24 crores (as of March 31, 2007). The Company manages a
comprehensive range of schemes to meet the varying investment needs of its
investors spread across 68 cities in the country.

PRUDENTIAL:
Established in London in 1848, Prudential plc, through its businesses in the UK, US and
Asia, provides retail financial services products and services to more than 21 million
customers, policyholders and unit holders worldwide with over US$400 (as of 31st
December, 2005) billion in funds under management. Prudential employs some 23,000 staff
worldwide.
In Asia, Prudential has life insurance and funds management operations across twelve
countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines,
Singapore, Taiwan, Thailand and Vietnam. Prudential has championed customer-centric
products and services for over 80 years, supported by an extensive network of over 145,000
staff and agents across the region.

ICICI BANK:
ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$
56.3 bn) at March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year
ended March 31, 2006 (Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005).

57
ICICI Bank has a network of about 614 branches and extension counters and over 2,200
ATMs. ICICI Bank
offers a wide range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialized subsidiaries and
affiliates in the areas of investment banking, life and non-life insurance, venture capital and
asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to
the cross border needs of clients and leverage on its domestic banking strengths to offer
products internationally. ICICI Bank currently has subsidiaries in the United Kingdom,
Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai
International Finance Centre and representative offices in the United States, United Arab
Emirates, China, South Africa and Bangladesh. Our UK subsidiary has established a branch
in Belgium. ICICI Bank is the most valuable bank in India in terms of market capitalization.

ICICI PRUDENTIAL MUTUAL FUND SCHEMES:

ICICI Prudential Infrastructure Fund
ICICI Prudential Services Industries Fund
ICICI Prudential FMCG Fund
ICICI Prudential Technology Fund
ICICI Prudential Discovery Fund
ICICI Prudential Power
ICICI Prudential Dynamic Plan
ICICI Prudential Emerging S.T.A.R Fund
ICICI Prudential Tax Plan
ICICI Prudential Growth Plan
ICICI Prudential Index Fund
ICICI Prudential Spice Fund
ICICI Prudential Child Care Plan
ICICI Prudential Balanced Fund
ICICI Prudential Income Multiplier Fund
ICICI Prudential Monthly Income Plan
ICICI Prudential Gilt Fund-Investment Option
ICICI Prudential Income Plan
ICICI Prudential Flexible Income Plan
ICICI Prudential Long Term Floating Rate Plan

58
ICICI Prudential Blended Plan
ICICI Prudential Short Term Plan
ICICI Prudential Gilt Fund-Treasury Option
ICICI PRUDENTIAL PRODUCT DETAILS:
EQUITY SCHEME:
ICICI PRUDENTIAL DYNAMIC PLAN is a diversified equity fund that could
be your ideal choice to make the most of dynamic changes in the market. It has the
agility to capture upside opportunities across value and growth, large and midcap,
index and non-index stocks. On the flip side it also has ability to move into cash as
markets get overvalued
Investment Objective:
To generate capital appreciation by actively investing in equity / equity related
securities. For defensive considerations, the Scheme may invest in debt, money
market instruments, to the extent permitted under the Regulations. The AMC will
have the discretion to completely or partially invest in any of the type of securities
stated above so as to maximize the returns.
Investment Philosophy:
ICICI PRUDENTIAL DYNAMIC PLAN is a diversified equity plan that follows the
growth investment philosophy to invest in a portfolio of large, mid and small-cap
stocks. It has the ability to move gradually into cash as the market gets over-valued. It
offers a portfolio of stocks selected through rigorous bottom-up fundamental analysis
across market capitalizations on a diversified basis for long-term capital appreciation.
Benefits:
1. Has the agility, aimed at capturing upside opportunities in the market across market
capitalizations.
2. On the flip side, in case stock markets get into an over valued position, the plan has
the ability to switch to cash thus seeking to limit the downside
PERFORMANCE:

59
Entry Load: (i) For investments of less than Rs. 5 Crores: Entry load at 2.25% of
applicable NAV. (ii) For investments of Rs. 5 crores and Above: Nil
Exit Load: Nil

ICICI PRUDENTIAL GUILT FUND:

Investment Objective:
To generate income through investment in Gilts of various maturities.
Investment Philosophy:
ICICI PRUDENTIAL GILT FUND is a pure debt fund that invests in short tenure
Government securities (G-Secs). These securities are essentially liquid and carry no
credit risk. Having said that, the portfolios exposed to some interest rate risk as the
securities are marked to market, and therefore, respond to changes in market interest
rates. The portfolio seeks to limit volatility by deploying funds in short-term G-Secs,
with an average maturity not exceeding 3 years. The objective is to closely manage
the downside risks of the portfolio arising out of changes in the market rates, by
actively managing the duration of the portfolio.
Benefits:
1. Enables exposure to a pure Government security portfolio.

2. Facilitates participation in the wholesale market for Government debt, even for
smaller ticket-size exposures.

3. Provides the benefits of professional management of investment portfolios.

Performance of the Fund:

60
Entry Load: Nil
Exit Load: Nil
ICICI PRUDENTIAL BALANCED FUND:
Asset allocation is the key to investing success. It helps to reduce the volatility of
returns. A Balanced Fund takes care of this asset allocation by investing in equity for
capital appreciation and debt for stable returns. It focuses on reducing volatility of
returns by increasing / decreasing equity exposure based on the market outlook and
using a core debt portfolio to do the rebalancing.
Investment Objective:
To seek to generate long-term capital appreciation and current income from a
portfolio that is invested in equity and equity related securities as well as in fixed
income securities.
Investment Philosophy:
An open-ended fund that allocates to both equity and debt markets reflects this
wisdom. In bullish market equity allocation can go up to 80%. In bearish market
equity allocation can go down to 65%. This dynamic allocation along with core debt
portfolio reduces the volatility of return.
Benefits:
Balanced fund brings you the twin benefits of growth from equity markets and steady
income from debt markets
Performance:

Entry Load: (i) For investments of less than Rs. 5 Crores: 2.25% of applicable NAV.
(ii) For investments of Rs. 5 crores and Above: Nil

61
Exit Load: Nil

KEY INFORMATION

CATEGORIES OF MUTUAL FUND SCHEMES:

1. SCHEMES ACCORDING TO MATURITY PERIOD:
A mutual fund scheme can be classified into open-ended scheme or close-ended
scheme depending on its maturity period.

1.1OPEN-ENDED FUND/ SCHEME:

An open-ended fund or scheme is one that is available for subscription and
repurchase on a continuous basis. These schemes do not have a fixed maturity
period. Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices, which are declared on a daily basis. The key feature of open-end
schemes is liquidity.

1.2CLOSE-ENDED FUND/ SCHEME:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The
fund is open for subscription only during a specified period at the time of launch
of the scheme. Investors can invest in the scheme at the time of the initial public
issue and thereafter they can buy or sell the units of the scheme on the stock
exchanges where the units are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the
mutual fund through periodic repurchase at NAV related prices. SEBI Regulations
stipulate that at least one of the two exit routes is provided to the investor i.e.
either repurchase facility or through listing on stock exchanges. These mutual
funds schemes disclose NAV generally on weekly basis.

2. SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

62
 A scheme can also be classified as growth scheme, income scheme, or balanced
scheme considering its investment objective. Such schemes may be open-ended or
close-ended schemes as described earlier. Such schemes may be classified mainly
as follows:

2.1GROWTH / EQUITY ORIENTED SCHEME:

The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide different options to the
investors like dividend option, capital appreciation, etc. and the investors may choose
an option depending on their preferences. The investors must indicate the option in
the application form. The mutual funds also allow the investors to change the options
at a later date. Growth schemes are good for investors having a long-term outlook
seeking appreciation over a period of time.

2.2INCOME / DEBT ORIENTED SCHEME:

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are
less risky compared to equity schemes. These funds are not affected because of
fluctuations in equity markets. However, opportunities of capital appreciation are also
limited in such funds. The NAVs of such funds are affected because of change in
interest rates in the country. If the interest rates fall, NAVs of such funds are likely to
increase in the short run and vice versa. However, long-term investors may not bother
about these fluctuations.
2.3BALANCED FUND:
The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. These are appropriate for investors looking for moderate
growth. They generally invest 40-60% in equity and debt instruments. These funds are
also affected because of fluctuations in share prices in the stock markets. However,
NAVs of such funds are likely to be less volatile compared to pure equity funds.
2.4MONEY MARKET OR LIQUID FUND:

63
These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively in
safer short-term instruments such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money, government securities, etc. Returns on these
schemes fluctuate much less compared to other funds. These funds are appropriate for
corporate and individual investors as a means to park their surplus funds for short
periods.

2.5GILT FUND:

These funds invest exclusively in government securities. Government securities have

no default risk. NAVs of these schemes also fluctuate due to change in interest rates
and other economic factor as is the case with income or debt oriented schemes.

2.6INDEX FUNDS:
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive
index, S&P NSE 50 index (Nifty), etc these schemes invest in the securities in the
same weight age comprising of an index. NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same
percentage due to some factors known as "tracking error" in technical terms.
Necessary disclosures in this regard are made in the offer document of the mutual
fund scheme.
There are also exchange traded index funds launched by the mutual funds, which are
traded on the stock exchanges.

OTHER SCHEMES:

TAX SAVING SCHEMES:

These schemes offer tax rebates to the investors under tax laws as prescribed from
time to time. This is made possible because the Government offers tax incentives for
investment in specified avenues. For example, Equity Linked Savings Schemes
(ELSS) and Pension Schemes. The details of such tax saving schemes are provided in
the relevant offer documents.
Ideal for: Investors seeking tax rebates.

SPECIAL SCHEMES:

64
This category includes index schemes that attempt to replicate the performance of a
particular index such as the SSE Sensex or the NSE 50, or industry specific schemes
(which invest in specific industries) or sectoral schemes (which invest exclusively in
segments such as 'IXGroup shares or initial public offerings).

Index fund schemes are ideal for investors who are satisfied with a return
approximately equal to that of an index.
Sectoral fund schemes are ideal for investors who have already decided to invest in a
particular sector or segment. Keep in mind that anyone scheme may not meet all your
requirements for all time. You need to place your money judiciously in different
schemes to be able to get the combination of growth, income and stability that is right
for you. Remember, as always, higher the return you seek higher the risk you should
be prepared to take.

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FREQUENTLY USED TERMS:

NET ASSET VALUE (NAV):

Net Asset Value is the market value of the assets of the scheme minus its liabilities.
The per unit NAV is he net asset value of the scheme divided by the number of units
outstanding on the Valuation date. Net Asset Value is the market value of securities of
scheme divided by the total number of units of the scheme on any particular date. For
example, if the market value of the securities of a mutual fund scheme is Rs 200 lakhs
and the mutual fund has issued 10 lakhs units at Rs. 10 each to the investors, then the
NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual
funds on a regular basis- daisy or weekly- depending on the type of scheme.
SALE PRICE:
Is the price you pay when you invest in a scheme or NAV a unit holder is charged
while investing in an open-ended scheme is sale price. Also called Offer Price. It may
include a Sale load, if applicable.
REPURCHASE PRICE:
Is the price at which a close-ended scheme repurchases its units and it may include a
back-end load. This is also called Bid Price.
REDEMPTION PRICE:
Is the price at which open-ended schemes repurchase their units and close-ended
schemes redeem their units on maturity. Such prices are NAV related.
SALES LOAD:
Is a charge collected by a scheme when it sells when it sells the units also called,
‘Front-end’ load. A Load is one that charges a percentage of NAV for entry or exit.
That is, each time one buys or sells units in the fund, a charge will be payable. This
charge is used by the mutual fund for marketing and distribution expenses. Suppose

66
the NAV per unit is Rs. 10. If the entry as well as exit load charged were 1%, then the
investors who buy would be required to pay Rs. 10.10 and those who offer their unit
for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should
take the loads into consideration while making investment as these affect their
yields/returns.

“Whether a mutual fund impose fresh load or increase the load beyond the level
mentioned in the offer documents”
Mutual funds cannot increase the load beyond the level mentioned in the offer
document. Any change in the load will be applicable only to prospective investments
and not to the original investments. In case of imposition of fresh loads or increase in
existing loads, the mutual funds are required to amend their offer documents so that
the new investors are aware of loads at the time of investments.
NO LOAD:
Schemes that do not charge a load are called ‘No Load’ schemes. A no load fund is
one that does not charge for entry or exit. It means the investors can enter the
fund/scheme at NAV and not additional charges are payable on purchase or sale of
units.

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BENEFITS OF MUTUAL FUNDS:

• PROFESSIONAL MANAGEMENT:
Mutual Funds are backed by experienced and skilled professionals, a dedicated
investment research team that analyses the performance and prospects of companies
and selects investments.
• CONVENIENT ADMINISTRATION:
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems
such as bad deliveries, delayed payments and follow up with brokers and companies.
This is important when you want to have a diversified portfolio through direct equity
investments.
• DIVERSIFICATION :
Mutual Funds always have an investment mix. The diversity in this mix spreads out
the probability of profits and losses, reducing the risk of a substantial fall in the
money you have invested.
• RETURN POTENTIAL :
Over a medium to long-term, Mutual Funds have the potential to provide a higher net
return as they invest in a diversified basket of selected securities.
• ECONOMIES:
Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial
and other fees translate into lower costs for investors.
• LIQUIDITY:
In open-end schemes, the investor gets the money back promptly at net NAV pegged
prices. In closed-end schemes, the units can be sold on a stock exchange at the
prevailing market price. The fund also repurchases from the investors at NAV pegged
prices. There is scope to speedily disinvest assets and obtain disinvestments proceeds.

68
 • FLEXIBILITY:
Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds
according to your needs and convenience.

• TRANSPARENCY:
You get regular information on the value of your investment in addition to disclosure
on the specific investments made by your scheme, the proportion invested in each
class of assets and the fund manager's investment strategy and outlook.
• AFFORDABILITY:
Investors individually may lack sufficient funds to invest in high-grade stocks. A
mutual fund because of its large corpus allows even a small investor to take the
benefit of its investment strategy.

• OPTIONS:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
• INVESTOR SAFETY:
All Mutual Funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investors. The operations of
Mutual Funds are regularly monitored by SEBI.

69
 LIMITATIONS OF MUTUAL FUND:

• NO GUARANTEE:
No investment is risk free. If the entire stock market declines in value, the value of
mutual fund shares will go down as well, no matter how balanced the portfolio.
Investors encounter fewer risks when they invest in mutual funds than when they buy
and sell stocks on their own. However, anyone who invests through a mutual fund
runs the risk of losing money.

• FEES AND COMMISSIONS:

All funds charge administrative fees to cover their day-to-day expenses. Some funds
also charge sales commissions or “loads” to compensate brokers, financial
consultants, or financial planners. Even if you don’t use a broker or other financial
adviser, you will pay a sales commission if you buy shares in a load fund.

• TAXES:

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

• MANAGEMENT RISK:

When you invest in a mutual fund, you depend on the fund manager to make the right
decisions regarding the fund’s portfolio. If the manager does not perform as well as
you had hoped, you might not make as much money on your investments as you
expected. Of course, if you invest in Index Funds, you forego management risk,
because these funds do not employ managers.

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ROLE OF INTERMEDIARIES IN THE INDIAN MUTUAL FUND
INDUSTRY:

1] The mutual fund industry in India started in 1964 with the formation of the Unit
Trust of India (UTI). In 1987, other public sector institutions entered this business,
and it was in 1993 that the first of the private sector participants commenced its
operations.
2] From the beginning, UTI and other mutual funds have relied extensively on
intermediaries to market their schemes to investors. It would be accurate to say that
without intermediaries, the mutual fund industry would not have achieved the depth
and breadth of coverage amongst investors that it enjoys today. Intermediaries have
played a pivotal and valuable role in popularizing the concept of mutual funds across
India. They make the forms available to clients, explain the schemes and provide
administrative and paperwork support to investors, making it easy and convenient
for the clients to invest.
3] Intermediation itself has undergone a change over the past few decades. While
individual agents provided the foundation for growth in the early years, institutional
agents, distribution companies and national brokers soon started to play an active
role in promoting mutual funds. Recently, banks, finance companies, secondary
market brokers and even post offices have also begun to market mutual funds to their
existing and potential client bases.
4] It is, thus clear that all types of intermediaries are required for the growth of the
industry, and their wellbeing, quality orientation and ways of doing business will have
a significant impact on how the mutual fund industry in India evolves in the future.

71
HOW SAFE ARE MUTUAL FUNDS:

By investing in mutual funds, the risk is not totally removed but one will have the
benefits of diversification.
Any mutual fund is as safe or unsafe as the assets that it invests in.
NAV of growth funds mirrors the fluctuations of the share prices of its constituents.
Sometimes there is permanent erosion in value too.
Bond funds, in which the constituents are debt instruments, don't waver so much.
Income funds seldom face permanent value erosion.
Despite professional setups for both investment decisions and research, funds cannot
be immune to fluctuating market health. However, funds diversify the investment
portfolio substantially so that default in any single investment (in the case of an
income fund) will not affect the overall performance of a fund in a significant manner.
In the event of default of a part of the portfolio, an income fund is extremely unlikely
to face erosion in face value.
Generally, mutual funds are not guaranteed by anybody. However, in the Indian
context, some of the mutual funds have floated "guaranteed" or "assured" return
schemes that guarantee a certain annual return or guarantee a buyback at a specified
price after some time. Examples of these include funds floated by the TI, Cannabis
Mutual Fund, BSI Mutual Fund, etc. Many of these funds have not earned returns that
they promised and the asset management companies of the respective mutual funds or
their sponsors have made good their promises

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GROUND RULES OF MUTUAL FUND INVESTING:
Assess yourself:
Self-assessment of one’s needs; expectations and risk profile is of prime importance
failing which; one will make more mistakes in putting money in right places than
otherwise. One should identify the degree of risk bearing capacity one has and also
clearly state the expectations from the investments. Irrational expectations will only
bring pain.
Try to understand where the money is going:
It is important to identify the nature of investment and to know if one is compatible
with the investment. One can lose substantially if one picks the wrong kind of mutual
fund. In order to avoid any confusion it is better to go through the literature such as
offer document and fact sheets that mutual fund companies provide on their funds.
Don't rush in picking funds, think first:
First one has to decide what he wants the money for and it is this investment goal that
should be the guiding light for all investments done. It is thus important to know the
risks associated with the fund and align it with the quantum of risk one is willing to
take. One should take a look at the portfolio of the funds for the purpose. Excessive
exposure to any specific sector should be avoided, as it will only add to the risk of the
entire portfolio. Mutual funds invest with a certain ideology such as the "Value
Principle" or "Growth Philosophy". Both have their share of critics but both
philosophies work for investors of different kinds. Identifying the proposed
investment philosophy of the fund will give an insight into the kind of risks that it
shall be taking in future.
Invest. Don’t speculate:
A common investor is limited in the degree of risk that he is willing to take. It is thus
of key importance that there is thought given to the process of investment and to the
time horizon of the intended investment. One should abstain from speculating which
in other words would mean getting out of one fund and investing in another with the
intention of making quick money. One would do well to remember that nobody can

73
perfectly time the market so staying invested is the best option unless there are
compelling reasons to exit.

Don’t put all the eggs in one basket:

This old age adage is of utmost importance. No matter what the risk profile of a
person is, it is always advisable to diversify the risks associated. So putting one’s
money in different asset classes is generally the best option as it averages the risks in
each category. Thus, even investors of equity should be judicious and invest some
portion of the investment in debt. Diversification even in any particular asset class
(such as equity, debt) is good. Not all fund managers have the same acumen of fund
management and with identification of the best man being a tough task; it is good to
place money in the hands of several fund managers. This might reduce the maximum
return possible, but will also reduce the risks.
Be regular:
Investing should be a habit and not an exercise undertaken at one’s wishes, if one has
to really benefit from them. As we said earlier, since it is extremely difficult to know
when to enter or exit the market, it is important to beat the market by being
systematic.
The basic philosophy of Rupee cost averaging would suggest that if one invests
regularly through the ups and downs of the market, he would stand a better chance of
generating more returns than the market for the entire duration. The SIPs (Systematic
Investment Plans) offered by all funds helps in being systematic. All that one needs to
do is to give post-dated cheques to the fund and thereafter one will not be harried
later. The Automatic investment Plans offered by some funds goes a step further, as
the amount can be directly/electronically transferred from the account of the investor.
Do your homework:
It is important for all investors to research the avenues available to them irrespective
of the investor category they belong to. This is important because an informed
investor is in a better decision to make right decisions. Having identified the risks
associated with the investment is important and so one should try to know all aspects
associated with it. Asking the intermediaries is one of the ways to take care of the
problem.
Find the right funds

74
Finding funds that do not charge much fees is of importance, as the fee charged
ultimately goes from the pocket of the investor. This is even more important for debt

funds as the returns from these funds are not much. Funds that charge more will
reduce the yield to the investor.

75
RISKS INVOLVED IN INVESTING IN MUTUAL FUNDS:

Mutual Funds do not provide assured returns. Their returns are linked to their
performance. They invest in shares, debentures, bonds etc. All these investments
involve an element of risk. The unit value may vary depending upon the performance
of the company and if a company defaults in payment of interest/principal on their
debentures/bonds the performance of the fund may get affected. Besides incase there
is a sudden downturn in an industry or the government comes up with new a
regulation which affects a particular industry or company the fund can again be
adversely affected. All these factors influence the performance of Mutual Funds.

Some of the Risk to which Mutual Funds are exposed to is given below:
Market risk:

If the overall stock or bond markets fall on account of overall economic

factors, the value of stock or bond holdings in the fund's portfolio can drop, thereby
impacting the fund performance.

Non-market risk:
Bad news about an individual company can pull down its stock price, which can
negatively affect fund holdings. This risk can be reduced by having a diversified
portfolio that consists of a wide variety of stocks drawn from different industries.

Interest rate risk:

Bond prices and interest rates move in opposite directions. When interest rates rise,
bond prices fall and this decline in underlying securities affects the fund negatively.

Credit risk:
Bonds are debt obligations. So when the funds invest in corporate bonds, they run the
risk of the corporate defaulting on their interest and principal payment obligations and
when that risk crystallizes, it leads to a fall in the value of the bond causing the NAV
of the fund to take a beating.

76
PERFORMANCE MEASURES OR RISK MEASUREMENT OF MUTUAL
FUNDS:
Mutual Fund industry today, with about 34 players and more than five hundred
schemes, is one of the most preferred investment avenues in India. However, with a
plethora of schemes to choose from, the retail investor faces problems in selecting
funds. Factors such as investment strategy and management style are qualitative, but
the funds record is an important indicator too. Though past performance alone can not
be indicative of future performance, it is, frankly, the only quantitative way to judge
how good a fund is at present. Therefore, there is a need to correctly assess the past
performance of different mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and this
fame is directly linked to their superior stock selection skills. For mutual funds to
grow, AMCs must be held accountable for their selection of stocks. In other words,
there must be some performance indicator that will reveal the quality of stock
selection of various AMCs.
Return alone should not be considered as the basis of measurement of the
performance of a mutual fund scheme, it should also include the risk taken by the
fund manager because different funds will have different levels of risk attached to
them. Risk associated with a fund, in a general, can be defined as variability or
fluctuations in the returns generated by it. The higher the fluctuations in the returns of
a fund during a given period, higher will be the risk associated with it. These
fluctuations in the returns generated by a fund are resultant of two guiding forces.
First, general market fluctuations, which affect all the securities, present in the
market, called market risk or systematic risk and second, fluctuations due to specific
securities present in the portfolio of the fund, called unsystematic risk. The Total
Risk of a given fund is sum of these two and is measured in

terms of standard deviation of returns of the fund. Systematic risk, on the other
hand, is measured in terms of Beta, which represents fluctuations in the NAV of the
fund vis-à-vis market. The more responsive the NAV of a mutual fund is to the
changes in the market; higher will be its beta. Beta is calculated by relating the returns
on a mutual fund with the returns in the market. While unsystematic risk can be

77
diversified through investments in a number of instruments, systematic risk can not.
By using the risk return relationship, we try to assess the competitive strength of the
mutual funds vis-à-vis one another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several
eminent authors have worked since 1960s to develop composite performance indices
to evaluate a portfolio by comparing alternative portfolios within a particular risk
class.

The most important and widely used measures of performance are:

Ø The Treynor Measure
Ø The Sharpe Measure
Ø Jenson Model
Ø Fama Model

THE TREYNOR MEASURE:

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and
systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta
of the fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.

THE SHARPE MEASURE:

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

78
Sharpe Index (Si) = (Ri - Rf)/Si
Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of
a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

COMPARISON OF SHARPE AND TREYNOR:

Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating less
than fully diversified portfolios or individual stocks. For a well-diversified portfolio
the total risk is equal to systematic risk. Rankings based on total risk (Sharpe
measure) and systematic risk (Treynor measure) should be identical for a well-
diversified portfolio, as the total risk is reduced to systematic risk. Therefore, a poorly
diversified fund that ranks higher on Treynor measure, compared with another fund
that is highly diversified, will rank lower on Sharpe Measure.

JENSON MODEL:
Jenson's model proposes another risk adjusted performance measure. This measure
was developed by Michael Jenson and is sometimes referred to as the Differential
Return Method. This measure involves evaluation of the returns that the fund has
generated vs. the returns actually expected out of the fund given the level of its
systematic risk. The surplus between the two returns is called Alpha, which measures
the performance of a fund compared with the actual returns over the period. Required
return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it,
alpha can be obtained by subtracting required return from the actual return of the
fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation
of this model is that it considers only systematic risk not the entire risk associated
with the fund and an ordinary investor can not mitigate unsystematic risk, as his
knowledge of market is primitive.

79
FAMA MODEL:
The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return
commensurate with the total risk associated with it. The difference between these two
is taken as a measure of the performance of the fund and is called net selectivity.
The net selectivity represents the stock selection skill of the fund manager, as it is the
excess return over and above the return required to compensate for the total risk taken
by the fund manager. Higher value of which indicates that fund manager has earned
returns well above the return commensurate with the level of risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Where, Sm is standard deviation of market returns. The net selectivity is then
calculated by subtracting this required return from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and
Jenson model use systematic risk based on the premise that the unsystematic risk is
diversifiable. These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds and can invest in
a number of options to dilute some risks. For them, a portfolio can be spread across a
number of stocks and sectors. However, Sharpe measure and Fama model that
consider the entire risk associated with fund are suitable for small investors, as the
ordinary investor lacks the necessary skill and resources to diversified. Moreover, the
selection of the fund on the basis of superior stock selection ability of the fund
manager will also help in safeguarding the money invested to a great extent. The
investment in funds that have generated big returns at higher levels of risks leaves the
money all the more prone to risks of all kinds that may exceed the individual
investors' risk appetite.

80
 PROJECT DETAILS

MAIN OBJECTIVE:
• To make Comparative performance analysis [Risk and Return] of SBI Mutual
Fund with ICICI Prudential Mutual Fund.

SUB-OBJECTIVES:
• To study the different kinds of schemes provided by each of Mutual funds.
• Comparative performance analysis of SBI Equity - Diversified with ICICI
Prudential Equity – Diversified Fund.
• Comparative performance analysis of SBI Gilt Fund with ICICI Prudential
Gilt Fund
• Comparative performance analysis of SBI Balance Fund with ICICI Prudential
Balance Fund.

THE STUDY COMPRISES OF:

• A detailed study on Mutual Funds
• Comparative analysis of Returns from SBI Mutual Fund and ICICI Prudential
Mutual fund.
• Comparative analysis of Risk associated with SBI and ICICI Prudential fund,
with the use of Sharpe ratio, Expense ratio, Beta, Treynor Ratio and Standard
deviation.
• To compare Mutual Fund Average Return with NIFTY Average Return
• Comparative analysis of corpus of the funds.

METHODOLOGY:
• Information is collected from the managers of selected firms
who deal in mutual funds.
• Information is collected from the officials of SBI Mutual
Fund officials.

81
 • Information is also collected from the secondary sources like
the offer documents, fact sheets, key information memorandum, web sites,
magazines, newspapers etc.
• In case of corpus size, lock in period, entry and exit load the
information is collected from SBI & ICICI Prudential the offer documents.
• In case of returns, minimum investment and performance
(Track Records) is collected from the offer documents & fact sheets.
• Extensive use of Mutual Fund Related magazines like
“Mutual Fund Review”, “Mutual Fund Insight by value researchers” is being
made.

SOURCES OF INFORMATION:
PRIMARY SOURCES OF INFORMATION:
• Officials and sales executives of Versatile Securities.
• Discussion about mutual funds with existing and new investors
SECONDARY SOURCES OF INFORMATION:
• Offer documents of SBI and ICICI Prudential Mutual Funds.
• Mutual Fund related magazines like Mutual Fund Review, Mutual Fund
Insight by value researchers, Outlook Money.
• Fact Sheets of SBI Mutual Fund and ICICI Prudential Mutual Fund
• Web sites, mainly
www.mutualfundsindia.com
sbimf.com
www.valueresearchersonline.com
www.indiainfoline.com.
icicipruamc.com

LIMITATIONS OF THE STUDY:

The analysis is done on the basis of past performance of the funds. But the past
performance may not be an indicator of future performance.
Performance of mutual funds is largely affected by environmental factors, which are
beyond the control of investors.

82
 ANALYSIS OF THE DATA

GILT FUND ANALYSIS:

ABSOLUTE RETURNS
2ND
1ST YEAR YEAR 3RD YEAR
NIFTY 9.715344 85.20646 125.8813
SBI 5.36 8.88 13.07
ICICI PRU 8.09 11.34 16.65

ABSOLUTE RETURNS

140

120

100

80 NIFTY
SBI
60 ICICI PRU
40

20

0
1ST YEAR 2ND 3RD
YEAR YEAR

The above diagram exhibits he absolute return from Gilts funds. These are the funds,
which are known for their high consistency. The consistent appraisal is assured in this
type of funds. This type of fund is suitable for retired people, dependants on income
from fund invested.
It is clear from the diagram that the performance of ICICI Prudential is marginally
higher than SBI Mutual fund at different point of time Gilt Fund.

83
 ICICI
SBI PRU
BETA 0.0004 0.00035
1ST
YEAR -0.0001 0.00003
2ND
RISK PREMIUM YEAR -0.0002 -0.002
3RD
YEAR -0.0002 -0.001

SHARPE INDEX RANKING

ICICI
SBI PRU
1ST YEAR -0.86 0.03
2ND YEAR -1.51 -1.4
3RD YEAR -1.35 -0.91
AVERAGE -0.45 -0.76

0.2
0
-0.2
-0.4 1STYEAR
-0.6
2NDYEAR
-0.8
3RDYEAR
-1
-1.2 A
verageSharpRatio
-1.4
-1.6
SBI ICICI PRU

Sharpe Ratio, which measures risk free return from the fund, is favorable in case of
ICICI Prudential Fund when compared to SBI.Higher the Sharpe Ratio indicates
higher safety. So depending on Sharpe Ratio SBI is safer than SBI.
Standard Deviation of SBI is lower than ICICI Prudential. It indicates lower risk
profile of SBI when compared to ICICI Prudential.

84
 Beta, which measures impact of market condition on funds, is lower in case of ICICI
Prudential when compared to SBI. It indicates lower risk profile of ICICI Prudential
than SBI.

TREYNOR INDEX RANKING

ICICI
SBI PRU
1ST YEAR -2.64 0.09
2ND YEAR -4.66 -4.99
3RD YEAR -4.15 -3.23
AVERAGE -3.82 -2.71

-1 1ST YEAR
-2 2ND YEAR
3RD YEAR
-3
Average Treynor Ratio
-4

-5
SBI ICICI PRU

A measure of a portfolio's excess return per unit of risk, equal to the portfolio's rate of
return minus the risk-free rate of return, divided by the portfolio's beta.

ICICI Prudential Mutual Fund is having a higher Treynor ratio of -2.71% as

compared to SBI Mutual Fund which is having a Treynor Ratio of -3.82%. A high
Treynor Index indicates that we're getting a good deal in terms of the return-to-risk
ratio.

85
 1ST 2ND 3RD
ABSOLUTE RETURNS YEAR YEAR YEAR

NIFTY 9.715344 85.20646 125.8813

SBI BALANCED FUND 25.96 91.85 172.5
ICICI PRU BALANCED
FUND 23.16 77.69 148.41

BALANCED FUND ANALYSIS:

200
180
160
140
120 NIFTY
100 SBI
80 ICICI PRU
60
40
20
0
1ST 2ND 3RD
YEAR YEAR YEAR

The above Diagram exhibits the absolute return of SBI and ICICI Prudential Balance
Funds. Both the funds are fluctuating. But in many a point of time returns from SBI
Balance Fund are higher than ICICI Prudential Balance Fund
Balance funds are known for their consistent return and are suitable for the investors
who can bear moderate risk and investors seeking consistent return.

86
 ICICI
SBI PRU
BETA 0.003 -0.0003
1ST YEAR 0.05 -0.004
RISK
PREMIUM 2ND YEAR 0.23 -0.009
3RD YEAR 0.09 -0.008

ICICI
SHARPE RATIO SBI PRU
1ST YEAR 0.91 1.01
2ND YEAR 4.23 2.42
3RD YEAR 1.72 2.13
AVG 2.29 1.85

4.5
4
3.5
3
1ST YEAR
2.5
2ND YEAR
2
3RD YEAR
1.5
Average Sharp Ratio
1
0.5
0
SBI ICICI PRU

87
 Sharpe Ratio, which measures risk free return from the fund, is favorable in case of
SBI Mutual Fund when compared to ICICI Prudential Fund. Higher the Sharpe Ratio
indicates higher safety. So depending on Sharpe Ratio SBI Magnum Balanced Fund is
safer than ICICI Prudential Balanced Fund.
Standard Deviation of SBI Mutual Fund is higher than ICICI Prudential. It indicates
lower risk profile of ICICI Prudential Fund when compared to SBI Mutual Fund.

Beta, which measures impact of market condition on funds on funds, is higher in case
of SBI Mutual Fund when compared to ICICI Prudential. It indicates lower risk
profile of ICICI Prudential Balanced Fund than SBI Magnum Balanced Fund.

TREYNOR INDEX RANKING

ICICI
SBI PRU
1ST YEAR 17.96 15.16
2ND YEAR 83.85 36.27
3RD YEAR 34.04 31.8
AVERAGE 34.95 27.74

90
80
70
60 1ST YEAR
50
2ND YEAR
40
3RD YEAR
30
20 Average Treynor Ratio
10
0
SBI ICICI PRU

A measure of a portfolio's excess return per unit of risk, equal to the portfolio's rate of
return minus the risk-free rate of return, divided by the portfolio's beta.
SBI Balanced Fund is having a higher Treynor ratio of 34.95%. As Compared to
ICICI Prudential Balanced Fund having a Treynor Ratio of 27.74%. A high Treynor
Index indicates that we're getting a good deal in terms of the return-to-risk ratio.

88
EQUITY FUND ANALYSIS:

1.ABSOLUTE RETURNS
1ST 2ND 3RD
AVERAGE RETURN YEAR YEAR YEAR
NIFTY 9.72 85.21 125.88
SBI MAGNUM GLOBAL
FUND 17.93 130.42 320.76
ICICI PRUDENTIAL
DYNAMIC 43.56 148.63 319.79

ABSOLUTE RETURNS

400.00
RETURNS

300.00 NIFTY
200.00 SBI MAGNUM GLOBAL
100.00 ICICI PRU DYNAMIC
0.00
1 2 3
YEAR

The above diagram exhibits the absolute return from Equity Funds for different point
of time. It is clear from the diagram that the returns from Equity Funds are very
fluctuating. Only moderate risk takers invest in this fund. ICICI Prudential Magnum
Global Fund comparatively has given more return compared to SBI Magnum Global
Equity Fund.

ICICI
SBI PRU
BETA 0.08 0.01
1ST
YEAR 0.81 0.37
2ND
RISK PREMIUM YEAR 7.16 0.68
3RD
YEAR 6.33 0.63 89
 SHARPE RATIO
SBI ICICI
GLOBAL PRU
1ST YEAR 0.07 1.4
2ND YEAR 0.58 2.58
3RD YEAR 0.51 2.4
AVG SHARPE
RATIO 0.387 2.127

2.5

2 1ST YEAR
1.5 2ND YEAR
3RD YEAR
1
Average Sharp Ratio
0.5

0
SBI ICICI PRU

Sharpe Ratio, which measures risk free return from the fund, is favorable in case of
ICICI Prudential Dynamic Fund when compared to SBI Magnum Global Fund.
Higher the Sharpe Ratio indicates higher safety. So depending on Sharpe Ratio ICICI
Prudential Dynamic Fund is safer than SBI Magnum Global Fund.
Standard Deviation of SBI Magnum Global Fund is higher than ICICI Prudential. It
indicates lower risk profile of ICICI Prudential Dynamic Fund when compared to SBI
Mutual Fund.

Beta, which measures impact of market condition on funds on funds, is higher in case
of SBI Magnum Global Fund when compared to ICICI Prudential Dynamic Fund. It
indicates lower risk profile of ICICI Prudential Balanced Fund than SBI Magnum
Balanced Fund.

90
 TREYNOR RATIO
ICICI
SBI PRU
1ST YEAR 9.93 35.56
2ND YEAR 87.39 65.19
3RD YEAR 77.21 60.84
AVG 58.177 53.87

90
80
70 1ST YEAR
60
50 2ND YEAR

40
3RD YEAR
30
20 Average
Treynor Ratio
10
0
s SBI ICICI PRU

A measure of a portfolio's excess return per unit of risk, equal to the portfolio's rate of
return minus the risk-free rate of return, divided by the portfolio's beta.
SBI Balanced Fund is having a higher Treynor ratio of 58.17%. As Compared to
ICICI Prudential Balanced Fund having a Treynor Ratio of 53.87%.A high Treynor
Index indicates that we're getting a good deal in terms of the return-to-risk ratio.

91
 FINDINGS & RECOMMENDATIONS

FINDINGS:

BALANCED FUNDS:
Returns from ICICI Prudential Balanced Fund for the past one year period is 23.16%
and returns from SBI Magnum Balanced Fund is higher at 25.96% for the same
period SBI Magnum Balance Fund is more consistently increasing than ICICI
Balanced Funds and its standard deviation is higher than ICICI Prudential Balanced
Fund. SBI Magnum Balanced Fun has standard deviation of 0.20% and ICICI
Prudential Balanced Fund has standard deviation of 0.15%.
Sharpe Ratio is comparatively favorable in case of ICICI Prudential Balance Fund.
Treynor ratio is comparatively favorable in case of SBI Magnum Balance Fund.
Sharpe Ratio and Treynor Ratio of SBI Magnum Balanced fund are 0.91, 34.95
respectively. Sharpe Ratio and Treynor Ratio of ICICI Prudential Balanced Fund are
1.01, and 27.74% respectively.
Beta coefficient of ICICI Prudential Balanced Fund is -0.0003, which is lower than
SBI Magnum Balance Fund’s Beta coefficient of 0.003.

GILT FUNDS:
The present NAV of SBI Magnum Gilt and ICICI Prudential are Rs. Rs.17.26 and
Rs.22.62 respectively. Returns for the past one-year period for SBI Magnum Gilt
Fund is 5.36%, which is lower than ICICI Prudential Gilt Fund Returns 8.09%.
SBI Magnum Gilt Fund’s NAV is more consistently increasing than ICICI Prudential
Gilt Fund. Standard Deviation of SBI Magnum Gilt Fund and ICICI Prudential Gilt
Fund is 0.35 and 0.31 respectively.
Sharpe Ratio is comparatively favorable in case of SBI Magnum Gilt Fund. ICICI
Prudential is having a good treynor ratio compared to SBI Magnum Fund. Sharpe

92
Ratio and Treynor Ratio of SBI Magnum Gilt Fund are -0.45, and -3.82. Sharpe Ratio
and Treynor Ratio of ICICI Prudential are -0.76 and -2.71 respectively.
Beta coefficient of SBI Magnum Gilt Fund 0.0004 which is lower than ICICI
Prudential Gilt Fund Beta coefficient of 0.00035

EQUITY FUND:
NAV of SBI Magnum global Fund is Rs.48.48, and NAV of ICICI Prudential
Dynamic Fund is Rs.67.18.
Returns from SBI Magnum global Fund are 17.93% and ICICI Prudential Dynamic
Fund returns are 43.56% for the past one year.
Returns and NAV of both the funds are very much fluctuating.
Sharpe Ratio and Treynor Ratio are comparatively favorable in case of ICICI
Prudential Dynamic Fund. Sharpe ratio and treynor ratio of SBI Mutual fund are
0.066 and 9.93 respectively. Sharpe ratio and treynor ratio of ICICI Prudential
Dynamic fund are 1.40 and 35.5 respectively
Standard deviation of SBI Magnum Global Fund is 1.51 and ICICI Prudential has
standard deviation of 0.25

93
RECOMMENDATIONS:

BALANCED FUNDS:
It is favorable for the SBI Mutual fund to promote more of SBI Magnum Balanced
Fund over ICICI Prudential Balance Fund, because SBI Magnum balanced fund is
giving consistent returns since inception.
SUPPORTING ANALYSIS FOR THE ABOVE STATEMENT:
Returns of SBI Magnum Balanced Fund are marginally higher than ICICI Prudential
Balance Fund. Returns from SBI Magnum Balanced Fund for the past one-year period
were 25.96% and returns from ICICI Prudential Balanced Fund are lower at 23.16%
for the same period. Even the standard deviation of SBI Magnum Balanced Fund is
higher than ICICIC Prudential Balanced Fund’s Standard Deviation. SBI Magnum
Balanced Fund has a standard deviation of 0.20 where as ICICI Prudential Balanced
Fund has standard deviation of 0.15. It shows justified returns against risk in case of
SBI Magnum Balance Fund, the high fluctuation, higher the returns for SBI Magnum
Balance Fund.
The Treynor ratio of SBI Magnum Balanced Fund is also high as compared to ICICI
Prudential Balanced Fund. The Treynor Ratio of SBI Magnum Balanced Fund and
ICICI Prudential Balanced Fund are 34.95 and 27.74 respectively.

GILT FUNDS:
It’s better to invest more in High yield Government Securities than investing in short
term Deposits with lower rate of interest
SUPPORTING ANALYSIS FOR THE ABOVE STATEMENT:
As everyone knows the rate of return on short term deposits is obviously low however
the only advantage is the liquidity. It would, therefore, necessary to invest higher
percentage of corpus into Government Gilt Edged securities. With a view to
maximize return on funds the fund may consider to invest in certificate of deposits.
The Portfolio of SBI Magnum global is showing that 50% of the corpus is invested

94
in short term deposits, the percentage should be brought down, and invest more and
more in High yield government securities.

EQUITY FUNDS:
As the Portfolio of the SBI Magnum Global is holding More of cash balance, the cash
balance should be reduced and invest same in Mid Cap and Small Cap.
SUPPORTING ANALYSIS FOR THE ABOVE STATEMENT:
As the portfolio of SBI Magnum Global Fund is showing that lot cash is idle i.e. 30%
only 70% of the corpus is utilized. Portfolio composition of SBI Magnum Global is
11% in large cap, 52% in small cap, 9% in small cap and rest of the 30% is cash. To
yield more the cash balance should be reduced and invest the same in mid cap and
small cap which yield abnormal returns.

95
 CONCLUSION

The Global market is fast growing in investment business. Countries like US, whole
of Europe spread their investment in different investment alternatives with the help of
advisory services to recommend investor.
Investment is the stepping stone to achieving one’s financial dreams. Mutual funds
offer an opportune way to long-term wealth creation. However, with more and more
funds flooding the market, the task of selecting the most suitable scheme gets even
more complicated.
In Indian scenario the investments are spread over Bank Deposits, Savings Certificate,
Post Office, Equity Markets and the latest Mutual Fund. Since Mutual Funds are
subject to market risk the investor take help of advisory services for financial
planning which helps the investor to take calculated risk.
The recent correction in the stock market has left many investors unsettled it is quite
common to see many investors moving to side lines every time the market turns
volatile or corrects itself. No doubt, watching the value of investments go down day
after day can be pretty tough. However, the pain becomes more bearable if one
follows a proper investment plan and invests for the long term. Having a well
diversified portfolio as well as a plan to rebalance it from time to time also helps a
great deal. No wonder, Mutual funds are considered to be the best way to invest in the
stock market.
The mutual fund industry has gained a higher growth in the recent years. There are
around 34 Asset Management Companies which are currently operating and the
numbers of Mutual funds are around 630 funds, so it is difficult to analyze each and
every fund in order to known their riskiness and return. Some tools are used to find
risk and return of the fund, which helps an investor to find out their risk.

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 BIBLIOGRAPHY

• AMFI Work Book

• Mutual Fund review by ICICI Bank Ltd.
• Mutual Fund Insight by Value Researcher.
• Marketing Management by Philip Kotler
• www.mutualfundsindia.com
• www.indiainfoline.com
• www.valueresearcersonline.com
• www.icicidirect.com
• www.amfi.com
• www.sbimf.com
• Reference Books: Security analysis & Portfolio Management
- Punithavathy Pandian
- Donald E. Fischer
- Ronald J. Jordan

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